Skip to main content

tv   Power Lunch  CNBC  January 10, 2017 1:00pm-3:01pm EST

1:00 pm
>> i believe bob will surge above 100. >> doc? >> olen, oln, unusual activity at the 29 strike, i bought it today. >> stephanie, what do you like? >> copper. freeport. new name. >> that does it for us. dow jones industrial average looked like it was going to make another run for 20,000. maybe it will before the day is over. "power lunch" is next. >> on the menu, markets move in higher. another record high for the nasdaq. we found not one, not two, but 194 reasons why you might want to be cautious right now. it's called the super bowl of health care, investing. exclusives from the ceos of sire and express. can you name the mystery chart for today? over the past three months. think you know it? stay tuned to find out. yes, the market to 20,000 in full effect again, 70 points away from that historic milestone. "power lunch" starts right now.
1:01 pm
>> and i am brian sullivan. if you tuned in looking for dow 20,000, you are in luck, america. because the market is still looking for it, too, as melissa laid out. not just about the dow. the small cap 600 index is now up 10% in just 90 days. among your top big cap performers, caterpillar. natural gas continues its run higher, as oil and gas stocks move higher as well. tyler? >> thank you very much, brian. i'm tyler mathisen. welcome to "power lunch." u.s. wholesale inventories are posting their biggest gain in two years in november, up a full percent. small business optimism soaring to its highest level since 2004 on expectations that business conditions will improve under the new trump administration.
1:02 pm
and hostess is issuing a voluntary recall of holiday white peppermint twinkies, ladies and gentlemen, over possible salmonella risk. >> good thing the holidays are over because they're very necessary. i'm michelle caruso-cabrera. washington, d.c., confirmation hearings and senate hearings on u.s. intelligence gathering and russia. eamon javers is on capitol hill. first we'll kick things off with john harwood. john? >> president-elect trump's nominee tore the next attorney general of the united states, jeff sessions, has been undergoing a grilling from his colleagues in the senate, using that toush back against charges that he is racially insensitive. racism is a word that's been used in this regard. periodic protesters have cropped up, who are then escorted out of
1:03 pm
the room trierksing to disrupt the proceedings. hillary clinton over e-mails, something that donald trump raised in the campaign. he doesn't seem very interested in it now. if it does arise, senator sessions said that he would recuse himself because of things that he said during the campaign that might call his objectivity into question. he was also asked about the russian hack of democratic accounts and their interference in our election, the subject of that director of national intelligence report that came out late last week. senator sessions acknowledged that this was a serious interference and promised to take a look at it. take a listen. >> i think it's a significant event. we have penetration, apparently, throughout our government by foreign entities. when a nation uses their improperly gained or intelligence-wise gained information to take policy
1:04 pm
positions that impact another nation's democracy or their approach to any issue, then that raises real serious matters. >> he promised to take a tough approach to the issue of cyber security. one of the questions overhanging this is whether or not the new incoming administration will support or oppose the effort by some democrats and republicans to have a bipartisan committee to look into this. so far, jeff sessions, i would say, has not been significantly bruised by this questioning. this is something that he has been prepared for. he, of course, was rejected by the senate in 1986 for a federal judgeship over some of these same issues involving race, as a a -- but served with these senators for quite a long time. it looks as if he's on track to overcoming those questions and becoming attorney general. we'll see. the hearing will go for several more hours and then reconvene tomorrow. >> john harwood, thanks.
1:05 pm
let's get to courtney reagan with breaking news. >> dow jones to report walmart to cut hundreds of jobs both at headquarters as well as regional personnel that help manage the stores. this now is according to a report. you may remember at the end of last year walmart also announced some job cuts that had to do with managing costs more effectively and some restructuring. it's very possible that this is news that we could be hearing soon, officially from walmart. we've reached out and will let you know when they get back to us. >> we heard so much about how bad it's been for the department stores. walmart isn't a department store. are we to see any similarities between this announcement and what we've been hearing from some of those guys that have suffered so much recently? >> walmart isn't a department store. we haven't heard much from walmart at all with regard to the holiday performance, not from the top days or holiday period. walmart usually stays pretty mum on that until the full earnings come out in february. >> got it. >> it's hard to tell. we know that ceo doug mcmillan
1:06 pm
has done cost-cutting options as ceo. it's a not entirely surprising, usually when the store closings and job cuts come from walmart it's around this time of year. >> six months after they paid $3 million to buy the big online company jet.com. they wonder if they're bringing in the jet people and releasing the walmart people who would have been more on the commerce side. jeff sessions was asked about russia. let's get to eamon javers on capitol hill. >> take a live look into the senate intelligence committee. they've begun the past few moments. chairman burr beginning his introductory remarks. first time we've had the opportunity to hear from the four big leaders of the u.s. intelligence, head of the fbi, as you mentioned, head of the cia, nsa and director of national intelligence since they briefed president-elect donald trump on russian hacking
1:07 pm
attempts last friday. trump, since then, has been somewhat dismissive on twitter of u.s. intelligence findings saying this was the fault of the dnc for having bad cyber security. you can expect committee members to probe those intelligence leaders. there was some criticism of the unclassified report that was put out by the intelligence community last week that it was too thin, didn't quite have enough substance to it in terms of how the intelligence community knows what it knows about russian hacking. there's nothing in there about sources and methods, of course. spice are very, very adamant about protecting those. still there's a tension here in this public debate over how much they should say about what exactly they know here. we'll monitor this for all that and bring you any developments to that, michelle. >> thanks, eamon. government borrowing money for three years. rick santelli is tracking the cme. how much money do people want to pay, rick?
1:08 pm
>> they always want to pay as little as possible. this auction garnered a b plus because they paid more than they wanted to on the stock option. the yield? first coupon supply of the year, 1.472 -- 1.472. offered side of the issue market was 1.475. metrics, little less than three times over subdescribed, two best bid to cover since the summer of last year, 2016. 54.6. listen, b plus, good auction. we need to go to breaking news desk, i believe. i'll take that, rick. let's get to phil lebeau with general motors 2017 guidance. phil? >> expects higher revenue in 2017. we'll explain why in a little bit. it also expects to maintain or improve ebit and ebit margins as
1:09 pm
well as profit margins. the earnings forecast -- this is what people will be focused on, a range of $6 and $6.50. this is mary barra, briefing people within gm headquarters about the guidance for 2017. keep in mind that what they're saying is they're seeing strength in north america, china. they remain strong. two biggest market notice world. they are also number one in both of those markets and the percentage of their vehicles sold that are new or refreshed models -- in other words, within the first 18 months of a vehicle hitting the market, that percentage continues to grow. one question that's out there, what might be the impact be from a border tax for vehicles manufactured in mexico and then imported to the u.s. be for general motors? that question is coming up, obviously, because of president-elect donald trump and gm is number one in vehicles imported from mexico and sold here in the u.s. here is mary barra talking about whether or not they will have to change production plants south of the border. >> i'm not going to speculate on
1:10 pm
that. recognizing what we're trying to accomplish, there are many things that we can do in working with the administration that are going to make america great again, that are going to strengthen business, which will strengthen growth, which will strengthen jobs. i'm not going to speculate any further than that. >> one other point. when you look at the return on invested capital for 2017, general motors says it will be at least -- at least 25%. we're showing you a three-year chart here because we're coming up on the three-year anniversary of mary barra becoming ceo of general motors. yes, the stock has momentum since the election of president-elect trump. it's down roughly 8% since she took over as ceo three years ago. >> phil, thank you. joining us is james albertine. we are also, by the way, seeing gm shares hit session highs off the back of this news. james, what do you make of this news? the stock hasn't been doing well. what's the biggest overhang in your view? is it the border tax, rising
1:11 pm
incentives, what? >> yeah, thanks for having me. good afternoon. i think two things here. gm is gaining share and gaining share in profitable segments like trucks but the pie isn't growing. the stock reflects the fact that many investors believe there's a negative cycle call here that's not going to correct itself in 2017 or maybe even 2018. you're gaining share and maybe even a decline. border tax, it's hard to say if it's related to that. nobody knows how it will be implemented. we've discussed, i think, even late last week we discussed on your show quite a bit of gm products are sold in the u.s. that come from mexico and canada and quite a few would-be seemingly foreign manufacturers that assemble vehicles in the u.s. so are they truly foreign? who's domestic, and so on? late cycle that it does the border tax. >> the mood that we're witnessing on the screens right
1:12 pm
now. gm shares spiking by 4%. short interest, very small, 2.9% of shares outstanding. it's not a short squeeze as far as we can tell by the numbers. is the guidance that much more optimistic than what had been expected on the street? >> oh, absolutely. i think, you know, folks were looking more for flattish or even down margins when you think about 2017 versus '16. the fact that they're expanding margins in an environment that's as complicated and difficult and laid wen incentives, as we've seen, it's a feat unto its own. a relative trade more than anything, gm outperforming peers, gaining share, albeit in a flat or declining market. that initial reaction, i think, reflects that. >> it's interesting. the stock is about two bucks higher now than it was when donald trump went after them in a tweet. >> right. >> zero reaction. amount of cars made in mexico is
1:13 pm
small. are you more concerned about how many they sell or how much they're making on every car they sell? >> that's a great question. i think over the longer run, we're going to start to focus more on how much they're making per car. and i think, you know, from my perspective, i think it would do the industry well to hear more manufacturers talk about cutting capacity and being more streamlined in terms of balance of supply and demand. so i do believe there's a sort of shift going on as it relates to profitability per vehicle. and in combination, shared mobility over time is not going to eat way at new vehicle sales. gm, ford and others, show how that can be profitable for them in the next phase of the cycle. >> james, thanks so much. james albertine. take a look at that chart. stunning move on the part of general motors right now. higher by more than 5% off the
1:14 pm
back of this guidance raise. take a look at shares of ford, by the way. ford shares are also spiking. what's interesting, though, is that shares started to spike before the embargo was lifted. i saw intra- day and thought the news was out already. apparently was not out. that small spike before the bigger one is before the news was released. >> somebody must have had a sense of what was coming. >> a feeling. just getting started on "power lunch." i have a sense we're heading out to the biggest health care gathering of the year, interview with ceo of shire. today's mystery chart. this stock is up seriously over the past 90 days. want a hint? company was founded when william mckinley was president. it didn't end well for mr. mckinley. the answer is coming up when "power lunch" returns.
1:15 pm
it's not just a car... it's your daily retreat. go ahead, spoil yourself. the es and es hybrid. this is the pursuit of perfection.
1:16 pm
1:17 pm
take a look at shares of general motors intra- day, up by almost 5% here, announcing an additional $5 billion in stock buybacks raising its guidance for 2017, very bullishly. additional $1 billion, sees pretax margins north of 10%.
1:18 pm
seeming to fly in the face of any border tax. right now in san francisco, meg tirrell is there live with the krechlt o of shire for an exclusive. >> joining us now is dr. fleming ornskov from shire. thank you for joining us. >> thanks for having me. >> a business model that comes with very high price tags. some folks have wondered even though it's been insulated from the pricing pressure we've seen across the industry, are you worried that the focus will start to see where disease drug s pricing? >> set out a strategy to make shire a global leader in bichlt otech in rare and highly specialized conditions. basically by this focus, you have very high impacts on patients and the ability to showing value of your products is very high. so i think we have one of the
1:19 pm
most intimate pipelines. the first or only one in the class to bring something very new. on an innovation score, very high up there and i think we show value of all our products. >> we haven't seen all that pressure on rare disease drugs from an insurance or payer perspective. do you ever worry about the political pressure, potentially, on orphan drugs when someone sees a price tag, do you worry about a tweet, for example? >> shire has a very broad portfolio. we have 40 products on the market specializing in rare and highly specialized conditions. we have 20 products. they span a number of price points but i think what is characteristic for all of our products is basically their degree of innovation. they go into areas of significant and very, very important need and they have significant impact on the lives
1:20 pm
of our patients. a very focused strategy and the fact that our treatments are for children, it continues to show value and shielded from things happening around us in the industry. >> question from the studio? i'm sorry, i thought there was a question from the studio. so, you guys have built your business mainly a lot by deal making. it's a deal making conference. what do you expect? >> are you not having anything new this year? two years ago we had a deal with nps. a year ago, the largest deal we've ever done. this year it's all about implementation and integration after our largest deal. we're also clearly totally focused on delivering our 2016 full year guidance and well on track to deliver our $20 billion in sales for 2017. this year it's all about
1:21 pm
delivering on the promises we have. if i look at the conference, for us it's a bit of an infliction point. we have the richest pipeline, a lot of product launches coming off this year. we'll have one additional launch last year and the most important launch, 20% market share up to three months. we're at an infliction point. look at the european analysts, many of them have us as their top pick. >> a lot to watch this year. we'll be following along. dr. flemming ornskov. >> the the ceo of express script. >> i do have a question for you, meg. are you ready? >> it's for you, though. >> me, okay? >> have you done -- >> my voice is suffering a little bit. thank you. thank you very much. >> and you're not done. we're not done with you yet, tirrell and myelan labs after that. thank you. today's mystery chart, tyler
1:22 pm
gave you the mckinley hint and then bashed mckinley. melissa told you this was the best performing stock over the past three months. this company's main product tries to keep you from going off road or off the racetrack. hmm. the answer straight ahead.
1:23 pm
1:24 pm
time to reveal today's mystery chart. stock, best performer, best performing index the past three months, final clue, founded when william mckinley was president.
1:25 pm
thoughts? ak steel. aks. stock up 122% in 90 candays. their main product is the armco, metal fwaguardrail you see on roadways and racetracks. should you own ak steel, given this run? phil gibbs, you were optimistic. you are no longer. when would you be again? >> i think it's important to provide a little bit of context. this has been a great turnaround story, probably the best turnaround story of 2016. the management team made a lot of key changes. they cut capacity. they really focused on mixed improvement and cut costs and also got a big inflection in the industry. in the first quarter they won some key tariffs in the product
1:26 pm
that they serve. and i think the rest is history. >> sounds like all the catalysts were already in the name they already threw everything into the pot pie, came out and got 120% gain. anything left to do that would be worth your client's money? >> a lot of the catalysts, we agree, have played out at this point in time and they've dramatically improved the balance, particularly if you're positive on auto. we're a little more muted on that, to be honest. but where we got a lot more positive over the last couple of days is we really feel like the manufacturing policy moving forward is going to be a lot more favorable for the group in general and u.s. manufacturing. however, we're taking a more cautious on auto. we think the industry has done well but it's in a stage of plateauing. we focus more on swren manufacturing companies, including new corps corporation, better source moving forward and
1:27 pm
to a lesser extent, u.s. steel. we also focus distributors, better up dside. >> if you change your rating, let us know, please. we'll get you back on. thank you very much. dominic chu with 194 reasons. he's going to list every single one of them -- you might want to be cautious right now. dom? >> how many stocks are actually participating in this broader market rally since this election that. and more coming up after the break. keep it here on "power lunch."
1:28 pm
1:29 pm
1:30 pm
>> hi, everyone. i'm sue herrera. foreign minister boris johnson telling parliament that the incoming trump administration is free to do a trade deal with britain. >> i have to say a huge fund of goodwill for the united kingdom on capitol hill. and a very large measure of understanding that now is the
1:31 pm
time to do a free trade deal. they want to do it. they want to do it fast. >> high blood pressure now affects more than 3 billion adults around the world. a new study says rates of high systolic blood pressure, the top number, have sky rocketed since 1990. hypertension was linked to more than 10 million deaths in 2015, making it the leading cause of preventible deaths. and clare hollingworth, who broke the news that world war ii has started, has died in hong kong at the age of 105. she was the first to report germany's invasion of poland in august of 1939. that's the cnbc news this hour. back to you guys. >> thank you very much, sue. let's show you what's going on right now with the markets. the dow closer to 20,000. nasdaq hitting another record high. two big headlines breaking in the past half hour, general motors, company buying back
1:32 pm
$5,000 of stock. you can see the move in swren motors is 5%. new round of job cuts at walmart, retail giant is planning cuts at headquarters before the end of this month. that stock is up 12 cents. first, dominic chu, looking at the s&p 500 and 194 reasons you might want to be cautious. do tell, dom. >> of the 500 members in the s&p 500, 194 of those members are either in correction territory or worse. that is down 10% or more from their recent highs. there hasn't been a broad amount of participation in this current rally, that 40% of members or near 40% could be reasons to be cautious. if you look at markets near these record highs right now, like you said, and with the dow closing in on that key 20,000 mark. sectors, utilities and real estate are the only two flirting or just around that correction level down 10% of their recent
1:33 pm
highs. out of 194 stocks we mentioned that are 10% or worse, below their recent highs, consumer discretionary the most, around 47 stocks there below their -- 10% or below their recent highs. 36 in health air and 25 in consumer staples. if you round out the consumer staples and consumer discretionary, that consumer story is a big reason people are feeling more cautious about things right now. in terms of the stocks you should watch here, nvidia has been on a huge run. the best in the s&p 500 last year, falling 10% from its recent highs. keep an eye on that one. numont down 22%. first solar off 50% and endo international down 73% from those levels, a few stocks that are indicators or signs from the overall market and its themes developing right now. >> thank you, dom. let's get to bertha coombs. >> the nasdaq at a record high again today.
1:34 pm
but today a little bit of rotation in the leadership. it's really about the small caps that are moving things higher. russell 2000 has been a laggard over the last few days. it's moving higher today. big reason why is bioteches, getting that big push out of lot of bullish news out of the jp morgan health conference, we saw meg tirrell there. big move for bioteches. right along with the nasdaq's strongest start in nearly four years or so. and it's up nearly 8% in these last six days. some of the big winners include repka out of jpm, licensing deal, insight at a new high, all-time high following on its deal yesterday at jp morgan as well and among the new highs within the nasdaq itself outside of health care you've got comcast and charter comcast, parent company of cnbc. etrade, upgrade from goldman sachs and hostess brands, on
1:35 pm
very high volume, guys. notwithstanding that recall of the mint twinkies, but it made a presentation recently and seems to be getting a lot of attention. back to you. >> bertha, thank you very much. so, where are the opportunities in this market, or are the opportunities getting a little thinner? tech, small caps, large caps, maybe even cash. next guest will cover them all, stephen de nichltnicolo, john m richlt rides with 300 million under management. john, you are concerned that the market feels expensive to you right now, at least in the short term. what are you looking for that might change that view? is it that earnings come in better than you might expect? i note that you're cautious on industrials, which have run a long way. explain. >> i don't think there's any surprise the market has had a
1:36 pm
huge run post election, feel expectations have gotten a little too ahead of fundamentals. we'll find out in a few days with earnings. what is looking attractive? bonds? so when you lift up the hood on the market you try to find value. one place we're telling investors to peel the money off tables is industrials. it's been one of the best performing sectors post rally. we don't think that -- expectations are for the republican-controlled legislation here will pass some sort of infrastructure spending. who knows the timing of it, the amount and who the winners will be. expectations are getting too far ahead of themselves. one last point on that, the dollar is very strong, had ans rallied very hard. >> is it really the promise or is it more corporate tax reform, promise of higher gdp growth? china overnight were better than expected and europe as well. >> right. i think it's all of those that have led the market to rally
1:37 pm
hard. i think the infrastructure has bnt cherry, the icing on the cake for the industrials. with a strong dollar you'll get a massive fx headwind on to the earnings. >> you are also of the view, stephen, that you need to avoid the areas of where the anticipation might have gotten ahead of the facts. do you agree that industrials is one of those areas? >> i think there's a lot of opportunity in industrials but you can't by every industrial company. caterpillar. you had $100 oil, an industrial capex boom. so i wouldn't go out and buy caterpillar. but a company like diacom. ticker is dy. fantastic play on faster internet speed. fiber optic networks in the u.s. brian if you don't like your wifi internet speed at home or you would switch customers if you can be offered a faster speed at home, would you?
1:38 pm
the answer is probably. so if you look at dycom, their largest customer is at&t. they're out there, saying they're going to bring faster internet so you can download a two-hour movie in about one minute at home. >> if at&t and verizon -- yes, by the way, i do want higher, faster speeds. if they keep spending on that broad band buildup. >> absolutely. >> do you think they will or do you know? >> they have plans that say they will. the cat is out of the bag as far as internet consumption and speed. if one carrier -- let's say comcast, chart er, if they brin high speed internet to a neighborhood, somebody else has to follow. so if you look at dycom, it's trading below a market multiple. said they could benefit going forward. this is a fantastic opportunity where there's actual growth. you have to buy more reality and less hope.
1:39 pm
>> john, health care and technology, your tech pick is qualcomm. >> i think health care and tech are cheap in a valuation standpoint. tech, qualcomm is interesting. they introduced their new snapdragon chip, getting into virtual reality, augmented reality. cash flow royalty from their licensing platform and they just did a massive acquisition of buying nspi semi conductors, a backbone that supports apple pay and the chips in your credit card, which i think is i ai huge growth. qualcomm has grown 18% annually for the last decade. they have a ton of cash sitting overseas. if trump is able to open up a tax repatriation window, they'll be able to use that as a favorable rate. >> and you like health care, in part, for that reason. >> that's right. >> pharmaceuticals have a lot of
1:40 pm
cash overseas. gentlemen, thank you very much. when is a sales decline a good thing? when you are this company. bonus mystery chart just for you. stick around to find out who we are talking about. you can now order wings -- yes, chicken wings -- through amazon.com. they've partnered with wing stop through alexa. in an exclusive interview we'll ask the wing stop interview exactly how it works. >> ask alexa how it works. >> i don't want to do talexa, never mind. today's powerhouse, get this. we'll take you inside meryl streep's former new york city townhouse. is it overrated? we're back in two minutes. this is my retirement. retiring retired tires.
1:41 pm
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. ...better than a manual, and my hygienist says it does. but... ...they're not all the same. turns out, they're really... ...different. who knew? i had no idea. so, she said look for... ...one that's shaped like a dental tool with a round... ...brush head. go pro with oral-b. oral-b's rounded brush head surrounds each tooth to... ...gently remove more plaque and... ...oral-b crossaction is clinically proven to... ...remove more plaque than sonicare diamondclean. my mouth feels so clean. i'll only use an oral-b! the #1 brand used by dentists worldwide. oral-b. brush like a pro.
1:42 pm
all right. here is our riddle. when is a sales decline a good thing for a major consumer company? the answer? when that company happens to be chipotle mexican grill.
1:43 pm
shares are up more than 5%. investors cheer because it posted a smaller drop in sales than they expected. sales only fell 4.8% after tanking about 20% in october. of course, chipotle has struggled to recover from that 2015 e.coli scare. michelle? top restaurant ceos are meeting at the conference in orlando. among them, the ceo of wing stop, partnering with amazon's alexa sounds very cool, sara iverson. >> that new alexa partnership. charlie morrison, ceo of wing stop. you were talking about chipotle. the executives are preannouncing another disappointing quarter. do you make market share when some of your fellow fast casual and fast food restaurants are declining, when your growth is coming in double digits?
1:44 pm
>> yeah, we're growing, obviously, faster than the market is growing in the restaurant sector. certainly it's not unusual for us to take some share from a lot of different concepts. i wouldn't say it's necessarily other chicken chains per se. it could be restaurants like chipotle or concepts within the space. >> how are you managing to do what nearly 20% revenue growth at a time when other chains are talking about a restaurant recession? >> we're a franchise primarily and have one of the best economic models, we believe, in the industry. allowing our franchisees to make great returns on their investments, which corresponds to fast growth for all of them. recently we're just about ready to hit our thousandth restaurant chain wide, one of 40 or so restaurant chains that's ever achieved that milestone. continued growth of our chain and the great model that we have. >> and technology. everyone is excited about this alexa partnership. how does this work exactly?
1:45 pm
>> it's great. wing stop is the first restaurant chain to debut, utilizing alexa to create orders. but not only through orders through just the mechanism through repeat orders that you've already placed but you can customize your order through alexa with wing stop by educating alexa, developing a skill and turning that into an order. you can order an eight-piece combo with classic wings, fries, drink, anything you want. >> you say alexa, order wing stop and then walk through the whole process with her. >> a few questions. number one, you know what people think when it comes to improving technology in the restaurant space. labor shortages are going to increase and there's going to be less demand for people working in restaurants. is that the future, where we have to worry about robots replacing restaurant workers? >> i don't know necessarily that robots will replace everybody. everyone still wants that human
1:46 pm
interaction. we opened well over 100 restaurants this year. each one generates about 18 to 20 new jobs. we'll continue to do that. we think that technology can really enhance the consumer experience, making it easier to order, pick up your food, take it home and enjoy it with your family. we see technology benefiting all sides of the equation. >> i think brian sullivan, no doubt a serious wing fan, has a question. >> that is true. but i actually have a comment and a question. charlie, you may have inadvertently ordered a bunch of wings for everybody who has the amazon. alexa cancel chicken wing order. no offense. we're learning the hard way that this is happening around the country. what do your franchises cost? we're trying to engage consumer ability to invest and grow on a small business level. >> our typical franchise investment is about $370,000. our typical average unit volume is about $1.1 million.
1:47 pm
our economic model is the best in the industry with a 3-1 sales to investment ratio. very attractive for franchisees. >> how much are franchisees, say sara isen, one person show, vrsz a powerhouse, coming in and buying 50 at a time? >> we have all of the above. a lot of large franchisees that operate as many as 70 restaurants and just as many opportunities for folks like sara to join the wing stop family. >> i guess not a powerhouse to brian sullivan. you pay north of 30% effective tax rate. what are your expectations for corporate tax reform under president trump, republican congress? >> the potential is there for it to improve. it's a little in the game right now. we see some upside in the future, hopefully, with that. >> what other policy implications are you looking forward to? do you expect this jump in consumer confidence to translate into better spending? >> little early to tell on both
1:48 pm
fronts, quite frankly. we'll wait and see how things evolve, ultimately. but i think it is exciting to see that there is strong consumer sentiment right now and hopefully that translates for continued growth for us. certainly we've been a brand that has weathered a lot of changes with 13 consecutive years of positive same store sales growth. >> got that point in. >> we've been able to grow despite whatever the macroeconomic challenges or opportunities are. >> charlie morrison, good to check in with you. >> thank you. >> thank you very much. send it back to you, melissa. >> sara eisen, thank you. inside look at homes of celebrities, sports figures and ceos. today we're taking you inside meryl streep's former new york city townhouse. >> this $28.5 million townhouse once belonged to three-time oscar winner meryl streep. >> not only did meryl streep used to live here for a long time. after that, it was owned by one
1:49 pm
the of the heiresses of the johnson & johnson corporation. >> more than 6,500 square feet. the living room on the second floor leads into a formal dining room that opens to a terrace overlooking the garden down below. >> like being in the south of france. >> brightly colored kitchen. upstairs are six bedrooms. indulgent master suite includes 640 square foot bathroom that takes up the entire width of the townhouse. >> it is full of italian marble. >> on the top floor is a private rooftop garden with skyline views of lower manhattan. >> one of the most compelling things about this property, it's been thoroughly renovated. it gives somebody immediate gratification. who doesn't like that? >> the townhouse is located on a prime block in greenwich village off fifth avenue. according to public records last time it was sold was in 2008 for $13.5 million.
1:50 pm
a decade later it's now listed for more than double that at $28.5 million. if you're wondering that's more than $3,300 a square foot. >> it's in move-in condition, though. >> turnkey, yes. >> turnkey. >> it's kind of ugly. >> i didn't like the green or the red. >> the red. >> very christmassy. not that there's anything wrong -- this is not a war on christmas. >> stripes, too, are a little butt of a turnoff for me. >> busny there. phil lebeau, breaking news? >> rumors have been flying around and are now confirmed by volkswagen, parent corporation of volkswagen saying they have entered into an agreement with the department of justice to settle the criminal probe into the diesel emissions scandal that has been going on over the last year. for a long time these negotiations were focused on how much that criminal fine might ultimately be. volkswagen saying it's in the neighborhood of $4.3 billion.
1:51 pm
that's a preliminary draft of the agreement with the department of justice. this still needs to be finalized and could even be finalized later today or tomorrow. as part of that agreement, vocation wlkswagen does includey plea, a criminal guilty plea from volkswagen. that's significant. you look back, whether it was gm ignition switch crisis or the unintended acceleration investigation involving toyota, there was not a guilty plea on the part of the company. it also raises the question whether or not certain vw executives could, themselves, face criminal prosecution. you had one executive who was charged in miami yesterday in relationship to this. again, this is confirmation from volkswagen that it has essentially entered into an agreement with the doj, awaiting finalization of that agreement for $4.3 billion, being the total fine related to this criminal investigation into the diesel emissions scandal. back to you. >> phil, thank you very much. i'm sure we'll get more on that story going forward.
1:52 pm
meantime, "power lunch" parade of high-powered ceos continues, defending the pharmacy benefit management model is ahead. plus "street talk" is coming up. 90% of the world's largest supercomputers run on intel? that means you can take a universe of data - in your case literally - and turn it into medical discoveries, diagnostic breakthroughs... ...proof that black holes collapse into one singularity. i don't know what that is. but yes. innovation runs on supercomputers... ...and supercomputers run on intel. you are super smart. and super busy. ♪ ooh! ufo! false alarm, eyelash!
1:53 pm
hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade. we only do it for everyone gary. well, i feel pretty smart. well, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head. i'm still the same old gary. wait, you forgot your french dictionary. oh, mucho gracias. get help on options trading with thinkorswim, only at td ameritrade.
1:54 pm
we're opening more xfinity stores closer to you. visit us today and learn how to get the most out of all your services, like xfinity x1. we'll put the power in your hands, so you can see how x1 is changing the way you experience tv with features like voice remote, making it easier and more fun than ever. there's more in store than you imagine. visit an xfinity store today and see for yourself. xfinity, the future of awesome.
1:55 pm
time now for "street talk." underperforming with the price target, credit suisse putting pressure on ratings. analyst is cautious with potential payback from the investment on international sports rights and discovery's high valuation. 9% premium. enterprise value. >> maybe some of that ad value is going to facebook. raising their target to 156 from 150. target is boosted for a few reasons. overall strength to the video ad market. instagram helping to drive more spend on the social side and facebook video doing well. 1.83 billion monthly users coming up, 15% jump year over
1:56 pm
year. their target on face book is 25% upside. >> third stock here, goldman socks, citi downgrading goldman to a sell. there's a compelling risk for run. goldman sachs would need an additional $4 billion in revenue above current estimates of 18% growth off the 2016 revenue base. that bar is high, according to the analysts, even if deregulation takes place. >> final stock crto. something i've never done before, this comes in the same big call as that facebook one from cowen and company. digital marketing company, boosting their target from 55 to 53 for many of the same reasons as the bullishness on facebook. they like criteo but moving toward the sweet spot of what they do. program attic ad buy. analyst sees lots of room for
1:57 pm
customer growth. that $53 target is 28% upside. melissa, rated a buy. >> tyler, back to you. >> thanks, folks. two most important words for investors as the trump administration gets ready to take over in ten days is why it's so important for your money, next.
1:58 pm
[phone buzzing] some things are simply impossible to ignore. the strikingly designed lexus nx turbo and hybrid. the suv that dares to go beyond utility. this is the pursuit of perfection.
1:59 pm
2:00 pm
welcome, everybody. second hour of power lunch. the gang's all here, melissa, brian, michelle. tyler mathisen is my name. here we go again, the dow moving closer to 20,000. the man who oversees vanguard's $3 trillion of assets lays out his portfolio points. mary barra says g shares
2:01 pm
aren't fdriving, they're flying. border tax plan on the financial wall it might create, or not. we will break it down. not the wall, just the issue. >> well, it's not just the dow we're watching today. we're tracking the nasdaq that hit another record intra- day high. today would be the sixth straight gain for the index. start of the year 2006. being helped by the airlines rallying today. walmart reportedly could cut hundreds of jobs this month according to dow jones. shares of valeant soaring. selling to a chinese conglomerate and l'oreal for $3 billion, losing 80% of its value the past year. gm, tyler mentioned that shares are flying. phil lebeau is in chicago with
2:02 pm
more. phil? >> melissa, this is the second straight year that general motors has provided its guidance the day after the detroit auto show. for the second straight year, general motors is giving an optimistic outlook. a very bullish forecast for 2017, including authorizing an additional $5 billion for share repurchase. also it's up iping $6.5 billion through 2018. fwiedance in regard to revenue earnings and margin for next year has a lot of people excited. higher revenue. maintain or improve ebit or ebit margins. just from some point of reference, the guidance this morning, the consensus, if you will, out on the street was for gm to earn about $5.72 to $5.76 in 2017. much more bullish than what many analysts were expecting. take a look at shares over the
2:03 pm
last three years, just under $38 a share. point of reference in terms of reference for the high-water mark, mary barra shortly after she took over in january 2014 -- actually 2015, it hit $38 a share, $38.50 a share. we're not far from there. all-time high since they came out of bankruptcy, somewhere in that $40.66 range in 2013 we saw shares trading at that level. certainly one of the biggest days we've seen for shares of general motors in a long time. >> phil, news came out at 1:05, correct, when the release was released? >> when the embargo was lifted. >> thanks, phil. take a look at the intra- day. you can see the stock spiking prior to the release at 1:05. dr. j, options guru had flagged this for us. so bullish options activity on
2:04 pm
the stock spiked starting at around 12:03:02, two seconds, and continued the next minute or so. unusual activity ahead of that new 52-week high that general motors actually hit. that's central time, excuse me, meaning 1:03, 1:02, exactly, when the news hit. >> a couple of minutes ahead of the release. >> which sort of raises eyebrow s. >> news alert. in the interview with "the new york times," adding more pressure on to republicans to move on their signature issue and his signature issue of repealing obamacare. this debate has been unfolding in a fascinating sbun predictable way. remember, we came into this year with the idea among republican leaders in congress that they would have a strategy called repeal and delay. they would move quickly to repeal obamacare, something their base has been demanding for some years, but that they
2:05 pm
would faze in a new system and take some time before they figured out what to replace it with. if you repeal everything at once you have people that now have health insurance that would lose it. then you've had a movement among some senators, rand paul, lamar alexander and others who have said no, before we repeal obamacare, we need to have our replacement lined up and be ready to tell people immediately what it's going to be replaced with. rand paul, who advocates that position, tweeted last week that he had talked to donald trump and that donald trump agreed with him, that wooshd not have repeal and delay. now donald trump has come out and said no, i do want a prompt repeal and we can wait a little bit to come up with our replacement but not very long. he's saying repeal and delay but only a few weeks. remember, republicans have 52 votes in the senate. they need at least 50 to move
2:06 pm
ahead on this. at the moment, they don't have them. and donald trump is trying to shore up that support. >> correct me, john. i seem to recall a tweet from the president-elect last week indicating to his fellow republicans to move cautiously on this. >> exactly right. he said republicans, be careful. this is going to collapse of its own weight and so we should not take the ownness off of democrats for obamacare. >> right. >> it's going in a different direction because he has caught some of the assessments on capitol hill in which people have noted falling support for prompt repeal. he is reacting to a new piece of information, saying no, don't waiver. go ahead and do t plenty more twists and turns on this story, tyler. >> thank you so much. john harwood. >> meantime, steve bannon meeting with house speaker paul ryan last night. the meeting was to discuss
2:07 pm
trump's plan for a so-called border tax on imports, controversial to say the least. it is also complicated. luckily, michelle is here to help us understand it. michelle? >> they were actually there to talk about paul ryan's border adjustment tax, which is slightly different because we're wondering if it's the same thing as donald trump's border tax. let me explain what the house gop plan is, that they were speaking about last night. here is what the current status of corporate tax are in america. worldwide profits get taxed at 35%. the flatten gop, a better way. it's been out there for a long time -- is this. take a look. here is the formula. domestic revenues only, subtracting only domestic costs at a much lower rate, 20%. stare at this long enough and you figure out pretty quickly, one, this is now a territorial tax system instead of a worldwide tax, right, there's been so much criticism of the u.s. being one of the few big
2:08 pm
countries in the world that has a worldwide tax. second, you can't subtract any of your costs from imports. only domestic costs. this is why retailers don't like this. everything they import won't reduce their tax base. here is what's crucial to remember about this. this is where the debate is. supporters of this idea say don't worry about higher costs of places like walmart because this is so strong dollar -- the dollar is going to rally so much, 20% to 25%, walmart will be able to buy a lot more stuff and the consumer is not going to feel it. there's a lot of question about whether or not that will be true. austin goolsby, adviser under president obama, now at the chicago school of business. and steve liesman joins us as well. austin, was that a good explanation? anything you would add? am i right about the issue of the dollar? >> i thought it was a pretty good explanation and love that you're embracing the economic
2:09 pm
theory of taxation. simplest way to describe this -- economists have been arguing about this type of tax in principle for a long time. this basically replaces the corporate income tax with a value-added style national sales tax. so you're shifting the base of who is getting taxed from production and the producers in the united states to consumers in the united states. you might want to do that if you thought, hey, consumers can't go anywhere while producers are mobile. but that's also what's going to be controversial because everybody who goes out to buy things is going to say, oh, wait, wait a minute. what happened here? >> so, austan, just so i'm clear here -- i think this is exactly what you describe. if i'm walmart or footlocker and i have domestic revenues of $100 million and 90 million of my cost of goods are imported goods, from wherever they come
2:10 pm
from, i am then -- i don't get to deduct that cost of goods from my revenues. >> yes, that's true. now the economists say -- that's why oil refineries are in a panic. anybody like ford or gm, who buys various supplies and parts from outside the u.s. -- you have a global supply chain -- or if you're a retailer that has imported goods, they're in a freefall panic. but that's not totally true because eventually the exchange rate should adjust, you know, as michelle highlighted. but i want us to just take a step back. you're shifting the tax base in a more european style where, in europe they have lower corporate taxes but they have higher sales tax taxes through -- it's not so much retail companies as it is the american consumers. we're going to shift who pays
2:11 pm
the tax from the producers to the consumers. and i don't think consumers yet understand that. >> steve, i think some of the appeal on this is if you are basically implicitly taxes imports you could almost argue you've got a border tax, right? and fulfill potentially a campaign promise. >> not if the -- >> vague enough to be accurate. >> the end of fulfilling a campaign process is hardly reason to do economic policy if it doesn't make sense. >> no. >> makes political sense perhaps. i'm a little confused here. i came here hoping michelle was going to sell me this idea. >> i'm not here to sell it. i'm here to explain it. >> i was hoping to see the benefits in it and i was hoping that austan -- by the way, in part it's come from the american left. alan auerbach wrote about this idea in 2011.
2:12 pm
this idea does not reduce the trade deficit. it should be neutral as to imports and exports. it creates all sorts of problems other than making the tax code less complicated, which does appear to be true, i would like somebody please to explain to me why i am spending the last remaining hairs in my head trying to understand this issue that doesn't solve any problems. >> can i answer that? quickly, austan, can i answer that? >> sure. >> our trading partners use a sales tax, but the minute any companies in their country export anything, they get all the tax. they get a rebate. isn't that an implicit subsidy on exports? >> i don't think it is. i don't think it is because -- >> they charge it domestically. >> because the exchange rate will move by that amount. steve, the argument is this -- you can buy it or not buy it. the argument is producers and
2:13 pm
capital are getting more and more mobile every year so that ultimately things like the corporate income tax are doomed because you're trying to tax things that can move away. if you shift to a system where you tax consumers and they can't go anywhere, you will at least encourage production in the u.s. and that's what the proponents say is good about it. >> by the way, people on the right hate this idea. one of the things it does is it gets rid of the competition on taxation between countries. and people at the heritage foundation and other places say that companies between states on taxes is positive for the economy as it is between countries. this say huge headache in a lot of areas for a lot of industries. i'm totally willing to support it if somebody can explain to me the problems they're solving. >> this is the house gop plan. we have no idea whether or not donald trump supports this idea. >> thank you. >> that's also crucial. thanks very much, austan. >> thanks, guys.
2:14 pm
drug price hikes are also a red-hot topic with americans and consumers. drugmakers took most of the blame. lately a new group of companies have come into the spotlight, policy benefit managers, express script the biggest in the country. meg terrell is now joined by their ceo. >> tim wentworth, ceo of express script is joining us. thanks for being with us. >> thanks for having me. >> with the outcry over the epi-pen you've brought into the conversation about drug prices. do you feel that your business model is under attack? >> no question that folks twoont attack our business model for their own reasons. epi-pen is job one because of that. our business model is all about making drugs affordable, accessible to our patients, epi-pens included, by the way. the challenge with something like an epi-pen is when the prices are going up like that,
2:15 pm
we have to do our job and find a way to create competition and bring them down. in the case of the epi-pen we didn't have ability to create competition. >> when the epi-pen competitor was on the market, their list prices were comparable and maybe one came in above the other. do you benefit when a competitor comes in and sets the list price higher? >> our clients benefit when we a competitor comes in and we can force both to compete. hepatitis c, a far more complex story. patients and payers were struggling to figure out how to afford it. we were denying care to certain people. when the second product came out we were able to immediately work with those manufacturers to get that product cut by more than half. then all of a sudden it became very available to those patients and payers who wanted to provide the cure but could not have afforded it at its initial price
2:16 pm
zbhie talk to a lot of drug company ceos over the course of the last two days. what would happen if we stop raising our list prices, how would that affect pbms growth? >> if they stop today we would welcome that. first of all, i would contend a lot of list prices today are still too high and so we still have a job to do to be sure that the right drug gets to the right patient but also that we can continue to leverage this competitive marketplace we uniquely create to bring prices down, to create better value for our clients. the other thing i would say -- i'm an optimist now -- increasing number of pharma companies want to work with us to bring value to other market through rebates in initial pricing, indication based pricing, outcomes base pricing, money back when a drug doesn't work. those are the things we're now having conversations with pharma about. that's far more interesting than them jacking up prices and
2:17 pm
rebating it back. >> pressure on bpms. short seller, andrew left, focus on express scripts trying to call out donald trump, saying this is the real culprit in drug pricing. >> you can never anticipate a presidential tweet. what i can tell you is that andrew connected the dots all wrong. if donald trump were to take a look at what we am our industry and in our company do, it's the kind of competitive market that he would understand and embrace. the department of defense, where we recently saved them an additional tens of millions of dollars a year starting this year by doing a simple changeout of who their cornerstone retail provider was. we changed it out from one to another. both are high-quality companies. we were instantly tiebl bring value to the department of defense by creating that competition. if donald trump or any other legislator were to look at that,
2:18 pm
it's what pbms and our companies can do for employers, health plans and the government in our country. >> fascinating conversation. we look forward to continue it this year. >> thanks, meg. much more coming up, including the ceo of etita. and mylan. >> look forward to that one. thanks, meg. larry somers says the markets are on a sugar high. are we about to crash? apple's second chance plus phil gross' magic number to watch and donald trump telling "the new york times" he wants obamacare repealed immediately. we talk to two senators hoping to slow down that process. much more coming up on "power lunch." bull rung out of steam, dow down by about 23 points. stay tuned. what's the value of capital? what's critical thinking like? a basketball costs $14. what's team spirit worth?
2:19 pm
(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, not just wealth, but things that matter. morgan stanley
2:20 pm
2:21 pm
headlines breaking moments ago, in an interview with "the new york times," president trump urging republicans to move ahead with the immediate repeal of obamacare and the immediate replacement. however, five republican senators want to delay the repeal until there is a viable replacement in place. it was introduced yesterday by senators bob corker, rob portman and susan collins. joining us are two of those senators, lisa burkowsky of
2:22 pm
alas alaska. both of you in 2015 voted effectively for repeal of obamacare and restoring the american americans health freedom. >> repeal is still what's in front of us and it's important to recognize that certainly everyone in our conference is adamant that we move forward with the repeal, and we do so expeditiously. what we also want to do, though, is make sure that we replace it with a structure that does right by the american people. so, making sure that we are being smart as we do the replace simultaneous with the repeal is important. >> senator cassidy, effectively, donald trump has come out and said to the "new york times," get this done now. you're probably willing to do that if there is a backup plan. is there any viable backup plan
2:23 pm
floating around congress, senate, the house? does anybody have anything or is it literally we've got nothing, we're going to repeal it and be left with a black hole. >> i have a plan that i introduced with senator collins and pete sessions, congressman. absolutely we have a plan. to echo, to go back what you asked senator murkowski, i'll say what happens changed between two years and now is that we also have the opportunity to replace. in that initial portion of the repeal you want to set the stage for the replace. we knew that president obama wouldn't sign a replace. now we know that president-elect trump will. we have to set up that replacement step by step. i call it all due haste. you don't plan a building and start building without plans. you build the plans and then build the building. that's what we're trying to do. >> so i'm confused. we heard from paul ryan saying it's going to happen within the next 200 days. how much delay are you guys talking about? >> well, again, when you use the
2:24 pm
word "delay," what we are doing right now, the way the budget reconciliation, budget resolution process is working is we are moving through that step that gets us towards the vote on repeal. that's necessary. i think you will have all republicans supporting that. what we are asking for is to make sure that as we are doing the replacement, we do it as expeditiously as we can, but we allow for that replace mechanism, that return mechanism, whatever it is you want to call it, that it is reasoned, rational and thoughtful. >> is that days or weeks, senator murkowski, what is that? >> we asked to postpone, if you will, the consideration to march. they came back and said january 27th is not a deadline. this is as soon as it could be considered but our bill is perfectly consistent with what the current setup is.
2:25 pm
we could go even without our amendment as late as march if that's what it takes to put all the pieces in place. and by the way -- >> go ahead. i'm sorry to interrupt you, senator. >> by the way, there are pieces -- tom price when he is hhs secretary, should be part of the conversation. we need to work out the way of paying for this. we need to have the plan itself and the pathway to implement. lastly, some votes to repeal and replace will take some democrats. we need to speak with them. there are four components that we need to address that we will do, in all due haste. it's a not that we're delaying. we just want to make sure that things are setup for thim ploeding obamacare to be replaced with something that works for the american people. >> president-elect has indicated he is willing to go for some timeline that feels like a few weeks, which you could argue is march or not march. whatever. this, to me, is procedural stuff. very important. very interesting for all of us to follow. it is highly fascinating.
2:26 pm
let me ask a more baseline question and either of you can answer. how much longer will americans live under obamacare as their principle safety net insurance plan before the replaced program brought forth by the administration and basically the gop take shape? is it one year? are they going to be looking at a new program in three years or what? >> the plan i put forward with susan collins that co-sponsors as well as pete sessions on the house side, would do this. in 2017, congress enables states to choose options they wish to replace obamacare with. in 2019 they implement the replacement. obamacare goes away. by 2020 it's all done. lisa used the comment of repeal and return. we want to return authority away
2:27 pm
from washington bureaucrats back to the state legislature to folks who hully live near and next door to those using the insurance. it should be decided on a state level anyway state capital not the nation's capital. >> one of the things that needs to be set out there is i don't think anyone wants to be in the place where we say on tuesday we repeal obamacare as we know it, but beyond that, we don't give the people of this country any certainty, any direction about what happens next. because that uncertainty is as frightening as the debacle that so many are facing with an obamacare system that is just not working for them. so, making sure, again, that there is a framework, that there is a transition. there's a lot of fancy washington words being used right now. but what we don't want to do is inject additional uncertainty,
2:28 pm
uncertainty to the americans, to the families, to the insurance market. this is what we're trying to avoid here. so let's make it work. >> senator murkowski and senator cassidy, thanks for your time. markets on a sugar high? are we set for a sugar crash? we'll ask the person who oversees more than $3 trillion for vanguard. have a marshmallow, why don't you?
2:29 pm
2:30 pm
2:31 pm
crude oil prices hitting a session low just under $50 a barrel and closing there. crude trade plagued by all the unknowns in the market right now. we'll hear from the d.o.t. tomorrow. inauguration day is coming. will the incoming president be able to execute promised fran structure changes? tillerson confirmation hearings beginning tomorrow. will it be a smooth process? recent strength in prices 55% gain being felt in retail gasoline. $2.37 according to aaa, up from $1.97 a year ago, a 20%
2:32 pm
increase. those who are worried about the consumer, this could be a headwind and 6% spike in natural gas prices as well, another consumer story. back to you. >> jackie deangelis, thank you. the dow is now in the red. the dow up 8% since the election but not everyone is convinced this optimism will continue. we spoke with former treasury secretary larry somers earlier on ""squawk box"." take a look at consumer confidence, optimism at 12-year highs, markets at record highs right now. how would you characterize this? is this a sugar high? >> sugar high. >> it's a sugar high? >> that can last for a while. >> somers went on to say that sugar highs like this don't often end well. are we headed toward a major downturn in the markets? >> tim buckley, chief investment officer of vanguard, helping to oversee the $3.8 trillion in assets under management.
2:33 pm
welcome. good to have you with us. >> pleased to be here. >> what do you think of the market? >> i would say right now there's a lot of euphoria in the market. going into the election, we would have had the market fairly valued. since then, it's run up. and the fundamentals haven't really changed. so, as professor summers said, it's a bit of a sugar high. it's that euphoria about infrastructure, cut in tax rates. what will happen to corporate profits? will they come back onshore? it's easy to speculate about those things. we don't know policy one around them and what form they'll take. it really matters the form that that takes and what happens with those corporate profits that are repatriated. >> some of those specifics are you have to wait. we don't know what form they'll take. certainly there is a lot of anticipation around the idea that the incoming administration is going to be a more
2:34 pm
business-friendly administration. and that has lifted the spirits of investors. how much money has been flowing into your equity funds and have you seen a reversal of the trend where most of the money was going into fixed income? has that flipped for you? >> it hasn't really flipped for us. there's this false premise this great rotation that everyone is going to leave bond funds and go into equity funds. it's probably quite the opposite. equity holds for the individual haven't been this high since 1999, where they were a bit higher. last thing you want to see people do is sell bonds and put more risk in their portfolio. when you have proposals out there like this, they could be stimulus but might not be. >> if you wait to know the details wouldn't it be too late? >> we would say stick with your plan. have you a plan that says you're a 60/40 investor. continue as you get your paycheck to buy into the market in that proportion.
2:35 pm
to do anything else is to speculate. that's not investing. investing at the end of the day, you're look out a ten-year period not a ten-day period. >> let me make sure i understand what you just said. maybe a different way to put this is of the fresh money that's coming into vanguard over the past nine weeks, say, since the election, is more of it going into stocks than prior to that, or the same amount or what? i'm not asking whether the money is moving out of bond funds and into stock funds but where is the fresh money going? >> we have seen a slight tick up on the equity side. we haven't seen it draining out on the fixed income side. >> right. >> that behavior is a false -- people don't dump their one set of funds and buy the other. they tend to redirect cash flow. >> what do you say to some of the folks who come on our air and say very confidently that, boy, this is a year to go with a managed stock picker kind of fund or investing approach?
2:36 pm
>> i would say if you look, there's a secular change going on. it's really that you're seeing this huge shift from active management to passive management because active managers have underperformed. and they haven't under performed because they're not any good. these guys are great. it's a zero sum game. the better they are, the less chance you have for excess return. and the one thing they have to do to outperform is to lower their fees. so if you find that great manager, if they have low fees, that's a good story. that's what we have. we have $1 trillion in active management. and we echo that story. we have the excess return to prove that. if you think it's a market for active managers, i would say any market should be a market for active managers. that's what you pay them for. the true essence here is it's never a good market for high fees. it's better to have low costs, whether it's an index fund or active management. >> tim, thank you very much. have a great year. >> my pleasure. thank you. you, too.
2:37 pm
consumer reports gives apple a second chance. will the mac book pass muster this time? big number to watch in the bond market and what it means if we get there. "power lunch" will be right back.
2:38 pm
2:39 pm
2:40 pm
hi, everyone. i'm sue herrera. convicted killer dylann roof telling jurors he could ask them for life in prison instead of the death penalty but he wasn't sure what good that would do. in his closing argument he did not ask for mercy or for forgiveness. a man was arrested after a hostage situation in tuscaloosca, alabama, at a credit union across the street from the university of alabama law school. 87 rock salt lamps are being recalled due to shock and fire hazards. under the luminiere brand. investigators are focusing on the possibility that the october robbery of more than $10 million worth of jewelry from kim kardashian west was an inside job. this, after the arrest of her chauffeur and his brother.
2:41 pm
they were among 17 people taken into custody. you're up-to-date. brian, back to you. >> we were just debating that game, how great it was and how tired we all are. >> yes, indeed. my husband stayed up till the very last minute. >> how could you not? >> i know. >> one second left they score a touchdown. >> i know. >> my 11-year-old. >> mackie stayed up? >> i had to root for clemson. >> oh, my goodness. >> how is that? natural gas, gene sequencing and household lubricants. quite a combination. it's coming up in the good, the bad and the ugly. and what you need to be watching. what happens if we get there? you thought three was the magic number? it's not. go tigers.
2:42 pm
2:43 pm
2:44 pm
in today's trade we kick it off with the good, illumina up 17% almost right now. upbeat sales outlook and a lot of optimism. on to the bad, wd-40. that's what brian was talking about when he said lubricants.
2:45 pm
estimates fell short as well, blaming the strong dollar since nearly half its revenues come from outside the u.s. that stock is down 10.25%. ugly day for williams company, selling 65 million new shares and pricing them at 29 bucks a share, nearly $3 below yesterday's closing price, a decline there of $10.6%. brian? >> the kids song famously sang that three was the magic number. subtract ten points from that and bill gross might agree. 2.6% on the ten-year bond is basically the magic number. above that on a ten-year, secular bear market in bonds will have begun. does your trading nation team agree? let's find out. bors sclass bechlt rg. is it some kind of a magic number, good or bad, for bonds? >> no. i think it's quite a number. is he basically making the
2:46 pm
argument at 2.6% or above there's going to be competition for stocks from bonds or is there going to be capital allocation or somehow capital will be more expensive? none of those things really number. the only number that really matters is the 3% number, 3% of wage growth. if we see wage growth at 3% or better this year, all the number also come in line. >> what he says is it's more important than $60 oil, craig. more morn important for your dollar parody and drives up investment. what's your take on the bond market and what bill had to say? >> well, from a technical perspective, i certainly respect bill and all the great work he has done. 2.6 is not the number in the technical world. you need to be looking at 2. 5 to 3. that's the down trade resistant line off the 1981 highs. reversal above that level would usher in an asset allocation shift from fix income to
2:47 pm
equities. and right now we're not there. it's going to take probably two or three pushes before you move through that 275, 3% range. we think it will happen in the second half of this year. but we're look at a number little higher than mr. gross. from our perspective in equities, secular bull market in equities won't work until you have a 5% ten-year bond yield. we've gone back and looked at long-term analysis on this. secular bull market is there for equities but higher. >> 50-year long-term chart in that analysis, craig. did you go back that far when looking at it? he's looking at a 30-year down trend. that's going to reverse that 30-year down trend. >> well, we looked at charts going all the way back to the early 1900s and can see that there's up phases and down phases here. from 1981 coming through this for us it's about 275 to 3%. i don't think you want to put in a precise number like 2.60 on it. it's a high off the highs you
2:48 pm
had back in '14, '15. 3% when you get that asset allocation to kick in. >> boris, craig, thank you very much. we have to leave it there, guys. hopefully, we'll get bill on to explain that as well, all readable on the janus website. trading nation.cnbc.com for more information. student who flunked a test, apple is now getting a retest from consumer reports. will the mac book pro get a recommendation from consumer report this is time? stick around.
2:49 pm
2:50 pm
2:51 pm
apple just issued a software fix to improve the battery life of new macbook pro laptops. they failed to receive recommended ratings from
2:52 pm
"consumer reports." joining us is glen derine. great to have you with us. >> great to be here. >> a do over because of this fix. the original problem was, what, the battery life was wildly not consistent? >> yeah. we got results of over 19 hours on the top end and below four hours on the bottom end. and this was across multiple tests of three different laptops. and when we get results that are that wildly inconsistent, the only thing we can suggest to the users that they can reliably expect is the lowest possible battery life. if you're going to unplug your laptop and go on a business trip, airplane flight, the only thing we can say is reliable is the lowest possible result. when they're that variable. so we couldn't recommend them given that. we had communicated to apple what our findings were and to their credit they worked really closely with us. they wanted to get more data. they wanted to get more information and we cooperated with them because we believe
2:53 pm
it's in the best interests of consumers to get the -- to get any problems resolved, especially if they're software issues and you can fix it. >> variability, battery life results as 19 1/2 and as short as 3 3/4. it could be a rude surprise. >> what was the problem, glen? >> what was interesting is apple went and did some checks on diagnostic runs that we sent them and they found that our testing stumbled into a software glitch, a bug in the safari browser which is part of the innatetive operating system to the macro pro laptops. the technical description, frankly they'd know better than i would, it's essentially when we put the browsers into a -- i don't want to get too technical unless you want be me to, we put the browsers into a mode where we turn off caching which is storing local web pages because we want the testing to be
2:54 pm
consistent. otherwise, the laptop is loading pages off of its own hard drive. it's not stressing the battery and wireless cards and all of that. we turned that off. when we turned that off apparently there's a bug in the system that suddenly caused the battery life to drain. >> what's typically the variability in battery life when you're doing comparable laptops? >> very low. previous apple laptops usually we get within 5%. the type of range that we saw is very unusual. it's a first for any macbook. frankly, our battery tests, we're trying to do sort of moderate to light usage. we're not trying to do gaming and stuff like that. so we typically over represent the battery life of a lot of laptops relative to what the manufacturers claim. >> glen, in general, batteries stink though from what i see with phones, with everything. i mean, it's got to be one of the most dissatisfy parts of
2:55 pm
electronics. is that getting better? >> in fairness to the batteries, nobody seems to mind when they're working, right? it's when they fail at the wrong time or when they run out of juice at the wrong time. battery life has been -- you know, what's interesting is battery technology itself has not gotten significantly better over the years. >> i've noticed. >> but what has gotten better is a lot of the kind of software management and the way that the chips in devices manage battery life has gotten better because they get more efficient. they use all kind of like methods to essentially zip battery life or turn down functions when the battery is starting to drain. >> has apple figured out a patch that would address this software matter, number one? there's another way of asking is the problem fixed? have you retested fixed computers and are you ready to recommend them? >> so apple has issued the fix, they just did it last night. we downloaded it on to our computers. we're currently testing them right now, actually, so, you
2:56 pm
know, we haven't changed our -- the status of them not being recommended just yet because we want to put them through battery tests. as you might expect, battery tests if they're going well, take a couple of days to do because you want to take a couple of runs and make sure they work that way. >> you'll let us know when you get the results? >> yeah. we're going to publish it as soon as the results come which should be in a couple of days. that said, we do want to say there have been other reports of battery life issues in user forums and stuff like that. apple says they've fixed what we saw and, you know, our results in the coming days will say whether or not that's the case. we can't necessarily speak to whether or not this addresses any i shall ussues anybody else seen. if this glitch came up in our testing and they addressed this glitch, we assume that will fix what we saw. >> glen, thank you. >> thank you very much. >> thanks. check please coming up.
2:57 pm
2:58 pm
2:59 pm
hey nicole. hey! i just wanted to think your support team for walking me through my first options trade. well, we're all about educating people on options strategies. i won't let this accomplishment go to my head. get help on options trading with thinkorswim, only at td ameritrade. check please. >> the j.pmorgan health care conference. tech sector is up 8% tonight. we continue to celebrate our 10th anniversary. we have a rare interview with gilliad. that's tonight at 5:00. >> speaking of health care, donald trump in the last hour telling "the new york times" he wants congress to vote next week on repealing obamacare and then immediately thereafter come up with a replacement. pressure is on congress.
3:00 pm
>> gm shares moving higher after mary barra gave a very upbeat forecast for that company, both raising earnings per share estimates and other metrics to investment. >> sad faces in ann arbor. announcing for the nfl draft. local boy. >> thanks. >> "closing bell" starts next. is that a market reference? >> i'm kelly evans with the new york stock exchange. >> record highs today. small business optimism is soaring. is this the making of a sugar high for investors. we're going to talk about that coming up. >> some strong guidance. in a $5 billion buy back sending shares of general motors soaring today. we'll have details on why the automaker is so optimistic. >> what a transition that was.

77 Views

info Stream Only

Uploaded by TV Archive on