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tv   Power Lunch  CNBC  October 2, 2018 1:00pm-3:00pm EDT

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again, this is it from here. >> i want to mention amd this is a stock that broke out above 20, screaming higher rsi is off the charts, now it's cooling off. i think it's setting up. >> new high for the dow. power lunch starts now i'm melissa lee, fed chair powell getting ready to take questions about the american economy and rate hikes ahead, we will carry that live he predicted the housing crisis, legendary value investor will tell us what is keeping him up at night, whether this record rally still has legs where he's putting $120 billion that he manages to work right now. tesla hitting delivery targets the stocks taking a hit. we'll tell you what is worrying investors now, new fears about the housing market the risk of mortgage fraud is soaring.
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it's not the banks, it's the bore roarers, power lunch starts right now. >> welcome to power lunch. the rally is rolling on, the dow up for a fourth straight day posting its all time high in more than a week intel, caterpillar, wall greens those are the ones fueling the gains. retail, bang, smackdown, the etf projects they are on the worst pace for more than a month the stock on pace for its worst day since its ipo. >> tyler, good to see you as well despite the weakness in futures this morning stocks have done a great job turning around as you noted, it is another record breaking day. kbob joining us now from the
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floor of the new york stock exchange we came in dark and early this morning, bob the futures were down 100, now, the dow is up 100. >> we had a buy program come through around 10:45 take a look at the dow jones i think this is trade related. the stocks that move on twrad are what moved here. we moved up 70 points on the dow. that was 10:45 eastern time. all the industrial names caterpillar moved up, we saw 3m move up. united technologies move up. put it together, that was about 70% of the dow >> you heard mentioned about the retailers this week, we saw a number of these stocks down 3, 4% today >> i think this is probably related to amazon raising that minimum wage to $15. that could put a lot of pressure on these retailers that tend to pay lower wages. banks doing nothing today again.
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i've been gone for 10 days, banks were straight down since they were, that's a new 52 week low for morgan stanley all the regional banks are weak, city group, we've been talking about this for a while banks are not getting any energy at all we have a problem with the flat yield curve. the upper end isn't doing anything, that's not going anywhere that's not helping we've seen deposit costs higher for them >> jerome powell speaking this weekend up in boston, we're going to go there as soon as the q & a begins, the u.s. economy looks very good. and forecasters have a remarkably positive outlook. he expects the low unemployment rate to continue let's get reaction to that from ann miletti. >> pretty much everyone agrees that the economy is doing well
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i wonder if there's anything on the horizon, i'm thinking specifically of an inflation that could come from higher oil, it could come from rising prices of automobiles, as some of the tariff issues move through that process, that could lead the fed to raise rates higher soon. >> it certainly has been a focus of mine since the beginning of the year when growth looked better than expected and so when growth surges better than expected, quarter after quarter, what eainvestors anticipate is that costs will rise too we're seeing that in certain areas of the market many labor costs are inflating, raw material costs are inflating in certain areas. the growth still seems to overwhelm it, and i know the fed chairman is speaking right now he has a very close eye on inflation, still seems to be under their 2% mark.
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and so the broader inflation rates look to be in check. and that's where the markets focus. we're seeing it in individual companies creep up to be problems on a quarterly basis. >> you seem to be interested in value stocks >> you know what, i'm a growth at a reasonable price investor, i don't -- our process doesn't discriminate against growth or value, and i do like companies that are growing, but i don't want to overpay for those companies. and so i want to buy stocks that are trading at a discount to their growth rate, not value traps, but i think the market has been a momentum one, one that's been focused on select stocks that really are producing a lot of growth, and leaving other names by the roadside, that's the area we want to look at, where there's less risk. >> i want to bring in joe, the chief economist for the america's and the cnbc
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contributor. just a pickup from our conversation with ann about inflation. amazon is moving to $15 an hour for the full time part time, seasonal, you name it, that's more than 350,000 employees in total. how do you think about that in terms of inflation airy pressures within the economy, the push for other companies to then match this $15 an hour? >> i love the fact that amazon is raising wages that's great workers need higher wages, we've had very little real wage growth in the past 15, 16 years the latest inflation data showed serious deceleration in prices to me, a tight labor market is not inflationary, that's very anti-fed thinking, that's exactly what the data shows. >> so it doesn't change your view of how quickly the fed might pick up their pace >> well, that's -- that's it i mean, the thing,they look at the inflation 3r0 ses as largely
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being determined through the phillips curve, meaning low unemployment drives higher wages, which in turn causes inflation, so, yes, they'll look at amazon, and they might see some higher average earnings data on friday and be more confident that inflation is going to move up, that to me is a risk, in fact, everybody worries about trade and china and what's happening with brexit and everything else. to me, it's the fed overtightening rates on an inflation threat that i don't see. >> ann a couple months ago, you talked about how oil companies were a good value, oil has moved up, many of those stocks have moved up are they still a good value? do you own them or have you sold some >> we still own those stocks i think there's an evaluation gap left there particularly, there was a
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bottleneck that existed in getting oil out of that area it looks like it's resolving quicker than people anticipated. but that is a example of listening for the quiet, looking for areas of the market where other people aren't paying attention. the price of oil has also gone up, the stocks have some chasming up to do, for the price of oil, which is why we are still looking at energy. to your point earlier, growth stocks have accelerated, way beyond where value stocks are, you look at the russell 3,000 growth index, it's up 17% year to date. within that gap, there's names the market is ignoring those are the -- >> you want to mention a couple of those names not to suggest that you're necessarily buying them. but names the likes of, blah blah blah. >> i think within the industrial
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space, mrc global is a name we're invested in, a supplier to getting energy out of the ground many a distributor to pipes and other equipment to get energy out of the ground, i think you guy guys mentioned gold earlier, that has legs. i know because of the dollar strength, we anticipate a little dollar weakness. >> sorry to interrupt. fed chair powell is taking questions at the nab gathering in boston. >> have introduced many, many new tools for dealing with the environment that they experienced over the last decade, and we heard from you today about a lot of normalization. unemployment rate that was almost unthinkable a few years ago, a very benign inflation environment. i'm interested in what tools do you think that the fed is -- is
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the fed going to continue to use the tools that they develop over the last decade? or do you think that we go back to an old form of moan terry policy as we proceed over the next several years >> the most recent fed statement was that the accommodation, we draft the term accommodation, but does that imply that we are going to go back to the old ways or is this -- continues to be a brave new world? >> let me start before we get -- just a second before we get to monetary policy. thanks for inviting me, it's great to be here so i think the main thing that we all learned after the financial crisis, or a main thing is the overwhelming importance of the stability of the financial system, that wasn't in -- that was where the surprise was, the kind of run on the financial system dynamics that emerged were the thing that we didn't see coming, and now --
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so now we're focused on that, and we spent ten years focused on policies that will strengthen the financial system, limit the amount of maturity the kind of unstable maturity foundation very broad program coming to monetary policy, i think at the meeting before this last one, did really a deep dive on what we know about monetary policy, a very good time in the economy, when unemployment is low, inflation is the right target, the question we asked ourselves is, what does our toolbox look like, how would it work through the cycle, not just in good times like this but also in different parts of the cycle. i think we came away thinking that we have good tools that, both forward guidance. our forward guidance provides support for the economy in a
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meaningful way during the financial crisis and so did asset purchases i think the vast research shows these were helpful tools it is also the case that we are in an era of lower rates rates have been coming down gradually for 30 some years. it's possible that it will be lower than we have been historically, that raises questions about the efficacy of the tool kit in the case there's no indication -- we think that they worked and we're also thinking about, are there ways to adjust the toolbox in the ways that would make the inflation target more credible and give us better ability to serve the goals that congress has assigned to us?
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>> one of the questions from the audience, thank you very much has been about remarkably positive economic environments we find ourselves in today this is being coupled at the same time with a rising fiscal debt and from a fed policy maker standpoint, is this a cause for concern in terms of, if we saw a future drop in demand how we would be able to respond >> we try to stay in our lane and not critique any particular fiscal policy, and also, fiscal policy is very important, and obviously very powerful. it's one of the figures that we consider and obviously, fiscal policy is providing real support to demand this year, and probably for the
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next couple years, in terms of -- there's a possibility of supply effects, w50e'll have to see how those emerge we're not on a sustainable fiscal bath, we haven't been for many years these last innovations in fiscal policy, at least in the medium term have probably reduced the amount of fiscal space that we have to react. i think the united states has meaningful fiscal space though our situation is more of a long term problem there's probably still room for fiscal policy to support demand. but still, this is a good time to be working, this is the top of the cycle and a good time in the cycle, let's say, and it's a good time to be working on putting our fiscal house in order. >> multiple questions about the terminal fed fund rate is 3% to
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3 1/2%, the recession airy environment has been 500, 500 basis points is the fed considering the use of -- what are your thoughts on the use of negative interest rates and perhaps even asset purchases beyond the ones that the fed is engaged in. >> as i mentioned, we did a deep dive on our -- looked at our tool kit, we agreed to come back next year, and think about at another meeting, think about a range of ways, what are the ideas that under existing law, without asking for congress to change the law, we could adjust the way we use our tools and which ones of them would provide the most support, and we're going to open up and try to seek lots of input about that question
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next year. we will use the tools in the enterprises, we would hope to be able to use our tools we have, interest rates the other tools, if needed, we hope it's not soon -- >> i was struck by your presentation on both the curve and trend for inflation and this dramatic deceleration over the last two decades one of the questions is about globalizati globalization, and we could track some of that to perhaps globalization. is there some concern that perhaps the change in trade policy may create an inflationary change in tone? >> trade policy being another area we try to stay in our lane, but we can certainly talk about it, i have to say that at the
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start. yes, it's -- so potential tariffs could increase prices. and then the question would be, is it just a price level increase, or does it still higher inflation it's hard to find any imprint in the data, would you have the same reaction, you don't really see much in there, and it's probably early to be seeing effects from changes in the trade policy a rising tariff would probably increase inflation >> one of the favorite indicators of all economists in this room is the shape of the yield curve. we've certainly seen the yield curve start to flatten over the past year, and my question is, how do you think of the yield curve, how do you interpret the shape of the yield curve and how it should or should not form fed
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policy >> you know what, a downward sleeping yield curve could mean that policy is currently tight in the sense that the short term rate is higher than the longer run neutral rate it might mean that, or it might mean that term premiums are negative it is true that there's an empirical irregularity i sort of look at it as -- going back to where we started we know why short term rates are going up, they're going up because -- a lot of things go into long term rates they could be low for premium reasons, to the extent if you can sort of pull out of them, an estimate of the longer run neutral rate, can you ask yourself whether a policy is tight. and even by those measures, policy is not tight at this
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moment i don't see -- i would always say too, it's just one of many things we look at. we look at it, we can tell from the minutes, but it's one of a range of factors that we're keeping our eyes on. >> so just to sort of take a different perspective and it's always -- i'll put a plug in for the closing session that i'm on the panel for, which is what have we learned ten years on from the financial crisis, but one of the things that i always think is interesting is, we probably -- what we learned 10 years ago, is probably not going to be what we learned in the next 10 years, one of the questions here is, what tools will the fed likely use? >> maybe a pretty standard answer but curious if you have any thoughts on that >> if we -- if inflation comes up -- >> above expectations, we would always -- our first choice would
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always be to use the federal funds rate and work through interest rates, that's what we have experience with over decades and cycles, that would be our first choice, embedded in that is a question of, would we start selling assets, the answer is no. we're going to stick to our balance sheet reduction program, it's working very well and i wouldn't want to send any signal that we'll revisit that any time soon. >> one of the ongoing discussions within the market. what form of labor crisis is the single focus for the federal reserve. when we look at the jane powell dashboard in terms of labor inflation, what are some of the key indicators that you're interested in watching >> key indicators of labor
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inflation? >> yeah. >> we have the big four are eci, average hourly earnings and compensation per hour. we look at a bunch of other things, and physical you take those four and look at where they were five years ago, they were clustered around 2%, you look at them now, they're clustered around 3%. very gradually and in an uneven way they're the same >> is there any lessons to be learned from the european union, european central bank? >> we did deploy or seriously consider using negative points
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in the united states i think we you can watch and see how the experience has worked for the other side it's not something we're currently examining, in theory, it's a tool, and i think we have the benefit of being able to watch other central banks as they try to come out of negative rates. we -- i any -- again, we get benefit from their experience and talk about that down the road >> great so with the gradual normalization of policy that we've seen taken over the last year, year and a half, perhaps one of the down sides may be that this very gradual normalization is creating a very benign volatility involvement and creating asset price bubbles, do you think that could be a risk that we're taking with the gradual policy
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>> it's a really interesting question there are three separate things going on one is, our policies, two there's a secular decline? interest rates that was lapping anyway that's been going on for 35 years, really, and three is that we're getting into a long, long expansion. and i think all of those things, what you see as an expansion like that goes on, you sometimes see low volatility, risk spreads coming in, and that kind of thing, what causes it, it could be any of those three things, all of those flee things as you may have seen, there was a big exchange on twitter last weekend about this very question i read that with real interest low rates with qe would bring
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financial instability, didn't happen i was one that was very worried about that really more the financial instability issues and high asset prices and high leverage, you don't see it banks are taking less risks, households are not taking risks, they're not borrowing. it hasn't turned up, you do see high asset prices by historical standards, you don't see a really bad case of financial instability that many had been concerned about. >> so one of the comments that i see here has been from the conference here today or over the last couple days has been actually very focused on the u.s. economy, very good information coming through from the u.s. economy, low unemployment, benign inflation, strong growth, et cetera when we look globally, however,
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we see some wrinkles in that story, particularly emerging markets, et cetera, do you think that is something that we should start paying more attention to >> i don't know how much attention you pay to it now, but we devote a lot of resources and thinking to that one of the principle risks we face is that when you look around the world, you see a reasonably positive picture. maybe less positive at the end of the year. a bit of a slow down in the advanced economies, and you see really just a handful of emerging market countries, experiencing significant turmoil, and then i would say some level of pressure broadly, but not a broad situation where there's lots of instability and lots of pressure in emerging
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markets. >> i'll finish with a classic question that you probably hear pretty regularly >> bit coin? >> no. but i'll ask you about it in you want me to >> well, actually, one of the things that you are touted as, you have had the shortest most fed meeting q & a of any fed chair since they started congratulatio congratulations. >> thank you >> less is always more in my book but one of the questions is actually, are you interested in moving to q & a after every meeting going-forward. >> we're going to do a press conference after every meeting beginning in january we did make that decision many that's something i'm really
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looking forward to, i think it's a good chance to get out and talk about what the committee decided. this will be -- not just the sep meetings, but all of the meetings, it seems like it will be a good improvement in transparency and in communication in general happy to do it >> i will finish this up and say thank you very much for spending time with us, really appreciate it and from the entire membership of nabe, thank you for being here >> you've been listening in to the q & a portion of jerome powell address a couple highlights here, he certainly underscored the importance of a gradual path when it comes to rate hikes, he said in a rates will remain a primary tool against inflation and here's where we did see the market reaction, not so much in the broader indexes. he said that the fed is not
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seeing effect notice u.s. trade policy yet we did see yields, they're slightly higher. it is full steam ahead when it comes to the broad rate path that the fed has led the world >> i think the moderator's point is well taken, mr. powell is a man of few words, he says exactly what he thinks and then he shuts up. >> yeah. >> the dow hitting a new all time high today. the markets are always worried about the next potential pitfall. and -- so up next, something special, howard marks of oak creek capitol tells you what he thinks should be your biggest concern. is it jerome powell the mawen just saw find out, howard marks, next 3
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. here's your cnbc news update for this hour. two pieces of mail that arrived at a pentagon distribution center have tested positive for ricin.
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the package was addressed to an individual, but officials will not specify whom jeff flake says he has an open mind on the fbi investigation into brett kavanaugh. he spoke at a panel hosted by the atlantic, and the national constitution center in washington >> my hope is that as they interview these individuals, they'll immediately follow up on other leads they might have. i hope we find facts and i have an open mind, just like i had in the hearings, and we'll see what they come back with, i don't want to prejudge it. >> kate middleton resuming her royal duties less than six months after the birth of her son prince louie >> you're up to date, that's the news update this hour. brian, back to you >> we appreciate it, thanks very much
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>> president trump speaking moments ago on trade what did the president have to say? >> the president was on his way to philadelphia for the national elect trickal contractor's association, he will tout his newly renegotiated nafta deal. >> the deal we made with mexico and canada, has gotten tremendous reviews, as you see, it's been praised by farmers and it's been really something i they have it's also going to be a very good deal for mexico, and i believe it's going to be a very good deal for canada. but it's gotten tremendous reviews and it's going through the process, even many of the democrats, including chuck schumer came out and said nice things that's very nice to hear that. it's nice to see a little bit of a bipartisan approach.
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but the trade deal, the largest deal ever made so far in trade, i expect to top it with china or eu or something. >> and brian, you heard that comment at the very end there, i expect to top it with china or the eu or something. a lot of people will take that as a dovish trademark in terms of a possibility of a deal with the chinese, there hasn't seemed to be an offramp for these escalating tensions in the wake of this deal the white house has been insisting the president's tough rhetoric on trade, it brings those foreign negotiators to the table and the president can negotiate a deal he likes. >> stocks hitting record levels since the financial crisis the dow is up 130% can this historic rally
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continue joining us is howard marks the co chairman who called the dot com bubble, debt is likely to be ground zero of the next crisis >> howard, it's a pleasure to welcome you to power lunch >> one byproduct of low rates, investors have gone out on the risk spectrum, is that the underlying concern of yours when it comes to pointing to debt as the potential source of the next crisis >> you know, oneof the things the book says, the consistent threats through all the booms are a lot of optimism, a low level of risk aversion, and a lot of money chasing deals, i think we have most of those things now, when a lot of money tries to enter a market, there's an auction that takes place 37.
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>> where in the credit markets -- are you talking about the billions of dollars in emerging market debt what source of credits are you concerned about? >> you mentioned the emerging markets in 2017 opinion arounden steen nawaz able to issue 100 year bonds that was because they were optimistic at the time, they were able to grant that things would go well. the bonds are down just 15% in over a year. >> we were just listening to jay powell jay powell says he believes in a gradual rate path when it comes to hiking rates. there's some investor belief that the fed could overshoot does that overshooting, does the fed's path overlay with this other problem and spark that
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crisis >> we never know for sure what's going to be the problem, we can enumerate some possibilities, that's one of them the interest rate tightening overshoots the contraction airy monetary actions of the fed are excessive. on the other hand, the -- you know, the tax cut and stimulative measures kick in, and the economy overheats and we get too much inflation requiring them to raise interest rates even more. the higher interest rates start to bind on companies that are highly levered and not prepared to cover high interest payments. there are a lot of possibilities. you know, i'm not ringing the bell to say that we're approaching an end it's just that on the one hand there are the opportunities you allude to, and on the other hand markets are rather high in their cycle. valuations are somewhat
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stretched. and i just believe this is a time for quality >> you might think you are getting a book that's going to tell me how to time the market, that's not what this book does so my question is, what is the message, the fundamental message of the book number one, and what is fundamentally the worst mistake that's smart, but maybe not professional investors make with respect to mastering the market cycles? >> well, look, you could go out and buy every security and you could hold it all the time and you would be guaranteed to have average results and the question is, would you like to improve upon that? not many people do that. >> in order to improve upon that, you could try to have better selection buy more of the things that do better, or you could try to have better cycle positioning, which is to say, to be more fully
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committed when things are going to go well, and lighter commitment when things are going to go poorly the theme of the book is that we can help do the latter to help investors have better results. if we are aware of what goes on in the world if we are aware of how things work, how fundamentals interact with investor psychology, i think we can improve important the average results. you asked what's the biggest mistake, and the biggest mistake is emotionality. people get excited when things are going well we all like to seethings go well when things are going well, people get excited and they tend to pay more perhaps than they should so you have to realize that good news is not necessarily the same as good results. if prices are too high, then good news may produce bad results, we have to have a
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feeling for when the market is demonstrating excesses and we cannot succumb to our emotions and get excited and buy when things are terrific and depressed and sell when things are down many. >> we introduced you as a guy that called for the sub prime crisis, you knew it was coming, we'll ask you this, we have a segment on later on in the show about people faking income statements to get mortgages. houses in vegas are 7 to 10 times the average income are you worried we're getting dumb again >> i think that when there's a lot of optimism, and a lot of money around, people tend to get dumb that is to say, they compete to make investments and that never works out well i'm not concerned that we're any place near where we were in '07. the sub prime mortgages do not have the magnitude they did then or the lack of substance, i only
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think that it's important to always apply discipline and not drop the discipline when things are going poorly that's one of the main messages of the book i hope peoplewill take away. >> howard, thank you >> his book is mastering the market cycle to the bond market we go, mr. santelli is tracking the action at the cme. >> we are highly unchanged in treasuries, highly unchanged with the stock market acting well, and those unchanged levels, virtually the best levels of 2018 if you look at a two month chart, i paired up the s&p 500 against 10 year, can you clearly see on this chart that right around august, the emerging market issues, there was a bit of delinking, if i consolidate that, and let you look at the same picture for one month you can see we've relinked, on the right side, stocks have taken up again
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it's not perfect the point of these charts is, these higher rates and higher equity prices and some of the good data points are all arm in arm. that's a good thing. everybody's nervous about oil, i get it, i like to take a big view let's flip to a seven-year chart. on this chart, what you see on crude oil, in october 2011, a key bottom at 75.67. if you look a little further in time in 2012 we see another bond. we're getting into some good long term resistance, dollar index as you see there at the best levels since august 23rd. melissa lee, back to you >> let's get to dom chiou now. >> general electric is up 12.33, this comes on the heels of a
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good news bad situation with standard and poors lowered its credit rating on ge to triple b plus it was an a rated credit before that, it also on the good news side has reviewed its outlook to stable from prior negative i want to clarify a couple things ge's outlook would be stable after a possible health care spin-off ge has a competitive position. it remains substantial in health care and power even though there are deep near determine challenges, they say also they believe new ceo lawrence kulp is committed to deleveraging all of that inform sum is ge shares moving up for the second day in a row back over to you >> watching ge closely, the story nowhere near being finished what we just leveraged with howard marks, mortgage fraud making a big time comeback,
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we'll take a look at the risks, and some of the creative things that people are doing to get a mortgage they can probably not afford the dow hit a new high today >>dy say that? >> you did >> the dow hit a new high today powered by boeing, cotter millar and intel. don't look back at anger by oasis was released this day 23 years ago.
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when my hot water heater failed, she was pregnant, in-laws were coming, a little bit of water, it really- it rocked our world. i had no idea
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the amount of damage that water could do. we called usaa. and they greeted me as they always do. sergeant baker, how are you? they were on it. it was unbelievable. having insurance is something everyone needs, but having usaa- now that's a privilege. we're the baker's and we're usaa members for life. usaa. get your insurance quote today. a trend from before the financial crisis may be returning to the housing market. is it deja vu all over again >> diana olick joins us from washington with the details. >> look, as home values rise and more people want to be
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homeowners, it's inevitable. more people will lie and cheat to get a mortgage. mortgage progress jumped over 12%. that's the highest level since they began tracking it during the mortgage crisis in 2010. core logic looked at instances of fraud and income identity, and occupancy among other things the biggest jump was in misrepresenting your income. lenders are pretty strict about how much debt you can carry. people are kind of juicing the numbers now, all this means more risk for lenders and mortgage investors. if a loan is sold to fanny or freddie, the original lender can be forced to buy it will back. states with the highest risk of fraud are new york, new jersey, florida, d.c. and new mexico california, the priciest real estate market ranked ninth, all of this is easier to do, how thanks to the internet i did a quick search online using some words about income verificati
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verification, and i found a bevy of sites that would generate fake pay stubs, and would verify phone calls to verify fake information. >> not only can you get a fake document done, you call a number or give a number as a reference? >> it's an 800 number. >> oh, yeah, he makes $6 million a week >> diana's sticking around this company works with lenders it helps them combat mortgage fraud risk how big of a problem -- i figure people would forthdocuments. they're going this far and it's that easy to get what is going on
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p. >> it's 2018 and we're still asking consumers to provide pay stubs when everything is digi l digital. let's say i make $5,000 a month, the bank has a trusted record of that income stream that's what blends does, we help lenders use that technology so they don't have to manually read pay stubs. >> by the way, and get that pin ski file finished. you plug in numbers. it spits out a robot, if you plug in the right set of numbers, you're probably going to get approved. >> that's why we should use
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data like direct deposit streams. databases, so the consumer isn't providing that information, so it can't be altered or doctored, or even have a mistake be made, and use that to make the decisions in realtime. >> how convincing are these forgeries, whether it be pay ste trying to verify somebody's employment, if i made that phone call, i mean, i would think that i'd be able to determine if that was a fake person or not in terms of working at that particular company saying that brian earns $6 million a year. >> you don't know. >> well, look, we talked to a mortgage broker about this, and they said, yes, you can go and verify this data, if you, you know, across the ts and dot the is and everything, but i'd be interested to know, we're also looking at not just the borrowers committing this fraud, but also some of the wholesale people, that is the mortgage brokers who package the loans and give them to lenders, get all your information also a big increase in fraud risk in that industry. that is, they say it's because there is so much fewer refinancing that they need more
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business, so they're actually committing the fraud and the borrower may not even know are we seeing that as well >> i think that the process is going to be just as manual and just as analoged, whether it's for the brokers or for the loan officers or for the consumers. and so, the way to solve that is -- and i think, yes, technology's definitely part of the problem, to the question earlier, because people can go and generate a fake pay stub and do all of these things on the internet they couldn't do 10, 20, 30 years ago but technology also could be part of the solution here where if we can get the brokers, the consumers, the loan officers, the agents, everyone access to that, their own data, and provide that data to the lender in a trusted way that can't be doctored, then that completely prevents any sort of custody issues around the data as well >> but are you seeing the brokers commit the fraud as well >> well, i think that -- i don't have a specific -- i don't have any sort of industry benchmarks on that. i think the story on corrologic looked at some of those things, but i think that they have the same problems in the sense that they're looking, manually reading through pay stubs,
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manually calling employers, all of the things you called out they're doing the same exact thing. so there's the same underlying issues that are still there. >> just an incredible story. diana olick and nima gamsari, we appreciate both of your times on a story that i'm sure's getting a lot of people talking to. nike's controversial colin kaepernick ad surely turned some people off, but did it bring in many more? up next, what consumers are saying about the values they want in a brand, coming up on "power lunch." the nature of a virus is to change. move. mutate.
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consumers don't just want to buy a product, now they want to support a company they believe in julia boorstin joins us now from ad week in new york city hi, julia. >> reporter: melissa, that's right, the numbers back nike's decision to put colin kaepernick and his beliefs front and center 64% of consumers are now belief-driven buyers, up from about 50% last year, according to a new survey by edelman that means these consumers will change their buying behavior based on a brand's stand, or that brands are an important way for these consumers to express their beliefs. now, of these consumers, more than two-thirds bought a brand for the first time because of its position on a controversial
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issue, and nearly as many say they will not buy a brand because it stayed silent on an issue it had an obligation to address. now, the obvious example of this is nike featuring colin kaepernick taking a knee during the national anthem to protest inequality, drawing support as well as some protests across social media now, hp is supporting diversity by painting a picture in an ad of an all-american family that shows all sorts of different kinds of diversity but it's not always beneficial for brands last year, sean hannity viewers called for a keurig boycott after that company pulled ads in response to the show's courage of roy moore but melissa, companies are willing to give up revenue for something they believe in, and tyler, apparently, that's increasingly important guys, back to you. >> julia, thank you very much. 2018 has been a big year for ipos so far, unlike some recent years. lots of companies going public, raising billions, but many of them are not profitable, so is that a bad sign for the markets?
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have we been here before plus, "consumer reports'" first rating of apple's new iphones. the reviewer is about to join us she had a machine drop her iphone 100 times i was not that machine we will tell you how it held up on the second hour o"per nch.f ow wow! ♪ obvious. sometimes, they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group - how the world advances. ♪
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good afternoon, everybody, and welcome to hour number two of "power lunch. i'm tyler mathisen, and here is what we're serving the teflon dow, ladies and gentlemen! stocks cooking up, no stick, no mess, despite all the noise around trade, emerging markets and the midterm elections, the index and the dow hitting a nirp intraday all-time high is it all systems go from here to infinity and beyond who knows. amazon raises its minimum wage to $15 an hour. why now? and could tv a negative impact on small businesses, if they must compete, raising their costs? plus, "consumer reports" releases its new iphone lab results, and this year the results even surprised them. and if you were looking to buy a nice penthouse in new york city, now may be the time, and we will tell you why
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"power lunch," hour number two, starts right now ♪ from new york, concrete jungl where dreams are made of ♪ and welcome to "power lunch. i'm melissa lee. stocks moving higher with the dow actually hitting a new all-time intraday high earlier this session, just off session highs right now. the index is on pace for a fourth straight day of gains right now the dow is higher by 0.6% or 156 points leading that index, intel, caterpillar and walgreens, boots alliance meantime, the tech sector on pace to close at its own record high, micron and lam research the leaders. and stitchfix is leading the decline, sinking 30% after its earnings report. >> ouch! and i am brian sullivan, one-third of this fine wait staff, and your first course is a taste of why stocks are having another record-breaking day. bob pisani is live for you at the new york stock exchange.
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bob. >> reporter: hello, brian. good to see you. our catalyst was a buy program that came through the market about 10:45 eastern time, lifted the dow 70, 80 points. we're at the highs of the day right now. a lot of this was initially due to industrial stocks moving up, trade-related. boeing, of course, another all-time high, but caterpillar, remember, high-priced stocks united technologies, when they move, high-priced stocks, the dow tends to move. 3m, another trade-related name moving but there have been counter trends retailers, all of them down 3%, 4% this is the amazon effect. $15 wages? a lot of these places pay $10, $11 minimum wages. that's margin pressure on the retailers. you see the effect there another countertrend we've got a rally with no participation from financials. morgan stanley 52-week low regional banks like key and citigroup been doing nothing for a long, long time. we talked about the flat yield curve and the lackluster loan growth we've been seeing finally, another countertrend, the homebuilders this has been going on for a while.
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new 52-week low for pulte. and lennar will be reporting tomorrow price rates and higher prices have been pressuring sales recently not everything is going up today. back to you. >> thank you very much robert, as the dow hits another all-time high, howard marks of oak tree is starting to get a little bit concerned >> markets are rather high in their cycle, valuations are somewhat stretched, and i just believe this is a time for caution. >> so, is he right let's bring in the chief investment officer at creative planning peter is the number one ranked independent wealth adviser on "barron's" for the third straight year. way to go, peter. >> well, we've been three times in a row, but not third straight year right now i'll take it, though. >> chiefs are 4-0. he's from kansas city. >> yeah. >> he's just winning. >> feeling pretty good. >> so much winning. >> yeah, we like our team. >> do you agree with what howard marks said, time for caution with respect to u.s. stocks? >> i think he's right that the
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u.s. market is stretched a little bit valuationwise, but he followed that up by saying after you asked him, you just can't time the market. >> yes. >> so there are a couple different ways this can sort itself out earnings can continue to grow and eventually catch up with valuations without the market having to pull back, or we can see a slowing of growth in the market and so, there's a couple ways besides a correction for us to get back -- >> i took away from his comments something that is really quite obvious, but nevertheless, he said it intelligently, and that is, when everybody is euphoric, don't go with them, and when everybody is despairing, don't go with them. >> that's right. this is like the last decade in reverse. 2000 to 2010, the u.s. markets really lagged the world, the s&p earned zero. everybody's saying it's the lost decade, and everyone was moving their money overseas and here we are the last five years, the u.s. markets are really outpacing overseas markets and you see everybody saying the reverse. >> where are you putting fresh
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capital? >> i think if you're a really patient investor -- first of all, you should have assets all over if you're a reasonable, disciplined investor, but howard marks was saying, don't necessarily go were everybody is going. so for those with overseas positions, international developed, emerging markets, if you're patient, this valuation gap closes 100% of the time, always closes. and so, it's just a question of when is that going to happen >> does it close because the losers come up or the winners come down or a little bit of both >> either way, right it happens both ways, but one way or another, it closes, which tells you that smart money's going to move towards value and be a little bit more patient. >> but when you put two and two together, i mean, before you said that u.s. valuations look a little bit stretched and you said this gap closes 100% of the time and that you can't time the markets. so why not take risk off the table right now? why do you err on the side of riding the rally out too long as opposed to pulling back now? >> we have to go somewhere, and bonds are earning very close to zero, right? unless we're going to throw our money in ten-year treasuries and
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pay taxes on a 3% return i think even if you're in the s&p 500, where you're collecting 2% dividend and you wait this out, you're going to do better than bonds as you look at all of the asset classes, it's better to be invested, even now. >> so there is no alternative. i mean, that's basically what you're telling us. >> what i'm saying is even when the market's overvalued and i think this surprises a lot of people -- in the next 12 months, valuation has very little to do with expected returns. i mean, the odds from here that in the next 12 months the stock market's going to be positive in the u.s. are three out of four those are pretty good odds. >> you're smart enough to live in kansas city the rich area of kansas city we're stupid enough to live in this area where we're getting crushed in taxes the new tax law -- how much has the new tax law and the reduction in itemized deductions affected your clients and your change in the way you think about investing? we always think about making money. >> right. >> maybe we don't think enough about saving on the tax side. >> there's no question that the tax breaks helped the stock market that's one component that really
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helped juice the u.s. markets this year, more than i think would have otherwise our clients are all over the country, so i can tell you, our clients on the coast, in california and new york, i mean, some of them are -- they're making decisions about where they're going to live now. i have never seen that before. so, even when taxes were very high, people still said i'm still going to live in these places and now that they're losing the tax break, you're starting to see a very big reexamination of that >> yeah, i have never seen -- tyler, i don't know what it's like in your neighborhood -- never seen more pricing homes for sale. >> i see the same thing. i was driving down the streets on sunday and i saw a lot for sale, and i said, what inventory crisis >> high tax -- these are high-tax homes, you're seeing people -- >> people who are trying to get out at the top. >> we're definitely seeing new york, l.a., san francisco, people are finally starting to say this might not be worth it. >> we need more millennials from brooklyn to come to my town. that's what we need. to buy the houses. >> i wouldn't hold my breath for
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that. >> millennials with some cash. >> that's what i'm saying. and they pay cash. peter mallouck from kansas city, thank you. let's get a news alert with dom. >> the ceo of jpmorgan chase making statements in washington, d.c., advice for president trump with regard to his negotiations with china he says he's getting his ducks in a row, but he says, that's what i would do, then just be very honest with china, tell him what you want, how you want it and when you want it listen to what they have to say. like in any negotiation and come up with something that works for both parties he also says he's open to perhaps some of the styles, i guess, that president trump has with regards to negotiation. he says that the indirect effect of confidence, capital, stuff like that, could actually mount and reverse some of the benefit we've seen in tax reform and regulatory reform, but i don't know it's just a different way of going about something, and i hope he succeeds making these comments, as you can see, from washington, d.c., at the aei, speaking with arthur
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brooks, the ceo, there back to you guys. >> thanks, dom chu. 2018 has been a big year for ipos 52 of the top filings raised $ . boyne 2 billion. the average ipo jumped 33% and we saw the most active fourth quarter in years but the most staggering stat, 83% of ipos this year were companies that lost money in the year leading up to their debuts. joining us now to discuss this is david menlo, and ipo financial president. david, good to see you. >> pleasure. >> we were just talking about the markets. the market's been fully valued places have pushed for money is the hot ipo market a signal that people are stretching, looking for return, in your view >> well, it's basically same story, different chapter we are continually in a state of overvalued with the ipo market, and nothing is changing that the only real barometer for it is going to be the extent of the chinese offerings that come into the marketplace that are always shady, shall i say, as far as
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their financials and checking things out for whether or not they're for real so, once we start to see an overabundance of those deals coming into the marketplace, i would say it's time to really, just take a deep breath and say, do i still want to be in these deals? >> where are we, though, in that spectrum >> well, i would say we are probably two-thirds of the way through. there's a lot of room here and the fact that these companies are losing money doesn't really matter to most of the people the big sectors that are out there now are the pharmaceuticals. so, i think if we take that in perspective and say none of them make any money, they're just looking to access the capital markets. >> so, if i look at that set of the current ipos and i say that 83% of them are unprofitable, the last time it was that high was the year 2000. that sounds very alarming. but then how do those ipos perform after the fact, the next two years, the next five years >> well, i will tell you -- >> do the profitable ones do better than the unprofitable ones do the unprofitable ones lose money and go out of business
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what happens >> it's selling the anticipation that's what it really is and as i started to say, pharmaceuticals are the top bracket as far as stocks that have come out that aren't making money, but in second place are blank check companies. these are the companies -- >> the spacs, special purpose acquisition corporation. >> right they say give me $2 million and i'll try to find -- >> there are hundreds of these now. >> why we just had the former president of the new york stock exchange who left the stock exchange to head up a blank check corporation. he pointed to a number of examples of big, bold bracket firms now with their own spacs, goldman sachs, et cetera. >> yes. >> why is there still a red flag over these companies. >> well, because people don't really understand the structure. 20% of the company is being sold to the investors usually that's say a $10 price 80% of the stock is generally owned at maybe a quarter of a penny per share. so, you get this big name that
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comes in and says, oh, i have a track record of previous companies, put your money behind me, and within 18 months, i'll probably have something that i can buy. people do it because they know if they can't meet that 18-month period, they get their money back so, this goes into the area of countries -- excuse me, companies that tyler was just talking about -- they're not making money either, but people are willing to sit and wait, because when they run, they run big. same thing with the pharmaceuticals. >> all right david, great to see you. thanks for coming by. >> nice to see you in person. >> david menlow. >> thank you. berne sanders says that amazon raising minimum wage will be a shot heard round the world. the other question is will other retailers hear it and follow suit and what will it do to small business plus, they were put through what consumer reports calls brutal tumbler tests sounds like a good friday night. the magazine reviews the new iphone and the results surprised even them. and manhattan real estate sales continuing to slow down. we are live in the big apple with a look at how big the declines have been and whether
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big news from amazon today, the company raising its minimum wage to $15 an hour. courtney reagan is here with all the details. and kate rogers joins us as well with a look at the impact on small businesses courtney, let's start with you. >> thanks very much, melissa good to be here. amazon says the new raise does
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impact 250,000 full-time, part-time, and seasonal u.s. employees effective november 1st. employees in the uk, they're also getting a bump, but it's not quite as high. before today's announcement, the retailer's average minimum wage in the u.s. was $11 an hour, though many locations did pay more last year, amazon says its median annual wage was $28,446 now, the online retailer is phasing out the restricted stock program as part of this. the company says the net effect, though, is, quote, significantly more total compensation. it is not, however, detailing the impact to the bottom line. now, senator bernie sanders has been a vocal critic of amazon's pay disparity between its ceo and hourly employees today the senator giving amazon's ceo and founder jeff bezos and amazon credit for the move and jeff bezos tweets, "thank you @sensanders. we're excited about this and also hope others will join in. senior vice president of worldwide operations dave clark
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echoed that today. >> we stand by, we listen to our critics. we thought long and hard about what we wanted to do we're encouraging the government to take on the federal minimum wage and increase it from $7.25. we think it's too low. we'd love to see other large employers join us at this level. >> $15 an hour puts amazon above retail competitors walmart's starting minimum wage is $11 an hour target's at $12 with a path to $15 by 2020. brian? >> okay, courtney, that's a big story. stick around kate rogers is here, covering small business i wonder what the impact might be i could see both sides they've got to pay more, but maybe their customers also have more to spend. >> yeah, definitely heard some interesting reaction today so, amazon's announcement that it would advocate for an increase in the federal minimum wage, it's getting really a mixed reaction from main street groups small employers by nature tend to already face pressure in keeping up with salaries and benefits that are offered by larger employers many groups are arguing that a federally mandated $15-an-hour wage just isn't feasible or sensible nationwide. the small business and
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entrepreneurship council said in a statement, "we appreciate what amazon is doing on its platform to help some small businesses, but we don't appreciate their lobbying for policies that could put many small businesses out of business." the jobs creators network said "amazon cannot be allowed to use its massive influence in washington to force small employers into paying labor costs that they can't absorb." wage advocates business for a fair minimum wage says "all businesses, big and small, should pay a wage that workers can live on. it's way past time to raise the impoverishing $7.25 federal minimum wage to strengthen the consumer demand and help level the playing field among businesses" p.m. groups that say higher wages are positive also tend to say that better benefits and pay help to hang on to workers, especially in a tight labor market like now. but what's interesting is these are groups kind of all across the political spectrum and some groups that tend to not really get into this did have strong opinions on what amazon did today, which i thought was kind of interesting. >> raising at the minimum wage to $15 for seasonal through full-time, i would imagine that puts a lot of pressure on the other retailers.
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we've already had walmart and target effectively committing to higher minimum wages, but how about the impact on the retailers that may be sort of on the cusp does this sort of accelerate their demise, their decline, whatever you want to call it >> i think it would be really hard if you're a retailer like a jcpenney or a sears to get up to $15 an hour from where you are now. now, they're not as vocal about what their average minimum wages are, but we know they're not quite as high as what target is paying at this point, at least for the starting wage. and so, i think that's going to be something that is going to make it a lot harder to grab employees in this seasonal hiring, but also beyond that as well >> yeah, and one thing that i also think is interesting is that while small businesses can't always necessarily keep up with these pay increases, what they can sometimes offer, especially at the smallest companies, is a better environment, because a lot of these are mom-and-pop shops. they know their employees on a first-name basis, may know their families, so advocacy groups that say we can't necessarily keep up with the pay increases may have other suggestions and ways that they can do it. >> maybe i'm a harrietic, but
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i've always been skeptical of why there's a need for a minimum wage. >> you sound like michelle caruso-cabre caruso-cabrera. >> maybe i'm channeling my inner michelle. >> i love it. >> because if a person wants to work at a certain wage and a company is there to pay them that, why should we -- >> but also the fact that amazon raised its own minimum wage without the federal government raising the minimum wage -- >> telling them to do it. >> it means that's what the market is demanding, right >> but small businesses -- >> or it's genius. >> -- in the middle of the country can't necessarily afford to keep up with that, so that's the key. >> the key is, i think, consumers. kind of to your point and to your point, will consumers -- if you put a sign up -- let's say there's no mandated minimum wage would you put a sign up saying "we pay $15 an hour" will the consumers pay more for the goods in the store, almost like buying organic, whatever it is you're trying to do good, so you pay more that's the question. >> maybe. >> i don't know. >> the other point i'll make is i think i underestimated the increase in pay at walmart and
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what that would help do for the company. i think i thought, yeah, you know, it's a couple bucks. but i mean, look, the employees seem happier, the stores look better, the service seems better so, in the end, i think that really did end up helping walmart. >> all right, guys, thank you. >> thank you very much. hitting the brakes, a number of automakers reporting big drops in sales for september, sending shares lower will the rut continue or is it time to buy the sell-off in those stocks and as we head to break, here's a look at the dow 30 heat map, heat map, ladies and gentlemen the index at a new all-time intraday high. intel, cat, boeing are your leaders right now. microsoft, nike, home depot among the laggards oh, and there's the closing bell.
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welcome back to "power lunch. it is time for "trading nation." take a look at the auto stocks getting hit hard over the last three months stocks like gm and ford also under pressure today after double-digit drops in monthly car sales. so, have autos stalled for the longer term? frank cap lettilerri is with ine and chad is here to address that look, these stocks are unloved
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they look cheap, sippingle-digit pes. are they worth a play for a comeback >> no, we would be cautious on the autos. they look cheap from a pe perspective, but when you include debt on the valuation, then they're not cheap you look at ford, for example, they have over $75 billion of debt as well as general motors the same, if not larger. so you want to be cautious on these kind of companies. when you're looking now in this stage of the market cycle, you want to find companies that have good-quality, consistent earnings growth. if you want industrials and you need that cyclical torque in your portfolio, look at 3m, look at stanley black and decker, but avoid companies that have a lot of debt on their balance sheet and if global growth decelerates, these companies are going to be quite impaired. >> frank, if you had to own one of the global auto stocks, is there any you'd pick >> well, i wouldn't call any of them particularly attractive right now, but if i had to pick one, it would be toyota. and i think to get an idea, you have to go back ten years in
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that chart since the 2009 lows, the auto's up 130%. respectable, but not that good compared to the moving averages there. and over the last five years, it's about flat, but it hasn't broken down yet, and that's interesting because it's built this constructive pattern along the way. so, i'd be patient but i wouldn't mind buying this breakout for month 40, if it gets there. >> well, it hasn't broken down that's good enough, i guess, what you could say about the car stocks right now frank and chad, thank you very much for more "trading nation," head to our website or follow us on twitter @tradingnation melissa, back to you. >> mike santoli, thanks. coming up, small and midsized business owners feeling a slight chill in the air, according to a new survey by pnc. their chief economist joins us next to explain. >> announcer: and now the latest from and a word from our sponsor. >> traders shouldn't let their politics affect their trading. instead, look to the current price trend and build an exit strategy based on where and when
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welcome back, everyone i'm sue her kra. here's your "cnbc news update" at this hour search-and-rescue work continues in indonesia, four days after last week's devastating earthquake and tsunami the death toll now rising to more than 1,200 people drone video showing the extent of the destruction in palu, which is the city hardest hit by the disaster. palestinians clashing with israeli troops near the west bank city of ramallah. soldiers fired riot dispersal rounds at the protesters, who in response hurled stones and set tires on fire. the fda says it seized thousands of pages of documents in a surprise inspection of the e-cigarette maker juul's san francisco headquarters last week the fda is looking into the company's marketing practices aimed towards teenagers. the company says it is committed to preventing underage use and will cooperate with the fda. and take a look at this guy! a maine lobsterman caught an
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exceptionally rare calico lobster over the weekend off the coast of scarborough, maine. it is named friendly krueger over the horror character freddy krueger. they occur once in about every 30 million lobsters. stay away from the boiling water. that's the news update this hour melissa, back to you. >> my first reaction is that the lobster's shell was like a tortoise shell. >> i know. it kind of looked that way, it did. >> that's kind of wrong to say. >> my first reaction was butter. >> oh, stop. >> that was my second reaction sue, thanks. sue herrera. the stock market making big moves today. seema mody has that story. >> that is right stocks in brazil jumping to a seven-month high ahead of the country's presidential election. the latest opinion poll shows leader jared balance entero as the front-runner in this tight race balsonero is seen as the
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favorable candidate due in part to his appointment of a former banker to run economic policy. right behind him is leftist fernando haddad from the workers' party, which has been mired in ongoing corruption scandals the currency, the real catching a bit against the dollar, but it is still among the worst-performing global currencies since the start of the year emerging markets as a whole down today, but asset management is close to a turning point, but most of that will be based on brazil's election results and the u.s. dollar, which has been range-bound since august back to you. >> thank you very much, seema. the oil market closing for the day and jackie deangelis is back at the commodity desk hi, jackie. >> wti hitting its highest level today since november of 2014 intraday high was $75.91 now, iran continues to be the driving force here the market bracing for u.s. sanctions to take effect next month, but it's also an equities story, too the new nafta deal, market optimism, these things are having an impact on crude and
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the price is certainly reflecting it. interesting to note that we're finishing lower on the session, but wti moves up 7.5% in a month. brent moves up more than 9%. it's not surprising you may every once in a while take a little bit of a pause. session lows today was $74.93, so wti is straddling the $75 mark, guys. >> all right, jackie thank you very much. let's continue our oil-related discussion should investors expect price to keep rising and who is poised to benefit the most michael kelly is seaport global securities good to see you, at a humane hour, by the way. >> appreciate that, brian. >> absolutely. happy afternoon. listen, here's the knock on the permian basin. we've talked about it before and bethany has a new sort of mini book on this, is that the permian basin is sort of built on debt and that, yes, stock prices may go up, but there's a real fear that the calumet dry up along with the wells. is there simply too much debt for these oil companies to really make a lot of money for investors going forward? >> brian, i just don't buy that. i mean, i love bethany's work,
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but i think the main thing that she is missing is -- well, two things -- one, capital efficiency has drastically improved since she probably started that book. you're looking at these shale players now at all-time highs in terms of capital efficiency, looking at product returns, organic growth is the best it's ever been. i was at a conference last month. rystad are best at predicting this stuff, say break-even prices in the shale play is down about 50% in two years' time so, that's the first thing to iron out secondarily, you look at the high quality, guys, in the permian basin. these guys all have -- the average net debt to ebitda is under two times. so, there isn't really a leverage issue there at all. >> but there is a lot of debt floating around that region. i know that personally, and you know that as well. >> yep, there's a lot of debt, but if you look at -- you run the strip through our models, and we see absolute compression of debt multiples going forward. i mean, you're going to see
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these guys now realistically drill and grow 20% production growth from within cash flow over the next few years. it's something that's actually never been done in this industry so, i could see how people are skeptical. but on our models and where these guys are now on capital efficiency, that it's possible. >> one thing i like about you is you bring a lot of new names here and i want to talk about jagged peak energy, j.a.g., a name i'm mildly familiar with who are they and what is the quality of their land? because now we've gotten to the point where you and i have talked about it, if you don't have the, quote, good rock, if you don't have those high-efficiency wells, that good land, you don't have a lot >> yeah, this is actually -- this is a great story, and this is the reason why i'm up in boston right now i'm actually taking around their relatively new ceo, jim cleckner, to see accounts up here for the first time in boston and he's convincing institutional investors here that they have amongst some of the very best acreage in the delaware basin, 80,000 acres,
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and that they've really hit their stride operationally as well second quarter, these guys -- jim's been there with his team for about two quarters now, just absolutely crushing expectations in terms of type curves, and this is when we think investors should really take a look. >> then you've got diamondback energy of course, that might be the original f.a.n.g. stock, if you will we've talked about that enough give us the lowdown on wpx this is a name that is more known, i think, to our audience. but again, what's the profile on wpx that makes it attractive to you? >> yeah, you'll like this one. so, this is kind of the best of both worlds. these guys are permian and bakken players and this is like a hammer should have hit investors over the head three weeks ago. there was a government lease sale on acreage down in the permian just offset wpx's position acreage there went up for $95,000 an acre for the winning bids wpx is valued by the market right now, we think the implied valuation is $35,000 per acre. so, there's a massive gap there. and if industry players are
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willing to pay 95k an acre, you're valued@$35,000, there's a big opportunity here. >> f.a.n.g., wpx,and j.a.g., jagged peak energy, which i think is actually just moving on this interview mike kelly, seaport global, thank you very much. >> thanks, guys. well, just a short time ago, fed chairman jerome powell saying that a strong economy and low unemployment should continue, this as pnc is out with a new survey which shows small business owners and executives are feeling a little less optimistic about the economy than they were six weeks ago. gus faucher is chief economist with pnc gus, good to have you with us. >> thank you. >> there are a few interesting highlights i wanted to pull out of the survey. first of all was prices and whether or not these small businesses were planning on price increases, whether they feel they have the ability to increase prices and what they're increasing prices in the face of so, can you fill us in on that, whether or not they're able to actually pass these costs on to consumers?
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>> yes businesses are expecting to raise prices, so about 40% of small businesses expect to raise prices it's for a combination of reasons. they're paying higher wages, they're seeing higher prices from their suppliers, and so, they're trying to pass these along. i think price increases should be rather modest but as the economy continues to improve, small businesses have a little bit more pricing power, and they are going to be taking advantage of it over the next six months. >> are small businesses feeling the impact of the tariffset and are they able to increase their -- pass on, i should say, those increased costs to their consumers? >> yeah, i think small businesses don't appear to be terribly concerned by the tariffs. some of them will see better sales because of the tariffs some of them will probably be harmed by the tariffs. but generally, i think given the strong economic environment, they do have room to both pass along some of the higher costs to their customers, but also i think they have a little bit of room in their margins.
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margins are pretty good right now, so they can absorb a little bit higher input prices as well. i think we will see some positives for some industries and businesses, some negatives, but generally, i think the overall impact on small businesses is going to be fairly small. >> sounds like small businesses are in pretty good shape i mean, if they're able and they're confident that they could pass on modest, you know, cost increases to their consumer in the form of higher prices, that's a pretty good spot for small businesses to be in. >> i think that that's correct, they're benefiting from the expanding national economy they're quite optimistic about their own sales and profits. they expect both of those to increase over the next six months so, i think small businesses are feeling good right now about the 40% are expecting to hire over the next six months. so, given the overall environment, they're in good shape and they're feeling pretty optimistic about the way things are going, even if they are a little bit less optimistic than they were six months ago. >> so, why are they less optimistic than six months ago
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>> you know, i think some of it's seasonality in the data, so they generally are less optimistic in the fall than they are in the spring. and then also, i do think that some of them are concerned about the potential impacts of the tariffs. they're also, however, feeling upbeat about the tax cuts, so that's a positive. but i think -- i don't want to sell too much the fact that they're feeling less confident i think they're still in pretty good shape and compared to the almost 15-year history of our survey, they're doing quite well >> if the trade war with china gets worse, gus, and we put tariffs on every single item that is brought in from china, how does that impact your view of the impact on the economy, given that it seems like at least for small and midsized businesses, they're able to weather at least the initial impacts of the tariffs pretty well >> yeah, i think, first of all, the survey was taken before the trump administration imposed 25% tariffs on $200 billion in chinese-made goods, so i think they haven't seen the full impact of those. those were just implemented last
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week and certainly, if we were to see additional tariffs, that would become more of a concern so, some of it is, is that they didn't feel the full effect of the tariffs. i do think that if we impose additional tariffs, that will put additional costs on the u.s. economy, so i am concerned about the prospects as we see more tariffs from the united states, more tariffs from our trading partners, that tit for tat retaliation. and that does have the chance to create a greater negative impact for the u.s. economy over the longer run >> all right, gus. interesting survey thank you. gus faucher, chief economist with pnc. all righty, coming up, open the door, insert phone, then violently rotate said phone and drop it up to 100 times. that is what "consumer reports" did to the new iphones why would you do that to a $1,000 product well, we'll find out we'll find out the results, next ♪ shake it, shake it
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are you thinking about getting one of the newest iphones? "consumer reports" out with its latest lab results on the reviews of the xs and xs max, and it's an understatement to say they tested them to the extreme. electronics editor with
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"consumer reports," god, would a lot of people love your job. electronics editor which is which i'm going to hold the product up which is which >> this is the 10s you want to say "x," but it's actually the 10-s. and this is the xs max >> this is smaller than the 8 plus that i just got all right, these are your highest rated iphones ever what did they do better than prior versions did they do it better enough that i should go and buy one >> well, it depends what you're using now. the iphone x last year didn't do -- it did great in our testings, but it still ranked below a lot of phones made by companies like samsung, because the battery life wasn't great. it might get you -- >> have they improved that in these? >> yeah, they have, actually with the x, it got you about 19.5 hours, which will get, you know, most people through the day, not power users or -- >> and that's 19.5 hours of your testing. it's not just sitting there.
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>> right, right. we have a robotic arm that actually runs the phones through a set of operations to kind of, like, put it through the paces and make sure everything's standardized but the xs actually made it 24 1/2 hours, and the max made it 26 hours. >> so, better battery life. >> yes. >> how about the camera, better? >> the camera is slightly better i mean, if you're really into photography -- >> top of class among these phones >> yes, yes. but the x was our -- >> better than the samsung s9, s9 plus? >> yes. >> better cameras? >> you have to remember, like our ratings and rankings for these things are super tight we're talking about less than a point overall that separates the top ten. so you know, you buy those, those are great, too, but you know, they really did some, you know, just notched up the quality just a touch more this time around. >> so, basically, you're saying that, really, the determining factor between this and where it sat last year is an improved battery? >> yes, battery -- >> it just lasts longer. >> i mean, that is a big deal to consumers.
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>> yes. >> if you can't get through the day. i mean, i have two kids. they are constantly playing with my phones, and they can drain batteries like you wouldn't believe. it's not tops for battery life, though we have some phones that will make it more than 30 hours. >> 30 hours? >> and the samsung -- yeah, the samsung galaxy note 9, that is our top phone, goes 29 hours. >> the note 9 is a bigger animal or about the same size >> it's about the same size as this this is a 6.5-inch display. >> let's get to durability, and maybe we've got some of that video. it's like crash test dummies tell us how you put these phones through their paces, and that was one of the areas where these iphones did not score as well as the competing ones from samsung. >> right i mean, you have to remember that these are made out of glass, front and back, and glass is never going to be as tough as metal. you just can't do it >> even i can understand that. >> yeah. i mean, it's common sense. samsung's phones are made out of glass, too it's just kind of how you construct them and what we have is we have a tumbler that will drop the
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phones the equivalent of 100 times from about 2 1/2 feet. and this is so you get a random assortment of drops. i mean, when most people drop their phone, oops, it's off a table or out of their pocket, you're talking about less than three feet. >> waterproof? >> yeah! they passed waterproof testing most phones these days do. the trade-off is that you don't see replaceable batteries anymore. you just can't really have a battery you can swap out and have a water-resistant phone. >> but you can do that with the older ones >> well, you can swap out the battery, but you know, don't spill a drink on it. >> yeah. >> do the batteries, even in these phones where the battery is improved, do they hold a charge less and less well the longer you -- the more you charge them? >> yeah. i mean, that's just the science of lithium-ion batteries. >> do these phones charge as quickly as their competitors, or is that something that these phones don't do as well as -- >> no, that's true >> -- competitors? >> we found that the max takes more than 200 minutes to charge.
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larger samsungs that take considerably less amount of time, smaller amounts of time, as do other phones so you kind of have to plan ahead, carry that external battery if you need to. >> of course, a lot of it has to do with the operating system you like best, the android system or this. >> right and you have the rest of your system do you use a macbook or google all the time a lot of google apps work on this as well. >> do you ever change -- you probably don't know, but does anybody change once you're locked in, aren't you just locked in do you know what i mean? >> i don't think so -- >> i mean, if you bought a lot of apps? itunes songs, do they play -- you know, i buy all those shows for my kids through the itunes video store. apple, i love you, you're a great company, but i'm never leaving you, even if i didn't love you you've got me forever. >> and it's by design to do that. >> bree, thank you very much interesting stuff. so, it's better battery life. >> better battery life. >> a very good camera. >> and a speedier processor. >> and a speedier processor. thank you. consumer reports.
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>> thanks a lot. >> kind of like you. >> i'm a speedy processor. >> you are better life. coming up, more signs of trouble for manhattan's real estate market. robert frank is live in new york city with more from, no doubt, some fine piece of real estate >> really frmg we'll telyou l why this got a price cut and why it's happening coming up right after this break ♪ a moment of joy. a source of inspiration. an act of kindness. an old friend. a new beginning. some welcome relief...
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or a cause for celebration. ♪ what's inside? ♪ [laughter] possibilities. what we deliver by delivering. when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today.
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robert frank is live in new york city. hey, robert. >> hey well, sales falling 11% in the third quarter. it is the fourth straight quarter of declines. the top end had been hurting for a while. this quarter saw something new which is trouble in the entry level. it is now a buyers market across manhattan. this apartment tells us why. we are here and inside 5,500
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square feet. outside almost 2,000 square feet it has a private elevator. you your own sunken jacuzzi. it came on at $25 million two years ago. it got an $8 million price cut now back on the market at 17 million and only now are they starting to get a lot of offers and a lot of interests that is the story across the city really discounts of 20 to 30% before you can finally get something sold bag to yo back to you. >> at the top end it is a lot of supply you know a lot of builders post recession. they built huge expensive apartments like this there is a lot of choice you have got to salt deductions
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which makes it very expensive. at the low end this last quarter you had the risinginterest rates. so you're getting pressure on the top and bottom >> what do experts say in terms of how much further prices have dropped? >> yeah. that is the question for buyers, for sellers, forbrokers. so until april when people have to write the tax check, remember, when the salt stuff passed last year they were
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saying at least a 10% decline. we have already seen that. we don't know how much more we are going to go. >> that's a long time to wait. thank you. >> it is thank you. >> and speaking of checks and prices, check please is next it's not what champions do. it's what champions don't do. they don't back down. they don't settle. and they don't quit... except for cable. cable? oh you can quit cable. because we are cougars and we don't quit!!
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>> yeah. the ones on 57th street and all of that. >> but the view. >> a lot of supply >> yeah. and if sellers have to wait until april to see the tax returns, if you have an apartment on the market right now that's a long time to sit there and wait a lot of mortgage payments to cover. they say their position remains substantial and they believe the cash flows will actually improve. they site specifically larry, the new ceo as a contributing factor this is an interesting stock move on something that might seem like bad news let's take a look at something i know you'll want to put on your christmas list and that is the putin 2019 calendar. there is the topless chest shot that we see so often there are
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also other nice ones if you know come one that might like the new putin calendar, so much i could say but won't putin on the ritz. >> bodgod, i miss you. >> closing bell right now. it's time for the closing bell financials largely sitting out the rally. analyst joins us for which bank you should be buying tesla out with third quarter production numbers the question now, can the auto maker turn a profit? we'll break down the numbers ahead. i'm leslie killing potential deals, why some hedge funds are generating big returns with


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