the many photographs auctioned off this weekend or purchased by collectors on art dealer in palm beach. we take the proceeds, it goes to the perry j. cone foundation, marvelous entity, google it, that gives money to teenage entrepreneurs. we did it in miami. very successful. moving it up the coast. i love what this does. it is all about kids that want to be entrepreneurs. >> great having you here. thanks so much. >> "power lunch" begins now. good day, everybody. welcome to "power lunch." along with melissa lee, michelle caruso-cabrera, i'm tyler mathisen. brian sullivan is in miami at a mining and medals summit, big interviews with the president of barrett gold, ceo of anglo gold, that's all ahead. gold one of the best performing asset classes this year, up more than 15%. you can't say that about many other things. rallying today as you see there, another 1%. stocks also pushing higher. right now the dow up a third of

a percent, ditto the s&p 500 and the nasdaq is up about a half percent. big interview on cnbc today. you know he who. billionaire investor warren buffett weighing in on this market roller coaster ride. >> there has never been a time in my life when i -- i know what markets are going to do over a long period of time. they're going to go up. but in terms of what is going to happen in a day or a week or a month or a year even, i never felt that i knew it and i never felt it was important. i will say that in 10 or 20 or 30 years i think stocks will be higher than they are now. we're almost always a buyer of stocks and we're more aggressive buyer when they're going down. i feel much better when they're going down. but it is hard to think of very many months when we haven't been a net buyer of stocks. >> i don't feel better when they're going down, but put that aside. many months, he says, almost always a net buyer, should you do what warren buffett does?

where is the value and opportunities for long-term investors? joining is charles rainier at mainstay investments and also nancy tanker, chief investment officer of hartland financial. good to have you here. you agree? th should you be buying all the time? >> you should be a long-term investor and thinking beyond today, tomorrow and the next day investor. in the long run, the economy grows, profits grow and it takes equity investments with them. >> you telling clients to buy all the time now? every month? >> we're telling -- that's not the particular strategy. but we have strategiy ies that are recommending. we recommend they seek value and shareholder yield. we're also looking, telling them to look outside the u.s. also. you can generate a high dividend yield outside the u.s. and manage the currency volatility with the 50% currency hedge. >> that is a strategy you like as well, right? dividend yielders? >> yes. i've been -- good to see you again, michelle. i've been a value investor my entire career, high dividend

yields and it feels good to be back in style again. so we're looking -- we're using the volatility to upgrade the quality of the portfolio. the holdings in our portfolio and our yield is, you know, a little over 3%, but it is also growing quite dramatically. i think that's what investors are missing. certainly in the bond market is lack of yield and then the lack of growth in yields. so we're finding a ton of value in this market. >> nancy, isn't it costly these days to upgrade when it comes to dividend yielders? we're looking at consumer staples, general mills, kellogg hitting new all time highs. you're paying for the yield at the same time and perhaps paying a multiple which is high, compared to the stocks themselves. >> yes. you're right, melissa. we're underweight staples and we went underweight utilities at the end of january. but there are other places to find attractive yield. energy is an industry we overweighted at the end of january also and not in the

riskier segment. so we're not shooting for absolute yield. >> what is not risky in energy these days? >> exxonmobil has been one of the top performing stocks in the dow, that's our largest holding. i've been on this show recommending it. it is up 5. the market is down 5-ish. that's one place. chevron is another place. and we also -- >> little companies. little ones nobody heard of. right? the little tiny -- theed piddl ones. >> a few years ago, nancy would probably agree with this, people turned up their nose, they were fuddy duddies, stodgy, no fun, didn't have any growth. are people -- so many people we have on here who are saying buy in big dividend players, are they fundamentally saying i don't like the market over the long-term? and i want to be defensive? or are they saying, i don't think you can count on growth the way you used to and therefore you need to get a relatively higher percentage of your total return from dividend?

>> historically over time stocks that do pay dividend also had a higher return than stocks that don't pay a dividend. and ironically they also have been less risky. the volatility in stocks had been lower than stocks that don't. >> win-win. >> it is a win-win. it could take it a step further, it is not just the nacfact they paying dividends, that's part of a good corporate allocation strategy because they're comparing opportunities for investment and they think returning some cash to shareholders is the best thing to do, that's what you would actually like to see companies -- >> it says about the management. >> absolutely. >> and they're stewardship of capital. >> what we also found is you can take it a step further beyond dividends and if you look at shareholder, which includes share buybacks and also paying down corporate debt, that's actually an even more robust indicator than dividends alone. >> tell me why is it you like google because that doesn't yield anything right now. >> that's my only nondividend

payer, but we look at two valuation metrics. one is relative dividend yield and that's important because management set the dividend as a portion of free cash flow. not earnings. there was an article in the wall street journal that pointed to the fact that pro forma earnings were up 3.4% last year, but gap earnings were down over 12%, the pe is more like 21, over 21 than it is like 17. google is an interesting opportunity here. we look at that based on relative sales ratio, the same way we look at apple which does pay a dividend. the stock is selling at almost an historic low in relative price to sales ratio and that's important because you're looking at what you're paying for a future unit of sales. and that dividends and sales don't lie. earnings sometimes do. and so it is a great opportunity. we were buying it in the low 5s and still buying it in our growth at a reasonable price

portfolios. >> charles, why do you like europe now? >> if you look at stocks outside the u.s. like europe and japan and australia, they trade with a higher dividend yield than companies in the u.s. also, if you look at their forward pe ratio, and compare that against history, their trading at a discount compared to normal. today is leap day. next month we anticipate that the european central bank will do more on the easing front and japan recently has gone into negative interest rates. we think they're very supportive. >> so easing will still help prop up stocks. you're not worried about how the european financials are trading as a barometer for what is going on in europe overall? >> they represent a portion of the stock. but not all of it. >> all right. charles, nancy graerkt thanancy you on. thank you so much. go to powerlunch.cnbc.com now and see nancy's other big cap picks. that's powerlunch.cnbc.com. warren buffett is not the

only ceo out with his annual letter to shareholders. the note from ge's jeff immelt out this morning and he pulled no punches when talking about the government, quote, technology, productivity and globalization have been the driving forces during my business career. in business, if you don't lead, these changes, you get fired. in politics, if you don't fight them, you can't get elected. as a result, most government policy is anti-growth. wow. interesting coming out during election year when a lot of the primaries have gone on. >> he was a former sort of corporate leader, remember, back in the crisis, he was criticized for that, by the way. but clearly not happy with the direction. >> he used the word populism, which i think speaks to a certain moment and being against it, and then i like this as well. governments love small businesses, but then regulate them to death. how often do we hear politicians come on and talk about how much they love small businesses and yet they don't seem to ever consider what their policies do, the businesses once they impose

them. >> this seems like one of the boldest statements from a fortune 500 ceo that we have heard to date. it will be interesting to see how many more come out of the wood work. >> what a weekend it was in the political -- >> fascinating. >> really classy what is go on there. >> getting weirder and weirder. >> he says sarcastically, by the way, if you're listening on the radio. >> i hope they can tell. gold prices are rising here. could be the best month, in fact. there you are. up by 1%. brian is at the big metals and mining conference in florida. down to you. >> yeah, melissa, everybody here, they're looking at that price they're showing now and probably more smiles on their face. if you're a gold investor or gold stock investor. we have an interview you cannot afford to miss. one of the hottest turn around stories on wall street, barrett gold, the world's biggest gold miner will join us. we'll talk gold, gold prices, currencies. we'll be back right after this.

lunch." i'm brian sullivan in hollywood, florida. if you're a gold or gold stock investor, you cannot afford to miss this interview. one of the hottest turn around stories out there and world's biggest miner of gold, barrick gold. the president is joining us now on cnbc. thank you for sitting down with us.

>> my pleasure. >> before we get into your company, specifically, because you have been in a remarkable balance sheet turn around story, still work to do, let's think macro. you're exposed to china vis-a-vis the gold market. is china in for a hard economic landing? >> we don't think so. growth projecting of china, not sure what the current numbers are, but anywhere in five 5, 5.5%, that's material. in our space, china has been a buyer of gold over the last year and beyond. so we expect that will continue. >> how about a global economic recession, concerns about that. do you see that? >> what is happening is because of the uncertainty in global markets we're seeing, the instability, coupled with geopolitical risk, it has been a positive for the gold price. we have seen that since january, gold is on the run. >> gold is not just on the run, kelvin. you're very modest. gold has been the hottest asset class in the world. one of the few asset classes making anybody money. your stock is more than doubled in six months. as you have undergone a dramatic balance sheet transformation, carbon off debt, becoming cash

flow positive, how much more work is there to do on barrick's balance sheet. >> thank you very much, first of all. we're really pleased with the progress we made. >> don't thank me yet. >> pleased with our progress, but not satisfied. lots of heavy lifting still to be done. last year we announced we reduced our debt by $3 billion, strengthened the balance sheet, we beat that target. this year we identified another $2 billion debt reduction target and well on our way. we announced already 750 million in debt tender that we'll close within the next few months. nice on track to receiving the new target for this year. >> what is the risk to that? >> i think certainly we're benefiting from the run in gold price now. we're generating positive free cash flow as you indicated. $471 million, positive free cash flow. the first year after several where we were negative free cash flow. very pleased with that, turn around is well in place. we think these gold price levels we're very good shape to do our 2 billion -- >> when you make projections,

financial projections, where do you pu gold in your budget? how much are you expecting the price of gold to be this year? >> sure. well, we're hopeful gold will continue to run. having said that, we're running our business conservatively. we're not relying on an increase in gold prices. our budget is using $1,000 gold price. >> $1,000 is your budget. >> correct. our intent is to be free cash flow positive with the dividend. >> anything above a thousand dollars an ounce for gold is, for lack of a better term, gravy? >> yeah, in some respects, i don't know if i call it gravy. we're pretty disciplined. we'll use that additional cash to continue to reduce our debt, dividends, we invest in the business and continue with exploration. there will be wise use for those proceeds, but we'll be very careful how we manage that. >> do you expect gold to continue to go up this year? we had a heck of a run the first two months of the year. i don't think anybody expected this. >> no, look, i think you're right. there has been volatility, we expect that volatility to

continue over the next year or so for the various reasons we talk ed earlier, speculation around u.s. interest rates. i think the general sense is those rates won't come up as high or as quickly as once anticipated. you move out beyond that, into the medium and longer term, we're very enthusiastic about the gold price. we think the supply and demand fundamentals are very positive. >> supply and demand is one aspect. you look at the price of gold over the years, supply and demand, like any commodity, matters a ton. interest rates matter a ton. demand for jewelry and things like that. also currency fluctuations move gold. how is this sort of uncertainty in the global currency market impacted the price of gold? >> positive. it is a wealth reserve. people turn to gold in those uncertain times and we're seeing that in the near term. you look out over the course of the next year or two and beyond that, and you can see it even becoming more important. reserve grades are dropping around the world. production is coming down around the world. time it takes to get a project from exploration to production

now, north america it is averaging 17 years. go back a decade, probably double in the last decade from what it used to be, to bring the project into production. >> you took a lot of heat. things have been good now. you took a lot of heat because you didn't have an investor day for five years. >> yeah. >> we're not going to go another five years, are we? >> no. we committed -- we'll have an investor day every two years. five years was too long. part of what we were doing is putting our house back in order. it has been a couple of years of heavy lifting. we have the structures in place, we have the people in place. systems, so we feel we can deliver value and starting to see it in our results last year. >> barrick went dark for a while. you're not going dark again? >> no, we're not. you're going to seat opposite. our objective is to be more transparent, be clear with information, good or bad. we had a good run. we're pleased. we're going to do our best for it to continue. we also committed there is times we'll share bad news and good news. >> kelvin, the president of the -- you changed your title

structure, the president of barrick gold. we appreciate you sitting down can cnbc for a bit. >> a real pleasure. thank you. >> don't let it be two years. see you again. tyler, back to you hafrom a ver difficult 75 degree day here in florida. >> i'm sure it is hard to take. we'll be back with you shortly. let's bring in dom chu for a market flash. >> shares of amborella up by 5%. tracking for its strongest day in about two weeks. the video processing chipmaker is expected to report fourth quarter results this thursday after the closing bell. the earnings and sales have met or exceeded consensus analyst expectations in all past of its eight quarters leading up to now. the stock is down about 16% year to date and just highlights the idea that some of these growth stocks are a huge focus and they have been volatile to the downside. ambarella is one of those. we always talk about it because

of its relation to -- this is a stock down 16% so far year to date and -- >> but it is up 16% in the past month. >> yes. >> so it had quite a reversion to the mean trade along with a lot of the other beaten down stocks. >> right. we talk about names, not the same industry as free port or chesapeake. some names beaten up the most have seen a bid over the past couple of weeks. it has a close relationship to go pro. everyone is watching about whether or not go pro can find a bottom. ambarella makes the optical chips that goes into some components. >> that's got to be a -- whether it is go pro capitalizing on it or not or any other company. >> fair enough. right, remember, the reason why some of these stocks are so interesting for investors and traders right now, with ambarella, in july, it was $129 stock and look at what -- look

at -- it is 46, $47 now. so, yes, melissa, to your point, up 16% over the last couple of weeks, but it is down a lot from where it was nine months ago. >> any news today that would drive this move? >> oftentimes you'll see jockeying for position. we are seeing this earnings report coming up. right now the options market is pricing in what could be an 8% to 9% move in the stock up or down on the heels of this earnings report. it is certainly a stock to watch, given the kind of volatility it has seen around earnings days. >> thanks, dom. two stocks you need to know. and warren buffett has been riding the rails, but he seems to have soured a little bit on the business. can you make money in rail stocks? we'll talk about that next on "power lunch."

welcome back to "power lunch." shares of taser are getting a jolt today. fourth quarter earnings and revenue, both beating expectations. cigna jeweler moving higher today. this is the company behind kay jewelers and jared. he went to jared. earnings were up. sales rose. adding 750 million to its stock buyback and raising the dividend. verizon pharmaceuticals -- earnings were short by three pennies a share. that seems to be what the mark set focused on right now. to the bond market, rick

santelli at the cme. >> interest rates are coming off a bit. look at the two-day of tens, you get the picture. they were accelerating earlier in the session. if you look at the two-day boons, starting to diverge. that spread is widening. normally very comfortable in the 150s, now the mid160s. who is going to blink? rally and treasuries tightening, tightening the spread or selling off, making boon yields come up to match it, tightening the spread. they're going for plan a but we have to wait and see. look at january 99, all the way back there for the euro, nine year instead of ten year. why did i pick it? in negative territory to the two to one basis point. euro two year. getting closer to minus 60. at minus 57 right now. and one of the most incredible drops i can remember in fx. two day pound, notice the low ever getting closer to 138. levels we haven't seen since

early 2009. mcc, back to you. >> thank you. been pretty astounding to watch the pound. shares of union pacific losing a third of their value. now warren buffett is questioning the railroads. we'll get analysis on the sector. and we're watching oil. final hour of trade as we look at it, higher by 95 cents. back above 33, approaching 34. 33.73 for april delivery per barrel. we'll discuss more when "power lunch" rights back. thanks. ♪ [ male announcer ] fedex® has solutions to enable global commerce that can help your company grow steadily and quickly. great job. (mandarin) ♪ cut it out. >>see you tomorrow. ♪

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modest moves for stocks, folks. welcome back to "power lunch." i'm tyler mathisen. the dow, the s&p and nasdaq up less than -- less than half a percent. for those three. the russell 2000 is up about half a percent. oil moving higher again today as we have seen for some days now. sue herera has a news update for us. >> good to see you. and here is your news update this hour. let's see what's happening. gop presidential candidate marco rubio calling donald trump unelectable after trump failed

to immediately disavow white supremacist leader david duke. rubio telling supporters in tennessee that trump is a con artist who has hijacked the republican party. democratic presidential candidate hillary clinton campaigning in massachusetts at a morning rally in springfield, she repeated her theme of making america whole and unified while blasting the republican candidates for their finger pointing. supreme court justice clarence thomas asking questions during a supreme court argument for the first time in ten years. his questions came in a case in which the court is considering placing new limits on the reach of a federal law that bans people convicted of domestic violence from owning guns. and the new england patriots extending quarterback tom brady's contract by two years through the 2019 season. he would be 42 at the end of that extension. having played 20 years with the patriots. no details of the contract have been released quite yet. i'm sure they will leak out, however. that's the cnbc news update this hour.

back to you, melissa. >> thank you, sue herera. a check on gold prices which are closing now. we saw a surge in gold today, extending the gains from last week. it is the closing up 1.2%. and just a few minutes from now, brian sullivan has an exclusive with the ceo of anglo gold, see where he sees gold going from these levels. a check on the rest of the metals complex, we're seeing green arrows across the board. silver up and palladium as well 2.25% this hour. 2015 was not a smooth ride for railroad stocks. union pacific, norfolk southern, csx down around 30% or more. here is what warren buffett said about the rail line industry earlier today. >> i would have expected it to do better. but we were coming off a bad year, which helps, in comparisons, and we ran the railroad a lot better last year than the year before. but overall the railroad industry had a disappointing

year, got poor during the fourth quarter. it has been poor in first quarter of this year. and there, again, some of that is secondary. >> let's bring in david vernon who covers railroad stocks. great to have you with us. is this a case where we simply need a recovery of some sort in the energy complex, whether it be oil, nat gas or coal? >> i think volume recovery would be helped along by recovery and commodity prices. i think where the railroads are trading and multiples come in, you have a good chance to find stocks. >> what would be the catalyst to turn the stocks around? i understand the stocks had a bounce in the past month, along with a lot of the energy and materials names in the markets. what is the actual catalyst to get the stock prices higher as opposed to their cheap right now and they could be a buy. >> yeah, so i think the catalyst for the stocks moving higher since the beginning of the year has been what you pointed out. the stocks derated, got cheap

enough and maybe got a little bit of a bounce. as we go forward over the course of the next 6 and 12 months, volume will be choppy. investors need to be looking for the railroads ability to drive costs out through productivity measures. they need to make sure the pricing story remains in tact, which we have high confidence in. and that is, you think about the setup for the year after, the year after, once you start to see better improvement in the weekly volume numbers, you should see good operating leverage in these businesses. >> which of the carriers is most exposed to the decline in shipments of oil or petroleum products by rail and which is the least exposed or most insulated from it. >> the crude by rail story that made the burlington northern experience for mr. buffett different than you would see at the other railroads. they were by far and way the largest -- had the most exposure to -- coming out of the north dakota region. as it stands today, you're seeing more exposure in the canadian carriers than the u.s. carriers. union pacific has seen their volume coming away because there

is still crude trades moving east. that would be the rank order. we would expect a lot of that volume to actually be lost back to pipeline competition. the western canadian volumes probably got the best long-term outlook. >> same question, but coal, where the carnage has been just nearly as bad, we have seen tons of bankruptcies in that sector as well. >> coal is a real structural problem for the industry. we have got natural gas prices approaching 17 year lows according to the journal earlier today. when we look out at the different coal franchises in the business, you see the utility coal business down some 40% at the u.s. carriers. less of a problem for the canadian carriers. you're also seeing export coal under a lot of pressure. as the global market remains oversupplied and there is not a lot of good home for the -- >> why should anybody buy any of these things? >> you picked up on a couple of things that were big headline news.

as you look out in the longer term, these are businesses that will be around for hundreds of years. they got very good pricing power and very good modal advantage relative to truck. as we look out over the next 10, 15 years, the federal highway trust fund is essentially empty, robbing from the strategic petroleum reserve to pay for that. the railroads are self-funded infrastructure. as highway costs inflate because of changing demographics and inability to find truck drivers, if we see a little bit of a resurgence in north american manufacturing, automated or putting the jobs in mexico, that will drive rail volume that we maybe haven't seen over the course of the last 20 years since deindustrialized in the country f you think about it from a very long-term perspective, the railroads are in good shape to manage this transition away from coal. >> there are a lot of ifs, david, to that scenario. and i'm just wondering, if you're in the camp and there are plenty of people out there where they believe that structurally the oil industry will never be back to where it was at its peak

most recently, that there are going to be a lot of companies out of business or going to be rationalization of the shale business, we're not going to see the volumes coming out of the balk we have seen in the past, is there anything that can replace those volumes in terms of revenues for the rail industries? some will say the auto industry and peak auto sales can do that, but it hasn't been seen in the prices and the stocks. >> well, you haven't seen it in the volume either. you've seen the commodities complex and driving down demand for coal, driving down demand, very difficult with rain. this will be a challenging year for volume. as you look at the intrinsic value of the asset and how much cash the railroads can produce, their opportunities to be pieing the companies at price levels you're probably not going to see three or four or five years from now. >> what about consolidation. who will be buying who? >> consolidation is probably not in the near term of any kind of

likelihood. but most likely targets are ksu, there has been a lot of talk between -- >> kansas city southern? >> yes, kansas city southern. cp is interesting in trying to acquire norfolk southern, rebuffed a couple of times. the rail industry is saying they're not very eager to pursue further consolidation at this point in time. there could be a case for future m&a. i don't know i would be investing in any of the rail stocks on that case. for the regulator to allow the combinations to happen, it would be to sustain the level of return. you may be earning less at the company you're acquiring and stock price might be a little lower before you get to that point of eventual m&a. >> thank you for joining us. appreciate it. >> thank you for having me. >> wanted to highlight potential news in the shipping sector. shipping as in boats, not railroads. shipping so bad, makes oil look good. persistent rumors that greece's largest shipper is in talks to buy 48 ships from scorpio bul r

bulkers. if it turns out to be true, it would be an enormous deal for the sector. these are the kind of deals you want to see for a sector to bottom, right? you got a strategic player with dry powder steps in, scoops up assets from a distressed player for a price that would have been just unthinkable a couple of years ago. we reached out to both the companies, received no comment, but not a huge deal in what we talk about generally on cnbc. 720 million. but within that sector, it would make angelicousis the second largest. >> whether in shipping or real estate, you come in at the distressed prices, that signals a bottom. >> a bottom. >> it is often -- in a real estate deal, often the -- after the third guy goes bankrupt in a development -- >> haven't seen too many bankruptcies in the shipping industry. >> at this point, i haven't paid that close attention.

>> curious to me why wait until the company goes into bankruptcy, pick up the assets, cheaper than on the market. >> the deal hasn't happened. only rumor, so that's a possibility. >> yeah. >> on to shares of valiant pharmaceuticals, another leg down today. we'll tell you why when we return. and we'll go back down to brian in miami for another big interview. hi, brian. >> thank you very much. more big interviews here for the bmo metals and mining conference in florida. we'll be speaking with the ceo of the third largest gold mining company in the world. more on what he expects the price of gold to be this year and what the company is doing to combat labor unrest. all that ahead when "power lunch" returns. tment management, we believe in the power of active management. by debating our research to find the best investments.

by looking at global and local insights to benefit from different points of view. and by consistently breaking apart risk to focus on long-term value. we actively manage with expertise and conviction. so you can invest with more certainty. mfs. that's the power of active management.

welcome back to "power lunch." i'm melissa lee.

look at shares of valeant pharma. two big things happening today. mike pierson is returning to the company after two months of leave recovering from pneumonia. and secondly, more important to the stock, delaying earns and withdraw ing guidance while it deals with accounting issues. the stock is down more than 60% over the past year, down 7% in today's session. and nat gas falling today, down 4% near 17 year lows. that is hurting the natural gas companies like southwestern energy. that stock is down more than 75% over the past year. take a look at that, down 8% today. back down to brian in florida. oil, melissa, has gone down. the price of gold has gone up. two commodities basically going in different directions. we're back here at the bmo metals and mining conference in florida with the ceo of the world's third biggest gold mining company, anglo gold, srinivasan venkatakrishnan joining us now. thank you for joining us. appreciate it. we talked to newmont mine,

barrick gold, one and two, and you're the third biggest, about, what, 3.5 million tons of gold every year? >> we produce around roughly this year we're forecasting 3.6 to 3.8 million ounces and you did the best to leave the best company to the last. >> i like the cockiness, fantastic. i asked everybody, to what is behind this amazing run for the price of gold this year, the single best performing asset class in the world. >> i think for four years gold has had a rough ride. and the price -- down from 2012. it has fallen down quite rapidly, down by 50 to 55%. the fundamentals which keep the price of gold up hasn't changed. jewelry demand, whether it is fear about uncertainty, and also potentially negative interest rates which is what people are talking about. and that's given the good support to the gold price and it is about time too. >> go to that last part, negative interest rates, i don't want to get into german bonds, you know he what they're doing, we're going into what they call

nerp, negative interest rate policy world. if we go further into this, what will happen to the price of gold. >> gold will go up. if interest rates go down, gold will go up. >> you're getting benefit by keeping physical gold up, gold equities, they appreciate as compared to the other classes of investments. that's the thesis behind it. you're starting to see a lot of people moving in that direction and funds coming in to gold funds. >> that's nice and it has been a good couple of month run for gold on currency fear, negative interest rate fear. but it seems like kind of a short-term reason for bullishness. >> if you want to look at it from a practical point of view, we did not bank on the gold price going up. our planning assumptions are quite conservative. it is around $1,100 gold and we budgeted for stronger currencies. and typically when the currencies weaken, our margins increase. so from that point of view , the four year bare run in the gold

market has to unwind at some stage. and you're starting to siebold position itself very well to basically get the uptick. i'm not convinced it is a short-term trend which you're seeing. but there could be volatility, certainly through 2016. >> on this show we talk about oil. and oil has undergone this really supply constraint, capital spending has been crushed, almost no new major projects out there, nothing is getting funded. gold has done the same thing. all of you guys have been cutting your budgets, lack of capital spending. what is the gold supply environment going to look like in five, ten, 15 years. >> i think the point you're making is valid. companies have pulled back on their expansion plans and in terms of actual exploration. when we launched our strategy back in 2013, we were very clear that we were not going to throw the long-term optionality away. markets go through cycles. we have kept our optionality in terms of long-term projects alive at an affordable cost --

>> what does that mean? >> you don't give up your ability to go back into those projects if you get the right return for your shareholders. but what you would certainly see is a decline in gold production coming and it takes roughly 10 to 13 years for a new gold project to take off. you will see that supply being squeezed, but having said that the view generally is also that you got enough about ground supply of gold which is available. >> is china going to have a hard economic landing? >> china could have a hard economic landing, but that would be supportive for gold. >> why? that's what we heard from the president of barrick said the same thing and with all due respect, i thought, well, it is a nice theory, but if they go down, how can gold go up? >> effectively people want something where they feel. >> can they afford it? >> they will be able to afford it based on the cash they have or any spare money which they generate goes into gold investment. that they see as a preserve of value, same thing priced to india, when the equity markets are not doing well, gold price go up your minds are in some

pretty risky places for lack of a better term and there has been labor unrest and miners that go into mines illegally, not just with you but with everybody. a serious problem. as an investor in your company, what do you say to them that you can manage that kind of unrest in an increasingly unstable world? >> i think the reality is gold is not normally put in place where you can mine easily. it is a challenging area. where you talk about labor unrest situations, a number of our mines actually have a unionized environment and in south africa, where people predicted a crippling strike last year, we didn't have it, the gold industry managed to negotiate three year wage deal with four unions, quite successfully. so it is about how you engage with your employees first and how do you engage with the union and importantly your stake holders. >> one of the two of us made a pretty bad prediction maybe last year that gold would end the year under $1,000 an ounce.

since that not you, i'll give you the chance on national television to say why i've been wrong. why have i been wrong about sub $1,000 gold and will i continue to be wrong? because many people are saying gold is likely to fall below a thousand dollars an ounce. >> i don't belong to the category where it could fall below $1,000 an ounce. >> why not? >> at the end of the day, for exactly the factors i mentioned, they would be sentiments around interest res, you will start to see central bank demand for gold pickup and even if inflation were to return, gold is a good hedge against inflation. having said that, i hope you're wrong in terms of your prediction, having said that, we're well positioned, even if the gold price go up. why? because about two-thirds of our production comes from local currency jurisdictions, so in the event that gold price were to go down, we get a very good cushion in the local currencies as well. >> srinivasan venkatakrishnan, a very polite way to say i was wrong and i do appreciate that. have a safe flight back to south africa. >> thank you very much. >> a guess the headline from

this interview and others is, negative interest rates equals solid gold. >> that's good. thank you very much. ibm down 18% this year. warren buffett has lost more than $2 billion on the stock. so when is it time to sell your losers? we'll get your trading advice coming up on "power lunch." understands insuy 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. i'm tyler mathisen. let's look at the power pitch, shall we? the major averages steady now. that's another word for kind of calm, another word for boring. russell 2000 small cap index, the biggest winner at this hour. up about a half of 1%. utilities, materials, telecom, consumer zrigs er discretionar. among the individual names, caterpillar leading the dow up 2%. signet jewelers leading the s&p 500, up 10%. must have been a good valentine's day. biomaran pharma leads the nasdaq 100. to dominic chu for a market flash. >> perhaps some fireworks after the closing bell today. shares of workday, up 2% now. this is the human resources software company cloud-based.

expected to report quarterly results after the closing bell today. on average, analysts expecting a loss of five cents a share on sales of $320 million, results have met or exceeded consensus expectations over the past eight quarters. shares down 20% so far. again, michelle, with a lot of other cloud companies, likely saw what sales force upside volatility there, we'll see if it sets up that way for workday. back over to you. >> thank you. shares of lumber liquidators falling again. we'll get you the latest in that saga. jcpenney still rallying, even after the big move on friday. we're going to be joined by the company's ceo. take a look. that stock is up 36% in a week. holy smokes. stick around. more on "power lunch."

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it has been one year now since lumber liquidators began fighting allegations about formaldehyde. scott cohn has been following this story and joins us live from san francisco. scott? >> tyler, since that 60 minutes report last march 1 st, lumber liquidators lost more than a

billion dollars in market cap and this morning's report is not helping at all with the stock near session lows. they lost $19.8 million last quarter or 73 cents a share. that's about a 53 cent a share miss on disappointing sales of about $235 million. a 14% drop from a year ago before these issues came to light. it has been a brutal year for lumber liquidators which pushed back hard against the report that it knowingly sold chinese laminate flooring with high levels of formaldehyde. the company finally pulled the flooring in question from its shelves in may, fired its ceo, and settled justice department charges related to its overseas sourcing. so there was some thinking that today would be the start of a turn around. short seller whitney tillisen behind a lot of the bad press covered his position in december, she tells me today he still does not regret. and the centers for disease control issued a report that the formaldehyde posed minimal risk. but then the cdc corrected its

report apparently they forgot to convert meters to feet and the cancer risk while still minimal was three times what researchers first thought. so this company, the company took out full page newspaper ads to point out it doesn't sell the stuff anymore, but the damage is done. still outstanding, a state investigation here in california, home of the only government standards for for ma formaldehyde. the losses could go higher and so does the reputational damage. guys? >> it is amazing because this stock, as you know, is at a seven-year low. within the earnings report, they basically said the number of customers billed declined and the sales volumes declined. in terms of getting back the customers, what does it seem to be doing at this point aside from saying our flooring is safe, are they also discounting -- what are they trying to actively do? >> they have been heavily discounting. that hurts their profits even more. also hurting the financial situation, they had to write off

all of this chinese inventory that they took off the shelves. so that's been an issue. it really is a matter of trying to turn around the reputational issue. today they announced bringing in a new chief operating officer dennis knowles from lowe's. they hope that will help things as well. but the company has a lot to get through. >> the company also in the advertisement, i saw in the newspaper yesterday, i found it a little curious, they said, you know, we haven't been selling this stuff for nine months now. they stopped selling it as you pointed out i believe in june. that was -- they fought and kept selling -- they first, as you said, denied there was a problem with this laminate flooring. so their sort of responsiveness seemed to be a little less than that advertisement might want you to believe. >> they had a huge executive shake-up since then in their defense. rob lynch was fired over this

who was behind the initial pushback, but, yeah, they first were talking about this in march. didn't pull the flooring in question until may. and it doesn't really mention that in the ad, this weekend, does it? >> no. >> thanks, scott. >> okay. >> all right, let's now take a check on what your money is doing at this hour. stocks are trading mostly higher as oil is extending its gains. the dow, the s&p 500 and nasdaq up fractionally so far. wti with a strong day, up by almost 3%. warren buffett sit downs with becky quick on "squawk box" this morning. one stock they discussed was ibm. berkshire hathaway. take a listen. >> i don't think so. but it could be. i mean, we owned stock we lost money and sometimes when stocks go down, we're wrong and we sell them. sometimes we think we're right and we buy more. a stock going down is a good

thing unless the company itself is losing value. and sometimes that's the case and sometimes it isn't. i don't think it is the case with ibm, but i could be wrong. >> berkshire's annual report showed a $2.6 billion loss on ibm since the end of 2015. let's bring in fast money trader jon najarian and robert miles. welcome to you both on "power lunch." i'll start off with you, dr. j. you're a quick trader. maybe not the long-term time horizon that warren buffett has, but you say he should get rid of these losses. >> yeah, mel. when you're an investor, of course, you can do what warren buffett's done, which is fabulous. his numbers are without question some of the best ever in our industry. however, when you shorten this time frame up, like you just said that i do, and you become a trade, you can't eat like a bird and take huge losses. that's just something that can't be part of the playbook. so if he had cut the losses, in general motors, in ibm, in

american express, these are three of his biggest losers, if you had cut those losses, look at what the performance would be. so all i'm saying is that he should really take a harder look at those companies and i know he still believes in both management and the brands of those companies, but it seems that the street doesn't believe as much as warren does. >> robert, you are sort of doubling down here, because you own berkshire hathaway as well as ibm. why stick with this loser? especially because you're exposed through berkshire hathaway and then exposed once again separately with another position. >> well, i think you should look back at warren in 2009 when he had seven losers in his portfolio. two of those happened to be craft and the other one, santa fe. he owns both of those today. in fact, he -- craft is now one of his largest holdings. so he's -- he's a long-term

investor, and i realize that he may be wrong on ibm, as he said, but i think as a long-term investor you have to give it time. >> you know what i find interesting about warren buffett sticking with ibm is during the dotcom bubble, he said, you know, i don't understand this stuff, don't invest in what i don't understand, i still don't quite understand what watson is going to do for them even though they talk a lot about watson in ibm and then look at the long-term plan, single digit revenue growth is their goal, midsingle digit -- growth when it comes to operating and then eps maybe high single digits. it is going to be a long time. what do you see in that that sounds compelling at this point? >> i looked at their 20-year plan that they put out or 2020 plan and they talked about the share buybacks as well as growth. and they're off the target, they were looking at 20 cents or $20 a share and around $15 a share.

so i think buffett's play was them going to the cloud and having infrastructure to see e-commerce go to the cloud. so time will tell. >> dr. j., cloud for ibm, while it is the fastest growing or one of the fastest growing segments of the business is still very small in terms of dollar contribution to their revenue line. if you want to invest in a cloud play, it wouldn't be ibm, i suspect. what is your cloud play? >> it would be ibm on the next page of the list, mel. it would be in the front -- on the front page, it would be microsoft. it would be sales force.com, crm. it would be linkedin. it would be amazon web services. it would even be google with some of the moves that they're going to be making as well as what they're doing right now. so i think that counting on this to be the significant revenue driver in a hypercompetitive

space is really, you know, hoping rather than investing, i don't think you're investing with hope. i think that's a bad idea. warren buffett as i said, all the respect in the world for the man has done fabulous things, but if you cut losers like this out of your portfolio, you'll do much better going forward and obviously warren buffett would have as well despite what the gentleman says about senofi and kraft. there are at least that many losers in this year's portfolio and i can name several others that are part of that loss that i would not hold any longer. >> yeah. >> so, robert, if you're comfortable holding ibm, comfortable, i assume, holding some other things that mr. buffett has, my question for you is at what point do you personally become uncomfortable with a holding? what is -- what does your sell discipline tell you is the right

time to get out of a position? >> well, i'm a long-term investor. so if the general conditions of the business are irreparably damaged, then i'm a seller. but i have owned berkshire hathaway for 20 years. and it is the largest position in my portfolio holdings and i'm very comfortable with it. buffett made other mistakes. he has lost money on conocophillips, the very name of his company is -- his biggest investment in the stake, which he's quantity tiesed at $100 billion. so even though he's a great investor, he has made mistakes. >> the washington post company, that was a newspaper that was top of the world in the 1970s and into the 80s. then, you know, it was sold for $200 million, which is really a pittance now that there were other parts of the company that performed well, that kaplan educational operation. >> tyler, he sold his position in the washington post companies

for one -- over $1 billion. so an $11 million investment got him dividends of $9 million a year and he sold it for a billion dollars with cash and the return for berkshire hathaway stock and television station in miami. >> there is an example of where he did sell, where something told him time to get out, right? >> well, he was happy to continue owning the washington post companies, it was the washington post companies that came to him, and asked to buy him out. but he has made mistakes. conocophillips is a mistake and there have been others. >> going to leave it there. john, robert, thank you. >> thank you. >> thank you, guys. >> important, when to buy, super crucial, when to sell. >> don't make a profit on just selling. >> just as crucial. los angeles judge today hearing a motion to dismiss in a lawsuit that has pitted media mogul sumner redstone against a former girlfriend. that judge making strong

statements in the ruling. let's get to julia boorstin with the latest. >> the judge deciding that the case can move forward, setting a date in may and raising big questions about philippe dauman, viacom ceo, being the health care proxy. here is the key quote from the judge's ruling today. the court does not see a person in charge of a public company in new york has the time or ability to look after red stone, based here in los angeles, even assuming the best of intentions. now, after the hearing ended, just earlier this morning, the attorney for redstone's ex-girlfriend, manuela herzer, his name is pierce o'donnell and he made strongly worded statements on the ruling. he said, evidence is clear sumner redstone is marooned and a prisoner in his home, he says they're developing more evidence to show redstone was brainwashed and kidnapped in his own house. and, of course, redstone's camp also came out with a statement, they say this is a far cry from

a win for manuela herzer, but seems like that by the fact that the case was not dismissed today. >> does this mean there will be a court case? we'll start to hear stuff that could be -- >> they're setting a -- it could be very interesting. they set a trial date for may. i believe may 6th. and then the other question here is there has been all this information gathered, but it has been sealed. so on friday the los angeles times variety and the hollywood reporter said they want these documents unsealed. and there is going to be a hearing on that and whether the documents will be unsealed i believe in march. so, yeah, march 18th they'll decide whether or not to unseal the documents. but manuela herzer, her lawyer also filed something on friday saying they do believe that these documents should be unsealed and sumner's camp wants to see them under wraps. >> could we see her testifying?

you can imagine what the hollywood reporter would be doing -- >> it is possible she could take the stand in may. and also we have to rep that philippe dauman we learned last week that philippe dauman will be deposed, so sumner -- so manuela herzer's attorney told us earlier today in the next couple of weeks he'll go to new york to depose philippe dauman, very interesting. dauman did not want to be deposed, but the judge ruled he will in fact have to be deposed. amazing stuff considering here that dauman is the ceo as well as the new chairman of viacom. you have the fact that sumner redstone still has a controlling stake in cbs and viacom, he's 92. the stuff is kind of amazing. >> a complicated stew, for sure. thank you, julia. up next, jcpenney on a major rally, up 35% over the past week. we're talking to jcpenney's marvin ellison about how he's turned around the company's stock and his plans for the future.

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my name is jamir dixon and i'm a locafor pg&e.rk fieldman most people in the community recognize the blue trucks as pg&e. my truck is something new... it's an 811 truck. when you call 811, i come out to your house and i mark out our gas lines and our electric lines to make sure that you don't hit them when you're digging. 811 is a free service. i'm passionate about it because every time i go on the street i think about my own kids. they're the reason that i want to protect our community and our environment, and if me driving a that truck means that somebody gets to go home safer, then i'll drive it every day of the week. together, we're building a better california. jrks jcpenney's stock up. 36% since february 23rd. courty reagan is live in new york with jcpenney ceo marvin ellison. >> thank you very much, michelle. this is marvin ellison's first tv interview. thank you very much for joining us today, marvin.

you had a nice quarter. michelle mentioned now nice the stock performed since you released results. you have come a long way from bankruptcy. however, still far from the peak sales of $20 billion in 2006. do you think jcpenney can return to that level again? >> it is not the focus. the focus is great shareholder value and shareholder return. we want to run a profitable company that grows sales and grows sales in a profitable way. if we can get back to that, that would be fabulous. that's tnot the intent. >> how will you grow those sales? you're in an environment that is changing rapidly. shoppers are coming to the mall less frequently. many of them are buying less apparel. what does that mean for jcpenney in the long run? >> we have a couple of things we're excited about. we're going to open approximately 60 more locations inside jcpenney this year. we're going to redesign the center court area of our a third of our stores, fashion, jewelry, sunglasses, accessories, very

high margin, very high traffic area. we're going to roll out pick up in store same day in back to school. one of few retailers in america that can't do that today. the upside potential is enormous. we're going to have a lot of other initiatives that will continue to drive great sales, but these three things are incremental to what we did in 2015. >> that's guy point. jcpenney isn't doing buy online and pick up in store as other retailers are. you admitted you're behind in a number of other areas. is it possible that jcpenney can catch up at this point? >> absolutely. it is about talent. we recruited one of the best e-commerce executives in retail. we recruited a great supply chain executive, named a new chief information officer. we have a new marketing leader. and so we're taking the talent from the marketplace, bringing them in, allowing them to implement things that they have done in the past, to bring us back to really a world class

retailer. it is about having very specific plans, great talent, and execution and the fundamentals that most retails take for granded, we're bringing those things back. we delivered a 4.5% comp in 2015 while catching up. so i'm excited about what happens when we catch up. >> you brought in many new leaders. you're a relatively new leader, seven months in. the company has gone through three ceos in four plus years. what is morale like? how are employees responding to the constantly shifting strategy? >> one of the key things i made on the earnings call, points i made, is that the reason why we were so successful in the fourth quarter is because of the buy-in of the team to the strategy. we have a very tenured front line team, general managers in the stores, district managers and merchants and those individuals bought into our strategy, we're trying to do three things. we're going to have a great omni challenge environment, we're going to increase our private brand penetration, that

increases profitability in differentiation and grow revenue per customer. every time a customer comes in, we give her more opportunities to buy from us. and that strategy has been bought in by the existing team. >> that's key. traffic, i understand, is down, but conversion is up. you need to both increase the total number of transactions or transaction size itself. >> mall traffic is down. our conversion and our point of sale transactions are up. so we're becoming a destination in the malls we're in. though traffic is down, our traffic is up relative to the mall and our point of sale conversion, which is the most important measurement is actually up versus last year. >> and when you look at your debt load, jcpenney and you and your management team have been careful about trying to reduce your debt load. are you going to be able to reward shareholders at anytime with the stock buyback in the near future? >> that's a way off in the future. but let's talk about what we did. we paid off a half a billion

dollars in debt in 2015. we have plans to pay off at least that much in 2016. and we think when that happens we get our ebitda ratio getting into 2017. we think that will be critical for our shareholders, put us in a much more balanced position from a debt to revenue standpoint and we have opportunities to do different things we can't do today. >> we're going to be watching very closely jcpenney's future. you've done a nice job, a lot of questions ahead. thank you very much for joining us today. for now, back to you in the studio. >> courtney, thank you very much. now that we heard from mr. ellison, let's bring in retail expert jan niffen. i think he gets an a for his first television interview there. what grade do you give him so far during his tenure as ceo. >> a solid a plus. he's done a great job so far. i was just saying off camera that i go in penney stores all

the time and talk to store managers and never go in one they don't tell me that marvin's been there, and what a great guy he is and how much he cares about things going right in the store and how he listens to what they think is the problem and the solutions and how he acts on those things. and you can't buy that in retailing. when you got an executive that the people in the stores really believe cares about how their job works, they work a lot harder and they work smarter. >> how many stores do they have? he's been to all of them? >> i don't know about that. he's been to all of the ones i've been to. there are 1100 stores. >> you think still he has too many stores? >> i do think that penney's long-term has too many stores. i think macy's long-term has too many stores. i think kohl's long-term has too many stores. >> there are too many stores in the world. >> even if all the sears stores go away, there is probably still too many penney's and kohl's stores. but if sears goes away, that takes a lot of pressure off that side of the business, right?

if they continue to fade and drop market share and if some stores close, then, you know, penn penney's is the biggest beneficiary. they overlap 83% in the space and the customer. >> huge transition. you talk about sears going away, there was a time we talked about jcpenney going away. this thing is back from the dead. we were predicting -- we used to -- on a daily basis watch the stock, wonder about the debt, wonder what was going to happen. it was failing. >> remember, i'm the guy that came in here after ron johnson's fresh air meeting, when he was changing pinies completely, sat down and said everybody should sell this thing short. it was at $43 and i said, we're going to ride this down to the teens and, in fact, i was way wrong because it went into single digits. then we all thought there was risk of a bankruptcy. we haven't thought there was risk of bankruptcy for quite a while. and, you know, penney's not only has a great guy in marvin ellison, they have a darn good cfo on the record. >> to one of our callers.

brian in ft. lauderdale. brian, you're on. >> hey, brian. >> yes, hi, tyler. big fan. first time caller. long time listener. no, jan, a question -- all right, jan, the easy thesis is if sears goes away, still and if, if sears goes away, penney's would pick up the customers. if sears goes away, isn't there also the thesis that it is just a sign of the way people shop is changing and that jcpenney or anybody else may not be a beneficiary because for lack of a better term, that league of retail is going? >> well, no, i don't actually believe all of that. i believe that, yes, there is going to be a need for a lot less of those kinds of stores. but in fact there is still going to be a need for those stores, so if sears goes away, and that $17 billion or so of sales can go some place else, they're going to be a lot better off than penney's than they are right now. and they probably will be another -- in other parts of the world too, right? they'll probably benefit kohls,

certainly will benefit penney's. so, yes, i think we have a big problem, all the business going online it going to fast fashion. a lot of things. but still an enormous customer base for companies like penney's, unfortunately we have got penney's, kohl's, sear and target more or less all in the same space. >> what do we like in terms of what we heard from companies who reported? are they grabbing share from kohl's and from dillard's and is the whole reason so they can twist the knife in sears? >> i do believe that adding home appliances is a good idea as sears continues to not be a place that people are going in the droves they once did for appliances. i think appliances will work in penney's. i think penneys gained shares from macys and took some back. don't think they took it from kohls. kohls is operating better itself. i think both of them actually hurt macy's a little bit. and macy's doesn't talk about

that. but, you know, 40% of the customers overlap. that means 60% don't. the 30% that do are going to penney's more often than they had been and shopping at kohl's a little more. so i do think that's a little bit of the issue there. >> got it. thank you very much. we appreciate it. coming up, five big analyst calls you need to know about for the week ahead. street talk is on tap. stay with us. 's it like to be the boss of you? (patrick 2) pretty great. (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done? (patrick 2) that's the kind of control i like... ...and that's what they give me at national car rental. i can choose any car in the aisle i want- without having to ask anyone. who better to be the boss of you... (patrick 1)than me. i mean, you...us. (vo) go national. go like a pro.

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clarification on a stock we're following today. and reported on earlier. horizon pharma, earnings beat there by a penny a share. the stock is down today after the company disclosed for the first time that it received a government subpoena over some of its marketing and sales practices. brian? all right, tyler, thank you very much. it is time now for street talk. that is our daily look into five stocks that are on the move and research calls that we think that you need to know about. melissa, are you ready? >> always ready. >> all right. i saw your stocks. i'm going to trump your stack. that will make sense in a second. our first stock is continental resources, the oil company clr, stevens upgrading clr to an overweight from an equal weight,

rising the price targ fret 30 to $24 a share. they say, listen, the leverage, the debt levels of continental are still higher than they would like. but the balance sheet is getting fixed a little bit. productivity should remain fairly consistent here and they like the opportunity in the stack, which you will explain to us. >> i got it. i should mention also raymond james raised the price target on this one to 40 bucks, so a lot of positive as analyst sentiment out there today. second stock, hilton posted a fourth quarter beat on ebitda but came in light on rev par. they trimmed their guidance. the first quarter looks light. he believes management teams are, quote, relying on nothing more than hope or faith in the second half. that's something you do not want to hear from an analyst. there is a planned spin-off with the time share in owned real estate assets later this year. >> really interesting story

because i guess, melissa, this could go two different ways. number one, things slowing at hotels, is it because the economy is slowing and people are traveling less or is this maybe an air bnb effect where people are choosing to stay in a private apartment or home. if that's the case, that could be a negative long-term phenomenon, something to watch. stock number three, a name i've never heard of, buygene tech. it is a china-base the biotech, going after cancer and oncology treatments. one analyst had covered the name on the sell side. now two. goldman sachs starting coverage on buygene with a $33 target. that implies 10% upside but in this market we'll take it. analyst says he likes the company's pipeline and potential accessibility to china's unfortunately growing cancer market. only one other analyst had covered the name. goldman sachs likes the name. >> i believe this is a recent

ipo, why there is a dearth of analyst coverage. fourth stock, one brian said you're going to trump me and you did, new field exploration and i'll say, you don't hear this too often about independent companies, but you did, it is getting upgraded by raymond james from strong buy to market perform, $42. four it cleaned up its balance sheet, has a large acreage position. brian known as the stack. >> i promise i did not try to stump your stack on purpose. i am down in florida. your fifth name of the day, always under the radar, also an oil related company. and also an upgrade. three of the five today oil company -- maybe something to this, more upgrades out there. forum energy technology. houston based company make products for on and offshore drilling.

citigroup starting coverage on the name, they like the recent drop, compelling entry point. they notice it is a shale recovery story. a $13 price target, about 18% upside. upgrade, not an initiation. so forum energy technology, citigroup likes this name, sees 18% upside. three of the five names today in the oil patch, two of them in the stack of the oil patch. but a lot more on the serious note, i am noticing more sell side bullishness on the beaten up oil stocks. >> that's true. this is an analyst group that has gotten things wrong for a long time. that's just a caveat. that's street talk for today. >> we'll end it on that happy note. >> two top traders weigh in on where they're finding value now. trading nation is on deck. that is ahead on "power lunch."

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welcome back to "power lunch." i'm jackie deangelis reporting from the nymex. oil closing at 33.75. close to 34, but not breaking through that level on the intraday high today. part of this 3% move having to do with china adding more

stimulus into its economy and also more from the saudis about a potential freeze, limiting some price volatility that we have seen. in is some rhetoric we have heard before. there is a reuters survey out saying opec pumped less in february than it did in january. in march, we'll get opec's official word on that. forming a bottom here, lots more talk about it, of course. we're getting to the point now, march/april, demand starts to pick up. you'll see builds in the inventories coming down as well. this could be the pattern that starts to form a little bit of a bottoming process here, especially as we go into summer driving season. >> jackie, thank you very much. oil up, stocks modestly moving the other direction, turning negative. the dow industrials right now off about 30 points. about a fifth of 1%. the nasdaq down about a tenth of a percent. s&p 500 at 1944, off a fifth percent. the russell 2000, up a fifth of a percent. let's go to sue herera for a cnbc news update.

sue? >> president obama bestowing the medal of honor it a navy s.e.a.l. who risked his life to safe an american hostage from the taliban in afghanistan in 2012. edward buyers jr. becoming the first living active duty member of the navy to receive that honor in some 40 years. a new york appeals court temporarily stopping new york city from enforcing a new rule requiring chain restaurants to post warnings on menu items high in sodium. enforcement believed to be the first of its kind and was scheduled to go into effect tomorrow. three people were arrested after leading police on a high speed chase near detroit. aerials showing police chasing the three suspects in a stolen red suv. that chase ended when the vehicle as you see there slammed into a coca-cola truck at an intersection. authorities in central india rescuing a leopard cub from a well where it had fallen after straying into a nearby village. residents noticed the cub,

called the police. the cub was sedated and rescued after an eight-hour long operation. it was later released into the forest. and that's the cnbc news update this hour. back to you guys. melissa, i think back to you. >> yep, you are. thank you. is junk back in style? high yield bonds have been one of the hardest hit areas of the market. they're seeing a significant bounce. joining us today to discuss is aaron gibbs with s&p investment advisory. it is interesting, we just got some data from bank of america saying there was a large $2.36 billion inflow, net inflow into hyg last week. that was actually the biggest absolute dollar amount and percentage amount falling into the sector since october 2015. what is the signal to you if anything? >> this is clearly that investors are starting to take a little more risk on the table. and particularly with hyg, this is some of the better risks, the less likely to get you to

default. but i want to warn investors, particularly for the really high risk, the junkiest of the junk, those bonds have actually been really negatively hurt over the past two weeks. it is very much about investors looking and getting the less risky junk because they have been oversold, getting into them. just as we have seen within the equity markets. >> max, i'm curious, you look at the components of the hyg, are you seeing the balance being more pronounced in certain sectors? are we seeing energy within the high yield index, bounce more, as we have seen this return to risk appetite in the sector? >> yes, great to be here, thanks for having me. i think the whole junk space has been recontoured. so much previous high quality investment grade forced into junk, either on the emerging markets fears and on energy fears, but the space is literally different. like an index that has been reweighted. so i think we're cautious about drawing apple to apple comparison with periods before that occurred. that being said, i think we're seeing the high yield bounce

with energy prices and also with that appetite i think what the market is figuring out is the macro situation is weakening and so there is probably a little more life in some of the flight to risk assets than we had thought. on the other end, the macro situation is weakening, not much fiscal policy response help and that was underlied by the g-20 meeting and looks like there is almost no dry powder left, nothing credible dry powder left on the monetary policy side. there will be more fears still to come. >> what is the take away in your view? is this an area worth investing and as we see -- it has been outperforming the markets to date. >> if you want to be cautious, it is good to play the return of risk as it comes in and out of the market. long-term, have to be defensive. we like gold. i think we like some of the health care names. i think that people have to realize they're adding a lot of volatility and real risk when they add any risk to the portfolio including in the high yield space. >> max and aaron, thank you for your time. for more trading nation, head to

tradingnation.cnbc.com. which sectors on the rise now for the s&p at this hour. some of the favorites we have seen since the beginning of the year. utilities, big yielders. so as more people pile into them. telecom as well and materials leading the way. stay with "power lunch." we'll be right back. and now, the latest from trading nation.cnbc.com and a word from our sponsor. >> many people say don't fight the fed. that doesn't mean you have to fear the fed. if you're a long-term investor, don't let a fed announcement derail your long-term investing plan. but if you're a short-term trader, before you take on any new positions, you may want to consider waiting until after a fed announcement and until the market establishes a new direction.

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rates. here's what he said. >> you won't see a word about sustained negative interest rates. we are doing something the world hasn't seen. it does have the effect of making all sates more valuable. interest rates are like gravity in valuations. if interest rates are nothing, you know, values can be almost infinite. if interest rates are extremely high, that's a huge gravitational pull on values. >> if interest rates are nothing, even they're less than nothing, negative now, russ, values can be almost infinite, but, of course, they can't go up forever. what do you say to that, what warren buffett said this morning? >> in theory i agree with it. this is basic finance. if you lower the discount rate, raise the valuation. there are a couple of important caveat s and mr. buffett got one of those. the first point to make, it is not a free lunch. going to a negative policy rate is very unconventional and very

least we see japan and europe, it extracts pain from the banks. that is always a challenge when trying to grow the economy. the second goes to, i think, something mr. buffett said, this is unchartered territory. we never have done this before. there are questions about the impact it will have on confidence. questions about the unintended consequences. and while i agree lower discount rate should be supportive of risky assets, we have to be a little humble. this is new territory and how it plays out is still to be determined. >> the reason interest rates is so low is because central bankers are so worried and investors in the bond markets are so worried about the global economy at this point. >> it goes to two other points. one is the reason we're seeing the unconventional policy, act of desperation, nothing else reflated the economy. and the economy is just getting by as it is. if there is any collapse in confidence, part of the worry

gis what do central banks do for an encore and that's what is behind this concern, the fear that central banks are getting closer to the point when they're out of bullets. >> is that why you have low expectations for 2016? central banks can't do any more or what is behind that investment thesis? >> it is port of it. it goes to the notion that, look, central banks, never ignore them. at this point in the cycle, with valuations elevated relative to where they were, with central banks increasingly stretching, it will be harder, more difficult to inflate valuations. which leaves you relying on earnings growth. in an environment in which overall economic growth is slower, it will be more difficult for companies to grow the top line. and this is why q1 is likely to be another quarter when earnings growth is negative. >> so what is your allocation like? is this a year in which investors don't necessarily have to be in the u.s. stock market? >> i think in any year it is a good idea to have international

diversification. i would agree that you want to have positions outside of the u.s., i say particularly in dividend paying stocks, some best bargains outside of the u.s. also think about themes like carry, preferred or municipals or investment grade. this is not necessarily the year to be greedy, looking for instruments that can produce a midsingle digit return with modest volatile. >> getting back to the original question, is this a year in which you're telling clients to have the least expo her to u.s have the least expo her to ure stocks. >> the u.s. is 50% of the global benchmark. it is never an argument to abandon the u.s. on a relative basis, we think some of the better opportunities are outside of the u.s. and that means bringing down that allocation to something below benchmark for u.s. equities. >> why ich regions of the world in which sectors and which -- in which sectors are those dividends too fragile to mess with? >> certainly places you want to be a little cautious.

what i would say is that for example, many of the classic dividend payers like telecoms and utilities that are fairly expensive in the u.s., those are cheaper overseas. they're cheaper in asia, cheaper in europe. looking for the consistent dividend payers which is a reasonable strategy, but doing that from an international perspective, right now, makes more sense than concentrating all the yield focus on the domestic market. >> i'm looking at the list here. international dividend funds preferred, investment grade, municipals. in your head you tell clients, what can they get on yield per average? >> i think you're in an environment where we're looking at midsingle digits. in order to get a 10% return, whether you're talking about income or total return, and in the environment, in which the policy rate is not only zero, but going to negative territory means you have to take a lot of risk and that's something that more aggressive investors want to get their arms around. there are good long-term bargains out there, good long-term bargains in emerging markets. >> i'm hearing you say, you

know, if you want to make money this year, kind of forget about it. because there is not that much out there that is really a -- that is really attractive. but you might make money investing today for down the road. >> i think what i would amend that slightly if you want to look for good long-term opportunities, there are places to go. but you have to accept the volatility. this is not a year you get the return without the vault. >> exciting at least, russ. we'll see. thanks. coming up, bertha cooms takes us to boston for the latest in our special series bridging the divide. >> on almost any health metric, african-americans fare worse than whites. i'll tell you how this health clinic in boston is taking an innovative approach to bridge that divide. hey kevin. hey, fancy seeing you here. uh, i live right over there actually. you've been to my place. no, i wasn't...oh look, you dropped something. it's your resume with a 20 dollar bill taped to it. that's weird. you want to work for ge too.

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african-americans are more likely to suffer worst health effects from hyper tension and heart disease and cancer making them twice as likely to die from those malldyes. bertha coombs joins us as we continue to bridge the economic divide. >> many of those health disparities are due to a gap in

the access to health care. one health center in boston is taking an innovative approach to changing outcomes in the largely black community it serves. for fantasia, getting her daughter into day care felt like coming home. >> i've been off and on this campus since i was born. my mother used to come here. >> reporter: with a history of hyper tension in her family, her kids' health care is a priority. >> if i ask my doctor things that people may be embarrassed to ask her doctor, i have so much greater comfort being here and i think that that does help you to be a step ahead of the health and education. >> providing access to care is part of the dna founded in 1862 as one of the first hospitals run by and for women the nursing

program graduated the nation's first black nurse. >> with that history came a lot of responsibility to the community. >> reporter: today serves 17,000 patients in dorchester and roxbury, the heart of the african-american community, where one in three suffers with chronic health issues like asthma, high blood pressure and obesity. >> it comes from a number of things, it comes from the poverty level and educational status and access to health care. >> the ceo says improving health outcomes means reducing barriers to care. >> if someone has diabetes and can't afford food, that's something we have to address within our model. >> the government funded clinic has tried to develop a kind of seamless health care approach with everything from dentistry to health screenings and pharmacies under one roof and social services and mental health workers in the same offices with the primary care team. >> with a nine acre campus, they

have the luxury of being able to offer a number of services in one place but it's the focus on coordinated care that makes the difference. >> historically in different cultures, there's a real distruflt of the health system. so what we work to do every single day at demic is to cultivate that trust and build relationships. >> they rank well above the national average for health clinics on almost a dozen health quality measures, perhaps more important, patients like fantayzia feel the benefits. >> it's home, like i wouldn't even know boston without this being here. >> the doctors say integrating mental health with primary care was made it so much easier to get help for depression and stress. it's too early to talk about the direct outcomes but it's really something that's coming along. to learn about the mission and impact on local residents, go to

cnbc.com/bridgingthedivide. >> bertha, thank you. tomorrow we conclude our stories and look how financial advisers groups are looking to bring more african-americans into the profession and share more insights about saving and investing in african-american communities. >> stocks are hitting their session lows. they are not huge moves. the dow lower by 50 points and s&p by 5.5 and nasdaq 8 points. generally flat when you look at percentage moves. "power lunch" we'll be right back and talk about gold and oil. (patrick 1) what's it like to be the boss of you? (patrick 2) pretty great. (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done? (patrick 2) that's the kind of control i like... ...and that's what they give me at national car rental. i can choose any car in the aisle i want- without having to ask anyone. who better to be the boss of you...

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so you can invest with more certainty. mfs. that's the power of active management. welcome bark, want to take a look at the markets, the losses are really contained to just fractions of a percent. we have the dow and s&p down a third of a percent and nasdaq and s&p 500, a lot of the biggest gainers are the material based. newfield exploration is the third best performer here on the s&p 500. it's interesting mix as we head into the final hour of trade. >> indecisive trade so far today. >> one of the few days we've seen oil go up in stocks move the other direction. i'm not making anything out of it but just observe. >> and energy stocks in

particular not getting a bid from a higher price of oil. energy sector down almost one full percentage. we are seeing oil services names do pretty well compared to the overall energy sector which is mostly integrated. >> and gold has been doing well today and in fact ron is down in a mining conference in florida with gold miners. hello. >> you know, it was interesting to wrap up with a final thought on your conversation about oil, we understand that oil is good for consumers and it's cheaper. that really matters for the oil companies. i knew it mattered a little bit but did not know how much it mattered. i guess it makes sense considering the mines are in the middle of nowhere and you have to bring in the fuel for the big trucks. we sat down with the ceo, listen to what he said how much the fall in the price of gold matters to them. >> for every $10 change in the price of oil, it's about $40 million for a free cash flow per year. >> every $10 change in the price

of oil, it's $40 million of free cash flow on an annual basis. >> so if you're investing in an oil stock, it's not just -- or gold stock, not just about gold prices, oil's drop has been great for these guys, 40 million cash flow from a $10 drop, wow. >> it makes total sense considering energy is a big input for any miner, oil, or copper or gold. a lot of great takeaways from that conference. >> thank you, melissa. >> coming up tonight at 5:00 p.m.? >> this is a good one as we are in a split decision market, stocks in the kill zone, what does that mean? technically speaking, take a look at the charts they are in an area where they are going to get killed. >> killed, technically. >> kill zone, got it. >> that's exciting to watch for tonight i thought you were talking about the supreme court for a minute, split decision

stock. >> not that close. >> all right that wraps it up for this edition of "power lunch", turning mildly negatively. >> "closing bell" starts right now. don't move. sfl i'm kelly evans. >> nice to be back. i had the flu last week. my strategy every year, i never get the flu shot because everyone around me gets it and i figure i'm covered then. clearly somebody failed me this year. and i want names. >> i still didn't get mine so -- maybe we better -- >> there you are. where were we? stocks giving up modest gains within the last hour. the dow and s&p 500 are still on track to post the first monthly gains since november. oil prices had bn