tv Power Lunch CNBC July 16, 2019 2:00pm-3:00pm EDT
of them, and also they're moving there because there's a skills gap there. >> we appreciate it very much. thank you, and say hi to that dan guy. i think he's over there, isn't he he's on squawk all the time. >> i will. thanks >> that does it for "the exchange." "power lunch" with brian sullivan and courtney, one name, begins right now >> that is right joe, thank you very much i'm brian. courtney reagan is over there. here's what's new at 2:00. the president sounding off on the fed and china again. and a scathing new op-ed out on the president's war with the fed head chicago fed president charlie evans will weigh in on all of it big tech under fire. top brass from apple, amazon, google, facebook, all grilled on the hill we examine the real risks facing the companies and their shareholders >> and solid demand and low interest rates home builders should be ecstatic, right? maybe not. we'll show you what's worrying them about the american housing market as "power lunch" begins right now.
welcome to "power lunch. i'm courtney reagan. let's get a check on the markets this hour. a cautious day on the street stocks trading in a narrow range. the dow managed to hit an intraday high earlier, but now we're in the red across the board for the three major averages with the dow down about 21 points, the nasdaq composite leading way lower by half a percent. oil also tanking this hour secretary of state pompeo says iran is ready to negotiate about its missile program. the final trade details are straight ahead brian. >> big oil story i'm sure we'll get more. thank you very much. we have a lot to do. let's kick off this hour from news from washington where else where once again, president trump sparking new uncertainty about any kind of a trade deal with china that happening in just the last hour kayla tausche is following it. >> as the president's top trade officials prepare to continue negotiations over the phone and possibly in person later this
month, president trump was ambiguous when speaking to cabinet officials and reporters earlier today about where things stand. >> we're doing well with china we'll see whether or not -- we're talking to china about a deal we'll see what happens we're doing very well economically because they're paying us billions and billions and billions of dollars. >> u.s. customs data show the u.s. has received roughly 21 billion dollars in proceeds from tariffs. that's less than the $28 billion the administration is paying to farmers to offset retaliation, according to "the new york times. president trump said we'll see if china ends up making the large purchases of farm products he said china committed to at the g-20, a commitment that did not show up in any of china's statements since the events. brian, president trump saying that he is still willing to consider those tariffs on the last $300 billion in chinese goods if things don't pan out. back to you. >> thank you, kayla. he's still naup dropping that idea >> meanwhile, the president again attacking the fed.
accused the fed's tightening of keeping the economy from growing. pointing to china and europe lowering rates fed chair powell speaking about the economy in the past hour, saying uncertainties around trade and global growth have increased. and that the fed will, quote, act as appropriate to sustain expansion. all these comments as earnings season kicks off let's bring in jim paulsen and alley mccartney, managing director at ubs wealth management a lot of cross currents going on earnings season heating up president trump, as kayla brought us, not dropping the idea of additional tariffs, $325 billion of u.s. goods, and this pressure continuing to ratchet up on the fed chairman how are you putting it all together to make your investing strategy >> i think that this is all at the intersection of there are two ways to interpret what's been going on in the market and what's going on both from the fed's desire to continue to be supportive in avoiding a recession or the end of this longest ever bull market
and the trade overhang and you know, you can either say that we are at an intracycle low, and that the earnings are going to show that and that the fed is going to help us come out of that, or you can just say that, you know, this is the beginning of the end and the fed, no matter how much stimulus they give in terms of fiscal or monetary policy, we have to position for something different. but i think today is a great example of the two things that really are moving the market, the last five days the rally was really fueled by some optimism around post g-20 conversations and trade, and the federal reserve, jay powell specifically, his comments last week to congress now, we have seen one of those reverse. and we have seen one of those continue to point to that supportiveness and the market is trying to interpret a lot of different signs, a lot of murky economic and technical data, and we're on a seesaw, and i think earnings
will, this month certainly, because the majority, 75% of the s&p will report before the end of july, that's going to show us, i think, less in the numbers and more in the positioning and forward guidance of these companies. what the companies are actually seeing and feeling >> alli makes a good point, jim. i find when i'm looking at the readings for the u.s. consumer, things look pretty good. retail sales, consumer confidence but then you listen to what the executives running the companies and investing in business are saying, and they are considerably more cautious you have some glass half full, some glass half empty. what do you make of what we're going to hear from this earnings season >> well, i think earnings are going to be, you know, weak just given where we're at here and the second quarter, we probably grew about 2%. but i really think there's a couple reasons that i think there could be some positive surprises around earnings this period, and looking forward even to the common tear from ceos
i think one thing that could happen that no one is talking about is there could be margin improvement. companies may be reporting that. if you think about what's happened here, this year, and particularly the second quarter, we have had all the costs go down you have labor costs that are down year on yernow. they were up about a percent and a half a year ago at this time commodities costs that are clearly down they were up a year ago at this time and you have capital costs or yields across the board that are down so when labor, capital, material costs are down, i think you might start to see companies saying they got a little more margin leeway here helping earnings >> jim, i don't know what to make of it because a year ago when the tariffs were slapped on, everybody said, there we go. margins are toast. the consumer is doomed businesses are - >> right >> i was going to use a different word businesses are in trouble, and here we are now talking about margin improvement, all by the way in the middle of a tariff
war. >> i agree you know, and you look at the data, just look at the data we had of late. that's what's important. earnings are already in the rear view mirror for the second quarter. but you know, just this month, we had a really solid jobs report, great retail sales number today, manufacturing production also went up claim numbers or layoffs are staying low. i think all in all, there's already evidence that a lot of the policy stimulus, brian, we have introduced is starting to work in the states and will. as it regards company confidence, you know, look at the behavior i think it's kind of interesting. companies are still across the board raising their dividends. even though their earnings are not very good, they're still raising their dividends. that shows confidence, i think they're still employing people at a fairly solid rate that shows confidence. and capital good orders, which most people think are way off, if you look at capital good orders, nondefense sort of the core capital good orders that don't have boeing one offs in
it, they haven't fallen at all they're up this year to date and flat over the last year at cycle highs. so i really think that the way the corporations and businesses are acting are still pretty darn confident about the future >> alli i want to give you the last word. how are you positioning your portfolio? what are you looking at as winners going into the earnings season with so many things unknown? >> that's exactly what you need to be focusing on. you need to understand sort of sector by sector and company by company how the continued overhangs, interest rate policy, and even more so, what we think is probably the biggest risk out there, is the investing public really over -- being overdovish about what going to happen 100 basis points decrease in the interest rate is priced in before 2020. we think that could be pretty aggressive, and so that could lead to some downside in certain areas. but we're really focused on, you
know, we're u.s. overweight. we still feel like the u.s. has some fundamentals and technicals, especially relative to places like europe. international developed peers that still make growth more likely and on the opposite based on what i just said, sort of the ability to navigate some disappointments, whether geopolitical or economic or trade so we have the u.s we have some japan overweight. we have some emerging markets. that has to do with, again, relative performance this year and a bounce back, and then from a sector perspective, communications services. and consumer discretionary again, to the point made earlier, consumers are out there, they're spending, lowest unemployment rate in 50 years. so that continues to bode well, and lift those sectors >> consumer discretionary hitting an all time itoday thank you for joining us today >> d.c. dominating your news cycle yet again today because also inside the beltway,
congress holding hearings on just how powerful big tech is becoming top execs from apple, amazon, google, facebook, on thehot seat ylan mui joining us with more on what we can expect and what we have kind of already heard ylan >> that's right, brian round two is about to get under way. the hearing will take place in the committee room that's just behind me here you can see the line to get in is already down the hallway. this hearing is being run by the house judiciary committee. it's part of their broader investigation into anti-trust and the big question they're trying to focus on today is whether the internet giants are not only squashing the competition but also preventin new entrants and start-ups from coming into the space. i also expect them to pick up the themes we have heard earlier this morning when facebook was testifying over in the senate to defend its development of its new cryptocurrency libra senators in that hearing kept coming back to one word, and that is trust. >> pretty hard to trust when there's so little contrition
pretty hard for us to trust you with the worldwide currency. mr. chairman, i wish we could trust facebook it's pretty clear there's almost nobody on this committee that does >> now, already, there is question about facebook's assertion that libra will be overseen by a swiss regulator. our colleague over in london is reporting that that swiss regulator hasn't yet heard from facebook the full story is on cnbc.com. >> thank you very much we'll see you throughout the day on that. well, adding to all of this, as if that wasn't enough, trump trumpeting that his administration will, quote, take a look into billionaire investor peter thiel's claims that google may be working with china. so hearings, headlines, and now calls for the cia to get involved where does all this go jimmy peth acukes and ali, analyst at morning star are joining us jimmy, do you think congress knows what it wants or do you
think this is a fishing expedition, all pp bbeit with af hooks and they're trying to figure out what's going to bite, what's going to stick from a regulatory perspective >> listen, i don't think they know exactly what they want to do and, you know, what that would actually entail. do they want to just copy what europe is doing or are we going to do something differently. is the key breaking the companies up is it regulating them. i think there are members of congress who think that these companies are too big, too powerful, that they're indeed squashing competition. and something has to be done i think a lot of people think that's the case. i think republicans less than democrats haven't quite figured out what the proper attack factor is here, but i think democrats think this is a case of unbridled market power. >> ali, do you think there's any chance that any of the names you follow will be broken up or regulated to the point where it's almost a de facto breakup >> that's a little tough to tell
because from a breakup standpoint, we do have an example, as you know in 1984, at&t was broken up but now, of course, since then, i should say, consolidation took place and you look at that space and there's still only a few players left in that space if you -- so that's a tough one. from a regulatory standpoint, i do think that over the -- let's say a year, year and a half from now, we will see some additional regulations regarding specifically around data privacy and data security. they have a pretty good example of that in terms of what europe has done with gdpr i think that's a little bit easier and more efficient, and clearer to understand for our lawmakers to take action >> jimmy, do you think -- go ahead. >> i was going to say, if what ends up happening is that congress sort of does what europe does, i mean, that's not terrible for big incumbent companies who can deal with like
data privacy regulation. ultimately, that's a pro-incumbency move. >> yeah, that's a great point. we certainly agree we have published this before. it basically creates barriers to entries for actually smaller companies. >> ali, i was going to ask, what are the headline risks here for a company like google? i know you cover, and facebook, if we're looking at regulation or a possible breakup? how do you play that into a model? >> well, the way we have played it into the model is basically assuming what the companies will do to minimize the possibility of that risk so in other words, whether, even before they're forced to work with the government and/or the lawmakers, they actually take steps towards that one is, for example, on the data privacy side, or the data security side. both facebook and google are actually investing a lot more.
so that compresses their margins a little bit the other one mainly on actually on both, on facebook and google, you're talking about content quality. on facebook, content quality, of course, on its overall platform. on google, content quality on youtube. and they're invisting a lot more on that. we have already pretty much models margin compression while these companies are going through this phase >> jimmy, ali, guys, good discussion, and one that is nowhere near being over. >> coming up, we are going live to chicago at the cnbc at work summit where tyler mathisen is coming up with a big guest who can really, i guess, put the wrench to the workforce? >> oh, that's good you know, i know why i miss you so much on "power lunch. it's puns like that, brian thanks so much for sitting in. we're at the at work conference here in chicago, looking at the future of work and if there is one company that has gone through the decades and has
evolved with the times, it's snap-on tools, snap-on incorporated we'll talk to the ceo of that company, and we'll talk about how he is upskilling the workforce in his industry to get ready for what is coming, and we're also hearing later this hour from charles evans, the head of the chicago fed. steve liesman is in the house. he'll interview mr. evans and we'll learn about the economy not just in this region but globally we'll talk to you from chicago right after this
lunch. and to the chicago at work event where we're exploring the future of work in a changing economy. and who better to do that with than the ceo of a company that has been around now 99 years nick pinchuk of snap-on incorporated congratulations on making it almost to a century. >> i haven't been there for the 99 years although you may think that, it's not true. >> i was going to say, you look pretty good. how's business >> business is okay. you know. >> okay, not better than >> our first quarter was okay. we do business across the world, and one of things about the market for auto repair, people always need to get cars repaired and the other thing is that cars keep changing. people think that the car repair is the same over and over again. but it really keeps changing every time they bring out a new model, it creates a new challenge for the guys in the garage the guys and gals in the garage, and that's how we help them. there's a lot of new technology
coursing through that. of course, there are different geometries so they need different hand tools and also there's all the electronics. >> all kinds of diagnostic things you have to bring to the table. >> yes, and that's one of the things you talk about upskilling the work force, but up skilling our customers is important for us. >> you have a u.s. market. probably your biggest market, but you also have global businesses >> we do >> where is the economy stronger relatively the u.s. or overseas >> i would say today, depending on, you know, overseers when you say that, it's a big area and a dated landscape, but the u.s. seems to be the strongest to me. it appears to be the strongest, and i think a lot of indications show that. the national association of manufacturers say their outlook is 79% positive. now, that's down ten points from the prior quarter, but it's up 20 points from what it was like two years ago. >> you're expanding in china, right? >> we are. >> a lot is it harder today to do business in china baz of the trade tensions between the u.s.
and china? or not >> we haven't really seen that, but the china market is off the bubble i mean, ford is down in the first half 27%, and buick is down 15% the auto repair market is down a little bit one thing you think about in china, they probably never saw a reduction. you have dealerships in china trying to figure out what to do about this, the fact that the auto industry is now down. our dealers are used to it so they batten down the hatches >> what percent of your tools you sell in the u.s. are made in the u.s., and what percent of the tools and equipment that you sell, for example, in china are actually made in local markets >> we tend to make in the markets where we sell. because we have 70,000 skus. it's hard to lob those customized tools 12,000 miles and 12 time zones. we keep adjusting our tools. we brought out last year hundreds -- one of our plants, milwaukee plant, brought out 10% more skus last year. we have to meet the different demands in the garage. not to mention, like i said, the
electronics. we have databases that are 130 billion records and 1 billion records that allow the technician not to worry, he plugs it in and says if it's an audi with 85,000 miles, this is the likely problem >> how did you know i drive an audi >> i could tell. you're an audi driver, i'm sorry. >> we're here to talk about the evolving workforce this has been a passion of yours literally. it's one thing to say that we do not have enough skilled workers. there is also, i think you would agree, a kind of pr problem around developing skilled workers in the trades. >> i would say exactly that, not just the trades, but auto mechanics and manufacturing. one of the things -- >> these are seen as consolation jobs >> i would say that exactly, and the national association of manufacturers did a survey 90% of people said mafring is important. 30% want their children to be manufacturers. because this is what other people's kids do
we view these as the - >> how do you change it? >> how do you change it, you have to celebrate the jobs things like skills usa we're doing things which trains people and celebrates their achievements in local, state, and national conventions the national association of manufacturers is starting a program next year, 125 years old, creators want it. they're going to go out all over the country and celebrate manufacturing. we need to recognize that technical jobs, not manufactu r manufacturers and tradesmen and people in the shops, can find a way to keep their family warm and safe and dry, and have pride and dignity, which was always the definition of the american dream. and i can assure you that pride and dignity and ability to keep your family warm and safe and dry exists in the garages of the world and at snap-on factories >> that impulse is a basic human impulse. >> we need to restore the
respikt of dignity of work >> you have a simple message it is we make things and we fix things keep it up nice to see you. >> thank you >> all right, folks, we're going to toss it back to you courtney, it's all yours >> thank you we're brr going to come back and visit the at work conference another big interview coming up. steve liesman sitting down with charles evans. >> plus, the real steps that tesla employees took to hit the model 3 production targets that story coming up next on "power lunch."
tesla employees telling cnbc they took short cuts to mead model 3 production goals phil lebeau joining us with more on the story >> this stems from an investigation cnbc.com's laura has been conducting, looking at the practices of building the model 3 out in fremont, california specifically at the assembly line that is in the tent that they have built next to the rest of the production facility tesla workers there have told cnbc that they have taken short cuts in order to build the model 3, that includes using things like electrical tape or not putting nuts on top of bolts
inside the vehicles and they complain the conditions in the assembly tent really were thought the best conditions, especially when the california wildfires were going on. in reply to the questions from cnbc.com, tesla says the anecdotes reported by cnbc from a few unnamed sources are misleading and do not reflect our manufacturing practices or what it's like to work at tesla. all of this is germane to the question of has tesla been short cutting on quality in order to meet production and delivery goals? here's where they stand halfway through the year they're close to meeting halfway where they need to be, but they have to come up with at least 200,000 vehicles in the second half of this year to hit 360,000 to 400,000 vehicles, and as you take a look at shares of tesla, we should also point out within the last hour, elon musk out with some tweets regarding the cost of the self-driving option for people who believe they want to have a robotaxi as part of
the tesla fleet. that cost will go up by $1,000 starting august 16th, and oh, by the way, elon musk says in his opinion, when your vehicle is full self driving, the will be worth between $100,000 and $200,000 your tesla will be worth that because it will be able to be used 24 hours a day in the robotaxi network >> thank you very much interesting stuff there. >> ahead on "power lunch," the new tactic in president trump's war on the federal reserve former fed vice chair allen blienlder out with a scathing new op-ed and he'll join us coming up. >> plus, the nation's housing shortage is getting worse. what it means for the market and your home value. >> and slicing the profit pie. why the big business of delivery is taking a bite out of nomi's all this when "power lunch" returns right after this - stand up if you are first generation college student.
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here's your cnbc news update house democrats planning to vote on a resolution that condements president trump's tweets about four congresswumen they say it has legitimized and increased fear of new americans and people of color. one of the co-sponsors of it resolution, jamie raskin >> it's un-american to tell people to go back to their
country, especially when they're born in america. and then for the people who were born abroad who became americans, they're ever bit as much a citizen as people whose families have been here for generations. >> imf director christine lagarde has resigned effective september 12th she didn't immediately resign because of uncertainty over whether the new european parliament would approve her they came to an agreement last week >> all tariff pharmaceuticals is recalling cvs eyedrops and ointments. the recall is precautionary. let me send it over to you >> thank you very much >> meantime, a skathding new op-ed piece out today in the "wall street journal" called trump's new tactic in the war against fed chairman powell sending dreadful nominees to make his job more difficult. the president has failed to fill the board positions with roger moore and herman cain, and now
sdaesh steven moore, rather. and has now nominated christopher waller and judy shelton to fill the vacancies. joining us for an exclusive is the writer of that piece, alan blinder, a man who has not been in a james bond movie that i know of, but professor blinder, good to have you on the program. do you really think that is the tactic, or do you feel that maybe in this environment, it is simply more difficult to locate and find people willing to take the job? >> no, i don't think the latter at all i think that's definitely the tactic look how it changed. his early appointments to the fed included randy quarrels and rich clarita, two very fine appointments not controversial in the least perfectly well qualified and then he runs off track lately so no, i don't think it's hard to find qualified people >> you know, we actually had
scott minored on of guggenheim he broke the news he has been either approached directly or hinted, he wouldn't go into all the details, but it indicates they're out there looking. professor, they are looking. if you could find the perfect person, obviously, i read the op-ed, you don't like ms. shelton. ia feel like she's flip-flopped on the rate story, i get it. who would be a good choice >> well, first of all, christopher waller's name came up in the same tweet, i think. that's a perfectly fine choice nothing wrong with that. nelly lang, you may remember, was half nominated some months back it never went anywhere that was a perfectly good -- that was an excellent choice in fact i think you could go, it's not like there are only three people, and can i come up with their names? there are many people. economists, bankers, people in the financial industry that would be very well qualified to do this job. >> president trump has jumped in and had a lot to say about the
federal reserve, chairman, in ways that most recent presidents have not he's also spoken an awful lot about the dollar does that concern you at all if he looks into some way of intervening, to intervene with the strength of the dollar, frankly? >> well, a little bit. it's not the worst thing in the world. it's certainly not the best thing in the world the problem with talking down the dollar is you may get more than you bargain for and you can kick off a real swoon of the dollar that nobody wants, probably including president trump, though i can never get inside his head. so, you know, a little bit, a small deviation from the orthodoxy, which is never talk about the dollar, probably doesn't hurt very much but if you keep it up and get serious about it, and especially back it up with actions, you know, the treasury department answers to the president of the united states. in the way that the fed doesn't.
so especially if you would do that, then you could be creating a problem. >> do you believe, professor, that jerome powell, despite what they say, is being influenced directly or indirectly by the president? >> i certainly hope not, and i believe not. he's in a tricky position right now, powell is and the whole fed is because there is a case for cutting interest rates, for sure there is also a case for not cutting interest rates that's why there's a debate over this he's in a position now that if he decides to cut interest rates, if they decide to cut interest rates on the merits, it's unfortunately going to look like they caved to president trump, which is unfortunate. and which, by the way, is one of the reasons why it's a good idea for the president not to keep opening his mouth about this question >> thank you very much, alan blinder, for being here with us today. we're going to get to steve liesman.
he's speaking with chicago fed president charles evans in chicago. let's take a listen. >> what is your outlook for policy now >> good observation. i think inflation has softened a little bit during that time period that you're talking about. and you know, over a slightly longer period, you go back to since the fed started raising rates, i was always a little nervous, was this the right time to start raising rates i think early on, 2015, december it was, 2016, it was but i was worried, was inflation going to get up to 2%? our objective, which is symmetric, we should be above 2% sometimes and below. and i think it's worked all right. there was a moment, well, there was a period of time after one of the big phone companies had big reduction in their data rates and the cpi, the data, you know, was very light for a while. was that temporary, was it something else we have been under 2% for a long
time i have been worried about it, and then sort of with the most recent nervousness, i say, you know, i think that a little more accommodation would be helpful for insuring we confidently get to 2% and above 2% i think 2.25% or a little more than that would be about appropriate for our economy and monetary policy. at this point in the economic cycle, we're ten years into an expansion, and if we're ever going to be above 2%, during this cycle, you would think this would be about right >> you have been very consistent about your concern about what you call the symmetric inflation target, which i guess means if you run a little under 2%, you shouldn't be too concerns if you run a little over. how much help does the fed, does the economy need from the fed in getting to a 2% target rate? >> well, that's a great way to ask the question because there are other ways that we could get to 2%. if we had even more stimulative fiscal policy or if the state of the global economy was much stronger so that that increased
exports, if the state of the economy was even stronger than it is now, and it's really quite solid, you know, if there's other additions to aggregate demand, that tends to increase inflation, and then the fed wouldn't have to do as much. at this moment, the way the economy is going and the state of anchored inflation expectations, we seem to be a little less than 2%. it's not bad, really i think it's a danger for the strategy of monetary policy if it's perceived that we can't get up to 2%, and 2% is thought of as more of a ceiling but you know, other factors, stronger business environment, where investment increases, more people coming into the workforce, growing economy that would tend to lift wages and lift inflation, so we only really should be doing as much as is necessary, but at the moment, it seems like more is necessary. >> the market debates the following issue. if you were to cut in july, is
it a one and done thing? is it more than one 25-basis point rate cut that's needed or do you do what has been talked about, no less than the fed chairman has talked about the idea, an ounce of prevention is worth a pound of cure as you get down to zero, the fed ought to act early and forcefully >> they're all important >> i can't do all three. >> i think we need to have our strategy in mind and so i think that it's very important to ratify and be very affirmative that inflation can go above 2%, but it's not a ceiling, and i look at the forecast that i was asked to submit in june and in order to get inflation up to 2.25% over the next three years, i needed 50 basis points of more accommodation. and in fact, maybe that's not quite enough i kind of think that would increase inflation expectations and that would help. on the basis of inflation, last
time i was on talking with you, i had the same story which is i think inflation itself is enough now, you talk about an ounce of prevention, because the global economy is weaker than certainly it was in 2017 2017, it was very strong, and now it's moderated and it's a little weaker. so that's not a source of strength, and so from a risk management standpoint, it makes sense that you might think we're a little more restricted because of that. >> you didn't mention trade in that list of things you're concerned about. >> global economy is weaker. there are trade uncertainties, obviously, the administration is pursuing a different trade strategy where there's aggressive use of tariffs, brinksmanship, trying to get other countries to alter their policies and you know, we'll just have to see how it works it's a different style, but that comes with adding more uncertainty. and you know, you're never quite sure how the other party is going to react so it's not what i do for a living, but in terms of how you think about businesses must be
reacting to the overall environment, it seems like this injects uncertainty into their decision making. >> i think the sum of your answers already answered, but i want to be clear about it. you would still be an advocate of easing policy if there was suddenly a deal between china and the u.s. >> unless i had great reason to think that that would somehow create a lot of inflation, yes, i think that's right i think on the basis of inflation alone, i could feel confident in arguing for a couple of rate cuts before the end of the year. >> one more question on near term policy here i paint the following picture of this fictitious economy. unemployment near a 50-year low. a recent pay roll number that was well in excess of expectations a strong retail sales number just this morning. economy running roughly at the central bank's view of potential
growth inflation, three tenths below the fed's target or the central bank, the fictitious central bank's target. you give me that stuff on a piece of paper i don't go from there to you need to cut rates. how do you explain or cut rates into an environment where it seems like the economy is doing reasonably well? >> i was expecting you to say the opposite i was expecting you to say that's exactly the argument for a rate cut >> that's why i'm not on the board, among other reasons >> economic fundamentals are solid. if what we really mean is we're supposed to provide monetary financial conditions to promote maximum employment and price stability and price stability is symmetric, 2% inflation. we need to go above 2% at some point or else i'm worried, everybody out in the audience and around the world is going to go that 2% certainly looked like
a ceiling, didn't it they really were worried about going above 2%, weren't they they were under three tenths under 2%, and for how long we haven't cracked 2% on a sustained basis since the great recession. and you know, if you don't do that, i worry a lot. i don't want anybody to think that we're in a position like the bank of japan where they got really nervous about all of this, and they have been dealing with it. i think the european central bank has been a little better, but behind what we have done at the fed. so i mean, i think those are the issues >> one more follow-up. i'm sorry, folks, i want to move on to the broader questions, but you said 50 basis points of tightening is what it needed to bring inflation back up. do you have a sense of the timing of when that 50 basis points is needed >> the kind of exercise we do, it's not so critical i said before the end of the year, but i think the way that i think about this is i look at the forecast and what is it that's necessary to generate
2.25% inflation, at least. and 2.5% is okay, too, because we have been under 2% by more pt it would be consistent with a definition of symmetry we probably need to work a little harder at explaining what we mean by symmetry, because i think everybody has a slightly different idea in their mind i think part of the monetary policy conference we were thinking about is kind of geared towards understanding that or at least that's how i see it. but so i think that if, you know, if 100 basis points got us to 2.5%, that's still consistent with symmetry. i think a lot of this is, you know, how is the community thinking about it? how do the members come into the meeting? what's on their mind i will say it's a little lonely to be talking about symmetry and, you know, it being above 2% we all say, yeah, it's symmetric, but when you start
explaining what you think is consistent with that, mine is a bit more picturesque on the upside relative to quite a few people that's why we go into the meeting, all participants talk, and we'll come out with a strategy i would think we would be well served by overshooting 2%. i definitely think that we need to work hard to do everything that we can to get to 2% with confidence. >> we're going to get to this issue of why and the connection of the labor market to inflation, which is critical, but i need to ask one other question which is about president trump on a nearly daily basis now criticizes the federal reserve chairman and the fed itself. he said that if not for fed policy, we would be growing faster he said that this morning. is that true >> you know, i think we have had a tremendous amount of stimulus for the economy. we had a big tax cut tax reform they added more government spending that's sort of been waning now
with the effects of that over a couple years and so we're coming down to trend growth i guess the short answer is, if you had more accommodative policy, you would guess that would stimulate the economy a lilt more. i think the path for the economy at the moment is one towards trend growth i think trend growth is about 1.75%. we're looking at 2.25%, 2% to 2.25% growth this year, maybe 2% next year. that's slightly above trend. i don't think we should be in the business necessarily of generating excess stimulus in order to get growth up we want to continue the expansion. there's no doubt about it, but find the right balance it does turn out that because inflation is undershooting that that's a fine thing to do. so yeah, i guess where am kind of saying, it would have been stronger if we hadn't raised rates. there can be an argument for that you have to be very careful in how you thing about it, and there's so much else going on.
i think the risk management argument is really a good one. economy is solid i don't really want to be talking down the economy because i don't think that's the state of the economy it's just that there are a lot of risks out there, and there's brexit you know, october 31st no deal brexit seems to be back on the table, if i understand some of the discussions of the future prime minister. and you know, who knows how that plays out unless they also get some type of new deal from the eu so there's a lot of uncertainty. >> president trump's been unique among the past three presidents but not perhaps before that in commenting on the federal reserve. how do you feel about the idea of the president talking and advising in sort of strong words what the central bank should do? >> zee a job to do we have to pay attention to the economy, explain why we're doing it, explain why this policy is good for the state of the economy. fundamentals are solid
i think we have got a good story to tell. even with the maybe an ounce of prevention is the right measure at this time so i think it goes with the territory. sometimes more than other times. but look, i think when you go out 37 b but when you state the case very strongly, which i think is very important. central bank needs to be independent. we need to have some distance between us and short run political pressure because somebody has to make hard decisions when the economy needs something that other folks would say, oh, no, that would be too hard paul volcker needed that measure of independence in order to raise rates to get inflation down in '79 through '82. so when you ask for independence, perhaps somewhat arrogantly, i think that you are saying look, i'll be accountable, you get to criticize, and you got to have a thick skin >> let's pivot from that it is not really a strong pivot --
>> we'll drop out of that if fascinating interview. headlines coming out of that interview there. we'll let steve continue on doing his job be let's stay in the city of chicago, rick santelli in the bond pits. so you've been listening in. and what do you make of his comments so far? >> has he ever heard of a country called japan just curious >> i don't think that was one of steve's questions. >> no, but it really is at the epicenter. there are large economies that have been trying to ranch ump u inflation and they have had little success but sxhcharlie evans thinks tha basis point can help consumers makes no sense to me what makes sense to me is the retail sales number and charlie
evans talked over the data seems like we're back to data dependent but not really but it was a solid number. you see the intra day chart of ten year notes hovering at 2.12 and we'll break free of levels we haven't seen since early june and early june on bund yields, even though they have also run out of gas little more than their treasury, the bounce was a solid run from minus 40. and value continues to be so evansecb poly is, bu i don't think that negative interest rates will be a good thing when the guy behind you won't buy something that nobody in their right mind would buy unless somebody behind him is willing to buy again >> and a quick question. with the bond yield here at
2.whatever, has the bond market already priced in the move if the fed cuts later on this month, is anything going to move or is the move already happened? >> i think that the move has already happened at least on the knee jerk reaction markets assume that the fed may have some efficacy to stoke a little bit of pricing issue. and i think that that is why the curve is a little steeper than it was but all things being equal, i think that the ten year and really from about the seven year on is much more motivated by what is going on with other sovereigns in an arbitrage trade. and well beyond the reach of this central bank to effect the long end and any sizable fashion. >> thank you, rick santelli. "power lunch" is coming right back stay with us
did see oil prices trade down nearly 4%. and then we had comments from the rbc analyst saying that let's take the comments and be cautious and oil may be overreacting to those comments from secretary pompeo a lot will rest on iran's response and a spokesperson for iran's mission saying that the missiles are absolutely and under no condition negotiable with any country. so that is pushing oil off its lows ending down 2.5%. shares of dominos fell today. but what did the company say about talent and labor costs that caught our attention. kate rogers has the story. >> that's right. so domino's ceo did have a lot to say about talent on today's conference call. allison said there is steep competition for delivery drivers and the fact that there is record low unemployment coupled with competition from third party delivery services in both fast food and grocery.
that has created a talent crunch to help fix the issue, they are focusing on scheduling algorithms and looking at alternatives and a test for autonomous delivery in houston will would get them to the place that would reduce dependence i on the labor market and allison mentioned that menu price increases did past kick in as minimum wage increases also kicked in in different states and municipalities >> is it people -- everybody has a local pizza place, right is everybody using door dash or whatever it is to deliver and is that working or like some who live in the burbs, by that the food is cold, soggy, whatever it is >> they have mentioned the third party aggregate tors putting
pressure on the model. dominos does all of their own delivery in-house. grub hubs and door dashes are bringing you also mcdonald's and chipotle so pizza delivery is no longer the only game in town. and they are opening up more stores -- we should mention the tore dressing strategy >> what sdrp does thdoes that mn >> they are opening up stores that are near other are stores and so a few different things at play >> potentially pizza delivery by bike and the ceo of domino's will be on m"mad money." time for check please. flushing drugs down the toilet could create meth gators >> what? >> this is according to the police department in laredo, tennessee. a suspect unsuccessfully tried
to flush methamphetamine officers warn if drugs make it far in into the river, they could be assumed by ducks, geese andalligators. i can't think made the horror that this will cause thanks, guys >> thanks for watching "power lunch. "closing bell" starts right now. welcome to the "closing bell." i'm morgan brennan >> and i'll wilfred frost. a tech antitrust hearing is getting under way. let's get try to ylan mui with the latest >> google, facebook, apple and amazon will all be testifying at this hearing in just a few minutes. it is being held by the house judiciary committee a part of their broader antitrust investigation. this focus will be on innovation and entrepreneurship the committee is worried about the so-called kill zones