Transcripts For CNBC Power Lunch 20160819

And im brian sullivan. Just three hours left in your trading week. Stocks are moving off their session lows, still we are in the red today. Dow down 65 points. The nasdaq and s p 500 also making slight losses. The biggest dow winner this week, the swoosh, nike up more than 4 . The biggest decliner, mcdonalds down 3 . Mcds now down nearly 8 over just the past 90 days, melissa. Brian, im melissa lee, heres what else is happening at this hour. Amtrak naming new ceo, previously served as chairman and ceo of norfolk southern. Crude oil pulling back slightly but still sitting in a bull market. Its up about 85 from this years lows. And team usa continues to dominate at the rio games with 100 medals in total. 35 of them are in fact gold. Weve got lots to get to today, but we kick things off with a developing story in the pharma world. Shares of mylon labs as the Company Increases the price of epipen drug fivefold. Bring in david from wells fargo. Thank you for being with us. Thank you. Weve seen get into hot water because of eye popping price increases. One could argue this is almost worse because theres really not a classroom in america that doesnt have at least one child armed with an epipen in his or her backpack. Well, there are two sides to every story, but youre right. The side that seems to be most logical here if you look at it, you have a patent, you have a product that kids need to save their lives or potentially save their lives. And you have a company thats raising price 15 a year, 15 twice a year without any end in sight. Is there a justification, david, for this . So their argument would be, at least ive seen in the press, they havent responded to our questions, but in the press theyve said, well, look, weve invested a lot in this. We had to institute a whole program getting it into school so the safety of kids. In addition we give a lot of it away for free. The other half would say, well, youre doing that to embed yourself for your future customers. You know, david, if theyd been doing this, mylan has been doing this as you say 15 twice a year over a long period of time, why is it just now becoming noticeable . Well, there are two things. One is, at some point a small pile of rocks becomes a big pile of rocks and the price increases just pile up enough and you say, well, enoughs enough. The other though is a lot of people are seeing their deductibles go up. So their out of pocket expenses are getting higher and higher each year. So theyre feeling it even more. David, were seeing the stock react today to this controversy. Its down about 2 . At the same time a lot of analysts like yourselves have been pointing out that this actually masks some weakness in mylans generic business. They have an increase in the price of epipen in order to offset some weaknesses elsewhere. How much of that is true . And if they are forced to dial back some of these price increases, what could that mean for the stock . So others have said that. We havent had a chance to talk to the company about that exact dynamic. I think theres some evidence maybe for that. There may be other arguments against it. For example, last year pricing an epipen with a headwind to them. But when you give a lot when you raise price a lot but youre giving a lot of that back as a rebate, you might not be seeing the benefit in your sales or directly, but it is keeping you on form laeweyewe formularie. Mostly when you have senators tweeting about you and its not happy birthday, thats the kind of scrutiny you dont want. Changed over the time to better weve made a significant investment to support the device over the past years. How much of that sounds true to you . How much of that sounds lochtelike . Well, to me it sounds like its true that they have done a lot to, for the product. And to get it into patients hands and to give away a lot of product. But when you see these types of price increases for a product thats so cheap to make, you really have to wonder what the motivation and here is the product. It looks like this if you havent seen it. Probably youve seen nit a classroom. A lot of people have it. So have the features in fact changed to warrant a four or fivefold increase in price . I dont know, you open it up and inject it into your leg. Doesnt seem like Rocket Science change to me. How much, david, mylan, this news, whatever, how much of these price hikes for a lot of the companies are because the United States in many ways continues to subsidize the rest of the world . We are paying for lower cost drugs and devices nearly everywhere else. Well, you bring up a great point. We should really look to the fda on this. This is a product already off patent. And there have been companies that are trying to get a generic on the market whove been pushed back over and over again. Do we have an fda thats really working for us . Or is it working for some of the companies . So we could see that teva approval, talking about teva in generic form. It could come in 2017 though. Thats what i think could happen. In addition, i think there should be more scrutiny on what this process has been. Why has it taken so long . And maybe shine some light on what the interaction has been among all the players and why it hasnt happened yet . Yeah, a lot of good questions. David, thank you so much for joining us. David maris of wells fargo. We have breaking news meantime on zika. And meg tirrell has that story. Meg. Tyler, the Florida Governor rick scott is confirming that theres active zika transmission in a second area of florida. This is in a 1. 5mile area of miami beach from about eighth street to 28th street. You can see it there. This is the second area of florida where we are seeing local transmission by local mosquitos of zika. The other is that area of wynwood. Now, we know there are five locally transmitted zika cases there in miami beach. That adds to 36 total seen in florida. Rick scott just wrapping up that press conference about this now. He did comment on potential impacts to tourism. Listen to this. Tourism is a driving force of our economy. And this industry has a full support of our state in the fight against the zika virus. Yesterday i directed the department of business and professional relations to work closely with hotels, attractions and restaurants in Miamidade County to connect them with the resources for zika prevention and education. So the question now becomes will there be another travel advisory to that area of miami beach . Of course the cdc issued that travel guidance involving pregnant women not to travel to that area of wynwood, a historic travel guidance within the continental United States. So we expect to hear probably from the cdc, guys. All right. Meg, meg tirrell, thank you for that reporting on zika. We appreciate it. All right. It is friday. It is near 1 00, that means the weekly rig count numbers are out, guys, and they are up again. Baker hughes reporting that 10 more Oil Drilling Rigs were put online over the past five days. This is the tenth week in a row of gains. Now, we are still well down, again, from a year ago. Looking here inside the numbers, eight of those came in texas. We always talk about the perm yan perhaps being one of the lower cost areas of production. Either way, more of these either maybe new rigs or these drilled but uncompleted socalled ducts are being put back online. Ten straight weeks of increased rig activity, good for jobs, maybe not prices. And with west texas up at 48 you would expect that trend to continue. Its gone up in the last month and a half. Companies cutting cost and more and more companies will tell you that they may not be making a lot of money at 48, tyler, but they can make some money at 48. Some is better than none. In that case. All right. Another big shakeup inside the Trump Campaign. Second in a week. Eamon javers is working on that story for us. Hi, eamon. Hi, tyler. It is a day of big change here in the Trump Campaign. Donald trump himself and his running mate, mike pence, are in baton rouge, louisiana, today. They are touring the flood damage of the hardhit areas in louisiana all through the morning there at this hour. But this mornings news is that Paul Manafort who had been the Campaign Manager, is out. Heres the statement from the Trump Campaign and mr. Trump himself, i am very appreciative for his great work in helping to get us where we are today, and in particular his work in guiding us through the delegate and convention process. So kind of a nice sendoff there from donald trump to his Campaign Manager Paul Manafort. Now we see an entirely new team coming in at the top of the Trump Campaign, a new tone from donald trump in his remarks last night. And also an effort here by the Trump Campaign to be more like a traditional president ial campaign that weve seen in past cycles. They havent been that way so far, but theyre now running paid Television Ads in four states. Take a look at this ad. This is a hardhitting ad from donald trump against Hillary Clinton thats now running in four states. In Hillary Clintons america, the system stays rigged against americans. Syrian refugees flood in. Illegal immigrants convicted of committing crimes get to stay. Collecting Social Security so hard contrast between trumps vision of america and what he says Hillary Clintons vision of america is. But take a look now at the contrast between the ad spending from the Trump Campaign. Yes, theyre spending money. But, no, theyre not outspending the Hillary Clinton camp just yet in any of these states, florida, ohio, pennsylvania and North Carolina. If you look down that list, you see in each of those states the clinton camp is outspending the trump camp for now. But nonetheless this is a Significant Development for the Trump Campaign, which has until now pretty much relied on twitter and tv coverage and massive rallies to get attention. This is Something Different from the trump folks. Thank you very much, eamon javers. And we have an update now on the justice departments decision to no longer or phase out the use of private prisons. Prison stocks fell sharply on the news yesterday, as we described. But look at the comeback that has happened since then. There you see them down a lot for the week. But look at the moves higher today on corrections corp. And the geo group. Scott cohn has more. Hi, tyler. This may be acknowledging a little bit of the overreaction when this broke, but both companies out doing damage control. Both Holding Conference calls this morning and both putting out statements to minimize whats going on here. And there might be some reason behind that. Corrections corporation of america says we are disappointed with the bop, the bureau of prisons decision to youtube laigs of privately operated facilities. As you see correction corp. Stock bouncing back today. The Company Points out there are only three contracts effected by this decision. It represents about 7 of the companys revenue. So the company is moving on. Yes, it will be a dent, but not a huge dent. As for the geo group, slightly larger portion of revenue. Company says while we are disappointed by the doj announcement, the impact of this decision is not imminent. These will be phased out nonetheless geo group was in sort of embarrassing position today saying one of the contracts had been renewed and then putting out another press release saying that has been rescinded and we are renegotiating. Might make sense to look at the longterm prospect of these stocks. On one hand theyre not going away, they can own the real estate and let the government manage the prisons. But at the same time prison populations are coming down both at the federal level and across the country. And thats something that analysts and these companies are looking at closely. Guys. You know, scott, as part of this damage control both companies came out and basically backed once again their 2016 outlooks. What stood out to me is they said nothing about 2017. Did they . Did they make any illusions as to future impact . I dont believe so. One of the Conference Calls i believe is still going on. But, no, i mean, i think that its difficult to look at the long term. And you have these competing ideas. On the one hand, again, there is a huge prison population in this country. Its the we have the largest population of any nation on the planet by far. And they have to put these prisoners somewhere without running into even more concerns about overcrowding. But at the same time there is really a bipartisan attitude now that the prison system has to be reformed, criminal justice has to be reformed. So the longterm is a little bit hazy right now. And it may be that way for a while. Yeah, i mean, listen, we can make the argument theres way too many people in prison. Thats a different argument, scott, just from the sake of the way things are now, is there the capacity in the federal system that if indeed some of these prisons, these privately owned ones are shut down or moved off, is there enough excess capacity elsewhere to pick them up . Because if theres not, whats the alternative . Well, thats a good question. I mean, the Deputy Attorney general yesterday suggested that because one of the reasons for this was because the federal prison population has come down and that they might be able to be moved elsewhere. But prisons are crowded at the federal level and at the state level. So the short answer is, no, theres not enough capacity. If you got rid of private prisons overnight, theres not the capacity to hold these people. And theres also this other proposition that both of these companies are very heavily involved in, which is real estate only. In other words, they own the prisons, they own the land and the government does the management. In fact, the geo group is a Real Estate Investment trust. Thats how the company is structured. So they may be well set for this kind of a move. Scott, thank you. Scott cohn from san francisco. Next up, the latest in the big shakeup at viacom and the jaw dropping golden parachute everyone is talking about. That story straight ahead. Miles per hour. Aveli0 to win, every millisecond matters. Both on the track and thousands of miles away. With the help of at t, Red Bull Racing can share critical information about every inch of the car from virtually anywhere. Brakes are getting warm. Confirmed, daniel you need to cool your brakes. Understood, brake bias back 2 clicks. Giving them the agility to have speed precision. Because no one knows like at t. Wont replace the full value of your totaled new car. The guy says you picked the wrong insurance plan. No, i picked the wrong Insurance Company. With Liberty Mutual new car replacement™, you wont have to worry about replacing your car because youll get the full value back including depreciation. And if you have more than one Liberty Mutual policy, you qualify for a multipolicy discount, saving you money on your car and home coverage. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. Welcome back to power lunch. Lets get to the latest in the big shakeup at viacom. Julia boorstin is live in our l. A. Newsroom with more. Julia. Hey, melissa, thats right. Sources tell us that Sumner Redstones ongoing legal battle with viacom ceo Phillippe Doman are coming to an end. Sources tell us agree to step down immediately as ceo and tom dually will become interim ceo. But dauman will take home a 72 million severance package on top of the 491 million in compensation hes made in his ten years running. That 490 million particularly stunning considering viacoms under performance of the s p 500 as well as cbs, which is also controlled by sumner redstone. Now, former viacom ceo tom freston telling me he believes this news is great although its long overdue. He calls daumans ouster a great victory for the people whove been so demoralized and demotivated. He now says it will be a lot easier for viacom to higher top talent. Back over to you. Julia, thank you very much. Viacom shares are higher today and actually up about 10 this year, but that is cold comfort for most viacom shareholders. The stocks gone from 88 to 48 in just two years. James dix, media analyst at wedbush security joining us onset. James, finish this sentence. The single biggest problem with viacom right now is, what . The ratings and the brands of the core media networks. Because if you look at their lineup, is there any channel that you believe is a musthave on a socalled skinny bundle . If people cut the cord and go to a la carte, is there anything you would say thats a musthave . If you have kids, nickelodeon might be on that list. Is that going to save viacom . They need more than nickelodeon. What should and i totally agree with you. I dont think theres anything in that group. I think you nailed it there. Other than nickelodeon, if you have kids, and there are alternatives to that suite of offerings. How about paramount, what should they do . It wouldnt shock me if they at some point in the near future went ahead with some type of strategic, you know, venture, sold a piece stake in it, yeah. Im not sure theyre going to do it in september unless Philippe Dauman might present to the board, but it might not be much long after that they might consider. Now with the stock, james, a lot of people before were saying this was a buy because of the potential shakeup, potential change at the top. Now its unfolding, is there another catalyst at this point, or for now are we on hold . Well, i mean, you have to pick a permanent management. You dont think tom duallys the guy . He very well could be the guy, but as far as what we publicly know is hes the guy to the end of the fiscal year. Well, fis car year is fast approaching its end. So you have to set upon him or his team or somebody new. You have to bring in the new board members. They have to sign off on him or someone else. And the strategy. Should Humpty Dumpty put cbs and viacom back together again . I dont think its necessary, frankly, in order to get those two, you know, businesses going. One helps the other. Yeah, i mean, theres always this argument, right, that well cbs has all this leverage with its broadcast network. And so therefore it could kind of serve as a shield. To keep viacom channels, distribution can i argue the other side . As much as there is wrong with viacom, youve got the Redstone Family circus, youve got Comedy Central has a lot of problems, ratings disasters. Maybe thats the perfect time to buy the stock . When everything is going wrong, isnt that when youre supposed to think, hey, im going to get it cheaper than i had it a couple years ago . I think theres a lot of merit to that view, but whats interesting is networks are fixeruppers, theyre not in the neighborhood like basic cable thats as good as it used to be. That still doesnt mean you cant flip it for a lot, if you put a roof on the house, right . If you just got a show or two you could build those networks into more powerful brands. You dont think thats the case. You got a neutral rating on the stock. I do. Because if you look at the valuation over the past year, you talked about the past five years. Yes, clearly a big problem. But the earnings is collapsed over the past year. The stock is basically held in there. I mean, its valuation discount to peers is much less than it was a year ago. A year ago on p e it was trading maybe half of what peers were. Now its maybe a 10 to 15 difference. I think a lot of anticipating the markets anticipating the improvement that youre thinking about. I believe we were one of the first counties in america to get mtv. Orange county, california, where i lived before when i was a kid moved to san diego. I think from the age of 12 to 18 i probably just watched only mtv. My 12yearold daughter i dont think she knows what mtv is. Of course she doesnt. Vh1 well, she wouldnt anyway, but mtv, is there still value there . There is. I mean, its a legendary channel thats gone sort of the way of the dinosaur. But thats exactly the type of brand that has the most potential. Because its got huge distribution. Its got a legacy. It just doesnt have the current shows that drive it, right . You can get a lot more potential upside by getting some hit shows on mtv, i would argue, than you could on vice, because mtvs got much better distribution. So it can leverage the success Brand Recognition too. Exactly. And an international presence. And still got the hold, hold rating. Still have hold. Its not as cheap as it used to be. Its not in the bargain basement. James dix, we appreciate it. Have a good weekend. All right. You too. Up next, sneakers, energy, health care, the music gives it away. The good, the bad and the ugly is on deck. Welcome to opportunitys knocking, where selfproclaimed financial superstars pitch you investment opportunities. Ive got a fantastic deal for you gold with the right pool of investors, theres a lot of money to be made. But first, investors must ask the right questions and use the smartcheck challenge to make the right decisions. Youre not even registered; im done with you i can. I can. Savvy investors check their financial pros background by visiting smartcheck. Gov mapping the oceans. Where we explore. Protecting biodiversity. Everywhere we work. Defeating malaria. Improving energy efficiency. Developing more clean burning natural gas. My job . My job at exxonmobil . Turning algae into biofuels. Reducing Energy Poverty in the developing world. Making cars go further with less. Fueling the global economy. And you thought we just made the gas. Energy lives here. And programmers i teach them to talk. Es, so yeah, ge is digital and industrial. So its indigital. Digidustrial. Indigenous. Shhhh. Lets go with digital industrial. For now. Digidustrial. Yeah. Or, digital industrial. Welcome back to power lunch. Im melissa lee. Time for a friday edition of the good, the bad and the ugly. First to the good, obviously that would be foot locker up 10 on an earnings beat and 4. 7 jump in samestore sales. Foot locker in fact the best performer in the s p 500 right now. On to the bad, not too bad, its down almost 1 , the lxe, the etf that tracks Energy Stocks in the red led by southwestern energy. Diamond offshore to the downside. And it is an ugly day for Davita Health care, worst performer on the s p 500 at this hour down almost by 5 , ty. Thank you very much. Still ahead, more on the big shakeup inside the Trump Campaign. We will talk to the man who broke the story next on power lunch. Announcer when they test you, stand firm and move only when you hear the seatbelt click that says theyre buckled in for the drive. Never give up till they buckle up. Take a check on the market, this might be the calm before the storm of jackson hole next week. Were pretty much flat line here, s p down by about a third of a percent. Biggest moves within the dividend paying sectors, utilities and telecom giving back the most today. Now lets get to sue herera for news update. Hi. Thank you so much. Heres whats happening, russian warships in the black sea launched three cruise missiles at targets in syria. Officials say they destroyed a command facility, a utility camp and a weapons facility. Baylor university has agreed to stop teaching at the law school. Being called a mutually agreed separation. The school did little to respond to accusations of Sexual Assault involving the schools Football Team. The nba has decided to hold the 2017 allstar game in new orleans. The league pulled the game from charlotte because of a North Carolina state law that limits antidiscrimination protections for lesbian, gay and transgender people. Heres your friday cute video alert. Take a look at them. Potter park zoo in lansing, michigan, has welcomed not one but two red panda cubs. And thats a really big deal because theyre endangered. We dont have any names yet, but they will be put on public display in early october. Thats the news update this hour. Ill send it back to you, ty. Looked a little like a raccoon. They do. Theyre really cute. Like a lemur. A lemur . Little ferret like too. Well, whatever, theyre cute. So cute. They bite your face off. Oh, stop it. Stop it. Sue, thank you. Its a bear. Oh, cute little just days after major realignment trumps former Campaign Manager Paul Manafort resigns. Lets bring in the person who broke the story, robert costa, nbc news political analyst. Robert, welcome. Good to have you with us. How much of this was driven by two things, one is the controversy that has attached to mr. Manafort regarding his work for the former ukrainian leader. Thats one. And number two, how much of this was driven by the trump family, the kids, the soninlaw, et cetera . They all had an impact on the decision. They were a combination of things brewing, manaforts previous work in the ukraine and scrutiny of how hes disclosed those relationships, or how failed to disclose the relationships have irritated trump and his family according to my sources, trump has also felt pressure from donor and friends to make a shakeup because of the dip in the polls. And you had him at his golf club in new jersey on sunday really thinking through the next 80 days what did he have to do. Thats when he called Kellyanne Conway and steve bannon. And saul Paul Manafort make his way outside. You reported there was a fundraiser in the hamptons on saturday night where mr. Trump was pressured by some of his contributors, i suppose, to make changes because they were saying that the campaign was running off the rails. Our jake novak wrote a very interesting piece today on cnbc. Com about the idea that a kinder, gentler trump, and that certainly was the kind of presentation we got last night, whether thats because of the new team in place or it was a hangover or what mr. Manafort was calling for, but a kinder, gentler trump poses much problems for Hillary Clinton, agree . He could. Well have to see if suburban swing voters and female voters have this message resonate with them. I think the timelines really important here to understand what trumps doing. So he goes to the saturday fundraiser, meets with the mercer family, very wealthy conservative donordonors, they express unhappiness with how the campaign is going, trump listens to that ire and retreats to his golf club sunday, continues the shakeup, monday, tuesday, wednesday within the campaign and Kellyanne Conway, this pollster comes on as the Campaign Manager. She spent her whole career trying to help republicans have a better pitch twofemale voters, she helped trump craft his speech in charlotte last night where he made the expression of regret. You have bannon and conway really assuming influence. And manafort was seen as someone who just hadnt gotten it done. And you have trump and pence today down in louisiana, so hardhit by those floods. Who whose call was that, do you think . It seems to me a very smart move because mr. Trump you would not rate him high on the empathy scale. This addresses that. And here he is for once in a rare occasion not standing in front of a packed house rally. Hes out in what appears to be a Community Center with real people. Whos call was it to send him to have him go down there . My reporting and based on my conversations with sources is that steve bannon, the former head of brightbart, encouraged trump to go to baton rouge and also talks of going to flint, michigan, of going to democratic cities, of combatting secretary clinton and president obama while also showing empathy at the same time. This is the new trump strategy. And it comes from these new hires. Is there further opportunity to bulk up the socalled Campaign Machine by replacing manafort . Or does that position just go away . Was that sort of a way of easing him out . I think it was a way of easing him out. He was allowed for the last few days to retain his title and have a seat at the table, but now you have bannon serving as, quote, chief executive. Manafort had been the chairman and the chief strategist, and Political Campaign titles are really meaningless. What matters in a campaign is who has the confidence of the candidate and who has control of the budget, right now thats bannon and conway. Sports may have bob costas, but we have robert costa, thanks very much for being with us, the Washington Post political reporter. Lets go to meg tirrell, we have more breaking news coming in on zika. Tyler, the cdc is issuing travel guidance for this area of miami beach where five cases of local spread of zika have now been confirmed. They are saying pregnant women should avoid travel to this designated area of miami beach. Its about 1. 5 miles between eighth streets and 28th streets. Theyre also saying that women and men who have traveled to that designated area since july 14th, going back that far, should be aware of the zika transmission there. Importantly, they are also saying that pregnant women and their sexual partners, because this can be sexually transmitted as well as transmitted by the mosquito, who are concerned about potential zika virus exposure may consider postponing nonessential travel to all parts of Miamidade County. The last thing ill mention here is theyre saying all pregnant women in the u. S. Should be evaluated for possible zika virus exposure. So this is coming after the news that there is a second area of local transmission of zika in florida in this area of miami beach. That adds to the other area called wynwood in miami where now as a total we have 36 cases of locally transmitted zika virus, tyler. Back to you. All right. Thank you, meg. Ill pick it up. No worries, meg, thank you, tyler. Back to the shakeup in the Trump Campaign. Does Paul Manaforts departure really matter . Lets meet Small Business owner victor defrisco, a trump supporter and donor. He runs a Florida Real Estate brokerage of about 30 employees. Thank you for joining us. Does it bother you as a trump supporter all this change going on at the top recently in the Trump Campaign . No, it doesnt bother me. Change is good. And i think his resigning is much better regarding what was going on with the thing with russia. And i think its much better that he got out now. You know, with Everything Else going on, one of the trump strategies has been to in part blame the messenger, blame the media, that is us. I dont want you to hold back, mr. Defrisco, with exception of adult language, do you believe that the media, us, others, are out to get mr. Trump . I think the media is very liberal. And i dont want to say theyre out to get mr. Trump, but its just odd to me how he utters a few words and its played 50 times on cnn in sound bites for three days. And Hillary Clinton does something thats extraordinarily corrupt and you hear about it once or twice. So, yeah, im kind of with him on the media, no offense to you. I wouldnt have asked it. I expected a worse answer, to be honest with you. Because its remote. Youre there, im here, and were safe. Youre a Small Business owner, and i assume a relatively successful one. Youve got 30 employees down there in south florida. Do you believe that donald trump is a good businessman . Yes, i think its an excellent businessman. Ive read his book art of the deal. Ive followed him over the years. And ive always had a very high regard for donald trump. Ive never met him. I dont know him, but, yes, i think hes a good businessman. And i can tell you right now the people we have in power and hillary would just be four more years of the same, if i ran my business the way they run this country, id be out of business. I would have no employees. I would be looking for a job. Are you more of a trump supporter, or someone voting against hillary . Im more of a trump supporter. But, i mean, if it wasnt trump, i mean, it could be you running and i would probably vote for her before i would vote for her. Probably, thats a lock. What are you talking about, victor . Tyler. I was going to ask the same question. I think a lot of people feel theyre voting for one candidate or the other because they just cannot imagine themselves voting for the other person. Does that describe how you feel . I could not have imagined myself voting for Hillary Clinton. I mean, i just look at what i mean, the Clinton Foundation and the money theyve taken from corrupt governments and the emails and white water and, i mean, she goes on for decades. They call trump out on having a corrupt or disgraced congressman sitting behind him when he made this speech. Well, bill clintons a disgraced president. Impeachment proceedings were started. Hes a barred attorney. Its like theyre always throwing stones, but people with glass houses really shouldnt throw stones. Victor defrisco, we are going to leave it there, sir. We appreciate your time and your honesty and candor. Youre welcome back any time. Thank you very much. I appreciate the opportunity. Yes, sir. Next up, rye onloc ryan apologized, sort of, but what happened to his madison avenue appeal . Andrew ross sorkin live with that story. Reporter when we come back, were going to talk about it. Big deal here. The apology is out but a lotd of people as you said calling it a nonapology. Well go through the economics, the sponsors, what it means to his career and also what it may mean to the United States and their ability to get the olympics in 2024. Back in a moment. U. S. Swimmer ryan lochte issues a long mea culpa on social media. Lets get to Andrew Ross Sorkin in rio for the latest on this juicy story. Thanks, guys. Ryan lochte apologizing in a statement he released on instagram a short time ago. In it he said the following, he said, i want to apologize for my behavior last weekend, for not being more careful and candid in how i described the events of that Early Morning and for my role in taking the focus away from the many athletes fulfilling their dreams participating in the olympics. He went onto say, i should have been much more responsible in how i handled myself. And for that im sorry. To my teammates, my fans, my fellow competitors, my sponsors and the host of this great event. Now, speaking of sponsors, heading into the rio olympics ryan lochtes list of sponsors was already down dramatically from what he had going into the london games. And now hes got three sponsors remaining. The question is, will they stay with him . Of course he wants to go to the olympics in 2020 in tokyo. Speedo, ralph lauren and airweave some of his sponsors. Speedo telling cnbc, speedo is following the situation and has a policy not to comment on ongoing legal investigations. Of course his situation does remain ongoing. The question now how much of this bad press will bleed over into the u. S. Swimming and the u. S. Olympic committee. And one point that i did want to raise with everybody is l. A. , los angeles, trying to bid for the 2024 olympics. Theyve talked about rying to use this olympics to show how the United States is humble, that were a humble country. We have lost the last two efforts at the olympics both in new york and chicago. This not adding to that. In fact, if you go online, lots of people talking about this experience. And ryan lochte has an ugly american, so not a headline that the l. A. 2024 group wanted to see, guys. Are there any more details about feigen, the fellow swimmer who is a part of this, hes apparently left the country after paying something on the order of 11,000 by way of restitution or donation, quote unquote, to a local charity. Thats a lot of money to be paying for an incident like this, it seems to me. It is a lot of money, however, we should note he was the only other athlete in addition to ryan lochte that had actually signed that statement chrks n chrks, which now the police said was fabricated. That was a bit of quid pro quo to get out of the country and try to end what has turned into a bit of a soap opera and to end this saga. We should note that the ioc has said they do want to put this behind them and that they accept the apology. So thats whats going on here. But that is the story on jimmy feigen, and he will be leaving rio if he hasnt left already this morning. Andrew, thank you. Andrew ross sorkin in rio with us. Actually, youre going to stick around. So has lochte in rio killed whats left of his marketability . With us is the director of the Sports Business Program at washington university. Patrick, according to an article that you penned, essentially you think that its kaput for ryan lochte at this point when it comes to any sort of future endorsements . Well, if rio is giving olympic gold for stupidity, he certainly won it. Its incredible, unfortunately, the lack of foresight. If you go back and look at what ryan lochte has done over the years, i think that his team has done a very poor job of training him for media. Anything that hes done on camera has been, in my opinion, atrocious. And now you add on top of that whats happened here where hes basically abandoned his teammates to get out of dodge before the you know what hit the fan. And all the characteristics that corporate sponsors want to see, someone thats a champion, someone that exudes class. He has exuded none of that with his actions this week. And unfortunately the apology that was issued just a few hours ago is a little bit too little too late. Let me push back a little bit here. This is a different set of circumstances that involved apparently lying to police. But Michael Phelps, the great hero, went through his own difficulties postolympics. He was photographed smoking a joint or taking a hit off a bong. He had multiple duis. And so there are obviously cases where people come back from situations like these. Well, in Michael Phelps case, its interesting you mention him, on the one hand he is the most decorated olympian of all time, so that has an impact. But i would agree with you in the sense that Michael Phelps himself has damaged his own ability to earn. Hes still going to earn money from endorsements, but i dont believe that hes going to see much more than what hes currently seeing from under armour and from oakley and subway. Because he unfortunately as you mentioned with the dui that he just received about 18 months ago, his second one, this is going to diminish and turn off many corporate sponsors. We live in a world now post tiger woods, post Lance Armstrong where their peccadillos came back and bit their corporate sponsors. Youre going to see great hesitancy from many corporate sponsors. Andrew, whats it like down there . Its dominating olympic coverage here, but down there is everybody talking about lochte . Or is it turn your head the other way and what lochte story . No, theres two issues. One, it clearly is a conversation. Its dominating the conversation here. And its dominated the conversation for the past 48 hours here. Nonetheless of course there are remarkable athletics taking place, competition. And thats what you want the attention to be on. And that is, i mean, people are still going to the matches. Theres brazilians right now out there screaming this minute. So its happening. I just wanted to take the over under on lock tehtlochte. I dont think this is the last time were going to see of him. I think hes a bit of a party boy and im going to make an argument and in an odd way i dont know if its from sponsorship or something else, hes going to be on our tvs and his bank account may be more full when this is over. Hes going to be on dancing with the stars, watch. Oh, thats a good one. I mean, patrick, isnt this sort of a way for him to break out of the pack . I mean, its clear that Michael Phelps, the most decorated olympian, is going to win the big the biggest sponsorships. Maybe this is his way of getting these sponsorships that may not be available to other olympians now that hes sort of easing into retirement here. He could endorse liquor and other sort of sin quote unquote sin products. I tell you i think usain bolt is going to be the biggest winner. Hes already making 30 million a year in endorsements. I think with his triple double he just accomplished hes going to do even better. Ryan lochte, hey, if the kardashians have taught us anything, its that sometimes you can still be on television and still do well for yourself, but i dont think that Corporate America is going to want to embrace. There are opportunities there to be the bad boy. I say that tongue in cheek, patrick, but its true, right . Bachelor. Just because youre a bad boy, theres a portion of society that may be dedicated to that. Im with andrew on this. I think reality tv, yes. But corporate sponsorships, no. Bachelor, thats your favorite show . Ralph lauren i like them all. Theyre just guilty trash. Speedo and ralph lauren will drop him within the next week, i promise you. I wouldnt doubt that for a second. I agree with that. Guys, thank you. Patrick rishe and Andrew Ross Sorkin. Enjoy the rest of your time there, andrew. Still ahead, the most expensive car auction out in pebble beach. But its not all serious. Robert frank has the story. Reporter crazy high prices and just plain crazy. Were going to take a look at some of the less traditional vehicles being sold here at monterey coming right up. What if a company that didnt make cars made plastics that make them lighter . The lubricants that improved fuel economy. Even technology to make engines more efficient. What company does all this . Exxonmobil, thats who. Were working on all these things to make cars better and use less fuel. Helping you save money and reduce emissions. And you thought we just made the gas. Energy lives here. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. This car is traveling over 200 miles per hour. To win, every millisecond matters. Both on the track and thousands of miles away. With the help of at t, Red Bull Racing can share critical information about every inch of the car from virtually anywhere. Brakes are getting warm. Confirmed, daniel you need to cool your brakes. Understood, brake bias back 2 clicks. Giving them the agility to have speed precision. Because no one knows like at t. For the next three days pebble beach, california, is the center of the universe for classic car collectors. So where else in the world did robert frank be . He is there with some of the most whack y cars. We think, robert, this, oh 20 million ferrari, but theres some weird ones too. Reporter yeah, some really weird ones, brian. We went in search of the weird and whacky because there are over 1,200 cars being sold and not many are those top ferraris. We also look for some affordable cars, affordable being a very relative term here in pebble beach. Were going to start with this 1961 fiat jolly, isnt that a great name . Jolly. This car is being sold by gooding and company. Its basically a beach picnic on wheels. The seats are basket weave. Its got the nice umbrella top. Only 70,000 to 90,000. If youre an art lover, get this 1952 mercedes called the rose garden. Thats restored and painted by hero yamagata. 200,000 to 250,000. Now, if you like to ride tall, check this out gm futureliner built in 1939 for the worlds fair, 800,000 to 1 million. We asked ceo dave majors what someone could buy here if anything for under 100,000 . I hate to say lower end of the range, but compared to what were seeing here at monterey that blow 100,000, you need to find something you like, something youre in love with. Reporter now, guys, if i had 100,000, i would buy this. This is a 1988 ferrari 328. Now, the low estimate on this is about 120,000. But these cars have more than doubled in value. This was selling for 60,000 just five years ago. I expect theyll double value again whether its five or ten years. If it doesnt, you can pretend youre magnum p. I. For a few days. Back over to you. What did you say that beach buggy was expected to go for . Brians interested. I can tell. No, im not. 70,000 . Give me a break. Reporter but basket seats, brian. Can you imagine sitting on seats made of basket weave. Do you think thats too much . Reporter how uncomfortable would that be . Exactly. Short seveninch inseam shorts on, 97 degrees, sitting on wicker, butt going to look like a waffle. When that wicker sticks somebody said build this car, throw it out there and see if anybodys going to hit that bid. All right, robert, well see. Reporter thats 70,000 to 90,000, its cheap. I like the ferrari behind you. Is that the 40 . Youve got the 328 there, magnum p. I. , very reliable engine. Reporter 1988, you know, these cars just three or five years ago people saying these arent real ferraris. Theyre not. Reporter but the real ferraris are gone. So these things are doubling in value just in five years. I think theyre going to keep going up. Plus, if you grew up in the 80s like me, this is the car you want. Robert frank, tell tc we said hello. Is wall streets dividend addiction going to end badly . That story straight ahead. Plus, well tell you why brian has an appetite for spam. No. Youre watching power lunch. Yes. Wicker seats. First in business worldwide. Hot and spicy spam. Im melissa lee. Heres whats on the power lunch menu this hour. Middle class comeback. Well tell you where the jobs are being created right now. And a Tech Industry legend is now taking on our countrys broken school system. And, spam, its on the menu. One analyst likes spam, a lot. The second hour of power lunch begins right now. I got the pun, melissa, all i can say is youre such a ham. Im brian sullivan. Lets get a check on the markets with two hours until the closing bell, dow down 55 points. Kind of a slower week for the markets. Were going to end the week likely lower though. Weve been in the middle of a nice rally. Kind of slow fizzle looking at the sectors, utilities, energy, telec telecom, theyre doing the same as the rest of the market. Utilities have been the big decliner 1. 7 decline, maybe, tyler the dividend trade coming to and end. Well find out. Thank you very much, brian. Welcome everybody to the second hour of power. Im tyler mathisen. In the headlines right now new zika infections identified in miamis south beach area. The cdc saying pregnant women should avoid that area. And all pregnant women in the u. S. Should be evaluated for possible zika exposure at prenatal doctor visits. A serious expansion of that program. Ken starr leaving Baylor University resigning as a law professor. In may he lost his job as president and chancellor in the fallout from a Sexual Assault scandal involving members of the Football Team at that school. And Major League Baseball clearing ryan howard and Ryan Zimmerman of accusations they used human growth hormone. They were accused in the same al Jazeera Documentary that pointed a finger at peyton manning. The s p Utilities Sector is up roughly 15 so far this year as investors look for dividends. But will the chase for yield end badly as chases so often do in the market . Mike santoli is at the new york stock exchange, mike. Yeah, tyler. Its not just yuutility stocks. Companies are stretching to deliver those dividends to investors. The wall street journal spotlighted today in a big indepth story just how much companies are having to strain to meet that demand for dividends. 38 of s p 500 profits in the last four quarters have gone to pay dividends. Dividends actually exceeded the earnings reported by 44 of those companies. Obviously other cash flows and borrowing makes up the gap if youre not earning as much as the dividend. This is the highest dividend payout rate for the s p 500 since early 2009 when of course earnings collapsed. Whats going on here is companies are very low to cut dividends. In fact, dividends were up more than 5 in the last year. However, earnings are down. So obviously dividends taking up more of total earnings. Is it cause for concern . That would be the big question. I would beware of very high dividend yields, maybe more than 4 is perhaps not in good shape, market thinks dividend is not sustainable. I will point out, tyler, in the late 90s people say payout too low, companies too stingy, were in the reverse situation. But if you go back decades, companies did pay out a lot more in dividends. So its sustainable but from these levels there may not be that much room to increase dividends over time the way many investors now expect. Mike santoli, thank you. Here to dive deeper into dividends, head of Investment Strategies of proshares 30 billion under management. Guys, good to see you. Tim, i havent seen you in a long time. Fast has been preempting olympics, good to see you in particular. In terms of dividends, mike referenced valuations in certain dividend paying areas. Right. Utilities, staples for instance, are we at a point now where we should rethink this whole dividend thing because the valuations that youre paying for these stocks are so high . I think you should always think about valuation. I think you get to a place where, i mean, look at the integrated names on the oil side. Some of these valuations are horrendous. We went through terrible Second Quarter in terms of eps and people are hanging on. And preversely Oil Companies protecting dividends at the expense of investing in cap x. You can make an argument that the dividend chase is something thats actually holding back even oil production. A lot of people will invest in dividends through etf. How does that correct for valuation . How do we make sure were not paying up not paying 26 p e for clorox for its dividend as opposed to lower valuation maybe integrated oils or in technology . Well, you know, i think the frame was correct. The risk is in stretching for yield. You know at proshares we focus on a suite of Dividend Growth etfs that focus on companies with the longest track record of growing their dividend. And to grow dividends over a long period of time as our flagship ticker, those are companies that have grown their dividends for 25 years in a row. Theyre not stretching to do it. They may not be the highest yields, but incredibly consistent. And supported by fundamentals. You know, we have been in this earnings recession, and thats one of the things thats driving those payout ratios up. But these companies with the long histories of growing their dividends, theyre delivering ill push back a little bit on my wonderful cohost here. Sure. The valuation argument you both made is very real, but i wonder, simeon, how many of your customers, people buying your etfs, are actually bombed people and they dont care about valuations because theres nothing but bonds. Theyre not sophisticated equity investors, but for you you become a bond. But that underscores the lack of valuation. I mean, the lack of value on valuation. You get my point, a bond investor may not say 26 times forward earnings and three times sales, they may just say i want the income, i dont care. But as bonds price go up yield goes down. Yet same dynamic with stocks. In some sense have you seen that with some of the higher dividend plays. So i think there are some people who are rotating from bonds to stocks. And that is in thats an Asset Allocation decision if youre doing ilt right. In other words, we have another choice right now where people looking at two choices that theyre a little nervous about, same thing in the markets today. Bonds look expensive. Maybe stocks look a little expensive. Now, in the stock market we have two countervailing forces. Very low interest rates, prop up those multiples, but that earnings recession. But if you do find stocks that can generate earnings, cash flow and Dividend Growth, you can justify as multiples. Im not going to ask you to make recommendation on individual name, but is verizon or mcdonalds, are they bonds in many ways . Oh, i dont think theyre bonds at all. I think theyre absolutely equities. And its equity risk. But the better the stronger the fundamentals, the Better Companies will persevere in difficult viernlts. Verizons been a yield play and dif play for a long time. I dont think they woke up one day and i think mcdonalds, frankly, mcdonalds been a turnaround story and a company also had a very good dividend yield. In fact i think it comes down to valuation for these names. Are there Company Sectors where the dividend is more in jeopardy than not than others . Well, were starting to see a little bit of a turnaround in the earnings story. So in q1 earnings had shrunk 8 . Dividend growers hopping along generating fundamentals. This earnings season weve seen earnings shrink only 3 . So theres a story out there maybe we hit the bottom of the earnings recession, but certainly sectors with those high dividend yields, 4 or 5 , where people maybe are poking in there a little too much as bond surrogates are a little bit of risk. All right. Thank you. Simeon, thank you. Tim will stick with us for the entire hour, so buckle in. One of the frustrating things about the economic recovery is the relative absence of middle class jobs. Take a look at this headline ahead of next weeks economic conference in jackson hole. Finally, some good news for blew collar workers. Joining us is the writer of that story for the Washington Post and i suspect will be traveling to jackson next week. So weve really focused on the fact that a lot of jobs that came back after the recession were low pay sort of low end jobs. The case now can be made that more better paying jobs in construction, education, Business Services are coming online. Explain. Yeah, thats exactly right. I mean, this idea that the jobs recovery has primarily been at the low end of the spectrum is really a narrative that applied at the beginning of the recovery. Weve been in the recovery for seven years now, so its been a while. And that was really true from 2010 to 2013. But since 2013 youve seen the number of middle class jobs that have been created in this economy outpace the number of jobs in high paying sectors and low paying sectors. So just to give you some numbers 2. 3 million middle wage jobs created between 2013 and 2015. And that compares to just about 1. 5 million, 1. 6 million in both the high end sector and the low end sector. So middle class jobs have really sort of taken off. And thats important because so much of what weve talked about in this recovery is the fact that it feels uneven. Many people feel like it hadnt started to trickle down to them. Maybe this tide turning from middle class jobs could be a sign that were starting to see this recovery broaden out to more sectors of the economy. How does one for the purposes of this argument, how does one define a middle class job . Yeah, so this is analysis that was done by the new york fed. And they define middle class income jobs middle income jobs as those that earn between 30,000 and 50,000 a year. And thats really based on what the average or Median Household Income is in america. So that includes sectors as you mentioned construction, teachers, transportation workers. It does not include sectors like food service and some of those retail sales jobs that were the drivers of the jobs recovery at the beginning. How does this provide the fed with color, ylan, behind the fed jobs numbers we get every month . A lot of what weve been looking at is wages, right . So wages have been wage growth stagnant for so much of the recovery. Now were starting to see a pickup in wages. If that means, again, the recoverys broadening out to more people, more income groups, maybe that gives them a little bit more confidence to move forward with that rate hike. But, you know, really you mentioned jackson hole coming up an ex week and the chair is going to be speaking, chair janet yellen. And im unsure if shes going to give us a real hint as to whether or not theyre going to move in september. Because you have to remember the fed is not just engaged in debate over september, theyre right now debating the entire framework from which they base Monetary Policy. And that is the largest debate that will determine the pace of increase over the next few years. Ylan, im going to ask you a complicated and detailed question you have 30 seconds to answer. All right. Lets go. For 30 years we had growth in very low skilled jobs and very high growth in very high skilled jobs. As your reporting shows, the middle is coming back. What does that tell us about where the economy is headed . Maybe weve reached the bottom in terms of the decline in manufacturing work. Maybe we are now seeing, you know, the need for more manufacturing jobs in the u. S. , more reassuring and youll see garage yuradual increase in tho but i dont think were going back to the 1970s. All right, ylan, thank you very much. Google celebrating its opening. Will it continue to be the moneymaker its been for its entire public life . Buy, sell or hold google coming up. Whats happening here . This is my new alert system for whenever anything happens in the market. But thinkorswim already lets you create custom alerts for all the things that are important to you. I guess we dont need the kid anymore. Custom alerts on thinkorswim. Only at td ameritrade. Farm fresh ingredients, stepbystep recipes, delivered to your door for less than 9 a meal. Get 30 off your first delivery blueapron. Com cook. Lets get to the bond market. Rick santelli tracking all the action at the cme. Rick. Well, melissa lee, i dont know how much action it is on this summer day in august, but theres definitely a trade pushing yields at the top of a wellestablished range. Look at a oneweek chart of 10s and you can clearly see, but the same chart i showed yesterday, popular chart down here, this is going to be the 15day every single trading day in august weve settled in the 150s. Maybe this is just a second 159. But you want to watch that range if nothing else some stop loss orders could get a little action on the dollar index, well, a oneweek chart, the dollar index is coming back. But its still down big on the week. How much lower could it go if we have a relaxed fed, and im being kind. I always like to go to the big chart. Look at a 20year chart. That looks like a dangling pa participle to me. Brian, back to you. Theres nothing wrong with paying big bucks for dune buggies, brian. Fair enough. Rick santelli, thank you, buddy. Have a great weekend. All right, folks, do you remember this . Okay. For real. Google is trading up 15 or 13 to 98 right now. That was cnbcs coverage of googles ipo 12 years ago today. Happy public birthday alphabet. Stock priced at 85. And you can say that its done, you know, reasonably well since then. Get this, shares of google up more than 1,770 percent since its 2004 ipo. No doubt minting a number of investor millionaires. What is next for the company . Lets bring in yousseff, a buy rating on alphabet, and also with us still as he will be the whole hour. You cant get rid of me. Lets keep moving, brian. Fast money 5 00 p. M. Eastern, starting next monday. Youssef, is google a good bet now . Hey, brian, we believe google or alphabet, i should say, is a good bet. On the one hand you have the core Google Business that continues to grow double digits. A 17yearold Company Still growing probably around 15 to 20 on the search side. You have this display business, which we were really excited about. This is the 180 billion global opportunity basically tv dollars making their way online. And lastly you have the big bats. They havent performed well or yet on the big bats, but thats basically the cherry on the cake potentially. So the valuation is still not that bad even with the stock having been a 17bagger since the last sure, but the Stock Performance this year its been a laggard compared to technology as a whole, tim. What does google have to do . Is it the muchtalked about dividend or capital return to shareholders . I dont think so. Frankly, i agree with youssef this is a Company Still not executing on a number of billionplus properties that i think are inherent. You had 18 times next year, i think its interesting. I guess the question for me youssef, also is have we gotten past the honeymoon about a multiple valuation for a company suddenly getting more transparent, alphabet breaking down into the pieces we know, the pieces we dont know and are the pieces we dont know really worth anything . I think were past that. I think she came in providing or promising more transparency. We got more transparency. I think she also promised more discipline on the cap x side. Weve seen that. I think youre probably going to see more transparency and more discipline on cap x on all these investment particularly to other bets. But, look, i think this is still a business that has a lot of growth. I think everybody still tends to associate google with search. Five years from now i think it will be a lot more than search. I think search probably will account for maybe a half, maybe twothirds of its revenues, meaning they still need to grow a whole set of other revenue streams. And so, you know doesnt it have to be youssef, especially a lot of people on the younger side, theyre on snapchat, theyre not google searching nearly as much. Yeah, but youre talking about two different things, right . I think social is definitely a great area of growth, facebook proved that. Google has not really benefitted all that much from that, right . I think google has made a great business out of search. The next great business is going to be display. All these tv ads for branding we see on cnbc, et cetera, i think some of them will at least see their way into youtube and the double click network. Tim, youre long. Im long and i think its mispriced in terms of growth valuation argument. And i think youtube is significantly underlevered in terms of the structure. All right. Youssef, thank you. One of the last quick thought. I was going to say i think one of the issues considering the market cap, a lot of guys that would have wanted to own it, already own it. So to get that incremental buyer, thats really the issue. All right. Thank you, youssef. Thank you. Big fight in las vegas this ween weekend, but before squaring off in the octagon, they have to face our jane wells. Jane. Tyler, the fights supposed to be saturday, but look at this video. It may have already started this week with bottles and cans flying around in which both fighters may be losers. Up next, what the ufcs new owners must be wonder whing wha have we got ourselves into, when power lunch returns. For decades, investors have used a 60 40 stock and bond model, with little in alternatives. Yet alternatives can tap opportunities that traditional assets cant. And even though theyre called alternatives, theyre actually designed to help meet very traditional goals. Thats why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. Translation . Goodbye 60 40, hello 50 30 20. Amazing sleep stays with you all day and all night. Sleep number beds with Sleepiq Technology give you the knowledge to adjust for the best sleep ever. The time is now for the biggest sale of the year, where all beds are on sale save 50 on the labor Day Limited Edition bed. Know better sleep. Only at a sleep number store. Big rematch taking place in the ufc this weekend. Connor mcgregor versus nate diaz. Last time diaz won in a big upset. While mcgregor is getting another chance at diaz, our jane wells is taking another crack at both of them. Shes live in las vegas. Hi, jane. Hi, tyler. You know, since then the ufc has been sold to wme for a whopping 4 billion. The most ever paid for sports franchise. And a lot of that is due to these two guys. Okay, a lot of that is due to one of these guys, Connor Mcgregor, hugely popular. When he and diaz first faced off in march, he was all brash in one of the weirdest interviews ever. They want you to give us a quick count to ten, both of you gentlemen, if you wouldnt mind counting to ten. Nate can only count to five. [ laughter ] count to five, nate, will you, if you can . [ bleep ] i aint counting, how about that . Well, he never got his coffee. Instead, nate diaz handed mcgregor his you know what in a stunning defeat. This time the irishman was quiet, humble, seething. Youre very different than when we talked in march. Your attitude is different. The way youre dressed is different. How is Connor Mcgregor a different man now than he was a few months ago . Im simply relaxed, calm, focused. Im looking forward to going in and fighting this man. Well, it wasnt all quiet. What is either good or bad for business, the two fighters got into a bottle throwing brawl. Somebody might have gotten hurt. Dana white tells tmz both men will be punished. They came in like they were high [ bleep ], but we got a whole army here. Aint nothing i aint seen before. Its all good. Like i said i was in fear of my life yesterday, bottles coming flying, i was talking, it was just selfdefense on my part. Well, pay per view trends, which is what its all about, are trending well. They were 1. 5 million estimated in march. Of course this weekend youre up against the olympics, so we will have to see, guys, back to you. You got, jane, mcgregor or diaz . Me . You know what, after what happened last time, it really is too close to call. Mcgregor still has a slight edge over diaz, but he has spent the last im telling you, he spent 300,000 of his own money on a Training Camp near here in vegas working on cardio because thats what they said thats where diaz got him last time, he got tired quickly. So its going to be epic. It will be. I didnt understand anything either of them said. There at the end. I dont understand what they do in the ring other than throw bottles. They kick, they punch. They punch. Entertain. Entertain. That guy diaz scares me, just to be clear. They both scare me. I dont want any piece of mr. Diaz. I think he can count. I think mcgregor wins tattoo and beard title. Coming up, former microsystems ceo Scott Mcneally says the Education System is failing students. Were going to the nymex for closing trades on oil as well. Dont go anywhere, were back after this. Hi everybody. Im sue herera. Here is your cnbc news update at this hour. The zika virus is now spreading in florida. Five people have been reportedly been infected in miami beach including three tourists. The socalled active transmission area includes much of south beach. The cdc has included that area in its travel advisory. The previously diagnosed cases of zika were found in the north miami neighborhood of wynwood. Ryan lochte says he is sorry. The olympic gold medal winning swimmer says he should be more careful and more candid about events that took place in a rio gas station on sunday. He and three other swimmers said they were robbed at gunpoint. But brazilian Authorities Say they were actually detained by an Armed Security guard at the gas station after they vandalized the bathroom. The swimmers gave the guard money for damages and then were allowed to return to the olympic village. Some german politicians are proposing a ban on burka and other Face Covering veils. In a speech the german interior minister said full veils do not belong in their cosmopolitan country. He also admitted he doesnt know how to put a ban into law. And finally, a milestone marked with a cookie in ft. Wayne, indiana. You see, volunteers there have been handing out cookies at the airport since the late 1980s welcoming people to ft. Wayne. Yesterday they handed out their 2 millionth cookie to a 4yearold. She and her family won lots of great prizes including travel vouchers and a year supply of, you guessed it, cookies. Thats the news update this hour. Ill send it back to you guys. Sue, thank you very much. Have a good weekend. The oil market is closing for the day. Lets go down to Jackie Deangelis at the nymex. Jackie. Good afternoon to you, brian. Looks like well close just under 48. 50. A little positive and negative territory through the session but ending on a positive note. 48. 75 was the session high. September that contract is going to roll at the close on monday, so thats probably responsible for some of the volatility, but not all of it. Remember, there was strong sentiment this week, we saw about a 10 gain in this week alone. And of course part of that issue is that weaker dollar, but also speculation about opec. Citi telling cnbc that it sees a little bit of a turn in the tide here. That around 50 is the right price for oil. Brian, you speak to ed morrison, you know theyve been on the bearish view here. So thats a little bit of a change. Meantime, as i said that 10 pop for the week for the last two weeks over 20 pop. So weve really moved in terms of pricing. Back to you. Thank you so much, Jackie Deangelis. Tim, i want your take on oil stocks. Interesting because were up about 22 from august lows, beginning of august, stocks over the last month have really sort of held in there when you look at the s p Energy Sector. I think thats appropriate. Again, we talk about dividend context i think a lot of these guys are bid up if youre talking big boys. Enp names, Higher Quality names eog, apache, i think are the places most levered to move up in oil. Those are the places id be playing. But get down to valuations and i dont think the Energy Sector looks terribly interesting here. Im somebody thats very constructive on the price of oil. I think were 55 to 60 in the Fourth Quarter and moving higher from there. But i think the move as a correlation against the dollar because jackie brought up the dollar correlation and weakness, i think oil is not totally decoupling from the dollar but i think were see ago breakdown. To me though, tim, tell me if you agree or disagree, its been a low Quality Oil Stock rally. I say that because chesapeake, sm, marathon, theyre the best performing names. Theyre also some of the most heavily shorted, marathon more in the distribution and sort of big cap space. Theyre the ones that have done the best. They should have. And a lot of these guys were priced for bankruptcy. So if you think about the credit implications what was going on in oil in february and march, and i think 50 oil for much of the industry isnt enough, actually. But what its doing is depends on where you are. I would agree with that but depends on where your assets are. Well, youve talked about the efficiencies weve seen in the shale market. Theres no questioning that. Youve taken 1 trillion of cap x out of the market since the lows. Thats not coming back any time soon. I know we got to go, one piece of good news we had in oil this week that i dont think we covered which is Continental Resources sold about i cant remember the number of acres but for 222 million an acre, theyre getting out of the bakken. To most i talked to that was more money than they thought. They were big there, right . They were. Now theyre getting completely out and focusing more on permian and the scoop and stack which is oklahoma as you in the next few weeks will learn more about on this fine program. Listen to you. Soup and stack, theres a lot going on there. Lets pivot, my least favorite word of the month, and talk about our Education System. Last year the government spent more than 1. 4 trillion on education. 788 billion of that was in k through 12 alone, yet nearly a third of our children cant score passing grades in basic baseline testing. Our next guest says our system is failing and he has some solutions hed like to school us on. Scott mcnealy, cofounder of wayan, we spend a lot of money, we dont seem to be getting the results. It would seem that one of the reasons is theres insufficient competition in schooling in america in k through 12, and also some entrenched bases that i know youre critical of like tenure and Public Sector education unions. Explain. Yeah. I mean, this is a complex issue. Ive written it up in a little more detail, on my twitter feed if you want to check it out, but there are six things i think are simple and understandable that isnt a complete solution, but we can and should do this. You know, politicians dont want to put this forth because the entrenched dollars are i can say it because im not trying to raise money to get elected. But first of all, get rid of the department of education. 70 billion plus per year, no perceivable improvement since carter cut a deal with the unions 40 years ago to create this monster. Shut it down. Disband it. Secondly, we got to abolish public government sector unions. That is a corrupt, you know, internal you scratch my back ill scratch your back thing. Unions are to protect the workers from their employer. Why do we need to protect people from our government . Thats just crazy. The third thing i would say is we need to invest in open source technology. We spend 9 billion a year nothing changed since newton got hid on the head with an apple, ten plus ten will and has been and is 20. So why do we need to go create new textbooks. Im spending 130 for a third grade math textbook for my kid. Are you kidding me . Websites are offering wonderful stuff for free. Next, give parents a choice, vouchers, competition. You brought that topic up. Competition matters. Let the parents know the government the federal government doesnt know what my kid should be teaching, the parents know and they ought to take responsibility. And eliminate tenure. How can a tenure professor teach anything about a market economy . Its fundamentally not possible unless we want to rerun another failed and corrupt socialist or marxist experiment here in the United States. We ought to eliminate tenure among those folk who is are teaching our kids. Those six things are easy to do. I assume, you think, that we spend too much time teaching to the tests and yet one of the only ways we know that our Education System is succeeding or failing is by testing. By those standards we dont measure up against the singapores, the hong kongs, finland and others. So do we want what do we want to test to . To the carpetnter, the doctor, the lawyer . Theres no one test fits all. What we have is the state system, le lieliminate federal garbage. What they need to teach, what the local environments and the states will experiment, innovate and you have competition. We have 50 different places we can experiment and see what works best. Lets talk a little bit about how you as a Silicon Valley longtime guy view the president ial race right now. It seems to me theres a choice between someone who might break the Glass Ceiling and a person who might break the glassware. Where do you come down . I come down with we need to change things. We need to change agents. We dont need more of the same crony statism insider pool, all the rest of it. Im not sure that, you know, the government sector Union Teacher and tenured professor educated voters are the last few generations really have a good idea what theyre doing. It just surprises me that these are the two candidates we came up with out of the hundreds of millions of citizens in the United States. But here we are given a choice. My vote doesnt matter. Im in california. Were a single party state. But if my vote mattered, id probably vote to break things down. Break the glassware. Yeah, exactly. Scott, if i could use tylers least favorite word and use pivot from education and talk about the company you took over ceo a matter of months ago at this point, wayin. Essentially it goes around social media sites and calls what people are saying about certain products, your customers include Companies Like Dunkin Donuts and best buy. Im wondering, nowadays are there certain types of social media that are more valuable to Certain Companies than others . Is snapchat more valuable than twitter these days, things like that . Well, it turns out for brands, and this whole Digital Marketing thing is turning the whole media and matching buyers with sellers game upsidedown. Brands are more influenced now by social conversations and recommendations than according to deloitte, than they are by tv advertising. Yet we still spend the bulk on tv advertising. And so with a brand doing a great example is the milliondollar shave club just sold for a billion dollars. Why . Because they just totally disrupted this whole idea of brand, tv advertising, retail model. And its getting turned absolutely upsidedown. I think you may have misspoken, the Million Dollar shave club, its the dollar shave club, i think. Yeah, the dollar shave club. Billionaire, millionaire. Whatever. With one quick thought, youve clearly done a lot of thinking about education. Im curious why more and youve probably gotten more than enough money to live on, im curious why more thoughtful Business People or exBusiness People dont go into politics . Would you ever consider it . Theres not enough kevlar to keep me alive given all of the sacred cows and the money and i mean, i give i think donald could be a little more thoughtful and careful about it, but you know, i dont want to go through the process. I have a wife and kids and all the rest of it. And i dont want to get its amazing what we do, the garbage we put them through. And theres just too many people the crony statism, twothirds of the federal budget is spent taking money from people who own it and earned it and redistribute it to other people to corruptly buy votes. Its called redistribution. And to try and break that up is a very, very dangerous game. All right, scott, thank you very much. We appreciate your time. Scott mcnealy. Thank you. Up next, one wall street analyst likes spam, a lot. Were going to give you the hormel call along with four other street talk calls of the day. Stick around. A good car has to maneuver quickly. Thats also true of a good car company. People have always bought cars. But we saw an opportunity in sharing cars. So we moved fast and launched car2go in 29 cities, all around the world. Doing that required dozens of data centers, designed for speed and performance. We built our business on the ibm cloud. Because thats what the ibm cloud is built for. We built our business on the ibm cloud. Mapping the oceans. Where we explore. Protecting biodiversity. Everywhere we work. Defeating malaria. Improving energy efficiency. Developing more clean burning natural gas. My job . My job at exxonmobil . Turning algae into biofuels. Reducing Energy Poverty in the developing world. Making cars go further with less. Fueling the global economy. And you thought we just made the gas. Energy lives here. Check out the eem etf tracking the emerging markets, up 17 in just three months. New report says money is continuing to pour into emerging markets. Seema modys looking at the drivers of this rally. Seema. Melissa, thats right. Emerging markets have seen seven straight weeks of inflows attracting a total of almost 15 billion. The largest in nearly two years, according to bank of america. And its the easing of external pressures fueling emerging market stocks. The expectations that the fed will use a gradual approach to tightening, the stabilization of oil prices, moodys this week upgraded the outlook on the emerging world citing these very factors. The gains been mostly in the asian world, i should say, bombay up 1 over the past one month. But higher by 18 over the past six months as we wait for the Prime Minister modi to announce who the next central banker will be. Hong kong at a ninemonth high. Shanghai up by around 2. 6 over the past one month. This despite weak Economic Data from the mainland, whether the outperformance in emerging markets can continue is largely predicated on how the china story plays out. A number of questions surrounding beijings Monetary Policy and if it will ease further. Thats keeping investors on edge, melissa. Thank you, seema. Tim, which rallies look long in the tooth . Where are there some values out there . If you get asia right, you get eem right. Remember this has been a four and a half year under performance against the s p, which means this wasnt just a pop something you should fade, Central Banks are cutting, growth is stabilizing. I think the dollar is less important. Thats why i would own eem. And one particular market, which one would that be . I tell you what, i think the latin American Consumer economies, chile, peru, very interesting. I think russia outperforms if oil goes sideways. Thanks, tim. Caterpillar is the best performing dow stock this year after being one of the worst last year. Will a similar turnaround happen for Restoration Hardware . Street talk and trading nation are up next. Your Insurance Company wont replace the full value of your totaled new car. The guy says you picked the wrong insurance plan. No, i picked the wrong Insurance Company. With Liberty Mutual new car replacement™, you wont have to worry about replacing your car because youll get the full value back including depreciation. And if you have more than one Liberty Mutual policy, you qualify for a multipolicy discount, saving you money on your car and home coverage. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. And kick it off. A price target after the price close yesterday, valve and controls business and the deal oes got quote unquote logic and unveiled many of the Strategic Moves she tried to say and the stock nearing the price target. No big catalyst to move the stock. I dont think the end markets are moving. Itsoff set. Im neutral. I agree with him. Good man. Spam reference. Bmo Capital Markets upgrade hormel and a surprise pick of the year and like the balanced business model, high cash position and a remarkably high market share underappreciated by the overall market. Bmo sees a big return to growth in part because hormel is going to lap a series of nonrecuring items. 44 target, tim, on hrl. Are you a believer in spam . Not really. Always believe in spam, brian, but coming down to it, valuation looks expensive to me. I think this is relatively crowded trade. Restoration hardware with a boost today which puts it on the america conviction buy list. Goldman says the retailer will return to growth next year and return the vitality expected last year derailed by the own struggles. This is company that said earlier this year people putting off big purchases because of and then goldman has a 40 price target. The stock down 58 this year. Is this a turnaround story . It is. The chart is unbelievable. I think their real Estate Transformation is manager thats a catalyst and the worst priced in. Home improvement, housing market, thiss the tail wind for these guys and i think the worst is there. Sends you the catalogs, 17 pounds. Are you still buying armoires . No. A flat panel tv killed them. No more. Thats funny. Actually funny. Surprisingly funny. Surprisingly funny . Tim seymour, out. Final appearance on power lunch. That was actually a funny joke. In a nice way. Actually. Finally today, under the radar name, el dorado resorts. It is a casino company. Suntrust starts coverage with a buy calling the underlying growth rate quote robust and the fundamentals are supported by an improved air lift. I dont know what that means and a stronger local economy and the analyst is worried about competition. 17 target on el dorado. 20 upside. Dont you actually have something to say . Obviously these acquisitions are paying off and i cant tell any funny jokes anymore. Cant match brians joke. Thats for sure. Thats gold. So far its not funny. El dorado. Two of the best performing stocks caterpillar and walmart. These were the two worst performers la year. Does this show the dogs of the dow theory showing strength or a random completely unrelevant statistic we just gave you. Eddie and craig. Eddie, does it mean something, buy the bad guys because they will be the good guys, or random luck . Dogs of the dow is a classic strategy. Both had terrible years last year and both did quite well this year. But i think thats where the similarities end. If we saw last month, caterpillar gave lower guidance and just yesterday we saw higher guidance from walmart. Walmarts been investing in themselves, theyre giving the employees a wage increase. Theyve been cleaning up the stores. Theyre going after targets audience. I think going forward, walmart is the better buy and i think caterpillar has a lot of work to do. Okay. Were going to look at the charts then, craig. Take the emotion out of it. Do you like the charts, none or one or the other . Brian, we like both of the charts but if i had to take a choice, i would choose caterpillar. I think you have more upside when you unemotionally look at the charts. Thats much better in the low count of 38 range than seeing with walmart which is in about a 15 range. You see your clear left shoulder, the red, the right shoulder, the neckline is broken and a move to at least the higher highs of where we were last year. All right. We leave it there. We have a lot of lines up and down on that chart. Craig and eddie, thank you very much. Well be right back. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Experience ore confidence regardless of the conditions. Get great offers at the lexus golden opportunity sales event. Get up to 5,000 customer cash on select 2016 models. Ends september 5th. See your lexus dealer. When a moment spontaneously turns romantic, why pause to take a pill . Or stop to find a bathroom . Cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis and a 200 savings card. We call it check please on power lunch. We want to reiterate the i can ka warning. Cdc expanding warning saying pregnant women should not travel to miami beach. They were alerting of wynwood now south beach and saying that pregnant women should consult their doctors about zika. And any exposure they may have had. Im keeping a watch on the zikarelated stocks. Airlines comes to mind. Cruise lines come to mind. Not a lot of movement. Not hitting any new lows based on the headlines but jetblue worth mentioning here, sitting right at session lows right now down by 2. 5 . Perhaps the airlines most exposure to florida or among the top three of the airlines in terms of exposure to florida. I feel like every time we get one of the trades and i dont mean to make light but this is an opportunity to pick these things up. Talking about serious stuff. I feel bad. Mine is lighthearted. Go ahead. It is friday. We can pivot. Brady brunch story number two. It was robbed in studio tv. The real snous. Its a real house. Still there . Robbed and heres the cool thing. The 94yearold woman that lives there chased them out. Did they take the lava lamp . Somebody threw the ball. Dont play ball in the house. Marcia. And the fake boyfriend. Tim see mow, thank you for joining us. It was a good show. It was fun. Tim, thank you for joining us. It was actually good. You were actually good. Just happy to be here. Hi and welcome to the closing bell, everybody. Im kelly evans at the new york stock exchange. Happy friday. Whats whats that . Stop, stop, stop. Its not that evident. Ill Bill Griffeth he said moving on. Stocks are in the red and well off the lows of the session. The dow off more than 100 points. Investors continue digesting some rather hawkish officials. The nasdaq in jeopardy of snapping an eightweek winning