Transcripts For CNBC Power Lunch 20160706

John. Michelle, the breaking news is that bob corker, the senator from tennessee, republican who chairs the Foreign Relations committee, has told the Washington Post he has withdrawn from consideration as Donald Trumps running mate. It underscores the question hanging over trumps running mate process, which is who exactly can he entice to run with him. Can he get given how controversial his reputation is, can he get a young rising star in republican politics, or does he got to pick somebody like newt gingrich, the former house speaker, chris christie, the governor of new jersey, who doesnt have much of an electoral future given controversies that have weighed them down. Bob corker is somebody who has been rising within the senate and in republican politics. He says the job of being the Vice President ial candidate is more political than he wants. That hes more of a policy guy. Not comfortable being the attack dog in the campaign. So he has taken himself out. Weve still got some others, mike pence, the governor of indiana, whos somebody who fits that rising star category. Joni ernst, the senator from iowa who is going to be giving a primetime speech at the Donald Trump Republican convention in clevela cleveland. So theres still some mystery surrounding where this running mate selections going to go, but bob corker is not going to be part of it, michelle. No, hes not. John harwood, thanks for the update. The market seems to have come off the bottom, lets get to bob pisani on the nyse floor see if hes got good explanations for whats happening today, bob. This is one of those days you get a bit of a stealth rally midday. Weve rallied 160 or more points off lows now, doesnt look like much because we were down and now were on the Positive Side here, the dollar calmed down, the 10year after hitting new lows this morning basically reversed and thats calmed down as well. I think thats helped the market overall as well. We saw nice moves up in some of the bank stocks and some of the tech stocks, take a look, cisco for example coming off lows, all this happened around 10 30, 11 00, we started moving up. Same thing with some of the other big tech names, microsoft also moved around. And we also saw bank stocks. The big discussion is whether or not were getting permanent move into a more defensive names. Theres new acronym floating out there, s. T. U. B. , meaning staples, telecom, utilities, bonds, and i think now that somebodys put a name on it, were definitely at a top. Thats usually what happens. But you can see the opposite has happened today because Consumer Discretionary banks and technology are leading in the telecom, utilities to the downside here. Well see if that holds. Take a look at amazon. I want to note, tyler, historic high for amazon, up about 10 this year. The juggernaut keeps ongoing. Theyre going to have prime day next tuesday. Thank you very much, bob pisani. Real estate investments taking a big hit from brexit. Henderson Global Investors and part of ameriprise, limit redemptions to a total of 5 following the uks decision to leave the european union. Uk commercial real estate funds have now frozen about 17 billion in assets over the last few days. Fear is redemptions can put a strain on open ended real estate funds. And unlike stock funds where theyve got liquid holdings, they cant quickly liquidate their holdings. Takes a while to sell a building ncht the other sector thats really been hit hard in the wake of the brexit vote even though its had its own problems is the european Banking Sector overall, particularly italy. When you look at the index of the stock 600 banks in europe, it is lower again today by 2. 5 . When you drill into that italian banks getting hit hard again with the exception of mont monte paschi, thats perhaps in the wake of the pummelling its gotten over the last few days. Spanish banks have not escaped as well. Bbva, all lower across the board. Bankia has been troubled for a long time. And Deutsche Bank in germany once hitting a new alltime low in earlier trade today. For reaction to all of this and whats going on in the markets lets bring in chief investment strategist with bmo capital markets. Great to have you with us. Michelle outlined the terrible trade in banks, banks around the world for that matter are trading if theres the next financial crisis or banking crisis around the corner. Weve got yields around the world at record lows including here in the United States and then some would argue Global Growth expectations theyre worse than they were prebrexit. So what where are we now in the markets . Can we exist with these worries and have the markets just a few Percentage Points away from record highs . Im so glad you mentioned that at the end. And then coming into this block you had talked about how the s p is only down 1 . Since brexit i think thats where you have to really provide some perspective to your viewers and investors. The s p is within an eyelash of new highs. Canada continues to outperform other developed markets because of the stability trade, we think. But all in all this downside to europe should not be surprising, especially given the fact that this is an asset, that is a declining asset. Theyve got bad demographics, bad politics, also in the early stages of structural reform on a fundamental basis and qe remains in the early stages. Aside from brexits ultimate impact on Global Growth, which oh by the way we still dont know because we dont know how long this process is going to be unwinding, brexit. So i think at the end of the day we remain in a very reactive mode, melissa. Our call all along is that the s p is going to be in a back and forth notion. Brexit is just one of those things thats worrying people. Its going to be the election. Its going to be the fed. And its going to be growth heading into the fourth quarter. So i would continue to expect very bumpy seas throughout the summer. Bumpy is one thing. Back and forth is one thing. But youre saying 2100 by year end, basically flat from where we are now and weve got six months left to the year. Thats right, we do. And remember we came out in our year ahead piece when we talked about stocks in 2016 saying there was going to be a correction to 1800, well, that happened in january. I still think that theres going to be risk if and when the fed does things. The fed is basically priced to perfection. Its going to be all about how the fed talks about Interest Rates Going Forward and the messaging that theyre going to provide. Were going to have even more clarity when we see the jobs report on friday. And so, you know, we think that the majority of investors, and this is important, we think that the majority of investors around the world are already positioned for one and done, and that one happened in december last year. And so we think that this whole move into defensive vehicles is way too reactive and its actually going to provide an opportunity to do some fundamental investing in the second half of the year upon a pullback in the market especially. Brian, a lot of people have been piling into what we would call the safety trade most notably 10year treasuries. Are those safety trades still safe . No, in fact i think we have to kind of start thinking, tyler, about renaming what risky assets are. We think the risk asset are bonds, and we think the stable asset are equities. And in fact we think north american equities are going to take money back from other areas around the world. Remember, we saw outflows in u. S. In 2015 and most of 16. And a lot of those moneys went to europe and emerging markets when we see the continued volatility there, we think equities are going to be more of a safe haven. And we think the actual downside, the riskier asset are bonds. If you think about it, right, this whole notion of fixed income is a fallacy. Is there a bubble . Investors are buying bonds for price performance. Has nothing to do with income. All right, brian, were going to leave it there. Thank you. Brian belski, bmo capital markets. Thats a good place to pick up. Global Central Banks, whats the best course of action for investors right now when it comes to fixed income. 1. 5 trillion from global head of Corporate Bond management at pimco. Welcome to power lunch. Hi, michelle. You heard brian, is the world upsidedown . I heard Peter Bookvar describe it the other day people are buying stocks for the yield and theyre buying bonds and treasuries in particular for capital appreciation. The world is a very strange place right now, mark. Yes, michelle. Brexit has caused significant uncertainty and really a growth shock in europe and also in the uk. And it will lead global Central Banks to pause. The fed will be on hold now for several months. Were going to see rate cuts by the bank of england. And were likely going to see more qe expansion by the ecb. And what this has caused is a huge dilemma for investors. Youve got 11 trillion now of government bonds with negative yields. And 85 of japan and german bonds are now negative yielding. And so investors are scrambling for high quality income. And thats whats causing the rally in treasuries. Should i buy that 30year bond with a yield of 2. 1 . It sure looks darn good when all of switzerland is negative. Sure, it looks good for foreign investors. We actually think now credit looks a little better than Interest Rate risk. Bonds have been the winners this year. Credit specifically is up 6 to 9 with equities roughly flat. But even today Investment Grade credit and select high yield and Agency Mortgages can earn 4 to 6 . So we actually think foreign flows given these negative yields offered in japan and europe will increasingly come into the u. S. Seeking this 4 to 6 type return. And thats a trend we think will accelerate now with brexit. Is there a bond bubble . You heard melissa ask that to brian, what do you think . We dont think theres a bond bubble. Particularly in the United States, when you look alt credit, credit is really a function of how well the economy is doing. If you look at the u. S. Economy, brexit really has limited impact. The consumer as you know is 70 of the economy. And in a 2 real growth environment, almost 4 nominal, the default rate on credit risk should be very low. So we would advise investors to seek out high quality Credit Investments today, whichan bonds, which are very low. And again, that 4 to 6 it may not be as high as high Single Digits but mid single digit returns in bonds today is still pretty attractive. And the world is still short income. Theres a huge demand around the world for high quality income producing assets. Credit markets can function as that income. Yeah. Pension funds around the world desperate to buy anything that might give them yield. Mark, thanks so much for joining us. Pimcos mark kiesel. The s p retail etf is down slightly this year, but there are some standouts, including this one. Its up 56 . But weve left the name off. Youre going to have to stick around to find out which company we are talking about. Plus, what does it say about the state of the u. S. Consumer . Thats next. Power lunch is back in two minutes. The heirloom tomato. When you cook with incblingred. 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. 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, everybody, im tyler mathisen. Thanks for joining us. We just showed you this mystery chart before the break. The chart is that of reveal, burlington stores. One retailer up more than 56 , a few other Retail Sector winners include 5 below, childrens place, barnes noble, ulta salon cosmetics. What does it say about the consumer . Lets bring in deputy head of u. S. Economics with b of a merrill lynch. Sheryl, welcome. I guess the Stock Performance charts, which i guess really isnt your forte, i suppose, youre not really a stock person, but it would suggest selectively the consumer in america is spending, right . I think thats right. Weve seen aggregate Consumer Spending pick up. If you look at the latest tracking for the Second Quarter in real terms on an annualized rate, we see Consumer Spending in excess of 4 . Part of that is payback from the weak start to the year where Consumer Spending came in at 1. 5 in the first quarter. But i think it is certainly the case that the consumer is spending. May be selective. You have parts of the household sector thats budget constraint. So theyll be careful in terms of where they spend. But i do think generally speaking the consumer is a bright spot for the recovery. So lets talk about your view of sort of Overall Economic performance in the United States. And as we look ahead to the jobs report, what kind of growth are you looking for in the second half of the year . What kind of jobs report do you look for on friday . So first in the nearterm, which is a little bit easier to forecast hopefully, is fridays jobs report where were looking for a bit of a bounceback after mays very weak numbers. So we think were going to see 180,000 jobs created. Assume you have about 35,000 or so thats verizon workers back on the books. So it means that your underlying trend in job creation is probably close to 160, 170,000. Which is still above the break even to keep up with population growth. And its still indicative of the labor market thats recovering, and thats expanding. I think when you take a step back and you look at the overall picture for the economy, were talking about about a 2 economy, maybe high 1 into the second half of the year depending on how big of an uncertainty shock we have into the economy from brexit and from other factors. I know you cannot wait. I am just beyond delight. Weve got 42 minutes and 37 seconds until the minutes are released from that june meeting of the fed. What do you expect them to say . I mean, obviously something changed there with that june meeting. I assume it was the jobs report. That was one of them. Uhhuh. I think they were frightened by that exceptionally weak number for the jobs report. I also think that they felt as though there was concerns about the underlying Growth Potential in the economy citing that Business Investment has looked weak, the jobs report which is also a signal of Business Investment was soft. And then of course there was uncertainties about the global environment, which im sure theyre going to highlight in that report. The other thing thats going to be very interesting to me is about the discussion of why they took down the overall path for the dot. So theyve revised down their longterm dot. They kind of flattened the whole distribution. And i think it shows the fed is starting to think more about this idea of low productivity growth, lower for longer Interest Rate environment, which frankly the markets have been in tune to for some time. All right, michelle, thank you. Always great to see you. Thank you for coming by. You as well. Thank you, tyler. The hunt for yield driving up those dividend stocks. Man, they always talk about them here. Talk about the etf that tracks those dividends, its the sdy up about 14 this year. Wouldnt you like to be up 14 and collect a nice yield . Are these stocks still worth buying . Power returns in two. Time for todays power pitch where one entrepreneur gets 60 seconds her panel. Her startup is the next big thing. Hi, im hannah raudsepp. Think about your last burger, cant remember the ranch where it was raised or who raised it, dont know how many animals were in your last burger. Now you can. Im founder of honest beef company, a platform that allows people to crowd source their beef. Our customers effectively purchase a part of animal, see the pastures and the family raised it and the pedigree of their steak. We eliminate 60 of the conventional beef supply chain and use small craft butchers so prices are 25 lower than the leading online retailer. Ranchers are beating down our door because they get premium on every animal we buy. Our customers pay up front. We have minimal inventory risk, and our margins are near 35 in this 3. 8 billion market. Weve had solid early traction via word of mouth and social media and have received incredible feedback on our single animal products. Know your rancher, trust your beef and crowd source a cow with honest beef company. Welcome to todays power pitch, im melissa lee, you just saw hannahs pitch. Now lets meet the panel. Joining us onset alicia syrett, more than 40 companies in personal portfolio and serves on the board of the new york angels. Also with us is venture capitalist nir liberboim. Natural Food Investments in its portfolio. And from the bay area david wu, general partner at maveron, with 1 billion under management, its portfolio includes Sandwich Company pot belly as well as pinkberry. So we heard what hannah has to say. Shes in the hot seat. Kick it off. So, hannah, i thought you did really well on your pitch. I loved hearing the story and a bit about the market and really great information around competitive differentiation. So i will give you an a. Now, on the safety front, how do consumers know that the products they get from you meet or exceed the standards set for bha what they would buy at their local Grocery Store . The most important part is the butcher we use is federally inspected by the usda, so our product meets the safety requirements that any other beef product would meet. I thought your pitch was well rounded, talked about your background, margin structure, i also gave you an a. Im curious about pricing. I noticed on your website that the average order price was around 100. Can you scale your business at these price points . Right now we think that we can. And were excited that our prices are 25 lower than the leading online retailer. The other piece of that is were able to offer the rancher more equitable piece of the pie in that sense because we have cut out all of the middle people. David. Im going to have to go the other way. I love how passionate you are about the cattle industry and the authenticity of your background, but i struggle with the pitch because it seemed like yowere talking a lot about neat product features and differentiation, but it took a long time for me to figure out whats the real customer benefit and consumer benefit. So im going to give the pitch a c. Is this really about a price differtiation and a cheaper cost of premium quality beef, or is i more abouthe quatyf the beef or the health confused the price is just an added benefit for that. Ally what were focusing on com very high quality and put it on your plate and tell you the pedigree of where it came from. Our producers keep very meticulous records so you know exactly ere that animal came from, how it was raised, the husbandry behind it, and mor portant the story of the faly who raised it. Earlier today. So, alic, what didthink . Were ypedigree of the cow when were eating that new york rip . You know, i wasnt. But i have t say that the quality really stood out. It wasbsoluty delicious. Ictually felt better eing it knowing thatt was traceable and sustaible. You have such areat brand name onest beef. Traditional retailat we know is. Wouldnt be opped to the future and maybe seeing if theres an oppornity for oth kinds ofgrultural producers to use a similar crowd sourcing model. Be it vetable or pork or whatever. But righnow beef i whate know and frankly what were best at. So were going to stay focused. David. Who is this end consumer . And why do they care about this radical transparency . When it comes to beef, why do you care exactly the pedigree and where exactly it came from . American consumers are really becoming more privy to the source of their food and where their od is coming from, the consumer cares about what were doing is really somebody who wants transparency, wants to know what theyre feeting their families and who it came from and also has a little care for the families, the 1 thats raising it offering them a more equitable piece of the pie. We heard what hannah had to say. The panel is out. Alicia, what do you sa early fo company and one of my big concerns is whether its too nichey, but because its so early what i have to bet on is the quality of the entrepreneur. And i think shes fantastic. So that combined with the transparency, the crowd sourcing, the quality and also the efficiency of the supply chain makes meretty positi. Im going to go in. Nir. I think the company is on trend with traceable and sustainable products. And i think the crowd sourcing try is very large, very crowded. So its tough, but i think honest beef is doing something unue. So i am in. Two ins. David, what do you say . Im a huge carnivorend omni but it feels more like a mission than a money venture scale business to me so im going to be out. So two ins, one out, hannah, whats your reaction . David, ill ship you some beef and see if we cant change your mind. All right. Thank you to everyone and that is todays power pitch. So are you in or out on honest beef . Twee us using powerpitch, for more visit powerlunch. Cnbc. Com. Power lunch back in two. L inv 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 3. With 5off just for signing up. For righttrack. P to get started, visit a local office or call Liberty Mutual today at visit a local office or call see Car Insurance in a whole new light. Liberty Mutual Insurance hi everyone. Im sue herera. And here is your cnbc news update for thishour. The Justice Department opening a federal civil rightsvideotaped black man who was shot as officers wrestled with him to the ground. In the cell phone video two officers have alton sterling pinned when gunfire erupted moments after someone yelled, hes got a gun. Longtime fox news host Gretchen Carlson has filed a Sexual Harassment lawsuit. Former cohost of fox friends was fired june 23rd. Complaint was retaliation against her after she rebuffed his sexual advances. Fox news has not yet replied to our reque for comment. Former british Prime Minister ty blair is denying there was a rush to war in the months before the u. Led invasion in iran. Hes facing hard criticism over s conduct. A decision had to be taken. And it was mine to take as Prime Minister. I took it. I accept full responsibility for it. I stan by it. I only ask with humility that the british people accept that i took this decision because i believed it was the right thg. Pope francis meeting with the parents of a u. S. College student found dead in a river in rome. 19yearold beau soloman disappeared after being seen at a bar near the tiber river. T final gold trades crossing. In todays session we hit a fresh twoyear high in gold. Up by 0. 6 . We hit the highest lev since march 2014. Check of the rest of the metals complex, a mixed bag. Copper down by more than 1 , but silver is really the interesting one. It is up for six straight sessions, higher today by 1. 25 . Well have much more on the silver trade later on meantime, to the bond market. Rick santellis tracking the action another day, another record low yield and you name it, whatever government you want to name around the world, rick. Absolutely. It reall is breathtaking to watch. If you look at a twoy of our carly see yesterday we finally had that closing yield below the july 2012 close which was a bit under 1. 39. Yesterdays was right around 1. 37. And were virtually unchanged, actually upone. Open a chart so you can see that july bottom. Listen, considering the type of activity you have in the world with all the negative rates, technicians are very leery to look foruch mo. I dont see how yields can spike though considering all the variables. Look at bund yields. Our chart wasnt working, but they got down to minus 20. They settle at minus 17. Foreign exchange, when we look at the pound versus the euro from june we see that the breadth of the drop after the results of the brexit vote is around 10 to where it currently is from the highest water mark. Look at the pound versus dollar similar pattern, it was about 13 . So a bit smaller ainst euro, but keep in mind most of the activity thats being challenged by brexit a will be worked out with the final trigger of 50 in agreement, its really more about the pound versus the euro. Michelle, back to you. Rick santelli, it was a great setup for our next segment. You saw how low the yields around the world are. Rick pnted it out. So the hunt for yield driving up the utilities sector. Utility etf up 21 this year. Check out the dividend etf, the sdy, its up 13 . Can you still buy these . Or is it too late . Joining us is president of far, miller and washington and cnbc chief investment strategist at key private bank. Gentlemen, good to have you here. I get why you wouldnt want to buy a utility this year. I get why you wouldnt want to buy a dividend stock this year, michael, because where else are you going to generate income. Heres the thing, what do i do right now . Should i still go into those areas, or is it too late . Not only do i think its probab too late, michelle, i think if youve owned those you probablyught to take a look at rebalancing and selling a little bit. Look, the rule is to sell high and buy low. The things up 21 this year. Something trading on yield means that its going to get a lot more money just based on the yield. If the treasury yield and other yields at some point start to move higher, relatively these become less attractive and prices start to fall. In the meantime i do like some of the other dividend stocks that still have some Earnings Growth and some upside pontial. Such as . Well, i think you can take a look at a number of the blue chips. Ross stores is a stock that i like. Its a domesc retailer. I think its reasonably priced. Its got a 1 dividend, but its got low double digit growth. Sam could see low teens returns on holding ross stores. If you look at Companies Like microsoft or johnson johnson, you get a 2. 5 yield or 2. 6 , 2. 8 , aaa Balance Sheets. I mean these look like attractive places, i think, to be when the world becomes less certain. Bruce, what would you do here . If youre looking for income, do you chase the utilities, do you chase the dividend players, or throw up your hands and try to find growth somewhere else . I think its always difficult to chase major market trend that way. When you look at the fact that a lot of the utilitieutilities, t quality utilities are selling for the same price as low quality utilities, not only do you have an overcrowded maet, you have a market thats become indiscrimina in some of the risks that underlie the vehicles. Wh you look at the basic earnings pattern for utilities, they too are probably above what they will be partially because of the low rates and the effects thats had. So, yes, theres a lot of risk apparent. There are others that may not be quite as high in yield but offer a better outlook. And for that reason i think going with them makes much me sense at this point in the market cycle. We were showing people you like two stocks, fortive, ftv, relatively new, very new, and facebook, which has zero yield at this point, right . Yeah. Well, again, i think a diversified portfolio including some growth but also some value me higher dividend yield makes perfect sense. Obviously facebook is not cheap, but it has such a strong growth pattern and such a major dominant force within the social media space, we think it makes sense in measured exposure. Fortive is a new company where high quality in their niches with high barriers to entry, which means theyre sustainable Going Forward. And you also have a management thats a proven track record of making acquisitions, making work for the sharehder. So having diversified exposure, some dividend yielding but some growth makes more sens michael farr. Well, i thi y that as rates e down that inverted p e ratio thatou look at stocks that greenspan used t look at argues for higher stock prices. But youve got to remember were market. How low can it go . At 1. 37 on the 10year treasury, it does argue for higher p e ratios historally. But be careful. Jumping in too early at these levels could get you whipsawed. What do you think this is ever going to turn around, bruce, when it comes to Interest Rate picture allowing people to pay higher price for higher price multiples. Part of why were seeing yields follow now is overseas markets have less attractive options than we have in the u. S. Markets. But as weve seen in japan, their efforts to lower Interest Ratefurther seem to be hitting a brick wall at least shorter term. So i think that the ultime end game is that you no longer can push rates down around the world. An ultimately this game will come to an en and eventually well reverse. But the valuations are changing you know, valuations arehanging and its not so much the fundamentals. Were seeing a flow of cash thats driving our rates down. Theres plenty of liquidity. But its not that our cpanies are earning that much me money. Its not that were seeing a fundamentally demand driven economy. No, we get th point. Which is what the whole mystery is about and the dilemma that decide where theyre going to put their money, guys. Appreciate it. Michael farr and bruce mccain. Go to powerlunch. Cnbc. Com to see now. Houhold productnames, speaking of dividend payers, theyve also been cleaning up t consumer staple stocks, or is that run over . Thats next. Approaching medicare eligibility . 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Shares of twitter up a little bit today, a nickel to exact at 17. 19. The u. S. Biotech company medivation has rejected sanofis improved 58 takeover bid. This follows sanofis previous bid of 52. 50 per share, that was in april. Shares of medivation right now up41 cents at 6. Sanofi down at 41. 04. Melissa. All right, ty, lets look at consumer staples, more specifically household products companies. All hitting alltime highs yesterday and clorox todayverga stock up on the names, or is with boston advisors, his firm owns all three stocks. Chief strategist in the bear camp on these names, great to have you with. Michael, im going to start with you. When i look at a stock like kimberlyclark and colgate similar profile, about a 45 p e for this name for estimated sales growth in 2016 of negative 1. 2 , even going out to 2017. That sales growth is only projected to be under 4 . Is the dividend worth that much that youre willing to pay this sort of multiple for this sort of anemic sales growth . I was going to say whats not to like, melissa. So the issue here is this is a safety trade. This is a crowd trade. We think its actually sort of in the early stages of the late 1990s with technology companies. This is, you know, if you look at whats working, these are all highly sensitive to Interest Rates and lower Interest Rates. These are going to continue to move up as long as Interest Rates remain low and go lower. So whether its a or consumer staples, this is a fear trade away and still reverberating from the 2008 bear market that we had, you know, almost eight years ago now. But inherently, mike, you said in your first sentence that this is a crowd trade. That makes me worried that perhaps these stocks have these price evaluations for basically nonexistent sales growth simply because people are crowding into this. And then theres going to be an exit. And then its going to be ugly. I dont disagree with you. I dont disagree with you, right. This is the challenge because most active managers, you know, look at this and say why in the world would i pay 25, 27 times earnings for any of these companies. The answer is you do it in a little bit. Because we do have this surge of cash thats coming in to minimum low volatility etfs, people are looking for safety anywhere they can find it. The unwinding is going to be ugly. Youre absolutely correct. The question is do we go to 50 basis points on the 10year before we go back to 2. 5. Right. Youre willing to take that gamble. On the other hand, should we be obsessed right now with the notion of dividend yield because treasury yields are so low at this point . Im really not sure you need me in this segment because youre making the case pretty well, so is mike as a matter of fact. Look, price Momentum Works great right up until the time that it doesnt. He pointed it out, i look at some of the valuations and you look at some of the charts. Theyre starting to go parabolic. You talk about companies that have peg ratios price earnings to growth between 3 and 4, facebook is at 1. 3, one of the premiere Growth Companies of our time, thats the value trade right now. Right. So when you get the first whiff of any Economic Growth, thats when at the same time did you miss out on this trade . I mean, these stocks as youve mentioned gone parabolic. You could have made the case, you know, a couple months ago. Now youve got valuations that are, you know, 10year peaks. Say you want to have yield in your portfolio but you dont want to pay these p es. You can go almost anywhere. Even if you dont want yield and a 2 yield, you want to accept a little less, look at the defense industry. Thats definitely going to work. Thats a safety trade right there. The lockheed martins, l3 communications, these companies are going to go higher because budgets are going higher. You cant keep growing earnings unless you grow sales and all three of these companies have flat to negative sales growth for the last three or four years. Guys, great discussion, thank you so much. Mike and david, lets get to john harwood with some breaking news here. John. Melissa, Donald Trumps president ial campaign has just released some fund raising numbers that should make republicans a little bit happier. He said that between his efforts and those of the Republican National committee hed raised 51 million in june. That hed put in another 3. 8 million of his own for a total of 55. He characterized that as a donation and not as a loan. Theres been question about whether he was loaning the Campaign Money he would later pay back. Now, this isnt as much money as Hillary Clinton and the dnc raised in june, that was 68. 5, or as much as mitt romney raised in the same period with the rnc in 2012. Nevertheless it is a step forward in fund raising for donald trump. What we dont have in this release is a cash on hand figure. He reported at the beginning of the june only to have 1. 3 million in the bank. Hillary clinton reported having more than 40 million at the beginning of july. So well wait and see when he files exactly what that cash on hand number is. But this is a positive announcement for the trump campaign. All right, john, thank you. John harwood in d. C. Floridas toxic algae is spreading and its not the only place dealing with an algae problem. Well tell you where else theres something fishy in the water. Stocks are rebounding this hour in fact close to session highs. Check out some of the biggest winners on the s p 500 at this hour. Carmax leading that board up by 4. 7 . Vertex also higher in the pharma space. More power lunch in two. Hiim here to tell homeowners that are sixtytwo and older about a great way to live a better retirement. Its called a reverse mortgage. Call right now to receive your free dvd and booklet with no obligation. It answers questions like. How a reverse mortgage works, how much you qualify for, the ways to receive your money. And more. Plus, when you call now, youll get this magnifier with led light absolutely free when you call the experts at one reverse mortgage today, youll learn the benefits of a governmentinsured reverse mortgage. It will eliminate your monthly mortgage payments and give you taxfree cash from the equity in your home and heres the best part. You still own your home. Take control of your retirement today thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. Take a look at this footage coming in from china after five days of torrential rain. Rescue teams evacuating a woman using a rope. According to chinas civil affairs, flooding across 11 provincial regions left 128 people dead, 42 others missing. A local state of emergency does continue in Martin County, florida, as officials continue to deal with a spreading bloom of toxic algae. We talked about it yesterday. Although beaches remain open in most cases, Martin County commissioner doug smith urges the public to stay away from the algae blooms which are toxic if inhaled. Inhaled. Inhaled. Why would you do that . Florida not the only place dealing with an algae problem. In east quogue, new york did i pronounce that right . Guogue. You dont go to the hamptons. Just a few miles west of the hamptons, locals are dealing with an algae bloom known as the brown tide. Im from virginia. Forgive me. Although not harmful to humans, the water is so murky that officials are concerned it will affect tourism. New sign that the luxury market for everything, for everything, could be cooling off. Robert frank has that story. Robert. Tyler, you could call it the recession of the 1 . Why the wealthy have stopped spending on everything from picassos to penthouses, thats coming right up. Ffices. Steve, other than making me move stuff, what are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. Td ameritrade. My m. About my toothpasteice. She eveand mouthwash. Ice. But shes a dentist so. I kind of have to listen. She said jen, go pro with crest prohealth advanced. Advance to healthier gums. And stronger teeth from day one. Using crest toothpaste and mouthwash makes my. Whole mouth feel awesome. And my teeth are stronger too. Crestpro health advanced. Is superior to colgate total. In these 5 areas dentists check. This check up . So good. Go pro with crest prohealth advanced. Moms right. Again the 1 is hitting the pause button on spending. Robert frank is here with that story. Melissa, from art, to diamonds, to penthouses and planes, trophies are piling up around the world as the rich slow down on spending. A slow down in emerging economies and all that election uncertainty has created a crisis of confidence in high end markets and that was even before the brexit vote. In new york Luxury Properties sitting on the market an average of 169 days, up 31 from a year ago. And london even before the brexit vote prices in prime neighborhoods were down 8 from their peak in 2014. And sales down more than 30 . Now, art auctions are running at less than half of last years total, classic cars have stalled, giant diamonds are failing to sell. And overseas buyers for real estate are becoming a little more scarce. So reports today from the National Association of realtors found foreign buying of u. S. Real estate fell in 2016. And chinese buying fell for the first time in five years. Now, the weaker pound total of 270 square feet but new york is cheaper with a million buying you 290 square feet. The problem is really even at these discounts its a crisis of confidence. Right. So far youre just not seeing all that bargain hunting translate to sales. Lets talk more about what is going on. Robert, stick with us. Foreign buyers in luxury real estate, are they actually hitting that pause button . Here joining us now is john gomes controls over 200 active listings in new york city priced up to 50 million. Great to have you with us. What have you noticed in the days postbrexit and now. Has there been any sort of comeback . Yeah, so brexit had a very strong impact on the market because it creates people to take a pause, right . So theres this Immediate Response. I think the best thing i can do is give you an example. I had a deal that was, you know, brewing on 20 million apartment. I had spoken to the individual who looked at it who was very interested who was considering an offer somewhere around the 18 million price point. And then the day after brexit happened i had communicated again with the buyer who said, you know, with the recent news, im going to reconsider my offer. And when i do put in that offer, im thinking its going to be lower. So i think the Immediate Response is that people are taking advantage of brexit and the uncertainty that it causes and ultimately taking advantage of that to negotiate lower pricing and what is already a softer market. Yeah, what we were talking before that softer market is really at the high end. So post crisis this was a Market Driven by the top. Now were seeing this huge inversion where the top is weak and the bottom throughout the economy but particularly in new york is the strongest. Where are you seeing the bright spots . Is it 5 million or less 3 million or less. Thank you for pointing that out. People have a tendency to generalize the market. There are many markets in this industry, anything below 3 million right now i say raging. Below 2 million, forget about it. Theres a huge amount of demand and limited amount of supply, which is putting an upward pressure on pricing. Whereas a lot of the inventory thats just sitting there is in these top very expensive high end towers, right, that are priced at 5,000 a square foot. Correct. And there were too many of those for too long because that was the focus. New york has done this for the years. It always focuses on the higher upper end luxury and then swings the pendulum to the other side. Were trying to get it to a place where we normalize it where we have a little bit of everything. We have just about a minute left, but in terms of the pendulum, how far back does that have to swing . In other words how much of a price correction should we be seeing at the top . When should i put in my bid for that 20 million penthouse . In my opinion i think the best time to buy is when the market is going down, right . Why buy when the market is going up . You can buy when going ideally you buy at the bottom. You cant tell exactly when the bottom is going to come but there is opportunity in a downward market. The prices recently have gone down. Second half of the year is that going to be even further down from where we are now . You think we still got a ways to go . Again, if i had a crystal ball. Yeah. I could make a lot more money. But i think that the second half of the year will bring opportunity, yes. Because whats going to happen in september is youre going to have more inventory come on. Remember, were in the summer slower months. As we move into the september months, more inventory will get released. Okay. Thank you guys so much. Great conversation. Robert frank, and john gomes with douglas. Weve got breaking news. Head to eamon javers in d. C. With the fed minutes. Eamon. Reporter participants thought it would be prudent to wait for the outcome of the thenupcoming brexit. Most participants now noted that the brexit vote, what they said could generate Financial Market turbulence, that could adversely effect domestic economic p performan performance. On jobs almost all judged surprisingly weak may employment report increased uncertain fi about the labor market. Many remarked they were reluctant to change outlook materially based on one Economic Data release and so as a result of all that most participants judged in the absence of significant economic or financial shocks raising the target range for the fed funds rate would be appropriate on three different conditions, those conditions, one, the economic information confirmed Economic Growth had picked up, also that job gains were continuing at a pace sufficient to sustain progress toward the committees maximum employment objective. And, three, inflation was likely to rise to 2 over the medium term. Now, several participants expressed concern that a delay in resuming further gradual increases in the federal funds rate would increase the risks to Financial Stability or would raise the potential for overshooting committee oos objective. If that happened, an overshoot, they said, might require rapid removal of policy accommodation at some point in the future which could entail significant risks for the u. S. Financial markets and the economy. Now, some other participants were uncertain as to whether Economic Conditions would soon warrant an increase in the target rate for the fed funds rate. Now, several participants interestingly expressed concerns that the committees communications had not been fully effective in informing the public on how incoming information affected the committees view of the economic outlook, its degree of confidence in the outlook, or the implications of the trajectory of monetary policy. So there you have it, guys, the fed minutes there expressing a little bit of concern there at the end about the Communications Policy of the fed itself. And the wrap up also with brexit and jobs, guys, back to you. Thanks so much, eamon. I heard the fed got something right there, guys. Which was . Brexit. Brexit could cause volatility. Could cause volatility. I dont think you need to be a fed economist in order to say that. Yeah, but you know why they invented economists, right . To make astrologists look good. On that note, lets get to unconstrained bond fund, bill, welcome back to power lunch. Hey, tyler. What did you hear in that summation that eamon gave us about the fed minutes . It sounds to me like the fed is divided. A house divided. Yeah, i think theyve been divided for a long time, tyler. I mean, several of the president s, bullard in st. Louis and evans and others, you know, have a rather distinct view in terms of the negative aspects of low Interest Rates. Others, you know, follow more conventional model like janet yell yellen does. They look at the tailor rule, they look at the phillips curve and suggest as you approach unemployment inflation will inevitably rise. You know, im with the former president s as opposed to the latter point of view in terms of the economy. Bill, its michelle here. Do you agree with the fed that to be worried about their communications being possibly ineffective. Yeah, i think so. You know, i think that the standard these days, michelle, is to give a speech, to have a take to come out and to perhaps even tweet like bullard has done basically in the last few weeks suggesting the fed funds rate not going to rise for the next several years. So investors become confused when they look at the green dots as high as they are and when they hear from others that suggest reliance on old standard models. And so i think investors are confused. I think ultimately what the fed really wants to do is keep the Interest Rate low and perhaps keep the curve as positive as possible because 10year rates and 30year rates at these levels are not conducive for Economic Health for many Financial Institutions like banks and insurance companies. Michelle and i were talking earlier today, bill, that when you see Interest Rates this low, and Central Banks around the globe have gone allin with the policies that have been in place now for several years here in the United States and more recently in other places. But with rates this low is usually a sign of distress. I think the last time you were here we talked about the fed and other Central Banks having sort of boxed themselves in. I guess the simple question to ask is are these policies having the intended effects . And what are those effects . Well, i dont think they are. I mean, the fed and other Central Banks, japan has created 4 trillion worth of quantitative easing, the ecb as well, the feds Balance Sheet at 4 trillion, theres a combined 12 trillion between those three Central Banks. And theoretically that should be enough money to provide prosperity across the globe. It hasnt taken. And i think there have been reasons for that. The private sector has been subject to regulation, for one. Second of all, many borrowers dont want to borrow despite the fact Interest Rates are low. And, third, many banks dont want to lend, you know, based upon the perceived risks in the economy Going Forward. And so for all those reasons the fed and other Central Banks that have provided trillions of dollars, you know, has not been effective in terms of generating credit. Which is really the thrust of your monthly note, and that is that credit creation by private banks is way down for the reasons you cite, number one banks may not want to make loans. Number two, borrowers may not want to take them. You said something very interesting at the conclusion of your note. Now is the time to be more concerned about the return of your money rather than return on your money. Elaborate. Well, thats an old cowboys sure. Phrase. From the 1930s, will rogers, but, you know, when money is so overpriced, when Interest Rates are so low and negative and stocks depending upon which p e youre using but reflective of the same thing are artificially high, then it is time to worry about the return of your money as opposed to the return on your money. We know in a bond market that in japan theres no return on your money. Everything out to 40 years, tyler, is at 0 or lower, close to the same thing in germany and elsewhere. And so the bond market its pretty obvious that the return on your money is negative as opposed to positive like it should be. Bill, you say at the end also that you think theres a ceiling on risk assets, on stocks, high yield bonds, private equity and real estate. Are you saying those have topped out at this point . No matter what they do with Interest Rates theyre not going . Or elaborate on that. Yeah, i think theyve topped out, michelle. That doesnt mean that, you know, they cant provide returns of 2 , 3 and 4 , which i think is what high yield buyers are trying to get. But when a private credit system, banks, cant create credit growth, which is my comparison to the monopoly board where as you pass go you collect 200, but at the end of the game its sort of not enough money to keep the game going. Its the same thing here. If Central Banks and Banking System cant create enough credit, then the economy slows down and risk assets become at risk, much like if you land on boardwalk and theres three hotels on it, you know, you have to pay an excessive rent. I think monopoly is a really good example of how capitalism thats based upon finance and based upon money creation doesnt do well when money isnt being created at a rapid enough rate. All right. Bill gross, thanks very much. Always good to see you. Youre welcome. Thank you, tyler, michelle. More on reaction to the fed minutes from bob pisani on the floor of the new york stock exchange. Looks like we drifted up a couple points in the s p 500. Thats right. Dow, rallied 20 points. We were up 22, 23 on the dow, now up 46. Modest gains since 2 00. I thinked to extent you want to interpret this as dovish, they made it very clear they wanted to wait for the outcome of the brexit and noted it could generate Financial Market turbulence which it did to a large extent certainly in europe and to a great extent among our financials here. If you look at the kbe, the bank index rallied a bit today, been a little stronger here, id say thats sideways since 2 00. The vix has been quiet in the last morning throughout most of the morning to the downside as you can see here. I would note of the three conditions they talked about, growth picking up, job gains and inflation to 2 over the intermediate term to the extent bond yields have collapsed, inflation going to 2 , thats probably not going to happen in the intermediate term. So to the extent, melissa, this is a dovish statement, i think you can partially read that in. I would note fed governor Voting Member of the fomc said this morning no rate hikes were needed until inflation is more solid. I think thats another supporting point for the lower for longer camp. Lets get the bond market reaction. Rick santellis at the cme, rick, what do you make of the minutes . What i make of the minutes and what the market makes of the minutes is probably pretty close to the same. Whether you look at the dollar index, 2year, 10year for whom the bells toll, the 30year, theres virtually no volatility. As people down here reading minutes one trader commented, he said our central bankers sound like retail stock traders. They look at everything in shorttermism, every number they live and die by, theres no longterm strategy. How could anybody define anything. Bill gross is right. Is it about communication . Probably. One guy tweets one thing, another speech goes another direction. Maybe the problem is overcommunication, but one things for sure, after the minutes that move the market looking for a tightening in the potential june or july meeting, these minutes did virtually nothing. And maybe thats because we virtually have no idea, no idea what could come next. And really what the feds looking at if you look at their forecast you might as well use a dart board, tyler, back to you. All right. Ill take it, rick, thank you. Rick santelli at the cme. Shark tank star kevin o leery betting big on europe and that is until brexit. Does he still think you can make money in europe . Well ask him. Were live on power lunch with him next. [beekeeper] from bees to business expenses, im in charge of it all. So ive been snapping photos of my receipts and keeping track of them in quickbooks. Now im on top of my expenses, and my bees. Best 68,000 employees ever. Thats how we own it. A massive recall on hoverboards due to the risk battery packs could overheat, explode and catch on fire, like you see there. At least 99 incidents of overheated battery packs been reported to the Consumer Product safety commission. The recall covers more than half a million hoverboards made by ten different companies. Our next guest is someone very bullish on european stocks. I dont know whether hes ever been on a hoverboard before. If you look at shares from the Dow Jones Europe first half of the year, seem to be doing very nicely. Unfortunately that was before the vote in england. Shares down now more than 8 since the june 23rd vote. Kevin oleary joins us, chairman of oshares investments and cnbc contributor. Kevin, i would guess if you liked europe before you like it even more now because you can buy more cheaply. Its true, but when we talk about europe now, we have to differentiate between three major currencies. One is the swiss franc which is doing nothing but going up, and Companies Like nestle are effected by that, they are a Swiss Company and a very powerful one in domestic sales. All the european currency companies around germany, france, italy, et cetera, and then in the unique situation now the British Companies whove had their currency devalued over 10 . And thats where really currently the most interesting opportunities are because while weve got a lot of instability and we had a lot of volatility on the friday and the monday during the brexit voting process, and many of those of us who are invested in europe took advantage of those days because some of the stocks that are on our Shopping List corrected as much as 11 in addition to the 12 of the currency. If you love glax smith klein, you loved a lot more on the friday and monday. But the point is they now have a huge wind at their back. If youre taking a drug from glaxo in new york city this afternoon, youre still going to take your pill tomorrow. And yet that company that has a huge advantage in selling its goods back into the u. S. So im arguing for buying these european stocks for three reasons, number one, their yields are as much as 30 higher on a dividend basis, number two, their p es are 20 less, but theyve got the wind at their back on currency. Thats whats really interesting. Do you favor british domicile companies with that in mind . No. I think when you talk europe you must go portfolio. I like to use indices. I use the ftse russell index, but theyre large cap multinationals, and they sell into the u. S. Up to 88 . Because i cant know, and neither can anybody how this brexit things going to play out. Im fascinated, im watching this thing, it could take four years. No politician wants the job of negotiating the deal. Meanwhile, back at the farm why not buy companies that are selling us domestic products at a lower price. Im not suggesting this is your only strategy, but to own no british or European Companies now, i think is a mistake because i think were only going to get 5 out of the market of which half is going to come from dividend yields and the best dividends globally right now youre going to find in europe and in asia, not stateside. Kevin, what makes you undo that position . Are you worried at all when we keep talking about the possibility of a fullon what we like to say an existential threat to the eu, that the whole thing could fall apart, that brexit was the Tipping Point to signal thats whats on the way . I worry about that every day. And i also take advantage of that fear as a result of kpom pressed p es and lower currencies. My basic theory is the market globally is only going to provide a 5 return over the next two years. You know, we just heard bill talk about 3 upside on junk debt. Thats horrifically low. Im saying equities only give you five now and half of thats going to come from dividends. My basic premise for taking the risk in europe and to a certain extent asia is these companies now over the last 20 years have taken as much as 80 of their sales out of their domestic regions and are selling globally including us in the u. S. And that diminishes my risks somewhat. It doesnt remove it, but if youre trying to find 5 of which half is going to come from dividends, im sorry but it takes you to europe, theres better value there right now. Kevin, you know, you make the case for these exporters in europe. And you make the case well. It almost seems like in the United States dividend paying stocks the case is the flipside. Youre paying a high p e multiple right now for a lot of these staple stocks, one example is kimberlyclark, 47 current p e. Youre paying for negative sales growth in 2016. And youre getting a little bit more than 2 dividend yield and youve got the stronger dollar working against you. So by those metrics, the opposite of that was your positive reasons for investing in europe, can we say u. S. Dividend stocks are overvalued right now . Well, you know, i look at those and i own those stocks by the way, and i look at those p es and i squirm. But the fact is our domestic market even though were hopeful to get 2. 5 gdp growth is one of the most stable on earth right now. Theres a tremendous amount of capital coming from other places supporting those p es. So my new theory, and this changes obviously as we go through these politics and weve talked about it before, but now im 50 in those u. S. Domestic stocks. Im on my way to 25 in european. And for the first time in the last two weeks given the devastation caused by the high yen, particularly in the automotive sector, started to nibble in asia. So my portfolio by the end of this year is going to be 50 domestic, 25 europe, 25 asia. Im hoping to make off that portfolio 5 total return of which almost 300 basis points, 3 , is coming from dividends. I cant think of a better way to derisk myself. And im trying to hedge the currency 50 of the time. Im like everybody else, hunting for yield. Its getting tougher out there. And i dont like the debt markets anymore. I think theyre way overvalued. If you dont like equities, look at whats going on on yields on debt and credits. Its crazy now. Very clearly stated. Kevin, great as always to see you. Kevin oleary. We appreciate your time. Yesterday on power lunch we talked to an analyst who downgraded netflix, another call on the stock out today. We will bring you that. And four other stocks to watch. Thats all coming up in street talk. I dont think ever too much except for cat videos. Im kind of tired of cat videos. That was former disney president and Creative Artist Agency Founder Michael ovitz at the sun valley conference. He was asked by our own Julia Boorstin if there could ever be too much content available. Hes not a big fan of cats apparently. I have to disagree. I love cat videos. Im the classic cliche female who loves cat videos. Thats the most shocking thing ive learned this week, this month, this year. Did you know . I would have never pegged you for a cat video did you know that there is an internet cat video Film Festival every year and its very difficult to get tickets. Im proud to say i did not know that. [ laughter ] ill try to get you tickets for your birthday. Thank you. Time now for street talk, Analyst Recommendations on stocks you need to know about. Netflix, assuming coverage with an underperform rating so technically its a downgrade because the prior rating had been market perform. 80 price target. Main concern that Domestic Subscriber growth will be slower than what the market expects, international will be strong but domestic slowdown will pressure the multiple while the International Opportunity is large it will be a challenge especially in nonenglish speaking and or emerging markets. Local content is expensivexpens subscriptions could be expensive, all potential hurdles. Yeah, if its too slow to download, thats a problem. Tesla, initial demand for teslas new less expensive car is strong. Analysts say this is likely to have dlutive impact on gross margins. Firm lowering fair market estimates from 190 to 212 to reflect this maintaining sector weight rating. Then of course theres all that other stuff. The autopilot death, the other reported by the Detroit Free Press and this stock has been trading like a champ here. It hasnt lost too much ground given the negative developments. I think you have to believe elon musk is like the next jeff bezos, right . Some transformative change agent of our time thats going to reinvent weve had a lot of shareholders. Thats what they believe. Yeah. Thats a longterm horizon. United and American Airlines Credit Suisse downgrading united and american. Yes, stocks are close to 52week and multiyear lows, but it says it thinks several more quarters of disappointing passenger revenue for available seat model lies ahead in 2017. Estimates may have to come down as much as 40 . The top pick in the space luv followed by save, spirit and delta. Charts not looking good. Next stock, Mgm Resorts International union gaming reiterates buy on the casino kpan. Analyst has positive outlook based on favorable dynamics in las vegas and reinvestment into the market. The companys improvement program, union gaming also raising price target to 32. Right now its at 22. 75. The firm says the tailwinds in las vegas should continue to provide growth for mgm. Expects low single digit growth in annual visitation to las vegas over the next two years. And our final two stocks of the day, cabelas and dicks sporting goods, Raymond James coming out incrementally more bullish on both because of june firearm background checks. There was substantial increase almost 29 in the number of checks initiated through the fbi, which is a leading indicator for Sales Performance in the firearm and ammunition category. And that category by the way about 20 of cabelas revenue, about 10 of dicks revenues, Raymond James rates both market perform. Both stocks trading higher today. Silver a hot commodity lately up 22 in the past month. Should you get in now . Plus, oil trading closing for the day. Were going to get the final trades when power lunch continues. Dont move. When it comes to medicare, everyone talks about what happens when you turn sixtyfive. But, really, its what you do before that counts. See, medicare doesnt cover everything. Only about eighty percent of part b medical costs. The rest is on you. Consider an aarp Medicare Supplement Insurance Plan insured by Unitedhealthcare Insurance Company. Like all standardized Medicare Supplement Insurance Plans, it could really save you in outofpocket medical costs. So, call now and request this free decision guide. Discover how an aarp Medicare Supplement plan could go long™ for you. Do you want to choose your doctors . Avoid networks . What about referrals . All plans like these let you visit any doctor or hospital that accepts medicare patients, with no networks and virtually no referrals needed. So, call now, request your free guide, and explore the range of aarp Medicare Supplement plans. Sixtyfive may get all the attention, but now is a good time to start thinking about how you want things to be. Go long™. Hi everybody. Im sue herera. Heres your cnbc news update this hour. Senator bob corker of tennessee has taken himself out of consideration to join Donald Trumps president ial ticket as the Vice President ial pick. Thats according to the Washington Post. He told the post there are people far more suited than he is. Northwestern University Researchers analyzing top rated sunscreens by consumers on amazon. Com found 40 of them did not meet guidelines set by the American Academy of dermatology. Many fell short because the spf wasnt at least 30, or because they were not water or sweat resistant. Mcdonalds usa is expanding its popular allday Breakfast Menu in september. The new menu will include mcmuffin and sandwiches as well as mcgriddles. And Sharp Corporation unveiling a new talking microwave oven that recommends what you should cook. When a reporter told the oven she had an upset stomach, it suggested specific meals that are easy to digest. Also send recipes of proposed menu items to mobile devices. Im not sure i want something that smart in my kitchen. I dont know. Thats the cnbc news update this hour. Michelle, back to you. I dont want a microwave that talks to me. No, i dont either. It would prove a lot of things. I dont either. Thanks, sue. Crude oil closing higher by nearly 2 today after losing nearly 5 in yesterdays session. Theres a new study conducted by Energy Consulting services that confirms the u. S. Now holds more oil reserves than both saudi arabia and russia separately. The estimated Recoverable Oil in the u. S. 264 billion barrels, thats significantly more than saudi arabias 212 billion and russias 256 billion. Managing director of the fatherstar Tortoise Capital and pipeline. What do you say to the numbers besides so what, so there . Its pretty remarkable that in the u. S. Now we are the largest hold the largest amount of reserves in the world. If you think about that, in my 20year history in the Energy Sector, most of the time we were focused on the World Running out of oil. And now in the u. S. We have more oil than anywhere else in the world. Its really a testament to technology and the u. S. Producers and their ability to use that technology. Thats really shows you bhwhy t Energy Sector in the u. S. Is underappreciated. Yeah, and in general when it comes to production and all these malthusiasm, but when it comes to the oil markets though those numbers suggest to me that you could have a lid on prices for a very long time. You know, michelle, low oil prices arent a bad thing. If you think about low Energy Prices around the world, thats a good thing. That keeps economies churning. That keeps consumers buying more and more oilbased products. Demand is really important as well as supply. We dont think low oil prices are bad. We need Higher Oil Prices than what we have right now because the key to those reserves are what is the price resumption youre assuming to get in the ground. We need at least 60 or higher to incentivize u. S. Producers to continue to produce more and more oil. But with all that supply, do you buy stocks at this point that are in the oil sector or the Energy Sector . If youre worried about the price being capped by the potential supply that comes online. Well, the Energy Sector has a lot of positive sentiment associated with it right now. And, yes, i think you do buy stocks. Couple ways to buy some stocks, first of all have you looked at the 10year rate lately . Its below 1. 5 . So high Yielding Energy infrastructure stocks are great way to get involved in the Energy Sectors. What does that mean . I mean mlps like Enterprise Products partners, sunoco logistics, both are mlps, own Energy Infrastructure pipelines, they provide investors 5 to 7 current dividends and they grow those dividends every year. So in an Interest Rate environment where the 10year treasurys below 1. 5 , high yielding infrastructure stocks are a great place to look at for investors. But i assume if when you recommend that you also warn investors who are buying them the yields are high for a reason, right . There was a point when we were talking about mlps being completely dead. We were talking about bankruptcies across the board at one point. So these are a little bit of a White Knuckle or depending on the price of oil. Six months ago they were White Knuckler, today the ones that are left are sustainable dividend yielding, dividend oriented stocks that will pay investors current income thats steady, thats predictable, really the winners and losers shaken out as this years progressed and weve really moved past the long painful commodity cycle that we experienced for really the last 18 months. If you like more traditional and exploration you like pioneer natural resources, tremendously strong Balance Sheet. So when the moments were at their worst talking 25 oil, this thing was at least holding on. Yeah, the great thing about pie ner when you Start Talking about Oil Producers in the u. S. , if youre an investor in this Current Oil Price environment 50 plus or minus five bucks, you want to focus on the perm yan basis Oil Producers, its really established itself as the premiere oil basin in the u. S. And so its low cost nature. Actually, the Permian Basin is like usain bolt before he got injured. So you want to focus on Permian Basin Oil Producers like pioneer that can produce oil at probably 40 a barrel economically and oil is at 45 right now. In pioneers case theyre actually growing Oil Production this year even in this low oil price environment. Got it. Rob, thanks. Tortoise capital advisors. Silver spiking up over 1 today but rising over 22 this month hitting highest levels since 2014. Will silver outpace gold as investors search for safety in commodities. Lets bring in cnbc contributor, jack, great to have you. In fact, this is the sixth straight session of gains weve seen in silver. So forced to choose, gold or silver right now . Right now silver. I think, you know, its on a trajectory that it tells you two things. One, that there is a big mantra of capital preservation thats taking place all across the investment community. And, two, remember theres also a physical need for it, especially in the industrial side. So people are looking at silver right now and wondering if indeed its starting to send that signal saying that maybe all this force feeding of inflation by the Central Banks is starting to work a little bit, at least with precious metals. If you look at the uses for silver you hit it on the head in terms of industrial uses. Its really used for industrial purposes. If we are to believe Global Growth is going to slow down, and thats why we see a pullback in oil prices, a pullback in copper prices, when does that catch up to silver . You know, id say that it would catch up quickly except for the fact youve also got with all of that a coupling with that is a loss of complete confidence in Central Banks. Look, weve got this global addiction to qemelissa. And with that, of course, youre getting everybody concerned. Its becoming this experience for european banks. What were seeing people pouring into precious metals. The brexit vote did a lot to increase the velocity of the move. Over the course of the next several months you want to be buying dips especially when it comes to silver. More than likely you want to stay in these trades through the election. There is quite a bit of madness and uncertainty still taking place. No matter what the dollar does, if the dollar strengthens, could you see this trajectory go higher . Remember rk the fed minutes just came out unless the fed does something drastically different than every other central bank out there, then were probably going to see the dollar to continue what its doing and steady along. If it goes higher and silver goes higher, watch out, thats a danger signal. Jack, thank you. Some old features of the iphone and the blackberry are going away. What does that mean for those two companies . Thats next on power lunch. Welcome back to power lunch. Im michelle carusocabrera. Walgreens Boots Alliance falling today earnings came in better than expected but the stock reacting to a miss on sales. Its off by more than 2 . Lending tree shares continuing to rally. The stock was up nearly 25 in just the past two weeks since the brexit vote. As Mortgage Rates have fallen. Higher today by 4 . And nortek being taken over by a british company, melrose industries, in a deal of total value of 2. 8 billion. Nortek makes ventilation products for homes and businesses including exhaust fans. Brexit didnt hold back that deal. No, you still need exhaust. All right, another Major Company hitting the headlines this morning is apple. The wall street journal reports apples next flagship iphone will start at 32 gigabytes of storage, the previous 16 gigabyte model will be discontinued. Lets bring in brian white, global head of tech Hardware Research for Drexel Hamilton, and diedre bone. Welcome to both of you. Brian, let me ask, you have a big fat 1585 price target on this stock. I think the doom and gloom around apple has gotten extreme. Trades right now at nine times this years earnings. Seven times next years ex cash and a market that trades over 16 times and what i call sugar Water Companies trading 24 times. So i think all this concern about iphone growth turning negative is really comp related. I think once iphone starts to turn positive, i think the stocks going to work again. And i think people ultimately are going to bget a better valuation. Hasnt the stock traded at a significant discount relative to the market multiple for a long time . It has. And i would say this, the big concern apple is going to turn into nokia, next motorola, next blackberry, its not going to happen. If anything i think a lot of their peers are going to go by the wayside. I think its going to take a little patience here. We put a market multiple on apple. And thats very, very reasonable considering their track record of growth relative to the s p. So, deeder, is anyone legitimate in saying, well, what took them so long to go from 16 to 32 gigs in terms of the storage on the phone . I mean, that seems like what you got to do today. Yeah. Absolutely. Its been several years now where weve been waiting for apple to increase the default storage from 16 up to 32. You cant expand the storage on an iphone. And the way apple does photos on the iphone with live photos, theyre very, very big. And so a lot of consumers use the storage quickly. Do you agree there will be a turn in sales when we get to the new model . Thats a good question. While the new storage will be nice, there are other rumors that its going to be thinner, which might effect battery life. Well have to wait and see. And the big one is the rumors theyre going to take out the standard 3. 5 millimeter headphone jack. We dont know yet what theyre going to replace it with. We dont know what their argument is for why getting rid of that is worthwhile. But a lot of people are probably going to be really annoyed by losing that. The thinner it is the less battery you can have hence the battery life would be less. That is a possibility. That would be bad. Its already bad now. Yeah. I carry a battery pack around with me everywhere i go. I use a mofi. Brian, im curious, by going to 32 as a minimum, does that raise the average selling price . Could that help margins at all even on incremental basis . I would be surprised if they raise prices. I think the big story will be the bump up the low end because you cant live with a 16 gigabyte. Its ridiculous. And i think theyll offer a 256 gigaby gigabyte. This is what they did with the ipad pro in march. Lets transition to blackberry on sort of hockey puck old school blackberry, theyre not going to have a physical keyboard pad, its going to go out of production. But on other models of the phone that they make, android phone, theyre going to have keyboards, i guess standard keyboards. Is blackberry ever going to be competitive again . You know, i really dont think so. Not in the consumer market. Theyre making a bunch of android phones. Some have a slide out physical keyboard. Right. Theyre kind of neat. But their ability to get mass market on android and be competitive with everybody else thats trying to make android phones is going to be a really steep hill to climb. I think you can expect them to sell the smaller niches of like enterprise classes people. Brian, what is blackberrys future . Well, thats a good question. I dont see much of a future in the smartphone market. They have some interesting software. They obviously could make a good combination with someone else, but i think as a stand alone company, as a Software Company to me makes no sense at all. So then what happens . Does it go out of business . Does it sell to somebody for the value of the patents and software they have . Well, the interesting thing is the world is constantly changing. Internet of things is a big theme. They could certainly play into that. But on the big picture of this if we bring it back to apple, and that is its these type of companies and theres more of them out there, theres some in china, theyre just going to disappear. And having the ecosystem that apple has is so unique and so differentiated and so impossible to emulate, this is whats going to give apple a huge advantage longterm. So this is a good lesson. This is one company. And i expect there will be more like this in the future. Dieter, what about what brian said android or any other company being able to break the halo effect that gives apple such dominance . I think it will be very tough for anybody to be as dominant as apple in the u. S. Android has a very large Global Market share, but in terms of any Single Company getting, you know, that much shine on their brand, its going to be really tough. The big thing to watch for android in the next 6 to 12 month ss whether or not they can be successful with the next version of android thats going to have more support for vr. Gentlemen, thank you. Brian white of Drexel Hamilton and dieter bohn. The worlds biggest soccer star convicted on tax fraud charges. Will he actually have to go to jail . All that and much more coming up on power lunch. By the time he was 25 he had a booming business called aquascape, but behind the scenes a family drama, the recession and a Building Collapse almost ended it all. See how he turned everything back around on your sunday morning. 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. This is a very messi problem. They were sentenced to 21 months in prison. Under spanish law prison terms under two years can be just patrol. He played professionally in spain. Hes accused of using tax havens to hide income. Huge star in soccer. Huge. Best player in the world by most accounts. Did not win the copa america. He said hell retire from argentine football. That was after you saw the horrific play where he blew it. He blew a penalty, yes, he blew a penalty. He has plenty of money to pay the fines. Thats a small dent for him. Smallest violin in the world for messi. Corn and wheat price have tumbled. Whats with the grain drain . Craig johnson a technical analyst, whats behind the move here in these two commodities . If you look at the corn market the liquidation has continued because rains have just been pushing across the United States. Hitting those key growing regions. Now corn right now is going into a key pollination phase. The pollination phase will determine the end yield of the size of the crop here. Now if you look at the good to excellent rating for corn, 70 is rated good to excellent. If we finish the year on a season like this well have an extra two billion bushels of corn lying around here. So an end user right now where somebody who is looking to import corn like another country, theyre going to continue to wait, watch the crop develop, prices should continue to move down here. So until a trader see as bottom and the end users start to step in well see the liquidation continue. If youre a farmer on the other hand and you havent sold your crop youre putting out additional pressure on the crop right now. So the go ahead. So i was going to say, the other market that you would discuss the wheat market kind of has this layover effect. Wheat right now is harvesting. Were at 58 of it harvested. Last year we had 50 . The problem with wheat is the crop last year was so huge. If you go to a Grain Elevator the bins are full of wheat. A lot of these farmers are getting their wheat turned down and the Grain Elevators if theyre not already full theyre just storing it on the ground. So wheat prices, they may have a little bit more of a slide to go here. You know, so youve got to keep an eye out and watch out, look for any kind offer turn around. I think its the Short Covering well see from those farmers that will drive it back up. Most people out there arent going to trade corn or wheat features, youre taking a look at dba . Exactly. When you look at the dba its interesting. You had a sharp selloff here. Down 6 . Not nearly as much as the 15 selloff you see on the underlying commodities of wheat and corn. 25 of the ctf is related directly to wheat and corn futures. This looks like a shorter term selloff. What ive been looking at the longer term down trend reversal. Youre coming back toen a interesting area of support. We make a higher series of higher highs and lower lows here. Maybe a lot of the bad news is already priced in. All right. Thank you. Phil and craig, appreciate it. For more Market Insights go to tradingnation. Cnbc. Com. Take a look at where we stand right now. Can we pull that up . All right. There we go. Dow is up 63 points, s p 500 is up 9. Were at session highs on the s p 500. Its of note the nasdaq is higher by. 7 . They include campbells soup kellogg, goodyear tire. Valero, 52 week lows, power lunch is back in two. And now the latest from trading nation. Cnbc d. Com. Can a toothpaste do everything well . This clean was like pow. It felt like i had just gone to the dentist. My teeth are glowing. They are so white. 6x cleaning , 6x whiteninga in the certain spots that i get very sensitive. I really notice a difference. And at two weeks superior sensitivity relief to sensodyne i actually really like the two steps step 1 cleans and relieves sensitivity, step 2 whitens. Its the whole package. No ones done this. Crest healthy, beautiful smiles for life. Welcome back. A number of stocks were watching. Deutsch bank, reuters is reporting theyre trying to sell a billion dollars worth of shipping loans in order to reduce their exposure to a sector that has struggled quite a lot. There were a lot of shipping loans that were going badly throughout europe. Nobody had unloaded them. They refused to mark them down. We may start to see this area get shaken out. Before crisis, europe was the epicenter for shipping lending and now the ecb recently said it will take a look at the shipping loans. Oil tankers have been doing okay. We talk today our friend over at nordic american. Container shipping, Bulk Shipping those have been decimated in terms of pricing. Thats where the problem is. Deutsch bank, this is a record low. Record low for deutsch bank. The pain continues, people thinks theres something run on deutsch banks books. If theyve got to sell it mark it down, theyll have to take the mark. Thats true. There you go. Take a look at apple. Two years, after we had the guest on he said he sees is going to 185 from roughly 95. There you see two years the two year return there, 1. 5 a former high flyer thats gone very, very cold. And as always, you know, not always i wouldnt say that. Historically traded at a discount to the market. Youd hear the bulls on apple say its so cheap, Everybody Knows its cheap. Yet the market doesnt give it a bigger multiple. Doesnt that give you pause when Everybody Knows its cheap . Its been there for a long time trading at a big discount. Things can do that forever. Ten years microsoft, for example. 1 gainer. Yeah. Ge. Yeah. Remember them . Oh, yeah. Yeah. Thank you for watching power lunch. Closing bell starts right now. Hi, everybody and welcome to the closing bill im kelly evans. We owe power lunch eight seconds they came to us a little early. Stoc stocks early at declines. Hitting the highs though right now thanks to better than expected Economic Data and the latest fed minutes which indicated rate hikes will likely stay on hold while the full impact of brexit is determined. Among many other things. I tell you what that ism services index, 56. 5, after the manufacturing rate. Well talk more. Imagine if we get a strong jobs report on friday. Thats what im saying. Well talk more about yields