Transcripts For CNBC Power Lunch 20160211

Coming up, two guys who are facing off each other in the ring when it comes to puerto rico. Jim millsteen, renowned restructuring attorney, advising puerto rico. Well talk to him about puerto rico. He was at treasury during the financial crisis. Knows a lot about that is go on with the European Banking system. Well discuss that with him as well. And ambac could lose a lot of money if jim millsteen gets his way. Well talk about that coming up. What is happening in puerto rico, guys, emblematic of what is happening in the world. Too much debt that people, governments, companies, cant pay back. Tyler, back to you. Thank you very much. Enjoy the warm weather down there. About 22 up here in englewood cliffs. Janet yellen getting grilled on capitol hill. The verb we always use when somebody goes up on capitol hill it seems, saying negative rates are not off the table. Lots of red numbers right now. Lets look at the dow, which is off by 322 points, not the lows of the day, but nevertheless, better than 2 decline. 15,595. The s p 500 down 1. 5 . The nasdaq off two thirds of 1 . Lets look at crude and show you where it sits now. West texas at 26. 85, down 2 . Brent crude at 30. 31. Down 1. 65 . And gold, the safety play, once again, 52. 30, higher than 12. 46 an ounce up more than a third of a percent. Our next guest says we may be close to a bottom on stocks. So how should investors position their portfolio . Jim paulson, chief investment strategist at Wells Capital management. Hes probably out in minneapolis where it may be colder than it is here. Jim, welcome. Good to see you. It is, tyler. What is telling you that we may be close to a bottom and how much further might we have to go before we get there . Well, i like a couple of things and one of them is the big rate revaluation we have done over the past 15 months. We were selling probably 19 times trailing earnings at market peak. Werent selling now at about 16 times trailing earnings. I think thats a much more sustainable moldable, even if we have some full employment pressures, wages, current inflation, or higher Interest Rates. On top of that, we have done a good job of gut checking Investor Sentiment here. We have had three almost 10 corrections since late 2014. And this is finally the only one that is really, you see, a rush to safety under conditions of fear. Youre seeing a rush to gold, a rush to treasuries, for example, which we didnt really get at the other lows. So i think i think you got really negative sentiment, much better valuation, and what we need is a catalyst and everyone is looking at a policy officials for that, whether the fed or the ecb or china. I dont think it is going to be a policy catalyst. I think it is going to be economic. I think were going to get better Economic Data out of the United States. It is going to take the recession fear out of the discussion. I think so. I think so. If we do that, we probably get a good rally. How do if were nearing that turn, that inflexion point, what do you do . What do i do . Well, i think this isnt just about a market bottom. And i dont know, we might have to go a little lower to find that. Who knows. I think it is also about a complete leadership change. If we do find a bottom and start going back up. I think the old leadership is not going to be the new leadership. I think it is going to be more oriented toward the producer side of the economy, the Industrial Capital good side, rather than the consumer side if the market does find a bottom and rally. I would be looking on days like today to add to things like industrials or materials, energy, even the financials picking away. And on days of strength maybe to lighten up on consumer discretionary, consumer staples, utilities, health care, the areas some of those that have been leading. Jim, stand by, we want to get to a news alert on the bond market. 30 year bonds up for auction. Lets check in with rick. Sometimes i say if you want to know what a perfect auction looks like, look at these results. If you want to know what an imperfect looks like, todays your day. I give this auction a d minus, d as in dog. Were talking about 15 billion 30 year bonds, the longest guy on the government coupon curve. The metrics, 2. 50, the yield at auction and, by the way, the lowest yield at auction since january of last year. Heres the problem. The one issue market was trading around 247 at the time, so really just nasty. From there we look at bid to cover. 2. 09. Chasing every dollars worth of securities available, well off from the 2. 35 auction average. It is the worst since the summer of 2011. Although in may of 14, we came to the exact number of 2. 09 but didnt surpass it. 58 on indirects, close to 10 auction average. 10. 3 on directs, close to 10 auction average. So the demand is relevant by bid to cover and the actual dutch auction pricing, really left a lot to be desired. 62 billion done and the 30year was a dog. Back to you. Thank you so much, rick santelli. Back to jim paulson, Wells Capital management. Jim, youre talking about seeing a bottom forming, a change in leadership. But in a market in which we had the tenyear yield hit an intraday low, not seen since august of 2012, in a market where we have gold trading at its highest level in about a year in high yield, by the way, the etf attracts high yield, at new 52 week lows, arent these other Asset Classes telling you something very different from, hey, a bottom is forming equities . They could be, melissa, no doubt of that. That certainly is the fear here. But i think theyre saying more, there is just colossal fear we didnt get at the last two market bottoms. And so you come down to is there going to be a recession or not. And my take on that is were not going to have recession in the United States. We could, i just think it is unlikely. I would say the data has gotten better. Clook look at that claims number we got this morning. The First Quarter has risen close to 2. 5 of late. We got great job openings. We had an awful good jobs report recently. Think were going to get combed down ultimately because the data will not support recession. And if it doesnt, i think you got a big chunk of the Banking Industry priced in the stock market for recession, if you will. If it doesnt occur, i think we get a healthy bounce. I guess i kind of have been waiting for there to be the moment when there is so much fear about a pending global depression or recession, bear market, and i think after two failed attempts in late 2014 and last august, this one finally is generating fear that i think could bring the bottom. Jim paulson, jim, a pleasure. Thank you. Thanks, brian. Big money descending on the debt laden island of puerto rico today. Michelle is there in san juan. Michelle . Hey, brian. Thanks so much. Im sitting here with jim millsteen, renowned restructuring attorney, now restructuring banker, has his eponymous firm after being at treasury before this and at clery before that. You were here in puerto rico. You are representing the puerto rican government. You want the bond holders to take big losses, big haircuts. I dont want them to take big losses. I think the situation is such that there needs to be a restructuring and noted again into a sustainable level where they wont have to take losses again. There has to be a fundamental restructuring of the debt. Heres their complaint. They say, listen, you could push us to zero, you could tell us were going to get nothing and yet puerto rico still has so many other liabilities that cant be paid for. They got a welfare state that with an economy that cannot support it. And then new bonds you give us are going to be worthless because the puerto rican government will not deal with the huge welfare state that they have underneath them and restructuring. I havent heard those exact wo words, but i think we have said that there are three legs to this story. There needs to be a fiscal ajusajus aadjustment, imf talk, it has to generate a surplus which it is not generating today. It has a deficit. It has to generate a surplus. That surplus can be used for debt service. There has to be a debt restructuring to bring the Debt Service Obligations in line with the realistic service that the surplus this government can generate and this economy can generate. And the third leg of the stool is there has to be a series of Structural Reforms and progrowth policies that allow Business Investment to increase and household formation to increase because those are the sources ultimately of Economic Growth. So the, you know, the if you look at the most highly indebted states in the United States, take hawaii, and this is all based on moodys hawaii dedicates about 14 of its revenues to debt service. Government of puerto rico today is dedicated over 30 of its revenues to debt service, so it is very hard to be to invest in Human Capital and physical capital as a government to promote growth when youre dedicating that much to debt service. Bond holders dont disagree with that. They say leg one and leg three theyre not convinced are ever going to happen, that right now this is a one legged stool anding and it is being put on them. That is a i understand that criticism coming from the bond holder community. And we have a test case right in front of us today. Where the first restructuring we have done on island is the electrical utility. The bond holders agree to some significant concessions to free up cash flow to allow utility to modernize itself, because this utility is still operating on diesel and unnatural gas. We should underline that. Their refineries run on oil, which is incredibly antiquated and expensive and like cuba basically. But, you know, in this Oil Environment they have gotten a break. Thats true. It was painful for this provides an opportunity to transform the utility without a massive increase in rates because you have the bond holders have agreed to a plan that allows the utility to take cash flow that otherwise couldnt use for debt service and reinvest in the facilities to modernize them, so to create more efficient utility, that will be better able to service the restructure debt down the road. And that is a model for, i think, what has to happen across the rest of the complex. The government of puerto rico is has to be a necessary party. Legislation is pending in Legislative Assembly today, it was passed in the senate last night to facilitate the proper restructuring. For the utility. It is now in the equivalent of the house of representatives, and were hoping it will pass there. And that will prove out that the government itself is willing to be an effective counterparty to the creditors in trying to modern basically in trying to restructure the debt in a way this allows Economic Growth to occur. If we can move on to europe, your treasury from 2009 to 2011, the fun times, looking back, when you black at what is happening with your European Bank bonds in particular, who how worried are you and how worried should we be about the u. S. Financial system and u. S. Banks being affected by contagion and what is happening there . So the europeans promoted one tool to deal with Financial Stability and large Banking Institutions called contingent capital. Cocos. The bonds that have gotten very punished. They can be converted from a bond into stock at tough times. Exactly. And some can be written off altogether. And so if there is fear in the market about stability of the Banking System or of any individual institutions, institutions that bought the co cocos, first in line to take the losses, start getting nervous. Thats what those cocos were designed to do. If there is a capital insufficiency at any Large Financial Institution that sold these, those bonds are first in line to take the losses to create new capital cushions, so as to protect the bank against failure and ensure the stability of the system. The markets are very volatile and i dont think any of the major institutions to my knowledge, i dont have any major information on any of them, dont think any of the major institutions are on the verge of collapse. But, you know, as the spreads widen out, the cocos become theyre more in the zone. Bring it back to the United States. If there is a larger crisis there, can we be infected here . Are banks protected enough here . What we learned in 2009 is none of these large institutions is an island. They all have deep inner connections with one another. So you can look back over the last now six, seven years, since the financial crisis and say what has happened . Sure, we have increased capital regulation for all of these major institutions, much tougher capital regimes, greater capital. But the interconnectedness of these 20 large global banks remains very very much remain interconnected and all of the major markets and in particular in the derivative markets. 90 of the derivatives in the world trade in the first instance between two major Banking Institutions. They lay off that risk to hedge funds and other Institutional Investors on the other side, but that derivative market is primarily a big boy market, big bank market and so if any one major derivative counterparty starts to shutter, all of them start to shutter. This is what we learned, this is what i did during the financial crisis, i was responsible for the recapitalization and restructuring of the aig. Aig was brought near collapse and the decision was made to rescue it, not so much because of the insurance operations, but because of the aigfb, because of Financial Products division. 2. 5 trillion derivative book. Today, 2. 5 trillion derivative book would make it a pica, a small fry. Has gotten so much bigger. Thank you for joining us. My pleasure. Power lunch on cnbc. Back to you. Michelle, thank you. Oil tanking again. Back to the mid26 buck a barrel range. The reason, record supplies and weak outlook for demand. The former president of shell on what the real saudi motives may be with oil, and you may be surprised. Speaking of oil, here are some of the big cap oil names, trading like most in the selloff, theyre down. Were back right after this. There you go. Crude oil, market selloff, by the way. Were back down to the mid to high 26 buck a barrel range. You might have heard over the last 18 months there is a lot going on in the oil patch. Iran offering crude to asia, to discount over saudi arabia. Inventories at kushing, oklahoma, hitting a record high. Goldman sachs projecting u. S. Crude at 20 to 40 until the second half of the year. Finally technicians saying that crude oil could soon fall to 25 or below. Not necessarily a bold call given were a buck and a half from 25 now. Lets bring in former president of shell oil usa, John Hoffmeister to power lunch. Nothing to talk about in the oil patch. Another quiet day. Another quiet day. It is quiet because there is no buyers. Nobody is saying buy, buy. Everyone is saying sell, sell, sell. We talked about saudi arabia. And about whether or not they want to doom the u. S. Shale industry. Is there something you think a little more political going on here . Do you think that saudi arabia, part of this, has to do with our normalization of relationships with iran . I do absolutely. I think heres whats going on in my view. There has been a complete breakdown in the washington, d. C. Relationship with the kingdom of saudi arabia over the lack of this countrys willingness to look after the stability of the middle east. And we have done that only since world war ii, but suddenly in the last few years, because of the iranian deal, and because of other issues including russia, the middle east is a very different place than it used to be and the kingdom had a belly full of washington not coming to its traditional role of defense. As a result of that, the kingdom has but one tool in its tool kit, and that is oil and oil price. And the only way to respond to iran, the only way to respond to the hegemony with russia is through overproduction of oil, relative to what the market needs. And so a decision was made in my view, in november of 2014, to keep production going, but the consequence would be a lowered oil price, that would do more damage in the short and medium term to iran and to russia than it would to the kingdom. So you think so, john, we go to the halls, you know, of power in saudi arabia, and maybe the discussion is not, hey, lets bring down the shale revolution, but rather lets hurt iran and because the u. S. And iran have normalized if the u. S. Goes with iran in terms of price, and economic pain, so be it. Do you think thats a conversation being held . Yes, u. S. Is Collateral Damage. The saudis have known about shale for a long time and theyre not going to do anything to directly harm the u. S. Industry, but it is Collateral Damage in the face of overproduction of oil that affects the oil price. And the u. S. Knows how to respond to this. We cut costs. The u. S. Government doesnt control Oil Production in the United States. Companies do. Companies look out for their own interests, they know how to cut costs. We will get through this as an industry. We always have. But in the meantime, while consumers can enjoy the lower oil price, and it manifest itself in gasoline prices, the whole world is suffering from the effect of pushing out Capital Spending of the fear actually of Rising Oil Prices as and when the iranians or let me set the iranians aside, as and when the russians and saudis come to some agreement over the future of Oil Production. Thats where i wanted to jump in, john, if i might. What, if anything, changes the dynamic that youre describing . I think two things. One, pragmatism on the part of putin. Relative to the russian economy and its near free fall conditions right now. And, two, loss of major, major amounts of funding in the kingdoms sovereign reserve. Theyre down a couple hundred billion now. They floated a couple hundred billion of bonds. Thats 400 billion that theyre down since this price decline started. How much more do they want to take it down . So the pain has to get the pain has to get so much greater. Has to get great enough for putin to move and for the saudi kingdom to move. I think were within six months of that happening in my view. John, you know, im sitting here taking a look at the chart of the Oil Volatility index, and were at all time highs as far as this has been a measure that has existed. Im just i want to get your thoughts on structure there are there other factors in this market that could either precipitate or prevent us from finding that bottom in crude oil in your view . I think the uncertainty over chinese demand and the rest of the world demand is a factor because if there is a softening of the general overall economy, and in particular if the u. S. Economy fades into recession, then i think all bets are off. Youre looking at the fundamental picture, i was talking about maybe structural changes and how crude or how crude is traded or who trades crude. I dont think there is going to be a whole lot of additional volatility in that arena. I think were simply on the downward slide. And i dont see a whole lot of volatility other than probably a lower oil price, but in a gradual way. Until we reach a point where the saudis and the russians say enough is enough. When is that going to be . Yeah, i the sooner the better from my point of view. How much longer can venezuela hold on . How much longer can nigeria hold on . It is like how long is a string . I dont actually know. Nobody knows. Maybe not very long. I dont think it is very long. Thats why i said within the next six months at worst. I think we have to come to our senses because if venezuela falls, if niger why goes into more turmoil, and boko haram does even more damage, i mean, this is getting worse and worse and worse. In addition, dont forget, the downturn in the u. S. Has seriously, seriously harmed the supply industry, meaning the suppliers to the Major Oil Companies and to the Major Service companies. This has been a value destroying decline in the whole supply chain, which affects the ability of the u. S. To respond when prices return. I think it will be a very slow upturn in the u. S. Because of the value destruction that has taken place. John hofmeister. A pleasure. Wide ranging interview. Thank you. Thank you. Stocks are selling off, but off the session lows. The s p 500 just about 12 points off of its lows for the day. Here is a staggering stat on that index. The s p 500 has now lost about 2 trillion in market cap this year alone. Where investor and traders are finding safety in the selloff. As we head out, look at what is working in todays session. Mosaic up almost 6 . Kellogg up 4 . Time warner up 3. 4 . Power lunch back in two. In new york state, we believe tomorrow starts today. All across the state the economy is growing, with creative new business incentives, and the lowest taxes in decades, attracting the talent and companies of tomorrow. Like in the hudson valley, with world class biotech. And on long island, where great universities are creating next generation technologies. Let us help grow your companys tomorrow, today at business. Ny. Gov im spending too muchs for time hiringnter. And not enough time in my kitchen. announcer need to hire fast . Go to ziprecruiter. Com and post your job to over 100 of the webs leading job boards with a single click. Then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. announcer over 400,000 businesses have already used ziprecruiter. And now you can use ziprecruiter for free. Go to ziprecruiter. Com offer2 welcome back to power lunch. Rick santelli live on a nervous cme floor. There is so much volatility. Traders dont mind it, but, boy, two helpings today. Look at intraday of 30s. Had a deplorably weak demand auction, even with the dutch process. Boy, 237 was our low yield at 8 00 a. M. Eastern this morning. Right now were trading, what, right around 2. 50. Open the chart up from the beginning of 2015. Wow. Check this out. At the lows of the day, early february of 2015, now were comping to early april of 2015. Fiveyear, not a lot of difference. Im picking this short because i think it is one of the most important maturities to Pay Attention to. If you look, it was at 96 basis points. Currently around 110, 109. Heck of a range. Early comps were may 28th to 13, now june 18th of 2013. But now look at the 24 hour dollar index. Does this look as volatile as the Interest Rates . There is mean liquidation going on, or selling the rates cash. But this is like half a capitulation trade and something worth monitoring if youre an Interest Rate observer. Back to you. Rick, thank you very much. Gold another safety trade in this selloff right now. Gold prices soaring as we head into the close. I think 12 month high for gold today, 12. 47 now, up 52 an ounce. Thats 14 . The metal up 15 so far this year. How much more upside might there be . As we head out, the gold mining stocks now, up between 3 and 6 as they are levered to that gold price. Stay with us. Here at the Td Ameritrade trader group, they work all the time. Sup jj, working hard . Working 24 7 on mobile trader, rated 1 trading app on the app store. It lets you trade stocks, options, futures. Even advanced orders. And it offers more charts than a lot of other competitors do on desktop. You work so late. I guess you dont see your family very much . I see them all the time. Did you finish your derivatives pricing model, honey . Td ameritrade. Welcome back. If youre just waking up, perhaps in guam, or micronesia, the Dow Jones Industrial average having another tough day. Down 300 points on the dow. Dow down 12 over the last 90 days. Boeing is the worst performer in the dow. Announced job cuts in its commercial airline unit. Financials dragging the index down. Also investigated for its accounting. And dreamliner. Being investigated over some accounting issues. Broader market, s p 500, nasdaq and russell 2000 all down again. Oil, big part of the story, dipping below 27 bucks a barrel. More concern about, you guessed it, too much oil. Look at the yield on the ten year treasury note, it continues to decline as well. The upside, guys, Mortgage Rates should fall once again. Lets get to sue herera for a check on the news headlines. Thank you. Here is your news update at this hour. A riot killing 52 inmates in northern mexicos prison, 12 others were injured there, the state governor saying the fight began between two warring groups and the inmates then set fires during the riot. No reports of any escapees. A u. N. Agency finding the earth faced more than twice as many droughts last year than the average of the past decade. It was part of a report looking into the human cost of the hottest year on record. Cruise operator Royal Caribbean surveying the damage to one of its ships caused by a major atlantic winter storm. The anthem of the seas which was carrying more than 6,000 people safely docked in new jersey last night. The company says a few of the passengers suffered minor injuries. And fenway park bringing an olympic sized ski ramp for its big air at fenway event featuring olympic skiers and snowboarders. Theyre doing acrobatic i could never do that in a million years jumps. Wipe out. The grand prize, 150,000 bucks. The ramp is three times higher than the ballparks green monster. Wow. There you go. Not for me. But there you go. Me neither. You do that . You could easily do that . Accidentally. Accidentally. Thats a different story. Screaming and crying. Do you ski or snowboard . You do both . I try to ski. I do. Youre a good skier. Im sure youre being modest. The older i get, the more nervous i am. Yeah. I find that some hills are looking steeper than they used to. The risk of risk is going up. There is one in telluride called scullies. Last year i did half of it on my butt. Lets check on gold prices now. Theyre closing. At least the comex. 1248. 80, up 4. 5 , the highest levels we have seen on gold in a year. Look at the leveraged etf, that rises three times the move in gold. Ticker symbol is nugget and ugt. That is up more than 100 so far this year. Gold miners benefiting, the gdx, tracks the miners, thats up by more than 7 right now. Billionaire mark cuban says hes bullish on gold. What are the technicals saying . Joining us is chief Technical Strategist katie stockton. You point out that gold has crossed an important level, now above the average. We havent seen that for months. Thats true. Thats that is a psychological hurdle on the chart and also near its october high. Immediate positive follow through. That immediate follow through is what differentiates this relief rally with previous ones. We have seen a breakout. It is very much a technically driven move at this point, and i looked at past days of 5 updays for gold, and they were always during bear markets and the s p 500. It is very rare to see such a big move in gold. And i do think it is significant. At the same time, it seems like youre a little skeptical, youre saying that gold needs to close, what, above 1200, two consecutive weeks. If it does that, what is the next level that we could be looking for . Breakout easily targets about 1350 with intermediate time frame which would be about several months for me. So that consecutive weekly closing basis, thats what i like to see for confirmation of a breakout, and that goes across the board, not limited to gold. Katie, got to leave it there, thank you. Katie stockton of btig. Major selloff on wall street now. The dow, the nasdaq, the s p 500 all sliding by about 2 . The nasdaq by 1 . There is one bright spot in the market, when things are bad, maybe all you need is a vacation. Online travel stocks are rising today after results from expedia and trip adviser. There is the priceline group. It is up as well by about 1 . Power lunch will be right back. [vet] two yearly physicals down. Martha and mildred are good to go. Heres your invoice, ladies. A few stops later, and it looks like big ollie is on the mend. It might not seem that glamorous having an old pickup truck for an office. Or filling your days looking down the south end of a heifer, but. I wouldnt have it any other way. Look at that, i had my best month ever. And earned a shiny new office upgrade. I run on quickbooks. Thats how i own it. Is the u. S. Going into a recession . Joining us with a look at the state of u. S. Manufacturing and the economy is jim metcalf of ceo Building Materials company usg. What are you seeing . Because your products, ceiling tiles, gypsum, wallboard, feed into both residential and commercial construction. So what are you seeing up there right now . Were pretty optimistic on 2016 in spite of what is going on today in the stock market. If you look at all of our end use markets, we project housing will be up about 10 this year to around 1. 2 million housing starts. Repair and remodel, which is about half of our business, is going to be up single digits, were seeing some high store comps from some large retailers. And the last segment is large commercial, and i think looking around here new york city and chicago, the commercial market is showing some signs of recovery. So for our industry, were optimistic for 2016. We finished off very strong in 2015. And january was a great month for us. You know in fact, analysts liked your optimistic tone for 2016, they cite margin improvement in the Fourth Quarter and the better than expected pricing for wallboard. At the same time, your stock has been an underperformer relative to the s p 500 and housing etf. What do you tell investors to why the stock is in catchup mode at this point . Were focused on the fundamentals as you said. Incremental margin improvement in each one of our businesses in 2015. Were focused on our Balance Sheet. We have a 500 million coupon that we plan to pay off in november organically, we want to repair our Balance Sheet, but also were investing in innovation and some of the new products that are starting to hit the market i think are going to be a nice surprise for people. Where do you stand on pricing and costs . Are you able to exact pricing increases at this point or are people bulking at that in this environment . We look at margin expansion, not only getting price improvement because of our value proposition, but also looking at cost, offsetting inflation you may see through lean manufacturing and signals. We have done a wonderful job of offsetting as much inflation but getting help from volume. Were working three levels, pricing with the value proposition, also cost through lean sick sigma and getting val increase in the market that i said thats improving. Jim, just a bottom line, to the question, is the u. S. Facing recession, your answer is no . You know what, in our industry, were quite optimistic. I think if youre in the oil and gas industry, you may have a different point of view. We feel optimistic, you look at all the fundamentals, you look at home resales, Mortgage Rates are very, very low. You look at home ownership, so the basic fundamentals of our business show it will be a positive year for us. Thanks for joining us. We appreciate your view. Youre welcome. James metcalf, ceo of usg. Now down to michelle in san juan. Im here in san juan as you say, melissa. Even though were in a big conference about puerto rico, everyone here is very attuned to the markets and aware of the selloff. They keep asking about it. I see my real time app. The Dow Jones Industrial average off 350 points. Well have a lot more on the markets and a lot more from puerto rico. We have the ceo of ambac coming up at the top of the hour. He has a lot of money on the line depending on what happens with the restructuring of the bonds here in the island. Well have that interview exclusively coming up in 20 minutes. More power lunch right after this. Okay, so you launched your banks app. Now what . How will you keep up with the new demands of todays Digital Economy . The fact is some believe they wont need a Traditional Bank down the road, so at cognizant, were helping banking and Financial Services Companies Think digital, be untraditional, and reimagine what the bank of the future can be. Our clients can now leverage customer intelligence to predict their financial needs and provide more contextualized products and services. Were creating new platforms across channels so customers can effortlessly invest, borrow, lend, transactwhereverwhenever they choose. And were digitizing the way banks run, driving efficiencies and delivering new value for their customers in return. Digital works for banking and Financial Services. Lets talk about how digital works for your business. When it comes to the fithings you love,. You want more. Love romance . Get lost in every embrace. Into sports . Follow every pitch, every play and every win. Change the way you experience tv with x1 from xfinity. Welcome back. This hours power points, a selloff on wall street, the dow is down more than 2 . Energy, materials, tech, the biggest sector drags. Boeing saks, a great company, they make planes and loans. Coming up, mad man himself, jim cramer will join us on set. Cant miss that. Power lunch back in two. Im only in my 60s. Ive got a nice long life ahead. Big plans. So when i found out medicare doesnt pay all my medical expenses, i looked at my options. Then i got a Medicare Supplement insurance plan. [ male announcer ] if youre eligible for medicare, you may know it only covers about 80 of your part b medical expenses. The rest is up to you. Call now and find out about an aarp Medicare Supplement insurance plan, insured by unitedhealthcare Insurance Company. Like all standardized Medicare Supplement insurance plans, it helps pick up some of what medicare doesnt pay. And could save you in outofpocket medical costs. To me, relationships matter. Ive been with my doctor for 12 years. Now i know ill be able to stick with him. [ male announcer ] with these types of plans, youll be able to visit any doctor or hospital that accepts medicare patients. Plus, there are no networks, and virtually no referrals needed. So dont wait. Call now and request this free decision guide to help you better understand medicare. And which aarp Medicare Supplement plan might be best for you. Theres a wide range to choose from. We love to travel and theres so much more to see. So we found a plan that can travel with us. Anywhere in the country. [ male announcer ] join the millions of people who have already enrolled in the only Medicare Supplement insurance plans endorsed by aarp, an Organization Serving the needs of people 50 and over for generations. Remember, all Medicare Supplement insurance plans help cover what medicare doesnt pay. And could save you in outofpocket medical costs. Call now to request your free decision guide. And learn more about the kinds of plans that will be here for you now and down the road. I have a lifetime of experience. So i know how important that is. All right, look who joined us. Jim cramer is here, mad money host. Glad to have you with us. I kind of feel a little more positive than maybe i should be. I see things i like. Thats good news. Thats good. I was going to say, daddy, when is this nightmare going to end . Kimberly clark boosted its dividend, a big beneficiary of lower costs and waiting for that to be able to yield better than treasuries because i trust kimberly the way i trust johnson johnson, procter gamble. Theyre coming in and giving you a chance. Im hoping toilet paper sales do not suffer because European Bank bonds are weak. That would be a terrible correlation. If anything, they should go up. There is an algorithm between Society General Balance Sheet and kleenex. They have nothing to do with each other. I checked this. I checked this. I ran it nine ways to sunday. Even ran it through the espn guys. Yeah. So kimberlyclark is a positive example. Listen, you have been doing a great job at squawk on the street, are you in the Deutsche Bank is going to bring down the world camp . Im in the crony capitalism versus our capitalism camp. I have hedge funds giving me the derivative book of Deutsche Bank. One thing i learned from 2011 was there are banks in europe that should have been belly up. Should have gone the way of country wide or washington mu mutual but they have a different system over there. They seem to find a way to make it so they fool people into thinking, yes, absolutely the Balance Sheet is bad. And they do have bad loans. But somehow you cant gain European Banks because they dont theyre not fair. Theyre not fair to the shorts. In the end, they come up with some way to save it. For some we did. We cleansed them. Tim geithner, treasury secretary, ben bernanke, they were like if you go talk to some of the bankers, they say, listen, you are to raise capital. I dont need to raise capital. We dont care. Youre not part of our this is what bothers me. This is what bothers me. Im just i just got to say it. This is the market. Every month or every three months there is a new acronym or new buzzword. Now it is coco bonds. Heres the thing. Heres the thing, jim. If get rich carefully, okay. If youre at home, and youre investing timeline is ten year and invested in ibm or kimberlyclark or boeing tech is not for takers. But theoretically dow Blue Chip Company and now worry about the convertible bonds in europe and mom and pop are sitting at home and going, i just want to do know what to do with my 401 k . What they want to do is they dont want to root against any bank and dont want to root against employment. But you have to sit there and say how come i didnt miss mcdonalds at 90 and suddenly there is there is a mcdonalds within a mile of the champselysees. Thats a clean mcdonalds, clean as a whistle. That stock has nothing to do with socgem. But if it comes in, it shouldnt come in. You know, you got youre sitting back there and should be saying at home, i wanted in on mcdonalds for the last ten points, maybe something bad will happen in europe and ill get a chance. Thats the only way to look at it. Looking at the u. S. Again for that. As i look at your list, i can cheat because i can see it, but well get to most of these in a minute. You say you have to be at a time like this, you have to be very discriminating and look at the companies, like kimberlyclark, mcdonalds it is a drag to do this work, but yes. We talk about the cocos and make everybody crazy because we do, were here, we want to make it urgent and everything, the calm investor looks at other companies that are going to endure and thrive and arent going to be sucked in. Maybe they should look at cocacola, a good quarter. You like it . I like to put it in terms of pepsi. Let me give you an example of j j. There had to be layoffs in the medical device. J jachlt c can raise the divi. We borrow a lot of money. Gore ski will be running johnson johnson. Of the fleethree people, the fr runners, goreski, sands and trump, i would rather go with goreski. Not a socialist. Just so we get that on the record. Capitalist. So i look at j j and you think lowell mcadam, they dont have theyre not even in europe. Maybe that stock goes down to 47 or 44 because of, i dont know what do you want to call it . Credit i think i suspect a lot of people who watch our network are looking at utilities because they have been American Electric power. Give me wisdom about utilities. The wisdom is that when you hear the treasury, you can be really scared, people at home are not scared about the treasury, they dont understand what the treasury is. I remember when i first started trading treasuries at goldman, they trade them. Why doo th they trade them . They do. You look at the treasury and say, wow, i cant really make even if i reinvest, im in the going to do that well. What utility has just conddone really well, good yield, that has call exposure, but cola is not going away, thank you supreme court. What happened to American Electric power, nick aikens, super job, more natural gas, and so theyre switching. How about this . We all three of us live in new jersey. By the way it you see the chart . Ill ask you a personal question about your home finances. Okay. Has your heating bill gone down at all . Mine has gone up despite the fact that winter has been warm and natural gas is near a record low. How come yours has gone up . I dont know. I dont know why it has. Turn the darn lights off. My point is that somebody mine has gone down. Somebody is making money off the sullivans, maybe are you a window open . What . I do have a in baby. Maybe that that could be it. Diapers and and whole foods has gone up while youve been telling me about the whole point im trying to make is with nerp, coco, all this i got ko, i got pep. Speak english. I got cox. Speak english. Okay. I got two ciscos i like. Not one. But two. I got two ciscos i like here. Do you see Chuck Roberts . No. Good this morning. That was a good quarter. The 365 was on. Chuck comes on. He boosts the dividend to where it is yielding 4. 5. I got to tell you, even under President Trump they cant boost that ten year. They cant get that. He wont boost the yield, but thats a joke. But hes not a joke, thats a joke. What you get is you got a guy who is unbelievable Balance Sheet, the business is good. Cisco. Raises the dividend. Yields 4 . How is that stock up today . Because people at home, he has got a rock solid Balance Sheet, getting so much more even after tax than with treasuries. That makes sense to me. Look, do we want to i remember standing in front of a camera and saying, listen, im looking at the book, no way that really they could be in trouble. It is france. France doesnt work like us. Those guys belong to the same club. I cant get into the most of the clubs that those guys belong to. Thats a totally other show. And receipts nlets not pres 2008. Theyre 70 lower. Thank you, volcker, for making it so they cant make money. Volcker did it. He said you cant make any money. They have a lot of money. The stocks are awful. My frustration i hear from viewers and airports and whatever is that there seems to be this incredible disconnect, maybe more than any time in the last five years between what the stock market is doing, and what the economy is saying. Yes. Thats the problem. I told him, i said 40, oh, my god, really, thats how down everybody is. I sent him a picture of my daughter. Really . These guys are, like, theyre all in the bunker because were in the bunker. We created a bunker environment. He said, listen, were going to create it ourselves. Im not meaning were meaning ceos, listen to us and ceos listen to each other, people stop buying cars. That would be bad. That would be bad. When i come on and im positive now, versus another year, i wasnt that positive, i say, listen, i dont see the i dont see a cataclysmic event curing in our country. In germany, if angela merkel, most loved person on earth, were to say, lets borrow 500 billion because we have an unbelievable Balance Sheet and put people to work and hope Deutsche Bank needs money, were there, what happens . We go up 2,000 points. I dont know. Why cant merkel borrow money . Theyre Balance Sheet is ridiculous. Lets reset if we can for one second. Okay. Reset is a popular word. It is my new favorite word. I use that with everything now. Lets reset. Three big worries now. European banks, we talked about them, European Banks, not american banks. Oil we talked about. It is an issue. We have been talking about it for over a year at least. Power lunch. You stole my guest. I say nothing because it is business. Okay. It is business. What did abe bagoda say, tell mike i always liked him. Thank you, barney miller. In the third worry is china potentially a deval. Didnt kyle come on and say they got the the wrong side. Where was jack lemon. Agreed. China revalued, devalued, whatever, 1994. I was not in the market at the time. You were. It didnt kill the stock market. If anything maybe we talk about lower purchasing power from low gas, wouldnt china deval in some ways help the United States and the profitability of American Companies . A lot of Companies Sell over there. That would hurt my but we point out, we sell far less to china than we buy from. Lets i have the yellen testimony set up. Just the way bernanke said bad things for me, you go up, you say, listen, it is not the time to talk about Interest Rates. It is the time to talk about how the United States can be the locomotive, other countries in trouble, were back as being, you know, the world leader, the lost inflation, we have lowest inflation and also some growth. Maybe what we need to do now is play our role as being the worlds leader. One of the reasons you got to do that, i dont know if shes seeing who is leading each of the two parties, but the Federal Reserve, everybody has to watch themselves because the Federal Reserve is not that popular. Im saying this is a great time to say lets not get into the trees. The world is on fire, were the leader, lets just stop talking about rates and Start Talking about leading. And you know what would happen . You know what the question would have been like. The question would have been, thank you, madam, chair. Thank you, madam chair. Thank you. What do you got tonight on the big show . I do not have ron shake, panera, 2. 0. Todd, great, i spent time with todd. We had a black bean burger at wendys, killer. I got two vegetarian kids. I cant get to wendys. And timothy boyle, columbia sports wear, i love their stuff. It is tech. What a show. I got to stick around. Ask tim if people are buying fewer fleeces because theyre concerned about coco bonds in germany . May i suggest you stop rupping your herupp i running your heat all the time and buy some columbia sports wear. Have you heard of honey well . Get a new controller. Havent you heard of honey well . I use xfinity connect home because the Parent Company is so solid. Thats the best. Xfinity connect. You see my jim cramer baseball cards that my assistant gave me for my birthday in. I did not. I want to see them. Dont forget. Listen to me, we have to lead. Kroger tonight. No, talking about buy fresh. I got to tell you, whole foods, im telling you, hes humble, theyre humble. Good guy, man. Is he ever a good guy . I went to a whole foods in tucson, killer. How was oregon . Jacksonville library . How did you get that . Promised land, guys. Promised land. Beautiful. Every other place, maybe they should be like a lot of pain. Not talking about coco bonds. That place is just that place is not part of our country in some ways. Another country. On the coast of oregon . It is gorgeous. My daughter is in southern oregon, gold country. Were going to go to dominic chu. Thank you, jim. Great to see you. All right, guys. Lets bring you more color on what you were talking about here. First of all, watch the shares of the fresh market, which are spiking right now, up by nearly 20 near the session highs after a reuters report saying rival Grocery Store chain and cant call them rivals, kroger is like the biggest one of them all out there. They may be seeking to buy fresh market, we have reached out to kroger. The company has declined to comment as they would in many kinds of situations like this. Reuters said that kroger is in the second round of an option process for the fresh market, that attracted other Companies Like pe firms. That all according to sources familiar. The shares are down 4 this year. Around 40 over the last 12 months. What is interesting about this again, this idea that many of these upscale alternative type grocers like the fresh market, like Sprouts Farmers Market or the biggest one of them all, whole foods market, had been in the downtrends for quite some time, right now a huge move higher in the fresh market, well see if any more details come up. Halted already once for upside volatility, up 7 on the reports, up about 20 now. Well bring you more details as we know more on the news desk here. Back over to you. Is that is a story to watch. It is just under 2 p. M. On wall street. Another tough day for the few of you out there who may be bullish stocks or holding in the red. The dow off more than 2 . Oil holding below 27 bucks a barrel. We should note that s p 500 level just about five points off the session lows so looks like were heading down to those lows of the session once again. Investors today flocking to safety, no surprise. Gold rallying well above 1200 an ounce. This say level we have not seen for about a year. Investors piling into bonds too. The yield on the ten year treasury to the lowest level since 2012. Here is your mind blowing jaw dropping panic inducing stat of the day. Thats fair warning. With todays slide, the s p 500 has suffered a whopping 2 trillion in market cap losses just since the start of the year. Brian . That is a jaw dropping stat, melissa, thank you very much. Bring in Steve Liesman and seth masters. Seth is chief Investment Officer at abe Alliance Bernstein with half a trillion dollars in assets under management. We got all kinds of fun stuff to get to. Seth, you heard our long discussion with jim. I think jim, the point is were trying to prove that maybe earnings are not going to just go away because of some problems with Deutsche Bank and germany. Has the market made too much of what is happening in europe or maybe not enough . I think the market right now is very turbulent because peoples sentiment has degraded dramatically. And the fundamentals are not nearly as bad as you might think given that fact. Earnings in fact are, well, not very robust, at least pretty okay outside of energy. I think you can even say that outside of the energy and manufacturing sectors there is a lot of Service Companies where earnings are pretty darn good. And the overall sentiment is degraded because a lot of people are very focused on the potential structural issues around the world and if everything were to go wrong, theyre worried that might lead to a lot of do you think the market is pricing in everything going wrong . Exactly. And what we generally observe is that everything doesnt go wrong. A lot can go wrong. Rarely everything goes wrong. Precisely. And another point i make is that you also have winners and losers even if things do go wrong. There are companies that mine well positioned even in very negative scenarios. This is a time we think when especially if you keep your head and are Good Research and discipline, you can take advantage of the overreactions of the market is creating. Steve, we have a chart. I want to make a chart because a lot of talk about recession and Everything Else and oil and what have you. If you look and, guys, there we go, there is a lot going on the chart. Hold on now. If youre on the radio, heres what youre looking at. I didnt take anything this morning. I drew this on a piece of paper and appreciate our team putting it on tv. It is a 40year chart, okay, of basically the markets and oil. And what he can can see is oil and recessions only go together when oil is going up. We have never had a recession when oil was falling. The last five recessions we had have all come after a dramatic jump in the price of oil. Now, maybe this time is different. But do you believe that the market, oil or whatever it is, is signaling recession . History says it is not. No. I think thats an excellent chart. A little busy. I had not seen it. I might have done it in a different way, but i got your point. Thats the you know, i have long maintained that there would be a positive side. I will say, our economy over the last five years became a little bit more like saudi arabias than i was perhaps aware in that we became a lot of the marginal growth, i think, in infrastructure spending, even some hiring seemed to come from the oil patch. If you look at the number of jobs we have lost in oil and mining, and at that same time the number of job bes we have gained overall, it is very clear that the u. S. Economy is overcoming that and to the issue that seth was talking about earlier, i think it is clear that you have a lot more volatility in the market than you ever will have in the economy. And it is very hard to correlate probable outcomes in the economy with the extent to which the stock market has fallen. You have to Pay Attention to it. You cant ignore it. But when you look at what is happening with jobs, with housing, with autos, you would have to have the economy stop on a dime very soon to confirm this movement in the market. Exactly. I think it is important to explain why it is that there is a disconnect between oil and the stock market and the economy as a whole in fact. Which is that oil is a commodity, so its movements are explained by supply and demand. And overwhelmingly the reason that oil prices are down is because of supply. Huge amount of excess supply that was built up about seven or eight years ago when people thought that china was going to continue to grow at 10 forever. That huge excess supply came online all over the world. The big surprise was how much of it came on in north america. And what happened since then is Oil Prices Fell and fell and fell to the point which choked off with all due respect, probably work and dont get the chance to watch the show every day. Ive been saying this kind of crash in oil has been bad for mesh. I don but not bad enough to send us into recession. Thats exactly right. As oil prices fall, eventually it chokes off the drilling of any new oil. And oil wells. And that is happening right now across which is bad for the relatively small portion of the economy that is directly linked to economy. I had a meeting yesterday morning, 30,000 companies that are vendors to the oil and gas industry in america and all 50 states. Yes. Thats a lot of companies, but accounts for less than 5 of gdp. 95 of gdp or thereabouts are consumers of energy. And for them, low oil prices, all things equal, are a small boon. I understand that analysis. It is very specific. At the same time, there are all sorts of Ripple Effects not accounted for in that analysis. You talk about not just the vendors, but how about the producers of steel that go into the pipes that move the oil. How about the restaurants that operate in the area where previously the energy patch fueled growth in that area. I want to answer that question very simply. I get we put oil into the hopper to make steel. We dont take steel and put it into the hopper to make oil. Which is to say oil is an input who it is very characteristic is less important than the value of the output. Otherwise, he would have what economists call negative delta g, our change would be negative. We would put positive inputs in and come up with a negative amount on the other side. Oil oil is an input to the economy. It is not the ultimate output. I get unless were saudi arabia. I get that. But from the market perspective, im sure you could speak to that, from the trader perspective, they care about the Ripple Effects and unquantifiable, not just the direct impact who is holding the debt. That is having who is holding the debt let me get back to your initial point. We thought about all the secondary effects, theyre still relatively small because energy is a relatively small however, the Financial System does have leveraged exposure to energy because a lot of people what percentage of energy was the growth that was behind all of that, though. If you look at, for example, the high yield market, at one point, over 20 or 20 of high yield was energy or energy linked. And a lot of that will actually be problematic. So that has been written down, but written down dramatically. If you look at high yield spreads, they have gapped out to extraordinary levels given how solid most of the economy still is. We think that a lot of this has already been reflected in market prices. Seth, thank you very much. Were going to go down and check in with Michelle Carusocabrera at the puerto rico investment summit. Youre talking about debt related to what is happening in the oil sector. Were talking about debt related to puerto rico. They got massive debt and sitting here with me is the ceo of ambac. Good to have you here. Thank you for having me. You have a lot of money on the line here because you ensured bonds that right now are facing restructuring. So you have to pay out. How is it going at this point . Are you confident a deal can get done . We are hopeful that a deal gets done. Were not sure what the parameters and the framework of that deal look like because we havent gotten financials from the commonwealth. Theyre behind by two years at this point. They have not issued a full year Financial Statement under this governor. It is tough. The accounting here, in puerto rico, is tough. We had on jim millsteen, the guy youre facing off on the other side of the table in the negotiation. He would be far more artful, far more glib, but ill boil down the little bit of trash talking that happened between you two on the stage here at a conference. You guys are cry babies. You ensure bonds. They got they have too much debt, the debt will get written down and take your lumps, thats what you do for a living and you wrote bad insurance. Thats your problem. Right. We well, well, you know, the problem with that theory is that the facts sort of get in the way. We have not seen any financials to demonstrate the need for restructuring. We have had a couple of paid for professional reports from dr. Kruger and others and when you open those reports up, first page says dont rely on anything in here because we had access to partial information and no audited numbers. And so we are being asked to take a leap of faith when in fact we would like to sit down and talk about the facts and what the numbers are around the vehicles to which we provide guarantees. And the other thing that theyre doing is theyre trying to do a back door consolidation of 18 different borrowers. Each borrowers has their own credit characteristics and own legal sanctity. And we would like to talk about the ones that we ensured as opposed to throwing this 72 billion into a pot as to as though there is 72 billion of commonwealth debt. Speaking of debt, we had a super interesting conversation which is happen on the show related to what is happening with the oil and gas sector. Used to work in high yields. High yield market, carnage there, the yields, the spreads widening, what signal does that send . Talk if there is a recession coming in the United States. Do you have any opinion on that and we get high yield market signaling . It looks like it is due to a number of things. One of them certainly is the Ripple Effect of Energy Prices and what that is doing to the Global Capital environment and the other is china and china devaluation and China Economy as a whole. The other thing going on is an absence of buyers. We have it in Regulatory Environment where the bid is taken out of the market to the extent that bid was provided by capital providers, brokers and banks and so on. So when sellers come into the market, you dont have that bid there and there is just an absence of buyers now given all the uncertainty around energy, around china, and so on. And is this specifically this issue of lack of liquidity in the bond market we heard so much about in. Thats right. When it comes to if there is a recession in the United States, what does that mean to all of the Municipal Bonds that you ensured . Are you wore iworried about tha this point . We have a large Municipal Bond portfolio. Once you get past some of our bigger exposures like puerto rico, we have a very high grade diversified portfolio. We go through it from a risk perspective all the time. Were not seeing any particular worry points. And on the whole, the municipal finance market has been doing very well. Municipal revenues on the uptick. There is capital coming into the Municipal Bond market, in large sums. We dont see any particular problems there, even the spreads are widening a little bit, were not seeing any cause for large concern. What about in area where there is lots of oil and gas money that drove the economy. Are those municipalities under threat in any way . Those are certainly concerns and we have gone through our portfolio, dont see anything there. And they tend to be in terms of the their debt situation, those tend to be smaller municipalities. If they have debt and a lot of those jurisdictions have been doing so well where they dont have very large amounts of debt. Your stock is getting hit very hard in last year. Why do you think that is . It is correlated to puerto rico. It is if you chart our stock movements against developments in puerto rico, youll see there is basically a correlation of one. And there is a fair amount of uncertainty around the puerto rico exposure, even though i think that as it relates to the Holding Company stock, it is, you know, we dont necessarily see the basis for it. Thanks so much for coming on. Thank you very much. Ceo of ambac. Joining us live here in puerto rico. Back to you. All right, michelle, thank you very much. Lets go to dom chou for a markt update. Pandora shares halted, up about 2 before the trading halt happened. This all because of a New York Times story saying that pandora is said to have held talk about possibly selling itself. Also retaining Morgan Stanley as an adviser according to people briefed on the talks. So, again, pandora shares still halted for volatility. This is not for news yet, but on the heels of New York Times story saying that they have possibly held talks to sell themselves, also retaining Morgan Stanley to meet with potential buyers, this all according to people familiar with the matter. Well keep an eye on pandora shares. Still halted. Well tell you, tyler, when it reopens for trading. For right now an upside movement in the shares. We could all probably speculate on who the potential buyers would be. But there was nothing in the report that referenced any . No. Again. It wasnt there. They were just talking about this idea that they may have held talks with, again, using private discussions and sources familiar with those private discussions. Those are the details that we know for right now. The story does not go into, again, many of those details, but, again, well keep ans happ. Shares are still halted, well let you know when they reopen again. Private discussions arent private anymore. Dom, thank you very much. Were going to follow that story and more, do a little reporting here and well be right back. Welcome back to power lunch. The pain in the financials continues today. Check out the bank etf. Down by 3. 2 . Were practically at lows now. All the companies in the s p 500 sector are hitting 52 week lows in todays session. Eric oja covers the banks at s p Global Market intelligence. A couple of things going on today i want to hit with you, where rates are now and also what fed chair janet yellen said about negative Interest Rates. She said negative Interest Rates are not off the table. How do you value banks and Business Models if were in a period of negative Interest Rates . The largest banks like citigroup and bank of america and Jpmorgan Chase would be most directly negatively affected if we go to a negative Interest Rate scenario possibly next year. They have a lot of money at the fed. And that that would hurt them right away. You see the share prices down 5 today. The regional banks like pnc, sun trust, they would be much less affected. Less affected. For the large banks, basically it would make it hard for you to recommend any of them in that sort of environment . Yeah, it is tough in that environment. And there is a lot of things hitting them today nation to what is going on with European Banks, and what is going on with longterm Interest Rates. It is difficult for these banks right now. Lets talk about what is going on right now. And on a hypothetical, and thats the yield on the ten year, levels we havent seen since 2012. How difficult is it for these banks in this environment . Well, it is interesting it look back at what happened in 2011 and 2012. The yield on the ten year treasury went from the low 3s to the low 2s. It is about a 30 decline in the yield. And right now the same thing has happened in middecember, right after the fed funds rate was hiked. Eric, im sorry to interrupt. We have news here on pandora. Straight to dom chu for that. Just to bring you up to speed. Pandora shares up about 5 now. They were as high as around 15 after the trading halt was lifted on the upside volatility side of things after the New York Times reported that pandora may have held talks to possibly sell itself. Also retain Morgan Stanley as an adviser to look for potential bidders. This, all, of course, a private matter and citing sources familiar with the matter, we should also note here pandora has been on a real market downtrend over the course of the past year plus. Shares down by 35 to 40 during that time span. So, again, a big pop today, gave back a lot of that, right after the initial 15 gain. Now only up by 4 . Volume, i will point out, though, about 8. 5 million shares have traded so far. The average volume over the past ten days or so about 7. 5 million and, of course, guys, they report earnings after todays closing bell, so there may be a little bit of jockeying for position ahead of what could be a volatile Earnings Report as well. Back over to you. Dom, thank you very much. Eric, i assume youre still there, i hope so. Great. I wanted to ask you, as you look at the ailing big banks, stock prices, that is, if you had to assign values to the three items that you think are most responsible for the fall in stock price, what would those values what would the items be and the values. It is fear of negative Interest Rates, oil, debt, what . The number one thing is the longterm Interest Rates. The ten year treasury was 2. 3 in middecember. It is 1. 6 right now. Thats i would assign that the greatest weight, i would say thats a way to five. In terms of Energy Prices, i would give it a weight of three. The largest banks have about a 2 exposure directly to energy. And then the lower one would be in terms of overall credit quality. The economy is still strong. And overall credit quality is still strong. So i would say, the effect that longterm Interest Rates has on these banks is that Net Interest Income, over 50 of revenues, will have another low growth year. And the reason that bank stocks did pretty well last year was that investors assumed that Net Interest Income would grow 5 , 6 this year. So we get a one year delay in that revenue boost. Thank you for understanding my question. Appreciate it. And you answered it. Sure. We appreciate you being with us. Eric oja of s p global. Up next, the five stock calls where analysts see some opportunity, even on big down days like today. Street talk is more vital than ever. And youre watching the ill mark market like a hawk, or a hawk with glasses. Will the crude oil hold the 27 a barrel mark into the close . Thats your question. The markets close and were like ospreys or ocelots. With glasses. With glasses. Like an owl with a graduation cap on right after this. At ally bank, no branches equals great rates. Its a fact. Kind of like bill splitting equals nitpicking. But i only had a salad. It was a buffalo chicken salad. Salad. Perfect driving record. Perfect. No tickets. No accidents. That is until one of you clips a food truck, ruining your perfect record. Yup. Now, you would think your Insurance Company would cut you some slack, right . No. Your insurance rates go through the roof. Your perfect record doesnt get you anything. Anything. Perfect for drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. And if you do have an accident, our claim centers are available to assist you 24 7. For a free quote, call Liberty Mutual at switch to Liberty Mutual and you could save up to 509 call today at see Car Insurance in a whole new light. Liberty mutual insurance. Welcome back. Im jackie deangelis. 26. 21 where wti settled the session, back to may 2003 lows. Intraday, 26. 13 the session low before we finished at 2 30. Took out the lows that we hit at january 20th as well. We heard from opec, the monthly numbers were out. More bearish nuggets out of this report. The saudis increasing their production in january in overall opec production going up because of iran and iraq as well. Also, owe pepec cutting its for for world Economic Growth. Some commentary interesting in the report, opec saying there seems to be some contagious effects taking place across many aspects of the global economy. So the cartel acknowledging the fact here that it is not just about supply and demand, but about Global Economic conditions as well. Interesting, the dollar keeps going down, but it is not supporting crude here. Shows you what kind of momentum is in this trade, melissa, back to you. Jackie, thank you. We just want to point out a key level here for the s p 500 just hitting a new two year low on that index. 1811 the intraday low and two year low here. Were just off of that right now. But that is one to watch here as we enter the final hour and a half of trade. So global oil concerns still impacting the markets heavily, especially on the Financial Markets of the past week. Crude oil falling once again into the close, lima kroft with rbc capital, joining us now. And headlines say were at 2003 lows, it is worse than that if you adjust for inflation. I dont know what to ask anymore with oil. How low can we go . Zero . Heres the question. Could you breakthrough 25, which is what were watching because if we look at the financial crisis sell off top to bottom, that would take us around 25 in percentage terms. Once you cross through that, could you approach 20 . Sure. The question is can you stay there . But really we dont see the real bullish catalyst now. Thats the problem in this market. Were in the season for refineries, we have refineries cutting their run, uneconomic to refine the product. And we have owe peck, you know, continuing to produce while production is coming down. U. S. Production is falling, but opec is up is there a im sorry for my phone, trying to get confirmation on a pandora story. Is there a price point at which we finally see real production come off lets assume demand is not going to change. No sign demand is popping, so lets forget the demand side. Is 20 bucks the level somebody says im done, throw in the towel, im capping the well, taking my pickup . That becomes a question of bankruptcies in the u. S. , and on the sovereign producers front, i think it is going to be interesting. I think in the next week, youre going to hear more stories about opec emergency meetings, because look what happened a couple of weeks ago when they mentioned that prices wept back up. In the last hour, john said what it is going to take to turn things, there is too much pain and too much drain of finance in russia, in saudi arabia and that at some point they begin to wobble and Start Talking to one another. Think about when we had prices this low before, the soviet union collapsed. If youre vladimir putin, you reside over a period of high prices, that puts him potentially at risk. He does not want a 2011 situation where there are people in the streets. He told people in december, 2016 would look better than the year before, so the question is, i think, when is he scared enough to call this out, and say lets get this done . When is that going to happen . Theyre meeting in may. We have a meeting but march, meeting in march, but who knows. At this point, the problem with the russians is they keep saying well cut and they dont have a particularly good follow through on their record. This is the challenge right now. It is hard to see who cuts. A lot of this stuff, a lost the headlines are there ready remember the headline, theyre ready to talk . Theyre ready to talk about maybe possibly cutting, were three steps away from an actual cut. Are they floating these comments to see if it firms up the market at all . It worked last time. For a day. We went over heres the thing, though. The problem right now is even the iranians are saying lets talk. But what are they doing now . Theyre undercutting the saudis to sell into the asian market. So i actually think some of the dynamics within opec are getting worse, not better. Lis this going to end in war . We think it ends in do you have a disorderly default in venezuela . Maybe thats what ends this. Would it eventually get to a point where countrys ways of life are threatened . Venezuela thats when people stop talking and start punching. They dont have clean water in venezuela. Theyre running out of electricity. They dont have essential medicine in their hospitals. This is a humanitarian crisis looming in venezuela. And it is going to be there for other countries as well soon. We got to leave it there. Thank you. Appreciate it. More on the New York Times report that pandora has had talks about a possible sale. Michael packer covers pandora for web bush. Were looking at a stock that is now 11 higher, halted for volatility, were ahead of earnings as well. Mike, what do you make of the report here . Do you think pandora is up for sale and actively engaging potential buyers . I would say that the active part is probably not correct. I think the rest of it is probably true. It doesnt make sense that the company made all these Strategic Moves in last few months, they bought ticket fly for about 20 of their market cap, they bought rdo assets because theyre getting into on demand and issue to convert. I think those are a lot of things to do and decide you can give up a few months later. I think more likely the bankers approached them. I think the bankers probably have a buyer lined up. But i think it is likely one of the usual suspects. I believe the story, i just dont think pandora well let you go. Our connection is a little sketchy. Thank you for phoning in. Appreciate it. Michael packer of web bush. We point out the s p 500 is now at 1810. This is a new intraday low and a new multiyear low. Multiyear low and the dow off more than 400 points now. The s p 500 is, as melissa mentioned, at twoyear lows. Youre watching power lunch. In new york state, we believe tomorrow starts today. All across the state the economy is growing, with creative new business incentives, the lowest taxes in decades, and university partnerships, attracting the talent and companies of tomorrow. Like in utica, where a new kind of workforce is being trained. And in albany, the nanotechnology capital of the world. Let us help grow your companys tomorrow, today at business. Ny. Gov hello, everyone. Im sue herera. Here is your cnbc news update at this hour. The u. S. Olympic committee is planning to hire Infectious Disease specialists ahead of this summers games in brazil. Theyll advise potential olympicens expressing concern over mosquitos carrying the zika virus. There is word the final four occupiers involved in a standoff at an oregon wildlife refuge have surrendered. They were part of an armed Group Protesting federal control over public lands. The standoff started early last month. Four people facing manslaughter charges in connection with the deadly 2015 gas explosion in manhattans east village. They are accused of bypassing a con ed gas meter during renovations. That blooft killed two people and destroyed three buildings. And it is being called one of the biggest discoveries of modern science. Scientists announcing today they have found evidence of gravitational waves. They were detected by the collision of two black holes, which made sound. The discovery confirming albert einsteins century old theory of ripples in space time. File that under the coolest story of the day. Power lunch back in two minutes time with the Dow Jones Industrial average trading down 325 points. We were down 400 just moments ago. Back in two. Vo know you have a dedicated advisor and team who understand where you come from. We didnt really have anything, you know. But, we made do. Vo know you can craft an Investment Plan as strong as your values. Al, how you doing. Hey, mr. Hamilton. Vo know that together you can establish a meaningful legacy. With the guidance and support of your dedicated pnc Wealth Management team. Sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Apparently our conversation with halima ended two minutes too early. We got headlines from the dow jones and wall street journal saying and citing the uae oil minister that opec is close to or ready to discuss a coordinated production cut. When that happened, we not only saw oil, some of the futures start to move a little higher, but the stock market still down, folks, by the way, but the dow down 400 when these hit. The dow down 280 now. Chevron if we have an intraday of exxon or chevron, you see exactly when these headlines hit, just a couple of moments ago, that according to the uaes Energy Minister, and according to the wall street journal, there is some talk really this time, they mean it, about a production cut. It was a bounce that happened at approximately 2 40 eastern time and very dramatic on the s p 500. This is in the next obviously doesnt move like this very often, but a sharp move off of that twoyear low that was put in intraday, 1810 was that level and we have almost immediately bounced about 17 points higher giving back a little bit of that right now. But we have a bounce off that low at this hour. More power lunch and joined by halima kroft i believe for the oil bounce. Stay tuned. Here at Td Ameritrade, they work hard. Wow, that was random. Random . No. Its all about understanding patterns. Like the mail guy at 3 12pm every day or jerry getting dumped every third tuesday. Jerry 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. Td ameritrade. All right, welcome back, everybody. The snazzy graphic says, time for trading nation. Lets get trading nation. David, its funny because if i said to the audience who maybe just tuned in and see a dow down 240, how about that comeback . What is he talking about . We were down 400. We get one opec headline citing a random Energy Minister and go up 160 points. What do you make of these markets . Look, volatility is obviously the name of the game. I look at it and say, you can see how oversold we are from a standpoint of how much we rallied off the headline alone. We were in a position today where its been more macro and etf selling. They have sold what they needed to sold and derisked to some accident to where they need to be. Now what were seeing is a buyers strike. On our desk in particular, weve been busy the last several days. Today were relatively slow. Not seeing buyers defend the positions because of fear. You see the headline overnight and banks are still extremely sensitive here. But you can see what one headline can do in a very oversold market. We seem to hold a level, 1810, held that pretty well. And i think you can see a massive snapback rally here just on the fact that we are completely, completely oversold. The negativity is extreme. It is extreme. Do you believe and agree with david that we are massively oversold. David is right, were oversold but the story has shifted from just energy, down 12 on the year versus the s p down 11, to being about the financials, down 18 on the year. As welcome as the news is about potentially some opec meeting coming about, we have bigger fish to fry at this point. We have to deal with negative Interest Rates and very shallow two to tenyear curve and sovereign rates around the world. Its about the economy globally as much as it is about energy specifically. We talk about, first off, 15 down in a bear market. 30 off the high. We talk about consumer is everything, 75 is Consumer Spending and gas prices at 1. 60 and potential devaluation of the yuan. Where is the consumer supposed to be riding to the rescue over the european bond concerns . David raised the issue of a buyers strike among equities, were seeing a consumer strike on the consumer side. They see lower Energy Prices and appreciate the cheaper tank of gas but best cases are going out to dinner for an evening. They are not thinking about spending money on a bigger ticket item. What im hearing from both of you is were oversold, does that necessarily mean that buyers come in could we be in a situation where we languish here . Absolutely, melissa. We talked about going into a holiday weekend, a lot of fear can be in the eyes of people. You can see a risk off scenario into the weekend and come out of it and see things change drastically depending on the news flow. We talked about on your show, so many stocks that are in a position right now that should be looked at and bought. I mean, even when you look at the dividend stocks right now, the yield that youre getting in dividend names versus the bond market is an incredibledy verge ens. When we see those extreme measures and the fear and negativity thats been persisting. You listen to kyle talk about the same thing hes talked about for past five years. When is that going to come to head . It could happen in 20 years. My point is people get extremely negative during periods like this and it gets pushed in the pendulum swings too far. Nick, you look at 75 stocks in the s p 500 at 52week lows, half of the dow in bear market today and 60 was as of yesterday. The dows decline basically cut in half in the last 12 or 15 minutes. The s p 500 is up more than a percent from its low today. How important would it be for equities if that headline turns out to be true and the Oil Ministers of the opec countries get together and cut production . It would be hugely helpful to begin to build a base for equities and baseline story about some stability in the energy markets. We havent had those classic selloff signs, down 5 and vix that goes to 40, so its very tempting to try to call a bottom but we havent had the panic low yet. A good discussion on trading nation and important topic. Volatility is the watch word. For more trading nation, tried to leave the building. These headlines from the opec oil minister when power lunch returns right after this. All right, this is a chart this is a chart there we go, of the s p 500 versus crude oil interday. If youre on radio, picture two lines going in the same direction. A few minutes ago headlines from the wall street journal saying the uae minister suggested that opec is ready or set or whatever to make a coordinated production cut. Helenena tried to go back to work and we stopped her car out in the parking lot and got her back in here. Anything any meat behind what the uae financial uae is important. The Energy Minister going into opec meeting saying he regretted nothing and no reason to cut. You have one of the Key Countries thats been a holdout now seemingly signaling a willingness to get on board. Im still waiting to see, is it an agreement to talk or sit down barrels . Uae will have to sit down barrels and we have yet to hear from saudi arabia. Do they come out today or tomorrow and say they are ready how many grains of salt do you put on that meat . If this were venezuela, i would say totally discount it. The only reason i would be watch the story more carefully, uae has been consistently in the no reason to cut camp. So if uae is legitimately moving in the direction of a cut, that might mean saudi as there as well. But they have to do the cuts. They are going to be doing the several hundred thousand barrels plus of sitting down. Thank you very much. Now well really let you leave. We all leave, in fact. The show is over. Thanks for watching power lunch. Closing bell starts right now with more on these opec headlines no doubt. Welcome to the closing bell, do you notice Something Different this afternoon . Im kelly evans new stair highly . Youre listening to the 1812 overture and theres reason. Just as we tested 1812 on the s p 500, a level everybody has been watching everybody. What happens this headline comes into the market about uae potentially a cut out of owe peck. Isnt that crazy how that happens . You hit that low, actually hit 1810 but there is no 1810 overture,