Transcripts For CNBC Closing Bell 20170316

Fargos ceos compensation went up despite the sales scandal that shook the bank. We have more details on that controversial story coming up. But we start with the budget blueprint the white house ingave this morning. You can see the percentages there. Hes calling for cuts, meantime, at the Environmental Protection agency and the departments of state, labor, agriculture and commerce all in the range of 16 to 31 . We have full Team Coverage on which stocks stand to gain and lose the most from these proposed changes. Kayla tausche taking a look at infrastructure. Meg tirrell looking at pharma and health care. We got some glimmers of what the white house wants to do with infrastructure. Its proposing to end several projects. The governments proposing steep cuts to infrastructure heavy agencies and their programs at agricultu agriculture, cutting rural water program. And a billion dollar budget cut at the defense departments corps of engineers which maintains inland water ways like dams and harbors. It proposes infrastructure funds increasing for Cyber Security and the nations power grid as well. Experts say the up side of having a white house centric infrastructure policy is it gives the Administration Bargaining chips for high agenda items lax tax reform. Infrastructure is a lower agenda item. Thats why you can see the infrastructure bellwethers have lagged the overall market. Theyre divided over this budget. This is far from a final draft so its hard to say which companies are going to be fighting over some of these new projects and losing business over the projects that get cut. Well have to see what makes it into the final draft. All right. Thanks, kayla. Kayla tausche. Lets send it out to meg tirrell. Lets look at the impact on drug and health care. The president is proposing a budget of 69 billion. Thats a reduction of 15 billion or 18 . Now the proposal includes support for areas including hiv and aids and Substance Abuse treatment centers. The proposal about doubles the Fees Companies pay the fda to review their products recalibrating the fees to more than 2 billion in 2018 saying, quote, in a constrained budget verne 789, industries that benefit from the fdas approval can and should pay their fair share. While it is a doubling, this wont massively affect the Large Pharmaceutical Companies across the board. They may affect smaller biotechs. Now where we could see more near term significant impacts is where we psy trumps proposal to cut the budget by 6 billion. The nih is the engine of medical companies. Many in the medical community are expressing concern. Look at Laboratory Tools Companies Like illumina, thermofisher and qiagen. Kate rogers is going to run through the budgets impact on education. Kate . Reporter kelly, President Trumps Budget Proposal is going to slash 14 from the education departments budget. Much focuses on k12 education with a 1. 4 billion increase. In the higher ed realm federal work Study Programs will be, quote, significantly reduced while pell Grant Funding is safeguarded. It eliminates the federal supplemental Educational Opportunity grant program. It saves 732 million. They have been on a tear since President Trumps election. Grand canyon and devry are up and Bridge Corporation are up close to 40 . The reason the Obama Administration had cracked down on the for profit colleges claiming they received billions of dollars in federal grants and loans but left students with sky high debt levels and earnings. The trump team has moved to ease the obama era rules. Great stuff, everybody. Thank you. Appreciate it. Digging through the Budget Proposal for us. Joining us is joe duran from united capital. Cnbc market analyst steve grasso and Rick Santelli from the cme in chicago. Joe, let me just begin with you. You know, early days for assessing the impact of this budget on a lot of the stock market. What impacts do you foresee from that and for other aspects coming out of the administration right now . I think what youre seeing is some questions about how difficult its going to be to get his policies put in place. And what youve seen with the Affordable Care act, with his executive ban on travel, were seeing that its not going to be that easy and that as long as it takes some time or were seeing some push back from congress, that implementation of whether its the new budget or anything else, its going to add uncertainty. And some of the optimism thats been priced in might add to a little bit more volatility. So i would just caution everyone whos priced in very quick implementation that its probably not going to be that quick. Thats going to add some volatility. Were at a seasonal time where april has been quite a sensitive time in the markets to price that into the fact that were probably going to see a little bit of heightened volatility. Forgive me, joe, for stepping on you for a sehk. Grasso, if nothing else its a reminder on all thats still to comfort market. Its the new health care plan, it is the budget. Right. It is infrastructure. It is deregulation, tax cuts. You could go on and on and on and on. Yesterday we were so optimistic about what the market could do post fed. We are down 41 points now. It was a sell the news type of event. Everyone sort of sat on their hands and start trading volumes lighter going into the fmoc meeting. You see people reacting to it saying, okay, this is where we pop to. We saw everything run universally on the marketplace. We saw the dollar originally run. Bonds, we saw everything from equities. To joes point, when you do look at we need we have a 52 basically a 5248 vote in the senate. You need all the republicans and you need the other side to kind of bridge the gap for a lot of these policies. When you look at mcconnell, orrin hatch, mccain, Lindsey Graham all already saying they oppose o. To joes point. Now youre looking at maybe a steeper fight. I do believe that this is the art of the deal, so to speak, for President Trump. You ask for much more than youre willing to accept. Theres going to be a negotiation process. The markets will price that in. Were not down a whole heck of a lot today. It does appear that the market is still constructive, positive and hopeful. You better hope its picasso and not some mud thrown on a canvass. Sure. Ive been accused of looking like a picasso from here. Rick santelli, what do you think . The budget obviously our reporters laid out some of the immediate impacts on Different Companies here, but what do you think the Bigger Picture longer term impact is if anything like this is passed . Listen, i firmly believe lots of things are going to get passed, okay . But i just think that the lots of things that are going to be passed dont look in their current form like they will once they are passed. So i think theres going to be a lot of good, bad, and ugly. I think this president is going to be signing legislation 3, 4, 6, 9 months down the road. As far as taking a more macro view, i think joe nailed it. What did joe talk about . He expects hyper volatility. If i see hyper volatility, then i would be very nervous if i was law and equities because to me whether its the dollar index not going down or the equity markets not going down, the thing that jumps out at me that you shouldnt ignore is the lack of volatility and lack of significant retracement. Yes, jugs were down 40 points . I cant see the board quite from this angle, but we were up 115 yesterday. These arent problematic in my opinion, but when we get volatility, thats more the kind of profile that you see on tops and bottoms. The volatility is a key component. Go on. Are you suggesting then, rick, that youre expecting a pickup in volatility and if so especially in the near term, do you agree with the likes of jeffrey gunlock who says you could see a push down in yields, the ten year could go below 225 before it eventually rallies towards 3 . Well, let me handle one thing at a time. First of all, i am absolutely not, underscore not looking for hyper volatility. Im saying if i was pushed to change my outlook on equities, thats one of the key ingredients id have to see. B, now listen, mr. Gunlock has a lot of money under management. Who am i to go against anything he said, but like all of us, whether it was equities three months ago he was looking for big down side, whether it was Interest Rates he was looking for test of 1 . Nobodys infallible. There are no krystal balls. I still see the current profile and stencil of all three markets. Foreign exchange and fixed income and equities doing what theyve done since november. They come with a trend move. Until that pattern is broken, i think you have to stick with the major trends. Steve, one more thing on the budget today. Terry haines thinks its a nonstarter. Even quoting one of the senior house appropriators, the president will propose, congress will dispose. You cant pay for an increase in the military on discretionary programs. We have the outline. Some of the stocks are certainly reacting to that, but what happens if the budget is just an extension of the budget that hes inherited . I think its going to be more of a prak tish ner proposing your ideas but even speaker ryan said this is a starting point, this is a launching off point. This is going to be a long negotiation. This president likes to throw everything at the wall and work on megaamount of projects all at once. Hes going to work on everything. Probably going to take longer than we would like but hes working on everything simultaneously. Were not used to that type of white house acting. Hes not a career politician. He might have a batting average of 100 . Having said all of that, ive been a buyer of this market out of the election. This week i made sales. Every sale youve made off of the election has been a bad sale. For me, i dont want to get greedy. When you try to be a pig in the market, you get slaughtered. Thats what i feel like im trying to be right now. I might buy it back. Do you think youre going to get hyper volatility . The problem with in other words, youve just painted a case where this is going to take longer than maybe people are ready for, for the president to get all of this stuff done. If, in fact, it does, youre right, doesnt the market then see volatility . Huge tail wind. Just look at whats happening to small caps and have a look at whats happening to the stocks that did best at the very beginning. I think youre pricing in that things are going to be a little tougher and you just want to keep an eye to where youre investing. I think you need to rebalance. If youve not rebalanced because things have changed, your portfolios out of line. But look at whats happening to small caps because theyre having pretty significant modest correction. Were down 5 with the dow and s p very close. Im saying ive heard people call for higher volatility over and over and over while its going down. Rotation is rotation and not valuation. Until something gets pammed in his face, the market still trends higher. Joe durand, steve grasso, Rick Santelli with us this afternoon. 45 minutes to go into the close. Dow is down. Canada goose flying high today. First day of trading despite an Animal Rights trading outside of the white house. Got a coyote mask . Oak tree founder oak tree cofounder howard marks speaks with us and later investing legend goal greenblatt of gotham funds shows where hes finding money in the trump deregulation. Oh the things you say oh youre unbelievab e youre unbelievab e additional spending. We have some more details on where that money is going. Were seeing increases at the va, increases within the department of justice for law enforcement. Increases within the department of Homeland Security for things that include Border Security and immigration controls. Increases within the department of energy to deal with Nuclear Triad and corresponding reductions in similar amounts offsetting dollar for dollar in other programs. The largest reduction if youve seen the budget is a 31 reduction within the Environmental Protection agency. The next is within the department of state and the other departments are reduced in lesser amounts. I think the smallest reduction we have is nasa which is just less than 1 . There again, as with many of the agencies, youll see certain line items within those budgets. This is the message the president wanted to send to the public, to the press, to capitol hill. He wants more money for defense, more money for border enforcement, more money for law enforcement, more money for vets, more money for School Choice and then to offset that money with savings elsewhere so that all of that is done without an additional dollar added to the deficit. As ive mentioned before, this budget does not balance the budget, this budget simply reallocates and reprioritizes spending as any family or business would do. This budget does not, for those of you who were not here last week, this budget does not address the big picture items such as policy changes, revenue flows, tax policy, mandatory spending. This is simply the top line spending budget, thats why we call it the budget blueprint and not the full budget. The budget which will contain all of those pieces and parts will be released in may. Before i take questions im going to do something i dont ordinarily do. Im going to call on the New York Times because theyre in trouble. Apparently wheres my New York Times guy. Matt flaganheimer and Ellen Rapoport are in big trouble. Ill give you the first question. They said i am the father of 17 triplet girls. My 17yearold girl wishes that had happened but my two 17yearold sons are upset. If you can clarify that, ill give you the first question. Go ahead. Were not great at math obviously at New York Times. The math is right, its the gender that was wrong. Biology. But during the campaign, candidate trump talked about the National Debt which, of course, reached around 20 trillion. You said this morning is there a plan as the president talked about during last Years Campaign to actually eliminate the National Debt in eight years . He said during the campaign it was easy to eliminate the entire debt, not the deficit, the debt. Is this something the president is committed to try to do . Its a good question. A fair question. The budget blueprint does not deal with the debt. It even doesnt even deal with the deficit. It is simply the first part of the appropriations process. Well send this up to the hill now and the appropriations committees of the house and senate, the house controls the power of the purse excuse me, congress controls the power of the purse. This will be the first step in that process. We will start to address the issues of the longer term deficit, longer term debt in that larger budget. Well have to deal with things like mandatory spending, tax policy, flows. Its a fair question. Now is not the time to ask the question. The 28 that comes out of the state department. I know youre leaving a lot of discretion to the people who are in charge there and all of these agencies for how to implement the cuts, how much is intended to come out of the foreign aid budget of 10 billion . A lot of it. As ive said before, one of the reasons that youve seen such a dramatic reduction in the state department on a percentage basis is not that the president thinks that diplomacy is important, in fact, nothing could be further from the truth. Secretary tillerson has had one diplomatic success so far in the deal he cut with iraq. We believe this budget protects the core function of the state department. It just so happens that much of the foreign aid that the president talked about in campaign, much of the money that goes to climate research, green energy, those types of things, are actually in the state Department Budget. If those line item budgets had been in the department of commerce, they would have gone down by a similarly large percentage. The answer is most of the cuts within the state department try to focus directly on foreign aid. Yes, sir . Yes. The budget showed a. 8 decrease for nasa but youve also talked about in the Administration Using private companies, such as spacex, for example, for more of that. So does this show is some of this going to be shifted over to the private sector . Does this show a commitment on the administrations part towards science and nasa . Again, if you do what we did, go back to his speeches and talking to him, we tried to identify his priorities. He said, im still interested in america being involved in space explorati exploration. Even though the overall number is reduced, 0. 8 , individual line items that deal with Space Exploration are plussed up. Part of the intent there is to understand it. Yez. Experience in the house tells you that a lot of these cuts havent been voted for before. Do you consider this budget an opening bid . Do you expect a lot of push back on the specificity of the cuts . To take your point that the president said he didnt want to touch Social Security, medicare, the fact that its not in the budget, is that a signal that those programs are going to be untouched . That ignores 70 of spending and 90 of the growth. Ill deal with the second one first. The president is going to keep the promise the on the campaign trail. Youll see no reference to Social Security here, medicaid here or any of the other mandatory programs which some people call entitlement programs. Thats not what this budget is. This is the discretionary part of the budget. Half is defense and the other half is everything else, the alphabet soup of government. Just because its not here doesnt mean were dodging the issue. You would never see any budget blueprint that deals with the top line measures. To your other question about it not being popular on the hill, yeah, i can recognize that. Ive been on the hill to know that some of these will be very unpopular. Keep in mind the president has been in a unique position. I had my constituency. It was a district. Senators represent an entire state. Were always dealing with special interests from back home. Were dealing with lobbyists from back home. The president is beholden to none of that. The president has drafted a budget for the entire nation because thats who he sees himself representing. He did not ask lobbyists for input on this. He didnt focus on how these programs might impact a specific congressional district. But we know that going into it. And, again, the message were sending to the hill is we want more money for the things the president talked about, defense being the top one, national security. If congress has another way to do that were happy to talk about it. Yez, in the classes. James fwras mount azura. 20 Million People in four countries facing starvation and famine yet youre cutting funding to the u. N. , cutting funding to the foreign aid budget. Are you worried that some of the most Vulnerable People on earth will suffer as a result. Were absolutely reducing funding to the u. N. And to the various foreign aid programs including those run by the u. N. And other agencies. That should come as a surprise to no one who watched the campaign. The president said im going to spend less money on people overseas and more money on people back home and thats exactly what were doing with this budget. Yes, maam. Given your focus on dollar for dollar offsets in fiscal 18 and for your fiscal year 2017 request you didnt insist on dollar for dollar offsets. Why is that . Why are you not concerned in 2017 . The point that the question deals with 2017 request, which is a 30 billion, i think its actually 3 billion billion and a half in there ford wall and its not entirely offset. Theres a couple of reasons, time. The other is some of that is con tense against si operations. I have april somewhat colored history with the over seas con continue again si operation. We went through to make sure it is true. Its focused on the areas where we involve iraq, syria. We have send them 18 billion. The president has called for eliminating funding for the corporation for public broadcasting and the National Endowment for the arts yet the Republican Congress says the president appropriations bill, will he veto those bills and tell the Republican Leadership to send bills that defund those things . I think the message the president sent right now is that we want to defund those. Its completely defensible reasons for doing that. Its a simple message by the way. I put myself in the shoes of that steel worker in ohio. The coal mining family in west virginia. The mother of two in detroit. I think, okay, i have to go ask these folks for money and i have to tell them where im going to spend it. Can i really go to those folks, look them in the eye and say, look, i want to take money from you and i want to give it to the corporation for public broadcasting. That is a hard sell and something we dont think we can defend anymore. As to specific vetoes, we know it doesnt come over one by one. They come over in large Appropriations Bills. Well work with congress to go through the appropriations process and well make determinations on whether or not to sign Appropriations Bills or to veto them at the appropriate time. Several places in the budget where youre talking about eliminating funding for unauthorized programs. Are you laying down a market for unauthorized programs and do you think spending discipline would be improved if congress authorized everything . We hope so. For those of you who arent familiar with this, we actually spend a lot of money in the federal government thats on programs that arent authorized at all. Remember, spending is sort of to break it down, its sort of a threestep process to spend money. You have to budget for it first, then you have to authorize it and then you have to appropriate it but a lot of the programs that we spend money on for years have been unauthorized spending. Either they used to be authorized and then they simply lapsed and others were never authorized they simply were appropriated without any authorization. The message is, thats not the right way to do it. Thats the wrong way. You heard the president talk specifically on the campaign trail about at least 5 reductions for unauthorized programs. You talk about this budget keeping the promises that the president made during the course of the campaign. Housing and urban development, this budget blueprint calls for a 13 reduction, 6 billion. During the course of the campaign President Trump said specifically the urban black voters, he says, what do you have to lose . It turns out what they have to lose is at least 6 billion that goes to many programs that benefit knows communities. What do you feel to those americans that that nobody is going to get kicked out of their houses. What we did when we looked at the hud budget was find a way to spend the money better. I talked to dr. Carson today. We went through the analysis of the hud budget. A lot of their money got spent on Government Housing and building it, infrastructure. What secretary carson and i talked about is figuring out a way to do that better. As we did that what we realized is we are working on a Large Infrastructure Program that we hope to roll out this summer. What secretary carson wants to do is take the money for the infrastructure thats in hud right now and not very well run and move that into this larger program. Youll see the same line items or similar line items for department of transportation. These do not mean the president is changing his commitment to infrastructure. Far from it. For years and years we have built infrastructure like this and it doesnt work very well. Let me finish. So what were doing now is taking it out of the discretionary budget and move it into the larger infrastructure. Housing and community voemt block grants arent excludsivel about housing. They include in part meals on wheels. Austin, texas, today, one organization that delivers the meals to thousands of elderly says that those citizens will no longer be able to be provided for those meals. What do you say to those americans who are ultimately losing out, not on housing but other things taken out of the budget . As you know, meals on wheels is not a federal program. Its part of the cdbg, the block grants we give to the states. Many states make the decision to use the money on meals on wheels. We spend 150 billion on the programs since the 1970s. The cdbgs have been identified as programs since the Second Bush Administration as ones that were just not showing any results. We cant do that anymore. We cant spend money on programs just because they sound good. Great, meals on wheels sounds great. Thats a state decision to fund that particular portion, to take the federal money and give it to the states and say, look, were going to give you money for programs that dont work. I cant defend that anymore. We cant defend that. Were 20 trillion dv3d in debt. We cant spend it on programs that did not show. Shyness in pennsylvania. It happens to be the state that helped President Trump to the white house. Im curious what you say to those americans in the community where they tell me today that 800 individuals will no longer children who need it most, children will no longer be provided in the most needy communities. Im not familiar. Yall are at an advantage over me. I have to remember all 4,000 line items. After School Programs generally. Supposed to be educational programs. Thats what theyre supposed to do. Theyre supposed to help kids who dont get fed at home get fed so they do better in school. Guess what . Theres no demonstrable evidence that its helping results, helping kids do better in school which is taking money from you. The way we justified it, these programs are going to help these kids do better in school. To be clear, were saying the administration is saying no after School Programs out there are doing their job helping educate these children in. Now youre asking me a question i dont know the answer to. I dont believe we cut all the funding for those types of things. Yes, sir. Just to follow up on that. You were talking about the steel worker in ohio and the coal miner in pennsylvania and so on. Those workers may have an elderly mother who depends on the meals on wheels program, who may have kids in head start. Yesterday you described this as a hard power budget. Is it also hard hearted budget . No, i dont think so. I think its probably one of the most compassionate things we can do. Programs to help the elderly . Half of the equation, right . Youre focusing on recipients of the money. Were trying to focus on recipients of the money and the folks who give us the money in the first place. I think its fairly compassionate to go to them. Were not going to ask you for your hardearned money anymore. Single mom of two in detroit. Give us your money. Were not going to do that anymore unless we can gaur an please let me finish. Unless we can guarantee to you that that money is actually going to be used in a proper function. And i think that is about as compassionate as you can get. Zblem on the border wall. The budget as i understand it asks for 4. 1 billion so 1. 5 for this year and 2. 6 for the following year. Theres no mention at all of whether or not mexico is going to help pay for it or reimburse the u. S. For it as the president pledged so where is that money coming from for the border wall . A couple of things. Your number is correct, 1. 5 for 2017. Back to your question about 25017. I think 2. 6 for 2018. People have asked me does that build the whole wall . No, it doesnt, but it gets us a start on the program. Youll see some of the wall being built this year. Obviously we increase funding in 2018. The wall will take longer than two years to build. As to the source of funds, thats up to the president and the treasury and the state department. Im the folks i am the guys we are the guys and gals at omb who take the money we have and allocate it on a budgetary process. Its up to somebody else to figure out where it comes from. The budget for d. O. J. Zeroes out reimbursements for states and jails Holding Illegal immigrants. Some goes to sanctuary cities. Is that part of the president s promise to withhold money from sanctuary cities . Are there other elements intended to carry out that punishment . Honestly, im not familiar with that particular line item. Let me deal with the doj and also homeland. There were increases with homeland that deal with this topic. Youre going to see an increase in homeland for an increase in detention facilities. Its a fairly significant increase. The president said he wants to stop the catch and release program. He signed an executive order to do just that. We fund that. We increase the amount of money for detention facilities for folks who come into the country illegally. Ill give you a followup because i didnt answer your first question very well. The question on the cuts youre making to transportation and housing. You said those will be paid for later with other appropriations. You said this would be balanced. I know youve been a fiscal hawk yourself. It sounds like a bit of a shell game where youre saying now this is a balanced budget but youre saying youre not stopping to pay for other things because those will be paid for later. Where are you going to pay for the other things . When does all of this stuff get paid for. Its not a balanced budget. There will be still roughly 488 billion deficit according to the Congressional Budget Office next year. We didnt add to that to spend money on the president s priorities. Regarding moving projects out of say the base budgets and into the infrastructure, this is something weve recently started. Wouldnt come until summer or early fall. We have to do Obamacare Repeal and replace first, then tax reform second. That leaves infrastructure third which may come after the august recess in congress. So youre making an assumption that im not willing to make. Youre making an assumption that all of that infrastructure is going to go to the deficit and im not willing to make that assumption. One, it provides robust funding for embassy security. Zbles citing the benghazi accountability review board. Does that mean there will be an increase considering all of the criticism theyve levied against president obama . Thats one of the line items to leave up to secretary tillerson. He and i talked about the state Department Budget and how he decides to allocate that. It may be that there are some embassies that dont need a lot more security and some that do. We gave him the flexibility to do that. The gentleman in the back had a question. Many countries around the globe say that President Trump will cut they are not voting with the u. S. So how does President Trump feel about those countries . The u. S. Taxpayers are asking that we dont have to spend on those countries who are against the u. S. Again, i come back to what the president said on the campaign was that hes going to spend less money overseas. To your question which is the hard power versus soft power. Theres a very deliberate attempt here to send a message to our allows and friends such as india and at very sarris. This is a hard power budget. We plan to change course. Ill take one more because im sort of running down. Yes, maam. Explain a little bit more about what message the president is trying to send by eliminating a lot of funding for science and Climate Change research as you mentioned earlier. And just followup. Sure. A couple of different messages when we talk about science and Climate Change. Lets deal with them separately. On science, were going to function were going to focus on the core function. Thiss reductions in the nih. Why . Thank you. Why . Because we think theres been mission creep. We think they do things outside of their functions. We think there are savings. We recommend that a couple of facilities be combined, cost savings from that. Again, this comes back to the president s business view of government which is if you took over this as a ceo, you look at this on a spreadsheet and go, why do we have all of these facilities . Why do we have seven when we can do the same with three. Wont that safe money . Yes. Focusing on efficiencies and what we do better. Climate change, the president was fairly straightforward. Were not spending money on that anymore. We consider that af waia waste money. Meals on wheels you determine has not been doing its job effectively. What evidence are you using to make that statement . Is that feeding seniors . My understanding from having been in the state government, i may have this wrong, ive been wrong several times today, this may not be the first time. My understanding of meals on wheels, that is a state determination. Federal government doesnt directly fund that. It funds the central cdbgs and some states choose to take the money and do meals on wheels, other states and localities might choose to do something else. We look at the cdbgs and when we do that, we look at this as 150,000 spent without the appreciable benefits to show for that kind of taxpayer expenditure. The cdbg im going to wrap this up. How sean does this every day for an hour and a half, i have no idea. Ive been up since 4 00 a. M. This morning so im going to turn it back over to sean. Thank you very much and well turn it over to sean. Around here thats a half day. That was the head of the omb Mick Mulvaney going over the budget blueprint, one that calls for a 54 billion increase in defense spending, 9 increase there. Offset dollar for dollar he said by cuts in the state department to the epa, labor, ag, and several other departments. John harwood listened in to the briefing and the q a there with mr. Mulvaney. Ive been on the hill long enough to know this is unpopular. How big of a fight . A huge fight and hes going to lose most of that fight. Congress is not going to adjust the budget caps in the way that the administration is requesting. You saw very energetic performance from Mick Mulvaney who loves the back and forth of budget skirmishing. He was unapologetic for things like cuts in foreign aid. He said were not going to spend your money on that anymore. He did acknowledge that President Trump will add to the deficit this year with a supplemental request hes making with over 30 million billion, rather, for defense spending but says the 2018 budget will not add. And on the question of is the president going to keep his pledge to eliminate the National Debt in eight years, he said it is not the right time to ask that question. John, thanks. John harwood with the latest from washington. Despite markets being lowered today, stocks have been on a tear lately consistently hitting new highs ever since President Trumps november election. Bond prices have slumped. Yields soaring since then. Howard marks speaking about the bond market at the forbes top investor summit this afternoon. Take a listen. People ask me all the time. Are we in a high yield bond bubble . No. Joining us is oaktree cofounder howard marks. Welcome, sir. Thank you, kelly. Its great to have you with us. So, you know, so many Different Things to talk about. Want to talk about tribune with you especially. Top level. Whats your assess nlt of the market at these levels . Stock market, bond market too . Well, i think that were in a low return. Asset prices are ellie vated everywhere. When you say sir, this is scott wapner. Nice to see you. When you say prices are elevated, valuations are elevated everywhere, are you talking about prices specifically or other markets as well . I think the u. S. , whose economy is the envy of the world, is leading the way in that regard but, you know, scott, it doesnt make any sense to think that we have one asset class over here which is rich, another rich, another rich, another rich and that one is really cheap and its freely available. If that one is rich it will appreciate to get into line. There are markets that are cheaper than the u. S. Market but i dont see any pronounced bargains in place. Lets talk about sinclair and tribune and this hangs on deregulation coming out of washington to allow that to happen. Youre a debt holder, right, i believe of tribune . Would you support it . Kelly, im sorry to say that i never discuss specific holdings in our portfolio and i dont have the information to give you on that today. Let me just try to put it differently then. You know, deregulation is the theme here so do you support the idea of allowing local tv stations, for example, to become partners in a way that previously everybody said, no, no, no, you kajtd do that . You cant have that kind of market power. The world has changed. Do we need those rules . Im not familiar enough to have a good answer. All right. I gave it a shot. You gave it two tries. Thats true. I may give it a third. Since we are talking about deregulation and all of these initiatives that the president wants to put through, we just listened to a briefing about the budget that is going to lead to a big fight on capitol hill. The market has run far on expectations of everything, infrastructure, tax cuts, repatriati repatriation, you name it. How patient do you think investors will be until all of this stuff starts to bear real fruit . Scott, theres no question about the fact that donald trump intends to be a highly pro business president. What he tries to do, what he can do, theyre all up in the air. There will be a lot of distractions from what goes on in the Business World in other areas where the road is perhaps more thorny. And, you know, my greatest concern is that the stock market has been very strong since election day, meaning that a lot of optimism has been factored in. I think that every investor should prefer to invest when optimism is low, not high. Are you suggesting then that in your own sort of investment thesis and how youre actually putting into action, are you more hedged now than youve been in a while . And do you see some sort of correction of any, you know, meaningful number happening . You sound like that thats the case. Well, were not hedged. Were not hedge gers. We dont short. We are fully invested, and i believe that for this climate, the right approach is to be fully invested in assets that have been selected with unusual care. For 5 1 2 years our mantra has been move forward with caution. I think thats been the right way to be. I think its right still today. Were not pulling money out of the markets, were just applying great caution. Speaking of caution in the bond bubble, howard, where do you think the ten year might be at the end of this year, at the end of next year if conditions continue to normalize . You know, kelly, one of our guys said to me a few years ago, if you name a price, dont name a date. If you name a date, dont name a plies price. I think you know me well enough to know that i dont make forecasts along those lines. Its obvious to the consensus that rates will have an increased bias. The increase is will they go fast or not . My own guess is they will go not too far and not too zblast if you in your earlier clip that we showed in the conversation with Joel Greenblatt suggested that theres a bond bubble, you would, therefore, suggest that bonds are in a more precarious situation, if you will, than equities. No, i wasnt asked about equities. My my my comment was not a relative comment. I think that bonds are fully priced. I think that stocks are fully priced. I participated at a session here at this conference and joel said his work shows that the mainstream stocks are in the 17th percentile of valuation. That is to say, 17 of the time theyve been richer, 83 of the time theyve been cheaper. I think that virtually all Asset Classes are elevated. That is the result of the Central Banks lowering Interest Rates and the resultant search for return in a low return world. And Joe Greenblatt will be joining us in the next hour. Glad to hear it. Howard, thank you for joining us. Howard marks keeping us on the mark always. Very much appreciate your time. Thank you, kelly and scott. Yeah. Its a pleasure. Little more than ten minutes to go. Dow is hanging on to a 25 point loss after yesterdays post fed game. Its been a rough six months for wells fargo. Today the bank finds itself embroiled in another controve y controversy. Well have the details when we come back. 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. Our first name has always been american. At at t, we employ more than 200,000 people with goodpaying jobs. 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Of course, it depends on you, how hard you work. Welcome back. We have news on wells fargo. Wilford frost is here. Kelly, it is likely that carrie tullstoff will be retroactively terminated for cause as part of the boards ongoing review of the sales practice scandal. The board has already terminated four Staff Members for cause, at least three of whom were direct reports to tolstedt. She retired and gave up 19 million of unvested options in the process. Based on conversations with sources and revelations in the Statement Last night i can reveal that when tolstedt was allowed to retire last year it was on the agreement that all of her remaining options whether vested and available to exercise or not could be bought back later if the board deemed fit. The value is 53. 6 million. Its likely the full amount will be taken back. The final results of the boards ongoing review on the 25th of april and likely to arrive a week or two before that when we receive final confirmation worth noting that while the proxy statement had the options available, the same was not said for former ceo john stumps outstanding options. Furthermore, the fact that tim sloan received a stock burden we can be sure that repurr kiercus for him will be over. From sloan . That is highly unlikely they would have granted that to a later date in a couple of weeks forward again. As for mr. Stump, there was a specific footnote in the proxy note related to carrie tolstedt. I gather this will come up . Exclusive interview with tim sloan tomorrow morning. We want to talk about the board specifically. Probably focus less on the pr side. I want to dive into the effect the sales scandal has had on the underlying business. Hes said in the past things would get worse before they got better. Probably where ill start the interview, scott and kelly, fundamentals of the bank in the country. The weird report about how loan growth has been slowing. Loan growth has been slowing. What does the rate hike this week mean for them, the view of deregulation and technology is a big thing for them. Theyve invested a lot. How is Technology Changing the landscape. Good stuff. Well let you get some sleep. Wilford will be interviewing him at 8 00 a. M. On squawk box. We are back with the closing countdown. After the bell Joel Greenblatt is talking stocks. See what stocks hes picking exclusively. Youre watching cnbc first in Business Worldwide. At vicarious visions, i get to be creative, work with awesome people, and we get to make great games. what i like about the area, feels like Everybody Knows each other. And i can go to my local coffee shop and they know who i am. Its really cool. New york state is filled with bright minds like lisas. 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That stock is up right now more than 27 on a day where the major averages really sputtered after yesterdays big post fed rally. The other ipo of sorts was snap. A couple of weeks ago. That stock going below 20 a share today. Opened at 24. Thats been a significant slide there. Im back here with bob pasani. What are people on the floor saying are the reasons for why we didnt have more follow through after yesterdays post fed bump . Well, were just right near the historic highs. Im not sure theres a major reason we should have more follow through. Checked off two of the big three concerns. Number one, the elections in the netherland. Positive market outlook. The feds comment positive market outlook. Gradual, three hikes. Got what they wanted. Now the big thing is the trump taxes and the deregulation. Everything. Thats the big thing sitting out there. The market is going to give them the benefit of the doubt until they see that nothing is going to happen or that its going to be pushed off into 2018. They should be giving them. Were going to talk about deregulation all day tomorrow. It could potentially have an almost equal impact than the tax reduction. Its a little harder to quantify which is why its tough for us to do it. Were going to take a stab at it. Youre talking about how big, big industry is across a wide array of sectors in the market. Think about it. For example, if caterpillar can reduce regulations, that would dramatically reduce the input costs, the costs of actually building machinery overall. That goes right to the bottom line. You could without having the actual numbers you could point out common sense things. Jamie dimon constantly is talking about do you know how many people we have to hire for compliance regulation . You can reduce them even 30 you can quantify how much thats going to impact jpmorgan. There are common sense ways to look at it. Tomorrow well talk about deregulation. By the way, just on canada goose, youre right about the big move up. It opened at 18. Its trading a little above 16. Certainly a nice move. I didnt see it recently. All those people who bought at 18 right at the open, theyre underwater right now. Id say this is a somewhat success. At least theyre warm in their parkas. In their 1,000 parkas. A lot of beautifully dressed people here. Closing bell continues with kelly. Thank you, scott. Welcome to the closing bell, everybody. Im kelly evans. Mixed session today on wall street. Some declines for the major averages with the dow dropping 18 points on the bell. The s p down about 4. Now the nasdaq looks like it held on to a small gain, 5900 on the nose appears to be the closing level for that tech heavy index. Russell 2000 small caps held on. Some dispersion coming back to that in a moment. All of this as Mick Mulvaney wrapping up a news conference. Coming up former omb director jim nussle will join us on President Trumps budget blueprint. Joining me on the panel, cnbc pro columnist michael santoli. Also with us is david katz from matrix advisers and jason braney here from post nine. Mike, what do you make . We had a pretty strong session today. They raised rates and Arthur Cashin said it sputtered out when theres an idea the trump agenda may be stalling. Forward momentum. That could be kind of a psychological overlay here. I do think that often you get the post fed surges or the spurts of activity. Yesterday was very much a grab forex pose sure, for exposur. I think you had a lot of that work through the system. 1 from all time highs in the s p 500. There wasnt more impetus today to add to the gains. I do think its a matter of perhaps resting a little bit here. I think the big question is as weve sort of consolidated, the market has rotated within itself for the last few weeks, was that enough to essentially kind of hold down the fort and maybe go to new highs or are we trapped in a new range . Jason, youre looking into one area where people are starting to talk about but not totally is inflation. We got a couple of reports, ppi, cpi here. What do you think is going to happen there . Are we going to see 2. 5 turn into 3 . I think actually inflation at a headline level might calm a little bit. Oil has lapsed from year ago levels. I think the core is there and wages are there in the United States. Away from the u. S. Id actually look globally and its important to me that chinese ppi turned positive a few months ago after being negative for five years. Yeah. This is really a global thing. Pursuant to the fed, the fed has to deal with a global picture even while its looking at the u. S. Economy. A tricky balance. We always watch the dollar and how its hanging in the balance. David, where do you think the opportunities are . We think the market will enter more of a trading range, be a little more volatile. We think you can look at new money for places that have not done well. Markets at new highs. There are a number of very Good Companies that are selling about 20 off their highs. We think thats where the opportunities in terms of industries. We think energy which has had a significant pull back is a better place to put money. We think there are some opportunities in Consumer Staples and fewer industrials. Either of you buying the canada goose ipo. Were not. Outside of new york it seems like it would be a good buy but overall, not so much. Snap chat. A couple of them going publicly. I wont press you on them. What do you make of the nasdaq the way its been hanging in there lately . I think the rotation that you talked about is really a key piece of that. So what were looking for in the u. S. And globally is growth, right . Were looking for things that can grow over and above whether its a slow growth environment, little inflation and how do we get to that . The nasdaq inspires that process. Thats been such a theme that hasnt gotten talked about all that much. Were going to talk about adobe. Theyre going to be reporting. Oracle. Ridiculously strong. Thats more of a come backster. If you look at the huge big platform companies, like visa, adobe, comcast, our parent company, the charts look like theyre rotating stocks and buy the ones they think can grow along with as david said, look and see if energy is over sold, look and see if airlines are cheap. Its a selective market. David, would it be a strategy to try to buy the names you think might do best on trumps deregulation agenda . We think theres some more money to be made. Weve talked to you in the last six months about financials. We thought that was a better opportunity. Theyre up a lot. We still think they have a lot to go. They will benefit by deregulation or less hostile environment in terms of regulation. We like names like wells fargo and jpmorgan. They easily have another 10 to 20 up side. Youre not worried about wells if they the scandals theyre still trying to resolve . Wilford frost will be speaking with them in the morning. Todays news was good. When the original scandal came out we thought the board was miserable. They acted like business as usual, nothing that extraordinary about it. They didnt want to fire people. They didnt want to take back bonuses. They finally have gotten their act together and changed the ceo. Theyre not giving somebody 50, 100 million bonuses when malfeasance went on during their oversight. Thats a good thing. We still think even though its rallied red wings its one of the cheaper financials. You were shaking your head a moment ago. No, i actually agree on the financial side. I think its a place where deregulation can make a big difference. Were looking forward as a lot of investors are. If you take a step back, just even looking at the chart of example jpmorgan has moved a long way. Its not tremendously expensive. Pretty high multiple book relative to a lot of folks. Obviously a key franchise taking this globally. Financials do have a really one of the few places where you can say this is relatively when youre talking about deregulation, what form is that going to take when it comes to the banks . What are you going to count on, capital return . Top down, sort of more agency driven . I think its as simple as what capital level are they going to be required to hold . Weve built enough capital, maybe even globally weve built enough capital. Jpmorgan used to distribute 60 of its earnings. As an Income Investor that sounds pretty exciting. A lot of folks havent been able to do that because theyve been trying to build capital. We could build to 20, 30, 40 if we need to or want to. At some point you say this is probably good enough. Theres another element of it when it comes to the banks and other financials where its hard to quantify. If theres a line that they think is there between what they can do more of and less of, theyre more likely now to push it and go on the other side of the line and spend a little less on compliance and be less conservative because of the bigger tones from the agencies that regulate them. Do you have any specific picks . I think cme groups an interesting one. Look at exchanges which tend to hold onto the businesses. Payout policy which i really like which is consistent. Theyve had a bunch of earnings. Cme has been trading at alltime highs. I wouldnt call it cheap, but actually when you think about the volumes that theyll get, more exciting fed days. When fed days get exciting, thats when the volume will go up. Relative just as a stock price, not cheap. Relative to the volumes they can generate, pretty interesting. We mentioned adobe earnings were coming out. Deed dre bosa has the earnings. Thats right. We do have a beat on the top and bottom lines. Adobe eps 94 cents, 87 cents was expected in terms of revenue. 1. 68 billion. 1. 64 billion was expected. A bit of a beat there as well. Looking further, the numbers you want to look at, particularly this one, arr, annualized recurring revenue. This is a point of concern and one that you really want to look at. That came in above expectations, too. 4. 25 billion. 4. 21 billion was expected. Also just want to mention buy backs, the Company Continues to buy back shares in the latest quarter, 238 million worth. Now i know that mike previously just said this has been a real comeback story, and that story continues seems to continue with this set of earnings. Of course, we still need to see guidance which usually comes out a little bit later on their web site. Adobe has had a very aggressive cloud strategy. Few companies have made the transition so smoothly. The stock is up about 20 year to date and in the after hours its up about 3 . And just want to mention as well that eps has topped consensus estimates by 4 in the previous four quarters. Thank you. Coming up, were going to speak with adobes ceo and talk about the companys outlook. Shares up 3 after hours. David, your stock picks are more old school. Do you have any picks in the tech space . Would anything like adobe interest you . We think its fully priced. We do own a lot of technology. Our favorites are microsoft, cisco and qualcomm. While some have done well, we think theyre selling at reasonable multiples at 12 to 14 earnings. Those are lower risk ways to play technology. We would have the Technology Exposure here. Just not the 30 and 50 pe stocks. Yeah. Adobe falls into that 30 category. At least for this years earnings, about 25 next year. At some point you have to imagine theyre not going to be able to kind of out race the expectations and be even. I cant believe theyve done it up to this point. Exactly. What i did notice actually, i looked at the wall street analyst consensus, the average price target is 122. 4 bucks for low. So the street is not necessarily pounding the table saying this is going to the moon. This is a ridiculously reliable and tied up trend. People are basically confident. Still chase it up. Shares up 3. 5 after hours. Well have more coming up. Health care one of the worst performing sectors on the street today after President Trump pitched the republican plan to replace oake in nashville and he stressed the rest of his economic agenda, specifically tax reform needing to take a back seat until health care is finalized. We are going to reduce your taxes bigly. Big. Big. I want to start that process so quickly. Got to get the health care done. Weve got to start the tax reductions. But are republicans anywhere near agreeing on a fwhal can pass the house and senate . Reporter it got their close vote in the house. The president said multiple times he wishes he didnt have to deal with Health Care First since tax return would be much more popular and easier. That left some doubt. Then he did commit to getting it done. He told the reporters in the pool on air force one after the rally, quote, we will get something through. Were going to mix it up. Were going to come up with something. We always do. Thats important for the market to have certainty. As he and speaker ryan figure out what that something is for the initial bill, the speaker who says he speaks daily with the president about this is getting reinforcement on the followon parts of enforcement related to health care. The house will be considered will begin considering additional legislation. These include reforms like eliminating the antitrust protections that create more competition. This will help make sure that people are not left with few or no choices like were seeing across the country. Leader Kevin Mccarthy tweeting that he will consider bills next week that create insurance competition and allow Small Businesses to pool and purchase plans. In the meantime, senate republicans, theres really no consistentivity there. Some like john coons have said is a work around. Tom cotton and rand paul have yet to reach out to the speaker. There is an expectation that starting next week the president will need to be getting on to phone to begin whipping those votes. Well see whether any of that opposition, kelly, sticks around or whether it begins to die down as some of the compromises come to the fore. Jason, no one is talking about health care. Used to be one of the favorite areas of investing. What would you do with it now . I think one of the reasons why its kind of come out of favor. One, a lot of uncertainty in the regulations. Two, youve had a lot of high profiles. Valeant. Were you in valeant . Some on the way up and some on the way down. How does the sector look now . How are we going to react to some of the realities coming out. On one hand it seems as though the sentiment is such that, oh, well were going to do it completely different. Frankly, i think theres potentially some value maybe in big cap pharma for example. Yeah. Because i idea youre going to take away entitlements once you give them to someone, i think thats pretty much never going to happen. Anything else you want to add before we go . We like health care. Theres a lot more headline risk and lots more opportunities to make money. We like merck, pfizer. We think 2017 is going to be their year. There you are on the pharma pieces of all of this. Thank you for joining us. Adobes out with its guidance that just reported earnings. Lets go back to that. Reporter hey, kelly. We have those numbers reporting guidance for fiscal second quarter. 94 cents. Thats above estimates of 91 cents. Also roughly in line is revenue, 1. 73 billion versus 1. 72 billion expected. Back over to you. Thank you. Those shares still up more than 3 . Well speak to the ceo shortly. Now President Trump saying last night Many Companies are competing to build the border wall. Were going to check on the publicly traded ones involved and what building the wall could mean for their bottom lines next. Then later Value Investor Joel Greenblatt will tell us what he thinks looks impressive. Youre watching cnbc first in Business Worldwide. Donald trump promising to build a border wall between the u. S. And mexico. Hes maintaining that promise now that hes president. Speaking to a crowd at a rally in nashville President Trump said plenty of companies are lining up to construct it. We went out to bid. We had hundreds of bidders. Everybody wants to build our wall. Usually that means were going to get a good price. Were going to get a good price, believe me. Well, our ylan mui shows those companies and what a border wall could mean. The president is asking congress for 4 billion over the next two years to Start Building that border wall. Omb director Mick Mulvaney said that will pay for the first pilot project. Does that build the whole wall . No, it doesnt, but it gets us a start on the program. You see some of the wall being built this year and we increase funding 2018. The wall will take longer than two years to build. As to the source of funds vgs thats up to the president and the treasury and the state department. More than 600 companies are interested in building the wall. Some of the publicly traded names are martin marietta, kbr, u. S. Concrete and floor. Two major players, beckh bechtl raytheon withdrew its names. They appear to be smaller local outfits concentrated in california and texas. A fair amount from new york. More are being added every day. Our latest analysis found 133 minority owned Companies Want to build the wall including 39 listed as owned by hispanics, 127 run by women, 80 headed by veterans and a dozen Foreign Companies are interested. Kelly, one is even from mexico. Ive got more up on the web, guys, cnbc. Com. Thank you, ylan. How do we know who the winners are . A big contracting award to the smaller players could be a make or break for them. So the official request for proposal has not yet been released. Were expecting it any day. Were expecting to see that some of the big contractors might subcontract out to the smaller players because it is so massive. 2,000 miles of border wall needs to be built. Theyre making a scramble. Thanks, appreciate it. She said theres more info online. Up next an interview with Joel Greenblatt. Does he think the market is over valued and where hes finding value. And President Trump releasing his budget blueprint but cuts do abound. Ahead former white house budget director jim nessle will size up the living budget battle and which sectors are most at risk. Oh no. Schwab, again . Index investing for that low . Thats three times less than fidelity. And four times less than vanguard. Whats next, no minimums . No minimums. Schwab has lowered the cost of investing again. Introducing the lowest cost index funds in the industry with no minimums. I bet theyre calling about the schwab news. Schwab. A modern approach to wealth management. Welcome back. We have a news alert from the white house. Eamon javers has it. Reporter sean spicer finished up his press briefing here at the white house a few moments ago. I had the opportunity to ask him the question about the president s 2016 tax returns. The president has said hes not going to release previous years of tax returns because hes been under audit but i asked him that presumably the 2016 return is not yet under audit. Would the president release that on april 15th or whenever he files his taxes this year. Heres what sean spicer had to say about the president s tax returns. St. Patricks day is tomorrow. Thats what im more focused on. Presumably his 2016 returns are not under audit yet. Right. Well cross that bridge when it comes to it. I think the president s been very clear about his position on his tax returns and well have to see where it goes from there. The president has been very clear and consistent that hes under a routine audit. So spicer there saying that well cross that bridge when they come to it. Maybe not a denial that the president would release his returns but also going back to this position that theyve had before that the president is under a routine audit. Maybe we should not expect to see those returns any time soon, kelly. You gave it a shot. Thank you, eamon. Eamon javers at the white house. Top Wealth Advisers gathering at the Forbes Advisor summ summit. Joel greenblatt held a panel earlier with howard marks who we spoke about last hour. They discussed active management and joel joins us now exclusively from that summit. Welcome to you. Hey, kelly. How are you . So howard referenced your comments about this market being kind of the top end of its historical value range. Does that mean it cant keep going or how does that change the way you pick stocks in this environment . Oh, well thats a great question. Big picture, we go back 25 years, look at Something Like the s p 500, the individual stocks in the s p 500 bottoms up for that period of time. Then we can contextualize where do we stand today relative to those 25 years if youre valuing the businesses individually bottoms up . Right now were in the 17th percentile towards expensive which means weve been cheaper 83 of the time, more expensive 17 of the time but that doesnt mean were expecting negative returns. Im not making a prediction, im sort of saying what has happened in the past from the valuation levels. Now during that 25 years we looked at the market was up 10 a year so were in the 17th percentile so when its been this expensive in the past year forward has been 5 . Two year forward 8 to 10 . Not negative returns but certainly sub normal. Joe, thats certainly the backdrop based oen a valuation glimpse right now. Im sure you hear lots of people trying to have you forgive these valuation levels saying maybe the returns can be better because of other atmospheric conditions, whether its low Interest Rates or other things going on in the broader Capital Markets that allow investors to think that buying at these valuations could help you out. Do any of these filter into forward returns . Well, thats also a good question. The big picture there is that stocks are ownership share of businesses and you value them and try to buy them at a discount if you can. We dont buy indexes. We buy the cheapest part of the index and we short in many of our funds the most expensive part. There is pretty wide dispersion even though the index itself is higher priced than usual. You can imagine that if you dont short the index but short the most expensive stocks in an expensive index you have great opportunity there. The long side theres enough dispersion where we think the long portfolios we can put together if you look at past history, whats happened to them, we think in most of our portfolios we could earn 25 or 26 on the long side. If your shorts are under performing the index and your longs over the next couple of years can earn 25, 26 theres still opportunity in the market its just that but the indexes are expensive. Hong the cheapest and short the most expensive. On that point your top holdings include cbs, cisco, boeing, qualcomm and express scripts. Anything granular there youd want to add other than that these came up on your valuation screen . Sure. Well, big picture. Usually we buy things if you read the paper you dont really want to buy. So those fall into health care. You know, apples been one of our biggest position. People think of it as a Hardware Company but i think theres a big ecosystem of products. Its being priced as a Hardware Company but we dont see it precisely that way. We like that. Health care were attracted to because people are worried about health care. Were able to get these bargains. And on the short side there are expensive things that either lose money or trading at 80 or 100 times pretax cash flow which, you know, david runion said the race isnt to the swift nor the battle to the strong but thats the way to bet. So were sort of betting that on average these companies we can buy cheap and short very expensive. Historically thats really the way to bet and thats what we do. You mention you dont see apple as a Hardware Company. Are you saying you see it as a software, services, platform company, Something Like that . Big picture, it is a Hardware Company but it also has an ecosystem of products that play off that hardware that make it more of a Network Ecosystem product. It also has a brand name. Cocacola has been selling the same thing for a long time. People like it. Its a combination of all of the above. It has the risks of being a Hardware Company. They have some counter val lent forces that make it more attractive. Its priced as one of the cheapest stocks in the large cap markets. That shouldnt be in our opinion. Its trading about 140 bucks here as of today. You know, you guys have a couple of different mutual funds. Joel, you have the hedge funds. On that note you made a recent change that i thought was interesting on the fee structure. Can you tell us a little bit about that and whether the rest of the industry might follow suit and start charging for the out performance you deliver . Well, we have mutual funds and we have hedge funds so performance fees are very difficult in the mutual fund area. Theyre very rare and you really cant address them so youre really talking about our private funds which i really cant go into the details of those but the basic idea of it is that we want to get paid for our outperformance and thats what investors want to pay for and thats what we want to get paid for so that works out well. That should work out very well for us if we do well. Joel, just on the sort of general investing landscape, what you do in terms of following your discipline and using specific factors in selecting stocks to go long or short, obviously its becoming a little bit more of a prevalent thing, isolate investment factors and invest along those lines. Can you see anything happening along ets or smart beta approaches that is at all changing the underlying changing of the market . Is it influencing certain things, bringing them in favor or out of favor or is this noise around what the market was going to be doing anyway . Well, look. Big picture, stocks are ownership shares of businesses so there are certain ways to value them. I usually use an example of a house. Just to keep the numbers simple, lets say theyre asking you 1 million for the house you want to buy and you have to figure out whether thats a good deal or not. There are certain questions youd ask. If i rented this out, how much money could i get . What kind of yield could i get on that . What are the other houses on the block going for and the block next door . Companies, hey, how cheap is this relative to other companies in the industry or across the whole universe of stocks. We would go over history and see how this has traditionally been priced relative to other companies and how its being priced now. These are simple things you do for valuation. Those dont change over time. If youre talking about factors like momentum, momentum has worked for 30, 40 years, not just in this country but across the globe and if it didnt work for the next two, three years wouldnt really be sure whether its a crowded metric, people have tested it and theres a lot of data and ability to crunch numbers. Whether its degraded a little or it hasnt. If you View Companies as ownership shares of businesses and youre valuing them and find ones that are at a discount or selling expensive, that doesnt change over time. It may go in and out of favor over the short term but its really kind of home base for us. We dont really worry too much about those other things. As far as the etfs, i think that affects prices in the short term. It creates dislocations. Meaning things that are over priced, things that are under priced because people arent discerning the fundamentals. They are following a strategy but companies have different fundamentals and at some point the market recognizes those. Ive been teaching at Columbia Business School for the last 21 years and i make a promise to my students the first day of class. I promise them if they do good valuation work the market will agree with them. I tell them it could be a couple of weeks or two or three years before the market agrees with them. They may have graduated. Are gotham etfs next and then well let you go . Not sure about that. The problem with etfs is you have to disclosure positions daily. Its hard to give away your hard work in a single day. Those are more appropriate for indexes. Joel greenblatt from gotham asset management. Appreciate your joining us. Thanks for having me again. Lets now get to a cnbc news update with sue herera. Hi, kelly. Heres whats happening at this hour, everybody. President trump and irish Prime Minister attending a luncheon on capitol hill. The bipartisan friends of ireland luncheon was hosted by House Speaker paul ryan. Were here today to celebrate americas commitment to ireland and the tremendous contributions, and i know it well, the irish immigrants and their descendents have made right here in the United States and throughout the world. Mcdonalds twitter account was hacked. A tweet from that account getting a lot of attention this morning. It said, quote realdonald trump you are actually a disgusting excuse of a president and we would love to have barack obama back, also you have tiny hands. It was quickly deleted by mcdonalds and it is investigating the hacking of its site. Saturday night live is about to go live for everybody. Nbc announcing the final four shows of the season will be broadcast live simultaneously across the u. S. Which means if youre on the west coast, you can see it at 8 30 p. M. It will replay at 11 30 p. M. Thats the news update this hour. Kelly, back to you. Just in case you want to stay up extra late to watch it. Thats right, or maybe you work late on the west coast. Thats true. That would be a tough one. Sue, thank you. Sure. Sue herera. Adobe shares higher after reported earnings. We break down the results in an exclusive interview. And later former white house budget director jim nussle will break down the winners and losers from President Trumps budget blueprint. Were back in a moment. Instead if getting caught up with the crowd, the Investment Managers at pgim take a long term view, teaming specialized active investing with riskmanagement rigor, to seek out global opportunities. We manage over a trillion dollars this way, attracting many of the worlds leading investors. Partner with pgim. The Global Investment management businesses of prudential welcome back. Adobe systems out with earnings. Stocks up 4 . Joining us to talk about it adobe ceo and our very own john joining us. Hi, great to you. Impressive quarter. If im looking at this correctly stocks at alltime highs. It has doubled in three years, tripled in four. It looks like Creative Cloud led the quarter. You said Small Business has done it. Its growing into new segments and building out new services. Which one of those three things really accounts for this beat in Creative Cloud this quarter . Thanks, john. Thanks, kelly. Always great to be back on your show. It was a great start to fiscal 2017, and i think it just reflects that Amazing Design thats built on deep data is making a huge impact for individuals who wish to create content for the next generation of story telling as well as for enterprises who wish to deliver a great experience. As it relates to Creative Cloud specifically, we saw trends across the board. We talked about how international represents a Good Opportunity to do well in q 1. Small and Medium Business which is our teams offering did well in europe. We continue to do a really good job with focusing on delivering value for our existing customers. The retention also had a great quarter. Okay. I want to ask you about growth from here. You recently bought 2 mogul, the video advertising heavy weight. To what extent can you get insight into what snap chat is doing as a platform and how that plays in as people are trying to have these Advertising Campaigns across various platforms and to what degree is that driving the growth of a product like 2 mogul and Adobe Marketing cloud overall . Whats driving 2 mogul is providing personalized experience for their customers. And as theyre spending more money online, spending it via social, search, display, video and video is certainly becoming the biggest category of where people want to spend their money. For us the beauty of having 2 mogul is we have the leading demand Side Platform and now we have dmp as well. The combination of audience manager and 2 mogul enables us to put the right ad at the right time for the right person. So i think its just enabling all enterprises to monetize their demographics and their data, something that no other company can do right now. Your track record over the past decade at the helm of this company is amazing. Why not drop the mike, say, you know what, ive done my job, i can go do Something Different right now. How much better and bigger account opportunity at adobe get from here . Well, im so passionate about continuing to enable people to deliver the kind of digital experience that they want, and we think were just getting started. When you think about the mission of the condition, kelly, we want to empower people to create. That has never been more important. Whether thats in education, whether thats for individuals with video, new areas like Digital Reality and augmented reality. Digital is a massive tail wind. Every single enterprise is transforming themselves. At the heart of all of that is innovative technology. We have the best technology and the best employees on the planet and, you know, were just getting started. All right. Great talking to you. A lot of investors, analysts question whether the stock is fully valued. Are you still on the acquisition path . Do you view the Growth Potential as being such quickly as you can if you can that thats worth while . When you look at the numbers, john, in a little bit more detail, i cant think of other companies that are growing both top line and bottom line at the level with which we are. Youre growing 20 of the top line and accelerating bottom line growth. Were in a rarefied atmosphere. I think you will continue to look at Great Technology as well. Thank you. Adobe shares up nearly 4 . Pretty incredible stuff. Thank you both. We have a news alert on caterpillar. Lets get to sue herera with those details. Reporter thank you. The new caterpillar ceo has retained the counsel of basically a former u. S. Attorney general to help the company work through its dispute with the u. S. Government. They are retaining william p. Barr as an outside counsel and they say that they want to have him review the matters related to the search warrants in 2017. They make the point that he has mr. Barr has no previous interaction with caterpillar so they are retaining him as an outside counsel and they say he says hes committed to maintaining caterpillars highest position in continuing the highest ethical standards in the business. I am can have debt that bill barrs assistance will help our Leadership Team achieve these goals. Theyre retaining his outside counsel to take a look at the governments action against caterpillar on march 2nd in which we had a number of agents go to various caterpillar facilities and execute search warrants. Ill keep you up to date. Back to you. Sue, thank you. Those caterpillar shares a little bit weeker after hours. Valeant shares are moving higher. Valeant is up 5 in extended hours. This just days after bill ackman sold his entire stake in valle ab ant. I spoke with him last year about the outlook of the stock. Do you think this will be 300 stock again . So i think you could earn your way into that, yeah. We havent been able to control the narrative at all that short sellers in the media, you know, that are dying for some new crisis like darn media. Whatever is kind of still in the space. Were just as we do here, we just put our head down and, you know, try to make sure the company is better when we leave it than it was when we got there. Again, thats from value asset and hes been a backer of valeant for a while. Mike, about a decade. The shares up nearly 6 on this report. It would be an interesting vote of confidence that they think the company can navigate through this period. The fact that it just went under 11 having peaked at 260 a share. When we got news that bill ackman was sharing at 11, does this represent a washing out of the stock . I think if you were in the position of jeff uban having sold, if you werent going to sell, you would buy. You would try to take a chance at this low price point and lower your costs. Thats exactly what he is doing. Valuex buying 3 million valuex shares. Thats sending it up 5 after hours. President trumps budget blueprint promising to increase military spending. Jim nussle talks about the important points the plan doesnt touch on and what that may show about the president s priorities. Stay with us. Our first name has always been american. At at t, we employ more than 200,000 people with goodpaying jobs. Connecting consumers and budiness through mobile, internet, and entertainment. At t invests more into americas economy than any other public company. Bringing americans more choices, more freedom, and entertainment everywhere. No company is more invested in americas future than at t. Deartheres no other way to say this. Its over. Ive found a permanent escape from monotony. Together, we are perfectly balanced. Our senses awake. Our hearts racing as one. I know this is sudden, but they say. If you love something set it free. See you around, giulia oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. Welcome back. President trump released his budget. White house budget director Mick Mulvaney broke down what is not included moments ago. This budget does not address the big picture items such as policy changes, revenue flows, tax policy, mandatory spending. This is simply the top line spending budget, thats why we call it the budget blueprint and not the full budget. Full budget, which will contain all the rest of those pieces and parts, will be released in may. Joining us now is jim nussle, ceo of the Credit Union National association. He served with president george bushs budget director of omb. Thanks for being here. Thanks, kelly. What do you make of the skinny budget . I was just reflecting as director mulvaney was there. Ive been at that podium having to do exactly what hes done. Thats a tough job. Hes been there about two weeks and reflecting on that as somebody who has been at both ends of pennsylvania avenue and now i represent Credit Unions that have to sit across the table from families every day and work through their budgets, work through their finances, its tough in just two weeks to take basically only 30 of the budget and try and do the puts and the takes in order to meet the priorities of the president s Campaign Promises and roll them out in some kind of blueprint thats going to make sense not only for the agencies that he has to work with as omb director but also for the congress that has to actually work through the appropriations process. Thats a tough job. Given that this is obviously kind of when it comes to negotiating a budget or presenting one to congress, what are the tactical considerations here . Obviously this white house wanted to make some statements about what should be priorities and maybe some radical reordering of them. No question the first things first are making sure that the president s priorities are outlined from the promises that he made in the campaign, and clearly that has been done. An increase in defense, increase in Homeland Security, building the wall so to speak. All of those changes. And then going after what the president suggested was government that is run amok, draining the swamp, reducing the size and scope of government and government programs. And so the huge cuts you see in nondefense discretionary to pay for the large increase in homeland and veterans as well as National Defense are what you get out of that. But there are still 70 that is really off the table. Its like saying im got to blueprint here that will build a house, but all im going to give you is the first bedroom. The rest of it is not going to be discussed today. That is a pretty tough thing to be able to do. And not only that, the prospect of tax reform, you heard the president s remarks about can we just get health care done and now the budget that they are separately working on. So a sense that the market did close lower is that entire agenda more show than actuality. Is it all kind of out there and we get the big blueprints, but is anything going to get done of substance. That is a great point because its been a long time since the congress and the president have been able to get together and actually show that the modern budget process works. But i would not say its just show. The president has definitely laid out through his budget blueprint, through the skinny, even though its a skinny version, what his priorities are. Congress will react as much as there are people who say its dead on arrival or whatever, that is nonsense. Nothing is ever dead on arrival that comes from the president. It will what everyone reacts to, whether the budget committees or the appropriations committees and yes this is that stargt point of that entire process. Jim, thanks for joining us. Good to be with you. Another shot fired in the fight against arconic, that when we come back. Yes . Please repeat the objective. Thrivent mutual funds. Managed by humans, not robots. Before investing, carefully read and consider fund objectives, risks, charges and expenses in the prospectus at thriventfunds. Com. Elliott management accusing arconic of buying votes. Those details next. Welcome back. Paulsingers Elliott Management accusing arrest of buying votes. In the acquisition of british arrerospace company, arconic locked of voting commitments in go exchange for dropping claims. Earlier in year the Hedge Fund Called for the replacement of klaus kleinfeld. We have not heard from arrest con i go. The issue for elliott even being the bigs or best track record in this industry is getting the votes to be able change the management. And in this instance it seenls arconics proxy disclosed this arrangement. Its only 2 of the shares, but it does show that even if youre elliott, items has already to p support. Is that because the blocks of more passive shareholders are so large that you actually have to go to the individual very small ones to try to get every single one to line up . And we have spoken to investors about this who say its tough getting the bigger snurinstitutl shareholders to say okay, well back you. It takes a lot of work, a lot of resources to be able to do that. It looks like at least 20 of arconic is held by index funds. And yes just structurally they are neat set ot set up to throw weight behind activists. I think the cards remain with basically management. And in this instarngs i dont know if that will ever change. The conventional wisdom is that activist wage the campaigns. Usually its something some progress. But i think this gesture is trying to whip up the other active managers and say we should press harder for change. Of course well keep following the story for you. Michael, thank you for joining us here on the closing bell. Fast money begins right now. Fast money starts right now. Live from the Nasdaq Market site overlook times square, im melissa lee. Your traders are at the desk. Tonight, it is President Trumps world and were just living in it. So how can you capitalize in what were calling deregulation nation . We have the playbook. Plus the man who moves markets is here. He sees a great opportunity to buy stocks if one thing happens. And lark later, a biotech stock could get a boost. We have the name and