With dom chu and the steel horse he rides. Dom . Good, bad and the ugly. I feel like watching fistful of dollars and hang them high and also looking at dog in the photo as well but lets talk about the good, the bad and the ugly right now because in todays trade weve seen a little bit of all of that stuff playing out. On the good side of things, weve got transportation stocks. Havent been doing great as of late, but they are moving higher and as of just a few minutes ago 19 out of 20 members of the dow transport index all in the green, perhaps a good sign for those of you looking for positive signs and on the bad side of things, Consumer Staples, bad on a relative basis because they are still positive on the year, they have been and some. Stocks have been making record highs, some of the Consumer Product names so Consumer Staples, bad in todays trade. The worst performing sector so far in the s p 500 and on the ugly side of things weve been talking about it for quite some time, about the Consumer Spending picture. Yes, some signs that retail sales are better than expected and retail stock earnings have opinion disappointing overall and even today with home depot saying that they have done an earnings beat and they have also raised their guidance the stock is still not performing the way that you would like. Home depot near its all time highs and Retail Stocks are going to be a big focus and, of course, as we talk about retail, guys, remember, there are those out there still looking for some of that at least opportunity in some of these beaten down names. Go to powerlunch. Cnbc. Com and some of the platinum portfolio players at cnbc pro, subscribers there can see what, stock pick some of those Portfolio Managers are looking to make in the down retail environment. Back over to you. Thanks. Lets add in one more factor to the good, the bad and ugly and thats great data we got today. David sieberg joins us and jon najarian, good to have you both with us. Lets go through the good, booed and ugly trade and dr. J kicking it off with the transports, transports rising in the airline sector, air fares rising after delta announced capacity cuts in the second half of the year. Finally, finally, do airlines have the discipline here . They have the discipline. However, even with that slump in crude oil at the beginning of the year, these cant get out of their own way, melissa, they had to reiterate buys across the boards, a number of brokers to get them moving to the upside because as you know they are down probably between 12 and 22 . American airlines being the weakest of the majors right here, but united and delta not exactually setting it on fire either, so, yeah, theres some reason to pause as to 47 crude and holding at that level, 47 just shy of 48. How these guys are going to do Going Forward and then you throw in the tsa lines. Right. And thats another bad things. Dont Like Airlines right here and david i go to you. Action on the transports is actually encouraging for those dow theorists if you look at last couple of weeks, last two weeks they goatth got smoked, melissa and i look on the move higher i would not be a buyer. Wouldnt chase this at all. Maybe a little more room for the upside, but i think we could actually sell off, and they can come back below 130. Id be a seller of transports a at these levels. The bad and Consumer Staples. Throw in there, dr. J, utilities, because its the yielding stocks, the highyielding stocks, safety plays the best performing sectors year to date that are the weakest in todays session. Why do you think that is . Like you said, some. Strong economic numbers, although you did see the atlanta fed sort of counter that, melissa, by taking some of their numbers down by as much as 10 for gdp for the second quarter. That was the atlanta fed, that is, but williams is out there, nonvoter saying that he thinks, you know, that everything is on the table, every meeting is live. Weve got the fed minutes tomorrow, and i think because of those statements about everything is live, i think thats why youre seeing some of those highhealeding plays that you spoke of in the Utility Space a little weaker today. Seaberg . No, i couldnt agree more. I think the narrative, its about a shift in the narrative, right . Nobody is expecting a rate move in juppe. However, the data is improving, so given its such a onesided sort of expectation, melissa, the risk is only for a more hawkish fed so in general youre looking at a tape right now that could be teetering on the brink of a little bit of a pullback or at least a pause for the near term. Lets go to the ugly trades. That would be retail obviously. Home depot had a beat and a raise and yet its selling off in todays session pand you add to that the gap, nordstrom, limited brands. These are multiyear lows, dr. Ja. Any worth a flyer here . Well, you guys already spoke of tom of the hour with dom about record highs for home depot, and it was right up against that record high. I think shop. These transport costs when you look at fedexups and old dominion or old dfl, those are showing those stocks are moving up by about 7 . I think many of these retailer were pricing in probably cheaper transportation. Goods to their stores and instead its all hold on. Its transportation costs, its not because the consumer doesnt want to buy a sweater or a wallet . I thought thats what it was. Its both. Okay. Yeah, its both. I think its both because i think a lot of these folks had probably priced in lower gas prices. Thats going to be not only good for consumers but good for us moving all these goods across the country. Whether we rely on odfl or walmart or our own fleet and now thats vipized. 47 crude verseus, you know, 30 crude in february, that i think has taken a lot of that off the table. Right. And incremently. I think thats part of whats behind it. Guys, got to leave it there. Thank you David Seaberg and jon najarian. Mallinckrodt has made Great Strides into transforming itself into a well diversified special if i pharmaceutical comthats meeting or exceeding expectations. You may have noticed mr. Leff brought with him a check made out to the company for 1 is million. He says hell give to charity if the company does a test on that drug. He has long questioned the efficacy of the drug which has been approved by the fda for usage for a number of different conditions, but its really remained the point of contention for mr. Leff and certainly the pricing of that drug. They go on to say our growth plan is based on volume. Pricing is a consideration only where a product may be undervalued in the market or to maintain sustainability. So as i said, this sort of war of words between these two parties continues today. Mr. Left just a short time ago and, melissa, you know this issue as well as anybody from when left was on your program at 5 00, fast money, along with the ceo as they debated one another on some of the issues that mr. Left has raised that caused this stock to slide some months ago. Yeah. And really put it into the center along with valeant and others on this drugpricing issue. Whats so interesting, scott, about these two stories is the commonality that they have, a lot of hedge funds in vale ant were making the same trades in mallinckrodt and allergen and the base overland quite a bit and interesting to see that andrew left has come out on differing forecasts on where the stocks are headed. The headline is hes now long valeant but reiterating it was pretty much a pair situation, long valeant and short mallinckrodt. Even though they have been so correlated. Scott wapner, thank you. Happening now, s p downgrading Icahn Enterprises to junk status, bb plus. You can see it go from the positive to nefgtive territory when the announcement came out just a short time ago. Shares back in positive territory, 52. 818 and the Ratings Agency still sees the outlook as stable and like i said shares of the company have fallen 42 in the last year. Tyler . Michelle, thank you very much. Stocks are giving back some of those gains from yesterday. Todays losses, the dow, nasdaq, s p 500 are negative for the merry, merry month of may, so is it time to get more defensive or do exactly the opposite. Reporter andrew slimmen is Portfolio Manager with Morgan Stanley and jill kuniff is president of edge as the management. Welcome to boast you. Andrew, you say one of the things that you like about the market right now is that value is closing the gap and lately maybe even outperforming growth. When that happens, what happens . Markets go up, not down, right. I get all the reasons to be negative. Look, not pay lost earnings growth. Were coming up to the summer, bad macro events happen, the fed might be acting and you just heard someone speak about that, and when have you had someone on thats actually been bullish. I dont hear anyone bullish. A very crowded trade right now and yet value is starting to work and typically markets are going up and look at a 02, 2012, 90. When value works markets go up. They dont go down and value sector is now outperforming the growth sector year to date. Jill, do you see it that way . In other words, why are people as down on the market as they seem to be . A year ago we were roughly at the same levels of the s p 500, roughly, roughly, and no one was really all that concerned about valuation. Now were at roughly the same levels and everybody is concerned that the market is toppy and overvalued and may fall . Well, theres this thing call the fed, and the fed has taken await punch bowl so this is a very volatile and different market environment but we still believe there are opportunities in this environment and we lean to the value space as well, but for the reason of dividends, dividendpaying companies tend to be valueoriented companies and we really like the commitment that the company and the quality that these Companies Bring to the market so in a volatile market like were nor and expect to be in for the next 12 to 18 months you should look for companies that can grow in a slow growth strirnt and take advantage of the volatility and buy when there are setbacks in order to keep your positions intact. The difficult denld play has been i guess in the ter of art a crowded trade. One of your choices, harman, youve got to have some fortitude, let me put it that way, to jump in there. That stock is down 40 in a year. We do have conviction, and we do we are a little bit contrarian so, again, we look for opportunities when something isnt quite right but edge is a longterm investor so well take our conviction and invest in companies that we believe can maneuver through these kinds of environments. In the case of harman most people know them as the sound systems. Right. But they have a lot going on in the connected car and inknowtainment space thats growing so dramatically. Right. Thats the area we would expect to see them grow for the long term and thofr investors opportunity . You know, back to you, joe. The election is coming and in this mornings times Andrew Ross Sorkin wrote a column where he pointed out that in the final years of president ial terms when the incumbent is not running again, the history says that the market doesnt do very well. Do you expect that the next five months will be times when the market moves higher, or is it going to be backloaded after we get certainty on who is in the white house . I think the point is that everyones positioned for just what hes predicting or the data says minus 2 , so all im saying is i think the market the underlying currents of the market is saying maybe the economy will aksccelerateaccele why value it will go thats why gold is going up. And whoever gets elected will have faster Economic Growth and the market starts to anticipate that. The data doesnt support it. But youre true to your contrarian side, andrew and jill, you as well. We have to leave it there. Alas, thank you both very much for your time today. Go to powerlunch. Cnbc. Com to see another smallcap name that jill is betting on for growth. Just Getting Started here on power lunch. Next, is china going to crash Silicon Valley in our next guest was just there in china and says yes. Plus, oil up 8 in the past week and 30 so far this year. Well talk torque run noted watcher on wall street saying a pullback is coming soon. Power lunch continues after this. Man 1 youre new. Man 2 i am. Woman exmilitary . Man 2 four tours. Woman you worked with computers . Man 2 thats classified, maam. Man 1 but youre job was Network Security . Man 2 thats classified, sir. Woman lets cut to the chase, here. Man 1 whats youre assessment of our security . Man 2 [ gasps ] porous. Woman porous . Man 2 the Old Solutions arent working. Man 2 the world has changed. Man 1 meaning . Man 2 its not just security. Its defense. Its not just security. Its defense. Bae systems. Things are tough in Silicon Valley as valuations of the socalled unicorns come under scrutiny and all the supposed disruptive Business Models just dont seem so disruptive after all. Inside remembers starting to admit theres maybe an even bigger threat, china. Thats according to our next guest who says Silicon Valley is too well fed. Its too fat, in other words, too clubby, while chinese Startup Entrepreneurs are raw and hungry. Lets meet tech entrepreneur and Angel Investor who after selling his startup went off to china for a Factfinding Mission and wrote about it in recode. Welcome to power lunch. Hello, how are you doing . Good. Tell me. What did you find in china . A lot of people are saying they are building over there and imitations what weve already done here in the United States. Thats a really wellused argument. In fact, its outdated. We are going to see a way for innovation come from china in the next decade. Already a lot will have ideas on the way in china that are interesting that we dont see yet because innovation takes longer than cloning, and to be fair, yes, they do clone, but whats interesting is they are starting with cloning. Thats just the beginning but not the end point, and and then they it rate really fast. For example, do you know the company maetuan . Tell me about them. Most people dont know them. 6 years old, they started as a groupon clone when groupons star was rising notice u. S. , and they were one of 800 in china that were trying to do exactly that. One year after they started it it was a completely different company. The company was then instead of doing 50 discounts, not sustainable, doing 10 , 20 that brought people back to the stores and drive loyalty. What are you telling me, that that metamorphosis is emblematic of what happens there . They adapt more quickly . Very quickly and they addeded into Delivery Services and Online Ticket sales and six years later the company is worth 20 billion. Are they profitable . Thats unknown because its private, but they are 20 billion driving tons of revenue and i met the founder for breakfast and a very impressive guy, and he looked me in the eye and says, you know, im really unhappy about my third business, the food delivery because im only number two in china with 48 Boston Market chair so thats the level of aspiration that the Startup Entrepreneurs, have and i found a lot of hirng and drive. Right. A lot of friendliness and openness, and i was very impressed by t. Loved it, and i actually think its a good thing for Silicon Valley, not a bad thing. Syriac, part of this depressed Business Cycle and hunger is their work ethic. They have a 996 model. Explain in a. 996 means the average normal work day is from 9 00 a. M. To 9 00 p. M. Six days a week and im talking about the normal employis. For founders, top executives and startups, it probably is more like 9, 11, 6. 5. In other words, there is no worklife balance, and im not a proponent of saying long work hours produce more output. Actually i think thats wrong because, you know, if you are always tired and dont even know your kids how can you be a good leader . Burks on the other hand, what what it is showing you is the enormous hunger and drive and i found that to be very impressive. You can see that in all startups. Went from late stage to termy stage. Is that because Silicon Valley has matured and now they just dont work as hard, right . Is it that simple . Is this Silicon Valley 20 years ago . Maybe, but i think there are obviously exceptions. Theres a generalization here in this article, of course, but what im trying to point out is when you love something, like i love Silicon Valley. I love europe. Im from there. We should look outside of where we live to look at what other people are doing really well, and when we can look at china and we can see this hunger, we should take it as an impulse, as a little bit of the kick in the butt which sometimes might be good for us and say, okay, you know what . Awesome offices, all the perks, were a little bit perked out in the Silicon Valley sometimes when i look at our offices and all the things that everybody wants here. Why dont we just focus on whats true entrepreneurship and that is creating awesome things out of almost nothing. I dont doubt a word youve said, really, i dont, but when i think of the breakthrough products that have defined the digital era i cant think of a one that was invented in . Facebook, google, the the cell phone, itunes, digital animation. All that have stuff really didnt come out of beijing offer shanghai or guangdong. Correct me. Well, what about consumer drones . Consumer drones. Consumers drones becoming a bigger and bi