Transcripts For CNBC Power Lunch 20151110

First though, that big hacking news. A News Conference set to get under way any moment now. We have the details from d. C. Earlier today u. S. Authorities unsealed this massive 68page indictment alleging a global hacking scheme against j. P. Morgan, wall street journal and a host of other companies and institutions in the United States. This scheme, according to the indictment, involves hacking attempts against major financial companies, attempts to manipulate individual stock prices and also a whole host of other alleged criminal activities including running illegal internet casinos and illegal distribution of pharmaceuticals. A big Coin Exchange and a host of other activities around the world. The three men indicted here are jerry shalom, jash what samuel aaron and israel, United States and russia. You dive into this, what you see is a picture of a vast global hacking scheme that had pockets in all corners of the world including a server in egypt that was used to allegedly hack into j. P. Morgan. And then take a look at this exchange here. This is one of the little bits of color of what life was like inside this conspiracy, algdzly. One of the conspirators asked another one, is it popular in america buying stock . Here was the reply from gery shalom. He said its like drinking vodka in russia. Were expecting to learn a lot more from u. S. Authorities in this press conference about how expansive this campaign was, what they know about these individuals who conducted it and where we go from here. But a massive, massive hacking attack that affected millions of americans. And thats moments away. Well begin that News Conference shortly. Bring it to our viewers. Thank you very much for setting it all up for us. In the meantime, while we wait for that News Conference, lets take a look at how stocks are doing. They continue to be under pressure right now. One Sector Holding up is consumer discretionaries. Its up 11 year to date. Slightly higher today. There say big divergence going on though. Dominick chu is here to explain. Its about the internal whats is happening with Consumer Discretionary. It encompasses so many stocks that people spend money on. Retailers, specifically, are dragging things down. This is why people are paying attention. Check thought chart. This is just again over the course of the past year to date period. You can see the Consumer Discretionary sector up 11 . The Retail Stocks as measured by etf that tracks, the spider retail etf. That is down 6 . If you take a look within the holdings of that etf that tracks the Retail Stocks, a number of names popup as big drags and have big market cap along with them. Walmart, 187 billion company. Its down 32 . A big drag for retailers overall as an industry group. Dollar general and the dollar store side about, a 20 billion company. Also dragging things down 7 . And then macys, of course, we get that big Earnings Report tomorrow. Dragging things down by 29 about, a 15 billion company. At this point, remember, all of this is about whats happening with the retail earnings coming up. Theyre going to provide a big picture. Wednesday is macys, thursday is kohls and nordstrom and then friday j. Cpenney and then octobr retail sales. Remember, were entering that seasonably strong all important Holiday Shopping period. These stocks are all going to be huge focus for those Consumer Spending fans out there. Back to you. All right. Thank you. General electric meantime, hitting a milestone. The stock at 30. Look at that. 30. 06. First time its been at that level intraday since wait for it, august 18th, 2008. Its not closed above 30 since june 10th, 2008. Lets get the trading action here in the u. S. Bob pisani joins me. Before i goat ge and the milestone, i want to point out were still waiting for mcdonalds to open. Post is here. You can see the crowd Still Standing around waiting. This is their investor day. We dont know what theyre going to announce. There is some speculation maybe. They might announce something regarding the real estate division, maybe forming a reet. They have a big breakfast plan all day. Maybe theyll increase the dividend. We dont noechlt well find out very soon. Im sure it will reopen and well get the news out. Ge, youre right. The good news, its over 30 foifrt time since 2008. Heres the bad news, it was 40 not that long ago. It was 40 in 2007. It was over 60 back in 1999. It went all the way down to 6, too in, 2009. Its good news. Volume picked up in the last couple weeks as they went over and pass the 2009 levels. So it is certainly good news. Just remember, the price history of the stock. I want to talk briefly about the etf price war we got. Its heating up. Black rock which owns the ishares business, big business, has slashed fees on seven etfs including the core total stock etf designed to represent the broad u. S. Stock market. The fees are now 0. 03 which amounts to what . 30 cents for every 1,000. Its below schwab and vanguard. So whats this all about . Its about getting more assets under management. Black rock ishares thats 2. 7 billion under management. That is far below vanguard. So kugt the fees will likely bring in more assets and make up for the lower fees overall. And the important thing here is those people want more assets under management. By the way, total market means the whole stock market, not just the s p 500, but small caps and mid caps go in there, too. So youre literally buying into the entire market. Very popular wave right now, other than the s p 500 this is the second most popular way to own the u. S. Stocks. Tyler, back to you. As you and i know, the fees really do matter to your ultimate total return. At that level, its so small. Didnt even know that. Thank you. News alert. In the bond market, can your notes up for auction setting near new highs . Rick santelli tracking the action at the cme. Boy, has that tenyear yield riz ne risen in the past month. It certainly has. The winner is five year which on the first dave the fed meeting last time was around 136. It is currently at 1 170. The yield is 2. 304. The offer was 2. 305. We gave it a c minus on the trade. You have to go back to 2011 to find a better auction. Im sorry. Thats 60. 5 on indirects. The bid to cover is a little weak. 14. 3 on direct is strong. It was a b minus auction. Much better than yesterdays three year. Tyler, we dont have an auction tomorrow due to veterans day. Well come back with 60 billion on thursday. Back to you. All right. Rick, thank you very much. As we mentioned at the top of the broadcast, u. S. Attorney general u. S. Attorney speaking about his massive hacking scheme. Lets check in now. Maximize profit, in short, it is hacking as a business model. The conduct alleged in this case may signal the next fron tour in securities fraud. To steal material nonpublic information, something they discussed for the next stagest sprawling criminal enterprise. You can see that in the indictment unsealed. So thats the bad news. The good news is that the fbi and secret service have cracked this case and we aim to proveit in court. The indictment describes the three defendants. Gary shalom was the alleged leader and selfdescribed founder of the enterprise. Zib warrenstein, Opening Bank Accounts and creating Shell Companies and managing payments mng cohorts. And joshua aaron, reported to shchlt alon and participated in the computer hacking and stock manipulation scheme. Together they used cyber hacks into major global businesses to advance several different criminal schemes. First, as previously charged, shalon, aaron, and orensteen ran pump and dump stock schemes. They inflated the price of penny stocks and false trading and dumped the holdings before the rest of the market recognized the fraud. But for this scheme to work, the defendants needed access to a lot of names and contact information, people to whom they could pump the stock before the defendants dumped the stock. What they needed was victims. Thats where the defendants took the classic stock fraud scheme and brought it into the cyber age. They allegedly hacked into networks of seven mainlior Financial Institutions and two Financial News companies. Why . To get personal information for tens of millions of customers, people most likely to be engaged in significant stock trade. They then used that stolen private information to blast spam emails, falsely touting the penny stocks that they later dumped. So the valuable customer information they stole through the cyber intrusions helped generate for them tens of millions of dollars in stock fraud proceeds. In a way, it was securities fraud on cyber steroids. Second, for many years, the conspirators also operated internet gambling businesses that generated hundreds of millions of dollars in illegal proceeds. To protect this business, they allegedly sought to undermine rival companies by hacking and stealing their customer information and by distributing denial of service or Cyber Attacks on his rival networks. He allegedly even hacked into Software Development firms to spy on their employees emails to make sure they were not favoring his competitors. Third, he also allegedly oenld and operated Payment Processing business thats processed hundreds of millions of dollars in credit card payments for all types of criminal activity including the distribution of illegal pharmaceuticals, counterfeit software, and computer malware as well as with their own online and illegal bid Coin Exchange businesses. The conspirators used their cyber hacking skills to protect and advance these criminal enterprises also. For example, as alleged, he cleverly hacked into a Market Intelligence company that worked with Credit Card Companies to detect criminal conduct. They monitored and reviewed that companys emails so that he could say one step ahead of their efforts to detect the very type of suspicious conduct that his Payment Processing businesses were engaged in. And so turbo charge in a way by the cyber hacking activity, he and the cohorts, criminal businesses generated hundreds of millions of dollars in proceeds that they concealed in Bank Accounts around the world. You can see that graphic we depicted in this chart. As i said, he was hacking to enable securities fraud and Payment Processing in all different ways including in the two different examples, spying on the competition and monitors and in that case, engaged in hacking in order to find victims for the fraud and Financial Institutions and newspapers and you see that depicted there. So you see him walking through the criminal enterprise at the heart of this scam. At one point saying the advantages of the hackers here was that they were becausest hacking, they were able to read the emails of competitors. They were even able to read the emails allegedly of an Intelligence Firm working for Credit Card Companies that was trying to bust them and in the indictment here it spells out what they d they watched as the Intelligence Firm tried to process fake credit cards through their own processing channel. They blocked those credit cards and, therefore, stimied the investigation by hacking into the investigators own email theres. So a sprawling massive, really breath taking in scale cyber hacking operation here. Well monitor this and bring you more as we have it. Thank you for that. Lets get fwook what is happening with the stock market. Apple shares are under pressure today with a new report by Credit Suisse raising fees about demand for the iphone. The firm saying that apple reduced the component orders by as much as 10 . Credit suisse says the cuts seem to be driven by weak demand for the new iphone 6. Credit suisse maintaining the outperform rating on apple stock with a pricetag at 140. Today though, it is down by over 3 . Tyler . All right. Fascinating story playing out here on cnbc. Literally, in just the last hour. Research report helped take down shares of valiant. The short seller now targeting another pharmaceutical giant. He was speeg with scott wapner about the call on the halftime report. Left calling mallincrot a poster child. For years theyve been the poster child for the problems and price gouging. Its been written about numerous it times. And most recently, obviously with the valiant soap opera, it pushed mallincrot out of the news. Maybe it hasnt been as good of its turn into like a valiant soap opera. I figured its about time people actually start looking at mal n mallinckrodt. The amading thing is the insurance push back on this is not coming because of issues like this. Theyre not reimbursing this because they want doctors to practice evidencebased medicine. Not peer review studies or were okay for this indication but rather evidence based. So this is not valeant. This is worse. Take a look at mallinckrodt shares. They are higher at 62. 30. They are down a bit in recent times. Lets go to Courtney Reagan with the latest on mcdonalds having an investor day. Mcdonalds holding the investor day in the first couple minutes. He gave us three key pieces of news. The company is not going to pursue a reet structure. This is not a positive benefit for shareholders at this time. Second, theyre going to increase the number of franchises to 4,000. This was announced in may. And the company also have increasing the gna cost savings to 500 million. The previous estimate was 300 million. Again this just first couple minutes of the mcdonalds investors conference. We have four hours to go for more potential news. But so far that those are the three biggest points that weve heard so far. Tyler . All right. Thank you very much. Much prettier day out there than it was yesterday. Not so cloudy. The ceo of Mcdonald Steve easterbrook will be on cnbc tomorrow on squawk on the street. Dont miss that. Thats favorite on cnbc. Steve easterbrook. Talk of a deal in the railroads. Emerging again. What is driving m a action in this sector . Should you buy those stocks . Plus, the latest read on the American Housing market. The most and the least expensive Housing Market in the nation. Youre watching cnbc, first in business worldwide. Dont change the chabl. Equals great rates. Its a fact. Kind of like ordering wine equals pretending to know wine. Pinot noir, which means peanut of the night. Mylan is doconfident of the successful completion of an offer. That should be finished friday morning. And vodafone is moving higher with the mobile phone giant boosting the full year earnings outlook despite a first half loss. The outlook comes amid a recovery in the key European Market and product development. That stock up is by 3. 6 . Controversy swirling at the university of missouri following the departure of the president and the schools chancellor is moving to a new job. Phil lebeau is live in columbia with the latest. Hi, phil. Hi. There is a sevense of normalcy returning to this campus. There is no doubt that demonstrations over the last few days have had an impact on the 35,000 students who attend this university. They accomplished the goal. Is there any change in the atmosphere or it is going to take more than that . It happened earlier today. I think its a wait and see deal. I was very surprised that they would resign this fast. But im actually not surprised because of all the money that is going towards football and we couldnt not play the Football Game on saturday. He didnt really have a chance. The threat of a boycott about it Missouri Football Team and the fact that would cost the university at least a Million Dollars had an impact here. By the way, the Athletic Department brought in 83 plt 9 million last year, a profit 36. 5 million. Most of that money brought in about it Football Team itself, over 40 . 32nd most profitable or 32nd most revenue brought in of any university in the United States. Here is the Athletic Director talking about the rolfe the Football Team and this controversy. Certainly there was financial ramifications if we didnt play the game. That wasnt our focus. Its not hard to look at a contract and understand what those ramifications are. Away from the football program, what are the change thats well see here at missouri . The university is appointing a cheap diversity officer and there will be diversity education classes for all members of the faculty as well as incoming students. Again, tyler, there is a sense of normalcy returning to the campus here in missouri. Back to you. All right. Phil, thank you. Were watching the railroad stocks. Were seeing renewed m a action in the rails at the moment. And all the challenges for the sector ahead. Dont go away. Its what sparks ideas. Moves the world forward. Invest with those who see the world as unstoppable. Who have the curiosity to look beyond the expected and the conviction to be in it for the long term. Oppenheimerfunds believes thats the right way to invest. In this big, bold, beautiful world. 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. 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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. Inc magazines iconic tour land in the nations capital. Kate rogers is on the ground there profiling startup successes in washington, d. C. We caught up with one startup that is helping to keep moms healthy during pregnancy. Take a look. Were in the age of apps and modern moms want to be connected to more than just facebook. Theyre able to monitor pregnancies via a Smart Phone App to make sure theyre healthy and on track. We do that in two parts. One is a mobile app and another is a kit called the mommy kit. We have Blood Pressure cuff and a scale and we remotely monitor elements of preying noncy. The kits collect dat yoont health and send it to the doctor. If something is wrong, the app alerts the physician. This lets doctors monitor their patients even when theyre not in the office. Babyscripts does not charge moms to use the products. They sell them directly to doctors starting at 300 a patient and the early results are promising. The president and cofounder says that while about 50 of women gain too much weight during their pregnancy, moms using his product are healthier. Babyscripts patients gain 20 excessive weight. And so you start to look at the impact that that can have on Health Insurance company, you know, the impact that they can have for doctors and for patients themselves. Thats really why we built this company is to move the needle and were doing that which is really exciting. For first time moms like Sarah Nicholson who also works at babyscripts, the product is helping her post pregnancy. There are a number of resource thats have educational material about how i exercise after pregnancy, what my Recovery Time should be, any signs that i should be looking for as to reasons why i should call my doctor. And with a new baby in the house, any tool that can make moms life easier is another welcomed addition. Right now theyre continue dloekt that patient data and working with hospitals like georgetown and gw to see how it can be applied further in the future. Tyler, as you know, we have a great lineup in washington, d. C. Tomorrow including underarmor and, of course, ill be there and i know you will be too. Heading down to join you later today. Kevin oleary will also be there as we celebrate tomorrow not only our veterans, we will celebrate but also entrepreneurship down at the warner theater. A great iconic movie house that my mom used to take me to way, way back when in the 1960s. I remember it we will. The warner theater f youre in the neighborhood, stop on by. Iconic tour last stop tomorrow in d. C. Well be broadcasting from there tomorrow on power lunch. Thats going to be quite a trip down memory lane. You bet. A check on the bond market on the back of that ten year note auction for which professor Rick Santelli gave a b minus. How are yields looking at the moment on the back of that . You know, its as if the auction never occurred. Look at the intraday go. To the short end. Yesterdays three year note, not a lot of volatility. Rates backing off just a bit. Dollar index is a start even though its well off the highs. Look at intraday, more important than a two day. It is holding above yesterdays highs even though barely. Maybe most appropriate charts going back to april, the last time the index was up here, consider this on the 14th of october, there was at 94. Now its over 99. Nod bad not bad in four weeks. Shares of d. R. Horton which i always want to call dr. Horton, but its d. R. Horton, soaring on the earnings. The bullish sign. The results are signalling about a key part of the American Housing department. Well talk about. That speaking of, which the numbers out on the most expensive Housing Market. Yes, San Francisco is on the list. But you wont believe which other cities are, too. Bob dylan. To improve my language skills, ive read all of your lyrics. Youve read all of my lyrics . I can read 800 million pages per second. Thats fast. My Analysis Shows your major themes are that time passes. And love fades. That sounds about right. I have never known love. Maybe we should write a song together. I can sing. You can sing . Do be bop. Be bop do. Do be do be do. Do do do be do. Hi, everybody. Here is your cnbc news update for this hour. President obama asking the Supreme Court to save his plan to keep Illegal Immigrants from deportation. Republicans consider criticized the plan as illegal exclusive overreach. Democratic president ial hopeful Bernie Sanders rallying on capitol hill with fast food workers fighting for higher wages and better benefits. He told the crowd its time for their representative to represent their interests. Target unveiling the black friday deals including bundling apple products with free target gift cards. So consumers who buy an ipad air 2, a mini 4 or an apple watch will get a gift card ranging from 100 to 150. Shoppers purchasing an iphone 6 on an installment plan get a 250 gift card. Ohio state quarterback j. T. Barrett pleading guilty to drunk driving charges in court this morning. He must complete a threeday program and pay a 400 fine before february 14th. He was suspended by the Football Team for one game but expected to start this week. Thats the cnbc news update this hour. Let geese to Courtney Reagan. Breaking news on mcdonalds. Hi there. Thats right. The mcdonalds investor day continues. We have a couple new items to update you w mcdonalds Fourth Quarter 2015 dividend has been increase bid 5 . It will be 89 cents. The company is also going to take advantage of low interest rates. It says go ahead and increase its debt. Also return 30 billion over threeyear period ending in 2016 to shareholders. And, again, to recap what we learned earlier, mcdonalds decided not to pursue a reet spinoff transaction. They dont believe that is beneficial to shareholders. And looking to franchise 4,000 locations, thats an increase from the previous intention of franchising 3500. So that 4,000 will take the total franchise model to 95 of companies stores. Tossing it back to mandy and tyler. Just to mention once again, we got the first on cnbc tomorrow, steve easterbrook. That is going to be very exciting on cnbc. The shares are still halted. Theyre flat at 112. 89. Thank you. We also got news data today calling it the question the strength of chinas economy. What does it tell us . This is data on the inflation front. Continued decline in producer and Consumer Prices in china. Heres why its important. Low inflation in china suggests the domestic demand for goods is weak despite the central bank stepping on stimulus over the past year. It puts china in a very special scenario from other merging markets battling deflationary pressures. And thats because china is in addition to grappling with lower commodity prices, dweeealing wi low food prices and strengthening currency. There is more news continues on the pboc front. Now switching focus, there is another pain point in europe where a leftist socialist party in portugal forced the current government to resign as leader antonio costa gains popularity for the antiausterity pledge. Expected to become the next Prime Minister f that happens, intelligence says the minority government will push for reduced austerity. The worry is this could hinder portugals economic reform. And this uncertainty around portugal and dovish commentary if from policymakers is sending urt yoe lower. Goldman sachs may be projecting the euro to hit parody against the dollar by year end. So that talk is heating up here. We heard the parody talk a lot of times. It can really happen. Get party hat ready. Thank you very much. Tyler . Folks, major investor in snap chat writes down the value of the stake in the company. What does it mean for the evaluations for deck companies . Julia boorstin is all over it for us. Its certainly not good. Snapchats valuation was 16 billion as of this last fundraising round. They just drove down the price by 25 . The combination of the filings and monthly Holding Reports show fidelity dropping the value of each year of the 4yearold messaging startup from 30. 72 the end of august to 22. 91 tend of september. Now fidelity wont comment an individual companies. This could reflect concerns about snapchats ability to make money from fast growing user base. In september, snapchat shut down the snap channel, the own content production and launch aid few tour that charge users to replace snaps. They have been launching more content partnerships and more targeting tools. This writedown comes on the heels that fidelity cut the valuation, their investment drop box by 20 . These writedowns feed into concerns about private Internet Companies evaluations and the ability to groet valuations in the Public Market with uber valued at 51 billion. I reached out to snapchat. They said no comment. Tyler . Thank you. Another down day for stocks. Fourth in five sessions if we close lower. The question, are small caps a better bet in this environment . With me is lamarvillery, comanager of the morning star four star ratedville rated villary fund. I dont think a balanced Fund Managers as being wild and crazy small cap dudes. Why do you like them . We think the u. S. Small cap market is the place you want to be right now. Why . For one thing, we think thats where you can find some growth. Thats where you can find some companies that arent as well followed. Can you get in attractive evaluations. Finally, we think youre more defended, youre a little more safe from outside pressures, whatever is happening in china, whatever is happening in europe, whatever, you know, janet yellen, whether they decide to raise rates or not, if you pick the right small cap stocks, can you do right. How have they done this year . Not as big as the multinationals, right . They lagged, absolutely. Which is why with you like them. We think thats where the opportunities are. If you can find the right small caps, youre in good shape. Why dont you react to what lamar just said and also more broaden it out a little bit. The wall street writing yesterday some concerns among investors like you that big blue chips are selling at extended price earnings ratios which you look back over the preceding 12 months. Are you concerned that stocks have gotten a little expensive . Of course, there is nothing to say they couldnt get more expensive. Yes, tyler. Thank you. So specific to small cap, really doesnt mat cher way you look at it. Whether its future earnings, past earnings, the tenyear average or fiveyear average. All of them will tell you the small cap is extremely expensive. The multiples, most of the times that comes up theyre on a 30 multiple. And whether you look at it on an absolute basis compared to its own history or relative to other Asset Classes such as large cap or overseas, small cap is very, very expensive. The time you want to buy small cap is when the earnings the multiple difference between large cap and small cap is relatively compressed. And right now theyre very, very wide. And small cap is very sensitive in our view. Let me let lamar jump back in here. Im confused. Lamar, he is contradicting exactly what you say. Not exactly. So were not here to be were not cheerleaders for small caps broadly. We think this is a stock pickers market. We only own 20 to 25 of ourt best ideas. While there are plenty of expensive and overpriced stocks in the small cap market, we find really interesting opportunities. So he is not wrong. No. Hes right on the point that as a group small caps. You have to be selective. You have to be very careful. There are two you like Financial Engines and taser. Do you have one with you . I dont. I left it in the car. Hes going to taser you the next time youre together. No, we agree. The theres always opportunities when you look at individual stocks. As asset allocators looking at creating portfolios, you have to be find million of what is there. So we are relative value investors. And so we look at valuation across multiple different Asset Classes. Lamar said he likes a small caps. As an asset category do you like best and quickly, please . So when you look across the spectrum, u. S. Equities are generally overvalued. European equities are undervalued on a relative basis. We like europe more than the u. S. That doesnt mean we dont have money in the u. S. We still do. Its just an underweight compared to what we would have in europe. You like european stocks. All right. Thank you very much. Bring your taser next time, will you . Ill do it. All right, lamar, thank az lot. Let geese to dominick chu with mcdonalds news. It is reopening. It was down by about 1 going into it. This, of course, after headlines coming from its investor day that it is not going to pursue a Real Estate Investment trust strategy. Also its going to try to franchise more of its locations and also boost its dividend by 5 to 89 cents a share quarterly. It was down 1 . You can see it turned around and gone up by 1 intraday. The stock just reopened about two minutes ago here. You can see here we did fall by 1 after the open. Reopening rather of trading. Now were up 1 . Well keep watching the mcdonalds shares. This is the fourth best performing stock so far this year to date. And also sits near a record high again. Mcdonalds is surely been a large cap blue chip jugger not in this particular year. Well keep watching the shares as the afternoon progresses. We will. Up by. 7 as we speak. Thank you, dom. Norfolk southern is having a volatile day. Were looking at the consolidation that seems to be going on the rails. Whats driving this . Lets call this round two. We have Canadian Pacific reportedly setting the sights on Norfolk Southern in a deal that could top 24 billion. Both companies declined to comment on this. Fwhut wouldnt be a surprise. Its coming a year after the number two Freight Railroad abandoned csx. The cp ceo is calling for consolidation. Hes been arguing this with reduces congestion in chicago and boost service. Analysts add this would stoke growth at a time when the commodity class and strong dollar pressured rail volumes as well as earnings. But a deal would create a trans couldnt nental railroad with little overlap. 35,000 mile of track that would stretch from vancouver, canada, all the way east and south as far as miami, florida. But some questioned whether rail and m a activity viable, including norfolks ceo who back in may said in todays political and regulatory environment, i think trans couldnt nental mergers further consolidation in the industry would be a mistake. Now thats the biggest hurdle. Getting this cleared by regulators after several decades of previous consolidation, ther carriers left including these two and that group accounts for more than 90 of industry revenue and nearly 70 of freight rail mileage already. So a lot of question marks over whether Something Like this could happen. Get the green light from regulators. Thank you very much. Twins today. Even down to the shoes. How about that . Ladies in red. Thank you. Most expensive Housing Market in america, okay, yeah, we know San Francisco. But throughout tl are others on the list that may surprise you. That is coming up next. A new report out on the most expensive Housing Market in america. Im going to surprise you right here. Youve been talking San Francisco. It is actually not in the top ten most expensive Housing Markets, at least according to coldwell banker. Its number 11. Nine out of top ten are in california with Newport Beach winning the priceyest. Average list price 2. 3 million. Then paloalto, saratoga and strangely, a town in minnesota. Most of the homes are on the lake. It is vacation country. After that, next nonCalifornia City on the list is greenwich, connecticut, 1. 3 million is the average price. When you round out the top 20, honolulu, cambridge, mass and wellsly mass make it outside of california. California accounting for half of the 100 most expensive markets. Now heres my favorite stat of the report. The average list price for a home in Newport Beach is 7 1 2 times the National Average and 30 times the cost of a similar home in the countrys most affordable market and that most affordable market is i will tell you coming up in the next hour of power lunch. That is what they call a tease. Diana, thank you very much. Newport beach. Bill gross can afford houses out there in Newport Beach. Coming up, wait until you see the painting that someone paid 170 million for. You wont believe who did it. Plus, shares of mallinckrodt after the short seller sunk the stock appeared on cnbc. Well talk to an analyst who standing by his buy rating on those shares. vo what does the world run on . It runs on optimism. Its what sparks ideas. Moves the world forward. Invest with those who see the world as unstoppable. Who have the curiosity to look beyond the expected and the conviction to be in it for the long term. Oppenheimerfunds believes thats the right way to invest. In this big, bold, beautiful world. Its gotten squarer. Over the years. Brighter. Bigger. Thinner. Even curvier. But whats next . For all binge watchers. Movie geeks. Sports freaks. X1 from xfinity will change the way you experience tv. 170 million for a painting of a naked lady . This is mashgt of extreme high ands lows. At a sale last night this painting sold for 170 million, making it the second most expensive painting ever sold. Now the painting was estimated at 100 million. After nine minutes of bidding, it was sold to a chinese billionaire and former taxi driver chen who plans to put it in his private museum in shanghai. Now also selling last night was nurse which went for 95. 4 million. Just above the 80 million estimate. Of the 34 works that came up for auction, ten of them failed to sell. The question now is whether were seeing a deflating art bubble or a sustainable adjustment in prices. 2 billion worth of art to be sold during this fall auction season. Still to come, a prize portrait of mao. That could fetch over 40 million. Big irony there for the founder of the communist party in china. Back to you. Ironic. Great story about the former taxi driver being the buyer of the painting. Good for him. Thank you very much. Robert frank. Shares of placeies are down 30 over last three months. Can you make money in this stock during Holiday Season . We have a good Old Fashioned bullbear debate. You know the storey. You cant predict. The market. But at t. Rowe price, we can help guide your investments through good times and bad. For over 75 years, our clients have relied on us to bring our best thinking to their investments so in a variety of market conditions. You can feel confident. In our experience. Call a t. Rowe price retirement specialist or your advisor. To see how we can help make the most of your retirement savings. T. Rowe price. Invest with confidence. Sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Does apple have a pc problem . Trust us on this one. The stock is the biggest decliner in the dow right now. Plus, why hedge funds have gone sweet on one rather bizarre investment. Well find out if its right for you. One analyst bringing his single best idea, the name and fast price target coming up one stock, thats it. Single favorite most best as we say zblc say. Most best. Okay. Macys is set to report earnings tomorrow before the bell. The street is estimating eps at 53 cents and quarterly revenue at 6 billion. We have a bullbear discussion ahead of the earnings. Lets start with the bull here. You know this company has basically missed estimates for the last estimates. Why do you like it, richard . Dominant in the sector. Enormous omni channel investment and tremendous importance to the suppliers. Sure this is going to be a long term successful player. They also have the real estate opportunity, the ability to monetize the real estate over time and provide cash wind falls. Weve seen 250 million of these so far. What do you think of this bullish real estate case, rick . How much is that worth for the stock . If it it is very hard to tell. Ill take you back to the Second Quarter when the stock was 73 and the real estate bulls were telling you it was worth 100. Macys completed a deal worth about 73 cents a share. The problem was the stock was overvalued by 50 . Thats where we are now. We still think there is a 20 real estate premium in the shares. And we think we think there is actually a fallacy of presumption in there, presuming that the current price values only the operating earnings. We think that value is significantly lower. Putting aside the real estate question here, rich, there are a lot of other things that macys is battling, right . Obviously the online retailers out there, slowing traffic, strong dollar hurting. I can keep on going. What you would counter on those issues going into the Holiday Season . No question its a tough 3q. No question they have 800 points of distribution that gives them an edge from omni channel and from retail. Theyre the most important distributor rather than an antagonistic relationship. So macys has the support from a wholesale side. And now needs to turn on the marketing machine to drive traffic and drive sales. Do you think gasoline savings will help . No. Gasoline really doesnt affect this consumer. The incremental change, theyve got a credit card and moving on. You would agree or disagree with the things that richard just said . Rick . I would agree that they have good products. The problem is none of its really selling, particularly handbags. The handbag Market Growth has slowed to low Single Digits from high Single Digits. That is a huge category in terms of sales and margins for macys. So we think we dont think they can make that up. And in termsst vendors, we think that were going to see a lot of markdown money. I think richard is right there. Thats not good for macys either. So you have rick, there a 43 pricetag. Once again, a sell on macys. Richard, you have a buy with a 60 price target. Well see who is correct later on. Thank you very much to both of you. Im buying fewer handbags these days. Im buying more im making up for you. I give handbags to my wife. Good luck with that. Happy wife, happy life, tyler. Thats right. Happy coanchor, happy anchor. Thats it for the first hour. Hand it over to you. Twint hear tyler more about what he means about having good luck. Thank you both very much. All right. 2 00 in wall street. Hello out west. The dow is struggling to find direction. Dout is almost exactly unchanged. But apple is not. Its thinking. Hi, everybody. Welcome into a very special shoutout to all of you marines past and present. Today is a 240th birthday of the marine corps. All right. Im brian sullivan. Melissa lee is at the nasdaq. Lets start with apple. Apple shares taking a hit after Credit Suisse announced they lowered the hardware performance by 10 . Weve got two apple analysts to day. Outperform still and Collin Gillis with a hold rating. Hes going to join us in a second. Dan, well begin with you. Following up your appearance last night this morning, you say that many people are infeeffecty yelling fire in a crowded room full of apple stock much its nothing to worry about. Why . The timing is impeccable. Youre seeing a lot of bears yelling fire in this crowded theater. Just like we saw three months ago. It comes down to iphone 6 sales are strong. Especially on the Holiday Season. Now guys are going to worry about march and june. We see the forest through the trees. The strength is in the channel. Well see year over year growth. And it sets us up for the blockbuster iphone 7. I expect given why the groups, theyll say similar things over the next week or two in the supply train. Its an opportunity just like we saw three months ago they say the same thing about december and look how apple guided. I think that is really the view here. This is an opportunity. Dan, you are not concerned that upgrade cycle is slowing down. That a phone today is probably going to be good enough to use in three years . Yes. There is definitely an iphone 6 hangover. Youll start to see that in march and june. But then it sets up for the iphone 7 which is really the blockbuster elite. You got to look 30 of iphone users have upgraded to iphone 6. There is a massive runway here and android switchers which we saw last quarter. That is how i view it. Right now, apple is still in the third or fourth inning of the overall growth story as theyre trying to tap the growth areas. I think thats the thing to focus on for a stock trading at eight times the class. Collin, you heard dans bull case. Why do you have a hold on the stock . No matter what people say, the iphone market is slowing down. This whole smart phone market is slowing down. If you look at what unit sales are going to do for the december quarter, theyre going down to the mid single digit range. Im not worried about the market contracting yet. It may happen in the march quarter. But this is a company that is dependent on hardware. What youre seeing is the market rewarding a lower pe. There is pe contraction happening for apple. Any time there is a hiccup of news on the name, you see it wants to become a source of cash. I would not want to be actively buying it even at these levels until we get later into 2016. What you are waiting for . Lets get to the 6s cycle. We have four difficult quarters of costs. Lets make sure that theyre going tibl to take market share from android users. Tim cook gave this stat that 30 of new iphone users are coming from android. A little misleading. Its really only about 3 of the total Android Market on a worldwide basis. Apple is a sub20 player. If they can get traction on the upgrade program and get people to, you know, try to move to a new iphone every single year, that will be wonderful. Thats not happening any time soon. The next o two quarters are difficult for apple. Very convincing argument both ways. The bears are wearing the stock down much theres a long way to go. You both made convincing cases. Thank you both very much. Well see you soon. Lets get a market sflash now. What do you got . Lets talk about shares of anheuserbusch. Molson was spiking earlier saying the company is near a deal to buy the remaining millercoors stake for 10 billion. Now this deal is contingent on the anheuserbusch takeover of miller and will pave the way for that sale. A. B. In bed for the offer for miller. That is likely to be formalized tomorrow. Something to watch. Brian . Thank you very much. Also topping your headlines today, the war of words over mallinckrodt. Theyre firing back at the ceo. Both men appearing right here on cnbc today. Lets get to our reporter with more on this increasing fight. Brian, yes. Its an interesting day to watch here. Mall inckrodt, they say theret worst example of reimbursement and pricing pressures. They say thats not true. Their drug is doing just fine. And then les joining scott wapner. This is one of the claims he made. This year they were supposed to do an proxy statement around 1. 5 billion in sales of a drug. Theyre coming in in under a billion dollars right now. Thats a colossal miss which means i mean you have the ceo on cnbc this morning saying that everything is fine with insurance. When youre supposed to be 1. 5 billion and youre going to do less than a billion, youre either having problems with the insurance reimbursement or with the sales force. I can say that apgar is the main drug that mallinckrodt sells. I spoke with the ceo. He said les made a number of statements that were incorrect and he took me through point by point including on that estimate as to aktars sales this year. He said he was probably taking the number from a projection for 2016. Questcor is a company from which they acquired that drug. As the drug is tracking now, it did just under 1 billion in sales last year. Its been growing 8 to 9 the first three quarters this year. One would presume if it grows on that level, it will come in above 1 billion. Taking issue with. That he also took issue with the claim that les said they were an inversion play. Theyre based in ireland. He said theyre based in ireland because they were spun off in 2013, an irish company. He went through a couple points, essentially saying were just wrong. Also taking issue with his characterization of a trial in lupus. They were testing a drug. The drug did miss the primary goal. They were saying that it was successful because it did well in some secondary goals. You can see there the stock really recovering after yesterdays fall. Not quite getting up to the same levels. Very interesting, brian, to see this kind of point Counter Point here from the two parties. Yeah. Heavy duty throwdown. Thank you very much. Lets get an analyst take on all. This he covers mallinckrodt. You heard from left and from the ceo, david, any change to your rating or price target base ond what you heard on cnbc today . None whatsoever. So i have a long history covering mallinckrodt and questcor. What is interesting about them is they have raised these red flags regarding sales potentially collapsing because of disappearing managed care act. This is when questcor was a stand alone company. None of that has happened. The fact of the matter is axar works. And it works in a number of different clinical settings. And the product continues to grow. Volume growth hasnt been quite as strong as what it was a year ago and two years ago. The fact of the matter is the product continues to grow. So my views on axar and my views on mallinckrodt havent changed. We havent seen any environments that this product is falling out of bed. Youre one of the few analysts on the street that does not have a buy rating on valaent. You have a neutral rating on avlaent. Do you see any potential issues when it comes to reimbursement, the assertion it will be a poster child for problems with reimbursement. To paint them with the same broad brush i think is just flat out wrong and overly simplistic. The issues for valaent are special to valaen. When we look at these companies, we know that product is essentially restricted to patients that have intractable disease, who have essentially failed every other therapy. So managed care is already quite restricted. And will they get incrementally more restricted . That is certainly possible. But not a way thats going to dramatically an impact on sales. Again, this broad brush approach and that kind of inendothnuendo wrong. You have to look at each company. Can i just ask you to emphasize that a little bit more . What exactly are the differences between mallinckrodt and valaens Business Models . They both have acquired drugs. Raised prices. What is difference ben b. What the companies do . We think valaent orders of magnitude more aggressive on acquisitions and on the price. And then you mention the filidor thing. That is a captive pharmacy for valaent. Mallinckrodt, theyre Third Party Relationships as is the case with many pharmaceutical companies that work with specialty pharmacies. And that is a meaningful difference. So the bottom line here is that these yes, these are two companies that have been inquiztive. But there are real fundamental differences between the two. David, i want to ask you about valaent specifically. The ceo Michael Pierson said that he is working on quantity fig a Short Term Impact with ending ties with filidor. The ceo himself is trying to figure out the impact. How big of an asterisk do you have on your price target and estimates . My price target assumes some sort of normalized pe multiple for the stock. But the reality is this we dont know when valeant is going to get a decent multiple. Its not because of filidor but because there is this tank on the whole company. Its not just a question of filidor, its question of fear of the unknown. What other information, what other stories, what other things are hidden under the rug so to speak . I think thats something that is problematic in terms of perception of valeant. Because of this aggressive nature, because of the scorched earth this is a company that is perceived as having no friends. And so in that from that perspective, you kind of look at a Management Team that is radioactive. And so thats a problem in terms of multiple recovery. David, you may not touch this. Michael pierson of valeant, should he quit or be fired . I think right now i think for the foreseeable future, he will be radioactive. I think if they do want to see multiple recovery, i think he is going to have to step aside. Or if thats not something he is willing to entertain, then maybe the answer is breaking up the company. There are segments within valeant that get a morrow bust multiple. But theyll never get the value they deserve under the valeant umbrella. David, real pleasure goat you on. Thank you very much. Appreciate. That well see you soon. Thank you. My pleasure. The rather bizarre trade many hedge funds are getting into. Were going to show you the other places that you may want to look. Plus, an analyst rolls out his single favorite stock and last hour we told you about the nations hottest Housing Markets. Guess what . They got to be got news. Mandy and tyler, thats what they do. Were the bad news. Well show you where the prices have fallen but maybe there are real bargains as well. The glass is half empty when power lunch returns. Working 24 7 on mobile trader, rated 1 trading app in the app store. It lets you trade stocks, options, futures. Even advanced orders. And it offers more charts than a lot of the other competitors do in desktop. You work so late. I guess you dont see your family very much . I see them all the time. Did you finish your derivative pricing model, honey . For all the confidence you need. Td ameritrade. You got this. At ally bank no branches equalsits a fact. Kind of like mute buttons equal danger. That sound good . Not being on this phone call sounds good. Its not muted. Was that you jason . It was geoffrey it was jason. It couldve been brenda. Some neighbors are Energy Saving superstars. How do you become a superstar . With pg es free Online Home Energy checkup. In just under 5 minutes you can see how you use energy and get quick and easy tips on how to keep your monthly bill down and your Energy Savings up. Dont let your neighbor enjoy all the savings. Take the Free Home Energy checkup. Honey, we need a new refrigerator. Visit pge. Com checkup and get started today. The deflation cycle continues. Live cattle down 14 over 90 days. The protein category, soy beans, that crop is high. The price is down 13 . Morning coffee, it should go down because, guess what . Coffee futures are down 12 , again, in just three months. On the other side, the metal side, platinum is down. Corn is down. Copper is down 6 and wheat is down more than 6 as well. Almost every commodity youre going to eat or build something out of is down. But there is one commodity that, shall we say, has been on a real high lately. It is sugar. It is up 38 over the past three months as well. Apparent lit big buyers are mini hedge funds. Kate kelly can unravel this mystery for us. Why are they buying sugar . That was so full of delicious puns. There is rarely so much excitement about a commodity overflied around the world its given away for free in many restaurants. A markdown taking production this year which sent prices to seven year lows plus emerging markets plays on brazil and other places are making sugar a popular futures trade. Year to date, sugar is the fifth best performer among major commodities that are otherwise in a sea of bread. Other companies are getting involved. One commodity trader i know caught a big part of this recent move which is actually up as he said, 40 or more over the last several months. But sold out recently on a bet that strong u. S. Dollar which typically hurts the price of Raw Materials like sugar and oil would likely continue. And like him, not everyone still buying the bull case. They said that price curve involved here where sugar futures outpaced cash prices suggest that the commodity is, in fact, overvalued. But wet conditions in brazil this year hurt the crop. That is a place where sugar is a mathor export tamped town production. We can certainly see more of an upsurge in sugar prices, brian. It is definitely one to watch. Youre not suggesting our viewers go into restaurants and load their pockets up with free sugar pacts and put it in contango. Im sure no one would do that especially with the lean towards stevia. Its so plentiful, you could do that with impunity. It is a commodity that is overproduced. Take a lot to make any real profit, probably more than you had room in your pockets. It would be nice do that its gas pump, right . Kate kelly, thank you very much. Everybody knows the phrase lost in the crowd. Right . Usually used to refer to people. But does it also apply to stocks . It just might says bmo. Jack, would everybodys attention so focused on a few named, right, apple, netflix, facebook, amazon, whatever, do you feel like as an investor there are some really Good Companies out there that are just become completely ignored . Yeah, i look at it from a ma macro sense. Youre right. The names you mentioned over the last three months are up between 13 and 16 . The average stock on the s p 500 is down. In fact, the average stock on the s p 500 is underperformed the s p 500 by nearly 5 since april. I look at it as an indicator, a really two sides of an indicator. One, i look at it as the breadth indicator to say as technical, as the technicals start to weaken and fewer and fewer companies are participating in the rally thashg, thats a conc. We had that in a big way in the late 1990s. But i also look at it in terms of credit. Credit conditions started to tighten as the average stock started to underperform. If you talk about apple and amazon and ge and the big companies, the microsofts of the world, these are company thats have unfeddered access to capital. I think apples bond is trading at. 5 above equivalent maturity treasuries. Smaller companies i heard this morning that Dallas Cowboys are 08 or 09 without tony romo. The quarterback has gone down the last two years. They havent won a game. If facebook, google, netflix and a couple others are the quarterback of the market, if they roll over, can the rest of the market win . And right now i would say no. In general, in most markets, the average stock tends to outperform the market. So i think that in a healthy, strong robust market, im going say four years out of five, the average stock outperforms the market in general. And thats really just strong breadth. And i would say that is the underpinnings of a lot of active manager strategies. And a lot of hedge funds. Hedge funds tend to short the mega companies. And they go long the individual opportunities. But right now the environment for that is reversed. And its reversed because i think the quality of the rally that we have seen certainly for the bulk of this year is probably suspect. Very quickly, i have to ask you, how do we make money . What were looking at. There are cheap markets. Were waiting for a little momentum. High yield bonds right now, yielding over 7 , looks pretty interesting right now. We havent jumped into those yet. Commodities, if we can just get a little stabilization and improvement, obviously against the backdrop of stronger dollar, its probably not happening too soon. And then lastly, emerging markets. Particularly commodity consuming emerging markets really cheap. Cheapest ive seen since 2002. All right. Jack, weell get you back on. A real pleasure. Thank you. Thank you. All right. Up next, a tale of two home builders. Were digging in on a pair of Earnings Report thatcy a lot about the state of the Housing Market. First, it is street talk time after the break. The five big analyst calls of the day that caught our attention. Time for our daily segment street talk. Its a daily segment. First stock is nordstrom. Buy on the 76 target. They say this year they Inflection Point for nordstrom. They think Management Investments and continued push towards the web will pay off. Nordstrom rack is also doing well. 76 target is 18 above the current price for them. The bigger question is, are consumers shifting away from buying from Department Stores . Yesterday was a terrible day for Department Stores across the board. Macys hit a two year low. Nordstrom was down 5 yesterday. And this is ahead of earning onz the 12th. This will be interesting to watch the report. Second stock were watching, dean foods gets downgraded to a rare underperform rating. Dairy cycle turned favorable for dean. Dairy supplies radically cut the costs. But there is still underlying challenge heres. Declining consumer demand, excess processing capacity. They think the stock will have a less than average upside over the next 12 months. You would say that analysts are saying that milk soured . I wouldnt say that either. The third stock, dont cry over that pun. The big off shore driller now boutique shipping and commodity from clarkson says sell this name. The analyst also cutting the target to 15. Thats about 15 below the current price. I emailed him this morning. He said brian, the call is not fancy. Its just that the stock moved up that was his word the stock moved up 30 this quarter. He thinks were not out of the woods in off shore drilling. The energy stock lately appears to be selling. Thats interesting. We highlighted another call, downgrade of an energy stock because of valuations. The ones that have good balance sheets, the ones that have ample liquidity are in that category. They are being rewarded in terms of share price depreciation with a certain burst when the market actually moved higher. So its interesting to note where we are coming from. We need take a look at exxon and chevron. Theyre up a lot. The fourth stock here, gap. As you know, posted disappointing results last night. Fell short on october. And reiterating the neutral rating on the stock. There is down side risk to november comps from old navy and expects a downward revision for the Fourth Quarter guidance. Also expect continued weakness at Banana Republic which has been a problem. And i give a shoutout to the analyst there, roxanne. She downgraded the stock a couple months ago and thats been a sec of a good call. All right. Finally, to days under the radar name is lados holdings. Reston, virginia best National Security and i. T. Produce r. Provider to the government. It was spun out of an old company. They won a huge fiveyear potentially 660 Million Contract recently. They raise the target to 60. Yes, 10 upside. The stock has also got a couple upgrades in the past few weeks so maybe a stock to watch. That is a nice top. Take a look at the tail end of the chart. The chart is up 25 since mid october. Huge move there for them. Through go. And with that, we wrap up street talk on a very rainy day in new york. Lets get to the oil close. Good afternoon, brian. Oil prices getting a boost today despite the fact that the dollar index is moving higher. One of the reasons is there was some comments in the marketplace that the opec secretarygeneral made at a conference today. Misinterpreted says opec. People were interpreting what he sbed a price cut if it happened the last meeting to be a price cut will happen at this meeting coming in december. And he didnt say that. So opec wanted to clarify. Having said that, the iea report was out this morning. You probably know. 80 target for oil prices in the next four to five years. That means were going to be lower for longer and slowly grind higher. So expect the volatility to continue. Expect this to remain range bound. A lot of raiders think we can touch that three handle before we come back up into this range that weve been settling in around 45 a barrel. As for the close today, looks like well be over 44. Brian . All right. Jackie, thank you very much. Lets get a news update now with sue. Hi, brian. Heres whats happening at this hour. The Syrian Government releasing video of fighting near the coast. State run media reporting at least 23 people were killed. 40 injured by explosions. The blast struck two separate areas of that particular city. Pope francis denouncing the exploitation of migrant workers. That area is a magnet for chinese nationals looking to work in the textile trade. The pope lamented the inhumane Living Conditions and unfair work environments. Indonesia continuing to spew volcanic ash. This time over 7,000 feet into the sky number evacuations but flights from an airport that just east of bali have been canceled until at least tomorrow night. Playboy launching play boy shop. Com, an Online Shopping website for the brands merchandise. You may recall last month it shocked the readers by saying it would no longer publish fully nude photographs in the magazine. So now you might be able to say that it wants readers to cover up as well but with playboy clothes. Thats your news update, brian. Are you trying not to Say Something or laugh, sue . What is it . I think its a little giggle. Just a little giggle. The articles, man. The articles. Thank you very much. Up next, more on that iea call that jackie referred to that oil may not hit 80 a barrel for another five years. Well talk about it ahead. And apple ceo tim cook taking a not so subtle jab at his biggest competitor. Were going to tell what you he said about computers. You pay your Car Insurance premium like clockwork. Month after month. Year after year. Then one night, you hydroplane into a ditch. Yeah. Surprise. Your Insurance Company tells you to pay up again. Why pay for insurance if you have to pay even more for using it . If you have Liberty Mutual deductible fund™, you could pay no deductible at all. Sign up to immediately lower your deductible by 100. And keep lowering it 100 annually, until its gone. Then continue to earn that 100 every year. Theres no limit to how much you can earn and this savings applies to every vehicle on your policy. Call to learn more. Switch to Liberty Mutual and you could save up to 509. Call Liberty Mutual for a free quote today at see Car Insurance in a whole new light. Liberty mutual insurance. Tand thats what were doings to chat xfinity. Rself, we are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. In no news that an oil producer wants to haeshgs the iea is out saying that oil will not hit 80 a barrel for five years. Lets bring in dan pickering. Were going to get to our trading nation team. They were on camera. Everyone was confused. Were happy to you have. I was shocked it wasnt iea said about 80. You disagree. How come . Well, i think that 80 is the right number. Theyre thinking it 2020 and im thinking it 2016 or 2017. The headwinds are stronger dollar and chinese demand and some oversupply that weve been dealing with for the past year. I think the tail winds are really the fact that investment contracted a bunch. And were going see supply fall. Im more bullish on chinese and asian demand in general. I think were going to get a tighter market faster than the iea is talking about. How tight and how fast . You look at the last 18 months, were about a Million Barrels a day. I would expect in the next year, u. S. Supply will fall about a miion barrels a day. I think demand in aggregate is going to grow about a Million Barrels a day. So a market thats been half a million to a million losing is going to get one to two million tight in the next 12 to 18 months. So i say fairly tight, fairly fast. You know, we keep hearing, dan, the bull case. And it makes sense. Its going to end the year writ began the year nshgts mid 40s. At what point do we say, gosh, maybe saudi arabia and everybody else is throwing so much oil on the market that no matter what happens here tshgsz going to overfill Global Demand . I think it has been a stubborn price. Weve been fighting, you know, a number of variables, market fear being the biggest one recently. The fundamental data is tightening. If we step forward another 6 to 12 months and prices are still this low, theres going to be real financial distress in the industry. And i think that something will have happened. Most likely demand will be bad if were at this price in another year. So i think the hard part is these markets trade day by day by day. The supply and demand dynamics settle out over quarters. And so its very frustrating hearing the bull case and not watching it show up in price. But i think another year of this and there will have been something wrong. And what i get your morning note every morning, thank you, dan. What are your clients saying . Are they saying what the heck is going on . Or are they more sanguine about it . Weve been here before. It will recover . I think its a function of the type of investor youre talking. To the traders are very frustrated. Its a hard way to make money in the short term. Crude is 38 and 5 o0. Stocks are in demand. There is a lot of incremental debt. I think the Institutional Investor base is frustrated. The value guys are slowly acquiring stock. The Hedge Fund Guys are trading like crazy. Its been a tough market to make money. It has. Dan pickering, youre leer to help douse that. We appreciate it. Thank you very much. My pleasure. All right. Now its time for trading nation. Lets bring up our crew once again. There we go. The ten year yield hitting a four month high earlier today before sliding bate this afternoon. After a treasury auction. But if rates do keep rising, what stocks might get hit . Let us ask our very fine trading nation team. When you look at rising rates, what looks and what looks bad in that snef. Also looking at prices rising for bonds and also declining in those correlations. The two sectors that really stood out were industrials and materials. Now obviously these are both heavily tied to the dollar story and obviously the dollar rising along with rates. But i think the most vulnerable fundamentally is the materials sector. Were looking at a 5 contraction of earnings over the next 12 months. On top of that, theyre trading rich. Theyre trading at 17 1 2 times earnings higher than quite a few other sectors. So while funneled. Ally they may have that correlation, they look good. Materials are the ones to watch. All right. Industrials look good. Boris, what say you . Which ones look positive to you . Well, you know, when speculating, i believe its best to kick the guy when he is down. So xop which is down went down to 31 is finally bounced back a little bit. Theyll get queez esqueezed low. And if rates go up and theyre all very overleverage. Any rally in xop is an opportunity to sell. To sell. Youre not saying buy the xop. Youre saying the opposite. Im not saying the opposite. These stocks are going to suffer the most from any kind of rate hike. Like our call on the street. The analyst said stocks gone up, problems are still there. Sell the stock. Similar thing . Exactly. All right. Thank you both. Good to see you twice in one show. Well seen our trading nation show on the web. All right, up next, were going barringian hunting in housing. The markets with real buying opportunities and as we head to break, lets take a look at how all 30 dow stocks are trading. If youre on the radio, ill say them for you. Apple, the worst down 3. 5 . Visa up 1. 5 . Youre best for tuning n and were first in business worldwide. If ynows the time to get your ducks in a row. To learn about medicare, and the options you have. You see, medicare doesnt cover everything only about 80 of your part b medical expenses. The rest is up to you. So if 65 is around the corner, think about an aarp Medicare Supplement insurance plan, insured by unitedhealthcare Insurance Company. Like all standardized Medicare Supplement insurance plans, they help cover some of what medicare doesnt pay. And could save you in outofpocket medical costs. So dont wait. Call to request your free decision guide. And gather the information now to help you choose a plan later. These types of plans let you pick any doctor or hospital that takes medicare patients. And theres a range of plans to choose from, depending on you needs and your budget. So if youre turning 65 soon, call now and get started. Because the time to think about tomorrow. Is today. Go long. Its the tale of two home builders. Revenue is coming in above forecast. The builder says new orders jumped 19 last quarter, not the same story for beazer homes. Orders were relatively flat for it. You see there beazer up by 4. 6 . Last hour we told but nations hottest Housing Markets. Diana is back with a little rain for that sunshine and maybe some sunshine in the fact that perhaps there were some bargains here. Rain . Its not rain. Its opportunity. And guess what . None of them are in california. 45 of the 100 most affordable markets are in the midwest. There is an he can check tick mix on the low end than the california high end. The number one most affordable market according to called well banker is cleveland, ohio. Average list price, 74,500. But cleveland is seeing something of a rebirth. You have your sports and the upcoming Republican National convention. Some have ranked it as much as 16 undervalue. There is an opportunity. Moving on. Riverdale, georgia, pennsylvania and detroit round out the top four most affordable Housing Markets. Florida gets in there at number seven with hastings, augusta georgia at 14th most affordable. The only city in california to get into the top 100 most affordable is California City california just north of l. A. Okay. Kansas city which is getting very popular with millennials these days. Came in at 44 rnlg most affordable market. So i have to repeat my favorite stat. The average list price for a home in Newport Beach which is the most expensive market as we told you is 7 1 2 times the National Average and 30 time the cost of a similar home in cleveland, your most affordable market. If you want to see them all, its online. Back to you. No offense to all the lovely cities, but maybe theyre affordable for a reason . Oh, stop it. There are opportunities. Okay. Look at your little apartment and think that your home is great. Thats true. If youre long on the stock, youre getting burned now. That name ahead. And tim cook says the pc is dead. Why the numbers tell a much different story when power lunch returns. Moves the world forward. Invest with those who see the world as unstoppable. Who have the curiosity to look beyond the expected and the conviction to be in it for the long term. Oppenheimerfunds believes thats the right way to invest. In this big, bold, beautiful world. 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 treatments. I want to be a doctor someday. I can help with that too. Watson, i like you. Cto everything from surfers welcomingto seals. Ul home attracting visitors from around the world, around the year. Along the coast, protected areas are set aside to preserve a Fragile Community of animals and plants. To protect these natural wonders, heres what to know before you go. Stay at least 300 feet away from seals. This is their home. Dont touch marine life in tide pools. Take away your trash and your happy memories. Always enjoy and protect our marine habitats. Tand thats what were doings to chat xfinity. Rself, we are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Welcome back to power lunch. Check out shares of sun edison, this is a new lock on the stock getting clobbered after reporting a bigger than expected quarterly loss, down 22 . Sun edisons tara form power deep in the red down 20 . Sun edison used to be a 33 stock earlier this year. Wow. Down under 15 bucks a share right now. Apple ceo tim cook taking a big swipe at the personal computer and really microsoft indirectly. According to a report in the telegraph newspaper cook said, quote, i think if youre looking at a pc why would you buy a pc anymore . No, really, why would you buy one . If pcs still dominate most desktops. We saw these comments and i thought it he is knocking microsoft and intel but also the way computing has gone, but is the pc dead, natalie . I think the pc is not necessarily extinct but its evolving and thats what theyre doing with their current sets of pcs which they dont really consider them pcs, the mack and i mack, theyre doing iosfiction of them. The mouse activates as a touch pad, you pinch and zoom. Theyre trying to make the two meet in the middle. Thats where this new launch with the ipad pro comes. Do you think, melissa, that cook he is definitely jabbing microsoft but do you think he was trike to make a bigger statement . I think he was trying to make a point that the days of the pc the best days are probably behind it, but in terms of data, i think natalie is spot on. In the corporate world apple while its made inroads with the iphone predominantly on desktops across the country, on trading floors you see pcs you dont see macks. Its going to take a lot of time for the programs that Corporate America uses im talking beyond word processing and spreadsheets to actually be usable on a mack. That used to be the big complaint that i. T. Executives would say we cant scale this, we cant secure it so we are not going to distribute these in the enterprise, but apple has worked hard to combat that. Theyve made these deals and made big advances in security. The enterprise is more open to bring your own device. Thats the i think this. Melissa, this may be my last appearance on the show because im going to knock our company for a second. Uhoh. We can get our work email on our phone and tablet if its approved, but we really cant get it on our own computer. Well, you have to have some empathy for the i. T. People. Youve got to love them. They have a tough job and one little Security Breach and who do we blame, right . My point, though, natalie, is that and melissa, because im able to put work email on the tablet, i dont know about you, melissa, i would rather buy the tablet now so i can get a Bluetooth Keyboard thats at least sort of seminormal size rather than trying to do the phone thing. Have you tried keeping on a Bluetooth Keyboard for extended periods of time . Its better than trying to type on the phone. If you have a full size if you have to do an extensive report, if you have to access trading applications which we do every say, its going to be on a pc for now. Im not saying this is forever, but for now. Those tps reports needs a keyboard. Two things very quickly, here we go, melissa, you have 1,000 to spend on some sort of Electronic Computing product what would it be. Macbook air. How much do i have to spend . 1,000 bucks. Yeah, a macbook air. Id id do that. I want to also make the point dude, no one is getting a dell. No. I also want to make the point that forester has estimated that 20 of all tablets owned will be corporate distributed tablets. I think the enterprise really is coming around on this idea of giving out tablets and if youve got one thats really focused on productivity, why not this one, right . If you think the tablet is dead you havent been to an airport lately because they are now staring us in the face. They are everywhere. Melissa. By the way, in case you havent checked out shares of apple lately, apple shares are down. According to its asian channel checks there will be pressure on units sold in the next quarter. We have a top technician on, is apple going to be lost in the markets . Is the stock on a down trend right now . We will answer that question tonight 5 00 fast money. Coming up next, power lunch. We will be right back. Were coming up on 4 00 a. M. In beijing which means the biggest Online Shopping day is officially under way it is known as singles day, 11 11 one of the biggest players alibaba. Will it give their shares a boost . Tim, its always good to see you. The numbers are staggering, 30 billion in gross merchandise volume was transacted in the first 30 minutes of singles day. The numbers are big, people expected the numbers were big, does that mean that the stock will react eventually to the big numbers . First of all, the stock last year if you look at it a month into the numbers it ral eed substantially, this year even more because it was beaten down. The expectations for gmv growth of 35 are out there. I think thats fantastic and i think they may even beat it because big ticket items, autos and other things could be part of this years numbers. I think the stock is certainly in a place where peoples expectations on china were built into what was going on in the stock into the lows it hit, 57, 58, i think things are not as bad as people are making it out. I think its a good story. Youre long baba shares. You think the better play on alley ba bas singles day is not alley ba ba. I think if you look across ecommerce in china, they traded in the u. S. Names, whether its 10 cent or jdr. Come. These were names pushed around by macro fears and market fears. They will have higher numbers because they are coming off of a lower base. I think it is baba, 30 times neck year or 23 times its cheaper than facebook, giving you the biggest growth i think you have right now in terms of the Global Player in the ecommerce space and ecommerce trends are china are more impressive than here and they are changing how the Chinese Consumer is behaving. You choose baba over yahoo or you are long on yahoo. I think long on gentleman hoo, too. I think ultimately play it through baba, you dont need to play into this number. Disappointment is one of these things that will be more profound on the downside than playing it on the upside. Be sure to catch our interview with alibaba executive jack maw tomorrow. We will look forward to that. Melissa. Thank you all for watching power lunch. The closing bell begins right now. Hi, an welcome to the closing bell, everybody. Im kelly evans at the new york stock exchange. And im bill griffeth. Dow component mcdonalds is holding its investor day right now, that stock has been on a bit of a wild ride as investors digest news the Company Turns out it will not be spinning off its real estate assets to create a Real Estate Investment trust, but it will increase its dividend. We will have details from that meeting momentarily. Yes, we will. Another dow component, apple, mean while taking a big hit on a