tv Power Lunch CNBC July 2, 2018 1:00pm-3:00pm EDT
it's a great name. estimates should be going higher than they already are. >> mr. new world >> doesn't matter as long as you and i do >> what's your final trade >> it's got room to run to the up side. the buyback is incredibly strong >>. >> me too. i'm melissa lee. worldwide retaliation kicking off over president trump's tariffs. will this end up as a full blown war or just a skirmish maybe just a tip we'll debate that straight ahead. tesla is on target elan musk, is he on the right road now and where does the stock go from here in today's session, it's going to be a major reversal call him l.a. bron striking $154 million deal with the lakers will this mean big green for the purple and gold, and is the league happy to see its top dog head west?
christopher "mad dog" russo will join us live the slam dunk edition of "power lunch" starts right now. >> at least so far in the red. the averages often their session lows dow was down more than 100 points nike, wal-mart, cisco, kmef ron, they are the big down decliners. energy, real estate, materials, the worst performing s&p 500 sectors. wynn resorts, on pace for their worst day since january. the stock slides for a disappointing june gaining revenue. melissa. >> we begin today with tensions over trade canada hitting the u.s. with tariffs, and more retaliation coming this week from mexico and china. aman is live at the white house. >> yeah, that's right we're getting our first reaction to
white house and criticism from the u.s. chamber of commerce thaends earlier today on tariffs where, they're expressing reservations there the white house offering this reaction just a few moments ago. the president is doing what he sees fit to protect american workers. what the chamber of commerce had said in a statement from tom donahue earlier today is the administration is threatening to undermine the economic progress it worked so hard to achieve we should see free and fair trade, but this is just not the way to do it meanwhile, the white house also minimizing reports that they've been working behind the scenes here on this potential piece of legislation that would give the president enormous leeway in terms of the wto and trade wilbur ross. the commerce secretary was on cnbc, and he offered this explanation of where this administration stands right now in terms of the wto. >> the wto knows some reforms are needed, so i think there really is a need to update and
synchronize its activities and we'll see where that leads nobody here at the white house is entirely stamping out a possibility that the president wants to withdraw from the wto or that he might push for that outcome. just saying that it's premature now to talk about it that would be a complex upheaval of world trade rules this white house, though, has shown that it's skeptical of any international organization -- international organizations more broadly than anything in their view threatens are u.s. sovereignty. >> aman javers at the white house. >> trade troubles once again the wait on stocks courtney reagan at the new york stock exchange courtney >> good afternoon, tyler stocks are lower, but certainly off session lows here. the dow down by more than about is00 points. the first trading day of the second half of the year, and
you're going to expect light trading volume this week it's already started today we've got a shortened market day tomorrow markets, of course, closed for the fourth of july holiday on wednesday. now, sectors are mixed though earlier setting a defensive tone for the day across the board we are negative not so much anymore, but energy real estate materials, those are still the biggest laying ggers. >> industrials are taking a hit. things like cummins, black and decker stanley black and decker down .4%. the dow coming off its worst first half of the year since 2010 down almost 2% well, the nasdaq is still the clear winner up about 8%. that could soon change if you look at history. historically july is the best performing month of the third quarter for the dow and the s&p 500. in fact, stocks haven't fallen in july since 2014 that is true for five of the past six years of course, tariff talks could throw a wrench into that equation this year we'll see what happens today
it's the first day of the second half tyler, back over to you. >> courtney, thank you very much just how big a worry is a potential trade war? josh, chief investment strategist with slate stone wealth and ben mandel, his global strategist with jp morgan let me begin with you. a lot of your tick points are negative you think profit is going to slow you think we'll have yet, you think the s&p 50000 and u.s. market is going to motor higher this year and well into 2019 explain. >> you're right. i do think earnings are going to sort of decelerate pace of growth is going to be somewhere in the neighborhood of about 8% to 10% next year. not the 23% growth that we
expect in 2018 i think the market is going to be able to handle that we're still at a low interest rate environment we still have full employment. the consumer should be able to continue to spend. there's still some money left overseas not a great deal of it you know, that money is still going to work its way back home, and i think the market, as you look into next year, 2019, the market is it only trading at about 15.4 times maybe a little bit lower today i think there's still more upside potential i think there's upside potential left in this year. as a matter of fact, i think we can get close to 3,000 on the s&p 500. especially if you can get this trade issue resolved i think as we approach the year end, we start to pull back a little bit 2,875 is our number for 2018 that's about a 7 approximate the 5% gain. not a bad year
i see in my notes about your stance that you are sort of pulling back on risk exposure, but not running away from it at a sprint >> we're also constructive with caveats, which is natural in this environment with all the trade rhetoric about a trade war with tightening financial conditions, with your usual late cycle worries, i think it's easy to overlook the fact that actually the fundamental environment is sound here the reality is that global growth is accelerating going into midyear it's slightly more fragmented than it was last year. solid -- it's a solid fundamental foundation for earnings growth here >> but there's something that the fundamentals don't measure, isn't there, and that is sentiment. >> uh-huh. >> and sentiment feels like -- >> two notes two things on that one is that we're arguably in a very elevated period of headline risk here. with regard to trade wars in particular, you have china you have europe. you have nafta erupting over the
weekend. you have the wto being brought into this as an overarching target here. it's not our baseline expectation that you are going to get all of those boiling over at the same time here. we think this -- in terms of headline risk, it's a very elevated period, which we would expect to dissipate gradually over time. the other thing is -- and to your point, sentiment matters when it starts being effective so far we have anecdotal ed that things like trade worries are seeping in to certain sectors like the auto sector, you know, from china's perspective we have pmi's over the weekend where new export orders are down people are pointing to that. you can put together a handful of enek dotes to see that sentiment is starting to be effective, but not quite at the point where we see damaging for baseline outlook >> bob, on the road to that to 11.9% high for 2018 on the s&p 500, which sector do you want to be in? do you want to be in big cap tech, which really gave the s&p 500 the bulk of its gains so far this year. >> so let's assume that trump
could actually work out a trade deal so, yeah, the cyclical space, things like consumer discretionary technology, energy, i think it's the place you want to be in. you could take a look at industrials as well. i think as we sort of move closer to 2019, there's going to be a bit of a rotation i think people are going to start to move to a safer haven you have to realize that earnings aren't going to grow at the same pace, and, again, we have a full employment situation, so we could be facing wage inflation and, you know, some of that repat yags of cash is just not going to be there because it's already moved back home i think you're going to see a little bit of a rotation of the things like consumer staples, maybe telecom, maybe even a little bit more into real estate and utilities. i don't think people give up the discretionary, you know, more cyclical type of sectors in the economy. that's where i want to be going into about 3,000, and then as we get there, i want to pull back and maybe rotate some of my profits into some of the more defensive areas of the market.
>> would you take more defensive stance towards the end of the year in 2019 >> i think there's a certain risk to that if you are expecting a bounce to the elevated levels of volatility here, based on trade concerns, you know, you probably want arguably a little more of a cyclical exposure. we think about that as a balancing act, and at the end of the year you want to have a balanced exposure. at the sort of asset class level from multi-asset portfolios, we think about that as having the u.s. as an anchor market and then an em exposure as well, which hasn't done great. that's one of the key beneficiaries for at least the trade wars turned around >> anchor in a good sense. >> a good anchor >> ben, thank you. bob, thank you as well >> you're welcome. consumer staples, the worst performing sector so far this year, but the best group over the past month which version of the staples do we see in the second half of the year plus, lebron james leaving cleveland again. heading to the lakers. we'll have the league's biggest star in the most glamorous city
be good for the nba, or are fans getting turned off by the championship chasing sports talk legend chris "mad dog" russo will give us his take ow lch" will be right back is hello. let's go for a ride on a peloton. let's go grab a couple thousand friends and chase each other up a hill. let's go make a person best, then beat it with your personal better than best. let's go bring the world's best instructors right to you. better yet, let's go bring the entire new york studio - live. let's go
oh! how did you get in the building? jumped off a super crane. what? whoa! skyscraper. can't fix it with duct tape, then you ain't using enough duct tape. rated pg-13. is. >> consumer staples group has been the second worst performer so far in 201 behind telecom, down 10% the staples were the best performing sector last month of about 4% can the run keep going in the
second half? joining us now is john baumgartner, vice president and senior analyst let's separate what's going on the past positive and also the previous five months the past month, was that mostly deal speculation driving the sector >> it's really beaten down the past six to 12 months. the m&a speculation also coming off. >> what is the growth like in this sector when it comes to sales? i thought there was little to no growth >> yeah. we're basically seeing flattish growth across the space. there are some pockets in the faster growing category, some of the snacking categories, some of the prim meters. you're still seeing growth still low single digits. >> we just conveyed it on halftime report whether or not the yield curve was going to convert. there was a time you looked at these companies, and you thought, ah, you're worried about a recession. this is the place to go. does that still hold, or are the issues that they're facing with changing consumer tastes so bad that that's not the case anymore. >> the chapging taste is an issue, and it's really
questioning of the defensive properties we do think on a relative basisist basis you are seeing exposure and the vulnerability there. that could work in this group's favor. in terms of valuation, you are seeing discounts relative to the market versus 35% premiums three or four years. valuations have really come in a little less vulnerability on a trade fund too >> what's gone wrong with smuft bigger companies, whether it's behind a craft, hooenz, or a mondolese? what have they missed? campbell's >> a lot of it's self-inflicted. we've seen general consumer malai malaise, and to counter, we've see seen the pipelines really just lacking really good differentiate the product. >> the millenials aren't buying it. >> you are definitely seeing a lot more focus on fresh food,
more packaged fresh, more proceeds frozen. we think the big issue there for large cap food is getting back into the pipeline. general mills, great example launched oui yogurt. reallydifferentiated product there's still a success there. z >> how long does it take from thinking up the idea in the rnd pipeline and actually getting it on to the shelves? how long does that take, and what percentage of the products -- i think of it like tv shows lots and lots of pilots. rarely do they become hits >> we think at this point probably two to three years, and you figure most food names, this is probably year one we think you should start seeing better sales growth 2019, 2020 one way of i think getting at that core consumer >> even if we see better growth next year, when you look at the forward p.e. on this group, it looks like to me on the etf, at
least, it's about 1.-- 17.5. if you think the defensivepoint they have, the demographics they're serving, why should there be any premium whatsoever? why should this group go up from here at all? >> if you break it down by subgroup, the thoughts themselves turned out 15 times 2019 numbers hpc elevate the overall reading. you receive 35% premium. we know 2% to 4%, we usually see this at a 10% premium, and then you are at a slight discount >> you like food stocks, though, right? >> our favorite in the global space is denone. >> the french yogurt company >> we think it's the best portfolio in global food the yogurt business. plant-based beverage we think there's upside tore revenue and margins going forward. >> have you thought about whether or not it's going to be acquired, whether or not the new french president might actually let it be bought at this point is that any part of your calculation, or no
>> this is straight organic growth >> okay. outright m&a would be a bonus th then. >> it would be, yes. >> if it was allowed >> i want to ask you one thing the thing i remember from your notes are pwams. >> people who aren't millenials. we're big thinkers >> wams. >> i'm going to take that away >> pwams >> pwams put your baby in the pwams >> all of us >> oh, no, it isn't. >> now, now. take a look at tesla shares today lower after popping on news that the company had production targets hit for the model three. the latest on tesla coming up. plus, every year in spain thousands of people get together and throw tomatoes at each other. a less messy but perhaps more consequential version of that food fight is taking place right now. we'll catch you up when "power lunch" returns
spoo shares of tesla pulling back whereby elan musk saying they hit the targets for the model three. phil lebeau joins us notice. quite a reversal premarket wow. >> right and i think a lot of people are looking at some of the commentary from the p analysts and they're also looking at whether or not tesla can sustain this production rate of at least 5,000 as it moves into the third quarter, which, by the way, the company says it will be able to do the q2 deliveries, it's
different than what the news there is a little bit below the expectations, and that's been one of the things that is weighing on shares today total of 40,740. t the. >> 20,000 deliveries when you look at the q2 delivery numbers, it's not going to get a lot of people excited because many thought that they should have higher delivery numbers and with regard to the model three and the production rate there, yes, tesla did hit the target of 5,000 model threes being built in the last week of the quarter. there's a picture of the 5,000 that was sent off by elan musk to employees late last night however, when you look at how the company achieved this, with basically a production surge all hands on deck approach over the last couple of weeks, you see
this tent here, this gets a lot of attention there are more than a few analysts who are out saying can they really sustain a production rate of at least 5,000 model threes the q2 production of just over 53,000 was up about 55%. the cfra research. he is out with a note today saying i don't think that's sustainable. we have not heard from a lot of analysts, but those that have weighed in have said congratulations on making your numbers. now can you prove that you can do it in the third quarter >> brian levy coming up. >> tell be that it ten is that a temporary production facility or permanent? >> not permianent. well, necessity put it up about three or four weeks ago. they're going to keep it it's not like they're going to take it down that is one of the production lines for the model three.
>> if you look tell skepticism in general about the surge production, whether or not the rate of sustainable, you have to believe that there is sort of a domino effect that they won't be able to sustain these levels for very long or long enough so that it would force them, right, to then go to the markets to raise capital. already it seems like panasonic has said we're willing to put more money in the joint venture. we haven't been asked yet. tesla is already asking reservation holdsers in the model three for funds before they could configure cars. they're raising money or they can raise money without even
going to the markets whatsoever. >> another 2,500 to essentially configure their order, their reservation. that's always been in the language with tesla. it's getting a lot more attention now because a lot of people, i think, maybe weren't realizing, yeah, that was part of the language all along. having said that also, you are going to get a couple, what, $400 million, $500 million from people that are going to pay that extra $2,500. tesla is going to need more than that if they're going to ask to ask for more capital in the third quarter. >> they managed with the model three. that's been crucial in generating cash flow at the same time disappointment on other models. where does that balance out in terms of their need for cash >> well, i think their needs for cash right now, they say that they can be cash flow positive if they hit 5,000 model threes per week and now they got there at the end of the second
quarter. can they sustain that into the third quarter? beyond that, the question becomes do you need to raise more capital as you expand production you can't just continue building out of a tent forever. and you're close to capacity at that plant in fremont. do you need extra capital as you are committing to building a factory in china, which we expect to happen in the next month and a half >> thanks, phil. >> companies ash the world hitting back against tariffs by -- workers at one ketchup plant in ohio may be getting squeezed that's where our seema is. >> the u.s.-canada trade battle heating up, and caught in the crosshairs, ketchup. veat that means for your money li from fremont, ohio, when "power lunch" returns.
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u.s. is reimposing tough sanctions on iran, and it's asking allies to join the effort the august sanctions will target trade, gold, and the auto sector >> our focus is on getting as many countries importing iranian crude down to zero as soon as possible we are also working with oil market participants, including producers and consumers. at&t is raising price to its streaming service by $5 across the board beginning august 1 st. the company says the increase is necessary due to shifts in the tv streaming market. some news buzz about coffee. nearly a half million people in the u.k. and found that those that drank up to or more than eight cups of coffee per day had a lower risk of early death
compared to those who didn't however they did tougher from insomn insomnia i could never drink eight cups of coffee a day >> sounds dehydrating to me. >> i think it might be all right, thanks, sue sue herrera. let's get a check of the markets. stocks off to a negative start it is off session lows it was down more than 1 90 points earlier in the session. recent history, though, the dow, s&p, and nasdaq had been higher in july in each of the past three years, and five of the past six years financials, betts performing s&p sector energy, the biggest laggard here one of america's favorite couldn't meants getting caught up in a global trade spat. canada slapping double -- why do they always slap these tariffs they're slapped.
s sema >> canada taking aim at craft hines. that 10 % tariff on ketchup going into effect yesterday, and that has this town of fremont, ohio, quite concerned. >> hineinze is very important to fremont. it's one of the top factories in this town. >> heinze is a staple in fremont. they've been here for years and years. as long as i can remember. i'm pretty old >> slapping tariffs on ketchup is a symbolish move on canada's part not only does kraft heinze dominate 76% of the market, but the company closed a large ketchup facility in ontario, canada, several years ago to centralize production in the united states. ohio, where most of the product is produced, is a political swing state, which often determines who wins the u.s. presidency keep in mind, over 51% of constituents here in the buckeye state voted for president trump. republican senator patrick
toomey said that there are potential adverse impacts of the canadian tariffs on kraft heinze and at this ohio plant where we are here today kraft heinze has been under pressure the stock is down 27% over the past 12 months plus, it's facing rising competition from french's ketchup. canadian-made. it's positioned its product as a rival to u.s. branded kraft heinze ironically, ketchup, french's ketchup, is owned by mccormick and company, which is head quartered in baltimore, maryland guys, back to you. >> perfect example of how global trade works. thanks very much for that rundown. as trade tensions escalate, what are president trump's priorities in the second half of 2018 what will he be able to accomplish let's bring in tony, founding partner of hamilton place strategies also a former white house deputy press secretary, and ben white chief economic correspondent for politico and a cnbc contributor. gentlemen, good to have you here tony, are we in a trade war?
>> yeah, we're definitely in a trade war. i don't know what else you could call it. you have countries that said earlier are slapping tariffs on each other we're slapping them on the whole range of companies and sectors of the economy other countries are doing it for us to us, and they're anticipating more in signaling more, and i think it's going to get worse where it gets better i don't see a quick out to some of the positions that we put ourselves in >> yeah, you don't ever place a tari tariff, do you >> you have to slap them slap them down >> what do you think of these reports that he is planning on some kind of legislation that would throw off the u.s. from the wto? >> well, i think they're ridiculous, and it's never going to happen. congress is not going to hand more power and they're not going to allow him to pull out of the world trade organization emphasis is on congress to go the other way and try to wrestle trade back it shows you the mindset of president donald trump and his wife he wants to be able to act
completely unilaterally on trade. he doesn't like the fact that we're subject to wto rules, and he doesn't like the fact that he doesn't have uniform authority that's why he is using these investigations on national security to talk about slapping 25% imports on all imported cars, which, you know, in another era -- he is not going to get one from the wto. that is what he wants. i think, you know, tony says we're in a trade war i had a good conversation with the trade lawyer earlier who said, okay, we're past the dipping our toes in phase. we're up to our ankles in the trade war. coming up later this week we slap tariffs on chooirn. then wire up to our knees. we lose nafta, and we're up next to the trade war >> so his opposition to wto and other multi-lateral organization is not without some reason people have circumvented china and others, have gone around the wto, and so it's not capricious. it may be capricious, but it's not capriciousness >> no, no, it's not that there
are not issues in trade. i mean, there are lots of issues in trade we have issues in trade with our best -- with our closest allies. very mature economies between the united states and europe >> tony, tyler's point is the wto, we know, has been suborned by the chinese we know the obama administration had actually started laying judges as well because they were upset with the way the process was going, and they, too, thought that it was ant anti-american. they had a different process for trying to deal with it, right, but the wto has issues and it's a different organization than when the chinese joined it >> the united states is a loser in a wto world it just completely is inaccurate we created the wto, you know, as a dominant economy in the world to serve our interests i mean, make no mistake about this, we have created a
post-world war ii world that is beneficial to the united states with the world's reserve currency in the dollar and a world trading system that twi actually benefits us if you believe we're only the losers in this, you get these kinds of ideas about pulling out of it. the rest of the world looks at us and says we don't understand what they're talking about all they do is win >> don't we want the wto to behave differently >> there are probably better ways to do it than to hold it hostage and to threaten to pull out of it. we know that pulling out of it is a ridiculous idea i haven't heard anybody, except nor party navarro, and you can see the comments that others in the administration say it's a crazy idea, and i think they're right. there are better ways to do it put better judges in we win 90% of our fightsin the wto. it's not like we go there and lose all the time. there are improvements to be made, but that doesn't mean you take your ball and go home when you have some issues that need to improve it. it is a club we're a member of that club. we should go in with our allies
to try to improve it >> this is where you get into the whole issue of president trump is not always wrong about problems he is often correct that china does use us on process for technology transfer, but he can diagnose a problem, but he comes up with solutions. u.s. companies don't want automobile companies don't want tariffs. most of the manufacturers don't want steel and aluminum tariffs where, what they want to see is a group of us and our allies targeting china together, not un unilaterally not in a tit for tat trade war all these things that he proposes doing are going to be hurting the economy rather than helping us >> the natural check would be the midterm elections and consumers saying, you know what, i don't like this. i'm paying higher prices when we reach that tipping point, will it be too late in the process that the consumer won't really feel? right now sentiment is great spending is great. everything is looking pretty good we may not see the full impact
until after. >> the other a big market dislocation as you see tremors on that getting much worse, and then real actual announcements of job cuts and manufacturing plants closing because of increased costs. you see a lot of that back that can force trump's hand. reason he has the upper hand politically. those aren't my people my people are midwestern hard-working manufacturers if he loses those people, and they start lose their jobs, and they could change trump's mind, and as he said -- >> a lot of if's do you think that's going to happen, tony >> i think it's a whole lot more harley davidsons than what we've seen so far to get to that point. i think actually, you know, most of the pain on trade with the exception of some of the sort of high profile decisions that we see, they're actually -- they happen over the long-term. there's not a cliff that you follow-up. it's like the slow boil of a
whole lot of sectors to the economy. you know, if they can't source some of the products in china or one other country because of tariffs, that doesn't -- work doesn't necessarily come home. they have to go out and find other places one of the best jobs in america today is to be a supply chain manager and try to help these companies deal with getting the things that he this need and to mitigate the costs of tariffs. that's the problem that we're trying -- we're dealing with these kinds of things when at this point in this cycle with america -- the u.s. economy super strong, unemployment low, revenue is high, profits high, we should be pushing the rest of the world to do better on trade and liberalize trade instead we're forcing the hand of other countries to turn towards more protectionism we want to hear from you too, the viewer where do you think we are when it comes to trade.
trade tiff, trade skirmish, full on trade war take our scientific poll at power lynunch we'll have results at the end of the show where are we when it comes to trade? tiff, skirmish or war? >> i'm going to vote right now to the bond market rick santelli is tracking action at the cme. hey, rick. >> it seems like everybody is so preoccupied with the trading curve today. you look at the two-year note yield, it was firm out of the box. it's up a basis point. almost two look at ten-year note yields the two-year note really dragged it higher as you see it's flirting with minus one which means the spread is still hovering around 31 what's interesting is ten minus twos we know it's the flattest incrementally every day going back to 2007 what's interesting is how it accelerated two weeks into june. that was the last fed meeting. you can see that in the next chart. february 1 st start to the
dollar index you can see it increased it in june, mid-june, but the point is if you look at settlement around 92, it's trading around 95 it's up on a year-to-date basis. a little less than 3%. if you look at it from the lows in february, 88.5, which is what a lot of businesses have in their minds, it's up 6%. maybe it's that metric, of course, that's making many traders nervous. especially on the multi-national corporations and emerging markets. power lunch gang, back to you. >> thank you very much you can call him l.a.bron now. lebron james joining the lakers. $154 million that's what he is going to make. is having the number one player going to the number two market good for the nba chris mad dog russo will weigh in as only he can next so, my portfolio did pretty well last year. that's great. but the market was up nearly twice as much.
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>> lebron james will earn nearly $40 million a year for the next four years to play basketball for the los angeles lakers for more on this deal, we bring in eric. hi, eric >> it's pretty good money, right? >> if you look at how excited the l.a. market is that lebron is going to be joining the lakers, take a look at the ticket prices. the home opener is five times what it usably is. sthe don't even know who they are playing yet. it's the fact that lebron is going to be there. that's something the betting odds in las vegas, because now everyone can bet on sports lakers har already the second best favorite across the nba that will be go zb to watch as we can bet what's interesting, though, about a business, if you are the nba, all your best players, all your best teams, are now in the western conference if we're here in new york, and we want to watch these games, 10:30 p.m. start times, that's not great. >> that's late >> maybe it's great if you try and get that chinese audience out of asia. they're big nba fans in new york and in florida, not going to be as good. like you mentioned, the $40
million a year it's chump change for how much lebron makes everywhere else he has at least $50 million a year endorsements. there's an estimate out there he could be worth around $400 million right now. his nike deal could be worth $1 billion by the time he is done playing. a few million dollars here and there. not that -- >> let's see what you were showing earlier. is that after market those tickets have already been sold to season ticketholders, and now they're posting on stub hub? >> these are tickets that the season ticketholders have the right to they're going to get a price that they would have paid normally this price is a secondary market >> it's a secondary market >> scalpers, brokers, lucky season ticketholders that have a gift by lebron coming. a lot of thought of money moving around here. a lot of winners and losers. >> does the sponsorship money go up by switching to the lakers or no >> that's the idea if you are nike, are selling lebron shoes, a lot of people
are not lebron fans. now think about how many millions of people live in a l.a. that will get on that lebron bandwagon and will buy these nikes. that's more money for the company. and the lakers are the enduring brand. no pai way around it >> look how famous kobe and shaq and kareem abdul-jabbar, magic johnson, beyond playing, i think lebron wants to get in that kind of funnel. >> for more on what lebron's move to l.a. means for the nba, let's bring in chris mad dog russo. he has his own sports radio channel on sirius xm christopher, good to see you i know you are a passionate guy. are you a passionate guy about this if so, where does your passion lie? >> well, you can't knock lebron for doing this he won his championship in cleveland. he wants to live in l.a. i think it has as much to do as anything else, living in los angeles. i don't think it's necessarily about who has a better team because the lakers are in a much tougher conference he figures that if somebody is
going to join him eventually, whether that's leonard from the spurs, demarcus cousins. he figures eventually they get pretty good. i think it really just comes down to the fact that he wanted to be in l.a i don't think if has that a lot to do with the owners in cleveland. everybody knows he doesn't like dan gilbert. i do think it's good and bad for the nba. first off, the celtics are as big a brand as the lakers are because the celtics are the nba and for a lot of basketball fans the nba right now has got some issues east and west because, as you just hinted, all the best players and all the best teams are now in the western conference as you saw last year or two months ago in the final, the nba was horrendous can 12 million watched game four 13 million watched game one. people are tired of seeing sweeps they all knew golden state was going to win that series easy, even with lebron on that cleveland team now with another d -- the best in the league switching conferences, nobody is ever going to take the eastern
conference seriously, although boston is getting better and they're going to be good next year where are they're not on this level the have and have not in the nba is bad >> not to get too far into the weeds on this, should the nba basically for playoffs throw out the idea that there's an eastern conference and a western conference and just do the 16 best teams by record snoo >> i think they should i think what they're going to do first is to reseed for the final four i think you might see that this year, for instance you would have had a golden states houston final instead of a golden state houston semifinal. i could see down the road when you have the boston, philly, and, say, l.a. -- houston or l.a. golden state, oor whoever the best combination is, i think they will bracket them so they have their chance to get the two best teams in the final. i think they do that first before they go out there and do one through 16 listen, you could go either way. cleveland is dead as a franchise. it's going to be a ghosttown in
cleveland. the team is horrendous for a long period of time. that's a negative for the nba. positive is you guys have alluded to here as i was watching, i mean, l.a. is a huge market there's a lot of pazazz. >> when you say who wants tol.a remember when he went to miami the first time, right? he didn't say i'm going to miami. he said i'm going to south beach. >> good point. >> he clearly wanted to go to a place that was going to be fun. >> hot. >> party. >> sexy. >> hot and sexy, right so to say he lives in l.a. i totally get it. >> that's the reason whatever he went to south beach and took bosh with him and wade was there. he felt cleveland couldn't win going to l.a. he doesn't have anybody else with him. and the conference istougher but i don't think lebron cares he knows with him on the team they're good anyway. he figures along the way as we said somebody will join him again leonard from the spurs
looks like that person and then ke compete. you saw lebron on the private plane, came in this week we saw the pictures. he didn't land in akron. he landed in los angeles he is in the l.a. scene. >> let me try this on you, chris, this is more about business opportunities than it probably is about basketball opportunities and that the field of business opportunities in the l.a. area are much greater in entertainment and other ancillary things than they might be for him in cleveland. here is my play. down the road what he really wants is to be an owner. and i see him and magic johnson getting together and becoming the owners of -- if not the lakers some other nafb franchise. because they probably have the capitol on their own and maybe put together a sinned kit. >> i could see that. lebron can make a billion dollars if he plays on the moon.
he is lebron james i don't think he was hurt advertising by being a member of the cavaliers. he is the biggest athlete we have in america. besides a couple sockers probably the top five, top ten athletes in the world. he is making $75 million a year, $80 million a year i heard the worth with him i think it's the i felt lifestyle. lieu challenged. the one thing i got to disagree with basketball people they are nuts by saying if he wins a championship here that means he wins a championship in three cities he will be the greatest no, we wouldn't. i like the idea of staying in one city the whole career, bird, russell, jordan. isaiah, i lake that with your spend 20 years. >> create a legacy. >> rather than multiples bouncing around city to city winning champions. >> we are running up against the top of the hour.
thanks, chris. thank you, man chris "mad dog" russo. >> rising mortgage rights, supply constraints and the forecast for home construction what's ahead for the american housing no contact in the second lf that's next on power lunch whoooo. when it comes to travel, i sweat the details. late checkout... ...down-alternative pillows... ...and of course, price. tripadvisor helps you book a... ...hotel without breaking a sweat. because we now instantly... ...search over 200 booking sites
well the spring selling season is over and the main theme, houses, are just too expensive add to that supply shortages what happens in the second half of the year np diane ol ig joins from washington. >> hi, ty, today's housing market is competitive and likely to stay that way the rest of the year but things may ease on a couple fronts look at this, first mortgage rates rose sharply at the start of the jeer but seem to have settled a bit albeit higher. kwhiel rates are unlikely to fall and could inch up a little bit more experts are not specking as big a leap as the first half of the year home prices, still very high rising faster than incomes and buyers hitting the afford ability wall even as the supply of homes for sale increasing a little bit supply will be key in the second half of this year. home builders continue to ramp up production. aflt not as quickly as needed. and mostly in the move up, not
entry level category costs are high for builders and a trade conflict would only make it worse with the higher costs passed onto the consumer one thing is certain, demand for housing will only increase as the stronger economy gives more and more renters buying power. back to you guys. all eye good data thank you diana. if you wrote off retail stocks for good, you may have been wrong the sector etf is up 6% in the first of the year. did buyers spop shop because the stocks were on sale or is there more to the rebound? and the next president of mexico, amlo, what will the historic mean for u.s. mexico trade relations? and we're involving o investing in mexico and emerging markets second hour of "power lunch" begins after this.
good afternoon, everybody. i'm tyler mathen here is on the menu for the second hour of "power lunch. summer showdown for stocks the markets haven't fallen in july in the past three years but will worries over the possible trade war break that streak this year? and retail resurgence, the sector seeing a comeback with this year with big names back more than 25 processors.
we are shopping for topics and the tesla tumble crashing down to earth after surging at the open the analyst who slapped the sell rating on the company joins us live to explain why. the second hour of power starts right now. ♪ ben down, isn't it a pity, doesn't seem to be a shadow in the city ♪ ♪ all around. >> it's a scorcher out there welcome to "power lunch" i'm melissa moving to trade tensions worry investors off the session lous, the dow down nearlily 200 points right now we are down by just about a third of a%. dit o for the snch 500 tech is top performing sector. energy real estate staples, lagging within the dow nike wal-mart and chevron lagging. goldman sachs a leader it has been rough for retail in general. macies nike nordstrom down 3% or more and the crews stocks. cruise lines both at 52-week los michelle. >> thank you melissa
i'm michelle caruso cabrera. here is what's happening the ipo market had the busiest quarter since 507. 60 companies went public raising 13.1 billion mccould you gaming revenue grows 12.5% in june. the 23rd straight month of gains. the number coming in below analyst expectations sending shares lower and the u.s. box office made a record $3.3 billion in the second quarter that's up nearly 23% year over year and incredibles 2 and jurassic world, the big contributors. ladies and gentlemen. >> all right thank you very much president trump dealing with the reaction to the tariffs as countries around the world hit back at the u.s. with tariffs of their own and american made products amonafters is live with the details. >> the prrmts of the netherlands drove behind me a gave us a wave on into the kwhous to meet with president trump. we expect to see some video of
that meeting we should hear from the president momentarily once that video plays out we might see him get questions on tariffs in the worldwide reaction to the administration's policy. wilbur ross the commerce secretary was on cnbc downplaying the idea that the tariff policy caused inhibititions for the u.s. economy. here is what he said >> we don't see any signs right now of any weakening in the economy. we think the june quarter will be a very, very strong quarter so i think all these claims about the sky is falling are at best premature and probably quite inaccurate >> so premature and inaccurate there, wilbur ross suggesting the folks suggesting that the president's policy of increasing tariffs is going to hurt the economy are at least so far totally wrong given what we have seen in terms of the economic data predicting that this is the time now for the president to
readjust some of those trade imbalances throughout the world that the trump sees. they feel at the white house, tyler, the economy is good and this is the time to do it process. >> amon, thanks very much. >> markets starring the second half in the red. recently history resides with the bulls in all three indices rice in july or have ris 199july in each of the past three years and five of the past six let's bring in braen bells ski and chris veren. head of technical analysis and partners with research partners. good to have you here. brian you sound bullish in the note can you tell me, how bullish are compared to say six months aig. >> same amount of bull zbliesh same amount as bullishness. >> same amount of bullishness. >> we could take that a whole different way. how much time do we have >> here is what i would say. we are -- this market -- we as investors we can't wait to call
the end of the market for the last six months we have had people come out and say this is the price peak for the year. this is the earnings peak for the cycle. recession is coming tomorrow this imminent denimise we thinks overblown. there is not to say there is excess volatility in the marketplace especially given that the stock market market in the united states s&p 500 was up 500% there is a zongs consolidation like what chris talks about. the earnings in america in terms of our companies are the most stable asset in the world with respect to equities period and in times of volatility you seek stability i think we have the best companies in the world i still think a lot of what's happening is really default to the negative side of things. and then just one more other quick comment. we think it's binary fashions,
melissa 37 what do i mean by that correction equals contagion automatically, right tariffs equal trade war automatically. i think there is somewhere in between that let's take a deep breath default to fundamentals, the second quarter will be great the markets we think go higher. >> i get that but the earnings last season were fallout a catalyst for the markets after the s&p 500 decline from the highs in january we have been in trading range. i wonder from the chart standpoint do the charts look better or worse than five or six months aig. >> i think it depends where you look i'm thinking about 2010 as a pause year. >> okay, the whole year as a pause year. >> yeah and if you look back for similarities in a market that makes no progress a year like '94 or '84 the multiple contracted and the following year was very, very good for stocks. what i think is notable here, the bar for surprise in the back half of the year has been
reportered mean flee investors bear itch clients are bearish pch last week cold data was spiking. you have seen a surge in put volume recently that sets the stage for a positivis surprise moving into the back half of the year. >> i don't know the exact statistic, but i remember as a -- as an analyst and strategy invite 1994, '94 was a bad year. and the majority of the gains happened in a eight to tennen-week, november to the end of the year that kick started the invite 50 big cap and ushered us into the age of green span's speech in the 1996 the rational exuberance. everybody things it was about tech no it was about big cap american staplingles companies. we are heading into scenario are have u.s. is head and shoulders above. the one thing people are missing pe are going down.
we have never seen that pes goes down because earnings outpace surprise earnings are great and that's positive for the longer term hemmati of the polk county. >> that's right. and if you think about '94 we were two years off the market low, earnings were plus 20 growth plus farah. multiple contracted two or three points 95 s&p up 25%. it was the pause or reset year particularly for valuation standpoint the other similarity no safety trade for '94 and no safety trade worked this year staples have been indifferent. utilities indifferent. you've been better off on small caps and microcaps than defensive groups that's an important. >> we'll leave it there, gentleman. >> do you feel better? >> yeah. >> i think we only asked one or two questions. >> yeah. >> answered beautifully that's the way it should work. >> thanks, chris. >> thank you. >> markets keeping an eye on the landslide victory of mexican
president-elect manual obrador >> translator: >> in his acceptance speech he told supporters there will be business freedom, freedom of expression, association, believes under his presidency. the president-elect trying to say sauj concerns of his being autocratic or hugh chavez. while he made no mention the u.s. administration has been vocal about the win and wilbur ross spoke to squawk box about what it means more the north american freed trade agreement, nafta for short. >> the clearly the reality is that mexico needs an arrangement with the u.s where the vast bulk of their exports and they are have a huge trade surplus with us, some $70 odd million. but over all they have a trade
deficit. so they need involvement with the u.s. we think he understands that and it's really a question of when will the talks resume >> lopez obrador's inauguration is december 1st. long transition period for more on mexico and the emerge being markets in the second half let's bring in our emerging markets portfolio manager for pimco. good to have you here. >> good to be here. >> what do you think lopez obrador means for a nafta or no nafta deal. >> all of his comments -- am low is very much pro nafta he understands that mexico needs it but the reality is we are very much ahead of the u.s. mid-terms. we don't think the u.s. political cardium really allows anything around nafta to happen until into 2019. as much as he wants to solve nafta ultimately it's next year's business. not to mention that most likely
the decision of president trump and the white house. >> what is he going to try and do with respect to the economy there are the fears that he might in some ways imitate chavez in venezuela. and we have seen what happened to that economy. is he that or not? >> you know, i think it's important to dispel the notion that amlo is the next hugo chavez he was a mayor of mexico city from 2000 to 2005. actually quite pragmatic, left office with approval ratings north of 80% our base case is that he was populist but far from chavez or marred row. it's not a superleft-wing administration however there is a sense he is focused on lifting out of poverty some of the disenfranchised mexicans so south of the country, which means more spending. and of course more spending, the questions arises how do you pay
for it some of his plans talk about 5% in gdp on spending on the efrld and youth programs, freezing oil prices and refineries. it's a laundry list of spending plans, whereas the way he anticipates to pay for that is from savings from anti-corruption initiatives. a lot of intangibles and questions. but investors are dually worried about what it means for the mexican economy. a very solid starting point but what's the direction of travel from here. >> based on amlo's victory is next coa no touch or maybe it's another reason it's a no touch in your view. >> it remains to be seen we watch for signals as you mentioned the inauguration is december 1st we watch to see who is in the cabinet, what are the measures there is budget announced later in the year for 2019 is there fiscal discipline
we are cautious but it remains to be seen the problem is in the mean we do anticipate further volatility in mexican asset prices. >> president trump is speaking right now and he just says he spoke with the president of mexico, how do you think that phone call went. >> they are both nationalists despite all the negative stuff about trump, understand by by mexican candidates, might these two actually get along. >> look i'm sure the tone is consil siltry. it's in his interest to have a good recommendation with trump to ensure nafta is solved. but a lot depends on the with the u.s. and the trade wars that u.s. is waging on china appear where does nafta fit into the puzzle. >> all big questions thank you. >> thank you. >> joining from us london. >> here is what's coming up on "power lunch" with the retail sector back in vogue this year what names should be on your shopping list for the rest of
2018 we have a play book for that plus the president calling on saudi arabia to boost production as oil hits the highest level since 2014 what it means for the sector and the former ceo of new kor, china, raltietiaon and the world trade organization that and more coming on "power." at fidelity, our online u.s. equity trades are just $4.95. so no matter what you trade, or where you trade, you'll only pay $4.95. fidelity. open an account today. but prevagen helps your brain with an ingredient originally discovered... in jellyfish. in clinical trials, prevagen has been shown to improve short-term memory.
house breaking news. >> the president met with the prime minister of netherlands president trump saying in the pool spray which we will see momentarily. the president saying he interviewed with four potential supreme court justices already said they're excellent in many ways he says he is meeting with two or throe more potential candidates for the supreme court and will make a decision over the next few days. that's a very fast time line for a supreme court nomination but the has had the list of 25 he says he is picking from for a long time. presumably a lot of the legwork has been done. this coming on tai when the white house announce the the internal stachgt for the supreme court nomination battle, assigning three officials here internally to lead that effort and to leave the day jobs here and focus full-time on the supreme court effort meanwhile, i can confirm to you that steven harper, the former prime minister ever canada has been in the building here at the white house on a day in which the canadian impose tariffs in the united states. harper met with larry cudd low
at least and possibly others while here no word on what they discussed but a possible back channel on trade between the former prime minister of canada and larry cudd low, the economic director at the white house. >> and amon there is reports on the tape as well he is talking a little bit about the wto and maybe or maybe not clarify what his position is based on all the reports that have been coming out that he is trying to write legislation removing the u.s. from the wto. >> that's one of the reports we saw over the weekend, they have draft legislation here at the white house that would do effectively that the white house not denying the reports over the weekend the president here according to reporters in the room saying the wto treated the u.s.ed aboutly that's what you here from a lot of white house officials when you ask them about the wto story. is the president going to withdraw from the wto? does he want to withdraw they never say that, no, he doesn't want to withdraw from the wto. in fact privately i've aides say
that he wants to withdraw from the wto that's a legislative challenge gloo we will now listen to the president. >> good afternoon. >> hello, everybody. >> this is a big group. >> big group academy awards big group. well thank you very much it's a great honor to have the prime minister of the kingdom of the netherlands. that's the official title. >> absolutely. >> that sounds very elegant and beautiful but it's a great honor to have you. we have worked together and have a very railroad close relationship i think the relationship with the netherlands has never been better than it is now. we will meet over the next two weeks again at nato. >> absolutely. >> and we will discuss that today also and we are discussing trade and the eu, and lots of other things a tremendous numbers are coming out on the united statesance our government our economy is very
good probably the best it's ever been >> yes. >> and very o we are close to making good trade deals. i didn't want to say good. i want to say fair fair trade deals for taxpayers and workers and farmers. a lot of good things are happening. the eu we will meet with them fairly soon and want to see if they can work something out. that will be good. if we do work it out that will be positive. and if we don't it will be positive. >> no. >> we just think about the cars. >> we have to work it out. >> it will be positive but, again, mr. prime minister thank you for being here. >> gad to be here. and can i add to that, that the relationship between the netherlands and the united states is over 400 years always been friends aballies working closely together our talks will no doubt concentrate on jobs and security because the president and i we are both convinced that as
leaders our prime task is essentially to make sure our countries are safe and stable and that we have an economy which is providing the jobs and the future growth for our people and there are so many opportunities between the united states and netherlands to do more in the area of security as well in the area of having more jobs and having more trade. >> right. >> and more investments, already almost 1 million people, 825,000 in a job in the u.s. because of dutch investments. and a quarter of a million people in a job because of u.s. investments in the netherlands. >> right. >> and our aim will be to increase the numbers, more successful so i'm really looking forward to our discussions >> a great honor i will say i spoke with the president elect of mexico. we had a great conversation about a half hour long talked about border security we talked about trade. we talked about nafta. we talked about a separate deal just mexico and the united states we had a lot of good conversations. i think the relationship will be a very good one. we will see what happens
but i really do believe it's a very good one. he had a very excellent election, did i would say even better than anticipated. i told him a number of years aig when i saw him campaigning for -- a different year, a different race, i said he will be did shall some day he will be the president of mexico. so he remembered that. and it turned out to be correct. we had great talk. in the morning during the morning i interviewed and met with four potential justices of our great supreme court. they are outstanding people. they are really incredible people in so many different ways, academically and many other ways i had an interesting morning, between the president of mexico and also the -- i guess you would call him the president-elect. but i think he will do -- he is trying to do very hard -- try and help us with the border. we have unbelievably bad border
laws, immigration laws the weakest in the world laughed at by everybody in the world. and mexico is very strong immigration laws they can help us in until we straighten out the immigration laws which have been bad for many years qb decades and we'll have them taken care of. but very interesting, though was my four meetings i'll be meeting with two or three more and we'll make a decision on the united states supreme court, the new justice, that will be made over the next few days and well be announcing it monday and i look forward to that i think the person that is chosen will be outstanding thank you very much, everybody >> thank you. >> come on everybody let's go make your way out. >> i'll be announcing that monday monday >> wto >> wt treated the united states very badly and i hope they change their ways they have been treating us very
badly for many, many years and we were at a big disadvantage with the wto. and we're not planning anything now. but if they don't treat us properly we will be doing something. thank you, everybody appreciate it. thank you. thank you very much. >> all right the last comment perhaps the most telling one, as the president meets with the prime minister of the netherlands. the wto, world trade organization treats us very badly he says. he hopes they change their ways. if they do not we will be doing something -- something -- but who knows what that something might be he also reported on his conversation with the new president of mexico, or the president-elect of mexico, lopez obrador. they talked border, trade, nafta and the possibility of a separate deal if nafta is not renewed. >> all right hitting the brakes, despite meeting the model 3
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welcome back to "power lunch. on the next new episode of the profit, a father focused bag company that once generated millions is now at death's door. after 15 years, the owner allowed his fierce to get the best of him. here is a sneak peek. >> is it a lower grade canvas. >> it's a 600 d. it's more of the lower version as opposed to 1,000 d. >> and what to be dsh what would this bag cost to make. >> $15. >> and if you upgrade the quality of the hooerl material. >> probably go up to a dollar minimum. >> what would you sell this for 64.99. >> at $65 retail. >> yes. >> with design on products like this. >> yes. >> the last dollar you spend. >> yes. >> the most important dollar. >> yes. >> it's a dollar to increase the fabric and another dollar to increase the zipper and there is little things you can do put an extra $3 in it and you go to 18 costs. still a $72% margin.
>> amazesing. >> you can catch the all new eptds of the profit tomorrow at 10:00 p.m. eastern right on cnbc. all right. who said retail was a wreck? the xrt, the etf tracking the sector gained more than 6% so far in 2018. with several big names up double digits during this this time look at these numbers. rh which the old restoration hardware up 61% under amor up 57% massies 44 koll was tiffany tjx impressive gains. can the rally continue in joining us is cnbc jan if i mayen and cowen and company director oliver chan oliver i'll begin with the general question then drill down more specifically on a stock you downgraded today do you think the retail run has legs for the second half of the year >> we are excited about the health of the consumer therefore, the retail rally could be sustained what we like is low
unemployment unemployment at 3.9%, also wage growth at 2.7% and stabilizing trends in terms of amazon, the future of the store, digital, those are all positives. as we think about themes, we like the high end. tiffany, lvmh, we like the low end, wal-mart, costco. and ideas that unamazable. including planet fitness and thinking about health and wellness there are themes we are interested in. there is rapid share shifts. and we think the consumer is in a good place with the weltier getting welty and the promotional environment at the low end. >> oliver high and low and he likes the environment. i take it you do too pup call it the best consumer environment in a long being, long time. >> i like the high rb low, middle i think we are just having a strong consumer. we had a strong consumer in may. we have a strong consumer through the back end unless some
strange event happens. and we have the tax through through q 3 and 4. we didn't have that before and that's good for the retailer and the consumer the retailer gives that back it the consumer, driving more business and the consumer has more money in the pocket. we are seeing a strong back half. >> a lot of the stocks have made tremendous runs. how much of this is priced in. >> well that's always the problem, right i don't know that the stocks are running as much in the back end as they did theed front but they have legs yet to go i think from the point of view of increasing value. i think we are seeing surprisingly strong earnings in q 3 and 4 but that the market isn't rtd for. >> oliver you downgraded nordstrom. what's behind this krpg they have a meeting next we can which take the stand now what are you expecting. >> what we think at nordstrom is it's a great company but bare stock. the valuation is 14.6 times. higher than macies and others at about 11 times also the nordstrom rack division
about 25%. the comps slowed there and underperformed tj and ross and that's something we watch and the market expects a lot from the stock, including a margin inflecten. expectations could be in the stock. it is a great company. we are comfortable on the sidelines in terms of being at a market perform rating today those are our caution zblos market inflecten, jans that sounds like taking two advil. >> he and i mostly grow on these in retail. i'm a big fan of nordstroms right now. i think they are going to occupy a space. that they haven't occupied before that the pace lord and taylor and sks np they about about will go up as those companies fade. since they are the most expensive of the off price guys highest price point they see a lift in the back half we didn't see in the front i'm actually a fan oliver on the other side i hope he is wrong. >> alexandra come on over here will you >> oh. >> alexandra is jan's 8-year-old
daughter just came from dance class. come sit up on your daddy's lap alexandra congratulations. the first tv appearance. >> woo hoo. >> first time ever on tv. >> now you read those words that say there what do they say go ahead. >> thank you mr. and oliver. >> thanks jan and oliver there you go thanks jan if i mayen and oliver chin oil excited as president trump pushes for more oil is is the production boost on the with i and the global food fight taking place. tariffs put on u.s. foods like orange juice, whiskey soup and seerp. up next a man calling the tariffs the height of hypocrisy. i love this song in the background love it. ♪ looking at you i can't lie ♪ ♪ just pourint.
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retaliation on $300 billion in u.s. goods ooh eu spokesman says the u.s. investigation lax legitimacy and violates international trade rules. retailers in india protesting wal-mart and cities across the country the retail giant plans to acquire flip card, for $16 billion. the lobbying group says the buyout will create a monopoly in the retail market and drive small shops out of business. >> wal-mart will dump global sources product in the country through the passage of e-commerce and ultimately control and dominant the trade. >> and here at home seattle the first major u.s. city to ban single use plastic straws and utensils in food service businesses that sell food or drinks won't be able to offer the plastic items under a rule that went into effect on sunday. you are you want to dit that the
update this hour sending it back to you. let's check the markets. we are at session highs, the s&p and nasdaq have gone positive, well they were positive just a minute aig but look at industrials down the s&p just a little bit lower there as you see process the nasdaq is up by about .5%. tech utilities financials leading. energy lagging big cap tech stocks leading include apple facebook, note flicks, amazon at sessions highs you see there. melissa. >> ty, the oil market closing for the day. jak dea angelis with the wrap. >> good afternoon. crude prices treated slightly closing under $74 a barrel after the president's tweet that prices were too high and that he asked the saudis for production increase of 2 million barrel a day to which they agreed the white house later said the 2 million is spare capacity and the saudis says they can use it prudently when necessary they are not necessarily pulling the trigger just yet and with the fourth on wednesday within and triple say saying
more than 45 million americans travel 50 miles or more gas prices are visen on higher oil provides and stronger demand this year's projection is 5% increase from last year and highest since triple a started tracking the statistic 1 years aig. the latest reed read on gas, up $51 cents from this time last year right now there are more reasons for oil to stay supported pu that could change after the holiday and the fireworks things could level off. >> we'll be watching for that thank you. let's talk more oil and energy and what's the outlook for the second half. let's bringin our guests gentlemen, good to have you here can i start with the tweet with the president over the weekend about the saudi araby increasing production by 2 million billers. >> please. >> do they have capacity cans the saudis increase by 2 million? do they have it. >> kpends on the baseline. they have been producing just under 11 million barrels most of year back in 2014 when prices were over $100 a barrel they targeted
12.55. obviously no they are short of that but even getting up to 11 and 12 stresses their capacity. stresses the system there. there is nervousness in the market about them approaches the maximum capacity. >> what does that mean for oil prices in the second half? >> it's looking tight. i think it's going to be well supported. demand is incredible u.s. refineries are running consistently week in a woon oat record rates gasoline demand is huge. the export phenomenon in the united states with the barrels are pushing out overseas it just trying to fill a void we are getting big time as you guys know from venezuela, and these iran sanctions we can't make it up but i want to congratulate on the president getting one thing right. oil prices are getting manipulated by opec not the sprkts >> mike what's your prediction on the second half. >> john is spot on with the macro. we need the opec billers we have 1.5 million barrels a
day coming off from iranian ngs is as and then just venezuela imploding. you have the permean which has been the major growth driver in the u.s. bottle necked now we have grown so fast and ramped so hard that production is actually going to exceed pipeline capacity. >> what stocks do you invest in then to take advantage of the things you are talking about >> really the last three years has been eds buy permean names. the hottest is the biggest baddest base that strategy has been thrown on its head. we think you want to be outside the permean wall, the bottle neck over the 1218 months. we favor the non-marathon, lone star if you are inside the permean, a wpx and alittle ace are the favorite ways to play. >> will iranian sanctions hold will most countries go along with it. >> it appears so the way they are structured you hear many multinational in not everyone saying they are not
touching iranen oil barrels they don't want to run afoul of the u.s. treasury and sanctions. country by country you slowly fall in line as well india is holding out hope against hope they will be get some waiver or buy but they are ready to pull the plug and saying we don't want to touch it. >> the administration talking tough. >> mike and skr john good to have you on. >> thank you. >> thank you. >> shares in tesla had been up 5% earlier today after reporting positive production but shares reversing course a bit down by .8% which us is efraim led levy downgrading the stock earlier today. thank you for being with us. >> thank you. >> you sprersed what a lot of skeptics had when the number crossed that is how sustainable is the production burst in the last week of the quarter can you connect the dots with us because it's not just whether or not they can sustain 5,000 but how long it takes them to get to a sustainable 5,000 because then that would mean what
that they would have to go to the capital markets? sort of project out what this means. >> the way i look at it is they basically put in the kitchen sink to get -- they literally made a tent to get the 5,000 vehicle production number and that they only squeezed by with a few extra hours. but that was really expected i think largely factored in. way it means is they are saying they want to get to 6,000 by the end of august. that's only a 20% increase from where they are now and if you looked at what they did from the beginning of the month, the beginning of the quarter from 2,000 per week to 5,000 that's a bigger jump so they put a lot of cash into making sure like adding to the line, so they had additional expenses in this quarter so there is a lot of things missing yes they made the numbers but it doesn't change you know the thesis. >> the company is still reaffirmed the positive cash flow outlook for third and fourth quarters you think only
increasing production by 20% the end of the next month that doesn't -- that the reaffirmation of that goal of cash flow positive doesn't supercede that concern >> well i'm still skeptical this they make the objectives of capital positive one of the ways they seem to do that is the recently news about -- i think you talked about it earlier on the show -- that there is $2,500 configuration fees for the model 3 reservation holders. if you hit even a quarter of the number of 450,000 you get 100,000, that's in the rage of 250 million in cash flow in the quarter if they get those configured is that the way they're going to get their cash positive? i mean, to me that's unnerving. >> pan sonic's ceo had indicated that they might be willing to invest further into the gig factory once the initial investment was complete which it is at this point, would that
alleviate concerns about the need to go to markets for capitol. >> i definitely look at that as a potential positive, the fact that pan a sonic is coming out in support of continuing the relation and they're even building on it that's one of the good news i saw. >> would that blow the sell rating so to speak if this -- if they came out and said we're up for another $1.5 billion. >> i don't give exact reasons when i change something. but it's a fresh sell. it's really about valuation. if you go toward the target price of $30 oh they are trading at 38 times or 2020 estimate of $28 if they meet that? and that's close to what the street has the street is 850 something. it's 120 times 19 epa estimate and they tend to miss estimates. so i think there is a lot of frisk the valuation here being a lot up-front for the good news potential. >> thanks for phoning in i appreciate. >> efraim levy thank you.
>> accurate beginning tare i was retaliation from mexico and china expected this woke as well meanwhile president trump saying the kworld trade organization is treating the u.s. badly. and he hopes it changes his ways after canada and other countries imposed retaliatory tariffs. well what it mean for the u.s. walking away from wto? let's bring in dan dmik o. he is a an economic adviser to the trump campaign good to have you with us. >> thank you tooirl. >> should the united states leave the wto and if so why? >> if the wto can't be more effective nan it has been the last 20 years in controlling trade americaen tile ichls and enforcing the rules against countries like china who totally ignored them then the wto is not helping the world trading system it's hurting it. process and we should be prepared to walk away. i think that's trump's position. i think he would rather negotiate a better system at the wto. but up until this point in time they failed miserably dealing with china. >> can you give me me an
example. >> first of all you consider china a free market economy? a market based economy the answer is no the whole world agrees it's not. they were supposed to be working towards get tlg and getting there years before now secondly, they have allowed china to manipulate their currentry ocy from 1995 to 2015 and gained huge competitive advantage on the exports they have -- china has flaunted every commitment they made to the u.s. and the to the world trade organization when they join and nobody held them accountable. i blame past administrations for not doing that as well gloo what would it mean in practical terms if the u.s. pulled out of the wto? i mean we pulled out of the trump administration of several other multilateral agreements, the tpp, paris climate accords it's a to seemingly relatively little practical impact. but is there a practical impact here. >> the tpp was not anything that
ever got off the ground. it was not an issue that was going to create any issues when we decided not to go forward with that. but the wto has a mission. the problem is they fail and if they're going to cope failing, and working against us, then we don't need to be part of it. and it won't be good for the world. if we're not part of an organization that works to reform the global trading system, the wto should be willing to do it but so far the membership failed. >> if the u.s. pulled out of the wto is that effectively it for the wto? >> well, some people would argue that it would be it. if the united states is not involved, the largest economy in the world taking the most imports, if the united states pulse out of it, it's going to be a big deal obviously. >> so what happens when you have a trade dispute if you don't do it through the wto just follow the trump model which is a lot of uni lateral things at the federal government level
>> is this michelle. >> yes, hi. >> hi, michelle. we have talked about this before listen, the wto has not been working. okay the process takes forever. >> i know you made that point. so then the way it works. >> it's not going to be any different than it is now we are forced to take the uni lateral actions because it nas not been working to the benefit of the world and to our detriment because we had the most open market in the world. it's not going to be any different for the united states than it has been >> all right, dan thank you very much always good to see you be with dan dmik o appreciate >> i wasn't trying to be contentious. >> it was a good question. >> if we are not using the wto. >> you zbo i expected him to say more of what we see now. >> where are you with when it comes to traded is tiff, tft, skirmish, a war? the results of the twitter poll moments away >> well, should you bet on casino stocks in the second half of the year in win in las vegas
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well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade.
mecca macao for the month of june was a bust. craig, how do the technicals look for some of these name snz. >> well, when you look at wins specifically you're breaking an up friend support line that's been intact since basically early 2016 and you're breaking below your 200 a day moving average from our perspective it looks like no, you don't want to be stepping up and buying these stocks yet i still think you're going to see more to the down side in any sort of relief rally we get is just likely that at this point in time. take a look at some of the smaller gami smaller gaining stocks, things like pen and probably won't be exposed to international trade tiffs and those kinds of things. >> chad, what about the
fundamentals hasn't any casino stock exposed to macao traded at some of a discount because you have to worry about authorities are going to do at any given day >> kooeeep in mind, 60% of the revenues come from china there are expectations embedded into both of these companies we would be avoiding the gaming industry altogether, and in particular if there are companies that have chinese exposure overall so therefore at this point in time we would wait and watch the evaluation if it comes down considerably, perhaps we would do that keep in mind also we would be avoiding our underweight emerging markets altogether. >> and even with those big sell-offs both are negative. good to have you from more markets, head to our website and follow us on twitter
at trading nation. check please is next >> and now the latest from trading nation.cnbc.com and our sponsor. >> you don't want a singing position to be too big of a percentage of your tradingatsets. additionally you want to make sure there's enough profit potential to justify the risk you're taking. nstely constructing suitable trade and adhering to our exit plan can help you build on trading successes
check please all right, the suspense is really building here let's get to our twitter poll. we asked you where you thought we were on trade 25% of you said this is a tiff 35% said it is a skirmish, and 40% said it is a full-blown trade war. tiff, skirmish, war. >> war was the winner. >> check please we have a physical version of the economist, and on the cover, which is rare, is this the check please itself? the hard copy magazine netflix is on the cover of the economist. in the old days when you saw it on the cover of times or forbes or business week you asked is this a peek in the stock those don't exist anymore. >> we will watch and see what happens. it's on the cover of cosmo
>> the minute a journalist really pays attention to a story it's over. you being a former magazine editor, you know that as well. >> my check please sort of ties the two together because netflix contributed 84% of the s&p 500's gains in the first year. and writing effectively about tech stocks faced the biggest vulnerability, the greatest pressure when it comes to draw downs related to trade war and we've seen that time and time again when markets seem to be very volatile we see if that takes place in the second half of the year. if we lose tech leadership, that could really challenge market gains for the rest of the year >> it inevitably reminds me of 1988 and 1999, and i get
nervous. >> and when you've got so many people owning these same stocks indirectly through etfs. >> right, and don't know it. >> and don't know it, the unwind may be something you've never seen before. >> absolutely. thank you for watching power line "closing bell" starts right now. in for wilford frost, and trade fears sending stocks on a wild ride. we've got your play book as uncertainty spreads. a volatile day for tesla shares as the company hits model 3 production targets but can it keep up production at a much faster pace in fremont, ohio, where a catch-up plan has become a focal point in america's trade battle with canada. i'll break down the winners and losers ahead president trump asking saudi arabia's ruler to help push down