"halftime report." thank you for having me. >> it's been fun. "power lunch" begins right now. >> good afternoon, everybody. welcome to "power lunch." i'm tyler mathisen. >> i'm down here at the new york stock exchange. what a volatile day it has been. let's bring in bob pisani. it really feels faz what is going on in the stock market and tracking what is going on in the oil market. and this recovery that we've seen in oil prices, whether it's a bounce or not, who knows? but people are remarking upon it. >> it's a very difficult morning overall. what we're seeing here is very, very choppy trading. take a look at the markets in the middle of the day. i want to point out how difficult overall it's been here. 3-1 decline to advancing stocks. we started out the morning 10-1 declining to advancing stocks. new lows are expanding, 327. that's in one in every eight

stocks at the new york stock exchange. vix is about 17 right now. we're having a rough day, mandy in the airline stocks and all of the transports. take a look at the big airlines, southwest this week, their passenger revenue for available seat miles is disappointing. guidance is disappointing. that is weakening all the airline stocks. they have all sorts of other problems. put up the other transports. we have new lows in a lot of the railroads. these are new lows across the board for a lot of these contribute stocks. industrials themselves also had a tough time. cat pill area, of course, is suffering all year. that is down 20%. all these big global industrials, mandy, all down 15% to 20% for the year. now the choppy trading in oil is very interesting. we had up and down session in oil. look at the xle, the oil stocks, the etfs for oil, it was down very early on. it came back a little bit in the middle of the day. and right now sort of right in

the middle of the trading range. it isn't all bad news. home depot is having a very good analyst day. autozone had excellent earnings report overall. and those two stocks are consumer names that have had a great year. look at autozone up 20%. they're benefitting from all of this. earnings were up 14%. there are stocks out there that are doing really well in the consumer space. we're all very focused on this collapsing commodity. >> right. to use the proverbial, it is a microsoft picker's market. look at the s & p which is back in negative territory today for the year. over the past year, kind of like a little bit up and down. but we're kind of flat, aren't we? >> the problem is that we're lacking any kind of leadership right now. and rightly concerned about commodities. >> okay. back over you to, tyler. >> thanks so much. let's go out west to brian sullivan who is at the

california summit and has a very special and timely guest. >> tyler, thank you very much. we're joined by the chevron ceo john watson for a exclusive and rare interview. thank you for joining us. >> thanks for having me. >> let's start with the basic question, what the heck is going on with the price of oil? >> this is a very turbulent time in our business. it's not uncommon. we see the big exertions up and down. we have too much oil in the market, prices are coming down. it's going to take some time for that market to correct. we're producing more than we need in simple terms. >> do prices deserve to be at $38 a barrel? >> what we've seen is saudi arabia increased their production. we have the miracle of hydraulic fracturing in the u.s. we have iran growing production. iraq is growing production. as an industry, we're producing more than market is demanding. we have a slight imbalance in

demand. it will take time to work that off. >> that's the big question that our viewers have which is the world is oversupplied with oil. yet, everybody seems to keep producing more oil. product that's fallen 500 barely as day in the last six months. hundreds of billions of dollars are being taken out of the business right now. but what you're also seeing is some companies are finishing projects that are under construction. so that's temporarily adding to supply. once those projects come on line and people absorb the current prices, you'll see production drop in many parts of the world. >> do you believe that? every time the u.s. comes down, maybe iraq goes up. or iran goes up or russia goes up. we have 11 million out of saudi arabia that we know of. there are countries and companies that need to keep producing. why are you so confident that we'll see supply drop?

>> there is a natural decline that takes place. as you pull investment out, oil fields decline over time. every country has to make choices. manufacture the countries have a choice between meeting the fiscal needs and internal needs in terms of reinvesting in the business. i think that capital will gradually withdrawn. and we've seen that happen in the united states. the market and investors do respond to the price incentives that are out there. we will see production come into balance. >> one year from today, oil prices where? i think we see the forces at work. if you look at rig counts in the united states and what is happening in the united states which has been a big source of the increase supply worldwide, it is declining in the u.s. i think you'll see that take hold elsewhere as governments are stressed with where -- with their financials. >> you made the biggest case that the oil bulls make and the

decline rate of current wells is much faster when they are fractured. we've been hearing that thesis for a better part of the year and oil prices must turn higher because of. that obviously, they've gone down. how fast is that decline rate for the wells to where we might need a drawdown in actual -- not drilling rigs, but actual production? >> we're seeing it now in the balkan. we're seeing it in the eagleford. but in aggregate, u.s. production is declining. so we're seeing it take place today. i expect you'll see the u.s. which is producing maybe a little over nine million barrels a day now, down from 9.6 earlier in the year, it will be in the eights next year. so that will help the market balance. meanwhile, demand is growing. so what i know is that there aren't very many investments that are economic. so natural decline will take over. you can debate when markets will come into balance and there is some spare capacity that could be put on the market in iran and

saudi arabia. but if you look at a worldwide level, spare capacity worldwide is at one of the lowest levels in 30 or 40 years. so it's going to take a little more time for markets to come into balance. >> do you think we'll be above $60 this time next year? you say higher. will say number that matters to you guys. >> there is. but we're prepared to live with whatever prices the market gives. we don't publish our forecast for prices. we have a range of prices that we look at. we're preparing to live with prices at whatever level. we made some sharp reduction in our capital spending. we expect it will go lower in 2017. so we'll finish the projects we have. we won't start many new projects now and fund short cycling investments that have a good return. and that will enable to pay the dividend and get the financial house in order. >> if oil stays at these levels,

will you have to undergo another round of capital spending cuts? >> we've given a range for capital spending of $25 billion to $28 billion in total. i believe we'll operate in that range. for the following year, $20 or $24 billion. there is some discretion that we have depending upon where prices are. but fundamentally, we're going after reducing costs and we're going after reducing spend in order to live within our means and get ourselves into a more of a balanced position financially. >> it is possible that another round of cuts could have to come if oil does not recover? >> well, certainly. we have to live within our means. so if we see lower prices for longer, we respond to them. what's not known is where costs will go in our business. we've seen costs come down in our business. but if you believe that our products are going to be needed over a long period of time and i do, if you believe that demand is growing, there are going to need to be investments in oil capacity made. and so supply and demand costs and rev knees will coenues will

balance. we're a believer in our business. it will be a tough couple of years. >> is the dividend safe? >> that is our number one priority is to pay the dividend. i made that very clear. our shareholders value that dividend. we generate enormous cash flow even in low prices. so we're going to do what we can to cut future spending. but the dividend is something, in fact, we increased 28 years in a row. so pagan increase in the dividend is a priority, certainly a priority for me. but we have to live within our means. we do need to invest in the future so we can continue to generate earnings and cash flow. we certainly have to get balanced financially in the short run by using spending discretion. >> i think that's the hard part that people have to square, john. there are job cuts but the dividend is safe. how do you square those two things? >> the cuts we're making in spending are really decision that's are based on the economics of the projects going forward. we are going to keep -- we worked very hard to develop people over time. we're going to be very careful about what we do on the people side. we know there will be an upturn

in this business. there are projects that we may not be choosing to fund today but it doesn't mean we're abandoning the projects. keer delaying prot jekts. so we'll need the foam develop those projects. but in the meantime, we are make something choices. we are trying to get our costs in order. >> there is kind of a semisarcastic saying in the oil industry, all the money is made in the down turn. and in the last down turn you were very aggressive buyers. are you a buyer now? >> well, right now the priority is finishing the projects under construction and getting our financial house balanced. our business is one of acquisiti acquisition. we acquire leases and develop them. we acquire discovered resources and acquire that and we acquire companies in the past. i suspect going forward that is something we'll consider. we'll look for a meeting of the minds with sellers. m & a is always something we're looking at. it's not my first priority now. >> bankers i talked to in the energy space said right now sellers are asking for a little

too much. is the market rational for energy m & a? >> you always have this debate between buy aernz sell berz what a fair price is. our view right now is at the things we're looking at, we're seeing prices are too high at this point. and so we've been on the sidelines. and focusing on the internal things we can focus on. a time will come when we'll see a better balance, i'm sure. >> do you believe that if this price continues that we will see a wave of bankruptcies? >> the small companies and medium sized companies have proved to be resilient. one thing that low interest rates have done is there is a ton of money out. there people are more than willing to put it in our business. >> rates are likely to go up next week. >> they may. but on a relative basis, interest rates have been fairly low. people have been chasing yield, chasing opportunity. and so a lot of money is poured into our business. if prices stay where they are, there are a number of distressed

companies out. there i direexpect that there w be opportunities that come out of. that on the other hand, these companies have proved to be pretty resilient. the financial community has money available in many different forms. i suspect some of the small companies will find a way to navigate with creditors through there difficult time. the one thing i know is if you're servicing debt, you're not investing and drilling oil wells. i think it will be very difficult. rig counts are falling. the stress is becoming more acute for small companies. >> is opec powerless? >> i say that they're not -- they haven't acted as a cartel for many years. there's a great deal of potential discretion that could be applied. but remember, opec only produces about a thirdst oil in the world today. that's down from 50% a generation ago. the only one with spare capacity to speak of is saudi arabia. collective action by opec would seem to be unlikely given the largest producers outside of saudi arabia are russia and the

united states. and there's a lot that is produced else. where. >> do you think saudi arabia did a market share grab that they're willing to hurt themselves just to put some american companies out of business? >> i don't think they're trying to put people out of business. i think what they're saying is shale oil is remarkably resilie resilient. there are others investing over time. why should we keep so much spare capacity in opec hasn't kept spare capacity. saudi arabia has. they invested billions of dollars to keep spare capacity for their, frankly, to keep prices from rising so they can put more oil on the market. they're now saying there are other forms of oil out there. we're going to get our share. >> are you surprised by the price of natural gas? did you plan for this? >> we did not expect to see prices where they are today. it's a gift to the american people. and a lot is talked about oil and oil pricing in the world. natural gas prices are very low in the u.s. today. it doesn't support drilling

either. and so prices are low. it's terrific for the gas export business in this country. it's terrific for investments in manufacturing capacity if we can get the permits to do that if other businesses. but it's been surprising to see how low prices have gone. >> how about the impactst u.s. dollar on chevron's business? >> well -- >> a lot of people did not realize and dinlt realize that you're more exposed to the price of brent crude than wti crude. the dollar is on the asent. >> the dollar has a number of impacts. at the highest level, our revenue is generally in dollars in our business. we benefit from that. what happens is when the dollar gains relative to other currencies, costs can decline in those markets. you can see -- you can see costs come down not from negotiating between venldors but just the fact that currency is cheaper in these countries. we've seen that in russia and we've seen that in some other countries. that low currency keeps costs of development lower in some

countries. >> if there was a perfect price for oil where you made money, the industry kept expanding to keep jobs going but gasoline was low enough that the consumer wasn't pinched. what would it be? >> the right price is what the market determines it to be. i'm a free market guy at heart. we have seen volatility in our business. we've seen ups and downs. we have to get better as a company at managing and seeing it coming. the right price is what the market gives. >> i lied. one more question. i forgot to ask about iran. do you expect iran to come on in any meaningful way? >> iran stated an intention to increase production by mailon barrels a day. we have to see what they have. they have to get through the sanctions period of time first. i expect they'll increase production in time. how much remains to be seen. >> you would operate in iran? >> we don't talk about iran today because we can't operate in iran. we're under sanctions today. we're not able to invest in iran. going forward, anyplace where

there are hydrocarbons and where our government encourages us to invest and live up to the standards of our investors and our values, we'll consider. >> john watson, chairman and ceo of chevron and exclusive interview with cnbc. we appreciate your time. thank you for being so patient. >> brian, thank you. >> back to you. >> all right. brian, thank you very much. fascinating conversation with john watson of chevron. a lot to think about and mull over there. meantime, let geese to scott he coulden with a news alert. >> we've been reporting on this vast troeb of new documents vofrg the most popular bolt action rifle in the world, the recommendington 700. these documents coming to light on the eve of what was supposed to be a hearing final approval of a nationwide class action suit involving 7 1/2 million rifles. that hearing schedule ford monday in kansas city has just been postponed. the judge in the case in missouri is concerned about the

low level of response to the settlement offer which has been out there for several months. only 2300 people thus far have filed claims. so he is telling both parties they need to come up with a better way of notifying the public. the judge writing in an order just entered that court cannot concede that an owner of a defective fire arm would not seek the remedy being provided under this settlement. so everything is on hold. everybody is supposed to come up with briefings after the first of the year. our special report, recommendington under fire, now online. cnbc.co cnbc.com/remington. >> a quick question this goes back to your original reporting some years ago on the special you just mentioned about a defective -- was it safety mechanisms and trigger mechanisms on the guns? and i guess what's happened here is that judge is not satisfied that the manufacturer or the lawyers have got to enough people to solicit their participation in the class

action suit. >> that's right. the allegation is that these guns are prone to firing without the trigger being pulled. sometimes when you switch off the safety or touch the bolt that guns go off. there are allegations which the company continues to deny, that this has been covered up and has caused injuries and deaths. again, the company says there is not a defect. and that was going to still be the case under the class action settlement. what the judge is concerned about and critics are concerned about and we talk about in our update to our special report, people will be lulled into the idea they don't have to get the triggers replaced even though the company is offering to do so for free. >> thank you very much. mandy, back to you. >> thank you very much. supposedly under pressure right now a new big headache for the mexican fast food chain. morgan brennan is live at a location in new york city. hi there, morgan. >> hey, mandy. so the outbreak that affected nine states, investors are steering clear of shares of

chipotle. is that the case for customers? s are free to realize a plan to fit your family's unique needs. we'll listen. we'll talk. we'll plan. baird. i'm in charge of it all. business expenses, so i've been snapping photos of my receipts and keeping track of them in quickbooks. now i'm on top of my expenses, and my bees. best 68,000 employees ever. that's how we own it.

welcome back. we're starting to lose our morning recovery. we were in positive territory after the revolverry in morning trade. wti is at 37.49 a barrel. we did early in the morning get below the $37 mark.

so let's see if we head back down there. at the moment, we're losing by .5%. we're keeping our eye on that. >> all right. fantastic. let's move over to chipotle. the shares recovering earlier. but there is a new problem for the mexican fast food chain. a number of people getting sick after eating at a location in boston. apparently, it's not e. coli this time. morgan brennan is live outside a chipotle in new york city. >> we don't actually no, there is no confirmation whether it is e. coli or not. some of the indications, some of the indications are leaning towards noro virus. 80 students now, that is up from an earlier count of 30 at the college have reported gastrointestinal symptoms after eating at a boston chipotle. that store is closed and continues to be closed. the company looks into that incident. a spokesman says it is a noro

virus which is the direction that health officials in boston are moving. they are testing the students for norovirus and e. coli. it will take two days for the results to come back. this could be an isolated incident in boston at a specific restaurant location that it may not be linked to the broader e. coli outbreak that affected -- that is tied to cipotle in nine states. but here in midtown manhattan, we caught up with a number of consumers to see how they're reacting to all of these headlines about e. coli at chipotle. do you eat there regularly? >> we used to. me and my family used to go there all the time to get dinner. >> what changed? >> the quality and also just the scare about e. coli. >> they have a sanitation -- they have that grade already. if it has an a, then i guess i can trust that. >> i'm not a regular. you know, the next time the spirit moves me, i'll think

about it. >> definitely some skiddishness. folks are aware of the situation. this e. coli situation, this e. coli outbreak with chipoltle. as you take a look behind me, it may not look busy now. but during prime lunch hour, a lot of people going in to get their burritto fix at this location. a lot of folks do know what is going on or somewhat familiar with it. but it's not stopping them from going into this store. but again, looking at the situation in boston, may not be linked to e. coli. all the early indications are this could be unrelated. it could be tied to a norovirus outbreak. >> thank you very much. we're calling it the 12 days of fedmas. >> day seven. the seventh day of fed-mas. we'll tell you how technology stocks may be winning trades if interest rates start to rise.

welcome back to "power lunch." the dow is down almost 200 points. once again losing steam. we're more than half way through the countdown though of the fed related trades or leading up to the big fed meeting next week, on the 16th. today is the seventh day of fed-mas. >> so we're over the hump here. seventh day of fed-mas. we took a look at possible

winning trades in a rising interest rate environment. janet yellen sent to me seven socks of swimming. socks referring to the philadelphia semiconductor index. according to the data partners, during one month periods of rising interest rates since 2005, some stocks have actually traded positively f we do end up seeing rising rates here. so if history does repeat itself, there could be a historical performance. not necessarily predicting future performance. look at micron technology. it's been beaten up a lot this year. it is down marketedly so. in the past, it's been a winning trade 77% of the time with average gains of 14% if rates rise in a one-month period. outperformers include names like skyworks solutions and nvidia. the etfs and the market semiconductor etf have fared

well in those environments as well. so soxx are swimming. you get that part of it. that is just that part of the story. for more on the previous days of fed-mas, can you go to our website. all the previous days are on there as well. tomorrow we'll take a look at day eight in some of the winning trades there. back to you. >> all right. thank you. check on the bond market now on the back of that three year note option. rick santelli is covering it for us at the cme. rick? >> yeah, tyler, you know, we have that great interview with chevron and sully. so we were all glued to. that the three year note auction gave it a b plus. really was a solid auction. and if we think $24 billion yield at the auction, 1.255 to 125 and a half. so you look at the lost auction, 1.271. those two yields today and the last option are the highest yields going all the way back to april of 2011. so we want to be very cognizant

of that. if you look at intraday of three, you can see we had volatility right around 1:00 eastern. not a lot. all maturities up and down the curve are within a basis point of unchanged. the two day chart may say it the best. yes, rates are moving a bit. but all rates are a bit under yesterday's high yields. a lot of that is attributed to the weakness we see in stocks. one other highlight on that auction i want to point out, we had the best direct bidding since september of 2014. back to you. >> rick, thank you very much. let's take a look at what is driving trading at this hour. as bob pisani mentioned, breadth is quite negative. not as neg fife as it was earlier in the day. there was only, however, one sector that is up and barely so by .100% there. it just switched over a little bit. but all of the others and bringing up the rear, the problem children of 2015, energy, materials, industrials all down by more than 1%. "power lunch" will return in two

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hello, everyone. here is your cnbc news update. donald trump's statement on muslims disqualifies him for the office of president. white house spokesman josh earnest saying all gop presidential candidates should say right now they would not support trump as president. secretary of state john kerry meeting with u.n. secretary-general at the paris climate change summit. they announced a new international meeting on syria will take place in new york on december 18th. online lender prosper recently made a $28,500 loan to the couple that killed 14 people in san bernardino last week. this comes as the fbi examines financial activity by siyed farook and his spouse tashfeen malik. but it says there are no indication that's they received any money from overseas groups. chicago police releasing a

graphic video showing a man who was tased and dragged while in custody three years ago. he later died at a hospital. philip coleman was arrest ford beating his 69-year-old mother. family members, though, say he was suffering from meantal illness and needed to be hospitalized. that is your cnbc news update this hour. back to you. thank you very much. stocks are moving to the down side at this hour. you have a 158 point plunge on the dow as we speak. let's bring in experts on the subject. bob pisani and the director of floor operations. >> an all around nice guy. >> okay. it's a very strange day. oil is somewhat stabilizing. it has really come off the lows. it is in positive territory. the stock market is losing steam. what gives here? >> well, oil is treating the stock market as if oil were a snake charmer. the stock market is following every little tick in oil.

it was much weaker this morning. we were at the lows. when it started to come back, we got a little bit of a bounce. and now they're micro managing. for every minor tick up or down, the stock market is starting to respond. >> a lot of things going on. not much worked for traders this year. if they can sense a direction, for example, keep selling oil stocks, work it another day and make some money on the short side, they're going to keep doing it. they're going to press this as long as they k there are season alt things. we talked about this. in the middle of september, there are a lot of tax law selling for the losers. there is a dip in the middle of september. we are seeing this, of course oil is not helping. i do think this is a little bit of a factor. >> the season alt is back. >> yeah. coming on here, ty. >> so i ask you, can the market go up if oil doesn't? in other words, if oil sort of stays in a below $40 a barrel level, is the market likely to make any head way or it is still

going to be snake charmed? >> well, if oil stabilizes, you got a little of a chance of having some kind of bounce. you're marginally oversold. i am very concerned about the negativity put out by the transport index. it is worse in the industrials for some time. it's continuing to do so. en that tells me we might be in for a couple of bumpy days ahead. >> okay. >> they're down 14% this year. the s&p 500 down 2%. >> incredible underperformance there. >> thank you very much for joining us. what do you have for a market flash? >> let's follow up on what they were talking about with transportation stocks. shares of southwest airlines are down by 10% at this point. the airline is predicting the fourth quarter revenue figures, something called passenger revenue for available seats are down 1% compared to the same time last year. still though, passenger traffic improved 14% in november from the same time a month ago.

the stock up is 5% this year. still, southwest, delta, american airlines all stocks that are moving decidedly to the down side given today's moves overall and despite the fact we do see a tail wind from lower oil prices overall. back to you. >> thank you very much. wild swings as we've been talking about in the oil market is driving market volatility overall in recent days. what is the outlook for crude next year? joining us is john kingston. thank you very much for joining us once again, john. >> thank you. >> when do you expect to see equilibrium come back to the market? >> probably not until the second half of next year. this is driving opec at the meeting last week and the decision to not do anything fuchlt look at the numbers and the projections with the a oil that the world is going to need in the second half of next year compared to the expected decline in nonopec production, they see a second half of year that doesn't look that bad for them. so i think they probably figure why go through this gut wrenching and probably completely unproductive effort

to cut production when the market may turn our way by the second half of next year? once again, inventories are continuing to build. the forward curve and wt sichi encouraging bills. there is really no reason to see any return any time soon. >> yeah, you know, i don't know whether you heard the great interview a moment ago with the chevron ceo who is saying we'll learn to live with whatever price the market gives us. you know we'll reduce our costs. we'll reduce our spend. so what degree are you surprised about it incredible resilience through all of this? >> i think we're all a little surprised. you're going to be our emcee at the global energy awards tomorrow night. they give out a rising star award to an individual and corporation. really, the big rising star this year has been the shale industry for the way it innovated around the problems. necessity is the mother of invention. those prices were very much necessity. they continue to innovate and

cut costs. i don't want to give them all the credit. but, yeah, they have shocked the world. will probably continue to do. so remember, one thing they did this year that you're not seeing yet in the supply side is they drove a lot of wells that they didn't complete. and that is a form of a semifinished inventory that can be brought on easily if the price comes up. so they have been disruptive all year and continue to do so. >> a lot of theories on what is on their minds and what they're trying to do. they haven't really been able to bully the u.s. shale places. you know, maybe a few companies are depressed. some default and some bankrupt and bought. do you think the saudis are banking on venezuela instead? >> that's a new theory that's out. there quite frankly, i think they're probably closer to collapse than a lot of the shale companies. you had the election last week. they provide very much a divided government between the executive and the legislative branches. amazingly, somehow they managed to keep the production at about .1 million barrels a day.

that is an oil company that years ago drove out all of the talented people. right now i would say what part of the oil supply chain is more likely to collapse? venezuela or the shale industry? i certainly would have to put my money on venezuela there. >> quickly, last question. 12 months from now. the chevron ceo was asked the same question, where will oil prices be, john? >> i think if oil prices are $6 o, this industry will have quite a celebration. >> we have our party hats ready for. that john kingston, thank you very much for joining us. i'll see you tomorrow for the global energy awards as well. >> thank you. which cities have the best economies in 2015? we have the list. you can probably guess a couple. some others will definitely surprise you. plus, let's take a look at how some of the most widely held stocks are trading on this mostly down day. cisco, wells fargo, gilead and the parent of cnbc, comcast. what's up with these things, victor?

we decided to give ourselves stickers for each feature we release. we read about 10,000 suggestions a week to create features that as traders we'd want to use, like social signals, a tool that uses social media to help with research. 10,000 suggestions. who reads all those? he does. for all the confidence you need. td ameritrade. you got this.

autozone beating estimates to day. morgan stanley decided to cut 1200 jobs or 2% of the global workforce. 470 of those jobs are in fixed income commodities and currencies units. fairchild received an unsolicited bid. the company is worth $2.5 billion or $21.70 a share. there you see it slightly higher than the deal fairchild accepted from on semi. that happened last month. let's go back out to california and brian sullivan at the california milken summit. go ahead. >> all right. thank you very much. before we get to the next interview, few folks remember we have the things called the power city index. it is here on cnbc and power lunch. there are 40 different stock indices that we follow. we can tell you which cities are

doing well in the stock market every week, month, year. averaging up this year in the past 12 months, the number one city for the stock market according to our power city indexes is raleigh, north carolina. the average gain, 29.9%. look at that. charlotte, number two. north carolina doing really well. you have seattle at number three. san diego at number four. and then silicon valley, california, number five with 17%. there is a reason we bring these up now. joining us now is the milken institute where they're unveiling right now on cnbc the best performing cities for 2015 which is a far more scientific study than we do with the stock market stuff, ross. how many metrics do you do in creating best performing cities? >> we use nine metrics, job growth over last five years and the latest 12 months. we also look at wage growth which gives you an idea of the quality job scene and then the

concentration in growth and technology. >> okay. >> i guess we need a fake drum roll here. out of 400 plus cities and towns that you look at, the number one top performing economic city in america is? >> san jose, california. >> is that another way to say silicon valley. >> >> they're about the same thin number one, just tremendous growth in the tech sector. the wages and salaries. the average earnings, $116,000 a year. >> that is g the average home is about a million. >> it is just about. >> then we go further north, san francisco. same thing, san francisco is not just tech, by the way. there is banking there and there's pharmaceutical and biotech. >> it's a combination of financial services but more it's the softer side of high-tech, the creative side of high-tech, web design, cloud computing, software, sales force building a new skyscraper tower in san francisco. tremendous growth there. >> rounding out the top five,

you have probo, utah, austin. we get that. dallas surprised me given what we've been talking a lot about just here today. when we look at the metrics you use, do you think dallas will be on the list next year given oil's turn? >> i think it will be in the top 25. dallas is not nearly dependent on energy as it used to be. it still has some oil service jobs that are there that help with exploration activity. it is really diversified. it's a regional banking headquarters. j.p. morgan chase is building a major building. there is a logistics hub. much more diversified than 30 years ago. >> you've been doing this for a few years. let's ask about trends. have you noticed any macro trends? how is ameca shifting? >> america is shifting south and west. we see very few -- >> shifting to warmth. >> you see outside, it's not a bad idea to do that. the northeast and midwest have

not had many in the best performing. madison splits into the top 25 this year. college town, a lot has to do with that. so it is shifting south and west. >> and the thing i like about your study is tt our power city index, there is no city in the top -- out of the top 20 for you guys that is not in the top five for us. so it appears that the -- your data and the market data that we track is linking up pretty well. >> it is. >> you think we can give ourselves a pat on the back? a great round of applause for both of us. >> a golf collaborate flap for . power city indices matching up. as you heard, go west, young man. apparently they're also going south. we're the last ones left in the northeast, tyler. you and i. >> warm and generally business friendly, certainly in many of those states that you mentioned. brian, thank you very much. nasdaq lower again after briefly going into positive territory. we'll tell you the one sector that is outperforming the market

today. there is only one. plus, the thing more and more drivers are doing behind the wheel that is making driving a lot less safe.

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welcome back to "power lunch." stocks are taking a dive. the dow down 158 points right now. major averages are off by about 1%. boeing, goldman sachs and caterpillar are dow's biggest losers. you have industrials, materials and financials. they are the biggest drag. tyler? >> thank you, mandy. the nasdaq holding on down about nine points right now last check. the biotech index is performing much better today. leading the way today, insis, alexion. but if you look at the ibb, it is down more than 10% as you'll see in just a minute. there it is. melissa lee joins me from the nasdaq. she covers bioteches heavily on "fast money" at 5:00 p.m. so this sector, you know, i was looking at the numbers of the bigger biotech this is year. they're all moving up largely today or a lot of them. >> sure. >> they're moving up today.

but as you pick through the sector, it is really a security specific story. some are up double, triple digits this year. others are down 50% or more. >> yeah, you have to really take a look at what they have in the pipelines and the recent drug news. it's important to keep in mind about the entire sector. even though it had a rough past six months or so, year to date the sector is still up 8% and if you take a look over the past four years, four years ago the ibb was sub100. it had a run so far. this year it's really been hit by concerns over drug pricing and the political sort of environment. and also the fact that people might want to be locking in some of their winners going into year end. but in terms of catalysts, certainly we're looking at the same old same old. m & a. some of the companies, larger biotech companies, they have the strongest balance sheets out there. they are ready and willing to make some acquisitions. they're almost forced to do so. they need to bowl stert pipeline. barclay's last week is talking

about big pharma buying biotech companies. j & j, merck and eli lilly looking to bolster in rare diseases and cancer. then, of course, we have the big biotech companies themselves like a gilead, gilead has one of the biggest balance sheets in biotech. it's got to shore up the pipeline. after help c, what a wonderful anchise it's been. but there are concerns that help c franchise has been peaking. we keep seeing numbers and they have to fill in that pipeline on the back end. >> all right. thanks very much. i'll be with you in a few minutes on "power lunch" part two. and we'll see you oshgs being, at 5:00 on "fast." we're watching oil prices as we have been all day. right now about a half hour away from the close there. oil helps sink the market yesterday. not really helping much today. if you thought texting while driving is dangerous, wait until you hear what more and more drivers are doing behind the wheel. i don't even want to know. "power lunch" is back in two.

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hi watson. annabelle, your birthday is tomorrow. i'm turning seven. what did you ask for? a princess. and a pony. you like things that begin with p. i like pink frosting too. will you have a cake? yeah. i was too sick to have one last year. the data your doctor shared shows you are healthy. are you a doctor? no. i help doctors identify cancer treatments. i want to be a doctor someday. i can help with that too. watson, i like you.

a quick chefk the markets. the dow is down by 150 points,

off the loews of the day. a very negative day across the board. the nasdaq dipped into positive territory earlier on today. it since lost that. wti crude, it is currently sitting at $37.56. we were below $37 in early trade. then we had a big come back. and now slightly moving to a very strange and volume tide trading day that has seen the s&p 500 into negative territory for the year. there may be a new threat on the road now. even scarier than xechltitextin driving. what can be scarier than texting and driving? >> how about going on the internet while you're driving. it's all about the ability to do more with these phones and because our phones can do more, we somehow have become convinced that we can do more of it while we're driving even though most people when you talk with them, they'll tell you we know the rules. we know the laws. a new survey from state farm shows of that the drivers they questioned, 36% admit to texting

while driving. and look at. that it's more than doubled since the last time they did the survey. now 29% of those who were surveyed say they surf the web. 19% are taking pictures with their phone. 10% are recording videos. this despite the fact that the sobering statistics make it clear how dangerous it is to use your phone in any capacity when you're driving behind the wheel. almost 3200 people were killed in distracted driving deaths last year. that is a slight decline from the year before. but still, it's very clear how dangerous it is to text or to use the internet while driving. >> you look at smart phones and what concerns me is the amount of activity that is available on that device. smart phone ownership increased dramatically. >> not only are people using phones more, but they're connected with their cars more

easily. as a result, the smart dashboard is an area of concern not only for people with state farm but other insurance companies as well as in the transportation industry. they're looking at people, guys, who can say what can i do on my dashboard or with my phone because clearly just driving is not keeping my attention. and these are scary statistics. i think it's going to continue to get worse in the future. >> unfortunately, i don't have faith it will get any better. thank you very much for that. phil lebeau joining us today. guys, back over you to. i think it's true that all of the rear end collisions that you see, i know brian you spent a ton of time on the road driving, so do i. i think a ton of them are all related to people using their devices or playing with the dashboard or whatever it is.

they get out and take pictures and block everybody out. i was in a taxi and i didn't take this while driving. in l.a., here's a screen shot of my traffic app waze. the gray dots, the gray dots are wrecks. so one, two three, four, five, six wrecks within about a one mile area right here in los angeles. that is everywhere now. >> i wonder if distracted driving or texting while driving is now more of a problem than drunk driving. i don't though whether, you know, phil has any stats on that. i would hazard a guess it is the case. >> there should be penalties for doing so. until then, i'm sure consumers will continue doing what they're doing. it is really also bolsters a case for autonomous driving. let the computer do the driving. do whatever you want with your smart phone or what not. let the machine drive. >> i'm all for. that take a move in the back.

>> we toss it to brian for hour number two. >> we begin this hour with a check on your money, america. right now stocks are indeed off the session lows. they are still deeply in the red. the dow is down right now 145 points. it has been a pretty lousy week unless you're short the equity markets. the story does remain crude oil. yes, we are bouncing up a little bit off that fresh seven year low. we are close though to the financial crisis lows of 2008. en that is just absolutely wall opening the energy market. maybe not today for the equity markets but check this out. all the companies operating in either the area of north carolina, shale of texas or the bases of texas, the average return of the stocks of the companies trading in those areas are minus 22%, minus 20% and minus 18%. folks that, is just in six

trading days in december. it has been an absolute washout for the energy and oil and gas space. that brings us out to california. we're here for a rare tv interview with the ceo of john wats watson. i did that in the previous hour of "power lunch." we covered a wide range of topics including chevron's dividend and where john watson sees oil prices headed from here. take a listen. >> do you think we'll be above $60 this time next year? because there say number that matters to you guys. >> there is. but we're prepared to live with whatever prices the market gives. we don't publish our forecast for prices. we have a range of prices that we look at. we're preparing to live with prices at whatever level. we made sharp reduction for 2016 and expect it to go lower in 2017 and '18.

we won't start new long cycle projects right now and we'll fund short cycle investments that have a good return. >> is the dividend safe? >> that's our number one priority. pay the dividend. i made that very clear to the financial committee. our shareholders value. that we generate enormous cash flow even in low prices. we're going to do what we can to cut future spending. this is a priority for me but we have to live within our means. >> is opec powerless? >> they haven't acted as a cartel for many years. there's a great deal of potential discretion that could be applied. remember, opec only produces about a third of the oil in the the world today. that's down from 50% a generation ago. the only one with spare capacity to speak sf sauwed of is saudi . collective action is unlikely given the largest producers

outside of saudi arabia are russia and the united states. there is a lot produced elsewhere. >> that is part of our interview, the ceo of chevron. the fuel interview will be on our website. let's talk more about chevron, the company and the stock. joining us, jerry castalini. he owns 116,000 shares of chevron. also us with, our two different oil analysts. we have a perform rating on chevron and stewart glickman, he has a hold rating on chevron. i'm going to begin with you. obviously i don't know if you have a chance to watch the entire interview. are you happy he said the dividend is safe or would you rather see the money used for growth purposes in a down turn? >> here's the problem. this is a company that put on all of their capital asset investing over the last five years based on $80 to $100 oil. they can cut back the spending. the impact on 2020 and beyond

production is going to be very severe for this company and everyone else who cuts back significantly. if you're an investor looking for that company and that business to grow, saying that you're going to spend all the remaining gas flow dollars on a dividend doesn't give you a lochlt alot. all it does is shorten the day before this company rolls over and becomes a much smaller business. i prefer all the companies look at the growth prospects and i think it's really hard to argue for it in the $30 price range. >> are you keeping a hold at 116,000 shares? you are selling some? are you buying? >> no, look, this is a price that no company, none of the opec producers can sustain oil in the 30s or 40s or 50 rz. we think we finally found a price range that is now going to create some action on opec and we think over the next six to nine months you're going to see a substantial increase in the price of oil.

companies won't have to cut too more drastically into the spending. that's why we think is a very interesting point to enter the stock and to the whole group for that matter. >> fidel, is there anything that's going to make you change from your interview, from that interview, make you change your perform rating perhaps to an outperform rating on chevron equities? >> i actually was sitting next to mr. watson last week. and they have to live within their means. the dif dividend is a top priority. they cannot guarantee the dividend. at the endst day, yes, there is financial responsibility to guide the company where it should be better for the shareholders. so this dividend is coming at the expense of something else. people are sending for. and they're taking away from the production. this companies don't go, chevron, bp and all the companies, you know, they can

hardly grow. all they're trying to do is to create value. and dividend is the path to achieve that. so dividend is paramount. dividend is a priority. exxon and chevron have a dividend for the last 25 years. and they are not about to cut the dividend. however, $40 oil, you cannot afford the dividend. none of these companies can afford the dividend. i'm not suggesting that oil prices will last at $30. it is not obviously likely to last more than a few months. what both of the $100 oil a few years ago is basically the collapse in oil prices and what brought us the $30 oil today is the $100 oil. basically, we have to come to grips with reality. and the new normal will be between $65 and $75 in a couple years. >> stewart, john made it clear they're still profitable and cash flow positive even at today's prices because they have such low operating costs.

they've been in markets like the permian for over 80 years. i referenced the old adage sort of semisarcastic adage in the oil business that all the money is made in the down turn in previous down turns chevron has been aggressive buyer. texaco comes to mind. they got chesapeake assets last year. do you think they should be aggressive buyers of other assets? >> i think chevron has a lot at play for 2017. they're trying to build out two major lng projects. they're trying to streamline the operations at the same time. they're trying to protect their dividend in a very low crude oil price environment. i think at best they're probably treading water on free cash flow in 2016. there's a lot that can go wrong given the strategies. i think the dividend is protected. i think it come at the xpenexpef production growth over the

medium term. >> on every metric price to sales and earnings and books, whatever, sent. around chevron and others, by the way? is that a 30-year low. are you going change your rating to a buy at all or to a sell? something's got to give. >> yeah, certain metrics are right. other metrics, for example, stocks are not cheap. price cash flow is not cheap. i think cash flow is really king. in this environment, i would rather play defense. i think chevron is migrating more towards an exxon strategy. if do you that, you may as well buy exxon. >> all right. guys, a good g. discussion around chevron equities. thank you very much. appreciate it. melissa? >> all right. let's check out what is happening in the markets right now. we have seen a roller coaster ride here on the equity side. stocks across the board off the session lows. the dow had been down as much as 1%. now down by just about .6%. 104 points is the loss there.

the s&p 500 is down by 7. the nasdaq back in the green. it is down by just .1%. biotech is the real bright spot. the biotech is up by 1.75% right now. among the biggest biotech winners, alexian pharma. let's got more on the action. bob pisani is on the floor of the stock exchange. is it because of the roller coaster ride in oil? >> oil is smack things around. the global slowdown is weighing on big industrials as well. take a look at the markets in the middle of the day. it's been very chopy. we were down 20 points at the open on the s&p 500. 10-1 declining to advancing. it is a lot better now. new lows expanding about one every eight nyse stocks at a new low here. modest uptick. take a look at the major sectors. materials and industrials, financials and energies again weighing on the markets. those big global industries like caterpillar are down much more than some of the energy names today. transports, number of new lows out there.

we have problems with the airlines. southwest is talking about disappointing numbers and the revenue for available seat miles. new lows on union pacific and kansas city, look at this big divergence between the transports and the industrials. you very rarely see the industrials down 2%. the dow transports down 16% for the year. i don't remember when iiver seen a divergence that big. finally, i just want to know, huge volume going off in a number of etfs. that includes the global energy. somebody dumping a lot of etfs on the market or bought a large amount, it's not clear. there is very big volume in energy etf today. >> that time of year. bob, thank you. >> shares of smith and wesson hitting an eight year high. we'll hear from two analysts with two different takes on this controversial company. the single will biggest threat to this industry and how gun owners could move prices higher.

and an e. coli outbreak spreads. and we have $12 billion worth of free investment advice coming your way. stay tuned for that. "power lunch" will be right back.

morgan stanley is cutting 2% of the global workforce. 407 will come from the fixed income staff. shares are lower by 1.a%.

toll brothers reporting a profit of 80 cents a share. that is three cents shy of the wall street forecast. shares are deep in the red at this hour. a bunch of stocks are hitting new 52-week lows in today's session including staples. kinder morgan and union pacific. >> shares of gun maker smith & wesson are trading at a eight year high as there is a debate over whether there needs to be more regulation following mass shootings in california, paris and else. where let's bring in two analysts. lcome to both of you. you have a buy rating on smith & wesson. let me just ask you this. it's a slightly, apologize for a long question. whenever there is a mass shooting in this country, typically the sales of guns go up and the stock prices of companies like smith & wesson rise. and the explanation conventional whiz so many is it's happening for one two of reasons. either because people are concerned about their personal

safety and want to protect themselves so they go and buy guns or they are concerned that there will be increased restrictions and regulations on gun sales and so they want to go out and buy now so that they cover their option there. which do you think is the correct explanation? and do either of those -- they don't have to be mutual exclusive, of course -- do either of those play into your investing hypothesis. >> my hypothesis is urban people and fear drives gun sales. that's the fact of the consumer and we see that fact play out when there is a mass shooting. and the number one reason why people, why somebody would buy a firearm for the first time would be for personal protection. now for the second time, it would be hobby shooting or they got really into guns. they find it to be a lot of fun.

definitely the first time gun buyer is going out for personal protection. not because they're afraid the government might change the law for some reason. that's only about a list of ten reasons why people buy a gun for the first time, that is number eight. fear of government legislation is not the top reason. >> you said something i want to pick on before i bring melissa into the conversation. you said one of the growing areas are urban, more upscale and female. right? >> yes. that's right. about -- new gun buyers, two out of five are females. that's a doubling over the past ten years. that's right. and then also new shooters tend to be. >> narrator: age of 35 or people who have been shooting for ten years or established shooter like ten years ago. the average shooter was 45 years old, sbhob has taken up target shooting as a hobby. brian, you got a hold rating on the stock. it's a winner of a stock when it comes to stock market performance, up 120% year to date. what is your thesis behind having that hold rating and do

these shootings and the registration that's we saw background checks on black friday, does that change your outlook for smith & wesson at all? >>kay. so the reason behind the hold rating, my logic is that the uptrend is primarily an inexpensive handgun that sell for around $300 at the retail level. smith & wesson has been heavily discounting has others of those inexpensive handguns. the last surge that happened in firearms was 2012 and 2013 and that was with military style rifles. a military style rifle on average will sell between $800 and $1200. so you're going to have to sell multiple more handguns, inexpensive handguns to make up for the sale differential for military style rifles as well as it's a much lower margin business selling inexpensive handguns especially in the discounting environment. so i'm concerned specifically for smith & wesson which is

trading at its, you know, 13 and 14 highs that we're not going to hit those same kind of earnings based on selling inexpensive handguns versus military style rifles. >> someone that has a buy on the stock, you are concerned that as brian says, the weapons on which smith & wesson might make the highest margin, they're having to come down and cut price ands compete with lower costs. and a related question, andrea, is this. is there a point at which america becomes saturated snt market becomes saturated and everybody that wants a gun has one? >> well, the thing about firearms as i like to liken them to women and shoes. if you are a gun enthusiast, you can never have enough. so there's a collector's mentality out there that will continue to drive gun sales. we also don't see any dem graphic trends that really point to americans buying fewer guns

in the future. all politics aside, the trends are up to the right. in termed of the cost of the guns, smith & wesson has a higher margin on the low cost handguns. at the same time, brian is right. the smith & wesson's dominate in handguns. that's what's driving a lot of the surge. >> all right. we have to leave it there. brian and andrea, thank you very much. we appreciate you being with us. >> up next, another gun story. this one involving remington. uncovering a new trove of documents related to the gun makers alleged cover-up of a deadly defect in the rifles. we have full details ahead. as we head to break, take a look at the most active stocks moving here at the nasdaq. "power lunch" will be right back.

welcome back to "power lunch." a federal judge just post

potential final approval of a nationwide class action settle. in which the remington arms committee agreed to replace the trigers in seven million gums. the surprise only comes hours after cnbc revealed a new cache of documents showing what remington new about the popular 700 rifles which the company still maintains are safe. the investigation is on cnbc.com now. he's here to tell us all about this new develop dg ment. >> well, it keeps on changing. the judge in missouri is concerned because since the settlement offer became public in may and until august, only a couple thousand owners filed claims out of some 7.5 million guns. the judge said he can't concede why owners would not want to get their triggers replaced and ehe ordered the parties to come up with a better plan to notify the public. the guns can fire without the trigger being pulled leading to injuries and even deaths. the company denies this. all of this as we reveal the document that's had been sealed

by court order until now. they're in the hands of rich barber who we met five years ago. he's the montana man whose 9-year-old son gus died in 2000 when one of the guns went off. >> how many documents are there? >> my best guess, it's in the millions. i have no idea. all i know is that i took the time to read them page by page and put the pieces of a puzzle together chronologically and topic specific. >> did you look at this? >> there are handwritten notes from remington engineers wrestling with the problem of fsr. remington's internal term for guns firing when the safety is released. which is what happened to the barber's gun. these notes written nearly a decade before gus was killed. we've got more of the documents and how lots of companies are able to use the courts to hide

potentially life saving information. we're also tracking this continuing court case. it's all in our special report "remington under fire" right now at cnbc.com/recommemington. >> terrific reporting. thank you. oil bountsing off a fresh seven year low as the final trades cross for the session. you're heading live to the nymex when power lunch returns. nto a . nto a . yeah... surprise... your insurance company tells you to pay up again. why pay for insurance if you have to pay even more for using it? if you have liberty mutual deductible fund™, you could pay no deductible at all. sign up to immediately lower your deductible by $100. and keep lowering it $100 annually, until it's gone. then continue to earn that $100 every year. there's no limit to how much you can earn and this savings applies to every vehicle on your policy. call

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here is your cnbc news update. paul ryan telling reporters that donald trump's proposal to ban all muslims from entering the u.s. is not what the republican party stands for. he says that it violates the constitutional rights to freedom of religion. the eagles of death metal band thats with performing when isis attacked their paris venue paying respects at a memorial outside of the theater. they laid flowers at the memorial and they read messages left for loved ones. outside group backing jeb bush will begin running first tv ad directly attacking other republican presidential rivals. the right to rise super pac aired nearly $32 million worth of commercials since september. today begins airing the first negative ad targeting donald

trump, ted cruz and marco rubio. jon stewart returned to the daily show last night where he made a push to renew a law that provides health benefits for first responders who became ill after the 9/11 terror attacks. he urged congress to pass the act which expired last month but it still has enough funding to last another year. and that is the cnbc news update. brian, back out to you. >> the bearded jon stewart. that is the correct phrase. thank you very much. he looked good. all right. oil is closing. it does not look good. unless you're short a barrel of crude oil, jackie, we were below $37 -- this is like the economic limbo. how low can we go? >> we closed in negative territory, $37.51 after bouncing around quite a bit between positive and negative territory today. as you mentioned, we did hit that seven year low, $36.64. that shows where you the

momentum s traders always tell me, we don't always go down in a straight line. we test the lows. we test them. we may rebound a little bit and then we try again. that is certainly something to watch for. but also present in this market is the buyer that wants to get in. that sort of feels like oil prices may have bottomed out here. we're hearing a little bit more about those kinds of people, those kind of entrants into the market even if it's just for a short term trade at this point. what i do want to point out this afternoon, the api data we're expecting to see a draw. that would be supportive of 1.2 million barrels. sometime the api surprises us and sets us up for the department of energy tomorrow. other factors in this trade, of course, the dollar and the fed decision fast approaching, brian. >> yeah. i want to be very clear and on the record. a lot of people talk about well we're going to move right into "trading nation." roll animation. i'll get to that point tomorrow. all right. let's stick with oil. we sat down earlier today with the ceo and chairman of chevron john watson. he talked about exactly what we

just did. running his business amid low oil prices. listen in. >> we're preparing to live with prices at whatever level. we made some sharp reduction in our capital spending for 2016. and we expect it will go lower in 2017 and '18. we'll finish the projects we v we won't start many long cycle projects right now and we'll fund short cycle investments that have a good return at whatever prices are today. >> all right. do investors have any reason at all to then buy the big cap energy stocks? we've been told for months now that prices of oil are bottoming out and are going to turn higher. that has not happened at all. let us join our "trading nation" team. we have max wolf and we have phil strebo with us as wel do you think companies like a chevron, max, will be able to manage this storm? >> yes, absolutely. in the long run, the super majors with deep pockets and relatively lower cost of capital and pretty good institutional relatively patient pace of investors will not only weather

the storm, they'll come out the other end assuming there is a carbon based future on the other end which looks like there will be in better shape. a lot of of the herd will be called. that is going to be a rough ride. we're in a situation where payouts are probably higher than the etfs. so more pain to go but probably deep into the pain and not too far away from the turn. >> and i don't want to knock etfs, max. i understand they're a great way, low cost generally for mom and pop to invest in whole sectors and spaces. we always talk about know what you own on this show. and here's the problem. balance sheets right now in the oil and gas industry are everything. there are companies that are weak and there are companies who are strong or at least less weak. how important right now is -- if you're thinking about owning a company, digging into that balance sheet and making sure that they have the cash or the credit to manage through this? etfs may not be able to do that for everybody. >> look, the individual investor

isn't always able to do it either. that's what pushes them into etf territory. my guess is the smartest money is using the etf as an offset or hedge. they're beating up on and shorting the names they really hate and own the etfs to offset. that or they feel like they picked a few winners and short the etf. it is part of a paired strategy. you get into this situation, you don't want to be running naked in either direction. maybe running naked isn't a great idea anyway. you don't want to be running with no coverage. either way, my guess is unfortunately a lot of folks at home may be doing that. >> yeah. running naked through a cactus farm even worse idea. >> probably not wise. >> all right. thank you. phil, no, for those that think oil will bounce back and that group seems to be getting smaller by the day, do you think a chevron is a good way to get some upside exposure? assuming we get, you know, upside? >> yeah. that was a great interview you had, brian. chevron is in a really difficult position here along with all of the other oil companies here. the current oil cycle is really

negative right now for companies. you have rising interest rates, rising dollar. you've got rising wages. so the operating costs keep going up. the price of oil keeps declining. i think oil prices are going to push to the low 30s, 32 or maybe $29. what does that do for companies like chevron? companies are lagging behind in the futures. i think futures prices are going to go a lot lower. there will be a time and place to own chevron much it's just, you know, right now there's a lot of problems with oil futures contracts and i think that, you know, you have to trade with the direction. >> yeah, the direction has been down. phil, thank you. by the way, thank you for the compliment, max. i appreciate it. let me just quickly finish my point that i was making right before "trading nation" began. at the california summit, the majority of the conversation around oil is not about the price of oil. it's about the leverage to oil. i can't make this point enough, folks, which is this -- this is different than other oil down turns because of the hundreds of billions of dollars

of oil and gas related debt that is sitting out there in the market. there are many bonds out there no matter what they yield. they will probably fail to get any kind of a bid whatsoever. this is a leverage market. that is the big risk for the market overall. just want to be on the record. make sure we know that is a key point here. a take away from the oil situation. it's not just about gasoline and the commodity itself. let's take a look at a two-month chart of the shares of chipotle. that stock is down 25% in 60 days. all because of increased cases of e. coli bacteria poisoning were reported in october. what long term effects will this have on the chipotle brand? is the company doing enough to con front the problem? we're going to dig into chipotle in crisis when we come back on "power lunch."

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shares of chipotle is falling 7% as more customers fall ill. this time 80 college students in boston. a senior restaurant and consumer analyst at maxim group, thank you for joining us. initial reports indicate that this outbreak is the norovirus which is different from e. coli. still, we don't know what the cause is. that's a real problem here. >> that's right. i think taking by itself, i think the norovirus is not a terrible concern for the company. coming on the heels of an e. coli outbreak that is still under investigation, along with two other health outbreaks over the summer in california and minnesota, i think raises concern for the company. at least in the near term. >> right. you lowereded the price target. that indicates a multiple forward pe ratio of 22. i think that is really important. if you take a look at mcdonald's and yumm as well as jack for

that matter, they all trade around those levels. does that mean that it is no longer a growth company because of what has gone on? >> i think it reflects the recession low multiple. going back even during recession, chipotle is able to generate same restaurant sales. that is unlikely to be the case at least through the third quarter of next year at the earlier. >> you're not the first analyst to say that pa nara is going to benefit off their woes. that really puzzles me. when i think about chipotle, i don't think i'm going to go get a bread bowl of soup at panera bread. >> i think that is the most direct comparison is a company owned by jack in the box. jack in the box has a strong concentration in the western u.s. whereas panera not only shares the same geographic base across the country, almost the same amount of units, about 1900 for both chains, but they also share a very similar customer

base. those that have slightly higher demographic, maybe wants to spend a couple dollars more than they spend at mcdonald's and other fast food restaurants but get the same amount of quality. >> do you think the management is hand whalg is going on well? >> in our view, we're puzzled as to why management came out with the release as they did on friday afternoon. given that we have given credit to management in the past to connect to millennial customers. we think they'll need to get more forthright with the customers again. and more aggressively. that's why we think they need to make investments to get the customers back. >> promotionals and maybe not give aways like other chains have done. chipotle has a creative way of doing things. i wouldn't be surprised if they came up with something similarly creative that they've done in the past. >> we're going to leave it. there thank you. >> thank you. >> tyler, over to you. >> all right. let's pick up where they just left off. let's bring in steve oddland.

he is a cnbc contributor and the former ceo of office depots and autozone. there is a question about management, the ceo. have they done enough to address this and speak to their customers? >> well, tyler, you know, their model is leading with integrity. and there is nothing more consistent with integrity that you have come to our stores and we will feed you and not make you ill. they have fallen down on this promise repeatedly over the years. that started in 2008 with the first outbreak of the noro virus. they had the norovirus outbreak and e. coli and a couple weeks ago they said all clear, everything is contained. it's okay. come back. and here we go again this weekend with the boston college students. so it clearly is not contained. they clearly do not have this under control. they're treating this like a pr event when they have a food

safety issue. they have to go back and clean up all of their processes going back up through the supply chain and back into the field, back to the handling of all of their ingredients from field all the way through to their stores in order to assure themselves as well as their customers. they can't afford to keep coming out and saying it's okay. it's contained. come on back. >> yeah. it's very curious. i realize medical detective work can take a long time. we don't know what the origin of the outbreaks is and just how related they are. so let me turn back to what the executive response should be. what should they be doing publicly right now and, second, how long do you think it will take if they can ever get back to the sort of primacies of brand they had in the quick serve in that quick serve area? is it two years? is it ten years? is it ever? >> these are the right questions. i think the issue is if it was a one instance thing they could go

back up and say okay, we found the ingredient. it was a tomato. it was in mexico. we found it and cleaned up the fields. but that's not the case. they have the norovirus and e. coli. so it's not one instance much it's a process issue. they have got to go back and re-evaluate every one of the handling processes, every one of their management processes. if i was on the board of dire directors or ceo, i would put a whole committee together, bring in outside help and really go through and evaluate everything. i mean i would tear this whole thing apart. you cannot afford to come back and say everything is okay again. only when you're sure can they come back and reintroduce a chase chipotle back to the shareholders. >> you would take your children to chipotle tonight?

>> it's hard. wunts this once they violate your trust twice, it's hard to think it's okay, isn't it? that's why i say until i see this, you know, process and i know -- they've got to be more forthcoming with the public as to what they're doing inside the company in order for i think the trust of the customer to come back and, therefore, for the people to come back to the stores. >> all right. thank you, steve. as always, good to see you. steve oddland, former ceo of office depots. >> that seems luke a no. the manager of black rock's multiasset income fund joins us with advice on how he's navigating the volatile markets. "power lunch" is back in two. the only way to get better is to challenge yourself,

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and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. stocks off session lows, dow still down triple digits. michael, greats to have you with us. >> thank you. you said in anticipation of a fed rate hike you dialed back our equity exposure. what do you expect to happen as we approach this fed rate hike? >> i think the fed will move next week but i think that's already pretty well understood by markets. we're more concerned about what's priced into the back end

of the yield curve and when you look at what the bond market expec expects, say, from the ten years yields one year from now it's only looking at a 20 basis point move up on rates. we've been putting on hedges to reduce our exposure to the back end of the curve where we don't think that the path of rate hikes is appropriately priced right now. >> it's an interesting day to talk about high yield given the hyg hit a new 52 week low in today's session. i'm wondering what you anticipate here happening. is this a canary in the coal mine? traditionally what's gone on in high yield has been a pretty good indicator of what will happen in the markets. >> high yield is a bit of a complicated story. it's bifurcated. you've got anything that's in the commodities complex under a lot of pressure, a lot of distress. we've avoided that segment of the market and focused on other industries and spreads have

widened in sympathy a bit but those bonds have done quite well year to date. that said when we think about over the course of the next year what do we think that the s&p will do given these really high multiples, i think stocks will do okay, but there are a lot of valuation head winds that i think will only increase as rates start to move higher. when you look at high yield i think it's been a year of adjustment, particularly in high yield ex commodities as those prices have fallen a bit. the risk reward is a lot more attractive as long as you are in the camp that 2016 is another year of decent growth and that's where we are. >> basically you're saying what has gone on for years now, there is a certain chase for performance and that's why you're going into high yields. you're after that yield because the stock market is offering mediocre return, right, and there is not many better places to invest to get that return. >> i think if you look at the s&p and at these valuations levels we struggle to think of

scenarios where you are up over 10% on the s&p next year when you have margins that are peaking and maybe even coming down a bit, rate hikes shouldn't help valuations. i think there are headwinds for equities. when we look at high yields and when we look at bank loans or nonagency mortgages, if you can hedge some of your interest rate risk, those markets have -- we think have much more attractive risk reward, especially in a fund like ours where we are trying to generate high levels of yield without taking a lot of risk. that pendulum has shifted. a few years ago a lot of these markets were really expensive. going through the course of 2015 you have had a nice adjustment and this is a good opportunity to reposition portfolios and have these higher carry asset classes. >> michael fredericks of black rock. just ahead, one money manager says there's big opportunity in the crew crunch, he will tell you where when "power lunch" your honor's returns. ing to find a bathroom?

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most money out of buying fear and selling complacency. i don't think you can find a bigger fear trade right now than oil. you had a great interview earlier, our number one pick in the area is chevron and for a lot of the reasons that the ceo talked about today. they are not necessarily dependent on oil being around $60, they are not enjoining $36, but with a 5% dividend yield for investors right now they seem they're very committed, i think he said that was their number one priority, i'm not so sure employees were happy to hear that, as an investor if you can pick up 5% with a 15% cap fans tax rate that beats any day a ten year treasury yielding 2.2%. if you're looking to the at energy you don't want to be to cute, play with a name like exxonmobil or chevron. really interesting right now dove tailing with what our previous guest was talking about on the high yield space, if you look at some of the companies like petrobras, if you go out four or five years on petrobras

debt right now which we like better than the individual equity you can pick up yields somewhere north of 12 or 13%. for investors so inclined to get into the debt market right now that's a pretty attractive way to play the sector. >> completely outside of the oil and energy space ugg boots, the parent company deckers, you've bought it and sold t you're rebuying deckers. how come? >> we prefer to buy and hold stocks for a very long time. deckers has been one of those stocks that you've got to buy it when it's beaten up, nobody likes it and always inevitably gets over valued. right now the company is trading at nine times next year's earnings, nordstrom and other suppliers that carry the ugg brand it's still selling extremely well. if you could pick up a high quality name like this under a $2 billion market cap you have the opportunity of somebody like a nike coming in and buying out the company as well.

eight times forward earnings we think this is one of the most attractive mid to small cap stocks out there right now. >> white wave, wwav, what's attractive to you about that name? >> silk milk. the whole sector has been beaten up from whole foods to haines celestial to white wave. this is a company committed to growth. the secular trend to maelt reeating is well intact, the stock is at about 30% in just the last month, month and a half, this is a good opportunity to buy a best in breed company like white wave. >> white wave, petrobras we thank you very much. we appreciate it. >> i think he said it well, buy at fear, sell complacency. at oil and energy there is a lot of fear out there right now. >> as you know there may be a reason why those things are yielding 12, 13, 14% a few years old, there's questions about their viabilities as companies.

>> you've got to make sure you get paid back to get the 12 or 13%. >> exactly. >> maybe one year it works out. >> good stuff out there. >> sounds like you have a lot -- thanks, melissa, got a lot going on in "fast money" tonight as well. >> "closing bell" starts right now. hi, everybody, welcome to the "closing bell." i'm kelly evans at the new york stock exchange. >> and i'm bill griffeth. another wild ride for stocks today, the dow climbing back from a decline of 245 points earlier this session despite oil creeping back into the green earlier. dow components exxon and chevron are still in the red today. >> especially exxon. natural gas, iron ore, copper all struggling. bank of america merrill lynch unveiling their outlook for 2016. we have the firm's top strategist on where price