Transcripts For CNBC Fast Money Halftime Report 20170920

And pays out 60 of it earnings through difficult depds and has bought back stock on what people think are attractive prices. This does not sound like a company that need your help. Its a Great Company and a great business and the stock has done great for a long period of time the issue for shareholders is not how well the company has done over the past and how well it will do in the future bottom line is adp has underperformed relative to potential. Youre judged relative to your potential, not relative to fat issus quo and this is a company with huge opportunities to improve its profitability. Its not an efficient business, and in fact many things you mentioned explain the reap why are the company has underperformed when you have no debt and have a really profitable business and dominant market share. Those are companies over time that get less efficient because they dont have to be as efficient, and that lack of efficiency becomes an issue for the business Going Forward and becomes a issue in terms of a companys effectiveness versus competitors and this is a company that had almost no competitors for most of its 68year history and then the last call it decade they have started to see real competition which has really accelerated in the last five years. Easy to see the stock perm formance and say five years, adp up more than 100 . Paycheck those numbers are not correct. Tenyear adp 66 and s p 65. Those numbers are not correct and one of the things well point out in the presentation well release tomorrow is the company overstates their total shareholder return under the ceos track record how do they do that . They start, for example, the measuring period on the day after he started the ceo if you started the day before, the night before which is the proper measuring period the total return comes down by 17 so they include in their total return the performance of a Company Called cdq spun out of adp. Adp disposed of a business and that business is doubling its margins and they include that in adp shareholder return and thats one of the issues that we love to talk about, you know, how a business has done once adp has disposed of them you cant have the ceo take credit for the business that has spun off when its no longer upped your management. You put out a video together with a letter with a specific question that you were asking him and up say, and im quoting here, over the last decade adp has really lost it way its difficult to make that case, is it not, when i mention numbers like that . The answer is its all about the business otential this is a stock thats done well by the way, if you look at the stock price chart of ibm up until a period of time and you talked about their track record and you say wonderful things youre not saying adp is ibm today. Its a risk of becoming ibm if they dont take seriously the competitive threat that they face and dont run their business as efficient lire as they can. Critics say you dont understand the business. Ceo Carlos Rodriguez said you dont know what youre talking about. Those were his words Lee Cooperman was on with me saying this was an incredibly high touch business. He would know. Hes on the board for almost 20 years. Certainly maybe i should address both of those. Let listen to what lee said specifically and then you can address it directly. Of course. I know and respect bill ackman so its difficult for me, but notwithstanding that i consider his behavior to be, in this instance, somewhere between foolish, inappropriate, irresponsible, and i feel its my job to speak out. You guys have been in contact, you and mr. Cooperman. So i actually havent spoken to him in the last few weeks and likely i think he owes a terrific i go and i point out he made the comment prior to our making our prempingts one of the things i said to lee is before you come out and go on cnbc and say you dont like what were doing, at least listen to what we have to say made the same port to the board. Wanted to meet with the board and sit down with them and work privately with them as we have with most of the companies weve invested in overtime and they forced us into a proxy cop test and thats unfortunate the good news is if you talk to if carlos is talking to his shareholders which im sure hes doing now. Sure hes watching this interview as we speak. Perhaps youre right, i hope he is, what were hearing from shareholders is they are learning a lot about adp, and i think no one disputes that we dont know a lot about the company. We put out a very detailed presentation, 168detailed presentation about the business. If you just look at the analyst commentary about what they have said, very supportive of the notion that there are significant opportunities to improve operating margins. Sanford bernstein came out with a recent report. I have it in my hand. Barclays yesterday. If you hear what the analyst say in response to our presentation and talk to the major shareholders of the company who started to do work on the business one of the fascinating things about adp was the stock in your portfolio you didnt worry about. Just went up, met the earnings, paid a big dividend, bought back stock and the Portfolio Manager didnt assign a team of managers to dig into it what we did was assigned a team to dig into it and we spent si months looking at the business and talked to many former employees of the company and i think weve done a service in terms of educating the Shareholder Base about the business and the more they look the more they know about an opportunity and one. Thing that resonates most with Share Holders is this spinoff transaction so adp, september 2014 spun off a Company Called cdk, owned by adp for 42 years under adps ownership it had 16 operating margins. Within two years it had 26 mar giants when it was spun off. If you put up a stock price chart of cdk this is what adp missed out on. In three years the stock has doubled. How is it when it was run by adp all they could muster was 50 basis point of annual improvement and when it spun off by adp they improved margins 70 in two years and are on their way to doubling margins in three years. Thats what were talking about. The crux of your case is they can improve their margins to be closer to what paychex is achieving. Thats 80 of the issue. Bottom line the case. Thats 80 of the issue and beyond that we think they can be a more effective company, more effective with technology. Lee coopermans point was right. This is a high Touch Company the answer is it shouldnt be. Yet there are certain kind of service thats very valuable to your customers in this business, right . They have valuable Technical Compliance and other advice they are giving customers or making tax filings but you shouldnt have to call adp to change your password or to understand how the product works. The product should be incredibly intuitive and the competitors that have have nipped away have better products. Today people dont want to call amazon to help them use the website to order something they want to completely intuitive easytouse product and one of the big issues in terms of cost for adp is the products are not as easy as they should, a lot of handholding and waiting on, you know, if you think the nature of the business where youre making a tax filing or a payment on, you know, for april 15th, think about the staffing that they have to put into the call centers with a deluge of calls coming in last minute to try to understand how to get something done, and what were talking about here is making this a best in Class Company and making it an Efficient Company and making adp the best company you can be. Dont you risk what is the bread and butter of of this company. Not at all. What Lee Cooperman says is high touch. And thats what makes adp in fact what it is. Low was on board six years ago and he sold the stock and probably did so six years ago and the world has changed dramatically in six years. Lee was right that this company was a Processing Company that relied on tenses of thousands of Service People to deal with customers. Thats not a model that works today. You put up a chart of their offices around the country got 130 offices and 10 million square feet of real estate thats a legacy of the old payroll business when people would drive their payroll tapes, you know, to pay fair employees. I mean, the world is a different world today, and adp has to modernize. You mentioned this bernstein report which im holding in my hand thats not like they are wholeheartedly in agreement with your idea that margins can go to this, you know, tremendously higher level they say the right answer, thats what they call it, the right answer nals somewhere in between what you say and what adp thinks itself. Thats an analyst one analysts opinion. You cited it. An heres what i can tell you thats quite simple. We believy that can expand margins by 1,200 basis points. Some analysts find that too high a number or difficult to achieve. Thats fine. Bottom line, the companys response to our presentation was to say they are going to get margins up 100 to 200 basis points over the next three years. Thats an embarrassingly low number thats 16 basis points lower per annum than they promised shareholders growth has slowed from 5 , 6 , 2 and call it 3. 5 and the core Employer Services business and the businesses are not hitting on all cylinders and not growing as quickly as they used to lets assume they are wrong and cant expand it by 1,200 basis point, thats 600 basis points more than management is attempting to achieve. Do you think youd in had a different position if you held it differently from the outset thats one of the points in a mr. Cooperman was making mr. Cooperman what is not in the room or on the phone when i called the company. Im talking specifically you waited until essentially the last minute to try to extend the nominating period. Thats not accurate what the company said in their press release that they put out after our meeting with them is i called the company and i wanted to fire the ceo and take control of the board and i was going to go on vacation for a month and a half and, therefore, i needed the 45day extension ive been doing this a long time not my first activist rodeo, if you want to call it that thats a good company and has a great reputation and carlos is someone that i have certainly an acquaintance with. We went to school at the same time, same place thats not how it went down. Now, all of that being said, and i think thats a sideshow, why does a company take that approach the answer is they higher activist defense advisers and they say if you show any leg towards ackman or show any indication that youre supportive of his idea the stocks will turn over to the hands of pan investor and it will become inevitable you lose your proxy contest stock went to 120 or 1 is a or is 16 on the rumor of the involvement and the company has done everything they can to knock the stock down and say theres no opportunity why are they doing this . Because they dont want the stock to go into hands of shareholders who will support us maybe thats a good shortterm strategy for the proxy holders but not for your shareholders. Four examples, if you look at canadian pacific, lock at air products, soetis and chipotle, four cases were working on operational improvement of the birks and those are the only four that weve taken that kind of initiative and cp, we promised shareholders we would increase margins by about 50 . Margins have doubled and the stock is up almost 5x from the price that it the unaffected price before we were there air products, we told shareholders margins could be increased by more than 50 they have gone from 15 to 23 . The stock is up 90 under the leadership and soetis, we believe there was a huge opportunity on the mart gin side, the stock has more than doubled and chipotle, owned it for a few months and had an unfortunate norovirus incident and the management is doing all the right things in terms of improving efficiency in three of the four cases weve been welcomed by the management of the business and the board. We sat with hem and we shared our views and weve worked very effectively from them. You know what the fascinating thing is, second time we had Morgan Stanley as the defense adviser. We have a slide that well put out later in the week and chairman what adp is saying about our plan hand percenting square, almost the identical words that canadian pacifics board used to describe our risk in the plan and we didnt know anything about the business. These are all catch phrases that in particular Morgan Stanley use. There seems to be, you know, between you and the ceo mr. Rodriguez an issue about how this whole thing got off to what you yourself have said is a bad start. Hold on for a second. What shareholders will tell you this is a complete sideshow and i invite car hose to the u. S. Open with me couldnt go. Have a perfectly nice relationship this is i know that cnbc thrives on the kind of, you know, battle this is not that kind of battle. The issue here is how big is the margin opportunity at adp . Management says theres a 100 to 200 basis point opportunity and we think that number is closer to 1,200 basis points and if im elected to bottard a get one out of the ten seats ill work with the other directors to make this happen thats what this is about, a major shareholder on the board has a 2. 3 billion investment in the company with the Third Largest investor in the company in terms of dollars committed to the company, and and, you know, we intend to be a longterm investor in the business you think its helpful to have that point of view in the room, someone who has had a lot of experience bringing about more effectiveness. Thats what i bring to the table and of the further question is we have two directors who say, look, your directors have been on the board so to is a years. We have directors with fresh perspective, experience and cost efficiency, experience in going through these kinds of business transformations. Would they be additive to the board, and thats a very simple question for shareholders to answer, and theres no downside to putting us on board of directors. Youre saying you can work with rodriguez who went on this network. Yes. And called you a spald brat. Yes my mother didnt like that comment because she raised me not to be a spoiled brat. Im sure im a big boy people have called me much worse names and carlos and i have had a fine interaction ever since he he made those comments, and, you know, one of the things i said, im a very direct person so i was honest and perhaps honesty caused this thing to go off traffic. I said, look, you know, if the board real believes that theres only 100 to a 200basis point opportunity in margins over the next three years fanned carlos believes, that thats going to be hard for this, you know, it will be difficult. We have to get on the same page. No reason why he cant be a successful ceo here and say theres no chance that this company the board is saying that adp is the best we can be an it cant do any better and weve said this company can do better. Weve had a very good experience working with the ceo of sew oetis and working with other ceos over the course of my career, and i think i can work extremely effectively with car lows you know, a lot of that bluster that you see is, you know, again, pr advise from advisers. Youve had bluster of your own. In the opening letter you suggest he needs to be replaced. Thats not correct. Theres no such document. Does he need to be replaced i dont form a view about a Management Team until inform a chance to sit with that Management Team, sit with that business and see how they perform. The last thing would i do is raise my hand and say carlos has to do. What we do and rim to the board is we get some outside advice, take a look at the organizational structure of the company and the cost structure of the company, benchmark versus compete torsion. There are there ways to make this business a more efficient business if the ceo stubbornly disagreed with what they want to do, and im simply one seat on the board. With one seat on the board or three new directors with us, these not this is not control. This is simply fresh voices in the board room and a message that shareholders believe theres an opportunity just like the barclays analyst has to say theres a very significant opportunity to improve the margins of in that the economic . These are not spec la trif options, they are struck at 55, 56 a share and these are options that give us the excellent of a mayor gin loan. By the way, if you sandercock goes up a dollar, the options go down a dollar. If we own the economics of 8. About of the it. If on the committee of the board when they did just this. What is the opportunity to improve the efficiency of our bris with border oversight and execution of the plan, we want to do precisely the same thing here and thought the fact that paul came from a process like that would be very helpful working with the board here. Ive watched the video that you put out today, a 2 00 video that i referenced earlier where you speak directly to the Retail Investor. Yeah. Which is unique in and of itself a lot of time these proxy votes come down to the index funds you speak directly to the Retail Investor why . Number one. The Retail Investor almost always gets ignored in proxy contests because very often they throw out mailers when they come in the mail and thats unfortunate because retail shareholders think i own 100 shares how will it matter if you think about Retail Investors here as one conglomerate, Conglomerate Group of shareholders, they are the biggest by far the Retail Community owns 28 of this company thats a major voting bloc, and so were going to reach out to that community were doing that with a series of video and well host i think the first ever, you know, webcast Conference Call for Retail Investors well do it at 8 00 p. M. At night and do it so that people after they come home have a nice dinner, or at least on the east coast and work until its over they will come on and ask us questions about what they plan to do and our goal is to, you know, explain what they have in mind for the Retail Investors and they dont like corporate waste and certainly not as much as Institutional Investors but probably more. You wanted to address the fact that adp and rodriguez themselves have taken a shot at your performance they have done it a couple of times. Do you think your performance over the last couple of years hurts you in this instance here are the facts. Theres a group called 13b monetary and ken squire certainly has been on cnbc they track all the activists they have looked at all of our activist campaigns 146 activist on the campaigns 16 over the same period, thats number one look at our track record from january 2004 and weve formed the firm to the present and look at adps return from january 2004 to the present and adp is up approximately 300 over that period, including the rise partially as a result of us and percenting square. They knock your total shareholder returns. And you know what, you can certainly take a major loss and what started out as a passive investment in valley pharmaceuticals, disastrous investment, we own that mistake. Thats part of our track record, but even with valiant which is included in our 146 average return on investment we have a superb report as an activist they are not focused on Pershing Square what they are looking at is are we right or wrong . One of the things we did today is put out a question for adp. Weve done a lot of work to try to figure out the segment margins of Employer Services businesses so theres a Small Business segment, called a Medium Business segment and Large Business segment and international. The company does not break out the margins. We said, look, lets put this to rest what are the margins of each various segment and lets compare the margin and weve ask the question and maybe weve asked too many questions in our first presentations and were just going to ask one. Every shareholder wants to know the answer to that question and the fact that the company has been unwilling to answer the questions as toss what their margins are by segment tells you something. You sent this out this morning at 4 30 in the morning, and youre still waiting for the answer to that question. I havent gotten an answer. You should give them a call. If only though it was that easy with shareholders you say, you know, the shareholders, they dont care, but do you think that your performance over the last couple of years, the most recent performance that you have its all about value. Makes it more difficult to make your case, that some of those investors who think you may be right with adp cant get past that other part of your story. The company will try to if you look at how the companies approach this. Weve made a number of very important points weve said, look, youre vastly underperforming your potential and look at the revenue. 162,000 and the average competitor 224,000 28 less explain. Your Gross Margins are 60 and your average competitive Gross Margins are 74 . Paychex, 25 of Employer Services, the core business of adp competes directly with paychex and has a product which competes with the paychex product. What are the margins and carlos says its about the same if adp had 41 margins in that business it would mean the rest of employers have 12 margins which is disastrously low. I want to work with carlos and the board and get beyond the proxy contest. That our goal from the very beginning. Always a bit of emotion. Look, raising with a show that, you know, we have in some cases, you know, in some cases open management and othercations the ceo doesnt want to pursue the opportunities and is not up for the changes, obviously people are going to react emotionally to that, i totally get it, but one of the things i encouraged carlos to do and one of the things i encouraged the chairman to do, excuse me, talk to the ceos of companies that im on the board and ask what its like having me as a director and universally youll hear that im thoughtful, that i dont take over the room, that i listen to other points of view, that i im not constantly calling the ceo. Its very rare for me to pick up the phone and call the ceo of a company were investoring in and i wait until theres something i can be helpful thats been my approach as a director and if only the chairman of this company made a few more calls about what im like as a director i think this would be a lot more straightforward but for shareholders this is about what is the opportunity to make this company the best that it can be and by adding an independent voice in the room, someone what is hate a 2. 3 billion investment in the business and is committed to make a longterm investment in this company, i dont see how anybody loses. Im not controlling the board, 10 . Reminds me of nelson look at Procter Gamble, they are spending 200 million or whatever the number is trying to keep the guy off the board the harder a Company Fights to keep someone off the board, the more desperately that board in the case of p g and the case of adp needs some independent voices in the room. I was, as you were telling that story, i was thinking to myself some of the same things that nelson peltz who was on this network yesterday morning is trying to convince Procter Gamble of, that hes not a Disruptive Force i want to take a quick break we do have an investor on our panel today in adp well find out what he thinks about the case that bill ackman has made with adp. Much more with bill ackman next. Not rebalancing your portfolio. Focused on what you love, not how your money will last through retirement. We make it easier to plan for retirement with day one target date funds from prudential. Look forward to your 401k plan. Track tuned handling, and aggressive styling. The bold lexus is. Lease the 2017 is turbo for 299 a month for 36 months. Experience amazing at your lexus dealer. Welcome back to the Halftime Report. Bill ackman with us and also jim levanthal is joining us. You made your case directly to an adownshareholder today. Which side are you voting on i vote the gold proxy contest. All things youve laid out are accurate when they take money now, say they go and say we want to grow margins, how much will in the Short Term Impact their ability to grow the business because, as you know, their Stock Options are all dependant on the stock price so if theres more shortterm thinking, do you think that affects what they are thinking now, or is this longer term the answer is i think cdk is a very easy story this is not about the stock takes a dive or three, four, five years from now the stock goes up. Look at cdk, the basic blocking and tackling on how to make a business more efficient and effective and getting customers over the owe versions and being thoughtful about the real estate footprint. The cdx is kind of a microcosm of adp maybe they can put up a stock price chart of cdk. It was as great asset and just mismanaged. Youre not giving me a some price chart. Basicallying a Straight Line up, because as you make margin improvement your margins go up and if you keep the same Dividend Distribution policy it goes up at a faster rate. Its up 100 in three years. Thats not bad. Not like that business all of a sudden became a much Better Business the business didnt change and the management didnt change for the first two years of the turnaround and what changed is they took a different approach, and when had the company was opened by adp for 40 years they said we can do 50 basis points per annum and as soon as it was owned by the public and no longer controlled by this board or this Management Team they found an increase of 70 in two years. 70 . These are incredible numbers. And that business was a duopoly so it was a great opportunity for the cdk business. It was too small for us and i missed it. Cdk is such a good test case, the guy used to work for me, scott ferguson. We were invested with scott. So thats a good way for you to participate and scott sat down with him and said theres a big opportunity here, i wasnt in the room. He made a presentation not dissimilar to the one we made publicly and the board said this is kind of interesting keep quiet and watch what we can do and we would have been delighted to take the same approach and look what happened. Adp says we cant do anything more this is as good as its going to get. Well give you 50 basis points, maybe 75, and thats it. As you sit there, you reference nelson and p g, a company that you were so closely involved with some years ago and were instrumental in the change ceo in fact. Is this deja vu all over again to quote yogi berra us a sit here and watch this . Look, there are a lot of big, proud companies, and i think p g is up. Great big proud companies, and they are sort of they almost treat nelson peltz like a virus. The notion that this company is going to spend 200 million. If youre a shareholder of of this company how do you feel about them spending 100 million making it harder for nelson to get on the board of the just let the shareholders decide. Whats the downside to putting on a director in my case one of ten and in nelsons case 1 of 12 i have my own Advisory Board, had my own Advisory Board meeting yesterday. You dont put an Advisory Board together of people who tell you what you already know. You want people in the room that will challenge that. Are you going to long that, short that, and its helpful to have a guy in the room that said i know what, we did things the same way for the last 68 years but is it worth to taking a fresh look at our approach to costs and looking at our organizational structure and a silo for the small customers and then another for the mediumsized and they have offices for different divisions. Is that the right way to be organized or is there a smarter way . I take what you say as gospel im not inclined to argue against you. Lets use the 1,200 basis points of margin. Talking about adp. I went back to adp. I want to push back just as a devils advocate lets say and im looking at the last years report, june 30th, they earned 3. 80 so lets say you get that 1,200 basis point pickup on margin and that goes to 550 or even 6 and im sorry i dont have the presentation, im sure youve laid out the numbers. My question to you, were all in the markets, right, and we think about where should the stock trade. Today its at about 25 times of forward earnings multiple so maybe that comes down into the high teens my question to you, if youre my investor, if youre my adviser from had a high teens multiple after youve made your changes, do you real el think the stock price is going to appreciate from there. Its not a question of whether youre right. I understand. Its a question of how the market responds to it. So we think this business becomes a more valuable business and gets a higher multiple three years out and heres why growth is slowing right now. Why is growth slowing . Theres some Light Reading for you. Employment Services Business is slowing, down 3. 5 , 2 to 3 projected for 201. Why is growth slowing . One of the reasons is they are losing market share in the National Part of their business. Very critical of adp in the original presentation is how they are doing versus the workdays of the world, versus the ultimates of the world and when you have a decent part of the business its down to 15 of the Overall Company where they are lose share i mean, again, they dont disclose or break out the segment. That slows the growth. We can we have a solution, an idea of how to fix this National Account business i mean, ill talk about it the first time adp has been working on a replacement product which is an original advantage product which has not gotten a lot of success. Theres a company that we now well, bought 50 of ce ri dian and ran a proxy contest to get on the board and they sold the company to t. H. Lee, still owns and controls the company that was like a mini adp, oldfashioned Processing Company and they did something very smart, merged with a very successful startup called day force which had a cloudbased best in class National Account product and one of the interesting things since t. Hfrmgts lee owned it for ten years, at the end of the fund, going to take it public, adp could acquire that business. Why is that interesting . Because we think it would overnight solve the National Class product. Day force has a superb and attendance product adp pays 100 million to 200 million called cronos. They could turn it tomorrow and replace it with day force. Because its a Small Company they are not able to manage the flow so theres a pickup on float and a savings with respect to cronos and have a product with huge traction thats winning business away from adp blackrock, one of the biggest shareholders left adp and went to the dayforce, what better measure do you have . They have a weakness and can solve it overnight and if im t. H. Lee, take cash and be done rather than drivel it out over the next couple of years these are the kinds of things if i was on the board of directors that we would encourage shareholders to explore. Were paying too much, does that make sense, thats an outside of the box thing for adp to do. They have never made a quote unquote major acquisition like that but it might be a very efficient way to solve a problem. We know that you have to get going. We appreciate you being here. Youve heard enough on adp. Youre the one who said you had to make a train out of heree have you trade the queso at chp. I think that chipotle is with a bunch of short serls and i watched tv right here on cnbc, the answer is people like it in the office it doesnt have the chemical filled with the chemicals that the normal queso do, quite an engineering exercise to get this thing done with natural ingredients. People like it, im going to try it and were on the board. I cant tell you what the results are on a storebystore basis but im hoping people will be pleasantly surprised. You still a believer . A big believer. Chipotle is a Great Company and think management is doing an excellent job. We think there were weaknesses and missing components on the Management Team and the company has been filling out those elements they are very responsive and they want this thing to be an enormous stock we paid 405 a share, today its 300. It went from 500 to 100 on a norovirus incident on one store. I think people should take a look at it next time ill come on ill have a careful review of queso. Grab some on the way to the train and try it out on the tracks bill ackman joining us today exclusive cc. Onnb Halftime Report is back in two minutes. We took legendary and made it liberating. We took safe and made it daring. We took intelligent, and made it utterly irresistible. We took the most advanced eclass ever and made the most exciting eclass ever. The 2018 eclass coupe and sedan. Lease the e300 sedan for 589 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. Were back on the Halftime Report we want to bring you the latest on Hurricane Marias path making landfall in puerto rico. Wtvj meteorologist Steve Maclaughlin tracking the storm. This storm peeked out at 165 and 115 at landfall and now at 140. Winds of 155 Miles Per Hour at 6 00 p. M. , a very strong category 4 want to show you a couple of pieces of video. First the wind in san juan which had its worst conditions between 6 00 and 9 00 a. M. Never got the eye but got the eye wall, and this is actually not as bad as some of the other video that we had coming in when had the eye wall is most intense. Now i want to show you what the biggest concern is for the next couple of days water. Its rain that fell from the sky that leads to the flooding, but we also have storm surge, and nas all that water being pushed up this particular video is from the south side of the island, but we have video that looks identical to this coming in from the north side of the island as well all right, back to the maps. Want to show you where the storm is right now, and can you see that eye came in at 6 sack and is now back out into the Atlantic Ocean again, winds right now 140 there might be slight strengthening by the next couple of days and by the time it gets to the east coast it wont be as strong as it is right now but you can see by next monday, two, wednesday, the east coast needs to watch out i dont know if there will be a direct landfall or if the storm goes out to sea, but right now it looks like the storm is going to be close enough from Cape Hatteras all the way up to boston we could have a nearby hurricane about five to seven days down the road more on that coming up, of course, in the coming days steve, thanks very much. Now lets head over to sue herera who has the latest headlines for us. Indeed i do thank you very much. Heres whats happening at this hour, everyone. President trump touting ties between the u. S. And jordan during a meeting this morning with King Abdullah in new york help praised the king for taking in syrian refugees. I just want to thank you for everything youve done in terms of the refugees and taking care of people that who knows what would have happened without you, so i want to thank you, and i want to thank everybody involved with you, and you have done an amazing job, thank you rescue teams are frantically searching for survivors in the rubble of collapsed buildings in mexico city after tuesdays powerful earthquake. A mix of volunteers, police and firefighters are using trained dogs and their bare hans to search through the rubble. The death toll now stands at 225. President trump spoke with mexicos president this morning pledging u. S. Support and help the Baylor School of medicine says a bad flu season in the Southern Hemisphere is not a good sign for us here in the u. S. Thats why doctors are urging americans to get vaccinated for the flu now before the flu season begins. It takes two weeks after receiving the shot to have protection that is the cnbc news update this hour. Now over to Michelle Carusocabrera with whats ahead on power lunch. Hi, michelle. Hey there, sue. Coming up on power lunch which starts in about 13 minutes, the fed will release its Interest Rate decision it can p. M. Followed by a News Conference by chair janet yellen at 2 30 weve got instant reaction, analysis, including bill gross apple stocks falling after some issues with the new watch and a live report fromueo co prtri as Hurricane Maria barrels through the island as you just saw on Halftime Report. Were back right after this. Power lunch starts right at the top of the hour. Kevin, meet your father. Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin trusted advice for life. Kevin, hows your mom . Life well planned. See what a Raymond James Financial Advisor can do for you. Congratulations to sarat sethi for making the barons top 100 independent wealth adviser list congrats. This is the first time i have seen you since this came out i was going to buy you dinner but you are on the 50 list so you buy us dinner i dont want to think i had anything to do with it he could have submarined the whole thing. Thank god, he didnt it is johnson johnson. You dont see this that often. Moving lower, Goldman Sachs downgraded it to sell. You dont get a sell call on a dow component all that often here, you get one from Goldman Sachs. I think it makes sense the way he is looking at it. I applaud the discipline you can continue to participate. My price target is 130 it is pricey im disciplined. Im going to underperform. I dont think there is enough to put an underperform on the stock. I still applaud it this stock is not a fast grower. He hasnt focused on the issues with the talc suits. I am not unhappy with it it is aggressive to me. You mentioned a dow component putting acell signal on a dow component. I could name a lot others that are a heck of a lot priceyer maybe pharmaceuticals and consumer products. It is hard to say relative to the rest of the sector this one is an outlier on the expense side not on the radar list is what they have been doing with the remicade suit where they have developing a fortress of patents around that one bio logic to set them up to defend similar franchises i dont think that you have to get long in the stock but to put the cell rating on it is pretty darn aggressive to me. Lets just talk about the market s p, another record. Are you thinking at all about what the fed may say today there is a News Conference today. There is. Is tlhere any risk in that . There is a small modicum of risk if they put it squarely in the fed sights, is that an issue for the market or not . I dont believe so. Just at a conference out in california, some of the biggest Family Offices in the u. S. , right . Whoo we what were they talking about . No chance of inflation. Not seeing it anywhere more people are focused on zero chance of inflation, nothing percolating to the up side thats one of the things that bites you eventually how would you characterize the Money Managers are they nervous. All of them are extremely nervous, have been nervous and most of them have had record amounts of cash and are cursing th themselves we are up double digits. Against the benchmarks, they are getting beat up. They are not happy with that we are pretty happy with it, because we have been, as pete says, dragging along a putt undernooeth all of t und underneeth all of the Long Holdings we have the danger is it is low risk not what happens in december that is baked in i think that the market believes that i dont think the market is going to react negatively if the language doesnt change. If the language goes to aggressive and saying we are seeing heightened signs of inflation, i think you will get a rotation no heightened signs of inflation. Basically, hold your thought. We are going to take a quick break. We will hear from sirat again. We will t geunusual activity from john when we come back at halftime were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. For tech advice. Dell Small Business advisor with one phone call, i get products that suit my needs and i get back to business. With its hightech the cameras and radar,c. Contemporary cockpit, three hundred and sixty Degree Network of driverassist technologies, and sporty performance. Whats most impressive about the glc . All depends on your point of view. Lease the glc300 for 479 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. What . Pony neighing] hey gary. Oh. Whats with the dogsized horse . Im crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. Isnt that right warren . Well, you could get support from thinkorswims inapp chat. It lets you chat and share your screen directly with a live person right from the app, so you dont need a comfort pony. Oh, so what about my motivational meerkat . Inapp chat on thinkorswim. Only at td ameritrade. A live show from aboard the uss intrepid. We want you to be part of the experience join scott wapner and the halftime traders for live trade and market analysis. Friday, november 10th. For free audience tickets, email us at veterantickets cnbc. Com jon najarian is on the hunt for unusual activity what do you see . We have two of them fedex, fdx, october, 222. 50 calls. They bought them in big numbers very quickly, ran the stock f2. 9 and change and next, sen next, cenex. They buy these really fast that stock is moving as well alcoa is up 3. 5 the space looks hot. We have about a minute left lets do final trades. Jim . Pfizer, an upgrade at Morgan Stanley, up 1. 5 which is testimony to how many advisers there are at Morgan Stanley. This stock has been breaking out, setting higher highs and higher lows and it is really breaking out this is a good company to own. Western digital, stock up on the announcement that toshiba is going with the bain group. I bought a little more it is very small frankly, it is low conviction. I dont know how they work with the pricing. Sarat i am looking at the slf this is going to have a lot of liquidity. I think they are going to move up you want to own financials going to the next quarter. Jon najarian. Verizon unusual activity this thing has been on a rocket ride that does it for us the fed decision is looming. So is power lunch. It starts now. Looming, thats a good word for it im Michelle Carusocabrera on the menu the 4 trillion question what will janet yellen say about unwinding the feds massive Balance Sheet . A Rate Decision and the statement dropping an hour from now. Hurricane maria ripping through the island of puerto rico causing widespread flooding. Siearch and rescue efforts your underway in mexico. More than 200 are dead following the earthquake losing it, the ceo