Transcripts For CNBC Squawk Alley 20170227

Good monday morning. Welcome to squawk alley. With me at post 9, our own sara eisen. Jon fortt is at the mobile World Congress in barcelona. A lot more from jon in just a moment. It is a busy morning here in the markets, especially in washington. The president wrapping up a meeting with the National Governors association this hour, holding a roundtable with Health Insurance ceos. Our eamon javers is at the white house with all the latest. Hey, eamon. Reporter yeah, good morning, carl. That meeting with the Health Insurance ceos is going to right now behind closed doors here at the white house. We expect to see some tape of that and well bring you any comments that the president does make. But this morning we saw the president in a separate meeting, meeting with the nations governors, talking a little bit about where health care is going and the efforts of the Republican Party to repeal and replace obamacare. The president striking a little bit of a glum note here this morning, a slightly more downbeat attitude than weve seen from him in previous days. The president seeming to acknowledge at one point some of the difficulty that his administrations having in sort of wrangling all the different proposals that are out there to repeal and replace obamacare. Heres what he had to say. I have to tell you, its an unbelievably complex subject. Nobody knew that health care could be so complicated. And statutorily and for budget purposes, as you know, we have to do health care before we do the tax cut. Reporter so, take a look here at some of the ceos who are going to be meeting with the president today. An allstar cast of characters here in the health care industry. Steven hemsley of United Health group, Mark Bertolini of etna, David Cordani of cigna, Bruce Broussard of humana and joseph swedish of anthem among those at the meeting today. Well wait and see what they have to say when they emerge and also what the president says to them, which we should get on tape here in just a few minutes to give any indication of where this white house is going to come down on all of these different disputes in the health care world, guys. Back over to you. All right, eamon. Well be coming back to you. Our eamon javers. Jared bernstein is former Economic Policy adviser to Vice President biden, cnbc contributor. And jim aemy pethakoukis, also cnbc contributor. Good morning to you both. Jared, lets talk about this legislative calendar for march. Did you hear the president this morning i did. Try to prioritize which of these he will push first or hardest in the coming 3060 days . Yeah, well, the Affordable Care act repeal and sort of question mark, because we dont know if theyre really talking about replace, repair, rename, its just not clear, comes first. Thats always been the plan. And then tax reform comes second. But there is an obligation to get a budget out there. By the way, the, quote, continuing resolution, the plan that funds the government, that sunsets on april 28th, so they have to have some kind of funding plans in place by then as well. Theres a debt ceiling out there. So, i do think that whats starting to happen here is that donald trump is great when hes in campaign mode. He really knows how to talk to his base. I actually think hes a masterful politician in that regard. He really knows nothing about governing, and it is really tricky. And by the way, i could have told him that health cares really complex. Its not true that nobody knew that. So, i think some of those realities are taking hold. Jim, you agree . Yeah. I think its fairly common knowledge, one, that health cares really, really complicated, and when he said the legislative calendar for march, did you mean march 2017 or march 2018 . This could take a very long time. And i think we see now that the animal spirits of december and january, they may be getting a little bit ahead of themselves, because some of this stuff may take a long time to do, if it gets done. I dont know if the market agrees with you. It does not. Dows up six. We are going for 12 days in a row of record highs, longest streak since 1987. Jared, how do you interpret what were seeing in the market right now versus the reality of the picture that you just painted . So, i wrote a piece exactly on this question today. Its in the washington post. And it basically said, Financial Markets love trump, what do they know that the rest of us dont . And the answer is this, in my view. First of all, theyre going to get a tax cut or theyre going to get some deregulation. I agree with jimmy, its going to come later and be less than they think, but theyre going to get something. But really, the Financial Markets dodged a distributional bullet in this election, and they know that. Its a distributional sigh of relief, because they didnt really know what to expect from donald trump relative to a standard issue republican like jeb or marco or somebody like that. And what they got is somebody whos just giving them their wish list. Now, i think this is peculiar from the perspective of the working class people that helped get him elected, but that is the reality. Or maybe, you know, you guys, jimmy, and everyone who says that its a little too ambitious and the markets gotten ahead of itself is underestimating the impact here of rolling back regulations. President trump has talked about 75 to 80 of them, and tax changes. These are changes that are effectively being written by the ceos themselves. Theyre having meetings nearly every single day with the white house, and the white house is taking advice on that. What could go wrong with that . One, youre assuming that if we get Corporate Tax reform, thats going to produce tremendous growth. I think thats debatable. I think its pro growth, but i dont think its going to give us 3. 5 growth just from that. 75 to 80 , i think those are just magic numbers that theyre talking about, like using the phrase kajillion. I dont think those are real percentages. And this is like in the ray dialleo letter from december that first talked about animal spirits. Yep. There was almost no word in that only one time did he mention trade. So well see what happens with trade. Well have wilbur ross confirmed and well see how the trump trade agenda rolls out, because thats really, i think, the huge negative that people just arent focusing on right now. Well, you know, that dialleo letter, the question at the time was whether this team was ambitiously aggressive on Economic Growth or aggressively reckless, essentially. Im paraphrasing. But i would assume you dont see these policies as being reckless, do you . Well, i do think the trade policies we dont know what they are yet, but kind of the rhetoric around the trade policies, theyre reckless. I do think that the idea of, you know, if ceos are really writing regulations like you were just saying, you know, thats not a good thing. I know that we have economic amnesia in this town a lot, but it wasnt that long ago that failure to provide proper oversight to Financial Markets blew up the damn economy. I dont see a speculative bubble right now, fwhaut oversight is there for a reason. So every time you deregulate something, it doesnt mean its good for the economy. And on the tax cuts side, look, the problem with this budget is the numbers dont add up, and you know, theres a sea of red ink out there. I dont think thats necessarily problematic. Im not a big budget hawk around that sort of thing. But you know, the idea that you can map what weve heard, which has been pretty chaotic on to 3 or 4 gdp growth, thats nonsense in my view. Jimmy, on the trade point, we did just learn something from the president when he was speaking to governors, saying that he supports trade, that thats nothing new. He said that before. But he did say if were going to get taxed over there, then theyre going to get taxed over here, this idea of a recripical kind of tariff system. That sounds awfully complicated to go through every single product, say, that would get taxed when it comes over to china and to do the opposite. Is that something realistic, and whos working on it . Listen, the border first of all, we dont know what the president has meant when hes talked about border adjustment taxes, border taxes, whether these are going to be these kind of punitive retaliatory tariffs. I sense not a lot of understanding in this administration and perhaps not a lot of understanding by congress. Thats why i think that remains a tremendous risk. And if we dont get this border adjustment that im not sure what plan b is, because obviously, the administrations going to do something on tariffs, so to me, that remains a tremendous risk that at some point were going to recognize, and maybe now that we have a commerce secretary and these plans get rolled out. But again, thats a huge question mark. Jared, as sara said, weve got record highs on the indexes today. Yep. People are going to start paying attention to their 401 k . Theyre going to hear hes not touching my entitlements. You saw a poll today that argued that even those who dont like him personally like what hes doing. So, does he go into this admittedly busy legislative calendar with a tailwind of goodwill . Well, the Approval Ratings are not nearly as high as that question suggests, at least the ones ive seen. I think theyre actually pretty low for this point in a president s early tenure. But i think the part about entitlements is really, really important. The idea that hes not going to touch Social Security and medicare, which is something hes always said, stands in direct opposition to that of his budget director, Mick Mulvaney. By the way, heres a little interesting fact nobody knew. Once in a budget hear, Mick Mulvaney quoted the communist manifesto to me, okay . Thats just a weird thing that happened one day, so think about that. All right, thanks but my broader point is that lets just you know, the not cutting entitlements is very smart policy from my perspective. Lets see if it sticks. The president is meeting this hour, jimmy. I just want to interrupt and bring you some headlines. Hes meeting with the ceos of the big Health Insurers. He tells them that 2017 is going to be a catastrophic year for obamacare. He tells the insurers they must Work Together to save americans from obamacare and bring down prices. Of course, well bring you the tape as soon as we get that, jimmy, but your reaction to that, the fact that hes partnering up here with these Health Insurers, which a lot of them have already pulled out of obamacare because it wasnt economical . If the plan is to just merely, you know, pass a repeal legislation, it will be a catastrophic year for obamacare, and i think weve seen that when he meets these ceos and he wants out of these meetings, that he tends to reflect their views. You know, whoever talks to the president last is highly influential. So you might want to pay very close attention to what the president says and how much that sinks with the views of the ceos. Were going to find out in the next few weeks how all of this is going to at least try to get done. Jared, jim, thank you guys. Appreciate it very much. Thank you. You bet. Lets get over to jon fortt in barcelona this morning. A busy week for you, jon, at the mobile World Congress. Reporter yes, indeed, carl. And its not exactly like previous years, different in a number of ways. I think assumptions are being overturned, certainly when it comes to globalization. And last night, samsung had its usual event. Thats become a staple of the global World Congress, but it was all about tablets, no phones. And a lot of people left there disappointed at the lack of news on the phone front. This morning i had a chance to catch up with ericsson ceo borja ekholm, and asked him about under this era of trump in the United States and questions about the effectiveness of globalization, how is ericsson affected. Here is what ericssons ceo has to say. Take a listen. We are a Truly International company, so we really depend on having, you know, the type of free trade that weve had, and we hope that well prevail. Reporter i also spoke with media tech chief operating officer jeffrey jue. Its not a name that we talk about a whole lot on this network, but its an important chip company in this ecosystem. They push lowend chips in countries like china. Its a big part of the reason why smartphones have gotten as affordable as they have. Heres what he had to say about india and how quickly it becomes as big as china. Take a listen. For these three years, i estimate, three year becomes say the two years, the china scenario in 2014, Something Like that. Reporter that is incredibly important, because in 2014, thats when china first really began to move the needle for apple in a very big way. Jeffrey ju of media tech saying india is going to be there in about two years, if the middle class continues to grow at the pace that it is. Incredibly important for apple investors, including Warren Buffett, who we had on squawk box this morning, guys. Back to you. Jon, thank you. Well see you later in the hour. Jon fortt in barcelona at the mobile World Congress. Do want to check on markets at this hour, because we are looking at another day of intraday record highs. The dows flipping between negative and positive here. A few standouts in the dow caterpillars the best performer, chevron and boeing also doing quite well. Carl mentioned, youve got that infrastructure play on caterpillar, the defense spending play on boeing. Energy stocks are the best performer in the s p right now. Thats the strength in chevron. Youre also seeing some strength in real estate and in materials when it comes to the s p 500. Carl, 12 days in a row, if the dow closed at a record high, would be the longest streak since 1987. Amazing resilience. The gains are becoming smaller, but it doesnt take much to get to a new record. Yeah. Lets hope the comparisons to 87 stop there. Thats the joke. Remember what happened there. When we come back, why Warren Buffett is a fan of apple and tim cook in his own words. The countdown to snaps ipo later this week. And jeff bezos getting a nod at the oscars. Well talk about the future of streaming in hollywood when squawk alley comes back. Uh, yeah. Its over, larry. What is . The whole wheelie thing. What do you mean . I just got this baby to get around the plant floor. Right, but now Ge Technology monitors every machine. Yeah, it brings massive amounts of information right to you. So you dont need that. Well, it makes me look young and uh. With it. Time to move on. Oh ill move on. Right into the future. Backwards. Youre going backwards. The futures all around us not just on your little tablet, my friend. Berkshire hathaways Warren Buffett sitting down with becky quick all morning on squawk box, weighing in on the market, valuations, and some specific investments, including apple. Apple strikes me as having quite a sticky product and an enormously useful product to people that use it, not that i do. Tim cooks always kidding me about that. But its a decision based but again, it gets down to the future earning power of apple when you get down to it, and i think tim has done a terrific job. I think hes been very intelligent about capital deployment. And i dont know what goes on inside their Research Labs or anything of the sort. I do know what goes on in their customers minds because i spend a lot of time talking to them. Joining us, kara swisher, recodes executive editor, and walter isaacson, aspen institutes ceo. Good morning to both of you. I love that line, guys, where he talks about i dont know whats going on in their Research Labs, because walter, it sort of let us to this discussion of whether or not we need to think of apple as a tech company or just your sort of ubiquitous Consumer Products company. Well, ive always said that i thought apple in order to move to the next level, keep the growth up, would have to do the research and development that it was so good at and come up with amazing, new products, but i may have been wrong. What suv a very Strong Company clicking on all cylinders, doing well, and as mr. Buffett said, its a very sticky product. Were going to be talking about snap launching soon. You know, this is something that was invented simply for the mobile device, for the phone. Thats something apple brought into our lives. What was your reaction to it, kara . Usually, Warren Buffett does not go for technology stocks. No. This ones interesting. Yeah, it is. I think he goes for value is what he goes for. And i think, you know, its an interesting obviously tons of cash, a lot of great products. I dont think hes worried in the near toerm about the new products, but i think they need to reinvigorate their products, and it will be interesting to see what they do with the new iphone. Its hard to innovate around something thats so innovative and get to the next step and what is the next thing and whats the next iteration. And i think for the short term, obviously, its an incredibly Strong Company, one of two in the phone space, along with google. Yep. And so, you know, well see what happens Going Forward, but i still think theyve got to think hard about what their next products are, because the last few have been somewhat duds. A few of them have, you know. The watch has been fine, the earbuds have been fine, the iphones been fine, and they really do need another stellar product. Let me interrupt you there. I think were going to be seeing the president here, guys, just for a moment, having met with some Health Insurance ceos. We have a plan thats going to be i think fantastic. It will be released fairly soon. Well be talking about it tomorrow night during the speech, but i think goings to be something special, and well talk about it right now, because i think well get you on and i think youre going to like what you hear. Again, thank you for being here. I want to thank also secretary tom price, whos with us and whos doing a phenomenal job on a very complex subject, the subject of health care. Hes an advocate for the patients. Tom is all about the patients. Thats what he wants. He wants to have a Great Health Care system. Obamacare has been a disaster, and its only getting worse. Last year alone, obamacare premiums increased by double digits. Since it has gone into effect, premiums are up by almost 100 in many areas, and i think that this year its going to be really the year that ive always predicted. 17 is going to be a catastrophic year for obamacare, for payments, and you just take a look at whats happening in various states like arizona. I believe it was up 116 . Its going to be worse this year. Obamacare forced providers to limit the plan options they offered to patients and caused them to drive prices way up. Now a third of United States counties are down to one insurer. And the insurers are fleeing. You people know that better than anybody. Since obamacare went into effect, nearly half of the insurers are stopped and have stopped from participating in the obamacare exchanges. It has gotten so bad that nearly 20 million americans have chosen to pay the penalty or receive the exemption, rather than buy insurance. Thats something that nobodys ever heard of or thought could happen, and theyre actually doing that, rather than being forced to buy insurance. We must Work Together to save americans from obamacare, and people know that. Everyone knows that at this point. To create more competition and to bring down the prices substantially. The chaos that obamacare has created and for which congressional democrats, and you see that, are alone and responsible for, requires swift action. I actually told the republicans that if we did nothing, nothing for a twoyear period, let obamacare totally implode, which its doing now anyway, that would be from a political standpoint the best thing we could do, just let it implode, and then people will come begging. The democrats will come begging to do something to help them out of a jam. Once we start doing it, we sort of inherit the problem. We take over the problem. It becomes ours. But its the right thing to do for the american people. I think allowing this to go on, this disaster to go on, is a mistake. So, im asking secretary price to work with you to stabilize the Insurance Markets and to ensure a smooth transition to the new plan, and the new plan will be a great plan for the patients, for the people, and hopefully, for the companies. Going to be a very competitive plan, and costs will come down. And i think the health care will go up very, very substantially. I think people are going to like it a lot. Weve taken the best of everything we can take. Its our hope that democrats will stop the obstruction and resistance. And thats what they have. In fact, they have a sign, resist, resist, they want to resist everything, including cabinet members. I have many cabinet members that havent been approved yet. People that are extraordinary, all of whom are going to be approved, but they just take forever. Its called obstruct and resist. I hope i didnt give them a new phrase, because their real phrase is resist. I think i just gave them another word. I shouldnt have done that. Im good at branding. Youre going to see them now come out, obstruct and resist all right, well, at least i can take credit for it. And then work with us and we are going to hopefully work with the democrats, because ultimately, were all people that love this country and we want to do the right thing, including reforms like expanded Health Care Savings accounts, flexibility and the ability to purchase across state lines. The state lines are so important for competition. Everybodys wanted to do it for years. Whats not to do . So, thats going to be very important. I want to thank you all for being here. I want to know and i want you to know that its an honor to do business with you. Its a great honor to have you in the white house. And we look forward to providing health care that is extraordinary, better than any other country anywhere in the world, and we can do that. We have the talent, we have the capacity, and we have the people. So, well work on that together. And maybe before the press leaves, we can just introduce yourself and your company, and the public will get to see what youre about. And then if things arent working out, im blaming you anyway. You know that. So, well start with ray. Thank you, mr. President. Appreciate the opportunity to be here. Im brad wilson, president and ceo of Blue Cross Blue Shield of North Carolina and pleased to represent our customers here today. Great. Great job. Mark berlini, etna. Matt niles, represent americas Health Insurance plans. We represent all Health Insurance plans in washington, d. C. , including plans to cover Medicaid Managed Care. Chris broussard, ceo of humana. Pat ga heraty, florida blue, the Blue Cross Blue Shield plan in the state of florida. Steve hemsley from United Health group, were a diversified health care company. We have about 230,000 employees. We serve about 120 million americans, and we are contributing in terms of the jobs. Weve grown jobs 35,000 the last five years, should do another 20,000 in the coming year, and were a missiondriven enterprise to help people improve their lives, make the system work for everyone. Thank you very much. President , im with cigna corporation, a Global Service company. Scott ceroda, Blue Cross Blue Shield. 108 billion subscribers, a pretty big group. Yes, it is. Im joe swedish with anthem. We are in 14 states representing 40 of the american public. We have 40 million members, and weve been involved in the individual for probably seven decades and deeply embedded in the Affordable Care act situation that has evolved over the last three years. I dont want to miss the opportunity to thank you for the swift and Decisive Action that occurred most recently regarding some adjustments that have occurred in and around we had this moment. Thank you very much. It was going to be an implosion. We had to step in. Thank you for saying that. Thank you. Im tyson, chairman and ceo of Kaiser Foundation health plan, better known as Kaiser Permanente. We cover 11. 7 million americans. We also are integrated delivery system, so we both provide the coverage and the care. We have permanente a medical group that works exclusively with the Kaiser Permanente health care program. We are proud to care for 11. 7 Million People. Thank you. Mr. President , im dan hellferty, based in philadelphia, independence blue cross, Independence Health groups, were in 42 states and the district of columbia. We have a large Medicaid Managed Care population. Were the only player on the exchange in the fivecounty philadelphia area. And again, id like to echo joes point, were thrilled with the initial steps to stabilize the market. We look forward to working with you, Vice President pence, secretary price, in making sure that we have a Sustainable Program for years to come. Thank you very much, dan. And the market, as you know, when we talk about stabilizing the market, the market is disastrous. Its going to absolutely implode. Its why were meeting today. And i think were going to come up with something that not only will the market be great but the people will be taken care of. I think well work that out quite easily, actually. Thank you very much. Thank you, everybody. Mr. President , do you support a special prosecutor on russia . Thank you, press. Thank you very much. Thank you. Take care. That is the president being asked a question by the pool about russia to which couldnt really hear an audible response, but largely the meeting about health care, which the president now acknowledging is perhaps more complicated than he had anticipated prior. Eamon javers in washington watching that and gives us a nice setup to the address were going to hear tomorrow night. Reporter yeah, thats right, carl. And boy, they always kick the press out just before the good part gets started, because you really want to know here what these ceos are suggesting to this white house in terms of the Obamacare Repeal and replace that the president has promised. Theres some question about what exactly this white house is going to end up proposing here and how thats going to dove tail up on capitol hill, where republicans seem to be divided on the approach they want to take, and democrats seem to be committed to not providing them any votes to get it passed. So, what suggestions do these ceos have in terms of the specifics of obamacare . And then also the politics of it, how to get this through a deeply divided congress where the window that republicans have up on capitol hill is not all that broad. They have a pretty narrow window up there. So, the question here is wheres this administration going to land . This meeting today will certainly help with that. Were waiting to hear from a couple of republican governors and democratic governors. Theyre expected to come out here to the west wing here and talk to reporters, so well see what the governors had to say, and then well also see what the ceos have to say when they emerge from this meeting in a few minutes, carl. Eamon, well be coming back to you on that. Walter isaacson, just put a coda on this health care comment. Words like disaster and catastrophe and imploding sort of fly in the face with what we saw at some town halls in the last couple of weeks, certainly some polls that suggest its popularity, although weak, is getting better. Is he trying to build in some urgency here for change . I think hes trying to build in some urgency, but as he said, hes discovered its more complex. You have 2023 Million People who now have health care. You cant just get rid of this thing. And i think it would be wonderful, its probably very difficult, to find a way to work, you know, across many sectors and say heres the things weve got to fix in order to allow people to get Health Insurance, even if they have preexisting conditions, and to find better ways to make it marketoriented. Yeah, weve sort of been having this debate, walter, today. And i think this is relevant for the Health Insurers at the white house. To what extent should ceos participate in these policies . On one hand oh, they should definitely. They need to be on board and its good to get their advice. On the other hand, if youre rewriting say Financial Regulation to protect consumers against banks, should the big banks be the biggest consultants . I mean, its a debate right now as we look every day to a new group of ceos in this white house having these policy meetings. Well, i think youre going to see people at town halls, youre going to see people expressing themselves in a variety of places, but especially when it comes to health care, which to me is the number one domestic priority nail sorting that out. Because as the president said, he cant really do tax reform and the budget that easily until youve figured out where youre going with health care. That requires the health companies, the insurance companies, but also Patient Advocacy groups and everybody else to weigh in pretty quickly. Walter, do you agree with the assessment that these marketplaces are eroding and that if he i think they are this notion that i think they are eroding. The house could burn, in other words, if he werent there to replace it with something else. I think youre having some problems. I think theres some erosion. But if you talk to somebody like sylvia biowell matthews who had a great bipartisan report when she was health and Human Services secretary up until a couple of months ago for obama, there are things you can do to fix this, and i dont think we have to say the whole things on fire. A lot of people now have Health Insurance. Its just a question of fixing and making it so that these things can be sustainable. I think hes overstating it to say the whole thing is imploding. You know, its useful to say that. What it is is its eroding, not imploding, and you can fix something thats eroding. Walter, let the good times roll. I hope you enjoy mardi gras. Laissez Les Bons Temps rouler. Its been a really nice mardi gras down here. That way, we get to avoid some of the static in the rest of the country. We are certainly jealous of you today, walter. Well see you next time, walter isaacson. And our thanks to kara swisher as well. Just keeping our eye here on the broader markets. We are seeing stocks hovering around record highs, sort of going back and forth around the unchanged line. A lot of focus on tomorrows big speech from the president to a joint session of congress. We are seeing some nice gains, though, from materials and steelmakers after the president said hes going to be spending big on infrastructure. Squawk alley will be right back. Were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your fute. How do you sol this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insig person on what matters to y. Morgan stanley. Good morning, everyone. Im sue herera. Here is your cnbc news update at this hour. A Major Accounting Firm doing damage control this morning after an epic mixup at the oscars over who really won best picture. Guys, guys im sorry, no theres a mistake. Theres a mistake. Moonlight, you guys won best picture. Moonlight won. This is not a joke. This is not a joke. Im afraid they read the wrong thing. And that was la la land producer jordan horowitz acknowledging the major error and that the real winner was, indeed, moonlight. Price Waterhouse Coopers says that presenters Warren Beatty and fay dunaway were given the wrong envelope by the tabulators. Bill cosby returning today to a pennsylvania courtroom. His defense team wants the judge to bring in outside jurors for his criminal Sexual Assault trial, which involves a former Temple University employee. Cosbys lawyers had been concerned that pretrial publicity could hurt their case. A new survey finds children between the ages of 13 and 17 are almost as politically disillusioned about the nations divisions as their parents are, but the poll conducted by the Associated Press norc center for Public Affairs research did find the teens were a bit more optimistic. They were not as quick to write off the future as adults. Thats the cnbc news update this hour. Lets get back downtown to squawk alley. Sara, back to you. All right, sue, thank you. Snaps public debut this week may be the biggest tech ipo in five years generating interest from institutional as well as retail investors. Our Julia Boorstin is in los angeles with a look at snaps Business Model and all sorts of questions that its raising in the leadup to this big ipo, julia. Reporter hey, sara. Snap generated 404 million in revenue last year, and some analysts say its on track to hit 1 billion in revenue this year. Heres a look at how it makes money. Snapchat says it reaches more than 40 of 18 to 34yearolds in the u. S. And it earns revenue in four ways snap ads, lenses, geofilters and spectacles. Its biggest business, snap ads, which run between stories from friends or brands. They begin with a fullscreen video ad of up to ten seconds with the ability to swipe up for more options. Snap says more than 60 of these ads are watched with the sound on, reporting an ad watched as soon as it loads. Snapchat has sponsored lenses, like this one for the nba allstar game, using augmented reality to put a brand on top of a users face. Snapchat charges a daily flat fee for these, reporting how many users played with the filters and sent them to friends. Sponsored geofilters target people within a specific location, like a concert or a mall, layering an image on top of photos. And the selfdescribed Camera Company now sells these 130 spectacles which capture video with only a limited number available. They havent yet generated significant revenue. Snap recently expanded availability of the spectacles, starting to sell them online, but advertising revenue, rather than glasses sales, will remain its bread and butter, at least for the next foreseeable future. Carl, back over to you. All right, julia. Thank you very much. For a deeper dive into snap, were joined by brian wiser, Senior Analyst at pivotal, who just posted a note on snap and gene, good morning to you both. Good morning. You talk about unanswerable questions that will persist around snap for some time. Where do we begin with this . Well, estimate the total addressable market, it is a big challenge. You know, do you compare this to television . Do you compare it to digital . Certainly, they can compete for budgets from both sides. The relative scale of the existing business is still a little difficult to quantify. We certainly have provided some data that is helpful to getting there, but do you compare it relative to television . Its still a challenge that i think a lot of the analysts will have to make. Jan, youre a numbers guy. What metric would you be looking at, at least in the first few months . Well, i think the growth in the user base is key, certainly, at this point in time. And pretty amazing. I mean, theyve reached 80 of people between 18 and 24, 50 of people between the ages of 24 and 34. So, theyve tapped into the Young Millennials that are very rampant and the older millennials as well. And if you look at the ranking of the snapchat ad, it ranks ninth among all of the apps. And the ones above it are owned by either google or facebook. So, the user base is growing dramatically, which obviously is a big positive, and i think now its going to be a question of the degree to which they hold on to that user base. Can they penetrate the older users . It looks like theyre doing that as well. Theyve got upwards of 25 of the people over 34 using it in a month, and now theyre monetizing it with advertising. So, i think it looks pretty good for the future. Yeah, brian, that seems to be their biggest asset, theyve got youngest crowd. And in the fight for advertising dollars, yes, you have the behemoths like facebook and google, but how valuable is that to have the younger millennial or even younger than millennial kind of demographic when it comes to advertisers placing their bet . An important question. I think sometimes people overstate the value of an 18 to 24yearold or 18 to 34yearold audience, notwithstanding the fact that a lot of the users will be 13 to 17. The reality is if you add up the revenue that say mtv, vh1, comedy central, adult swim, if you add up the revenues from those networks, what are probably the highest concentration 18 to 34yearold networks, you still only end one a few billion dollars, like 3 billion in total revenue. Its not that big a market by itself. You need to reach a much broader audience and be able to look at a broader set of potential revenue to become a massive business, as facebook has done. Hey, brian, you know, we do expect them to emphasize other metrics over user growth, right . Well see the degree to which the street warms to that message, but is there anything wrong with that in your view . Well, if i were them before we get to that, sorry to cut you off. Weve got to go to the white house and listen to the governors who are at the microphone. Hang on one sec. Joining a number of our colleagues as well up at the capitol, to join a number of governors from both parties are going to be meeting with congressional leaders as well to finish off the day. We wanted to comment now in this meeting, but specifically on obamacare. First off, i should just say, in a minute youll hear from a couple of the other governors, that we really appreciated the meeting today. You know, the president at his inauguration talked about taking power out of washington and giving it back to the american people. And one of the best ways to do that is to work with americas governors, send it back to the states where its more effective, more efficient, and more accountable to the people in our states respectively, and to all of us here in america. So, we were thrilled to hear from the president , the Vice President , and numerous members of his cabinet who really reinforced that partnership and collaboration with the states, which will respectively help the people that we serve. And so, we cant thank the president and the Vice President any more than repeating that again. Specifically, though, a number of us have been meeting both with the president , not only today governor rick scott, who is the vice chair of the republican Governors Association i happen to be the chair this year the two of us met with the president for lunch the other day. A number of us here met with the Vice President and secretary price to talk about what the next steps are, but before we talk about anything in that regard, obviously out of deference to the president s state of the union, well let him lay out the beginning of the details, but we wanted to reinforce things. First off, lets be clear, obamacares a failure. And it was reiterated again today. Mark dayton, the governor from my neighboring state, minnesota, said late last year the Affordable Care act is no longer affordable. Heck, bill clinton, bill clinton said its the craziest thing this thing is a mess, and we know from the questions we heard today that if we do nothing, and as was noted politically for republicans, maybe it would be great if we did nothing, because over the next two years, people would lose coverage because obamacare is falling apart, because insurers are pulling out and giving up, and thats why we see grades like we saw in minnesota, premiums going up 67 and people losing access to coverage because people were coming out of the market because of the failure of obamacare. So, one of the things you all in the media need to do better on is pointing out that if nothing happens, problems happen for people in this country and in our states. So, what were here to do is to partner with the president , the Vice President , this administration, and the congress, because we dont want to do what may be politically expedient, and that is to prove it by letting things sit and show the failure of obamacare. Instead, as governors, were glad to hear the willingness of a president to fix it, despite whether it is politically advantageous or not, not to, but fix it to replace it to insure that we have access to Affordable Health care options for all of our citizens in ours states and across the country. And along with that, we actually reform things. We have the ability many of our states already have stepped up to put in place reforms. We can empower forums all across america that dont just talk about access to quality and Affordable Health care, but going further, particularly when it comes to things like medic d medicaid, and that is empowering the states to help people transition from government dependence to true independence through work. And as governors, we are committed to doing that, and we are so happy to have a president and a Vice President thats willing to collaborate with us, to partner with us, and who most importantly, and i think well start to hear it tomorrow night, will start laying out how he understands, as we do, that many people are scared because of whats happening with obamacare. They need our compassion now more than ever to recognize that we hear their concerns and that were going to fix the problems of obamacare and were going to lay out a path Going Forward that ensures that people have the choices that they want, not that the government wants when it comes to health care. And so, were pleased to be here with the president today. Well defer to his state of the union later in the week. Well be laying out some of the things that we hope grow out of that, but we in deference to the president of the United States want to give him a chance to lay out the details and where hed like to see things head. And then later this week, well be laying out some of the specifics that weve been talking with him and his administration about. And i dont know if jump right in. I want to address as governor of kentucky, you have often heard our state used as an example to counter the statement that was just made as to the abject failure of obamacare. And it has been a failure, and its not just an average. Its not just a broad stripe. It has been individually, state by state, a failure. In kentucky, which has long been vaunted as an example of the opposite, im telling you as a matter of fact its been an unmitigated disaster. The whole point of Health Care Coverage is of no value if you dont create Better Health outcomes. And i think the point that was just noted is one that should not get lost in the course of this entire dialogue. There will be a repeal. There will be a replacement. But its not lost on those governors here. Its not lost on our president and our Vice President. Its not lost on this administration and secretary price or on any other governor that im aware of, that you cant simply remove something without being thoughtful as to what will come in its place. And there has been an inordinate amount of discussion on that front, and it has been had specifically so that we understand we want Better Health outcomes. Simply providing coverage and thats something i would challenge you all to realize, its not purely about coverage, its about access to and the receipt of health care so that folks have Better Health outcomes. In kentucky, the fact that my predecessor, who ironically will be giving a followup to the president s address its an interesting choice, frankly, because he unilaterally chose to expand medicaid in kentucky, enrolled hundreds of thousands of people. The net result of it has been a remarkable decline in access to Health Care Coverage. More people covered, but covered by what . Fewer people able actually to even see a doctor. 50 of our counties, theres only a Single Health care provider on the coverage front. There are only governor of kentucky, matt bevin. There is Asa Hutchinson of arkansas, obviously, scott walker of wisconsin talking about the governors meeting with the president and the Vice President , who said this morning that the Trump Administration would be the best friend theyve ever had, referring to the governors. Well, theres no question about it, carl, obamacare is the political punching political punching bag of the day, at least if you listen to a number of republican governors there, the president. I mean, tough talk. And it does feel like theyre trying to counter this argument which has popped up in the press recently, that obamacare is a failure, they are saying. Make no mistake about that, that people may be concerned about what would replace it. They say weve got your back and were going continue to have you covered. Were also going to Pay Attention to the receipt and access of health care not just about coverage. So really trying to control the message and the story, that it is a failure. And also build up to the president s big speech tomorrow which we are expected to learn details about what a replacement is going to look like. Well keep an eye on the white house for you. In the meantime, dow is down 15 points. Squawk alley will be right back. Dow is down about 13 points. S p 500 is a little changed. Lets go out to bob pisani on the floor with a special guest, looking at a special group of companies. Thanks. The cnbc iq100 is 100 Large Cap Companies chosen from the russell 1,000 based on innovation. Market rights to exclusive ideas and patents and trademarks and copyrights. All very important after more than doubling the s p 500 in 2016, its still outperforming this year, the index. The index is undergoing first rebalancing today. David more tan joins us. You have ten new company heres but the one that caught my eye, target. I dont think of target as an Innovative Company but youre saying necessity has made them innovators. Why . Mother of invention. I will tell you target is a Great Company story around innovation because they had one of the biggest embarrassing cyber hacks, Huge Consumer exposure, loss of information, and what theyve done is theyve taken that opportunity that created by necessity and brought it together to bring together technology which actually is point of sale, end to end, consumer, really pulled cyber into the real world for them. Just saying now leaders in cyber security. Not only leaders. Theyre taking best of breed out of defense, out of infrastructure, about other places. And what theyve done is integrated an approach that made them an innovative leader and on this index. You sound leadership and other areas as well. Neighbors technology. A big drilling company. Theyre one of the great leaders in fracking technology. Neighbors is a funny story. As their name mistakenly, if you spelled it wrong, would imply what their understanding is. You have to be able to drill horizontally. They are doing a great job of saying its not just putting a hole in the ground. Its making the hole smart. Its coming across and its looking for researches in places that you couldnt get to if you just had not in my backyard. There you go, nabors. Microsoft is the Number One Company you rank by innovation. You say its very simple, theyre making the cloud more usable. Why . The story about cloud used to be about archives. It used to be about data. It used to be about putting a huge amount of information away from you. Microsoft is bringing that information in and bringing software around that. Snapchat, would they make it in . Absolutely not. No. No. Ill tell you why. Very simply, theyve got a beautiful platform of graphics overlay, interactive stuff. Thats stickiness for the consumer. Its not cortege. Very interesting. Carl, google also not in that list. Still not there. David martin, thanks. Thank you for that. Dow remains in a narrow range today. Were down 17 points. Back after a break. Not t smo men. Whats goi on here . You know howe tenology allows us tthey sloproducti, yeah. Well, no me catchybusinesn waitwe dt need to smooch . M wcan smooch a solution we jneed to m wcan smooch over er the candice,prlem until. We jneed to st let it. Hey, sorry im lte builngsmoooooooch that felt ght. St let it. What wrong with you . We cannot finish the hour without checking in with Rick Santelli for the santelli exchange. The dollar yen just dropped below 112. I would continue to monster effects closely. Bonds are giving us a different message than the equity markets. Im not sure i buy into that. I think currency is the way you protect against the wrong message, meaning that Interest Rates overseas negative rates are creating buying opportunities in treasuries. And i think that especially looking at how negative rates are in europe, if the euro cok. Hold up as good as it has, thats your tell. Until youeuro starts to do a c undoor 104 im not sure that our rates respond to the upside the way the equities have been trading. Back to you. All right, rick, thank you very much. As far as the intraday range here, 67 points but a friend says it feels like 10 as we wait to see what the president will say tomorrow night. Youve got stock movers like materials and the infrastructure plays. Energy doing quite well. Lets get over to headquarters and the half. Guys, thanks. Welcome to the halftime report. Im scott wapner. Top trade this hour, going dp long, why Warren Buffett told cnbc he is sticking with stocks even after the postelection surge. Stocks versus bonds right now is not close. Now, bond yields can change a lot. If bonds go to 15 i may be recommending bonds. Measure it against Interest Rates stocks actually are on the cheap side compared to historic valuations. Were going to kick that