Transcripts For CNBC Power Lunch 20151228

Sea. No, not a giant squid or Chris Hemsworths biceps, theres a gigantic cargo ship in operation. Look at that thing. It literally is a monster ship. I know, and we are going it talk about how this could change the shipping business forever. Tyler is out all week. You just saw mandy doing the halftime report. A lot of swaps going on today. Stocks are sinking on the final trading week of the year. Major averages down a half a percent overall but its not all bad this year. If you own these stocks, treat your family to a nice dinner soon because you have made some money. Netflix up 135 , amazon up 115 , activision nearly doubling this year and nvidia up more than 60 . Oil and Gas Companies have been leading the declines. Chesapeake down 80 for the year. Consol and southwest energy down 75 and a list too long to mention of many more stocks down 30 , 40 or even 50 in the group so far this year. In the meantime, the financial and the Telecom Sectors are kind of the january and peter bradys of the market. The middle children of returns. Telecom down 1 yeartodate. Financials down 3 . The question is, can these sort of boring laggard groups this year become your Winning Investments next year . Jennifer fritsche covers telecom for wells fargo, Brennan Hawkins covers financials for ubs. The fed rate hike heard around the world hasnt proven to be that big an event nor tfor the financial names. Are there any you feel will outperform next year in part because of higher sflats. What id say is we prefer given the fed rate hike and the tailwinds you hit on briefly, we would prefer the bullish bracket groups and then the trust groups. Even if we see a flattening yield curve, they can still benefit. You get an increasing earnings lift on the back even if you see potential multiple compression across the market. The group ought to do well at least on an outperformance basis if not an on an absolute basis. Talk to us about citigroup, the most international of that bunch. We have seen emerging markets get absolutely walloped, brennan because of the commodity collapse. Is there a sign citigroup can turn it around even if commodities dont turn around. Citigroup trades at the biggest discount, a full turn Business Count on an earnings basis. So citigroup clearly the stock reflects at least a component of the risk to the emerging market exposure as you hit on, and its really more than just commodities. Its all about strengthening dollar with the worry that if youve got stronger dollar, its going to draw cash away from some of those emerging market economies and put pressure macro economically on some of those economies and, therefore, the Banking Industry within. Its a question of how much the dollar is going to continue to strengthen here for citigroup. Citigroup is a stock i like. I feel like at current prices at least the component of risks are reflected and the dollar has strengthened quite a lot in anticipation of these first rate hikes. Shes going to move slow. Shes going to move cautiously, and so we might not get a whole ton of follow through, maybe another hike or two, perhaps at most three or what most investors expect. Im with them. Brennan, i want to really hone in on that point because even in todays session we saw twoyear yield hit a 5 1 2 year high and the 10year yield come down. Were seeing a flattening of the yield curve since the fed had its meeting and hiked rates. What if the yield curve doesnt steepen, does that change the outlook . Most loans are pegged to the front end, particularly when you think about commercial loans that are often libor based. You also have credit card which is prime plus, right . So when you think about the money center banks, which tend to be more consumer lenders, most of the loans, the mortgages they keep on the Balance Sheet arent the 30year fixed theyre selling off. Rather, theyre going to be a. R. M. S where they float after a certain amount of time and then theyre going to be credit cards which are pegged to the prime rate. So really the long end of the curve is not as important to the money center as some might think. Of course, a flattening yield curve, they call it a flattener. Sorry. Have to leave it there. Thanks so much. On that note talking about twoyear note. Waef twoyear note auction. Lets get to Rick Santelli with the results of that. Melissa lee, this could be the strangest auction dynamics results i have ever seen. Okay. 26 billion twoyear note yields. Last twoyear note auction of the year. The yield 1. 056. So a couple whiskers under 1. 06 which happened to have been pretty tight. That was pretty good in terms of where the one issue was trading but here is where it gets strange. First of all, thats the highest yield at auction since 09. Bid to cover 3. 29. This one was 2. 8. That was the weakest bid to cover. How many dollars are chasing every dollars worth of securities available since the summer of 09. 37. 5 on indirects. Thats the softest since christmas of 14. The only really good metric here was the directs, and they were off the charts, 27. 1, the best since december of 2013. A lot of extremes, probably because theres extremely vacant areas in a lot of the trading desks but d plus, dog plus is the grade for first of 90 billion in supply. Tomorrow 5 year followed by 7s. Melissa lee back to you. Dog plus for the 2year auction. I have to ask you about the yield curve because we saw the 2year yield jump as i mentioned to the banking analyst and the 10year yield come down. Whats the outlook down there for what happens with the yield curve going into year end . Well, pretty much many are looking for ongoing flattening because the short end will be nailed to the notion of the fed raising rates and the long end so soft growth, whether its the 2 handle in our gdp or think china here. But anything can happen and sometimes the contagion of raising rates does catch up to the longer end, it just doesnt seem to be occurring on this tightening cycle, but it is only one tightening thus far. Well have to continue to monitor when we get into the next several meetings. Rick, thank you. Rick santelli in chicago. Lets take a closer look at tell com. Jennifer fritsche is a Senior Analyst at wells fargo. Great to have you with us. You have a few picks going into 2016. I want to start off with sprint. It seems tmobile is upping the ante in terms of the promotional activity and thats causing others to up the ante including sprint. When tmobile rolled out free video streaming sprint came out and rolled out an aggressive half price deal here. So, jennifer, what do you like about sprint and are they going to be sort of forced to continue to discount into 2016 . So sprint is kind of the big empty airplane. Remember, they have the most spectrum of any of the four National Carriers and as all of us continue to use more data, thats extremely compelling because the rest of the carriers with less spectrum will be fighting with one arm behind their back. They need to get customers to them and thats why these promotions i think are value add. Remember, these are temporary but sprint from a network standpoint is ready to take them in and show with their greater depth of spectrum they can offer more for their dollar. Do you get a read based on christmas weekend sales of phones as to whether or not sprint is gaining from the holidays . Our checks do show that sprint has seen nice momentum. Remember, their churn was really at an alltime low in the in the most recently reported quarter. We expect that to continue but we also expect gross a. D. Ddds w is new customer additions coming to them to see a nice lift. Its coming from the larger carriers, at t and verizon. One thing we love here, jennif jennifer, are new names and im not familiar with zayo corporation. You say theyre a great dark fiber player. I presume youre not talking about cereal. Who is zayo and why do you like them . We like with the wireless pressures which melissa just alluded to, wire line is actually becoming a lot more exciting. These are the pipe layers, the Highway Builders to and from the cloud. Names like zayo is the dark fiber. As you have companies and headlines like apple building their own cdn, more edge out strategy, google needed more bandwidth, this is all positive for the highway owners and names in that space would include zayo, also level three which is our top pick. We also even like the Highway Builders names like dicom, ticker dy. Jennifer fritsche of wells fargo, thank you very much. Sprint and zayo, have a happy new year. Well see you soon. You, too. Thanks. Speaking of the highways of the sea, the era of the mega ship has officially begun. The largest container ship ever to come to america arriving at the port of los angeles. This literally is a huge story. Morgan brennan joining us now with more. Morgan . Reporter hey, brian. Thats right. Were going to call this the dawn of a new era for shipping as this mammoth ship called at the port of los angeles this past weekend. So the ship is called the b benjamin franklin. Its the biggest to ever arrive at a u. S. Port. It has capacity for 18,000 containers, that is about double the average ship that calls at l. A. , and just to put its dimensions in perspective, it is longer than the Empire State Building is tall. Wider than a football field and when its fully stacked, it stands about 20 stories high. So the ship is making a test run. Its coming from ashia to l. A. Late they are week it travels north to oakland. It was not loaded to full capacity, only 70 utilized in part because u. S. Ports are just not ready for these super sized ships yet. Even l. A. Which after a decade of planning is the closest. So one maritime consultant recently warned if we see more of these super size vessels before the ports are actually ready and specifically the flood of containers they bring, that could overwhelm the west coast ports and make the east coast ports look even more attractive. Still, the expectation is we will see more and more of these super sized vessels coming on the transpacific trade routes in coming years because they are very fuel efficient and they dramatically cut down the overhead costs for cmacgm and other container shipping lines. And a few Amazing Things about this ship, it has the thrust power of 11 747s but to me the most incredible thing, the crew is only 27 people to run that huge thing. Its only 27 people. Its all computers. Reporter it is pretty incredible. Right now cmacgm has not announced any more plans to bring the ship back and forth to the west coast, but the expectation is were going to see more and more of these massive ships coming online and coming into places like l. A. The fact that the crew is that small with that many containers is really quite something. And they do have an indoor swimming pool, i might add. Morgan brennan, thank you very much. So this year was a tough year for most bond investors. What about next year . One fivestar fund manager will tell us where he is finding some relatively safe yield. By the way, youre watching cnbc. We are first in business worldwide. Shows that people really like how with directv you could put tvs anywhere and not see cable wires and boxes in every room. Why cant we get people to just say cables, schmables . Hold on, hold on, i really like what youre doing there because if we just add schma in front of something, it just doesnt seem like a big deal. Boxes, schmoxes. There you go. Cold sore, cold schmore. Yes scotch, schmotch what . Ill take some of that schmotch alright. Schmank you vo get rid of cable and upgrade to directv. Call 1800directv. Welcome back to plunk. Im melissa lee. Chipotle shares are lower. A restaurant near Boston College has reopened several weeks after 136 patrons fell ill with the neurovir neurovirus. Valeant pharmaceuticals taking a big hit. Michael pearson has been hospitalized and has take an medical leave because of a severe case of pneumonia. His illness comes amid government scrutiny into drug pricing and pressure from investors on how the Company Plans to grow profits. We have more on this story in the next hour. Lets get to seema mody for a market flash. A bright spot on our radar. Sign Signet Jewellers up 1. 5 . The company was the focus of an article in barrons over the weekend suggesting shares are expected to rise and the recent selloff and credit concerns are largely overblown. For the year, shares though down about 8 . Brian . Seema, thank you. Turning now to the broader bond market. How are investors balancing their positions as we head into next year . Thoughts now from jeff, manager of the fivestar 3. 8 billion thornburg limited income fund. Joining us from beautiful santa fe, new mexico, this afternoon. Thank you for joining us on power lunch. I guess the delicate balance, the basis of your job going into next year is going to be where can my client get a relatively decent yield but relatively safe yield because we have seen many bonds, especially the higher yielding junk bonds, have severe problems this year. You know, thats absolutely correct. Our job every day is looking at the markets. Its global generalist. The team here trying to find interesting sources of yield that wont introduce a lot of volatility into the portfolio. One of the ways we do that is dividing the word into a three Balance Sheet approach. Government Balance Sheets that started off the crisis in a pretty poor situation and have since gotten worse. Corporate Balance Sheets that started off the crisis in a relatively safe place but have leveraged up and the consumer Balance Sheet which arguably may have been the reason for the crisis but have since delevered. Its the consumer Balance Sheet where were finding the most interesting sources of yield. Like what . Across a lot of spectrums. When i say the consumer Balance Sheet that can be on the assetbacked side, auto loans securitizations, credit card securitizations, fairly highly rating securities short term. Even in the safer parts of fixed income where spreads have moved out quite a bit, those look kind of interesting to us. But as well as on the corporate side of the consumer Balance Sheet side as well. Auto loan story, jeff, is interesting because we have highlighted on this program many times about all this sub prime concern around auto loans and how auto loan defaults could spike. It doesnt sound like youre that worried about that. It depends. You really have to divide the world up. Theres a pretty significant difference between your average person with a relatively hifgh fico buying a reasonably priced car versus that of the subprime world. We have played in the Higher Quality auto story as well as the subprime story. But in todays market where spreads in both sectors have widened pretty significantly, were finding more value in the high quality, not the subprime space at the moment. Well leave you with one final question because people say this is really the housing problem redux on a smaller level. And the housing issue, as our viewers know s that crap loans were bundled in with good loans and then sort of packaged together and sold. Is there any indication that these crap for lack of a better term, auto loans are being bundled with the good stuff or can you really identify the good stuff as the good stuff . I think it depends on which name youre speaking towards. There are certainly programs out there that do pubundle a wide spectrum of loans out and pile them into one broader securitization. Then you brought up the story of subprime auto loans and generally speaking in the market they tend to be two different buckets, if you will, where the Higher Quality securitizations go into a unique bucket versus the subprime borrowers who are pushed into a discrete bucket as well. All right, jeff. We appreciate it. Thank you very much. Have a happy new year. Well see you in 2016, buddy. Thank you. Sounds great. Thank you. The collapse of oil certainly one of, if not the biggest business stories of this year. Prices were down 30 . Saudi arabia posting a record budget deficit because of those declines and that could have an impact on how the government deals with its citizens. Whats ahead for Oil Next Year . We have your 2016 playbook. Thats next. As 2015 draws to a close, cnbc is breaking out the 2016 playbook looking at ways you can make money in the coming year, and this hour were focusing on oil. Here is jackie deangelis. Oil prices saw massive volatility in 2015 hitting lows not seen since the financial crisis. Global producers continue to pump more crude choosing to maintain market share despite a low price environment. Here are three predictions in energy for 2016. Prices will bottom in the first half of the year. The biggest global oil producers, opec, russia, and the United States, have not and will not significantly drop production in the first half of the year. This will cause crude to bounce around the 30 range, maybe even the 20s before profit pressures force more meaningful production cuts that will eventually stabilize prices. Iranian oil will come online. Though the markets have already priced in this expected bump in reserves, when it actually happens, it could cause more pricing pressure initially until Global Supply is curtailed by other producers. Buy big oil. Share prices of Big Oil Companies have suffered this year as crude prices dropped. They could see more pain in 2016 but names like exxon and chevron that pay dividends and are diversified will weather the storm and see upside when prices stabilize. All right. Take a look at this video. Iraqi forces declaring a big victory as they reclaim the city of ramadi from isis. Is this the beginning of the end for the selfproclaimed Islamic State. Michael reuben with is the enterprise institute. How meaningful if at all is this victory over isis . This is extremely meaningful for iraqs Prime Minister. He pulled a rabbit out of the hat because his back really has been against the wall. He had this oil crisis making it hard to pay salaries. He lost a lot of territory, and he was being called indecisive and infective. Now, however, theres a major victory. The big concern however is after every single victory against the Islamic State, they do something astounding to shift momentum back and so we need to hold our breath and see what might be up their sleeves. And every time, unfortunately, that we have seen a victory against isis, isis has responded with pretty horrific acts. The terror attack in paris and some other things that are too gruesome really to mention. Do you anticipate then that isis not going to take this loss sitting down . Well, absolutely. The Islamic State is motivated by ideology, not by grievance. There isnt really any compromise that can be struck with them. That said, one of the Big Questions for Prime Minister abadi and his administration now is what is he going to do with al anbar, this predominantly sunni province. How is it going to be governed . When i was in iraq, when i was in baghdad last month, already plans were being put in place perhaps for a provisional council and so forth, but this is really the biggest question on his plate right now in addition to fighting the Islamic State. The only other major city in iraq which they occupy is mosul and perhaps in the liberation of ramadi, if it really happened, were seeing inside the crystal ball for what might happen over the next couple weeks or months with regard to mosul. I want to turn the corner and talk about oil and money. Today we got the budget. We understand that in 2015 there was a deficit. In 2016 there will be spending cuts. It seems saudi arabia is content with continuing to pump oil. The chairman saying saudi arabia will outlast the others until the market rebalances. How long can they keep running at deficit, mike, and at what point do they risk perhaps civil unrest because of the budget cuts that they will have to then pass on to their citizens . Well, you know, saudi arabia is no they dont want anyone to know the answer to that. While they said they can last five years, some analysts believe they can only last about two years. The question is how large are their foreign reserves really and how fast are they burning through them . In the First Six Months of the year they burned through about 10 of their foreign reserves. If the figure is greater than that, then this really is a game of poker and saudi arabia is bluffing until everyone else folds. All right. Were going to leave it there. Thanks for your time. Mike rubin. China stocks having their worst day in a month. Its been a wild year but the shanghai index is still up 9 in 2015. China announcing two big moves that could impact their stock market in 2016. Plus tornadoes and heavy rain killing more than 23 people. More bad weather is on the way. They have your forecast. Thats next. Hello, everyone. Im sue herera. Here is your cnbc news jupdate. Iraqs Prime Minister is vowing to defeat isis in 2016. The remarks came in a nationally broadcast speech hours after the iraqi army retook the city of ramadi from islamic militants. Isis had controlled the strategically important city since may. Officials in san diego say a man fell 60 feet to his death because he was distracted by an electronic device. Lifeguards say the 33yearold man was walking on top of sunset cliff looking at that device when he fell. Severe flooding causing evacuations for hundreds of People Living in its northern british city of york. I think we just saw that video a couple minutes ago. Englands Prime Minister David Cameron is touring this region where thousands are still without power. A 94yearold bridge came tumbling down today in pennsylvania. The structure was demolished after inspections showed it needed to be replaced. Work on a bridge is expected a new one is expected to take about two years. Youre up to date. Thats the news update at this hour. Back to you, brian. All right, sue. Thank you very much. Gold prices are about to close right now. Lets get a check on the price of gold. It has been a very tough year for the precious metal. And here are your closing trades on gold in the commodities. Gold down 9 bucks to 1,066. 90. Down 0. 8 . The other metals down as well. Silver, copper, playalladium, a platinum all down. Stocks in china having their biggest loss in a month plunging 2 . China stocks in the u. S. Are also down. A revamp of ipo rules sparking investor fears. Seema mody has more. Overnight china gave the green light to a new ipo system which was designed to make it easier for Chinese Companies to raise funds and go public. Over the summer regulators banned ipos due to volatility in the stock market. The concern though among investors is that this new system will lead to a flood of initial Public Offerings and sent an oversupply of shares in the market. Nsbo Bank Anticipating over 600 companies could go public on this system. This in addition to weak industrial profit data sent the shanghai xosity lower witnessing its worst day in a month. While china tries to ease investor fears over the financial markets, its also trying to avoid a demographic crisis. Chinas one child policy going away, families can now have two children as of january 1st, 2016. A move that policymakers hope will boost labor supply and ease pressure from an aging populati population. But a number of economists are skeptical saying if china really wants to see a significant change in the population mix, it shouldnt limit how many children families have altogether. History has also shown us beijings move to ease restrictions back in 2013 really didnt help and thats why experts dont expect this announcement to lead to a baby boom or a meaningful change in chinas growth picture. Its interesting to see the fallout here in the United States when you see names like a baidu and others. Can i ask you both a stupid question . No question is stupid according to socrates. Only stupid people. I will be that person. Bring it. Why do we talk so much about china when india has about the same population . We never talk about india. I know the personal income is much less, right . Only 1,500 u. S. A year versus 4,000 u. S. A year. Its a huge growing market with a solid contract system. They use british law, but we never talk a about a possible india boost. Two reasons. First, in you look at the s p 500 companies on average have higher exposure to china than india and secondly, when you look at the size of the economies, china is still much larger than india. Why are oil prices down today . Why have commodities been down this year . Because of china. When nike is on the Conference Call theyre talking about exposure to china. India is a growing market and investors have been looking at india particularly after the election of Prime Minister modi but for the most part china is a much bigger force when it comes to the global economy. Fair enough. When it comes to modi, i would just say people have been saying hes been overpromising and underdelivering. Thats why in 2016 the focus will be on what kind of Structural Reforms he tries to implement. Agreed. Made a surprise visit to pakistan. Thats true. And in 50 years india will likely have more people than china. Im just throwing it out there. Its an interesting point. Hopefully a decent question. Seema and melissa, thank you very much. Stocks are down on first day of your final trading week of the year. The dow and the s p 500 now in the red for the full year. Lets forget 2015. Lets look ahead. What kind of returns can we expect next year . Joining us john trainor chief Investment Officer at peoples United Wealth management and craig columbus, ceo of tower square investment management. John, what kind of year do you expect for the broader stock market next year . Well, i would love to tell you that were pounding the table, but we actually have fairly muted expectations. Were looking for the s p to be up midsingle digits. We dont see pe multiples expanding and earnings will be better but not good enough to really boost the market. So 5 , lets call it 5 next year. So youre not pounding the table but it doesnt signound l youre hiding under it either. No, we actually like the u. S. Market. Were overweighted u. S. Equities. We think there will be pockets in the u. S. Market that will do very well next year, but the overall market will be muted. For instance, we like financials right now quite a bit. Can you be more specific on the financials, john . Sure, sure. If you take a look at the larger banks, we like jpmorgan and in the regional area we like key bank. Your viewers are probably familiar with the fact that key bank Just Announced a very large acquisition about two months ago of first niagara. We assume that acquisition will be approved, and that will have tremendous cost savings for key bank. We like it on the cost side and there will be incremental revenue next year. Craig, to you. Will 2016 be the year of recovery for energy. And by that i mean if our viewers hold their nose, buy some oil and gas stocks, will they profit next year . I think so. For the patient. Because we are now at peak energy pessimism. And if you look at commodity bear market cycles, they typically last 20 years but most of the price damage is done in the first six years. Weve had five consecutive negative commodity price years, so i think a couple things. Dollar appreciation will still be up but less in 2016. And as nonopec supply starts to flatten, as that shale production starts to come off, i think it will create opportunities in things like natural gas in particular, pipeline, refinery, so my answer, yes. So i would assume then you are one of those People Holding your nose. Can you give us an idea as to what you might be buying, craig . I think you have to be patient on pullbacks. I thought once we took out 38 on oil, we would trend back down to the mid to low 30s and so i think you have to be patient. Wait for it to pull back. I think the case is these names start to stabilize. Its not oil going up. Its just stopped going down and then theres some good incomeproducing assets here in the integrateds in the service side, even the mlp side for the patient, longterm holder. You say maximum pes p pessimism. I beg to differ a bit but thats another conversation. Go to powerlunch. Cnbc. Com. Lets get a check on the bond market. Rick santelli is at the cme. Whats going on . If you just looked at an intraday of 2 year note yields, you pretty much cant pick out much. If you go down the curve to 10s, the yields moved down before they came back a bit. There was some flattening. Lets look at 10s minus 2s. We have the flattest curve just above 120 going all the way back to february but look at the 20 year chart of that same 10 minus 2 spread. Were on the precipice of comps going back to 08 and beyond which makes sense considering it was the first tightening in almost ten years. Brian, back to you. Rick, thank you, sir. Deadly weather across much of the central United States. You had tornadoes, you had blizzards, heavy rain killing more than 20 people across three states. Unfortunately, more bad weather is on the way. Here is the weather channels chris warren. We are tracking multiple threats today and beyond. Starting off right now with a look at the Severe Weather threat, where the best chance for some of the strongest storms will be. Anywhere with orange or red theres a chance for thunderstorms but its that red area where theres the best chance for damaging winds, also the threat for tornadoes again. Parts of alabama into georgia and tennessee. Then theres the flood threat. Tornadoes, damaging winds, and a flood threat. This is the amount of rain in the next couple days. 3 to 5 inches of rain. We have seen already the water rescues happening in texas. Weve seen a lot of flooding from arkansas to missouri and throughout the south. More of it is on the way. More rain, more flooding expected. And then the snowy side of this massive storm thats moving across the country. 12 to 18 inches in the darker purple. A widespread area, 8 to 12 inches of snow and outside of that 3 to 5 inches. As you look here at the northeast, a foot to a foot and a half of snow. This is mainly for the northern locations and the higher elevations. The big cities, if you see some snow, it will change over during the day tomorrow into rain. So any snow that does and if it does accumulate will go away because of that rain. This is a look at the power outage map. This is basically where were expecting the most ice and the most wind, and that combination potentially can bring down branches and power lines. We are tracking multiple threats from Severe Weather to ice and snow. Thank you. Its been a hot year for housing in miami, but trouble spots are forming. Plus, we speak with one Luxury Real Estate broker about what to expect from highend housing in 2016. Stay tuned. Welcome back to power lunch. Want to draw your attention to shares of fitbit near session highs up about 5 . This on reports that the wearable gadgetmakers app was the most downloaded after christmas. Suggesting strong holiday sales. The stock is up over 50 since its june ipo and shares are very close to the ipo price of 30. 40. Brian . To housing now, and we all know that Miami Real Estate has been hot this year. In fact, singlefamily sales are on track for a record year. That aside, it is apparently not all sunshine. Diana olick taking a closer look. Brian, miami is fast becoming a tale of two housing markets. Singlefamily home sales on pace to break another record in 2015 according to the Miami Association of realtors but all those coastal condominiums, they are another story. Condo construction is booming. 38 towers with more than 3,600 units have been completed in miami, dade county. There are 74 towers with over 10,000 units currently under construction and 65 towers planned but not yet in development. Im not making these numbers up. Condo inventory is up 12 to nearly tenmonth supply. A balanced market is considered around sixmonths supply. Condo prices were still up 7 from a year ago in november but that has been fueled by foreign cash. More than half the sales. And that cash starting to dry up a little bit. Now, singlefamily is a much better picture. Sales strong and a healthier 5 1 2 month split. The medium price is up 12 from a year ago but prices are still at 2004 levels and about a quarter of singlefamily sales are of distressed homes. Thats foreclosures and short sales. And that is a big improvement from a year ago. Dont get me wrong but we still have a lot more ground to cover on that one. Melissa . Diana, stay right there. Lets bring in samantha, a Miami Real Estate agent and on bravos Million Dollar listing. Latin america is feeling some pain in terms of the economy. Is that why were seeing a glut in the condo market . That is part of it i will say. Actual foreign cash and cash in general has gone down by about 9 from last year. Obviously, you know, latin america, europe, those are really the main markets for miami that are really spending their money internationally. So losing them and taking that number taking that hit, thats definitely not a good thing. I think the main question now that so many people ask is if miami is actually heading into a bubble, and its interesting because there was a recent poll of 70 housing experts. 19 of them said that, yes, in the next three to five years well be heading into a bubble, and 13 of them said theres no bubble at all. So moral of the story is the housing experts obviously have no knowledge of anything and the poll was kind of pointless, but what i can say is based on everything that diana just said, those are the facts and thats the information. So if youre a buyer, you really need to look at the market and figure out what area are you interested in and whats what area youre interested. Im interested in why so Many Developers are going north. Miami, south beach, thats got the cachet and thats where you saw the demand. Now all i hear about is developers saying were moving north up the coast. Were heading into area that is werent that popular before. Why are they doing that . Well, because in my opinion there are certain areas, lets take brickle for example, very, very saturated, lots of buildings, lots of inventory. You go on the mls and you will see plenty out there to choose from, but george perez is the miami condo king. He actually has moved north into an area called ft. Lauderdale which is a great area. They cant have the volume that miami currently has. It has everything that miami has on a much smaller scale and people are realizing that, you know, its a better bang for your buck and people in miami, look, if youre going to buy miami, youre buying miami because its miami. Youre not necessarily buying because of the price. Youre buying because you want to live there. Right. So then theres the other half of people that really want to buy and have a good spending for what theyre getting and thats north. Thats ft. Lauderdale, thats boca, pompano. Theres plenty of other areas you can enjoy the sun, the fun, and the sand p. M. Im curious because you said people are wondering whether miami is going to head into a bubble. Given how many developments are currently under way right now which diana had outlined, one might think theres a bubble in the process of popping right now. How much more inventory can that market can the miami market actually support if all those condo that is are currently under development actually are completed . I mean, this is the thing. George perez just actually spoke about how he sees that theres a lot of inventory and not as much demand as there used to be. But on the other side, all of these preconstruction, youre putting down 50 , so theres got to be some security, some integrity with whats going on. Its a little bit scary that there is a decent amount of inventory, yes, but, again, it depends on what price point are you looking at . If youre the ultra luxury, theres the 10 million penthouse, youre not necessarily waiting for the best deal in town. Youre buying the penthouse because you want the pebt house. If youre looking at that 300,000 unit, those have been going up in price. Theres more and more that are coming onto the market. So thats when you really have to silt down and figure out, okay, these prices are inflated. Obviously rates are going up now. Do i want to be here for the long run . Can i see that cycle circle out . Right. Or am i trying to buy it and flip. If youre looking to buy and flip, this is not the market to do it in. Thats the bottom line. Samantha, thank you. And diana, our thanks to you as well. Thank you. Still ahead on power lunch in the next hour, oil prices, guess what . Taking another hit today. All in all, theyre down now big time this year. Will the major producers be able to pick themselves back up if oil remains as many say lower for longer . And why is it that some have weathered the oil storm far better than others . Early numbers in for the Holiday Shopping season. What retailers might be the winners and losers . Well dig in. And which big name stock that you know could be headed for 1,000 a share. An analyst making that call today. Well tell you who, what, where, why, and how all after this break. Oh remotes, youve had it tough. Watching tvs get sharper, bigger, smugger. And you . Rubbery buttons. Enter the x1 voice remote. Now when someone says. Show me funny movies. Watch discovery. Record this. Voila. Remotes, come out from the cushions, you are back. The x1 voice remote is here. Welcome back to power lunch. Im melissa lee. Stocks are down broadly on their day of the last week of the year. Energy shares are by far the biggest loser followed by materials. Oil is on track for its first down day in a week. Crude oil down over 3 and back below 37 bucks a barrel. The s p 500 is struggling to carve out gains for the year, but, hey, look at germany and china. Both are posting strong gains. Is your cash better off overseas than in america next year. Plus three sectors that may post strong growth next year. Were breaking out the full cnbc playbook just for you. Its a profitable hour and its coming up. Stick around. Random . No its all about understanding patterns like the mail guy at 3 12 every day or jerry, getting dumped every third tuesday. This happens every third tuesday. We have Pattern Recognition Technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. Theres no way to predict that. For all the confidence you need. Td ameritrade. You got this. The Dow Jones Industrial average is on pace to post its first down year since all the way back in 2008. Remember those days . Thats right, six years of gains could be coming to a close this year. Weve got a couple days trading left here. Lets talk about what was the big surprise from 2015, what might be your big surprise for 2016. Bob keiser is here. Thank you for joining us. The surprise to many is not that oil got weak, but that it got weak so fast. The massive decline in oil and gas related stocks and the subsequent risk of the bond market related to oil and gas. Do you see any of those three things abating or improving next year . Well, absolutely, brian. The u. S. Dollar has been strengthened for three years. Its been putting downward price pressure on commodities for three years. I dont think most people pictured crude oil going out at 35 at year end. By the way, the Federal Reserve is also normalizing policy which we have been waiting for for a long time. You have high yield down 10 , 12 , 15 for some funds. Its sort of misleading to think that equities were going to have this great year when even Investment Grade bonds are down 3 to 4 this year coupled with the stress coming out of the high yield bond market. Im not an investor, but i have a 401 k like everybody else. When i look at the markets here in america, i think valuations are pretty not high but theyre not low. Oil is going to remain cheap. The fed may raise rates a couple more times. The consumer is sort of on edge right now. There are a few very positive things, too, but i dont see many gains for the u. S. Equity markets personally next year. What would be the where would i be wrong . Well, it depends because the u. S. Economy if you look at personal income and consumption, theyve actually been decelerating all year. Against that backdrop you have to ask yourself how many more fed tightening measures are going to come in the name of normalization . If its going to be two, possibly three, a lot of that tightening is already priced into the Foreign Exchange market which means the downside for commodities could be limited. We see crude averaging about 46 a barrel in which is its 25year inflation adjusted average. Okay. But having said that thats where oil wants to be long term. And if thats okay, then a lot of the panic in the high yield market is probably overstated. By the way, this is a great metric for you. Historically in years that the high yield bond market is lower on the year, equities are usually down that much or as much as double. So equities to some extent have been immune. They are sort of the Silver Lining the fact were not down much more is a positive sign . Exactly. Its a positive sign because equities are hanging in there and if we are looking backward right now in the Rearview Mirror for credit stress, in 2016 it will be a lot better, could you get to 2200 in the s p which is a 16 multiple which is the 15year average price earnings ratio for the s p. Nearly everybody thought oil would be higher by the end of the year. You said that at the beginning of the year. A lot of people did. Almost everybody seems to think the dollar will continue to strengthen against the euro. Could they be wrong just like so many have been wrong with oil . And, yes, they could because which would make european stocks look what attractive . The dollar has been strengthened for three years. They were three years in advance of the fed pulling the trigger on normalization and european he can wequities have performed relatively better. The European Central bank is still conducting squeezing. They are outperforming. If you had to take your kids allowance and put money into europe or the u. S. , not wanting to lose your kids allowance, is europe a better bet . At this point for my money i would have to say no. Were sticking with the s p 500. The 16 multiple gets you to 2200 at the end of the next year. We are already going through a lot of this pain of normalization, how Central Banks extricate themselves from extraordinary monetary ease. The European Central bank and the boj have gone through the same exercise ander and its been painful. Bob, its a pleasure. Well see you, by the way, in the new year. Pleasure. It is now 2 00 on wall street give or take, about lunchtime in denver. The dow is lower, as you guessed it. Oil falls again. Hi, everybody. Much more to do on stocks and oil but your big developing story this hour, a huge drop in shares of chimerix after a drug the company is developing did not work well enough in trials. Cnbc biotech reporter meg terrell is joining us with this developing story and a big loss for the company, meg. Thats right. It was its lead drug. It was in phase three latestage testing to prevent infection after stem cell transplant and it failed to meet its primary goal in the study. The stock falling 81 . Analysts downgrading the stock. Piper jaffray lowering the price target to 10 from 63. The company trying to figure out its path forward. It expects to get the fulda that set early in 2016. Trying to figure out what happened in this trial that made it not work out where as earlier studies did turn out more positively. Its an example that really tough time in biotech investing. These phase three trials, when they go another way, it can really be bad news. What are analysts say in terms of the hope. That drug had shown pretty decent results up to phase two. Its that period afterwards where there was what was it a significantly higher significantly higher rate of mortality sn. Thats right. People are trying to parse what was different between phase and phase three. Thats why i love melissa, she readsed analyst notes in biotech. There were differences based on when she started treatment and theyre trying to figure out, is there a path forward either in this specific incompetent fex or this is nonstatistically increase in mortality. I think any increase in mortality is statistically significant for those facing mortality. Its a binary event. You really have to have a strong stomach to invest in individual biotech stocks which are dependent on lead assets. We compiled some biotech stocks just this year that have seen these kind of very binary events to the downside. If we can show some of those. They show the biotech cliffs of doom in their stock charts. These are charts that strike fear into the hearts of every biotech investor. There we go. Tetraphase is one of them. Its down 74 . But in one day it was down 79 in september. It was developing an antibiotic. Celadon lost 81 in one day on a failed trail on gene therapy. Of course, biotech can go the other way as well. What they say is high risk high reward. In street talk last week we had adapt immune. A lot of these analyst price targets on biotech seem off the charts because youve got to realize what theyre saying is if the drug works, they could make 1 billion. Right. Or they could make zero dollars. Biotech perhaps more than any group is a little gambling, no . Youre gambling on the drug trials. Nobody knows how theyre going to turn out, not even the scientists. Thats why its so expensive, why its so risky and the valuations you see going in here are sort of percentage of the likelihood something is going to succeed. You can say maybe this will draw 1 billion but we only give it a 60 lick liehood kelihood. Its not all of them. Theus are o these are ones with only one drug in the pipeline. I have to ask you about valeant. The ceo diagnosed with pneumonia. The companys response was interesting. They created an office of the ceo and then another office for the support of the ceo. Whats your take on this . Its a really interesting question. A lot of people are worried about the Succession Plan for mike pearson even bout thwithou this illness hes going through. We hope he gets better fast. The fact they had to create an office with three people in it and three more folks from the board to oversee that. What a lot of people have worried about is who is the successor. When you create a committee of three people, its not clear who that one person to succeed him would be. When you look at one person being replaced by three, you wonder why is that the case . They have no bench . Valeant says they are overly complicated as an accounting structure and you wonder why cant they find one person, the coo, who could step in. The general couns maybe it they think it will be very interim and they didnt need to yet des tig nate his successor. I think theres a bigger question as to whether or not there would be somebody who could step into this complicated company. There were a lot of questions about mike pearson, whether he should continue as ceo. There was talk because maybe they couldnt find somebody else who would either take the job with the company in the mess it was in or be equipped to deal with the mess that the company is in. And its still in a mess. Which what you said is so true, but to me if i was an investor i would think do i want to invest in a company where it is so complex that you need a group of people to figure out how to run it. I dont know. Maybe they would. Its a rhetorical question i guess to our viewers whether they would care. Yeah. Theres a lot of questions going on with valeant. Its just a really bad time for the company to have any more uncertainty. Meg, thank you. This year will go down no doubt as a year of pain for many oil and Gas Companies and their investors. Particularly hard hit the oil and Gas Companies focused on the higher cost areas such as the area highlighted right there, the bakken in north dakota. Many of the big bakken producers have been absolutely walloped this year. Continental resources down 42 . Whiting oil and gas down 73 . Youve got hess, major corporation, losing a third of its value. Eog, a little more international, down 23 i ie yeartodate and statoil losing 20 . There are many other companies down even more but their market caps have become so lowther difficult to mention on this program right now. As some see pain others see opportunity. Low prices can, not will, can mean potentially big returns if the stocks come back. That, of course, is a gigantic if. John white, Senior Research analyst at roth capital joining us. Its been a surprising year. I understand the idea if oil turns around, some of these names may look attractive. Given what weve seen, what is the real likelihood that things are going to at least stabilize if not turn around . Hello, brian. Its good to see you again. With regard to 2016, we rely a lot on the iea estimates and the iea most recent iea estimate is for about a 1. 2 million barrel a day increase in Oil Consumption combined with about an 800,000 barrel a day decrease in nonopec production. When you consider those two figurein the context of an oversupplied market of about 1. 2 to 1. 4 Million Barrels a day, you can see a glimmer of hope that we might be in for a more balanced market in 2016. Now, the market has to make room for additional iranian production once the sanctions are formally lifted, and thats probably the major wildcard on the supply and demand equation. And ill tell you what, john, glimmer of hope is a hard investing strategy. Well, compared to the rest of 2015, a glimer glimmer of hope looking pretty good for our sector. Fair enough. Do you anticipate, and i dont want to mention names because theyve already been walloped, some of the bronze are a trading at 12 cents, 20 cents on the dollar. Do you anticipate it will be the situation where a number of companies go away but the ones that can hang on that get the capital or get the investment or whatever it is are going to be stronger five years from now. These could be solid longterm investing opportunities but theres going to be a bankruptcy wash ahead of it . Its going to be a very mixed bag. With credit risk you have to be company specific, and, yes, there could be some tremendous bargains in energy high yield and theres also going to be some tremendous losses resulting from bankruptcies. Theres some smaller E P Companies that are financially leveraged that have acreage in the wrong spots, and then theres some financially leveraged E P Companies that have acreage in the sweet shots of shale plays. The good news is most of these companies dont have a lot of bank debt thats currently drawn. Most have high yield maturities out to 2018, 2019, and 2020. As a very basic starting point, john, and this is one of the reasons weve been to the bakken, weve been to midland, to the eagleford shale, as a good investment just starting point, should investors look at bakken which is much, much higher cost on average than texas and say i want to avoid bakken heavy . If i want to invest in oil and gas, i should at least look at texas over north dakota . Youre exactly right, and as you highlighted, the large decreases in Continental Resources and Whiting Petroleum reflect those companies concentrations in the bakken play, and the fact is the bakken has economic that is dont stack up as well when compared to the Permian Basin and the core window of the eagleford. The primary reason for the relatively poor bakken economics is the price discount on bakken oil, which was recently 8 a barrel. Thats a pretty big number when youre around 35 and 40. Thats a big impact to the margins plus bakken operating costs are higher and north dakota state production taxes are higher relative to texas state production taxes. You will notice eog fared quite a bit better than continental or whiting, and that is, in my opinion, due to the diversification of eogs asset base as they have a very large holding in the core area of the eagleford and also a very strong Balance Sheet. John, i wanted to focus in on the point that youre making about the bank debt and how a lot of these Companies Already have bank debt thats long dated bank debt so they have those lines in place at this point. Should we be concerned though about the Interest Rates that theyre paying and how are those notes trading at this point . Is it trading are they trading as if investors are concerned about whether the company will be able to pay this debt . Id say theres quite a bit of repayment concern and actual repayment fear with some of the weaker e p credits. As mentioned, when you see bonds in the 8 to 15 cents of par, theres considerable credit risk even though you dont have a drawn revolver. Again, its going to be very company specific. Theres some companies that have bonds trading in the 30s and 40s that have pretty good, pretty decent acreage pog agage positi theres some companies that acquired large acreage positions, borrowed money to do so and those acreage positions turned out to be in the wrong spots. All right, john. Were going to leave it there. John wright of roth capital. Well see you in 2016. Thank you for your time this holiday week. Thank you. Appreciate it. Sure thing. On your menu for the rest of this fine hour, the early numbers are in for the Holiday Shopping season. What retailers will be the winners and what will be the losers . And 2015 could go into the books as a down year for stocks. First time in seven years. What does that mean for next year, if anything . Well look at some of the numbers and get more investing advice just for you. And what big name stock that you know could be headed to 1,000 a share according to one analyst . That name, that target, and the reason behind it as power lunch rolls on on a monday. Stick around. Announcer its time to make room for the new mattress models during sleep trains huge year end Clearance Sale. Get beautyrest, posturepedic, even tempurpedic mattress sets at low clearance prices save even more on floor samples, demonstrators, and closeout inventory plus, sameday delivery, setup and removal of your old set. Why wait for the new models . Sleep trains year end Clearance Sale is on now superior service, best selection, lowest price guaranteed your ticket to a better nights sleep welcome back to power lunch, everybody. 11 15 out west. Good morning if youre just waking up because youre tired. Disney shares are higher today. The new star wars movie has made more than 1 billion so far at the box office. And it hasnt even opened up in china yet. That also does not include merchandising, licensing revenue, and Everything Else associated with it. Disney paid george lucas 4 billion for the franchise which seems like a big bargain right now. Fitbit shares higher as well and an early sign holiday sales may have been strong. Its free app was number one in apples app store on Christmas Day. Melissa . Brian, early returns on the Holiday Shopping season are coming in and it was quite solid according to mastercard adviser spending pulse. Retail sales excluding cars and gas rose 7. 9 for the period between black friday and Christmas Eve. Online sales were up 20 . Furniture and womens apparel were the biggest drivers there. Here with us with this postholiday update is charles oshea. Welcome back to power lunch, charlie. Good to see you. Thanks for having me. Good to be here. Walmart, we always think of walmart as competing with amazon. Should we think of it that way . Because walmart just needs to move the needle this much on online sales in order to see a big gain. I think they compete in a lot of segments but walmart is the largest food retailer in the u. S. By a big number and we dont view that as being a really heavy online spend type category for now. I think when you look at walmart, you have to look at the core customer that walmart has, which is probably not a lot of overlap with amazon yet. I think youll get there over time, but i think right now amazon skews a little more high demographic than walmart and the walmart shopper wants to kick and see things and i think thats what youve seen this holiday. Do you think walmart actually did well this Holiday Season . How is it setting up into 2016 . It was sort of a dog in 2013, midtu midturnaround story. I think we have to divorce the equity performance and the fixed income prerformance. I think we see longterm investments that make a lot of sense. Brick and mortar retailers need to move online. Its not free, it doesnt happen in a day. So in walmarts case, they make the announcement in october, the stock tanks but we still believe the company is doing the right things. We think all the other brick and mortar retailers need to do the same things. Beef up your online presence, beef up your ship from store capability, multilevels of distribution. Be able to get at some point to sameday delivery for a decent amount of product if the consumer wants that, and it takes time. You know, again, its not rome wasnt built in a day and moving multichannel doesnt happen overnight either. Right. In terms of the fixed income side of things, do you see a lot of movement to these Companies Bonds . Im assuming these are all pretty much high Investment Grade, the ones you cover. Do you see Much Movement based on how they did during the holiday period. The fixed Income Investor takes a longer term view so we dont see the volatility on the bond price side. Some of the cds may widen nominally. I do cover toys r us which has seen significant volatility on the bond price size and claires which has been very volatility on the bond side. Why . Why do you think those issues . Toys is typically the Holiday Season. Its as seasonal a retailer as we cover plus you have the overhang from the lbo. Theyre 6plus billion dollars of legacy debt. The company has had issues in the past. We think theyre on their way now to having a better Fourth Quarter than theyve had in a while. Claires same issue. A lot of buyout debt. The companys performance has been a little soft. So youve got some issues when it comes to coverages and leverage met tricks. Quickly on toys r us, do you like that issue . I assume its getting a huge boost because of star wars. We think the company is positioned well this holiday. Weve said that in the past when the game systems came out and things didnt go as we thought. The mobile app is much better. I think theyre doing a better job marketing, getting the online the penetration online is up. They still dont have full control of the website. Thats coming, but its better now than it has been in the past. I think star wars to your point is going to resonate and toys is a destination toy retailer. The question becomes how do the margins hold up. Charlie, good to see you. Thanks a lot. Charlie oshea of moodys. An analyst slapping a 1,000 price target on a big name stock today. Well have the name and the move. Plus, four other names as part of our street talk. And can industrials help build gains in your portfolio . Build gains, melissa, in your portfolio. Industrials. Sectors to consider investing in for the new year when power lunch rolls on like a steam roller. Next. Next. Next. Welcome back. Im sue herera with this news alert for you concerning jpmorgan which is going to increase deposit rates for some of its biggest clients in the month of january. Thats dow jones citing that. Jpmorgan will increase those rates. It will affect mostly institutional clients. The size of the increase will vary and it will apply to operating deposits which are deemed a bit stickier. Theyre less of a withdrawal risk for the bank. So deposit rates for some of the biggest clients at jpmorgan will be going up. Brian, back to you. Presumably, sue, institutional clients mean not people like me, you, or brian. Not mom and pop. Or the people at home. We will not be making any more money on our deposits, sorry, but the big institutional clients will. And i guess if youre talking fractions of a penny, it matters if youve got a lot of money. But mom and pop still cant get a break if theyre save erssave. Thats absolutely true. And one of the reasons theyre doing that is that money usually stays in the bank. Its not transferred or it doesnt usually get withdrawn. So as a result of that, theyre raising it on that particular tier of rates. You know, its crazy because for so long weve been talking about the fed raising Interest Rates and that being a good thing for savers and we have not seen a bank so far raise their rates on deposits for the average consumer. Weve seen them raise their prime rate but not their deposit rate. Which goes to their profits. Virtually everybody raised the prime. However, at the same time theyre saying they will only increase rates on certain tiers that are linked to certain benchmarks, if you will. Right. You know, i guess listen, sue, you have worked for cnbc a lot longer than we have. I dont want to say were a stock market channel but we talk about investments. Absolutely. From our perspective, it drives people to invest because youre getting squat in the banks so what do you have to do to make any money . You have to buy stocks or bonds. Some sort of other instrument. You have to buy something. To get the beta and to get alpha in your portfolio. At the same time on the flip side of it, the bank side, theyre not paying more on deposits for the average consumer and theyre raising their rates on the long pure profit, baby. In theory this is a better environment. For banks, absolutely. Thats what they call the nim, the net trt interest yo will hear that acronym a lot in the next year. Jpmorgan stock not really moving too much, about a half a percent. We are seeing a lot of Big Money Center banks trade lower because we have seen a flattening of the yield curve with the short end of the yield, twoyear most notably, rising in todays session. There you go. Its a good day when you can say yield curve. And nim. And nim. Time for street talk. Its always a good day. Analyst recommendations on the stocks you need to know about. Alphabet is your first name. Formerly known as going. Axiom Capital Raising the target to 1,000 a share from 900. They cite a couple things, increased revenues, eps growth, valuation. 30 or so upside. Comes on the back of that bullish barrons article how youtube is going to be bigger than netflix. In january its going to be the first Earnings Report for alphabet in which they break out what theyre losing or making but probably losing. A lot of their ventures such as project loon and the selfdriving car and robots and things like that. So its going to be the most transparent quarter they will get from alphabet in its history. And you will have that on fast money 5 00 p. M. Eastern. We will for sure. Sun edison, were watching that one giving back a lot of big gains made during the Christmas Eve session on news of a credit line. A neutral rating, a 10 price target. Sun edison appears to be on track to meet its 2016 deployment guidance although we should note if did lower installation guidance for the Fourth Quarter. That stock, what a roller coaster ride, is down 7 today. When you have a rating of neutral but your price target is essentially a double, you know, but i understand it was well above that before. You know this name well. I cant figure this company out one bit. Anyway, down 7 today. Your next stock is three stocks in one, marathon petroleum, pbf energy and valero. The refining space remains a, quote, bastion of strength. Wow. Im referred to that way also. By whom . Two reasons, first is the companies benefitting from the difference in gulf coast versus heavy crude oil and what the analyst calls a strategic optionality. Not exactly sure what that means. But they like these three names. Sell assets . Any day you can say crack spread also a good day and crack spread benefiting these companies, the refiners. Yeah, thats true. Although the spread spread, wti and brent, thats increasingly narrowing. Even today we saw brent briefly trade below wti and thats really been dogging this group of late. Were watching gopro. Raymond james saying there might be a positive take away from the amount of downloads christmas weekend. Whats the upside for gopro. Download trends also improve modestly and the analyst at Raymond James says that could indicate price cuts have helped to sell cameras and limit the inventory overhangs going into 2016. We wont see much upside overall until theres a new product out. Fitbit, everyone is ramping up for that january 1 resolution. I was there last year. Why wait for start today. I use the fitbit for months. I dont wear it anymore. It was nice. I got my benchmarks. Its like i dont im still fat. Its not helping. Your stock five, adro, smaller cap under the radar name. Roth capital adding it to the focus list. This goes to our conversation with meg terrell earlier. A 68 target. Its a 28 stock. I dont want anybody to freak out, okay . Its just one ever these things where you have an early stage, i want to be careful here, they have a phase one test coming up for a Prostate Cancer drug, phase one. First of three. It may not work. The analyst likes the companys prospect, notes the solid cash balances. I worry about doing biotechs in the under the radar names but the calls are interesting. This is a big one. If they work, they work. If they dont, they could go to zero. They Just Announced the phase one six days ago, but this is in the hot spot of cancer. An immunotherapy Cancer Therapy company. So those stocks have been doing quite well this year. Thats why were watching it. Aduro biotech is the small cap name. Thats it for street cap on a monday. Lets talk about oil. Jackie deangelis at the nymex for the closing trades on crude. It looks like well close under this 37 a barrel mark. This is more than 3 loss on the day. Brent closing under wti today. Thats a phenomenon we need to watch. Its a trend that koncontinues brent is falling out of favor. We had a santa claus rally going into the holiday, going into the long weekend. That was short lived. Hit with a reality check when we got saudi arabias budget and found out the country is being squeezed by lower oil prices. It wasnt really shocking but a deficit of 100 billion and thats expected to continue into the coming years if this environment remains tough. So saudi is getting squeezed here. We know a lot of the other players are as well. Theyre trying to stand firm and hold onto market share. That could depress these prices even further. Consensus right now is we may not see it this week but early in 2016 we could test those lows that we saw not long ago. Guys, back to you. Jackie, thank you. Despite a recent deal, is puerto rico facing another major default . Plus industrials were a laggard in 2015. Can these stocks helped build your portfolio next year . The names you may want to keep an eye on when power lunch rolls on. Youre a bastion of strength. Checking out the listing on zillow i sent you . Yeah, i like it. This place has a great backyard. I cant believe were finally doing this. All of this. Stacey, benjamin. This is daniel. Youre not just looking for a house. Youre looking for a place for your life to happen. Zillow. Hello once again, everyone. Im sue herera, here is your cnbc update this hour. A grand jury has declined to indict two Cleveland Police officers for their role in the shooting death of 12yearold tamir rice. Surveillance video of the 2014 incident sparked national outrage. The footage shows officers opening fire within seconds of arriving on the scene. Rice was holding a pellet gun. Secretary of state john kerry calling a move by iran a significant step towards fulfilling its end of a Nuclear Deal Reached earlier this year. A ship carrying 25,000 pounds of low enriched uranium material left iran for russia. Rescuers still searching the rubble in garland, texas, where eight people died overknignight during a string of tornadoes. The storms are part of a larger system of Severe Weather. And patriots coach Bill Belichick defending his overtime coin toss decision to kickoff rather than receive. The the Buildings Authority and a slew of others. Puerto ricos government has been framing the debt situation in dire terms for months now with the governor saying since summer that his islands overall some 70 billion in debt is just fundamentally not payable. He has asked congress for help in the form ideally in a bankruptcy filing privilege which it doesnt now have access to as a territory, but so far to no avail. Creditors are in negotiations with a number of issuers for new plan that is would lessen the debt load in exchange for other givebacks and the Island Authority recently had some success in striking a new deal. That said, some investors expect to see at least a few defaults on monday likely on the islands rum tax bonds which owe 36 million and maybe some others. Are the Hedge Fund Investors sweating it at this point, kate . It seems like a lot of bonds that where there isnt even a payment due, theyre also trading lower just on fear theres going to be some sort of wider default of issues. Yeah, i mean, its kind of anybodys guess. If you listen to the government rhetoric, they cant pay this. They cant even necessarily pay the constitutionally guaranteed bonds, the socalled go general obligation bonds. That said, there are many that think theres some rhetoric involved there, the situation is not that dire. There is revenue to draw from. One thing that caught peoples notice is some bonuses were paid out to government workers over the holidays. Really . The rationale is theyll spend money over the holidays and create sales tax revenue but you see how theres this push and pull. In time for the deadline in january. Weve seen it in greece, in argentina. There is a difference, and a lot of our viewers will say why are you talking about puerto rico bonds, who cares . A lot of Pension Funds in the United States, a lot of towns and cities, they own puerto rico bonds. According to if off town or a state or a county pension, you should ask or find out what theyre invested in. There are some with 2 or 3 of their portfolio in puerto rico bonds. Over 50 of closed end muni bonds are in this paper. Its a widely held investment. Yougate triple tax holiday. There are tax benefits. Its been a kind of more risky issuer in recent years so the yield has been a little higher, but you can see why. All right. Well be watching. Thank you. Kate kelly. Shares of freeportmcmoran down 8 and 70 this year. The latest news here, james moffet, the companies chairman and a cofounder of mcmoran will give up the stake. Is he the mo in mcmoran. The gas sector is among the losers in 2015 but could the group turn into a winner for you . Ann, thank you for coming on power lunch because with all due respect to everybody else in your industry, we dont see a lot of analysts who dont have at least one buy on something. You have no buys on anything, any sign that youre going to turn around a little more positive anytime soon . Well, frankly, were going heading into the eighth year of an economic expansion, albeit maybe anemic, and with rising Interest Rates and the strong dollar, it does not bode well for things like machinery where you have to borrow money to buy equipment. So actually we see more Downside Risk than upside risk heading into 2016 and in our most recent outlook piece we did highlight a few names that might at least on a relative basis outperform. Names like dividend payers ticker pcar, thats the Parent Company of truck brands, ken worth and peterbilt. They might have the lowest risk of negative earnings revisions and in general we would caution investors to avoid the Agricultural Equipment names. A strong dollar is probably the biggest headwind for agricultural exports and we think that thats going to weigh more heavily on that group going into 2016. So nothing really to cheer about for machinery. We can understand caterpillar, you know, even with our media minds because commodities have crashed an theyre directly affected. The consumer economy seems to be okay. Why isnt a truck builder benefiting more, ann . Its a great question. This time last year we were looking at the truck orders in the neighborhood of 30,000 a month and last month we turned in 16,000 plus truck orders. So it seems like oil and gas may have spilled over to general freight. You know, we did haul a lot of sand and a lot of pipes and a lot of other indirect materials into the oil and gas space, and i think were just seeing a temporary pullback. Weve seen capacity loosen up a little bit. Weve seen used truck prices fall a little bit, and so i think that industry has just taken a pause. It doesnt help that exports are down and so the ism is suffering. So not as bad as mining or oil and gas directly, but i think were seeing the spillover now across the entire group. Okay. Ann, when you do get a buy on something, please let us know and well invite you back on, especially with that beautiful lilt of yours. Thank you very much. No problem. With only a few days left, the dow is going to need a sizable rally to avoid their first down year since 2008. All is not lost, but a down market could also mean investing opportunities if you know where to look. We will continue with our allday look at money advice, the playbook for 2016 continues after this. With just three and change trading days left in the year the dow is down 2 . What happens to markets the year after the dow is down or even flat . Bob pisani has been looking at those numbers and he joins us now. Flat years are not that common. I look at the s p 500 its been up or down roughly 1 , lets call that flat, only twice in 25 years. Look, only 1. 5 in 1994 it was down. And in 2011 when it was essentially flat. Now, the good news is that both of the following years were strong up years. You see here, 1995, s p up 34 . 2012, up 13 . Thats good news. But these were very different times. 1994 was preceded by two very mediocre years in 92 and 93 and it was the last down year for the next five years. The s p had double digit returns for five years. It was the final phase of that great bull market run that began in 1982, ended with the dotcom bust in 2000. Arguably the longest period of growth in u. S. History in the 1990s and it was overvaluation that ended that run. Very important distinction. 2011 was different. Unlike 1994, it was preceded by two strong years in 2009 and 2010, but like 1994, its also been followed by three strong years all up double digits until this year. Here is the difference. In contrast to 94, the markets are not overvalued this time. And in contrast to the 1990s, this has been a period of anemic economic growth. Stock prices have, instead, been helped by the feds massive Liquidity Program and thats why the traders are cautious on 2016, guys. Withdrawal of liquidity makes it a potential tough year for stock. If you could thats why people are cautious. Guys, back to you. Bob pisani. Thank you. Were watching nat gas closely, seeing a massive rally in todays session. Nat gas is up by 10 . Traders are saying part of this is Short Covering going into the final days of the year and also the weather. Were seeing some very cold weather across a lot of the United States and thats helping to drive prices higher. Were going to keep track on this trade for you throughout this hour. Meantime, more power lunch will be right back. Checking out the listing on zillow i sent you . Yeah, i like it. This place has a great backyard. I cant believe were finally doing this. All of this. Stacey, benjamin. This is daniel. Youre not just looking for a house. Youre looking for a place for your life to happen. Zillow. The down draft in oil, more concern about china, concern about Earnings Growth for American Companies all continue to weigh on stocks. Lets bring in jack brewer, ceo of the brewer group and matt maily. Jack and matt through for coming on power lunch. Jack, when you say here are the big things that i worry about or at least maybe i think about the most, what would be the one or two things that you think will be eased going into next year and could provide an investing opportunity for our audience . I think we have a little bit of a pull back in the u. S. Dollar, you know, overall if you look at our portfolio we really feel strongly with our muni bonds our allocations have performed quite well. Its probably been our number one performing asset class. We expect for that to continue throughout 2016. If you look at the finances of most states are in very strong position. We will continue to keep our safe allocation there and we also are looking at other opportunities. As you look at the u. S. Dollar if we give a little back from those gains we also feel that the emerging markets will provide some opportunity as well. You can see some stability there. So you are the guy, jack, that thinks the dollar is going to weak almost everybody else is in that stronger dollar camp. Take that out a few notches what does that mean for your clients . Okay, jack, maybe you are right on the dollar but what do i invest in . Emerging markets. Thats a big world, jack. Emerging markets is a big world. It is, but in the days of the etfs, you can find some good allocations and you are able to get into some kind of Broad Spectrum investments that allow you to touch multiple countries, multiple places. I mean, as i said before, the bond market is where i think you will find some strength there, if you can, you know, pick and choose. Listen, this is a traders market and youre going to have to stay on the right side of the trends. If you cant be on the right side of the trends in 2016 you are going to have trouble. This is not the rear to have an ego. 2016 is going to be about being able to take money off the table when the time is right. Matt maley, you are up in boston so i wont mention that sometimes it comes down to the flip of a coin and maybe there is some miscommunication. Sorry about that, a little dig at the a treats there. If you had to flip the coin it sounds like you might also be following jack in that, gosh, what if the dollar rolls over camp. Its funny. And i do agree with jack that there is a chance out there that we get a surprising decline in the dollar, but the thing that concerns me the most about 2015 and for 2016 is i think the Biggest Issue is not necessarily china and the price of oil, its been the fact that theres too much debt in the world. China and oil are just subsets of that. I mean, we have first we saw it in greece, i mean, the problem is we have more debt in the world, theres more total debt in the world than there was in 2007. Theres more total debt in the u. S. Than there was in 2007. So and its just very tough to service this debt. We saw it in greece first, but everybody rolled their eyes and said no big deal its greece, then we are puerto rico, the Municipal Bond market has been strong but there are some pockets that are a problem. Then we have china with their debt to gdp ratio is well above 200 and the high yield market had problems with the lower oil prices. This issue is starting to spread. That concerns me. If we can get and again if you look at a chart at the dollar it is potentially making a double top here. The last three times its done that in the last 15 years its been followed by a significant decline. We are not there yet, it would have to drop a lot further, but thats going to change a lot of peoples playbook if that happens. It could happen. Jack and matt, we appreciate it, have a happy new year, we will talk to you again in 2016. Thank you very much. Thank you. Fedex getting negative attention this weekend as its drivers had to work Christmas Day just to get those presents delivered on time. It even inspired a fedex failed hashtag on twitter but is that a good sign, so much business they cant keep up . We will discuss that when power lunch returns. Lets take another check on that the gas. A massive rally up 10 , Short Covering as well as cold weather across the u. S. We was want to bring your attention to the etf that tracks that the gas, this is the three times levered, ugas is of the ticker on that. We will ask the commodity king what he thinks about that the gas tonight on fast money at 5 00. Lets talk ups and fedex right now. Fedex having well publicized delivery issues over christmas, in part because of storms, donald broad joining us. Don, you have an outperform rating on fedex, a high price target. Do the delivery issues and the, quote, outrage on social media affect your recommendation on fedex at all . No, not really because this is a high class problem. This is more business than you can handle. What we saw on fedex was a situation in which they were very clear with shippers, look, these are the limits, this is give us your projections, tell us how much youre going to ship and then when those retailers came back, those e tailers said we need you to ship even more and fedex said its going to be difficult to handle that. This is the fifth year in a row in which fedex made deliveries on Christmas Day. Thats an enormous amount of commitment to trying to get everything delivered. Its the fifth year in a row. At what point does this high class problem actually become a liability and you see amazon i mean, already its got its own trailers and warehouses, its trying to work around these Package Delivery companies because there has been inconsistencies in the service. At what point do we say, fedex, youre losing business . Ups is a much larger amazon is a much Larger Customer of ups than it is fedex. Second of all, ups had Service Issues as well, one of the ways they dealt with it, more than a week before christmas they went out to the e tailers and said you have to move our Service Standards back by a day. Any of us goes to school and says, gee, i know the test for everyone else is on thursday but im going to take it on friday. Thats not fair. If a fedex customer says this is what i want, this is how much im going to need your services, its like me going to a bank and saying, look, i need to wore bow 10 million them saying, okay, weve looked at your financial sheet, were going to loan you 10 million and i come back and say i need 50 million and then me saying that makes me a bad bank. No longterm damage done. Have a great day. Thanks for watching. Shop earlier, america. Closing bell starts right now. Welcome to the closing bell. Im sara eisen in today for kelly evans here at the new york chock exchange. Im bill griffeth. Oil the big story today, its taking its toll on saudi arabias budget deficit as well, commodities selling off after four days of gains. We are going to dig deeper into the move coming up. Take a look at natural gas. Speaking of energy, surging today on more typical weather for this time of year. Forecasts for the next few weeks, colder temperatures. Weve got a meteorologist to tell us whether more wild weather is ahead and specifically what the impact is going to be on the energy