Transcripts For CNBC Power Lunch 20170112

Stocks in the red, the dow about 160 points as you see there from that 20,000 mark. Elusive, it has been. Banks hit hard. On pace now for the worst day since last summer, july. Energy rallying. Oil up 1. 5 . Nat gas on fire, up 5. 5 on a day where its 60 degrees, michelle, here in new york. Its beautiful, isnt it, tyl tyler . It sure is. You could be a naked chalupa in that weather. Im melissa. Shares off by 10 , and more on that in moments. Amazon promises to create 1,000 new fulltime jobs by this time next year. Shares higher on that news. Disney downgraded to a sell. Firm pointed to eroding subscriber base. The stock off by 1. 5 . Delta in the red despite better than expected quarterly revenues. Shares down twothirds of a percent. Melissa . More on the market slide. Hey, bob. Melissa, yields lower, dollar lower, stocks lower. Thats the story. Off the lows, but its been a rough morning. Take a look, for example, for Interest Rates, stocks there, and, of course, with the yields down, banks in trouble, but companies that compete for yield, when yields are lower, that is good for them, telecom and real estate to the upside. Tomorrow, big banks kick it you have, jp morgan, wells fargo, all to the downside today. They had a nice runup here. Theres problems elsewhere. Global industrials like united technologies, down four days in a row. Down 2 so far this week, thats a problem. Big oil, we had saudi arabia announcing they cut production below 10 million a day. Oils up. Exxon day day after day. Chevrons not helping. Thats not good news. Downgraded disney, they had a great year, 2016 right into 2017 so far, but the comment is key here. Downgrades in other companies, valuations of companies we cover do not appropriately reflect environment for stocks, and companies is riskier now than of the case several months ago. Number of people feel that way. The market is a coiled string now, priced for perfection. Where high stocks, we have high Investor Sentiment and High Consumer sentiment and High Expectations for big earnings boost in 2017. Some people talk about 20 . That is an awful lot to ask for the stock market under these perfect conditions, of course, we have the trump tweet risk. It is not surprising were taking a little bit of a pause here. Remember, though, we were down close to 200 points on the dow. We paired a number of those losses, almost in half. Guys, back to you. Good, thanks, bob. Another reason for todays selling, perhaps, market concerns of Corporate Tax reform may be a struggle due to the inclusion of an item called the border adjusted tax. The gop plan in the house of representatives calls for the following, no more worldwide taxation. Set a territorial system, impacting only what happens in the United States. Immediate expensing of investments rather than spreading out deductions over years, reducing the Corporate Tax rate by a lot, 35 to 20 . Heres the controversial part. Its no longer an income tax, instead, for corporations, its a border adjustment tax, to simplify means e e kwif lanlt of a 20 tax on imports and 0 taxes on exports. One of the architects of the tax plan, representative nunez of california, a key member of the ways and means committee. Sir, good to have you here. Great to be here. Tell us why you like this tax plan and why its so important to have, what many people are concerned about, a border adjustment tax. Well, this is really the first time in 100 years since the income tax was put in place that we have a chance to get rid of it. This puts us on par with the rest of the world. The only countries without border adjusted tax is somalia, yemen, libya, its quite small countries that have this. Its not controversial. Its a little offensive some of the Major American Companies that are importers who do business worldwide are even raising concerns of this plan because i dont see them going to germany or mexico or china to raise the concerns, and donald trump has been exactly right to call people out on this. If im a major retailer, why wouldnt i be nervous when i see a 20 tax on imimportaports . This is not a tax. Its border adjustment, what they do in all other countries. I know few people selling retail in the United States that are not selling retail into asia and europe. This is nothing new. Its nothing different. Perhaps if youre just an accountant and youre looking at this statically and looking at your old Business Model, yeah, you see where it would be an added tax, but, in fact, its not. The Business Model changes. Your Investment Strategy changes because this encourages investment in the economy. It creates jobs. We get out of Debt Financing and into equity financing, so its a plan that will really thats a longer term view, but, i mean, for michelles point, for a lot of retailers, basically, you say, for the retailers already operating on thin margins, i mean, as you know, the Department Stores suffer, for one, struggle because of the change to the Business Model, and for some, this is viewed as a nail in the cough tip of the guys. You are telling them its not a tax . Everybody else in the world does it. Yeah. Well thats very unsatisfying answer for the retailers and for the people who work for them. Well, that would be a ridiculous statement, so retailers go out of business if the retailers going out of business. What keeps them in business is growth. Job growth. Economic growth in this country. So if youre a retailer, no matter where you are at, you are all paying the same exact price, whether youre selling Retail Products at a store in new york or in california, everyones under the same system. Youd also have to assume that there would be no currency adju adjustment, and every economist has said that the currencies would quickly adjust to this change in the system. So how, congressman, trying to wrap my head around this because i find it complicated and accept on some levels its unfamiliar and complicated. Yes, i think thats accurate. How would the tax apply to a large American Corporation in the Restaurant Business that sells only american sourced food to american consumers, has no foreign operations at all . Would they pay no Corporate Tax because theyre not in the business of imports or exports, or pay some Corporate Tax, if, for example, they got avocados from mexico . Oh, let me explain. Theres two components to this. So you have the border adjustment, okay, thats for things that are exported or products imported. On the other hand, you still have whats called a tax flow tax. Everyone company in america, if youre a ccorp. , you pay 20 tax on cash flow. If youre a passthrough, its 25 . In addition to that, you have import and export border adjustment that essentially what it is for things that you import it is no longer it can no longer be deducted. Thats the difference. As a cost . Right . Thats correct. Okay. If you export, you no longer pay tax on that. So then explain to me, because, again, i have a hard time wrapping my head around it, a company like bmw that manufactures a very complex product in spartonburg, South Carolina with components coming from the United States, components that come from asia, components that come from germany, how does that get figured out . So lets say the third of the products come from the United States, well, those would not be taxed. If a third of the products come from asia, those are not deductible. If a third come from europe, those are not deductible, so on the price of the car, twothirds of the components are not deductal. Representative, we heard a lot from the house, and, clearly, many members of the house of representatives, authors of the better way, the blueprint supportive of this. It is not clear to me that the Trump Administration would be or is supported of this. Have you heard anything from any members of the Transition Team that he likes this idea or they like the idea, and what if he doesnt . Well, what youve seen is that you saw donald trump clearly state that the tax systems that are in place in Foreign Countries are very unfair to u. S. Job producers and job creators, and he wants to fix that. Theres really only two ways to fix it. You can either put our tax structure on the same field as everyone elses tax structure, or you can go the tariff route. Those are really the only two ways to fix the problem if you are really looking at the unfair systems in other countries. I think its a Fair Assessment from a couple of you that said it, that this is really a new, completely new tax regime. We are doing away from the income tax in a sense. So all Business Activity in the country would be under a simple tax system thats going to revolutioni revolutionize, i think, tax structures all over the world so i think other places around the world would have to move to a similar system like ours. Representative nunes. This is larry kudlow. He was going to be on after you, but we just sat him down, and he disagrees. You dont think its eliminating the income tax for corporations . Well, if you want to repeal the 16th amendment, im fine with that. I said this a million times down through the years, but what youre introducing here is theres a problem that exists, but this is not the right solution, my view, at least, and i dont want a National Value added tax. I dont want a National Sales tax. I dont even want partial value added taxes. One of the issues here is mexico renagged on the original deal back in 93. They had a 5 back tax applying to imports from america, and they said they would not raise it, and they did. Raised it twice. Its now 16 . Our imports, you know, mexican imports to the u. S. , duty free. Our imports to mexico, 16 . Thats wrong. I agree with you thats wrong. I dont agree that we have to have border adjustability and subsidize exports and go through a rig ma roll, and i strongly, congressman, with all do respect, disagree. We are not getting rid of the Corporate Income tax. Thats in no plan, not the ryan plan, not in the trump plan. This is an addon. Yeah, larry, were saying the same thing, and were in complete agreement. No one wants a vat, and at the same time, no one wants tariffs, what this border adjustment does is simply put in where its nondeductible or nontaxed, and that essentially does the same thing, creating a simple border adjustment scenario. When i talk about getting rid of the income tax, what im talking about, larry, is the traditional income tax, the traditional complicated income tax, and as you know, youre a fan of expensing the way that were moving to a cash flow system versus this archaic income tax that we have, so, yes, Companies Still pay tax on the income that they earn, but they will be encouraged to invest, and if they invest, as you know, rates become very, very low. I think we are actually saying the right thing or the same thing, and what we have to do is familiarize the American People with how this system works because we will accomplish the very goal that you have, larry. Yeah. I just got to say, look, this is a keep of thing that could doom business tax reform, which, in my opinion, is the most important progrowth element, and, really, the heart of president elect Donald Trumps plan, to spur economic growth, add jobs, okay . I think this why do you say that . Why do you say that . Because i think were going to get hung up on it like we are now. I think what congressman nunes said, for example, about replacing our tax system with a cash flow system, thats entirely different concept. Right. Senator cruz ran on this in the republican primaries and lost, very unpopular. Americans dont want a National Sales tax. Polls show they do not. Candidates who let me ask you this, though were taking a problem, i agree, it exists, but the solution is vastly greater than this problem. But what if the choice is this versus a punitive import tariff, larry, to achieve Donald Trumps goals, and what you heard the representative nunes say, he doesnt want tariffs. You see what im saying . Is this a better choice . No, its not a better choice. This is systemic. I dont want systemic. I want to deal with the problem. We may have to renegotiate every single one of the agreements, and nobody better than donald trump, in my opinion, okay, but i dont want to change our entire tax system right now. Countrys not ready for that. I will say this, with respect to mexi mexico, just focus on that, plus china and elsewhere and representative nunes has to go soon. Cant be here all day. Look, the issue here is mexico reneged on the original nafta deal with respect to border taxes, okay . They said they would keep their vat at 5 i dont know if thats precisely the right number, but it was a low number and they did not. They raised it two stages to 16 . Thats unfair. Trump is right about that. Every step of the way hes been right, but to renegotiate this into some kind of border adjustment which will penalize imports and subsidize exports, that is an exercise in government planning and complexity that i believe is doomed to fail, and if you stay with this, congressman, the whole Corporate Tax reform thing, the most important progrowth measure goes down the drain over this. Let me give congressman nunes a final word here because we have to move on. You can address what larry said or address the question that id like to pose to you. What would you say to what i think is implicit to what larry just said, that this proposal is a National Sales tax or is basically a back door tariff . I think this is a very simple way to border adjust. Its not a vat. Its not a sales tax. Its not a tariff. Actually, i think we owe this to larry because larrys been great throughout the years. A lot of people have worked on this over the decades, larry, going back to David Bradford who you knew well. So i think part of what we need to do is get larry over here to congress and talk in depth about this behind closed doors because what we are saying is the same thing. We want economic growth. We want to have business taxes completely revamped in this country because we want to encourage people to invest in the economy so that jobs can be created so donald trump can be successful, and at the same time, we dont want to have this trade war of any kind, even though i do agree that a lot of these trade agreements need to be renegotiated. All i would ask, ill come down for that conversation, by the way, thats a great idea, thank you. My dear friend, kevin brady, hes the best, best of the best. Read steve forbes column in forbes about the issue. He absolutely trashes this idea. He makes the points that are good supply side points, we want simplicity, not complex my. All right, gentlemen, thank you for the enlightening conversation. I love you, youre a great man, a great american. Talk about this for days. Well talk more, im sure. We have breaking news. Tyler, thats right. The independent Inspector General of the department is justice announced hes going to be conducting a review of how the fbi and Justice Department handled what they call certain aspects of the clinton email investigation ahead of the 2016 president ial election. This is an independent bodies within the department of justice which is tasked with looking into all sorts of potential violations of growth and conduct by department of justice and fbi employees. They say they are going to be looking at several different aspects of this including one, allegations that the department or fbi policies or procedures were not followed in connection with or leading up to the fbi directors public announcement of july 5th, 2016, and the directors letters to congress on october 28th and you remember thats all about the fbi director jamecomey looking into emails and informing the public just up ahead of the election he was going to conduct further review of Hillary Clintons emails that the Clinton Campaign felt badly done by that. They felt this was possibly a determinative event in the election. The Inspector General says hes going to be now investigating that. Hes going to be looking into allegations that the fbi director should have been recused from participating in certain matters, allegations that the departments assistant attorney general improperly disclosed nonpublic information to the Clinton Campaign or should have been recused from certain matters and allegations that department and fbi employees improperly disclosed nonpublic information. Well see where it goes, but a Significant Development in washington. Oh, mied go, this never goes away . It never goes away . Were still talking about this. We will be for years. Something historians will be looking at to figure out what happened here, and now we know that the Inspector General and department of justice is looking at it in short time. I got it, yeah. History. Great history. Jfk and the reagan revolution. Haha we know a story like that. I hear it was decent. Another emissions scandal, Fiat Chrysler. The stock tanking. Peter says the age of apple is over. Is he right . Why he said that and what did apple do today firing back at the claim. Shares of Energy Company hess taking a beating today. Dont go anywhere. Power lunch is back in two. ÷ shares of Fiat Chrysler taking of being allowed to use excess diesel emissions. Phil lebeau is live in atlanta with the latest, phil . Reporter melissa, we talked with sergio in the last hour, and hes furious at the accusations. Hear from him in a little. Here are the accusations, allegations from the Environmental Protection agency, it says that there are 104,000 Fiat Chrysler models, were talking about 201416 diesel versions, models were talking about, the epa says the software in the vehicles allows excess emissions. Essentially e mamissions regist in tested are lower than real world results. If that sounds like volkswagen, you understand why the ceo of fiatchrysler is none too pleased with this. This is what he said in the last hour. Its a class of criminals, were trying to do an honest job here, and those of you who know me realize im not looking for pity nor compassion, but the reality is that were not trying to break the bloody law, and this there was a difference of opinion in a software collaboration, lets have a discussion to resolve it. Reporter again, Fiat Chrysler denying its vehicles have software that essentially is rigged through lower emissions. Fee i cant chrysler and epa are negotiating the issue for several months. The models impacted here, 104,000, put that in perspective, talking about 1. 5 of the sales between 20142016, shares of Fiat Chrysler have come back a little bit. Guys, ive interviewed sergio numerous times since becoming ceo of the Company Coming out of bankruptcy, never heard him this mad. This is not just irritated with the epa and, oh, by the way, he understands that the dojs also investigating the company. Hes furious. He says lets have a conversation, and if you dont have to have it, epa, well have it with the trump team, the people from the trump team running the environmental agency. Guys, back to you. Phil, do not move. Breaking news on your beat well get from sue herrera, another story not going away. Sue . That concerns takata. They will plead guilty to criminal wrong doing as soon as friday. The criminal case stems from misleading air bag testing reports. According to the sources quoted by dow jones, takata is expected to pay a criminal penalty, restitution to victims and auto makers as well. That restitution is expected to be 1 billion to resolve the u. S. Criminal probe of ruptureprone air bags, and, of course, this comes just one day as michelle said, this story doesnt seem to go away, just yesterday, we were talking about Fiat Chrysler doing a recall because of issues with the takata air bags, but they are pleading guilty to criminal wrong doing as soon as friday facing a 1 billion fine to resolve the criminal probe, guys, back to you. Thanks, sue. Phil, what do you think . Reporter im not surprised. We all knew this was coming at some point between takata and department of justice. The key here with the criminal plea, similar with volkswagen is the element of deceiving regulators, giving false information. Thats why as opposed with general motors, with the ignition switch or with toyota with the unintended acceleration investigation, in both of those cases, the investigator said, what, it was incompetence, but no intent to deceive regulators. Different with takata and volkswagen and thats why theres criminal pleas. Thank yous. More on amazons hiring push, the Company Creating 100,000 new jobs. What jobs will be and where . Thats ahead. Its a bird . No. Its a drone. We discuss. Dont move. Atatngik cseaoror o s tth atatngik cseaoror eath antas tth welcome back to power lunch, everyone, heres your cnbc update at this hour. A new jersey judge overturned a lower courts finding of probable cause of misconduct against governor Chris Christie involving the bridge lane closing scandal and denied his attempt to dismiss the complaint and ordered a new Municipal Court to hold a new hearing. Six children are presumed dead after a fire ripped through a house in baltimore. One adult and three children were rescued and hospitalized, but six other childrening in age 8 months to 11 years old were believed to be inside that house. Scientists say they have a better idea how stress causes heart attacks or strokes. A new harvard study finds the key is in the fear sensor of the brain. Scans of 300 people showed those with more activity in the particular region were more likely to have an attack. The San Diego Chargers are moving to l. A. To join the recently relocated rams. The move comes less than three months after san diego voters rejected a measure asking for 1. 5 billion in increased hotel taxes to help fund a new stadium. Thats the news update this hour. Back over to you guys, michelle . I didnt know the brain had a fear sensor. Neither did i. Now we do. Got it. Thanks, sue. You got it. Dont worry about it. Big news from amazon. The Online Retailing giant pledging to create 100,000 new fulltime jobs. Shares higher on the news, and we have the details live from san francisco. Deidre . Hey, michelle. Numbers shouldnt be surprising, but they put amazon in the spotlight as the president elect pushing Corporate America to create more jobs, and it could help to further ease tensions between trump and jeff bezos after a twitter spat in the campaign and after trump had this to say about amazon. Believe me, if i become president , oh, do they have problems, theyre going to have such problems. Now, amazons Job Announcement this morning was quick to catch the attention of the next administration. In this mornings transition media calling White House Press secretary spicer making reference to it. The announcement made after the president elect made with heads of several other Tech Companies urging them to keep their jobs and production inside the United States. Now, never mind, guys, amazon has already been steadily growing its work force. The questions into multiple businesses beyond its core ecommerce from groceries, apparel, and logistics and brick and mortar. Analysts noted this morning, the number of announced, 100,000, hint at a faster rollout of physical retail and that eases fears of job destruction as amazon embraces automation. Now, it also sets amazon apart from other Tech Companies that have come out and touted jobs since trump won the election like ali baba and soft bay. Amazon specified where they are creating the jobs, what kind of jobs, and we have not heard any clear road map how they create jobs talked about. Guys . All right, thank you very much. Lets look at this video, a drone, here it comes, crashing into seattles, oh, my goodness gracious. Space needle while this pyry technicians prepared for the new years eve fire works display. They were working on top of the space needle. Its the third time, by the way, that a drone has crashed at that famous seattle landmark. The drone, not surprisingly, suffered significant damage, but the spice needle took the hit, and the technicians were unharmed. Seattle Police Department has the drone, and the incident was reported to the faa. Amazing its still recorded. Yeah. It was still working there. Yeah. Who fixed the camera . Thats what we need to know. Apple pushing original content, netflix or amazon worried . Taco bell serving up a lot of new jobs, and, also, this this. Its the naked chicken chalupa. You want it. Okay. I can say chalupa. Thats ahead. Dot thhakeeat h thin dot thhakeeat n j. Eaoise. E esbrof h 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. Excuse me. I sneezed. I knew it was coming, ladies and gentlemen. Im so sorry. Welcome back to power lunch, a check on the markets this hour. Stocks sneezing a bit today, the worst day of 2017 so far. Major averages lower across the board, off the session lows right now, as you see there, down 96 points. We were down 183 at the low, so those losses have been roughly cut in half. Tell con and real estate the only s p 500 sectors in positive territories right now. The financials and technology, the worst performers as we move into earnings season. A lot of the banks reporting next week. Venture capitalist, peter, telling the new york times, the age of apple is over. The Company Reportedly just made a move firing back at that claim. Lets get the details from los angeles. Julia . Michelle, thats right. Netfl netflix, amazon, and youtube pour money into original content to draw subscribers, and apple is notably absent from the exclusive content game. They are planning to invest in original shows and movies to bolster of appeal of the 10 streaming music service, which the journal says in effort to make apple music a more robust competitor to spotify. They dipped the toe in video content announcing shows and playing apps, and car poolwith james, but the real question is whether apple invests significantly enough to pose competition to the leaders of the space like netflix spending 6 billion this year on content nearly doubling the number of originals it produces. That paid off for netflix with the stock up 180 in the past few years. The company credited excitement for its originals for driving subscriber growth. For years, apple reportedly worked on creating a new tv style bunle but has not been able to secure deals with content companies. No word on whether thats any closer to launch, but in the meantime, well see if apple switches focus to building apple music into a netflix alternative. Tyler . All right, thank you very much, julia. Lets talk more about apple coming in on original content. With us now, colin, bgc financials director of research. Welcome, good to have you here. Colin, my initial reaction here is that this is one of the first times in my recollection that apple has been playing catchup, coming up from behind, not leading. Is that right . Well, i mean, go small and cautiously . Is that the motto for original content . Not only are they late, right, but remains to be seen if its a meaningful move into original content, a space where you already got firm number one, netflix, amazon pouring in billions of dollars, so apple, clearly, is late, and its unclear if its going to meaningfully change the value pop session for apple nemusic. You have a sell on the stock with the price at 85ish . Correct. Not only are we concerned about apple missing big trends like artificial intelligence, augmented reality, virtual reality, homes, but its lackluster. Apple pay, thats been two years since we rolled out apple pay. Nothing meaningful happened there. Streaming video. All right. Apples nowhere. In the music, they got about half the subscribers spotify has. All the services need peeping up. Deidre, address the question of peters comment that the era of apple is over. Agree, disagree, agree in part . I agree in part. I think that hes right that were not going to see another big innovative world changing iphone moment, especially in the world of phones, but i do think its a little bit unfair to say the era of apple is over. The iphone is the best business in all of Technology Still although sales slowed a bit, and, you know, you shouldnt completely discount year over year evolution innovation. Evolutionary . Is that speaking to peters point . Weve seen an iphone, know what it does, only minor changes by this point, so thats why the age of innovation is over. Thats why you said, evolutionary, not revolutionary. Yeah, i think thats a fair point. I would also say that to expect to have massive world changing events from this company, you know, every year, is setting up, you know, too high a bar. I mean, you have to remember that there was between the release of the iphone was a decade or more, and so to there could be Something Else coming big from apple, but dont wait for it year after year. It comes when it comes. So, colin, back to you, if i might, what do you suggest . You talk about services and deriving more cash from those services. What would you if you were sitting down with tim cook, what do you suggest he do . What i suggest they do, sit down, what would happen if we had to sell our hardware at cost . Right . What additional Revenue Streams can we bring in . Amazon sells hardware at cost. Their tablets, ecodevices, right, but theres a Commerce Business as well as the advertising business as well as digital consumption of music and movies that they pull in through the entire ecosystem. You can just focus in on bolstering those things. Lets get a video streaming service, right . Focus on driving more apple pay. Focus on the bigger areas that i mentioned earlier, artificial intelligence, get home kit rebooted and make sure were on track for home automation. With you look at the pc market, its declined for five years in a row now. Its entirely possible that this could happen to the smart phone marketplace. All right. Folks, thank you very much. We appreciate your time. Thank you, tyler. One of the worst performers in the s p 500 right now. Whats behind the drop . Thats next. Next to rick. Hi. We had 12 billion of 30 years hitting the wire at the top of the hour. I gave the option to see 2. 914 is what the auction yield was. Weak on the indirects excuse me, directs, strong directs, and now if you look at the intraday chart of the aforementioned 30s, rates are up. 293, so 2. 9 is 14 is a loser. They are in the l column if you bought the auction, at least given current trade. Look at the three year. We had that tuesday. Excuse me, monday. Look at 1. 43 is where its at, 1. 47 is where it came out. Look at the tenyear yesterday, 2 preponderate 33 now. Its a small winner, going out at auction at 2. 34 and change. Dollar index is fascinating. That intraday chart, when the auction ended, they topped a couple basis point and dollar popped a bit as well. Power lunch will return in a couple minutes. Y usne isre iny he osonnklc y usne tedot urasr rwaurout is. Aly y ou takin welcome back to power lunch, hess is the worth in the s p 500 now, budgeting 2 billion for exploration and production, up 18 from 2016. The company is also going to take a 4. 6 billion dollar charge for the Fourth Quarter. On the phone is pavel, and we got an outperform rating and 75 price target on this company, which is up, by the way, 46 over the past year or so. Pavel, why is the stock pulling back so much here . Is it a buying opportunity . Caller it is a buying opportunity. If it were not for their production guidance, the market would have undoubtedly reacted positively to another discovery. Hess, as well as exxon, drilling high profile exploration wells if a country thats never had an oil industry, and low and behold, they made a second big discovery just this year. Now, the reason the stocks down is because they also gave a 2017 Capital Budget in production guidance, both of those were short of expectations. So now theres a link between those two things, cap x budget, up 18 . You know, i think a lot of people were expecting maybe up 2530 . Whats the concern . That they are not as bullish about the outlook for 2017 . They dont feel they have the cash to use in 2017 . I mean, i would think spending less money might be a good thing. Caller yeah, so, exactly. You can look at it as a positive. They are showing capital discipline, right . You know, whens the last time we know a Company Actually did that . However, the less they spend in general, you know, the less production is going to grow, and were seeing that, so they are guiding to production down 5 in 2017, you know, and, you know, again, that is a short fall, you know, we were hoping for maybe a little bit of growth, kind of a, you know, low single digit type growth rate. They are not going to be as aggressive in the balkin, for example, as, you know, some of the smaller guys in particularment particular. If they wanted to, invest 2. 5 billion or close to 3 billion versus 2. 2 pennsylvani5 and cou achieve growth. A broader question about exploration. Are the good times back with oil above 50 a barrel. Hess is less than what many peoplemented in terms of spending on exploration and production, but devon is increasing production out of that area. Caller with oil above 50, drilling is accelerating. Now, remember, last year, it was one of the steep declines. When u. S. Oil supply last year dropped almost 500,000 barrels, it was a big slice of that, so now were seeing an inflection point, and half is tripling its count other than maybe its not saying very much because they have only two rigs there today that are getting fixed by the end of the year, so if they added if, for example, they were to add those rigs more quickly instead of back end loaded, they would have grown, of course, for the year as a whole. They are taking the disciplined approach. I mean, its a legitimate strategy. Right. Caller look at it as a positive. Sure. Caller this is a growth stock, and they are not going to grow production for the year as a whole even though they will end 2017 with higher production than where they started 2017, so thats the silver lining. Thank you, pavel, appreciate it. All right, taco bell on a hiring binge hoping you binge on this. The naked chicken chalupa. Thats a lot to talk about. Its a mouthful, ladies and gentlemen, and more, power lunch exclusive with the ceo straight ahead. Were going to chew on it. , big changes coming to taco bell with a long term promise to hire over 1 preponderate 6 million, yes, million, new employees in the United States. Menu also getting a total revamp with the launch of something called the make chicken chalupa. Power lunch exclusive with the ceo. Good to have you here. Great to be here. Im a serious journalist and do it with a capital j meaning i want to start asking why its naked. Why are you going to create 1. 6 million new jobs . Yeah, sure. Well, obviously, we love to talk about our food, but its the great employees that make it, so were really excited because taco bell has had just an unbelievable growth story for five years. Weve gone from a 7 billion business to a 10 billion business just in the United States, and whats behind is is bri building new restaurants with the franchisees, and with every restaurant we build, thats an opportunity to hire 3540 new employees, and then whats great about our business is, you know, for young people, its a great place to get their first job, whether they come home from college or need a job during high school, like, myself in order to have gas money for a car, and we get them started with their careers yeah, i get that. Weve been showing people, sorry to interrupt you, but addressing a graphic were showing people that says 1. 5 million young peoples jobs by 2027. These are entree level jobs . When i hear that, i think to myself, okay, children grow up, right, and so theres got to be a lot of turnover there, right . Whats the net yearonyear . Assume in 2027, you employed millions of duadults, but the Employee Base is not growing. That might be terrifying. No, no, the Employee Base grows by 100,000 employees, really, over the next five years, is thats what we talk about, with all the new restaurants we are building, and as the restaurants that we have get bigger, you know, well add employees. But, yeah, we have people that join us for short period of time and then go on to do other careers, and then we also have people that join us and choose to stay with taco bell and ultimately become restaurant general managers or chief operating officer or other areas of the company. Did you have the president elect at all in mind announcing the hiring spree . You know, actually, no. We are excited about the growth that weve had with taco bell in the u. S. Theres also a really exciting growth story for taco bell just emerging outside the u. S. , and what we stay focused on is how do we make sure we have a great culture so people want to work at our restaurants, provide a great experience for customers, and come up with great food like the chalupa. Thats where i want to go. Michelle is the capital j journalist ha, im not, i was joking. I know you were joking. Whats naked about this, brian . It looks good to me. I have to eat it in the buff . You do not eat is while youre naked. Imagine the restaurants. Only hackers eat is while they are naked. You know, the thing thats fun about the product is, you know, the shell chicken or is the chicken the shell. Which came first, the chicken or the shell, okay. Exactly, exactly. Look. People, all around the world, and in america, love fried chicken, and weve been trying to figure out how to get into this piece of the business in the qsr industry, and i think weve come up with a, you know, unique craveble way only only taco bell could. How do you bend the chicken . Is it fried that way . Thats exactly right. Go ahead, tell me about it. Yeah, no, literally, what you do, you have a great piece of all white chicken, breaded with great seasoning, and when we fry it, we have a frying holder curving it up to look like a chalupa shell, and in goes the lettu lettuce, tomato, and cheese and avocado ranch. Send us a couple. Yes. I would love to, that would be great. Thats great. Thank you. Betting on the bank, earnings tomorrow, a group had a great run in the rally. Can they push the dow to 20,000 and beyond . Thats next. Stto tyo sr hrmy o a welcome to the second hour of power lunch, or as my 11yearold says, its lunch money. Were with michelle and melissa, two hours until closing bell, and this is what were watching in this hour. The dow and s p posting the biggest drops in 2017. The question, is it time to reduce the risk in your portfolio as this recordsetting rally hits the pause button . Banking on the banks. Gearing up to report earnings tomorrow. Financials have been flying in this rally. Where these stocks go from here, and, of course, keeping a close eye on capitol hill. Confirmation hearings on defense, cia, housing, we have them covered for you. Tyler said it, stocks with the worst day of the year, but improving off the lows now, the nasdaq not posting a down day in 2017, but look at the screen, today could be that day. Financials, industrials, technology, the biggest drag in the s p sectors. Financials off by nearly 11 . Disney and boeing losers in the dow right now with microsoft off more than 1 and disney down 1. 5 . Heres an interesting stat. A fifth of the 30 dow stocks downgraded since the new year. Investors looking for safety, and yes are rallied, and oil is rallying. Well get the trades on oil just ahead. The developing story at this hour, the Environmental Protection agency accusing of, and trucks and suv made it appear as if the vehicles were getting lower emissions than they were in pollution tests. Fiat chrysler denied accusations saying the Software Meets regulatory requirements. Phil lebeau has more with the chrysler ceo. Phil k take it away. Thank you, melissa. Lets bring in the ceo of Fiat Chrysler joining us from auburn hills, michigan. Sergio, you heard the allegations from the Environmental Protection agency. Before we get into the details here, youre upset they accused you essentially of lying, of cheating, rig iging emissions f diesel vehicles. Give me your response. Well, i mean, we were relatively clear with the press e release issued this morning. We have a number of control strategies that run the engines, and theres never been any intent in putting the soft ware on the vehicles to defraud anybody. We think that that software is client with current legislation. We have a difference of opinion as to whether epa and cars have different expectations of the calibrations, but the fundamental difference in our case recent cases that they settled have to do with the fact that these control strategies work all the time in our vehicles. They do not distinguish between test cycles and running a normal running operation, so the case is fundamentally different, and it is important for us to distinguish ourselves from the current state of the art in this area. I think we have been unnecessarily maligned with a desire or a wish or intent on our part to defraud anybody. We havent. And you, essentially said on the Conference Call, dont lump us in with the criminals, yet the epa said they did not disclose the soft ware to us. Did you not disclose to the epa . We make all disclosures, all the software that goes into the vehicles is disclosed. Theres a part of the regulation that requires the nonoperation of some of the control mechanisms to be disclosed and to be vetted by the epa. This is governed by practice. By historical practices that have been in place between us and the epa over a number of years. We have had discussions now with epa on the matters since september of 2015. Its been more than a year and a half. We have made tons of material available to them. We continue to discuss the issue, and we are in the process now presenting a more complete set of control strategies that remedy all of their concerns, so the issue could have been settled and should have been settled, i think, in my view, in a more efficient way and more businesslike manner as opposed to elevating this to suggestions that were trying to defraud anybody. Why are they coming public now calling you just short of saying theres defeat devices in the vehicles. They did not say that, but painted a picture leading people to conclude that. Look, there are two issues. One is that if you have mechanisms in your car that defect test cycles, and that system doesnt function when you run the car normally, that, to me, is a classic definition to be penalize. When you got mechanisms in a car that prevent damage from lapping to the engine and that operate under very specific circumstances, those things are exceptions under normal operating conditions of the car urn the rules. They may have been cases, at least in our issues, where in our case where some of the disclosures may not have been complete as they could have been. We are in the discussions on that, on that issue with the epa today. We sincerely hope that we can find an equitable expectations and theirs. It will cure all their concerns, and its they cannot be classified as defeated devices. Were trying to defeat nothing. These were mechanisms that were put in place to protect the engine under particular circumstances when the engine was under load. To sum it up, you said this was a technical misunderstanding, and if i dont have that right, correct me. Do you think that you will get a more sympathetic understanding of this misunderstanding from the new administration . Its difficult for me to judge. What i do know and which is the reason why we got somewhat hyper sensitive about the matter is we are dealing with people who will not be here to try to resolve the issue. We will have to deal with a new administration. We will have to deal with a number of new people who will handle the case, and its difficult for me to try and predict what the outcome will be, but i think our conscious is completely clear. I think we understand fully what weve done. Weve done all the work that needs to be don on the inside to make sure theres no mall feasance inside chrysler. Weve not found an indication that any of our people were trying to defraud or trying to come up with a scheme to circumvent regulations. If there was a mistake made, i think its a mistake that needs to be clear through normal process, and i think what weve offered now, the epa and the car has a solution urn the Software Side to cure all. Sir, michelle here. Speaking of the new administration, putting aside this case, what about epa requirements and emissions requirements in general . Theres been complaints over the years that they push for more and more and more, and they are not necessarily achievable. Well, look, when we agreed to the changes in the emissions standards and objectedives for 2025 with president obama, there was a very pure road map put in place that required a Midterm Review that should have been completed by 201718. It should have been review carried out, and the last action by the epa confirming the 2025 standards with our consultation are industry was in our view an unwarranted act. I hope the new administration gets a better audience to try to resolve these issues and determine what is, in fact, doable by 2025. Sir, one last question, its phil. Do you feel like this is at the end of the day, a bit of a witch hunt on the part of the epa . Those are my words, not theirs or yours, but from the sense that you made it clear in the Conference Call youve been communicating with them, and now they come out and say, you know what, we think they are in violation. Look, obviously, we knew that they have concerns. We have been in dialogue with them now since september 2015. Could have. Earlier, but thats the best of my knowledge, september of 15. What came out of the wild blue was that announcement this morning that it issues a notice of violation and we have three hours to respond. That, to me, given the level of discussions and the level of disclosure made by epa, i found the time period too short to prevent any dialogue from happening before the notice of violation was issued. Sir, whether it be this specific case with the epa or just epa emissions standards in general, are you sort of glad that you announced the billion dollar investment into plants and job creation in order to gain a little more favorable ear from the new administration coming . We would have made that announcement anyway. This is part of our Strategic Plan for the development of both the ram and the jeep ram here in the u. S. , and to allow for the manufacturing footprint to be available for global penetration of the new brands. So im glad in a sense we did it. We would have done it anyway, but i think it came at the right time. Sir sergio, whats the next step . Well wait until we sit down with the new administration to hammer this out. Our people are going to be with the people in california on monday to try to discuss this issue, so the operating side of the epa has been fully collaborating with fca and i think we are in a good place. I sincerely hope we can resolve it very quickly scene get certification under 2017 diesel engines available to be installed in the grand cherokee and ram 1500. If we get over that hump, we take that software and redo the 14, 15, and 16 cars and the issue goes away. The issue comes with the compliance and whether we agree or disagree an infraction was in place, but certainly not to the extent that was portrayed today in the epa conference, which i found a bit overreaching. Sir, thank you for the patience. Just one more, your italian, people know that. Youre familiar with back taxes and the International Taxation system, i dont know if you are aware, but theres a movement here in the house gop to dramatically change Corporate Taxes in america and instead go to what they call a tax flow tax, borpder adjustment tax. Any opinion on that . Have you heard about it . Thinking about it . Im not sure ive heard it, but im partially italian and im canadian. The issue is a complicated issue because border taxes, i think, have significant implications on the flow of goods out of the u. S. , and i think it will impact our expansion strategies for jeep and ram. One of the cornerstones of what weve done here in the last seven years is to try to turn jeep into a global brand, and we need the u. S. Manufacturing footprint to get that done. We have to be careful. I appreciate the reduction in the Corporate Tax rate, but i think we have to be very, very careful we dont become too involved in the process. Fiat chrysler ceo joining us exclusively on power launch from the companys aheadquarters in michigan. Thank you very much. Thank you. There you have it. They believe this is, as you said, tyler, a technical misunderstanding and believe their vehicles are in compliance and will show they are in compliance and monday they plan to meet with epa and environmental regulatorregulato. If i was going to tweet out one thing from that, phil, i say, our conscious is clear. Yep. Very much so. Thanks, phil. Financials worst performing sector right now coming as Bank Earnings kick off tomorrow. Jp morgan, wells fargo, and bank of america all reporting before the bell. This group has had a great run in this rally, so can the bank stocks push the dow to 20,000 and beyond . Lets bring in the managing director and senior Equity Analyst from barclays, and William Frost who covers the sector. Jason, starting with you, it term of your sfiestimates, the banks trading, have you raised the estimate with the expectation Fourth Quarter was a more robust quarter . We did. At the start of the year, we did update all the numbers and for the majority of the banks, covered top 20 by market cap or so, and we took up the q4 as well as 2017 earnings estimates to reflect both more constructive Interest Rate backdrop as you had trend up throughout the quarter in the tenyear trash ri yield increase as well as reflect improved trading conditions both prior to and more so post the election, and, you know, we, you know, look to be above consensus for the majority of banks that cover for the quarter and despite the fact q4 is a challenging quarter for the banks, we think most exceed expectations. Whats the guess in terms of banks reporting tomorrow and those you cover, jason . Are the ceos cautious . Is that their nature or going to sort of justify the run weve seen already in the stocks . I think, you know, from a fundamental standpoint, trends are good. Growth continues in the mid single digit area. Margins compressing, and i think they begin to turn as the yield curve steepens, and we talked about improved trading environment in the income side, room on the expenses and credit clouds remains benign. Fundamental outlook is good. Theres a lot of other things brewing in terms of the new administration, prospect for lower Corporate Tax rates or infrastructure spend or deregulation. On issues like that, i think theyll be more cautious begin uncertainties around the times and possibility of the events. Whats interesting, we had a downgrade of Goldman Sachs for citi, expressing concerns the runoff is on this hope of nothing that, you know, its not happened yet and gold has to make much, much more in revenues to justify valuations. Interesting you mention that. Citi group downgraded Goldman Sachs itself from neutral to buy. Theres a difference now, of course, the Analyst Community from the retail bank to have exposure to the pickup in rates to the yield curve which weve seen come off the highs, but as the investment banks more exposed to a pickup in terms of trading revenues and hope for m a that theres more reliant on deregulation and tax changes, which we have not seen yet, and thats the general theme across the Analyst Community. Theres upside in the Interest Rate, retail bank, and we have to wait and see now, given the runbacks have had in terms of policy. Well, if im looking at banks as a group, during this earnings season, what would be the sleeper surprise that you might be looking out for, either positive or negative . Negative, credit quality. They are in a better position than this time last year. If you remember, of course, fears of over credit oil companies. Particularly, exactly. Bridges in that space. Year on year, thats going to look good. However, loan growth is strong. If theres guidance in the commentary that they are full, that could derail the positive sentiment. The Positive Side as we heard, trading expected to be good, key is on the commentary and outlook because if question bet a similar tone to middecember, the last time we really heard from all the ceos together. There was a Goldman Sachs conference we were at, they with super positive then. That was the peek. The first two weeks of january, they either plateaued or traded off. If they come out bullish as they were four weeks ago, days like today down a percent in the half of the index, they could be ready quickly. Thank you, gentlemen. Here is coming up. Confirmation hearings on Donald Trumps Foreign Policy and defense policy in the spotlight. Will lithium be the hot commodity of 2016 . How can we unite the United States . All that and much more coming up on power lunch. Spotsed a short time ago in the lobby of trump tower, the parent of alphabet, no word on whether hes there to meet with the president elect or the Transition Team. Or just hanging out, checking out the scene, holding elevators. Retired Central Command appearing for the confirmation hearing as secondary of defense issuing a stark warning about the challenges the u. S. Is facing around the world. Do you believe that that new world order is now under more strain than its ever been . I think its under the biggest attack from world war ii, sir, from russia, terrorist groups, and with what chinas doing in the south china sea. I think deterrent is critical right now, sir, absolutely, and that requires the strongest military. Do you think we have a Strong Enough military today in order to achieve that goal . No, sir. Between that and yesterdays press conference focusing on russia and confirmation of tillerson, trumps Foreign Policy directly in the spotlight. This is our columnist from Public Diplomacy and representative to the United Statesed nations. Good to have you here. Thanks for having me. Heard general mattis today, but theres a lot of business people, sir. What do you think about somebody like Rex Tillerson, wilbur ross, a lot of experience in international business, but tillerson, critics say he doesnt have experience in international diplomacy. What do you think . Well, first of all, i think business is diplomacy. What you really mean, and what i think the critics mean is he doesnt have government bureaucracy experience, and i think thats a fair point, but i would come back and say thats a benefit. The reason why its a benefit is because someone like Rex Tillerson knows how, for instance, sanctions work. Not how they are crafted in a building in washington, d. C. By politicians, but how they actually work, how they affect change. Someone like mike who spent most of the career outside of government knows how intelligence is gather, how its used. I think putting people like that in charge, and your example of wilbur ross, someone who knows how business functions, putting somebody like that in charge of a government bureaucracy is going to bring about change. Its going to bring about an education process to say these are the priorities we should be working on. Hes one example. We have harris, the new senator from california, shes coming to washington, d. C. From sacramento where in sacramento democrats control everything. She showed up at the hearing today to interview the cia director and to question him, and she brought up gay marriage and climate change. Its just a world that politicians need to understand that people want change. They want to bring in the change makers. Uhhuh, okay. Let me turn you to some of the reporting on the confirmation hearings yesterday of mr. Tillerson and today mr. Mattis. Some of that reporting characterizes a more, quote, hawkish tone, in foreign affairs. I wonder whether you see it that way, based on what the testimony has been, number one, in a Trump Administration, and number two, what would that mean in practice . A more confrontational approach . More boots on the ground in europe . What . Well, first of all, take general mattis from today. I think hes an expert on military readiness, and hes frustrated that we have declined in that area, so i think what youre going to see there is someone who is going to build up the military. When it comes to Rex Tillerson, i thought yesterday he did a phenomenal job of being very judicious, very thoughtful, said im not getting intelligence briefings. I want more information before i commit to a policy. I think all of this points to the fact that donald trump doesnt have a rubber stamp when it comes to nominees. What donald trump wants are experts who are going to give him expert advice, practical advice from the field, and both of these gentlemen, these two examples, have said publicly that they are giving donald trump raw advice, and that hes listening, and that hes interested, so i think what youre going to get from president elect trump is someone who is going to make a very informed decision, and hes not looking for rubber stamps. Got it, sir, thank you so much for joining us. Any time. Senator Elizabeth Warren drills ben carson at his confirmation hearing. Just assure us that not one dollar will go to benefit either the president elect or his family. Flr. Hi, everybody, heres your cnbc news update at this hour. More than 40 of california has emerged from the drought that covered the whole state a year ago. It is a stunning transformation caused by unreleapting series of storms in the northern part of the state. Southern california, however, remains in a drought, but it has also experienced a dramatic reduction in the severity. Jetblue living up to the promise to provide free wifi on every domestic flight. It says every jet is now e equip with its flyfi service, offering gate to gate high Speed Internet used before reaching cruising altitude. The Honest Company is recalling all bottles of its organic baby powder in the u. S. Due to possible contamination with microorganisms that could cause eye or skin infections. If you want a selfie with former Heisman Trophy winner johnny manziel, it costs 50, a professional photo is 99. Hell provide an autograph for 99 as well, and 29 is a forwarded inscription. Great money if you can get it, but shows how far hes fallen. Thats the update this hour, back to you. Wow. I actually got a johnny manziel, not a selfie, but son and best buddy. Ran into him in a Hotel Elevator in cleveland. Glad you did it when you do . Absolutely. Now you pay for it. He has reputation has been good to hear he was nice. As you said, the reputation has been tarnished. Thank you. Sure. Crude is rallying. Oil market closing for the day, and jack ki has the numbers. Seconds away from it, finishing over 53 a barrel, session high was 53. 50. The strength from the middle east, the minister at a conference in abu dhabi saying they would make deeper production cuts in addition to what was agreed to. The market liked that. Of course, still worried about what could happen here in the United States, and as production does ramp up, but not worrying about it at this moment. The weaker dollar, today, certainly supporting crude and the rest of the Energy Complex and supporting gold prices which dont look like they are going to close over the critical 1 tur 200. Back to you. Thank you. Ben carson up for secretary of housing and urban development. He faced tough questions from senator Elizabeth Warren. We are joined now with the details, diana . Reporter specifically, about that direct connection between the president elect, his reality empire, and government money. Senator warren press the dr. Carson to make a promise no hud money goes to trump businesses. Carson said he would use his moral judgment, but he would not rule it out. If there happens to be an extraordinarily good program thats working for millions of people, and it turns out that someone that youre targeting is going to gain, you know, 10 from it, am i going to say, no, the rest of you americans cant have it . I think logic and common sense probably would be the best way. The problem is that you cant assure us that hud money, not a 10 varieties, but of multimillion dollar varieties will not end up in the president elects pockets, and the reason you cant assure us of that 12 because the president elect is hiding his familys business interests from you, from me, from the rest of america. Now, also of note in the testimony, dr. Carson said there needs to be a government backstop in the mortgage industry, namely the fha and said hed look into this weeks announcement by outgoing secretary castro of an fha Insurance Premium reduction. Did not say hed reverse. It more about the testimony online at cnbc. Com. Thank you very much. Coming up, why jamie dimon is optimistic about the Trump Administration. Thats not dimon. Do they like the new England Patriots . Thats an analogy used. As we come back, dow making a comeback. Power back in two. C. Ea worth . M . Trump called jamie dimon the worst banker in the country, but the head of jp morgan is giving mr. Trump a chance. Heres what he said on cbs this morning. Optimistic about the Trump Presidency . How are you feeling . Yeah, i am. Because . Because hes putting professionals in the field. If you want to win the game, put tom brady on the field. This analogy make sense for the president elect . Bill belichick doesnt make a lot of friends, but gets results. Lets bring in author brooks, president of the American Enterprise institute, thanks for being with us. Great to be with you, thanks. An article you wrote, i believe, a couple months ago about what you see is one of the crisis of the American Economy today, and thats whats happened to american men, and you believe that thats one of the reasons why mr. Trump p prevailed in the election. Explain. I encourage anyone to read it. Interesting take. I wrote that, and in point of fact if you want to understand whats going on in politics in america today, understand the dignity that a lot of men around the United States feel. Theres an interesting article that came out from a couple of professors in princeton last year that show that the only Demographic Group in American Society today with a rising mortality are white mean between 4554 without a college degree. Theres three reasons for that. Number one, a 50 increase in the liver, 58 increase to suicide, and 323 increase in oiiod overdose. Its a population thats transparent, troubles are brewing. Were going to see it. Most people know ser row sis of the liver is alcoholism. Killing yourself and, come on. Why is that happening . Thats happening because in too many parts of the country theres nothing to do. You know, a dignity crisis comes when people are not needed, and what you find is that there are huge percentages of the population today, particularly in rural america, the part in big cities we do not see and talk about, the deplorables, and the verbiage introduced by the loser in the last election, people who do not have a job or possibility for a job have inadequate education, have nothing to move for. Thats what we see. We see december per ration that turns to abuse. I think, also, just as we sit around the table, i think it is also a crisis infecting boys, the father of two sons, compare boys and their level of motivation and their level of achievement and accomplishment to what i see in young women today, and they are behind. Behind. No, no, sure. Its the truth. Ask any parent that. They will pretty much agree. Sons and daughters, its the same deal. Public Education System today does not teach boys adequately. Part is because we warehouse kids in a unionized Education System. One of the things we have to do, frankly, and the Trump Administration can do in an environment with a terrific educational secretary is to talk about the best way to teach people in the way they are actually going to learn, and that starts with treating boys like, i dont know, boys. It comes to acknowledging that boys and girls are different and yet for every day that goes by, it seems you are not allowed to suggest there are differences between men and women in the world. Its transgressive, what you said is some sort of microaggression against something. Created an unsafe space for you . You crossed a line. Its very frustrating for people to talk in all these words that are just so beyond reality, but how we live. So lets get to the question that we started with, which is the lost boys. Right. Men. If i can use that phrase. What would be the smartest thing to do to reengage them in the economy productively and restore some of the lost dignity that you pin point . Well, the key thing to remember is that when people, they lose their sense of dignity when they are not a necessity to the economy. This is an economy based on making poor people needed. The families came, none came with money, but came because they were necessary in the American Economy. It attracted ambitious riffraff. This is a country based on that effecti effectively, and when the economy says youre not necessary theres a dignity crisis. The solution is in that observation. What can we do for an economy that creates skills needed in the economy and creates jobs for people in the bottom of the Economic System . Make people needed. Thats the solution to the dignity gap in america today. I hear you say improve education. I get that. Right. Are there other policy prescriptions that should be put in place by members of the cabinet . Well, number one, tax reform that makes it possible to create jobs in the country. Its very encouraging that president trump, apparently, talk hes going from the inauguration to the capitol and sign executive orders that try to erase some of the job destroying president ial orders that have been made over the past eight years. We can get out of the way of people trying to create jobs. Jobs have been created. To be clear, jobs have been created, but could have been much more. Much more. All kinds of barriers put in the way, particularly of american manufacturing, kinds of jobs people have seen disappearing in a lot of Rural Communities in the United States. I heard a stat today from a noted economist who said in the last eight years is the first time in the history of the United States where fewer businesses were created than were than more businesses closed than opened. Exactly right. Ordinarily in this point in an economic crisis, in the out years, four, five, six, seven, theres a tremendous boom in entrepreneurship, starting from people laid off for six months or more. You have not seen it this time, and a big part is policy uncertainty, another part is Regulatory Environment that is punitive for people starting businesses, and thats got to stop. Do these people, these men, lost dignities, do they have a disadvantage in the work force versus women or other racial groups that prevents them from getting the jobs that are, in fact, available . Does this need to be a program, which dare i say, actually favors white men because there is this crisis happening . I dont think that. I think that the main reason we find this group is particularly disadvantaged because they live in the parts of the country where opportunity has, in fact, gone away. When we create more opportunity in general, because we have more inceme inacceptabili incentives to create opportunity and growth, it comes to the bottom four quin tiles. We dont have quotas afirmtive action for white men. Who lost dignity. She asked, didnt suggest it. You go into parts of the country, and you see that Manufacturing Companies that were there are not there in many cases or employeeing fewer people because of automation, right . Thats true. Interesting statistic is that manufacturing is a percentage of the American Economy, the same in dollar terms as it was in 1970. The problem not employment. Exactly right. One eighth as many jobs, however, there are millions of blue collar jobs in the country that are up filled that, today, on this very day, theres 300,000 skilled welding jobs that we cant get filled because theres no skills because they are not getting the education. Just because we have not talked about it enough today, would a adjustment tax address the issue . We dont know. It certainly wouldnt hurt the issue, and so when were talking about creating opportunity in the form of jobs for this group, the border adjustment tax does not appear to be deleterious. Its not problematic. Did you see j. P. Morgan calling this presidency the aei presidency . I like that term. I think that the aei school could per sue the presidency in great effect. Thank you. Arthur, author of the book. Thank you. Responding to the meeting with the president elect today. We have details next. Welcome back to power lunch, at t ceo met with donald trump at trump tower today. We have a statement from at t explaining the contents of the meeting. Mr. Stevenson had a very good meeting with president elect trump earlier today covering a wide range of topics, and the proposed merger with time warner was not a topic of conversation. Rather as the countrys leading investor of capital for the three of the five years, they focused on how at t can work with the Trump Administration to increase investment in the u. S. , stimulate job creation in eric, and make American Companies more competitive globally, end quote. Contents in an official statement from at t, melissa, back over to you guys. If they are not going to talk about it, why have the meeting . Right . I dont know. I mean, come on. Seems like the elephant in the room. Here it is. Its here. Hes with marie down on the grounds. All right. Lit yum is the key component of batteries for everything from electric cars to smart phones. How can you get in on whats likely serging demand for lithium . Talk to the ceo of the company that you might want to consider next on power lunch. Heading to break, the dow, a a comeback here on this thursday zegs. Session. Si b broests if . Icxpn ca on aobb fuel prices have tripled in two years drifrp by prices for batteries. Albemarle has been a big winner. Shares are up by 92 . A power lunch exclusive with the ceo luke gresham. Great to have you with us. Great to be here. Thanks for having me. What are the projections for pricing for 2017, 2018 especially as we witnessed teslas giga factory come online. It looks like the demands and supply will be relatively tight and balanced. We think we have good pricing momentum and that well be able to meet the ever growing demand of both the specifications and volume that our customers need going forward. Were really excited. Are you right now exploring for new lithium sources . I mean, theres a lot in the United States that still has not been tapped yet and certainly a big supply coming from chile. Absolutely. Were expanding our derivative capacity and searching for Additional Resources for the most coast competitive positions we can have around the world to meet the demand for growth in lithium that will be the next 10, 20 years. We have to be ready to meet the demands and feel great about our position. I want to talk about Battery Technology. Electric vehicle i understand uses 48 times the amount of lithium that is used in a smartphone. As Technology Gets better and better, is there less lithium in a battery or more lithium in a battery . You know, i think it really depends where that Technology Leads us. I think if you look today, lithium is about 3 the cost of a battery. Theres as an example, theres about 3 to 350 worth of lithium in a tesla automobile. So its a key contributor to allowing us to electrify the world yet its a small portion of the costs. So we feel as though that over the next 10 to 20 years were going to see significant improvements in this Battery Technology but the key to it is going to be the purity and the amount of lithium that were able to put in those batteries for Higher Energy density. Sir, its michelle here. How long is that going to take . Its 2 00 in the afternoon. Im at 2 on my phone and it makes me crazy. When will batteries get better . Get a i have backup batteries, you have no idea. Abc, always be charging. Im with ya. Im charging my phone right now as im doing this. To see whats coming over the last decade, youll see an intensification where youre going to see continuous, continuous improvement. Its going to drive critical specifications. Thats where we feel has a competitive advantage based on our resources and ability to transfer that to the higher specs. Are we more likely to solve michelles problem. By improving the battery life. Can we improve the way the power is sucked out. More efficiency. For the power. Whatever. You get my point. Yeah. Youre going to see about power. And the use of the batteries. Its going to drive demand for even more and more lithium. So i think over the next 10 to 20 years this is the best growth story of chemicals. Were excited to be a Market Leader in that area. A Chemical Company even though investors love to think of you as a Lithium Company over the past year or so. Right now is the lithium business in fact the Fastest Growing part of your business . Where do you see that as a percent of revenues a year, two years down the line . If we look at it, its 1 3 of our revenue. The next five to ten years its a percent. Were well above 50 to 60 . Weve got to have it. The best of the chemical to have the low cost to get the lithium. The high grade and high specifications for the carbon and hydroxide to meet the market demands. I dont think we can pigeonhole ourselves. Luke, thank you for joining us. Appreciate it. Hey, thanks for taking the time. Good luck. Luke huson. Check please is next. Well be back with fully charged phones after this. Check please. My check please. Did you see the top of the show, the battle between larry kudlow, devin nunez. Fighting it over the border adjustment tax. This is emblematic of what is happening right now when it comes to Corporate Tax reform in the United States and amongst republicans, if they dont get this done, you can see an end to the trump rally. You can see a stall. Youll already be seeing a stall. I think larry was objecting to the idea that this is changing the whole discussion. What looked to him to be a very simple tax cut boom. Has now gotten muddy. Interesting discussion with Arthur Brooks about the white man problem in america that so many have been sort of disfeektdisfeek disaffected and left out of the economy. Youre an okay white man . Tonight on fast money we continue to celebrate our ten year anniversary. Carsons lock of muddy waters give us a medical waters device. Closing bell right now. Hi there. Welcome. Were glad youre with us today. Im bill griffeth. Its the closing bell at the new york stock exchange. Im sara eisen in for kelly evans. The s p 500 having its worst day. We are well off of our lows for the session. The dow is down 60. The major averages coming back up. Lets see what happens in the final hour of trade. Well discuss whether the trump rally is in danger of coming to an end. I mean, the leadership upward is the lears