Transcripts For CNBC Power Lunch 20161024

Welcome in, everybody, to power lunch. Im tyler mathisen. Glad you could join us. Three hours left in the trading session and stocks showing animal spirits. They are in the green. As you see, the dow industrials up about a third of a percent or 65 points. Ditto the s p 500, a third of a percent of 2148, thats a sevenpoint gain and the nasdaq leading the way up. 75 . Big winners, boeing, 3m and microsoft, microsoft trading at an all time nominal high. Im michelle carusocabrera. Here is what else is happening at this hour. Consumer reports naming lexus its most reliable automotive brand. More on that coming up in the next hour. Nike topping forbes list of most valuable sports brands. Oil cracking below 50 a barrel, right around 49, 50. Right now crude down 1. 9 . Back to you, tyler. Thank you very much. We got a big two hours ahead. But lets kick it all off with the deal of the year. At t, there you are, announcing plans to buy time warner for 85 billion. The ceos of both companies weighing in on the deal earlier today on cnbc. This is one where the nature of this deal is unique for me, what we have done before, that is a vertical integration. It is a big merger, but a vertical integration. And as you think about the areas that have been really contentious over the last few years and our industry and jeffs industry, they have been horizontal mergers, where the government was concerned about a competitor being taken out of the marketplace. This has none of that. We were talking about what is happening in media, all these new products, like subscription vod networks, all the increase in mobile consumption of video. And as we got into it, we were talking about what the Media Companies are doing, what the Distribution Companies need to do, we realized that if we had ourselves together, that we could create more innovations for consumers, so they can have more choices of package, they can end up with more competit n competition, lower prices. Lets get reaction now from both sides, what do you think of all of this . Well, bigger is bigger, ill say that. Im not sure bigger necessarily is better, but bigger is bigger. I wish they had done these kinds of deals, sitting on the time warner side, when i worked at time warner, what i worked at time warn, the only deals they did didnt work like aol. A disaster. We understand the difference between vertical and horizontal integration . You have three companies. Mathisen, carusocabrera, we all compete against each other. This is the idea that mathisen buy s dom, youre on the same business, youre separate, the three of us exist and thats their argument. I dont know if the government is going to see it that challenging to get the deal done. Could be massively wrong. Just seems like this is the kind of deal that the government, they blocked office depot and staples, blocked cisco and u. S. Foods, horizontal deals, but lots of overlap. This will be challenging as they say. Lets talk more about that. At t, david berk and on time warner we have rich tullo. Guys, good to have you here. You rate at t, had it at a buy. Still a buy . Yes, we think so. For income warranted investors. It has the same appeal it did before. Attractive yield and modest earnings growth. We dont think this announcement changes anything. We view it as a potential positive and it could expand the companys growth rate, it diversifies from the slow growing wireless business and further strengthens the ability of the company to maintain its dividend. Youre not concerned about the ceo being distracted as he deals with one integration when it comes to directv and also trying to get this deal done with the regulators . Is he going to be able to keep his eye on the ball. If youre focused on the dividend, youre not worried about him running the company . Clearly you have to worry about the day do day abraisions a operations, thats a lot between the directv deal closing last year and this deal that will go on through the end of next year. Thats a lot to go on for them to deal with. What about the debt . It is large, isnt it . 180 billion if you add the two companies. However, we think it is manageable and the company talks about being able to delever over the next several years. We think thats a commitment. They want to maintain their Investment Grade Credit Ratings and we think theyll do what they need to do. It is potentially they may sell assets. You dont see any risk to the dividend as a result of this deal, especially since youre focused on income . No, the company Just Announced a Dividend Increase over the weekend, in addition to the announcement of the takeover, and the Third Quarter Earnings Release, they raised the dividend 2. 1 to 1. 96 annually. For at t, the dividend is a sacred cow. On the debt side, point of note, 180 billion is more than many small and midsized countries, including your favorite place, greece. Rich, lets talk about the other side, time warn, the natural reaction, of course, with us, and everybody is who is next . Do you think this deal, assuming it is done, creates a runway for others to be purchased and if so, who might they be . Yeah, we have been looking at that as well. We would think amc would need to be acquired by an ott provider. Netflix about a billion dollars worth of cash over the last 12 months. Amc generates about 600 million in cash. So that would fill a hole. It would also buy netflix, a bunch of content that they need, the Conversion Rate of amcs content being successfully reviewed is about 70 titles for every one port title. Netflix, about 12 good titles for every one poor title. So that would invigorate netflix a bit, since they plan on sending 6 billion on content, might as well spend it wisely. What about fox . We know one thing about mr. Murdoch, he does not like to be left out when deals are happening, they already split the company up into two sides. Do you believe that 21st century fox will in some ways have to come in here and be a buyer . We dont cover fox. But of the names we cover, like amc being acquired, we also think pandora being acquired, activist on the board, owns 9 of the stock, and, you know, for the same reasons strategically why at t would buy time warner, we think pandora is a nice fit for somebody who wants to go in, a little more diversified smaller way. What do you think about the way time warner is trading, the probability of the deal actually happening. Because, you know, somebody is waking up on the west coast, just tuning in, it would normally see the company that is getting acquired, that stock would move higher, but the stock, time warner hasnt been moving higher. So it is important to understand this is not a cash deal, it is a cash and stock deal. So the reaction, although a little negative, shouldnt be unanticipated. We liken it to charter, when charter decided to buy time warner for a long time, trading at a discount. And now charter is trading to well above 200 a share. You could have bought charter for 175 and Time Warner Cable for a lot cheaper. So were not going to look at this necessarily as a vote of disapproval for the deal, but just market technicals and concerns about why is it trading so far off of the Acquisition Price . 20, thats a big gap. Yeah. Well, i was just explaining that it is going to be some time and so, you know, with time, and it is not a cash deal, you get a bigger discount, right . So, you know, time warner traded about 20 lower than with the deal was actually completed, man a little bit more, and you shouldnt expect not to see that here. We saw it with tivo as well, they merged. Time warner right now, stock off its highs but has gotten nice pop on this news, right . Do you sell it on the risk that the deal doesnt actually happen and then just take your money now and think back to twitter, right . Or do you hold on and wait for the integration because you think it is so good . We thought about that over the weekend, and we decided to raise our price target to 107. Because we see this price right now and, you know, 90 a share. You have, you know, quite a bit of upside, 17 upside. And not allow downside, right . This is a cash deal, 54 a share in cash and at t, is at t going to trade below 15 a share, probably not a high probability of doing that. Therefore, you know, it is kind of rational to own time warner here. Okay. David berk, rich tullo, thank you very much. At t getting all the attention, but bankers were extra busy this weekend. Rockwell collins buying be aerospace and Td Ameritrade buying scott trade. Lets talk about both and begin with phil lebeau. First off, who is be aerospace . A lot of people are not familiar with be aerospace, but were familiar with them in terms of when were flying. Were talking about seats, were talking about the products that are used in the galleys for when the crews are serving passengers, the interior of the plane is the strength for be aerospace. So when you look at rockwell buying be aerospace, this is a vertical integration, 62 a share in cash and stock. The deal valued at 6. 4 billion, 22. 5 premium to be aerospace Closing Stock price on friday. And as i mentioned, youre basically creating a global aviation supply giant. Rockwell strengths, they supply planemakers like boeing, airbus, et cetera. Strength, avionics and the cockpit, where they have long been accelerating. Be aerospace supplies the airlines, their strength, aircraft interiors, put it all together and from front to back, you have basically one stop shopping, whether youre an aircraftmaker or an airline, look at shares of Rockwell Collins and be aerospace, by the way, Rockwell Collins expects 160 million in sinner ja ensin. You know, phil, because we talked about the regulatory burdens on at t and time warner, this deal, rockwell, be, seems like it could fall under more regulatory scrutiny. This is that aforementioned horizontal deal, cockpit throughout much of the plane. If youre a smaller parts manufacturer, it may be more difficult for you to get on a plane now. Well, you could make the argument they dont overlap. Thats the argument they make from Rockwell Collins. They dont overlap, their feeling is it is a winwin and not one that is going to hurt competition. If youre a supplier, sure it is going to be tough to compete with these guys, but they would make the argument that were not pricing anybody out of the mark e we market. We have a portfolio of products that you want on your plane. All right, phil, thank you very much. Phil lebeau reporting from chicago. Now to dominic chu taking a look at the Td Ameritrade deal. So it is not nearly as big as that megamedia merger you were talking about in the news world. In the world of online brokerage, it got tighter with privately held scott trade selling itself out. This deal has two major components. The brokerage business at scott trade will be sold to larger rival Td Ameritrade. 2. 7 billion. It is a mix of cash and stock. Then you got the scott trade Retail Banking operations, theyre going to be sold to canadian Banking Group toronto, dominion or td bank as you might know it here to those u. S. Customers. That deal for 1. 3 billion in cash. The total price tag then 4 billion and the deal is expected to close in september of next year. So this is also the Td Ameritrade can grow its brokerage footprint, adding nearly 500 more branches and employ 1,000 investment consultants. Meanwhile, td bank itself gets a Retail Banking business that for now caters mostly to those scott trade brokerage clients, around 13 billion in cash and securities. All part of this particular deal. Scott trade founder and ceo roger ryany, remember the commercials back in the day, will join the Td Ameritrade board of directors. This is about consolidation in brokerage and thats why it is a big deal. A lot of our viewers and readers and listeners probably have accounts, schwab, fidelity or Td Ameritrade or scott trade. All going to be part of Td Ameritrade now. Dom, thank you very much. More on what this deal means for investors coming up on the closing bell. The companys ceo, tim hockey, will be their guest. Up next, why all this dealmaking might just be a big canary in the coal mine for your money. Were going to explain. And with just 61 shopping days now left until christmas, one wall street firm declaring this retailer their big holiday winner. That name is coming up when power lunch returns. Today, i am helping people work better. And also feel better. I am helping hospitals personalize treatments using billions of data points. And working with medtronic to predict the highs and lows of diabetes, hours in advance. And i am working with orreco to use Biomarker Data to boost the performance of athletes. Hello, my name is watson. Working together, we can outthink anything. This is the new comfort food. Hello, my name is watson. And it starts with foster farms simply raised chicken. California grown with no antibiotics ever. Lets get comfortable with our food again. Overall stocks are trading modestly higher today. We ask, is the sudden rush of deals the sign of a market top . 1999, huge year for m a, so was 2007. We know what happened in the years right after those. Lets bring in mark hepenstal and brad mcmillan. Mark, lets start with you. Companies buy other Companies Generally for one of two reasons. Lets simplify it. Number one, you got a business, i want or need, and want to get into your business and i want to grow that way or, two, i see organic growth slowing and i need to figure out a way to get into other businesses or cut my costs because im worried about growth down the line. Do you think that this deal may be the sign of a macro market top, only because there is so many cost synergies involved . I wonder if it says the number two reason. To me i think it is more likely the number two reason. Certainly if you look at the prospects for a lot of these deals announced today, it means to me organic Growth Prospects doesnt look that great. So talking about one of the Biggest Companies in the world. What does that tell you about the Macro Economy and the stock market . We view the stock market as pretty fully valued at 25 times trailing earnings. We view that as a pretty full valuation. There has been a push out there, risk curve, by Central Banks, forcing investors to take more risk and the equity Market Performance benefited at a result of that. We think companies are rushing to take advantage of low Interest Rates. What do you think . Often when you see big megadeals, that signals a market peak. You worried about that . I am worried about that. Not immediately. And the reason i say that is if you go back to some of the periods you mentioned, 1998, 1999, 2005, 2006, it is typically a clustering of these kinds of deals that significantny pfize tsignifican significantny signifies it is immediate. I went back to the 15 big ticket mergers and typically what happened, the gap between a serious market pullback and the merger was about 15 months. What this says to me is that, yes, risk is now elevated, but were probably going to see more deals like this and thats when we should start to worry. Were 15 months away, in other words, potentially . That sounds like a reasonable estimate. The other thing, you look at market pullbacks, you typically only see them when we have a recession. The way jobs and the other metrics have been acting, were probably at least a year away from a recession and therefore a year or more away from market pullback. Therefore, probably starting a year or so from now, im going to start paying attention, but right now im not that concerned. You know, mark, do you think to brads point there, do you think this deal will spawn other, not necessarily copycat deals, as people begin to think, wow, these guys saw something, they saw low Interest Rates, they saw high market prices, this is the moment for me to move. Well, certainly Companies Across the board are taking advantage of the low Interest Rate environment and whether it is to do share buybacks, Dividend Increases or whether to do m a activity. We have seen record corporate issuance for the past two years, sort of spurring this type of behavior, shareholder friendly, and bond holder unfriendly. If you saw more deals to brads point, and they started to cluster, would you start to worry it was a sign of a market top . I think that you do have to worry because we do think that the tailwind that has been Interest Rates is eventually going to turn into a head wind. We think that may happen sooner than other folks do. Were forecasting the fed to increase Interest Rates in december, so you may see this mad rush, and i will say the Regulatory Environment in washington is such that i think the likelihood of this deal getting done, i would handicap it below 50 50. All right. Time will tell. Thank you very much. Mark, appreciate it. Brad, appreciate it as well. Time and time warner will tell. Thank you very much. Coming up, going up in smoke. Listen to this. An rv packed with marijuana candy bursts into flames. The full Details Behind this must see video when power lunch returns. Just like that, a moment turns romantic. So why pause to take a pill . And when youre having fun why stop to find a bathroom . With cialis for daily use, you dont have to plan around either. 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Com [aand ive never seen a rocketge ship take off like this. [owner] im lindsey. Im the founder of ezpz. My accountant. Hes almost like my dad in this weird way. Yeah, im proud of you. You actually did some of the things i asked you to do the other day laughs . [owner] ha, ha, ha. [accountant] ive been able to say, okay. Heres the challenges youre going to have. And we can get it confirmed through our quickbooks. And what steps are we going to use to beat these obstacles before they really become a problem. [announcer] get 30 days free at quickbooks. Com hey nicole. Hey i just wanted to thank your support team for walking me through my First Options trade. We only do it for everyone gary. Well, i feel pretty smart. Well, were all about educating people on options strategies. Well, dont worry, i wont let this accomplishment go to my head. Im still the same old gary. Wait, you forgot your french dictionary. Oh, mucho gracias. Get help on options trading with thinkorswim, only at Td Ameritrade. Check out this video from delaware. A motor home filled with marijuana candy burst into flames. Five people escaped unharmed. But the vehicle and its contents were a total loss, it is unclear what caused the fire. Hard not to watch that and just think of the first scene and First Episode of breaking bad. Youre right. I wonder, so five people inside, have they stopped eating since . Marijuana candy the high must have been unbelievable, right . Wow. Where was it . On the delaware bridge . Trying to figure that out. Why is it so flammable . Is pot flammable . That was on the delaware Memorial Bridge . That should have done wonders for 95 traffic, which is already backed up by ten miles, all the way to the Chesapeake Bay house, a great roy rogers . Still does . What is next in the media game of Musical Chairs or will apple or amazon make a big buy . Who are the potential targets . Well discuss that and more next. And why Hillary Clinton is making that particular face. Thats the moment she found out the cubs were going to the world series. Well talk to a person who was more excited, a cubs minority owner will join us coming up on power lunch. I am benedict arnold, the infamous traitor. And i know a thing or two about trading. So i trade with e trade, where true traders trade on a trademarked trade platform that has all the. Get off the computer traitor i wont. cannon sound mobility is very important to me. Thats why i use e trade mobile. Its on all my mobile devices, so it suits my mobile lifestyle and it keeps my investments fully mobile. Even when im on the move. Sign up at etrade. Com and get up to six hundred dollars. Earnings triple play with Top Company Leaders first on cnbc. And Straight Talk from ken langone. Hi, everybody. Im sue herera. Here is your cnbc news update for this hour. Iraqi forces are shelling isis positions outside mosul, fighting to retake the extremist held city enters its second week. Iraqi and Kurdish Forces are within 5 1 2 miles of mosul, home to more than a million people. 11 people arrested in the town of katania and charged with illegally trafficking women from nigeria as sex slaves. Authorities say they were forced in a voodoo ritual before the journey to italy and then told that they owe the travelers ffip to 43,000. Syrian refugees have arrived in rome. Italian authorities granted visas for the refugees in a bid to stop dangerous and illegal sea crossings to europe. On a lighter note, fans of Girl Scout Cookies will soon be able to eat their favorites for breakfast. Girl scouts of america and General Mills teamed up to create girl scout cookie cereal nationwide by january were told. Thats the cnbc update. Not that there would be any sugar in there, michelle. I was just thinking about that. Thanks, sue. Lets get to steve liesman, breaking news from the fed. Thank you very much. Charlie evans, chicago fed president , out with a speech where he will say the fed may need to undershoot its unemployment targets and overshoot inflation. And then in the speech in chicago, he gives something of a checklist for what he would like to see in order to raise rates. Higher inflation readings, higher Inflation Expectations and lower unemployment rate. He notes the fed has been too high in its inflation forecast and too high in its forecast for the federal funds rate for many years now and inflation is too low globally. These comments come back in october, couple of weeks ago, evans had also said a december rate hike would be fine with him. We dont know if hell say that same thing, but certainly he is for a much lower pace of rate hikes. Earlier in the day, jimbo said he would support a november rate hike but no hurry to raise Interest Rates. Michelle, a little bit of dovish fed talk to go with your Girl Scout Cookies. There you go, thank you. Well look at the bond markets right now. You can see steven who is going through that news, the intraday chart. Lets show them to you again here for our bond report. The tenyear note is at 1. 77 , you see on the intraday chart that the yield has been higher throughout the day. The bond itself has been lower as we have seen buying in stocks and the twoyear ditto for the same kind of pattern, the yield is up 8. 44 . For the fiveyear, 1. 27 . Lets look at stocks right now. People have been buying generally speaking today. And you see the dow industrials up 67 points, a third of a percent, fairly stable level over the past hour or two. Nasdaq is up. 85 at 5302. And the s p 500 at 2149, about a third of a percent higher. You may have heard about this. At t announcing plans to buy time warner for about 85 billion. So, how are people reacting to the news. Well, take a listen to some of the responses we heard so far. Jeff buickous, hes done an incredible job by spitting off the cable business, time, and then what hes done right here in terms of getting a partner as the industry is radically changing. I think this is thats a great move. Youre talking about essentially two Legacy Companies that are both facing challenges that they recognize and are trying to come together to be better for it. I would give that a higher chance. I dont think it is ever easy, but give it a higher chance and experienced management on both sides of this. I think this thing happens. Will it take time, a lot of looking at it, absolutely. There may be a few conditions. But at the end of this day, at the end of the day, this deal goes through. I think this transaction makes all the sense in the world economically, carl. The question is in this environment is it politically viable. The market is raising question marks. Lets be clear, what theyre doing right now is a vertical integration, it is attempting to enter businesses and have adjacent revenue streams. What people shouldnt think theyre going to be able to do or would do it hold content hostage. Among the strategic advantages are the advertising thing. The data that at t has which they dont tout very much because there are all kinds of privacy questions, they have enormous amounts of data and directv customers. And if you use that to target people more effectively, you built a new revenue. Well, with at t and time warner getting together, at least they intend to, we want to know what is going to happen next. Could apple or amazon or google or someone else make a big acquisition . Julia boorstin joins us now from l. A. Historic scale, at ts purchase of time warner could spark more mergers as distributors and content look for scale to compete with each other and with internet giants. Plus, as more content is watched on mobile devices, and consumers demand more choice, thats threatening traditional tv bundles. We could see other distributors like verizon and charter follow at ts lead. Or Tech Companies apple, google or amazon could be buyers as they all put together more video offerings. For content creators, this deal creates more pressure to consolidate, for negotiating power with distributors. So we can expect that deal in the works to happen and fox which made a failed bid to buy time warner could be looking for other deals. Disney, which has a track record of content acquisitions like lucas film and marvel could buy out the rest of streaming Technology Company bamtech which bought a third in august. In smaller media assets, such as amc networks, discovery communications, Scripps Networks inactive and msg networks, some channels at risk of being excluded from the more popular skinny bundles, they could be snapped up. At t ceo Randall Stevenson said this morning that other companies will be closely watching his strategy of vertical integration. If it works, he says it will be widely copied. Back over to you. Julia, what are the studios, it seems to me that those are the ripest targets in this, those are the people that really create stuff. Lions gate and others. There is a wide range of content companies. You say studios, television studios, there are movie studios, so for instance, amc networks which has made shows like madmen, they have their own channel, but also produce some of their own content, they buy their content, madmen was a lions gate production, so that is the kind of asset that could be valuable, but less valuable than it was ten years ago. Then Companies Like lions gate which recently bought stars and john malone, who is a well known dealmaker, also owns a piece of that company, as well as other companies such as liberty global. Well see john malone has something in the works for all of the different media assets that he owns pieces of. But there are really a lot of different players here and i think it is going to be much harder to be a stand alone Media Company than it once was. Or maybe, julia, a stand alone phone company, we talked about it on friday a little bit, rumor of the deal was happening, comcast is our parent company, were very siloed, but look at shares of sprint and tmobile. Sprint is up 5 . Tmobile is up 8 . One of two reasons. Maybe as john said earlier, at t is going to get distracted and sprint and tmobile pick up customers, or there is a possibility that perhaps a comcast or somebody else could come in and say why cant we own a phone company now. Yes, tmobile has been a rumored acquisition target of comcast for some time now. Now you have this time Warner Acquisition by at t, it raises questions of whether comcast will look to make that purchase of tmobile. It raises the stakes for everyone. There is two factors at play here. The idea that content distributors, they dont want to just be dumb pipes. They want something that distinguishes their service, at t with unique content for mobile subscribers or comcast, now nbc universal. You said at the end of your piece, if the deal works, the stock is not acting like everybody is convinced it is going to work, if this doesnt happen and there is a chance that doesnt, all the fervor, could it cool down . Well, i think a couple of different factors at play here. Maybe one of the reasons why the stocks are down is because there are so many regulatory hurdles to be overcome for this deal. I think that we are likely to see more consolidation among the content players, like cbs and viacom, as Companies Like viacom, at a disadvantage in this world of the skinny bundles. They look for more scale for negotiating leverage. So i think well see the content Companies Come together as they try to negotiate because theyre now not just trying to get distribution, they want to make sure that theyre not cut out of the picture as people go a la carte and they also look to have more flexibility with their deals. So i think that no matter what happens with this deal, we will see more consolidation. Got it, julia, thanks so much. One thing that Randalls Stevens made clear was hard time wrapping my head around this, he believes a day is coming very soon where you and i, all three of us, will be able to buy our cable. Mobilely. Not from the cable company, from him, from a Wireless Company. Enough wireless in the sky and enough technology that we can skip around that well have a competitor it cable. Thats 5g. 5g. All right, switching gears, just over 14 days to go until the election. I think we went a whole 20 minutes without talking about it. More than 6 million americans have already cast their ballots. Early voting ramping up in georgia, nevada, North Carolina. What do the early votes reveal in key battleground states . Lets bring in Michael Mcdonald with the university of florida, tracking the early Voting Results for the u. S. Elections project. Good to have you here. What exactly do you know at this point from the early voting . Do you know how they voted or do you just know demographic trends . What is it youve got in terms of data . If we have Party Registration in the state, we often know the Party Registration of the people who voted, we also have a comparison to 2012, so we can make a comparison of how well democrats and republicans are performing relative to that base line 2012 election. Also in terms of turnout . Yes, people who already voted so far and relative percentages that are democrats and republicans. We also have in some states data like race, gender, and age, but thats not everywhere across the country. What state do you have the most data for . What can you be most solid . I see you have information about North Carolina, nevada, iowa, california. What stands out . North carolina has been voting september night believe it or not. And their state elections board produces just a wealth of data, so we got a lot of good data out of North Carolina, and we can see that leading up to the in person early Voting Period, which started last thursday, that democrats were outperforming republicans on the mail ballots. But once we had the in person early Voting Period start, democrats started slipping. There is lots of things going on here, so you have to be cautious here. There were some local election boards really curtailed the amount of early voting and those were in predominantly democratic and africanamerican counties, so some of what were seeing when the democrats slipped in North Carolina has to do with the bottleneck that was created. That bottleneck will be released later on this week and into next week. And so well just have to monitor. This is a very crucial period for the democrats at this point, in person early voting. A state like North Carolina, more than 90 of the votes will be cast early, will be cast in person. And in other states we also have in person early voting going on, thats when the democrats really shine when it comes to early votes. So if there is anything that makes them slip, that will be problematic for them. 90 of the early votes in North Carolina are cast in person. Not 90 of the votes are cast in do they count these votes early as well . Well, you know, well see up to twothirds if not more of the votes cast early in the state like North Carolina. So it is this is a substantial number of the votes for the electorate. Twothirds of the total turnout will be early voting. Is that true across the country where states have early voting . There is a lot of variation across states. But if you look at key battlegrounds like florida, North Carolina, ohio, iowa, colorado, and nevada, youre going to see half, maybe twothirds or more of the votes cast prior to election day. But to go back to your other question about when they country these, by federal law, the local Election Officials cannot begin counting these votes until election day itself. Is there a new most important state, michael . Well, theyre all important. Pick one. We talk ohio, ohio, ohio. Is there something more important than ohio . Ohio is very important. But if trump cant win florida, that pretty much is the death nell for the campaign. And even then, even if he wins florida, there is still places like virginia and colorado that are safety states for clinton and so although clinton trump does look to be well positioned in the midwest, he needs something more beyond that in order to be able to swing this election. Got it, thank you, michael. Youre welcome. Thousands of chicago cubs fans still celebrating the teams big win. Theyre in the world series for first time in 71 years. Can they, will they win it . Well be joined by one of the coowners to talk about that and more when power lunch returns. I had to leave my happy home in exile oh which way should i go . Home is where i want to be home we love being green. So the nest learning thermostat connects to your phone, and learns what you like, to help you save energy. And thats something everyone can appreciate. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive the chicago cubs advance to the world series for the First Time Since 1945, did it in a sti stirring fashion on saturday evening. Even more powerful than the curse of the babe. Now andrew berlin, partner and investor in the team. Welcome and congratulations on the cubbies getting through. How exciting is it for you as a minority owner to be a part of this . It is very exciting because i get to see a plan that has been executed by fantastic ownership, the rickets family has done a fantastic job along theo epstein, jed hoyer, the brain trust that started this plan years ago and here we are, going to the world series, very exciting. Quite a day for mr. Rickets with his history with ameritrade, et cetera. Obviously, it is going to be an interesting series, two teams that have had more suffering than most, the indians havent won since 48 and gone through some lean years as well. So we wish you we witsh you well on that. Lets turn to business now, your Main Business is the packaging business, you make bottles and cans and things like that. You got a good pulse on what businesses are doing and what consumers are doing. How is business, what does it tell you . Well, business is good right now. We sell to the food pharmaceutical cosmetic wine beverage industry. It is a pretty decent bellwether of the economy. And we have 35,000 different kinds of bottles and jars. So business is good. We see a Strong Economy in the future, although we do see a little bit of slowing down as we approach the election. I think there is caution out there. Your business is global. Are there certain parts of the world where you see any more softness than others . Well, certainly in the European Union we have our antenna up, but we just choired a Company Based in italy with plants in italy and paris, excuse me, france and spain. So we do have confidence in the European Union. I think theyre going through a cycle like we have gone through in the United States. But for every mountain there is a valley and every valley there is an opportunity to come back up. We see the we believe the European Union is going to be fine probably within the next year. Tell me more about that, are you hoping you buy at the bottom . Those economies have so many issues. Italy has all kinds of labor laws that are just horrendous, true across the European Union. I see you nodding your head. But there is depressed value there to overcome the hurdles . We bought a company that is well run, well managed, growing through tough types and good times. And so the adjustable market there, in the packaging industry, is quite sizable. The company we purchased there had Addressable Market to go. So though the economy may soften a bit, the ability to take share from competitors and to build new products and be innovative in europe, the inoue ration nov appreciated. Back to the cubs. Cub fans are good drinkers. Here is the thing, how much have you been able to do an analysis of what it would mean financially, forget about the emotion, 110 years, i get that, but wrigley sold every game anyway. They could you could win with games a year and still sold out because it is an awesome atmosphere and awesome town. Is there an economic benefit to you guys from winning this series . Sure, of course there is. It is not just about tickets or the per cap or the food and drench you se beverage you sell during the game but the brand. The cubs brand is an iconic brand and international brand. But to associate it with, you know, someone who can win at all, especially with the execution of a great plan, great management, great vision, that builds the brand and to the extent that the brand builds, the value of the stock builds. And so we have no, you know, no concerns about that. Rooting for a loveable teddy bear is really one of the best brands in the world. Thats what little cubbies are, but strong and powerful. What do you see as what do you see as the future of Television Sports ratings. The nfl hit an air pocket for reasons we dont completely understand. Baseballs ratings not quite what they are. And when they come up against the nfl, they usually get beaten. What about that . The nfl has a few issues of its own not the same issues in Major League Baseball. What is nice is that our commissioner in Major League Baseball has a plan as do the owners. A plan to improve the demographic, for example, to attract younger viewers, to shorten the length of the game, to build into the game more offense to stimulate the viewers. But these are all plans that mlb is bouncing around and analyzing, but they are very much aware of what it takes to build the demographic. But i have great faith in it. There is 80 something million tickets sold to major and minor League Baseball on an annual basis. A lot of americans love baseballs. They sure do. I get quite a few perks. One of the best perks is watching an amazing front office and team on the field, execute a plan that was the ground work of what was laid a long time ago. From a really good seat. Yes. Do you want to sit with me . Is that whats going on here . Next time im in chicago, ill take you up on that. Congratulations. Deal. Thank you very much. Thanks, andrew, appreciate it. 166 years of world series futility between the indians and cubs. 176 years. A hell of a series. Only way to be better is if my Washington Nationals made it in. Thats that futility would be longer. They last won it in 26, i believe. My great grandfathers best friend is walter johnson. Is that right . My mother lived next to ozzy, third baseman, i believe. More baseball references. A stock one Analyst Thinks could raise 50 . It involves cars. And speaking of cars, Consumer Reports latest reliability rankings are out. How did your car do . If you drive a pacer, it is low. Well give you the rest of the list coming up. For decades, investors have used a 60 40 stock and bond model, with little in alternatives. Yet alternatives can tap opportunities that traditional assets cant. And even though theyre called alternatives, theyre actually designed to help meet very traditional goals. Thats why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. Translation . Goodbye 60 40, hello 50 30 20. Street talk, the Analyst Recommendations on the stocks you need to know about. First off, kalyn, upgraded Dicks Sporting Goods to outperform from neutral citing increased customer traffic and Rising Consumer satisfaction. They found that people actually like going to retail store, higher marks than amazon, variety, selection, price competition, et cetera. Now Dicks Sporting Goods, 67 billion u. S. Market, just 10 of the Sports Authoritys sales, 270 million. Price target, 64. One of the hottest Retail Stocks in the United States over the past 12 months because Sports Authority bankruptcy. I like i dont know about you, i buy commodity items online. Something new, i want to go check it out. Try it on. Stuff it in the jacket and walk out. Kidding. Next up, drechlt ldrexel hamilt see earnings at verizon accelerating as wireless returns to revenue growth. Barry adds the losses from what he calls Strategic Media investments beginning to lessen. Notes the recent disappointing results of the stock downturn, but calls the google pixel a strong android alternative to any samsung issues with the right. Third stock, williams sonoma, city says theyre optistic about the Holiday Season because of the solid Macro Economic backdrop and encouraging signs that consumers will pay more than last year. Retailers, williams sonoma, top holiday pick, investors have low expectations, going to be easier for wsm to score a beat. New initiatives to drive sales. 67, thats a 40 upside from the current price of 47. And finally, fourth stock, smaller cap call of the day, true car, california based car pricing and review website, b. Riley upgrading from a buy to a neutral, raised to 14 from 9. 50. The new Management Team has an opportunity, they think it is large and unexplored. May be a lead generator like yelp or trip adviser. So it is nearly 50 upside to the stock right now, less now because the stock is up 4 . Either way, a big call on true car. Sure is. Tyler . Thank you very much. Agreeing on an 85 billion takeover is hard work. Getting regulators to approve it may be tougher. Will the at t time warner go through . Power lunch will be right back. Experience the thrill of the lexus is f sport. Because the ultimate expression of power is control. Get up to 5,000 customer cash on select 2016 models. See your lexus dealer. This is my retirement. Retiring retired tires. And i never get tired of it. Are you entirely prepared to retire . Plan your never tiring retiring retired tires retirement with e trade. Im in vests and as a vested investor in vests i invest with e trade, where investors can investigate and invest in vests. Or not in vests. Sign up at etrade. Com and get up to six hundred dollars. Good afternoon, welcome back. Im tyler mathisen. Heres whats on the power lunch menu. At t buying time warner, 85 billion. The price. Will lawmakers and regulators in the Nations Capital give it a thumbs up or not . The alist gearing up for a huge week of earnings, apple, amazon, alphabet. Well get you ready for that. And they are the most and least reliable cars on american roads. Well tell you who is which as the second hour of power begins right now. Lets get a check on the markets with two hours left until the closing bell. Deal news and earnings out giving stock a lift. Exxon and chevron lower as oil drops below 50 bucks. Tech, Consumer Staples and discretionary leading the sectors. Like we said, more on the crude oil trades coming straight up. Im michelle carusocabrera. Chicago fed president Charlie Evans breaking headlines in the past half hour saying that the fed may need to keep rates lower for longer to convince investors that the central bank is really serious about reaching its 2 inflation target. A Union Representing thousands of voiceover actors are calling for strike against almost a dozen video game Companies Like Electronic Arts and take 2 interactive over pay dispute. 25 of the companies in the s p 500 have reported earnings, almost 80 have beaten expectations. About 15 have missed. Now to the big deal of the day, at t buying time warner for 85 billion, big question everyone is asking, are regulators really going to approve it . Lots of doubts. Eamon javers looking obstacles facing the merger. The politics are not so clear. Look at where were going to go from here for the rest of the week and next month in terms to path to approval here. Were expecting well see s. E. C. Filings on this merger at some point this week and the question is whether we see s. E. Fcc and department of justice filings. It is not necessarily clear yet whether theyre going to file this with the fcc or not. That depends how many licenses would be transferred. And that is unclear at this point. If youre at t, you may want to avoid scrutiny if you can find a way to do that. On capitol hill, were expecting some hearings in the senate side, the Senate Judiciary subcommittee on antitrust to hold a hearing in november. So you can expect some public testimony about this deal at that point. That would be after the election. And that will clear up some of the politics questions here. We have seen Bernie Sanders and donald trump come out against this massive merger. The question is whether Hillary Clinton will come out for it or against it or stay quiet with the polls leading the way they are, a lot of expectation that a potential Clinton Administration would be the one making the decision on this deal. Got it, thank you so much. Lets bring in chris sager. Will this deal pass or be blocked by regulators . Thank you very much for having me. Very simple. Im in the sure there is a simple answer. Easiest answer maybe it gets approvaled with substantial conditions and maybe challenged. The biggest hurdle is whether the fcc asserts its jurisdiction aggressively. It has done that in the past. It may do that in this case. And the general view is that if the fcc takes jurisdiction over this deal, it is probably not getting through at all. You got three agencies, correct . Help our viewers walk through this, maybe time warner shareholders and have a vested interest in this. Doj, fcc, ftc, like a cornucopia of government agencies. The ftc may take precedent looking at the chair, edith ramirez. Staples, office depot, cisco, they were blocked. Those were the horizontal deals. We could make the argument this has no blockade of anything. Maybe this is too bigley to know what the implications might be. It is a vertical deal as they say. The ceo made a strong claim that it wont face serious hurdles. The two antitrust agencies, the federal trade commission and justice department, you know, they differ somewhat, but they both take essentially the same view toward the substantive law. I think both would take this deal very seriously. One of the most interesting things about this deal from my humble perspective as a watcher of antitrust is that if this thing does go to court, i mean, if this is a drawn out challenge that involves an antitrust challenge by the antitrust agencies as opposed to the fcc, im thinking this is likely the first vertical merger challenge we have seen in a long time. The fact it is vertical doesnt mean it cant be challenged. And while it is true that horizontal deals are much more likely, subject to challenge, this one is serious. Under what conditions could the fcc do that . Is there we keep hearing this phrase thrown around, too much concentration of power in one end take or institution. Is there a legal doctrine somewhere, somehow, that says that the doj or the fcc or the ftc can step in for that reason . Well, yes is the answer. So the only one of the antitrust agencies will review the deal. It is likely to be doj. Doj technically analyzes the deal under a slightly different Legal Standard than the federal Communications Commission would. The ftc applies the antitrust laws which ask will this affect competitiveness in markets. The fcc also asks whether there will be harm to competition, but the fcc can additionally ask whether the merger is in the quote unquote Public Interest and within the Public Interest consideration, they can ask whether there is an undue concentration of democratic, you know, avenues for he did badeba on. You mentioned very quickly, you mentioned if it goes through, it might go through with significant concessions or adjustments. What might the concessions include . Who would have to sell what . Yeah, sure. So not clear what would have to be sold. Thats typically the case in vertical deals. When it is not a head to head horizontal deal, not so clear how you can solve problems by selling off assets, youre not combining competing assets. What has been the case in very big vertical deals is that an agency, whether it is the fcc or antitrust agency will impose a socalled conduct remedy. There will be a bunch of limits on what the merged entity could do in its negotiations with various other players. Cant give the favorable pricing to an inhouse offer of content over someone else. Exactly. And they cant yeah. Thanks a lot. Chris sayiger, cleveland sta university. There are all kinds of things fairness and access. Got to start helping create new content by minorities, got to help start new networks and there was all kinds of things in there. Really in the nittygritty of running the business. If the deal does manage to get past those regulators, it would be the Third Largest media buyout of all time and the 11th largest buyout in the past 20 years. Getting washingtons approval just the first of many hurdles that lie ahead. Inside on what comes next from two veteran media players, Kay Koplovitz and john kline. Welcome to both of you. John, let me begin by asking you, is this a deal from where you sit that is being driven by an attempt to seize opportunity or fear specifically the fear of not doing anything and then missing out on a big opportunity . Yeah, terror pervades all big Media Companies right now. And it is really terror about snapchat, and facebook, and those 20 billion video views per day that are being viewed on those platforms alone. And that is content that no existing entity has control over. Either in the creation of it, or in the distribution of it. And the big boys are just trying to wrap their arms around it and try to control as much of the pipes and what goes through them as possible. Kay, your reaction. Is that whats driving this, fear, terror over a changing media environment . I think there is fear in the Media Business today, but i dont think thats whats driving it. I think that at t wants to be first a market to really market to the new entrants of consumers out there that are looking at mobile and video as the really the plain stakes for media in the future and it is happening more rapidly than a lot of people realize. And i think at t wants to be out there, first grab territory, grab the consumer, and have lots of new product and content to provide to them. What i hear you saying is that it will be a pipeless world eventually. I think i think were going to find wifi everywhere. I think mobile is very important. Look, last thursday i was out in los angeles, i wanted to see the thursday night football game, packers playing, thats my team. I watched it on twitter. This is the world were going into. And i think that it will just proliferate. I think the younger audiences are very comfortable in that world. Media companies have to figure out how to operate in that world and i think at t buying directv and now attempting to buy this company, time warner, one of the biggest content producers in the industry is really trying to be first out to market with the new paradigm. John, what kay is saying is true and awesome you can watch anything from anywhere. Lets envision the this is what i thought about it earlier today, lets call time warner nike. They mack a produke a product. At t is macys. Theyre the they distribute everything. Macys can tell nike without owning nike now, right . Johnny, understand, the metaphor im making here, i dont understand i hear what kay is saying, i dont know why at t would need to own it, because they can distribute it now as they want. When that 5g world comes. If youre nike, you dont want to only be sold in macys, you want to be sold everywhere. Do you have to give it to macmas first. Those are among the issues that have to be worked out here. Thats why i say terror. I dont disagree with anything that kay says in terms of the rational. It is just driven by the unknown. Theyre staring into an environment that is bewildering in the raed pidity with which i has evolved. What about the culture. We talked with Reynolds Stevens. Do you really want to own a tv content company . The people in television are very very different running a Media Company than it is running a michael wolf has a big article where hes just laughing at this notion when he looks back on the history of industrial congloom rants of any kind, trying to buy a movie studio or tv network and he thinks it is going to be quite negative that the culture just isnt going to mesh. I think culture is a big challenge. I think for management, one of the Biggest Challenges in a deal like this, because you have a highly regulated industry, coming out of baby bells and growing up in the telecom industry. Nothing to do with content, nothing to do with managing talent and merging and declaring a talentbased company, actually, and creativity. I think thats a huge challenge, you cant underestimate it at all. I think it is probably one of the preeminent challenges. I also think this deal offers a huge challenge to the other carriers, to verizon, tmobile, sprint, et cetera. A lot of people didnt talk about that. But it is a big challenge on that side to them because if it didnt go through, this is a pretty big monster deal. I think from the time warner point of view, first out in the market, i think jeff buickous put it in context this morning on his interview when he said that he wanted his content to be first out into these new Distribution Systems that are developing today, and, yes, nobody knows exactly what the Business Plan is going to be for all of them, but theyre forging head, they want to be first in the marketplace. Were going to play what Reynolds Stevens said about managing talent now and i want you to respond. Very few people know hold on one second. The primary issues we discussed is this issue that you are articulating. I dont know how to run a movie studio. Youre exactly right. We had fun with it, but i know nothing about running a movie studio. And making sure that the talent is retained and we organize the business, post transaction, so that the business is operated and run largely like it is today, and thats a huge piece of this, so i feel really comfortable with just playing on keeping the talent in place and making sure we have continuity. All fine, john, right . I think the fact that it is a vertical integration and not horizontal will help a lot culturally. As you heard him say, theyre not coming in thinking they know how to do media better. And that was the big problem with the aol time warner merger. Do either of you see what are politely described as cost synergies here . Another way of saying big layoffs . Kay . I dont actually. In this vertical integration, i dont see i think that they really have to maintain top talent and i think it is how the talent is going to be handled is going to be key to how many people they keep on that side. I dont see a lot of cost john, do you or do you see that and how do you think your friends at cnn are feeling this morning . They have been through this dance several times before. Yes, they have. Theyre used to it. The company is bigger, and generates more revenue than ever before. So they ought to be okay about it. Wary but okay. One tricky thing for them is at t is going to be in the news, in controversial ways, a lot more often than time warner was. So it will be interesting the way that gets dealt with. Kay, thank you very much. Great to see you. And john, we appreciate it. It is one of the busiest earnings weeks of all. The alist getting ready to report. Were talking about apple, amazon, alphabet, that stock hitting new highs today. And most reliable car on the road right now, you probably wont be surprised at the top two, but number three is a bit of a shocker. Power lunch returns in a flash. Sing girl, come on. [ singing ] sorry, ariana you gotta go. Seriously . Verizon limits me and i gotta get home. Youre gonna choose navigation over me . Maps get up here. Umm. That way. Girl you better get on tmobile why pay more for data limits . Introducing tmobile one, unlimited data for everyone. Get four lines just 35 a month. Were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. It is one of the most influential reports of all in the auto industry, Consumer Reports reliability rankings, the results out just this afternoon. And phil lebeau has them for us. Who did well, who didnt . What is interesting here, tyler, who did well in terms of who made the top three. Take a look at this list. At the top, youll see leveloxud toyota. No surprise, theyre in the top three. Number three, buick and why is this important . It is the first time in 35 years that Consumer Reports has put a domestic brand among the top three when it comes to auto reliability. They have been improving steadily over the last couple of years, so not a huge surprise that they cracked the top three, but the first time in 35 years. But what is interesting is who did not do as well. Honda, it fell to number ten in the rankings in part because of complaints about the civic. It made a lot of changes with the civic and not all of them are being well received by honda civic owners. And then you have tesla with the model x. The model x was rated as the least reliable midsize luxury suv by Consumer Reports. By the way, tesla overall, came in 25th out of 29 brands. This is the first year they have been included in this list. Who did the worst . Well talk about that in a little bit, but here is Consumer Reports, the director of automotive testing talking about the problems with that model x. The model x out of the gate is very problematic. The sixth least reliable vehicle in our survey this year and a lot of the problems have to do with the complex doors, the falcon wing doors we talked about. Theyre an accident waiting to happen. Here are the bottom three according to Consumer Reports when it comes to reliability. At the very bottom is ram, right behind fiat, right behind chrysler and what we dont show there, ranking behind them also is dodge. Not a good day for fiat, chrysler but,guys, newsworthy in this report, you look at those rankings for both honda and tesla, that will get some attention as well. We get lots of reports like these, some focus on socalled initial quality, this one is reliability. Tell me what is actually being measured here. Well, this is based on survey answers from Consumer Reports subscribers, about 7 million of those both between the print and online. And they fill out a form saying here is what i like, dont like with my vehicle, primarily what problems that theyre seeing with their vehicles and thats why it is considered such a bellwether, because in large part, these answers from the owners make up the bulk of why they say, okay, were going to rank this brand here and this brand here. So this is not initial quality, initial reliability. I bought a car this year and reacting to what went right. This is ownership. You got to keep in mind, some of those initial ones for the first 90 days only. Right. This one, no parameters set there. Certainly the model x is not out very long. You could make an argument, those are initial impressions and we should point out, by the way, the model x is now recommended again by Consumer Reports because of the response in this survey. So it is improved its quality overall, but for the brand, this is the first year they have been ranked. Thank you very much. Appreciate it. Still ahead, the good, the bad and the downright ugly in todays trading. Plus, speaking of ugly, it has been a very difficult year for chipotle investor. That stock down 15 year to date. Earnings, though, set to come out. Where is the stock going from here. Has the company overcome safety concerns . Im only in my 60s. Ive got a nice long life ahead. Big plans. So when i found out medicare doesnt pay all my medical expenses, i looked at my options. Then i got a Medicare Supplement insurance plan. 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So we found a plan that can travel with us. Anywhere in the country. [ male announcer ] join the millions of people who have already enrolled in the only Medicare Supplement insurance plans endorsed by aarp, an Organization Serving the needs of people 50 and over for generations. Remember, all Medicare Supplement insurance plans help cover what medicare doesnt pay. And could save you in outofpocket medical costs. Call now to request your free decision guide. And learn more about the kinds of plans that will be here for you now and down the road. I have a lifetime of experience. So i know how important that is. Welcome back to power lunch. Brazilian stocks hitting their highest level in more than four years, now up nearly 50 in 2016. As investors bet on the economic forums, the stabilization in oil prices helping the story. Investors cheering the Central Banks most recent decision to cut rates, a move that could slowly but surely help brazils growth story. Back to you. Thank you. Welcome back to power lunch. Time for the good, the bad and the ugly. First to the good. Boeing moving higher as it expands its production of aircraft replacement parts. That stock is up 1. 5 . The bad is vf corp. , weaker than expected quarterly revenues due to weakness in some top gene brands. Davita, ugly day, that stock one of the worst performers in the s p 500 at this hour. Lower by more than 5 . Apple, amazon, alphabet, all getting ready to report their latest earnings. What could the tech titans tell investors . Plus, crude under pressure, prices falling below 50. The Oil Market Getting ready to close. All the final trades. Time for the entrepreneurs of the week. It may look like a scene from a reality tv show, but this group of recent College Grads are actually venture for america fellows, sharing a house and incubating businesses that will eventually open in cities like detroit that are in serious need of revitalization. For more, watch your business sunday mornings at 7 30 on msnbc. Hi, everybody. Im sue herera. Here is your cnbc news update at this hour. Scuffles have broken out at a refugee camp in northern france as authorities begin the complex operation to shut down the makeshift site, which now holds 6500 people near calais. Several migrants have been hurt in that crackdown. Chinas calling on the United States to stop interfering in its border dispute with india. It comes after the u. S. Sent its ambassador to that disputed area. China says the u. S. Does nothing but complicate the situation. Dont be surprised if your favorite restaurant is out of guacamole. A shortage of avocados is pushing prices up by double and triple. The shortage could last until the super bowl, when you probably know demand is at its highest. And finally, a teenage memory for you, bobby v. Has died at the age of 73. The 60s pop idol took to the stage at age 15 when he filled in for buddy holly after the plane crash which had killed him. He also gave bob dylan his start. Heed briefly in vees band, his biggest hit, take good care of my baby. Back to you guys. All right, sue, thank you very much. Were about an hour and a half away from the closing bell. Oil, keep in mind, is a pretty interesting story. It is back below 50 bucks a barrel. Jackie deangelis, are we to blame maybe iraq for this . Thats one of the key pieces. Even though there was a conference in vienna, the russia opec energy dialogue, sideline conversations between the secretarygeneral and the russians that seemed constructive, nobody is really sure if the russians are going to get on board either. This deal right now, at least in the markets eyes, appears to be in jeopardy. That sends us it a session low of 49. 62. But we did rebound and close over 50 when we finished the session here. Strong dollar continues to plague this trade. The fact we closed over 50 shows there is still some support, you and i have seen this a hundred times before. Lets see what happens over the course of next few days. Back to you. That will be key. Thank you, jackie. New news related to the potential at t time warner deal, a faw hour few hours ago, on ra potential downgrade. At t ceo Reynolds Stevens knows hell face questions about the companys Credit Rating as a result of the debt that the company will take on to buy time warner. Here is what he said about the issue on squawk box this morning. Investment grade. Well keep our credit 2 1 2 times. You had indications that no one is going to go below triple the data is what the data is, right . The business can handle the debt, the debt service, very handily. In fact, we think in a very reasonable period of time, we get our debt back to what i consider more normal levels. The u. S. Carrier has 119 billion in net debt, double what it was five years go, moodys estimates the number will balloon to 170 billion if the deal with time warner is approved. Joining us now is mark staten who put the company on watch for downgrade. Good to have you here. Why did you do it . At t was prior to this deal, still relatively close to our boundary for the current rating. We moved from a negative to a stable outlook at the end of august. And that was based on the Progress Making and digesting their dtb merger. Now theyre layering on another large transaction, that is going to be heavily financed with debt. And even the equity component will drive further dividend requirements and reduce their ability to delever over time. We think that this deal will be difficult for them to digest. Right now rated baa 1, still considered Investment Grade. Correct. Warned they could go down one notch. Would they still be Investment Grade or get them to junk . Still two notches above the speculative grade boundary. But the issue is really more relative to their size. With 170 billion of debt, they could start to experience some crossover risk at even a what does that mean . I apologize. That means as Companies Start to migrate down, toward the speculative grade border, there is technical pressure that builds on their cost of debt. And some investors are not allowed to hold nonInvestment Grade debt and there could be forced selling and wider spread spreads. Selffulfilling prophecy. Baad, which would be bad. What happens to this company if Interest Rates start to move up in a market way . You have 9 billion a year to refinance, so higher spreads, higher benchmark rates means higher cost of capital and high dividend, you know, pressure on cash flow. In addition, the dividend has been the savior of these stocks, reits, utilities, telcos and outperformed the s p because of the yield. So higher yields may pressure the stock price because of that dynamic. If the deal gets done, funded in part by debt, two things, number one, it will be more than the imf 2011 bailout of greece. Which was 169 billion. Also, this will outstrip, more debt than at ts expected annual revenue of about 145 billion. How common is it where a companys debt load is greater than its annual revenue . It is uncommon. It is unheard of. This is new territory. New territory. So when we analyze it, when you analyze it, when anybody analyzes it. For Investment Grade. Youre coming at it from a no historical model. Yeah, i think to be fair, at ts cash flows, diversity, asset base, reach, breadth, unmatched as well. The company is extremely strong. And is buying a great asset. So we dont really think there is a lot of risk of moving to speculative grade. Were more concerned about Market Access for this amount of debt and the refinancing requirements, if the fixed income markets become choppy. If for some reason there is some volatility in the fixed income markets, it could be problematic for a Balance Sheet this large. Earlier this year we had some volatility in february where credit spreads widened dramatically. And that was short lived. And you have seen much smoother sailing since then, but a prolonged period such as that would be challenging for a company that has this much debt, and so we think theyre going to have to be a little more conservative on their liquidity manage, hold a little more cash, refinance their upcoming maturities as far in advance as they can and focus on delevering. Thank you. Good to have you on, mark. Lets bring in a shareholder of both at t and time warner. Shawn ohara, president of pacer financial. Good to have you with us. Good to be here, tyler. What do you think of the deal and how does it affect your Share Holdings . We own both companies. That is where ill focus my comments to begin with on this, with at t, they have enormous Free Cash Flow, 16 little over 16 billion worth of Free Cash Flow. And they pay about a 5 dividend today. We like the company from that perspective. When you look at the other side of it, to me, what it looks like, from both sides, it is a beneficial merger of two people looking for the same thing, if you will. At t looking for a content business, that they can utilize on their network, and time warner looking for more eyeballs if you will via the at t network business. Talking to somebody a little earlier about this. I got four children. Theyre not kids anymore, because im an old man, but two of them dont have televisions or cable tv service. Delivery mechanism for information and entertainment is changed dramatically in the last several years. And the speed of that change is increasing to even faster and faster levels. I think a company i dont know anybody in their 20s who is living independently of their parents who has cable television. To be honest with you. Not one. Not one. Let me ask you about the dividend and the debt levels were talking about with mark. Do you have any concern that the amount of debt that at t is going to carry might make it more difficult for them to pay the dividend that they are so famous for . Well, i was listening to the previous segment, i think it was a slight misstatement. Their total debt will go to 180 billion. The debt they take on for this particular acquisition is 40 billion, which is kind of funny to throw the numbers around. Those are the real numbers. This is a company with 16 billion plus in Free Cash Flow. So how they use that and how they manage this debt will determine for us whether we continue to own them. Because as you add the debt to the market cap of these two companies and take the amount of Free Cash Flow it generates, that creates Free Cash Flow yield measurement. And we have on a global high dividend, we have run a simple screen, every six months, well screen it down to 100 names. If, in fact, their dividend gets challenged by this or if their Free Cash Flow is a part of their enterprise value, there are other companies that have higher Free Cash Flow yield and higher dividends, then well replace them. When reynolds was on this morning, talked about how all the young people want to watch tv on their phone, i guess. But he gives the impression that the world that is coming is that he is going to supply cable, but it is not cable. Were going to get our ability to watch tv on our tv in our living rm and on our tablet and phone and anywhere we want to from Wireless Companies in the future, thats where technology is going, that 5g will be that powerful. Have you been told that story as an investor . I was just reading that, in preparation for the visit today. And thats the next level is 5g. And so now we break away from the cable, dont have to be tethered to the cable. I flew back from paris, i was on vacation, i apologize if i look a little bleary eyed today. But the way people consume information entertainment is completely different. Think about 30 years ago, you had a television in your house, six or eight channels. The first big revolution was cable going to 300 channels. This next big revolution is delivery mechanisms that are free from the constraints of having a cable attached and at t is one of the Major Players there. They have a huge network in the cellular phone market and in the tablet and device market. And this gives them youre telling me as an investor you only knew this . No, but you always say, i always worry somebody will ask me a question and i wont know the answer. I bone up on the answers. Got it. Sean, thank you very much. We appreciate it. And you look good for just having come back from paris. But who wouldnt . The food is good. The wine is even better. And then there is the people. Thank you for saying that. Good to see you. Yoga pant protest. Does d did that get your attention . Hundreds of people taking to the streets. Stick around for the power lunch protest. eeeeohmumohweh hush my darling. dont fear my darling. the lion sleeps tonight. hush my darling. man snoring dont fear my darling. the lion sleeps tonight. woman snoring take the roar out of snore. Yet another innovation only at a sleep number store. Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley welcome back to power lunch. Call it the athleisure backlash. Hundreds of proud yoga pant wearing protesters taking to the streets of rhode island over the weekend after a local newspaper printed an oped from a gentleman who called for women to stop wearing yoga pants. The man who wrote the letter to the editor calling yoga pants the worst thing to ever happen to women, not since the mini skirt has there been something worn by so many women who should have never had it on in first place. Fighting words, tyler. More than 300 people took part in the, i would hope, peaceful yoga pant rally. It is time now no comment . It is time now for trading nation. Lets get spicy and trade chipotle. Earnings set to cross, waiting to find out if customers are coming back to chipotle after the health care earlier this year. That stock down 35 of the past 12 months. Ari and boris your guests. You think cmg is a good buy, turn around story or stock to be avo avoided . I think a good buy. One of the best ways to make money is to buy companies when they stumble. It appears chipotle has gotten a handle on the Health Problems and now at this point really seems to be seeing a resurresur. There are posts about lines being back at chipotle. The second reason, theyre expanding into europe. I think if they can catch in europe, thats a huge new market for them, that could be very interesting. I think their menu pallet could be very, very attractive to the europeans. So, yes, i think it is an interesting buy at this point given the fact they have been able to solve all the Health Problems going forward. The chart, i dont know, it had a nice run for years, now it is kind of overlaunched, like an awning filled with snow. Is this a shortterm reaction . The chart on cmg. Thats my assessment of it as well. As far as your introduction, this is a bearish trend and investing is too difficult to buy bearish trends. I would be staying away from this one, i dont think the trend has come around enough. The stock has been beaten up and we are indeed seeing some signs of stabilization at this 400 level, very important level, seen a base here. I guess im a little bit more concerned because the stock is still trading below the 200 day moving average. Still in a defying down trend, and hasnt been able to get through that 440 mark. Thats been the key resistance level. How we see it, a trading range environment here, probably see some volatility post earnings. We would rather get a pop to sell it, rather than a drop to buy it. Overall we think there is better opportunities for your fund right here, brian. A bull market. Why buy the trends. Snow filled awning, not a true technical term, i did that on my own. Ari, boris. Thank you for. For more trading nation, go to our website, tradingnation. Cnbc. Com. It is not just chipotle, the ateam also set to unveil their numbers. N were talking about apple, amazon and alphabet. Shares of all three have done well. Alphabet at an all time high. But will the numbers justify this kind of optimism . And now, the latest from tradingnation. Cnbc. Com and a word from our sponsor. The best method for reviewing trades is to keep a trading journal. When you enter a trade, write down the reasons you went into the trade and the conditions underwhich you exit for profit and for loss. And take a screen shot of the chart. When trade is completed, take another screen shot of the chart and look to see if you followed your initial plan. A trifecta of alist tech earnings on deck. Apple reports tomorrow. Alphabet and amazon come out thursday after the bell. If you own any of these or thinking about buying these lets find out what might matter to you. Paul, im going to begin with you. Those three pick one name and tell us what is the most important one or two things for investors to watch . I will pick two out of three. That is 100 inflation, by the way. Good point. But when i take a look at alphabet over time as you have seen with two other stocks that are jumping on the cloud, microsoft and amazon, the dialogue about the company is going to go to what kind of traction they have in their cloud space. And then obviously on the amazon side of the house does Amazon Web Services continue to grow at such a rate . Microsoft announced their cloud businesses and say they are on annualized run rate. Amazon will have to print that number and then some. And lets talk about apple for a second because paul does not like apple. You do. What is the number one thing outside of the valueuation that you think makes apple special . We take a look at all of our Tech Holdings we are focussed on connectivity and content. We think apple is right at the con influence of those trends. I know there will be focus on the Earnings Call tomorrow. We will be looking at sales of the seven and how many samsung phones were shifted to the iphone. The key issue for us is how many of those samsung customers has apple been able to convert over to the Apple Ecosystem . Are they consuming more apple content or using the cloud. Apple has a great franchise. We want to see that frnchise grow into the ecosystem and not just the mac product and iphone product but entire Apple Ecosystem. S p placing at t on watch negative after the time warner deal. Unrelated to this. So john another one on apple. What is the number one number you will be watching for in Earnings Release . We have seen the iphone 7 numbers creep up. I think the high number i saw for phone sales for this is 46 million. We were expecting fairly poor numbers this quarter. We will keep an eye on that number. We are hoping apple can differentiate between the core demand. How much is samsung related and what they are doing to convert the samsung customers over to apple customers. Last one to you on amazon. You and i have known each other for a while. You sold amazon. You made money but sold it too early. Are you going to buy it back . First of all, im in a stock picking competition with ten other Institutional Investors on your squawk segment called platinum portfolio. I didnt want to tease the other show. They do enough. I bought the stock in the 500 plus range. I made 50 in six months and sold it like a bone head at 769. Stock up here at 830. I sold it too early. I would take a look at unless there is something extraordinary and i dont expect it i dont think i would buy amazon no matter how much i like it long term. Tech stocks are volatile. There will be amazonspecific issue that will cause a dip in the stock. If it gets deep enough i will buy it then. Might have heard about the at t time warner thing. Telephone company. What about t mobile . Check please is next. Ive invested a lot in this game and the returns i get out are measured in reps, huddles,bright lights, competition and games played. At Td Ameritrade we believe the best investments are the ones that matter most to you. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive time for our final thoughts kind of a wrapup of what we heard and talked about. Want to focus on t mobile that stock up more than 9 . You can say the stock is up on earnings. I will point this out. They added fewer subscribers last quarter than the last four. I wonder if there is a bit of a big bid in t mobile. Im just saying subscriber ads are good but worse than expected. The idea that if the Wireless Company is going to buy a content Company Maybe content company will buy a Wireless Company. There is discussion about the companies, at t saying today that one of the things they are going to do is sell you your tv content wirelessly at some point in the future. Never mind watching on the phone. Comcast announced back at a conference in september that they will try to offer wireless by buying up minutes. I do a lot of wireless viewing. Im watching via my app. It seems to work. I go back to the point i made on friday that the history of these deals is that they exist for 15 or 20 years and then get undone. History of Big Industrial companies whether they are in telecom or Companies Like General Electric they decide they dont want to own content. Just saying. Sound like michael wolf. Thanks for watching. Closing bell starts right now. Hi everybody welcome to closing bell. Im kelly evans at the new york stock exchange. Im Michael Santoli in for bill griffith. Stocks of at t and time warner moving lower on concernathize 85 billion deal may not be approved by regulators. We have every angle covered. Fighting words from ceo of t mobile this morning. T mobile up 9 today. Another big day Td Ameritrade is