Transcripts For CNBC Power Lunch 20170111

Good afternoon. We have the best reporters in the business tackling this massive news day for you. Bob pisani is live at the new york stock exchange. Eamon javers is standing by on capitol hill. Lets start with john harwood live outside of trump tower. John . The president elect, donald trump, had his first News Conference in months since july, actually. And he addressed a wide range of controversies that have been dogging him over the last several weeks. Lets start with a bit of policy news. You heard about the or you eluded to the farmna npharma ne. On obamacare, he wants a virtually simultaneous replace and repeal process, so that within even the same hour or the same day or couple of days that they would offer an obamacare replacement plan to a company, the repeal process. He said he would announce a new Supreme Court justice, his choice for that position within two weeks of his inauguration. So, that is something to watch. The most interesting things he discussed were, first of all, about his business entanglements, second about this controversy surrounding around russia. In terms of his business, he talked about steps. He will a lawyer present from morgan lewis to insulate himself from information about the business which will be run by his sons. Interestingly he argued for the proposition that if he wanted to, he could continue to make business deals and profit because president s are exempt from conflict of interest. For example, he said that over the weekend, he was offered a 2 billion deal in dubai, which he could have taken. But he said he decide not to because he didnt want to give the appearance that he was taking advantage. Thats clearly something to watch since he believes did he have the ability to make those kinds of deals. Russia has been the story of the last 24 hours, actually the last couple of months because of the questions about the leak shun hack of the dnc, and John Podestas email. Donald trump continued to say that he thought that russia was a potential asset to the United States, and when he was asked to criticize Vladimir Putin, take a listen to how he handled that. We have a horrible relationship with russia. Russia can help us fight isis which is number one tricky. If you look, this administration created isis by leaving at the wrong time. The void was created. Isis was formed. If putin likes donald trump, guess what, folks . Thats called an asset, not a liability. Now, he did say for the first time that weve heard publicly that he thought russia was behind that hack, though he later qualified it and said maybe others may have hacked the dnc and john podesta. He did not indicate he would support tougher sanctions. He was asked about Lindsey Grahams proposal about that. He said he was not aware of the proposal. He also continued to escalate the war that hes been undergoing with intelligence agencies. He tweeted out something this morning about what is this nazi germany . He was asked about that question. He talked about leaks from the Intelligence Community about information involving him. That is going to make for a very interesting relationship in nine days when he becomes president , the commander in chief and has those intelligence agencies reporting to him. Finally ill know that on the salacious details that came out and were published by buzzfeed, sharply critical on buzzfeed and cnn on reporting this information, he said it was fake news. They did not have leverage over him and he was conscious of the potential presence of cameras, recording cameras in hotel rooms, and he wouldnt do anything that would cause him to be embarrassed. Got it. John harwood, thank you very much. We should point out that Dubai Company that he referenced confirmed they made the offer and that donald trump turned it out. The markets moved lower during Donald Trumps News Conference, perhaps in part because pharmas got hit so hard. Lets go to bob pisani. Youre right. Wild press conference and wild moves in the markets for a brief period. Look at the Dow Jones Industrial average, didnt take long after president elect trump started speaking that the dow dropped about 100 points. He said Drug Companies would not be getting away with murder. Pfizer, that moved down need limit merck was having a great day it also moved down. Unh, all the healthcare stocks moved to the down side. He went on to talk about Lockheed Martin saying he would bring the f35 costs way down. Nothing he hasnt said before, but markets are hyper sensitive now. In the middle of the day, industrials, materials, tech rebounded. We saw a drop in tech stocks as well. Banks doing nothing. No leadership this year at all. Why these gyrations on statements hes sort of already made . Look at the state of the market. We are hyper sensitive because the stock market is at historic highs, Consumer Confidence at highs, Investment Sentiment is bullish and volatility is near multiyear lows. This market is in perfect condition. When you get that, its hyper sensitive to the smallest comments. Earnings season is starting. Remember what went on, evercore had a great quote, expectations for growth have increased. Thats under the new fraTrump Administration. Hyper sensitive market right now. 2017 Market Expectations high for the earnings boost. Lets see if that happens. Lets get over to the nasdaq. A lot of biotech stocks trade over there. Theyre taking a beating after mr. Trump said the drug industry is disastrous and getting away with murder. He then went on to say that he wants the government to negotiate drug prices. He used the phrase bid. Theyve never been able do that before. Bertha . Largecap biotechs, pharmaceuticals themselves look like theyre falling off of a clip as donald trump was talking about negotiating prices. Biotechs were on pace for the seventh straight day of gain. They had moved up fast here in the beginning of the year. Trading down on huge volume, about 300 of daily volume. Biomarin is a drag here on the nasdaq. But, even as you see some of these biotech stocks that have done such a boost out of the jpmorgan conference earlier this week, being taken down today, you are seeing a few healthcare stocks bucking the trend. Look at intuitive surgical, a big gainer on the nasdaq after it upped its outlook for its Fourth Quarter revenues. Cerner, a health i. T. Stock, insurers are kind of flat on the day at the moment. Earlier this morning on the issue of obamacare, i did talk to the folks from ahip, the insurance lobby, they said they would like to see an immediate or simultaneous outline of what the replacement will be for obamacare. They say that by being clear we can take away a lot of uncertainty. A lot of people ask why is it that the government isnt allowed to bid or to negotiate on drug prices . Because historically theres been a worry that the u. S. Government is so large, it would be such a big bidder, whatever price they negotiate would be a default price control and hurt research and development within the drug industry. But thats always been hotly debated. Lets talk more about that News Conference today. Bring in sarah fagan, former senior aide to president george w. Bush. Jared bernstein, and former chief economist to Vice President biden, and also jordan banks, also a former cia and state department official. Lady and gentlemen, thank you very much. Thank you. His style. I know we want to talk substance. First of all, some people find it horrifying. Some people will find it refreshing. But it is clearly going to be like no president weve ever seen before in the United States. Yeah. I think thats right. Just think about his First Press Conference in a long time, first conference as president elect. And he comes out of the gate and is talking about drug prices. Theres no overarching arc to what he is about to say. You get halfway through the conference, then we go into what was supposed to be the news of the day, how he is unconflicting himself from his business. So, there was a lot of news made. There was a lot discussed. It is very entertaining. Its unlike anything weve seen and likely not like anything well see again. Mr. Banks, this was supposed to be about his conflicts of interests, its a story weve been interested in here at cnbc because were a business network. Then that 25 paige leaked document from buzzfeed comes out last night. The whole conversation changes today. We were once again focused on his relationship with the intelligence agencies. What do you think about that and the way he spoke about them today . As a former cia analyst, i can say with complete confidence that those leaked memos are as fake as the play money you would buy at a toy store. Lets face it sorry to jump in, isnt it even dangerous to call them a leaked memo, because it sounds something official, rather than something that somebody fabricated out of nothing . Thats right. So lets assume this is real. Lets humor the possibility that its real. What would this actually mean . The first point is that russian counterintelligence is in total disaway. You supposedly have this former British Intelligence official meeting senior officials from kremlin, folks from the russian intelligence services, hes meeting people in hotels, bars, cafes down the street from the kremlin. The russians should know that. The fact they havent caught up with that is a problem. Second point, the sources, if this is real, these sources are all dead at this point or thrown in jail, because at this point the russians would know who they are, again. This kind of information would be in the hands of only a few people. Jared, i have to imagine that you were a little bit happy in hearing about drug pricing, when i heard the president elect talk about additional bidding on pharmaceuticals, it sounded to me a little bit like is he advocating for a pseudo single payer system . Its not just a little bit like, but president obama has had that in his budget for medicare for at least four years running. The idea is, as michelle said, the government is the major purchaser. Im not so worried about their bargaining clout because on the other side of the table you have the just incredibly bargaining clout of the pharmaceutical industry. That tends to be met with far too little by this huge buyer for medicare and medicaid. Half of our healthcare dollars in this country come from public sources. But sticking with healthcare for a second that was a plus. A big minus for me was im just about 100 convinced that no republican, including president elect donald trump, has any idea how to replace the Affordable Care act. When he says he this great replacement idea and is keeping it under wraps, i dont believe it. I dont see it coming. I see repeal. I dont see replace. Well see what the nature of that plan is. Various proposals are floating around. Maybe none quite in total as comprehensive as one might need to replace the totality of obama care. Lets set aside russia for now, sara, lets set aside this other stuff. One of the hearts today was what mr. Trump is going to do with his business. I dont presume for a moment that what he has done is going to satisfy everybody of every political strife. Did he do the best he could here . Do you think that basically that problem is going to dog him or be off the stage . I think the problem will dog him. I think he made very valid points, is its a complex business with a big brand. Its impossible for him to unknow what happens at some of these iconic properties. Removing himself from the business, placing it in his childrens hands or two of his kids hands, donating the profits from Foreign Governments who stay at his properties, i think he took some good steps but it will dog him and its something he will deal with the entirety of his presidency. I dont think the public cares about it. Unless theres a big scandal or pay to play investigation, they dont care. The public knew who they were voting for. They dont care. The public doesnt, democrats in congress do. Thats one of the reasons it will dog him. Because until he divests, many believe hes not far enough away from his businesses. Sara, is he a good communicator . I think hes a good communicator. I think hes a unique communicator. Look, he is effective. Its not a style that i would recommend a principal take, but he goes out, hes very direct. If you think about i was critical about the style but the reality is what did the public cake from this i divested from his business. He didnt divest. He removed the conflict of interest from his business. He created barriers where he will not be involved in the business. He will lower drug prices by doing better bargaining. Fix the va, and he is going to do better contract negotiations with other companies. Bottom line, he got the messages out. Okay. Thats right. Sara, thank you, jared, thank you. George, thank you. Thank you. The u. S. Chamber of commerce releasing its annual state of American Business report. We want to get to that. Plus reaction to the president elects News Conference. With us is the president and ceo of the u. S. Chamber of commerce, thomas donahue. Always good to have you with us. Lets start with your reactions to the president elects News Conference. What did you think . Well, i think that most of what i saw is i actually heard from others, because we did our thing right up to 11 00. Then i did some other press, and so on. But everybody is talking about it. I was pleased just to listen to the exchange on your program. I think a good thing for the president to lay out, the president elect to lay out his efforts to separate his business. Its very hard for people in government and others to look at a successful businessman and say why doesnt he give it all away . Why doesnt he, you know, sell it all . He had a big family, people with great skill, im going to support him while he tries to separate it. Ill give you one thing that will probably keep him out of it, that is when he sits in the oval office, theres not going to be much time for anything else except dealing with problems all over the world, all around the country, and all through the objectives that he has set and is working very hard to pursue because of the people that quite surprised to a lot of people elected him president of the United States. Good luck to him. Yeah. Are you give us your thoughts. The president singled out either industries today, pharmaceuticals on prior occasions, major manufacturers, whether in the auto business or not, technology, how do you feel about the president singling out businesses and using his influence and leverage to effect their commercial decisions . How do you approach that . Ill answer that question directly after a 30second or 20second history lesson. Roosevelt, eisenhower, kennedy, who locked the steel executives in the basement of the white house, Lyndon Johnson all through the presidencies on economic and geopolitical matters, they and their white house colleagues deal directly with the heads of companies to try to get their support for this issue or that. This is a little different because none of those people had the benefit of the technology we have now. And none of those people had a tweet account that covers almost 20 Million People that allows the president to go around the whole system with the press and the media and talk to a lot of people who basically support it. I think you have to look at whats happened. Most of the time there was some accommodation and the people that run the companies have gone ahead gently with their business. I think theyre billing relationships with the president , and the president with them. The two things that the chamber and my colleagues and i are supportive of with this administration, so far they have appointed to the cabinet and other critical jobs a level of people that we may never have had before. Extraordinary talent. The second thing is the president , even though we may disagree on issues, he may disagree with others on issues, when hes better informed on the issues, he doesnt get rid of what hes try doing but moderates his approach. We have great optimism about what we can get done on legal reform, regulatory reform, trade and michelle here, sorry to interrupt. I want to get in this question about when he talks about the u. S. Government being allowed to negotiate on drug prices, you know why historically that hasnt been allowed. If the government does that, theyre such a powerful buyer it could almost be like a price control has been the argument. Yes, its been debated. Are you prepared to defend your pharmaceutical members against something which would hurt their revenues and perhaps hurt research . Are two answer. One is absolutely yes. The second is there has been drug price negotiations, a, between Large Companies and, you know providers. And between medicare and medicaid and the Veterans Administration and others. For example i have personal experience. My wife has been benefiting from some of these drugs. And price was way up on one, and as soon as the fda and the people that do medicare approved it to be covered, the price dropped way down. Were all going to find out this thing is still theres still about the same percentage of healthcare that they always have been, but when you see some of the crazy things, it gives you an opportunity to go out and beat up on the pharmaceutical guys, its not a very good idea if its your more or son thats sick. Tom, two more quick things. Switch off pharmaceuticals. I know you guys put out the state of American Business. I want the chambers take on how strong American Business is right now. Before you answer that, lets talk about infrastructure. Because many people may not know that for 13 years you ran the american truckers association. So you were still very connected with people that want good roads and good bridges. Do you believe i know youre dialed in on this, that we will get a massive Infrastructure Spending bill . I believe we have a phenomenal opportunity to do that. Understand that roads and bridges and transit and all of that is covered in part by state and federal road tax. And by the way, it has not gone up for 24 years, so we should push it up. But the real big issues in infrastructure are issues surrounding energy, power generation, questions about airports, ports. These are the great opportunities. And i believe that these matters can be funded in create ive way as long as were able to get a source of interest that enabilitenables us to pay a source of debt. We can get this done, it will take time and it will take money. Tom, thank you very much. Mr. Donohue from the u. S. Chamber of commerce. Thank you. Well, it is not just trump making headlines today. Former exxonmobil ceo Rex Tillersons confirmation hearing to become secretary of state also happening. Its still going on. Well head live to the hill for the latest on that. And should big pharma be very afraid . Well dig more into what trump said about drug prices that has many stocks falling today. Its an incredibly was zi new day. Were back after this. I n n nor welcome back to power lunch. Im Morgan Brennan with a news alert about Lockheed Martin. The defense contractor responding to president elects trumps comments in his News Conference where he renewed concerns about the f35 Program Costs and its overschedule and budget. Lockheed saying we understand president elect trumps concerns about the f35 program and weve given him our full commitment to drive down costs aggressively. The price has come down 63 from the first contract to this one, and they expect the next contract to show another price decrease, discussing two initiatives known as the blueprint for affordable and the price Sustainment Initiative to bring them down by 5 million by 2022. Back over to you. Thank you, morgan. Coming up a volatile session for the dow swinging between big gains and losses. Trump taking aim at a number of sectors that then moved lower. What should you do be your money now . We discuss after this break. Hello, im sue herera, heres your cnbc news update. On nbcs the today show, Reince Priebus slammed a newly released document alleging that the russians might have compromising evidence on donald trump. Here we are on the today show, one of the greatest shows in the history of america talking about stupidity. Garbage. Its shameful. Many are describing the snowfall in californias see ar sierra mountains as the most theyve ever seen. The area is under blizzard and avalanche warnings. Changes coming to the monopoly board game. Hasbro is letting the public vote for the next generation of tokens to be used in the game. Theres a mix of emojis, footwear, vehicles, animals. 64 tokens are in the running including the current eight. None of them are safe. The winners will be announced on world monopoly day on march 19th. Thats the news update this hour. Back over to you guys at the desk. Thank you very much. Rex tillersons confirmation hearing to become secretary of state is underway on capitol hill. Eamon javers has more on how its going. The tillerson hearing is going into its fourth hour here. A lot of questioning centered on russia, exxonmobils relations with russia. Tillersons relations with russia, and president elect Donald Trumps relations with russia. One of the surprises of the hearings has been marco rubio, his questioning and the tone he took with Rex Tillerson, very, very skeptical. Heres one exchange in which he asked tillerson to talk about Vladimir Putin as a war criminal. Heres what he said. Is Vladimir Putin a war criminal . I would not use that term. Whats publicly in the record about whats happening in aleppo and the russian military, youre not prepared to say Vladimir Putin and his military violated the rules of war and conducted war crimes in aleppo . Those are very, very serious charges to make. And i would want to have much more information before reaching that conclusion. I find it discouraging, your inability to cite that, which i think is globally accepted. Tillerson has been asked about exxons lobbying here in washington, d. C. Hes been asked about what exxon knew and when it knew it in terms of Climate Change going back decades. He declined to answer that question. He was also asked about exxons relations with other countries around the world and what Business Practices it has in those countries. A contentious hearing. Well have to wait and see whether the republican majority holds together in favor of Donald Trumps nominee to be secretary of state. Breaking news now to susan lee. Volkswagen admitted guilt to federal criminal charges, including charges of obstruction justice and is paying a 4. 3 billion fine. The 4. 3 billion in fines covers criminal and civil parts of this federal case which brings the total amount of fines and settlements that volkswagen has paid up to 20 billion. Volkswagen has already stated that the money they have set aside to cover scandalrelated costs will not be enough under this latest agreement. Also whats important to highlight in this case is they are admitting guilt. Something that is rare in these corporate cases. This also means that volkswagen has less of a defense now Going Forward against these lawsuits being brought against it by shareholders who accuse volkswagen of really waiting too long to disclose the financial risk of the emissions cheating and they may be required to cooperate with investigations against individual company employees. Volkswagen is the latest corp pra corporate name to settle federal charges ahead of the inauguration. Back to you. Thank you very much. Still ahead, investing in a trump stock market. Our next guest says wait for fact pitches to hit. Hell explain what that means next. Yf . Er o y or÷aneres yf . Er on lp r n incerscr. Pildfoth th. T stharofst in and theyre absolutely right. They say that its hot. When really, its scorching. And while some may say the desert is desolate. We prefer secluded. What is the desert . Its absolutely what you need right now. Absolutely scottsdale. Welcome back to power lunch. Lets look at gold prices, sitting just under 1,200. We started the session hitting a sixweek high earlier, then we turned negative and flat, now a bit of a bump. Equities are positive. Its ban rocky ride today post that trump tress conference. To susan lee we go again. Want to draw your attention to workday shares, outperforming on the day. The Hr Management Software Company says walmart purchased a subscription a day after walmart announced to cut 1,000 jobs, most in human resources. This is the Biggest Company that workday signed to a contract. Shares are up 7 so far in the session. Susan, thank you very much. It has been a choppy day of trading following president elect trumps News Conference. So what should an investor do now . Joining us is chris ressler. Also with us, peter anderson, cio of fiduciary trust. Ill start with you, chris. When you invest, you did great last year, congrats, congrats to your clients, when you hear trump say this stuff does it change the way that you invest . Do you take it to to heart from an investment perspective . Its hard to determine where it all will go. This week, the management teams ive met with, they are not changing game plans right now. Theyre waiting to see what comes down the pike. So as an investor you take that into account. You know, we think that things will be okay and status quo Going Forward but the marquette market is a bit ahead of itself, and we may see a pullback. One of your favorite stocks, gilead. Are you cheating a bit by going with gilead . Gilead is a name we hold in our multi cap fund. We think its a great platform company, one that can weather a storm, biotechs have been under pressure since, you know, september of last year. But with a great management team, one that can be a consolidator which will drive costs out of the healthcare system. So we think thats a good place to be, a safe place if you have to be in healthcare. And its one of our favorites. Down 24 in the last year. Maybe a little value there if youre right. Pet peter, what do you think of the market here and in light of the Donald Trump Press Conference . To answer your first question, when you listen to a press conference like that, one of our approaches is to take him seriously but not necessarily literally. Theres a big difference with that. He might Say Something surgical, very specific, but in general were not taking that literally, but we are taking his general narrative seriously. So when he comments on healthcare, for instance, i think thats extremely important. When he signals out individual stocks, maybe not so important. It might be an instrument for him to just demonstrate his point. That will remain to be seen as he unfolds in this president ial nomination. Let me ask you this when it comes to the pharmaceutical sector. When he says he thinks there ought to be better bidding, that would perhaps mean they face lower prices that they get paid, do you take him seriously and literally . Do you buy the pharma stocks or dont you. Heres what we do. I was thinking watching that press conference, i was thinking how quickly we react to those statements. And, you know, lately theres been trends where we react so quickly to everything that maybe the positive that will come out of this is that well be coming well be getting a bit less sensitive to these individual statements, these flash statements and take a longer view, which we have desperately been needing to take, but weve been more forced to take shortterm views. And i think that probably is not the way to go. Maybe if he continues to talk in this style, it will get us comfortable to not looking at such shortterm volatility. Because my guess is that within two, three days those stocks will return to normal values. Were looking so closely at instant reactions to his comments. Chris, i was looking at my 401 k for 2016, i just did this week. My Small Cap Stock fund did very, very well. You know, high teens in total return. Wow. My large caps didnt do as well. I was tempted i almost put all of my money in the Small Cap Stocks what would you tell me to do . What should i expect this year . I think the highyield market is still supportive of the small cap asset class. They underperformed for quite a few years before last year. And we think that can continue, especially in a higher growth economic environment where they can get more leverage out of their businesses to the bottom line. Mergers and acquisitions are still quite abundant. We think small caps are great tuckins for Large Companies and can drive costs out of there. I think small caps are a good place to be. But, again, we have gone quite far recently. And i wouldnt be surprised if theres some small correction. Gentlemen, thank you very much. Chris and peter, appreciate it. You heard us talking about it, trump is turning to drug prices, biotech and pharma dropping as a result. Theres the ibb. Right there, the middle of the press conference. As we head to break, a look at treasuries, buying across the board. Twoyear tenyear yield, excuse me, solidly below 2. 4 . 2. 345. Power lunch will be back in two minutes. Ryin ey imconnsadinlesa,nyo e ras,s msitherrs our drug industry is disastrous. Theyre leaving left and right. They supply the drugs but dont make them here. Theyre getting away with murder. Pharma has a lot of lobbyists and a lot of power. Theres very little bidding on drugs. Were the largest buyer of drugs in the world. Yet we dont bid properly. Well start bidding. Well save billions of dollars over a period of time. The president elect putting pharma in his crosshairs. The nasdaq bio tack index reacting sharply, down 3 on pace for its first negative day of the year. Lets bring in michael king from jmp securities. Welcome. Thanks for having me. What do you think are the implications of what the president just said . Look, i think mr. Trump highlights a macro issue that i think the sector has been dealing with for quite some time now. Thats the marketplace is getting crowded. Even before you introduce medicare into the equation, you had entities like express scripts getting hard with Companies Like gilead and some Oncology Companies about contracting. If the medicare were to go to a similar system, i think there would be a onetime adjustment for the sector, but something we could live with. What investors worry about more are price controls. I dont see that happening under this administration. As michelle was pointing out earlier, effectively because of the bulk or the mass of the federal government, if they become the gorilla bidder here, do you effectively have a sort of price control . In other words, they set the poli price. Of course the Pharma Industry is a price taker, but one thing that may be conflated here, what people know as the shkreli effect, where you have drugs that have been generic, marked up a lot, and maybe the price exceeds the value, as opposed to things like oncology drugs or even things like hepatitis c, where you have life saving drugs. One thing we need to be careful about, we need to retain the profit incentive for this industry. We have the best industry in Life Sciences in the world. I dont think the government would want to go too far and kill the goose that lays the golden egg. Let me some golden eggs, will you . What do you like . I tend to follow more like smid cap names, though in the large cap universe we love celgene. We continue to think theyll raise guidance throughout the year the we like anelym, they have a key phase free trial results this year. Some smaller guys in oncology where we think you could get acquisition activity like we saw earlier this week with ariad, we like blueprint, pepizyme. Are you going through and saying this company has an expensive drug. This may be one the president is going to go after. You have gone company by company and said this company is at risk of being called out . I think, you know, theres twoways to look at it. Theres oncology, where these tend to be for small markets and then orphan. I dont follow the orphan sector, thats followed bay colleague of mine. But the one drug that people are concerned about is spinrozza. These are for very small patient populations, these are lifesaving medications for patients but 500,000, 750,000 a year michael will get somebodys attention, even if its a drug that may be used by 1,000 people a year. Right. When you think about it in the overall context of the trillion dollar healthcare budget in this country, you know, pharmaceuticals are only 10 , 12 of that drugs like spinrozza are a smaller fraction of that. So we need to put these into better context rather than react rashly. I think the market was overbo t overbought and mr. Trump spooked people. But well be fine this year. Michael, thank you very much. Michael said all the rational things youre supposed to say, but this is an emotional topic. In response to your question, you dont want to kill the goose that lays the golden egg, we get that but when the president is angry about drug prices, you wonder if hell do that. I feel like the market is overworried about biotechs, underworried about big pharma. Biotechs have one or two trial drugs, try to get them approved. It sounded like the president elect was going more after big pharma. The pfizers, mercks, bristolmyers, astrazenecas, glaxosmithklines that have widely used drugs by millions of people. Would you interpret it the same way . He speaks and you never quite know. He says bidding, you think negotiating. You wouldnt buy a lot of these drugs the biotechs make. People get confused by orphan drugs, they treat a sort of small population, usually very terrible diseases. Afflicted by a small percentage of the population, and they cost a lot because you wouldnt manufacture them unless you could charge a certain amount. I wonder if big pharma is underfocused here. Even on a news day dominated by donald trump and Rex Tillerson, wall street is still working. We will, too well walk you through the big stock calls of the day. Perd. ,elniwal tandde perd. Forwn. Thth veyo ce yvethvernment in, still have time for street talk, your daily dive in the wall street calls. A threestock version today. First is u. S. Bancorp, ubs out with a big call on usb. A neutral rating on most ranks, but loves u. S. Bancorp, its their top pick in the space. They start with a buy rating. They say u. S. Bancorp is a rare bank that can generate value because of its high business mix and its solid track report of expense, risk and capital discipline. They have a 60 target. Second stock, exxon. Wells fargo has downgraded the oil and gas company to market perform from outperform. Previously they had expected exxon to pursue an acquisition during the Oil Price Downturn as a way to deliver growth and returns. Lots of talk about that one. Oil prices were crashing, thats when the big players step in and buy good assets on the cheap. They didnt see that happen. Wells fargo says that window is closed now, so theyre stepping back to neutral. Thats it. I misinformed viewers, its two stocks, not three. I was erroneous. See you back in two. Hello. Welcome to the second hour of power lunch, two hours until the closing bell. Heres what were watching this hour. President elect trumps first News Conference since winning the election starting with a bang. He didnt pull any punches, but did anybody expect him to . He took aim at a number of ae sectors, biotech and pharma one of them saying they are getting away with murder. Volatile session for stocks. The dow la been swinging between losses and triple digit gains. Right now up about 48 points. As tyler said, donald trump taking down shares of some big biotech and pharma stocks today. Check out trading now. The nasdaq biotech index down nearly 4 . Pfizer the biggest drag on the dow. J j also lower. The drop in biotech taking down the nasdaq. It was higher before Donald Trumps comments. The dow also took a drop but is moving higher again, creeping, trying, clawing to get close to 20,000. United Airlines Shares flying higher, raising their revenue guidance hanks to stronger bookings. Sue herera with a news alert. Pharma at this point, the pharmaceutical lobby is responding to the comments earlier this morning from the president elect. In response to mr. Trumps criticisms, the lobby says they are committed to working with the president elect and congress to boost u. S. Competitiveness, protect jobs, thats in a statement they just released. In addition to that, they also say that the pharmaceutical lobby says it will work with trump to improve the marketplace and make it more responsive to the needs of patients. The lobby also says in a competitive u. S. Marketplace, large sophisticated purchasers aggressively negotiate lower prices. So theyre firing back against the criticisms of the president elect earlier this morning. Sue, thank you very much. Just nine days until president elect trump becomes President Trump. Trade, taxes, tough talk, debate about the impact of a trump economy. Lets bring in steve liesman. The economist david smick is also with us, author of the world is curved and the great equalizer. Welcome to both of you. Steve, you go first. I have to make a major complaint about my brethren in the media, the president elect has plans for a major border adjustment tax and potentially import tariffs, they couldnt find a way to ask that question . We need major clarity. You are with me on this . He was asked on corporation taxes, but mostly russia, russia, russirussia. Another question on trade, but they never got around to the big issues that matter. Border fence. But not the border adjustment tax. We could use clarity on this. I want to make one point, mr. Trump continues to make an error in some of the data he brings up. 96 million americans he said. Do we have the sound from donald trump . Maybe this is a small point. 80 million here, 30 million. Listen to what the president elect said. Youd have millions more workers right now if the United States that are 96 million really wanting a job, and they cant get. You know that story. The real number. Thats the real number. Sorry, mr. President elect, its not the real number, its maybe 5 million who want a real job who are not part of the labor force. Maybe as high as 14 million. I think we ought to get that number right. What is he counting in the 96 million that ought not to be counted . People in school, people who are retired, people who are home because theyre housekeepers . Disabled people. People who dont work because theyre ill. This is not the u6 . My number is the u6. Thats the 14. 7. Got it. Its almost down to where it was before the recession. We have to get that number right to figure out how bad the problem is in the job market and what policies are needed. Maybe mr. Smick has some ideas for the policies. I listened to the press conference, and i thought a lot of talk about cajoling this corporation, that corporation to come back into the u. S. I have a feeling that when this is all over, that trump will be furious because a lot of those companies that come back and set up plants will use a lot of robots. What bothered me is that he didnt talk about startups. I mean, hes in office because the average working family said we are suffering from a lack of social mobility. In other words, used to be the bottom 25 of the economy had a 25 chance of rising to the top. Now its a 5 chance. One reason is a lack of business startups. People are holding back. Our whole risk taking culture is not what it once was. David, can i jump in to get it going. I love what youre saying, i completely agree. We often hear the media say things like Small Business is the job creator. Thats technically not true. Its new business that is the job creator. New businesses by default tend to be small. They start small and grow into starbucks. How do we reignite the animal spirits, your book talks about main street capitalism. How do we get mom and pop reengaged to take the risk, take a loan, borrow money, start a store, get rich, send it to me. Its a paradigm shift. But also one other fact, its not just Small Businesses that created jobs, most of the jobs are created after the Small Business expands and goes public. And it is very, very difficult to go public right now under the constraints. Its very expensive. And trump ought to talk about reforms to sarbanesoxley and he ought to be talking about i would put it this way. He should ask himself why is it if youre a proiivate equity gu and for years you paid a 15 tax, why is it the little dry cleaning guy is paying a tax twice as much . He at least gets the Broad Strokes right in terms of less regulation, making it easier for business. Those are things that he hit on over and over again. I do. Certainly compared to the other candidate. I do. But if you look at the period since 2008, i dont think the Corporate America has had a difficult time. Theres too much regulation clearly, but Corporate America but, you know david, corporate side has been buying back their stock. Its the little guys that have been starved. Corporate profitability has been stuttering. I want to congratulate you. Your book has gotten praise from republicans and democrats. You speak to solutions that are not necessarily of a partisan nature. Whats happened in my opinion, and i think in yours as well, the lobbyists and the lobbies have come through to seize parts of both parties. And ultimately thats what is creating the sclerosis in the economy right now, is that you have rules in place that are designed to keep out competition. By the way, this is not even the worst part at the federal level, its at the say the level and the low level where people get together to keep Small Business. If you wanted to reignite the animal spirits, you have to get rid of some of the laws that were created by existing companies to keep out competition. Exactly. We were talking about the border tax or border adjustment tax. Do you think thats part of a solution . What would it help . I think what will happen with the border tax, the dollar will soar. And i think Energy Prices will go down. We saw Rex Tillerson today testifying. I keep wondering, you know, no one really knows what the trump Foreign Policy is. I wonder if at the end of the day, the policy, particularly with regard to iran and russia, is to drive down the price of oil and natural gas, which will hurt the iranian and russian economies and give trump leverage. And i think the border tax would be part of that. Hurt exxon, too. It certainly would. It would also crush coal. Donald trump has promised the coal industry the main reason the coal industry died is because regulation is there, but low Natural Gas Prices are the main reason coal died, thats the primary competitor to firing a power plant. David, give me one idea to solve the problem. Well, i think trump ought to move right now hes got the hes using reconciliation on obamacare. I think that was crazy. The first round should have been what he could get through quickly, which is his tax proposals. The whole idea and i know theyre going to use dynamic scoring, but the idea of coming out with expensing could be very, very powerful. But theyre not doing that. Theyll wait and and it will probably be august before they do anything. That will add a lot of uncertainty to the market. Thats been a similar criticism that we have heard a lot. Maybe they should have done tax refo reform before they did obamacare. Thex pen expensing is a big deal. If you can do that the first year, you can reduce the taxes. The people were talking about are both telling us they get the border adjustment thing because they get revenue. We have to go to some refiners, pgf energy, they could be crushed under a border tax because they import a lot of their fuel. So were talking about helping oil and gas, theyre not all the same. Lots of time to talk about all this stuff. We all have animal spirits. Animals. Trump also detailing his plans to separate his business ties to a point. Robert frank always with animal spirits joining us now. Robert, trump making it clear with his comments and through one of his lawyers who went up on stage that he does not feel he has to break ties, but he will turn over the business to his sons, donald junior and eric. Yeah. We forget the purpose of this press conference before all the russia headlines was to divest trump from his companies so you wouldnt have all those headlines about potential conflicts of interest. But he started that portion of the press conference on a defiant note saying he turned down a 2 billion deal with a dubai investor and friend, and that legally he didnt have to do anything. Take a look and listen to what he said. So i could actually run my business. I could actually run my business and run government at the same time. I dont like the way that looks, but i would be able to do that if i wanted to. Heres what he announced. Basically he will step down as the ceo and chairman of the trump organization. His two sons, eric and don jr. Will run the company. His ownership and assets of the company will be put into a trust. We dont know whether thats an Irrevocable Trust or what kind of trust that will be. We also dont know who the beneficiaries will be. Those two questions are central to the creation of this trust. Its not a blind trust, they made that clear. They also will appointed an ethics adviser to the company, that person will have to oversee and sign off on major decisions. They announced they are not going to do any new deals overseas, but they will expand and do new deals in the United States. Also with regard to Foreign Governments that may be sort of funding the company with regard to the clause in the constitution that prevents Foreign Governments from providing a benefit to the president or leeelected officia he said any Foreign Government that pays for rooms at the trump hotel in washington, d. C. , all that money will be donated as a clarity to the treasury. On a scale of 1 to 10, 1 doing nothing, 10 doing everything, this goes fairly far to answer a lot of the critics. Whether it goes far enough weve been talking to some president ial ethics attorneys who say he could have gone further. But i think separating himself, putting it into a trust, putting his kids in charge, having this ethics oversight, and also ending all new projects overseas, i think that goes a long way. Back over to you. Yeah. Well see if that quells any criticism. Thank you very much. So, remember, dow 20,000, will we see it . Over here its the nasdaq. Its been on a tear so far this year. Today, however, on track for the first losing session. Is that fourletter rally over . Can earnings trump trump when it comes to the market . Earnings season starts friday. All that and more on power lunch. By aau sliok back to stocks and your money. Amid the drag of the headlines, you probably want your investments and Retirement Plan to move higher, have a bit of extra money in your pocket. Lets focus on that. Specifically today the nasdaq. Joining us now is todd gordon. This is not the price is light alpine climber game and you hope he doesnt go over, but a nice looking chart of the nasdaq composite, nominal record highs, real record highs would be 7200 in inflation adjusted dollars, thats for a different segment. How good does the nasdaq look Going Forward . It looks good Going Forward. Were looking at the low from 2009. I will throw some numbers at you. Theres been two separate advances that weve seen so far. In classic dow theory, which charles dow is the grandfather of technical analysis, he would show you theres usually three primary advance phases. Number one, this guy lasted about 130 . We sat back here in 2012, we have gone on another advance. Funny how small this looks now, when at time, it was a disaster. Turned out to be a great buying opportunity. Absolutely. This guy was about 129 . Believe it or not, we just did another 128 rally here. We sat back again, felt miserable at the time. We are right now in our third phase. Why are you so confident there will be a third phase . What the heck is that . Thats the universal sign for bad news. That means you need to find a new job. It means im right handed and doing it with my left hand. Why you are so sure it will go up . In the psychology of a rally theres three phases. The percent change that weve seen over the last two advances, we should see at least half so a 60 rally from this low points us you said the number is 7,000. Were halfway there. Can we look at a stock thats important to the dow, computer and phonemaker, apple. How does apple look . Its a simple chart. Were coming back, seeing a break through the 120 mark. I have the trade on. Technically trying to get up to 125. Whats interesting is apple not only this is, by the way, a ninemonth chart . This goes back to may. So weve seen a nice rotation back into tech, financials have been lagging, energy lagging. It looks like 2017 might be kind of a move back into tech. This chart is confusing. But it is dividing apple by the nasdaq. Its a quick way to gauge relative strength. Weve seen tech come back into favor. This little line here is showing that apple is actually starting to outperform the nasdaq. As we know, the composite is that a good thing . Its a great thing. Its not just tech and the composite. We are seeing a move back into apple. Bottom line, the path of least resistance, that way. No whammies. No whammies. Press your luck with todd gordon. Appreciate that. Very good stuff. Looking at nasdaq and the nasdaq. Michelle . Got it. Earnings season is upon us. So what can investors expect . Joining us is laurence golleb from golleb capital. They have the golleb capital altman indeindex. What is that index predicting for earnings season . Tell us, what is it predicting . Revenues look good. But profits are coming in at a disappointing level for q4 based on the actual earnings for october and november from about 200 companies, profits are down about 2. 5 . So were seeing continuing margin compression, seeing this in multiple sectors, the consumer sector, restaurants, healthcare, even in i. T. And technology, revenues have not been growing as much as expected, so the Forward Spending is Holding Earnings down a bit. Profits are declining or they are just lower by a little more than 2 compared to one year ago . Its a decline of almost 2. 5 from same quarter last year. Thats pretty material. Is the earnings recession not over that we talked so much about . We talked about finally a trough, that we were going to actually get some improvement which would explain why weve seen in part why the markets have been acting so positively. In the industrial sector, absolute i will have profit growth. The industrial sector is doing very, very well. Our Portfolio Companies are not in the energy business. So, to the extent theres recovery in energy, thats an extra, an over and above. In the restaurant sector, we have declining samestore sales in many companies. The competition from overbuilding and from lower costs, food at home, Higher Quality and variation in food you can bring home, thats really putting pressure on the restaurant businesses. So, even though theres growth in revenue in the consumer sector, were seeing outright declines in profitability in the median company. How do i use this information to invest . What should i be doing . Well, in the restaurant sector, weve seen about 12 different Restaurant Companies go bankrupt, chapter 11 over the past year. I would be concerned about system of the projections about samestore sales, revenue going up. I think theyre going to be more negative surprises than positive surprises on that side. In healthcare, you know, the healthcare stocks have underperformed the s p since the election by 7 . A lot of that is about the Affordable Care act. Were seeing outright margin compression there. I think on a selective basis thats something we should take into account in your trading. Negative on restaurants and healthcare. Thank you very much. Thanks for having me. Oil fields, groceries, industrial supplies, the good, the bad, the pug ugly is next. And trump taking down biotech following his comments on drug prices. The ibb index down more than 3 on this day. And could at t and its merger with time warner be in the cross hairs . Should you be concerned if you own this one, at t . Power lunch will be right back. Il welcome back to power lunch. Time for the good, the bad, the ugly. First the good, msc industrial direct sells Industrial Tools and supplies, earnings betting street estimates. Stock higher than 7 . The bad, parsley energy, spending 600 billion to buy land in the permian basin. Selling shares to do that. Lower by 1 . And its an ugly day for sup supervalu. They posted a net loss, earnings were short of wall streets estimates. That stock off by more than 7 . President elect President Trump promising to get rid of regulations that many feel are holding back Small Businesses, but his tax policies could harm companies that produce and source abroad. Well talk to two independent Business Owners with different views of the incoming president. And we will get the closing trades for oil on a big up day. Power lunch returns after this. Hi, everyone, im sue herera. Rescue workers from syrias Civil Defense pulling a body from the rubble of a destroyed building after Government Air strikes struck a rebelheld province. Those air strikes killed three rebels. Hundreds of Israeli Arabs took to the streets to protest the demolition by israeli authorities of 1 1 homes in that city without permits. Honda recalling 772,000 honda and acura vehicles in the u. S. For defective front Passenger Air bag inflaters made by takata. Overall more than 100 million vehicles involving 17 automakers have been recalled worldwide. And this ones for you, ty. Dozens of Alexander Hamiltons letters will go on the auction at sothebys on january 18th. Their estimated worth tops 2 million, but the high interest in the hamilton musical is likely to drive prices higher. Thats the news update this hour. Back to you guys. Michelle, i think ty should bid. I was just going to ask, you love hamilton so much. The checkbook will be open. We will be bidding. Dow making another run to 20,000 today. Today those gains evaporated as trump began speaking. All trump had to do was mention drug prices, complain about them. Say the Drug Companies were getting away with murder, you can see the ibb took a sharp turn lower. Lets talk about the oil market. Its closed for the day. Lets get to jackie deangelis. Reporter crude oil coming off the session high which was 52. 78, Still Closing with a 2. 6 gain. We had a bearish inventory report, so a lot of trade wrrs surprised by the action we saw higher. I can give you two reasons for it, inside that report, you had a bullish report on cushion, and plats reporting opec numbers for december showing a drop of 300,000 barrels. So people having confidence that plan fors so people having confidence that plan for for that deal, enactme of it and follow through. And some optimism that remained in equities today, pushing oil a bit higher. Overall, a near 3 gain. Pretty strong in the energy patch. Jackie, thank you very much. Donald trump, you might have heard that name a few times today, pulling no punches in his first News Conference since winning the election. Trade, taxes, repealing obamacare, those are some issues that the new administration will takal nine days from now, but really every question seemed to be about russia. How are businesses preparing for a trump economy . We are joined by dan levin, and phillip coused, ceo of bamco. Both men members of the young president s organization. Dan, lets get down with you. Do you change anything about your business plan, your business planning, or your future investments because of what you heard from the president elect so far . Thanks for having me on the show. Really right now im optimistic. Have i made changes to date . No. President elect trump is not the first president to promise something before he took office. If he can follow through on what hes talking about, and theres any uptick on making it comfortable and successful environment for manufacturers in this country, we would not only be expanding payroll but also operation. So you will be a Small Business getting bigger. Is it just because of trump or other economic and confidence factors causing you to do it . Its a variety of factors. It depends on when the president elect says he wants to grow manufacturing in this country. If its a combination of, you know, having taxes that benefit those employers like myself who are supporting manufacturing now today, or going we have competitors in our business that slap a made in the usa label on the back of their trucks, because they are a couple people in a plant, but most of their product is made in mexico and china. If the Playing Field is even and we know cushisupport jobs here,d will increase and it will be a good place to have good workers making good product in the usa. Phillip, how has your optimism or nonoptimism changed since the election . What dan is saying is false. Millions of jobs over the last 20 years have gone abroad and continue to go abroad. Unfortunately if donald trump goes through with his tariff, as he proposed, it would end up being one of the greatest tax increases on the lower and middle class that weve soon in decades. And it wouldnt bring jobs back. You look at brazil who has high duties across the board. They slapped a 100 duty on the iphone and samsung, it didnt have manufacturing spring up in the cell phone industry, instead the average person in brazil buys a phone for a couple grand so then everyone has to spend more which hits the lower and middle class the most. I want jobs here as well, but its not a reality the longer we live this lie is the longer we go without addressing the true problem, and that is reeducating our work force in a world where globalization is a big factor. I didnt expect this to be a fighting segment, but dan, go ahead. I feel thats a gross generalization. I dont think theres a one size fits all approach to any industry, especially manufacturing. You look at Something Like that, youre saying we cant manufacture in the United States, everything will be expensive, you look at a good like crayola crayons, they have found a way to manufacture them and they will in the future. With robots, thats it. Of course. If you look at manufacturing thats come back, they spend money on the technology which replaces the jobs. We use technology as well, but the technology does not replace the work force t made us do things better, faster and produce more. If you want to bring in cheap goods, how good are you going to make that good so they can afford it . Its one of those things if you dont address the root problem, well continue to have the same problems weve had for the last two decades. Americans will continue to believe that hopefully one day the manufacturing will return, and unfortunately if we put tariffs on goods from china and mexico, you know where that production will go . Bangladesh, vietnam, thailand. The longer we dont address this lie, the longer we dont address the root problem. If education is the issue, do you support more School Choice as has been suggested by who has been put in charge of the department of education . I think its a bit more in depth and more mob neney needs e spent on reeducation than proposed. I think thats the area who should be doing that spending . The federal government, state level or companies training people . I think its something that unless the federal government and State Government has some sort of active role, it will be tough for the companies to bear the brunt of that type of training. I would think tax incentives regarding training for companies would be one policy thats important and getting the companies involved. But also the federal government needs to step in. The same way as they build a road and create an army, they also have to do the same thing when it comes to reeducation of the work force. Are many, many, many federal Government Programs designed for retraining, and many are failures. Phillip is right, if you have a Skills Mismatch in the country, you cant hire people for jobs that are available. Absolutely if we want to grow manufacturing in this country, its not something that well be able to do tomorrow. But you cant do it until you start. I think its a matter of saying what is manufacturing looking like in this country . Were not talking about how to retain people who are telephone operators. That job is long gone and not coming back. But those people still need jobs. In manufacturing theres a place for technology but also something still to be done by hand. So what are those jobs that can and should be done in the United States that have just been sent overseas for nothing more than profits. Not only have we outsourced jobs but also innovation. The people figuring out how to make the box stronger and the widget faster and better are doing it every single day. We have to go, i liked your last analyses. My mother was a telephone operator for 20, 30 years, that obviously ended. She went back to school and now does taxes for a living. She retrained herself. Go mom. Beautiful story. Dan, phillip, thank you very much. Thank you. Give me klondike 555. A big drop for stocks when donald trump started speaking today. Is the socalled election rally over . Trading nation team will tackle that next. Gu, s . R r ny oyt ca tpoy frhert st. Time for trading nation. Today lets talk macro strategy. Jonathan krinsky and dennis davet. Dennis, what do you see after the inauguration . Is it a buy the election sell the inauguration kind of market . Well, it all depends if we talk macro or global. After the election, if then President Trump comes out and holds true to what hes saying, what i heard today is get long russia, get long mexico, finance it by selling china. It seems like when he talks about mexico and russia, he talks about a dialogue. I dont see that relationship with china. I think youll continue to see the dollar increasing in value, so increasing bullish dollar. That will be forced by the fed who is behind the curve on raising rates if all this happens and we get enflashary te inflationary tendencies. Is the u. S. Market a buy or a sell . Would buy calls. I would buy calls right now. Okay. I think volatility is inexpensive, and its an efficient way to get long the u. S. Market by buying calls. Jonathan, i know youre bullish of the entire market. Do you see dow 20,000 on the horizon in the nearterm . Please say yes. Just not because im bullish, just because its been a month and we can stop talking about it. Well say yes on that. If 2016 taught us anything, its predicting market moves based on future well known events is difficult. We know about the selloffs post brexit and other things have not proven to be correct. Thats why we prefer to stick with whats happening. Before that, lets go back to what happened at the end of last year. The verticality from november into early december was almost unprecedented. About a 12 move in the dow. Whats followed since middecember is equally as impressive. The trading range since middecember had been about 1. 5 for the dow. Thats abobrought the daily volatile bands down to the narrowest its been in history, only one other time was it that narrow, 1964. That doesnt predict the direction of the next move but that the market will likely come out of this trading range. So well stick with a trend up for a while now, and we think that pushes through dow 20,000. All right. Dennis said buy some calls if youre looking for an option strategy. Jonathan, dennis, appreciate your views. Thank you very much. Thank you. So we know donald trump attacked the pharma sector today. Were hearing from various lobbying groups, ceo, Brent Saunders speaking with reuters saying allergan is aligned with the priorities of the Incoming Trump administration, we want to create more jobs in the United States to fuel the u. S. Economy. So, allergan famous for most people know it because of botox, but a number of drugs. A company that inverted. Thats probably one of the reasons that allergan is coming out because donald trump said the pharmaceutical and Biotech Companies were leaving the u. S. In droves. They also invert. Allergans technical headquarters is in dublin, ireland. Allergan is realistically based in new jersey. All the ceos and top executives are in new jersey. So its a company with a tax base in ireland, but thats the reason allergan came out. Pfizer was supposed to buy allergan so it could invert will you the purchase of allergans headquarters, that deal was scuttled. Under pressure. One of the major objectives of Corporate Tax reform, it totally gets rid of the incentives to do that. It makes no difference where your company is, its where do you sell your stuff. Where do you source it and make it . Thats my question. Yes, but also where do you sell it . Is it domestic revenues where is botox made . If botox is made outside the United States my backyard. You cook it yourself, my friend. I cook it myself. I dont get this face i didnt get this forehead for nothing. So smooth. We can see things like the price of botox go up. What would the news industry do . Next at t planning a controversial takeover of time warner. Will the Trump Administration oppose the deal . Some very Harsh Criticism by the president elect today directed at cnn, owned by time warner. Plus a fascinating press conference, if you have not heard from mr. Trump today. If you only heard the headlines, youre missing out. Well play mr. Trumps greatest morning hits coming up on power lunch. Now the latest from trading nation. Cnbc. Com and a word from our sponsor. Trading physical Precious Metals can be a risky proposition. The most important step is knowing how the markets work and understanding the mechanics sufficiently so as to not to be surprised. If you dabble in Precious Metals, keep it small as you work towards understanding this group better. S. The Telecom Giant at t falling 1 today after a down grade by Deutsche Bank analysts, the third downward revision by the firm of estimates since october. Lets bring in Deutsche Banks director of equity research, matt nicknam. Explain why you did what you did to at t today. Think about, as you mentioned, three negative revisions in the last couple months. Juxtapose that with the stock having rallied 15 off the lows postelection and you have had a little bit of a a little bit of a weird move where you have got the stock up 15, estimates moving lower. We are actually now 1 below the street both in 17 and 18. We roll this up and look at a much tougher backdrop facing at t. Both in wireless and video. Youve taken it from buy to hold. In the face of that, how do you explain the idea that the stock has gone up . Yeah. Well, i mean, i think a lot of the things we try to outline in terms of drivers of of the stock of late have been really what i would call nonfundamental or noncore to the business. Post election there is optimism around Corporate Tax reform, around a potentially less Regulatory Oversight from the republican fec. The rising tide is lifting the boat, perhaps, more than it should. Absolutely. So when they wanted to do a big merger here in the United States and it was scuttled by the doj they decided to do a big investment in mexico. The peso is geetitting creamed after day. Did the cfo do anything to impact that . No, i dont think thats what they expected. I will say one good thing at t has going for it is they are netprofit negative. They are still in a net loss position. Despite the exposure of the peso and the headwinds. Its good when youre net ebbitda negative. You have at t only about 10 shares. This is more of a longer term play. At t really looking, i think, at the u. S. Core distribution business that is slowing and looking elsewhere for other avenues of growth. Lets take a little bit about the deal to dbuy time warner. The president elect no fan of cnn. He said earlier i believe it would make the company too big. I believe i am quoting him correctly. Do you think this deal is a positive for at t, do you think it will go through and are you worried at all about the level of debt that would ensue with at t or its level of debt today which is already quite high . Definitely. If you look at the core challenges at t is facing in its distribution business. Wireless, fairly mature market in the u. S. Net share loser. 25 million video customers. A lot of threats from over the top video. The deal makes strategic sense. If you think about at t moving more into content it is more of a hedge. The tougher it gets on the core distribution side the more valid the strategic nature of the time warner deal is. In terms of probabilitywise, we are assuming a 5050 probability in our valuation framework. In terms of leverage as you mentioned, on a gross net perspective. Fairly high sum of debt the company is taking on. The company is committed to retaining an Investment Grade rating. If you think about the leverage. Theyre about 2. 5 turns, higher than in the past. The Pro Forma Company will spin off 2. 5 billion in annual cash flow. Not a big concern regarding leverage. President elect trump insists he will build a wall, not a fence, between the u. S. And mexico. That and all the other stuff you might have missed from the president elects big press Conference Since his election. Check please is next. Is of it is time for check, please. Donald Trump Holding his first News Conference since becoming president elect. You knew it was going to be a jawdropper. I will be the greatest jobs producer that god ever created. Its not a fence. Its a wall. Im not going to give you a question. Can you state you are fake news. Lindsey graham. I have been competing with him for a long time. He is going to crack that 1 barrier one day. Im not really saying tax returns because as you know theyre under audit. Every president since the 70s. Gee, ive never heard that before. You know, the only one that cares about my tax returns are the reporters. You dont think the American Public is concerned about it . I dont think so. I won. I dont think they care at all. I think you care. You learn very little from a tax return. You should go down to federal elections. Four years of that. Well, its going to be interesting. To the extent he has press conferences. You do not usually hear applause at press conferences. You heard it today. I assume because he had people from the staff in the room with him. Yes. Its not appropriate for reporters to usually, yeah. Show any kind of then he would argue that they did. You hate to toot your own horn as a network. People criticize the rest of the media for talking about russia all the time. I think on cnbc weve done a great job of staying focused on jobs. Thats what its going to be all about. Taxes. His entire cabinet is business people. Its about creating jobs. Its about nearly all have been on cnbc multiple times. You cant say that about any other network. I think this will be an interesting time Going Forward. Do i like to see him go after people we know in the media . No. But i think the job story needs to be hit harder. You are the man to do it. Overshadowed here is mr. Tillersons testimony. From what i hear he handled questions solidly. A very sophisticated individual. One thing thats happened in the last few minutes. Mr. Tillerson was asked about cuba and he says he wants to revisit whether they should go back on the states terrorism list and he doesnt want the embargo to end, essentially. Thanks for watching power lunch. The closing bell starts two seconds ago. There will be a major border tax on these companies that are leaving and getting away with murder. Our drug industry has been disastrous. Theyre leaving left and right. They supply our drugs but dont make them here. Theyre getting away with murder. Obamacare is a complete and total disaster. It will be repeal and replace. It will be essentially simultaneously. I have no dealings