tv Power Lunch CNBC November 18, 2019 2:00pm-3:00pm EST
experience now that they are basically saying we could just touch this other part over here and that's okay. >> that's a big piece. i know you and your colleagues worked for a while on this check it out over the weekend. thank you very much. >> thanks so much. >> that does it for the exchange i'm going to join melissa for power lunch. we'll see you in a moment. here is what's new at 2:00 on power lunch. stocks hitting fresh record highs again today. forget about recession fears everybody was worried about a month ago. this market is being driven by fomo, the fear of missing out. former macy's ceo is here. what would he do to fix the struggling department store. he will tell us the two retail stocks that are a screaming buy. fedex is under fire for not
delivering we have all the details. "power lunch" starts right now let's take a look at the markets now. stocks just slightly higher putting them in record territory. all three indices hitting all time highs check out shares of disney the big dow winner again today that stock is up another 3%. now more than 14% in the month of november alone. the dow and s&p 500 hitting new record highs today bob is at the new york stock exchange every time we tick up it's a new high hey, another record high people are remaining very bullish, are they not in. >> shockingly bullish. it's the diversity of the rally that made peel bullish it's not just the fantasy. it's quite amazing there's two things you want to market about the market in november the lows for the day are right
at the open and the mark is driven upward. this is a notable print in november that's not always followed in many other months. second thing you want to know is the stunning diversity of the rally. you rarely get this kind of thing. boeing and industrials new high. united health and health care. apple and technology there's nike and consumer. there's jpmorgan you don't see these stocks hitting new highs at the same time and the most under the broadest rallies they are just shy of new high. this is not something to quibble be this is the whole market is sitting alt new highs. you could see this this is a little odd growth stocks and value stocks are both at new highs. that rarely happens. then you have technology which is a cyclical sector hitting new highs and lows with health care which is a defensive sector. no matter where you rolook all
these polar opposites are hitting new highs. what's driving this? we see the marginal droiver i didn't put the fed on here but that's number two in my book remember six month ago it was all recession in 2020. that's not only gone, there are people talking about bottoms and growth concerns and bottoms for earnings situations in the s&p going to be flat this year, maybe mid single digits on the upside for earnings. that's a different scenario than we had even three months ago >> a new report shows investigators fear of missing out or fomo on this rally is greater than the fear of recession. how much more room does this rally have to run in let's bring in chief investment officer and evan brown great to have you with us. evan, you think markets can go
even higher and we're good through 2020 what's powering that >> that's right. one is the global manufacturering cycle looks to be turning we should get more confirmation of that on friday when the flash pmis come out. it looks like that's the recipe we have right now. >> what happens if the china talks break down and what happens if trumps decide to put tariffs on european autos? do they have an impact on what your forecast is right now >> they have to. if suddenly the u.s. china-trade talks break down and you get tariffs on all the chinese goods in december then that will be a
very negative shot to markets and the economy. we're climbing that wall we're assuming the incentives are too strong for president trump to increase tariffs a year before the election. that's a risk. >> there's something that's very unsexy but i wonder if it plays into the discussion which is the sh ririnking size of the market is there a really long term bull story here because the available assets just get -- they shrink >> we think on the margin that impact stock prices. what you saw 12 months ago is when sentiment turns negative even though there's a shrinking base, stocks will go down. you have positive sentiment.
we think this fomo is driving stocks higher these last four, five, six% usually some concerns pop up and the market can pull back having said all that, we think there's some great buying opportunities in the market. some very good businesses that have missed the rally entirely you can put money to work. >> i looked at your list i saw slb and i thought that's an oil and gas company there's no way that david is recommending buying oil and gas company but apparently you are >> if you look at that list, each of these companies are good long term businesses but have been miserable this year oil prices are at a reasonable 57, 58 level we have a new ceo and we think he's focused on earnings and cash flow.
we think the stock can be 20 to 40% higher cbs has been a dog this year if they were about 50% higher in next 12 months we wouldn't be shocked. that's a very low risk stock to buy here >> bob was mentioning something very interesting going on. that's s&p value and growth are hitting record highs what do you think is behind that barbell approach does that belie investors both fear of missing out but also caution because we don't know what will happen with the trade war. >> it's very positive signal it's not just a low interest
rates, we're heading into circumstance cyclical growth story. they can start to rally here the broader the market is performing the healthier signal that is in my view >> all right thank you. >> thanks a lot. topping your headlines today, president trump meeting with fed chair jay powell. the president describing the meeting as cordial i saw these headlines. i'm thinking cage match. things being thrown but it's all very gentle. >> we don't know that. we know one person threw some stuff but pretty sure the other did not. this is their second meeting this year. it comes amid criticism of powell by the president.
they had some things like is he a bigger enemy than the president of china empg was discussed including interest rates, negative interest, low inflation, easing, drar strength and effect on manufacturing. the fed will set monetary policy it said as required by law this is what the chairman told the president. they will make the decisions on objective and non-political analysis they argue u.s. economy is in much better shape. >> how unusual is this meeting >> it's the second time this
year there was a dinner before. i guess it's not that unusual. it's unusual in light of the president's unusual comments it speaks of jay powell after the president asked the question who is the worst enemy, powell or the president of china? powell sits with him any way >> is there a situation where jay powell could say no thank you. could powell say no thank you. >> my comment at the beginning, this is really one handed fight. the fed does not fight with any of the elected officials they said anything they wanted in the financial crisis the fed didn't fire back the fed said all of these things and powell asked everybody wants to start this cage match that
you seem to so desire. powell refuses to play >> it could be great ratings he's asked in the meetings, and ask yourself this question if you have one question at the press conference and you'll raise your hand and say mr. powell how do you respond to the president, you know the response is somebody always does. it's a waste of the question >> that's like the tenth question it's not one through number five >> it started off in top five. >> plenty more where that came from >> thank you let's go to the bond market. rick is at the market exchange
to how bonds are reacting. >> we'll leave it at that. look at the day of tens. what you want to noets notice i before the futures open, most of the move occurred before our time zone. we have seen a will the of that. the main sessions seem to be most lie sily sideways. look at a one week chart of boon bund it's given up ground if you look at that early november low, that was right around 97.23 we're about a half cent above it that's what traders are watching the heat index coupu next coupl. look at the correlation over the dollar and ten year note yields. it's gotten very tight again this is the world acknowledging
we're in pause i think this pause is the reason not only but the dollar has been acting a little bit heavy but also some of these flat ranges we're getting on long dated sovereigns around the globe. back to you. coming up, new numbers igniting an old debate did the president's corporate tax cut provide a boost to the committee. -- economy former macy's ceo joins us in the studio
welcome back we're 36 days away from christmas. what's going wrong for retailers? who will be the biggest winners for this holiday season? here is the former chairman and ceo of macy's. always it's great to have you here with us i usually don't ask this as the first question, but who do you d think the winners are?
who's getting it right in. >> when i turned over the krec e reins, i never bought a retail stock. i bought walmart, target and home depot >> what about macy's >> i think i'm still the largest share holder there i've got plenty at stake there those are the three retailers that i bought. i'm happy to say i think they are all doing extremely well not just on their stock price but i think they are performing well with the consumer >> what is it about what they are doing that's right in. >> starts are leadership i like doug mcmicmillan and bry are terrific leaders i sort of bet on people. i think those two had some good ideas. they are changing. they are investing in future they are trying things that may not work but you got to try them
and see -- don't decide yourself let the consumer decide if it works or not both of those cases the consumer responded positively >> what's happened with macy eermacy's >> everybody has been whacked. there's too much retail space in the united states. there's way too much retail space. this has been a problem for a long time but the bubble burst when the online business started aggressively drawing think about it this way, 20% of the apparel businesses sold online, well 20% of the stores haven't gone away. the total pie isn't growing. something's got to give. business is just being transferred in terms of
consumers from one pocket to another or one purchasing behavior to another. that's part of it. the office price business has been growing aggressively so consumers are saying a lot of these brands look familiar to me they look similar but it still says this brand and that brand the business has been cut up quite aggressively you put that consumer change with too much retail space and i think you have the formula for a need to change and a need to contract macy's did close 20% of their stores before i left and as a good start i think retail needs to make that adjustment as well. you're starting to see with sears. the barney situation i think you're starting to see that pull back >> how much more stores need to be closed before we're not stored anymore in. >> america can afford to have more stores but not five times more than europe
i think it's happening i think the mall developers are aggressively pursuing this too i think the good malls will continue to be good malls. they are changing what's in the shopping center. it's got athletic equipment now or got sports. it's got good, entertainment i think all those are good adjustments that people are making now to bring this business to where supply and demand need to be. >> does the whole experience need to change in fiveyears does going into macy's, will that mean something different than from what it means today? i don't go to macy's because it's pain many neck to navigate. >> it's too big. >> they're talk about one store. they are not all a million square feet. >> in general, department stores in general it takes longer to navigate to get what i want. >> i totally get this and understand
it's all available your shopping time can be much more condensed you've done your rezersearch you can go in mangz your purchase and go. >> we had a gust on liz dunn she made a comment it's not just the industry that for years you guys had bad relationships with your vendors listen to her and respond, if you don't mind >> they were adversarial to their vendor partner i think that's a big, big thing. they did not focus enough on product and they didn't focus enough on being supportive environment for their vendor partners to thrive when that relationship got strained, many of the vendors said i'll open up my own stores and once they lost the vendors the retailer became not a place that people go to discover fashion or products.
>> well, i cannot only say -- i want to make sure i don't come off defensive. i may but i'm going to give it a shot vendors didn't seem to have any problem when we were the top performing retailer in america in 2010, 11, '12, '13, '14 and '15. when business gets soft, they get soft because we're their largest partner. it does become strained. it's not just with macy's but every one. >> the market cap of macy's is about 5.5 billion.
say they wrong by a couple of billion. the real estate is still three times more than the operating company. how do you value the real estate >> there's lots of discussion about that that did lead the stock. i don't believe they left with the profit as we stood side by side and i learned a lot through that proce process. they taught me a lot we ended up selling one of our san francisco locations and son sol dating into the two for a couple hundred million tlars we turned that around for invetsing in the stores and giving it back to shareholders we learned a lot from that experience having said that they were definitely incorrect about their overall assumptions. what are you going to do if you sell a store in a mall what are you going to turn it into, an apartment building? there wasn't really a buyer on the other side for those transactions that's why that theory wasn't necessarily good one
>> all right great to speak with you. >> nice to see you both. >> come back any time. coming up, what elizabeth warren's tax plans for the wealthy could mean for you as an investor even if you're not a billionaire. each day our planet awakens with signs of opportunity. but with opportunity comes risk. and to manage this risk, the world turns to cme group. we help farmers lock in future prices, banks manage interest rate changes and airlines hedge fuel costs. all so they can manage their risks and move forward. it's simply a matter of following the signs. they all lead here. cme group - how the world advances.
if are looking to be a little more conservative, estee lauder looks good the stock has had nice run until early in fall this year. then it pulled back about 12%. the bounce seen more recently is taken above its trend line it's pumping up against its october highs. it's going to rally further. that will follow its nice break out of the trend line to a new high and that would be pullish on a longer term basis, this is a stock until this year has been getting clobbered. it was down well over 60%. the rally is only just broken above that multiyear trend line. if it can take it further and break above 1360, that will follow that upward break of the
trend line with a very nice high or high and will confirm the trend has broken to the up side. a little more risk but more reward when ever you buy any stock in the early change offense a change in trend it gives you more up side possibtential. >> coty up a percent and a half. pretty sizable outlay to suggest the market is right. would you agree with that. what are your general views? >> lyme looking through the stocks and looking at the idea of a transaction where coty made an acquisition into kylie jenner if you're an influencer enough on social media, the economic benefit that it could have toward you and here's a company that's willing to pay for the eyeballs and followers that kylie jenner has, this could be
new paradigm for the consumer staples which has been suffering because of weak mall traffic and the rise of e commerce because shell space has become infinite in ecommerce world it could be the new model for companies to acquire top line growth by partnering up. >> as they struggle to figure out how to tap into the taste of younger people it will be an ongoing issue. thanks for joining us. the new york times reporting fedex paid zero dollars in taxes. we'll talk to the author of that op-ed yet. stocks hitting another record high but one sector is stuck on the side lines we explore the fate of the
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the house is probing whether president trump lied in his written testimony submitted to then special counsel robert mueller as part of the russia investigation. a federal appeals court is hearing a case involving the house request of secret grand jury evidence gathered by mueller. the supreme court has put a hold on a subpoena for president
trump's records to be turned over the congress. the court has not set a schedule for when it will allow the documents to be released but it has asked the house to respond thursday to the president's request to block the issue people that. the house has posed any lengthy delays california is suing the biggest e cigarette maker alleging juul targeted teenagers with its marketing campaign. a 9-year deal will help provide accommodations for the world's biggest sporting event it runs from the tokyo games until 2028 that's your cnbc news update back to you. thank you very much. the oil market is now closing for the day. let's go to frank at the cnbc commodity desk >> concerns putting a lot of pressure on oil today. the international benchmark is down a percent and a half right now. wti, the u.s. benchmark down more than one and a quarter percent.
this is following kwhecomments a source opec expected to cut production when it meets in december. we're keeping our eye on natural gas prices nearly 5% in response to milder winter weather and elevated supply back over to you >> thank you fedex at the center of a controversial new york times report that claims zero dollar tax bit it's not made good on its promise to invest more fedex ceo was a big proponent and said america needed the cut. >> the country is not investing enough either business or government to produce the type of blue collar, middle class wages that people want to see. we're not even back at the pre-financial crisis levels and
federal investment and infrastructure is down to 1948 level. >> it's not just fedex that didn't deliver u.s. investments like buildings and equipment spending fell in the second quarter of this year. over high texax cuts, just whati the problem with trump's business agenda. why trump is bad for business and the magazine's editor at large joins us now >> great to be with you. >> should we use the tax cuts as an example of why trump is not good for business. the tax cut, companies use the savings as they saw fit. there was no obligation to spend more money on equipment or on buildings or anything like that. there's plenty of companies bought back shares or they raided the salaraid -- raised salaries of workers >> the tax cut was good for
business he did two things in his first year thing he is promised he would do and he delivered on the promise. he did both of them. lower taxes are good for business point of view personally, i think it's just fine there were no requirements that they spend the money on capital extend yours or wages or anything else in particular. having the government direct how companies invest their money would be overall a pretty bad idea >> why do can you say trump is bad for business then in. >> it's what he has done after his first year as i said, the first year really was a home run for business. you could see it in the stock market stocks net first year went up tremendously profits went up. it's what he has done in the two years since then that is now making him bad for business. he has essentially wiped out all the good stuff he did in his first year and it comes down to just three big things. one, his trade policy. what happened at the beginning of 2018 was he launched the trade war. two, the immigration policy.
like immigrants. they need immigrants they do not like his stance on immigration. overlaying all of it is this tremendous uncertainty about policy he's so often contradicted himself or changed his mind on big policy matters the export, import bank is useless. no, it's good. china is a currency manipulator. well no, it's not. business hates uncertainty when you put it all together the result is ceo confidence as measured by the conference board at the most recent reading was the lowest it's been since the financial crisis ten years ago. >> sure. despite all of this we have the longest economic expansion on history. we still have stocks at record highs and we have low unemployment
we're still hanging in there isn't it too early to say the president is bad for business. >> the stock market is the obvious retort the stock is at highs. how can that mean it's bad for business what you need to remember is these current record highs are only little bit higher than the highs that were reached in january of 2018, almost two years ago. if you look at the market indices from january 26th -- >> that just means we didn't reverse. >> we didn't reverse he put in two great things for business in the first year the tax cut and the regulatory roll back. it's amazing he's managed to erase everything he did since then the worry among ceos, the reason
they are pessimistic is they are afraid he's doing more harm than good >> if you had to balance out either of the two or three leading democratic candidates with the exception of buttigieg and i'm not speaking politically, you're still probably going to go with mr. trump most of the time >> yep, there's no doubt about that if this comes toout to be a contest between donald trump and elizabeth warren, there's no doubt objeabout how the vast majority of business people would vote i'm not sure that pete buttigieg would be that attractive to business people either when it comes time to vote, trump may be the best alternative. it's also true michael bloomberg could turn that around >> pleasure speaking with you.
>> one thing just quickly about the fedex story, they did a lot of good reporting. they didn't mention the amazon fight. how fedex has been fighting with amazon for two years and killed that business. they were in the middle of a massive business transition. mplgt e l elizabeth warren proposing several new taxes on the wealthy. they could force a major shift in how the wealthy invest. >> just the mere multi millionaires >> sounds pretty good. >> it could bring tax rates for many billionaires and multimillionaires. she's proposing two categories of tax you have the annual wealth texas on saassets and then you have incomes taxes. you combine them both, they could erase any gains for big investors. if a billionaire invests one
million, that's a gain of 50,000 bucks. we would wealth tax and income tax for combined of $89 on a 50,0$50,000 gain multimillionaires would lose some of their gain combine taxes of $49,000 on a $50,000 gain that pretty much wipes that out. big investors would have to see returns over 7 or 8% that would mean that would drive them into the riskiest forms of debt, stocks and hedge funds just to make enough to get over that tax hurdle >> those are crazy numbers >> it is crazy it's crazy especially when you compare it to the two cents that she's talking about. why don't the wealthy chip in two cents which sounds reasonable until you put all her
plans together and consider the two cents is only the wealth tax on the lowest part, the 50 million. when they get up to the billionaire it's 6%. >> whatever any candidate with their own business, i don't like to talks about politics but i'll say a few things number one is the federal government spends $11 billion a day. $11 billion or an hour whatever it is, the point is the numbers we add up will be a day or two of spending and that's fine the other at spect is there's a level of sort of are you going after certain groups we don't know if there is constitutional, do we >> correct. >> there's some that could make the argument that the fifth amendment does make this wealth tax illegal. >> right >> i don't know if it is or not. >> lots of people claim certain
forms of taxes are double taxization this truly is. you're taxing the asset and then you're taxing the return it's almost impossible to make any return when you're taxings both >> and we're not even talking about the death tax yet. coming up, the latest in fake food and the end of double foamt nk aduin about medicare and 65, ysupplemental insurance. medicare is great, but it doesn't cover everything - only about 80% of your part b medicare costs, which means you may have to pay for the rest. that's where medicare supplement insurance comes in: to help pay for some of what medicare doesn't. learn how an aarp medicare supplement insurance plan, insured by united healthcare insurance company might be the right choice for you.
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ten million people already subscribing to disney plus adding another recurring charge to all your monthly bills. here's the question, are we as americans over subscribed? we have a look at this growing trend which is, i would imagine, kate, just eating into our cash flow without us even realizing it >> it seems to be the case for a lot of people. what seems like a small monthly charge can really add up as people are now subscribing instead of owning their assets half of americans have one
subscription 46% have a streaming service like netflix and around 10% have a box subscription or ecommerce like stitch fix. most of us are way off when it comes to guessing our monthly bill 84% of americans under estimate their recurring monthly expenses the average consumer spends around $237 a month. the media options are growing with the streaming wars but it's also ecommerce that's growing by more than 100% every year. this is good for tech companies. it gives them revenue predictability but not always good for consumers a third of people's income is already going to paying down debt obligations this really comes down to behavior economics people aren't thinking of a $5 subscription as money that would otherwise go to retirement
guys >> it might. math >> completely. it's adding to debt and it's also making it so you're not thinking about savings i talked to one financial add vierz that said that's not a mo 401(k) you don't think of it, but it's sort of the death by a thousand cuts situation but tech companies don't seem to be turning around. it's really a predictable good revenue model for them so, it's just a matter of adding up your finances, which i did before on the back of an envelope and i was shocked >> and it lets them raise prices, because you don't know what you're paying you think you're paying less >> kate, thanks. >> kate rooney in san francisco. >> thanks, melissa >> every sector in the s&p 500 is up at least 10% so far this year that is except energy. in fact, energy is the only sector in correction, down 14% from its april high. what can get these stocks at nt.k? th'sex is nice. his haircut is "nice." this is the most-awarded minivan three years in a row. the van just talked. sales guy, give 'em the employee price, then gimme your foot.
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all right. welcome back to "power lunch." ho-hum another day, another record high for each of the three major averages but the rally has left one sector behind. way behind energy the only sector still in correction down more than 14% from its recent high. it's also the only sector to lose value in the past year and the worst-performing sector of
2019 in fact, most stocks are down over 40, 50, or even 60% in 12 months bottom line, haven't we seen the worst of this electric slide or the sector will continue to fizzle let's bring in my partner, mike, thanks for joining us. listen, i would imagine this is a fantastic time to be an energy equity analyst and please note my sarcasm on that because it's been impossible but by any -- if you get your mba, any major valuation metric, all the models, everyone teacess you, by every single rational and historical measure, nothing with the way that energy stocks are trading seems to make much sense. is that a fair statement >> i would say yes and no. yeah, thanks for those lovely stats that you rattled off there. it is a great time to be doing this and 'ti'll tell you what, brian. what investors are see and they're not wrong is a very messy 2020 we're set to grow production, non-opec, over 2 million barrels, year over year.
demand growth is going to grow maybe half of that so, it's an ugly, macro backdrop and investors want no part of that until we get more clarity how that shapes up and it's probably a 2021 event. >> and what i mean by that with this historical stuff, you've got of the these oil stocks that are trading below financial crisis lows, and in some cases, blow where they were when oil was at 10 or 15 a barrel one thing they didn't have back then, mike, was massive debt loads. is debt the real problem here? >> it's a killer that combination of high debt loads and the potential to have oil back with a four handle on it, maybe a three handle at some point next year, nobody wants any part of that and we have this, you know, this supply/demand mismatch that we've never really had to this extent in a long, long time. >> so unless we see oil turn around, is it safe to say, mike,
that 2020 or 2021 could be a very good year for bankruptcy attorneys and bottom feeders in the oil and gas industry is right now the goal of analysts and investors simply to pick the companies that are going to survive >> yeah. you know, that certainly is kind of our tune. we've said, there's a whole series of tier 2 names that just really don't need to be around and we've said, they should go the consolidation route. the merger of equals is the path for them there's a subset that tier 1 core names that will do just fine just have to get through this period of sloppiness or -- >> and who are they? >> so the three that we absolutely love, you know, the core are the core permian guys or bakken players are right up there. partially, energy is one that's just still trading very, very happy. four and a half times next
year's ebit to ebitda. and then another company -- >> is brigham. >> brigham minerals. >> the ticker there -- mike, unfortunately, we've got to leave it there we had some breaking news earlier in the show. parsley, wpx and brigham minerals we appreciate you coming on, seaport global, michael, see you soon > ec pas i ban >>chk,lee!s next h! giving one. the lexus december to rembember sales event lease the 2020 nx 300 for $329 a month for 27 months. experience amazing at your lexus dealer.
and that for me is what teamwork is all about. you can't do everything yourself. you need someone to guide you and help you make those tough decisions, that's morgan stanley. they're industry leaders, but the most important thing is they want to do it the right way. i'm really excited to be part of the morgan stanley team. i'm justin rose. we are morgan stanley.
okay, so chobani, the famous yogurt company want to create something called oat milk, which is apparently water and oats milked doesn't sound very milky, but apparently it's a thing. >> and they want to make yogurt out of that oat milk we do this, because oats don't at a time. thanks for watching "power lunch" >> "closing bell" starts right now. >> welcome to the "closing bell," everyone. i'm wilfred frost. here at the snap post, it's up 150% year-to-date. coming up, we've got exclusive comments from the ceo and founder, evan spiegel. the broader markets are higher, only slightly, 30 points or so on the dow, but anything positive is another record all-time closing high with 59 points left in the session >> and i'm morgan brennan in for sara eisen let's look at what's driving the action today the mood in beijing about a possible trade deal with the u.s. has turned pessimistic. a source tells cnbc that trade uncertainty weighing on oil prices and bond yields today and new data sho