Transcripts For CNBC Power Lunch 20160630

Cut Interest Rates after the uks shocking brexit vote. He definitely said that there needed to be more stimulus. But look at that. Despite that, still at 1. 32 when it comes to the british pound. Almost went down to 131. But Still Holding on to that level. The british tenyear guilt at 0. 863 . Compare that to the u. S. Twoyear. And the tenyear note is 1. 495. Bob pisani is here with me at the nyse on this last trading day of quarter. And the six months, bob, the one major european average thats in positive territory, london ftse 100. The 250 Broader Market is not in positive territory. Everyone loves easing. Carney hints at easing. Says Economic Conditions are deteriorating. The markets start moving to the upside. Take a look at the s p 500 and the important thing today, the rally continues. Even after carney was making his marks about Economic Conditions deteriorating, the markets helicoptered to move to the Positive Side. Were at highs of the day here. Lets take a look at the markets in the middle of the day. Were trying to sort out the threads between people who are playing on the brexit or the Positive Side of the brexit, and, of course, the end of the quarter rise that were seeing. Weve been talking about pension Fund Rebalancing as well. So theres a lot of cross currents going on. 31 advancing. The volume a little lighter than its been in the last several days. And the volatility, the vix just keeps dropping here. All ten sectors on the upside. We started very defensively throughout the day and early morning. Consumer staples and utilities were strong. But as the morning has worn on, more riskon names like industrials and tech stocks have been coming to the fore overall. Why the rally in the last few days . Well, again, a lot of people are trying to sort out the implications of the brexit here. There were obviously very heavy short positions that were caught a big off guard, as the market stopped going down three days ago. Some people are thinking perhaps the impact on u. S. May be a little more limited than some people originally thought. Again, up in of this is settled, but a lot of debate going on right now. You can see how the markets are playing at this point. Thanks, bob. Now to a sweet deal in the works. The one big market story, chocolate. Mondelez making a takeover bid for chocolate giant hershey. Mondelez shares, as you can see, are higher even though theyre the ones potentially making the bid, and hershey is higher than even the reported asking price that david faber has been telling us, and hes here on the set. We should point out that hersheys shoes are halted, news pending, and have been for about the last halfhour. I would expect if hershey does comment, as were waiting for them, they will perhaps confirm the talks. But not give us much more detail. Dont expect too much from them. What we can tell you, though, as michelle referenced is the bid that was made by mondelez last week in a letter to her, 107 a share. It was half cash, half stock. It was made after months of discussions between these two companies about a potential acquisition of hershey by mondelez. Again, this is all according to people who are familiar with the situation, have been involved, as you might expect in those ongoing discussions. And nonetheless, it remains unclear whether theyll get a deal done. Not necessarily just because of the price that they are offering, though some may believe it is low. As michelle referenced, stock price is above, or at least it was before it was halted, above 107, and the expectation perhaps that mondelez will come back with a higher bid at. So point as these negotiations perhaps continue. Or that there might be another bidder. But also, you have to remember that hershey is controlled by a trust and owns about 34 of the economics of the company. But most importantly, controlled roughly 80 of the vote. So the trust is everything. If it agrees that this is a deal that it would like to see done, and the board of directors brings it to the trust and says we approve this deal, then it will get done. If, in fact, the trust says we dont like it, then it wont get done. Regardless of what the board of directors of hershey may or may not think. So in order to try to win the approval of the trust, mondelez, as i reported, has made a series of potential concessions. One is theyll change the name of the combined company from mondelez to hershey. A lot of us will just be happy about that. Awful name. Two, is that they will keep all the manufacturing jobs that are currently in place in pennsylvania, in place for quite a bit of time, although not clear to me based on the conversations ive had what those commitments look like. And three, they also will headquarter the chocolate Business Worldwide that will be created here in hershey, pennsylvania. Perhaps those will be enough to overcome any worries on the part of the trust. Not to mention it will monetize some of the trust stake and give them a stake in a far larger company, which they could see as a positive. But thats where this all goes. Assuming the hershey board, at least, gets to a place where it feels comfortable with the offer in question. Certainly all of those concessions have to go back to last time, back in 2002 when they tried to do something, and the community was in an uproar. The attorney general was in an uproar. Tyler, you have a question . What is the cliff notes version of the history of the trust. Who is the beneficiary, and what would happen to it if this deal goes through . In other words, they have right now, as you say, a controlling voting stake in the company. Obviously a big economic stake. What happens to it if mondelez becomes the Beneficial Owner . Well, they own roughly 35 of hershey. The trust was set up by Milton Hershey, of course. His ownership stake in the country. It will be used for disadvantaged children and beyond that. But basically, to help disadvantaged children, many of them in that area. Thats been the case for a very long time. And that will not change. The trust, of course, actually oversees that stake. And they monetize as they need to or get dividends to help them. But they would then sell half of their stake for cash, and they would remain a large shareholder, though not a controlled shareholder any longer, tyler. But the mission of the trust would continue. And it would not be lick quidat in any way. Going back to the 2002 situation, the trust was interested in diversifying a way. Imagine, youve got 2000 disabled children that youre trying to provide for. And you have heavy, heavy reliance on one stock. How good an idea is that . Exactly. Its a terrible idea. They tried to diversify. And i dont know, have we changed enough as a society that now a lot of people recognize thats probably a bad idea . Because at the time, nobody wanted to hear it. It was all about keeping jobs, the attorney general, everything else. Youre exactly right. It was about the attorney general at the time. I think a mr. Fisher who came out strongly against the deal, and convinced the trust that this was a bad idea. And also, being incorporated in pennsylvania as hershey is, its not delaware takeover law were dealing with here. Its broader considerations, including the community itself as a constituency that you have to consider. I dont know. I dont even know who ive got to find out who the a. G. Of pennsylvania is. Thats job one here. Were going to work on that. Maybe get him on the phone, or her on the phone and see what they think. But thats a key point here. Because the trust originally and the sale that was already approved by the board to wrigley that youre referring to, the trust was onboard. Then changed their recommendation after pressure from the a. G. In pennsylvania. Yep. This is going to be super interesting. Been waiting for this one a long time. We have. And overall consolidation in the food industry. Mondelez has been under some pressure as well. Dont forget for a long time, he wanted pepsi to buy mondelez. Well see if anything follows from all of this. Or whether, in fact, we even do get a deal. Thanks, david. Sure thing. Sue herera with breaking news. Thank you very much, michelle. This is concerning s p, which has revised its European Union rating to doublea from doubleaplus. Interestingly, though, the s p has revised its European Union outlook from stable to negative. This following the uk referendum. S p says that going forward, revenue forecasting longterm Capital Planning and adjustments to key financial buffers of the eu will be subject to greater uncertainty. So they have revised the European Union rating to doublea from doublea plus, but they have increased the European Union outlook to stable from negative. Ty, back to you. Thank you very much, sue. Naseem nicolas talebs book the black swan is a mustread for anyone on wall street for its unique take on the relationship between unforeseen events and financial consequence, or doom. Four years ago, he blasted the European Union as a stupid idea that would eventually fail. Ive got to get the exact words here. Welcome back. Thank you. A horrible, stupid project. Thats what you said. If you would only speak your mind, you could actually have an impact sometime. Thanks. I mean, if you overcome that hesitance. Naseem farage. Yeah, exactly. The fact is, the article they listed these from the article. Traditionally, nothing has ever worked from the top. You dont have a union from the top. Needs to bubble up from below. The most successful country is smack in the middle of europe. Its not part of the eu. Its a bottomup country. So now they replicated it. Instead of using the swiss way, that they want to get together, they use the french way. Now you have even the french are complaining about it. A bunch of bureaucrats telling them what speed, if they have a truck and the truck has a windshield. A tractor has a windshield. The speeds got to be 20 rounds per minute. People in brussels have nothing to do. It became a rather incompetent bureaucracy. Is it doomed to fail . Will it be here in ten years, let alone 50 . Well, the holy roman empire, which was neither holy nor roman, lasted for a thousand years. It was a phenomenal thing. Countries get together. They have agreements. Free trade agreements. They could have done some integration by meeting, say, a couple times a year at the elite level and have general military and Economic Policy together. Okay, hey, you know, you can do business here. I can do business there. We can employ my citizens, i can employ yours. It was done that way. However. The way theyve been building it, topdown from brussels is doomed to fail. This is 2016. Okay . Theyre still thinking in 15 economics. The desire not to repeat the rivalries that led to millions of deaths. I mean, that was really the origin of it. Definitely. But its one thing at a time. During the first war, they represented fi eed 5 to 10 gd europe. Now its as high as 70 in some countries. You realize having a topdown government is a different business. If you dont want people to have wars together, they can have some kind of agreement. But the eu became way too intrusive. So it sounds like you agree with the criticism that nigel farage levied in the Eu Parliament to a lot of jeering that the eu morphed into a Political Union. Even a Political Union im not on the side of nigel farage. Im coming to it as a complexity person. As swup look someone looks scie at how systems collapse. How egypt collapsed and the roman empire thrived. So you look at it from a standpoint of you cannot build something centralized. And we today are in an era where you have many more localists. People think in term of bottomup localism. They understand the value of localities. Dont we see that in the u. S. . Ive spent a significant number of time in wisconsin in the summer. In a very rural area of wisconsin. You hear it from the people there. Its hey, why are you east coast elites in the media trying to tell us how to live . Okay, thats a deeper problem. Thats a true problem. Just put your finger on the core of the problem. And thats what you see having happened in england and what you see explaining the phenomenon of trump. Trump and other people. And the roman phenomena. Its basically people just realize that these elites dont know what theyre talking about. I mean, its nice to have elites. But they dont want them to tell you what to do, right . You dont want them to tell you what to eat. What food you should eat. What you should vote for. How you should be thinking. So theyre tired of that. And its a rebellion. Its very justified because the elite that were talking about doesnt have the intellectual level that you would expect from an elite. Economists cant predict anything. Theyre pretty much incompetent. The social scientists are not really scientists. I think they realize that. They want to be left alone. And would rather trust their grandmothers instipnct to thes bureaucrats. I heard a joke in the wake of brexit and all the economists that were experts about this, that, and the other thing. Somebody said well, you know, the creation of economists come only so that astrologers will look good, right . Exactly. To underline your point, though, i watch the eu for so long through the prism of greece, and what really startles me is they are so willing to enforce the things that make everybody uncompetitive, but hardly ever enforce anything that would help people stay, our country stay competitive. And i look at how hard they have worked to keep greece in. They give greece a pass on everything and yet when the uk wanted some changes to their treaties, they were like, see you later. It said to me that their priorities were just completely warped. I agree that theyre not very consistent in their overall policies. But it still goes beyond inconsistency in having waivers here and there. Its just that the idea of a union cannot come from brussels topdown. Its got to come much more organically. And unfortunately today, and fortunately for them, people are building their own, you know, relationships. And countries can build a relationship. And the fact that it may be good news, because well be able as u. S. Citizens to work in the uk without having to bypass european quotas. Theres an integration. Theres an angloamerican economy. And hopefully ireland would be added to it. Its the ecozone that is very robust. What do you make of the folks in england that are calling for a revote or protesting . Because it was a fair vote. They may not like the outcome. Yes. But nobodys saying that the vote was tainted. Maybe by misinformation ahead of it. But the actual voting process exactly. Thats the problem, again, with the elite. Were not dealing with people of huge intellect out there. They want democracy, but if these people vote they want democracy their way. Exactly. We see that in america, do we not . We have that here. Theres some kind of paternalism. Telling people how they should be voting, by people who cant find coconut island. Before we go too hard on the elites which is us, by the way. Thats exactly my point. Lets stipulate not really us. Were on tv in new jersey. Every single day, as we know exactly whats going on. We are the elites. And thats why thats not quite true. Its why people dont like the media, nassim. This is not the elite. The elite is an employee in washington, someone working for a think tank in washington, part of that circle, or working for brussels with an employment for life. Thats one elite. Right, okay. Its more organic here. You have to make a living. You have to prove yourself. Its a completely different situation. The eu isnt as undemocratic as it is portrayed to be. The bureaucracy, maybe. But there is a european parliament. The definition of democratic is bizarre, all right . When you look at things bottomup, then you realize that the outcomes, even from voting, would be completely different. Uhhuh. Plus, theres another thing. Are you part of the elite . Do you consider yourself part of the elites . I consider myself someone whos principally critical of the people who use scientism. Not that elite. Elite in another way. Can we talk about science of earthquakes for a second . Bear with me here. Earthquakes begin with the shifting of tech tonic plates. You dont see them, and theyre very slow, and they hook and theres pressure. And finally they give. Do you feel that trump, brexit, bernie sanders, that that is the beginning of a shift that may start the broader earthquake politically . Around the world or in america. I kind of agree with that. I wonder whether this is the beginning of a revolution. Well look back in 20 years. Well look back in 20 years and say 2016 was the year. I am in full agreement. Things start abruptly. Im not saying its true. Im starting the question. Things start abruptly. And you have waves. And of course, we have a wave. And i think that has not it is spreading. You can see. Even my own country of origin, lebanon, where the municipalities are taken over by people outside the establishment. So its not so much lets use the notion of establishment versus people not in the establishment. There have been twitter allows you to communicate without using the new york times. I can come here and express my ideas. You know, uncensored by anyone. We elites dont like that. Lets use establishment. Establishment last thought. They have their own way of thinking. If you deviate from it, they need a new election. And theyve been patronizing the bottom 30 . And the bottom 30 these people are, you know, intelligent. They know what they want. And they realize, hey, maybe that game is not for them. Maybe the globalization doesnt pay for them. It pays for someone else. Who has a villa in the hamptons. It doesnt pay for them. So these people are realizing. What donald trump has done, hes a brilliant well, hes a brilliant salesperson. He knows how to sell you real estate. He knows exactly as you walk in what he wants, how he likes lobbyists to be, impeccable, elevated stuff like that. He knows how to hear the customer. He detected exactly that point. And hes delivering. Through trial and error. We have to leave it there. And i want to point out, thank you for coming. You said earlier youve been coming to cnbc for 20 years. About 20 years. Were grateful to you. Thank you very much. Well all go out to dinner sometimes. Well go to a greasy burger joint. Were wrapping, but ill say this. Maybe if more politicians referred to their electorate as customers, they would be better off. Definitely. Thank you. Thanks so much. We will be back in just a moment. Good to have you with us. You pay your Car Insurance premium like clockwork. Month after month. Year after year. Then one night, you hydroplane into a ditch. Yeah. Surprise. Your Insurance Company tells you to pay up again. Why pay for insurance if you have to pay even more for using it . If you have Liberty Mutual deductible fund™, you could pay no deductible at all. Sign up to immediately lower your deductible by 100. And keep lowering it 100 annually, until its gone. Then continue to earn that 100 every year. Theres no limit to how much you can earn and this savings applies to every vehicle on your policy. Call to learn more. 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. Last trading day of the month, the quarter, and the first half of the year. It has been a wild ride lately. Look at the righthand side of the screen. The dow and the s p finally scratching out some gains. Dont move, because were going to set you up for the second half of the year. The stocks you should be putting on your shopping list, when we come back. Used a 60 40 stock and bond model, with little in alternatives. Yet alternatives can tap opportunities that traditional assets cant. And even though theyre called alternatives, theyre actually designed to help meet very traditional goals. Thats why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. Translation . Goodbye 60 40, hello 50 30 20. Welcome back to power lunch, everybody. I Dicks Sporting Goods up 15 . The retailer winning a bankruptcy aubs to use sports authoritys brand name. Mccormick rallying 2 . The spice maker beating earnings estimates thanks to cost cutting and acquisitions. That stock, spicy, up 23 this year, hitting new alltime highs. Up another 3. 50 today. Revenue fell short of estimates. The stock up 12 this year, sitting at 52week highs. Up 23 cents. Power lunch back in two minutes. Hi, everybody. Im sue herera. Heres your cnbc news update for this hour. House Speaker Paul Ryan telling lawmakers that the house will vote next week on a measure intended to keep guns out of the hands of terrorists. Its unclear, though, whether it would be a part of a larger terrorism package. Protesters interrupting a Senate Hearing on Homeland Security this morning. The incident started after senator Charles Grassley asked Homeland Security chief jeh johnson if he would crack down on cities that shelter illegals. Do you feel that you have enough tools in your arsenal to go after sanctuary jurisdictions . Id like to see more cooperation from counties and cities. The wall street journal reporting californias attorney general has subpoenaed exxon mobil to the subpoenas were sent in may. And the london zoo releasing video. Look at that. Of its newest arrivals. Two rare tiger cubs born on monday. Zoo keepers dont yet know the sex of the cubs because they monitored the birth using a remote camera system, nicknamed the cub cam. Thats the news update. Everybody all together, aw. So cute, brian. Cute until about a year from now when you go to hug it and it chews you face right off. Just say aw. Chews your face. But good. Sue, thank you. Youre welcome. Lets take a look at Something Else that may be good. The sector check, there are ten green squares on our wall. If you were on the radio, showing all ten major s p sector. Theyre all green, because theyre all up. Well call it 2 . Big part of that is hershey. That stock up 15 . But clog, General Mills, campbells soup, theyre up as well. Your worst performing group, which is still higher, by the way, discretionary. Up. 4 of 1 . It is green all around. Lets go to the bond market and rick santelli. Its interesting, because while the equity market has nearly recovered almost everything from the brexit related losses that began on friday morning, the bond market hasnt moved. I mean, still looking at a 1. 49 yield on the tenyear. Whats happening . Yeah, the macrotrends have lowered Interest Rates for longer, really. Its been on the radar screen a long time. And i dont see it changing any time soon. Lets stick with exactly that, sully. Lets do some pairing, shall we . Shortterm, longterm. Look at a year to date. The bund, its so spotty. Im telling you, the current low yield close was yesterday, a little over 12 basis points. We want to watch that. A lot of people are playing at that expand. Look at guilt. Shortterm, longterm. There arent many of these around for a government security. Its unbelievable. Now, something nobody watcheser very much but me. We watch bunds and tens. Month to date. This thing has moved almost 50 basis points. And its not even really i mean, theres still a day left. If you look at a fouryear chart, it gives you some perspective. But its very impressive that we rejiggered these markets so big and we still for the most part are somewhat orderly. Sully, back to you. Santelli, thank you. Now, from bonds to gold, and gold losing a bit today, it is down about six bucks an ounce. You see that, about half a percent. But kind of like the bond market, gold has maintained much of its gains. In fact, so far this month, we are seeing the price of gold up 8. 5 . But gold is no silver. We should note silver up 16. 5 . So silver, well call it the burl ives trade. Silver and gold but silver has doubled gold. Michelle . Yeah, its been a big move. Golds huge rally after last weeks brexit vote was up about 4 for this week alone. 8 for the month. J. J. Joins us with his bearish take. Jim joins us with the bullish take. Jim, its already had a great run. Why do you think theres more to come . Well, were looking for the market to get up to around the 1,400 tlr level. I believe theres still enough safe haven flows coming in, as you pointed out. Yields are extraordinarily low. Around that level, it is supportive. And outside of the United States, even before the uk vote, we had negative Interest Rates, which has actually been propelling the gold market to a degree higher all this year. So those things i think in combination with some level of geopolitical risk is enough to keep the market on the burner, i think. What do you think, j. J. . I think in order to believe that, michelle, you have to believe that the s ps are going to collapse, and so really, if you look over the last few years, weve seen gold have a negative 82 correlation to the s ps. And so to get to 1,400, i think it would be difficult. Really, for the rest of this year, i think the s ps are going to stay more in a range which to me means gold is going to stay more in a range. So as the s ps go from, you know, 2,200 to 2,100, etc. , youll probably see gold, in my opinion, stay between 1,300 and 1,200. With the election coming up, i just dont see a great reason for anything to break out right now. At least through the rest of 2016. Between both the election and what were seeing in Interest Rates. Interesting, because i thought you were going to say things that we typically have here about gold. Every single piece of gold thats ever been mined still is above the ground, etc. , etc. What about the negative yields and how much more attractive if youre worried about the value of any currency, gold seems like a natural place more and more, considering that you lose your money if you give it to many major governments. Yeah, but i think the big difference in that right now, and i think thats one of the reasons youre seeing the bond market hold up so well. This is more about not necessarily making money, but keeping your money. Its safety over yield, and so when we get these events, as we saw with brexit over the past, people turn to gold for that. But i think longer term, youll see people turn toward as crazy as it may seem, with little or no yields, governmenttype products. Particularly its going to keep pressure on u. S. Government products, and with that, well continue to see the s p just bounce back and forth in a range which will keep gold there. Final word to you, jim steele. I think were going to see continued central bank buying. If youre worried about risk, gold will remain attractive on that level. Were also seeing some tightness from the supply side. So the movement up from here wont be extraordinary. But if were also consider that, were unlikely to see a rate hike any time soon. Our view is up until december. That will be supportive of the market going on. The big declines in gold last year and the year before were predicated on significantly more rate rises than weve seen to date. So the market has been in a recalibration phase. And that will continue for as long as the fed holds off on rates. The longer they hold off, the better for gold. Thank you so much. Thank you. Lets get to seema mody, shes got a market flash. Share of visa and mastercard are both lower as a federal Appeals Court threw out a 7. 25 billion antitrust settlement among the Credit Card Companies and millions of retailers over credit card fees. Mastercard has issued a statement to cnbc, saying the company is disappointed by the ruling and is reviewing the decision to determine its next steps. Were looking at shares of visa and mastercard. Near session lows, down about 3 on the day. Back to you, michelle. Thank you. So you dont have to have a job. You dont even have to have an income. But you can still get this particular loan. What kind of loan are we talking about . Well explain. Stocks are now rallying for a third consecutive day. The dow and the s p recovering now about 80 of those losses. Dow and s p now positive for the Second Quarter. Positive for the year by 1. 5 for the dow and 1. 3 for the s p. Is this good news for the second half . Joining us, jim tierney, chief Investment Officer of u. S. Concentrated growth at a. B. And eric ristoben, chief investment strategist at Russell Investments. Welcome to you both. We may be higher on the dow and the s p 500, but speaking for myself, it doesnt feel that way. Tell me i should feel better about this. Well, the problem with the u. S. Market is its expensive. Stocks are priced at above average pes, and the margins that are supporting those earnings are at record levels. I think you should be a little bit worried because were probably going to have a Third Quarter of negative earnings. I think the market did overreact to the brexit. Priced in the worst Case Scenario to something that no one knows how its going to turn out. Theyre not going to find out for two and a half years. I think valuation matters. You think valuation matters. By that standard, if youre going to go strictly on valuation, let me follow up with eric here. You think the u. S. Markets are highly valued. You think the european markets are obviously much better valued. If you had to choose between the two of them over the next six months, between now and the end of the year, which would you be buying . Im overweight europe, overweight emerging, and principally overweight in both because theyre cheaper. Jim, how do you feel about the u. S. Market . Weve come through a lot of turbulence. Worst start to a year ever than the big boomerang back up . Then the stuff over in britain. Weve worked back most of the way from that. I think the market hates uncertainty. At the same time, theres a lot more uncertainty in the u. S. , so were pretty favorable about the u. S. Market. If you look at what happened last week, i think you have a few impacts. One is on the economy. Economic growth is going to be a little bit slower. But not dramatically so. When you look at currency. Currencies are weaker. Its something were going to have to live through and factor into numbers. But the flip side is Interest Rates are going to be lower for longer, so valuation should be higher, and when you look at a pe on the s p of 17 or 18 times compared to a tenyear treasury at 150, to me, that says equities are still very cheap. Do you think priceline has been hit too hard, i guess . You never like to live through what you went through in the past week, particularly friday and monday. But for a stock to go down 17 or 18 is just overdone. Ask the question, are europeans going to stop taking vacations because of brexit . I dont think so. And thats what priceline is all about. They will go somewhere and priceline will be a major beneficiary of that. All right, eric, why are you so when you say europe and emerging markets, would you do that by a vet on individual companies in the eurozone, or would you buy a broad etf or fund that invests broadly in european stocks . Were a multiasset investor. We like to have lots of bets in our portfolio. So we implement through active principally active strategies in a broadly diversified strategy. Since the open, the u. S. Equity market is up 4 . Europe is up almost 7 . The uk is up 13 . The action has basically been in a currency. If you avoided the uk pound, you did well. And we were short the pound coming into the brexit. Jim, appreciate it, and eruk with Russell Investments in seattle. Go to powerlunch. Cnpc. Com right now to see another large cap pick from jim. If youre looking for a home rental investment, listen up. Now this is a real story, folks. This is not a mock story. You can get a mortgage without a job, without an income, or without a down payment. Diana explains this, from 2016, apparently. You do need a down payment. But this is an investor loan. It is not about the investor. It is underwritten entirely on the rental property. B2r, a blackistone company is offering an investor home loan based entirely on rental income of that home. Up to 750,000 per property. As i said, you need a minimum 20 skin in the game, that is equity in the home. Then the rent on that home has to be 33 higher than your costs. Your costs include principal payments, interest, insurance, and taxes. But thats it. This is a 30year fixed product, and there are prepayment penalties, so its more for those who buy and hold, not so much for the flippers. The Interest Rate will be about 6 to 8 on the loan, but commercial investor loans today can be twice that and far more restrictive. I spoke to one investor in florida who bought dozens of houses during the crash. These are a few of them. Theyre now worth over 6 million collectively and he owns them all outright, all cash. He says if he can take 80 out in a refi, he can build a real estate portfolio worth 20 million. Btr launched this product two weeks ago. They say there has already been huge demand, the vast majority from these investors who own several homes and they want to do the cashout refi so they can do more. If you want to run the numbers yourself, go to cnbc. Com. Its all there. One story im happy to be wrong on. Diana olick, thank you very much. It is a police chase that youve got to see to believe. But it is not a car chase, because the cops were chasing a man on a gokart. And where else but los angeles . The rest of that video coming up. Plus, what the brexit has to do with this, the worlds biggest rough diamond. That story straight ahead. People talk about deals on their auto insurance. Wouldnt a deal involve two parties discussing something . A little give . A little take . Because last time you checked, your rate was just, whatever they say it is. Why not give you some say in the matter . Or even better let your driving do the talking. Liberty mutual righttrack finally puts you in control of your rates. All you have to do is connect, drive and save. In fact, safe driving could save you up to 30 . With 5 off just for signing up. For righttrack. And the discount is good for the life of your policy. To get started, visit a local office or call Liberty Mutual today at take control of your rates. Visit a local office or call see Car Insurance in a whole new light. Liberty Mutual Insurance possibly another casualty of brexit, the sale of this 1,109 carat diamond. The size of a tennis ball, they say. For those of you who dont know much about diamonds, like me, its a big one. It was offered at auction in london last night. Failed to meet the reserve price of 90 million. It is about the size of a tennis ball. It was found in botswana last year. Take a look at this video that was posted on social media. It is a car chase. But it is involving a gokart in california. A black suv that looks a lot like a police van in pursuit of a man driving a gokart, and not a particularly fast one, down the freeway. Witnesses cheering as the gokart drives by them. It is not clear if the driver wuss apprehended. It is a good guess that the cops probably got them because you cannot outrun radio. Im told this was in oakland, not los angeles. Either way, it had to be this was going to happen. And i mean this with love for all three cities. Either in miami, houston, or somewhere in california. Every car chase happens in one of those place. Its good weather for a car chase. If youre going to race a gokart in the street, get one of the racing carts. That thing aint going anywhere. Okay, got it. These stocks hitting new highs today. Among them, General Mills trading at alltime highs, back through its history to 1927. Kellogg. Lockheed martin, Johnson Johnson also hitting new highs. Americans want selfdriving cars, but they dont want to buy them from automakers. Well, who are you going to buy them from if you dont buy them from a company that makes cars . Well explain next. Before the break, though, lets check on the markets. The dow is near the highs of the session, higher by 183 points. Nasdaq up 41 and the s p higher by 20. Dont move. Its here, but its going by fast. The opportunity of the year is back the mercedesbenz summer event. Get to your dealer today for incredible onceaseason offers, and start firing up those grilles. Lease the e350 for 499 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Here at the Td Ameritrade 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. Take a look at the price of oil, lower today by a dollar. Thats 2 when it comes to wti. The auction will happen in december, and it is possible only because of the very controversial reform in that country, which ended the stateowned monopoly on prungs. Earl yes we spoke about why they are proceeding with the auction, despite lower oil prices. The gulf of mexico is a very attractive place. For oil. The south of the gulf of mexico is largely unexplored. The senior level, there was a debate whether the deep water auction should be postponed at the beginning of the year. And we got a lot of feedback. I think it makes sense. And the feedback we got, this oil is going to come online in a very long time, until 2023. Nobody knows what the price of oil is going to be in 2023, so the government as a whole decided to go forward. If you look at a map of the gulf of mexico, the u. S. Side, many, many rigs. Thousands. Mexican side. Before only pemex could do anything that had to do basically with hydrocarbons. And now we dont. What happened . We didnt adjust in time. We lost a lot of market share. Is that going to change . Oh, yes. Its going to be a very difficult change. To try to change the mentality, about having clients, adjusting to clients, competing for clients. Competing for markets. Thats one of the Biggest Challenges that were facing right now. Incredibly difficult, but theyll have to do it if they want to increase production, which has been falling the last several years. That will do it for me. Power lunch is going to continue with tyler, brian, and now melissa lee. Guys, over to you. Thanks so much, michelle. See you soon. As we head into the 2 00 p. M. Hour, the markets are hire for the Third Straight day. Were just off the session highs right now. Lets take a look at the boards. The Dow Jones Industrial average higher by more than a percent. The s p 500 up by about 1 , leading the s p 500 right now. Consumer staples, which are up 1. 9 . The big story we are watching right now, mondelez offering to buy hershey for 107 a share. Shares of hershey and mondelez trading sharply higher. Michael lavery, a 48 price target. Chad morganlander is a hershey shareholder. 100,000 shares. Hes founder and Portfolio Manager with Washington Crossing partners. Chad, im going to kick it off with you. How likely do you think this is to actually happen since the Hershey Trust really has the ultimate say . I think it is likely. Theyll have to increase their rumored bid. I would anticipate a 130 to 140 type of offer. It is a good quality asset. It will be acreedive. There is a mismatch of time horizons. The trust is looking out ten, 15, 20 years. Of course, mondelez needs this deal to work in the next two to three years to be able to be able to bring it back to their shareholders. A good Quality Company if the deal does not go through. And the stock goes down to 100 or below. We would still be buyers of the stock with a three to five year time horizon. Can mondelez pay 120, 122, somewhere in that range for this property . They could given the low cost of debt and the fact that they could use some equity. Obviously they want the best price possible. But certainly one of the hurdles apart from just whether or not the trust is interested is some of the political risks. Certainly in the past weve seen state and local legislators fight to take over hershey to protect the town. Theyve made some concessions to try to anticipate that. Theyve structured the deal in a way that would put the global chocolate headquarters there. Is this the best deal that mondelez could make, or would it be better off merging with somebody else . We think the reason to own mondelez shares is the likelihood of a takeout. We think the international piece of mondelezs business fits well with the mostly heinz international piece of craft heinz, and gives them a nice bit of exposure outside the United States. We think thats important for what kraft would look for in how they think about their next likely acquisition. It could make thatless likely. We think that theres ways that we have to think about other implications. Hershey a very special situation because of the trust. Theyre not a normal Public Company in the sense that they vote almost more like a family or a town. Still, lets say the shareholders would like to sell, but the company does not want to. Do you worry as a hershey investor that perhaps hershey could do what others do and say ah, lets do either a poison pill, or maybe try to buy somebody ourselves to make us too unwieldy for mondelez, which could then damage hersheys share price. I dont anticipate hershey doing a selfinflicted acquisition. We think its a good quality, wellrun company. Yes, theyve had some disappointing acquisitions in the past. Golden monkey in china is not working out. Its a complete disappointment. But nonetheless, if you have a three to fiveyear time horizon, deal doesnt go through, the stock drifts back down to 98 to 100. We would be acquiring the shares at that point. Rising dividends stock, underlevered company. This company has very little debt. Thats whats making this a key acquisition, or a candidate to an acquisition for a strategic buyer. That is critical to this whole deal. That they dont have a lot of leverage. Its making this deal an easy target. All right, guys. Thanks so much. Lets get to bob pisani on the stock of the New York Stock Exchange. Bob . Just off of the highs for the day, melissa. Take a look. Even when mr. Carney came on and talked about cutting rates and potential issues down the road, markets still continued to rise, right near the highs for the day here. 12 on the New York Stock Exchange at new highs today. Keeps expanding here. Just take a look at some of the new highs we have here. Some of the big cap names. Exxon, chevron. Many of the defense names do not have any real exposure over to europe. Interest rate sensitive stocks every day. Weve got a new group of Interest Rate sensitive stocks, including simon and kim co, tanger, verizon and at t have been there. And, of course, a good swath of all the old utilities like southern and pg e. Consumer stocks, which really were the only sector that were hitting new highs earlier in the year continue to do it. The big issue for the second half of the year, whats the impact of brexit on earnings . My concern has been very simple. The potentially higher dollar and the lower rates for longer is going to be a drag on earnings and may, in fact, impact q3 and q4, turning them negative. Tech and financials could be impacted by this. More on earnings and how its going to be impacted by the brexit on my blog, tradertalk. Cnbc. Com. Melissa, back to you. Thank you. Lets get to seema mody for a market flash. As bob was just pointing out, those comments from carney definitely moving markets. The pound, in fact, hitting session lows as the bank of England Governor Mark carney hinted at further easing. He basically said given deterioration and the Economic Outlook for britain, some Monetary Policy stimulus is likely needed over the summer following that surprise vote by the United Kingdom to leave the European Union. He even said Capital Requirements of the largest banks now at ten times higher than before the crisis, so again, were looking at the pound weakening against the u. S. Dollar, and now down about 1. 46 , trading at 1. 3. Back to you. The dollars gained may hurt the industrials. Now a quick look at industrial stocks that suffer when the dollar rises. Yep. Definitely the case, tyler. So the u. S. Dollar seen as a place of safety when markets sell off. That trend continued the day after the brexit vote, which saw the greenback surge over 2 in just one day. That kind of move has only happened five times since 2000. And i can tell you that industrials, they tend to get hammered in the month after the u. S. Currency rallies 2 . Almost twice as much as the s p. Let me show you the Major Industrial decliners. Building products also suffering, losing more than 31 . They all get hit down more than 20 each. On the flip side, it was probably hard to find industrial stocks. The ones that actually outperformed, they were all defense and intelligence names like raytheon, l3, and northup grummond. One of the hallmarks is all the rhetoric against trade agreements by both paerptrties. Listen to donald trump and Hillary Clinton talking about why they oppose the Transpacific Partnership. The Transpacific Partnership is another disaster. Done and pushed by special interests. Who want to rape our country, just a continuing rape of our country. Thats what it is, too. Its a harsh word. Its a rape of our country. I just dont think that when you add it all up, it, you know, meets the standards that i set, and i couldnt look in the eyes of a voter and say yeah, im convinced this is going to raise your income, because i wasnt. Lets bring in the president of the Pennsylvania Chamber of business, gene barr. Thanks for joining us. I like to see either candidate lay out the main tenets of the tpp, because given that it is multithousands of pages long, im not sure anybody has read the whole thing straight through. Either way, gene, lets talk about trade. Its a hot topic. What is the Pennsylvania Chambers view on trade . Well, look, brian, thanks again for the opportunity to be on here. It is extremely important to our members. Here in pennsylvania, weve got about 40 billion a year of exports. 95 of the population, 1. 6 million jobs in pennsylvania, and we want to be in that market and compete. It is keenly important to us. Pharmaceuticals, medical devices. So we want to go out and compete in that. Those are high value goods. So you can make those things, make some money when you sell them. And pay somebody a fair wage. A lot of things, gene, are not high value goods, and no country in the history of the world has succeeded by trying to pay people a good wage, but selling low margin items. It simply does not happen. I think the candidates both have talked more about fair trade. Do you hear it from your Manufacturing Base . Im all for free trade, but its got to be fair, because theyre paying people a buck a day with no health care and no vacation. We cant compete. You hit on an important point. Free trade does have to be fair trade. There are a lot v lot of issues out there. Its one of the reasons why many of our members are concerned about what they see in Certain Industries such as steel, and why we have sent a letter asking the itc to investigate some of those allegations to make sure its exactly as you state. That free trade would be fair trade. But again, we want to compete. And interestingly, the two candidates, of course, have expressed different sentiments over the years on tpp as well as other issues. I understand its election year, though. If i go to some of these areas outside of pittsburgh, where mr. Trump made a different speech than the one that we just heard from, and the center of pennsylvania, theres a lot of towns, as you know. Ive seen them, youve seen them, that have been decimated. A big steel mill. Its gone. Theres no jobs there. The towns in decline. Aliquippa, pennsylvania, for one. Good people. This is the point of the election, right . People are not antichina. They are protheir own family. Theres no business moving in. And im not just picking on pennsylvania. This is true in many other states. Whats the future for them . You bring up a really good point. There are parts of pennsylvania that have had a really difficult time, particularly pittsburgh after steel. One of the things that is really moving pennsylvania forward, weve got a tremendous history in energy. In fact, the oil industry in the u. S. Started here in 1859. Over the years, we have had great strength in coal. In nuclear, etc. Natural gas is going to be the one that in our view is going to help this commonwealth tremendously. We sit on the second largest natural gas field in the world. We have a county in northeast p. A. That was hit hard. The highest producing natural gas county in the United States. Just a few days ago, shell made the final announcement, royal dutch shell, billions of dollars of investment to build a cracker facility in the pittsburgh area. What we hope to do is build around that, such that we get not only the construction jobs, the fulltime jobs at that facility, but all of the other things that utilize and make high end all kinds of products. Ive been there a few times. Are you worried the federal government is going to come in and shut down i know youre doing this, pennsylvania, but you cant build a pipeline here. Theres far too many people who want to stop the natural gas being produced here in pennsylvania, and theyre trying to stop the infrastructure, trying to stop markets, and it is incumbent on us to do that. It is lower co2. It has tremendous promise for this commonwealth. Its going to drive us forward. Its helped our manufacturing, because it has made energy costs less. We have got to be able to drive that forward if pennsylvania hopes to truly realize all that we can from this resource. And look, we understand that people have been disaffected over the years by all of these things and theres a lot of disruption in the marketplace. One of the reasons why our organization is looking to do a comprehensive Work Force Development to try to get people back into jobs that are available, do that education. We know we have to participate. I cannot let you go without asking about the mondelez bid for hershey. Near where you sit right now. What is the Pennsylvania Chamber or your own personal view on the bid for herhershey . I just heard it before we went on here. Hershey is a member of ours. Mondelez is a member of ours. Were not going to comment on those types of things. It will certainly get a lot of attention in this area. Gene barr, thank you very much. The Business Chamber of industry and commerce. The dows are at highs of the day, guys. We are almost ready to completely gain back everything we lost from that vote in england last week about something with the eu. Ive heard about it. A big day for the nasdaq as well. Were back with more right after this. With usaa is awesome. Homeowners insurance Life Insurance automobile insurance i spent 20 years active duty they still refer to me as Gunnery Sergeant when i call being a usaa member because of my service in the military to pass that on to my kids something that makes me happy my name is roger zapata and im a usaa member for life. Usaa. We know what it means to serve. Get an insurance quote and see why 92 of our members plan to stay for life. Looking like a 210point gain right now. Nasdaq is up by a percent. S p 500 up by 1. 1. It is worth noting that we are still seeing a firm bid for safety trades. We are seeing the tenyear treasury being bid higher. The yields moving lower. Weve also got a bid in the dollar and Consumer Staples and utilities among the bestperforming sectors in the session. Yeah, and our frequent guest and friend of show shri kumar, a strategist. A pretty measured guy, but hes fired up on twitter here. Tweeted out, that the dow is surging. Yellen to declare she sees no sign of speculative excess. After all, yellen has left open the possibility of negative rates. He was calling for 1 on the tenyear. Hes a very measured guy. But hes a little fired up about the fed here. Yeah. Maybe well have to get him back on soon. Lets get back to another big story of the day, mondelez offering to buy hershey and all the chocolate they can eat. We want to get some insight from someone who knows the chocolate businesses very well, joelle glen brenner, author of the emperors of chocolate inside the secret world of hershey and mars. Sealed with a kiss. Good to have you with us. Thanks for having me. What do you think the reception within the inner sanctums is to this bid . What a lot of people dont realize is that hershey is a company like no other in the world. And by that, i mean when you buy a hershey bar, your money, the profits, actually are going into the Hershey Trust. And the Hershey Trust was something set up by Milton Hershey way, way back at the turn of the century to ensure that he had support for a school for orphaned boys. Now known as the Hershey School. It is still viable and up and running. It now has girls and boys and its not just orphans. They really serve children from broken homes around the country. The Hershey School was what miltons legacy was. Thats what he left and what he wanted to see always remain. So thats why he put all the stock into the trust and thats why you have this odd situation where the trust, you know, has this 80 voting share. And over time, you know, hershey has generally been a depressed stock because most people recognize in the Business World that its not really an acquisition target for this reason. Now, hershey, on the other hand, has entertained some bids in the last decade or so. The one from wrigley failed. This bid could absolutely, you know, be received positively by the trust. But i will tell you, even if their trust receives it positively, i predict there will be an absolute Storm Brewing in the town of hershey, pennsylvania over this. And a lot of people who went to that school, or had part in the hershey medical center, which is funded by hershey money, that entire town is sort of part of this. And so they all let me just interrupt here, just quickly. The management of hershey incorporated is not the same as the management of the trust, correct . No, no. Completely separate. The trust just takes the profits from hershey corps the portion that theyre entitled to. They dont have all the economic interests there. But they take their share of the profits and apply them to this school. Do you think that the trustees would be inclined to do this . And then i want to come back to the idea of the uproar that this might cause in the town and region around hershey, pennsylvania. And i cant help but draw a parallel to what happened in st. Louis when Busch Anheuser sold to the busch family, which was at least as equally tied in to the town as the hersheys are, sold to the other company. To inbev. I think those parallels are perfectly appropriate. What i would say is there is no hershey family anymore. When milton died, that was the end of it. He did not have any children. And so he left everything that he had into that trust. So what is your sense of the trustees and their openness to this kind of thing . And to what it would mean for their responsibility, which is to provide a steady stream of income to the school that you were talking about a moment ago . Well, its very interesting, because believe it or not, so few people have heard of the Milton Hershey school. But it has an endowment bigger than harvard. Really . Because its the company too in a way, right . Thats right. So its a little different. Its not like people just gave the money. The money, you buy a candy bar, it goes to trust, then it goes to the company. Its a passthrough. Okay. Sorry to jump in. Its all very intertwined. Not the management. Thats completely separate. But in terms of hershey interests overall being all the things Milton Hershey cared about in his lifetime, they are all directly tied into the company. The trustees, though, have a mandate to make, you know, the most value that they can out of this trust, and i assume they will view this as a good deal though they will absolutely want to see the price raised. Because as i said, the hershey stock over time, you know, very, very underappreciated, undervalued. The company is well managed. They dont have any debt, which is pretty incredible in this day and age. So, you know, its a great acquisition target. Its just a matter of wooing the trustees and ensuring them that Milton Hersheys legacy will continue. All right. Thank you. Author of the stories on the emperors of chocolate. Thanks so much. You bet. Imagine a major market event and your adviser wont let you make any trades. Well, that happened, and the firm said it made the move for investors own good. We will discuss this topic next on power lunch. But before the break, another check of the markets, which are flirting with real highs there. There are the utilities. Up 1. 5 . The sectors doing well. Welcome back. Tracking the fall ute from the brexit internationally where mexico has decided to raise rates by 50 basis points to 4. 25 in an effort to support the peso, the mexican currency, which has been hardhit by the brexit decision to leave the European Union. The peso has shed about 7 since the last policy meeting in early may and hit a record low on friday following the brexit vote. Mexican stocks also moving higher. Take a look at the mexican etf, spiking here by around 2 on this decision from the central bank. Back to you, tyler. Thank you very much. Were going to pick up with some news on hershey. According to dow jones, the hershey board has unanimously rejected the takeover offer from mondelez. Hershey shares right now are halted for trade. So the last trade showed hershey up by more than 15 at 111. 87. Again, this is a report, according to dow jones, the bid has been unanimously rejected. And perhaps not entirely a surprise. Its rejected previous overtures from other companies in the past. It is ultimately up to the Hershey Trust as to whether or not a deal will go through. Yeah, and you wonder if hershey no reason given here, right . Its usually price. But again, hershey and im not touting hershey, but they are a different kind of a company. Sure. Theyre literally a company town. And a viewer pointed out on twitter that mondelez shut a cadbury factory down, laid off half the workers in chicago, moved into mexico, closed the philadelphia bakery. Which businesses do all the time. Im not picking on mondelez. But you wonder if hershey may be saying listen, we are literally the town. Right. Its not like dupont in wilmington. No, the town is named after the company. It could be as simple as we got that letter last week, it was 107 a share. Were trading above that offer right now. And as chad morganlander just said, the hershey shareholder who we interviewed on the show, he would expect the bid to go higher, or he would want the bid to go higher and he could see a bid around the 120 level. You wonder if m m mars is going to pop their head up. Faber might now. What does this do to their valuation theoretically . What is their valuation . Its private. In terms of thinking about what is valued, a higher bid for hershey pushes that theoretical multiple up. Can you imagine an m m stuffed inside of a hershey kiss . Thats synergy. I like that. The latest news here, hershey shares are halted. Well have much more of this when power lunch continues after this break. Hello, everybody. Im sue herera. Heres your cnbc news update at this hour. At the pentagon, ash carter announcing that transgender individuals will now be able to openly serve in the military. The new policy also establishes a way by which Service Members may transition gender while serving. Our mission is to defend this country. And we dont want barriers unrelated to a persons qualification to serve, preventing us from recruiting or retaining the soldier, sailor, airman, or marine who can best accomplish the mission. Presumptive republican president ial nominee donald trump is vetting new Jersey Governor Chris Christie as a possible choice for Vice President , according to multiple reports. Christie is currently leading Trumps White House transition team. In a major joint operation, u. S. , italian, and Colombian Police have seized a total of 11 tons of cocaine and arrested 33 people. Most of the cocaine was seized in colombia where it was refined in the colombian jungle. It was then shipped to europe and the United States in Containers Holding tropical fruit. And First Lady Michelle Obama calling on young women in spain to help promote her global Girls Education initiative. Speaking to some 100 young women at a conference in madrid, she spoke of the difficulties that girls face trying to get an education in many countries around the globe. Thats the cnbc news update at this hour. Back to you. The oil market is closing iffer ti for the day. It looks like into the close, oil is really selling off. You see that drop there. Wti is down by 3. 2 right now. But a precipitous decline in the last few moments. Didnt see too much of an increase in the u. S. Dollar, but well be checking on this move. In the meantime, lets get more on this hersheys mondelez story. Lets get to david faber at the stock exchange. David . You guys were doing it. A very quick rejection to that offer from mondelez that we told you about earlier today. 107 a share in cash and stock confirmed by hershey in a press release that the company put out just moments ago. And they say that the board of directors after receiving input from its outside financial and Legal Advisers carefully evaluated what they call the indication of interest. It was delivered to the company about a week ago last week. Following this review, the board unanimously rejecting that indication of interest, and determined it provided no basis for further discussion between mondelez and the company. This would seem to be clearly focused on price. Of course, 107 far below where hershey was trading before it was halted, and even below the highs that it saw today on the initial news of a potential offer from mondelez. This may not even get to the trust, which we spent a lot of the day talking about, which has the voting power over hershey and will decide its ultimate fate, if, in fact, the board of directors decided it was worth doing. The board clearly stating its not interested at this price. The question then will be whether mondelez tries to come back with a price perhaps that will do more than allow them to determine it provides the basis for no further discussion between mondelez and hershey. Well have more if we get any more insight from the mondelez side. But things moving pretty quickly today, of course. When we first learned news of mondelezs approach after months of discussions, its offer, its conditions that it was willing to accept in terms of trying to ameliorate any concerns of the trust should it get that far, and the fact that weve already gotten a rejection. Back to you. David, i hope you wont mind i ask you to stick around while we bring in and participate as we bring in ken goldman at jp morgan. Has an overweight rating on mondelez and a neutral rating on hershey. Welcome. Good to have you with us. You said earlier today in a note that you were intrigued by the idea that the trust had not immediately rejected this bid from mondelez. They still have not rejected it. But maybe they didnt need to because the board did. It sounds like a pretty swift and sweeping rejection. What comes next . I think thats the right question to ask. I think the question is, is the rejection by the board part of a ploy to get a higher bid . Weve seen that obviously before, across many industries. Or is it a return to what weve seen in the past with hershey, which is were never going to accept a bid from anyone no matter what. What do you think . Is this the heisman pose here . I think its a little bit different this time. I think that, you know, the tone of their rejection was pretty strident. Ill give them that. But i think its a little bit different in that the Hershey Company is not as strong as it once was. And the Hershey Trust, there are certain members that are a little beleaguered right now for lack of a better word. The attorney general is on record saying he wants them to resign. So what youre referring to, just to jump in there, is that the pennsylvania a. J. Guys had earlier going after three numbers, alleging misuse of trust funds. Three other Hershey Trust members resigned the year before. So maybe mondelez sensed some weakness in the trust. Possible . Its possible. I also think mondelez may be doing this as a defensive move. Weve speculated on this, that kraft owned by partially by 3g, kraft heinz, is interested in buying mondelez next. We know thats a possibility. Maybe this is their way of saying no, thank you, lets get bigger and prevent that from happening. How important is hershey in your view . Its hard to say, melissa. Certainly, mondelez wants to get bigger. I think and im speaking generally here. Theres a fear of kraft heinz in general in the food industry. A lot of Companies Think well, theyve got another year or so, and then theyre going to make another move, and theyre going to try and do another big deal. By getting bigger, you perhaps make it less likely that you would potentially be their prey. But that said, i think mondelez certainly has been focused on trying to increase its Global Presence in chocolate. I want to add one thing on the trust. In the press release, hershey makes no mention of having consulted, that is the board of directors, with the trust. There are overlapping directors. I think three of them on the board of hershey and also on the trust. But my understanding of the way this typically would go is while there might be some conversation, you first would have the board say yes or no before you would even get to it. David, im sorry to interrupt. Hershey shares have just reopened. And the strength is Still Holding in there. Its off of the levels which it was halted. But it is still higher by about 12 . Sorry to interrupt, david. Thats all right, i made my point. How high can mondelez go . Mondelez or hershey . Mondelez as a bidder. Im sorry. Honestly, given that the multiple that were getting is about 15 1 2 times, thats not that egregious. Weve seen Companies Like hillshire, which are attractive, but not quite as attractive as hershey, go for more than that. Can this bid go up to the 115, 120 level . I wouldnt be shocked. Guys, if i can quickly ask him. Its been made clear to me that the kit cat Licensing Agreement with nestle, which would go back to nestle on any change of control, is very valuable. I think mondelez is happy to have people understand that our bid includes the fact that we know were going lose 10 of the company. Does that figure into the numbers you were just going through . Yes, i should have clarified that. The 15. 5 times, that includes the negative impact of losing kitkat. It is a lower multiple. Is there anyone else who could come into this . I mean, i dont want to speculate on too many names. I dont want to put anyone in play. But i can tell you whats happened in the past is weve seen in 2002 that nestle made a joint bid for it. So clearly its a different environment now. Nestle is looking more for health and wellness. Could i speculate . Please. Ill jump in and speculate. Why not . David wont do it. Ken wont do it. And david, what you said, by the way, is really spectacularly interesting. Because you talked about the potentially for kraft to go after mondelez. Lets not forget, mondelez was created because it was spun out of kraft. Its like, kick the bird out of the nest. Bring the bird back in. But heres the variable. Come on, brian, its wall street. You know that. The bankers are going to make fees. It never sees im just an easily amazed guy. But david, heres the other variable. Which is nelson peltz. Big activist investor. Both him and bill ackman are heavily invested in mondelez, and nelson peltz i guess a couple years ago was trying to pressure pepsi to buy mondelez. So its not speculation. Its real people, ken. Do you see someone like a pepsi potentially coming for mondelez . Yes, i mean, i wouldnt say pepsi. I think all indications have been that endra has no real desire to do that. If you notice, peltz has pulled out of pepsi. I know you do know that. Hes sort of given up on that. I do know that there are many investors ive talked to who are disappointed if mondelez buys hershey, because theyre in the stock partially because they thought that they would get as part of their ownership taken out by kraft. So this is not the ideal situation if youre a mondelez holder today. Well, i wonder how it got past nelson peltz then on the board. You assume the board would have to agree to make the bid. I mean, the board knows about this. If he wants to be bought. Theyre in the loop about the offer for hershey. I wonder how together the mondelez board then would be, because beltz would not be happy about buying hershey. If he wanted to be bought thats true. The board could be fractured a little bit. I dont know the answer to that. But certainly by mondelez making the bid, you could come around and make some sort of argument, it makes itself vulnerable. Because if a pepsi or somebody else was interested, theyd want to move before it got a lot big we are the acquisition of hershey. Right now, the acquisition of hershey looks very much in doubt. Forget the trust, which i spent a lot of time talking about, because the board has said we dont think we would even consider discussing it with you. So what about that idea, if one of the goals was to have mondelez bought by somebody else. How do you think nelson peltz is feeling about this . Er are i wouldnt want to speculate on what hes thinking, other than i know nelson a little bit. Nelson has been someone who i think is very shareholder friendly. A very smart investor. I think if he is onboard with this, he sees this as the best opportunity. What i would suggest, though, is that by conversations with not only him, but other ip ves or thes over the years, would suggest that mondelez getting taken out is the best way to create value. Last quick question for you, ken, and taking a look at mondelezs shares. Theyre up 4. 4 right now. Whats your guess as to why people are bidding the stock higher . Because the deal for hershey would be so great for the company . Or because it believes that its making this bid because the company there might be somebody actually closer than just waiting in the wings to make an offer for mondelez . Yeah, thats my speculation. I would agree with that. That you have people maybe circling over mondelez. Its closer to happening in terms of a bid for mondelez than it being a possibility . That would be a guess, but i would agree with that. Guys, good discussion. Thank you. David faber and ken goldman. Thank you. My brain hurts. Energy stocks closing out a great quarter as they rise on the day despite a tough session. Lets talk about what might be ahead for the Energy Sector with your trading nation team. Stacy, are the options side of the market telling you anything in particular, sending a signal either way about energy . Right now, the Options Market is really suggesting that were going to likely take a breather here. Investors are more interested in protecting their gains so far. Youre up 31 since our january lows. Some of the biggest components in there, cvx, xom. Were seeing protective put buyers. Some of the other names were seeing upside callers. Overall, i think investors are protecting some of their recent gains. One point i would really add here is in the oil etfs, as we approach 50, this is where we typically see a lot of resistance, a lot of sellers entering the market. Weve seen buyers the last couple of days. Yesterday, as we approached that level, sellers came in. I think thats another contributor here as you start to see oil hitting resistance around the 50 level. Okay. Your view on the energy space generally, sir . Stacy raised a lot of great points. The easy money i think has been made. And youre looking at a couple of headwinds. The dollar obviously is the biggest one. Youve also seen lower amounts of money flows into energy etfs in the Second Quarter versus the first. Like 2 billion became less than 1 billion. And youve got headwinds from the global economy. Against that, you have still a very Strong Demand picture in the u. S. That should support oil prices here, and we like the group, but its going to be a much tougher slog in the second half versus the first. Tougher second half. Thank you very much. For more trading nation, head to our website, tradingnation. Cnbc. Com. Selfdriving cars coming soon to a road near you. So whom do Americans Trust to build them . Auto Companies Like gm or ford, or tech Companies Like apple or google . The rather surprising answer coming up. And now the latest from tradingnation. Cnbc. Com and a word from our sponsor. Every trader should know that losses are part of the process. So in an effort to reduce your risk and define your max loss, consider using static stop or trailing stop borders. This can help eliminate emotion from your Decision Making and set you on the path to consistent trading. Tokyostyle ramen noodles. When you cook with incredible ingredients. You make incredible meals. Fresh ingredients, stepbystep recipies, delivered to your door for less than nine dollars a meal. Get your first two meals free at blueapron. Com cook. Welcome back to power lunch. Im phil lebeau with an urgent warning from the u. S. Department of transportation for owners of certain models of honda and acura vehicles. These are vehicles that have defective takata airbags that still need to be replaced. 313,000 are on the road between model years 2001 to 2003. The airbags may rupture, and thats why the d. O. T. Is saying dont wait around, dont keep driving these, get them into the dealership as quickly as possible. These vehicles have previously been recalled because of the defective takata airbags. They have a higher failure rate in testing that has been done recently. Thats why the secretary of transportation in language you rarely see from the d. O. T. Saying, these vehicles are unsafe and need to be repaired immediately. This is not a get to it when you get to it. This is a get to it now and get it fixed. Well have more power lunch in just a bit. The race to build selfdriving cars is on and a study Shows Consumers are putting trust in apple and google to build the brains in them than ford and gm. Gene munster covers the tech space and dave witson covers the auto area. Good afternoon. Who has the inside track here, gene, in terms of building the brains that will drive Autonomous Vehicles . Well, theres four companies, the answer is google is probably the one with the inside track. Apple, google, obviously, tesla and a Chinese Company and theres 1. 5 million miles google driven life to date with Autonomous Cars and leads the pack. How much, dave, are the automakers collaborating, cooperating or competing with those Tech Companies for the ability to control the brain of an Autonomous Car . For now, its really its kind of been more on the collaboration side is doing things of apple car play or android to auto. Longer term, though, thats going to be a showdown so to speak and they dont get enough for what they have done. Diamler has been doing it for years and no one cared. Audi, too. As phil lebeau has reported. Who will win the standoff, dave . Thats a big question. Nobody knows. Theres a lot of angles to that question. One is do the automakers just become like foxcon and just do the actual building to ensure trust as i think phil talked about today on cnbcs website and then the brains from someone like an apple or a tesla. That remains to be seen, honestly. I think its way too early to write off the automakers in terms of ability or inability to come up with the software. Gm doing things like automation shows theyll go down that route and i think some automakers, particularly smaller ones that cant invest the capital and partner. Youll see more of that, i think. Are you a believer that its coming and coming soon, dave . Autonomous vehicles you mean . Yes. Oh yeah. This is not a fad and one thing thats interesting is this is one of the rare times you see government, the regulators, and the private sector on the same page here. The government wants this to happen, too, for safety reasons. Over 30 people die in the u. S. Alone every year and want to bring the number to zero. It takes time, though. Gene, let me ask you the question i asked dave. Who do you think is going to win this standoff . Whos going to wheres the center of power or the center of gravity going to be 15 years from now when these cars are on the road . Silicon valley, detroit or munich . Theres something huge going on here. This is the next mega tech theme in terms of automotives. I think tech wins it. This is the reason why. Traditional Automotive Companies have a vested interest in everyone owning a car. The Tech Companies see a shift. Last 100 years you would buy gas, drive your car and have an asset with you all the time. In the future, it will be electric, self driving and basically have a car as a subscription and thats how consumers and millennials you sound like youre saying that tesla wins, gene. It is a tech company. Whether its tesla or apple or google. Its the Tech Companies. The existing Automotive Industry has a much different model and the Tech Companies have the model of the future. All right. Got to leave it there. We appreciate your time. The dow rallying for the Third Straight day. Recovering almost all of the losses after the british vote to leave the European Union. More market coverage on this 214point day at 54 past the hour. Its here, but its going by fast. The opportunity of the year is back the mercedesbenz summer event. Get to your dealer today for incredible onceaseason offers, and start firing up those grilles. Lease the cla250 for 299 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. When a moment turns romantic why pause to take a pill . Or stop to find a bathroom . Cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis and a 200 savings card. 57 past the hour. Welcome back to power lunch. Lets look at the markets rallying. Now 212 for the dow at 76 ben willis, good afternoon. First half is over in two hours. Second half begins, actually, in an hour, excuse me. Second half begins. What do you expect the second half of the year to look like . More of the same or Something Different . Safe to say more of the same for american investing. Continues to be belts and braces. Old school. Look for dividend paying stocks continuing to be the beneficiary of the scared money of ten years ago by this economic experiment thats being taken place within our governments, the Central Banks will continue to drive the equity investing and any type of investing going in to the second half of the year. Youre seeing people at the helm of huge Monetary Policy with no experience whatsoever doing it, meaning janet yellen, the pboc, meaning the bank of japan, bank of england. Invest based on the idea of the people at the control of the Printing Presses and truthfully no idea what theyre doing right now. And theyre printing, right . Oh, they are printing. And continue to print and that would be that would argue in the short term that equity prices could continue to move higher. Right . I believe the market continues the move higher and even though we had a great deal of discussion about the price valuation, particularly of the dividend paying stocks. Utilities were the best performing group of the first half of the year. I dont think thats going to change and much of a leadership change. Looking for some place else to continue to add money to, i think the regional banks of the United States of america whether you do that through an etf or individual banks will continue to benefit. As Interest Rates rise, and theyll rise, i dont believe that a rate increase is off the table this year. As that happens, that will benefit the financials. Hammered recently because of the fear factor of whats going on. It turns out, i believe, that you will see Great Britain made the right decision by leaving the eu and having control of their own currenciment its a defacto devaluation all right. Got to go, ben. Got to leave it there. Thank you very much. That will do it for the first half of the year for power lunch. Lets get to closing bell. Bens still talking. Right over there. Im going to chat with him. Well get the rest of the story. The rest of the sentence. Welcome to closing bell. Im in for kelly at the New York Stock Exchange today. Welcome back from london. Oh it is great to be back. Cant wait to hear all the brexit stuff. It was crazy. Im bill