more looking through it than you are freaking out about it. i think that's the appropriate stance of an investor. >> yeah. just focus on some of the sectors i talked about. conferences and listening to companies and buying on weakness. >> guys, enjoy the weekend. "power lunch" begins right now. >> announcer: "halftime's" over. the second half of your trading day begins now. hello, everybody. i'm mandy drury with brian sullivan standing in for tyler mathisen today. there is a huge call on oil from goldman sachs. >> we have the man behind it. if it happens it could be a nightmare for the entire oil industry from north dakota to texas to venezuela to russia. one year ago, by the way, that's when oil's descent began. crude down 50% in just a year. what are you going to be doing with your money on thursday next week at 2:01 p.m. eastern? we'll help you make some decisions whether the make makes a move or not.

doctors are likely to change their procedures after hearing this major news on blood pressure. everybody needs to pay attention. a lot to do today. we'll start with a check on oil trading because oil is down by 3%. one reason might be a note from goldman sachs that came out this morning suggesting that oil could -- not will, but could fall as low as $20 per barrel saying, "the oil market is even more oversupplied than we had expected and the potential for oil prices to fall to such levels which we estimate near $20 a barrel is becoming greater as oil storage continues to fill." powerful note. just to be clear, guys, goldman sachs not saying this will happen. that it is going to go to $20. just that it is a possibility. their six-month price target is $40 a barrel. that's still very bearish but it is not the case scenario. coming up in the next hour

on "power lunch," we have an exclusive interview with the man who wrote that note for goldman sachs, jeff kcurrie will be our guest. kate kelly is live at a bp facility in whiting, indiana with that story. kate, what are they telling you? >> reporter: well, not withstanding the bearish tone you mentioned regard rg goldman sachs note which could be quite bearish indeed for the market. we've seen a bit of more momentum in crude since the august lows. however, traders and analysts that i've talked to are a little bit concerned about what's going on at the refinery behind me and others like it around the midwest and gulf coast. why? because they're about to go into a seasonal repair period, a seasonal maintenance season where they stop buying crude, at least slow down their buying crude for a period of time while they make necessary repairs and they can't refine products during that time. take a look at this map. all around the midwest this is going to be the focus in september and october. we have places like ponca city,

oklahoma. places in minnesota, illinois and michigan, and right here in whiting, indiana. also a lot of focus on solve gulf coast locations as the focus for this year. however, it may not be bad news for drivers, guys, because of the long planned nature of the process and the fact that auto seller -- fuel sellers have a chance to go to other suppliers. it may not be as disruptive as it is say when there is an unscheduled maintenance issue as there was here in august. so the question is when does the low potentially hit? people think at the end of september or beginning of october is when we may see that lesser demand for crude oil at its strongest. that's when some of these nearer term targets may come into play. goldman and jeff currie saying in that note the one-month target is $38. we touched that at the high point of the summer. we may see it again in the coming weeks. a lot to watch here and refinery

maintenance really could be a fundamental swing factor that we need to pay attention to. >> it's been a very frustrating losing game, hasn't it been, trying to call that bottom or the low, as you put it. kate kelly in indiana. thank you. coming up at 2:30 p.m. eastern, the man who made goldman sachs' call on oil, saying the worst case scenario would be $20 a barrel. jeffrey currie joins us for an exclusive interview on the topic. it's friday so of course we got the weekly numbers from baker hughes. u.s. rig count over this past week, oil rigs in the u.s. down ten to 652. again, u.s. oil rigs a reduction of ten rigs over last week. count now 652 for context over the longer term. the same time last year oil rigs are down 940 rigs from the same time last year. so again, u.s. oil rigs again posting another decline.

this time down ten to 652 for this past week. >> is it's down 23 over the past two weeks down 13. if you're bullish oil, if you want oil prices to go up for whatever reason, you want that rig count to come down. >>y he. that brings supply down. another big interview today on cnbc. pershing square's bill ackman sharing his thoughts on how he views companies based on a big interview with david tepper yesterday. >> i would say i'm probably a little more bullish than mr. tepper. the reason is sorts of valuation. i think today the stock market on next-year estimates is something less than 15 times earnings. the earnings yield and stock markets are something approaching 7%. the last way we win here is just basic business deterioration. the company's business is declining double digits in pretty much every market around

the world except for china. china's been the growth engine in the last couple quarters, up 38% in the last quarter. this characteristic of massive growth and fairly massive declines is something you see in pyramid schemes. i think this meets our standard for a simple predictable cash flow generative dominant company. i can't tell you where any of our stocks are going to be next month or where they'll even be at the end of the year. i can tell you mondelez will be a much more valuable company a year from now than it is today. two years from now even more vabl. cp is going to be a much more valuable company. >> start with the last one, cp is ka filletedian pacific railway. it has not done well. it's down over 30% the past year. they carry a lot of oil rigs so a declining rig count may be bad for them. mondelez the big food company with the bad name has fared a lot better, up 18% in that same time period.

lastly, herbalife, a big short, a big fight. than stock up more than 20% over the past 52 weeks. so the short working against mr. ackplan. let's check the broader markets. the dow industrials went positive about one hour ago. we were down i think as much as 85 points earlier today, up by about 50 points right now and solidly higher over the course of the week. as for today though, goldman sachs is the dratill on that index. mcdonald's and united technologies are among the biggest gainers. tech stocks, morgan brennan joins us live from the nasdaq. >> we've seen an about-face with the nasdaq much like the broader markets today. we have the nasdaq composite up about eight points right now, on track for solid gains for the week up 2.6% so far for the week. tech sector is largely in line with the broader market right now. we saw apple start the day lower. it's also done an about-face,

now trading slightly positive. but a different story for some of the other hardware names. we're continuing to see weakness there. hewlett-packard is lower ahead of its analyst day which is next week. also weakness in seagate and western digital, those are lower today. semi-conductors giving up some of the gains we saw earlier in the week. stocks, semiconductor index really underperforming the broader markets today. one of the reasons for that we're seeing marvel technology down about 16% after disclosing accounting investigation. also seeing some subsequent downgrades by analysts in light of that fact. micron, kla-tencor and skyworks solutions also trading largely in the red today though giving back some of those losses. there is a bright spot though, that is moves to the up side in several of the large cap names that had been leaders for the nasdaq 100 overall this year, names like amazon, google, gilead sciences. many investors are parking their cash in a lot of these big large-cap names. they are considered a little bit

safer, higher growing names because everybody is really essentially sitting on their hands ahead of that fed meeting next week. meantime, a new government study on blood pressure was so conclusive that it was cut off a year early. meg tirrell is here now to explain what the study showed and more importantly what it means. >> that's right. the national institute of health is actually calling the findings of its study potentially life saving. in preliminary results, the nih found lowering blood pressure more than current guidelines recommend resulted in drastically reducing cardiac events and deaths among adults over 50 years old. normal blood pressure is 120/80. the top number is systolic blood pressure around that's what the study focused on. researchers found lowering systolic blood pressure to 120 rather than the current target of 140 reduced rates of heart attack, heart failure and stroke by almost one-third and country the risk of death by one

one-quarter. the results could have a big impact on the 1 in 3 americans who have high blood pressure which is a leading risk for problems like heart failure, stroke and kidney disease. some experts caution the results are preliminary though and need to be confirmed when the study is completed. blood pressure is also big business for the drug industry. blood pressure medications brought in $12 billion in revenue in 2014 in the u.s. according to industry researcher ims health. dr makers like novartis, pfizer and allergan all make drugs in the space. what is the best place to invest your money? large caps? mid caps? small caps? the mattress? we've got three fund managers each defending their own. you are watching cnbc, and we are first in business worldwide.

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welcome back at 13 minutes after the hour. let us take the time to check out some stocks on the move today. beginning with the grocery store chain, kroger. earnings beat the street. it is one of the best perform erps in the s&p 500 this week. next up, marvel technology. a semiconductor maker warns that it will lose money in the second quarter but more importantly, it launched an internal accounting investigation. the stock taking a big hit as a result. it is down nearly 16%. lastly, mattress firm cutting its earnings expectations, stock having its worst day in several years. they're based in houston. they simply say that sales have been hurt in areas that are

affected by -- you guessed it -- oil prices. if you're an oil worker worried about your job, maybe you simply don't go buy a mattress. >> losing a little sleep over that one. where is the best place to put your money to work right now? small caps, mid caps or large? we've asked three money managers for their top picks in those three categories, calling it the goldilocks trade. welcome to "power lunch," everybody. lamar, starting with a little deuce. the small caps here often more domestically focused, potentially can grow with or without chinese growth for example. which stocks do you like in that sector? >> one of the stocks we like is a company called everbank. that's a bank heere in the u.s. based in jacksonville but it is more like a national bank where

they take their deposits and loan to anywhere. it is a well run group and the way we look at it, we want to pick the best management team, best exposures, contrast that with like a jpmorgan, for example, do you know where jpmorgan's indonesian operations are based out of? >> no. indonesia? >> nor do i. nor do i. if you go on jpmorgan's website, you get a "page not found." by the way, it is in jakarta. i found it out on google maps. if jpmorgan themselves don't know, i think people buying some these large caps because they think they're diversified and safe may not really understand what they're buying and behind hide the large cap nature of those so we try to find very specific names and pick those. rather than just saying small caps, we try to pick the very best ones. >> another one is called dft systems. it is kind of focused on technology. interestingly you use their

technology, their system for your own mutual fund. >> that's right. they handle a lot of the customer records keeping that we're frankly makes no sense for us to do. the nice thing about it is that it is a very sticky business. their customers stay with them forever. we're not going to mess with that. it is a small piece, not the kind of thing we'll look to make any changes, nor any of their other customers. these guys are selling off non-core assets. they'll have about $1 billion of cash to put to work making some creative acquisitions. this is one that's traded down as the markets many could down but we think it's got a great outlook. >> for those you can't see who might be listening on the radio, financial engines, dst and everbank. let's move further up the scale to the mid caps. talk to me about heartland express, something you view as a great, cheap stock. >> thanks, mandy. hi. heartland express is one of the probably highest quality, best managed truck load carriers around.

it's got a debt-free balance sheet. really good operating margins and excellent fleet utilization. the industry and the company have benefited over the last few years due to pricing power. we think that's set to continue due to some regulatory actions. there's industry regulation on safety standards, and that should limit driver hours which will limit industry capacity. there's also regulation on emission standards. and that should increase the cost of doing business and push out some of the marginal players, again minimizing industry capacity. so those two constraints on capacity should push up pricing. at the company specific level, the company about a year ago acquired a competitor called gordon trucking. and over the last year they have done the hard work of integrating gordon and cutting costs so they are poised to

benefit from that as well. >> that's heartland express and you believe they've got a great balance sheet as well. another one on your list is sort of a midwestern thrift bank with a name that's not exactly rolling off the tongue but it is cc ccfmb bank corps. >> capitol tv financial. it is a well managed thrift based in totopeka, kansas. it has leading share in its markets which are primarily kansas and missouri. we appreciate its lean cost structure and we like its over capitalized balance sheet. it has a tangible common equity to asset ratio of about 15% which is -- compares very favorably to peers which are at about 10%. so with this good balance sheet and also pristine credit on their loan book they are able to return a lot of capital to shareholders.

100% of earnings can come back in regular dividends and also special dividends, as big or bigger than the regular dividends. so we think this is a really safe, conservative investment for a volatile market with attractive valuation and we think if we ever get interest rates going up, it should benefit from that, too. >> safe can be good in the current environment. the last one on your list is cy sysco with an s. gary, a lot of these big caps were basically used as cash machines. atms. for those that wanted quick liquidity when we were seeing some violent moves to the downside in the last few weeks in the markets. which ones do you think can benefit from here? >> you're right. a lot of them have sold off. we use this opportunity to add to positions in the hodges equity income fund. we really like gilead sciences. they have fabulous treatment for

both hepatitis c and hiv. they'll earn $11.50 this year. the stock trades at less than ten times earnings. it wouldn't surprise us to see gilead buy another oncology company that we think will allow their multiple to expand. >> any particular company you think might be an acquisition target or are you just saying in general? >> well, in general, they sold $10 billion worth of bonds yesterday. we think their cash -- they're loaded to buy. and i don't know who that might be, but i do think they want to be in the oncology field to add to their franchises there. i think it will happen in the near term and they have the cash and cash flow to do that. so i don't know who, but it wouldn't surprise me if it happened soon. >> something to watch in the ongoing m&a deal making in the health care space. thank you very much for joining us today. gary. your other two are boeing and

home depot. thank you very much to all of you for moving through the scale, small, mid and large. the s&p is slightly lower. dow holding in marginally positive territory. nasdaq has dipped back. now to jane wells in los angeles for a story that i think we can safely say only jane can cover. jane? >> reporter: mandy? brace yourself. coming up next -- franco harris smells my dirty socks. i asked my dentist

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i'm never going back to a manual brush. treasuries. you can look at the big wall where all the yields are showing. right now the 10-year is yielding 2.18%. that's lower than where we were sitting late yesterday which was 2.23%. certainly saw a dip lower in yield this morning after we saudis pointing consumer sentiment data perhaps reflecting a little nervousness in what's been going on in the stock market. that's your very short, sharp and sweet bond report. one company claims that it has the cure. for smelly socks. jane wells tested them out. jane, did the product pass your smell test? >> not only mine, brian, but the man behind them. an nfl great, best known perhaps for the most famous play in nfl history, the immaculate reception. ♪

♪ >> we felt that there was a n d need. ♪ >> sweat has odor causing bacteria in it so that bacteria now on this towel. well, what the silver does, it starts to react with the bacteria and eliminates the bacteria. >> so he sent me the socks. i'm going to put them on, wear them every day for a week. and at the end of the week, i'm going to make him smell my socks. ♪

♪ ♪ >> okay, so i'm going to take these socks off now and we're going to smell these socks. >> oh, my gosh. >> are you ready? me first. >> i'm ready. >> i know my own smell. i don't smell me on there. >> you did all that and no smell. >> franco harris smells my socks. this is like the ultimate -- it's almost like a fantasy for me. >> well, i got that checked off my bucket list. right now on cnbc.com, franco harris talks about he knew when he played football in the '70s he was going to have to work afterwards. it is not like the money they make now.

but he always loved business. guys, he talked about which locker rooms are the smelliest. back to you. >> what locker rooms were the smelliest? how long you now been wearing those socks, jane? >> this is about a month into it. these -- i'm telling you, these socks are dirty. but they don't smell. now every time you wash them -- which you wash -- or the towels you go et. here's one of the towels. your gym towel. which you probably want to wash like every time or couple times. you can wash this maybe once a month. every time you wash it you'll lose a little bit of the silver but if you're only washing it once a month, it's going to last a long time. i. >> we have to go. this question will sound indelicate but i don't mean it to be. is it just socks or is there other stuff you can wear all the time? >> he has a spray that you could soak your other stuff in,

equipment padding. >> what other stuff you talking about, brian? i'm not following. >> ties. jane, thank you. that was awesome. gold falling again today. down now 7% for the year. we'll take you live to the my next a -- nymex and closing trades on gold. our market guests may have ideas on where to look for a good value. stay with us. here at the td ameritrade trader group, they work all the time. sup jj? working hard? working 24/7 on mobile trader, rated #1 trading app in the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of the other competitors do in desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivative pricing model, honey? for all the confidence you need. td ameritrade. you got this.

i'm sue herera. here's your cnbc news update for this hour. the white house just announcing that israeli prime minister benjamin netanyahu and president obama are making arrangements to meet likely in early november. meeting to reflect the commitment of both leaders to maintaining a strong relationship between the two countries. 12 major banks have reached a $1.86 billion settlement to resolve investor claims they conspired to fix prices and restrain competition for credit default swaps. according to the lawyer for the investors, the district judge has given both sides two weeks to iron out details. a spokesman for donald trump confirming the republican presidential hopeful has

purchased nbc's half of the miss universe organization. as well as settled all lawsuits against the media company. cnbc and nbc are units of comcast. the nfl kicked off its season last night but not without controversy involving -- who else -- the new england patriots. the headset system used by its opponent, the pittsburgh steelers, was picking up the patriots' radio broadcast of the game. made it impossible for coaches to talk. the patriots won the game. you're up to date. that's the cnbc news update this hour. back to you guys. brian? packers play i think sunday. right? >> packers play the chicago bears. i believe the game is in chicago. chicago's like a 6 1/2-point underdog. i am taking chicago. >> you're taking chicago? it's just a fantasy league but i'm taking them but i think the packers will win the game, just by less than 6 1/2. >> i'm taking the pack. >> you betcha. gold prices getting ready to

close. jackie d. is at the nymex. >> gold prices down slightly on the day but hanging in there over 1,100. that's the key psychological and technical level to watch. for the week, gold down about 1.5%. things that you need to watch next week -- the fed. for sure. and how that is going to impact the dollar. of course this relatively stronger dollar has had a negative impact on gold prices. few things to watch when it comes to this trade but it's been a tough trade and traders do think we could go lower from here. back to you. >> thank you very much, jackie. gold and copper moving higher. that's later on in the show. as for the stock markets right now, they've all turned into negative territory once again. the dow is down by five points, nasdaq down by seven and s&p by four, though i do believe they're still probably higher over the course of the week. where can you find value in this market? joining us now, james liu and ben pace.

thank you very much for joining us. james, we don't know when rates are going to rise. it is a guessing game at this stage. you do not want to be caught flat-footed when they do. how do you make sure that that does not happen? >> that's absolutely right. i wouldn't be caught out of position when rates start to rise. although we don't know the exact month, it's been pretty clear from fed statements that they do want to start raising rates by the end of this year. that's how i would be positioned. when you look at different sectors of the stock market, really it is the cyclical sectors that tend to do well when rates start to rise especially if it the u.s. economy stays intact despite all of this turmoil. those are sectors like technology, like financials, especially consumer discretionary where a lot of demand for consumer discretionary really is internal to the united states. to the extent that even if there is global turmoil, consumer discretionary still still outperform in those circumstances. >> quick follow-up on financial sector. do you think for example loan growth is going to be able to

offset sufficiently even if rates do no the rise? >> i do think financials will still be attractive even if rates don't rise. part of it is simply the cost cutting trends we've been seeing over the last several years. but really the thesis i should point out is ultimately hinged upon the fact that rates will rise. if that happens, and delinquencies continue to work themselves down on bank balance sheets and global growth starts to increase that's where you'll see a pop in the businesses for financial companies. >> ben, you're taking a more global view here. i guess the theory goes 25 basis points is probably neither here nor there in a growing economy in the united states but it could have ripple effects around the world. how do you invest globally? >> i think the ripple effects have happened basically coming out of china as far as the slowdown there a lot harder than anybody thought it was going to be coming into the year, the devaluation was really a surprise. we thought the correction would come based on fed tightening but it wound up happening because of china devaluation. i think that as you spread from

china, that's where it becomes a little bit more concerning. i think our outlook towards japan is basically based on another quantitative ease because that economy is struggling right now and will continue to with a lot lower exports going to china. we do worry about the impact on europe, particularly german exports. but again, the strong monetary policy and the fact that mario draghi will probably extend it beyond next year is one of the things that's keeping us in those markets. but just an equal to slightly overweight. we think the better opportunities continue to be in the united states. >> a quick question on emerging markets. china is just one of many emerging markets, but is it too early to be lured by so-called cheapness of these emerging markets? do you think there will be better opportunities ahead? >> what i've been saying about that is that valuation provides a floor for you but it is not the catalyst. you really need something to improve from an economic standpoint. i think that those economies are

going to stay weak for at least the next couple of quarters before any kind of fiscal policy ease will be able to bail them out of that. >> james, ben, thank you very much for joining us today. enjoy your weekend. go to powerlunch.cnbc.com to see how ben is playing oil and other commodities. brian? the market for master limited partnerships was hit hard over the past 12 months. the cio of investment advisory research says this pullback is the second-worst in the past 20 years which he believes could be a great long-term buying opportunity. jim, thank you very much for joining us. here's the thing. i understand that the mlps are supposed to be more subjected and impacted by volumes rather than price. but of the more than 50 mlps i'm looking at on a screen, only four are up year to date. why is the market dumping these names? >> hi, brian. thanks for having me. well, definitely mid-stream assets -- so between the well

head and the consumer -- talking about pipelines and terminals -- are sensitive to volumes more than price. but the reality is in the short run, you will see the market trade off mlps because they are in the energy business and they are equities. >> but they're being crushed. i'm look -- just during the commercial break i went through the numbers here. not only are 47 of the 57 or whatever i tracked down here to date down 30%, 40%, that sounds like either the market is completely wrong about how these companies make their money, or there's something else to the story. >> this has been relatively historic sell-off. it's not unprecedented. we look back through the 20-year history that my team has been focused on this space and we see two comparable pullbacks. one was in the low commodity price environment in '98, '99. the other was the financial crisis in '07 and '08. we saw similar pullbacks in that period. but here's a key point that i

wouldic ma imake to you. the earnings and distributions of the entities in our universe are higher today than they were a year ago. what that's caused is a significant pullback in valuation. we would argue that today's valuations are in the same vicinity as the opportunity set that we had in both that '98-'99 market and '07-'08. i believe investors who buy mlps today will see double didn't digit returns -- double-digit by the end of 2016. >> because of the mlp tax structure, are any of these payouts or distributions at risk? >> not from a tax perspective. from a tax perspective you always have to worry about the tax advantage of mlps over time. it is a big picture but low

risk. but what is causing some concern is that there are some lower quality mlps. we've seen 16 mlps or distributions over the past year. now we have a quality process that we focus on on our team, and our team is focused on the quality of assets focused on the management teams, diversification of the asset base, commodity exposure. and if you can put your portfolio into assets with higher than average quality, you avoid that distribution covering. we consider that a key attribute that we bring to investors for example in the advisory research mlp and energy infrastructure fund. >> jim, we'll leave it there. it was a good discussion. the two stocks you like are ete, energy transfer equity, and mplx, ticker mplx. jim, thanks for joining us. we move to a tale of two metals. gold falling to a one-month low while copper is pat a seven-week high. where do we go from here? that is still ahead. call it the "hunger games"

of codesing. a massive coding competition kicks off today. it is a strategy by one company to find new talent. "power lunch" is back in two. stay with us here on cnbc. i'm only in my 60's. i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i looked at my options. then i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare, you may know it only covers about 80% of your part b medical expenses. the rest is up to you. call now and find out about an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, it helps pick up some of what medicare doesn't pay. and could save you in out-of-pocket medical costs. to me, relationships matter. i've been with my doctor for 12 years. now i know i'll be able to stick with him.

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and learn more about the kinds of plans that will be here for you now - and down the road. i have a lifetime of experience. so i know how important that is. restoration hardware reporting an adjusted quarterly profit of 85 cents per share. one cent above estimates. revenue also beating forecasts. the company increasing outlook. restoration up by nearly 7%. robert olson stepping down at interim chief executive officer at winnebago. if the position hasn-- the shar 3.2%. ebay testing out a membership that features faster shipping. the new service called ebay plus is being tested in germany with no word on whether it might be standard beyond that market.

shares unchanged. let us get another check on what tech stocks are moving today. we'll go back over to morgan brennan at the nasdaq. >> we're down, we're up, we're down. but it's all been a very narrow trading range. down about five points right now on the nasdaq, fractionally lower. however, we are on track for solid gains for week. composite is set to close 2.2% higher for the week. nasdaq 100 even better. 2.6% for the week. in terms of what's moving to the up side today, it is actually consumer stocks despite that slightly disappointing consumer sent many reading this morning. names like liberty global, american airlines, o'reilly you a automotive. biotech is up right now. having a good week, up 4.5%. some of the names really strong there this week, gilead sciences, illumina.

big winners also in terms of tech. amazon up about 5.5%. google 4%. apple 3.5%. all of those names higher today as well. but there has been one stock to the downside with the biggest losers in the nasdaq. wynn resorts. another month of gaming revenues in macao. also a report from an animal cyst we could see some theft at wynn macao in the hundreds of millions of dollars. that stock is down 7% on the week. goldman's top oil guy says crude could hit $20 a barrel. again, worst case scenario. our exclusive interview is ahead. the worst performing sector is energy, down 1.2%. crude prices are also lower. the crude close occurs right here on "power lunch." you'll get et it at 2:30 p.m. eastern. a number.ry auto insurance polis

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kroger, newport mining and best buy. losers, murphy oil, williams companies and transocean. we'll have much more on president obama's nuclear deal but let's talk about the impact on the defense sector. domini chu, what have you found? >> there are a handful of defense stocks really starting to outperform over the course of the past eight to nine months year to date. if you look at defense, part of the broader industrial side of the market and s&p 500, 11 stocks are categorized on an industry level as being part of the aerospace and defense sector. only four of those stocks are positive on a year to date basis having the momentum going along with them for the medium term. these are the four. first of all, general dynamics. they make everything from m1

abrams tanks to nuclear submarines. san jose shares are up a modest 2% but still positive year to date. they also make a number of different items as well. mine resistant ambush protected vehicles, that sort of thing. boeing, one of the biggest defense contractors out there be with up 3%. we are talking apache attack helicopters here. also what's happening here with different kinds of ordnance bombs, smart missiles, that kind of thing. lockheed martin, the biggest defense contractor, up 7%. they are the ones behind that f-35 joint strike fighter, one of the costliest programs in defense history. northrop grummond shares up 13%. it is the company behind the b-2 stealth bomber and those unmanned aerial vehicles, drones, in essence, as well as a number of different missile types systems. these four stocks standing out. iran may be part of that story there as people look towards defense stocks as possibly places where people are getting more business because of what's happening. geopolitically, not just there

but around the world as well. we'll have much more on defense stocks and the iran impact in the next hour. plus, we've got a big executive shakeup at yahoo!. jon fortt has the latest on another shakeup at yahoo!. >> kathy savitt is leaving, heading to. stx entertainment, a new media outfit that's only been around for a year, their model is medium budget films with one major star. they've done a little tv work as well. "state of affairs," that katherine heigl thing was theirs. so they've got a little bit of work to do as well. she's one of several executives who have left yahoo! in the past year. scott burke, scp of ad and data platforms. two others. this makes the turnaround story

for ma ris is rissa myer a bit challenging. savitt had been with yahoo! for more than three years. >> looking at the stock there, it is virtually unchanged. does this mean this latest departure by savitt isn't something that would move the needle? >> i don't know if you can watch the stock for these sorts of things. yahoo! stock's been moving more dependent of what's going on with alibaba. that tax spinoff that's being abouting more complicated. with yahoo! not only is revenue not growing at the rate people would like, costs are rising in the core business, and now all these executive departures. >> is it an executive headaches for marissa? >> yes, it is. >> one she probably didn't need. thank you much, jon fortt. the countdown to the fed is on. literal literally. we've got a countdown. what should you do if they raise rates and what should you do if they don't? some practical advice straight ahead. you totalled your brand new car.

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when that decision is announced? rob morgan, chief investment officer with seth financial group. rob, let's take you forward to next thursday. 2:00 p.m. eastern. hopefully you are watching cnbc. the fed comes out, we are hiking. what do you do? >> mandy, historically bull markets and equities continue well into a fed rate hike campaign but it does make some sense to begin to get a little more defensive, take some equity chips off the table and shift into some defensive sectors. broadly speaking that would be my game plan if that happened. >> if there is no hike? >> i'm really not expecting a hike. so i'm lined up to be a little more aggressive. i'm overweight stocks right now and in the sectors i'm in are cyclical. but that could certainly change. >> what are you likely to do, charlie? what would you be advising? >> i'm sure that this is going to have absolutely no impact on the actual value of stocks,

whether they increase in september or december. but i think it could move some stocks. so what you want to be on the lookout for is some interest rate sensitive stocks that become attractive. there is a name like kkr that tends to get hit when interest rates go up, even though it has virtually no impact on the business. it is a good chance kkr goes down a fair amount if the fed increases. if rates do stay flat, on the other side, you might have yield sensitive stocks like reits trade up. since we think those stocks are already overpriced, it would be a great time to sell those stocks as well as any long-term bond that you may still own. >> do you think any reaction there is to let's just take the hiking scenario, do you think it is going to be a knee-jerk reaction like potentially a knee-jerk sell-off, then we'll be okay? or do you think it would -- perhaps if there is a hike, it will pressure some further volatility to the downside. >> i think there will be a knee-jerk reaction. rates are going to go up over

time. four years from now they'll be up higher than they are today. but because there is so little liquidity in the market in the volcker rule stocks are move more than they should. these rate sensitive stocks are going to move. if there isn't an increase, bank stocks which have been going up in anticipation of an increase are going to probably come down. you want to take advantage of that because it just doesn't have any impact on profitability of these companies. >> i think you said a really interesting phrase -- you said whether it is september or december or even later that that is completely irrelevant. would you agree there's way too much obsession over this, that we'll be fine, that rates and stocks can still move up together? >> i agree with charlie. whenever the hike comes, there will be a knee-jerk reaction. but at the beginning of my comments usually bull markets and stocks continue well into a fed rate hike campaign. but sure, there will definitely be some kind of knee-jerk reaction when it does happen. >> rob and charlie, thank you both very much for joining us today.

domini cc chu? >> as oil prices continue to slide transportation stocks are up by 3% this week and tracking for their best week since late july. some of the names leading the game so far this week, conway on its recent marcher with xpo logistics. jetblue, avis and csx pushing transportation stocks higher. a lot of people like to watch those transportation stocks as perhaps a leading indicator for parts of the overall market. >> thank you very much. dominic chu. that's it for the very first hour of "power." a second hour of "power," even more pour potentially coming up. >> or could be dramatically weaker. have an awesome weekend. it is close to 2:00 on wall street, just about 1:00 in midland, texas. hello, everybody. i'm still brian sullivan. melissa lee is at the nasdaq. thanks for joining us on this 9/11 remembrance day. the dow is up about 14 points right now.

the goldman sachs today suggests that oil could fall to perhaps as far as it the $20 a barrel range. oil has not been at those levels since all the way back to 2002. the man whose team wrote that note, jeff currie, is your exclusive guest in a few minutes. even if the worst case scenario doesn't happen and oil maybe falls just a couple bucks, financials could be in serious financial trail which could lead to more deals as big money comes in to snatch up as they view as undervalued assets. what are those assets? senior analyst with thompson reuters has crunched some numbers and they are out with a new note today suggesting some companies who could be potential takeover targets. sri, thank you for joining us. . to you and your numbers, who looks vulnerable to a deal? >> thanks, brian. so the oil and gas sector in general, the energy sector in general looked very vulnerable

for m and a activity. for the last several years companies have invested so much in capital expenditures. we took a look at just the top 50 companies with over $10 billion in market cap and we found that over the last year they spent almost $300 billion in capital expenditures. off that, the debt levels have increased $150 billion on their balance sheets over the last two years. debt levels are rising, credit models, we actually have a proprietary credit model that takes a look at the structure of the balance sheet. these companies are really low on that balance sheet. we identify five companies. we are taking a look at these companies. the balance sheet does look weak on these. debt levels are the highest ever in ten years. keep that in mind. >> let's try to put this sort of in layman's context here. i guess the analogy when we talk

about the amount of debt that's been taken on versus what they're spending is kind of like a household where if you are going to repair or upgrade your home, you can either use cash or you can borrow money. borrowing money has to be paid back. many -- if i'm correct, these oil and gas companies were growing rapidly but they were borrowing to do so. >> that's correct. they borrowed -- as clearly we see the debt has increased. but another thing to keep in mind, it is okay to bother money when interest rates are very cheap. we actually took a look at yield spreads in the energy sector. yield spreads are about 10%. we are talking about a huge premium to borrow money right now. as the money dries up and these companies with distressed balance sheets look for new ways to raise money they might look at possibly acquisitions and companies with deeper pockets might look to acquire companies with weak balance sheets and the ability to withstand these lower oil prices for longer period of time. >> debt levels certainly are a concern and are a red flag. at the same time, as jeff currie points out in his goldman sachs

note today, it doesn't necessarily matter what the debt levels are. it matters what the cash flow is. that a lot of these companies can actually withstand the current pricing environment and have the cash coming in to cover those debt payments. do you think do a deeper screen and see which companies are actually in jeopardy of not making debt payments? >> we actually did. all the companies that we have had negative free cash flow over the last year. so when we talk about negative free cash flow, that's to your point, that means they're taking on additional debt and they're not generating cash to fund these capital expenses. given they're going to cut down on capital expenses in the coming year, but with oil prices at the rate they are at right now, these projects aren't going to be nearly as profitable as when they were first conceived. so once again negative free cash flow is something that we. screened on and these companies do seem to have negative free cash flow in the past year and i expect to continue to see some negative free cash flows going forward unless something happens to oil prices and they improve.

>> marathon, anadarko, devon energy, noble energy and continental resources. those are the names you have highlighted? >> keep your eyes on those. they have weak balance sheets. coming up in about 20 minutes, our exclusive interview with goldman sachs' top commodities guy, why he says the potential for oil to fall as low as $20 a barrel could be greater. it is the tale of two medals today. gold to a one-month low, copper and seven-week highs. george garrow and alan nutman. alan, talk about copper. the glencor news yesterday had an affect on the market but is it enough to right the supply situation? >> we will very to to see. usually these kind of things happen near at a bottom. we finally got a bounce.

it's been four years straight down, finally seeing a bounce. it is really a story of a market that's going sideways. between 240 and 220 last couple of weeks. at the end of june we trade between 250 and 265 and when we couldn't go any higher it broke down. be interesting to see if copper can get back above the 2.60 level which is the half-way point of this recent decline but i'm not ready to say there is a bottom in commodities yet but i think in the long term some of these assets can be banked for appreciation eventually you can look long enough term. >> alan, thanks for your analysis. gold is on pace for its longest quarterly losing streak since 1997. george, what do you see ahead for gold? >> well, for one thing this week i see two major events coming for gold. one of them of course is going to be on the 17th. the fed. but we have two other events that are very interesting.

i'm still on the comex board. i spent 35 years trading on the floors and i watch open interest and volume and higher and lower closes and these technical indicators are possibly showing me a bottoming action now in gold because i do think that once the news is out on the fed, we'll probably have a bit of a rally as all the bills have been driven out and all the bears in the woods have been gathering around gold lately. >> how big is the seasonal factor going to be when it comes to gold buying in asia this year? >> it is going to be a little bit less. that's reflected in the market now. india has been somewhat less because of the drought. india has also -- the modi government has been too friendly to gold. therefore, their shops were moving more silver than gold. and a lot of that business went to dubai.

however, i think there is a major change coming. i think eventually we are going to start to see inflation because of the low crude prices. right now low crude prices are moving the funds more into cash and they also are selling gold. now we have the gold dinner and we have the platinum dinner this week. the ipmi and the cme comex gold dinner, they're both sellout dinners and we are going to see a gathering of the major traders of the world here. >> george, have a great time at those dinners. i appreciate your time. george gero. >> we didn't get invited. >> no, we didn't. a symbolic vote to approve president obama's nuclear deal with iran rejected in the house today. it might not come to a vote in the senate. democrats are blocking on an up or down vote. back to the house, some republicans are delaying a vote to disapprove saying the white house is has simply failed to give them all the information in their possession as they have sworn to do. let's go beyond the politics of in he deal and talk about the

impact on the defense sector. a note today out focusing on middle eastern arms buyers saying national security needs an increase significantly with stresses on border security and the pending iran deal that further raises national security anxiety. peter armond, a rough ride for stocks over the past year but lockheed up 18% the year. raytheon up 3% in just the week. general dynamics up 11% in the past several months. what defense company, if there is one or two, benefits most from this renewed middle east arms race that we appear to be seeing? >> thanks, brian, for having me on. i would say raytheon by far has the most exposure because of missile defense and all the electronics that they provide for border security. but they all are benefiting. about one-third of the current backlogs of defense companies are tied to foreign military sales which you mentioned that we highlighted in the note today. the pace and anxiety i think of

activity out of the middle east is causing a new renewed activity of orders. >> as we wound down the afghani and iraqi war, people said the defense space not good to be in because those wars are winding down. but we have seen a massive build-up lately in the middle east. saudi arabia buying aggressively. how much action, how much sales, how much revenue right now is going to the middle east? >> so it is one-third of the foreign military sales. we highlighted today that the current pace is $31 billion so far this year. that in 2010 that same number was $17 billion. there's no question that the activity level out of of the middle east caused by a lot of this turmoil and the stress is going to continue. i think that -- clearly raytheon, lockheed martin, general dynamics providing a lot of armored vehicles are all going to benefit from it. >> is there any company that is not going to benefit. any one that missed the boat? >> no. for the most part. i mean it is a rising tide.

it is not just the middle east. look at what's going on in poland. poland just announced that they're putting 2% of the gdp to national security spending. that's going to provide tens of billions of dollars of order flow to the u.s. manufacturers. they'll want u.s. technology. i think it really is going to be a tailwind. you couple that with the fact that domestic budgets have bottomed out. >> peter, are you concerned about any contracts or orders will be canceled given the low price of oil, the continued low price of oil and what it is doing to the budgets in the middle east? >> clearly the budgets are under a lot of pressure, no question. we had discussions with raytheon last week and they said the actual amount of activity level has actually increased in terms of weapons spending or what they plan to buy. i think they're willing to dip into their reserves and they certainly want strong flashl security. >> peter, we'll leave it there but we do appreciate your time. thank you very much. for a very cool story on one

new weapon that israel and lockheed martin are making right now, go to our show page. when you safely can. powerlunch.cnbc.com. up ahead, why oil could drop to $20 a barrel. and what would happen if oil hits that price? plus, connecticut in the crosshairs. the growing battle between ge and the nutmeg state. and one stot getting a big upgrade thanks to lower gas prices. not a name you might think. we'll give you that name in "street talk" all when "power lunch" returns. while every business is unique,

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welcome back. let's get you caught up on some stock headlines on a friday. toyota suspending output at three japanese plants due to flooding. more than three people have died in japan due to eight days of heavy rains. zumiez miss iing guidance. they are pointing to higher promotions during back to school shopping. a handful of stocks hitting new 52-week lows in today's session. among them -- tiffany, murphy oil and joy global. this summer for the first time ever in new york state five companies were awarded licenses to offer medicinal marijuana manufacturing facilities and dispensaries. there are rules. all products must be grown in new york and will likely be on sale by january 1st. kate rogers is live in union scare here in new york city with

more on this. kate. >> hey, melissa. that's right. one of those award winners is based out of illinois and was founded by two husband-wife duos that come from legal and business backgrounds. it is a growing trend we are seeing of more business professionals jumping into the cannabis space. they were selected from a pool of 43 applicants. each will open up one manufacturing facility and four dispensaries across the state. they will manufacture in upstate new york and one of its dispensaries will be located in the bronx and they were also the top scoring applicant in new york. >> we believe very much that it's important to provide education to communities, to physicians, to patients in terms of what the program is all about. and that's something that we incorporated into our application. >> 23 states and washington, d.c. so far across the country have legalized marijuana for medicinal use but in new york

state you can't actually smoke the drug. here in union square, in a few months a medicinal marijuana dispensary will be opened up right here. >> kate rogers, thank you very much. up next -- the five big stock calls that need to be on your radar this friday. we call it "street talk." it is on deck. we are just minutes away from our exclusive interview with jeff currie from goldman sachs. he's bearish on oil and says $20 a barrel is actually a possibility. we'll press him on that and talk about the difference between investment grade and high-yield oil companies. a lot to discuss. that exclusive in a few minutes. do not miss it. >> announcer: the cnbc realtime exchange market snapshot is sponsored by the interactive brokers. time for friday "st

talk," getting analysts

recommendations that you into ed to know about. melissa, stock number one is marvell technology. they disclosed an investigation into their accountle. susquehanna investment group downgrading the stock to neutral. calling it "unownable" during such an investigation. target cut to 9 but they note the down side risk to $7 which is nearly $2 lower than even the 17% off yesterday's price we're seeing right now. >> wow. that stock chart was just a double from where it was now in february. that's how far the stock has fallen. amazing decline there. stock number two, petrobras. estimates cut on top of yesterday's brazil credit rating account, that's the second cut and that officially makes pbr credit high-yield. it is also dealing with low oil prices and a massively deappreciated real.

>> this has been an ugly story. down 73% over 12 months. stock number three, another oil company. chevron. jpmorgan upgrading to overweight from neutral. they think the stock is fully discounting the bear thesis around their projects and the dividend cut risk. they note sell side pessimism is at a decade long high. analyst calling the balance sheet "top tier" and says the risk of a dividend cut is near zero. >> you got to wonder how this sits with goldman sachs' call that oil could go down to $20. would a interesting that earlier this week credit suisse said chevron was interesting in mega cap oils but still not in value territory. >> just a quick note -- i had dinner with a market technician last night. he thinks oil and oil stocks are

going to be in a 10-year bear market. negative for a decade. i'll try to get him on the show to explain the case. casey's general store getting upgraded by bmo. new price target of $105. first quarter results were strong, traffic was up. improvement by the stores and the premium brand cigarettes because consumers have a little extra money in their pockets. >> study after study shows what people do the most is they drive more when gas prices go down. if they're visiting casey's more it would imply they are driving more. i guess smoking better cigarettes. >> if they can be better. >> stock five, your always under the radar name. today it ismonolithic. piper jaffray starting coverage at overwoith.

analysts focusing on high-growth, high-value markets. the company's operating efficiency. it's about 20% upside the target. >> this chart has been had an may amazing run. it was a $10 stock in 2011. >> all of these little chargers we have to keep buying. that's it for "street talk." on the other side of this break, our exclusive interview with jeff currie, goldman sachs' head of commodities. we'll talk a little bit about oil. you may have heard something about this call. stick around. rd. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade.

you got this.

hello, everyone. i'm sue herera. here is your cnbc news update at this hour. a security guard shot and injured a man who stabbed a woman inside union station. that's according to d.c. police. the stabbing was believed to be a product of a domestic dispute. the train station was briefly cleared while police and emergency crews rushed to the scene. everyone though was eventually allowed to return.

at least 87 people were killed and 184 injured when a crane collapsed in the ground mosque in mechanica in saudi ar. the annual hodge pilgrimage takes place this month. protesters threw rocks and battled police protesting the ban of the slaughter of cows and sale of beef. the greek elections take place on september 20th. the final oil trades are starting to cross for the day. wti is down by 1.8%. how does it look into the close here? >> i thought we might be able to

get closer to $45 a barrel but $44.83 is where wti is trading right now. these last couple of minutes can be very volatile so we'll see exactly what happens here. but the range, $44.16 was the low. only $1.60 whereas we've been seeing these larger swings during the day. for the week looks like we'll finish 2% lower for wti but still up 4.5% on the month. back to you. goldman sachs rock being the oil markets today. their commodities team putting out a note saying they expect oil to be around $40 a barrel in six months. but they add that given the global over supply and increased production, they say, "while not our base case, the potential for oil prices to fall to such levels, which we estimate near $20 a barrel, is becoming greater as storage continues to fill." here now for a cnbc exclusive, jeff currie, head of commodities research and goldman sachs. people saying that you guys were

long a couple years ago, you made the $150 call. now you are calling for this big drop. why are you so all over the map with these price targets within a number of years? >> the last time we had $150 price call was all the way back to 2008. obviously the market ran up in early 2008 but then got hit by the global financial crisis in to the end of 2008, early '09. however we maintained a bullish outlook because rights of in the long-term secular trend. clearly what occurred in late say 2012, early 2013, the markets began to shift. i want to emphasize that's also correlated with what happened to the dollar. when you look at when oil rolled over last year, so did the dollar. we have a macro repricing going on here. that's one of the key drivers behind our -- >> that's big part of your thesis then. u.s. dollar. if our viewers and listeners are watching oil, they're invested in an etf or the commodity itself, they need to watch the dollar. >> absolutely. not only the dollar but you even need to watch other commodities. iron ore, steel, copper. they're all under pressure right

now which lowers the cost basis and completely creates a deflationary impulse all over the world right now which again puts more downward pressure on commodity prices. >> when oil fell to the $40s, then want back to the $60s, you guys have been right in the long term. but when people this morning saw that $20 number, that's when the freak-out began. how much of a likelihood do you put -- is that a 2% chance? 20%? >> i think the title of the piece we put out was "searching for a new margin of adjustment." meaning there is a lot of uncertainty on what lever will create the rebalancing in the market. it could be u.s. production. $40 a barrel is where our base case is set is the levels at which you see a drop in drilling. we saw today in terms of the rig counts. however, if you don't bring u.s. production or global production down low enough underneath demand tocreate that

rebalancing, you are likely to run into storage demand. that creates pressure. i don't think anybody can put an exact figure. we believe less than 50%. >> less than 50% chance we get down to that low. what you mentioned in your note -- this is the big mystery in oil. people say when prices go down, a, drilling activity will go down, wells will drain faster because of new fracking technology, and maybe we'll see some bankruptcies, therefore production will fall and prices will stabilize. we haven't seen that yet. how long can this drag on? >> i think that is the critical point. the adjustments have not occurred that are significant enough. you look at opec. low cost production. continues to surprise to the up side. even non-opec. xufs where we expected to see some declines in production has surprised to the up side. i think it goes back to that fx point. weak currencies around the world are encouraging increased production, not reduced

production. in the u.s. information is very mixed. the question is how long can this go on? we estimate at this point right now the surplus is so large that we cannot focus on that high-yield group anymore. they're not large enough to create the correction in the market. the correction needs to come from healthier companies that are more financially secured and more investment grade. that's going to mean lower for longer to meet that correction. >> if i hear you right, you're suggesting if we're waiting on venezuela or russia or nigeria or saudi arabia to cut their production, we're going to be waiting a long time because they need the monomore than our companies do, and therefore this production and supply balance that we are waiting for is only going to come from one place, and that is the united states. >> i'm not going to say that. we don't know. again, the size of the correction is enormous. we put it at 800,000 barrels per day next year. that's nearly 1% of global supplies that need to be taken out. that's going to be difficult.

u.s., at best, maybe does somewhere around 550,000, 600,000 barrels a day. you still need another 200,000 elsewhere in the world. if we do blow our storage, it's temporary. you bust through cash costs -- >> i'm sorry, melissa wants to jump in. that's your thesis on the $20, is that if we fill up all the tanks in cushing, oklahoma and everywhere else, you can't just like let oil spill on to the ground. you've got to sell it to somebody and those are going to be fire sale prices. that's the fundamental basis -- >> absolutely. i want to emphasize how different it is from metals. all you need is a parking lot, chain link fence and a guard dog, you are good to go. you stack the metals to the moon. energy requires expansive storage tanks and once you exhaust them, you have nowhere to put that oil. >> in terms of where the production cuts may come from, sounds like you want them to come from the mega cap oil

companies. at what price were exxon-mobil, chevron or the like be incentivized to pull back production significantly? >> no. strong balance sheets producers out there like exxon-mobil and chevy von chevron we don't see making the production cuts. it is going to be in the higher cost players. one thing about the integrated oils, they have strong balance sheets but they have some of the higher cost production out there, the lower quality assets. the weaker balance sheets on the other hand have the higher quality assets like the shale plays. that takes out the non-linearity that exists and reinforcing this idea lower for longer. it took us a year-and-a-half to go through those stronger balance sheets which is going to take a lot longer before you actually get to the lower cost, weaker balance sheets that like u -- u.s. e and ps. in '96 when we came off, it was

'86 to '98s with the super mar juro -- majors. it will take some time until we see a rebalancing of into es capital markets. >> earlier in the show we had a segment on defense sales. there is a rearmament going on in the middle east. yemen. saudi arabia. the iran deal is a flash point. could you be wrong in your thesis if something goes wrong there? is that the biggest sort of black swan for you? >> i'm not going to say it's the biggest. but i do want to say that it's been diminished. why do i say that? geopolitical risk has never been higher, but oil at risk has never been lower. >> why do you say that? >> reason why i say that, we look at libya. production's off. look at iran. production is already diminished because of sanctions. nigeria, production's been ravaged since 2004.

venezuela. list goes on. growing production in the region is iraq and saudi arabia. security in iraq was proven to be quite strong when isis went down in the south. lots of jvs and production corrected there. >> the markets should balance out, why is there such a gap between supply and demand? is it because everybody's looking out for their own interests? used to be opec had this sort of hammer around they would come down once in a while and everybody would get in line and we'd balance out. now everybody is kind of just pumping what they want, whether u.s. e and p, or iraq, nigeria, or russia. is it sort of an unbound world for oil right now? >> two reasons. first is this is a supply shock, not a demand shock. every other price decline we've seen since 1986 was a demand shock. >> demand is not shopping. if it is, very small. >> second reason is what shale has done. this is one of the core tenets

of the new oil order. have you a flat supply curve. shale has turned into a very competitive industry. what this does is it neutralizes capability to run a cartel. all of opec members are very arare aware of this. start growing capacity. right now saudi arabia has record rigs in the field. i think that's really an indication. >> we got to let it go but it is just incredible, like the deeper -- like venezuela, the deeper you get in trouble, your currency falls, you need to produce more to counter your falling currency so you fall deeper into trouble. that spiral is very difficult to stop, is it not? >> that's what we call the negative feedback. it is applying to all of these emerging markets that produce commodities. brazil is another case that's experiencing it right now. >> jeff, cnbc exclusive, thanks. >> all the best. what if jeff is right and oil hits that worst case scenario, storage gets full and

we drop into the $20s. up next, we'll walk you through what could happen both here and around the world if that occurs. can a business have a mind? a subconscious. a knack for predicting the future. reflexes faster than the speed of thought. can a business have a spirit? can a business have a soul? can a business be...alive?

so here is a look at what

could happen if oil does hit the $20 or $25 a barrel range. again, goldman sachs not saying it will. saying it is a possibility. firms the bad news. there is a lot of it. one, you're going to have more bankruptcies and mergers. we've already had a few. given the price for some companies to bring oil out of ground is $50, $60 or above a barrel, you'll have losses and bankruptcies. two, could texas or north dakota fall into reception. texas not as likely. they're much more diversified. but north dakota, this would be a big blow. the third fact, if venezuela or russia sovereign default, the cost of debt to both countries is up. watch these countries in particular. four, wind and solar development could be hurt. higher oil and gas prices push investment in new energy tech

follow giz. lower prices long term could have the opposite effect because people won't be looking for alternative technologies, especially in the auto sector as much. it's not all bad. if oil goes down that low, the good news is this -- gasoline prices would fall in many spots around america to maybe 15-year lows. in fact, the last time oil hit $20 a barrel was back in 2002. gasoline then was at about $112, on average, at the pump according to the federal government. if you adjust that up for inflation, it would be about $1.50 per gallon in today's dollars. that's 80 cents less than average price nationwide. with all eyes on the upcoming fed meeting, which sectors could see the biggest moves on a big decision? let's ask the "trading nation" team. andrew berkeley of oppenheimer, and stacey gilbert with susquehanna. andrew, how are you positioning yourself and your clients ahead of the fed meeting? >> yeah, brian. if you think in terms of can the

economy support a quarter basis point increase, i think the answer is yes. but will they go is really the question. we don't think so. we're leaning more towards latter part of the year. to me it is all about inflation expectations which really get back to what you are talking about in terms of oil prices. if oil prices are $10 or $15 lower in a couple months, i don't think even maybe they go at all this year. so to me the risk is especially that it is longer, not sooner. but the sector that i like and i think could benefit from all this is financials. financials rates have been kind of sitting in a range right now. i think anything -- even if they don't go next week, there are going to be going at some point relatively soon and that should push up rates eventually which would help the financial sector. that kind of would be my sector recommendation around the fed meeting. >> stacey gilbert, what is the options market, what you focus on, telling you about fed expectations? >> hey, brian with be how are you? not surprisingly, the options

market suggesting that next week's fomc meeting could be potentially one of the most volatile that we have he a seen in years. if we look at s&p 500 options, it is pricing at a move of $2 2% for a wrone-day move and somethg we haven't seen relative to the fed in quite a while. what's interesting given andrew's comments, we have seen an increase in what i would call crash protection. i want to stress this is not a bearish trade but i do think that prfl manaortfolio managers investors are being loo being at their portfolios saying what if. i want to be able to sleep at night. we haven't seen this increase of crash protection over the last couple of years. this is one of the biggest increases we've seen. i do think there is a lot of uncertainty out there. . the market is pricing it in as a notable event and investors are definitely looking for some protection. >> we are less than a week away from that fed meeting. for more "trading nation" head to tradingnation.cnbc.com.

up next, the battle brewing between big businesses and the nutmeg state. talking big taxes in connecticut. >> announcer: and noup the latest from tradingnation.cnbc.com and a word from our sponsor.

that music you hear the thing of the hartford wailers, what some would say were better days in the nutmeg state. jeffrey immelt was asked about the possibility of ge moving its headquarters from connecticut to a state with a more business friendly tax policy. you fed up with connecticut? >> listen, i think we're a high-tech exporter. we want to be looking forward in a place that's going to be supportive of where the company's going. we want to be someplace where people support job creation, what's attractive to talent,

good cost of living, and that is very supportive in terms of what a high-tech exporter has to be all about. it is a global battle that we're in and we need people on our side. >> ge employs 800 people in its headquarters along and nearly 6,000 employees across connecticut. what should connecticut do if they want to keep ge? scott cohn, start off with you. every year you report on top states for business for cnbc. where does connecticut stand in all of it? >> reporter: well, it's interesting that jeff immelt is talking largely about cost of doing business because our research has general lip sholy that businesses are sort of moving away from that and concentrating much more on workforce. here's how connecticut's done overall. that workforce helping connecticut finishing 33rd but the state has never done well overall and it has a lot to do with the costs. where it does poorly, access to

capital. surprisingly perhaps for a place that houses so many hedge funds. where does it do well? workforce climbing to fourth place this year. a lot has to do with the fact by the numbers, connecticut workers are productive. a lot of economic output per job that probably has to do with the hedge funds and insurance, things like that. good for education, good for quality of life. decent for tech and innovation. for the overall economy, sort of in the middle. if ge is looking for low-cost states, these are the lowest, indiana, kentucky, mississippi, arkansas and south dakota which was our america's top state for business back in 2013. >> i want to go to you because you make the point taxes aren't the only reason why companies choose a place to be. scott neatly outlines the other pluses and minuses in

connecticut. where do taxes fall in the scheme of things according to your research? >> the research tends to show taxes are not a factor businesses consider all that heavily compared to more than more fundamental factors like education and infrastructure. taxes fall in here is taxes pay for those things. it's i not an accident that connecticut has a very well educated work force. they paid for that with good schools. the connecticut budget this year are focusing on the tax side of that. that also makes major new investments in infrastructure so hopefully it will be less lousy than apparently it is now. >> we are talking about headquarters and having physical people there. it's got to be a major factor or we wouldn't have this debate about inversions, right, steve? we wouldn't be talking about companies moving headquarters domiciled overseas. >> you have a competitive situation among the states. connecticut has certain

advantages like intelligent work force and good schools. other states are catching up. this whole debate or discussion about general electric started because they have threatened to leave the state because the state is putting in place its second big tax increase in the last four years. even neighboring demonstrates have not done that. so connecticut, i think, has a spending problem. >> scott, we've seen this where a big company threatens to leave a state and the state bends over backwards. how does that usually end? >> it depends on the company and state if you look at tesla where it had states bidding against one another and settled on nevada for its big battery plant, that came down to money. the incentives nevada was willing to give. indiana was best because it's giving out incentives. you look at texas that has low taxes, it's an expensive state or in the middle of things for

the cost of doing business. there are high property taxes, high utility costs. it depends on the company. the thing ge has going for it, it could probably do business just about anywhere. it can attract a work force anywhere. it has presence in most of the states. they have a lot of leverage. connecticut has to decide how badly they need these 6,000 or so employees and how badly they need bragging rights. >> harry, you made the point that taxes aren't the only thing yet it does sound like incentives play a major role. the wave of companies that sought tax inversions to seek lower corporate tax rate abroad. are there certain kinds of companies for which taxes don't matter and companies which a move because of taxes might matter? >> steve hit the nail on the head. it depends on the fundamentals. how easily can you attract a quality work force? how much do you need quality infrastructure? how important is quality of life to your employees?

a the love things often are important. this whole debate reminds me when sports teams threatened to leave and the public built a new stadium. it's important to remember ge and other companies that talk about leaving a state with lower taxes have a self-interested motivation. it's a good way to lobby to lower your threat bill to threaten to leave. states need to avoid a race to the bottom where no corporations are paying taxes to anyone. then there is no tax base left to fund schools and roads that we need to have a good business climate. >> guys, thanks for your input. it's a good discussion. we'll be talking about this topic a lot in the future. >> great discussion, thank you. from smelling socks with frank o'hara to the hunger games of computer wizzes. jane wells has more. >> because you have your fancy science degree from stanford doesn't mean you're the best in

the world. a whole new way to recruit the best programmers.

breaking news from the world with of sports. there will nobody calendar year grand slam in tennis because serena williams just lost to unseeded roberta vinci of italy. i'm going off the top of my head here. she won the first set i think it was then 4-6, 4-6. serena williams out at the u.s.

open. she was going for the first calendar year grand slam since steffi graf did it in 1988. >> a massive coding competition kicks off today. it's like the hunger games for computer wizzes. let's get to jane wells with more. >> a lot of women. you would be surprised. the race is on to find the best coders in the world and get m e more. recruiters don't have time to get rounds of interviews. they found a new way to recruit, games. attacking several challenges tackling, testing their computer science skills like this one.

amazon, target, zenefits. they play hackerrank half of what they would pay to traditional recruiters to have access to these contests. >> pedigree and resume aren't as relevant as they might have been at one point. >> programming is a sport. programming is a sport. the fact you can just get better at it by practicing more and like computer with people better than it makes you a better programmer. >> we talked to one past winner from brazil over skype. he is now in cornell getting his ph.d.. >> i went to school for undergrad in brazil on a not very well-known university. i got a lot of offers because of things like hackerrank. >> do you think it helped you to get into cornell? >> yes. definitely.

>> the most extreme example, there is a programmer now working for a big bank. when he entered the hackerrank contest he was working in a nail salon. >> if i'm wrong and jennifer lawrence shows up in a red leather outfit, i'll smell your socks, jane wells. >> i'm not smelling anybody's socks. have a great weekend. "closing bell" starts right now. >> thank you. hi, everybody. welcome to "closing bell." i'm kelly evans. a little devastated about serena williams' loss. >> some of us have tickets to tomorrow's women's final. >> what are you going to do now? >> watch two italians to beat it out to try to win the u.s. open tomorrow. won't that be fun? congratulations to both of them though. i'm bill griffeth at cnbc headquarters. i'll be doing "nightly business report" tonight. hope you can join us on pbs. goldman sachs saying the poteia