Transcripts For CNBC Power Lunch 20170508

Disadvantage. That was a predeal with 108 dividend payout ratio projected for next year. Post deal, down to 70. The growth from enterprise r revenue at level three and synergies offset the declines and you fast forward and the new company two years out is a 2 grower at the top line. Not a 2 shrinker. We have the opportunity to take the best of both cultures, the best of century link and apply it across the bigger asset base. When do you see a deal 40 cash flow, increases the asset mix and the stock trades down . So management doesnt come together or you use the football analogy with the patriots not keeping tom brady on the bench. What happens if they give you the heisman . I think were in the fourth quarter. Were sharing this today. Weve had great constructive dialogue so far. We told them we would be sharing an idea. Theyve responded constructively. And then i believe the idea will snowball. I believe stakeholders will get behind this and that we can get this to happen. My goal is getting it to work and not worry about what happens if it doesnt. Look, our view is were willing to fight for this. We dont think we have to but we think all shareholders want to fight for this because it makes too much sense. I worked for karl for many years. He made a lot of money by doing the simple and obvious things. Theres a simple solution here. Lets get it done. Its an interesting idea. The stock is up, as you see, 4. 25 . A great idea. As were having this conversation. Can you talk at all about pandora, another holding of yours which the Company Still seems to be under fire to do something to do a deal. So can i defer discussing pandora because given certain events im not in a position to comment right now . Okay. Thats fair enough. Ill read into that. Let me ask you quickly, weve had this conversation before about active versus passive investing and the role that index funds play in all sorts of different areas of the market. He said about passively managed funds if everybody indexed the only word you could use is chaos, catastrophe, there would be no trading. There would be no way to convert a stream of income into a pile of capital or a pile of capital into a stream of income the markets would fail. Whats your view . Thes giving the end game answer. Passive invest something a great product for people who want to compare with an index. The challenge is it if the passive money in the market gets to be too big you have no real price discomfort and no accountability. Right now 16 of the typical s p 500 companies are owned and thats fine. He says if they were all 100 who would issue the price you buy a deal or if a deal is a good deal or bad deal . That would be a disaster. The flip side in the important nuance in the mitd is where does it take you . Our Capital Markets benefit from massive transparency and accountability and, for that, the primary Reason Companies want to list in the u. S. Because its the most robust capital market. If you have 50 of the shares held by index funds, does the balance rotate too far away from equity holders to other stakeholders . And theres not enough accountability. Its not just the activists. The proverbial fidelities do a great job Holding Management teams accountable, right . If they only own 10 of companies and 90 are held by index funds, right, i worry youll have less accountability and our businesses may be less efficient and there might be a negative unintended consequence from a Great Movement and for many people a great investment product. He has to find great balance. Keith meister founder of corvex. His pick century link is on the move and on the move big time today. That does it for us from the sohn investment conference. Power lunch begins right now. Thank you, scott. Welcome to power lunch. A lot to get to this afternoon. Much more from the sohn conference including the best n investing ideas from David Einhorn and bill ackman who you will hear from live in a few minutes right here plus well head back to omaha for more on beckys big interview with warren buffett, why he says he was too dumb to invest in amazon, which i find hard to believe. Melissa . A quick check on markets. Stocks are lower but in a narrow range. The nasdaq set another high before moving lower. The s p 57 managed to set its first interday record high since the beginning of march also before loss of gains. Apple having the biggest impact, positive impact, on the dow hitting new highs once again. Its market cap now close to 800 billion. Tyler . And we begin this hour in omaha where becky quick sat down for three hours with the billionaire investor warren buffett. She was also joined for part of the conversation by charlie monger and bill gates. That is three in a row. He lamented he didnt really understand tech for a time. Hi, becky. Its great to see you. Youre right. This was a different Berkshire Hathaway meeting. So much focus. Warren buffett said he doesnt understand technology stocks. He told us he doesnt even own a smartphone. It was an amazing weekend to hear about technology. He went on and on about how impressive amazon was and how impressive jeff bezos is, calling him the best manager he sees in business today. Hes been so impressed by what hes done over the years and yet still buffett does not own shares of amazon. How come you dont buy shares of amazon . Stupidity. I was impressed with jeff early. I never thought he could pull off what he did. And i thought he could pull off something but on the scale that has happened, i mean, its changed your behavior, its changed everybody in the offices behavior and the remarkable thing about jeff and Everything Else is hes done it in two industries almost simultaneously that dont have that much connection. Now forced to choose between either buying or shorting shares of amazon, buffett said that he would actually buy the shares. He said the same thing about google. He said hes not buying either one of them now. Again, if he was forced to choose, he would go ahead and buy those shares. And with google, he admits not owning them was a mistake, too. Charlie brought up the fact we missed it, too. Google i should have had some insight into because he was a heavy user. We saw value and i have no idea what were paying per click now but we were paying 10 or 11 per click for something that had no cost of goods sold and we were going to keep doing it. We could see that. I should have had more insight into that. Now thats one of the refreshing things about sitting down and listening to buffett and munger. Theyre willing to talk about their mistakes. They say theyve made plenty of them. Obviously theyve done well when you look at how theyve achieved over the years. Theyre reflective. They will go back and say we should have seen this, we should have seen that. When it comes to either commission or omission, they are more than willing to sit up and say, hey, we made a mistake. Guys, back to you. And perhaps you can learn more from mistakes than winners even. Becky, see you soon. Becky quick from omaha. Warren buffett admits he missed out on google and amazon. Is there still opportunity for you to get into these internet names . In one year amazon up 40 . Google up 32 . Lets bring in ali who has a hold rating on google at morning star. A buy rating on google at canacore. Ali, you think maybe at this point shares are, what, fairly valued . So its not a buy. Yes, actually we do think the shares are fairly valued. The company is a great company. Its one of the two behemoths in the online ad industry making some headway on the cloud side. The youtube is growing nicely. But we think all of that is priced in right now. Michael, you like both of them. You think both amazon as well as google are buys with plenty of upside both your targets are well over 1,000 a share at this point. What would you tell mr. Buffett in terms of looking beyond valuation because thats usually what gets it particularly value investors. Mr. Buffett certainly has a great track record. I think that amazon is probably the better stock of the two, if you have any sort of longtime horizon. I think the durability of the Revenue Growth will be there for a long time for amazon. I think google is a pretty good stock in the short term. Its definitely, in my opinion, closer to the end of its run. I think there will be head winds later this year that the company will have to fight through. But i still like them both. Quick point if you look in tech, other than these stocks which are showing tech leadership, there arent a lot of large cap Growth Stocks to buy so theres a scarcity of merchandise and that, i think, helps those stocks. What could trip, michael, amazon, if anything . I think the biggest risk in the very short term is an aws price war with microsoft and google. So far theyve been able to weather the storm, but aws is now one half of amazons profits. And so in the short term thats the biggest risk. I think in the medium to long term its really just investors have given amazon a pass to make these investments and the Shareholder Base has rotated in the type of investor that supports it. If that were to change in some way that would be a more structural issue for the stock. Ali, how much does the membership of google and amazon or any other major stock you cover in major etfs mitigate any down side . Are these companies now so involved in passive investing that it doesnt even almost matter how they do . Yeah, i agree. To a certain extent passive investing lets management and their strategical plans go on no matter what the short or medium term impact on the stock may be. But for google itself historically theyve proven that their longterm strategies while it may initially appear as bets do pay off. That is certainly with the Online Advertising and it looks like their longterm strategy with autonomous selfdriving cars and the cloud side is probably going to pay off. Michael, in terms of metrics, youre obviously not looking at valuation for either of these two stocks. So if you are to advise somebody out there, what would you look at . How do you justify paying 950 plus a share for either of these stocks . I would say for google its the valuation is quite reasonable. Its trading at about 18 times next years earnings and the Revenue Growth rate is above that level. You can go out and see good returns. Q1 demonstrated they controlled it really well off that number. I think google is in a pretty reasonable place. Amazon is different. In order for the stock to keep working you have to have this Investor Base that supports that and that was a big change in 2015 and the early part of 2016 the Shareholder Base rotated into a group of people that just were very focused on the long term. All right. Gentlemen, were going to leave it there. Thank you, ali and michael. All right. Now lets find out what is coming up from paris as a relative unknown former investment banker becomes president of the worlds sixth largest economy, michelle. Hes a wunderkind. Can he end frances notorious 35hour workweek . We discuss coming up after the break. ] what . Hey gary. Oh. Whats with the dogsized horse . Im crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. Isnt that right warren . Well, you could get support from thinkorswims inapp chat. It lets you chat and share your screen directly with a live person right from the app, so you dont need a comfort pony. Oh, so what about my motivational meerkat . Inapp chat on thinkorswim. Only at td ameritrade. So beautiful. What shall we call you . Tom name it tom studies show that toms have the highest average earning potential over their professional lifetime. See . Uh, its a girl. Congratulations two of my girls are toms. I work for ally, finances are my thing. You know, im gonna go give birth real quick and then well talk, ok . Nice baby. Lets go. Here comes tom 5 nothing, stops us from doing right by our customers. Ally. Do it right. Whoo look out. Welcome back to power lunch. Im Michelle Carusocabrera live in paris where there will be a brandnew president for france, Emmanuel Macron, 39 years old, never held office before. Won yesterday handily against marine will le pen. 66 to 34 . But now comes the hard part, trying to fulfill his promise to reduce unemployment and change france to make it more competitive. Can he get that done . Joining us is with, can he achieve . We talked to all these Business Owners for the last several days. They are desperate for labor laws to change. They hate the 35hour workweek. Can he do anything to change all of that . It it will all depend on the majorities that he will get or not get in the legislative elections so it will happen in june. Its unprecedented we have somebody who is president of france who has no seats in the parliament and who doesnt know how many he will be able to get. So it will really depend on how his majorities will look like and whether it will enable him to do the reforms that he wants to actually do. Im not convinced the french people want the reforms. When you see surveys and you ask them, they dont actually when you ask them about the 35hour workweek, Business Owners dont like it. But the people who work the 35 hours do like it. The french are really proud, lets say, of their welfare state and they really enjoy it and they dont want anything, any reforms that will take those benefits away from them and thats the crux of reforming france is the simple fact that the population was granted and doesnt want to lose out on the benefits. That will be tough, a very big hurdle to get over. The rest of europe breathing a sigh of relief. The candidate has been squashed. Should they be sitting back on their laurels saying all is okay in peoples support of the eu . Probably not. Obviously macron has won this with a bigger win than was expected in the polls and thats positive. On the other hand, still, a huge part of france voted blank, and these people wont go away. And the president will have a big challenge of dealing with their fears and what they think of the eu and with globalization and what is going on in france. He will have to find a way to address those. Otherwise in the next elections in 2022 were just having the same story all over again. Wow, Marine Le Pen has a niece that everyone says is the next person to watch. Many, many people said to me, most of them frightened, wow, she could be the next president of france or within the next 20 years will be the president of france. Shes definitely lining up but we have to watch and see what happens to the party as a structure right now. It might as well fall apart because there are disagreements. Le pens niece, as you mentioned, is in position with another Important Party member who is advocating opposite policies from her. Marine le pen has tried to federal rate the two but if they start to fight more publicly that might make the party fall apart. It doesnt mean that overall the e ideas they are defending will go away. We have to see whether they can be united and stay a political force. Famke, thank you. I really appreciate it. Guys, well have more coming up a little bit later from paris. We profiled a small business, one of those Small Businesses i was talking about that are really frustrated by the labor laws here and constrained their ability to run their business the way they want. Back to you. All right, michelle. Well look forward to that. Thank you very much. Even before today many investors telling us lately europe is a better spot to invest in than the united states. Does the outcome of that French Election make it even more so . Black rocks chief multiasset strategist joining us now from london. I would imagine you are probably more mildly optimistic given the results of the election. How much of your bullish position comes down to good old passioned Earnings Growth out of corporations . I think thats quite right. In the short term were quite positive on Earnings Growth and thats been the story coming both from within europe and coming from the Global Recovery that were seeing increasingly take root. So i think youre absolutely right. In fact, thats been our story for now a couple of quarters except that until last night this story was clouded by the Political Risk perception. Now that cloud is gone. That doesnt mean there wont be others coming through or down the road but for now the cloud has gone away. I appreciate you saying im exactly right but i only got my information from reading your research. Im just quoting you back to you. At 20 etf growth, thats great. I think investors worry more about whats going to come not what has happened. Do you see that pace of Earnings Growth continuing . Yes. As i said, we do. We think the growth momentum from within europe is quite strong. Unemployment is still going down. Were beginning to see more after pickup in investment and consumption still has some way to go. And whats more the european corporates get a very large share of their earnings from the rest of the world. And the rest of the world we also have a very nice recovery taking hold. Theyre very well positioned to keep growing. Perhaps not exactly at that pace but when you compare to other markets, particularly the u. S. , we see much more scope for solid returns in europe than, say, in the u. S. Right now. How much of a wild card, isabel, are the german elections in september, and did the cdu victory over the weekend ease some of those concerns going into that election . Yeah, you know, were look ing at the german election in a pretty relaxed way compared with the pren of or even the dutch election. We think that which ever the outcome its a very stable political system. Maybe Angela Merkel will still be the chancellor. Maybe it will be her competitor. Regardless we expect quite a bit of stability in policies and nothing that would be detrimental to the health of the european economy or the german economy. So were pretty relaxed about that election. Isabel, thank you for staying late. We appreciate it. Hopefully well speak with you again soon. Straight ahead we will take you live to the sohn conference in manhattan where the Billionaire Hedge Fund manager bill ackman is set to take the stage in a few moments. [vo] when it comes to investing, looking from a fresh perspective can make all the difference. It can provide what we call an unlock a realization that often reveals a better path forward. At wells fargo, its our expertise in finding this kind of insight that has lead us to become one of the largest investment and Wealth Management firms in the country. Discover how we can help find your unlock. Iits where we end up. T, expedia. Everything in one place, so you can travel the world better. Reporter welcome back to power lunch. Rick santelli here. I look up and i see the vix under 10, hovering to go under 9 3 4. I look at tenyear notes, 2. 38. We havent seen it since the 10th of april on a closing basis the 7th of april. Open the chart up so you can see from the beginning of april, there it is. Really selling off aggressively. And it isnt just the long end. The short end as well. Twoyear notes hovering at 1. 33, 1. 34. Since the 7th of the 13th of march, how is that. And a oneweek chart of the dollar index is trying to recoup some of the losses that it had as macron was giving the yeuro dollar a tail wind so we really want to watch but the vix seems to be whats on everybodys mind and to see this type of selloff in treasuries is really waking up some of the market participants. Melissa lee, back to you. Rick santelli, thank you. Coming up live to the sohn conference where bill ackman is moments away from taking the stage. Meta appetite control. Its your glass of willpower that helps keep cravings. Far, far away. Feel less hungry with the natural fiber in clinically. Proven meta appetite control. From metamucil. Usaa gives me the and the security just like the marines did. The process through usaa is so effortless, that you feel like youre a part of the family. I love that i can pass the membership to my children. Were the williams family, and were usaa members for life. A used car, hello, everybody. Im sue herera. Here is your cnbc news update. Secretary of state Rex Tillerson meeting with the Prime Minister of montenegro at the state department. When tillerson was asked of his upcoming meeting on wednesday with his russian counterpart Sergey Lavrov might be an indication of improving relations, he simply replied, we shall say. South African Police firing rubber bullets at protesters in johannesburg after they took to the streets over a shortage of housing. The protesters say the government has done nothing over the past 23 years to alleviate the problem. Several people were injured when a car crashed into a Dunkin Donuts shop in miami this morning. The aerial footage shows the car completely inside the shop. No word on what caused the crash. And former president bill clinton and bestselling author James Patterson are teaming up to write a book titled the president is missing. It will come out june 2018. Its the first work of fiction by the former president. Thats the news update this hour. Ty, over to you. Sue, thank you very much. Lets get over to a market flash. Drug Research Provider spiking here object a report citing sources that the company is exploring a sale with a price tag of roughly 4 billion. Ill point out the current market cap of parexel around 3. 7 billion. Its worth noting that activist and investor Corvex Management has built a sizable stake in parexel. Shares now up almost 7. 5 . Melissa . You mentioned corvex. We just had Keith Meister on and he was spending a lot of time talking about other investments but had not mentioned to my knowledge parexel. This report says the firm has not publicly talked about its investment but according to wsj do have a sizable stake in parexel. Something to keep in mind. Thank you very much. Lets get to bob pisani. Hi, bob. Reporter narrow trading range but, remember something, we are essentially at historic highs. Were at historic highs in many parts of the world. Take a look at the s p 500. We have been in this 12, 13point range for a couple weeks now, frankly. But the important thing is we broke through on friday with a historic close. The important thing overall, too, most of the sectors are continuing to hold up the market. Leadership in technology and has been for most of the year. Energy is not getting any real help at all. Its still flat the today and given that the Oil Situation is stabilizing thats a bit on the disappointing side. Materials are the weak part of it. A lot of arguments that stocks are priced for perfection and that is certainly true, however, when the facts are almost perfect, theres nothing wrong with having the market priced for perfection. If you look at the earnings situation, theyve been rising here and in europe. Geo politics has seen a much lower risk. The u. S. Economy is improving. The fed is essentially neutral in terms of the stock market. Everyone believes two rate hikes of the year. And tax cuts are in play. If you look at the fiveri risks all are lower than a few months ago, so certainly stocks are priced for perfection but near persuasion here. Global markets, when you have that kind of situation, this is what you get, the u. S. At the a historic high, germany at a historic high, japan at a 16month high, emerging market etfs are at multiyear highs as well. So priced to perfection but then again it doesnt get much better in terms of the risk factors for the stock market. Back to you. All right, thank you very much, bob pisani. To scott wopner. We are awaiting bill ackman to take the stage. Scott, it has certainly been a very interesting, a rocky ride for bill ackman although it seems hes coming off what had been a good month. Yeah, melissa, were waiting for bill ackman. He should be taking the stage within a matter of moments. Well find out what kind of idea hes presenting whether its one thats already in the Public Domain or whether these are no ideas. Remember, he has a couple of new investments, new in quotes because hes had them for some time. He hasnt revealed them publicly. We wonder if he uses the sohn stage today to bring those to light publicly. It will be interesting, in fact, if he does that. He gets about 15 minutes on stage. Not a tremendous amount of time. He would have to go through both of the names and, in fact, he reveals both of them quickly. He is off to a decent start for the year. Certainly last month was good for bill ackman, up 4 in april, up 2. 5 , a touch better than that year to date. Thats net of fees. A little known fact as well, and i mentioned this, guys, on the air within the last couple of weeks that if you take from march 31st of 2016 through april of 2017, up 18. 5 net fees, it just happened that the tremendous disaster that was valiant obviously weighed heavily on performance. Herbalife has traded in the wrong way as well. Other things had done quite well over that period of time. You take Restaurant Brands or platform specialty air products in the Howard Hughes corporation, and hes actually done quite well with those names. And in any of the conversations that ive had with bill over the last weeks and months he is steadfast and unwavering, really, in his belief that he is going to stage a comeback. He hasnt been as public as he has in the past. I think at this point he wants to let his performance speak more than himself certainly on what he thinks is going to happen. But if april is any indication certainly his performance has gotten better and if the more broad indication that i told you, his performance from march 31 through april of 2017, it seems as though hes stemmed the tide that valiant had really pulled out had caused him so much pain. Well see what happens on the stage in the room just behind me. What have his investors done . He hasnt lost a ton of investors, has he . I dont think hes lost a ton. Obviously hes had an eight quarter gate on his money as well so it takes a long time to get the money out once its in, tyler. The other thing hes done just last week he had another initial Public Offering in london. So it gets him more of that permanent capital. Remember, he had a publicly traded vehicle in amsterdam already. Now he took one public in london. It just adds to the pot, if you will, of permanent capital which, you know, obviously cant be redeemed. Now certainly the value of it can go down if the overall Net Asset Value goes down, but it certainly helps in the Bigger Picture of where hes trying to go and keep his assets growing over a period of time. What are some of his more recent investments, scott . Cmg and chipotle comes to mind. How does that tell you how his views of what he will invest in next change if they have . Chipotle, look, was a risk obviously when he took it on because of all of the negative publicity and the noise that was surrounding it but its done quite well. You have a stock chart up as were having this conversation. The stock is up 25 year to date. Took a lot of criticism, i guess, when he revealed that investment for one because hes bill ackman and, two, all of the noise around chipotle. The performance of cmg has certainly helped his overall performance. Its one of the reasons hes been able to have a decent april. I dont know what these other names in the portfolio, to be honest with you, are. Nobody does except for the folks who are inside. Were going to find out if, in fact, hes ready to reveal those. Today there have been instances in the past where he sort of goes over a previous idea that he had, whether its herbalife or valeant. Hey, scott hes walking out on the stage right now. There he is, bill ackman. Well go right to him. Go back one slide, please. Just a quick little update on the foundation, up to 400 million in grants since that last fact so something we take quite seriously. I want to talk about a business that people think about as a risky business. The Land Development business. Why is it risky . Enormously capital intensive. You need to make a large upfront investment. You can only get recourse leverage, it takes time to get zoning, get approvals, youre ready to go with the market changes, you have to go forward anyway. And your profits are in the last few lots that you sell. This is a very highrisk business. Whats interesting is the 27th wealthiest man in america and, by the way, i think forbes numbers are wrong. This is donald bren. A lot of people have never heard of him. Hes a land developer. He did one deal or one very, very large deal. He built a Master Plan Community, he took over the irvine ranch. Thats been his life for the last 40 years. My guess is his net worth is closer to more than 30 billion. One way to find a great business is to look in the forbes 400 and see where people made their money. Whats interesting here is he did this this wasnt he got this cycle right. Hes been doing it for 40 years. That tells you hes been through the best and the worst in real estate. That picture on the left is the irvine ranch, Master Plan Community, which he purchased in 1976. 40odd years later its one of the best places to live in the country, and hes done a remarkable job. One of the keys to investing in ma master plan communities and Land Investment you dont want to be the first guy. He stepped in more than a decade after the planning took place. You want to be the second owner or perhaps the third owner. You want to get in after a large upfront investment has been made and the community is established. What is a Master Plan Community . Its more than 10,000acre property. Its a piece of raw land designed almost like building a city with a lot of forethought but instead after traditional government you have one owner, and if you have an owner with a longterm approach, a lot of very longterm value can be created. The key is making sure you have the right assets in the right places. You start out putting in an infrastructure, and then you start selling some lots and you Start Building the amenities necessary to making it an attractive place to live and eventually have a fairly remarkable business. So the irvine ranch is 93,000 acres, about a fifth of orange county. And he bought it with a group of investors for about 337 million. A good chunk of that money was borrowed. Over time he bought out all his partners. He owns 100 personally. And he was pressured over many years to sell pieces of the ranch and he refused. He retained effectively all of it. It now has a population after quarter million people, considered the safest big city to live in america, and its been a remarkable investment. I couldnt figure out what his actual original capital inve investment here is, but he turned a relatively small amount of money as a minority investor in this deal, i think it was less than 30 , into at least a 15 billion fortune. So what did he do . First, he started off with very good real estate. Location, location, location applies. He bought into an existing Master Plan Community where a big investment had already been made, used increasing value to minimize the equity required so he could avoid having outside part mers. He was able to boy out his partners over time. He used debt, an appropriate amount of leverage, municipal financing. These are basically tax increment bonds where you build infrastructure and you issue bonds to pay for it. He kept his Balance Sheet conservatively financed. He would make sure Home Builders bought enough but not too much. And he was careful about not over building and, again, he controlled the zoning, the timing of the release of land, and he was the develop er. He took a very longterm view. This was going to be his legacy. And his Guiding Principles were, number one, maintain the land under a single owner because only one person could have this kind after vision. Wouldnt have to argue about what to do. Think very long term the master plan, constantly update the planning. Continue to reinvest in the land. Be careful. Land stewardship, make every city in the irvine ranch an important and happy place to live. Just make sound decisions. These are basically their principles. Go back one more slide. Okay, next. Developing property is the most important thing in my life. I expect to be work iing well io my 90s. Hes approaching his 90s. Hes not for sale. Here i am in a conference talking about public investments and you cant invest. The question is how can you invest at least in the style. A Public Company called the Howard Hughes corporation, a company we formed about six years ago. Whats interesting about it is it has five master plan communities around the country with very similar qualities to the irvine ranch. The seaport district and its a district. The only privately owned district in manhattan. Well talk about that. Downtown columbia we wont talk about but its ranked fourth in the country in terms of places to live. In houston we own the woodlands. Im chairman of the board of the Howard Hughes company. A 24,000 acre Master Plan Community. And in hawaii we have an urban Master Plan Community, we own 60 acres on the beach with 9 million square feet of approvals. And like the irvine ranch were coming in not as the first owner but in many cases the third owner or later. Our Oldest Community is in columbia. We have over 5 million square feet of vertical development to do there. All of the lots have been sold. Thats a 50 odd year old project. The woodlands is 30,000 acres, twice the size of manhattan. Howard hughes controls the zoning. I call this sin city but for real. We own the remaining 4,000 undeveloped acres. Bridge land a lot more to go because its a younger community. The south street seaport is 400,000 square feet of Street Retail in new york. And ward village in hawaii is 9 million square feet of development. In terms of history, Howard Hughes, you think of him as an aviator but made most of his money in real estate, he invested in real estate, he acquired sommer land. They bought rousch for the Shopping Centers and didnt take much interest in the master plan communities. We got involved when they filed for bankruptcy and thats when we bought out the 50 interest held by the heirs of Howard Hughes. And Howard Hughes began its existence when we spun it out of general growth. Just a little bit of history on the company. We bought 25 of gdp in 2008 for 60 million. Filed for bankruptcy in april of 2009. I talked about it at this conference in may of 2009. I think the stock at the time was around 1. We bought out the hughes heirs. The company emerged from chapter 11. Investors made 100 fold return versus the november 2008 price while bondholders got their money back. We spun it off to shareholders and got backing from black stone, brookfield, fairholm and us. In 2011 we bought the 47. 5 of woodlands held by Morgan Stanley and began to consolidate ownership. We bought out brookfield and exited and retained our stake in Howard Hughes. Weve never sold a share. We never talked publicly about the company. The question is why are we talking about it now . This is one of the most attractive times in the history of the company to invest. The stock trades at one of the widest discrepancies between then asset value and we have a better understanding of the business and the business has had a huge head start over the last six years. So if you look at the irvine ranch principles, weve adopted them. Sole owner in Howard Hughes. Thoughtful master plan, continual reinvestment of land, buying out our partners, longterm approach, judiciously selling land but not dumping land on the market, and being an appropriate longterm steward. We have a conservative Balance Sheet. We stopped selling commercial land. When this was owned by others they would sell off land to pay debt service. We stopped land sales and started buying out parts of the mpcs we didnt control because we understood once you get to a certain Tipping Point the commercial Development Opportunity becomes large. Once you get beyond a certain population you can build vertically. And we control effectively all of the commercial and residential vacant land and we control the zoning. When you own these assets in the later stages of a Master Plan Community you can build enormous value. Its a business with a cycle so you start by selling lots of Home Builders to bring in a population that creates demand for Shopping Centers, office buildings. You build the buildings, they generate cash flows and so on and so forth that makes it appealing to live. Sell residential lots at a higher price and the cycle continues. A few examples of the mpcs owned by Howard Hughes. The woodlands, anyone who has been to texas, is considered one of the most desirable places to live in houston, its twice the size of manhattan. We own the vacant land and the timing of supply. 115,000 residents ranked as the best place to live in texas, the sixth best place to live in the country. Exxon mobil moved their campus close to the woot lands and, in fact, we did a build to suit for exxon in the property. Perfect example we saw this nice piece of vacant land. What should we do there . We came up with an idea. Fast forward 2 1 2 years we built space, lease d it and are generating 15 million of Net Operating Income from the property. Having to buy land or buy buildings we have an enormous amount of opportunities. More than 50 million square feet of unbuilt vertical opportunities inside this company. This is a sense of the scale of this community. Again, about 1. 5 times the size of manhattan h. Is las vegas. Its nine miles from the strip. Its 25 years old. The most attractive place to live, an asset you could not create today. We did a deal with discovery. People know discovery land. Were selling land in the desert. You can do the math, 4 million lots in the desert gives you an idea how valuable a Master Plan Community is and the remaining land in that community. We kept the commercial land, so we didnt sell it to others. We built out the Community Around it. The best way to see that is by going to this picture. All that surrounding property and development, those are the households, and we save to the end the commercial property. You build a commercial property. Once you have that density it becomes enormously valuable. You help make properties more valuable. We own all the property and, therefore, we get the benefit for the company. This is what it looked like in 2010 and this is what it looks like today. The stabilize the existing assets. These are office buildings, retail Shopping Centers apartments that we build and build new ones. We got 50 million square feet, developments inside this company. Vast majority of the land, no debt on it. 30 million of it is within the four walls of our commune. Were beginning to deliver more towers in hawaii the question is whats this business worth. So the problem here is, if you take a look at the Financial Statements for irvine ranch itll be hard to make heads or tals of it. It is a development business, huge amount of the appreciation, lot of capita going in. Gap accounting is not a good way to think about the business. Book value is not a reflection of longterm asset value so we think the best approach is calling back the approach. Certainly more than i can do in 15 minutes in front of a group. The easiest think to value owe got operating assets, these are lease constructing assets. 340 million stabilized in hawaii. You can sign a cap rate we believe will be at this level in two years. Because these assets are within master plan communities and we control the comply this is muchless risky real estate. You need one more apartment build requesting you got four developers that build one more pardon me building at the same time here we can control and prevent that from happening. The capita you use to evaluate the assets is lower. A lot of people think about lands as a risky business. Went your selling remaining lots in certain communities its a certainty those lots will be sold. You know youre going to sell them. And generally those assets appreciate at a rate similar to where we think you should discount those cash flows because of the high certainty. You can look at todays value to access the val. Asset 110 north wacker was the old headquarters for gdp. We signed a lease with bank of america to take half million square feet and it goes on. We think the operating assets, thats the stabilized or approaching stabilized income bruce bruises assets. The residential assets will be sold over time is equal to the enterprise value of the value. So what else do you get for your money . This is the new south street sea port. You go downtown. It looks like this today its going to hope in 2018. This is 400,000 square feet. 170,000 square feet of the peer. The next over is 1050 square foot building. All the land to the west is part of this assets. This is going to be a great place to work, to entertain, to have fun, go to concerts, roof deck holds 4,000 people for an outdoor concert. John george is opening up the equivalent of harrys marketplace in this location. And this is one of the most valuable pieces of real estate ive seen in my career. Its going to open in a year you get it for free. You get 60 acres in hawaii at the peach for an approval of over 9 million square feet for builders. We built almost 1100 condominiums. We sold 1100 and were building a new development again, only as needed. We only build until we see the demand. That is what it looked like last year, heres one of the completed buildings and it goes on. Next. Thats what it looks like fully built out. And again once you build a whole bch of highrise kcondominiums t make it is street rae tail for valuable. Alamo shopping center, half inches were sold for 1. 5 billion and we own a similar location in this location. You get 37 million square feet of development in the mpcs which is yet to be built. We built almost 4 million square feet over the last six years. In hawaii 44 million. 100 on cost. These assets we think are 5 6 type as session you get that for free. What about taxes . This is a tax efficient business for the most part. The nature of Land Development laws you to defer taxation and of course were the beneficiary of reduction in tax rate. Our Balance Sheet is entirely almost nonrecourse. Were 2 3 nonrecourse. We gunshot a greet management team. The company is in a specific way. Obviously in sensitive is to see a higher share price but hes going to reinvest 50 million in new warrants when he sell the old warn. Our ceo believe, as do other members of the management team. With that ill tell you how you can learn more. Weve kept the company kind of as a secret. We had our first Earnings Call on the first quarter. Were going to have our First Investor day if you want to come thats very soon. Thank you very much. Well thats the hedge fund more bill act man rap b up the conference. Talking about Howard Hughes investigation. Scot wart ner, mr. Browne and mr. Tar nova are all there. What do you think guys . Im surprised. Only in the sense tyler, that i was expecting perhaps a new name to come from bill action man today. While he said its knew in the sense that he hasnt really talked about it publicly this is by no means a new holding or position for bill act man. Perhaps some of you might recall the famous forbes cover store of some kreergs, baby buffet which has action man on it and the cover story was about his hopes and dreams for the Howard Hughes corporation and how he view thatd and how he was hoping others would view it. Where it was a cash machine. Now if anything i guess this is bill going back to his roots somewhat right . Real estate is where he made his biggest mark ever and that was with general rode properties. One of the greatest investment in hedge fund history. This is a bunch of reasons why i would say that as well. D this is a spin off from general growth since 2010. And its moving away from the Master Plan Community as far as acquiring relate estate assets and operating them. Everything everyone watching the show is surprised. I think its fantastic, its about discipline. Being disciplined, not forcing things and focuses on what he knows best. Hes made most of his money if real estate and hes confidently talking about that today. I think its great hes not up there in a marketing environment. Hes not forcing a new issue idea. For those of you who may not know,in when bill was back in Harvard Business school he was buying stock in the Department Store zaneders because of the real estate it had. He owned a rocker feller center, the company that owned the mortgage for rocker feller center. Its where he cut his teeth. His fathers and family founded actmans real estate. This is where he grew up. The buzz or the antibuzz i should say about this, people are so surprised, im not surprised at all because i remember in 2013 when persian square was somewhat chasened after something that didnt work out well, notably the old target fund, city group wasnt great, to persian square come out with gamble. Whichever one in the audience said, boring, but borings good sometimes. Hes running an operatirganizat with people who work there, employees, they read all the headlines. At a certain point you dont want any more publicity. You dont want to steer the pot. Not only is it not a new idea its actually an idea that has been in the powerfrtfolio maybe longer than anything, eight years. No surprises for the people that work with him, no surprises as far as investors, i think in this stage in the game thats what if doctor ordered. He is the chairman of Howard Hughes corporation as well. We should let people know the significance, brian, position and stake that he has in Howard Hughes. Yeah. Its done well since the 2010 founding of the company. Talk about 240 since 2010. It is down about 30 from its lows of 2013 but he still made a lot, lot money on the Howard Hughes corporation. I wonder though guys, we talk about the timing of this as you guys have noted, not a new investment, but the south Street Project is a massive project. Its going to be oling early next year and i wonder if this does not also provide a bit of a boost from the marketing side of the sea port as well. Not just the investment in the corporation. It did catch my ear when he talked up the ground level retail. I wonder if thats a positive in todays environment . Joe has a thought on that. I do. He just put bank of america in 1 10 whacker. I think we talk about amazon and the Square Footage were youg about a Real Estate Investor who probably see opportunities to buy off some of the assets and put it into this proefrt. I think its greet. Sea port is not a strip mall its a destination. Even if the people from the chairman divesting in wall and retail, keeping the 5th after knew property because its a destination shopping. To the sea port visits into that it does now. Sea port was the place you went to get the gap and have a chain hamburger eight years ago in manhattan now it becomes cool. Congratulation if you own mutual funds in horizon and gifford. Those companies are some of the biggest holder of Howard Hughes holdings. Those stocks are up today. Let me be clear, im only surprised in that maybe it was for anything else. I was hoping we were going to get a new and original idea. Bill packaged it as sort of a new idea as only he can, but the reality is is that he has this stock for a long time. So from a suspense standpoint i was a little under whelmed only in that nature. You were in the media, now imagine from another prisonism, lets say youre a hospital thats got part of the endowment being managered by persian square, lets say your a fourth or fifth year competent and a lot of your career is tied up in persian store. Today, thank god hes not going after anyone and looking for a lewd chris spinoff idea that has no shot, hes not doubling down on something not working. Hes bail saying were investing here, hes an update of whats going on. If you dont know about it now you know about it. If youre a shake holder thats what you want. Guys hes been skaen with me over the last many years in talking about his belief for Howard Hughes even off line about what his hopes are for this company, how well this company was performing and the outlook hes had for it. Now hes shared that view with a broader audience. Not for just a couple thousands of people who are in the auditorium but for the that can that were talking about it. And the way he unfolded his argue, you buy Howard Hughes and you get the woodlands and south sea port for free and you get all the other things for free given the discount of asset value, it sounds like you know, buy this knife and well through this in for 19. 95. There are a few marketers, tyler if you want to stay on that ber than dallas, texas tick. Thats what he does if not better than anybody else. He can sell an idea, this is a stock he believes it, its done well for him and he has much higher hopes. All right guys thank you very much. Well be checking back in throughout the rest of the afternoon. Brian. All right lets get to becky in omaha for her interview. The guy has done well in investing for himself, little warren buffet, hes and up and comer. That guy is an up and comer. If he sticks with it. We should keep our eye on him i do agree. He talked a lot about his mistakes today guys, but for all of his mistakes he has been in credibly right over a long period of time. Its hard to bet buffet to pin him down where he think it is stocks are. He almost never does that. In fact he said today hes only done that a few times over the last 50 years or a few times where its been obvious it was a screaming buy or an indicator it was time to get out. However he did say when he looks at the market today theres one overriding factor that will determine whether stocks are cheap or expensive and that is Interest Rates. People are making a judgment every day. The yardstick is there its just the question of whether you believe the yardstick or not. But that is something we dont like in corporate in what well pay for a business but it is incorporated in the market. Its not fully in corporated in the market, the stock market is dirt cheap now if these Interest Rates were guaranteed for ten or 15 or 20 years. As for finding bargains in the market that is a lot tougher to do. That is what munger had to say, charley munger. He blamed a couple different things, he said you got private equity guys who are jumping over deals and that drives up the price. And then you have all this cheap money flooting around and that makes prices more expensive too. When they are looking to buy companies they are having a tougher time these days. Buffet and munger, gaetes dont see eye to eye but this is one thing they have agree on. Listen to what bill gates had to say. The is fairly high. Interest rates go up a lot, youd expect some retreat from these levels. So when it comes to the idea that Interest Rates are the most important overriding factor thats one thing that all three of them agree on. However, try and get them to say where they think Interest Rates are headed good luck. None of them are sure at least theyre not willing to venture a guess. Buffet says hes got a rough idea where Interest Rates may be but again theyre not going tobit putting down money on that. Thats the one overriding factor. Tyler back to you. Becky fill us in about what mr. Buffet said over the weekend about the healthcare reform package in his view. He was a clinton supporter, of what it does for folks like him. He made some comments over the weekend and then followed up on that this morning with this is well. He said this is what youre talking about, a tax cut bill when you look through it all. He did look through the details himself and says if this bill that was passed by the house would have been past last year he would have paid out 17 less in his taxes. Gates pointed out gaets backed him up on some of those issues said look, its for anybody thats making more than 200,000, the obamacare surcharge that was put on that gets taken and striped away. When you look at healthcare there are two issues going on. One is the idea of trying to bend the cost curve, trying to make healthcare cost come down because its now 17 of gdp. The other is figuring out how to pay for it. Then it was the payment structure that this house bill focuses on. Buffet says its a big tax cut for guys like him. Becky thank you very much. Thank you guys. In the meantime in the market today shares of apple greeting new highs. Its well above 800 billion. This is really been per vaf over the last couple of weeks or so which leads to the question of why with everything going on the markets stuck in the mud. Lets bring in nancy changeler and david cats. David i had this dream i woke up from raert a might mare. Is it possible the markets are going to be doing this for a long while because of the the fundamental ships in pass lg, fundamental shifts in ep s . We think the market is doing this because its normal for the markets to do. The markets taking a breather and digesting it. What youre see g is a lot of areas in the markets, that pretty significant pull back 5 . Theres certain stocks like apple, google and amazon thats going to be continuing to the high. If you have a six to 12 month horizon. We look at thing that already had the pull back and take a view. We think things are pretty good with the market. Nancy what do you think . Is this normal . Well yes. We cant go straight up forever. I do think to your earlier upon i agree mostly with david but i think theres a lack of catalysts. When we saw that the senate over the weekend decided to rewrite the healthcare bill that pushes back tax reforms tax cuts. We were up 13 , lot of companies exceeding accommodates but now it begs the question, well when are we going to see tax reform. Thats the next leg up for growth. Does that mean nancy, you look at the pause in the markets, the markets look like they shut off. The movements in the markets are crazy but do you look at this pause as an opportunity to trim winners since there are no catalysts in the horizon you stick with whats going on . Yeah. Melissa thank you. We have come a little more defensive. Im optimistic as you know weve been talking about apple for a long time. This morning i still liked it when its up 4. 5. Id like to pauds and tick a pit off the table. We still like many of the names that we talked about on your air like healthcare. I love what the pharma lobby did today, theyre pushing out the price gougers and keeping the in know varts in the farm may lobby. I think thats going to be good as we muddle through the healthcare bill. This is the time when you up the quality of your holders and you do so by selling and trimming back on your winnings. David what can i do now . We look at things that are well for the quarter. The thing like te kon activity raise their bonds for a year theyre upbeat. Occidental petroleum in the patch is down for 13 of the year paying a 5 dividend. We think oil in the trading rage is 35 to 50. If oil price to move up oxys gunshot a good upside. We think its a great place to put new money right now. All right nancy stangler and david candidates, guys thank you. Thank you a lot. What are french Business Owners hoping Emmanuel Macron can do for them. Well tell you what the deals could mean. And golf channel david fairty joins us live in studio. A big line up from zone still to come. Much more coming up on the closing bell. Huge interview tomorrow on power lunch. Gold man staks lloyd blaine fien will join us. Be right back. Because they have tvs in them. And, when were not in those rooms, we want our shows to go with us. Anywhere . You got that right, kid show thing. Get a directv allincluded package for 4 rooms. Only 25 a month, price guaranteed for 2 years. Available for at t unlimited plus customers. Akman. Welcome back to power lunch im michelle carousocabrera live in paris where there is going to be a new president. 39yearold Emmanuel Macron won yesterdays connection. New wonder kid in International Politics here in europe. Didnt have a party one year ago and now hes the president. Now comes the hard part, governing. He didnt colony seat in power lemon. Hes got a big election in june can he achieve what he needs to . Theres a lot of Business Owners that have hope for what hes going to do. We spoke yesterday with a man whos awarded with the best baguette in paris. A baker. This is a big business in paris because bred is served at every meal. He one best baguette in paris and as a result his lines doubled. His sales dulled from 1,000 bag gets a day to 2,000. You can see the line there. He supply all the bag gets to the palace for the next year. He voted for macron. Why . He says he really needs help with the labor laws in this country. The 25 hour workweek is nonsense he does that in two days. He says even with all the new business hes afraid to hire new people because legally to dismiss someone is extremely difficult if there was ever a downturn in business. A fall in sales isnt enough. He is hopeful that mcron can live up to the promises hes made about making the labor market hereless rijt and more dynamic. A lot of economist believe itll help lower than employment rate right now that sits over 6 . And in germany its 4 . Back to you. Michelle thank you very much. Up next on power lunch well sit down with a man whos interviewed some big names in america. Dave faherty. Hes had trump and steph curry on the show. More about those interviews and more when power lunch returns after this. Check out the scene when a blast from the past, john daily won the inspiration on golf champion tour. His friends showered him with champagne and he sooked it all up. This is a joyous moment for many daily. First win anywhere in 13 years and even the president took notice tweeting congratulation to john daily on his big win. John is a great guy who never gave ultimate up and now a winner again. Lets talk about golf with david faherty. Dahm chew who can hit a golf ball far as well. John what a story john daily has been. Hes got a great touch of the green, but personal demons got in the way of his success. They did thats for sure. Hes always been a honest man not sure his exwife can say that. Yeah. Which one. Well you know some of us have been there. Hes such a great character and have become more clofrl as the years gone buy. Hes won two major championship, very few people won one of them much less two. Is it fair to say that golf is in a better state now or a worse state now than it was say, when john daily was winning the opening championship in the pga . I think professional golf is in the best position its been than ever perhaps. We gunshot a great crop of Young Players coming through. The tiger woods era we might not see that kind of golf there, which were may not see that kind of golf again. The game miss him, theres no question about that but we have the most greatest that lents on the depps. Do you think tiger will come back and play and be except ti again . If he comes back and play again and if he gets healthy yes. He can be competitive, theres no question about that. He didnt have to play well to win, weve seen that before. Hes only 41 years old, the only mistakes ive made when people ask me about tiger woods is when ive underestimated him. Having said that, four back surgeries, boy, one back surgeries this is a difficult do you think some of these players work out too much . He was a demon apparently for he looks like yeah a quarterback. Yeah. I think its possible to develop the wrong muscles thats for sure. If you look at the average professional pga tour professional theyre in phenomenal shape. If you look at mechanically roy, even someone that jordan he has great strength. Have i ever played with donald trump, have you ever played with president obama . No i havent. You should. I thought if i played i would. How long has it been yes, sense you played and do you think your physically able to take up the game again . No i wont be. I got crushed on the left side in a bike accident and my left arm didnt work, i cannot close my left hand well. Im around golf i get to see plenty and dont miss it that much. Steph curry is on your list and hes a good player. Yes. Hes going to be listed on your show. Monday night is airs. So steph passionate being golf. Loves it. Lives for it in the offseason and plays during the season as well occasionally. Yeah. Lets talk about the tpc this week. They call it the fifth major, has one of the best sort of fields in the game. What do you like going . Do Justin Johnson came back and looking good. Yeah. Didnt get to play in the masters, you know falls down a flying of stairs. Finished his second yesterday at quell hallow. It will be hard to go past him as a favor. Sergio garcia wins the masters, will be playing and hes won it before. Its sort of the golf course that finish really sorts the men out frft boys, it does. So 17th thats a hole krsh thats right. Where you kind of have to throw a dart. 16, reachable par 5, 18 extremely difficult to finish. The last three you could be leading by two or three shots and not feel secure at all. The fields is the secure in golf they say. People that youve spoken to you must get this question a lot, is there an interview that you think has been the most enjoyable or defining or most memorable in your career . Youve interviewed a lot of people. Yeah were past 100 now and its a difficult question to answer. Theres been great moments in interviews with jack mirror mno bill russell that stands out for me. Shaking bill russells hand was like shaking Nelson Mandelas amanda. Theres a oraa that they have. Bill russell, i asked him a question about what a young athlete how they should do, turning professional in any sport and what they should do, and he said be kind. Which i thought was a stunning answer. I mean its just the best advice you can give anybody in life is those too little words. Its a fun show to watch. Thank you. You look like you have fun. Thank i get paid to have fun. I felt guilty. Dont feel guilty. David thanks. Dahm will chef dustin on the ja squawk box tomorrow. Are you going down there. Im getting on a plieg at 5 00 p. M. To head down. Melissa. Thanks guys. Coming up on power lunch coach is buying a stock. And oil suddenly lower once again today. The closing trade moments away. With objectives like building capital for the future, managing Portfolio Risk and liquidity and generating income. Thats real etf innovation. Flexshares. Built by investors, for investors. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Looking from a fresh perspective can make all the difference. It can provide what we call an unlock a realization that often reveals a better path forward. At wells fargo, its our expertise in finding this kind of insight that has lead us to become one of the largest investment and Wealth Management firms in the country. Discover how we can help find your unlock. Where are mom and dad . saved money on motorcycle insurance with geico goin up the country. Love mom and dad im takin a nap. Dude, you just woke up im goin up the country, baby dont you wanna go . Im goin up the country, baby dont you wanna go . Geico motorcycle, great rates for great rides. Hello once again. Im sue herrera heres your newsup date. Greeted by protesters secretary ryan zinke says he will be gathering the prospects of people on all the sides of a issue as he review moon yewments in utah. Im looking to make sure we follow the law, talking to all parties and getting a perspective. Jury selection has begun in the case of a White Tulsa Police officer accused of shooting an unarmed black man last year. Police video shows 40yearold terrance curber walking towards his vehicle with hands up before being shot by betty shelby. Shes completed not. Check out this game by cubs. He reaches out to make the grab before tumble over a wall with the mitt still up. The cub lost to the the new york. Ill send it back over to you. I think im going over to jackie d. Jackie. Turning around late in the day, sue closeding a little bit lower at 46 a barrel. Lets get straight to what the moves were. If you look at crude and gasoline theyre both down in the month or so. Not to see declines this time of year, youre suppose to see prices rising. Part of this is translating at the pump 2. 41. Cooler than normal temperatures you might realize that if you take a step outside. If these trends cap youll see some of the summer models suggest them to be cold and rainy. Could be a break for consumers who want to hit the road despite the chill. Back to you guys on power lunch. Thank you. Bill presenting his next idea at his company on cbc. Its Howard Hughes corporation. You can see act mans presentation is topping that stock 3. 5 . Hes been investigated in it since 2010 and hes the chairman of Howard Hughes corporation. Joining us is james deb loes. Hes the portfolio shareholder. James thanks for joining us. I mentioned your firms name shortly after mr. Akman presented it because we did a search, i found out you guys was when you were one of the biggest owners you must be feeling good right now. Yeah we like to see these names get discussed in the market. What do you think about i dont know if you were able to were you able to hear akmans presentation. . I just heard a few bullet points. But ive heard his speeches over the years and were in pretty much full agreement. Cwhat is the most attractive thing to you about Howard Hughes corporation and how long have you guys at verizon been investigated in the stock . Weve investigated going back at a spinoff growing property so weve been invested since the companys formation. It has to do with the lack of appreciation for the stock. First you have a massive inventory of raw land and this raw land, while its not giving off cash flow right now it has tremendous value at high margins. He explained the economics of the land, its remarkable and it plays into bills comments about how master plan communities have created so much wealth. It was going to quickly if i might, he has owned it since 2010, ive assumed you owned it since roughly back then. If chs investor is persuaded by akmans argument and yours, what kind of time horizon are we talking about here . Is this the kind of warren buffet owning coke kind of investment where you own it for decades . Is that the his or her rise were talking about . Absolutely. I think were going to reach an Inflection Point where my other point about the company is that a lot of assets are being developmented and thats why they were spun out of general properties. Because the marketplace has no demand for properties that are not generating a stabilized aoi. As these Companies Start stabilizing and throwing off cash flow its going to be a mark appreciation for these assets. I think that combine the longterm nature of the land creeding a longterm opportunity. Do you think james that sap sara sea port is a slam dunk or tricky to its development . Back whendeveloped originally it was filled with National Retailers so there was a mall on south sea port. Now were coming to the point where it could be leased, its going to come to be leased soon. What sorts of retailers would you like to see populate that development in order to make it successful . Well you have a types dez nation retailers u youre not going to go there to buy a pair of jeans or make up. So this is not your typical mall. And the typical mall model where youre going to drive a half hour, i dont know what the future of that is going to hold. This is a destination in and of itself where you have a john george concept thats going to draw in shoppers. You have a ten course a successful italian brand launching their flag ship in new york. Then you have david change a an all of these highend concepts where thats going to drive the shopping not necessarily simply going down there for to buy retail. And it ultimately with the italian brand, this is your flag ship american presence, and so this is whats going to driver it. And the rooftop is going to drive a lot of foot traffic and then the concert series, the sponsorships all of these types of events are going to drive an ultimate and feed into one another and get that foot traffic thats different from any other Retail Concept out there. James thank for joining us on this short time. Thank you for spending your late lunch with us. We dont serve food james but come back with us. Happening now in washington a Senate Committee hearing on russian interference in the u. S. President ial election, former acting attorney general sally yates will testify and amon javers covering this store in washington. All the official washington is fix sated on this hearing this afternoon in the senate for a subcommittee as you mention. The former acting attorney general salary yates this will be the First Respond we have to hear from here. She was a Obama Administration who from the time became the legal officer under donald trump this president over 2017. The interplay between her and Donald Trumps National Security adviser Michael Flynn is whats at issue. The president himself has been focused on this including tweeting this morning saying general yates was given the highest defending hi decision there to hire mike flynn as a security adviser. Then also tweeting, ask sally yates under oath if she know how qualifying information got in the newspaper after she explained it to white house counsel. That as an effort to go after information of leaking information which this Trump Administration has been focused on. All of this come on a day when president obama warned donald trump has been hiring Michael Flynn as the National Security office in a meeting they held one on one. The white house out with a statement on that today saying, while the president has neverdy individualed the details of this information which lasted longer than any party anticipated, obama made the president , that is President Trump indicated he is not a fan of Michael Flynn. So now tyler, well watch to see what sally yates has to say before the senate and whether or not she contradicts the Trump Administration in terms of the timeline and what they knew about mike flynn and the events led up to his firing. Hasnt flynn he has. The nbc news reporting is suggesting that president obama warned in coming President Trump about flynn. What we dont know is exactly what he warned him of. Was it just that flynn was a lose cannon type or relationship with the russians. All right thank you very much. After months of speculations coach is buying kate spade. Coach popping 100 in the s p 50000 today. Lets bring in courtney reagan. Guys good to see you. Simeon ill start off with you, this was an interested stat from the ceo. 60 ceo of coach. 60 of kates consumers are millennials is that what coach is buying here . I think coach is buying a number of thing. Everybody buys a customers list so you want a little over lap. But theyre also buying a status and what theyre focusing on, weve spoken a lot about this, consistency is the form of growth, its hard to invest in retail. When you think about the european houses, when people talking about why they like them so much, youre not focusings on one grand, but picking up kate spade coach is essentially creating to use their words at the house of modern luxury brands. That carries weight and profits and it carries a sentiment it becomes a different level of companies. I just got off the phone with coach ceo victoria luis he said they have a 20 overlab of customers. I said you are hoping perhaps as the millennial customer ages get older perhaps theyll move into the coach brand. He said maybe but not necessarily. As far as were concern we dont know consumers to know that those brands are owned by the same company. Thats the plan they followed through. To simeons points many theres may be a house of brand but theyre going to be operating completely on the front end. Which is the hottest brands right now . I think its depends on who you ask. I think hes right the millennials do like kate spade. It has this fun fashion edge to it where coach is timeless. Youre going to invest in a piece that youd buy from coach at a higher price point. The prices are for act bl to you and more fashionable so you may not hang on to it. I think from an operational perspective because were talking about companies and stocks, i think coach is the more popular version. Its rare, you see a company execute on acquisition especially in the fashion world its tough. What is this thing for coure. If coach is in the midst and going through this turn around and codling together a luxury of brands, wheres kors is it boone coach or can you make that comparison . Its interesting, i think the important thing to keep in mind for kor is twofold from a promotion perspective its probably a good thing. From a business perspective you have two companies talking about pulling become on distribution and promotion. From the perspective of acquisitions that i have been talking or on most of their Conference Calls talk about on the idea theyd be open to a sic asian is the one point. It didnt feel like a name or company that kor was after. I dont know how it changes from the perspectives today on that point but i see how people are ordering the acquire. I asked him far out are you looking for jimmy choo but theyre not looking for any action sixes at this point. Choo is owned by it is in london. Jimmy choo makesless sense for them. They also spent a lot money on jb buying all that stuff, they feed some capital. Courtney thank you. Simeon thank you as well. The s p 500 hitting a new high today. Believe it or not its been quiet because the mark is in such a tight range. What is it going to take to get stocks to break out either way up or down . Well talk about it on trading nation next. E trades powerful trading tools, give you access to indepth analysis, and a team of experienced traders ready to help if you need it. Its like having the power of a trading floor, wherever you are. Its your trade. E trade your insurance on time. Tap one little bumper, and up go your rates. What good is having insurance if you get punished for using it . News flash nobodys perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch and you could save 509 on auto insurance. Call for a free quote today. Liberty stands with you™ Liberty Mutual insurance. You may not know it unless we say it and we have said it. The s p 500 hitting a record high on the morning trade today. Is the rally about to accelerate, turn down or do something, anything please . The trading nation team, kevin. I know youre a value guy and you take it slow youre the fortist and youre going to win the race that way i get that. What do you make not only with a lack of market movement, but the viccings under ten if that matters. And the lax of underlying movement in the market. Does that worry you at all . No but i think theres some turn. If you look at the things that were leading in the past year it was the high volatility stuff. Now that we got questions about the trade going on, Slower Growth rate in the economy, theres now a question of what do wow do for an on core. I think the mark is churning in some of the placings that are slow and steady and not so much as the thing with the torts. Give us an example. Look at consumer stock versus financials. All right. Wolf are there any indication were going to break out and get some cooperation yooirt up or down . There are. I think were setting up for a brach out to new highs. I think the conflicts is evaluation. Evaluation points to late cycle activity. The markets behaving in a midcycle way. We think the way the markets behavior the bull market continues. Look at the s p 500 reverse the lower end high suns march and now picking up to that huddle up 2400. Underneath the service the stock has steady in nature. Made a high two weeks ago. We see some of the more safer stocks have some of the up to sa breakout to new highs there. Bull market in tech, brian. Bull market. Waiting for the breakout. A new tom petty track. Thank you very much. Appreciate it. For more trading nation, go to tradi tradingnation. Cnbc. Com. The big call made on tesla as we head live to the sohn conference next. Dont no anywhere. Come right back here. These goofy glasses. Yeah. Well, we gotta hand it to fedex. Theyve helped make our ecommerce so easy, and now were getting all kinds of new customers. I know. Can you believe were getting orders from canada, ireland. This ones going to new zealand. New zealand . Psst. Ah, false alarm. Hey you guys are gonna scare away the deer idiots. Providing Global Access for small business. Fedex. A strong dollar is viewed as a net negative in the economy, but thats not always true. While export driven Companies Struggle under strong dollars because their products are less competitively priced abroad, consumers benefit because imported products will be cheaper, and because the u. S. Imports more than exports from an economic perspective, a strong dollar is a positive. Lets get to leslie with the news alert from the conference in new york. Hi, leslie. Reporter thats right. We just heard from chamath, room is buzzing after suggesting buy 2020 convertible bonds in tesla. The presentation is especially important it listen to because last year, he suggested that investors buy amazon, which is up 40 since that. Now, his rationale for tesla was compared to products life cycle like of that apple and showing the first two it rations of the product for the early adopters with the third for mass adoption. He said the same could be true for tesla. He compared musk to eddyson saying that you want to stand shoulder to shoulder with someone like edison, but the convertible bonds, of course, protect downside. Hear more from chamath on closing bell today so stick around for that, guys. Did he mention,less leslilee should buy tesla . He said that in january, not too long ago, saying something to the effect of it baffles me why apple doesnt buy tesla. Reporter he didnt talk about the m a strategy involving tesla, and but it is interesting that he could put those two side by side after making those comments just a few months ago and saying that, you know, tesla is very similar to apple thats a Company Rising dramatically in the stock market over the last few years. Interesting to hear if he comments further on that in the oneonone interview later. Obviously sees downside for the stock itself in choosing convertibles instead. Not a slam dunk. Reporter from the beginning said exactly, he said at the beginning that investors look at this presentation and say this is a company thats completely bankruptcy and worth 0 in a few years or something that could be just through the roof, and so i think the convertible bond, thats why you would choose a structure like that if there is a small chance it goes to 0. Thank you. Leslie picker. Our genius insightings in check please are next. Stick around. My business was built with passion. But i keep it growing by making every dollar count. Thats why i have the spark cash card from capital one. With it, i earn unlimited 2 cash back on all of my purchasing. And that unlimited 2 cash back from spark means thousands of dollars each year going back into my business. Which adds fuel to my bottom line. Whats in your wallet . After becoming one of the largest Broadband Companies in the country. After expanding our Fiber Network coast to coast. These are the places we call home. We are centurylink. We believe in the power of the digital world. The power to connect. And thats what drives us everyday. Anything worth pursuing hard work and a plan. At baird, we approach your Wealth Management strategy the same way to create a Financial Plan built to last from generation to generation. Well listen. Well talk. Well plan. Baird. At crowne plaza we know Business Travel isnt just business. Theres this. a bit of this. Why not . Your hotel should make it easy to do all the things you do. Which is what we do. Crowne plaza. Were all business, mostly. Check, please. Reporter welcome to a special pairris edition of che, please. I told you about the story of the gentleman who won the best annual best baguette contest, and, guys, here, bringing back two from the bakery. They are absolutely delicious. They still smell wonderful a day later. Tyler, melissa, and brian, youll love them later on in the week. I learned you are not to eat them hot or warm, but Room Temperature so you can taste the colors of the bread, he said to me. The colors of the bread. So french. Uhhuh. The french bread is astoundingly good. Yes. It is really the best. Yes, yes. Hurry home with the bread. I know. Dont put it in the overhead, okay. Also, be sure to pay. All right. Well see you tomorrow, the next day. Stereotypical french music. Great work in paris and france. Reporter thank you, thank you. Reminding you tomorrow, lloyd blankfein, exclusive guest on cnbc. The Goldman Sachs chairman with us. A lot of changes in the executive ranks announced today and over the weekend at goldman. Thank you for watching power. Closing bell starts right now. Hi, everybody, welcome to the closing bell, im kelly evan, and, bill, im at the conference in new york today. Imagine that. Im bill griffeth, and kelly, im at the New York Stock Exchange today where the most exciting thing here is the vix is comfortably below 10. Were all astounded. Oh, yes, i could imagine. Filling you in on whats happening here today. Investors give the best