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tv   Power Lunch  CNBC  January 31, 2017 1:00pm-3:01pm EST

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>> i think people want to own this space. >> jimmy? >> very good core to core. should do well. >> josh, a final? >> apple, if you're in it, don't worry about earnings tonight. >> joey? >> the market is not going down. that concerns me when i hear that statement. >> by the president? >> yes, sir. >> thanks for watching. "power" starts now. i'm melissa lee. fear on the street, second straight day of triple-digit losses for the dow. february sell-off coming? brutal earnings some stocks big league, under armor, u.p.s., just to name a few. bad news after the bell? president trump meeting with ceos, lowering drug prices what's ahead for the sector? and pro-business policy with his protectionist stance. "power lunch" starts right now. dow dropping triple digits
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once again. we are down 137 points. close to losing our gains for the year. s&p 500 lower for the fourth straight day. industrials and tech are your biggest laggards. transports taking a big group, on pace for its worst day since september. not everybody is losing money. you've invested in gold and oil, they are higher. here is the question. is it trump tremors that are really sending stocks lower? maybe not. melissa highlighted under armour, u.p.s., exxonmobil, harley davidson. none of those moves, by the way, tyler, related to the political environment. >> specific to the individual businesses. welcome, everybody. i'm tyler mathisen. straight to bob pisani on the new york stock exchange for the trading action this hour. hi, bob. >> the important thing is we hit our lows about 11:30 eastern time at the german close, just off the lows but not by much.
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it's dead even but doesn't feel that way. it feels a lot weaker. the dow is notably underperforming the rest of the market. dow is price weighted. goldman has been falling apart the last two days. 228, that's where they were in early december here. that stock drives all the rest of the dow down because it's such a big price stock. intel, caterpillar. the farther we get from tax cuts and infrastructure talk, the weaker the market gets. fluor, vulcan, marietta were on the plus side last week now they're on the down side. the farther away from tax cuts the weaker the market gets in this area. transports, u.p.s. lower guidance there. yesterday, problems with the airlines and that problem is still following through. you see united, delta. fedex also down and united
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parcel service. underarmour, that's not a typo there. decelerating sales growth. only good news today, president trump meeting with pharmaceutical executives. talking about less regulation and speeding up approval times for new medicines. guys, back to you. >> robert, thank you very much. another busy day of business leaders meeting at the white house. president trump sitting down with the leaders of big pharma today. only a couple of weeks ago that then president-elect trump said the industry was, quote, getting away with murder on drug prices. eamon javers is live in washington. >> reporter: the impact of the stock market with this meeting today, the president gathering all the pharma ceos. he was talking about what he wants from this industry, particularly in terms of getting drug prices down. he also said that he wants the industry to bring its
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manufacturing base back to the united states. here is how the president put i it. >> you have to get your companies back here, make profits back, get rid of a tremendous number of regulations. you vom problems where you cannot even think about opening up new plants. you can't get approval for the plant and then you can't get approval to make the drugs. other than that, you're doing fantasti fantastic. >> bringing that workforce back. he's also dangling the number of goodies that the industry might want, including slashing regulations, speeding up approval time at the fda and tax deal of some kind is in the offing. but the problem is that the president, despite the round table effect of that meeting today, the president is not the only one in this equation. congress, of course, has to weigh in on any major tax overhaul deal. that process could get muddied by politics, as we've seen
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before. so, for the industry, as they consider which pieces of this they like, which pieces of this they want to accept, they have to bear in mind that donald trump is not the only person that they're going to need to be negotiating with here in washington, d.c. >> i can't think of another industry beyond pharma that is caught in the push/pull from tax reform and repatriation of foreign held earnings where foreign-held countries have a tremendous amount of money and invested capital in manufacturing overseas and in sourcing drug ingredients from overseas. >> what's so astonishing in its first week or so here is how many different industries are affected. you think about apple as another company, entirely different sector that has an enormous amount of money offshore that would presumably like to bring it back, like some kind of tax deal on that. on the other hand, tim cook and apple are putting out statements of concern about the president's executive order on immigration,
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a key issue for them. there's a different push/pull in that industry. again, offers are being made here from the trump white house. there's a price to be paid for a lot of these offers in terms of things that the industry doesn't want as well. each of the industries is going to have to sift through all that. >> eamon javers, thank you very much. >> can the president and his mighty pen change an industry that is deeply entrenched in its current system? let's welcome in credit suisse pharma analyst and no panel would be complete without our reporter meg tirrell. this is an industry that makes hundreds of billions of dollars collectively in profits. it is an industry that could really be change bid donald trump or anyone. >> first question is, does donald trump really want to change it? we've seen a pattern where president trump talks very tough in public. when he gets in private with his
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business leaders likes to make nice. he essay business leader. softening on drug prices, willingness to give the industry tax breaks and help with regulatory issues. i don't think this is an industry he's trying to change. big issues on repatriation, taxes, fda. the president is about to pick a new fda head. they've got a lot of business to do with this white house and the white house seems to be willing to do that business. >> what would be the biggest he could make? >> i think change on regulatory issues. he is going to pick a new head of the fda and all the names that are going to be floated are names that would be very acceptable and welcome to industry. a big boost for them. i do think they have a major repatriation issues. many of them have that. tax issues can be very impactful for them. my guess is that you're going to see pharma being that winner in
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that exchange not a net loser. >> would you agree with that, pharma being a net winner? tyler used the phrase push/pulls in this conversation with the president today, corporate tax reform, repatriation holiday or relief. that's a great thing but trying to lower drug prices, the notion of trying to get drug manufacturers to manufacture more in the united states when some have built up manufacturing phils in ireland and other places. some will benefit more than others it seems. in the marketplace we're not seeing a differential. pharma across the board is trading higher. >> the issue for the pharma companies has been the drug pricing issue. you talk about the push and pulls, drug pricing and trying to control that in some way. if it is a broader discussion around tax reform, regulatory reforms, i think that is a net positive for the industry as a whole. i would agree that the u.s. based companies might benefit
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more, some in the u.s. recently inverted may not see the same benefit or get the value from the inversion they did a few years back. and maybe for the ex-u.s. companies also, more level playing field and more challenging for them to compete for assets in the business development as they try to bring in new growth drivers. >> i was interested what you said about trump softening his position on drug prices. what was the evidence that you took from what he said as to softening? it was the first thing he said. he didn't talk specifically about the drug companies getting away with murder. >> he also didn't -- he also took a shot at the question of medicare negotiating prices, talked about price fixing. so, i think that -- and i think we see just a general pattern that president trump gives these speeches, public speeches. he is a deal maker. i'm not a fan of the president's. obviously i worked hard to keep him from being elected but the
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guy is a deal maker. what we're going to see over the course of this administration is a lot of sabre rattling in public and handshaking in private. my guess is that ultimately pharma will get more than they have to give to get what he want from this administration. >> talk to me about if you were sitting in the executive suite of a pharmaceutical company and over the past 25 years you had operated under one tax regime and one set of trade rules that led you to do a lot of expansion overseas, to build factories in india, source to india, build factories in ireland, germany, wherever, and now the game is change. how would you feel about that? is that fair? zbl >> i would say it is fair. we talked about this on earnings calls as well. they've been playing with the hand they've been dealt. now if the hand changes --
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>> the hand is different. >> they have to adjust to that. it's not necessarily fair or unfair. but a lot of room for the innovati innovation, added growth. i think they would have to adapt. i don't think there's any question that they could and still be a very profitable, successful industry. >> what are their margins as a group? big pharma. >> there's a big range of operating margins. we talked this morning, they're in the mid 20s, and some in the 40s or even 50%. >> it's a nice profitable business. >> that's why a lot of focus is on drug pricing from investor side. if they can get their -- sort of self regulate the pricing into issue. there's a lot of other reason this industry should do very well. >> i shouldn't worry about it being fair or unfair? >> i think they can adapt to the changing environment and still be very successful. >> have you factored in yet the impact on any sort of border tax on the drugs being brought back into the united states? i mean, according to the fda
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website 60% of all finnish drugs -- who will feel the most impact? even though the margins are fat right now how much could a border tax eat into those margins? >> yeah. so, trying to play with the rules they have right now. how it all plays out, puerto rico okay for them to do the finishing in or not? if it is, a lot of them have manufacturing facilities in puerto rico. so i think it will take them some time to adjust. look at the spectrum. effected tax rates are in the low 20% range. maybe they go up a little bit. allergan is one we cover, recently inverted companies have low double digits, even high single digit tax rates and might be more at risk from some of these changes. so, again, from the broader
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industry perspective, they would welcome these changes if it comes in a comprehensive way and not just focus strictly on borders and on bringing drug prices down. >> if i could add one more thing, i think we shouldn't underestimate how valuable to these companies a change at the fda could be. particularly companies that have bigger pipelines, things coming through the pipeline that could be very significant to their bottom line. if president trump appoints someone to the fda who significantly excels the process or simplifies the process of drug approval that will be significant boone to the industry. >> trump focused a lot on the difference in the u.s. versus the rest of the world, potentially making price a global trade issue. there's this idea that you paid so much more in the u.s. for drugs than you do everywhere else. he said basically we're sitting here like a bunch of dummies and
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i would be very curious to know what folks have to say about how he addresses that issue. >> meg, thank you. and also thanks to ron and vamil. sean spicer addressing the press right now. we will monitor it. it has been must-see tv in recent days and we will bring you any headlines that cross if mr. spicer makes some news. meantime, balancing pro-growth policies with protectionism. if you're a ceo, how can you make both work? can you make them work? plus flipping homes like it's 2006 is that a good or bad thing? we'll ask a titan in the industry and star of a new cnbc show called "the deed" later on power lunch. >> under armour tanking 25% right now. hitting three-year lows. not three pointers like steph curry, their endorser. should you take advantage of this plunge and get into some under armour?
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welcome back to "power lunch." strength in precious metals like gold. steel stocks selling off, despite nucor beating expectations. hitting profits in the first
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quarter but still expects a strong 2017. steel dynamics, u.s. steel, all names that were up double digits and the dow is now drifting back down toward its lows of the day, off by about 165 points. back to you. >> thank you, dom. under armour tanking. athletic apparel giant guiding lower and the cfo is leaving after being on the job just one year. should you buy on this big drop? let's bring in erin murphy and piper jaffrey, lowered her price target from 41 to 17 following under armour's results and andy connick with jeffries, lowered his price target from 19 to 34. good to have you guys with us. erin, you make it clear, you don't like being an after the fact downgrade. what did you miss in the quarter? what did you underestimate? >> sure. thanks for having me on this
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show. clearly, no one likes to downgrade on the fact. reality is that some of the things we learned on the call were very alarming. earnings algorithm is is evaporating and level of spend that will continue to need to happen for this brand to remain competitive with nike and adidas is going to need to accelerate. it will need to build, not get better. second departure of cfo in 1 1/2 years. visibility going forward is too cloudy and one we can't support at this point. >> randy, if i'm a growth investor and invested in under armour as a growth stock, is it still a growth stock at this point when it's halved it's 2017 growth forecast and trading at a premium to north carolina nike? >> no, it's not. we have been guard on under armour for all of 2016. we continue that guarded view into 2017. what we think the market was not
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focused on enough was the issues of market share transfer and the growth algorithm slowing at the company. in 2016 we have seen the rise of adidas in the fashion foot category, data-driven analysis that the curry franchise of under armour in basketball was starting to peak as well. we think the big issue here is on the growth side from a marketshare perspective back to nike, adidas and under armour, which has 20% of its sales in athletic footwear is a big risk for the growth profile going forward. as a growth investor we would not be buying the weakness on under armour shares. >> erinn, it's amazing. if you just read the press release it looks like a good quarter. yes, growth fell 1.5%, revenue is up, operating income up 3%, net income up 11%. i hear all your points and the
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miss and concerns on the eps side. but why the 27% decline when most of the metrics were up? >> i think you've got to look at the forecast. this is a company that has been rated as a growth stock. that top line which, to your point, wasn't that bad in the fourth quarter all considering. q1 will be a mid single digit growth rate. that points to some risk potentially even in the back half when they're still looking to protect that top line and 11% to 12% range. it's really the forecast that is a big concern for us. and one that still has some risk on it. >> is that, randy, their problem? have they been too bullish talking about their growth or have analysts misread it?
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>> we've been guarded all of 2016 and continued that guarded process into 2017. where did the company get it wrong? they gave a long-term growth outlook last year, calling for significant increases. i think the market is mostly focused on these growth issues. top line issue happening at the company. it's pretty simple. market share related. it's product related. we also think that the management team of this company has been focused more on connected fitness and technologies, digital technologies and not focused on fashion footwear and fashion clothing, making this stuff look good. making this stuff look good is what sells, not focusing on those simple tasks. >> randy konik, erinn murphy. >> thank you. >> here is a riddle for you, america. when is business so good that it's actually bad for earnings? it may have just happened to
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u.p.s. the answer to that vexing question, coming up. alaily tatan
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his macae e blprriohn excesslis if ittete before the break we asked you a riddle, when is business so good it's bad for earnings? morgan brennan here to answer that and what it has to do with u.p.s. morgan, please, solve the riddle. >> i'm going to do my best to solve this riddle. packages may have made it in time for christmas but that took a toll on u.p.s.
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disappointing earnings guidance for 2017. soft industrial production and strong dollar did contribute to this. the biggest culprit, the answer to the riddle, gangbusters growth of e-commerce. u.p.s. shipped 712 million packages, 16% more than in 2015, higher than forecast. 63% of total volumes went to residences, including 2.5 million new additional addresses. so, cfo richard peretz telling cnbc a tremendous shift that represented the fastest rate of change in terms of product mix in at least a decade. higher volumes, more strain on the network, more pressure on margins. so, remember, it's much costlier to deliver individual packages to individual doorsteps rather than to one location, the case with business shipments. as e-commerce continues to surge, u.p.s. doubling down. capex, 33% more than last year,
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as management speeds up its plans to automate facilities and expand capacity. also, u.p.s. is raising prices for shippers. but while it's accelerated, we've seen this trend play out in u.p.s. results before. analyst consensus is a holds rating. all of this pushing shares of u.p.s. down today. falling as much as 7% earlier in trade. they are down about 6.5% right now. the worst day in terms of trading in two years for the stock. by the way, we are seeing shares of fedex down %, falling in sympathy as well. >> thanks so much. appreciate it. answered the riddle. >> e-commerce. >> well done. business too good. stocks sliding on weak earnings and economic data. presidential policy jitters into the mix. hard to gauge what might be coming next. where are money managers putting their money now? we'll tell you after this. tu ie g
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during his morning briefing, house speaker paul ryan says he
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supports president trump's temporary seven-country travel ban saying border security is a top priority for american voters but said he regrets what he calls the confusing rollout of that order. >> i had a long talk with secretary kelly yesterday and i'm very pleased and confident that he is, on a forward-going basis, will make sure that things will go correctly. >> 000 bolton dressers will be recalled. the dressers are unstable if they are not anchored to the wall, resulting in serious injury, especially to children. a lot of competition in the retail space. walmart is offering free two-day shipping without a membership fee, lowering the minimum purchase required for free shipping to $35 from 50. it is trying to compete with amazon prime. they have not been all that successful. maybe this initiative will do it. that is the cnbc news update this hour.
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back to you at the news desk. >> we're close to wiping out our gains for 2017. i know it's only been a couple of weeks. you get the headline, s&p 500 meantime. industrials and technology are your biggest s&p drags. under armour and u.p.s., big name stocks you know leading the declines. melissa? what do top economists and money managers expect for economic growth and the possibility of recession under president trump? steve liesman is here with the result of the latest cnbc fed survey. hi, steve. >> melissa, thank you very much. let's take a look at what they think about the outlook of growth this year. money managers and analysts and you see here what we did in 2015, came down with that first weak half, came back in the second half. see an increasing for 2017. 2.5% and 2.8 in 2018.
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how much of this is the trump effect? we asked them and the response was about a quarter extra point in 2017 and a 40 base points in 2018. this doesn't get to the 4% or even the 3% that the president had said he can do with his policies. let's take a look at the outlook for those policies. overall growth, 82% of our respondents say his policies will increase growth and jobs also. also the stock market. higher deficits are expected, higher inflation as well as higher bond yields. the sum total to tally it all up, they do expect more growth. that said, we'll take a look at the outlook for the recession. and that's sort of moderate. not as low as it's been, back in january 2015, not as high it was when we were afraid about the global meltdown, 28%. the probability of recession in the last 12 months, now it's hovering around 18.5%. number one threat to the
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economy, protectionism. 51%. that is double the number from december. it is also the highest number for any single threat we've ever had. this goes back, i don't know, seven, eight years. we'll be doing this survey. global economic weakness back in january 2016. the fiscal cliff 41% and the european financial class is 37%. that is the single biggest threat. there's lots of good things from the trump administration. they're very worried about protectionism, tyler. >> how will president trump's economic policies play out in the markets? joining us now, lisanne saunders and sandra neviti, ceo and founder of beyond global, macroeconomic consultancy, with a new book out called "super hubs." welcome to both of you. liz, let me start with you. people think everything is going to go up. growth is going to go up. inflation is going to go up.
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markets are going to go up. markets are going to go up. do you agree? >> well, that was certainly the hope by the market. what we pointed out, protectionism was a significant risk. it doesn't tend to result in a win/win situation. there's this view that maybe we could possibly win more than others but i think it ends up being a lose/lose situation, especially if we head down the path toward trade wars. many of the progrowth policies that the market was enthusiastic about seems to have taken a backseat to this. the attention around it, media and otherwise, was higher. i would like to see a reset of the administration to reiterate the importance of the fiscal stimulus on the tax and regulatory side. >> soandra, america first, manufacture here, sell here, hire here. and on the other hand a very business friendly deregulatory
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regime and lower taxes. which is more important going forward, to business? >> i think business would be well advised to be careful because the uncertainty, the degree of uncertainty that he is generating can't be factored in. that's what we're seeing with the growth numbers. risk, you can calculate. uncertainty, you cannot. >> liz ann, where has all the volatility gone? >> it is incredible. if you look at probably the most common proxy for a policy uncertainty index and the vicks, the two of those tend to go hand in hand. they have diverged to a significant degree. now, this incredibly low volatility is unlikely to last. that doesn't mean you go into a spike mode. but i think there is likely to be a narrowing of the gap between policy uncertainty and volatility. the ideal way is policy uncertainty comes down to match this complacency that has been
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building. i think there is a little bit like the vicks. >> more bluntly, is protectionism the greatest single threat to the economic boom right now? >> i would think so. basically trump is trying to short circuit complexity. you don't know what kind of black swan risk that may generate, and unintended consequences. germany, for instance, where i'm from, german exporters are very concerned. i spoke to many ceos in davos. >> peter navarro, by the way, when michelle interviewed him and again today, basically said your hometown germany, as effectively a currency manipulator. >> germany is the first one to admit it has benefited from the currency but it has no control over the euro and peter navarro's neanderthal economics has raised eyebrow. >> tell us what you think, sandra.
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>> has raised eyebrows in davos. with rational arguing it's really hard to understand. >> liz ann, if protectionism is a concern of mine, am i best suited to look at small caps, for instance? >> we have a slight buy as toward small caps. although i think when you're in rally mode, the liquidity force is there, supportive, too. i wouldn't go with too much emphasis on small caps. i also think you want to have a value orientation in the types of companies you look at. that doesn't mean blindly by the russell value indexes. sometimes stocks housed into value indexes can get overvalued. i would put utilities and telecon in that mix. we still think technology and financials make sense. many of the larger cap companies could benefit from some of this fiscal stimulus. on the margin because the domestic orientation of the
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smaller companies on the margin, i would say that's where the buy as is. >> sandra hourks do you handicap the possibility that consumers within other countries that we target will retaliate? in other words, block our products from coming in or boycott them once they're there. >> for sure they're going to retaliate. in germany alone, 1 million jobs are dependent on exports and the car industry, even though it's only 7% of global market share, the german car industry in the u.s. and share is declining it's still 200,000 jobs that are dependent on that industry. i think what donald trump is doing is very dangerous. that is, distorting competition. in essence, as he puts it, he is picking winners and losers, telling companies where to produce, how to price, who to hire. and that is very dangerous. and i think we're seeing that ceos are starting to speak up. they would be much stronger if they spoke with one voice. >> sandra, thank you very much.
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good luck with the book. >> thank you. >> liz ann sonders, good to see you as always. >> thank you. we haven't forgotten about finding stocks for you. we would never do that, unless we do. four big stocks you cannot miss. stick around.
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it is time for street talk. first off here, buffalo wild wings, downgraded by clsa to a sell. down $5. clsa says there's more competition. >> wing stop. >> another wing kind of restaurant. exactly. widening. cheaper to eat at home. clsa says overall casual dining in the u.s. is saturated, particularly for bar and grill
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concepts. as long as the market fails to consolidate, meaning buyouts and closures, et cetera, demographic challenges will be a persistent headwind. >> look at that stock. it looks like a microchip or volatility stock. no one can make up their mind. keybanc capital markets raising its rating overweight, missed and lowered expectations in six of the last eight quarters. yikes. but says the stock story is more compelling because it reduced expectations coupled with, get this, a better hazardous waste -- >> does that mean more hazardous waste? that means there's more of it. terrible. >> target is 62. about 17% upside on the better macrohazardous waste backdrop. >> you don't hear that too often. cognizant getting downgraded at morgan stanley.
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made a decent recovery from the lows. rose above low levels last year. visa related developments are expected to last through this year. >> smaller cap call of the day. venom energy partners, right the original thing because this is a subsidiary of diamond back energy ticker. credit suisse upgrading venom one dollar. but that's about 30% upside. analyst says stocks a bit off investor radar despite diamond back's performance. 60% growth rate $55 crude you'll get 8% yield by owning venom. production at diamond back should continue to grow. vnom energy. lot of upside. >> viper energy. ticker is vnom. it's all the snake symbolism,
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tyler. >> pro-growth policies and protectionism. if you're a ceo, how can you reconcile one with the other? that discussion is ahead. first mr. santelli at the cme for the bond report. hi, rick. >> first day of the two-day fed, yes, definitely drifting lower. maybe the bigger story is foreign exchange. let's look at the intra-day, dollar index down .7 of a cent. look how important that neckline is. mirror image euro versus dollar. dollar/yen as well. this is the dollar chart. what you're seeing there is weakness in the dollar. does some of this has to do with anticipation of further policies by the administration? i can't tell but it's getting a technical life of its own. update your charts right now. "power lunch" will return in two minutes. wandn ea.br hygit. n s t'reea
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knno neoo rndshh h undendred..o.oosia wandn ea.br hygit. n s t'reea myee i'nly usane brase deld alallindat are ydendred..o.oosia wandn ea.br hygit. n s t'reea owk alallindat are ydendred..o.oosia wandn ea.br hygit. n s t'reebema
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owti wh id icicur on a perfect car, then smash it into a tree. your insurance company raises your rates. maybe you should've done more research on them. for drivers with accident forgiveness, liberty mutual won't
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raise your rates due to your first accident. and if you do have an accident, our claims centers are available to assist you 24/7. call for a free quote today. liberty stands with you™. liberty mutual insurance. you have pro growth policies
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that have sent stock soaring but the protectionist impulses that have investors concerned. let's break them down into three easy pieces. on the pro-growth side you have ideas for corporate and individual tax reform, the president's desire to dramatically slash regulation. on the other side, though, a broader backlash possibly from countries like china, mexico and maybe even parts of europe that have been singled out. the question is, which way will the trump-o-nomics scale ultimately tip? let's welcome in cnbc contributor now, ira millstein as well and former ceo of continental airlines. ira millstein's book just out, by the way. gordon, we'll get to you in a second. we tried to lay it out in a neat
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and easy way, sir, which is a lot of good things for business over here. some worrying things over here. which one do you think ultimately will tip the scale? >> heaven only knows. >> we brought you in because we want you to be heaven. make a prediction. >> i'll give it a whirl. obviously, we have a president who has created enormous uncertainty. the question you raise is the absolutely best question of all with respect to uncertainty. nobody can answer the question. and everything i've seen on your program up till now talks uncertainty, uncertainty, uncertainty, in the market, business and everywhere we look. >> with all due respect, sir, i thought we were more certain of at least that the president would be exceptionally pro-growth. he continues to say that. yet some of the stuff we've seen about protectionism, perhaps, currency wars, trade wars, border taxes, some would say, hard to find the pro growth in that. >> also do you believe it?
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the president says lots of things and we don't know which one is up or which one is down. we don't know which one is going to succeed and which one is not. which one will get past congress, which one won't. we have no idea how these things will be implemented. i'm on the side of the populist. i hope he's right with respect to what he's trying to do to the people who have been down-sized, out of work and so on. i hope he wins. so far it's only words. i don't see anything happening other than talk about what he would like to do. the things he would like to do, agree. can he do them? i don't know. are they balanced by business? >> the democrats are going to try to get their pound of flesh. >> yeah. well, everybody is. >> yeah, everybody is. >> they're not going to roll over for the new supreme court nominee. in fact, they're going to try to block it. >> i have no doubt that that's going to happen. that's part of the uncertainty. >> that's part of the process. >> yes, it's part of the process. we never had anything -- >> the republicans didn't
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exactly roll over for mr. obama either. >> no, they didn't. obamacare got a big headache. he didn't go out and try to get some support. >> he won by two votes. >> i know. that isn't the way you win the public. >> so, gordon, just to bring you in, as a firmer ceo when you look at trump it's easy to say he's a pro business president. he meets with companies every single week. in terms of the actions he's taken, the rhetoric that's come out of the white house so far, do you agree he's still a pro business president when he's talking about controlling where products are made, how much they cost, who to hire? >> i think those are openers to get your attention. i mean, he can talk about the downside to his approach. but ultimately, he's going to do the things he said he's going to do, which i'm surprised everyone is surprised. he's really doing the things that he promised to. no one expect this had quickly or forcibly, but i think he's got his cards and he's playing his cards right. >> do you think, gordon, if you just sat there and you were sitting at continental, would
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you buy an airbus, an imported plane? >> i used to work at boeing so i'm parochial so that's not going to be a good answer. i'm a boeing guy. i don't think that necessarily is going to happen. there's a lot of people invested in airbus whose best interests are to continue with them. and i believe they will. >> ira, to go back to you. to tyler's point, if you're a ceo and there is this uncertainty in the air, would you expect that corporate actions, they'll sort of take a pause right now until we figure out what the policies are? >> i think it's worse than that. not only will they take a pause. i'm afraid they're hunkering down because of their uncertainty as to what to do. you talk to ceos. they don't know what's going to happen. one part of uncertainty is to hunker down and do nothing. just wait. don't do anything. because you don't get tweeted. you don't get pestered. you don't get into trouble. so don't do anything. >> gordon, let's go back to the
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scale, right? our trump-onomics scale. first two months after the election it was largely rah, rah. stock market soared, slashing regulations, tax reform. that's still there. in the past few days we've had this immigration stuff going on. germany being a currency manipulator. people getting a little more nervous. do you think, though, that the trump-o-nomics scale will side to pro growth? will those outweigh any negative impacts on the other side? >> i believe he will listen to his advisers and i think he's got some good ones. i would give him a b on implementation on his ideas. they've been rougher around the edges than they need to be. directionally, he's correct. he has also hired people that will tell him, you can't do that. he said he would listen and i think he's right. >> so, ira, let's talk about something that you pay a lot of attention to. that is corporate boards.
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are they better than they used to be, worse than they used to be? >> better than they used to be. nowhere close to where they have to go. >> what's wrong? why aren't they functioning the way they should? >> up till now, they've been passive. get picked, don't get into trouble. that's not the way to treat this era or the era we just passed through. we need people on boards who think, can object to the ceo, can raise their voices, have something to say about strategy and partner with the ceo. we haven't had that. we need it badly right this minute for the simple reason that when you're facing uncertainty, as a ceo, i would not want to do it alone. i would want to have the best people i had. >> do you want a bunch of yes men or yes women on the board? >> no. >> with that in mind, would you describe this cabinet -- >> glad you asked that question. no. >> no what? >> no, because exactly what -- if i were advising mr. trump i would say president, get yourself an activist board.
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you need somebody in the room who says you're wrong. who raises the question as to whether or not the implementation is going to go the way you say it is. >> is this a president who could deal with hearing that? >> i would hope so but i don't know. my concern would be that there's got to be -- he's got some good people in the cabinet. >> to be fair, we don't really know. >> no. >> if the people have not pushed back or they have pushed back. we don't necessarily know what that dynamic is. >> looking at immigration, did anybody push back? if it had, maybe it would have been implemented in a way it didn't get everybody crazy. >> he only has two cabinet members approved so far. homeland security is one of them, notably, on that. >> i'm only here to give advice. >> gordon, final thought to you. i mean, to that idea of the board, did you go out and actively recruit people for your board that disagreed with you? and where did you find them? >> i found the smartest ceos that i could find in the business who have been
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successful, who didn't need my advice, but were there to help me become successful. and you know, the strongest leaders pick strong followers or board members. i agree with ira surround yourself with really smart people who have the tumerity if you will to say you're wrong and you need to change. >> gordon bethune and ira millstein thank you. >> should investors be nervous here? goldman sachs out with a new call. s fosptorerg sltwhs n,me yb tdre'ge. i etltwhs n,me
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welcome back to "power lunch." i'm brian sullivan. they are still tyler and melissa. president trump expected to sign another executive order. this time on cyber security. he will meet with industry experts as well. we'll take you inside that meeting this hour. meantime, second straight day for losses in the markets. yesterday, the worst day of the year so far. today, on track to maybe be even worse. apple may have the power to turn that all around, at least tonight when it reports
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earnings. what do markets want to hear for the world's biggest company? we'll let you know. energy stocks taking a hit. valero, tesoro, consol. and after president trump met with drug company executives, h biotech moves higher and gold moves higher, about 1200 an ounce. we go to bob pisani at today's new york stock exchange. >> hello, melissa. essentially at the lows today. s&p 500. normally the day before the fed meeting, the market tends to move up. this say phenomena known as drift and stocks do rise in the 24-hour period before that. that is not happening right now. whether it is end of the month selling or we're having some issues with mr. trump and his agenda, not entirely clear. laggards, though, former leaders have turned into laggards, jp
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morgan and goldman sachs, 50 points in the 180-point decline we're seeing right now. throw in boeing, caterpillar and 3m, another three points. the dow's decline is essentially five stocks right here. president meeting with pharma executives. lily and merck on the upside. technology stocks up about 4%. biggest sector far and away. they're up 4%, they drag the whole rest of the s&p. materials are 3%. they don't matter that much. industrials helping a little. you see the big decline we've seen in energy down 4%. still a couple more hours to go, though. we'll see what happens at the end of the day. guys, back to you. >> bob, thank you. >> let's get market flash right now with julia boorstin in l.a.
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>> arris stocks plummeting as much as 10%. comcast announcement that it's releasing a beta of xfinity tv app bringing it one step closer to over the top. now more choices in how they access their tv bundle. instead of a $10 monthly set top box customers using roku will get a $2.50 credit. back to you. >> thank you so much, julia. big earnings report we're all waiting for after the bell is apple. what are the key numbers to watch? josh lipton joins us with those numbers from san francisco. hi, josh. >> tyler, i'm here at apple's headquarters. heading into this print you can see apple stock has enjoyed a nice move over the past few months. question is whether ceo tim cook can keep that momentum going. today, after the bell, street was going to look for earnings per share of 321. that's on revenue of 77.3
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billion. investors will concentrate on the iphone, which still does represent some 60% of sales and there, analysts think some 77 million iphones in the december quarter. that would imply growth of just about 3%. one question, though, does the average selling price of those phones get a lift from the bigger price iphone 7 plus? also in focus for investors, what does apple have to tell us about that march quarter? >> we're more optimistic about the march quarter guide, given what we think was strong demand exiting the december quarter. separately is the comps are pathetically easy for apple. specifically in the march of 2016 quarter, iphone units were down 16% year over year. so the easy comp should make it relatively easy for apple to hit, if not slightly exceed where the street is at for the march guidance. >> so far this year, apple stock is in the green.
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it's up more than 15%. on the conference call today, certainly a safe bet. financial analysts will have some questions for cook about this new era of trump-o-nomics. lower tax rate and repatriation on one hand on the other hand, calls for tariffs manufacturing overseas, could pose a challenge for the iphone maker. we'll have those numbers after the bell. >> josh lipton, thank you. from apple's report, jason weir, apple shareholder and financial cio. andy, i'll start it off with you. this quarter may be the least important quarter for apple this year from an investor standpoint. most of the analyst research i've been reading say look through this because we know that december shipments were not good. we're going to have a big launch and apple shares will be ranged out a few months. what are you looking for this report? >> next quarter may even be less important. at th least you have the
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bellwether of december as the indicator of where baseline demand is. we're in the camp that you outlined, relatively in line. i do think that people will look through that to a certain extent the next cycle. >> why are you worried about march quarter guidance? >> you know, we've seen conflicting data points out of the supply chain and demand. demand seems okay. but supply chain has been sort of mediocre. that gives us a little back-to-back of concern that we might see numbers slightly below what people are looking for. >> i understand the iphone still is -- i don't want to say everything. it's most things. it used to be everything. apple was kind of becoming a one phone pony, if you will. wall street journal had an excellent article last night about how apple services, itunes, the app store, is now doing $24 billion a year in revenue, which is more than the majority of the s&p 500 companies, it's growing more than 20% a year. do you think that services is going to -- now is big enough to
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sort of lift any weakness in the iphone? >> that's a great question, brian. and, you know, i think there's two perspectives there. we've been bullish on the services side of the business for some time. and it is becoming large, as you stated, somewhere around 15% of the total business. >> second biggest segment after the iphone. >> that's right. and that's the funny thing. we talk about ipad and mac but people don't think as much about services. if you look at doing the heavy lifting i think you'll be disappointed the next few quarters. if you're an investor looking out further than what's going to happen, say, in 2017 or in this quarter in particular, optimistic about services. growth rate is great. >> andy, in term s of services, though, they get different revenue in terms of percentage of revenues, for instance. what line of services do they
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make the most money on? what are the biggest margins? >> yeah, app store for sure. the rest of the service business isn't very high margin. app store certainly is a smaller segment of the overall services business but still very large, growing very quickly. i would contend, though, that it is an iphone company. app store sales are tied to iphone sales. >> with that said, how much of a question do you have in your mind about trump policies and apple's future and what it might have to do or pay in terms of border taxes or where they put manufacturing facilities, for instance. >> if you can tell me what all those policies are going to be, i can give you a straight answer. it's difficult to tell today what is going to end up getting done and what isn't. if we get tax back -- excuse me, tax break and we get the cash back, you know, that could offset any sort of trade policy changes that might come. >> is that services, andy, the
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stickiest part of apple? we always think about the iphone being the stickiest thing. the reality, and all our viewers that may have bought apps or a lot of shows. dora the explorer for those of us who have kids, once you get locked into that itune system and accumulate a certain amount of songs and stuff you're never switching. the majority of that stuff is not going to play anywhere else. is that maybe the glue? i don't want to say holding apple together, but you get my point. >> they work together. i think the stickiness of operating systems in general is quite high. when you add a bunch of content sales on top of that, it definitely helps. if you're deep in the ecosystem, you're not leaving any time soon. >> who is apple's biggest competition in services and where are they number one in that market? if anywhere. whether it's apple pay, app store as andy mentioned.
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apple care carries high margin. for apple pay would you say their competition is the network companies? i would argue it is not that they have a niche in there that is all their own and seeing fantastic transaction growth. if you're an analyst you could make an argument content sper expectative, google will be one of their biggest competitors, android system kind of has a big piece there, and big footprint there. >> and google play. >> right. >> or android play. >> exactly. the list of usual suspects. when you look what apple is doing with content, trying to get further entrenched in what we think is an important part of the platform and investment story, they've acquired companies and spending $10 billion in r & d, and they're trying to, you know, fortify that side of the business and really have a beach head that is free of competition, if you
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will, from a standpoint of one large giant they're going up against, spreading their bets pretty thin. ai, vr, machine learning. it's all important. >> thanks, andy and jason. >> yeah. you know what, guys? the point i was trying to make, and our viewers probably know this. if you're an android guy or iphone person, the reality is that you're probably never going to change. you could sit there and scream i hate google, i hate apple. but are you going to change when all your media, a lot of it anyway -- >> and all your pictures are stored. >> there are services where you can cross them. i get that. for the reality you don't want to deal that. >> and you don't want to risk. >> i just wonder if apple and google -- you're in. you've chosen a side. >> i think the younger generation is less loyal to the platform. that's just my guess. >> they may be less loyal to everything, melissa. i think you're right as usual. >> coming up on "power lunch" goldman sachs bullish on commodities overall. goldman sachs commodities guy will join us.
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can protectionism and commoditixhoprofits coexist? brand new show coming to cnbc called "the deed." it's cool. we'll introduce you to the star of it. so much to do in 49 minutes on "power lunch." seeing is believing, and that's why
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company formerly known as gmac, include things like mortgages, health management and the stock has been the bigger beneficiary of bank stocks ever since the election, up about 23%, guys, since then. back to you. >> dom, thank you very much. overall markets focused squarely on president trump's actions, goldman is focused on commodities. what's in store for oil and the rest of the commodity markets? power lunch exclusive, jeff curry, head of commodities research at goldman sachs. it's a little complicated. here is the thinking on the domestic producers. correct me if i'm wrong. a border adjustment tax, and
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maybe one reason kevin brady of ways and means is pushing it, because he's a houston guy, it will directly benefit domestic oil producers and domestic oil refiners and kill those who have to import their oil to put in their refineries. is that overly simplistic? >> yes and no. it's accurate for what happens in the industry but not accurate in terms of what happens in the u.s. you do end up with higher gasoline prices. who is ultimately going to pay for this tax is going to end up being u.s. consumers. so -- >> agree with that. but let's focus on the production side. talk about oil. >> yes. >> this may go to domestic volumes. >> right. >> and hurt imported volumes. i'm not sure anybody is going to care about except for the overseas producers. border adjustment tax, if you're drilling in the permean, isn't that good news? >> yes, but it's not good news for the consumer. >> talking about whether or not to buy crude oil there.
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>> i got you. but i think the key there is, you nailed it. you end up with a mismatch with the refiners not wanting to import crude, wanting domestic crude and the producers wanting to export it. wti prices need to move up high enough to make you indifferent between foreign crude and -- >> you need to pay at a premium. >> 29%, somewhere around 12 to $13 a barrel. substantial. >> how elastic is consumer demand? if consumers have to pay more, wti is going to cost more. there's going to be a tax. at what point do we say it's going to destroy demand? >> i think the key point is oil is one of the most inelastic commodities out there, like food. ultimately, you get a pass through the tax to the consumer at relatively high rates. in terms of thinking about the ultimate impact, i think it goes to your point. you're right. the reason why it means u.s.
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producers will get that price signal, increase production and add supplies on the market, putting downward pressure on prices. >> if the two big pipelines get built what does that mean for supplies of commodities? >> i look at the keystone -- at this point it's a moot point. it was first conceived u.s. mid continent was short oil. today it's long oil. it really brings into question what are the benefits of it. so when we think about what it will do to the mid continent, it will continue to create more supply in an oversupply market. >> overall, we talk about stocks and bonds a little bit. commodities have outperformed. >> yes. now you're moving to where -- >> stocks and bonds in what's called sort of phase three of the cycle. is that where we are? will commodities be a better bet? >> sierra b index or -- >> s&p. >> the equivalent, okay. >> they're selling us the goldman index. >> i get it.
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>> it illustrates an important point about where we are in the cycle is the primary reason we're bullish commodities. i want to put some numbers out performance relative to equities. we first recommended commodities, they're up 9% versus the equity market up about 4. outperformance has been significant. what drives that outperformance? equities and bonds are what we call anticipatory assets. they anticipate the future. they depend upon growth rates. the economy has now reached full capacity. both in the u.s. as well as in china. that means that the equities, they were anticipating it. we're there. the upside potential for equities is not as significant as we move into the second half of the business cycle. commodities are not what we call anticipatory assets. they're what we call spot assets. they perform well when you're at that point, at full capacity. another important point is financial assets depend upon growth rates. commodities depend upon activity levels. the level of demand has to exceed the level of supply.
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that creates the deficit market, which creates the upward pressure in prices in what we call the scarcity premium or backwardation and forward curves. >> and that's where we are with oil and that's why it will go a little higher? >> we're not quite there yet with oil. metals, you are. metals are further -- >> super bullish on paladium or platinum? >> paladium. yeah, yeah. >> do you remain so? thinly traded contracts. the viewer at home, you have to be careful. you might be trading its producer but you like paladium still? >> not as much as we like copper and iron ore. the focus has shifted, demand for gasoline-powered cars. our outlook on metals is really based upon capex expenditures and improvement in the industrial manufacturing cycle which really puts the emphasis much more on the copper cycle. >> great stuff. real world ideas. very interesting view on tacks
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and oil. great to get your insight. >> thank you. president trump's pharma photo-op. you've got to see this. why harley-davidson is hitting the skids. when "power lunch" returns. wiell
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this is interesting, the president posting pics of his meetings with big pharma and biotech came with a bit of an eye opening photograph. >> people have been worried about a tweet of a drug pricing. pretty friendly photo-op with the pharma ceos, trying to parse out what the tone and tenor was. merck, eli lily, novartis all smiling there, look happy with president trump. people trying to figure out how did this meeting really go? looking pretty good if you take a look at this facebook photo, just posted from donald j. trump there. >> do you want to be the guy not
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smiling? >> you want to be the guy who says it was a contentious meeting and said things that we don't want to do. >> right. >> no one is saying that. >> no one is saying that. >> along with that, yes, we need to get prices in line but he also talked about the u.s. position and the rest of the world for the drug industry. a lot of people are taking that as positive. >> what was interesting to me, he talked about using trade policy as a way to sort of close the gap between what we pay here in the united states for drugs and what others pay around the world. >> this is something that investors have been talking about today. and that they're wondering how can this actually happen? the u.s. does pay a lot more for drugs and also invests a lot more in research and development. interesting to see how that all plays out. if the president can really impact that. >> the simple reason we pay more, we don't negotiate the prices single payer. >> don't we also subsidize some of the world, too? >> re. >> buying under cost? >> yes. >> because they have single payer systems they can say that's too much to pay for a
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drug and won't pay for t here we pretty much do pay for it. >> and subsidize the r & d. that was a picture with the guys getting -- >> can we put that back up? >> and they're all guys, all of them, getting away with murder. >> can we put that back up? i bet anybody on this little panel lunch in the cnbc cafeteria. >> that's really not -- >> anything up to six bucks that one of those ties is a trump collection tie. >> ah. >> can you pick out which one that is? >> wouldn't you do that? >> i'll take the other side of that. i don't think anybody is going to be wearing -- >> no way to win this bet, by the way. meg, get on it. what was that tie you're wearing? >> thanks for the update, meg tirrell. etf, ibb is on pace of its best day since january 4th on the back of that meeting. are two sides of president trump's agenda coming into conflicting? how can companies make more money if they are pressured to
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use more expensive labor and locate factories in the higher cost united states? that push/pull debate is next on "power lunch." hour f ca v ed anbr die.oaberyhour edt t. fankn tng t.sorah anbr die.oaberyhour 'so t a trkderm tal..
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hi, everybody. i'm sue herera. here is your cnbc news update at this hour. nato chief stoltenberg says they're looking into iran's reported launch. underlying the need for nato to continue developing its own missile defense system. >> continuing to develop its ballistic and missile defense system because we see that several nations, including iran, are developing different kinds of ballistic missiles. and are testing and strengthening their systems. >> the boy scouts of america has announced it will allow transgender children who identify as boys to enroll in its boys only program. it had previously relied on the gender listed on a child's birth certificate to become a scout.
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drone video of apple's new campus. looking to make it completely sustainable on renewable energy. and that's the news update this hour. i will send it back to you, brian. >> cool headquarter building. >> it is. it's beautiful. >> you could run laps all day. >> all day. round and round and round. >> never get anywhere. thanks. >> it's huge. >> now i'm depressed. the dow is down triple digits right now, off 165 points. keep in mind, five or six companies are responsible for the majority of the losses in the dow. industrials, however, are amongst some of the worst performing groups. big industrial etf is down about 1%. meantime, the oil market closing for the day. who better to take us through it than jackie d at the cnbc commodity desk? >> unimpressive close for crude oil here, slightly higher on the session. we've got a tightened range
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here. the support is around 52. the resistance is coming in around 54. what's going to get us out of this range? some traders telling me some details out of opec, that the follow-through is happening with that production cut. that could potentially take us higher from here. to take us to the downside we might hear more about u.s. production numbers in the doe report tomorrow, telling us they're on the rise. we've been watching the recounts closely. after the close we'll hear from the api. as i said 10:30, we get that u.s. number. what we're seeing right now is a range-bound trade, buying the dips and selling when we move higher. back to you. >> thank you so much, jackie deangelis. to the good, we always start off with the good. after earnings, revenue missed expectations, making scientific instruments and lab supplies. on to the bad. valero in particular is lower.
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it beat out earnings and revenue, the stock sliding along with the rest of them today. ugly day for u.p.s. quarterly report didn't deliver on analyst expectations. the stock is having its worst day since january of 2015. tyler? >> thank you very much, melissa. and one more stock having a rough day, harley-davidson. landen dowdy has the story. >> tumbling as much as 7 prs, following disappointing fourth quarter results as motorcycle shipments fell short and are not forecast to grow in 2017. shares are down about 3%. harley's problem, 2016 models aren't selling as much as they had hoped and there's a limited number of the hot new 2017 models with the new milwaukee 8 engine. add to that, economic uncertainty, unfavorable foreign exchange rates and heavy discounts by competitors. the result? flat sales in the u.s. the question for the company on the road ahead, how to get more riders, especially in the u.s.,
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their biggest market. guys, back to you. >> thank you so much, landon. president trump's may be pushing two sides of the coalition that sent him to the white house. larry kudlow and john harwood join us. john, let's start with you. what do you make of the possible collision on the two impulses? on one hand, mesh first and what it conotes on trade policy and the other side of the ledger, so dear to larry, low tax, low regulation and progrowth. >> tyler, multiple dimensions to it have been playing out over the last week or so. first of all, we saw in the post election period, tremendous anticipation about cuts in regulation, cuts in taxes, contributed to the rise in stock price prices in hope that that part of the agenda was the part that president trump would move through more quickly.
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in particular the executive action on refugees, on immigration has generated tremendous amount of blowback, which has a couple of different effects. one is that it increases resistance among republicans to donald trump in general. republicans have been very lockstep behind donald trump but the more he's fighting about this with john mccain, lindsey graham, rob portman, other republicans who are raising questions, the more problem he will have holding rbs together on other things. the second part which is practical. democrats have been inflamed by this. the slowdown, for example, in the confirmation process for steve minuchin as treasury secretary. the slower that goes, the slower the process for tax reform goes. because he's a key player. parts of his economic agenda that are also in conflict with the desires of the multinational business community that has been looking for some of these
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regulatory and tax changes. peter navarro, his trade adviser, gave an interview with the financial times today where he said that a priority for a trump administration is to unwind and repatriate the global supply chain that multinational firms have been relying on. that is something that i think has the potential to raise consumer prices and really rattle wall street and some of that turbulence may be reflected in what's happening in the dow today. >> larry, a lot to think about. a lot to process. and a simple way to pose a question to you would be, is there a risk that the administration has gotten -- as it has gotten involved in some of these other matters on immigration and the ban on visas and so on and so forth, have they gotten distracted from the core growth message that you are the chief evangelist of? >> look, this is all part of president trump's agenda, so you knew it was coming. these are promises kept.
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i, by the way, happen to agree with him regarding the moratorium on refugees and so forth. i know senator mccain has never agreed. i don't think that's going to stop everything. to me, the key issue here is get the business tax reform done as soon as possible. it's the absolute backbone of the trump economic growth plan. and as we wrote in the wall street journal op-ed last week, steve warren and i, break it off from the individual. put it in reconciliation as soon as possible. that's an idea that, i think, is alive inside the administration. they may be able to make a deal on this. but that's the key. if you don't get the business tax cuts until late in the year, i think it's going to damage the stock market, it's going to damage the economy because people are going to postpone activities. so i think that's still the key. and i think there's huge support for it. the question is sort of ways and means and procedure. me, i say go for it right away. >> it seems like it. the two don't have to going to,
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do they, john? in other words, individual tax reform and corporate tax reform. i suppose it would be great if it could but it doesn't have to. >> not at all. i never thought that it was realistic to expect a comprehensive rewrite on both the individual and the corporate codes in one swoop this year. however, you are going to get objections. republicans made the argument for some time that you have to do individual and corporate at the same time because so many businesses are organized as pass throughs. you can't leave them behind. former republican member of congress today who said you watch. if they separate this out, then nfib, national federation of independent business, will go to war against that corporate tax cut. don't know if that is in prospect. that may be one of the considerations inside the white house that larry is referring to. that's a wild card to watch. >> look, there's opponents to my strategy. i get that. but there's no reason -- when you say split it off, remember,
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i'm talking about the big tax cuts for both large c corps and the small s corps. i don't see why that can't include proprietorships and llcs as well. separate business income from personal income. there's a lot of good tax lawyers in these committees that can do that. now i know that's a somewhat controversial thing. i tell you this, if you wait -- this is a promise. this is a pledge. if you wait and don't get to business tax reform until the end of the year and it doesn't take place until we're well into 2018, you're going to postpone economic activity and there's stock market risks. i think deregulation stuff is great. >> we have to leave it there, guys. we'll look at a playback of the president meeting with cyber industry experts. this is what they call a pool spray. we'll listen in.
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>> appreciate it. today i'm convening this meeting to follow through on my promise to secure crucial infrastructure and the networks that we were talking so much about over the last period of time of the federal government against cyber threats. i will hold my cabinet secretaries and agency heads accountable, totally accountable for the cyber security of their organization of which we probably don't have as much, certainly not as much as we should have. we must defend and protect federal networks and data. we operate these networks on behalf of the american people and they're very important and very sacred. we will empower these agencies to modernize their i.t. systems for better security and other reasons. we will protect our critical
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infrastructure such as power plants and electrical grids. the electrical grid problem is a problem. we'll have it solved relatively soon. we must work with private sector. the private sector is way ahead of government in this case, to ensure that owners and operators of critical infrastructure have the support they need from the federal government to defend against cyber threats. now, i think a pretty good example of this was, despite having spent hundreds and hundreds of millions of dollars, more money than we did, the democratic national committee was hacked successfully, very successfully. and the republican national committee was not hacked. meaning it was hacked but they failed. it was reported, i believe, by reince and other people that it was hacked but we had a very strong defense system against
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hacking. so, despite spending a lot less money than the democrats and, in all fairness, winning -- people don't say that. we spent a lot less money and we won. that's a good thing, isn't it, when you can spend less and win? we were also very successful in our defense against hacking. we ought to make sure that cyber security is central to both our military and the ships, planes and tanks built by great americans for our great american military. and our military will become stronger and stronger as we go along. i just met with general mattis and he's doing a great job. we're really happy with him and everybody. you probably saw general kelly, he was spectacular today on his press conference. we appreciate everything he said. with that, i want to introduce rudy giuliani. he is going to be working with jared kushner and with tom
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bossert, who are also here. and rudy is very much an expert on cyber security. it has been a very important thing to him and what he does. maybe i'll ask rudy to say a few words. where is rudy? >> thank you very, very much, mr. president. congratulations on what is an historic administration. i've never seen so much done in so short a period of time. i was in the early part of the reagan administration. used to sit in this room every thursday and i remember how fast they got off to a start. you're about three times ahead of them. i don't remember the roosevelt thousand days but i think you may be ahead of him and you're doing it without a cabinet. >> it would help if the democrats would approve that also. >> congratulations. what you've been doing is keeping your promises and this is one of your promises. one of your promises was to shore up our country because one of the dangers we face, national
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security is cyber security. and a large part of our country, unlike other countries, is made up of the private sector. this private sector is wide open to hacking and sometimes by hacking the private sector, you can get into government. so we can't do this separately. you are wise enough to decide that we should have a council where we can bring in the private sector, they can explain to you the problems they have. they can explain to the administration the solutions they have, which in some cases may be better than the government and in some cases they may not be as good as the government's. plus we can search around the world, including in countries like israel and places where they're doing a lot of advanced cyber security analysis. we can look for long-term solutions. so here, you're addressing not only national security problem but you're addressing the fastest-growing form of crime in
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america, which is cyber attack. it's growing faster than any other crime. and, finally, by speaking out on this and holding regular meetings on it, you're using the bully pulpit of the presidency to get the private sector to wake up. some of the private sector has awakened to the fact that they have to do more about cyber security. but part of it hasn't. and as president, you are in a unique position to get the private sector to realize that they have to pitch in and help the government. and i'll work very closely with jared and with tom and sebas tichlt an and all the people you have working on this. we'll take our priorities from you. first we'll look at the grid, bring in all the private grid companies and solution companies. if you want to look the financial institutions, we'll do
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financial institutions. if you want to look at hospital, we'll bring in hospitals. we'll let you set the priorities so we can have a very, very close working relationship. congratulations on fulfilling another one of your campaign promises. >> well, thank you very much, rudy. i appreciate it. and i know you're going to do a great job. you formed the committee and we'll go into great detail and we'll have it up and running and doing something very special in many ways. i just want to thank senator dan coates. thank you for being here, senator. do you have anything to say about cyber? >> clearly, it's risen to top priority because of the impact on the campaign. my job, if confirmed -- i'm not confirmed yet. >> i have a feeling you will make it. >> i hope so. my job is that they -- policies that are implemented are the right policies, an enormous challenge but something that needs to be -- we have to get
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after this right away. >> i want to thank you for your service and thank you for everything you've done. even over the last week. your knowledge is amazing and everybody has great respect. so, thank you very much. and he thought he was going to leave after many years of the senate and have a nice, peaceful life and i called him. how about going a little bit longer? we really do appreciate it. thank you very much. admiral, thank you very much, for being here. do you have anything to say about cyber? >> other than as mr. giuliani indicated, the key here will be partnerships between the private sector and the government. the capabilities to bring together both is the sweet spot. >> we'll do that and, as you know, john kelly just gave me a very long news conference and a very, very good one, effective one. while he's warmed up, might as well go for another one or two minutes. >> i have a lot of things to say about cyber.
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i think i'll leave it at the feet of the wise men here. >> a lot to do with what you're doing. it's going to be very important. thank you all very much. we'll get it going. >> we've been watching a playback of the president meeting with cyber executives. he talked about his desire to beef up cyber security of infrastructure, for instance. he is widely expected to sign an executive order about cyber security some time today but that hasn't happened yet. as we understand it. some of the cyber stocks in today's risk standouts, overall indices. strong gains there. these individual names, barracuda, fireeye. and tracking cyber security stocks, hack as well as cyber trading higher in today's session. we want to check in with eamon
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javers live in washington. eamon? >> you heard the president and rudy giuliani speaking. they're not quite on the same set of talking points. the president said the private sector is way ahead of the government in terms of security and cyber but then you heard rudy giuliani saying the private sect ser wide open to hacking. they did mention a number of key sectors, including power plants and hospitals that will need protection. our understanding right now, in terms of what senior officials have said, is that this executive order that the president is likely to sign but not necessarily guaranteed to sign this afternoon, is all about raising the level of cyber security inside each federal agency to the agency director. they don't want this bounce down to the chief technology officer inside each of these agencies. they want the director of the agency to be aware of the cyber security plans and responsible for it. they also want to coordinate cyber security across the entire government through the office of
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management and budget. that's something that we haven't seen before. they're trying to reprioritize cyber security here at the white house as well, guys. back over to you. >> eamon, thank you very much, aemon we'll look at the newest edition to cnbc lineup. sidney torres will offer developers cash and expertise to help save their distressed properties in return. in return, a cut of their profits in return. we'll talk with him to get a sneak peek of his new show, "the deed." ahead on "power lunch."
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i look at this, you're operating in the last nine months at $157,000 at a loss which is around $17,000 a month. if you're at $17,000 a month, this is your cash flow problem right now. between now and the next 60 days, you have $17,000 of loss how much money do you have in your bank account now? >> i have 7200. >> that's a problem. >> that would be a problem. >> big problem. >> if you're going out 17 grand a month and you've got 7200, that is a definition of a problem. cash flow deficit.
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>> what was she buying, mar-a-lago? >> how do you have a $17,000 a month cash flow deficit? >> that was a clip from "the deed." it premiers, wednesday, march 1st. you have time to get ready for it, folks. the host of this new house flipping show is sydney torres joins us. you go in, give us the premise here. you go in, you find house flippers who are having a problem like that young lady did and you come in and you show them the way and you put your own money in, right? >> correct. this show is different than any other show on tv right now and the reason why is it shows the real troubles you go through when you are renovating your own properties or personal properties. people over invest. they get emotionally invested, don't do their homework. they jump into a market and they over invest and the market doesn't support the sales price. >> what's the biggest mistake they make? thinking the market's going to bail them out? >> they always do. they think that they can add the over age onto the sales price
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and that's not the answer, you know? the biggest thing is doing your homework. a lot of people jump into this thinking it's easy because they watch these flipping shows and think, i can do that. they don't do their homework, they end up buying in a bad area and over invest and don't put a budget together or schedule and they have to call people like me. uh-oh. >> i'm a secret wanna be flipper. >> she is a slumlord. she is a landlord. she owns some rental properties and so she's listening to what you're saying going, uh-huh, uh-huh. >> it's tricky even if you do your homework. in terms of this market environment, sidney, what have you noticed? is this a good environment for flippers? flipping is the highest in 2016 that it has been -- >> it's scary. i went through that. i went through the times when everything dried up and you're sitting there and the banks are staring you in the eye and they say, hey, we want our payment. they reappraise the property and
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you have to pay down the principle. i'm very cautious when i invest with these individuals. >> melissa's places are very nice from what i understand. let me ask you the question most people ask. should i buy a cheap place in a, quote, up and coming area. >> that's the biggest thing. >> for the better up side or should i spend a little more money, buy a more expensive place, cap my up side but having the security of knowing the area is established? >> this is the way i look at it. i like to be in between. >> you must be good at it because you have your own tv show. >> i hope people feel the same way, but what i like to do is find in between the fringe and the sweet spot and really try to buy within that area. you know, a lot of people make decisions on buying emotionally and that's when you go wrong because i always say don't fall in love with it because it won't love you back. people do that. they fall in love with it. they get in it and they're renovating. they fall in love with the renovation. they over invest. don't fall in love. >> oh, i know. >> just fall in like. >> just an investment. >> we've got to leave it there,
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sidney, congratulations. >> see you in a month's time, march 1. series premiere "the deed." cnbc "power" back in two. ♪ ♪
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we're in the negative for the month. we're still in the positive for the month but not by a whole lot.

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