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tv   Squawk Alley  CNBC  February 1, 2018 11:00am-12:00pm EST

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member. good morning 8:00 a.m. at facebook headquarters it's 11:00 a.m. on wall street
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"squawk alley" is live. ♪ ♪ good thursday morning. welcome to "squawk alley." i'm carl quintanilla at post nine facebook is up 4% after reporting the earnings beat as revenue and price per ad increase mark zuckerberg says people are spending less time on facebook and that's not a bad thing take a listen. >> i want to be clear. the most important driver of our business is never been time spent by itself. it's the quality of the conversations and connections. and that's why i believe this
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focus on meaningful social interaction is the right one >> joining us this morning, henry blodgett and mark may, an analyst at citi. good to see you both >> good to be here >> mark, it's looking past these quarter on quarter declines. and assuming ad buyers will say this is better for the product >> it should be. i anecdotally, i don't like to invest in anecdotes, but i'm seeing a better news feed myself in recent weeks. more friends and family content, more content that's less controversial. you know, more relevant to what i like and i think the ultimate goal here is improve the quality of the content and user experience, users react favorably to that. and that also is good for advertisers and the returns that they see as well so, yeah, i think that's what investors are reacting to is, you know, an optimistic outlook to how the changes will impact the quality of the product >> henry, i'm a fan of
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obviously, you know, business wise what facebook's numbers have delivered around social media. and a business just from a reporting stand point. covering that. but can they have it both ways i mean, you see daily active users in the u.s. actually ticking down you combine europe, there may be a little bit better than flat. at the same time, they're saying it's never been just about time spent. it's been about quality. what about exploding watermelons and some of that stuff they were doing with live? one can't be true if the other is true. how do they let this happen? >> stepping back over time, facebook iterates, tries to improve the product. there are many times in the company's history where mark zuckerberg said we're going to stop doing this and start doing that stock market initially panics and then says okay, maybe he's right. maybe this will create a better experience i think what they're trying to do is create a better experience which will tie people more closely to facebook and be more
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valuable the thing is it's important to step back again and this is a $60 billion company growing at 50% per year they have two billion users. there is not that much more user growth left that they could have it's all about how they can mond mon monetize you are losing one engine of growth and there is a lot left over time the multiple compresses but the business is on fire. >> mark, i want to dig into that more it seems to me this is very much a longer term supply/demand story here you have less supply you have better safeguards you're going to increase demand tied to that quality for the advertisers looking to get their ads on facebook. it seems to me we're talking about longer term. upward pressure on pricing am i right >> you're right. and let's just, you know, put a bow on that. what's happening the evolution of facebook, i like henry stepping back, is what we're
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going into next is really facebook moving into more and more premium content premium video. longer form video content. that's what the watch tab is all about. we're starting to see them use the news feed to promote this quality watch tab content. that is going to, i think, improve engagement over time and bring in all -- much more rich advertiser experiences. tv-like ads that are more valuable and do help drive -- or tail wind to pricing that's what you're talking about. yeah, this is an evolution of facebook's platform and type of content from text to pictures to video. and with that brings a richer ad canvas that brings with it higher ad pricing. i completely agree with you. >> yeah. i don't know about you, henry, but in the circles we're in, tom brady documentary gets talked about a lot. again, anecdotal but that's richer content.
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there's been long talk about streaming sports rights. how far does this go >> again, facebook is -- we're talking about $30 billion of cash flow per year now they could put a huge amount of cash to work to secure rights like that. and again, the question is what are they worth in digital when it's broadcast on television there is not as much watching on mobile as there is on tv still own that but over time they've got the money to spend >> mark, facebook, though, i hear what you're saying. they alienated content creators by being really selfish about allowing others to actually build audience on that platform. you're talking about quality we just saw this memo from box's ceo come out saying facebook is more about promotion not about building a brand name. can facebook spend enough money to build quality content and the premium experience that you talk about? and if so, is that built into your cost expectations >> i don't they they have to
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spend much money on content. i think the distribution platform i think with the two billion users, with all the incredible data they can use to target ads really better than almost anyone, maybe google is a close rival, they end up being the best distribution platform out there for quality content producers to get their content in front of hundreds of millions if not billions of users around the world. and the best advertising platform to monetize that with that is really the model they're pursuing sure, initially they have to seed the market, prove the market out by, you know, producing and funding, self-funding, co-producing some content initially. that's not what we see the model. the expense that we bake into the model is sharing of ad revenue with those content producers. it's a performance-based success-based model. >> speaking as a company that has the ad revenue shared with it, mark is absolutely right
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it's great >> at what point do we start to see facebook regulated as a media company in light of all of this >> it is a very good question. and i think one of the reasons you're seeing facebook make some startling and quick changes is you have to head that off. okay, we did screw up. we didn't realize it now we want to take it more seriously. i think the whole trend of distribution, silicon valley distribution with content now is moving more toward the traditional word networks are always controlling about what programming is on the platform it couldn't be any other way so silicon valley said hey, you know, we want to let everybody share whatever they want you think okay, people are sharing a lot of stuff we don't want to be anywhere near that. let's upgrade. that is happening at youtube, facebook, all the other platforms. >> should facebook pay businesses the way murdoch is? >> they are paying business insider and everybody else with ad revenue share and also on watch now paying with dollars to commission shows it's small relative to netflix and youtube and others
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you have to start somewhere. they're heading in that direction. >> mark, we appreciate your time good seeing you. mark may over at citi. hen i have going henry is going to stick around. alibaba takes a stake for a possible ipo they're up 14% for the year. let's bring in joseph berger, a firm folk used on tfocused on t >> we were not surprised by the results this quarter they did quite well and we were seeing that in our data and analysis i just got back from spending three months in our shanghai office and a couple things that i noticed this time around, one, during singles day we saw alibaba do a good job of game
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gamifying the user they can go online, play a game, redeem a coupon at a local merchant they're really integrating the online and offline experience for the user and keeping them coming back during the biggest promotion period of the year the second thing that i noticed is the ali pay that's going to benefit them long term. that is something that we're seeing and i saw most recently in my trip there >> and, joseph, we've seen jack really go on a spending spree in the last couple years, $13 billion since 2015 to add brick and mortar to the empire is that retail straty paying off a -- strategy paying off and can we read that to amazon ahead of their earnings later today >> that is clearly the strategy that jack ma has is to intergrate the life of alibaba, the life of the consumer into
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alibaba. whether you're online or offline, they want to engage the consumer wherever that consumer might be that strategy is something you're going to continue to see for alibaba. i think ali pay is a good example and a half in that integration strategy as far as it relates to their growth long term, we definitely think that they have that long term potential and we're seeing a lot of interest amongst investors around alibaba more importantly, china internet in general zblfr is there a chance they jump across the pacific and buys ebay this is a story that they had global aspirations and they would start to acquire things. is that even possible? >> i certainly think that alibaba is eyeing other potential targets that could benefit their ecosystem. and there's no doubt that they're very focused on growing that ecosystem in china and focusing on the china consumer given the growth rate that exists there in the penetration
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rates so low as you look at potential targets outside of china, anything that benefits that ecosystem is clearly a likely target. and so there's certainly something to look for there in the future >> i wonder if they would even let it through. >> that is the big question. >> that is the big question. >> yes >> joseph, thanks. good to see you. henry, thanks to you >> great to be here. >> yeah, thank you when we return, what to expect from apple as the biggest company in the world gets set to report earnings after the bell today. and later, paypal plunging this morning after ebay dumped the company as its payment processor. paypal's cfo joins us exclusively in just a bit. stay with us you know what's awesome? gig-speed internet.
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these houses! yes, yes and yes. and don't forget about them. uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. apple is set to report earnings after the bell this afternoon. our josh lip ton is out at the new apple spaceship headquarters with more on what to expect. josh >> jon, apple stocks surged 50% in 2017 and then we saw hit that new all time high of around $180 in mid january and in part, that was due to these high hopes we had of really the iphone 10 being this smashing success since then though, jon, we've
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seen the stock take this hard slip it's down about 7% from those levels on concerns about weaker than expected demand for that flagship hand set. we know there are reports suggesting that apple sharply slashed the production targets for the phone. j.p. morgan says demand has gone sour bmo is now talking about a lack of traction. analysts saying that noise levels right now are high even for an apple report. it's not all negative. an executive at apple supplier told reuters just this week that reports of production cuts are in fact overstated gene munster tells me he continues to think that the ten is going to make up about 25% of the total i-phone mix in 2018 even even if there is weakening of demand for that device, demand for the 8 and 8 plus do he could help pick up the slack
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bernstein says that the single key metric for investors, the march revenue guidance they're looking betwefor betwee2 and 64 number. >> josh, you know, i'm really curious about what average selling price and margins are going to do with a x in the mix. yes, there is all of this focus on raw numbers of units. but people forget the 8 and 8 plus are new too apple overall sells a good number of phones and the average selling price is in the upper 700s that, is pretty good. >> yeah, i think, jon, you know, that is certainly munster's point. that even if perhaps units were a bit weaker, so the bulls would argue, we flow people on average are paying more for the phones and perhaps that gives revenue a boost. i thought it was interesting he crunched some numbers, you know, he said that even if you just saw a 3% unit bump in 2018, that could still by his math mean a
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20% bump to iphone revenue so in his opinion, that is still a super cycle. maybe just different than the super cycle investors are used to seeing. >> well, we'll be watching after the bell when we get apple, amazon, bunch of other tech names as well, google. josh lipton, thank you for joining us on the west coast its lots weighing on the markets today. we have big tech earnings and expectations from tomorrow's first read on the 2018 jobs number joining us now, j.p. morgan's chief u.s. economists and michael j. wilson, morgan stanley's dhechief u.s. equity strategist the other thing that still seems to be in focus is the fed what we got yesterday despite no rate hike was -- what seems to be more hawkish tone coming out of that statement, how many rate hikes you are forecasting this year and do you think the fed is behind the ball on this? >> so we're forecasting four
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hikes once a quarter we think yesterday's statement was broadly consistent with that like yourself we saw it as mildly hawkish a few changes in language that suggested a little more confidence and inflation will come back to their 2% target are they behind the curve? not yet. but i think they're at risk if we do see a little bit of a tickup in inflation here they could get a little more worried. i think right now they're in a pretty good position you know, they are moving at a pretty regular pace here last year they did tighten almost once a quarter they took off september to start the balance sheet normalization. we do think they could probably catch up by the end of the year or into next year. >> and mike wilson, given the fact we do have that jobs report tomorrow, what are you watching most closely especially in light of inflation is it wages? >> yeah, wages is the key for longer term interest rates regardless of what the fed is doing, the ten year note moved up on its own. this is the key thing for the equity market. it's been going up in a straight line for a couple months in anticipation of better growth and better inflation
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so the jobs numbers are important in that regard i think the things that really kind of wobbling the markets is we reached a point where the equity premiums reached fair value. this is despite the fact that earnings yeel earnings yields are going up dramatically equity is picking up that makes a lot of sense to us. also, earnings dispersion and economic data dispersion is also picking up so this is the environment we're in we've had a straight shot, 2850, 2900 this is a pause. it's well needed regardless of the data tomorrow, i don't anticipate markets to resume the path that we've been on for the lastfour to six weeks. >> mike wilson, i want to dig into that more one thing i've been hearing about equities at these sort of stretched valuations is the idea that looking at earnings that we're getting so far is that the earnings are much kaicatching ue price right now. peak earnings may have already
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come what do you think? >> i don't know about peak earnings but peak rate of change in the earnings. so in the last four or five weeks since the tax bill was passed, forward earnings estimates have gone up 8%. i mean that's almost a parabolic rate we're getting there in terms of rate of change revision breadth is as high as we've ever seen in 30 years of history. that's going to weigh on markets too. we're not anticipating negative growth any time soon but the market will start to think about the peak rate of change that will weigh on multiples a little bit if rates don't settle down, let's not forget we have a debt ceiling debate to go through which could put a further spike in rates, that is the main governor on multiples and upside for equities in the near term. >> michael, i want to dig into this idea of tax reform and just how much that could stoke economic growth and whether it's priced into the market right now. i say this because u.p.s. came out with earnings this morning they said due to tax reform they're going to buy more planes they're going to pull the cap-ex
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forward. that is pressuring stocks. it seems to me longer term that, is better for the bottom line and that is a bigger reflection of growth longer term. so this idea that tax reform is a short term bump, is it maybe shortsighted >> well, no. i do think that some aspects of the tax reform certainly did encourage capital investment and that should in the longer run support trend growth in the u.s. so we do think it adds between this year and next year a half point to overall gdp growth. i would also point out that while in terms of equity markets, we're focused on tax reform i think for gdp growth is if we let the budget caps that are under consideration tlashgs cou, that could also add to growth. it should give us a push here versus what had been fiscal policy dragging on most of the last five or six years >> and gentlemen, we'll have to leave it there thank you for joining us
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thank you to you both. as we go to break, take a look at shares of microsoft this morning. up to above 95 company reports results this morning that beat on earnings and revenue. stock currently, of course, headed a long way from the lows of the crisis. qualcomm beats expectations against its backdrop of the patent dispute with apple and a hostile takeover bid by qualcomm dow is up two. stay witush the great emperor penguin migration. trekking a hundred miles inland to their breeding grounds. except for these two fellows. this time next year, we're gonna be sitting on an egg. i think we're getting close! make a u-turn... u-turn? recalculating... man, we are never gonna breed. just give it a second. you will arrive in 92 days. nah, nuh-uh. nope, nope, nope. you know who i'm gonna follow? my instincts. as long as gps can still get you lost, you can count on geico saving folks money. i'm breeding, man. fifteen minutes could save you fifteen percent or more on car insurance. and i recently had hi, ia heart attack.
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european stocks in the red to begin the month of february bond yields continue to rise investors digest a ton of earnings reports we are seeing a notable underperformance in the german dax, the index erasing most of the gains for the year here's why daimler, the home of mercedes benz reporting a 49% jump in quarterly net profit but issuing a cautious outlook for this year
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saying it expects spending on new technology to dampen earnings growth. that stock down 2.5% in the uk, shares of royal dutch shell also moving lower despite profit that's tripled in 2017 as oil prices rebounded the stock under pressure because cash flow figures came in a bit below forecast that stock down about 3% and then there is unilever upbeat earnings thanks to stronger demand in emerging markets like india and brazil. that stock up 1% take a look at pharma, big movers there, roesch moving lower. 2017 sales growth came in line with estimates led by new drugs for multiple sclerosis and cancer the company also says it expects profits to grow faster than sales this year due to the new u.s. tax law and we take a look at nokia. that's been a big talker today maker of telecom equipment, beating with the fourth quarter report card boosted by a license
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fee. but nokia adds the networking business is likely to experience another tough year despite promising north american sales the stock, despite the big move, is still in bear market territory trading 20% below the recent high. guys, back to you. >> great thanks, seema mody back at hq. let's get to sue herrera >> good morning, everybody here's what's happening at this hour the international olympic committee says not so fast it might not necessarily invite the 28 russian athletes who won their olympic doping ban appeal to compete in the winter game. not being sanctioned does not automatically confer the privilege of an invitation to the games. ups announcing it ordered 4 14 boeing cargo planes and 676 aircraft to provide additional capacity for its increasing demand and this comes in addition to 14 cargo planes that they ordered back in 2016 all 32 planes will be delivered
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by 2022. and lowe's says it's giving bonuses up to $1,000 it's the latest company to invest in the workers since the tax overhaul it will be sweetening benefits for maternity and parental leave. and mitsubishi recalling 141,000 outlander suvs because the engine belt can detatch draining the battery and causing the engine to stall. it covers the 2008 through 2012. you're up to date. that's the news update back to you. jon, i'll send it to you >> thank you, sue. up next, the cfo of paypal sits down with us after the company reported a beat on earnings and revenue. his thoughts on why the stock is tanking this morning over the relationship with ebay but first, it is the first trading day of the month markets are hanging in there, about flat the dow up fractionally. the s&p 500 and nasdaq down fractionally
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paypal saw the stock fall after ebay dumped the company as the primary payments provider. we're out in san francisco and we have the chief financial officer of paypal in a cnbc
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exclusive. >> good morning, jon that's right we have the cfo john rainey. thank you very much for being with us today. i was on the call yesterday and you told analyst thit will be manageable what are investors getting wrong? and what does the split say about paypal's competitive position >> i'd love the opportunity to speak about ebay first, i think we should sort of acknowledge the fact that we had a great quarter for the fifth consecutive quarter. we had a record number of net new actives, grew revenue 24% which was an acceleration. eps 30%. with respect to ebay, the main take away is this. there is nothing about yesterday's announcement that was not anticipated by us. that was not in our plans. and it does nothing to change our long-term earnings growth. >> how did you anticipate that >> i think there is misunderstanding there is a few key points to focus on as part of the separation from
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ebay that we had, there was an agreement, we call it the operating agreement. it was for five years. and there are a couple main factors that are included in that agreement the first is that ebay was restricted for a period of time from putting volume on another -- or having another payment service provider produce volume at the same time, we were restricted from going out and partnering with the competitors, the largest and fastest growing marketplaces in the world. this is simply the next chapter. this allows ebay to go out and experiment with other payment service providers. it allows us to go out and partner with some of the other marketplaces we have a term sheet where we have a three year extension for the part of the business that is the largest part of the business for us and the most profitable so we're very excited about that >> there is more than an experiment they're moving with another start-up to be the primary payments processor what if other big customers of
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paypal like uber or air b & b look at what they're doing and think about doing the same thing? how do you keep them >> that is the norm rather than the exception. most large technology platforms or marketplaces like ebay have multiple payment providers this is a restriction they had coming out of separation we deal with this all day long and where we are side by side with some of our competition, we see that we continue to be the majority of payment volume on many of the platforms. >> okay. i'm going to throw back to you just a quick one some are speculating that the relationship with ebay, the company that you spun off of about two years ago, has become strained how do you respond to that >> ebay is a very large and important customer for us. we have to continue to work with them as we go forward. we'll continue to be a big part of their payments platform going forward. i wouldn't characterize it as a strained relationship. >> okay. my colleague morgan has a question for you back in new york >> hi, john. thank you for joining us today i do have a question with this parting of the ways with ebay, i can't help but think that it makes paypal a
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more attractive acquisition target would you be open to a merger? >> we always look at doing what's in the best interest of for our shareholders whether it's going out and acquiring other companies or how we invest or even how we return capital to share hoholders. so we'll never rule anything out. i would say though that back to the ebay agreement, one thing that we focus on that is there is maybe some misplaced concern around this is ebay is actually the slowest growing part of our business so there have been ten quarters since we separated from ebay the average revenue growth of our ebay part of our business and those ten quarters is 4% the other 87% of our business is growing at 23% if you extrapolate that out into the term where the operated agreement ends, ebay is a much, much smaller part of our business that we're not nearly as dependent upon. >> john, this is jon fortt i got a question about apple pay
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cash apple recently launched that granted, ios not necessarily a huge percentage of overall smart phones but those users tend to move a lot of money around. what impact have you seen thus far from the launch of apple pay cash and what do you expect the impact to be on venmo, on paypal itself >> sure. i would never be dismissive of competition, certainly from competitor like apple pay. but this is something that we deal with all the time there have been a host of pay announcementes since we came out from separation. in the face of all that competition, we continue to demonstrate that we're growing our volumes upwards of 30% which is 2 times the rate of growth of commerce part of the ability to do that is because we have a global presence in a two sided platform with 18 million merchants on one side and 200 million consumers on the other i think it's more of a sign of
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the time that money is digitizing and there is a little bit of a notion that there is a rising tide that lifts all ships. we happen to be the biggest ship in that tide >> that competition is getting very, very fierce in the payment space. one side of this announcement from ebay yesterday that maybe hasn't got as much attention as what it meendz for you guys, the end of that operation agreement. you're going to be free to court other retailers. but both of those are going deep into the payments business themselves you have the alibaba announcement this morning. are talking to either? does this open you up to a relationship with them a deeper relationship and what might that look like >> i don't want to comment on anybody that we spoke w but it's fair to say that we talk to all the major companies. and we pivoted a year ago to take a strong partnership approach if you look, we're partnering with the leading companies in the world like a google, facebook, samsung. we can take the best of what we have and compliment that with
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their technology platform and their customer base. >> okay. morgan has one for you back in new york >> john, given the move we've seen in the ten year and other treasury yields and recent days, what where do you see interest rates going? >> you're better equipped to answer that than i am. i would say from my perspective as paypal cfo, a good strong economy and we're seeing synchronized global growth for the first time in a while is very good for us and good for our customers. >> you know, i'm glad also we heard the previous question the idea of m & a. what about what you are looking at now there was a ton of speculation that you're interesting in this company that ebay is partnering with were you ever interested >> so we look at the competitive land x landscape all the time acquisitions is a key pillar of the strategy with respect to this other company, i might argue that this makes them less attractive when we look at acquisition targets, we look at volume and we look at profitability
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and knowing what we know about the terms and economics of that agreement, that doesn't really fit our profile. >> they're profitable now. >> i think, you know, what they're doing is unbranded processing what tends to be a commodity, a lower margin part of the business we certainly have the opportunity to bid on that when we looked at the economics of that, that was something that we close we chose to withdraw from because it was not interesting to us. >> good point. john, thank you very much for being with us today. >> thank you >> throwing it back to you guys. >> all right thank you. three giant tech names reporting after the bell today some of the biggest, amazon, alphabet and apple they're not even the only ones but first, rick santelli, what are you watching today >> i'm watching the markets, obviously. we righted our self to some extent on equities rates are still firm we had important number today, productivity it didn't look very good it's still best since 2010 we'll talk about all of those issues after the bakre for mom,
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an exclusive interview today with the head of investments for ubs asset management one of the most powerful women in banking is with us live to
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tell us the one area of the market she thinks will outperform every other sector. we're at noon eastern. carl, we'll see new 15 >> let's get to the cme group and get "the santelli exchange." hey, rick. >> hi. thank you, carl. we've had a lot of things going on in the last couple of weeks big time you know, consider about three weeks ago some of my equity friends told me, boy, watch out this rebalancing is going to be big. i wish i would have made a bigger deal about it but like many things in the equity markets, i heard art cashen say this, he's such a sage man that there have been a lot of issues where it looked as though dire selling was going to push the legs out from underneath equities but always swamped by more buying of course, this rebalancing dn the quite have that. and we remember a couple of days where the market was down-and-out now it seemed to have gotten the sea legs back. make that volatility is going to be in the rearview mirror.
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and vicx is not any favorite wa to approach this it still is a 13 handle. the market really since november of 2016 has been small retracements and low volatility. so we really need to be cognizant that if that starts to change, you don't want to grab into your opinion too firmly listen, i've been around markets and traders for a long time. you have to be flexible. you may say things but you need to be willing to think about how the possibilities are changing and your thoughts not that long ago may be wrong or they may be in flux. now, another thing i want to talk about, we had dr. judy shelton on today i know the repatriation trade has so many dimensions the one big dimension written up many times over the last couple months is the notion it's going to be a dollar friendly. we just lost the 89 handle in the dollar index we're still comping back to december of 2014 in terms of
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weakness and it really doesn't look like that chart has any kind of footing. looks like there is a lot more sand below it. my point is, usually whether you get these notions, traders jump in front of things they like to get out early the long and short of it is i don't think the dollar will be saved by anything that has to do with the repatation trade. finally, do you remember whether we had the durable goods not that long ago? even though it was preliminary, the proxy for business capital spending, capital goods orders, nondefense aircraft was minus three tenths that can change. when you add it into the productist, it makes me nervous. granted, today's terrible numbers still gives us a year. that was the best since 2010 by the way, the interesting thing about 2010 is it's the only year between where we're at going back in time that had all four quarters positive with regard to productivity and real quickly, neutral main reverse. i know 2.8 is a lot lower than the fed's previous neutral
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rates. i'm still thinking maybe that will be too high three or four rate hikes this year, i don't agree. carl, back to you. >> all right rick, thank you. rick santelli in chicago when we come back, the president touting taxes is one of the keystones of the first state of the union speech the ceo of jet business is going to join us with more on how tax reform is impacting private jet sales. had a nice reversal to the upside once europe closes. the dow is up 108. don't go away. t anymore, td ameritrade lets you trade select securities 24 hours a day, five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ trade 24/5, only with td ameritrade.
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are we entering a new golden age for the private jet? the industry among the winners from the recent tax bill which relieves private jet owners of the ticket tax imposed on commercial airlines and offers a writeoff on new jets bought for business purposes. we're joined by the business purposes our guest is the founder and ceo of the jet business. good to have you here, welcome fair to say you saw a change in the business trajectory once the election happened, right >> absolutely. it's been slowly coming since the crisis happened in 2008 when it took a major dive it's been inching, and in the past year skyrocketed up >> the impact of the tax bill, what specifically does it do >> there's a couple of things that help in the corporate jet side of it the decrease in corporate taxes has given the companies a lot more free cash flow to invest in different things like infrastructure, i.t., and actually corporate assets, including the best corporate tool, which is the corporate jet. the depreciation has changed, it
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used to be 50 persons the first year, now it's gone to 100% the first year that's a big change which actually puts a lot of deductions that allows you to invest in assets >> we're coming off pretty depressed levels when you look at the private jet business over the last couple of years how much growth are you expecting this year, and for what kind of planes? >> you know, there's probably -- just to give you a picture of the market, there's 20,000 corporate jets in the world. there's about 2,000 that are for sale in the world. so it's a very small percentage. the new aircraft manufacturers, there's about 650 in the whole world that get sold. there's 2,500 pre-owned airplanes that get sold. we think you'll see a 10 to 15% increase in that, which completely changes the whole demographic of the corporate jet market, especially on the manufacturing side >> who is buying corporate jets? over the past five years or so, we saw all of these experiments and fractional ownership, hey,
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it's going to be better than flying first class a lot of that seems to be dying out. is silicon valley still buying corporate jets >> never is there an individual buying an airplane, it always goes to a company. but there are a lot more entrepreneurial-led companies. the startups that came out of nowhere in the last five years, are now multibillion dollar companies. today i think the average age of a buyer, of a ceo of a corporation, has probably gone down in the last 15 years. it used to be 55 to 70 and i think today the average age probably goes from 40 to 55 of a leading ceo of a company buying an airplane >> just to dig into that a little bit more, how closely are you watching crude prices? not just from a jet fuel cost standpoint but also given the fact that we've seen a link between oil wealth and jet demand over the years. >> yeah, it's one of those things, be careful what you ask for. as the price of oil has gone
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down, you would think the people who use jet fuel at the retail level are having a cheaper price to fly the plane the problem is, there's a lot of countries and companies that are dependent on oil prices. as those prices go down and they can't make enough profit or their economies suffer, it really directly affects the purchasers of corporate jets >> pricing and delivery time are they both going up >> prices actually have stabilized her they were going down, as you said, morgan, it's gone down for the last three years 30% in the preaircraft owned market prices don't really go up, they're depreciating assets, they don't really go up. but in and out market has stabilized pretty significantly, and a lot of the supply has dried up you're starting to see more people that are tried to buy a young airplane, say less than five years old, not really there. it will push more people into buying new airplanes >> as a rule of thumb, what percentage of the purchase price is spent per year in fuel,
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insurance, crew? >> yeah, it actually -- it doesn't work as it does on boats. on airplanes, it goes from 1 million to $3 million a year, no matter what size the airplane is once you get to 3 million a year, it maxes out so it really doesn't grow any more than that >> interesting >> and the price of the airplanes can go from 5 million to $75 million so you can see the percentage as the price goes up, it's a minuscule part >> if we were going to go three ways on a plane, what would you have us buy? >> it depends. where do you want to go? >> the sky's the limit >> paris, rome >> the top airplanes like the gulfstream iii 50, global 6000, boeing business jet, airbus, legacy 650 there's a choice depending on what you like, there's different favorites. >> fascinating, steve, thanks for coming n see you soon steve varsano with the jet business bitcoin is a story this
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morning, below 9k, as you can see, down about 12.5%. we'll watch that closely, although it's not affecting anything else. dow subpoeis up 104. tomorrow, jim cramer aadhe of sunday's super bowl. more sidewalk sidewa"squawk alli a minute ♪ (nadia white) the moment a fish is pulled out from the water, it's a race against time. and keeping it in the right conditions is the best way to get that fish to your plate safely. (dane chauvel) sometimes the product arrives, and the cold chain has been interrupted, and we need to be able to identify where in the cold chain that occurred. (tom villa) we took our world class network,
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in case you missed it, jeff immelt taking a new job, joining a new company whose portfolio names include uber, buzzfeed, and 23 and me. also a busy week for qualcomm, the chip maker beating expectations on revenue last night. but it fell short on current quarterly guidance smartphone sales in china largely the culprit. the company promising to deliver 5g network ready devices based on its chip based on a licensing deal with samsung late
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yesterday. executives say that should stabilize things all of this as qualcomm continues its dispute with apple. broadcomm still expects to raise its bid shortly, mulling a massive breakup fee to allay antitrust concerns and it sees qualcomm's earnings as concerning. guys, important to watch in the aftermath of apple's earnings. qualcomm says cellphone sales in china are higher but units are down which will affect apple's quarter? >> the business is being taken as a read-through ahead of their results later today. >> hopefully some questions answered on the apple fronted and maybe on the amazon front, but cloud, about whole foods, maybe about health care initiatives, right >> going to be a lot of questions specifically about cloud. that tends to be the number that people are watching now. the growth rate of cloud a little bit lower than people
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expected last quarter. we'll see what it does this quarter. >> after microsoft azure numbers up 98%, we talked about that this morning a lot to pay attention to, keep your eye on the dow which continues to trudge higher on session highs, up 122. let's get over to the judge and "the half. and welcome to "the halftime report." i'm scott wapner our top subject, the state of the rally. can stocks keep climbing even if rates do as well, and is that the key for where your money goes from here michael farr is with us, president of farr miller and washington also back with us, suni harper let's begin with the markets and a snap back, a volatile day shaping up as interest rates continue to grab all of our at

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