Transcripts For CNBC Power Lunch 20170531

And welcome to power lunch. Im melissa lee. A winning month with a losing day. The major averages lower across the board here. We did hit record highs with the nasdaq and dow jones utility average before the markets went lower. Crude oil, meantime, hitting threemonth lows. Traders are worried the opec led cuts to reduce global inventories are being undermined by those outside of the deal. Financials, big hit here. Regional banks on pace for the third consecutive day of losses. Im michelle carusocabrera. Here is what else is happening this hour. New york times offering buyouts. The move aimed at cutting the number of editors in its newsroom. Contracts to buy previously owned homes are falling for a second straight month amid a supply squeeze. Jetblue launching its first of its kind selfboarding Program Using facial recognition software. More on that intriguing story ahead. Brian . Michelle, welcome back. Well, if you are just a casual market observer, you probably know the stock markets having a good run, its in the headlines these days. Did you know especially just how Good Technology stocks have been and may come as a big surprise to even the most cynical investors among all of you, and i see you out there, check out the staggering stats for the month of may. If the nasdaq 100 closes higher today, itll mark the 19th positive trading day of the 22 weve had this month. Heck, even if we fall today, still 18 out of 22. That aint bad. If we finish higher today, that would make it an 86 win streak and, folks, that would make it tied for the third most positive breadth month and the magical may of 1979. Plus, unless the nasdaq crashes by 9 over the next couple of hours, we doubt it will, itll be the seventh consecutive positive month for the nasdaq and that, my friends, would make it the third longest win streak since 1986 and 1995. If you think this means the run may be done, think again. Longterm win streaks like the one were on usually are signs of longer term strength instead of weakness. Some pretty spectacular market stats for the month of may. So the question is, is the nasdaq and tech the place to still be in in the months ahead . With us the Vice President and portfolio manager, aaron kessler, senior vp at raymond james. He covers internet names like facebook, twitter and alibaba. Good it to are have yto have yo. The xlk is the tech etf. 5. 27 million closed yesterday. The largest oneday redemption since january 31st. Are you concerned that everybody loved this trade and when the trade is over, who is going to be left with the chair when the music stops . Well, lets see. I think where does an etf investor put their money . Thats the big question. Is it back into a market etf . If so youre buying those stocks right back. Think about that. Arent they the big six. I dont think thats a big indicator. I do think people are probably taking profits but theyre probably piling it back no the market and this has been a leading secotor as the i cant remember his name brian, as brian was outlining. So its a winner. Brians a little upset that you cant remember his name weve only been interviewing each other for a decade, kim. Its okay. The penguins make the nhl playoffs and this is what we get. I know. You cover some of those stocks, aaron, but theres a whole world outside of faang and theyve gone gangbusters. Does it concern you in terms of the pace made so far in relationship to your price targets . Im not sure what youre forecasting for a lot of names in your coverage universe but i would imagine you are like many other analysts on the street where they point out the price target and, wow, youre getting there faster than you thought. Yeah, some have gotten close to our price target. We tried to be more disciplined with amazon. The stock has been up a lot in our space, internet names. They are secular growth winners and most are trading at reasonable valuations, look at google and facebook. Were at 20 . We dont think valuations are stretched on large cap. We did get cautious on amazon at 100 times earnings. Profits havent mattered so far but we do think valuations are getting stretched there. Kim, you mentioned etf investing and that has been a big trend, the trend, the rise of passive investing, do you think those dollars are stickier . Do you think if youre an investor and put your money into, say, the xlk, youre more likely to keep the money and, therefore, the gains made in this particular sector might hold better because that money stays there or is it the flip side where we see what we saw with the biotech e uy etf, ther a lot of knowledge and when we got that tweet the bottom fell out pretty quickly. Yeah, i think thats my biggest fear and why were not necessarily investing in the top five names. We like things further down the chain because the Retail Investor does kind of go from whats hot now to whats hot now and whats hot now. So that money does move along. So thats why we like semiconductors and maybe next years tech stocks as opposed to this years tech stocks. Aaron, were out of time but whats the topic within your universe . Right now alibaba growing about 40 plus revenue growth, trading around 16 times earnings, we think one of the best valuations in our space currently. All right, kim, aaron, thanks a lot. Thank you. Code conference under way in rancho palace verdes,c california. A lot of big names on the stage including alphabet and google ceo. Shell be speaking live during power lunch. Well bring that to you when she begins. Lets go to Carl Quintanilla who is there with some of the highlights so far. Carl . Reporter good morning, michelle. Reid hastings on stage talking about the companys longterm strategic play trying to play at the high end of the socalled movie budget spectrum, the low end of the spectrum, the median part of the spectrum, talking about their play in china which she says now is off the table for the next couple of years. But as with most ceos at this conference it always comes down to how theyre relatinging and competing with amazon. Here is Reid Hastings talking about amazon and how he says theyre trying to rewrite the rules of american business. If we try to out Amazon Amazon then thats a losing battle. So he what we have to do is be the specialty play. Were trying to be starbucks, theyre trying to be walmart. We have to have brand love and focus. What they do is incredible. So we wouldnt focus on those things. We would focus on how do we be really the embodiment of entertainment and joys and tv shows. Reporter of course netflix is working on europe, asia and south america. China has been a hard part as they are try to break into that blocked off market. This is hastings talking about whether china is a near term play for them now. Weve done awfully well in latin america and in europe and of course in north america so weve learned some things but we have a lot of room to grow in asia and a lot to figure out still. What about china . Are you still trying to launch there or is that off the table . He think thats off the table for the next couple of years. Reporter finally, guys, one of the highlights is always Kleiner Perkins running through literally hundreds of slides in a deck presentation that covers everything from the u. S. Economy to e sports to media to china to india. This is her talking about the number of retail score closings weve seen in the past year even at a time when amazon is opening stores. Retail store closings may break a 20year record while amazon is opening retail stores, Digital Stores are going off line. The Worlds Largest off line retailer, walmart, is getting aggressive and showing good results. Amazon has become a leading private label supplier of baby wipes and batteries. Reporter fascinating work from meeker. All that have is available on Kleiner Perkins website. Were off to the races after balmer and andriesen last night. Looking forward to hillary clinton. Sherry redstone. Recode brings the headlines in a hurry. We want to warn people if they look for that presentation online its 355 different slides in the power point. Youll be there a long time if you want to look at the whole thing. Reporter its almost i dont want to say its a parody of itself but there are slides going by so fast theres no way you could possibly consume them. Even mary says go online if you want to delve into some of these things. If you have a color printer, dont do that. We made that mistake earlier. Everybody is hollering. Its just another hour. Reporter toner is low. Every 30 minutes. Youve been going out there for years and years. Who is the star every year theres a breakout star. Who has been the star or maybe the shock so far this year . Reporter i think in absentia it it remains its jeff bezos. The one thing that every ceo here has asked about and has to comment on is the degree to which amazon is disrupting not only their business but retail and cloud and logistics and even when hes not in person. Hes not here this year, you cant not talk about what amazon has done. Its a big part of meekers pre preng. I thought thats been striking. Hillary clintons going to speak in a couple of minutes. I think she will be a highlight through the prism of how Technology Companies are taking responsibility for the free flow of information and alternative facts, so to speak. Lyclinton will talk about that d as Carrie Swisher said its up to tech to take responsibility for what they brought. All right, carl, thanks a lot. Carl quintanilla from the code conference. Sticking with technology, alphabet shares flirting with the 1,000 level. Ruth porat set to teenage the stage. Red flags in the auto industry. Are we back to our precrisis ways with subprime loans. The man on the frontline of that issue next. I joined the army in july of 98. I did active duty 11 years. And two in the reserves. Our 18 year old was in an accident. When i call usaa it was that voice asking me, is your daughter ok . Thats where i felt relief. It actually helped to know that somebody else cared and wanted make sure that i was okay. That was really great. Were the rivera family, and we will be with usaa for life. Usaa. We know what it means to serve. Call today to talk about your insurance needs. For years, centurylink has been promising fast internet to Small Businesses. But for many businesses, its out of reach. Why promise something you cant deliver . Comcast business is different. We deliver superfast internet with speeds of 250 megabits per second across our entire network, to more companies, in more locations, than centurylink. We do business where you do business. Welcome back. There is a growing concern that another subprime loan crisis is beginning to bubble up. This time were talking auto loans. Given this is a 1 trillion Global Market investors, phil lebeau, are right to stick up and take note. Phil . Reporter brian, its worth paying attention to but we should point out that everybody weve talked with has said this is nowhere close to being a level of concern that we saw back before the auto crisis or the recession and the big auto problems back in 07 and 08 leading into 09. Basically what youre seeing right now is that there is greater emphasis on whether or not people are able to make their loan payments. Subprime make up onefourth of the auto loans written. Yesterday fed governor brainard said theres evidence the subprime borrowers might be struggling with payments which raises the question how many people are actually in default, delinquent on their loans. The most recent data from the Fourth Quarter just 2. 44 of the loans are in 30 days delinquency and 60 days is less than 1 of all auto loans and, again, those are below the historical averages. The may sales rate coming in estimated at 16. 8 million. Well find out the official number tomorrow when all of the automakers report. One thing to point out is that automakers and lenders, and weve talked with a number of them, have all said theyre being much more selective when it comes to writing auto loans. This is not a case theyre saying, hey, you have bad credit, thats fine. Well put you in the car regardless of what your credit is. In fact ubs out with a note today saying that 33 of the dealers that they is yosurveyed may reported tighter credit standards meaning theyre being much more selective who theyre writing loans for. Take a look at the auto dealer stocks under pressure basically over the last year. And that has to do with a number of factors not just because of what the concern is regarding the subprime market. You hear a lot of people say, oh, theres a subprime bubble out there. Almost everybody weve talked with, and weve been talking with a lot of people the last couple of months, they all say the same thing. This is nowhere close to what it was back in 2008 and 2009. Phil, thats mainly because of the dollar size of the auto loan pool. In terms of the impact on the automakers, the fords, the gms of the world, this is a double whammy for them. Falling prices hurts new vehicle prices and then the lending standards tightening. We did see that for the First Quarter. The median credit score went to 706 from 695. So youre getting lending standards which limits the number of people who will actually buy a car. Reporter right. And for the automakers, they realize this is a concern which is why they are trying to adjust as much as possible. One area where people are going to be focusing their attention is the percentage of buyers out there who are upsidedown, in other words theyve taken out a seven, eightyear loan on a vehicle and they need to trade it in for whatever reason or they decide to trade in. Well, its not worth the amount of money that they owe on it and theyre upsidedown on their loan. That has been increasing slightly over the last year or so. Thats what people will be focusing on. Thats a phrase we all got familiar with during the housing crisis when people owed more on their homes rather than they were actually worth. Thanks, phil. You bet. Lets bring in scott adams, president of Adams Automotive Group in missouri. Scott, you just heard phils report. Phil is still there as well. Are you seeing people pay their car payments to you later . Do you feel were sort of at the beginning . I dont want to call it a crisis but of a concern . I dont think were at the beginning of a concern really at all. Theres always been a subprime market. Theres always been people who pay their payments a little slow, but were at historical lows on that. Losses in the car paper business are below 1 . Banks i see their figures on are below half a percent. So, yeah, i think theres a little more maybe tightening or looking or less maybe ought mat ek approvals on some people but in general i think the bigger problem is that people are not wanting to buy actual cars, that people are willing to buy sport utilities and trucks which cost more money. What does that have to do with debt, though . The issue, scott, you have ostensibly over a trillion dollars in auto loans. A percentage of those are subprime and a percentage of those are beginning to be paid back later and later if not being paid back at all. True. But when somebody cant finance the car theyre in and maybe they want to trade in, they cant go buy an even more expensive vehicle than they have now. They would want to trade down or, like phil said, with the upsidedown try to put that in their new loan. There is some of that. But theres also new lending regulations coming out to banks and Financial Institutions about how they have to handle the loans as they put them on the books. So it is a little bit of difference and will probably come down from 17 million in sales. I think think were in a healthy market. Speaking of regulations when it comes to banks, who is extending these loans . Who buying them . Who is holding the bag if there is an increase in the rate of failure with these loans . Thats what drove the systemic problem with banks in america when it came to the housing crisis. And the minute we hear subprime, everybody goes back to 2009 and wonders if thats whats going on. So who has all these loans that are at risk . Well, some of them are going to be at your captive finance companies, toyota financial, gmac, ford motor credit. One good thing about a car thats a little different than a building or a house is you can take that car to an auction and get some amount of money on it in a hurry. So its not like youre going to be seeing cars 18, two years, three years before theyre sold if a lender gets them back. They can get their money back or a vast majority of their money back within 30 days. So youre not going to see a huge amount of cars sitting around unsold with losses at these lenders. Michelle, id like to add one thing. Ive talked with Rick Santelli about this and weve been doing some research on this. The percentage of these bad loans or the subprime loans that people cannot pay and then go bad in Asset Backed Securities is so small and theyre usually packaged in a larger Asset Backed Securities so that even if they go bad its not bringing down the entire portfolio. In fact, rick and itch been looking specifically at this issue and rick made a great point. Its a really small slice within the larger pie. And, yes, i agree with all of that. That was also true of the housing market, right . Bingo. It was very, very tiny and yet all the insti ttutions wereo leveraged. Reporter nowhere close to where it was with housing. Great. Thank you, guys. The tale of two retailers, one up double digits. A closer look at the latest retail earnings next. And i know a thing or two about trading. So i trade with e trade, where true traders trade on a trademarked trade platform that has all the. Get off the computer traitor i wont. cannon sound mobility is very important to me. Thats why i use e trade mobile. Its on all my mobile devices, so it suits my mobile lifestyle and it keeps my investments fully mobile. Even when im on the move. Sign up at etrade. Com and get up to six hundred dollars. Flexshares etfs are built around the Way Investors think. With objectives like building capital for the future, managing Portfolio Risk and liquidity and generating income. Thats real etf innovation. Flexshares. Built by investors, for investors. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Welcome back. Shares of michael kors down. One good, one bad. Michael kors down. Lower than expected comparable sales which fell 14 . The premium brand did beat the streets estimates on profit and revenue but the ceo acknowledges the merchandise failed to excite shoppers making an already difficult retail environment harder. The brands wholesale sales which includes sales done at Department Stores fell nearly 23 . Kors like other handbag makers are pulling back on the amount of inventory told sold in the struggling Department Store group. Kors says 2018 will be a new baseline year meaning its doing some of the work coach has been doing for a while to reset the brand including closing up to 125 stores or about 20 of the stores that it runs. Coach started closing its stores three years ago. Earnings are now thought to be at the bottom and that the shortterm pain is for the longterm gain. He is sticking with his buy rating for kors. It is a different story for j. Jill shares up 10 after it beat analyst con seven sis on profit and revenue. Comparable sales also outperformed, improving nearly 10 . Plus j. Jill is driving full price sales online and in its small store base. Both of those are rare in it retail right now. Whats also rare are loyal shoppers and j. Jill says it retained shoppers for an average of seven years so this is merchandise that is resonating with that shopper subset. Whats amazing about the luxury or aspirational luxury when it comes to michael kors a lot of times it seems the brands never learn. You expand, you expand, you expand. Its to longer luxury. Everybody has it so nobody wants it. Weve learned this over and over. Thats true. The top retailers in the space constrained supply on purpose. Theyll destroy supply rather than putting it at a discount or fall into hand it cant control when it comes to distribution. And thats why michael kors is not considered luxury. Ill call it premium or high end. If you want to charge a higher price for a handbag, then you need to have some intrinsic value. Shoppers need to want to pay more. If you see all of that merchandise in the t. J. Maxx or marshalls, maybe it is constructed with less quality and they are lower price points and why would you pay full price in the store . Exactly. Bed, bath and beyond, you always get a coupon. Courtney, if you ever start a podcast you should call it one good one bad because that sums up all of your reports these days. I know, doesnt it . Too good were going to go buy lottery tickets. Have to rename the podcast and start over. Thank you, courtney. Why the biggest shoe yet may be about to drop for uber and why mcdonalds wants to you get comfortable. My dell Small Business advisor for tech advice. With one phone call, i get products that suit my needs and i get back to business. Hello, everyone, im sue herera. Here is your cnbc news update this hour. Secretary of state Rex Tillerson hold iing a luncheon at the sta department. The Southeast Asian leader will meet with President Trump at the white house later today. Billions of dollars in business deals between the two countries are expected to be signed. Washington, d. C. , Police Holding a News Conference to discuss the arrest of 43yearold byron moles. They received a tip today that he was armed with weapons and of heading for the trump hotel. Hotel security found an assault rifle, a happened gun, and 90 rounds of ammunition in his vehicle. I believe the officers and our federal partners and the tipster coming forward avert add potential disaster here in our nations capital. Jetblue will collaborate with u. S. Customs to use biometrics and facial technology to verify customers at the gate during boarding. The Pilot Program will begin in june on flights between boston and aruba. Phil lebeau will have more on the story in the next hour of power lunch. Thats the news update this hour. Brian, back to you. Sue, thank you very much. There is growing talk that President Trump may pull the United States out of the Paris Climate Accord. Theres a rather Surprising Group of people who may be against that move. Eamon javers has the latest from the white house. Reporter thats right. Its a question now of will he or wont he after we saw some news reports from media organizations earlier today suggesting that the president had made up his mind to pull the United States out of the Paris Climate Accord but just after those reports hit the wire we saw the president take to twitter to say, no, no, no, he hasnt made up his mind just yet. Here is what the president tweeted today. I will be announcing my decision on the paris accord over the next few days. Make America Great again. So not necessarily today, not necessarily coming soon, and its not necessarily a done deal that the United States will pull out of the paris accord. White house officials tell me the president hasnt made up his mind yet and well be seeing that decision in coming days and they wont be any more specific than that. Theres a large group of organizations mainly in Corporate America that support the paris accord, a big chunk of the fortune 500 actually supports the paris accord here and you see those names, too many to list off but a couple of key ones there, exxon mobil, microsoft. You also see bp on that list and dupont on the list of companies that support the paris accord. As it is a lot of Corporate Executives say weve baked into our assumptions what were going to do on Climate Change and so this wont change either way. Its easier if we have certainty about whats going to happen here. Organizations that oppose the paris accord include the National Mining association, the Industrial Energy consumers of america, and the competitive enterprise institute, all of those against the paris accord. Well see where the president comes down but its viewed as a big test of internal politics in terms of who is going to win this sort of globalist size of the Trump Administration or the more against globalism side of the Trump Administration, the side that says we have to revert to a more nationalistic approach and not be party to the International Climate accords. Meanwhile we have some new news coming in about next week. The former fbi director james comey expected to testify before the Senate Intelligence committee next week so that will be another political challenge for the white house when Congress Comes back next week. Eamon, thank you very much. Dealing with ambient noise with what i guess is just another protest. Reporter another day, another protest. Take one a day. Eamon, thank you. The battle over Medicaid Expansion is heating up with senators taking the issue to their home districts this week. Kayla tausche with a look at how this is all playing out there. Kayla. Reporter hey, brian. Medicaid expansion that took place here in arkansas is very p popular with voters and is also popular with participants, approximately 30 more signed up than the state had budgeted for, so now its having to save m money, figuring out how to make the program sustainable. The state legislature voted to remove tens of thousands of participants from the medicaid program, which allows federal funding to be used to purchase private insurance. We spoke to Governor Asa Hutchinson this morning. He said it was an active preservation for those resources for lower income residents. I think weve laid the groundwork here for reform in arkansas that will be sustainable over the long term under the status quo, but i do Hope Congress changes things. Reporter President Trump tweeting that he hopes republicans can pass a Health Care Bill quickly. But governor hutchinson says he is reassured those from this state will be prirp advertising that medicaid funding. Hospitals like the one im standing in here today at university of arkansas for m medical sciences are worried about exactly what these changes will mean for their business. Over the last several years the added investment meant they could have more funding and more innovation and more hiring. Increased coverage meant the uninsured ranks fell by 80 but the outlock for the business now isnt so rosy. We have a fiduciary responsibility to be here, to deliver on our mission, but we also have to balance our budget. So were doing everything we can to reduce expenses, to operate more efficiently. Theres a lot of unpredictability. Reporter that was the chancellor for this hospital. He says that these hospitals are huge hirers in the state and that closures would only hurt the people who are seeking jobs here. There have been no closures of hospitals in arkansas unlike neighboring states, so you can see why what has been a more Popular Democratic issue, brian, is still very popular for these deep red states. People are looking for jobs and theyre looking for good jobs. All right, kayla, ill take it. Thanks a lot. Kayla tausche. Uber has been facing problems but the biggest shoe may be about to drop. Thats eric holders report on work place culture and sexual harassment. Deirdre is live with the very latest. Reporter melissa, thats right. A source close to the matter tells us ubers board subcommittee is receiving the report that has been three months in the making and could have major ramifications for the ride sharing startup. The subcommittee is made up of Arianna Huffington and two highprofile bay area investors, bill gurley and david bonderman. All three members of ubers board. Were told that they will then decide who will see the report and when. The aim, though, were told is to make an executive summary, not the full report, available to uber employees some time next week. This is the culmination, of course, of a months long investigation led by former ag eric holder after an explosive blog post in february about the companys culture. While holder has worngd for uber on past projects he has staked his personal reputation on the review and promised to leave, quote, no stone unturned. Now as for whats next, guys, while this could have a major impact on the 678 billion startup and how it operates, for one it could lead to more departures on top of the high level exit weve already seen this year. Just yesterday it lost another top engineer in its allimportant selfdriving car unit. It could also make it harder for uber to attract new talent which it badly needs. Some of the open positions at uber include cfo, president , general counsel and, of course, guys, a coo that is supposed to take on some of the Sweeping Authority and help right the ship. All right, deirdre, thank you. Deirdre bosa in san francisco. Live now to the code conference where ruth porat is starting to speak. Wind surfing somewhere, im certain, but who does run it from day it day . So larry is the ceo. Sergei is very involved. One of the super cool things weve put in place with the other bets is actually on a weekly basis were going through reviews of each of the various other businesses like a board review with the other bets. And i think whats been really effective is, as we said when we set it up and the hope was we would have a greater level of focus within each of those, really backing great coos but providing guidance and effort that was need ed to make sure w were building some great businesses across this other portfolio. How do you interact together and make decisions . Larry makes decisions, or how do you interact with larry . Its extraordinary. One of the most Amazing Things ive seen over the years and for me the opportunity to get to be at this company is something i department believe would happen when it first came up i was at Morgan Stanley talking to bill campbell, spending a couple hours actually in his home and he the one thing i said i knew i never wanted to do was be cfo again and his comment after a couple hours was, well, you should really be cfo of google. And i had gone back a long way with google and just watching what layrry and sergei have don creating this extraordinary culture to me was what made it so such an incredible magnet. Why did you say yes to that besides hes very persuasive . He is persuasive . I first invested in google in 98 and was a buyer thereafter. I really believe in what the founder set up and i believe in the mission and felt that we were on this mission to change so many things that improves lives for millions, the mission of the company, and it was an extraordinary time and opportunity to be there. So when you came in everyone, they didnt see adult supervision because that was the last era but the person who will put a stop to the craziness and whats interesting is when you came in you quickly got the name i dont know if you know you have this nickname but its ruth vader. Fantastic. Thats fantastic. Because cutting costs, youre the one that drops the hammer for larry on things like that. Can you talk about that . That has grown. I think you must be aware of that idea that you kind of put the kabosh on crazy moon shot ideas. I want to get into those ideas and the other bets and well get into googles business itself because thats the driver of all the revenue. Was that your job to, like larry says kill that and dont blame me, ruth, you do it, or what . So whenever im asked about expenses, my first answer is we have been and remain committed to longterm growth. And i think just to be focused on expenses really misses what makes the Company Great which is innovation. We remain very committed to innovation and are making very bold investments to support the growth areas weve laid out. That, foremost, is where we spend our time, what are the bets within google and the bets within the various companies we call other bets. Weve been really clear about what those are. What were doing with the cloud, what were doing in hardware, the youtube subscription opportunity, and then a host of things. Selfdriving work. Thats the most important. Now, as ive often said, i dont think thats inconsistent with being respectful of the resources one is using and prioritizing where we want to put those resources. Theyre complimentary. How does it work . When youre deciding not so much on this one, you guys have identified cloud. Youve identified youtube subscriptions, youve identified very clearly, very spendy over there. How do you go google five were going to pull back on. Were going to pull back on nest perhaps, on other things. How does that go through that . Who decides that . You hear stories about you. You get a lot of the blame. Oh, that ruth. Im like youre a bunch of sexists. Its the dudes at the top. Youre seen as the one who makes those so my view has been the most valuable thing for leaders to have is clear data and you can make better decisions. I was quoting erics book while i was still at Morgan Stanley having no idea i would get to be at google. I believe firmly when youre working with extraordinary leaders, which i am, if i provide them, theyre going to make choices and thats what weve been doing. One of the big things we did is push down to the various product areas. We have a lot greater visibility by having google who is spending what. What are we spending. One of the very important elements, this stockbased thing which allowed Companies Push to the side and its a real expense. Most people are aware of that. Go ahead. And its valuable because youre looking at your business saying, okay, im using this much but it cant come from, in my view, the cfo. They can make the best decisions. What resources are they using, how do they best want to prioritize and what can be selffunded. Its about data. Do you use like a white house chief of staff. Not this particular one but you give them the data did you have a thought really cloud where we should go and maybe not so much with the invisibility cloak or what . I think cloud is pretty selfevidence, one of the most extraordinary opportunities to come around in our lifetime and its were uniquely situated with the engineering strengths whether its the data security, our Data Analytics and then very importantly Machine Learning and then our apps. You look at it and say this is a sizable opportunity. Its moving quickly. I came from a world that i would say was somewhat skeptical a couple years ago but now youre seeing the pace of move to the cloud accelerating. And so if were not investing now were going to rue the day that we didnt. We are investing meaningfully. Again, i said data. One thing thats important is taking a multiyear look at what are these opportunities, whats the scale of the addressable market, how are we positioned. What about innovation for innovation sake. Mark talked about experimentation and google is famous for that doing the wind kites, some barge going on. We are listening in to alphabet and google ceo ruth porat speaking live at the code conference. Key question that a lot of investors have asked for a very long time other bets which are so expensive, how involved is she in just tamm pg down those extra costs. She was pretty good at evading whether she, herself, ever said, no, you cant spend money on that but suggested that once you show everybody how much everything is cost iing the businesses control themselves. The interviewer is saying are you the bad guy in this all because larry says i want to kill it but i dont want to tell anybody so you tell them. Right. I think in a longwinded way she might have said yes. To Rick Santelli at the cme with todays bond report. Rickster. Reporter thank you, miche e michelle. You notice the low yield is 2. 19. The chart year to date. Yes, the low yield the 19th of april at 2. 17. Getting very close. One week of the dollar index. Todays low around 96. 95. If you open the chart up to october, that was last time the dollar index was here, youll notice one area were below that so big technical days going on. If youre busy working on your charts, you have a taste for mcdonalds, stay tuned after the break susan lee might have a tip for you. Approaching medicare eligibility . You may think you can put off checking out your Medicare Options until youre sixtyfive, but now is a good time to get the ball rolling. Keep in mind, medicare only covers about eighty percent of part b medical costs. The rest is up to you. Thats where aarp Medicare Supplement insurance plans insured by Unitedhealthcare Insurance Company come in. Like all standardized Medicare Supplement insurance plans, they could help pay some of what medicare doesnt, saving you in outofpocket medical costs. Youve learned that taking informed steps along the way really makes a difference later. Thats what it means to go long™. Call now and request this free decision guide. 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You will soon be able to enjoy mcdonalds on your couch without having to leave your coach except for answering the door. Susan lee is here with more. As of today you can order in new york and new jersey now, make that phone call, get on the mobile phone, get online. So, yes, using uber eats you can order your fries and big macs while you sit on the sofa, netflix and chills. Ceo Steve Easterbrook making the announcement at an Investment Conference this morning saying 6 60 of delivery orders are in the evening or late at night. And on average it takes around 30 minutes to get your food. M to get your food. Mcdonalds hitting a record high today up 23 this year. Investors like the mix of digital delivery along with plans to roll out mobile order and pay across all 14,000 restaurants by the end of the year. Most fast food and fast casual chains understand the convenience, thats key. Mobile ordering and pickup or delivery. Y yum focussing on this and dennys. Around 50 of its nationwide stores and panera, the first mover using technology when it comes to restaurants. Hiring around 10,000 drivers for its own delivery service, expanding delivery to over 35 of their bakeries and shares rewarded this year. Take a look at the restaurant names that outperformed. Embracing the restaurant and technology trend. Why you see the stocks moves this year. Dennys hoping to also make a grand slam for them. Pun intended. All right. The four big wall street calls you need to hear about today. Your daily dose of street talk is next. I need the phone thats where i happen to be. To be the one that rings. I need not to be missed phone calls. To not be missed. I need seamless handoff. Canyon software. From reception, to landline, to mobile. I need one number. Not two. Im always moving forward. Because i cant afford to get stuck in the past. Comcast business. Built for business. Time for think tank. The stocks you need to know about. Kicking off with catching upgrade ahead of earnings. Bair raising it outperforming. And strategic shift to partnering not compety with the cloud. And amazon web schbss allowing users to aploy legacy applications. Dont have to rewrite or retool. Second stock is gogo. Raymond james bullish on the airline. Coverage with an outperform an s 15 stock. And note the company is finally setting a move from consuming cash to having Free Cash Flow in 2019. Saying the company is a leader in the Inflight Entertainment space. I didnt know this pap 91 market share in private business aviation. Who knew . Like private jets . I assumed so, yes. Unite has its own. Private market, 15 starting. Decent upside, and 5 below, ahead of earnings, potential upside particularly because of a huge popularity of spinner devices all the kids love these days. But demand for spinners may have peaked. Peaked spinners . It wont change anything the first half of the year. Report t for the stock up 37 may fade once its clear the spinner fad is fading. Walked out of penn station, 31st, 32nd people covered with selling spinners. That important to five below . Catching on to the trends and what they do. Yes. I believe jim cramers favorite store. Thats what cramer is for. You know me. And inc research holdings, North Carolina based. Doing drug testing for drug companies. Heat around this industry. Suntrust upgrades to a buy after raising price target saying a waeshg Fourth Quarter was pickup. Step ug growth, a deal to prevent company, bigger is better. Their term. A 67 target on incr, about 20 upside of todays price. Solid run the past year. 30 gain. Michelle over to you. Thank you, melissa. Laters reading on the economy, coming up. The feds beige book do you out in two minutes. Stay with us. This is where i trade andrs. Manage my portfolio. Since i added futures, i have access to the oil markets and gold markets. Okay. Im plugged into equities trade confirmed and i have Global Access 24 7. Meaning i can do what i need to do, then i can focus on what i want to do. Visit learnfuturestoday. Com to see what adding futures can do for you. A market check ahead of the release of the beige book, which happens top of the hour. Markets are quiet. Firmly in the red. Nasdaq posting an intraday record high before backing off that. S p 500 down by six points and the russell is down by a half percent now. Look at financials. Really the sector feeling the pain the most. Down by 1. 25 . Third straight day of losses. Meantime, getting the beige book. Get to elon in d. C. Reporter melissa, three Federal Reserve districts reporting slower economic activity. Boston and chicago downgraded assessments to modest growth while new york said that growth has flattened out. The rest of the 12 reserve districts enjoyed moderate growth. Across all the districts, most firms are positive about the nearterm, but the report did caution that optimism waned in several places. Consumer spending is reportedly softening, especially in the auto sector. There were several mentions of tight labor markets pushes up wages, calling out one Manufacturing Company in chicago, even though raises are rising, prices, little changed, quote unquote, according to the beige book. Some districts saw lower prices for goods like groceries and apparel. However, higher production costs for commodities like lumber and steel are resulting in higher prices for manufacturers. Also rising, housing prices, and thats due to lower inventory. Guys, Home Builders in philadelphia are saying that those new tariffs on canadian lumber are trickling through the system and pushing up costs. Back to you. Thank you. Bring in steve liesman. On the one hand, three big cities say, see a softening. On the other hand, you still have modest to moderate wage growth. I dont like the Consumer Spending part of this. If you had come to me, some attention had to come me before the 2 00 break. I was going to say, looking in the beige book for inflation. We dont appear to have found it. Even when it comes to wage growth . Even wage growth. Little change in recent trend of modest to moderate wage growth. Next one after that, pricing pressure, little changed. Modest increases in most areas. Yesterday the fed governor posed the puzzle of the moment, which is this idea, how is it that the Unemployment Rate is so low and the labor market seems to be tight. By the way, affirmed here, yet were not seeing pricing pressure around not seeing it in wages. A bump up, a little, the story a while. Now wages flat again. My question is, they seemed hellbent on raising a certain number of times. As long as they continue to see wage growth rise, isnt that an offset to any softening they might see in the cities . It could be an idea of normalization for normalization sake. The idea we get there. Were going to try to get up and get a little bit of traction here and get a little ammunition for the next downturn if it happens. Thats one idea. Get back to reducing that balance sheet. But it appears, listening yesterday and to a lesser extense Robert Kaplan on our air as well. This idea if these Inflation Numbers dont pick up, that the hike after june is the one in jeopardy. Can you this seems to be one of those times where the fed, close your ears, seems so disconnected from society, because i think most of our viewers understand a Pretty Simple point which is wages have not risen because the cost of health care has. Isnt that how much did my health care copay went up this year. So in effect i got a raise, because they have to contribute more. Does the fed factor that in . You know that yes. Gives you an extra 200 a more for health care. I cannot remember which it is. Two measures. I believe, somebody correct me if im wrong here, the one the fed favors takes in health care a little bit less in waiting. Increases in health care mattery bit less. They still matter. Theyre still a part of the overall inflation picture for the Federal Reserve. Which is weird, because if a company i may have that wrong. A company said, steve, i love you. Youre a hard worker, youre a genius. We know you are. We want to give you an extra 350 a month. 250 goes to a Higher Health care premium. Its a piece of that. We can have the debate as to the cause of it. Health care premiums going up quite a while. Thats a piece of it. Bottom line, brian, i think is a little bigger than that, which is, if labor is scarce. Michelle, be you can finish this sentence. We know you were an economics major. Labor is scarce, the price goes up, and theyre not. Its a puzzle. They are, not very strongly. Going up, 2 , 3 a year. You would think going up the other side of this, by the way, more controversial, a relationship between prices and unemployment. The idea if unemployment goes down you should have some unflation especially running below the natural rate of unemployment. Many think we are. And not seeing Inflation Numbers. Its a step down, down, down. Three months with no progress. 2 towards inflation goal. The best guess i have, june is still on. You have the fed funds probability chart in the back. In terms of agreement. 80 . I could look here to see if its gone down. Running 80 , 85 . Fed, chart guys, come up, its at 84 now. Im looking at it. That seems to be on. What the fed does in september, my best guess if it doesnt show a little traction, you could have doubts about sorry. That third rate hike this year. Got it. Thank you, steve. Pleasure. And graphic codes live on the air. Love that, that is hot. May come up and the guys in the back are very good. Theyre fast. Thank you very much. Talk about your money, the beige book, whatever else we want to talk about with a couple guests. Bring in jerry castleany, and rich bernstein, cnbc contributor, and richard, i guess we actually talking about this in the commercial break a couple breaks ago which is, with all the stuff going on, things are good. Stock markets record highs. Why is the tenyear at 2. 2 and the twoyear bond trading where it . What is the bond market telling us maybe the beige book or stock market is not . Well, a couple things, brian. You asked a lot in one sentence there. Always do. But i think, first of all, if youre talking about the slope of the o curve, the slope of the o curve flattened, everybody knows. Its basically mirroring peoples fears about a continuation of the First Quarters kind of weak patch in the economy, if you will. I think theres a lot of data all right suggesting were past that weak patch, but i think thats what youve seen. Same in commodity prices. Same thing youve seen in defensive leadership in the stock market. Youre seeing it in the slope of the yield curve. All the same story about First Quarter. Do you think that this is a troubling sign, rich . A lot of talk that, art carbshi was weary. Everyones crowding into the same stocks. Is there a big warning sign or just sort of echoes on the horizon we have to Pay Attention to . I personally argue that what people are doing, become momentum investors. The people were never really bowled up or confident. The First Quarter peak watch reinforced their fears which began this huge momentum in trade, i argue, into defensive positioning either in the bond or stock market. Again, i think thats very misguided right now. I think theres an increasing amount of data showing were 3569 th past that. Be that as it may, the markets the market. Jerry, youre trying to identify good stocks at a decent valuation. Identified financials. You like financials. You dont think theyre a value trap . They havent performed. Listen to market signals, i put forth there are plenty of reasons not to invest in financials at all given the stuff out of the spread, heard a number of bank cfos today speaking at a conference saying that trading in the Second Quarter has not improved and will be lower compared to a year ago levels. What are we waiting for, for the financials . Financials and a lot of other sectors that have yet to move with this market are one more example how early we are in this entire bull market cycle. I know it sounds odd arent we in the later stages of the bull market, though . Not at all. Theres too many indicators that suggest our economy in the u. S. Is still got further to go. Global economy is just getting started. If you talk about the formation cycle that the financials sit at the base of, i mean, thats just beginning, and generally those are fiveplus year cycles. Add to that the other sectors still treated as we are as though they are close to a recession and you have an entire, basically, twothirds of the market that hasnt really discounted a broader economic recove recovery, and thats what sits behind, really, the value and the attractiveness of this market and why we think as rich talked about, theres really just been this persistent defense trade in this this place to go hide and in bonds themselves, and whats really lurking outside there is this phenomenal bull market that still hasnt happened for the majority of stocks. And thats what we think youre going to see happen and evolve over the next six months. All right. Well watch for it, then. Thanks, jerry. And rich. All right now to eamon javers at the white house with a news alert, eamon . No Immediate Reaction from the white house from tweets were seeing from elon musk, web, one of the most freechbt highprofile visitors to the Trump White House, serves on a number of advise riz counsels and upset about the apparent decision of the white house to possibly remove the United States from the paris accords. What elon musk tweeted just within the past few moments saying i dont know which way paris will go, but ive done all i can to advise directly to potus through others in the white house and via counsels that we remain, that is, the United States remain in the paris climate agreement. Hes asked by a follower on twitter what will you do if he makes the decision to leave . Elon musk responds, no choice but to depart counsels in that case bp so musk there threatening to leave those Advisory Councils he sit on. By our count, he sits on at least three of the counce ims created by the Trump White House. Manufactures, strategic and policy forum and Infrastructure Council and as i say, a highprofile visitor to this Trump White House and taken heat from democrats and liberals for continuing to engage with the president when they think he should back away, but now elon musk signaling on twitter this might be the issue that does cause him to break away from the Trump White House, and as i say, ive asked officials here for reaction. None yet. But sean spicer will brief at 2 30 east coast time. We expect well get a chance to ask him a question about that soon. Got it, eamon. Thank you so much. Sets upper perfectly for our next discussion. Cue the clash. Should we stay or should we go when it comes to the climate accord . Are we better off out of it . Joining to us debate the withdrawal, and former white house reason and ronald bailey, science colonel at reason magazine. What would happen if donald trump decided we not going to commit to the paris accord on Climate Change . I think its a real disaster for us not just in terms of Climate Change accountability and our economy domestically but for globe leadership. Abdicating our role on the global stage. Telling allies they cant take us seriously. We already know Angela Merkel said this past week before this announcement or news coming she felt thes u. S. Is a less reliable partner than it had been in the past. This really sends a terrible signal for us in terms of the international influence, in terms of growing our Clean Energy Economy and has disastrous consequences for our ability to act on climate. Ronald is it as disaster jous make it clear to the audience, you are not a climate ching denier. Some people describe that side of the aisle or that positioning. You believe its a problem, but do you think that the paris accord and talkdown agreements at the government level are the best way to solve Climate Change . Are there better ways to do it . I think there is a better way. If i were advising the president what i would do is submit the climate paris Climate Change agreement to the senate for ratification. After all, all the other countries of the world who are signatories to this pact have gone through their formal processes instead of having an executive agreement of the sort that obama decided to go forward with. So thats what i would do, whether he would recommend ratification or not is up to him. The other way to solve the problem, i suggest, rev up the economy as rapidly as possible and get, so we can generate the wealth and new technologies that would handle the problem of Climate Change. For example, you get rid of the regulations that are slowing down the progress on fourth generation Safe Nuclear Power plants, for example, or get rid of regulations slowing down the adoption of selfdriving automobiles that would be electric powered. These kinds of things address and cut the Carbon Dioxide thats causing the problem. Ronald, dan says it would be a disaster, and people who say that Climate Change is a major problem say its an exessential problem. A sdamp disaster if the preside pulled out . No a disaster, but how would we domestically handle the br. Problem. Go back to the earlier treaty, the one the u. S. Refruzed to join was an abject failure, ultimately. The countries that did not keep their promises, canada, for example, russia and japan, withdrew. Nothing happened. It simply didnt work. The paris accord could easily turn into that as well. What we should be doing is, as i say, concentrating on technology and Economic Growth to handle the problem. Dan . Well, there are two countries not joining this agreement. Syria and nicaragua. This is not kyoto. This is a very strong comprehensive agreement that relies on the willingness of major emitter to stay at table and engaged. If we pull out, yes, we threaten the health of the agreement. Stay in a good chance to make it work. If we pull out what were really doing beyond the fact were abdicating leadership on the global stage, threatening the climate but undercutting ourselves. What about Economic Growth actually solves the problem . There are 17 faster growth in the Solar Industry than the rest of the economy. 650,000 venerable job, 75,000 in coal. Coal futures going down more than a decade because the cheap price of natural gas is happening. We have a chance to be a leader on the global stage, create more jobs here. Thats ronalds point. Right . Natural gas and fracking is happening because of innovation despite attempts by the Obama Administration to show it down . That is exactly wrong. I see you nodding your head. Correct. Look at what happened to germany. The electric, electricity prices in the last decade, spend over 100 billion trying to move to solar power have tripped over that period of time. Electricity is considered a luxury item now in germany. We wouldnt want that in this country. Thanks so much, gentlemen. Ron and dan. Well wait to see what exactly the white house will do on this issue. Thank you. Thank you. Coming up on power lunch, a new plan to get you on a plane without a boarding pass. Just your face. Goldman sachs criticized over investing in venezuelan bonds. Well talk to an inventor who did the same thing and doesnt feel bad about it. All that and more coming up on power lunch. Er than making me move stuff, what are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. See options data like never before. With thinkorswim only at td ameritrade. Welcome to holiday inn thank you wait, i have something for you making every stay a special stay. Holiday inn, smiles ahead. Whether for big meetings or little getaways, member always save more at holidayinn. Com did you know slow internet can actually hold your business back . Say goodbye to slow downloads, slow backups, slow everything. Comcast business offers blazing fast and reliable internet thats over 6 times faster than slow internet from the phone company. Say hello to internet speeds up to 250 mbps. And add phone and tv for only 34. 90 more a month. Call today. Comcast business. Built for business. Welcome back. A good news story around air travel. Kind of. You may soon not need a boarding pass to get on a plane. Just bring your face. Phil louisianouisianala phil. Up to the kiosk a chance to look into a camera. Take a selfie, so to speak and voila. Youll know whether or not you can board the plane. Jetblue is trying out this technology. Facial recognition boarding what theyre calling it, on select flights out of boston, logan. Basically your International Flights where youre going to need to show a passport anyhow. This technology, which xbrjetbl is cog in connection with a firm that works with a lot of airports and airlines. Match it up to your passport. Look at jetblue. What we see with this not only test Pilot Program happening starting next month in boston, its something well see more and more with other airlines on a limited basis in different markets around the world. Another example is delta using facial Recognition Technology similar to what youll see with jetblue only theyre doing it when it comes to your bags and how youre checking in and retrieving them. At minneapolisst. Paul. Another program that is going to be tested starting next month, and, again, in minneapolisst. Paul. Well see this more and more. The key thing here is, it works on those flights and those destinations where you need a passport. So that they can, they have something to register up against and say, okay. This works. Its going to be tougher to see this expanded on a widescale basis, on a flight say between chicago and nashville. What about the Privacy Police . Are they going to freak out . I begin to wonder if theyre going to use this oh. If this person walks through, arrest them, because theres an a warrant out for them. A lot of countries use special recognition . Right. Oh, im sure youll hear those kinds of, types of complaints. I think for right now the airlines are not concerned about that. Michelle, i think their primary concern is, does this work in terms of improving the flow and efficiency, whether at boston, at minneapolis . If it does, okay. See how we can expand from there. And as always, whenever you have this type of technology you have the privacy complaints. Thank you. Phil lebeau. You bet. From Airline Using new technologies to the use of robots in our lives, how a. I. Is changing the world we live in. Something dramatic tipped it off five years ago, a whole category of things didnt work all of a sudden works. I think at this point a feeding frenzy in the Tech Industry and the valley to experiment with every single possible permutation what can be done with a. I. And robots at every possible shape, size and description. I think its spectacular. One of the biggest booms exploratory, lets go map the landscape and try all the ideas i have ever seen. Matt murphy, a top b. C. Fund and a. I. A great focus for him. Great to have you with us, matt. Thank you. How should we think about a. I. Right now experimental phase. Well try to apply it to everything out there and see what actually works. Do you agree with that . I think mark mentioned it in the context mainly of robotics and certainly thats a key area for a. I. As robots move from just mechanical devices to devices that can really simulate human behavior. Its broader than that. Look at what a. I. Is doing in the bio area helping with Drug Discovery or ef caficacy and cre patterning, trends, benchmark to make people work better and smartt. Its one of the broadest technologies that weve seen in a long time, and a lot of things have had to come together to make that possible. Weve had, you know, shifts to incredibly cheap compute and storage and bandwidth. A huge number of companies Training Data scientists as well as universities and, really, more than anything i think the driver now is most Companies Realize that it is the key competitive advantage. It youre not the best in a. I. For your application, somebody else is going to be and theyre going to beat you. Right. Anything from Health Services to Financial Services and were seeing it all over. Matt, how do we think about in the financial markets, always like to think about whos ahead, whos well positioned in this area . You think about an amazon, obvious one. Facebook, a google. A report that apple is working on an a. I. Chip. How do you think about it . I mean is it the ones that are already using a. I. Now that you think are ahead . Or could other companies be working on it in a back office and leap out ahead . Sure. I mean, the big five are clearly going to blaze the trail with a. I. And they have a tremendous number of data scientists. What were most excited is around innovation going on in startups using a. I. We invested in a company in the fall calmed clarify. Essentially a platform for a. I. Any application can use adopt and embrace a. I. They couldnt before because the googles and amazons of the world have teams and armies of people who understand a. I. And infrastructure even longstanding algorithms to help them be successful. The late company does not. Whether the company, startup, old industry company, they dont have the expertise or time to develop it. Now they can accelerate their time to market and make them more competitive. Thats one example. Id say also a number of different applications are just, its become a core part of how that application operates and differentiates from matt, running out of time. I hate to jump in. And andreeson said, dont worry about autonomous cars. Laughed it off. Never will happen. Because machines are thinking, not just doing . You never know whats going to happen in transitions like this. Everyones worried in the Industrial Revolution jobs would be taken away by new types of manufacturing and it created a bunch of different types of jobs. Weve seen such a Technology Job with uber redefines hoe we get around, spotify, how we listen to music. Airbnb, rent a hotel room. Tons of companies innovating with a. I. , new services and politician applications and that creates new jobs, takes away jobs but net super positive for our economy. Andreesons point, too. He thought jobs, a lot more jobs would be created because of driverless cars. Thanks. And the better jobs. Thank you. Even better. Thank you. Tesla hitting an alltime high today. Is that where you should put your money . Power lunch will be right back. Hello, everybody. Im sue herera. Your cnbc update. Nasa announcing an historic new mission. One the agency plans to fly closer to the sun than ever before. Flying to within 4 million miles of the suns service. The announcement made at the university of chicago in illinois. Were going to be seven times closer than any other mission has ever been and we will repeatedly swoop through the corona making these measurements. Why has it taken us 60 years to be able to do it . Hon negligently, the materials didnt exist to allow us to be able to do it. Cbs says scott pelley is leaving the anchor chair and will work full time on 60 minutes. He will be replaced on an interim basis by anthony mason. And terminated Kathy Griffin to appear on cnns new years eves special. Griffin apologized for posting a video involving President Trump. A gym and hotel is no longer enough. Now some hotels are offering rooms with thi own private gyms. Diana olick joins with more. Reporter we know how hard it is to get out of bed in the morning and work out. Especially when on the road traveling. Well, what if the gym was literally right next to the bed . Thats what hilton is banking on. You will pay a premium, 45 extra a night for a room that is five feet from fitness. One of the most fascinating elements of this entire space is the sheer volume of different activity be and options that are here. Its a tiny space. Exactly. Reporter its not just a bike and yoga mat but an apparatus of active amenities like sandbags, bosu ball, trx. Lets go. Reporter and a screen with ondemand instructional videos and routines for every piece of equipment. The great thing it takes the guesswork out of it. Reporter so would you pay more for this instead of just going down to the regular gym . No. Absolutely not. Reporter why not . Because i can get it right here. Why pay more just to have it five minutes away . Reporter for budget crunchers, maybe not. For others. I would be, because i do a series of stretches before i ever walk out of the room. For me, very convenient. Conveniences is what theyre selling. Testing it here and in san francisco. Only costs about, well, only 12,000 to outfit the whole space. Get a return on investment in a year, that is, if people take the room. Look, competitive Fitness Options in hotels are huge right now. We just got an announcement from pellaton, station aware bicycle ci the screen and live interactive classes, will put these in Westin Hotels and airbnb, Summer Vacation rentedaling, the bike, the treadmill, people are using it 20 sell their rental properties, rent them out. What do you think . Brian . Yoga mat, the trx. You are yeah. According to melissa, you are ignoring the elephant dung in the room. A special air vent no. A special avent. Not kidding. The room smells better. Theres a filtration system theyve trains the cleaning crew so there wont be, like, sweat everywhere when you get in here. Is that a hard surface floor or carpet . Reporter its actually, you got the regular hotel room carpet here and then you move on to this floor, a little bouncy, and its supposedly soundproof so people below dont get upset. And sweat dripping into the carpet fibers. This is the model. Only me. Skinny me. A little tall. I feel like well, five feet to fitness. Get down, push ten. Reporter i can do at least ten. Shes doing it. Wants a bigger challenge. Give us 00 on the trx. Whens the next contract . I dont know. Maybe. Its a lot of stuff. A lot of options. The trx thing is yeah. Drawers. Everything many gos good. Stuff in here. Give me what you got on the bosu ball. Thank you, diana. Hilton wellness. There you go. Perfects. Barefoot. And thank you very much. And Goldman Sachs criticized for buying bonds invenezuela accuse in part of propping up the government. Watching oil over concerns about output. Trades on oil when power lunch rolls on. Welcome book to power lunch. Libyan production is up and, of course, so shale. Weve been keeping tabs on that a while. Those two factors combine troubling traders today. Also suspicions out there that opec compliance could be an issue as this agreement drags on another nine months. On top of it, traders havent seen a seasons bump in gasoline. Concern growing a little. Session low today, 4743, closing oes over 48. And draw your attention to a factor that could cause things to turn in the other direction. All eyes on the crisis in venezuela and the role oil is playing there. Lower for longer. Certainly its hit the country hard. Energy makes up about 95 of venezuela the export revenues. Theyre sitting on more reserves, get this, than saudi arabia. Roughly 300 billion barrels. Their economic problems caused a little maintenance and investment issues in the fields and refineries. They havent been able to pour money into it. Venezuela produces a little more than 2 Million Barrels of oil a day. If that is threatened it wouldnt just drag them furtherer into crisis but could be a black swan event that spikes prices for the entire market. Back to you. Something to watch. Thank you, jackie. Another day of violent protests on the streets of venezuela. Protestors facing off against large tanks. All this youre seeing on the screen coming on the heels of a vote by venezuelas opposition congress. The opposition says it offers a lifeline to the president s unpopular government. Violating our citizens rights. And the oil bonds. Says he doesnt feel guilty about it. Here to tell us why, the cio, diego faroe. Youve other thanned venezuelan bonds a long time. You feel bad about it . Not at all. Actually i think that whats happening in venezuela are due to the government and people voted for the government. The bond we own were issued many, many years ago. Legally issued by venezuela. We bought it in the secondary market from other investors who didnt want to hold the risk, and the thesis is that this country, i think as was said before, 95 of their income comes from oil, and they need to continue making payments, because otherwise, i think that they are going to be funds who be disrupt those oil shipments, if they defund on that in other words if they dont pay investors like you what looks like a hoar terrific situation, grows even more horrific, because they dont have revenue, one. Yes. And youre at a point, when you bought on the secondary maesh market. Venezuela raised money and that trades. You didnt give money directly to the venezuelan government when you bought the bonds . Absolutely. Venezuela hasnt been able to tap the market a kind of regular way for years. If you had followed the story, they have tapped money from china. Tapped money from russia. They have done a retransition with the fund a few months ago and are really desperate for funding and anyway they get access to the funding they try to do it, but not in an ordinary way. Let me ask you this. Its not clear what Goldman Sachs knew, et cetera. If you knew the central bank was Holding Assets and came to you and needed money, would you do it . An interesting question. I think that there was information that venezuela that the intrabank held bonds. These bonds have been issued by venezuela before, and that i think clarifies a little the legality of it, because the new National Assembly wouldnt approve new bonds, but these bonds were issued and given to the central bank. Sort of a hybrid situation, because you are giving money to something that was issued before. It looks in retrospect, it doesnt surprise it hits this reaction. I dont think there was anything illegal and it was a market transaction. How about this. Should the bond market be used to affect social change, anywhere . An interesting question. I think there are more, other constituencies more responsible. Seeing any major penalties against venezuela or embargoes or measures . Most of its money that goes to venezuela comes out of refined oil and that refined oil is here in the states. So i dont know if you necessarily have to do that, but if you find a company, you have to be sensitive to the backlash. And do i follow correctly, you could say Oil Companies shouldnt be doing business there if youre saying goldman shouldnt have bod those bonds . Or we shouldnt be buying Venezuelan Oil if thats the case . The whole issue, even the oes is having the organization of the american states is having difficulties purting sanctions on venezuela. So to blame a bank for this i think is a bit exaggerated but easier to blame Goldman Sachs to blame an oil company in this case. Got it. Diego, thank you so much. A pleasure. Biotechnology leads financials. The biggest financial etf that biven all all gains of the year. Now lower. Did that mean now is the time to buy bank stocks again . Thats next. All right. Welcome in. Time for trading nation. Talk about the banks, big etf, giving up up a gains for the year. And 55 capital max, and max, quick question. Down. Buy opportunity or going down more . Sit and wait here. Inflation trade out of the trump deregulation trade. Got in trouble around the same time. Still no clarity. Closer, not there yet. Ari wall, chart it . Glo look good or bad . I think the first reason we have to look at here is the reason theyre underperforming. Really its a function of interest rates. If you overlay the relative performance of the financial sector, with that in the tenyear u. S. Treasury yield youll see underperformance over recent months coincided with a drop in interest rates. The question what does it take to get rates higher again . You need Global Growth to come back. U. S. Rates in the u. S. Are not going higher when you have rates everywhere else in the world at zero percent. In our take, you just want to stay away from that trade altogether. Buy the growth of your sector to the market, Like Technology that are less influenced by what should continue to be a rangebound interest markets. Financials could do better come second half of the year. For now, staying away. And technically and fundamentally dur fundamentally dumping on the banks. Thank you very much. And the for more trading nation go to the website. Melissa . Teslas torrid run, 60 this year. Record close yesterday. Can it keep rising . Well talk about that. Announcer now, the latest from tradingnation. Cnbc. Com. And a word from our sponsor. You always pay your insurance on time. Tap one little bumper, and up go your rates. What good is having insurance if you get punished for using it . News flash nobodys perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch and you could save 509 on auto insurance. Call for a free quote today. Liberty stands with you™ Liberty Mutual insurance. The fifth annual list using technology to disrupt the status quo. We narrowed down to 50. Here are the top tesla had a new intraday all time high day, up almost 1900 from ipo price of 17 bucks a share. Continues to soar the market to open mystic. Senior auto analyst, edge research. James, good to have you with us. That intraday record here was 342. 89 according to my notes. Your price target is 330 over rating. Are you going to raise or what is going to happen here . Were watching as were going here. Look, theres a lot of model 3 expectation baked into the stock currently. Were trying to assess, you know, as we go whether or not theyre going to be able to hit their targets. From an automotive perspective theyre doing something no one else is able to do in the industry right now, which is to sell a fairly high profit vehicle but then after the fact make money, make profit on selling over the air, remote updates with their technological advancements. We like them for a lot of different, new, unique reasons on the auto side. We will revisit our target price accordingly. Model 3 sort of the biggest sort of possible catalyst. What is the next date were watching nor in terms of updates . Well, there will be a delivery number on or around the 4th of july weekend we get for the Second Quarter so we will get a sense of model progression there relative to their guidance for 50,000 nor the first half. You know, really dont expect too many model 3s in the Third Quarter but it is an opportunity for them to give us an update as well. I think no update is probably the worst thing, so at least talking around, you know, the progression theyre making with sflie sfli suppliers is what most people are looking for to get comfort in the Fourth Quarter and early 2018 deliveries. You believe there will be 3s some time this year . Some bear channels actually think it will be push out. Im not sure that im any more right than they are, but certainly im more optimistic they can start to deliver in the, you know, single digit thousands, 5,000 to 10,000, maybe even double digits if all goes well on suppliers side and they get production rolling. Well await your assessment on the price target. Good to see you. James albertine. Buy. No significant update watching on tesla because in april 27 we had our stock draft when todd slash, crash gordon, picked tesla as his pick. Lets bring in team captain, only member of the team and thus the captain, todd gordon. We heard the fundamental view on tesla. You are a momentum trader, this is why you liked it. It was a hot stock. Are we running out of steam on tesla . No, but i loved the story. The momentum break was real. Heading into the stock draft for 2017 we were in a range that began in 2014 and adjusted in 2017 we just finally broke it. Im going to throw some technical at you here. The high to low peak on the range was 107 . Technicals say once you get the break which occurred at 292 are you talking about from here to here . Yes, 107 move. Why is it significant . Thats the width of the range. Once that range is terminated and you break, the break point was 292. If you add 107 to that, that ultimately im get to put it right next to the red tesla sign heres, reaches a 600 price target in tesla probably 12 to 24 months out. 600 price target on tesla. Aim going clean it up a little bit. We broke this once. Im not a pro, but im not talking about it to know, does one break mean that much . Do we need to test it a few things . Put that base under. As the conversation we were having about trading it, im holding longterm january 2018 call options that i put on in the stock draft. I just sold 370 strikes in the july option to kind of hedge a pull back. I do think we return to the scene of the crime, and if i can collect that premium, it is kind of a covered call situation, great. Ill take that trade off. You know enough about options i could ask you this, should you write some calls on this . Should you protect yourself a little bit . As we were talking about, the brass is becoming so thin. Theres 10 or 15 big cap tech basically all of trading is 10 or 15 is all which art cashin said he was worried about today. I love hedging. Were on trading nation a lot, so i feel you should trade it. There are a lot of things working against it in the near but this is not impossible for tesla says flashcrash gordon . No, it was great. This is going to be longer term, but to your point its been a nice gain since the stock draft. So ive got to take some off the table. One thing i can say, crude oil dropping a bit, crude oil dropping should pressure tesla. But it did well today. Take a little off the table, but the stock looking very good. Todd gordon, looking good in the second place in stock draft. Check please next. Check please. Check please. The british pound getting hit. Have you seen these polls . Election in the uk a week away. It looked like the conservatives and theresa may were going to increase their majority. Huhuh. She has blown it in the campaigning and now looks like she could actually lose parliament. Thats amazing. So the pound is weaker against the dollar. Im watching the banks, a huge drag on the markets in todays session. A number of bank ceos speaking at a conference. Saying that Second Quarter market revenues would be down about 15 or have been down because of lower volumes in trading. Remember, this is a miss for jp morgan in the last quarter and the stock reacted very poorly to the earnings report. Here we have this concern once again being highlighted at jp morgan. Got to wonder how long if we had to guess on thing, on banks, how long does the trend last . Mine is the internet and what they call the mem of the day, which is covfefe. I think the president should own it and say it was a told covfefe. I think it is going to come like the world smurf, going to mean everything. So covfee for watching power lunch everybody. Lets go get some covfefe. Hi, everybody. Welcome to closing bell on this wednesday. Im kelly evans at the new york stock exchange. Im mike santoli in for Bill Griffeth today. Is everybody afraid of amazon . Seems like it. Telling cnbc amazon is scary right now. Find out why coming up. Cole is saying it is the most more anyway, well talk about it. Hillary clinton will be interviewed in just a few minutes at the same conference out in