Transcripts For CNBC Power Lunch 20151207

Other indexes. And a new blend. Keurig Green Mountain agreeing to a buyout and those shares are absolutely soaring. Lets get straight down to the trading action this hour. Bob pisani is joining us from the flor of the new york stock exchange. How much of the stock markets drop is due to whats happening with oil and Energy Stocks . Oil and the fed are the two things motivating the market right now, but the problem is there is no trend and thats causing a lot of confusion in the last few days. Just look what the dow has been doing since thursday. Thursday the dow is down 250 points. Friday the dow is up 369 points. Today the dow is down maybe 200 points, we dont know where its going to end up but right around there. Is your head spinning . Mine is. And the Trading Community is having trouble figuring out where they want to go. Fed and oil two big things. You mentioned some big oil names. Theyre all down 2 , 3 . But were hitting a lot of new lows in some of the smaller names, particularly the exploration and production names. Your cabots, anadarko petroleums, chesapeake down 7 approximates. They are new lows and many of them were at new lows even last week. Kinder morgan sparked a big discussion friday when they announced they were reviewing the dividend. They didnt cut it. Look whats happened again today, still following on, and the problem is a lot of these energy plays are based on the dividend staying or growing. Now a big name and this is a Pipeline Company, not an integrated company, saying the dividend is under review. The problem is this is a high dividend, 13 . Chevron, exxon are much smaller. Theyre an integrated Company Versus a Pipeline Company but still across the board people are saying how safe is the dividend in say 2017 . Two years from now what if oil is still below 40. Thats the problem we have. Material names also weak right across the board. Theyre taking down the commodity complex once again. Back to you. And we have so much more coverage on this topic during the show. Lets get to dominic chu for a market flash. Mandy, shares of both smith wesson and ruger up by around 5 to 6 in midafternoon trading. Among the catalyst for todays move, the Supreme Court has declined to hear an appeal to an illinois law that bans certain assault weapons and accessories for those weapons. That may, again may, open the door for legislation of that similar nature in other parts of the country. This comes on the heels of recent Mass Shootings both here in the u. S. And abroad that involve possibly terrorist gun violence. Apparently prompting people to buy guns for self protection or get ahead of the possible tightening of gun laws in the future. But it hasnt just been in the wake of what happened in San Bernardino. Prior to that Law Enforcement statistics show there was a surge in background checks tied to gun purchases that on the day after thanksgiving. Both stocks are tracking for their fourth straight week of gains. So far this year ruger has gained over 60 and smith wesson has more than doubled in price. These could both be companies to watch as this national dialogue, tyler, continues over gun laws. Back over to you. All right, thank you very much, dominic. To the big deal of the day and it is a big one. Shares of keurig Green Mountain soaring 75 . Yes, you heard me right. That is a caffeinated gain. The company being acquired by an Investor Group for 14 billion. Keurig still down more than 30 this year. Morgan brennan takes a closer look at whats driving this deal. Hey, tyler. Were going to call this coffee talk. So keurig Green Mountain going private in a deal valuing the single pod coffee brewer at 92 a share. That is a heady 78 premium to fridays Closing Price and its really not bad for a stock that before today was down over 60 this year. A huge reversal from 2014s 75 run up. So weve seen that due to slumping sales and so far disappointing roll out of keurigs cold brewer but the takeover is being led by jab holding company. Jab managing the multibillion dollar fortune of austrias ryeman family. Jab already controls roughly 10 of the global coffee business. Thats thanks in part to caribou coffee, petes coffee and tea and a joint venture with mondelez. This deal is about distribution, potentially accelerating an International Roll out of Keurigs Kcups and other products. This is good news for keurigs top holder, cocacola. Coke invested 2. 4 billion on a 17 stake in the company only to watch keurig stock sink this year and that deal values its stake at 2. 4 bltz. That allows coke to break even on this volatile investment. One of the questions analysts are asking now is, does this heady price is it warranted. Exactly. Thats a lot of kcups. Thank you very much, morgan. Lets just point out before we move on that oil is now at or near a sevenyear low. Look at that. 37. 58, off 6 today alone. Thats more than 2. 40 of decline. Lets pick up where we just left off and that is with the keurig deal. We bring in caroline levy. Welcome to power lunch. Whats the game plan . They have a lot of coffee brands. Why this one and do you expect them to do . Well, this is a very, very shrewd Management Team at j. A. B. , and maybe one of the first things they do is cut the 125 million of losses on the Cold Initiative at keurig, and that would bring the ebitda multiple down from 13 times to 11. 5 and, of course, you can borrow or they can borrow at less than 2 right now. So the timing for this deal is very good for them. So is it worth what theyre paying for it . Even if the financing is good, the Interest Rates are low, is it really worth it . Im totally intrigued. This came out of left field. I see it as a private label coffee manufacturer. They may see it as a way to distribute their own strong european brands into the u. S. As well as perhaps be able to use the manufacturing skills on the pod side in europe and the rest of the world. But, again, such shrewd operators and a very sort of low trading ebitda multiple at the time they made the offer, but i still think the keurig shareholders and coke got very lucky here. You just answered the last question. We have to go to some breaking news, but obviously you think this coke has a sigh of relief here as a result of this . Absolutely. Absolutely. Caroline, thank you so much. To sue herera we go for breaking news. Thanks, ty. The ftc is challenging the proposed merger of staples and office depot. They basically say that the staples proposed 6. 3 billion acquisition of office depot would violate antitrust laws by significantly reducing competition nationwide in the market for Consumable Office supplies sold to Large Businesses. The ftc goes on to say that in general staples and office depot are the top two bidders most of the time for Large Business customers so they are filing suit and they are challenging the proposed merger of staples and office depot. Office depot, as you can see, now down better than 17 . Staples is off about 11. 5 . Both of these stocks we should note were lower going into this announcement but they have taken a second leg down, mandy, on this news. Back to you. They certainly have. Thank you very much for that breaking news, sue herera. To the Ongoing Investigation into last weeks terrorist attack in San Bernardino. Cnbcs jane wells joins us now with the very latest. Hi, jane. Reporter hi, mandy. Im outside San Bernardino Police Headquarters where in a couple hours police and the fbi will update us on the investigation, perhaps we can start to learn more about enrique marquez, the man whose home investigators raided this weekend. They believe he legally bought the two rifles used in the shooting. Nbc news reports marquez checked himself into a Mental Health facility since the shooting but has since left. Theres a custody hearing over the 6monthold daughter. The sister and brotherinlaw want to adopt the little girl. Government facilities here are reopening with higher security, and we heard from the head of the county Health Department who was at that Christmas Party when the shooting happened as well as the first doctor on scene, an immigrant from iran. I want to thank the incredible outpouring of support nationally and internationally. We have received your words of support, your offers of condolence, and your offers of help, and we are grateful for them. Im here because i came for democracy and its sad to see that you come miles from across the world and see Something Like that happen here. There are questions over whether the two killers had help. Farooks salary was 50 grand a year yet somehow they had amassed an arsenal worth thousands and thousands of dollars. There are published report the couple had a u. S. Bank corp account with 40,000. The bank telling Mary Thompson we are cooperating with the proper authorities. Beyond that i have no further comment. Finally the president outlined last night what the u. S. And allies are doing to fight isis and their income streams. Theres a report this morning from ihs estimating that isis makes about 80 million a month, most of it not from oil, guys. According to ihs, but from taxes from the territories that they control, and that could be a target much harder to target. Back to you. Jane, thank you very much. Left turn now, a big conference down in florida today. Its focusing on closing some of the gaps, income and otherwise, in the american economy. Our robert frank is live in palm beach. Robert . Reporter hey, tyler. Well, john scully is of course the former ceo of apple, now an entrepreneur, investor, and mentor in all things tech. John scully, thanks for joining us. I want to ask you about apple and i want to talk about some of your current ventures, but first we just finished talking about San Bernardino, and when we look at Cyber Security and technology, what more of a role could Silicon Valley play in battling isis and battling terrorism . I think you have to have the perspective that crises always create opportunities for innovation in the hightech world, and i know of a number of Cyber Security technologies that will move up to the next level, so i suspect that the conversation today is about getting access to todays devices, but i think youre going to see more and more advancements in Cyber Security technology over the next year. You just sold one of your companies, misfit, that was to fossil last month for 260 million. Youve got the obi world phone. Now i gather youre into Cloud Computing. Many people say cloud compute something a bubble, there are just too Many Companies in this space. Where do you see an opportunity . Im not investing in the technology of Cloud Computing because the technology has basically been scaled, its been vetted, its been commoditized and thats all because of the tremendous success of Silicon Valley new kinds of businesses like facebook and snapchat and linkedin and so fort. What im focused on is particularly in the Health Care Sector a new company i cofounded which is called rx advance. Were going into the 350 billion Pharmacy Benefit Management industry. So were taking an existing industry and applying cloud. Were going to take out the inefficiencies. Rx advance we expect well do 400 million revenue and probably scale to over 1 billion in 2017. Very exciting company. I notice youre not wearing an apple watch but you do carry an apple phone. What do you think of apple as an innovative or not Innovative Company right now. Would you buy apple stock right now . I think its a great company. Tim cook has been an outstanding ceo. Hes different than steve jobs, so he doesnt necessarily invent new products but what he does is run supply chain very complex businesses better than anybody in the world. Apple has at least another two years of refreshing its iphone install base, so the outlook for apple over the next couple years is pretty good. Tyler . Can i jump in here as well . Going back to the original topic. Hi there, john. Good to see you again. I wonder if you think Silicon Valley is doing enough to provide backdoor access so the government can comb data more effectively and if there is a socalled backdoor key, how do you stop people with bad intentions of using that backdoor as well . The backdoor issue is not a technology issue. Its clearly an issue about privacy, and obviously these companies are concerned about their customers. Thats what its all about. So theres going to have to be some balance and a lot of conversation beyond what weve had today to figure out how do you keep the country safe . This is obviously a very dangerous time that we live in. At the same time recognize that privacy is something that is well understood and expected by Consumer Reports co consumers. I wonder how many of them would give up a certain level of their own privacy in return for perhaps the knowledge that the government is doing all it possibly can to keep america safe . Well, i think if you were talking to millennials, they have no problem giving up their privacy because the reality is they dont pay a lot of attention to privacy. Its older people who probably pay more attention to privacy and older people tend to be the voters. So well just have to see where it goes in a political Election Year like 2016 will be. But i think realistically i would give more priority to the safety of citizens in the United States and give some backdoor access. One last question sorry, go ahead, tyler. Go ahead. Ill jump in if theres time left. I just wondered, your panel here is titled moon shot and the ideas here are huge in terms of their ambition. Do you think that when it comes to the middle class, mobility, how we deal with technology as a Workforce Needs a moon shot idea as opposed to what were seeing now with government which is frankly not much. Well, first of all, lets acknowledge the problem. The problem is that wages have gone down in the last 15 years, and this is largely a fact of very cheap capital and capital has been replacing labor, and its an issue because we have a serious gap. The middle class is really not sustainable in its current form, so whats happened, people have taken on a lot of debt. So i do believe that weve got to think about the implications of technology. I happen to think that there are going to be a lot of jobs in the Health Care Industry because people are going to live longer. By 2030 they will probably live ten years longer on average than they live today. Who is going to look after them . Who is going to keep them out of assisted living . Who is going to keep them out of hospitals . You combine med Tech Technologies and im involved with some with giving People Better skills to use these technologies and there will be a lot of jobs out there. The problem is the colleges dont train them. The high schools dont train them. Its a skills gap. We have people getting out of school, we give them a College Degree and a lot of loans that they have to pay back but were not giving them any of the vocational skills that they need and thats a real problem and were addressing that here at this conference. Mr. Scully, somewhat randomly, way tonight get your thoughts on whats going on at Silicon Valley company yahoo . You have had experience on the inside of companies that were in distress and in need of turnaround. This one sure seems to be that. So my questions are do you think anyone could turn around yahoo , and do you think that it will remain, survive as an independent company lets say within two years . Well, you have to qualify to say i have no inside information. I have never actually met Marissa Mayer and i hear only good things about her as a very bright woman, but the reality is that you could build an argument that you ought to spin out the old business yahoo to someone else who could find it perhaps accretive into something theyre already doing. And i think whats interesting is just on the rumors, how Many Companies have been speculated about that they could actually buy yahoo that may not be great as a standalone business in this day of were into mobile and into search and theyre really a portal. Its an idea of 15 years ago, but it may be a valuable company to a verizon or to a news corp. , someone who can tuck it into another business and find value that it cant be able to create on its own. So i dont think its a criticism of Marissa Mayer as the ceo. Its saying where does this business as 15 years old, a port, where does it make sense for someone else. Ill jump in because i want to show everyone what is going on with crude prices. Down by nearly 6 . The august low was 37. 75. We are below that level at 37. 62. Well keep on watching crude as the close occurs in the second hour of power lunch at 2 30 p. M. Eastern. Make sure you stay with us during the course of the show. Well be back in two minutes. Welcome back to power lunch. Im mandy drury. Stocks are sinking at this hour. Currently sitting around session lows with triple digit losses of 166 points for the dow, but we were down by over 200 points earlier on in trade. Crude oil is also hitting near sevenyear lows falling well below the fee 40 mark. Brent crude getting slammed hitting a 6 1 2 year low and Energy Stocks one of the key weaknesses dragging the overall indices down. The dow is off by nearly 1 along with the s p and the nasdaq. As for individual shares, shares of office depot and staples are sinking as the ftc is filing a lawsuit to block the merger between these two retailers. 9 drop for staples. Office depot off by 17 . Power is back in two. Money now, are you investing . Ag well, ive been doing some research. Let me introduce you to our broker. How much does he charge . I dont know. Okay. Uh, do you get your fees back if youre not happy . dad laughs wow, youre laughing. Thats not the way the world works. Well, the worlds changing. Are you asking enough questions about the way your wealth is managed . Wealth management, at charles schwab. You ppremium like clockwork. Month after month. Year after year. 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We talk about some of the stocks and assets that might perform well. Our colleagues at cnbc pro have taken a look at what could be outperforming trades if we get performance during raising rate periods like we have in the past. On this sixth day of fedness, janet yellen provided or sent to me six etfs of leverage. Maybe more like six shares of etf of leverage. Were at the halfway point. What we have according to our data partners at kensho, the ultra bullish direction triple leverage long etf. The ticker is tna. It could be a possibility. If we get a period of rising rates and things follow historically trading patterns at least since 2005, that fund has gone up an average of 13 during those periods and its been a winning trade threequarters of the time. During that span that leveraged long large copticer sso has done well. So u. S. Small caps may be a beneficiary. Theres a lot of Historical Performance not necessarily a predictor of future returns. Also keep in mind these types of leveraged etfs are geared more towards traders and professional risk managers. They have unique risks associated with them. Thats part of the story. For more on this and the previous fedness day trades, subscribers of the cnbc pro can go to cnbc. Com pro. Back over to you. Thank you very much. Lets go now to the bond market and Rick Santelli tracking the action at the cme. Hi, rick. Hi, taylor. Data, who needs data . A lot of central banking microphone activity, were down seven basis points as you see on the intraday ten. If you look at bunds, maybe they shook their snow globe up a bit more because all the mean reversion has pushed it back down close to ten basis points. Do you want to talk etfs . Lets talk a couple. Lqd, look at the chart. Starting in 2011 were flirting with levels we havent seen since early 14. Look at the more aggressive hyg for the junk, getting close to levels we havent seen since 2011. Pay attention to those two etfs. Mandy, tyler, back to you. Rick, thank you very much. And were going track this selloff for you on wall street. As you see about a 1 slide. The dow and s p giving back half of those big gains from friday. Plus, many call it the problem that will start the next financial crisis, a crisis that could do a lot of damage to anyone holding equities. Well tell what you it is and what may happen coming up. So whats your news . I got a job ill be programming at ge. Oh i got a job too, at zazzies. friends gasp the app where you put fruit hats on animals . I love that guys, ill be writing code that helps machines communicate. interrupting i just zazzied you. phone vibrates look at it friends giggle i can do dogs, hamsters, guinea pigs. You name it. Im going to transform the way the world works. proudly i programmed that hat. And i can do casaba melons. Ill be helping turbines power cities. I put a turbine on a cat. friends ooh and ahh i can make hospitals run more efficiently. This isnt a competition hello, everyone. Im sue herera. Here is your cnbc news update for this hour. Nbc news has obtained a new photo of the husband and wife couple behind last weeks mass shooting in San Bernardino, california. This 2014 Government Photo was taken the day the couple arrived in the United States at chicagos ohare airport. A Memorial Service under way in pearl harbor marking the 74th anniversary of the attack on the u. S. Navy ship stationed there. That ceremony is being attended by veterans who survived the bombing by japanese fighter planes which killed 2,400 service men. Dunkin donuts joining a list of fast food restaurants using only cagefree eggs. The chain says it plans on making the squiwitch by 2025. Mcdonalds and taco bell have made similar announcements. The 2016 grammy nominations are out and the big winner is den rick lamar. The rapper receiving 11 nods including bun for album of the year. Taylor swift and the weekend were tied for second with seven nominations each. And thats the cnbc news update at this hour. Mandy, back to you. Thank you so much for that, sue. Stocks are off their session lows now but the dow was down more than 200 points earlier and is still down by triple digits as oil prices tumble. How should investors few the selloff . Joining us is michael congeno and robert. Can the stock market advance broadly if Energy Prices continue to move down . Well, it can. Youre still confident if you look at housing strength and car strength and a lot of times whats missed on the cost of oil going down is thats a raw input cost for a lot of companies, especially International Global conglomerates, so consequently it has a negative effect in some sectors but certainly can have a positive effect in others. Michael, i know you actually quite like the energy sector. You say its cheap for a reason, but if youre looking longterm out there, there might be a few names you want to start looking at. Before we get to those names, i know you guys arent oil analysts but nonetheless, how low do you think oil prices could go . That has to be something you factor into your outlook for the stock market as well . Well, we dont get into predicting prices, but the lower they go, the less likely theyre going to fall much further. So, i mean, i think in the longer term we tend to focus long term. We do believe energy is a growth story long term in the globe with economic global economies improving and so this would be a good buying opportunity for a longterm investor with a strong stomach. Basically the reasons for the selloff are real. A strong u. S. Dollar, very anemic to negative global growth, and anemic u. S. Growth, and as a result the demand for energy and other commodities just hasnt been there. But we see that as more of a shorter term issue than a longer one. We still think the world needs these products to grow effectively and so, again, for a longterm investor, theres fall there. But at the same time theres so much pain being felt in that patch, right, michael, were starting to see quite a bit of m a action going on, potential takeover targets being sought out. Apache, do you see that as a potential takeover target and is that one of the republicaasons like it . Its been talked about as one. We think its been undervalued just based on its own. We never invest just in m a. That is an example of one though. The issue the reason some of the stocks are trading down is the Balance Sheets are awful. Theres a lot of debt that were banking on haier oi higher oil. The cost to extract and produce and be a viable business is much harder. The assets are still in the ground. You might see a lot of change in who owns the assets and the what price but the assets are still there. Thats why youre seeing a lot of m a activity. Do you think its possible to still get a yearend rally because it feels like so many people are banking on that santa claus rally. I dont know whether its seasonality or whether theyre hoping and crossing their fingers but when you look at fridays rally and the internals were not good on low volume, narrow leadership, do you think a santa claus rally is looking less and less likely . I do. If you compare the active versus passing investing, i think if youre fundamental and can look at companies that do have sort of the fundamentals that are continuing to improve, i think you can have that strength lead to a rally and like i said earlier, theres still strength in housing, still strength in cars, and the consumers confidence is still relatively high. I know the Interest Rate scenario with the fed increasing the rates is an issue, but that is essentially already baked in and thats almost symbolic from our point of view, so, yes, we think theres confidence. I certainly hope so. We hope. We need that consumer to come out in the holiday season. You can also go to powerlunch. Cnbc. Com to see what else those guys like next year. Over to you, ty. Thanks very much, mandy. Elections held in venezuela and france over the weekend, and parties that were once on the fringes are making some big gains now. Here is our chief International Correspondent michelle carusocabrera. Michelle . Tyler, were going to start in france where the National Front, thats the extreme right party, did very well in regional elections, much better than they did last time. This is a party that wants much greater control on immigration, on frances borders, and their Strong Performance clearly a response to what happened november 13th with the terrorist attacks. The woman that you see there is marine le pen. She is the leader of the National Front. Why the Financial Markets would care about the National Front is not only is she encouraging more control of borders of france, of immigration, shes also said that if she is ever elected the leader of france, she will get rid of the euro and bring back the french franc. This would be a big negative for the euro. Thats something to watch to see how they do in the second round of the elections. Moving on to venezuela, the opposition won in a landslide. Were still waiting to see if they got a majority or a supermajority, but there was great celebrations in the street. Nicholas marudo in theory could lose a lot of power. Hes still in power. These were parliamentary elections but he no longer controls the house over which he sits at this point. We have to watch and see what happens to make sure the opposition, its possible that the opposition could seize defeat from the jaws of victory because they have been disorganized, splintered, et cetera, but its clearly dissatisfaction with whats been going on in venezuela which has been absolutely horrific. Take a look this is a venezuelan debt due to 2027. What were showing you at the bottom is a chart of the price. Huge rally in the price of venezuelan debt as a result of the outcomes of the elections. Thank you very much. To dominic chu for breaking news. Were watching shares of pet boys because the headline here, carl icahn and his funds are now offering to take over all the shares they dont already own of pep boys for 15. 50 per share in cash. That level is now above what bridgestone has proposed it take over manny, mo, and jack, the pep boys for. Its also 2 per share higher than what icahn had previously offered to take over the companys Retail Operations as well. Those shares of pep boys still up by 2 , about 16 per share but carl icahn saying he will now offer 15. 50 per share in cash. This is now higher than what bridgestone has offered to take the company over. Well see how the shares respond in kind to this particular note and, again, well bring you more details as we get more here on the news desk. Thank you, dominic, very much. Many call it the problem that might well start the next financial crisis. Where we stand and details on when the danger is most likely to strike. Youre watching cnbc, first in business worldwide. Ive read all of your lyrics. Youve read all of my lyrics . I can read 800 million pages per second. Thats fast. My Analysis Shows your major themes are that time passes. And love fades. That sounds about right. I have never known love. Maybe we should write a song together. I can sing. You can sing . Do be bop. Be bop do. Do be do be do. Do do do be do. Shares of Ameriprise Financial near their worst levels today down by over a percent. The company did though say it was going to add 2. 5 billion to its stock buyback program. Its previous plan had about 550 million left on it. The stock is down about 14 so far this year. So, tyler and mandy, interesting moves for ameriprice financial. Thank you very much. As rates rise do so fears of corporate defaults in a sluggish economy or in certain sectors of it. Today well look at a crucial piece of the puzzle, the impact that corporate defaults will have on the stock market and what the bond market is signaling right now to stock market investors. A lot of people, mike santoli, think that the bond market usually gets thingsrighter than the stock market . Thats the conventional wisdom. Just to get into it, high yield bonds or junk bonds have become a leader worry for investors. Credit conditions have historically led the equity markets, especially around economic turning points. So with the junk bond market conspicuously weak in recent weeks, stock investors are wondering if a significant economic slowdown is imminent. Take a look at the Interest Rate spread over treasuries of junk bonds. Its near its high for the year and not too far from the postfinancial crisis high. There are three main takeaways here to the situation. First, theres the significant risk aversion by Credit Investors as they demand higher yields to compensate for the hazard of holding them. Second, the default rate on these riskier bonds has been climbing from low levels with the number of distressed bonds now at a sixyear high. And, third, the likelihood of a fed rate hike next week seems to have scared some money out of junk bond funds because no one is quite sure how this sensitive sector of the bond market might respond to a slight change in shortterm rates. Now, as you can see, the s p 500 has managed to climb back toward the highs of the area even with todays declines despite the continued pressure on high yield bonds. What has Bond Investors so anxious . Much of the pain is centered in energy bonds. Now in distress due to low oil and gas prices. The weakness has begun to extend just a bit. Looking past december, investors worry about the maturity clip of bonds set to become due in 2017 and the market has started to sort out how much of that debt might not be paid back. Distressed issuers have about 145 billion in bonds scheduled to mature between 2017 and 2021. Some issuers whose bonds already trade at levels implying high risk of Default Companies like chesapeake and struggling consumer anz industrial Companies Like eye von and titan international. Now, on the other hand note some market handicappers think the junk market is overstating the threat to the stock market. Goldman sachs last week said high yield was sending, quote, a false recession signal, and the stock market might not be as oblivious as it seems when it comes to heeding the message of the bond market. Energy and industrial stock s, of course, have lagged badly and a small number of stocks leading the s p higher have been fast growing tech and consumer stocks that arent reliant on easy credit. Tyler, back over to you. Thanks very much. Lets bring in diane vasa to talk more about this. Welcome. Good to have you here. Hi, tyler. Lets do a little basic work. What is the average default rate on bonds broadly speaking . Where are we now, and where do you think we will be a year from now . So the average default rate in the u. S. Is about 4. 5 . Per year. Per year. And you can have peaks. So basically postrecessions youre seeing something closer to 12 . Where we are right now, weve been ticking up and were at 2. 8 , so we started the year at 1. 7 . So we have seen more this year and they have been and do you expect that that 2. 8 is going to rise closer to the average of 4. 4 over the next year or two years . Right. So we forecast 12 months ahead. So each quarter. And currently we have so the beginning of Fourth Quarter 2016 we have 3. 3 default rate in the u. S. So what that means is that 60 companies would need to default between now and then for us to get there. Now, we have a downside. The downside is 4. 8 and that would mean in that same period 87 companies would need to default. Somewhere between 3. 2 and 4. 8 if a worst Case Scenario takes place. Most of the defaults that you have seen, that you expect to see are concentrated where but where are other areas where you might expect to see them . So 50 of what weve seen in the u. S. This year have been oil and gas and metals and mining. So commodity related just where we thought theyd be. Just where we thought wed be. Going forward what do we expect . So we continue to see commodityrelated defaults. We monitor companies that we consider the most frail in terms of their credit quality, so those are companies that we rate b bimuss mi lunus or lower. 40 of those are in commodity related. And where is another big concentration of them . Okay. Where else would you expect to possibly see it . So it falls off pretty rapidly after that and not a surprise for those in the high yield market, media and entertainment. Its a broad sector so you have everything from Gaming Companies to Publishing Companies but thats about 15 . The reason why i say nobody would be surprised at that, if you look at our rated portfolio, 85 of the companies that we rate in that industry are high yield. So at what point do you remember back in the Mortgage Backed security crisis, when some of those securitized mortgages, 6 , 7 went blooey, thats when the thing cracked. At what point do the risk of the high yield default become something thats very worrisome for Equity Investments or the economy and the market as a whole . Commodity prices have been at multiyear lows, so its not a surprise. So Asset Managers have combed their portfolios. Theyve looked for those industries, companies, that may be infected by these lower prices and also those that would benefit like transportation companies. Theyve been bleaching their portfolios . Correct. And so this is not something thats a surprise to them. But at what point does it become really distressing to the markets . Is it 6 . Is it 12 . The default rate . Yeah. The default rate once you start to get you close in on that average of 4. 5 , you know, people certainly stand up and look. All right. Fantastic. Die an diane, thank you for coming. Mandy, over to you. Another big hour of power is just ahead. Lets get to Brian Sullivan joining us from the west coast in the l. A. Bureau. Lucky you. Thanks very much. We are live in los angeles, and we have another huge pour hour power. Much more on oils big drop. Are there any bargains within the very leaky oil drum . Well find out. Plus, the l. A. Based ceo of live nation and the former ceo of reliance deal are both here with their view of this often confusing economy. And angels great c. J. Wilson, by the way, also a bigtime car dealer, with his view of the consumer and maybe what he thinks those 30plus Million Dollar deals for two pitchers, all that coming up, because why not . We love l. A. Were back right after this. Welcome back, everybody. A look at the dow movers this hour. Walmart, p g, and j j, the only three stocks on the dow in the green. Energy is the biggest loser in trade today. Exxon and chevron the dows biggest drags. Chevrons ceo will be joining us on power lunch tomorrow. You must watch that, but coming up next, former heavyweight boxing Champ Mike Tyson himself and hes got a lot to say. Hes going to say it to us. Power is back in two. Make sure you stay with us. What are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place that lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim . For all the confidence you need. Td ameritrade. You got this. Welcome back to power lunch, everybody. Thanks for joining us. Im tyler mathisen. The green institutes closing the gap conference is in full swing down in florida. The goal of the conference is to bring together different voices to explore solutions to increase upward mobility in the u. S. Economy. Robert frank is live in palm beach, florida, with the former undisputed boxing heavyweight champion mike tyson. A lot of very different voices down here at the green conference. One of those, of course, being iron mike tyson. Hes doing books, going movies, cartoons. Thank you so much for doing this. Youre welcome, bobby. Let me ask you, this is a conference about economic ups and downs, and you have had some ups and downs i im still working ups and downs. When im at the top, im ready to fall. When you were at the peak how much were you worth . At my peak . 100 million . 50 million . At my peak . At least 400 million or 500 million. Are you nuts . Are you crazy. 400 million . Are you crazy. So 500 million let me ill set the stage. I was a new machine. This guy good the new machine. Im the new machine doing that stuff, man. Everything i have done if anybody copied it they were successful. Right. Including your tattoo. Exactly. You went from 500 million to bankruptcy. What lessons did you learn from that whole experience . I learned to stay out of my way. That im very dangerous and toxic sometimes with money and i was just a young baby. I was totally out of my league. Didnt know how to handle money, didnt know how to handle people involved with me that were involved with my money. The most beautiful thing about that now is that im not with them no more and that im bigger now than i ever been in my boxing career and i got more fans than ever in my boxes career. Because i have the internet and it showed the 5 million or 6 Million People and i didnt know that when i was at the top of my career. So are you back to millions . Are you a millionaire now . Yes, a millionaire but still paying my debts though. Yes. Still paying my debts. Theres no doubt about that. Lets talk, you got so many things going on. Off c you have a cartoon, are you going to do another hangover movie . If they call me and pay me. Mandy, jump in here. I dont want to get hit again. Hello, mike. Great to have you on our show. Hey, mandy. How are you doing . Im looking at you, mandy. Good. Im looking at you, too. What would be the one piece of advice you would give to a young star boxer or any young successful sports star in how to manage all that success . Like how to not lose the money like you did . Listen, youre going to lose money listen, it has nothing handling money is an art. If you notice like the robber barons in the first turn of the century, they all made millions, billions and billions, and now the robber barons there were hundreds of them, probably only five families now. They didnt understand the art of handling money. They were immigrants and they made mass money and they lost it, the family members, ex partners, exwives, and thats because they had no idea of handling it. Rockefeller had problems as well. If he didnt send rockefeller jr. To school and he adapted some kind of form of managing money, he would have been wrecked as well. You also made a good point, you said wealth makes people become something that theyre not. Pretend to be someone that theyre not. Well, listen, this is whats real, right . Only thing thats real is what we made. The money is real. The statues are real of course the buildings are real. Were an illusion. What we believe of ourselves are illusions. Right. But the money does help in that illusion, doesnt it . I dont know if you know how to manage it emotionally. Its all about our emotions. Its a false sense of security. Im looking at you now. Mike, how are you . I wonder i love you. What you think has happened to the heavyweight division or really to boxing. When you were the champ, everybody knew who the heavyweight champ was. Everybody knew you. Everybody knew the champ, ali. They knew fraser. I bet if i asked 100 people today who the heavyweight champion was they would not be able to tell you even though he won just a few weeks ago in a real upset. Whats wrong . Well, really, fighting is much more entertaining and show business than it is real brutality because the act of boxing there are guys that are very successful and have long range but theyre not excitin exciting. Only reason they become exciting and popular is because people are paying to see them get beat not because theyre a great guy and theyre inspired to be like them even though theyre successful and make a lot of money. My objective, you know, is to entertain the people. What the people want to see, they want to see two people hurt each other. My objective is to hurt my opponent and do it in a s sophisticated way and its exciting. Everybody time they see me they say when do i see that guy again. Thats entertainment, its business. Business you have heard it from the business heavyweight champion of the world. Back over to you. I just dont want to get hit anymore. Tell mike he has to get over that enthusiasm problem. Once he solves the enthusiasm problem he will probably go. That does it for the first hour. Im out of here, youre sticking around. Im sticking around with brian. Over to you in l. A. , sir. All right, tyler has been officially knocked out. We are in. It is 2 01 on wall street. 11 01 in los angeles. Good morning, everybody. Dow and oil are both sinking. Im Brian Sullivan. Mand, as you heard, sticking around for another big hour. We have the very latest from San Bernardino. We have the ceo and former ceo of live nation and reliant steel on, and angels pitcher c. J. Wilson will be joining us as well. Thats all ahead. But we have got to begin with oil. It is down big again today. Incredibly falling below 38 per barrel. Folks, this is not a complicated story. There are 1 to 2 Million Barrels of oil more per day being pulled out of the ground than the world needs. Its a classic case of over supply and under demand. Look at this. 20year chart of crude oil. The recent nominal lows were 33. 55 per barrel hit intraday back in 2009 at the very height of the financial crisis. In todays dollars, thats about 37 bucks and change. In other words, we are nearly at more than a decade low for a barrel of crude oil. Unless you are a owner of oil related stocks, probably a win for you because wholesale gasoline prices are also falling. That should put more money into your pockets, but if you are an oil investor, unless youre short, it is a very difficult day. On our screens here, more than 150 oil and gas related names, none are higher. The big goose egg, zilch. Every major oil and gas stock related services, whatever, down. The two big oil etf, the oih, xle, those also getting whacked. Thats how a lot of mom and pop investors play the oil markets. Exxon, chevron also have a big impact on the overall market as well. Thats why we have a dow thats down 156 points right now, and if you look at a list of the worst performers in the broader s p 500, it is a murderers row of Energy Stocks. Of the more than 150 oil and gas stocks that we follow here like i said, none of them are down, but here is the thing or none of them are up. Here is the thing, youre supposed to buy when its darkest below the dawn. When there is blood in the streets. Well, we actually have oil pretty much in the streets right now. Lets bring in jason gamell. Do you think this is the point finally of maximum pain for oil and Energy Stocks . Well, i think were not quite at the maximum point yet. As you mentioned earlier, we are still in an oversupplied market. Its about a Million Barrels a day of oversupply and that probably isnt really correct until the second half of next year. So i think that despite the move were seeing today its really too early to be saying we found a bottom in the oil price. What has happened, jason . What has everybody gotten wrong . I think the big thing we got wrong was the capacity for both iraq and saudi arabia to put more oil into the market, and we had anticipated that 2015 was going to be a pretty tough year, but that Incremental Oil that the saudis and the iraqis have put in have made the oversupply significantly larger than we had anticipated. Had it not been for that incremental production from iraq and saudi over the course of the year, wed be in a more balanced situation right now and could be talking about a recovering oil price. Maybe what we got wrong was not that but rather the irrationality of human greed sometimes. Lets get to some of the stock picks because at some point some of these names will be worth buying. When i look at a chevron, it is at a 30year low on nearly every metric, price po book, price to sales, price to earnings. Its one of the few stocks off buy rating on. Chevron has the biggest potential for an inflection in its cash cycle. The Capital Expenditures will be coming down quite a bit over the course of the next year and a half but the production levels are going to be going up. That means they should be able to balance their cash cycle at about 58 a barrel brent. I know thats quite a ways above what were looking at now. Thats amongst the lowest in the sector. The combination of growth and stronger cash flow is what underpins this. I think most importantly that means their dividend, which is currently yielding Something Like 5. 5 should be not only sustainable but progressive. You think they could in this environment with layoffs and cost controls, you think they could actually raise their dividend . I think they will raise their dividend over the course of 2016. That probably could be weighted towards the second half of the year when it looks like we have a better chance for a fundamental oil market recovery. And is that the only big cap integrated oil stock you are recommending to your clients right now, jason . The only other one we are recommending is shell. Kind of the same basis, cost controls, eventually some sort of recovery being smart with the Balance Sheet . Exactly right. And they also with the completion of the bg transaction had the potential for i think a lot more cost synergies than what most of the other companies in the sector have. Jason, we appreciate your time. Thank you for joining us here on power lunch. Happy to do it. Speaking of chevron, tomorrow on power lunch a big interview. We are joined in a rare exclusive with that guy, the ceo of chevron john watson will join you exclusively. Well talk about why oil is so low, why producers are cutting back production, what the impact of oil prices on the u. S. Companies in the world will have. The impact of the prices on chevrons business, its Balance Sheet. Obviously well probably talk to him a little bit about the dividend jason mentioned as well tomorrow in the 1 00 p. M. Eastern time hour of power lunch. We have got a long, rare interview with john watson, the ceo of chevron with everything thats going on in oil today, it is very, very timely. It is not just oil that has been feeling the commodity pain and pinch lately. Copper down more than 25 this year. Aluminum down more than 15 . Other metals too numerous to name also getting slagged. Lets talk more about this commodity crunch and the impact on all of it. David hannah, chairman of reliant steel and aluminum based here in l. A. Been with the company for more than 30 years. David, thank you for joining us. Thanks for having me. We talk about the Energy Complex a lot on power lunch. That is a big part of your in business as well. How is the oil and gas downtourn impacted reliant and the metals market. Its had a significant impact. Weve grown in the energy end of our business over the last four to five years. Its been the best performer weve had in our company in the last four years. Today its the worst performer. But what weve tried to do is balance our exposure to Different Industries over time, so we dont want to get all of our eggs in one basket so to speak. Were exposed to the auto industry, Aerospace Industry which are doing quite well. Is that enough to make up for the slowdown in energy in oil and gas when drilling rigs have fallen by 50 in a 12month period. Its not quite but its close. We have a lot of exposure to nonresidential construction. Its getting slowly better since 2010. Most ceos and chairmen that i have had the privilege of speaking with over 15plus years have a hard time saying they got something wrong. I have just sort of noticed that as a trend with all due respect as do tv anchors by the way. Why do you think so many not just with reliance, in so Many Industries have gotten that oil collapse wrong . I wish we knew. It would sure help news the future. Were you shocked by the magnitude of the declines, the speed of the descent . In discussions with our customers, we saw it coming. We started to cut back our inventories, started to cut back our people in reaction to where we thought we were going to be although the magnitude has been quite a bit more than we had expected. At least we started to make the adjustments we needed to make to our businesses ahead of the time. So your customers told you in advance they see a downturn coming, so you have got some foresight into the business. Are your customers saying that things will turn positive anytime time . No. What are they telling you . I think its going to be more of the same. In line with your thinking, i think were we might not be at the bottom. We might be a little bit could have a little bit more to go. Rig counts is the big deal for us. So when people are drilling, then were selling them metal, and we dont think youre not hearing of any turn in drilling rigs . Because weve lost like i said 50 , actually more than 50 of our drilling rigs in a 12month period. Yeah. And our business related to the energy side from a revenue perspective is down about 60 . How do you make up for that . Because your margins last quarter increased, david. You raised margins but youre telling me these segments are down 60 . Well, we do it the energy side is about 8 to 10 of our business. So weve got 80 to 90 of our business thats even better. So aerospace is really going very well and weve got good, solid exposure to the aerospace market. We think thats moving along well. Nonres construction, 30 of our business. Its getting better. From a demand standpoint is what im talking about. Okay. The challenge that weve had and why maybe our numbers might not look like its making up for the energy side downturn is because of pricing across all of the metals. You pointed it out on your screen at the beginning. You know, with copper, steel prices, everything is down 30 to 40 . And no sign of a turn in those prices either. No, no. I think were positioned to weather it out and our people have done an outstanding job as you said with the margins. Quickly, last question. Are we in an industrial recession . I dont think so. From a demand perspective, i dont think so. I think theres part of our economy like the energy side, the mining side, that is definitely in a recession. But i think the other part of the economy is okay. Its not terrific, its okay. Just okay. David hannah, reliance steel, we appreciate you coming on the program. Thank you very much. Thank you for having us. Certainly, folks, oil is the big story in the markets right now. We are below 38 a barrel for crude oil. That is a nearly sevenyear low. It is nearly a decade low if you adjust for inflation. Stocks, as you might imagine, are also down. Oil and stocks have been trading pretty much in the same direction constantly. The nasdaq is down 0. 8 . Biotech stocks are falling sharply as well, and coming up, we are going to speak with the ceo of one biotech whose investors are losing a lot of money today. He will be out defending his company and that stock when power lunch rolls on from l. A. Stick around. They come into this world ugly and messy. Ideas are frightening because they threaten what is known. 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. Welcome bark to power lunch. Kinder gor man, another Energy Company is down big today to the tune of over 6 . Also down more than 60 so far this year. Our david faber reporting the companys reviewing its dividend. It may cut the payment to save money. Soda stream, one stock moving to the upside. Its getting a boost as keurig soars after getting taken private. The stock is, however, still down more than 20 so far this year. And shares of global blood therapeutics, its falling by 16 today. This is as the data it presented at a conference about its treatment for sickle cell anemia did not look as good as earlier data. Blue bird bio also falling sharply on skepticism about its sickle cell treatment. Meg terrell is at the hematology conference in orlando, florida, and shes joined now by the ceo of global blood therapeutics. Over to you, meg. Thanks, mandy. And joining us now is dr. Ted love, the ceo of global blood therapeutics. Thank you for joining us. Thank you. We are seeing stocks taking a hit over the data out over the weekend. Is there something that was negative in our Sickle Cell Program . Not really. We are seeing small cohorts of patients so its normal to have some variability but the theme were seeing is absolutely consistent. The drug dramatically inhibits the disease. Red blood cells are not being destroyed and the hem mow globen is going up. We need to dose patients more often but we dont want to make conclusions ahead of the data. But the data net net is very good. Lets paint a picture of what it looks like to treat sickle cell right now. Whats available for patient approximates. Thats why im doing this job. I decided i wasnt sure if i wanted to run another company but this company was focused on sickle cell and i remember i used to treat these patients and the idea of giving something for these patients was very exciting to me. Mostly today we give them pain medications. There is one medication that isnt very effective that many concerns exist around, so its not widely used, but there really isnt a disease modifying treatment thats widely used the way we hope that this drug could be. And so what yours looks to do, its a pill you take once a day to fix basically the problem that happens in sickle cell. Youre trying to undo the sickling youre seeing in red blood cells. Thats exactly right. Compare it with a potential gene therapy cure that could come down the line from blue bird. How do you envision the marketplace . Well, i have said before, i hope that everything that were doing in this disease for Drug Development works. We welcome competition. My tragedy when i was practicing is we didnt have much to offer so the idea of having many options is wonderful to me. I do think that a once a day oral therapy is going to be the preferred therapy by most people, but not everybody will necessarily respond to our drug, so it would be great to have many options for physicians with these patients. Why do you think that would be a preferred therapy if you could get a onetime cure through gene therapy . Do you think most people would want to take one pill for once a day for the rest of their life . I think so. Gene therapy, transplanting is a fairly big medical procedure with significant risks associated with it. Were hoping our drug continues to be well tolerated and a simple pill. Coy perhaps lower your cholesterol with gene therapy but probably cholesterol lowering drugs will continue to be preferred therapy for most people. Dr. Love, thank you so much for joining us. Really appreciate it. Thank you. Brian, sending it back over to you. Meg, thank you very much. On deck, oil still remains the story of your money today. Crude oil tanking again. Were below 38 bucks a barrel. The dow industrials down 142 points. A big day, a lot more to do on power lunch live from los angeles. We are back right after this. Crude oil tanking again. Hi watson. Annabelle, your birthday is tomorrow. Im turning seven. What did you ask for . A princess. And a pony. You like things that begin with p. I like pink frosting too. Will you have a cake . Yeah. I was too sick to have one last year. The data your doctor shared shows you are healthy. Are you a doctor . No. I help doctors identify cancer treatments. I want to be a doctor someday. I can help with that too. Watson, i like you. Some of these experimentsere notmay not work. Il. But a few might shape the future. Like turning algae into biofuel. New technology for capturing co2 emissions. And cars twice as efficient as the average car today. Ideas exxonmobil scientists are working on to make energy go further. No matter how many tries it takes. Energy lives here. We are now just a little more than a week away from the feds next decision. Many think that we are in for the first rate hike in 9 1 2 years. But may i be the first to say lets forget december because a rate hike may already be priced in. The key to your money is what happens after that. Joining us now, sre kumar and john bellows who comanaging the western asset fund. Good to chat with you both. Great to be hire and welcome to los angeles, brian. Thank you very much. You and john see things very differently. You view the bond market and the fed differently. You think the fed is the only game in town. John, you think the fed is part of the game. Why do you think its all about the fed . We have had almost ten years of no rate hikes, brian, and we have had seven years of continuing with zero Interest Rates. The market has got used to this liquidity being available as and when desired. The fed has stopped quantitative easing before, the stock market went down. They brought it back again, the stock market always rejoices when that happens. The problem here is it is like drug addiction. You go through with that and after a long period of time, that becomes the only thing that motivates a person or keeps a person going. I dont see a quick end to it. I dont see an easiant y anend either. Here is the heir scary thin john. Unless you are over the age of 31 or 32, not you but money managers, have never run money or traded in a rising Interest Rate environment. So, first, let me say i am over 31, so take that off the table. The second is i want to say i certainly agree with sri that the fed can have a big influence. Theres been periods recently where the fed has been very much leading asset markets, leading the economy, theyre trying to change the mindset, theyre trying to change investors expectations. The fed can be a leader, but i dont think thats the mode theyre in today. I think the fed today wants to follow. They want to be data dependent follow what though . Well, i think they want to follow the market. They want to let the market lead them and go where asset prices and the economy direct. I dont think the fed is in the mode of leading the market today. But the only thing i will push back on that, john, is that theres a wide school of belief that, yes, the fed may be following the data, but they have built the environment in which the data exists, so really theyre trying to say theyre following the Franken Stein of their own creation. So i think theres something to that. Wint overplay the feds ability to guide the data right now. Weve reached the outer limits of the feds ability to influence whats going on in the economy, and i think bigger forces are at play. I think the u. S. Economy has some momentum here but clearly whats going on in oil markets is a big factor. Thats not designed by the fed. Whats going on in Global Markets is not under the feds control. I think the fed is more of a follower than a leader. Brian, first of all, it was a great tweet. Youre right, 31 years old and younger, they have not seen anything never managed money, never traded. If youre a financial adviser, you have never advised your clients in a rising Interest Rate environment. Basically onethird of people running all the money in america have never operated when the Federal Reserve is raising Interest Rates and im sure theyll do a fine job, but you forgive me for being a little nervous. Im nervous as well for the same reason. The second is the feds rate hike that you talked about is far from being fully discounted and, again, just look at the oil market today. A drop below 38 and we are continuing to drop. If the fed actually increases december 16th, and lets wait to see if they do it, you have five more days of this kind of a market. The fed may be rethinking its plans completely. You complimented me only then to come in and say i was wrong about being discounted. Thats beautiful. Did you it in such an elegant way. I have never had somebody tell me i was wrong in a nicer way. You dont think this is already priced in, that a quarter point rate hike is already into bonds and the twoyear and the equity market . I dont think it is priced in for the simple reason the fed has shown again and again it doesnt have any longterm strategy. Remember, two weeks ago janet yellen told us whether she hikes on december 16th or not is data dependent. How can you be data dependent two weeks, three weeks prior to the actual move . If you have a longterm strategy, you should have decided already what it is that youre going to do. Thats first problem. The second is that you are looking at oil prices reacting to it, emerging market situation is going to get worse. China just put out a figure a few hours ago showing reserves fell sharply, and that again is going to be a negative which will come back and haunt us in the u. S. Last word to john. Is the market prepared . You run money. Are you prepared . I think the market is prepared for it. I think anything other than a hike would be inexplicable and would risk a lot of volatility. If we dont get a rate hike, what happens . Everyone is like if we get it what happens . What they dont . Thats a big risk of volatility there. We saw last week with mario draghi when the central bank delivers something other than whats expected, you really see a lot of volatility. Here we are. Next wednesday, folks, is when it is. Of course, been the last three meetings too but really this time we meet it. Thank you both very much. Thank you. Appreciate that. Coming up, it is a big day for oil in a bad way unless you are short crude. Crude oil is below 38 bucks a barrel. Folks, many oil stocks are down double digit percentages just today. Were going to go get the oil close and show you some of the hardest hit stocks on a very, very big day. Tough day for oil. Stick around. Welcome back, everybody. Oil is a big story today. It is down big below 38 bucks a barrel. Lets go to Jackie Deangelis at the nymex. Give us the final trades and the reaction to traders about oils big drop today. Good afternoon to you. This was a big blow. I was checking the final prices and seeing were just about at session lows. The session low was 37. 50. Looks like were going to be just above that at the close but still its about a 6 drop on the day. Wti a 6 1 2 year low. It broke through this years august low, 37. 75 was the level everybody was watching and it took it out. Prices seeing pressure after the fallout from the opec meeting, a little trickle down impact here for people to digest the news that production is still going to go up globally. As you know, opec is producing over the quota. In the United States even though we lost ten rigs, production went back up to 9. 2 Million Barrels. The secretary of energy telling our colleagues in cnbc europe that we should expect to see the average around 9 Million Barrels a day and production will be restored towards those peak levels of 9. 6 Million Barrels. So whats happening here globally . Were awash with oil and the consequence of that, of course, is these lower prices. 36 bucks is the next support level to really watch here, but if we take that out, Goldman Sachs called for 20 oil earlier this year. It was not the base case but a lot of people on the Trading Floor are talking about that again, brian. Ill tell what you, jackie, when goldman came out with that note and we had the commodity guy, jeff curry, on the show, everybody was scoffing at him, making fun of Goldman Sachs saying theyre fear mongers, their call is getting more attention. Here is the interesting thing, you know the headlines tomorrow will be oil hits sevenyear low. Its actually almost a decade low because the prices we hit back in 09, if you adjust for inflation as you always should, were almost at a 12year low for the price of oil. I saw your analysis. I saw your analysis before and i actually i think thats brilliant to put it in those terms and back to the point that you made about Goldman Sachs, everyone loves to say Goldman Sachs was wrong last time when they called for 200 oil but thats not to say necessarily they may be wrong again. Its something to think about. Were very close to those levelseslevel levelsleve levels. If you say anything else i did was brilliant im going to throw the mic down and retire. Appreciate it. Here are some of the harder hit of the names that are the bigger of the mid major. You have whiting, off northern oil and gas, you have an petroleum. These stocks are down 12 and 13 in a day. Many oil bonds down more than 60 this year. As Oil Continues to fall as we said, many energy names are getting crushed. Lets get though the next move with the trading nation team. Try to find some opportunity in this Dumpster Fire that is Energy Stocks right now. Erin gibbs with s p. Ari wald with oppenheimer np any reason to jump in some of these numbers youre supposed to buy when theres blood in the streets . Now theres oil. Particularly after the comments we saw on friday where theyre just very clearly stating that theyre just going for market share, opec is going for market share. Theyre going to let prices keep dropping. We really dont see any stop to this oversupply, and i think a lot of analysts will be revising their estimates even further down. We may see still some very meager growth going into next year. We were looking for that rebound and expecting prices to finally stabilize in 2016. After these comments, it just doesnt look like its going to happen and id say avoid at this point. Okay. Avoid at this point. Ari, you just heard jackie talk about guys, my sound just went out. We can still hear you, erin, so its find. Youre charting the etf, the xle. Its composed of big Energy Stocks. Any sign of that bottoming out technically . Brian, we do not see it. We see it as a resumption of xles longterm down trend op our view has been and continues to be to sell Energy Stocks. Theres really four key points here. One, the sector spdr has broken a 12year uptrend. A 12year uptrend. The structure is broken. Two, the 200day is still sloped lower meaning theres no signs of a base here. Three, credit markets are still signaling caution. Its the sector with the widest credit spreads and four we think the sectors relative trend continues to be pressured by a secular decline in oil prices. So when you add it up, if theres a q1 correction in the market, we think this is what drags it down. We would continue to recommend selling, underweighting, or avoiding the energy sector. Technically avoid it, fundamentally erin says avoid it. Everybody says avoid. Sometimes maybe that makes you think maybe you want to go to the other side. Thank you, guys. Appreciate it. For more trading nation head to the weeb site, tradingnation. Cnbc. Com. Lets get to sue herera with your cnbc news update at this hour. Here is whats happening. The Chicago Police department is now the subject of a federal civil rights investigation. U. S. Attorney general Loretta Lynch announcing that move today saying her department will search for patterns of Unconstitutional Police practices. The investigation comes after Chicago Police released dash camera video showing a white officer fatally shooting a black teenager. Time releasing the eight finalists for its 2015 person of the year contest. The list includes the leader of isis, black lives matter activists, caitlyn jenner, angela merkel, and viewladimir putin among others. Italys mt. Etna erupting overnight spewing fire and lava into the sky. The worlds most active volcano has been erupting for three days drawing crowds of visitors. And were getting to see pluto in a whole new way. Nasas new horizon spacecraft was able to get closer to the dwarf planet than any before it snapping those High Resolution pictures as it flew by. Great stuff. All right youre up to date. Brian, back to you. Pluto is a planet, then its not, now its a dwarf planet. Its in play. Pew toe is in play. It is in play. Thank you very much. It is the company that issues more than 450 million tickets every year for concerts. We are talking about live nation entertainment. They own ticket master, the company has expanded to promote events, managing artists, running their own ecommerce platforms. Joining us is michael rapino, the ceo of live nation entertainment. Thank you for joining us. Thank you. We talk about the oil pain. You probably love it because the price of gas has gone down. Have you noticed any positive change in your business because of what is happening to gasoline and oil . Not today but i would say to you were on sale for next year already earlier than usual but thats the way the market is trending and were coming off a record year in 15 and were looking at next year as probably being bigger, more shows are going up and the consumer demand is bigger than ever. What is making it so big . Who is filling the stadiums and the arenas right now . Generally the live business disconnected from all of the recorded right stuff thats going on has been a booming business for the last few years. Weve been on three record years. Why . Because live music business in itself, the concert is now global. More shows are happening around the world than ever. Emerging markets are booming. Consumers, millennials, especially live the experience of a festival and of a concert. We have seen the live show booming, consumer demand bigger than ever and the supply side. Artists are making about 95 of their revenue when they get on the road. That means theyve got to get on the road. I can pull up almost any song by any artist at any time anywhere i want right now, my phone, in the car, doesnt matter. Why are so many people going to concerts . Well, theres never you cant replace that two hours of magic. The average customer only goes to three shows a year. Three a year. Its their kodak moment. When you see your wife to see adele is she going to tour by the way . I know people are still buying cds. She went on sale last week in europe and blew out everything. How big is adele going to be in the United States . Shell sell out in minutes. If i want to see adele, take my wife to see adele, what is a ticket going to cost for that . Theyre still putting together the u. S. Plan but its going to be somewhere between 75 and 125 but its going to be high demand. Theyre going to sell out. Two other quick things. The secondary ticket market, every analyst i talked to prepping for the interview said ask him about that. How big can that be for live nation . We think its a huge opportunity. When we bought ticket master so we could own the end to End Experience was being in the technology business. Through our investment weve been able to add new products. Ticket master plus, the biggest weve done a billion dollars in revenue. Its about an 8 billion category. We think we have a long way to go still. End it on a serious note. Obviously given everything thats going on with San Bernardino, with paris, the bataclan hall. That was a music venue. How has that changed the way you put on concert. People want to be safe but you also want to make sure you have some freedom of movement, the extra cost your facing, everything else. Right. You know, overnight we cant solve this. Theres just too many small venues, big venues. Most big venvenues, festivals, e a sophisticated system, a lot of security, a lot of metal detect yors. I assume they picked that type of target because the smaller the venue the less sophisticat d sophisticated. Overnight we made sure we increased security at all of our own venues, increasing our metal detection but increasing the pay, the quality of the people, do you have to ramp that up as well . Maybe parttimers, do you have to pay more and thats going to increase ticket prices . I dont see that happening yet. I think the industry in general has looked at this as a oneoff. I think the industry in general wants to be better at security but i dont think youre going to see dramatically overnight the concert business become the tsa. Its just not a cost thats the thing. You want to go and have a good time, having fun with your family and you want to be safe but you also i probably phrase this incorrectly, you dont want to go to a show in a prison basically. Harder to get into a rock concert than to get on an airplane. Exactly. We dont see it headed that way. Were very proud last night we were able to bring u2 back to paris for the first big show. We think rock and roll will continue as is. Michael rapino ceo of live nation. It was a real pleasure. Thank you for joining us. Well see you soon. Two stocks making big moves, first off Green Mountain, they are going private. That shocked the market this morning. But that is bad news for those shorting Green Mountain. Guys like David Einhorn. Also, chipotle shares continue to sink on e. Coli fears. That stock is down another 3 . How serious of an issue is e. Coli for chipotle or you and your money. You have got apple, alphabet which i still have a problem saying, aka google, microsoft and jpmorgan chase, theyre all down. No surprise. We are back on power lunch right after this. Not everyone is making money on this deal. Hedge fund titan David Einhorn has been short on keurig stock. Kate kelly is here on more. How bad is he hurting right now, kate . Well, mandy, its kind of a mixed bag. Einhorn is still in the black on this short trade but by a lot smaller margin than he was as rendly on friday. He got in at an average price of 102 this time around. Hes been short it in the past as well which pegs the placement at around may and it was shaping up to be one of his biggest winners this year, down nearly 50 as of late last week until this morning that is. A surprise announcement that the Investment Firm j. A. B. Holding would buy keurig for a huge premium sent the stock soaring this morning up to about the 90 mark erasing many of einhorns previous gains but not obliterating them. Einhorn is down more than 20 yeartodate through october in his Green Light Capital fund im sorry, thats true november. He declined to comment on whether hes closed out the keurig position or plans to anytime soon. While it may not longer be an outsized winner, he still made 12 or so per share. Eminence capital, the sixth largest overall keurig holder and the largest among hedge funds is up by more than 30 based on rough math from the filings and other hedge funds all of which were long the name appear to be doing pretty well. Einhorn is okay at this jinx to juncture but a lot of others are doing very well. Now to chipotle where shares are down 30 from its 52week high. Chipotle withdrawing guidance for 2016 and slashing outlook for the Current Quarter as the e. Coli problem is spreading now to nine u. S. States. Bob darrington covers chipotle. He lowered his price target to 5. 75 from 6. 25 but does reiterate his outperform rating. Good to see you again. I would imagine that outperform rate something for your investors with a strong stomach but nonetheless, why keep it . To be fair, you know, as i have mentioned before, i think ultimately the business will turn. The problem, mandy, is weve seen the turn in the business likely to be elongated from what we previously expected. Clearly the fact that the harshness has been magnified by the users of chipotle, the mill lenell base which chat with their friends literally has turned a relatively regional problem into a national issue. Basically saying social media is to blame for this elongation of the problem being solved . I think its a contributing factor. If we look back in past times some of the bigger outbreaks were never fanned to the extent this has been. Also they have this food with integrity slogan. I comment chipotle for really making an effort to source locally and obviously the locally sourced producers are going to be the ones that lose out at the end of all of this, but how much does its slogan actually kind of create a bit of a backlash against the company in the healing process because, you know, now people are saying, well, you know, actually its got a bit of a problem when it comes to quality . Thats a very fair statement. Ultimately the monkey is on the companys back ultimately to win back over customers over time. And, you know, mandy, the tough thing about that is it wont happen overnight. Theres not a bogo coupon that will instantaneously turn someone who has been affected or squar scared back into a hard core user. Bob, thank you for your thoughts on the subject and once again your price target is 5. 75. Brian, back over to you. All right, mandy. Thank you very much. Right on deck on power lunch, well give you more on oil and stocks big slide. Wti crude at 37. 58 a barrel. Plus, angels pitcher c. J. Wilson in the house. Hes also a big time car dealer. We will try to throw him some curveballs coming up. Welcome back to power lunch. Seven months after debuting the latest installment in cnbcs disrupt the 50 list we take a look at how the Game Changing companies have fared since being named to the list and the growing concerns about surging c valuations in tech right now. Julia boorstin is here. So great to be here. Despite concerns about mutual funds writing down the value of startups, the valuations of the private companies on cnbcs disrupter 50 list have been surging excluding the two companies that went public, swear and pure storage the values are up 26 since may to 201 billion. Listener has more than tripled its value since may, intarsi therapeuti therapeutics, today it is worth 5. 5 billion. Then theres draft kings, despite its legal challenges it has nearly quinn tumd in value. Today the disrupter list includes 27 unicorns and there are three more than at the time our list was published. The search for the 2016 disrupter 50 begins in january. Follow cnbc disrupters on twitter for all the latest. Brian, back over to you, sir. I just want julia to know i had a big bowl of lasagna and pizza at her disc just before the show. Please dont make too much of a mess. Thank you. Im kidding. All over the keyboard. Im taking care of your desk, dont worry. Oil the big story today, getting down to ten year lows if you a just for inflation and we have another huge show from los angeles tomorrow, john watson will join us exclusively. We have a live wide ranging interview, that Company Fighting like everybody else to deal with these low prices do not miss that tomorrow in the 1 00 p. M. Eastern time of power lunch. We are back with angels pitcher, car dealer and all around good guy tj wilson. At ally bank no branches equals great rates. Its a fact. Kind of like shopping hungry equals overshopping. Welcome back to power lunch. Lets take a look at the numbers. The dow is currently down by about 160 points, so its down by triple digits but certainly off the lows of the day when it was down by over 200 points. One of the reasons for the weakness in trade today is what is happening with Energy Stocks. You can see wti crude at 37. 57. Today it did settle at the lowest since february 2009. Meantime lets take a live shot of San Bernardino in california where they are awaiting a live news conference. We will of course bring that to you in the next few minutes when it is due to start to make sure you do stay tuned for that. Brian. Mandy, thank you very much. Special guest right now, angels pitcher, car dealer owner, race team owner cj wilson. You are a car dealer. Yes. We talk about low energy and gas prices what has this meant for you . For us we sell motorcycles and the High Performance motorcycles are going to fly off the shelves right now. They burn fuel. They burn fuel. They still get 40 miles to the gallon or something but we are not a truck dealership so we tend to see more economy cars coming through the mazda dealerships. We will retail about 4,000 units so thats pretty good for us. I sat next to the ceo of mazda north america on the flight here and he said tell cj i said hello, he is one of our top car dealers. How well are you doing with the mazda . Were probably i think we are number one with one of our stores in the midwest and probably number four with our other mid wets store and our one in california we are trying to come in a little bit. Its a cool friday, im looking together into other brands, i have other stuff that im interested in right now. Anything you want to tell us . Come on. Fast, super expensive. Fast and super expensive, maybe. In arizona. Maybe. Maybe zach rinky can buy one of them, david price. Im going to have to get david a convertible, he is too tall. What do you make of these pitching 31 million a year . You have guys that finished second in the cy young multiple times as well, those guys are premiere talent, but baseball is flush with cash, the teams are doing well, the balance between local revenue and centralized revenue is very strong. We have the cba coming up in year. We have to keep going. We have to go to San Bernardino with a live newscast. From San Bernardino pd. San bernardino city and sheriff john mcmahon from the Sheriffs Department San Bernardino as well as assistant special agent in charge John Deangelo from the atf. Today were going to go through a number of things and we are going to answer some of your questions, we are going to open it up for a few questions, but first off i want to talk about the work that the atf has done, the joint Terrorism Task force and our local and federal partners throughout the weekend. Our job is to continue the investigation at breakneck speed as long as we need to do that and we will do exactly that. I want to correct something because it continues to come up