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tv   Power Lunch  CNBC  February 19, 2016 1:00pm-3:01pm EST

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ha halftime-portfolio in real life. >> i like this as a volatile play. because of the earnings and because of the christmas shopping season, simon, so watch this one next week. >> guys, thank you very much. have a great weekend. >> that does it for us. "power lunch" begins right now. >> welcome to "power lunch" all right. we have three hours left in the trading week. stocks are mixed. pretty indecisive, considering the volatile trade we've had lately. right now the dow jones industrial averages are lower by 58 points a. decline of a third of a percent. nasdaq is higher, a third of a percent. the s&p almost not worth mentioning lower by 3 points. >> pretty much like every day, michelle, for the last year-and-a-half, we are keeping
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a close eye on oil. oil right now down 4%, managing to hang on by its fingernails above $31 bucks a barrel. as oil has fallen, so too is gasoline prices. you don't need us to tell you that. you see it every day, aaa says it's now a buck 72. over the last year, everybody said those lone gas prices will give a huge boost to the consumer spend. so far, nearly everyone has been wrong. they haven't added it. jack allen says that's about to securities & exchange commission. he is here. jack, welcome. all right a. two-parter, one part is not enough for a man of your intellect. number one, why do you believe low gas will finally translate into better consume were spending? number two, if are you right, how do you profit from it? >> no, i think you're right, it's been this coil. what's happened is that just like the fed policy has really hasn't worked, households are taking this, the pump savings and using it to pay down debt
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and, you nope the baby boomers that were the big debt buyers or the debt holders in the early days are now empty nesters looking to actually downsize. so i think that some of these pump savings are going down to debt repayment. we're seeing mother-in-law debt off a trillion. consumer credit card debt off six or 700 billion. but, you know, the point is that one of the things we look at is the number of miles an american can drive on an hour's worth of work. so let me sort of disaggregate that, if i may. we take average hourly earnings. we look at fuel efficiency and ten we look at pump prices to figure out how many miles an american can drive on an, you know, a median hour's worth of work. what we found was as of the end of january, at 370 miles, we just hit an all time high.
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>> that high was reached the previous high was reached in 1999. early 1999 at 340 miles and that was when pump prices were 90 cents a gallon. so we don't have to get pump prices back to 90 cents a gallon to reach record. in fact, as i said, earnings are up two-and-a-half percent, regardless of what you will hear in the campaign trail and, of course, fuel efficiency, thanks to the teslas, thanks to just about everything else. >> right. >> is up pretty dramatically. >> jack, how do we unpack where we see the impact the most? initially i think when gas prices were going down, we saw the savings already or the impact on the convenience stores located at the gas stations, cigarette steals, for instance, people were trading up in terms of premium cigarettes as opposed to the cheaper cigarettes. what's the next leg here if you think this is actually taking effect? >> sure. so we're already starting to see it in restaurant activity. restaurant sales are up pretty dramatically for a number of
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reasons. as i said, discretionary income is up. but also millennials. this is a really a generation that is not into owning a lot of stuff. but they are into experiences and certainly dining out is one of those experiences that they enjoy. so we are seeing that pretty dramatic results across most of casual dining. >> so does that mean i should buy those now or. >> yeah. >> do i buyee owe what do i do with that in fgs? >> shower. so i this i that, you know, the kind of stuff that millennials are looking for would be travel, would be dining out. but i think the other thing that we have at least, what we're anticipating is at some point older americans will say our balance sheets are in pretty food shape. we will start to spend. we expect retail sales will ramp up pretty dramatic ally. one of the other things wire watching is consumer confidence against a backdrop of lower oil
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prices. confidents keeps rising and rising to a point now that historically it's equated to retail sales that where confidence is right now, we would expect retail sales activity up 5% year over year. right now we're at 2. last monthry tail sales surprised to the upside, last week i should say. that was the catalyst to that three-day rally that we had. i still believe that retails will likely continue to surprise on the upside. >> hey, jack, sorry to interrupt on you, buddy. . we got the breaking recount numbers. i do want to get a reaction as well. the numbers show a drop of 26 oil rigs. this is the ninth separate week that we have seen a drop in the number of drilling rigs. we had a drop of 29 last qe2. now a drop of 26. that's just oil, guys. just on shore, so, jack, we are seeing a decline in rigs. the price of oil not moving. people, of course, have been focused on the production numbers. 'an investor, you talked about
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how to profit from low gas prices. let me ask the inverse, are you anticipating oil will move up soon and are you investing for that as well? >> no, we're not anticipating oil to move up that soon. i think that a lot of the talk of opec and non-opec agreement appears to be just talk. you know, ron wants to continue to ramp up production to a point where they were before the sanctions were out there yet. i think there are still a couple million barrels away from that. so i do think oil prices will stay low. one of the things we like, i mean, high yield bonds look great. we talked about picking them up yesterday in portfolio. we decided against it, given that 15% of the high yield bond market is alocated to the energy space. >> that's a great point to lead. because our next discussion jack, will be about high yield bonds. >> thanks, michelle. >> all right. speaking of which, moody's economist warning that the credit markets could be
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signaling a recession. he points out that the high yield spread is above 800 basis points. here's what that means. we've created this over simplified graphic to explain a spread. the bottom line is the ten-year yield. think of that what the u.s. government has to pay to borrow money. the top line with a huge curve, we've created for near explanatory purposes. it's in theory what it costs junk rated companies to borrow money. during economic times, lendsers are relaxed. junk rated companies don't have to pay that much more than the government. ist never gets as cheap as we've suggested there. we've done there to make a point. you move to the right, during bad economic times, junk rated companies have to pay more than the u.s. government. that's the spread you often hear analysts refer to. you can chart the spread. that's what moodies's done. take a look at this. there it is. look to the right the spread right now is wide. not as wide as 2008 and 2009, when we see that huge peak. its still more than 800 basis
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points, in other words, the u.s. government is borrowing at 1%, junk rated companies are paying 9% to borrow money. so what? well, take a look at the most recent recessions, moody's points out. when the spread is under 800 basis points, it has coincided with the recession for an impending recession. food for thought as we debate whether or not the u.s. is headed to recession. joining us on set, cnbc contributor, none of that is a surprise to you? you have been talking about the tightening in the credit markets for a while? >> certainly, absolutely. not only that, michelle, no single indicator can be relied upon to forecast a recession. you look at high yield spreads, interest rates falling. commodity pricescrashing. all those markets are sending the same message at the same time. it's a much more potent signal than one by itself. >> show me a concern there might be a distortion on the read of the spread because of what's going on in energy and other
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sectors. in other words the borrowing costs for an energy company would be much lieer than say a consumer discretionary company. >> you can say that in every discretion. always technology, 2008, it was real estate, which had obviously a much more bigger impact on the economy. can you go to various different economic cycles and see the spread was in the late '70s, early ''80s. it depends what your greatest exposure, what does that mean regionally and nationally. >> let me ask the same question to mellissa, using the other kooid side of the chart. i like that chart. it's nice and simple t. high yield spread going up because of energy, can we also argue that maybe it's different this time on because of the treasury yield may be down because of all the central bank nonsense that's going on. it's not actually reflective of the market. >> it's always difficult to argue this counterfactual, brian. but were it not for central bank intervention, you have to ask
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the question, where would it be? one could argue they might be lower than they already are. so, no, i mean, interest rates falling even with central bank help, it's still an indicator of recession. if the bond market wanted to drive interest rates higher because growth was outpacing the fed's ability to tighten, we would see that happening and we're not. >> did the fed hint they were looking at this kind of thing in the last minute when they said the credit market is tightening? >> the fed hinted they're looking at everything again. >> would this prevent them from raising rates? >> i'm on the record as saying i think it's a one and done and we may go to negative rates in the u.s. following the rest of the world. so i think they're quite constrained in their ability to move any time this year, certainly higher. they either freeze or go lower again. >> to mellissa and brian's point, he says he likes high yields right now, as long as you exclude energy. because a lot of high yield has gotten punished when he doesn't think it should have.
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>> well, it depends how we are leaded to a recession. that's when you -- >> do you think we are? >> yeah, i do. i think the risk of a cyclical recession and a cyclical bear market is quite high and the risk of a cyclical recession this year is also higher than most people. >> i agree, there are lots of big flashing red lights that signal an economic slow down. but i'll also say that no recession in the last 50 years has been preceded by oil falling? >> two weeks ago, accompanied by deflation either. so you have to go back to other periods. >> the only recessions we have had in oil is spiked. then we have a recession. never had it when oil is crashed. you say again maybe it's different this time? >> i think oil this time is a symptom and a cause when we saw oil shocks in '73, '74, '79, other periods in history. few go back to the '30s here, if you look at japan, oil is impooerl material in terms of
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what fed their inflation. the feds are noticing it's the single biggest issue out there. >> the cpi numbers don't sort of resolve the inflation. >> i think cpi is unduly influenced by rent, more than 60% of a company lives in a home. when the owner's rent goes up, that drives the cpi higher. the deflator is still running at one and a quarter percent and has for 26 quarters in a row. i think the cpi is the wrong -- >> on that note, do you think it's time for the st go, okay, i'm going to do a little method acting here. this is the government official inflation measure. do you feel it's time to do that? because all the stuff we talk about doesn't seem to reflect modern life. put cell phone bills on measure of inflation. more in terms of college tuition. i know health care is on there. add that up, ramp that up. it seems we're getting into the inflation numbers are this. nobody cares because they know the numbers are built in the
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1870s. >> fuel prices are higher. rail cross cost are lower. >> if treasury inflation forwards the break even so-called break evens are pointing toward lower inflation, that tells you in the aggregate bobbled market investors are expecting lower deflation. that's probably a more reliable way to look at inflation than the actual data we get from the government anyway. >> thank you, ron. you get more at cnbc.com. all right, let's go to seema mody for a market flash. >> terex is halting all work on a deal with konecranes. that's a bid from china zoom line. they say the terex board will decide which ones they want to pursue. the merger had been announced
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back in august. we have to see which company they go with. >> seema, thank you. here's what's on your menu for the rest of the hour. up next, one of tech's hottest incubators, plus, security expert john macaphee says the fbi doesn't need apples to unload the san bernardino terrorist iphone. macaphee says he can do it himself. he will join us live ahead. we found starbucks and the three things that caught our eye this week, it's all ahead on "pourer power lunch cftc stay with us. have earned the very best service in return. . wer power lunch cftc stay with us. . power lunch cftc stay with u. . "power lunch cftc stay with . .
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. what's going on in silicon valley these days? venture capital funding fell by 30% between the third quarter and fourth quarters last year. only nine companies joined a unified company in the third quarter. are we seeing the end of a unified quarter? they are invested in over 1,000 startups. dalton, great to have you with us. >> great to be here. >> what is going on in the funding, is there a twitter effect out there? people are gun shy oput more money to work here? >> yeah, i mean, you definitely see the psychological impact of it. especially on the later stage companies. we fund people in the early stages. so, strangely, we're happy about it. a lot of the best companies get founded during slow downs. we've seen the cycle happen. it happened in 2000 and 2008.
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and so on the earliest stages, it's fine. delaware, if you are a company with high burn, if you have a lot of employees, not make enough money, a lot of people are worried out here right now. so, yeah. >> hi, dalton, it's michelle. thanks for joining us. it seems everybody from the west coast, silicon valley, particularly san francisco, when it comes to the apple situation is siding with tim cook. are you one of those? and can you explain why? >> yeah. i think i am. i think when you deal with very complicated technology problems and the way that they, the way that the law affect. s them, companies that are forced to comply with these sorts of things end up opening huge back doors which can net be bad for consumers. my concern is a slippery slope can open up if they comply with this. it will be another thing that comes up in a few more weeks or
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months. while i definitely understand in this specific case why people want apple to help unlock the phone, i do tend to agree with apple's perspective. >> i'm all for privacy, at what point does the common good outweigh these concerns about privacy? if we know there could be another terrorist plot that could be derailed if he unlocked a phone, you know, where does your privacy argument fall here? >> look. i totally am sensitive to your perspective. i just knowing the more, i'm a technologi technologist. the more i understand what the government is asking apple to do the more i appreciate this is an extraordinary task. if they were to comply with this sort of request, they would end up again opening up back doors that could potentially cause a lot of net badness for the world. that's what i'm concern e concerned about. >> i don't know if you saw yesterday, dalton, venture
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capitalists. they were all on. it got a little heated. i sort of suggested silicon valley is a little hippo critical in that so many of the kreinture companies business model is basically selling us, we are the product. they don't have a business model. except for mining data and information. what's the difference between these sort of privacy funded models, i don't know how to say it and the apple-fbi dispute? >> sure. i'm actually, i've rin blog posts that have exactly your perspective. you happen to have a guest that agrees with you in that i'm pretty cynicable about supported models. i don't love funding things, especially if i not privacy friendly. so i agree with you, there is a deep hypocrisy, if you are making money from pulling people's data but refusing to turn it over. i think in this case, what it comes down to is the technical burden put on apple to comply with that measure is a very high one. they actually have to create a
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brand new version of ios specifically to unlock this key. again, in my opinion, that does lead to a slippery slope. that's not just suppcomplying. i think the devil is in the details what they are asking in this case. >> human beings are priceless, we're all special in our own way. dalton, how many am i worth? how much, when you go in to fund a company, is an individual's information, where i shop, how fast i drive, what i buy, how much am i worth to silicon valley? >> i think you are worth very little as an individual. what is valuable to companies like google and facebook is your intent to buy when you want to purchase. in general, just having a dump of all your data, i don't think that is inherent. >> it looks like he was going to cry. >> many my heart. >> you have done, like my
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parents. you are worth very little. >> finding out that what a person is going to purchase is built on their patterns of behaviors. that's where big data comes along, you can process where brian has song gone and have a decent prediction where he will spend his next dollar, right? that way he's worth something? >> i think you are right. off the top of my head the average revenue of facebook per year is somewhere in the $5 to $10. your quick stream is five or $10 bucks a year. i'd have to look at that. it's on that order of magnitude. >> just like telephone companies do? >> they report it. they sure do. yeah. >> is the ad supported model dead, dalton? >> i mean, they're struggling with a small percentage. it's a very small percentage of the things we fund, just in our total portfolio. we funded 126 companies in the
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last few months, i would estimate 500 reported. >> is that a lot, a little, average? >> that's a lot we run it high scale. which fund over 500 companies, at early stages. in our case, yeah, it's a pretty large batch a. lot of what we are doing now is biotech, health care, business-to-business, enterprise software, pure play. supportive is a small part of what we think about. even though i know it gets a lot of attention in the consumer press. >> getting back to biotech. >> that seems to be a big area for you. what has the fair note effect been on you? they are looking at biotech start-ups with a more skeptical eye now this whole fair note thing is blown up? >> yeah, i think so. what is really interesting to me about that case is that i have personally heard whispers about some of the stuff that became public several years ago. it never actually got printed or i never read about it in the
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press. there were definitely rumors of there being issues with how real the technology was. frankly, i don't know, maybe it will all turn into a happy story for them. i do think that folks are very skeptical of not showing progress in the field. folks are very skeptical of founders and companies, they're very secretive about what is proprietary about their business. i think you will see, a higher level of skepticism when someone claims to have something possibly too good to be true and wanting to see basically early results. you will know they got far along and raised a lot of money before they had to show what they were up to. >> when you say you have funded 126 companies, how much do you give on average and what is that process like? is it all kind of the same? >> it's all kind of the same in early stages. we, every company, we have a standard yield, every company gets $125,000 for companies at
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the early stages, often when it's an idea or the founders and they're trying to put their prototype together, that's the stage when we work with companies and some of our most famous are airbnb and drop box and stripe. so we order the earliest investors and work with them at the early stages we're lucky those ones worked. there already lots of ones that work as well. >> something will stick. dalton, thank you. >> thank you so much. >> he said i wasn't worth anything. >> i have no value. no value as a human being says dalton. >> he said very little value. not no value. >> that's better. >> a warning for the millennial investors out there. you are doing crazy stuff. they know that. plus, heart stopping video captures a helicopter falling
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can a a subconscious. mind? a knack for predicting the future. reflexes faster than the speed of thought. can a business have a spirit? can a business have a soul? can a business be...alive? welcome back to "power lunch." of course on the floor of the cme. how does that fair for the
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markets? let's look at two-year note deals. six up on the sex, 30 on the year, let's look at ten. tens up two on the day, unchanged 41 on the year the longest span, which is somewhat ignoring the dynamics that pushed two-year notes up. most likely, the fed is paying more attention on the growth. if we look at the euro versus the dollar the euro is higher. look at the dollar versus the yen. the dollar is lower. the yen is lower. this is significant. because everything that's moving the yield curve should most likely be positive for the dollar the carry trade continues to unwind and befuddle a bit. after all that, i will tell you this, "power lunch" will return in a little more than two minutes. (patrick 1) what's it like to be the boss of you? (patrick 2) pretty great. (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done?
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(patrick 2) that's the kind of control i like... ...and that's what they give me at national car rental. i can choose any car in the aisle i want- without having to ask anyone. who better to be the boss of you... (patrick 1)than me. i mean, you...us. (vo) go national. go like a pro.
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>> they s&p cites icahn investment portfolio losing a significant amount of value in the last several months. s&p pointing ut the increase. it's important to note any rating cut from here would be junk status. something to watch. >> according to s&p that amount is $1.4 billion in lost value on icahn enterprises since september 30 object of last year. >> this is a publicly traded limited partnership. >> a lot of oil and gas in there if i recall correctly, right? >> what he has been holding and adding to his position. >> free port mack. >> pa lot in the material space. these can be perceived as values. so far they have not broke. there has been one way only on these trade.
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it's been down. >> he's been early maybe? >> timing is everything. >> early can be wrong. >> they're not all winners. apple and netflix in the past. >> prior to several months. but take a look at iep. >> that stock is down over the past 12 months. at its pique peak in 2013, it was $144. so this thing has gone down by more than 60% since its peak in 2013. that's the degree in terms of deterioration. >> it's interesting, normally we don't talk about a stock and its loan portfolio. this is not a company, it's an investing in other companies. let's not forget, they spent a lot of money on pet boys. icahn bought pep boys. he owns 82% of that company. they spent a lot of money on pep boys and a big investment in xerox recently as well. obviously, that company will split in two. we'll see what happens.
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>> that energy could come back. >> it could be early. >> it could be early in the year. >> if you have enough capital, early is okay. if you don't, early can be really wrong and really back. >> let's get another news update. sharon. >> brian, here's what's happening at this hour. u.s. warplanes carried out airstrikes early this morning in western libya. the military says the attacks targeted a senior tunisian militant linked to an attack last year. local officials said they hit a bit building in which at least 40 people were killed secretary of state john kerry expressing concern. police arresting him as early results in the country's presidential election showed the incumbent set to extend his 30-year grip on power. kerry called on the government to reign in their security forces. today is the deadline to get drones registered with the faa. it applies to owners of all
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remote controlled aircasts that weigh at least nine ounces, so far more than 320,000 people have registered. a rare copy of a comic book with the first appearance of spiderman has sold for a record price t. 1962 edition of "amazing fantasy" number 15 sold for $454,000 to an anonymous collector. the seller bought it in 1980 for 1,200 bucks. that's the cnbc news update at this hour. back to you. >> that the a nice profit. >> thank you. the metals market closing for the week. take a check on gold with all the volatility in the market. gold had a fairly flat week. it is up half a percent. for the week, down .6 of a percent. the more industrial oriented metals. the biggest decline for palladium. can we talk about the stocks and investment? >> are you on the comic book?
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>> i am a comic book kid. bought it for $1200. sold it for $454,000. the return was 37,000 percent. >> how long did he hold it for? >> 35, 36 years. >> 1980. >> i'll take it. >> you'd be hard pressed to find. i'm sure there is a few net flicks. let's put it this way, spiderman is a better investment than most american corporations. >> not very liquid. >> you are welcome, america. especially not the web. >> all right. despite the mixed performance today, it's funny. the dow, the s&p, the nasdaq are still on track to top their biggest weekly gains this year. is the worst snoefr over? joining us are the vice president and portfolio manager at rockland trust and president of wealth management. guys, good to have you here. kevin, i want to start with you.
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because you like exxon and i'm wondering if that's a way to ask the broader question here that the worse is the over? if you are willing to buy exxon, is the war over for the market? >> well, i think the worst is behind us. i don't think it's completely over. oil prices are still under pressure. more cap on oil output at record levels. that's not going to help the oversupply problem. it's going to exacerbate it more if we have to get production out of opec. we like exxon from the flight to quality perspective. it's a solid, integrated oil producer, solid bounds sheet. 10% debt to capital ratio. and it could be the beneficiary of a shakeout in the energy sector. companies that are not going to survive this kind of a downturn in energy prices, like an exxon quality will be able to do. that by the way, paying a
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dividend, still is buying back shares, although it's buying back less than it has in recent years. so they've got the good solid cash flow in oil prices. i guess, candidly i don't think it will last forever we will stay at 25 or $35 per barrel, prices will rebound, not to $100 levels yet. >> matt, you like alphabet what we used to call google. why are you buying that here in this time in the market? >> we did well with it. lately it's about a 10% pull back from the broader market. googles is growing those earnings at 17% per year for the foreseeable future t. market as a whole is trading 15 times earnings, really with no growth. they have a new cfo in place they are doing a good job of reorganizes the company. the only knock is how are they managing the finances? with the inflation, it's a core
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business as well as the moon shot businesses and she's doing a good job. there will be more clarity around that that's a free option on the stock. we'd buy the stock if there was none of. that you add that in. >> tell me about mckesson in the health care space. down 32% over the last year? >> we are looking at beaten down growth companies non-cyclical. it's 37% over pfizer last year. it's a company that's been tremendously run. it's the best in its space, pharmaceutical distribution, trading 11 times, the cheapest it's been since the financial crisis. a lot of the noise around the stock is customers merging. cvs bought the target in stores. >> we got to cut you off. so sorry, matt, kevin, we have to go to eamonafters. apologies. we'll have you back. >> the department of justice has now filed motion to compel apple
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to comply with a court order in this overall fight over whether apple has to allow the fbi access to the terrorist syed farouk's cell phone. the fbi has been trying to get into that phone for months. apple was the subject of a court order to forbes them to comply. apple says it will not comply in public statements. now the department of justice in an aggressive move here, timing a mention to compel apple. what's interesting here, guys, is that the department of justice did not wait for apple's official response in court. they have until february 26th to do that. the department of justice putting down a marker here, filing this motion to compel. i can tell you the government feels very strongly here, this is a terrorist investigation and there is no reason now not to know what is on that phone as they try to figure out what happened in one of the worst attacks of terrorism on u.s. soil in american history, guys. >> so do i understand correctly, this is above and beyond what we expect it to be in the typical
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legal process where apple files and the government comes back, all the other stuff we expected? this is now a more intense step suggest that time is of the essence, perhaps? >> i think it's fair to describe this as an aggressive move. we expect to get the court order. apple made a statement earlier this week and would technically respond on paper by february 26th. now, this is the department of justice not waiting here, clearly, there is a sense of urgency over at the department of justice. they would like to know what is on that phone and soon. they're making the points here, apple into evidence to comply with that order from the judge from earlier this week. >> i don't want to, listen, i have a lot of amount of lawyers. i don't want to speculate here. i'm trying to think of what the doj could do as a penalty if apple declines to. >> right. >> fight it out in court. it's a legal matter. >> apple can say. the doj can i assume come after
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them. this is what our guests said, this could end up in the supreme court. because this is just in a lowly circuit court in california a. district court in los angeles, a pa 9th circuit. if apple doesn't comply, we need to get a lawyer on the phone, if apple doesn't comply, what happens? >> have we had the doj comply for something they do not want to do? is there some precedent with that? i'm sure there is. >> you have to look up the question here. but clearly the department of justice filing this motion to combel. there the a legal process, a legal fight very intense going on right now. guys, there is also a public relations battle around this happening at the same. the idea that this fight is taking place in public is i think to the fbi's benefit in the public relations fight here. >> is it? >> the fbi is making the point very much this is a terrorist
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investigation. this was a killer who killed 14 people on u.s. soil. >> it's interesting say that. i wonder if it's because you are on the east coast. we had so many people on is the silicon valley, they are clearly on the other side. >> they could have filed this behind the scenes. they wanted this to be a public motion out there to get access to this phone. they wanted apple to be forced to respond in public to this. apple according to the reports out there. apple did not want to fightt. now it is public. tim cook went public, himself, with his statement, long and heart felt statement explaining why he doesn't want to comply with the u.s. government's request here. the fact that this fight is public means there is this public relations battle going on behind the scenes, in public. >> right on tv. >> behind the scenes. it's on tv, it's a part of the national discussion. there is a lot of intense
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interest from all quarters around the world. >> you said there is a proposal, a legislative proposal to bring criminal penalties against companies that don't comply. you look at how remarkable that would be. because there could actually be the one issue that would unite both side of the aisle. >> what's interesting here the proposal discussed by the senate intelligence committee, dow jones reporting yesterday, under discussion were criminal penalties. i talked to them today. what they're saying is they're not necessarily talking about criminal penalties. there is definitely a discussion going on, on capitol hill to force companies to comply with this and penalize them in some way if they don't t. question is, how will they work? that will be worked out. the idea that this debate is going in a correction that apple doesn't necessarily want legislation that would penalize companies for doing what it's
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doing. >> that seems to be what is at least starting as a discussion on capitol hill. >> now, so you know, did you ever get into a fight? middle school? >> 3rd grade once. >> i'm not going to say who won. now, here's what happened now, the doj was kind of shoving apple. now they've got apple against the wall. apple has to punch back t.doj is now calling apple's hands. it was mouthing off. now it's something that will have to happen. i believe if you are apple, now you have to fight back. i don't know if you will give into this because this could be a press tent set for all technology disputes like this for years to come and the doj is now, they've now basically backed apple into that hallway up against the hallway. they have to hit back. you were talking. i'm looking, it looks like the
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power is monetarily. they can basically continue to fine apple. you are talking finding the richest company in the world. >> with tons of cash. >> is there any amount of money that is going to compel apple to do anything? >> i do not think so. i think you are right. >> i think if they lose at the supreme court level, you can't, it would be stunning to see companies that simply defy the u.s. government at that level. >> few are apple, your apple is general council, let's ask on the table, if they are the head of strategy, tim dock, if i was tim cook, now i'm going to fight it. i'm going to say, okay, doj, we've made our line in the sand. if we go to the appeals court or the supreme kour, the appeals court could rule one way. >> i think feel he has already drawn the line. he decided once the letter was
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written, it was decided all the way. >> hey, we're on the examiner's side, the courts are making us do it. >> now they fight it an lose in the courts. >> do they lose in public opinion, though? if they win in the court of public opinion, then they've won as a consumer country. >> i think the only way to lose is to lose in court. >> i was going to say, the answer to your question about the court of public opinion are whether there are more people afraid of terrorism or more people afraid of losing tear right to encryption. >> the flipside is that if you are really afraid of terrorism, then you are afraid of terrorists getting ahold of the back door. >> right. >> that's the next step. if you are truly afraid of the terrorists, you will not create the keys to the kingdom, because you know what the u.s. government has been terrible at protecting its own secrets, how is it going to protect this ultimate secret? >> we have john macaphee coming
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up, that's his exact point he's so furious about the situation. look, i know he's controversial. but he describes this in the darkest of terms, this request from the government to apple. he says it's the end of the u.s. as a super power if they give into this. this is a huge battle going on between two very dominant ways of thinking about what the role of the government is in the united states. >> it's a huge battle. it's fundamental to the u.s. constitution and the founding of the united states itself. this has risen the whole debate about unhadn'table sizier in the british army occupying the colonys before the revolution. these concepts have been a part of american juris prudence for a long time. >> you are going to create a new software but constrict the workers? you must work for us? you have to do it? it's a big tall order. >> what the government is saying here is that apple must create a piece of software that will help them get access to the phone.
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apple doesn't have to crack the phone the way the government sets this up in its motion, this will be done at apple's office by apple engineers. they would access the phone and disable some of the systems like the auto erase system and allow the fbi do do what is called a brute force attack. they would be the ones metaphorically typing in the pass code until they get it. not apple. ultimately, they would have to create new software. >> that software, the government is saying that could live at apple and stay there. the government doesn't necessarily have to have it. they can analyze the data. >> we will ask john macaphee about that later. >> to your point, people might be listening in, thinking why is eamon javers talking about the revolutionary war. i'm trying to do two thing here. the base of the legal precedent is writs. i'm looking at a paper written
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by a law professor at the university of idaho. we literally could, it's a serious topic. in sort of a sad way, we literally could be looking at this massive privacy security fight based on a 1789 law. >> don't steal my cat. >> the system is antiquated in the way it thinks about technology. >> absolutely. >> a lou professor. airplane marie in idaho, if you are watching cnbc, calm in. we're not a call-in show. we all have phones. i'll give you michelles number, you got a pen? >> they're all encrypted. >> you bet. coming up, we just talked about it. this interview you cannot miss. you can't misz it. john macaphee cyber security legend, that's what he calls himself. >> self proclaimed. >> presidential candidate former
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bolivian fugitive. >> resident. >> he was hiding behind a bush is going to chime in on this. we'll talk about apple, the fbi, he says give me a couple dudes, i'll break into this phone, the fbi can hire us. he is apparently threatening to eat his shoe. 2:40 eastern, under an hour from now. john macaphee will join us. the news is this, the department of justice filing an order compelling apple to comply with the fbi and hack into that iphone used by the terrorists in san bernardino, california, a lot more to do, it's moving parts. we're back after this.
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>> welcome back. boeing receiving words it received a u.s. license to hold talks with airlines in iran, just as their competitor airbus has done.
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they stopped lower by 3 bucks, once again, getting the u.s. license to hold talks with airlines in iran. we'll be right back. .
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>> in 40 minutes an interview
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you cannot miss, john macaphee,
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self proclaimed cyber legend, former bolivian fugitive says he can hack into that apple phone if given a couple smart guys. he is our guest in 40 minutes time. that will be a barn burner interview. we are back after this.
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welcome back to "power bun u lunch" we learned am is insisting with the unlocking of the phone used by the terrorists in the san bernardino shooting. with us on the phone is a privacy attorney. palm, it's great to have you with us. >> great to be with you. >> what can apple do at this point? >> well, there are a lot of things that can happen at this point. number one they will pose this immediate request ordering them to do something. this is still in the early stages. there is probably going to be several round after this as they make their record. that's very important the reasons why they feel this is improper to ask them. >> are there precedence? >> there is a lot of precedence where industries and companies are forced to turn over information. what's interesting in the
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technology area, usually these companies your so-called legacy carriers have traditionally cooperated voluntarily with the government. what you see now is some of the newer communication companies like google, apple, are making more of a fight. i think that's as much for business reasons as it is for legal reasons and trying to draw a line in terms of what information government can access. >> we are showing, the headlines says the department of justice is filing to compel apple to assist the fbi. just because they've done that doesn't mean they have to, right? >> correct. >> if you were advising apple right now, what would they do and at what point does it get to where they have to do it? >> right now, this is gefl not an order yet. what this is seeking an order compelling them to do it. radio it now apple will commit papers to oppose it. there will be a decision and probably whatever that decision is, the losing party is going to appeal it to a higher court and
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i think this has the potential then to go to the u.s. supreme court. because there are so many issues that it raises. >> even if apple loses in the first round, they appeal it, it keeps on going? >> absolutely. . apple is concerned, too, about unleashing this technology into other hands, for example. it's not just a question of what happens in this case. why is that important? whether it gets into the hands of competitors, for example, that's a business issue. whether foreign governments can then order them to do the same thing. remember, you can be dealing with governments that are hostile to us, seeking to gather access to iphone information also. >> paul, this is a very different thing, looking in a commercial break, trying to scan through old cases, anything semi analogous to this would basically be the government saying turn over information, the case of microsoft in ireland, getting data off a server in ireland. last year they got a lot of attention basically compelling a company to hand over something.
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this is very different. >> it is very different. >> it is the government telling apple you have to build something. i don't know if there is a precedent for this. >> i think ryan, that's definitely the key distinction in this case. you are forcing the company to do something. for example, there was information on an island or some underground locate in the ocean, you are forcing the company to build a boat or submarine to get there. can the government do that and force the company to take those affirmative acts? and the answer may be, it depending how burdensome it is. >> correct me if i'm wrong, palm, in criminal case, i do damage to somebody. i got an e-mail, gmail, google has it on their server. they can compel me through perhaps a warrant to turn over that e-mail content. >> they have done that. >> and those case, i don't want to say are settled, but there is some sort of a process. this would be a case of them asking google to build a new
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e-mail system. >> exactly. >> have you heard anything like this? >> i have not. that's why this is an important case. you are saying how much farther beyond producing what you already have do these telecommunication companies have to go to respond to a government request for information? again, because the information now jay days isn't necessarily a piece of paper or a document. now are you talking about having to develop software insistence. one of the things apple probably argues that is very burdensome on them to force them to do that. and companies shoum not be forced. >> that may be one of the lines that a court is going to draw on this case event whquaventually disclose proprietary information to benefit a government request. which again traditionally as you point out, if the information is on a server, they're going to have to produce it. >> so this is a legal fight. it's a policy fight. it's also a pr fight. inevitably, all these conversations go to this point, palm, which is what if there is information on that phone that
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could prevent another terrorist attack? if you were defending apple, what do you say to that kind of argument? >> i would say, look, you can go into certain houses in this country, open the door to every house in this country to look for information to stop and attack. but we don't do that, we don't say you can just walk into somebody's house, you have to have reasons. there's limits to how far you go to provide safety. >> the fbi, paul, saying we want keys to this one house, not to every single house. the owner of the house is dead. so why not open that door for me? >> the owner is actually county. >> what they're saying is this opens the doors to everybody's phones. we want to protect the privacy of our phones like your houses should be protected. >> what is the most compelling argument? i thought the one about foreign governments could then ask the same thing, who may be hostile to the u.s. could ask for that same key to the kingdom that you are getting it's scary. >> there are several.
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one, this opens the door to hostile powers getting the information. it opens the doors to criminals getting the information. the burdensome aspect of this i think there is many good arguments. sort of the slippery slope argue, too. where does this take us in terms of other requests for information? again as tim dock pointed out, there is information concerning medical history that we carry on these phones, this, too, will be accessed at the same time. >> this isn't a request for information. this is a request for the construction of a product. >> and i think that's where the legal determination has to be made. can the government do that to a company and force that type of conduct to be taken? >> we don't know if there is information on that phone. the phone could have nothing. obviously. it could have nothing on it? they just compelled apple to build a whole new system to unlock a phone that contains no useful information. >> apple points out they're using this law from 17 yievenlt it's an old law t. constitution
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is old. we still use it, right? the fact that it's old doesn't necessarily mean it's wrong. what is it about apple's concern that the use of this writ of 1789 is problematic and that they were using it in a way that is overreaching. can you explain that in a simple way? >> again, that old 1789 basically says the government can require a third party to help law enfosterment. what apple is saying, look, now you are dangerously expanding what you require a third party to do. again, are you going to make us build under surveillance software to help us, again, spy on people or gather their information? so again, it's a question of limits, like so many laws. but the amendment is old also. we have to interpret old laws all the time. >> and it's really from a legal perspective, fascinating. there is a couple things here let's say that apple gives in or loses, i guess, paul, you could see a situation where the government could then come to apple or google or samsung or
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anybody that's got anything when krichgs on it and say, we think this terrorist has information on his phone nothing's happened yet. now build us a product to get in. this is expost facto we're talking about. i think the fact that a crime has already been committed, excuse the legal thinking or the emotion on this, palm, versus ifch a him loses, the precedent maybe then could be used to say, oh, by the way this guy, we think we got some good information, can you build us that? that's where the risk is, correct? >> that's correct again from the government point of view, this is a good case, because it is a dramatic case. >> the motion had people on their side to say, dam it, 14 people were killed. but, palm, would you? if you were the general council of apple, what would you had advise them to do? >> i would advise them to fight it. i think, number one, it is an unsettled area of lawsuit. also, it does have potential risks to the company from a
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business point of view. i think it could require them to divulge proprietary information that could get into the wrong hands. i would think that even if they lose this case, many know this company will stand behind them in trying their best to protect their privacy when that happens. i think the concern you saw a few years ago when icloud accounts as several celebrities were breached. again, that really created i think a security issue and perception problem for the company. so i think a company wants to show it will do to protect accounts of individuals or celebrities. >> imagine if the chinese government said, you need to give us information about the terrorists. >> exactly. >> we have information about a potential plan. >> he's not a terrorist a. dissident. in their eyes, he's a terrorist. >> that's right. >> a slippery sloechl thank you so much for joining us. we appreciate it.
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>> my pleasure. >> let's hear from a chief strategy it. mark, we were going to have you on to talk about all kind of stuff, stock picks, the economy, whatever. given this news as an apple shareholder, what do you think of the case, do you care about the outcome? just from a purely investment perspective? >> bryant, i think your previous guest hit on a lot of important points. at the end of the day from an investment standpoint as you had mentioned, i think the worry would be the competitiveness of apple. should they be exposed to divulging something that could actually cause users to turn away and use a competitor's phone, they're more protective the privacy of that user, that could dissuade further purchases. in addition, it could open them up to precedent that other governments step in and act the same. necessarily it's for terrorist reasons or otherwise, it could be to steal competitive information. copywrite information, encrypting device information that allows their competitors to step into apple space. >> if apple is compelled to assist the fbi, then all
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companies will be compelled to assist, therefore, leveling the playing ground, correct? it will not be a competitive disadvantage, necessarily? it won't cause me to become a samsung user in everybody will be compelled in that sort of case? >> that will be the key. if they decide to expand this, we are looking into an apple phone because it was a device used for the san bernardino case to something we are going to expose every competitor in the u.s. market to level the playing field such that they're all subject to the same scrutiny, then i'd feel a lot better from an investment standpoint. >> there are bigger fish to fry, thoerk when it comes to the apple investment case, correct? how does this rank in terms of the thought that the upgrade cycle is dwindling, the thought that they don't have the next big thing. then you have this. where does it all rank? >> well, i think that'sest dent in the share price of apple. after launching the iphone 6, wider screens the plots, bigger screen yet. we know there is a dearth in the product cycle at the moment t. watch is out.
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we'll wait to see what comes next. whether it be tv, cars, this product vacuum caused pressure on the stock trading from where it's at to its highest. even though it looks cheap and emits cash the question mark remains, what is it doing with the cash and how will it monetize shareholder value going forward acquisition or otherwise, so that's the risk at the moment. what's the next killer app? >> mark, thanks. coming up, we'll hear from security expert john macaphee, get his take on all of this, believe me, it already colorful. "power lunch" will be right back.
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man 1: [ gasps ] man 1: he just got fired. man 2: why? man 1: network breach. man 2: since when do they fire ceos for computer problems? man 1: they got in through a vendor. man 1: do you know how many vendors have access to our systems? man 2: no. man 1: hundreds, if you don't count the freelancers. man 2: should i be worried? man 1: you are the ceo.
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it's not just security. it's defense. bae systems. >> choice hotel stocks getting a bump, as the hotel is expanding into more territory, growing concern over the zika virus is spreading. hawaii declaring a state of emergency. the president and ceo joins us. steve, good to have you here. >> thanks for having me. >> i want to get to all those things. i feel compelled to ask you as a corporate leader, this is a national discussion i think we all put ourselves in the place of the fbi and mentally also in the place of tim cook. what would you do? >> well, i'm a little biassed. my father was one of the founding members of the national security agency. i think you can figure out where my opinions are. >> articulate for me. >> so i think when you have an
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individual circumstance under these conditions. i agree there is a big concern it's widespread. this is as specific a circumstance that i think they should end up trying to help the government if it is not an undue burden. >> what if it means, though, that criminals and everybody else can get ahold of this, the chinese government can get ahold of this these so to speak and demanding it? >> i think that's the whole point is you have to use judgment and allow this to be a point in time where you say this is isolated, we're going to be careful where it occurs and we're not going to allow it to spread. >> how's the hotel business? >> it's much better than this conversation. there is no win to that question, by the way. >> right. >> actually, we had a terrific year. we wrapped it up yesterday with our earnings call, it was well received. we've given our folks the speech, it's back to zero. we got a number of exciting things going on. >> we have commentary, steve,
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from priceline on the commentary earlier this week getting at the sense they are seeing people spend more because finally they're feeling the impact of lower field prices. is that what you are seeing? should we expect another push? >> clearly for us. we represent the 99% who drive to their hotel location. it is like a pay raise for our customers. therefore, as a result, we are expecting a huge summer to come. we made a lot of new challenges changes that are exciting for millennials. we revamped our program to make it millennial attractive. which means, basically, when you show up and join our program, you get freebies from the very beginning. >> oh my gosh. they got trophies. >> instant gratification. anti-millennial thing going. you know what, i tell you what, though. >> for everybody in our audience under 30. >> what's funny about it, the boomers like it, too.
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we like all this stuff. we wouldn't ask for it. >> people like free stuff. i will ask you, to continue on that line of questioning. when you do your projections, i understand gas is cheap. people will order a second dessert or spend a little more here and there. are they going to travel more? is anybody going to take a trip? are you guys anticipating selling more home rooms because of gas or are people going to upgrade on a trip we will anyway? smr we found out when people felt a little pinched, they would eliminate a people, not the trip. what we're hearing now, i will take more trims than i would have taken normally. >> you are projecting that if some family out there is actually going to go somewhere they were not going to go before gas prices fell? >> well, gas prices have been down a while. i think what people are saying instead of taking one trip for three or four days to a park. i'm actually this summer, i'm
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feeling good about my job and feeling good about my personal situation because i have more discretionary income, i'm going to take a little bit more vacation this time. which translates for us into more hotel rooms. >> your crt looks different than most other charts right now. >> it goes both ways. we're very excited. >> can i ask, before you go, zika, the spread of it the caribbean, we are see income hampblths you got more hotels in both of these areas. people are slowing down their travel. are you seeing a hit in those specific regions? >> we have not seen that yet f. you follow these circumstances as it persists, if it gets bigger, you can clearly expect some impact. right now, what we're doing, unfortunately, we're good at this we're monitoring it very closely. we're being very clear with our commerce about what they should be doing and so as a result, this is just not us. this is the whole travel industry. we've gotten good at dealing with these kind of situations and what you got is you stay
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alert to all the information being provided by the world health organizations and cdc and everyone else. you are aware of where it's occur. then you do whatever you need to do to make sure your customer versus the best chance of staying safe. >>ly go south on a limb. i have stayed in choice hotels more than any other cnbc personality combined. >> now do you know that? >> because i ride all over the country. i am in places like youngstown, ohio, south carolina. >> next question. >> you guys know, i'm going to give you a promotion, you are known for value, 129 a night. >> or 60 in some cases. >> steve sit tight. we will come back. we have breaking news from eamon javers in washington, d.c. what do you got? >> bryant, that's right. in the last couple of minutes, we heard from the white house, press secretary jon josh earnest was asked whether they could support pending legislation on capitol hill that would impose some kind of penalty on
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companies like apple that don't comply with a court order in encryption cases. here's a little of what the press secretary had to say. take a listen. >> we don't want to allow the terrorists to establish a safe haven in cyberspace. the good news is that technology companies don't want to see them do the same thing. there are some people that lost their lives, patriotic american sids who lost their lives. >> josh ernest not taking a position on legislation. he says he hadn't seen anything in writing, couldn't comment on it. the folks in the senate intelligence committee are considering writing something. it's unclear that is the direction of the debate here in washington that apple doesn't want to see. they don't want to see legislation on capitol hill that would force them to do the very thing they're fighting in the courts here. >> thank you very much. quickly back to steve joyce, choice hotels. my point is, you are known for
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value, why am i looking at a kond mind minnium in bear -- condominium in bear lake, california? >> they're not high end. we have moderate offeringings, we will have a wide rage of product that starts from very value oriented to as separational. we want to provide an option for all of our customers to enjoy their vacation longer term stays with us as well as on the two and three-night travels. >> steve, got it. thank you so much. steve joips, choice hotels. thanks, for sticking through the breaking news. >> glad to be here, thank you. john macaphee says he can unlock the apple iphone and is offering his team services free of charge in a business op ed. he writes, i will, free of charge, decrypt the information on the san bernardino phone, with my team, we will primarily use social engineering and it will take us three weeks.
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if you accept my offer, you will not need to ask apple to place a back door on its product, which will be the beginning of the end of america. the often controversial outspoken john macaphee joins me now with details of his offer. john, i want to get to your offer. first i want to explore a little more of this idea that you are so concerned about what the government has asked apple to do. you say it's worse than handing over the code for nuclear capability to the chinese and the russians. you say it would be a dark, this is a black day and the beginning of the end of the u.s. as a world power him really? you think it's that high a stakes situation? >> well, listen, a back door to encryption is a master key, it's in software. you can make a million copies of it for free. there has never been a back door that has not been hacked into by bad hackers or firestoor foreig
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nations. what apple is making every individual who uses an iphone susceptible by bad people, foreign governments and anyone who wants were. it's not just the fbi. here's the problem. the fbi sed says, well, we can keep it secret. utter nonsense. there are no secrets. there are none. there is always a bad apple somewhere. you know there won't be just one copy, there will be hundreds of copies. the more copies there are. the more likelihood the bad people will get it. just imagine, if hackers had access to every encrypted communication on the iphone, we would be losing our money, we would be losing our social security information. everything about us would be known by the wrong people. sure, the fbi would know. so would everybody else. what is worse is. >> a lot of people come back and say what if there is information on that phone that could prevent
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a future terrorist attack? doesn't that offset the concerns? >> no, it doesn't. we're on the verge of a cyber war with china. china has already taken 21 million records from the office of personnel management last year of every employee whoever worked for the u.s. government. no greater crew of espionage has ever happened in the history of the world. keep in mind, a suber wore is going to be many times more devastating than any nuclear war you cange paen. our entire infrastructure will be shut down. now you weigh that against what the fbi is asking. it's not that the fbi cannot get into the phones. i offered to get into it with my team. it is easy on one phone to do it without creating a back door. it is nonsense to ask a computer mefr, a telephone manufacturer to give a back door which we know all the bad hackers owe show. >> what i don't understand is you said can you do this and for
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this one specific phone and apple is making a case it would have have to create a whole new operating system, which would essentially be a back door. >> snow. >> why can't apple say they will do what you will do and unlock this one phone? >> that's not what the fbi wants. the fbi wants a back door. >> that itself the way that they have asked to get into it. if they asked, here, we'll give you the phone, you tell us what's in it. great. i am now forcing the hand. i'm saying,oyou say you only want utd for this one telephone, perfect. give me the phone, i will tell you what's in it. my team and i. any team of great hackers can do that. . they have not taken me up on that. they want a back door. back doors into enkrimgs are the worst thing. >> how do you know that what you do would be safe? you say apple does whatever it does, then it could be repoliticked. swob could get ahold of it. why couldn't the same applied to
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what you will do to the phone? >> we're not putting a back door in, copying the digits on to some other device. >> that can't be reply indicated. it has to be worked order and over again for each individual component phone. it would take anybody three weeks, that's not a problem. to have a key to access hundreds of millions of phones, that's a problem. it is a serious problem. one the fbi simply ignored and our government has ignored. it's not a matter. whether or not it's right that the fbi should be listening to all of our conversations is a completely moot point. do we want the chinese and russiansed a bad hackers to do it? do we want them to have access our bank accounts, social security cards, they will have that. >> i will assume the phone is in government hand already, police evidence somewhere. >> yes. >> i'm assuming then the fbi must have tried to get into the phone prior to begging apple for
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help. >> of course of course. >> and obviously failed. when can we read into u.s. government tech no logical capability from this? >> we are 20 years behind the rest of the world. here is why. all of the great hackers are not the type of people who want to wear surkts shine their shoes and show up to work at 8:00 every day. many are very asocial. they have their own style. they want to smoke weed while they work or whatever. this is not conducive to being hired by the fbi t. fbi and our entire government has become a bureaucracy, sick, tired and old as far as technology is concerned. this has to change. do you think the chinese think twice about hiring a hacker with a mohawk or a tattooed face? >> no. >> it just happened this was an iphone, so it's an apple product. what if it was a samsung a
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galaxy? do you think the south korean government would do this? >> of course not. of course they would not put a back door in. >> that would be idiotic. neither will google i hope into their android system. see, here is the fundamental problem. if apple falls, so will android and google and so will everyone and we are then in a world of hurt. we will be defenseless as a nation in the up and coming cyber war and as a people, we will lose everything to the hackers who go, oh, heavens, we don't have to do work anywhere. we got the back door to go into. think about this for a minute. think about the implications of every man, woman and child, everything about your life being opened to the bad people in the world. it's not the fbi. it's the bad people now, we can talk about the fbi, if you wish. i personally don't want the fbi,
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i think privacy is an innate right. just that, society cannot exist without it. you don't realize you exercise privacy 100 times a day, when you check out something from the grocery store. you don't tell that person the intimate secrets of your life. you may tell your wife everything. you may tell your boss those things that will insure you get a raise or a promotion. privacy is necessary for the dp glue that keeps us together. >> in your op ed you compare hackers to the students at juliard, there is a brilliance that is somehow in their dna. can you embellish that? what do you mean? >> i said juliard cannot create a mozart or a bach. this is inherently a genetic thing. there are mathematicians born with the capacity to multiply 2,000 digit numbers in their head instantly. it is a unique talent.
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there are hackers that have this talent that can look at a piece of code and disassemble it in their minds. too es are the types of people i work with. i promise you, none of them are working for u.s. government. they need to. we are behind a cyber war is coming. we are ill prepared. 20 years behind. go ahead. >> i appreciate the sentiments completely. i did a cyber documentary years ago. i like to think i understand that the cyber war thet threat is very real and could, in fact, be imminent. but we are living in a world that saw the instance of a stuffed net, for instance, why is that more detrimental in your view that would cause the world as we know it or whatever terminology you are using to come to an end when we seen destructive worms out there thatted the notice bring the destruction that it could have? >> it's because we're talking about cell phones. we all have one. we carry them with us.
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and when they become compromised, they are watching us, listen to us and people within government carry them. people within industry carry them. top secret people carry them. it is universal and it affects every aspect of our society. >> so it's not judd my privacy. my health records. my information, my contact. it's the intellectual property that might be sold the state secrets as a government? >> yes. >> it's much bigger than thinking after your address ore your buying patterns will be hacked? >> it's kindergarten stuff. this is the real world with bad things happening when we start messing with our phones. i mean, they're already spying on us, because we're downloading makes without looking at the permissions we give them. we have to get real here. we cannot do this. we cannot allow forced back doors into software. it will be the end of us.
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i assure you. >> what is your team seeing when it comes to the international cyber war that maybe isn't apparent to people oak right now, but feels based on the report we read, it's fully under way. what is actually happening from your view? >> well, there is no full under way. i think the chinese and russians are playing with us getting information. i guarantee they have a button they can push any time they wish, which will shut down our power grid, it will shut down our communication, our emergency services. there were studies done and presented to congress last year that said 90% of americans will perish in an all out cyber war with russia or china. we are looking at something massively serious here. you can't give up. >> i turned while. i looked at mellissa. yeah, it's all true. everything. >> balls worms can cause
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physical destruction, for instance, the net, a control room, a semens control room. it caused physical destruction to the centrifuges. >> absolutely as you may know -- >> is it an illusion, i buy a phone, they track everything i do anyway, why do i care? >> well, you should care. >> i do, i mean, let me ask you something. >> is there nothing in your life, if, for example, i could say, i know everything you've ever done and i published it in the "new york times," would you be comfortable with that? >> no i don't think anybody would. >> who could? none of us would. it's not that we have something to hide. >> are we self publishing using twitter and facebook and gps enablement. we see it all the time anyway. >> with you we still choose what we publish. we don't choose to publish our darkest secrets. we all have them.
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you know i'm running for the president under the libertarian banner. my prime concern becoming president is to change this cyber illiteracy within our government to bring it into the modern age. we have to. the next war is not going to be fought with bombs, missiles and tanks. no, it will be fought with cyber science and warfare. >> on that note, john, when the white house was asked about opposition to the order. they said the doj is not asking apple to create a new back door, they're asking apple for access to one device? >> wrong. absolutely wrong. you can look at tim cook's -- that's the white house. look at tim cook's comment. he was the one that the fbi asked to do the thing. he said, one thing they asked me to do is the equivalent of a back door. is tim cook lying? i do not think so. i respect this man. everybody in the industry respects this man. we as americans have to stand behind tim cook and apple.
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or else we are going to be in a world of hurt. we are. >> you are saying the white house is wrong when they say this. >> yes, they are absolutely wrong. they are couping their words in ways they can make it look like it's not a back door but it is. >> back to brian's point about the issue of privacy, all these kids, me too, we all do it. we post on facebook like crazy, we post on snapchat, instagram, twitter, et cetera. what do you think about that? is that food or bad? if you are worried about being able to see stuff, i mean, there it all is. are they crazy narcissists? what? >> here's the point. i read statistics from the puig research where 65% of millennials get news from facebook. good luck. because if you are on facebook, you know half of the news stories there are from satire sites. they're unreal.
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so the chinese want to gauge what's happening with the american civilization by reading the news on facebook, well, good luck to them. but we still have to take care. on facebook, you don't see people publishing their dark secrets. you see people saying this is what i had for dinner with photographs. clearly, those with any sense can recognize a satire news piece. >> i guess i even mean, we self publish. i get that. if i write on twitter like i do now, i get it. i'm talking about the fact that we go anywhere, from driving in our car, we get an ad for something nearby. do they know where we are? >> you turn off locations, number one. >> you know there's cars today. they know how fast you are driving. >> yep. >> they know where you go. i'm trying to play devil's advocate to suggest. >> aagree. >> as men, we have surrendered unless you live like ted ka
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sinzy in a boothor a box in montana, go off the grid, people will know where you are going and what you are doing. i'm not agreeing, i'm trying to play devil's advocate. >> to that point -- >> this is why we need encryption. this is the sole reason. for those things that are critical and that we must keep private. whether it's a business deal we're about to close. whether it's an erotic conversation i want to have with my wife. whether it's something i want to tell my son, those things must be kept private. >> these are not the end of the world as we know it. were you speaking in just xanl rating to make a point here? >> no, i was not exaggerating. listen, once you have access to the phone, you have access to microphone the camera. you can watch what you are doing. even though you don't know you are being watched. you can listen to everything you say, even while are you not on the phone. i'm not exaggerating. we're talking social media and what people publish.
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when your phone becomes compromised, bad things happen. you are going to start losing things t. bad hacker will go, oh, you got a lot of money in your bank account. i will empty it. oh, you have a new credit card, i will use it to buy a new car, depending on your credit limit. no, this is what i'm talking about. we have to have encryption. imagine and the government was talking to one of its agents overseas on a sensitive topic, if it were not encrypted, then why bother talking about it, because you are having that agent executed. we have to have it. we can't have back doors, because if we do, everybody will get into that them way. >> thank you so much for joining us. >> before i leave, before i leave, go to macaphee2016.com. we need your help, if you believe in anything that i have said today, if you are behind me, go to macaphee2016.com, vol teerks do nate, help out.
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>> on a libertarian ticket. we appreciate it. we'll be right back. don't move..
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>> in new york state, we believe tomorrow starts today. all across the state the economy is growing, with creative new business incentives, the lowest taxes in decades, and university partnerships, attracting the talent and companies of tomorrow. like in utica, where a new kind of workforce is being trained. and in albany, the nanotechnology capital of the world. let us help grow your company's tomorrow, today at business.ny.gov
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♪ no, you're not ♪ yogonna watch it! ♪tch it! ♪ ♪ we can't let you download on the goooooo! ♪ ♪ you'll just have to miss it! ♪ yeah, you'll just have to miss it! ♪ ♪ we can't let you download... uh, no thanks. i have x1 from xfinity so... don't fall for directv. xfinity lets you download your shows from anywhere. i used to like that song. . >> all right. it is time for trading nation. traders trade better together. let's take a look at the overall market, dipping a bit after a good start for the week. craig johnson and phil strieble.
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should, though, we be selling the rally? >> well, brian, let's start out, look at the long-term sper specttive and boil to the longer term. on the long-term chart, we think this is the great shakeout a. lot of investors are wondering where are we finding our footing in this market? they found good support around this 18, 20 level. >> that has been defended many times. if you zoom in and see the chart, you can see that 18, 20 level comes to play a. lot of investors hold this line that a nice relief rally the question mark coming into play is, can we get back above 1950? i think the pay trade, which has been down for most investors will flip. a lot of of investors will be
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caught. you will see this turn into something more than it has thus far. >> phil, are you watching 19 vivths is that a crucial level for our viewers to know? >> 1950 is a critical level. you drop back a few months ago, that was the key level of the report. if you rewind one week from today, gases a low, 1822, 1922 was the high today. that terrifys me. one week from now, we might be back at 1872, 1722, the shoe could fall. it's impressive we shrugged off today's weakness not oil market. slow global growth. problems in china. the oil market. second nick amgly i think you have to lighten up here. you don't want to be the person that stays at this party too long. look at this sign of strength as a possibility to rebalance your portfolio. >> okay. sign of strength. rebound, watch 1950. phil, craig, thank you both very much. for more trading nation, head to
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our website trading nation.cnbc.com. we'll be right back after this.
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we're the hottest young company around but if we want to keep the soda pop flowing we need fresh ideas! >>got it. we slow, we die. >>what about cashing out? no! i'm trying to build something here. >>how about using fedex ground for shipping? >>i don't need some kid telling me how to run a business! i've been doing this for 4 long months. >>fedex ground can help us save money and deliver fast to our customers. not bad, kid. you remind me of a younger me. >>aiden! the dog is eating your retainer again. let's take a short 5-minute recess. fedex ground is faster to more locations than ups ground. do something! get on the floor!
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dow down a third of a percent. boeing, intel on the upside. american express up by 1%. "power lunch" will be right back. e*trade is all about seizing opportunity. and i'd like to... cut. so i'm gonna take this opportunity to direct.
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thank you, we'll call you. evening, film noir, smoke, atmosphere... bob... you're a young farmhand and e*trade is your cow. milk it. e*trade is all about seizing opportunity. without looking at cable wires and boxes in every room. mother, we are settlers. we settle for cable. and the simpler things in life. like our drab clothing. that's right, daughter. and homemade haircuts. exactly, boy. besides, if it weren't for wires, how would cousin tobias get his privacy? hey - shut the blanket! i need my privacy! (vo) don't be a settler. get a $100 reward card when you switch to directv.
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>> there's one stock to take a look at, epam systems, our under the radar name of the day. startling coverage with an outperform rating, $80 per share target, analysts on epam, i know you love it. >> up 17% on earnings. that was earnings sfl the analysts has a talent pool coupled with software engineering and able to become a higher volume for clients and employees, epam would have been your fifth stock call had street talk existed. street talk does not exist
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a great update from a story earlier this week. the irs going after small businesses, one of those small businesses got their money back. kate rogers has the details about the big fat refund. >> we told you wednesday about a palestinian immigrant who owns a convenience store in greenville, north carolina. he had more than $150,000 seized by the irs in june of 2014 after
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unknowningly forfeiting his entire bank account to the agency and drew a red flag for making many large withdrawals under $10,000, which obviously a big red flag to authorities because it's considered structuring and that is illegal. english is not his native language. his lawyer said they received a letter from the irs saying their petition for remission was granted in full meaning that ken will get his $153,000 back hopefully in the mext month or so. >> standing up for the little guy. >> i hope we played a small part. >> let's start a new segment, kate on the case. >> that's a good one. >> i own 8% of the product. >> great, i don't know if i want that deal -- >> kate on the case. >> let's -- listen, "closing bell" can start wherever. >> as bill griffeth ways. >> sir richard branson will
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unveil his newest space ship tonight. tonight. >> cool. >> i want a space ship. >> i'll ask about apple too. >> thanks for watching "closing bell." i mean, "power lunch." "closing bell" starts right now. >> yes, welcome to the "closing bell" i'm kelly evans. >> and i'm bill griffeth at cnbc headquarters, i hope you can join us at that time and stocks on track to post the biggest gain since november, which is very exciting to brian sullivan. let me show you the dow was up 2.5% roughly to begin the week we're now down just a fraction right now. the nasdaq is the big gainer, up almost 4% for the week to begin the week and telly it's been a real tousle,

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