and when we talk to your managers, nobody thinks brexit is going to lead. >> and nobody thought donald trump would be the nominee. hello. >> that does it for us. "power lunch" starts now. >> see that fancy building there? big battle breaking out inside at opec. we're live at the cartel's headquarters straight ahead. welcome to "power lunch." brian sullivan is at opec headquarters. brian? >> all right. thank you very much. yeah, the building behind us, maybe a battle, maybe a fight. maybe a discussion, either way, no deal on output limits were struck. in fact mshgs members were not looking for some. we know, however that, certain nations, ven ez wail yashgs we're looking at you and nigeria

and others were looking for higher prices. for the second time in two months, opec mebdz unable to strike a deal. this meeting was also relevant because for first time in 25 years, the saudis set a new oil minister and we heard from him for the first time coming out of the meeting. of course, he talked it up. listen. >> we are extremely happy. i think the market is in good shape. the market is balancing. trends are all good in terms of supply and demand. prices have recovered somewhat. i believe they will continue to recover. spirit of the meeting is very cooperative, collaborative and all of the ministers see basically the same funneledamen. >> a lot to decipher in that short sound bite. our guest is also making a long journey. before we get into prices and market balance and everything, what if anything did we learn from the new saudi minister

today? >> i mean, basically, i think he went on the listening tour. he really wanted to convince the rest of opec he cared. he was not impervious to their plight. and so basically, i think he is trying to play nice in the sand box. >> yeah, there is some talk that maybe if the former minister was here that thing was have gone a little different. >> he said in the past, look, it's not our job to defend prices. i don't think he would have given a lot of relief to the other members. i think he wanted to make everyo feel good. >> you think he did that? >> nobody has any choice. that's the problem. >> what was interesting was is venezue venezuela, their energy minister walked out saying it was an excellent meeting. that made me wonder if he's in caracas. >> almost everyone is like i described it earlier, the oscars of oil. they all come out one at a time, flash bulbs. everyone is looking for kmen takery. they came out with a big smile,

happy, pleased. happy, pleased. come on. do you think they really are? >> it's a lot different than december. they all walked out furious. they walked over to the people and said the meeting was a disaster. what i heard this time is there are so many meetings and hotel rooms before today, everyone knew the outcome. no one was surprised this time around. >> balanced. you heard the saudi minister was balanced. do you believe it is balanced? >> certain countries have they balanced it for them. >> what about the united states? >> the united states helped them balance. going into this meeting when you lose 800,000 barrels, you really balance quickly. >> all right. thank you. we'll see you a little later on on "fast money." great analysis as always. so there you go, guys. everyone is extremely happy. >> everything is fine. >> everything's fine. thank you. >> everything's fine. yeah. good stuff.

thank you so much. that is not opec headquarters originally. u see the building that brian is standing in front of, that is the opec headquarters. traders got a chance to digest the opec decision. so what next? with us now, oppenheimer senior energy analyst and the analyst at seaport. why you would bother to be a cartel if you can't cartel? >> they're in denial. >> they're in denial. >> opec is finished? >> opec is over. >> we actually heard that from the saudi oil minister today. he said that opec may not have the function of the future of being -- of managing the market. isn't that an acknowledgemen of that? >> absolutely.

production has kblecompletely changed the way we look at energy. opec and saudi arabia are no longer the one producer of the world, only two years ago. >> what does this mean for oil prices then? >> the market will dictate where oil prices will be. and that is basically the new normal. the new normal is not going to be 40. it's still going to be 80. it's going to be close to 60, 65. why? because that is the margin of production in the u.s. the people that are delusional think we're going to go back to $80. they're looking at the wrong charts. >> mike, the charts have will a great run recently. do you agree with him when it comes to the price of oil? what does that mean for what has been a big run? do you keep riding that wave or

take profits here? >> thank you for having me on. i agree with fidel. i was reviewing a deal out there in the market right now, the hot plays and the stack. a company out there is pay rock energy. and they're citing 200% rates of return on a $40 oil price for the wells. so there's some superstars here in the u.s. that are going to be able to grow at a price much lower than 60, quite frankly. we think early long term pricing we is the is 55 that balances the market worldwide. >> who is better positioned at this point with opec being dead, as you say. shale be the swing factor and oil around 65? >> the companies will probably be the best performing stocks

going forward. these are the companies that are producing mainly in the u.s. these are the companies that we benefit from improving efficiencies. companies become more creative companies. they cut costs and they have operating efficiency and seek a way out. that's what the industry has been doing for the last three years. the break even point continues to go down. higher oil prices will create profitable environment at $60, $65 oil which was not possible only two years ago. you need 80 or $85 or $90 oil. that's no longer the case. >> if we buy your theory that opec is over, how does the end of opec look? what does it look like? the lost control of oil prices years ago when they realized being this producer you get

penalized. you're in the penalty box for most of the time. so, therefore, it's over. what happened today is that regardless of where prices are, opec is forced to sell as much oil as possible because oil in the ground has no value for them. so those countries that need the cash, pump and pump and pump, whether it's venezuela, algeria, they need the snn. >> they need the money. they'll not have enough money to support their capital spending if you will in the fields in order for them to maintain production let alone increase production. so, therefore, you have normal decline rate between 5% and 10%. >> right. >> and basically it's a treadmill. you can run as fast as can you but you're not going anywhere.

>> all right. thank you very much. good to have you in the house again. >> thank you. >> thanks, mike. >> and mike, thank you as well. >> we want to alert tout markets and what they're doing right now as we're talking about oil. we did see wti and brent reach session highs and at the same time the dow pushing to session highs. we have been as many as 90 points lower. now higher by four points. of course, we're watching all the major indices right now. the dow and nasdaq are up. tesla ceo make something interesting revelations about where he sees the competition coming from and where he doesn't. they're not a car company. so they would potentially, you know, license the technology to other car companies. i would say, you know, google is a competitor. >> apple? >> yeah. that will be more direct. >> that will be more direct? >> yeah. i think they'll make a good car and probably be successful.

the car industry is very big. so it's not as though, you know, one company to the exclusion of others. >> that is also critical about the timing of apple's auto plan saying the iphone maker should have embark ond this project sooner. let's bring in andrew erkow tichlt z. he's not convinced the auto industry is where it should be. guys, great to speak you to all. andrew, i'll kick it off with you. what is your take on a potential entry? >> yeah. no, i wouldn't disagree with you. i think, you know, you look at the auto industry. it is awfully sexy for somebody at apple. if you just get 1% penetrationst overall market, it's a lot of revenue. but there is more it to than just revenue. there is supply chain issues. you have to get scale. and so forth. it's very capital intensive. i wouldn't expect a positive roi for many, many years. so we're a bit skeptical of this

is the right move for apple. >> john, what is your take on why apple might want to do this? i mean they're already facing margin pressure on the iphone with the introduction of the sc. they're taking oun the estimate, specifically citing the lower margins it will face because of the push into emerging markets y go into a business that is at the get go a low margin business? >> i'm not sure it will be a low margin business for long. i've been talking to people like gene lu who is here. i'll have more from her tomorrow. but also to mark fields from ford. this is turning perhaps into a car as a service business. particularly in places like china where they want more electric vehicles and they're not looking for individuals to buy the vehicles but have companies buy them. koinld up mo

you koend up with a lease structure or a maintenance business going on over time. if can you get the costs low enough, get the technology that is the play at this particular moment because of all of that. >> as you know, musk said that he would expect apple to be in the business with production, cars rolling out as soon as 2020. tesla already thought about this future. they don't think about this as cars. they think about it as mobility. sustained mobility. do they have the edge already just because their minds are already wrapped around this concept? or do you think that there is room for a competitor coming? it is shocking to hear elan musk concede there could be competition. >> there will be competition. could apple be successful? elan musk thinks they could be. you have about 90 million vehicles worldwide that are manufactured every single year. and that's going to grow. it's going to be over 100

million in a year or. two april come peel off a clufrpg of that business. not a huge clunk right away. but a chunk of that business. what concerns the automakers, not just tesla but all auto make berz apple is, a, very deep pockets. so if they need to withstand some losses or if it needs to buy something, it has the resources to do that. and, two, how disruptive will it be? to elan musk's point about they waited too long to get into this business even if they get in by 2020, tesla is already out there with autopilot and other advance features. you're going to see more of that from other other maker as well over the next couple of years. >> andrew, on a day when apple is saying they're going to raise $4 billion in a bond sale in the asia pacific region, they end the quarter with $233 billion of cash. is that -- is that a big concern on your part this they do have the deep pockets? they could actually spend the money to make a car and to your point before you think that would not be a good business.

>> clearly they have the pockets. do they have the expertise to enter that snashgt you take what apple is great at. they're really good at chafrging the way we interface with devices. doing that in the auto industry is going to be difficult. build ag supply chain, again, apple is extraordinarily good at building a supply chain. >> give me the bottom line though, andrew. if you hear apple announce they're going to build a car itself, do you downgrade the stock? >> well, i -- i would view it very negatively, for sure. >> guys, thank you. tyler? >> all right. thank you very much. let's bring in our first guest of several who join us in this segment. she'll be joining us for the rest of the show. she is the spouse of our friend

jack welch. >> thank you. >> we're going to talk management. we're going to hit three big issues starting with big versus new or big autos preparing enough for the changing landscape provided by companies like uber. a couple of hr issues, new employee review guidelines from goldman and bridgewater, the way they review folks. and three seems like nobody is going public these days. what is the deal there and why? bill jorng joins us from harvard. we have the ivy league covered here. let's talk first, suzy, about, you know, i was at a symposium a few months ago where people said that uber and what it represents, not just to the automobile business but to the interior of cities, to how people live, how many parking lots we need. it's going to change everything.

is rest of the culture ready for the change that uber and/or self-driving cars can bring? >> uber is one of the companies like so many companies now that just drupts and drupts and disrupts. but isn't that story of the economy? they make gigantic disruptions to our way of life. the business we're all in is trying to figure out what is the next industry that is disrupted. uber is looking for a world where nobody owns a car. that will change our culture in maybe the same way that having smart phones did. >> paul, it's not just ub are trying to eat the lunch. tesla is coming up with new cars. there is talk that april sl going to have a car. so you have new producers and then you have the potential shift in lifestyle or maybe people just don't have a car. cars now with service. what do auto ceos need to do right now? >> i think the first thing they need to do is get management house in order with most of the companies.

they have an enormous amount of problem as a result of the issues that are going on with the safety units and the cars exploding, as you know. and so this comes at a really bad time for them. i think the new competition is something they're not ready for. >> what this have they not done management wise that you would have them do? >> i think management is a problem for them and also a talent problem. the young, exciting talent that people -- >> it's not going there. >> it's going to the new companies, the companies with the very sharp, you know, growth. and so if you're running an auto company right now, onest huge problems and you have enough of them, is that really smart engineers that you want are going elsewhere. they're not going to go to a company that has problems and is in detroit. >> it seems to me that old line autos in the united states have been focused largely on how do we get to the electric powered

car? millennials don't want cars. they want to live in the city. they don't want to live in the suburbs. it is really changing things dramatically. if can you have an uber, why have a car? then tuesday it's always been that tesla and uber will change things. i met with both elan musk and ub aers leader. they are totally redesigning systems. i remember the chief designer for one of the largest german companies whose name you'll recognize is very dismissive. they don't know what they're talking b i think they're very foolish. they're going to change the whole landscape. you saw the chevrolet didn't burn them up with the bolt. they got a the love burdens and legacy costs right now.

older naem cannot go out now, they'll just qual an uber and they'll pick them up. >> thanks. >> i actually would like to see a merger. [ all talking at once ] >> they're conspiring here. but paul is an old friend. paul will have to double-team against them. i think we're making a mistake on the panel so far. a mistake about using broad brush strokes. fiat-chrysler is the ones talking in ways that are minimizing this where they're saying we have to worry about the here and now. forget all the future modes of transportation. very narrow, very short term view by contrast. ford is -- paul, 40% of the management team is new and from the outside. there is incredible variety from

there. people working, the most senior levels as well as from wall street and strategic roles. it's quite exciting. and mark fields built up a gian. he was talking about how they see in about five years about 40% of the vehicles will be electronic. but in terms of the self driving cars, he also talked through the mathematics and legal issues which are quite fascinating much it's going to be easily mapped urban routes. so much driving actually won't happen. ford is on top of this. >> i want to pivot to energy. we've been talking a little bit about oil. but bill george, i want to start with you. you are on the board or recently were. i assume you still are on the board of exxonmobil. is that correct? >> do you think -- >> yeah, up to a year ago. >> do you think the large energy companies are doing enough to get ready for intensified regulation having to do with

climate change? >> clearly, they're trying to cut the co 2 usage, trying to cut the carbon footprint. there is a lot of people that just want to get rid of fossil fuels altogether. that's not going to happen. by 2050, renewable sources count for less than 25% of the total. the real issue is in china. i think you've seen exxon invest in carbon sequestration technology which could be very beneficial in a kplp called fuel cell. they've been dabbling at it. i know exxon doesn't feel they have the expertise in wind and solar. >> so new -- the paris accords do a lot, right? >> yes, it's going to affect a the love industries. are they ready? >> they have a huge number of people focused on. this you wonder about the productivity of the companies

because everybody is looking at compliance. the job of the leader is to put the company where the future is going. and they have to see if they're look wrg the future is. >> i can push back? is it part, jeff, weigh in here. is part of it though, i mean, if you think that ultimate ly you'e going to be using carbon production for the flrg is part of the leadership role to push back and say all this concern is important and lovely, et cetera, but the way we drive our cars is the following. unless there is dramatic technical change which hasn't arrived yet, to say look, we really have focus on what we do as our core s there any role for push back on that? >> you have two billion people who have no access at all to anything other than fossil fuel, right? the world is in great need of that for years to come. i can see push back. but in the long term, i think there is interest in social

change around fossil fuels. the growth curve for energy companies looks like this. it's pretty hard to not want to stay in that business as long as you possibly can. we've just seen moments ago opec, you know, unable to reach any major price hikes which is good news for any industrial nations aren't world. but we also have seen incredible change in the last five years. if we had this panel discussion five years ago, we would be wringing our hands more. the u.s. has gone from basically zero in oil shale production now to -- so dramatically, the fifth or sixth largest oil source. that is a huge change to your point, michelle. that is something to celebrate. but we're also seeing that when i comes to the biggest use of oil is for transportation fuel, and that's where the question earlier part of this panel about electronic vehicles really matters so much.

they're up an amazing 60% in the u.s. over last year. >> electronic vehicles means more coal production at this point. i want to switch topics. we're running out of time. can you hear me? >> the gas is an interim step. it cuts the by 50%. that is an interim step for the next 25 to 50 years. china is the one that really has to get their act together. the emissions over there are just creating a horrible environmental situation. they're trying. they're moving. but it's way late. >> if we can go to another topic. 3960 feedback model at goldman sachs and bridge water where you're getting feedback all the time. is this a good idea? >> bill is on the board of goldman sachs, too. >> i always give people feedback all the time in real time. why wait until the end of the year and save it up as though you're going to nail them. 360 feedback is a very, very good tool. you don't really know how you're doing until you know how the people working for you and the pi peers that work with you every day. >> they're improving the

leaders' emotional intelligence. somebody at goldman sachs has no problem hiring the best and brightest people anywhere. we have to ensure that they have a high level of self awareness. you only get that through feedback. something we teach in the classroom every day here at hbs. and we'll continue to beef that up because that's the key to leadership. >> suzy, you're shaking your head. >> i half way agree with bill. you have to give feedback all the time. that's what do you if you're a good manager. michelle this is how i feel you about. that is how you were in the meeting. 360 feedback works once or twice. of that, people start gaining the system. using something about me and i'll say nothing nice about you. it is shocking. you're hearing for the first time what people around you really feel. it is very infeeffective the fi. anybody that goes through it that, is a game. >> what about bridgewater? they do the thing where it feels like a brutal culture. >> it's a big problem. there are discussions at

bridgewatter that some seniors have that are not -- i've been in. there i had to sign away my first born if i say more about it. but they -- not everything is up for grabs. certain things that that are noes the trans mitted. you have issues of privacy and mediocrity. suzy, i'm sure you and bill and paul you may agree, many times you have group norm that's are reinforcing people that are not postors. a maverick gets destroyed in a 360 process. goods to have the feedback. but maybe sometimes the world is crazy and you're the right one. maybe profound change will disrupt people fuchlt want no disruptors, let's drowned the world of 360. >> there are two things going on. there they always had 360 feedback once a year at goldman sachs as far as i know. they're adding this constant feedback loop because they're having trouble tracting millennials. >> do they like this? >> absolutely. >> they like it. they want candor. >> they can't get enough.

>> i get the impression they don't want to be criticized. >> some do. they want honesty. they want honesty. that's what millennials want. they want somebody to be straight with them. the reason they're fleeing corporate settings is they're not getting honest feedback and candor. you have to have a culture that has truth and trust in it to get any feedback. we want to thank bill george for being us with. i guess that means you have to carry harvard forward here. based on your history. but that's okay. >> can we talk about bill now that he's gone? >> talk about bill? go ahead. quick thought there, jeff. then i want to turn to the question of why fewer companies are going public or why many are waiting longer to do so. >> that's a great question. years ago, in fact, last few years whether i would go off to the private equity forums where you have a private equity firm, they bring the portfolio

companies there. they talk like they're chains. let me free. now they go in there. they say don't throw us out. there the ceos of the portfolio companies, they're saying the regulatory environment, the uncertainty of these ipos, the ipos are down 2% to 10% in recent years. haven't been looking so good overall. we're down dramatically. 60% ipos. there's a great fear of going out. there they prefer the privacy, brainstorming. a lot of advantages as we see they're not going public. >> the activists have scared many into staying private. >> okay. there are pools of money sitting around. can you get it y go public? why have the discipline of the market staring at you. >> and low interest rates, right? >> saudis need to invest. negative interest rates and large part of the world. >> right. >> you throw-in a thing like uber trying to get higher growth. reaching for yield that means they don't have to go public.

>> there are people in saudi arabia that can't drive. >> a very social implication there with uber. now they can get out in a car. >> yeah. >> if can you get money from a southern fund, can you remain private, it's a much better way to run a business. >> i would. unless -- i understand why companies go public. >> i don't know. there is a disblin in the market that makes you better, i think. i really believe that. >> the markets make you better. they make you more customer focused. they push you in speed and competition. >> but then the counter argument is they make you quarterly focused. >> but if you say i'm going to be, you know, strung out by the security -- you have to be strong to be out there in the markets. so i think it does separate good leaders from bad. >> it brings visibility. >> we'll talk more about thernos later on with suzy as that company goes through its whatever kind of pains it's

going through. but let's talk just very quickly, jeff. i now know you had the thought t the untimely passing of pepsi. >> i was a close friend. i can't believe you read my mind. it's a profound loss. there are so many people like morely safe wloer is also a friend. he got to see age 84. yet working up to his last minute. roger rico was a very young 71. he actually really brought the first competition between coke and pepsi. he was the authorst pepsi challenge. part of the dirty secrets on that is that people slightly prefer pepsi in the blind taste test. people prefer pepsi was an eyeopener. roger voluntarily pulled the plug because the dirty secret behind that is that basically people didn't care which cola it was. so they thought maybe this is not so good to reveal. but he brought a new sense of marketing, a great sense of energy of creativity and, of

course, the spinout of what became yum brands was his amazing vision to reverse wayne calloway and say that was a great strategy of bringing pizza hut and taco bell in the house and kfc. but we have channel conflicts and a spirit that is being destroyed this that kind of restaurant business. let's open things up. there are so many great things. dasani came out and be developed, many great new products and things that were -- but also the kind of a person he was. just very warm embracing person who came into a very tough culture. it is one of the toughest places in the country to work. he lead a real trance formation. >> all right. on that note, we'll leave it with thanks to you. we appreciate it also to bill george and thanks to our panel. we'll see more of you soon. thanks so much. >> appreciate it. >> all right. to the bond market. rick santelli, i guess this is for melissa to read go. ahead. >> that's all right. doesn't matter who reads it.

it's the charts we need to read. if you look at the chart starting in the beginning of may, a couple things should jump out at you. we had 11 sessions. 11 session that's settle between 182 and 187. last time we settled under 1.80 was 12 sessions ago. now today is the 12th session. we're dabbling with the 1.80 mark. pay attention. let's look at an april 15 chart of boonz. they're trading at 11 basis points. four basis points away from potentially new all time low yields. let's look at one week chart of the euro versus the dollar. the ecb met today. not a lot of toll vilt. finally, we talk about the curb flatten. we can't debate what it is doing. we're at the flattest we've been since the end of november 2007. we're about ready to break. >> narrator: 9 -- break under t 90 mark. melissa lee, back to you. >> wow. rick santelli, thank you.

of course, all eyes are on tomorrow's jobs report. why do we see this little bit of quiet in the market as we did in the bond market as well. we're seeing that in the gold market as well. 1213.40 is the level. dpoun .1%. over here, checking on the rest of the metals complex, also gradual moves. we have palladium down by 2.3%. we have platinum down by 1.2%. now let's get to sue herrera for a cnbc news update. >> here's what's happening. the los angeles police chief says the man who carried out a murder suicide at ucla yesterday left a kill list at his minnesota home. a woman on that list has now been found dead in a nearby town. mainak sarkar killed a professor and then killed himself. they were all on that list. >> turkey's president saying a decision by german lawmakers to call the killings of armenians

by turks a century ago a genocide has the potential to create significant tensions. turkey promptly recalled the ambassador to germany. the louvre museum will close to the public on friday to allow priceless art works to be moven after the swollen rivers keep rising. the water level burst through five meters. the record high was 8.60 meters during the floods of 1910. and the new york knicks report lid agreed to hire general hornacek as the new head coach. the three year deal is worth $15 million. he will become the knicks fifth head coach in the last six seasons. no pressure there. that's the cnbc news update this hour. back to you. >> all right. sue her ar >> all right. sue her aeraherrera, thank you. are ceo's under too much pressure to protect the dividend? we'll debate. that the call just came in. she's about to arrive.

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. all right. welcome back to "power lunch," everybody. if you love dividend paying stocks, listen up. there could be big dark clouds on the horizon. let's get to cnbc with more. what you are finding? >> yeah, that's right.

we know dividends are a good thing. but could too much dividend be a bad thing snt data is showing that over the last ten years, companies are giving up a lot more in dividends relative to the earnings. so just look at three examples. microsoft, chevron, pfizer, you see the data. there look at pfizer, they're paying out all of the eps as a dividend. so these ratios at around 100% means you can't keep it up forever, right you? don't have enough money to keep doing this if you're paying out more than you're making. look at the broader trend compared to ten years ago. there are a huge proportion of companies now, 43% that are paying out more than half their earnings in dividends. almost 20%, tyler, look at that, they're paying more than 100% of the earnings in dividends. so problem is can you keep this up? you look at chevron, they're going to be cutting cap ex in order to maintain the dividend. fiz myrrh years ago, they cut the dividends in half and have had to come back up. so if you're just a passive investor, think about all the retail people, retirement accounts, they like the big

dividends. if you don't think about it any further, you might be in for a double whammy late wler companies can't pay the dividend. they have to cut it and the stock goes down. so this is one of the numbers that there's no right or wrong answer here. obviously, some companies can get away with this if they grow the earnings later. a lot of companies can't. you have to be careful. you have to look at these numbers a little more indepth. >> all right. eric, thank you very much. >> i assume that lots of ceos and boards with long histories of raising their dividends are terribly afraid of doing anything but raising their dividends. >> right. >> they're under pressure. you know, ceos are under pressure from everybody. they're under pressure from the media. they're under pressure from activists and from security anlives. so part of the whole role of leadership and to go to 50,000 feet is to decide who you're really going to pay attention. to tend of the day, it's the customer, how satisfy ready the customers and the employees are. then you have to sit down and

decide, you know, what are we going to do with the dividend? and communicate, communicate, communicate. there will come a time when you can't -- >> i guess there are some cases where in the case of chevron, they may be dipping into capital, reserves, cash, to keep the dividend going at a time when their earnings have come down. >> right. >> a short term matter, i suppose you can do. that you can't do that forever. >> you can't do it forever. maybe i'm too believing in the system, i have to believe somebody is on top of this and watching it and this is what they're talking about in the board room. it can't go on foreenvironmenter if they're communicating to the financial communities. they'll be ready for the day it comes that they're going to have to cut the dividend and explain why. >> in the last analysis, the profits are the share shoulders money. >> it s so money should go to them. that's why they hold the stock and they want the dividends. it will play out. i'm not sure it's a bubble though. i would push back on that. i think this is managed probably managed very carefully. >> yeah. all right. let's be joined by ron weiner,

managing director and partner at rdm financial group. tim, why don't you pick away at this thesis? are we paying too much dividends? >> i think the dividend trend is going to be difficult to sustain. you had four quarters of lower earnings across the board and the s&p 500. at some tipt point in time, cash will run out. you know, utility stocks, for example, one of the strong holds in terms of dividend yields over the years is training at pretty much market or above market multiples at this point in time. are there other attractive areas in the market where they're trading at more, you know,

attractive multiples. >> ron, you like dividends. you think that invest fwhg dividend stocks is the way to go. why? >> well, not for everybody. dividend stocks, it's complicated. you have clients that need dividends and cash flow tlachlt is a whole other metric. you want that cash flow going even though last year's dividend paying stocks didn't do well. nobody wanted them. everyone wanted the growth stocks. this year they don't want the growth stocks, they want the dividend stocks. as the previous guest said sh it's getting expensive. so that's you do research. you do research and say that growing their dividend, thr dividend is solid. earnings are such. microsoft, can you make the case, we own it. they're building cash. so it's not that simple. it's not just can they sustain their dividend? what's going on with the whole business? so in some cases, yeah, dividend stocks are great. in other cases, you want growth. there are a lot of dividend

stocks that are pretty solid. dividends will be fine. >> you like three of them. ron, thank you. let's get to a market flash. >> tyler, private equity firm carlisle and blackstone are back ago way with a deal from concordia. that is according to "the wall street journal." it was reported earlier this year that blackstone and carlisle were considering an acquisition of the canadian pharmaceutical firm concordia. they created a special committee to consider strategic alternatives. but according to the report, a deal may not happen. we're looking at the stock down 14% on the day. >> thank you very much. 22%, that's how much natural gas is gained over the past week alone. so what's fueling that rally? we'll dig into that ahead. and later, the bond legend bill gross has some out of this world investment ideas for you, literally. he's talking about money and mars. we'll explain when "power lunch" returns. what are you doing right now?

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natural gas in rally mode as we head into the summer. it's 2up 22% in a one-week char. allen, great to you have us with. what is behind this 22% rise? part short squeeze, what, supply/demand? >> thanks for having me. it's a combination of a couple things. we have very hot weather coming in. we also had very hot weather. using up quite bate of natural gas. we also have a lot of shorts in the market creating a short squeeze which is starting to overswing it to an overbought situation. >> how long does this last? >> i think we have a couple more weeks of. this we have warm weather still on the horizon. we have natural gas during this time. i think we'll get to the $247 to 252 level. >> are you positioned long? >> i am long now. i was a scaled down buyer for

july. and my get out is a 2.47. if we slide down, we'll be back around 2.27. >> allen, thank you. >> thank you for having me. zblup next, why investors are loving health care plans and torpedos in today's trade.

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built for business. welcome back. a few names managing new all time highs to day including united health, l 3 communications and raytheon. coming up next, we're going all in on california. first up, why donald trump may have a giant tech problem on his hands in the valley. and then to southern california, bill gross, that's where he lives. he joins us with some out of the world investment ideas. says go to mars if you're looking for big time returns. he'll explain when "power lunch" returns.

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welcome back to "power lunch," everybody. just five days to go before the california prime airy. donald trump is not getting much love from sill con valley. let's get to josh lipton with more. josh? >> well, tyler, you're not going to find many trump signs in california. it's a city about an hour south of san francisco and home to tech's elite. but intel ceo who lives in aferton was going to host a

fund-raiser for trum top day. intel confirmed that event to the "new york times" on tuesday and then said can sild several hours later and intel spokesperson tells cnbc brian is not endorsing any presidential conditioned date. we're interested in engaging if both campaigns and open dialogue on issues important to the technology industry. but it certainly true at least right now that trump doesn't have many fans among teches. his views on a range of issues from trade to immigration put him at odds with many in the tech industry. and we know he's also personally gone after some tech executives like amazon's jeff bezos, referring to his "no profit company." of course, trump isn't concerned with what the elites living here really think about him n fact, there may nobt a fundraiser to night in atherton but there will be a trump rally in san jose, california. back to you. >> all right. let's see how attendance is there, josh. let's bring in a sill con valley entrepreneur who is willing to

say that he does back trump. he's not afraid to admit it g to have you here. >> hi. thank you for being here. >> you're one of the few who is willing to say that you back trump. why do you think that in silicon valley so many people are like this? are there secret backers that just don't want to admit it? >> absolutely secret backers. since the new york time article came out, i received a number of invites from linked in from people from apple and hollywood and various tech companies throughout silicon valley and san francisco thanking me and praising me and be very supportive. it's been great to connect with people like that. >> why don't they want to admit it? if they're willing to talk you to, why aren't they willing to say it out loud? >> i don't think they want to be pigeon holed and labelled n this valley, it's all about the network and people that you're hiring and you want to be inclusive as much as you can be to attract the best and brightest minds and you just

don't want to be incendiary. >> do you think there would be reprecushions if someone said, yes, i'm a trump supporter that there would be reprecushions because of the support? >> number i don't think. so i think people are not blue and red as much as they are purple. it takes courage to be transparent. and that's what you're going to see. >> i think what i like about donald trump is he's very much like a silicon valley tech guy. he pivots if something isn't working. he finds the right level that he has to get his investment, to get the product going. he cares for his employees. he cares for his customers. he cares for his investors. and in that order. he is good under fire. you have to be good under fire

to survive in this incredibly competitive marketplace. >> your thoughts on trump here? people's willingness to say or not say? >> there is so much social pressure to not say you're a trump supporter. it's like admitting in l.a. or sill con valley that your dog is not a rescue. people recoil in horror, you know? >> you eat kale, i hope. >> and, you know, we were at a party roontly. i asked a friend of ours who sort of in the tech circle, what do you think about the election? well, i'm going to hold my nose, i guess, and sort of embarrassing. he says i guess i'm going to hold my nose and vote for donald trump. if you don't recoil in horror, the next thing you hear, is you know, i actually think that he has some good ideas. you say really? and you're not having a heart attack, you find out this person supports trump quite a lot. but they start off by denying. >> scott, it's interesting. i'm working on a story about mial mat maer, wellsly. hillary clin clp went to wellsly. there is a lot of open support for hillary.

there i can't find anybody who admits on the record that they would vote for trump. like it's going to be unanimous because they're mortified. i think this is this whole social movement. it will be very interesting to see what happens. >> i'm going to my reunion this weekend in virginia at mr. jefferson university. we'll compare notes on monday. i haven't spoke ton anybody about whether they're trump supporters. but i will bet that you there will be more there than there would have been at wellsly. >> from a ceo perspective, suzy, should brian have come out and actually said i'm hosting a trump fund-raiser? it is smarter for a ceo to just not endorse anybody? >> well, they're endorsing hillary. i mean, they're the ceos are -- i think ceos are throwing parties for hillary left and right. nobody bats an eyelash. en that guy says i'm going have one for trump and he has to shut it down? that feels a little bit unfair. >> scott, you were comfortable coming out, obviously. you run a company.

do you think you'll feel any reprecushionors follow up on melissa's question. >> i don't. >> can you endorse a candidate at all? >> i think it is appropriate. i think what intel's ceo did is right for him. he is a world global player. he's going to do the right thing for the investors and marketplace. as far as that party getting moved, i think that party got nofd a whole lot bigger venue. one thing you were talking about is reunions. i went to vegas roonlt ecently. every cab driver wanted to engage and thrp all for trump. i find that so fascinating. you know, trump tower, trump casino. why are they so engaging and open about it? i think it's the common people. it's not the .1% elite. it's the every day common

employee who wants to get back to work. and this company has to get back to work. and trump is, you know, i think he's a racist for the american employee and i think that's what people are resonating for. he wants to get america back to work. i think that's a great thing. i hope you don't edit that out. >> it's live. that's the beauty of it. >> some guests just go on and own and on for that reason. we appreciate it. >> no, that is a sign we have to go. >> i that i is important. thank you. it's going to be great. >> we're editing you now. thank you, scott. stocks, let's see. these are massive gains. look at that there. .4%. s&p 500 up one point and the nasdaq up 4.83. that doesn't suggest though that there isn't lots of back and

forth within those broad indices. oil turning higher after opec failed to reach a deal. not really a surprise there on an oil production ceiling. we'll tloed brian in vienna for more detail and color in just a moment. first, bond legend bill gross out with his late environment investment outlook saying the good old days are over and not coming back. unless you're going to mars. big gross is portfolio manager of the janus global unconstrained bond fund. i think you should call your newsletters, your monthly news letters unconstrained gross. that's what it s it is gross unbound. you say that era of sort of easy carry is done. don't expect 7% returns that we've had in corporates over the last 30-some years.

and don't expect double digit gains in stocks. explain. >> i think it's impossible in the bond market we see negative yields and n. many developed markets. and we know 7.5% is not possible to attain from a negative yield. we know as well as the 10-year treasury market at 1.8%, ten year treasuries to duplicate the 30 year history of bonds would have to drop to a minus 15% in order to, you know, produce returns of that magnitude. can you add 3% equity premium to all of that and basically come to the conclusion that if a ten year treasury at 180 is going to yield 180 for the next ten years and stocks with a 3% equity premium would yield 4.8% or 5% in terms of total return, then, you know, the markets are entirely different. and it would pay to travel to mars as well as stay on earth because the returns are very, very low. >> the implications of what

you're saying, bill, are -- i mean already the pension funds in europe, they don't know what to do. >> and the u.s. >> well, we're at a moment -- we talked earlier about, okay, are the car companies watching their lunch get eaten now by new entrants to the market, different business models snt pension system, i mean the investment system in this country and all over the world is buckling as a result of this. how is this going to shake out except of being ugly? >> it is ugly. that is a reason that pensions is one of the business models affected by low to negative interest rates. you know, they have promised 3% and 4% and 5% in term of death benefits and other relatable liabilities. now they can only earn zero or 1 or 2 and sort of slowly they're at the margin they're going bankrupt. the big insurance companies will not go bankrupt. don't misquote me. but they're hurting like you suggest. same thing with banks in term of

the net interest margins and same thing basic wli household savers. they can't earn more than zero at their bank, how can they pay for education? how can they pay for retirement? and so low and negative interest rates at these levels are producing lots of problems for business models. >> this predicament in your view is a direct result of? >> it's a direct result of central bank policy. it is necessary to lower interest rates for 5.25% by the fed in 2008 and 2009 to down where we are. ultimately, they have to move back up. i think a certain number of fed governors, you know, realize that the normalization process is necessary in order to save, you know, business models and to save capitalism basically because capitalism doesn't work at 0%. it doesn't work at negative interest rates. so, you know, we're moving back up. we have to do it gradually based on a level. >> just the way you phrase it there, capitalism doesn't work

at 0%. will you stay with us for a second? we need to go over and check in for a market flash. we'll be right back you to. >> want to point your attention to shares of cst. up 15%. canada's and japan holdings have submitted indicative offers to acquire cst brands. the u.s. convenient store. that according to reuters. the two operators are competing against several other bidders including private equity firms. again, up about 14.5% on this report. back to you. >> all right, thank you. bill, back to you. what is an investor to do? where am i prone to make a little -- a little more than that 3% or 4% that you refer to or a little more on bonds?

what do i do? >> what you shouldn't do is extend in terms of risk. you shouldn't xenld a high yield markets a good 3% or 4% more. you shouldn't move into the riskier side of the equity market in order to hope to make 8% or 9% which might be your targeted goal. what an investor needs to do is go the other way. basically, to hold a lot of liquid cash basically to not buy corporate bonds, to not buy duration with long ends being, you know, ridiculously low in term of yields. the japanese 30 year jgb yields 30 basis points. >> you get nothing. and two basis points. and a two basis point increase from 40 to 42 takes away the entire annual income. what an investor needs to do is get safe. and in some cases, you know, borrow money as opposed to vinest it.

i have a few good idea for that if you have time. >> save them for the next time. maybe not for the beyond. we've got a fed meeting coming up. we'll get you there, i'm pretty sure. bill gross, thank you. >> thank you, tyler. now to the battle inside opec. members of the cartel unable to agree on a new production ceiling. brian sullivan is live in vienna, austria. brian? >> all right. thank you very much. let's talk about opec. all day long we've been hitting the supply side of the story. right? how much supply? no deal, no output cap, blah, blah, blah. well your next guest has an interesting and different view and bullish price target. the co-founder of corner stone analytics joins us now. i feel ashamed. we've been hitting the supply side of the equation all day long. you're saying, brian, you got to focus more on the demand side. how come? >> at the end of the day, the issue of the oil balance is really how inventory is moving and why.

can you look at one part of the equationen that is supply. you talk about the contraction and not opec. it is very, very robust and underestimated. the first order came in almost a million barrels higher than generally believed. april looked like it was a million and a half higher than the consensus estimate. >> it's interesting. so this is like your 30th year at opec. you've been doing this a long, long time. you do a deep dive into the numbers. why do you say the official numbers or estimates on demand are too low? what are you seeing that says no, demand shyer? >> to make this sim will and it's a short program and we don't have to overtechnicalize it, inventories are the province of the oecd countries. so when you look at the data, you're really very focusing on the inventories. there was a draw in march. that was completely counter to what most people expected. the preliminary data showed a draw in april. may is going to be a very big

draw. canada drew down the inventories to keep sales commitments. if people believe we're oversupplied and inventories are drawing, there is a gap. so it's either falling into a hole somewhere or typically what is always happening is demand higher. >> so you're not concerned about the look of an output cap deal today? >> no. in fact, the point of the meeting and the most critical pa part of meeting is the change of the tone in the saudis. >> new guy. >> right. the first guy since '95. that's right. but the point of what he seemed to want to do is put his mark on the meeting and try to mend fences. and they were expressing very clearly that it would be difficult to put a deal together. given some of the issues in venezuela and nigeria. iran is still trying to recover. >> do you think they're conciliatory enough that if oil prices fell -- i know you're look forg a higher price. but let's say oil prices fell for whatever reason. that when they come back here in november or have an

extraordinary meeting that they be excited enough to get something done? >> for -- to be fair about it, for oil prices athis the point to fall back, something horrible would have to happen to demand. that means it's not a repeat of a lehman but something that would derail economic activity wlchlt that did happen the last time which was in 2008, they met three time in ten weeks and cut their production $4.2 million a day. they address it very rapidly. >> and you're sticking by your $85 target. but when is that by? >> about it end of the year. >> $8 aa bare snell. >> that's right. this son tape. can you keep repeating it. >> it's on the internet. this is forever. corner stone analytics, safe travels back home. thank you very much. >> thank you. >> he also lives in new jersey. when to come all wait to austria to meet each other and talk to each other. so very bullish view. he's on the record. back to you. >> all right. thank you. meantime, let's take a check on

where oil is trading now. we're well off the levels right now. wti has been a roller coaster ride today with the opec meeting going on. wti is up by .5% and brent crude is higher by .8%. here's what's on the menu forrest of the hour. home flipping was huge before the housing crash. well, it looks like it is making a huge come back much we have the startling new numbers. plus, calls on five big retail stocks. we have the analyst who made the call. and something just happened in the auto industry that has never happened before. it's going to have major implications for the automakers. auto dealers and you the consumer. all that and much more ahead on "power lunch." (speaking japanese) oh watson, your japanese is very good. thank you. (speaking japanese) exactly. i can understand nuance, context and idiom in seven languages

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home builders are not the only ones doing well in this housing market. diana olick is live from bethesda, maryland, with more on this story. diana? >> rising home prices are bringing flippers back in a big way. even in pricey suburbs like this one on pricey homes like that one much it's not just foreclosures anymore. the share of home sales that were flipped jumped 20% in the first quarter of this year from the previous wart torte highest level in three years. and the returns are rising as well. the average gross profit for flippers was more than $58,000. the highest in over a decade. so what is different today?

well, compared to during the housing boom, it's the flippers are mostly using cash. that means more risk, more skin in the game so they say. but they're benefiting from a very tight market of hoemdz for sale which means if they can find a gem, they can make a mint. the investor here in bethesda, maryland had, to shell out $680,000 for a tiny two droom. she is doubling the size and updating everything adding half a million dollars to it. because of that big investment, she expects a 15% to 20% return. she says it's just as dicey as those dramatic flip shows portrayed on tv and even worse. this is her fourth and every time she says it is like birthing a baby. >> it's absolutely not as easy as it looks. it is long hours and, you know, people need to get in and there is a snowstorm and if you don't have a stomach for risk, it's -- it can be very, very unhappy experience. but in the end, you get the baby. >> now the builder here says

that you can actually get better returns in a priceyer neighborhood like this one than if you go to a cheaper neighborhood and buy a cheaper house. because you put money night but you might not get that money back if the neighborhood can't support it. again, though, all this cash coming into neighborhoods like this one really puts pressure on prices higher. a lot of people are talking about that online. go to the realitycheck.cnbc.com. >> thank you. a number of big calls made in the home improvement space. joining us is the analysis who initiated coverage on a slew of companies at btig. allen sh great to have you with us. i want to first get to lowe's and home depot. diana mentioned the return of flipping. that indicates a robust housing market. do you expect the two retailers to do well in that environment? when i take a look at home depot's chart, the stock has not done too much especially after earns. price action hasn't been good. lowe's held up better. forced to choose, which one would it be? >> actually, we're bullish on

both companies. they put up a better same-store sales than home depot. that that was the first time in a few years. investors react podly to. that i don't think you have to choose one versus the other. so even though home depot is off all time highs, you still like it up here? >> we do. it's a tremendous company. they have a very disciplined capital allocation program. they're still comping among the best in all of retail. the fact that they're a $90 billion revenue company, it really is admirable that both companies in the 6% to 7% range. >> so that's good. let's get to the bad. you point out that the e-commerce business is very strong. they have a big global expansion plan. what specifically are they doing wrong? what do you tell them to reel that back in order for you to take a better look at the stock? >> to be fair from an e-commerce

perspective, william sonoma, they're derived on e-commerce. where do you go from here? we think in the next three years sh the number can grow to 55%. but what is a little disappointing is the fact that despite the immediate orric rise, this company's marge vinz really gone nowhere for the better part of half a dozen years. they are growing internationally in europe, philippines, middle east. we would like to see the company focus more so on cital allocation and maybe return more to shareholders. >> i want to ask you about bed bath & beyond. it's a neutral rating. as a conser, i always wait before heading into bed bath & beyond until i get a 20% off coupon. is that their problem, too much promotional activity? >> i think certainly so. most people now are schooled to wait for that coupon and it's certainly affecting the company's merchandise margins which has been a drag on the earnings. they were very late to adopt the e-commerce. that is hurting them today.

amazon clearly is taking a lot of share from this company. >> all right. allen, pleasure to have you with us. >> thank you. what do you think about that story about the house flippers? it takes a special person to renovate houses over and over again. >> right. i'm trying to wrap my head around the fact that you would do it willingly. open the vein and let the money flow out. i mean it is a very expensive proposition financially and motionally to renovate. and to do it now in this market, that's -- >> we all watch the shows "flip it or sell it." it's not so easy. i'm a guy -- i never made money in a house sale ever anywhere. divorce got in the way. so it wasn't all that the real estate market's problem. but i just can't do it. >> it shows you how short people's memories were. wasn't it a little while ago that people got in a whole heap of trouble over this? >> you never know when the market is going to turn on you. it's tough. i mean some people do it though.

>> and make money. >> all right. the tragic death of the gorilla at the cincinnati zoo. added to the mix the debate over the treatment of killer whales at sea world. are animals for entertainment soon going to be a thing of the past? what is the business model for companies that rely on it? we're going to discuss that next.

the cdc says flour produced at a general millions plant is the source of a e- he could lie outbreak. the cereal maker is continuing to investigate but they found no e. coli in the manufacturing facility. the warehouse reporter is reporting flat sales in may. anlives were expectsing an increase. warren buffest boosting the stake in phillips 66. he bought nearly 538,000 additional shares of the energy producer. according to an sec filing, he held 76 million shares prior to this latest purchase. >> back now with suzy welch on "power lunch" today. let's turn our attention now if we might to that story about the little boy, the video that is

grabbing headlines all week. 450 pound gorilla grag dragged three 3-year-old. he went into the enclosure and then fearing for the toddler's life, zoo officials shot and killed the male silver back. since then, there have been many questions about how they slipped the barriers, whether or not the zoo did you have d. enough to safeguard visitors. whether or not the parents were responsible in some way for not monitoring their child better. you're on the board suzy of the humane society. it is your view and i think in light of what we've seen at ringling brothers, at sea world and other places and increasingly prevalent that using animals for entertainment is going to wither and maybe go away. >> i mean -- >> certainly going to chafrpgt business model. >> there are two things going on. there is a social consciousness being raised about animals in captivity and animals being used in entertainment.

that is related to the rise of technology. i mean the internet, right? there is this pervasive -- everyone on facebook or twitter has seen videos of animal cruelty. and this whole incident would not have gotten the energy behind fit there wasn't somebody filming the whole thing and hadn't gone out on every single platform. so this rising consciousness combined with the availability of what it's really like, the lives of these animals is going to change. i mean look at what happened with sea world and the massive change there's and ringling brothers shutting down the use of elephants. >> does it make a difference? those are for profits and a zoo is really educational, more for educational purposes? >> i think the outcome is the same. people are going to say -- people will have a heighten add wareness that the animal either shouldn't be in captivity or treated differently in captivity. i think there is this tipping point moment that has been a long time and coming, i mean decades in coming. >> yeah. for sure. >> folks, to be continued for

sure. crude staging a rebound. the oil market ready to close in about four minutes. we'll have the final trades. plus, the battle inside opec. no agreement today. what does it say about the cartel's grip? and what i means for the global oil supply? that and more when "power lunch" resumes after. this thank you. ordering chinese food is a very predictable experience. i order b14. i get b14. no surprises. buying business internet, on the other hand, can be a roller coaster white knuckle thrill ride. you're promised one speed.

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. a chicago judge ordered at pointment of a spshl prosecutor in the case of a chicago police officer who shot a black teenager 16 times. former officer jason van dyke is charged with first-degree murder in the 2014 killing of the boy. donald trump says he will reopen trump university real estate school at the close of litigation. he tweeted that there is so much interest in the school right now. he is fighting a lawsuit that accuses the school of misleading thousands of people who paid up to $35,000 for seminars. spacex ceo says if thing goes according to plan, there will be people on mars just nine years from now. he made the remark at the code conference in southern california. >> we're going to send a mission

to mars with every opportunity from 2018 on wards. approximately every 26 months. so, you know, we're establishing cargo flights to mars that people can count on for cargo. should be able to launch people probably in 2024 with arrival in 2025. >> and a new arrival to tell buchlt a baby panda was born in belgium in a zoo there just three months after chinese experts artificial lyn semiconductor naturing the mother. the zoo which is 30 miles south of brussels distributed that footage of the mother holding the cub in the mouth. don't worry, i asked the same question, doesn't that hurt? apparently not. that is the cnbc news update. it looks like it hurts. but they say that's the way that they take care of them. >> i can't look. >> i know, right? it's kind of like -- i thought it was going to be cute panda footage. it's kind of like -- >> rat like. >> yeah, the baby is okay

though. >> that's a little baby for a big bear. >> yeah. >> the story that goes on and on. >> yeah. >> all right. the oil market is closing for the day. crude oil is higher right around $49 a barrel. this is in the wake of the nonagreement from the opec cartel. higher by seven cents. brent is in positive territory as well. it's turning positive. let's bring in john kilduf. good to you have here. >> tell low. >> no agreement from opec at this point. so what does that mean when it comes to oil prices? markets are reacting today. i assume that is because what was happening today was priced down. >> we were oun done ott announcement there was no production ceiling. we showed the one true thing for this market that the one country pulling its weight and carrying the load in this oversupply market is the u.s. production is now down 850,000 barrels from last year. that's a function of the falling rig count and the cut backs by the shale producers here. so these guys are getting -- the saudi plan is working. and i do believe this was all

theater, all this talk about -- i think they just didn't want to be airing their dirty laundry to the globe, to the world sh to the public thecht came out and i think they learned the great lesson of talking up this market, at least putting a veneer over this whole situation. which i think remains very disarated. >> we began the two hours with fidel gates saying opec is over. >> yeah. i always wonder about that. i don't think they're over. we're all hooked on what they're saying. if the iranians and saudis could ever get back together and , they'll be back in the driver's seat. i think the saudis are very much the predominant force. let's see what happens. >> these are historic. >> let's see what happens when they get back to the presanction levels. >> everybody doubt they had could do. >> but to push along, it costs money to belong to opec. indonesia dropped out once at one point. they didn't want to spend the money. i mean, vienna is nice at this

time of the year. but other than that -- >> not much. >> i don't understand the incentive to keep maintaining this facade of the cartel when there is no cartel. >> i think because, look, it's an opportunity for them to achieve objectives at times. you know, usually -- i like to say with friends like them, we don't need enemies. i think at times we've seen them coordinate to a degree. right now, i still see saudis and iranians at each other's throats. there is no way there is any happy talk in the room. like a good familiar lishgs they broke up. i'm going to go outside and put a happy face on this right? they all said yes to. that. >> you would be worried about shale oil coming back at $50? the saudi oil minister said he's not worried. >> i think it's a little early for. that i think if it lasts for a period longer or if it goes even a little bit higher, yes. so i think these weekly numbers

that we're seeing from the rig kou count that you cover closely and the production number, that's the thing to watch. slightest uptick, the slightest thought they're getting back in, this unravels. >> all right, let's get sima mody. >> the dow of 19 points, hk is the best performing sector today. the sector is on track for the seventh straight day of gains which would be the lockest streak since february of 2015. among the names leading the sector higher today, humana and med tronic is up. the health care sector is flat for the year. down nearly 3% over the past 12 months. guys, back to you. >> all right. thank you very much. let's turn to biotech. of course, part of the health care sector. surging more than 1% today. 5% in the last movement will the biotech breakout help give the broader market a boost? they specialize in the options market. rich ross, looking at the charts. of course, we're looking ahead to the meeting which gets under

way tomorrow which could be a mover for some of the biotech stocks. i'm going to start off with you, rich. what do you see in the charts? >> i think you care about health care and you're a buyer of biotech here. you're on fire and up 9%. let's bring up the short term chart. you can see, you still have jeans to split here. you're in a down trend. but you've been building a base of support for virtually the entire year here which i think gives us a nice foundation to get through that down trend and take out that 200 day around $300. but what i really like about biotech is the long term chart. when we zoom out and we look at that weekly, you can see a 40% decline off the top. we test and hold 2900 week moving average with a beautiful double bottom there. that 200 week is held for the last six years. comes in around $250. that double bottom is going to give us a springboard to higher prices. once again, you're a buyer of biotech here. >> jeans to be spliced.

i didn't miss that. good one. what is that indicating about the direction of biotech? >> what's interesting is how it's not pricing in a the love the events around. this options are reasonably priced in the options market. but it we go back to last summer, this is an index trading at $400. i agree with rich, it could break out to the upside. all you sneed a few more tweets from hillary clin clen and it could go down to $250 or $150 if the market just breaks down. so the way to play it in the options market is fit does breakthrough that level, that rich mentioned, it's really going to take off. but to limit your losses, you know, you have to do a post election trade. so buy option that's expire in december. you risk 2%, $6 to buy the $325 call. and you're limited to only losing that 2%. fit breaks through, it's going to run. fit rolls over, you're only going to lose 2%. there is a lot going on here. it's a very binary type market due to a lot of political

events. >> so use low volatility to buy options. thank you. rich ross and dennis abbott. for more "trading nation," head to our website. something major happened in the auto industry. that has never happened before. what this means for automakers, dealers and especially you the consumer. you need to hear this.

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my name is roger zapata and i'm a usaa member for life. usaa. we know what it means to serve. get an insurance quote and see why 92% of our members plan to stay for life. something big happened in the auto industry. it will have major implications for the auto dealers and car buyers. phil lebeau is here with that story. phil? >> michelle this is all about auto loans and how much people are paying for those auto loans every single month. look at this dat yachlt q-1 data that just came out this morning shows three records. the average auto loan, amount borrowed for the first time ever, it topped $30,000 the

average monthly payment for the first time ever topped $500. that's important because that's the threshold where a lot of people say i want my monthly payment under $500. and, yes, it's now over that. and finally, the average term for an auto loan is at an all time high. it stretched to 68 months. a couple things are driving. this first of all, you got vehicle prices rising. the average transaction price, what is paid at the dealership 3shgs $3,000 last month. on top of that, you got low interest rates which are contributing to. this and that's why people now stretching out their loans. the most popular loan term, 73 to 84 months. is this a problem? jamie die monld talking at a conference in new york today said auto is clearly a little stretched in my opinion. someone is going to get hurt. we don't do much of that. i was not at that conference. my sense is that jamie diamond is talking about subprime auto loans and asset-backed securities which are based on those. take a look at the annual pace of sales.

17.5 million last year. all time high in the united states right now we're just a little below that for the first five months of the year and we're heading into what is the busiest time for the auto dealers, the summer months. let's see how sales go this month. >> eye popping data, phil. let's get a look at the loan growth in general. citizens financial, regional bank with 1200 u.s. branches. the ceo joins us now on a "power lunch" exclusive. good to have you here. >> thanks. pleasure to be here. >> did you consider the numbers eye popping or did you know about that because you do auto loans? what do you make of that? >> we do auto loans and focus on the super prime and prime space. so some of those more challenging conditions in the subprime space where we're not a player. and, in fact, even the terms and conditions that we have in the safer part of the market aren't as attractive. so we've been pivoting to some other areas like student loan

refinancing and equity line of credit. >> it's just not profitable to do the auto loans. >> all right. okay. can you tell me something? if i deposit money in your bank, what you are going to pay me? if i get a loan or mortgage, what you are going to charge me? and what i'm trying to get at is this question of the flattening yield curve. certainly we would benefit from higher rates. we have the variable rate loans repriced higher. and for a while, dwoenlt reprice our customer deposits. eventually that catches up as rates move higher. but first few moves largely the customers aren't getting a significant benefit. so, therefore, we're looking forward to the fed moving hopefully in june or july they move. that would benefit banks net interest margin. >> bruce, what is the sensitivity to rate hikes? for every 25 basis points, for instance, how can you

extrapolate that on to your business model? what are you factoring in right now for the end of the year in term of number of hikes? >> yeah. so we gave some guidance at the beginning of the year that if we had a hike in the middle of the year, that was worth about $35 million to us. and a hike later in the year was worth about $5 million. we still think that is likely to happen. some of that benefit has been dampened a little bit by the flat ening of the curve. we didn't anticipate that as we came into the year. >> what are you seeing in the mortgage market? what's going on? >> the mortgage market is pretty healthy. so when rates first came down, we saw a little bit of a re-fi boom. but we've seen continued stability and growth in that market. the purchase market seems pretty healthy. >> you are the exclusive -- you have an exclusive agreement with apple to help people who want to buy an iphone. they can buy it on installment. you're the exclusive provider of that credit. how is that going? what can you tell us about that

program? is it a large part of the business? profitable? why you would do it? >> you know, we've had a relationship previously with apple in terms of financing some of the things they sold through university book stores. and then when they moved to the iphone upgrade program, they gave us the first crack at it. apple is a great company to be a partner with. they have a very demanding level of customer experience. >> what kind of loan do you make more money on snt iphone or a mortgage or on an auto sale? an auto loan? >> since it's unsecured credit, it looks more like a credit card receivable. so the yield to us on that loan is better than on a traditional mortgage which is a secured by the value of the house. >> so unsecured so it is riskier. >> yeah. >> all right. can you give us any sense of iphone sales?

>> no. i think you should inquiry of apple on that. >> good answer. just a quick question, bruce, on the energy exposure. it is small for a bank of your size. 2.7 billion total according to the data i have. 1.8 billion funded, 85% of the total is noninvestment grade w oil back up to $50, do you feel better about that portion of the portfolio? >> frankly, i've always felt good about the portfolio notwithstanding some of the migration into those watch category that's we had to do earlier in the year. all banks had to do. it's a small part of our portfolio. it is well diversified across a bunch of different sectors. we have a lot of reserves. >> the worst is over though? >> yeah, i think it certainly helps to see that prices are higher. so the more asset price sensitive segments of the portfolio are going to do better

with higher oil prices for sure. >> i can just ask you one quick question. i'm curious, what you are paying on deposits at this point? >> well, our average cost across all our deposits consume eastern commercial today is 24 basis points. >> wow. >> i'm going to switch to your bank. our peer group average is 18 basis points. i'm actually trying to lower that. >> all right. wow. isn't that amazing? that's crazy. bruce, thanks so much. great having you on. >> thank you. >> ceo of citizens financial group. thank you. all right. >> those numbers are not going to go up as fast as the loan payment. >> no. >> guys? >> there you are. you just appeared. >> i got a big mover. joy global up more than 18% on the day. the mining equipment maker reported a surprise quarterly adjusted profit helped by an uptick in service sales and aggressive cost cuts. hinting actually at a slow

recovery in demand. shares though keep in mind are down 15% over past 1 year. again, a big pop here on earnings. back to you. all right. thank you very much. one of the hottest silicon valley startups around, how things have changed? but as the ceo actually getting a free pass from investors? suzy welch has a lot to say about that. that's next. in a world held back by compromise, businesses need the agility to do one thing & another. only at&t has the network, people, and partners to help companies be... local & global. open & secure. because no one knows & like at&t.

back now with suzie welch. co-founder. i saw her network stricken yesterday by "forbes" down from $4.5 billion to zero based on the testing problems that that company has had. as that company's private value rose and she raised capital from venture capital and others, were they looking at her closely enough or were they giving her a little bit of a favor because she was female? >> well, there were two things going on. i think that people who were close to her were looking at herring and i definitely had conversations along the way with people in that industry who said something feels off, something feels off, but something stopped

them from saying that out loud. i don't know what that was. was it gender? might have been. she didn't get that kind of scrutiny. and now on the way down -- >> she had glam and she had a glam board. >> well, the board was a silly board with lots of big names, boards not in business. >> clearly they were not. >> they've got to be mortified, right? larry summers on the board of this? >> i don't know if mortified is a great word. they're scared, all sorts of things they should be answering right now. >> if we go back to the gender, she's on the cover of "style," all the media coverage. a guy wouldn't have gotten that. let's not kid anybody. she's blond, female, worth billions, and silicon valley wants peopleorth millions. >> and the black turretingneck.

was she the next steve jobs. >> was she or wasn't she. if she was sitting here, she'd say, they did it to me. but i definitely think as her persona was growing and growing, it appears now there was nothing underneath it and people clearly were reluctant to push and push and push because they were afraid of saying it's because she's a woman. you're asking these hard questions because she's a woman. now that she's on her way down, there seems to be a little bit of glee going on. >> can the board be sued? can all these glamorous people on the board get sued? >> i'm not sure they can because there are all kinds of different rules. if they can be, they're probably lawyering up right now because there's a lot of liability there. >> we've seen a lot with silicon valley. people have been tough, we're going to revolutionalize

everything and, poof, it's up in smoke. >> when jack and i were on tour, you're in kansas and people are asking you about business and management and leadership and core questions like how do i motivate my employees and i've got -- and then you go to silicon valley and you're sitting in a room full of eager faces. what do you think is the valuation of uber. they're in such a different world out there. they're not thinking about what people in business generally are thinking about. it's a fantasy world in way. >> in a publ. >> in bubble. >> in a bubble. not a financial bubble. suzie, thank you. we're going to be right back. but in the meantime the race for driverless cars shifted into high gear. one of the biggest automaker's plans next. can a toothpaste do everything well?

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welcome back to "power lunch." tesla, audi, g.m., now add honda on the list of driverless cars. josh lipton in san francisco with this story. hey, josh. >> well, melissa, the story may be here in silicon valley where they're now racing to develop the first driverless cars. tesla owner saying what about honor dachlt it's become a

testing ground for honda's self-driving cars. >> i think every company right now is looking into these technologies, even our nontraditional competitors. you look at what uber is doing and google is doing. i can't speak to what their strategies are, but what we're after is kind of moving safety up to the next level. >> honda gave us a sneak peek into two of their newest prototypes. they use cameras, radar, gps sensors that allow them to drive themselves. their goal, roll out these autonomous vehicles to the mass markets by 2020. and bhiel some of the bigger players like gm and toyota have been more vocal, honda has been a bit more discreet, adding semiautonomous features to their vehicles to lower the price point. their hope is by gaining acceptance now, fully autonomous cars won't seem so far-fetched down the road. however, this could be honda's

way of playing a bit of catch-up. last year mercedes was doing testing of its own at this very same location. back to you. >> josh, thank you very much. michelle wants one of these cars. i am a skeptic, but i look at all the people pouring millions of dollars into it. this is coming. >> the big question is human nature. will people want -- will there be people who want the pleasure of driving. remember, driving can be fun. kids wanted to learn how to drive and they wanted the experience. do you remember the famous mckenzie study that came out in the late 1980s and it said people would never walk down the street on a phone. nobody would speak on a phone publicly. now the game we play with our family is how many are not speaking on a phone outside. will there be a whole generation

who will not care about the experience. >> yes, those who want to get into fewer accidents. the safety aspect is huge. >> summer sunday, driving on down the highway it's great having you. >> thanks for watching "power lunch." >> "closing bell" starts right now. ♪ we're not going to take it no, we ain't going to take it we're not going to take it anymore ♪ >> welcome to the "closing bell," kelly evans. >> with the air guitar version, i'm bill griffeth. coming up, we're going to talk to one of the men behind this song, dee snider. he's going to talk about the rock and roll exhibit. he's been spearheading this thing. we'll talk about that conversion, even a collision between rock and roll and politi t