Transcripts For CNBC Power Lunch 20150421

In houston. Energy is a big story today as it has been every day recently. We will get to brian in a minutes time. First we begin with the growing fears of how vulnerable airlines are to hackers and whether a plane can be brought down by a cyber attack. In San Francisco, live at the largest Information Security event in the world, what are we hearing . This is as you say a big Cyber Security conference. They are just about to open the doors for the beginning of the conference, but controversy and researcher Chris Roberts was on the way to the conference last week. He tweeted out information alleging that he can hack into airplane cockpit systems based on some of the infrastructure inside an airplane. He tweeted that out on wednesday when he arrived at his destination on wednesday. He was met by security at the airport and detained by the fbi for several hours of questioning and conversation. He also said that on saturday as he was on the way here to San Francisco to come to this event, he was given notice by United Airlines that he was not going to be able to be allowed to fly on united. United banned him from flying on the airline based on the tweets and the allegations that you can hack into the systems as a passenger on the airplane. I spoke to Chris Roberts a few moments ago and heres how he described how it happened. I was flying to syracuse via chicago from denver. Tweeted when i was midpoint between denver and chicago and london into syracuse was everyone was told to sit down. I got taken off the plane. Very civilized and nice guys and a third joined them and we had a several hour lengthy conversation. We have talked to the fbi about this and they have given us an official no comment on Chris Roberts and the allegations. We have reached out to united. They said there is no truth to the allegations that you can hack into the systems. Because chris robbers was putting out the tweets in the Public Domain they decided it would be inappropriate to allow him to fly on united. When i was talking to chris, i asked him if he will ever fly united again. As far as he knows, he has been banned for life. We will have to get more information. He was able to get here flying southwest. Thank you very much. Lets bring in phil as well. You cover the airlines for us. Whats your take. What are u. S. Carriers saying about this . I asked people and we have done stories like this in the past. Pretty much what you hear is not only the airlines but the plane makers as well. The ifd systems inside airplanes or the Inflight Entertainment or communications systems, those that are used when you are trying to send email in the air, those are separate and kept separate from the flight and Navigation Systems and therefore it is improbable for somebody to go through the ife into the flight and navigation system. Everybody said you cannot make a 100 guarantee, but they have the protections in place to keep planes from being hacked while they are being flown in the air. I want to change gears because there is lots of news vonding gm today. You have the Green Light Capital taking a new stake nearly a year after selling off the position and also its rivalry with toyota with new sales figures. What are the new numbers telling us . Gm released the q1 global sales up 1. 9 . When you look at the break down in terms of the four Major Regions of the world, china and north america up 9. 4 and 6. 1 . Those are the number one and number two markets in the world. They easily upset the weakness and europe continues to be a mess. They are making improvements there, but overall they are struggling in large part because look what happened. They have been kput in half. As you look at shares there is the potential with sales topping 2. 4 million worldwide. There is the potential to make it to 10 million vehicles in annual sale this is year. That would be a record. Its not enough to catch up with volkswagen and toyota, but it will be showing a nice gain if they can sustain this. If is the question. Thank you very much for that. It is a monster week for earnings. Lets begin with harley davidson. The iconic motorcycle maker beating on the bottom line but revenue missing expectations. Sales outlook for the year and the stock as you can see is getting whacked to the tune of nearly 9 . Under armor is under pressure down by nearly 5 . The apparel maker meeting profit and revenue estimates, but the cells outlook is disappointing. The stock is still up about 23 this year. Lockheed martins profit dropping 6 because of lower military spending. They managed to top eps estimates, but revenue fell short. A common theme this season falling 5 . The stock today only down by about 3 10 of 1 . As we mentioned yesterday and continue to see today, one trend is emerging this season. Companies missing Sales Estimates and one factor to blame here is the stronger dollar. Era sizen is taking a look at how the dollar is impacting earnings. What have you seen in. The excuse du jour. Every company with any presence overseas is feeling a hit. Even under armor that has 12 of the sales abroad. Three examples to show us. It gets 2 3 and saw an 8 drag from the dollar on top of that. It expects it to shave 80 Cents Per Share higher than 60 cents it predicted. They called that a big impact. Du pont a company that sells chemicals and seeds said sales fell 9 and 6 of that was the drag from the strong dollar shaving 25 cents a share off of earnings. A challenging currency and market environment in the words of alan coleman, the ceo. Kimberly clark another example. They noted substantial head winds from currencies in the press release. The impact there and a 9 drag on sales in the quarter. It could be as much as a 20 hit for earnings for the year. 20 . Now the reaction results that shine through, like Kimberly Clark and nike for companies that have headaches and challenges, like ibm or harley davidson, the strong dollar is just exacerbating the trouble and gives investors another reason to think about selling. You said it. The excuse du jour and in many cases its justified. Lets go out to sue herera for breaking news. That are comes to us from the department of justice. The department of justice today is charging a futures trader with illegally manipulating the stock market contributing to the may 2010 flash crash. That is the day when the dow jones dropped 600 points. Here are the details. They are seeing United Kingdom and they were arrested in the United Kingdom and they are seeking extradition and charged in a federal criminal complaint with one count of wire fraud and ten counts of commodities fraud. One count of spoofing a practice of bidding or offering with the intent to cancel the bid before it is actually eh cuted. That is called spoofing. He allegedly used an Automated Trading Program to manipulate the market in the mini s p 500 futures at the cme. He employed according to the doj and the allegations, dynamic layering technique to protect the price by allegedly placing simultaneous large volume sell orders at different price points known as layering. He created the appearance of substantial supply in the market when there was not substantial supply. She charged with contributing to the may 2010 stock market flash crash and we will get you more detailed when we get them. Meanwhile, lets go down to the floor of nyc. Whats your reaction to the news . This is very interesting and out of left field. The sec did a very large and comprehensive study of the causes of the flash crash. Their conclusion was much of the problem did indeed start in the e mini futures and implied several times that several orders throughout various points of the day for various people including a mutual fund manager, but they never implied that anybody was engaging in anything that was abusive or manipulative. They are legal terms under the 1930s. Thats obviously what they will go after. I would like a little bit more about exactly whether this person was doing all of this on this one day. It sounds like there multiple charges meaning it was more than one particular day going on. These spoofing allegations have been levelled for a long time in the market. Its the layering allegation that is the doj is pointing to specifically. They are putting it in quotes called dynamic layering and apparently as part of this scheme, he allegedly modified these orders and put in an enormous amount but modified them so frequently they remain close to the market price and canceled the orders at the last minute without executing them. It sounds like from this it is implying that he had an enormous amount of orders outstanding. Heres what they have to show. What they talk about is multiple sell orders at different points. There people who have that all the time in the market and there is nothing illegal about it, however if he had the orders with no intention of executing him, but to move the market around, that would be abusive and manipulative for sure. The difficulty would be being able to prove that he was clearly trying to move the market around with no intention of executing a lot of orders. They used the words large volume, different price points frequent trading and very close to the market price. There allegations here that indeed he did try to manipulate the market and that helped to contribute to that flash crash. Come in here. Thank you. Listening to the conversation, there so many Unanswered Questions and a lot of legal things here. Heres the big question. How would it be possible that one individual can put these orders in that would roll the market over into a false bid period. I find it difficult to believe that one person and are they with a big bank or with a High Frequency firm. Who would have the power to put that order flow in or fake order flow or allegedly they would have the power to manipulate prices. Let me give you an example. If you go to a car dealership and they have a ka marro on the lot and i say i wanted 1,000 and i put in the orders and others are turned away and prices spiked and i say just kidding and it goes down. Its a simplistic analogy. Who is this one person that would have the market moving and Market Making ability to move the market this much . They use the term Automated Trading Program. He had an algo rhythm in there. This is the person they are referring to and thats what he did. It was widely discussed that a poorlytimed algo rhythm could have been contributing. Nobody ever talked about a guy over in england. This is a little bit of a surprise. Poorly timed. Think about what we have talked about already. You talked to the guy in california who said he hacked into the United Airlines flight. We are talking about one person who was able to create an algo rhythm to manipulate the stock market. In one block of television we talked about manipulating an airline with human beings aboard to manipulating a stock market. Whatever this might be is ridiculous. It is ridiculous. There a lot of questions we need answers for. Thank you very much for all weighing in and thank you for the breaking news as well. If you hear anything more. I tried to read through the rest of it if there is anything more substantial, i will bring it along to you. Back to you. Thank you. Americas Energy Future they are gathering to discuss how to deal with the plunge we had seen in oil. You can clearly see Brian Sullivan is there with them in houston. Brian . Normally in an oil field, i have a rig behind me and im in a nice hotel or a suit. Its a big conference. The executives and ceos are there. Pioneer ceo will join us the. Here is the biggest player in the middle. One of the biggest in the world. We will ask him where he sees oil going and the layoffs and what will happen in the industry. A lot to talk about. Talk about dynamic layering. We will door that in this show and we are back after this. Take a look. The lightest or nothing. The smartest or nothing. The quietest or nothing. The sleekest. Sexiest. Baddest. Safest,. Tightest,. Quickest,. Harshest,. Or nothing. At mercedesbenz we do things one way or we dont do them at all. The 2015 cclass. See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz Financial Services. Amazon introducing a total of travel bookings. The shares are up by 7 10 of 1 . Up by nearly 10 to all time highs back to the ipo in 2009. Back to the Network Security company on earnings and revenue. Israel offering to buy myelin for 40. 1 billion in cash and stock. They will be joining us with more on what this deal means for investors and the entire pharmaceutical sector. Since oils nose dive in october, many oil and Gas Companies have taken a beating. Pioneer Natural Resources have tumbled 24 . Stock has gapped team up more than 16 and it is down today. Brian sullivan is live in houston for a one on one. Over to you. A year and a half ago, you and i stood in an oil rig and 18 months later its amazing how much things have changed. In laymans terms, what in the heck happened to set prices spiraling . Its great to see you from our days in west texas. Obviously saudi arabia made a change. We had a supply and demand mismatch last year. Too much supply. A lot over the u. S. Demand was down about 700 billion barrels a day. They decided not to repeat. They acted as a swing producer. This time they said we want market share. Simple as that. Let the u. S. Supply be the new swing producer. Its interesting because we look at pr production and we get so many tweets from viewers. If oil prices are down by 50 , why is product at an all time high . Is it a giant game of oil chicken . It takes about six months to see a new hoff zontal from the time you saw in west texas to the time the welcomes on and production takes about six months. We have seen production five weeks in a row stop growing. It flattened at 9. 4 Million Barrels a day. We are starting to see the effect from 1600 oil rigs to 730. It will drop more and in the next few week you will see u. S. Production start declining. Do you believe in six months time we can see 9 mill bon barrels a die. 9. 1, 9. 2 billion barrels a day. Thats a lot of oil. Thats why we need the ban lifted. Is there a real risk that storage could be filled up . If that does happen wow. We are selling and prices will collapse. There is a small risk. I think its low and oil bottomed at 42. We have the iranian negotiation that is our president wants to do. 700,000 barrels at least over the next 12 months. We probably have another 8 million to 9 billion barrels a day storage. The ceo will speak about it later. Oil exports. Have you been to washington to talk to high ranking officials about ending the ban . I went about three weeks ago and we are speak to the house and senate and testified in the house. Just recently. Also we are seeing all the officials in the obama administration. We are making progress and educating people and becoming more and more optimistic. Can you put odd says on it . About 40 to 50 . A low chance and because of the Election Year next year and High Percentage by early 2017. Every show that grace our show. 12 months from now, will ois prices be higher or lower . Definitely higher. Next time we will go back out in the field. I prefer that. That makes two of us. Back to you. We will get back out to you shortly. Vaccines and autism. Is there really a link . Will the Antivax Movement stay locked in a bitter battle. A new report is out adding more fuel to the debate. You will need to hear this. Many are using social media like twitter trying to become the next big investing stars. A valuable investing tool or a mine field . Still ahead. It took tennis legend serena williams, fencing champion Tim Morehouse and the rockettes years to master their craft. But only moments to master paying bills at chase. Com. Depositing checks at the atm and transferring funds on the mobile app. Technology designed for you. So you can easily master the way you bank. You can call me shallow. But, i have a wandering eye. I mean, come on. National gives me the control to choose any car in the aisle i want. I could choose you. Or i could choose her if i like her more. And i do. Oh, the silent treatment. Real mature. So you wanna get out of here . Go national. Go like a pro. Thank you for being a sailor, and my daddy. Thank you mom, for protecting my future. Thank you for being my hero and my dad. Military families are thankful for many things. The legacy of usaa Auto Insurance could be one of them. Our worldclass service earned usaa the top spot in a study of the most recommended Large Companies in america. If youre current or former military or their family, see if youre eligible to get an Auto Insurance quote. Welcome back to power lunch. We expanded and traders are paying attention. Look at the chart of tens. We are still driving around the block. We always seem to end up with the parking spot with regard to closing yields. Lets look at the spanish market. You can see the impact with a lot of issues moving up a bit. The threeyear note and lets look at a march 1st chart. They seem to be losing ground and paying attention to the 119 handle for a close. Back to you. Thank you very much. Rick santelli. 50 a great new series is online and its set and ready for clixs on cnbc. Com. Its about marijuana and money. Heres a look at what you will find online. We need an accountant so bad for this industry. In 2013 i started a separate firm to service the marijuana industry. I now have well over 100 Marijuana Dispensary clients and grow operations. Today my client base and marijuana includes people who grow and sell who have retail as well as manufacturing facilities where they grow the marijuana. Edibles companies and concentrate companies and people who buy and lease the equipment to do the extraction process. People who want to use the real estate for marijuana. 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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 . Per im sue herera and here are your cnbc futures updates. Illegally manipulating the stock market contributing to the flash crash when the dow jones plunged 600 points in five minutes. The u. S. Is seeking extradition. Kateicly in a few minutes has more details on the charges. A drain derailed this france after being struck by a truck. 37 people were injured. The passenger train collided with the truck carrying Farm Equipment on a rail crossing on the way to paris. Five train cars derailed. A team of scientists may have discovered the way of shrinking tumors that could have a profound effect on how it is treated in humans. A hire us attacks the humor while stimulating the immune response. A farm in the United Kingdom when a fivelegged lamb named jake was born. He was hopping around in his pen. He is healthy and doing well. Thats your c, nbc news update at this hour. Back to you. Always great to end a segment on a fivelegged lamb. Serious news. What a cute guy. No mint jelly jokes please. You think the markets are not having a good day. Bertha coombs, thats not the case with technology that is looking strong right now. Not the case at all. It led by chips and biotech. Research much better than accepted. Its one of the big gainers. You have amazon with the new high. The best performer up 6 for the month of april. All the talk about deals. Not just myelin at all time highs, but the topic. Gilliad has so much and needs to make an acquisition. Thats one of the likely targets. The nasdaq is working on the all time highs. The high this year is 50. 26. That would be bullish. Thank you very much. Is the u. S. Still the best place to invest . Right now we are seeing emerging markets outperforming the u. S. And the world. Now is the time to shift out of the u. S. Into other markets. Here with me the chief executive and investment officer. To aing is he is mr. Emerging markets, but none the less he will agree with what he said. To be fair this is a positive year for equityiesequities. And the bull market continues in the u. S. You have this great combination for low oil and Interest Rates and excessive pessimism. At the same time the u. S. Is under performing in other parts of the world like asia and europe. Do you think that will continue so it would be better to look elsewhere . We think there is potential for a catch up trade and a lot of events whether its greece or other geopolitical concerns. We think at this point it could be a time where the u. S. Catches up. What are about you . Here is the fact. Asia and the emerging markets. There is no good fundamental reason. The government is doing everything it can. It has a strong and growing market. There is a distinction between the economy and the stock market. The economy i think is going to do better. But the stock market is something different. That would be healthy. That would be the summer and the fall. Most corrections seem to happen in the summer and the fall. That would be a great buying opportunity. We need to leave it there, but thank you very much for joining us. Go to power lunch to get more and see what the Market Outlook is for the second quarter. Over to you. Its really unbelievable. Thank you very much. We are here to talk about oil and this has come down. You are reading the indictment right now. The 33 page indictment in london. The more we learn about him, the more interesting this is becoming. Its astonishing. I was just on the Conference Call with the head of enforcement. You are right. There was a concurrent doj arkz and he was arrested in the uk by Scotland Yard and currently in custody which is why they unseal these documents. This sole practitioner was the fifth greatest volume trader just two days before the flash crash in 2010. His order modifications on the day after that was 60 of all the order modifications that took place in the contract. The next day, the cftc and others allege he played a major role by putting up fake sales orders to fool the market into thinking there was more selling pressure than there was. Then they benefitted from the downside to the upside. If he did execute the orders 60 would be one of the biggest traders in the world. Ever. On one given day. They are alleging he continued to engage in the spoofing and other illegal practices. Allegations only at this point. Up until his arrests. Opening a new could as recently the fall of 2014. Thank you very much. Back to you and it will be a lead story. This guy would be the biggest trader. Nobody has heard of it. You are talking massive millions of dollars. As you say, we will continue following it here. I have another incredible story to share with you. A 69 and recently diagnosed with terminal cancer. He became an uber driver and paid off a hefty mortgage and left his family debtfree. A passenger in his car who was so moved by his story that he has a go fund me page to solicit the nations. Complete strangers donated nearly 100,000. Now from ann arbor, welcome to power lunch. Im impressed and hope my boys grow up to be half as communityminded as you are. Its wonderful that you raised even more than you set out to raise. What was it in thwack made you go and do this . A lot of people might hear the story and think thats sad, but not actually go and start a go fund me page. It all started back in high school. My mother cancer. She had multiple miloma. During that time i felt extremely helpless. I couldnt do anything about it. I couldnt control it. The only thing i can do is bring my mother a report card with as and a couple of bs. That was the only way to put a smile on my mothers face. His daughter was homeless and i was homeless before i came to the state of michigan. I identify with that. It made me fell compelled to help. Thats wonderful and you see the power of what you can do starting so small and becoming so big. What more can you do in Going Forward . The possibilities are limitless. I leave everything to god. Im blessed and grateful. Thats wonderful. Congratulations. Its great and i believe you have become good friends with ken as well. They donated 1 for everyone who used the promo code until yesterday. Great to talk to you. Yesterday. No problem. Have a great day. Surfing, skiing on the slopes and outer space captured by a go pro camera. Now they are offensing their own version of the go pro, but at a much, much lower price point. That story straight ahead. Blap [ radio chatter ] [ male announcer ] andrew. Rita. Sandy. Meet chris jackie joe. Minor damage or major disaster, when you need us most, were there. State farm. Were a force of nature, too. Welcome back to power lunch. They are talking about water or the lack there of. There was a court ruling that comes down to changes the game. Hi brian. One of the big tools that water agencies are using to try to get people to conserve are tearedbased systems. The more you use the higher you pay for the water. A Court Ruling Said that is unconstitutional in the case of one city. San juan capistrano is charging a lot more if they use a lot of water. Government agencies can only charge you for cost. This city was not proving that providing excess water for the people usinga i lot of it cost them more. That was thrown out and we will have to see. The bigger question here is that in a time when water is so allegedly scarce, why is it still so rel livatively cheap. People at the bottom only paying about 2. 50 for 800 gallons. That is cheap. People are paying a lot more if they use more but the only way to charge more is if they raise the rate for everyone. Its an excellent question. I agree it should be more expensive, but water like air is considered a basic human necessity and its hard to account for. We will be watching. More on that story to come. A major foot food recall in the United States. Blue Bell Creameries issuing a recall for all of the products on the shelves. The recall was ordered after two samples of Chocolate Chip Cookie dough tested positive for lis terria. A partial recall was issued last month for the center for disease control, linking ice cream contaminated to three deaths at a kansas hospital. Brian . More bad news in iowa. Cases of the bird flu affecting a number of chickens. In fact as morgan is here to report, the number of hens that have been infected is is simply staggering. Thats right. The facility is Sunrise Farms owned by privately held foots companies. They said this farmhouses 4 million layer hens and it went to Great Lengths to prevent the birds from contracting Avian Influenza influenza. They have to decide how to dispose of this flock. This brings the total number of chickens by bird flu to 6. 5 million since the outbreak started late last year. A dozen states including wisconsin where scott walker declared a state of engineer have been impacted. Have have been no human cases detected in the u. S. And the usda said there is little risk to humans but there is growing risk to the culture industries. So far this year china, south korea, canada and the eu have banned or limited poultry imports from the u. S. Because of this flu. Hormel foods said the turkey sales will take a hit due to the challenges resulting in the supply chain. They will come in at the lower end of the guidance. That was lower as the shares of other poultry companies. Tyson foods and pilgrims pride. All of them are lower as investors worry about this outbreak and that it seems to be worried. The consultant and professor is here with us now. Can we contain this from spreading further. We can. We had a previous experience in 1984 in pennsylvania. We learned a lot. The federal authorities have worked closely with the states and they developed contingency plans. This happens to be a big challenge. How do we prevent further outbreaks in the future. I didnt mean how do we prevent from spreading it, but how do we prevent it at a future time. It has been unusual because they are transmitted by the water. I have to eliminate any possible contact between migration and the droppings and the commercial farms. Back yard farms is a different thing. We will be able to do this. I have every confidence that it can be done. When you say instructor by security measures. Any of them actually in the works . A lot of them are. We just have to respond to the challenge with the action and investment. Up to now, i believe what we have to do in the future. The industry adapts and adopts new technology and techniques. The one thing that we wont be doing in the immediate future is vaccination. Thank you very much for your comments on the disease. We will look at what exactly happened. We are back in two. S to help walk you through that complex trade. So youll be confident enough to do what you want. Ill pull up their number. Blammo. Lets get those guys on the horn. Oooo looks like it is time to upgrade your phone, douglass. For all the confidence you need. Td ameritrade. You got this. It took tennis legend serena williams, fencing champion Tim Morehouse and the rockettes years to master their craft. But only moments to master paying bills at chase. Com. Depositing checks at the atm and transferring funds on the mobile app. Technology designed for you. So you can easily master the way you bank. If youre looking for a car that drives you. And takes the wheel right from your very hands. This isnt that car. The first and only car with direct adaptive steering. The 328 horsepower q50 from infiniti. A down day for travelers and the earnings coming in a penny short of estimates and revenue missing the mark and the company is raising diffident is announcing the buy backs. The shares up 3. 5 the worst performer. Back to you. Thank you mary. A stunning display of courage from police in mesquite texas on sunday night. The camera shows officers at the scene of a single vehicle crash finding the vehicle burping and the driver unconscious with his clothes on fire. They were able to pull him away from the car. The driver was taken to baylor where he remains in intensive care with burns and internal injuries. Here are the power points. Number one, the u. S. Dollar seems to be wreaking havoc. As expected Kimberly Clark up to 9 on First Quarter earnings with the potential 20 on the full year. Next an iowa chicken flock with 5. 3 million birds was hit with the bird flu. This marks the biggest to be affected by the vire us that began late last year. Brian sullivan joins us with the conferences and we found out that despite the stock, it is up by 16 year to date. You can simply go to the site. Power lunch at dot cnbc. Com. Go pro exploded in popularity since the idea with 2014. A time with the editor has a virtually identical camera with a much much more price point. We will tell you all about it when power lunch returns. This sets the table for the power menu for the next hour. We will talk about the oil and the decline from last year and where the Big Industries see oil going. Bill gross making a big and bold call on one thing. What they said is the short of the century. More on that breaking news and an arrest made around the 2010 flash crash and it is not from what you think. Guy in london being accused of this. Is it possible . It is a story rattling the markets over the last hour. We have the latest breaking news coming up at the top of the next hour. Stunning news. Thanks and we look forward to it. From a surfing pig to outer space at the slopes. Go pros are being used everywhere allaround the world. We have both of them here. Weest tested them out yesterday and most of them know its the Biggest Company going after apple. Going after the go pro with this. Its a lot better. The price is whats amazing. Half the price of a hero. When you take a look at the video, they look very similar right over there. What is the difference . A lot of other programs would say go pro is better in terms of the video. I would say that its about half the price, but there is a lot of brand loyalty here in the United States. I wonder how much they will gain traction from a market share perspective here in the face of all those fan who is love the go pro. The people who buy the go pro love apple, but its more for then droid. Right now its used only in china and sold only in china and worth watching. Because of the fact that we have seen a lot of action cameras made by the Chinese Companies and not able to take off that well because as much as they get the hardware right, they dont have the software right. They do have the integration and the technology and it has a great app. There a lot of people who still use android phones. Very true. Particularly in asia. It might make it hard for the plans for them. Especially for china. It might be hard if they have a following over there. Thats right. Go pro is there in a lot of markets. They are selling more and more in china. They are popular with a certain segment of the population. There so many other options out there and they have a loyal following as much as go pro here. And go pro shares are up about 85 since the ipo here. Thank you so much for that. That is it for the first hour. Now for the second hour of power lunch. I dont know where you will start and how you will pack it all in. We will do our best. We have a great production staff and thank you very much. Welcome to the second hour of power lunch. Im Brian Sullivan in houston, texas. We have a lot more on oil all this hour and into the next hour as well. We have the exclusive interview at the ceo of bp bob dudley. We have more on the story that broke less than an hour ago and rocked the trading world. That is sue herera. The arrest of man in relation to the flash crash years ago. Heres what we know. The department of justice is charging a trader from the uk of illegally manipulating the stock market and contributing to the flash crash. Its a criminal complaint and he is charged one count of wire fraud and ten counts of commodity manipulation and one count of spoofing. It is now illegal after dodd frank was put in place. The doj claim they used an automatic Trading Program or algo rhythm to manipulate the market. He allegedly did that by using a dynamic layering scheme. He said that they say he replaced multiple simultaneous large volume sell orderers at different prices. That created the appearance of substantial supply in the market and alleges that he modified the orders so frequently they appeared in price to be close to where the market was trading. Then he allegedly canceled the orders without executing them. The doj said when the prices fell as a result of his activity he sold futures contracts and brought them back at lower prices creating a profit. He is being charged with commodities manipulates and that is a civil filing. On the Conference Call Authorities Say he profit bide 40 million and its worth noting that he has been poofing since 2010 and was active according to the officials on the Conference Call on the day of the flash crash. I know you asked the question basically how could one person do this. I had that same question and the cftc called him a very significant player in the market. I dont know how to justify that in terms of volume but those are their words in a quote. We will see. Thank you very much. And also significant in terms of dollars because the contracts are very expensive to play at that level. You have to have millions upon millions of dollars. You are sticking around. We have bob dasani. I want to go to you first. You have been scrambling anded reading through the timeout. And whatever his name is has been continuing to do this since then. Right. A couple of facts and figures from the illgotten gains. That was over a year long period. They have been placing the orders and did so until recently. He was just arrested and in the custody of Scotland Yard. He was a significant player and not saying he was the only party who contributed to this but he was a major player because of this volume that he was putting off and falsifying. I want to say lack of trust and a lot of investors say the game is rigged. This is an example of one guy with a computer al do rhythm that has gone a wry that has the ability to send the stock market into a 900 point decline. This will open up a lot of eyeballs and a lot more questions. I would like to see more details on this. The official position on this was the it executed 75,000 cell contracts sold. The considers are like 4 billion in a short period around 2 00 eastern time. They said he sold 75,000 contracts. I dont think this is the same person. This is a little bit of an additional point of view. I would like to know how much he contributed on that particular day. Abusive and manipulated behavior is a legal term and anybody who is doing in any way should be prosecuted. I want to know more about his contribution. I have the same questions. I dont think they would they unless he was. To get at that question you rather than at the volume. In the days leading up to the flash crash. To remind the viewers, in the two days before in 2010 they suggest that he was the fifth largest in that contract. He was a substantial volume player. This would seem to debunked the theory that came up on the Conference Call. That report ri flekted the best investigation and this component now, grown it renders inaccurate but it ats another twist. The firm that was blamed is kansasbased. A couple years later, the government claimed they solved the problem and they figured it out and put the blim them. Are they ob solved or were they used by him and if they are ab solved does the government apologize apologize. It marks the first time manipulation was a part of the flash crash. She on the phone right now. He was never blamed with manipulation. They executed a poorlytimed algo rith thaum had no regard for time or price. They really dumped the algo rhythm and we need to execute this much volume and dont care about the price or the time. Thats poorly timed for sure but there was never any legal issues. That was like the implication that you guys should have had a better one. The question i want answered was that wrong . Did he literally have nothing to do with this or it was screwed because of what he was doing . I would like to know more about what he was doing. 75,000 contracts is 4 billion. Thats huge. No liquidity in the market. People dont remember what happened between 2 00 and 3 00. They backed off to figure what was going on. There was a real lack of liquidity in the market. That was the exacerbating factor. I think thats a substantial fact. Whats confusioning is i dont know how this fellow was interactioning ing interacting with this at the time. We would all like to know. Lets get to mary thompson. We have deal news of course in the drug industry. Drug deals continue to heat up and cool down. Take a look at shares right now. They are supporting the firm will reject a 29 billion take over bid with a take over target which is offering a hostile bid in cash. Perrigo is off about 2 and teva up about 1 . Thank you very much. Another geopolitical development, war ships off the coast of yemen that has to do with iran. It slowed down to a crawl. It slowed down to the seven or nine iranian ships. Two freighters suspected of carrying weapons to the rebels in yemen in that civil war. As many as five military ships, war ships from the iranian navy and revolutionary guard are chugging along at about five knots hear hour. Thats a slow rate. They have slowed down their speed and the u. S. Is keeping a close eye as are the saudi arabiians and the Egyptian Forces in the waters there off the gulf. So far u. S. Officials are pretty much convinced that some of the ships are carrying weapons and no intent to intervene until at some point the iranians make a move to enter the territorial waters of yemen and attempt to deliver the weapons and its not clear that that is the intend in the end of the iranians. Its up in the air and they are waiting for the iranians to take the next step. Brian . Jim, thank you very much. We are here at the Energy Conference talking about oil. Oil is in the news right now because it is sliding. Down nearly 3 . Did 2. 8 to 1. 65 a barrel. Still well off the lows from march, but remember we have come down nearly 50 since this conference took place just last year. Also u. S. Stocks off the highs as well. We are seeing selling coming into the markets. Commodities and equities over the last few minutes. For looks like oil and stocks are at the same time as session lows. Lets talk about chipotle. The stock is moving higher. 3. 66 in revenue and 1. 1 billion. Interestingly if you take a look at last quarter. Is that your main concern that chipotle is based on rising costs and running out of refers because it hiked prices last year . Its a factor and a concern about the foot cost as well as labor cost. Its really more of a valuation call. Maybe its more friendly like a yogi bear. Its an expensive stock, but the fundamentals are that are excuting are growing and they have more traffic. Even the increase in pricing is not scaring away customers. I top the go to you. If everyone is a cuddly bear and you have a hold and a lot of factors in your notes seem negative including the self imposed moratorium with the locations are there. You are finding that they are continuing and that could impact sales. It will be a near term and they think it will extend to the end of the second quarter. They are shifting supplies around the country. In the longterm, i think its what we think is a halo effect. It will sacrifice the shortterm sales. It will generate longterm traffic. I think that will affect the stock and could be a reason why the shares are trading higher this afternoon. Even with the selfimposed moratorium, they are gain traffic. Brian . Thank you very much. We are just getting starred here in the second hour of power lunch. Ever the break, much more from the oil Energy Conference and talk about the price of oil all leading up to the exclusive interview with the ceo of bp. After the break, it is not just about oil. Bill gross calling one trade perhaps, one of the trades of the century. What is gross recommending and what is he so opinionated on. We will get his trade and the take on this as well. On the other side of the break. You are watching cnbc. Stick around. All of the problems of the world could be settled easily if men were only willing to think. All of the problems of the world all of the inefficiencies could be settled easily all of the opportunities could be realized if we were only willing to see patterns in data we could never see before. To design a machine that thinks like we do. Track epidemics. Predict breakdowns before they occur. To become smarter every day. If men women machines were only willing to think. Welcome back to power lunch. We asked to you come on because of a tweet of the short of a time. I would like your reaction to the arrest and not to the case itself. Just to the idea that one pace. That they would be able to have this size impact on one of the most liquid marks in the world. How is this possible . Your reaction. My reaction is not to point to one individual but simply to point it to the markets in which there is a high amount of leverage and when a butterfly wing flaps, that can happen. And its a punk of leverage of one individual and firm to impose on the market for a short period of time. Do you think it tells the story of a market that is rigged or what it was simply able to beat the system in a weird way using software five years ago. I dont think thats the proper word. They have a small question. There some that can stand aside and you can see significant placements based on referage within the system to which they are investing in the selling. You felt shorting them based on their version of pressuries would be the short of a lifetime in 1993. They are back in 1993. They were not sure about the timing. They said this morning and they suggested that there was no way that the gentlemen can go down in price. They are buying throughout the zone on a monthly basis and perhaps 25 . The question is why fight . Theation is such that these yield upward and there is a minus 20 basis and that simply means that it has an upside of nine or ten points. I know it sounds complicated, but you have the downside. Its just a kwef when. You get a trade that doesnt cost you in the shortterm. Thats one or twoyear periods. What are do you mean by trade doesnt cost anything. It costs something. A lot of people have tried to short pressuries saying they were overvalued during this time and that trade hasnt worked out and has been a costly trade for some. When you say it doesnt cost anything, how would you put this on and when you say the only question is timing timing is everything. It is but its 61 in terms of a ratio, if you can wait it out with no cost it seems that the experts will be patient. If you buy them you are paying the government 10 or 15 or 20 basis points for the privilege of owning that. If Interest Rates are zero its basically to short them. What happens is an investor can make it short. They can be sensitive and playing on the other side. The negative there and they know at some point in time they are based on that. There is a lot of money to be made. Let me give you one example. In the forward markets and inflation and expectations. And they expect 1. 8 million inflation by the years. They are higher than the german and with inflation five years from now in terms of expectations, they have spread and what does that amount to . 10 or 15 . You made a convincing argument. In your unconstrained bond fund. The shorting boom. You dont have that. The futures and treasury much like the u. S. Has them. In the market place, they can sell the german future. The number of ways to do this. Were you saying you were into trade . Are you into trade . To buy the fund pla blah blah. Or in this trade. All my lawyers are on top of that. If you look back to the end of march. You see it is last reporting point. You see the Interest Rate coming. The question of timing it happened. The timing happened and you are in the trade. You are in the trade. It only happened today basically. The german boom down by a half point. It doesnt make for a year or for a century. I would dpekt on a daily basis. They go up and down and to move lower on 10 basis points. The risk is minimal. Thats on the other side. He is committed to this for 18 months. That happened and he could also say hey, you have the points to buy and buy something else. Its a lot of risk and reward and its all levered on the side of reward. Got it. Always good to hear from you. Thank you. Still to come a big love triangle performing in the pharma world. Stick with us. When a moment spontaneously turns romantic why pause to take a pill . And why stop what youre doing to find a bathroom . With cialis for daily use, you dont have to plan around either. Its the only daily tablet approved to treat erectile dysfunction so you can be Ready Anytime the moment is right. Plus cialis treats the frustrating urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. 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Good afternoon, everyone. Heres the cnbc update. Releasing video showing the Aircraft Carrier uss Theodore Roosevelt and the guided missile cruiser in the arabian sea. They were sent along with other ships to keep tabs on an iranian convoy helped of delivering arms. The Court Proceedings continuing if are a former nazi official who faces 300,000 counts of accessory to murder. He acknowledged he shares the blame and the 93yearold volunteered to join the ss and served from 1942 to 1944. The south korean Prime Minister offered to resign after he took over the post. It flaired up after he killed himself leaving a memo of eight high profile figures. Our last story about someone coming in last. Michael approached the finish line about 4 00 a. M. The 39yearold has muscular dystrophy and that didnt stop him from finishing the 26mile race. The crowd of supporters who waited for him rivalled that of anyone who finished justice. Congratulations to him. We are counting you down to the close in the oil markets power. Back in two. The Technology Changes the design evolves the engineering advances. But the passion to drive a mercedesbenz is something that is common. To every generation of enthusiast. The 2015 dream machines, from mercedesbenz. Todays icons. Tomorrows legends. Visit the dream machine event today for up to 3,500 towards purchase. Welcome back to power lunch. Im jackie deangelis. The oil markets closing a few moments ago. Current closing under 57 a barrel. Api gives us an indication of what we hear about flies about the department of energy. Traders are expecting a build and thats why we sold off a bit today. Also saudi arabias output at record highs and not helping the supply situation, but prices near the 2015 year to date peak not that far off. There is support out of the mideast right now. Headlines about the iranians supplying rebels with weapons and also u. S. War ships traversing the areas. Also chinas simulous wondering if it will bring the demand back to the table as well. Back to you. All right, jackie. Thank you very much. A reminder if they missed the previous hour. The ceo of pioneer Natural Resources. They will start to fall eventually. For now it is time for trading nation as the slick animation showed you. We are joined by david seager and today we are looking at oil here in houston. Let us trade the oih, the oil index is the main etf in the market. The analyst there, they view the oil stocks fundamentally as they buy. No. I think there is a lot more here to be short at the oih. There is a lot of small means that make up that etf that are at risk of missing. There is a lot of concerns out there and a lot has been predicated by the sort coverings. Again, i think we can agree on that fact. I think the stocks have near term risk from the perspective that i dont think numbers have come down enough to justify. It will be interesting to see what happens. I love your message and its a message that needs to be hammered home. Know what you. Do not buy any mom and pop. Never ever ever without going on to the internet or whatever it is and knowing exactly what stocks are inside of an etf and what the percentage weight really is. I will tell you why. They represent a large waiting within the oih. When you think about the waiting they have, its a lot less but its an overhang. They have then really supported this halle. I think that is over. What it is the next catalyst. There is not a catalyst in sight for going lower. Could the catalyst be technical . It may be short, but there is a turn. Do you see a technical turn . We know what we own and we buy more on the declines. The pull back in crude created a compelling buying opportunity and bring up the chart and i will show you why we are a buyer of the oih. The key feature is this fivemonth base of support. A text book double bottom. A 22 run off and convenient excuse to take the profits into the welldefined resistance. You want to be a buyer in anticipation and that will set the stage for a move up to 45. That offers 22 from the current levels. You have to take advantage so you are not chasing the move. This is why they trade better together. You have to view positively with rich. You should buy and sell to and from each other. Thank you very much. Check out the website trading nation. Cnbc. Com. The breaking news at the trading arrest. Guys great to have you both. What caught my attention was the degree to which this person this one individual was participating in the markets. The fifth biggest volume trader two days before. A 60 order modifications in a single day. If i were a regulator and i had a list of the biggest traders and it was a random dude. That would raise eyebrows. Without a doubt. I vividly remember that. The best that day was getting out of a loser and it was a wild day. Think of it this way. It was like a charge. He took stocks. He blue up underneath and this bid on the offer system reacts upon others. This is a predatory algo rhythm and yolk he stands alone. This is a system to cripple the system globally. To your knowledge, do people take a look at what is participating and accounts for a lot of the order flow . Should that have been a red flag that day . Its hard to say. I know at the group, they have rigorous policies implementing, but as we see the policies its hard to keep up with the thieves. I think they do a great job and that day, everyone else is living in this world that we have. It reeblths with the emerging react we did regain control after the chaos. Betheny and now to you. He makes a good point in terms of how complex things have gotten so far to an individual investor to know that this one person was not a huge firm. It was this one person, 37yearold in the uk who managed to contribute to the damage. That was scary, but what caught my attention is wait they blame the futual fund and i dont recall any manipulation of the market. That said before i am harsh, i havent gone back through the reports with this report. The question that raises in my mind can the regulators understand whats happening in realtime to protect the investors. Can they get it right after the fact . How do you come up with one and it was one random guy in london. We apologize. Agreed. I think thats frightening and it does feel a little bit and raises the question well is this the whole explanation or could there be more out there . It feels a little to me like blaming the housing financial crisis of 2008 on that poor goldman guy who ended upbearing the brunt. Here we are. You just dropped, alec. Is he 100 responsible . I dont know. This is a map of all the Cyber Attacks taking place right now. 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Eir beard salve is made from sustainable tea tree oil and kale. You, my friend, recognize when a trend has reached critical mass. Yes, when others focus on one thing you see whats coming next. You see opportunity. Thats what a type e does. And so it begins. With e trades investing insights center, you can spot trends before they become trendy. E trade. Opportunity is everywhere. Welcome back to power lunch, everybody. This is National Drivers month as a major new technology is about to come out. The apple watch. The former ntsb chairman and the president and ceo of the National Safety council. Thank you so much for joining us today. How worried are you about the new apple watch and how it could distract drivers . We have so many things that distract us and this is another thing to pile on. We have seen studies coming out from them that show watches like this are more distracting than looking at your device. Because its buzzing on your arm and doing all kinds of things. If you look down at your buzzing device, is that enough to cause an accident . Absolutely. People respond when someone taps you on the shoulder and when your wrist is buzzing, you are tempted to look at it. Drivers are actually looking down more as far as time 2 1 2 seconds rather than less than two seconds. These are very distracting. When you talked to automakers about this what do they say . We have distractions as far as the nomadic devices and whether its the hand held and the tablets and the smart watches, there is no end. When we look at google there so many things. What automakers are putting into the cars with the info tanment and they are so interactive, we have a lot of challenges and trying to get a driver to focus is getting harder and harder. I believe it is. Coming on the conversation. I had a chance about a year or a year and a half ago where they put you in a car and they measured your Response Time while you were upon looking at a blackberry. Anybody who is like this you make huge mistakes and if i was in real traffic, i would have rear ended another car or hit a pole. I am curious about your perspective. Is there a possibility of going to a company like apple and say i understand what you are doing in terms of giving people convenience, but you are really pushing it in terms of making it easier for people to be distracted while you are driving. Have you approached apple or is that you cant really blame the Technology Company . Its important for not just the technology companies, but consumers to be aware. Its interesting and i opened up thing with the jps. It does caution you what you do during distractive driving. We end in a situation with cars where we are encouraging people to go hands free. We are saying go hands free but hands free is not safer. Its not your hand that is distracted. Its your brain. If it was just about hand held we would have said no stick shifts a long time ago. If you put on the regulator cap, if you can make one change something that the auto makers should do to make us safer with Something Like an apple watch or i smart watch, what would you do . It would be to isolate the driver from the other passengers to make sure that they are not distracted by vehicle or no matic devices. I agree with what debra is saying. Would you believe that there should be technology that blocks . If you are in the drivers seat that blocks you from receiving a phone call and a text it makes it almost impossible for your technology to communicate with you when you are in the drivers seat. I think it has a lot of difficulties associated with it. We can do something. We have Airplane Mode on the phones. What if we had car mode we see 35,000 fatalities on our roadways every year and we estimate about a quarter of those are as a result of people being distracted on their electronic devices. Weve got to make sure that we do a better job when it comes to preventing crashes on our roadways. I think blocking is not necessarily a bad idea. Debra, its great to talk to you. Thank you very much for your your expertise on the show. Ryan, back over to you. Before the tease, say hello to debra herschman classmate of mine at virginia tech. Same major, political science. There is atechnology to make sure you dont text while driving. You know what it is . Shifting. Im think of extra lamm chopb chops as well. Tell debra to give us a go hokies. More from the Energy Conference and the bp ceo exclusively on cnbc. Back after this. Pulls you back into your lane. Even brakes all by itself. Its almost like it couldnt crash. Even if it tried. The 2015 mclass. See your authorized dealer for exceptional offers through mercedesbenz Financial Services. Check this out. Its a live map of Cyber Attacks happening around the globe right now. Youll notice activity from all the usual suspects china, russia, north korea. Iran, a new threat. The danger lies not in the sophistication or volume but in how willing they are to cause destruction. Eamon javers is coming to us from the conference in San Francisco. This is the floor of the rsa Cyber Security conference. There are tens of thousands of researchers here talking about all the latest developments in Cyber Security. But im join by brian contos of norse. They put out a study focusing on iran. Lets talk about what you found here. Fascinating case study looking at the iranians and what theyre doing in terms of Cyber Security. What did you find . At norse we monitor the internet for attack. At about 30,000 attacks a second. About over the last year weve detected a much greateren crease in attacks coming out of iran and assets that iran controls in the use and other western countries. What are the iranians trying to hit inside the United States . What kinds of Companies Need to be concerned that iran is after them . Any large enterprise as well as government from critical infrastructure, Financial Services and health care. Anybody that has sensitive systems, data that they might be able to exploit. One the toughest issues in Cyber Security is attribution. How can you contribute these attacks directly to iran . Its hard to are 100 an attribution. Because iran has a controlled access point, their universities and government control everything going in and out. Its easy for us to determine if it is coming out of iran it is government sponsored and controlled in most cases. There are other studies that say the opposite of what you have found actually the iranians aring baing off in light of the Nuclear Negotiations that are going on right now. How can average people who dont understand all this stuff make sense of all these studies when they seem to present corn flicking information . I think theres lots of different perspectives on an incident like this and sanctioned talks and other politics. To be honest we have a large perspective, 16 million ip addresses, watching attacks all day long every day. Our slice of the pie even what we see tends to be unique. Great. Brian contos thanks for joining us. Melissa, back to you. Thank you so much amman javers joining us from the technology conference. Well be back with more. What if we finally had a backyard . Thatd be amazing. Hey, what if we took down this wall . What if this was my art studio . What if we were preapproved . Shut up. From finding, to financing. Howd you do that . Zillow. Can it make a dentist appointment when my teeth are ready . Can it track my crews performance, and protect their heads . Can it tell the Flight Attendant to please not wake me this time . At cognizant, we see opportunities for every company. To meet the new digital demands of their customers. Can it process my Insurance Claim . Like, right now . Can it download a track while im sampling it . Can my keys find me . With the power of digital, analytics and automation now every little thing can provide even greater value. Ok, so can it tell the doctor how long you have to wear this thing . The answer is yes, it can. So, the question your customers are really asking is can your business deliver . If youre running a business legalzoom has your back. Over the last 10 years weve 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. All right, melissa, wrapping up our hour at the conference. We are not done yet. The bp ceo in the next room making comments about storage and the amount of oil in the world, melissa. We have a cnbc exclusive with bob dudley. Tomorrow we have rich kinder some say hes the smartest guy in oil and gas. Hell be our guest as well. To paraphrase monty pythons night, were not done yet. Far from it brian. Tonight on fast money well be trading some of the comments we get from the ceos. Well be all over the big after the bell reports, we have amgen, yum, chipotle as well as yahoo . Live from houston and the nasdaq, closing bell starts right now. Hi, everybody. Welcome to the closing bell. Im kelly evans on a busy day, bill, here at the new york stock exchange. Im Bill Griffith back here at cnbc headquarters. Well be seeing you later on nightly Business Report on pbs. What a day, we have earnings galore, a nasty takeover offer from mylan labs from a competitor of theirs. That will be juicy to follow. Now this strange story, this arrest going back to the flash crash of 2010 may of