Transcripts For CNBC Power Lunch 20180117

And welcome to power lunch. The dow is up above the 25803, holding on to 26,000, up by. 9 of a percent and big games in ibm and boeing. More ahead and Goldman Sachs shares taking a hit on the back of the earning. Well take a deeper dive into the numbers in a few moment. Thank you. Welcome, im tyler mathisen. And here is what else is happening at this hour facebook, google and twitter fold up to capitol hill and are telling congress they are going beyond screening and removing extremist content from their services they are actively fighting against that content and terror. Senate Banking Panel voting again to approve j. Powells nomination for the next fed chairman the vote advances his nomination to the full senate floor and home builder confidence slipping this past month but still hovering near an 18year high melissa. The dow back on the upswing after yesterdays selloff. Bob is at the New York Stock Exchange tracking the action so bob, is it back volatility i mean . There are a lot of people who want it back ab it is back for a day and a half so let me show you the vix here we shot up, below ten and went as high as almost 13. That was at the open the most important thing is this is one of the big crowded trades out there. We talked about this this morning. Short volatility for a couple of years and long the fang stocks people wanted to reverse the whole trade. We saw that yesterday. As of today, i think the it is still out whether that will succeed. Because look at s p. It is climbing all day i think people coming in this morning im sure thought we were going to be a lot choppier this is not evolving if you look at sector, you could see how broad the rally is it is the cyclical names weve been talking about for the last several weeks like semi and defensive names Like Health Care and Consumer Staples that is what a broad rally looks li like, and a big day tor bitcoin. The third day of declines. A little more than a month ago the future contracts were instituted, december 10th and that contract expires today. And the cme expired on january 26th and well see how smooth that close goesme, and if it gos smoothly, that will make bitcoin more respectable and well need to see several months before anybody is convinced this is a longterm trend. The dow at the high for the day. Back to you. Bob pisani. And josh has breaking news on apple. Just crossing from apple. Detailing how it is accelerating the pace of u. S. Investments and job creation, say it will make a 350 billion to theis economy over the next five years an breaking down the number had highlights the spending with the domestic suppliers, apple saying it is on track to spend 55 billion in 2018. It goes on to say that they are going to invest 30 billion in Capital Expenditures and they are hiring or creating over 20,000 new jobs at existing campuses and apple already employees around 84,000 people that advanced Manufacturing Fund, they first announced that fund on cnbc, that is going from 1 billion to 5o note that app they say they are the largest u. S. Taxpayer. They anticipate repatriation tax payments of about 38 billion. Again, here, the headline, apple saying they will accelerate u. S. Investment and job creation and putting the number at 350 billion to the u. S. Economy over the next five years back to you. Josh, thank you. Guys, quickly around the table. A couple of quick questions i have josh, thank you very much. 20,000 new jobs over five years is great but apple has added 50,000 jobs over the last five years so that would be a slowdown in the pace of the last five years of job creation. This is on top of that on top. Theyve gone from 75,000 to 125,000 employees roughly over the last five years. Globally. Globally. But what does 350 billion mean in Economic Impact that is not direct i would imagine that would be the over all impact. And we dont know how many of the jobs are not in the u. S. Either right . 20,000 could be across the whole globe, which case it isnt a huge job add in the United States. But there is a possibility of another campus which is interesting, given they just put the finishing touches on the new 5 billion spaceship, which ive seen and is impressive. I think what stands out is the repatriation of 38 billion in cash and that seams like that would be much lower than what analysts and people in general had anticipated and keep in mind that apple has about what 200 billion. More than 200 billion in cash overseas. About a 15 repatriation. My brain math is not so good but that is about 15 of the overseas cash coming back to the United States. 15 to 20 very roughly. A small number for apple. A lot of people would be surprised, that it wont be higher moving on. Talk about volatility. Where did it go . Were going to see more of it . If we go another three days without a 5 correction, this will be the longest such stretch ever without one in the s p 500. Lets bring in kevin mon, from hennan and walsh and james norman, president of kwuf s investors. Let me begin by asking you a simple question, kevin, that bears on volatility and other things but how is 2018 likely to be unlike 2017 . How is it different. I think well see several shortterm bouts of volatility in 2018. More than in like yesterday. But than in 17. But likely to be shallow in terms of any potential pullback because every pullback with additional new cash coming off the side lines as we saw today and still biased to the upside with stocks. The implementation of the Corporate Tax cuts weve seen will likely improve corporate earnings for the balance of 2018 that should also improve valuations and i think fuel at least fuel another year of this bull market rally. Does growth continue to outperform value. I think value starts to outperform growth. I think they will pick up from the bouts of volatility and from a valuation standpoint in the length of the cycle. So james, you have to looked back at history and drawn some comparisons between the Market Conditions we look at today and our recent experience and other periods in history and then what happened next. Could you explain what you found when you did that . Sure. We keep a proprietary data base where we look at Macro Economic and behavioral indicators going back to the early 1970s and what we really found is that three indicators struck us in terms of how extreme they are. The low volatility which we all know about but it is going back to t the 70s at the first percentile so very low. But another one contrasting strongly is the price people are willing to pay for Earnings Growth what we call the glamour effect. And that is actually at the 95th percentile and if you combine those two indicators and look historically at what the time periods similar to know and we all know history doesnt exactly repeat itself but it often rhymes. It is the period of 94 to 98 and the period of 2004 through the first half of 2007 great periods to be invested in stocks and you want to be allocated. Were over allocated but at the same time we know how they ended. And people were willing to pay so much for Earnings Growth, if you have an economic event, you need to be prepared to with stand what might be a larger correction its hard to know what that might be, whether it is a Government Shutdown or a nafta not being neglected and other factors such as that. And it is not all that far in a way, away from what kevin just said and that is he favors value stocks right now which would have lower price earnings multiples. You, jame, i think would take it one step farther and say you need to play a little be a little more mindful of defense. Yes i would absolutely say that. I would say that in particular what we want to focus on is stocks with low volatility of earnings they are more attractive, instead of the price to book, a more traditional value metric we like to look at the earnings to price. How much are you paying for the earnings and we Want Companies that have those earnings to pay them out as a measure of value and that is the way to go in the markts to protect against any downside but capture the upside at the same time. And kevin, you like small caps, where and why. They are the largest benefactors from the Corporate Tax cuts from 35 to 21 as they paid higher and that is another changing of market leadership in 2018 just as i expect value to out perform growth, i think mid cap and small cap will outperform. Thank you very much appreciate it. Thank you. Controversy erupting over Steven Bannons testimony to a committee. Eamon javerss has the latest. The back story into the showdown between steve bannon an the House Intelligence Committee on capitol hill. Yesterday a white house official telling me that it all began on friday when the white house was negotiating with the House Intelligence Committee they say republicans and democrats over the scope of the questions that would be permitted toward mr. Bannon. The white house felt it had an agreement on friday to limit those questions to just issues that came up during the president ial campaign. But not toward the president ial transition or matters that occurred while bannon was in the white house itself on tuesday when the hearing began behind closed doors and bannon was testifying, at some point a couple of hours into that bannons attorneys were in contact with the white house over the phone, relayed some of the questions that were being asked and said they were going beyond the agreed scope and at that point the white house put the brakes on. And they say, hey, hey, pump the brakes we said to bannon, dont answer those questions because we havent agreed to that scope under the process. Now i asked that white house official if the white house is asserting executive privilege to protect conversations between bannon and the president of the United States and the official said this, we are not asserting anything they need to discuss it with us. There is ae privilege over Steve Bannons testimony but nonetheless, it wasnts to negotiate with the House Intelligence Committee over what he will be permitted to answer in that testimony should it reconvene at some point. Bannon spent about ten hours on capitol hill answering questions or not answering questions as the case may be well see if he goes back for another visit. Thank you very much. A surprising good News Announcement from one of the worlds hottest spots. North korea and south korea will march as one team in pyeongchang next month is this just symbolic or a serious step at improving the tensions between the two nations. Hans nichols joining us now. Hans. They dont know they dont know whether or not the nation steps by the north koreans represent something more substantial or whether or not this is just talk about the olympics so when you hear both the pfrnt and the state department the pentagon and the state department is yes, this is a positive indicator and the fact the talks are taking place but it is just sequesters to the olympics right now the focus is on the olympics nas what the talks are about secretary mattis, i flew out with him to vancouver to the big diplomatic meeting with all of the sending states and i mean the state that initially sent militaries to fight in the korean war in the 1950 and 1953 conflict all of those sending states got an update on military options from secretary mattis. He was very clear that they could, indeed, have a trigger that would have military options that would take place there. All that said, Everyone Wants to give time for the diplomacy to breathe. That seems to be the case from mr. Tillerson. Briefing reporters yesterday and it is certainly the case here at the pentagon thank you very much, hans appreciate it. Hans nichols apple adding thousands of jobs an will add 350 billion to the American Economy but a rare downgrade for the stocks the analyst who made that call tells us what hes seeing and what has him concerned. And crypto crush. A pull back for something much bigger and well explore that when power lunch returns you always pay your insurance on time. Tap one little bumper, and up go your rates. What good is having insurance if you get punished for using it . News flash nobodys perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch and you could save 782 on home and auto insurance. Call for a free quote today. Liberty stands with you™ Liberty Mutual insurance. Really interesting breaking news on apple. The worlds Biggest Company just a couple of moments ago, a lot of headlines and stuff in a press release. Lets try to condense it apple announcing investment in the u. S. Expecting to add 20,000 jobs in the u. S. They have 123,000 employees globally and 84,000 here and they want to add another 20,000 over the next five years they anticipate an Economic Impact of about 350 to 360 billion overall to the u. S. Economy over the next couple of years. That is likely the halo effect of the things they are doing however, the stock getting a downgrade today from long bow research cutting the rating to neutral from buy saying the current iphone cycle is good but not great. Before we go to the guest. A couple of more things. Apple announcing well get to the guest in a second. Apple announcing theyre going to add another location. I just heard back from apple moments ago. That location will be in the United States. So what that means is right now we have this huge race, multicity fight for amazons Second Headquarters. Hq2 and outside of the cupertino campus and a facility in reno, this will be a third major location for apple which means we could have two huge economic fights on our hands between cities and states to land either apple and or amazon. And cities would love to have either one, wont they. Im sure. They would love to have either one. The race to give them tax breaks to win them these are high paying jobs and lots of them. And apple are having a 38 billion repatriation tax payment which i dont know if that is part of more money coming back or just a onetime payment. Melissa, maybe you have something. This is what they are paying to bring money back. Apple will not say at this point in time how much they are bringing back. This is according to josh lipton who just got off the phone with apple himself. So we dont know what the tax rate will be if they make a 38 billion onetime payment to the government, does that mean they are bringing back 100 billion out of a 38 tax rate or im sure lets backtrack. I think we specified in the tax bill. We have all kinds of stuff to do on apple. Lets get to the core of apple Sean Harrison of long bow, im going to ask you about the downgrade in a minute. But all of this news just breaking moments ago, i know you probably havent had a chance to look at it what is your back of the envelope just quick take on what you just heard from apple . So they had 250 billion of cash trapped off shore lets assume the tax amount they paid the 38 billion is to bring it all back. Leaves them 210 billion of cash that most likely will be used to return cash to shareholders. So you could see a buy back or the normal spring event and investors were expecting either one or both to come up in the next three to four months out of apple. In terms of expanded job count and everything like that cleveland is a nice place to live it is a balmy 23 today and sunny but i think that is what the white house wanted to hear out ever a large company, expanded jobs. And how much cash roughly roughly do they have overseas. 250. It is about 250 billion. So a 38 billion tax payment would imply a tax rate of about 16 . That is the effective tax rate i think. If that is right i dont have any iphone calculator. That is a correct payment. Does that seem im being told my math is good thank god for engineering colleges sean, is that a good rate for snu would you be happy, does it alter your earnings numbers. That was the expectation of the tax hit they would receive earnings numbers would change depending on the apple tax rate with the next earnings call. About a point of tax rate reduction is about 15 of earnings power 20 billion of buy back is another 30 cents of earnings upside so there is nothing in the numbers because apple haebts announced anything but that is how the math would work out. Back to the reason you are here, which is the iphone. You said iphone sales are good but not great okay fair enough but why does that lead you to a downgrade. You are not negative on the stock either like maybe the money has been made i think that is the excellent point, the money has been made we upgraded the stock a year and a half ago at 95 and an excellent run. I think expect aces need to come down with doubledigit growth and based on our analysis high to middle singledigit for 2018 and it is still 50 of apple sales and with expectations to come down from that product, i think the stock settles out until the negative news flushes out of the system. Does atterygate, is that elongating this cycle. So it compresses the upswing that we might already have seen or might have otherwise seen if there were no ability or less ability to upgrade the battery on the six. It may. It probably adds on to the issue of a lack of excitement around the iphone 8 because the form factor looks similar to the iphone 7 or 6s and so being able to switch out your battery and elongate the life of your phone, it puts further pressure on the iphone 8 and why it hasnt sold well we believe so far. So what does this stock do . I think it sits around 175 at lower end of the valuation range. On a five year average about 20 discount to the s p and at about 25 discount right now trading back to that 30 discount at the lows that would be seem unlikely. You would need to see negative growth to china. I think it is turned around but likely a large pending buyback so i think it stays here in the mid 170s for the near term. Despite a large pending buyback . Despite a large pending buyback. And like i said, the iphone is still 60 of sales and if expectations come down that could negate the benefit of i buyback. Sean, thank you very much appreciate it. Thank you. Shares of Goldman Sachs drag on the dow after the Earnings Report what is bothering the bank but not hurting the dow. Another big rally for the dow. Stda this one fade like yeery. Watch to find out. Power lunch will be right back at fidelity, trades are now just 4. 95. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. And at 4. 95, you can trade with a clear advantage. But through goodt times and bad at t. Rowe price weve helped our investors stay confident for over 80 years. Call us or your advisor. T. Rowe price. Invest with confidence. Notheyre not investing iney commoditiesies. Or fixed income. What people are really putting their money into is what they hope to get out of life. But helping them get there requires a real refusal to settle for average. Because when you approach investing with a tireless desire to beat the status quo, Something Wonderful can happen. Those people might just get what they wanted out of life. Or maybe even more. Right no, the dow is up 240 points that is i lot but only nine tenths of 1 and whatever you have in bitcoin, it is getting crushed tanking 15 today on that exchange were all over this breaking news on apple as well. The tech giant expecting to create 20,000 new jobs in the u. S. And add 350 billion of Economic Activity to the u. S. Economy over the next half decade the company also set to bring back billions to the u. S. And create a new campus. Mu mchore on this ahead. Power will be back in two minutes. E no idea its not theirs. Its mine. Mine. Mine. Mine. The new lexus rx 350l with three rows for seven passengers. Are you excited about your baby sister coming . Experience space for the unexpected with the rx l, part of the rx family. Experience amazing at your lexus dealer. Hello, im sue herera. Your update for this hour. U. S. Ambassador to the United Nations nikki haley optimistic about u. S. Policy in afghanistan saying President Trumps plan involves shifting from a timebased approach of fighting, to linking u. S. Assistance to concrete results and cooperation from the afghan government. The u. S. Policy on afghanistan is working we could see dramatic changes in terms of what the u. S. Policy has been doing we are seeing that were closer to talks with the taliban and the Peace Process than weve seen before. Demonstrators calling on congress to pass a clean d. R. E. A. M. Act were detained during a protest on capitol hill. It was orpged by a national organized by a Jewish Organization called bend the arc. And take a look at. That temperatures in russias Remote Northeast siberian region hit minus 88 degrees farenheit on tuesday ands cous could see, they posted cold weather selfies showing eyelashes covered in frost. That is the news update this hour back to you. Melissa, i think it would be better to get glitter maersk. It doesnt look real. Im skeptical but there you have it. Lets take a check on markets. Were around session highs at this hour. The dow is up tripledigits. Up 238 points or almost one full Percentage Points and trading above the record closing eye and ibm and boeing leading there. And apple expecting to create 20,000 new jobs an add 350 billion to the u. S. Economy over the next five years, according to the company the company also said to bring back billion dollars to the u. S. , in other words repatriating overseas profits and it will create a new campus, which we will be announced later this year. Investigators investors giving a disappointing out look for ford the stock is down 7 right now phil lebeau is in chicago with more. It is a rough week for ford after getting the guidance for 2017 year end earnings and 2018. And that is at the heart of why shares of ford moving lower and under pressure for sometime. This is disappointing guidance for 2018 theyre expecting to make between 8 and 9. 2 billion, roughly speaking that is down from the expectation of 2017 of 9. 6 billion in total profits. One reason is higher commodity but a company in transition. Look at the truck lineup yes they dominate with the f series and bet profit margin but facing greater competition and expanding with a mid size pickup truck. Some are wondering if they could face pressure there. And the question of what they are doing when it comes to electric and autonomous drive vehicles chairat yot chariot is the program theyve launched in new york is one example they are in vesting heavily in autonomous drive vehicles, they expect greater losses in that area in 2018 and the question for a lot of investors is when is this all going to pay off how many years in a row will ford and other automakers invest in the mobility platforms. And i want to show you this chart. Since jim hackett took over as ceo and ford has moved higher since he became ceo. But look at the performance of Fiat Chrysler and i point out it is a clear diliniation sergio mashon is articulating and making profits with ram and jeep that is our focus right now. You look at ford and there is more ambiguity. And investors do not like that and at the end of the day that is why you see the split in those two stocks. Phil, thank you very much brian. Well this is not on the front page as much but given the gdp numbers are out tomorrow, is it time for investors to start worrying about china are there are headlines out there but they dont mean much, but if you add them up it may tell a larger story wore t the worlds second biggest and maybe the most important economy in the last couple of weeks weve had a crackdown and slowdown on credit growth and money supply led to home prices flattening out and forget fake news, how about fake data. One big region in china admitting it fakes Economic Data points it had done it before. And then there is this the u. S. Government blocking two mergers between chinese and u. S. , and just today the lead banking regulator suggests that a black swan event could threaten its economic stability. So perhaps nothing to worry about yet. The economy is still expected to grow at a nearly 7 rate but given the trump and bitcoin headlines dominating the news cyc cycle lately, we want to point out what you might have missed that could be something to watch from china the gdp numbers are out tomorrow. Worth watching. Thanks a lot. Bitcoin down more than m than 30 and investors gotten to excited. Luke is from crypto advisory and jo van future with future perfect ventures good to have you with us ill start off with you, jo van, this is a volatility you expected. It seems like people were getting on the crypto and block chain band wagon for for some time. Was this expected . Yeah. I think those of us in the space were very surprised at how quickly bitcoin went up in price. Especially in just the last month of last year it went from 10,000 around thanksgiving to over 20,000 before retreating a little bit and it started the year at 1,000. So it was a lot of new money from all over the world. Coming into the sector and a lot of folks that hadnt seen downturns in the currency before, there were five 30 declines in it 2017 alone. I ip vested in invested in 2013 and weve seen 90 decline during that time so a lot of new money that came in, that expected it to keep going up. And lou, if we could make the extrapolation to stock trading, that is where you began your career on the equities side of things you have weak hands and maybe some of the weak hands are being shaken out but without the increment alibiers and they got burned and they are lousy at buying at 17,000 or 18,000 and they might never come back so what is that driver back to new highs . Sure. Well as she said, weve seen this before. It has been down 71 in one night. So any time you have a new asset like when the internet first came around in the 90s. There was extraordinary volatility there amazon the greatest company in the history of the planet was down 95 over a couple of years. So any time you have a new asset like this, you get this kind of volatility and that is why anybody who has been in this base for a while considers themself hodlers we dont holden crypto, which means we are hold on for life because it is a wild ride. That is a term crypto investors use to hold back when there was a hypo made when it said just hold it. And back to you, you are an investor in Block Chain Technology and im wondering, we have the advent today of two block chain atfs, one actively trading and one passively managed atf, is it too early for an investor to invest in publicly traded companies with the hope theyll get exposure . I think it is very early. We certainly have Certain Companies like Semiconductor Companies that have been providing technology and Processing Power that enables the processing behindbitcoin and other cryptocurrency to occur so they could be mined and issued but were in 1994 or 1995 internet so if you think about investing in amazon back then or other companies on the internet, it was a long ride before they really fulfilled their potential and had longterm sustainable gains. And so i think theres longterm potential, future perfect ventures is my venture fund focused on investing in the space since 2013 were seeing Great Movement in the Underlying Technology and it is happening a lot faster than i had even anticipated but it is not for the shortterm investor. Well you could say that again, lou. I guess is this you likened it to internet stocks back in the late 90s, amazon and you must have others in mind too. But are these cryptocurrency destined to do what those what those internet stocks did, on the one hand a lot of them went away. And just disappeared and then a lot of them morphed and became the amazons of today. What is going to happen here or are these cryptocurrencies destined to be perpetually as volatile as they are today. No, i think weve seen this move before. Again with the internet. And you are going to see the exact same thing a lot of us in the in encrypto referred to this and now there are thousands of kpz and next month tens of thousands. And the majority of them will probably fail. But the ones that the ones that are successful will be the next facebook and googles of the next generation. So, are you a holder of the cryptocurrency themselves at this point and does it matter what the crypto currency does in terms of your portfolio companies. Yes and yes. I am a holder of cryptocurrency and i think there are a number of ones that have been issued, or about to be issued. So they are about to go through the initial coin offerings that will building out forms that are transformative and Block Chain Technology is going to be 10x in terms of Value Creation and transformation as the internet was. I was an early internet investor and started my venture career in the mid90s and very excited to see the internet grow. But what is different with this is it is much more global. It also creates volatility and shortterm volatility because you have so much capital from around the world it is currently fairly unregulated. Were going to start to see all of that change and i believe cryptocurrency as an asset class is still going to be around. But buyer beware i think it is still important to look at the Underlying Technology you could day trade it but that is not what i do. I just look at the underlying fundamentals and look at the teams that are going to be apr for a long time. Lou, this is brian. Many of the early bitcoin and bit stamp and all of the other, bit block chain, they were from countries originally with unstable occurrence yif. From some argentina, slav ownia and a number of those countries. I understand that. What is it about u. S. Money or eu or yen that isnt good enough that we would need this Digital Currency what does money fail at . I think a primary thing that money fails at is it is not regulated by the government. To some degree the government, they are printing as much money as they want to. And if you ask how many dollars were presented yesterday, nobody has the answer because the government doesnt tell us and so if you want to hold something that you know how much of it will be there tomorrow and next week, and in 20 years, bitcoin is a great way to understand exactly what it is you own. Were going to leave it there. Im sure we talk to you again. Lou and jollic, we appreciate it. Thank you. Youre very welcome into to the bond market. Rick tracks the action hi, if you look up atted board trading at 256 if you look at the tenyear closing yields were clees to a high for the close to a high for the year, under 256 is the high yield close if you look at the chart of tens minus two, the curve spread, you could see weve been in pretty much a narrow range but still were still very compressed. On dollar index, no yields but here were flirting with the new low close for the year yesterday and today the dollarin tex had the same high, around 9080 and now 90. 32. And now i through a Dow Jones Industrial average chart yeartodate yesterday seems like a wild day and it was but on the books, if you look at what most technicians look the, closing prices, only down 10 points it is up close to a 5. 25 for the year and setting the tone and it drives the point home, eye yield close for tens still takes you only back to march of 2017 sully, back to you. Santely, thank you. And were all over the breaking news story that apple dropped right here the tech giant expected to create 20,000 new jobs in america. Bringing back 38 billion in a onetime tax payment the biggest single tax bill ever by a u. S. Corporation for repatriation of profits and add 350 billion all in in the American Economy over the next five years oh, and if that is not enough. Apple is saying they will build a new campus with a location to be revealed later on this year wow a lot of news to digest. lgefu reaction and analysis straight ahead. nadia white the moment a fish is pulled out from the water, its a race against time. And keeping it in the right conditions is the best way to get that fish to your plate safely. dane chauvel sometimes the product arrives, and the cold chain has been interrupted, and we need to be able to identify where in the cold chain that occurred. tom villa we took our world class network, and we developed devices to track environmental conditions. This device allows people to understand whats happening with the location, but also if its too hot, if its too cold, if its been dropped. Its completely unique. dennis woloshuck if you have a sensor that can keep track of your product, it keeps everybody kind of honest that way. Who knew a tiny sensor could help keep the food chain safe . Your friend just marea. You like her. Shes really good at social media. She buys stocks in companies that stand for something. You like her. Shes always up on the latest trends. She got in early on the whole goat yoga thing. And her sunsets are always nofilter. You like her. But youd like her better if you made more money than she does. Dont get mad at just marea. Get eatrade. Another black eye figurely and almost literally for the nba last night aaron aflalo taking a big swing at another player of the Minnesota Timberwolves now the day before the Houston Rockets and the clippers were involved in an ugly game that become became uglier because the rockets busted into the clippers locker room and the police got involved separately the nba just announcing a deal with verizon, they are expanding what users can see on yahoo sports including live games and other nba programming and coming with an official nba approval format for fantasy basketball. Times for the earning squad. Taking a look at Goldman Sachs and Morgan Stanley which is a report due out tomorrow. So they are all down today. They are all down today so two key things for Goldman Sachs. First trading was very poor again. Down 34 by fixed income currency and commodity which was down 50 it rounded off a very poor full year of trading for the former leader in that area. The second thing in their numbers, the tax bill not delivering as big a benefit as hoped for. Guidance for the 2018 tax rate at 24 , was higher than expected and the 4. 4 billion runoff writedown for the past quarter, due to repatriation tax fix will affect their ability to buy back stock in 2018. Now as you said, Morgan Stanley tomorrow, they hope to beat Goldman Sachs and they are awaiting equities which have declined less year on year than fixed income and does bode well. They also want to show on going continuing strength in Wealth Management and not to have to pay up for deposits in that area and finally comments on the tax bill will be important kbws, the 2018 tax rate to end at around 22 . So lower than Goldman Sachss 24 . Am i wrong or right in assuming that the Big Financial Services companies are taking a lot of charges now, but they are going to be big beneficiaries of the tax bill later you are exactly right so in the quarter that weve just passed, they all have most of them have write downs. Wells fargo didnt have that down to two factors. One the denvered tax assets. So past losses that they are able to offset against taxes going forward. But now they have a less of a value because the tax rate comes down and because of repatriation tax and moving forward, to the year ahead, most averaged around 30 tax rates last year and they are all now between 19 and 24 and it was just that Goldman Sachs came up toward the top of the range this year, today that it had on the share price but still lower than last year. It is perceived among the Analyst Community and others that Goldman Sachs is perhaps the most disadvantaged when it comes to the banks they dont have a large Asset Management business sort of the things that smooth earnings and more subject to trading which has seen a deep downturn because most of the revenues from trading is what has hurt them. Absolutely right. Trading was 56 of revenue in 2010 it is 37 of revenue for the 2017 full year which shows the decline theyve suffered in that area of the bank and how important it is to them. In terms of the within trading, they have been too geared towards active Asset Managers as opposed to passive Asset Managers and a different area in terms of corporate thats hurt them and they dont have the deposit base. Which they are trying to tilt towards but its a long road. You framed the question are they disadvantaged they are, but whose fault is that its theirs. At what point do people say, hey, lloyd, what have you been doing . Hes pretty well protected. But its a question for why they have let themselves get into this position. Marty chavez was as optimistic as you can imagine him being given the recent set of numbers in terms of trading going forwards cyclically and structurally. In a couple of years they need to meet the latest guidance. Thank you pleasure. The dow is up 240 points. Tim and walmart contribung what analysts are saying next in street talk. We had this plan to go to the hottest place on earth, harness the energy from the sun to develop popcorn. We thought we had the right equipment, we quickly realized we needed more. We were able to send a Wire Transfer to a local vendor and get more Solar Cookers delivered, right here in death valley. Manage business expenses from virtually anywhere. The chase mobile app available with business checking. Chase for business. Make more of whats yours. And made it liberating. We took safe and made it daring. We took intelligent, and made it utterly irresistible. We took the most advanced eclass ever and made the most exciting eclass ever. The 2018 eclass coupe and sedan. Lease the e300 sedan for 569 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Flexshares etfs are built around the Way Investors think. With objectives like building capital for the future, managing Portfolio Risk and liquidity and generating income. Thats real etf innovation. Flexshares. Built by investors, for investors. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Time now for street talk first sig cutting the price by 8 cutting after they fell short of expectations. There could be down sides to the estimates depending on Revenue Growth from citis card segments the stock is moving fairly higher. Second is walmart citigroup adding it to their focus as they hosted walmart management they reranked the Retail Investment list. That put walmart on top. Analyst calls it a best in class retailer and strong holiday trends should continue they like the valuation. By the way, if you are wondering, auto zone is their second ranked retail stock advanced auto parts is dead last. Auto zone auto zone is two but advanced auto is last walmart, number one. After a huge run. Third stock here, ibm. Barclays upgrading it to overweight boosting the price target to 192 from 133 could be coming to an end. The analyst believes it could be the next cloud vendor and Strategic Revenue could surpass that is aavoid vendor lock in and complacency. They mentioned block chain. Mmhmm. And thats a feature to help ibm sell cloud services. Block chain is hot i like block chain. Im not an anticrypto guy its not new its been around for a decade. You wonder why its gaining steam. Maybe somebody out there smarter than me can let us now. Your final stock is pure storage. Small cap call today its a californiabased data storage company. Barclays upgrading it to an overweight from equal. They see an opportunity to Grow Market Share some of the bigger players are struggling and Analysts Expect it to pitch its brand and win business they boost the target on pstg to 22 from 19 stock is up 10 today, but still a couple bucks, maybe 30 or so upside still seen by analysts there at barclays. Tyler thank you very much. Weve got a big rally on wall street now had one yesterday and it disappeared. This one looks like it has stability in it. Above 26,000, up 258 points. Will today be different . Plus, we have the feds big beige book breaking moments from now. About three and a half minutes when the second hour of power begins after the break see thats funny, i thought you traded options. Im not really a wall street guy. Whats 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 youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade we are about 20 seconds away from the release of the beige book lets check on the markets major indexes at session highs rebounding from yesterdays selloff you see the industries up 250 points, about a full percent s p up 3 4 of a percent. Lets go to hampton for the beige book release. Tyler, reports on Economic Activity from all 12 districts indicates the economy continued to expand through the end of the year 11 districts reporting modest to moderate gains dallas reporting a robust increase the outlook for 2018 is optimistic for most of the country. Retail sales excluding autos expanding in most districts. Some highlighting holiday sales that were higher than expected most districts reported little growth in home sales due to limited housing inventory. Most manufacturers reported modest growth and some increased capital [ speaking french ]expes employment continued to grow at a modest pace. Actually putting limits on growth its still a modest pace firms expect pages to increase in the months ahead. In some districts, price growth described as modest to moderate as well. In most districts a couple of exceptions chicago noting only slight price hikes. San francisco saying Price Inflation was actually slightly down in recent weeks overall prices mixed with increases. Manufacturi manufacturing. In boston, the Residential Real Estate market expressed concerns about the bill signed into law and shrinking on the cap on the mortgage deduction discouraging Home Ownership ditto for new york which also reported a demand for loans in the housing segment. Atlanta was one of several districts reporting Holiday Retail sales exceeding expectations but softer auto sales. Finally the robust Economic Growth in dallass region was broadbased. Manufacturing, retail, Energy Sectors all seeing growth accelerate the next fed meeting is just two weeks away back to you. All right hampton, thank you very much bringing in now cnbc we need to say senior economic it takes time talking about it takes even more. Thats my point given the time i have. There is a junior. 30 seconds of my life i will never get back. True. Let me talk about it. I have a problem with where the beige book has been the last couple of months let me talk about it the lead paragraph in the beige book says modest to moderate about the economy. Whats the economy been doing . Its been growing at 3 . Im not saying thats a riproaring economy, but the overall characterization of the economy its been the same. Its beige. Been the same for years. Its beige. Excellent word to describe it. We are doing over a percent higher than potential growth when you look at some of the details, you do see some of the robustness that was the word used by dallas you would think some good stuff about holiday sales, tightness in the labor market. You dont get the sense that the economy is roaring the way its been roaring from the beige book the way it should be used is overall characterization of the economy. I would go with the data rather than that. But use the inside to say is the fed getting feedback about widespread inflation or widespread wage increases to inform decisionmaking im not seeing it yet. Is there a danger if they are underplaying, under verbalizing the rate of growth right. Is there a danger that they are missing something and they are more prone to a policy mistake as a result . All you can ask is the fed asking the same question you use the beige book as input. Whats the fed hearing out there . Thats nice about them publishing it. They talk to a lot of people people visit them all the time they visit places. This is an overall general characterization of what they are hearing from contacts. If they heard wage pressures are widespread in the economy you would be like, oh, wait, the fed is getting feedback i may not have they are looking at data, reading this stuff and seeing the dissonance and wondering whats telling the real story. My guess is they would side with the numbers now showing 3 growth in the economy. Before josh, guggenheim partner scott thinks unemployment will be the lowest since 1969 anybody else there are several people including, i believe i interviewed a fed official who said he thinks it will be a three handle on the Unemployment Rate coming this year. That was Robert Kaplan you believe you interviewed him . Things are robust. I believe thats what he said i was groping for the data today 4. 1 . We have been down. The three handle is coming the next question to ask is does it scoop the fed it might be something to get the fed moving faster. Stick around. We have other news stay here. Apple announcing in the past hour well, a lot of news. Theyll add 20,000 jobs in america over the next five years. Add 350 billion to the American Economy, repatriot money and, oh, yeah, josh, look for a location for a Second Headquarters, kind of like amazon did you process that i think your beard is longer thats right. Lets walk through how apple gets to the 350 billion number. One, apple will be hiring more people creating 20,000 new jobs over the next five years remember apple already employs 84,000 some people, as you noted, will be working at a new apple campus which will be announced later this year. Apple telling me the campus will be here in the u. S two, apple will continue to spend, invest with domestic suppliers and manufacturers. An estimated 55 billion in 2018 alone. Apple expects to invest over 30 billion in Capital Expenditures. Apple is also anticipating repatriation tax payments to come in at 38 billion apple has declined to say how much it is repatrioting but they said they could be doing a 245 billion repatriation tim cook saying apple is a Success Story that could only have happened in america and we are proud to build on our long history of support for the u. S. Economy. Cook adding, we have a deep sense of responsibility to give back to our country and the people who help make our success possible cook also first announced the companys 1 billion advanced Manufacturing Fund right here on cnbc that fund, apple saying, will increase to 5 billion apple has never issued these projections like this before but tax reform, specifically when it comes to repatriation, perhaps getting Cooks Company greater clarity and confidence to make the announcement today. If we presume they are bringing their cash and Cash Equivalents back which is 252 billion, they are spending what, according to the press release 30 billion over the five years . That would leave a balance of 220 billion in cash we dont know exactly i would love greater clarity from apple if the cfo wants to give me a call i would love to take that and get more clarity not a lot of detail. Perhaps paying down debt capital returns, you would think. Perhaps another prime use of the cash dividends or buybacks. Well see if we can get details there. Why is the imputed tax rate on the repatriated money 16 when the tax law split between cash and noncash assets. One was taxed at seven or seven and a half and the other at 14 how come it is higher . Do you know . I dont know, tyler im making back of the envelope projections here we reached out to apple to get more clarity there so far not giving details when we use the number we are assuming 16 on cash we come up with the 245. Josh, i want to be clear. You announced a series of things apple is doing you also announced they are repate rating this money is that coincidental or is there a line from the repatriation and the added jobs and investment . I dont think we know your question being do we know if this is all baked in, already in the works. Exactly how much more than we originally thought . Right i dont think we have a lot of clarity on that now. You heard me say i have to assume that luca and the team were waiting for tax reform, waiting to see how exactly that would flesh out. Last month, i was talking to the c. O. O. Jeff williams saying, listen, we are trying to get the details. Although he at that time made it clear repatriation made a lot of financial sense. How that played in, i dont think we know. You have to assume after that they had a lot more clarity and perhaps that influenced what they were able to say today. These are projections they havent made before. Maybe i can answer the question a little bit. Apple is committed to adding work here. Fox con maybe coming to wisconsin. We are waiting for that to be finalized. Either way, this is going to be effectively a 38 billion transfer to the u. S. Treasury, is it not . Thats true the u. S. Government they get a windfall. Here is the analogy tyler has a rich uncle in norway he decides to give tyler his money. Tyler, you get a big windfall, pay 38 billion to the federal government and you have a ton of cash to use that was doing nothing before but sitting overseas theyll do stuff with it theyll build a new location if other companies microsoft, cisco, whoever has the cash does this, could the u. S. Treasury find itself in a weird position of having a multi hundred billion dollar windfall . Some of this was anticipated in the tax bill. I have to look at the scoring to look at the expectation from repatriation that was always an uncertainty what we are interested in from an economics and political point of view is when this money comes back and the money from the tax cut how much goes to labor, how much goes to capital there are people out there that are trying to price in the windfall to earnings from the tax cut. So they are bringing back 250. This number, by the way, this money is already largely invested in u. S. Assets. Treasuries, corporate bonds. Maybe corporate bonds, Something Like that. Does the form of this money change shape does it become Capital Investment does it become a sheare buyback, a dividend thats why i asked josh what do we know thats new it could stay in the form in which it is now. In the form of u. S. Treasuries and there would be no change. Exactly. Other than the windfall to the treasury and not spending it. My question was this way and maybe its insane. We are two, three days from a federal Government Shutdown. We are arguing over a couple billion dollars. Daca water, water everywhere, but not a drop to drink. 38 billion writing a check, but the federal government has been dithering over a couple billion dollars and other issues they could get a big windfall here im only being half facetious, i wonder if this could help stop a Government Shutdown. I dont know. I dont know. It could narrow the deficit. It doesnt change the fight over money. Correct the other thing worth noting in terms of the Straight Line is it doesnt say thanks to taxes a lot of the other companies came out saying they would pay bonuses, increase minimum wage because of the impact of tax reform thats not mentioned in the press release. They politicized that they do that. Yeah. They dont want to say thank you. Steve and josh, our thanks to you. Sachs sending things higher. Good to talk to you, guys. Jerry, do you think investor positioning is still conservative meaning there is still cash on the sidelines . All kinds of cash the numbers are anywhere for the economy between 8 trillion and 10 trillion. Why is there an assumption if there is 8 trillion to 10 trillion or whatever the number on the sidelines that it will come into stocks or any part of it will . Thats my point. Okay. Since it hasnt yet, it is not likely to be a problem there is plenty of liquidity to take on a dip or downturn in the market if you havent put in the money yet its hard to say the economy or the market is fully valued. You combine that your apple discussion is fascinatin fascinating. Only a handful of companies have talked about the impact. But what we see is the net transfer of capital back to the United States. Its hard to envision a market that peaks with the liquidity that sits there today. When you throw on top of that all of the firepower behind the Global Economy and just the simple fact we havent touched what the upside earnings potential is, both from tax reform and from Global Economy, thats a much better scenario than anyone would paint who is looking for market top sean, do you think investors are adequately pricing in or acknowledging the upside risks to things like inflation and wages because Companies Like apple are using their tax windfalls to reinvest in their companies . Its a little bit disconcerting, the lack of appreciation for what the potential downside looks like today when you look at things like the number of corrections we have seen over the last year or so. You look at vicks and things like that with measure of volatility it is a little bit concerning generally speaking to think about those things when you look at the reasons to be optimistic, the big part of the segment leading in is really the story going on you really should just set politics aside and say whats going on from a fiscal perspective with regard to the tax plan will be a windfall for American Companies, american consumers. Its going to be a windfall for American Workers that leads to good things. We have to leave it there thanks for your time well see you there. Heres whats coming up on power lunch. Bitcoin might be sinking but that doesnt mean investor interest in block chain investment is disappearing new funds betting big on blockchain and the repatriation of billions of dollars, is it what President Trump was hoping for will other Companies Follow . Well debate it. Plus, how the market rally has recharged americans retirement savings. That and more ahead. And dad got. 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Technology, big tech lets start with apple its not your wheelhouse apple announcing Different Things your quick take as a Venture Capitalist about what apple was doing. Its great that they are taking a leadership position bringing money back to the u. S. , creating jobs and focused on the u. S. The second thing that encourages Venture Capitalists like myself is so many businesses need scale to survive apple and others do the same thing buying up smaller companies, plugging them into the system thats interesting. The debate we were having with Steve Liesman is what do they do with the money they are bringing back they are writing a giant check to the government. That will leave them with a lot of money theyll probably buy bonds, maybe a buyback. Do you think apple could be a bigger Venture Capital investor . Absolutely. We believe youll live in a world where the big get bigger because of the flywheel effects of data. Apple will be doing that a lot of things that couldnt survive on their own, plug them into the apple system and they have a chance. Better odds for an exit for you for companies or competition . I think its better for exits. Right now you have the ipo markets. You have had less acquisition. Youll see smaller acquisitions picked off because apple Needs Technology or somebody else. If the big get bigger are they more likely to be antitrust targets thats the challenge. You see what happens with uber they are able to take advantage of scale, data, network effects. Thats the big challenge the big get bigger how do you survive to get to the point where you could be acquired by apple and how does amazon not eat the world, or apple. Or google or facebook whoever. Exactly right we are showing on the wall a list of companies that are household names that you have invested in early on you say things have changed that if you are a company with no path to profitability you would never get funding. It seems crazy because it seems you never should have gotten funding to begin with. Does that change the way snap looks at v. C. S we thought with growing customers, getting into the demographic nobody had and now the demographic isnt attractive anymore. They are not growing the base at all. Yep we talk about it in the book short cut your startup. Everyone needs to think about the world. With Companies Like blue apron we see they are not as tolerant to longterm unsustainable business models. Lets go back to the wall help me understand, carter you have spacex, lyft and then beef jerky krave is good. The point is thats an odd mix. The Clothing Company when you look at a company what are the first things that qualify or disqualify another look you say, no, out i think the two things to think about is we talk about it ourselves as consumer and tech investors. The world is meeting in the middle can amazon become walmart before walmart becomes amazon every Snack Company is now a tech company when they launch. We look at a company and getting ready are you serious or joking no. Were serious. Like a Beef Jerky Company is a tech company basically kevin plank said it at a Goldman Sachs conference if you dont think you are running a tech company, you are confused four years ago that was potentially unique now you think of things like daily harvest, consumer smoothie business, they are getting to scales and levels they never would without technology think of the brands that started off, bonobo acquired by walmart. They were direct to consumer, no retail, no tv commercials. Now they have tv commercials, retail the world is meeting in the middle right. To go back to the question, one thing we look for especially in an ultra competitive world, everything is open source these days whats a true competitive advantage . If you dont have it, you are not going to survive there is somebody in a dorm room somewhere. The apartment complex next door, another country all trying to do the same thing. Carter reum, author of shortcut your startup. Thank you very much for coming in and rolling with the apple stuff. Appreciate it. Say hi to your brother. Ahead, are facebook, amazon and google too dominant in the markets . We were talking about it discussing the growing antitrust case against big tech and the wolf huffed and puffed. Like you do sometimes, grandpa . Well, when you have copd, it can be hard to breathe. It can be hard to get air out, which can make it hard to get air in. So i talked to my doctor. She said. Symbicort could help you breathe better, starting within 5 minutes. Symbicort doesnt replace a rescue inhaler for sudden symptoms. Symbicort helps provide significant improvement of your lung function. Symbicort is for copd, including chronic bronchitis and emphysema. It should not be taken more than twice a day. Symbicort contains formoterol. Medicines like formoterol increase the risk of death from asthma problems. Symbicort may increase your risk of lung infections, osteoporosis, and some eye problems. You should tell your doctor if you have a heart condition or high Blood Pressure before taking it. Symbicort could mean a day with better breathing. Watch out, piggies get symbicort free for up to one year. Visit saveonsymbicort. Com today to learn more. If you cant afford your medication, astrazeneca may be able to help. Do you remember yesterdays massive reversal in its reversing today. The dow is up big now, 268 points boeing up 3. 5 the unstoppable boeing nasdaq and the s p are up. Big apple news today more on this market rally when power lunch rolls on whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley you or joints. Something for your heart. But do you take something for your brain. With an ingredient originally found in jellyfish, prevagen is the number one selling brainhealth supplement in drug stores nationwide. Prevagen. The name to remember. Its abor it isnt. Ence in 30,000 precision parts. Its inspected by mercedesbenz factorytrained technicians. Or it isnt. Its backed by an unlimited mileage warranty, or it isnt. For those who never settle, its either mercedesbenz certified preowned, or it isnt. The mercedesbenz certified preowned sales event. Now through february 28th. Only at your authorized mercedesbenz dealer. Hello, everybody im sue herera here is your cnbc news update. Retiring republican senator jeff flake condemning President Trumps attacks on the free press. He did it in a scathing speech on the senate floor. He compared trumps rhetoric to that of soviet dictator Joseph Stalin. Mr. President , it is a testament to the condition of our democracy that our own president uses words infamously spoken by Joseph Stalin to describe his enemies it bears noting that so fraught with malice was the phrase enemy of the people even kruschev forbade its use. More people speaking out against dr. Larry nassar it is day two of his sentencing trial. Nassar pleaded guilty to seven counts of criminal Sexual Misconduct a 43yearold Mountain Biker take a look at this decided to conquer a legendary downhill course in austria he rode down the twomile ski run which features a 27 average gradient using a regular Mountain Bike with metal spikes on the tires he topped speeds of 65 Miles Per Hour hes not crazy, they say thats the news update this hour back to you. Crazy is in the eye of the beholder. It is thank you, sue. You got it. Big news from apple. The company is adding thousands of jobs, will repate rate cash and build a new campus in the United States. They will contribute 350 billion to the u. S. Economy over five years joining us is wall streets top apple analyst of bernstein toni, thank you very much for phoning in. Sure thing. The only thing they state is theyll pay the tax repatriation payment of 38 billion is the assumption theyll bring back their cash and Cash Equivalents . We believe thats the case. It is important to note that u. S. Companies this is mandatory. U. S. Companies have to pay 15. 5 on all accumulated foreign earnings we were expecting a large payment from apple it is possible it could keep some of the cash offshore. Given that apple generates most cash offshore each year we believe it will likely repate rate pretty much all of it we were saying maybe its a smart thing for apple to make the payment and bring money back in case tax law changes and the window closes. Youre saying once they make the payment the ability to bring that lump of cash back, the 252 billion, they can do it even if the tax law changes because they made the payment this year correct well, they take the charge this year the tax law says they can pay over eight years the payment itself wont occur immediately. The charge will occur. Again, it is a mandatory charge under the new tax law on any accumulated foreign earnings what would you like apple to do with this money they bought companies in the past like beats and that hasnt turned out that well right look, i think apple feels like it is in a pretty good place its Big Initiative is to try to double its Services Revenues over the next three years. It announced the target a year ago. Over a fouryear period. Its on track to do that organically without acquisiti acquisitions historically, apple has done very, very few large acquisitions beats was the largest acquisition. It was only a couple billion dollars. So this is a company that i think doesnt really feel like it needs to do a deal. Nor does it have a lot of historical experience doing large deals. I would be surprised if this triggers an acquisition spree for apple. It is more likely that you will see incremental cash returned to shareholders in the form of higher dividends and or incremental share repurposing. Where does the cash go . You answered that question maybe you answered this earlier. What is the rate on the repatrioted money . 15. 5 on cash 8 for noncash accumulated earnings. Thats based on what was in the tax law just passed . Correct that is our point, toni you would imply from 38 billion, just do the math reversed you will be bringing back pretty much if not all of apples cash. Ibm, how much money do they have overseas about 10 billion not a lot what about hp . Hp has well, there are two, but they have nominal amounts. In the low billions. Microsoft has a lot. Im putting him on the spot mandated, this would likely be the first of many of these types of headlines we should expect. Absolutely. Ibm reports tomorrow after the close. We expect an update on not only the onetime charge theyll take associated with offshore cash, but also what the new tax rate will be under tax reforms. Thats the big question apple didnt really address in its press release today. You know, the press release today was all about investing in america and its commitment to america. But from an investor perspective, the tax law has two significant implications for companies. First, they can bring back cash and pay a onetime take a onetime charge. The second one is will the tax rate go higher or lower . In apples case we believe the tax rate will go considerably lower on a go forward basis. Some people suggested ibm could go higher. The reason i ask is i know people hate the idea of using the money for buybacks unless they are an investor in the company. Bottom line, in a rally like this in a market like this, do you think we could over the next couple of weeks and quarters see a bunch of Big Companies start to announce second rounds or upping their current buybacks to reduce stocks on the market and give us another pop up i think you understand what im trying to do with that. Sure. I dont know if well see the announcements initially. I think it may take time the spirit of the tax law is to try to invest in tax law apple is communicating that. To turn around and say well anticipate buy backs, im not sure companies will do it that quickly. That said, i do think over the course of the year we are going to see incremental cash returns from over capitalized companies. Apple is a perfect example where the net cash, net of debt will be about 130 billion or 140 billion after the charge you know, given their debt position thats just too much cash even for a big company like apple particularly since it generates over 50 billion a year. Given that its not likely to do big acquisitions in our eyes it is likely you will have incremental tax, capital return. I think you will see it across the technology sector. Im not sure you will see it in the next two months. Why do you think apple didnt mention a cause and effect relationship between the investment that its making, its going to invest with the impact of tax reform i thought it was curious in the press release. Yeah. Look i think perhaps it was implied that there were some the investments in the u. S. , i mean, apple now has huge numbers generate 50 billion a year in Free Cash Flow over the next five years, thats 250 billion you know, is bringing the cash back its all fundable Manufacturing Fund of 5 billion . They could have done it anyway. Good point. Thanks for phoning in. All right. Lets talk about the big announcement from apple today. Well bring in a couple of guests jimmy pepakukis from aei, a cnbc contributor, and chris cofenis, ceo of park street strategies. Welcome. Good to have you here. Jimmy, lets talk a little bit more about apple and its moves here is there any i mean, this is what President Trump said would happen it looks like its happening with apple they are leading the way presumably other companies will do the same thing. Doesnt he deserve to take a big fat victory lap . I thought it was funny. You asked the analysts why didnt apple make the connection between the investment moves and tax reform dont worry. The president will make that linkage for them there will be many tweets talking about apple. He should take a victory lap we are caught up looking at the models, private sector models, what will be the impact of tax reform we failed to pull the camera back and look at what happened this was very significant and comprehensive Business Tax Reform big drop in the rate, expensing repatriation we are starting to see that and i expect to seer many. This was a big change in u. S. Tax policy. Chris, let me get your reaction to apples moves. And to the idea that the economy is really doing very, very well. As Steve Liesman and the beige book may have under stated how well the economy is doing. There have been reversals in races for the gop in various states most recently wisconsin in a state senate race there. With the economy doing well, with a company like apple coming in saying we are going to create 20,000 new jobs in the United States, build a new major campus in this country, isnt that going to isnt the state of the economy going to be the thing that voters turn to this fall it tends to be a more significant factor in an electi election the distinction is the damage i would say trump has done to hilhil himself. The apple press release speaks to that. Dont reference the tax cut, the Trump Administration i dont think thats by accident when you write those press releases you know what you are and are not putting in there if you were looking at it subjectively, the president should be probably higher considering where the economy is now. When you run what is essentially a divisive presidency, your rhetoric, the words he uses, how he talks to opponents, about the media, thats creating a degree of political instability you have seen it play out in alabama, in virginia playing out in wisconsin you see it in the poll numbers even with the economy where it is the majority of americans think the country is on the wrong track. I take your point that the president s tweets and sometimes his comments alleged or otherwise tend to trip him up. Dont you think he deserves a modicum of credit for the moves apple gives him specific credit for it or not that he deserves and this tax law deserves credit for things that American Companies are doing like walmart last week paying 1,000 bonuses and creating lots of familyfriendly bchts that werent there for employees. If you polled most americans the reason most have a negative view of the tax bill is if the goal were to enrich and benefit corporations and i dont have to tell any of you corporate profits were pretty good and in a strong place last year now they are Even Stronger if you are talking about the working class, the middle class, a lot of Small Business owners, they are questioning what the benefit is to them i think this is the dichotomy in our country now. Im sorry, chris. Excuse me. Arent the working class people, the middle class getting the bonuses and the increased wages the companies are giving out thanks to tax reforms and arent the Small Business owners getting the benefit of a lowered llc rate and passthrough rate let me tell you about the first one. Take for example Walmart Walmart gives a bonus that is an increase in starting wage for those employees that are new at the same time it closes multiple sams club stores, firing 9,000 workers including 1,000 corporate jobs the idea that it is an absolute benefit isnt true to the second point in terms of passthrough i can tell you for example depending on the type of Small Business you have and how you are incorporated, including myself you could pay more taxes depending on how you classify yourself as a Services Group or not. Forget the politics i went to oracles headquarters in redwood city, california, ten years ago. It was built on a former landfill there were restaurants and dry cleaners and car dealers all around it. All of them were there because of oracle. If amazon brings the Second Headquarters to newark, new jersey, it will fundamentally change the lives of hundreds if not thousands of people who have nothing to do with amazon. Right . There is a bigger story here. Tremendous. Its not political. It is the halo effect of bringing prosperity which is stuffed into a couple of counties in california, seattle and los angeles and moving it around the country im against cities giving tax rates to companies though in this case with amazon you have a chance to become a tech hub which every city wants to be a tech hub they are spending money on incue l incubators that doesnt work that well. But thats a game changer for the economy. Not just the immediate jobs but the spillovers. When people leave they start new startups in town. You turn your city into something completely different and more prosperous. We have to leave it there thank you. Thank you if your 401 k or ira or 529 is tied to the strength of the stock market you had a good year last year. What the rally means for retirement and how you position yourself this year is now the question well try to answer it coming up weve been preparing for this day. Over the years, paul and i have met regularly with our ameriprise advisor. We plan for everything from retirement to college savings. Giving us the ability to add on for an important member of our family. Welcome home mom. With the right financial advisor, life can be brilliant. And as you might expect the white house reacting to apples announcement lets get the news from ayman javrs at the white house we are getting a reaction now from the white house and the Deputy Spokesman Lindsay Walters issuing a statement saying the white house applauds apples announcement to add 20,000 new jobs and contribute 350 billion to our economy over the next five years due in part to the historic tax reform passed last year as the president promised making our businesses more competitive internationally is translating directly into benefits for the American Worker through increased jobs, wages, Better Benefits and new jobs. Thats Lindsay Walters, Deputy Press Secretary at the white house offering the white houses first reaction to the apple news of major new investment in the United States. Thank you very much brian . Well, let us bring us bring street journal, we will, so, get to it, about whether or not Big Tech Companies are too big, but you might have heard about the apple news, breaking less than two hours ago whats your reaction to the news i know, you dont want to politicize it. Its a big economic story, whatever political side youre on credit where credit is due. Weve known for a long time the money is locked up overseas and apple had said its staying there until theres corporate rate cuts. They are more or less delivering the tax cut, and apple held up their end of the bargain as it was. As to whether the addition of jobs, apple creates jobs because of demand for product. In my judgment, they probably would have created jobs anyway if things were going good, but the extent is going well, the Global Economy is going well, nobody is surprised theres job creation going on as Global Leader in the United States. Theres a lot of listen, it is the economy, a lot is the economy, its done better in the last couple years, and its feeding on itself, but theres another element to this, which the president is going to take credit for i get it theres people that cant expect the fact that sometimes good things happen. If we get i mean, im sorry to say that, but its true, a thousand dollar bonus means a lot to struggling middle class families, amazons second head quarters, apple, whatever you call it, its going to change lives for the better from the construction crew that makes it to the car dealer that sells cars, to the new workers that come in. Absolutely. And, now, i wouldnt give all that credit to the tax cut im not im just saying its an economic story. Yeah. I agree with you 100 on that. This has been building up for the last year. We would have had a good economy whoever was in the white house it helps its an administration that dials back regulatory system rather than tighten it further and lower taxes rather than raising them. No getting away from that. Its econ 101, lower taxes on business investment, theyll do more of it if you give people money rather than tax it, they spend it that may create problems down the road, but nobody should be shock the theres positive spillovers today when you bring back when apple is going to write a check for 38 billion, they pay that over a number of years, eight years, theying the charge in years as i understand it, but other Companies Bring back money, writing checks to the federal governmenting and they may be contributing a quarter of a trillion dollars to federal coffers or something on that magnitude. That helps thats meaningful money. I want to turn to your article on the front page of the wall street journal today or yesterday yesterday or today, greg hard to tell, todays newspaper, but online yesterday. Thats what i thought saw it online yesterday coming back from a trip you make the case that a lot of todays tech giants may underscore being in a position analogous to standard oil, the bell system, and others broken up how close are we to that point, and how neat are the analogies id say bottom line, tyler, were not at that point now, but you cannot dismiss responsibility at all of what we know from history. Reason is as follows first of all, its not a fact that anyone argues over that, in Companies Like google, facebook, microsoft, apple, some extent amazon, very big market shares, but we can assert that having a big market share, even a monopoly is not illegal or necessarily bad. The issue is do consumers suffer because of the behavior of the company with a monopoly . A century ago, it was clear big oil and at t were behaving in ways making customers worse off. Is google or facebook similar . In some ways, no, its not they give away their product hard to argue facebook or google are price gougers. The next two years, given they are now on this platform, their gateways to the digital economy, does their Competitive Position and desire to leverage that position for whatever reason prevent other potentially Innovative Companies from coming up and providing a product and service we would benefit from. When you look at the monopolies in the prospect of breaking up companies, seems like the risk is greater in europe than here in the United States why in europe because they are harder when it comes to these companies in terms oh, yes yes. On a regular basis, and look at data privacy, and very close fashion, concerned about how much control these companies have over consumer data. So that can be seen as a monopoly in and of itself on data thats a great point. It relates to the somewhat different world view that european and american regular laters bring to it we are more likely to say to protect competition, you dont necessarily have to protect competitors. Right in europe, they think that link is explicit if the behavior of a company like google, even not intended, far fewer companies offer, for example, various search engines, that, at the enof the day, is bad for competition and consumers. They are willing to wield a big stick. What is going to happen over five years, as market shares are consolidated, theres more instances and examples of competitors and those complaining of this behavior that is what we saw in the past, whether it was the standardat tt thank you greg, thank you all right, thank you very much weve got a rally going on this hour. Three major averages up more than 1 . In fact, record intraday high for the dow. The dow, s p, nasdaq up more than 5 already this year. How do you check the oh401k la y lately you may be closer to your goals. Reporter they are doing better in general. The average is up 10 year over year, third quarter, the important thing is, doesnt sound like a lot, but theres a lot of bonds in the funds. A good return. They are contributing more, 8. 5 we complained for years, have to contribute more to retirement. They are now from 8. 2 to 8. 3, to 8. 5 thats good news baby boomers are not saving near enough they have average 178,000 its not enough. You ought to save multiples more than that. In fact, fidelity recommends if you are sixty years old, save eight times what you make. Making 50,000 at 50 years old, 400,000 is what you need guys, bottom line, we still need to save more back to you. Ec pas y, b. Chk,lee, is next is the monolithic view of emerging markets obsolete . At pgim, we see alpa in the trends, driving specific sectors of out performance. 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See you tonight at 5 00 thank you for watching power lunch. Closing bell before fast money starts now. Welcome to the closing bell, everybody, im kelly evans. Im scott walker. Major news for apple today the company will add another corporate campus, hire 20,000 employees in five years, and invest 350 billion in the United States. Yeah. Well tell you why, what else they plan to do, and we begin today with this amazing market rally. Look its dow 26,000 back after yesterday afternoons pullback the markets came roaring back to life to record highs here. The dow now up