Transcripts For CNBC Power Lunch 20160826

Robots. Im Michelle Carusocabrera. Stocks giving up their gains, the dow was up more than 100 points earlier. But well show you in a second moving lower in the wake of the fed. The fda says it noi wants all u. S. Blood banks, all of them, to start screening for the zika virus. The death toll rising again in central italy following wednesdays massive earthquake. Well have the latest from the scene straight ahead. We have a big two hours headed your way. First, lets begin with that big aboutface in the markets. Bob pisani is live at the nyse. This is about digesting what janet yellen said or didnt say, bob. And fisher, even more importantly. Lets call it good cop and bad cop. I just want to show you a chart of what happened here. So yellen comes on at roughly 10 00 eastern time. And the important thing for the market overall here was she basically said, look, i believe the case for an increase in the fed funds rate has strengthened in recent months. Theres her one hawkish statement, but then threw in a lot of qualifiers that made the odds of a september hike are not dramatically more. So up eight, nine points. Then stan fisher comes on with Steve Liesman saying yes to both questions and a second rate hike might occur later in the year. Well, youll notice the market dropped twice as much, about 15 points as it went up under yellen. This gives a very clear indication about what the markets concerns are. Weve been saying this for a few days and that is with stocks at new highs, the risk is to the downside that Janet Yellens relatively mild comments would only move stocks up a litter. But once stan fisher came out and said september was very, very real and aggressive on his statement, that moved stocks down much more overall here. You can see this as well in the reaction in the twoyear note which is generally very sensitive to anything the fed says. You see moving down slightly there. Theres your twoyear note, thank you. Moving down largely sideways, but the moment fisher come out, that was just before 12 00, you see the note moving to the upside. Clear reaction from stan fisher. As for the vix and vix futures, you can see the confusion here. Generally moving to the downside, moving to the lows of the day. Just as yellen came out. And then as fisher was talking moved up, oh, about a full point and a half overall. Lets just call it good cop, bad cop. Back to you. All right, bob, thank you very much. If its friday near 1 00 that means the rig counts are out. And after weeks of adding oil rigs, we are unchanged. According to baker hughes there were zero new oil rigs added. Oil holding study up 0. 3 to 47. 47. But no change. First time in a number of chawe we have not seen a jump. Lets bring in bill gross, and cnbc contributor ron insana with us as well. Bill, janet yellen, what do you think . Because it seems the market is just getting more and more frustrated by the fed. Are you . Well, ive been frustrated and disappointed with the fed for a long time, brian, you know that. I think today in addition to the slight hawkishness of her statement and then the fisher addon has been just suggested that yellen reinforced the long term view that asset prices rule fed orthodoxy. And she and they should appear renewed qe, including, and this is the important part of her speech, i think, including alternative assets other than bonds. Such thinking to my way of thinking stems from a trickledown notion of Monetary Policy which suggests that the greater financial wealth leads directly to higher investment in the real economy. And i think the evidence of the past 15 years in japan and certainly in the past six years in the United States suggest otherwise. So i continue to be disappointed by her focus on Financial Markets close to negative Interest Rates. And now the potential for purchases of Corporate Bonds and stocks at some point. Ron. Well, i tend to agree with bill. Now, i have a slightly different take which i think the markets prior to Stanley Fisher were actually looking through Janet Yellens commentary about the possibility of a nearterm rate hike if at all. And instead looking to that next easing that bill was just describing. And the fed also included the notion of using interest on excess reserves held at the fed as a tool to ease Monetary Policy further, which essentially could take us toward negative Interest Rates in the next recession. So the initial positive to yellen, i think the initial reaction to janet yellen, pardon me, was positive in looking at future easing. In other words they didnt think she was that hawkish despite the recent months a strengthening case for rate hike, but youre saying the market didnt believe her at all. Im not saying that. Looking at however many rate hikes we have at the next easing level. I think Stanley Fisher might have complicated that. You saw gold pop, stocks go up and bond yields fall. So you say the market was looking toward an easing, you dont necessarily mean thats the next step . No. I mean that would be however much they tighten would be relatively modest and the next move theyre contemplating is how to deal with a recession if and when it comes. But the next big move is easing, the next small move may be tightenitigh. Wow, thats wait ou on the chess board. Yeah, ill go with what ron said. Tightening the potential for easing. And interestingly enough in terms of prior qes, you know, the long bond has basically gone up in yield based upon inflationary expectations. So i think once observers read the speech that they figured out the potential for the fed joining the ecb, for the fed joining the boj in this what i consider rather desperate struggle to purchase assets to support the real economy. And ultimately the hope is, or the fear is in terms of the bond market that that creates some inflation. And so we did see a huge selloff in terms of the long bond. It was up at first and now in negative territory. But bill, its like the fed is operating i think you were on squawk box yesterday, jim pauls sesen investor said we ar crisis rates and so far from a crisis. If you look at gdp, okay, its not growing. Ive made the argument, bill i dont know if you agree, but gdp at this point officially should be worthless. It seems to be so far off what every other data point is telling us. Are you a believer in the data . Well, no, ive always been suspicious of the data. But theres data in terms of inflation, but that in turn is distorted by what they call e donnic adjustments and same thing with the gdp. So i think what yellen has told us is that she almost entirely focuses on job growth. To the extent that next month we see a decent job growth number, then i think for sure or close to for sure, you know, in september were going to see a fed hike of 25 basis points and the market hadnt expected that. Well just have to wait and see. Where are you on the fed has no idea what theyre doing curve . I dont believe that at all. You know there are large parts of the market that these guys have no idea. Theyre using outdated mode for Monetary Policy, for whatever reason because the issues with productivity or the fact that with regulation means the money supply doesnt move around. Theres lots of reasons. So having said that, i think that is the feds problem. I dont think they dont know what theyre doing. I do think in many cases there are certain old rules that no longer apply. The phillips curve, in a closed system, absolutely. We have a bifurcated economy with 5. 6 million jobs but people lack the skills to get them . Definitely. Does gdp represent growth, yes, in the aggregate it does, but since the economy split some people are doing well, some are not, some people benefit from Interest Rate policy, some people dont. I dont think this is a problem of the feds making per se, nor do they lack understanding. I think their tools at this juncture are not the right ones to use to fix the problems that exist. You know, in the past, bill go ahead. A little bit different take on that. I do think it is the feds problem. And they do lack understanding. I think yesterday in the wall street journal the oped page featured a fascinating piece by former fed official kevin warsh titled, the questioned needs new thinking. Todays speech by janet yellen was not that. Questions the ability of the fed to manage three goals at once, the real economy, inflation and Financial Markets. And he suggests one or two of the three will eventually break lose of moorings only because of free market forces. So i think the fed with their focus on low Interest Rates is distorting the savings function not only in the United States but on a global basis. And savings of course is connected to investment by the hipbone to the thigh bone and ultimately i think thats what reduces real Economic Growth going forward. And they dont realize that. But i think the hip displace ya were getting globally is also a function of demographic, technological deflation that is a worldwide phenomenon. As such Central Banks dont have too many other options but Interest Rates at their disposal. So why do they think they can tinker this and theyre going to manage the economy . I dont think thats what they i think so. Ben bernanke and janet yellen have both gone before congress and begged for them to take the ball and run with it and provide an alternative form of stimulus. Or provide a Regulatory Framework in which businesses can grow more freely. Theyre not getting any help, so theyre the only game in town. And i hear what youre saying. The fed may turn out to be right. They may be right. They may be crazy, but it just might be a lunatic youre looking for. Because we dont know. To your point, we have never been here before. No, not since the 30s. With change and productivity, and ultimately, bill, including the smartest minds in the world are guessing because nobody knows how its going to go. In the past when the bond market got frustrated by the fed, to quote another song, they went their own way, right . And they were the bond vigilantes. Where is the bond market now . Is it an impotent bond market . Its been killed. Well, let me address your point about the fed guessing. And the fed doesnt like to guess. The fed likes to model and to use as ron has suggested old models including the phillips curve and taylor model which have been proven up until layman to justify higher or lower Interest Rates. But once you get into subjective territory like demographics or robotization, which weve talked about before on your program, it becomes very difficult for the fed to guess or be subjective. Theyre not a subjective body. And thats the problem. Going forward they have to begin to make some guesses as to what these Structural Forces and low Interest Rates are doing to the economy that didnt happen before and they dont do that. That solves it, right . We cleared that one up. The last time we had a situation like this of the industrial revolution, we really didnt have a functional fed either. We had a decentralized banking system. If you want to use the model of how technological demographicization, you have to go back to the 70s. My argument, and got to go, but im not one of these data conspiracy guys, its just that the numbers the way the reports are built dont reflect a modern day kmi. Yeah, gdp has to be updated frequently. Anyway, thats a different topic. Bill gross, have a great weekend, sir. You too, brian. Appreciate it. Ron, stick around. I will. I mean, you have to. Okay. The italians did they what . They added prostitution to still to come we can talk about productivity levels, all kinds of levels. Mylan shares stabilizing but will it lead to a dodd frank moment for big pharma . First, shares of herbalife getting news of carl icahn wants out. Is this the beginning of the end of the company . Thats next. Thisompanys servers. Accessible by thousands suppliers and employeesglobly. But with Cyber Threats on the rise, rys data could be under attack. Th the help of at t, rys data could be under and secu that senses and migates Cyber Threats, their cral data iser than ever. Giving them the agility to be their cral data iser open sure. Because one knows like in stgal formagegreaofrs s goget up to 5,000 ctomer on sec2016odels. Ends septemb. Seyoexus dealer. Whats happening he . Thism seyoexus dealer. For whenever anyinhappens e but inkowim already you crte cusm aler for althe thgs that are imrtant to you. I eswe dont nd the kid anore. Custom art. What creates the confidence in the company . With carl exiting, i think, the things over and over quickly. Obviously the sooner he sells the better. That was Hedge Fund Manager bill ackman talking herbalife on squawk box this morning. Ackman saying carl icahn is looking to sell his stake in herbalife because, quote, he knows the company is toast. The stock right now is lower by about 5 . Lets bring in cnbc contributor ron insana and Herb Greenberg also joining us. Kate kelly, bring us up to speed. Carl icahn apparently wants to sell. How do we know this . We know from the wall street journal this morning, michelle. What they reported is longtime banker had been shopping this block of stock at 17 million shares, hes the number one holder of record. So they had been shopping and in recent weeks since this ftc settlement on july 15th with a demand that herbalife change its Business Practices in a 200 million settlement, apparently icahn wants out. Were not sure of the motivation. They tried to put together a consortium of buyers and along the way approached bill ackman if he would be interested and he briefly considered it. The reason im talking to you right now is i got ackman on the phone this morning. He called into squawk box and i interviewed him. And he basically said, yes, this is true. And, yes, i considered buying a few million shares, maybe 3 million, because i want carl out. Im still short the stock. I still think its going down, if not to zero and if its a means to an end, i buy a few shares plan to sell the next day just to get carl out, thats great. Its great for the stock. And it says to ackman, anyway, the fact that icahn would want to sell that the stock is toast. Sure. Herb, do you think thats right . Does this mean that the stock is thats what icahn thinks at this point . Look, i dont know what icahn thinks. I know what i would think he would think because at this point as ive said on air and ive said other places, mainly social media, is that i think herbalife with this ftc settlement is a broken Business Model certainly in the United States. And they say theyre rolling this out around the world, i would say around the world. So from this point on at least over the next year it would seem like herbalife is like a biotech stock. Its a speculative stock. Theyre currently in phase one trials. Theyre going to be in phase two trials and by the end of the year, 12 months, phase three trials. Yeartodate still higher by 9. 5 , ron. Yeah, my whole view of herbalife is never has there been such an intense test of manhood over such an inconsequential stock. And i think thats whats been going on between mr. Icahn and mr. Ackman. Its not a market bellwether. Maybe its a pyramid scheme. Maybe its something thats not agree, but its just the people involved, ron. Yes. And i think that, you know, listen, i dont know why theyre so tied up and balled up in this thing because there are plenty of other places you could go and make money. Can i [ overlapping speakers ] i was going to say, are we suggesting that, kate, that billionaires with outsized egos might sometimes hang onto something too long just to prove a point . I know we would never want to beat a horse to death if we had great video or great sound on cnbc that we wanted to reuse, and the personalities are big. I grant you. But in all seriousness, bill ackman made a pretty brash move here, a pretty aggressive move in terms of a billion dollar short that hes now been in for over four years, saying the company was a pyramid scheme, opening himself up to all sorts of liabilities with that alone. And then icahn taking the other side of it saying it was a great company, winding up on the board, sort of exhorting other people to get involved on the long side. I mean, it may be an inconsequential stock in the scheme of things, ron, but what these guys did and the capital that they put behind it is really significant. Well, to me thats the part that i dont understand in a certain sense. And bill ackman, as you discussed with him this morning, kate, his performance since the last year has been abysmal. Won the bad bet on valeant, and two the bad bet on herbalife. We talked about that and he blames that almost 100 on valeant. Said ive never been in such a bad stock position as this in my entire history as an investor as i have with valeant. But by the way he then on the tail end compared the situation with valeant to general growth properties. Right. At the time when it was in bankruptcy or close to it. So obviously hes sort of touting a potentially great outcome there. Herb, lets talk about in that case general growth properties, he bought low and sold high. Herb, right now ackman has bought high, and i dont know if he sold, but he has been obliterated in herbalife. Hes been obliterated in valeant. He can blame valeant all he wants. But its like if you bought exxon the day before the bottom dropped out of oil, thats what you do as an investor, your entire job is supposed to be smarter than the market. In your long illustrious history, have you ever seen an investor hang onto a position like this . Yes. He did with nbia. Yes. I have to tell you we get so used to this short term of focus that there are investor who is have very long term views. And there are investors who maybe i was having lunch with a very good Hedge Fund Manager the other day who was in san diego, and we were talking about this. And he has sticky money. And he can take very long term views of things. And if you have a very long term view, you can take whatever view, you can trade around it. But there are let me tell you something, on some of these situations the shorts get into are troubled companies, broken Business Models, other types offiof i issues, sometimes it takes years to play out. But what are you supposed to do i can agree with your argument. I can agree with herbs argument on the long side because you know your losses. A short investment for a firm that i would imagine like ackman, kate correct me if im wrong, probably has Pension Funds and some public trust money put into it to do a short where your losses are unlimited. Brian, the story i was doing this morning originally and then sort of i stumbled upon this other situation with herbalife, was about Pension Funds redeeming from hedge funds, including pershing square, getting some redemption including the Illinois State pension, for example. Luckily for ackman he has this eightquarter redemption policy and claims the redemption hes seeing now is not historic anyway, i wont go on. But i just think ackman has actually put quite a lot of research into this herbalife short as herb knows very well. I think some people in the Investment Community think hes actually correct on the merits of his argument. Its just that the ftc settlement was not as dire for the company as he might have predicted. All right. Ladies and gentlemen, thanks. Herb, sorry, we got to go. Sorry. Sure, okay. Well argue another time. Because, as kate mentioned, speaking of ackman and icahn and amazing pieces of video, who could forget both of them hugging it out on stage. Delivering alpha two years ago. Does it look like they like each other . Two tall rich guys. Icahn will be back at this years delivering alpha on september 13th in new york city. For more details please head to deliveringalpha. Com. You can see the whole lineup there including carl icahn. In the meantime, coming up next, the good, the bad and the downright ugly stocks in todays trading. Energ. Vel of its perfoance machi with this gr o inigen. s a supercomputer wwith this stdard of. On. Xury. s an sis. Introditand more. Hinneed ito b. Resign ecla ase the e300or 54a moh oulocal mercbenz deer. Mercedesenz. The best or nothing. Energpeopler. Challenge. Of energylatednou fcarbmissions. E chalnge iscapture the emissions before theyre released the a aosphere. Our team is woing to makehis techlo better, atshat were rkinsions aroon right now. Atsengyives here. Sions aroon right now. Welcome back, partners. Time to saddle up and hit the good, the bad and the ugly in todays trade. First to the good, auto desk hitting an alltime high after boosting guidance on better than expected results. On to the bad, and ill get my big bad self out of the way here. The nyse index down, lower led by sky west. And it is the ugly day for ulta salon. Stock now about 9 off 52week high. Still, michelle, cant complain too much, ulta salon the best performing s p 500 stock over the past five years. But today it is ugly. Yeah, but it has had a great run. Thanks, brian. All right, the outrage of the cost of the epipen continues, but did mylans ceo blow the lid off a much bigger controversy when she was on cnbc yesterday . Do we now need a dodd frank for big pharma . That discussion next. Eres a loof places u never wao e 7. 95. [ beep ] buyoull be gl see it here. Wherif only the signs were asid ere get out delitys active trader pro can lp you find smter eny and exit points d can he protect your potential profi im just a g whs and m just a guy who w to sell him that tru. Rk. So i usetruecar. Itold me what other people in the area paid forth. I already owe a uecar thuck he wants. So were othe same page fo heven gets re its fair. A its. Look good . Looks great. Th is howg was alwa meant to be. Th is truecar. Look good . Looks great. Th is howg was alwa meant to be. Hi everybody. Im sue herera. Heres your cnbc news update for this hour. The white house says iranian vessels encounters with u. S. Warships in the gulf are cause for concern. At a News Conference for press secretary josh earnest saying iranian intentions are unclear but the behavior is unacceptable and increases risks of miscalculation. Federal police in brazil are urging prosecutors to charge former president lula of money laundering. He and his wife are accused of receiving almost 750 million as part of a kickback scheme centered around petrobras. Uber and its ceo lawsuit to put a new york price fixing on hold while judge appeal denial to and Richard Branson suffered a cracked cheek, torn ligaments and severe cuts after crashing his bike in the virgin islands. The billionaire posted those pictures on social media. Branson said he thought he was going to die. And that wearing a helmet saved his life. Lucky guy indeed. Thats the news update this hour. Back to you, michelle. Those photos look awful. They do. Thanks, sue. Death toll rising again after that 6. 2 magnitude earthquake in central italy. Nbcs lucy kafavnov has the latest. Reporter here in amatrice rescuers are focusing on what they call red zones, pockets of rubble they believe people could be trapped underneath. The difficulty has been gauging the number. Theyre hopeful perhaps they could get lucky and find folks trapped beneath. You can see behind me the state of some of the buildings. People have not been allowed to return back to their homes. A lot of soul searching also taking place as folks are trying to come to grips with what exactly took place. Could authorities have done more to secure the buildings . This area is a known earthquake zone. Back in 2009 quake claimed the lives of more than 300 people. Were the proper precautionary steps taken . Now, this building is a school. Back in 2012 authorities here spent roughly 1 million reinforcing it. They said it was supposed to be earthquake proof. You can see behind me now its turned into a pile of rocks, sand and stone. A lot of School Children could have lost their lives. A lot of Unanswered Questions about what more should have been done. Back to you. That was nbcs lucy kafanov reporting in italy. Lets get back to the market. Stocks headed toward session lows, back toward session lows. The Dow Jones Industrial average down 54 points, again, not a big move at all. Wieng ere in record territory, michelle, for lack of 1 days. Really almost a calendar month and a half without a 1 move. Figure that out. We havent had this kind of lack of volatility since the mid 90s according to some people who track this kind of data. Those people need to do Something Else. We appreciate them, but thats not the most exciting thing to do. Lets get a check on the bond market. This should be a big day given janet yellen was all the focus. Her remarks came out today, we didnt see a big move. The 10year yield, there you see 1. 599 . Again, not seeing much of a move at all here. Yields are, yeah, little changed. There you go. 10year 1. 6. Holy smokes. Havent seen that in ages. Its like the Minnesota Twins hitting a home run. Rare, but exciting. The outrage over mylan hiking epipen prices about 500 since they bought it now leading to questions about the pricing of drugs in general. In exclusive interview yesterday on cnbc with mylan, hceo heathe bresch explained. My frustration is theres a list price of 608. Theres a system. I laid out there are four or five hands that the product touches and companies that it goes through before it ever gets to that patient at the counter. No one everybody should be frustrated. I am hoping that this is an Inflection Point for this country. Our health care is in a crisis. Its no different than the Mortgage Financial crisis back in 2007. Could this be the spark that will force some kind of dodd frank like rules on big pharma if indeed it is a crisis . Joining us former vermont governor howard dean and larry kudlow, gentlemen, good to see you. Mr. Dean, im going to start with you. Thinking we may need more regulation . Well, we may. First this is an outlier ceo, this is more like Martin Shkreli. What they did was uncon shscio e unconscionable. This is an outrageous price increase for a drug that doesnt cost any more today than it did in 2007 when they started this. So if theyre an outlier, does that mean you dont think we need a dodd frank piece of legislation well, i certainly dont think we need a dodd frank. We actually need something far more sweeping. We pay for medicine on a fee for Service Basis in this country. As long as we keep doing that, were going to keep encouraging this kind of stuff. You pay us remember physician you pay us to do as much as we possibly can whether it works or not. The only way youre going to get budgetary predictability by payers private and public is to get rid of medicine and do all this cap tated basis. Cns is the center for medical error and medical reimbursement. Its the government, medicare and medicaid no, no, my friend howard dean, my good friend howard dean go right ahead and interject, larry. I was just waiting for this moment. My friend howard dean, dr. Howard dean, toii want to say, missing the absolute key point here. And that is we need more competition. We need thorough reform of the fda, which takes years to let these generics in. I mean, just this whole injection business theyve stopped a couple generics coming in because of an Injection Technology that was back in the mid 1970s. Thats the log jam here. Sure. Mylan shouldnt have a monopoly. Im sure their prices are too high. But the way to deal with that is to have more market entries. Larry, i disagree with that. Because theres a fact youre missing here, thats the patent law. The reason theres not more competition in general is that there are patents on these products. And there should be patents on these products. So i have to disagree. I think more competition is a good thing. But in this case they still have a patent on the injection portion of this. Youre correct about that. Thats what the problem is. Im not in teva is expected to finally get approval next year. Then you know what, if you get approval, then a couple of companies will come in. And youre going to see the price come down. Thats the easy way out. Michelle, im absolutely crushed, destroyed when i heard you wanted a dodd frank for this Health Care System. I didnt write that tease. You know better. Were making cable, larry. Were making cable. I feel so much better because the only free market graduate in the history of Wellesley College has always been a free market problemsoev solver. By the way, howard dean has free market in him too. Two things here, regarding Health Care System, number one, its not just the fda long overdue for reforms. But number two, look at obamacare for heaven sakes. These people that want to use this drug are stuck with high premiums and high deductibles. Why . Because of obamacare mandates. Second point, we are taxing the manufacturers, we are taxing the equipment makers, we are taxing the pharmas all for obamacare. By the way, obamacare is on a death spiral and its going to have to be completely replaced. So you put it all together. Yeah, politically lets blame pharmas. Lets blame drug companies. Thats what we always do. How about making an analysis . How about using the free market . And how about getting rid of obamacare . Larry, are you still running for Public Office in connecticut . I am not. I am here. Okay. Away on vacation. Because this sounded like a political speech. Obamacare has absolutely nothing to do with. Thats the argument obamacare has everything the argument howard dean, you dont think higher deductibles have anything to do with this . They have everything to do with it. Thats not the excuse for the behavior. Higher deductibles doesnt change the pharmaceutical company. They jacked up rates and say the Insurance Companies should pay more, all that does is take it out of your pocket at a different time when you pay insurance premiums. [ overlapping speakers ] im going to get louder and louder, im going to jump in, governor. Go for it. Im not going to defend the price increase, but they were kind enough to sit down with us yesterday. So ill take the other side. Cant compare them to shkreli. Mylan has 35,000 employees and makes 14,000 different products. I know. Theyre a big company. They fought a teva patent that was an 80,000 a year pill. They got that wiped out. Listen, i understand everybody wants to hate them. I get it. Not defending the epipen thing, im saying lets look at it in the bigger picture. The point mylan was trying to make and lets advance the dialogue, theres too many people involved in the process. Everybodys got their hand out, and it shouldnt be this way. Amazon knew this about selling books, and now of course everything else. Why cant we amazon distribution. The complex distribution system. Sully is right about the competition. I assume he means amazon equals competition, but dont forget you can fully writeoff the obamacare piece, howard dean, my friend, but thats not right. You know why . The mandates in obamacare have driven up premiums for those people that would like to use this antiallergy drug, theyve driven up the premiums by 30, 40, 50 . The whole system is crumbling right now because its going into bankruptcy. And by the way, theyve also had to jack up deductibles because of this mandate. So it does matter. For people who are trying to afford the drug, theyre getting killed. For people who are trying to make the drug, the fda wont let it through. Theyve been a pain in the you know what for many years about this. Theres no transparency. And on top of that youre taxing the manufacturers, for god sakes. So its like 0 for 5. Listen, as you imagine yesterday there was a lot of feedback, a lot of commentary, governor. I spent the whole ride home speaking with a contact inside an Insurance Company, not one of the big public companies. Not a Public Company at all. And the complaint was, basically well, people say stuff is that true or not everybody politicizes everything these days chrks is terrible. But all these people that arent sick, they get on a plan and jump off when theyre not because its economically rational thing to do. One Insurance Company i talked to last night said exactly whats happening. Now with these high deductibles people are starting to see, oh, my god, why are drug prices so expensive . Right. Do you think at least something good may come of all this . In the longer term . Because finally, us, and others are exposing a light on this dark corner of something that we all know about but very few of us fully understand . The drug pricing mechanism. First of all, let me just say that mylan is historically a great company. They have a plant in vermont and they employ people here and theyre great jobs. But that doesnt excuse this predatory pricing. I dont buy any excuses anybodys given about obamacare or any of this stuff. The other pharmaceutical companies by and large are not doing this. They do have very expensive products, but they dont do this. Second of all, let me defend the fda for a minute. The fda is a problem no question about it. They have approved drugs where the professional Committee Said you shouldnt and vice versa. But its gotten a lot better since the regulatory act has been properly funded by congress. Thats up for reauthorization. So, look thrks is predatory behavior by a particular drug company. Theres really not an excuse for it. I dont see other companies doing this of course they have. Look, the word predatory is all right, thats a very power charge word. Pharmas have to make a buck. Pharmas are the guys im not against them making a buck. Im not against the industry making a buck. But i am against raising your prices 600 . All right. But, howard, the disciplinarian here should not be dodd frank, should not be the i agree with that. The disciplinarian here should be the market. Look, teva has tried to get into this thing. And the fda keeps keeping them out. Theres no reason for that. Or, if there is a reason, they refuse to give one. So this is why i come down hard on the fda. Regarding the other points, im sorry, this is related to obamacare. Theres so much pressure going on in the Health Care System from insurance to customers to pharma manufacturers and everybody else. Theyre being taxed, theyre being overregulated. And i know nobody can afford this stuff because of these government rules. Governor, Heather Bresch to us yesterday sort of compared this a little to the mortgage crisis. And she took some heat for that, but what she meant as far as i understand it in the 20 minutes or so where we did the interview was that, you know, all this mortgage crap went on for years. And a few people and michelle is one, i was one, different network, were starting to call attention to this and Congress Kind of ignored, ignored until it imploded but then congress acted like they knew everything. But the point shes making some point things get so bad finally action is taken. New york times had an article in april about all these drug hike rises well before the epipen thing. Do you think though this thing, this little epipen, could be the thing that finally gets somebody to act on all the things that were talking about . The tipping point, the popping of this pharma bubble, if you will. Not in terms of the stocks, but just in terms of the fact that americans basically cant afford medicine anymore . Thats the key point, what you just said there. Americans cant afford health care because of government imposed rules, regs and mandates. Thats absolutely not true. You cant say that with a straight face really. Im going to say it with a straight face. I want to just make another point on this front. The fda has to be completely reformed. It has to be transparent. They are a frfraid of their own shadow and largely to blame for these price increases also. Gentlemen, so sorry. Looks like weve got some breaking news we have to get to related to a very wellknown technology name. Its been a great discussion. Governor dean, great to have you on and a doctor, its great. Larry, good to see you. Susan lee. We have blackberry in a trading halt at this point. News is pending and we are looking at pretty low volume day in terms of number of blackberry shares trading hands. But we have put in a call to the company. Still havent heard anything back, as you know, i dont need to tell you, michelle, that analysts have been saying for a long time now that blackberry might be the target of a buyout in the future still embark in this long turnaround plan theyve been on for the last few years. Back to you. Thats immediately what i think a lot of people thought when they saw news alert halted for news pending oh, hold on. Im going to pull an audible. Excuse me, im standing up. Theres a reason for this, jon najarian. Jon najarian see, jon sits behind me at the office. And i remember jon i think i heard him say when he wasnt complaining about laguardia traffic blackberry call buying. That theres been a lot of options activity in shares of blackberry over the past month. Its amazing people in the Options Market know things in advance sometimes. Yeah, so theyre going to go grab najarian here. Blackberry halted, im not suggesting anything, but i do remember jon saying a lot of there he is. Well find him. Maybe a break in here, guys and get jon on the set. All right. Still ahead amazon doubling down on bet on brick and mortar. Will the strategy payoff or is this too much . And well get jons take on this blackberry halt. What could be going onto halt the stock in the middle of a friday . Were going to find out when its unhalted. Whats this music . Were back after this. All right. Welcome back here. We got a news alert on blackberry. We dont know what the news alert is. Right now the news alert is that shares of blackberry are halted both here and in toronto. They are of course a canadian company, formerly known as research in motion. You might have seen my inelegant audible as we went into break here spooking everybody out. Jon, i believe, people dont realize we sit behind each other you were talking about blackberry options a few weeks ago. Yep. What are you seeing in blackberry option activity . Ahead of this today, brian, nothing. Its dull as heck today or in the last couple weeks . Last couple weeks there was upside. Thats what i was pointing out couple weeks ago. Youre 100 right about that. But today frequently going into a weekend we will see people actively speculate on a deal for any rumored stock, whether its this one or any of the go ahead. I was going to say there had been speculation earlier in the year in fact earlier this summer that perhaps they were just going to shut down the Hardware Division completely. Right. Which would lead to less revenue but higher margins, just be a software company. So that, you know, we dont know what the news is so were speculating on what it could be. Yep. There have been talk there would be deals or patents sold or things like that. That wouldnt merit a halt, though. A couple patents, maybe. Well see in the middle of the day, yeah, i dont know. And maybe its virtually all of the patents. Whatever it is the blackberry activity the past couple of weeks i can look at options activity a little bit. I know a tenth of what you know, if that. Could somebody make some coin here . How is it the options pricing on blackberry . Well, they basically like i said, brian, were pretty dull today. Couple weeks ago there was active speculation. And whenever there is the premiums accelerate and theyre more expensive. Theyre more dear because people are saying, wow, seems like somebody knows something. Today, 2,000 options, 2100, Something Like that thats all traded on the call side, only about 600 on the put side. Again, this is not typical of what you would see going into a trading halt like this, all the more reason that people will be watching this one as it comes its also just incredibly slow summer friday. So its weird to see a stock halted. Yep, absolutely. Market cap of 4 billion. Wow. I get so nostalgic about blackber blackberry. I remember when i got my first one and you could finally leave your desk and not wait for that email. It was like getting my first cell phone. And super secure too. Yeah. Still. So well be watching. Thanks. Okay. Sorry for the ill have more for you later. Next, is this what the future of farming looks like . Yeah, those are robots who are cutting lettuce. Were going to head live to solinas, california, where robots are running the farm. Thats straight ahead. [rock mus playing] [music stops] [whistle] [rock music playing] [record scratch] announcer dont let e. Coli mosh with your food. An estimated 3,000 americans die from a foodborne illness each year. You cant see these microbes, but they might be there. So, always separate raw meat from vegetables. Keep your family safe at foodsafety. Gov. Youve heard the predictions robots will take over the world. It appears they are starting on farms. Yes, they are picking lettuce. Aditi roy is live in salinas, california, with that story. Reporter hi, michelle. We are one hour south of Silicon Valley here in salinas, california, look how gorgeous it is. Were standing in a field of lettuce that belongs to taylor farms. Right now harvest is done for the day, but early, early in the morning they use a vast piece of equipment that really helps them increase their productivity. Lets look at pictures of that equipment. Its actually called a water jet knife. And it uses streams of water to cut heads of lettuce in the field. It increases their productivity by 10 and requires half the workers. Inside their Processing Plant for taylor farms, lasers help scan for impurities and robots also help with packing. But taylor farms isnt just using technology, its also investing in it. The companys headquarters actually house an incubator run by the western Growers Association with 15 startups in the building. Among them a startup called harvest port which allows farmers to rent out idle farm equipment. Innovation helps keep costs down. Farming is a low margin business. And its a commoditize business, so farmers can only compete on cost. And so theyre really looking for these cost savings to come out of new innovations, new technology. Reporter and lets take a look at those numbers. The agtech industry is flourishing with 307 deals and 1. 8 billion invested already this year in the sector. The number of investors has risen by 52 . Some of them are farmers. In fact, 70 5 of farmers say they plan to invest in agtech in the next three years. Thats according to the American Farm bureau. Guys, back to you. Fascinating stuff in salinas, california. Aditi, thank you very much. Coming up, back to the outrage over epipen prices. Who exactly is getting a slice in the huge supply chain . And how much are they getting . Well, that depends a lot on who you ask. Were going to take a closer look inside this bizarre world coming up. Eres a lot of places you never want tsee 7. 95. [ beep ] but yoll 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 helpou find smarter entry d ex points and can help protect your potenti profits. Fidelity where smarter investors will always be. Im melissa lee. Heres whats on the power lunch menu this hour. Outrage over epipen prices. We take you inside the money chain. Is a big Central Bank Party in the mountains signaling a september to remember . And tricked out trucks of the future. Well kick the tires take you for an incredible ride. The second hour of power lunch starts right now. You dont have to dance in the dark, were always going to shine a light on the markets for you. Im brian sullivan. Hey, everybody. Check on the markets, dow down little more in fact near the lows of the session. The dow off 80 points right now. Stocks in the red. We were down nearly 100 points. It was up triple digit earlier. So the markets really weakening as we head into the weekend. Check out the financials. Getting a nice lift on the back of some of the janet yellen comments maybe a little hawkish. Would love to see higher Interest Rates. They sure would. Im Michelle Carusocabrera and headlines at this hour apple rushing out a security update to prevent attacks by spyware that exploits flaws in iphones and ipads. The death toll now stands at 267 from the devastating earthquake that hit italy on wednesday. And were keeping an eye on blackberry shares. They are halted for news pending, still waiting for that news. Melissa. Thank you, michelle. To the controversy over drug prices, when you walk up to the pharmacy counter and hand over your insurance card or credit card or both, youre kicking off an incredibly complicated process between the Insurance Company, pharmacy and a series of middlemen. So who gets how much of your health care dollar . That depends on who you ask. Cnbcs pharma reporter meg tirrell is here to help us break it down. Very complicated. Its very complicated. In this case we asked ever core isi put out a note essentially mylan charging the middlemen are incentivizing rising drug costs. We want to understand exactly what the middlemen are doing and perhaps what they are getting out of the system. Say youre a patient, youve been prescribed an epipen, you take that prescription to your pharmacy, maybe a walgreens or cvs. They check your plan and figure out how much your copay is going to be. Say thats 30. You pay that to the pharmacy. Meanwhile your insurer, aetna, cigna, United Health, one of these guys credits back through your pharmacy benefits manager, ccs, United Health or express scrips, they credit that back to the pharmacy, then you have to get your drug, the pharmacy pays maybe 500, taking maybe 20 out of their for their own fee. The distributor then goes to get your drug from mylan, the big pharma company, picks up a 20 fee there, maybe passing along 540. So your drug then travels from the manufacturer through the distributor to the pharmacy and back to you. That doesnt sound so complicated, right . But there is actually more. Then theres what is the rebating process. So essentially big pharma, the mylan company, pays a rebate through your pharmacy benefits manager, that is basically a discount that the pbm has negotiated on behalf of their client, the insurer, your employer. So they pass that rebate on, maybe taking out 10 , pocketing about 25 if that rebate is perhaps 250. So what does everybody end up with at the end of the day . If the list price of the drug starts out above 600, you have the pharmacy taking the 30 copay plus maybe 20 fee for processing. Distributor 20 for distributing. Pharmacy benefits manager, 25 for negotiating that rebate. And then that rebate is passed on to the insurer, your employer, mylan, the manufacturer left with 290 the net price. Okay. So what is markedly different from the graphic that we saw yesterday, which was provided by mylan is that in this graphic mylan, or the manufacturer, makes much more than a lot of the other parts of the chain. Thats right. What mylan was saying is that the drug the rest of the drug supply chain was essentially taking out a huge chunk of what it was 50 to 55 of the list . Thats right. So this kind of tries to show what actually happened to all of that money in there. And the real murky part of all this is the rebates. Because what are public are the list prices 610. When you hear people in the drug industry saying thats not the real price, thats the real price over there. But that doesnt have to be public. And thats why this is so confusing. The other thing that i draw from that when i look at that whole process and i see that 610 which is off screen right now but way to the left over there, it sounds like almost nobody pays that. I mean, mylan ultimately rarely actually gets 610 for the product. Its got to be they never get that. Will never get that. If you have insurance, youre not going to pay that amount because the Insurance Companys getting rebated. This is only that price only falls down to somebody who doesnt have insurance and cant get a refund for whatever reason because they didnt bother to file the paperwork with mylan to get the rebate . Thats right. Very, very few people would actually pay the list price here. Folks who maybe uninsured and walk in and pay the much higher sticker price. We look at insurers too. Melissa, you can see behind you another big number which is the insurers. Right. Those are the ones were closer to because we go to get drugs and somebody says you owe 150 out of pocket and you think, well, i have insurance. Im sorry, mr. , mrs. Smith, your copay has gone up. If you look at the revenues, insurers, United Health group right now 101 billion in 2011, 157 billion in revenue last year. Aetnas revenues have doubled over the past five or six years. Not picking on the insurance business, but theyre not struggling. Right. To be fair this number that we say is flowing through the insurer, thats coming through your insurer to your employer and you are paying your premiums to your employer for your health insurance. That is kind of whats left over from the rebate that you get from the drug company after the pbms taken out its cut. All right. Its not confusing at all. Not at all. Megs going to stick with us. Were now joined by evercore isi managing partner ross muken joining us on the phone. Ross, thank you for joining us. Meg walked us through but still kind of confusing. The question i have for you in terms of understanding what the supply chain makes and specifically for instance pharmacy benefit managers, have what they made either in terms of the absolute dollar amount or the percent in gross margin, has that gone up in a commensurate way with drug prices . So when we look at the financials of most of the supply cha chain, margins have not expanded and in many cases have contracted over time. Not the best way to gauge the Economic Health of these businesses. You said before sometimes you get the revenue and no profit associated with it. But the reality is this is sort of an unusual example in terms of epipen, for the most part the supply chains economic profits are just not that high. Most of them have gone through government scrutiny before, their margins are relatively thin. And overall, you know, theyre reasonably wellrun businesses that obviously try to maximize profit but also keep the consumer in mind. So essentially we can cite revenue numbers, et cetera, but its not nearly the same margin as say a manufacturer would be making . No. I mean, if you look at a distributor for example on some branded drugs, they make 1 or 2 margin, thats gross. So very little profit for them to move all these drugs through our system in an incredibly efficient manner. And, you know, it is confusing because theres all sorts of pricing numbers and theres not a lot of transparency on how all of the mechanics work on the back end. But the reality is the supply chain isnt really responsible. And, ross, listen, they shouldnt make as much profit because theyre moving boxes around and basically handling logistics. I get it. They make an argument they save people they put out a press yesterday they saved people a couple billion in medication, i have no doubt they have. But what does it tell us about the system that the pbms are saving us a couple hundred billion dollars and we still have the most expensive drugs in the world . I mean, clearly you make the right point. When you step back, were going to be spending 20 of gdp on health care. Thats not sustainable. And were not Getting Better results, but thats not the fault of the supply chain or the insurers. Obviously as you point out its the system and the way its set up. Hopefully at some point d. C. Will spend less time, you know, criticizing folks on epipens and more time actually figuring out how to help health care and bend the cost curve. Ross, thats something i want to ask you about. In your note today in the last paragraph you say in the bottom line you say theres real risk to drug pricing reform that you think the market has been a bit complacent about. So should people be more concerned about this from folks investing inned pharmacy benefits managers, to folks investing in traditional Innovative Biotech . Obviously therapeutics is not my expertise. We have a great team for that. As it relates to the supply chain, our view is that, you know, if we see president clinton and you see a bit more of a mix in the congress, theres real where wiwithal to something done on the pricing side basically the average american is spending out of pocket on health care than ever intended. Theyre starting to get frustrated. Thats going to make its way to d. C. And hopefully make its way into policy. How that plays out i dont know. The good news for the supply chain is multiples are relatively cheap so these stocks are not expensive so the markets already discounting in some of this risk. Meg, when you talk about drug price reform, i think what youre implying is a path towards price controls or some kind of government intervention, right . That somehow bends the cost curve forcefully and not necessarily using the market. Do i read that correctly . The thing that spooks biotech investors is that the government is going to get the ability to negotiate on drug prices. That was the whole scare when hillary tweeted about Martin Shkreli last year. And people continue to be concerned about that, however there is basically this whole philosophy that congress cant get anything done. So i think thats why i was so interested in ross note when he said market is being so complacent. The other issue with the philosophy is maybe that shouldnt be allowed because if that happens then were the last advanced economy in the world that is actually paying for research and development, right . Those prices are high in part to pay for r d, right, ross . No, thats exactly right. I mean, its a delicate balance, right . Because we clearly dont want to not find a cure for cancer in the next decade because we pulled back on r d because we really hurt drug prices. But we also need to look at the areas where there should be more competition and there isnt or theres policies in effect that arent being instituted or arent being applied and where extra normal process being earned. I think we need to be mindful about what we ask for in some of these instances. As you rightly point out we pay more than anybody else in the world. If the solution turns out to be the wrong one where we go more towards which i think is the wrong one, which we move more towards what the rest of the world does and you get almost no innovation in the world. Exactly. And, ross, thank you very much. Well chat around for a second here. I know theres a lot of people say look why dont we just import drugs from canada. First off, and i love canada, but they dont have any innovative farm pharma companies. Theres some good companies, im saying they dont have huge innovative pharmaceutical companies. And also the majority of the pills are from u. S. Companies. So if we import from canada, arent we just basically buying they buy our pills, theyre subsidized by their taxpayers 30 million canadians, 300 million americans were going to sell to them and buy our pills back . I dont think the canadian taxpayer is going to be happy to subsidize a tenfold bigger population. Doesnt solve the problem of higher drug prices in the United States. Its a work around and while some people advocate for doing that i think including donald trump, people dont think its going to fix the problem. You got youve been around, i got sick in egypt once a number of years ago. I got really sick. I went to get sipro and paid like 6 cash. And you didnt need a prescription. I didnt. And you wonder like why is it a couple hundred here . Thanks, ross. How is it six there . Because its a lower economy. All right. How does this all impact the pharmacy owner at the end of the supply chain . Joining us now is brad arthur, owner of blackrock pharmacy in new york and president of the National Community pharmacist association. Hes also testified before congress on the issue of the pbms. Brad, love hearing from the Small Business owner. Its easy to hear from the corporate have pr message structured and 17 advisors. Youre just a pharmacy owner. How does this game work . You know, it is a game. And my childrens favorite character is pinocchio and they have been having a field day the last two days watching the way this has been characterized by other advocacy groups trying to distract real attention from what the issue is. And this is purely an issue of true competition. And not only competition, but beginning to bring transparency to the manner in which pharmaceuticals are not only priced but paid for in this country. Is there an issue with the distributors, the pbms . Theres a huge issue with the pbms. Absolutely i think theres an issue with the pbms. I think the real issue with the pbms is they operate within a sphere of secrecy. And they dont wish to discuss the manner in which they price pharmaceuticals. But let me be clear, the pharmacy sector, the Community Pharmacy sector, in which i live, at the end of the day operates on very thin margins. Im not proud to share with you but the average gross margin before operating profits is between 20 and 22 . We have nothing to hide. So the assertion that somehow pharmacies are benefitting from these examples like epinephrine is completely ludicrous. You mention that your kids favorite character is pinocchio implying theres a lot of lying going on. Who is lying here . I think theres enough blame to go around to be quite frank with you. I think the pbm industry has been hind e hiding behind this notion that theyre managing costs on behalf of payers when in effect theyre doing nothing more than preserving their particular segment of the health care with respect to Prescription Drugs. So weve advocated for greater transparency. And i think its also important to note that when a Prescription Drug price goes up like this, and while its, you know, very offensive to the senses of many particularly as our kids are going off to school, theres a whole other element involved of access to these drugs. I mean, i will be spending hours counselling young parents as their kids go off to school on how to use these very essential medications. Whats your pbm . How does it so youre not a walgreens or a cvs, youre not one of the big guys. So whos your pbm . And how does that relationship work . What do they do for you or not do . Well, the fact of the matter is its stores like mine deal with many different pbms. I have probably 18 to 20 that i deal with on a daily basis. So we engage with organizations that hopefully will contract on our behalf. The reality is that theyre unilateral contracts. We in fact have no leverage against these very, very large entities. So theyre basically take it or leave it contracts. They tell us how and when were going to get paid. And as its a substantial part of my business, im not in a position to just say thank you but no thank you. So in effect the pbms exert their leverage on the marketplace at will. The notion that theyre bending costs is absurd. And i think they have certainly some explaining to do in this whole discussion about why do you call it absurd . Why do you call it absurd . Its absolutely absurd because the notion that a drug product should go from under 100 to 600 and then imply that thats that there are marketplace forces that drive competition is not the reality of it. I mean, you have pay to delay schemes, you have other barriers to entry for generic competition. We need true competition in this marketplace. And this is a very unusual the health care the economy is very unusual. You have the end consumer of the product, often is not the payer of the product and they dont order the product. I mean, its just well, you said branded. What you said, brad, to me, meg, the most egregious thing i can see after digging in for a couple days is this paytodelay, what brad just meant. What that means is i have a product, michelle wants to make a product that competes with mine, i pay her a couple hundred million bucks not to. Not to. Its like can you imagine if a pharmacy wanted to open up next to yours and you went to that guy and said, hey, dude, heres a million dollars, go away for a few years. How is this happening . Right. Thats called reco in my view. Its patently absurd. Its unbelievable its allowed to occur. But yet in this marketplace it has been challenges. By the Time Companies have settled they have raked in hundreds of millions of dollars. It needs congressional it needs some impact by congress. One basic question about the epipen. Sure. I assume that you give it out as part of the process at the pharmacy . I do, yesterday actually. So what percentage are paying that 70 copay that express scripts talked about, what percentage are finding out ive got nothing here and im going to have to foot the whole bill . How does that play out at the counter . You know what, its different in different communities. In my particular community here in buffalo im serving underserved populations, so most of my folks are covered by a traditional fee for Service Medicaid program or a Medicaid Managed Care program. So those folks dont see these types of changes in the marketplace. Its not really apparent to them. Now, converse to that is if i have folks within my community who im taking care of have newer high deductible plans, those folks are paying out of pocket. So drugs like epipen and others they go up astronomically. Theyre presenting at the counter and im having to explain to them how their copays have gone through the roof. Theyre forced to pay 600 theyre paying 600 at the counter and then having to apply for the rebate . No, no, they cant apply for any rebate. Those rebates are negotiated between the pbms and the manufacturing. No, the company now has rebates directly to the purchaser of the epipen. Oh, the copay card. No, those are copay assistance subsidies. Thats correct. Right. Thats slightly different issue. So the pharmacy does routinely process copay assistance cards on behalf of the patients. My question would be why not go back to the manufacturer and just reduce or revisit the policy of raising epipen to some amount thats a little more palatable in the marketplace. Thanks for the opportunity. Future of trucking is at hand. Were going to dallas live. Plus, sometimes its hard to know who to trust for your investment advice. Some on twitter are saying you could do worse than, yep, jose c conseco. Have you heard about this . Oh, yeah, its unbelievable. Those stories and more straight ahead on power lunch. , is the stuffhat matts . The stakes are so high, your finances, your future. How doou solve this . Yodt. U partner airm that ses govemes anthe foe 500, and, can deliver insight person what tts to you. Rgan stanl. Welcome back to power lunch. Im Michelle Carusocabrera. Stocks are sitting at session lows right now. Lets find out why. Kenny, director of floor operations with o neil securities. Kenny, whats going on . Is this janet yellen, fisher, is this Something Else . Its all stan fisher. Remember when yellen first started talking the market was in fact rallying because she gave indication theres potential for new and other policy tools in part of her commentary this morning. So the market just assumed that meant absolutely no rate hike in september and that was more off to the races. Stanley fisher had a fit over the way the market was reacting and had to come out and say, no, no, theres going to be two rate hikes this year alone. So you have to assume september and december. Market went from up 14 to minus 6 or minus 7 relatively quickly. But even that being said, i think thats the whole reason the market turned around. I still dont think youre getting a rate hike in september at all. And i think the markets going to continue to churn. Were still in that 2150, 2175 range. Havent broken down or havent broken up really, therefore the markets just going to continue to churn. All right. Kenny, thanks for the info. Kenny polcari on the floor. Back in two minutes with more power lunch. Dont move. M onlyn my 60s. Iveot a nicng life ahah big plan m onlyn my 60s. Iveso when i found outh mi looked at my options. All my medical expenses, th i got a micarsuppme in. [ male annouer ]f youre eligible for micare, you may know itnly cors about 8 [ male annouer ]f youre eligible for micare, of your part b medical expenses. Tcall nownd find outu. About aarmedicare supplement iance pla insured by unitedhealthcare Insurance Company. Like all standardized suppmentnsurance pns ps pick up some of what mecare doetay. And could saveou in outpocketedical costs ps pick up some ofieen th mctoroetay. To relatr 12 yrs. W i knowlbeble to sck with him. [ male annncer ] with t types of plans, youll be le to visit any or hoal thatccepts medararpatien. So dont wait. And virtually noeferls us, there needed. Networks, ca now reque this free decisi guide hp you and which rpand medica splemt plan mighbe best foyou. Therea wide ran to choe from. 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My bank of japan haiku, negative interest, next helicopter money, kuroda von mise. Thats a violation of the haiku. I mean, if its pronounced i may be my austrian is poor. Okay. Anyway, nobodys disputing or saying hes a great poet. Theyre saying simply that he has made some bold predictions that have actually been not so bad. But youre not even just talking about a regular baseball player here. Youre talking about one of and i mean this in a nice way because hed probably throw me out of a wrestling ring, craziest guys. I mean, he says and does crazy things. But hes making these right predictions. Jose conseco is performing better than ackman. Thats a low bar. Isnt he bankrupt . Canseco . Yeah. I dont know. He had a lot of money problems. Yeah. It all comes did he date madonna . He did. He did date madonna. Thats right. Cuban american jose canseco. Straight ahead, fed chair janet yellen making waves in jackson hole, wyoming. A september to remember . Power lunch back in two. Hi everybody. Im sue herera. Here is your cnbc news update at this hour. Detectives in the uk say that five men have been arrested on suspicion of terrorism offenses. Those arrests took place in the stoke and birmingham areas where police are searching a number of properties as part of an ongoing investigation. 29 Companies Including general motors, apple and facebook have agreed to sign the white houses equal pay pledge. Each of those Companies Involved have committed to conducting an annual gender pay analysis. The department of agriculture says a deadly bird flu strain has been found in a wild duck in alaska. Its the same strain that led to the deaths of about 50 million birds in the u. S. Last year. And speaking of birds, kfc insists a recipe published in the Chicago Tribune is not the authentic and secret Colonel Sanders chicken recipe. An article in the paper included an 11 herbs and spices recipe that the tribune claims is from a sanders family scrapbook. But kfc says its original recipe handwritten by sanders in 1940 is safely locked up in a digital safe. Youre uptodate. Thats the news update at this hour. Brian, back to you. Glad to know its safe. Sue, thank you very much. You are welcome. Finger licking good. There you go. Extra crispy the way to go. Oil market closing for the day. Jackie d at the nymex, how do we look this week . Good afternoon to you, brian. For the week saw a bit of a loss, for the month up about 10 . Today a seesaw ending higher around 47. 60. So this morning we started on a positive note. We turned negative after yellen. The spike in the dollar was a piece of that. And also the turn lower in equities. But then in the afternoon session we popped back up. We had some comments this morning from the opec secretary general and also the Iranian Oil Minister that were somewhat constructive for the potential for this freeze coming later in september. But also some reports of missiles out of yemen hitting saudi power facilities. So watch for some potentially escalating conflict there that could rile these markets up. But still, were smack in the middle of the 45 to 50 range once again. This is a volatile trade not for the faint of heart. Thank you, jackie. Stocks meantime on a roller coaster ride, dow was up 100 points following fed chair yellens speech, but then turned negative by hawkish comments by Stanley Fisher. Dow and s p down about 0. 5 , nasdaq down about 1 . Utilities and telecom seeing most pain in todays reaction. Steve liesman is in jackson hole, wyoming. Steve. Reporter hey, melissa. Im here with two luminaries from the meeting, susan collins, shes a university of michigan dean of the Forward School of public policy. And cardiogrmen rhinehart. Tell us what you heard janet yellen say today . Sure. I heard four key thigpengs say m quickly. One is she reiterated that the evidence has strengthened the case for an increase at some point in the future. She also said that the increase in the federal funds rate is going to be really gradual. And she highlighted that its going in the long term to a lower rate than had been true historically. More like 3 . She also was really careful not to give any precise information about the timing. And thats very consistent with the message that the fed Funds Leaders have given in recent months. Carmen, do you hear all that and agree with but the question i want to ask you is do you also see a rate hike coming in the next several months . I think so. I think the takeaway was that a rate hike is in the making. Specificity was not there, or at least i didnt hear it. So the odds that between now and december theres a rate hike i think the point was are you critical of the lack of specificity . Should the fed be more specific and provide more details . Or is there a lot of volatility because of how the fed is running the show here . I think the running theme through chairman yellens remark was also data dependency. Data dependency is necessitated by the fact that reality happens, shocks happen. Would we have foreseen brexit . Would we have foreseen the volatility in some of the recent labor market data . You know, with may being one thing and june being another. So i think the specificity would be to some degree false. Because you cant know what the future exactly. Susan, do you think the fed should be raising rates now . So my view is that the current data is consistent with them leaving federal funds rates where they are right now in september. All right. Hold on, we have a 4. 79 unemployment rate. We have the current tracking of the Third Quarter gdp for us the cnbc tracking forecast running at 2. 7 . Why would you why is that consistent with essentially emergency Interest Rates of 0. 25 Percentage Points . Couple reasons. From my perspective the risks of moving too quickly are quite a bit higher than the risks of waiting a little bit. If it turns out inflation rates are rising, the fed is well positioned to address that promptly. At the same time, i still see the growth as somewhat fragile. And i think that there is really good news that the stronger labor market is translating in to helping a wider range of groups of the u. S. Labor market. All right. Carmen, governor collins is associating herself with the dovish wing of the committee. Are you similarly there . Yes, i am. Really . And let me highlight for the following reasons. You know, relative to what other Central Banks are doing, a rate hike is a far call because weve had a colossal round of monetary easing. Japan, europe. Japan, ecb, boe, we can go down the list. You also said that really the fed has relatively tightened, four times essentially . Look, we dont have Monetary Policy in a vacuum. If you look at what a widening spread between treasuries and bunds imply, it implies a stronger dollar. That has domestic consequences. By the way, chairman yellen at the beginning mentioned that the strong dollar had been a drag in economic activity. That strong dollar also has disproportionate effects on u. S. Manufacturing. But also some of the groups that are out there in the United States in terms of unemployment rate, susan, how far should the fed let this notion of what is maximum employment run in your opinion . Should they run an experiment with this and see how far they can let it go down without causing inflation . So i think that its a balance. I think that in a datadriven environment they have to be considering the impact of their decisions not only on labor markets but also certainly on whats happening with inflation and also concerns about the financial stability. All of those things have to be balanced. Give me a number. Give you a number. Shoot for 4 and not raise rates . Im not sure thats the right way to think about it. Okay. Carmen, i have to ask you, weve done Fascinating Research and we cant get into details, but everybody says the idea of rare, negative rates is unusual, but youve shown research over the last 50 years it is not. It is not unusual. It is only unusual if your focus is post 1980. Capital markets were liberali d liberalized, inflation stabilization became really first line of policy objectives, real rates were post 1980 fairly high by historic standards. But if you look at the period from the end of world war ii to 1979, real Interest Rates, short term rates were negative 50 of the time, this was not just a u. S. Phenomenon. It was an advanced economy phenomenon. So protracted periods of negative and sustained low real Interest Rates are not a rarity. Its not necessarily good, but its not abnormal. Its not. Okay. Carmen reinhart, susan collins, melissa, back to you. Thank you very much, Steve Liesman. Weve got smartphones, smart tvs, smart cars, what about smart trucks . Morgan brennan live in dallas at the Great American trucking show with the preview. Morgan. Reporter hey, michelle. Thats right. So weve got new technologies coming in to big rigs like this one all the way down to the engines. This is an x15 from cummins. Were going to go inside the truck of the future when power lunch returns. Ay azing is movg li one. Real is an al rescue. Is closos amg otwentyseven thousand othem theres only onece whe re and azingive. Book aworld vaon pacge and t thineds. Loomomat en youk e fresingredients, stepyst re u ke idie ver door f less tn 9 aeal. Welcome back to power lunch. Im Michelle Carusocabrera. The Great American trucking show underway in dallas, texas. And according to the executives, the suppliers, the hundreds of truckers who are attending the conference, the future of trucking is here. Morgan brennan is live at that conference with more on all the Cool Technology thats going on in the trucking sector. Morgan. Reporter hey, michelle. And theres some Cool Technology. Im going to run you through some of it. Lets start with the internet of things. This is not just invading homes and wearable, its coming into big rigs. One company focused on that is omni tracks spun out of kwaul k qualcomm. We can predict when a vehicles potentially going to have a failure. We can predict weather patterns or traffic patterns that impact that route and allow us to reroute or dynamically change the route while the trucks in motion to, again, try to predict provide predictable delivery of those products and services. Reporter so thats one company thats working on tech like that. Theres a number of them. This type of technologys already making its way into a number of north american truck fleets. The whole idea here is to boost efficiency, cut costs on things like fuel usage and accidents. You could call this somewhat of a precursor to a fully autonomous truck. In terms of fully autonomous truck, those already somewhat exist. Diamlers freightliner has one, a prototype thats already in use. But industry executives here say thats Widespread Adoption of Technology Like that is still really years away. Meantime, trucks are getting smarter right now in part because of regulations. Just today the d. O. T. Actually unveiled proposal to electronically monitor or i guess limit speed limits for trucks. Weve also got electronic logging devices that have to be in all u. S. Fleets by the end of the year. Those are going to log drivers hours. The other thing, and this is probably save the best for last here, is that you have the epa unveiling fuel efficiency standards basically to cut emissions, Greenhouse Gas emissions. Thats technology thats traveling down into the engine. Cummins has actually developed a truck or line of truck, engines specifically focused on these new regulations and increasing fuel efficiency and cutting those emissions. Were sitting inside one of these trucks with a cummins engine right now. And actually sitting beside me is a driver who has 1. 7 million miles under her belt. Might i note its a female driver. Rock on, women. Back over to you. Cool. Hey, morgan, can you ask her how many gears that has . Im curious. Seriously. Reporter the anchors want to know how many gears this has . Ten. Reporter ten gears. A tenspeed. How does that compare to the trucks of five, ten years ago . Its got to be much, much better to drive. Reporter how does this compare to the trucks of five or ten years ago . They think they assume it must be much easier and much better to drive. Its really amazing. The transition between the shifting of the gears is so smooth. The automated transmissions have come a long way. I have driven a manual since i started in 94. But the 9. Miles per gallon that this can get me will woo me over to the automated transmissions. Its a smooth ride, really comfortable almost like driving a minivan. Morgan, people are going to be shocked by this i know 9. 8 miles per gallon, thats good for a truck. Where was she ten years ago . Five miles to the gallon. Reporter ten years ago, what were you, five miles to the 2k3w gallon . If youre lucky. Reporter if youre lucky, she says. Depends on the weight. Reporter she says this depends on the weight. So this is really were seeing a major transformation with technology in trucks like this. Id also just mention weve literally been driving around on streets legally. Were going through lights and passing cars and everything else. I mean which is cool live shot technology we didnt have five years ago. Thats true. Very true. Morgan, thanks so much. Have fun out there. Javiers mexican tonight downtown. A font of knowledge. Alibaba fell over 16 yeartodate but there may be reasons to stay bullish. Well bring one analyst take ahead. And janet yellen speech taking the s p 500 on a rough ride. Well ask trading nation traders about their next move straight ahead on power lunch. Gget up to ,000 customer cash gogo opportunityal ent. Back with street talk, Analyst Recommendations on stocks you need to know about. We kick it off with alibaba. Mkm getting more bullish raising price target to 130 from 95 primarily because of significant upside potential in cloud. Chinese cloud over the next five years. China could the market could be 20 billion in five years and baba is dominant there already citing the gem of the portfolio. Good ipo in the first half of 2017. Talked about the amazon clone. You can agree or disagree. If they dont amazon with web services absolutely. That would be a very good thing for baba and shareholders. Express scripts, rebounding a bit from yesterdays steep selloff and jeffries defending the company saying the mylanrelated selloff is overblown and the price squeeze is there and not new. Most of the pricing problems they argue from the drug manufacturing side and say that customers save about 5 in increase of drug spend and less than most and justifies express script and the pbm Business Model. 88 target on express scripts. 72 stock now. An analyst yesterday and today. This analyst note. Defending express scripts and this part of the supply chain. The issue is not the earnings but the cap on multiples. Why. Buft uncertainty. The chief medal officer on yesterday, as well. Exactly. Whens considered what looked like a good quarter, selling off hard today down by almost 6 , ulta. Raymond james says momentum is good and management executes and reflected in the stock. By the way, the stock up 40 this year. Yeah. You know, we did kind of a fun thing a couple of weeks ago. Whats the best performing s p stock since the president took office as a marker point, it was ulta up like 4,000 . So all ulta has done is printed millionaires. Really. Final stock, guggenheim defending the tock thats like a dropped in water today. Down 11 . They note a good quarter, not good enough and the Quarter Results reinforced the view of the longterm opportunity intact. Yet, quote, meaningful underperforming. They reiterate a buy and a 75 target about 25 upside. Stock whacked today and gugen time defending it today. I believe its splunging. Caving and not throwing a rock in. Plumbing the depths. Like it. The earnings made a ripple effect. It is time now for trading nation where traders trade better together. Lets look at the markets and the seesaw reaction to Janet Yellens speech. Now were down. Larry mcdonald, nick colos. Larry, theyre awaiting on yellen and underwhelmed. Two big thinged happened today, brian. Very, very meaningful. The vix traded today, the volatility index, nearly a 25 range. Its happened very few times this year. It speaks to more volatility coming at us in the short haul and also the 10year treasury broke a 3month 150 to 160 band. Were up at 163. Bonds are selling off. We made some bearish bond calls here on the show recently. A key technical. Doesnt sound interesting looking at the chart but you are saying its key and important. We appreciate that. Nick, are we overreliant on yellen . We certainly are and seems like the fed gotten so tired of being kicked around that theyre coming out swinging today and talking about still having two rate increases on the table and fed funds futures are now saying 30 chance september versus 20 just yesterday and 60 in december. Market does not like that at all. Yeah. No. It doesnt. Do you expect, nick, more jawboning drives us over the next couple of weeks until normalization and traders return from the shore . Absolutely. The pendulum swung too far in one direction for general criticism of the fed and everybody from bernanke to the journal and the Washington Post coming out saying the Federal Reserve behind the curve and didnt know how to forecast anything and i think some of that has gotten under their skin and trying to establish a narrative of a continuing normalization of rates but the market wont believe it and wont like it. Do you have a dream like me, larry . Yellen says complain, raise 200 basis points and mike drop and walks off. Thats a very, very fun day. At the end of the day not for everybody. She is walking a fine line because the fed, Hillary Clinton is the feds beloved best friend so they want to talk up the economy and show that hillary and the democrats have a good chance in november but when they do that, as nick said, they bring in the risks that the dollar strengthens, commodities head south and all that credit risk comes back. I pick your seinfelds dad georges dad. You want a piece of me . Picture yellen, you want higher rates . You got them. Anyway, have a great weekend. For more go to tradingnation. Cnbc. Com. Naturenounc] ist rcf or a salesvent thsummau salve he. Get up to ,00000onusn selectmodels. Check please. The final check please for the week. A serious week and probably more big topics next couple of weeks. Ill end on a fluff entertainment note because my brain is tired. Highest paid actor last year is Robert Downey jr. This year, dewayne johnson, the rock. Started with 7 bucks and nothing and a wrestling career. Made 70 million last year. Rock, youre out there watching cnbc, investing in stocks all hbo show . No. San andreas. I got it. Catch up on the rock i know what im doing this weekend. Number two, jackie khchan. I said it would be the pharmacist but actually its melissa pointing out that jose conseco didnt get the haiku correct. Its five, seven, five. To make that third line he cut off the guys name. So that makes that six syllables. If you do a haiku, you do it right, jose. Hello. Children, pray to anybody you want to pray to that melissa lee is never your professor. Fail. Favorite moment of the weekend. We dont have enough homework. Right. Thats right. This is why. See . America. My check please was about the pharmacist talking about how many people actually come to the counter and have to pay the 600. We never got a clear answer from him and didnt sound like that many ever. The poor get subsidized by medicaid. If you have insurance you dont pay that much and then the uninsured. Thanks so much for watching. Closing bell starts right now. Hi and welcome to the closing bell. Im kelly evans at the new york stock exchange. Im mike santoli on a day when the markets woke up a little bit. Janet yellens speech arriving today. Right around here. At 10 00 a. M. And then a little bit later, after the markets were rallying a little bit, seems like status quo message, our Steve Liesman interviewed vice chairman Stanley Fischer right there and the market went down from there. Well hear more from steve in just a minute. Well take you to jackson hole for that. Well come back to that pattern. Alom