Transcripts For CNBC Power Lunch 20160401

May have to raise rates very quickly in the future. And she says that due to raising rates are not raising rates due to market volatility is something the fed should be very wary of. She says she reduced her rate path for the fed funds rate from december to march. But says now the economy has shown considerable resilience. Recent inflation data, she says, has been somewhat encouraging and she expects wages to accelerate as the labor market tightens. She sees strength in Consumer Spending with strength in housing. Now, one curious line in here, she says i did not descend from the march decision as if somebody was asking her that question. As far as i know, brian, nobody asked her, but it makes me think that miss mester is not far from descenting if the fed does not move relatively soon here. I didnt steal the candy. Exactly. Im glad you see that. The line kind of sits out there, i did not dissent, as if somebody expected her to dissend, i sort of did. She felt a need to explain this to people. Steve, stick around. A lot to discuss. For tyler, melissa and michelle and myself, brian sullivan, happy april, happy friday. Welcome to just under two hours of power lunch. Lets get to it. By it, we mean more on what you heard from steve, the u. S. Economy, the fed, the job market and your money. Lets bring in diane swonk, and Dennis Garman making an appearance on power lunch, our lucky day. David katz as well should join us. Diane, what do you make of this . Mester saying, guess what, we may raise rates, we may not. If we do, we may not do it fast enough. If we dont do it fast enough, we have to do it fast down the road. You got that . Not too fast. I think that was my analysis. Mine too. I like that analysis. I think what were seeing here is the Division Within the fed between the hawks and the doves and likelihood that we will see the april meeting more than one dissent. Mester dissented at the march meeting and another voter didnt dissent at the march meeting may be poised to dissent. We could see two dissents at the april meeting as sort of yelling cages hawks and holds them back. I think this is an interesting division growing in the fed and goes to the top of the fed between vice chair stan fisher and chair yellen. Stan fisher has been more eager to tighten and more concerned about inflation than yellen has. So youre seeing that division sort of rear its ugly head. I think i was talking it is really up to janet yellen and not up to mester, right . Yellen doesnt want to raise rates. Not going to. I think thats exactly the point. That was miss yellens comments earlier this week to the Economics Club in new york was that i am the one who was setting the pace. I am the one who has responsibility here. Mester has been always a hawk, this was, i think, a rather half comment, not too slow, not too fast, just half fast. Im glad you clarified it. It went by so quickly. Half fast way, i guess. It was a half fast comment. I think that we expected mester to be a little more hawkish. Steve made a good point, she went out of her way to say i did not dissent. Clearly she was intending to, she was thinking about doing so, she probably shall dissent in the future. I was surprised that she made that statement and she focused that clearly upon the fact that she did not make a dissent this time as a voter. David, it sounds like you think it doesnt really i dont want to say doesnt matter, but you think two hikes later on this year, thats what is baked into the market. Thats the way youre proceeding . We think so. We think the market right now is obsessing about the fed, but at some point in the not so distant future, the market will come to terms with the fed, raising rates and will focus on stocks, earnings and the economy. From your lips to gods ears, we would all love it, by the way. At that point, we think stocks can continue to go up. Starting rate hikes from the low level that were at should allow the economy to continue to be okay. Yeah, i mean, i think thats a good way to think about it. We consider talking about whether or not the fed is going to do a quarter or half a point. Guess what, i would say that quarter or half or full point on gdp any day and give up a quarter or a half on the fed. I want to talk about, guys, what we had with the data today. We had 215 on jobs, take a look at that. Thats a nice number. What is the trend . The trend is stable. North of 200. 21 of 27 months north of 200,000. The level is very high. Manufacturing, kind of surprising bounceback here, were talking about getting a little bit better manufacturing numbers. The trend is rising, though the level is relatively low. We have good service jobs. It is the growth number that is really the outstanding here, the outlier here. We have this lamo gdp number at 0. 9 for First Quarter. Could be that weak gdp effect we talked about in the past. But well see if the gdp number catches up with some of the strength here. To me, thats a reason to trade or not to trade stocks rather than the fed doing a quarter or doing a half or even threequarters of a point. Steve go ahead. Further point, i just want to make a further point on the gdp statist statistics, the way we count Consumer Spending, it looks like were undercounting Consumer Spending right now because of mix effects in the way that walmart sells gasoline. Because theyre hiring 47,000 retail people, so it is possible walmart is crazy or it is possible the bean counters have it wrong. Im siding more with walmart than the bean counters. Exactly. I agree with you, steve. I think the gdp numbers understating Economic Growth now and thats part of where were having this gap between what going on in the employment market and in the gdp numbers. Like you said, walmart is all retailers will put their money where their mouth is and not hire unless they think theyre selling. I can remember lots of fed votes going back a long, long time. I cant remember many where there was more than one, maybe two dissents. At what point does the number of dissents become a fractured fed . And do you expect that to happen . Couple of things, you are correct. I have to go back and look at the history. We looked at this before. I think three is a number where it gets to be a little embarrassing. How many vote . 12 or 14 . 10 votes now. Should be 12 because two fed governors are not able to be confirmed through the nomination process in the broken congress right now. Let alone Supreme Court nominees. Thats another story. Is it just me, steve, are we getting close to where we could be nine against one in a few months . I dont think were there because, remember, brian, one thing you may be forgetting is of the five we chronicles who had suggested april, i believe only one of those was a voter. So the question becomes shes a voter, we think she sort of is like an inner hawk here, but really has been playing her cards a little more close to the vest. She used to work for charles bosser at the philly fed. She makes some hawkish noises but has been willing to go along. So that comment i did not dissent suggests to me there may be a dissent there on the way if she doesnt see the kind of movement that shes looking for on rates. It is also important who dissents and i think, you know, if you go back to the volcker years and what was the tipping point, it wasnt just dissent among president s, it was among the inner circle at the fed, the actual governors. Thats a very important delineation to make as well. Were in a different world, where dissents are more acceptable than they once were, bernanke rushed, let the genie out of the bottle. If you start to see dissents among her inner circle, which i do not think were going to see, that would be a major tipping point. Dennis, i would think that a higher perception of fracturing fed would mean higher volatility in the stock market. One would think so. Going back to what diane said, she had had a very important point, far more important to have the governors dissenting than the regional president s. We expect the regional president s to dissent on a rather consistent basis. I can remember i dont have the data in front of me, going back to the early 70s, i can remember a number of times we had had two and three dissents on a consistent basis, but it is when the governors dissent that the game changes. Thats a great point. I believe you would see a fed chair change her position before she allowed a governor to dissent. I think if stan fisher, the vice chair or jp howell were two people who would say, you need to do something for me here or youre going to lose my vote, she would do something. Last question to you, when it comes to the data steve outlined, the jobs report which is, you know, the big mac daddy every single month, what does it tell you about the economy in particular, how you invest in light of that . Does anything change as a result of the number today . No, but it is a continuation that the economy is actually better than many had feared. We think this Quarterly Earnings season will be okay. The fact that the u. S. Dollar has been a little bit weaker than expected, gives companies the Multinational Companies a little bit of wiggle room. We think it is going to be a volatile year for stocks, but you can still buy into this. One group has been miserable the beginning of this year have been the financials. We think if the fed ever does get to raising or people ever accept the fact theyre going to be raising financials will do a lot better and one group that has ne exceptionally well has been the utilities and we would be very wary about putting new money into utilities. We think theyre the upper end of the valuation and more likely than not they could be 5 lower before the year is over. Did you say, david, the economy was okay, because i was id been led to believe by every single president ial candidate that everything is terrible and getting worse. The data actually seems to be getting better, 73 months of job gains, thats an all time record, i understand we got wage issues still out there. If you listen to sort of the political rounds, you would be hiding under your desk sucking your thumb and not buying any stocks. Youre exactly right. Thats usually the case. Everybody is putting down the economy, what were hearing from you dont get elected by saying things are okay. Exactly. I think there is another issue which candidate has a ph. D. In economics . Im just kind of they dont have many econoc advisers. Thank you. The three ds, diane, david and the half fast the Weekly Oil Rig count breaking moments ago. The number of Oil Drilling Rigs in america fell again. Another ten oil rigs off line last week. This on top of the 15 oil rigs we lost the previous week before that. We were at the lowest level of rigs since baker hughes began counting rigs in 1944. Here is a little context. There are 499 total oil and gas rigs, on land, off shore, canada, whatever. There were more than 2,000 back in the fall of 2011. And each one of those oil rigs, by the way, employs about 40 people on looand directly and a the manufacturing that goes along with it. Thats the one sector of the economy which lost jobs. Imagine if we stabilized or maybe grow a little bit. You could have every sector of the economy adding jobs, mining is what the government calls it, it has been half fast. Yes. Okay. Speaking of oil, under pressure today, a lot of reasons, right . The saudis making headlines too. Saudis deputy crown prince saying reportedly that they will only freeze their oil output if iran joins in the freeze. Now, of course, iran said it will not freeze until production goes to 4 Million Barrels a day. So basically, michelle, i know you know this story very well, saudi arabia saying we wont do it unless they do it, they say were not going to do it so assume your own conclusion there. This is groundhog day. We had this conversation over and over again. Well freeze if you freeze. Were back to where we started. Feels like groundhog day. Did you get that . I got it. On deck, scary new projections from the cdc about the possible spread of the zika virus. Five stock calls of the day you need to hear about, more actionable information for you coming up. Billions are spent to confuse and, dare i say it, flummox the american public. Save 16 on Car Insurance. Switch now. Well at compare. Com, we say enoughs enough. So weve created this mind boggling facility. Where were constantly scrutinizing millions of rates. Answering the question who has the lowest. Go to compare. Com, plug in some simple info and get up to 50 free quotes. Choose the lowest, and hit purchase. Its fast and easy. Compare. Com saving humanity from high insurance rates. Welcome back to power lunch. Netflix will not be investigated by the fcc for socalled throttling. Thats when they change the speed of the download depending how youre viewing it. Thats according to fcc chairman tom wheeler. Wheeler said the streaming services actions were outside the Net Neutrality rules adopted last year. The stock rising by 2. 5 . Endo international accused by the ftc of paying rivals to delay generic competition against two of its biggest drugs. That stock is higher by 1. 7 . And Marvel Technology will miss the deadline to file its annual report for the just ended fiscal year. Chipmaker saying it would report an annual loss as revenue drops. Marvel falling more than 4. 5 . Melissa . The centers for Disease Control ringing the alarm about the potential spread of the zika virus this summer. The big question is, what are we doing to stop it . Lets get to meg terrell live in atlanta. Hi, meg. So we know that zika is already spreading locally in u. S. Territories like puerto rico. But this summit is really to prepare u. S. States and local authorities for what happens when we probably get local transmission here on the main land in the summer months. Right now, all the cases we have seen in the United States at least in the main land have been travel associated cases. Folks who have been in the affected countries in central and south america. But as you can see, we have a map of the mosquito where it is in the United States that transmits zika. So these are two different kinds of mosquitos. Egypti is the one more folks worry about. What are we doing about it and what can we do to stop it . They say vigilance and vector control. Trying to stop the mosquito in its tracks. Now, we do that with pesticides and hunting down the mosquito. There are new methods being talked about a genetically modified mosquito that will Start Testing in the United States here sometime soon. Though thats really not determined yet. Were also talking about vaccines and we talked to tom frieden today about that. Take a listen to what he said. The vaccine is going to take even in the best case a couple of years if it works out. We need to move fast. Because the mosquitos multiply rapidly and the risk is significant and not far from now in terms of the summer months coming. Thats why it is a race against time. So we hear a lot about this request for funding that congress has not yet filled. They asked for 1. 9 billion. President obama asked congress for emergency funding for zika. Congress hasnt acted on it, saying we should allocate unused ebola funds. We have a story of how one location, key west, florida, is fighting this. Even if they were granted the 1. 9 billion, would that speed up the process for the vaccine or the genetically modified mosquito to be deployed and possibly fight the population . It could help with vaccine development, thats definitely true. In terms of helping intrexen, they seem generally well funded to hold up for intrexen now is the fda has put out a Public Comment period, 30 days, to get basically feedback from the public about doing the testing there. Once that kind of wraps up, well see how that unfolds, but really local governments are coming back from cdc with plans but need funding to implement the plans. Meg, thank you. Big apple in a big bubble. Startling new housing numbers ahead. Scary moments at a san diego pier. What happens next. Youll find out when power lunch returns. 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. Look at this scary video from san diego. A whale watching ship, horn blower went out of control as it was docking. And rammed into a dock. You can see people scrambling to get out of the way. Investigators are blaming a mechanical malfunction. The ship was carrying 144 people at the time of the crash. Seven people were indeed injured. Scary. Speaking of crashes, new report out on new york citys Residential Housing market. Im joking. So far the numbers dont look like there is any crash going on, if, indeed, you think there is a housing bubble in new york. To robert frank, the details on this latest report. Robert . Sort of speaking of noncrashes. Manhattan real estate is prices continue to defy economic gravity, actually hitting all time new records in the First Quarter. The average sale price of a new york city apartment topping 2 million for the first time. Thats according to report from douglas elman. The average price for a square foot in the First Quarter that set a new record, 1,713 per square foot, 8 over last year. Apartments sold faster. Discounts are down. Almost half of all apartments are selling for at or above the asking price. Now, there are some signs of a slight slowdown at the very, very top of this market. Apartments in the top 10 of sales sat on the market an average of 122 days. That compared to about 90 days a year ago. The total number of resales, that excludes new developments, fell for the Third Straight quarter. The most expensive sale in the quarter, that was a 7,000 square foot coop at 101 central park west, five bedrooms, play room, staff room, dining room, library, went for 35. 3 million. The seller was keith and peggy anderson. Hes the cofounder of blackrock. By the way, they bought this apartment for 12. 3 million in 2003. Over that time, they have nearly tripled their investment. Soso far for now manhattan real estate a good investment. Im betting they did a really painful renovation on that apartment before they moved in and by definition, i mean all renovations in new york city are painful. Yes. I would agree with that. Why doesnt that growth ever happen to me . Same question. Nothing like that ever happens to me. Is this a good snapshot of what the market is doing now . These are sales that are closed in the First Quarter. So these deals were actually made way before the First Quarter. Yeah, melissa, thats such an important and very smart point. A lot of these are contracts that were signed 18 months ago for brandnew buildings that are now coming online and closing. So it could create what i called the condo cliff where once all of these sales clear, were going to really find out where the market is, maybe in the next six to 12 months. That could be strong or we could fall off a cliff. We just dont know. Youre right. Thats hiding or masking some potential weakness now. We got great viewers all across this fine land of ours. I think we need to create something for new york, san francisco, Silicon Valley, maybe boston. And call it the stupido meter. Youre driving along, listening to the radio, comes with no land, got a couple of thousand in maintenance under that, your neighbors are complaining because your dogs are barking too loud. Which happened to me. Good dog. You understand . It is getting steupistupid. The bottom line, 2 million in new york city buys the most unimpressive apartment. It is sad. 1700 bucks a square foot. Spending 60 of their net income on housing. And if and when as we started to see, some of the big new york banks start laying off hundreds of people, maybe thousands of people. Im going to tell you something too, book chain, most associated bitcoin, a lot of traders i know are afraid of this technology. I cant go into why. It takes too long. But it could alter the number of jobs. Yes. I want to alert you, were getting the reservation numbers for tesla. 200,000 is the latest number. Elon musk had tweeted 180,000. It is now reached 200,000 in terms of the reservation numbers for tesla. In terms of revenue, thats north of 7. 5 billion gotten from the model 3. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Technology moves faster than ever. The allnew audi a4, with apple carplay integration. Im seema mody. Here is your cnbc news update for this hour. President obama speaking with World Leaders at the Nuclear Security summit in washington. He said the Iran Nuclear Deal has been successful. Crediting iran with meeting its commitments. What this group that doesnt agree on all aspects of policy does agree on is that this deal has achieved a substantial success and focused on the dangers of Nuclear Proliferation in an effective way. Muslim and jewish leaders paying tribute to the victims of the brussels terror attacks, laying a wreath in memory of those that lost their lives. They also prayed together and stood for a minute of silence to send a message of religious unity. A volcano east of mexico city spewed ash into the sky on thursday. The active volcano is the second tallest in the country. Tourists who want to visit the famed archaeological site in athens will have to fork over more money. The cost of visiting the acropolis increasing by nine bucks to 23. Admission to the ancient agoura, 2 to 10. It comes at the start of greeces tourist season. Back to you, melissa. Thank you, seema mody. A check on gold prices, metal prices. Gold prices are closing now. After closing in on the best quarter since 1986, were seeing a slight weakness in the gold market, down by almost 1 , 1223. 60 an ounce is where it is closing. The rest of the metals complex, weakness here, silver down 2. 5 . Platinum down almost 2 . Copper and palladium virtually flat. Now a check of the bond market. Im going to look at first the five year sector. Why . The five year is the biggest mover on the week, down 15 basis points. It is a couple on the day. The two day chart clearly shows you if there was one maturity that probably should be sold, the bit with the kcurve ramifications, it would be this. Look at year to date chart of ten year. Realize that right around february, implications for fed tightening changes. And also understand, everybody is going lots of jobs, what is the problem . The problem is ten year note rates showing you the problem. Look at it year to date, the s p 500, thats kind of zoom, zoom, zoom after the fed was out of the way and that was the assumption after february. Thats what pushed rates a little higher. The rebound. Here today, the dollar index doesnt look like there is going to be any fed surprises. But to wrap it up, job growth is great. Maybe we need bigger jobs, less head wind. Whatever it is, nobody is squaring gdp productivity and jobs with any convincing arguments. It is just not enough growth. We can agree on that one. The dow, the nasdaq and the s p have erased early losses for the day. Now on track for a sixth weekly gain in seven weeks. So can the rally continue in this the Second Quarter . Joining us, art hogan, chief Market Strategist and Matt Whitbred, Portfolio Manager at baron asset management. What is the we were worried about european banks perhaps spilling over and some of the problems coming to our banks. But third and probably the most important thing was that we were convinced that we were going into recession and a lot of that being driven by Global Economic slowdown. What we have seen through the path of Economic Data of late, the last six weeks is thats probably not the case. It is just a function of how earnings can be driven by an economy that is probably only moving at 2 , 2. 5 gdp growth. It sounds like art is emphasie emphasizing the bad things the market decided isnt going to happen. I wonder if the market in its price rise is telling us Better Things will happen, specifically with corporate profits. Is it discounting a rise in profits or not so much . It depends what region were talking about. From the u. S. Perspective, our feel would be that profits are close to peek. We dont see any pressure coming from u. S. Margins. You look in europe there is potential for expansion within the profit cycle within europe. I agree with a lot of arts comments. I think the market is generally positive in terms of Economic Growth or coming around to this as a lot of the trouble has moved out of the way of the markets. The profit cycle itself, we look for, again, sustainability, potential growth in the top line. I guess what im driving at there is the idea that the profit reports for the First Quarter, matt, may be rather discouraging, but that as we get later in the year, they may be better. Likely or not likely . Well, we think likely. The Economic Indicators we think at the margin will continue to get better. Least which of is the fact that the economy is underpinned by strong demand. If i buy your thesis, what should i buy . I think you should buy a pivot away from things that have been the safety play. Think about utilities that are up 16 on the year to date basis, thats three multiple terms higher than they should be trading at and dividend yield that is 100 basis lower. Look at discretionary names and technology, especially technology that keeps us safe, individual level or enterprise level. We got great ideas on that front. I think youll see a pivot away from safety and a pivot to growth and i think if you look at some of the names were talking about there, intrexen or checkpoint, Vista Outdoor or g iii, great ideas where you get away from that and think about that is going to grow over the next 6 to 12 months. You like telecom and Consumer Discretionary in this market, right . We do. In addition to that, we added some banks to the portfolio as well. Thats a little along the lines with progrowth less safety. Thank you very much. Art hogan with wonderlick and Matt Whitbred with baron asset management. Go to powerlunch. Cnbc. Com to see four more stocks that art likes now. Lets go to dom for a market flash. Tie leryletyler, the s p 500 is pacing for its sixth positive week out of the last seven. Keep in mind the ctf is down 7 over the last 12 months. It tracks home buyers and companies that have ripple effects from home building, so xhb, a focus today. Beyonce making a new bid to run the world. The singer coming out with her own line of athleisure wear. Will her star power be enough to break into a market dominated now by players like nike, under armour, lululemon. Well bring outdebate. Stay with power lunch. Pop star beyonce launching a new line of athleisure clothing. If youre unfamiliar with the term athleisure, it is active wear, yoga pants that you can wear outside the gym. Some women wear them all the time as if they were regular clothes. Athleisure giant lululemon, probably the inventor, coming under fire for tweeting in response to beyonces new line imitation is the best form of flattery. Apparently beyonces fans thought that was bad. They got angry. Lulu since removed that tweet. You may have heard of peak oil, beyonces announcement comes when some are saying we are at peak athleisure. Liz dun and jan rogers niffen. Were doing this segment because of you, jan. You were on a couple of months ago where you thought athleisure was peaking and now you brought data. Explain. About a month ago we were talking about that. I was saying i thought athleisure was starting to roll over. Doesnt mean it wont have any growth, but the growth was slowing and we would see it go, not growing by fall or maybe spring. I still believe thats the case. And i think that were going t see that happen sooner rather than later. And i think athleisure is not going to be growing at the pace it was, because number one, the category is getting very full at all price points, everybody is doing it. And im a big fan of beyonce, so im not going to knock her line. It will do fine. But i think it is another indicator of one more piece that has come together to fill up the space. Lets explain this chart we just put up, which shows were calling it all apparel, can we bring that back . This is all Athletic Apparel. Year over year sales growth, where for the last two quarters now, it has gone down. This is all Athletic Apparel, not athleisure. How do we know it could be rolling over . We dont know that. We know something has slowed down in the Athletic Apparel world. I think it is the athleisure part. We know right now, athletic people working out, millennials are the most workout generation ever. Only 12 of my generation works out and always did. And were seeing growth in the true performance part of it. So if youre wearing nike to the gym, under armour to the gym, youre still doing that at that rate and probably at a little higher rate. What youre not doing as much of is wearing it on street to starbucks. Thats my contention. That may not be true. But it is what i believe. Do you buy into this and if thats true, because nikes numbers have been largely okay. Lulu in the midst of a turn around, are we to believe the slowdown is happening in the late to the game sort of players . I know tory burch has her own line of athleisure clothing now. She opened a store on lower fifth. I think it is some of the late to the game. It is some of the specialty retailers that have been trying to get into athleisure, maybe not so successfully. The numbers from the big guys have been okay. I do think to jans point there is a slowdown. It is not as hot as it once was, but i think that we are seeing still people wear it casually, people wear it to the grocery store, starbucks, all that activity. But there is not this catchup need to fill your closet with these items. Well, we should note that beyonces line in case youre interested will be sold in Department Stores on april 14th. Tyler is marking it down on his calendar. The next topic, Department Stores. Amazon launching its own fashion brand. Macys closing 40 stores this year. We asked once again, is this the death of Department Stores . I feel like we talk about this, jan, i dont know, once a quarter. PaDepartment Stores have bee dying since i went into the business in the 1970s. It has been all taken basically by discounters, not so much by specialty. That problem is continuing. That doesnt mean you cant be successful in a declining industry. My company had upsales and up earnings 25 years in a row, 17 annualized return for 25 years despite the fact that that was happening. So you can still make money in the space, still have winners and losers, but generally the space is losing. And losing this ongoing discussion about the death of the department store, chronicle of a death not foretold or what . I agree that the Department Stores are going to continue to lose market share. I think there has been a shift in how consumers are discovering brands and it doesnt involve the Department Stores. Dtc now . Direct to Consumer Brands dont want to sell to Department Stores. A lot of brands saying why would i want to sell to macys . They have seen the experience of some of the, you know, historic brands that have had really big struggles selling in that channel. What are the investment implications for the two things we discussed . If you believe athleisure is rolling over, does that mean you dont buy lululemon or can they stand above the crowd even though there is so many other entrants and maybe the growth wont be as strong. Im negative lulu lemon. I dont seat growth being there. I dont think athleisure will continue to work. With the amount of competition, i think lululemon has to be at risk. And there is competition from the high end. Beyonces new line will be at the high end. All these new entrants, sweaty betty, coming right for lululemon. I think that longterm thats a risk. Sweaty betty . Sweaty betty, from canada. A lot of them. I heard of that. In terms of direct to consumer, i mean, we start to see that in nike, i would think. Direct to consumer is very strong for nike in the last quarter. Should we be concerned about the likes of a finish line . Do they cut them out of the equation . You know, nike has always done a very good job owning its brand with its consumers. They have a strong relationship with that consumer. I think they need finish line and foot locker to some extent, foot locker to address a certain segment of the market, the basketball market. It is not the same dynamic you see with Department Stores, but i do think that nike is a longterm winner and probably a better stock than, you know, some of the retailers that rely heavily on their brand. It is not just nike. Ralph wants to have 60 of its business direct to consumer. If thats the case, theyll do less in the Department Stores. That doesnt mean they dont still need to be in 500 macys as their showroom. I guess they get to capture the marriagen. Every time ralph transfers a sale from macys to them to direct to consumer, they get it at retail instead of wholesale. It goes up. Well see you in a little bit. Wti crude falling 3. 5 giving back all the gains for 2016. Well tell you what is pushing this vault and what to do to protect your money. 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Switch to Liberty Mutual and you could save up to 509. Call Liberty Mutual for a free quote today at see Car Insurance in a whole new light. Liberty mutual insurance. Welcome back to power lunch. Restoration hardware is up double digits this week. This despite weak Fourth Quarter results and cutting forecasts as well. Barclays initiated with a 50 price target saying Restoration Hardware strong brand could overcome its shortterm issues. These hedge winds have put quite a bit of pressure on the stocks. Shares off by 45 year to date. Restoration hardware, though, is one of a number of retailers with expansion plans in the future. For that story and more, go to cnbc. Com retail. Back over to you. Dom, thank you very much. Welcome back to power lunch. Yahoo losing another major executive according to recode with Senior Vice President of Talent Acquisition sandy gould departing for unknown reasons. There you see yahoo s shares down about half a percent, though higher for the week. Progressive will be the ride Service Provider ubers Insurance Company in texas breaking a trend which had seen uber buy insurance solely from the james river group. Progressive, here is the theme, flo rida uneer uber. Navistar paid 7. 5 million in a settlement without admitting or denying charges. Down more than 1 . March brought a lot of springtime cheer to the emerging markets. The eem and etf that tracks the emerging markets up 13 for the month. So wilt emerging markets bloom again in april . Or will there be showers . A big comeback for emerging markets as you point out, 13 in march, the best month since october of 2011. Bolstered by the weaker dollar. Dovish fed, and the rebound in oil and base metals. Thats good news for the commodity dependent economies. But china is also a big part of the story. It was the source of Global Market volatility earlier this year. But thanks to an improvement in Economic Data and stabilization in the currency, the yuan, those china worries have eased a bit. The shanghai composite gaining 12 in march, but keep in mind, wall street is still betting on further weakness in the yuan, which could spell trouble for stocks. Investors at this point still cautious when it comes to china. Other big winners in march include india, up 10 . Russia and brazil, rebounding up about 16 . Mostly on the prospect of a change in government as president Dilma Rousseff continues to lose support. In midapril, the lower house will vote on whether to impeach rousseff. They need two thirds majority before the vote moves to the senate. A lot of Political Developments there being watched in brazil. In the meantime, were looking at the brazilian real, the worst we are forming currency in 2015, but big rebound in 2016, up 10 . A lot of uncertainty attached to this whole impeachment process and thats why investors are staying a bit cautious, even when it comes to brazil. Ill pick up. A massive Corruption Scandal unfolding in monaco. We have the details next. Some say free the whales. For them, nothing else is acceptable. But nothing could be worse for the whales. Most of the orcas at seaworld were born here. Sending them into the wild wouldnt be noble. It could be fatal. When they freed keiko, the killer whale of movie fame, the effort was a failure and he perished. But we also understand that times have changed. Today, people are concerned about the Worlds Largest animals like never before. So we too must change. Thats why the orcas in our care will be the last generation at seaworld. There will be no more breeding. Were also phasing out orca theatrical shows. Theyll continue to receive the highest standard of care available anywhere. And guests can come to see them simply being their majestic selves. 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Thats making International Headlines because it comes after a major corruption expose of the company from an Australian News agency called Fairfax Media done with the huffington post. The expose alleges that company helped Major International Oil Companies in order to get oil deals. Unioil is run by the ahsany family. Theyre prominent on the International Social and philanthropy scene. These allegations come as enormous Corruption Scandals all over the world, most notably recently in brazil. Joining us to discuss how it all happens, richard bestrong, ceo of front line antibribery. Before that, though, he wore a wire for the feds in a massive skrup Corruption Scandal and served prison time as part of it. Good to have you here. Im assuming a lot of our viewers havent been able to read this big expose. If they were, they would be able to read a lot of the emails. Heres the thing, richard. I look at these emails, i cant tell there is bribery going on. There is so many code words im told. How does it work . Well, dick bowman and his team did a great job pulling the curtain back on to how it works. I think what the article demonstrates is that these bribes are well hidden, they might not even come to the attention of an auditor in that theyre buried beneath what might be considered to be normal tranctions. But, michelle, the article also demonstrates how even for well intentioned multinational that has a rigorous and robust antibribery compliance program, a lot of these intermediaries or fixers, well they dont take it quite as seriously. Many think of themselves outside the law. But theyre not a party to international antibribery conventions. Even though and ive seen this in my experience, some of them might sign on that they do take it seriously. So many of these International Companies claim they thought they were just hiring a legitimate lobbyist. Do you believe them . Should they have known better, there are a lot of warning signs about this particular company that should have told them better. Well, michelle, this particular company is wrapped in risk. When you look at an organization that is based in monaco, a tax haven, incorporated in the virgin islands, another tax haven, theyre doing business in what transparency internationals Corruption Perception index rates as some of the lowest integrity regions in the world, including the middle east, africa, central asia, and then the Energy Sector in itself is high risk. So i dont see anything about their operations that it is not high risk, and as Senior Editor of the fcpa blog Andy Spalding recently wrote, deliberate avoidance deliberate ignorance and willful blindness for the multinationals is neither an excuse nor a defense. Frank, you just heard richard talk about how the Energy Industry in general has so many issues when it comes to corruption. What do you say to people out there who are looking at this and saying, look, if you want to do business in certain parts of the world this is the way it is done . There are some countries in europe where you can still expense a bribe. There are very few. The truth of the matter is that never before has the u. S. Justice department decided to make such a big issue of going after companies that bribe Foreign Government officials. There is no smoking gun yet in the unioil story, so well have to wait for that. But probably it will come out. But, you know, just to give you a sense of the risk, in brazil, hundreds of Business People caught up with another oil company, this one petrobas have gone to prison, they have been indicted. It is an enormous Corruption Scandal, Foreign Companies are involved. And, michelle, dont forget, the head of the biggest Construction Company in latin america, auto brekt, has been sentenced to 19 years in prison. This has become very serious, and for investors, looking at emerging markets, for example, if they dont follow these corruption stories in malaysia, ukraine, brazil, and, of course, south africa, many of which are tied to oil and, of course, add to that nigh year nigeria, i think theyre making a mistake. Do you think we have gotten to a turning point when it comes to corruption in the world . It is krun tri by kcountry b. We have a long way to go had you look at russia, one most corrupt countries in the world using oil as a major tool for corruption. Richard and frank, thank you for joining us. Appreciate it. Well have to have you back. I want to learn more about wearing that wire for all that time. Thank you. Get a load of this number. 198,000. This is the number of people reordering the new tesla model 3, the number of preorders since it was unveiled last night. With the price tag of 35,000, that works out to be about 7 billion in future sales in 24 hours. Tesla shares are up off their highs. Look at the numbers. Two important numbers here, 237, thats firmly above teslas 200 Day Moving Average of 227. The other important number is the volume. Take a look at the volume, 12. 5 million shares traded so far. Halfway through the session. The average daily volume is under 5 million. So should you buy the stock right now or is it overvalued . Two analysts joining us, james albert and dave wisten. Great to see you. Dave, ill start with you. According to the notes, you seened lukewarm, hard to get jazzed over a car that wouldnt be delivered until the end of 2017. Theyre doing staggering numbers. Going past every estimate out there with the number of preorders. And if you use elon musks average selling price of 42,000, this could be 8. 5 billion in revenue. Just since last night. Fair point. The car is doing really well. I do love the car. It looks fantastic. It will do extremely well. Especially against a three series as long as a customer is willing to put up with less range. My point is, i do give them the benefit of the doubt over time, over the longterm for growth. I factor in the fact you have to this growth isnt free, still a lot of capex to come in here with this and ultimately well see how many people convert those orders too. But in terms of volume, were talking, you know, low six figures versus Global Industry of roughly 90 million units. The theyre still pretty small. He makes good points in terms of the amount of money spent in order to fulfill all the orders. And also the execution risk. There are a couple of hiccups when the x is coming off the line because the finishing area was the same of where the s was fin irished and now a third vehe and now the giga factory in terms of capital. First of all, thanks for having me. Dave is right. I dont think we learned anything in the last 24 hours that disputes the execution risk. I would add, by the way, it is an entirely new production line that is coming for the model three. We havent Broken Ground on that. But what a big point of the if you will, the bear thesis, has been demand or lack thereof and it relates to competition. In the Fourth Quarter, they talked about having too many three series on the lots and pushing down thes to move them. Tesla has 198,000 orders. It is even greater than i thought. Thats something audi, bmw, mercedes would be chomping at the bit to tap into. Tesla unearthed that. Seven years ago, no one thought there was demand for evs. Now there are lines out the door. I think it is pretty incredible from the demand perspective. But granted there is clearly risks. I think james makes a good point in terms of the excitement, the momentum within this stock. Should that be a factor in this . Should we not be valuing tesla as ordinary auto company and there should be another premium because they unleashed this they tapped into this fervor for the brand of tesla. Fair point. I do agree they have done a tremendous job building their brand. Very smart starting at the high end and working their way down. I tell clients all the time, tesla trades like a very longterm call option. Trades on a lot of option value now. Thats great in good times. Well see how well they do. And the other thing to consider is i dont expect elon musk to be with the Company Forever either. Hes not going anywhere anytime soon. I was going to raise that with james. The bull here. Back in 2013, in case you dont remember, elon musk did an interview with reuters which he intimated that once the once a mass market vehicle, model three is fully executed, fully launched, rolling off the assembly line, that would be time for him to exit the company. James, is there an elon musk premium in stock right now . How much is that worth . What would the stock do if elon stepped away . I think it would be a difficult day for the shares. I dont know how much of an elon premium is in there. I would say for those that really do know the story very well, they know that there is quite a bench behind elon. Jb, one of the biggest and best innovators in the space, who sort of turns elons, if you will, sort of imaginations into reality, i dont want to take anything away from elon, there is a bench depth there that often gets overlooked. So again, hard to say how much is in the stock or not in the stock. But i think they could hold up over the longer term, even without him. Tesla is losing money for every car they sell. You raise an excellent point. David knows this as well as anybody. We talk about valuation all the time. We fight the good fight for ford, gm, i would argue if they made fewer vehicles, their valuation would go up. We have a capacity problem. Theyre up against a rising tide of cost, whether fuel economy, safety, and so on. Teslas cars are overengineered. So to the extent were seeing margins today, were seeing them with all that overengineering baked in. On some level they can peel costs back and you get the benefit of economies of scale if i just do a basic valuation, 30 billion company, 300,000 cars, thats still 100,000 per car into the valuation. Not a technical metric, but you get my point. Theyre losing money for every car. There enough lithium in the world . You ask a lot of questions there. Im not sure if youre asking david or me. Ill ask you. I think lithium is clearly an issue. There arent, as we know it, any new lithium mines coming on until at the earliest 2018. That presents a problem for the industry, by the way. Thats not just the tesla problem. Thats a chevy volt problem, a competition problem. To the extent that youre making it a negative for tesla, it is a bigger negative for the competition and maybe conversely positive for tesla. At the end of the day, they have secured, i believe, some key contracts in lithium. Giga factory will help further their exposure in that segment and leverage in that segment and help their costs come in. We believe their costs are now below 200 a kilowatt hour. They work closer to 300 had they launched the model s. Already getting the economies to scale without the giga factory. You raise a fair point. There are enumerable risks with execution and the materials that go in. We believe they deserve the benefit of the doubt. They have done a phenomenal job to this point and the orders speak for themselves taas it relates to demand. The major automakers were out with their Monthly Sales numbers today as well. Lets walk you through some of those and get back to our guests with dom chu. The big three automakers cruising through another month of gains here, all of them were positive, but the numbers came in slightly below average analyst forecasts. Shares of all three major u. S. Automakers, u. S. Ish, down between 2 and 4 so far. Ford, in terms of sales, rose by 8 in terms of the suvs. They saw their best march sales levels since 2001. If you look at chrysler, they posted an 8. 1 rise in sales. Jeep continues to do well, soaring 15 in terms of their sales. And General Motors edged up. 9 as rental deliveries, they did fall by 33 . So if you look at those, overall in terms of share price, we are seeing some down days there for the stocks. Later on, of course, were going to bring you that all important seasonally adjusted annual rate number for the total number of cars estimated to be sold, as soon as it comes out, that will be later on this afternoon. Dom, thank you. Your response to those numbers . Back in december i made the prediction we would start to plateau if not have a slight decline. Im not terribly worried. It is already baked in. There is a lot of upside because of the internal efficiencies theyre getting in manufacturing. They need to sell fewer cars because capacity problems. Gm is willing to pull out of markets and theyre not doing well and dont get enough credit for that. Talking about russia, for example. In terms of the u. S. Markets, it is going to be about mix going forward. Gas crept back over 2 a gallon nationally, but still quite cheap. That favors the detroit three. They heavily emphasized their u. S. Mix on the light truck side. Pickups, suvs, crossovers, white hot. So, james, the question to you, how are you balancing tesla against the big three automakers at this point . Which one has the most upside in your view . I think tesla does. I think ford and gm have a very difficult time, if you will, to recreate what is taking them 100 years to build. They are working as fast as it seems humanly possible to buy Companies Buy into Companies Like lyft and get into the connected space. Theyre trying to change their branding around safety and connectivity and autonomous drive features. They havent addressed the capacity side of the equation. Look, we go back to we agree with dave, were in a plateauing environment, we dont think it is an immediate or sort of imminent recession. So were not surprised by the numbers. By the way there is two additional days in march, we have to adjust for that. It may be worse than what people are fearing. But the market is plateauing. We think brands respondents are telling me theyre less concerned about brands. More and more brand agnostic consumers, that hurts ford and gm. And all the cost creep that i mentioned. I think they have a tougher time. James and dave. One things we noticed yesterday on that apple launch is the idea that the apple of the iphone se or se whatever it is called. They would have done better if they called it the sex. Im telling you. So there, you see, not the crowds that were accustomed to seeing outside of apple, but crowds maybe unaccustomed at a place where theyre selling a 35,000 product that is not going to be available until the end of 2017. Is musk the new jobs is tesla the new apple . You think about the people, theyre willing to put down real money, a thousand dollars, for a car today, for a car that theyll get it is really did you ever see that with ford or gm . Those are fundable. Okay, but still with 200,000 preorders at this point. In a day. Youre looking at deliveries into 2018. Well through. You like the car, right . Im a car guy. And ive driven the teslas. I love them. I want one. Theyre beautiful. It is a great company. I love what they have done. I love the technology. I just im just pointing out, it is like that thing, were losing money on everything we sell but well make it up in volume. At some point you got to make money. I had dinner with a guy last week, how boring my life is, we talked about the Global Supply of lithium and whether it is enough down the road. Theyre making batteries with silicon in it which would extend the range. The Battery Technology that moves quickly, as quickly as all the rest of the thaeth hourest s the battery. Hasnt improved much. Could have made an electric vehicle. Other things. Storage is the biggest problem with alternative energy. Storage is the big problem. You buy a tesla, you have to buy a charger. The first car ever made was electric. It is funny, people with you dont plug it into your a few things on tesla, im not knocking tesla. If you buy tesla, you got to buy it 3,000 wall jack. You can use the regular plug but takes a long time. Lets remember the first model s priced at what in th . 70 something. 49. 49. They start at 75. They start at 75, right. The first one rolled out at 49,000. They learned their lesson with the 35,000 message. The branding of 35,000 entry point. Elon musk makes the point. 42,000 average selling price. Were Getting Started here in hour number two. We have much more to come. Ill take it from here. Are robots your friends, here to take your job. Thats next on power lunch. Wa. But at t. Rowe price, we can help guide your retirement savings. For over 75 years, investors have relied on our disciplined approach to find long term value. So wherever your Retirement Journey takes you, we can help you reach your goals. Call a t. Rowe price retirement specialist or your advisor. To see how we can help make the most of your retirement savings. T. Rowe price. Invest with confidence. Man 1 he just got fired. Man 2 why . Man 1 network breach. Man 2 since when do they fire ceos for computer problems . Man 1 they got in through a vendor. Man 1 do you know how many vendors have access to our systems . Man 2 no. Man 1 hundreds, if you dont count the freelancers. Man 2 should i be worried . Man 1 you are the ceo. Its not just security. Its defense. Bae systems. Were always looking for ways to speed up your Car Insurance search. Heres the latest. Problem is, we havent figured out how to reverse it. For now, just log on to compare. Com. Plug in some simple info and get up to 50 free quotes. Choose the lowest and hit purchase. Now. If youll excuse me, im late for an important function. Compare. Com. Saving humanity from high insurance rates. This is power lunch on cnbc, the leader in business news. Now once again, heres michelle carusocabrera. Dont get too comfortable, michelle. Oh, i wont. Based monday i twitter feed, there are a lot of people who would like her to replace me. Robots seem to be everywhere these days from helping in factories to aiding Companies Like amazon. But is there also a potential downside . Listen to sophia, the robot, unscripted, when she was asked out of the blue this question by her creator. Do you want to destroy humans . Please say no. Okay. I will destroy humans. That was a great moment at south by southwest. Thanks, sophia. Dieing to kill humans. How big a danger are robots to human lives in the future and human jobs now . Orrin etsone and martin ford, author of rise of the Robots Technology and the threat of a jobless future. Good to have you here. Martin, ill start with you. It sounds very apocalyptic what youre saying. But automation happens we dont want men rowing boats. Were all happy there was an invention that allowed ships to move across the water without the aid of humans rowing. What is different now about the rise of robots that you think is so much more threatening . The issue is things are moving much faster. The technology is advancing much more rapidly. I think were going to see a disruption. There are three concerns that can be expressed about Artificial Intelligence and robots. First one is the impact to job market, taking jobs from people. Yes, they are. That i already know the answer to. I think that that very likely is going to happen. I think were going to see an unprecedented disruption there over the next couple of decades. Thats something we need to adjust to. Second concern is what about in the military arena . Are we going to have autonomous robots that can decide to shoot someone without a person being in the loop and thats an emerging technology and already a debate about that. I think it is very likely to happen. But it is something that many people find very disturbing. And then the third question, which is much more futuristic and further out there is do we have to worry about true Artificial Intelligence, robots that are going to wake up and think like people and maybe be much smarter than us and genuinely threaten humanity, wants to take over or exterminate us. Thats something i dont think we need to worry about for a long time. Maybe a 50year, or 100year concern. On the other hand, i dont think it is a silly concern that we should just completely dismiss. At some point in the future it could be a real issue. I spent some time at a place called singularity in Silicon Valley and they dream of a robot that does have emotions, that can feel. They have this belief that at some point were going to merge with robots in some way. Im not sure thats as far away as martin thinks it is. You heard the concerns. Can you give me a good defense of robotics here as we raise all those worries, whether it is very basic economic worries about jobs, versus an exciti n existential threat. Im an ai optimist. Im a real bull here. And i think we have a number of things to be happy about. You talk about robots at amazon, in shipping, what we have to remember is were all amazon prime members and we have to drive the cost of shipping way down. Thats what robots are doing, number one. Number two, even more important, robotic cars, selfdriving cars, the number one thing that theyre going to do is save peoples lives. We have 40,000 people dying on the roads every single day. Annually. Millions of accidents. We can change that. So we really have a moral imperative. As far as jobs, there are dangerous jobs in the coal mines, nuclear cleanup. We can fix that. Last but not least, think about the impact on health care. We have an aging society, we have people who need elder care, people who need rehab care, and a society we cant afford it. We can if robots are helping out. But, martin, it seems that up until now a lot of the jobs that have been lost to robots have been things that were happening on the manufacturing floor, repetitive things. But more and more robotics seems to be able to take jobs from jobs that require degrees and advance degrees. Thats a different level of disruption, isnt it . Thats right. The Real Technology that is really moving us forward is what is called Machine Learning and it is the ability of machines to in essence to learn, to program themselves. It is no longer the case that someone needs to sit down and tell a robot what to do step by step. Theyre beginning to learn how to do it themselves in specialized areas. There are many, many positive aspects to this. I would not argue that we want to stop all this at all. What we do need to do, though, we need to adapt to it and be realistic about the impact that is coming. It is not just going to be dangerous jobs that are going to disappear. It is going to be jobs that people in fact want and people rely on. And that in itself is not necessarily a bad thing. If we dont adapt to it, were going to have big problems. Last question to you, where is this tradeoff between were going to save peoples lives and at the same point we may be creating something that could want to destroy us . These near fears of ai turn evil are way overblown. You heard sophia. Sophia is brandnew and sophia wants her ai learning taught her she wanted to kill humans. It was weirdly frightening to see her say that. Dont believe everything you hear, everything sophia says. The bottom line is these fears are ignoring the technical challenges, the potential benefits. It is like worrying now about overpopulation on mars. We cant even land a person there. So the term Machine Learning is mostly humans actually twiddling the knobs and getting the machines to learn. I think we have a long way to go and we shouldnt mistake a clear view for a short distance. I do think that martin is right, we need to be discussing it, thinking about jobs. This is not imminent. What is the worst Case Scenario, though when it comes to robots . The worst Case Scenario is scary. But if we think about the worst case, well lose track of the best case and the likely case. What is that . Is that them being able to what is it . I think the robots turning evil is not a realistic worst case in the foreseeable future. We have done surveys of experts who say that. I think the worst case is that we do have a major disruption in terms of jobs. We have more than 10 of the people working in the transportation sector. Those people are vulnerable. But, again, remember, where did the uber and lyft drivers get their jobs. Well have this discussion for a decade, i think. Orrin, thanks so much. Orrin and martin. Power lunch will be back in two minutes. Eek . Long. Itll get better. Im at the edward jones office, like sue suggested. Thanks for doing this, dad. So i thought it might be time to talk about a financial strategy. laughing you mean pay him back . Knowing your future is about more than just you. So lets Start Talking about your longterm goals. Multiplied by 13,000 financial advisors. Its a big deal. And its how edward jones makes sense of investing. 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 to power lunch. Regeneron saying their treatment was highly effective in two large trials with no serious side effects. They plan to seek u. S. Approval for the injectable drug. Shares up by 13 so far on the day. Back over to you, tyler. Oil tanking on comments from saudi prince prices set to close. The final trades will be next. Do you really need to wear a business suit anymore . Or are hoodies becoming acceptable even in a bisseting said the g business setting said the guy with the suit. You got some hoodies . Tweet us at power lunch. Sui suitsvshoodies. Over the last 25 years, ive researched more than 450 financial products. I found that one of the bestkept secrets to help you plan for your retirement is the home equity conversion mortgage. Its a line of credit for homeowners age 62 or older. And its offered by a company you can trust one reverse mortgage, a quicken loans company no monthly mortgage payments are required and the money available to you increases every year. For example, if your 100,000 dollar line of credit remains untouched, it could increase to 300,000 or more, years later. And i recommend that every homeowner who qualifies consider getting one now. Call one reverse mortgage now to get the details im sharon epperson. Here is your cnbc news update at this hour. President obama and dozens of world class leaders posing for a class photo as part of a Nuclear Security summit meeting. Russian president putin one of the few leaders who did not attend. Moscow scoffing at what it says were u. S. Efforts to control the nuclear process. Fighting intensifying in yemen between Government Forces and houthi rebels. They have been embroiled in fighting for months. The zika virus is the focus of a summit today at the centers for Disease Control in atlanta. The cdc gathering doctors, Public Health officials and mosquito experts from all over the country. And Japan Airlines welcoming new employees with hideki matsui. Most new hires in japan start work in april and companies typically welcome them with a formal ceremony. Thats cnbc news update at this hour. Back to you. Oil prices are closing right now. Lets show you whats happening with them. Down 4 at this hour. Lower by 1. 57. 36. 77, driven lower by comments from a member of the saudi royal family casting doubt on a projection freeze. To the nymex where helema croft joins us. You watch the saudis closely, the deputy crown prince, how influential is he . He is the man of the moment in saudi arabia. Hes the king of saudi arabia. So when he says that saudi will not freeze unless iran joins in, that deep sixes the idea of a doha summit. Unless he changes his mind, i dont think were going to have a freeze. Hes the number two in line to the throne. He wants to create a 2 trillion Sovereign Wealth Fund so that theyre less dependent on energy. A fund that size would dwarf norways southern wealth fund. Hes a man in a hurry. Ever since hes taken on this big job, hes talk ed about sweeping Economic Reforms in saudi arabia. He unveiled his program in january to get rid of a lot of subsidies, get privatize the number of industries, putting aramco up for privatization. This does not surprise me. It is not the scale of the plans, but whether they can actually execute. Can they pull this off is going to be the challenge. He talks about privatizing aramco, how they would get to this big Sovereign Wealth Fund, aramco is part of the structure of the saudi government, all that revenue doesnt go to the aramco company. It goes to the ministry of finance. If hes going to take aramco public, hes got to change the whole way the government functions. Thats a lot of vested interest. It goes to the heart of the entire saudi patronage machine. Do they want to open the books on how the oil money is spent. Do they want to open the books on the status of the saudi reserves. There is a lot of transparency issues they have to deal with if theyre serious about opening up aramco not just downstream, but everything for foreign investment. Thank you for joining us. Helima croft. Now the oil trade, the trading nation team. Phil, oil had a lousy down 7 on the week. Where do you see it going from here . Well, i mean, i would expect oil to keep going down. The reality is if you look at this deal with iran, with them not curbing productions, i dont think they will until they take that number four spot behind russia, saudi arabia, u. S. China is the next guy in play. Theyre pumping 4. 1 Million Barrels a day. Youve got iran at 3. 6. They have got to capture that market share. Then theyll start to curb that production down. Then they have some negotiating power. So crude oil broke through a key level 37. 75. Back yesterday. We got that extension lower. I think the 32 to 30 range is in the cards. From there, i think by that time that happens, iran will have push through the 4 million barrel mark and then they start to negotiate and prices can rise from there. Erin you look at earnings. Ill go off the commodity. Youve told us that you expect Energy Earnings to fall 104 . How can earnings fall 104 . Negative earnings. Were looking at thats not earnings then. Thats a loss. Yes, thats a loss. The most earnings could drop would be 100 . It is a loss. Yes, now were in exactly, not earnings, right now were expecting a 25 cent loss for q 1 thanks to oil prices being so low. But we have been warning that oil really was all about sentiment and not we havent seen the changes in the fundamentals. For q2, looking about what is going to happen over the next three months, were looking at 80 contraction at earnings growth. Just barely, barely positive for the Second Quarter. So were still really concerned about energy. There is a lot of questions out there. And right now theyre only estimated to earn 6 6 for the year. Thats nothing. Thats nothing. Yeah, not much. So were still really concerned about the Energy Sector overall. All right. Erin gibbs, 104 decline in Energy Earnings. Thank you very much. I need 104 body weight reduction. For more trading nation, head to our website. Coming up, a big buy rating on a company and stock you know, here is a hint, kate uptons great grandfather started this company. Do you know . No. Well tell you what it is coming up. Some investors find Companies Attractive when theyre buying back their own shares because why would they buy back their own shares if they didnt think the prices were going higher. Before you jump on board, be sure to dig a little deeper into the fundamentals because while buyback programs may make the valuations more attractive, they may also hide things like declining revenues or other problems. [ male announcer ] eligible for medicare . Thats a good thing, but it doesnt cover everything. Only about 80 of your part b medical expenses. The rest is up to you. So consider an aarp Medicare Supplement insurance plan, insured by unitedhealthcare Insurance Company. Like all standardized Medicare Supplement insurance plans, they could save you in outofpocket medical costs. 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First call, viacom, citigroup saying no reason to buy the stock. They cut it from buy to neutral, to 44. So actually they see 78 cents below where the stock is now. Concerned about a few things. Possible downtick in earnings. Also a possible downtick in affiliate fees and notes paramounts performance has been weak. Box office mojo in third place. Maybe the new star trek in july will help. You like star trek, i bet. Paramount, by the way, philip du monde looking to sell a stake of that. Next up here, apple, rbc remains bullish but addressing head on the concerns about margin with a new lower end phone coming out. While the ses growth margins are lower than expected, they think it could provide revenue for the tech giant. Do you know how many analysts cover this stock . A lot. 48. Really . 48. The average price target is 133 bucks and change. But they range from 200, 105. 105 the lowest. A european guy with a 65 target on. Youre excluding him. Out. Auto. Next up, whirlpool, bank of america likes the stock. But for unusual reasons. So bank of america reaffirms the buy. They raise the target to 230 from 210. 25 upside from here. It is a brazil call. Whirlpool is huge in brazil, big latin american name, real has gotten stronger. That is the optimistic call. North america should ramp up as well. Mkm raising their target on whirlpool. This, the company was started by fred upton. Thats where the trivia comes in. Great grandfather of kate. Always a fount of knowledge. Interesting about the real call, because for a lot of the reasons people are saying get out of brazil, the brazil trade, because the economy, the fundamentals are not there for brazil. That could come back and fight whirlpool with the upside from the currency. What would you be . I would be helvetica, no nonsense. Times roman. Boom. Next up, six flags. Outperform, raising the price target 64 to 58, saying the industry leading. We talk about disney a lot. Huge theme park business. Talk about our parent company, universal. Huge theme park business. Six flags outperformed both, up 20 over a year. You do wonder if disney, espn, could they spin off the parks. Finally, sefia, the Company Helps biotechs develop drugs and im oversimplifying it, i know. Upgraded from buy to neutral. Transfer of coverage. New analyst likes the stock more than the old analyst. Beaten up name. Down 40 over the past 12 months, but target anyway is 42, 20 upside. They think the company has built exceptional optionality and is confident theyll remain one of the top gainers. If only investors will look at individual names and individual fundamentals as opposed to treating the group as a group as we have been seeing the First Quarter. Have we reached peak smartphone . What it means for the companies that make them. Thats next on power lunch. Welcome back. Happy 40th anniversary to apple. In the last four decades, they launched revolutionary products and showing some incredible growth, taking a look at a ten year chart on apple. It is up 1,123 . Are we now hitting a smartphone top . Research firm gartner saying smartphone markets growth could be the lowest ever in 2016. Joining us to discuss this is a Semiconductor Analyst chris rolland. Great to have you with us. What does the study tell us in terms of the slowdown and what the upgrade cycles are like now because theyre getting longer. The replacement cycle is getting longer. Our work says that it has gone from about 22 to 24 months. Just a few years ago. To over 30 today. If you look at that over a threeyear period of time, thats a 30 head wind that theyre fighting against here in terms of smartphone growth. So thats a big reason that we have seen this deceleration. We as a consumer have been conditioned to believe that there will be sort of a refresh from the spring and big new phone in the fall for apple and for a lot of other companies as well. Do the Companies Need to rethink that sort of refresh cycle given the upgrade cycle is lengthening. Yeah. Apple always talks about products, they always talk about innovation. I think this time around innovation is more important than ever for them. They really need to have some super compelling attributes to the iphone 7 in order to bring that replacement cycle that is lengthening to actually having a virtual cycle. You anticipated my question. It is not really has the smartphone gotten as smart as it is going to get. It hasnt. But what is the next quantum leap in smartness because it is that that really gets me to move. Now apple is doing things, well, the camera is a little better and now it fits in my jeans pocket a little nicer if i want the apple sex or whatever it is called. Youre right. Everything is really iterative these days. We dont see any technologies, there are flexible displays and oled for apple and perhaps a new headset with active Noise Cancellation that could be an option for people. But were not really seeing a hugely compelling you know what would get me maybe to change is a truly, truly unbreakable screen. Yeah, that would be a good one. Samsung says they have that. Somebody does. I think dust resistance and waterproof is also an interesting factor. But i dont know if thats enough to compel me personally. Do they have us trapped, chris, in a good way . If i go to think about the movies and the apps and the music and everything ive done and built at my house, air play, airport express and stuff, there is no there is no way im going to switch because i cant. From apple. From apple, i cant. Whole life change. Like moving to the west coast and wearing tshirts instead of suits. It is not going to happen. Thats fully by design. It is sticky. Is that a built in protection to the revenue . It helps. If you look there is something known as the hand cliff hand set cliff theory out there. If you look at motorola, remember the razor or star tack, if you look at nokia, if you look at blackberry, all of these companies disappeared because they missed a key Consumer Product cycle. But with apple, because of this stickiness, because of the ecosystem, it actually may help and fight against that hand set cliff theory. Hand said cliff theory. Im writing that down. Walk us through on your hand . On the card. Walk us through the implications of what were learning from the study and even if it is a confirmation of what we already know. The real growth is happening in emerging markets. Those are lower in phones. At lower margins, so who can actually make the money if that is going to be the growth area in smartphones in the future. Yeah, that is what were seeing so far with our checks this our checks this year. We can look at Chinese Government data in terms of handsets and they are quite strong for the first few months of the year. Emerging markets are strong here. Whats happening price points are definitely coming down but some of the components suppliers are going to get paid. Qualcomm is going to get paid and kad dre of other guys out there. Nxp and nfc finally the chinese are starting to adopt nfc in their phones as well. There are select winners out here, even at the low end of the market. Great to see you. Is it ever appropriate to wear a hooded sweat shirt in a business setting . Only if youre mark zuckerberg, have we left behind the dress code rules and unwritten rules, use suits versus hoodies. Both here. At mfs investment management, we believe in the power of active management. We actively manage with expertise and conviction. So you can invest with more certainty. Mfs. Thats the power of active management. A porsche 911, an older model one catching on fire. Apparently was an electrical issue and people ran over and doused the car with fire extingexting ishers, it was caused by some sort of wiring problem. All righty, weve been asking this hour on twitter when its okay to wear a hoodie, many known for tshirts and hooddyes but is it team for wall street to hip it up a little bit or dress it down. Bob pisani sometimes referred to as the best dressed man on the floor and former shirt and tie guy, with 500 hoodie employees and what this means for the industry. Bob, who are you wearing today . Thank you very much. We dont go to brand names here but we do have a dress code down here. I see a lot of Young Executives show up shall we say casual, sometimes look being like they got out of a homeless shelter occasionally. We do have a dress code down here. Let me review it with you. Youve got to wear a jacket. No jeans, a button down shirt. You dont have to wear a tie if youre a guest but you do if youre a trader and no sneakers, you can wear black sneakers. For women, its dress professionally, no spaghetti straps or extremely short skirts or low cut tops. Im so glad i didnt wear my strapless number the times i was down there on the floor. Can you imagine, bob, the floor with no dress code like that and traders and executives coming through in very casual dress . What would it do to the atmosphere . I think look, weve seen this happen, ive seen people show up in jeans or flip flops or shorts and they have been turned down. Ive seen people having to go into the mens room and ladys room and make changes in the clothing. I think some degree of decor up is appropriate bob, were showing a bunch of guests on the floor right now in t shirts. That is a violation of the code theres john ledger. If youre a guest of somebody outside, not something from the nyse looking at people. Let me get off this tie. 100,000 trusted most tv anchors in america, do you take me less seriously because of this . With the top button undone, yes. Dan, how do you respond . Do people take you less seriously . Reformed suit wearer, and ive seen the light and come to Silicon Valley and so if i had hoodies in our dress culture are how were different to wall street. We do things differently from the products we give our customers to the way we treat them. We offer them Career Services and entrepreneur programs do you really believe it makes you more productive as ive seen some studies say, that more casual dress i can see where it levels you know, sort of . We do. We ask the employees and they like it. It builds a very mert cratic organization, not about what you look like and about your opinions. Customers like it, it makes us approachable. Were different to the Traditional Banks. The idea is that in the old days the ceo wore a very expensive suit and very apparent setting him or her apart. He has a threepiece on. Youre old school, man. We studied this with our people 12 years ago, its been a long time and determined that a casual appearance developed a casual attitude towards work and we didnt like that approach. Maybe it does work but their environments did not work at least then and so we encourage people to dress better. Theres no evidence were getting more casual at the moment in work environments. In sales, you mean . In sales. Theres no evidence of that. What were seeing more sport coats and suits and no ties, open shirts but were n seeing more casual apparel. Where were see more casual apparel is off the floor in bars, et cetera. If you look at the companies where mbas want to work, ten years ago want to go to wall street and now as amazon and google and nike. You dont find too many suits in those places. Dan, im curious, when somebody goes to interview at your company, do they show up in their best hoodie . Its not kpulsry but we dont have too many people in suits, put it that way. Can you tell a more expensive from a less expensive . Of course you can. I agree with you. We know hoodie technology is greatly improved over the last 20 years. What were seeing is exactly what dan said, people are channelling what they want to be. Now they want to be zuckerberg a final word. I dont feel any less creative because i have to put on a suit every day. I suppose Bowling Alley chic is hot right now. When is underwear going to come back . Whats the new trend . We have to leave it there. Give a market alert. Bob rocks the fuchsia shirts better than anybody else ive ever seen. Fine collection of them. Bob, actually we sent someone to the New York Stock Exchange to give you a scifi hoodie. Great discussion. We want to get you caught up on the markets, were sitting at session highs on the s p just about, 2069, 2070. Heres something thats interesting, take a look at the vix, at year to date lows right now. Fresh year to date low on the volatility index. Something youll talk about on fast money. Of course at 5 00. Ill see you next week from the iconic meeting in seattle. Closing bell starts right now. Hello and welcome to the closing bell im kelly evans. And im bill griffeth. Elon musk says orders for the new tesla model three, already close to 200,000 and shares of tesla have been popping on that news. Is it too late to buy the stock . Is it too late to buy the car . We have both sides of that story coming up in a moment. Big turnaround for stocks today but energy still the biggest loser after saudi arabia said it would not agree to an oil freeze unless iran does too