Transcripts For CNBC Closing Bell 20150304 : comparemela.com

market when oil prices are moving lower -- hello -- and at the time that was often said, listen this is the wrong interpretation. today we have higher oil prices and a lower stock market. >> we'll take a closer look at what was a formerly red hot group that has recently gone in the tank. we're talking about the utilities. those supposedly safe stocks just about in bear market territory now, and if you watch this show and you read cnbc.com you knew that the fall the decline, was coming. we'll show you why and see if there's stocks are going to bounce back or just keep heading lower. >> this is key to watch for the entire rates discussion hovering over this market. we're also joined today by robert johnson, founder of the black entertainment network and the nation's first african-american billaire. the hit tv show "empire" has a story line that seems to closely track real life events for johnson. we'll ask him about that, plus his take on net neutrality and the income inequality debate. >> plus a historic case before the supreme court. six words could decide the fate of obamacare. the outcome could have a huge impact on what we all pay for health care. could have a big impact on the insurance industry, not just the 7 million or 8 million that would be immediately affected if obamacare would be altered or taken away. we'll tell you about the arguments that went into that coming up. >> market pricing in today what it thinks could happen with that ruling this summer. here is where we stand with the dow on the session off 116 points. the nasdaq is off 9. and the s&p is off about 9 as well. we continue to retreat from that 5,000 level we closed above on monday for the first time in 15 years. although the nasdaq remains the outwe are outwer outperformer of the session. >> i'm told we closed at nasdaq 5,000 on monday. i wasn't here so i don't believe it. >> i think that's why it didn't stick. you have to be here the next time for it to stick. >> i just don't believe it until i see it. let's go to our "closing bell" ex exchange. keith fitzgerald, jack ber bouroudjian bouroudjian, monica and steve liesman and rick santelli. the beige book out an hour ago. a little something for everybody in there wasn't there? >> i don't know if i can quite explain why the oil market would take such comfort in it. there were some comments about rigs being shut in about layoffs, declines in cap ex but the idea that the market should get that information from the beige book is a little curious. that information was mostly out there, completely expected. i don't think it showed that there was going to be -- there were going to be more cutbacks in the oil industry than originally thought. in general it was a 2.5% gdp beige book is the way i like to put it. modest expansion, pretty good job growth not a whole lot of wage pressure. some weather affect throughout the nation especially in the east. >> it reminds me a little bit of netflix stuff going on where you have the stock moving although people are saying this information was already priced in. is this just a market kind of i don't know, in a little bit of silly season before we get to friday's jobs report and the ecb meeting tomorrow? >> kelly, i think that's what's happening. the market is digesting a couple things. the move to 5,000 was important. remember, 15 years ago i remember sitting around with a bunch of traders saying if the market ever got to 5,000 nasdaq again we would all get out. well, things have changed quite a bit. just to put it into an apples to apples comparison, we were trading 50 times plus over earnings. it would put the nasdaq at about 12,000 foodtoday if we made a real comparison. we don't want to take a look at the markets back then and look at them now and make the same comparison. the bottom line we're looking at is you have a market which more than likely has got a psychological trigger which it just hit but in another three or four weeks we will be sitting here talking about new highs again, talking about the s&p reaching 2150. everything he have seen a fundamentally bullish for this market. the low rates are still there. janet yellen is telling us that. and oil has a big cushing supply question over its head. >> but prices are still going up though. that's the crazy thing. keith fitzgerald, you make a good point. the markets very data dependent, just like the fed is. they're watching data because that's what the fed is watching right? >> yeah. you know this reminds me of that game we all used to play in kindergarten where two friends would sit down across the desk and stare and the first one to blink would have lots of laughter and theoretically lose the game. really what's happening is traders are watching the fed, the fed is watching the markets, the markets are watching the data. you have this circle and there's no significant news. ahead of friday's data report when we see the labor information, i think that's the catalyst. i think people are going to go sideways. there's not really any commitment. nobody is selling, nobody is buying. it's just kind of a walkaway and it's soft territory. i'm not anxious to put new capitol to work but i'm not anxious to leave either because i'm in with jack. i think a couple weeks from now it will be a different market. >> obviously keith had an exciting childhood. >> we did, rick santelli have some interesting fed speak today, including from charlie evans. i just want to draw people's attention to this. he says yeah -- and he supports which is what a lot of people on the hill support, especially the republican party a more explicit target for the fed. his involves unemployment and inflation. in his speech this morning he doesn't think we're going to hit 2% inflation, rick until 2018. he's basically saying the fed should wait until 2016 or maybe 2017, that it needs to be really patient here. >> well my answer to that would be i think i'd pay more attention to what mr. evans and many other fed speakers say if they could give me some documented hermetically sealed envelopes, including some of the things they've called right before they've happened. which in my opinion after watching the market firsthand since '79, that envelope is going to be quite light and probably mail it with a 2 cent stamp. in terms of what i think is important, i think that the headline by mario draghi is the most important, honest thing i have read in a long time. he basically, and i'm paraphasing, said today that the qe that we're going to be bringing to market isn't going to be enough for growth in the eurozone area. i think that pretty much speaks volumes, and i don't think in this case he was being a keynesian larry summers type when he said not enough. i think what he was doing, like many have tried to do around the globe, is incite the people that are elected to office to go serve countries and get something done but believe me after watching both parties in this country, i wouldn't be raising the flag on some of the issues that are easily solved which really leads one to think they just like it the way it is. >> and yet, monica while we hear from people like charles evans who say maybe the economy just isn't ready for rates to go higher here they couldn't withstand that yet the stock market sits near all-time highs. is that warranted at this time do you think? >> well, again, i think the stock market and the economy don't necessarily walk in the same path. they've been dislocated for a long time and all of this attention that we pay to unemployment and jobs we're really nearing an equilibrium with jobs but by the same token the gdp is growing just 60% of what it was prerecession. in the six years prior to 2008 we added 3 trillion to the economy and the six years since we added maybe 1.75. so unless slow is the new fast i just don't see how focusing on jobs is necessarily giving us a proper indication of what's happening with the actual economy. >> all right. just a quick word. we have some news to get to but, jack if we get a strong u.s. jobs report friday and the european central bank moving on qe, are we going to see yields really start to move higher for the major industrial countries here? >> i think we will. and you know what? they should. something rick has been talking about which is very important. one of the ancillary effects of having these low rates is look at some of the triple b paper coming out trading at 5% or 6%. that is ridiculous. all of that is starting to worry me. even the most bullish of people on this network. so i think we've got to watch that a little bit. >> jack i'm not sure why you would have that. it seems to me what the bond market is most concerned about is inflation. doesn't really necessarily -- it sees jobs as a potential sign of inflation but as the last guest just said we had a lot of job growth but not a lot of inflation. we're not near the 2%. i'm not sure why bond yields would go higher given the outlook for inflation. >> it would signal real growth. look, what we're talking about are pro-growth policies that -- >> it would signal real inflation. >> well the real inflation isn't there yet. look, the real inflation -- >> guys -- >> you know and we might not see -- we might see the 10-year at 4% when we start to see real inflation kick in. >> hang on -- >> between now and then what we want to see is growth. >> good conversation. give me one second here. we have some breaking news regarding hbo. julia boorstin has details from los angeles. >> that's right. hbo and apple are in talks for apple tv to be one of the launch partners for hbo's new over the top streaming service which is going to be called hbo now. the two companies are talking about having hbo now launch in april ahead of the launch of "game of thrones" which is set for april 12th and the idea would be for this direct for consumer service to cost about $15 which is more than netflix charges. this is according to sources. nothing is official but sources tell me these are the talks that are going on and we expect to hear much more in the coming weeks ahead of that launch of "game of thrones" or we may see hbo launch its direct to consumer service on apple tv's platform. back over to you. >> thank you. they're in san francisco. steve liesman, a new wrinkle in media distribution. >> i tried to do this many years ago. i created a big computer bock and i -- box and i went and spent a couple thousand dollars to try to get around the cable box. >> and you're admitting to it now? >> he says on a cable network. >> but here was my conclusion which is that the cable box -- and i know i have a self interest in this because of who i work for, but the cable box is a really good browser for television stations. and it's hard to see that there's other technology going to get around that. hbo may come out with that. it's a convenience thing, but what's going to happen is hbo will do this nbc will do that somebody will come together and bundle the two together and what do you have? you have cable. >> you're not telling me cable is genuinely a good browser for tv. it's the worst, isn't it? those guides? is that what you're talking about. there's so much better technology that will supplant that. >> if there's a better browser for television stations than the box, i have a whole bunch of things in my house. the cable box ends up being the best quote, unquote, i'm calling it a browser which is the ability to change between channels and it's better than anything else i have there yet. >> wow. >> you know what makes this really interesting though is the fact that it's apple and hbo, and apple is not necessarily the jobs like apple we knew. it's not device driv. the tim cook apple is very different. this is an ecosphere issue. apple is a genius company in terms of creating a product and getting everybody else to fill it in. so i could see this growing like wildfire, and you know i have historically not liked apple because of the device dependency. so me this is -- >> but do you want to send a $15 check to hbo and a $10 check to this company and a $3 check to that company? why is that more efficient and when you're going between them, what's the interface like of going from this company to that company? >> agreed 100% right now. >> they may get it right. >> the consumer is not going to make that decision but five years from now they're going to redefine this if this agreement holds water. >> it's already been redefined. if you have kids in your 20s, it's already been redefined just so you know. >> trust me they're not watching it in the traditional way. that's for sure. thank you all. >> a lot to pack in this hour and more still to come. the dow again under pressure off another 114 points. the nasdaq retreating further from the 5,000 mark today, bill. >> even though oil was sharply higher today. very interesting day. when we come back from first to worst, utilities getting zapped this year after beating all the others in the s&p groups last year. you were warned both on this program and on cnbc.com that this could happen. the pros will be weighing in on if you need to still pull the plug on utilities or get back in because of those great dividends. >> also coming up the head of cantor fitzgerald's exchange traded funds desk speaking with us exclusively. reggie browne has helped launch hundreds of etfs. we'll get his take on the markets and which etfs he thinks are ripe for the picking. stay tuned. if you're running a business legalzoom has your back. over the last 10 years we've helped one million business owners get started. visit legalzoom today for the legal help you need to start and run your business. legalzoom. legal help is here. at ally bank no branches equals great rates. it's a fact. kind of like mute buttons equal danger. ...that sound good? not being on this phone call sounds good. it's not muted. was that you jason? it was geoffrey! it was jason. it could've been brenda. ♪ ♪ ♪ tigers, both of you. tigers? don't be modest. i see how you've been investing. setting long term goals. diversifying. dip! you got our attention. we did? of course. you're type e* well, i have been researching retirement strategies. well that's what type e*s do. welcome home. taking control of your retirement? e*trade gives you the tools and resources to get it right. are you type e*? welcome back. as we watch markets, dominic chu joins us with an eye on the biggest movers of the session. >> it's a down day but let's start with some of the bigger individual movers. we'll start with lumber liquidate liquidators. the stock is down 10% after senator bill nelson called on the federal government to investigate the company in response to that negative story in "60 minutes." shares down by 12%. next we have sandisk. the shares are on the move to the upside after the company announced a new technology called infinflash which will reduce the cost of one gigabyte of storage to less than $2. and the utility sector is one of the worst performing sectors falling by 1%. it's been a weak performer year-to-date. only now down 6% but still to the downside as rising interest rates can be bad for the sector. . it was one of the best plays last year and it's up 10% over the last 12 months. a star from last year a defensive play a utility and dividend play now lagging the rest of the overall market. kelly and bill back over to you. >> what is that chip called? >> infini flash. >> nice. >> thank you, dom. cnbc the first to point out a possible bruising in utility stocks. there is john malloy's piece. on december 31st he did some digging and found they were poised for a beat down. it was a prominent piece on cnbc.com. we talked about it on air here as well. >> yes, we did. joining us now with their take their current take on utilities, greg gordon from isi group. he's bearish on the overall seshg sector. mark newton thinks now is the time to buy. good to see you both. greg, why don't you like utilities at this point? >> well just like your commentator, i came into the year thinking that the stocks looked pretty fully valued given they were trading at very high pe multiples and very low dividend yields relative to the mid single digit earnings and dividend growth expectation they offer, but the market was positioned for lower rates for longer and a lack of overall global inflation. they actually went up 4% in january. got to 18 times one year forward earnings at their peak on january 31st so that's them being down 6% is really a 10% reversal from the peak as treasury bonds have risen from 1.6% to a little over 2.1%. there's probably another 5% downside before they look like they're fairly valued. >> wow mark. 4%. you put 4% on anything somebody will buy it here. >> you're absolutely right. this was the sector that was the strongest last year. if you know how a year should play out, often sectors that outperform in january outperform for the balance of the year. we have had a 10% pullback which makes this sector attractive having a short-term pull back within a longer term uptrend for the group. >> is this only attractive if rates stay low or do higher rates change the attractiveness altogether? >> they will change the attractiveness and right now we haven't seen sufficient technical proof to argue that rates are trailing meaningfully higher. we need to see the 10-year at least over 2.4%. the longer term trend in treasury is still very much lower. if the fed is going to be data dependent, a lot of the economic data has been missing expectations so it's tough to think all of a sudden we could have this big turnaround that might make the fed ready to act in june. so rates right now i think are still going to remain under pressure. >> greg you don't want to lose money if you're going to buy a stock and it's going to go down but with some of these utilities and the yields they have why wouldn't you want to buy them when you're being paid to hang onto this stock as so often is the case with some of these utilities? >> look, so the bottom up fundamental profile for the groo up is actually pretty good. most of these companies offer a 4% to 6% earnings growth and dividend growth rate over the next couple years and it's pretty solid. but they're not cheap enough to buy yet. i use a bunch of analytic tools to try to figure out when the group is worth owning. the group looks about 5% undervalued to current bond market conditions today. back in july the last time that the market was positioning for a synchronized global economic expansion like it is now, they got 10% cheap to the bond market. and from there they then rallied 15% versus 4% for the s&p. that was the last time i was bullish on the group. i'm looking for a pullback of about another 5%. it could be more if interest rates start to rise on the back end of the curve. my technical analyst rich ross has looked at the data. he agrees with me on that. and i think the fundamentals support it. so i think we're about two-thirds of the way through this correction. i think we have another 5% to go. perhaps more if you start to see the yield curve steepen, but then you'd see me start to get more bullish. >> and that's what makes friday and thursday, bill we should reiterate to everybody so important for utilities, for the rest of the market. >> thank you. >> greg bringing in friends to gang up on mark on that one. we got 40 minutes left in the trading session here. the dow down 116 points. this pullback ever since the nasdaq hit 5,000 on monday the pullback continues on this wednesday. and coming up the chief investment offer of the california state teachers retirement system is speaking with us exclusively. they're the second largest public pension fund. up next our weekly "beat the street" focus on fund manager who have been outperforming their bench marx. a growth fund manager will tell us what he's buying to crush this market. stay tuned. we are back with our weekly series "beat the street," and today we look at a small to midcap stocks in this particular fund. in the past year the hennessy cornerstone growth fund is up 18% while the benchmark, the bogey it goes after, the russell 2,000 was up only about 1.5%. so a big beat in this case. >> so what are they doing right? joining us now is the fund's co-portfolio manager brian peery. pk. welcome. >> thanks for having me. >> what jumped out at us were the top holdings. talk to us about the selection and what comprises your portfolio. >> you know we use some tenets in all the stock that is we select and what they really are is we're looking for a market capitalization above 175$175 million. we're looking for a price to sales below 1.5. we're looking for increasing earnings on a year-over-year basis, and then we're looking for positive momentum over three, six, and 12-month periods. so that really kind of is the foundation for how we build the portfolio and then we'll take 50 stocks, we'll allocate equally to those 50 stocks and we hold them for hopefully roughly a year. >> but more specifically to kelly's question about your stock selection, we noticed at least in the latest revelation about your portfolio, your largest holding was southwest airlines, which is about a $27 billion, $28 billion company. number five is delta air lines which has a similar market cap. those are not small caps. i don't even think either one of those is in the russell 2,000. so why are they in your portfolio? >> you know we don't put an upper boundary on the companies that we look at. we're happy to take good companies whether they're in small or midcap space or whether in the large cap space. it just happens to be that this portfolio really finds its sweet spot generally in the small and midcap pace. so we do wind up with companies that have larger market caps but they tend to make up a smaller percentage of the portfolio. >> and clearly you like airlines right now. >> i think airlines are in a great position. you know whether it's united jetblue, i think they're all doing exceptionally well. obviously the consumer has a lower oil and so do the airlines and i think that that is really going to benefit them long term. there's cost cutting involved with a number of the airlines that we really like, and i think, you know, in terms of a sector for the next 12 to 18, 24 months we really like the group. >> and clearly we mentioned last year the russell lagged its other major averages the blue chip averages, the dow, the s&p and so forth. is this the year it plays catch-up? do you think it outperforms? what are the small caps going to do do you think? >> my belief is there's always some great opportunities whether it's large cap, midcap or small cap, but i certainly think the small caps have lagged this year and that really presents some opportunities. you know, as you're really looking at the valuations, we're still seeing a lot of small cap companies that, you know are attractive to us. you know they meet all our tenets of providing a relative value and good growth components, and they're doing well in the market. so, you know, we think there's some great opportunities out there if you can be selective. >> all right. brian, thank you for being here. appreciate it. >> much more to come on "closing bell." when we come back, the pros debate if car buyers are better off taking out loans as long as seven years even if they have the cash to pay for a car up front. you won't want to miss that one. it actually makes a lot of sense. >> first though here is sue her hara with our business news update. >> here is what's happening this hour. the republican controlled senate has failed to override president obama's veto of that bill to approve the keystone pipeline by a vote of 62-37. it needed a two-thirds majority or 67 votes to pass. and while that was happening, president obama was signing the bill that funds the department of homeland security until the end of the year. the end of the fiscal year. just a day after the house approved that legislation without any immigration restrictions. the fda has approved bristol meier squib's drug for lung cancer. bris tal mytol-myers is up 3%. mexican authorities have arrested the man considered to be the most important leader of a drug cartel. he was caught by mexican soldiers and the federal police near monterey. $7 million in rewards were offered for information leading to his arrest. you're up to date. that's the cnbc news update this hour. 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ask your doctor about cialis for daily use. for a free 30-tablet trial go to cialis.com we've got 30 minutes left on the trading session. the dow -- this would be -- if i just read our notes correctly, the first triple digit move for the dow since january. we had several of them in the month of january. none in february. no triple digit moves for the dow in february and this would be our first one for march. >> correct. we had nine triple digit decline declines in 20 sessions. and this could be the worst day for the dow since january 3st30th. the american love affair with cars alive and well. the dealers have the pricing power and that's pushing people into longer and longer car loans. >> our phil lebeau has more on that story for us. >> bill all day long we've been talking about this story, and i have been getting a lot of tweets. i have been getting e-mails from people saying are you kidding me? people are taking out seven-year loans? look at the latest data which comes to us from experian. it's about the fourth quarter. they look at all the loans in the fourth quarter and they basically extracted that the average auto loan was for $28,381 a record high. the average monthly payment a new high at $482. the real growth has been in those loans with terms of at least six years in length. when you look at all the auto loans in the fourth quarter and you break it down by term lengths, the only length that grew were those loans drawn for six to seven years in length. everything else dropped. that's because there's been a surge of people saying, yeah, i want to spread out my payments even longer. the reason why? because the loans in terms of how much they're borrowing continue to grow. go back to 2008. it was $24,444. since then it's been going up anywhere between 2% to 3% every year. most recent number 28381$28,381. that's the growth in terms of auto loans. part of what's driving it higher is the fact that suvs and trucks are in demand. they're higher priced than smaller vehicles that were popular back in 2008 and 2009. in fact, truck sales this year up 15.2%. compare that with the market overall which i think, guys is up 5% 6% over overall. people are spending more upcontenting these vehicles and buying more expensive vehicles so the loans are getting bigger. >> they're upcontenting them? >> yes. if you have the chance to load it up with the bells and whistles, do you want me to drop some dealer lingo in on you? they are putting everything they can into the vehicle. >> but the point about the dealers is really important. stay with us as we bring in two personal finance experts. we want to know if you're no longer getting much of a discount for paying cash for a car, is it a smarter financial move to take the longer loan at a low interest rate and invest that cash over the same time frame? >> joining us an old friend jonathan clemens, finance columnist, the author of jonathan clements money guide 2015. mark marty yak is with us from first wealth allied securities. jonathan, pay with cash or take out the loan? which way? >> depends what you're going to do with the cash. if you're going to take out the loan you will pay 3% or 4% in interest. can you have the cash you would have used to pay cash and invest it and earn more than 3% or 4%. you're not going to do that if you invest in bonds or if you leave it in a savings account. if you go in the stock market and you have a long time horizon, you probably should earn more than 3% or 4%. >> this is fascinating, insane telling. is the point here ultimately that people are going to use the purchase of an asset like a car to get into the stock market, and if so is that a prudent thing to do from an investing point of view or does this just reflect the fact these car loans to everybody out there and they might as well invest the money? >> it is a prudent thing to do. i don't think it's a problem because it's good consumer debt and if you have most of your cash, free cash working for you in the financial market specifically in equities as long as they're in a well diversified portfolio, take advantage of the low rates while you can. extend the term out, and even though the car is an illiquid asset, the car still is an asset that helps you perform at your work. you use it every day usually presumably to go to work. i believe it's a smart move to take advantage of the low rates and the extended loan term. >> but we had talked -- >> if you hold onto that vehicle. bill, i was going to say if you hold onto that vehicle. it's not a smart move if you're going to turn around in three or four years, a, either you get into an accident and then you're upside down or b, you look back and say i don't have the latest connectivity and it's not exactly the most stylish vehicle. then you're in bad chapshape. >> you're usually upside down on the vehicle. as long as you're going to hold the vehicle for that period, i agree. >> we had a guest come on this program who is a retail investor, jonathan and tell us this is exactly what he's done. he's done it with the first car. he's now about to do it again. i think at&t was the stock he bought ft. first case. he said i will keep going this as long as the conditions hold. >> borrow at 3% or 4% and invest in the stock market. i wouldn't actually be that concerned about whether the car is going to depreciate or not. we know it's probably going to lose half its value in the first four years. if you take a wholistic view of your finances you probably want to take out that loan and invest in equities. if you're going to leave the money in a savings account, pay cash for the car. >> i was raised by children of the depression. they paid cash for everything, and i don't know, i have got that gene in me. i don't like having a debt if i don't have to have one. you know for me it just makes sense to pay cash if i can up front. >> bill for many investors, many consumer paying all cash up front makes sense. however, for a lot of clients, they feel more comfortable not doing that having their cash work for them. as long as -- jonathan had indicated as long as that cash is not sitting in a money market account paying a very flat rate because after taxes, after inflation, you're not making any money in the money market account. you want all your money working for you. >> i still kind of can't get my head around this whole discussion because it sounds like the advice in today's environment is basically, yeah go ahead and do this and it just seems to fly in the face of common sense, but maybe it doesn't. maybe i'm missing something. >> well you have got lower interest rates, kelly. the interest rate right now on these 84-month loans, it's not 0% but it's pretty darn close to it. that's some cheap money to take out over the course of seven years. also, keep in mind that leasing right now, about 29%, 30% of all of these purchases in the fourth quarter, they were actually three-year leases. that's where a lot of people are rotating instead because they know that they're going to want a different vehicle in three or four years. >> that's the thing. usually if i did take out a car loan it was for four years. seven years, that's too much. i don't own the car that long. >> that doesn't really matter bill. the question is what else are you going to do with the money? >> i understand. >> if you are going to borrow don't necessarily take the auto loan and don't necessarily take it from the dealership. a better option for a lot of people is to take out a home equity line of credit because the interest on the home equity line of credit will probably be a similar range to the auto loan and it will be tax deductible. >> it makes me wonder about the auto sales number. i'm sure this isn't happening at a large enough scale to suggest we can't take them at face value but if some of the demand for autos isn't spurred by a fundamental demand for autos, we have to include that context in the months eye head. >> i would keep in mind this kelly, the average auto in this country is still at 11.5 years of age. there's still a lot of pent up demand out there. there are a lot of people who are driving around with cassette decks. i know that sounds strange to people but there are a lot of people who bill would be very comfortable in their car driving some of those older vehicles. they are going to be coming into the market and continue coming into the market. >> my eight-track works just fine lebeau. just fine. >> i just like the design of the older ones. thank you so much. >> thank you very much. >> phil lebeau, jonathan clements -- >> older for her is 1999. >> 1989 toyota land cruiser is my favorite vehicle of all time, preferably in light blue. >> wow. how specific is that? the dow is holding steady with a decline of 11 points. it would be the first time in six weeks that we've had a triple digit move for the dow industrials. >> still to come chris ailman tells us what he's buying to keep returns up. also ahead -- >> we expect the firms we oversee to follow the law and to operate in an ethical manner. too often in recent years bankers at large institutions have not done so. sometimes brazenly. >> wow, was that janet yellen or senator elizabeth warren talking? the pros will be weighing in on the fed chief's latest statement on the banks coming up. keep it right here. we're like a lot like a golf tournament here. doing this kind of live television. people can call in and say we broke a rule or we said something wrong or something. in this case it was our statistician saying wait a minute, bill we have had triple digit moves for the dow higher since january 30th just not a triple digit decline. we want to be specific about that. thank you, robert. >> that's the level we're watching with the dow off 106 with 15 minutes to go into the close here. >> bertha coombs red ink at the nasdaq as well. getting further and further from that 5,000 level right? >> fortunately, it's not anyone seeing you move a few pebbles you end up losing the tournament. we've been watching apple. it's interesting, nasdaq was at 5,000 on the day you were away bill. apple really wasn't the major contributor. today it is a drag and it seems as though folks are kind of cautious on apple ahead of monday's big event with the apple watch, and it continues to be a laggard. the big caps that said are kind of fractionally outperforming some of the other sectors. sandisk is big mover. one of the things about that new flash disk sandisk says it can provide storage on that huge new flash disk for less than $1 a gig. that cuts the price by about 50%. that's a huge move. some of the other old names like yahoo! and intel today are also bucking the trend. and really it's been a big day about health care. interestingly enough it was of the biotech that is moved first but you have also seen insurers and hospitals move higher on the back of some of the headlines that came out of the supreme court hearing on obamacare today. take a look at anthem. it moved higher along with the rest of the group today midday. back to you. >> thank you so much bertha. >> we were paying attention, bertha, but that land cruiser from 1989 that is a handsome -- >> it is a thing of beauty. >> it is a handsome vehicle. >> reset with a modern engine. make rick santelli could give us a hand. he could even get it running on natural gas. >> he is a whiz in the garage. >> 1 minutes3 minutes to go with the dow off 102. >> volatility continuing to knock stocks around. he's called the godfather of etfs reggie browne. he will be here to tell us where the money is going. but at t. rowe price we've helped guide our clients through good times and bad. our experienced investment professionals are one reason over 85% of our mutual funds beat their 10-year lipper averages. so in a variety of markets we can help you feel confident. request a prospectus or summary prospectus with investment information risks, fees and expenses to read and consider carefully before investing. call us or your advisor. t. rowe price. invest with confidence. now with the xfinity tv go app, you can watch live tv anytime. it's never been easier with so many networks all in one place. get live tv whenever you want. the xfinity tv go app. now with live tv on the go. enjoy over wifi or on verizon wireless 4g lte. plus enjoy special savings when you purchase any new verizon wireless smartphone or tablet from comcast. visit comcast.com/wireless to learn more. ten minutes to go. the dow is still down 100 points. you know exchange traded fund assets in the united states exceeded $2 trillion last year and it's projected that the -- they will grow to $5 trillion in assets in etfs in the next five years. and the majority of that passes through our next guests department every day. some have called him even the godfather of etfs. joining us now is reggie browne head of etf trading at cantor fitzgerald. welcome. >> thank you. >> great to see you. >> thank you very much. >> tell us where some of that $2 trillion and the next money flowing into the space right now is going. >> right now it's around fixed income and hedge to europe. everyone is buying fixed income etfs because the bond market is broken, etfs are not, and europe because the ecb -- >> did you just say the bond market is broken? >> etfs help price discovery help more efficiently. >> i'm really interested -- is that a contrary indicator sometimes, the amount of money going to fixed income etfs, could that signal that rates are going to be going higher here? >> well i think there's a duality. i think some folks are taking risk off and are putting money into short duration etfs, and then folks are yield seeking and they're going to longer data buying high yield. >> will i get more from an etf than i would if i just bought the bond outright? >> not necessarily. >> why buy -- >> you get a better price. price discovery is much cheaper and more competitive on etfs. you're buy bonds in a nontransparent marketplace. >> that can go both ways. we've heard goldman warning about a liquidity issue if rates move in a big way because of this price discovery. some people don't want to discover the price if interest rates are jumping. is there a risk in these products? >> absolutely not. the market is deep. it's liquid and there will be a price for everything. if you want to get out and rates are rising market makers like cantor fitzgerald will be there for you provided a two-sided market. >> we've talking about this with other etf players. the amount of money going into etfs these days instead of going into individual stocks, how does that change the nature of the market? >> i think it's making it more efficient. you have a lot of play efforts offering liquidity. price discovery is cheaper. right now in today's marketplace, a retail investor is getting the best bang for its buck because market structure in equities is very efficient and very competitive and super price approximates. >> quick word on this one of the trends we've talked a lot about is corporate buybacks. we're starting to see a lot more etf creation around this. state street just launched a buyback fund. power shares pwk. how much money is going into the products and do you expect to see more launches around this theme? >> i think you will see more acceleration. i know renaissance just launched an etf as well. i think you will see -- i saw a stat $46 billion in buyback activity. that will translate to more etf activity as well. >> and it's outperforming the s&p 500. you can understand the attraction there. >> how bhabout that. >> thank you. reggie browne the godfather of etfs. i want to be the godfather of something. >> i just want to be on my best behavior. >> we'll be back with the closing counsel downtown with the dow down 100 points. >> and then cal stirs, chris ailman. you're watching cnbc first in business worldwide. ameriprise asked people a simple question: can you keep your lifestyle in retirement? 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>> yeah. >> is that what the play is? >> the fed has not made any comments, bill to suggest that they're not going to have liftoff in 2015 -- >> they're still patient. >> that's right. we had such a big february. we looked at discretionary, technology, and materials were all up almost 8%. that's almost a year's return in one month. so very natural the first couple days of march we get a little bit of pullback a little resetting, particularly on the utilities down 7% in february, down another percent or so here in early march. that's all based off of an anticipation of higher interest rates. >> what do you want to buy here? what will be able to grow even as rates -- the anticipation for rates going higher continues? >> we think cyclical takes the lead. even though discretionary and tech had a good month, we like discretionary, tech and industrials. we'll be dented a little bit from the weather. we'll see that in probably friday's job report a little bit, but not materially, and we'll see it a little bit through march as we get the february data because of the third coldest february in history for the northeast. >> and more snow coming again tonight. >> that's right. >> believe it or not. nasdaq 5,000, did that matter? did it mean anything to you? >> no. >> could it signal something to traders out there? maybe it's time to start taking money off the table? >> i think it signals the cyclical leadership we've seen and the tech continuing to run as we've just talked about. the index level, not so much right? because if you inflation adjust the index level you should be around 7,000. the multiples are still much better than they were back in march of 2000 when we hit this last time. so i don't think it's anything more than semantics to be honest. >> are we to the point -- i was making the point earlier about utilities. you're paid to hold those stocks with the yields they have. doesn't that make them attractive no matter the direction of the price? >> it makes them attractive for the yield, but the valuations are pretty stretched in your opinion at this point. so you do start to get a trade-off at some point. >> all right. daryl, good to see you. thank you for joining me. so here we go. this could be the first triple digit decline the dow has seen since january for what that's worth and the nasdaq still pulling further away from nasdaq 5,000. stay tuned. the head of calstrs is stouningjoining kelly evans on the second hour of "the closing bell." see you tomorrow, kel. >> thank you bill. welcome to "the closing bell," everybody. i'm kelly evans. let's begin with how we're finishing up a second consecutive down day. after notching that nasdaq 5,000 close on monday, we're retreat retreating back further away from it. the nasdaq gives up 12. the s&p off 9, back below 2,100. you heard jack bouroudjian tell us he thinks it's going back to 2150. the dow the underperformer on the session off 105. its first triple digit decline since january. let's bring in today's panel and talk about it. jim lacamp is here from ubs. sara eisen and kenny polcari from o'neil securities joining us shortly off the floor as will "fast money" trader steve grasso. welcome to you both. jim, it's a little bit of a lull before the storm as you have discussed here at length. the european central bank tomorrow, we get payrolls on friday. is this market like a coiled spring? do you think it's about to move sharply one direction or the other? >> i think it very well could. it's all about the central banks right now. we had the people's bank of china over the weekend that made their move. the bank of india last night. if you look at the data though in the u.s. and you look at the economic data over the last three weeks, hadn't been that good. so i don't think we have to fear our own central bank as much as maybe surprises from other central banks. i think interest rates stay low for longer. i think the market goes higher. we just hit new highs. it shouldn't surprise anybody that the markets has sold off a little bit. >> before we get further into that because we haven't seen you yet, what was your reaction to the nasdaq closing above 5,000 on monday? >> look the nasdaq has got a lot of the better growth companies out there and a lot of the better valuations. if you look at the valuations versus your growth rate a lot of these companies are doing very very well. it's tech heavy. you've got really nice earnings coming out of conditions like facebook and apple. you have the biotextyiobiotech that is have provided a lot of leadership. a lot of people have compared it to 2,000. valuations are nowhere near what we saw in 2000 so i think it's healthy. small caps and midcaps are moving, too. so it's kind of a broadening out from the all s&p all the time market we had last year. >> we are seeing a lot of investors looking to rotate in europe. once the european central bank starts buying bonds, they're going to try to shove everybody into stocks into other risky assets and even a more compressed and aggressive time frame we saw in the u.s. >> in anticipation you saw the euro sell off agreesgressively. that helps european companies. everybody wants a weak currency. europe is getting it and that's another reason to buy european stocks. if you look at february, what a tremendous month that was for u.s. stokts best for the s&p since 2011. europe was even better and there you have to wonder on your central bank theme, do you by the stock markets where central banks are cutting rates and easing because it's happening everywhere except for the united states. >>druckenmiller's answer is yes. he said he's buying europe. he's buying japan and some of the european blue chip names are his biggest positions. >> we are, too. we're focused on germany but i think you have to do it with euro hedge because -- and you can do that pretty easily. there's a lot of etfs that will do it with a euro hedge. but you're going to get killed on the euro if you just buy them in dollar terms. >> we just heard that from reggie reggie browne. steve grasso joins us off the floor. good to see you. why do you think markets have retreated? >> if you look at everyone can come up with ten reasons why the market should sell off, right? whether you go from isis ukraine, greece, so every time we get a headline like that people are a little bit itchy on the trigger finger kelly. everyone has bet sense this market. it's defied all laws of probability. right now it's important to know that we did break that old high of 2093 in the s&p cash. closed a little above it but that was the old high that we stared at for so long. so this market is 2093 2190 i hate to oversimplify that but there's a lot of sellers out here that are looking to really push this market lower and today with that violation of that lower band i think they got a little bit overzealous. >> sellers looking to push lower, kenny? are you witnessing some of that? >> i think so but i thought it held at 2085. now it's rallied back. the market is trying to find its way. i think it's more digestion and consolidation that's happening versus kind of like a big sell-off. >> there were no fundamental reasons that were driving -- >> there's oil prices too though. and oil prices are a big player in the s&p because a lot of those names underperformed in january, outperformed in february -- >> oil prices moving up today. >> they went up. >> exactly right. oil prices moved up today, so therefore, that argument kind of doesn't work today. but in the end i think energy and oil is going to do very well. i think oil has found a bottom here. >> $51 i think we saw the settle around $51.50 on crude. again about $1 move today. it was a pretty big move. i wonder if you think that has anything to do -- i know we're looking at wti. we can look at brent here as well. talk about some of the impact we heard from netanyahu before congress this week that spread between brent and wti has blown back out. wti had a huge month in february. i'm sorry, brent did, moving higher. >> they both did. >> is that having the impact? >> i think oil prices are headed back down. i hate to disagree with kenny. he's a smart guy but the inventoryin inventoryies are skyrocketing. i know there's a depletion rate that you're going to have to deal with and all of that but if you look at what devon has said, rig count is way down but production is up 48% year-over-year and a lot of the other companies are saying the same thing that production is actually up. and until we start sopping up some of that inventory, i think prices are headed lower and the chart looks like it's rolling over. >> jim brings up an interesting point. ed morris was the first one to came out from citi talking about that term full storage. he's calling for prices of crude to be in the 20s, high 20s. a lot of this stuff is just trading around in shorts covering because a lot of these hedge funds have gotten squeezed. but i think ultimately you're going to see lower levels in crude. >> steve he said that when crude was trading -- when wti was trading in the low 40s and, in fact it's only built a base and moved higher. >> as a trader you know risk/reward coming from $110 down to $42, if you're short the name -- >> don't forget the impact of the dollar either. if the euro central bank gets aggressive dollar goes higher and the chart is rolling over on crude. >> it may put some pressure on oil. i think it's settled right here. >> he's from texas. >> i talked to oil guys every day. believe me. >> if you have the accent, you're more credible. no, we will hear from one of the biggest players in the industry on cnbc tomorrow morning. rex tillerson, the ceo of exxon will be speaking with the "squawk box" crew. interesting to see whether he kenny, to your point, being an industry that has to be fundamentally long is as bullish,s a s aas constructive on oil prices as you are. >> i think we will see kind of a depletion of reserves as we move into the spring and summer which is what will hold it right here. and then i think this global demand -- i think the whole global demand story is in fact intact. i don't think you're going to see this huge global slowdown. >> demand or global growth? >> global growth and by default demand. i'm of the camp global growth will grow. >> we have seen a cycle of emerging market central banks cutting interests. what does it mean to investors here? >> the last time i was on the show i was talking about the central banks. this has been the most aggressive year for central banks we've seen in decades. i think we will see it continue. i think europe will step in. japanese data has been really weak lately and i think you will see a return of abenomics. >> the last time we saw a big global rate cutting cycle it was in order to spur demand. abenomics, the piece of that structure that hasn't come through is the structural reform side. now are we in a situation where we need supply side reforms, if you will? >> absolutely. >> we've needed that for a long time and that's what nobody has done. we need the legislators to come up with fiscal reform versus monetary policy cannot do it. we're seeing that in this country. >> and the nikkei is at more than a 15-year high. so while you need it economically and fundamentally speaking, that doesn't necessarily what you need to make the stock market go up. >> that's a point. steve, we'll give you one of the last words here as well. what will it take for us to build and rebuild and maintain the infrastructure, the bridges in this country, all the important things to need to happen for long-term prospects. >> when you look at the supreme court, trying to hear an argument on the aca. when you start to see that the market was being tapped a little bit, and then hospitals started to rally off justice kennedy's comments so that the aca is not really going to be overturned, but we're looking out to a decision in june kelly. so if this market is that skittish that we're trading off something that's not going to happen, i would say lock in some profits right here. >> you mean -- you're saying not going to happen or you -- >> i don't think the aca will be overturned. >> wearing your health care policy hat this afternoon. >> well you have to be everything. ever since the collapse in '09, we have to be cfos, we have to be ceos, and we have to be coos. that's my health care cap. >> it's a point, steve. thank you very much. wearing a number of hats today and more to come with steve grasso and the rest of the crew on "fast money" at 5:00. they will be talking about the nasdaq with dan niles. he'll break down which tech stocks have more room to run and where you should be taking profits. don't miss it. straight ahead, stocks pulling back for a second straight day. is the market rally in danger of running out of steam after hitting new highs on monday? up next we speak exclusively with the chief investment officer of calstrs. find out how the world's second largest public pension fund is putting its money to work in this environment and the supreme court taking up a potentially historic case on obamacare today. cominge ging up, we will look at the fallout for hospitals, insurers and patients if the court sides with the plaintiffs. you're watching cnbc, first in business worldwide. tment when my teeth are ready? ♪ ♪ can it tell the doctor how long you have to wear this thing? ♪ ♪ can it tell the flight attendant to please not wake me this time? ♪ ♪ the answer is yes, it can. so, the question your customers are really asking is can your business deliver? you, my friend are a master of diversification. who would have thought three cheese lasagna would go with chocolate cake and ceviche? the same guy who thought that small caps and bond funds would go with a merging markets. it's a masterpiece. thanks. clearly you are type e. you made it phil. welcome home. now what's our strategy with the fondue? diversifying your portfolio? e*trade gives you the tools and resources to get it right. are you type e*? an american has been killed on foreign soil. >> when something means that much to that many people someone will want to find it. >> it's time. >> "dig" tomorrow at 10:00 on usa network. >> my next guest has nearly $200 billion under management. he's chris ailment, chief investment officer of the california state teachers retirement system better known as calstrs, the world's largest educators only pension fund. welcome back. >> good to see you, thank you. >> want to start here generally with your asset allocation. talk to us about how much of the fund is still in stocks, how much in bonds, how much in other kinds of products. >> we're still heavily tilted towards stocks and we're going to stay that way. that's our long-term strategy. we're almost 60% in stocks. we're very low in fixed income. you have had a couple speakers already talk about the challenge of low interest rates, and weaver got about 20% of the portfolio, 25% in private markets, real estate and private equity. >> and the piece about fixed income is really interesting, chris. i mean wouldn't it typically have been the case for you guys to want to be more in these products but it just doesn't make sense in today's super low yield environment? >> well, if you look back over time, calstrs had 25%, almost 30% of the portfolio in fixed income. you go way back and we were 50% in fixed income but as interest rates have been in this almost 20-year decline, we've been reducing our exposure over time. >> and you're global equities. we were just discussing investors who see much more opportunity in europe, for example. are you among them? >> we are. we're a little more cautious in europe right now. we have a home country bias so we're invested here in the u.s. almost two-thirds of that equity portfolio. compare that to our peers who are more global. for us the u.s. is still a base that we're making money in. we like europe but we're actually a little bit more optimistic, a little more optimistic about japan. it's tough to bet on abenomics, but hedge the currency but we think there's some opportunities in japan. >> and what returns, chris, are you guys still shooting for here? >> our goal is to earn 7.5% per year over a three-year average. so it's not every year all the time, but we always say it's a pace per mile on a marathon. we have a 30-year horizon so we're very long-term investors. >> do you feel comfortable that 7.5% for you guys will keep being doable? >> you know, kelly, over time i have been at this for over 30 years, and people used to say 7.5% was too low in the '80s and '90s. now they say it's too high. i think for a 30-year period it's actually a pretty good average. >> and one of the ways people are getting their lately i know is in -- we talked about fixed income but credit in particular where we're seeing corporate debt issuance at all-time highs. sometimes it's criticized as financial engineering, sometimes it's to get around tax policy and repatriating cash but are you among the buyers when we see the major corporate debt offerings? >> very little no. we're underweight in fixed income. we do have a credit portfolio and we're turning that over over time, but generally we're staying away from duration and away from fixed income risk and trying to take on some of the growth risk. we're not looking for a lot of growth but we think there are growth opportunities in the market around the world. you talked earlier on cnbc about real estate and i know they were talking about residential, but we think real estate will be a growth area low double digit returns over the next year or two. >> are you talking residential, commercial, both? >> for us we're talking about commercial. there are four basic food groups for us in real estate. office industrial, commercial/retail, and then apartments. we've done fairly well in all of those, and we think that there's some opportunity for that lease income to continue for the next couple of years. >> chris finally, what's your view on interest rates here? i imagine you have to have one implicitly i guess. are you staying away from fixed income because you think interest rates might start to move higher in the near term? >> we've been low in fixed income for over two years, so we were early and i would say last year we were wrong because rates actually went down. we are concerned that the long-term trend for interest rates is going to be higher. we're not worried about whether they raise rates a quarter of a point in june. we're really looking at the fact that the long-term trend will be for higher interest rates into the future. >> and finally just a comment on the extent to which these pension plans are now funded. i have heard people chris, say that the u.s. is actually going to need another financial crisis to break some of its obligations on both public and private pension funds. how comfortable are you about the long-term ability you have to meet these obligations for workers as the workforce continues to age? >> when it comes to calstrs, kelly, i'm actually very comfortable. because when you're talking about retirement you're not just talking about public employees, you're talking about all of us and so to say that they want to see another crisis that means all of the baby boom because i'm part of the back end of the baby boom we're retiring. we don't have an interest in seeing another crisis. we invest for the long term. retirement planning whether it's personal or for a pension plan is all about contributing over time and investing wisely. so i think they're very sustainable and very balanced programs. it's better to spread -- the biggest risk we all have to me is not the financial ricknlinancial risk, it's longevity. most people will outlive their money when they're in a 401(k). >> it's a point that comes up time and again on this program. everybody tries to figure out what to do. for now fascinating to see you guys, as mentioned 60% in global equity, only 15% in fixed income and what could be a pivotal year. thanks so much for being here. >> thank you kelly. >> chris ailman is the cio of calstrs. coming up, obamacare facing a make or break ruling in the security. millions of people could find themselves uninsured if a court rules against a key element of the law and that could make investors and hospitals and in insurers feel pretty sick. and also is "empire" presenting a realistic picture for an african-american owned entertainment company? who better to ask than robert johnson? he joins us exclusively coming up on "the closing bell." welcome back. obamacare on the line. the supreme court taking up the issue of who is eligible for subsidies. hampton pearson in washington with the highlights of today's hearing. >> hi, kelly. yeah, you know, the latest challenge to obamacare really centers on the tax subsidyies that makes health insurance affordable for millions of americans and the irs is in the middle of the controversy. they put out rules that say those subsidies should be available in all 50 states, essentially for everybody. but opponents say only residents of states that set up their own insurance markets can get government subsidies to pay those insurance premiums. now, inside the high court, justices tested lawyers on both sides. the court's liberals challenged michael car vin over his argument to limit the subsidy. justice ruth bader ginsburg said giving subsidies only to people in the 16 states would be quote, disastrous when it was the government's turn the sol lis ter was hit by questions about the law congress wrote for subsidies established by the state. justice alito suggested it might be possible to delay the effect of any ruling from the high court to give the states and federal government time to act. the government says about 8 million people in 34 states where there are only federally run health care exchanges would be impacted. we expect the high court to give us a ruling in late june. kelly? >> all right. that hasn't stopped people from speculating now about the outcome, hampton. thank you. let's take a look at what's at stake for the health care industry. all of america, and for investors. joining us now, dan mangin and deep. deep, do you have a sense of outcome or odds when this ruling emerges. >> we don't give odds on supreme court decisions. there are two things that are important, there's less premium dollars to go around which means that top line might decline year-over-year. and second from our perspective, the potential for adverse selection. everyone's pre yums go up. there's a potential the insurance companies might see alleviated loss ratios. >> dan, at the same time it was the flip side we saw playing out in the market today to some extent. i guess remarks by kennedy indicated perhaps this wouldn't happen, that obamacare would effectively stand? >> there was a bump on health care sector among hospitals and insurers today when it was reported that justice kennedy had suggested there's a serious constitutional problem if the plaintiff's argument is accepted as true and that's based on the idea they argue the federal government was trying to coerce the states into setting up the exchanges and the states risk losing their valuable subsidies if they didn't set up an exchange. if there's a constitutional problem that could lead the supreme court to say we're not going to interpret it in that way. we're going to accept the government's presentation that the states are owed the money regardless of who runs the exchanges exchanges. >> it appears that the supreme court is taking a politically angle. robertson in the first ruling said we're going to call it a tax. he made it conveniently expedient to keep this bill alive and this law in place. now you have justices on both sides, one justice saying it would be disastrous if we undid it, and the other one saying well, maybe we delay it and kick the can down the road like washington always does. so it appears to me that it's very little about whether this is constitutional or a legal issue and more now of a political issue. what do you think about that? >> i think you got to wait until the ruling to see where it comes down to how much is political and how much is legal. i would point out one thing you didn't mention is justice kennedy in the last decision sided with the conservatives. today he asked a question, a very pointed question, that suggests he might side with the quote, unquote liberals. that's an interesting point. the other point to take away is that roberts was conspicuously silent. i think he said something like 75 words of which 50 were irrelevant to the debate. so he's playing his cards very close to the vest. you might be right that it was a political decision last time that he might make a political decision next time. but people are closely watching kennedy after today. >> deep back to the company impact for a moment if this does happen, i would think that the insurance companies that are most exposed to individuals who use the subsidies would be at risk versus some of the one that is use companies. who is that? can you name some names? >> in general the industry in general has majority of its members coming from the groups, the employer-based insurance. our view is this suit will have moderate impact. a short-term elevation of earnings losses but on the longer term, one, they can renew this product and reprice it and, second majority of the earnings still come from the group so they can subsidize the losses maybe from the group business. >> kenny, we have to go but a word here. some of the s&p leaders on the session included hch and tenet, the hospital operators. >> my question to dan or to deep, whoever, was why are we even having this conversation in the first place? why does this loophole exist when they jammed this down our throat? why did they leave it open so that two years later we're now having a conversation where all these people are potentially going to get thrown out and rates are going to skyrocket? >> last word to you, dan. >> very few people were aware there was a potential loophole here. the federal government says there is no loophole it's maybe just an oversight, that they didn't make it clear that people could get the subsidies but the advocates say the plaintiffs in this case and their lawyers are saying, no no, no this was an obvious intention by congress. a lot of people don't agree with them and the people that drafted the law certainly don't agree. >> deep, did you want a quick word there? >> also the point to make here kelly, is the individual mandate is going to be weakened without the subsidies because you only pay a tax or a penalty if it is affordable. if it's not affordable the individual mandate is gone and you have a smaller pool of people. >> a reminder to which the subsidies are at the heart of the current affordability. thank you very much. really appreciate it. following that supreme court ruling. we'll hear more this summer. let's send it over to dom chu for a quick market flash. >> shares of pharmasick licks are moving higher. a report that johnson & johnson is close to acquiring the company. the bid would value them at a premium to current market levels and could be agreed upon in the coming days. this company has been doing well over this past week on bloomberg reports that both johnson & johnson and novartis were possibly interested in an acquisition. this is a report citing people familiar and the usual of a yacht -- caveats apply. >> speaking of health care. thanks, dom for now. we'll get exclusive reaction from entrepreneur robbed johnson, the founder of b.e.t. on hbo's move to offer its service without a cable subscription subscription. >> here is what's happening this hour. in an nbc exclusive interview, iran's foreign minister tells anne curry iran is very close to a nuclear agreement with western powers. it comes a day after israeli prime minister benjamin netanyahu urged congress not to make any deal with iran. the special house committee investigating the 2012 attacks on the u.s. mission in benghazi libya, will issue subpoenas for former secretary of state hillary clinton's personal e-mails. the move comes amid the disclosure that clinton relied exclusively exclusively-other personal e-mail account. 33 miners died in an explosion at a coal line in the rebel stronghold of donetsk in ukraine. and a new york district court rejected venezuela's bid to reduce interest on a $1.6 billion reward that an international tribunal had ordered it to pay exxonmobil as compensation for nationalization nationalizations nationalizations. and squawk box speaks with rex tillerson tomorrow morning at 6:00 a.m. eastern time right here on cnbc. that's your news update for this hour. "closing bell" with kelly returns after a quick break. every day, our teams collaborate around the world to actively uncover, discuss and debate investment opportunities. which leads to better decisions for our clients. hour. 's a uniquely collaborative approach you won't find anywhere else. put our global active management expertise to work for you. mfs. there is no expertise without collaboration. ♪ help join a continent with nearly 3 million rugged square miles with a single broadband connection. when emerson takes up the challenge it's never been done before simply becomes consider it solved. emerson. in new york state, we're reinventing how we do business so businesses can reinvent the world. from pharmaceuticals to 3d prototyping, biotech to clean energy. whether your business is moving, expanding or just getting started... only new york offers you zero taxes for 10 years with startup ny business incubators that partner companies with universities, and venture capital funding for high growth industries. see how new york can grow your business and create jobs. visit ny.gov/business welcome back. it is unheard of these days that a tv series sees ratings growth for six straight weeks, but fox's latest hit "empire" which dedistricts the life of a hip-hop mogul and his entertainment company has done that. as we sit here how realistic is this fictional ipo? here to talk about that and much more is cnbc contributor robert johnson who founded b.e.t. >> thanks for having me. >> are you a fan of "empire"? >> it's a great show and the cast is terrific and it's sort of a first-time ever show showcasing really dynamic, powerful african-american personalities. >> were you involved at all in its creation? >> no not at all. i just enjoy it like everybody else. >> let me quote "the washington post" here who says trying to figure out what's going on behind the success, is it the diversity? is it the music? is it the acting? is it taraji p henson? what do you think is the key to the success of this program? >> i think the key to the success of the program is that for first time in a drama you're seeing powerful african-american men and women who control and influence a lot of individuals in a powerful way. pick up the phone and call president obama. able to engage in things that sort of threaten other people in a sometimes legal and illegal way. it's a little bit more like "dallas" and "dynasty" with black personalities. instead of oil it's talent and intrigue. >> does it give you goose bumps after? does it reflect the reality as you have lived and experienced it for taking a company public? >> you know, taking it for the fact it's an entertainment show you have to give it a little bit of a poetic justice on that one. the point is if you're going to take a company public you got to have a couple -- search reasons. the first if you started a business like terrence as the actor in the movie did -- in the show did, one thing you want to do, can i take some money out? well, he's dying so i'm not sure what he did with the money he takes out. the second part is you got to know what you're going to do with the money so you can tell your shareholders if i raise this money i will grow the value of your shares. it seems to be a little bit light on the question of why would you take a company public unless you're going to use that money for growth capital or acquisition capital, and so i think that's probably where it sort of falls down in terms of being realistic. it's almost as if i'm taking it public for some legacy issue, but shareholders don't buy legacy. shareholders buy opportunity. and i think they should be talking a little bit more about of who is going to run the company. the other thing is there's no way you take a company public without disclosing that the owner is likely to die. or at least if he dies who is going to take his place, and failure to do that in the event the company has problems or some shareholder feels that the company suffered because he didn't know the owner was ill and passed away you've got your first shareholder lawsuits. so that's -- >> i can't wait until that episode of the show. i want to ask you about your new venture, movie channel.com and pivot and talk a little bit about the unfolding landscape with online distribution. >> well as you know kelly, i started black entertainment television at a time of satellite and cable as the technology that allowed cable companies to -- basic cable companies to become dominant players in the media land scape. when you look at the internet and over the top streaming, you've got to play in that space because that's where the audience is going, and so content has to move where the audience is taking that content. so the urban movie channel really is b.e.t. 2.0, if you will, where i'm saying there's a huge african-american market out there looking for content that appeals to their interests, and there's a huge underemployed african-american talent pool out there looking to go to work. if you can get african-american consumer who have proven in the way that -- the amount of money they spend on movies and music and other things that they're willing to pay for specialty content to their interest and you got a talent that's under work and you put those two together and have an internet system where there are no gatekeepers, where there's nobody keeping you from getting to your customer you've got a pretty powerful opportunity, so the urban movie channel on rlj entertainment is exactly that. it's a way to deliver content to an audience and provide talent a chance to showcase their talent and make money, and at the same time do it in a way where the internet becomes an open network that has not only national potential but global potential on any device that you want to see it on. >> quickly on this issue of gatekeepers and the open internet, i would imagine as a startup you support net neutrality, what the fcc has done here or have you gotten involved in this issue? >> well i think net neutrality is a critical cornerstone for emerging companies who want to engage in over the top streaming. you want to be treated equally out of the gate in terms of access to your customers and so your technology is just as superior just as fast as anybody else's technology. and i think the fcc has gotten it right on the first approach to this. the internet has become for most people and more and more so a utility. it should be regulated like a utility but not necessarily based on the old communications act where you were dealing with the telephone companies and dial-up service. i think the 21st century commands there be some changes in the law to reflect the technological change that is move so fast over the internet. >> and a reminder again today with hbo, this partnership with hbo now and apple that everybody, as you said is spying the trend getting involved. your involvement is urban movie channel.com which you told me is b.e.t. 2.0. so for your thoughts on that and "empire," robert, thank you so much for being here. >> appreciate it. >> robert johnson. and "empire" airs at 9:00 p.m. tonight eastern and pacific. >> coming up a college course it seems most parents would fail. we also have the latest installment of our "million dollar home" series. this time we're hitting chicago. see if you can pick the home hitting $1 million from our contenders. coming up next. and "empire" airs at 9:00 p.m. coming up next. welcome back. the million dollar home series is back and it's with a twist. this time around we're taking you in three homes in the same city but only one is listed for $1 million. the other two are priced either higher or lower around our panel will guess which one is the truly million dollar home. our diana olick with a snapshot of the housing market in this featured city. >> recession took a lot of wind out of windy city real estate but the good news is that supply appears to be coming back to this market. that won't do much for price gains but at least it will juice sales a bit. foreclosures have dropped nearly 25% in the past year which means there will be fewer investors to compete with on the lower end. the city is benefiting from a surge of millennials heading to downtown apartment rentals but with rents soaring they could soon turn into buyers. how do the stats stack up? $187,500 is pretty good compared to national average. those prices are up 4% year-over-year. as for supply, up 15%. that's good but we're still low on supply. we could use even more. unemployment rate 5.6%. that's good right around the national average so let's see what's on the market in chicago. >> located in a classic chicago neighborhood, this 4400 square foot home was recently gut renovated. there are five bedrooms including a master suite with a dream bathroom. the chef's kitchen boasts a double oven and marble countertops. there's a downstairs family room with heated floors. >> with a panoramic view of the lake, this 2,100 square foot condo on chicago's gold coast offers a large open floor plan that includes a newly renovated kitchen and dining area and three bedrooms and 2 1/2 baths. the full amenity high rise has an outdoor pool and deck. >> a brand new brick construction this 3,400 square foot quad level home has floor to ceiling windows throughout. there are five bedrooms and 3 1/2 baths. the double oven and quartz countertops add nice finishes to this chef's kitchen. there's also a fully finished basement and head on to the roof deck to enjoy the city views. >> i think it's that one. >> that one. >> all right. so which of those chicago properties is the actual million dollar home? we're asking cnbc contributor and super broker dolly lenz joining us post nine. >> well you have all guessed it already. >> wait -- >> don't say it. >> we know what we like. we want to move into the historic treasure. agreed? >> but that's above $1 million for sure. >> compare and contrast. >> compare and contrast. the historic treasure is the largest. it goes in order by price. which is not the norm. in the other cities it wasn't true. so here we're in order by price and you're right 100%. the largest is the most expensive and that's a gorgeous home. >> beautiful. >> the detailing, the wane skoting, the woodwork everything is amazing in that house. >> this one is not the $1 million home. can you tell us how much this goes for? >> 1.345. >> and it's a lot bigger than the other one. >> it hasn't sold yet for that number so we don't -- >> that one has not. but i have to tell you the one that is a million dollar home has sold -- >> which is the lake view condo or am i spoiling the surprise? >> you guessed. it's the modern oasis. >> the last one. >> exactly. the one that's 3,400 square feet. beautiful, beautiful home as well. modern versus the traditional fireplace story. but just all the houses there were amazing. my favorite is the condo. >> how much is that one listed for? that's the one -- >> just over $1 million. >> that's also over $1 million. >> just over. so that's -- >> that's $500 a square foot. >> which is phenomenal. >> chicago is so much cheaper than new york. >> not only that but look at the median price in chicago of the four cities we visited is the lowest. lower than baltimore. >> you should come down to texas. our houses are a lot cheaper down there. >> well depends where, right? >> in ft. worth, $125,000. if you're $200 a square foot you're talking a very nice home in ft. worth. >> and no taxes. >> no stated taxes. >> what are you buying in chicago for $187,500? >> well, you know you're buying a nice little house, probably not in the center of town a little bit outside of town. you're buying a nice house for $187,500. >> are you? >> dolly, thank you. >> one more thing. the way these are assessed it's always about location location location. views, right? and lastly liveability. so the views the men, they want the views. they don'tliveability, don't show a woman a house that doesn't have liveability. >> dolly, thank you so much for coming down here. dolly lenz. if you missed any of today's action, you can see all the million dollar homes on cnbc.com. oil prices rallying just over $1 today. settled over $51 a barrel. crude is still down 45% over the past six months and cnbc's becky quick sat down with exxon ceo rex tillerson earlier to discuss what it will take to get oil prices heading higher. >> we need a pick up in market demand, and if you look at the performance of the u.s. economy, it's okay but it's not robust. europe is still struggling with declining demand and china has actually slowed its rate of energy demand growth. so all of those are conspiring to create this imbalance, which is why i've indicated to people i think people need to be prepared to live with this for a while. >> oh kenny. i think he's siding with jim on this one. >> but he didn't say it's going lower. he said here. did he not say here? >> you can watch -- >> we're going to have to live with lower prices. >> the rest of that exclusive interview is coming up tomorrow so everybody better set their alarms here on "squawk box" at 6:00 a.m. eastern. you can get the full context from rex tillerson, the ceo of exxonmobil exxonmobil. how much are people saving for yir that's coming up next burning up the hot list. i think about the shape. i think about color. i also think about sound. i take it into my brain and i think about... ..what would it look like to me? my tin man has a big toe the size of a house. the lion is small like a toy poodle. it has webbed, duck feet. and he is very scared of everything. my scarecrow has wooden teeth... his fingernails are really long. and his clothes have tubes on them. ♪"somewhere over the rainbow"♪ ♪"somewhere over the rainbow"♪ and that's dorothy. she looks like me. everyone has a favorite movie. now people with visual disabilities can find theirs. comcast is proud to introduce the first talking guide. from xfinity. remember the outcry when the president was planning on taxing college savings plan. might not have collected much in taxes. that story on cnbc president come hot today, isn't it in. >> college savings plan big area of interest for our readers. sort of good news and bad news. the good news is money going into them this year increased by about 9% to about 247 billion. great, and the number of accounts increased 4% to about 12 million, even better. the average amount in your 529 account is about $20,000, and according to the most recent cost numbers, that will cover maybe one year of public college or half a year of your typical four-year private college, so have fun with that one. another story we're getting a lot of traction on chinese goods, do they always have to be bad? no, but american companies have the responsibility to trust by verify through the contract. and speaking of which out of the pork crisis we have a story looking at more retailers looking to source in the usa because they got really fed up with that pork crisis. that's my big three for you, kelly. >> i'm looking at kenny here. >> i've got one quick question the 529 story. the fact that you point out that there's only 20,000 in these accounts are those accounts that parents are looking to use next year or are those accounts that still have 10 or 12 years to go? >> those are some that still have a number of years to go. it's the average of all the time links which is a good question. >> right. >> here's a scary stat though for you, kenny. out of those accounts more than 20% didn't have any added to it this year so a lot of people start them. >> right. >> and then they don't add to them. >> that's the mistake. >> that's the dangerous part. >> it's putting pressure across the college complex. sweet briar college, a bunch of girls went there, closing because they couldn't offer enough financial aid because if you can't do that students aren't coming. thanks. i think he has a future race a wwe announcer. big banks are taking broadside shots. the latest from none other than fed chair janet yellen. up next what she had said and what people on wall street had to say about that. fed chair janet yellen in, case you missed, it criticizing the culture of the big banks and in a speech tuesday night in new york city, here's a spilborghs of what she had to say. >> we expect the firms that we oversee to follow the law and to operate in an ethical manner. too often in recent years bankers at large institutions have not done so. sometimes brazenly. these incidents, both individually and in their totality raise legitimate questions of whether there may be pervasive shortcomings in the values of large financial firms that might undermine their safety and soundness. >> all right. mr. ubs, cultural problems? >> i hate to say this, but i think she's absolutely right. this is one of the things that really gets me angry, and the reason it is -- that it gets me angry because the regulatory sort of dam cleese swings way too far the other day. currency scandals and you have 4x scandals and libor scandals and these firms keep getting in trouble and the people who pay the price are the ones who go to work every day for these firms. have you to sign a form to go to the bathroom these days in the industry. >> or shareholders. >> or the shareholders exactly. >> but in fact have you to sign that form and the regulation went all the way left because in fact she was right. >> yes. >> i think that was all part of the whole crisis thing. i would like to think by now, after we've gone through it, that the controls tend to be a little bit tighter. >> still in the news. you still have currencies scandals, 4x candaeles. >> got to go. >> aren't these scandals that happened and are not dragging out. >> the question is what she going to do about it? she is the banking regulator and the jobs matter to these companies but what can she do? focused very much on what they call liftoff higher rates. >> got to leave it there. almost sounds like elizabeth warren at the podium. thanks for your insight. thanks for being here this afternoon. "fast money" coming up in a few minute. melissa lee, what's on top? >> up 50% in the past two trading sessions. we've got the answer to that. >> all right. over to you guys. >> thanks, kelly. "fast money" starts right now. live from the nasdaq market site overlooking new york's times square. pete najarian dan nathan karn finerman and dan grasso. you heard all the rumors that the apple watch may be a massive failure. survey results that back up those claims. that's ahead. plus biotech's orrexgen and tomorrow could be a huge day with the bce and stress stests on tap. we'll hear from one guest who says the euro could drop another 20% against the u.s. dollar.

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