>> well, off the bottom that was really low bottom after brexit. they really sold off. but oil stabilizing below 50 is a really good plus for them. >> they back? >> i think they're back. i think if they keep capacity, which delta said they're cutting and they raise prices, that's where you want to be. >> good stuff. thanks again. see you all, "power lunch" starts now. welcome to "power lunch." i am brian sullivan. he is tyler mathisen. we have a jam packed two hours of tv coming your way. we kick it all off with michelle who is live at the republican national convention in cleveland, ohio. michelle. >> hey there, brian. hi, tyler. day two of the republican national convention ready to kick off the theme today is the economy, make america work again. tonight we're going to hear from paul ryan, he's the big headliner. and speaking, we're expecting right now mike pence. this is the first time we're going to hear him speaking by himself ever since the

announcement on saturday that he would be the v.p. on donald trump's ticket. huge chaos yesterday on the floor in the late afternoon when those who were trying to stop donald trump from being the gop nominee tried to get a vote on the floor. it was chaos. this was going to be the moment, i want you to look at the woman in the blue to the right there in the corner. she's coming up right now. she is the colorado delegate who serves on the republican convention rules committee, co-founder of the never trump delegates, the unbound soup r pac, the group failed in its change the party rules to unbind delegates who could vote their conscience and then you thought hopefully maybe trump wouldn't get on there, did we get that right? >> that was the goal of free the delegates. the unbound movement was making sure that the delegates remained unbound forever. in perpetuity we want delegates to do their job and that is vote confidence. it was more than that in the coalition of people that came together because this was a

reaction to an extraordinarily tough overreach of the rnc. what they basically did is they encapsulated all the power from the grassroots movement and took it to themselves. and so now the voices of the delegates are irrelevant, the votes are irrelevant. so you had a coalition pushing back against that overreach because donald trump proved he's nothing but a consummate insider. >> let me ask you this, if you'd actually gotten the floor vote, if all the floor delegates could really vote, do you still think donald trump would have lost? >> undeniably we have the votes. they bussed in and shipped in all the orange and green hats, trump wips and rnc working together, huge no-no combining those resources, what they ended up doing was voting. they were the voices you heard. they were noncredential. this has been robbed from the grassroots. this is why they're going to have a pushback they think we're now united and go out and work for this ticket. >> that's my question. what do you do now? you've lost, right? >> we haven't lost because -- >> there's more to come?

>> get to vote their conscience tonight because conscience cannot be given by the rnc, it cannot be taken from the rnc. even when i was on the rnc rules i was only codifying that exists. >> is this a push to get trudon trump on the -- >> he coerced votes from delegates. he can't do this. >> general election, fast forward to november. you've got hillary clinton, donald trump and the libertarian candidate. what are you going to do? >> well, i'm actually going to cast a protest vote and write in ronald reagan because i want to say i voted for him, but most people involved in the unbind movement were making sure he was not our nominee initially. so they have actually not determined before now that they were not going to vote for donald trump. but now when they realized they were completely shafted and told they were irrelevant, that doesn't inspire the conviction to go out and work for a

candidate and tell their neighbor that they're the best person for the party. >> i hear all of that, but if a large percentage of republican voters choose to abstain, those end up being votes for hillary clinton, don't they? s >> well, i'm not voting for hillary clinton. >> but it helps for donald trump. >> in the long run because of the winner take all states, the handful of votes, it's not going to matter. but there has been a massive exodus of republicans, they called it the exodus day. and they're denying their republican registration because of how they've been treated. >> who would you rather see president, hillary clinton or donald trump? >> i'm going to vote my conscience and the voters need to vote their conscience. he's promised he can win without the conservatives, so go win without the conservatives. prove it to us. he said it's not the conservative party, it's the republican party, going to be the workers party. >> are we on a verge of a permanent leave in the republican party as a result of this? >> unfortunately i think you're going to see a multiparty system because we've been used and abused by the system. >> the democrats could say the

same thing. with the bernie supporters, almost a divorce. >> they should be watching this going into their convention because this is the grassroots base, what they've done is said you're irrelevant. and they have taken all the power under themselves. and the delegates are just simply not inspired to go out and tell their neighbors please vote for the candidate because they've shown that they've been willing to mitigate us and just relegate us to the back room somewhere. here's the interesting thing, donald trump ran as an outsider. and he convinced everybody i'm not one of the insiders. that was his whole platform. >> wouldn't be the first time we've seen -- no hypocrisy amongst politicians, right? thank you so much. kendall unru with the never trump movement, the unbound delegates movement. see where things go from here, brian, back to you. >> michelle, see you in a bit. staying with politics because it appears some in the gop are trying to lift a page from the democrats playbook and calling for the restoration of glass

steeg l, it's a surprising move. is it simply a political stunt to grab bernie sanders supporters. managing director of acg a analyti analytics, author of "colossal failure of common sense" a book about the financial crisis and a guy formerly at lehman brothers. but, larry, you're the quintessential wall streeter, and i say that with love. and yet you believe that glass deeg el should be restored and the big banks should be broken up. how come? >> absolutely. brian, when i wrote my book i sat down with the highest executives, the revolutionaries within lehman that were trying to stop the madness and person after person told me this one thing after being dismantled by the clinton administration and the republican congress, the banks in america had all these deposits they were massive

advantage to banks like lehman, so the lehmans of the world, ber sterns has to lever up 8,000 to 44 times in 2008. so the smaller banks because of the big banks with the large deposits had to massively lever up. i really think it's a slam dunk. >> that's just honestly -- really that's just silly. i understand there are hard feelings by people over at lehman brothers who thought lehman should have been saved, but had nothing to do with the financial crisis. lehman was levered up because of the deterioration of its assets and doubling down and trying to save itself in 2008 from some pretty bad practices. but that had nothing to do with glas it was monolined

institutions likie indy mack an investment banks like lehman brothers and behr sterns would not have been effected by it either. it was universal banks products able to sustain themselves. >> goldman was levered up, larry. so were a lot of the big multiline banks, right? >> of course. but, tony, you're missing the point. sure leverage increased in the 2008 era, but the moment glass-steagall was dismantled. leverage increase because small banks had to compete with large banks. let's get something straight, this $8 trillion of deposits you can't have those deposits. these are hard working people, you put those deposits in banks with say $200 trillion of derivatives, it's a colossal

failure of common sense. it makes no sense. bring back glass-steagall. >> that's not the situation today though at all. look at capital, liquidity, sources of short-term funding. the things that contributed to instability were not just that there was some increase in leverage, but if that's what you believe that leverage was a problem, leverage has been taken care of. you can't have levels of leverage that you had up to those periods. we've already increased, we doubled in these institutions, more than doubled the amount of capital, increased the quality of capital, increased liquidity, took away their business practices. and even, you know -- elizabeth warren doesn't think that glass-steagall contributed to the financial crisis. the argument it did is just silly. it has nothing to do with the state of banking today. we already have a lot of reforms in place that have taken away the very things you've listed as concerns. >> guys, great discussion.

but tony, let's switch back to politics. >> bad politics too. >> let's frame it with the rnc. >> okay. >> even though you obviously don't agree with it, do you think it's a smart political strategy? or just a cheap suit? >> no, i think it's a desperate lurch on the part of the -- the trump campaign has always had this belief that they could absorb bernie sanders voters. and the problem with that is that bernie sanders voters don't just have a problem with wall street, they hate donald trump on a whole range of issues because of what he said about women and immigrants and his tax policy. lots of other reasons. the idea they're going to overlook all these other reasons why they hate donald trump in order to support him for this one reason, which they know enough about donald trump not to trust him, they're not going to be there for him. for republicans the problem is that, you know, republicans are broadly free market conservative and they see this kind of lurch as another reason to be skeptical of donald trump. >> larry, it's michelle here.

i don't understand why you want to bring back glass-steagall when the major institutions that failed weren't even really subject to it. lehman wasn't subject to glass-steagall. it wasn't a deposit taking institution. aig got in trouble for stuff not related to glass-steagall. all the constitutioinstitutionsd had nothing to do with that. we talk about commercial banks we talk about basic bank that takes deposits. they got in trouble for writing bad mortgages. even if glass-steagall comes back they're going to write mortgages, and i bet in the future they're going to write some bad ones. >> it's an even playing field. you cannot take a commercial bank with $2 trillion in deposits and have it compete with a small investment bank. tony's point on leverage, leverage is irrelevant. the leverage now is government bonds which aren't counted as risk weighted asset on bank

balance sheets. so you have these banks around the world massively long govlt bonds, which have gone from 100 to 190 in the case of german bonds. you're talking about risks on bank balance sheets not counted as risks. >> we could have a separate conversation about where european banks are and where they're getting their capital liquidity. it's very different for the american banks which is what we're talking about with glass-steagall. >> 30-year treasury, i know you're not a risk taker, look at the price of the 30-year treasury. you're talking about these bonds trading like equities on bank balance sheets not counted the right way. for politics sake i think mr. trump made a brilliant move. >> but, larry, if they brought back glass-steagall, would they not have bonds at that price? i don't understand. >> the point is is that the big banks, the investment banks are competing with massive amounts of deposits on the big bank balance sheets. so in other words in order to

compete in 200 human resource four, five, six and seven, the banks had to lever up. >> again, guys -- hold on, no, tony, the point of the segment was supposed to be about the political part of it. i appreciate the sort of deep insight into why it happened and sort of glass-steagall, but, tony, i want to bring it back to what it is which is will it win the gop any votes for saying it? >> it won't. because look you're not going to out elizabeth warren elizabeth warren. what elizabeth warren is doing every single day is she's out on twitter and giving speeches and talking to reporters and reminding all of those bernie sanders voters why they should keep hating donald trump. the idea is just pure fantasy trump is going to be able to capture those voters. they're not going to be there. it's a silly distraction from what has become a silly distraction of a campaign. >> if i said to you, tony, next time i see you i'll have a drink and give you a hug. you don't mind a hug, but it's

not going to decide whether or not we have cocktails. >> we're not getting married. >> guys, good discussion, wide ranging. thank you. let's get right now to bertha coombs for a market flash. bertha. >> brian, we've got the insurers today under pressure on reports that the doj may be poised to file suit against the companies that are trying to merge. at issue in aetna and humana is the private medicare plans for seniors. at issue in the anthem-cigna deal is their overlap when it comes to commercial employer plans. we are told that there could be a deal announced as early as this week. humana shares hitting new 17 month low on the news. is 2016 the year we finally hit peak apartment? we're talking about real estate and your money ahead.

you know what, guys? there's a lot of tree branches and dry brush over here. we should probably move the bonfire over there. [smokey whistling a tune] i'm guessing smokey liked that idea.

welcome back to "power lunch" everybody. i'm tyler mathisen. could one of the hottest areas of the housing market be peaking? let's get to diana olick in washington. >> home building continues to move forward but not nearly as fast as most would like. one analyst went so far as to say it's in a slump. take it by the numbers.

june total housing starts up 4.8% from may, down from 2% of june of last year. single family is the driver right now up 4.4% for the month, 13% from a year ago. multifamily apartments, that's where we're seeing the slowdown. starts are up for the month, but down nearly 24% from a year ago. and that has some saying we may be hitting the peak in multifamily construction for this cycle this year. now, permits which are an indicator of future construction, edged up from may but nearly 14% lower than a year ago. again, led by that big drop in multifamily. so why would anyone call this a slump? well, patrick newport of ihs global says single family housing starts fell 3.5% in q-2. as a result residential investment in the second quarter will likely be a drag on gdp growth for the first time in nine quarters. trul ya's ralph mclaughlin said monthly starts about 20% below historical averages and nowhere close to meeting that pent up

demand for housing. one thing i'm hearing more of is nesting is investing. that is that housing is getting so expensive now and it's so hard to find a good house that people are choosing to stay where they are and renovate. might be worth it, guys. >> all right, di, thank you very much. so with a slowdown in multifamily homes, have we reached what's being called peak apartment? let's bring in bob wettenhall at rbc capital markets. always good to see you, bob. >> thank you, tyler. >> do you agree with the thesis that we may if not seen a peak in multifamily building, at least we're beginning to turn and the wave may be turning over. >> we think we have peaked. and we think this is the beginning of the fall. so right now we're going to see a big shift. housing recovery stronger for longer, but beneath that there's a material shift between single family detached away from multifamily construction activity. it's great for home ownership. it's bad for rental vacancy

rates. >> let's take those two parts apart. if i am a renter or a would-be renter, are my rents going to come down over time? that's number one. and if i'm an investor in the companies that build or invest in multifamily, is the time passed? >> the time is passed number one. we see a distortion. rents are too high and affordability for new home ownership is very high as well. so this can't -- this imbalance has to normalize over time. so rents -- >> rent fever is going to break? >> rent fever is broken, man. and so is multifamily construction. and the beneficiary is renters becoming homeowners. >> so before we get to some of the home building companies, the single family built which i assume would be the ones that would prosper? >> that's right. >> let's talk about some of the multifamily builders that are cautious. >> i would be cautious on the

reits sector. we have a lot of supply on the horizon. it's not a great time to be there. >> so you see this as a time where renters become buyers. >> yes, sir. >> that means single family home builders are going to go farther. >> precisely. >> which ones? >> well, for starters we like the resale market. we see mid single price depreciation and tight inventories, 90% of the u.s. housing market, it's a great place to be. prices to diane's point are still going to move higher. and in the for sale market new homes where the public builders operate, prices are still too high. they're going to see pressure. what's big, what's hot right now, entry level and move out buyers, so companies that are well positioned to leverage themselves at this point in the recovery include stocks like d.r. horton. >> entry level. >> cal atlantic on the west coast. and we also like a distributor, bmc stock holdings. >> what does a distributor do in housing? >> they provide the wood and

other products used to build homes. so they -- >> it's a building supply play basically. >> that's right. and bmc has a better mouse trap. they have a ready frame trust product. and we think this is a fantastic product because it reduces waste, condenses cycle time and eliminates labor. so they're providing builders with the solution that drives profit. >> great advice. thanks very much. >> my pleasure. >> appreciate it bob wetenhall, thank you very much. very crisply done. microsoft shares down after its earnings, should you buy the stock? and netflix what a day tanking after latest results out yesterday afternoon. is this a buying opportunity in a stock now down 13% and off by a quarter so far this year. we'll be right back. you both have a

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hello everyone. i'm sue herera. here is your cnbc news update for this hour. secretary of state john kerry holding a joint news conference with british foreign secretary boris johnson in london. johnson refusing to apologize for his past remarks about world leaders. those remarks were deemed offensive. >> i'm afraid that there's such a rich thesaurus now of what things i've said, through what alchemy i don't know misconstrued that it would take me too long to engage in a full global ie ttinerare titinerary concerned. >> a crane collapse at the tappan zee bridge in the new york suburbs. the crane lying in both directions. at least one person taken away

by ambulance. advanced prostate cancer cases rise, the increase could be due to fewer minnesota bei e screened for the disease. memorial service for some of the 84 victims of the terrorist attack in nice taking place today. family and friends join representatives from mosques across the city in a series of special prayers. this as the bodies of the attack victims are being released back to their families. that is the cnbc news update at this hour. now back to michelle at the rnc in cleveland. michelle. >> thank you, sue. we are gearing up for day two of the republican national convention already marked by protests, claims of plagiarism. today's an important day because this is the day that house speaker paul ryan will preside over the official nomination process. it's going to start about 5:45 this evening. they're going to dpo state by state. and new york state is being saved for last so donald trump jr. can cast the vote that will make his father the official gop

name on the ticket for the presidency. if indeed it happens. we keep hearing these desperate people who are trying to prevent donald trump from being on the ticket. but there's about zero chance that that is going to happen. the mood is very quiet right now. later on it should be a lot more rauco raucous. eamon javers is live outside the convention hall and has more on what's going on in cleveland right outside these doors. >> yeah, michelle, it's a little more raucous out here outside the convention hall. we're just outside the q where you are, and i can tell you it's a bit of a carnival atmosphere here. people are selling t-shirts, a woman just down the road here offering up free hugs to anybody who comes by. protesters of every stripe, we saw protesters marching through who are saying america was never great. we have some pro trump folks out here. we have some people selling t-shirts saying hillary clinton for prison in 2016. that t-shirt seems to be moving pretty briskly among the republican crowd here.

i tell you, i talked to the conservative movement leader grover nordquist, he thinks it was a real missed opportunity. these big convention days don't come along very often for a candidate of the president of the united states. you want to make the most of it. he said there's an opportunity cost for them for having sort of flub that one and dealing with all the blowback today. ultimately though he said he thinks the media is making more of a story of that than really should be. so that's sort of the mood right here among republicans that you talk to here outside the q, michelle. inside later when it heats up we'll talk to more of the delegates and get a much bigger sense of what's going on in there. out here everybody's having fun, very peaceful, a lot of t-shirts being sold, michelle. >> leading up to this there was a lot of talk this could be another 1968 when it came to a convention. i'm looking at your live shot

with all those people, it looks like an outdoor mall. can we say at this point about all those fears about what happened thus far have not come to pass? >> thus far, right? i mean, look, this is a carnival atmosphere. everybody's walking along. there are open air restaurants, people stopping for lunch, buying t-shirts, pins, free water being handed out. it is a beautiful summer day here in cleveland, ohio. everything is peaceful. everything is calm. that said, the security package here is very, very tight. i can hear helicopters above us right now keeping the overhead area on surveillance. we know there are people watching all the rooftops, all the windows above us. the police presence here is pretty significant and intense as you saw going into the q. so there is a heightened sense of alert here giving everything that's going on in the country and everything that's going on in the world. but right now a very pleasant day here in cleveland. >> got it, looks great out there. eamon javers live in cleveland for us here at the rnc. coming up later actor stephen

baldwin. he was fired by donald trump. we'll see what he thinks about him being on the ticket, tyler. >> thank you very much, michelle. in just the past month we've seen a spade of deadly shootings across america, those killed police officers, civilians, many of those civilians and even police officers african-americans. has race relations improved or deteriorated under president obama? let's bring in marc morial, president and ceo of the national urban league and former mayor of new orleans. mayor, it's good as always to see you. and our sympathies as a lo louisianan. why do you think race relations in this country are as frayed as they are right now? and are they worse than they were eight years ago? >> i believe that it has so much to do with the very high profile

incidents between citizens and the police. citizens and law enforcement. if you go back to three years ago there was tremendoayvon mar then michael brown and eric garner and tamir rice. and through this very day there's been this just high profile, many of the incidents being caught on videotape or on camera. and to a great extent there's been no one really held accountab accountable. i think that's at the root of it. does the political environment in america, has it caused race relations to deteriorate? you know, that's debatable. certainly the political environment in america has not facilitated a reasonable conversation about the challenges we face as a nation. >> so as i hear you speak, mr. mayor, let me just because i'd like to sort of drill down a little bit. as i hear you speak, you seem to be defining the racial issue in

a rather narrow way, as a problem between law enforcement and the african-american community. and implicit in that is an idea that if you separated that out, race relations in america are better than they would be. am i hearing you right? or reading something into your comment? >> i wouldn't say that. i think that the police community relations have been a flash point. now, underneath it you've got this tremendous loss of wealth, continuing high unemployment, really as a result of the recession and the slow -- slower than really expected recovery. so i wouldn't think they would be absolutely better. but i think that's been the flash point. that's been the tension. that's been the high profile. and so it's just awful that

people have been injured. and it's awful that some people have felt that they've had to retaliate by taking the lives of police officers. >> do we have a problem -- >> and i condemn all of this absolute cycle of violence we see in this country. and we've got to turn the corner on violence because this violence, i think, is making our race relations worse in this nation. >> is the problem with policing, or is the problem with individual police? >> i think it's the system which doesn't hold those police officers who offend sensibilities, common sense and constitutional rights accountable. that element, if people were held accountable, there would be a faith that the system corrects those that get out of line. so that -- i've always said the handful of police officers. but you've got to also look at

what systems continue to produce this repeat, if you will, and other dynamic, ty, is the fact that people get an opportunity to make their own judgment because there's so much social media and videotape, if you will, videotape versions of these events. so people are not waiting for the official version. they're not waiting for a court decision. they see what happens and they say i don't think that what the police officer did was right. some may say i think he was justified. >> right. >> they're making their own mind up. >> so let me turn to i believe it's the gray case in baltimore. and you've mentioned a couple of times that you're concerned that police officers have not been held accountable. in that case the prosecutor brought charges against, i can't remember the exact number, five or six officers, and so far most of those cases have ended in

acquittals of those officers, in other words they were not held responsible for mr. gray's death. do you think those officers -- is that a case where the individuals were held responsible. >> i wouldn't second guess the decision of the court. the important thing is that the prosecutor felt charges should be brought. the matter was heard fully in court. and we've got to live with the decision of the judge. what i think is important, and i say this as a former mayor, is whether those officers will be subject to disciplinary proceedings. because some offenses by officers may not violate the constitution. but they violate departmental rules. and sometimes accountability is not whether an officer's going to be charged criminally, but whether they're going to be subject to a disciplinary section, are they going to be suspended, are they going to be fired, are they going to be reprimanded. i think we've got to look at

this with a great deal of depth. in that case there is very few people who believe that those officers followed the baltimore police rules for the transport of a suspect. so we've got to wait to see the entire, if you will, accountability question goes beyond just whether a criminal case is brought or whether there's a criminal conviction. but we've got to respect the judgment of the court in baltimore. >> final question. you know, people criticize president obama for everything. and i think they criticize him as an african-american for not bridginged racial divide more effectively. has he done enough? what could he have done differently, from where you sit, to maneuver us away from where we are where relations seem so

frayed. >> i think the president by his very temperament and by his very demeanor and by his very, i think, reasoned approach to governing, i think has set an example of dialogue and example of reason that i think we should all think about following. what was stunning to me with president obama was what he faced in his first term. the rise of the tea party, the birther movement was sought to delegitimize him. and i always thought that some of that was below the belt and that some of that had more to do with his race than with politics, the politics of the opposition. now, if you want me to answer what else the president can do, i'm going to reserve judgment on that until the president leaves office because we still have six months to go. we're in the middle of a crisis. and while political speculation

is interesting, what i want to see is the leaders of this nation, local and national, find ways to dialogue about addressing some of the systemic challenges that we face, whether it's economics or voting rights or police community relations. we have to do this. it's a time for this generation to step up across the board. the president has a role to play. he's the leader of the country. >> right. >> but others, others have to certainly be a part of this and meet him halfway. >> well, you are right in the center of it all. mayor morial, head of the national urban league, thank you as always for being with us. >> thank you, ty. let's get back -- am i going to do this? no, i'm going to toss it over to brian. >> i'm happy to accept your toss, tyler, thank you. let us get now back to the markets, right? get a quick check on what is happening and what we call bond land, aside from the cubbies being still somehow very good at this time of the year, rick santelli's live for us at the cme. you get my point, rick. >> yeah, yields you can't

believe, stock prices that defy fundamentals and the cubs in first. yeah, it is a crazy time to be alive. look at a two-day of tens. couple things should jump out at you. the settlement of 158, we've never seen it. that's been above the market all day. as a matter of fact we're on the lows now around 154. and you were right, brian, earlier. it's all about the dollar today. and every currency is down against the greenback. look at a two-day of the pound versus the dollar. two-day of the euro versus the dollar understanding it is the biggest percentage in the dollar index and look at the dollar/yen, and finally, yes, it's been march since we've had these prices on the dollar index and many traders are continuing to play the buy side. sully, back to you. >> rick, thank you. driverless cars are coming, eventually. and the brightest minds of the business are meeting this week to talk about how to get them ready for you. but what do they think is the single biggest roadblock to a future of self-driving cars

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at this very moment the top minds of the biggest companies in the race for self-driving cars are meeting in san francisco to talk about the future of autonomous vehicles. but with a federal investigation underway into tesla's autopilot system, is there a bumpy road still ahead for the automated car? phil lebeau is live in san francisco at the 2016 automated vehicles symposium. and, phil, i assume you took a taxi there. [ technical difficulties ] >> i actually walked here from the hotel, brian. the question of the day is whether or not we are going to see autonomous vehicles or autonomous drive vehicles restricted in the future. we had a chance to talk with the department of transportation secretary anthony fox about this. he said, look, autonomous vehicles are coming, ready or not, the key is to be ready for

them. along those lines he says that the guidelines for autonomous drive vehicles will be finished later this summer. we're expecting in july it's going to happen later this summer, but to the question of what technology should be restricted and not used by the public as it's being developed, think again. secretary fox says there's a lot of value in these systems being out there and being used by the public. >> there's an opportunity with the data that the systems develop to have shared knowledge between systems, just like we do with the faa where an individual vehicle experiences an avoidance situation that can teach others to do the same thing in similar situations. so i think there's an opportunity for accumulative knowledge with autonomous vehicles. >> secretary foxx would not comment about the u.s. investigation into tesla's autopilot system. that's likely to go for several more weeks before we see any type of resolution with regard to that investigation. meanwhile, tesla's ceo elon musk says he is working, his company is working with their suppliers,

whether it's mobile eye or bosch or others to improve the system. if you look at tesla, one other note, elon musk saying today he is going to be working on the master product plan. he may be releasing that in the next day or so. back to you. >> all right, phil, the ultimate driverless car, the foot. thank you. let's chat more about this. let's see if what kind of limits if any should be placed on autonomous driving technology. let's bring in head of duke university robotics and richard wallace, research director at the center for automotive research. missy joins us by phone. richard, you guys are both on the same page, you want this to happen. you believe it will happen. but missy, i'll start with you. we talked about the litigious side, technology side, to you what is the single biggest hurdle in the race right now to the fully autonomous world? >> well, to get to the fully

autonomous car world, we have to get through this scary period we're in, which is the partially autonomous car. once we get the fully autonomous car that can really drive by itself and no expectation that the human will intervene, life will be great. but we're not there yet. >> is this stage maybe more dangerous in some ways, missy, than the fully autonomous car? >> absolutely. this is the most dangerous period drivers could be experiencing on the way to full awe t autonomy because the expectation is the driver will intervene occasionally or maybe rarely, and that is the worst time to expect a human to intervene. >> the halfway intervention, if you will. sit tight. we've got some breaking news, richard, missy, sit tight here. we're going to come back to you. but we have to go to josh lipton who has some breaking news. josh. >> well, brian, we have an update here on that hyperloop one case we brought you just last week. hyperloop one now filing a

countersuit and seeking at least $250 million in damages. you recall last week, brian, brogan van brogan, co-founder of hyperloop one filed the lawsuit in that they had engaged in krone yichl, nepotism and gross mismanagement. hyperloop firing back in a statement saying this lawsuit that these four men staged a failed coup to take over hyperloop one and conspired to start their own competing company. so the allegations here an illegal and failed conspiracy to take over hyperloop one that when the power grab failed that van bro gan and others launched a plan b. this is a sham it says, media ploy filled with lies aimed at smearing hyperloop one. of course hyperloop one company that attracted a lot of hype, attention and money, it's raised some $100 million from

investors. but this fight obviously still heating up and we'll stick on it. >> most interesting part of that case, the guy's name is actually brogan van brogan, that's the most important part of that case. let's get back to our discussion. i apologize for the interruption there. would you agree this midway point is the most risky time for this industry or is it something else? >> no, i agree 100%. the average age of the car fleet right now is 11.5 years. so even if the companies developing this technology could make it fully automated starting with next year's model year, we've got a long transition time of mixed traffic. and for me personally that's the scariest evolutionary period. >> richard, do you think people really, really, really want autonomous driving cars? and will they really, really, really be willing to pay whatever the cost is? and i can imagine the cost at

least initially as is usually the case with technology is going to be pretty high before it comes down. >> yeah, so there's a lot of consumer evidence out there that people are willing to pay for this because they think it's going to help them save lives. we face close to 40,000 traffic fatalities a year in the u.s. we think computers can drive better than humans eventually, as we talked about earlier on this program. and you want to be an early adopter. and if it's another 1,000 or $2,000 on the price of your car, that's something a lot of consumers are going to be willing to do. >> is that the price you think it's going to come in at initially? >> we forecast a lot of different ways. >> that's the price of a navigation system. >> yeah. i think so. you have to think not traditional auto technology, but think about moors law, that seems to apply to these technologies. prices have fallen dramatically on the sensor sets that are out there, software obviously is critical here. replacing your eyes and your

ears, that's the easy part. replacing your brain, that's the hard part. >> that's always been hard for me. replacing my brain. richard, thank you -- >> i wonder if richard's ever driven in new jersey he would know replacing the brain may be the single most important thing to safe driving. >> the best thing. >> missy, thank you, richard, thank you. and we move on. no, there you are. where are we going? >> any camera you look good. >> shares of microsoft are, dot, dot, dot, down 1.4%. messing with me here. i was out yesterday. i was a little under the weather. had a cold. down 1.14%. 1.41%. the company reports some earnings after the bell. you've heard of that company. we're going to have a preview. microsoft. you're her your insurance company

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welcome back to "power lunch." i'm michelle caruso-cabrera reporting live in cleveland where the republican national

convention is underway all this week. we've got stephen baldwin coming up next here on "power lunch." fired by donald trump twice, but now he's set to support the man who is officially tonight, we expect, going to be named to be the head of the gop ticket for the election in november. tyler, that's coming up, plus a lot more. michelle, thank you very much. let's turn back now to the markets as stocks aim to do something they haven't done since titanic was shattering box office records. when was that '98? let's get to mike santoli. >> yeah, tyler, we came within a few points of closing at record high every day for five straight days in a week. that did last happen in 1998. i'm looking at elements of this market and parallels to 1998. i'll run through it quickly. we have a seven-year bull market into its eighth year starting to grow expensive and starting to get hit by global shocks. that was as of march of this

year also where we clocked in of '98. the u.s. market now and then viewed as a safe haven. you're hearing that a lot right now that the u.s. is really worth the premium because the rest of the world's capital is safer here. that's something we also heard back in '98 and '99. stock valuations starting to stretch upper end of the realm. official gap earnings at 25 times the last year's gap earnings, got there as well in early 1998. i think most relevant to the outlook the fed arguably right now is easier in terms of policy than the u.s. economic conditions warrant. in 1998 we had the big scare with the long-term capital scand scandal, russian debt default, global fears kep the fed on the sidelines more than it wanted to for the u.s. economy that was humming. i could argue we have a similar situation right now. the broad economic backdrop and public mood all very different now than versus then. >> thank you very much, mike. despite the market rally, morning star out with data that

shows investors are not feeling terribly optimistic about stocks. investors pulling an estimate d $21.7 billion from actively managed funds that buy u.s. stocks in june. that's the biggest monthly withdrawal since october of 2008. with us now finance professor jeremy siegel, he's still bullish, calls for dow 19,000, maybe even 20,000 by the end of this year. we will probe that with professor siegel. welcome as always. why, professor, do you think fund holders are so gun shy right now pulling money out of actively managed funds hand over fist and presumably pouring them into bonds? >> certainly actively managed funds have not been doing well. particularly this year. and if you want to know the truth, i actually think the bearishness that we see on the part of not only ordinary investors but professionals is a positive for the market.

certainly in 2000, in 1999 and 2000 we had a little rundown of that situation. people were unbelievably bullish. we reached 30 times earnings at the peak of that bull market. that's another 50% higher than we are today. now, i hope we never get there because we know what followed there. but i think things are still very, very different here. i think we got very reasonable valuations in a record low interest rate environment. and for me that is still positive for stocks. >> you know, the other thing that has been happening, professor, as i'm sure you know, is people have been pouring money into passive funds, index funds and etfs. >> yes. >> do you favor them? >> yes. >> do you think that's the way to go? what do you do with your money? >> i don't think actively managed funds are worth the fees. and i think that we sometimes talk about index funds or

intelligent beta funds or fundamentally weighted index funds where you might tilt towards those that have good dividends and earnings. those people who have followed me know that i'm a big fan of dividends. and in this world we have today with no interest on fixed income, either now or perspectively, i think people are going to continue to move toward stocks as their source of income. >> uh-huh. >> but, yeah, active management, wow. that has been poor performer for many, many years. >> yeah. you know, professor, i will see you comment and i will raise you a pretty incredible statistic, one you probably know but if not, here you go, 90% of all bonds in the world are yielding less than dividend yield of the s&p 500. really something we haven't seen since 1959. now, i understand your point. hey, that's good for stocks. you get the capital appreciation and the dividend.

but does it concern you at all about why yields are this low everywhere? >> well, you know, a major reason why they're low, and you're right, there isn't a lot of desire on the part of firms to invest, or isn't a lot of productive investments out there. there's a lot of risk aversion out there where people are saying, hey, at least i'm not losing money in a zero interest rate bond or a zero interest rate cd. and, yeah, i think that's holding back a lot of investment and holding back the economy. so, yeah, there is a downside to that, but when you look at what realities are, wow, to have 80%, 90% of stocks beat bonds in fixed income. wow, it has to go back at least until the early '50s. and i think -- no, i think that that is certainly something everyone has to think about when

they're saying where going to place my money in the future. >> down 19,000 isn't that far off less than 500 points. dow 20,000 is a little bit of a farther pass down field. why are you confident that we could get to those levels by year end? >> well, confidence, you know, in the short run the stock market six months anything can happen. certainly not going to bet my life on that. but what i see is a better second half. i see -- i mean, last year it was really tough. the worst earnings recession we had since the financial crisis. oil was hit. and that caused a lot of the problems particularly s&p earnings. that has come back. commodity prices have come back. and i think second half is going to make much better comparisons. and with the fed, hey, maybe they're going to raise in december. that's what people are saying. maybe 25 basis points. that's not going to threaten people. say, you know what, i'm finally going to think i'm going to

nibble a bit in the market and try to buy those dividend paying stocks. that's why i think 19,000 to 20,000 is something that's very likely by year end. >> jeremy, thanks very much. professor jeremy siegel, we appreciate your time. let's get to michelle meantime at the rnc in cleveland. >> hey there, tyler. joining us now, actor, producer, director stephen baldwin who got to know, and he says admire donald trump as a contestant on seasoncelebrity "apprenti "apprentice." thanks for joining me. >> thanks for having me, michelle. >> so do i understand he fired you twice. >> yes. >> and you're supporting him? >> yes. >> why? >> i'm gluten for punishme-- gl punishment. it was interesting and surreal, sometimes rapper lil' jon sitting there talking with mr. trump, you know, et cetera, et cetera. but for me it was really cool

there was one moment when we were doing a live finale during one of the shows and we're sitting at this big table and he's organizing things and has ivanka over here and don jr., and i see mr. trump go, hey, don, you're fired. ivanka, you're fired. and, you know, the guy is actually more down to earth and regular joe than most people realize. i think the trump business guy is who he's been for many years to brand himself and be successful. and now, i believe, personally that the fact that he's not a politici politician, and he's responding and doing things the way he's doing, i think you're seeing voters out there and americans now very interested in the fact that he's not a politician. >> let me quote to you from the hollywood reporter. >> uh-oh. >> this was your advice to other candidates. >> yes. >> to be like mr. trump, be willing to absolutely disregard your morals and your character in order to be successful.

>> and that was in the limo right after he fired me probably the second time. and it was down to me or gary bussey, i mean, wouldn't you be upset if you got fired over gary? >> oh, yes. >> love you gary. but i was saying that relevant to the game and how you play it, et cetera, et cetera. >> so you don't think that's true of him as a presidential candidate? >> no. listen, i don't think mr. trump has ever demonstrated forgoing his moral character. i mean, i think he's been a pretty ruthless tough business guy, but that's how he made multiple billions of dollars. >> do you talk politics with your brother, alec? >> not really. sometimes. like i'll be on the phone and he'll call me and he'll say where are you and i'll say texas, and he'll be, oh, you're with all your people over there in texas, are you? >> he always threatens to move to canada. >> right. >> he doesn't? >> i'm still not going there.

mr. trump, i'm so happy you're going to be the next president so that i don't have to move to canada. >> let me ask you this. is it tough being a republican in hollywood? how tough is it being a republican in hollywood? how tough is it being an openly christian republican in hollywood? >> yeah, christian conservative republican, well, i will say this, there's more of them out there than you think in hollywood. we're in a time right now like a lot of americans that are very scared to speak their mind, they don't want to say something, you know, get labels put on you. it is pretty tough. but that's okay. you know, my whole life i grew up with a dad who was a football coach and a schoolteacher. and he instilled in all my brothers and my sisters you can do anything if you set your mind to it. and you focus and you work hard. so for me it's been tough especially the christian part. but i'm not worried about it. i kind of have stepped back from a lot of the acting that i've done in the last ten years has only been in christian films. and all of a sudden who says, you know, god's got a sense of

humor, all of a sudden these big christian movies that are lower budget, god's not dead and war room, these are films budgets of $2 million doing $30 million, $40 million, $50 million. >> so there's a market out there. >> there's a business in there somewhere. >> mr. baldwin, thank you so much for joining us. stephen baldwin. >> thank you. >> guys, back to you. >> interesting stuff, michelle. thank you very much for that. all i could think about the usual suspects now for the rest of the show. your big money earnings tonight come from microsoft, not windows and the x box are nice, yes, but the focus tonight should be squarely on the cloud business and how microsoft is competing against amazon and google. remember, last quarter's growth fell below expectations and sent the stock down 7% the following day. let's bring in timothy horan, managing director of cloud equity research at oppenheimer. what is the number one or number two most important thing for your clients and our viewers to watch for tonight from microsoft? >> well, clearly cloud. you hit the nail on the head.

we think azur ability to gain customer there, but broadly speaking cloud's around a quarter of their revenue. they're going to shift dramatically in the next six to seven years, and the key is not to cannibalize the core business all that much. so the server business, there was concern last quarter we were seeing cannibalization, they blamed it on the overall economy. so we're trying to make sure that does not get cannibalized. >> is there a specific metric within cloud that you will be most closely watching? >> if we can get more color on the azur and what the azure growth is, we're hoping for around 100% growth in that business. >> 100%? you're looking for a doubling in azur growth? >> yes. >> what if we don't get it? that sounds like a lot. >> well, it's still a small part of their business. that piece of it is kind of in a 1% range of revenues. they only have about 10%, 15% market share. but they are clearly gaining a lot of share. the overall public cloud market is probably growing in the 60% range right now. so they're clearly gaining

share. >> how much money is microsoft making, or maybe anybody else, on cloud, timothy? i understand the cloud business is growing, but i also understand google, amazon, microsoft to some extent, maybe ibm and oracle are all going after parts of the same business, which says to me discount, discount, discount. are there margins to be had? >> well, the amazing thing is amazon has 80% of the market share. and that pricing has remained very, very firm. and we think it's an incredibly profitable business. you're basically taking server utilization from an enterprise that's at 20% and moving it up to 80%. they have created a platform and microsoft is behind them to allow developers to create massive new products and services much more efficiently than they can do on their own. those two right now are basically a due oply. >> those numbers crossing after the bell tonight. timothy horan of oppenheimer. thank you. we appreciate it. >> thank you. next hour of power, as one of the hottest retail stocks of

the past year finally cooled off? ceo of a small cap housing play you need to hear from is here. netflix shares sinking after shocking everybody with slowing growth. but is that stock a buy because of today's drop? a lot more to do, don't go anywhere. we're back right after this. ♪ you've wished upon it all year, and now it's finally here. the mercedes-benz summer event is back, with incredible offers on the mercedes-benz you've always longed for. but hurry, these shooting stars fly by fast. lease the gle350 for $579 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing.

welcome back to "power lunch." i'm michelle caruso-cabrera.

day two of the republican convention here in cleveland, ohio. joining us former florida senator george lemieux now at large republican delegate who says while donald trump was not his first choice as nominee, he thinks trump is better than hillary clinton. good to have you here. >> nice to be with you again, michelle. >> that's the kind of endorsements you're seeing from establishment republicans. well, this is what we got. i mean, so not full throated. >> let me do better than that. i thought yesterday was a great first day of the convention. i thought they made a great case that donald trump will be better for the safety and security of american families than barack obama and hillary clinton have been. this is my fourth convention. i thought it was the best first day of convention that we've had. >> political's headline today is trump's disastrous day one. >> i don't think so at all. i really love the way it culminated in my mind on that fanatic with rudy giuliani. i thought that was the best speech i've ever heard him give. i thought he made a case like watching babe ruth at his last at-bat. tremendous persuasive speech

about why donald trump's going to keep us safe and secure. i thought it was a great day. >> the unbound delegates, this group of individuals shooting at windmills, that's an editorial comment on my part. >> sure. >> keep sending out, they have sent out guidance delegates tonight about what they can do to try and stop from having donald trump on the ticket tonight. is there any chance they're going to succeed? if all the delegates could vote for the person they really wanted to, would donald trump win? >> donald trump's going to win tonight. there's zero chance -- >> that's not what i asked. >> you asked two questions. there's zero chance. and the reason is there's many things going on here. there's a lot of people here who are trump supporters from the beginning. there's other people like me who believe he won fair and square. he won more republican votes than anyone's ever won. he won 66 of 67 counties in florida. we got to respect the will of the people. if we were to throw that out, we would divide and break our party

perhaps irrevocably. i think he's earned it and i think we've got to give him our support. >> is there -- there must be concern though on your part that the gop is so divided over him. what does that portend for the full on election? >> well, i think it's getting better. and sometimes you can't tell it's getting better until you're fuller into the process. but over the last month the trump campaign has been a lot more disciplined. they've kept the candidate between the rails. he's used his energy to attack hillary clinton and barack obama and sort of has not got caught in other issues that has hurt him in the past. so i think you're seeing his campaign come to a crescendo. i think it's going a lot better. i think the new top advisor is doing better than the previous manager. so i feel like he's going to come out of this convention and get a nice convention bump and be ahead in the polls. >> were you embarrassed by all the kovrmg this morning that melania trump had similar language in her speech to michelle obama's speech? >> yeah, i think it's ridicul s ridiculous. i think it's blown out of proportion. there are similarities between their two speeches, but as a parent of four, i've said all of

those same things to my kids. i went back and looked at laura bush's 2004 speech, there's a lot of that language in her speech. i don't know what happened, but at the end of the day it's not a big issue. >> foreign affair, the headline today, the apocalypse in u.s. political thought with the photo of donald trump. what do you say to people who watch and think the guy who hosted "the apprentice," they - president of the united states. the foreign policy establishment defined by foreign affairs calls it the apocalypse. >> well, how are all the smart people doing now? we've had three domestic terrorist attacks, at least three in this country in the last year or so. people do not feel safe and secure. they're worried about their families. they want to change. we don't want to have the same foreign policy strategy that is failed under president obama and under hillary clinton will continue. >> what is donald trump's foreign policy?

>> i think he's going to be a lot more aggressive. there's something about republican presidents whether it's president reagan or president george w. bush that create a little uncertainty with our enemies. and it makes our enemies a little more cautious. and i think donald trump's going to create more than a little urn uncertainty. he'll have great generals around him and make great decisions. right now we're not taking the fight to the enemy. right now isis is taking the fight to us. every day we turn on television and hear or see is another attack. >> former senator lemieux, appreciate you joining us. >> nice to see you. >> back to you. michelle, thank you very much. on deck, a special express edition of street talk, all kinds of opportunity for you in just 90 seconds. hard to believe, but it's actually accurate. stick around.

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note record gas demand not enough to help most refiners and sees negive earnings revision for most of them but quotes the recent pullback creates opportunity and that the value of tesoro assets held up better than others and getting them now at a discount to peers. their target is 92, about 20% upside. stock number two, truck maker paccar, longbow research says this is an opportunity, but an opportunity either get out or short the stock. longbow cuts their rating on pcar to under perform from neutral. they note pricing pressure on some of the new big rig trucks, this is the parent company of ken worth. longbow also thinks sales are off to a slow start. their target, get this 44, about 18% downside to the current price. and third stock your smaller cap under the radar call of the day, it is merit medical. 900 million market cap medical device company based in utah.

can accord buy rating and $27 target say merit medical finally on track in part t moving to higher margin products and in luring more manufacturing to lower cost areas, where have we heard that before? analyst adds should accelerate the other way $27 target on mmsi implies a 30% return, five analysts cover the name with an average price target of $25 per share. tyler. sounds good. netflix shares sinking after the company shocked everyone with slowing growth prospects. but is the stock a buy because of today's drop? we will debate that one ahead. plus, all the latest from the republican national convention in cleveland when "power lunch" returns in two minutes time. when it comes to medicare,

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hello everybody. i'm sue herera. here is your cnbc news update at this hour. secretary of state john kerry reaffirming america's commitment to the uk following his meeting with british prime minister theresa may. this follows the uk's decision to leave the european union. >> i think the prime minister is very much committed to finding a calm, thoughtful, reasonable way

forward that meets those needs. so i was encouraged by it. and i look forward to conveying her very best wishes to the american people and to president obama. eight turkish soldiers kwho flew to greece aboard a helicopter during the failed coup appeared before immigration authorities to begin their asylum application process. one lawyer says they denied involvement in the coup saying their helicopter had been used to transport the wounded. turkey however is seeking their return. a massive sinkhole opened up underneath a home on florida's gulf coast. pest control workers discovered the 30 x 15 foot hole yesterday. the homeowner is currently out of state, but neighbors had to be evacuated. and the california lottery says marvin and may acosta have come forward to claim their $529 million share of the record power ball jackpot which occurred in january. the winning ticket was sold in a chino hills 7-eleven. the other winners in florida and tennessee have already come

forward. that's the news update this hour. ty, i'll send it back over to you. i'd be worried i'd lose that ticket. >> absolutely. i would want to put it in a safe deposit box or get et out of my hands quickly. >> exactly. >> i don't know where my keys are. >> it's true. oil market closing for the day, let's check in with jackie d at the nymex. >> good afternoon, tyler. well, oil august contract closing under $45 a barrel just when the dollar index seemed like it was stabilizing it popped up today. that certainly added to some of the bearish pressure. also going to hear from the api this afternoon and the department of energy tomorrow. and inventory build is expected not likely, not a usual thing for this time of the year. so that's certainly bearish as well. tomorrow is expiration of the august contract. and that does create some directional momentum as well. but we're still holding close to $45 a barrel. it really continues to be the sweet spot at this point. back to you. >> all right. jackie, thank you very much. netflix shares down big today on a huge miss on the number of subscribers it added. it is the biggest one-day drop

in nearly two years but could this be the opportunity you're looking for to get into netflix or reason to sell it if you own it? that is today's trading nation. your team rich ross and michael pacter. michael start with you, surprising a lot of people, your take on in the meantime flix-- >> i have a sell on it and $50 target. clearly i don't think it's a good deal. i think the big surprise was that people quit before their price went up. and that really shocked us. i mean, netflix made the decision a quarter ago to delay the price increase that was originally scheduled for may 9th, and phase it in over six months and before prices started going up, which is really pretty much june, july, people quit. and i don't get that. i think netflix is grasping at straws to explain it as the media, you guys, were duplicitous in reporting prices were going to go up. i think the fact is long-time members are running out of stuff to watch.

we've seen everything. and now the house of cards and orange is new black are over for the year, maybe we'll go try something else. and there's something else. >> that was a weird excuse, mike. i mean, listen, we're members of the business media. i am a netflix subscriber. i didn't know the rates were going up. i found out when i got an e-mail saying, hey, you got grandfathered in, your rates are going up. so i love to blame the media in this case. but, michael, you must have an idea as to what it was. i mean, a best guess as to why it missed so much. >> well, they're reaching a ceiling. their content is getting thinner. i mean, they're investing so many billions of dollars literally $7 billion in original content and in buying rights to other stuff that they're having to trim a lot of what they consider to be the fluff, the stuff from discovery network, pawnshop wars type shows. and i think that that means that they're not satisfying everybody. people are looking elsewhere. you have hulu, you have amazon. >> yeah. >> and i think competition's starting to hit. >> whose forecast did they miss,

theirs or the analyst communities? >> well, both. first they guided below a year ago to 500,000 domestic subs and they delivered 160,000. that's a miserable number. that's the lowest domestic sub add ever. so that's pretty bad. and then internationally they guided to 2 million and everybody was at about 3 million before they lowered the guidance to that number. they missed that at 1.52 million. so they're just whiffing. and that's down year over year after adding 130 countries with billions of people. it makes no sense at all. >> and your price target 40% below today's price. michael, thank you very much. rich ross, the one thing i will say is this when you look at a chart as we did this morning in february and about a month ago, we were here and it held and bounced back. will it do the same? or has it really started to roll over, technically? >> no, brian, i don't see this stock holding here. look, typically i don't like to pile on a stock down 13% on the day. but in the case of netflix i'm

going to make an exception. bring up the chart and i'll show you exactly why i think the stock goes to $50 as well from a purely technical standpoint. >> wow. >> look, last year it was the best of times a 200% run. you see those gaps on the way up. now, the gaps can be your best friend on the way up, but they're your worst enemy on the way back down when those gaps get filled. a big double top at the tail end of that 200% surge. that's where the trouble starts, brian. and truth be told this stock wasn't doing particularly well even before today's 13% decline. you were down 12% already year-to-date trailing the s&p's plus 5%. so miserable relative under performance below the 2-day all year. when we zoom out, it goes from bad to worse. we look at that 100-week moving average, brian, that's held for the last 3.5 years as the stock has climbed 1600%, so that 100-week that comes in around current levels that would

strongly suggest we've had a primary reversal in trend to the downside. and once again i could see the stock testing 70 and making its way down to $50 in sort of a worst case scenario. >> wow, don't want to pile on, but some technical piling on there. rich ross and michael, thank you very much. i still argue narco season one was one of the better shows. for more tradingnation.cnbc.com. let us find out what is coming up from cleveland and the rnc with mcc. >> hey, brian. national poll showing very tight race as the republican convention rolling out this week. we're going to bring you the latest read with 538 and our own larry kudlow. you're not going to want to miss this as we delve into the polls and what they mean. stay with "power lunch." and now the latest from tradingnation.cnbc.com and a word from our sponsor. >> some traders believe they need to be smarter than the market to make money. the challenge is that the trend

is reality, it represents a collective actions of all market participants. when the broad market is heading higher, or moving lower, so are most of the stocks in it. rather than bucking the trend, acknowledge direction of the overall market and plan your trades accordingly.

floor fights, fact checks, lots of face time. the republican national convention hurling into its second day, hurling, that's a good word. joining us cnbc senior contributor larry kudlow and faracha deia. used to be associated with the "new york times," now with espn, nate silver, very famous statistician. i tell the audience all of that and i want to start with you, two competing headlines. the "new york times" put out an alert within the last hour. hillary clinton has a 76% chance of winning the presidency. that's a headline they would have gotten. that's the style they do simply because nate silver and 538 used to be with them. your 538 says clinton's lead is as safe as kerry's lead in 2004. that sounds a lot less optimistic. >> it is certainly less optimistic, but i will explain a

little bit more of the context. significantly lower than "new york times," it's really about three to four percentage point lead still for clinton, but it's because her negatives have gone far up. after the non-indictment for benghazi and, you know. >> let me say i'm not a polling expert, however, the overnights for melania trump were fabulous last night. another one that's an outlier,

nbc is running overnights in new york state. why, i don't know, it's even. >> overnights are overnights so polls from just one night. >> just one night. >> now, you're going to roll them into one and two and three days. one pollster just brought that to my attention. >> because most are done over a week or ten days? >> and should be. but overnights, are overnights, so people involving the professionals think it's quite interesting. including me. i like to look at real clear politics averages. i do. it's basically a toss-up race right now. some states she does better, swing states, some states he does better. you're at three or four points nationwide, actually she's come down a little bit. my final point is i agree with you, she's lost some ground after the non-indictment indictment, however, i think she made some very inappropriate remarks regarding the police, regarding the last tragedies of the police.

very inappropriate regarding racism and police departments. >> those will hurt her, you think? >> i do. the only reason i don't think you've seen the bottom is i don't think those remarks have yet been captured in the latest round of polls. >> farai, it feels very brexit to me the closeness in these numbers. >> yes. >> meaning that nobody thought they were going to leave and then they voted leave, right? >> first of all one of the things at 538 is we don't actually predict election outcomes. we just offer a look at what the polls say and also what history tells us. but i won't call this a heat -- this is not a dead heat. because among other things there are states that are in play like arizo arizona. arizona has never in recent years been in play for the democrats. but according to our forecast, there's a chance it could go for the democratic party because of pushback from latino voters, because of the trend of mobilizing existing latino citizens and also naturalizing legal residents who are particularly of mexican descent

because of what donald trump has said. you have to realize and you well do realize politics is a give and take. for everything strength, you know, someone pushing strong in one direction, there's usually an oppositional force. so in ohio where you have a lot of rust belt reagan democrats, they are very interested in donald trump. and i've gone and talked to them in person and in places like warren, ohio, so donald trump has some strength in ohio. but in a place like arizona, his statements are working against him. >> well, okay, we'll see. i mean, it's a good point. iowa, ohio, michigan, indiana, pennsylvania, trump is running even. no republican at this stage of the game has done that well. in fact, no republican in decades who won those states if i'm not mistaken so he's really got some strength. i don't want to emphasize this overnight new york state poll, but it is interesting. that's what i'm saying. >> i haven't seen numbers, were there numbers? >> yes. and they're running neck and neck in new york. >> okay. >> i don't want to overemphasize, i'm just saying. >> okay. >> but in the swing states, and

you're correct, arizona's too close, on the other hand he's pulling away in georgia. north carolina looks pretty good too. on the other hand heshe's doing well in virginia. these are tough states. saying net, net, net, net. this is a toss-up. here we are in the convention, tomorrow night, thursday night, the issues that come out are going to be hugely important. issues. issues on economic growth, taxes, regulations. issues on foreign policy, destroying isis, for example. issues on immigration, issues on trade. now, my view personally is trump will have the upper hand on all of those issues. i don't think mrs. clinton has an economic growth policy, i think she's done badly on immigration. she's kind of tried to beat trump on trade but she's got bad rap on the diplomatic stuff in the middle east. so if, there's always a big if, this is a very exciting race. if mr. trump and mr. pence and

other surrogates this evening, if they have a clear message on economic growth and destroy isis, i believe the issues favor that. i believe that. >> i happen to disagree on these issues of the economy and trade. for example, yesterday i spoke with descendants of two presidents, david eisenhower, a historian, and tweed roosevelt. and both of them are pretty dismayed by the protectionist slant of trump's republican party. this goes against what i would argue establishment republicans have done. this is not about -- >> but it would suggest though that it's an issues-driven election versus, i thought it was a personalities driven election. >> i think it's both. i think it's both. when you look at the controversy over whether melania trump plagiarized michelle obama's speech. that's a personality issue. when you look at the questions about how many trumps are on the speaker platform as compared to how many senators and congressmen were in 2008 and

2012. >> i think that helped them. i got to tell you i think that plays into the theme that donald trump is a very good father, which melania said last night. but we will agree to disagree on the issues because i think trump -- >> a lot of -- >> i don't care. >> do not want isolationists. >> i don't care what they want. i'm just saying trump is running ahead of hillary on the economy. trump is running slightly ahead of hillary on national security, on the terrorism. trump has played his hand exactly right on these horrible shootings in the united states. he has backed the police, he has backed the law and order position. the speech that rudy giuliani gave last night is incalculably good. she has no response on economic growth, on taxes, on these other issu issues. that's the key. >> last question to larry, sorry. the republican party still at moments feels like it's being ripped apart at the seams when you see these never trump people. the people who didn't show up to her point, the people who aren't

speaking. can the republican party survive a donald trump ticket? >> yes. yes, it will. he will wind up with 90% of the gop, if not more. there are some very well-known people who will never support him. never. i get that. i'm sorry about that. some of them are very good friends of mine. but it is what it is. trump is bringing a somewhat new brand of populism on the economy, on trade and immigration. i think it plays well. i don't agree with all of it, but i agree with most of it. and he's shaking up the gop. and, michelle, the gop needed a little shake and stir. >> to farai's point. >> an earthquake. >> yes, it is. larry kudlow, thank you so much. farai chidaya. brian, back to you. on deck, we talk tile. that's right. t-i-l-e and one of the hottest

retail stocks of the past year has finally cooled off, down big today but up big over the last year. the tile shop ceo your special guest coming up. andrea sikon. medical doctor from cleveland clinic, watson, let's review the electronic medical record of the next patient.. no problem. it's a pretty huge file. done. sorry for the wait. that was quick. as part of our research, i also compared lab results with notes about prior treatments, then cross referenced it with thousands of medical journals. and i get the benefit of much more data, and a lot more time to plan the best treatments. i stay focused 24/7 and never sleep. you sound like a lot of medical students i know. freshly made in the tokyo-japanese tradition, each batch is small. special. unique... every bowl blurring the line between food...and art. when you cook with incredible ingredients... you make incredible meals. fresh ingredients. step-by-step-recipes.

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today may not be a good day for investors in tile shop. but this has been a little store that could over the past year. shares are up more than 20%. by the way, that tops home depot and the overall s&p 500. let's welcome in the tile shop ceo chris hornmyseideahornmeist. what have you done to steal business or investor dollars from the lowe's and home depots of the world? >> thank you for having me today and great to be with all of your viewers. i think at the tile shop we want to stand for customer service. we think a great thing of the experience of buying tile that can be overwhelming for many consumers is not in the particular market very often is that we want to provide a high customer service environment.

over 4,000 skus at 117 stores across the country and we think it's, you know, that type of mentality of having each customer and one on one basis allowing us to go through the process of selecting the right things for their home and feel proud of and sharing with their family and friends for many years to come. >> how much of your story is a refinance, low interest rate, federal reserve driven story and some argue that's temporary or a real recovery in the overall housing market? >> well, i would look at the housing market is certainly important. we look at existing home sales and we also look at the median home value. which is certainly improving on the year over year basis in the low single digits. we look at mortgage rates, obviously, certainly being historic lows. people feeling confident in the value of their home and

confident in their job and income, as well. couple it with a story such as the tile shop in looking at how to improve it. i would also look at the things we're changing at the tolerant and expanding greatly across the 31 states that we market in right now. i look at it as a combination of the two and the housing backdrop is important for us and the individual things at the tile shop of having that customer is a center of everything we do is certainly a big driver of our success. >> chris, you could ask my wife for this. my favorite thing to do is shop for back splashes. i'm telling you, it drives me -- i love to spend a whole year shopping for back splashes. >> that's fantastic. >> what investors seem to be having a problem with today is not your results which were very, very good. most companies would love to have the kind of profit growth

and revenue growth you reported. what they seem to be nitpicking here is guidance going forward. can you explain what that guidance is and can you hazard a guess as to why the market didn't like what it heard? >> well, i think -- i'm glad that you touched upon that point because, you know, we had a fantastic quarter, really on every metric we follow internally. incredibly proud to represent the company, about the things we have been able to do. having, you know, within a few hundred thousand dollars of record revenue quarter. an 8.2 comp. revenue growth of 11.3%. i think the, you know, there might have been some disappointment around our top-end guidance and where that might have been and coming off a heels of a fantastic qis 1 and off the heels of a great q3 and q4, as well. so we look at while we're certainly a bit disappointed in the reaction of the stock today,

our managing the organization along with the men and women that work at the tile shop for long-term growth and long-term opportunity. i feel we're on a great growth retailers in the united states. and i think we're well positioned to continue that. >> chris, ceo of the tile shop, i frequently am stuck overnight in minneapolis and miss connections, i'll see you next time i'm in the msp. >> i would welcome it. >> thank you so much. >> thank you so much. >> profit jump 53% and people -- >> people are not happy. the comps describing. >> that's right. >> nice tile at the airport. >> back splash matheson has spoken. the fireworks at the rnc and we don't mean the fourth of july kind. stay with us.

big night on tap at the rnc. let's get back to michelle. michelle, i split my time last night between "the bachelorette" and the rnc. >> there's a parallel there, isn't there? >> only choose one. only choose one. >> tonight's a pretty big night when house speaker paul ryan presides over the actual nomination process. donald trump doesn't accept. we'll assume he'll say yes on thursday. that happens tonight and a senator with mitch mcconnell, governor chris christie who wanted the job and ben carson

and shelley capito, as well. >> interesting night and the next day hearing from mr. pence and then thursday mr. trump himself. >> hey, thanks, michelle. good luck tonight. see you more tonight. america, thank you for watching "power lunch." we mean that. >> yes, indeed. "closing bell" starts right now. hi, everybody. welcome to "the closing bell." i'm kelly evans at new york stock exchange. >> i'm bill griffeth. netflix, shares sinking as the streaming giant saw a major slowdown in subscriber growth in the most recent quarter. that being the second quarter. largely attributed to price increases for some users. so we're asking, has netflix lost the pricing power? we have both sides of the story coming up. donald trump taking a page out of the warren playbook, perhaps. the presumptive republican nominee says the campaign