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tv   Power Lunch  CNBC  February 20, 2019 2:00pm-3:00pm EST

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foldable phone is not something we'll see any time soon. today they are pitching the s 10 line, the regular mainstream phones that maybe look like last year's, a bunch of new features and i don't know if they will blow anybody's socks off. >> that does it for the exchange and the minutes are about to be released we'll see you on "power lunch" which begins now >> and we'll see you in just a moment i'm melissa lee along with tyler mathisen the fed releasing its latest minutes on interest rates and investors looking for more clues as to what powell and company falloon do with the fed's $4 trillion balance sheet and we'll find out why the policy did its policy u-turn weeks ago. >> they are higher right now let's get a check on the markets as they stand at 2:00 p.m. eastern time the dow industrials are up by 53 points all three of the major market
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barometers in the green. the nasdaq trying for its longest winning streak since back in august of 2018 this recent rally has brought the dow to about 1,000 points from its all-time high that, of course, set back in october, the 3rd of october was the date let's get right to bob pisani now at the new york stock exchange and check in on all the action down there. hi, bob. >> hello, tyler. you know, the market is continuingies sl continuing its slow climb. the line has been advancing almost every day since the december 24th bottom and other internals are also strong. new highs are expanding. the selling pressure is fairly low and the dow is riding an eight-week win streak so the s&p 500 at about 2,800 the big issue is what can get us over 3,000 what can do that besides a trade deal talk of the fed possibly easing would be significant and any clear indication that the fed's balance sheet will be reduced less than expected
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also less talk about an earnings recession. well, that would be helpful and significant and i think most importantly it would be less talk of a global slowdown. how about positive growth commentary in europe, a more stable china and maybe better u.s. economic news than we got last week with the disappointing retail sales and industrial production number? as for the fed, remember something. these minutes occurred when jay powell was pivoting to being patient regarding future rate hikes so that's important. the markets come to believe this essentially is signals no more right headaches in 2019. we'll see about that and it could change the roll-off in the federal balance sheet if needed. all that to watch coming up. >> coming up, rick santelli is watching the bond market for us. rick >> reporter: kelly, i'm looking up at the board, and i see rates creeping up just a bit not sure how much is out there with regard to the fed i can't wait to hear from steve, but as you look at the two-day of ten, you can clearly see we're going nowhere fast but that doesn't mean we're no an important place. if you look at since the last
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fed meeting for tens, clearly a downward bias, and if you look at the dollar index there's clearly a bias but a much firmer stance that's going to the upside which is very counterintuitive for the dollar. we want to monitor how growth is perceived by the fed because even though the markets were down and that was a catalyst for the pause, the markets and the economy and growth aren't all exactly the same they rhyme, and right now we know there's a growth deficiency in the u.s. and maybe less, but, still, less than there was back to you. >> all right rick, thank you very much. we're just getting some headlines crossinging on the minutes. for example, officials are calling for patience to determine future rate moves. they smoke about the balance sheet as well. we'll have much more on this with steve liesman in just a moment. >> can't we all just be patient. let's just be patient, okay. let's bring in julia coronado, founder of macro policy perspectives and lids young, senior market strategy with bni
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melon. julia, why don't you start you're looking at the words here so what do you see >> what i see is almost all participants thought it would be desirable to announce before too long a plan to stop reducing asset holdings later this year later this year, before too long means we'll get an announcement in march they will stop cutting the balance sheet later this year. >> that is one of the things that was part of the tightening that was going on. >> exactly. >> for most of last year. >> befuddled the fed. >> and the guy who is never befuddled about the fed is steve liesman, and he's had time now to look at some of this stuff. steve, what can you tell us? >> yeah, some of this stuff, tyler. what we're looking at here is the fed saw the growth risk increasing it saw consumer and business sentiment was lower, and it saw financial conditions had tightened. it expected slower growth in 2019 a bunch of things. it really looks like just it accumulated to bring the fed to a position of pausing. i think what was found then, i think that was by liz young
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about the balance sheet, it's interesting because it's pretty much what was expected was that the fed was getting around to making some kind of balance sheet announcement in march. i don't know if you remember i got a chance to question chairman powell about whether or not they had a number for where they wanted to go to, and a number about how they wanted to get there. they said, no, we're formulating a plan right now and the implication in the press conference back in february was that they were formulating a plan and now it looks like there's a hint in the minutes that that plan is coming haven't had a chance to read that section i'll go read that section and you guys can talk about what is going on already what, we know already. >> liz, why don't you jump in and tell us what you see. >> it's definitely a good thing to see them pausing based on a number of different factors, we've heard them say a number of different times it will be data dependant. it's all about inflation and unemployment, and now i think we're learning that it's not all about those things and we are actually watching financial conditions and the things that corporations will be worried about. >> it looks like specifically they are watching the markets.
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the fomc minutes, they are worried that qt may have contributed to the fourth quarter selloff. this is a direct acknowledgement, market, you're very volatile and you saw a massive selloff and it could have been all that task about the balance sheet. >> right, right. >> the acknowledge thement that they don't have a playbook for this they have to take some cues for the market it's a more flexible approach, so they are learning as they go, and we're in uncharted territory so it makes sense and so i think that's definitely a positive for the market. >> what does the fed see potentially that the white house doesn't see? we had on kevin hassett yesterday, the chairman of the cea, and he said this year is going to be another 3% year of economic growth. it was going to keep going very nicely he's not -- he's non-plus completely about all this talk about a possible recession later in 2019 or 2020. what is the fed seeing that the white house isn't? >> i don't know that they are seeing anything all that different. i think the difference here is that the market and the economy has been sort of dislocated, even in the fourth quarter, right.
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the market sold off and economic data was reasonably strong now in the first quarter of 2019 we have a really strong market in the face of some deteriorating economic fundamentals so it's a little bit of a head scratcher, and i think what's important -- >> what's deteriorating? >> well, there's some industrial production around the globe is deteriorating. we've got consumer sentiment that fell off a cliff in january and that was mostly due to the government shutdown. i think it's important that they are watching the data and waiting to make a move and what the market wants them to do is have data that proves that they should make a move, and if the market understands why they did it, then there won't be so much of a negative surprise. >> and that's the key, too, is that they raised rates four times last year so they are in a neutral zone now is the time to back off and wait and see how the data -- >> when you're at zero or 1% it's a lot different the level of interest rates is much higher. >> going back, julia, to what you saw about the balance sheet, if you're following along at
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home almost all participants thought it would be desirable to announce before too long a plan to stop reducing the as esholdings later this year so what does that tell you about the terminal size of the federal's balance sheet at this point? >> if they stop cutting later this year, we'll be about 3.5 trillion overall, so it's higher than they were thinking before we've seen reserves decline much more rapidly. >> so here's the question for you. do they want to keep it at 3.5 trillion and if the mortgages continue to run of course, does that mean they will have to be back in the market buying treasuries >> absolutely. that's what it means, so what we're expecting is that they will stop letting the treasuries mature in april, and then they will let the balance sheet keep gliding down at a slower pace on mortgage redemptions, and then when they reach that level later this year, then they will have to start stepping in and buying treasuries as much as 15 to 25 billion a month. >> wow, that's a big number. >> it is a big number in the treasury market. >> do you think they will do
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that on the shorter end of the curve? >> that's the other question, and i don't know that we got any information about whether they are going to reinvest and build. the current policy is to reinvest across the curve. whether they are going to change that policies, i don't know whether we have information on that yet they may not decide that yet. >> i'm a little bit slow in these matters so you'll have to educate me here. is what i'm hearing this, that the neutral interest rate that we all are sort of targeting here is lower than we might have expected and that the balance sheet when it gets to sort of stasis is going to be higher than we might have expected? >> i think both those things are true, tyler. i really wouldn't add much to it the fed is really groping in the dark as any central bank does to find what the right neutral rate, is and it got some feedback, and imagine that you are groping in the dark and you stub your toe. it tells you there's something in front of you, at least at your feet, and then in that
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regard, tyler, the federal reserve learned that it plans to raise interest rates this year was more than the market thought was warranted and more than the economy appeared to think was the right way to go, and then the idea of the balance sheet being on autopilot was also something that was -- that concerned the markets and the economy. i want to read you something almost all participants it said thought it would be desirable to announce before too long a plan to stop reduce the fed's asset holdings later this year, that's announcing later this year, and let me put the parameters of what i think is going on here. lyle brainard last week in an interview said she thinks it ought to end this year and john williams thinks it ought to continue a little bit. i don't see in the minutes resolving that or how many members of the fed are on each side that have debate, but that's something that the fed is going to have to come to grips with, is how much more it's going to do, where it's going to stop, but we do know, tyler, to your original point, originally i want to say back when chairman
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powell was doing his nomination hearings in 2017, he talked about a number between 2.5 and $3 trillion for the end point of where the fed might stop now the discussion is very much in the 3 and maybe more favorably towards the 3.5 trillion range that means the fed plus or minus has an additional half a trillion to go which you might imagine is quite a bit less than adding another twillion to that so it's pretty close to being done say a year's worth of runoff. >> here's my issue though that i think is a little confusing. i'm a flow, not a stock person, so if they are going to be back in the market, starting at the end of this year to keep the balance sheets the same size, buying as julie suggests $20 billion worth of treasuries a money. you're saying by winning, by getting back to normal we're going back to quantitative easing >> no, we're not i'm a little bit jealous
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were you having a super wonky conversation about the balance sheet and i couldn't chime in. i'm going to chime in now. it's about what is the right level of reserves, and the way tyler astutely talked about searching for the neutral interest rate, they are also searching for the right size of the balance sheet. there's two things we know the amount of currency that people in the world of u.s. dollar currency want to hold as much larger. the federal reserve balance sheet must be larger to offset that the amount that the treasury has on deposit at the fed is larger. the amount that foreign banks have on the fed is larger. also, the fed does not want to be in a place where banks are scrambling for reserves. it wants to be in the fat part of the demand curve, not on the upward sloping part of the demand curve for reserves. it's -- it's my air chart helpful here for you guys when do you that. does that help you understand what i'm talking about >> do you believe that if the federal reserve is buying $20 billion or so of treasuries a
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month. >> right. >> that that means the fed is back in the market, and in a way that it was previously easing or was the argument, no, that doesn't have the same effect because they are not changing the size of the balance sheet? >> i think from the market perspective it certainly is a signal of willingness to support the market when needed, but, remember, they are letting the mortgages roll down, so they are letting the mortgage securities roll off. >> they are buying in the treasury. >> but they are buying in the treasury market so i think, look, overall, it does say that probably question is a monetary policy tool that's going to be with us. i don't think that there's any way to really conclude otherwise given where we're getting to on rates. >> right. >> in a real downturn, and i'm not talking about where we are with just uncertainty, but in a real downturn where they are having to ease, there's just not a lot of room on rates and they are maintaining that position in markets. >> what's the ultimate position in markets, liz in, all of this? it sounds to me like the fed is going to be there. it's going to be very responsive to how the market reacts to what
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the fed does, and we are seeing right now a flattening of the yield curve. we've got the shorter end coming higher on yields and the longer end coming down a little bit. >> so what i would really stress here is that although we're talking about the fed today, it's not all about the fed. >> yeah. >> and the market is completely ignoring some of the other risks that are out there which actually makes me nervous, and we've had this huge rally because of what the fed has said and they did this complete u-turn and said we're going to support it, but we've all but forgotten about brexit and still have trade to figure out and if the market is pricing in a positive outcome on all of those fronts so it makes me nervous that we're in this far of a rally with still a lot of question marks. >> they did say -- officials said it's not useful to characterize the balance of risks given the uncertainties so they are themselves leaving all those uncertainties out there. >> let's tie it off with one thing, here. i'm looking amount these flashes here so some of the governors and the members there say not yet clear what rate moves may be needed later this year others say if the company unfolds as they expect
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more rate hikes are expected later this year. looks like a divided house here. >> right. >> what do you think will we have more ateth rate hikes this year? how many, if so? >> we're seeing one more hike this year. >> a quarter point >> probably summer or fall. >> all right. >> i'll have my suntan lotion on how about you? >> i think they have set the bar a little bit higher than we expected for another rate hike we heard that from john williams, for example, so we're sort of on the fence about whether we'll get another one. what it would take is a declining unemployment rate and further market rally >> did you have any idea all these people were actually in the room at these meetings >> i did i used to work there. >> my god, i had no idea look at all the people. >> it's a crowd. >> whoa. >> hard to turn a crowd like that on a dime, too. all the more impressive. >> steve liesman thank you as well. >> thank you. >> let's get to josh lipton from the samsung product event. hey, josh. >> reporter: melissa, we're at this event which just started and execs are on stage making news getting a lot more color
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about their foldable phone so when this phone is folded, melissa, they say it will be small enough to fit in the palm of your hand, 4.6 inches when it's unfolded and 7.3 inches it's going to come in four colors, two batteries, six cameras. the price, $1,988. it will be available on april 26th so why is there so much excitement about this technology we've talked about foldable phones this is a radical new form factor, a radical new design and the hope of some analysts is that it will inspire a lot of consumers in the months and years ahead. and i caught up with a tech analyst at this conference he understands the excitement, but he said let's test drive these devices and see if the os and the operating systems and the apps work as smoothly as advertised and, of course this, price tag, $1,980. how many consumers are going to be excited about that? i'm going to hop back inside and
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bring you more headlines as they come, guys >> all right josh, thank you. exciting stuff josh lipton. coming up on "power lunch," while politicians are paying increasing attention to the tax returns of the wealthy, the irs is not we will tell you why audits are down, especially for the highest earners. plus, the show of tilray joins us to talk about his company's $3 billion -- actually $400 million. the stock is up over the past six months can it go even higher? "power lunch" will be right back we see harnessing natural gas unleashing the promise of clean energy. at emerson, when issues become inspiration, creating a better world isn't just a result, it's a responsibility. emerson. consider it solved.
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president trump talking about tariffs moments ago and eamon javers has the news from the white house. eamon. >> reporter: this is on ought ore tariffs. the president was asked about the prospect of those. take a listen to what he said and he'll tell you what we know on the known landscape of the auto tariffs in the e you are. here's his comment. >> something we're working on. they are certainly tough to make a deal with, the eu. they have been very difficult over a period of time, over many, many years, so it's something that we think about, and we're negotiating with them. if we don't make the deal we'll do the tariffs. >> you haven't changed your mind about it at all? >> the new report is not that kind of a report it's just really a study that's under way. we've studied it very carefully. we've seen the results but the bottom line result is whether or not we can make a deal with the eu that's fair
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we've lost about $151 billion trading with the e you are that's a lot of money. and this has been going on many years. they wouldn't meet with the obama administration, and they are meeting with us, so we'll see what happens >> so the new report that the president is talking about there, guys, is a commerce department it's confidential given that the president over the weekend a lot of speculation what might be in it, whether or not it recommends tariffs, but ultimately this.is saying if he doesn't get a deal that he likes in the eu he will impose tariffs saying they are the negotiating level and this is something that he's done with other countries around the world. the president was quoted in german media just over the past couple of days saying that trump gave me his word that there won't be any car tariffs for the time being i view this commitment as something you can rely on so that's an interesting commitment from the german side, from the eu side, suggesting that the president has committed to no
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tavaras, and here we hear the president suggesting if he doesn't get the deal he likes tariffs are certainly an option, guys. >> there's 90 days basically, right, for the receipt of the report, for the amount of time that the president has to decide >> right, and the question is what did the report say and ultimately what does the president want to do here? does he want to impose the tariffs? the president has talked a lot about the number of german automobiles on american roads. that's something he doesn't like just visually as an aspect of the economy that he sees day to day, but the question is does he want to disrupt such a major sector when there's so much going on with north korea and china and all the other fronts that he's dealing with right now. does he want to open up enough fight? we'll have to wait and see as he says. >> eamon javers joining us at the white house today. shares of tilray soaring as they bought manitoba harbor joining us for a cnbc exclusive
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is brendan kennedy, the president and ceo of tilray. thanks for joining us. >> thanks for having me. >> how big is this north american market? since the passage. farm bill in december a lot of people are wondering how big this market could actually reach. >> it's really hard to now you know, current simts are that the hemp-derived cbd markets in the u.s. markets could be around 22 billion. >> in terms what have this gets you, it gets products like these into the hands of north american consumers. >> for us it's a strategic acquisition to accelerate our entry into the u.s these products are available in about 16,000 retailers in north america, about 13,000 in the u.s., so places like walmart, costco, whole foods, amazon, consumers can buy these products, and they have a supply chain that ties them into about 30,000 acres of hemp grown in north america and so we like the supply chain and the product >> does this is have any cbd oil
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or cbd product in it >> it doesn't. >> this is hemp. this is hemp it's fully legal in the united states and in canada, available in retailers even the oil is hemp seed oil. >> what are you going to do with that >> you can cook with it, add it to a smoothie. >> you look really skeptical. >> i'm just curious. >> it's very nutritious. >> if i had the munchies, will these help >> they will so they are high in protein, they taste -- have a nutty flavor. >> had a nutty flavor. >> you use them in pancakes you were saying? >> i use them in pancakes when i cook pancakes in the morning for my kids. >> is the ultimate goal to have a portfolio though of cbd? >> that's right. >> think about their supply chain. they have relationships with 30,000 acres of hemp grown by farmers. they have a state of the art processing facility where they make these products and then they have a distribution channel through 13,000 of the largest
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retailers in the u.s., and our intent is to use that supply chain to help accelerate the cbd products that we will introduce by the summer through that same supply chain all of the retailers are facing demand to supply and sell cbd products and so this helps us speed up that process. >> i've been wanting to ask you since we had alex baronson on the exchange a couple of weeks ago. he wrote the book and i'm sure you're aware of about the dangers of marijuana. >> "tell your children." >> and he tells how there's a lot of psychosis as a result of marijuana use that people aren't focused on because it's dismissed as, you know, that's old fogey stuff and, you know, this market is great what the happens -- are you convinced enough about the science to say we're not worried about facing litigation or blowback or those kinds of concerns down the road >> you know, we -- when we look at that, there's a lot of that science has been debunked. some of it hasn't.
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there's certainly -- when i look at cannabis, i think that prohibition causes far more harm than the product being prohibited, right? >> yeah. >> think of mass incarceration, african-americans and hispanic-americans and talk about medical patients that don't have access to medical cannabis. >> we went very quickly from saying there should be medical marijuana and all the appropriate uses we've talked about to recreational marijuana is fine that happened so quickly. >> i think part of it has to do with the fact that in the united states cannabis is scheduled as a schedule 1 narcotic so the dea considers cannabis to be as dangerous as lsd and heroin, and that -- that just doesn't make sense. 13% of americans believe that medical cannabis should be legal. you can't get 9 out of 10 americans to agree on anything so since it doesn't make sense you've seen this push for government agencies to rationalize cannabis
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legalization. >> is your business ready? for instance, will you roll out cbd products to have dosage information for food how many, you know, grams of, i don't know what the measurement of cbd would be in a certain survey or even for medical marijuana if -- there had to be warning labels are you ready for that >> so tilray's medical products are available in 12 countries around the world in all of those countries through farm circumstances all of those products have dosage guidelines, data sheets on the precise dosage and what's in that -- that gmp product, and so we'll do that same thing with cbd products here in the u.s. >> so even for food? >> that's right. >> pick up a bag of cbd granola and they will know how much is in each serving. >> that's right. >> how much is that slice going to be, is it going to be medical or recreational cannabis-related
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products >> today there are 41 countries that is have legalized medical cannabis eight years ago it was just 15 it's really hard to predict the next three or four countries that will legalize. >> on the recreation side i heard this morning a number about taxation of recreational marijuana in new jersey. sales tax of something like $40 per ounce. is it likely that marijuana, legalized recreational marijuana will be so heavily tax that had it will be available -- it will be a rich man's product, rich person's product and that there will still be a street product out there? >> i think you've seen states like washington when they initially implemented their adult use product, their taxation level was too high and that actually fueled the black market, the illicit market, so you always have the illicit market to keep things in check, and so the tax rate is too high. >> that's quite a way to think of an illicit market
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>> if the tax rate is the too high, it actually fuels that market, and so that's the worst outcome. what -- what we would prefer is that the tax rate be rational so that illicit market can be wiped out and then use that -- that tax -- those taxes to benefit people who have been harmed by cannabis in the past and cannabis prohibition in the past. >> brendan, thanks so much for coming by. brendan kennedy, the ceo of tilray. >> maybe melissa will try hemp heart. >> oh, yeah. i'm all for it. >> i'll mix it in some yogurt. >> time for "trading nation. chinese markets outperforming the s&p 500 in the past three months is there a bigger market ahead >> mark newton and stacey gilbert of susquehanna joins us. >> china year-to-date has been impressive do you think it keeps going? >> i think 2019 might be the year of the bull, not pig for china. i like china i'd be buying current levels the xsi, pushed up to levels
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near 43, 46. that's an important level. if you look back over the last couple of months, getting above 43, really the 65 level should cause further acceleration higher you've seen longer term breakouts from a one-year pattern. a lot of this has to do with the u.s. dollars we've seen more and more signs that have rolling over as of late which has helped the u.s. markets and commodities and china so i think that really continues in the months to come, potentially the years to come. >> it would be good for u.s. companies, too that's the etf stacy, what is your view about the china rally to keep going? >> i would say when we look at the etfs and options investors certainly are agreeing with more that there could be more upside here specifically if we look at xfi options, it's interesting to mark's point about the 44 level. that seems to be the strike that investors are positioning suggesting that fxi could see more upside here in the near term but it's not related to fxi. there are other names where
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we're seeing upside positioning. i would look at "x" trackers harvest 300. hsar that's where we'll continue to see upside positioning this could be also be related to the discussions including ashares more into their indices. if we look at individual etfs, the china etfs, we continue to see inflows there and overall i would say yes on the cash levels and options level. investors are positioning bullish for china. >> stacy and mark, thank you very much. for more "trading nation" head to the website or follow on twitter at trading nation. >> let's get back to josh lipton more breaking news from the samsung event. josh >> so, melissa, in addition to that foldable phone coming april 26, samsung right now just introducing four new galaxy phones so the s 10e and of the s 10 and s-10 plus will go on sale
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march 29th some of the new features will depend on the model, but the big emphasis on camera technology so, for example, on the s10 there's a wide-angle zoom lens and there's also new features. an in-screen fingerprint reader. this sounds like a sensor that is embedded into the display, and that should in theory make it that much easier to unlock the device and a fourth model here they are talking about a new 5g-enabled hand set. don't have a price yet on that smartphone, but it will launch in the second quarter. interesting to think about samsung's position as it launches all of these hand sets. still a dominant force, obviously in the global smartphone market, market shares around 21%, but actually caught up recently with idc's tom minelli, and he points out some. pressures that the company is facing, too, on multipam fronts from apple on the high end of the market, from chinese vendors
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like zhao ming and the news sheer that samsung is now introducing four new hand sets guys, back for you. >> thank you very much, josh and ahead on "power lunch," why the irs might be auditing fewer tax returns this year. plus, the battle over the bundles. does cord-cutting really save you money. and what samsung's latest devices that josh just talked about, what do they mean for apple and the cell phone wars? >> announcer: and now the late forest tradingnation.cnbc.com and a word from our sponsor. short interest is often used to gauge market sentiment a rising short interest could mean investors are becoming more bearish on a company and however when short interest reaches an extreme tlefl could off be a contrary indicator because traders are often forced to buy back their short stock and that can drive the stock much higher.
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i'm courtney reagan. here's your cnbc news update british prime minister theresa may meeting with european commission president john conclude junker in brussels as
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she seeks to secure legal assurances on an irish border security backstop agreement later both called the meeting constructive and plan to meet again. a convoy of trucks carrying hundreds of civilians leaving the last enclave held by the islamic state militants in eastern syria signalling a possible end to a standoff that has lasted for more than a week. it's the final scrap of territory left to the extremist group. >> secretary of state mike pompeo greeting the maldives foreign minister at the state department during his visit to washington the foreign minister met u.s. trade reps to discuss increasing exports from the maldives fisheries to u.s. markets. and according to new data from "usa today" and survey monkey most consumers prioritize the basic such as battery and camera over flashy features. 735% want longer batali life while 52% like a better quality camera that's your cnbc news update at this hour. tyler, back over to you. >> court, thanks very much. while scrutiny of the wealthy and their taxes from
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politicians have increased, scrutiny by the irs has gone the other way. robert frank joins us to explain why. they are not watching the wealthy, that's where the money is >> reporter: they are watching them, just not quite as much anymore. the new tax law filled with loopholes and opportunities for let's call it creative accounting and the odds of getting audited by the irs are the low nest is a years. the irs rate has fallen by half since 2011 6 in every 1,000 returns were audited in 2017. the irs did 630,000 fewer audit last year than they did in 2011. now the wealthy which are audited the most have seen the biggest reduction among those making 1 million or more about 1 in 6 used to get audited, now it's less than 1 in 20 many say budget cuts the agency's total budget is down 16% since 2011. the number of auditors, they call they have recommend neuve agents have fallen from 14,000 to under 10,000.
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that's the lowest number since 1953 now many democrats say the agency is being starved for funds and can't do its job of collecting revenue to fund the government, and many republicans say it's a blow to bureaucracy that became politicized under the obama administration and should be reformed and perhaps cut even further add to that the lingering backlog from the government shutdown and you have an agency that could be stretched during one of the biggest rerights of the tax law in more than 30 years. >> we should look at whether or not the irs is actually bloated because the absolute number of agents should correlate somewhat to the population or the number of returns filed you know how that has gone over the years. >> they just look at the total number of people that it has on staff and just says it's too big. it's inefficient we have given the money to improve their technology to do things that they haven't done, and it doesn't spend that money wisely so why give them more >> here's the question jeff levine is with us as well
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ceo of bluefin alliance. is it possible that if they add to staff later on they go back -- what's the period? three years that they can do an you had a senior citizen longer? >> generally three years in some cases if you severely underreport your income it can be extended out to six years and if you're committing fraud there is no statute of limitations they can go back indefinitely. >> somebody who thought i kind of got away with it now. >> they wouldn't go back and look at 2018-'19 returns you would have to do something wrong three years from now to say i have a reason to go back it's only when they catch you at something that they then go back. >> as long as people just do it once. >> exactly. >> this year is the year to do it. >> i can see is it true they might be waiving some of the penalties if you under -- what's the right word, underpaid because people are so confused >> yeah. they did give us a little bit of a window where instead of having 90% paid in you could have 85%
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paid in but it was so late it was after the year even ended so very few people were really going to benefit from that, unfortunately, to begin with. >> let me ask you two questions. what's the most common reason for people to get audited? >> well, it depends on who they are, right i mean, the irs has an idea of what a deduction should look like for someone who is in your income range, so let's say you're making $50,000 of income but you're saying you gave $20,000 to charity for instance, that's going to send off some red flags, and there's a lot more core stoppedens audits going on. >> what are those? >> might get something in the mail, a nice love letter from the irs. >> they don't knock on your door >> and they don't phone you? >> no, no, no. the whole idea that the irs is showing up to your house guns blazing is ridiculous. they are going to send you letters for the first time and say can you show us proof. can you give us some evidence that these deductions actually exist or that you didn't actually have the income that we think you did. >> given the statistics that robert just cite that had 1 in
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20 millionaires. >> making more than a million. >> are audited in every given year, does the president united states just have really bad luck >> there was a period of time during the obama administration where he created this group called the high net wealth group, and they put s.w.a.t. teams on auditors on the super wealthy. >> on the super wealthy. >> hand knows who had private companies and the audit rates for specific categories. >> for them it would be higher. >> and there was a period of time three or four years where everyone that i talked to, my sources, were getting audited because they own their own companies, and they were doing things that the government felt they really had to crack down, so they cracked down for a while. it's since then. so he was probably getting audited 2012. >> goes back to what you're claiming and maybe what business you're in, et cetera, et cetera. >> shower. >> that makes all the sense in a world. ever see a fisherman say i'm going to go fish and i'll go where there's no fish? of course no they are going to go where the biggest dollars are. you can audit 20 returns
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you can audit 20,000 returns of small income taxpayers and not come up with anything. when you audit the large taxpayers the person making 10 million, 50 million, 100 million a year, you should expect it. >> what about people who are getting more not getting the refund they are expecting? >> that's the problem. people are not getting the refunds that they expected this year everybody talked about lower taxes and 80% of americans are going to have a lower tax rate, and all of that can be true and simultaneously we can still have refunds that are not as high as people would expect, and that's exactly what we're seeing today because throughout year many people got a little bit back in each check, a little bit back in each check but they got a little bit back in 24 checks, 26 checks, hand now their refunds are not as high and one thing we always tell people is don't bank on your refund for, you know, critical expenses. i can't pay my mortgage this
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month because i was counting on my refund. that's bad planning. >> that sounds terrible. >> a much bigger problem than just getting a smaller check than you thought. >> jeffrey, thank you so much. >> robert, appreciate it >> are cord cutters really saving money by dropping cable, or are they signing up for a new and possibly more expensive bund. when this all shakes out who will be the winner well to "the bundle" next on "power lunch." ♪
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signing up for streaming services and cutting the cable, are they really saving money julia boorstin, welcome to the bundle. >> consumers are increasingly creating their own streaming packages first there are the sports apps, espn plus, the zone, second, hbo
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and show time along with netflix, of course third, the skinny live tv bundles from hulu, youtube, directv and sling. is it worth it to cut the cord we created two sample bundles. my producer, let's call him sports-loving speed picked high-speed broad band directv now so he could add nfl ticket along with espn plus and he has to have netflix. all together this costs $138 a month down from the 215 he currently pays for cable now instead of sports, i care about premium cable shows. with my broad band access i picked hulu with live tv for the originals along with hbo, showtime and netflix that adds up to $154 that's pretty much in line with the $150 i paid before i dropped cable last year. but i will be paying more when disney launches its app later this year. now, digital bundles can end up
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costing more, depending on the discounts you get on your cable bundle and how many streaming apps you choose. broad band costs do generally increase when you call to cancel cable. tyler? >> stick around. how will these various cor cord-cutting options impact the streaming wars in 2019 ed, take it away is the average person probably going to end up paying less, more, or as in julia's case, roughly the same as they paid when they had cable tv plus a separate fee for internet? >> what her bill looked like when you tack on those streaming services i think we'll all be paying about what we had been paying, maybe slightly more, maybe slightly less but economics of video even out to be what we had before and, you kn know, you're not necessarily getting a price improvement. maybe you're getting a better product arguably or these
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streaming services there's more control over what you're watching, how you're watching it, but you're out of pocket about the same amount now it's just going to be a fight between these streams services, are you part of this mini bundle you created for yourself you're probably a baseline product of that. >> are you going to get less but like it more, julia? is that the whole point here >> one thing to keep in mind, tyler, you can add and drop services without being locked in so it's much more complicated to cancel your cable bill you may be locked in at a certain price for a year but you could add hbo just before "game of thrones" starts its new season i was talking to one of my colleagues about how she was just about to add hbo for that very reason. there is more flexibility. i think it will be interesting to see what happens when our parent company, nbc universal, starts offering this new ad supported service that specifically is for people who pay for paid tv.
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is that going to make sort of people more inclined to stick paid tv bundle if they're creating their own package they might like that extra perk. >> ed, how should we think about competition and what consumers are willing to pay has there been research done on what a total wallet might be and how many services can fit in that wallet? how much do we think about how much a consumer is willing to spend? >> i think about four or five services is what a lot of studies are saying right now if you're paying about $10, $12 or $13 per service, a household won't go more than four or five services you want to be one of the four or five. what's interesting about julia's report is that in these hypotheticals, it's the sports package that's about the same or slightly cheaper and sports has long been blamed as what inflated the price of capable video bills. you could argue now, if you think about netflix, hulu, showtime, these premium services
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and the disney line, that might end up costing more despite the fact that you have more flexibility. with these guys, they're all fighting to be one of the four or five. i think netflix is probably in there as a sure bet. the rest are up for grabs. and that's where disney and at&t when they come out this time next year, they're going to fight to be one of those slots. >> i think of a big piece of it as navigatability. if somebody makes that easier. >> right. >> julia, want to ask you about the youtube headlines today. disney pulls their ads because of content. >> wired he shalled an expose talking about how content videos on youtube were getting a lot of comments from pedophiles and there were ads running on this content. and this was, obviously, a big controversy. so, epic has pulled all preroll
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advertising. they've paused all preroll advertising on youtube and their advertising agency is reaching out to goog sbl youtube to determine what actions they can take to limit eliminate this content on the service and disney has paused its advertising. youtube has issued a response saying any content including comments that endangers minors, we have clear policies prohibiting this on youtube. we took immediate action by deleting accounts and channels, reporting illegal activity to authorities. there's more to be done. we continue to work and improve and catch abuse more quickly this really speaks to the fact that ad-supported platforms, especially those that do not rely on and rely on user content. they still haven't fixed all their problems. >> julia, anyothk u. ed lee, thank you as well.
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is to never ever stop making it better. the new 2019 c-class family. lease the c 300 sport sedan for $429 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing. we segetting to patientscines in record time. at emerson, when issues become inspiration, creating a better world isn't just a result, it's a responsibility. emerson. consider it solved. during our hour, samsung unveiled its foldable phone at a price tag of $1,180. >> why do you need it? >> you don't. >> it folds. isn't that enough? >> you need it to be cool. you're going to pay for that premium. >> although the most expensive iphone is 1449.
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>> you don't really need or want to have -- it's a little bit of a signal but not like the fold. >> it's actually pretty cool i know i'll want when it comes ou out. >> clip holder is much cheaper. >> exactly "closing bell" starts in about five seconds from now. see you tomorrow good afternoon very warm welcome to "the closing bell." i'm wilfred frost and i'm morgan brennan. we'll break its latest comments and get comment reaction from former fed governor mishkin. >> and jp morgan's joyce chang

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