microsoft. they are all reporting their earnings after the bell today. joe, if you had to pick one name that could be the more important one, the market mover of those three, could you identify one? >> now the market mover? amazon and google have been the market mover all year. >> is it the donkey driving the market cart? >> for someone like myself and many out there right now, you're hoping for an earnings miss so you finally get the -- >> whoa, you're hoping for an earnings miss? >> yes. >> why? >> because you want to get into these names. >> cheaper. >> you want to get in cheaper. that's the opportunity. you're waiting for a pullback. a lot of people, myself included, have stepped out of some technology names. they have continued to appreciate. >> and you're happy with that? >> major money, moved on. now you look at these names reporting this evening and you're hoping for an earnings miss. you don't want them to keep going higher and higher unless you're long. >> i'm going to qualify what you're saying. i generally agree with it. >> thank you. >> but specifically to alphabet -- wait a minute, wait a second. if amazon has a big miss and it's down 20%. >> 20%? >> just hang on. if they decide to value it on any reasonable metric, that will scare the heck out of this market. now, i do hope actually for a miss at alphabet because i have a half position and i think this whole thing about the ad placement could cause a little sell-off if earnings are a little light and i pick my other half up. but amazon, you want this to stay in this incredible, heavenly aura of nobody cares about value. you don't want people thinking about earnings. >> do you think amazon could fall 20% tonight? >> no, i don't. what i do think, joe, is at some point and i don't know when and josh will tell me i'm wrong, at some point valuation will matter for amazon. >> i'm going to say something i've never said and may never be said again on this network, josh brown, bring some sanity to this conversation. >> no, i think you're right. at some point people will pay attention to the earnings multiple on amazon and that's precisely the moment you don't want to own it because that means something is very wrong. it's been 20 years and nobody has cared. so you want to make the bet they're going to care tonight? you can. it doesn't sound like you are. to joe, please stop wishing ill on my stocks, earnings misses. i'm long google, okay? i don't know what tonight's results will be. however, i think the big report is probably going to be amazon. just in terms of sheer how much we're paying attention to what's going on, what are the read-throughs to the economy, et cetera. so i think that's the big one. they're expected to do an earnings number that is a 25% improvement over this quarter last year and i think it's 33 or 34 billion in revs. anything short of that, specifically on the rev side i think will hurt the stock. again, if you're not in this name and you've been praying for a pullback, look what happened with netflix. they didn't like the earnings number the next day, they beat it up. the stock is now higher than where it was before it record. same outside of tech. look at goldman. they didn't like the quarter. 48 hours later, nobody cared. higher. if that happens with one of these names, probably it's more of a gift than it is a curse. >> john, it's interesting and i think josh makes a good point, which is the momentum right now is so strong in this market, if you look at amazon, let's say they have a slight miss or slight disappointment for next quarter or alphabet does that, do you think it will impact the overall market? >> first of all, i'm long all three stocks. amazon is up 23% year to date. options are up five or six times. i've rolled and rolled and rolled. this has been just a fabulous stock to be in. same thing with alphabet. it's up 12% and those options have more than doubled. microsoft is up 9. an those options -- >> why not pull a terranova and pull some profit? >> you could, you could. he's missing upside. >> you never lose money by locking in some profit and you've already made a bunch of money on these stocks. >> before the market closes tonight, i will be out of those positions. i liwill likely be in new positions in these same stocks. just what jim said, we talk about it all the same. if i say i like it but i'd like it after a 10% correction, i can find plenty of strikes in amazon puts that you can sell and bank some big coin for taking that risk on, because you're obligating yourself to buy the at those lower prices, but you're getting paid for it. you're warren buffett when you do that. >> any view? >> i think the most important one of all of them is microsoft. everybody is looking at amazon, who cares. they dominate in e-commerce an it's all about aws. if they keep growing in there, we know the story. we know how people will react to that. look at the googles of the world. it's still a search company. as much as we want to talk about youtube and everything else, their revenues are search and obviously the ad campaign has done very, very well. we've heard some of the previous earnings. microsoft is important. >> their cloud business? >> it's old school, right, and the fact that how about sas sashi nudella. yes, the focus is on cloud. it's also on surface, on a.i. he is looking at everything. those are the pulls. look at that stock. look what it's done year to date over the last 52 weeks and what i think will lead the market from here. >> john, are you short any of these three names? >> i can't pretend to add value on these stocks this big. i think these stocks are just an effect of the passive wave and the things like the qs. i agree with pete, microsoft is the one nobody has talked about. >> they have got linkedin. they have a lot of things. >> let me ask the same question in a slightly different way, john. even if you thought amazon was the greatest short, would you ever short it? >> i just -- >> or is it too much risk on momentum and to josh brown's point, nobody has cared for 20 years. >> i think this is an artifact of the wave into passive investing of etfs. the stock will pop right back up. >> you do have a tech stock that you do like to short. guys, hold up. we've got a market flash now with dom chu. >> shares of anadarko petroleum are down. they are going to shut down more than 3,000 colorado wells. those closures are in part due to an investigation into a deadly house explosion that did kill two people. now, in a statement, anadarko said it is cooperating with investigators and state regulators to figure out what caused the blast. but that's one of the reasons apc shares are down that big. >> dom, thank you very much. well, technology may be the best performing sector this year, but health care as a group is not far behind. in fact that sector is up nearly 10%. meg terrell focusing on four earnings movers for us. meg. >> we've got quite a bonanza in biopharma earnings and it's been a mixed day. let's start with amgen. they reported after the bell. while they did beat on earnings, they missed a little on revenues. that's being driven by one big drug so the stock trading down today. it wasn't the same for abbvie and that's why the stock is up almost 3%. they have humira, their biggest money maker. that one not seeing the same pressures. bristol myers also being driven by opdivo. that beating expectations driving that up 3%. celgene being driven by one drug, really missing expectations. that was otezla. seeing some pricing pressure which is a big question for the whole class right now. politics, will we see the government step in or is it just the focus from the private side, from the payers driving all this pressure. >> meg, thank you very much. josh brown in chicago, you own both amgen and bristol-myers. >> i do. it's a little bit of a bar bell. amgen is a darling, very close to all-time highs almost all the time. and then on the other side of that barbell is bristol, which really looks like somebody dropped a piano on it a few months back, but it's starting to recover. the technicals are getting better, the news flow is getting better. so i like both holdings a lot. i don't expect them to act in the same way but i think both can work. i want to make a very quick point broadly speaking on the sector. on the show i spent a few months arguing with people should you get out of health care because of trump tweeting. it was the most ludicrous thing i've ever heard until the next day i heard something else ludicrous. this is why you don't do this, because people forget about the tweet that happened one day and they come back and look at fundamentals and they realize it doesn't matter if trump's agenda goes through this quarter or later in the year or it's a 2018 story. there are some areas of the market where there's secular growth completely untied to anything that's going on with gdp estimates or tax rates or what have you. and health care for the foreseeable future, drugs, equipment, whatever, is going to be in that camp. we're an aging society, not just in the u.s. but around the world. and a lot of these companies are going to work higher regardless of somebody sending a tweet about the price of tylenol. so it's very important you tune that kind of stuff out and you don't miss out on moves like these. >> i agree. josh, one of the things i did on that big drop was, of course, broken record, i sold puts on that big drop back in january when the thing hit $46. i put on call spreads -- >> that's why you're my hero, john. >> i put on call spreads after that. >> that's why you're my hero. >> me too. >> that's why i'm pete's hero. i'm his older brother. but i think, josh, you're spot on. any time you get like yesterday you had a tweet -- or not tweet, we had information that the president was asking for some executive orders to take us out of nafta, right? courtney gibson was on the show. it was a negotiating tactic, it actually was. courtney called it. stock was down two or three bucks. today it's up four. >> you're not making investments surrounding these tweets, you're making investments when you look at health care and understand it's the second largest sector in terms of cash overseas and the potential for repatriation. >> right. >> thank you, josh. you're also making because of the eps growth that we just are seeing right now and the revenue growth. eps growth is 27% for health care. you're talking revenue growth of 6%. so the medical devices names, which i know, josh, you have followed as well as i have and pete, you've got striker, you've got med tronics, pki, these names have all worked well so you really didn't have to go for the high beta biotech trade, you could go with the devices but health care is working. >> meg terrell, thank you very much. josh brown, we'll see you in just a bit. we've got a rapid update from steve liesman. weak economic data this morning, especially the durable goods number, reinforcing the idea that the first quarter which we just finished is running at about a stall speed. we're now down to a 0.8% gdp for the first quarter. that's down 0.2. the range 0.2 to 1.5. we're looking for a rebound in the second quarter up to 3%. bank of tokyo still holding out hope here, 1.5%. goldman sachs 1.1, barclay's 0.8. there's atlanta fed at 0.2%. fourth quarter was 2.1% and this quarter now is 0.8% and there's the third quarter, 3%. average the three and it all comes up to 2% over the three quarters. >> steve liesman with a rapid update. thank you very much. time now for our call of the day. american airlines downgraded to neutral from jpmorgan chase. the company's new labor deal establishes a worrying precedent for that airline and the entire industry. cutting their price target by $9 on american airlines. jamie baker the analyst buying call and he joins us now. jamie, welcome. looking at your report here, you use the term harmonize, american airlines because of labor pressure raising pay to match delta and united. you think that's going to jack up cost for available seat mile. is that the main thing behind this downgrade today? >> there are two parts of it. one, it's simply a modeling exercise. it removes close to 50 cents from our earnings and that puts downward pressure on our price target. but it's more worrisome from the perspective of the uncertainty that it injects into the marketplace. you know, we believe that airline stocks are worthy of higher multiples. to get higher multiples, you have to attract longer term investors. to get longer term investor, you have to show as much earnings durability as you can. fuel cost savings never got much of a multiple because of the effemorality of that input. you were good for four, sometimes five years. unfortunately the american move has emboldened unions probably across the entire space. it's led them to believe that you can come back mid-contract, ask for whatever you want, and that in turn makes that march towards higher multiples not impossible, but a little bit more challenging. >> but here's the thing, though, j.b. american airlines was in many ways behind the pay curve against united and pilot. a friend of mine is an american pilot. believe me, he told this all the time. so now that they are matching that, dwhy is the rest of the industry spooked? aren't they now bringing it up to where everybody else is? >> sure. we have cited cost harmonization. it's really the message it sends to other unions. there are other airlines with open contracts. one of the most common questions i've taken from investors this morning is who now has exposure as labor is more emboldened by this effort. setting a precedent that contracts are only as good as one party to that contract feels for some uncertain, you know, period of time is potentially damaging to the industry. i certainly get the cost harmonization aspect, but it's the precedent that it sets that we are worried about. >> jamie, stick around. we'll come right back to you. american airlines not the only stock drawing fire in this sector. as jamie noted, united airlines also making headlines, but perhaps for different reasons. phil lebeau is joining us with that story in chicago. phil. >> brian, united still trying to work its way out of this situation involving how it handles bumped passengers. today it announced new policies when it comes to overbooked flights. here are the policies announced by united airlines. it is authorizing gate agents and flight attendants to offer up to $10,000 so people voluntarily give up their seat. if you are seated on a plane, you cannot be bumped unless there is a safety or security issue. finally, united says that it plans to reduce the amount of overbooking. all of this in addition to the fact as you take a look at shares of united, they are going to be increasing the training for their crews, working with them so that they have the technology, the apps to handle these types of situations in the future. here's ceo oscar munoz talking about the approach they are taking and whether or not this has had an impact or the incident a couple of weeks ago had an impact on the bottom line. >> i haven't looked, and our team hasn't looked. we've been so focused on the review and action report that you've seen and how we're going to move forward that we haven't put pen to pencil. we're in the middle of a month and watch our numbers normally and so we'll see. but that hasn't been a focus for me or for us during this period. >> one other note regarding overbooked flights. earlier today gary kelly, the ceo of southwest airlines, told us on "squawk on the street" that his airline will stop overbooking seats. so this continues to be an issue for the entire industry to a certain extent. >> which boggles the mind. you have 200 seats, you sell 200 seats. phil lebeau, stick around. jamie, a dead rabbit on united airlines. you had the assault on dr. dao. is any of this -- it's terrible pr, but have you modeled or seen or done any channel checks? is this impacting united's business at all? >> look, we've not adjusted our models because we haven't seen any data to suggest a need to do that. let me make something very, very clear here. i am that guy. i wake up in the morning with two, three, sometimes four different tickets, four reservations. i come out of a meeting in denver not knowing if i'm going to seattle or los angeles. overbooking is pro consumer, okay. so let me make that patently clear here. >> how? >> if you eliminate overbooking, it drives higher ticket prices. overbooking helps keep ticket prices low. now, i absolutely think we should debate how airlines should enforce policies in regards to overbooking but make no mistake, overbooking keeps airfares low. >> jamie, just one quick question about that. when they say, well, we have to overbook because people don't show up, isn't that a happy problem for the airlines? you don't show up unless you buy that refundable ticket, which has to be less than 2% of the people on any given plane. why isn't that just a gift to the airlines, because you walked away from money. >> because the seat is perishable. >> who cares, somebody paid for it. >> when i don't sell an f-150 this afternoon, i can still keep it on my lot and try to sell it tomorrow. when i don't serve -- >> but they did sell it already. >> it's perishable. look, they're walking away from revenue. >> they sold it already. they sold that seat. you sold all 200 seats. how many of them are refundable? those are the only ones that it matters to the airline's bottom line, because somebody could get some money back. >> sure, but refundable tickets tend to carry the highest ticket price which is why i use the example of myself. >> that's why nobody buys them except you. >> sure, and other business travelers in fairness. >> it's a real small number, though. >> industry revenue trends, if overbooking were legislated out, if it was regulated away, revenue trends would initially go lower and ticket prices would have to be increased and that would come out of consumers' pockets, out of the vacationers' pocket. not out of my pocket when i play on jpmorgan's name but certainly on jamie baker's time. >> but so far you've seen no noticeable impact -- >> correct. >> jamie, the airlines have done a spectacular job of creating these regional monopolies. so you may be ticked off in united, but if you live in new jersey like i do, you're pretty much going to have to fly united. if you live in minneapolis, pete, you're pretty much on delta. doesn't that provide a giant monopoly moat around many of these names? >> i think one of reason the industry is as profitable as it is today and one reason that we're long term as bullish as we are on airline stocks is the oligopolization that you cite. but the longer the flight and as soon as you introduce a connection, chances are you have a choice of four, five, maybe six different airlines. in the local market, i hear you. you're a captive to your hometown provider, but of course you are rewarded with status and that sort of thing. if i'm flying out of white plains and want to fly to seattle, gosh, practically every u.s. airline can get me there. >> jamie, i followed you from ten years and owned continental from before the last flood. this idea i want to push back that we're going to get a higher multiple here. >> sure. >> look, they have done capacity rationalization. that was key. we're no longer empire building. you've unbundled services. okay, that's done. these things are long term already in the stocks. now you've got the warts coming out when you think about what traditionally has turned people off. you've got labor issues, you've got -- oil is still there, regardless of whether you're flying fuel efficient planes or not. it's still there, and you've got the regulators, and by regulators with this dr. dao thing, i mean the senate coming in and looking at this. it seems to me the warts outweigh what's already in the stock as far as a long-term positive. >> sure. look, near term risk/reward doesn't look as favorable as it did in mid-summer. there's no question in our minds about that. that's one reason that as an advocate i think we might have been the very first ones to say it's different this time and that's why i felt a responsibility to point out the american labor reality, because it does speak against our thesis. having said that, we do believe that the risk profile of the industry is meaningfully lower than it has been in the past. if this industry can withstand and remain profitable in a recession, you know, that alone justifies materially higher multiples. it's how scary things get in a downturn, that's where we think the greatest fundamental change has taken place. for a lot of investors, they do need to see us pass that recessionary test. >> american airlines down just under 7% right now. jamie baker and phil lebeau, that you both very much. next up, three short sale ideas, including a major u.s. automaker from today's guest, jacqu john pickthorn. also ahead -- >> president trump wants to put an end to one of your biggest tax breaks, your state and local deduction. coming up, see how you will be affected. plus, one of wall street's top ball investors on where fixed income goes from here. then at 2:00 p.m., the power lunch stock draft. "the halftime report" is back in two minutes. hey gary, what'd you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim. only at td ameritrade ♪ ♪ i'm dr. kelsey mcneely and some day you might be calling me an energy farmer. ♪ energy lives here. hey you've gotta see this. cno.n. alright, see you down there. mmm, fine. okay, what do we got? okay, watch this. do the thing we talked about. what do we say? it's going to be great. watch. remember what we were just saying? go irish! see that? yes! i'm gonna just go back to doing what i was doing. find your awesome with the xfinity x1 voice remote. welcome back to "the halftime report." short seller john pickthorn is still with us. is ford an automaker that sells loans or a finance company that happens to sell cars? >> i think that's the key question. >> what's the key answer? >> there's $130 billion of net receiverab receivables on their balance sheets. there's seriously leveraged car loans on this balance sheet. so today ford looks cheap, but if car prices go down, every 1% they lose $120 million out of their finco income. >> repeat that. 1% drop in the price of a used car. >> used car. >> a two-year-old f-150. >> their finco earnings go down by $120 million. so 10, 12% drop you've got zero in their finco. >> their finance company. >> yes. it's about 20%. if you look at the total exposure and look at morgan stanley's scenario where used car prices could drop 50% going forward because of technological changes and safety changes with the auto emergency braking systems that basically are going to make it so that insurers will charge you a lot more to own a used car than a new car, then you have a real crisis on your hands. i don't think ford is just a core short for your retail consumer, but people need to be aware of the risks there. maybe it's a tail hedge. if used car prices start to k kra, ford could be the gm. >> should the retail audience, should they be shorting anything at all. >> only with options. >> or anybody at all. >> no, i'm just telling you. >> we're going to come back. >> that's a very important point. >> we'll talk about your book in a minute. >> there's 22 rules, by the way. >> don't short stocks? >> yes. >> what you're saying is very important, though. every 1% drop in used car prices should bring down finco 20%. you're saying a billion two in finance company earnings could be wiped out, which is one-fifth of ford's business effectively. >> and that's not really considering the negative effects that you have in terms of deterioration of the existing loans on the books and everything else. you know, the fact of the matter is you have nine months in a row of used car price drops according to nada. and so this is a trend that is firmly in place. you have current 60-day delinquencies for subprime loans at 4.3. you've got recoveries at 45%. they used to be in the high 50s. this stuff is all back to the peak of 2009 and we're early oar this is supposed to be a great economy. so i think lower interest rates aren't going to fix it. this has happened. we have borrowed as many sales from the future as we can as a society, as an economy, possibly globally, and i just think you're looking at a trend that's not changing and rates are probably going up. >> your next short idea is a smaller cap stock. it is one other people have talked about. it is usana health sciences, a salt lake city based company which is in some ways a multi level type marketing, correct? >> it is, it is. >> sort of an herbalife type model. >> correct. >> why this short, though? there seems to be other people in this trade as well. >> i'm a well-known -- i didn't know actman at the time. >> you hate the model generally. >> i think the model damages poor people and desperate people globally. what's interesting about usana is true about the entire industry. i don't think the industry was a great short a few years ago because they had this china phenomenon. china is 50% of usana's exposu e exposure. it started to roll for even herbalife in the last quarter which is surprising. but they filed an 8-k saying they are conducting an internal investigation with regards to their china business. they bought baby care a little while ago. what we've discovered in the chinese press recently is that actually they had 13 people suspended and three arrested. their executives arrested in china. now, they're conducting -- oh, an $56 million frozen. so here you've got this company -- >> that's 8-k. >> no, the 8-k is we're doing an investigation. in the chinese press in chinese, so you have to have somebody out there looking at the chinese press who can read chinese. this has come out that they have had three executives arrested, $56 million frozen. >> one source, however. >> a couple of sources. you can call that reporter and do your own checks. i would love for the company to deny this has taken place. those executives have not shown up at recent ribbon-cutting ceremonies and u.s. executives have. so theoretically they're doing their own internal investigation and yet they had a few executives get arrested and didn't feel the need to file an 8-k about that. last time in nuskin had that happen the stock dropped 50%. once that bubble which is half of their business and 75% of their growth cracks, we believe it is our research that shows these guys don't have a lot of the licenses they need, unlike some of the other guys. this could be a huge problem for this company. >> and obviously we are going to reach out and do our due diligence, cnbc reach out. if they're watching, anybody from usana is watching, you're welcome. we'd love to have you come on this show or power lunch which isn't too bad of a program either. you talked about your book -- >> you brought up the book. >> let's talk about your other ideas. it's not one company, it's a sector. now, it's canadian. i don't know the short rules are different and some of the float might be different. canadian banks, canadian imperial, genworth canada, it's rather an securobscure. >> we have been focused on the canadian bubble. three or four years we've been saying there's a canadian housing bubble and they say, no, it's different up here, you don't get it. it is our contention the setup is identical and statistics are identical. the houses, the affordability, the prices are all very similar to the u.s. most importantly, the mortgage fraud, the mortgage application fraud is maybe more pervasive than it was in the u.s. something that has not been discussed until now. in vancouver they tried to pop the housing bubble because houses were unaffordable for people that lived there. it cracked vancouver transactions 40% to 70%. still it didn't break the market. now, last week here's what happens. home capital group gets an osc investigation on three of their executives and they come out and say something fascinating. the fraud that they admitted in 2014 with 95 brokers perpetrating fraud on over $1 billion in mortgages wasn't just 95 brokers it was actually, quote, systematic fraud inside the organization where they allowed fake mortgage applications to not be checked. >> sounds like america in 2006. >> exactly. we believe this is everywhere across the market. home capital group is the first one to have this happen. they go down 60, 70% yesterday because this suit is filed. >> it's up 19% or 18% right now. in fact td securities upgraded the stock to speculative buy. so you're starting to see some of the canadians defend this name. >> it's down from 35 to 7. let's just say the news has been bad. granted me that. >> and you're still shorting it? >> no, no, no, no. we've covered most of home capital group. that isn't the story. that's just important because now this fraud expose is going to expand. they announced housing restrictions on toronto. >> if you're a landlord and you're renting it out, you're going to be capped at what you can make. >> correct. half the market is investors. and we think you're going to see this in cibc. these guys are massively levered to uninsured mortgages. >> a bunch of ideas there. usana health sciences, ford and some of the canadian banks. now let's get to sue herera with the latest headlines. here's what's happening at this hour, everybody. british police say a man with knives has been arrested near parliament on suspicion of terrorism. the man, in his late 20s, was arrested as part of an ongoing operation. he's being detained under the terrorism act and held at a london police station. german police have arrested an army officer suspected of plan an attack. he was arrested on wednesday in the german town of hamelburg. he is a 28-year-old lieutenant, a german citizen and serves with a german army brigade in france. the pentagon has opened an investigation into whether former national security advisor michael flynn violated the law by taking payments linked to foreign governments after leaving the military. flynn was reportedly warned against taking any foreign payments without advance approval from military officials. and a diary from john f. kennedy was sold at auction for nearly $719,000. the 61-page diary included both handwritten and typed pages during kennedy's brief time as a journalist in the summer of 1945. the original estimate for the diary, $200,000. that's the news update this hour. "the halftime report" is back after a quick break. it's an important question you ask, but one i think with a simple answer. we have this need to peek over our neighbor's fence. and once we do, we see wonder waiting. every step you take, narrows the influence of narrow minds. bridges continents and brings this world one step closer. so, the question you asked me. what is the key? it's you. everything in one place, so you can travel the world better. with e*trade's powerful trading tools, right at your fingertips, you have access to in-depth analysis, level 2 data, and a team of experienced traders ready to help you if you need it. ♪ ♪ it's like having the power of a trading floor, wherever you are. it's your trade. ♪ ♪ e*trade. ♪ ♪ start trading today at etrade.com i did active duty 11 years.my in july of '98. and two in the reserves. our 18 year old was in an accident. when i call usaa it was that voice asking me, "is your daughter ok?" that's where i felt relief. it actually helped to know that somebody else cared and wanted make sure that i was okay. that was really great. we're the rivera family, and we will be with usaa for life. usaa. we know what it means to serve. call today to talk about your insurance needs. welcome back to "the halftime report." we want to call your attention to what's happening with shares of whole foods. the upscale grocer is up about 2%. this on the heels of dow jones headlines saying one of its top shareholders has called on whole foods to possibly explore a sale, that they sent a letter to the whole foods board urging a review of a possible sale or joint venture. this of course comes after an activist investor, the second biggest shareholder, pushed for certain kinds of strategic reviews as well, so watching those shares very closely. volume starting to pick up just a hair here in the midday. we'll have that story and more coming up. stocks near their session lows right now. we'll have more on "halftime report" coming up right after the break. the power of 100 of the world's top companies. the power of an etf. the power of qqq. the thinking we put in, clients get out. power your client's portfolio at powershares.com/qqq. before investing, consider the fund's investment objectives, risks, charges and expenses. call 800-983-0903 for the prospectus containing this information. read it carefully. distributed by invesco distributors inc. containing this information. read it carefully. i can't wait for her to have that college experience that i had. the classes, the friends, the independence. and since we planned for it, that student debt is the one experience, i'm glad she'll miss when you have the right financial advisor, life can be brilliant. ameriprise mr. secretary, would you be willing to raise your right hand and look at the american people and say, i steven mnuchin, promise you that this will be revenue neutral and deficit neutral? >> again, our objective, matt, is to pay for this with economic growth. >> no hand raise. treasury secretary mnuchin not taking matt lauer's pledge that the tax plan will not raise the deficit on the "today" show this morning. now, part of the plan getting perhaps the most attention, the plan to end one of the biggest deductions americans take on their returns, in fact by the number of deductions, it is the biggest one, the state and local tax deduction. robert frank has more on what it means for you. but first the epic battle shaping up over taxes in d.c. >> brian, this deduction is one of the biggest. it is the biggest actually itemized deduction that households can take. $1.8 trillion, that's the estimate of how much it's worth over the next decade according to the tax foundation. that makes it even bigger than the mortgage deduction. this hit will primarily be felt in blue states, mostly california and new york, but it's also big in new jersey, connecticut, maryland, democratic strongholds with high property or income taxes. the fight over this deduction has already started. new jersey senator bob menendez called it double taxation and he said middle class families would be paying the price and new york governor andrew cuomo brought up this with the president back in january at trump tower. >> it is a proposal being susd that would end the deductibility of state and local taxes, for example, which would be devastating on the state of new york, california, et cetera. >> but it's not just the white house that's behind this, it's also baked sb ed into the tax p with house republicans with kevin brady arguing that the federal government shouldn't be subsidizing state taxes. the politics are murky. 30 republicans from the house come from new york and new jersey so they'll be facing a lot of pressure to keep this alive. now let's get to robert frank. robert, it's a big deal here. what do you think is going to get hit? she laid out some of the states. if the high-tax states like new jersey and new york and connecticut where most of us live, where are we going to go? >> it's not where most of us live, but it's certainly where most of the wealthy live. now, we know that the top 1% pay about a third of federal income taxes and they are the biggest beneficiaries of state and local tax deductions. removing that benefit could create huge moves in capital and people. let's take a look why. right now the top 1% account for a third of all benefits from deducting state and local taxes. they save an average of $30,000 each year. to be a 1%er, it's around $400,000 or more for a couple. the top earners in high tax states like the ones you're talking about, they account for by far the lion's share. new yorkers who make more than a million dollars a year average over a half million dollars a year from this benefit. and californians who earn seven figures, they save an average of $497,000 a year. again, the average income for that group much higher than a million dollars. now, if this group loses that benefit, the wealthy could have another incentive to move to florida, arizona, texas or some other no income tax states. realtors in florida tell me this morning they have already been on the phones with clients saying they have yet another reason to head south. but get this, guys, even taxpayers in florida and these other states stand to lose something. florida taxpayers taking an average of $14 billion a year in deductions from deducting their local taxes. the average deduction for a florida millionaire earner is $133,000. so even the guys in low tax states, if they're high earners, are going to lose something if this goes forward, guys. >> i think it's a little bit of a gift perhaps for the trump administration and some of the wealthier blue states. but why would anybody leave the northeast? i mean we' got high taxes, bad roads, crowded airports, trains that don't work. >> don't forget bad schools. >> schools, we've got that. i don't understand why anybody would leave that. oh, by the way, a lot of snow for about six months of the year. it's a perfect storm. robert frank, thank you very much. "power lunch" live from nashville forever. with the next fed meeting coming up next week, how might the president's tax plan affect the bond market? joining us now, joined exclusively from the morningstar conference in chicago. rick, do you expect the fed to raise rates on wednesday? >> so, no, i think you're going to get a dynamic where the fed will raise a couple more times this year. we think they're going to go in june, probably going to go in september and then probably start to talk about the balance sheet being reduced but i think that's where we're going down for the foreseeable future. >> what do you expect or do you want to hear from the federal reserve on wednesday? >> listen, i think the markets have adapted to the fact that this is a fed that's communicated pretty well recently and has described a dynamic where you can start reducing the balance sheet, which makes a lot of sense, and you can be predictable around where rates are going. i think the economy is growing. you've hit the fed's targets. as long as the fed keeps talking about we're in and around a 2%, as they said last time, with -- 2% inflation with symmetric risk around that, that's predictable. that's what the markets want to see, continue down the path of normalization and that's where markets will react well. i think people misinterpret the fed has to be easy for markets to do well. that's actually not right. >> the confusion i've got is the dow is down a little bit today, but the dow near record highs, the nasdaq over 6000 and the ten-year yield is at 2.3%. why? >> so we are living through what is the most extraordinary demographic demand for income that anybody has ever seen. we are still in this dynamic. not only is the demand for fixed income continue, the flows in fixed income continue to be profound but you also have the ecb as you already heard is going to take some time in terms of moving and the bank of japan will be behind the ecb. the demand for people that need cash flow is extraordinary. until the ecb starts moving and the bank of japan starts moving, it's very hard for u.s. interest rates to move higher and inflation is not pressuring rates of any significance. so we're going to be here a while. i think rates can drift a bit higher from today but we're not going very far. >> rick, it's joe. many investors are using high yield spaces and equity replacement. do you think that's the right strategy given where we are in the cycle right now? >> so you ask what is one of the best questions today. the demand for income, and this is part of why the fed has to move. if you start normalizing interest rates, what people are doing, they're looking for all places to get income and it's pressed high yield spreads to aggressive levels today. so do i think high yield will continue to do its job? it will because of the yield you're getting but i do think normalizing -- this is why money will continue to flow into equities. not only is it priced fairly relative to the credit markets and fixed income markets but does actually get you some income. i think that's what you're seeing play out this year. money will flow into equities because you're pressing down some of the levels in fixed income. >> rick joining us from chicago. rick, a pleasure, thank you very much. >> my pleasure, thanks for having me. well, a lot going on. if you haven't paid attention to oil, you should be. oil prices dropping again. we'll give you the energy trade as crude is off another 1.9%. we're back right after this. [vo] quickbooks introduces rodney. he has a new business teaching lessons. rodney wanted to know how his business was doing... ...so he got quickbooks. it organizes all his accounts, so he can see his bottom line. ahhh...that's a profit. know where you stand instantly. visit quickbooks-dot-com. welcome back to the halftime report. crude oil falling 2% today in trading near one-month lows on reports that production has picked up in libya and that's weighing on black gold. jeff, how are you trading at these levels? >> well, we aren't price discovery mode, you're right. but i think the conversation between the opec members, talking about continue those 1.8 million barrels per day cut past june will come into factor. right now the price discovery, the bears want to poke at the lower end of the range. we've been stuck from 48 to $54 all year. >> jim, on a technical level, crude has been below 200-day moving average, 50-day moving average as well. how are you looking at this? >> what's more significant in the year-long trend it seemed to be bounce off trend support at about 48 1/4. you know, i would say 56 to 48 is the long-term trend. i think risk/reward is to buy it instead of selling it right now. i don't think you're supposed to catch a falling knife or anything. look for a basing pattern and look for strength from here. >> today on future's now, keep the crude oil conversation going and plus we're joined by former director of the office of management and budget under president reagan and discuss why he thinks trump's tax plan will be dead on arrival. that's all at the top of the hour. halftime is back after this. this is where i trade andrs. manage my portfolio. since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities- trade confirmed- and i have global access 24/7. meaning i can do what i need to do, then i can focus on what i want to do. visit learnfuturestoday.com to see what adding futures can do for you. ♪ ♪ i'm dr. kelsey mcneely and some day you might be calling me an energy farmer. ♪ energy lives here. welcome to holiday inn! ♪ ♪ whether for big meetings or little getaways, there are always smiles ahead at holiday inn. you are looking live or listening on the radio live at the stock draft floor right here on cnbc. that's our lobby. this is will be very 00 cool coming up on "power lunch." the rutger student all-stars, former new york giant, many more will pick two stocks oil, gold or oil, hold them until the super bowl. we are going to crown just one winner. kevin o'leary is involved. it will be fun. could be a little crazy. give you stock pick ideas as welcoming up on "power lunch" 2:00 p.m. -- the show is at 1:00 p.m. but the draft starts at 2:00 p.m. eastern time. let's get unusual activity. pete, you're up. >> take a look at snap. 4,500 of the may 22 calls being bought up today. 1.50. the stock is just under 22 right now. this thing moves in the next couple weeks, you'll have a real winner here. i like this name and bought into it myself today. >> john? >> well, i was going to go with snap because i liked that one so much, but since i can't go with that one, brian -- >> in the same trade? >> yeah. i'm going to go -- >> for how long would you hold? >> i'll be in the snap trade with pete until may basically end of the earnings here even though i hate the stock overall. >> hate the stock. >> hate the stock, but may be in it -- infn. they bought it like crazy today. i'm in that one. >> may is monday, you know? >> yeah, well the earnings -- this is may 12th expiration for snap. >> two weeks. >> let's get our final trades. joe? >> teradine. i think it goes higher. semiequipment strong. >> jim? >> brad, how are you? >> intel. >> he was distracting me with the light -- he has some powder that wore off so the light from his head got right in my eye, like an ant. >> that's not right, man. >> magnifying glass. >> i can't break you guys up. i'm the smallest guy on the desk. intel, we were talking tech stocks. intel. here is a great value player, coming out with earnings after the close today. watch that going higher. >> al those cuts at disney mean the stocks go higher, brian. >> he is right on intel. keep an eye on these various names, unp the rails are continuing to rock. they bought all the way out to may 2019. keep an eye on these rails. >> john, the last final trade, another short idea for audience, please. >> we just merged our firm with b. riley associates they're a leader in shutting down retail stores. i have a front row seat at inventory liquidations and we see retailers closing at a faster rate than ever before. >> we know that. >> understand. but seritage. >> run by eddy lampert. he runs a retothat is involved with the store sears which he also controls. >> sears has a bankruptcy problem then seritaga has to do a lot of revamping. >> srg short seritage. thank you for joirning us. >> pete, john, jim, joe, thank you very much. i've enjoyed being with you. we have the big power doctor up. thank you, john. buy your book. "power lunch" with the great melissa lee begins right now. >> thank you, brian. here is what's on the menu. the nasdaq hitting yet another high but the dow, s&p 500 struggling today. flood of earnings meantime, where is the value in this market? and we have the outline now. can washington get a tax deal done? plus, why the elimination of a key deduction could trigger a massive flight of wealth. tackling concussions in football, how one company is reinventing the helmet. it's incredible stuff you've got to see. "power lunch" starts right now. melissa, thank you very much. lc