Transcripts For CNBC Power Lunch 20170227 : comparemela.com

welcome, everybody. i'm tyler mathisen. little oscar joke. too soon, perhaps you? can see a lack of direction for your money. dow down 13 points right now. right now the dow, not doing a whole lot. even if we fall today, this has been the dow's longest win streak since all the way back in 19d 87. of course, all eyes will be on the president's big speech tomorrow night. melissa? >> i'm melissa lee. busy monday at the white house. the president making his first budget proposal, talking with ceos of a number of health care companies. eamon javers is there. eamon? >> reporter: obamacare, which he calls a failure, disaster and teeing up his own plan to replace obamacare later this year. he's meeting with health care ceos at the white house this morning. here is what the president said in teeing up his criticism of the obamacare act. >> we must work together to save americans from obamacare. you people know that. everyone knows that at this point, to create more competition and to bring down the pries substantially. >> reporter: we didn't hear a whole lot of specifics from the ceos who came out to talk to some of the reporters at the white house after that meeting. here is what joe swedish said, ceo of anthem. see if you can get any detail in this sound bite of exactly what they talked about in this meeting today. >> we're very glad to be with him today, to hear that message and certainly are willing and wanting to witness how this will all transition to a workable plan for the united states. >> reporter: so, we're still waiting on specific details here from the trump administration in terms of where we go with obamacare. obviously, there are deep divisions up on the hill, including with republicans. at some point this trump white house will make very tough decisions about where it goes in terms of repeal and replace of obamacare. no details yet on where they're going to land. >> he shot back at people like larry kudlow and steven moore who said you should do tax reform first and he said no, we can't. and he actual ly started to articulate that he understands how the legislative process work zblrg he said they need to do obamacare and then rule out tax reform and other details later in the year. this president seemed flummoxed, saying nobody knew how difficult it would be. it's obviously a very complicated subject. getting into the weeds is where you have to go, though, if you're going to come up with a proposal to repeal and replace obamacare. that's the struggle that this administration has to face, to come up with what they promised on the campaign trail. in politics you have to make choices. and that means you have to make enemies. >> thank you, eamon. we heard from president trump and also warren buffett, spent three hours on "squawk box" with becky and joe. they talked about everything from the new president, tax reform and the health of the markets even. >> you can buy a barn, apartment house or part of american business. if you buy a ten-year bond now, you're paying over 40 times earnings for something whose earnings can't grow. and compare that to buying equi equities, good business, i think there's no comparison. if interest rates were 7% or 8%, then these prices would look exceptionally high. you measure everything against interest rates, basically. and interest rates act like gravity on valuations. last year in our annual meeting, it was clear i was for hillary, but i got asked a question about the market based on who got elected and that's not -- i said america is going to do fine economically under either candidate as president. people who mix their politics up with their investment activit s activities, i don't think that makes sense. border adjustment tax is an import tax, a sales tax. the store, in several buildings, does over $400 million a year. 75% of what you see is imported. if we pay an import tax on it, our customers are going to pay for it. >> let's bring in buffett watchers to see what the oracle had to say. author of "the warren buffett:ceo." and ceio of greenwich wealth management i don't want to call warren buffett a tech hater. he has invested in ibm, big tech. are you surprised that warren buffett recently bought 120 million shares of apple? >> yes, i'm surprised, because he has been a long-time critic of investing in it can nolg because he can't see where it will be in ten years. ibm, very consistently over ten years, consistent revenue, consistent earnings when he bought it in 2011 and it's since struggled. apple, he followed in one of his investment managers in his office. he purchased most likely purchased apple and then followed him in. >> do you think that this is a sign that warren buffett is doing apple maybe not that much as a technology company and maybe more of a cash company? >> yeah. he is viewing it as a consumer products company. he said that the iphone is very sticky, that he doesn't really know a lot about the technology, but he knows that people love their iphones and will continue to buy them. but, you know, i would argue that it's not like another type of consumer product. iphones are not toilet paper. the technology changes quite quickly in this field. it wasn't too long ago when everybody thought that blackberry was the best product. look what's happened to that today. >> robert, you've been a buffett watcher for quite some time. are we getting glimpses of what the berkshire hathaway might be without buffett at the helm? >> sure. cash parts brought to him by todd cones and now with these two recent additions to his portfolio, both apple as well as the airlines were brought to him by his co-investment managers. so, i think we're seeing wholly owned acquisitions as well as partly owned equities being led now by some outstanding investment managers. >> you said stocks are cheap because interest rates are low. do you agree? >> i don't agree. i think we've had a tremendous run-up since the election. in my opinion, a little bit unjustified. i think investors right now are focusing on what i would call the good aspects of the trump policies, which include deregulation and tax reform. and they're ignoring some of the bad aspects, such as the possibility of creating trade wars. i think there's quite a bit of risk in the market right now. i certainly agree with warren buffett that stocks are a better bet over the long run, especially when interest rates are so low. if i had to choose between the two, i would rather be in stocks than bonds. but in the portfolios that i manage for my clients i've recently been trimming some positions, because i think we've seen too much of a run-up. >> interest rates still are low, though, right? you look what the ten-year yield is doing, it's not budging, even as we talk more and more, as the markets price in ever-higher rate increases from the fed. >> correct. i think it's inevitable, though, that the fed will continue to try to normalize interest rates. at the short end of the yield curve i think we'll see higher rates. whether that translates into longer term interest rates going up or not is a different question. i think if we do see some of the inflation that could be created by infrastructure spending, for example, then we could see bond yields move higher and it would be a mistake to be in long-term bonds. >> it is hard, robert, to criticize warren buffett, for many good reasons. but i'm going to try. no. his hatred of financial engineering i find a little baffling, given that he supports buybacks, which many people will say is a form of financial engineering. can you square those two things? >> well, i think share buybacks are a way to very efficiently and cost effectively return capital to the shareholder, far more productive than to use dividends, which are taxed twice at the corporate level and then at the individual level. so, i can square share buybacks as a very effective -- and if you study, as we do at the university of nebraska of omaha, all his previous investments, one barometer he looks for are share buybacks. it's a very effective way of investing. >> which apple does, by the way. >> yes. >> yeah. >> but, brian, can i point out he's actually not that much in favor of buybacks? in fact, in this year's letter, he pointed out that share repurchases make sense only if the stock is selling for less than intrinsic value. so, he's not in favor of companies buying back stock just to prop up the price. >> i want your take, vahan, on why rates are so low. he said interest rates are a gravitational pull. if you think they're artificially low, for a number of reasons. it could be because there are many shorts in the bond market and there's a short squeeze or short rally holding bonds up and rates lower, that could really educate you as to why you might not think that stocks are cheap right now. what do you think is holding bond yields down? >> i think there's still a lot of accommodation coming from central banks around the world. the u.s. central bank, for example, is trying to normalize interest rates but is still plowing back a lot of money into buying back bonds and that's providing accommodation. i also think that many bond investors, anyway, are a bit skeptical about whether the trump policies will actually create as much growth as equity investors expect. >> mr. miles, berkshire hathaway at an all-time high today. nervous at all about that stock considering the run it's had along with the rest of the market? >> no, i'm comforted as a long-term shareholder. i didn't buy or invest in berkshire hathaway to flip it because it's gone up 10% or 12%. i'm a long-term shareholder. so, i'm comforted that it's in great hands. it's enjoying $70 million a day flowing into omaha, which are reallocated by the best capital allocator possibly in the history of capitalism. >> but that change is coming at some point, right? >> yes, it is. >> about who the capital allocator is? >> yes, but i was also comforted to hear an 86-year-old on television this morning, on cnbc that was very sharp and recalled figures and facts better than most mortals. so, i'm comforted that his -- we're in good hands. >> especially at -- >> 4:00 in the morning. >> yeah, whatever time it was and his fourth diet coke of the day already by 4:00 or 5:00 in the morning. it was a very good morning on cnbc. robert and vahan, thank you very much. do appreciate it. >> thank you. >> thank you. netflix taking stage. moments ago, look at what he said. plus two analysts who couldn't be more divided on where they see the company going and "the biggest loser" at the oscars could be the company who was responsible. sean spicer is expected to hold a press conference at any moment. say carl, have a question about your brokerage fees. fees? what did you have in mind? i don't know. $6.95 per trade? uhhh- and i was wondering if your brokerage offers some sort of guarantee? guarantee? where we can get our fees and commissions back if we're not happy. so can you offer me what schwab is offering? what's with all the questions? ask your broker if they're offering $6.95 online equity trades and a satisfaction guarantee. if you don't like their answer, ask again at schwab. ♪ it's not just a car, it's your daily treat. ♪ go ahead, spoil yourself. the es and es hybrid. experience amazing. netflix ceo delivering the key note address. jon forte has more. >> reporter: he talked about downloading, the importance of that. before november, you couldn't really download netflix and take it with you. you had to stream. in order to expand internationally, for example, you kind of need to download. it can get really expensive to try to take data with you. he also talked about making buffering as acquaint as dial-up. the idea that you won't have to see that circle spinning around and our kids will ask us, what was it like back when you had to buffer. he talked about the fact that netflix shows are able to get to audiences globally. one of the most important points he made that data plans, in the u.s. specifically, are a boone to video. he talked about netflix's technology efforts to capitalize on that. take a listen. >> what we've done is invest in the codex, video encoders so that at half a megabit you get a quality picture. now we're down to 300 kilobits in some cases and we're hoping to get down to 200 kilobits. >> then you'll be able to stream netflix without busting your budget. >> thank you, jon fortt from barcelona. two guests that have very different outlooks for the company. bob sanderson joins us. michael packard joins us with the sell rating, $68 price target. michael, i will start with you. netflix is a couple of bucks from its 52-week high. what is reed hastings doing wrong? >> he's doing a lot right, certainly growing subscribers like crazy. what he's doing wrong is losing money. they have gap profits but generated negative $1.66 billion in free cash flow last year and lost $17 per subscriber last year. they're projecting losing more this year. he's burning cash. i think a lot of investors, and i'm ascribing the greater fool theory here, take a leap of faith that they're building this amazing content library. yet if you actually explore what's in that content library, it's hard to find any owned intellectual property that justifies adding $3 billion to their content library last year. >> michael, it's a young company, right? it's supposed to invest now and eventually it gets to profitability. that's the rationale that will be for a lot of people. >> and if they were building a big plant in nevada like tesla, maybe i could believe it. if they're building 40 or 50 fulfillment centers like amazon, i absolutely would believe it. they're building content that nobody is watching. after "stranger things" an owned original, you can't name a netflix owned original anybody has told you to watch. they don't have any. they're building flaked, the ranch and lady dynamite. nobody cares. they're capitalizing the stuff but it has limited value if nobody watches it. >> do you agree with michael that they're making investments that won't pay off in the end? that's essentially what michael is saying, investments are being made in content that nobody wants and so there won't be a return on that investment. >> i don't agree at all. couple of things. one, they're building a very substantial brand and subscriber base. whether they own the ip outright or not, look at the franchise value of espn. there's many examples of a very substantial business being built on licensed content. i don't think that diminishes their earnings power or devaluation of the company. >> can you name a series that netflix actually owns that you would recommend aside from "stranger things"? has there been a hit? >> sure. again, i think whether they own or license is not the -- does not determine their ability to drive earnings power and cash flow from those titles. i think the franchise value is really in the brand and the subscriber base. >> so, michael, netflix is maybe short because i just got it last month and did that specifically to watch "the crown." to me that's a netflix product. distinguish why it's so important that they own it rather than just something that they -- that's why i got it. >> if they own a property, they pay once. if they license, they pay every single time they show it. so, "house of cards" is something they don't own. they have to pay for season one again when season five launches next month. that's the problem. so, yes, it's got tremendous value. just not on their balance sheet. it's got value as they run it through their income statement as an expense. so, what i'm saying is their earnings are vastly overstated by literally three or four bucks a share unless the stuff they own has that much value. it doesn't. the stuff they license, they have to pay for again. that's going to run through their income statement. the stuff they own doesn't have $7 billion of value. that's what's on their balance sheet. >> rob, clearly, you see this, too, so why does the math work right now? what needs to happen in order for that math to continue to work? >> revenue less expenses and whether the spenexpense is lice or owned, as long as you're growing, 100 million subscribers and i think they'll get to hundreds of millions of subscribers. >> when are they going to be profitable? >> they're profitable now. they're financing bigger and bigger content investments so they're cash flow negative but they're turning the corner on very substantial investments made going to the rest of the world. historically it's taken them three to four years to turn profitable and there's a significant amount of increment al contribution. >> michael laughed at your response. you get the last word very quickly. >> the value of any company is the present value, their future cash flows. cash flow is the basis for valuation. negative negative $1.6 billion this year, negative $2 million last year. there is no value here. i'm at $68 because i believe there is brand value and to their subscriber list bough not in their content. not a chance. >> rob and michael, always a good discussion. >> it's interesting. he is 68. he he is easily the low estimate on the street. they go all the way to 175. you've got about 40 analysts who see the company somewhere between 68, although michael is sort of out there, and 175. >> that's a market. >> that's called gap in earnings. that is a gap. beer, handbags and oil. just a few of the movers this hour. the names, next. i'm only in my 60's. i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i looked at my oions. then i got a medicare supplement insurance plan. 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[ ma announcer ] join the millions of people who have alreadynrolled in the only medicare supplement inrae plans endorsedy aarp, an organization serving the needsfor generations.d over remember, all medire supplement insurance plans help cover whatedicare doesn't pay. and could ve you in out-opocket medical costs. call now to request your free decision guide. and learn more about the kinds of plans thatill be here for you now - and down the road. i have a lifetime of experience. so i know how important that is. welcome back to "power lunch." boston beer, citing growing competition has weighed on recent results and that trend is likely to continue, lower by 1.5%. chevron shares trading higher, franchise pick by jeffries, products growth. higher been 1.5%. shares of kate spade getting a bump of almost 1.8% as bidding for the handbag and accessories makers heads into its second round. according to reuters, michael kors and coach are still in contention as possible buyers. he has been dubbed the ceo whis p whisperer. billionaires have relied on his advice, as well as presidents. they're both here to give you some of the top financial advice and secrets straight ahead. stick around. the future of business in new york state is already in mion. mpanies across the state are growing the economy, with the help of the lowest taxes in decades, mpanies across the state are a talented wororce,y, and world-class innovaons. where the most advanced transportation is already en like inroute.urgh, and in corning, where the futu is materializing. let us help grow your company's tomorrow - today at esd.ny.gov we're drowning in information. where, in alof this, is the stuff that maers? e stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500, and, can deliver insight person to pern, onhat matters to you. morgan snley. hello, everybody. i'm sue herera. the pentagon delivering a preliminary plan to defeat isis. they're sending it to the white house. a pentagon spokesperson saying u.s. defense secretary jim mattis will brief the committee this afternoon. rio de janeiro, a float went off course and squeezed revelors up against a wall. grand hyatt tokyo surveying the damage from a fire that started at a steakhouse on the hotel's sixth floor. it took two hours to fight the blaze. luckily, no one was hurt. police believe the fire was likely caused by a cooking accident involving oil. a recall to tell you about. one that's affecting three different types of trader joe's unsweetened apple sauces comes after reports of customers finding glass pieces inside the jars. they've all been removed from trader joe's store shelves and destroyed. no reports of any injuries. you are up-to-date. that is the news update at this hour. brian back to you. >> sue, thank you so much. let's get to a news alert with morgan brennan. morgan? >> aig, insurance giant. according to the wall street journal, penalize or even oust ceo peter hancock on the disappointing results earlier this month. according to this journal report, mr. hancock's directors are expected to debate at a board meeting, potential actions resulting in cutting his bonus or possibly even removing him. this comes on the heels of more than a $3 billion loss in the fourth quarter. that was much bigger than street had expected. we have reached out to aig for comment. we will bring that to you once we hear back. according to this report, aig directors are poised to discuss whether to penalize, even p potentially oust peter hancock. >> you see it spiking on the news. >> yes. >> thank you, morgan. rick santelli is tracking all the action on the cme. hi, rick. >> when you look at my charts, we've had a couple of data points today. durable goods. headline was okay. intrinsic, internals were weak, revisions were weak. having said that, intra-day of twos, up 6 basis points, tens, up about five basis points. intra-day of the dollar index isn't even up. it's down. fed fund futures may be the culprit. march contract doesn't trade all that much. intra-day or one week won't show you a lot. i will tell you it's closed right around 99.30 1/2. it's down two whopping points. those two whopping points have made a difference in percentages as poe tepgsly if you just looked at this, the possibility basically is 50/50 on a tightening at the next fed meeting. what is in traders brains to cause that, i don't know. i will tell you this. it's something to pay attention to. because we're in this quasi world where the fed probably isn't going to tighten unless it thinks the market is expecting it. so the loop goes on. michelle, back to you. >> and on and on. rick, thank you. tony robbins, dubbed the ceo whisperer, life coach to ceos and confidant to many presidents, including bill clinton and donald trump. investment advice to just about anyone, whether they are in the oval office, c suite or main street. a new book out called "unshakeable," co-written with peter maluk, who you may be familiar with from barrons. little blurbs in the book. anthony scaramucci, everybody has heard of him. alan greenspan. why should i take investment advice from a guy who teaches me to walk on hot coals? >> maybe that's what you need to do when you're investing, be prepared for anything. i wrote this book because i was obsessed. i took five years, and i interviewed the list of the 50 most influential people from finance. it became number one. i like writing books as much as pulling out my eyelashes. but the level of fear you see today, level of volatility you see today -- i interviewed greenspan for three hours and said what would you do if you were made head of the fed today? he paused and paused and leaned in and said resign. i thought when he says that doesn't encourage. i wanted to protect people, show people that corrections happen every year since 1900. remember last january, everybody is freaking out. the market doesn't take money from you. you give money to the market by making wrong decisions. bear markets, we're eight years into this one. that's one chance you to have leap frog financially because everything goes on sale at that point. >> the key point you make in the book is that people don't focus on protecting money, on not losing. they focus on making money and earning money as opposed to protecting the money they have. >> that's right. you're looking at an investment, what wealthy people know is i really want to make sure i don't permanently lose money. so they're making decisions that have more upside than downside. they're trying to do that in a repeatable way. that's a big key to success with investments. >> that's your core four. >> you do your reading. i'm impressed. >> i can read. >> number one is don't lose money but that's buffett-esque. that's like saying don't get hit by a bus. it's not that easy. >> no, it's not easy. >> the market has no feelings and doesn't give a you know what if you lose money. >> that's why it's about being unshakeable. it's all about asset allocation. unlike so many forecasters -- you had warren buffett on earlier. and market forecasters are supposed to make reading glowing balls look good. >> you just blew up our shown shoe. thank you very much. >> everything is about not taking huge risks for huge rewards. least amount of risk for the highest amount of return. how do i make sure i have the most, diversify across markets. >> and tyler hates fees. he has a mission against fees. you are, too. >> that's right. if you're really going to look and say the alternative space you want to get away from hedge funds and vehicles in the zero sum game market but they have fees that are 10, 20 times higher than everything else. there's a reason buffett is winning that bet. >> we've promoted the book. you spent last week with bill clinton. how is he doing? how are the clintons doing? how is hillary doing? >> hillary is recovering. bill is doing well, refocusing on his foundation. >> he's not the one who lost, though. >> they were there together. with all that we hear about the current president and challenges people have that are dividing the country, it used to be political discourse when clinton was around, they fight it out and go have a beer together. that kind of disappeared now. i was talking to president bush, george w. a few months ago. and he said obviously i wanted my brother to win. i never attacked president obama. i kept quiet. he said but what i can tell you is that i thought nixon destroyed our country, the president of the united states being impeached. he said he didn't. what i learned is that the office is bigger than the occupant. we are, as a nation -- three branches of government will balance themselves up. there will be upsets, ups and downs. overall, america is doing just fine. >> but he has a concern, though, right? you only make that statement if you're worried about the current occupant. >> that's true. a lot of people have concerns. concerns are not what controls our lives. what controls our life is fear and action. >> people are out of their minds, tony. i was speaking with a bunch of conservatives, life-long republicans this weekend. they're freaking out. >> never mind the liberals. >> you can't even -- yeah. >> they're in the fetal position. >> i just said nothing has happened yet. >> correct. and the markets. >> i'm not agreeing with anything. it's not a political statement. everybody needs to calm down, including us. not us us, because we're cool, but everybody else. >> you turn on the news and watch msnbc, it's one world. if you watch fox it's another. facebook it's another. >> that's it. you could go to bed and never hear anybody else's opinion and never question your belief. >> we fed 200 million people. the book does it, then i write a check for the balance. if anybody is watching, get this book. it will change your life and it will also -- >> you must be very good investing. do you think you're good at investing? >> yeah. >> where are you right now? >> doing well. >> what does a tony robbins portfolio look like? >> to give you an idea, i invested in a large number of mlps. you've watched the market drop. and everything got thrown, baby with the bath water. they're a toll booth. it doesn't matter what happens to the price of oil. it's still going to flow. some of them dropped 50%. 5% return, i got a 10% of income while i still have an asset i believe in that was undervalued. those are the types of things i look for. >> any private equity? >> i do deal with private equity. >> hedge funds? >> i do because i have some clients. for 24 years. >> do they cut you a fee for the advice? >> no, but i earn so it more than balances out. >> peter, we were talking in the green room before we came out here and said that taxes are something nobody ever wants to talk about. if we did a show on tax strategies, we would lose 100% of our viewers. it's the most boring thing. >> it is. >> but if your clients were all successful, smart people, they would come in and say i want to buy this stock, do this, and forget about the tax implication. >> they do. the key is, what do you earn that you keep? taxes shouldn't be the driver. sometimes you see people get too focused on taxes. but they should definitely be one of the top four elements you're looking at with an investment. if you have a high income or you've got a signet worth, because you're moving into higher bracket. >> you know donald trump. >> yes. >> you know him well. >> yes. >> for how long? >> 15, 18 years now. >> got him his first speaking gig. that's what it says. >> thought it was 200 or 300 people but now it's 10,000. he was a bit taken aback but now clearly is addicted. >> are you going to go see him at the white house? >> at some point we'll chat. he's not looking for advice, as you can probably tell right now. the point people want advice, i give it. i don't give advice without being asked. >> as somebody who gives advice do you identify that some of your clients need advice but they're not asking you for the advice? >> the ones that whether they ask me or not, those people who engage me i go after. that's my job. that's what they want me to do. i don't tell the president of the united states what the hell to do. i've coached multiple presidents of the united states but it's when he asks. >> let's pretend i'm him and i'm asking. what would you tell me? >> watch your words. if his concepts were communicated better, people could understand. he uses such bold words, general phrases, words like idiot don't exactly build a relationship. >> lack of precision? >> lack of precision for sure. i don't think that's going to change, unfortunately. do you? >> oh, no. i think some people think that's his charm actually. >> we're in this for the next four years, or eight, depending what actually happens. we all have to realize this is still our president. we have to work together. working against him is working against the american people. we're going to do fine. >> but if you say that, matthew mcconaughey basically said what you said and people are vilifying. matthew mcconaughey is supporting donald trump because he said work together. you can't even express any support for anything the man does. >> we're in a tribal world. everybody gets connected to their tribe and think their tribe is wrong. you go to berkeley, the center of free speech, and you see people bombing and trying to keep people from being there. he's an idiot. i don't support him but you see how far off we are. humanity always throws its pendulum one way or the other. we exhaust it and it changes. i hope we exhaust it soon. i partnered with this young man because i'm on his board. people do business with him. i benefit, so everybody knows. i asked him, you're dealing with billionaires and millionaires. how about somebody who has on the journey but not gotten there yet? he has created a new vision anybody ultra wealthy or someone with $100,000 can get a second opinion from him, secondopini secondopinion.com. he will do it. there's no charge. if you want to become a client, he'll do it for you. if you're at a low level, he will do it. he has partner ed with me, givig me all the money for this book. i thank him for that. >> tony is no little, 6'7". tony robbins, the book is called "unshakeable." street talk is coming up. and the real loser of last night's oscar not warren beatty, not faye dunaway, not even jimmy kimmel. the company that's in an oscar mess and may even need to call tony robbins. ♪ ♪ ♪ only at&t offers you all your live channels and dvr on your devices. data-free. entertainment. your way. only from at&t. we have a question about your brokerage fees. fees? what did you have in mind? i don't know. $6.95 per trade? uhhh- and i was wondering if your brokerage offers some sort of guarantee? guarantee? where we can get our fees and commissions back if we're not happy. so can you offer me what schwab is offering? what's with all the questions? ask your broker if they're offering $6.95 online equity trades and a satisfaction guarantee. if you don't like their answer, ask again at schwab. i love how usaa gives me the and the security just like the marines did. at one point, i did change to a different company with car insurance, and i was not happy with the customer service. we have switched back over and we feel like we're back home now. the process through usaa is so effortless, that you feel like you're a part of the family. i love that i can pass the membership to my children, and that they can be protected. we're the williams family, and we're usaa members for life. call usaa today to talk about your insurance needs. welcome back. it was an ending with quite a twist at last night's oscars. not a happy ending for one company in particular. julia boorstin is live with more. julia? >> reporter: the biggest mistake in oscar history after warren beatty and faye dunaway announced "la la land" won best picture, it was revealed that "moonlight" won. the whole audience gasped. >> thank you to our incredible cast and crew, who are all up here right now. >> guys, i'm sorry. no. there's a mistake. "moonlight," you guys won best picture. >> this is not a joke. >> this is not a joke. i'm afraid they read the wrong thing. >> here is how this happened. price waterhouse coopers has duplicate copies. one partner with each set on either side of the stage. beatty was handed the wrong envelope, for emma stone's role in "la la land." this statement, written by pwc apologize i apologizi apologizing to everyone for the error. the presenters had mistakenly been given the wrong envelope. and when discovered was immediately corrected. we are currently investigating how this could have happened. >> julia, we got to get to white house. thank you so much. mike mulvaney, budget director for president trump is speak right now. in the press briefing room. let's listen in. >> something the president had said previously. he simply is -- we are taking his words and turning them into policies and dollars. so we will be spending less overseas and spending more back home. i forgot your second question. >> entitlements. why not arrest entitlements? the biggest driver on spending. >> some people used to call the skinny budget and it would not be unusual for larger policy decisions, including tax reform, revenue projections not to be included in this budget. >> yes, sir? >> down the line, could we see some type of -- >> full budget will contain the entire spectrum of the president's proposed policy changes. >> on rebuilding the military, can you talk more about the breakdown of that? >> no, i can't. again, where we are in this process is that the number is going to the d.o.d. today. over the course of the next ten days to two weeks we'll be kooming up with those type of details. time for one more. yes, sir? >> you are going to increase the military budget. are you going to at least ask the people in the defense department to take a look at budget and say where can we cut and save some money? is that part of the process? >> secretary mattis and i already talked and he is interested in that and omb will be involved in the procurement process. all of that will be our bigger budget in may. >> it's not like a blanket where you're going to throw money at it? >> no, sir. >> is there account for spending for the president's wall that you're going to request this year or the $54 billion increase, money for the wall, how to pay for the wall? >> a little bit of both. we do expect to include some money for 2017 as a supplemental and 2018 budget will contain some longer term dollars for that. thank you all very much. >> mick mulvaney, head of office of management and budget for president trump. the reason he's out there, we're getting indications of the first budget, what they're looking at. there will be an increase in defense spending. he was asked the specifics there and if they're going to work on trying to actually reduce some of the issues within the defense department and defense spending bills we've seen in the past. he said absolutely they're going to try to drive efficiencies. why didn't they tackle entitlements? this wasn't the proper vehicle to do so but didn't dismiss the possibility certainly. we'll hear more from president trump tomorrow night when he addresses a joint session of congress to talk more about what his budget priorities are going to be. home sales fell unexpectedly in january. only, though, because there weren't enough homes on sale. we'll take you to a sunday open house where the competition was, next. [pony neighing] what? hey gary. oh. what's with the dog-sized horse? i'm crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. isn't that right warren? well, you could get support from thinkorswim's in-app chat. it lets you chat and share your screen directly with a live person right from the app, so you don't need a comfort pony. oh, so what about my motivational meerkat? in-app chat on thinkorswim. only at td ameritrade. walmart has won a court victory in a battle involving its mexico operations. new york city judge dismissed the lawsuit, accusing the unit known as wal-mex had been accused of concealing suspected bribery of mexican public officials. the judge rejected claims the top wal-mex officials knew of the allegations or were reckless in not knowing about them. >> shares of the home builders on the move today. d.r. horton, pultegroup, lennar across the board. is the housing market getting ready for a spring surge? let's get a realty check with diana olick. >> reporter: pending home sales fell in january because there's so little supply. pendings are signed contracts, shoppers out in the market. out west demands are the highest. even in the midwest where prices are lower, short demands kept buyers out on the hunt. in l.a. more than 120 people had already listed this as a favorite. house is in a great neighborhood and was priced very well and nearly a dozen shoppers were knocking on the door even before the start time. >> this spring rush has officially begun and sellers who price their homes competitively can expect to see a lot of action. typically for a home like this, we would expect to see upwards of 15 to 20 offers. >> emily leech has been looking for a home for several months. she wants something urban but hasn't been able to win a home yet, not one she can afford. >> we actually had a house that we saw that we really liked in south central los angeles and we tried to make a move on that and we got outbid. >> a house last week with the same comps had 66 offers. supply is worse at the entry level which, unfortunately, is where most of the demand is. more online realty check.cnbc.com. michelle? >> the shares moving higher and the reason you're seeing more volume you look at the ten-year yield despite all the talk about interest rates, long-term rates don't seem to be going up. >> no, they don't. they've been hovering in a tight range for the past month. everybody expected them to go up. they haven't been. it's a little questionable, though, given that new home sales were weak, we saw last week, and buyers can't seem to afford what they want. we simply need builders to build more. >> should there be any concern for the pockets of weakness we saw in the west and midwest declines? >> well, the weakness is simply there is not enough out there that people can afford. again, it's that entry level product we really need to see. you saw investors scoop up, literally, hundreds of thousands of entry level homes and they're holding them to rent. that takes that entire segment out of the market. that's where all that leading edge millennial demand is. >> got it. lack of supply. thank you, diana. big downgrade for underarmour. what's behind that call? that's coming up in the second hour of "power lunch." don't move. the future of business in new york state is already in motion. companies across the state are growing the economy, with the help of the lowest taxes in decades, a talented workforce, and world-class innovations. like in plattsburgh, where the most advced transportation is already en route. and in corning, where the future is materializing. let us help grow your company's tomorrow - today at esd.ny.gov 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 poweof a trading floor, wherever you are. ♪ ♪ it's your trade. e*trade ♪ ♪ whether it's connecting one of or bringing wifi to 65,000 fans. campuses. businesses count on communication, and communication counts on centurylink. welcome to the second hour of "power lunch." topping the headlines right now, the dow slightly in the green. can it hold on to make this a 12-day winning streak, the longest since 1987? we are all over these markets and your money. because the beltway is now the capital of the financial universe as well, what the market wants to hear from the president's big speech tomorrow night. exclusive story just for you. softbank, finalizing a deal that would value the company at just $20 billion. all this just days ahead of snap chat's big ipo. is this a sign, though, is that start-up valuations are getting just a wee bit tough, michelle? caterpillar is up nearly 2%, leading the dow. the stock rising after president trump announced he will release a budget that increases spending on defense intestine fra structure. tegna up one percent. sony is down after its virtual reality headset sold that pace may be too slow to spur developers to come up with new software for the playstation vr. mick mulvaney making a surprise appearance in the press briefing room. what mulvaney said about the forthcoming trump administration budget. >> he was there to elaborate on a budget blueprint that the white house is scheduling for release in march, offset by cuts to most federal agencies and some consolidation of agencies could occur as well. omb director mick mulvaney did surprise the press corps by appearing to defend the budget policies. >> it's still consistent with what the president said. when you see these reductions you'll be able to tie it back to a speech the president gave or something he said previously. we are taking his words and turning them in to policies and dollars. we will be spending less overseas and spending more back home. >> mulvaney said it will be the largest proposed reduction in nondefense spending since the reagan administration and said the final budget blueprint will be sent to congress march 16th. health care is the first legislate i legislative priority, calling the 2016 catastrophic for payments into the program but stopping short of weighing in on medicaid, the issue that still divides republican governors. group of those gop governors said they will focus on preserving access and affordability in a new plan. governor scott walker said some details will come later on this week which, of course, is very soon. we have these broad contours, guys. but we will be keeping our eyes peeled for any specific details about how exactly the gop plans to rectify this impasse over medicaid. >> all right. kayla, thank you very much. as kayla said, president trump's first budget proposal will call for a $54 billion increase in defense spending in fiscal 2018. naturally, the defense stocks are taking a lot of notice. morgan brennan is here now with more on that story. morgan? >> that's right. they certainly are. $54 billion. it's a 10% increase from last year. the reason that ita air space and etf is up 1% today it's gained 19% since the election, outperforming the broader s&p's 10% gain. who likely benefits from this? the navy, submarine orders, also air force, positioning lockheed martin, boeing for more jet orders and expect more readiness spending for army and marine corps. that could potentially mean more armored vehicles from ge, so despite the double-digit gains in defense stock since november, many analysts do remain bullish. defense spending has been on the cusp of a multi-year cyclical upturn. and not just here but globally. in addition to the 2018 proposal this week the pentagon will request more money for the current fiscal year. of course, congress will have to sign off on all of this. with nondefense spending expected to drop, that could be a challenge, especially since we've had budget caps that link the two together and have been in place since 2011. it will be an interesting face-off. >> is there a concern from analysts that the margins will be under pressure because donald trump will want a better bargain for the u.s. dollar that the government spends? >> bingo. that's what everyone will want to see. even though you're seeing top line growth that's at least being proposed, what will it mean in terms of costs for these actual companies? we've seen this with f-35 and air force one. could be the blueprint going forward. >> morgan brennan, thank you. turning back to the other big newsmaker, berkshire hathaway's warren buffett spoke in glowing terms about apple and why he has doubled his shares since the beginning of the year. and apple users have been more bullish on the product even though he, himself, is not part of that ecosystem. >> apple strikes me as having quite a sticky product. and an enormously useful product that people use it. which i don't. tim cook is always kidding me about that. future earning power of apple when you get down to that. tim has done a terrific job and has been very intelligent about capital employment. i don't know what goes on inside their research labs or anything of the sort. i do know what goes on in their customers' minds. >> buffett coming out against hedge funds saying the fee structure borders on obscene. that's a quote. he's not the only one who hates hedge fund fees. >> it's easy to hate hedge fund fees. buffett says they've wasted more than $100 billion last decade on such fees. that comes from his annual letter where he spent four pages out of 29 criticizing active management. bu buffett took particular aim that s&p 500 index would outperform a basket of funds over a decade. more than 85% over the last ten years. the other five funds have returned as little as 3%. yet the wealthy continue to shell out money toward the high fees that hedge funds require. buffett told cnbc's becky quick the hedge fund managers usually reap the benefits, not the clients. >> 2020 will make a lot of managers retch and very few investors rich. it borders on obscene. >> he said in his letter much of the damage befell pension funds. buffett urges investors to stick with low-cost index funds instead. guys? >> any reaction or expected reaction from the hedge fund community? do they ever take shots at warren buffett? >> not that loud, though don't. >> private, they sure do. >> i'm sure they do. they must. >> oh, yeah. >> you talk to these people off the record, buffett, he has a whole thing. >> it's interesting. wall street journal put out a report saying that its new fund is marketing lower fees than he has historically. he is known as having high performance fees, charging investors a lot. we're seeing them react to some of the complaints, not just from buffett but other lps as well in response to some of these large fees with little performance to show for it. >> they're really reacting to assets moving out of hedge funds in general, especially on the part of pension funds. pension funds have questioned the fees that they're paying as they're investing retired employees' monies. >> exactly. the performance hasn't justified putting more assets to work in these hedge funds. it's interesting. there have been a couple of surveys that come out that showed that pension funds and other institutional investors are preferring private equity or straight-up index funds as opposed to wasting management fees and hedge funds where there hasn't been much need for protection these day. >> 3 and 30 at some point, in the heady days. >> if they were good. >> they better be more than good, michelle. they better be super good, great, fantastic. leslie, thank you. >> thanks, guys. >> warren buffett was on for three hours. he is also saying that he doesn't believe we are in bubble territory when measured against interest rates right now. in fact, he thinks stocks are cheap based on where interest rates are right now. these comments coming as the dow is trying to extend its rally. if the dow is able to pull out another high today, it would be its 12th record close in a row. chief investment officer with penn mutual asset management, has about $21 billion under management and maryann montane has about $1.3 billion under management. lady and gentleman, good to have you here. do you agree with warren buffett? is the market still cheap relative to where interest rates are? >> i guess it depends which market you're looking at. we think the u.s. markets are pretty fairly valued. not fully valued but the multiples have risen and we really think the opportunity is overseas and international markets where the multiples are low and they've underperformed the u.s. on a one-year basis, three-year basis, five-year basis and a ten-year basis. >> when you say multiples, what measure do you use very specifically? give me the example of how they're trying to compare to a market you do like. >> we're looking at forward multiples, forward price to earnings multiple based on 2017 estimates. that's where the u.s. is now about 17.8 times. to get a little technical one standard deviation above the median would be 19 times. we're pretty close to 19 while the international markets are at 15 times forward earnings. >> lower, sure. mark, what do you think about the valuation of u.s. market, where it stands right now? >> well, when i was listening to warren this morning i got the feeling he was saying stocks were fairly valued in the context of rates. if rates moved higher, valuations would turn to expensive. i agree with warren. with a two 30, ten-year on the s&p sounds about right to me. >> what are you expecting with interest rates? what if they do go up? that's the key question we're asking all the time, that we expect to happen. >> well, it's really about the pace of the interest rate rise that will determine whether or not stocks suffer some setbacks. our call is for a 3% ten-year by the end of the year. one thing that does trbl me, that is the consensus view among most fixed income investors. our view is for gradually rising rates. >> mariann, something has happened with the bond market. we saw a huge move in a very short amount of time and then nothing for weeks. >> falling, in fact. >> 2.36. the bond market, and the stock market appear to be saying different things. >> well, i think the bond market is looking at gdp growth, which for the last two quarters on a core basis was up only about 1.9%. we don't see that accelerating unless and until we see the whites of the eyes on some fiscal policies that will help stimulate our economic growth. so, in the meantime, i think maybe three interest rate hikes might occur this year. so, we're more between where we are right now, about 2.4% to 3% range. but we don't think it's going to be rising as fast as most others do. >> mark, why is the key to the overall market performance bank of financial equities in particular? why are they the bellwether? >> well, i think it's the trump trifecta, taxes, regulation and interest rates. all three of those factors stand to benefit the performance for financials. and it's been a long time since financials have led this market. but if financials are doing well it's really hard to be bearish on the overall stock market performance. we think that's going to be a good bellwether for just how quickly some of the trump policies may get implemented in here. >> yeah. lot of people talking about that sector right now. as we talk about interest rates. lady and gentleman, so great to have you on. thank you. mark happenstall and mariann montagne. helping to lift the etf higher, on news it teamed up with bristol-myers on some cancer trials. exelixis first positive day in five and up overall 12% since the election. a place to watch, brian. >> and we are, dom. thank you very much. shares of under armour having a terrible year. why does one analyst say now is the time to sell the stock? what investors are hoping to hear from the president's big speech tomorrow night. and our start-up valuation is starting to run just a little bit hot. exclusive story on the latest big money investment has a lot of people talking today. that and much more on power lunch. stick around. say carl, we have a question about your brokerage fees. fees? what did you have in mind? i don't know. $6.95 per trade? uhhh- and i was wondering if your brokerage offers some sort of guarantee? guarantee? where we can get our fees and commissions back if we're not happy. so can you offer me what schwab is offering? what's with all the questions? ask your broker if they're offering $6.95 online equity trades and a satisfaction guarantee. if you don't like their answer, ask again at schwab. what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley japanese softbank close to finalizing a $3 billion investment. it would be dealt a $2 billion additional round of funding followed by another $1 billion later. my source tells us that could rise to $2 billion for a total investment of nearly $4 billion. shared space start-up, two sides are working to get the deal closed as quickly as possible. if it does happen -- and it may not. but if it does happen, it would be workable to $20 billion, putting it in very rarefied air. palantir below the $30 billion valuation of airbnb and stunning $68 billion valuation of uber. all this happening two days before snap chat, snap inc. prices its public offering. i don't know if anything is overvalued or undervalued, ed. all i know is that it was a pretty eye-popping valuation for what is effectively a real estate firm. yes, a different kind and, i guess, a cooler one but still a real estate company. your thoughts? >> nice reporting on that, by the way. nice numbers there. >> thank you. >> in the case of wee work, it's a great business model. there's real revenue coming in, right? there's real real estate contracts happening. you probably justify it. no visibility into their profitability, run rate or any of that stuff. we would like to know more certainly what gets them to that $20 billion value aegs. on the high side for sure. >> my sources tell me, sort of saying it's not just hipsteres sipping their cappuccinos and types on their lap top. >> your people essentially. >> there are those. but using wework because they can eliminate massive other fixed contracts they have with big expensive commercial office buildings. there's the enterprise corporate side of this story as well. look at uber. $65 to $68 billion, it's losing. the idea of business is to make money. >> and then we've got snap coming up as well, which is also losing money. yeah. the thing particular with wework, i like it. there is real revenue coming in. it doesn't hold businesses down to like 15-year contracts necessarily. you could do a month-to-month lease, which is a nice thing. that wasn't really sort of addressed in the marketplace before. snap. twitter, we saw what happened with twitter. airbnb and uber, we don't know what's going to end up happening. they've had their own specific issues. they've got tons of customers, being used on a regular basis. they'll figure out, they'll turn on the profit engine at some point. you want to get in as an investor. that's where these sky-high valuations are coming into play for sure. >> wework, do they have an advantage in that there's no direct comparable? when we're talking about snap, we're saying is it more like a twitter or more like a facebook and there are benchmarks we can use. when we talk about wework, i don't know what the comparable is sbl you bring up a great point. tech start-ups, you're getting sky-high valuations because there aren't these comparables. we're disrupting the industry, changing it, fulfilling a niche, marketplace that hasn't been addressed before. we can come up with our own valuation, multiple, whatever you want to call it, whatever you want to look at. that's why you're getting these crazy high numbers. >> they seem incredibly vulnerable to me. i know it is an advantage right now that they don't have long-term contracts but when you go to like a tech-crunch disrupt event and there are all these kids in their cargo shorts and they all think they're the next person to bring great transparency to -- that's going to go away at some point. i don't know what's going to happen. and then suddenly those very short-term month-to-month contracts work against them because a lot of renters dry up, go away or go back to mommy's basement. i don't know where. >> your point is exactly correct, the downside risk, specifically with wework. that's the big pool of clientele for wework, start-ups. if start-ups start to dry up or the fear of them to begin with or facebook and google are so dominant that it ultimately crushes a lot of the start-ups that have come out into the space that will hurt wework for sure. i think they are specifically looking at enterprise clients. as brian pointed out that levels off a bit. that's definitely a risk for them. >> ed lee, thank you very much. we appreciate it. >> sure. >> as our viewers probably know, michelle, softbank control led y the man who met with trump who said i'm going to invest and create a lot of jobs. maybe this would be the first of that $50 billion pledge. >> there are the pictures there we are showing from that day. how and why it has increased drug price over the past year. recipe for controversy or an important step for the much bunted word of transparency? ♪ some things are simply impossible to ignore. the strikingly designed lexus nx turbo and hybrid. the suv that dares to go beyond utility. experience amazing. and her new mobile wedding business.tte at first, getting paid was tough... until she got quickbooks. now she sends invoices, sees when they've been viewed and-ta-dah-paid twice as fast for free. visit quickbooks-dot-com. 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. report concluding that drug prices are going up is like telling you that the browns won't win the super bowl. it's obvious. but is this new piece of transparency, especially considering where it is coming from? meg tirrell joins us. >> health care company, johnson & johnson, transparency report on its u.s. portfolio, saying they're going to do this every year. we th comes at a time we talk about a lot of drug prices and the conversation is focusing in the wrong price. that list price, sticker price is not the whole story. that what we make is a lot less than that. we've heard that, especially from myelin in the epi-pen scrutiny. johnson & johnson saying our average list price was 8.5%. after you take out those rebates and discounts that go into the system to government insurers and pbms, the actual price they recognize is 3.5%. over the last five years. in 2016, that amounted to about $11 billion that was going back into the system off the list prices of their medicines, discount at about 35%. the question becomes are the other drugmakers going to follow suit? others have done so. allergan coming out, saying it's limiting to 10%. they have similar numbers in terms of list price versus net price. this, of course, coming as a lot of pressure from the president on drug prices, trying to kind of circumvent prices in this area. >> we generally limit our aggregate list price. that's the general. give me an example of a drug that you did raise it more than 10% and why. >> i asked them about that as they were preparing this. i was like, can we get down to the drug? >> yes. >> it would be like 50 pages long. >> that would be like giving a target to congress on a silver platter. no? >> sure. >> or to your competitors as well. but one example would have helped, i think, to justify. some go up more than single digits. >> that's right. a lot of people argue that saying you're going to keep list prices or increases less to 10% that's different for a drug that brings in $5 billion versus $500 million a year. so, we do kind of want more data. some people saying this is maybe a step in the right direction at least, a start. >> thank you. market moved higher on the heels of president trump's remarks at the governor's association. tomorrow night he addresses a joint session of congress and is expected to lay out his economic plan. what does wall street want hear? bob pisani has some answers next. your insurance company won't replace the full value of your totaled new car. the guy says you picked the wrong insurance plan. no, i picked the wrong insurance company. with liberty mutual new car replacement™, you won't have to worry about replacing your car because you'll get the full value back including depreciation. and if you have more than one liberty mutual policy, you qualify for a multi-policy discount, saving you money on your car and home coverage. call for a free quote today. liberty stands with you™. liberty mutual insurance. hi, everybody. i'm sue herrera. a small plane crashed into a colorado reservoir. two men aboard were killed in this morning's accident. divers are searching the water to make sure there aren't any other victims in that incident. bill cosby's legal team winning a victory in pennsylvania. a judge has ruled that a jury from outside montgomery county can hear the sexual assault case against the actor. cosby's lawyers have been concerned that pretrial publicity could hurt their case. he is set to go on trial june 5th. and it's almost cherry blossom season in washington, d.c. the national park service will reveal their peak season predictions on wednesday. last year's peak bloom happened march 25th. and peak bloom means at least 70% of the trees around d.c.'s tidal basin are blossoming. a new report that suggests youtube could soon top tv viewership, youtube, owned by alphabet, has surpassed 1 billion hours of watch time per day. a figure far larger than previously reported. u.s. tv viewership is typically about 1.25 billion hours a day. that's the news update this hour. back to you guys, melissa. >> thank you so much, sue herrera. markets are slightly in the green. something very important happened today. dow and s&p 500 touching all new intra-day highs. in the dow rises today, it will have a 12-day streak. s&p is up 1.25%, brian? >> let's get a check of the prices with jackie deangelis. >> interesting day for oil, we are up higher, closing just around $54 here. just a marginal gain on the day. we do see from the commitment of traders report that speculative long positions are the highest they've been ever. you know what they said when people are too much loaded up to one side, that it could go the other way. but right now we're looking at rumors coming from the iranian oil minister, saying that the opec cut won't be extended. that next opec meeting is in may. we may hear a little more about this then. most people think we're going to see this sort of back and forth job owning until then. this has been tough. we've been in that 50 to 55 range. we keep testing it. many people think we will break through 55. the question, of course, is when. back to you. >> jackie dea inform gelis, thank you. fueled by expectations of president trump's economic agenda. tomorrow night, we should hear just exactly what those plans are. bob pisani is on the new york stock exchange, taking a pulse on the floor and what the markets want to hear tomorrow. bob? >> it's very interesting, melissa. traders are trying to figure out not just how the trump agenda is playing out but how it collides with another large object in washington, januariette yellen and the federal reserve. they're talking about a sharp increase in defense spending, leading entitlements on change and talking the president today, a big statement on infrastructure spending. that's the president's words. sounds like deficit spending will be coming and traders believe that as well. if we suddenly have a large tax cut with additional spending hikes in terms of defense and infrastructure it's likely the fed will view this as a risk to their inflation outlook, like they might finally be getting to that elusive 2%. that means more likely that the fed will get more aggressive on raising rates. this brings me to yellen, speaking at the executive clubs of chicago on friday. it will be one day before the fed enters a blackout period. meaning all fed officials will be quiet after that date leading up to the fed meeting march 14th and 15th. this will be the last shot she has at summing up the state of the economy. trump is proposing spending programs that seem to imply the economy is weak and in need of help. yellen sees the economy in a recovery mode and seems ambivalent about how much additional stimulus the economy might need. sounds like a collision is being set up here potentially between the president and between ms. yellen. you can see the two-year note moving up on concerns about that. guys, back to you. >> a lot of predicted potential coming. thanks, bob. white house press secretary sean spicer addressing jobs and the president's press plan. kayla tausche is live with details. kayla? >> the press secretary was asked to clarify the administration's stance on a potential border adjustment tax after some confusion last week when views expressed privately by gary cohn were reported and there was some confusion stemming from that. here is what the press secretary had to say. >> the president has made clear that we'll have an outline of a plan very soon. what i will say is that i think he has talked about the concerns that he has with current regulatory and tax policy that benefit people from moving out of the country and shipping products back in while shedding american workers. he will continue to fight for policies that promote manufacturing and job creation in the united states and supports american workers. >> so, he is noncommittal about that border adjustment tax itself. he was asked to respond to a statement from house minority leader nancy pelosi who said five weeks into the administration, president trump still has not introduced a single jobs bill. to that spicer said he doesn't need to introduce legislation. just from the ceos and announcements, this president is committed to creating jobs. guys? >> thank you, kayla. let's see what's going on with the president's budget, what we hope to hear from him tomorrow night. bill rogers, professor at rutgers university, and also senior research fellow at george mason university. vernika, i've been reading your stuff for years. for our viewers who don't know you, you dream day and night about the day that the government will spend less money. >> yes. >> when you hear that president trump wants to spend more on defense spending, which a lot of conservatives think is justifiable and cut spending elsewhere, what do you make of that? >> well, i think the president is kind of falling for this idea that every increase in defense spending essentially leads to an increase in national security. unfortunately, i think that considering the -- i mean, you could be actually getting a ton of efficiency in the way we spend our defense money just by rearranging all the money we already spend. more importantly, i think that the kind of spending cuts he's talking about -- it's not that i'm opposed to them. i would get rid of all inefficiencies, all the things that the government shouldn't be doing. i would cut all this. but the real thing that i want to see, i want to see him address the programs that are the driver of our future debt. and these are what we call wrongfully entitlement spending, that these programs like social security, medicare, medicaid that are really growing, exploding and are insolvent. rather than wait for these programs to hit the wall and then rush reforms, which will hurt people who actually truly need it. >> right. >> you should be starting to actually reform. >> he was asked very specifically about that and he realizes -- you know him -- i think he probably agrees with you. but not right now. at least not with this measure. bill, what are you looking to hear from the president tomorrow night? >> i think first off, i'm looking for the details. >> oh, yeah. >> simple phrase. the devil is in the details. and i want to see, hear what he wants to do about health care. i want to hear what he wants to do -- particularly about the infrastructure bill. if he's looking for more wins, quick wins that's probably one area that he has, or democrats and republicans alike, i think, are very important. also, in terms of our simple needs. i think all of us in this sort of northeast corridor and where we travel, you know. >> or try to travel. we live near each other. we try to travel. you know what it's -- >> it's beyond just the northeast corridor, right? infrastructure needs throughout the state, throughout the u.s. are so large. we've done this type of investing where we just have slowed down this we've slowed down. >> or wasted the money. >> the thing about the inefficiencies -- i'll be interested to see what they are able to uncover. the last time we did the budget, federal budget conversation from start to finish is when i was at the labor of department in 2000. pretty much since then it's all been continuous resolutions. the effort, the ability to create new things, create new spending, we really haven't. >> the band-aid is on the broken leg and the leg has been broken for years and years and years. >> that's right. >> veronique, do you have any confidence that the president and the congress will find some -- even the gop and the president have been fighting about a lot of stuff both in front of the camera and behind the scenes as well. do you think we'll hear any kind of concilla tchiatory tone or wt be even more combative? >> i don't know. i think there's a lot of disagreements on the tax plan within the white house and within the gop. i think there's a lot of disagreement on infrastructure spending, how to reform health care. there's a ton of light between the president and congress and fighting within congress. i'm very curious if we're going to see any tax reformat all, if we're going to see anything very concrete. >> you think there's a doubt that we actually get tax reform this year? >> i think that's taes going to be harder than it should be. let's put it this way. >> because? >> unfortunately because a lot of what the republicans and leadership has been doing on the house side is proposing a border tax that is a distraction from policies moving to territorial tax system that we all have been gunning for, for years, that we need it. >> it's an important point. earlier in the show, i said nothing happened yet. people got upset on social media. i was talking about laws. the idea being the president can say a lot of things. 535 men and women in congress, even the gop, are not necessarily aligned with trump and everything, who are going to have a say. are they not? is there a chance that literally nothing big happens for months? >> i think in general. >> from a law side. >> i get you. from that process, yes, that's a long, drawn-out process with hearings, public comment. also what may be creating some anxiety for a lot of us or angst, this is the first time for most of us, we're seeing the sausage being made, with twitter, social media. we're seeing them being made. when i was at the labor department in 2000 and worked with the committee, there was policy. but now th is real-time policy. >> thanks for joining us. >> thanks for having me. >> up next, why every tesla stock owner in america is angry at goldman sachs. plus under armour downgraded. why now after a lousy year? with e*trade you see things your way. you have access to the right information at the right moment. and when you filter out the noise, it's easy to turn your vision into action. it's your trade. e*trade. why pause a spontaneous moment? cialis for daily use treats ed and the urinary symptoms of bph. tell your doctor about your medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, or adempas® for pulmonary hypertension, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have a sudden decrease or loss of hearing or vision, or an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis. s&p 500 index gone restructuring? >> they range from bank of america, chevron to companies like callaway golf and stryker, medical company. we take a look at our real-time map here. we have a methodology for it. the reason why we care, the reason the index is so important -- let's talk about the outperformance. you mentioned in over the last 12 months, iq 100 up 36%, s&p 500 up 22% overall. index methodology is interesting. what m-cam and partners have done is take a look at russell 1000 companies, innovation leaders and say who has gotten the most money from their intellectual company? their algorithm scanned documents and come up with a portfolio, what you just saw back there. five of the most heavily weighted stocks here, guys, interestingly enough, micron, baker hughes, dow, and microsoft. all these guys here, range in performance over the last year from 25% up to more than doubling for micron. for each of these stocks they've all outperformed the s&p 500 in that same time. at least the top five have. if you got more questions about the methodology, how the index works, go to cnbc.com/iq100 for a list of how we come up with these stocks at m-cam. next hour, through the most heavily weighted stock and why that's up there this time. back to you. >> we look forward to that, dom. trading nation, traders do trade better together. trading tesla because goldman sachs is telling shareholders to sell tesla. reconcerns about the upcoming model three rollout, unproven solar business and constant cash needs. rich ross and stacey gilbert are your trading nation team today. stacey at susquehanna, do you have a view on tesla and does it jive with what goldman is saying, to quote jim cramer, sell, sell, sell? >> if we look to how analysts break this down between your bulls, bears and sitting on the sidelines it's a third across the board for those different types of ratings, very different than what you see in a large company where almost 50% of analysts are bullish on a name in general. that's fascinating. from the options perspective, it will give you a perspective of what's priced into. headlines on the model three, any capital raise comments, the actions really are not seeing a ton of activity. and, if anything i would make an argument that for those that want to participate and think this pullback is overdone, calls are as cheap as we've seen, in the bottom quarter of what we've seen the past two years. those that are nervous that this goldman sachs downgrade or any other potential downgrade, protection is about as bad as we've seen it. there's not this huge sentiment in the options place it sets up nicely for those that have a strong opinion directionally. >> rich ross, directionally, this chart looks like it's dangling like a bad participle here. is there any support for tesla? >> i think i'm more sanguin than goldman sachs. i would be a buyer from a trading standpoint. bring up the short and long term first, short term i'll show you where that support is. phenomenal run from december when it looked like the stock was out of gas. of course, we know that's not possible, given the short interest. of course, you run into resistance back at the old highs. now you've had a 38% retracement, textbook retracement on the 50-day. on here i like the stock, risk reward for traders is back in your favor. if you zoom out, that's where it gets real interesting. you're looking at a very long-term, consolidated flag, very volatile, admittedly. 280 on the high end, 180 on the low end for simplicity sake. >> bullish view there. stacey gilbert, rich ross, thank you. trady nation.cnbc.com for more. the sports world is full of comeback stories. now the question is, can under a armour be one of them? stocks downgraded. top analyst explains where he sees under armour headed next. trading nation.cnbc.com and a word from our sponsor. my business was built with passion.. but i keep it growing by making every dollar count. that's why iave the spark cash card from capital one. witht, i earunlimited 2% cash back on all of my purchasing. and that unlimited 2% cash back from spark means thousands of dollars eacyear going back into my business... which adds fuel to my bottom line. thousands of dollars eacyear what's in your wallet?iness... now for our call of the day. under armour getting a reduce. shares are lower by 1.5%. down 50% in one year. simean joins us now. great to have you with us. even in blue sky scenario shares are fairly valued at best. this is a short year in your view. >> so, yeah. we downgraded today. there's an important distinction i want to make so it's clear, this is against the shares, not against the company. as we think about the company there are still sales prospects ahead. we're an equity analyst. i ned to look at the equity and there are prices that are relevant. for a company that could have potentially shown a sales blip we figured let's look further out. let's take a few years and see what could happen. the issue we came up with, when we did that math, even in what we call the blue sky scenario, sales reaccelerating, margins and saying fy '17 number didn't actually happen, we come up against the ceiling of a very expensive stock and the reality is what was probably most interesting to us was the day they reported under armour guided the full year '17 number down roughly 38%. shares were down 25. so to over simplify that, that means the stock got more expensive. for a quarter that everyone would largely agree was a disappointment at best, people gave the shares more credit. >> not necessarily that there will be a negative catalyst pushing the stock lower, you actually see even if the stock performs on all cylinders, you're saying even if under armour beats the full year guide by 50% the stock is still expensive. it can really hit the ball out of the park and it's still too expensive in your view. >> to be clear, we don't expect them to beat by 50%. even if that happens, this is a growth multiple on a company that definitionally is not growing next year. >> all right. >> so you maintain that multiple as it seems like the company has matured. companies do mature, normally the multiple follows. >> we have to leave it there. thank you. coming up next, time for check please. don't move. yes,ir, we need your password. the passwordhat i use? 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"moonlight" was a little indie film. it can be nominated to a maximum of ten though it didn't certainly help with the numbers this year. >> julia, thank you. julia boorstin with an update. >> check please time. fed fund futures, the markets are acknowledging that perhaps janet yellen could hike interest rates in march. it's at a nine-month high. 52%. that's quite a change than a couple of weeks ago when it was in the 20s. >> that might explain why we don't see a lot of movement in the averages even though the dow is on the 12th record close if we close higher today. that would be the longest streak since 1987. boeing is the best performing stock during that run. and if the name on the card doesn't seem right, ask. i thought that threw that under the bus. >> thanks for watching power. >> "closing bell" starts right now. hi, everybody. welcome to the "closing bell" on this monday. i'm kelly evans at the new york stock exchange. >> i'm bill griffeth. we'll see if we get a surprise ending to this program. >> i thought you meant last night. >> of course i did. you watched, right? >> no. >> yeah, i didn't think so. the dow is higher today. president trump announced a few details of his budget plan this morning. now if the dow closes in the green today this would be the longest win streak for the industrial average going back to 1987. this would be the 12th in a ro

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