tv Power Lunch CNBC May 6, 2019 2:00pm-3:00pm EDT
beneficiari beneficiaries. >> very binary outcome investors have to see what conclusions they havenappreciat. that does it for "the exchange." thanks for joining us. i'll join tyler and melissa for "power lunch" which starts now >> thank you very much we'll see you in just a second or two welcome, everybody i'm tyler mathisen melissa lee is here as well and new at 2 today -- trade talks in turmoil china backtracking, president trump threatening more tariffs what's at stake for both sides, the economies of the globe and those two countries and investors like you plus, that uncertainty sparking a sell-off on wall street but after a recent massive melt up, is today a very good buying opportunity? and keep calm and carry on that's warren buffett's motto. he was on cnbc weighing in on today's drop trade tensions and his favorite stocks "power lunch" starts right now
>> and welcome to "power lunch." melissa lee, stocks are down at this hour and trying to make a comeback the major averages are well off the session lows dow down more than 470 points in the session and dow down under 200 and nasdaq more than 2% and down under 1%. oil prices bouncing back after falling below the 50 day moving average for the first time since mid january. much more on the oil trade straight ahead and in the meantime, bob pisani at the new york stock exchange for all of today's action bob? >> the additional tariffs. it sounds pretty serious but the market reaction indicates that traders don't believe an all out trade war sis imminent. the low print at the 2898 on the s&p. well off the lows there indicating initial sellers were not met with waves of additional sellers after that the vix or the volatility index, it's 16 now, indicating options
traders are not following up on buying more protection there's been the usual knee jerk reaction you know this. en -- sell the semiconductors. that has been halfhearted. buying all of these including caterpillar coming off the initial lows but if a real trade war were to develop, the market is vulnerable right now and it's expensive. we've been saying this 17 times earnings, well above the historic norm of 16 times forward earnings and a trade war would definitely reduce global growth and earnings prospects and overall, a lower multiple and you could drop down. that's to 15.5 and 26.15 on the s&p very quickly get that multiple down lower global growth and then dropping the earnings back to you. >> thanks. president trump making those tariff threats just days before trade talks were going to
resume kayla tausche in washington with the very latest. kayla? >> reporter: kelly, it's a make or break week for trade talks in china. raising in the stakes and the end date for this friday to make a deal for the biggest to see rates more than double going too slowly and trying to renegotiate. given the new demands by donald trump, china is weighing whether to pull out of talks as it did under similar circumstances last september. and progress for a deal and president xi but the foreign ministry said they're looking for more information mick mulvaney and larry kudlow and mike pence with the possibility the deal won't work wut outbut cl out but more in the coming days. >> the president claiming that
tariffs are actually good for the u.s. tweeting that they are, quote, partially responsible for the strong u.s. economy. let's bring in pimco, managing director hamilton plays strategy partner and our own steve liesman but, steve, we start with you to do some fact or fiction, sussing out of the president's comments. >> off of truthfulness it's just way out there. i don't see how possibly tariffs are increasing or helping u.s. growth you know what brings up the trade deficit? u.s. growth. we have more money, buy more stuff from overseas. tariffs are a tax and we just kind of do the back of the envelope 25% on $200 billion of goods is about a $50 billion tax on the american consumer and american
businesses i'm surprised larry kudlow is sitting there on the one-third of the tax cut wiped away. >> for ten months, china is paying tariffs to the usa of 25%. is that a misunderstanding of how tariffs work >> i happen to know several people who work for the president who explained this stuff to him i don't think he misunderstands it >> in other words, you think that's a deliberate? >> i think it's deliberate mischaracterization. >> because americans pay the tariffs, correct >> one way that chinese can pay the tax. two ways chinese can pay the tax. reducing profits on some of this so they may hold the line on some of the prices but the other losing the business. vietnam and thailand, those are two ways but ultimately @tax is paid and the profit margins are
maintained, it's the u.s. consumer and business that pays the tax. >> what's your take about when the president issued that tweet? we sort of saw this before when the u.s. is negotiating with canada, for instance, with the usmca and other negotiations. >> i do think it's part of the pattern for the president and when he gets into negotiations, he feels like this kind of rattling puts himself in a better position, if not win concessions from the other side, but to at least color the context of the deal once it's announced later on to say that he has done everything he can to get the best deal possible and that's part of it and that's fine, a whole lot more strategy to it than that. as accurate as it is. >> is it dead? u.s. china trade deal dead >> i don't think it is at all, actually i think you'll see an agreement and you are going to see it within the context of the next weeks or so, we still feel strongly about that. there may be some walking away, that happens in lots of
negotiations but put too much work into it both sides. even if there are things that some of us don't like, i think we'll see. >> could this be quite contrarily a point at which the trade deal is actually closer to the finish line rather than farther and this is the president using his leverage in the form of tariffs to nudge it along and i also note that he seems to have expressed his annoyance that the chinese, at this late date, seem to be trying to renegotiate things that he thought were clearly resolved >> yeah, tyler i mean, that's an excellent point. i think that is at the heart of this pair of tweets, that potential the sort of engagement, there was some walking back that the u.s. thought the chinese had made however i think like tony is
framing this, this is kind of the eighth or ninth inning of these negotiations, they'll tell you this is where the rubber meets the proverbial road. the hard knotty things that have really not been addressed start getting addressed and so in some ways, a hiccup is not that surprising i also think that, you know, you would be misplaced not to take the threat seriously to increase tariffs. he could be doing this as part of the art of the deal, trying to extract more concessions in these late term negotiations but what this president has shown time and time again, he believes tariffs work he believes tariffs got him a better nafta agreement and brought the chinese to the table. i think this is not surprising, but at the same time, i don't think we should be too
optimistic this is simply just an empty threat just given based on previous actions. >> a little reality check. in the normal course of these sorts of deliberations which i've covered many for the last 20 years, on the eve before the deal, you don't say i'm about to blow the deal up you start getting nicer as things get closer to being signed you don't go the other way the idea this is some sort of genius negotiating tactic kind of defies the history of successful negotiations. >> the way successful negotiations have played out historically and in diplomatic avenues, but this president is not from the diplomats >> just another point on this too. no matter what deal he gets with china, we know that half the political world is going to call it inadequate, right we know. we've seen this before whatever deal he comes up with,
they're going to say it's not a great deal it's a weak deal he could have done better. so the context of this from him, for him, is really important and important for republicans. so take the politics out of it also. >> we heard from derek scissors but the idea there's not concessions from china on cyber and they're not really changing the rules of the road when it comes to doing business over there but is the president hearing what people are coming back after the talks last week and saying, this is not the kind of deal? >> i think he is hearing some of that i think it was always unrealistic to have all of those things wrapped up in a trade agreement in ten months. you would need years to negotiate the complexity of this relationship between the u.s. and china. >> at the same time, in terms of being tough at this moment in time, it looks like the president is getting bipartisan support going into this and when it comes to the economy and stock market, he's got that as a
wind on his back what is the president's motivation for caving in at all? it seems like he would be emboldened to take a harder line stance and not have a deal necessarily in the immediate future. >> certainly, the strong gdp numbers and the strong jobs report, the strong equity valuations to your point, all tail winds for him and all increase his negotiating leverage at the same time, i do think there is political appetite here on both sides to ultimately reach a deal, but you're right to your point. and this might just be a way, given the strong economy, the strong numbers, he's able to kind of go back to his base and go back to democrats who could be potentially critical of, this isn't a substantive deal and i did all i could. i just say this could also include increasing the tariff rates. sort of this idea he's just putting it out as an empty threat is quite misplaced. >> i want to ask you a question. what do we do now when the
president comes out with a tweet that says bad things about tariffs? and kudlow and mnuchin try to calm the markets do we believe them anymore is there an undermining of the credibility that i think is significant for potential volatility in the stock market >> you're getting to, i think, a dynamic that, as you know, existed in this white house since the very beginning there are the bob lighthizers of the world, the the pierre navarros, the china hawks and then, of course, the more free market, kind of free traders in larry kudlow and steve mnuchin you're seeing something playing out for the last two years or so i'm not sure it's a new dynamic but i do -- >> the money is being made and lost we get these negatives on trade. kudlow comes on and says everything is going to be okay and the market swings back i'm just wondering now if that dynamic may be changing.
>> everything won't be okay though the market reaction will be pretty significant >> we'll leave it there, people. thank you. libby cantrell, tony, and steve liesman. >> hot topic, everybody. chips getting chopped on the trade. all lower and a closer look at all the sectors that could be affected if trade tensions heat up even more what does warren buffett think of a possible trade war 'lhe fm m xtn wel arrohine o "power lunch."
warren buffett weighing in on a possible trade war and much more in a wide ranging interview with becky quick this morning. becky joining us now from omaha with more. hi, becky. >> hi, ty. it's great to see you. things are looking better in the markets than they were this morning before the open. at one point, we were looking at the dow futures down by 500 points at that point, people were thinking that the chinese might not have actually sent their delegation here to continue the trade talks this week and had people assuming the worst. >> if we actually had a trade war, it will be bad for the whole world and could be very bad depending on the extent of the war, but there's times in
negotiations where you talk the talk the one thing you can't do though is shake your fist first and then your finger later on. that's not a technique that works well >> reporter: the chinese have since said they are sending their delegation that has calmed a lot of things in the market. that might be why you're seeing such improvement in the stock market aside from that, bill gates telling us this morning with the situation with the heated rhetoric, most people are assuming logic will prevail. >> markets up until recently were assuming this deal would get closed so that's a little bit why you see the delta, the rational thing would be for a deal to get closed and i still rate that as likely >> reporter: our interview this morning coming at the end of the berkshire hathaway annual meetings that took place this weekend. all kinds of people come to this 40,000 shareholders, plenty of business leaders along the way
including tim cook this was the first time to come to the annual meeting for tim cook the apple ceo. he did that, of course, because of the large stake that apple, berkshire hathaway amassed and got a chance to sit down with tim cook and talk about things that are happening in his industry we did talk about how washington is really eyeing technology, additional regulation coming there and the potential for breaking up some of the big tech companies. cook is a little bit ticked off his company gets in with some of the others in the industry >> tech is not monolithic. that's like saying all restaurants are the same or all tv networks are the same they all have their own personality and characteristics and so forth if you look at apple, we are large and we're geographically in the same location as a lot of tech companies and that is about
the extent of the commonality. market cap may be another one, perhaps, but put those aside, i don't think anybody would call us a monopoly or anybody that has a very deep mindset because if you look at our share, we have 15% share in the world on smartphones or 8% or 9% on personal computers, so on and so forth. so the share is clearly not a dominant kind of company our dominant market. that's different depending upon which of these companies you look at, right >> reporter: cook never named facebook as the bad player but it's pretty easy to draw that comparison when you hear what he says about privacy and the huge distinctions he's made with what apple protects and the others are getting waylayed on.
clipped in, how hard apple works for tech privacy and why they think it's their responsibility to make sure their consumers' privacy are protected. >> i want to jump in with an observation and not a question i've been watching a lot of the nba and sports later and apple is doing something which is very qualitatively different in advertisements they are advertising their commitment to privacy. they are not at all, it sealems, advertising a product. >> reporter: you're right. tyler, i've seen the same commercials. privacy is important in every aspect of your life. your phone too they are really out there with this message they are really trying to make sure they are drawing a distinction. i think part of it may be, they're so frustrated to get painted with the broad swath of the others like in the eu and other places they want to stand out and say,
this is not what we do tim cook in our interview but also other times privacy, our customers are not what we're selling other places, our products are there and it's our responsibility to protect our customers' privacy other companies, the customer is their product, the information they're taking from those people >> becky, thanks very much i appreciate it. >> thanks, guys. >> the apple ads i've seen looks like an episode of planet earth. did you see? just montages of forests and snakes and i don't know, they have good cameras too. chip stocks on pace for the worst day in two weeks still up about 30% this year we'll talk about it. the market trying to make a comeback but three sectors in particular getting slammed tech, materials, and industrials. all down 1% or more. dow dupont leading and then black and decker
feeling the losses stay with us what's a target date fund? what's a hedge fund? a mutual fund? an index fund? what should i ask my investment professional? how do i know if they're even legit? edgar? who's edgar? how do i read a 10-k? what about fees? what's an etf? 529 plan? 401(k)? how do we plan for retirement? where do i start? empower yourself with the free tools and resources on investor.gov. before you invest, investor.gov. on investor.gov. does your wealth manager a cfa charterholder does. you've worked hard to grow your wealth. make sure you're working with a wealth manager who can grow with you. cfa charterholders have the investment expertise
york stock exchange. semis stocks sinking today tensions with u.s. and china after raising 30% higher in 2019 is it time to back away from the chips? larry of oppenheimer and gina sanchez, your "trading nation" team today this has been a leadership group off the december lows and started to wobble before this week do you buy this dip or no? >> we think you do we're in the camp that this pullback is viable and one of the reasons why and i guess framing the environment i think we're in, it looks like 2013 and 2016 to us speaking in terms of the philadelphia semiconductor stock indexes. this was the last time the index punched through yearlong resistance after at least a 20% decline and in those prior periods, went on to rally for another year and they were viable so i think that road map sticks and it's very simple for us. the assumption is that it does,
as long as the breakout holds and as long as you're above the breakout at 14.45 which was the january 2018 peak. you buy the pullback and this long-term uptrend continues. >> that would suggest every three years get one of these chances. how do they look here? a view on china and also where the chip cycle is. >> you got it. you have to assume this china noise goes away. if you take that assumption, you also need to buy into the idea that chips should be recovering by the second half of this year or the first half of next year that's the current rhetoric. but if you look at the chip stocks, this is really idiosyncratic and i'm not sure we'd recommend trading this as a group because each one of these stories often trades against another chip stock so you have to be careful about how you trade this but generally speaking, the assumption is that chips recover by the second half of this year or the first half
of next year so you're going to be in for a rough ride between now and then based on trade >> usually a jumpy group has been a bell weather for the overall market see if it continues to be so ha larry and gina, thank you follow us on twitter at @tradingnation. back to you, melissa >> thank you, michael santoli. stocks well off the session lows trying to make a comeback right now. should you buy on this drop? where the opportunities are right now. bombshell news about boeing and the safety features of the 737 max jet and wall street's smartest minds meeting up at the conference, next best investment ideas. we'll head there to break it down ahead on "power lunch." >> and now, the latest from tradingnation.cnbc.com and a word from our sponsor. >> volatility spikes are notoriously difficult to forecast but when they do occur, tend to be short-lived rather than try to predict the
i'm sue herera with your cnbc news update this hour the mississippi river is rushing through a key levee in st. charles county missouri north of st. louis. the national weather service says the levee was breached earlier this morning people living in that area have been asked to move to higher ground quickly a new united nations report says one million species of plants and animals in danger of becoming extinct seas are lost at a rate tens of hundreds times faster than any time in the past however, researchers say it's not too late for human beings to fix the problems causing this wave of extinctions. the president's one time former attorney is now in prison he will serve a three year sentence for campaign violations pope francis is in bulgaria helping to celebrate first
communion of catholic children in that european nation. there are only 60,000 catholics in bulgaria. 80% of the country is orthodox christian. you are up to date that's the news update at this hour back to you. >> thank you, sue herera. 90 minutes until the closing bell rings quite a comeback the dow jones has been down as many as 470 points and now down 150 or just over half a percent right now. the nasdaq was down 2% or off 0.8% or 65 points in the s&p 500 down by 20 cancel sf kelly? >> some of the others, sinclair broadcast, biggest gain in ten years sent the stock to a record high the company is buying 21 regional sports networks for disney had to send to buy fox, look at the $35 gain different story for churchill downs. after that controversy kentucky derby where the horse that crossed the line was
disqualified that gave the win to long shot country house churchill downs 165 million dollars on all sources the sheriffs down 2.5% and the check of beyond meat which is higher once again and getting close to triple the ipo price of $25 at 6% higher for over $70, $71 a share. a wild day for crude oil prices there are closing let's get more of dom chu at the commodity desk dom? >> part of the story, the turnaround to start off with the headlines here oil prices in the green right now. west texas intermediate up by three quarters of 1% and low as $60.04 overnight a 3% decline reversed to a near 1% gain and same story, $71.36 there and at one point, those prices have been pretty much higher all day long. some traders point to increased tensions in the middle east as the u.s. is deploying the uss
abraham lincoln in a show of force against iran and now we have headlines out of reuters just this hour with secretary of state mike pompeo continuing to see iranian activity that makes america thinks escalation is taking place a bid to oil prices again. the story in energy markets was the conflict, the tug of war between downward moves in oil because of what may be happening with faltering u.s./china trade talks and the bullish story out of the persian gulf and appears more emphasis placed on geopolitics. back to you. >> thank you, dominic. the whole market taking a hit on the china trade worries, which sectors could be hit the hardest if trade tensions do escalate seema modi looking at this for us >> we discussed the u.s./china trade discussion the u.s. imported $500 million in goods in 2018 top three sectors, technology including consumers, electronics and chips made up $186 billion
and 30% of that and industrial goods at around $120 billion and clothing at 30 the question is which companies would most be impacted by these renewed trade tensions and higher tariffs now, analysts say within tech, it would certainly be the semiconductor stocks like sky works, qualcomm and make up 50% of the revenue in china according to goldman sachs and in industrials, boeing, commons and caterpillar come to mind these rely on growth in china. lastly are the consumer driven names like nike and resorts betting on china to drive future growth wynn resorts drawing over 70% of its revenue from china the market reaction today shows that it's these companies with high exposure to china that are faring the worst although they are off the lows
if tariffs increase from 10% to 25%, these kind of companies that investors keep an eye on. back to you. >> thank you very much seema mody. stocks down on the trade worries but a dow up about 13% so far in 2019 so is today's little dip a buying opportunity with the dow industrials, look at how far they've come back. down 133 points. a chief investment officer with whittier trust and chief investment strategist. for u.s. stocks, let's just say global stocks but particularly, u.s. stocks, do you see green lights, red lights, yellow lights >> green lights, the fundamentals are very strong think back to december what were the big fears in the market it was that the global slowdown would result in impending recession and the fed would be on its way to committing a costly policy mistake. those fears have receded
dramatically, today notwithstanding. come back to the tariffs in just a moment but first quarter gdp growth in excess of 3% jobs growth has been nothing short of remarkable. we added 263,000 jobs. >> been good. >> corporate procfits have been good the fundamentals of the u.s. economy are stellar and they don't signal any recession on the horizon. in fact, it is this very strength that's emboldened the u.s. party in its trade negotiations because they want to leverage this strength. >> do you see green lights ahead for u.s. stocks, reds or yellows? >> i agree a lot with what he said i'm kind of a green light too right now. i would say this, tyler. just to add on to what he's saying there i look at valuation day and the forward and trailing is slightly
above average, and pull back in the stock market that occurred followed, of course, by the big rally from '17 into '18. i think values are good and so far, the rally is because we paused, the fed paused and inflation came off and that's created a big evaluation and the next catalyst could be not only that we recess, that's kind of already come out but we start to notice that earnings don't just do better than feared but actually start to reaccelerate and growth turns out stronger than expected and if you have rising earnings where the ten year treasury still below 2.5% and the fed hasn't started tightening, inflation up 2%. i think there's quite a bit of upside room for even the multiple to go higher or even 20
times earnings as well as 20 times trail, as well as earnings as they start to climb as well so i do think there's upside, yeah. >> you're both green light type of guys. let's say they go up to 5% from 10%. let's say another round of tariffs go into effect on the rest of the goods we bring in from china given the market reaction, very, very muted to president trump's threats, could you say you would still be a green light if the tariffs were put in place? >> i think so. all this does, and it pushes back the resolution. the end of the saga gets postponed a little bit but it does not change the end game and that is for one simple reason no one wins in a trade war and to fully engage in one would be incredibly foolish. so yes, out of implementing the threat, we could have a couple weeks, maybe a month of these additional tariffs sooner or later, this will get
resolved, calmer heads will prevail and the weakness today or anything that ensues in the following days might actually be a good buying opportunity. >> jim, this morning, warren buffett says he was most surprised with fuller employment, a growing budget deficit, the long bond was only 3% and if it stays at 3%, stocks are ridiculously cheap do you think it stays at 3%? >> i think i agree with that the 10 year treasure of 2.5 and trailing at 19, inflation, you could easily see multiples of 20 times earnings they've been there a lot since 1990 and been there or better with any kind of remotely close environment like this. so as long as we stay in this area, i think there's upside room on values >> as long as we do but i ask if you think we will. >> that's right. i think eventually, kelly, yes growth is going to be stronger than we think here in this second half. we might stay around 3% this
year and if we do, with the unemployment rate already below 4, we're going to see a return of problems. wages into 2020, head towards 4% and push 10 year yields back above 3 and the fed back in the game while overheat has been paused, this has been an opportunity i think it's going to come back and by 2020, deal with some of the same issues we had in 2018 again but it could be from a lot higher levels than we are now. >> 4% wage growth sounds pretty good to a lot of people. jim paulson, thank you very much appreciate you being here. fantastic. >> great to be here. >> interest rates on the move. rick santelli from the cme rick >> they're on the move but they're in awfully tight ranges. consider some slight curve flattening impressions two years down three and ten years down four and 30s down two so the 30s being traded here in chicago. look at a two day of tens.
and then melissa lee is right. it's crazy but once the craziness ended, a couple basis point range. look at a month of 10 year on top of the s&p 500 you know, that drop in rates from the 260 area certainly didn't hurt stocks and as many as fundamentals changed and the final chart, gave up pretty much all of his flight to safety value today and hovering just above on chains but still 97 handle still a bit of strength as we continue to monitor how investors are dealing with complete uncertainty as what lies ahead for trade kelly, back to you >> thanks very much. rick santelli. wall street's smartest minds gathering in new york to unveil their next best investment ideas. that means not the next best but anyway, stocks moving. 3m and chemours.
we'll break it down. it could be a wild couple of hours heading into the close the dow was down 471 points rlr d wn22ndacin two. people know aflac. aflac! but not when to use it. do i use aflac when the kids get slime in the plumbing? no. that's home owner's insurance. slime in my motorcycle. no. that's motorcycle insurance. slime everywhere? ughhh nooo, there's no insurance for that. do they help when i have bills health insurance doesn't cover? yeah! that's it! aflac! gross guys. get help with expenses health insurance doesn't cover. get to know us at aflac.com
right now, stocks still down by well off the worst levels of the session. good day to be talking to the biggest names in investing leslie picker from the sohn conference >> reporter: a series of elon musk quotes. he said they were meant to show musk's broken promises and at the end, he put up a poop emoji over his face. that was part of the presentation and then pivoted towards the suggested trade which was really a long and air cap and gatx this is emblematic of his thesis later in today's presentations,
larry robbins gave an impassioned overview of the health care industry right now against the regulatory backdrop and he said the odds of medicare for all becoming law less than 1% and investors for a pharma etf. the one issue both democrats and republicans agree on is that drug prices are too high and recommended hmos and hospitals and also urged investors to short chemours and 3m over what he described to be their litigation risk related to the chemical pfas. if they leak into the water supply, they can be unsafe to drink and so robbins said the lawsuits are accelerating against 3m and chemours which could amount to billions of dollars in losses that they have not yet appropriately reserved for. other interesting picks today included a short and community health systems, along in zillow
and cabot oil and gas. >> thank you very much to kayla tausche we go with breaking news on those trade talks. kayla? >> reporter: tyler, we learned that the chinese delegation does plan to come to washington definitively this week for a potentially final round of trade talks. we are trying to get some more detail on exactly what we could see later this week. whether that delegation will in fact be held by the vice premier liu he if in fact liu he is the one who comes with the delegation, that could portend a positive outcome by the end of the week on the other side, china expected to send a 100 person group to washington as a sign of good faith for this round of negotiations one of these sources briefed on the status of talks expected to have a smaller group because of the escalating tensions but should still expect to see a
group of chinese officials here to discuss trade this week back to you. >> just looking at the markets, dow is down less than 100 points right now. kayla, as earlier reported, going back to last night, this meeting may not happen you had firms like goldman saying, you talk about those tariffs looking like the base and now unwinding that, if they are coming after all, maybe we bring down the prospect of those going into place >> reporter: to be clear, kelly, in most of the situations, all of the handicapping, it tends to be wrong because it's anyone's guess what it will be. like 20 news cycles here in washington my sources are briefed on the current status of talks because always the caveat that president trump could decide he isn't happy with where things stand in trade talks or doesn't want the delegation to come so as always, a fluid situation but right at this moment, there is expected to be a delegation coming this week. >> like 100 news cycles lately
kayla, thanks have, very much. markets with the dow opening 471 points this morning now staged almost a complete comeback blue chips down less than 100 points nasdaq down half a percent but the 40 point 86. about a third of a percent so it is the outperformer today. s&p 500 still down 13. we'll have more right after this
shares of 3m taking a hit. glenn roberts urging investors to short 3m over concern over the chemical -- scott davis, he's got a hold rating on 3m, a $227 price target on the stock scott, great to have you with us >> happy to be here. >> he's making the comparison to an erin brockovich kind of situation where they might be tied up in litigation for years to come. what's your take on larry robbins' claims? >> well, i'll tell you i've known larry a long time he's pretty sharp. and assuming he's done his homework on this one, i haven't read anything he's put out there yet, but if he's done his
homework he could have something. we don't really know these pfcs are toxic they're called forever chemicals because they just don't break down naturally so once they're in your water system it's almost impossible to get rid of them. so in theory, yes, these lawsuits could be rather large it's really hard to know how much >> one of his points is that 3m, just 12 days after filing their 2017 10k in 2018 paid out $850 million to the state of minnesota, which claimed that 3m had contaminated the water in the state for at least 50 years. new jersey has similar suits prior to larry robbins coming out today on the stage at the stone conference sxurnlging investors to short the stock did you think that the litigation claims were contained? >> no. i mean, i lived through asbestos many, many years ago and i don't think you can ever draw the conclusion that claimed are contained. i think the company is doing its best at least to communicate a
scenario, an outcome that is likely not going to be reality but at least is a scenario and i think investors have to decide what they're going to take it's a big company even if larry's right, it's not fatal to 3m in any way, shape, or form, but it will certainly cost them cash flow. i think it's just very hard to know exactly what you're going to get and when we lived through the asbestos fears of many moons ago it was -- things just got worse and worse and worse. >> yeah. >> is this a stock that's in the penalty box for a long time? you just wouldn't buy it >> i don't think you need to own it today when you look at quarter they put up one of the worst prints that we aw in all of industrials, negative 1% growth in a group that did close to 5%. they did 160 basis points of margins in a group that had up margins in the quarter negative 11 eps in a group that was close to 10. the execution on the core
operating line isn't there and then the lawsuits on top of that it doesn't make for a very interesting stock right now. >> scott, thanks so much for sharing your analysis of 3m with us we appreciate it scott davis of melius research "check please" is xtne what's a target date fund? 529 plan? a 10-k? what's an etf? an ipo? 401(k)? where do i start? empower yourself with the free tools and resources on investor.gov. before you invest, investor.gov.
lexus ux and ux f sport. also available in hybrid all-wheel-drive. lease the 2019 ux 200 for $329 a month for 36 months. experience amazing at your lexus dealer. check please >> welcome back. pretty dramatic turnaround you started off the trading week with the shanghai composite down 5 1/2% after the president's
tweets about china and those talks not going well now you have a market where the small caps have almost turned positive, probably have now. dow's down 63 points after kayla's report a small delegation is still going to travel to the u.s. for talks this week. >> what began as a holy you know what kind of day has now become a ho-hum kind of day really. a 57-point decline is really nothing. i thought sandeep's point was interesting. even if the tariffs are imposed on friday, don't figure that's the last pitch of the last inning of this game, that it will probably play out over several months and come to some kind of cooler heads resolution. but who knows? is this a negotiating tactic or the sign of a real snag in those negotiations >> the key thing, though, is the best case scenario is that there is a deal that will be reached, it's just a matter of when and that's really helping put somewhat of a floor underneath these markets. that and of course the luxury of low interest rates and keep in mind historic valuations you take a look at p/es.
with low interest rates p/es can be more like 17 or 18 here and that's pretty much where we are. >> exactly what we heard from warren buffett this morning as well derek scissors by the way said it doesn't have to be tariffs, it could be the enforcement tool, we could do sanctions, export controls. check that out >> thank you very much for watching "power lunch. >> "closing bell" starts right now. good afternoon it's the final hour of trade i'm wilfred frost. >> i'm sara eisen. big question, could we close positive after trade war fears and stocks sinking this morning? details on negotiations with china. >> blackrock's rick ryder will tell us whether -- >> and carson block will join to us discuss a new firm he is backing. "closing bell" starts right now. welcome to