Transcripts For CNBC Closing Bell 20170501

Banks, although they since recovered from the losses, and are now one of the best performing groups. Coming up, whether a bank breakup is good for the industry, the economy, investors, joined by independent Community Bankers of america ceo, cam fine, and the former ceo of wells fargo. Caterpillar up 10 over the last month and could rally another 20 from here. Coming up, debating whether you should be buying this dow component or selling it right now. But we begin with the old adage as you mentioned, sell in may, go away. Referring to the six months strategy from may to september in which markets historically perform worst than the rest of the year. We look how sell in may has really worked out for investors or not so much lately, dom. It all depends on statistics and looking at the overall picture for stocks because theres any number of viewpoints and any number of time frames to look at with regard to whether sell in may and go away actually ends up working, so we asked our data partners to look at the statistics behind what those sell in may and go away stats are. Look at this first of all. Over the last 20 years for the s p 500, if you look between april 30th and august 31st, we call that the summer months. On average, the s p 500 does lose about a percent, so that seasonally weak factor we talk abouting and its a negative trade over half the time during that span that kind of takes a look at the moves overall. Now, look at this, because heres another indicator as well. Take a look at the fact that we have maybe some seasonality or reasons you want to buy this market. Over the last five years, between april 30th and september 30th, so add another month to put it in perspective, near term, s p 500 gained 2 on average and positive four of the last five years. There are a lot of factors at play here, not any one data point tells you whether or not this is the right trade or not, but, certainly, a lot of paratrs and invest rs look at these points in aggregate for app idea of how to perform in the near term, guy, seems these months ahead have been bullish for the market overall, guys, back over to you. Dom, thanks very much for that, a lovely green spring tie as well. Right on point. Everyone else is in black. Well, you are, not everyone. All right. Many investors, of course, ready to decide what to do in light of that analysis. Were asking this year if investors should instead buy in may and stay to play. Joining us is david nelson, mark, and our own rick santelli. David, starting with you. Sure. Youre right next to me. Markets had a decent run in the last week or so. Certain sectors like tech have. Sell in may or buy in may . Im buying. You know, its a trading rules that works up until the time i use it. Im not sure that some of these old traders almanac trading strategies that were developed decades ago, they really translate to our economy and the markets today, the third year of a president ial cycle is to be the best. It did not work out well in 2015. Looking at stocks, if i want to buy something, im going to buy it. Mark . Well, the same, perhaps for somewhat different reasons. Our investors are longterm oriented. Its about being in the market time opposed to timing. That said, look, the market peaked march 1st, and we had a correction in time, more than in price. The thing that worries me at this point is if i felt we entered a recession, which causes a derating in earnings and share prices fall off. Thats a very remote possibility in our view over the next 12, possibly 18 months. Therefore, buy right here. Your view on this . Factors, looking at earnings and the like . Absolutely. As david said before, these old add a adages, time and economy changed. This is lack of participation. Theres not enough people in the market in the summer months so we do see a little bit more volatility, and even like a day like today, really, really low volume. I know may day plays in effect there, but translate this to as i talked to colleague, it feels like a summer monday. Hitting the lowest daily volume for the year coming into today. Its a participation thing. I wonder how positioning plays into this . Rick, chatter about positioning in the bond market today, and youre watching the equity markets, especially with the nasdaq at record highs . Yeah. Ill tell you what, i want to give a quick trim on monthly charts. If you look at monthly charts, basically basically, its the last day of the months pricing. Why bring it up . The next chart, this goes back aways, a long term vix chart. Its above ten right now. Look at that chart, were at the lowest level on it, which is true, because its based on monthly closings. A longterm only chart using daily closes, what you discover is these are the lowest level for the vix since a few weeks in january and february 2007. Thats a big deal. Now, im not talking about contactually the same volatility our guests was. Thats more price volatility. The vix is really option volatility, but, lately, they are close to the same, and, to me, if i look at equities making an objective, very simple observation, i dont know that the sell in may and go away is going to work. I understand that its thin these months, but thin doesnt necessarily sell or buy, and i think thats proving to be the case as the momentum of the nasdaq i really think helped keep other indexes in lightly positive territory, so i think that chart gives you very important clues. Mark, weve been looking at the financials a lot today, down when President Trump seemed to suggest there was a possibility of some form of glass steigl bill coming back, and they shrugged it off and rallied again. Do you like the financials if so, which areas . I do. The bank index basically sold off 10 over the last six weeks or so, recovering valuation support that they lost in the postelection rally. Particularly, i like the Asset Managers and custodian banks. If the fed continues to raise Interest Rates, our base case, at least similar to whats laid out in the dot plot suggesting a couple more times this year, we dont dmeneed to see the yield curve flatten or steepen for banks to build money, but we need money market funds for the custodian banks trust fees go up. They are leveraged to short term Interest Rates than the larger and particularly the universal banks, and therefore, we like a pnc, for instance, we like a mason or etf like kce, 42 populated by these kinds of companies. We could have the debate and will on the banks, david, but i think the traders said it best on Halftime Report hard to trade on a trump consideration of policy than he said were in the heart of earnings season, and thats driving the market. What it is what are you picking from it . It is for me, and i think one of the things i like to do is look for companies that have a great Earnings Report, and yet the market really slaps them down. We have owned a name for some time, great earnings, but ran hard up in the earnings, dropped 5 friday, and i think its a perfect opportunity to pick up this name if you like semiconductors. This is the space to be. The Semiconductor Equipment manufacturers area, kla and others, process control, yield management, with a customer book like from intel to samsung, its a good bet, especially below market multiple like this. Tech stocks, of course, reported strong numbers, but they reacted positively, and has the tech sector as a whole, likes of apple not reported yet, ran over the earnings . They might have. Looking at the tech sector, its one, clearly, household names are familiar with, and everyone is looking at the apple report of what theyll say and what comes from it. You know, whats their new ideas . Whats their new products coming forward . Thats really whats going to trigger Stock Price Movement there, but at this time, i think investors are really waiting to see and get a better idea of what the well, they are not waiting. They are buying. The stock is up 2 , and its up 26 this year. Weve seen that normal activity ahead of earnings. Its fun to watch the rebound around after the earnings come out. Interesting to see whether you get a google or alphabet, amazontype reaction, another big boost after a runup or something else. I think more important than the actual headline number are the revenue numbers, the breakdown of earnings, what we see in the income statement online item by line item. How much are services contributing to the bottom line . Investors look at that. Like jim cramer was sitting here from this morning. Gentlemen, thank you very much for joining us. Thank you. All right. 50 minutes before the closing bell, and we are looking at stocks mostly higher, the nasdaq is the standout yet again, and it is pushing near the highs, up eight tenths percent into record territory, the s ps up a third of a percent, technology and financials are the stars there. The dows been waivering back and forth on unchanged line pretty much all day. Mean tile, treasury secretary and former fed chief b bernanke disagree. Later, the cofounder and coceo gives us his take on risks facing the market. Youre watching cnbc, first in business worldwide. I joined the army in july of 98. Our 18 year old was in an accident. When i call usaa it was that voice asking me, is your daughter ok . Thats where i felt relief. Were the rivera family, and we will be with usaa for life. Anything worth pursuing hard work and a plan. At baird, we approach your Wealth Management strategy the same way to create a Financial Plan built to last from generation to generation. Well listen. Well talk. Well plan. Baird. Hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. 45 minutes to go before the close. Nasdaq in record territory, up almost a full percent, and some tech names like facebook and netflix in record territory, apple as well, ahead of apples Earnings Report tomorrow, facebook wednesday. Another stock higher today is valeant pharmaceuticals, announcing 220 million in unscheduled date payment. They completed sales of a manufacturing facility in brazil and three skin care brands faster than expected. Since the First Quarter of last year, they paid down about 3. 6 billion dollars in debt. The companys total debt exceeded 32 billion last year. The stock getting a 5 pop on the news. Meantime, ben bernanke said the trump tax plan would not necessarily drive the growth of the economy to 3 . And shortly after, the secretary took after the criticism. We have the details of both conversations, steve . Yeah, we have dualing views on the prospect for 3 in the economy. Bernanke said its possible, but unlikely. On a sustained basis, its certainly possible, but not likely. I think if theres big tax cuts, for example, you might have a bump because of increased demand and spending, getting over 3 , probably not. I would be under on that. Most economists agree with bernanke, full point extra in gdp is tough to come by because the key to growth productivity gains. The president looks like the population, reducing immigration, and cant do much about productivity, but treasury secretary says the entirety of the president s economic plan can get the nation at 3 growth from the current average of 2 . Three parts drive that, first is tax reform, the most sweeping tax reform weve ever had. The second part is regulatory relief. We can have sound regulations, but make sure we have proper regulations. And the third part is fair trade. Renegotiating the trade deals, so we think those three things together create sustained Economic Growth of 3 or higher. To be sure bernanke said its useful to try the things the president wants to do like spurring business investment, spi spending on infrastructure and making the tax system efficient. They should focus on policies that boost growth. A civil debate among two different guys who know about the economy. It is the debate de jure, and well continue it. Thank you, steve, for setting that up. 3 growth, fact or fiction . Joining us to discuss, Cycle Research institute and Chris Thornburg funding principle at beacon economics. Thank you for joining us. Thank you. Any of those factors, the three factors Steven Mnuchin outlined, any chain the long term growth rat or cyclical alterations to grow in the short term . Neither, to tell you the truth, just to unpack that, long term structural things are the way steve or mr. Bernanke outlined them. Si cyclicly, the cycle does what its doing regardless of some of the proposals. In fact, were already well inside of a cyclical upturn in growth that began in the middle of last year before the election. Dramatic as it was, a cyclical upturn was starting already, and it is underway. So near term, count me as a bull for the economy, and you might see a 3 print. Long term, though . Longer term, we have the structural issues, things, by the way, we are glad to hear everybody talk about it now, but we talked about it since 2008. The more the merrier. Those are serious issues. Population, in particular, Labor Force Growth and Labor Productivity growth, and if youre going to propose a policy to get you to 3 growth, show me how it impacts those factors. So, chris, sounds like you have a difference of opinion here. 22. 5 growth is your forecast given current trends, which is pretty much what the wall street economists are saying. Right. How do you get there . Why are you not as bullish . Well, im afraid to tell you we agree on most things. Long term, demographic challenges are there, and the countrys facing severe challenges in ten years, take, for example, Driverless Cars, putting millions of people out of work and various other Information Age impacts on the economy. Idea to get Growth Without influx of immigrants, candidly, i think, is a pipe dream. In the short term, we are stuck in the 2 range this year. After we pick up speed in the end of last year, but keep in mind, two biggest problems in the Economy Today have a lot to do with the fact that trade is still relatively weak, the dollars awful high, and, of course, the construction markets continuing tooling wish. We had no meaningful mortgage reform, the Housing Market in the dull drums, and theres not need for commercial space outside these jet setter cities, so, i mean, 2 , over this year seems best case for us. Well, i agree with some of those things, but i point out, however disagreeing now . Im going for it. I got a couple points. One is that the global economy, okay, this is a big change from where it was earlier. It also is in a cyclical upturn. The broad global economy, and, so, that wind is at our back, not at our face, looking from the u. S. , and thats a definite positive we have not had before. There is not as much uncertainty. I think the election threw a lot of people into uncertainty, some of the proposals that may or may not have happened, the euphoria, and some things that didnt happen, those things are not as uncertain as you think. The cycle is going to move any way. Surgically, though, if we got Corporate Taxes lowers, 15 is aggressive, what if its 20 , how much gdp growth does it add . I dont think it adds a lot because where are they going to spend the money . Thats critical. Are they going to spend on business what about repatriation in. Ceos talk about share buybacks and the whatnot, you know, maybe m a, but im not sure how that moves productivity growth, which is the key. And even if you do business investment, you knee the people who have the skills to use that higher business investment, higher tech stuff in order to get productivity gains. So those are big challenges. Were going to get a cyclical recovery anyway. Theres one downturn out there, Global Industrial growth is slighted to slow, so thatll be another debate. Thatll add some cross currents to the discussion. Chris, you mentioned Driverless Cars earlier. Stepping away specifically from them, broadly to all the Technological Innovations that are dominating our lives in recent years, is there a possibility that growth is higher than all of these numbers that we quote anyway and its in a hidden economy, as it were . Absolutely. Think about whats going on right now, pointing out, we have an incredible communication over the ipads that was impossible technologically ten, 20 years ago, and, today, we consume hours and hours of it for free. Clearlyings theres a miscount there. Id like to make one point about the short run, about the tax cuts. You know, whats interesting, you bring up the idea of cutting taxes, repatriating earnings, is that above 3 . Actually, absolutely could over the next couple years, but imagine all that in combination of getting rid of dadfrank, another financial bubble the way we had ten years ago. Thats a way, of course, to get the economy rocking and rolling in the short term, but the question is, whats the midterm consequences of that . That, of course, is another crash and potentially a great recession, so sometimes short run growth is not all that good. Yeah. We heard that warning before. Youre thinking too long term. Thank you, guys, good debate. All right. Weve got just under 40 minutes before the bell. We are looking at gains strong in the nasdaq, tech leading the way, apple at the top of the dow, over 2 , but its not enough to drag the dow higher. Dows flat, nasdaq up, and look at shares of twitter. On a roll today, up 6 . Whats driving that stock higher today . When we come back on closing bell. I think that shes a very nice girl. You never got the brakes looked at . Oh yeah. 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Liberty stands with you™ Liberty Mutual insurance. Welcome back. Lets check out todays market movers. Wynn resorts, las vegas sands, mgm all higher, gaming inspection, and revenues jumped 16. 3 in april from the same month last year, exceeding analysts forecasts and marks ninth consecutive month of positive growth in macau. Twitter gaining ground as well. The social media giant teamed up with bloomberg to have twitter 24 hours a day, seven days a week, and jack dorsi disclosed he bought shares of his company for 5. 9 billion. Twitter jumped 6 today off the back of both those bits of news. Look at markets, just 30 minutes to go as we said already, we are green across the screen, but much more pronounced gains in the nasdaq, a record high look to be hit at the close, up 0. 8 , the dow is essentially flat. Barrens right for singling out caterpillar as a beneficiary of the president s tax and infrastructure policies . Stick around for the debate on the earth movering equipment makers prospects. President trump is considering breaking up big wall street banks. We got reaction from the head of the independent Community Bankers of america at the white house today. Plus, hell tell us what happened at the meeting with the president. Also, former wells fargo ceo is joining us. Well be right back. Be right ba. Lets go, shes a dog. [ whimpers ] find pingpong. Find your awesome with the xfinity x1 voice remote. Thats amazing gains keep coming this monday during trading. The dows up four points, led by apple and microsoft. Speaking of technology, the nasdaq in record territory. Well watch that for a record close. Amazon, apple, facebook, netflix, and tesla are all hitting new highs today. Apple, of course, reports earnings after tomorrows close, and facebook and tesla after the bell on wednesday. Sara, thank you very much, pointing on the positives there. Im with matt from financial, talk about the negatives. Oil prices. Is that a concern for the Broader Market or just that sector . I think its just for the sector, i mean, obviously, its one of the weaker components of the market for going for the historically the shortest term. Markets hit alltime highs, but i think its the sector most unloved, leading me to believe this is the time to think about getting in because it could have the most upside. Moves, down when the president mentioned the idea of bringing back glasssteigl, your view . D. C. Doesnt matter in this market. You know, some of the Economic News seen does not matter. Its priabout earnings. Rallying back if theres a hiccup. Theres too much money to be put to work, and market shows that. Dont buck it right now. Nasdaq, likes of apple, not reporting, overrun already . I dont know. I dont think so. I dont hear nip thats very really negative on apple. Some people are cautious, but they are not negative on it. I think the teches have been strong, hitting new highs every day, and the earnings support valuations, id be careful about shorting. Matt, pleasure as always. Sara . Time now for a cnbc update with sue. Thanks so much. This is whats happening at this hour, everybody. President trump telling Community Bankers that the white house that he will roll back regulations. He called Community Banks the backbone of Small Business in america. I have taken action to roll back burdensome regulations that undermine Community Banks, especially i know you will be disappointed in this, doddfrank, right . No, its out of control. By the way, not only for Community Banks, but banks. May day marchers in the country rallying for walkers rights and against President Trumps immigration policies. Demonstrators in milwaukee to protest for better pay and work ing conditions. Hundreds gathering in new york city carrying signs including black lives matter as well as proimmigration. Oscar meyer making radical changes to the hot dogs, making it the first to market with no added nitrates or nigh trites, no artificial preservatives in the meat or by products. The overhaul came after a year of recipe tasting and tinkering. The Market Campaign begins today. I hope they dont tinker with the song. I was just going to say, they should bring back the old school song. I think so too. Sing it. I dont know the song. How does it go . Oh. Oh i wish i was an oscar meyer weaner my bologna has a first name thats all for now, will. Thank you, sue. Great song. See you later. Mean time, shares of cac had a nice run since the election, 20 up since trump won the election in november, and according to barrens, the far is far from over. Shares of caterpillar rising 20 in the next year. Bet on the stock . According to johnson, not a believer. He said weakness, sees weakness ahead for cat and Stanley Elliot from steeple thinks the company is well positioned to go higher from here. Stanley, starting with you. Momentum on your side. Caterpill caterpillars up 30 in 12 months off a quarter where investors liked especially the guidance. Why do you think it goes higher . You know, i think when you look at how far many of the markets have fallen, whether its china being down close to 80 , brazil down 70 , Resource Business down 70 , look what you see is the markets are finally stabilizing, and what we have not quite seen yet is the earnings power that can come of it given audiotape restructuring that the companys done thus far through the cycle. Your concern is what . Based on a margins peak this year. Margins in the First Quarter driven by nonu. S. Indicators or factors like timing of nonbased stock comp, variable comp expenses as well as the mix, and what they said on the call, margins decline this year, and when you look at the gap between soft and hard data. They are making and tracking a lock step. That gap opened up when trump was elected. The gap is shrinking. Theres a downside in the actual fundamentals for caterpillar. Gordon, what about the data around the rest of the world . Thats been improving. Is that a big enough kicker for cat, or do you just care about the u. S. Picture . Well, we care about the u. S. Picture, but one other thing to highlight is valuation. Look at if you look at the biggest earnings cat ever made, its 8. 43. 15 times multiple on that, discount to the present, that gives you a stock price of 94. The stocks trading at 102. People are using midcycle earnings of 9. Cat never made that in the most robust cycle for equipment, so we think that earnings are the valuation right now is aggressive. Seen as a trump stock, fits with President Trumps idea of infrastructure, building with American Companies and using the machines, not to mention Corporate Tax reform would help even if caterpillar has a lower rate, all the other businesses that buy caterpillar equipment. How much is that a part of the thes thesis . Its an important part of the thesis, but our view is what the inflection looks like for the company from a revenue basis as we come out of the cycle. The last three cycles, you look at revenues compound 15 a year per year coming out of the cycle. If thats really the case and rationale holds, you look at significant earnings revisions upside from here. Bake in the fact that the 1. 5 billion in the restructuring thats happened, that adds a couple dollars to earnings per share as well, so while, you know, while the number talked about, you know, it could, in fact, go higher than that. Maybe something in the 9range is something we see as reasonable. We got to leave it there, but it depends on prices of commodities, copper, for instance, a strong run. Well have to watch that as caterpillar bet on mining. Gordon, stanley, thank you. Thank you. Thank you. Appreciate it. We have 23 minutes left to go before the bell. Green across the screen as you can see, but very much led by tech, the nasdaq, apple, top of the dow at this moment, of course, ahead of their numbers. Other tech names to come as well like facebook. Meanti meantime, President Trump stating today its time to break up the big banks. The ceo of Community Bank association was at the white house meeting where President Trump said this, and hell be joining us live coming up. And Tribunes Television statements are up for grabs. Launching a potential bidding war here between giant media players, what it means for investors, for viewers, and possibly President Trump. Coming up. Coming up. Nasdaq led markets higher 1 , nasdaq 100 as you can see. At the top is ctrip and lamb research, but names we know better like amazon, tesla, wnyy, netflix, and Applied Materials close behind losers like mondelez and mondelez with results tomorrow as well. President trump promising to protect the home Interest Rate deduction, but may double standard deductions, and that could have a negative impact on the housing sector. Whats it mean . Joining us, good opportunity, thank you very much for joining us. Thanks for having me. Theres a lot of talk, not a lot of results yet. If some pull back on regulation, its great for borrows in terms of lenders overall. So what i said about the standard deduction, the idea there is that if you double it, it makes it appealing, and if you itemize, you cant take the Mortgage Rate deduction, is that the idea . Then that makes housing less desirable in this country . You know, the Mortgage Rate deduction only affects a certain percentage there, and its not a driving factor to buy homes, broader things need to drive that, and part of that is really inventory out there. If we look at banks earnings from a couple weeks ago for the First Quarter, mortgage refinancing was soft. Are you as surprised as how much an impact early rate hikes have had on that area in terms of mortgage refinancing . Because these are very small increases we had. Not surprising at all. Any movement up, the industry expected that to come down substantially. Whats driving Mortgage Finance now is the purchase market. Thats a healthy market as we shift to maybe 6070 and positive look going forward. Interest rates have very little impact on peoples decision to buy. You really make a decision about buying a home, based on life events, affordability, new jobs, things like that. Small change in Interest Rates dont affect it that much. Apparently you guys are in tune with what millennials are doing in the Housing Market. Whats the status of millennial home buying in the cycle . It is happening. It really varies, depending where you are. We have a tracker, covering 30 of the loans in the u. S. We track whats going on kroogs the across the regions across the country, and what you expect, of course, is in the costly areas in new york, san francisco, the percentage of millennials buying, the broader population, its 20 , however, as you move into the country, where affordability increased, they are becoming a much, much bigger part of the whats driving purchases in the u. S. Having trouble getting mortgages because theres demand for housing overall now, and as that picks up with such strict mortgage rules, doesnt it make it harder for them . Whats really holding, i think, most people back right now is not the demand side. People have the ability to go and do that. Its inventory right now. You are seeing a lot of first time home buyers entering with fha, lower down payments, lower credit profile, but whats restricting from taking off there is the amount of first time home buyer inventory out there. In terms of broad looks, we saw provisions tick up, again, but gauge for us what its like. Historically right now, the quality of loans, underwriting credit is very, very high. You know, we are in a very dirvet place than back in 20062007, so, you know, i would not expect to see a lot of default happening. I mean, loans have been very well underwritten over five, six years. Just going back to the Mortgage Rate deduction, surprised to hear you say its not an incentive or a driver of decisions. It feels like me and everyone i know who has a mortgage. Its its a benefit. Its a benefit, but its not it doesnt make your decision for you. Its emotional for folks in the industry as to whether that is out there and available, but doing the broad analysis of it, looking at especially, say, lower income folks buying homes or the market downward, they are not taking advantage of it because they are not deductsing itemized, and thats part of, again, where they are in the country relative to their income in deductions. Thank you very much for joining us. Thank you for having me. Appreciate it, thanks. All right, we got 15 minutes before the bell. The dow is up, just 12 points, fractionally higher, and s p up a third percent and nasdaq leads the charge up. 8 . Pushing higher. Word out of washington is there may be another attempt at passing Health Care Reform in the house this week. A perfect time for bullbear debate on health care insurers, which is coming to you next. The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Containing this information. Read it carefully. At crowne plaza we know Business Travel isnt just business. Theres this. a bit of this. Why not . Your hotel should make it easy to do all the things you do. Which is what we do. Crowne plaza. Were all business, mostly. Hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Earnings continue as reports from aetna, humana, and zcigna and others. Its nearly 10 higher year to date. Health insurance a buy now or sell for investors . Joining us with more is morning start Senior Health care analyst, and Senior Health Care Services analyst. Youre bullish on the group. How much of it has to do with the obamacare reform that we may even see a house vote on as soon as this week . Its a bit of both, sara, its a bit of the Obamacare Repeal and replace, and thats really to do with the favorable tax policy because it would repeal a very burdensome tax, particularly on the large diversified insurers, as much as 20 upside for them just from the tax repeal, and then going forward, it paves the way for Corporate Tax reform, its another 15 , maybe even 30 depending on how low the Corporate Tax rate goes. Upside in the stock, is that what youre refer to . Yeah. I think the multiples have expanded to some degree, and then in anticipation of repeal and replace, and potential future tax reform more broadly from a tax perspective, however, its also because a very strong fundamentals, you know, overseeing top line growth and Margin Expansion in medicare, and then the pharmacy benefits management business is gaining share and expanding margins as well. A lot has to do with the base fundamentals. Youre less constructive on the names, so what extent does that base on uncertainty on what the Trump Administration may or may not achieve on the health care front . Correct. Weve seen a lot of talk on administration and in congress about Health Care Reform and how if looks like but we dont know exact details or whats going to be passed. Theres a lot of uncertainty out there for the names. In addition, you have a lot of erroneous mandates still in play, gross market caps, and the like, and in addition, i think growth comes from lower profit cohorts, so we got growth driven by medicaid, medicare, and exchange lives, carrying lower profitability than the historical legacy core. Weve seen attempts by names to merge in recent years. Is there a possibility that the new administration is going to have a more lean yet view, which, of course, have not gone through in the past . Well, being a political novemberist, i dont know that i can answer the question, but i can tell you this. They try to merge for a reason, and i believe the merges would have been very good for the companies, would have made them bigger, help with scale and leverage, and help pricing overall, i think, however, with these mergers nixed by the courts and with the cigna anthem case, they are pretty much denied over last weekend, and i believe theres going to be a lot of head winds here for the companies here to deal with. If they were bigger, would have been easier, but because they cannot merge, its harder for them. Pinning you down for names here, which ones are you looking towards selling . What do you think is overvalued . Right now, i believe aetna, humana, and cigna are overvalued. Good news is priced into the sector. Avoid those names. Look at anthem and United Health as two of the better ones in the group at the moment. I think thats something you guys might be agree on because those are your picks. I like united, and them, and i like humana. I think its a strong growth story. Wort was different under the obama administration, and now theres a republican super majority and policys getting a lot more favorable for the medicare names, so i have a buy on humana, and on united, i think the valuebased care tail winds continue under tom price as secretary of hhs and option which is there, Health Services is growing nicely and poised to expand margins, and, finally, on anthem, i disagree because i think medicaid exposure on the expansion population is very low for anthem, and its nonexistent for united, humana, and aetna, they exited exchanges at this appointment, and so the large diversified managed care companies, i think, theres a lot more upside going forward. Thank you very much. Thank you. Thanks. Insurance aetna reports earnings tomorrow and chairman and ceo speaks with us on a first interview. Dont miss that. Up next, coming right back with the closing count doup. And after the bell, Artificial Intelligence on the march and subject of a new book by Gary Kasporov taking on a. I. In a chess match two decades ago. Talking about the impact of the rise of the machines. Watching cnbc, first in business worldwide. Worldwide. Were on to you, diabetes. Times up, insufficient prenatal care. And administrative paperwork. Your days of drowning people are numbered. Same goes for you, budget overruns. And rising costs, wipe that smile off your face. Were coming for you, too. For those who wont rest until the world is healthier, neither will we. Optum. How well gets done. I cant wait for her to have that College Experience that i had. The classes, the friends, the independence. And since we planned for it, that student debt is the one experience, im glad shell miss when you have the right financial advisor, life can be brilliant. Ameriprise im dr. Kelsey mcneely and some day you might be calling me an energy farmer. Energy lives here. With e trade you see things your way. You have access to the right information at the right moment. And when you filter out the noise, its easy to turn your vision into action. Its your trade. E trade. Start trading today at etrade. Com looking at at gauges, looking at negatives first of all, chevron interesting picture for all of the energy sector, which was gains on fridays, old price up on friday, and those names reported as well as exxo, today, down again. Look at oil prices slipping. Friday, the gain was the exception. Also, now look at banks. Extraordinary intraday moves when President Trump mentioned breaking up banks. There was a dip intraday, but ended strong. Banks a decent performer today. Final look at the nasdaq because tech is leading the charge. Apple up over 2 , amazon, netflix up, and, of course, nasdaq is headed for another record close. Comes ahead of apple reporting earnings tomorrow. Bob is with us now, bob, what are you looking at today . Important thing is, i want to put up the vix, volatility index. Briefly dropped below ten, a tenyear low. Theres a reason why markets are five points away from a historic high and vix historically low because theres less concerns. Look at the concern covering in europe, so ably, less worries about europe here, better earnings overall, and global economys been improving, and the fomc likely lays the ground work for aed d mmodest continu series of rate hikes, not this week, but in june likely, thats where the market is. So right now, the sense that there is some kind of imminent problem on the horizon other than north korea, the one thing sitting out there, is lower than its been in a long, long time. You mentioned banks, maybe the president would break up the big banks. Remember, the Vice President , mr. Pence, came out and specifically said that they are considering getting rid of doddfrank. Dodd franks days are numbers is what the Vice President said, good news for banks overall, and, remember, thats a key aspect of the trump trade, reducing taxes, reducing regulations, and infrastructure spending, and thats why you saw many of the banks, the regional banks actually hold up fairly well, even though on the surface, breaking up big banks is not good. Thats not a problem for the regionals. Talking banks in a moment, but a mention of tech though, thats the focus. Youll get comments from amd, biggest chip maker in the world, they are on fire and continue to hear that from them, continue to hear apple really well, so youll have the faang stocks doing well, responsible for the biggest move in the tech so far. Itll continue here. Banks and now industrials and now tech. There is the bell. Were ending with gains across the board. Biggest gains, running the bell, nasdaq, Albert Einstein legacy chairman, second half of cloeting bell starts now. Welcome, im sara eisen in for kelly evans. Look at how were finishing up the day on wall street. Another record close for the nasdaq composite. Check it out, almost at 6100, up another three quarters of 1 on another busy week for tech earnings starting with apple tomorrow. Apple, facebook, tesla, netflix all at record highs. The s p 500 closing out with a gain of. 2 , finishing lower at 21 points, and russell 2,000 up a half percent. Coming up, taking the pulse of the private equity market with david reubenstein, and a first on cnbc interview, but well talk to the panel first about the market. We have cnbc senior markets commentator and procolumnist mike santolli, peter anderson, and sam. Welcome to all of you. You took on the low volatility, the vix today, below the 2007 to a tenyear low. The fear index, signaling, what, complacency in. You know, not strictly speaking, sara. It doesnt tell you that much about the mood initially. It tells you its been an amazingly stable and calm market. The daytoday behavior of the market itself is in a tight range, not a lot of drama to it outside the couple days surrounding the french recently. Thats the input in what the volatility index is doing. Option traders do not have a catalyst out there for something to bring a storm on, and just the fact weve been calm and summer is coming, i hate to point to seasonal stuff, but shows you that basically people do not perceive dramatic risk of a 30day storm. Doesnt mean its not going to happen, but its hard to really predict. These lows in the vix, though, accented by the fact that asia and europe are closed . Potentially. Just a quiet day in general. Low volume day. You basically had the default mode of the market, which is buy megacap tech stocks, do nothing else. S p failing to trudge that short distance to a new high. Sam, youve been doing analysis on historic valuations to see where the market stands. What did you find . Looking at trailing, projected, operating, gap earnings, we are trading at a premium to the market, but as your guest today, professor seigl, said, you dont look at ps alone, but in relation to inflation, and even so, the were in the Second Lowest quin tile of inflation since world war ii, trading at a premium as to when we normally have, so as mike said, theres nothing out there thats necessarily going to trip us up, but i think high valuations valuations make us vulnerable to some sort of a trip up. Pete, is we learned in the last month or so, whatever the Trump Administration is doing is slightly irrelevant for markets . They shrug off either way. That is the puzzle, right . I dont think they should be shrugging off at all. The trump premium is something we have to respect, right . Right now, when you look at the s p 500, its up about 7 , by my calculatio calculations, it should be up 34 . What is accounting for that premium . I think its an incredible amount of hope built on earnings, but earnings have come through, so thats good. Also, the tax proposals, health care, the infrastructure, all these items, and if they dont come through, i think we could see a selloff of anywhere from 47 . Mike, take the other side of that. Well, the other side of that is the mci world index is more than the world index now. Hard for me to say theres a tremendous premium built in domestic policy expectations. The other thing is, you know, i look back exactly two years ago, s p 500 forward multiple was 17. We were about to go in an earnings recession. It was more expensive than that. Right now, were at 17. 5 on a forward basis, and presumably were not going to tumble into an earnings recession. In fact, the back end of the year, estimates are holding up. Looking up. Its not necessarily as expensive as all that, and i dont think the kinds of stocks that are working best are the kinds that would benefit most directly from policy. Can i add to that . So if you use a Building Block approach with the s p 500 and estimate 78 Earnings Growth this year, and you add on a merely 2 of the dividend growth, by my count, thats 9 . So already its a pushback i give you in terms of over valuations. Sam, what about the hard data, particularly, the economic data, gdp numbers, something thats concerning you as for compared to market valuations . Peter said, basically, trump got an a for his first 100 days, but its an a for anticipation. Right now, expectations are that well see, at best, 2. 6 gdp growth by the Fourth Quarter of this year, and so, really, whats being translated into the numbers or expectations as to what will be happening. If it does not happen, i see the market currently being at 7 overvalued, but a year from now, given the opportunity for Earnings Growth and still low inflati inflation, we could see the market at about 24. 50 to 2500. Do you include the nasdaq in the a for anticipation . Nasdaq goes up every single day now, another record, no record on the s p and dow since march 1st. Right. This is where momentum hits. Does that hurt earnings . 80 of all first term republicans since world war ii or meaning from election day until the end of april, the market has been up 80 of the time, and its the cyclical sectors that do well. Yet in the mayoctober period of first term republicans, market is down 830 of the time and posting a loss of 4 average. No guarantee thats going to repeat this time around, but, again, its the hype that could turn to gripe if we dont get the things that are expected. Pete, just a time thought coming back to what mike side. International environment. Hope for what is seen in the u. S. Is real and sustainable . Well, i mean, one thing i worry about with the International Environment is brexit. I mean, that seems to be pushed way back on the headlines. Lest not forget its a two year process. Theres over thousands of rules that has to be negotiated, and i think we have to factor that in. I know the French Election is looking pretty good, but on a risk adjusted basis, i still think that International Stocks are trading at a level thats warranted right now, given up certainty. Okay. Gentlemen, thank you very much, peter, sam, thank you. Stocks initially falling, but pairing losses following reports of President Trump considering breaking up big banks. This as the president met with more than 100 local bank leaders at the white house today as part of the independent Community Bankers of america summit. Joining us with more is the chief executive camden fine in the meeting with President Trump and former wells fargo ceo, dick, thank you very much for joining us. Cam, starting with you, you were in the meeting with President Trump today, specifically in that meeting, did he talk about bringing back some form of glasssteigl, a form of ring fencing, different operations within banks . No, actually, he did not. The president spoke of either repealing or sharply modifying doddfrank. He pledged to the Community Bankers that doddfrank would not be a problem any longer for our banks once his administration would deal with it. He endorse d saying the choice act conformed with principles seeking in Regulatory Reform for Community Banks. Thats an interesting thing he endorsed that particularly, cam, did he give you a time line of when he expects this thing to be achieved . He did not give a specific time line, but he said that we would be very pleased, and he was hoping that his administration could accomplish Regulatory Reform on this Community Banking sector, and in the next few months, and in, certainly, before the next election pb. Comments came as a surprise from bankers this afternoon, told us, rebounded, but theres reports that gary cohen, chief economic adviser supports the idea. How did you read the comments trump is considering breaking up the big banks . Well, i think its a mistake i think you have to ask the president that was for dick. Oh, excuse me. Im sorriment im sorry. No problem. Go ahead. I think it would be a mistake, history demonstrates what would happen if we broke up the banks, and in 1980s, the taxpayer paid 150 billion, and in todays dollars, thats close to a trillion. When snls went under, primarily home lenders, same problem occurred in this crisis, snls did all the sub prime lending, and we know what happened there. In contrast, in the 1990s, texas banks were primarily commercial lenders, commercial real estate and energy loans, and they all failed. The key to a safe and sound banking is diversity. You have to be diversified. You cant depend on one sector. When you are concentrated, you have a very high possibility of failing sometime in the future. Dick, as for the likelihood and time line when we see parts of doddfrank perhaps roll back or other regulations ease, what are you expecting . Because we have not really seen significant progress from the administration in the area more than just talk, even on appointments to various important posts, which have been easily a part of it. We have not had them yet, so are investors losing faith that deregulation is delivered on . Well, i think they are losing faith on a lot of activities that the president wants to do because its difficult to do. You mentioned one thing, i think if he apoints gets appointments done, a lot can be done that way. I have to say, i really do agree with pam that the First Priority in my opinion is we have to reduce regulation on small banks. Ive been saying it for 25 years. It makes no sense that the same regulations are for big banks and small banks. We need small banks. We are losing them because of excess regulation. I expect that would be the First Priority from a legislative for those activities that need legislation. Well, cam, exactly on that point, among the things that you think are most important in terms of regulatory relief for smaller banks, how many of them are within the powers of the president and treasury department, itself, or other executive departments, and how much requires new legislation . Requires legislation, the president , certainly, sets the tone, and hes doing that with his executive orders, his orders to review all regulations, his orders to hold up on regulations not yet issued. The president can certainly set the tone and put a very, very big thumb on the scale, but it takes mostly congressional action, and one of the good things is most Community Bank regulatory relief legislation is fairly bipartisan. That helps us a long way, particularly in the senate. You know, were talking about two Different Things here. Breaking up the banks, modern version of glass steigl and at the same time deregulate banks. Can they go hand in hand and potentially get both from the administration . Well, i think they are in conflict, right . Deregulation means we dont put regulations on we dont say you have to act in one way or another. Its kind of strange to me that on the one hand you talk about benefits of deregulation, and now you have to reregulate financial institutions, and it has not worked in the past. Its the worst thing you can do. I dont know. You know, you tell me. Yeah. It seems like thats a new regulation, but this is not necessarily a partisan issue, dick, so, also, President Trump has populist wave behind him, an issue brought up before by populists. Yeah, it has, but congress has been steadfast in saying that going back to glasssteigl or back to break up banks is not something that makes sense. Regular laters said it, Federal Reserve has been and janet yellen stated many, many times she doesnt think it makes sense, so, you know, it could be just, you know, populist and, you know, the president said things that on many occasions that with after thinking about it and getting input from others, decided to change those positions so this could be one of them. Cam, just a tifinal thought. Your members, smaller Community Banks welcome rules to break up bigger banks . I think our members would welcome regulatory relief first and foremost. We have been suffering under massive Regulatory Burden for a number of years. They are frustrated. They want to see true, targeted regulatory relief on the Community Banking system. They do believe that the fdic, Deposit Insurance Fund needs to be protected, and to the extent that that needs further protections, they would be in favor of that. First and foremost, they want true, meaningful regulatory relief, particularly in the Small Business lending sector and the mortgage sector. Well, we know thats something that the president is focused on as well as piz team, thank you, both, for joining us on this discussion on the banks today. Sure, thank you. Thank you. The battle for Tribune Media heats up, 21st century fox reportedly the latest media giant interested in the owner. Well tell you what other companies are in on the bidding and what it means for more media m a in the Trump Administration. And later, well get the outlook for the private Equity Industry joined by coceo David Rubenstein. We, the entertainmentloving people, want all our rooms to be tv rooms. Because those are the best rooms. Because they have tvs in them. And, when were not in those rooms, we want our shows to go with us. Anywhere . You got that right, kid show thing. Get a directv allincluded package for 4 rooms. Only 25 a month, price guaranteed for 2 years. Available for at t unlimited plus customers. The shlike a bald penguin. How do i look . [ laughing ] show me the Billboard Music awards. Show me top artist. Show me the top hot 100 artist. They give awards for being hot and 100 years old . Well take 2 [ laughing ] xfinity x1 gives you exclusive access to the best of the Billboard Music awards just by using your voice. The Billboard Music awards. Sunday, may 21st eight seven central only on abc. Another shakeup at fox as Parent Company, 21st century fox, boasted about a particular deal to boost holdings. We have details on the stories, julia . Thats right. Fox news copresident bill shine resigning today pushed out on the heels of star anchor bill oreilly leaving fox news amid scandal of Sexual Harassment lawsuits and settlements. This shows changing culture. He was a long time right hand of roger, fired in july, following a Sexual Harassment scandal. Sean hannity defended shine saying on twitters the departure is the total end of the fmc as we know it. This comes as fox news Parent Company makes a a move for Tribune Media. The source says that fox is in talks with blackstone to create a joint venture. There was a deadline for bids at the end of this week. Fox looks to trump sinclair medias offer, owning 143 stations. This combination means 28 of fox affiliates, giving it more negotiating power against fox. Now, fox launched a stronger rival, wants advantages of scale to strike more favorable distribution deals. Sources tell me that blackstone contributes cash and 21st century fox contributes 28 owned and operate the stations giving fox an equity stake in what a source calls a substantial amount of cash, and either of the deals is only possible because the fcc has loosened its ownership rules of stations. Gu guys, back to you. Julia, thank you for that. Bringing in james dicks from web bush securities and vince, a former ceo of media general, which was sold to next star, another name mentioned. Talks to acquire tribune, start with you, james, in terms of this latest development with bill shine. Another leg of the sort of management shakeup. Does it matter for the stock price . Probably not. He was copresident , so he, obviously has, you know, management thats there that can keep, you know, running the Network Group and a lot of the impact is from the onair which already happened. Move to the deal, vince, especially if theres a bidding war between sinclair and fox. How do you frame it . Battle for conservative news supremacy . I really dont think so. I really think it is opportunity to benefit the company from a financial perspective. When i sold my company to nextstar media, our particular niche of media was still very, very fragmented relative to the networks in the studios, and so still a lot of opportunity to consolidate in the particular area, the plilimiting factor wa the Regulatory Environment under the former fcc chairman, and now there appears to be a real opportunity to further consolidate, which is terrific for all parties interested. So from a 21st century fox news perspective, james, they want greater scale in the station ownership group, but eyes towards what in terms of the future of tv . Just a matter of, oh, we can own more, produce overlap, the rest of it, or Pricing Power in the new distribution environments . Right. I think one near term thing is any time you own stations in an fnc market, if youre fox like seattle, thats good because the nfc, you know, they have the sunday package at the network and theres sipper ji the eginn. Theres more leverage in, you know, and scale in negotiating, get the fees from the paid tv companies, but longer term, theres probably some eye to their value chain relative to the nonand operated groups like the sinkclairs because they negotiate with them, turning the affiliate compensation, which those station groups have to pay. James, if we see tribune purchased, whether by sinclair, fox, or anyone else and approved, do you think that sparks a much broader wave of m a within the sector in. Oh, i think just the fact that they fcc is already changing the uhf discounts, that rule already. It set the bell ringing in wave of m a. What fox is doing broadens the scope of who might be buyers, potentially large station groups, maybe a cbs gets interested. I mentioned conservative battle here, but i didnt realize tribune station included fox affiliat affiliates. Sure. Does trying to get ahead on that as well. Yeah, youd like to if you could have control over that, and i mean, theres a lot, you know, multipart agreements here, right . Theres cw network involvement to it, some of those affiliates, and what cbs and time warner. Its in the interest of 21 century fox to have control over the extra piece of the affiliate stations. Vince, cbs mentioned there, what do you think reaction from the likes of cbs would be if the deal goes through . Yeah, to me, that seems to be the more challenging aspects of the combination is having coowners of the cw network as well as quite a few skrbs stations owned by triv. Those aspects would be something that cbs, i think, have difficulty with, but, yeah, nonetheless, its really the cash flow generation for the station business over the last decade or so is really driven by retransmission fees. The growth in both the gross as well as the negotiations over the net with the networks so at the end of the day, whoever owns television stations, it always is very, very difficult negotiation over the economics regarding network affiliations. Were out of time, but whats the deal price . Whats the call here, james . Well, i dont cover tribune, but i think either sinclair or fox makes synergies. A buy on both . Yes. Okay. Great stuff. Thank you very much both to james and vince. Once lost to deep blue, former world chess champion Garry Kasporov is excited about art official intelligence and the good it does for humanity. Discussing that and increasing tensions between u. S. And russia. That was two decades ago. Plus, President Trump ramping up a milk trade war with canada. Live to a new York State Dairy farm to see whats at stake later on closing bell. Welcome back, puerto rico could face lawsuits if they do not restructure their debt today. Its highly unlikely puerto rico reaches an agreement with the predators over eight hours given they had months to come up with a deal. Midnight is the deadline, and after that, hedge funds and mutual funds will be free to sue the commonwealth over nonpayment from its defaults last year. Puerto rico will then be forced to decide whether to activate title iii, similar to chapter 9 bankruptcy proceedings in the states. Now, sources we spoke with say that we can expect a flood of lawsuits in San Juan District court as well as new york tomorrow, but i want to draw attention to this video. This is the u. S. Appointed Oversight Board put in place to manage the restructuring process of the islands 70 billion in outstanding debt. Today, thousands took to the streets to protest the potential austerity measures and interference by the u. S. Congress. Here you can see the tensions ran high as Police Clashed with protesters in the demonstrations, and, also, the airport entrance was block today, and tear gas used to disperse protesters, and windows of banks were smashed. The protests are on going, and well keep an eye on it. Leslie, thank you very much for that. It is time now for cnbc news update with sue. Hi, sue. Heres whats happening at this hour, everybody. One dead, three others taken to a hospital with potentially serious injuries after a stabbing attack at the university of texas campus. Austin Police Say One person is in custody. Agriculture secretary sonmy per due has new rules for School Lunches that reverse some of the elements of former first ray dis myrrh shell obamas Healthy Eating initiative. He visited an Elementary School in virginia. We all know that meals cant be nutritious if they are not consumed, if they are put in the treasure, and thats really we got to balance nutritional, sodium content, the whole grain content with the tastes. Warming temperatures in california are expected to separate melting of the states record snow pack. They were measuring right there. Water, though, surges down a major river that could overflow banks. Nearly twice as much snow as normal blankets the 400 mile Sierra Nevada mountain range. You are now up to date. See you tomorrow. Sue, thank you very much. Musk, gates, hawking warned about dangers of Artificial Intelligence, but former world chess champ and political activist Garry Kasporov says a. I. Will help humanity thrive and unlock creativity. Plus, will President Trumps tax plans spur growth on wall street and main street . Hear from David Rubenstein later on the closing bell. Bell. Hey, the future, whats her problem . Apparently, i kept her up all night. She said the future freaks her out. How come no one likes me, jim . Intel does just think of everything intels doing right now with Artificial Intelligence. And pretty soon ai is going to help executives like her see trends to stay ahead of her competition. No more sleepless nights. Were going to be friends im sorry about this. Dont be embarrassed of me, jim. Im getting excited about this we know the future. Were going to be friends because were building it. So we know how to cover almost alanything. Ything, even a coupe soup. [woman] so beautiful. [man] beautiful just like you. [woman] oh, why thank you. [burke] and we covered it, november sixth, twothousandnine. Talk to farmers. We know a thing or two because weve seen a thing or two. We are farmers. Bumpadum, bumbumbumbum welcome back to closing bell. First of all, advanced microdevices, interesting one, talking a 4 Cents Per Share loss that is bang in line with expectations for a 4 cents loss. Revenues, 984 million. Exactly in line with the consensus analysts estimate of 984 million. However, theres strong Current Quarter revenue guidance, 12 growth year over year, and they looked for 9 . Thats why the shares there, well, now they extended, down 8 . 5 million shares worth of volume, but they were showing volatility. I want to show tenet health care, up 13 on 315,000 shares, and this after reports of loss of 27 cents a share, better than the 51 cents loss people expected, and also revenues 4. 18 billion versus 4. 81, a miss there. Current quarter revenue guidance, better than expected, and 2017 full year Profit Guidance is above estimates, still a stock thats lost half the value over the course of the past 12 months getting a bid in the after hours trade. Back to you. Big moves in either direction. Watch that amd stock, now down 8 , dom, thank you. A new jobs report on friday, but new study out today says that half of millennials looking for work will actually be competing with robots. Sounds grim, but our next guest who loss a chess match to a machine says human intelligence and a. I. Have to work together. Joining us is Garry Kasporov, former chess champion and author of deep thinking where Machine Intelligence ends and human creativity begins, thank you for joining us. Thank you for inviting me. Headline is this whereas other people are pessimistic about a. I. s impact on human life, you are optimistic. Well, look, i think its a normal history of civilization. Machines always replaced labors, farm animals, manual labor, and now its coming after people with degrees and every profession and occupation feels pressure or else it will mean humanity ceased to make progress. You were shaking your head reading statistics on jobs. No. I think its news because it improves the quality of preparation. You have to compete. At the end of the day, market is about competition. We, you know, we should realize that its going to happen anyway. We dont get to choose when and where Technology Progress stops, and people whose jobs are on the chopping block, they also depend on the next wave of technology to generate the growth and create sustainable new jobs. The new jobs piece carries the one where people have a hard time, i think, creating that bridge to what needs and products will be, right . They look at work thats done now and assume its the same lump of work to be done. Look at the lucrative jobs, you know, 3d printing, these jobs did not exist years ago, so thats progress. We are speeding up. We cannot slow down. There is no choice. We have to look for new horizons, come up with ideas that are not yet there. Anything we do today, machines do better. Not to be redundant, we have to do more. Which companies impress you most in terms of level of innovation that they are doing at the moment . Well, i think now we can see something in google, and i think we understand that most of the companies now are just acting in this process, but, obviously, google, you know, thats impressive, and i believe in the next few years, theres a shift because they realize now that to stay afloat, they take more risk than wanted. You lost a chess match against intel machine ibm. Excuse me. Oh, oh excuse me. I take it back. Its all right. Has ibm, the point of the question, have they slipped in terms of the level of innovation compared to apple and google . Look, i won the match, lost the second match. Of course. It was a tie. Came up later in more than ten years later was watson. Ting as a significant piece of the hardware, but nothing close to a. I. Step in the right direction and trying to improve, so, again, even ibm is trying to move in that direction. A lot of the big companies, people are surprised to hear you of all people say this because the companies are testing it out on games to see whether computers and games can beat gamers and they are winning. You know, its 9 11, you know, all dream of the founding fathers, signs like allen, and deep blue was not intelligent. Its unless you, you know, consider intelligence as a result of an output, but it we could see the human intelligence, far more complicated because in any game, humans are too vulnerable because machine has a steady hand. We make mistakes, and we are punish for that. Quickly, your perspective on things relating to russia and mr. Putin. All sorts of questions to ask, specifically, i wanted to ask whether the French Election will be something putin watches closely if le pen wins, is that a boost for putin given her favorable view towards russia . Oh, that will be a boost to putin and disaster for europe, and thats what putin mewants. Anything that diminishes european unity, anything that weakens alliances like nafta, its a big win for putin. Seems despite all efforts, massive attacks, on the president ial campaigns, putin is on the losing side. I dont think she can overcome this huge deficit. Down 30 points, i think. Maybe the trend is turning, and, by the way, i have to say the reaction of europeans on trump election was that the nationalist parties, hole land, germany, and france, losing ground. There we go. Thank you very much for joining us today. Great to have you with us this afternoon. All right. Moving on. Its not just tax on lumber that touches off a trade war with canada. Well tell you what other commodity could be used as a weapon coming up. But first, well get a check on the private Equity Industry with David Rubenstein weighing in for the global conference next on closing bell. I love how usaa gives me the peace of mind and the security just like the marines did. At one point, i did change to a Different Company with car insurance, and i was not happy with the customer service. We have switched back over and we feel like were back home now. The process through usaa is so effortless, that you feel like youre a part of the family. I love that i can pass the membership to my children, and that they can be protected. Were the williams family, and were usaa members for life. Call usaa today to talk about your insurance needs. So you miss the big city . I dont miss much. Definitely not the traffic. Excuse me, doctor. The genomic data came in. Thank you. You can do that kind of analysis . Yeah, watson. I can quickly analyze millions of clinical and scientific reports to help you tailor Treatment Options for the patients genomic profile. You can do that . Even way out here . Yes. Even way out here. Welcome back, 2017 gloeshl conference underway in beverly hills, and david faber is there with cofounder and coceo David Rubenstein. Take it away. Thats right. He is both those things in addition, by the way, to being his own talk show host which people dont know, david, you do the interviews that wed like to do, and you just interviewed wilbur ross, by the way, anything interesting to say . Well, many interesting things, and i asked about the slippers he wore. It was commented he wore slippers at the state of the union and said they were made for that event and didnt realize people would notice his footwear, but liked them and recommended them. Interesting. Your footwear looks fine for this event herement talk about events when it coming to private equity. Okay. You lead an event thats going to monetize the overall investments last year, we did not see a lot of ipos. This year is changing. Is the likelihood of being anyone to take something public increasing your desire to do so in terms of starting to actually realize investments . In private equity for the last five years, more money returned to investors than invested, and thats because the markets have been good, while the stock market is high, that doesnt mean its good for people, so they sell to private equity buyers and trade buyers. What do we see entrance is the better question. You might ask that if this were reverse. Clearly, prices are high, so the average multiples that people pay crept up over the last year or two, and now the reason people paid slightly higher multiples is that investors are willing to accept slightly lower returns. In private equity, they wanted a return of 20 . Now people seem to be satisfied with net internal rates, 1516 , so if you get lower rates of return and keep investors happy, you pay a little more. You know, one of the ideas in the tax reform proposal seen from the house ways and means is no longer allow deductibility of interest. I dont know that ends up in any final plan, and i spoke to secretary mnuchin earlier, and its not part of the administration, but how would that impact private equity if, in fact, you cannot deduct interest . All private equity firms would be equal so no penalty for us relative to each other. Clearly, we pay lower prices. For the assets we already own, we presumably get lower prices for them as welt, but i think the likelihood of this happening is relatively remote. Why . Affects so many different businesses aaround the country dependent on borrowing and Interest Deductibility, it changes business too much. Its unlikely youll get a gigantic comprehensive tax bill any time soon. We have these every 30thurt ye 40 years. Its not easy to get done. What you have to do is figure out whats the most important thing, reduce taxes, comprehensive tax reform, reduces taxes is a higher priority, tax reductions, but i dont think likely to see wholesale elimination of deductions like deductions for interest. Right. So you dont think were going to see reform in the sense that it was embraced by the house ways and means plan where you, obviously, capital expenses year one, the bat, all things a part of that, not ending up with a package like that . The senate is not where the house is. The house ways and Means Committee spent a lot of time on this and a lot of people who know about this and really good at what they do, but the senate has not really bought into this. I think its unlikely the house passes something they know the senate will not pass. We have a long way to go before were done. So you see tax cut, not reform, repatriation deal a part of it . Any part of tax cuts because that money is relatively right to be taken back and many think its a good idea to bring back. Whats it mean in terms of the markets . Talking about kpats, willing to accept the return, obviously, lesser if you were forced to no longer deduct interests, but the point of that, not every deal we do or people like is is using borrowed money. A lot of deals come in state transactions. They are not buyouts, but emerging markets. Interest is not that important and Interest Deductibility while it should not change, but will change, not as expensive as it used to be because we used to borrow money, used to be much more expensive. Now its not as expensive. Im not in favor, but its not calamitous. Your willingness to pay higher multiples, that decrease if, in fact, rating move up. Well, of course, if rates move up, theres an effect, but, remember, when i worked in the white house, rates were 17 dating yourself. Thanks. You were in grade school or not even born . I may have been. 40 years ago. Long time ago. If rates go up, unlikely Interest Rates go up to a point that makes it difficult to borrow and so expensive. Remember, actually, over the last couple months, Interest Rates went down. I know they have. Going down. Finally, you dont think well get reform . Well get some tax hudding, nobody talks about getting rid of your key tax break, carried intersection deduction, but if you got 15 in the past, you wouldnt care anyway. Well, the president has said hes going to address this with respect to hedge funds, and i dont know hedge funds. I dont know exactly what his plan is going to be. Well have to see what congress does. Too early to know. Too early to know. How are the earnings going to be when you report, what is it, next week . Im told ill go to jail if i say anything about my earnings before its supposed to be the case. So i dont want to tell you. I dont want to get you in trouble. Youre a competitor now ill try not to get in trouble. Youve interviewed gorman and dimon and oprah. Come on. Comcast. David, thank you. My pleasure. David rubenstein. Back to you. I love how competitive you are. Thank you for bringing us that interview. So, milk could be the next weapon in the u. S. Trade war with canada. How the relationship with our neighbor to the north is curdling, next. And coming up on fast money, trump considering breaking out the big banks. Theres only one name you should own says dick bove. Hell tell us in the 5 00 p. M. Hour. Closing bell is back in just a couple of minutes. Uple of minut. Staff meeting. Noon . Eating. 3 45 . Uh, compliance training. 6 30 . Sams baseball practice. 8 30 . Tai chi. Yeah, so sounds relaxing. Alright, 9 53 . I usually make their lunches then, and i have a little vegan so wow, you are busy. Wouldnt it be great if you had investments that worked as hard as you do . Yeah. Introducing essential portfolios. The automated investing solution that lets you focus on your life. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. Democratic center Chuck Schumer dont agree on much these days, but they do have one thing in common. A dairy farm in upstate new york with that story. Great shot, contessa. Reporter im just outstanding in my field there, sarah. This is when birch farm, where the owner of a profitable around the clock proprietor of a dairy farm here. And hes used to making money. But suddenly hes taking a real licking. He said hes competing with the prices from canada. It was going to canada, mostly to be used in cheese making. But the government managed dairy industry there suddenly lowered its prices. So the canadian processors abruptly stopped buying the higher priced american product. This particular dairy farmer is writing off any future with canada. You know, that ship has sailed. So now what we want is to make sure that they dont take any of that cheap powder, subsidized powder, dump it on the world market, because thats going to drag all the world market down. In fact, thats already happening. April 1st, the milk ingredients lost its canadian customers, worth 30 million. Thats 25 of its business. And then on top of that, it lost a bang le deshi contract for bouderred milk when canada beat its price by 12 cents a pound. Thats normally competition on a penny a pound. I want the canadians out of the world market at these absolute rockbottom undercutting lowball prices. Who would enforce that . I think we have to go to the wto to enforce that. Reporter well, that could take several years. In the meantime, canada is denying any wrongdoing on what its calling a preferential Pricing System for its domestic producers. And the Industry Experts that i talked to, sarah, will say its most likely that some, potentially hundreds of the 42,000 mostly familyrun dairy farms in the United States will go bellyup. Wow. An important issue. One weve heard the president increasingly talk about. Thank you. The cows really like you. Be careful. Reporter i smell good. Theyre trying to get in your pocket. I dont think theyre dangerous. Contessa, thank you very much. Coming from where . Atlas, new york. Nice little town, actually. Apple hitting new highs today before earnings after the bell tomorrow. What to listen for in those numbers coming up next. Up next. Its been over 100 years since the first stock index was created, as a benchmark for average. Yet a lot of people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Why invest in average . Whyour boss . Ork for . Yourself . Your family . Our Financial Advisors are free to realize a plan to fit your familys unique needs. Well listen. Well talk. Well plan. Baird. Apple hitting an alltime high today, ahead of earnings tomorrow. Mike, give us the keys to what youre looking at. Whatever they can do to scale the expectations to the iphone. They were reluctant to click to a new high. To me its more a test of appetite for the huge mega cap tech stops, not apple per se. And the cash file. Which the wall street journal raised the curtain on today. Talking a re pa tri aation. How much of it would they expect to come back . And what plans might they have for it . Theres not necessarily a compulsion to bring the cash back, even if they do pass a law. Apple after the bell tomorrow, up 2 today, some 25 in recent weeks. That does it for the closing bell today. Fast money begins right now. Fast money starts right now. Live from the Nasdaq Market site overlooking new york citys times square. Tonight on fast, financials taking a midday dip after President Trump is talking about breaking up the big banks. Dick bove said there will be one big clear winner. Later, steve grasso one stock he says could be one of the most overlook