Transcripts For CNBC Power Lunch 20151109 : comparemela.com

Tyler, we begin with the selloff on the street. A triple digit drop for the dow with the major averages down more than 1 . This is actually we havent seen since late september for the dow and the s p. Weve been sort of a little bit complacent recently after all the volatility of late august and september. The nasdaq is down by just over 1 along with the dow and the s p. Lets get more with bob pisani at the nyse because you have fears, bob, about retailers reporting this week as well as, of course, the rate sensitive stocks in the firing line as well, right . Thats right. A number of different issues here. Six stocks declining for every one advancing. Look whats popped up again, the vix. We havent seen this move double digits since the end of september. Its 16 and change. I dont get concerned until its over 20, but this is a move we havent seen in the last five or six weeks. Why the drop . Mandy is right, a couple reasons here. There is continuing concerns about the reverberations on higher rates that are out there. Theres also cross currents. The Global Economy is still weak. Overnight china reported that exports in october fell for the fourth consecutive month. And finally, weve had one heck of a run in the last six weeks. The general indices are up close to 10 in six weeks. So were a little overbought. Stocks are a little expensive at this point. Take a look at Interest Rate sensitive stocks. They were hit on friday, again today. Thats the reits. Home builders there, that third one is the eem, emerging markets, and oddly utilities which was hit notably on friday is not today for some reason but Interest Rate clearly an issue here. Mandy mentioned the Department Stores. This week the Department Stores will start reporting. They report on a onemonth lag compared to everybody else, so well have macys on wednesday, kohls and nordstrom on thursday, jcpenney on friday. Citigroup was negative on it recently. Jpmorgan was negative on the group. Noticeable declines here. 4 and 5 for that group overall. Finally just note the transports cant get anything going as well. Airlines are weak, even the railroads like csx are on the downside. Fed ex also weak here. 6 to 1 decliners to advancers. Back to you. Boy, that is really the case. Im looking at the heat map and it is really a red letter day. Uptown to nasdaq. Its the biggest loser in percentage terms right now down 1. 2 . Small caps and chip stocks have been the weak link there today. Bertha coombs is on site tracking the movers. Hi, bertha. Its a little about the of a reversal from last week. Last week it was the small caps were the outperformer, today theyre the worst. And incyte, today its getting a bounce. Bear in mind on friday incyte fell 14 following negative results for a Cancer Treatment it was going with merck. Priceline sis seeing its bigges decline since december of 2008 after a disappointing Fourth Quarter outlook. The strong dollar is hurting international bookings. Its weighing on the number of the travel stocks like trip adviser and expedia today. Chip stocks is where some of the pain is. The Semiconductor Index under pressure today. Take a look at the china stocks. Those with china exposure under big pressure. Wynn resorts in particular. Macao gaming stocks falling. November macao revenue expected to be down 30 after a 28 decline in october. Chinese travel site seatrip one of the biggest losers, a double whammy on the travel and china front. Thank you. A news alert in the bond market right now with 3year notes up for auction. Rick santelli is watching all that action at the cme. What grade would you give it . I gave this one c as in charlie, but this was a tough one to grade. If we just look at the notion of 24 billion 3s, one issue market was bid around 127. 5 which was the high yield, but it priced a little lower than that. 1. 271 is where the yield was set. That all looks pretty good. And when you look at the indirect bidding at 40. 8, theres a bigamy news. At 40. 8, thats the weakest since november 2014, but flip it around. Directs were 15. 1 which is the best since that same period of november 14. Bid to cover, weakest since october of 2009. So it was really a mixed bag. I give it a c and it really probably explains how difficult it is for those involved in the process to step into the arena when yields are moving higher at a time where it may just be easier to wait and jump into the secondary market. Mandy, tyler, back to you. Thank you very much, rick. Bob pisani earlier highlighted the rate sensitive stocks. Diana olick is taking a closer look at reits. Reits had been the darlings of low interest environment. Take a look at the s p all equity reit index, up over 40 in the past two years. Then coming off the gains this year as talk of the fed hiking rates ramped up and especially it ramped up last week. Avalon bay, an apartment reit, a steep climb over the past two years, but a precipitous drop over the past two weeks. Boston properties also seeing a nice climb over the past two years but down dramatically in the past week. Three apartment reits, equity residential, udr, and inco were downgraded to sell. Equity reits had given investors nice gains in october. Infrastructure led with 12. 84 total return for the month. Regional malls up 9. 94 with industrial and Shopping Centers not far behind that. Yeartodate, its all self storage, manufactured homes and again those red hot apartments, but that said analysts at kbw say its hard to find the positives other than attractive yields and cheap valuations. For half the sector yeartodate book value e clines have outpaced dividends paid. Overall economic return zero. Back to you guys. Zero. No one wants zero. Thank you very much, diana, for setting it up. Where is the best place to invest your money in reits. Mark hallie joins us now. As diana was explaining, it is a common assumption that reits wont do so well in a rising rate environment. But it doesnt necessarily have to be the case, does it . No, it doesnt. When you look at reits, its primarily driven by private markets. Only about 10 to 15 is in the Public Markets and the private markets are doing quite well. When you look at supply and demand, thats whats driving the real estate underlying valuations of these reit stocks. When the fed does finally start raising rates, its hopefully for the right reasons like better overall growth and rising rents and rising rents is one positive for reits, isnt it . Absolutely. Historically real estate and reits have been a good hedge against inflation. When you look at real estate and reits, its not just a single asset sector. You have to look at duration. You have apartments and hotels which have been benefiting from the increase in activity to longterm leases Like Health Care or infrastructure which will have the potential to decline with rises in Interest Rates. Lets talk about some of your picks. One was one that diana pointed out as having had a steep fall over the past week and that was avalonbay. We look at avalon as a very good company, Good Management team, excellent markets and the ability to selffund their Development Pipeline for good growth. When you look at multifamily, its a graeth sector to be in. Theres still millennial demand driving this group and when you look at the occupancies across the sector, youre seeing 95, 96 occupancy. Fundamentals, you have excess supply and not a lot of demand. Banks arent lending for speculative new development. Super quick the other two are general growth and Camden Property trust. Sure. Camden benefiting from the same Macro Economic driver as avalon and youre seeing markets which have been overdone, oversold in houston but still Good Management team, and general growth in the retail sales should do quite well. Theyre not in the tourist exposed market where we see hits from currencies. Fundamentally class a regional malls are still doing well. Youre seeing growth in tenant sales and theyre moving along in excess of cpi. Thank you very much for joining us today. Thank you. Mark hallie. Tyler, over to you. The major averages seeing their biggest drop since late september. Where do we go from here . Why the bulls may go into hiding in 2016. Weve got the bearish call you need to hear and at least be exposed to. Youre watching cnbc, first in business worldwide. Weve got the bearish call you my name is griselda zendejas. I love working in the salinas area because i always wanted to do something where i could help people around me. So being a construction supervisor for pg e gives me the opportunity to give a little bit back to my community. I have three boys. Theyre what keep me going every day. Our friends, families live in the area. And it is important for all of us that we keep our community safe. Together, were building a better california. Welcome back to power lunch. Im mandy drury. Valeant is bright spot in todays selloff. Theyre holding another Conference Call tomorrow to give an update on the business. The stock is up by 2. 4 after a steep fall yeartodate down by over 40 . Shares of plum creek timber tracking for their best day since march 2009 with a gain of 17 today. The Forest Products company being bought by rival weyerhaeuser. Plum creek shareholders still need to okay the deal though. And shares of dean foods surging. Beating profit estimates and raising its full year forecast. The shares are up by 4. 5 . Ty . Mandy, the end of a twoterm presidency marks the beginning of new leadership for the country but it also may mark the start of a bear market. Here to explain is larry mcdonald, head of u. S. Strategy at Societe Generale. Good to have you with us. This is a historical pattern. Take us through what the data say. If you look back over the years, eisenhower, nixon, reagan, clinton, bush, at the end of those two terms, theres always been disruption, and sometimes it comes from political elements that are inside the administration, and a lot of times its because of economic breakdowns, but at the end of the day weve got over the last 50 years during the end of a twoterm presidency, weve got an average decline of 28 to 30 , so there were some substantial numbers that back up this historical element. Nixon obviously didnt serve out the end of his second term. I guess, but what are you measuring there . Are you measuring the last two years of the presidency . Well, the disruption typically comes within the last year and a half to two years, and if you think about what happens is the voters and the investors listening to us right now, they dont theres so much uncertainty, we dont know who the next president is going to be, and the other element is if you think about what mr. Trump has recently said about obama and the fed, hes basically said the fed has been too accommodative to try to help the president. This is what donald trump has said. And today a fed governor said if were too accommodative we build up excesses in the credit markets. Ive been talking about the excesses in asia but the credit market excesses could alter the path here and create a problem. So what do the odds say with respect to the probability of a bear market between now and the end of obamas term in 2017 . Well, our team, Andrew Lapthorn has been very helpful and we have a team of analysts, our model, were up to near 30 . Its the highest level since 2007 in terms of a bear market probability, and we look at all different types of indicators. Weve got our lehman risk indicators but the most upsetting thing is credit is breaking down globally in terms of emerging market credit, in terms of the credit quality and yields in the United States. The spread between, for example, single b bonds and Investment Grade or aa bonds is the highest its been since 2007. Were seeing disruptions in the credit markets that could lead to weakening the equity markets. All righty. Thank you very much, larry. We appreciate it. Larry mcdonald from Societe Generale. When talking about of the president ial race, ben carson continues to defend his recollection of the past amid growing questions about his personal history. John harwood joins us now with all the details. John . Mandy, ben carson is discovering that higher poll numbers in a president ial race means a higher level of scrutiny. Now, hes not a politician or hasnt been a politician previously, so he doesnt have a record to pick over, but, instead, people are going through his inspirational life story to check up to see how well the story matches the reality. That produced this contentious friday night News Conference at which ben carson was defending his claims to have received an offer of appointment to west point. Something that happened with the words, a scholarship was offered, is a big deal, but the president of the United States, his Academy Record being sealed wait a minute tell me how theres equivalency there. It doesnt matter where it is. Thats a silly argument. Tell me how theres equivalency. You see ben carson trying to turn it back on the news media, raise questions about the scrutiny of president obama. He continued talking to our colleague Chris Jansing on meet the press saying that simply this level of scrutiny to long ago events is not appropriate and not precedented. You said this 20 years ago, this didnt exist, this didnt exist, i have not seen that with anyone else. If you could show me where thats happened with someone else, i will take that statement back. Now, this just adds to the unusual nature of this particular race where donald trump and ben carson both very unconventional candidates now are commanding about half of the republican vote, but interestingly, republican insiders dont believe either man can be nominated within the Republican Party which is why the betting markets have established marco rubio who has less than half the support of either of those men as their favorite for the nomination, guys. Well have to see how it unfolds over the next few weeks. Thank you very much, john harwood reporting. Check out the defense stocks so far this year. Despite the market ups and downs, these stocks continue to fly high with two Major Military moves involving the u. S. , russia, and iran, how much longer can the sector continue its winning streak . That is next on power lunch. No matter how fast the markets change, at t. Rowe price, our disciplined investment approach remains. We ask questions here. Look for risks there. And search for opportunity everywhere. Global markets may be uncertain. But you can feel confident in our investment experience. Around the world. Call a t. Rowe price investment specialist, or your advisor. And see how we can help you find global opportunity. T. Rowe price. Invest with confidence. Ive got a nice long life ahead. Big plans. So when i found out medicare doesnt pay all my medical expenses, i looked at my options. Then i got a Medicare Supplement insurance plan. [ male announcer ] if youre eligible for medicare, you may know it only covers about 80 of your part b medical expenses. The rest is up to you. Call now and find out about an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement insurance plans, it helps pick up some of what medicare doesnt pay. And could save you in outofpocket medical costs. To me, relationships matter. Ive been with my doctor for 12 years. Now i know ill be able to stick with him. [ male announcer ] with these types of plans, youll be able to visit any doctor or hospital that accepts medicare patients. Plus, there are no networks, and virtually no referrals needed. So dont wait. Call now and request this free decision guide to help you better understand medicare. And which aarp Medicare Supplement plan might be best for you. Theres a wide range to choose from. We love to travel and theres so much more to see. So we found a plan that can travel with us. Anywhere in the country. [ male announcer ] join the millions of people who have already enrolled in the only Medicare Supplement insurance plans endorsed by aarp, an Organization Serving the needs of people 50 and over for generations. Remember, all Medicare Supplement insurance plans help cover what medicare doesnt pay. And could save you in outofpocket medical costs. Call now to request your free decision guide. And learn more about the kinds of plans that will be here for you now and down the road. I have a lifetime of experience. So i know how important that is. Welcome back to power lunch, everybody. Im mandy drury. Two big stories out from the Defense Sector today. Jane wells joins us with more details. Hi, jane. Hi, mandy. Well, defense stocks are down today. That may be more to do with whats happening in the dubai air show. Its a little sluggish at the start. However at the same time, we may step another toe in the proverbial syrian water because defense secretary Ash Carter Says the president is willing to send more troops to fight the Islamic State in syria beyond the 50 special ops forces which were announced late last month. However, carter tells abcs this week this would only happen if the u. S. Can find enough locals willing and able to join the fight. Quote, you need to have capable local forces, thats the key to sustainable victory. Minetime, russia has followed through with plans to sell its s300 surface to air Missile System to iran despite concerns of some of irans neighbors and the u. S. Russian Global Economy<\/a> is still weak. Overnight china reported that exports in october fell for the fourth consecutive month. And finally, weve had one heck of a run in the last six weeks. The general indices are up close to 10 in six weeks. So were a little overbought. Stocks are a little expensive at this point. Take a look at Interest Rate<\/a> sensitive stocks. They were hit on friday, again today. Thats the reits. Home builders there, that third one is the eem, emerging markets, and oddly utilities which was hit notably on friday is not today for some reason but Interest Rate<\/a> clearly an issue here. Mandy mentioned the Department Stores<\/a>. This week the Department Stores<\/a> will start reporting. They report on a onemonth lag compared to everybody else, so well have macys on wednesday, kohls and nordstrom on thursday, jcpenney on friday. Citigroup was negative on it recently. Jpmorgan was negative on the group. Noticeable declines here. 4 and 5 for that group overall. Finally just note the transports cant get anything going as well. Airlines are weak, even the railroads like csx are on the downside. Fed ex also weak here. 6 to 1 decliners to advancers. Back to you. Boy, that is really the case. Im looking at the heat map and it is really a red letter day. Uptown to nasdaq. Its the biggest loser in percentage terms right now down 1. 2 . Small caps and chip stocks have been the weak link there today. Bertha coombs is on site tracking the movers. Hi, bertha. Its a little about the of a reversal from last week. Last week it was the small caps were the outperformer, today theyre the worst. And incyte, today its getting a bounce. Bear in mind on friday incyte fell 14 following negative results for a Cancer Treatment<\/a> it was going with merck. Priceline sis seeing its bigges decline since december of 2008 after a disappointing Fourth Quarter<\/a> outlook. The strong dollar is hurting international bookings. Its weighing on the number of the travel stocks like trip adviser and expedia today. Chip stocks is where some of the pain is. The Semiconductor Index<\/a> under pressure today. Take a look at the china stocks. Those with china exposure under big pressure. Wynn resorts in particular. Macao gaming stocks falling. November macao revenue expected to be down 30 after a 28 decline in october. Chinese travel site seatrip one of the biggest losers, a double whammy on the travel and china front. Thank you. A news alert in the bond market right now with 3year notes up for auction. Rick santelli is watching all that action at the cme. What grade would you give it . I gave this one c as in charlie, but this was a tough one to grade. If we just look at the notion of 24 billion 3s, one issue market was bid around 127. 5 which was the high yield, but it priced a little lower than that. 1. 271 is where the yield was set. That all looks pretty good. And when you look at the indirect bidding at 40. 8, theres a bigamy news. At 40. 8, thats the weakest since november 2014, but flip it around. Directs were 15. 1 which is the best since that same period of november 14. Bid to cover, weakest since october of 2009. So it was really a mixed bag. I give it a c and it really probably explains how difficult it is for those involved in the process to step into the arena when yields are moving higher at a time where it may just be easier to wait and jump into the secondary market. Mandy, tyler, back to you. Thank you very much, rick. Bob pisani earlier highlighted the rate sensitive stocks. Diana olick is taking a closer look at reits. Reits had been the darlings of low interest environment. Take a look at the s p all equity reit index, up over 40 in the past two years. Then coming off the gains this year as talk of the fed hiking rates ramped up and especially it ramped up last week. Avalon bay, an apartment reit, a steep climb over the past two years, but a precipitous drop over the past two weeks. Boston properties also seeing a nice climb over the past two years but down dramatically in the past week. Three apartment reits, equity residential, udr, and inco were downgraded to sell. Equity reits had given investors nice gains in october. Infrastructure led with 12. 84 total return for the month. Regional malls up 9. 94 with industrial and Shopping Centers<\/a> not far behind that. Yeartodate, its all self storage, manufactured homes and again those red hot apartments, but that said analysts at kbw say its hard to find the positives other than attractive yields and cheap valuations. For half the sector yeartodate book value e clines have outpaced dividends paid. Overall economic return zero. Back to you guys. Zero. No one wants zero. Thank you very much, diana, for setting it up. Where is the best place to invest your money in reits. Mark hallie joins us now. As diana was explaining, it is a common assumption that reits wont do so well in a rising rate environment. But it doesnt necessarily have to be the case, does it . No, it doesnt. When you look at reits, its primarily driven by private markets. Only about 10 to 15 is in the Public Markets<\/a> and the private markets are doing quite well. When you look at supply and demand, thats whats driving the real estate underlying valuations of these reit stocks. When the fed does finally start raising rates, its hopefully for the right reasons like better overall growth and rising rents and rising rents is one positive for reits, isnt it . Absolutely. Historically real estate and reits have been a good hedge against inflation. When you look at real estate and reits, its not just a single asset sector. You have to look at duration. You have apartments and hotels which have been benefiting from the increase in activity to longterm leases Like Health Care<\/a> or infrastructure which will have the potential to decline with rises in Interest Rate<\/a>s. Lets talk about some of your picks. One was one that diana pointed out as having had a steep fall over the past week and that was avalonbay. We look at avalon as a very good company, Good Management<\/a> team, excellent markets and the ability to selffund their Development Pipeline<\/a> for good growth. When you look at multifamily, its a graeth sector to be in. Theres still millennial demand driving this group and when you look at the occupancies across the sector, youre seeing 95, 96 occupancy. Fundamentals, you have excess supply and not a lot of demand. Banks arent lending for speculative new development. Super quick the other two are general growth and Camden Property<\/a> trust. Sure. Camden benefiting from the same Macro Economic<\/a> driver as avalon and youre seeing markets which have been overdone, oversold in houston but still Good Management<\/a> team, and general growth in the retail sales should do quite well. Theyre not in the tourist exposed market where we see hits from currencies. Fundamentally class a regional malls are still doing well. Youre seeing growth in tenant sales and theyre moving along in excess of cpi. Thank you very much for joining us today. Thank you. Mark hallie. Tyler, over to you. The major averages seeing their biggest drop since late september. Where do we go from here . Why the bulls may go into hiding in 2016. Weve got the bearish call you need to hear and at least be exposed to. Youre watching cnbc, first in business worldwide. Weve got the bearish call you my name is griselda zendejas. I love working in the salinas area because i always wanted to do something where i could help people around me. So being a construction supervisor for pg e gives me the opportunity to give a little bit back to my community. I have three boys. Theyre what keep me going every day. Our friends, families live in the area. And it is important for all of us that we keep our community safe. Together, were building a better california. Welcome back to power lunch. Im mandy drury. Valeant is bright spot in todays selloff. Theyre holding another Conference Call<\/a> tomorrow to give an update on the business. The stock is up by 2. 4 after a steep fall yeartodate down by over 40 . Shares of plum creek timber tracking for their best day since march 2009 with a gain of 17 today. The Forest Products<\/a> company being bought by rival weyerhaeuser. Plum creek shareholders still need to okay the deal though. And shares of dean foods surging. Beating profit estimates and raising its full year forecast. The shares are up by 4. 5 . Ty . Mandy, the end of a twoterm presidency marks the beginning of new leadership for the country but it also may mark the start of a bear market. Here to explain is larry mcdonald, head of u. S. Strategy at Societe Generale<\/a>. Good to have you with us. This is a historical pattern. Take us through what the data say. If you look back over the years, eisenhower, nixon, reagan, clinton, bush, at the end of those two terms, theres always been disruption, and sometimes it comes from political elements that are inside the administration, and a lot of times its because of economic breakdowns, but at the end of the day weve got over the last 50 years during the end of a twoterm presidency, weve got an average decline of 28 to 30 , so there were some substantial numbers that back up this historical element. Nixon obviously didnt serve out the end of his second term. I guess, but what are you measuring there . Are you measuring the last two years of the presidency . Well, the disruption typically comes within the last year and a half to two years, and if you think about what happens is the voters and the investors listening to us right now, they dont theres so much uncertainty, we dont know who the next president is going to be, and the other element is if you think about what mr. Trump has recently said about obama and the fed, hes basically said the fed has been too accommodative to try to help the president. This is what donald trump has said. And today a fed governor said if were too accommodative we build up excesses in the credit markets. Ive been talking about the excesses in asia but the credit market excesses could alter the path here and create a problem. So what do the odds say with respect to the probability of a bear market between now and the end of obamas term in 2017 . Well, our team, Andrew Lapthorn<\/a> has been very helpful and we have a team of analysts, our model, were up to near 30 . Its the highest level since 2007 in terms of a bear market probability, and we look at all different types of indicators. Weve got our lehman risk indicators but the most upsetting thing is credit is breaking down globally in terms of emerging market credit, in terms of the credit quality and yields in the United States<\/a>. The spread between, for example, single b bonds and Investment Grade<\/a> or aa bonds is the highest its been since 2007. Were seeing disruptions in the credit markets that could lead to weakening the equity markets. All righty. Thank you very much, larry. We appreciate it. Larry mcdonald from Societe Generale<\/a>. When talking about of the president ial race, ben carson continues to defend his recollection of the past amid growing questions about his personal history. John harwood joins us now with all the details. John . Mandy, ben carson is discovering that higher poll numbers in a president ial race means a higher level of scrutiny. Now, hes not a politician or hasnt been a politician previously, so he doesnt have a record to pick over, but, instead, people are going through his inspirational life story to check up to see how well the story matches the reality. That produced this contentious friday night News Conference<\/a> at which ben carson was defending his claims to have received an offer of appointment to west point. Something that happened with the words, a scholarship was offered, is a big deal, but the president of the United States<\/a>, his Academy Record<\/a> being sealed wait a minute tell me how theres equivalency there. It doesnt matter where it is. Thats a silly argument. Tell me how theres equivalency. You see ben carson trying to turn it back on the news media, raise questions about the scrutiny of president obama. He continued talking to our colleague Chris Jansing<\/a> on meet the press saying that simply this level of scrutiny to long ago events is not appropriate and not precedented. You said this 20 years ago, this didnt exist, this didnt exist, i have not seen that with anyone else. If you could show me where thats happened with someone else, i will take that statement back. Now, this just adds to the unusual nature of this particular race where donald trump and ben carson both very unconventional candidates now are commanding about half of the republican vote, but interestingly, republican insiders dont believe either man can be nominated within the Republican Party<\/a> which is why the betting markets have established marco rubio who has less than half the support of either of those men as their favorite for the nomination, guys. Well have to see how it unfolds over the next few weeks. Thank you very much, john harwood reporting. Check out the defense stocks so far this year. Despite the market ups and downs, these stocks continue to fly high with two Major Military<\/a> moves involving the u. S. , russia, and iran, how much longer can the sector continue its winning streak . That is next on power lunch. No matter how fast the markets change, at t. Rowe price, our disciplined investment approach remains. We ask questions here. Look for risks there. And search for opportunity everywhere. Global markets may be uncertain. But you can feel confident in our investment experience. Around the world. Call a t. Rowe price investment specialist, or your advisor. And see how we can help you find global opportunity. T. Rowe price. Invest with confidence. Ive got a nice long life ahead. Big plans. So when i found out medicare doesnt pay all my medical expenses, i looked at my options. Then i got a Medicare Supplement<\/a> insurance plan. [ male announcer ] if youre eligible for medicare, you may know it only covers about 80 of your part b medical expenses. The rest is up to you. Call now and find out about an aarp Medicare Supplement<\/a> insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement<\/a> insurance plans, it helps pick up some of what medicare doesnt pay. And could save you in outofpocket medical costs. To me, relationships matter. Ive been with my doctor for 12 years. Now i know ill be able to stick with him. [ male announcer ] with these types of plans, youll be able to visit any doctor or hospital that accepts medicare patients. Plus, there are no networks, and virtually no referrals needed. So dont wait. Call now and request this free decision guide to help you better understand medicare. And which aarp Medicare Supplement<\/a> plan might be best for you. Theres a wide range to choose from. We love to travel and theres so much more to see. So we found a plan that can travel with us. Anywhere in the country. [ male announcer ] join the millions of people who have already enrolled in the only Medicare Supplement<\/a> insurance plans endorsed by aarp, an Organization Serving<\/a> the needs of people 50 and over for generations. Remember, all Medicare Supplement<\/a> insurance plans help cover what medicare doesnt pay. And could save you in outofpocket medical costs. Call now to request your free decision guide. And learn more about the kinds of plans that will be here for you now and down the road. I have a lifetime of experience. So i know how important that is. Welcome back to power lunch, everybody. Im mandy drury. Two big stories out from the Defense Sector<\/a> today. Jane wells joins us with more details. Hi, jane. Hi, mandy. Well, defense stocks are down today. That may be more to do with whats happening in the dubai air show. Its a little sluggish at the start. However at the same time, we may step another toe in the proverbial syrian water because defense secretary Ash Carter Says<\/a> the president is willing to send more troops to fight the Islamic State<\/a> in syria beyond the 50 special ops forces which were announced late last month. However, carter tells abcs this week this would only happen if the u. S. Can find enough locals willing and able to join the fight. Quote, you need to have capable local forces, thats the key to sustainable victory. Minetime, russia has followed through with plans to sell its s300 surface to air Missile System<\/a> to iran despite concerns of some of irans neighbors and the u. S. Russian Officials Say<\/a> the system is only defensive. Speaking of missiles, what the heck was that people in Southern California<\/a> were asking saturday night. It scared the bejesus out of some people. It was a test of a trident missile launched off a submarine off the coast. It wasnt armed and more tests of something or other may be continuing as l. A. X. Says late night commercial flights are being rerouted through thursday so they dont go over the ocean because the military is active in that area. By the way, thats an expense tiff test. Those trident missiles cost about 70 million a piece, but i guess you have to make sure everything works. Thats amazinamazing. Thank you very much, jane wells. As the military expands its presence in europe and does tests like that, is that a bullish sign for the defense stocks or is it already too late to get in . Howard row bell is a defense an lest with jeffries. Good to see you. You think the Defense Sector<\/a> has lots more room to run, why . I think i will use janes comments and expand on it rather than have a toe in the water, you want to have a toe in syria and thats an optical wire guided missile built by raytheon were using right now. So you think that our involvement in that part of the world, our build up of forces in europe, all augers strongly in favor of investments in Domestic Defense<\/a> stocks. Do you have two or three that stand out in terms of investment potential . Yeah. I mean, i think its really a munitions story in the near term and theres three companies that supply products, raytheon, orbital, and general dynamics, and each help troops on the ground and thats a big part of whats going on. The other thing thats going on thats very important is the u. S. Has lost control of air space over syria because of the russians air defense capability and there you need suppliers of Electronic Warfare<\/a> and the leading supplier of that is raythe raytheon. Are there defense stocks that are less appealing to you . Conspicuously not on your list are Lockheed Martin<\/a> and boeing. Is that because you didnt think to include them or you dont like them. You said pick three and i picked three. You want to stay focused and those are some of our top picks. Boeing has also been a top pick but thats a different story and its more productivity and theres a lot of good things going on with air traffic. Howard, let no one say you dont follow directions. I asked for three and you gave me three. Thank you. Youre welcome. We appreciate it, howard rubel joining us today. Mandy . Maybe follows orders better than we do. Yes, clearly. Stocks are giving back a big chunk of their recent gains today. The major averages are all experiencing their biggest drops since september 28th. The major averages are also in danger of breaking another positive streak. How traders are positioning themselves. Thats coming up ahead. Plus the president of the university of missouri resigned amid criticism of his handling of student complaints about race and discrimination. Why University Leaders<\/a> failed and how to prevent it. That interesting story coming your way as well. Dont go away from power lunch. Hi, everybody. Im sue herera. Here is your cnbc news update this hour. Bond has been set at 1 million each for two louisiana marshals charged with fatally shooting a 6yearold. Both are facing murder charges in the death of Jeremy Mardis<\/a> who was killed when the marshals fired on his father aes car. A new orca experience will debut at seaworld in 20917. Its unclear if the same changes will be made to the orlando and san antonio locations. President obama has a Facebook Page<\/a> and hes using his first post to talk about climate change. The president urges users to post comments and share his twominute video on the topic. And the retailers would be ready for business on thanksgiving. Target joining a list that includes toys r us, macys, and staples in announcing they will open thanksgiving day and remain open through black friday. Let the games begin. Thats the cnbc news update this hour. Back to you, ty. Sue, thank you. The final grades on gold just crossing. Lets go to Jackie Deangelis<\/a> at nymex. Hi, jackie. Good afternoon, tyler. Gold prices saw a little bit of a boost today after really having a bloodbath session on friday after the jobs report. It was this notion that we could see a december rate hike that really took gold prices down under 1,100. This 1,087 level is an area of support here. It could generate a little buying interest but right now traders arent ottistic were going to get over that 1,100 hurdle again. The rest of the metals complex today in the red trading alongside equities. A lot of those metals have industrial uses. When you see thedo dow down mor than 200 points, they tend to move down as well. Markets starting off with a selloff. Lets check in with bob pisani. Just off the lows for the day. Look at the markets in the middle of the day. You can blame it on concerns about fed hike and other issues out there. I think were overbought a little bit, six weeks market has been moving up. Right now volume on the moderate side. I would note volatility is pretty elevated. The breadth 6 to 1 declining to advancing. Everything is down a little bit more than 1 . Energy, industrials, health care, financials, this is what i mean when i say a fairly broad decline. Two groups have notable declines today. Take a look at Interest Rate<\/a> sen sensitive stock, reits, home builders, emerging markets, utilities oddly are not even though they got hit rather hard on friday. The other major group on the downside are Department Stores<\/a>, as we mentioned. Theyre going to be reporting later this week. The last sector to really move and report. The retailers. Citigroup and jpmorgan had negative comments on them and the earnings estimates have been coming down for more than a week. Thank you very much, bob. So should investors be concerned about the selloff after six weeks of gains . With todays drop, the dow is now negative again for the year. Joining us david from Atlantic Trust<\/a> and mark chief investment strategist at janney montgomery. Are u. S. Stocks beginning to look a little expensive and this is maybe just a bit of reevaluation going on . Thats exactly our view. The market looked overbought by almost any measure. Were not put off necessarily by the pull back. Woe wouldnt be surprised if it didnt run a little deeper before it was said and done. Not that we need to test the lows set in late september, but in order to invite investors who are sidelined back into the market, we need to see a little lower prices and a little better valuations to entice investors off the sidelines for the socalled santa rally to take place. What about you, dave . Whats your feeling on the topic . Id agree with that. We saw a 12 rally from late september through last friday. Six weeks in a row the market was up. So its time for a little bit of pull back. Even in the best of times, the market doesnt go up every day and were not in the best of times. We have kind of mixed conditions regarding the economy and obviously i think with the fed getting poised to raise rates, it makes some sense that markets would get a little more volatile as they ponder what would be the first policy rate increase by the fed in over a decade. And it seems to be, dave, that the focus is shifting not the focus is shifting from sort of when the first hike is going to be, i think increasingly december seems to be the date that the market is sort of zooming in on. Its the pace of hikes and the terminal rate after that. What are we going to see and how will the stock market and bond market perform . Youre right. Markets are starting to look beyond the first rate increase to where are we going to be, say, a year from now . And our expectation is at the end of 2016 we will have seen three or four small rate hikes from the fed, so think of the fed funds rate. It now effectively is zero. Somewhere between 1 , 1. 25 , so thats higher but still well below the historical norms and our view is this is all happening because the u. S. Economy is performing pretty well and thats a good thing, not a bad thing. So if the economy holds up in 2016, which we expect it will and were looking at 1 or 1. 25 shortterm percent on shortterm Interest Rate<\/a>s, thats not the stuff that will kill an equity bull market. All of that being said, mark, if you were to put some money to work into the market today, would you get better value will you get more potential upside in europe . Absolutely. We continue to believe the european story is one in which were seeing credit expansion help to facilitate obviously exceedingly low Interest Rate<\/a>s with the ecb contemplating even perhaps more stimulus as soon as their meeting in early december. In addition to that, theyre benefitting from the same thing we are here in the United States<\/a>, which is the tailwind from the gas tax cut. And so together with cheaper valuations, i think a much steeper earnings projection profile for europeanbased companies, thats a cocktail thats, i think, exceedingly attractive, and, therefore, we had bias portfolios to european equities. Before i let you both go, to what degree has the emerging market thesis deteriorated with the stronger dollar . Well, i think the pressures for the emerging markets are going to continue because of this renewed surge in the dollar. Its depressing Commodity Prices<\/a> which is a key economic input for a lot of emerging countries. So we continue to underweight emerging markets relative to developed markets. Dafer and mark, always good to speak with you. Thank you for joining us today. You can go to powerlunch. Cnbc. Com to see what dave and mark are avoiding right now. Thats powerlunch. Cnbc. Com. Ty . All right. Thank you very much, mandy. Lets get a check on the bond market on the back of that weak 3year note auction. Mr. Santelli tracking the action. Hi, rick. Hi, tyler. Its interesting, the word most commonly used to describe that auction that ended about 35 minutes ago, weird, and i totally agree. I might have been the first one to call it weird. Look at a 1 day of 2 year and 10 year. The very short end thats most susceptible to what the fed may do and then the benchmark. You soo he a little volatility at 1 00 eastern. Now, when you make it a 2day, most of that disappears which shows the real story is the daytoday staircase elevation of Interest Rate<\/a>s. On that 3year, how far back do you have to go to see the yield in that dutch auction . All the way back to november of 2010, very similar to a 2year note. Tyler, mandy, back to you. All right, rick, thank you very much. Lets look at the markets right now. Dow, nasdaq, and s p all sporting losses of about 1. 25 to about 1. 25 basically. What is behind these declines . Were going to ask a couple traders when power lunch returns. 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Insurance coverage has expanded nationally and you may now be covered. Contact your health plan for the latest information. Well, right now you can get 15 gigs for the price of 10. Thats 5 extra gigs for the same price. So five more gigs for the same price . Yea, allow me to demonstrate. Do you like your pretzel . Yea. Okay, uh, may i . 50 more data for the same price. I like this metaphor. Oh, its even better with funnel cakes. But very sticky. Now get 15 gigs for the price of 10. Whyour boss . Ork for . Yourself . Your family . Our Financial Advisors<\/a> are free to realize a plan to fit your familys unique needs. Well listen. Well talk. Well plan. Baird. Welcome back to power lunch. Lets take a look at the shares of apache which are rising strongly today. The oil and gas Company Reportedly<\/a> rejecting an unsolicited takeover offer from an anonymous bidder but that may not be the end of it. Well ask an analyst if apache can go even higher. Also shares of Weight Watchers<\/a> are up again today. Hedge fund manager steve coen disclosing a 6 stake in that company. In october Oprah Winfrey<\/a> bought 43 million worth of stock and under 7 bucks a share. The stock is trading around 23 right now. So a nice little killing there, and shares of priceline down more than 100, 139 to be exact right now. Thats a nearly 10 drop with Fourth Quarter<\/a> Earnings Guidance<\/a> well below what the street was looking for. A lot of disappointment being shown in that stock. Lets check out whats happening at the nasdaq with wynn resorts among the biggest drags in the nasdaq 100. Bertha coombs is following the other big movers there. Hi, bertha. What were seeing is the big caps are all feeling a bit of pressure dragging the nasdaq 100. Apple had started the day in positive territory. It is starting to take orders on wednesday for the ipad pro just in time for the holidays but the stock has gone back into negative today. Were sort of seeing the same even with some of the momentum stocks, the f. A. N. G. Stocks. Amazon off 1 , netflix down 3 , and alphabet, Parent Company<\/a> of google, also weighing on the big caps. Whats interesting is we are watching the biotechs just inching into positive territory here coming off the low and some of the smaller cap names are actually some of the ones helping to buck the trend today. A number of them moving higher on news of the positive trials like isis, immunomedics, incyte pharmaceutical which had been off 14 on friday on a bounce back today with news a drug its working on with lilly for Rheumatoid Arthritis<\/a> had positive results. And yahoo a little under pressure. Our friends at recode reporting that yahoo s Marissa Mayer<\/a> looking to restructure in the wake of a number of very highprofile departures among some key names now turning to the consultants over at mckinsey. You can imagine that doesnt really get much cred on the street in silicon valley, tyler. Thanks very much. The major averages down 1 , a little more than that. The dow is off 200 points, down 1. 13 . Lets bring in cnbc contributor peter costa. Peter, welcome. Good to have you with us. Is there anything unusual about this selloff or is it just kind of what one might expect after six weeks of gains . No, i think its typical. I mean, the market was overbought. I think everyone felt that way on friday. And i think this is a continuation of it. You know, its not the end of the world. Were down 200 points. I think that, you know, we will probably have a little bit of a pullback that will continue for a little longer, not much. Its just typical, totally typical. We had a guest on earlier this hour who said that his work or his teams work at Societe Generale<\/a> suggested a 30 chance of a bear market. Thats not a majority chance but 30 is higher than it has been. Do you see that in the cards . I dont necessarily think were going to see a bear market. I do think there will be a corrective phase, but i dont think were going to see a bear market. I still think that the bull market that weve had for the last six years, in the bigger, longer term, is still in place. You know, a little bit of a correction cant hurt. As a matter of fact, i think it would be very, very healthy. Look who has come into the picture right there. He just wandered up off the street, matt cheslock, just wanders in. Matt, good to see you again. Good to see you, tyler. Is this selloff anything we need to be overly concerned about . I dont want to make more of a couple days of down prices after weve had six weeks of up. No, i wouldnt be concerned about this move at all. You know, in fact, if you had bought the last dip, you probably would have made a lot of money. Take this for what it is. Its just a little bit of selloff, a little bit of retracement. As peter said its very healthy right now and, you know, there are going to be times to buy individual stocks during this, but i think right now what youre going to focus on is the retail earnings that are coming out this week. That could set the tone for the rest of the market and maybe some place to put your money going forward. What do you think the retail earnings are going to look like, peter, and would there be any buying or selling opportunities surrounding that . Im sure there will be. Ive not been a fan of the retailers for a very long time. I think the whole industry is going through a huge change. To me its a little scary because i think some of the best names, you know, they get hit the hardest. Im going to stay away from the retail sector. I still like the health care. I still like energy. I still like the financials, but retailers are just not my bag. You know, matt, weve been talking about Interest Rate<\/a>s going up for as long as i can remember. It seems like since i was a little boy weve been talking about the concern about Interest Rate<\/a>s. How worried should Equity Investors<\/a> be about rising Interest Rate<\/a>s . You do see that the 10year coyote has gone from a smidge above 2 now to almost 2. 4 in a period of maybe 2 1 2, 3 weeks. Youre going to find out what it means for equities. Equities have had this established bull rally for about six years now. So, you know, modest uptick in rates really shouldnt affect, you know, equities as far as the u. S. Economy goes, but, you know, its going to increase borrowing costs and if china falters and the rest of europe is under a little pressure, its going to affect us long term just in that nature of things. From a laymans terms, rising Interest Rate<\/a>s arent going to be good, but its not going to be the reason why were going to see a massive selloff. Peter, a second ago you said you like energy. I think you said you still like energy indicating this is not a new thing. If you take a look at, you know, energy prices, oil, i mean theyre just finding such a difficult time to gain any real traction, get back up to 50 and hold it above. What is it about energy that you like . This is a much longer term play. I think that when you have a well diversified energy company, you know, they look at things in terms of 5 and 10 years and i think that you pick the right companies in this group and theyre the better managed ones, youre going to do well over time. S in not a shortterm play because obviously oil is going to be stuck in this range, 45 to 50. It could be for, you know, this could go on for a year, but i do think in that time frame there will be opportunity to buy good names at a fair price. Are you allowed to say which ones you like . Well, i mean, im not an analyst but well do it as a personal preference. I still love exxon. I think that that company is, you know, as big as they are and as cumbersome as that stock has been, over the longterm this is going to be a great play. You know, and they do generate a lot, a lot of cash. So to me i think that would be my favorite. So peter, how did tennessee do this weekend . I dont even know. Lets go over this again. They were fortunate to win the game against South Carolina<\/a> and not having Steve Spurrier<\/a> on the sideline probably helped them, but they did win, so well take it as we can get it. Go vols. Thats the word from peter costa. Matt, good to see you as well. Mandy . Lets take a look at the dow right now currently down by nearly 200 points. Not the absolute lows of the day but certainly not looking good and also wiping out the gains for the year. Yep, the dow is now negative for 2015. Groundhog day, guys. Much more market coverage coming up on power lunch. Anything worth pursuing hard work and a plan. At baird, we approach your Wealth Management<\/a> strategy the same way to create a Financial Plan<\/a> built to last from generation to generation. Well listen. Well talk. Well plan. Baird. Hi watson. Annabelle, your birthday is tomorrow. Im turning seven. What did you ask for . A princess. And a pony. You like things that begin with p. I like pink frosting too. Will you have a cake . Yeah. I was too sick to have one last year. The data your doctor shared shows you are healthy. Are you a doctor . No. I help doctors identify Cancer Treatment<\/a>s. I want to be a doctor someday. I can help with that too. Watson, i like you. Welcome back to power lunch, everyone. Im sue herera with this news alert concerning pimco. According to dow jones, pimco has filt ed an objection in tha breech of contract lawsuit filed by bill gross. Pimco calling that lawsuit, quote, legally groundless and a sad postscript to a storied career according to court documents. In the civil lawsuit, gross, as you may recall, accused his former colleagues of plotting to drive him out of the firm and in that he is seeking a jury trial and damages of no less than 200 million. Basically pimco is filing the objection in the breach of contract suit and theyre asking for that to be thrown out. Mandy, well keep you posted. Back to you. We certainly will. I feel like its not the end of that story. Thank you very much, sue. To dominic chu for a market flash. Good afternoon. Shares of Frontier Communications<\/a> up by 4 after receiving a favorable proposed decision from a california judge over its planned acquisition of some local wire line assets of verizon. Remember, the company has already received all other necessarily approvals including from the federal Communications Commission<\/a> and the justice department. So, again, all part of the story here, frontier perhaps getting some more good news. The stock is down 27 so far this year. Back over to you. Thank you very much, dom. The big news this morning, the university of missouris president resigning. Was that a failure of leadership . Well discuss that hot topic. Plus, lets take a look at how some of the most widely held stocks are trading on this down day. Power lunch returns in two minutes. I state your name , do solemnly swear that i will support and defend the constitution of the United States<\/a> against all enemies foreign and domestic. And the uniform code of military justice. So help me god. Coming up, we have got more on this weak start to the week. What has gotten the market so worried . Were going to dig in. Plus, what the saudis are saying that is spooking the oil market. And well call these the decor wars. One analyst says buy this home retailer but sell this one. Beth of those names coming up at the top of the hour. Tyler . Brian, thank you very much. The president of the university of missouri steps down calling it, quote, the right thing to do, and he takes full responsible for what he describes as the inaction that occurred on campus. More insight on leadership or the lack of leadership during a crisis like the one from mizzou from our guest bill george along with tim judge at notre dames Mendoza College<\/a> of business. Bill, tim, welcome. Good to have you with us. Bill, you have written a book on leadership. Was this a failure of leadership and how would you characterize or describe it . Well, i think it was a failure. I feel sorry for president wolfe and im not here to judge him, but i think it shows how tough it is to lead today and how you have to reach out to all your constituencies and be personally engaged, and i think he wasnt. After the problems in ferguson, i think he could have anticipated that there were going to be problems with africanamerican students on the campus, and so he let this thing get out of control, and in the end he did the right thing by resigning, but i think its so important that you engage the students, you engage people that are concerned, you engage your faculty and it shows all these constituents coming in. You cant just engage the shareholders, you have to engage all your quaeticonstituencies. You need to listen really carefully and i think in his resignation statement he was clear in saying we needed to listen to each other better and that starts with the head of the organization being the one who is listening. Mr. Judge, how do you see it . Well, i agree with bill. I think, you know, this is a situation where i think once the case had gotten to this point, there was little that president wolfe could do but resign and you have to ask yourself, okay, looking back, what could we learn from this . And i think a lot of it is this is a very public situation with the ferguson incident, and i think, you know, you look back on this and think, you know, when you see these incidents occur and they build up, the leader, president wolfe, theres a public side to this that the leader has to be very vocal, and i think dealing with this in private meetings was, you know, not the approach that many people expected because you have to set the tone, and you have to let the people who are sympathetic to these incidents know that this kind of behavior is not welcome. You know, mr. Judge, im reminded of a case 40 years ago when i was at the university of virginia where there were similar issues over race that led to the Student Council<\/a> and the members of the student body basically marching up to the president s home and walking right into the front door, knocking on the door, because he was judged to have been insufficiently proactive with respect to questions of race. How far, professor judge, have we come on race on campus . You know, i think in some ways weve come a long way, but, you know, you have to ask yourself why is it that some of these incidents keep happening around why is it that a lot of times we see our leaders fall into this same pattern of kind of closing the walls in and sometimes feeling the best way to deal with this is publicly counseling people and reassuring them. You know, i think you have to be more progressive and proactive. Right. And these actions are absolutely outrageous, and i think, you know, all the students need to know white and black that that kind of behavior is not going to be tolerated. Right. Let me interrupt, bill, i want to come back to you. We have to take a quick news flash with dominic chu. Well be right back. Dom . Tyler, the reason why were bringing this to your attention is right now Norfolk Southern<\/a> shares have been halted for volatility, have been for the last six minutes, up 5 . This on the heels of bloomberg headlines saying that Canadian Pacific<\/a> rail is said to possibly be exploring a takeover of Norfolk Southern<\/a>. Norfolk southern shares right now halted for volatility. Theyre expected to reopen momentarily but they are up 5 going into this particular headline. We should note Canadian Pacific<\/a> is still trading right now and its currently up 5 as well. Also watching, of course, the ripple effects from other Rail Companies<\/a> like union pacific, Kansas City Southern<\/a> as well. So rails very much in focus in this trade today. Back over to you. All right, dom. Let me turn back to bill george if i might. Just tie it off here. I know you, bill, well enough to know that you believe that leaders lead, leaders engage, leaders get out front. Is that where this president failed . Yes, i think it was. He didnt sense the issue coming. He didnt anticipate it, and really sit down and have listening sessions. I went to georgia tech, tyler, and we were the first school in the south to peacefully integrate. We talked about it for a whole year before this happened and you have to get out and talk to the people on the football team, talk to the africanamerican community, talk to others and make sure there is understanding of what aktss and if there are students taking inappropriate actions it has to be dealt with very swiftly and you have to shut it off quickly because if you dont get out in front, then all the blame comes to the leader, fair or unfair. Thats where it winds up. Its like the vietnam war protests in the 70s. So do i. Were old enough to remember them, both of us, bill george, thank you very much. Tim judge of notre dame, thank you as well. And that, folks, does it for the first hour of power. Brian, well hand it over to you for the 2 00 p. M. Show. Thank you very much. It is now 2 00 on wall street, 11 00 a. M. At yahoo s headquarters in sunnyvale, california. Dow and oil both losing a lot of money today. Hi, everybody. Im brian sullivan. Melissa is at the nasdaq. As we noted, it is a weak start to the week. The dow is down by 200 pountint led lower by pretty much everybody. But we have got to get right now to bob pisani at the New York Stock Exchange<\/a> because shares of Norfolk Southern<\/a> have now reopened after a brief halt. What do we know, bob . Well, theyre up rather noticeably on good volume, up 11 . Norfolk southern was 83 and change tooling along here down along with the rest of the transports. Suddenly news report came out on bloomberg that canada pacific was considering a takeover of Norfolk Southern<\/a>. We have not confirmed this. The companies have said nothing about this so bear that in mind. The stock was briefly halted. Good volume up about 11 . Canada pacific also up about 4 on that news as well. Its been overall fairly there you see the move. Its been overall a fair ll llyh day. Were down 200 points. This is the roughest day weve had in the last five weeks. The important thing, higher rate worries is the main issue for the markets. On top of that the Global Economy<\/a> is still weak. China didnt have good numbers overnight as well. Remember, stocks are a little on the overbought side right now. The other big story today, Department Stores<\/a> are getting hit bad. Generally negative comments from jpmorgan about earnings coming out. All the big names, jpmorgan and some of the other names will be reporting. Nordstrom, dill lards, all after the close in several days from now. The most important thing is theyve generally been having warmer weather and weaker traffic overall here and less tourism spending in a case like macys. Thats a major issue for them. They have made that issue notable in the past here. A little excitement over the tra transports and a lot of discussion about what kind of earnings well see from the retailers. Thank you very much. I guess youd also want to look at csx and perhaps ksu, Kansas City Southern<\/a>. Csx much smaller. Certainly those two names could also now be at least not in play but in focus of investors. Forget the rails even though theyre fun. Lets pick up a few other factors at play in todays market slide and lets talk about global worries, okay . Until the nsx news broke this was going to be the headline. The oecd shaving its forecast to just under 3 from 3. 3 , thats just weeks after the imf warned the World Economy<\/a> would grow at the slowest pace since the financial crisis. Meantime, goldman sachs, which really coined the term bric, referring to brazil, russia, india, and china, believes clients should have some bric exposure but maybe less so. The brics now just becoming a part of the wall, but we dont need no education. Also a big warning from the Worlds Largest<\/a> shipping line saying the Global Economy<\/a> is slowing a the a faster than expected rate and the emerging markets etf, the eem down more than 2 . Lets bring in paul chryst fer and tim seymour with 19 years of investment advice, also, of course, a fast money guy and a pretty good drummer. Paul, well start with you first, on our wall of worry, if you will, which of those worries you perhaps the most . Well, the brics really have had a hard time. Brazil and russia in particular. Theyre in recession right now and, of course, china is slowing but china is slowing on purpose and its slowing its manufacturing sector. The consumer side still looks good to us. Maybe they want to put the brics back in wall. You mentioned the i for india. Russia, china, and the brazil especially not so much. Do you see them, paul, recovering anytime soon or really india going to become its own story . I think india is a very interesting story going forward. Its really a diversifier among emerging markets, but china is i think the most interesting story although we have some concerns there for the medium term, two to three years out. I think theres no risk of a hard landing this year or next. Simply put, the Services Sector<\/a> is taking a lot of the slack that manufacturing is laying out and you have to remember the government will stimulate as it needs to. So if you think of india and china as maybe 1. 5 positives and russia and brazil as 2 negatives, you really have a split game, a tie game. Tim, i think a lot of concern for the emerging markets these days is what the impact of a rising rate environment will do. Last rising rate environment we were in, the commodity cycle wasnt where it is in now. It was in an upswing which is opposite of where we are today. How will that change the outcome. Some people will argue last time it was fine. This time it is different. It usually comes when theres global growth. Does the u. S. Have escape velocity here . Emfx though for all the pain and all the Fund Outflows<\/a> and, therefore, almost a manifestation of that have seen, you know, emfx is at its alltime lows. The South African<\/a> rand alltime lows. Even the mexican peso which i would argue is being unfairly lumped into a commodity export commodity is near alltime lows. You have had a major adjustment already. The Fund Flow Activity<\/a> tells you where sentiment is. Goldman who pioneered this whole brand, it tells you that momentum is so low fore em, i think it becomes interesting. I may be talking by professional book but thats where i see it. The negative flows out of em is an indication to you to actually buy the space . Yeah, and Merrill Lynch<\/a> pointed out in some of the recent data that for 100 left em in september and october, only 2 has come back whereas in high yield 88 has come back. People tell you em is going to come back but a lot of people arent following the trade. Tim seymour and paul chryst fer, we have to leave it there. A big market flash coming up. Lets go down to meg terrell with a market flash on mnk. It is sinking 22 before being halted. It just opened back up. This after a tweet from short Seller Citron Research<\/a> saying at these prices they have significantly for downside than valeant, a far worse offender of the reimbursementment more to follow. Saying valeant cant live in a vacuum. It has to do with their acquisition of a company last year, about 5. 6 billion. That company sold an old drug approved in 1952 for some Rare Diseases<\/a> including infantile spasms and it raised the price significantly. It was a controversy four years ago. Mallen krot has been the focus of other short sellers including david eye horn. We look at what krcitron is saying. I presume a report will be coming out. Which is basically calling into question the Third Party Distribution<\/a> model. Right. So its a lot of the same concerns that have struck valeant. We should note that even though valeant grabbed all the headlines and has suffered the most market cap loss, mnk has been under pressure for the same pressure valeant was and they are also another Hedge Fund Favorite<\/a> in the pharma space. A lot of holders who have valeant are also exposed to m l mallinckrodt. Mnk getting whacked down 21 right now. Obviously a story just developing. Were going to follow that throughout this hour. Thanks for being so patient. Weve got more on yahoo , more on the market selloff, more on the potential deal for Norfolk Southern<\/a>. Speaking of walls, theres a big wall. A lot of stuff on that, a lot to do. Were back right after this. Youre welcome. In 2014 saudi arabia produced over 11 Million Barrels<\/a> of oil per day despite the fact that the price of oil is now down 40 in the past year. The saudis appear determined to keep pumping oil for the Global Market<\/a> share whether it hurts their economy. Lima kroft is joining us now. And you are somebody who is involved in political intrigue. You call this the game of thrones. The intrigue of saudi arabia. Without getting into too into the weeds with all the players, what the heck is saudi arabia doing . They dont seem to care what happens to their economy. It looks like for now theyre going to continue with the market share policy. We had officials over the weekend saying, you know what . We have runway to deal with this, we have the fx reserves, we can borrow. Youre not going to pull back production. Shouldying the oil markets in 86, but when you look at history, 1986 the price of oil collapsed in america, saudi arabia drove the price down and drove Many American<\/a> Oil Producers<\/a> out of business forever. Do you believe theyre trying to do that again . What i think is interesting is the summer ever 86 they also called the russians and said youre in an expensive war in afghanistan, maybe you want to coordinate with us. What the saudis are also saying is were not going to balance this market alone, and russia, the other big producer, you better do this with us. They keep saying theyre not going to bear the burden of adjustment. Its going to be the other high cost producers, north america and russia, you better get in. You have the starks, the lansters, the bar rathons effectively in saudi arabia. We say the saudi royal family like its a happy unit. No, its intrigue. Based on some of the moves and people who have been elevated inside the saudi power structure, where do you think theyre headed . I think whats really interesting, what a difference a year makes, we now have a very young man basically calling many of the shots in saudi arabia. You have a deputy crown prince between the ages of 29 and 32 and he really occupies the most prominent political real estate in the country. 70 used to be young. 29 to 32 is really young. His rise has caused some backlash and not everyone is entire lly happy with the war i yemen and with the oil policy. What role if any about the bombing of the jet play, if any. Talk about lansters and all that. Thats it. So what does that do to this love triangle . I think its going to make it harder to get russia audi cooperation. I dont think you can have two tracks in terms of Foreign Policy<\/a> now and oil policy. And the russians on the back of this bombing if it turns out to be a bombing are going to probably have to double down in syria, maybe put land troops into syria. Now you have the russians and saud saudis squarely on opposing sides. There are reports the russians have been courting the houthis. I dont like to russia to help saudi arabia out of the bind. From an oil perspective i imagine russia more than anybody out there in the world my news venezuela needs to keep pumping oil as well. Its a race to the bottom. Every producer who is circling the drain is like i have no choice but to max out my production. Russia is at a postsoviet high in terms of production. Going into this opec meeting, the question is who is really going to put their hand up and say, okay, enough. It doesnt look like were going to get there in december but i say if something changes internally in saudi arabia, maybe we do. I referred to this as a game of global oil chicken. We think somebody will eventually turn the wheel and chicken out. Sometimes they hit. Times they hit. And sometimes countries you have the opec map up there, sometimes countries just blow out. There are a whole host of countries, venezuela, in iraq, libya, they really cant stay on this environment. So you have some type of epic political catastrophe in one of these oilproducing countries that need the revenue. Do you think theres a chance russia could default . Going into 2016, if we stay in this pronounced lower for longer environment, i think a lot of questions about sovereignty float around the table. Always a pleasure to get your insight. Thank you. Another major headline hitting the wires this afternoon if there werent enough already were that oil and gas giant apache was reportedly approached to be bought but turned it down. The alleged bidder not named but if the reports are true, it would have likely have been a Major Oil Producer<\/a> because apaches market can is 18 billion. Gail nicholson managing director of klr group joining us now. Gail, you increased your target to 72 for apache, 20 bucks more than the current price. How much of that was expectations of a deal versus simply the fundamentals of apache . There is no expectations for a deal in our target price increase. Purely fundamentals from that standpoint. When you look at what apache has done, theyve driven down costs, spent 12 less than the previous quarter but kept production flat. Highlighting the efficiency gains. Four the Fourth Quarter<\/a> of 14 they have reduced loe by over 20 and driven efficiencies in the permian. We look at apache and we think theres high all assets. They have 1. 3 billion of cash left on the Balance Sheet<\/a> at year end 15. They really offer a potential buyer optionality for the future. What youre saying about the efficiencies, everybody has cutting costs but theyre also selling a barrel of oil for half of what they were selling it for basically last year. Absolutely. But i think what you highlight from the standpoint with apache is they plan to spend between 3. 6 billion and 3. 8 billion from a capital. Theyre going to generate almost 3. 6 billion this year. Theyre roughly cash flow neutral versus a peer group outspending 30 to 40 due to the significant decrease in the commodity. They sit in a very nice position. Sold over 6 billion worth of assets during the year and so they are well positioned to weather the storm, accelerate into an improving commodity price environment when we hopefully get one as we progress through the second half of 16 and really kind of put the pedal to the metal. Gail, i get what youre say being the strong Balance Sheet<\/a>. Theyre in a rarefied group with strong Balance Sheet<\/a>s but they have all materially underperformed their group over the past year or so. So at what point does shareholder pressure come into play, shoulders who are like its got the strong Balance Sheet<\/a> but the stocks have been underperforming . Apache has had a Management Change<\/a> and theyve been very effective streamlining the business and reasideliligning ta of where theyre spending the capital. I think youre seeing that through in 15. I can understand the disappointment in shareholders but we think in a better commodity price environment and on in course of action they have started in 15 you should see an appreciation. Theres value wedges that havent been unlocked. About 50,000 acres. They have the properties in canada. I think from the 1257nd point when you look at stock price, the market doesnt understand the international assets. 50 of their oil is weighted to the International Market<\/a> where you get a better commodity price environment versus wti and more importantly their cash flow positive assets, we anticipate the company is going to 3r0id us vfti information on the north sea. Gail, we have to go. I was going to actually jump in and can you about egypt quickly. Apache at least a couple years ago when i was with them in egypt was the biggest foreign investor in that country. Thats got to be a concern. Is it all positive . Theres a big risk there now. You know, i think from the standpoint they have weathered that storm exceptionally well. They never had any issues in terms of their operation. They have become the largest producer again in egypt. We had 2. 95 billion for a third of that working interest of their position. So i think egypt has legitimate value. Its a cash flow positive business. They repatriate money back into the u. S. Apache continues to do what they do properly from an exception standpoint. Gail, mlr partners. Thanks for coming on power lunch. Appreciate it. Thank you. All right. Up next, the big changes that might be coming to yahoo . Plus, much more on the two big story that broke moments ago. Canadian pacific reportedly considering a deal for Norfolk Southern<\/a>. Mallinckrodt tanking on a new report from short Seller Citron Research<\/a>. Look at that stock down 14. 5 . Were back with more right after this. Look at that stock down 14. 5 . Welcome back on a busy monday. 23 minutes after the hour. Shares of yahoo in the red right now down 2 . According to recodes kara swisher, the company may be about to make a sweeping reorganization and is reportedly doing what Many Companies<\/a> do when they dont know what to do, hire a bunch of high priced consultants. Yahoo is going to bring in mckinsey and co. Lets get more about this and talk about what it might mean for you. Jon, first, to you and the facts of what we know, sir. Well, as kara has reported, we know that yahoo is in a really difficult spot where its core business is shrinking. Weve had executives, top placed executives, leave and now kara is reporting that thats because Marissa Mayer<\/a> said, hey, i need a commitment from you guys, three to five years. Some people that at least shows marissa wants to be in it for three to five years, but when you have executives leaving, people who she said quarters ago, this is the team, its set, this is a bad sign. When you hear mckinsey coming in, thats never a good sign either. I understand there is maybe a buy rating on the stock. My question for him would be every time we hear somebody say hes right there, ask him. Hes hooked in. Every time people say it couldnt possibly get cheaper about a stock, you know, a lot of times the stock figures out a way to get cheaper. Is that the best reason to have a buy rating here or do you have a sense there is value here, Growth Potential<\/a> that perhaps investors are not understanding . Well, look, john, our buy rating is really predicated on alibaba. Definitely not predicated on yahoo . The yahoo turnaround and what she can do with the assets. I completely agree with your assessment. I think the fact shes hiring mckenzie doesnt speak well to her ability or the boards ability to turn the business around itself. This is the longest honeymoon i can think of. Shes been on the job for 3 1 2 years. Weaver been waiting for a tu turnaround. She sold a bunch of assets, bought dozens of assets and you look at the organic growth, its none existent and the margins are flat. So we like it only because if you strip out the asian assets, even assuming really no multiple on four, you to put two to three times multiple ebitda on that core you get to a number somewhere north of 40. Thats the reason behind the buy rating, not because of what she may or may not be able to do for the core. Youre making a great fundamental case for the stock, but if youre bringing in a consultant to sort of help us figure out what we are, thats not good. No, its true. Its not good. And you would think that these ceos get very well paid and the reason they get well paid is because they think at a higher level than most of us and the idea there is she was brought in to an ailing 3wr57nd, an ailing asset to think strategically about what she could do with it beyond just trying to spin off alibaba, beyond just trying to spin off yahoo japan, and the fact that after 3 1 2 years she finally decided to bring mckenzie tells you there was nothing really there that she was able to do or the board was age to do to turn this thing around. So theyre outsourcing that functionality to somebody else. At this point 3 1 2 years into steve jobs tenure he was coming out with the titanium powerbook and itunes. It would be nice to see yahoo come out with the equivalent. Now mr. Fort it may not come true because they will watch this, the stock will go down and they will say dont bring in mckenzie. Right now its just a report is the point. If yahoo has an itunes up its sleeve, now would be a good time. Itunes could use some help. They keep changing it. Its almost 15 years old. Thank you. Appreciate it. Thanks a lot. Still ahead, the decor wars. One analyst sation buy this home retailer but sell this one. Both of those names ahead. First, the final oil trades are set to cross for the session. Were headed down to the nymex where oil is falling once again. Stick around. Im here at the Td Ameritrade<\/a> trader offices. Ahh. Steve, other than making me move stuff, what are you working on . Let me show you. Okay. Our thinkorswim Trading Platform<\/a> aggregates all the options data you need in one place that lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim . For all the confidence you need. Td ameritrade. You got this. Advisor and team who understand where you come from. We didnt really have anything, you know. But, we made do. Vo know you can craft an Investment Plan<\/a> as strong as your values. Al, how you doing. Hey, mr. Hamilton. Vo know that together you can establish a meaningful legacy. With the guidance and support of your dedicated pnc Wealth Management<\/a> team. Hello, everyone. Im sue herera. Here is your cnbc news update at this hour. The president of the university of missouri system has stepped down. While announcing his res sig nition tim wolfe urged students to start listening to each other. It caps week of student protests after a lack of action. There may be a better way to test for concussions. Researchers from orlando say theyve developed a blood test that correctly identified the presence of a concussion 94 of the time in their study which included 250 children. The federal regulators in charge of Highway Safety<\/a> says school buses need seat belts. The national Highway Traffic Safety Administration<\/a> is endorsing threepoint belts for every child. Its a major change in position for the agency which until now had said that buses were safe without seat belts. And a daytime Television Institution<\/a> celebrating a big milestone. Days of our lives celebrating its 50th anniversary today. Still a favorite of so many people. Thats the cnbc news update this hour. Back to you, brian. Like sands through the hourglass, thank you very much sue herera. Why do i know that . Lets go to Jackie Deangelis<\/a> at the nymex with the oil close. Hi there, brian. I was thinking the same thing and wondering why i know it as well. Just under 44 a barrel. We are moderately lower today. Of course, we did have a rough session on friday after the jobs report. That dollar index spiking up to 99 was tough on the commodities complex. While the dollar index is in the red today, its still relatively high. Traders are worried about that. The session low 43. 64 today. So getting close to that lower end of the recent trading range, that band that weve been in. Wti has lost 4. 5 over the last week. 11 over the course of the last month. The apache news could be accretive for the company but traders are talking about it as consolidation meaning that these oil prices could really be much lower for longer. Back to you. All right, jackie, thank you very much. Time now for street talk. That is is our daily dive in the key analyst stock calls of the day. Stock number one, lending tree. The ticker tree. Rbc Capital Markets<\/a> beginning coverage with an outperform. They call it one of the leading Online Marketplaces<\/a> for consumers and lend irs. Lending tree had 17 billion annual loan originations. The target is 150, about 20 upside. The stock has been firing on all cylinders when it comes to its Quarterly Report<\/a> in the Third Quarter<\/a>. A beat and raise. And for 2016 they gave guidance above consensus estimates. That caused the stock to pop at the end of last month. Second stock, eog resources. Talking about a patch in the takeover bid also in the emp space and Raymond James<\/a> is downgrading it to market perform from outperform. Here are the reasons. The analyst was positive on recent quarterly results. Got a best in class Balance Sheet<\/a>. The stock has held up well versus the index down 25 since june. Its getting downgraded on valuation. Valuation of the sector, brian. Things are so good theyre not good anymore . Things are so good its already reflected in the stock apparently. Okay. Downgrades an upgrades in oil is turning my head around. Next up we have two stocks and one call. Restoration hardware and pier one. Buy Restoration Hardware<\/a> but sell pier one. Now, they start Restoration Hardware<\/a> with a buy. They say the company is filling a void of creating a brand to fill the 200 billion a year aspirational consumer market. Ubs says sell shares of pier one. Theyre 10 below the current price. I didnt read the calls. Just punched up the stock prices. Restoration is up 31 over the past 12 months and pier was down 44 . Its interesting how theyre saying buy the one thats already up 31 17 pound catalogs in, papasan chairs out. A sign of the times. Amplify snack brands the maker of skinny pop is get an upgrade. Strong Third Quarter<\/a> results indicate the company is on track with managements plans. Its already improved its footprint there. Key customers at existing accounts like target and costco have already agreed to merchandise more skinny popeye thames. Thats a huge positive. The Tortilla Chips<\/a> are on track for a launch in the first quarter. This could have been you are under the radar name. Its had a nice run. One of those companies where maybe you dont know all their brands now but theres hope you will. Ruckus wireless is our under the radar name. California based wifi provider to stadiums, public wifi hotspots. Goldman sox aachs adding it to conviction buy list. About 40 upside. They say the company is the biggest remaining pure play vendor in the high growth wifi market and they see multiple sources of optionality, end quote, that could drive the stock. What does optionality mean . A sale or something . I dont know. We should note that the stock over the past month since its earnings was down 11 on that day on very heavy volume. Well see if this manages to lift this out of the rut. All right. So ruckus ending another street talk. It is time to go to trading nation because traders, my friends, do trade better together. Today we trade priceline. Com. Priceline has no doubt been one of the great moneymaking stories of the past decade, but today slammed on disappointing guidance. David seaburg and ari wald are your traders today. Your analyst take on priceline . Look, weve been on the sidelines in this one a little bit, but the stock was bowled up into the print, expectations were extremely high. I look at it and say 25 , i think the number is 25 of their sales come from u. S. , are u. S. Centric. 75 outside the u. S. It really becomes brian a bid on the dollar now. Its a currency trade. You think the dollar is going to say strong, they will have a massive headwind and it will affect Earnings Growth<\/a>. If you look at Earnings Growth<\/a> this year, i think its projected to be 22 . Back out 14 out of the gate as an fx headwind, its a massive number. I say thats going to plague them for the near term. I think 1,300, you probably have a line in the sand there. Ultimately as far as them going higher in the near term, i think theyre a little hindered until we see the dollar start to come back and investors get more confident in the fact that the dollar is not going to keep skyrocketing. Talking lines in the sand, david. Ari wald, hes mentioned it 1,300 as potential support. How does the chart look on priceline . That number stands out to us as well. I think its a nearterm versus longterm story as well. Longer term we tend to think when you get this type of weakness amid longer term strength, it does provide a buying opportunity and i think thats what were seeing. I think whats important to note is, yes, we are correcting from these overbought conditions, but support levels are still intact after this weakness. Still above the rising 200day moving average, still above the stocks uptrend line and youve pulled back to these prior peaks from earlier in the year. All converge around that 1,300 mark. So near term likely needs to stabilize. I dont think its off to the races just yet but longer term we see it as a buying opportunity. There you go. Ari wald, thank you. David, your concern is noted as well watching the dollar. For more trading nation, head to the website, tradingnation. Cnbc. Com. Melissa . Still ahead, much more on the two big stories that broke just moments ago. Canadian pacific considering a deal for Norfolk Southern<\/a> and another name in the pharma space tanking today, its down 15 in just a few minutes. Stocks are we should note deep in the red. Look at the most widely held names on this monday. Power lunch will be right back. [ male announcer ] eligible for medicare . Thats a good thing, but it doesnt cover everything. Only about 80 of your part b medical expenses. The rest is up to you. So consider an aarp Medicare Supplement<\/a> insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement<\/a> insurance plans, they could save you in outofpocket medical costs. Call today to request a free decision guide. With these types of plans, youll be able to visit any doctor or hospital that accepts medicare patients. Plus, there are no networks, and virtually no referrals needed. Join the millions who have already enrolled in the only Medicare Supplement<\/a> insurance plans endorsed by aarp. And provided by unitedhealthcare insurance company, which has over 30 years of experience behind it. With all the good years ahead, look for the experience and commitment to go the distance with you. Call now to request your free decision guide. Big developing stock stories of the past hour is that of Norfolk Southern<\/a>. Its popping on reports that Canadian Pacific<\/a> is considering a deal for nsc. Joining us, mark levin, railroad analyst at bb t capital. First off, your response to this report. Do you believe it . Do i believe it . Yeah, i do. I think thatc cp is probably looking at all available options. They looked at csx not long ago, were rebuffed by their management and board. In an environment like the one were in today, it is very challenging to grow the top line. Cp has a demonstrated record of taking out costs, running the railroad about as efficiently as you can run, and Norfolk Southern<\/a>, unfortunately, is at the other end of the spectrum where theyre theyve really struggled from an operational perspective. So i think it makes sense on a number of levels. You know, rails are all about where you go, mark. Its like i own these rails and i want to get to here. When you look at where the holes are in Canadian Pacific<\/a>s framework, does nsc fit well, and if not who else might fit if nsc rebuffs them and theyre desperate to make a deal . I think nsc fits nicely. When Canadian Pacific<\/a> was looking at csx, one of the things that came out of that was the fact that csx operated in the densely populated and heavily industrialized eastern United States<\/a> where some 65 of industry is concentrated. Cp does not have a very big position there. Norfolk southern obviously is there. Csx is there. So i think it does. I think it fills a very big hole for them, but i think the biggest opportunity might be the fact that when we talk about railroads, we talk about something called operating ratio, which is, you know, expenses as a percentage of revenues. In short the inverse of an operating margin. Canadian pacific is absolutely one of the two best in the industry from an operating ratio perspective, and Norfolk Southern<\/a> is near the bottom. Near the bottom. Yeah. When you look at some of the things cp has been able to do in a very short period of time, their management newish. Hunter harrison who is sort of a legend, maybe railroader of the century if you were, some of the things hes been able to accomplish at Canadian Pacific<\/a> and you can kind of dream and think what could he do here with Norfolk Southern<\/a>. Its been so challenged. Its really an interesting thought. Okay. It is an interesting thought. We have to go there. We appreciate, mark, your instant insight. Thank you for joining us especially on short notice. Appreciate it. Well, your other big developing stock story this other is mallinckrodt. Meg terrell is watching it for us and watching it fall. Thats right. Down about 15 after citron research, the same short seller that was such a problem for valeant in recent days, put out a tweet saying essentially these prices mallinckrodt has more downside than valeant. He says its a far worse offender of the Reimbursement Center<\/a> and theres more to follow. We have been looking at the citron website. Were waiting to see if they put something out there. Mallinckrodt last year made an acquisition of a Company Called<\/a> quest core that sells a drug approved in 1952. According to the new york times, they raise the price of the drug in 1,650 to 23,000 a vial. It treats infantile spasms, complications of multiple sclerosis and other things. A lot of similarities here. Not specifically to valeant but another name, turing, which raised the price their old price quite a bit after acquiring it as well. Right now we dont know exactly whats going to come out from the short Seller Citron Research<\/a>. We should note that the holding of mall inckrodt includes a lot of hedge funds. It was the focus of short seller David Einhorn<\/a> as well. Off about 17 right now, guys. Fascinating story. Meg terrell, thanks for the update. Our next guest is making a bullish bet on valeant. Corey davis rates valeant is buy with a 170 price target. Great to have you with us. Thanks for having me. Why are you standing by this stock . Do you have a firm grip on what this Business Model<\/a> is going to be in a year lets say . Yeah. I think theres a lot of things going on here and in the pharma industry, weve been through tons of scandals. This one is disproportionate in terms of Media Coverage<\/a> and press coverage and a catastrophic drop in the stock relative to whats actually going on. I have a really good handle on the fundamentals and for a drug company it comes back to the drugs and the drugs are still doing exceptionally well, not based on price, but on volume. Lets do worst Case Scenario<\/a> analysis. You make the case that rollups are blowups when they run out of things to buy. Even if they never did an acquisition again, valeant could still be poised to growth. What about the inability to raise drug prices . What sort of picture does it paint for valeants future . Worst Case Scenario<\/a>, consensus for 2016 eps about 16 a share. Worst case that i calculate its 4 a share and you have a stock for no more acquisitions and no more drug price increases. Thats correct. 2 a share difference only. Thats correct. Okay. And you have a stock thats trading at five or six times earnings. And then also the point that theyre now spending much more on r d than they had in the prior full year of 2014. I think its a quadruple from 1024 levels. Theyre spending 500 million. That may seem like a large amount of money but pfizer will be spending more than 7 billion. 7 billion this year compared to valeants 500 million. Given that valeant is one who acquires their pipeline, lets say they cant acquire anymore, is a spend level of 500 million a year enough to populate that pipeline in the future for growth . Its enough to get them through the next several years. This is the Natural Evolution<\/a> of valeant. They acquired enough stuff to get them to this level. Theyre going to get 10 on the top, 15 on the bottom line even with no more acquisitions. Eventually they will have to. But 500 million, half of their business almost is xus that doesnt require any r abandon and d. We have to leave it there. Fascinating stuff. Thanks for joining us. Cory is a buy rating, 170 price target and were watching valeant for the Conference Call<\/a> at 8 00 a. M. Tomorrow. Big one. Thank you. Power lunch is going to be coming back right after the break. If you own stocks, most of them are down. Cisco, wells, fargo, gilead and comcast are losing steam as the dow is down 216 points on a very busy monday. Were back right after this. When a moment spontaneously turns romantic, why pause to take a pill . And why stop what youre doing to find a bathroom . Cialis for daily use, is the only daily tablet approved to treat erectile dysfunction so you can be Ready Anytime<\/a> 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. Do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. 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Take a look at some of the stocks that may be dragging down your portfolio today, pfizer, know var tis all in the red. Power lunch back in two. Today, were seeing new technologies make healthcare more personal with patientcentric, digital innovations; from selfmonitoring devices that can interpret personal data and enable targeted care, to Cloud Platforms<\/a> that invite providers to collaborate with the patients they serve. Thats why over 90 of the top 25 Global Pharmaceutical Companies<\/a> are turning to cognizant. Our domain experts, technologists, digital and data specialists, clinicians and scientists are transforming the way Clinical Research<\/a> sites collaborate with pharmaceutical companies, and enhancing Patient Engagement<\/a> with innovative platforms and solutions. Our populations growing healthcare needs present growing opportunities for our clients to advance the future of medicine with digital, and improve the quality of lives. We heard you got a job as a developer its official, i work for ge what . Wow. Yeah okay. Guys, ill be writing a new language for machines so planes, trains, even hospitals can work better. Oh sorry, i was trying to put it away. Got it on the cake. So youre going to work on a train . Not on a train. On trains youre not gonna develop stuff anymore . No i am. Do you know what ge is . Weve been talking a lot about mallinckrodt and valeant stocks get walloped. Sun edison is down 62 , they are reporting earning after the bell. We will could ever that on fast money at 5 00. Barons over the weekend said that dm shares are undervalued by as much as 40 adding that the revival is here to stay at general motors. Should you agree with that . Patrick laser and jim al ber teen hes got a hold rating on gm so maybe not as convinced with that. Patrick, as a fund janger you would agree. What is the most bullish thing you see about gm right now . Got a great Balance Sheet<\/a>, great market positions around the world, whether in china or this country. One of the things out there is the bears will say we are at peek sales, china is going to fall apart. This is one of the cheapest stocks in the world, seven and a half times earnings, the stock market is not efficient, it is not rational, at some point investors in the market as a whole are going to realize that gm is not the same gm that it was before the crisis, but its being valued that way and thats the opportunity is that the valuation, the market share they have in pickups, the market share they have in china all tremendous dunts out there. Jim, he makes good points unless, i guess, china falls apart and sales start to slow down. Is that your concern . Actually, the consider were hold rated on gm its a relative call, we think there are other manufacturers that have after better margin profile and better spot in their product cycle namely ford to benefit from some of the newerer products and pricing they will get on those newer products. Gm products have improved dramatically but there isnt a worry. The incremental investor is worried that we are later cycle and have been overearning. The biggest risk is who is the leaner manufacturer and who has the better product cycle to offset some of those later cycle ma inpressures. Patrick, the issue is should you trust gm . I think a lot of people just dont. Yeah, and thats irrational, thats just not smart. There is not data out there to suggest we shouldnt trust gm management. They have done the right things in china. You saw yesterday or the day before china sales in october were up 15 . Four, five months ago investors on the bears side were saying margins are going to fall in sunshine, prices will fall in china. They were wrong. That didnt happen. Gm management has delivered. They will be close to 5 a share. Wall street has been too conservative. Gm never got credit. It doesnt have to be either or versus a ford. 7 1 2 times earnings, less than half the market multiple. I easily think theres 30, 40, 50 from here. I meant trust it as an investment given that they filed for bankruptcy six or seven years ago not trust the management. We have to leave it there. Thank you both very much. Thank you. Got a big show tonight, 5 00 sun edison. And also what happens with nfc and the Canadian Pacific<\/a> and this mallinckrodt story. Should be a fascinating close. Faster than usual fast money. Exactly. Thanks for watching, everybody. Closing bell starts right now. Welcome to the closing bell, im kelly evans at the New York Stock Exchange<\/a>. Im bill griffeth. A lot of moving parts and pieces to this day. Stocks are struggling, though, right now, the dow down 200 plus points, all the major averages down roughly 1 . Much of this day on in part on fears that the fed probably will raise Interest Rate<\/a>s next month based on that strong jobs report. So is the recent rally now ancient history as investors turn their attention to the fed . We are going to talk about that in a moment. We will talk about whether","publisher":{"@type":"Organization","name":"archive.org","logo":{"@type":"ImageObject","width":"800","height":"600","url":"\/\/ia801209.us.archive.org\/19\/items\/CNBC_20151109_180000_Power_Lunch\/CNBC_20151109_180000_Power_Lunch.thumbs\/CNBC_20151109_180000_Power_Lunch_000001.jpg"}},"autauthor":{"@type":"Organization"},"author":{"sameAs":"archive.org","name":"archive.org"}}],"coverageEndTime":"20240623T12:35:10+00:00"}