disney, of course, as you heard by now, buying various assets of 21st century fox in a deal worth dl more than $66 billion when you include the debt david faber broke the story weeks ago that the two companies were in talks and lo and behold, it's soup now. congratulati congratulations. >> thanks. >> we were reminiscing about the various deals you've broken over the years. >> yes, you and i go back to my first big one, british telecom and mci. $2 $22 billion deal in inflation? >> exactly that got to the finish line on this one, bill a lot of talking going on between disney and fox and also our parent company, comcast and fox. that's sort of where we want to begin today as we head toward the later parts of the day comcast did compete vigorously for these assets people close to the company indicate, or people close to all the companies involved, that being the people who were advising and so forth, indicate that the bid from comcast, in fact, did have a higher value than what fox accepted from disney we all know our parent company fairly well here, brian roberts, of course, somebody i followed both as when i've been working as a part of this company, but long before comcast owned nbc universal, a very aggressive gentleman who has created a great deal of value through doing deals and certainly was focused on the international assets in particular that were being offered by fox as a real opportunity for comcast to grow in an area that it does not have a lot of exposure in but on the fox side, ruppeert murdoch and his board of directors seem more focused on a disney deal for a variety of reasons including simply a preference for that disney paper. remember, both companies were going to off a full stock deal the disney deal, of course, is all in stock as we told you it would be and so they went with that deal and, in fact, for weeks now we've been reporting while comcast was still trying to be aggressive, the focus for fox and its advisers was on getting a disney deal done i'll come back to some of the other reasons, but earlier we did talk to bob iger, company's chairman and ceo at disney, who also explained, perhaps, why disney would have been favored while also admitting there is always the possibility that a comcast or another company could try to still seek the when you n agreement right this you have to have your eyes wide open to all kinds of possibilities whether the regulatory risk of risk of getting topped i think you have to look at what's best for the shareholders of the companies we're convinced that this is certainly good for the shareholders of disney, but if you're a shareholder of 21st century fox, and you can suddenly own currency that combines disney and all of its assets and its reach and its heritage and quality of its brands, and the 21st century assets, particularly the international side, but also the intellectual property and the people, you end up with something i think is very, very compelling as an investment to create long-term value >> and that was a focus, of course, for rupert murdoch, his trusts, his children who will be owning this stock and all the fox shareholders, 25% of the new disney will be owned by current fox shareholders not an insignificant sum antitrust was also a concern, though, as to why it favored a disney deal. comcast certainly would be a vertical integration we know where that is with the doj when it comes to time warner and at&t and in the past fox had made known its opposition to that deal in certain areas and comcast's own acquisition of nbc universal. there was a fear that certainly could be used against it, were to have tried to do a deal with comcast. none of which is to say that comcast won't try to continue to figure out points of leverage as to whether it can somehow get something here the strategy of hanging around the hoop has worked in the past for the company. although it does seem unlikely to imagine a deal in which it would simply make a public offer in a sort of unslolicited manne trying to upset the vote of fox and disney shareholders. the murdochss control 36%, 37% o the vote not inconceivable were you to have another offer far higher, the shareholders would say no, though that is a tough thing to do, bill more likely that comcast perhaps considers a way to cause trouble by making a bid for the 61% of sky that fox is currently trying to buy, or making a difficult partner in the likes of hulu we don't know but it's certainly worth at least keeping an eye on as this unfolds in 2018. nothing's going to happen for the rest of this year. >> bob iger's eyes are wide open yes. >> kelly has a question for you, kell >> yeah, i appreciate that, david, precisely that what you were just saying, i don't know if this is an antitrust issue but i thought that this deal was valuing fox around 40 bucks a share so why are they trading below $35? >> well, it's going to take some time and there's certainly some question as to the overall value of fox, itself remember, this deal, the $515 million shares that are being exchanged for fox are worth roughly based on disney about 29 bucks then you want to make a decision as to what you think the remaining fox assets, what we're calling the spin co, will be worth, kelly. $2.8 billion you can put a multiple on it, assume a growth rate there bt the way, i'm hearing they they have a significant divid d dividend the company will have list debt on it because they are getting rid of $1 billion of debt. they will be taking on a certain amount of debt to pay the tax bill here but can do that over seven years. they're stepping up their bases. that's why also a year, a year, at least, before you see anything given how long the regulatory processes take, kelly. >> before you go, you and are i both parents our children come to us, we're not sure they want, we say we'll think about it, we'll talk about it i was intrigued disney is saying on the succession issue with james murdoch, the role he'll play in the transition period, what role he'll play beyond that disney said he'll talk about it. >> mr. iger earlier today indicated certainly james will play a role in the integration he has great knowledge of those international assets, in particular very much unclear whether he will take some sort of a place personal innocent l permanently at disney, itself, once the deal is done. interestingly, none of the murdochs have a place on disney's board, very significant ownership by the family and shareholders of 21st century fox. it's unclear what happens with james. he was one of the engineers behind this certainly also embraced the idea that, you know what, we may simply not be big enough to compete with the scale we want to at 21st century fox, but i would agree, it's unclear what his future will be, though, again, murdoch was motivated both by understanding the changing world, but also wanting to deal with some of the struggles within his family between the two brothers and between himself and james as well >> very interesting. great stuff as always, david, thank you. >> thanks, bill. >> kelly >> thank you, guys and joining me now in an exclusive interview is mr. james chanos joining me from the jayae summit in midtown, manhattan thank you for your time. >> hi, kelly, how are you? >> we're good. there's a lot of stuff we want to get to. is there anything about the disney/fox deal that has you thinking about investing in it, against it, or in the media landscape, shifting media landscape in general >> well, the big news that david has been has been that merger and also the change in the net neutrality rules today so we had a session earlier today here at the yale summit, we had a pretty spirited discussion about what this means for the big four, google, amazon, facebook, netflix, and i think that the net neutrality rule coupled with a bigger competitor in the content area is going to put pressure particularly on the content buyers which is amazon, google, and netflix. everyone forgets they look at netflix, but everyone forgets that netflix's biggest two competitors are actually google and amazon. >> you're not willing to bet against any of these companies, are you? >> we're looking at all of them. let's just say that. one or two more than others. i just think it will be interesting to see netflix, for example, came out this afternoon and said, sort of blasted the change in the net neutrality rules and yet for years now, they have said when asked, a change in net neutrality would not have a material impact on their business which is it? you know, is it not going to impact your business, or is it really something that you're going to go out and have a big legal protracted fight on? it's going to be interesting to see how this all sorts out. >> you do you think they're more vulnerable because that's effectively their only business model, whereas other tech platforms have oather levers to pull and disney is trying to gear up to compete with netflix. >> right, disney/fox combination is going to gear up and try to have their own streaming system and netflix raised prices recently and analysts, of course, automatically assume most of that falls to the bottom line what if these price hikes really are to offset increasing costs and i don't think people have put that in their models and the fact of the matter is that netflix is a middleman. they're banking and producing and financing more of their own content but at the end of the day so is everybody else now, and it's funny that the one company that's never been affected by amazon as a competitor has been netflix. >> still, they're the widow maker. anyone who's tried to bet against netflix, that's been a difficult trade. >> well, that's why we invest through the windshield, not the rearview mirror. >> but you're not doing anything right now to report on that front. >> we're looking at all of them with interest, leave it at that. >> understood. the other big issue of the day emanating out of washington is tax reform marco rubio said he won't vote for it -- >> posupposedly. >> -- unless they expand the child tax credit now a democratic senator coming in from alabama. what's the effect for you, what names are you watching as this moves through the process? >> so we sort of made our chops in the late 8s '80s inadvertenty on the last tax overhaul, reagan's '86 bill. the '86 bill is interesting, it intended to do a lot of things but what happened is actually a huge unintended consequence. if you recall, they made passive losses in real estate nondeductible against ordinary income and seemed like sort of a technical thing. no one paid a lot of attention to it other than the real estate industry at the time but what it did was took an already shaky commercial real estate market and shoved it over the edge. just as the s&l's were having their own issues it put us into a banking crisis. and this is a problem with these kinds of bills particularly when they're rushed that bill was not rushed that bill took a couple years. >> years, as i understand, yeah. >> and so this bill has been rushed and the question is, what are the unintended consequences? one of the areas that we think, if it goes through, it's going to impact the health care economy a lot more than people think. >> health care is that because the repeal in the individual mandate >> the mandate basic nondeductibility of medical expenses. >> right. >> really, i think it will be, as paul ryan, i think, has hinted at, it will be the opening salvos in '18 and '19 for cutting entitlements they're going after obamacare in this backdoor sneaky way and we actually have this saying with the health care stats, we think winter is coming we think we're about to see deflation. >> you just quoted netflix, by the way. no, that was hbo "game of thrones." i stand corrected. >> get your streaming services right. >> you know i'm a true viewer. >> we think that winter is coming is the reality for the u.s. health care sector that deflation, not inflation, is coming. >> and you've bet against names like mckesson, drug distributors >> malencrot. >> i'm sorry names in the kidney it dialysis space, for example are there any others you would expand -- >> we've been looking at the rent-seeking companies, companies we think have existed on the periphery of the health care economy that basically have went after these pricing sort of gamesmanship models. that's over. we think as the pie shrinks, b it's going to be tougher and tougher to justify the ability of companies to hike drug prices 1,000% or charge commercial insurers five times what you charge medicare and medicaid in the case of dialysis we think that there's a number of those companies, some have already dropped, some haven't. we're still very negative on the pbm space, express scripts came out and reaffirmed guidance, raised it this morning there's no reason for independent pbms to exist, for example. >> does the cvs/aetna deal make sense to you >> i think that's -- everyone's looking at it the reverse way through the telescope. we think it's the pbm, cvs caremark because they're worried about the pbm model than the other way around not an insurer getting more vertically integrated. one of the things we told clients is as health care companies found more and more innovative ways in which to get paid over the past ten years, we think going forward, the payer is going to find more and more innovative ways not to pay. >> that's one consequence from the tax reform bill. what about something else that actually this week we heard quite a lot of anger about, stanley druckenmiller said it's outrageous. >> yeah, it's just ridiculous. >> jamie dimon said it's not proper jeff gunlock said it's unbelievable it's going to survive given everything else -- >> it's a fee, we said that publicly. >> is that how you're compensated. >> we basically get carried interest but everything is short-term gains for hedge funds, by in large, it doesn't apply. this really affects the guys that hold assets longer. carried interest is the performance paid on your clients' capital it's not on your capital that's the big difference. i think stan druckenmiller made that point if you're earning it on your clients' capital, it's a fee if you're earning a return on your capital on your part of the partnership or fund, then that's a capital gain that's just clear. and i think anybody that looks at the tax code? a reasonable way would say that. so why this was kept in analytically i'm scratching my head because it doesn't really -- he's not getting any extra votes from the private equity or venture community on this and seems politically to be really bad optics. >> let me ask you just as we're looking back on the year as well, one of the other things that mr. druckenmiller mentioned, this has not been a great year for him, despite his portfolio having some solve the best-per fo best-performing names in the market what kind of year has it been for you especially and a bull market that you typically think for a short seller would make it quite difficult? low are you positioning for 2018 >> we have three pools, short only, market neutral, and our basically 190-90, which is 100% net long but has short component in it. market neutral up slightly 190 h 190-90 beating the market. we let the clients make the market call. we have the same short portfolios in out. we had little bit of outflow this year. mid single digits outflow which is okay, not great. >> it's been an average year for you then, you'd say? >> historically we've done mid-teens, although that's been tough for the last sort of ten years, so for us, it's okay, not great. >> let me ask you about one more thing before we'll take a short break. but you just called bitcoin beanie babies. given that they actually -- there's cryptokitties being created in the ethereum market is probably an apt comparison. does that to you indicate broader successes do you blame the federal reserve for or see in the stock market? >> jeff asked me this morning in the session were we short bitcoin? i said i'm having a hard enough time being short the stuff i understand, so we're not short bitco bitcoin, but, i mean, i think the speculation of bitcoin, whatever you might think about the valuation, i think is indicative of the speculation beginning to increase in this cycle, right we've always said, where's retail there's no speculation well, there is now clearly. and so whether you understand what blockchain is, and you understand what bitcoin -- eretheum is, understand what icos are, which are all sort of different concepts, you know, i just heard in this room, a few hours ago, really, really smart people including computer scientists, financial security experts, ceos of banks, and everybody had a different answer as to who this was going to be a big thing, whether it was not, whether it was going to be implemented and regulated. quite laiterally, leaders of business and finance had diametrically opposed viewpoints and not anybody could have had the tsame explanation of what they were talking about so it's sort of a head scratcher a little bit. >> we'll leave it there. when we come back, we'll talk a lot more about other investments. we'll ask you about tesla and a few other things in you'll be so kind we're going to take a quick break and we'll have much re thr. chanos when we come right back welcome back can to tto "cl bell." we're sitting down with kynikos founder and president jim chanos thank you for rejoining us a lot of individual nates we want to talk about, companies you discussed in the past. i actually wanted to start by asking about shale when you talk about the prospects, you know, back in september when w saying i saying, look, it doesn't look very good. the stocks have been on a tear since then. >> some have, some haven't i mean, the chesapeakes of the world have stayed on their lows. the continental is up. it sort of depends on their debt structure and percentage of gas versus oil and there's a new belief, kelly, that they found religion, right, they're going to cut back now on the growth at any cost. >> yes. >> live within their means. >> profit over production. >> yeah, we told people be careful what you wish for because that's fots going not be very attractive, either. >> why not >> when they were growing cap-x, they said it was due to growth most of these companies, not all, but most, if they spent 3 capital spending enough to keep their production constant, so maintenance cap-x, we call it, cash flow, ebitda, minus that figure, is usually close to zero which means you don't cover your interest and so that's a problematic problem. that's what we've been saying for years now. this is an uneconomic business it was uneconomic at $100 oil and $4 gas, it was uneconomic at $26 oil and $2 gas and it's uneconomic at $55 oil and $2.70 gas. >> so how does it end? is. >> when they can't raise capital. because this is really more financing scheme than a business. >> so at the same time there's so much talk about electrification. >> yep. >> and moving sort of the entire fuel infrastructure in that direction. >> right >> is that all over done because we're focusing -- look, even toyota this morning said half the fleet is going to be electric or hybrid within -- >> right, which is bad for petrole petroleum, theoretically should be better for natural gas because you need power increasingly, it's also solar and wind and so as we move away from petroleum toward electricity, that's good for nat gas which is in abundance, by the way but then we're also on the margin going to start losing it to solar and wind. >> sounds like a good setup for solar -- >> and so -- well, not really, but that's a whole separate conversation so i think that the whole move toward renewables is just not good for carbon at the end of the day. and i think that's why aramco is going public. >> you wouldn't buy that ipo, i would assume >> i haven't seen any numbers yet. we'll wait and see when they come public. >> let's talk about tesla for a moment there are reports that they're actually increasing production back up toward 5,000 a week now, having had it sounds like some pretty big struggles at first in their factories there. actually, i don't know if you saw this, on our network earlier this week, it was said i don't understand when people like you say the company is a fraud, i don't understand what he's talking about, there's nothing fraudulent about this guy, meaning musk, there's nothing fraudulent about the technology. >> i think, let's just say we think mr. musk and tesla has a broad, broad interpretation of the truth. you know, there have been all kinds of announcements that this company has made just in flippant comments that are public statements that turned out not to be true for example, most recently, he unveiled the semi. the tesla semi and the roadster and he said the semi will be available in 2019. the roadster in 2020 where's he producing those those production lines have to be up and approved now years before we get financial production >> but there are companies like pepsi who are happy to give them the money now to reserve that. what do you think those announcements are all about? >> those are all about being green and showing their customers. you know, mercedes-benz has electric semis on the roads right now testing. you don't hear them crowing asht this every day you don't see the ceo, you know, coming out they're on the roads testing and so it's not as if electric semicabs are new they've been out and so it's -- it's remarkable that this company keeps hyping things that are all without -- i was in detroit yesterday and spent the day, the evening, before some auto execs and talking about this and, you know, they're sort of shaking their heads because already detroit has leapfrogged tesla in autonomy jim is certainly at or past their level. the germans are past their level. waymo, which is at level four, google's operation, is at level four tesla's at two audi's at three. so you already have a company that is supposedly a technological leader that is behind in the most exciting part in the technology. autonomy and so we're puzzled, but don't ask us just ask the scores of executives who have left in the last two years >> yeah, there has been a -- >> we have a spreadsheet i have to keep expanding the spreadsheet because it keeps growing. so -- >> but by the way, the shares -- >> what do they see >> how long can you afford to keep staying short the company >> the stock underperformed the market for the last few years, kelly. the market is up about 40%, 50% since then so it depends on where you want to start your analysis and, again, i kind of, to me, where the stock is now is not the story. i.e., where it's been. it's the opportunity is it a buy here or is it a sell here i don't really care that it came from 30 or 200 or 300. >> but it's still a sell here as far as you're concerned. >> we're still short, yeah. >> and do you have a price target in mind >> well, we think the equity is worthless, so how's zezero >> zero. that's a pretty aggressive one aren't they like shale where they can keep going as long as people give them capital including deposits for future vehicles >> right that's going to be the problem, i think, that, in fact, a company that wholly dependent on the capital markets has to assume the capital markets will always stay open to them that's a very dicey proposition in my lifetime the capital markets close from time to time. >> let's talk about burgers for a moment, if we can. what sort -- so we just had a big announcement that arby's is buying buffalo wild wings. >> so we're going from tesla to burgers. >> we're going from tesla to burgers. just complete, complete flip side of the coin >> all right >> but i am just curious a you make of the economics in that space right now. >> yeah. so, we're short actually a snurm of the fast food operators we're not short mcdonald's and that's one of the reasons, but one of the things that's sort of intriguing to us over the past two years is how wall street has embraced the franchise model so if you look at the buffalo wild wings deal, there are a number of announced deals. the whole idea, everything that restaurant brands, qsr does, for example, they're taking restaurants by in large that were owned and they're selling them to franchisees and the franchiser. >> asset light model. >> everybody gives a higher multiple to the asset light model. the problem is at the oendend oe day the box has to work and one of the easiest ways to look at that, if you look at qsr, a darling stock, high multiple, burger king, popeye's, tim horton's their largest north american franchisee is public, company called carol's simple taste and it's fascinating to look at the financials of qsr and compare them to their franchisee the franchisee is struggling the numbers are there. sales are growing a little bit but profitability is imploding because they're being loaded with more and more costs and this is what some other franchisees in that particular company are alleging at tim horton's lawsuits. >> where are those coming from, labor costs, are those -- >> they're hiking royalty rates, they're putting restrictions on the fran cheechisefranchisees all sorts of different ways to do at the end o the day, a franchise can only grow in a few ways same-store sales can increase in the system or they can raise the royalty rate those are the three levers as opposed to they can sell them more things out of the commissary ma maybe four levers. each of those with the exception of same-store sales probably ultimately hurts the individual box because you put more units out there, well, it hurts same-store sales. >> yeah. >> you raise royalty rates, it hurts the franchisee so, it's a little bit of this zero-sum multiples to the franchisors nobody wants to own the restaurants anymore. that's a problem and a paradox i suspect we're going to see more and more distress in the franchise systems as more and more restaurants sort of struggle but yet the parents are doing well. >> so would you be short, then, those names that you mentioned >> i'd be short pretty much anybody in the quick service industry besides mcdonald's. mcdonald's still calls the tune. they're the 6 billion pound gorilla, so to speak they just went to a new value menu a few weeks ago which always impacts the industry. it's a dog fight it's a dog fight domestically. we aren't growing. we're physically growing probably, but we're not growing population that fast yet units are still growing. everybody wants to grow units. >> what about fast casual then which has a little bit different model. >> yeah, but i think, you know, when you start to see the shake shacks of the world, they begin to blur, right people once they go to shake shack, maybe i'm not going to go to mcdonald's as much anymore. you begin to blur some of the lines particularly the burger space. >> so you feel as -- that the fast casual is as negatively positioned as -- >> not quite as quick serve, but probably not far behind it and, again, if you just look at the unit economics, it's a much different story than the franchisors. there's a reason wall street is embracing the franchisors but at a cost if it doesn't work at the box level, ultimately you're going to have problems. >> one other thing that goes to the demographic trends you're talking as ining about and part phenomenon, what happened in retail i'm curious which names there, if any, that you're short given a lot of them have fallen a lot this year and we're seeing a pickup into year end. >> we had some of the well-known shorts we covered them. we have very small exposure in retail right now and they've all bounced. so we're kind of taking another look but right now, our exposure is not dramatically large in retail we think actually it will probably be a decent christmas but we'll probably dust off some files in 20138. >> we'll leave it on that note for everybody. >> happy holidays, right. >> exactly jim, thanks for your time. >> pleasure. happy holidays. >> jim chanos from kynikos associates back over to you, bill. >> always instructive to hear jim talk. time for a cnbc news update and contessa brewer. >> congressman blake farn holt won't seek re-election next year the texas republican is the latest lawmaker to leave congress amid sexual misconduct allegations. >> quite simply, my constituents deserve better they deserve a primary campaign that's focused on the serious issues facing our country and our state and fixing a broken system therefore, i'm announcing my decision not to run for re-election. german special police raided a number of places in berlin today looking for suspected members of isis. they said a number of people were arrested including some who planned to travel from germany to areas in syria held by the extremist group. wow, the heavens put on a stunning light show over the mountains of northeast china look at this meteor shower took place overnight in a crystal-clear sky. that meteor shower occurs every year between december 4th and the 17th that's the cnbc news update at this hour. that's a little star power for you there, bill. >> that is very cool love that kind of stuff. thank you, contessa. see you next hour. all right. 26 minutes left to the close we're going to come back and look at how today's vote to end obama-era internet regulations could affect cable companies and others like netflix and facebook as "closing bell" continues for thursday [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, it's 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. well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. session today. the dow was up 87 points in record territory. we have since fallen off the lows down 22 points right now. to our "closing bell" exchange, joining us, lori, she's here at post 9 sitting next to steve grasso with stuart frankel and our friend, rick santelli, is at the cme in chicago as well there seem to be some concerted selling earlier this afternoon, steve, what's going on here, do can you think? >> a couple things going on. you saw the comments by senator hatch regarding tax policy saying they might make it shorter in duration, possibility so that -- >> still individual -- >> individuals, so there's a lot of that sausage-making still going on >> right. >> on capitol hill and then as well as the net neutrality headlines both those things definitely took a big steam out of the market and if you look at it on an intraday, there's no denying that those were the two issues that the market's battling with. >> lori, so many themes now as we close out the year, mergers and acquisitions in media, net neutrality, retail as we go throu through. energy with opec doing what it's doing. what are you looking at right now? >> great question. you know, typically this time of year, you see a santa claus rally or a small cap rally going into the new year, and we've been rallying all fall in anticipation. >> yeah, santa's exhausted by this time. he's been rallying for a long time >> well, the tax talk has been, the media mergers have actually been in conversation for quite some time. you know, the at&t/time warner merger which looked like it has a hiccup coming to it. the last time we saw these kind of mergers in media, the highlight was the time warner/aol merger then a year or two later -- >> we know what happened there >> -- the bubble burst. >> right are you kleinclined to buy the companies now or looking to fade them into the close of the year? >> we've done most of our buying for the year but see a lot of portfolio shuffling by major managers this time of year so the losers have gone down more. >> right. >> we're seeing a sector rotation, though. >> hey, rick, you know, while i was gone, of course, a lot of things happened. the fed and so forth, but the yield curve continues to flatten here the spread between the 5s and 30s, for example, going back to october of 2007. but, yeah, janet yellen suggested yesterday that that's not necessarily symptomatic of a slowdown in the economy here d and -- >> reporter: yes, you picked 5s to the 30s good pick. 30 years are right now are the only part of the curve whose yields are higher than where we settled yesterday. that's because a lot of the yields like 10s and 5s got hit a bit so they came back to where they were, not 30s look at some charts, intraday one week, these are the lowest yield closes since early september. i couldn't agree more. listen, let's keep it simple back in our day, bill, two negative quarte erers were recession. last i looked, we have two quarters with a three handle and now gdp now moved up from 2.9% to 3.3%. it doesn't look like the kind of cocktail that's going to end up in a recession any time soon. >> yeah. all right, folks we have to move along. we've had a busy schedule as we all know thanks for your patience. >> thank you. >> and your thoughts on today's market action. kelly, back to you >> all righty. still ahead, jim chanos told us where he stood on the burger wars and we'll have an exclusive interview. up next, ajip pi calling seven things you can still do on the internet after net neutrality his critics say rolling back the obama-era rules could harm consumers. what today's repeal means for the future of the internet ♪ traders -- they're always looking for advantages. the smart ones look to fidelity to find them. we give you research and data-visualization tools to help identify potential opportunities. so, you can do it this way... or get everything you need to help capture investment ideas and make smarter trading decisions with fidelity for just $4.95 per online u.s. equity trade. fidelity. open an account today. ♪ open an account today. why did you take credit card debt on? second kid. private school. medical bills. moving costs. solid ground. a personal loan from sofi is a smart way to consolidate credit card debt. certain borrowers cut their credit card interest rates 42% and increased credit scores 17 points on average. borrow up to $100,000 with low rates and no hidden fees. find your rate in just two minutes, and take on your debt at sofi.com. welcome back the fcc voted today on whether to repeal obama-era regulations that require internet service providers to treat all content equally. julia boorstin joins us now with the outcome of that vote and more importantly what it means for the companies affected by it julia? >> well, bill, net neutrality was repealed 3-2 despite 39 senators and 18 attorneys general asking for the vote to be delayed fcc chair ajit pai looked to assuage consumer and company concerns >> returning to the legal framework that governed the internet from president clinton's pronouncement in 1996 until 2015 is not going to destroy the internet it is is not going to end the internet as we know it it is not going to kill democracy. >> internet providers such as comcast, verizon, at&t, and charter are expected to benefit from loosened regulation which would open the door to charging companies or consumers more for higher quality streaming cnbc's parent comcast reassuring consumers and customers that they won't see higher prices saying, "today's action does not mark the end of the internet as we know it rather it heralded in a new era of light regulation that will benefit consumers. "internet giants including facebook, netflix, google, and twitter opposed net neutrality's repe repeal sheryl sandberg posting on facebook that the fcc's decisio to end net neutrality is disappointing and harmful. netflix saying it's disappointed in what it calls the gutting of protections. saying, "this is a beginning of a longer legal battle. netflix stands with innovators, large and small, to oppose this misguided fcc order. that legal battle is beginning new york attorney general eric schneiderman tweeting he'll sue to stop what he calls the fcc's legal rollback of net neutrality guys, back over to you. >> all right, julia, thank you very much. we're heading to the close shares of costco trading higher for the year up about 20% in that time. the retailer reports earnings after the bell tonight and coming up, a debate on etr u ou btangwhheyoshlde ki profits and sell ahead of those results. stay tunes the trends, driving specific sectors of out performance. where a rising middle class powers a booming auto industry. a leap into the digital era draws youthful populations to mobile banking and e-commerce. trade and travel surge between emerging markets. everyday our 1,100 investment professionals around the world search out opportunities for alpha. partner with pgim, the global investment management businesses of prudential. their leadership is instinctive. they're experts in things you haven't heard of - researchers of technologies that one day, you will. some call them the best of the best. some call them veterans. we call them our team. you myour joints...thing for your heart... or your digestion... so why wouldn't you take something for the most important part of you... your brain. with an ingredient originally found in jellyfish, prevagen is now the number one selling brain health supplement in drug stores nationwide. prevagen. the name to remember. directv has been rated number one in customer satisfaction over cable for 17 years running. but some people still like cable. just like some people like wet grocery bags. getting a bad haircut. overcrowded trains. turnstiles that don't turn. and spilling coffee on themselves. but for everyone else, there's directv. for #1 rated customer satisfaction over cable, switch to directv. and for a limited time get a $100 reward card. call 1-800-directv [ mouse clicks, keyboard clacking ] [ mouse clicking ] [ keyboard clacking ] [ mouse clicking ] [ keyboard clacking ] ♪ good questions lead to good answers. our advisors can help you find both. talk to one today and see why we're bullish on the future. yours. we got a bunch of earnings today as well. after the bell, we have costco set to report. up next, we'll debate if the retailer has what it takes to fight off the amazon effect. later, don't miss my exclusive interview with former nba commissioner david stern wel k m 'lashito weigh in on the disney/fox deal and what it means for the future of tv stay with us ♪fly me to the moon ♪ ♪and let me play amon-- (ding) (bell mnemonic) i used to have more hair. i used to have more color. and... i used to have cancer. i beat it. i did. not alone. i used to have no idea what the american cancer society did. research? yeah. but also free rides to chemo and free lodging near hospitals. i used to maybe give a little. then i got so much back. i used to have cancer. please give at cancer.org. welcome back shares of costco slightly lower as we get ready for ennings in a few minutes. the stock is up 17% this year so far. good old-fashioned bull/bear debate our bull is david. consumer edge research ryan is our bear, president of payne exam manacapital managemet at post 9. for you, it's too expensive. >> 29 times future earnings, very expensive stock priced for perfection as far as i'm concerned, bill. >> david, doesn't that bother you at all why do you like it i know you think they're among the retailers that will benefit from tax reform. what else? >> yeah, tax reform is a new issue. i certainly hear the valuation debate you could have said that at any time really over the last couple decades with costco's valuation. over that time, nine bagger in earnings coming from come. pounding growth. they're comping the comp why? digital shopping now, you want to find great products at the sharpest prices and costco does that so they're really an omnichannel retailer growing membership, growing business at a multiple of gdp really only big box retail has been able to go outside the u.s. and found equal or better margins than they do in the u.s. so it's a growth story >> it would seem -- >> inconsistent. >> it would seem, ryan, they're one of the few retailers that seems to be amazon resistant. >> i think it's the tip of the iceberg. the attention is tastarting to o down, the driver of the revenue. it's not tested against amazon yet. they just bought whole foods and launched their costco grocery only in october. i think it's really yet to be seen that's a pretty pricey multiple for a yet to be seen, bill. >> how much is it worth? we're at $187 right now. >> the s&p is trading at 18 times forward earnings i like to see it closer to that. not at 26 times. i think growth stocks in general, that's the problem. they're getting overpriced. >> david, in the short term, i know you like the company, but in the short term what do you expect them to report here what do you think the stock will do about that? >> sure, in a couple minutes we were a nickel ahead, a few percent ahead on the quarter there's some fluctuation in gas gross margins in a rising spot environment which we're in they're well positioned on the labor line net/net, we're overweight the stock. we've been overweight the stock this year. not really about earnings. it's about the competitive barrier. i agree with the other guests we have to keep watching what they do and what their competitive response is on grocery. >> there we go, david, ryan, we'll know all in it a few minutes when the company reports earnings thanks for joining us today. appreciate it very much. we'll come back with the "closing countdown" in just a moment stay tuned the moment a fish is pulled out from the water, it's a race against time. and keeping it in the right conditions is the best way to get that fish to your plate safely. bacteria can multiply to high enough levels that even cooking it will not destroy all of them. it's definitely the most important thing in my business. how fresh is the fish? 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food has to be fresh. it's that simple. let'sfist word that comes to mind when you think of low-cost futures trading. was it happy? what about a dedicated service team with futures licensed specialists? and what about being able to react to the 24-hour futures market with integrated trading across web and mobile? still happy? good. then it's time for power e-trade. the platform, price and service that gives you the edge you need. e-trade. the original place to invest online. about 2 1/2 minutes left with the dow down 55 points. opened hire up up 87 on the open this morning looked like we'd see a continuation of yesterday's rally of the fed raising rates and tax bill looking in pretty good decent shape. we've gradually been losing ground here today and we're just off the lows of the session right now. of course, the big deal, the biggest gainer in the s&p today has been fox 21st century fox with the deal being reached with disney which, by the way, itself, is the best gainer in the dow today. so both companies are benefiting from that. gap inc which has been very strong the last three months is the big loser. in the zs&p so far today late this afternoon we had a pop in the snack company, snyder-lance, now up 12%, bob pisani, with word campbell's soup approached them they hired an investment bank to help them with that. now we get earnings after the bell tonight pretty good little cross section here with adobe, oracle, and costco, which we just talked about getting ready to report earnings here. >> can't grow organically, you got to buy. >> that's how that works, yes. >> we've been talking about when would we get the sell on the news thing with the whole tax bill it looks like it's starting a little bit i want to show you, for example, the bank stocks which would be big beneficiaries from a tax cut. they pay relatively high taxes it started in the middle of the day yesterday, this is the kbe, the bank etf see it's been pretty straight down not a lot of help here we did have some comments in the middle of the day by nikki haley over at the u.n. ambassador, u.s. ambassador to the united nations, about iran possibly violating some u.n. sanctions. that probably didn't help. you look at xrt, the retailer, another one that's been doing really well in the last few weeks and also has been largely to the downside today, although it started on the upside then you can see some of the other groups, the russell 2000, which is the other proxy for the overall tax bill same situation here. sort of selling off in the middle of the day. again, not a lot of news other than the fact the tax bill is now very, very real. so i -- we've been waiting for this for a while >> thanks, bob, very much. got red across the board for the major averages no records a lot of earnings, though, coming up and more from the yale ceo summit former nba commissioner david stern on the disney deal and danny meyer from shake shack coming up right now. hi, everybody, and welcome to the "closing bell," i'm kelly evans in midtown, manhattan, today, at the yale ceo conference where we've been joined by guests throughout the last hour or so. we have more coming up bill will rejoin me in just a moment from the new york stock exchange here's how we're finishing up the day on wall street the dow dropping about a quarter percent on the bell to 24,516. the s&p down .39% to 2,652 the russell 2000 dropping more than 1% for the small caps while there were perhaps hurdles on tax reform this afternoon with marco rubio voicing some dissent reportedly again, the russell down more than 1% today. now we also have to turn our attention to earnings, of course, and it's going to be a busy hour for that jon fortt is standing by to cover adobe results for us josh lipton will bring us results from oracle. and courtney reagan will have earnings from costco thanks to all of you guys. we'll see you in just a moment i'll also have much more from the yale ceo summit in midtown coming up, shake shack chairman and u.s. hospitality group danny meyer joining me to discuss shake shack's success, why he's spending on startups looking forward to that. moving on now, dennis burman joining me, cnbc contributor from the "wall street journal" along with stephanie link, contributor at tiaa over at post 9. good to see both of you guys we had stocks losing steam in late day trade leading the dow was disney while caterpillar was the laggard afte over on the s&p, 21st century fox is the big winner while perrigo was trailing behind. still a 2% decline not a huge move for the s&p 500. stephanie, i know we've got some earnings headed our way, too what do can you make of the big drop in the russell today, how serious are these concerns, perhaps, about tax reform? >> well, i mean, i think we've had to digest quite a bit over the last 24 hours, to your point on tax reform. i still think something -- sounds like something gets done. probably in the 11th hour. but we've had a fed rate hike to digest, commentary that some people said it was dovish, some people said it was hawkish i think it was basically in line with expectations and the question is how many rate hikes do we get next year? how much growth do we get? do we net any inflation? that's going to determine whether we get three hikes, four hikes, or two hikes. that kind of thing then you add on today, you had very good economic data, real, i mean, the retail sales numbers, best since 2004. >> right. >> really very impressive. and the inventories to sales ratio also very strong the economy seems to chug along. we got all this other data we have this big m&a going on. i think maybe there's a little bit of investor fatigue. i'm not reading too much into it at least at this point let's see what happens on tax then we can go from there. >> what do you think, dennis, is this a sell on the news kind of day? is that what this is about >> the rubio remarks are pretty interesting. >> didn't help. >> didn't help in the end you have is to think it's more of a political statement than necessarily one that affects the end vote. so if rubio is the person who holds up the tax reform bill, his standing in the republican party obviously would be deeply, deeply damaged that's from the outside -- at least from new york looking at washington, bill, i'd have to say that's relatively a nonevent. >> let's do some more of that right now because this is the latest out of washington today that we've been talking about. the "post" reporting that senator marco rubio is a no on the gop tax bill right now as it stands "washington post" also reporting that congressional republicans are considering allowing tax cuts for families to expire sooner than earlier versions of the bill had it. and politico is saying that house speaker ryan is going to retire after the 2018 midterm elections, at least that's something he's been telling people although the speaker says at the end of the day, today's press conference, he's not going anywhere any time soon and we have some breaking news on tax reform right now. ylan mui, i can't imagine what's next what do you have for us? >> reporter: bill, top republican appearing to confirm the first in/first out provision will not be in the final version of the bill. we caught up with senator john cornyn of texas as he was heading into an elevator we asked him whether fifa was in or out he said i think it's out then the elevator doors closed behind him. so the final text of the legislation will be out tomorrow, but in the meantime, there is another senator who is now on the fence and that is mike lee of utah his office tells me he is undecided on the current form of this tax bill and that's because he's been working with senator rubio to try to get that child tax credit expanded. now, today president trump said he has been working with rubio and hopes that rubio will get there. we'll see if mike lee and marco rubio end up voting for this bill back over to you guys. >> all right, ylan so some people sighing relief here on wall street. >> viewers who are stock owners, they should be sighing a sigh of relief. >> assuming that john cornyn didn't have anything else to say when the elevator door closed, to this point. what do you think of that? >> i just don't think it -- it's a nonevent truly. >> you don't think it would have affected -- >> it would have to a degree there are puts and takes in this tax bill, right? there are some things i like there are some things i don't like obviously would have a consequence. but as a long-term investor, portfolio manager running institutional money, i'm not really worried so much about fifo at this point and obviously looks like it's not going to happen. >> but if you are an individual investor -- >> different story totally different story. as a pm, as an investor, as an institutional investor, it's a little bit different i'm not demeaning it i'm not trying to, you know, to say it's not important, and it wouldn't have implications but there's a lot of puts and takes in this thing. >> yeah. >> that's why you have is to step back and see it as a whole, see kwhat exactly gets passed. >> exactly we have to wait until it's soup. >> no, we don't. >> we'll keep speculating there. kelly had a question or you want me to go on? okay so credit suisse is out with a note highlighting companies with the highest effective tax rates and here they are. centene, humana, technipf, kinder morgan, broadcom. >> here's the thing, financials have actually benefit add lot since we've seen that tax reform is likely to get passed. the stocks benefit not only from the lower tax but also because they don't have as much regulation, higher interest rates, so i can see why financials did well. i can see why industrials do well because they also pay high tax but you also have a potential infrastructure bill. so you have -- i can see why those two groups have done well. hmos, united and cigna pay a 38% tax. clearly they will benefit. i like to see the underlying fundamentals in addition to tax. >> take it on a company-by-company basis right now. >> absolutely. >> you can't paint it with a broad brush here. >> i would say these stocks, sectors have done quite well since we've gotten more comfort that tax is going to happen, they've done pretty well. >> right somebody's been painting with a broad brush. anticipating this. >> someone has. let's get some earnings out here oracle is out with its numbers josh lipton, how do they look? >> bill, oracle reporting 70 cents versus expectations of 68 cents. revenue $9.63 billion versus expectations of $9.57 billion. let's dig into the cloud numbers, bill. softwares and service revenues, $1.1 billion platform as a service and infrastructure as a service, remember, they combine those two now, $396 million. total cloud revenues up 44% to $1.5 billion the street was at $1.56 billion. total on-premise software revenues, $6.3 billion ceo mark herd saying here in a statement, "we're now the clear market leader in enterprise back office sass applications." he goes on to say "we expect to extend our lead by selling $2 billion in new enterprise sass application cloud subscriptions over the coming four quarters. and that, herd saying, is more new sass sales than any of our competitors. we have a lot more questions for him tomorrow you can catch him. a live exclusive interview with him tomorrow morning that is going to be coming up on "squawk alley" so be sure to tune in for that this conference call starts at 5:00 p.m. eastern and we'll be on it. bill, back to you. >> josh lipton with liz larhis ellison beard. that's amazing so oracle down almost -- yes, it's very nice, josh that's good. oracle down about 2% is the outlook cloudy see what i did there >> oh, my word that was -- with the beard and the cloudy, you're on a roll here. >> i don't know where it comes from. >> you're totally on a roll. it is all about cloud. >> got it. >> it's all about cloud guidance i think the quarter looks really pretty good, right i mean, total cloud growth of 44%. sass cloud being 55% that's better than expected. so i think the buyback is good i mean, $12 billion authorization, new one that i have $60 billion overseas we'll see what they do when they get more repatriation news the growth looks pretty good. >> interesting to note the on-premise versus the cloud, four times -- hurd presses too much when he says we're the best, we're the greatest. >> right, right. >> they've been playing catchup in part of making so many acquisitions over the year. >> the cloud, where are we on the cloud cycle? that's just -- >> we're in the fourth inning. the third or the fourth inning. >> okay. it's early. >> back to our sports conversation. >> is yes. i'm with you now we have adobe out. jon fortt, how do those numbers look >> bill, they look pretty good to investors the stock is popping 3.5% after however hours because adobe not only beat on the top and bottom lines but hit a couple interesting milestones numbers, $1.26 nongap eps versus $1.16 expected and $2 billion in quarterly revenue, $2.01 billion versus $1.95 billion expected. first $2 billion quarter annualized recurring revenue which is, of course, the number we're seeing more and more many the cloud era for adobe, that's $5.23 billion, first time cracking $5 billion on that. of course, the end of adobe's fiscal year. $7.3 billion total in revenue for them and we'll listen for guidance on the call the ceo of adobe also on "squawk alley" tomorrow so looking forward to that. bill >> jon, thank you. the stock up 2.25%. >> i'm a little surprised because we already have the guidance, they had an october analyst meeting which was quite bullish and gave us the outlines the quarter was quite good the revenue number is impressive it pulled back with the rest of tech perhaps you get a little bit of a bounce here. >> you don't think of adobe as an $85 billion company ibm is a $140 billion company. so the fortunes of these two companies moving in opposite directions not that they're really the same business but as a point of comparison, it's quite interesting. >> what do we think about these kinds of companies when it comes to tax reform? i mean, right? is that -- >> so a lot of technology companies, the reason they sold off, they aren't as big beneficiary. they do have a lot of cash overseas so it kind of doesn't make sense. they may not benefit from a lower tax but going to repatriate a heck of a lot of cash and do things with it i suspect it's going to be buybacks, dividends versus plowing into new job creation and that sort of thing but they're in really good shape balance sheet wise. >> one positive case may be that the customers of these companies who might be either getting the tax dividends or repatriating is spending on these services whether it's oracle or adobe so that would be the positive. >> what is the repatriation percentage now what are they talking about? anybody know >> i don't know. >> the tax rate? >> yeah, yeah. bring it back. >> isn't it 15% or 20% >> okay. >> i should know somewhere in there i bet kehlry evans knows. >> not what tim cook would want. he wanted maybe -- >> i thought it was 14%. >> -- 8% >> something is sbet erbetter tn nothing. >> kelly, any questions or comments on what we're seeing on technology from either oracle or adobe? >> no, i was just going to say on that repatriation, i thought ts it was, like, 14%. we have to see exactly how it shakes out it's 14% you know, stephanie and dennis can speak to this, but it's not voluntary. you know, they're going to take 14% of your overseas earnings then change the tax system entirely so, you know, steph, i am curious, i mean, there's not, frankly, a lot of choices these companies have to make, right? they're going to pay the tax, they can then do what they want with the capital and it will be a different tax system going forward. >> right jamie dimon thinks he'll buy back stock which is not a bad thing he said. >> i heard that from a dozen companies and actually heard from more technology companies that they will buy back. specifically that is what their agenda will be, they'll buy back stock versus you talked to some industrial companies, and they actually think they're going to plow it back into kind of their business >> right. >> so it will be enterest i esi, sector by sector i think and company by company. >> we got more to come here, right, kelly >> yes, we do. costco is set to report its earnings any minute now. looking forward to hearing what they had to say. just put up an 8% comp, u.s., in the latest month we'll get reaction to the results. the state of the retail industry more broadly. shake shack has been cooking up strong gains for shareholders lately stock up more than 40% in 3 months coming up chairman danny meyer tells us what's driving sales in the competitive burger business and how the tax cuts could impact his company's bottom line. we want to hear from you, contact the show afternoon twon, twitter, send us an e-mail, closingbell@nbcuni.com you're watching cnbc first in business worldwide cannot live without it. so if you can't live without it... why aren't you using this guy? it makes your wifi awesomely fast. no... still nope. now we're talking! it gets you wifi here, here, and here. it even lets you take a time out. no! no! yes! yes, indeed. amazing speed, coverage and control. all with an xfi gateway. find your awesome, and change the way you wifi. welcome back, and just like that, oracle has announced a big share buyback. josh lipton, tell us about it. >> bill, yeah, just a bit more news here on oracle specifically the company's capital return program. oracle saying in a statement here that the board of directors has increased the authorization for share repurchases by $12 billion. as you can see there, though, investors not helping the stock right now. initially here investors selling that stock we're down almost 4% of course, it's on the conference call, that's when we expect oracle's catz to deliver the company's guidance that call is going to start in 40 minutes and we'll be on it. bill, back to. you. >> josh, thank you for those at home keeping score, during commercial break, able to confirm on the repatriation rates it's 8% right now on illiquid assets. 15% on cash. we all feel better now kelly? >> yeah, i'm taking notes. thank you, guys. appreciate it. famous short seller kynikos associate jim chanos was with us last hour. here is what he had to say when we talked about net neutrality. >> i think the net neutrality rule coupled with a bigger sk t competitor in the content area is going to put pressure particularly on the content buyers which is amazon, google and netflix. >> but you're not willing to bet against any of those companies right now, are you >> well, we're looking at all of them let's just say that. one or two more than others. >> stephanie, i'm curious what you make of his remarks. i mean, these are some of the most successful companies, especially this year in the market >> yeah, the faang stocks had a heck of a run this year for sure, but first, they're very diversified companies. a lot of different ways they're monetizing their businesses. each and every one of them are very different and unique. we can kind of dive down if you want to. i come back to, you know, every month you pay $50 or $60 to comcast, right, for broadband. that gives you the right to use the faangs, right, to use amazon, to use facebook, to use netflix, to use -- so i just don't see that this change is going to lead to massive pressure we'll have to see. i mean, the cards will be now at a comcast? y if you will but i think they're going to work more together more than we think. i'm not surprised that the faang stocks actually didn't sell off on the news today. >> you don't see any change -- i don't know what you think, dennis, on the margins, could their treatment by the comcasts and others of the world be different? >> on the margins -- >> squeeze their margins -- >> on the margins, they could extract higher rents from the likes of those guys. those guys also have their own leverage, too. you see it in health care at the same time. that's what's so interesting, you see massive conglomerates with different business models created in health care and new variants created in media. one just today disney the range of their assets is just breathtaking right now. >> yeah. >> this really sets up war of big versus big you know what, in the empnd, tht kind of favors big players even if they're on opposite sides they reach a certain market -- even if they aren't in competition with one another. >> kelly >> yeah, jim also gave a candid view on one of his most famous shorts in the market which has also had a pretty good year. here's what he had to say about tesla. >> to me, where the stock is now is not the story i.e., where it's been. it's the opportunity is it a buy here or a sell here? i don't really care that it came from 30 or 200 or 300. >> it's still a sell here as far as you're concerned. >> we're still short, yeah. >> do you have a price target in mind >> are well, we think the equity is worthless, so how's zero? >> how's zero, dennis? >> ah. >> i mean, this feels like -- >> dennis said stephanie, you take that one. >> this feels like a widow maker trade. i mean, just, you got to give respect to jim for being a short seller during this market run. we are now almost at dow 25,000. >> he admitted it, too, by the way. >> so i just find it hard to believe that tesla is a zero, despite some real capital funding challenges, i think those are legitimate conditions, but they've been able to sort of keep the ball rolling and if the model 3 production sort of just comes into line, i just -- i probably would take the opposite side of that >> yeah. it's a big if, if the model 3 production comes in line they haven't made a production number since they've gone public. >> jim took them to task for the new semi, electric semi. he said, look, mercedes has one, they're test driving it right now, what's the big deal there's >> there's a lot of competition in that. tesla is a cult stock, you either believe in the story and buy into it because you take a 30,000-foot view of the story, of the concept of the theme. and i get that right? you can do that with amazon, you can do that with a lot of the high-flying, higher-priced stocks at the end of the day, it's not a cheap stock. they do from production issues and higher costs waiting in the wings as they roll out these various different products so i'm not involved in the name i have missed it so but i don't think i would short it because i do think there's a real core group of investors that are believers >> let's not forget the put value, so even if it does run into trouble, there will be someone who will want to buy tesla. >> is yes. >> all right let's move on, we've got the earnings that we've been waiting for. costco, courtney reagan, how do they look? is. >> hi there, bill. we have costco's first-quarter results. earnings per share beating by 2 cents coming in at $1.36 adjusted revenues also coming in better than expected at $31.81 billion. remember, we get the revenues and comp sales still monthly from costco, so all in for the first quarter. those comp sales were 10.5% higher than what we saw the year before so very impressive number there. and then the e-commerce comp sales for the first quarter for costco, up 43.5% they've been working on that strategy and seems to be picking up some steam. bill, back over to you >> all right, thank you. those e-commerce numbers, walmart does the same thing, target does the same thing it's easy when you're working with small numbers to begin with. >> yeah, but they did a 10-5 comp, the total company. who's going a 10-5 comp? >> right, right? >> so a revenue beat, a comp in line -- that's kind of the -- the number was 10-5. that's an outstanding e-commerce number i want to see kind of the membership fees and i want to see the subscriptions and that sort of thing because that's what's really been putting pressure on the shares but it doesn't look like amazon/whole foods is really putting pressure on the costco story. i think it still works. >> bill, you make a good point, they're starting from almost literally zero on the e-commerce so it's not really a relevant number. >> comps are pretty easy. >> i think if you examine the amount of inventory they actually have online, it's still pretty small and so they'll be able to tout that number forever simply because they're starting from -- >> again, they seem to be amazon-proof right now with the overall number they have there >> they seem to be, just a different -- it's a different type of proposition, but, of course, amazon is going to have so many levers to pull once they truly integrate whole foods. >> the stock went from about where it is to 150 on the amazon fear came all the way back. so ex prote-protec protec-pro t so expectations were high heading into is this print it's nice to see the fundamentals are very much on trend. it's an expensive stock. 29 times forward it's a unique asset. it truly is. >> is yeah. up next, former nba commissioner david stern is here to talk about the booming sports rights business. and about how disney's purchase of 21st century assets could reshape the sports industry. there's more, we'll look at whether that massive media deal gives disney enough streng ttho challenge netflix in the tv streaming wars coming up what is the power of pacific? 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[ click ] [ keyboard clacking ] [ clacking continues ] good questions lead to good answers. our advisors can help you find both. talk to one today and see why we're bullish on the future. yours. welcome back time for a cnbc news update now, back with contessa brewer. contessa >> bill, here's what's happening right now. president trump talking up his deregulation efforts at the white house. he claimed he surpassed the goals of eliminating past administrations' regulations which he says costs the american taxpayer >> regulation is a stealth taxation so many of these enormous regulatory burdens were imposed on our citizens with no vote, no debate, and no accountability. french prime minister edward philippe arrived at the scene of a collision between a train and school bus in southern francench four were killed others on the bus injured. it's not immediately clear what caused the accident. at an air base outside washington, u.n. ambassador nikki haley says iran is violating u.n. resolutions she says iran is exporting missiles and related material to a rebel group in yemen iran disputes those claims that's the cnbc news update at this hour. bill, i'll send it back to you. >> thank you, contessa. now let's take a look how we finished the day on wall street, if you're just joining us here, we opened higher, finished lower for the most part. the dow was up 87 points in record troierritory so was the s&p both finished lower. the nasdaq and the russell also with minus signs at the close. and come of the names moving in after hours, oracle, adobe, and costco all reporting earnings. they beat on the top and the bottom line. as you can see, the market response has been different. even though oracle announced an increase to its share buyback program, it's down 4.5%. adobe up 1.5%. and costco up a fraction right now. now to some of the other big stories today. it's our "rapid recap. >> we finally got the deal that we've been talking about now for more than a month, of course it is a large deal, to say the least. about $5 5 billion in equity. >> has to start with the quality of the assets that we're buying. rupert managed over time to assemble a stellar group of assets they're global in nature, so we're getting high-quality content. we're getting global reach we're get lg access to new technologies we're also getting great talent. >> i know that the president spoke with rupert murdoch earlier today, congratulated him on the deal. and thinks that to use one of the president's favorite words, that this could be a great thing for jobs >> breaking news from politico, which is reporting that house speaker paul ryan plans to retire after 2018. >> the net neutrality vote has gone through it has been overturned chairman ajit pai's proposal to overturn the obama era net neutrality rules has been approved two dissenting. >> going after obamacare in a backdoor sneaky way. we actually have a saying with the health care stats, we think winter is coming >> jim chanos there. quoting -- the name of the show escapes me right now "game of thrones." thank you. i couldn't think of it there lost it there for a minute. >> i learned my lesson. >> say hi to david stern mofor e >> i got it confused with netflix. i will thank you, bill. we're going to talk more about the disney/fox deal. disney plans to buy most of 21st century fox's assets, fox's regionional sports networ will be added alongside espn and there's worry they could get shortchanged in the deal bob iger says he sees it as an opportunity for regional sports channels and espn to come together. >> on the sports side, i think you have to look at the regional sports networks as a complement to espn, not an overlap in the sense like a television network has tv affiliates where a network is a national programmer and the affiliates are local the same thing is the case here where espn has essentially a national program footprint, and the rsns are more local in nature and will be able to complement one another there will be a sharing of product so we can infuse espn national with more local content and infuse the local regional sports networks with national content. the result of both will be better the consumer than it is today. >> joining me now to discuss all of this is david stern at long last he is the former commissioner of the nba. thank you for your time this afternoon. >> my pleasure >> you've been here at the yale ceo summit in midtown. so disney/fox -- actually, think about the nba' two big media partners, turner and espn both involved in megadeals. what's that going to mean for future negotiations of those rights >> well, actually, the fox regional sports networks and the nbc regional sports networks comprise another large partnership with the nba so this is good. i agree with bob iger. i think that this is very good for those regional sports networks that he's acquiring because he has additional programming from espn. espn has a lot of programming. >> yeah. >> so you're going to wind up getting that programming to more exposure on the regional sports networks. >> is it good for the leelague, for the nba might have fewer individual competitors but maybe the ones left have deeper pockets. >> yeah, i think it's good for the leagues. i think the commissioners are lining up saying to disney, okay, you'd like to take those espns assets nationally and move them locally, well, let's talk about that because that's something that you have to bargain with us about. >> so you think they're going to have to pay, disney is going to have to pay the league more for some of the local -- enter whether they have to pay or make an accommodation, it isn't an immediate transfer, it isn't so easy to transfer i think it's very easy to transfer disney/espn to the regional sports networks the regional sports networks have acquired certain local programming -- >> sure. >> -- that doesn't have a national footprint i'm sure it's going to work out and it's -- i'm very impressed with not only that acquisition, but the part of the deal that goes with sky, with rights throughout asia, with rights in europe i mean, rupert has put together a very good footprint and i think it augments disney's assets >> the nba, itself, is on an upswing. you know, they really -- last i checked the numbers it was a few weeks ago but this season is bucking the trend of broad declines in live sports viewership and television viewership with big increases that the nfl, by the way, would love to see right now and have kareem abdul-jabbar writing the other day he thinks the nba, now, granted, he's a basketball star, but all signs point to the nba replacing the nfl as america's league, he says. is there a shift under way >> there's a shift it's not going to replace the nrkts nfl. the nfl i think is going to be number one for years to come the nba on many bases including the u.s. is going to skyrocket and continue to skyrocket. our players are at the top of the celebrity pyramid and our millennial base can't seem to get enough of them >> so why does that justify $200 million for roger goodell? potentially as commissioner of that league, when the nba can -- i mean, i don't know if you ever got $200 million, but it seems like -- >> i can't remember, but i -- >> i think you'd remember. >> i would like to represent commissioner silver in his next negotiation with the nba owners. >> but actually what i'm asking is do you think that compensation for the nfl commissioner is justified? >> do you think that i'm going to answer that question? >> i think it was worth a shot. >> okay. well, good try. >> do you know how much adam silver makes >> i have an idea. >> is it anywhere in that neighborhood >> i'm not going to comment. i would just say that the nfl has a very, very large television contract. and a very large revenue base that roger has helped to establish and grow >> yeah. >> adam is doing the same thing. so nba owners, if you're listening and watching, get ready. >> one other thing i wanted to ask you about, because you had been staunchly against it in the past, sports betting >> yeah. >> huge case, chris christie's taken it all the way to the supreme court and it sounds like they may give it the green light. what do you think? >> well, i -- as i said in the past, i think that once fantasy was so widespread, the difference between fantasy and gambling -- >> the daily fantasy sports. >> doesn't really exist. and so if there's anywhere between $150 billion and $400 billion wagered illegally, i think that the states will very much want to put that in the position to have it legal and tax it and so this is going to be a revenue issue over time, although there really should be some specified regulation because the states don't do a very good job of regulating sports like wrestling, like boxing, like horse racing and the like so there needs to be some federal involvement. >> we can say david stern no longer against legalized sports -- >> i've been saying that for a long time. >> we tried to break some news here david, thank you so much for being a good sport very much appreciate your time. >> my pleasure thank you. >> david stern is the former commissioner of the nba. bill >> all right as we know, netflix shares have been rallying despite disney's purchase of film and tv ads from 21st century fox still to come, we'll discuss whether this deal could dethrone netflix as the king of streaming vid video. up next, exclusive interview, shake shack chairman danny meyer on the outlook for the restaurant industry, his expansion plans and whether tax reform wl lpilhe his company's bottom line. stay tuned firstthen you put yourselfareer. through school. got the degree. you've given it your all, to reach the goals you've set. don't let student debt hold you back. refinancing student loans with sofi can save thousands. so you can get where you've always been headed... sooner. see how much you can save with sofi. the leader in student loan refinancing. i suspect that we're going to see more and more distress in the franchise systems as more and more restaurants sort of struggle but yet the parents are doing well i'd be short pretty much anybody in the quick service industry besides mcdonald's >> that was jim chanos from kynikos associates weighing in on restaurant stocks in the last hour meanti meantime shares of burger chain shake shack up 25% year to date. short sellers piling into the stock like usual one reason is the chain's struggle to grow same-f store sales. in a cnbc exclusive, danny meyer, shake shack founder joins me from the yale ceo summit in mi mid-town thanks for being here. >> my pleasure. >> jim talked about fast casual having challenges, too, but there was a story about you saving his kid's life in advertently when they went to get a shake shack burger i won't get into it. >> we're in jim's good graces. the other thing is, i think he said he'd short quick serve places last time i checked shake shack was not a fast food restaurant no one's ever said this place is too fast. >> that's fair but, so talk about the trends in growing same-store sales at your location and i was surprised by the way you guys are increasing the pace of openings next year. >> we are. the brand is strong as ever every time we open in a brand new city as we did this past weekend in my hometown of st. louis, the welcome is just absolutely extraordinary so we're learning. our same-store sales base is quite small still, mostly in the northeast. we feel really, really excited about next year. >> if -- but, listen, anyone would love to put up a costco comp right now i mean, 10.5%, you know, so if you're struggling with the comps, is it sort of the strategy to say, you know what, fine, we're just going to expand all over the place how are you weighing those tradeoffs? >> so, shake shack is not going to expand all over the place we're actually pretty careful about it it took us five years to open a second store it took us another five years to go west of the eastern time zone so we're pretty careful about it our culture is what matters more than anything, and you can only grow as fast as you can grow people but we seem to have an amazing bench of talented people who have the hospitality gene and that's all that matters at shake shack. nobody got hired at shake shack because we said prove to me how many great milkshakes you made in your career they get hired for who they are. >> since you brought it up, let's pivot to a larger conversation about tipping at your restaurants i know this is something that you've been dogged about for, it's probably been a couple of years now. >> two year. >> since the announcement t are you going to chuck it and go back to the withhold wold way? >> it's been a challenge for sure don't let anyone tell you it's easy we began this two years ago at our restaurant, the modern, at the museum of modern art we added ten restaurants since that point and it's working and it's really, really important because what the tipping culture does is create a situation where tipped employees are now making 350% of what non-tipped employees can make and that disparity just is not fair, especially if you have a culture that says we are for our employees. you can't only be for half of your employees. >> i get all that. a lot of this is based on people speaking at anonymous sources at your restaurant, that sort of thing. i get that when they talk to speak experiencing the changes, there's a lot of negative feedback they say there's been a lot o of turnovers at the restaurants and diners aren't happy with seeing the menu prices go up and quality go down. >> i'd have to counter that by saying our covers at all of our non-tipping restaurants are actually as strong or stronger than any of the handful of restaurants that we still have tipping. we have macro issues that affect comps throughout the restaurant industry i wouldn't segment it for one category or another, but it certainly is not anything to do with tipping whatsoever. >> when do you see those macro issues abating it is something mr. chanos talked about as well. >> we're watching carefully, you know, it's kind of a fascinating moment because there's never been more interest globally in food certainly people take pictures of it, blog about it, tweet about it, instagram constantly and yet we're at a point when people are, you know, they're not sure should i be pushing a button, getting it delivered at home, should i be pushing a button and getting a meal kit delivered at home, should i go to the -- >> you're describing my tuesday nights, but, yeah. >> yeah, so should i go to a restaurant, should i go toa fast-casual, should i go to a fine-casual, should i go to a casual restaurant? the good news for consumers right now are there are more good ways to eat food than ever, but there are so many ways to eat good food than ever that the existing pool of outlets are going to probably feel a pinch for a little while. >> let me ask you about something that's probably difficult to talk about for the industry, but you're not the only ones right now dealing with it, after mario batali, after the spotted pig and everything that allegedly happened there. is there rampant sexual harassment in the restaurant industry and if so, what do you think needs to be done about it? >> well, it makes me really sick, i have to say that we have always had a culture at union square hospitality group we call enlightened hospitality. we put our customers second, we put our staff members first. that, alone, obviously is not going to eradicate the errant behavior of some people. what we've learned is that i've always been taught is the fish stinks from the head down. what i've also learned, though, is that just because the head doesn't stink, doesn't mean the head doesn't have to be completely aware of every single thing happening within our restaurants. and have a short, short, short patience for anything that crosses the line. >> are there -- so have there been responses you think your company has taken when those issues have come up that sets you apart from how others have dealt with it or have you not had this come up >> i hope there are. i hope we're the kind of company that people feel very, very comfortable speaking to our hr department which is extraordinary. i hope we're the kind of company that feels comfortable hosting roundtables with our employees to just let people talk. you know, whether i'm a boss or a parent, i've learn add long time ago i don't necessarily have all the answers but i do have to use my two ears and be a really good listener. >> i think bill had a question, we just wanted to get in here as well bill >> yeah, let me lighten it up just a little bit here danny, we all acknowledge that shake shack makes the best burger on the planet, but i'm curious, who among your competitors makes a great burger who do you like out there? >> got to say union square cafe is my favorite that's where we got the idea to use beef at the shake shack in the first place. >> you know that's unfair, you can't pick another one of your restaurants. >> of course here'scompliment, appreciate that. i don't know anyone on earth who likes burgers who only eats one kind of burgers in their life. if you go to my shower, you'll see eight different kinds of shampoo. i hope people will just keep shake shack in their rotation. there's a lot of really good burgers out there these days sk >> since you totally dodged that, my next question is what's the next hot trend for fast-casual do you think >> one thing we've seen at shake shack are chicken sales are consistently growing we got a fantastic chicken sandwich at shake shack and we didn't put it on because we're trying to create a new concept, but we put it on to give people another reason to come to shake shack even on that day that they don't feel like a burger i've got to just say that that could be the next big trend. >> does that mean watch out, chick fil-a? >> i wouldn't say that it has nothing to worry about. it's a great company. >> i just had it for lunch wanted to make sure. thank you for your time. >> thank you. >> for joining us. danny meyer. bill >> i want to know the names of the eight shampoos he's using, too. thank you. we have a news alert on hess dom chu, what's going on >> hess shares up in the after-hours session. this on the heels of dow jones/"wall street journal" headlines that elliot t management, a new proxy fight with hess corporation. elliott wants to remove john hess as the ceo of consider a sale of part of all of the assets at hess they also want to look for things like a dividend cut but more buyback we should say this, john hess has according to the chairman over at hess, james quigley, the full support of the board of directors, unambiguous and unanimous support of the board this isn't the first time elliott has tangled with hess management back in 2013, they had another battle right now elliott owns 6.7%, bill, of those hess shares back over to you. >> and they just made 6% on their money with that news thanks, dom. we'll take a break, come back, debate whether disney's deal for 21st century fox assets will help it better take on netflix in the streaming wars. tethis win an uncertain world?k predictable income pgim sees alpha in real assets. like agriculture to feed the world. and energy to fuel its growth. real estate such as e-commerce warehouses. and private debt to finance transportation and infrastructure. building blocks of strategies to pursue consistent returns over time from over $120 billion dollars in real assets. partner with pgim. the global investment management businesses of prudential. i'm not really a, i thought wall street guy.ns. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade directv has been rated number one in customer satisfaction over cable for 17 years running. but some people still like cable. just like some people like wet grocery bags. getting a bad haircut. overcrowded trains. turnstiles that don't turn. and spilling coffee on themselves. but for everyone else, there's directv. for #1 rated customer satisfaction over cable, switch to directv. and for a limited time get a $100 reward card. call 1-800-directv so we know that disney is buying fox assets in a $52.4 billion deal many see this as a bet on streaming for disney, potentially to take on netflix joining us with their thoughts are the senior media and equity analyst at cfra research and the partner in charge of the eisner amper of the firm's sports and entertainment network. thanks for joining us. should reed hastings be worried about this deal? >> i think he should we're not only talking about one streaming service. we could be talking about three streaming services coming together with disney's recent purchase of bamtech. >> is there room for all of them or will there be a winner or loser? >> there could be a winner and loser. whether they all survive, still to be determined >> netflix has something to be worried about. we think the pie for streaming is large enough for disney and netflix to co-exist and be profitable over the long term. there's no question in our mind that this deal significantly enhances disney's ability to go head to head with netflix and potentially surface netflix with the launch of direct to consumer offerings. clearly disney has not just entertainment but life sports which netflix doesn't offer. that life sports has proven to be the glue that holds some of these packages together. you throw in hulu, which we think provides optionality that disney can use to dial up or down as they see netflix continue to react. >> all right gentlemen, we're tight on time but thank you for your thoughts, short and sweet. thanks for joining us today. we'll take a break and come back and find out what to listen to on the conference calls for all the big compierertg rngsonightpoin hey ron! they're finally taking down that schwab billboard. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums? ...no minimums. schwab has lowered the cost of investing again. introducing the lowest cost index funds in the industry with no minimums. i bet they're calling about the schwab news. schwab. a modern approach to wealth management. we are minutes away from the adobe, costco, and oracle conference calls another 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(cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley we are moments away from the conference calls for the companies reporting earnings tonight, costco, adobe and oracle all of them beat on the bottom line we'll wait to hear more on the cloud outlook from oracle. and we had already heard from stephanie link that costco provided some positive numbers for their quarter. we'll see what they have to say, coming up as well. your big takeaway from the yale economic summit today, kelly >> reporter: yes, when we ask whether the carried interest deduction should stay the way it does, we hear it's ridiculous. i followed up with danny meyer and said, really, should chik-fil-a be worried? he wouldn't say anything i'm going to watch that, there's a chicken concept coming >> all right we'll watch for that watch out for those chickens that is "closing bell. we'll be reunited tomorrow at the new york stock exchange, which we look forward to "fast money" begins right now. good night, everybody. "fast money" starts right now. live from the nasdaq market site overlooking new york city's times square i'm melissa lee. your traders on the desk tonight on "fast," disney announcing a massive deal to buy a number of fox's assets for $52 million. and it looks like disney ceo bob

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