Transcripts For CNBC Power Lunch 20240714 : comparemela.com

Welcome, everybody, to the aforementioned power lunch. Im Tyler Mathisen all three major averages are on pace for a second consecutive day of declines. Havent seen that in a while the dow down triple digits at this hour. Down 141 points. 175 points at its low earlier today. Now, boeing and apple account for roughly half of those losses that you see right there the russell 2000 and dow transports have both been slipping back into correction territory. Kelly. Thanks. Stocks are lower again today as apple drags down tech and the fed looms large. Bob pisani has more at the New York Stock Exchange. Hello, kelly. Downgrades are dominating trading today. Tech, including semiconductors are down the leadership board pretty narrow energy is up on oil strength the rest of the leaders are largely defensive like real estate and consumer staples. Retailers, though, doing well. Under armour, nike, and gap helping Consumer Discretionary elsewhere, no big news on the fed or trade today those are the two things that moved trading today, usually, but most of the talk today was dominated by Morgan Stanley downgrading Global Equities to underweight, saying earnings expectations are too high and theres a risk corporations may lower guidance in the second half of the year the key for the markets, jay powells congressional testimony later in the week. The dilemma is the market wants a rate cut, but its not clear theres an argent need for them. A lot of debate on what earnings wim look like beginning next week with jpmorgan back to you. Bob, thanks as bob mentioned, the markets will be closely watching fed chair powells testimony for any hints about what the fed will do later this month Steve Liesman is watching the will they wont they scenario. Yeah, in two days of testimony this week, Jerome Powell has a choice, to affirm the markets deeply seated belief in a rate cult or push back he faces the risk of a short market selloff and more criticism from the president who has raised the prospect of firing powell if he doesnt cut rates. One, trade is still a negative, despite the g20 inflation remains below target, and Global Growth remains weak and that threatens to weaken the u. S. Economy job cuts remain priced in. There you go, looking at the 50 or higher average for the rate in the fed funds theres one cut. I probably should round up to make it easier why do i go out to the 100th decimal . Thats just me being me. I apologize to viewers. 2. 4, down to 2. 13. Thats right or 2. 2 whatever it is 1. 9 would be september somewhere in there is the second cut with the debate about the third cut. But the strong jobs report friday complicated the decision. Its anything but text book Monetary Policy for the fed to cut rates at near record low aunemployment amid the longest post market expansion. Its going to tell the market its right earnings happen between now and the fed meeting. Do you think that will play a role if Companies Come out in their Conference Calls and this is sort of a rewind to the fall of last year where we tenored this hiking cycle and powell was firmly convicted in where he was, and the markets dictated or massaged the direction in which powell and company went through their Conference Calls and the warnings we got over warnings season i would say earnings could affect the fed in the following way if earnings disappoint and the market falls, thats where you get a greater huen cry for more rate cuts i dont kneif that will have a big effect one thing i dont think youll hear is companies complaining about high Interest Rates. Its weird that would be the feds response to it though that said, one of the big concerns about the economy right now is capital spending. And the strange thing about that is theyre concerned about spending capital, much more closely linked to the trade war than it is anything else outs there, certainly more than it is any suggestion that rates are too high in the market that seems to be the way the fed is going to react to all of it, too. The worse the trade situation is, the more they might. Thats a smart comment and one thats hard to put into place, but the fed has to take whats going on across the street at the white house and in congress as a given. It doesnt have a choice it doesnt have a say. And one of the things that will be just for sport, for a guy thats had to listen to every comment of every fed chair over 20 years is watch fed chairman jay powell dance around the question of are the tariffs good, are the tariffs bad . To him, theyre just there, and he has to deal with it all right, steve, thank you very much. While investors keep a sharp focus on the fed this week, specifically the chair and what he says, you can add three new bricks to wall streets wall of worry. Margen stanley getting bearish on global stocks, downgrading them to underweight, saying despite the fact o policy, they havent enacted easier funds, and blackrocks Economic Outlook has worsened for the second half. Lets brin in brian with bmo capital markets, and brent schuette, chief investment strategist with Wealth Management company welcome. Brian, you take each of these three points we began with Morgan Stanley, investors leaving active funds, and blackrock becoming more negative, and you pluck them off and shoot them dead right on the spot why are they insignificant worries to you of course, i do, tyler. Good afternoon, everyone lets call a spade a spade blackrock is a fixed income shop of course, theyre negative. With respect to active management, we have known that active managers have had a hard time performing. They got in this rally very late they have been underperforming in the majority of Portfolio Managers have less than ten years experience, and they have been more busy the last five or ten years managing redemptions versus managing portfolios and more succinctly, theyre more busy managing their careers. So lastly on the Morgan Stanley side, we dont like to comment on other firms opinions, but lets face it, this is a firm that has been negative for a year they were right for a quarter. They have been wrong for nine. We like to think a little more fu fundame fundamental, more longer term. We think its preposterous the market thinks were going to get a 50 basis point cut, that we thought we were going to get a 50 basis point cut people are still negative. Theyre the most negative i have seen and im not trying to grandstand here, i think investors are more negative than they were in 20082009 longer term, we think stocks are higher at year end brent, why dont you take apart what brian has just laid out there. Sort of disarticulating or disassembling the earlier points, and also react to what he just said, which is if i heard him right, that investors as a group are more negative now than at any time since 20082009. Really sure. I actually agree with brian on many points. I think the first and third brick of worries are related i guess one, if you think theres going to be a recession, to us, the only way that happens is if the fed tightens too much. Right now, it doesnt appear anything economically from a fundamental standpoint is in ecses, and markets in the economy over a lunger period of time are connected at the hip. While Morgan Stanley may get a correction in the near term, theyll be wrong in the long term, towards the end of the year, maybe next year. We still think theres a higher probability markets move higher, and right now, i think active managers have a chance to perform outperformance just because of the popularity of passive management and the fact people are buying assets in one fell swoop and doing it in a reactioner manner. I think people have the ability to look longer term and focus on fundamentals have an opportunity to add value in the future, and the weak hands have been forced out. Brian, point taken regarding Morgan Stanleys track record, but i want to delve into a point Morgan Stanley was making, which is markets are being too sanguine when it comes to what low bond yields indicate around the world, and thats what were seeing right now, more than 25 of sovereign bonds around the world are negative yielding. Why shouldnt the markets care about that are you worried at all that were facing inverting yield curve here in the United States and bond yields are terrible around the world well, i would say this. If the fed cuts, the yield curve is going to steepen. Thats number one. Number two, in terms of around the world, we have seen a massive underperformance of other assets around the world relative to the u. S. And for one thing, europe is the next japan we actually have still pretty decent growth here and one of the things that mr. Liesman said is just, again, not on, not correct. We have had the longest postrecovery postworld war ii, but its been the slowest, most boring recovery in the history of recoveries. We have yet to get frothy. Typically, recessions happen when we see some sort of frothy growth we havent seen that yet the markets overall remain excessively defensive, so thats why we think investors in general are going to rotate back to the u. S. , quite frankly, because of the stability, especially relative to the rest of the world lastly, we have now reared an entire generation of investors that only buy stocks because Interest Rates go down thats where Morgan Stanley is right in terms of investors giving the bond market way too much credit, but this notion of only buying stocks because Interest Rates go down is not fundamental. Its more momentum, and its really a reflection of whats happened in the last ten years i didnt hear steve saying anything about us being frothy no, to just say the market needs to recess, kelly, because this is the longest recovery in postworld war ii history, thats not a reason for the market to recess right i dont think he was saying that, but i hear that refrain. Youre right, all the time yeah, i guess so. Let me turn one back to brent. I see in my notes that you are sort of neutral on u. S. Equities and if you have an overweight, its for international why . Because thats been ground zero for Federal Reserve fears and tariff fears, both of which we think are in the process of going away for example, the Federal Reserve, we do think, cuts rates because they are Market Driven and the Federal Reserve, that 13 trillion worth of negative debt you mentioned, we think Central Banks around the world can contemplate a recession ending in banking based society where theres negative yielding Interest Rates can you contemplate a recession happening in the u. S. Where the Federal Reserve has yet to meet their 2 target . What does that mean for their future credibility we think Monetary Policy will be incredibly easy. Thats the environment we live in Going Forward investors need to think about that, and that favors assets outside of the u. S theyre cheap, looking for a catalyst thats a u. S. chinese trade truce in the coming month and we move forward with that outperforming because investors have flown out of those into the safety of the u. S. You dont think thats all priced in, brent that could be the catalyst, the agreement on the u. S. china front. It feels like people have already kind of priced that in maybe not fully, but you know, to some extent i think to some extent the market is now waking up to the president and his reliance and belief that the economy and markets are more important than any great trade deal but i dont think its fully priced in by any means theres still room to go if we get the trade deal, there will be a further rally. You saw the market rally last week with news of a truce. We think that will continue in the future when the trade deal does get done, which we think has to happen before the elections because he needs the market and the economy to get reele reelected, and i think he realizes that. Brian and brent, the killer bs, we thank you thank you now to ylan mui who joins us from washington. The cbo just released its analysis of a democratic proposal that would raise the minimum wage to 15 an hour over the next six years the cbo found that the proposal would boost wages for 17 Million People who were making less than 15 an hour. About 10 Million People who were making more than 15 an hour would also potentially see their wages increase as well, but the tradeoff would be about 1. 3 million jobs lost, according to the median estimate from the cbo. Now, this proposal has divided the Democratic Party 15 an hour for the minimum wage has the support from democratic leadership like nancy pelosi and steny hoyer, but some moderates in the party worried that 15 an hour is too high this puts meat on the bones. Gives them data to parse over. Well see if this comes to the house floor for a vote especially after this thanks to another developing story rocking the financial word Deutsche Bank beginning the first of about 18,000 job cuts under a new Restructuring Plan the ceo calling it a reinvention of the struggling german banking giant. Layoffs took place in asia earlier today, and job cuts will continue until 2022, the bulk of the losses are expected in europe and also parts of the u. S. As part of the plan, deutsche will close its Global Equities sales business and scale back. They say a socalled bad bank will be created to wind down unwanted assets. The shares tumbling about 5 , almost 60 today they have rallied recently after being sold off to alltime lows. I dont know what number Restructuring Plan this is, but even the cfo of Deutsche Bank said at this point, there still significant challenges to break even by 2020 they have been struggling for so long. Longer than anybody. They havent been able to fix it compare that to the u. S. Banks. We went through an extremely severe crisis, but ow cleanup feels like a distant memory. This is ten years on coming up, more on Deutsche Bank is now the perfect time to buy the stock . Plus, two major earthquakes in a week in california why is it happening, could it happen again, and how bad could it get we have a seismologist to plain it all and the open championship kicking off in ireland next week David Feherty iser he to talk about tiger woods chance and much more. Power lunch will be right back or built to last . Etfs are only part of a portfolio. So make it easy to explain. Give me a quality fund that helps me get clients closer to their goals. Flexshares etfs are designed and managed around investor objectives. So you can advise with confidence. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Southern california still dealing with the aftermath of two backtoback earthquakes over the Holiday Weekend the first registering a 6. 4 mag teed and the second, 7. 1 some estimating the state could see as many as 30,000 aftershocks in the months to come california is the worlds fifth largest economy with a population around 39 million what are the chances of another earthquake, major one, hitting and what impact could it have on the state . Joining us is david wall, the seismologist with the United States geologist survey. So great to have you with us thank you for joining us thank you for having me on. Reading the most recent bulletin from usgs, the good news to the earthquakes if there is good news is the damage is limited, correct yeah, i think the good news is because the earthquake happened in a fairly rural area, so even though theres very strong shaking, there wasnt that much to damage. The town of ridgecrest got significantly shaken and significant damage what were trying to figure out now in terms of the tremors, the extent of the tremors, the strength of the tremors is how far out could this be, and could these aftershocks hit areas that could potentially suffer more damage yeah, well, we expect at least dozens more earthquakes. Maybe a 50 chance of a magnitude 5 or larger. Magnitude 3 earthquakes will be felt but not damaging. Chances are the aftershocks that come from this earthquake will be limited to the area in the fairly remote of the Mojave Desert and wont contribute to significantly more damage. If a larger earthquake happens and happens towards a more populated area, we expect significantly more damage. Where is the greatest risk, if you can quantify it is it in california . Is it in alaska . Is it up the coast in Washington State . Where is the greatest risk for a really big earthquake . Or is that just kind of a naive question to ask . Thats a great question the risk is actually the chances of a large earthquake happening in an area thats populated thats also vulnerable california and alaska both have enormous earthquakes, but the population of alaska is much, much lower the risk, the greatest risk in the country really is in Southern California and some degree Northern California where you have the Tyler Mathisen<\/a> all three major averages are on pace for a second consecutive day of declines. Havent seen that in a while the dow down triple digits at this hour. Down 141 points. 175 points at its low earlier today. Now, boeing and apple account for roughly half of those losses that you see right there the russell 2000 and dow transports have both been slipping back into correction territory. Kelly. Thanks. Stocks are lower again today as apple drags down tech and the fed looms large. Bob pisani has more at the New York Stock Exchange<\/a>. Hello, kelly. Downgrades are dominating trading today. Tech, including semiconductors are down the leadership board pretty narrow energy is up on oil strength the rest of the leaders are largely defensive like real estate and consumer staples. Retailers, though, doing well. Under armour, nike, and gap helping Consumer Discretionary<\/a> elsewhere, no big news on the fed or trade today those are the two things that moved trading today, usually, but most of the talk today was dominated by Morgan Stanley<\/a> downgrading Global Equities<\/a> to underweight, saying earnings expectations are too high and theres a risk corporations may lower guidance in the second half of the year the key for the markets, jay powells congressional testimony later in the week. The dilemma is the market wants a rate cut, but its not clear theres an argent need for them. A lot of debate on what earnings wim look like beginning next week with jpmorgan back to you. Bob, thanks as bob mentioned, the markets will be closely watching fed chair powells testimony for any hints about what the fed will do later this month Steve Liesman<\/a> is watching the will they wont they scenario. Yeah, in two days of testimony this week, Jerome Powell<\/a> has a choice, to affirm the markets deeply seated belief in a rate cult or push back he faces the risk of a short market selloff and more criticism from the president who has raised the prospect of firing powell if he doesnt cut rates. One, trade is still a negative, despite the g20 inflation remains below target, and Global Growth<\/a> remains weak and that threatens to weaken the u. S. Economy job cuts remain priced in. There you go, looking at the 50 or higher average for the rate in the fed funds theres one cut. I probably should round up to make it easier why do i go out to the 100th decimal . Thats just me being me. I apologize to viewers. 2. 4, down to 2. 13. Thats right or 2. 2 whatever it is 1. 9 would be september somewhere in there is the second cut with the debate about the third cut. But the strong jobs report friday complicated the decision. Its anything but text book Monetary Policy<\/a> for the fed to cut rates at near record low aunemployment amid the longest post market expansion. Its going to tell the market its right earnings happen between now and the fed meeting. Do you think that will play a role if Companies Come<\/a> out in their Conference Calls<\/a> and this is sort of a rewind to the fall of last year where we tenored this hiking cycle and powell was firmly convicted in where he was, and the markets dictated or massaged the direction in which powell and company went through their Conference Calls<\/a> and the warnings we got over warnings season i would say earnings could affect the fed in the following way if earnings disappoint and the market falls, thats where you get a greater huen cry for more rate cuts i dont kneif that will have a big effect one thing i dont think youll hear is companies complaining about high Interest Rates<\/a>. Its weird that would be the feds response to it though that said, one of the big concerns about the economy right now is capital spending. And the strange thing about that is theyre concerned about spending capital, much more closely linked to the trade war than it is anything else outs there, certainly more than it is any suggestion that rates are too high in the market that seems to be the way the fed is going to react to all of it, too. The worse the trade situation is, the more they might. Thats a smart comment and one thats hard to put into place, but the fed has to take whats going on across the street at the white house and in congress as a given. It doesnt have a choice it doesnt have a say. And one of the things that will be just for sport, for a guy thats had to listen to every comment of every fed chair over 20 years is watch fed chairman jay powell dance around the question of are the tariffs good, are the tariffs bad . To him, theyre just there, and he has to deal with it all right, steve, thank you very much. While investors keep a sharp focus on the fed this week, specifically the chair and what he says, you can add three new bricks to wall streets wall of worry. Margen stanley getting bearish on global stocks, downgrading them to underweight, saying despite the fact o policy, they havent enacted easier funds, and blackrocks Economic Outlook<\/a> has worsened for the second half. Lets brin in brian with bmo capital markets, and brent schuette, chief investment strategist with Wealth Management<\/a> company welcome. Brian, you take each of these three points we began with Morgan Stanley<\/a>, investors leaving active funds, and blackrock becoming more negative, and you pluck them off and shoot them dead right on the spot why are they insignificant worries to you of course, i do, tyler. Good afternoon, everyone lets call a spade a spade blackrock is a fixed income shop of course, theyre negative. With respect to active management, we have known that active managers have had a hard time performing. They got in this rally very late they have been underperforming in the majority of Portfolio Managers<\/a> have less than ten years experience, and they have been more busy the last five or ten years managing redemptions versus managing portfolios and more succinctly, theyre more busy managing their careers. So lastly on the Morgan Stanley<\/a> side, we dont like to comment on other firms opinions, but lets face it, this is a firm that has been negative for a year they were right for a quarter. They have been wrong for nine. We like to think a little more fu fundame fundamental, more longer term. We think its preposterous the market thinks were going to get a 50 basis point cut, that we thought we were going to get a 50 basis point cut people are still negative. Theyre the most negative i have seen and im not trying to grandstand here, i think investors are more negative than they were in 20082009 longer term, we think stocks are higher at year end brent, why dont you take apart what brian has just laid out there. Sort of disarticulating or disassembling the earlier points, and also react to what he just said, which is if i heard him right, that investors as a group are more negative now than at any time since 20082009. Really sure. I actually agree with brian on many points. I think the first and third brick of worries are related i guess one, if you think theres going to be a recession, to us, the only way that happens is if the fed tightens too much. Right now, it doesnt appear anything economically from a fundamental standpoint is in ecses, and markets in the economy over a lunger period of time are connected at the hip. While Morgan Stanley<\/a> may get a correction in the near term, theyll be wrong in the long term, towards the end of the year, maybe next year. We still think theres a higher probability markets move higher, and right now, i think active managers have a chance to perform outperformance just because of the popularity of passive management and the fact people are buying assets in one fell swoop and doing it in a reactioner manner. I think people have the ability to look longer term and focus on fundamentals have an opportunity to add value in the future, and the weak hands have been forced out. Brian, point taken regarding Morgan Stanley<\/a>s track record, but i want to delve into a point Morgan Stanley<\/a> was making, which is markets are being too sanguine when it comes to what low bond yields indicate around the world, and thats what were seeing right now, more than 25 of sovereign bonds around the world are negative yielding. Why shouldnt the markets care about that are you worried at all that were facing inverting yield curve here in the United States<\/a> and bond yields are terrible around the world well, i would say this. If the fed cuts, the yield curve is going to steepen. Thats number one. Number two, in terms of around the world, we have seen a massive underperformance of other assets around the world relative to the u. S. And for one thing, europe is the next japan we actually have still pretty decent growth here and one of the things that mr. Liesman said is just, again, not on, not correct. We have had the longest postrecovery postworld war ii, but its been the slowest, most boring recovery in the history of recoveries. We have yet to get frothy. Typically, recessions happen when we see some sort of frothy growth we havent seen that yet the markets overall remain excessively defensive, so thats why we think investors in general are going to rotate back to the u. S. , quite frankly, because of the stability, especially relative to the rest of the world lastly, we have now reared an entire generation of investors that only buy stocks because Interest Rates<\/a> go down thats where Morgan Stanley<\/a> is right in terms of investors giving the bond market way too much credit, but this notion of only buying stocks because Interest Rates<\/a> go down is not fundamental. Its more momentum, and its really a reflection of whats happened in the last ten years i didnt hear steve saying anything about us being frothy no, to just say the market needs to recess, kelly, because this is the longest recovery in postworld war ii history, thats not a reason for the market to recess right i dont think he was saying that, but i hear that refrain. Youre right, all the time yeah, i guess so. Let me turn one back to brent. I see in my notes that you are sort of neutral on u. S. Equities and if you have an overweight, its for international why . Because thats been ground zero for Federal Reserve<\/a> fears and tariff fears, both of which we think are in the process of going away for example, the Federal Reserve<\/a>, we do think, cuts rates because they are Market Driven<\/a> and the Federal Reserve<\/a>, that 13 trillion worth of negative debt you mentioned, we think Central Banks<\/a> around the world can contemplate a recession ending in banking based society where theres negative yielding Interest Rates<\/a> can you contemplate a recession happening in the u. S. Where the Federal Reserve<\/a> has yet to meet their 2 target . What does that mean for their future credibility we think Monetary Policy<\/a> will be incredibly easy. Thats the environment we live in Going Forward<\/a> investors need to think about that, and that favors assets outside of the u. S theyre cheap, looking for a catalyst thats a u. S. chinese trade truce in the coming month and we move forward with that outperforming because investors have flown out of those into the safety of the u. S. You dont think thats all priced in, brent that could be the catalyst, the agreement on the u. S. china front. It feels like people have already kind of priced that in maybe not fully, but you know, to some extent i think to some extent the market is now waking up to the president and his reliance and belief that the economy and markets are more important than any great trade deal but i dont think its fully priced in by any means theres still room to go if we get the trade deal, there will be a further rally. You saw the market rally last week with news of a truce. We think that will continue in the future when the trade deal does get done, which we think has to happen before the elections because he needs the market and the economy to get reele reelected, and i think he realizes that. Brian and brent, the killer bs, we thank you thank you now to ylan mui who joins us from washington. The cbo just released its analysis of a democratic proposal that would raise the minimum wage to 15 an hour over the next six years the cbo found that the proposal would boost wages for 17 Million People<\/a> who were making less than 15 an hour. About 10 Million People<\/a> who were making more than 15 an hour would also potentially see their wages increase as well, but the tradeoff would be about 1. 3 million jobs lost, according to the median estimate from the cbo. Now, this proposal has divided the Democratic Party<\/a> 15 an hour for the minimum wage has the support from democratic leadership like nancy pelosi and steny hoyer, but some moderates in the party worried that 15 an hour is too high this puts meat on the bones. Gives them data to parse over. Well see if this comes to the house floor for a vote especially after this thanks to another developing story rocking the financial word Deutsche Bank<\/a> beginning the first of about 18,000 job cuts under a new Restructuring Plan<\/a> the ceo calling it a reinvention of the struggling german banking giant. Layoffs took place in asia earlier today, and job cuts will continue until 2022, the bulk of the losses are expected in europe and also parts of the u. S. As part of the plan, deutsche will close its Global Equities<\/a> sales business and scale back. They say a socalled bad bank will be created to wind down unwanted assets. The shares tumbling about 5 , almost 60 today they have rallied recently after being sold off to alltime lows. I dont know what number Restructuring Plan<\/a> this is, but even the cfo of Deutsche Bank<\/a> said at this point, there still significant challenges to break even by 2020 they have been struggling for so long. Longer than anybody. They havent been able to fix it compare that to the u. S. Banks. We went through an extremely severe crisis, but ow cleanup feels like a distant memory. This is ten years on coming up, more on Deutsche Bank<\/a> is now the perfect time to buy the stock . Plus, two major earthquakes in a week in california why is it happening, could it happen again, and how bad could it get we have a seismologist to plain it all and the open championship kicking off in ireland next week David Feherty<\/a> iser he to talk about tiger woods chance and much more. Power lunch will be right back or built to last . Etfs are only part of a portfolio. So make it easy to explain. Give me a quality fund that helps me get clients closer to their goals. Flexshares etfs are designed and managed around investor objectives. So you can advise with confidence. Before investing, consider the Funds Investment<\/a> objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Southern california still dealing with the aftermath of two backtoback earthquakes over the Holiday Weekend<\/a> the first registering a 6. 4 mag teed and the second, 7. 1 some estimating the state could see as many as 30,000 aftershocks in the months to come california is the worlds fifth largest economy with a population around 39 million what are the chances of another earthquake, major one, hitting and what impact could it have on the state . Joining us is david wall, the seismologist with the United States<\/a> geologist survey. So great to have you with us thank you for joining us thank you for having me on. Reading the most recent bulletin from usgs, the good news to the earthquakes if there is good news is the damage is limited, correct yeah, i think the good news is because the earthquake happened in a fairly rural area, so even though theres very strong shaking, there wasnt that much to damage. The town of ridgecrest got significantly shaken and significant damage what were trying to figure out now in terms of the tremors, the extent of the tremors, the strength of the tremors is how far out could this be, and could these aftershocks hit areas that could potentially suffer more damage yeah, well, we expect at least dozens more earthquakes. Maybe a 50 chance of a magnitude 5 or larger. Magnitude 3 earthquakes will be felt but not damaging. Chances are the aftershocks that come from this earthquake will be limited to the area in the fairly remote of the Mojave Desert<\/a> and wont contribute to significantly more damage. If a larger earthquake happens and happens towards a more populated area, we expect significantly more damage. Where is the greatest risk, if you can quantify it is it in california . Is it in alaska . Is it up the coast in Washington State<\/a> . Where is the greatest risk for a really big earthquake . Or is that just kind of a naive question to ask . Thats a great question the risk is actually the chances of a large earthquake happening in an area thats populated thats also vulnerable california and alaska both have enormous earthquakes, but the population of alaska is much, much lower the risk, the greatest risk in the country really is in Southern California<\/a> and some degree Northern California<\/a> where you have the San Andreas Fault<\/a> and other faults, a large population, very large population, and then the potential for damage goes way up david, theres a long history of different kinds of earthquake event to draw on what does this experience remind you most of right now . Well, you know, california is a big state. You can put a large earthquake into an area and get relatively low impacts because the population density in some areas is so low. What were really concerned about is something further west and further north or south, in los angeles or San Francisco<\/a> where you would certainly up the ante in terms of losses. The losses from this are kind of expected given the low population, but we know that earthquakes are going to find Population Centers<\/a> down the road when the first earthquake hit, i read a seismologist being quoted in a newspaper saying that were due for one because one typically happens every five and ten years and this was the largest in 20 years. Where else are we quote unquote due for one in your view well, we have what we call is a hazard map of the United States<\/a>, and the west coast of california is along the San Andreas Fault<\/a> where we have two plates moving next to each other. Thats one of the biggest concerns that goes up to the Pacific Northwest<\/a> and becomes a bigger fault that can cause problems for oregon, washington, and alaska but we have faults really throughout the United States<\/a> its just that the rates of earthquakes in california is much higher than it is in the rest of the country. All right david, thanks so much for phoning in we appreciate your time. Absolutely. Deutsche bank has lost 75 of its value over the past five years. Are the companys latest moves a step in the right direction . Or too little too late plus, what is the magic number you need for retirement well tell you what some people think that number is, and tell you why some people are having a hard time getting there, when power lunch ntuecoins. Welcome back to power lunch. Im mike santoli at the New York Stock Exchange<\/a> Deutsche Bank<\/a> tumbling after announcing 18,000 job cuts over the next three years the company calling this restructuring the most fundamental transformation in decades. Is there light at the end of the tunnel for deutsche and the rest of the european banks. We have your trading nation team today. So boris, in absolute terms, this really radical shrinkage by Deutsche Bank<\/a> is certainly a negative in terms of where its business has been, but what does it mean for perhaps yoeuropean banks taking capacity out of the industry here, and no real systemic issues that seem to have popped up thats the one positive thing on the european side no systemic issues and the quality of the book now is a lot better than in the Global Financial<\/a> crisis having said this, its a very different business when you have negative rates and a slowing economy. I cant imagine that the european banks are really going to be good in shape. Its not a sector i want to invest in. The one i would make an exception for is ubs its an interesting look at a 5. 7 dividend yield makes it very attractive. Plus you add one interesting thing. The dollar goes stronger against the swiss franc. Thats going to help the stock if im going to invest in europe, its probably as ubs as a brand name an area obviously, all of these banks thrk stocks have taking a tremendous beating. A lot of folks saying it looks like they might get washed out and have true value. How would you play it . Whats most notable looking at the chart of the european stocks Bank Industry<\/a> is the industry has come into a test of decadelong support dating back to 2009. Now, this is the level that stirred turnarounds in the industry in both 2012 and then again in 2016. I would say that just how deeply oversold Interest Rates<\/a> have become offer that dry powder as well however, i would still stick with the Higher Quality<\/a> u. S. Banks like jpmorgan that score higher in our momentum work. If european banks do get that turnaround, i think jpmorgan breaks through 119 resistance which would be a big breakout if the turnaround doesnt play out, i see less Downside Risk<\/a> as well much better risk reward to stay in the u. S. In that group. All right relative winners should stay that way if conditions in general improve, i suppose thank you very much. More trading nation, head to our website or follow us on twitter tradingnation back over to you thanks. Ahead on power lunch, tackling americas savings crisis the father of the 401 k lays out his new plan plus, elizabeth warrens wealth tax sparking a major battle. And the 148th open championship tees off next week. Nbc golf analyst David Feherty<\/a> joins us and hes bringing claret claret jug with him. Stay with us and now, the latest from tradingnation. Cnbc. Com and a word from our sponsor. Theres a classic investment thesis called the dow theory it says that transportation stocks can either confirm or deny a Broader Market<\/a> trend. But its important to remember that transports can be sensitive to changes in oil prices and other market influences. Dont rely exclusively on this theory when making ainstntn veme decision im randy frederick, and schwab is the better place for traders. Welcome back, everybody. Im sue herera heres your cnbc news update at this hour. Wealthy financier jeffrey up steen has been brought to federal court to face sex trafficking charges. He pleaded not guilty to the charges but he will remain in jail until a bail hearing on thursday democratic senator dick durbin blasting the Trump Administration<\/a> for trying to put the citizen smp question on next years question, claiming it will cause an undercount and less money for states. It is impossible to describe where we are, how this disarray will play out, but ill tell you whats obvious after four different failed attempts, we now know why the real reason for putting the Citizenship Question<\/a> on the census to discourage hispanic americans from answering the questionnaire. Experts begin restoring one of the most famous paintings in the world. Rembrandts the night watch is considering a masterpiece for its use of lights and shadow the restoration is expected to take about a year. It will cost almost 3. 5 million. And it will be done in place, theyre not going to take it down for the restoration, which i find fascinating thats the news update back to you. Thank you about 90 minutes to go until the closing bell on wall street. The dow and s p 500 fairly steady its the nasdaq were watching closely, down by. 9 , weighed down by the rosenblatt downgrade. The oil market is closing for the day. Lets check in with Courtney Reagan<\/a> good afternoon. Oil prices selling off late in the trading session, closing close to the flat line the market had received some support from concerns over Irans Nuclear<\/a> program after the nation threatened again to step up its uranium enrichment in defiance of u. S. Sanctions pressures remain over lingering worries over Global Growth<\/a> and the trade war continues to drag on, and growth in u. S. Production will outpace that of Global Demand<\/a> through 2020, limiting the effects of opecs supply cuts. Thank you very much now to americas savings crisis many people still dont have access to 401 k plans a lot of Small Businesses<\/a> simply dont offer them our next guest has a plan to change that. He has a new oped out, all part of cnbcs partnership with acorns here to discuss is ted, considered the father of the 401 k , and in recent years is on a mission to help Small Businesses<\/a> pick and implement the best types of plans. Theres now movement afoot in this country oregon, many other states are rolling out their plans. Are they getting it right . The oregon plan is really very well designed and its the one generally serving as a model for it, but, you know, probably one of the issues with it, however, is its limited. It only has one model, and the expenses are still somewhat higher than what they need to be in fact, quite a bit higher than they need to be. They should fix that. Are there other states who you think have the banner plan that should be adopted everywhere from what i see, theyre all following the same model and what it is is limited to a pay roll deduction, you know, roth ira program, and there are a lot of other alternatives. Some of these businesses are quite small, the ones that are now going to offer 401 k plans. Some have 10, 15 employees i think the first reaction is Small Businesses<\/a>, can they afford the administrative costs involved with this everything involved with offering this sort of plan well, the 401 k is their own plan for many Small Businesses<\/a> its definitely very complex, you know, legally. I mean, extremely. And the expenses are definitely on the high side and you know, there are other alternatives that make a lot more sense for that type of business 15, 20 employees down unless theyre professional, its normally going to be the wrong type of plan what is the alternative plan that is economical, would work for the 15 to 30 employee company, lets say a law firm or a nail salon or a restaurant well, a law firm probably it will be a 401 k because the attorneys want to put in the max they can. And 401k k gives them the opportunity to do that i have worked on irabased models and there are five that i have worked on that have lower max contribution limits. 401 k is about 18,000 a year is the max . If youre over you have the catchup provision, which you and i are subject to we can play catchup sure, but there are many Small Businesses<\/a>, when we get out of the professional environment, many of those businesses arent owners making a couple hundred thousand dollars, okay, so a lower contribution limit makes sense to them, and so designs i have worked on are all irabased. They dont have any fees and you know, the cost of the participants could be as low as 0. 05 . And i run into 401 k plans in the small Employer Market<\/a> that have fees as high as 2. 75 theyre taking that much per year that should be against the law i mean, are the states just getting greedy why thats not the states its not the states i understand. Its the manager. Well, the whole group of people who are involved, you have your Financial Organization<\/a> you have your whats known as tpa, your adviser. The whole group of them. This is why, if youre a member of a 401 k plan, it behooves you to figure out what the costs are in it, and you can then agitate within your employer to move to a lowercost provider absolutely. Theres an example here, when i was working on these first three models, i had a little business with eight participants contact me who had a 401 k , without getting into details, they were able to switch to model three, eliminate over 1500 a year on fees, plus the participants went from 2. 75 to 0. 15 youre talking years of additional Retirement Income<\/a> to participants its with no amount of humility and a high amount of reverence that i ask the edison of the 401 k the following question that is this if theres a criticism of it, it has been that 401 k s made it all too convenient for employers to discontinue their Pension Plans<\/a>, their defined benefit plans. And that those defined benefit plans that covered all employees, based on their salary, they would get a stipend at 65, that those plans were actually better for the employee than a 401 k . When you hear that criticism, what do you feel there isnt a fast answer to it i started we have all day okay. I started in that side of the business yeah. And a little while ago, you mentioned arissa, before we got on the air here. That is the number one reason for the death of defined benefit plans. Not 401 k s. And im not defending 401 k s. Theyre far from perfect they were never intended to be what they are, okay. But arissa, which was intended to save the pension what do you mean, they were never intended to become what they have become, which is 15 trillion worth of assets its like amazon was never intended to become what it became in a way, right what do you mean it was a fluke politically. You know, the legislation here wasnt because some member of Congress Said<\/a> why dont we set up this great Retirement Plan<\/a> to help people save for retirement. It was enacted for what were known as cash deferred employer funded Profit Sharing<\/a> plans. That was the reason for it that legislation was passed in the fall of 1978 had a delayed Effective Date<\/a> of january 1980 january 80 came, no one was running around the country setting up 401 k s we didnt have Financial Advisers<\/a> selling these because no one anticipated it being a big thing. It was in the fall of 80, you know, that i came up with the idea of throwing a matching employer contribution and an employee pretax contribution into this section of the code. And there wasnt anything there saying thou shalt not. So i chose to take the more aggressive interpretation, and ultimately, it got supported for better and for worse. Very interesting. Better and worse, exactly but aris ain your view is what ended Pension Plans<\/a> or made them less attractive made it impossible to sell them i couldnt sell a pension plan after arissa and the reason for that was corporations had financial risk if they had a pension plan post arissa which they dont have they didnt before. Well, they didnt before all right ted, thanks very much for your time. Again, if people want to read more about it, cnbc. Com investinyou thank you for joining us appreciate it. Nbcuniversal and comcast are ventures and investor in acorns. Lets get to the bond market with Rick Santelli<\/a> tracking the action at the cme. Hi, melissa lee we had a pretty good set of data points regarding employment on friday if you look at in tra day of tens, you cant tell 2. 03 is where we settle. We have done most of the work slightly below that level. It isnt until you hook in friday you can see that changed the balance a bit. Everything perked up on the fixed income side. But mostly, its been about curve flattening and the strong dollar now, the fed day and the decision not to move rates was the 19th lets look at the dollar index since the 19th remember, mario draghi kind of upstaged the fed, talking about stimul stimulus, and you can see the dollar suffered a bit, but it has been improving and maybe thats because the Euro Currency<\/a> after its rise on Mario Draghis<\/a> comments understands like many debating the feds next move, lowering rates doesnt cure everything, and finally, heres that tenns minus twos we have flattened rather dramatically, thats another reason the market seemed to be demanding a rate cut thank you very much heres whats on the tasting menu facebook and twitter get left out. The fallout from a fire, and one giant mistake for nasa stay with us well cover all that when we return with sofi, get your credit cards right by consolidating your Credit Card Debt<\/a> into one monthly payment. And get your Interest Rate<\/a> right. So you can save big. Get a nofee personal loan up to 100k. Join us for a walk . Id love to, but my legs and feet are so tired and achy. Walter, you need revitive its the circulation booster it really got me moving. I use my revitive every day to relieve my aching legs and feet. Its so easy. Drug free. And its electrical muscle stimulation really improves the circulation in my legs. Im back walking this guy everywhere. Check it out online. Revitive. Fda cleared. Clinically tested. Only revitive relieves aches and pains, increases oxygen rich blood, and strengthens leg muscles. Weve gotta do this. Dont suffer any longer order revitive medic with a 60 day money back guarantee. With Free Shipping<\/a> and free returns. Someone got revitive. Order now and well send you our most popular treatment boosting accessories. A 50 value absolutely free go to revitive. Com or call. Get moving today i felt completely helpless. Trashed online. My entire career and business were in jeopardy. I called reputation defender. They were able to restore my good name. If you are under attack, i recommend calling reputation defender. Vo theres more negativity online than ever. Reputation defender ensures that when people check you out, theyll find more of the truth, not trash. If you have search results that are wrong or unfair, visit reputationdefender. Com or call 18778668555. Heres a taste of some of the other stories were looking at today the white house is going on a social media cleanse this week with its new social media summit, by reportedly not inviting facebook and twitter to participate. The white house spokesman, a white house spokesman said the meeting would, quote, bring together Digital Leaders<\/a> for a robust conversation on the opportunities and challenges of todays online environment sources told cnn that theyre not surprised that the two social media giants werent invited. Given the backlash from the president and others in conservative circles who claim that those two outlets limit conservative speech. So we shall see what happens there at the white house i mean, still, can you say anything substantive if you dont have the two biggest players in the room . You need them in the room. They should just do a parallel summit of their own who needs the white house to host anything . They could just have it on their own. 23 miles of the Kentucky River<\/a> apparently are flowing with up to 45,000 barrels of jim bean whiskey after one of its kentucky warehouses caught fire. There have been multiple reports of dead fish floating down the river, which environmental groups believe could have been caused by the whiskey. Yikes thats not a pretty sight there are fish that are probably quite happy. Thats terrible terrible fire one small step is expected to translate into a giant profit for a former nasa intern in 1976, nasa unknowingly sold the best surviving tapes of the apollo landing for just 218 in honor of the 50th anniversary of the landing, sothebys is auctioning those bids. The minimum bid is 700,000 and theyre expected to sell for tomillion not bad for the intern who ended up with them seems like 2 million would be a lot of money to spend in 1976 you think theyre selling old tapes around here . Are they worth anything all right, up next, were talking golf with nbc sports David Feherty<\/a>. He has the claret jug with him eaof nt ahd exweeks championship power lunch will be right back of your investments. Key portfolio events. All in one place. Because when its decision time. You need decision tech. Only from fidelity. The golf world will be focused on Northern Ireland<\/a> next week the 148th open championship tees off for the first time in nearly 70 years there our next guest will be at the royal portrush golf club, covering it for nbc sports back with us now is golf analyst David Feherty<\/a>, who is originally from Northern Ireland<\/a>. Hes here with the claret jug, which is the trophy that will be given to the winner of the open. Welcome back thank you nice back. This is the first time in 70 years it has been in Northern Ireland<\/a>. Yes what kind of pressure does that put on an irish player like a rory mcilroy to perform well well, it puts a lot of pressure on. Thats his backyard. Its really his home golf course, along with Graeme Mcdowell<\/a> and darren clark. Each of them calls royal portrush, really, their home course the tournament sold out in a matter of days, which is the first time thats ever happened. The sense of excitement is just off the charts if one of those three men you just mentioned is in contention on sunday, the collar is going to get a little tight. Well, yeah. Not that it wouldnt otherwise. My collar is usually loose. Yours is usually unbuttoned, i know itll be difficult for me to remain objective, shall we say its very difficult not to be a cheerleader when someone from the province might be in contention so lets talk about the who the favorites are. Obviously tiger won the masters. He has not played much since then no. Do you think hes match fit to come in and contend i think hell be match fit, yeah but hes not typically a great bad weather player it wouldnt surprise me, being from there, if we get some weather. You get some days at royal portrush where the seagulls walk to work. Yes and i would think also the rough will be long yes and tiger is not known for having the straightest drives. Yeah, and its not a golf course thatll particularly favor the longer hitters there isnt a level lie on the golf course. You have to mold yourself to the slope. The rough will be savage in places you could lose your dog in it, never mind the ball. So it will be someone who hits fairways and can play, you know, a nice technical player, someone very used to links golf. Wouldnt surprise me to see a veteran win. Ratings wise, what are the expectations seems to have a lot of ingredients for a very wellwatched tournament. Yes, well, the crowds will be huge the buildout for the tournament, you know, the bleachers and whatever, the biggest ive ever seen around the 18 the green is just spectacular. The open is a tournament where you walk into a canyon at the end. Its kind of claustrophobic almost this is a semicircular arrangement where i think it seats close to 20,000. Its just spectacular. Really is. I cant wait im just so excited about it being, you know, home. I didnt realize how much people bet now on golf why have people taken to it so much in Sports Betting<\/a> what impact do you think thats going to have on the sport well, its been going for a long time in the uk. You can do individual match betting. Theres all kind of things you can bet on you can take one player out of the field and say hes going to play better than another player out of 150 or a combination of both or whatever theres a lot of money in it thats for sure. But as always, itll be the bookmakers that make most of it. Are these all people who watch golf and follow it passionate, or are there people who say this is kind of an interesting thing . You can bet on so many different tim types events now that people arent watching that much, but they become conducive. I think its a mixture of both in belfast, for instance, i was over shooting promos for nbc about a month ago. It was interesting to see. There was one particular row of shops where there werent any shops. It went bar, bookmakers, bar, bookmakers, bar, bookmakers. Three of each, all in a row. An indication of the main past times there. Maybe a few drinks and a wee bet. We know the short list of men who may contend next week, mcilroy would be there jon rahm just won the irish open i guess tiger, dustin johnson, koepka is there a long shot, a dark horse that we should be watching its difficult these days to pick a dark horse. The strength and depth is so amazing out there. I wouldnt really call rickie fowler, you know, a dark horse hes maybe a gray horse. Hes overdue and he usually wears an orange about as bright as melissas dress. Exactly that orange, in fact, yes. But keep your eye on him. Im going to cheat a little bit. No, were not going to go. Were going to ask this last question you do a lot of interviewing you said this morning on a radio show who your favorite interview of all time was. Who was it bill russell. The basketball great. Yeah, wonderful man i adored him thank you so much i wish he would adopt me. You would be an odd couple. Have a great time. Thank you have fun at home. Thanks. All right the open championship begins next thursday the 18th on the golf channel on nbc. And dont go anywhere checkleeft ts. Pas aerhi your brain changes as you get older. But prevagen helps your brain with an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. Healthier brain. Better life. This years wifecarrying championship, there you see it, took place saturday. Men compete on an Obstacle Course<\/a> with their wives slung over their shoulders, as you see there. The winners this time around were a lithuanian couple its really something you would like to see once you know what you win what do you win your wifes weight in beer. Not that i know personally what you win. Anyway, thanks for watching power lunch. Closing bell starts right now. Welcome to the closing bell. Im Morgan Brennan<\/a> in for sarah eisen, here on the floor of the New York Stock Exchange<\/a> at the boeing post. Stocks down 1. 5 right now its one of the biggest drags on the dow. More on that and Everything Else<\/a> an investor needs to know before the mark closes in 59 minutes. Yes, we do, morgan. Im wilfred frost. Good afternoon to you. Lets get to whats driving the action today investors awaiting fed chair powells testimony later this week shares of apple weighing on the tech sector. And health care is underperforming. Lets check in on what the market is doing. Down 0. 5 on the dow. 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