Transcripts For CNBC Power Lunch 20170712

Front of us. We have talked before about Monetary Policy and i havent been a fan as a banker before i was in congress of going beyond the feds initial Interest Rate policies i felt like qe 1, 2 and 3 didnt produce the gdp effects or job increases that perhaps fed policy makers at the time thought. I have also been concerned that as we go back and look backwards now since 2008 that fed officials really have always been a little reluctant to talk about some of the unintended consequences of that, such as distorting the price mechanism in our economy, depressing cap rates for commercial real estate or running up equity prices which i think are a result when you have that, we have flooded from qe 2 into our economy, affecting price earnings, multiples, et cetera today i havent heard any discussion, we talked about the Balance Sheet, we talked about setting Interest Rates but i want to talk a little bit about the money multiplier aspect in your toolbox we flooded the system with reserves but we have a money multiplier thats down at echols rates, 1930s type rates, and i guess my view is shouldnt you lower the rate of interest paid on banks on excess reserves as youre raising rates and planning this very thoughtful, careful shrinkage of the feds Balance Sheet . The Interest Rate we pay on excess reserves is our key tool to adjust the general level of shortterm Interest Rates in the economy. And the committees deemed it appropriate to gradually raise the level of shortterm rates as the labor market has strengthened and we have come closer to achieving our objectives, so no, i wouldnt agree that we shouldnt be using that tool to normalize the general level of short rates in the economy. The rates on excess reserves. That is our key tool that we use to adjust how do we get the money multiplier to increase, then well, i guess i dont look at the impact of Monetary Policy on the economy through the money multiplier i think what do you think accounts for it being at 1930s levels when we have advanced reserves into the system as mightily as we have over the last eight years . Well, we had a highly depressed economy where Interest Rates fell close to zero and banks were willing to hold on to excess reserves my colleagues on the other side say the lending business is booming and the economy is growing successfully, so why is the multiplier not changed why is velocity still low like that in your view thats something we measure. Thats how we measure successful fed policy by looking at that. I mean, i wouldnt agree at all that we measure the success of fed policy by looking at the money multiplier i think the quantity of money and its relationship to gdp has been extremely unstable and not a good way of running Monetary Policy im not aware of any central bank that would any longer approach it that way why is that why is it that it was between world war ii and 08 something that people looked at and it was talked about as a way that shows that we have a healthy investment and lending market and growing economy but in the 1930s and since 2008, were just satisfied with it, that its low and we dont say its important anymore . Can you put some perspective on that well, both in the Great Depression and in our more recent great recession, we have had a situation where shortterm rates fell essentially to 0 and pushing out additional reserves was essentially what they said during the depression was like pushing on a string and we encountered socalled liquidity trap and the relationship then between the quantity of reserves and nominal income begins to break down in those situations, and we faced a similar situation as to what we had during the Great Depression my time has expired time of the gentleman has expired. The next member will be the last member we call upon. I now recognize the gentleman from ohio, mr. Davidson, for five minutes. Thank you, mr. Chairman chair yellen, thank you for being here today i really appreciate your testimony. Thanks for the work you and the team at the Federal Reserve do to get our Monetary Policy right. I want to understand that a little bit you have talked about your policy is neutral to accommodative but what you have started to do is at least talk about applying the brakes. You have raised rates, you are talking about how to frankly you talked briefly about the supply of money being a little unstable well, 4 trillion of it, we know where it went but it did create some velocity in the money supply thats nontypical. So is what you are doing now essentially gently applying the brakes yes i think thats a fair characterization we have had our foot on the gas. We have been in an accommodative stance and as we have come closer to achieving our objectives, we have taken our foot off the gas to some extent so that we can sustain a strong recovery but we are moving towards something closer to lets call it a neutral stance. It keeps the economy operating on an even keel. Historically, applying the brakes gently or at the right time has been a challenge just like its been a challenge to hit the gas. I guess everyone always feels optimistic about their course of action at the time generally, people say bubbles have been one of the things that have caused this miscalculation. What bubbles do you see out there in the Macro Economy right now . So i try not to opine on the level of asset prices, although our report notes that valuations generally are toward the top of their historical ranges. What i try to think about is if there are adjustments in asset prices, what consequences would they have on our Financial System and our economy, and in that context, look for evidence that surging asset prices might be leading to imprudent borrowing, a buildup in leverage in the economy that would be dangerous if the prices were to unwind, and we are not seeing that so we judge Financial Stability risks at this point as moderate. So you have laid out a good plan and i dont really want to go over the whole thing. You have talked a lot about it but i am particularly concerned about the role that you kind of allude to here as, you start to see instability, you kind of shift hats from Monetary Policy to regulator in the regulation, you talked about really a pretty heavy hand in the sense of Steering Companies on policies, the Financial Times highlighted cases where you have even as regulator addressed h. R. Practices up to the point of advising terminating or replacing certain employees in companies, and at that point i guess how critical is it that our agent of Monetary Policy also serve as a regulator . Im not saying regulation doesnt need to be done. How important is it that our central banker does that so i would say especially in the aftermath of the financial crisis, we have found that our understanding of the economy of the Financial System and of appropriate Monetary Policy has been greatly informed by the role we play in supervision. Its helped us understand risks to Financial Stability, pressures in particular portions of credit markets, and theres been a close integration between what we learn in Bank Supervision Financial Stability and Monetary Policy. Most closely on the mortgagebacked Securities Markets where you guys developed a strong affinity for them and accumulated quite a lot of them which gets to the monetary supply at this point you are looking at some of the asset purchases that you have made, really directly interacting with a key part of the market, putting those on your Balance Sheet, unwinding them, you have talked about a plan to do it, you talked about a change of plan to do it. What do you see as the risk to the monetary supply and you talk about, not to say its a bubble but clearly theres going to be affect on asset prices as you try to get that right. So we do believe that our asset purchase programs were effective in pushing down longer term rates and the socalled term premium embodied in longer term rates and very gradually over time, as we shrink our Balance Sheet, i would expect some modest but over a number of years, upward pressure on longer term rates its not something very substantial, but it is something that we have taken into account in deciding on what is the appropriate path for the federal funds rate. Thank you, chair yellen thank you mr. Chairman i yield back time of the gentleman has expired. I want to thank our witness, chair yellen, for her testimony today. Without objection, all members will have five legislative days within which to submit additional written questions to the witness, to the chair, which will be forwarded to the witness for her response i would ask our witness to please respond as promptly as you are able this hearing stands adjourned. Chairman hensarling gaveling the end to chair yellens testimony in front of the House Financial Services Committee Welcome to power lunch. Brian, melissa and tyler here t chair wrapping up her testimony on capitol hill at least for this day her comments sparking a bit of a rally. The dow up 119 points. We will get to that in a moment first, Steve Liesman is hire with the highlights. Three hours of testimony and as far as the market was concerned, it all boiled down to something the fed chair janet yellen said in about 14 seconds over the outlook for rates Monetary Policy is not on a preset course. We are watching this very closely and stand ready to adjust our policy if it appears that the inflation undershoot will be persistent that prompted markets to start to bake out the possibility of a third rate hike this year. Its now just around 43 helped the rally in bonds and also in stocks yellen also sees Global Growth helping out all over, reject the effort to audit Monetary Policy. Lot of back and forth on that in congress and no comment on a second term, though congress did try three or four times the fed chair was also asked to respond to jpmorgans jamie dimons case about the feds plan to reduce its Balance Sheet. We have tried to be very methodical about informing the public and the markets about how we are going to do this. We have provided essentially complete information weechlt have not heard significant concerns or seen a significant market reaction. So we have indicated we expect to begin this if the economy stays on track this year she indicated Balance Sheet reduction could begin soon but didnt give a month. One point i want to make, an observation, maybe interesting, there werent a lot of questions about tax policy, economic policy, fiscal policy. Indicates to me not a lot of momentum going on in congress right now. Usually when theres bills on the tip of their tongue, when they are hot and heavy in congress, they ask a lot of questions to the fed chair about these kind of policies how does she feel about this or that. Exactly sometimes she parries and doesnt answer them. How many Interest Rate hikes have there been in this calendar year there was one in december. Two this year there have been three as part march and june . Yes no, no, sorry. No. There has been one this year one last year. One at the end of 2015 2016. 2015. There was year and a half december, december, june. So one this year one this year three over three years to get three Interest Rate hikes this year you would have to have one im telling you there were two this year. I really think there were. Am i crazy about that . I defer to steve. Sorry. I think okay. Hold on. We have a challenge on Live National television. Who is in team liesman we should know this. This is our only job this reading stuff its the memory thing i thought the comment that rates wont need to rise to levels of past cycles was a huge thing for the market because that basically signals theres a cap on the number of rate increases. Not only cap and also its more than a cap. The magnitude but also the effect of the normalization of the Balance Sheet in terms of tightening plus rate hikes, we will see some sort of ceiling. Heres the thing i took from that in addition to what you are saying first of all, it was said yesterday, we made a big deal of the comment, yellen echoing it today suggests theres a little bit of does it mean that the 3 long run rate that the fed says is the long rate for the economy actually needs to come down, and thats another question that what she said begs you were right. March and june but we were both right because it was december, december, march, june. Right but heres the thing i want to tell you i dont know a lot of things but dont tell a blind man where the furniture is in his house. If he knows where anything is, he knows where that is okay so i dont know very much but i know that. Good pick you were right. Thank you lets get to bob pisani at the Stock Exchange the date and time of rate hikes aside, is today a day where despite the headlines of the rest of the media, the fed trumps trump yes yellen and oil to a lesser extent are what moved the market it wasnt her q a, it was the written testimony early on the two things that moved it, yellen implied rates may not have to rise much because we are not far from the neutral funds rate, whatever that might be, and oil, the crude inventories were down, saudi arabia cutting august shipments, that helps this all pushed bond yields down thats helped bond proxies, utilities, consumer staples. Five to one advancing to declining stocks nice even emerging markets, Interest Rate sensitive. Banks have been down throughout the day as rates have been down a little bit we will get four big banks, all four reporting on friday couple moved into positive territory. The declines are modest. Oil has been up all day, helping some of the oil companies, downn the year the dow industrials and transports at new high big names like boeing, caterpillar, black decker, 52 week highs guys, back to you. Bob, thank you. Lets bring this all become to what it means for your money joining us, michelle mier from bank of america and jeff crumpleman of Riverpoint Capital Management the fed can be this sort of big scary thing, lot of really sort of wonky questions out there i think probably, i will speak for most of the audience, their 401 k maybe at a record high. Their kids Retirement Fund or college fund, may be at a record high is the feds reduction of its Balance Sheet which is coming going to send stocks down . I dont think it will send stocks down. I think what she said today is what the market wanted to hear we at riverpoint, its what we wanted to hear we can talk about this are probably four nuanced points but the summary is, she said we are going to be gradual, we are going to take our time, be measured, be datadependent. They needed to do something because of their dual mandate, Economic Activity is solid and the employment report kind of illustrated that this last friday yet inflation is rolling over so lets take a baby step, recognize this kind of pull and tug between those two and do something but lets dont go crazy. It was very very good. Okay, the last question from the congressman was about a foot on the gas pedal obviously the fed is in their own words taking the foot off the gas pedal. Will that slow the economy enough that it will send earnings down and thus, the stock market down . I think the fed is trying to do everything they can to avoid that scenario. They are talking about normalizing policy very slowly, depending how the data reacts and how financial conditions react. If you look at the past four hikes, financial conditions have eased following the hikes rather than tightened in that respect, it seems like the market is taking it in stride and the economy is taking it in stride as well, given that financial conditions are actually easier and more supportive for growth. So jeff, to pick up on the point in the prior conversation, what do you think the terminal rate is going to be when they get done with this cycle, whatever it is so you know, that is such a hard question when you are looking out into 18, 19, 20, to make a conclusion on that we look out six to 12 months and i think the key is trend the market cares about trend, not absolutes. She said the neutral rate is going to be lower than it was historically and what that says is whatever that peak is, its going to be lower. Thats what the market will look at over the next six to 12 months and thats just a good thing for equity prices and for the economy, both. Michelle and jeff, we have to leave it there because that testimony kind of bled into the hour here. We are a little bit tight. We will have you both back on soon thank you both very much news alert in the bond market right now tenyear notes are up for auction. Rick santelli, how did it come in you know, it wasnt as good as yesterdays threeyear, thats for sure. The grade, charlie minus cminus. Do keep in mind we are adding to an auction originally putting the coupon out there in may so its the second reopening so technically, nine year, ten month securities it dropped the a cminus the yield 2. 325. That was on the high side. The one issue market was trading around 2. 32 so a little gradeoff there. 2. 45 on the bid to cover, ten auction average almost spoton we are a little bit on indirects at 64. 8. We are light on directs at 5. 7 tomorrow, of course, we will have the end of this with a dozen, 12 billion 30year bonds. For those of you paying attention to janet yellen, trying to think about what the market was doing, fed fund futures can be summarily said to have moved about half a point in january 2018 pretty much Everything Else remained unchanged. Back to you. Rick, thank you very much developing news this hour. Some movement on capitol hill on health care. Kayla tausche is there with details. Shes in washington. The Senate Majority leader may have bought two additional weeks of time announcing yesterday that they will be delaying recess, but the Health Care Bill is still expected to be on track this week, with a meeting tomorrow at Senate Majority leader Mitch Mcconnells office scheduled for 11 30 a. M. , at which all republican senators are expected to attend and the details of this newest version of the Health Care Bill are expected to be shared. Keep in mind, leader mcconnell holds these meetings almost every day when the senate is in session. They are normally held in a lunch room, not in his office specifically, but still interesting that a lot of senators are expecting to get these details after which they will be able to potentially tally the votes and see exactly where this thing stands before the week is out. Guys kayla, thank you. It has been a disappointing debut for snap and blue apron. Both stocks trading below their ipo prices, raising the question are Companies Going public too quickly. What does it mean for the state of funding we will talk about that next 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 up to 16 times faster than slow internet from the phone company. Say hello to faster downloads with internet speeds up to 250 megabits per second. Get fast internet and add phone and tv now for only 34. 90 more per month. Call today. Comcast business. Built for business. Its been eye a tough run for this years biggest ipos the question that keeps coming up, are Companies Going public too quickly. One company that has been holding off going public, uber releasing new data showing q 1 and 2 bookings are up 9 and 10 respectively lets talk about the state of funding. Ing jo ining us, Sallie Krawchek from ellevest. Thank you for coming whats your take on whats going on in the ipo markets . These were former unicorns and they are being dehorned looks like they were overvalued when they were private companies and the Public Markets are sort of working this out and figuring this out. With some of the other unicorns in just private companies in general, there are issues about diversity i heard that. I heard that why do you think there it seems there has been a Tipping Point reached since the uber engineer back in december wrote that blog and she had actually she wasnt looking to sue the company, she wasnt looking for any sort of retribution, it looked like. She was just posting her thoughts and experiences at uber why do you think this Tipping Point has been reached first of all, shes a hero because regardless of what she was looking for, to put yourself out there like that about a company like that, invites all kinds of criticism what was so interesting, everybody knew uber was hypercompetitive, hypermasculine. Not a great place. I wouldnt say for women to work, but for people to work she went public on this and it went viral the power of social media. And the one voice, the one story that changed everything. Then followed by women talking about how this is going on in the Venture Capital world itself there really does feel like a sea change here. Forgive me, how lets talk about uber specifically and the quote, bad behavior thats taken place there. How much has that delayed or the eventual ipo of that company and how many billions of dollars has it cost it well, who knows you do see the ridership is up because its a terrific service. The question is how much better it could be if it had a stable Leadership Team. They have to get that team stable before they go public heres the thing, guys Venture Capital has got such a great story around it. Its the uber, facebook, airbnb. The truth is, returns on Venture Capital investments for Institutional Investors have been meh we talk about those very Successful Companies but for companies that were not talking about the hundreds and thousands and thousands they invest and that dont do particularly well. Over the past five years, according to cambridge associates, you would have been better investing in the s p than in Venture Capital amazing because that dissuades people from investing. We should all thank Venture Capital. If it wasnt for them, we wouldnt be able to take uber because thae aey are funding ub losses its a multi billion dollar losing corporation but lets point to the other flaws of silicon valley. Products just havent worked out. Right right. How do we clean that up its high risk. Venture capital is high risk you start with a company thats an idea, a power point, and you expect it to get to a Multi Billion Dollar Company you are going to have failures for that you expect higher returns overall and you arent getting it heres the other thing last year, companies run, startups run by men were funded at a rate of 58. 2 billion by women, 1. 5 billion okay we might agree, i doubt it, guys are just better than gals. But 39 times better . 39 times better . When in fact First Round Capital has shown that their investments in companies with women in Leadership Team have performed 63 better than their companies overall, and companies with men only you have very few women being funded despite the fact that diversity, gender, background, perspective, cognitive diversity leads to better results. Silicon valley has been missing the boat lot of progress needs to be made sallie, always good to see you thank you. Sallie krawcheck, ellevest. Still ahead, Barry Dillers take on President Trump. The streaming wars, media mergers, much more thats next. One of the most interesting guys in American Business 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. So thats the idea. What do you think . Hate to play devils advocate but. I kind of feel like its a game changer. I wouldnt go that far. Are you there . Hes probably on mute. Yeah. Gary wont like it. Why . Because hes gary. phone ringing what . Keep going yeah. laughs voice on phone its not millennial enough. There are a lot of ways to say no. Thank you so much. Thank you so were doing it. Yes start saying yes to your companys best ideas. Let us help with money and knowhow, so you can get business done. American express open. Well, last week it was aspen, this week some place else nice out west. Sun valley the annual allen and Company Conference under way in sun valley, drawing tech titans, the biggest names in investing lets get to julia live at the event with barry diller, chairman of iac and chairman of expedia. Take it away thanks, tyler barry, thanks so much for joining us here on the hilltop today. Theres been a lot of conversation so far about impact that President Trump is going to have on the businesses of all the ceos here. You have been an outspoken critic of President Trump. What are the issues you are most concerned about right now . Well, he hasnt done anything, really i think hes i think its just a joke and hopefully it will be over relatively soon it inexplicably began and will end. Jared kushner and ivanka trump are on the attendee list for sun valley so i heard. Would you talk to them . I would say hello i have been friendly with them prior to, of course, the current situation. But i cant blame them for the current situation. So of course i will say hello. Are there any issues you would ask them to bring up with the president . None. What would be the point . Bringing it up to somebody who has no curiosity, doesnt listen, et cetera . Why would anybody bother well, there are various issues that will impact your company, immigration, potentially, tax reform. Do you think theres potential positive impact from tax reform . Of course there is. I think the reason the market is buoyant is because of expectations on repatriation, tax reform of one kind or the other. I think that its a little less likely i hope it happens. I have hoped it would happen during the obama administration. I have always hoped it would happen, certainly repatriation which is a true craziness in terms of competitiveness and fairness but i dont know, i think this administration will have difficulty getting anything done what about the crackdown on immigration . Obviously as chairman of expedia and iac are really in this tech space which relies a lot we have been very outspoken and interestingly, we have a Company Called trivago, very fastgoing travel company which is founded and based in germany. This morning, the chairman of that company, founded it, wrote that they are having the easiest time recruiting employees from the u. S. I have been hearing that a lot so in fact, we are going to lose talent rather than importing talent which we always need. I think i heard a million or two million jobs in the future, tech jobs, that we simply dont have the work force for. So i mean, i think, look, the immigration policies are reprehensible. Todays Net Neutrality day of action to try to draw attention to President Trumps Net Neutrality plans how will his plans to roll back Net Neutrality legislation impact your companies and eacian particular look, i think Net Neutrality is it is the current accepted way. There is no question, though, that if you roll it back, that the magic of the internet, it is a magic, press a button and you publish to the World Without anybody between you and the person you publish to. Thats a miracle that is Net Neutrality now, everybody who distributes over the internet, the big guys, of course dont like that because the way they dominated media over the last century was out of scarcity and out of denial and out of saying if you want to get on my distribution network, you have either got to pay me or i have got to own 50 of your company. So that kind of colonialism will be in great danger if theres no Net Neutrality and our company, we have ncited every company w can find to speak out, its just shocking to me that the American People would allow this miracle to be in danger. So i think everybody, i really do think with information, they are going to write to the fcc, they are going to be outraged by this, and i dont think that it will get very far. Im kind of confident that we will have Net Neutrality but im only confident to the level that just ordinary people dont recognize that their Free Communications are going to be in danger. About two years ago on cnbc you thought all tv news with the exception of local news was irrelevant that was the term you said now that trumps been attacking the tv News Business, hes going after all of the tv players with the exception irrelevant . You said local Television News was going to be the most important part of tv news. It was in 2015 no, i said its the one thing i absolutely can guarantee will survive. So whats your take on the News Business now that you have trump attacking the Television News business . I think its actually great for the News Business. I mean, whats horrible of course is this idiocy of fake news and his choosing off news people i mean, im saying the obvious any bimbo would feel this way. But actually, because of the fact you kind of got to pay a little bit of attention today and you are going to get it from all of these sources, good sources, bad sources, fair sources, unfair sources, this environment is very very good for news certainly good for investigative reporters. Do you think trumps criticism of cnn will prevent the at t time warner deal from going through . Will they have to sell off cnn i cant imagine it. Anything can actually happen but i doubt it listen, you do have, separate from trump and a few of the other crazos in the administration, you have pretty decent, smart people at work i dont think they are really going to say because that bimbo president of ours thinks that cnn is the antichrist, that its going to prevent the time warner merger. I have to ask about snapchat. Snap is trading below its ipo price. Whats your take do you think it has a chance to be a third big player next to facebook and google . I dont know about third. But i would pack it up there in the numbers. It has a big audience. People like snap snapchat so i think that theres a lot of hype i dont think that any ipo is at all relevant until three, five years after other than the people who selloff at the beginning or buy at the beginning and hold so i think time will tell. I think evan speegle, who runs it, is brilliant so hes got a good shot. Would you buy snap shares at this price i dont buy shares in publicly traded companies other than in all the ones that we own. To be continued barry diller, thanks so much for joining us really appreciate it guys, back to you. That was a fascinating interview. Couple of interesting words thrown out there as well that im sure will get picked up and parsed elsewhere coming up, bullish news for the Airlines Sector today. Its having a nice rally guess what phil lebeau got on an airplane he le psoafr iser sivinern teth hi, everybody. Im sue herera heres your cnbc news update secretary of state Rex Tillerson arriving in saudi arabia to continue his diplomacy in resolving the gulf crisis surrounding qatar. He met with the crown prince, coming just a day after his visit to qatar Russian Foreign minister Sergei Lavrov says hes surprised donald trump jr. Had been accused of interacting with the russian lawyer, Natalia Veselnitskaya. August busch iv was held overnight by police after he attempted to leave an office park in his helicopter while appearing to be intoxicated. A breath test showed he had no alcohol in his system but police say he did fail sobriety tests no charges were filed. My favorite story of the day, the vast iceberg with twice the volume of lake erie has broken off from a key floating ice shelf in antarctica. It weighs one trillion tons. A scientist says it was a natural event not caused by a manmade climate change. That is the news update at this hour back to you, melissa thank you, sue. Airlines rallying following positive news from american and united phil lebeau is here at headquarters with the details. Looks like united and ual ual and aal are up more than 3 . This comes down whotowhto e see with june numbers. Its really all the airlines, much better than expected. Lets take a look, first, when you take a look at American Airlines the company today raising its guidance in terms of what its expecting for the Second Quarter when it comes to passenger revenue, now up in the range of 5 to 6 previously it was up 3. 5 so they are raising that substantially. 2 q margins will be 13 to 14 this in addition to what we heard earlier or actually yesterday from united airlines, if passenger revenue miles up 3. 4 pe 3. 4 you want to look year over year. That was in the midsection of the guidance the Company Provided we are seeing strong guidance from all major airlines. Their demand continues to be exceptionally strong they havent had to do as much discounting on fares so the Second Quarter when you add it all together, is going to be decent actually pretty strong numbers we get the first numbers from delta tomorrow morning when they report their quarterly earnings. We are paying more, in other words. You know my thoughts on this. Yes, air fares go up in the summertime as they always do the average will be 3. 63, Something Like that according to hopper. Com they are down historically from where they were. What we are paying more for, checked bags, ancillary fees, et cetera it gets back to this chicken and egg question in the Airline Industry do you want to pay for this separately or do you want it lumped in with everything. When you look at the great business turnarounds of the last decade, decade and a half, the Auto Industry in the united states, airlines would be right up there amazing. They were coming out of bankruptcy so they could get a lot of debt off the books. They got all the organized labor unions to agree to contracts that worked for them they are seeing increased costs now. Its not going to kill them but they are seeing increased costs. The other factor behind this is that the consolidation of the airline allowed them to get some Pricing Power when it comes to things like ancillary revenue. They are taking advantage of that for a long time i would hear people say its not fair, they are making a profit. Do you want airlines to make a profit or to be in bankruptcy all the time phil, thanks. Fed chair Janet Yellens term is up next year and there are doubts she will receive a second term. Members of the House Financial Services committee asked her about that in her testimony today. I absolutely intend to serve out my term. Im very focused on trying to achieve our congressionally mandated objectives and i really havent had to give further thought at this point to this question ms. Yellen focuses on her current job while President Trump may be planning her exit ben white, chief economic correspondent at politico who says gary cohn is a top candidate to replace yellen. Is she out of the running . What are the odds she gets reappointed . Very very small shes not completely out of the running. If you remember during the Campaign Trump was very critical of her often since then he said a couple nice things if you talk to people in the white house, at treasury, on capitol hill, they put the odds at 5 to 0 . Republicans want a republican or somebody more conservative on rates, somebody who is not yellen i think it would be very unlikely he would nominate her for another term back it up, because i have talked to people that are close to cohn as well, maybe you heard the same thing, hes not happy in his current role. He wants a bigger role whether that is chief of staff, which is currently occupied by Reince Priebus you read my story i talked to people as well. Do you think if he dont gesnt bigger job, he will leave. Its possible chief of staff is a consideration, the job he might like to have in the white house. Problem is, a lot of people in the white house dont want him to have that job, who think hes a democrat, globalist, all that stuff. He would escape all the white house wars between the nationalists and globalists by going to the fed its sort of dependent on whether he can get tax reform done if they can get a package out of the white house sent to congress by later this year and its in the legislative process, he would see himself clear to maybe make a move. The fed, tough job to turn down. In congress, do you think being from Goldman Sachs will be an asset or liability . It will be a liability among some democrats, certainly. But hes got good relationships with a lot of democrats on the Senate Banking committee, like sherrod brown, traditionally hes antiwall street. The elizabeth warrens will criticize him, others will criticize him over the Goldman Sachs ties that stuff, doesnt have the resonance it once did. Republicans are in control they will get most republican votes, couple democrats. He wants the job, is it his i believe it is at this point, the president likes him, the president s family likes him that matters a lot in this white house. Treasury secretary mnuchin likes him. Those are the two people deciding who gets recommended to trump. Mnuchin and cohn he could recommend him himself loong chan lock and change. People rise and fall in this white house. If hes on the outs six months from now, no as of today, if trump had to make a recommendation, it would be him thank you, ben white. The hyper loop is one step closer to reality. We will talk to the ceo ahead. At fidelity, trades are now just 4. 95. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. Yesterday, we unveiled the top states for American Business along with the rankings for all 50 states and today we take a closer look at one area where some states seem to be managing better than others and that is the skills gap scott cohn is in seattle in the winning state with more. Reporter were finally able to show you where we are yesterday we unveiled washington as americas top state for business in the shadow of mt. Rainier, its a beautiful stopot. One of the reasons that washington won is because of workforce. We have almost a full workforce. 1. 7 Million People unemployed for six months is called the skills gap so who delivers in the top five states in our workforce category begin with texas texas Unemployment Rate has risen a bit. Its above the average and that helps with the availability of a Skilled Labor pool and then virginia, georgia, colorado and washington with a great pool of hightech skilled workers. Whos at the bottom . Mississippi, kentucky, hawaii, West Virginia and maine. When you get to the bottom states, sometimes thats where innovation is. In the state of mississippi, theyve done something called mississippi life cracks, a database of every outcome of all levels of education, all in one place so that policy makers can make sure that they are matching skills with workers. There are National Efforts about this as well something called the workforce innovation and opportunity act that was passed overwhelmingly with bipartisan support back in 2014 to overhaul the job training programs. President trump wants to expand apprenticeship but theres disagreement of who is to pay for it scott, as always, great stuff. Congratulations to washington state. Im sure well see you again, scott. Take care. Coming up, its street talk. Melissa and i are back together once again were back right after this. 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 782 on home and auto insurance. Call for a free quote today. Liberty stands with you™ Liberty Mutual insurance. When this guy got a flat tire in the middle of the night. So he got home safe. Yeah, my dad says our insurance doesnt have that. What . . With Liberty Mutuals 24hour roadside assistance, get a jump, tow, and more any time of day. Switch and you could save 782 on home and auto insurance. Call for a free quote today. You can leave worry behind when liberty stands with you™. Liberty stands with you™. Liberty mutual insurance. Time now for street talk. We kick it off with Credit Suisse dean foods is well below consensus. It is sticking with the underperformed rating. Analysts are worried about private label and believe u. S. Gro grocers and private label 67 of milk volume. 50 of dean sales. That stock is down more than 4 on this. Whats amazing, as ive said before, all of the battles across the business spectrum, grocery is becoming the most interesting. Really interesting all right. Stock number two, a short sell idea virtu financial. Sell from a neutral. Its a new analyst on the stock. He clearly sees things differently than the old analyst. He thinks virtu has peak penetration. Pressure over the dividend, dropped the target to 16 from 17 not a lot of downside but, still, a sell slapped on what was once kind of a fad stock, i guess is maybe the right word. Next up, nvidia to a buy from a hold raising the price target to 1. 27 from 1. 44. Business and gaming and automotive look strong the analyst says nvidia has a scarcity factor. Few Semiconductor Companies have what nvidia has. All right Pdf Solutions works with flat Panel Display companies. It sells to the semiconductor company. Upgraded to a buy from a hold. Increased confidence in management expectations for recovery and revenue on a leading product because it suggests a leading taiwanese customer may consider using it on a larger scale. Bumps the target from 22 to 20 a lot of upside for pdf. Brian, thank you very much. From the stadium to the virtual arena, two big name sports owners are getting into the sports business. Robert kraft and jeff wilpon join us live ahead plus, more news from the fed on the state of the u. S. Economy. The beige book is out in a few minutes. Power lunch returns in two we. Times up, insufficient prenatal care. And administrative paperwork. Your days of drowning people are numbered. Same goes for you, budget overruns. And rising costs, wipe that smile off your face. Were coming for you, too. For those who wont rest until the world is healthier, neither will we. Optum. How well gets done. Welcome back to power lunch. The Federal Reserve has just released its beige book and it shows that all but one of the Federal Reserve 12 districts experienced modest to moderate economic growth. The one holdout is philadelphia, which experienced only slight economic growth. It blamed declining in Consumer Spending, auto sales and real estate for that slower growth. The labor market tightened in both districts both for lowskilled and highskilled workers and many firms say thats driving some wage growth. However, it is not enough yet for the fed to reach the 2 inflation target prices are rising modestly across most districts. Several districts also highlighted uncertainty around fiscal policy, both at the state and National Level boston said the drama over the Health Care Bill resulted in da dampening of activity in that sector San Francisco saying that immigration policy was slowing International Bookings in Southern California and chicago saying that a Construction Company in illinois had been forced to lay off employees and stop work on some projects because of that states budget crisis now, one industry that is seeing growth, two districts are reporting strong hiring in cybersecurity. Back over to you guys. Were joined by Steve Liesman and bob pisani steve, we have you on double duty today with the exception of philadelphia, would you say the fair read is that the economy remains pretty good . It sounds like a 2 beige book with decent, moderate job growth. The whole thing was beige. Beige is that the connotation you want to give not at all. Lets stick with beige. Appreciate the fashion advice what you have in a situation when none of the policies that were promised got anywhere close to being legislated, except for maybe health care, well see about that, but not the tax reforms and what you have is the negative side of the uncertainty, which is probably the biggest drag on the economy right now given that some of the old drags, like global uncertainty, global Recession Risk are the things that had been dragging down the economy before. How are consumers feeling they are feeling pretty good and we should see better from them we had a lackluster first quarter. We had modest wage growth but why do you say we should see more from them because retail sale wasnt that great . We havent had Consumer Spending commensurate with the other good numbers. Again, i kind of disagree only in the sense that the Housing Market the Housing Market has been so good that people are buying these really big ticket things and not going you have these either or. If youre going to buy a home, tough save 20, 30,000 bucks. Youre not going to macys because youre saving for a home. We have a wealth effect from the stock market not all consumers but certainly the wealthiest consumers and we also have high job numbers, the strong job growth. More money in your pocket should get people out there spending so it should be helpful lets get to bob pisani were close to session highs right now on the nasdaq and dow already had an intraday high it seems like the old mantra of, youve got to look for growth in the market for technology or dividend looking stocks, thats back on . Yes you can see technology is leading again and its interesting, were going into earning season again tomorrow and thats the big growth sector the two sectors were expecting significant Revenue Growth is in technology and in financials. Were expecting outside growth from Energy Stocks again, thats a very small sector so thats really whats been powering the markets the fact that earnings come out of the earnings recession. We saw it ended in the Second Quarter of last year weve now had three going into fourth quarters of straight Earnings Growth and probably have s p up 10 for the Second Quarter year over year those are very big numbers and for this beige book, i see nothing that is any different. Labor markets heightened, prices rising and its important that the markets not move on any q a from yellen but when she said they wouldnt have to rise to get to a neutral policy. Thats why were up 130 points here because that says were not going to see much in the way of rate hikes that are very aggressive for a while harper said that yesterday its not clear whether well get any kind of rate hike, even in december right now thats why were at new highs. Low glide path and very strong Earnings Growth. Back to you. Bob, how much concern is there about margin down there . Ive been talking to a bunch of guys who say, you know what, if these raises rise, you have corporate Profit Margins as a percentage at or near alltime highs. The only trajectory here is down and that could be a real road block for the market yeah. 10 . Margins have been about 10 for a long time now. And weve been pushing up against that wall. I dont know how much further we can get it up right now. What weve seen is overall well have a Second Quarter for earnings its not just been buybacks but actual Revenue Growth occurring and thats why the actual number, the dollar value of the earnings have been increasing. But as you know, steve, you can get an increase in the dollar value of the earnings and not necessarily have the margins go up if other costs go up. If you keep costs low and keep inflation down, you can do it. The problem is wage growth thats the big issue. Guys, thanks. Bob and steve. Fbi director nominee Christopher Wray Senate Hearing is happening today eamon javers is watching all of that for us. Eamon . Reporter yes, melissa. Wray was asked at one point what he would do if the president asked him to do something that was illegal or unethical heres what he said. First, i would try to talk him out of it and if that failed, i would resign there isnt a person on this planet whose lobbying or influence could convince me to just drop or abandon a properly predicated and meritorious investigation. Reporter the president has been tweeting today as well. He said, my son donald did a good job last night. He was open, transparent and innocent this is the greatest witchhunt in political history. But his own nominee for fbi director didnt exactly agree with that Technology Using the phrase witchhunt. He was asked about it and heres what he said on the hill. Im asking you, as the future fbi director, do you consider this endeavor a witchhunt i do not consider director mueller to be on a witchhunt. Reporter so a bit of an endorsement from wriChristopher Wray of director muellers investigation. They seem ready to vote for him. Well see what the final vote tally comes down a possible bipartisanship coming up there on capitol hill back to you. Eamon, im glad to hear they have leaf blowers on the north lawn as well yes just like my backyard. When donald trump jr. Met with Natalia Veselnitskaya, the carrot for the meeting was a prospect of dirt on Hillary Clinton. All the lawyer wanted to talk about, so says trump, was the magnitsky act. So what is that . It became law in 2012 and is intended to punish russian officials who violated human rights the law exists largely because of Hedge Fund Manager bill browder. The law is named from mr. Browders now deceased russian tax lawyer Sergei Magnitsky. He uncovered fraud and organized crime. He said they seized tax documents to file a fraudulent return that brought the profiteers 230 million. Later that year, magnitsky was arrested and spent more than a year in prison and died after being beaten to death by the officers of the interior ministry of russia and a Popular Program for americans to adopt russian children was banned. Great to have you here, browder. Do you know of Natalia Veselnitskaya and have you ever had any dealings with her . I know her well and ive dealt with her as an adversary for three years. Natalia veselnitskaya represents the family of a russian Government Official the son of a russian Government Official who was accused by the department of justice for Money Laundering having allegedly received millions of dollars from the crime that Sergei Magnitsky uncovered going into new york she showed up as a lawyer. I was a witness for the government and got to deal with her for over three years, know her well. What do you think of her . Well, what i know of her is that she is on a mission shes been on a mission to undo the magnitsky act. She wants to get the u. S. Government to repeal this piece of sanctions legislation so that human rights abusers, tortures and murderers from russia no longer face any consequences. Finish your thought im sorry. She went to washington with huge resources, huge money to hire lobbyists to try to get that done. Do you believe, as she has claimed, that in her meeting with mr. Trump and two other members of the trump campaign, mr. Kushner and mr. Manafort, that she was acting, as she has said, completely on her own or and was not in any way acting as an agent of or carrying the water of mr. Putin and the kremlin . Well, i dont believe a word that she says. Lets look at the situation. She is the family lawyer for the katsi family, the pat tree yark of that family is high Government Official who at one time was the vice governor of the moscow region, which is bigger than france hes an intimate member of the putin regime she works directly for him i dont believe anything that she says as far as not representing the russian government. I guess, bill, my question this is brian now and ill ask you to opine, i understand everything youre saying you and i have spoke a lot what would she have to gain from talking to a then candidate with an albeit long shot chances son. What could donald trump jr. Do about the magnitsky act . Well, probably not a lot. But what you have to understand is that this was just one of many meetings that she had so she was on a mission and she was meeting with everybody she was all over the u. S. Congress she was at various congressional hearings she was meeting with anybody who had any power who might be able to achieve the objectives that she had which was repealing this act. And what you just said is an extremely important point. It sounds like a bit of a fishing expedition for anybody with power so we could assume that miss veselnitskaya met with other people, potentially other candidates i suspect that she probably made 12 attempts to get into the trump camp and got there through one of them and i suspect she made a similar attempt on the clinton camp and various other people i dont think that this was a specially targeted exercise towards trump. She had an agenda, an agenda coming from the top of the russian government to get rid of this law that putin hates so much and she was using every tool she had and spending an unlimited budget to do that. And including the dangling of the possible dirt on Hillary Clinton to lure donald trump jr. Into this meeting. Two points as we conclude here do you continue to do any business or investing in russia, thats number one. And number two, you asked us not to disclose your whereabouts today. And why . And do you feel threatened or imperiled . Ive been on a campaign for seven years to get justice for Sergei Magnitsky and ive got a sanctions legislation passed in the united states, in great britain, estonia, soon to be canada, against human rights violators. They are very, very angry with me my life has been threatened on a number of occasions and i am living perilously life because of that. Coming to the next question which follows from that. Should you invest in russia . I was the largest foreign investor in that country and now they want to kill me you dont just risk losing money investing over there you risk your life its completely, absolutely uninvestable and nobody should get involved in that country. On that note, mr. Browder, well leave it there appreciate it. Heres what is coming up on power lunch. Two big interviews first, the men taking elon musks hyperloop dream into a reality. Plus, the owners of the new England Patriots and new york mets buying esports robert kraft and jeff wilpon will be here next on power lunch. The future isnt silver suits and houses on mars, its right now. Think about it. We can push buttons and make cars appear out of thin air. Find love anywhere. Hes cute. And buy things from, well, everywhere. How . Because our phones have evolved. So isnt it time our networks did too . Introducing americas largest, most reliable 4g lte combined with the most wifi hotspots. Its a new kind of network. Xfinity mobile. Hyperloop completed the first fullscale test in a vacuum environment this is becoming a true reality. Joining us now is the cofounder of hyperloop and our own phil lebeau joins us as well. Pleasure to have you here. Explain what got accomplished here, in plain english. Today we announced that Hyperloop One has successfully done our first kitty hawk test thats showing the world that hyperloop works. We built it in record time, in 2 1 2 years we started the company together and a team of almost 300 people have made history and shown that the system at full scale works with propulsion and full vacuum, like were inventing our own sky in the tube flying at almost 200 feet is the effect of that were pretty excited about that. We unveiled our pod, xp1 and weve shown that today. Josh, give us parameters. People will hear the hyperloop and think that you had this sled going up to 700 miles an hour today. This was a much more truncated limited test today, right . And what gives you the confidence to say what we saw today tells us that we can do this up to 700 miles an hour. We have a 500meter long tube with 300 propulsion. It got up to 70 miles an hour but its really the first phase of a long period of testing and we had the control system, vacuum system, propulsion, all of those verified and worked at the lower speeds and thats half the battle building out a longer length is all we have plans for in the future. We cant get a bridge built in this area you cant fix 150yearold train line i love what you guys are doing i hope it works. How do we get it done in this kind of environment where nobody wants to spend any money and theres a million regulations . Well, Hyperloop One is working closely with governments around the world you cant build a hyperloop without the support of governments and there are supports to do the right of ways and weve been acknowledging that and working closely with governments and we should have some announcements in the future where we hope to build and break ground on the first hyperloops in the world. Who provides the propulsion we take power from the grids, wi wind, solar, you name it and then a motor inside of a tesla and cut it at the seam and unroll it, thats what is inside theres no wheels grinding on steel. Its contact and full electric p propulsion. This is a limited size tube at this test phase how do you create and keep up that vacuum and the speed within a longer length of tube as this grows more and more or when youre going in between cities, for instance we had a target for a pressure inside the tube and achieved a lot lower than we expected and it was with very little sealing technology and making it very pretty and nice its much more able to deal with the longer distances than we anticipated. So show me what your gut says when its first likely built are we talking about europe . A port to another area in land how long do you expect that first area to be thats a great question our goal is to have an operational hyperloop that weve built somewhere in the world by 2021 and whether thats the cargo or people solution, which we were building both, we will see. But most likely it will be somewhere abroad and we would love to build it in america. Why not whats wrong have any humans ridden on this or is it a test without people without people. What would it feel like, a roller coaster where it gets launch or an airplane where you dont feel like the sensation . Why would we not buy repeat customers is thegoal for us wed like to stay alive. Safest, fastest. Will this displace trucks and trains complementary okay. Even in a world of autonomous vehicles, youre going to care how long it takes for you to get long distances so this would be able to take you there faster. Thank you, all, and our own phil lebeau. The annual sun valley conference is under way which is where we find Julia Boorstin with some guests who announced big news about a new Video Game League julia . Reporter that is absolutely right, tyler im joined by bobby kodick, robert kraft as well as jeff wilpon, the cofounder of sterling vc in the Sports Entertainment space and ceo of the new york mets. Thank you for joining us here today. You two are two of the seven new team owners for the activision game overwatch a big move for esports and for activision to create this new league well, when we created overwatch at blizzard, it was always with the expectation that wed be able to celebrate, recognize our sprayers in a way that would be consistent with traditional sports and so the only way you really could accomplish that would be to have the very best traditional sports team owners participate in ownership in the league along with all of these great entrepreneurs from esports and thats what weve done. Robert, you reportedly paid about 20 million for the rights to attain thats what the team rights are going for, as i understand it. What is the longterm potential of creating a team in boston well, we looked at we try to think long term with everything we do and weve seen that there are 30 Million People already involved with overwatch and we hear that 60,000 people in korea go in to a stadium and watch two people play and see in the nfl that the millennials are consuming things differently through their mobile device and not watching sports the way we did. So we wanted to go with the best and try to participate in what is happening in this feel. But do you think this is a potential of being in boston like the way you have the pats play there we do and its a way to connect globally we think the nfl is the best Sports Entertainment product but its basically in the u. S. , mexico, canada, england. But heres something that has a global appeal and we think we have some business skills just like i know jeffs organization does, where we can take that and take advantage of that to get a global audience. Jeff, coming from the new york mets, why did it make sense for you to move into esports . We have been looking at it for a while and we sort of skirted around it, looked at a couple of teams, made a couple of investments and some companies that work within esports but never had the real opportunity to buy a team like this and knowing bobby as i do and knowing how committed activision is, it made sense to come in and obviously with people like the krafts of vo involved, it gave a good feeling. Whats interesting to me as an outsider, each of the games is like a different sport. Why did you choose to go with overwatch as opposed to one of the other teams out there . I think basically because of the structure that bobby put together with his team, theres going to be a sharing of revenues from the Central Point which we dont have in baseball as much. Some of the other sports do. I thought that was a great model, to be able to really grow this and, you know, in five, ten years, the franchise value should be quite a bit more than they are today. Bobby, this is the first time esports teams has been done on a city by city basis we thought the most important thing in celebrating our players was getting local recognition and developing what fans have with their local markets, its never been done on a global basis. The idea that shanghai and seoul can play boston and new york, thats never been done before. There are National Competitions in soccer. This is the first time where youve had global competition, citybased pairs where you have the local level of enthusiasm. That was really important for building and growing overwatch as a league. If youve officially sold seven teams, how many teams will there be total. We havent announced the total but today were focused on the first seven and two of the best owners that we possibly could attract and what weve been able to do is build an enormous amount of demand and interest in every city that weve been participating in the process through and today is a really extraordinary opportunity. It will give us an ability to recognize the over 30 million overwatch players for the commitment that they make to the game. Robert, theres been so much attention to declining nfl ratings in the regular season. Stories just this week about big advertisers like cialis and viagra pulling their ads from the nfl. How much of this comes from the concern about the traditional sport of the nfl and its future on television . Well, our family is involved in many businesses and we try to go with things where the future is bright and people might say, why did you go with Activision Blizzard and its really because of bobbys leadership. We both know were making a big commitment financially and there will be some rough times but i believe this is the future of sport in many ways and its something two, three years ago i could never relate to. But being around young people and seeing how they play this game for hours and theyve got to be physically fit, its a whole new world out there. I think part of it is the iphones and ipads and the kind of world that creates, facebook having the impact that that has. So we have to go with the changes in the world and were we have an infrastructure and i know jeff has the same where we can do marketing, sponsorship, we have a great Analytics Department that can work on this. So if we get good quality product, were going to be fine. Knowing that he committed and has spent close to 500 billion, were going to have an advantage on this. What do you think about the way kids are watching sports in different ways now and how does that change your perspective on the nfl . Do you want to see changes for people like that we have made an adjustment, since shes the controlling shareholder, one of the networks were going to have fewer ads and our Television Department has worked with that when you have something great, you have to constantly adapt and change and i really believe the nfl has done that very well. Why dont you watch what the ratings are this year and i and what my big dream is that this man can help us get this product in 10, 15, 20 years to start to rival our sports. So you think nfl ratings will be up this fall and then in ten years, esports will be as big as the nfl . I didnt say that if the nfl is 97 years old, weve learned a lot. I think this is a growth area. Look at a company like facebook 20 years ago look where they are. Esports can have the same Dynamic Growth and we want to play on it. How does what youre seeing with Major League Baseball and how were starting to see sort of more streaming of games on facebook, how has that changed your perspective on what you want to see traditional sports do right now i think we all want to connect with millennials and talking to a bunch of our advertisers while we were doing due diligence, we would love to get into it. We just dont know the right way. This will allow us to bring traditional advertisers over to esports thank you so much for joining us and back over to you. Julia, thank you. Why has it been so hard for nearly everybody to figure out where the price of oil is heading . Were going to ask Goldman Sachs jeff cryur, next, when power lunch resumes hi sha, everybody. Im sue herera Turkish Police killing five isis militants. They launched the operation because they believe the militant cell was planning an attack four Police Officers were slightly wounded civilians in mosul have called on that government to ensure that the city is fully rebuilt and kept safe following the iraqi armys victory over isis despite scenes of celebration, those living in the city have expressed anxiety over what the government will do to ensure the city remains secure a federal judge sentencing David Wildstein to three years probation and 500 hours of Community Service along with a ban on working in government this, after prosecutors recommended wildstein not serve jail time in return for his cooperation. And maybe you saw this during the hearings today on cnbc, an unidentified Person Holding up a sign saying buy bitcoin. And, of course, as a result, bitcoin hit session highs. It was trading 3. 5 higher thats the news update at this hour melissa, back to you that just tells you a whole lot about bitcoin. Yes, it does. It tells you all you need to know. Thanks. Sure. 85 minutes, is that right, left in todays trading day . Time goes by fast when youre having fun stocks hitting an intraday high and strong gains for the nasdaq which is up by 64 points or more than a percent and our big gainer unveiling plans to raise access as much as 4 billion and pay off debt the oil market is closing for the day. Lets go to Jackie Deangelis at the commodity desk melissa, after the department of Energy Report came out, we still finished in the green. The drawdown of 8 Million Barrels was in line with expectations but included in that report was demand from the fourth of july holiday and u. S. Production growing by 25,000 barrels a day. Wrong way to have this rebalance going. Meantime, speaking of output growth, we found out in the opec report that saudi arabia, iraq, iran, all boosted output as well a 1 bounce holding the 45 mark but not much room for strength here reports out that the opec governors meet next month in vienna the ministers wont be there probably no headlines but well be watching. Back to you. Jackie, thank you. Well, being an allprice predictor has been about as easy as surviving a barrel ride over Niagara Falls. Jeff curry is holding on longer term hes a downticket in the near term but a recovery of 55 by years end jeff curry is joining us now jeff, welcome. We were definitely one of those washed over the Niagara Falls in the last quarter. Okay. And i appreciate that. But you and everybody else. Uhhuh. What has been so hard what has been so difficult to predict . Why . Well, there was two things that were unpredictable. One was the return of libya and nigeria. The second was weather did not support the demand for natural gas. Just in general, weather was not supporting but those were the two things unpredictable. We did anticipate the shale response the part unanticipated was the velocity of that response. And what did we learn from this . What is new . Whats the new pair diradigm, y asked any trader and they did not trade next years crop why . Because at that point, if they made up the price of corn, all of the farmers will plant less soy be soybeans and more corn why would they trade the near term crop . Us ba t because the producer and consumer cannot do anything about it once the seeds are in the ground six to six months is the lifecycle for hale. But now the prices are back down yet drilling activity continues to rise. Primarily, as i understand it, apart from your research, based on private equity money, which is funding new drills. At what point do these lower prices reduce the amount of new drilling which then might lead to higher prices thats why we titled our last piece still in search of an equilibrium. We dont know where those are. We thought they were in the 50 to 55 range. And we saw the rate count tick up which gave us breakevens in the 50 to 55 range on the way down, the 43, 44, it was kind of mixed. We did see a down tick in the rigs at the end of june but saw an uptick last month im not going to be so as definitive as you are. We dont know. Which is why we would point to it being uncertain. Why set a longer term price target if it seems like were in this cycle where, you know what, prices tick higher, shale production goes up and were in this repeating cycle our longer term price is 50 a barrel i think the key point, that brian pointed out, theres not too much oil in this market. Theres too much money in this market the headline coming out was riverstones group. Focused on energy. 2 billion barrel find in mexico that just shows you that that money is at work in finding oil. So the question i think you have to ask longer run is when does this market rebalance . We havent seen a consolidation period yet because that will recapitalize the market and lower costs further. When you think about lower for longer, i think its very much in play. So lower for longer you have money chasing the product and a lot of competitors who want to get in and sell oil, obviously. What are the odds that oil really crashes it doesnt just go from the mid40s down to the low 40s but, boom, falls off. Unfortunately, i would love to see that but i would argue that its very low the reason why is, lets go back to why did we crash in late 2 5 2015 because we reached Storage Capacity weve built so many inventories. You had to bring supply down in line with demand immediately unfortunately, we have continued to add Storage Capacity. If you drain the spr, you end up with more Storage Capacity you look at the ability to roll the storage over unfortunately, this market is looking like aluminum. If you take aluminum and stack it in a field, its easy to do they will build aluminum for years. The ability for this market to roll over inventory is quite high that means that youre probably stuck in a relatively tight it sounds like you have a dull market. The dull market i think its a really important implication in this. If you have low ball and razor thin margins, which is what this market does, what does this suggest . You have the credit market and its trading up here and the equity market is trading down here relative to the oil price what does that tell them issue more debt and increase back in line with the oil price. Were in a different environment and a client pointed this out to me youve been talking about a competitive market as being the core of the new oil order and it means razor thin margins, low volatility and its actually an ideal market for recapitalization. Isnt that the way that oil has been, bias from the last six or seven years where oil spiked and then crashed it was fairly calm for 40 years. And the other question is, given how hard it is to make money, is Goldman Sachs going to stay committed to the commodities business the answer is absolutely yes. But in terms of the historical norm of oil historical norm of oil, i would argue that the volatility of the 80s and 90s was far greater than the 2000s. From 10 to 15 the volatility in 2015, in terms of the bust of the cycle, happened in part because the sector was too levered up and yet youre saying were back into that phase where were going to lever back up do you think the banks will do that it caused all kinds of Balance Sheet concerns not just banks here but also in europe do you think they will extend that credit in order to get these companies to lever up . If you just look at where current prices are, you know, high yields running around 7 , thats pretty attractive to a Company Relative to getting up the cost of capital around 10 or 11 . In other words, the spreads are too tight. Why are they too tight because its the existence of the etfs or not enough supply out there. The other way to come back in line is the demand collapses and thats the other argument to make. And that would be a bigger issue. Bigger issue. Jeff curry, Goldman Sachs, appreciate it. See you. Stocks solidly higher. All 11 sectors of the s p are higher tech is leading the way. Where we go from here next in trading nation. Trading knowled thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. On a day with a record high for some of the stock indexes, like the dow, lets talk stocks on trading nation. Craig, you have been optimistic. You have been correct. Do you see more gains for the u. S. Equity market from here im going to ask that question until we dont get them. Brian, the answer is absolutely yes we have a price objective of 6 higher i think theres a lot of strategists out there that will have to bring up their numbers for the years because the market is trading above those levels at this point in time when i look at this market, i hear so many people say that its a market that is expensive and we need to have a price correction you can have a correction in one of two ways, price or time if you look at the chart that i brought in today, you can see the two time corrections and weve broken out the correction at new highs and i think were setting ourselves up for further highs from here and the market has brought itself time and were going to value it off of 2018, the numbers here in the next month or so more upside to come, brian, and we still remain bullish and optimistic. Are you bullish and optimistic, boris . So tomorrow is going to be about 100 degrees in new york, which if youre a contrarian investor, its a great time to buy a mink coat. With that in mind, its probably wise for investors to buy some very out of the money puts not because i think something immediately is going to happen but i do think that the time correction that greg talks about is also going to be complimented with a price correction. I think theres about 1500 points of correction in the dow here because everybody is so complacent and confident, nothing but going up at this point, that i think buy at this point is a very intelligent insurance policy even if im wrong, i think it would be money worth spent. And they dont cost a lot right now, right youre not spending a ton of money to get insurance that someone is going to spill spilln your mink coat this is probably a good time. Its always winter in minneapolis, boras and craig, thank you very much. Appreciate it, guys. All right. For more head to our website at tradingnation cnbc. Com. What amounts to taemp rare museum in manhattan. Our robert frank is there, hi robert hey, tyler, im wearing gloves you know were going to handle multimillion dollar watches. Were going to show you this, the most complicated wristwatch that was ever made were going to tell you what it costs and how you have to apply to guy thats coming up on power lunch. And now your trading nation stats of the day and a word from our sponsor. In a losing trade, avoid letting your emotions get the best of you. Too often traders want to add to a losing position, but experienced traders will say your first loss is your best loss in other words, take a sllma loss and move on before it becomes too big. It could be the worlds most expensive popup shop renting space in midtown manhattan to show off millions of dollars worth of watches and robert frank would be there for us, robert hey, tyler. Well this is the latest weapon in the luxury watch wars renting out of the chips for an entire month to build a popup museum called the art of watches. This took only two weeks to build, but its two stories, cost millions of dollars and our cameras were the only ones allowed inside from the beginning to the end here. Its going to run through the 13th, from the 13th of july to the 23rd now the idea here is that swiss watch sales have really struggled lately with slowing demand in asia as well as those pesky millennials that just really havent taken to mechanical watches like previous generations because of their digital phones and their smart watches. What theyre hoping to do with this museum is to really educate people on what it takes to make a watch. Theyve got some incredible historical pieces, theyve got jfks desk clock which was protective they have the caliber 89 which is one of the holy grails of the watch world. The most complicated watch for over 20 years, and theres nothing really for sale here, but there are a couple pieces that you can buy im going to show you one of my favorites. This is the reference 6300 its the most complicated wristwatch that theyve ever made its a reversible, so you can wear it with a black face or the white face, 2. 2 million, now this is one of their famous chime watches. Im going to hold it up to my microphone to see if you can hear that. Thats ts sountd of money right there, 2. 2 million. You have to apply to buy that. Not just anyone can buy it you have to be educated and a connoisseur of watches now the entry level, they Just Launched this watch today, its a stainless steel, this is only 20,000, this is the only. Im hoping to make away from the elite gloves that i got today. These are nice, that way i can say thats the only thing lots of crowds coming here. This is really ive never seen anything like this in the even in the luxury watch world sort of longterm plan to get this brand in the u. S. Which is their largest market now and to grow it among young people i like watches a lot, robert. What makes that one that you described as the most complicated watch. Apart from the fact that you can flip the face. What makes it so complicated and why would you want complexity well, we in life, complexity is usually bad, in watches, its good its very expensive. This has the moon face, its got all kinds of calendar functions, its got the leap year function which means theres a dial in there that accounts for leap year they showed us a watch that caliber 89 that has the leap century. So once every 400 years, it accounts for that time change. Thats a very optimistic watch , we talked about the hyperloop and whether that could be the future of transportation. Tomorrow, youre going show us something that you think could be, right . We have to write it today, its called the three wheel, electric car took some of our producers here for a spin it was pretty fun. Do you really think its i think of a golf cart okay. Tomorrow it looks like a golf cart. Bring it. Tomorrow, the ceo will be here bring it. Ill tell him that thanks for watching power lunch. Closing bell starts right now. Hi everybody, welcome to the closing bell, im kelly evans at the new york Stock Exchange. And welcome from me as well, im bill griffin it is in high territory right now with the rally weve seen today. Its the transports stealing the spotlight once again Airline Stocks helping to power that index higher, even though oil is also higher today but we have a debate on whether airlines have flown too far too fast. Theyve put up some good numbers and the stocks are rallying nicely. And the always outspoken iac sounding off o