>> oh, my, geez, that's fabulous. >> oh, that's neat. >> they loved our option platform. they thought it was great. and i think general atlantic did a great job. >> great work. thanks for being here, o'toole. >> good to be here. >> thank you very much. we'll talk after the show. >> you bet. >> "power lunch" starts now. and welcome to "power lunch." you're looking live at the floor of the wells fargo center here in philadelphia as day two of the dnc kicks off. we have a huge guest lineup coming your way including hedge fund manager orrin cramer, peter schumer and dick morris as well. so many parallels already to the republican national convention. once again, the organizers of the convention perhaps not getting the headlines that they wanted out of day one. michelle obama last night, the biggest winner when it comes to speeches. got lots of accolades. people were so thrilled with the speech. but what are the headlines

today? speech therapy, trying to deal with the mutiny that was coming as a result of bernie sanders supporters who did not want to give in. after a storm calls for unity is the headline in the philadelphia inquirer. as the night went on it looked like the bernie supporters had finally calmed down. you heard john harwood report earlier about how sarah silverman told them they were being, quote, ridiculous. and that seems to have helped. let's see what happens tonight with the big headliner. former president bill clinton, historically he's always a crowd pleaser. but, guys, he has run into trouble with the black lives matter protests as he's been on the campaign trail a couple of times. but you can assume this is probably going to be a pretty friendly crowd tonight. let's get over to brian and tyler back at cnbc headquarters. >> all right, michelle, thank you very much. so a ton in the business world going on as well. your "power lunch" menu seems very appropriate today because mcdonald's is the big drag on yourdisappointing. it is bringing really the entire dow industrial average down.

you look at the headline, it looks like a bad day, but about half the dow stocks are actually higher. so has the recent mcdonald's magic thanks to all-day breakfast finally become toast? we dig into that. but also a host of other restaurants are getting fried with downgrades today. there is new concern seemingly over the consumer. we are digging in on all of this with our all-star panel of food analysts, tyler. >> let's start with mcdonald's and let's bring in btig's peter solay. he has a buy rating on mcdonald's and a $137 price target. peter, you're not so worried i guess. >> thanks for having me on. no, look, it was a poor quarter. we can't sugar coat it. it was a poor quarter. they are continuing to take a lot of market share. the market share gains were similar this quarter as they were last quarter. the industry slowed and that does happen from time to time. our sense is we continue to create more jobs in this country, which we believe that's going to continue to happen, i

think we should see another sales acceleration. it was a poor quarter but i think they can rebound from it. >> you're not alone in observing that some of the restaurant stocks have faced headwinds this past quarter. why do you think that is? i mean, they seem to have a lot going for them particularly with the broadening of the breakfast menu into all day. >> yeah, the entire industry slowed. is there any smoking gun as to why. not sure. we had some poor jobs numbers intraquarter, i think it was the may jobs number was pretty weak. i don't know if that played a part. we had some rough weather. you know, there could be a number of things why it slowed for one quarter. but, again, i think they've got -- they're on trajectory to gain more market share and that market share gain continues quarter in and quarter out. >> what's your price target again? >> 137. >> 137 from 121. peter, thanks very much for being with us. peter saleh of btig.

let's bring in insider cnbc contributor and very well known restaurateur. tim, thanks very much. you heard that previous interview. here's my question though, i am convinced the one thing people are still eating. so if they're not going to mcdonald's as much, they must be going somewhere else or sitting at home and cooking. what are you seeing from restaurant trends as a restaurant owner. >> well, as he said, you know, the comps have been down as well in the fast food segment. but if you think about the things that happened with mcdonald's, one of them is when they started the all-day breakfast, you see the surge in sales and surge in the price of the stock. but also you got to remember at the same time chipotle was having problems. so with those two things happening, you kind of saw what i would say a little bit more of a push in mcdonald's than you really should have seen. now the market is just settling. and understanding what's happening you see chipotle moving forward even though sales weren't great. their stock is moving forward. the confidence in chipotle is moving forward. i think that affects mcdonald's

a little bit. at the same time i don't think people really cooking at home, there's just a lot more options. >> uh-huh. >> and while breakfast was a great idea and still is all day long, eventually that settles and they need something new to spark it. >> we're seeing big changes. we're trying to get healthier, tim. we see some of these sweet green types minichains as you'd call them pop up, although looking at $10 or $12 a salad at some of these places. do you think the trend against the traditional fast food will ever really die? everyone's been predicting the death of it for a long time. and guess what, they've been wrong. >> that's right. you know, the majority of people are still going to eat the $2 special whereas all the people in the press and the people all around it want to talk about the great healthy options that are giving you $12 salads and things like that and all these great new fast casual concepts that are coming up. at the end of the day when you look at people spending money, they want to spend it cheaply. that's what's keeping mcdonald's in business no doubt.

>> help our viewers and listeners, tim, make a little money. your job, one of them, is to spot trends. if they were going to invest not in a stock but a restaurant concept or trend, where would you go? what's the next thing? >> i think, you know, if you see a chicken concept that comes about that goes public, i would invest in that. people are really, really getting behind chicken concepts these days. and i'm not talking about the old school row titisserie chick one that's more flashy and more style. at the same time i wouldn't let go of mcdonald's. it's one of those brands that will eventually get itself right. and the ceo now definitely has some great ideas. and he's adventurous enough to try them. which i think has been a stigma for mcdonald's in the past. when you look at these different fast food concepts that are coming up, anything can happen, but quite honestly, i mean, you see these donut concepts. i would latch onto one of those. >> flashy chicken concepts and

donut concepts. tim, stick around -- >> you just named my new fantasy football team name. >> we're going to a news alert in the bond market. five-year notes up, back with tim in a second. rick. >> i'll tell you what, tyler, i know yesterday's two-year wasn't good. the five-year is pretty much not any better. the grade, i gave it a d. should have probably given it a d-minus. had such a long tail like yesterday if this was lassie, front paws wouldn't be on the ground. yielded 1.18, the market trading 1.165, arguably 1.16. yesterday was 1.5 basis point tail, today was every bit of that depending on how sharp your pencil was. and yesterday's bid-to-cover the worst since '08. this is 2.27 the worst since july of '09. 53.6 on indirects, that's the

weakest just since february of this year. 4.7 on directs while last auction was 3.7. you'd have to go through a ream of paper to find a lower one. listen, whether it's 2s or 5s, they're all mostly on the short end. i think there's a lot of data fed implications here. tomorrow we'll get our final clue, but back-to-back dogs, back to you. >> thank you very much. let's continue this fast food feast. we have a buffet of restaurant stocks getting hit with downgrades today. several wall street firms turning sour on several of these names. tim love is still with us. let's add bob darington who downgraded two of them, texas roadhouse and chewy's. welcome. >> thank you. >> i know when you downgraded these two companies it was less because you have a problem with how they're doing but more that they've done so doggone well for

you. >> listen, to be fair, these are two of the best performing casual dining restaurant companies in the industry. if you look at the stock price performance over the last 12 months, you know, both of them are up well over 30%. and in our view i don't want to say they're priced to perfection, but at the level at which they've been trading they both literally exceeded our target price. >> exceeded target price, they're working well, they're up powerfully over the last six months or thereabouts. and at the same time, bob, you see some headwinds in this casual dining space. why are they there? does it have anything to do with people's fatigue at going out and eating at yet another chain restaurant? >> i think that's part of it. if you look at the sequential deceleration in industry trends since the beginning of this calendar year, each month it's gotten a little bit worse. june was a horrendous quarter for the industry. i don't care whether you look at the black box, industry indes it was an abysmal month with

traffic trends down 3.5% broadly. as we look forward there are industry headwinds coming up where there's going to be less benefit from commodity prices, labor cost pressures on the horizon, less menu pricing restaurant chains can take when consumers are benefitting from the grocery store prices being down as they are. so directionally, with two having the performance and price as they were. >> but how do you explain then the fact june was such a bad month? and i'd like you to address one of the things that's sort of unspoken but worrying around in the ether somewhere and that is americans may be concerned that they're not safe when they go out. >> that's a real fair point. part that's a contributing factor to the industry malaise. i think there's a national court in the mind of many consumers.

my view is at this point in time where the uncertainty is creeping into the back of their mind, they're going to spend a little more. >> tim, let me ask you to react to that same sort of concept, with all the frightening things that are going on around the world. another attack today in normandy, france. so horrific i won't even describe it. but do you think that that fear that people aren't safe is restraining people's willingness to go out and spend in restaurants? >> i think it's restraining their willingness to spend period. and i think when there are that kind of things, again, you know, weighing on their consciousness, i think they're cautious about their household budget and where they spend and how much they spend. >> let me get tim's thought on that. tim. >> yes, sir. i think that, you know, it's a major point. and in fact my wife and i just discussed the other day the fact

that there is fear in going out. i mean, my wife was running on the trail today and called me on her phone to make sure she knew i was on the trail. it's those types of things that keep people from spending money all the time. fear makes people hoard things, no doubt about it. we celebrate over food all the time. if there's no purpose of celebration, it causes us not to go out and eat. and you can see that trend happening over the summer for sure. >> fascinating. bob, tim, brian asked a great question, which was what's the next trend in food. and tim said flashy chicken concepts and donuts. what do you see as the next trend? >> you know, my own view is that directionally as the consumer population continues to age, i think they'll be more demand for -- >> purees. >> pre-chewed food. >> you know. whether it's salads. whether it's food like panera serves, i think there's a real

consciousness in the mind of consumers about what they eat and how much they eat. now, don't get me wrong, fast food's going to be around. but i clearly think there's an element -- >> what about panera? what about panera's actually healthy though? i love the way you said that. people are going to eat healthy stuff like panera. i want to know -- i want a real definition of what that is. because that is the most unrealistic comment i've ever heard in my life. have you had their soup? cream of everything soup. come on. really, that makes you healthy? >> fits with the idea of foods you don't need to chew. >> it's the perception consumers have about the food. to be fair the calorie counts are on panera's menu in every cafe in the country. so they know what they're getting. >> that doesn't make it healthy. >> tim likes flashy chicken and bob likes food you can gum. gentlemen, thank you very much. >> i guess so. >> bob derington and tim love. >> going to call it the parrot cheek cafe because you know how parrots store food in their

cheeks and bring it back up a couple weeks later for their little chick lets. big day, folks, for earnings. twitter and apple report after the bell. both stocks having a rough year. what to watch for today is still ahead. but first, send it back to michelle at the dnc in philly where they got cheesesteaks. what's happening, michelle? >> i can't wait to have one either, tyler. coming up, hedge fund founder orin kramer talk about what the democrats have to do to win the white house in november. "power lunch" after this. a good car has to maneuver quickly. that's also true of a good car company. people have always bought cars. but we saw an opportunity in sharing cars. so we moved fast and launched car2go in 29 cities, all around the world. doing that required dozens of data centers, designed for speed and performance. we built our business on the ibm cloud.

because that's what the ibm cloud is built for. announcer: when they test you, stand firm and move only when you hear the seatbelt click that says they're buckled in for the drive. never give up till they buckle up.

welcome back to "power lunch." coming to you live from the wells fargo center in philadelphia for day two of the democratic national convention. john harwood is on the floor of the dnc right now here at the wells fargo center. john, we're looking at a pi yan that's there on the floor. so if some singing starts, we know they're practicing for the night. you got your strong mike ready, correct? >> i got my mike, my double ear piece, i've got everything. and, michelle, our country's going to make a little history on this floor tonight. hillary clinton is going to be nominated as the first woman to head a major party ticket in american history by a roll call vote of the delegates who will be seated on this floor where i'm standing right now. now, the chief concern of democrats is to portray an image of a party coming together. bernie sanders did his part for that with his convention speech

last night. he did it again this morning when he told his followers at the california delegation it's time to fall in line. >> it is easy to boo, but it is harder to look your kids in the face who would be living under a donald trump presidency. >> now, of course there's a fine line between allowing sanders supporters to express their enthusiasm and letting it turn into an anti-hillary demonstration. the corp horeography of all tha still being worked out. vermont and bernie sanders himself may play a starring role in that roll call. this is something the type of unity move we've seen in the past. in 2008 barack obama at the end of a roll call or in the middle of it was nominated by acclamation by who else? hillary clinton. now, of course hillary clinton's husband, bill clinton, the former president, is the star speaker in the 10:00 hour tonight. and this is a guy, michelle, who

knows how to talk to democrats. >> yeah, absolutely. i expect that -- and tell me if you think i'm wrong, but i expect he's going to be like michelle obama and help bring down the house. or is there any chance that he's going to face boos like we saw last night? i was struck last night, john, i was watching pbz news hour for my coverage in the early hours. and they said repeatedly that when hillary clinton's name was brought up, she was booed. but donald trump's name was brought up and not booed hardly at all. i mean, is that put to bed finally after the chiding they got from people like sarah silverman last night and michelle obama's speech as well? >> well, i think democrats made some progress through the course of the day. there was a loud displeasure being voiced during the day, forced debbie wasserman schultz out. she got booed at her home state's delegation. there was some noise being made on the floor. but silverman tried to put a

little cork in it. and then you had with michelle obama, elizabeth warren and bernie sanders more progress. i'd be surprised, michelle, if they boo bill clinton the former president. of course he's not the candidate this time. but it's going to be interesting to see whether bill clinton has still got the ability to light this place on fire. he did that four years ago for barack obama defending his economic record. that was considered a high point of barack obama's 2012 convention. four years later, four years older, we'll see what kind of energy he brings. >> yep, thank you, john. and, tyler, there's almost no doubt that bill clinton will speak for a long time, as he tends to do, tyler. >> he is known at these conventions to give long, long, long expository speeches. i think the president described him as the explainer in chief after the last one. stick around, michelle, because with us now is the noted political consultant and analyst dick morris, former advisor to president bill clinton. but his new book is called

"armageddon: how trump can beat hillary." it's currently number one on amazon's best seller list. good to have you here. >> good to be here, thank you. >> i want to begin with a couple things as i scan through here you say among other things a hillary clinton presidency would be cataclysmic. make no mistake about it if hillary clinton is elected president, the end of the america we know and love, the end of our sovereign democracy and the transformation of our political system to a european model of social welfare will take place. 25, 20 years ago when the last clinton was in the white house, i think americans remember it as a pretty good time, a time when the economy thrived, when jobs were growing, incomes were moving up a little bit. the budget was balanced. the nation was at peace. >> and i was the chief advisor. >> and you were an advisor. why is it different now? and how do you square that? do you think she would really be

as cataclysmic as your book says? >> yeah, i do. i think first of all hillary is totally different from bill. hillary knows nothing about the economy. never talked about it. never made that her focus, ever. when she's asked about it she says i'll leave it to bill. but i think that more importantly there are three irreversible things that can happen if hillary is elected. one, 11 to 12 million illegal immigrants will become citizens and get the right to vote supported by supreme court who she appoints. the right will never again win an election for 20 years. >> because of that. >> because of that. secondly, you will have millions of immigrants from countries that are sponsor terrorism and harbor terrorists. and we will go -- we would become very much like france with an indigenous terrorist population. and thirdly, the balance between those who pay taxes and work full time and those who are on welfare, will tip.

right now there are 107 million people on welfare, counting medicaid, food stamps, eitc, section eight housing. and 114 employed full time. when obama took office it was 137 versus 75. now it will tilt. and when the people who eat the taxes or outvote the people who pay the taxes, there's no disappoint. >> mr. morris, it's michelle here in philadelphia. >> hi. >> when you were brought on by bill clinton, you were republican. you brought republican ideas to him. welfare reform happened under bill clinton for example. >> right. >> he now gets chided on the campaign trail as a result of welfare reform. what's happened in america that you could never be hired by this party now to bring it to the center. >> well, i believe that the model that you're pursuing and others pursue is fundamentally obsolete. the left-right continuum, like a

clothesline and hang your socks somewhere on the line depending on which you are, i think is obsolete. i think the current model is concentric circles. i think the innermost circle are those at the core of the global economy. imf, world bank, the clintons, the romneys, the bushes, all different parties, european union. then outside that are their enablers. and outside of that are those left behind and screwed by the global economy. i worked for brexit for the leave campaign. and we drew the same percentage of votes from labor and conservative voters. there was no left and right. it's a circle. you don't have left and right. ral ralph nader wrote a wonderful book called "convergence." i think what you're watching on the floor today are bernie sanders voters who have more in common with the agenda donald trump articulated on thursday night than they do with hillary. i'll just give you one mental

exercise. you heard bernie say there are worse things than changing because you wake up and have to look your children in the eye with donald trump as president. can you imagine if he said what we have to do is to rally tonight and elect hillary clinton president? he'd be booed off the stage. >> what does the rise of bernie sanders tell you about the future of american politics? >> that it's insiders against outsiders. that there's become a coalition of the left and the right that embraces an agenda of reenacting glass/steagall, ending quantitative easing and wallpapering of wall street with money and anti-elitist agenda. >> you talked concentric circles. i would argue maybe the defining symbol of this election maybe should be a time machine. in many ways when you look at what donald trump and bernie sanders are saying, and it is accurate some of the

similarities and viewpoints. there is an affection for the past where you could not go to college and you could get a job and work your way up and make a decent wage and send your kids to college and not pay $50,000 for a car or have to take loans out. don't you agree that some of this is -- i don't mean it in a negative way either, backward looking? >> no, not at all. in fact, it's quite the opposite. after bretton woods, the united states was the only power in the world. >> that's right. >> we assumed obligations to open borders, to open our markets to pull countries out of poverty. >> we were also the only nation who could manufacture at scale and thus we had a burgeon middle class. >> and because of that decision to open, we helped the world emerge from poverty, fight communism and so on. now we're in a situation where trump is basically saying pay attention to the national interests of americans rather than the global economy. >> that's the america first

concept. >> exactly my point. just like the brexit voters put britain first. that's not looking back. that's looking forward from the consensus. >> final thought here, and i have to ask you to make it quick because we're running out of time. it seems to me that donald trump makes as wounded a candidate as hillary clinton possible and viable and vice versa. that hillary clinton makes donald trump viable and possible. >> well, neither of them is electable, but one of them's going to win. >> one of them's going to win. >> that is a great line. that is a great line. >> but i think the fundamental difference is that donald trump is in trouble because of the way he acts. >> yes. >> hillary clinton is in trouble because of what she's done. >> what she's done, yes. >> you can reverse how you act, you can't reverse what you've done. >> dick morris, thank you very much. nice to have you with us. >> "armageddon, how trump can beat hillary" is the new book. oil slide continues this month. down again right now. we're drilling down on oil when "power lunch" returns.

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talking about a lot big picture things. let's get to ja nus capital taking in a few million into etfs bonds and equities, shares higher today despite slight revenue miss. dick wile is ceo of janus capital and he joins us now from

denver. when you see some kind of trend with investors with the dow sitting pretty much at record highs, are the american people getting back interested in the stock market? >> i think the american people are getting back interested in the stock market. i think the reason is fairly obvious with low rates. they don't have a lot of choice. if they're going to meet their retirement goals and their investment targets. and so to a certain extent they're forced, which is driving a relatively high valuation and sort of absolute sense. but in a relative sense relative to yields i think it's pretty fairly value. >> where are you seeing them? i saw inflows into etfs, some inflows into equities and some inflows into fixed income. so it seemed balanced. but are you noticing one part of the market, dick, where people are much more focused than they used to be? >> well, brian, we're happy that we're bucking the industry trend. so i think broadly speaking the industry is seeing a lot of pressure and outflows in a lot of these areas. we were pleased that our results for the quarter were slightly positive and that we're gaining

market share and equity mutual funds and fixed income mutual funds. so i think a lot of that may be a janus specific story and not such an industry wide story. >> there's a lot of talk you probably heard the previous segment, dick, i'm not going to ask you to dip your leg into the deep sand of politics, but as a guy that runs a company and invests money for a living, is there a candidate who you think would be better for the capital markets? not a personal preference. >> yeah. let me answer the question this way, i think the candidate is better for the capital markets if they create more jobs. and i think if you want to be critical of both rings of this two-ring circus, you can say that they get caught up in a whole lot of other issues and discussions which i think are largely irl lly irrelevant to o future. really we have two issues, security and jobs. and the candidate who does a better job of both those things should get our vote. and i think the discussion tends

to cover a lot of other areas which are -- >> are you actually -- we got to go. but this is an interesting point you're making here because i've argued on "morning joe" and some of these other shows i've said i'm shocked at the lack of level of conversation about the economy. it would have been topic one two years ago. there's discussions on the margins around income inequality and wage growth, but from an economic point of view there's a lot of just sort of big things thrown out without detail. are you disappointed by that? >> i am. this election so far has been an election cycle two-ring circus around emotion rather than policies and facts. and hopefully as we get closer to the actual election policies will come to the fore and the economy and jobs will get front and center. the central banks can't do it. the governments needs to have policys that are pro-employment, pro-jobs. and i think that really needs to be the center of the discussion. >> maybe they should come to denver. i understand there's a few thousand people a month now moving to the mile-high city. dick weil, we appreciate your

time. >> nice to talk to you, brian. well, there's a lot of big money in the room at the dnc including hedge fund manager and top democratic donor orin kramer. we'll get his take on this election coming up. ♪

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hello everyone. i'm sue herera. here is your cnbc news update for this hour. hearses entering the facility for the mentally disabled in japan where 19 people were killed in a stabbing rampage. police say a 26-year-old former employee at that facility carried out the attack. the deadliest mass killing in post-world war ii japan. vatican officials say they're shocked by the barbaric killing of an elderly priest at a church in normandy, france. one official saying the pope condemns all forms of violence and hatred. isis says the attack was carried out by two soldiers from its group. munich's olympian shopping center is open for business again after a shooting spree that killed nine people on friday. outside the mall flowers, condolence messages and photos of the victims filled the

pavement. here at home on a lighter note, archaeologists made a significant discovery after digging around the alamo in san antonio. they found remnants of an adobe brick wall that may have been part of the original alamo complex. they plan to further analyze what type of structure the fragile bricks supported. that's the cnbc news update this hour. let's go back to michelle at the dnc in philadelphia. hi, michelle. hey there, sue. thanks so much. joining us now here at the democratic national convention, legendary hedge fund manager, now retired, he winces when i say legendary, megademocratic donor, i doubt you'll wince when i say that, orin kramer. you sound like you might have your doubts. >> yeah. >> do you have your doubts? >> it's important to have financing for causes that you believe in. the people i respect do not have the highest regard for people who basically go out and just

raise money. so it's a necessary evil. by the way, if hillary clinton is president, then the role of money in politics is going to decline. so if it bothers you, that's the first reason to vote for her. >> because you think there will be more transparency about it. >> she'll change -- it's not just transparency. she'll change the supreme court. and she'll have legislation she can dial back where you are now, where by the way keep a really do buy politicians. >> let me ask you about a headline that's crossed this morning. the united auto workers president dennis williams says hillary clinton has told him that nafta needs to be renegotiated. we just listened to donald trump last week say he's going to renegotiate the trade deals. you already heard her speak negatively about tpp. two things strike me. both parties now have very similar positions on trade, which seems to be a galvanizing

topic in this election regardless of what side you're voting from. and you're involved in finance. are you worried about the way trade has been demonized? >> well, there are a couple things. first of all, it isn't as if the concerns are not without substance. there are real costs that have been imposed. there are a lot of people who are left behind because of trade but also because of global forces that we're not going to be able to reverse. and the question is what do you do about it. hillary clinton's got a library of proposals that are basically about providing support for people who need retraining and so forth. and then also if you go to the other extreme, donald trump wants trade wars. he wants a level of protectionism that no one has talked about in the last 50 years in this country.

and at least my recollection of american history is did not work well in terms of the depression. >> you say trade wars. he's talked about tariffs, absolutely. we've all heard him and it's made people worried. buthen she says renegotiate or reinforce, that often means tariffs. that means going to the wto and saying, china, you're dumping, and that leads to -- i mean, they use different words, but are they driving to the same place? >> no. you know, hillary -- secretary clinton has had decades of experience with these issues. and she does understand that there are pressures today that didn't exist 20 years ago. the dialogue has changed in response to changes on the ground in the facts. but i think her understanding of what's balanced. and if you went to nonpartisan economists and say here's what secretary clinton is saying, here's what donald trump is

saying, which one do you find scary in terms of precipitating a depression? i think she wins among the nonpartisan economists. >> orin kramer, thanks so much for joining us. >> thank you. >> you're legendary, right? it's okay. it's cnbc. >> with family. >> that's a good way to be legendary. tyler. >> tell him we call them all legendary. it's all just what we say. >> i won't say that. >> i'm legendary. achieving the american dream, it has been a hot talking point on the campaign trail, really central one. next, we're going to bring you the story of someone who has done it big against big odds. it looks sweet.

welcome back to "power lunch." rick santelli here. of course live on the floor of the cme group. we had a five-year note auction. we had a two-year note auction

yesterday. dog, dog. dog squared. look at intraday of five-year we made our high yield of the session thus far straight up 1:00 eastern. interim of 30 long end has a similar characteristic. the one odd intraday dollar index. one would think this potentially should boost it higher. we do need to realize it is hovering at a fairly lofty place over the last six weeks. and finally, i don't have the chart. but everybody is talking about something we haven't said in so long, libor. remember libor? three-month libor hovering around basis points. something to pay attention to. rick, thank you very much. in today's make it, a web developer from brazil moves to the united states and can't find a job. kate rogers joins us now to explain what he did next. >> with a little luck and a lot of hard work, he's living out his own version of the american dream. take a look.

>> new york is everything for us. >> growing up in sao palo, brazil, he dreamed of making it. he dreamed of winning the lottery at age 24. could you believe it? >> it was amazing. >> he couldn't find work in the states in his old profession without speaking english. so he worked his way through restaurant industry kitchens over the next decade. but on the side to keep creative juices flowing he baked cakes and desserts out of his queens apartment and business requests starts to grow. he entered a competition for brides magazine for one of america's most beautiful cakes and he won. >> i was a little scared. like, i can't be doing this from home. how are we going to do this? people start calling asking for

tastings. >> in another chance encounter a fateful customer offered to front him the cash to open a store front in 2013 and sweet corner bake shop was born. >> have you baked before? >> yeah, the only thing i'm good at is chocolate chip cookies. >> that's what we're going to make. >> today, the bake shop is profitable and has a loyal customer base who loves sweet corner's unique twists on classic. >> i have this cookie. it's sea salt chocolate chip cookie with four kind of chocolate. need a little help. >> yes. probably. >> other side. >> oh, other side. so i'm not going to get hired here obviously. thankful for his humble beginnings. >> sometimes you look back and a decision that you make can make a lot of difference in your future. if i said, no, i'm not going to work in a kitchen, maybe like i'm just having a regular job in

another place. but today i have a business in new york. this is like a dream. >> what about your family in brazil? what do they think? >> oh, my mom think i'm a superstar. >> now, as you can see he certainly had luck on his side winning the green card lotto, a national cake design competition and having a customer front him the cash to open that store, but it's his perseverance and dedication that make him a standout to us. for more stories like this visit cnbc.com/makeit. >> you didn't bring any cookies. >> i didn't. but they were really good. >> you make good cookies too. >> i told him, i don't know if you had the cookies i made last year, brian. >> no, i didn't get anything. i'm feeling really offended and alone here. >> it's about the only thing i can cook or bake. >> you said luck though. i'm going to take umbrage with you, rogers, there were elements to his story, luck, but he knew what to do with the luck when he got it. >> absolutely. it's about what you do with the

opportunities given to you. he couldn't find any work here. he had a great job as a web designer and developer in brazil but didn't speak english when he came to this company. he could have quit but worked his way up through industry kitchens for a decade. these stories make you feel good. great to tell. >> did you eat the dough? >> oh, heck ya. >> best part. >> salmonella be damned, i will eat the cookie dough. >> that's the latest topic. thank you, kate. great story as usual. "power lunch" back in two minutes

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. but do you consistently get it? you do with comcast business. it's reliable. just like kung pao fish. thank you, ping. reliably fast internet starts at $59.95 a month. comcast business. built for business. . welcome back to "power lunch" everybody. vancouver the latest city to tax foreign home buyers. robert frank joins us now with the details. that's a hot market. >> it really is. and it's become a haven for really wealthy chinese people. but now the locals, they want a bigger cut. the british columbia government yesterday approving a 15% tax on foreign buyers of vancouver real estate. so if you have a $2 million purchase, that's going to cost you an extra $300,000. now, this is a response to the surge of wealthy chinese buying up vancouver property and

driving up properties beyond the reach of local buyers. in the past month alone foreign purchasers a billion dollars of real estate. prices in vancouver up 30% just in the past year. average sales price of a home there 1.6 million canadian. >> wow. >> so like $800,000. >> what do you get for your money. third of an acre listed for 8.5 million canadian. so tax would be an extra 1.3 million on the house. vancouver joining lots of other countries that have added similar taxes on overseas buyers including singapore, hong kong, australia, new zealand, switzerland, mexico. in new york there was a tax floated in 2014, but it stalled amid strong opposition from the local real estate industry. but it's a response to not just chinese nationals but buyers around the world driving up prices where the locals say, look, we're either going to get a piece of this. by the way the money in

vancouver is going toward affordable housing. or, you know, we're just not going to let this happen. it does slow the market. >> how much has -- how does it stunt the market? in other words is $300,000 more on an average house going to deter the kind of buyer who's coming in there? >> australia, singapore, hong kong have all slowed dramatically once they imposed these taxes. so, yes, it will slow. >> i'm surprised. >> form of protectionism. >> yeah. especially when you get up to 15%. you know, we have a mansion tax in new york 1%. 15% as we showed there in that example, that's meaningful. >> all right. let's get to another big story, one that is sending chills really through the formula 1 racing community and, i guess, just around the world. the mother-in-law of billionaire formula 1 controller, i don't want to call him the owner anymore, bernie ecclestone, has been kidnapped in brazil. what do we know? >> yeah thrks is a difficult story. brazilian media reporting and there's no confirmation of this yet from bernie ecclestone, but

media reporting that the mother-in-law of the billionaire has been kidnapped and demanding 28 million pound sterling to be divided into four bags of cash. now, the woman abducted is the 67-year-old mother of ecclestone's 38-year-old wife. she was kidnapped from her home in sao palo. he and his wife live in london. no comment as we mentioned right now from ecclestone. when you look at kidnappings, there's no reliable data since most go unreported. but this taps into one of the big fears of the wealthy around the world, which is mostly around kids. but now we have to sort of rethink all the security the wealthy put to protect their kids now to broader extended family do you go to mothers-in-law, aunts, uncles. >> how far does it stretch? >> tough time with the olympics

comie inine ining up. >> is she a resident of brazil? >> she lives in sao palo. kidnappings in brazil have fallen dramatically in recent years. this is one high profile example not exemplary of the rest of the country. but given the olympics coming up, you got to guess their timing was not coincidental. that the olympics is coming up. >> yeah, and i would imagine that the security industry in rio and sao palo and other areas where olympic venues are going to be held is probably booming right now. >> yeah. and if you're a wealthy visitor to brazil, thinking you're going to the olympics, this could possibly deter some of them. >> possibly. >> robert. thank you very much. robert frank. well, that was the scene yesterday. you're looking at it right now at a pro-bernie sanders rally in philadelphia. it included a giant joint. the question is, will the protests start to fizzle out today after sanders called for party unity last night? we're going to go back to philly coming up.

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the big headliner tonight here in philadelphia, former president bill clinton is going to be making the case for his wife, of course. look at that lineup you're going to see throughout the week here. but of course bill clinton tonight, possible also we're expecting maybe alicia keys to sing later on in the evening. he's going to make the case for his wife as we've seen a very contentious convention thus far. we had bernie rallies both inside and outside the arena yesterday. we're going to check in outside where the protests are going onto see if things have calmed down. and on this hour of "power lunch" i'm also going to sit down with vermont governor peter who i think is standing in the back of the room here, brian. he's going to sit down any moment now. thank you, michelle. apple and twitter rolling out their latest results, both stocks having rough years with twitter losing nearly half its value over the past 12 months, there's a lot riding on the line

for twitter tonight. josh lipton in san francisco covering apple. julia boorstin in l.a. tracking twitter. josh, first to you and what's expected from apple. >> well, brian, if analysts are right, you could hear the word decline a lot when apple reports earnings after the bell. that's because the street will be looking for eps of $1.39 on revenue of $42.1 billion. and that would represent drops of 25% and 15% respectively. of course investors are going to make a beeline for that iphone number. for all the talk about apple pay and apple music, the iphone still accounts for more than 60% of this company's revenues. analysts think apple sold 40 million iphones in the quarter a drop of 17%. apple struggles with tough comps and as users await the iphone 7 expect also on the call, sully, analysts to ask questions about the se and how much it's boosting demand in those emerging markets. back to you. >> josh, thank you very much. let's talk more about what's ahead for apple. joining us is brian white,

global head of technology at drexel hamilton. and sherry scrivener tech analyst at deutsche bank, a bit more cautious. i think the discussion here, folks, boils down to this. brian, you seem to think that the iphone 7 can be, will be a catalyst for growth and better comparisons. and, shar ri, you're not convinced of that. brian, why don't you make the case for and then sherri, you get to respond. >> i think it's really about comps. you had iphone grow 37% in fiscal '15. we have a decline of 11% in fiscal '16. and you're really going to start to anniversary that iphone 6, which is a bigger iphone. and i don't think iphone 7 in terms of the features are a game changer. but i think it's enough to start to drive growth and iphone in the quarter. >> sherri, follow-up on that, and specifically since the release of the iphone 6 with the bigger screens, the way people

buy cell phones has changed. you don't really have those subsidized phones as much anymore. why do you think it's not going to be the catalyst that brian sees? >> well, the compares definitely do get easier, but the problem is the worldwide smartphone numbers are starting to slow pretty significantly. we saw negative growth for the overall smartphone last quarter. and that's because people are taking a longer time before they refresh their phones. phones are expensive. the iphone is a very expensive phone. average selling prices are in the $600 range. it's hard for people to justify buying a new $600 device every two years. so you're seeing those refresh cycles elongate. >> you know, brian, you still have $185 target on apple, correct? >> exactly. >> so you're looking basically a double -- not quite, but almost a double. so either revenue is just going to boom for some reason, or investors are going to have to

allow apple to have a massive multiple expansion, in other words trade a lot richer, go up even if revenues or earnings do not follow that path. what is most likely to happen? >> i think will return to growth, i think the market is going to sit back and say wait a second, trading at eight times x cash at the low of a cycle, we're at the very end of the iphone cycle, 6, which is a two-year process. they're going to give it a better multiple. i go back to the summer of 2013. this is exactly like that to me. you've got a lot of negativity. the iphone cycle, the sale cycle all bottom in the june quarter, sentiment is very, very negative. and i think as we look forward, apple's going to be one of the last companies standing in the smartphone market. >> sherri, last word to you, your price target is $80 lower than his. $105. you see it sitting right where it is. >> that's the thing, i mean, if you look at apple their multiple

has contracted pretty significantly since 2010 their average multiple has been 13 times. part of the issue is apple is too big as a percentage of s&p 500. large companies that are more than 3% of s&p 500 traded discount to the markets. >> all right. sherri, brian, thank you so much. we appreciate it. >> thanks. now let's get to julia boorstin with the lowdown on twitter ahead of its results this evening. julia. >> hey, brian. well, the question with twitter is whether all the changes ceo jack dorsey has made since returning as interim ceo a year ago are working to reignite stagnant user growth. analysts project twitter will add 2 million active monthly users to 312 million. and revenue growth projected to slow slowest rate since the company went public just 21% to $607 million. dorsey is likely to focus on recent sports deals including one announced yesterday with the mlb and nhl. as twitter looks to become a destination for live video.

i'm sure we'll hear a lot about how that video could help drive engagement, guys. >> all right. julia, thank you very much. the question of course is can twitter make a turnaround or will that stock fall flat? let's bring in rob sanderson, managing director of mkm partners and, rob, you've got a hold rating on it. even if twitter's revenue comes in near the high of what is expected tonight, it will still be one of the slowest quarters or the slowest quarter of revenue growth since the company went public whachlt are the key one or two numbers you need to see from twitter tonight to be impressed and raise your rating? >> well, i think the expectations are very low, as you pointed outd. 21% growth. they were growing 70% a year ago. 2 million monthly active users well below any of their peers, the large peers in the social media space. i think the expectations are really, you know, really not high at all. and if can't meet these expectations then there's a real problem. the focus is more on the second half. the q-3 guidance is going to be important. but more important really is, you know, to your point, are these sports deals really

driving engagement and can they finally find a solution to address the mass market? >> that's the question. i mean, what if, rob, and it's a what if, so you don't want people on twitter coming out, but what if active users go down? >> that's a possibility. >> do you think so? do you think that's a real possibility? >> we're splitting hairs here. 2 million on a 312 million user base, up a little bit or down a little bit is almost the same number. so it could. it would be optically a big negative but i think it really doesn't change fundamentalfunda. if they're up two or down two, that doesn't really change the pickle they're in right now on the user side. >> brian, is twitter the next yahoo? >> i don't think anything could be as disastrous as that has been. i mean, here's the thing, twitter is very clearly the number four player in digital advertising. the yahoo sale to verizon was a

good thing for twitter because that deal is going to take a while to close, good traction for twitter and everybody else frankly not just twitter but to take share from yahoo in the short-term. and there's nobody really close to twitter in terms of being a number five player. from the vantage point of madison avenue and the largest advertisers that spend money with twitter, they're still very relevant. the user number has always been a red herring. it's not why advertisers spend money. yes, if they double user base obviously that's significant. if they fall on half that's significa significant. that's not why advertisers spend money with them. it's a different vehicle and very unique at what it does. >> here's the problem with twitter. as somebody uses it a lot and this is our industry although we will say, brian, some of us have a megaphone, right, the people that are on it tend to love it. once they get used to it, once they -- they can engage, whatever, we try to write back, et cetera, but the people they don't have any interest in checking it out or maybe they hang out for a couple days and then they leave, but they still have a login so they're kind of

users. how does twitter solve that? that seems to be their biggest problem. they have a loyal base but pretty much 90% of the country's ignoring them. >> this is the biggest mistake that twitter management has made and that most investors have made as well. in ever expecting twitt eter wo be ubiquitous that it would be something everybody would use. it's a very powerful niche medium. there's nothing wrong with a niche. but it is a niche. it's upside if they could ever come up with a different product that would appeal to everyone, but that's optionalty. you shouldn't think of that as being what they will become. it's just maybe they will. take them for what they are. take them for where they stand on the digital advertising income system. >> let me ask you, bob, do you think in two years, three years, five years, twitter will be an independent company? >> i think there's -- everything's on the table for twitter over that time period. it's really binary outcome in my opinion. but just to address the niche, you know, i tend to disagree with that. they're a long way from making money.

they've got a pretty good monetization ramp, but they're a long way from making money. and they continue to expand the share base through stock compensation, et cetera. and i think the important thing to recognize with social networks is, you know, there's a network effect. and when the influencers are seeing declining audience, they spend more time on other platforms. and that's why things like friendster or myspace have really gone away quickly after a quick rise. that's the danger that twitter sort of skirting against in my opinion. >> you notice in the introduction i called them let's wait for twitter's results. i didn't say earnings. there are no gap earnings. rob and brian, it was a good discussion. we will await twitter. i know you guys have busy nights, thank you. >> thank you. all right, back to another twitter hotbed, a lot of tweets about the d in,nc, but forget a twitter, let's find out who's down with the dnc, mcc. >> hey, brian. i won't call you b.s. two shots to show you here in

philly side by side, on the left of the screen the floor of the dnc. they're doing practicing, walk-throughs, et cetera. kickoff the big speeches in just a few hours from now. on the right this is a live shot of philly's city hall where demonstrators are once again gathering today. are we going to see as much as we saw yesterday? the calls were bigger today, but did bernie sanders and his speech last night quell his supporters and finally get them to come along and support hillary clinton? we'll discuss more as soon as "power lunch" comes right back. rock c )

welcome back to "power lunch." i'm michelle caruso-cabrera live at the dnc convention in philadelphia. it is day two and there are a new round of protests taking place at this hour. let's get to eamon javers outside of city hall. eamon. >> hi, michelle. we are just outside city hall here in philadelphia, as you just said. this is a hard core bernie or bust rally similar to what we saw yesterday. let me step out of the shot here and you can see the crowd that's gathered here in the square. this is about a tenth of the size or smaller than what we saw yesterday. but these are hard core critics of hillary clinton. we saw one of the critics up there comparing hillary clinton to donald trump in a pantsuit. we heard some speakers earlier today saying that they think

michelle obama was wrong to endorse hillary clinton on stage last night. and a lot of people very critical of sarah silverman, the comedian who on the stage here in philadelphia last night said that the bernie or bust people are ridiculous. these folks think sarah silverman is ridiculous. and they're saying that on the stage here. but the question is whether they have the numbers that they had yesterday or going into november whether they have the numbers to change the dynamic in the election overall in the general. that's an open question as of right now. but i can tell you, michelle, these guys here are very fired up. they say they're not going to vote for the democrat. they say ultimately they might end up with the green party candidate or somebody else altogether. but they are not going to vote for the democrats, michelle. >> it's a bigger crowd than i expected, eamon, on this day especially when you heard bernie sanders last night trying to get them to go along. thanks so much, eamon. eamon javers outside. are we going to see more booing inside like we saw last night? joining us now is vermont governor peter shumlin.

welcome to "power lunch," governor. >> great to be with you. >> your senator has left a huge mark on this campaign and this convention. you saw -- you can see what's happening outside. you saw the live shot. >> that's right. >> last night on the floor there were a lot of boos every time hillary clinton's name was mentioned, at least in the early going. has that finally been put to bed by bernie sanders coming out and telling his followers to get on the train, so to speak? >> well, you know, i think bernie was extraordinarily magnanimous last night. and he means it. i've known bernie sanders, he's been a long friend of mine for a long time. he told me something long before this race began, he said i have tremendous respect for hillary clinton. i served in the senate with her. she's anleader. and i do not want donald trump to be president of the united states. and i think that as this transition happens, as people become more alarmed by the hatred, the division and the simplicity of donald trump's message, you're going to see

that even the green party folks are going to say stakes are too high, we're with hillary. >> don't divide the vote. >> let's not divide the vote. listen, we've got huge challenges ahead. and this is the toughest job in the world. there's no one more qualified, more ready and more of a pragmatic progressive who's able to lead this country than hillary clinton. >> if you look at bernie sanders' legislative record in congress, he's been in congress almost continuously since 1991. not a whole body of it really to speak of much. are you surprised that bernie sanders of vermont has been able to put such a large set of fingerprints on the platform of the democratic party at this stage? >> not at all. what i said to folks long before bernie said he was running for president was bernie sanders is the perfect candidate for our times. what i mean by that is when bernie talks about the gap between rich and poor, the top 1%, fighting for those who are struggling, trying to lift the boats of everyone in our economy, taking on the

corporations and fighting for economic justice, all the issues he's talking about bernie's been talking about that for every day of his political life. and he's very good at it. he's a great advocate. so i'm not at all surprised that a whole bunch of folks in america who are fed up with the status quo say that's the guy we want. >> you're a small business owner, correct? >> yes. >> does it concern you as a small business owner -- and these are people on the right who as you know there are a lot of people on the right concerned about donald trump. but they see what they think -- you call it progressive, but bernie sanders is a self-described socialist. the division of resources of a nation being divided by government rather than the market, right? that doesn't bother you? >> actually start by telling you i'm a hillary clinton supporter, have been from day one and i believe she's the most qualified person to be president of the united states. having said that, i've watched bernie sanders fight for jobs, fight for economic development and fight for the middle class and low income vermonters to

have a better shot, better economic opportunity, better jobs opportunity. and when bernie talks about job creation, let's remember he's saying for god sakes wie ahy ar exporting jobs into china and india and shipping good manufacturing jobs out oflt united states? a lot of conservatives, republicans, democrats agree with him on that. >> but the bernie supporters eamon javers was just showing, a lot describe themselves as socialist or being sympathetic to socialism. >> who knows what they describe themselves as. all i can say is there's a growing frustration, and hillary clinton gets this, that we cannot continue to thrive as a country when the top 1% get all the resources, the middle class continues to see their incomes go down and we continue to struggle economically. i think the exciting thing about bernie's message is he's helped to unify -- he's helping hillary clinton, not hurting hillary clinton. by getting young people and others involved in this campaign. my prediction is, don't forget we go through this every eight

years. i was in denver when we nominated barack obama the first time. and i can tell you that at that time the conversation was, will the clinton people ever go and support barack obama. look where we are. so my point is we've got a lot more uniting us. the fact we aren't trying to run on a negative message as donald trump is, i've never seen a more depressing speech in my life. talk about depressing. >> we'll see if you're right. >> this guy thinks crime is going up, america's in terrible shape. america's in great shape. barack obama's done a great job. hillary will make it better. >> governor peter shumlin of vermont, thanks so much for joining us. >> thanks for having me. >> tyler. michelle, thanks very much. let's get to our new cnbc reporter in san francisco, didi roy with a news alert. welcome. >> thank you so much, tyler. silicon valley has a new player in town, chinese base laiko which moments ago.

laiko is the digital content distributor in china. the $14 billion company also makes smartphones, streaming devices and self-driving cars. spoke with the ceo touted as the steve jobs of china about the acquisition. >> translator: will become the top three tv manufacturer and also become the largest ecosystem tv company in the world. with the integration of hardware and internet, we will lay a great foundation for leeco in the u.s. and in the global market. and provide more unique ecosystem values for global users. >> and apple and google may soon find a competitor in leeco. its ceo telling us the company has plans to bring its entire e ecosystem including smartphones to the u.s. consumer. and just a few weeks ago leeco expanded footprint right

here in silicon valley snagging prime real estate from yahoo. >> fantastic. good to have you with us. aditi, welcome to cnbc. "power lunch" returns in two mines.

it is today's disaster

dejour. stock down nearly 10%. also, caterpillar climbing after beating on the top and bottom lines, unfortunately revenue still falling overall. the company is expected to cut more jobs. crude oil under pressure again as well. the oil market getting ready to close. we are going to have your final trades, will oil fall four days in a row? we're going to find out just a couple minutes. stick around. hey gary, what'd you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim. only at td ameritrade

welcome back to "power lunch." we want to call your attention right now to shares of linear technology company just opened up for trading after a volatility halt to the upside. you can see those shares up by 25%, up close to 30% at one point right after the open. this on the heels of bloomberg headlines saying that the company could be an acquisition target for analog devices and that a possible deal announcement could come as early as this week or as early as today rather. so, again, that's what's moving the stock flt we'll keep an eye on what's going on there especially since the semiconductor space has been extremely hot as of late. now off to sue herera with your cnbc headlines for this hour. >> thanks so much, dom. here's what's happening at this

hour. a federal judge has given preliminary approval to a $15 billion settlement over volkswagen's emissions cheating scandal. the judge's decision allows attorneys to notify vehicle owners of the terms including the use of settlement website to determine just how much compensation they might get. fiat chrysler says it will invest $1.5 billion into a sterling heights, michigan, assembly plant. they want to retool it from making small and mid size cars to ram pickup trucks. the automaker says the investment hinges on formal approval of incentives by state and local governments. general mills has expanded a flour recall issued over a possible link to an e. coli outbreak after four new illnesses were reported. the cdc says flour produced at a general mills plant is likely the source of the outbreak. and we end on a sad note, the man who built the needer lander organization into a powerhouse has died.

jimmy nederlander produced or co-produced nearly 100 broadway shows. he was 94 years old. and that is the news update this hour. i'm going to send it over to you,ty. sue, thank you very much. the oil market closing now for the day. and courtney reagan is at nymex with the final trades. hi, court. >> hi there. good afternoon to you, tyler. does look as if wti is going to close just a bit under $43 a barrel, right around the $42.90 mark. oil actually hit a three-month low in trading today. a lot of traders telling me there's just not a lot of reason to be bullish on the price of oil. we do have the fed beginning a two-day meeting. very few expect the fed to do much if anything when it comes to rates. of course we always pay attention to the wording, which can move things like oil, like equities, like the dollar. but also there's a morgan stanley note out today saying that the bearish bias that the firm has been seeing has been confirmed in recent weeks and they're looking for oil to trade

around $35 in the second half of the year. and that has put some pressure on the price of wti crude. brian, back to you. courtney, thank you very much. as crude oil continues this four-day losing streak, should we start to accept that maybe $40 to $45 oil is the new long-term normal. let's bring in kent morris, executive chairman of energy capital research group and john kildoff at again capital. starting with you, kent, month and a half ago we were above $50. everybody said the 40s are behind us. we're going to start to see more production come offline, demand will increase. that has not happened. what do you see as having going on in the oil market to drop us ten bucks in 45 days? >> well, brian, we have a balance that's coming, but it's a far more sluggish than people had anticipated. we have an incredible amount of extractable demand reserve surplus. and that's been driving this market even more than the crude oil that's in the market itself.

it's the presumption of the traders rather than the actual oil that's driving this down. we're going to see a leveling off here. i don't think we're getting close to $35 a barrel. i think we'll start going up to about $45. and once that balance hits, we're going to see a price of oil that's going to be north of $50, well bebefore the end of this year. >> you do? >> yeah, but it's taking longer, brian, than anticipated. >> so you believe then if i heard you right that this is really a trading play. because as we've reported, we've shown our viewers these ducks, drilled but uncompleted wells, the number of drilling rigs has gone up by 90 since the may lows as well. do you think this is traders saying people are going to get greedy and in the short-term throw more production out? >> absolutely, brian. there's something else you have to remember about these ducks that's incredibly important. even though we've had an increase in overall field abilities and technology, we're still seeing a drain off about 18 months into a deep well, which means most of these ducks

once they come online are merely to recover volume that will be lost from capped wells. this is not all automatically additional oil coming on to the market. >> kent moors talks about ducks, john kildoff, has he quacked in terms of the price? >> no, kent's awesome. on kent's part though i think there are a number of folks very embracing of the balancing act theory about this market. but i have fought, i have not embraced it whatsoever. i think, brian, i was on a couple weeks ago when crude hit $52 and took me to the wood shed about it a little bit. and i said i just don't see these balancings happening. >> i didn't take you to the wood shed. >> you brought yourself there. >> exactly. you were in the wood sh over the head a few times. listen, you were bearish, the price spiked. >> you're 100% -- >> and you stuck by your guns. a lot of people would have been, no, you didn't hear me right. i was bullish. we've seen that before.

>> your viewers deserve better than what i gave them for a coup weeks. >> if you find anybody right 100% of the time, i'm going to show you somebody with beach front property in arizona to sell us, right? >> nice. i've been hearing so much about the market supposed to be in balance, but it's not happening. what we're going to go through next year is that refiners are going to go into their seasonal maintenance. >> yep. >> and the little bit of oil that got taken out of storage for the past 12 weeks or so in terms of inventory reports is going to come right back on. we're going to have libyan oil coming back online, chinese demand falling off. that's still a disaster out there for me if you ask me about the oil industry. >> kent, i just -- because i love, just because i love, answer john there. he sees a lot more stuff coming on than evidently you do. >> basically because we're going to be seeing production levels

in the united states begin to decline. that oil debt crisis is about to explode. we have a number of companies that are drilling and producing like crazy just one step ahead of the sheriff. give us another couple of months, that volume's going to be out of the market. >> if i could say to kent's point, he's absolutely right. i think this next downturn -- i do think we are getting down to 35, we may go lower. this is going to be the knockout blow for a lot of companies, particularly here in the u.s. >> well, we got close. i mean, the equities of many of these names went down 80%, 90%. some of them have bounced back because they were heavily shorted. >> and also beyond kent's point i think this may even bring opec back together, the iranians and -- >> got to go back to qatar? >> yeah, baby. they're going to say let's get back together and let's reign production in. they may do the math and figure they can sell less oil and make more money and make more money.

>> that was a good conversation with dr. kent moors and john kilduff of again capital, soon to be named wood shed capital. with everything else going on do not forget today -- you just pointed this out, it's the start of a fed meeting. >> i'd forgotten completely. >> yes. we're going to have the decision in the fed's latest outlook tomorrow. tomorrow. right here on "power lunch." >> tomorrow's national scotch day too, i hear. >> they go together. we're back right after this. ntu, the earth needed to find a new way to keep up with the data from over 30 billion connected devices. just 30 billion? a bold group of researchers and computer scientists in silicon valley, had a breakthrough they called... the machine. it changed computing forever. and it's been part of every new technology for the last 250 years. everything? everything! this year, hewlett packard enterprise will preview the machine and accelerate the future. see star trek beyond.

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welcome back to "power lunch" everybody. i'm tyler mathisen. it may take a while before the uk officially cuts ties with the eu, but it could be feeling some economic pain before then. steve liesman is here with the results of a cnbc fed survey, steve. >> yeah, tyler, it's very important because while it seems like brexit is so far in the past right now, it is certainly animating the attitude of our response to our cnbc fed survey about the federal reserve and current policy. take a look here at we asked the question in the next 12 months what's the probability of recession, 55.1% for the united kingdom was the average among 43 respondents. that's very high. 38% for the european union. just 22% for the u.s. and i want you to think about the next couple slides in context of what amounts to

essentially a free ride for the u.s. all right, now, take a look at this one the likelihood of other countries leaving the eu because of brexit, 73% say it increases the chance. so that's a possibility that it could hurt the european union. but what about the overall effect on the economy? we've been using this scale of 0 to 10 for quite a while, i want to show you what happens here in the next screen -- do we have the next screen? yes, we do. well done, guys. just 2.8, this barely registers among main issues for the economy. 5.3 about middling for the eu economy and big number nearly 7 for the british economy in terms of how much risk or seriousness it for the overall economy. but then take a look at what's happened to the outlook for the fed. the average for when they think the next hike was going to happen was pushed ahead or later in the year by three months from september to now december. and the funds rate, the average funds rate forecast has come down for each of the next three years, 15 basis points for 2016, 30 basis points or a little more than a full quarter point hike is gone from the outlook.

and 39 basis points or almost from 2018 put it together and we see in our stock and bond outlook is that relatively higher stocks at lower bond yields. so the u.s. may be getting essentially the best of this from the brexit which is lower yields, less fed. but not a whole lot of economic impact from brexit expected to wash on the u.s. shores, brian. >> all right. steve, hey, steve, you know, listen, it's funny because on any other day -- tyler and i were joking that, wow, it's start of a fed meeting. we would have been all over this. if we have to dive in tomorrow, right, we get some big surprise, what do you think will be the one or two key things that should beat our headline on cnbc tomorrow? >> so i think the key will be the extent to which the federal reserve is comfortable with this chart behind me. and the reason is because the market has reset the expectations for interest rates. it had come closer to the fed and now it's further apart. so does the federal reserve, does the committee feel as a whole they need to lean against

the dovishness of the market? or do they need to claw back essentially some optionalty in order to hike say for example september into december. i think that's a long shot. >> i had a brain far there. so let me ask in a more clear way which i meant to ask you is has the fed run out of reasons to not raise rates in the next couple of meetings? >> they have their reasons, and they will give us their reasons, brian. those reasons are going to be they want to see the actual economic impact of brexit come through and see what happens in europe. see what happens in the u.s. i think there's also some risk associated with the u.s. election, but it's going to be hard for them to gain that. >> it all comes back to "caddy shack". >> which is? >> you'll get none and like it. >> exactly. >> steve, thank you. the economic impact of brexit will likely be a topic at central banks meetings in the u.s. and japan this week. so what is the market focused on? let's bring in brian beski and kate warren investment strategist at edward jones. kate, which of these two central bank meetings, japan or the

u.s., is probably more important for the market and the global economy? >> well, i think the u.s. fed meeting is probably more important, but the question will be does either of them do anything that surprises. if one of them surprises by either being more aggressive in the case of fed or by easing more or taking new policy in the case of the bank of japan, that will be more important. but i think as long as they do what's expected, both won't have a lot of impact. i do think the fed is more important though. >> all right. brian, same sort of question for you, which is more important? do you expect the fed to do anything over the next couple of meetings though? you do expect the fed to raise rates before the end of the year, which means december. >> we do. and i think any kind of rate change before december would be a surprise. you know, our issue with what's gone on right now is that it is so utterly super duper consensus that the fed is one and done. and the one happened last december. everyone is trying to chase

yield. and i mean everyone. it is super consensus the yield trade. and whenever we see that type of binary type investing, tyler, we really, really worry about that. so we think that the economy's improving. we think we might get a little bit of an inflation scare because commodities are actually up on a year over year basis. i think the fed could surprise people and that could happen sooner than most people are positioned for. so we don't really buy this whole fact that the fed can't raise rates before the election. >> how big is brexit to the -- in the fed's thinking, do you think? >> i don't think it's that big at all. i think it's more with respect to anecdotal, because at the end of the day they're looking at data. and growth is improving. we haven't seen a brexit hiccup with respect to growth. so i think they're waiting to make sure we don't see one and then i think that's where we see the surprise. >> kate, what kinds of stocks do you like at current levels and in view of your forecast for the fed, which is no change this time, maybe they indicate that they'll raise rates later if the

economy continues to improve? >> yes, i do think the economy's improving. and i do think they will try to remind the market that they do plan to raise rates, but they're in no hurry to do so. in that environment we like dividend paying stocks, but it's not the high yielders. it's not the yield chasing that brian was mentioning. it's really the lower yielders that have the potential for dividend growth. what you want to look at are the companies that have the ability to grow dividends over time. and we like companies that have international exposure. we also like ones that are tied to the places consumers are spending today, we think those kinds of companies will be able to perform well regardless of the interest rate environment. >> one on your list, and i like your thoughts, is apple down for the year, big earnings coming out later today. we had a big debate about it. some people thinking that the iphone 7 is going to be a catalyst, others saying not so much. >> well, we think the iphone 7 is likely to be a catalyst. we also think people are underestimating the impact of the apple watch and the apple music that basically what we're

seeing is a broadening out of sales of apple. company has incredible track record and traction with customers. and we think that will help them generate growth over time even if it's not in tonight's earnings. >> money into stocks, money out of stocks right now. >> into stocks. well, i think at the end of the day north america is beginning to reap the benefits of additional volatility would say in emerging markets and europe. and so as such we're starting to recognize again america has the best companies in the world. so at the end of the day we think the three hallmark sectors in america, namely financials, consumer discretionary and technology, will be the biggest benefactors any kind of rotation out of these high yield areas that have clearly outperformed. from strategy perspective, dividend growth cash yield is the way to play dividends. >> appreciate it, brian with bmo and kate with edward jones. go to powerlunch.cnbc.com right now to see a stock kate says is

a good dividend play. and we'll have full fed coverage tomorrow here on "power lunch" mplgt it's under the radar name flying soaring almost 30% this year and analysts expect it to go higher. that and two other big calls. street talk is next.

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a solo quick version today. here we go, first stock, southwest airlines. ever corps isi upping it from to a buy from a hold. balance sheet strength and longer term revenue enhancement potential. in other words maybe some more fees coming in at southwest airlines. they note the stock is trading at ten times earnings per share. ever corps' target $47 a share. 23% upside. stock number two, sprouts farmers market. it's part of a bigger grocery call from goldman sachs. they upgrade sprouts from a sell to a buy. it's a two-level upgrade. pockets of growth exist.

they call sprouts an early stage disrupter p.m. they like the way the stores have the vegetables in the middle surrounded by vitamins. they note generally that leads to higher margins. in the same call they update g kroger to a buy. $29 target on sprouts at goldman. 24% total upside return. final stock jacob's engineering group, ticker jec. under the radar call. not a small company, $6.5 million market cap. citigroup adding them to the recommended list and bump the price target up to $60. the analyst likes the restructuring at jacobs and sees recovery in early cycle refining. in the same call citigroup removing chicago bridge and iron from their recommended list. so they're adding jacobs, and with that we wrap up "street talk." it is time for the other daily segment, tradi"trading n."

let's take a look at the small caps because even while the s&p 500 up 4% over the past year, the russell 2000 index is down about 1%. here now to discuss ari wald and stacey gilbert. ari, are you seeing continued weakness in the russell or a turnaround technically? >> no, we think small caps play some catch-up here and start to rally. now, if you're looking for small cap exposure, i'd steer you to the s&p 600 small cap index. it has more highly profitable companies in it, some higher quality companies, and it's done better as well. stronger trends to it. it's pushing up against its high from last year. we think it gets through and here is why. if you look at the underlying constituents, the advance/decline line has broken out to new highs. it tends to characterize a continuation in trend and we think it will lead price higher

higher. >> stastacey, primarily you loot the options market. do you see the same thing or a different conclusion around the small cap equities? >> both the etfs and options are almost as divided as analysts are. in the bull camp you have obviously u.s. economy, the argument that it is fairly strong. earnings improving particularly for small caps making valuations look cheap, and interest rates staying as low as they are. the bear camp is going to be the opposite on a number of sides there, that the earnings aren't getting as strong, interest rates are going higher, and there's a debt issue within the small cap space. in the etfs and options, it looks like it's fairly divided, although it is slightly more bullish here. we've seen about $2.2 billion of inflows in small cap year-to-date with almost half of that coming post brexit. within the options there's definitely more of a bullish lean to it, but quite honestly i would say that the trade is not contrarian nor is it crowded. it seems to be fairly mixed with a bullish bias. >> stacey and ari, thank you both very much. and as a reminder, everybody,

you can go to the website, the interweb. tradingnation.cnbc.c tradingnation.cnbc.com. coming up after the break, we're going to take you back live to the dnc in the phl. stick around. >> and now the latest from tradingnation.cnbc.com and a word from our sponsor.

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hurry up. that's what universities are telling their students. "the wall street journal" says colleges across the country now encouraging students to graduate on time. what a concept. or sooner. why? well, apparently low graduation rates for four-year degrees are hurting the reputations of colleges. "the wall street journal" says administrations are using financial aid and school apparel to motivate students to take full course loads and graduate quickly, not to mention less time in school means less student debt. i don't know whether it means less revenue for the schools though. >> it might. >> the longer you go, the longer you go, the more presumably you pay. >> listen, there are many programs that are now mandatory five years. i know at my alma mater, virginia tech, we have engineering and architecture

programs. as much as i love the school, all colleges y do they need to take so many electives. college didn't need to be four years. i had to take oceanography, which was a great class but it had nothing -- it was there and you have to take 60 credit hours of electives. >> i don't need to be well-rounded. >> but you are. you're a political science guy. >> i was. >> so was i. what are we doing here? i don't know what we're doing here. >> speaking of college -- >> all right. michelle. >> speaking of colleges. >> go ahead. >> my fellow wellesley alumna is set to be named the head of the ticket for the democratic party tonight. we've been talking about bill clinton being the big headliner, but there's an official action that happens here at the democratic national convention. they do the roll call, and then hillary clinton will officially be on the ticket running for president as the first woman to do so here in the united states. getting to the head of a major party. >> you may have gone to school or at least a lot after hillary clinton, but he went to a school built by a president.

>> that's true. >> i had nothing to do with that. >> ridiculed in my obsession with "hamilton" the play. it would be thomas jefferson. >> it's going to be a big night down there, michelle. >> we're going to see what happens with the bernie sanders supporters and whether they're going to be quelled. that's the overhang drama. supporters hoping with the ousting of debbie wasserman schultz, with sarah silverman last night, bernie sanders sending out text messages, pleas, support the nominee, let's see if that gets his supporters to come in line so they can put forward a unified front. >> does he have that kind of control over them? >> that's what we're trying to find out. thus far, it hasn't looked like it. >> doesn't look like it no. it doesn't look like there's that kind of discipline because it's a rather disparate -- >> only sarah silverman had that

kind of control. >> michelle, we'll see you later tonight. later today from the dnc in philadelphia. everybody, thanks for watching "power lunch." >> "the closing bell" with more from the dnc and apple earnings and twitter earnings starts right now. hi, every. welcome to the "the closing bell." i'm kelly evans at the new york stock exchange. >> and i'm bill griffeth. investors prabracing for earnin after the bell from apple and twitter. after the close, we'll tell you what to expect and the impact that apple especially could have on the broader tech sector which we've already established is pretty big. plus, we've been talking about this for a while, but today a look inside tesla's gig ga faa factory. >> plus hillary clinton is hoping to appease bernie er