tv Power Lunch CNBC December 23, 2016 1:00pm-3:01pm EST
pfizer. pharmaceuticals had a rough year. i think the last shall be first next year and pharma is the place to be. >> josh brown? >> i bought deep out of the money puts on john's sweater. i think it will pay off by the 26th. >> quickly. >> i'm short his sweater and i wouldn't own pharma. >> happy holidays. >> you too, scott. welcome to "power lunch." here's what we're watching this hour. president-elect donald trump ratcheting up the rhetoric on what could become a new nuclear arms race. the same time, he's getting letters from putin and battling with defense contractors. the latest developments coming up. the finish line fast approaching, the winners and losers from the final mad dash straight ahead. and speaking of mad dashes, planes are set to be stuffed like sardine cans this christmas. is this a good omen for the sector going into the 2017? buckle up, put your seat belts on, your tray tables in position, "power lunch" starts right now.
♪ ♪ move what you're trying to do ♪ >> welcome to "power lunch." i'm melissa lee. stocks are lower, but steady, headed in the long holiday weekend. nasdaq trying to scratch out gains. dow 20,000, will have to wait. still on track for its seventh week of gains. health care, by the way, the leading secretarier in today's session. here's what else is happening this hour. a developing story we're watching closely, the fbi investigating a hack at the fdic which regulates the big banks. more on this story ahead. reports that u.s. government is now requesting select foreign visitors provide their facebook, twitter and other social media accounts when arriving the in the country. consumer sentiment on the rise and new home sales rising 5%. we also have jon fortt here with us for the hour, riding shotgun. welcome. >> thank you. >> good to have you here. president-elect making waves today when it comes to russia. our nuclear weapons arsenal and the future of our air defense forces. both stories front and center
this hour and being watched by the markets. eamon javers, morgan brennan. >> donald trump may be at his beach place down in florida, but certainly not shy about making news today and over the past 24 hours. let's start with this letter that donald trump released today, after this controversy over the past 24 hours about america's nuclear position in the world. donald trump releasing a letter from vladimir putin written last week, trump releasing it today. in the letter, vladimir putin says please accept my warmest christmas greetings. donald trump put that out with his own statement saying, quote, a very nice letter from vladimir putin, his thoughts are so correct. so what prompted all this? well, it began with donald trump's own tweet yesterday
talking about america's nuclear capacity. trump tweeting, the united states must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses, regarding nukes. we also had a tweet just last night from donald trump, which is making news, particularly in the defense contractor space, that tweet about boeing and lockheed martin, donald trump saying based on the tremendous cost -- tremendous cost and cost overruns of the lockheed martin f-35, i asked boeing to price out a comparable f-18 super hornet. so clearly donald trump trying to put some pressure on the defense contractors, and trying to reshape his relationship with vladimir putin here this morning by putting out this christmas wish that he got from putin last week. >> thanks so much. also tweeted about the nuclear capability of the united states. let's dig into both those issues now. latest russian reset and all the military posturing. with us is jack jacobs, and
valerie insinnia, reporter for defense news. i want to talk tactics with what the president is doing, and get to the underlying core issues here. valerie, let me start with you. he talks about the f-35 cost overruns, is he right? can you give us context about this particular weapons program, the fighter jet program, and where it fits in? >> sure. i think that it is no secret that the f-35 had a lot of cost overruns back in the day. a lot of scheduled delays as well. but over the last couple of years, it made quite a lot of progress. this year there was a contract, and prices for a model went down to 102 million per copy. and the head of the program says that he wants to get prices down even lower about 6% to 7% lower in the next batch, which they're going to negotiate next year. but he also said just this
monday that the program needs about $500 million more to complete the development. now, only about half of that is an actual overrun and a lot of that has to do with new requirements. it is a little bit of a mixed bag. there has been a lot of progress made, but still have work to do. >> colonel, when he tweets a comparable super hornet, is that even -- is that even possible? it is my understanding that the f-35 is meant to be super advanced, very stealthy, stealth fighter, and the boeing super hornet isn't that way. they made it stealthier, but can't be as advanced. >> it is not the same and can't make it the same aircraft any more than you can take trump's 57 and turn it into air force one. can't retro fit it. yes, it is stealthy. f-35 is stealthier. has a capability to integrate all the tork traelectronic trans
from everybody in the theater so you can coordinate both air defense and air to ground attack in a way which assists the overall campaign. can't do that with the fa-18. no matter how much money you spend, might as well stick with what you have. one more thing, part of the cost overrun were new -- brand-new requirements to extend the life of the f-35 program. and all those costs also include maintenance and operational requirements that go well into the future. yes, extremely expensive, and, yes, yelling about it will bring the cost down a little bit. >> valerie, how common is it for the president -- i mean, i know -- this is rhetorical, how common is it for the president to tweet about such issues and get so deeply involved in contract negotiations like this? >> i think it is pretty unprecedented. and i think -- i think colonel jacobs hit it right on the head, i think that it is pretty impossible for boeing to retro
fit a fourth generation aircraft to become a super stealthy fifth generation aircraft. i think that maybe what trump is trying to do is force lockheed to back their unit prices down even further, but that's something that the government is already working on too. if we do see a sharp decline in unit prices in the next batch, you know, i think maybe trump deserves a little bit of credit for that. but not as -- >> if it is impossible to retro fit the superhornet to become the f-35, it is an empty threat. >> everybody in the business knows it is. >> ridiculous thing to threaten. >> the bad news is he's jawing and that's not really going to have any impact on anything except public relations. he's jawing and it has an impact on those who might shave, you know, 50 basis points off the total price. it is not going to save zero money. >> 50 basis points on billions
and billions and billions is a lot of money. >> it adds up. >> is there a chance that folks stop taking him as seriously. once we look at boeing and lockheed and then this, if you know that these are two completely different products that he's putting into this negotiation, i mean, do we start to dismiss it and say it is pr? >> yeah, i think at a certain level, yes, he is dismissed. but don't forget he's also the president of the united states, can have a very big impact on missions that are sent to the defense department who contract with prime government contractors. there is not -- there is at least a little bit of trepidation among them. they don't know what he can do. the fact that he jaws all the time as you can take it with a grain of salt until you submit -- you respond to a request for proposal. and then you might take it into account and shave those -- >> also tweeting about the nuclear capabilities of the united states. you see all these -- new nuclear arms race.
correct me if i'm wrong, aren't the chinese and the russians upgrading dramatically they're nuclear capabilities while we have not in. >> yes. and we have to. don't forget both delivery systems and nuclear weapons themselves deteriorate over time. we're going to have to spend a trillion dollars just to keep what we have. we will save money if everybody reduces the number of delivery vehicles. technology also costs money, if you want them to be more efficient. you want to reduce the number, you want to keep the same number of warheads but reduce the delivery vehicles. >> has he changed policy is what i'm asking? people are making it sound like if you read front page of certain newspapers, it is like there is a new nuclear policy. >> well, i think the incoming administration walked that back a little bit. he's not talking about reducing the number of warheads, we're still going to be able to blow everybody up if we want to. but we do need to spend a lot of money on refurbishing the systems we have and replacing
some of the systems that are t outmoded with new efficient ones. yes, the russians and the chinese are doing the same and we definitely have to keep pace. we don't have to increase the arsenal. >> thank you so much. valerie, thanks so much for joining us. appreciate it. >> and lockheed martin shares with the rest of the defense sector under pressure at this hour. how much damage can be done to these stocks by the president-elect's 140 character missiles? morgan brennan is here with that. >> so short-term at least expect some carnage with lockheed martin. several analysts do say, though, it is still a buy, as we get the dips, this is an opportunity to continue to buy this stock. why? the idea that boeing's fa-18 super hornet can replace the f-35 joint strike fighter is, as we just discussed here, unrealistic. that's one reason that boeing stock is not trading higher on this news. the f-35 stealth uses advanced electronic capabilities, analysts say that can't simply be built into an updated super hornet update. that said, the less expensive
super hornets have already snagged some defense dollars that otherwise may have gone to f-35 purchases. we have seen that with the navy as well as canada, which announced an f-18 deal last month. but what this tweet does, it tees up competition or the optics of competition and does so on the heels of the dod invoking a unilateral contract, the biggest such contract in history on the ninth lot of f-35s. but that's just one factor to watch in defense here. and the other, you also just touched on this, the nuclear capabilities. the comments about strengthening america's nuclear capability, analysts say it is a signal that the administration will make modernizing the aging nuclear triad a top priority. that could benefit general dynamics, replacing the ohio class submarines. and it could also mean that the administration will move forward on the new ground based
strategic deterrent system to replace the land-based minuteman 3 muscle. it is going to put raytheon and many others into focus. >> morgan, thank you. morgan brennan. let's bring in robin schweitzer at kalyn washington research group. rowan, in your note, you said it is lockheed martin's time in the barrel, which would imply if you go back to the old adage that it is a fish in the barrel, it will only be a matter of time before it gets shot. what exactly would that mean for lockheed? >> i think the important thing to consider is that, you know, president-elect trump is taking a very unusual tact to inject some competition into what is really a pretty uncompetitive industrial base. in many cases you have one or two or three large cap defense primes that are able to compete in these areas. and really the government can't afford to let coke or pepsi go out of business. they have to figure out a way to sustain that industrial base long-term to preserve some element of competition.
i think what president-elect is doing is by picking out boeing and lockheed martin, he's picking up -- picking on the two biggest kids on the block. if he can get them to change the behavior, it will flow down through the other dmcompanies i the group. >> lockheed martin would have more at stake, correct? 78% or so from the u.s. government, 20% of its revenue in 2015 was from the f-35 program. so doesn't it have much more at stake in terms of negotiating with the president-elect versus a boeing which has a commercial business as well? >> correct. i think the president's tweet, though, really, when you consider what some of the other people we had on talked about, within the f-35, there is about 3,176 of them plan to be purchased and the navy buy, which would be eligible for replacement, is about 340. you're talking about 11% of the buy, the navy is the only piece of that. certainly lockheed would not like to lose that business.
but this is a one area where you can actually compete that l the program. if you did away with the program entirely, he would have to build more lockheed martin aircraft, probably f-16s or restart the f-22 program. we're in this situation where he's sort of limited in what he wants to do. i think right now as one of the people mentioned, lockheed is actually negotiating for that contract, this is what i meant by this is their time in the barrel, boeing on the presidential aircraft replacement, that negotiation comes up sometime next year and the president is in a bit of a bind. is he really going to contract with airbus to build air force one? that's really the issue that is unique in this defense industrial base. >> that would be a problem. so what is your take? is this posturing but nobody can call it posturing because they don't want to lose business down the line? or what? >> look, i really, you know, i worked in defense acquisition previously and i'll tell you that i think there are a lot of
uniform and civilian officials in this town doing back flips over the president-elect's interest in this. as someone mentioned, this is really unprecedented. when the secretary of defense gets an interest in the program, it moves the entire pentagon. when you have this being done from the oval office, it really changes the game dramatically. and i think this -- second, third, this will embolden government officials to go out and pursue aggressive deals and it is going to perhaps sharpen the demeanor of corporate management who know that they're going to get twitter spanked by the president-elect or the president if they are too greedy. >> twitter spanked. >> yeah. absolutely. >> i think it is a funny phrase. >> roman, thank you. >> thank you very much. >> happy holidays. to jackie deangelis for a news alert. >> we just got the numbers from baker hughes. we saw we added 13 oil rigs back online. eight straight weeks of increases here. remember this is one of the
biggest risks to the oil trade right now. u.s. production coming back, these prices are higher. 9.6 million barrels was the peak in june of 2015. we came down a million barrels, since the summer, we're back up another 400,000. i just want to point out that we also look to where we were at this time last year. we only have 15 less rigs online. so that deficit is quickly shrinking. oil prices are a little bit lower today, taking a little bit of the breather. trading just under $53 a barrel. back to you. >> thank you, jackie. stocks stuck in neutral, perhaps in an oil slick on the final trading day before christmas. will next week be the week we breakthrough the 20k mark? airlines flying high this year, led by hawaiian air. that stock up 70%. the trends in the friendly skies for 2017 when this first class program we call "power lunch" returns.
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and the hope of lower tax rates. so i think there is a lot of complacency too. you see that in the sentiment, volatility measures and they're discounting the fact we're going to transition next year from the about benign monetary policy environment to what you talked about, the uncertainty of political decision-making and finally i think there is three things that are going to temper that, higher rates, stronger dollar and hotter inflation. when that backed up, you want to buy dips in the first quarter rather than buying right here. >> barry, would you agree with that advice? craig is saying na we're not getting a big rally here, not crossing 20,000, but doesn't look like we'll decline a lot. why would you sell any winners here? wait until next year, which could bring on selling in q1, right? >> well, as we look at things right now, we don't want to be underinvested in stocks for sure. we had a great deal of pessimism right before the election that is starting to burn off. but not all of it has burned off. and the other thing is, if
really we see those tax cuts for corporations, you're talking about a more than a doubling of after tax profits and that will build in a lot into stock prices fairly quickly. we don't want to be underweighted at this point in time. we know there are some risks in terms of valuations and so forth and so i think the other guest is right, there can be volatility. >> how does big lots secure its inventory? is it going to be under pressure because of the border adjustment tax or does it acquire its inventories over on other retailers? >> well, as we look at the retail area, it is relatively cheap. we lock baok back over the last years or so, we see that area is reasonably cheap. we think things focussed in the united states look better than things overseas and if they're importing stuff that should be good with the strong dollar. those are some of the pieces of
the puzzle. we have seen the sell-off yesterday in the consumer discretionary. big lots is one of the names we like. it was sold off. 27% of the shares are short right now. so people have taken a bet the one way, which is often good for prices going up. and so we're looking for bargains. we like cheap stocks, small stocks, stocks with good earnings and rise in price. and big lots is one of those. >> i know we're focused on dow 20 k. we love the round numbers. the dow has been on quite a run during november and december, right up to the front door of 20k. but can't seem to go through. taking that particular number out of the picture, is there anything to make of the fact that we have stalled at this level after a run? does that tell you anything just sort of from a technical perspective about the market? >> i actually think it is healthy to have some consolidation. we sold parabollic after the election. growth is accelerating.
i this i stocks are breaking out of a two-year base. that's positive. so seeing the market go sideways, to me, that's constructive. i don't mind that. i know the emphasis on round numbers. i think we can go higher here. we need to be patient. i think there is nothing wrong with cash. i know that the patients are wanting to buy pullback and takes some discipline. >> all right, guys. merry christmas, happy new year. >> thank you. same to you. merry christmas. >> irritable bowels and bathroom supplies. the good, the bad and the ugly in today's trade. that's straight ahead. >> that's a tease. manage my por. since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities- trade confirmed- and i have global access 24/7. meaning i can do what i need to do, then i can focus on what i want to do.
welcome back to "power lunch." time for the good, the bad and the ugly. to the good, synergy pharmaceuticals up 14.2% after reporting positive results in a clinical trial for an ibs treatment, irritable bowel syndrome. microsoft down a percent today, the stock is still up more than 13% for the year. and ugly day for cintas, down by 3%. the company missing profit estimates but revenue was slightly above forecast. if you haven't gotten your holiday shopping done yet, what are you waiting to snr you're probl probably not alone though. >> you're definitely not alone. we talked to a lot of folks who have a lot to do including the
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hi, everybody. i'm sue herera. here is your cnbc news update for this hour. a new video out by isis showing the tunisian suspect pledging allegiance to the group. anis amri was killed in italy by a police officer during a routine i.d. check at a train station. authorities say the suspect killed 12 people and injured 56 after plowing through a christmas market. the united nations is expected to vote later today on a resolution which would condemn israel's settlement construction. the u.s. along with palestinians and nearly all of the international community opposes israeli settlements in the east bank and west jerusalem. they see them as obstacles to peace. there is no word at this point whether the obama administration will abstain or veto the resolution. a winter storm is pounding northern california today. it is making travel along interstate 80 and the sierra mountains treacherous. the area is expected to get about two feet of snow by
christmas eve. and the radio city rockettes will dance at president-elect donald trump's inauguration next month. but not all of the rockettes are looking forward to the high profile gig. one of the dancers said she was, quote, embarrassed and disappointed on instagram today. that's the cnbc news update at this hour. back to you. >> time to get a grip, sue. >> when is the last time we had the rockettes at an inauguration? >> they should be thrilled. thank you. >> there you go. >> going to be interesting. stocks slightly lower now, the dow jones industrial average struggling to reach that 20,000 mark. it is lower by almost 6 points. it is headed for its seventh straight weekly gain. the first time that happened in over two years. industrials and health care are in the green. >> it is a mad dash to the end, michelle. today, expected to be one of the biggest shopping days of the year.
courtney reagan is live at a jcpenney in elmhurst, new york. >> to quote one of my favorite movies this is it, don't get scared now. christmas is tomorrow. if you haven't done your shopping yet, you're probably going to hit the stores because your online shipping window is now closed. the traffic here is beginning to pick up. and we heard from some employees that it seems to be a little better today than what they have seen most of the season. but will the sales turn in? that's the big question. shopper track does predict that today will be the third busiest day of the year for foot traffic, 26th will be second. those sales likely won't take as high in the 26th, remember, you got the deeper post holiday discounting and returns. a slice intelligence scan of 1.7 million e-mail receipts shows that amazon is dominating e-commerce through december 16th. capturing 37% of sales. best buy comes in a distant number two with 3.9%, followed
by target, walmart and macy's. slice says that last week the top categories online were electronics, followed by apparel, home, kitchen and toys. market tracking firm npd did publish point of sale data showing sales were down compared to last year. that was just through december 10th, key days since then. alex partner joel binds thinks that the total holiday sales will hit growth of 3% to 4%. that's what the forecast are for. he also points out that's pretty average. and he thinks the discounts have actually gotten deeper. which means margins will probably take a deeper hit than many retailers had planned in order to get those sales. back to you. >> all right, thank you very much, courtney reagan. that npd report along with reports of a possible border adjustment attacks tank the xrt retail etf yesterday. today it is flat. let's break down the sector and consumer now with jan niffen, a
cnbc contributor. steve liesman also joins us. was there an overreaction yesterday in retail? >> overreaction, that's an interesting question. i think sales will be about what we expected. and i think that we're not having actually deeper discounts than last year. i think they're in line. i think the last two days helped us get to the 3%, 3.5% range. if you look at this christmas, this holiday, it was an overreaction. if you think the tax law is going through, as currently drafted, maybe it is not an overreaction. it hits retail pretty hard. and there is winners and losers. you have to figure out who has the most debt who has the highest gross margin, who gets hit harder. there is a lot going on in this -- >> who looks the best? under a new possible tax change? >> who looks the best? well, if you happen to be high debt, low capital expenditures, and 100% cross border and 100% sold on the states, you look
pretty ugly. if you happen to be high capital expenditures, low debt, sell some stuff outside the states, you look a lot better. most apparel retailers that import directly are going to look pretty bad on that measure. >> you answered her question, implying who would do better or worse under the proposed tax plan. generic question. you're asking very specifically -- >> if you know about who looks better or worse in the stores, if you look at department store side, penny's looks good, they fixed their problems they had over the past years, gaining market share. they put in appliances, working that -- that part is working. if you look at the mall itself, interior of the mall, the traffic is pretty slow. and those retailers don't look so good. if you look across the street, where tj max and ross and ulta and nordstrom rack lives, things look better. >> when you look at the impact
on retailers and being a huge employer, where does the push/pull happen? >> i think the instinct for it makes sense, the practical part of it is what is problematic. most of this stuff you cannot source in the united states. that's the first part of it. >> for retailers. >> and maybe five, ten years before we're able to source it in the u.s., if you think about it. and, look, no doubt that parts of this country have been devastated by the offshoring of the manufacturing. i don't know how quickly that comes back. it is interesting to think about a place like indiana where the president-elect went to go save jobs. did anybody tell you what happened to the unemployment rate there? it has fallen. half a point below the national average. you may argue that they didn't get the same job as earlier. but they're running 4.4% in indiana, the people who have lost those manufacturing jobs have found other jobs. we're running at a 4.6 unemployment rate in the united states right now. and the surplus labor to make
these goods and, by the way, whether or not it makes sense to make these goods in the united states is debatable in and of itself. we get to import the adidas sneaker for $3 and sell it for $100. that's a pretty good business. >> but you -- you talk to a lot of economists, you're the senior economics reporter, a lot of them argue that this new form of taxation that the gop is talking about doesn't actually necessarily mean you produce more here, if you need to buy outside the country, the dollar is going to be so much stronger that you're going to be able to spend a lot less money on the stuff that you -- >> there is a goodly amount of skepticism about this idea that the dollar will adjust to equalize this issue. can i talk about -- i want to talk -- we a match going on. and it is a match between the months and there is a tie now. if you look at what happened to retail, october was a good month, november was a lousy month, you can see that by looking on the right-hand side of your chart there, and
december is going to break that tie if we get to january's coveted 3.5%. what is interesting, it doesn't always work out like this, folks. look what happened to wages and salaries. guess what it is going to show. october was a good month. november was a lousy month. it was actually negative. and there is one of those things that maybe jan will back me up on. people tend to spend more money when they have more money in their pockets. this is a high level macro theory that they pay me for. >> two things happen. they spend more when they have more. they spend more when they're not afraid to borrow. but we discovered if you're willing to use your credit and in the afraid about paying it back, so if you believe you'll have a job, if you believe you're going to get another job, you're likely to spend more. people feel pretty good about that right now. >> the good thing we got going is the november confidence numbers were higher, they can or cannot translate into sales, but if i was going into december, and it was a make or break month for me, i would rather have those higher confidence numbers than have them be lower. >> yes.
there is not a lot of evidence now that the consumer feels that good other than the confidence numbers. you cannot see it in the sales and cannot see it in the fact that they're not willing to pay as much. it is tough right now to argue the consumer feels as good as the consumer confidence number said if you're looking at the sales numbers. >> let's bring in former jcpenney chairman and ceo alan questman. i know you walk the floor, so what are you seeing so far and is what you're seeing corresponding to that npd report that was out yesterday? >> i think you're seeing that the mall stores, the brick and mortar stores in general will do less well than expected starting this season. i think you don't have to be a genius to see that a lot of this is the result of the internet where people are -- do come into the malls, they look and they price shop in the malls and then they go back and they order it on the internet. but saying that, that's partly the cause of the retailers not
focusing on new and different products. everything is about sales today. you walk over to tj max, you walk over to these kind of stores and you see plenty of people in there. you go to ulta and sephora, those stores are doing very well. the stores going after the millennial customers are doing very well. you look at the zara's or h&m, they have put together products that are attracting the customers. the challenge is to have a good internet business. that's going to reduce numbers of people coming into my stores, however. how do i get the customer into my store? by creating exciting product. and i think the retailers in general that i've been a part of, we have lost our focus on creating new product and developing new and different product, and we have allowed promotional sales to be the total driving force. and that wears itself out, very quickly, that's very cancerous.
>> so, allen, does that mean, if in mall is not doing well, but out of mall, discount, are premium retailers at the mall just worst of all in. >> i think zara is a mostly mall-based store or -- they have created very exciting products at very affordable prices. i think that's the -- true of anybody doing well today has unique product. and i would also say to you, they are trying to better understand the millennial customer who doesn't have the same money and the same money in their pocketbook as the baby boomer has. >> allen, january is a month where the rubber meets the road where we find out where companies were on the edge and that's the month we learned that they didn't make it in december. and they end up shutting down stores. help us get ahead of the news
here. who needs to make it this december? and is going to give us those dark announcements in january? >> i would want to go down that road. i don't want to be a predictor of where people go. i think this -- every year, you see stores that are going to fail and you see them just -- you can see pretty clearly that stores that haven't done well for first half of the year, haven't done well for the third quarter, not going to do well in the fourth quarter and will do less well. so i think that those are probably pretty ridiculous, but just by going down the list. i say most of all your department stores are okay. the challenge is to rethink how they run their business and you got to get off this promotional craze, just can't be the way people run their business, as a long one. you can't have a dominant playing field. >> gentlemen, thank you. a allen, steve and jan, thank you. now to rick santelli at the cme. >> the cash bond market closes
in about 18 minutes. all the bodies in the options sheer left. as you look at intraday ten, i want you to take close notice to the low yield. 252. let's open a chart up for week. three days this week we had had a 252 bottom. if you consider that the first time we traded and closed over 2.5% was on the 14th of december, and that was the first time it happened since the 29th of september, 2014. let's look at a chart starting on 13. today will be the eighth day we closed in this narrow range of 253 to 260. many out there are talking about the huge tlt call accumulation at the 126 strike. you need to see rates down at around 2% to get any serious pay off, but the reason i bring it up is all you need right now in a thin week next week is any kind of settlement under 2.5, maybe in the game, that's what the technicians are watching for.
michelle, back to you. >> rick, thank you. air pockets, a holding pattern, or blue skies? what is ahead for the airlines in 2017. the key trends you need to watch. as we head out, look at the biggest airline winners this year. hawaiian air up 70%. spirit, 47%. united continental up 30% so far in 2016. ♪
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fixodent plus adhesives. there's a denture adhesive that holds strong until evening. just one application gives you superior hold even at the end of the day fixodent. strong more like natural teeth. 2016 is a wild year for airlines. >> pardon the pun in 2017, airlines are trying to fly through the type of turbulence that could keep profits and airline stocks from flying higher. first, the battle of basic airfare raises the question of whether airlines can finally
grow passenger revenue. in the fight to keep from losing passengers to low cost carriers, larger airlines like delta have rolled out basic fares. they may be filling seats, but those cheap seats and competition is keeping airfares down. good for travelers? not for the bottom line of airlines. second, congestion at america's biggest airports is not going away. for all the talk about fixing america's airports, it is the air traffic control system that needs to be upgraded. the faa has made progress, still, at the largest airports, you can expect some rough days in the next year. the good news, the tsa security lines that we saw in 2016 are unlikely to return due to greater staffing by airlines and airports. finally, some flyers could be in store for a better experience in the air. united's new polaris brand is an upgrade. american is adding premium economy to more international
routes. and delta is experimenting with bringing back complementary meals on some of its transcontinental flights. overall if you're flying in the u.s. next year, be prepared for packed planes. phil lebeau, cnbc business news. so what other trends should we be looking forward to in the new year? let's bring in rafat ali, founder and ceo of skift. my first question, welcome, what is going to be the best loyalty program of 17. any shifts there of people looking for deals? >> so airlines, all u.s. airlines moved from mileage base to revenue base. trying to gain the system has become a lot more difficult this year as well as the years ahead as well. >> you say uncertainty around
the world because of neo isolationism will affect travel. >> i think europe is at the center of all of this. what is happening is spain, portugal, iceland, huge boom because these are ever green places where people go. those are some of the places that a lot of people are going. the rest of the place, france has been the center of this, all other kinds of countries as well. >> you got bots that are out there now, facebook and google, with automated pieces of software that are supposed to help you do things like book travel faster. is this really going to help? >> voice search is the next phase. not just in travel, but in tech overall. travel online booking has been in that box, search box for the last 20 years.
and it is trying it break out of the box so you can speak to alexa or any other kind of phone an be able to book. i think conversational travel, b booking is going to be a big trend. >> we know the big money people are going to have the best programs. what are the smartest travelers doing, even if they're not spending a ton of money that the rest of us aren't. how can we improve our game? >> i think credit cards are back again and travel, chase is a big leader. safire reserve. i think if you're an average consumer like us, cars are the big deal. so you should focus very much on that. and then look at low cost airlines. if you're going to europe, norwegian air has completely changed again for everybody. delta, united, american, u.s. look for airlines outside of the ones you've been doing in the past as well. >> thank you. those are the tips we were looking for.
marble and 24 carat gold, we're used to seeing donald trump in lavish surroundings. look at the screen. his early years were quite different. we'll look at trump's childhood home. and if you see if you can figure out on this chart, it is thisfi it is not a stock. the infamous traitor. and i know a thing or two about trading. so i trade with e*trade, where true traders trade on a trademarked trade platform that has all the... get off the computer traitor! i won't. (cannon sound)
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comcast business. built for speed. built for business. most of us associate donald trump with extreme wealth. today we're take a sneak peek at his childhood home which says he came from more humble beginnings. here is cnbc's wealth editor robert frank. >> just 13 miles from president-elect donald trump's lavish fifth avenue apartment is this home where he lived until he was 4 years old. >> this is the address listed on his birth certificate. >> the modest tudor on a quiet street hits the auction block on january 17th. thanks to the unique history, it is expected to bring in millions. >> the home went on the market for 1.65 million back in july. some have speculated that the house is worth anywhere from 3 to ten times the original price now that he's president-elect.
>> the 2500 square foot home was built by trump's father in 1940. and still includes many of its original features. >> the hard wood floors, we expect those are original, panelled library, the wood trim, the wood fireplace, those are expensive trims that weren't commonly added to homes of this nature after they were built. >> there are five bedrooms and four and a half bathrooms. >> on the second floor of the home now. this could have been the room that the president-elect slept in as a child. >> a piece of history, that can be yours for the right price. >> the auction will take place on january 17th, through paramount realty usa and a seal bid process. those who wish to participate will submit written bids. that means we're not going to know the exact price on the home until that actually closes. probably about 30 days later. the auction house suspects the home will be sold to an investor or someone who would preserve the property as a museum or library. you see that tudor revival look?
very common in queens in that area. >> true. and the father installed all these things that were embellishments at the time. it was that era's version of gilding and marble. >> nature or nurture. >> right. >> apple didn't fall far from the tree. >> might be the most direct way to play the trump presidency, though. if you think it is going to be an outrageous success, you should buy it. >> there you go. >> even if it is three times the market price? i don't know. big bet. >> yes, it is. >> carl icahn weighing in on a possible trade war. how can you protect yourself? stick around. this car is traveling over 200 miles per hour. to win, every millisecond matters.
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welcome to the second hour of "power lunch." i'm melissa lee with michelle caruso-cabrera. scott wapner joined the party. >> i heard there was a party over here. >> he'll be with us for the entire hour. here's what we're watching. bracing for a showdown with a possible trade war with china, what it could mean for your money. a new cold war, president-elect trump ready for a new arms race, new relations with russia.
something just happened to apple that has never happened before. we'll explain. >> developing story this hour, big bank regulator, the fdic reportedly the target of hackers. eamon javers has the latest. >> the fbi is investigating the incident which goes back to 2010. what reuters is reporting today is that back in 2010 the fdi senior officials concluded this breach was sponsored by the chinese military. they're saying the breach gained access to dozens of computers including the work station performer fdic chairwoman sheila bear. they say the fdic took immediate steps to remediate the apt. cybersecurity is a top priority for the fdic and we are continuing to take steps to enhance our cybersecurity program. i should tell you that apt is cybersecurity lingo for advanced persistent threat.
it often refers to a state-based attack but not always. but that's the kind of entity you have to have to get -- to generate an advanced persistent threat. back to you. >> thank you. a check on where the markets stand now. the dow stalled on the side of the road. we are virtually unchanged. 19,916. broader markets hanging around the unchanged line. we're seeing some action in drug. the biotech stocks, ibb up by 1.8%. all moving higher. health care the best performing s&p sector today. >> harsh words today from china for president-elect trump. they don't like the new trade adviser and doubt they liked what carl icahn told scott yesterday on "the halftime report." >> obviously if you get in a trade war with china, sooner or later i think we'll have to come to grips with that, maybe better to do it sooner, but that's not my decision at all. >> here is the editorial in the
china daily today. that individuals such as navarro are being picked to work in leading positions in the next administration is no laughing matter. any move to damage the win-win relationship with result in a loss for both sides. how is this going to play out? patrick is chief strategist. good to have you here. >> hello. >> how do you think this plays out? are we setting up for a trade war? >> i think we're heading for some kind of confrontation. people say it is common to say about trump don't take him -- take him seriously but not literally. people use that expression to take him near literally nor seriously. he sees trade as a win/lose proposition and the u.s. is losing and i think that will lead to a confront trags with not just china, but a number of
other countries. >> he may be wrong on that. when the chinese call this a win-win relationship, we talk to a lot of ceos, they won't say it on the air, they fear losing access to the market but they feel often it is not win-win with china. is there anything to the possibility that having a tougher stance with them might actually get us better trade terms? >> back when i was in china, and i lived there for ten years, i participated as the chairman of the public policy development committee for the u.s. chamber of commerce in china, for the american chamber of commerce in china. and one might have jobs was to put together a book, a really thick book about all of the ways that china had unfair trade practi practices, block access to the market. i know all about that. it is a problem. it needs to be confronted. the best way to confront it is by the u.s. having a proactive trade agenda, which it had by
tpp. the trump administration now says it is dead, which was basically to hold out to china, if you want to be part of this, then you have to change your ways and otherwise you're going to get left behind. that's not in the cards anymore. >> that train left the station. >> maybe we should take mr. trump literally at this point and maybe we should do what carl icahn suggested, if you're going to have a trade war, do it. rip the band-aid off and get it over with now. >> a lot of trump's aides will say the u.s. is already in a trade war with china, trump can't start a trade war. the thing is, we have over $650 billion worth of trade with china last year. now, more of that is imports than exports, that's true. americans are consumers as well as producers. and if we start -- we start reigning in access to our markets, americans don't win from that. >> so on that point, patrick,
what is the pain point for the u.s. consumer in terms of how far to bring the trade war before the consumer says we're not going to pay anymore, we elected you? middle class, lower class america, where do you -- >> the most likely approach to this will be that the trump administration takes a few actions using existing trade regulations against specific industries like steel, which the chinese are accused of dumping. but the chinese have been very adept at picking out industries they think that they will retaliate against and do the most harm. so i think we're going to see a few shots across the bow, but maybe we won't. maybe we'll just see a big tariff. and, like, trump has talked about. and in that case, you're talking about, well, that tariff would translate into a big tax on the u.s. consumer. that's who is going to pay for it. >> what about the corporate impact? look at companies like apple, which are looking to china for a
lot of their growth. intel and qualcomm, which just seemed to have reached some sort of agreement peace with china. if something like a trade war does erupt, how hard do those companies get hit? >> i think there are two different kinds of impacts. first is, u.s. exporters who are exposed to china, and are high profile. like boeing. like the ones you mentioned, where they could become targets of chinese retaliation. and that could have an impact on them. the other thing is how trump's policies will affect even if they're successful how they would impact u.s. companies. we don't know the shape of trump's policies, necessarily, exactly what they'll amount to, but it is fair to say that we know the direction and the direction is that we'll see something that penalizes imports and would increase costs on companies which rely on imports, whether they're retailers or
whether they're importing inputs. and reward or encourage exporters. so i think that you have to take that into account when looking at investing. >> when you look at the gop house plan, i've been wondering, it is a dramatic change in the way we would tax corporate america, right? no longer profits. instead cash flow. and if you're an exporter, everything you export, your corporate tax rate goes to zero. i am wondering if that isn't a stealthy way for him to argue i did put on tariffs on imports. >> right. >> and that gets him optically where he needs to be and yet changes the tax structure so u.s. corporations are in a much more advantageous position when it comes to all of their trading partners. >> there is an argument that the u.s. should tax consumption and not income for corporation. whether it is done on a corporate level, done through a vat, this is where it gets into the weeds because the current
plan is likely to be challenged at wto as a corporate tax that discriminates against imports. you can say it has the same impact as a vat, but it is not. it is an income tax. so there is a danger the way that it is being framed that it get challenged at wto and the u.s. loses. >> that could work to achieve his ends. >> right. if that's the cover he needs and wants that the u.s. should have a consumption tax instead of taxing other things, there is a good argument for that. but that's not all that is on the table. >> before we let you run, peter, good pick or no? >> his views on china are different than mine. let's just put it that way. the china he describes in his books and in his videos bear only a caricatured relationship to the china i lived in for ten years. so on that basis, i'm not probably go heing to end up
agreeing with the policies that he recommends. >> sure. appreciate your time. enjoy the weekend and the holiday. the us is ekt in thsuspect attack was killed today by police in milan. let's go live to rome. >> interesting, scott, while all the intelligence agencies and authorities across europe were looking for this guy, what got him was a routine check. two young policemen at 3:00 in the morning at the outskirts of milan in a usually quiet residential area were patrolling the area and found a suspicious guy hanging around the local train station. they got out and said, show us your i.d., and instead pulled out a 22 caliber pistol, shot one of the policemen in the shoulder, and the other policemen was prompt enough to just extract a piece and shot back and shot him dead right there. and later, of course, it came out it was clear that this was amri, the guy believed to have been behind the wheel of the
truck that plowed into the christmas market on monday. now the authorities are wondering why did he go back to italy? why did he end up on the train? local train station, 3:00 in the morning, was he hoping to meet someone, safe house or safe passage throughout italy? these are questions that the authorities are trying to answer right now. and in the coming days. back to you. >> thank you, claudio. switching gears, apple's late mac book pro failing to get a recommended rating from consumer reports. first time that happened to a mac book. consumer reports saying the battery life, one model they tested lasted less than half as long as the advertised ten hours. through successive tests, it was way different. lasted 16 hours and then lasted less than five. >> that's such a dispersion in terms of battery life, right? >> really weird. normally a couple of hours difference perhaps.
apple tends to be just rock solid on battery life. they say ten hours, you get 11 or 12. this time, three laptops they tested, some with the touch bar and some without, and they all had these weird glitches in them. >> the stock, people don't want to buy the stock, now they're throwing shade all over the battery life. >> the upside is the batteries are not exploding. >> that is a low bar. that should be a base case scenario, i think, but -- >> but it is 2016. >> billionaire investors carl icahn says there is too much money in etfs. is your portfolio in danger? the great active versus passive debate is coming up. 2016 was another record year at the box office. are there signs of danger ahead for the new year? hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades
say hello to internet speeds up to 250 mbps. and add phone and tv for only $34.90 more a month. call today. comcast business. built for business. in the market today, the danger is you have all this money pouring in from -- in america from etfs and etfs are almost blind buying. i question the fact that if you are buying these stocks and you really don't know what you own, you're prone to these periods of time when you're going to get -- you know, there could be some kind of crisis and could be a problem. >> that was hedge fund titan carl icahn raising the red flag. to me, yesterday on halftime, about the explosive flood of
money going into the etf space and now beg the question, is there major danger brewing in the way that individual investors are putting their money to work in the market? here to debate that pressing issue of active versus passive investing, herb greenberg, bob, you first what do you make of what icahn said? you know the etf world as well if not better than everybody. >> i love carl icahn. i think he's got to worry about some other things. look, carl is an active investor. we know active investors have always been a little bit hostile towards investments. the great thing about etfs, they're perfectly transparent. you see every minute, exactly what you own. if you own an s&p, i think i know what i own. i own the s&p. i don't see the problem. i don't see an investment ideology conflict. >> he's not talking necessarily about the tried and true etfs that most investors are putting their money into, the sby, et
cetera. he's talking about some of the more ill liquid ones that could have some genuine concerns that a good part -- a portion of investors don't know about. >> why don't they have that concern about mutual funds? there are plenty of obscure corners of mutual funds. high yield bonds, did mention that one. 3%, probably high yield bonds in the etf space. very small. most of it in the mutual fund space. and that's where the big problems are going to occur. not in etfs. i don't think he gets how the structure works for etfs versus bonds. >> those are fighting words. >> you were with larry fink. >> fink was practically apoplectic about it. said that icahn was dead wrong in his characterizations of etfs and implied carl didn't understand what the structure was and what was going on. >> larry was defending the black
rock business. right? >> absolutely. listen, larry made one of the great investments of all time. black rock bought i shares at a moment they weren't a big business. paid $11 billion. people said he was crazy. he still made the main point that he doesn't quite say -- doesn't quite understand how the industry works. >> the bigger issue is as you had all of this money going into the so-called passive investing, whether there is a bubble that is going to reverse itself, the moment that real volatility returns to the market, whether it is in the form of a bear market, the beginnings of such, a big correction, and then you're going to have active investing come back to the forefront, the cream is going to rise to the top. a cyclical thing as some have suggested on this network. >> i think if you're a professional, and you're looking and you have a hedge fund, the type of people my clients are, they are positioning themselves,
i'm sure, some are, on the short side with stock selection, you have to have stock selection. there are still others who are so afraid that they got to be -- they use the etfs as a hedge. look, i think you can look at this both ways. i think bob makes the point, i was one of the guys out there on cnbc five years ago, against bob, raising questions about etfs versus computers. i think etfs have proven themselves, very tough market environment, to not break the way some people may have thought they would break. that doesn't mean that they don't have some sort of -- some sort of -- they created some sort of broader issue causing all this tremendous volatility. i don't see people talking about that. i think the etfs, i know doug wrote about this today, talking about icahn's in the right church, wrong puew, you talk about the ill liquid etfs, but there are great stocks out there.
really smart people still on the long and short side buy great ideas. >> to that point, maybe it is not just the good times that keep people -- but also correlations are very high, then i would think it is much more efficient to be in etfs. they start coming down and so-called stock picker -- >> everybody is doing the same thing. >> so you're saying that -- the correlations are at the lowest level since '07 now. >> right. that's where you get the potential for stock picking to come to the floor. nobody in the etf business is against active management. there is active managed etfs. pimco has a bond fund that is huge. whatever you want, let all the ideas come forth. but making vague accusations against the industry and against bond funds that there may be -- when we already had these crises already, brexit, the oil crisis, bond redemptions, massive bond redemptions this month, what
happened in the etf space? nothing. they all function fine. when you get these vague accusations from active management, i think people, the etf industry has to respond to that. >> part of this conversation, the genesis of -- was because hedge funds had underperformed. and if the market was going up, and hedge funds were underperforming, why bother. >> and mutual funds. >> right. why bother? why not just set it and forget it and buy the market. if you bought the market on election day, you know in those -- in the wee hours, or in the next morning, you've done pretty darn well for yourself. >> there are moments, right, when -- so remember the morning, the dow literally did open lower by a thousand points? do you remember that day? there were severe dislocations in some of those funds because the fund traded, but the stuff in them wasn't yet. right? a lot of people made a ton of money because they bought low.
that's an issue, isn't it? >> it is a market structure problem. not an etf problem. what happened there was there were delays right here, in the opening, for the stocks. and that created issues. there has been changes in the way that happens now. there is much more automated opens that are allowed by the nyse and you saw in brexit, we didn't have that problem and the reason we didn't is that oil stocks down here opened at the same time with the rest of the market and able to price the etfs immediately. it was a market structure problem, not an etf problem. >> let me tell you guys one thing. i'm in the business of doing research in individual companies. i can tell you that when i look at our subscribers, they're doing work on individual companies, on our case, mostly on the short side. there are certainly people out there with funds because let me tell you something, when the market broke many maniesy month they were penalized by their
investors saying what am i paying you when you're not actually doing work on the short side of the book and you're just using etfs. there are people who are doing serious work, serious stock selection and while i am talking my book, the business end, i know it, i'm doing it, they're doing it. they're looking for great names. and they're looking for it on the long side and short side. they understand the risk. i do think a lot of individuals couldn't do the research on the individual stocks but they also couldn't do the research on the etfs. that's the problem when you get to the whole indexing issue, you only buy the market and you're immediate oat a mediocre and the market goes up. >> i'll bet you -- >> we got to go. >> active management will outperform at some point. >> prediction for the coming year. thanks, guys. coming up, the stock is higher. we'll explain. now is your last chance to guess our mystery chart. it is not a stock. it is something you probably
share loss. excuse me. the company is an egg producer. don't chickens deserve the credit for the eggs? take a look at the stock chart this is surprising. the stock is up 5% today. short squeeze as the major reason here, more than 30% of the flow is short, about 37% in fact. you can see last night when the results were released, the stock made a sharp move lower. it is squeezed higher in today's session. >> you're right. those chickens deserve -- >> profit sharing. >> those chickens are job creators. >> one last look at our mystery chart. told you it is not a stock chart. that's a good thing. it is the youtube chart of daily views for mariah carey's "all i want for christmas" is you. right before christmas, it gets
4 million hits per day. yes. >> how come you're not dancing? >> tired by now. >> little bounce, right before you said that. >> i did. >> you got to -- yeah. >> you're a dancer too. just sitting there in your chair. google lost billions of dollars on, quote, other projects. does the company need to focus on what it already does well? we discuss. and the dow is stuck on the side of the road to 20,000. will the drive forward resume after christmas? ♪
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until someone else scoops your story. switch to comcast business. with high-speed internet up to 10 gigabits per second. you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. here is your cnbc news update at this hour. more details emerging on what motivated two hijackers today to take over a libyan airliner. airline officials say the hijackers wanted to take the plane to rome, but fuel issues interfered with their plan. they surrendered peacefully several hours later in malta. no one was hurt. firefighters in japan assessing the damage today from a massive fire which demolished 150 buildings. it began at a chinese restaurant yesterday in a coastal fishing
town. there is speculation it was caused by an unattended stove. a dramatic rescue in south florida, state troopers rescuing an adult and a child today after their vehicle crashed into a canal. it happened off of i-95. no word on their condition yet. and furniture retailer ikea is trying to stop people from sleeping in its stores. it has become a problem in stores from canada to britain, and even here in the u.s. just two years ago, eikea teame up with air bnb. now an ikea sleep overcouover c you jail time. >> they're open 24 hours? is that -- >> i don't think so. i think they stay there. >> they hide under the bed. >> when the lights go off, they get in the bed. >> it is mostly teenagers. >> swedish meatballs for dinner. >> they serve meatballs.
i hear they knock you right out. >> mostly teenagers, surprise, surprise. >> i'm not surprised. thanks, sue. we got breaking news. eamon javers is standing by. >> the u.n. security council has passed a resolution in new york demanding israel stop building settlements on occupied palestinian territory. the united states abstained. you remember there has been a diplomatic back and forth with donald trump, israel and the obama administration. donald trump and israel had called on the united states to veto the measure. the u.s. representatives at the security council abstained. that's where this one ends up. we'll see this shift of u.s. foreign policy now as donald trump takes over as president on january 20th. but we have got this awkward period of time now where donald trump as president-elect is making his foreign policy views very, very public at the same time the obama administration is carrying out u.s. foreign policy, guys.
back over to you. >> ayman, thank you. the dow and the quest for 20,000, we might have lost sight of how far we have come in the last two years. today marks the second anniversary of dow 18,000. what lies ahead in the new year. let's bring in ernesto romes. we're sort of just stalling here as we go into the holiday weekend. a lot of people on the floor of the stock exchange will say there is lack of selling out there, people are holding out to the new year. you see volatility ahead and downside pressure specifically in the next two or three months. what is the main cause of that? >> we have gone very far since the election. we see certainty related to infrastructure spend, related to
rollback of regulation, as well as tax cuts. we seem to have priced 100% of the good news. and only -- pretty much none of the bad news related to potential curbs on immigration, which would impact hospitality, businesses, technology industry as well as free protectionism. >> the things we can calculate, taking that and let's assume the 10% reduction, whatever it is. that's -- for each percent, that's a 1%, have we calculated that into valuations and where we are now? >> yes, and i think that's been pretty much absorbed to the fullest extent possible. are we going to get the full cuts that he's talking about down to 15%? probably not.
when there is pushback, we might see pressure related to trade protectionism, i don't think the market is priced in all of the potential -- or none -- any of the potential negatives that could be associated with that. i think we really just focused on the glass is half full side of things and none at all on the potential negatives and the dollar strength that we have seen in the last 5% since the election will impact in a negative way s&p earnings. we have gotten excited about the bomb for change and not yet fully thought out the potential for -- >> i want to focus on one of your picks. the valuation is high. when you compare it to -- on a sales basis, invidia is trading at what, 9.5 or something and nxpi is trading about four. i'm wondering how you can get your arms around being
comfortable with valuation like invidia when you're concerned about valuations in the market overall. >> this is very price specific. i think invidia is gone beyond its traditional market to expand into other markets we think it is trading 14 times current earnings. the future earnings is the story here. we think invidia has tremendous potential to keep going further. we're still very excite. we owned the stock for two years. >> this past year alone, up 230%. good for you. >> thank you very much. google parent company alphabet ending 2016 up, but a disappointing 3.8%, underperforming the nasdaq.
is it time for alphabet to refocus on the core search and youtube business? let's bring in neil doshi. he's he has a buy rating on the stock. google is up around 40% last year. got to factor that in. and cfo ruth porat has been tightening the belt lately. does she need to do more? >> i think the setup for next year could be interesting. we have seen ruth cut back on google fiber. planning to spin off waymo. pairing back a lot of the other bets has been positive for alphabet. and that will drive margin improvement into next year there is opportunity on the core search business, on youtube and on the cloud. google has been really ramping
up its cloud efforts, starting to compete with microsoft and amazon. if they can refocus their efforts on the big opportunities within core advertising and the cloud, we can see significant growth. >> we have been talking a lot about china and last couple of years it has been an achilles heel of google, they're not in china. might it be an advantage to them they're not in china if other peers that are start to get hit in this talk about a trade war? >> google has been out of china for a number of years. they had very little presence. even with android, but that has been pretty diminimus. the fact they haven't had a big expo sure exposure to china, they won't
get hit on that front. >> a lot of talk about bots these days and google has got this home appliance that is supposed to help you talk to it similar you can with amazon's echo. are they going to invest more in that, you think, or less. will investors continue to give them room to do that. >> i think so. there is a lot of opportunity on the machine learning and official intelligence side. i have the echo at home and the google home. i've been playing more with the home fairly recently. it is tied into a lot of my google accounts. seems to know more about me and just the interface is a lot more exciting than i think amazon's echo and alexa is. i think there is a big opportunity on that front. i think investors will want google to continue to innovate. the last thing that would the achilles heel is if they just
stop innovating and just start milking their businesses for -- as a cash cow. the fact that they're moving away from some of these other bets, but, you know, probably reinvesting some of that back into the core business and into other new growth opportunities i think is a positive. and, you know, i think as we look into next year, cloud, machine learning are going to be big opportunities for google and for a lot of companies and i think google is definitely ahead of the pace on the machine learning side, which i think will be a very big opportunity over the next three to four years. >> we'll see. neil, thanks. >> coming up, "star wars" boosts the box office and street talk. all that and much more. critica? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create,
time for street talk. we kick it off here with gnc, cautious saying consensus estimates are tie high. they have been cutting prices, eliminating paid memberships and that adds risk to an earnings short fall. piper cutting the price target to 7 bucks from 11. it is already rated underweight. this is a smaller cap stock, the market cap got $830 million. >> they already don't like it. they're just -- hating it more.
>> exactly. >> next up is game stop. why do we pick that? initiating with a buy, they say that they don't believe that physical discs are going to disappear as fast as some people think. that the digital runway is going to be longer, that they're gaining market share. downloads digitally may be up year to year. but they think that's going to moderate and expect it to continue doing just that. >> it is fascinating, people say that every single year it is like the barnes & noble of the sector and still here. >> i'm still going and buying the physical discs. >> are you? >> yeah. well, santa is. >> santa, hope your boys aren't watching. sarepta, concerns this week about whether doctors will prescribe the treatment for muscular dystrophy or smurinsur companies will pay for it.
writing the disease has a high unmet need. atten he oppenheimer bullish. >> that's a buckle up stock. it has been -- >> almost like a binary sort of -- >> like 40% gains, 40% drops, and slightly conservative. >> bank of america. td ameritrade came out with a list of the most bought and most sold stocks by retail investors in 2016 and bank of america was on the sold list. in an environment where since the -- you had such a tremendous run for the banks since the election, now, i don't know the date at which this survey sort of cut off, but -- >> the latest week i think it was, i think dom did this. you wonder what the holding period is and people taking losses for the year. and why are they selling since the gain since the election, right? >> gains and then mark the
losses at the same time if you're a long-term holder. >> caught my eye today. dom did it on half. that's interesting. the stock, the financials have had such a great run. >> yeah. >> coming up, steph curry does something we have never seen any other nba player do during a game. plus, rogue one helping the u.s. box office set another record in 2016. can 2017 be even better? box office red flags coming up. this is where i trade andrs. manage my portfolio. since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities- trade confirmed- and i have global access 24/7.
check out this move by stephan curry last night. warriors win over the nets. gives the pass to kd. the mouthpiece is falling out of his mouth. he catches it, that's -- that's a no look pass. >> see that again -- whoa, look at that. >> catches it. gives almost a no look to durant, goes in -- >> i bet he's a good jugular. >> i didn't know he needed invisalign. >> can somebody get on that? we need -- >> you're the tech guy. >> you're saying it is my job?
>> north american pox office, hitting a record high. julia boorstin joins us with a look at good news and not so good news. >> the north american box office will hit a new record it year, topping$11.3 billion. despite that record average profits of the seven biggest studios fell 17% through september that is due to declining home entertainment revenue, high marketing costs and the fact that there are fewer hits. higher ticket prices are driving the haul, not bigger audiences. attendance is expected to be flat from 2015 and down about 6% from a decade ago. while china's box office grew by almost half last year this year chinese growth basically flat lined as uncertain economic forecasts raised questions whether the box office projected to top out of north america next year will be bullet proof.
there are signs of cracks in hollywood systems. everyone suffered from at least one high budget flaw to lion's gates allegiant. studios are feeling pressure to innovate. only 3 of 14 summer sequels out performed the predecessors. word of mouth spreads faster. >> stick around. let's bring in paul, box office analyst at com score. is this locking? is 2017 going to be bigger? we have rogue one in china. we have the next "star wars" movie here at the end of the year. is this a shoe in? >> i think it is. 2017 will be the box office equivalent of the 100 year flood. if you look at the lineup we track box office but track what is coming up on the release
calendar and that release calendar for 2017 is incredible from 50 shades darker in february, you have the summer kickoff with guardians of the galaxy 2. you have furious 8 in april. there is another pirates of caribbean movie, as well. spiderman homecoming. of course, at the end of the year episode 8. we have to wait one year from now for that one. it's a product-driven industry and the product is there in 2017. >> does that grow the market or do those movies just fight for market share? >> they do fight for market share but they can also grow the market because there is not a finite audience out there. it's how do you get them into the theater and it is with great product. there is so much competition on the small screen that now the level of competition is so high that if the movies don't deliver
then the audience is going to stay home. in 2017 when furious 8 opens that they are going to stay home. that is the important part of this is the product. >> that means expectations are sky high. disney did a pretty good job this time around it seems managing expectations for rogue one. it's outperformed. next year expectations are going to be huge. could this be a solvent news event? >> one thing i point out here that is something to really watch is a tech story that you might be interested in is the question of whether or not the studios are going to be able to break the window. the studio spent massive amounts of money to get the films into theaters. they have to wait a certain number of months. i think we are just on the brink of real innovation in terms of
home entertainment. it is a question of whether studios can start to sell movies digitally at home. i think that is the next big thing for the studios to change their home entertainment struggle. >> that will be the real killer. what is your estimate -- >> there is the issue between the exhibitors and the studios. the studios want the revenue coming in but the theater owners want to keep those video windows pretty long and keep movies in theaters as long as possible. as julia said with all the technologies available today the platforms that are out there and the potential revenue streams and that potential revenue coming from the small screen i think we may see a shift towards shorter video windows but it
will have to come i think with a negotiation with the theater owners. how are you going to earn $2 billion in revenue on a movie like we did with "the force awakens"? you have to have that window. there is a reason for that. i understand in today's world studios want revenue streams coming in as quickly as possible. theatrical is the engine that drives all of those movies and creates the prestige for those movies by being in theaters. >> can't wait. thanks so much. we are going to show john and scott what check please is all about. >> next on power lunch. >> you get to pay the bill. this is my retirement. retiring retired tires. and i never get tired of it. are you entirely prepared to retire? plan your never tiring retiring retired tires retirement
with e*trade. i'm in vests and as a vested investor in vests i invest with e*trade, where investors can investigate and invest in vests... or not in vests. sign up at etrade.com and get up to six hundred dollars. i thyou never got the brakes looked at? oh yeah...no. at cognizant, we're helping today's leading manufacturers make things that think and do, automatically. imagine that. a world of new digital products and services all working together for you. can i borrow the car when it's back? get ready. because we're helping leading companies lead with digital.
check please. >> check please. this is like the end of the show. you have the fun stuff. >> we are watching. i'm watching bit coin. we haven't talked about bit coin maybe ever on power lunch. it surged above $900 at one toint. right now it is 892 or so. the reason why we are seeing the surge is because fears of a china trade war. we will have much more about this on fast money at 5:00. the biggest gains. >> we are looking for a safe
haven. >> the steph curry thing we just saw i thought the play was amazing enough. i thought we would maybe look at it from a stock perspective. steph curry catches it and dishes for the layup. the stock has not been such a winner lately. on a week that nike had earnings, future orders for north america were a little disappointing. the stock has come year to date the stock is down 42.5%. i just wonder what the new year will have in store. >> you have to win. that applies to apple, too. consumer reports not putting it on basically its buy list. that is bad for apple. we will have to see if that has an impact on the stock from here. >> not their main product but one to watch. >> my check please is dow 20,000. i predicted today would be the day that we cross dow 20,000.
melissa is always right. unless you got to watch the last hour of trading to see if i hopefully turn out to be right. >> you never know what will happen the last hour here. thanks for watching power lunch. thank you for joining us. >> "closing bell" starts right now. merry christmas. hello everybody. we are the "closing bell." i am kelly evans at the new york stock exchange. >> we got things planned for this hour. the so-called trump rally has not been able to get the dow over the key 20,000 mark that michelle predicted for today. will a santa claus rally get us there next week? the market holds study around 19,900. president-elect trump creating competition in the defense space asking