Transcripts For CNBC Power Lunch 20171122

The holiday. Lets get this show on the road, power lunch starts right now welcome to power lunch. Im will stocks lower this hour, nasdaq and russell 2,000 did manage to hit record highs before pulling back Oil Pushing Higher in more than two years and check out individual movers as well. Amazon hitting alltime highs today. Under armour reing but the stock on pace for its worse year ever. More than that ahead serna, expected to announce a deal with the company and gamestop rallying posting strong results. Michele . We begin with this hour with ubers hack attack millions all over the world have been affected whats causing outrage however, uber paid money to cover it up joining us now with the latest, deadria . Hey, michele, the names, emails, drivers license numbers of 57 million riders and drivers were exposed uber paid as you said 100,000 in hush money to the hackers and hid the breach for the public and regulators for a year. Drivers are only now finding out if they were affected. I spoke to Harry Campbell and he did have data stolen an sent me the screen shot of an alert he received from uber today after submitting his information on the website. They have subsequently set up. Now the broader fallout, though, has been swift today a key democrat has called for an ftc probe into ubers handling of the breach the ftc was already looking into the company and experts say that the cover up could open uber up to criminal liability. And the ftc just now responding saying that it is closely evaluating the serious issues raised from uber hiding the breach a lawsuit has been filed by user accusing the company of negligence and the new York Attorney Generals Office yesterday opened an investigation into the matter. The falls has extended overseas with the uks commissioner expressing, quote, huge concerns guys, one of the most important impacts this could have on the company itself is in its negotiations with softbank a deal that would raise billions of dollars and make major governance changes had in a blog post yesterday the new ceo said he wont make excuses and cant erase the past but commits to learn from ubers mistakes the problem is, that is that list has not stopped growing since he took up the position just over two months ago guys, back over to you. Its not stopped growing but is he getting the issues out early enough its not on his plate, a mark against his record, and perhaps another mark against travis kalanick. Im told travis did know about the breach but handed it over to his chief Security Officer fired this with week, joe sullivan it may not be the responsibility may not lie with the new ceo, but this is still another problem that he has to deal with when hes supposed to be shoring up ubers business remember that lyft has been making inroads this year, has a reputation problem, problem with drivers, so these are many, many more distractions for him. The impact on the london hearing the next one on the 11th of december, will be interesting to watch thank you. So the uber case raising questions about how companies handle Cyber Attacks should they pack hackers ransom to minimize the damage eamon javers joining us from washington 100,000, sounds cheap to me. It does sound cheap to ceos too. Youre right this is a murky area and companies dont like to talk about it but when you talk to Cyber Security experts they do tell you Companies Often pay to get their data back in two scenarios, one you ransom ware which the hackers have hacked into the company, stolen data or locked down their computers in a way they cant function and you have to pay the ransom to get your data bank a lot pay in that theres honor among thieves and you never know when dealing with thieves and hackers whether they will honor the deal or not. The other case you hear about this on the dark web when somebody has stolen data from a Company Selling that data on the dark web to any buyer who comes along, you hear of cases where companies will pay on the dark web to get their data back from the hackers. In order just to figure out what was stolen and to kind of reverse engineer what the hack was itself as its a moral dilemma for ceos attempted to do it but you create a market for this hack material youre paying the people who broke into your house and if you do that, youre going to get more breakins. They are incentivized to do it more. Reminds me of the somali pirates situation, when you had the pirates taking over ships and what Insurance Companies said was, if you dont pay them, theyll stop nobody wants to be the first person that doesnt pay because in their case they thought they were going to lose employees would die as a result. But its about moral hazard like in the insurance company, that you can actually affect more of what youre trying to stop when you pay. And its a collective action problem. Right. If you are a ceo confronted with this challenge you know that other ceos are paying so you have an incentive to pay yourself to get your business back on track and functioning as quick as you can and you might feel like you can hush it up and nobody will know but if all the ceos sort of act together and stop paying that would put a damper on a lot of this but wouldnt end it altogether the data is still vl valuable and sell it on the dark web to other people. What about disclosure and the timing of disclosure when its expected by companies . Clearly they dont want to disclose immediately or become an open invitation for other hackers saying were susceptible to hacks here. They have to keep it secret at least a period, right . Yeah. A lot of times they dont have to disclose it at all. The key concept here is materiality, is the hack and the damage done or the size of the payments so large that its material to the company that it has to disclose it in its s. E. C. Filings. Oftentimes the companies will argue its a minor deal, small payment, done through lawyers and other cutouts and therefore its not material to the company so we dont have tell you anything about it. The size of the things is whats alarming when you see the number of millions of people impacted by this. Thats dramatic. And yet sometimes you still see the companies arguing not material to our business eamon thank you for that. The markets are mixed, the nasdaq and russell did hit record highs again today buff pulling back it is rally on for the end of the year or not. And what about the view of 2018. As you can see we have the nasdaq slightly higher t the s p and dow are lower. Michael joins us and peter chief market analyst with the Lindsay Group and cnbc contributor. Michael, ill start with you if i may. In terms of earning season and what weve seen is it justifying the highs weve been hitting over the course of the last couple weeks well, its helping a lot. The increase in earnings help support the stock prices we saw the stock prices start to increase kind of on the trump anticipation rally, which has been terrific, but we were concerned about the loftier evaluations. Fundamentals are keeping up a bit. The market still expensive were happy, of course, to see the earnings increase and see the fundamentals improve steadily. Peter, you havent been super positive for a while the earnings themselves as we go into next year are they going to continue to grow is it more the valuation side youre concerned about than the e side. Its been more of that. Over the last four years the s p is up earnings 80 that typically happens in bull markets, but its been pronounced and we can all understand why weve seen the multiple expansion because of Central Banks helping things out. Going into next year i think the key thing to watch is profit mar girns, labor costs are beginning to rise in the u. S. And companies are going to be able to offset that through productivity, raising prices or eat it something to watch next year in addition to Central Banks stepping up to the plate a little more on the tightening. On the tightening lets touch on that. Clearly what weve seen this bullish factors of new highs in the market, bearish factors in the yield curve and the way its been flattening. Are you taking that very much as a bearish factor or think its influenced by the fact that Central Banks around the world arent tightening yet and thats, therefore, keeping long ends of the curve down across the world . Its probably a combination but look at the last two rate hike cycles its flattened curve. We know how this ends. Since world war ii the last rate cycles put us in recession we will get an intensification of the tightening. Through the fed continuing to raise interests, ecb raising and even the bank of japan pulling back from their easing michael, are you worried about that nothing to compress a good multiple than a rise in interest rate. Yes, im worried about that this is why you have to listen to peter he just mentioned two really important things this margins for the s p have expanded and have been sort of near record highs and a lot of people have been worried about it for a while because weve seen the very low unemployment costs and seen cost cutting, but they are well above their means and this is mean reverting data. So you have to watch those margins come down as p e multiples are so high and i am also really concerned when you look at the spread from 2s to 10s right now were about 60 basis points thats normally like two full Percentage Points is the norm. So if thats getting more narrow, will the fed invert the yield curve on the next bump of 25 basis points. Will they keep rising and then, you know, you see an inverted yield curve anybody with this much gray hair thinks recession automatically. I think that peter is right. So the fed did it to us in the 30s will they do it again now . I think they need to be careful. And i think that jay powell has his plate full. On the topic of yours, peter, should we be concerned about whats happening in china the spike in very shortterm yields the shorter term yields above fiveyear yields is that something thats a shortterm factor or a sign of bigger things to come in the second biggest economy in the. Tremendously over the past ten years now seeing a rise in Interest Rates its somewhat combust be long term optimistic on china but the debt overhang is there and when you see a rise in not only interbank rates but market rates you have to Pay Attention it could be a concern for next year. Good session, though, this morning in asia, despite some weakness in some of the smaller cap stocks over the last week or two. Michael, peter, thank you very much thank you very much happy thanksgiving all. Happy thanksgiving to you michael. Tell willeford what it is, will you. The lemon cake . No, no, no. The thanksgiving oh, thanksgiving. We had a conversation this morning already explained it and christmas. I would like to point out i was aware before the conversation, but thank you. You have been here two years. Right. Second thanksgiving. And i have been exposed to Global Factors for some time we love teasing you heavyweights in media and politics brought on by sex scandals allegations against charlie rose, john lassiter, glenn thrush and john conyers and may stop there axios cofounder joins us from washington a lot more to come it says in the notes. Mike, who is next . So first of all, happy to be here on thanksgiving 101 this has been fun. So yeah, we said a lot more to come and heres why. So for months, Silicon Valley has been having its harassment secrets spilled, a lot of founders who were exposed in that wave, its now seven weeks since the New York Times dropped its expose on weinstein and since then, hollywood has had this domino of revelations but three more big areas to come we saw the first of the capital hill revelations this week, we found out about the fund to pay settlements that people who have worked all their life at the capitol didnt know about. This is just the tip of the iceberg. Much more could be coming about members of congress. Second, we know about media investigations about media figures in new york and d. C. So media has more to come. And third, the Business World has barely been touched. Thats an area where your viewers well know is not immune. Mike, whats your view in terms of the possibility to survive in current careers which have when people dont admit guilt . With the likes of harvey weinstein, of charlie rose, kevin spacey, they made statements that showed some admission of wrongdoing and its led to their careers being cut short or at least temporarily cut short quickly. What about when people deny allegations . They continue to fight against them and theres no outright criminal wrongdoing in terms of those accusation, do you think the people will be able to weather the storm or not what weve seen so far most of the highprofile cases in the places where there was an admission of guilt, was where there was repeated situations, many of them similar, and some cases in the case of senator al franken, democrat of minnesota, a photo, so difficult to deny there. Your question about whether or not you deny or admit will be fascinating as we move into the Business World so im told that more so than the corporate side, the real vulnerability is on wall street. People who came in perhaps with a 1980s mentality, kept that theres a lot of mike, let me ask you you know that for a fact . Cou know specific individuals youre waiting to come forward because youre aware of that or just youre guessing because its so male dominated the reason i ask is that i mean all this stuff that were reading about in hollywood, i mean, wall street in the 80s, give me a break. There was so much that went down that there was a lot of Corporate Governance interference so to speak to try to clean up the situation. You know, i mean you go back and read Michael Lewis book, i dont know that they have strippers on the trading floors anymore. I think its been more than a decade since that kind of thing happened supposedly they tried to clean up their act because it was so bad . I think that thats right what our reporting shows people on the street believe there are people who have sort of kept that mentality, perhaps wall street is immune if you think that thats very possible but our reporting shows people on wall street who are worried and who think you know of names specific names so what im saying is that our reporting shows that people on wall street believe that there is vulnerability. Okay. Do you think and sounds like youre skeptical of that. Do you think it was i want to know if you know theres a name coming we should be watching for and you just cant reveal it yet because, obviously, until the facts are in place, you cant do it, right . Right. Thats all. Im not trying to be combative even though thats my tendency. You think in the 1980s it was cleaned up and you are skeptical. So rampant for so long. Wolf covers the banks not me. I cover that side of it. Mike, in terms of the broader question of sort of trial by media, trial by television and newspapers, is there a problem broadly in your eyes do you think this should be taking a formal line or are you happy with the way the media is executing on the stories when they get on them. The media has been not only very aggressive in showing their own reporting but the media is a place women can go who have stories to tell who perhaps have been frustrated in the past. Either they didnt report it to Law Enforcement and perhaps wish they did perhaps they did report it within their own Corporate Structure or their reporting structure and didnt feel like they were taken seriously, perhaps it was a case like charlie rose where there wasnt a clear reporting structure for people, so the media now has become an outlet for people who are emboldened to tell their stories, perhaps have stories that are very worth telling and they didnt know exactly where to go or werent taken seriously. Now what were seeing in the new environment is these stories are being taken extremely seriously as they should be. Mike, very quickly in terms of the stories you expect to hit in coming weeks on the c suite and corporate world are these historic issues or in that sense has Corporate Governance changed enough these arent things that happened in the last decade or fresh issues to come out as well. Perhaps they have been mitigated by some of the Corporate Governance changes i can tell you i was having another conversation about this morning and tell you that people who have spent their life on wall street believe that there are vulnerabilities there. Believe that the story wont end in washington and Silicon Valley and hollywood. That new york will get its day in this harassment story all right thanks, mike allen with axios happy turkey to you and yours. You too wonder if some of the enablers will start a to go down like somebody who employed somebody in various locations and did they know and continue to employ them even though a lot of people really knew what was going on. I think thats definitely a question of this i wonder whether Corporate Culture today, my six years in working, whether it was a financial or media company, it seems implausible to me because there are so many multiple checks and balances. Well learn as this continues. Weekly rig counts are just out. Jackie deangelis is at the commodity desk. Good afternoon to you well baker hughes releasing rig count numbers ahead of the thanksgiving holiday the u. S. Added nine oil rigs for the last week. Thats up 273 from a year ago, brings the total to 747. Now not surprising to see in addition like this Higher Oil Prices make it more attractive to pump. Interesting we havent seen this in the last few weeks, perhaps maybe the tide is turning. Meantime crude is rallying the Keystone Pipeline leak is causing a an 85 reduction in shipment on the pipe through the end of the month people are worried about that and dont want to be short ahead of the opec meeting next week or ahead of the Holiday Weekend for that matter either, guys see crowd oil trading under 58, but we did test over 58 today. Usually we test and hold that level. We will be watching for that. Thank you. Coming up retails biggest weekend its been a rough year for retailers. So this Holiday Season is it going to turn around plus the ceo of kohls joining us his stores are opening at 5 00 p. M. Tomorrow. Were getting you ready for black friday when power lunch returns. What we do every night is like something out of a strange dream. Except that the next morning it all makes sense. To power global ecommerce Fedex Networks are massive, farreaching and, yes. A little magical. Fedex. Com slash dream every day, on every street, in every town, across america. Small businesses show their love to you. With some friendly advice, a genuine smile and a warm welcome they make your town. Well, your town. Thats why American Express is proud to be the Founding Partner of Small Business saturday. A day where you get to return that love, because shopping small makes a big difference. So, this saturday get up, get out, and shop small. Friday is on, 32 days until christmas and its make or break time for those over Leveraged Companies defaulting on debt or running out of cash. Bring in matt ruble, the former ceo of collective brands and cole hawn. Great to be with you . The over Leveraged Companies and the companies for which this would be black friday, this will be the make or break season, you actually held a position at j. Crew long ago and theyre one of the retailers, 1. 7 billion in debt as of october 28th. What do you think happens to a name like j. Crew. The debt holders control j. Crew, but its really the fact that theyve wandered from what the original positioning of the brand was and theyve lost their place in being really relevant with the american consumer, so for me, i look at j. Crew as fairly problematic in terms of it regaining what its former luster was. So its too difficult to turn around and there would be no buyer for it in your view . Well, there will be a buyer i mean at some point they have a good infrastructure both in stores and in digital, but they were a little bit behind in they were first mover in digital but ended up slowing that investment up and have come back more recently to understand that thats what theyve got to do. They have a new ceo who is quite thoughtful about how to do that. A wait and see with that one. How bad is it going to be for the mall based retailers, a name click claires come to mind, they sell like 9. 99 earrings and things like that low ticket items. I think if you really come down to a claires, they will have more challenges but if everybody keeps talking about the four wall or the brick and Mortar Retailer being in trouble and this is where i disagree, i disagree because if you really look at how digital is growing, its growing primarily with two companies and amazon and walmart. If you look at the other people theyve put in the infrastructure at this point to actually enable the customer to shop where they want and when they want and the way in which they can return goods and move back and forth into the stores is working so when you look at names like macys or look at Urban Outfitters or the great brands out there, that have enabled themselves with this infrastructure to move forward, i think people are underestimating the change that has happened in the way in which these retailers have responded to what the consumer really ends up wanting claires thats different. 9. 99, youre not going to sell that digitally over the internet you cant afford to ship those and do that in the same way. The other more relevant or exciting brands of retailers theyre set to do business and i think were in for a good christmas. Has macys found it ways forward in your view the stock market year to date tells us it hasnt. The stock market is right at moments in time, but the stock Market Measures things as they were, not necessarily always as they will be i think there have been Good Investments made there that being said, the mod until which they have model they have done business has been challenging but i believe they will overperform relative. Theyre selling at a multiple that is they got a 7 yield do you think thats safe i do, based on the current share price. Wow okay holy small pox smokes thats a good contrarian view just like my wifes lemon cake which if you want lemon cake she has great stuff. Michael kids business is strong even with toys r us you will be in good shape this christmas. Enjoy your turkey and lemon cake appreciate it. Its not just shopping also a huge weekend for travel. A Record Number of people expected to fly and Contessa Brewer is live at newark airport. Contessa you guys, what would thanksgiving eve be without that live report at the airport the reporter standing out and talking about the crowds only this year i have something youre not going to want to miss suppli a surprise you probably have not heard in decades on a live report on thanksgiving eve i be llback after the break dont want to miss it. Stay here on power lunch. Global markets, thatf the rhythm of the world. But to us, its the pace of tomorrow. With ingenuity, technologies, and markets expertise we create the possible. And when you do that, you dont chase the pace of tomorrow. You set it. Nasdaq. Rewrite tomorrow. Kohls moving higher as the retailer gets set for the crucial part of the year, the Company Getting a jump start an black friday opening its doors at 5 00 p. M. , an hour earlier than last year Courtney Reagan joins us now with Kevin Mansell the ceo of kohls. Kevin, thanks so much for joining us i think this is pretty rare, i dont know that weve had you on black friday week. Thanks for being with us from a kohls store in wisconsin. Well start right there, youre opening an hour early and then have in yours past being aggressive in general, putting out those black friday deals and hours much earlier than almost everybody else youre staying open all night long so why is this the year to get really aggressive . Why the change well, i think its pretty consistent actually with the way weve behaved. Were trying to lean into what customers are looking for and generally what were seeing is the desire from customers to buy holiday earlier. Weve made online availability to our black friday ad, beginning on monday, as you said, were opening an hour earlier on thanksgiving day itself well work through the night anyways so weve been staying open overnight the last few years and thats worked well for us because it allows us to recover and get ready for the next day to me it makes total sense and it from our perspective kind of puts the customer first. So kevin, you did mention youve offered some of the early black friday deals not unlike some of the competitors. Youve had a chance to see the consumer appetite. What do you think . What are people buying better than last year . Well, momentum has been good. We ended Third Quarter in october very strongly. As i said at the Earnings Call in november we started at november very strongly and thats pretty much continued i think theres a bunch of factors there. Pent up demand from earlier, warm anddisruptive weather across the country and then cold weather finally arrived inning by a way as i said, consumers are looking to buy earlier for holiday but retailers are leaning into that to a great degree so you see more activity promotionally. Were participating in that as well but were not the only ones. I think all things are kind of moving in that direction which makes this week a more important week. Competition is a big deal this time of year but kohls has made interesting partnerships youre accepting amazon returns in a handful of stores in the chicago and l. A. Area going on for a couple weeks now so whats happening . Is it actually bringing kohls radiated sales its exciting we have it in about 80 stores, all our stores in chicago and Los Angeles Metro market first focus, of course, was the experience we wanted to give them a great experience and anecdotally and statistically is the experienced customers are getting when they bring in an amazon return is very strong in the pilot and then second, of course, were looking most importantly for this long term drive traffic thats our objective in this and again, early indications and were very early, were just a few weeks in as you said and ramping up is that its very positive. So both experience has been great, but also customers reaction in terms of taking availability of the opportunity has been great as well. Do they buy more stuff . They do you know, i mean in very similar to the way our customers behave when they buy online and pick up in store an attachment rate that comes with a visit. And, of course, thats what were looking for. Were looking for the footsteps, just in the same way as we are with, to increase in the store and then a certain percentage of the time customers will make an additional purchase in the in buy online and pick up in store its around 25 of the time and i would expect thats something similar well see on the returns. Kevin, when the reports of this partnership were first out, the next conclusion that was jumped to because traders liked to jump to conclusions this could precede perhaps a longer term tie up and acquisition in its entirety of kohls by amazon look at what amazon has done by whole foods and traffic in whole foods has gone up. Goods are being sold on amazon. Com with some success what would you say to the notion that there could be a longer term permanent tie up between kohls and amazon with amazon purchasing kohls . Our objective is straight forward. We have two priorities in the company. Number one, drive more traffic you know thats been a challenge for brick and Mortar Retailers from a returns perspective what were looking to have happen is more people visit kohls stores and get the experience and the opportunity to transact more often at kohls. Our objective is simple and straightforward and isnt any other motivation in it as you know we also have in some of those los angeles and chicago stores, an amazon shop within a kohls store, and thats been received well as well. And i think to a great degree customers have found there is just a great experience. The interactivity of the shop has been fantastic. Thats not a no though, is it, kevin . I think the objective we have is really straightforward. I cant put it any other way which is two priorities drive traffic, operational excellence, the return pilot with amazon is all about driving traffic for us kevin, pricing is really important this time of year to a lot of shoppers and kohls has been doing a lot of interesting things with the pricing. Because of the strong loyalty that you have with your shoppers with the kohls card and the return shopping online, you can provide a your price, meaning a different shopper will see a different price on different items. Is that working to actually add to baskets for shoppers . For sure. Conversion rates driven by your price have incrementally improved significantly, driving our Online Business as you know our Online Business is growing at a double digit rate it penetrates about 16 or 17 of our total sales year to date but at this time of year, november and december, it will be about 25 off you are business in fact, this week and next week is probably closer to 40 of our business so the importance of providing clarity to customers on pricing, making it simpler, is a big idea for us your price does that smart cart, another Technology Tool we use, sort of interrupts a customer who is considering buying something online and offers an additional discount if they pick it up in store all these Technology Tools, personalized search is another one, are all driven by the idea we want to make it simpler, we want to make it seamless and make it easy i want to go ahead i was going to ask about the capital return plans, because youre sitting on a big dev dined yield at the moment. Given the share price, obviously, is down sort of 20 or so over the last 12 months do you want to substitute that for a Buyback Program or whats your plan on those two fronts were fortunate enough that cash flow of the company is strong and substantial and we actually have had a buyback in program now for quite a long period of time it continues this year as well i mean our capital structure has, you know, multiple platforms to it. First and foremost because were investing in our business, we talked a little bit earlier about technology were investing about half of our Capital Outlay into our stores and into technology, so investing in a business. Second is the dividend, a really strong yield but most importantly from an investors perspective its a highly productive yield and risen it generously over time i hope and would expect and will continue to do that. Share buyback has been an important part of the Capital Allocation as well and i dont see that changing either in the future. I will take another bite at the apple melissa threw out, have you and amazon discussed any kind of permanent tie up, purchase market cap of 7 billion it would be easy for them to buy you. Honestly im giving you a straightforward answer, we have a simple and straightforward objective, improve traffic into our stores i think its a big idea. I think the opportunity for amazon is great. But we are literally four weeks into this pilot and were learning every single day and our objective right now certainly hopefully is to improve traffic in those stores which would lead to an expansion of the program, but most importantly, we want to make it a great experience its no different than the way we approach our business with our customer elsewhere give customers a great experience over time, well benefit from that kevin, i want to end it talking about traffic for the Holiday Season a lot of retailers see a big push this week, maybe a little bit following into cyber monday and then it drops off a cliff before picking up again a couple days before christmas. How nervous does that make you when in the middle of that lull and what can you do to prevent that lull from happening with your shopper traffic and sales i mean, theres always been courtney you know theres been a cycle to selling in our business. And this is no different this year i mean it definitely peaks this week, though i think retailers have successfully been able to spread what used to be highly concentrated on black friday into a longer period of time i think thats working and tactically we need to come back postthanksgiving with new ideas and cyber week is a big idea were going to start our promotion early. Were launching it on saturday and in addition were going to make those prices available in store and online and we think thats going to be a big differentiator and then the other value triggers that we have as you know, big differentiate for kohls is kohls cash and thats going to be driven heavily but you wont change the cycle of consumers you have to lean in to when they want to shop and you cant create an artificial demand. Thats right. That customer is always right. The one rule we go by, that has to be the one. Kevin mansell, ceo of kohls, thank you for joining us happy thanksgiving and good luck on black friday week and our thanks to you, courtney, again. A record 28. 5 million travelers expected to fly on u. S. Airlines during the thanksgiving holiday what can consumers expect at the airport . We are live at newark. Plus soul cycle may be looking to ditch the cycle for the soul. The details straight ahead at fidelity, trades are now just 4. 95. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. And at 4. 95, you can trade with a clear advantage. Flexshares etfs are built around the Way Investors think. With objectives like building capital for the future, managing Portfolio Risk and liquidity and generating income. Thats real etf innovation. Flexshares. Built by investors, for investors. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Hello, everyone. Im sue herera your cnbc news update at this hour former Michigan State university and usa gymnastics dr. Larry nassar pleaded guilty to Sexual Assault charges. Wearing an orange jump suit he listened as prosecutors recommended a sentence between 25 to 40 years Vice President mike pence made a stop today at Walter Reed Army Medical Center in bethesda, maryland while there pence met with wounded veterans an their families and thanked them for their service. Bmw is recalling all of the electric cars it has made since 2014 and is telling dealers to stop selling them after models did poorly on government crash tests. The results found a small female driver not buckled in could be at higher risk for injury in a frontend crash. Oh, deer, a young buck who got into a sticky situation you might say received help from police the body cameras on the officer with the Peachtree City police force captured this video of them trying to free the deer whose antlers were tangled in some branches. Poor little guy. He got out, though thats the good news the news update this hour. Back to you. Oh, video that makes girls go oh. I know. And boys too. Well done makes everybodys voice go up about four octaves. Charming. Thank you, sue. You got it. Record number of people flying this weekend, we sent Contessa Brewer to newark for a firsthand look hey, contessa. Here i am at newarks hub or uniteds hub at newark, terminal c where all the flights leave and take off look at this normally this is a chaotic mess. Weve seen things be organized today. A surprise for thanksgiving eve. It could be were in the afternoon lull and theres a bit of a break for the airport workers and the gate agents, but we know in newark overall, air travel is up 6 this year and united alone has 400 flights taking off just today. 44,000 people. That matches what were seeing nationally where travel overall for thanksgiving is up 3. 3 according to aaa youre talking 51 Million People traveling this year and we havent seen this kind of busy thanksgiving Holiday Travel since 2005 now why is that . I mean if youre choosing to fly it could be because of cheap airfare. The average price for airfare right now is 157. Thats a 23 drop over last year the lowest prices that have been seen here since 2013 heres another surprise. Though air travel is up, look at the misery map today this is a live look at airports across the nation. And what youre seeing is flights are on time. Theres no major areas of misery houston was seeing a little bit of a problem today but this is so abnormal for a thanksgiving holiday and you guys, heres another good news, washington, d. C. , chicago, new york, l. A. , seattle, their big rush time was yesterday so if youre heading to those airports youve already missed the mad crush. Good news for once, contessa. Fantastic. Right see you later all right this any misery in the bond market lets find out Rick Santelli tracking the action at the cme. Buying going on today intraday of 10, down 3 basis points guess what, look at the year to date chart notice the high 263 the low 204. What the average is, you guessed it 2. 33 where were trading. Right now the biggest buying and biggest drop yield on the curve is the five year down 4, third year down one. Yes, 30 and 5 steepening today dollar index new lows for the wee and finally have to go until the 19th of october to find out the last time the dollar index closed down this level have a happy and healthy thanksgiving. Thank you we may have a winner in the feud between the commissioner and one of the leagues bestknown owners. Plus, is soul cycle ditching the bikes . Well tell you what the company is planning on doing at nt. Ive been thinking. Think of all the things that think these days. Businesses are thinking. Factories are thinking. Even your toaster is thinking. Honey, clive owens in our kitchen. Im leaving. Oh never mind, hes leaving. But what if a business could turn all that thinking. Thinking. Endless thinking into doing . To make better decisions. Make a difference. Make the future. Not next week while you think about it a little more. But right now. Is there a company that can help you do all that . I can think of one. Soul cycle plan for growth may include a move away from the cycle presumably keeping the soul diana is live outside of a soul cycle in maryland. Hey, diana. It could be risky cycle in the name. But after ten risky with it in the name, but after ten years and ten studios nationwide soul cycle is launching its first new brand this time no bike. Its called soul annex and theres one location in manhattans flatiron districts and its highintensity cardioto stretching and strengthening it is not a risk to the brand because the devotees were begging for it what we heard from them as they were looking for ways to spend more time with us, not just on the bike, but outside of the studio and for us, were in the business of community and personal transformation and fun, and its never really been about the bike so we wanted to create a space for our riders to come together with our instructors and experience the best of soul cycle than off the bike. Caller soul annex has its own branding and ripped tshirts will cost you about 95 and all in line with the luxury fitness line it admits its a way to get more business from current climates and she claims its not about competing with the other big names in the cycling space when i mentioned names like peleton and flywheel which launched an athome cycling platform, she did not rule out the idea of putting a soulcycle in your home what do you think, guys . I dont know. Its a different brand ultimately, but the cycling at home is im too lazy to do that just sit on my couch instead diana, thank you very much an ugly feud between jerry jones and Roger Goodell may be over well tell you who won next here on power lunch. Well, its earnings season once again. Yeah. Lot of Tech Companies are reporting today. And, hows it looking . I dont know. Theres so many opinions out there, its hard to make sense of it all. Well, victor, do you have something for him . Check this out. Td ameritrade aggregates thousands of earnings estimates into a single data point. That way you can keep your eyes on the big picture. Huh. Feel better . Much better. Yeah, me too. Wow, you really did a number on this thing. Sorry about that. Thats alright. I got a box of em. Thousands of opinions. One estimate. The earnings tool from td ameritrade. Welcome back to power lunch. The battle between Dallas Cowboys jerry jones and Roger Goodell may be over. May be over, key word news of the ongoing nfl civil war. After weeks of threats and inflammatory language Dallas Cowboys owner jerry jones told usa today overnight that he would not sue in regard for the contract renewal for commissioner Roger Goodell that paves the way for goodells new contract to be approved and signed asap. He is not stopping the fight saying he still wants accountability and he will continue to be a voice for the other owners in the past few days the fight between jones and the league got increasingly tense, lawsuit threats and Profane Language and leaked cell phone videos and anonymous contract leaks they believe it could be completed as early as next week. What about some of the other things that goodell was off to, whether it was the pay levels and the jet tickets and et cetera, et cetera, health insurance. All of that . Were not sure, but that was the one thing hed asked for in the leaked version of what he wanted a 50 million deal, lifetime private jet and Lifetime Health insurance. People think hes going to end up more in the 40 million range and not the 50 range, but this will probably be his last contract and thats why hes trying to get himself set up and he said hes going to be done. Thats four years away and this will be a fiveyear deal and he wants to get set up for a golden parachute. 40 or 50 should probably set him up id take the difference for sure. Big weekend ahead, as well for nfl. Thanksgiving. Im going to a game, in fact. So american of you. You will have turkey and go to a football game. Im trying my best. Do you know who is playing in the game youre going to i am. Its the texans playing jim cramers eagles. You know they touch the ball, right . Im well aware. Much like a goalkeeper. Poor will. Up next, the latest from the minutes and huge controversy erupting on the latest star wars game and well tell you why me agarsre outraged and why two lawmakers are investigating. Is now a good time to refinance . Yes Mortgage Rates are historically low. The time to refinance your home is right now. Get started at lendingtree. Com. The only place you can compare up to five real offers, side by side, for free. Our average customer can significantly lower their monthly bills. Quick. Beat the feds next rate hike. Do not miss this window. Are you sure you have the best rate . It only takes 3 minutes to find out. Go to lendingtree. Com right now. Your insurance on time. Tap one little bumper, and up go your rates. What good is having insurance if you get punished for using it . News flash nobodys perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch and you could save 782 on home and auto insurance. Call for a free quote today. Liberty stands with you™ Liberty Mutual insurance. If you want Incorrect Information ill join in. Lets get a check of the markets here check the nasdaq here is higher by about three points and mprety much at the flat line. The dow is lower by 65 points and s p is down by two telecom, energy and industrials are your leaders and tech and real estate are laggards among the big movers in the session after cigna seeing a comeback lets get to Hampton Pearson with the minutes. Low inflation concerns continue to dominate fed monetary policymakers Decision Making on when to raise key shortterm Interest Rates. A minute of the twoday meeting that ended on november 1st found many participants that low inflation even as the labor market tightened and also the influence of development that could prove persistent, with concerns that it may rely on 2 . On the flip side, other participants caution, waiting too long to remove accommodation or moving too slowly could result in a substantial overshoot with a level of employment participants agree they continue to monitor the Economic Data several participants saying their decision when to raise rates would depend on boosting their confidence that inflation was headed toward the committees objective. Nearly all participants have a gradual approach and participants judging financial conditions as accommodative despite recent increases in Exchange Value of the dollar and treasury yields, was there a concern that the combination of high asset valuations and low volatility could lead to potential buildup of financial imbalances looking at Economic Conditions overall several participants are having increased Business Investment about the Overall Economic outlook. Monetary policymakers noting that it could be given an additional boost if tax reform legislation is enacted the labor market, they say, appears to be getting stronger in spite of the hurricanes, monetary policymakers are seeing some firming of wage growth, but overall it remains modest. Back to you. Thank you very much for that. The tenyear bond note is near session lows, but hasnt moved too much and the dollar down about 0. 9 against the yen, as we speak thats moved down just five basis points or so for reaction lets bring in former dallas fed adviser danielle di martino booth and cnbc contributor ron insana is with us and senior economics reporter Steve Liesman steve, start with you. Your take on the headlines what were hearing is persistent conflict at the Federal Reserve. On the one hand you have this issue of inflation continuing to run below the feds target and the belief that its no longer transitory fed chair janet yellen made a change in her outlook saying shes not certain anymore that this is transitory is this concern for imbalances and the need to raise rates and i would say from these minutes, its continuing as believed bied market with the december rate hike and you start to debate 2018 which on the one hand you have the Federal Reserve saying three hikes and the markets priced in one, maybe another half of one so far daniel, one of the lines is fed members want to wait until inflation is concerned i dont think so. I dont think they would shock the markets come december 13th and youre right that is definitely a change in the tone and it comes along with Janet Yellens comments at nyu and it would take the 60 probability that we would see the second rate hike by the end of march the market difference versu the other difference. We are starting to see some of this, at least we had seen some of this in bond spreads and highyield spreads had begun to widen suggesting there were some concerns that the fed would next year raise rates three or four times and emerging market spreads are very tight and were getting mixed signals from the marketplace itself and the long bond and the tenyear note is seeing rates come down and the yield curve has been flattening and there was some anticipation that it would have an adverse impact on the economy. Right now there seem to be a variety of mixed messages coming from the markets as to how exactly the number of hikes and all of that is up in the air. Should we assume that what janet yellen thinks is what jay powell thinks . It would appear a nod on the website. That you wrote . That i just wrote theres no reason to believe that right now powell diverse at all from yellen. The last comments he made about inflation i think he made to me august 25th and he said low inflation was something of a mystery that inflation, he thought would be higher at this point relative to the growth rate, relative to the lower Unemployment Rate and that it allows the Federal Reserve to be patient. I think whats interesting about this is that powell who was not an economist will be tested economically very quickly, and that is the need for him to devise essentially unconventional policy responses to essentially unconventional economic realities. Im not sure about how much of a mystery low inflation, at least by the feds measure and the pce deflator is. You have goods, disinflation and technological disinflation in the system and those places where inflation is accelerating is typically in the feds control and the fed cant really control those prices and where asset inflation comes into place is in the Real Estate Market and the stock market the fed has had an influence and if we do get a problem in one those two areas either prices escalate further or we see some sort of disruption and were starting toy so the commercial real estate and then the fed has to rethink the whole proposition. I would be curious to see, well have a 70 change of personnel at the fed and this is a massive and its not just janet yellen and its also bill dudley and bill dudley has been ha harping on financial conditions as easy as they are and ill be listening to the financier in powell in the months to come as hes in office and hes been a little bit more skeptical, if you will, about some of the imbalances building in the system and it will be interesting to see whether or not hes going to side on that hawkish and being more hawkish philosophically or whether hell continue being i give him more credit and i think hes going to be his own man. What do you think, danielle, some of the next appointments and do you think the president will go more wild card than the chair appointment . Think the market was disappointed that we didnt see a taylor appointment so i think that he could be bolder Going Forward i dont think the name mohammad would have been floated in the first place and i dont think they would have let that name out if the Trump Administration didnt plan to continuing on the unconventional path on filling the empty seats onboard. Youll have to watch to the extent that the fed continues to deregulate the markets which could accelerate asset price increases and lead to imbalances that the fed will have to deal with later this is a huge issue for the Federal Reserve because if you think about what fed doctrine is right now, it is to use what they call macroprudential tools and regulation in order to address asset bubbles and try to at all cost try to avoid using monetary policy. What ron just said, this idea that maybe more with the new leadership of the fed monetary policy, that should be a change of doctrine. I doubt he will. That is more untested waters that he wont want to go into. Theyve seen with their own eyes that when they impose stricter positions and collateralized lending that the banks in many ways and especially those in the shadows have given him the heisman because weve seen no protection on bonds continue to be priced in the market and well oversubscribed. More flattening next year i think the yield curve is the one thing thats not eyeing right now. When you say that, though in march, i think yesterday we hit 59 basis points on the close for the first time we broke 60 at yesterdays close. The yield curve is communicating that theres two more rate hikes out there at the moment in my view the question becomes whether or not the market is starting to price in what it thinks to be a mistake by the Federal Reserve exactly i would agree with that thats what ray was worried about. There are two things that animate. Everybody thinks its growth. I dont think the bond market really prices in growth. Maybe as a second or tertiary factor, but the main thing it prices in is a, inflation, because a person who gives money to the fixed income market wants to be compensated for inflation and the second order it compensates for mistakes by the Federal Reserve and that kind of risk and you have to wonder if at some point here this yield curve thinks the fed is going to do too much next year. It is pricing in low yields still around the rest of the world which is dragging down all parts. Aftertax yields are negative exactly guys, thanks very much. Danielle, steve, ron. Happy thanksgiving. You, too. Goldman sachs out with their hedge fund report for the Third Quarter. What stocks do they love what names are they shorting leslie picker joins us with the details. Lots of love for tech and banks in particular. The stock held most frequently as the top ten position in Hedge Fund Portfolios is facebook. Thats according to 13 f filings compiled by Goldman Sachs. That ones followed by amazon, alibaba, alphabet and microsoft and time warner, apple, bank of america and Nxp Semiconductors and citigroup. Goldman also looked at the stocks with the most and least concentrated ownership by hedge funds. 3m has the smallest concentration of Hedge Fund Ownership at just. 3 . That one is followed by exxon, ventas, sempra, bb t, apache, Cincinnati Financial and international paper. So hedge funds appear to be less interested in energy and Smart Financial companies and to take it one step further, goldman also looked at the companies that were most heavily shorted by hedge funds those include a lot of familiar names and retail names as well as tech. At the top of the list is at t which is likely related to its merger with time warner and then intel, walmart, priceline, target, becken dickinson, nvidia, chevron and ibm. The market cap is sitting just below 2 tied with january as the lowest level since 2012, guys im really interested on the tech point clearly, lots of big names there and it makes you think theyve run up and yes, its the biggest sector exposure the report says in terms of net terms and relative to the net markets it is an overweight sector, but materials are bigger overweight sectors and relative to the benchmark, the other interesting thing is the financials is the biggest underweight relative to benchmark which i thought was interesting given that names like bank of america and citi are appealing that for people to increase their banking exposure. Theyve tended to increase their leverage to generate alpha, so theyve been paring back their short exposure, riding out the Long Exposure and leveraging that and that, of course, is a risky trade and weve learned our lessons in the past, because what happens once you start to see a correction that will be a problem for the hedge funds and it catapults their returns to the downside. Leslie, thank you leslie picker. If you are just coming up on power lunch, just in time for the biggest travel days of the year, gas prices are spiking and what can drivers expect . Can black friday pull retailers out of the red well talk to the former walmart u. S. Ceo about what brick and mortar is doing to push back against amazon outrage among video fans taking down ea stock all of that and much more coming up on power lunch. Their love to you. With some friendly advice, a genuine smile and a warm welcome they make your town. Well, your town. Thats why American Express is proud to be the Founding Partner of Small Business saturday. A day where you get to return that love, because shopping small makes a big difference. So, this saturday get up, get out, and shop small. Flexshares etfs are built around the Way Investors think. With objectives like building capital for the future, managing Portfolio Risk and liquidity and generating income. Thats real etf innovation. Flexshares. Built by investors, for investors. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. With retailers kicking off the Holiday Shopping season this weekend what can they do to attract more consumers our next guest says its chic to be cheap these days. President of the United National consumer suppliers brett, great to have you with us. Great you try to move overstock goods to places where those goods can be sold amazon resellers as well as National Chains in this retail environment with so many distressed retailers out there is that supply of overstock goods, i mean, is it very strong . Will consumers have a lot of choice i think consumers have a fantastic choice especially in the chic to be cheap in the offprice world, this year will be one of the last years we see black friday in the traditional sense where many retailers like a marshalls, ross have morphed black friday into this yearround shopping, vent which is a phenomenal opportunity for consumers to save every day in terms of the leadup for black friday, what is it like for you . I would imagine the patterns may be slightly different from your regular retailer so its interesting theres no arguing that black friday is what it is and will lead to billions of dollars in retail spent all over the globe, but for us, its just another day. We do we do black friday business in july we do black friday business in february so our retailers are fairly consistent versus looking for the big spike to kind of be the hail mary and saving grace. As you look at the field littered with troubled retailers out there and there are a lot of projections coming in the First Quarter of 2018, some of the retailers will be in deeper, distressed situations. Do you think that will be the super bowl for you guys in terms of gathering up all of this excess inventory i think whats interesting for us is you see the retailers that make the shift are the ones in multiple categories you will find the toys r us, the Sports Authority and the best buy are the ones that will have the challenges and absolutely because the manufacturers still have to keep those factories running. So for us its a phenomenal opportunity which translates into an amazing opportunity for the consumer brett, we have the kohls ceo on earlier what do you make of the partnership, the initial Testing Partnership that theyve made with amazon and that sort of says for the importance of amazon to have some kind of bricks and mortar exposure well, i always find it interesting because im a brick and mortar shopper married to an Amazon Shopper and the kohls partnership was strategic and very smart because amazon has to compete with walmart and walmart is coming after them pretty hard and north of 4,000 doors, walmart has that edge. The kohls partnership will help amazon edge into those people that still want the gratification, still want the ability to return products and not have to worry about sending it back. So very strategic and very smart. We talked earlier about your view that its chic to be cheap, but what about to be local are people moving away from the bigbranded National Presence retailers . So i think youll always find those who like to shop local and i know local business saturday is coming up what you will find, i believe, and the big box retailers will have to shrink the footprint to compete with that. There will always be target, walmart and kohls with the big box format and you will see store in store experiences and stuff that small and local businesses offer, theyll offer more of the same. Well leave it there. Thanks so much for joining us. Brett rose from the United National consumer suppliers. Thank you as the tech lash Gains Momentum around the world, the earlier pioneers of Silicon Valley are taking stock of what went wrong following interview caught our eye, wellknown writer and comput Computer Scientist was on squawk, and he described the internet. There was a purehearted activism coming from the left, actually, at the dawn of the internet age saying everything should be free we should have free email, free social networking, free, free, free, free news, but at the same time we love entrepreneurs and we love Tech Companies and we love steve jobs and we love bill gates and we have to combine these things if you say you want both of those things the only option left is advertising. Theres no other Business Plan that gives you both of those together. Lanier says the unintended consequences is manipulation of the consumer that then drive behavior he recommends a wholesale change in the business model. If we want to fix it, i dont think breaking up the companies fixes it i dont think regulation can really fix it. I think we have to change the financial incentives and let the companies have to charge for their services and even more important, people who contribute a lot of value to a social network say they have to earn money back from it so they feel theres equity in paying for the service in the first place we have to create a real Digital Economy instead of a fake one and that would solve a lot of our problems what struck me about this is another example of good intentions having unintended negative consequences, in this case, really great negative consequences when you look at the attempts of user manipulation that free is never free i think absolutely. I think we have to be moving and there is an issue of are they paying enough for the digital stuff that they use and it might address that and on the regulatory front, these are now Media Companies essentially as opposed to Tech Companies and are they going to be regulated in a way that reflects that . Yeah. At the same time are you willing to pay for gmail are you willing to pay for google docs and use on twitter and for all of these things that were so used to now can you take it away at this point . Would that save the Digital Economy eaven if its fake. Well push it through to the people that provide the pipes as opposed to the people that provide the software if you look at the market cap increase in Telecoms Companies and Cable Companies versus the Tech Companies themselves over the decade theres not a comparison to make i think he makes one tiny, bad assumption is that if people paid for the content then maybe there wouldnt be advertising. I remember the early days of cable . Do you know what they said about cable . There wont be ads because youre paying for it through your cable bill. Guess what we now all have ads, right exactly as we head into the busiest travel day of the year, gas prices are on the rise and morgan is at a rest stop morgan hi, will. Those gas prices or as you say petrol prices are at the highest level since 2014 and well talk about that and other travel trends aecffting travelers this thanksgiving eve when power lunch returns take a deep breath in and exhale. Aflac. And a gentle wavelike motion. Liberate your spine. Aflac. And reach, toes blossoming. Not that great at yoga. Ya but when i slipped a disc, he paid my claim before i knew it. So he had your back. Yup. In just one day, we process, approve and pay. One day pay. Only from aflac. Kwak po power lunch, as millions hit the road, they may get surprises at the petrol pump morgan is live in new jersey with that story. Hey, will, thats right so here along the new jersey turnpike weve really seen, its gotten busy. Weve seen traffic pick up as the day unfolded the state predicts nearly 800,000 vehicles will move along this major highway today alone overall, nearly 51 million americans are expected to travel 50 miles or more this thanksgiving week. That is the most in a dozen years, but aaa does warn that it could cause some major delays, that drivers in some major metro areas could see travel times that are up to triple their normal commute times a little bit busier on the highway. We started out around 4 00 a. M. And it was busy towards d. C. , and its picked up a little bit here headed to new york. It seems, everybody, that ive been talking to seems a lot more confident in the way the economy is going, anyway, so people are spending and thats all good so those types of sentiments despite the fact that prices seem to be higher at the pump and we have thanksgiving gasoline at its highest level since 2014 according to gas buddy. The National Average for a gallon of gasoline is 2. 53, but the bottom line here folks that weve been speaking to seem to be shrugging off that higher expense and seem to be feeling more confident about the economy and guys, just to wrap this up, that doesnt seem to be the only thing. Its not just travelers that are hitting the road right now its also more trucks as we come into whats expected to be another record peak shipping season back over to you morgan, thank you very much for that Morgan Brennan its gasoline, willford. And its rest stop. I didnt know what it was but i cant work out what the british word was ill just say petrol station the white house just now saying that the president will be meeting with u. S. Congressional leaders next week to discuss end of year legislative issues the meeting expected to happen on tuesday i assume that means tax reform one major strategy for brick and Mortar Retail lets shoppers order online and pick up their products in the store. Who is doing instore pickup right. Courtney regan put six to the test and well tell you her story straight ahead voedtate regulators are getting inlv well tell you why power lunch is back in two hello, everyone. Im sue herera heres your cnbc news update at this hour. Today marks 54 years since president john f. Kennedy was assassinated while on a trip to dallas in deeley plaza this afternoon people gathered for a ceremony at the memorial on the site bringing flowers and also signs the search for a missing argentine submarine has hit what officials call a critical phase. The ship that disappeared with 44 crew members onboard may be running low on oxygen. 4,000 people from five countries including the United States have joined in the search wondering if you were duped into liking or following a post by a russian troll during the course of last years election Facebook Says its creating a portal that will be active by the end of the year where users will be shown which known russian linked accounts they might have interacted with and travelers going through the international airport, and the airport says it hired old st. Nick and his elf and they do it each year to bring some Holiday Cheer to passengers, and if you see him, make sure to be good you dont want to end up on the naughty list that is the news update this hour michelle, back to you. Maybe i do. Maybe you do. Depends on what kind of naughty list you have. Oh, ladies lets move on thank you, sue. You got it, michelle. Lets check on the markets and a shortened trading week its my friday the nasdaq and russell 2000, hitting new highs and its lower by more than a point and the s p is pushing the index higher and leading the sector, marathon and also williams. The tech trending to the downside, hewlettpackard enterprises and hp inc. All dragging that market lower. The oil market is closing for the day. Lets get to Jackie Deangelis. While the Energy Stocks are moving higher crude, closing just under that level. Several reasons for that move even though the inventory report wasnt as bullish as expected. First, you have a Keystone Pipeline reduction of 85 through the end of the month because of the leak last week. Second, opec next week, that can move prices a lot. The market anticipates this ahead of these meetings, some people will take a long weekend and well see ahead of that as well and session high is 58. 09. We could see that 06 definitely in the cards before the year end despite the fact and i just highlight this that fundamentals dont necessarily match up with how far the price has come, guys jackie, thank you very much Jackie Deangelis brick and mortar is using every trick theyve got to keep up with amazon and one strategy is to use their store as a distribution center. Who is doing it right in our Courtney Regan is here with a special cnbc pickup challenge to see how it works this is really fun. Cnbc and our affiliate partners in chicago, dallas and san diego tested out the same retailers, and each team placed similar orders as we possibly could at three pairs of competing retailers. So heres how it went at home depot and lowes. 45 of home depot. Com orders are picked up instore 60 of lowes. It tells you right where it is although hopefully someone else is getting the order for us the trick is finding items your store stocks. If you want sameday pickup. Gosh, thats 15 days from now. Like home depot, it gives exact store inventory. One available ooh, thats good see if they get it for us. It doesnt actually tell us when the order will be ready only that well be notified when theyre ready and all four items was available and lowes not com was easier for pick up in store. Or so we thought. So i just got a call from lowes that our order is ready for pickup except for one item our team in chicago had the same experience with the same item at lowes so lowes took a little while because there was a really long line once we got up to the front of the line it only took four minutes. The home depot order is ready an hour and 16 minutes after checkout the order was ready in one minute from the time i got to the counter. Between home depot and lowes, home depot wins for buy online pickup in store for speed and easier ordering. So 40 of lowes shoppers that pick up in store end up buying more than their online order. At home depot, 20 to 25 of shoppers end up adding to their basket coming up on closing bell, we will put all six of the retailers, who is first and who is last and we did macys and kohls, walmart and target, home depot and lowes. 60 of lowes customers seem to pick up in store. That seems very high. That is high. Theyve been doing pick up in store since 1999. They are more likely to buy more once theyre at lowes. Is that because the line is so long to go shopping . Thats driven by design . We dont know for sure, but thats actually true at almost every single retailer. You see a big percentage of customers that end up buying more once theyre in store picking up an item either they forgot something. The numbers you cited was much lower and the pickup time is shorter so it suggests to me that maybe theres a correlation. Its possible we only tested four lowes, four depots in four different cities and i dont know for sure and those are just the results and the overall numbers the store provides for us. Keep us on track of who wins or who loses i cant tell you either one you almost got me that was really close. An hour away, less than thanks, courtney. Thanks, guys. Here is the pulse of the big box retailers, bill simon, former president of walmart usa, joins us via skype welcome to power lunch. How are you . Hi, how are you i hope you saw courtneys story. How important is instore pickup tell me how the ceo of a big chain thinks about what that does for traffic and revenue sure. Its important today because the customer is demanding the products when and where they want them, not where and when we want to get them to them and as a point of the advantage to the pure online pure play guys and the brick and Mortar Retailers have figured out that having Product Available for pickup in store and the faster the better is a competitive advantage and realistically whats happening is you are paying for someone to put it on the shelf and youre paying someone else to take it off the shelf and you have to be really, really good with your inventory to mike sure exactly where everything is to make it happen its a competitive advantage if you can do it right. Walmart, bill, how do you think about success . Do you want the customer to have the fastest in and out experience at the store or do you want the customer to actually hang out a little bit, maybe walk an aisle and maybe put another thing in their cart . Its always good to have the customer in the store and the longer the better and you see that particularly with black friday coming up that was always the goal get them in first and keep them there the longest and theyll buy the most im not sure you want them waiting in long lines to do that, but youd like to have them be dazzled by your merchandise and their store in order to stay there. As walmart builds out the online offering and do you think they would have stores than they otherwise would have done. The market would tell them that right now walmart has always been in a good position and the cash flow really well and all of them are making money and even the ones that closed were pretty profitable in the return they were closed for another strategic reason the market will determine that and the way walmart is going to market and increasingly youre seeing the same from amazon as having a physical footprint is important. Whether theyre all big boxes like supercenters or smaller like the neighborhood markets or another variant will be determined over time, but i think the customers told us clearly that they of the to shop both online and in physical stores where their needs apply we have the ceo of kohls on and he was asked repeatedly about whether or not this relationship with amazon could turn into something bigger, fullon tie up like we saw amazon buying walmart walmart, excuse me, maybe that was freudian, whole foods. Kohls is much you will smaersme cap and do you want to say whether or not it leads to something . I dont know about those two, but amazon is aggressive into space and the movement into whole foods means they can accomplish their goals without having some physical presence in the marketplace because theyre seeing walmart and others cross that paradigm across that border in a way that customers have really reacted positively to so i wouldnt be surprised at all to see them make another big play into brick and mortar what about if you can comment on alibaba taking a stock in the retail group in china because thats not an amazonwhole foods type deal and compared to sanaa being the biggest Grocery Store chain across china yeah. Thats exactly what were talking about. Thats a good point. The pure play ecommerce has gone a long, long way and theyre realizing as much as theyve grown and as much as theyve expanded, very few markets have moved past 15 of the market particularly in categories like grocery that have been slow to move online and they can do more and accomplish more by being both digital and physical and walmart is really showing the market how that can be done theyre doing very well in that space right now. Bill, there are a lot of reasons to like walmart this year and i know every single one of them being the walmart ceo, but when you take a look at walmarts climb its up 39. 5 over 12 months and its outperformed alphabet if you believe that we had a Goldman Sachs downgrade, walmart just a week ago on valuation concerns. Is this where walmart should be trading, in your view . Being look, if i could have guessed the market i would be there. Walmarts done some wonderful trings and theyve made some strides, but theres still some fundamental things that need to be fixed in the Retail Industry and walmart is a poster child for it walmart sales right now while theyre moving and ecommerce is up and slightly positive in samestore sales havent really grown since 2015 theyre operating income at 2015 was 29 billion and last year it was 23 billion, so while the share price is up and the economic fundamentals havent yet responded and i think they need to show that not only can they convert to digital, but they can also grow the top line and they can also continue to grow their operating income. Nobodys really done that yet so im not being critical of walmart, but thats the challenge for the brick and mortar guys and the challenge for the ecommerce guys as they move into physical space is to figure out how to operate stores because thats really,really hard outside their core competency thank you very much, bill simon. Happy thanksgiving. Still ahead on power lunch, well talk to a construction ceo about whatax t reform will mean for him and his business thats coming up and a lot more in a couple of minutes traders theyre always looking for advantages. The smart ones look to fidelity to find them. We give you research and datavisualization tools to help identify potential opportunities. So, you can do it this way. Or get everything you need to help capture investment ideas and make smarter trading decisions with fidelity for just 4. 95 per online u. S. Equity trade. Fidelity. Open an account today. Looking from a fresh perspective can make all the difference. It can provide what we call an unlock a realization that often reveals a better path forward. At wells fargo, its our expertise in finding this kind of insight that has lead us to become one of the largest investment and Wealth Management firms in the country. Discover how we can help find your unlock. Next week is a big week in washington as the senate is expected to vote on its tax reform bill. Joining us to talk about how tax growth can affect employment in the Manufacturing Sector is the president of Gray Construction good afternoon it you. Thanks for joining us. You, as well. What was the effective Corporate Tax rate last year and if we did see it cut to 20 what would be the first top of the agenda item to spend some of the savings on yeah, right so we are an S Corporation so we were in the we started off at 39 and fell below that, but if we go below that, i think that the way we see things is in a responsible way, i think this reform package has been put to the American People that this is going to grow the economy and thats the way we should first look at it and for us to serve our customers which are primarily in the manufacturing market, we will be hiring engineers primarily mechanical, electrical and engineers related to food and beverage production. Stephen, you mentioned the way that you should act based on how this has been framed to the American People. So is that your purely Economic Driving decision or is it something that you feel compelled to do and if its the latter how confident are you that all companies will act that way . I think its the way it should be done i cant promise you how all companies will go about that, but i think thats the way that bode rooms should look at this because its clearly the way its been presented to the American Public that this tax reform package is definitely to grow the economy and i think thats where we should go, and i know thats how our company will be looking at it. And what percentage of any saving would you pass on in that regard well, i would say to grow our mechanical and Engineering Base and also our architectural and Construction Management base you know, our company would be adding, it could be between 10 to 20 engineersand so thats not a base of about 400. So thats a pretty solid jump there. On u. S. Manufacturing, do you feel like it is fighting back compared to say, five years ago or ten years ago and do you put a lot of that down to the president or is it a more medium term in the shift that you may have seen . Going back to 2008 and 2009 when things were in a much different position, since then we have grown quite a bit, and i think it goes mostly to the fact that the United States is seen throughout the world as a great place to be for manufacturing. We have incredible competitive advantages, and i think the tax reform package will actually help us. Its michelle here. Theres been intense debate about whether or not americans salaries will go up because of the tax reform package you mentioned hiring more. Do you get is there any justification to say you will pay them more, too its certainly a possibility and thats also going to have to do with, for us, how the manufacturing market responds. As our competitors, if theyre going to be raising their wages, im sure that we would have to follow suit, as well the skills that i was just telling you about, the professions that i was just telling you about, those are in high demand right now. So its possible that those wages could increase. With the unemployment levels where they are, it could make sense. Thank you all right. Representatives say ea is engaging in predatory behavior with the star wars game. Well tell you about the growing controversy next lets begin. Yes or no . Do you want the same tools and seamless experience across web and tablet . Do you want 4. 95 commissions for stocks, 0. 50 options contracts . 1. 50 futures contracts . What about a dedicated service team of trading specialists . Did you say yes . Good, then its time for power e trade. The platform, price and service that gives you the edge you need. Looks like we have a couple seconds left. Lets do some card twirling twirling cards e trade. The original place to invest online. [vo] progress is an unstoppable force. The season of audi sales event is here. Audi will cover your first months lease payment on select models during the season of audi sales event. Every day, on every street, in every town, across america. Small businesses show their love to you. With some friendly advice, a genuine smile and a warm welcome they make your town. Well, your town. Thats why American Express is proud to be the Founding Partner of Small Business saturday. A day where you get to return that love, because shopping small makes a big difference. So, this saturday get up, get out, and shop small. Gamers are up in arms about Electronic Arts for star wars battle for two and now two state representatives are getting involved julia is live in los angeles with the details, julia. Reporter hey michelle, heres the issue, invited gamers to make ingame purchases which shut down after consumers criticized the game maker for luring consumers for spending more money on content which they inspected to be included in the 60 game now representatives are vowing to take action to protect underaged kids asking states attorney general to look into whether it is exploiting consumers. This game is a star warsthemed Online Casino designed to lure kids into spending money its a trap. Were looking at legislation this coming year that could prohibit sale to those folks who are underage to protect families reporter after turning off the ingame purchases, weve heard that this is overshadowing an otherwise great game. This is never our intention, sorry we didnt get this write now shares are down about 9 which is the day it reported earnings that fell short of expectations and even with that decli decline, its worth pointing out that shares are still up over 35 so far this year back over to you difference between this game julia and other game that offer ingame purchases. Reporter its not uncommon, thats for sure. It seems like the ones in this game were more aggressive and people expected to get more for that 60 there was also question which was implied by that state representative, whether or not there was an element of gambling weve had analysts weigh in saying this is nothing to do with gambling. This was more of a getting people to spend money about not getting clear about whats in exchange its the cheap games. Like its only 1 to download them on your phone i think its the price point, you spent 60 bucks and youve got to spend even more so this is, this is a console game and console games do have an ingame purchases and part of it is itll be digital addones or games that are out for a while and offer new pack give you the next level of the game so thats not unusual. I think what youre thinking of is another whole category of games which is the more casual mobile game and those games are usually free with inapp purchases. All right, thank you. Julia in los angeles its been a wild couple weeks for underarmor following executive departures lets trade it with the trading nations team and the stock is so low at this point. We will look at this as a value with enterprise value to sales trading roughly at one times they are earning money they dont have a lot of debt. So you want to look at this company and perhaps over the next three to five years you can get a better than market return with a little less volatility. Sounds like chad is saying that its a value play, would you agree . No, i think its a classic falling knife palm wide open trap right now if anything, its a value trap the reason why is because as was pointed out, this has now become an operational issue which now is hurting their brand. So they have to stabilize operations they have to stabilize brand, and, they may be facing very, very stiff competition from nike from above, adidas from below and amazon coming into Sports Apparel business which will destroy them from the sidelines. I think you need to wait and see that theyve performed first before committing any kind of capital. They need to stabilize operation and prove to the market that they are Going Forward at this point, i think its very much a past. Two very different opinions thank you, boras and chad, appreciate it, have a great thanksgiving for more trading nation. Head to our website. Up next, check please. Is this for me . [alarm beeps] happy . Wooo let out your inner child at the lexus december to remember sales event. Experience amazing at your lexus dealer. Hey. Pass please. Im here to fix the elevator. Nothings wrong with the elevator. Right. But you want to fix it. Right. So who sent you . New guy. What new guy . Watson. My analysis of sensor and Maintenance Data indicates elevator 3 will malfunction in 2 days. There you go. You still need a pass. Check please heres a happy thanksgiving check please, not. There is a video thats gone viral, 1. 4 million views in the last week. Its sponsored by stop autonomous weapons. Com and its a very, very scary movie about how drones could actually kill people, you know, kill a robot as weve heard from a lot of tech giants in the world who are nervous about this kind of thing. And you circulated this earlier, its a scary video to watch. Yes, it is, it is you can see why its got 1. 4 million views. I cant wait to watch this. Its fascinating slightly terrifying my item here is to wish the English Cricket Team good luck it kicks off tonight which is the ashes versus australia and its perfect for the long weekend to tune in, five day competition. Very enjoyable down to the low on the street, 15 bucks nice bounce in todays session well see if this holds up thank you so much for watching power lunch. Closing bell starts right now. Happy thanksgiving hi everybody on this thanksgiving eve welcome to the closing bell, im kelly evans at the New York Stock Exchange and im Bill Griffith Retail Stocks getting a boost today ahead of the biggest shopping day of the year, that would be black friday, not tomorrow and why many people think its all about amazon and e commerce, we have a former Retail Executive who says brick and Mortar Stores are still relevant hes going to make his case for that coming up i think he came from one. Yes theres that