Transcripts For CNBC Power Lunch 20240714 : comparemela.com

Straight day of declines the nasdaq trying to snap a twoday losing streak. Industrials the worst performing sector following a downgrade of 3m, and for more on all of this and what is sending the dow lower today, lets go to bob pisani at the New York Stock Exchange an important thing, scotty, here is were down three days in a row, and this is not so much i would call searching for direction as i would say that we really need to figure out where the market is going. Were waiting for news, essentially here were waiting to see if the fed really decides they needed to cut rates aggressively, we really need to see if there is any progress on trade. And we really need to find out if the earnings estimates are too high going into the second half of the year take a look at some stocks moving here. The good news, the low print was at the open. I see semiconductors like advanced mike row are doing well, all the metals have had a terrible year. They have no traction at all amazon has a new breakout thats a new high for the year, thats 23 of consumer discretionary. Thats another sector. Historic high today. And 3m, look at that sinking there. Third day in a row, and of course, a downgrade there from rbc citing macro pressures for them that stock hasnt had traction since april when they lowered their guidance back to you. Appreciate it, bob. The big new s the market is waiting for comes tomorrow when jay powell talks to congress but before that, we heard from larry kudlow today weighing in on powells job security and Central Bank Independence among other things Steve Liesman is here with those details. Melissa, the firing of tur y Turkeys Central Bank chief and President Trumps consistent throats to fire or demote the chairman of the fed sparked a controversy over whether the central bank is and should remain independent larry kudlow weighed in, saying he believes the fed should be independent. That word independent, i mean, it doesnt mean they operate from another planet. The fed reports to congress. And thats in the constitution and the fed is appointed or the governors are appointed by the president. So i think that in a daytoday sense certainly theyre independent, but that doesnt mean that they shouldnt listen to advice from their elders. That advice from their elders, from the president , also from kudlow, was for the fed to cut Interest Rates to accelerate growth, with both going further than their predecessors and the clinton, bush, and obama administrations in offering advice to the fed. Leading them to write in a recent piece, the heyday of Central Bank Independence now lies behind us in a world of rising populism, low Interest Rates, and bloated Central Bank Balance sheets, independent Monetary Policy increasingly looks outdated. For now, kudlow said, i believe, end quote, that chairman powells job is safe, but he added, quote, at the present time at the present time we feel better now, at the present time at the present time that could change is there really a debate on this issue of fed unless . I feel like those who are saying it shouldnt be independent are on an island, and the majority, the great majority, suggest the fed should be independent . I think the evidence comes from like the firing of the central bank chief in turkey not that he was fired, but that there was no cry around the world to this, that the United States did not speak out you think about what you might call, and well talk about this next month erdogan, too. And people are like okay and you think about the jackson hole consensus for at least several decades. It was an independent central bank and that led to better Interest Rates policy, better inflation, and better growth outcomes now you have a president of the United States who routinely criticizes the fed, threatens to demote him, essentially, if he doesnt lower Interest Rates, and thats part of the process so i think maybe theyre on an island, but its part of the big process going on right now, and you do have people like, you were there, art lauffer you were there, and he won the president ial medal of freedom, so we have to take these ideas seriously. He wrote a book on trumponomics right steve i mean, look, if you think its not a real threat, we wont take it seriously, but it seems like its an issue out there its out there. People are talking about it more because the president and the president s men, so to speak, are talking about it but do people really take that seriously . Really take it seriously is there going to be a day when the fed is really not independent . Are we injecting are we politicizing by talking about it in a way that has never happened in the two decades that i have been covering the central bank, yes. If jay powell cuts rates by 25 basis points later this month or 50, lets throw 50 in the mix, would you say that was a political pressured move i think part of the reason he might cut has to do with politics i think part of the reason theres no inflation, theres no cover theres cover for that, how do you create, well, if not for what the president is saying, its out there maybe he hiked in part in december because of what the president was saying so poor jay powell. A lose lose situation. There was an interesting story in the wall street journal thats worth noting where they talked to leaders of gres, and they support him, and thats ultimately what matters if youre going to change the Federal Reserve act, congress is going to do it the whole reason you want to keep the fed independent is to keep politics as much out of the process as you can possibly do right its even more brass tacks than that, scott. You think about a creditor to the nation im going to lend you money. Are you going to depreciate my money or not if the history, and i mean going back 5,000 years of civilization, is that despots and monarchs depreciate currencies thats the where word debase comes from, where you add base metal to gold, right so the idea of an independent central bank is in part the sanctity of the currency, and you pay lower rates because of that thought the last we have heard of that. Despite the uncertainty over the fed and the economy, some are still bullish on where were going. Lets bring in scott, expecting the first rally to head much higher from hereof, also with us is michael, the chief investment strategist with state street global advisers. Great to have you both on set. Tom, ill start with you because you raised your price target in may, 31. 25, which i imagine is on the upper end on the street there. What is the catalyst here at this point i think theres actually quite a number of catalysts in the second half that are much more bullish than consensus thinks about one is, i think it is actually very positive if the fed does cut rates, i think its a real affirmation to markets about the friendliness of the fed. I think that ism and pmis which have been tanking and probably weaken into Third Quarter look like theyre going to rebound into 2020, and i think the yield curve has been telling us that for 16 months. And third is that theres still this tina issue. U. S. Bonds are yielding 2 versus negative rates. Equity cash return in the u. S. Is around 5 its higher than any other country in the world i think stocks are a real bargain. Tina being there is no alternative for those playing along. To be clear, you raised your price target in may. And even today, you say i think im too conservative, because you suggested it could go higher than 31. Fwoiv thats right. 31. 25 is only 5 upside from here when you look at fed first cuts in the last 50 years when either the ism is above 50, which is where it is, or the leis are positive, which it is, or were not in a recession, the median sixmonth gain is 12 . Its talking adding another 300 points from here, which means 3200 to 3300. By year end way above 3125 can you see the path to that number, michael . I think if toms thesis comes through, whats interesting is if you get a u. S. china trade agreement, better than expected earnings and fed rate cuts, thats constructive for the markets. My only challenge with that is i think a lot of that is already priced into the market if you look at kind of fair value for stocks, given if we just tack on a few Percentage Points for earnings per share growth on the s p, which seems about right, we put a higher than normal multiple on that because Interest Rates are low and inflation is pretty benign, youre getting in the 3 houn area as dom said, were kind of already there, so kind of you need a lot to go right and a lot is already priced into the stock prices in terms of really good news so what that next catalyst beyond is, is really hard to determine. My opinion is that most of the risks are skewed to the downside similar to the conversation you were having with steve, what happen physiced if the fed flexs muscles and doesnt deliver the rate cuts. Then theres a risk to the downside unless, like tom said, you essentially have people being forced into the market the fed, there is no alternative, the fed is going to cut rates. Ia dont want to miss out on a possible trade deal with china so you have nowhere else to go, so youre going to bid the market up, even if you feel a lot of if is already in. We would agree with that. We continue to suggest investors stay toward cyclical Growth Stocks in the u. S. You have to. You have no other choice 13 trillion now trades with a negative Interest Rate so those bonds, if held to maturity, guarantee losses for investors. Its amazing so investors do have little choice bought to own risk assets in this environment, and i think that sports toms thesis where youre likely to see markets continue to rally. We would suggest you think about Quality Growth Companies that have a cyclical bent and not try to get too defensivo too value oriented at this point i want to ask you about bitt kaine because bitcoin while we have you. Ill say the same thing i said six years ago when it was at 80 a coin, which is it is the single best hedge against the traditional financial infrastructure whether you support fiscal and Monetary Policy or not, it doesnt matter this is the schmuck insurance you have under your mattress but thats kind of a default. So where do we go from here, and this whole debate about fed and monetary independence, i mean, does that sort of feed into this rally that we have seen in bitcoin . I think hes making a great point that theres a macro argument to own some bitcoin whether if you owned 2 this year, it would have added 400 basis points to your funds performance. Thats caviar for a hedge fund but you know, increasingly, bitcoin is a macro story because we saw it with china and some risks. People buying local bitcoin, chinese bitcoin. It happened in turkey. Now people are responding to that idea, if you have a little insurance, its great, and its tiny the fact that facebook and likely other fang companies are going to create their own Digital Currencies is really validating the idea that digital money is here to stay. This is almost a suggestion that bitcoin is a bit of a safety trade you have seen bonds go up, bitcoin go up, gold go up. Does that dynamic have to break for the market to truly break out to the upside, michael i think its a total manifestation of easing central bank policy. All of these things rallied when the fed pivoted. Stocks are up, bonds are up, gold is up, crypto is up why . Because the fed and other Central Banks are pursuing very aggressive, very easy Monetary Policy to me, if you want an asset thats really uncorlated with anything else, Something Like cold has proven to have that property so the kind of negative Interest Rate environment, the very accommodative Monetary Policy has inflated all assets. And to me, that just doesnt feel right from that perspective. So i think crypto is another manifestation of just very easy Monetary Policy. Something has to give then, eventually, maybe. Thank you michael and tom. All right, coming up, several analysts initiated coverage on chewy today. That stock is up 50 since its ipo, so should you buy it or is it a dog will it roll over . Got any more no. Okay. Well chew all over it guess they did have more tailwind. The world will be watching jay powell tomorrow, how the feds moves could Impact Global l atndth alth a much more coming up on power lunch. Wall street weighing in on chewy today. Several firms initiating coverage, but some arent biting despite the 50 rally in the stock since it went public on june 13th. Jeffries setting a hold rating saying with competition from big players like amazon, it might be better to keep this one in the kennel joining us on the news line, maybe he has cliches of his own, the analyst behind the call, brent thill. Good to talk to you. Thanks for having me. Is this as much a call about what the stock has done already as much as where you think it could go from here yeah, as you mentioned earlier, stocks up over 50 since the ipo came at a reasonable valuation were bullish about chewys prospects, but i think there are a couple things were concerned about. One is the move in the stock two, when you do a Price Comparison against amazon, prices are literally right on top. Third, having worked in technology for 20 years and taken over 50 companies publiceripublic, theres very little differentiation between technology they sell other peoples products, and target, walmart, the rest of the industry, wants to be in this business as well chewy definitely has Incredible Customer Service and effectively this autoship capability, you know your dog is going to eat, your cat is going to eat, so that autoship gives you great visibility, but in terms of a price differential, the proprietary analysis we do suggests other retailers are right on top of their pricing. Sure, but as long as the other retailers arent undercutting the prices by anything of magnitude, you just described a pretty reliable subscription based business, no . Thats right. Thats why, you know, again, were not sell rated, not buy rated, right in the middle because we also note the stock is up, and from a competitive perspective, we have just seen a lot of other models that have been disruptive that had much higher motes this is not quite as big as most think. In your note, which you titled keep this in the kennel, so one of those puns because in fact yours. Nicely done. You note that just 14 of u. S. Pet food and supply spending is done online, which is staggering to me. That tells me that at amazon, which has the autoship sort of feature when you run out of something at the end of the month, it automatically ships to you, amazon could easily step in, walmart could easily step in and snatch that business away from chewy i dont really understand what mote if any chewy really does have its a good point even on amazon, if you add more than five items to your basket, you even get a larger discount on the return revenue model. So i think, you know, amazon cares. Obviously, chewys ceo came out of amazon, i think it waw strategically a smart decision by the board to bring on an examazon executive. He knows the playbook. This market is big theres plenty of runway for multiple vendors in this market, and i think, again, consumerization of pets is happening, but again, i agree. I do think theres a moat. When you look at the net promoter scores, you look at the customers that i speak to, my friends that use this product love it. And they have no reason to switch theyre also doing things to differentiate the model. Theyre getting the pharmacy we think over time they could create digital marketplaces, as much as you spend for your bird food, how much time and money does it take to actually watch the bird, the cat, or the dog when youre on vacation . Its a lot more expensive than the food theres other things you can do around pet care, around longterm care theres other digital pieces to this model they can introduce that would effectively be higher margin that arent in the model today. They could also ship more of their own Product Sales versus selling other thats are at a lower margin its hard to negative, but its also hard for us to be really positive given the magnitude of the move since the ip oo. I appreciate urtime giant leap forward today in the race to space. Will it be a game changer, and wheres all the money coming from plus, one read on how boeing is holding up at the 737 max situation drags on and how you should play the stock. And what a federal court said the president cannot do on twitter. L atnducmo cinupalth a mh reomg on power lunch. Read earnings reports, looked at chart patterns. Ive even built my own historic trading model. And youre still not sure if you want to make the trade . Exactly. Sounds like a case of analysis paralysis. Is there a cure . Td ameritrades trade desk. They can help gut check your strategies and answer all your toughest questions. Sounds perfect. See, your stress level was here and i got you down to here, ive done my job. Call for a strategy gut check with td ameritrade. Lets get to Kayla Tausche about latest on trade talks with china. We were waiting to hear next steps between the u. S. And china, and a u. S. Official confirms that the u. S. Trade representative, Robert Lighthizer and the treasury secretary spoke with the vice premier and commerce minister and providing information that the two sides continue negotiations at resolving the outstanding trade disputes between the two countries and both sides will continue negotiations as appropriate. But no Firm Information about when a next inperson round would potentially take place in beijing or what the content of the call was, but confirming that call did in fact take place today. Melissa. Thank you New York Stock Exchange<\/a> an important thing, scotty, here is were down three days in a row, and this is not so much i would call searching for direction as i would say that we really need to figure out where the market is going. Were waiting for news, essentially here were waiting to see if the fed really decides they needed to cut rates aggressively, we really need to see if there is any progress on trade. And we really need to find out if the earnings estimates are too high going into the second half of the year take a look at some stocks moving here. The good news, the low print was at the open. I see semiconductors like advanced mike row are doing well, all the metals have had a terrible year. They have no traction at all amazon has a new breakout thats a new high for the year, thats 23 of consumer discretionary. Thats another sector. Historic high today. And 3m, look at that sinking there. Third day in a row, and of course, a downgrade there from rbc citing macro pressures for them that stock hasnt had traction since april when they lowered their guidance back to you. Appreciate it, bob. The big new s the market is waiting for comes tomorrow when jay powell talks to congress but before that, we heard from larry kudlow today weighing in on powells job security and Central Bank Independence<\/a> among other things Steve Liesman<\/a> is here with those details. Melissa, the firing of tur y Turkeys Central Bank<\/a> chief and President Trump<\/a>s consistent throats to fire or demote the chairman of the fed sparked a controversy over whether the central bank is and should remain independent larry kudlow weighed in, saying he believes the fed should be independent. That word independent, i mean, it doesnt mean they operate from another planet. The fed reports to congress. And thats in the constitution and the fed is appointed or the governors are appointed by the president. So i think that in a daytoday sense certainly theyre independent, but that doesnt mean that they shouldnt listen to advice from their elders. That advice from their elders, from the president , also from kudlow, was for the fed to cut Interest Rates<\/a> to accelerate growth, with both going further than their predecessors and the clinton, bush, and obama administrations in offering advice to the fed. Leading them to write in a recent piece, the heyday of Central Bank Independence<\/a> now lies behind us in a world of rising populism, low Interest Rates<\/a>, and bloated Central Bank Balance<\/a> sheets, independent Monetary Policy<\/a> increasingly looks outdated. For now, kudlow said, i believe, end quote, that chairman powells job is safe, but he added, quote, at the present time at the present time we feel better now, at the present time at the present time that could change is there really a debate on this issue of fed unless . I feel like those who are saying it shouldnt be independent are on an island, and the majority, the great majority, suggest the fed should be independent . I think the evidence comes from like the firing of the central bank chief in turkey not that he was fired, but that there was no cry around the world to this, that the United States<\/a> did not speak out you think about what you might call, and well talk about this next month erdogan, too. And people are like okay and you think about the jackson hole consensus for at least several decades. It was an independent central bank and that led to better Interest Rates<\/a> policy, better inflation, and better growth outcomes now you have a president of the United States<\/a> who routinely criticizes the fed, threatens to demote him, essentially, if he doesnt lower Interest Rates<\/a>, and thats part of the process so i think maybe theyre on an island, but its part of the big process going on right now, and you do have people like, you were there, art lauffer you were there, and he won the president ial medal of freedom, so we have to take these ideas seriously. He wrote a book on trumponomics right steve i mean, look, if you think its not a real threat, we wont take it seriously, but it seems like its an issue out there its out there. People are talking about it more because the president and the president s men, so to speak, are talking about it but do people really take that seriously . Really take it seriously is there going to be a day when the fed is really not independent . Are we injecting are we politicizing by talking about it in a way that has never happened in the two decades that i have been covering the central bank, yes. If jay powell cuts rates by 25 basis points later this month or 50, lets throw 50 in the mix, would you say that was a political pressured move i think part of the reason he might cut has to do with politics i think part of the reason theres no inflation, theres no cover theres cover for that, how do you create, well, if not for what the president is saying, its out there maybe he hiked in part in december because of what the president was saying so poor jay powell. A lose lose situation. There was an interesting story in the wall street journal thats worth noting where they talked to leaders of gres, and they support him, and thats ultimately what matters if youre going to change the Federal Reserve<\/a> act, congress is going to do it the whole reason you want to keep the fed independent is to keep politics as much out of the process as you can possibly do right its even more brass tacks than that, scott. You think about a creditor to the nation im going to lend you money. Are you going to depreciate my money or not if the history, and i mean going back 5,000 years of civilization, is that despots and monarchs depreciate currencies thats the where word debase comes from, where you add base metal to gold, right so the idea of an independent central bank is in part the sanctity of the currency, and you pay lower rates because of that thought the last we have heard of that. Despite the uncertainty over the fed and the economy, some are still bullish on where were going. Lets bring in scott, expecting the first rally to head much higher from hereof, also with us is michael, the chief investment strategist with state street global advisers. Great to have you both on set. Tom, ill start with you because you raised your price target in may, 31. 25, which i imagine is on the upper end on the street there. What is the catalyst here at this point i think theres actually quite a number of catalysts in the second half that are much more bullish than consensus thinks about one is, i think it is actually very positive if the fed does cut rates, i think its a real affirmation to markets about the friendliness of the fed. I think that ism and pmis which have been tanking and probably weaken into Third Quarter<\/a> look like theyre going to rebound into 2020, and i think the yield curve has been telling us that for 16 months. And third is that theres still this tina issue. U. S. Bonds are yielding 2 versus negative rates. Equity cash return in the u. S. Is around 5 its higher than any other country in the world i think stocks are a real bargain. Tina being there is no alternative for those playing along. To be clear, you raised your price target in may. And even today, you say i think im too conservative, because you suggested it could go higher than 31. Fwoiv thats right. 31. 25 is only 5 upside from here when you look at fed first cuts in the last 50 years when either the ism is above 50, which is where it is, or the leis are positive, which it is, or were not in a recession, the median sixmonth gain is 12 . Its talking adding another 300 points from here, which means 3200 to 3300. By year end way above 3125 can you see the path to that number, michael . I think if toms thesis comes through, whats interesting is if you get a u. S. china trade agreement, better than expected earnings and fed rate cuts, thats constructive for the markets. My only challenge with that is i think a lot of that is already priced into the market if you look at kind of fair value for stocks, given if we just tack on a few Percentage Points<\/a> for earnings per share growth on the s p, which seems about right, we put a higher than normal multiple on that because Interest Rates<\/a> are low and inflation is pretty benign, youre getting in the 3 houn area as dom said, were kind of already there, so kind of you need a lot to go right and a lot is already priced into the stock prices in terms of really good news so what that next catalyst beyond is, is really hard to determine. My opinion is that most of the risks are skewed to the downside similar to the conversation you were having with steve, what happen physiced if the fed flexs muscles and doesnt deliver the rate cuts. Then theres a risk to the downside unless, like tom said, you essentially have people being forced into the market the fed, there is no alternative, the fed is going to cut rates. Ia dont want to miss out on a possible trade deal with china so you have nowhere else to go, so youre going to bid the market up, even if you feel a lot of if is already in. We would agree with that. We continue to suggest investors stay toward cyclical Growth Stocks<\/a> in the u. S. You have to. You have no other choice 13 trillion now trades with a negative Interest Rate<\/a> so those bonds, if held to maturity, guarantee losses for investors. Its amazing so investors do have little choice bought to own risk assets in this environment, and i think that sports toms thesis where youre likely to see markets continue to rally. We would suggest you think about Quality Growth Companies<\/a> that have a cyclical bent and not try to get too defensivo too value oriented at this point i want to ask you about bitt kaine because bitcoin while we have you. Ill say the same thing i said six years ago when it was at 80 a coin, which is it is the single best hedge against the traditional financial infrastructure whether you support fiscal and Monetary Policy<\/a> or not, it doesnt matter this is the schmuck insurance you have under your mattress but thats kind of a default. So where do we go from here, and this whole debate about fed and monetary independence, i mean, does that sort of feed into this rally that we have seen in bitcoin . I think hes making a great point that theres a macro argument to own some bitcoin whether if you owned 2 this year, it would have added 400 basis points to your funds performance. Thats caviar for a hedge fund but you know, increasingly, bitcoin is a macro story because we saw it with china and some risks. People buying local bitcoin, chinese bitcoin. It happened in turkey. Now people are responding to that idea, if you have a little insurance, its great, and its tiny the fact that facebook and likely other fang companies are going to create their own Digital Currencies<\/a> is really validating the idea that digital money is here to stay. This is almost a suggestion that bitcoin is a bit of a safety trade you have seen bonds go up, bitcoin go up, gold go up. Does that dynamic have to break for the market to truly break out to the upside, michael i think its a total manifestation of easing central bank policy. All of these things rallied when the fed pivoted. Stocks are up, bonds are up, gold is up, crypto is up why . Because the fed and other Central Banks<\/a> are pursuing very aggressive, very easy Monetary Policy<\/a> to me, if you want an asset thats really uncorlated with anything else, Something Like<\/a> cold has proven to have that property so the kind of negative Interest Rate<\/a> environment, the very accommodative Monetary Policy<\/a> has inflated all assets. And to me, that just doesnt feel right from that perspective. So i think crypto is another manifestation of just very easy Monetary Policy<\/a>. Something has to give then, eventually, maybe. Thank you michael and tom. All right, coming up, several analysts initiated coverage on chewy today. That stock is up 50 since its ipo, so should you buy it or is it a dog will it roll over . Got any more no. Okay. Well chew all over it guess they did have more tailwind. The world will be watching jay powell tomorrow, how the feds moves could Impact Global<\/a> l atndth alth a much more coming up on power lunch. Wall street weighing in on chewy today. Several firms initiating coverage, but some arent biting despite the 50 rally in the stock since it went public on june 13th. Jeffries setting a hold rating saying with competition from big players like amazon, it might be better to keep this one in the kennel joining us on the news line, maybe he has cliches of his own, the analyst behind the call, brent thill. Good to talk to you. Thanks for having me. Is this as much a call about what the stock has done already as much as where you think it could go from here yeah, as you mentioned earlier, stocks up over 50 since the ipo came at a reasonable valuation were bullish about chewys prospects, but i think there are a couple things were concerned about. One is the move in the stock two, when you do a Price Comparison<\/a> against amazon, prices are literally right on top. Third, having worked in technology for 20 years and taken over 50 companies publiceripublic, theres very little differentiation between technology they sell other peoples products, and target, walmart, the rest of the industry, wants to be in this business as well chewy definitely has Incredible Customer Service<\/a> and effectively this autoship capability, you know your dog is going to eat, your cat is going to eat, so that autoship gives you great visibility, but in terms of a price differential, the proprietary analysis we do suggests other retailers are right on top of their pricing. Sure, but as long as the other retailers arent undercutting the prices by anything of magnitude, you just described a pretty reliable subscription based business, no . Thats right. Thats why, you know, again, were not sell rated, not buy rated, right in the middle because we also note the stock is up, and from a competitive perspective, we have just seen a lot of other models that have been disruptive that had much higher motes this is not quite as big as most think. In your note, which you titled keep this in the kennel, so one of those puns because in fact yours. Nicely done. You note that just 14 of u. S. Pet food and supply spending is done online, which is staggering to me. That tells me that at amazon, which has the autoship sort of feature when you run out of something at the end of the month, it automatically ships to you, amazon could easily step in, walmart could easily step in and snatch that business away from chewy i dont really understand what mote if any chewy really does have its a good point even on amazon, if you add more than five items to your basket, you even get a larger discount on the return revenue model. So i think, you know, amazon cares. Obviously, chewys ceo came out of amazon, i think it waw strategically a smart decision by the board to bring on an examazon executive. He knows the playbook. This market is big theres plenty of runway for multiple vendors in this market, and i think, again, consumerization of pets is happening, but again, i agree. I do think theres a moat. When you look at the net promoter scores, you look at the customers that i speak to, my friends that use this product love it. And they have no reason to switch theyre also doing things to differentiate the model. Theyre getting the pharmacy we think over time they could create digital marketplaces, as much as you spend for your bird food, how much time and money does it take to actually watch the bird, the cat, or the dog when youre on vacation . Its a lot more expensive than the food theres other things you can do around pet care, around longterm care theres other digital pieces to this model they can introduce that would effectively be higher margin that arent in the model today. They could also ship more of their own Product Sales<\/a> versus selling other thats are at a lower margin its hard to negative, but its also hard for us to be really positive given the magnitude of the move since the ip oo. I appreciate urtime giant leap forward today in the race to space. Will it be a game changer, and wheres all the money coming from plus, one read on how boeing is holding up at the 737 max situation drags on and how you should play the stock. And what a federal court said the president cannot do on twitter. L atnducmo cinupalth a mh reomg on power lunch. Read earnings reports, looked at chart patterns. Ive even built my own historic trading model. And youre still not sure if you want to make the trade . Exactly. Sounds like a case of analysis paralysis. Is there a cure . Td ameritrades trade desk. They can help gut check your strategies and answer all your toughest questions. Sounds perfect. See, your stress level was here and i got you down to here, ive done my job. Call for a strategy gut check with td ameritrade. Lets get to Kayla Tausche<\/a> about latest on trade talks with china. We were waiting to hear next steps between the u. S. And china, and a u. S. Official confirms that the u. S. Trade representative, Robert Lighthizer<\/a> and the treasury secretary spoke with the vice premier and commerce minister and providing information that the two sides continue negotiations at resolving the outstanding trade disputes between the two countries and both sides will continue negotiations as appropriate. But no Firm Information<\/a> about when a next inperson round would potentially take place in beijing or what the content of the call was, but confirming that call did in fact take place today. Melissa. Thank you Kayla Tausche<\/a> in washington with the latest on the u. S. china trade talks. Now over to mike santoli for trading nation mike scott, thank you very much. More bad news for boeing after it reported a sharp drop in first half deliveries. But the stock is proving resilience, recovering from earlier losses to move slightly higher on the day. Is the worst over for boeing todd gordon and steve chevron of federated investors, our trading nation today todd, a long kind of sideways period for boeing shares does it retain the benefit of the doubt at this point, do you think, or not . Its hanging on by a thread. Before we go into boeing, lets look at the xli, the industrial. Boeing happens to be the Largest Holding<\/a> in xli we have some concern here. Xli barely holding on to the 2enday moving arg xli, into the s p, that is declining indicating industrials are significantly underperforming and being that boeing is the Largest Holding<\/a>, thats problematic looking at boeing specifically, there is hope. Without getting too much into the math here, if we look at each of the declines over the last four years, theyre roughly 25 to 30 were right at a 25 decline right now, holding on to that 200 moving average we need to hold 310 in that area, if we can, its been a symmetrical pullback and we could recover. Below that and it is an issue. A little bit of a buffer between here and 310. Steve, part of the bull case on boeing for years has been the predictability of its longterm order book and the cash thats associated with it has anything changed on there . How would you view the stock fundamentally . We come to a similar place as todd from a different angle. What you look at is the name screens well on some of the fundamentals not the least of how much Short Interest<\/a> is out on the name, and its being resilient, holding in at this 350 level right now our view is you certainly need to get past this max issue, but once you do, demand looks relatively good. You think you can get a return of profitability, cash flows start to improve its not overly expensive at this point from a value perspective. It may be worth jumping in we own it in global out. All right well, well see. Still some headline risk out there, but its absorbed a whole lot of tough news. Well see how it goes. Todd and steve, thank you. For more trading nation, go to our website or follow us on twitter. Scott, back over to you ahead on power lunch, mexican made autos coming across the border at a record rate. What it means for the Auto Industry<\/a> and the trade war plus, the race to space Richard Branson<\/a> launching Virgin Galactic<\/a> to the stars and wall street and cnbc top states for business how will the fox condeal weigh on wisconsin now, the latest from tradingnation. Cnbc. Com a double top is a chart pattern that suggests an up trend might be ending and ready to reverse sometimes called an m formation because of the way it looks on a chart, a double top consists of two well defined peaks at approximately the same price traders often view a break of the lowest low as a bearish signal m e bohl, and schwab is the better place for traders Xfinity Mobile<\/a> is a Wireless Network<\/a> designed to save you money. Whether you use your phone to get fit or to find the perfect gift, youll use less data with a network that automatically connects to millions of wifi hotspots and the best lte everywhere else. So you save hundreds of dollars a year on your wireless bill. Xfinity mobile has the best network. Best devices. Best value. Simple. Easy. Awesome. Click, call or visit a store today. Welcome back, everyone heres your cnbc news update at this hour. Senate minority leader Chuck Schumer<\/a> calling on labor secretary alex acosta to resign because of acostas role in a 2008 plea deal that let Jeffrey Epstein<\/a> escape prison time for allegedly molesting dozens of teenage girls. I am calling on secretary acosta to resign it is now impossible for anyone to have confidence in secretary acostas ability to lead the department of labor. If he refuses to resign, President Trump<\/a> should fire him. Prime minister netanyahu warning iran it is within range of israeli air strikes, on a visit to an israeli air base, netanyahu cited recent statements by iran that he called threats to destroy israel and france will introduce an eco tax for Airlines Flying<\/a> out of that country which is expected to raise about 200 million in 2020. The french transport minister said france will gradually introduce that tax youre up to date. Thats the news umidate this hour back to you. Thanks so much. Cars were imported to the u. S. From mexico at a record pace in 2019 remember about a month ago when the president was threatening a series of escalating tariffs for anything coming out of mexico, but really everybody knew it would hurt the Auto Industry<\/a> most theyre going to stop buildish cars down there. That hasnt happened look at the latest data released by the mexico automobile association. Its clear that auto imports, they continue at a strong pace up 13 in the first half you see how many were brought in from mexico last year, 2. 7 million. Were going to blow by that at the rate were going right now by the way, mexico, now responsible for 16 of the vehicles that are sold here in the United States<\/a>. So because were on that record pace, lets look at three stocks that stand out in terms of automakers gm and fiat chrysler, they both have large operations down there. What do they build down there . Pickup trucks. High hft profit, highly valuable vehicles, and theres Strong Demand<\/a> right now thats going to continue for the remainder of this year you also have to look at nissan. They were one of the first to get into mexico in terms of auto production in a big way. Now the Third Largest<\/a> auto exporter out of mexico the bottom line is this, we will not see a slowdown in auto imports coming from mexico just not going to happen, especially with usmca, essentially agreed to, now it has to be ratified by all the parties. Thanks. Before i let you go, i want to switch to the other beat you cover, airlines. You told us in the halftime report, we showed the president talking about orders from qatar for boeing jets. Which the president described, i think he used the words a very large order, but we didnt have numbers. Now apparently we do whats your definition of large . Theyre ordering five 777 cargo planes now, thats nice youll take any orders you can get if youre boeing theres also going to be engines orders from ge raytheon is getting orders and a few other Aviation Companies<\/a> as well any business is worthwhile, but this would not be something thats going to move the needle. Maybe he meant very large planes must be yeah. The 777 cargo would be a very large plane. Exactly, phil, thanks were counting down to fed chair powells testimony before house lawmakers. Stocks are down for a third day on fears the fed may scale back rate cuts after the jobs report. And across the pond, outgoing ecb president mario draghi signaling hes ready to start easing all this comes under the cloud of trade uncertainty and the global slowdown fears. Weve got vilim, the special economic adviser with citi a pleasure to have you with us what do you make of what the ecb is doing and powell has to maneuver himself while not getting too far away from whats happening across the pond, so to speak. Ecb is central bank of a region that is stagnating at best, and maybe sliding into recession or growth recession. So they are going to be looser, theyre going to cut rates theyre going to resume asset purchases, the lot this is a very different position from what powell is in where the economy still, despite slowing down a bit, still has a lot of oomph i mean, Consumer Spending<\/a> was 68 of gdp is healthy. 224k payroll, thats not a long time, so they are in very different boxes. At the same time, powell doesnt want to let himself or our bank get too far away from the rest of the world, which is still so easy. Absolutely. I think there will be due consideration given to the need to act in a more sort of elusive way, either by ending asset purchases, asset sales earlier or by cutting rates. They are of the view that it is still early days for the u. S. , this month of july, getting closer to the moment of truth will be the moment is there any question in your mind that independent Federal Reserve<\/a> policy is the way to go . That that is the preferred way, or can there in fact be a case to be made that perhaps Monetary Policy<\/a> should become a little more political well, it should be operationally independent, clearly. The objective of Monetary Policy<\/a> is politics by the Federal Reserve<\/a> act. Thats political but given these objectives, the implementation should be basically a technocratic exercise theres a division of labor, and i very much hope and expect you will stay there in this country too. What do you make of the whole argument, you said it yourself, our economy is good. The stock market is at an alltime high. Access to capital is incredibly easy, as its been for the last handfuls of years. Why in the world should you cut Interest Rates<\/a> in that kind of environment . This is an excellent question, which is why we believe that it is unlikely that we will see a cut as early as july but the economy is slowing down. There are external risks and you have to not just look at where the economy is but expected to be going so a long view taken into account, the negative impulses from trade wars and related issues abroad could drive you to cut rates even when the domestic economy is still humming along pretty reasonably well but we dont think its the time this month in this world, though, of such low Interest Rates<\/a> around the world, were in an environment where more than a quarter of the worlds sovereign debt is negative yielding and were in a situation in europe now where there are now, if you can believe, 14 european corporate junk issues that have negative yields. Negative yields right now, and thats up from zero at the beginning of this year what does it tell you about Investors Trust<\/a> in banks, and the need to put their money into a negative yielding junk issue this is crazy times, right . Yeah. And to we have to get used to it, unfortunately, because its not going to go away. In europe, certainly, and in japan, yields close to zero or negative territory are going to be the norm for at least several more years to come fortunately, the u. S. Doesnt suffer from that particular malfunction. Rates are low here, but not negative but be prepared for the idiocy of the liquidity trap. Well, well leave it with that good to see you today. Thanks for being here. Joining us from citi, the special economic adviser lets get to the bond market. Rick santelli is tracking the action at the cme. Hi, rick hi, melissa lee tomorrow, jay powell speaking has a very large reach in the marketplace. We had a threeyear note option today kicking off 3s, 10s, and 30s, and it was not a particularly pretty market i gave it a cminus. 38 billion threeyear notes at 1. 843 , and it shouldnt be shocking to anybody, thats the lowest note since 2017 the bid to cover 2. 39 was the lowest bid to cover since march of 2009. Basically ten years. All the other metrics were fine, indirects were above average, directs were above average it had priced a little dirty, but not too bad. Ultima ultimately, the notion of what jay powell may say tomorrow is making shortend investors take pause. It might be causing all investors to take pause, but at the end of the day, after jay powell testifies tomorrow or deals with one side of the aisle, my guess is the tenyear note option will go a bit better thank you space has become the new battlefield for billionaires Richard Branson<\/a>, elon musk, jeff bezos all trying to become the winner branson making a big move today. Well tell you all about it when power lunch returns. It all started under this buttonwood tree. Twentyfour people came together to sign an agreement that created the stock exchange. Just the right elements coming together. It started when scores more people came together, just down the street and traded bonds that helped pay for the revolution, and the nation it created. It started in an office on the corner where the right people witnessed the telegraph and brought information and humanity together forever. It started with the markets, bringing together steel and buildings and silicon and medicine and rockets. We believe the possibilities of life and investing are greater when we come together. Its why for eighty years weve connected ideas with technology, data with inspiration, investors with solutions. So that every day together, it all starts again. Its a very, very, very exciting time for space, with Virgin Galactic<\/a>, with what elon is doing, with what jeff bezos is doing, what boeing are doing, and the Investment Community<\/a> beginning to take a lot of interest in it and beginning to do Analyst Reports<\/a> on the space industry, and you know, obviously, we believe it will be one of the big new industries of the future this thing looks like a Software Business<\/a> under the hood, even though its flying people to space. So this is, i think, actually a really compelling risk reward. That was sir Richard Branson<\/a> earlier today on squawk box talking about ipo plans for Virgin Galactic<\/a>, it would be the first Space Tourism<\/a> company to go public. Could this be a Game Changing<\/a> moment in the race to space . Joining us now is michael sheets great to have you with us. Great to be on. It is the first does it mean were expecting the others, blue origin from jeff bezos and spacex from elon musk to follow . Were not expecting those two particularly because spacex has said theyre not going to go public until they reach mars thats a little bit of a ways off. Blue origin is wholly owned by bez bezos, so they dont have a need to go public there are other Companies Like<\/a> rocket lab that could come public in the new generation of private space companies. Wondering, making it all profitable, how you do that if its simply flying civilians into space for a price or if you have to do deals with governments and other areas to draw enough revenue in well, with Virgin Galactic<\/a>, their Business Model<\/a> is solely focused on the revenue of those tourists i mean, its not cheap 250,000 per ticket, and theres over 600 people already signed up, and both branson and chamath today were talking about another 2500 since their test flights have expressed interest. The revenue is their main source from those tickets itself, but over time, ubs has estimated they expect within ten years Space Tourism<\/a> could be a dl3 billion market the potential is there he said theyre aiming for profitable in two years which seems astounding 2021 could be the day, but sir richard, what was so interesting about how he talks about the business is the optionality they have to go into other businesses along the way because their spacecraft, unlike elon musk and blue origin, which rely on huge rockets to catapult them into space, more like an airplane so he was talking about hypersonic travel to destinations on earth. Bringing back the concord, but almost on steroids is the idea theyre thinking about. And spacex talks about this a lot as well. This idea is probably more five to ten years away for Virgin Galactic<\/a> theyre going to focus on the Space Tourism<\/a> right now, but hypersonic would be a bigger market because in that same ubs report, they estimated it in the same timeframe that point to point space travel or hypersonics, would be a 20 billion market compared to Space Tourism<\/a>s 3 billion market i think of total Addressable Market<\/a> how many people are really willing to pay that much to get into space and mow much if any is a recurring business transaction. Once you have gone, youre done. There are always new people to do that thats a great point because on top of that, i mean, 600 people, and they havent even begun business, have signed on for this thats a Pretty Amazing<\/a> demand already, and if they actually prove this out and start flying people regularly, i mean, talking thousands of people willing to pay that very, very large price tag. So where is all this money going to come from to fuel the space race lets bring leslie pickner to the conversation hey, guys so i think you bring up a good point about the total Addressable Market<\/a> here, although they say mt. Everest is quite crowded so maybe people will add a new thing to their buckest list does it cost 250,000 to go up mt. Everest to hire a sherpa, training. And everest is quite dangerous. But you bring up a good question in where the money is coming from looking at three of the most well known orbiters to space, blue origin, spacex, and Virgin Galactic<\/a> are all funded by vastly different funding models which i think is interesting you have the Virgin Galactic<\/a> trying this spac method, which has never been dry tried before. That was what was so revolutionary, this back door way of getting public and access to a new group of investors. Spacex, much more traditional venture funding model. Spacex valued at 33 billion with a whole host of investors theyre on to seriesjerk in their funding round. They raised 3. 2 billion among the most highly valued Venture Backed Companies<\/a> in the u. S. , and then blue origin, which is almost entirely backed by its billionaire founder, jeff bezos, except for some grants to the tune of about 26 million from 2011 and 13 million in 2017 from nasa so youve got three different fundal models and that partly speaking to the unconventional aspects that we see in space travel and the difficulty in really valuing them. Ipo is when second half of the year, we should expect to see their merger documents which should be very interesting, in the next six to eight weeks, which will really explain how this deal came together. Good stuff. Guys, thanks good to have you both here coming up, todays tasting menu trumps twitter. Tsee school studen nd Financial Aid<\/a>, and burger king taking on taco bell. Stay us. Welcome back to power lunch. Heres a taste of some of the stories were watching today President Trump<\/a> cannot block out hater oshis twitter account. A court says trump is not allowed to use the blocking function to limit access to his account. This came after the Knight First Amendment Institute<\/a> and several other twitter users trump blocked challenge for action i think thats fair. Umhum. If hes going to use this as a way of disseminating information. Free and open Public Square<\/a> yes Student Loan Debt<\/a> is at an alltime high but College Students<\/a> dont know how to pay it more than half of current 11th and 12th graders are unaware of repayment programs or the government will subsidize their interest on certain loans while theyre in college thats not surprising. But people should understand where their money is coming from perhaps there should be an exam given to the students prior to them getting the Financial Aid<\/a> prior to receiving the Financial Aid<\/a>. Okay. They should learn these things hello acorns thats the first thing i thought of when i read this. Yes. This is why that exists, right . Yes so people can understand. Because people dont have enough understanding of Financial Literacy<\/a> exactly. At any level. Even 11th and 12th grade. Its taco tuesday and burger king is getting in on the action theyre bringing back the crispy tacos after nearly a decade. I wonder why they went away in the first place. The tacos are available for 1, will be available for a limited time today we have some samples of the tacos that cost only 1. Dig in. Most of them are wrapped. You can see one is not wrapped and you can see precisely what you get. Its probably a get what you pay for. Lets leave it at that do they have a mote in terms of the taco mote dollar taco mote taco bell, del taco im trying to think of the taco places i visited i dont think burger king jumps up to the top of my list. Probably not. But if youre in there, wow, ill try a dollar taco. The latest on the fox con wisconsin deal, plus, check please t im command central. Its so important to us that verizon is supporting military families. When i have a child deployed, having a Reliable Network<\/a> means everything. So, when i get a video chat, and i get to see their face, its the best thing in the world. And ive earned every one of these gray hairs. Military moms, we serve too. vo the network more people rely on, gives you more. Like military plans with a special price on unlimited, 100 per line, and big savings on our best phones when you switch. Thats verizon. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Welcome back to power lunch. Tomorrow on cnbc we will reveal our top state for business the battle for business between the states took center stage with amazons h2q drama. Allot of attention paid to wisconsins com deal he joins us from a secret location. Im in the top state for business every year for 13 years with top states for business, its that the h2q situation in virginia and new york and also this the most expensive deal ever offered to a Foreign Company<\/a> to locate in the u. S. , that is the deal in wisconsin for foxconn. Were talking about a plant where they broke ground last year President Trump<\/a> said it was going to be state of the art ultimately supposed to have 13,000 employees where are we at now . Not even close theyre looking at, i think it was, 1,500 employees, which is less than the original thought, although i believe that foxconn is of theopinion that at some point in time they will have larger numbers of employees there. For wisconsin 1500 employees is important. His First National<\/a> interview on the topic he spoke with us exclusively. And that 1500 number, its important to wisconsin and foxconn, which to collect on 4 billion in incentive, it has to hit targets for hiring next year when theyre supposed to start production on the plant. Its supposed to be 1800, 1500 is short of that, a lot of concern and controversy in the state of wisconsin and incentives are one of the things we look at in americas top states for business in our cost of doing business category where is americas top state for business heres another hint, surfin usa. What does that mean . You can read more, including the foxconn deal tell us what you think your first clue was keep your lips sealed or Something Like<\/a> that, now its this. I dont know we cant wait until tomorrow thank you, scott cohn. Thank you for watching power lunch, thank you scott for boin joining us today welcome to the closing bell, im will frost 3m is down 2. 5 . Where they got a downgrade from an analyst we have everything you need to know that call and all the other broader action movements with 59 minutes left of trade. Lets get to what is driving the action in the final hour, lower for the market mainly, investors are await powells testimony tomorrow fang strengths and transports ar","publisher":{"@type":"Organization","name":"archive.org","logo":{"@type":"ImageObject","width":"800","height":"600","url":"\/\/ia903003.us.archive.org\/29\/items\/CNBC_20190709_180000_Power_Lunch\/CNBC_20190709_180000_Power_Lunch.thumbs\/CNBC_20190709_180000_Power_Lunch_000001.jpg"}},"autauthor":{"@type":"Organization"},"author":{"sameAs":"archive.org","name":"archive.org"}}],"coverageEndTime":"20240716T12:35:10+00:00"}