we have been building this wall of worry. we need to see the market climb it. it's not happening today, maybe tomorrow it will. >> they say the bull market will last until the end of the decade. it's been great having you here. have fun on "mad." thank you for watching, as well. "power lunch" begins now. thank you very much, scotty. this is "power lunch." i'm mandy drury along with tyler mathisen. >> it is a day of worry for investors and noninvestors alike. the dow showing big losses, more than 200 points, 214, 215 at this hour. nasdaq is off about 1% as well and the s&p did owe that, down 21, a little more than 1%. >> this after this woman in north korea told the world her country designated a hydrogen bomb. they are 450 times more powerful than the nagasaki bomb in japan. >> a short time later japan called its air force into action

to verify the claim. it could take a few days before samples tell scientists the real story. >> mind you, there are skeptics doubting north korea's claims. the south korean market sold off before recovering and finishing near flat, only down about 0.2%. japan lost 1%. chinese stocks picked up some ground closing higher by just over 2%. >> for more on how the u.s. is faring in the markets at least, let's get to the new york stock exchange and our bob pisani. >> very volatile open there, tyler, but we've stabilized a little bit. let's take a quick look at the markets today and that korea test and other factors. china is setting the currency fix lower also was a major factor in the down move we saw late last three. 3 to 1 declining to advancing but it was worse earlier on. the volume, believe it or not, has only been moderate. we're just seeing disinterested buyers. no one wants to buy. the volatility is up but it's stable. i wouldn't say it's skyrocketing. look at the s&p 500 25 point gap down at the open.

that was ruff, but you can see we've been coming off the lows, although still notably to the downside. i want to point out we had an ugly day in oil here, down 4.5%. we are close to the 2009 lows in oil. as for the oil stokcks themselves, they're still down but not nearly as much. down 2.5%, 3%, at least not dropping as much. there's an expansion of new lows, many of them oil names. you see some of the typical ones there. i think it's encouraging if you look at the high yield space which has been very worried about the energy drop, jnk, not particularly freaking out. we started down and one of the main high yield etfs jnk is probably positive now. consumer stocks down. gold not up a lot, but gold right now very heavy volume. in fact, twice normal volume in that gld. certainly a lot of interested even if they're not moving the price. guys, back to you. >> the gold price hitting around a seven-week high on the safe

haven bids. thank you very much, bob. new bricks in wall street's wall of worry. china's currency sinking to five-year lows and there is now north korea as well. seema mody and michelle caruso-cabrera are all over the various market movers we need to know about from offshore. michelle, as we go to you, we also want to point out the head of the nuclear test band treaty organization says that the magnitude of the north korean seismic event seems to be less than a different missile test in 2013 which is casting maybe more doubts on the north's claim of a successful hydrogen bomb test. >> increased skepticism for sure though seismologists are certain they conducted a fourth nuclear test. what is still unknown is whether they detonateded an atomic bomb or hydrogen bomb. they've done the atomic bomb before. they claim this one is a hydrogen bomb. developing a hydrogen bomb is

much more difficult than creating an atomic bomb. even if you know how to do it, actually constructing it is difficult. if they detonated a hydrogen bomb it would represent a significant advance. hydrogen are also much more destructive. if north korea has one, that could be a bigger threat to world stability. experts as you heard from mandy are doubtful because the size of the tremor created by last night's bomb appears to be too small for an h-bomb, and north korea has a history of exaggerating its capabilities. there was worldwide condemnation of north korea for exploding this bomb, even china, north korea's chief ally said it was lodge a protest with the government. north korea is also subject to sanctions for nuclear tests conducted in 2006, 2009, and 2013. and south korea has put its military on high alert. seoul is only 35 miles from the north korean border, hence why there is so much concern.

>> thank you very much. in the meantime, michelle, let's get to you, now, seema, on the moves happening out of china. major currency moves with a sharp drop in the yuan. >> it's a combination of a weaker currency and disappointing data that is concerning investors. the chinese yuan plunging to a five-year low against the u.s. dollar. that's resulted in the spread between the onshore and offshore currency widening to its historic high. why should investors really care about this? socgen points out a widening spread has occurred before every major surge in u.s. equity volatility in the last nine months. so further weakness in the yuan could spell trouble for u.s. stocks as we saw in august when the currency fell by 3%, stocks did react negatively. meantime, stock ban on large shareholders set to expire on friday is expected to stay in place indefinitely pending further details from regulators. a near-term positive for the stock market, that's why the shanghai composite closed up by

2%, but it's seen as a long-term negative because it suggests china needs to intervene in the markets every time volatility rises, thus moving away from a financial system that is market based. lastly, more disappointing economic data from china. pmi services falling to a 17-month low indicating that this transition to a consumer-based economy is going to take a long time. >> thank you very much for explaining it to us. the weaker yuan could possibly mean better news for u.s. real estate. >> we do get the capital outflow number tomorrow. >> thank you very much for that, seema. over to you, ty. >> folks, the world's biggest power players in the energy sector meeting in miami to talk about the impact of low oil prices and the challenges ahead. brian sullivan is there with them. hi, brian. >> hey, tyler. kind of ironic, we were in houston yesterday but we had to come to miami to sit down with oil company ceos. go figure. not a bad place to be in january either way.

joined now by gary hemminger, the ceo of marathon petroleum refiner and probably the only group, gary, that is happy in the last year or so because of what's happened, but we had some inventory data this morning that showed a huge build. your stock and others fell, but you told me before the show don't necessarily believe the numbers. how qocome? >> specifically export data, the refining industry is exporting around 3 million barrels a day, that includes the entire lineup of gasoline, diesel. the last couple years they've corrected the volumes in the next couple weeks and i expect that will be the same. we have very good optics of

actual demand day in and day out in our retail stores, and i'm not seeing anywhere near a drop-off in gasoline demand or diesel demand -- >> could be on the supply side though. if demand remains constant, supply goes up, there's your gap. >> well, but supply from the refining side, we're already running at a very high utilization, so i don't see that that gap is out there in the inventory. >> so you think the market is tighter than the numbers would have implied today? >> right. and these will be corrected over the next couple of weeks. i think the crude oil side is probably pretty close, but the 16 million barrel build on the does and 12.5 million build on the apis, those numbers will be changed. >> how is consumer demand? >> as we come through the fourth quarter here, consumer demand has really kept up with what we saw coming out of the second and third quarters. year-over-year, so an a calendar day basis, we're ahead of last year. and i would expect coming into the first quarter here because the demand really didn't pick up

until the latter part of the second quarter last year, i would expect to continue to see those types of gains with the lower price. gasoline across our footprint is about $1.70, $1.75 a gallon, so i would expect to see gasoline demand continue to be robust going into the first quarter. >> you know, we sort of say that our viewers -- we talk about oil all the time but they probably don't care about the price of oil. they care about the price of gasoline. >> right. >> because that's what they use. where is the price of gasoline headed. >> i think -- we have big analyst meeting in early december in new york, and i said that we're probably going to see $30 crude before we see $50 crude, and we're seeing a downturn in the crude price today. i think that's going to continue to put pressure on gasoline and probably come down and probably be below $1.60 a gallon if this continues into the weekend.

>> possible we will have sub-$30 oil before we don't? >> certainly could happen. you know, with what's going on, the tensions in the middle east today, the tremendous inventory, cushing is very full of invento inventory, and cushing is where the nymex crude price is set. cushing is full. you come down into the houston and the western gulf, inventory is pretty much at the top of the tanks, and the inventory coming in from exports continues to come into the gulf. so i expect to continue to see pressure on crude oil prices. >> gary hemminger of marathon petroleum, pleasure to have you on. thank you very much. >> appreciate it. >> if consumer discretionaries a -- consumers are happy now, they might be more happy in the months to come. >> let's get back to dominic chu.

>> the dow transports underperforms the broader market hitting the lowest level since march of 2014. shares of kirby corp, csx, unipacific, kansas city southern. the index remains in bear market territory, something referred to when a stock or index drops by 20% or more, tyler. >> are they down in part, dom, because the rail carriers are carrying less petroleum? >> that's certainly going to play into part of the discussion here. we're also talking about this idea that it's interesting the battle that's developing because at the same time you have these people carrying loads of energy related items -- >> their fuel costs are down. >> fuel costs for things like, yes, those train operators, especially the airlines. that will be an interesting tug of war, especially given the fact that airlines over the last couple of years have been real high flyers and have seen some of the air come out of those sails so to speak i guess on a transportation -- >> we forgive you. thank you, dom.

top ceos have been converging this week in las vegas. world's biggest consumer electronics show gets under way on the strip. jon fortt is there with the ceo of under armour. jon? >> thank you, tyler. kevin plank, ceo of under armour, a man who needs to introduction but we'll introduce you anyway. you have some technology here moving beyond the my fitness pal app acquisition did. it's a bundle for 400 buck. what's in it? >> this begin more than two years ago. we decided the bet for us would be on the commune and not just the hardware. may sound a little different today but today we now have acquired over 160 million members in our community, registered users. 192,000 people downloaded one of our four apps just on monday alone. so the scale is extraordinary. and with that scale it's going what do we have that we can use to offer this community, the people that have demonstrated they have a proclivity to care about biometric measurement, how did i sleep?

how did i eat? how many steps did i take? at ces we're launching a suite of product that is begin with our own connected shoe which is a shoe that is really allowing you to do untethered running. it will tell you how far you went, down, distance, time, et cetera. it will give you and tell you unrelated as to, you know, typical shoe runs about 450 mile life cycle and this shoe will tell that you when you're encroaching on that and time to buy a new shoe. >> you have a scale and a heart rate monitor and headphones. bringing all this together. i don't run unless a dog is chasing me, but this other connected activity stuff i do use. the heart rate monitor is not wrist based, it's chest based which the experts say provides you a more accurate reading. what else have you done with this to kind of put your under armour signature on it? >> ekg quality heart rate readings. simplicity is at the heart and

soul about it. the fact you know more about your car than your own health is a crime. how many days were you sick last year? and you go, i don't know. you're an a type and you say i didn't get sick. you did but you just went to work. we're asking for a wearable device completely frictionless, seven-day battery life on it, charges in less than an hour. a scale you step on every morning and then if you decide to exercise, put a heart rate strap on. from those three components we can triangulate four parts. first is how much did you sleep. secondly is did you exercise. if so, for how long and how hard? third is how many steps did you take and fourth is what did you put in your body and that's where we leverage the my fitness pal community into telling us. imagine that readout if i had that every day. and also it put into place how much you weighed and then there's a component we have which is unique to the record platform, i encourage you to download the app and take a look at it in the app store, ua record, and this tells you how do you feel? on a scale of one to ten, just

quantifying how did i feel for the day. there's nothing out there -- apps will tell you how many steps you took, how much you excellent, but how do i get proactive information that will help me enrich my life. incredibly bullish about this $400 box. we have a set of headphones. a suite of products from underarm you're. >> thank you for joining us. nike seems to have moved out of your way perhaps too soon when the apple watch came out. tim cook is on the board. i don't know. maybe they thought the watch would take more space. interesting to run. tyler, back to you. >> jothank you very much. >> the u.n. security council has unanimously condemned north korea's nuclear test. it's a statement from the council president just coming out in the last few minutes. there was unanimous agreement on condemning, strongly condemning north korea and they are going to begin work on measures they

will take in order to combat the situation with north korea. the u.n. security council coming out and condemning what has occurred in north korea last night. >> thank you very much. >> there was just a statement made saying the seismic event caused by north korean events was similar to another caused in 2013. on a scale of 1 to 10, do you believe that this was a hydrogen debt nation or something less than that? >> look, i'm tempted not to go into the debate of hydrogen or not. the first thing i would come is why even a test in the process to build up a nuclear weapon? if we take the previous test by the democratic republic of korea, they have, indeed, moved to improving the way they did

the test from 2006, 2009, and 2013. if confirmed and verified, this fourth one is, i hope, the last wake-up call to the international community to start being more proactive rather than being reactive into events announced by the korean peninsula, so the question of hydrogen, it's another debate, another state of the debate that researchers can work on. >> but do you think that the international community is impotent to try to prevent north korea from becoming a genuine nuclear power and do you think this is their end game or is this maybe just a little saber rattling like we have seen many times in the past? >> look, i'm trying to build upon what we've achieved with the nuclear iran deal. this was a success through

multilateral diplomacy with mutual respect and dignity from all parties. this is the same that i hope we can build with the north koreans to get them to stop this process they have been engaged in through 2006. >> i take your point you don't want to get into the debate of whether this is or isn't a hydrogen bomb that has been tested here as the koreans assert. i understand that and i understand that you want to -- we ought to be more proactive with respect to any test, hydrogen or not. >> yes. >> but if it is proven this was a hydrogen bomb, how alarming is that to you? >> indeed, if it's proven that this is a hydrogen bomb it is quite alarming because that indicates they've mastered the technology to a point where i was tempted to say as we often say in france -- that would be quite alarming but i'm hoping

that we're not there yet because for anyone to make a clear decision that this is a hydrogen bomb, i think you need more information to come to play. >> right. >> before this decision can be made. >> we appreciate -- >> and at this point in time not only us but i don't see anyone with radio isotope detection to be in the position to make a conclusion on this except the north koreans themselves. >> all right. we really appreciate your time and your insight, lassinazerbo of the united nations test ban treaty organization. "power lunch" will be right back in two minutes. announcer: it's time to make room

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welcome bhak to "power lunch." shares of netflix are heading higher on news its launched in 130 different countries. it makes netflix available in 190 countries total. it was announced in the last hour during a keynote speech by reed hastings at the consumer electronics show in las vegas. netflix will not yet be available in china though. the company does continue to explore options for providing the service there. remember, netflix was one of last year's best performers. shares had a rough start to 2016, down two straight days but then right now we're seeing that near 6% gain, tyler, on today's session. back over to you. >> we have an eye on oil and it is sinking yet again. look at that now $33.95. below $34 a barrel. another 5.66%.

morp more than $2 a barrel. the ceo of marathon said he thinks below $30 skoooner than back above $50. brian is going to be talking to more energy executives coming up, and you'll want to not miss that one. he's at a big energy conference down in miami. "power" is back in two.

stocks selling off this hour

in part on north korea's claims of a successful hydrogen bomb test. that partly fueling investor fears as you see there. the industrials now back down 237 points. the s&p off more than 1% as well, but look at crude there, down below $34 a barrel. even china has condemned pyongya pyongyang's move. japan called it a serious security threat. ambassador christopher hill knows all too well what's happening in the region. he led the u.s. delegation at the six-party tauklks aimed at limiting north korea's nuclear program. ambassador hill, we're very happy to have you here. the ambassador i should point out is no stranger to conflict. he worked in kosovo. he was ambassador to iraq among other accomplishments in his long career. let me begin by asking you what leverage, if any, does the united states have on north korea or specifically on kim jong-un other than to cut off his private netflix account?

>> right. we have very little leverage on our own. what we need to do, of course, is to work with the chinese and the south koreans and make sure that together we can come up with something, but even collectively it's kind of hard to find the sort of leverage you need. this is a hermetically sealed country. i mean, certainly there are things with china, and that's why that's become the sort of hardy perennial of this discussion, which is to always see what the chinese are prepared to do, but in and of ourselves, i mean, we have already had every visa ban you can imagine. we've limited trade in every way we can imagine. so i think ultimately we're going to have to take some other measures and probably they're going to be in the area of thickening up our military presence there and also for the purpose really of reassuring our allies, but also to work with the chinese and see if they feel

unusually dissed by this latest outrage by the north koreans. >> what do you think, ambassador, the chinese are prepared to do and how much leverage does the u.s. have with china on this point. >> it's funny, the chinese always say they don't have much leverage with north rea. i beg to differ. china as i know your program hasek plahas explained over the years is a very complicated place. it's not as easy for them to go to the provinces and shut things down. it's not so easy. so often the chinese make virtue of their inability to get stuff done and the virtue meaning you have to be more patient, you have to understand the north koreans have concerns, we, too, oppose their policies. we are seeing the chinese have been kind of nice to the north koreans in return for which the north koreans did not do a nuclear test. today the north koreans have

thumbed their nose at the chinese and at some point xi jinping needs to react to this. >> ambassador hill, you have dealt face-to-face with the north koreans. what did you think of them when you were across the table from them and did you think they would cheat? >> well, you know, these are people who don't make my christmas card list, that's for sure. i mean, they kind of look at you, they say things that they know to be untrue and you know to be untrue, and they know that you know to be untrue, but they just say these things. so they're very difficult to deal with, so obviously what you're looking for is -- it's all about verification. it's all about facts on the ground and ultimately we stopped negotiating with them when they did not give us the adequate means of verification. they are not stupid people. it's important to understand that they have some real talent there as their nuclear program would suggest, but i think to call them stubborn is not to do

justice to all the other stubborn people in the world, so i think they really carry that to an enormous degree. >> very quickly, if i might. the security council has condemned this test, whatever it turns out to be, and has pledged additional sanctions. what additional sanctions are even possible now? >> oh i think there are probably some additional sanctions with the point being that maybe the chinese will implement them in connection with their u.n. obligations, but as you suggest, there are not a lot of economic means. i think we need to really thicken up the military presence and maybe look into areas where we can slow down that program and certainly to talk about strategic patience at this point, if it is at all true that they have somehow made an advance in hydrogen technology, we have a serious problem and a serious problem that's coming a lot faster than anyone thought.

>> ambassador hill, we are very grateful for your time. ambassador christopher hill, thank you very much. >> thank you. >> let's look at what is happening with oil, which is today plunging again by more than 5% hitting session lows. brent is also at an 11-year low. wti crude falling to its lowest level since february of 2009 and is wreaking havoc with the energy sector as well. talking of which, one of the biggest power players around, the ceo of pbf energy will tell us how he is navigating low oil prices and where he sees energy prices going this year. that is all coming up with brian sullivan. don't go away.

hello, everyone. i'm sue herera. here is your cnbc news update for this hour. house speaker paul ryan weighing in on north korea's reported nuclear bomb test as a news conference with reporters on capitol hill. >> this looks like a provocat n provocation. i think this means we have to have a well-honed response with our allies on this rogue regime. so i think it's a little early to say exactly what the response ought to be until we get all the facts at hand. canada's horse racing

community is reeling after a devastating stable fire. authorities say more than 40 horses were killed when the blaze broke out monday night at a facility in southern ontario. none of the horses survived. the cause of the fire is under investigation. sony's playstation 4 sales have topped 35 million units. the japanese electronics company is touting its dominance over microsoft and nintendo. and have you bought your powerball? strong sales have propelled the jackpot to $500 million for tonight's drawing. the fourth largest ever for a powerball lottery, but keep in mind, chances of winning are about 1 in 300 million. good luck. that's the cnbc news update this hour. mandy, back to you. >> thank you for reminding me. >> you have to get one. >> absolutely. good luck to everyone out there. let's take a look at gold prices which are currently closing.

we're sitting around a seven-week high as a lot of safe haven trading going on. we're sitting at $1,091 with a gain of 12 bucks an ounce. this is after we were sitting around six-year lows for gold only back in december. let's get to dominic chu for a market flash. >> well, you just talked about gold. let's talk about the bright spot for the gold miners today. shares of yamana, baric, gold fields, and ashanti up 3% to 5%. gold extending its gains for a third straight day. check out the gold miners evident, gdx, up over 1% as well. tyler, gold miners a boyfriend day on the heels of gold prices. >> let's check bonds with rick santelli at the cme. rick? >> 2 day of 10s tell you all we need to know. we're breaking out of a tight range that's been down three weeks. open the chart up to december

10th, the 11th was the last time we closed at these yields should we stay here. it's all about currencies. 2 day dollar/yen. 2 day of the dollar versus yuan kants to fly in the dollar's favor. 2 day of the dollar/euro. 2 day of the pound versus the dollar. the pound is down and at the lowest level since the summer of 2010. mandy, back to you. >> let's now get to christian mamami and bernie williams. gentlemen, thank you very much for joining us. christopher, for the third year in a row stocks are starting out an a weaker note for the full year. what do you make of this? >> so i think this year what is different is the fact that the fed is in a tightening mode and, therefore, while for the full year we'll probably do well, along the way there will be tremendous amount of volt aatil.

>> but krishna are you taking a defensive or offensive position at this stage? >> i think right now we are probably going to go through a tough spot but i think trying to be too factcle on a day-to-day basis is probably not the best thing to do. looking through the volatility for a year-long process i think makes more sense. >> bernie, you're already not particularly keen on u.s. stocks. full stop. i see you're neutral on the large stops and actually unfavorable on the u.s. small caps. where would you rather be, in fixed income or stocks offshore? >> well, a little bit of both. we like europe. we think they look cheap on a relative valuation basis in normalized earnings and europe is a couple years behind the u.s. they're in a stimulative mode so their large multinational companies just like ours and so we think the returns and earnings will be a little better this year, as they were last year. >> bernie, when you see events like north korea, does it factor into your investment thinking at all or do you try to brush it off as sort of a short-term

effect? >> no, it doesn't. we caution our members not to make investment decisions based on geopolitical events that are usually very transitory. you know, on a long-term basis, this is just north korea being north korea. so there's not much you can do about it and it doesn't seem to impact the markets on a longer term basis. >> we certainly hope it's just north korea being north korea. >> thank you very much. you can go to powerlunch.cnbc.com to see how they're playing the emerging markets this year. that's on the website. over to you, ty. >> let's go to jon fortt at the consumer electronics show in las vegas. he's with the ceo of at&t mobility. jon? >> all right. i'm with the ceo of at&t mobile and business solutions. let's talk connected car. this deal with ford you just talked about is going to allow people to lock and unlock their car, to look at how much gas is in the car, start the car and

more from the phone. is this the future? >> that's just the beginning of the future, jon. what i love about it is we on monday declared that we are the exclusive provider for those vehicles and they announced 10 million between today and 2020 so that's a huge, huge amount, but what the automobilemakers are doing with cars these days is amazing. the connectivity, the services that are being provided. it's a really exciting time, but it's also more than cars. we're connected cargo containers, connecting coolers, we're doing all kinds of things with the interstate net of thin which provides realtime operational data for businesses and cities. >> talk about the cities. excitl city initiative. it helps cities become more effective for that i citizens. we announced trial with atlanta, dallas, and chicago taking the same things we're doing for enterprises and taking them to the city to improve their transportation systems, their

sustainability initiatives, and a number of other things. >> how will people see that show up? less waiting at the stoplights i get, but beyond that, smarter about how many cars are on the roads, smarter about what? >> smarter about how they maintain their infrastructure. the city spent a lot of money on their infrastructure. getting realtime data about how the infrastructure is performing, whether it's traffic lights or the water system or sewer systems. just so they can really operate the city in a better fashion. >> what's taking over for the smartphone as we see growth slowing in that category that's been so good to you. >> well, it's everything that's been connected to it. it's not only just the smartphone growth but everything connected to that. we say that the smartphone is the remote control of your life. it controls your tv, it controls everything else. it's providing that connectivity but what i like about what i see in the future of the smartphone in that context, jon, is what we're doing with our directv acquisition. now we're the world's largest cable tv provider with 45 million subscribers. that means we have the capability to get content at scale and make sure that content is available for our customers

in their smartphones, in their tablets, in their tvs. >> tyler mathisen has a question for you. >> i love my smartphone but i worry i'm too dumb to use it effectively. i think a lot of people -- >> you will have to translate the question. >> while highly, highly impressed with what smartphones can do might well be concerned that hackers could get in and smart my car if that's one of the options here or take over controls of the stoplights in a city and cause a lot of mischief. how safe is the technology? >> and the question is about security both in the car as that gets connected and the city as it gets connected particularly that critical infrastructure. what are you doing to make sure those things are secure? >> we are extremely focused on making sure that the connections are secure end to end so all the way from the mobile devices through the provider. we provide what are call virtual private network connections that are not going through the regular internet. they're dedicated and that

provide the most secure connection all the way from mobile devices through our network all the way to the provider of choice of the city, the business, or answeven an individual. we spent the morning talking with providers about how we can make that better. there's hardware as well as software security in the cars to keep them safe. >> thanks so much for joining us. we will continue to bring you more from here at ces in las vegas. back to you. >> thank you very much for that, jon. energy is one of the big drivers of stocks today to the downside. oil itself is down about 5%. natural gas is also falling. we're currently sitting around february 2009 lows for wti. we will get back to brian in miami with the ceo of pbf energy and that stock is up 50% over the past year because their input costs, crude oil, is getting cheaper. you're watching cnbc, first in business worldwide. don't go anywhere.

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welcome back to "power lunch." i'm brian sullivan live in miami and let's continue our focus on oil and gasoline and we are joined by thomas nim bli, the ceo of pbf energy based in the oil capital of america, parsippany, new jersey. >> there you go. >> thanks for joining us. >> nice to be here and happy new year. >> thank you very much. we just had the ceo of marathon patretroleum on about 20 minute ago. he thought the price of oil could have a two handle before it gets back to $50. would you agree with that? >> let me first say if i could predicted accurately the price of oil i would be on an island some place my family would own, but i agree the fundamentals are bearish oil. there's 500 million barrels more oil in the tank this time this year than last year. there's 100 million barrels more in the united states.

it's supply and demand. in behind sight, it was predictable. u.s. crude oil productions increased 4 million barrels a day cumulatively over the last five years. that put the world in a supply excess. i think we believe perhaps the saudis would do what they usually do, buttress the price, and they decided to not compromise their market share. that's maybe the piece that was missed, and they're going to protect and have protected their market -- >> do you think -- saudi arabia is going to keep pumping? >> i do believe so. i think they're saying the answer here is they're not going to give up their market share. the oil minister actually made this comment, if i recall, saudi arabia will no longer provide a free insurance policy to other producers in the world. i believe their strategy is let the free market work now knowing that the price is going to come down. it does send a signal to producers who are looking at investing large amounts of capital. if you're doing that believing you're going to sell your oil at $100 a barrel, you might want to

rethink that. >> you think they're going to damage the u.s. oil industry even more than they have? do you think we could see some bankruptcies? >> i don't think that's their intent. it will be what it is, but the other side of the equation with saudi, they're in the fossil fuel business. they sell hydrocarbon and what they would like to see is demand increase. a low, flat price of crude worldwide and in the u.s. spurs demand. gasoline demand in the u.s. -- >> that's the theory. >> it's more than theory. gasoline demand in the u.s. first nine months of '15 versus '14 is up 3.3%. a little factoid, 3.3% doesn't sound like a lot, but on 9 million barrel base that's 338,000 barrels a day of increased demand of gasoline. our company, the four refinery system we run today, is budgeted to produce 314,000 barrels of gasoline a day in 2016. so spurring demand obviously helps, it helps the demand side,

reducing the oil helps the supply side, and in think that will help the market. >> 2015 was a good year for you and other refiners, especially in the stock market. will this year be as well? >> i believe it will. low, flat price ever crude is very good for refiners. we produce material like petroleum coke that sells at a low value. if you're buying your crude at $100 versus $50, you lose $50 less on the low value products. we'll see the spur in demand. the u.s. refining 12industry is running at capacity. if you're running at 75% utlycation, it could be a tougher environment. >> thank you, tom ninb bmbley, tell who is in the refiner business, because you are the only guys smiling. thank you. >> thank you for having me. >> coming up in the next hour,

one of the only nonrefinery oil stocks that is higher, diamo diamondback energy. the ceo has never done tv and he will be your guest exclusive. we'll also hear from sow know advice, based in canada but with refineries and operations in the united states as well. more on the live price of oil, the markets, all the knees -- news you need to know and maybe some knees, too. we're back after this short break.

stock market los is steepening this hour. let's look at the sector driving the sell-off. energy down 3.5%. the other problem child of last year once again, materials down almost 3%. telecom down 2%. "power lunch" returns in two minutes. you pay your car insurance

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welcome back to "power lunch." we are headed back towards session lows on the dow jones industrial average. we're down 243 points. 1.4% is the loss. the s&p 500 hanging on to 1991, down 1.25%. let's bring in david seaburg, the head of trading at cowan and a "fast money" trader. good to see you. >> good to see you. >> we did have oil test new lows below $34 a barrel. we didn't see the s&p 500 follow testing their intraday lows of 1 1986 or so. what do you make of the move in the markets today? >> i think there's still fear and a lot of concern about positioning. people are still, you know, wondering sort of what's to come, whether it be geopolitical, whether it be just watching energy, and also look at the dollar. the dollar needs to sort of pull back a little bit for us to

really sort of get comfortable about moving to much, much higher levels. we talked about it last night on the show. we've talked for weeks about the energy space. stay away. there's no reason to get involved in the equities here. you're going to see probably the second half of the year positioning start to take up for 2017. now is just not the time to play the equity. but what i find encouraging today is really a lot of these stocks that we looked at that were the growthy names, the f.a.n.g. stocks that people really piled into, are starting to catch a little bit of big. large cap names in particular are doing better, which i do like to see. >> netflix in particular, netflix announcing it's now in 190 countries, just added 130, and you see it, the stock really rallying on a down day up 5%. is this one you want to stick with? how do you handle a name like netflix which has had a massive run trading at a high valuation but it seems to be working. >> look, when you think about this company and the valuation its trading at, he cexecution i

super important. we've talked about it on "fast" quite a bit. it's a name that's just announced they're going into 130 new countries where the street expected them to be roughly in five. it's an amazing doct-- or 130 n markets. that's 125 new markets they're in well ahead of street expectations. q1 sub numbers will have to go up. i think the move here up 6%, melissa, i think it should be up a lot more if the market weren't down as much. i think you would see netflix trading much higher. it changes their address on the market for broadband subs. you look at it and say this new additional 125 new markets that they're in, it gives them access to a massive amount -- i think it goes from 27 million addressable subs to something like 200 million. so assume a 1% market penetration, you're talking about 1.6 million new subscribers more than the street expected. look, the stock is executing on all cylinders. i think it's going to continue

to work long term. >> so you stick with it. let's talk about oil stocks today. obviously a hard time. the xle is down more than 3%. take a look at some of the drillers. that's where the pain is being felt. you have names like transocean, noble, all hitting 52-week lows down to the tune of 7% a piece. could this be actually a good sign? you're seeing real pain in this sector. maybe that is when you see rationalization of production. >> no, i don't think it's going to happen yet. look, i think there's still overhang concerns about iran. >> right. >> the amount of supply that's going to hit the markets. i think you're still -- obviously, i think the biggest thing we've talked about is the fact there's going to be so many companies, some of the smaller highly leveraged companies that are going to go to the wayside, sflit. >> sure. >> that's going to be the trigger. zbr >> got it. david, great talking to you. david seaburg. let's go straight to brian sullivan in miami tracking all the energy action from there at the conference but, of course, we are just moments away from

the fed minutes, bri. >> yeah, melissa. thank you very much. that's right. nearly 2:00 on wall street. about the same time here off biscayne bay in miami, florida, with a big oil and energy conference going on. we'll get to ceos who will giver you insight into the oil market but right now steve liesman with the fed minutes. >> minutes for the federal reserve's december meeting say almost all fed officials agreed that the conditions were satisfied for labor markets and inflation to hike rates. all members agreed that further rate hikes would be gradual and that rates would remain low in the long run for some time, but there were some disagreements there. for some rate hikes were seen as a, quote, close call, and some said in order to hike rates further, they would need confirmation that inflation was, indeed, rising towards 2%. that's greater confirmation creating the pocket of some dissents in the future. they gave four reasons for why rate hikes would be gradual. first, inflation outlook was uncertain.

second, it would allow the feds to assess the economy as they go. kind of underscoring that rate hikes are really meeting to meeting. third, the neutral rate or the rate that wouldn't increase inflation and with full employment is likely to rise only slowly and it seemed to be around zero right now, and, fourth, it's harder for the fed to fight deflation. if it's going to make a mistake, it will make a mistake staying lower for longer. the minutes say over and over, rates could go up more quickly or more slowly that be they have signaled. many said the global economic risks had receded before the meeting and they expected improvement this year in overseas economy. however the drag on net exports, from the stronger dollar because u.s. goods are more expensive, they think that's going to continue for some time. now, here are the lingering concerns that fed officials expressed in their outlook. one is further dollar

appreciation. two, persistent commodity weakness, and three continued difficulties coming out of china and overseas economies but they did also point out some upside risk. they said one of the upside risk is that lower energy prices could spur better consumer spending than expected. they also pointed out that in many districts, it looks like wages are, indeed, picking up. just a couple things here, there's concern about inflation expectations declining and when it came to the staff, guys, the staff was worried about the high yield spreads widening and the earns and credit qualities going down, but overall they didn't make much change to their forecast. so it looks like pretty good agreement on that first rate hike but not a lot of information here on the next rate hike. only that some officials are going to want a little more evidence before they go to that second rate hike. melissa? >> steve, stick around. let's bring in rich clarita and bill stone. rich, i'm going to start off with you. any surprises out of the minutes? >> no. you know, i think steve did a

good job of summarizing. it was unanimous. they emphasized actual inflation, and gave a lot of reasons for a gradual liftoff. i think they reinforced the message chair yellen delivered several weeks ago and i think that's what they wanted to do with these minutes so it looks like mission accomplished. >> bill, investors wanted to hear some clarity on what gradual meant. they wanted to hear about the path forward. we don't know anything more necessarily about the path forward. how are you feeling right now in terms of how you're looking at rate hikes impacting your investment decisions. >> steve talked about the risks, strong dollar, weak commodities. i think what you've seen the start to this year hasn't been that much different than some of the things we saw in the late summer, early fall, so i think it does tell you a little bit about the fact that if you had thought that the fed might move quicker this year, you might be

rethinking that, which i think is being part of what's shown in the treasury market. implications for investors is really to think about how quickly the fed will move so i think the dot plot shows four moves this year. we're calling for three so we were looking for a little more gradual f gradual, futures looking for more like two. if we're not in the midst of all this geopolitical would be a more interesting subplot to the financial market. >> bill, i suspect the only dots our viewers care about is moving the decimal one spot to the right as their assets grow. with all this stuff about dots and inflation, what do they do? what are you recommending to your clients that they can make more money and protect what they've got? >> well, i think what you have to get down to is where do you actually think things are going, so we would say this is some soft spot obviously in the u.s. economy here in the fourth quarter, particularly in manufacturing. you know, yes, the fed is going to be a little bit, i guess,

less quick in moving up than maybe they had even said in their dots, so what do you do with that? one is i think interest rates probably move up from here in terms of treasury rates, so you stay defensive on interest rates. you know, maybe don't have as much duration. other side is we think the economy will bounce back a bit. so in terms of sectors we like, we like the consumer discretionary sector. i think that's a place to think about. other spots, maybe the technology sector. i think steve talked about in terms of wage pressures. it's a place where companies can look to add technology to try and offset -- >> you know, brian, with all due respect, i think investors care a lot about these dots because they've been telling us which way the market is going to go, and i want to answer melissa's question from earlier which is, well, how do you know when they're going to go next time? i think the way you do that is not that hard. the fed has given us a base case for the year. the base case is those four rate hikes. now you judge the economy, the

incoming data as plus or minus whether or not the economy is going to come out to that call it 2% growth and then moving towards 2%. on the issue of dissents, it's important to point out. there are some who may dissent if we don't get better inflation data on the next hike but it may be yellen wants to go forward with those dissents anyway. it didn't look like it was overwhelming in there. so these dots are consequential for investors and i think what we're hearing, we heard from stan fisher this morning, also importantly is the fed is on track to do four rate hikes and we'll be judging whether or not the economy lives up to their expectations and so, therefore, their forecast for rate hikes is up to expectations. >> i hear what you're saying, steve, and, rich, maybe you can jump it on this. i'm not trying to dis the federal reserve. now we have dot plots to pay attention to. kind of like air-traffic control. i just want to know what they're going to do. do you think the dot plots represent or that the fed is

accurately forecasting what it's going to do. something else in my mind to glaze over people's eyes because they're sick of the fed because they talk every day. >> way i like to think about it, folks, i think if we get four hikes this year, and i'm with your other guest, our view is we won't get four, we'll get two or three, but if we get four, that's great. it means the economy is surprising on the upside, it means there's increases in wages. the reason why some of us think we won't get those four hikes, especially off to the start we're seeing this year is as the fed minutes point out, there's a slowdown in the global economy. the strong dollar will hurt exports so i'm from missouri i guess in terms of whether we get the four hikes. if we do, i think it will be great. >> brian, i want to push back against what you're saying because consider the alternative. first of all, the federal reserve is most importantly criticized for being this black box, this secretive organization that makes policy that nobody can scrutinize here. so here they are telling us their outlook, the uncertainty around that, and, yeah, i'm

sorry it's confusing, i'm sorry if your eyes glaze over but as a financial journalist i'm always in favor of more information. i think markets make more perfect choices with more information, not less, and maybe rich wants to back that up. >> i love data in all forms including dots, steve, so i want to go back -- >> thank you, melissa. >> i want to go -- >> you guys, you can't just -- >> come on. >> you can't just leave it like that and say i don't like transparency. that's not what i'm -- we like more information. that's not what i'm saying. i didn't say less is better. i'm just saying that people care more about how do they interpret it. that's our job in my view is to say what do we do. the dot plots -- i'm not knocking the federal reserve per se. i admire their effort -- >> you can knock them. >> it's like fantasy football. >> i that i we're all in agreement, guys, we are all in agreement. >> no, no, no, no. i can't let that go unresponded to because, brian, the outlook for the federal reserve on

interest rates has been the holy grail of the market and the financial journalists for the decades that i have been covering the fed. the fact that they put this out there as dots, imperfect as they may be, is a major step forward in transparency and it's not something to be knocked as being incidental to the data they put out. it's important. it's really important. >> all right, guys. we have to leave it there. thank you. >> okay. >> rich, bill, and, of course, steve lessmaiesmaliesman. >> the white house saying today it is already talking to china about north korea's supposed test of a hydrogen bomb, although many, including the white house, are doubting north korea's reports. that's just one of the many issue that is are dogging china this week and, of course, what dogs china also dogs the rest of the world as well. you've got a great wall of worry behind us. what is top of the list? >> let's talk about china, has been a problem for this market all week. first, there was another round of weak economic data out of china this morning. index that follows the service sector of china came in at the lowest level in 17 months.

particularly significant because china optimists have been saying don't worry about weakness in manufacturing in china because china is transitioning to a service economy and as long as it's growing, all that is okay. service sector data not to mention recent consumer data puts a hole in that argument. the chinese currency fell to a five-year low today. another big worry. in china the currency does not trade freely. it's strictly controlled by the central bank, so the fairly sharp decline it made today was by design. desired by the central bank. traders and investors worry this is another signal that the chinese economy may be weaker than the government is letting on because this would make china more competitive, especially their exports. then there's the volatility of the chinese stock market all this week. moves of up to 7% in the market have the leadership of that country scrambling and worried. the government encouraged individuals to invest in the markets throughout last year. now today the government announcing large state enterprises are not going to be allowed to sell stocks next week. they were scheduled to lift that ban on selling on friday but now

that's been postponed. the chinese government is constantly doing this, tinkering with the stock market rules, trying to have the best of both worlds by using the stock market and the currency to bolster its economic policies. and then, mandy, of course, there is north korea. regardless of whether it was an atomic bomb, a hydrogen bomb, the world sees a north korea's as china's responsibility. if they can't control them, it's another headache for them. >> the question is, of course, how far china is willing to go to stick its neck out in helping out the rest of the world in the north korean issue. >> exactly. >> as the u.s. says, they're already talking about that. thank you for laying it out for us. >> thanks, folks. let's bring in ambassador seward holiday. he oversaw counterterrorism programs. ambassador, welcome to "power lunch." >> good afternoon. >> you heard what michelle caruso-cabrera just said outlining the various stresses and challenges that the chinese regime faces right now with respect to their economy.

what do you think is happening in china? >> well, it's interesting that their statement indicated that they had no advance warning. they have the best information on what's going on in north korea and they were part of this afternoon's unanimous presidential statement from the security council. if i were the chinese i think some lines have been crossed. they have traditionally just called for more negotiations. it will be interesting to see what happens this time, especially with their economic pressure. >> we just heard in the last hour from ambassador chris hill that he said the u.s. has very little leverage with respect to kim jong-un or north korea but we have leverage with respect to china. is that how we should be playing this nuclear test, whatever it turns out to be? >> well, i think there are three prongs, and i think chris hill not only mentioned talking to the chinese which has not really yielded what we had hoped for heretofo heretofore, but i think there's

a strong possibility that can change. he also mentioned ramping up, frankly, direct measures from the international community outside of the u.n. framework but dealing with the technology and the capabilities we have to disrupt this advancing program, and then third is to the united nations. there are a couple areas, including certain sanctions on third parties out of north korea we haven't gone to that we could ratchet up. >> the world is obviously a dangerous place, and today's events on the north korean peninsula certainly tell us that. but earlier this week we were focused on the conflict between iran and saudi arabia. i wonder what your view is on whether the sort of departure of american power from the middle east, from iraq and elsewhere in that region, what has that meant in that region and to what

extent do we bear responsibility for what may be going on today in libya, in iraq, in syria? >> well, that question, it depends on what you start the clock. i mean, the region has been in tumult for centuries and we're not responsible for that. leaving a vacuum and giving deadlines for troop withdrawals and so forth, yes, we have surrendered real estate that has been filled by radical islamist terrorists, but that doesn't mean that the regional powers, the major powers, the saudis, the egyptians, some of the other gulf states, don't have a responsibility to step up and actually begin to create a better climate not only for their people but not let this fall into a clash of shia/sunni sort of regional war that it looks like is a potential danger. >> regional and sectarian war indeed. ambassador holliday.

we hope you will kocome back an join us soon. >> what's the best way to play china right now? let's bring in david reedel. i want to pick it up where tyler and the ambassador left it off, that's the notion that perhaps the u.s. could use its leverage on china in order to -- i don't want to say strong arm but have influence over north korea. should that happen? does that change your investing view of china? >> i think any interaction where the u.s. and chinese work together to solve an international problem is good. the problem that i have is the ongoing disputes in the south china sea remind us how far apart the u.s. and china are on a lot of issues. china sees the u.s. as not very powerful in asia today and i think the actions this morning in north korea indicate that maybe that's true, that there has been some weakness in terms of the u.s. commitment to korea -- sorry, to korea, to japan, to north asia in general.

i think it's a little bit of a poke in the eye to the u.s. it's a reminder of how weakened the u.s. position is in asia. >> let's talk about what is going on this china and the volatility that we've seen in 2016, is it really just market concerns here? is it concerns about the economy, or is it really at the end of the day about the yuan and the depreciation we've seen in recent days? we have the yuan/dollar trading at the lowest level since 2011. there's an impact to trading partners. dade, what's your take on this depreciation? >> on the market you have a market that was up 60% in 2014, up 6% in 2015. i'm not surprised to see this kind of volatility. it's still a relatively immature capital market where the regulator is finding their feet in terms of how to deal with these crises and it's something like 80% or almost 90% retail driven. so things like those -- the circuit breakers are really just an invitation for vomelatility

many ways. we try to look at some of the data on the ground that doesn't rely on government data. we look at things like box offi office receipts which were up 45%. we look at things like oil imparts, up 8% in 2015 compared with '14 and they're expectinging expecting to be up another 8%. we monitor the consumer confidence surveys and that's showed an uptick in december. i think there's a lot of anecdotal evidence on the ground that things in china aren't as bad as many people feel. you have the yen which was down 35% over the last three years, you have got the korean won which was down. i think china had to devalue a tiny bit to stay competitive with their exporting competitors. juf a stock picks. >> china telecom, car, which is the hertz of china. you can say the consumer is fine

and you have the anecdotal evidence to prove it but on a day when we see for instance on monday or today, on a day when we see the shanghai composite sell off, we still see a sell-off in the internet names even though these are consumer facing names. at the end of the day, david, doesn't it just matter what the shanghai composite does in terms of the other names you're advocating? >> while it matters it doesn't have a real impact on their bottom line, their ability to deliver earnings. i think at the end of the day you've got to understand the companies and their business models, they get earnings to the bottom line. they will get whipsawed by volatility in shanghai on a day-to-day basis because they're a large liquid way to play in new york the chinese story and the chinese consumer story in particular, but i think longer term you're going to find what wins out is fundamentals, corporate governance, and ability to get earnings to the bottom line and that's what underpins our recommendation

approximates. >> thanks so much. good to speak with you. david reedel of reedel research. we're headed back to miami where brian is speaking with the ceo of the original f.a.n.g. stock, that would be diamondback energy whose ticker symbol is, in fact, fang. and a look at some green arrows on this very down day. see if they're still green? yes, they are. time warner, american airlines, and netflix up 7%. we're all over this market slide when "power lunch" returns. what do you got to offer us today? ♪balance transfer that's my game♪

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starboard value firing off another letter criticizing marissa mayer. the letter saying 2015 was an extremely frustrating year for yahoo! shareholders and calling for a change in leadership. yahoo! stock is up 105% since maier took over in july of 2012 but the stock has been mostly in decline since the alibaba ipo in september 2014. yahoo! spike is down nearly 25% since that time. david faber joins us. it's interesting because i think it was a year ago, maybe more than a year ago, that starboard was also calling for a change in management and then they sort of went away and now they're back. >> yeah. i mean, they have kind of never gone away in some ways, melissa, and as you pointed out this is one in a series of letters. they originally were calling for the spinoff of the alibaba stake into a separate company before they reversed themselves and said, no, we'd actually prefer that you spun off the core business. of course, a few weeks back yahoo! decided to do exactly

that, reversing course itself because of the tax ramifications perhaps of an alibaba spin. but this letter, as you said, centered more on what they feel is a failure of management and the board of directors to turn around that so-called core business of yahoo! pointing out that the value of the stake in alibaba is worth roughly what the market cap of the company currently is, and certainly threatening it would seem the possibility of a proxy fight saying things like you see right there, shareholders have lost confidence in the board, at least according to mr. jeff smith. they talk about changing direction of a spend in that way is not acceptable. they're coming back to the idea of selling the core business as opposed to spinning the core business along with yahoo! japan. that's the plan that yahoo! is now embarked upon. and mr. smith, well, he makes no bones about it in his statement or along with the statement saying if the board is unwilling to accept the need for significant change, an election

contest may be needed so that shareholders can replace the majority of the board with directors who will represent their best interests and approach the situation with an open mind and a fresh perspective, of course. it does seem perhaps likely that yet another proxy fight may be in store for yahoo!. for its part the company responding with a statement that was out a little less than a half hour ago or let's call it very recently saying yahoo! is in the midst of a multiyear transformation. we attract more than 1 billion people every month and we built a profitable business that we expect will drive sustainable growth. we will share additional plans for a more focused yahoo! on or before the fourth quarter earnings call. our board and management team engage in and maintain regular, open dialogue with all shareholders and consistently strive to deliver and to

maximize shareholder value. mr. smith believes multiple parties have approached yahoo! and he says a number of them have talked to him and say we'd been interested but we can't seem to get an engagement in terms of a dialogue. the maynard webb, the chairman of the company in an interview we did, said we remain open to all things doing our fiduciary duty as board members, but that said, there certainly seemed to be potential impediments to a sale of the core business that at least may be giving yahoo! pause at this point. you've got to negotiate a contract with yahoo! japan if that were to not be a part of the spin because of the royalties they get. softbank that controls yahoo! japan, what would he think if they were veling to verizon, a competitor of sprint which softbank controls. none of which says it's impossible, but makes it more difficult and extends the time

line for said sale. that said, it's very hard if you're a buyer not to have a dialogue before you actually put a number on the table. so we'll see where this advances, but yahoo! just doesn't seem to be able to avoid controversy, does it? and it certainly continues today. mr. smith won't back down even though he's not the largest shareholder but he's certainly one of the more vocal ones. >> david, thank you. david faber joining us from new york. now down to brian sullivan in miami with an interview with the ceo of the original f.a.n.g. stock. bri? >> you talk about f.a.n.g. stocks all the time on "fast money," 5:00 p.m. by the way, this is their ticker, fang diamond back energy. we're joined by travis stice. they're one of seven companies nonrefinery whose stock is higher over the past 12 months and this is not only an exclusive, it is travis' first time on television. i would promise to be gentle but this is not a market you can be gentle in. >> fair enough. >> what have you guys done right

that you're one of seven stocks up when 181 are down over the past 12 months? >> well, there's a lot of smart people even here at this conference that are spending a lot of time trying to forecast what the price of oil is going to do. the one thing i'm convinced i d is i don't know what the price of oil is going to do but what diamondback energy has consistently demonstrated is a relentless focus on execution, extremely low cost operations, and a pristine balance sheet, and we think that's important whether commodity price is $35 a barrel or $100 a barrel. >> at the end of the show i will do my takeaways. the first takeaway has been this, 2016 for oil companies is not the year of oil. it's the year of the balance sheet. if you're screwed at 31, you're probably screwed at $33. would you agree with that? >> agreed. >> so how do you manage through that when as you just admitted, really can't predict where the price of oil is going to be?

>> we allocate capital the most efficient way we can, so when you look at 2016, we might have a mild outspend of around $100 million or so, and that's against a revolver of 500-plus million dollars. so we're in pretty good shape from that perspective. we try to run the company consistently with the leverage ratio of less than two times. and so as we allocate capital, we look at things like how much we're drawing on our revolver base, what is our leverage ratio and we look at commodity prices as well. consistent with the capital discipline we've had all along, when returns to our shareholders go up, we accelerate activity into that environment. times like we're in right now where returns are going down, we decelerate and that's what we're doing. >> it's so interesting. how do you run a company when you have almost no visibility into where the price of something will be, your primary product, in six months or a year. >> again, back to my original point, you know, you have to be the last man standing in a

commodity-based business, and the only way you can be the last man standing is to make sure that your cost structure is the lowest and your execution is the highest. and, you know, we're hearing at this conference that commodity prices are going to go down to the 20s and diamondback is going to be the last man standing under that scenario not because of anything other than we've got really good rock and we've got an organization that focuses on that execution and low cost structure. >> i keep hearing that as well. again, another theme. it's all about the rock. it's not just that you're in the permian, and you're a three generation midland, texas, resident, it's about the quality of the rock. how do you define your asset quality versus others at diamondback? >> we spent the last three years and i believe we've spent about $2.5 billion of which we paid for primarily with equity building an inventory that's resilient. we didn't plan to run the business at sub-$30 oil, but we've done a good job of building an inventory that tells us right now we don't have to go

out and add rock into our inventory like other companies may be forced to do. really our business is no more complicated than taking rock and converted it into cash flow and the most efficient guy that does that is the one that attracts the most investor dollars and i think if you look historically at diamondback's performance, that's one of the reasons that we've been able to do that. really good rock, really good conversion into cash flow. we do acquisitions, fund them with equity, and ther accretive acquisitions. >> a couple years ago it was all about the benjamins, now it's all about the rocks. travis stice, thank you for joining us. first time on television. jackie deangelis, let's get the oil close down at the nymex. >> good afternoon to you, brian. crude really falling out of bed in the last hour of trade here. at one point we were down 6%. just closing around this $34 mark. nearly seven-year lows. five reasons for why this happened today. first of all, a draw in crude, it produced a big build in gasoline. the problem is if you don't have the demand to use that gasoline,

we're going to have storage issues. the second reason, inside the eia report, u.s. production up for the third week in a row and a lot of people speculating we are not going to see production cuts coming out of the middle east. the third reason that dollar, the dollar index still over 99, and worries about growth in china adding to this. finally, the flight to safety could trigger a lot of people selling, moving into cash, and all of these things are the perfect storm to send crude lower. as you know, when we hit these technical levels, the momentum really builds and you have a lot of bearish reasons. i called around, very hard pressed today to find anybody who was really interested in getting into this trade right now to the upside. so whether you believe that the equity market drives crude or crude drives the equity market, certainly some bruises here today and potentially to come. back to you. >> yeah, it's amazing. travis, i'm sorry to bring you back in, listen, we were in midland about a year and a half

ago, and you're looking at $34 oil. it was at 100 bucks when we were there. what's the mood in midland? did anybody see this coming? >> well -- >> it's okay to say no because i don't think anybody -- i don't know anybody that did. >> the one thing about midland people is we've been through these cycles before, and in my 30 years of doing this, this is at least my fourth down cycle and in the first half of my career when i got out of college in 1985 to 2000, the first half of my career crude was below 20 bucks a barrel. do people like low commodity prices? absolutely not. does it cause some pain? absolutely to the workforce, but can we -- are we accustomed to this? yes, we are. the longer crude stays lower, there will be a recovery. i don't know when or what catalyst is going to cause that to occur, but there will be a recovery and we'll be back to fight another day. >> one of our guests said the other day, the only cure to low prices is low prices. short break.

ceo interview with cenovus. canadian company with refinery operations here. more on allel headlines you need to know live at the global energy conference from miami, florida, when we're back after this. energy conference from mia florida, when we're back after this.

welcome back to "power lunch" in miami, florida p.m. i'm brian sullivan. thank you very much for joining us here. we are focused clearly on oil, and you just heard the ceo of diamondback energy say basically he doesn't know where the price of oil is going and for all those predicting out there, he is not the only one. earlier today we spoke with the ceo of canadian oil giant cenovus energy. they also have refining assets in the united states, and i began the interview by asking brian ferguson where he sees the price of oil. >> i think that's something that's really difficult for anybody to call here in the short run and that's where i think as corporate executive what is we really have to focus on, having great balance sheets, focus on cost structure. there will be a rebound here i think in prices sometime over the next several quarters, but i think we're also in a world where it will be a lot more volatile. supply and demand are setting price now and supply and demand will result in more volatility. >> what would be the odds then that the price in u.s. dollars would be over $50 a barrel at

this time a year from now? >> odds, again, hard to handicap. at least even odds i would say. there's going to be some impact as a result of 40% reduction in capital expenditures in the business. that's got to have an impact on natural declines and supply. >> production has gone up in many parts of the united states and in canada despite the low price. your production is expected to go up. why does production keep going higher? >> so it really becomes a function of the investment that you put in place and what you're moving for. in our case as a company we've got a couple major oil sands projects that were well advanced, about 80% complete when prices started to drop a year ago. we're bringing on 100,000 barrels a day of incremental production over the course of this year, 2016, but what we're doing is not funding future phases beyond that until i see some clear signs that we've got clarity on the direction of prices. >> so how long will that -- this

is probably the wrong term -- that drain rate drag on. in other words, no new we wills being drilled or few, how long will these wells and the oil sands in your case last before production starts to go down meaningfully? >> we design for 30 -year flat production lives. you want to run at a high capacity utilization. drive your costs down. our unit operating costs, for example, in the third quarter last year under $10 canadian per barrel. >> analysts say off strong balance sheet, you have some cash to use. any plans for using that cash or other leverage for a buyback? >> right now what we're focusing on is completing these projects that we talked about. the volatile world that we talked about. i'm going to run a more conservative balance sheet than i otherwise would. we certainly will give consideration. in my mind the question in terms of buying back shares competes with should we invest to grow

our business. how do we create the best value per share for our shareholders? buying back shares could be a valid way to do that. >> like many other companies, you had to cut your dividend. you slashed it by 40%. is this dividend safe? >> it is. we've taken a look and run models over the long term. i always take a few longer than the next couple quarters. take a three-year view. if we see prices coming back up in that $50 wti range, then we're very sustainable, yes. >> and the one thing about you guys that many people may not understand despite being a canadian company, do you have some u.s. refining assets. the refiners here are the only ones who seem to be smiling. what has that meant for you guys as a natural hedge on your cash flow? >> we've been generating about between 400 to $1 billion annually from the refining assets we've got. it's a good offset. allows us to take advantage of lower feed stock cost, lower prices coming in, as well we benefit from the crack spread as well. so it's been a great asset as

well-being integrated. takes a lot of the volatility and gives us more stability. >> brian ferguson, ceo of cenovus. we are going to continue our focus on oil here on cnbc. coming up tonight in an interview you cannot afford to miss, 6:00 p.m. with jim cramer, boone pickens. do not miss that tonight. we're back with more "power lunch" right after this. when a moment turns romantic why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision,

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we are at important levels for the markets intraday. the dow is just off of session lows, now down 1.7%. a loss of 287 points, and take a look at the s&p 500 we are sitting at session lows on the s&p 500, down 1.5% or 31 points. apple we should note, too, is close to its intraday low. it's down 2.5% and closing in on $100 a share. let's discuss it with max wolf, todd gordon on "trading nation." we get the positive news of the record holiday season in the app store but all people care about is the iphone and the stock simply doesn't trade well. i don't buy the argument of people knew this, people had

doubts about iphone shipments because otherwise we wouldn't see the stock react the way it's reacting. what's your take? >> great to be here. thanks for having me. i couldn't agree with you more. i think we knew the u.s. dollar would be a headwind. we knew china was slowing. if that's news to you, you've been in a coma for a while. we saw some selling momentum into this game as people sold winners which was a clear pattern and then that got enough downside momentum it didn't really pick up as quickly as we thought and people are just taking chips off the table because they're nervous. that being said, this is a buy unless you think that the future is a lot dimmer than we think it is and we're generally were sanguine at manhattan venture partners. >> so it's a buying opportunity. tadd, do you see that as well. it looks like it could pierce $100 and then what is it, the flash crash intraday of $92? >> it's actually supported. if you look from the 2013 to today's low, $100 is not just a

psychologically important level, it's a technically important level as well. should we break there, yes, we have concerns. on the options side we have over 390,000 calls traded today to 300,000 puts. we actually have more call action. and finally point, melissa, look at the f.a.n.g. stocks. look at amazon, netflix, google, they're all performing well today in a down market driven by energy. don't give up on this market yet. we're still seeing some of the names from 2015 show some relative strength. >> before i let you go, todd, s&p 500 now at 1985. we are at session lows pretty much. a lot of technicians have signaled that 1990 was going to be a key point to support. we're below that otherwise we could test lows. where are you seeing the s&p 500 headed? >> i will be buying at 1940 from the our technical levels. i don't think this is a meltdown. i look forward to buying there. >> all right, guys. thanks so much for your time. max and todd. find out more market insights at tradingnation.cnbc.com. as we mentioned, the dow and s&p 500 hitting session lows as

we count you down to the close. oil down 5%. it did breech the $45 a barrel level on wti. "power lunch" is back in two.

let's point out that the markets are at session lows right now with the dow industrials off 308 points. the s&p 500 down 1.66%. 34 points. the nasdaq down similarly at 3812. a 79 points slide. the slide steepening in the last few minutes. let's bring in sandy vilerry and david smith of rokelackland tru. sandy, is this a year where stock pickers will do better relatively than the indexes and if so, why? >> i think it's very important to be a stock picker in this

market. last year seemed to be the market of amazon where everything -- at least some of the larger cap names did we will. in 2014 you saw larger cap names go up a tough market for small mid caps, but i think it's going to be a good market if you're a stock picker and focus on good quality companies are low p.e. to growth and dominant market share and good balance sheets. >> david, 2016 has been anything but sweet '16 so far. what's your outlook for the year overall, and should i diverse if i by not just concentrating on u.s. companies, but overseas ones too? >> our outlook is reasonably positive. i think the economic environment in this country is going to continue to kind of muddle along. the rest of the world seems to be improving, so we would expect global gdp to be reasonably productive and corporate earnings follow that and stock prices ideally follow that afterwards. from the perspective of diversification, this is

absolutely i think the time to take a look at portfolios and ensure that you are properly diversified globally, and as the previous speaker mentioned, it has been a very long period of time now that the large cap u.s. stock market has outperformed those other capitalizations inside the united states in other stock markets around the world. so inevitably that will change. >> sounds like you're making a slight case, if i might, for sandy's pickings, which are smaller companies. sandy, pick up on that. >> we really like the smaller cap names. going back the last two years, there's been pretty dramatic underperformance. small caps at about 2.2 times book value. i think there's a lot of names that have been beaten up unfairly. just over an hour until the close. the dow sitting at session lows. "power lunch" returns in two minutes. here at the td ameritrade trader group, they work all the time. sup jj, working hard? working 24/7 on mobile trader,

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sawing our way to fresh intraday lows. so this should be a very interesting final hour of trade here. of course, we are watching very closely the price of oil. wti going back below 34 bucks a barrel. we are down 5.6%. and with these new lows on oil, we are watching the xle. this is not only a 52-week low here on the etf that tracks the energy equities, but it's also a five-year low. these are levels that we have not seen since september 30th of 2011. >> what's amazing about the xle's decline is that the xle is really 40%, just three companies. exxon is 18%. chevron is 14%. schlumberger is 17%. these are not smaller companies with weak balance sheets. these are the giants of the industry. so even the biggest integrated companies have not been safe from what has happened, especially via vis-a-vis is xle.

>> we are seeing them at 53 close today. >> a good point there on the xle. i'm sure you guys will talk about it on "fast money." we're going to take a short break. we'll be back with some final thoughts to wrap up what we've learned at this big energy conference. some might surprise. you. that's coming up as "power lunch" rolls on. the life behind it. ♪ those who have served our nation have earned the very best service in return. ♪ usaa. we know what it means to serve. get an auto insurance quote and see why 92% of our members plan to stay for life.

welcome back. the dow is now down 320 points.

according to our great data team here, this is now the worst start to a year since all the way back in 2008. wow. oil a big part of that. let me quickly walk you through some final thoughts and takeaways from our two days in houston and one day here talking to producers. if you're going to invest in oil and oil stocks, here are the things that you need to know. number one, no one can predict the price. ceos have been saying they don't have any visibility. people can guess. maybe that's all that it is. this year, a plns sheet is going to be more important than the price of oil. it is all about a company's balance sheets. look for the leverage, look for the amount of debt they've got. bigger does not equal safer. a couple of hedge funds saying listen, some of the big integrateds may have a weaker balance sheet. don't assume because a company is large in terms of market cap it is safer. if oil doesn't recover, some companies that are here at this conference this year won't be around one year from today.

>> great stuff. this will be an interesting final hour of trade here as we had the markets at fresh session lows. thanks so much for watching. "the closing bell" starts right now. >> hi, everybody. welcome to "the closing bell." i'm kelly evans. >> and i'm bill griffeth. here we go again. another big selloff in the stock market today here in the u.s. all the major averages are sitting near their lows of the session right now. the dow, the s&p, nasdaq now on pace for the worst first three days of the new year since 2008. the dow down 4% in the past week right now. today it's new fears about china. we've got the situation with north korea claiming to test a hydrogen bomb overnight. that has been spooking t