Transcripts For CNBC Power Lunch 20160713

There it is. And you see about twothirds of the dow stocks are higher. United Health Leading the way. And trailing down there, let me see, i cant see over there. Home depot. Home depot. Lets get more on todays market action. Bob pisani on the floor of the new york stock exchange. Hello, tyler. Mixed market today, but something unusuals happened. Oil dropped and the market didnt fall apart. Take a look. We had a disappointing inventory numbers here. It wasnt as big as expected, gasoline inventories went up. Oil dropped a buck and a half in the middle of the day, but look at the s p. Really very moderate response to that. In fact, took a while for it to drop at all. You can see its come back a little bit on top of that. Energy stocks, like the xop, oil and Gas Exploration sector, did drop on that. Its just coming off the lows, but even that its not that dramatic overall. If you look at sectors here back to the slightly more defensive posture with telecom, utilities and Consumer Staples leading, industrials essentially on the flat side. Ive spent the morning talking to traders about what do they call this rally weve had, this new rally breaking out to new highs. We had fang, and stub, theyre calling it febb, meaning all driven by Central Banks. Others insisting the all Old Fashioned tina, theres no alternative to stocks. Thats been around for a while. And finally theres a number of others who insist its a lot of fomo, fear of missing out. They said if we hit new highs, oh its a lot of fluff and no fundamentals. I think i might go for that one right now. A lot of people moving around a lot of action. Bob, weve got to go. Weve got to go to theresa may, new uk Prime Minister speaking out. Asked me to form a new government, and i accepted. And David Cameron i follow in the footsteps of a great modern Prime Minister. Under davids leadership, stabilized the economy, reduced the budget deficit and helped more people into work than ever before. But davids true legacy is not about the economy but about social justice. From the introduction of samesex marriage to taking people on low wages out of income tax altogether, David Cameron has led a onenation government. And it is in that spirit that i also plan to lead. Because not Everybody Knows this, but the full title of my party is the conservative and unionist party. And that word unionist is very important to me. It means we believe in the union, the precious, precious bond between england, scotland, wales, Northern Ireland. But it means Something Else that is just as important. It means we believe in a union not just between the nations of the United Kingdom, but between all of our citizens, every one of us whoever we are and wherever were from. That means fighting against the burning injustice that if youre born poor you will die on average nine years earlier than others. If youre black, youre treated more harshly by the criminal Justice System than if youre white. If youre a White Working Class boy, youre less likely than anybody else in britain to go to university. If youre at a state school, youre less likely to reach the top professions than if youre educated privately. If youre a woman, you will earn less than a man. If you suffer from Mental Health problems, theres not enough help to hand. If youre young, working harder than ever before to own your own home. But the mission to make britain a country that works for everyone means more than fighting these injustices. If youre from an ordinary working class family, life is much harder than many people in westminster realize. You have a job, but you dont always have job security. You own a home, but you worry about paying the mortgage. You can just about manage, but you worry about the cost of living and getting your kids into a good school. If youre one of those families, if youre just managing, i want to address you directly. I know youre working around the clock. I know youre doing your best. And i know that sometimes life can be a struggle. The government i lead will be driven not by the interests of the privileged few, but by yours. We will do everything we can to give you more control over your lives. When we take the big calls, well think not of the powerful, but you. When we pass new laws, well listen not to the mighty, but to you. When it comes to taxes, well prioritize not the wealthy, but you. When it comes to opportunity, we wont entrench the advantages of the fortunate few. We will do everything we can to help anybody, whatever your background, to go as far as your talents will take you. We are living through an important moment in our countrys history. Following the referendum, we face a time of Great National change. And i know because were Great Britain, that we will rise to the challenge. As we leave the european union, we will forge a bold new, positive role for ourselves in the world. And we will make britain a country that works not for a privileged few but for every one of us. That will be the mission of the government i lead. And together we will build a better britain. Theresa may finishing her speech. She is the new Prime Minister of the United Kingdom. A breathtaking pace of events ever since the brexit vote. Using that speech to acknowledge the Economic Uncertainty and anxiety of the middle class of the United Kingdom, of the lower income class of the United Kingdom, which many pundits believe is what drove this historic and surprising decision by the british people and the people of the United Kingdom to vote to leave the european union, guys. We thought this wasnt going to happen until september when the vote went down there was going to be a whole conservative party vote, Boris Johnson was in the lead and then, poof, all up in smoke. He pulled out. Cameron said he was ready to stay on until october but might have even gone to a whole party vote. But obviously the brush got cleared away very clearly. And mr. Cameron, who resided at 10 downing until yesterday, is gone today and theresa may is there. Wilfred frost standing by at 10 downing street. Wilfred. Reporter michelle, thanks very much. Yes, theresa may just arriving here. Shes the 75th british Prime Minister, the 13th of the current queen. And as we well know the second female Prime Minister. Shes 59, 10 years older than her predecessor. And shes come in to say that the true legacy of David Camerons government was not about the economy but about social justice. And that is something she wishes to continue. She stressed very clearly that the name of the party is the conservative and unionist party. And she described the bond between england, scotland, wales and Northern Ireland as precious, precious. So important she repeated the word. And also said that that precious bond existed between all citizens wherever theyre from. She said shed do everything to help people go as far as their talent can take them, whatever their background. In relation to pulling out of the european union, he said she would forge a bold, new, positive role for the United Kingdom in the world. She was standing there as she waved to the Associated Press here with her husband philip may. Now the focus of course is on o who she will choose for her cabinet. One philip, Philip Hammond, current foreign secretary is the favorite to be the new chancellor. But we dont know that for sure yet. But she has just arrived, gone inside to both her new home and new office here at 10 downing street. An historic day here. We woke up with one Prime Minister and of course we now have a new one. Guys. Yep, next stage were waiting for the new cabinet. Wilfred, thanks so much, live from london. Lets get a news alert on the election here in the united states. John harwood is in our Nations Capital with this. Brian, a lot of americans might wish we could choose new leaders as quickly as britain does. And that very rapid elevation of theresa may. But weve got a few months until november when well find out who Barack Obamas successor is going to be. We do though have just new out now nbc the wall street journal marist polls. Talk about the state of iowa, democrats have carried recently, Hillary Clinton has a three percentage point lead over donald trump. Then you look at ohio, thats critical, no republican has ever won the white house without winning ohio. Donald trump and Hillary Clinton are tied in that state. And finally, pennsylvania, the quintessential rust belt state that donald trump hopes to win by expanding his support among blue collar white voters. That was his base in the primaries. Hillary clinton is leading donald trump in this nbc the wall street journal marist poll by nine percentage points, 45 to 36 . These polls come after a very damaging week for Hillary Clinton after fbi director comey criticized her and her team as extremely careless in handling classified information. So given all those facts, is she maybe fortunate that shes got a lead of the magnitude were showing in pennsylvania and in iowa, but donald trump is tied with her in ohio right now, guys. All right. When were these polls done . July 5th through 10th. 5th through 10th. So that was tuesday through, what, sunday . Tuesday through sunday. Exactly. It does capture the aftermath. And the shootings in dallas and baton rouge and minneapolis. Thats right. All righty. Thank you, john. We have a news alert in the bond market right now. 30year bonds up for auction. Rick santellis tracking the action at the cme. Rick, we had a couple of tepid auctions in the 3s and 10s, what happened here . Finally, a good auction. I gave this auction an aminus, an appleminus. Straight up on eastern, that was the demand. 29year 10month issuance. Yielded auction 2. 72, close to the low yield in the wi market. Of course low yield, high price, that was a big positive. If we look at 2. 48 bidtocover almost 2. 5 times subscribed best since september of 2015. 68. 5 indirects. Listen, i know they stopped and restarted issuing long bonds, but i couldnt find a higher number than 68. 5. And a little bit of a reversal down a bit, 8. 4, 23. 1 go to primary dealers. Aminus, this is what they should have been about. Is it because its the long end . Maybe, is it because stocks surge slowed a bit . Im not sure. But whatever it is they certainly did grab on to the longest part of the yield curve. Michelle, back to you. Got it, rick. Thanks so much. Well, even the markets sitting at new highs, citi out with a new note highlighting four investor concerns. Here to explain is chief u. S. Equity strategist at citi. Tobias, certainly these are concerns everybodys thinking about. The president ial election for one. I think theres a deeper more overarching concern about this particular rally and that is how much faith can you put into a rally thats really being driven by negative yields around the world and this notion that people have to be in stocks in order to make any money . The funny part is that most investors have not actually been in stocks. Mutual fund flows, Exchange Rate fund flows since 09 actually have been pretty poor when it comes to u. S. Oriented equities. When we track sentiment still pretty high. So investors actually havent been chasing the market. Which is kind of inconsistent with the market going up. But its been more about stock buybacks, more about mergers and acquisitions, hedge funds, leveraging, things like that. But they have been chasing what they think of as safety, right . Right. So what if safety isnt . Well, thats what i worry about. Theyve been buying some of these defensive sectors paying up very handily for the yeelgds they generate in almost a desperate search for income. And part of it is what was being discussed before with low bond yields, where do we get the income. And the term safety works and the term defensives work if you dont pay too much for it. Then they start becoming a little less safe and little less defensive and were concerned about that. We think investors may have taken this theme a bit too far. Tobias, you say one of the questions youre asked a lot by clients in your note here is how do you invest if trump wins. What do you tell them . So, you know, i first wave my canadian flag and say im not voting in this election, so dont blame me whoever wins. But i think the issue really is there have been some people fear desperately if you have a Trump Presidency theyll be this great pause, everybody will stop. I think its probably an overstatement. At the same token hes also talked about trying to stimulate economic growth, people think hell cut taxes, hell borrow money to stimulate through expansi expansionary government spending. Hes talking about shredding dodd frank, which would be positive for financials. Hes talked about taking away regulation, which would be positive for energy. And i think both candidates probably a bit challenged for health care. Well forget both candidates do a lot of talking, they still have this thing called congress to get through. That aside, tobias, finish this sentence for our viewers. The biggest risk to the s p 500 right now is so the biggest risk that were watching is the nfib hiring intention survey. What . National federation of independent business, which is trade association for Small Business not china. Not brexit, its not trump. Its the nfib Small Business hiring intentions index . Well, something i worry about. Im not going to predict china, brian. Im not going to predict what happens to the yuan. I dont have that capability. So i dont sit and worry about shocks because i cant predict them. I look at the survey of hiring intentions. It has seemed to roll over, very usually a good indicator for employment with a oneyear lap and does suggest unemployment could be rising at this point and time next year. That is a concern. We dont have to worry about it this minute, but if were kind of looking out as investors, not looking out as traders because im not going to pick the next trade. Im not that good. But answer me this, tobias, go back to melissas first question. You say one of the questions, the four questions you get asked, can you get ever higher p e ratios in a world of negative yields . Melissa and i talk about that all the time. We think about it all the time. I mean, in theory when yields go negative, your multiple can go to the sky, right . I mean, how much more can you get out of that multiple expansion can you get, if any . Im not banking on multiple expansion in our outlook for the markets. Could it happen, its a positive, well take it. What im focused on is that question and the reason i wrote the note and said three plus one. Four. That last question well, the reason i put that last question plus one is part of the reason for that question about the yield is can that continue to support the defensive trade. Right. Thats really what that questions about. As opposed to does it support the are you saying no . Im not willing to go there. It could happen, but if it does, we have to see lots of money flow into markets. So what people think conventional safety trades in your view right now are not safe . Theyre not as safe as they were and in some instances id be very worried. Utilities for example are trading on a price to sales basis of 25year highs. Theyre not going to generate 30 earnings growth. They just dont. Tobias, thank you. Good to see you. Thank you. Teslas cheaper model x, chrysler rewarding hackers, and nissan is getting into the race for selfdriving cars. Plus, audis big push carmaker says it has the most advanced vehicle in production. So we went on a special ride to see it for ourselves. All that coming up next on power lunch. Your Business Needs Better Technology to drive better performance. So you need it to be reliable and fast. Really fast. Introducing the comcast business Summer Savings event. Fast Internet Speed to drive performance, plus cutting edge wifi for your employees and customers, and voice mobility so your calls find you wherever you are. Get some of our most advanced products at a great price with over 500 in savings. Call today and ask how to get these savings plus a 250 prepaid card. Comcast business. Built for business. Welcome back to power lunch. A lot of news today in the auto world. Lets get riegght to it. Phil lebeau joins us. Offering cheaper version of the model x crossover starting at 48,000, right . Yes. Following the same strategy theyre using with the model s, put a 60 kilowatt battery, lighter range in there, when they put that in the vehicle they bring down the price by about 9,000, base price, bringing down to about 74,000, thats what its going to be. And remember with that lower range thats the initial range. You can pay extra at some point theyll do an over the air software update, which would then allow them to increase the range on that battery. Again, theyve tried this or are trying it now with the model s. This is all about expanding the range of potential buyers for the model s and model x. Lets move onto talking about Fiat Chrysler talking about hiring hackers. Theyre hiring an outside firm, teaming with an outside firm to say you look for the bugs and the hacks in our system, those Cyber Security flaws that we have in our products, tell us what they are and depending on what you tell us well pay you between 150 and 1,500. Whats interesting about this, remember it was last year that it was a couple of security researchers working with wired magazine where they took control of a jeep and they said, look, were able to hack into this jeep. That led to the recall of 1. 4 million vehicles. And one more story thats getting a lot of attention in the auto industry, and it has to do with nissan and its efforts to join everyone else when it comes to autonomous drive vehicles. Today in japan it rolled out new software and new technology called pro pilot. Basically its their version of autopilot what we see with tesla and other automakers as well. Remember, in january we were in the Silicon Valley with ceo carlos gohn from nissan. We talked about the future, he is targeting selfdriving cars by 2020. Nissan doing what everybody else is doing, starting to roll out this technology, doing it in steps. All right, phil, thank you very much. Phil lebeau reporting. Phil, youre going to stick around as we transition now to audi, which is also making a big push into autonomous driving. I think, phil, youve had experience with this luxury carmaker taking to the streets of my hometown, washington, d. C. , this week giving congressional members and other federal officials a firsthand look at audis Autonomous Car. Cnbc got to take a ride. Heres how the technology works. Programmed to work on freeways. Doesnt have all the antennas and cables and sensors sticking out. It just looks like a car that you can go buy at a dealership today. There are over 20 sensors. One determines it is on the road where it can operate by itself. The car lets me know the motor is available by one of several ways, an audio, there are some l. E. D. S that light up directly in my field of view, theres an instrument that pop up and lights on the Steering Wheel light up as well, they are the a. P. , autopilot buttons. I push them to engage and now the car is driving by itself. All right. Thumbs up there. Joining me, scott kio, audi of america president. And phil lebeau is with us. You call this car, jack, is that right . Thats right. I dont know jack about Autonomous Cars to the extent that phil does, but i guess my simple question for you is what does the current iteration of these cars, what can they do . And what can they not do . You know, thats a good question because we think theres a lot of over hype in this industry. If you look at it similar pl simplistically, the car youre seeing there jack does not exist as a Consumer Product today and its level 3. Everything youre seeing or what most people are mentioning today have some form of assist. For audi what does that mean . Basically it has all the sensors, it can brake, it can stop. It can only steer for limited amounts of time in traffic. But, again, theres a lot of over hype id say a fully Autonomous Car is going to be here in x and y years. We think its a step by step process. The first car that will achieve level 3 will be an audi. It will be a8 and launched in 2018. Fully autonomous, i think, is going to be much further out. 2023, 2025, that timeframe, from what we can see. So if im interpreting what youre saying correctly, and i know everybody wants to jump in here because were all very interested in this topic. Todays cars could not reliably pilot me around Columbus Circle in new york city or Dupont Circle in d. C. , or trafalgar square, right . Absolutely not. They can level 2, what i said. And for the audi what its capable of doing is traffic pilot, so it basically keeps you below 35 Miles Per Hour. And you must touch the Steering Wheel every 15 seconds. So, again, its intended to be working with a pilot, you being the driver, not fully autonomous. And thats, again, where theres a lot of pt im sorry to jump in, but it is a topic we all have an interest in. Give us a year, im going to put you on the record right now, what year will it be when we see the first real fleet, not tested but, you know, michelle goes and buys one, fully driverless car, what year will that be . I want to sit in the backseat of that car. Take me to jack in the box, jack. I hate to get into similarse. Get in the backseat, tell me what year. The answer, a very, very long time. Thats not a year. 2025 and beyond. There you go. Hey, scott [ overlapping speakers ] you have infrastructure issues. You have to have proper markings. You have to have a whole assortment of things. Later rather than sooner. Yes. Again, theres a lot of over hype [ overlapping speakers ] phil, in my lifetime, ill take it. I never thought in my lifetime id see Driverless Cars. I think more people agree with you. Go ahead, scott, what were you going to say . I dont think we should be too cynical because the way were looking at it is, look, when we launch this level 3 car, which will be the first, with the a8, it will handle 60 to 70 of what we call normal driving needs. When you think about it, the issue is not driving around your driveway, driving around your local neighborhood, its when youre stuck in tedious traffic, someone who lives here in virginia, lives here in d. C. , theres a lot of that, thats where this is going to come to life. So i wouldnt focus on the 10 that it doesnt cover. I would focus on the 60 to 70 that it does, which is the most tedious and frustrating driving. That to me is the point. And its going to do it safely. Phil, im curious what your thoughts are and go to scott as well in terms of biggest obstacle fully autonomous vehicle, is it more infrastructure side or Technology Side of the equation . I mean, we know for instance in that fatal autopilot crash that it was because the technology to handle lateral collisions does not exist, according to mobile eye, and will not exist until 2018. So there are just some shortfalls right now in the technology. But is it really the city side of the equation that will cap the trajectory progress . I think its the technology is not the Biggest Issue right now. It is the infrastructure. And it is the education of the public. Youre taking people who have been used to driving a certain way for more than a century and youre saying to them youre going to have to change how you view driving. That is one part of this that is going to be slow in coming around. Sure. And the other thing to keep in mind is this is a messy transition. There will be somebody who is hit and killed by a car at some point by a selfdriving car or an autopilot car, regardless of the maker or whoever the manufacturer is. When that happens, you will hear how. They will focus on one incident. Theyre going to try to sue the manufacturer to within an inch of their life, right . Absolutely. We have to look at the Higher Ground here. First, i agree with phil, it is a combination of three entities. Its obviously us, the manufacturer, the consumers in having the trust to go along and then of course the government with the infrastructure, the laws, the regulations. But lets not forget there have been some form of Adaptive Cruise technologies in audis for over seven or eight years. Customers are paying 6,000 to 7,000 for this technology. If you look at government, they said some of these brake guards, some of these Adaptive Cruises have saved 300,000 lives. When you look at that number, have to take the Higher Ground. Its technology. Were innovating. This is what audi does for a living. You get it accepted. You get it embraced. It gets better. Thats exactly whats going to come here. Scott, on that note, can we go back to that, youre stuck in traffic, bumpertobumper, when do we get to the point where were stuck in traffic, bumpertobumper, my productivity is going down the tubes, i can actually read emails, read a book, do Something Else, is that coming sooner than the level 5 . That will come with level 3, so you will still need to be behind the wheel, so you cant be in the back. But of course in that situation as long as you are in that position, the car is under 35 Miles Per Hour obviously all the markings and sensors are working that will come with the audi a8 first car with level three technology which no car on the road has today. But it probably wont be legal for me to read my emails while im doing that, right . Because all the rules about texting and et cetera, et cetera while youre driving. Youre precisely right. These are exactly the conversations. Good example right now new york state has a rule where you martin soong have one hand on the wheel. Thats why were doing these demonstrations right now in d. C. Were working with the federal government and obviously with the states. Wed like to have one common set of regulations that we can then go innovate. Very quickly, how good are these cars going to be in hazardous conditions, ice and snow when some of the sensors get covered by ice and snow . I have a very simple philosophy, audi sells 1. 9 million cars a year. Weve been around for 100 years. We dont put things on the market that dont work. If that situation cant be handl handled, and again, we train for the worst case scenario, not a sunny day scenario, the car wont be on the market. Its as simple as that, if it cant do it, we wont sell it. All right. Enjoyed talking to you. Thank you very much. Phil, also. Remember that katie couric advertisement where she asks whats the internet . Very good point in terms of consumer education. And elon musk has said now theyre going to redouble efforts on consumer education. So you wonder how much of that education is actually going to benefit the auto manufacturers who come a little later in technology on the market. Lets be clear, a salesman, i know tesla has a different model, but a salesman is a salesman and that person wants you to come in and quickly purchase the car. The more time you have to think, the worse it generally is. If you have to sit in some class for a couple michelle, we want to put you in that new model s, but first you have to watch this fourhour instructional video on how to work autopilot. You might change your mind. I dont know about that. You get my point. The industrys going to be like, whoa, theres risk to everything. We shouldnt have to literally tell tyler everything. You know, i have two cars that have variations of Driver Assist. Well get to the generic break here in just a sec, i want to make a final point. Im not being mean here. My little warning lights tell me i cant merge. Its too dangerous to merge. But my human brain knows that i can merge. That i know exactly how to cut this car off in front of me. Like humans get into accidents more. So humans are going to override those Driver Assist things because theyre too impatient. And if you need, again, this is going to be a driverless show if we keep blowing breaks like this. To your point, if anybody out there just coming from wisconsin this past week where theres no traffic. Come back to new york, if the Driverless Cars are going to require a certain amount of safe space to merge, youre never going to have it. Youre never going to have it. Anybody of our audience that is right now on the radio getting into the lincoln tunnel, they understand, you just got to go. And that dude has got to move over. Thats how it goes. If my bumper is ahead of yours, i win. Thats right. If theres a fleet of Driverless Cars out there, then there will be that space. Driverless power lunch coming back after this. Your logic is mind boggling. Youre right. The first stock index was created over 100 years ago as a benchmark for average. Yet many people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Its time to bench the benchmarks. Thats why i run on quickbooks. Details. I use the payments app to accept credit cards. And everything autosyncs. Those sales prove my sustainable designs are better for the environment and my bottom line. Thats how i own it. Welcome back to power lunch. Rick santelli here live on the floor of the cme group. Look at an intraday of 30s. We had a great auction. I gave it an aminus. You cant pick it out of that chart. Yields are exactly the same before the auction 35 minutes ago. Twoday of 30 slightly elevated. If you look at a mid june start to the dollar index, weve been unable to get a real significant close over 96. 5. You look at the fiveday, intraday weve pegged it but we keep backing down. Thats what traders are looking at on the charts. Now, power lunch will return after a few commercial breaks. Rock crawling is a great activity. Its a lot of fun. Its exciting. Its exciting. male 1 you get to explore, you get to see things that people dont get to see or do. announcer at truecar, we believe buying a car should be as fun as driving one, so well help you find the car you want and show you what others paid for it. male 2 once truecar came into the picture, thatsthats where i go now. It was just such a quick, easy experience that i just go back to them. announcer discover for yourself how easy carbuying can be with truecar. Cnbc news update sponsored by comcast business, comcast business, built for business. Hi. Im sharon epperson, heres your cnbc news update for this hour. Britain has a new Prime Minister. Theresa may accepting the position from Queen Elizabeth ii at buckingham bapalace today. May becomes the second female Prime Minister in british history following margaret thatcher. She replaced David Cameron seen leaving 10 downing street for the last time. He made the short trip to Buckingham Palace to tender his resignation to Queen Elizabeth. Before he left he made a brief statement about his six years in office. I said we would confront our problems as a country and lead people through difficult decisions so that together we could reach better times. Its not been an easy journey. And of course weve not got every decision right. But i do believe that today our country is much stronger. The cdc says the risk for zika transmission will be low for visitors to the olympic and paralympics games, thats because august and september are actually winter months in the Southern Hemisphere where cooler and drier weather reduced mosquito populations. Barbie has a new running mate, its not ken. Mattel rolling out a new president barbie doll that comes with her own female Vice President as part of the first allfemale ticket. The dolls retail for 24. 99 and available in six different skin tones. Thats the cnbc news update at this hour. Back to you. Game developer barbie, president barbie. Exactly. Cool. Thanks, sharon. Take care. Stocks giving up gains not before the dow and s p 500 hit new intraday highs. So what do you do now . Joining us, managing partner at harris financial group, guys, good to see you. Burns, what do you think . Can we move appreciably higher from here now that weve finally broken above that 2100 in the s p . We believe that we will continue to move higher somewhat, but its going to be a lot more muted. The analogy i sometimes think of i guess timely with the olympics coming on, you might watch a sprinter just blow through a finish line whereas you watch the marathon and the runner hits that finish line and they can very, very quickly slow to a walk. And so i would argue that with as far as the new records topping out for the s p, its probably going to go through those records more like a marathoner than a sprinter. Theres a couple of things, i think, that have us wary as far as how quickly they can move going forward. A couple things we havent seen in a long time, one of that is the flattening of the yield curve is something that typically tends to predict recessions. Right now the yield curve is the flattest its been since 2008. And just in todays the wall street journal it was interesting there was a whole article increase in share buybacks, which in theory is a good thing for the markets, but companies dont necessarily always have good timing. It can sometimes be a contrarian indicator. I got to looking after i read that burns, hold on one second. I want to get jamie in here. We talk about those issues a lot. It is the decline in yields actually that a lot of people think is the reason why the market can go higher because people will seek some other source of appreciation rather than the bond market. Would you agree with that, or you think the market stalls out here, jamie . I dont think it stalls out here. Merrill had a piece out today show 60 of the companies have dividend yields greater than the 10year treasury. Thats proof enough people are going to continue to buy stocks. I mean, you can go all the way down the line, health care, financials, you get the pick of the litter with companies that have yields greater than the 10year treasury. That lends itself to people wanting to buy stocks. So i dont think that were at the end of this. Also, weve actually only seen four other three other times in history where the s p 500 has been 3 below the 50day moving average and then rocket to be 3 above the 50day moving average. Three times, october of 11, march of 2009 and june of 2009. And those were all three good setups for markets to move forward. So if historys in guide, i think were probably at a good place. I think people should consider the markets to go higher from here, not lower. Okay. So youre neither overwhelming bulls, but generally constructive, positive whatever it is we say these days, guys. Thanks so much. Burns mckinny with nfj investment and jamie cox. Go to powerlunch. Cnbc. Com see another large cap stock burns is betting on right now. Power lunch is back in two minutes. Or stop to find a bathroom . Cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis and a 200 savings card over the past two days we have revealed the top states for business. If you missed it, the beehive state, utah coming in as the number one place to do business in america. But if there are top states the immutable laws of television physics say there must also be a list of bottom states. Scott cohn joining us now with the lovable losers. Lovable they are especially if you do live there, scott. Ten categories of competitiveness and you know now who comes out on top, but lets look at who brings up the rear. Maine comes in 46th this year, down from 44th last year. By the numbers, maine workers are the least productive in the nation. Infrastructure is lacking and the economy is barely moving. In 47th place, a tie, mississippi drops from 43rd place last year, the worst economy, worst for technology and innovation, though it is the cheapest state to live in. And west virginia, its an improvement from 49th place last year, but the state still comes in next to last for technology and innovation and business friendliness. Number 49, hawaii, which was americas bottom state for business last year. It is still the most expensive state, but that does buy the best quality of life. Americas bottom state for business has a crumbling infrastructure, high costs and a struggling economy, and it has never finished above 48th place, rhode island is americas bottom state for business 2016. Now, they are doing a lot to try and change that in rhode island. We spoke last week before the rankings came out with governor gina ray mondo. You can read all that and see what theyre doing particularly on the infrastructure on topstates. Cnbc. Com. Where i am today is what were calling the top of the tops. This is the state that has the best cumulative score over the ten years weve been doing this, i dont know if you can tell based on where i am where this might be or based on watching our studies over the last decade, but we will reveal that today on closing bell. We always want to hear from you. Topstates. Looks like a set out of the old twilight zone. Give us a hint . Its got to be texas. Throw you off. I remember, on the first one i was managing editor at the time and he had this idea to do this and i said lets go do it. And i remember texas has been up there third, fourth, fifth so you have a competitive advantage. I have a competitive advantage. Ive actually paid attention to scotts work. We all paid attention. Scott, we all pay, first off. Melissa, when are you going to tell the crowd yesterday in a commercial break i said i bet its utah. Thats true. You did. People are like you peeked. No, they keep this thing locked down. Look at all the technological but, scott, when you came up is that whats become of providence, rhode island . Behind you. Well, yeah. Smallest state also by the way, good trivia question, the longest name. Rhode island oh, wow. Good trivia question. Looks like a shantytown, scott. I may have to come back to you for hints next year, brian. You know why its the beehive state . Youre going to tell us. Has nothing to do with bees except theyre thrifty and hard working and utahans believe they are thrifty and hard working so adopted the bee as their symbol. Industriousness. All righty. Up next, what do these have in common . The big money answer when power lunch returns. Youre making money now, are you investing . Well, ive been doing some research. Let me introduce you to our broker. How much does he charge . I dont know. Okay. Uh, do you get your fees back if youre not happy . dad laughs wow, youre laughing. Thats not the way the world works. Well, the worlds changing. Are you asking enough questions about the way your wealth is managed . Wealth management, at charles schwab. Can an established bank move like a startup . Its a question we get from some of our largest banking clients. The face of their business was tellers. Then atms. Today its their mobile app running on the ibm cloud. Across every transaction, the hybrid cloud helps their data move quickly and securely. Our clients are building out features and pushing updates faster, on five continents. With the ibm cloud, they can move at the speed of any startup. With the ibm cloud, in a world held back by compromise, businesses need the agility to do one thing another. Only at t has the network, people, and partners to help companies be. Local global. Open secure. Because no one knows like at t. 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. Before the break we asked you what do call of duty, turbo tax and doritos have in common. All hitting record highs. Act vision blizzard hitting high. Its pulled back since then now negative territory. Peps kico hitting highest level since its merger with fritolay. Also hitting new record before the pullback. Stick around, minutes away from some potentially market moving news from the Federal Reserve. Power lunch will be right back. Then your rates go through the roof. Perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. And if you do have an accident, our claims centers are available to assist you twentyfour seven. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. After a flee day record setting rally, stocks have taken a bit of a breather today. The Dow Jones Industrial average is up, but its up three points. Still, its up. So its technically another high. The s p 500, nasdaq are down. But we have two market guests with us right now who can make sense of whats going to happen, not what has happened. Chief investment strategist and Portfolio Manager with mfs, nearly half a billion in assets under management, and richard bernstein, ceo and cio. I guess you got my point of my sloppily spoken intro. What has happened is nice. Our viewers care more about what is going to happen. How do you see the next six months or so playing out . Well, brian, i think were actually quite bullish. Weve been quite bullish the past seven years. Weve been arguing this is one of the biggest bull markets if not the biggest bull market of our entire career. And were still pretty bullish. I think if you look at two things, number one, is the fed going to be more benign than people think . I think the answer is probably yes. And number two, is the profit cycle troughing . The answer to that is definitively yes. The worst of the profit recession was the Fourth Quarter of 2015 and profitabilities already starting to improve. If you believe those two things, it says you have a pretty good backdrop for the equity market. Well, do you think though that if the fed is not benign, lets say they raise rates in july i mean, the meeting in the next two weeks probably wont but september or whenever, is that going to kill the rally . Well, theyre not going to do that. Theyre not going to do that if growth is extraordinarily poor. So if they are raising and they surprise people, i actually think the surprise will be everybody will know its coming. The economy will be so strong, people will say what took the fed so long. So if i hear you right, the reason for a rate hike if we get one would supersede the potential negative impact to everybody but the financials, i guess, from the actual rate hike. Absolutely. The fed is in no way going to kill the economy, which seems to be most peoples fear. Yeah, okay. I thought everybody else no, its fine. I love your drive. Autonomous vehicle. Yeah, lets talk about, are we staying on this segment or are we going to Hampton Pearson in washington, d. C. Just so the audience doesnt think were insane, we have the beige book coming up and so you hate to ask a question and then cut the guest off, so notice what im doing right now is randomly putting words together in order to eat time. Its not as good as eating a corn dog or chili dog. You want to give jim 20 seconds to see what he had to say on the market . I screwed up. Jim swanson, quick market comment, will the fed kill any rally in the stock market . No, they wont kill the rally but what is going to kill it is the lack of Pricing Power in these companies and expenses in the u. S. Are starting to rise. I think margins are under pressure. Okay. Lets get now to hampton. Economic activity continued to expand at a modest pace in most districts from mid may through the end of june. Labor Market Conditions remain stable. Employment continues to grow modestly. Wage pressures remain modest to moderate. Price pressure described as slight. Consumer spending positive, however with, quote, some signs of softening. Manufacturing activity mixed but improving. Real estate mostly strengthened including banks reporting overall increases in loan demand. The outlook generally across broad segments of the economy including retail sales, manufacturing in real estate the districts reporting overall growth to remain modest. Now, back to those wage pressure concerns. Strongest wage pressures as for skilled positions in cleveland, chicago and san francisco. In the Construction Industry in philadelphia, cleveland and san francisco. As far as those signs of softening consumer spending, slight retail sales declines in philadelphia, cleveland and richmond. Modest to moderate tourism growth in most districts, however it was tourism spending and growth was described as sluggish in new york. Energy firms downsizing in several districts. But however the outlook for oil and gas reported as improving in kansas city and dallas. Now, boston and chicago districts did raise concerns about brexit, specifically in boston, the brexit concerns were tied to a possible Downside Risk to Overall Economic growth in the future. In chicago those brexit concerns were tied to volatility in the banking and financial sectors. Back to you. All right, Hampton Pearson with the beige book. Jim swanson, well get back to you. Overall a sort of modestly positive beige book if you will. Any change in your outlook or strategy because of what you just heard from the Federal Reserve . Not based on what ive just heard. I would say this is a moderate growth story. But now companies are under increasing pressure, were running out of labor. I think we have to remember this cycle we saw record high profit share of gdp and record high Free Cash Flow from these companies. That is what drives the market over long periods of time. I want my clients to follow that and not what Central Banks are doing. So that is weakening. And the companies that are showing themselves in the Second Quarter earnings season are not showing much better in terms of margin or profit. So i am a bit concerned here about the market. Okay, quickly, richard, you are bullish. What are you most bullish on . Give us an investment idea before we let you go. I think if you believe the profit cycle is troughing, as we do, you want to buy Cyclical Companies in the united states, that would be energy, that would be materials, that would be financials. Its anything that has a cyclical component to it. I think you want to stay away from the safe haven companies that are actually quite expensive now. Jim swanson and richard bernstein, gentlemen both, thank you very much. Do appreciate that. Lets now get reaction to the beige book with Steve Liesman and diane swonk joining us, founder and ceo of ds economics. Steve, modestly positive a Fair Assessment based on what hampton said . Two ways to dissect this. The first is try to put a number on what this means about gdp. To me this is right in line with the 2 gdp. Weve had no reason to think the economy is accelerating or decelerating based on the anecdotes collected. What does it mean for fed policy . It seems to me even a little more dovish when it talks about wage pressure being relatively modest, to add some stuff in the prior one about some wage hikes out there. Im not seeing that or hearing that in the detail that reported or wires. Ill have to dig more into the details. But, again, what we had we had 7 of 14 fed speeches so far this week. Were at the Halfway Point on fedapalooza and the story is were not seeing any change, take the summer off, reconsider in the fall. Diane, do you agree . Absolutely. I think this is a more modest and i do agree with steve more dovish report than i expected especially on the wage side. That gives the fed a little wiggle room, although i think their data dependency has lost a lot of credibility out there. I think its important to understand that the fed is looking at its interesting they threw that brexit comment in there for boston and chicago given it really wasnt getting much traction even in Financial Markets when the surveys were taken. So im surprised that that was in there although it was obviously a factor in the feds delay. And the fed has a lot of comfort now to sort of say, listen, external shocks could still hit us, were not as steve said average growth, you have to average it during the first half of the year. It is right in that range. And thats what the fed is looking at saying were not booming here. And as long as were not booming, were willing to hedge to the downside and stay on the sidelines. Educate me a little bit, steve, on the timing of these surveys. Yeah. Always like to know when actually vsh contemporary. Are they . The fed helpfully reminded us some Oil Companies had layoffs. That started two years ago. I think it finishes this is july 2016 . Does it take two weeks to put this together . Yeah. So its up until the two weeks before i can get that, obviously. Yeah, usually its about it was definitely prebrexit. It probably was beginning to be part of the market volatility that we saw, which is why i think chicago and boston threw the question in there. Although i didnt expect them to. So im surprised by that. I used to be part of the survey so i do know how its done and collected. But that was a surprise. The other part that was surprising was that wage situation. This is something weve been watching really closely and i think underlying wages are picking up. I also think interesting the new york story and the pullback by tourism from abroad. I think thats one of the issues thats really hitting new york now is, you know, what once was a real buoyant factor for new york foreign visitors and foreign tourism, that from china, russia, europe, thats not happening anymore. Diane, i have this idea, just be my travel agent for a second here. Im just back from japan and still jet lagging. I feel like if i have to go cover the Federal Reserve then i can probably come back, you know, some time when the data starts to get serious in september, right . Because i dont think theyre going to theyre not doing anything in july. August theres no meeting. Were going to jackson hole, report there he wants to go fishing, diane. I want to fish and i can ask you about places for ideas, but mostly im looking for time. And i think there are people on wall street looking for time given what theyve been through the last couple weeks or months here. Can we begin to think about reconsidering in september . Actually, im not sure. Because theres still a big election here in the united states. So they wont even think about it in september. Even longer. I think its even longer than that. Whoa. I think the election and the uncertainty on policy surrounding the election is important. This is something i feel like an emerging market economist all of a sudden. I used to know emerging market economists talk about politics and what it means for the economy, thats where we are now. I want to stop you there now because this is interesting, there will be charges the fed will play politics. But thats not it. I know. Its as if i understand what youre saying, but thats not it. The election in the u. S. Same as a brexit event. Exactly. I just got back from a meeting which Chatham House rules but i can tell you in general with over 30 people, policymakers, economists from around the world in japan, mostly from europe, and the two number one concerns for the Global Economy was china and trump. It wasnt brexit . Brexit was a very big concern as well, but those werent the two biggest things going forward. Diane, does anybody, or steve, does anybody expect the next beige book to actually Say Something like fed officials in kansas city report steakhouses were down because of the brexit . Is anybody going to actually report any negative impact of the vote . [ overlapping speakers ] we saw that from oil, it was an excellent indicator of what was going on in the oil patch. It was contemporaneous with your reporting, brian, but when there were layoffs in the oil patch, the beige book was talking about it. When there were troubles in finance, beige book talked about it. Im not knocking the beige book, i dont think Business Owners oh, thats your point, yeah. The other side Business Owners say, diane, i cant sell you a pair of shoes because i didnt stock up because i was afraid of brexit. Think about where its going to come through, stronger dollar, flight to safety, low bond yields, those things, squeeze on bank margins, flattening of the yield curve, thats where its going to show up. And thats where, i think, certainly banks will understand that and will be responding that way. But on the other side of it manufacturing to have to deal with yet adding insult to injury. Diane, i want to answer that, which is one place it would be meaningful and we havent seen this yet, its in here a little bit, is if the context of the Federal Reserve and big businesses start to get nervous or anxious or otherwise change their investment spending or employment plans, thats why you would use these things. Steve, one of the points in the beige book was hesitancy on hiring, which was surprising. Thank you, diane swonk, excellent economist and travel agent. Thank you, guys. Okay. We were just talking about the issue of politics and what it does to the economy. Well, venezuela a military general has been elevated to the number two position in the venezuelan government by nico s nicolas mauduro. Elevated to the mostly civilian cabinet. The military now in charge of distribution of food and medicine. As of last night theyve taken over all the ports in the country. Reuters reports padrina went on television yesterday and said he did not liking have the military to intervene in nonmilitary affairs but theres a need for discipline and order. All saying they are reducing their presence dramatically or just getting out completely. I spoke with political analyst from ihs. He says in the case of this military general, the word coo, which may be thrown around may be too strong, but the venezuelan government was already highly militarized and at this point he thinks maybe the current president is trying to harness logistical capacity of the military because its desperately needed. Speaking with bond traders this hasnt moved venezuelan bonds in an appreciable way. That could mean markets dont expect any major changes in the countrys attitude toward paying its external debt which right now has a yield of 49 for a bond due in 2027. If you take venezuela out of the emerging markets, theyve been doing pretty well lately. Seema mody is tracking the much better side of the picture for us. Thats right, michelle. Many have been surprised by the recovery in stocks post brexit. But just check out the price action in emerging markets. Indian equities up about 5 . China despite disappointing data overnight which indicated weak demand for chinese goods, stock market bear up about 6 since the brexit. Russia, dollar denominated terms up more than 7 even though oil has faltered in the same amount of time. And brazil higher by around 10 driven mostly by politics, the acting president there introducing new reforms. Overall blackrocks jeff yen who manages about 200 billion says the political volatility in europe and the policy uncertainty in japan has major emerging markets to be a bit more attractive on a relative basis and one of the theories perhaps helping emerging markets outperform. So far this year emerging market etf up overperforming the s p 500 up just about 5 in 2016. Michelle. Got it, thank you, seema. Are there opportunities in the emerging markets e. M. . Lets bring in paul christopher, head of Market Strategist at wells fargo. Where does e. M. Fit into your Asset Allocation . Should people be heavily exposed to it right now, less exposed to it . Less exposed to it, michelle, right now. Weve taken the step of reducing exposure in small caps here in the u. S. And emerging markets because theyre simply the most volatile equity asset classes. And we do expect some further political volatility in the months ahead. Having said that there are some places in emerging markets we like a little bit better than others. Such as . Well, emerging asia for example. We think theres been a strong play so far this year on the commodity rebound. We dont think thats going to last. What probably is more lasting is the rebound in trade since early this year. Very sharp contraction late last year, early this year. That has rebounded. We think that benefits asia at a time when the commodity benefit is about ready to peter out and turn southward. And that puts latin America Closer to the bottom of our list. How do you define emerging asia . Obviously you exclude japan. But are you talking about indonesia . Where . And how are you doing that . Should people buy an index . Should they actually buy stocks in those countries where there isnt as much liquidity as you expect in u. S. Stock market . Thats a good question. So think of emerging asia as not australia, not new zealand, not japan, not hong kong, but southeast asia, so the countries you mentioned, indonesia, malaysia, thailand to some extent vietnam though some indexes put that in the frontier basket. Little bit further lower. You might include some cases korea this that group as well. India of course and china would be the big heavyweights. And how . Are you buying bonds . Are you buying stocks . Yeah, yeah, look, we like the bond market in dollar denominated terms. Because we think with the rebound in trade youre not really going to have so much of a credit risk, but we are worried as commodities turn lower emerging market currencies could become more volatile, so we prefer the dollar denominated etfs or funds that would broadly invest across those countries in emerging asia. Also on the equity side. Got it. Paul, thanks so much. You bet. Heres what else is on the menu for power lunch. Private equities role in the housing market, is it helping or hurts . Plus, does Silicon Valley have a discrimination problem against Older Workers . And which business in cleveland is expecting a boom when the Gop Convention comes to town . The answer is really kind of funny, when power lunch continues. All right. The recent drop in Interest Rates has encouraged people to refinance their mortgages. Lots of them. Refis up 11 in the latest week, this according to the Mortgage Bankers association. And staying with housing, housing and urban Development Secretary Julian Castro is testifying on capitol hill today about troubled home loans that were sold to private equity firms following the housing crisis. Diana olick live in washington with that part of the story. Hi, di. Hi, ty. The government sold just over 100,000 of its troubled fha loans to private investors in a program that started in 2012. The idea was to rid the fha of the problem and refuel its Insurance Fund with the proceeds. And the rationale was that deep pocket investors would foreclose on fewer homes. If they do their modeling correctly, these investors actually have an economic incentive, a profit motive to keep families in their home, so that we can keep because basically keeping them in their home is more profitable than going through the lengthy foreclosure process. But the program has come under fire recently in part because investors did foreclose on some of the homes. Now, hud is changing the rules requiring that private investors consider reducing the amount of the loan as part of the modification. Hud is making it harder for investors to reduce Interest Rates only temporarily. It is prohibiting investors from abandoning properties, and it is making it easier for nonprofits and Community Groups to buy the loans by making smaller, cheaper loan pools that these groups can afford. Now, these rules only apply to the sales going forward, but before you go saying that the crisis is already over, there are still 390,000 homes in some stage of foreclosure, and 1. 1 million mortgages are considered seriously delinquent, that is at least 90 days past due, tyler. All right, diana, were going to have you stick around to join us as we discuss this a little bit more. And for more now on the role of private equity in the housing market, lets bring in sarah edelman, welcome. Good to have you with us. Thanks. Great to be here. Do you believe broadly speaking that the private equity companies, the investors that have bought these loans have acted responsibly, or not . And if not, why not . Well, look, i think part of the problem is that we have very little data about how theyve acted. And there appears to be, you know, some companies that do a better job than others. So what many of our organizations have been pushing hud to do for the past do a better job of what . Keeping people in their homes . Keeping people in their homes, but or making money . Keeping people in their homes and when the home cant be saved rksz taking care of that foreclosed property so it doesnt become a blight issue in the neighborhood. Or, you know, making sure they dont walk away from Vacant Properties leaving local governments to clean up the mess. Diana, you reported that this effects specifically a small slice of the homes, 100,000, you said, were sold to investors. When you mentioned the 390,000 homes are in partial or full diz closure and 1. 1 million are serious delinquent, whats the overlap 100,000 sold to private investors and the ones in foreclosure . Were talking specifically here about fha loans, these are loans backed by the government and insurance program. The vast majority came from Fannie Freddie and of course the failed bank loans sold in Mortgage Backed securities that all tanked. That all came under the realm of the banks. The banks were much more regulated when it came to modifying the loans and reducing principle and doing what they could to save borrowers and notes, all sorts of legal settlements that involved the banks. What the issue here is that the government loans that were sold to investors did not fall under those settlements that the big banks did, therefore they havent been policed in the same way. That said, these investors have saved a lot of borrowers. Its just that some of the homes couldnt be saved. And id be interested to know, you know, do we really think all of these homes could have been saved, sarah . Or do we think there were some certainly either were abandoned and had to go to foreclosure . Did investors have any other choice . Sure. Absolutely not all of these homes are going to be saved. What we want is a basic set of standards so we have a floor of standards so companies are doing right by homeowners. They are not going to be able to save all of these homes. Thats for sure. But if you look at the standards for instance over on the loan sales that fannie mae and freddie mac have, much higher standards. The fha kind of brings up that floor of standards. And many investors are already doing good work. Some are probably not. And so this basically just helps cover the bases so there arent problems. All right. Thank you very much, sarah, we appreciate youre being with us. Diana, always good to see you. Michelle. Thanks. Now to wilfred frost in london with a news alert. Wilfred. Michelle, thanks very much. Yes, George Osborne has resigned as his role, no longer the finance minister in the uk, and Philip Hammond has replaced him. Philip hammond was the foreign secretary, hes now the chancellor. And he was the first to arrive here at 10 downing street after theresa may became Prime Minister. He like theresa may seen as a safe pair of hands taking over. The other big, big surprise is the second person to arrive after mr. Hammond was Boris Johnson. Of course many people thought his career was in tatters after he led the leave campaign and then couldnt mount his own bid for leader. But he seems to be the second person on Prime Minister theresa mays hit list, and one could only assume that would mean he is in line for a top job. Offices kountded would be foreign secretary of home secretary. Philip hammond vacating foreign secretary to become chancellor, but perhaps thats the big announcement here. Osborne no longer a member of the government. Boris johnson, that is intriguing, absolutely. Wilfred, well keep watch to see what comes of that. Wilfred frost in london covering the transition over there. Tyler. He would bring a certain amount of color to the foreign secretary role, wouldnt he, wilfred . Oh, he certainly would. And, you know, i think that was one of the reasons it was seen why he couldnt mount a leadership bid as Prime Minister because he is so colorful. He is so charismatic. And people felt he perhaps didnt have the ability to take such role. Certainly a big surprise, but we always knew the cabinet had to be a balance between brexiteers and remainers. We also expected to include a great amount of loyalty to theresa may. Philip hammond certainly has that. Were not so sure about Boris Johnson. Thats why his arrival here such a surprise. We still however dont know which job hes discussing. Ive been at cnbc so long, wilfred, im going to start calling myself a remainer. Wilfred, thank you very much. Wilfred frost. Were going to take a quick break. I also hope to be a remainer for a very long time. We all do actually. We all do. Were going to take a quick break. And the remainers will be back after this. All right. We are getting set to close in the oil market. Jackie deangelis, where are prices . Good afternoon to you, brian. Well, were seeing a little bit more than a 2 drop today, and its a big drop because of that inventory report this morning. Actually, the drawdown wasnt as steep as people were expecting, and also u. S. Production moved higher on a weekly basis. So a lot of traders telling me were going to see this. We go down 5 and then people will buy the dip and were going to be range bound for quite some time. But closing under 44. 78, thats a key technical level. Watch for that. Wow, back down to the mid to low 40s. Jackie, thank you very much. Time now, folks, to introduce you to a new oil guest, at least to us. Kate warwick, Investment Firm owns more than 4,000 oil and gas wells. Named oil and gas magazine 20 under 40. According to your linkedin profile, you went to harvard. Good to meet you. We spoke on the phone yesterday in sort of a preinterview and you said something that caught my ear, which was the move in the price of oil was so outsized relative to the supply demand imbalance. But you should know its more than supply demand thats running this market. Supply and demand does not move this market. This is a market that moves partially on fundamentals but more importantly on macro cross currents. Thats whats been driving crude since the brexit situation in the last few weeks. Its been movement and usd Exchange Rate. We do the rig count every friday. We do the Inventory Data when it comes out. And we do see the market move. But if supply dlsh demand is not the main thing moving it, what is . Currency is really important. Terrorism is really important. And then the prospect of a decline in chinese emerging market demand is really important. And the chinese situation is interesting because weve seen pretty Strong Demand out of china all the way through this downturn. And the prospect for chinese demand continuing to be strong is a question. And thats partly related to the chinese nonperforming loan cycle that were watching. And the prospect for contagion and recesssive contagion in southeast asia. Youre an oil person, but youre an investor, really. I mean, warwick, youve got funds. I know one just closed. So you look for value. And when this market really took a you know what about two years ago and prices went you know where, there was a thought that investors were going to save the oil market. Have you guys been buyers . Absolutely. But the important thing to understand about oil and gas is its like real estate. So its sub surface real estate. This is real estate at 10,000 feet of depth. And there are core areas to be in, core basins, like west texas, like oklahoma. And then there are core parts of those basins. So if you think about it like real estate, manhattan is an interesting place to be, and even more interesting than that is fifth avenue. Not for oil. Not for oil. But if you look at the real estate analogy it is very important to be in the core of the core of the basin. So we buy into the core of the core. Whats interesting about oil and gas is there was supposed to be a distress cycle. That actually really hasnt occurred. One thing that ive learned about the transactions in talking to bankers in the space as one put it to me the gap between what sellers want and buyers want to pay you could drive a super tanker through. Have sellers gotten more rational . Well, the people whove been forced to sell in this cycle have been the high cost producers. So we havent seen the lowest cost area we havent seen the lowest cost areas which are the highest return areas actually sell. Thats where you havent seen transactions in the northern midland basin, you havent seen people forced to sell. That would say to me deals are going to get harder because the forced sellers are going first, hes not buying, hes selling, you go in and buy it up. Is there still value out there . Theres value in the wholesale market. The bigger the transactions are the more expensive. There is more value underneath the market and wholesale market. Fantastic. Kate richard at warwick. Glad to have you here at cnbc hq. Power lunch will be right back. 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. Im sharon epperson. Heres your cnbc news update at this hour. Outside 10 downing street, theresa may making her first statement as the new british Prime Minister, pledging to forge a new role for the country following its decision to leave the european union. I know because were Great Britain that we will rise to the challenge. As we leave the european union, we will forge a bold, new, positive role for ourselves in the world. And we will make britain a country that works not for a privileged few but for every one of us. Donald trump meeting with indiana governor mike pence this morning at the governors residence in indianapolis. Pence is in the running to be trumps v. P. Pick. Trumps three Adult Children all took part in the meeting. The two men waved briefly to the camera following their hourlong conversation. Striking Atlantic City casino workers taking their protests to new york city. Dozens of workers from the taj mahal casino protesting outside the offices of carl icahn and donald trump. They claim the two profited from the taj mahal even as it went through multiple bankruptcies. And a Funeral Service was held today in dallas for Sergeant Michael smith, one of the five officers slain in the city last week. The church was filled with families, friends, parishoners and colleagues. Thats the cnbc news update at this hour. Back to you, brian. Sharon, thank you very much. Sure. Well, it is time now to get back to business and trading nation. Today were going to focus on the Airline Stocks most have had a good run over the past month. Majority still lower for the year, delta, united, American Airlines all down about 20 this year. Weve got max wolf of Manhattan Venture Partners and erin gibbs of s p global to talk about the Airline Stocks. Seems a little chaotic, erin. Recently theyve had a run, overall theyve been a disappointment. What do you see from the sector . So the big problem with just as you mentioned those three big players is they really havent been able to increase revenues. And theyre all expecting lower revenues this year. And even united expecting lower revenue for the following year. Though theyve had a better capacity, theres still an enormous amount of sales activity. And you would have thought with all the mergers and acquisitions that with three less Major Players we would have had less sales activity, but that just hasnt happened. And they havent figured out ways to increase those unit revenues. So until we see that turnaround, hopefully in 2017, thats when those stocks will be able to pick back up. Okay. Max, would you agree with that . I mean, do you think the good times have sort of rolled already for the airlines . Largely. I do think were going to see a little more synergy from some of these big mergers, but its going to take a while. I think the airlines had a good sweet spot and shares reflected it for a while. Not so much lately, but generally with the lower oil prices, little consumer recovery, but i think we have a real consumer cooling, we have the flat wages and last month notwithstanding we have some issues in the labor markets. The truth is the world is inspiring less people to go further from home because theres lots of nerves from one reason or the other and the political cycle is also causing people to baton down the hatches. So we dont see these guys having a ton of Pricing Power. That happens as they finally expand inventories. Theyre expanding inventory into a low pricing environment where there arent big mergers to push up laggard shares and there isnt that much relief probably coming down the pipeline immediately in terms of energy prices. All right, max and erin, a brief but insightful look at the airline space. Appreciate it. For more trading nation head to our website tradingnation. Cnbc. Com. Coming up, one stock an analyst calls a compelling opportunity with an inexpensive valuation. That name plus four other opportunities just for you all coming up in street talk. Plus, does Silicon Valley have a problem with Older Workers . Is ageism rampant in the valley . Were going to find out coming up. Stick around. And now, the latest from tradingnation. Cnbc. Com and a word from our sponsor. Im often asked why a companys stock drops after a good earnings report. Well, earnings are only half the story. Frequently the market will focus on what the company says about its future prospects. If future expectations dont measure up to current ones, sometimes investors will look to sell the stock. They may want the latest products and services, but they demand the best shopping experiences. Theyre your customers. And by blending physical with digital, cognizant is helping 8 of the 10 largest u. S. Retailers meet their demands with more responsive retail models. Ones that transcend channels and locations, anticipate expectations. Creating new ways to engage at every imaginable touchpoint. Its a new day in retail, and together, were building the store of the future. Digital works for retail. Lets talk about how digital works for your business. Street talk time, that is our daily dive into the key wall street calls of the day. Lets go. All right, stock number one, williams companies. Goldman sachs reinstating coverage of the stock. They had a no rating because the deal, theyre reinstating now with a buy. And a 25 target. That implies about a 25 total return. Just keep in mind williams pays about an 11 yield. Goldman calls it a, quote, compelling opportunity with relatively inexpensive valuations. This is especially against peers, strong position in the natural gas and visible growth from well contracted projects and the valuation especially against the rest of the sector. All right. Second stock were watching, six flags. Credit suisse bullish on the stock saying the risk reward is 4 to the downside but whopping 20 to the upside over the next year. Credit suisse says this is not a call on earnings per se but feels comfortable owning the stock. Sees possible upside in favorable attendance mix current pricing expectations are too conservative. And six flags, get this, Virtual Reality will be very powerful and there will be product appointments in ten parks by year end. Six flags, its not a Media Company like disney, but walloping disney if you compare the two. Gets no love. Lower gas prices, people can drive to the six flags. You know what its named after . No. The six flags that flew over texas. Really . Yes. Excessive time wasting right there. Inside joke. That too. Stock three. Excessive something. Beemus calls itself the inspired package solution company. Suntrust with a buy 60 target. Analyst say number one or two market shareholder in every category of flexible food and medical device packaging. Flexible food. The food is not flexible, but the packaging is. Clarify. The focus on bemis conservative capital structure while pushing margins higher. The most attractive risk return adjusted profile in the space. Its looking good because of the yield. Bemis. Pandora, piper jaffry upgrading raising estimate fr. Improving margins at core Radio Business and release of on demand platform that could add incremental 9. 2 million subscribers. Also they did a Spring Survey of 6,500 teens and that suggests listenership trends are actually improving. The stocks up 45 in 90 days. Been a monster. It has been. Its been a pandora. Monster was a Different Company that was purchased by youre under the radar excessive time wasting. Youre under the radar stock of the day, nuvasive, medical Device Company focused on spinal surgery. J. P. Morgan upgrading. Stock already with a nice run. The analyst says outperformance is not a fluke and sees this as a start of a, quote, extended run in which performance to the market widens. They see an acceleration on the top line and jump in margins. Their target on nuvasive goes from 55, stock already past that, to 74. About another 20 upside. Wow. Have you ever heard of it . I had not. Good. Yeah. You stumped me. Excessive time wasting. Right here. According to data from the benefits and Compensation Research company pay scale, the median age of a google employee is 29. Maybe that doesnt surprise you. And just last week the eeoc joined a Class Action Lawsuit claiming that google has, quote, engaged in a systematic pattern of age discrimination in hiring. So, is this a case of ageism in Silicon Valley . Yale school of management senior associate dean joins us now. Jeff, always great to see you. Do you think Silicon Valley has a systemic problem with age discrimination in hiring . I do think they have an unconscience peter pan syndrome where there seems to be this quest of neverland, of little boys who never grow old. They have underrepresentations of key segments of society. There are some great women in Senior Leadership roles, but not too many. And then when it comes to grownups, theres really very few. There seem to be systemic biases, there are top leaders do you think its a question i mean, its hard to tell, obviously. And we dont have the numbers in front of us and some of the information the eeoc would have, but could it merely be a more benign explanation, in other words, that it is not systemic a systemic bias but the fact most of the people who have the backgrounds and skills and schooling that google seeks are more recent graduates of the schools from which they recruit . I dont think so. I think bias might be conscience as much as unconscious. Weve seen some prominent venture capitalists who have outright said and that after people are 35, theyre dead in terms of ideas. And cofounder of sun microsystem, venture capitalist, when you look at googles data, the eeoc is apparently joining what may be a federal class action suit in formation to look into this. And perhaps its just random that its in the 20s, the average age of programmers in google and nationwide were looking at mid 40s as the average. Or its even higher in Silicon Valley, but very problematic here. So you might wonder why is it numbers are so much lower. Take a look at when people win their nobel prizes. The research has suggested the median age is 39. So half the people are past that. In fact, since 1985 nobel Prize Winners have the best work has been celebrated when they were published around age 45. Theres a lot of research on this. And Hard Sciences and physics and chemistry, to your point. Uhhuh. The median age is 45 the work that people have done this breakthrough work. You look at steve jobs, the contributions we celebrate there most these days jeff, i was under the impression they wanted around the age of 45, but it was generally for work done in their 20s and it takes that long to recognize just how important it turned out to be. No, you could argue that. And you could argue that its gate keepers in a field takes a while to be recognized, but you would be wrong. This is actually when the work was published, when it was celebrated, was actually work at that point. Not when it was recognized but the work when actually it was done. Michelle, it was done at age 45 since 1985, and age 39 earlier. So you look at this and here we have the oldest president ial candidates weve ever had in history with Hillary Clinton 69 the time she would take over the white house if she steps in or donald trump already 70 and Bernie Sanders at 75. Supreme court cvs would rue the day they had a forced retirement age 65 and kicked out walter cronkite. Weve got to leave it there, jeff, sorry. Wilfred frost from london with a news alert. Absolutely, tyler. Extraordinary developments, ten days is such a long time in british politics. Boris johnsons career looked doomed just a couple of weeks ago. But hes just been confirmed as the next foreign secretary. One of the massive jobs of state. And no one expected it a few days ago. No one even expected it a few hours ago, but he was the secon. But he was the second person to arrive at 10 downing street and he just left moments ago and with a little cheeky grin as new foreign secretary. And the other role is Phillip Hammond as chancellor and rumors of previous foreign secretary, osbourne, didnt resign but was pushed out to raise may weather a second role under government and he has not got it. A brexit here in foreign secretary role remain Phillip Hammond in the clans ellor role and that old adage comes to mind, michelle, keep your friends closer and your enemies closer. Perhaps that is what is going on in teresas mind right now. Im sure a lot of viewers are familiar with Boris Johnson. Can you remind them about why he is such a controversial figure. His messy hair. Tendency to drink, if i recall those kind of things. I dont know about the drinking one. I dont know about controversial. His politics have been relatively Center Ground in terms of conservatism and stood to the likes of cameron and osbourne whose politics we know well. The big surprise is when he came out to back exit. Many suggest that was a career move and one that backfired ten days ago. And now seems like a master stroke as he ended up as next foreign secretary. So i dont know if controversial is the right word but certainly charismatic and confusing and colorful. Colorful, definitely. Does this mean he will be the point person in the negotiations with the eu . No. We expect a new role. Not confirmed yet. A new role whether the title is brexit negotiator or eu negotiator. I assume a role one would have to be involved. But it is such a separate issue, we expect a separate role to be announced as well. Got it, will fred, thank you. Willfred frost live in london. Here at the Td Ameritrade trader group, they work all the time. Sup jj, working hard . Working 24 7 on mobile trader, rated 1 trading app on the app store. It lets you trade stocks, options, futures. Even advanced orders. And it offers more charts than a lot of other competitors do on desktop. You work so late. I guess you dont see your family very much . I see them all the time. Did you finish your derivatives pricing model, honey . Td ameritrade. Your Business Needs Better Technology to drive better performance. So you need it to be reliable and fast. Really fast. Introducing the comcast business Summer Savings event. Fast Internet Speed to drive performance, plus cutting edge wifi for your employees and customers, and voice mobility so your calls find you wherever you are. Get some of our most advanced products at a great price with over 500 in savings. Call today and ask how to get these savings plus a 250 prepaid card. Comcast business. Built for business. 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 in cleveland next week. Ill be reporting there live. One business in particular is expecting a boost. Eamon javers always there. Eamon . Yeah, this is one of the best bar areas in all of cleveland. We have been talking to a lot of Business Owners in cleveland. For the most part, what they are telling us is that they are happy for the boost in business. They are expecting a wave in customers and a boost in profits. Some are worried about potential disturbances, the rioting, damage to businesses, locations. But we did talk to one guy who said even if that happens, hes still going to make money and that is the local bail bondsman whose office is right across the street from the Police Station where they are processing anyone arrested at this convention. Here is what he told us. What i was hoping not to happen is rioting, protesting, people not getting along, cause any type of harm to families, people, businesses, cleveland, stuff like that. That can be good for your business . It could be good for business. On a business end, i hope it does. It would kind of give us a lot of customers, a lot of time to expand. So guys, theres always a way it make money out of everything for every kind of business here in cleveland. Back to you. All right. When bad actors are good customers. You are so good with those phrases. Lets be clear, okay . Cavaliers win the title. Indians lead the division. Whatever you think of politics, it will bring a lot of money. Everything is bringing up cleveland. I like cleveland. Cleveland is a nice city. Thank you for mentioning the power city, except for the browns. Theyve got rg3 now. Good time for that it may not be good. Who knows. Cleveland is interesting. Cleveland is cool. Record highs around the s p. Bonds on the gainer. Market is up by more than 1 . A bid for safety in the market. We enter the final hour. Thank you for watching power lunch. Closing bell starts right now. Hi, everybody. Welcome to the closing bell. Im kelly evans at the new york stock exchange. Im bill griffith. We could have another record day for stocks. Dow and s p hovering at alltime highs. Any positive close will be a new high for each of them. But we have strategists who say there is still money to be made in the market. They will tell us where that is, coming up. In venezuela, new pictures. Military just seized reports and government seizing a Kimberly Clark factory after a supply