tv Fast Money Halftime Report CNBC March 22, 2018 12:00pm-1:00pm EDT
industry >> we don't hold our breath waiting for congress to get things done. i read some of that into what mark zuckerberg is saying. he's got to do something about this first >> he's going to have to, for the sake of advertising dollars. >> many while the dow down 473 points at this hour. >> ouch. >> that's it for "squawk alley." "halftime report" is starting up all right, guys, thanks so much welcome to "the halftime report," i'm scott wapner. we begin with developments on two major stories this hour. stocks down sharply as the president is set to announce new tariffs against china at this hour you can see the dow jones industrial average down by nearly 500 points, a loss of nearly 2%. big selling remaining in tech today as well, nasdaq down 2%, a loss of more than 130 points, a
day after the fed's big decision on interest rates. there are so many market parts that are moving this hour. we'll take you through all of them then there's the facebook fallout remaining front and center, the stock falling again. ceo mark zuckerberg making his first public comments. in a few minutes we'll speak live with a man who co-founded the company that would become facebook, for an exclusive interview, we're looking forward to that, as we are to later this afternoon, 4:00 p.m., when you'll get an exclusive interview with facebook's sheryl sandberg we'll get her first public comments as well as she sits down with julia boorstin we'll discuss all of this with our panel today. jon and pete najarian are here at the stock exchange, erin brown is the head of asset allocation at ubs, josh brown joining us as well
we've got tariffs coming down the pike on china, stocks are having their worst day since february 8th >> vix pushing up to 22, that kind of level, judge, you and i talked upstairs about whether or not when the president's -- the unknown of what the president is going to present we know it's going to be about $50 billion in tariffs we of course can only speculate as to what the reaction will be from china the counterpunch, if you will. but i think there's the possibility at the bottom of the hour that the market reacts to this news not in the same way that it's been reacting while it's unknown in other words, once we know how -- which industry groups are going to be impacted by this, i think then we're more likely to see a potential for maybe not taking it all back, but for some sort of bounce we'll see. >> the dow, erin, is down a full 2% as we speak we'll call it 500 points we just eclipsed the 500-point
decline. >> i think what will be important this afternoon is whether he imposes or proposes the tariffs. if it's proposing the tariffs, then he takes it back to the u.s. business community, gets feedback and input from them also then it gives an opportunity or a window for china to start talking about concessions, about what they're willing to give up so that these -- the harshest of these tariffs aren't imposed on china. the key is going to really be on the language and the timetable that he sets forth in order for, you know, a window to open for potential discussion >> and josh, i don't want to forget the comments yesterday that we got out of fed chairman powell, it was his first news conference they raised rates by a quarter of a point almost sounded near term dovish, long term hawkish. and maybe that's unsettled the market as well, for what the market thinks is going to happen with interest rates in the next let's say two years. >> yeah, it was an odd reaction in the bond market especially. so basically what you have now is curve flattening.
and that's something that's been happening, but maybe accelerated a little bit the good news is, if we are going to pursue a trade war, you won't need that many more rate hikes. that's one way of looking at it. some of the yield plays are holding up the best in this market utilities are a highlight. even in reits, take a look at iyr. this is an interesting area to be showing strength at this stage in what's going on with rates and until the cycle. so it's not all bad news for diversified investors. you know, and i think bigger picture, john really nails it. a lot of times what goes on in the equity market is a lot of nerves as we get closer to an announcement then once it actually happens, people look at what they've sold, they look at what they still prefer to buy. they say, all right, we did the panic thing, let's do something
different. maybe they buy a different sector or a different stock. we've seen that over and over again. i think that's actually the best comment. >> pete, there are some really concerning signs internally, technology, leadership we've discussed this on numerous occasions because of how important the sector has been, how much it's meant to this bull market >> no doubt -- >> and it's rolling again. >> leadership getting pounded down take a look at the chinese tech names getting pounded as much as we're seeing here in the u.s to josh's point, the president has put out all kinds of stories over the last year and a half or so that become negotiation points, judge. so that i think is how you have to look at this. yes, we're down call it 500 points right now, but it's the reaction, once we start to get from the unknown to the known. when we get more of the known, and it's not necessarily just today, it will take time for all of this to play out. that's going to be something the markets can read right now it's all reaction on
the unknown. >> one of the key parts of the unknown, erin, is to what degree china hits back. >> right, absolutely is and what's really interesting about this is over the last 24, 48 hours, we've actually seen a lot of cross currents on the trade discussion we saw coming out from the u.s. ambassador from canada talking about maybe there's some negotiation now with respect to nafta negotiations so we're seeing a little bit more dialogue, a little bit more progress emerging there. then we saw overnight the trade representative from europe also come out and say that she's optimistic that now we're seeing some negotiations, where europe may now be excluded from those tariffs that were announced regarding steel and aluminum a couple of weeks ago. so we're seeing, again, just to your point, that trump is really using this as a negotiation tactic so the question is, is whether or not the same is true with respect to china >> i agree, and i think erin's point at the top, judge, was spot on.
is this what he's proposing? because many of us, and certainly the market, expected this is what it is come the bottom of the hour, what if it's a proposal to get into that negotiation again, to get people to carry his water, whether it's merkel from canada -- or from germany, whether it's the prime minister of canada, talking with china, since he proposed these, maybe it happens again >> i wonder, josh, if you feel as though the market can stabilize without tech stabilizing. i'm looking at the names today apple is down yet again. microsoft is down 2% i've got inteldown by 3/4 of a percent. stocks that have been working, netflix today is down by 3%. you get the point. can the stock market do anything positive until tech figures out what the heck is going on and where it wants to go from here >> scott, that's a really great question i think the answer is yes, we
can certainly stabilize without tech leading the way we can even rally. one great way to think about that is there was a moment on the heels of president trump's election where all of the strategists came out and said technology is going to suffer under trump because, you know, the cultural things, and they're not going to be able to import talent from other countries, and, you know, on and on and on. and, you know, technology stocks did take a break but we got big leadership from things like small caps, industrials, even basic materials. obviously financials so tech is very important. google and facebook together are 10% of the cues and a not insubstantial chunk of the s&p add in apple too these stocks matter. what if we get leadership from energy take a look at chart on crude in recent days. if crude breaks out to the upside and momentum players leave the technology stocks, which all the charts are starting to look pretty broken,
but if they find other places to make money, financials included, perhaps, it wouldn't be the worst thing in the world for the market to have another group take the reins >> i hear you, but pete, what is the market that's going to do it rates are going down >> you're right. but let's not blow that out of proportion either. it was just two weeks ago we were talking about, oh, my goodness, they're going to go through 3. now they're 2.8 and we're worried they'll go lower as long as they remain within the range they've been, financials are going to be able to earn money. could they earn more absolutely, we all understand how that thing works listening to josh, he's talking about energy we had this conversation yesterday as well on "closing bell." when it comes to energy, look at the disconnect, look at where oil has come from, hitting highs yesterday, yet you're not seeing higher moves in the equity sooner or later those moves have
to come together in some form. >> so you were at, what, 2.9 yesterday, going into the fed, you're at 281, you lost nine basis points in the span of less than 24 hours as people assess globally >> because we talk about this all the time, when we talk about velocity, this is a very fast, hard core velocity move to the downside people at home go, 290, 281, what the heck is that? the reality is, that's a big move much. >> i wonder, erin, if in any way this is short throwing shade on the whole concept of a synchronized global recovery there are some people who think the u.s. economy isn't as strong as others think it is. >> right i think we need to put this into perspective. yes, the data has been weaker than expected in the first quarter. if you remember back in early february, the gdp now survey which was forecast by the atlanta fed was predicting the
first quarter gdp was going to be 5.46% today they're expecting 1.8% we've seen a massive downgrade relative to what the gdp was going to be earlier in the quarter. that said, we're still having gdp growth above trend, both here in the u.s. as well as on a global basis versus the g-10 economies. we still have really robust growth, it's just slowing down slightly from expectations >> i bring it up, josh, because if you think oil is going to break out, you don't want to see pmi numbers out of europe negative if you think that cyclicals could fill some of the void that technology is leading, you don't want to see questions about global growth all of a sudden seep into the market >> so i think it's important to point out a couple of things about that, consolidate. it's a fair point. every first quarter has been a disappointment, every single one, in the post-crisis period we really do have this weird
seasonal lumpiness things that goes on. with respect to data, we've had these big storms, they've thrown things off and pushed things out into the spring. we've seen this overagain and always out-shopped where want the breakout in commodity prices, probably it doesn't happen if you continue to get negative data into the spring who could possibly know if we will the most important thing here is not to look at monthly or weekly data points and extrapolate out a new trend. look at rolling 90-day periods of this stuff, and you don't see quite as much variance as maybe the day-to-day noise would have you believe. >> let's welcome in professor jeremy segal joining us from the wharton school as always, professor, welcome back, nice to see you again. >> happy to be here. >> what do you make of this selloff and these fears over tariffs on china >> well, it's a one-two punch today. i definitely think the tariff
uncertainty is probably the proximate cause. but i definitely think the long run hawkish stance of the fed, i know they didn't go to 4, which is what i think the knee-jerk reaction, why it was favorable yesterday for this year. but they're projecting a median in 2020 of 3.6 on the fed funds. take a look, as we've been talking, the ten-year is two eight. that's an inversion of the curve. wow. every inversion in the post world war ii period has been followed by a recession. you could say, well, by then the ten-year will be much higher if the ten-year is going to be higher, we should all be shorten the ten-year there's a lot of things going on there. others say they're not going to be that hawkish but you know, once they're on a path, every quarter, they're raising rates it's got to be bad news before they don't raise the rates
i think that -- >> i thought the chairman put on both hats yesterday, as i said, i think he said he sounded like a dove in the near term and a big time hawk, not that far down the road >> yeah. right. and by the way, i think he did an excellent job for the first time, many times, you know, you make a bluff one way or the other he was smooth and he was to the point. i was really quite impressed with him but don't forget, i mean, stocks are long term assets ten-year bonds are ten years what happens the next nine months is one thing, but what happened two or three years ago is still very, very important. obviously the data will tell us what's going to happen he said, we're way above the growth rate of absorbing the 200,000 a year monthly flows, which is going to squeeze that unemployment rate. he did admit the bell curve is a
lot flatter. but we take a look at what the unemployment rate's going to be, and, you know, the question is, we've got to slow this economy or there's going to be a clash at some point. that's what the fed said and i think that's a worry >> i think people are clearly worried about it professor, stand by for two seconds. breaking news on these new tariffs from the white house where our kayla tausche is today. kayla? >> reporter: scott, we have details on what exactly is going to be happening in 15 minutes' time trump will be signing a presidential memo here at the white house that directs the office of the u.s. trade representative and the treasury to levy roughly $50 billion in tariffs to offset what the ustr will have found to have been $48 billion in harm to the u.s. economy by china's unfair trade practices. in 15 days, the ustr will be publishing a list of products that these tariffs will apply to and in 30 days, there will be a window for industries and for
any public comment to be accepted by the administration the announcement today is the result of a 200-page report that ustr put together covering about 1,300 product lines that has been going on for eight months and has involved many different agen agencies, including the pentagon and the state department in putting this together. today ambassador lighthizer told lawmakers those tariffs would likely focus on ten industries in china where china is seeking to get a high tech advantage or an innovation advantage over the united states. ambassador lighthizer also acknowledged that china would likely retaliateagainst u.s. agriculture as a result but said that alone is not a reason to not institute these tariffs. >> it's something we worry about, it's unfair that soybean farmers would be singled out
having said that, it's not possible to take the position that because of soybean farmers we're not going to stick up for our rights and have hundreds of billions of dollars with exporters and browser producers advantage because of trade >> reporter: he said the u.s. plus strategically defend itself from aggression. by the looks, consolidascott, o the stocks of these multinational corporations, they seem to be interpreting this in the other direction. >> kayla, thank you. kayla tausche on the north lawn of the white house for us. i should also point out that as kayla was speaking, doc, the dow came 100 points off of its low >> mm-hmm. >> the point that you were making earlier, and maybe some of that is, okay, we went into this thinking it's going to be $60 billion, looks like $50
billion according to the details trickling out, we'll hear from the president in just a little bit. maybe we go back to, it's a negotiation and let's take a step back. >> erin nailed that. >> professor, we got the details. is this a bull market killing scenario, if a trade war fully erupts >> well, if a trade war fully erupts, and i'm glad it does look like a measured step where they're going to look for comments from the trade groups you know, the basic fact is, china does hold u.s. compani companies -- pay a ransom for intellectual property, that's really against the wto and there is good cause for trump to go through established channels to try and correct that
that would be to the benefit of the united states. now, there's always unintended consequences from doing that obama put some trade restrictions on, i think they stopped chicken parts from going over to china. there's always going to be something. we're going to have to see how that unfolds, uncertainty-wise so it's a very important move. it could be very fruitful for the united states. >> professor, lastly, before i let you go, what do you make of this rollover in technology? as closely as you follow markets, when you lose a leadership group or certainly one appears to be teetering on the edge, how should we view this >> well, i think, as some of your commentators said, it could be taken up by others. it could be taken up by energy, by faang if only one group leads and continues to lead, that's not a healthy bull market. i think a healthy bull market is one that does rotate to other
sectors. i'm not particularly disturbed about that but the market is still going to be challenged by the interest rates and trade uncertainty over the next week, certainly >> that's why we have you on, professor, to shed some light on how we should be viewing all this we appreciate it, as always. wharton school's professor jeremy siegel. eamon javers has a news alert. >> reporter: john dowd, one of the president's personal attorneys, is resigning from that position, telling nbc's kristen welker, "i love the president and wish him well. jay sekulow, another attorney for the president, texted me that "john dowd is a friend, a valued member of our legal team. we will continue our ongoing representation of the president and our cooperation with the office of the special counsel. a few days ago the president was
tweeting, denying reports of a shake-up in his legal team, stating "the new york times purposely wrote a false story. something must have changed between then and now, we don't know exactly what the situation is here, scott it would be a little early to speculate on what's going on behind the scenes. you remember that john dowd was involved in a straininge episod over the weekend in which he seemed to call for an end to the mueller investigation, then gave different accounts to different media outlets, suggesting once that he was speaking on behalf of the president and then suggesting later he was not in fact speaking on behalf of the president. we'll have to get to the bottom of all of this nonetheless, a shake-up in the legal team it may mean the president will get more aggressive with the mueller team, scott. >> eamon, thanks so much, eamon
javers with that update from our bureau in washington next, an exclusive interview with a man with a very unique perspective on facebook. >> after the break, he, with the winklevoss twins, sued facebook and settled with the social media giant. accusing mark zuckerberg of stealing his intellectual property while they were students at harvard. our executive interview, next, live from the new york stock exchange
facebook's c.o.o., sheryl sandberg, speaks exclusively to cnbc's julia boorstin, speaking for the first time since the news broke that a data firm used the personal information of users. ceo mark zuckerberg broke his silence last night >> this was a major breach of trust and i'm really sorry that this happened. we have a basic responsibility to protect people's data if we can't do that then we don't deserve to have the opportunity to serve people. >> our next guest co-founded the
company that would go on to become facebook while a harvard classmate of mark zuckerberg divya narendra joins us live for a cnbc exclusive interview great to see you >> good to see you >> we heard the apology. >> yes >> what did you make of it >> he did a pretty good job of answering the questions. this is obviously a complicated issue. it's worth people taking a step back to appreciate sort of the scale of the problem when you look at facebook, you're talking about a company that has 2 billion users across the globe. and policing every aspect of that community is hard one of the things mark didn't say is that facebook should be a neutral platform, right? we don't want to build a community where people don't feel like -- they don't feel comfortable expressing opinions. i think what their responsibility is and should be is to kind of maintain some
standards for veracity throughout the platform, both in terms of its advertiser base but also, you know, also the community itself and that's really hard to do when you look at the timeline of events here, which is also important, you know, getting to cambridge analytica, their access to the app dates back to 2013, not long after facebook actually went public and, you know, i think what i took away from kind of the interview is, a, i think mark has a genuine desire to solve the problem and acknowledges the fact that it's not something that can be solved 100%, just given, you know, i think the nature of bad actors and some of the concerns of, you know, just the scale of the community it's a hard thing to solve but it sounds like they're taking concrete steps. and it sounds like he has a genuine interest, both a moral interest but also for obvious reasons an economic interest in solving this problem >> do you think he waited too long to speak out?
>> no, i think that's crazy. you know, from what i read, mark actually found out about this entire incident almost through the press itself and very recently. so when you think about, you're a ceo, words actually matter, you have to be careful about what you say i think taking the extra time to assess what the facts actually are is a much better tack than simply getting out there and making statements without knowing what actually transpired i think the other thing he said, this is obviously something that will be followed up on, they still don't know exactly what happened there's a lot of uncertainty as to, what did cambridge analytica really do with this data, was it effective at all in terms of, you know, controlling the emotions of facebook users to -- in a way that may have swayed their votes? there's a long chain of logic from, you know, accessing this data to swaying an election. and you have to kind of buy into
all of that very long chain to come to the conclusion that, you know, facebook is somehow responsible for, you know, the deeds of a consulting firm >> you don't think they were asleep at the switch, that they waited too long? >> i think they may have been. >> to assess what had happened or even to check up on that data to make sure it was destroyed? >> from what i understand, they had an agreement with the academic himself, aleksandr kogan, to make sure that the data wasn't used for commercial purposes, and it was if it turns out that in actuality, like, they did give permission to aleksandr kogan to use the data for commercial purposes or sell it to a consulting firm, it's a different story and a serious offense. but just kind of taking it on its face, it sounds like they were duped more than anything. i can see how in 2013, that could have happened, just given
all their other priorities and we also kind of look at the situation, nobody was even talking about, you know, like privacy and data protection and all these issues until after the election, until after trump got elected. so, umm, you know, i could easily see a scenario where to them it wasn't as big a priority to them as it is now but hopefully they'll kind of take tangible steps to solve the problem. >> what do you think sheryl sandberg needs to say today when she sits down exclusively on cnbc you heard from the founder, he has obviously a unique perspective unto himself sheryl sandberg has an opportunity to speak to investors in a way >> sure. >> what's the message today? >> well, i think -- i think where people criticize mark specifically is maybe his tone, the way he comes across. some people have labeled him as robotic or maybe a little bit
mechanical and for a lot of, i think, folks who listen to him, it's hard to connect with that type of shere hopefully resonate in an emotional way with investors and members of facebook, which is a hard thing to do, but i think maybe she can do that and also reiterate what they're actually doing to solve the problem in the long run this is not the type of problem -- i mean, this is espionage 2.0. it's not going to get solved overnight by anyone. but i think facebook is better resourced to do that, to create solutions better than anyone else in the industry it needs time to implement those. >> all that said, how much lasting damage do you think has been done to the brand itself? >> umm, it's very hard to say. i mean, if you look at what happened with uber, the whole travis kalanick debacle, it seems like they've been making
good steps to kind of improve the brand and make sure people continue to use uber at the end of the day, it's a utility, right if you want to connect with people around the globe, in a way, facebook is kind of the way in which to do that, there's no other app or collection of apps that connects as many people in the way that facebook does >> i don't think people will -- this whole, you kno know, #deletefacebook movement that's out there, in the interview last night zuckerberg said we haven't seen that in great amounts to this point. do you think we will >> i think if facebook continues to innovate its core products, continues to be focused on product initiatives, ai, making it easier for people to connect around the globe, then i think, in the long run, no, it will continue to be the dominant network as they have been. it's just that in the press you oftentimes see that people who
are aggrieved tend to be the most outspoken i do think it will pass. it's one of these things, it turns into a firestorm very quickly and that's just kind of the nature of media, one article leads to another and before you know it, you know, you have people sounding alarms in a very short amount of time before the company has even had time to process what they need to do to keep the business moving forward. >> i know you know who roger mcnamee is, he was on cnbc earlier today. i want you to listen to what he said about the stock, and then we can react on the other side here is roger mcnamee. >> i've trimmed a bunch of it, because -- especially this week, because i don't think they get it >> "i don't think they get it. this comes from an early facebook investor who also told me, and i'm quoting here, we talked about after the interview, that they've shown a callous disregard for the privacy and security of their user data that zuckerberg thought facebook could grow huge without growing up
what's your response to that >> i don't know where he gets that from. you know, roger -- i don't know him personally but he tends to make pretty dramatic comments when i have seen his interviews on television. you know, a lot of folks, i don't know if he has any sort axe to grind or whatever, but, you know, this is a company that's very young. it's definitely got a lot of growth ahead of it for folks who are thinking about it financially as an investment, this is a company that you can buy for 20 times earnings, even less, arguably, depending on what your view is on earnings. despite 50% growth and this massive portfolio, unmonetized assets what's interesting about facebook that a lot of people don't realize is historically they've actually been pretty slow about monetizing. they tend to wait to grow the community out, and in their case, grow communities out into the hundreds of millions in size or a billion plus in size,
before they actually decide to monetize and i think it shows that they understand community engagement maybe better than most you know, they could have easily have extracted more dollars out of facebook earlier than they actually did but i think they've shown actually the opposite m.o., which is let's be patient about growing the community, let's get the strategy right, and let's monetize it in the correct way and for them, it's through an advertising model, right at the end of the day, you don't pay for facebook you have free access to the platform i think it's fair for businesses, not just them but any internet business, to be able to leverage an advertising model. they just have to be transparent about how they're doing so >> do you think, though, to roger's point, as the company has grown bigger and bigger, do you think they've shown enough regard for the data that they collect from their users >> umm, i think so i think it's very much like --
comes down to like do you believe that management has an incentive to guard user data, is that incentive, you know, exemplified in the way they communicate. and i think they actually did a pretty good job of taking the time to sort out what had happened, react accordingly, in a measured way, not in a rushed way. >> i thought it was interesting, though, in the interview, where zuckerberg, as you talk about what needs to happen next, can facebook police itself, which some doubt that they can, even had said, maybe we should be regulated. >> i think the issue there is striking the right balance, right? like -- >> should they be regulated? >> i don't have a strong view on it just the economic forces alone will force them to make the types of changes that they're making now, and frankly at a greater pace frankly one of the most interesting things i saw, him making the comment that we've hired 15,000 people to focus on
security, that's an os tastonis number when you think about the total employee base of facebook. does boeing and raytheon have that many folks focused on security, does jpmorgan have that many folks focused on security just the investments they're making in terms of staff says a lot, speaks for itself whether or not it works will obviously take time. >> are there any doubts in your mind that he's the guy to run this company >> no. to have a business like this, a technology leader, you want somebody who is very close to tech, very close to the product, which as the founder, he very much is so someone who is close to engineering and understands kind of the challenges involved with, you know, building products that can achieve scale. and no, i mean, i think this is also a company he's grown from -- we're talking about a
company that achieved a $500 billion market cap in a very short amount of time when i see these reports about people calling for mark to resign, it's just bananas to me. you listen to these reports, it's like, wow, who is this person making these kinds of claims they make for good headlines, but they're just totally disconnected from the reality, which is, this is a company that's grown at a rate that, you know, is highly impressive quarter after quarter they've managed to beat expectations both on top line and bottom line and they have a long runway ahead of them, if you think about some of the acquisitions they've made, whether it's instagram or stuff they're doing in the ar space or vr, whatsapp, et cetera. there's so much i think room for this company to grow and the fact that you can own it today and pay an s&p 500 multiple for it is an incredible opportunity. >> you own a sizable amount of stock? >> it's the largest holding in my portfolio >> have you been a buyer on this
pullback or is it too big to do that >> it's a large percentage of my own portfolios i did recently add some, when -- this was pre-cambridge analytica, after their last earnings report, the stock fell into the 170s. i was like, this doesn't make any sense. i wrote a pierce on sum zero about it, just to discuss the merits of facebook as an overall business so, yeah, i would -- i mean, i think it's a screaming opportunity. it's almost -- it almost trades like apple did in 2016 it's like a value stock, like a deep value stock you rarely see these kinds of opportunities to own this much growth at this low multiple. >> you don't have any concerns, as we wrap it up, that this thing that you helped create, this precursor to what became facebook, this thing that incubated in a dorm room, is too
powerful you never think about that do you think it is >> umm, i'm not sure what "too powerful" means. >> does it have too much influence? >> so it's a -- >> we're talking about fake news, now we're talking about the loss of private information. >> yep so if i felt like management was trying to steer facebook in one direction versus another due to some sort of political bias or some sort of agenda, then yes. but i think they've been very open about the fact that they want to keep facebook, you know, a platform for everyone, not just liberals, not just conservatives. and i think what's ironic is that mark and his team, and like most of silicon valley, is liberal by nature. so i think for them the idea that, you know, they're being accused of swaying an election in favor of trump, has got to be surreal, you know. and i think -- i think that sort of was an eye-opening moment for
them, showcasing the influence of the platform. i think the big issue is not like whether facebook can be used for influence, but how is that influence used. and again, is the content that people are consuming truthful or not. and that's something that kind of comes with the territory, right? when you achieve this type of scale, you know, it's one of the challenges that you're going to face, just naturally, it's a natural byproduct of the size of the community. i think both their tone and kind of the economics of it, the impact that this story has had on them is going to force them to make the type of changes that are necessary. >> thank you for being here. interesting conversation divya narendra, the ceo of sum zero we thank him for being here. let's remind you that facebook's c.o.o., sheryl sandberg, will be on "the closing bell" today at 4:00 p.m., right here on cnbc,
an exclusive interview, we're very much looking forward to it. our traders react to what you heard from divya do facebook's investors agree it's a screaming buy the dow is down 350, it was down 500. we're back in two minutes. let's stop talking about diversity, and actually be more diverse. as investment management professionals, let's measure up. cfa institute.
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here is president trump. >> and now they're starting to come back. you see what's happening with chrysler, with foxconn, with so many other companies wanting to come back into the united states but we have one particular problem. and i view them as a friend. i have tremendous respect for president xi we have a great relationship they're helping us a lot in north korea. and that's china but we have a trade deficit, depending on the way you calculate, of $504 billion now, some people would say it's
really $375 billion. many different ways of looking at it. but any way you look at it, it is the largest deficit of any country in the history of our world. it's out of control. we have a tremendous intellectual property theft situation going on which likewise is hundreds of billions of dollars and that's on a yearly basis i've spoken to the president i've spoken to representatives of china we've been dealing with it very seriously. as you know, we're renegotiating nafta. we'll see how that turns out many countries are calling to negotiate better trade deals because they don't want to have to pay the steel and aluminum tariffs. and we are negotiating with various countries.
mr. lighthizer, mr. ross we are just starting a negotiation with the european union, because they really shut out our country to a large extent they have barriers that they can trade with us but we can't trade with them. they have very strong barriers, they have high tariffs we don't it's just not fair nafta has been a very bad deal for the united states. but we'll make it better or we'll have to do something else. the deal we have with south korea is a very one-sided deal it's a deal that has to be changed. so we have a lot of things happening. but in particular, with china, we're going to be doing a section 301 trade action it could be about $60 billion. but that's really just a traction of what we're talking about. i've been speaking with the
highest chinese representatives, including the president. and i've asked them to reduce the trade deficit immediately by $100 billion that's a lot so that would be anywhere from 25%, depending on the way you figure, to maybe something even more than that but we have to do that the word that i want to use is reciprocal when they charge 25% for a car to go in, and we charge 2% for their car to come into the united states, that's not good that's how china rebuilt itself. the tremendous money that we paid since the founding of the world trade organization, which has actually been a disaster for us it's been very unfair to us. the arbitrations are very unfair the judging has been very unfair
and knowingly, we always have a minority and it's not fair. so we're talking to world trade. we're talking to nafta we're talking to china we're talking to european union. we're talking to european union. and every single one of them wants to negotiate and i believe that in many cases, maybe all cases, we'll end up negotiating a deal. so we've spoken to china and we're in the midst of a very large negotiation. we'll see where it takes us. but in the meantime, we're sending a section 301 action i'll be signing it right here right now. i'd like to ask bob lighthizer to say a few words about the 301 and where we are in that negotiation. and we're doing things for this country that should have been done for many, many years. we've had this abuse by many other countries. and groups of countries that
were put together in order to take advantage of the united states and we don't want that to happen we're not going to let that happen it is probably one of the reasons i was elected. maybe one of the main reasons. but we're not going to let that happen we have right now an $800 billion trade deficit with the world. so think of that so let's say we have 500 to 375. but let's say we have 500 with china, but 800 total with the world. that would mean china is more than half. so we're going to get it taken care of. and frankly, it's going to make us a much stronger, much richer nation the word is reciprocal that is the word i want everyone to remember. we want resprecireciprocal, mirr some people call it a mirror
tariff or mirror tax just use the word reciprocal if they charge us, we charge them the same thing. that is the way it's got to be. for many decades, it has not been that way. and i will say the people we're negotiating with smilingly they really agree with us i really believe they cannot believe they have gotten away with this for so long. i'll talk to prime minister abe of japan and others, great guy, friend of mine, and there will be a little smile on their face. and the smile is i can't believe we've been able to take advantage of the united states for so long. so those days are over ambassador lighthizer, thank you. >> thank you very much, mr. president. first of all, for those of you who don't know section 301 is a
statute that gives substantial power of -- >> we just heard the president of the united states announce those new tariffs on china what the president said could be about $60 billion. the president saying he is asking china to cut the trade gap by $100 billion pointing out, quote, we have a tremendous amount of intellectual property theft going on said the president. he also said of china, i view them as a friend, which was interesting in the way that all of this could be perceived and what china's reaction to all of this may in fact be. kayla tausche has been listening in what did you make of this? >> reporter: this is really the culmination of the president's campaign trade strategy that he has been pursuing. of course the business of government works a little slower they launched this investigation eight months ago but this is the latest and i would say perhaps the biggest of any of these investigations. the report that the ustr is putting out deals with 1300 product lines and they have be
levying tariffs on ten industries it is important to note this will be a stair step approach. in 15 days the ustr will be putting out a list of products that will east see these tariffs. stake holders have 30 days to weigh in with any additional feedback on this and then within 60 days, treasury will be evaluating investment restrictions to follow this. it is sort of a one-two punch. the administration at some point may also start are considering restrictions on student visas. so this is a stair step approach, but at no point in that process does it really allow for softening of this or any opportunity for china to come to the table which is a different quality to this announcement compared to what we saw with the steel and aluminum tariffs that the administration announced about three weeks ago. >> kayla, thank you very much. we'll continue to follow the story. the market reaction of course. okay, guys the dow 150 points offer of its
worst levels what do we make of it? >> the unknown is now the known. as best as it can be known and i think that the opportunity here now is to see who else carries the water along with the united states against china. they don't want the stuff dumped in germany as we were saying they don't want dumping going on in france and all the rest so i think that you will get that push back from the rest of these countries to try to get the negotiation so that this is not a $60 billion or $100 billion or whatever. >> josh, there are obvious risks that come with all of this, whether it does become a full blown trade war, how china -- even though the president says i view them as a friend, how they reacts to all of this and how investors need to figure all of that into their calculus of where the market may go from here >> so china is playing a much bigger game. they are militarizing the pacific ocean.
they are focused on a little bit more than ip at the time a theft. i'm not an expert on trade, just making a guess based on what has gone on in the past. we really won't know for sure. but when you look at nike and ford and companies with a big china business, whichever s&p 500 company pretty much looks at china as a growth market it's not going to be great so i don't think it is the end of the world i think investors will eventually get comfortable with the idea that things have changed. but i don't know that we can actually formulate trades. what youyou can say is if you h google and facebook getting into china this decade, you can forget it. >> there will be some level of corporate support. certainly the president would like to see that you all may have noticed besides the president trump stavice-pre behind president trump, you had the ceo of lockheed martin there
as well. so let's react to the interview with knee if you look at the stock, it is a screaming buy. do we believe thatknee if you look at the stock, it is a screaming buy. do we believe that i've heard it from other people who have big skin in the game too. >> i don't believe it. i think facebook could see considerably more pressure on it especially depending how he comports himself when he does go before our congress, when he goes before the european union which has also called him, when he goes before the uk. so it won't be the same as a softball interview this will be people that are really going after him and how does he bristle when that happens. >> let's listen to how divya talked about the stock and the company of all companies that he compared to.
>> it almost trades like apple did in 2016. like a value stock like a deep value stock. and you rarely see these kinds of opportunities to own this much growth at this low multiple >> we've heard that from others, too. >> yeah, i don't know a deep value stock. apple was setting eight times earnings net of cash i think at its low valuation point in '16 this is probably not that extreme. i don't even think that it will get that low because i do agree that they will find a way past this the more interesting comment that was made, very quickly, compared to jpmorgan would jpmorgan hire that many compliance people? i looked it up on the break. actually, yes. 43,000 employees of their 240,000 employees are in what is called fortress control positions, a lot of which is compliance so, yeah, they did take it that seriously. they hired 8,000 compliance people from the end of the crisis through the end of '15.
and i doubt many of them have been laid off. facebook did $40 billion in revenue last year at 50% profit margins or operating margins that is not going to be the case going forward. you have to expect as an investor margins will contract, even if growth continues, costs will grow because they have to address this >> josh, i have to jump down quickly to elon moi in d.c >> the house looks like it has passed the $1.3 trillion spending package that final vote 253 lawmakers supporting it, including both republicans and democrats. the now is up next this sets up for a vote in the senate unclear if the senate will be able to pass the bill before the friday midnight deadline even though has enough support. earlier today mick mulvaney told reporters that the white house does stand behind the bill, so
now the house passing it, the white house behind it, it is up to the senate do its job >> all right thank you so much. give me a ticker for final trade. >> how about gilead. >> alcoa >> and i'm going long the tech sector here. >> thanks for being here that does it for us. "power lunch" starts now here is what is on the menu. president trump it willing china with $60 billion worth of tariffs raising fears about a global trade war what is at stake for america and the trade war fears are playing out on wall street stocks are dumb fwlitumbling shy and add to that the fed. which one is the biggest concern for your money mark zuckerberg finally speaking saying he is sorry for facebook's role in the data scandal and that he has taken the steps to correct the mess. but will it push advertisers away $40 billion is