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tv   Power Lunch  CNBC  February 21, 2017 1:00pm-3:01pm EST

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>> we said tesla was reporting this week as well. do you have a take on tesla quickly before we go? >> i think the shorts are running out of gas and these things are going higher. >> good stuff. we'll see you back here soon. by the way, pete najarian joining us from minneapolis, follow his twitter speed. "power" starts right now. >> welcome to a huge market on tuesday. stocks once again hitting new highs. is there a rather sneaky reason that stocks are soaring? you can find big opportunities, straight ahead. plus, the three things that you need to watch for politically this week, even as congress takes a few days off. and later, the great millionaire migration. where the world's richest are relocating. we're following the money trail. i'm brian sullivan. "power lunch" starts right now. welcome to "power lunch."
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i'm michelle caruso cabrera. the dow and nasdaq and s&p 500 hitting all-time highs. the dow in particular has been unstoppable, on the longest winning streak since july. up to the eighth straight trading session. commodities are always volatile. check out nat gas down 9%. it's been warm in the northeast. huge part of the nation has been warm. take a look at that. a decline of 29% for nat gas. don't see that very often, tyler. >> michelle, thank you very much. because you can never have too many lunches, welcome to "power lunch." i'm tyler mathisen. we begin with this rally in the stock market. for that, let's go to bob pisani. hi, bob. >> hello, tyler. happy tuesday, everybody. the important thing is this is a global rally. it's not just the s&p 500. not just new highs here.
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germany hit a 52-week high. brazil hit a new high. canada hit a new high. some of this is on the commodity rally but there's a global rally going on, two powerful forces moving the stock markets around the world. the first one is the trump rally. tax cuts, infrastructure spending and regulation reduction. but the other equally power is the reflation trade. higher rates and improvement in the global economies. put these together and you've got a market that is traditionally down in the united states in february. financials and technology leading the way. those are cyclical plays. but even consumer staples are up 4%. you get the idea? rising tide, lifting all boats. the only real aggregates, interest rate sensitive groups, like utilities. exxonmobil down 3%. the market doesn't believe
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there's going to be 60 to $70 oil this year and you saw what is going on with natural gas. that's hurting the market as well. so far, goldilocks for the stock market. >> bob, thank you very much. all right, america, if you needed any further proof the bulls are fully in charge, look at this video. utter chaos on the streets of queens, new york, after a bull escaped from a slaughter house. police were able to tranquilize the bull. this happened about an hour ago. we don't mean to milk the story but we have to ask, is this a sign that the so-called animal spirits are alive and well even beyond wall street, even in a magical place called queens? let's bring in jerry. do you have any beef with this rally? >> mark this moment. we'll never know how important it is that that bull got out of there. and i don't think it's random. the market that bull are seeing things that people don't see.
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and however the bull got out of there is the same way the market is getting out of word spin. >> we thought it was perfect video so we approached it a little tongue in beef cheek. i'm not done. showing that video again. >> can't get enough of it. >> we keep hearing this is a goldilocks. she was almost slaughtered. this bull will most likely be eaten as well. the market has been running. is it going to turn down for any reason and potentially meet the same fate as our brave bovine brother? >> that poor bull. >> markets always have downturns but the ones we worry about, the 10 to 30% ones is very unlikely. if we're talking about the bull getting stuck in somebody's side yard for a month or two and a pull back of 3 to 5%, most likely it's going to happen and could happen next week. but the general trend that's been caused by, as bob pisani
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reported out a second ago, this trade with inflationary sensitive, with the whole trump deregulation and tax reform and then finally the positioning that basically most investors haven't made towards equities is all in front of us. those things are yet to be fully discounted and we haven't really come to grips with how much stronger overall earnings are going to be in that late 2017, 2018. >> jerry, does that mean i can just buy anything or should i be picky? >> no. so two things i would focus on today, the interesting one, you mentioned energy earlier. it's being held by by the fact that it's been so warm here that no one's felt any confidence in generating energy. more importantly, the price of oil has to get significantly through this 54 mark which is a sign that traders would have a home now for all of the excess
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inventory that needs to be burned off. most investors are looking at that level and if you break through the 55, i'd say it's time to go back in full with the energy names. the other side is, the group that's broken out and has had no time to pull back is financials. and it's another area, it's correcting a ten-year underperformance phase. you won't have many opportunities to buy into those and if you do, they are very brief. both of those places right now, in my opinion, are going to be this further catalyst in the overall market. >> some of the things that -- a lot of things haven't been fully discounted due to the market. a lot of the hardest work for the trump administration and for congress lies right in front of it in terms of tax reform and in terms of repeal and replace of obamacare and in terms of getting a budget through and raising the debt ceiling and so forth. >> absolutely. but understand this, the overall
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market -- so repeal and replace is an example that will have some impact on health care stocks. the high margin companies that are dependent on a reduction incorporate tax rate will have an impact. but the overall impact of having a pro -- anti-regulation type of mentality and a lower tax type of mentality hasn't yet been actually discounted into the 2017-2018 earnings estimate for the s&p. and those push those numbers higher, in general. we don't have a market, we don't have a specific day where that has to happen. i don't think there's anything to shoot at there yet. >> jerry castellini with a very clear and well-taken perspective on this market. it's very clear to everybody, jerry, this is not your first rodeo. jerry castellini, thank you very much. i'm done. >> only an hour and 50 more minutes. >> no, i'm done. we have a news alert of the
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bond market right now. two-year notes are up for auction. the bond pits -- i think they actually used to have cattle where rick is standing right now at some point in time. >> i thought you were done. >> darn close. darn close. the cattle is over on the side that used to be bond futures but you're close there, brian. we swap it around down here. 26 billion two-year notes. the first of 88 billion in supply, auction 1.23 was the yield. i gave it an a-minus for demand at straight up 1:00 eastern. 1.23 was below, was below the -- priced nice and right on the money. 2.82 for august of '16. 20.1 on direct. best since august of '15. and to really sum it up, this auction was pretty aggressive
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considering two-year notes are so tethered to the fed. tomorrow, of course, we'll get 34 billion in five-year notes. brian, michelle, the gang, back to you. >> rick, thank you. a bunch of names entering the all-time high club in this record rally. dominic chu has the standouts. dom? >> there was a lot more green on the screen before. we've come off of the highs of the session. at one point today, there were 73 new 52-week highs. among those, 44 are close or thereabouts of the record territory that you were just speaking of. the green on the screen up half a percent is translating into fanatic elements. you heard bob pisani talking about the moves here. i'm going to pick out three of the four biggest sectors in the s&p 500 technology. apple, ebay, adobe, a sampling of the technology stocks that have made record highs at some point today. adobe we showed you the chart
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earlier moving towards their session lows right now. however, financials, goldman sachs, progressive insurance, capital one. and then amazon and hasbro and home depot has made up a huge part, the fourth biggest sector in the s&p. now, if there's cause for caution, tempering this side of the story with the anomaly. you mentioned where you used to see cows walking around the streets of new york city. it's rare to see a market this high above its average price over its longer term. the last time we saw any sustained move above the stock's 200-moving average was back in 2013. tyler, as we talk about the idea that statistical rarities don't happen like this very often, it's giving traders the trajectory that is currently is. >> dom, thanks very much.
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walmart earnings posting the best quarter in four years. the stock is surging, as you see on that graphic right there. we will go inside the numbers next and a whopper of a deal in the restaurant world. sending shares of popeye popping up nearly 20%. what it mean force investors and the rest of the restaurant sector, still ahead. >> announcer: you're watching "power lunch" with tyler mathisen, melissa lee and brian sullivan on cnbc, first in business worldwide. [vo] quickbookintroduces jeanette
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i'm ricardo, a sales and service consultant here at the xfinity store in bellevue, washington. here at the store, we offer internet, tv, phone, customer service, home security. every situation is a little different. it could be about billing, simple questions like changing the phone number. sometimes, they want to upgrade, downgrade, but at the end of the day, you want to take care of the customer. one of the great things about comcast, there's always room to move up.
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of course, it depends on you, how hard you work. ♪ welcome back to "power lunch." retail is a big winner right now with the xrt higher for the fourth day in five. walmart reported better than expected earnings. the stock having its best day since may. courtney reagan has more on walmart's big quarter. courtney? >> this was really our first chance to know despite what's felt like a very negative overhang on retail, the world's largest retailer had a strong holiday season. the comp sales were 1.8%. the best performance in 4 1/2 years on strong traffic and what walmart calls broad base categories. u.s. e-commerce contributed more
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than prior and that includes the marketplace up 36% over last year. the discounter's full year guidance did bracket estimates. i spoke to the cfo of walmart, brett biggs, who said that spending started out slower due to the late tax return checks. of course, doug mcmillan has been to the white house but was not part of the retail group that went to washington last week. >> we all wait to see whether or not it finally ends up in the bill and whether president trump likes that idea. >> we're starting to hear that the white house may not be so much in favor but they're not really ready to come out on one side or the other. they are dancing around the middle, it seems. >> stick around, if you wouldn't find, court, and let's bring in
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sharon on barclays. why don't we start with the border adjustable tax that is such a hot topic of conversation. how do you factor it in to your price target, your rating on walmart and your evaluation of its business? >> yeah, i mean, obviously this is the question of the day, the question of the month, the question of the year. and i guess what i would say is when you think of the retail landscape, there are many, many retailers that will feel the impact of this much more than walmart. so it's something everyone has to consider. but i think let's not, you know, get overly obsessed with it as it relates to whether or not walmart -- >> why is walmart relatively immune or maybe i'm overstating what you intended to say there. >> no, what i was saying was let's not lose sight of the fact that they did the best comp that they have done literally since the second quarter since 2012.
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so irrespective of what is happening on the border side of things, the momentum is there and the momentum is most likely there to stay. as far as them being immune, i'm definitely not saying they are immune but i would say if you think about their mix of sales, more than 50% of their sales are food and, you know, the import component is going to be 5% at most. you know, the rest of the store, there could be lots of things that they actually have -- they don't directly import themselves. so at the end of the day, a company like walmart that has the positive momentum and trajectory, they have bargaining power with their vendors. i think you should look at their suppliers that will have much more of a problem with this than walmart will and walmart will have an advantage compared to the smaller retailers in the u.s. >> what i'm hearing you say, the idea that it's the suppliers who would ultimately pay the tax and because walmart has such
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power -- bargaining power, that they will force those suppliers to eat it, right? >> yeah. i mean, that definitely is one of the things that has to be considered and if you pick which retailers in the u.s. have the bargaining power and the leverage with their suppliers, absolutely it's walmart. walmart's demographic skews on the lower end and they don't want to hurt the lower end customer and i don't think the new president wants to be perceived as hurting the lower income customer either. so somewhere in there the solution will be had eventually. no one knows what the components will be. at the end of the day, walmart's momentum is unbelievable and it doesn't appear to me that it will soften any time soon. you look at their comps compared to the rest of the retailers out there -- >> courtney, she's saying what oliver was last week, declines in earnings by 50%.
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>> right. >> there's a wide variable here. >> yes. it very much depends. i just spoke to home depot. they think they potentially have a 30% exposure. 30% of their goods would be subject to a border adjustment tax. that's much lower than a gap because gap is vertically integrated. they are getting all of those goods from overseas. >> isn't everybody right now just guessing kind of? >> well, we don't have any details. >> the information you have is -- karen, am i right? >> absolutely. >> the information is scarce and you're trying to patch together a story and an investment thesis without knowing how congress is going to fashion the bill if they fashion any bill at all. >> bingo. >> it's like putting a square peg in a round hole. nobody knows. there's 20 different scenarios that you can come up with. i'm not dismissive of it but you have to look at where the momentum is in retail and who has leverage. >> on that question of momentum
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which you hit and really believe in, how do they get their mojo back? >> well, reality is it starts with the employees. people don't realize how important happy employees are to the success of a retailer. and that was greg's first move, was to raise wages. happy employees make happy customers. but that was stage one or first phase of the turnaround and then it was executing the turnaround within the four walls. as a retailer, you have to visit stores. if you went into a walmart three years ago and compared it to today, it's a different experience. it's significantly improved. >> it's a record high market day. walmart aside, what would be your other favorite stock? you cover a wide variety of retailers? >> i'm not positive on the space at all, frankly, because i think a lot of these retailers that i cover are going to be negatively impacted by walmart and you can just do the math on the dollars coming out of the system and
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where they're coming from. walmart is my topic. i have another overweight on a company called sprout's. >> yep. >> it's a different dynamic going on and the reality is you're looking at conventional food retailers reporting negative comps and walmart is reporting, again, the best quarter u.s. comp in 18 quarters in positive food comps. >> great. thank you. >> thanks. all right. let's get some breaking news on wells fargo. dom chu has that. >> the board of directors of wells fargo has decided to terminate the employer of four regional heads or division heads within its community banking division. this is all tied to that scandal involving account openings that weren't authorized by some of their customers. the four people, it says, wells fargo will not receive any kind of compensation with regard to their termination. none of these executives will receive a bonus for 2016 and
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will forfeit all of tlaheir equy options. this is an investigation that is still ongoing. they expect the investigation to be completed by their april 2017 annual meeting. guys, back over to you. >> dominic chu, thank you very much. i'm sure we'll get more as the hours roll by. in the meantime, uber hiring former attorney general eric holder to investigate a sexism problem. we have the analysis straight ahead.
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welcome back. uber hiring a high-profile roster of people to investigate allegations of sexual harassment and gender bias that came after a very long blog post from a former female engineer at the company who said her boss came on to her via text. deidra is live in san francisco with the latest. deidra? >> reporter: michelle, that's right. here at uber headquarters, inside the ceo is holding an all-hands meeting to discuss those allegations, those serious and explosive allegations over the weekend coming from an ex-uber engineer, susan fowler. she details her experience at the company and a rampant culture of sexism that she says hr and executives at the company failed to act on. there's a high-profile roster of
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people tasked with an independent review that includes former u.s. attorney general eric holder. he's been tapped to lead it. he'll be joined by covington & burling partner and aerie arian huffington will also be involved in the review. uber's headquarters has been the site of controversy. but this issue is not unique to uber. you asked us before the break, does silicon valley have a gender and diversity and discrimination problem. many people would answer yes. for example, of all of uber's technology staff, just 15% are women. if you take a look at the numbers from twitter, facebook and google, the numbers aren't a whole lot better. what happens next? well, there is hope here in the tech community that these allegations will lead to a
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greater dialogue. back over to you guys. >> it would be interesting to know what percentage of the applicants are men versus women, deidra, to see. because those numbers tell us one thing and it looks bad but, at the same time, to what degree are women actually applying for those jobs is another question altogether. >> reporter: it's a good question. also what's important to note, it's such a fierce competition among tech companies to get good engineers in the first place, male or female. so you have seen some people come out and say, if you don't like working at uber, why not try twitter or facebook because they are so fiercely sought after. >> thank you, deidra. all right. sean spicer is set to hold a press briefing. will the economy be center stage or will this will another free for all for the media? we'll monitor it and bring you the details. don't go anywhere. "power lunch" is back in two
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here's your cnbc update for this hour. president trump is pledging his support for african-americans to help bridge a divided country. after the president toured the museum in washington, d.c. >> i pledge to do everything i can to promise freedom for african-americans and for every american. so important. nothing more important. malaysian officials have not yet determined the cause of death for kim jong-nam, the estranged half-brother of kim jong-un who died after apparently being poisoned in a kuala lumpur airport. fire crews rescued some two dozen homeless people from a flooded california golf course this morning. an aerial view showed them waist-deep in water wading to a raft to those stranded on dry areas of land. no one got hurt. that's the cnbc news update at
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this hour. >> back to you. >> thank you, contessa. the record rally continues. let's look at the dow heat map. there are 30 members of the dow and i guess 21 of them are in the green right now. and about nine of them aren't. the dow on pace now for an eighth straight day of gains which would mark the longest win streak since july. as we talked earlier in this hour, walmart, the big winner today, it is up better than 3% at 71.58. boeing continuing its run higher. and here's a live look at the white house press room where sean spicer will be providing a briefing. in the meantime, the economy front and center as president trump starts a new week. ceos calling on lawmakers to end what they are calling the made in america tax. that means they support the border adjustment tax. there's also talk that the trump
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administration wants to change the way we calculate trade deficits. the change would make them more course than they already are and stronger assumptions to growth when calculating the tax benefits. lots to talk about. joining me is larry kudlow, former labor secretary robert reich. let's talk about these assumptions. you have to make an assumption about the economy because that's going to lead to tax revenue and help you decide what your budget and deficits are going to be. the story people are reading today is that the trump white house is being very aggressive, telling everyone to assume 3.5% and they are being scoffed at, larry. what do you say about that? >> with reagan, we put up 4% growth rates coming out of a deep recession. so this is so much fun. the trump people who are cutting tax rates, particularly on businesses but every place else,
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rolling back regulations, rolling back obamacare which by itself is a huge tax increase and they are pencilling in a 3 to 3.5% growth of real gdp, you know, for the first budget that. would go out -- i haven't seen the numbers but presumably five, six, seven years. >> what did president obama -- >> the obama presidency which increased spending, taxes, increased regulations, so their first budget had 3% plus. the actual was 2. that was 2010. 2011, they moved it up to 4. the actual was 1.5. 2012, almost 5. it was 2. >> they assumed 5% growth in their expectations when doing the budget? >> actually, let's do this. they had 4 to 5% for the first three years. i'm sorry. yeah. the first year, 3%. then it runs up to 4 to 5% with essentially big government high
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tax anti-pro policy. >> so secretary reich -- >> so give trump a little commonsense credit. the guy is cutting taxes and regulations and so forth and he's just saying 3 to 3.5. i think he's being too conservative. >> secretary reich? >> well, i disagree with larry kudlow. first of all, in terms of growth, there's two sources of growth. one is population that is the workforce. are you growing the number of people in your workforce? the answer is no. a lot of people are retiring. the baby boomers, remember, larry, there are baby boomers born in owe 46, owe 47, '48. a lot of them have gone into retirement. the working population is not growing in the united states. the second thing is productivity. the productivity numbers are not great. they are not showing a boom in productivity. and so to be realistic, a 3.5 or 3.25 or 4% growth rate is not in the cards. >> why is that any different than obama? look, i'm going to disagree with
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you on this. but let me just ask you, obama faced the same lousy argument that you can't have productivity and the baby boomers aren't going to work anymore because they're retiring. i don't agree with that factually, by the way. he posted 5%. trump is going to have 3 to 3.5. i make him realism. realism. not the pie in the sky. >> two points. i'm going to go to defend the obama growth estimates. they were too large and proven to be too large. secondly, eight years ago or nine years ago, the baby boomers were not moving into retirement as quick as they are right now. you and i can debate the facts but we haven't seen a growth in the 3 to 4.5% rate for a very long time and i think that it's a rosy scenario. why not be cautious? because if your growth estimates are way out of line or if they
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are overly optimistic, your budget is going to be overly optimistic and you're not going to make an irresponsible budget. >> i would just say to my friend bob reich, productivity can move. if you incentivize the economy -- the backbone of the trump plan, something we haven't done in i don't know how many years, slash tax rates for large and small companies. this is hugely important. it's been the biggest obstacle to growth and productivity. i would say this. i understand this disagreement here but i would say, if you look at charts and tables -- by the way, john taylor from hoover institution did this. look it up. productivity shifts when policy shifts. we've had anti-growth policies for a number of years and i'm going to include some republicans in the 2000s as well as some democrats. you're getting pro-growth
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incentives and those pro-growth incentives are going to keep the backbone of the labor force, which is more or less the 25 to 54-year-olds, they are going to come back and work. their anticipation is slumped, incentives, lower tax rates that pays more to work. they are going to come back. >> larry, let me tell you -- excuse me, let me tell you why i disagree with larry. it's not as if particularly large corporations are without cash or facing a shortage of profits. prof profitability has never been so high. they are already swimming in cash. and they are not investing more in productivity. >> small business. >> bob, let's move on and talk trade and other stuff. for the better part of eight years after the financial crisis, it was, we need policies to help us grow.
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it looks like everything is kind of humming pretty well. have we flipped it, bob, to where we are in a situation where it's, don't spruce stuff up and when we hear stuff about trade, taxes and border adjustments, aren't we in a situation where maybe we should just let the economy continue to roll on and that congress or the president or whoever did more harm than good? >> i think this border adjustment tax business makes absolutely no sense. logically or economically. >> it's probably -- >> larry, why increase effective costs of imports for consumers and give companies a big benefit with regard to exports when in fact what that really means is consumers pay more and companies aren't even more profitable. >> this is cable and you two are going to agree and we don't allow agreement. okay? >> i want to say my friend of over 30 years that robert reich is completely correct. >> write this down. >> completely correct. >> i'm going to have to
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rethink -- wait a minute, i'm going to have to rethink my position. >> i also want to say that through the years, robert reich has been a pretty good free trader. >> tell us what you think, larry, about how they want to change the way that the trade deficit is measured. >> this is not good. this is not good. why mess around with that stuff? it's not going to get through anyway. >> it's more authentic as to what is being manufactured in the united states. >> it makes them look like they are cooking the books. >> of course they are fixing the numbers. >> you're probably right. i don't like that. but here's my bigger problem with this. president trump and some of his top guys do not understand why trade deficits are not a measure of the economy. if you're going to go after trade deficits, which is what they want, they want lower deficit, then you're going after capital investment inflows. if people are pouring capital
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into the united states because our -- >> foreign companies. >> foreign investors. >> the whole nine yards. they are also creating factories, they are also creating construction, increasing our income, creating jobs. in other words, if you want to crush trade's deficits, you're saying i'm against investment capital inflows and that's wrong because why is it that the president doesn't get that? somebody's go the to sit with him and walk him through this. >> why are you doing that, larry? why aren't you sitting down and walking him through this? who's he listening to if he's not listening to you? this is crazy stuff that is coming out of the white house. >> >> well, we talked about it during the campaign. we had our agreements and disagreements on this. right now i am concerned that among his top senior staff there's nobody in there that either, a, wants to disagree
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with the president or, b, wants to walk through a correct analysis. >> that's dangerous. >> he's got it right on tax cuts. he's got it right on deregulation. he's got it right on obamacare. >> well, i disagree with you on that. >> i know you do. >> let's talk about trade. >> the person who seems to have his ear on trade is peter navarro. >> well, good lord. >> peter is an old friend of mine but we're in for a very, very long time. >> can i just say one other aspect? >>. >> one other -- somebody's got to walk him through this and make him understand. he's a smart guy but he's got to hear this. >> larry, this is part of a much larger problem that i am, frankly, concerned about. if he's not getting good economic advice, if no one is walking him through any of this, also, on foreign policy he doesn't seem to have anybody walking him through any of this,
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he is even changing data. i mean, economic data we just talked about how they want to change the trade data and no one is telling him the truth. >> we have to pay the bills. >> he's got a terrific foreign policy. i will add to this, i think gary cohen is going to prove to be much more of a free trader with steve mnuchin who understands capital inflows. that's my hope. >> glad to have you here. >> my phone is always available for calls. >> mine is, too. mine is, too. >> coming up -- >> i would be happy to answer their questions. >> fantastic. "street talk" is next.
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we have not forgotten about you, loyal viewer. time for the analysts' recommendations on what you need to know about. michelle, you first. >> dick's sporting goods. large number of sporting goods manufacturers and retailers well shy of expectations. they are also concerned about revenue issues for the entire sector so they don't think it's possible that sporting goods will be able to escape that. >> keeping a lot of money in the stock and they are saying that the run looks to be over. second stock, colgate-palmolive. raising the price target on the chance that unilever will be bought by kraft. the analyst is based in london and says he believes there's a greatly increased possibility that unilever will seek to buy
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colgate. that gets him the $90 on a tries target. i guess be careful here, michelle, because if unilever decides not to go after colgate or anybody else -- >> yep. >> that's a technical term. jpmorgan has downgraded bloomin brands. they recently announced it was closing 43 of it is restaurants. >> the fourth stock, laredo petroleum. it's a petroleum company. simmons investment research upgrades it to overweight. there were balance sheets concerns in november but now they say the concerns are less
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so. they've turned around and they are more comfortable with the debt ratio that the company has there are multiple catalyst capable of moving the stock higher with a potential of 35% upside and lpi versus 20%. >> i bet it's in laredo or is that too obvious? >> it's not in laredo but it may have been. >> nothing wrong with laredo. tyler? >> thank you very much, guys. on the menu now. the restaurant deal sending popeye shares soaring. the latest on that good food of a deal coming up. ♪
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popeyes louisiana is scoring after acquiring burger king restaura restaurant brands. >> it's a 1.6 proposition and
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it's a very pricey deal valued at 18 times earnings whereas the average for the franchise peers is a little more than 14 times and the growth potential is being priced in by restaurant brands. this deal is expected to close in april and you're probably asking why did restaurant brands even buy popeyes. analysts think it's because they needed the chicken. that's right. they have burgers and with this deal they get a familiar chicken franchise that has a lot of overseas potential, they say, none in china. it should be noted that it's 3g capital, which owns a stake in heinz. and almost 99% franchised like
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burger king is and there's a potential to take it across borders after 3g capital is a familiar name to our viewers which owns 18% or so. it really does fit the 3g model. >> i'm going to ask you each a personal question. have you been to a popeyes? >> i have. many times. >> you're a virginia guy. you must have. >> you know, i have never been to popeyes but a friend used to bring popeyes fried turkey to our thanksgiving table. >> i bet it was good. >> oh, yeah, in plantation, florida, many times. >> the reason i ask that, not just to dig into your personal lives but when you look at the national brand, do we think of popeye as a national brand? >> i think of it as regional. >> exactly. i wonder if it fits the national strategy. >> i see it internationally because there's a popeyes at hong kong international airport. >> really? >> yes. so i get a full disclosure since
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it's so personal, i would stop by and grab a drumstick beforehand. >> and the biscuits are good, too. >> yeah. >> you're just comparing popeyes to airplane food. it's good, though. and i need to meet your friend. >> all right. thank you very much. what does this deal mean for restaurant brands and the restaurant sector? joining us is r.j. with morningstar. r.j., thanks very much for being with us. let me pick up on susan's point. did they overpay? >> yeah, they might have. we have it 32 times well above the group average around 24. if it's something that they can accelerate, an opportunity in asia to really make this brand work, then maybe it works more
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reasonable bl reasonably. >> so what do you think? >> i think there are two stories here. i think the first one is there is an opportunity. 3g is very smart when it comes to expanding internationally and what's interesting is you can compare it to the deal where they took their time and cleaned up the balance sheet, the cost structure and now positioning it for an international brand and it looks like they will do the same thing. they will take their time and make sure that popeyes financials look good. >> we discussed last woke, there was talk of this unilever deal and one thing that they would do if they had achieved that was dramatic cost cutting. is there room to do that at popeyes besides international expansion? >> that's the second part of this story. there's a meaningful cost-cutting opportunity here. they reduced the sg & a from 176 million to 76 million this past
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year. if you look at popeyes income statement, they have 92 million. they will slash those costs and make it a much leaner business and that will be very and track tif to t attractive. it's an expansion story. i could see this being a 37,000 chain and if you look at the cost-cutting side and margins of burger king, 71% ebitda, absolutely great cost-cutting opportunity here. >> what would it take number-wise to make you change your rating on restaurant brands on a hold and levering it up a notch or two? >> we are still doing the math. you have a well-entrenched competitor in the china region. that's the key to this deal, figuring out what the real opportunity is.
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if you're you can taitalking ab day, that's probably worth looking at and something we take up our numbers on, too. we're looking at that and there's going to be more costs involved. that's the other thing we have to factor in here. >> r.j., great to see you, as always. thanks for coming on. >> thanks, tyler. in the meantime, snapchat executives are in new york city and selling investors on their upcoming ipo. everybody knows snapchat is the social media preference for teens. but how does snapchat make mo y money? we'll find out, coming up. ok, t' hisgent. m mingverighw. thney vanc g c see in your ind onmeras d radar dete allunyou. drer assist systempu you intyoat
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welcome to the second hour of "power lunch," i'm michelle caruso-cabrera. markets once again hitting all-time highs. remember dow 20,000? we're now only a few hundred points from dow 21,000. snap pictures to investors. and railroad stocks chucking along. we have a warning before you pop
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on board. welcome, everybody. i'm tyler mathisen. walmart, the biggest among them, earnings beat estimates even though sales were a little bit disappointing. look at the move there. post a big jump in online revenue and that has been key. unilever pulls its $143 billion offer. i think we got that in reverse. wasn't kraft the buyer? it was heinz buying unilever. now let's move on to momenta pharmaceutical. they got a warning letter from the fda which could delay approval for the drug which is down 17%. and as we noted, the market rallying to all-time highs. the rally had been driven in large part by earnings. they have been pretty good. that leads some to suggest that the good earnings are themselves being driven by a wee bit of
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financial engineering, shall we say? bob pisani has more on why buybacks are under scrutiny. bob? >> i think it's financial engineering, brian. home depot had great earnings. what's really moving the stock is an announcement they are hiking the dividend and buying back $15 billion in stock. that's nearly 9% of the shares outstanding. wow. home depot was already a buyback monster. they've cut their shares in half from 2.3 to 1.6. a lot of companies have drastically cut shares and they cut their shares by 30% since 2001. buybacks are no panacea for stock growth.
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ipos woefully underperformed. the revenues were shrinking and there wasn't revenue from businesses like watson and artificial intelligence to really replace it. so here's the lesson of all of this. no amount of financial engineering, like buying back shares, can replace management's inability to grow the business. home depot grows the business. stocks go up. it's a pretty simple situation. >> thanks, bob. quincy crosby is a market strategist and lea dalton. do you care that there are so many buybacks? >> no. home depot had it all, top-line revenue growth and it was optimistic in terms of the
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guidance. that's as good as you can get. it was a monster report. >> but buybacks alone, if they are used to try to raise earnings because you can't do it any other way, that's problematic, isn't it, or no? >> no. the tape is the tape. granted if you look at it from an academic standpoint, you want companies to do more research and development and more spending and hiring. that's probably a more constructive way to use their capital. but in terms of the market, in terms of my returns, share buybacks have been very helpful. it's not illegal. >> liam dalton, we flip it. maybe there was too much stock out there a decade ago. the market was flooded and there weren't enough buyers. buyers and sellers coming back into balance. >> if you look at the history behind the buybacks, they tend to buy shares of their own company as the stock is towards the higher end of its range rather than the lower end.
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so you get this inverse -- what we're going to find out about corporate buybacks, which were festered by incredibly low interest rates and very active activity is that they were using this excess cash to buy back stock perspectively after we grow the businesses. that would be the negative argument. over time what ends up happening is if companies are smart about it, they buy their shares on the way down. they are accelerating the buy backs now. >> so what happens? some of these companies use their own cash to buy it. they are not borrowing it. others borrow. what happens if there's a change, number one, in interest rates, and what happens if there's tax changes that do not subsidize that borrowing. >> that ends up being a drag on the activity level that they would be creating with it. but on the other hand, we've seen historically, too, that higher rates become a drag on the stock market eventually. so if stocks are in a downphase.
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>> you said it's not illegal. that seems like faint praise. >> well, because if you listen to the critics, they make it seem like they are doing something untoward. but the fact remains -- >> you don't see it that way? >> no, i don't. if top line revenue growth is not going to grow the way that you want, companies have to do something for shareholders as long as they are public companies. just based on an announcement, the share price moves higher. many times they don't fulfill it. they hold off. it's a catalyst. >> the original idea for the discussion is does the level of buybacks worry you about the level of the stock market at the moment? >> no. do you have any fears about the current stock market? you're bullish? >> i think there will be
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pullbacks. the interesting thing will be if the president comes through with the repatriation, $3 trillion, $2 trillion, does he say it can't be used for share buy backs, it can't be used for anything other than investing in the dynamic. >> i tell you what is different. having been around the market for 35 years and talking with guys who have done this for so long, there's a difference in the price movement itself. when it comes to quantitative programs, it acts as a very similar -- it's a blunt-force instrument and you see these marches in stocks and it's much more created by the computer-driven programs on the
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market. >> so you're worried about the market? >> i'm a little worried. if you have a football stadium of super computers and they are all driven by programs written by guys that went to the same schools, these programs are very similar and then if they roll over, what ends up happening is they all go to sell. and we have the platform of the president, low rates. if any of those variable changes, you've got a problem. >> all right. thank you, lady and gentlemen. good to have you on the show with us. >> thank you. coming up, our next guest compares the structure of snapchat compared to a dictatorship. if you want less of something, tax it more. bill gates says there should be a tax on automation, on robots. all of that and much more coming up. >> announcer: you're watching "power lunch" with brian sullivan, tyler mathisen,
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melissa lee and michelle caruso-cabrera. cnbc, first in business worldwide. your path to retirement may not always be clear. we can help guide your retirement savings. so wherever your retirement journey takes yo we can help you reach your goals. call us or your advisor t. rowe price. investstith confidence. ♪
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snap posting a big lunch today for its investors in the ipo. leslie picker is there. leslie? >> reporter: thanks, tyler. here about 45 minutes ago we saw investors trickling out after an hour-long lunch with snap executives where they were here to pitch their $3 billion ipo.
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the media, of course, is not allowed into these road show meetings but we spoke with investors on the way out and they told us that evan spiegel presented and the questions centered around two different buckets. the first were sweeping. looking at things like innovation and total addressable market size. other questions were a bit more specific from investors looking at how exactly to model this thing and decide what price they're willing to pay for snapchat shares and cost structure over the next three years. interestingly, the questions did not focus as much on competition from facebook despite the news that what's app is presenting something similar to snap's own products. that was much of an investor concern or at least one that they were willing to ask questions about today. we were told that there were about 200 people in the room
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which overlooked central park. after today's meeting, they will stay in new york and then head to boston on thursday before continuing their cross-country the rest of the week. brian? >> leslie picker, thank you very much. folks, you might recall last week we asked sill licon invest giant about the snap ipo. here's what he told us. >> i think it's tracking to look more like twitter than facebook simply from the perspective of the top-line growth doesn't support a long-term oriented growth model. >> all right. joining us now, silicon valley insider and distinguished fellow at carnegie melon. i have a poll going. would you love it or do you not care? the number one response right now is it's the next twitter. which is not praise. would you agree with that? >> i agree with that.
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i'm worried about it being the next groupon, frankly. it's overhyped. it will do well initially but what happens long term, especially with the voting rights and all of the issues around the company. >> what is your biggest concern? is it the corporate governance that you just alluded to? the fact that 85% of the revenue comes from advertising and most of that is from the top big ten advertising industries. is that a risk as advertisers have realized social media maybe isn't all that. >> to start with, look at the voting rights, the fact that the ceo observed everything for themselves so they want $3 billion from the public but the scale is required very different than writing a cool app. we have a bunch of kids really who were accused of misogyny, sexism, we were disgusted with
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the company. these people want to take billions of dollars on the public market and say leave us alone, we want ownership for life. they have control of the company as long as they live and then nine months afterwards they don't control the company. this is wrong. >> sounds like you wouldn't buy it, vivek. >> if i had insider stock, i would buy it to flip it. you're going to make a lot of money but long-term, the big -- >> i want to get kurt in here. do you have anything to say about this positive at all? >> i guess if you look at what they did between last 2015 and 2016 they grew revenues up to 400 million. >> so that's pretty fast. >> that's pretty good. >> they lost over 500 million. they are protected to be over
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over $2 billion in 2018. i think there's real positive signs on the revenue growth but i think the user growth stuff is a earn can. the fact that it's slowing down in terms of what facebook and instagram is doing, that's not a good sign. >> what makes them turn the corner, kurt, and make money? >> they are making money but i think the big thing is the way it's been described to me, they are big here in the united states and in europe. and thos are markets where there's a lot of money per user. facebook has been able to grow it really big. they believe that, hey, we have a good user base here in the u.s., let's go ahead and try and grow that number from $2 a user up until $18 a user. they don't think they need to grow internationally as much as simply continued to milk the current users that they already have. >> vivek, you brought up sexism. what do you think of uber? >> outrageous.
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not acceptable. >> is it common out there? >> i wish i had good things to say. >> kurt, is it common out there? it feels like it's the wild west in a number of different measures for silicon valley. >> let's go back to the birthing of some of these companies, like snapchat. >> yeah. it was on the down-low stuff. >> kurt? >> i think the fact that this happened with uber is a sign that if it's happening at a company that size, it goes to show you as the companies are ramping up, focusing on growth, a lot of things that companies focus on -- >> what is it? >> it's bigger than that. the only reason kurt and vivek are passionate on it, they have been working on the fringes of a documentary on just this topic. if you look at uber, these are
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allegations. theranos, does the product work? is it real? it seems like the trust in silicon valley is being chipped away which will hurt the valuations of some of these companies because we've had some very well-known high-profile companies that have major, major fundamental problems, have we not? >> this is what happens when there's a lot of money involved. we've seen this in other industries over the last couple of years we've seen the valuations that don't have to disclose anything, right? they don't feel the need to disclose revenues or profits or spending and they are getting these multibillion dollar valuations so there's a lot of money switching hands and, as a result, traditional stuff that comes with growing a company, like good hr, is getting ignored. so i think that as we see more of these come up, it's going to happen more and more often. >> vivek, is a town full of con
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man? >> there are some con men but some great people, too. kids get rich too fast, they believe they are god and above it all and can get away with all of this. they can't. they'll be held accountable, especially by the public markets and that's why the voting rights issue is more important than it might be because they will trip up. we want to hold them accountable yet they are hijacking the stock right from day one. >> yep. >> and i love kurt's point. you talk about hr. zenefits had massive hr problems of its own. it didn't even do to itself what it was selling itself to do for others. >> thank you, guys. vivek and kurt, great to have you. >> we need "power lunch" in san francisco, don't you think? >> sure. >> tomorrow. not. copper and diamonds. coming up. the good, the bad and the ugly.
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first, where do millionaires want to live? which nations they are heading to and which ones they are fleeing. we are following the money next on "power lunch." with the help of the lowest taxes in decades, a talented workforce, with the help of the lowest and world-class innovations. like in pltsburgh, ere the most advanced transportation is already en route. and in corning, ere the future is materializing. let us help grow your company's tomorrow - today at esd.ny.gov
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welcome back.
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time now for the good, the bad and the ugly. first to the good. tiffany's stock is up after reaching an agreement with a partner to appoint three new directors to the company's board. higher by 2.5%. on to the bad, freeport macmoran had a government dispute with the government of indonesia. that's lower by nearly 6%. hsbc posted a drop in earnings, down 5.5%, tyler. >> michelle, millionaires are moving. it's one of the reasons i'm staying put. i'm not a millionaire. where they are going might surprise you. where they are leaving might not. robert frank has the answer. surprising. >> well, you could call them the migratory millionaires. last year, 82,000 millionaires
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moved to different countries. their numbers are up 60% just in the last four years. so huge growth there. now, where are they moving to? well, australia tops the list with 11,000 millionaires moving down to australia. for the first time, it beat the u.s. which had been first and had 10,000 millionaires moving last year. canada ranked third with 8,000 followed by the uae and new england. they a they are looking for good schools for their kids and lifestyle and clean air is important. taxes traditional drives tax immigration is no longer quite as important but taxes can drive millionaires out. the top country for millionaire flight was france. millionaires citing taxes and religious tensions there as the main reason for leaving. china is also a big loser. they lost 9,000. most of them citing education
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and the environment as reasons for leaving followed by brazil, india and turkey. now, the migrant millionaires represent less than 1% of the world millionaire total so it's still a small amount. china is creating more millionaires than it's losing but at a time around fierce debate around immigration, this is a group that all of these countries are trying to divide policies to get more of. investor visas, you know, permanent residency -- >> does australia do that? a lot of countries do -- >> they do. >> you write a big enough check, you're on the path to citizenship. >> australia is one of the most expensive. at last it was almost $1 million but quite easy to get. and so for the chinese especially, like our eb5 program -- >> it matched up precisely between the millionaires leaving china and going into australia. >> exactly. >> i don't think that's an accident. >> and canada is -- technically vancouver, has been a big inflow
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of chinese millionaires. again, if you're france, you're worried because you're not creating many new millionaires. >> i didn't know france had that many. >> where do most of the millionaires moving into the united states come from? >> china and then secondarily to that it's venezuela, brazil, argentina. those are the big -- >> venezuela, of course. >> those are the big into the u.s. >> there's millionaires who are working and have a lot of income and don't want to be taxed on that and then millionaires who have so many millions that they don't really work and probably don't care about tax regimes because their money is not being taxed because it's not income. >> and technology is allowing them to be more mobile than ever before. >> lucky for us, that's why he's staying. >> robert, thanks. the dow rallying to record highs on a strong economy on hopes for corporate tax cuts.
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will this ideal situation for stocks stay in place or will politics ruin it? and a gain for oil today as opec says production cuts are working. we'll have the oil close in three minutes on "power lunch." ♪ ♪ whr you're after supre perfornce... ...advanced intelligence.. ...or brthtaking style... ...there c-c just r you. decisions, decisions, decisions. lease the c300 san for $389 a nth at yr local rcedes-benz deal mercedes-benz. the best or nothin when you hav$7.955 ne u.s. equityrades, you realize the smtest investing idea isn't just what you vest in, but who you inve with. ♪ isn't just what you vest in, but who you inve with. if only the gns were asbvious when you tre.
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i'm contessa brewer, here's your cnbc news at this hour. hundreds of migrant bodies have washed ashore. the circumstances are not clear. migrant deaths have risen to record levels along the bolivia smuggling route. and there were protests in rome about cracking down on uber and limousine drivers. three national monuments were defaced over presidents' day weekend, the third major vandalism of memorials in the capital since 2013. the lincoln memorial was hit, world war ii memorial and washington memorial. men and women have different motivations for exercising. they found women exercise to
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lose weight and men exercise as a form of recreation but fewer than half know what their target heart rate should be. by the way, it depends on your age. that's the cnbc update at this hour. >> thanks very much, contessa. all right. minutes from the "closing bell," once again, a record day on wall street, the markets are higher across the board. all three indexes hitting new highs. oil market is closing for the day. let's get to jackie deangelis. >> good afternoon to you. take a look at the april contract. it was at one point close to $55 a barrel. major support for crude oil. a lot of it has to do with our friends overseas. opec will continue to extend its cuts and keep the prices supported.
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also, with all of the talk around the iran ipo potentially here in new york, people are reminded that saudis have a vested interest in keeping crude prices over 50. meantime, you have the russians pumping and the u.s. producers pumping as well. at the same time, february tends to be the season when crude oil traders see the switchover in terms of demand. they start to think about summer driving season. that's bullish for crude prices, too. more bullish than bearish at this point. back to you. >> thank you, jackie. the economy is once again front and center at the white house asking congress to kill or revise the corporate tax code. we're witnessing a pivotal chapter in economic history right now. cnbc contributors are joining us
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right now. jimmy, let me start with you. the last hour we talked a little bit about the administration's use of forecasts that are rosier than those put out by nonpartisan organizations in washington. larry kudlow did interesting reporting and showed that mr. trump may be a little rosier than some of the other forecasters. mr. obama was even rosier than that, predicting 4 or 5% growth in his first budget proposal. isn't this sort of endemic to washington, that you overstate what the economic forecasts are going to be? >> listen, administration forecasts tend to be -- let's say aspirational. they think all of their policies are going to get passed and boost growth and economy is going to improve. and i think that's okay if you can imagine those policies if
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they are all passed actually producing that growth. i don't think there's anything wrong with setting a target that the u.s. should grow at 3 or even 3.5% if you have the policies to do it. i don't think we're going to have that going forward if it's because of a super giant tax cut and repealing obamacare. that's not going to get us there. it's going to take a lot of different policies from education and even things like housing to get there. it's not going to be one magic policy. >> we have breaking news? >> a market flash here with dominic chu. >> we want to point out what is going on with shares of fannie mae and freddie mac. shares are getting slammed, both losing a third of its value on the heels of a ruling that hedge funds cannot sue the government for seizing the profits of the companies after they got bailed out by taxpayers during the financial crisis. one of the reasons people bought the stocks on the heels of the election was under the hope that
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investors would be able to participate in company profits and have recourse to some of those previously seized profits. today's ruling makes that more difficult. however, both companies have repaid around $68 billion to the government more than what they took out in bailout funds. those shares, guys, both down by 34 to 37%. back over to you. >> dom, thank you very much. jimmy, let me get your reaction to this. it's obviously kneecapping fannie and freddie. >> there was a lot of optimism on policy fronts by investors. this is one of them. i think this is a good reminder that things may not work out exactly as they anticipate and it's housing here that may be tax policy later. things are not going to quite turn out the way we had hoped. >> remember when fannie and freddie were going to go away? >> yes. send it back to the private market. >> i'm still waiting.
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>> not happening? >> no. >> when are we going to get real movement? honestly, and i can't speak for my esteemed and well-loved colleagues here, but if we have to talk about what happened every day for the last six months, i might not make it because nothing yet has happened. executive orders have not been tr translated into laws. sources i've talked to recently, michelle, i know you've talked to people, too, they are worried any infrastructure bill at all may get done and there may be no infrastructure provision in the tax code if we get that done. list. >> listen, if you were to tell me we'd be sitting here saying what's going on with the trump plan, repatriation infrastructure, that would not shock me. >> sebastian, let's bring you in. let me get your reactions overall to the conversation
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we've been having the if the on the one hand said i inherited a mess but he thinks he can make the economy grow 50% faster than it is now. at least 50% faster. >> i'm extremely worried by that kind of talk. i mean, the fact is that the economy is relative to europe. relative to other countries that went into a shock like japan. they have to pay down a lot of debt so when you take that into account and take the slow demographic trends into account, the u.s. economy is not that bad, right, and the idea that you can boost it into 3 or 3.5% on a sustainable basis, that's just not going to happen. if we think it's going to happen, we're going to make all kinds of policy errors. >> why can't growth be faster than it is today and i assume
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the predictions that the administration is using reside on the idea that tax rates are going to go lower, regulatory burdens are going to melt away and infrastructure is going to get invested in and that all of this will have a real tonic stimulative effect. do you disagree with that or with the idea that it can be -- that it can be the -- a tonic of that magnitude, in other words? >> yeah. it's a magnitude question. i mean, anyone who believes in economics wants to expand the supply side. you can do that a bit by stuff like deregulation or you could do it by allowing more workers into the economy so you can produce more stuff but trump wants to do the opposite. he wants to restrict migration. is you could expand it by allowing more efficiencies. but it will restrict the supply side. if we have a good supply side
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agenda, i'd be willing to say you can push the sustainable rate up, you know, maybe towards 2.75 -- >> sebastian? >> yes. >> i'm sorry. i thought you finished your point. when president trump said the economy was a mess, you wrote a counter to that for "the washington post." it was very long with a lot of detailed data. but the first few sentences you wrote, president trump asserts the u.s. economy is a disaster and he alone can fix it. the truth is that the u.s. economy is doing better than most americans realize. i thought there was a little bit of truth that -- i'm not sure you addressed it. which is that there's a lot of people who feel like their economy and their personal lives isn't very good. i think that's what he's referring to or at least his voters, that's what they hear. >> yeah. you're certainly right about that. i got a ton of e-mail and so forth after that saying we understand our lived experience. i think i chose a bad phrase there. most americans realize. people do realize their own
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circumstances. but that's their own circumstances. if you look across the country, there are lots of states that are doing pretty well. if you look in fact at the data on median wages, you know, for those in employment, they are now higher than they have ever been and i believe actually that's even an underaccounting because technology is producing welfare affects that we don't measure very well. so i accept the point that many people having a tough time but the majority of people are actually doing better than they were. >> all right. go ahead. >> i spent a lot of time thinking about economic growth and productivity and innovation. i feel reasonably confident that we can have the next ten years, 20 years of very fast growth. i think certainly we can grow as fast in the future as we have in the post war era. i think we can grow 3 to 3.5% and i think it can be inclusive growth if we have the right policy. sebastian said, look, limiting
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immigration, trading less, that's not going to get us there. there's no talk on the campaign, really, about education reform, higher education. those are the kind of things that are going to get us there and get sustainable growth over the long term. tax reform is part of that and we talked a lot about it but i'm not sure that is even the most important thing. in fact, i don't think it is. >> gentlemen, we'll leave it there. thank you. >> thank you. if you have not erd had, there are record highs for stocks here in america. america is, of course a. great land. did you know that other stock markets are doing better than ours? some, much better. those numbers are next. and one analyst says this stock is going down and you've got to sell it. what stock is he talking about? trading nation coming up. >> announcer: the live data board is brought to you by the cme group.
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stocks are higher across the board, likely to set new record highs at the close. markets around the world have been rallying as well. seema mody is tracking that for us. seema? >> there is a possibility of another brexit-like event in 2017 for now and focused more on the improving economic data in europe. in fact, today, eurozone surging to the highest level in six years. earnings continuing to improve as well. check out the miners which were on fire. is similar story of the share price that has tripled in the past 12 months with copper prices at nearly $6,000 a ton and iron up 4% over the last year. latin american markets are feeling the love. in i can it, brazil. stocks there at a six-year high. all of this happening the emerging markets now performing up 11% so far this year.
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brian? >> wow. big runs there. seema mody, thank you very much. meantime, speaking of copper, shares of freeport mcmoran sliding. deutsch bank things it's over. joining me is craig johnson, technician with piper jaffray. chad, i'll start with you. it had one of the biggest surprise runs of the year last year. maybe we need an award for that type of thing. do you agree with deutsch bank that now is the time to sell it? >> i would. i would stay away from freeport at this point. it's had a huge run in the last 12 months and that's on the back of copper prices surging 30% year over year. we believe that was because of a fiscal stimulus plan within china and also global prospects of growth over the next 18 months. we think china's going to roll over. hence, that's the reason why we'd be more cautious. that's number one. second reason is, it's got
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roughly $18 billion of debt and it's a highly volatile revenue line with very little consistency on the free cash flow side. we tend to shy away for those types of companies. with that said, i'd take a pass on this one. >> craig johnson, when you look at the charts or fundamentals, do you sell it as well? >> absolutely not. i think the world has forgotten that this is a new secular bull market. when i look at a chart of freeport mcmoran, what a great setup. classic converted head and shoulders bottom. stock is up 26% year-to-date. this is an absolute buy-in here and we've continued to think it's a leadership throughout 2017. price objective would put the stock into the low 20s. we're a buyer here. it's a great opportunity. >> classic inverted head and shoulders bottom. craig johnson, that's why we
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have you on the show. chad's go the a different view but that's why we do it the way we do. thank you very much. for more, go to our website, tradingnation.cnbc.com. there's something about a train that's magic. up next, an analyst that has a sell rating ohhen that stock. is he wrong or is wall street missing something? we're going to be right back. >> announcer: and now, the latest from tradingnation.cnbc.com and a word from our sponsor. >> when you enter a trade, write down the reasons you went into the trade and the conditions under which you will exit both for profit and loss and take a screenshot of the chart. when the trade is completed, take another screenshot and look to see if you followed your initial plan.
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welcome back. norfolk southern hitting a new record high today. highest level since the company went public all the way back in 1982. your next guest isn't buying the rally though. he downgraded the stock back in september. since then norfolk has climbed. let's bring in donald. how are you feeling?
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>> well, you know, wish we had made the rating today as opposed to months ago. >> but you stand by this? you still think it's a sell? >> absolutely. >> why? >> what happens, what we're paid to do is what's going to happen six months from now, nine months from now, not what's happening right now. if you look at the appreciation, the value of the dollar it thwarts off shore export and thwarts on shore manufacturing. that's detrimental to railroads. if you look at the strength of the dollar it has historically led to lower rail volume. if i want to get lower rail volume, then i have to question next whether i'm going to get pricing. >> so the end of the war on coal under the trump administration i would have thought would have been good news for the rail because so much of what they move is coal. >> it is. we have extraordinarily low coal volumes so it's a hurdle. but that said, everyone wants to say, railroad business would be much better if it weren't for
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the declining coal to that which i want to say circuit city's business would have been good if it weren't for the demise of the vcr. >> isn't coal coming back? >> i -- >> i mean, coal country thinks coal is coming back. >> michelle, natural gas is under $3. >> much better competitor? >> it's less expensive to generate kilowatt hour, epa or no epa. >> you mentioned the dollar or say the border adjustment tax, whatever it might be. how much are they bringing from docks to the heart of st. louis where you live? >> that's less of the contingency. the sell is we're going to see less exports. >> a company carrying from american factories. >> we're an incredibly resource rich -- >> there are businesses carrying coal. >> less than 25%. it keeps going down. >> i would hope it would take a step in both directions, don. i don't want to see empty trains coming one way and full trains going the other. >> in the business of trains
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it's 50% dead head. >> you don't want your vegetables in the coal bin. >> that's what you said. >> so the border adjustment tax, let's push through that. >> sure. >> the supporters say the dollar is going to rise 20 to 25%. >> which would make exports even less advantageous which would make exports of coal, of ore, lumber. >> all the importers are freaked out about the border adjustment tax but i wonder why it isn't the exporters. >> let's think about it. let's say i'm in korea. i don't care if the farmer in nebraska is more efficient than the farmer in argentina. i care about the value of my currency. i'm buying argentine soy beans rather than american soy beans. >> your premise doesn't work right now. >> it doesn't, but you know, that's the joy of being a fundamental analyst. you look at the underlying fundamentals.
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every day when the stock doesn't go the way you want it to, you go back and look, h'm, what does the market thinks it knows that i don't know? if i come in with a fresh rating today what would the rating be? if the answer is sell, i should stick to my sell. if i have new data that says if i were initiating coverage i'd go with a hold or a buy, then i should trade my rating. >> as long as it takes? >> the underlying fundamentals matter. the street is littered with carcasses of analysts who see something you don't. csx, bring in hunter harrison. i capitulated, went from sell -- >> fund a.m.al change. >> because he's that good? >> that's what's going to happen. they're going to grow earnings and they'll pick the top line up and the stock is worth more. it's different as a result. so guess what happens, i changed
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my rating. >> got it. thanks so much. >> pleasure's mine. so you know who likes railroads, warren buffet. you can ask him all about it on cnbc's annual ask warren show. after releasing the berkshire hathaway annual letter, he'll be on "squawk box." >> check please is next. ♪ it's been over 100 years since the first stock index was created, as a benchmark for average. yet a lot of people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing. translation? why invest in average?
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fannie and freddie stock getting kneecaped here. it's 1/3. 1/3 is 1/3 either way you get it. a court ruled in a suit brought by hedge funds which were seeking to recapture some of the profits that the -- those two organizations have paid back to the federal treasury as a result of their bailouts, that that suit could not move forward so some of that was priced into the stock and now it is priced out of it. wanda is trying to buy dick clark productions and reports are that will be less likely to happen. dolly and wanda is having trouble getting money out of china because they have all of these capital controls as they try to defend the currency. >> do you think mariah carey had anything to do with this? did it damage the brand? >> the new year's -- >> they own dick clark productions. we all know that didn't go well. >> it took me a while to draw
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that direct line. >> i just remembered. >> i used my magic wanda to connect the two stories. >> 15 seconds. >> stock market's at an all time high. everything is up. the bulls are running wild. the bull did not make it. it died. >> what? >> not the market. >> terrible news. >> the actual physical bull. >> thanks for watching "power lunch." "closing bell" starts right now. ♪ doctor, doctor, give me the news, i've got a bad case of loving you ♪ >> hi, everybody. welcome to the "closing bell", i'm kelly evans at the new york stock exchange. joining me is dr. bill griffeth. >> stop. it's too early. >> did you notice the song? >> yeah. very clever, guys, but it's way too early right now. and you hadn't heard about the bull. >> no. no. the slow speed chase of a bull in queens. >> in queens. >> where did it come from? >> i -- i -- that i can't help you. i know where it was going, but i don't k

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