Welcome to power lunch. Weve got the s p and the nasdaq just above the flat line here in the green. The dow is down by. 1 of a percent. Brent crude back above 50 bucks a barrel. Wti crude up close to 11 over the past week. Both are in bull market territory right now. Take a look at oil stock, a fresh 2016 high. Heres what else is happening at this hour. Twitter suspending 235,000 terrorlinked accounts since february. Twitter says daily suspensions are up 80 since last year. Shares are down over 4 right now. Walmart beating expectations last quarter, thanks in part to groceries. Walmart shares also higher at this hour. Team usa continues to lead the medal count to the rio games. 94 in total. And 31 of those gold. Welcome, everybody. Theres a lot to get to today. We begin with the big breaking news on americas jails. The Justice Department planning to stop using private prisons. That is sending stocks lower, down more than 40 . Scott cohn joining us now by phone. Scott, what do you make of this news . Well, to some degree, brian, it was expected. This backlash has been going on for years. Its been going on even before that. But now it is official as far as the Justice Department is concerned. Instructing the prisons not to renew the existing contracts with private prison companies. But lets give it a little bit of context. Cca, the largest private prison operator, which has its stock down sharply, as you can see today. They get 11 of their revenue from the federal bureau of prisons. A much larger percentage comes from state prisons and well have to see whether states follow this lead. They also do private Detention Services for the u. S. Marshals service, which does not seem to be affected, and for the department of homeland securitys immigration Customs Enforcement, their immigration Detention Services. That also is not effective. Geogroup gets about 16 of its revenue from the federal bureau of prisons. Both companies have yet to respond to our request for a comment. So clearly this is a dent, but it is not a death nell for these companies. This is an important point that you made at the top. From an investment perspective, thats what youre looking at. About five minutes ago, a note from Height Securities. They basically just reiterated what you just said. The majority of revenues for corrections corps and geocome on the state level. So even if the doj goes through with this plan, its not as if the entire Business Model is gone, is it . No, its not. Its a substantial amount of revenue here. But the other thing we dont know is whether states will follow. Theres been sustained backlash at the state level, so well have to see what happens there. The other interesting issue, and this is actually pointed out in the Deputy Attorney generals note here to the bureau of prisons is that they are not ending the use of private reentry facilities, like halfway houses. That is a big and growing part of ccas business. So thats a positive for them as well. So theres definitely a knee jerk reaction here. Some of it is probably warranted. But put it into context. This is not the be all and end all for these companies. All right. Thank you very much, scott. Now to Julia Boorstin for a quick news alert. Gawker. Com will be shutting down next week after 14 years of operation. This news comes just hours ahead of a manhattan bankruptcy judge evaluating whether or not to approve univisions 135 million bid for gawker media. There are six other assets as part of gawker media, in addition to gawker. Com, and we are awaiting news of what the plans are for those other websites. Back over to you. Thank you. Taking a look at shares of valeant pharmaceuticals. T. Rowe price has filed a suit against the Canadian Drug maker, alleging it engaged in a fraudulent scheme that cost them billions of dollars. The lawsuit was filed earlier this week in federal court in new jersey, and became publicly available today, and in it, t. Rowe price and allegheny alleged that valeant used mail order pharmacy prices, deceptive reimbursement practices, and x fictitious accounting to shield its drugs from competition. Whats interesting, from a stock perspective about this, is that this follows a couple of upgrades this week. It had been a good week for valeant prior to today. It was up 22 . Now its giving some of that back. But Morgan Stanley went to an overweight. Said its no longer a short move to the sidelines at this point. So this really highlights sort of the unknown in the valeant story. That would be the liability aspect. Theyre accusing them of fraud. I mean, where are we on the actual fraud proceedings on this company and whether or not they are under investigation . They are currently under investigation by federal agencies such as the s. E. C. And the Justice Department. And this type of suit by t. Rowe is not knew. Back in december, tiaa cref, they filled a lawsuit against valeant back in late december of last year, alleging among other things that valeant had fraudulently inflated its stock price. So now we have seen arguably two of the biggest investors, t. Rowe price and tiaa cref, sue valeant alleging fraudulent practices. At the heart of both is the relationship with philador. To me, this is nearly unprecedented. Weve seen this against enron and others. This is a functioning corporation and youve got these lawsuits really unprecedented. Not bothering to wait for what the authorities actually exactly. Were going to go ahead and press. You have to wonder whether or not they will join in on these sorts of suits. Fidelity out there with 4. 4 of shares. Value act with 4. 4 as well. And, of course pershing is on the board. Real revenue generators. Even just today, they won some amendment to their debt covenants, which really bought them some time. That had been seen as sort of the elephant in the room. The legal risk to valeant is when you look at the credit structure, obviously, theyve got a lot of bond outstanding. So the secured creditors will be first in line in suits or anything else. I dont want to take it too much further than that, but you get the idea. The equity players, they tend to get very little. These guys are going after the company itself, saying we want to be made whole from our losses. With t. Rowe, you wonder if and heres the headline risk for valeant investors. Will others follow suit because they want to get in line . Other shareholders . Correct. Other shareholders might join. Lawsuits often beget lawsuits would be a shorter way to say that. Right. All righty, folks. More on valeant as it becomes available to us. A rate hike could come this year. Why that means we could be entering the danger zone for markets. Thats next. And if youve ever wanted poke the fed, now you can on facebook. Were back in two minutes. Pping. Where we explore. Protecting biodiversity. Everywhere we work. Defeating malaria. Improving energy efficiency. Developing more clean burning natural gas. My job . My job at exxonmobil . Turning algae into biofuels. Reducing Energy Poverty in the developing world. Making cars go further with less. Fueling the global economy. And you thought we just made the gas. Energy lives here. At ally bank, no branches equals great rates. Its a fact. Kind of like grandkids equals free tech support. Oh, look at you, so great to see you none of this works. Come on in. Weand sustainability goals asool one of our top priorities. Mental i definitely rely on pg e to be an energy advisor. Anything from rebates, to how can we be more efficient . Pg e has a number of programs, to help schools save on energy. When i see a program that fits them, then i bring it to them. With the help of pg e weve been able to save a tremendous amount of energy and a tremendous amount of money. Were able to take those savings and invest it right back into the classroom. Together, were building a better california. Rejoice, you can now friend the fed on facebook. The Federal Reserve launching its own facebook page. The fed says its designed to make educational content more accessible. This this is a live look at the feds page. Youve got to wonder how many friends it has. Who it has friended. What is on its wall. I am checking right now to see if liesman has already friended them. Hes one of the first guys. Even if he is on vacation. A friend of the fed also. Bill dudley saying the job market is improving. One day after the fed minutes showed the central bank is keeping the door open an a rate hike this year. But how soon, how will the markets react . Many strategists say we are entering a danger zone. Lets bring in charles rinehart. Gentlemen, welcome. Charles, let me begin with you. The danger zone thought is predicated on the idea that a lot of Investment News letter authors, writers are exceedingly bullish right now. Do you believe that theres too much bullish sentiment today . I would prefer to see less bullish sentiment, but historically, when you make a new alltime high as we recently have, if you go back and look at the data since the 1950s, historically it tends to go on another 1. 2 years. Doesnt mean that you necessarily have to be overweight, but its a positive dynamic historically. It means that for a variety of reasons, were now moving into new higher ground. So when you set a high, most of the time the market persists going up for another 1. 2 years, and another 20 , did i hear you right . Correct. That is the median. All right. Dudley had some comments this morning. I mean, he basically said the strong gdp data would help the case for a rate rise. Were not going to get any more of that before september. He thinks the labor market is pretty firm right now. He seems to be making the case for a rate. Sometime this year, if not septemberdecember. I think as everybodys been talking on cnbc all day, the real test comes when janet yellen speaks at jackson hole this week and that will be the definitive word on whether or not theyre getting ready to pull the trigger. But dudley is very close to janet yellen. Hes part of the triumverant. Youve been saying no, right . For a variety of reasons. The fed needs to move as a consequence of 4. 4 unemployment rating. When does the tenure really start to move . If they raise, does it go down . I think were in a situation. David fisher wrote a book about the great wave about deflationary cycles and how long and how global they tend to be. I think if the fed raises rates, you get a pulldown in long rates, not an increase. You need to see growth accelerate and Inflation Expectations accelerate. People in this environment are misreading it. What should i do with my money . Well, just a couple of quick ideas. First of all, with respect to the equity market, we think we want to be in companies that have very strong fundamentals. So they have earnings growth. They have good profitability. Theyre good stewards of capital. They have a nice opportunity set in front of them for growth. Everything else being equal also paying a dividend. And having a Strong Shareholder yield. And a couple of examples of that might be a name you know, like veriz verizon, or nestle, a global champion. I think five, ten, 15 years from now, people will still be eating their kit cats and washing it down with some perier water. Whats the matter with nestle today . Its down 13 . They had a sales release today. I think its a shortterm dynamic. Good day to buy it. Perhaps, yes. And also, thinking more wholistwhol i holistically, theres good value in the Municipal Bond market. That could help make your portfolio election ready, no matter who wins. Municipal securities will be a very good value. Theyre not priced at break even rates. Late last year, there was a transportation bill that was passed. We think thats a good sector also. One last thing. Over opportunities in Government Bonds. And also true in Investment Grade. When we take a look at your smart beta etfs, agge and t, they use momentum as a factor. And what theyre citing with right now is theyre saying on a risk adjustment basis, opportunities in Investment GradeCorporate Bonds and mortgages im going to jump in. Ive got a question here. You were making the point that the yield curve will steepen because there wont be that growth to support the inflationary deal towards the long run of the yield curve. At the same time, investors have been pouring money into technology, which is cyclical. So how do we have it that investors are so stumped on what to do with financials because theres a lack of belief in economic growth, and yet theyre piling into cyclicals, which have been outperformers in the past. I think thats more of a fiscal policy bet than a monetary fiscal bet. Everybodys expecting japan and the u. S. To ramp up fiscal policy because of the belief that Monetary Policy has hit its limit, at least in the near term, in terms of stimulating the economy. All right, ron, charles, thank you very much. Appreciate it. Oh, by the way, does the fed get a limit of 5,000 friends . Or are they unlimited . They might have a mentions page and then they can have more. Okay. Coming up next, we are live to rio for the late nest the drama surrounding ryan lochte. Of the next patient. No problem. Its a pretty huge file. Done. Sorry for the wait. That was quick. As part of our research, i also compared lab results with notes about prior treatments, then cross referenced it with thousands of medical journals. And i get the benefit of much more data, and a lot more time to plan the best treatments. I stay focused 24 7 and never sleep. You sound like a lot of medical students i know. [dance music playing] [music stops] woman looks like its done. [whistle] [dance music playing] [record scratch] announcer dont let salmonella get funky with your chicken. On average, one in 6 americans will get a foodborne illness this year. You cant see these microbes, but they might be there. So, learn the right temperature to cook each type of meat. Keep your family safe at foodsafety. Gov. Lets give you the latest on your top stock story of the day, the precipitous decline in shares of geocorps. The Washington Post published an article saying the Justice Department will stop using private prisons onboard of prison contracts. Those stocks were down 50 at one point. Now, theres a key here. The stocks are down 36 each. Theyve come back fairly significantly. Still down a lot. But theyve come back significantly, partly because of scott cohn, his reporting at the top of our show, which is to remind people that, a, this is a federal issue. Theres still mini state contracts. And b, even under federal the federal contracts that the post is talking about, theyre only referencing the board of prisons contracts and there are still federal contracts primarily under the marshals service, which reportedly would not be impacted. So, a, its not all the contracts. States are a big deal. And b, even on a federal level, it is a smallish portion of the federal contracts that may be impacted. That reporting by scott cohn, who did a documentary on this, has brought those stocks back up. A dent, not a death nell. We should point out the Short Interest is fairly sizable in corrections corps of america. So part of this could also be short covering, saying 39 . Might want to cover that short. The alleged gunpoint robbery of ryan lochte and other swimmers in rio. Lets get to andrew ross sorkin, who is in rio for the latest. Thanks, michelle. That story now appearing to unravel. We have some new video, as you know. He did allege earlier this week that he had been held at gunpoint and robbed. That someone had impersonated police and pulled over his taxicab late into the evening saturday, early sunday morning. We now have video showing these guys, he and his team members. Two of them were pulled off of an airplane last night to get some testimony. Youre seeing them at a gas station. Well follow you through what happened here. Apparently, they went into a bathroom, may have broken parts of the bathroom, and then were being held, had a conversation with security guards. Youre seeing them sit down. At one point, they do put their hands up. A little unclear what happened. Apparently they then went on to pay the gas station for gave them some money for breaking whatever happened in the bathroom. We dont have images of what took place in the bathroom. So it is all a bit unclear. But, of course, that story appearing to differ from what he told police and what he told billy bush on the today show. I want to show you what he said in his own words. Who were you with . What time of night . Who pulled you over. I was with a couple swimmers. We were going back, and we got pulled over in our taxi. And these guys came out with a badge, a police badge. No lights, no nothing. Just a police badge. They pulled us over. They pulled out their guns. They told the other swimmers to get down on the ground. They had gotten down on the ground. I refused. I was like, we didnt do anything wrong. So im not getting down on the ground. And the guy pulled out his gun, he cocked it, put it to my forehead, he said get down, and i put my hands up, i was like, whatever. He took our money. He took my wallet. And then clearly, the version of events that he talked about on tv not happening in the video that weve seen here. We should also note espn now reporting that two of his teammates have said that the story was fabricated. There would be a press conference here at 3 00 p. M. Locally. We will bring you that news as it happens. But this story taking just another very strange turn, guys. Well, andrew, you heard me yesterday. Given the benefit of the doubt between the brazilians and ryan lochte, i said ryan lochte. The guy is 32 years old. You cant even attribute this to being some kid making a mistake, if this indeed turns out to be a total fabrication. I should say, by the way, on that note, we talked about whether hes a kid or not. This from the spokesman of the ioc saying these kids just tried to have fun, they tried to represent their country to the best of their abilities. Lets give these kids a break. Sometimes you take actions that you later regret. They had fun, they made a mistake. Life goes on. But still, for this city that considered this such a showcase, and then to have the questions come up about security here in rio, it is it has clearly become a headl