Transcripts For CNBC Power Lunch 20160705

Server while she was secretary of state. A server that had information that was classified. The Clinton Campaign responding now. Lets get straight to john harwood in the nations capital. John. Hillary clinton as you suggested is off the hook legally, but not so much politically. Now, first of all we just gotten a response from brian fallon, her press secretary, to james comey, the fbi directors statement. And he said in that statement that the Clinton Campaign is pleased that no further action will result, was recommended by the career professionals that Hillary Clinton has said it was a mistake to use a private server and wouldnt repeat it again. But theyre glad to move on. And they consider the matter resolved. But the surprise today was not that no charges were recommended by the fbi, the surprise was how strongly james comey the fbi director criticized Hillary Clinton for how she handled email. And with that in mind let me just go back to an interview i had with secretary clinton in march when i asked her about the question of how careful she had been with classified information. Would you concede that you and the people who work for you at the state department were sloppy in the way you handled no. Top secret information. No. Because lets be clear about this. There wasnt a single one of those that was marked classified, either sent or received. So that was Hillary Clinton in march. Heres fbi director comey on how careful she was today. Although we did not find clear evidence that secretary clinton or her colleagues intended to violate laws governing the handling of classified information, there is evidence that they were extremely careless in their handling of very sensitive highly classified information. Now, tyler, the significance of this is that, you know, Hillary Clinton has been running as somebody capable of governing on day one whos competent and experience as compared to donald trump whos somewhat of a loose cannon. That was not a flattering picture that he painted of how she handled classified information. Obviously shes relieved not to face the possibility of charges. Donald trump quickly came out and said it showed that the system was rigged. But the argument about how she handled that classified and secret information is not going to go away any time soon. And james comey justified republican arguments against how she did handle it. And he was very specific, john, in talking about, i believe it was 110 different or 50 some different email chains where the information when it was sent or received was in fact confidential, should not have been used on a private server. He said he went out of his way to say they may not all have been marked as such, but any reasonable individual in the secretarys position should have sensibly known that they were classified documents. Thats the question. James comey said they should have known that the information that they were handling should have been handled in a different manner. Right. And that is something that is not a strong credential for being the next commander in chief. As you heard james comey unfold his statement, he indicated at the beginning that theres the question intentional misconduct, theres also the question of gross or willful negligence. You could almost hear as he described how the information was handled, the justification for a charge of willful negligence or gross negligence, he didnt get there. He said in the end that a reasonable prosecutor wouldnt bring the case. That the elements of cases that have been brought in the past werent there. But the discussions going to go on. One final question here. People are acting as though this is all over with in terms of legal jeopardy. But as i understand it what the fbi director said today was he and on behalf of the fbi, the fbi is not recommending that the Justice Department bring charges. But it is really still up to the Justice Department, isnt it . Thats right. Loretta lynch as the attorney general who has not recused herself from the case despite that meeting on the airport tarmac with former president bill clinton, Hillary Clintons husband, she is not recused. She will have the final say, however she indicated as the furor broke out over that, she will follow the recommendations. I think we heard what james khomeicom comey thank you, john. Lelts bring in cnbc contributor larry kudlow, what do you think, larry . Dont hold your breath Loretta Lynch is going to reverse the fbi. Having said that i thought John Harwoods report is spoton in every dimension. Legally hillary is off the hook. I presume today shell be on her knees praying to her higher power in gratification for this decision. Because it will keep her campaign alive. However, as john noted, the politics here are very tricky. Shes getting killed in issues like trustworthiness, and i dont think this is going to staunch that. Maybe shell find the bottom, maybe she wont. The odd thing to me, and im not a lawyer, is when you watch jim comey, and im a big fan of jim comey, no two ways about it, but it sounded like he was making a prosecutorial tape, said were not going to make the case, a lot of people are interpreting this as gross negligence which would be a case for indictment. You know who brought that up . Rudy giuliani, he was on last hour. Yes. He said, comey worked for me and i am shocked by what he said because when i listen to what he said, to me there are absolutely grounds for prosecution. And he was very, very specific about the statute. Whoever being entrusted with or having lawful possession or information relating to National Defense through gross negligence permits the same to be removed or lost or stolen, abstracted or destroyed, bring on the next one, fails to make a prompt report of such loss shall be fined under this title or imprisoned. He said for up to ten years. He really felt like the phrases used by comey could have easily justified a prosecution, larry. Well, as i was watching it, that was my thought. I dont know how Rudy Giuliani knows the law, but it sounded like mr. Comey was making a strong prosecutorial case and then backed off. Look, to John Harwoods point which i think is extremely important, for the moment she gets a legal pass, but not necessarily a political pass. Let me add this, there is a separate investigation going on of the clinton foundation. And that investigation includes bill clinton and this whole rig ma roll about going on to the airplane last monday and then wont release email tapes for clintons hillarys top four people regarding discussions with the clinton foundation. That stuffs still out there. And that has not yet been evolved. Having said all that, let me get this said, look, Republican Party, theyre going to take whacks at hillary as they must. But, but, but, this is just my view, this election is going to be fought over the economy, wages, jobs, growth and its going to be fought over islamic jihadism and terrorism and security. And i dont think the gop should completely obsess about hillarys legal position because those are the big issues of this campaign. And they must attend to those issues. Larry, to be machiavellian about it, if youre donald trump and if youre a republican whether or not you want him to win, who do you want to run against if she were to be indicted, that would mean potentially a joe biden ticket instead. I mean, what candidate do you want to run against . You probably want to run against a weakened Hillary Clinton. Well, mcc great conspiracy minds think alike. What i think youre inferring, that in fact joe biden would have made a tougher candidate to run against donald trump. Yep. And so therefore the Republican Party might actually have some daylight here. They might see some good about. She still runs and shes damaged. People want to like their president. They like to like their president. And they are now confronting two candidates with the highest negatives going in of in my memory. And they both have reasons for people to dislike them. Joe biden, i think john harwood would say, is one of the most likable guys on the political scene. Right. I know joe biden. I really like joe biden by the way. Ive interviewed him down through the years. Ive spoken to him. Hes a wonderful human being. I want to just come back to this key point. This is a kudlow point, just me speaking, the issues in this campaign are going to be economy, jobs, wages, and theyre going to be national security, terrorism, isis. Those are going to be the big issues. And the gop cannot let up, dont lose sight, dont take your eye off those balls because if they are to win in november, thats going to win it for them. What about this you see donald trump tweeting about president obama using air force one with Hillary Clinton on the campaign and taxpayers are paying a fortune for the use of air force one on the campaign trail by president obama. Of course he refers to her as crooked hillary, a total disgrace, thats the next tweet we have. Larry, there are a lot of private planes out there all of a sudden. Weve got hillary riding on air force one, youve got president clinton whos now a former president whos clearly been made extremely wealthy by having been the former president traveling around on a private jet, were paying for Loretta Lynch to travel on a private jet. It just wreaks of the whole elitism thing that the world is so angry about right now when you look at the brexit vote, et cetera. Well, theres that. Listen, michelle, if your plane was parked next to my plane, i would go over to a visit with you and i would love to say hello as i have these many, many years. So is this a smack of elitism . I dont know particularly. Youre probably right, theres some of that in here. I think the issue of i think little low class warfare there what . Im sorry . Private jets are incredibly expensive to maintain and to run. And bill clinton is clearly very comfortable flying around the world in one. And we use it for members of the cabinet by the way under republicans and democrats, but it speaks to the whole issue. John harwood, im only jealous because mcc has never offered me a ride. I dont have one, larry. I aspire to have a private jet. Theres no more expensive private jet to operate than air force one. John harwood, could there be a worse day for president obama to be flying on air force one with Hillary Clinton and campaigning for in light of whats going on . Hes down i gather in North Carolina today. Well, you know, if youre Hillary Clinton, maybe youre glad that something can blot out the words of james comey today. But, no, its certainly an awkward situation. Well wait and see if either one of them either to the pool that gets close to them as they go in or out of the event or on the public stage itself whether they will address these or not. Id kind of be surprise firstdegree thed if they do. I think Brian Fallons statement will stand for the Clinton Campaign reaction. No doubt about it its an awkward situation especially no doubt about it one of the things james comey said is if an incumbent official had been looked into for handling information this way, they might face some sanction. So if Hillary Clinton still worked for president obama, would she be admonished, would she be fired for what comey described as her handling of the information . We dont know. But it certainly makes the meeting awkward. Let me just remind, i believe, maybe im wrong, someone correct me, there is a separate investigation going on conducted by the fbi with respect to the clinton foundation, their procurement of cash there have been reports of that about whether theres pay to play going on. Pay to play. Everybody tells me thats going on. And i still think this story is not over until that story is over. And i think that one is going to continue to cook. All right. Larry, john, thanks so much, guys. Could be a pivotal day in this election. Yeah, it is really wild. All right. This could be bigger than brexit and disastrous for the european economy and the big banks. That story is next. guy oh man, the shows pretty much over. friend wish we could start it from the beginning. jon bon jovi with directv, you can. You see, weve got the power to turn back time lets start over, lets rewind and lets go back and not quit the gym and have a chance to say goodbye to grampy tim oh, thats the power to turn back time. vo get the ultimate allincluded bundle. Call 1800directv. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Welcome back to power lunch. Im michelle carusocabrera. Stop trading for a minute. Get your hands off that keyboard. Look at a story that could turn out to be bigger than brexit when it comes to the European Union. Italian banks are in a lot of trouble, and the ramifications if the situation isnt handled well could be serious for the entire European Union. While we were all off yesterday, tyler, there was news a bank in italy heard from the ecb that they had to figure out what they were going to do with their nonperforming loans. Look at the Italian Bank Index in the last year. It is down 56 yeartodate, a huge percentage of that happening in the wake of brexit because of concerns of lower Interest Rates and the future of the European Union. The banking question very small, monte paschi happens to be the oldest in the world, down 99 , a very troubled bank. Whats at issue is the entire italian Banking System probably needs more capital. And there are new rules that went into effect january 1 that could punish bondholders and junior bondholders. And in italy many retail investors, mom and pop, hold bank bonds. Spoke with the bank of italy today, theres 29 billion worth of what you call bail inable bonds that in theory could get hurt and do you want individual bondholders in italy taking losses in the middle of this situation in the European Union. You would think, what, those are eu rules that caused me to lose money, another reason to be worried about the future of the eu. So as people worry over the italian banks, concerns are raised just over how deep this problem can run. Lets bring in brian jacobson, chief portfolio strategist with wells fargo. Good to have you here. Thank you. Great job summarizing all the issues facing the italian banks. Thank you. Im flattered. So its not so much the italian banks themselves, right . Its not like american banks have lots of exposure to them or american shareholders have a lot of exposure to them. But its this issue about whether or not youre going to see bigger issues for the European Union as a result. Do i have that right . I think that is the bigger issue here because everybodys been aware of some of the problems in the italian banking sector. But now you have the problem where matteo renzi has what he calls a plausible solution to the problem which involves recapitalizing the bank with Public Sector money. However the germans are saying nine, they dont want anything to do with it because of the new eu rules. I think this is calling a Major Political issue here where the banks are the focal point of it and people could be talking about italeave instead of brexit if they dont come to an agreement about how to capitalize these in a way matteo renzi is rolling out. You can use as an excuse brexit to say, listen, weve got a systemic problem here. Would this not be a problem if for the fact there are lots of individual italian bondholders out there that could lose a lot of money and hence hes so worried politically about votes that are coming up . Thats correct. I think that is the bigger issue here. The fact you have so many pensioners and depositors who under eu rules would effectively need to be wiped out before there could be a recapitalization. Matteo renzi wants to avoid that because theyre voters as well. Thats why this becomes a Major Political issue. And its not really painting the European Union and especially germany in the best of light when they are apparently obstructing what could be a potential solution. Now, im not a big fan of having the Public Sector stepping in to bail out the banks in this situation. I think there are alternative solutions to look at, but some of those alternative solutions might take a lot longer to play out. Like for example setting up a bad bank to securetize some of the nonperforming loans and such. If they want a big bath approach to fixing the banks seems theres going to have to be a compromise here. Got it. Brian, thanks so much. Thank you. All right. Another focus is the major decline in 10year yields here in the United States. The lowest levels since 1953. I wasnt even born then. Just by one year. Just missed by one year. Over the last decade any time the u. S. 10year has made a move of this magnitude in one month, moving lower yields that is, the markets have not responded well. Lets take a look at some specifics from our team. Dig into the sectors 56 of the time in the past decade only one major sector etf has traded positively. When that has happened, that would be the utilities etf, ticker is xlu, as for the worst performer that goes to the financials i suppose unsurprisingly. Stock specific goldman and j. P. Morgan have posted average losses greater than 7 when this happens. Verizon and cocacola narrowly traded in the green by a fraction of a percent. Lets bring in paul miller, managing director and head of Financial Institutions research at fbr capital. Paul, what do you see in the immediate future for the big u. S. Banks in light of what yields have been doing . Well, you know, year curve continues to flatten and go down, that 10year is very low, youre going to see earnings remember it has to stay here. So weve seen it hit this low before or come down in the 140s only to bounce right back up. I think whats going on right now is a big safety trade. Everybody is running to the u. S. Because of a lot of the troubles going on in europe. So thats why you see that 10year down. If the 10year continues to stay down, you will see earnings revisions as its very difficult to make money in a low flat rate yield curve environment. On the plus side though you will probably see another re if everybodys running [ overlapping speakers ] forgive me for interrupting. If everybodys running to the u. S. For safety, paul, why arent the yields even lower . Why arent they as low as for example we saw for the italian yields theyre 1. 27 and ours are 1. 3. Why arent our yields lower . I think were having trouble oh, were having trouble. So he didnt know i interrupted him. Exactly. He didnt hear me interrupt him. In the meantime were working on that we have now video of Hillary Clinton getting on air force one. President obama of course going to make his debut on the campaign trail with her in charlotte to help give her a boost. There she is. This coming in the wake of james comeys announcement, director of the fbi. If it were up to him she would not face criminal charges. There Hillary Clinton getting on air force one. All right. Were going to take a quick break. Another bad break for tesla. The automaker missing its delivery target. Stock down more than 3 on that news. What does it mean for tesla moving forward . Plus, a robotics expert weighs in on automated cars. Why she says they shouldnt be on the road just yet. The beging of the 21st century, the earth needed to find a new way to keep up with the data from over 30 billion connected devices. Just 30 billion . A bold group of researchers and computer scientists in silicon valley, had a breakthrough they called. The machine. It changed computing forever. And its been part of every new technology for the last 250 years. Everything . Everything this year, Hewlett Packard enterprise will preview the machine and accelerate the future. See star trek beyond. Freshly made in the tokyojapanese tradition, each batch is small. Special. Unique. Every bowl blurring the line between food. And art. When you cook with incredible ingredients. You make incredible meals. Fresh ingredients. Stepbysteprecipes. Delivered to your door. Get your first two meals free blueapron. Com cook. Welcome back to power lunch. Im michelle carusocabrera. Another bad break for tesla. The automaker missing its delivery targets now. Stock is down more than 3 on that news. Just about. Phil lebeau is in chicago with the latest. Phil. Michelle, Second Straight Quarter that tesla has come in with deliveries below expectations. Take a look at the numbers for the Second Quarter. Most on wall street were expecting deliveries of 17,000, maybe 17,300. They delivered 14,370, about twothirds being the model s. Again, this puts them behind pace to meet the full year forecast provided you dont expect them to make full year estimates in terms of 80,000 to 90,000 vehicles being delivered this year. Tesla by the way points out were going to be able to increase deliveries in the second half of this year, and most of that is due to the fact that were going to have model s production ramping up dramatically. Analysts are out with notes today saying we continue to see them being ham strung because of the model x in particular. Deutsche bank out with a note this is not the first time tesla has missed a target. Tesla has admitted to overreaching on the complex design of model x and they are paying the price. Their Production Target for the Third Quarter 2,200 vehicles per week and increasing it to 2,400 vehicles per week in the fourth quarter. Guys, if they can hit those targets, they should be able to make 50,000 vehicles and then meet the full year target of 80,000 by the end of the year. All right, phil, thanks very much. Stick around as i bring in mary cummings, professor and director of Duke Universitys robotics program. Lets chat about teslas first fatal crash involving its autopilot technology. This crash took place in may 7th in florida. Mary, welcome. First off, good to have you here. You say i do not think we should be deploying systems on the road with known deadly flaws in the radar systems. You think the technology, and this was not strictly autopilot, this was Driver Assist, but you think these systems arent ready for primetime. Thats correct. I testified three months ago in front of the Senate Commerce committee that these accidents were inevitable because the technology really has not been tested across the wide span of people and road conditions. For example, this is exactly one of those conditions where the radar and the camera vision system just didnt work. And theres phil driving down the road in a prior example of a tesla. I guess, phil, on autopilot. Right. And we pointed out then and we have pointed out and marys well aware, tesla makes it clear to people when they sign up for this option that they need to stay alert. They need to be ready to be engaged behind the wheel. But, mary, this brings up the broader question and we discussed it at the time i did that demonstration not just with tesla but with all vehicles, is there a concern that were sending the wrong message to drivers that they phil say i can become disengaged. Mary, can i interrupt for just a moment. We have lots of news involving the president ial campaign and i want to go to eamon javers for more of it. What were looking at right now is the president at Andrews Air Force base, hes just flown on marine one from the white house to Andrews Air Force base. Hes getting on Board Air Force one there as you see the salute in the Live Television picture. Hillary clinton already on board that aircraft. She did not go up those same president ial stairs that president obama is going up now. But Hillary Clinton is accompanying mr. Obama to a Campaign Rally in charlotte, North Carolina later today. And obviously there have been some criticisms now from republicans who say that Hillary Clinton is getting a benefit here from the taxpayers because shell be flying on air force one and getting that free ride down to who pays, eamon, when the president takes that aircraft which costs a couple hundred thousands dollars to operate an hour, clearly a president ial trip, who pays for that. Theres a long established formula for that. For political trips typically the president ial campaign or the Democratic National committee in the case of a democratic president would pick up the tab for the equivalent of air fare, commercial air fare to that destination presumably. Well have to wait and see exactly how its all parsed out, but presumably in this case you could see a situation where both Hillary Clinton and president obama himself reimbursed the air force for the cost of travel on air force one for the political portion of this trip. That said the taxpayers end up eating an enormous amount of the cost whenever air force one goes anywhere, even for political events because it costs a whole lot more to move air force one and to move a president of the United States anywhere in the country or in the world than just the cost of air fare even first class air fare for those travelers like you and i. Okay. So lets underline that. In theory the customary practice is she would reimburse for first class air fare. And youre saying in theory because this is purely political on the president s part as well he could reimburse for first class air fare as well. However, that doesnt even scratch the surface of how much this really costs. Right. I mean, look, every time you move the president ive flown on air force one just a couple of times, but its an enormous undertaking. There are other aircraft that go along with air force one. There are all the air force officers who you can see there in the screen shot who are on duty. Theres the secret Service Component to this. They have to scope out the location where theyre going, the arrival, departure, all the travel in between, the hotels if theyre staying overnight, all of that costs money as well whenever a president goes anywhere, not all of those costs are necessarily picked up by the Democratic National committee or the president ial campaigns. And this is true in both republican and democratic presidencies. The simple truth is that air force one is a big Home Court Advantage for any incumbent president. And Hillary Clinton is getting a little dash of that today, whether or not she ends up reimbursing for the cost of her travel. Unless it feeds into the whole criticism, eamon, of the political class, et cetera, especially coming on the day when she did not face charges, or comey says shes not going to face charges even though he felt that the state department was really negligent in some ways. It could feed into the whole issue that she faces at this point. Oh, absolutely. And the Political Drama of today is wlahats so fascinating. You saw fbi director comey in the political world he hadnt told anyone until the moment he revealed it to all of us on camera today. Those were the stakes this morning as both the president and Hillary Clinton knew she would be riding on air force one and going to this Campaign Event just this afternoon just a few hours after that event. Imagine how this would feel if we saw a different decision by the fbi director this morning. It would lend a totally different tenor to todays events. There was a lot riding on that statement by director comey this morning. And now as you say were seeing this imagery of air force one. Obviously Hillary Clinton as a former first lady as somebody whos already spent quite a bit of time on air force one over the years, and she knows the political value of those pictures as well sort of establishing herself as a credible and president ial type candidate. So theres enormous amount of value here for the Clinton Campaign. All right, eamon, well be following it and you too and john harwood as well for much of the afternoon. Lets bring back mary cummings, professor and director of Duke Universitys Robotics Department down there. And phil lebeau. Im sorry to have to interrupt your question there, phil, but if you could restate it for mary, please do. Sure. And ill make it much quicker this time. Mary, is there a false sense of security for people who have autopilot, or any of these Driver Assist systems that they can take their hands off the wheel and it will always know what to do . Absolutely. One of the problems we know with these systems and weve known this for a long time because of aviation accidents that as soon as planes or cars go on autopilot, even though youre supposed to be paying attention, people immediately checkout. They dont even have to have a cell phone, which most of us do, to divert their attention. People will do something called mind wandering and just be in their own heads and not paying attention at all. And so situations like autopilot, particularly on the highway are almost a for sure case where humans are not going to be paying attention. And if anything goes wrong, then this kind of accident is going to happen. Professor, i know that phil has said repeatedly that tesla warns the driver that theyve got to pay attention, keep their hands on the wheel, look straight ahead, et cetera. But thats not the way selfdriving cars are sold. In the mind share of the american public, theres a time coming where we will not have to pay attention. Thats the whole point. If i still have to pay attention, i dont get to read or do other things while im in that car. Are you saying thats never going to happen, that should never happen . Or its just not ready yet . No, i am absolutely a huge fan of this technology. I run a robotics center. This is what we want to happen. I have an 8yearold, my personal goal is that in eight years that this technology truly is there, that it is completely hands and eyes free. And we will get there. Unfortunately, were in this very tenuous place right now where the cars are only partially capable and there are problems in the technology. And its implementation. And if we are not going to be able to get that correct, then we probably shouldnt be using these kinds of modes of operation. Mary, one of the things ive noticed, and with all due respect to all of the people including phil who have ridden in these cars, almost every piece of footage that ive seen has shown these cars operating in pristine conditions. It is bright, it is sunny, it is warm, it isnt raining, it isnt foggy and lord knows it isnt snowing. Are these cars tested out enough for bad weather conditions . Absolutely not. This is one of the points i made to the Senate Commerce committee that unless we do significantly more testing and evaluation, we wont really know how these cars are going to operate in those conditions. I personally after spending ten years in boston feel like thats the ultimate graduation test. If you can spend the winter in boston and navigate those roads, then youll do okay. As phil knows in chicago the very same. Mary, thank you very much. Ditto, same for chicago. I hope we can call on you again. Absolutely. Thanks for having me. And phil, thank you as well. Final gold trades crossing for the day. Lets show you whats going on there. Precious metal higher by 18. 40, gain of more than 1 has a very strong twoday move here 13. 57. Rest of the metals complex, about a mixed nearly 2 , copper lower by 1. 5 or 3 cents, and silver is higher by nearly 2 . And there goes air force one. President obama on board, former secretary of state Hillary Clinton on board as well off to a Campaign Event. President obama making his debut on the campaign trail for Hillary Clinton. Hi everyone. Im sue herera. Heres your cnbc news update for this hour. Fbi director james comey says his agency will not recommend criminal charges in its investigation into Hillary Clintons use of a private email server while secretary of state. In this case, given the importance of the matter i think unusual transparency is in order. Although there is evidence of potential violations of the statutes regarding the handling of classified information, our judgment is that no reasonable prosecutor would bring such a case. The cockpit voice recorder of the crashed egyptair flight indicate an attempt to put out a fire onboard the jet before it plunged into the mediterranean sea. The recordings are in line with data extracted on the planes other devices. Saudi arabias crown prince and antiterror czar visiting the wounded from the terror attacks that killed at least four people on monday. Saudi television showing security personnel searching through the debris of burnt out cars following the explosion near the mosque of the prophet. And u. P. S. Introducing a new delivery plan, instead of driving to your home, it will deliver your package to a locker at a nearby convenience store. Youll scan one of those, we missed you slips, and the door containing your package will open up. Competition heating up from amazon. All right, thats the cnbc news update this hour. Back to you, ty. Any minute now. All right. Were going to fix tylers mi o microphone there and in the meantime run you through the markets. Dow jones industrial average is in negative territory along with other major averages. Dow off by 152 points, nasdaq lower by 62. Tyler, hows the mike . Now i think you can hear me. Thank you all very much. Earnings season less than a week away, so will solid numbers boost stocks in the second half . Joining us rich weiss, senior Portfolio Manager at American Century investments and bob phillips, managing investor at spectrum management. Bob, start with you. You see higher highs for the s p later this summer, why . Yeah, tyler, we think as the rest of the year progresses we do expect earnings to continue to come in better. I think the markets at a very high multiple, and i dont think well have multiple expansion. But if you look at analyst estimates, theyre projects 14 Earnings Growth this year. Thats probably too optimistic, but i can see high Single Digits and that should push the market higher. So push the market to record highs, but no breakaway here between now and year end. No. Rich, what do you see as we turn the corner into the second half of the year . Unfortunately i would have to disagree. We see more of the same from last quarter, which is earnings retrenchment virtually across the board. More importantly top line negative growth. So sales are down, earnings are down, we dont see any reason to believe that the Second Quarter is going to be any better than the first quarter. Possibly for Energy Stocks given the way oil prices have gone recently. But certainly in the Financial Sector some of the growthier sectors, were going to see some more negative surprises this quarter which means lower stock prices later this year. So, bob, why do you think earnings are going to help here . I mean you guys couldnt disagree more basically. Sure. Yeah. Well, we think earnings for Material Companies should be better. I do think that telecoms and financials are going to be negative, but i think the other sectors of the market are going to pick up. Utilities, so some of the defensive sectors should drive to a higher overall s p 500 number. So, rich, if i buy your thesis here that earnings arent going to light anybody up here, how should i reposition my portfolio for what you seem to be suggesting is a pretty defensive time for the next few months . Yeah. Fortunately the defensive sectors are the play here, the higher dividend yields, but the late cycle defensive sectors, utilities, telecommunications, theyre leaders pretty much all year and likely to continue to lead given where we are economical economically. Gdp growth 1. 5 to 2 at best this year. And still waning. Major economists continue to bring their expectations down. And so theres really nowhere else to go in the stock market but the defensive sector. So Equity Income funds are the place to be now. All right. Rich, thank you very much. Bob, we appreciate it. We got lots of breaking news. And for it were going to go now to the phone with wilfred frost. Hey, tyler, we have the results of the first round of voting in the leadership election to be the next conservative party leader and with it prime minister, resounding result for theresa may, shes the favorite. Majority despite there being five candidates, strong second place from leave campaigner andrea leadsom, liam fox came fifth, hes now eliminated. He was also a leave campaigner. Well see where his 16 votes go next. Looks like may is certain to make the final two now. The race is onto become second. The next vote will be on thursday. And of course the members of parliament of which there are 330 continue to whittle it down to just two candidates. At that point it goes to a vote of the Wider Conservative Party membership of which there are 140,000 voters. The final decision will be the 9th of september, but strong showing by the favorite theresa may just now. All right, will, thank you very much. Wilfred frost reporting from london mpkts the yield on the 10year hitting record lows and Rick Santelli is tracking all the action at the cme. Hi, tyler. We are definitely watching sovereign fixed income history, no doubt about it. Down 8 basis points. Alltime new closes. Of course we want to see exactly where we close. Intraday, you know, its important. We want to pay attention. Look at a oneweek of tens, look at a oneweek of bunds, yeah, might have to squint but thats minus 18 basis points on that yield. 10s minus 2s now the flattest its been since thanksgiving of 2007, hovering just above 80 basis points. And if we look at the pound versus the dollar, everybody is, of course we have to go back quite a ways. And the more you look at it since the 15th i want you to look at that pattern, because as the pound is deteriorating, its not unusual to see the stock market of a depreciating currency do better. And, boy, thats exactly it. The same Pivotal Point on the 27th of course which is when we came back after the brexit vote. You see how the ftses been flying. Well continue to monitor that, but of course gravitys going to continue to pull these yields down especially with all the bazooka promises coming from the ecb. Great point, rick. Japanese work so hard to weaken the yen. Toxic green algae infesting beaches in florida. Officials calling it unprecedented. How its impacting Business Owners, particularly tourism right now. Gross. Stocks hitting session lows. Biggest dow winners at this hour, the jnj, p g, verizon, cocacola all in positive territory. Power lunch back in two minutes. Minutes. Fireworks lit up the sky this weekend as part of the fourth of july festivitiefestiv not all exhibitions went smoothly. At least six people in mt. Vernon, kentucky, were rushed to the hospital with minor injuries when fireworks accidentally launched into the crowd. Oh. Operators say the force from one of the fireworks caused oh, caused others to fall over and misfire as well. I was once hit by a firework. Did it hurt . It must have. Third degree burns on my back. I believe it. You saw what happened to the guy in central park this weekend, right . Yeah. He lost a foot. Yeah. Little helicopter things. Anyhow, floridas governor rick scott declaring a state of emergency in four florida counties. This announcement coming after a toxic algae bloom spread to the beaches and waterways in the southern part of that state. Looks like guacamole on top of the water there. Lets bring in stephen vitale, owner and operator of the old colorado inn in stewart, florida, one of the communities affected by the algae bloom. Steve, welcome, good to have you with us. How bad is it . Hi, tyler, thank you for having me. Well, this is the worst ive ever seen it. Ive lived in the area for about 25 years. I opened the old colorado inn about five years ago. Its an Historic Boutique Hotel that was originally built in 1914. And the rivers always had issues because this issue with the release of the water from lake okeechobee into the st. Lucie canal into the estuary has been going on for decades. Ive noticed the Water Quality has had its problems but now definitely the canary in the coal mine with the algae, and its time for action. We dont need anymore finger pointing. And we dont need anymore words. We need action by our leaders. Are you sensing action . The governor has declared a state of emergency, has he come by, have you heard from him, has anybody from the state reached out to you or other Business Owners . Nobody has reached out to me. It hasnt impacted us so badly yet because this is only occ occurred within the past few weeks, but i am worried about the future. I do have to say im disappointed that Governor Scott has not come to ground zero and seen the devastation. I hope he will come and assess the damage and do what a leader does so he can make the decisions to get this problem fixed. So this is traceable back to the release of water from lake okeechobee, which is controlled by i guess the army corps of engineers. That water then flows into canals and changes the sa linty, as i understand it, of the waters on coastal areas and inland estuaries and so forth that gives rise to this. This is something that happens a lot, right . Practically every year, but this is a more extreme event of it . Exactly. Because of the extreme rainfall in the winter theyve had to release more water than they usually do. But this is not only affecting our coast, its also affecting san abel, were connected to the indian river lagoon, which is the most biodiverse estuary in all of the United States. So this really is a national disgrace. Its not only this area, its also effecting the everglades steve, im confused. You said you werent being effected much. If im going to your hotel, it doesnt look like im going swimming or anything like that. The reason i say were not effected so much yet is because people are coming downtown where my hotel is located to experience the old charm we have to offer. We were just designated by coastal Living Magazine as the happiest seaside town in america. And last year we were designated by the Smithsonian Magazine as one of the top towns in america to visit. So people like to come to our town to experience the old florida charm. All right. This historic museums, theres a lot of other things to do besides going to the beach. But dont get me wrong, water is the life blood of this area. And its negatively effecting tourism which is the largest industry in florida. Got it. And also real estate. Im also a real Estate Attorney and its negatively impacting real estate also. I bet. Steve, thanks so much. Steve vitale. Thank you. All right. Stocks hitting lows. We discuss right after this. Igh. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of at t, and security that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Stephen king, the master of suspense and the macabre. I enjoy keeping people up at night. My Analysis Shows your stories are actually about human connection, even love. Great storytelling needs drama and empathy. My cognitive apis can help any business Better Connect with its audience. You should try writing a book. Find a remote hotel. Bring the family. I do not think that is a good idea. One month to go until the summer olympics in rio. What are National Teams from all over the world doing to protect their athletes from the zika threat . Still ahead here on power lunch, dont move. Lunch, don. Welcome back to power lunch. Im melissa lee. Lets take a check on the markets because were just off session lows. S p 500 just about a point off the session lows down 21 right now or 1 percentage point. The Dow Jones Industrial average losing 153 points today. The nasdaq composite down 1. 25 . We should note oil is also close to session lows down by more than 5 ahead of the close, ty. All right. And more now on the markets in a moment, but first the fbi has completed its investigation into Hillary Clintons emails, the use of that private server. And fbi director james comey recommending the department of justice not charge her with a crime. John harwood joins us now on this day that the Campaign Just got curiouser. John. Got a lot curiouser, tyler. Look, Hillary Clinton avoided the worst. Fbi director comey recommended against the filing of criminal charges against her, but he was highly critical of how she had handled Sensitive Information as secretary of state. This was something i discussed with secretary clinton in march and asked her even if there werent going to be criminal charges had she been careful. Take a listen. Would you concede that you and the people who work for you at the state department were sloppy in the way you handled no. Top secret information . No. Because lets be clear about this. There wasnt a single one of those that was marked classified, either sent or received. Today, fbi director comey directly contradicted that statement from secretary clinton. Heres how he characterized her handling of Sensitive Information. Although we did not find clear evidence that secretary clinton or her colleagues intended to violate laws governing the handling of classified information, there is evidence that they were extremely careless in their handling of very sensitive, highly classified information. So the judgment there is not intentionally careless, but extremely careless nonetheless. This is something thats going to be an element of the Republican Campaign throughout until november. Youve seen criticism from donald trump today saying that the comey announcement showed the system was rigged. The republican National Committee came out and said it showed she had not been transparent and not shown solid judgment as secretary of state. All of that discussion is going to be continued once we hear from the department of justice. Keep in mind Loretta Lynch, the attorney general, said a few days ago that she was going to accept the recommendation of career professionals. That includes fbi director comey. And there will be prosecutors at the Justice Department who will also make recommendations. Dont expect them to go against what james comey said today, but this is not a great day for Hillary Clinton by any stretch given the vehements of the criticism she got from james comey. John, i thought there were a couple interesting points here. He pointed out there were several email chains where the stuff in the emails were sort of confidential information, had varying degrees of sensitivity. He said that some may not have been marked as such, so mrs. Clinton was careful in her words saying none of them were marked as top secret, or whatever she said there. That could be sort of her way of saying i didnt know, but then he went onto say she should have known, and people around her should have known. The other thing i thought was very interesting was when he said they did not uncover evidence that the server had been compromised or that any of the mobile devices that she had used, multiple mobile devices that she had used had been compromised but that she was using those mobile devices while in countries that have interests to ours. Thats right. Although he also said that its possible that compromises of those systems might not be visible to the fbi, even if they went looking for them as they did. But he clearly made the distinction between intent and the actual practice that Hillary Clinton followed. And on your point about classification, youre right. What he indicated was that given the knowledge of officials of the nature of the information theyre discussing, even if its not marked classified, if it contains information that should be known to the people transmitting the information that it was classified, that calls for a higher level of discretion. All right, john. Thank you very much. John harwood covering the story today. All right. Lets bring in excuse me, former u. S. Attorney district of columbia. Thank you for joining us, sir. Im assuming youve heard this whole conversation. Listen, we had Rudy Giuliani on last hour and he said, listen, comey worked for me and im shocked he didnt file charges against Hillary Clinton. What do you think . Well, i think the News Conference that the director of the fbi gave can only be described as an exercise in cognitive dissidence. He spent 15 minutes describing major violations of federal espionage laws, giving the reasons that the statutes were violated, criticizing what he called extremely careless behavior which actually exceeds the standard in the statute of gross negligence. And then at the end of it all he says no reasonable prosecutor would bring charges. Well, let me just say during my five years as u. S. Attorney i consider myself to be a reasonable prosecutor. And i would have brought charges based on these facts. And i think that mr. Comeys conclusion can be described as nothing but bizarre. Absolutely bizarre. It is beyond my belief and then you couple that with the fact that he didnt take any questions on the day that the president of the United States is going to be on a plane with Hillary Clinton. And for him to say that nothing that he did was coordinated with the white house is absolute it is absolutely clear that the white house knew in advance that no charges were going to be brought. No reasonable white house chief of staff would have put the president on a plane with someone he knew the fbi was going to announce they were going to recommend charges. So james comey said it was clear through the investigation that it wasnt their intention to do anything wrong. Yes, it was careless, but not their intention. Well, number one, first of all, intention is not required to violate the statute. Which he himself pointed out. Its called gross negligence. Second of all, i absolutely disagree with his conclusion that there was no intention. How many federal Civil Servants would set up a number of private servers to handle classified information at all their government work and not be charged with a crime . And the answer is every one of them would be charged with a crime. I say one more time, i think this performance by the fbi director was one of the most bizarre performances by a public official that i have ever seen. And i will tell you this, the fact that he wouldnt take questions shows that he was almost embarrassed by his own conclusion. So, joe, do you think it is possible, in any way possible that one of those reasonable minded prosecutors with whom you used to work at the Justice Department would see this differently and decide to go against the recommendations of the fbi and bring those charges . Or do you think that its all just its all just stacked . In the old days i might have felt that way, but in the new world rksz the new legal order where night is day, day is night, morning is evening, this nonsense that we watched today, and i really mean it, this was nonsense today. You know what i thought as i watched it . I said to myself, now, why would james comey do this . Maybe he wants to be on the Supreme Court when Hillary Clinton becomes president of the United States. I sat there and i said, you know what, im going to reject that notion because it would make me feel even worse than i already do about Law Enforcement today. I tell you something, i have a top secret code word clearance. And i go through somersaults to make sure everything i do is consistent with the law. What the fbi director did today was an absolute disgrace and an embarrassment to everybody who works with classified information and handles it. For him to say that she acted extremely carelessly along with all of her staff and then say theres not enough evidence is absolute nonsense. I think you speak for a lot of people who were watching director comey today. I should point out is a republican, was initially appointed by george w. Bush as a federal prosecutor. But as we watch, as larry kudlow said last hour, as he was laying out the case i found myself thinking, man, hes going to charge her. Hes going to recommend charges be filed. And heres whats so bizarre about it. There is a statute available in which you can charge a misdemeanor. This didnt have to be a felony. You could have charged her and all of her staff with misdemeanors. She still would have been eligible to run for president. The rule of law would have been sustained. And yet he couldnt bring himself to do it. Now, if he wants to say that in his opinion it didnt violate the law. Thats fine. Thats not what he said. He said no reasonable prosecutor would bring charges. Well, i say to the fbi director that is tripe. That is stomach lining of animals. That is tripe. That is absolute legal tripe. What do you make of we havent spoken to you since the situation with the private plane and Loretta Lynch and bill clinton. What do you make of that . How does that play into this . Lets ask ourselves a couple of questions about that little diddy. The former president of the United States accidentally is on the tarmac in arizona with the current attorney general who is not only investigating his wife but is investigating him. And they have a chat on her plane, not his plane, her plane, for a half an hour. And we are to believe nothing about this case was discussed. We are to suspend belief. Now, let me tell you what a reasonable prosecutor would do at that meeting, if i may quote mr. Comey, you subpoena both of those people and get them in the grand jury, because thats the only way youre ever going to get the truth. I must tell you. And then to think that comey does this after that meeting and the president gets on a plane with Hillary Clinton, you do not have to be a conspiracy theorist to think that this was fixed. This is disgraceful. I dont know how comey is going to get up tomorrow morning. Well, tell us how you really feel . Let me just tell you something. And ill tell you why this is important. If you believe as a current or former federal Law Enforcement officer who all have clearances that that stuff is important, that it means something how you handle classified information, and you listen to that tripe that came out of his mouth today, you are embarrassed as a current and former federal Law Enforcement officer. You are embarrassed. Mr. Digenova, we appreciate your frankness, forthrightness. Hope to be able to call on you again soon. Former federal prosecutor. John harwood now with more. John. Sorry, tyler, did you just come to me . Youre on, john. Breaking news. Sorry. Thats quite all right. I just wanted to bring to you the news from the gaggle thats taking place aBoard Air Force one with the White House Press secretary saying that the white house was not going to comment today on the conclusions announced by james comey, that theyve tried to stay out of this process. Theres still a step to be taken by the Justice Department in acting upon the recommendations from james comey. The president s going to come out and make a strong case of why Hillary Clinton should succeed him, but not going to talk about the fbi investigation today. John harwood, we just had a lawyer on who thinks theres just no way that the white house didnt know that there werent going to be charges. Theres no way that if youre in charge of president obamas schedule youre going to let him get on a plane on the very day that the fbi directors going to make an announcement and not know what the answer is before you do that. Look, i take james comey at his word that he did not coordinate with any other officials within the administration. President obamas been saying for a long time that he thought Hillary Clinton did not compromise national security. He wasnt he didnt really comment to my memory about the legal saspects of the case, but its pretty clear the white house has not expected criminal charges. I would just be very surprised if james comey was not speaking honestly today when he said he had not coordinated this with anybody else. John harwood, all right. Thanks very much. Take a quick break. Well be right back, right . I think thats what well do. Why not . Why not . Welcome back to power lunch. Stocks hitting session lows at this hour. The markets have had a huge rally off their postbrexit lows, but now as you can see we have some weakness today. Some stocks and sectors have been left behind. Which ones . Dominic chu has those names. Michelle, its a historic day overall for the markets. I mean historic because we saw a record low in tenyear u. S. Treasury yields. Sovereign debt in the u. S. 1. 63 for 10year treasury bonds. Thats a huge deal. Look at sectors perform the best and worst, all ten sectors have managed to post gains since the brexit bottoms back on june 27th. Health care and industrials now have taken top spot both up by about 5 . Earlier today it was energy and financials that had led the way higher. But now a little change of leadership there. However, utilities and materials, utilities an interesting one only because theyre Interest Rate sensitive. As Interest Rates drop, these types of stocks tend to get a bit. Youre seeing that among trading today. Some of the individual names underperformed so far in the s p 500, take a look at zion bankcorp down about a percent here since post brexit lows, john deere down 2 . And of course soft Commodity Prices overall. Darden restaurants and Southwestern Energy both down 4 and 7 . And i want to call your attention one more time to whats happening with some of the big european banks. Deutsche bank in particular because we are still hovering right near historic lows for Deutsche Bank as well. So european banks a huge focus. Weve talked a lot today about the italian banks and how theyve been weakening. Deutsche bank one of the big proxies if you will specifically on the continent itself. Got it, dot cm, thanks so mu. Goldman sachs down about 20 , will the stock come back in the second half . Jeff hart has a buy rating on goldman. Going to 1. 90 from where it stands right now 1. 44. Good to have you here. Whats goldmans problem in the first half of the year . Is it going to get solved in the second half . For starters this is one of the unique times where i think Goldman Sachs is going to be unhappy about being ranked number one as they are a lot of their league tables. But i think what were seeing here is as much a financials problem as a Goldman Sachs problem. I mean, you know, three of the five worst performers in the dow are financials. Its not so much a reflection on goldman. I think specifically for goldman were seeing an overreaction specifically is kind of a nearterm, right . The brexit and macro uncertainty that comes along with that. Were looking at gdp estimates globally going down by 50 basis points. Not a recession. When you look at things like Capital Markets activity, m a in the uk is already down 70 yeartodate. The rest of the markets down 25 , 30 . So you could argue the uk is already kind of adjusted there. So time will tell, but i think the i dont hear anything good yet. I just hear its been really bad and it cant get much worse than that. All those things you talk about were well aware, is that going to turn around in terms of their ability to have a Business Model that will generate profitabil y profitability . Let me work my way to that. Part of the overreaction, and we see the market do this a lot historically is when things get a little volatile and activity levels slow down, it kind of implies thats the new steady state and thats where were going to be. Look back at 2008. Really bad year fundamentally, big event, the stocks really underperformed. 2009 was a record earnings year. So i think to look at the uncertainty were facing today and say a year out goldmans still going to be struggling is historically the wrong conclusion. I remember those record earnings, but they had been diluted, the shareholder had been diluted so much that even if the Overall Institution had made a ton of money is the actual individual shareholder back to hold from pre2009 . For Goldman Sachs i dont think you quite saw the dilution. For some of the big banks you did, but didnt see Goldman Sachs going out issuing a lot of common stock or preferred. They kind of weathered there was some but they weathered their way through it fairly well. The point being if youre looking at Goldman Sachs today and saying tough first quarter, tough Second Quarter, its over, this stock should be trading at a 20 discount to book value, which by the way historically youve always done well buying goldman south of book value. You never know the timing. It may be next quarter versus next year, but youve always done well with that. I think globalization and goldmans leadership position in Capital Markets is through would be a mistake. I think at a 20 discount to tangible book value this is a good time to be stepping in to an Industry Leader in a growth segment. Jeff, good to have you. Jeff harte, sandler oneil. Thank you. Now lets take a closer look at nike, which is the third worst performing dow stock yeartodate. Will the olympics in rio help the stock rebound in the second half . Susan anderson, senior retail and apparel analyst has a market perform rating on mnike 63 prie target. Susan, great to have you with us. Historically has nike seen any sort of olympic bounce . I would imagine that if it has we would see it by now. Yes, historically the olympics have helped out because typically you do have a lot of innovation coming out of the olympics, which typically tends to drive sales. However, i would note this time around it seems like there is a lot more competition versus historically. You have under armour coming up, particularly in the international markets. You have adidas really getting its game back on. It will be interesting if they can reaccelerate that growth in the back half of this year. Is nike actually losing share to these guys . Yes, so the most recent basketball data share has shown nike has started to lose market share, but its tough to keep when you have 90 market share i dont think its surprise, but we are seeing adidas regain share and under armour with curry also regaining share as well. What do they do at this point . Do you see discounting and promotional activity . So thats the concern. We have seen slowing growth over the past few quarters. North american futures went from 14 to 10 this last quarter 6 and actual growth in north america this last quarter was only flat. Its hard to believe it could reaccelerate to the high Single Digits theyre expecting in the back half of this year, but its possible with several of these catalysts coming. So but you did say that the catalysts would have been present already. We would have seen the stock react. So at this point if were going to writeoff those catalysts like the olympics, like the championship in soccer or copa america, then what is there left towards the back end of the year . Well, we do have some more innovation thats not out yet coming in the back half of this year for the olympics. We havent seen that hit yet. But with inventory still high, particularly in north america, the need to clear through that and the discount channels such as outlets or third parties, it could take away from full price sell. So it may be difficult even with some new products and new innovation coming out to really jump start that north american sales again. All right, susan, thanks a lot for joining us. Appreciate it. Susan anderson with fbr. Oil is down 5 today. Whats behind that big drop . Plus, what could be a big opportunity in housing right now . Stay with us. Welcome back to power lunch. The yield on the 10year note dipping to 1. 36 . Now holding onto 1. 37. The lowest level since 1953. So is opportunity knocking at your door . Mortgage rates havent yet hit record lows, but they could. Diana olick has the story. Diana. Well, melissa, if the 10year, which Mortgage Rates loosely follow is at that 60year low, why havent we hit that record low Mortgage Rate of 2012 . Well, simple, all those new regulations to safeguard borrowers that weve been talking about for the past few years, they make lending more expensive. And banks and nonbanks alike bake that into your rate. That said, take a look at the direction of the popular 30year fixed heading down now at 3. 37 , compare that to just over 4 where it was a year ago. That according to mortgage news daily. Will it go lower . Well only if the yield stays lower for more than just a few days. Lenders do not like all this volatility. And it costs them to move rates around, especially lower because they can lose all those locks. So if youre more than 50 basis points, or half a percentage point higher than the current rate, yeah, you might probably consider a refi. And the expectation is that millions of borrowers will. Dont forget the Closing Costs though. The more the lender is paying, the less of a rate drop you need. Now, researchers at the urban institute said we could see a refi boom as big as 2012 when rates hit rock bottom and 25 million borrowers headed back to their lenders. Thats Good Business for banks, but not so much for investors who own the mortgagebacked bonds. All those prepayments or refis means they get lots of cash back, but they get it in a lower Interest Rate environment. And nobody wants that. For more details on that part its online realtycheck. Cnbc. Com. Back to you. Diana, great story. Thank you. A big drop in oil as we head into the close. Right now take a check, wti trading lower by almost 5 . So its off the session lows. Well get you live to the nymex for the closing trades coming up. Ng up. Americans are buying more and more of everything online. And so many businesses rely on the United States Postal Service to get it there. Because when you ship with us, your business becomes our business. Thats why we make more ecommerce deliveries to homes than anyone else in the country. The United States Postal Service. Priority you welcome back to power lunch. Fbi director comeys comments on the Hillary Clinton email scandal, we talked about them with Rudy Giuliani, former mayor of new york city, two hours ago on the phone. Mr. Mayor, thanks again for rejoining us. You want to clarify because i asked you specifically whether director comey chose the words extremely careless versus grossly negligent for a reason. You had said that he actually did use the word negligent. And you wanted to come on and clarify. Yes. I did. He did. He used the word negligent in the introduction to his statements. But then in his conclusions he used the word specifically when i reread it, extremely careless. Does that make a difference . No difference. Gross negligence is the first definition in blacks law dictionary is extreme carelessness. Gross negligence included words extreme carelessness. Carelessness equals negligence. Extreme carelessness equals gross negligence, under the law. He knows that. And there is a clear violation of United States code section 793 doesnt require intent, it requires gross negligence. Extreme carelessness is negligence. So to underline, sir, when you were on earlier you came to the conclusion you mentioned that james comey worked for you and that you were shocked by what he said today, right . [ technical difficulties ] go through much greater detail, but that would be too hard for people to understand. [ inaudible ] we are having trouble with the signal. Sounds like the mayor may be on an elevator. Were going to need you to call back in, sir. But i think we got the thrust of what he was saying, that mr. Comey did not allege gross negligence on the part of former secretary, he did use the phrase extremely careless in her handling of that information. And the mayor says theres functionally no difference. Lets bring in former doj official james malendres, he led some of the Justice Departments most high profile and complex matters including prosecution of former cia director David Petraeus over the mishandling of classified information, a charge that turned out to be a misdemeanor to which he pled guilty was served two years probation and paid a large i believe 100,000 fine. Welcome. Good to have you with us. I assume youve heard what mayor Rudy Giuliani was saying there, if you heard mr. Joseph digenova 15 minutes or so ago he basically said this decision is a disgrace. Did mr. Comey get it right . Yes, thank you for having me today. My reaction is that based on both what has been reported in the Public Record as well as what director comey laid out during his remarks today that he did make the correct decision. Let me take a step back and say, you know, the Statement Today was extraordinary in that an fbi director identified not just investigative steps and detailed investigative steps that were undertaken but findings and recommendations of the department of justice and that obviously is driven by the fact that we are at the height of president ial politics. Having said that, and it is true this was an unusual Statement Today, based on my experience and my reading of his remarks and whats in the Public Record, i think that the conclusion was the right one. You base that on central to your argument is the question of intent here . Am i understanding you correctly . Thats right. Why does intent matter . Thats exactly right. In mishandling of classified information cases, whether you are looking at violations of title 18 United States code, section 793, or the misdemeanor charge title 18 United States code section 1924, the most difficult element to prove is always intent. That based on what mr. Comey said their investigation did not uncover any indication of willfulness. It is true title 18 section 793 includes a gross negligence provision. That is 793 subsection f. However, it has been exceedingly rare, in fact i cannot think of a single gross negligence prosecution that the department has brought in these matters based on the publicly reported cas cases, the evidence that is required to go forward has always been willfulness despite the fact that there is a provision in the statute. So when giuliani was on, Rudy Giuliani was on earlier, he argued that you never actually find express willfulness. Nobody writes down, i want to break the law. What they look for are patterns of behavior and repeated patterns of behavior that suggest a willfulness. And the fact that the numbers cited by the fbi director he felt were certainly large enough to suggest willfulness. I missed that part of mayor giulianis comments, but, you know, it is true that whether youre talking about a white collar case, a securities fraud case or a mishandling case, it is rare to ever identify express evidence of intent. However, as in complex white collar matters, security matters, in looking through classified information in cases theres always the ability to look through email correspondence, to look at circumstantial evidence. And if after reviewing that type of information in which the fbi does day in and day out in classified mishandling cases and other complex white collar matters, there is a quantum of proof that satisfies a willfulness standard. You know, those are the types of cases that are pursued. So, james, im just curious in other cases prosecuted under this specific section of the law, give me some examples of how you would prove intent. I mean, was there specific language within the email . Let me send this to you this way, i dont want anybody to find out . That just seems too obvious. Sure. Well, let me speak about the matter that i led. And im only going to refer to information that is in the Public Domain and in particular that was included in the plea agreement and the factual basis that former director petraeus executed regarding evidence of willfulness. In that matter his former by videographer, paula broadwell, recorded a conversation with former director petraeus in which he said explicitly the information he shared with her was highly classified and that, you know, he was the conversation was clear that he was hesitant to share it with her for that reason. And so that is in my view express evidence of willfulness. That obviously based on director comeys remarks today did not exist in their investigation of secretary clinton and her handling of the server. Mr. Melendes, you cant see probably but what were showing people as you talk is air force one has arrived in charlotte. We expect president obama and former secretary of state Hillary Clinton will emerge from that plane for the first public ef event the president is going to do on her behalf as shes on the campaign trail. James comey said he had not told anyone, anyone, within the government what his decision was going to be here. Didnt notify the white house. Do you believe that, one . Im going to assume you say yes, but two, if the decision had been the other way, if he had decided that they were going to recommend charges be filed, do you think he would have informed the white house . So the answer to your first question is, yes, i do take him at his word. And i have to believe that the fbi director, the fbi and the department of justice would have conducted itself in the same independent matter regardless of where the evidence led them. So i believe that director comey would have conducted himself in the same way and relayed his recommendations directly to the department of justice. The i want to go back to the very interesting point, and i recognize that its deeply steeped in the law of the importance of intent. And on the other hand you have oh, theres the president and mrs. Clinton at the top of the stairs there getting ready to descend from air force one for a Campaign Event in charlotte on this rather propitious day, i guess you would say, in the 2016 president ial campaign. This is, i believe, the first joint appearance that they have made. I believe one was scheduled for the tuesday after the mass shooting, the terror attack in orlando. That was rescheduled out of respect for the victims there. And this will be the first time, i believe, that they have appeared jointly since the president in a taped endorsement about a month ago came out in favor of mrs. Clinton, as the democratic nominee. I want to get back, james, if i might, to my question. On the one hand you have the matter of intent and that is important in the prosecution of these cases. You laid out why there was evidence of intent in the case of cia director petraeus in which he clearly indicated he knew what he was doing and he shared the information with his biographer mistress nonetheless. In this case, where does that question of negligence or extreme carelessness trump the absence of intent . Or can that happen . You see what im driving at . I do. So within the statute there are different provisions. Theres a willfulness provision that is 793e, and there is a gross negligence provision that is 793f. So gross negligence, at least according to the terms of the statute, is an alternative means to prove thethe. I am not aware of a single case in which the department of justice ever has prosecuted an unlawful handling of classified information case based on gross negligence. It is a lower mental standard. In other words theres a point at which gross negligence becomes willful unto itself, right . If the quantum of evidence was greater. Right. I think that you would find a willfulness standard. Sir, what if i were a lower level state Department Employee who set up a server in my house . What would happen to me . My experience is that the fbi and the department handles these cases on a case by case basis. And that they would, you know, conduct the investigation as they did in this matter. If the facts were the same, i believe come to the same conclusion. The other point that the director made i think is important in looking at, you know, the constellation of factors that he alluded to in terms of making a charging decision is that in cases that are brought under the fbi there are oftentimes evidence of disloyalty to the United States of the large trail information of classified information as well as obstruction of justice. According to the directors Statement Today, there was no evidence that he or the fbi uncovered that they believe satisfied any of those aggrav e aggravating factors that the fbi director mentioned are important in making charging decisions. Can you recall an occasion where the fbi would make a recommendation either to prosecute or to not prosecute as in this case where the officials in the Justice Department would go against that recommendation . In other words, is it possible despite mr. Comeys recommendation and im sure it carries a lot of weight, he was a former federal prosecutor, but where the justice would come out and say, no, were going to go ahead and prosecute nonetheless . I cant recall an occasion where that occurred. And i would also make the point that its typical for the Justice Department and the career prosecutors assigned to an investigation to work hand in hand with fbi agents wlo are undertaking the investigations. So although director comey mentioned today that he had not shared his comments with anyone at the department, you know, it is true based on, you know, whats been reported publicly and Standard Practice that the department and the fbi have likely been working very closely on this matter. So i would expect that there would not be resistance to the directors recommendations. All right. James, thank you very much. James melendres sharing some history as one of the prosecutors who brought the case against former cia director David Petraeus over his mishandling of classified information. All right. Well move on. Well keep monitoring the situation down in charlotte where the president will be appearing shortly with secretary clinton. They rode down on air force one together. Netflix a bright spot in todays selloff. A bullish call on the streaming service today. And were going to talk with one analyst who says hold on a second. She explains why she is now bearish on netflix. Arish on net. Take a look at the chart over ten years. You would have done bet we are a treasury bond etf than the s p 500. Will that be true over next ten years . Lets add the trading nation team. Guys, i dont know about the next ten years, i want to know the next year. Eddie, what do you think . Will they continue to outperform . I would say, no. I mean, just looking at the numbers, you are talking about 1. 36 on the treasury. Looking at the s p 500, the forward indicated dividend yield is right now 2. 18 and that doesnt include growth rate. Its dividends up 5 this year. The math says stick with stocks. What do you think and what does the yield curve look like in terms of the depth that its gone down . I mean, a lot of people make the case that there could be a drubl in treasuries right now. This is not about growth but yields. Swiss yields negative 60. Why cant u. S. Yields go to 1 . We have seen people fight it down. We have heard at 3 they never go lower. 2 , today at 138 with new lows and circle 00 on the chart. Where we think this is going. 1 where you see it. All right. Thank you. Chris, eddie. For more trading nation head to trading nation. Cnbc. Com. Now the latest from trading nation. Cnbc. Com and a word from our sponsor. Approaching medicare eligibility . Dont put off checking out your Medicare Options until 65. 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It might not seem that glamorous having an old pickup truck for an office. Or filling your days looking down the south end of a heifer, but. I wouldnt have it any other way. Look at that, i had my best month ever. And earned a shiny new office upgrade. I run on quickbooks. Thats how i own it. Shares of netflix higher. Comcast, if you didnt know, is Parent Company of cnbc. Netflix stock added to gugen time securities best ideas list. Others are not as bullish. It was downgraded from buy to hold and joining us is laura martin, analyst for needham company. I want to work back to the eu effects of the currency effects and everything but first welcome. Hi. But i want to start with something that leapt out at me in your research and that is the idea that netflix may be vulnerable to eu rules that have been proposed that would require them to spend Something Like 20 of their revenue, is it, on european generated content, just like in france has to spend 12 of the revenue supporting the french film and television business. That sounds crazy, man. Welcome to socialism. Its 20 of the country revenue. Of the country revenue. Okay. Impose on it. Right now thats zero. We think netflix spends about 1 of the revenue on all european content and obviously it would have to step up the spending for italy, france, portugal, all of which dont travel so well as englishbased story telling. Welcome to the eu. Wow. Wow, wow, wow. No wonder people dont like it in many ways. Others do. I fully understand. Lets talk about the affect of Great Britain leaving the European Union. Do you think this dents netflixs revenue in a material way and do you expect any economic slowdown, not just in Great Britain but europe for a denting effect of revenue . Well, the imf saying that uk revenue could slow from 2. 5 to 0 and the eu more generally by 100 to 200 basis points over 18 months. The two points on netflix i think are important are, one, a subscriber can cancel a Netflix Subscription at any time but the costs that netflix pays to content owners like disney and cbs are locked in over multiterm contracts and not based on the number of subscribers so they have a fixed cost structures. Costs are denominated in u. S. Dollars and strengthening right now and the reevenue from spain or italy are in local currency with a huge correction to the downside brexit was signed. Whats the currency hit on netflix . Right. So, in the uk where we think netflix has 5 million subs, 15 negative currency impact as of last week. Yeah. And so wont affect the quarter to announce which is june 30 quarter but if the currency levels stay at this rate which we would expect then the september and december quarter will miss the estimates on just because of the curren currency. Laura, thank you so much. Thank you for watching power lunch. Closing bell starts right now. Hi, everybody. Welcome to the closing bell. Im kelly evans at new york stock exchange. Im bill griffeth. Uncertainty in europe and u. S. Bond yields, hitting record lows today especially on the long end of the curve. Financials in the u. S. And abroad suffering, as well, today. Well dig deeper into whats behind that move today. Energy also one of the worst performers. Oil prices under pressure with the new study saying u. S. Oil reserves surpassed russia and saudi