Transcripts For CNBC Power Lunch 20170303

Essentially met the feds goals certainly on the employment side and nearing it on the inflation side. 2 inflation goal. She continues to expect, however, gradual rate hikes and says the fed or the committee has decided its appropriate to move to a neutral stance of Monetary Policy rather than one that is accommodative or stimulating the economy. Not acting, the fed chair war n warre warrens waiting too long risks rapid rate hikes. No evidence that the fed chair says its fallen behind the curve and the u. S. Economy has shown remarkable resilience in the face of several shocks. Some of them domestic and some of them global. Prospects for growth, quote, look encouraging and global risks have receded somewhat. Economic challenges, she says, do remain. Doesnt give the economy a clean bill of health and points out some of the problems that plague the economy, low productivity, for example, fiscal policies would best help address rather than monetary polishes. So, whats happening here, guys, is a very, very clean, very, very clean very clean mention of a march rate hike and really affirming this idea of three rate hikes. Talking about a new regime here where the pace of removing accommodation, aka rate hikes, may be moving faster than the fed has previously done. Im taking a quick look here. The twoyear has risen by two basis points. One quick check of the fed probabilities. It looks like its about the same at 74 at the moment. Well check that as time goes by. Certainly if there wasnt an sxl exclamation point of a rate hike, there is now. Steve liesman, thanks so much. Intraday chart of it. You might think that the fed funds were pricing in a lower chance of a rate hike. Remember, the spread is so tight that any kind of move is going to look very, very big. Stocks didnt seem to move that much. But the entire yield curve seems to be moving, spiking slightly higher, depending which one youre looking at there. Instant Market Reaction to yellens comments. Bob pisani, if you are one of those traders who thought a rate hike was coming in march as weve seen the fed funds futures, i didnt hear anything there to dissuade me from that thinking. Not at all. The economy has essentially met the fed goals . Thats very important. That signals a new phase in fed policy here. Less worry about low inflation and less worry about global risks and more confident that theyve attained their goals. I think its an important inflection point. Whats interesting is the Market Reaction. I call this very, very muted. We were down two points on the s p 500. The market has been, obviously as you saw on the feds funds future, expecting this kind of statement. I still think its very important for them to state a goal that they essentially are meeting their fed goals right now. You can see the markets are not moving too much. Gold, which has been down four days in a row here, 12. 26. It rose just a little bit. 12. 25 is what i had prior to the overall announcement. Kbe, the bank index, essentially unchanged on that. Market is remarkably stable on most of this. I would point how the that the market has accepted what the fed has been saying but its now moving to an extraordinary position. Can i make one statement about snap here . We are really moving in notably for the second day in a row. Closed a little below 25 yesterday. Moving up rather aggressively again today, another 2. 76. Remember, we also announced Nbc Universal, our parent company, announced they were investing 500 million in that. That is part of a oneyear lockup. Its very important here that snap has a number of shareholders that are essentially locked up. 200 million shares were floated yesterday, 50 million shares are locked up. Thats one of the reasons this Company Stock keeps moving up. The amount of shares that are available is fairly small because a lot of people are essentially locked up, about 25 of the shares. Guys, back to you. Bob pisani, whats amazing is that everybody accepts a rate hike and the market is still sitting near highs. I know were weaker today but last couple of days certainly weve known that a lot more people expect a rate hike and yet stocks sit very close to alltime highs. Look how Different Things are, michelle. The important thing is, if this would have happen aed a year ag we would be down 250 points right now if they were talking about the fed meeting their goals, implying theyre clearly going to raise rates almost imminently. The market has made a remarkable turn around. Part of this is the reflation trade that started before the trump victory. Interest rates started rising in the middle of the summer. Global economy started showing signs of improvement in the middle of the summer. Things really took off after the election. I think the expectation that youre going to see some kind of fiscal stimulus was that added little hope that a lot of the bankers around the world were hoping for. Remember how many of them complained, including the head of the ecb, about the lack of any involvement, lack of any fiscal stimulus. Now that were hearing about it, theres clearly a Market Reaction, as you can see. Great news for the financials. The rest of the market maybe doesnt care that much about the Federal Reserve, with all due respect. Wilfred, incredible statistic, in 180 of the last fed meetings, only one meeting where the odds of a rate hike were greater than 50 , and the fed did not hike rates. So if youre in the market every day, 30 years of fed history says theyre going to raise. You already adjusted. Its great news for the companies you talk about every day, the banks. Absolutely is. The banks, clearly, despite one day, yesterday, where they pulled back significantly, theyre up largely this week, around 2 for the week as a whole. They responded well to this fed rate hike expectations going higher. Only one thing i would say to offset that slightly is that in the bond market, the way people have reacted to the last two weeks of higher likelihood is the short end of the curve reacting. Ive been very cure why ious that. Are they worried about Economic Growth . What is happening there . The whole thing should be going up but its not. The first part, the banks, clearly yields going up are good but they prefer a steeper yield curve. Yes, banks have responded. Thats fine. The shape of the yield curve as well so the market doesnt overdo the Bank Share Price reaction. As for why has it flattened down, its probably because people are expecting march to come, but investors perhaps arent necessarily expecting that meaning more hikes throughout the rest of the year. Were going to get march but still maybe only two or three years. Lets find out from the bond market. Rick santelli, as always, in chicago to you, rick . Ill tell you what. Never have i seen so many people enamored with the flash of headlines based on Janet Yellens texts. Three hikes this year, met most of the feds objectives, faster normalization in 2017 than in the past. Resilient u. S. Economy. Hip hip you heard me earlier. Im giving the fed a real high grade. From this point forward, forgetting the past, this is wonderful. The fed has confidence, investors have confidence. How can we prove it . Lets look at some charts. Look at fed funds, two day and one week, what youll notice is that fed funds started a rally. See that . They went right back down after the testimony. When it goes down, that is pricing in more fed. What isnt happening with bad things in the other markets. Dollar index, yes, its down but not much before the text. Twos and tens are going a bit lower. But, by far, the piece de la resistance is the dollar. Not only can the u. S. Economy handle normalization, it needs it. Kudos to the fed. Lets forge ahead with more tightenings. Rick giving the fed a good grade. Im writing this down. Writing this down. Now we have to make sure it doesnt have what brian just expected, such High Expectations but no action. Yeah. Like every weekend for me. High expectations, no actions. Of course, we wait the q a as well, which will be crucial. Thats coming up from janet yellen in about 45 minutes time. Meanwhile, commerce secretary wilbur ross going on the record exclusively with cnbc with the markets fearful about a trade war with chiena. New commerce secretary said we have to focus on deals closer to home before looking abroad. Kayla tausche has more. Hey, wilfred. He did talk about chiena. He said theyre focusing on a neighbor in particular, mexico. The president has called nafta a disaster and situation with mexico severe. Secretary ross signaled a significant change that caused a change in the peso, some puview that America First would hurt the peso, secretary ross said the goal is to help. I think if we and the mexicans make a favorable trade agreement, the peso will increase a lot. I think part of it was worrying about renegotiation of nafta. We have to think about making the peso Dollar Exchange rate a bit more stable. So what could a u. S. Effort to stabilize the dollar peso Exchange Rate . Thats unclear at this point. He did speak about bob rubin, treasury secretary under clinton, who set up a lending arm between the countrys Central Banks to give mexico a source of capital. The peso is down 66 against the dollar, since nafta, taking a sharp leg down since the recent election because of President Trumps harsh comments. Its interesting to hear what secretary ross said this morning. The continued rhetoric from the president , you wonder if theres a little bit of a good cop, bad cop dynamic going on. Certainly. The other thing he said, he didnt think that mexico had done enough to raise the standard of living in mexico. Kayla . He talked to michelle specifically about what a stronger peso could do to help mexico. If you have a good peso, its good to attract jobs but hurts their ability to purchase things like food and things that are imported from the u. S. Mexico in the early 90s was praut into the organization of economically developed countries but its not really a developed country. Right. Disposable income each year is 12,000, 13,000. The average is 29,000. The u. S. Is currently at 41,000. Very good point. Thank you very much, kayla. This idea of mexico improving its standard of living, you see it in a chart. If you show u. S. Productivity over the last 20 years versus mexicans productivity over the last 20 years, look at the u. S. Its nearly doubled. Mexico, its gone nowhere. Why do we care . The higher your productivity, the higher your workers get paid. Why is that happening with mexico . Done so many things to try to improve productivity there. Thats why you have the big disparity between wages here and wages there. Wealth inequality is a huge concern here. Even more so in mexico. Mexico is a wealthy country. Its just all concentrated among a few prominent families, whose jets you frequently see in vail, by the way. Particularly, those clear points on nafta, where he said easy fruit to grab perhaps and the remarks on china. It means so much more to china than they mean to the u. S. And, therefore, the terms of negotiation are very much in the u. S. s favor. It was good. We know squawk box is carrying worldwide exchanges water. Jackie deangelis. For seven weeks in a row now we added seven more oil rigs. Total number 609 up 217 from a year ago. Production in the eia over 9 Million Barrels a day. Were adding rigs, pumping more. You can see they havent really moved on this number, trading over 53 a barrel. Thats because traders are following reports out of libya that there could be some strife at one of the big oil ports there, keeping us lifted. Smack in the middle of the range still. Back to you. Dont go anywhere. You can go, jackie. Were talking to the audience. Fed chair januariette yel n janet yellen is about to speak. Shes now going to take some questions. Well take you there live as soon as the q a begins. First, though maybe the interview of the day after wilbur ross, ceo of mylan, heather bresch. Will it be easier to create drugs in america . Lot to talk about in little time. Ill shut up and well go to break. 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 fl like were back home now. The process through usaa is so effortless, that you feel like youre a part of the family. I love that i can pass the membership to my children, and that they can be protected. Were the williams family, and were usaa members for life. Call usaa today to talk about your insurance needs. May not always be clear. But at t. Rowe price, we can help guide your retirement savings. So wherever your Retirement Journey takes you, we can help you reach your goals. Call us or your advisor rowe price. Invest with confidence. We are waiting for janet yellen, the fed chair, to speak. Theres going to be q a as well. In the wake of Steve Liesmans reporting on her speech, fed funds pricing in the probability of a rate hike this month in march at 83 . Brian . Michelle, thank you. It certainly has been a big week. Its been a big year for pharmaceuticals. On tuesday before a joint session of congress, the president promised to bring down drug prices immediately. Mylan reported a blowout quarter, stocks surged. Same day, 20 more states joined in a sweeping lawsuit against mylan and other generic drug makers, accusing them of colluding on drug prices. Epipen in august. Heather bresch joins us exclusively. I would say its been an eventful 12 months. I would agree with you. Understatement. There was firestorm about epipen. Where do we stand with epipen pricing and trantransparency . I believe our conversation launched a very Important National conversation around health care and the supply chain and how pharmaceutical pricing works. I see that conversation continuing to broad and expand, to be much more inclusive about how it works. And i think thats the first step in trying to get to a solution. I think, importantly, on epipen, we fixed epipen, introducing a generic, 300, cut the price in half. There was a lot of conversation about the Competitive Dynamics of epipen. Competitor came back on to the market at 4,500. So, you know, we took action with epipen. Its half the price. Everyone who needs one has one. But, importantly, it showed that the system is broken. Omniq, theyre trying a bizarre, interesting, whatever you want to call it, pricing strategy. Free for some people but 4,500 to the Insurance Companies. How might that impact epipen pricing . All i can say is that their list price is 4,500. Whatever strategy theyre trying to put in place, all i can speak to is that it shows it incentivizes higher list prices, because everyone is taking percentages off that list price and the list price is absorbing what is happening through the entire supply chain. You blame the pbms, pharmaceutical managers. How much are the Insurance Companies also to blame . As you said it used to be, even a few years ago, deductibles were pretty low. Sullivan family at 500. You could cover the rest. A lot of our viewers probably have deductibles in the thousands of dollars now. When they go to buy epipen, wait a minute, i have to pay 600 out of pocket . Well, your deductible is up. How muches that has the change in deductibles impacted pricing and transparency on pricing . Those are yours, not mine. I didnt blame pbms. Everyone is bringing value in the chain. What i said is that no one there is no transparency as to who is part of the supply chain and how it works. To your point, though, importantly, i believe benefit design is absolutely driving the problem that the patient at the pharmacy counter is having. I would say the viewers watching this that have a 5,000, 6,000 deductible, they look uninsured until they hit 5,001. Cash buyers, effectively. Right. We were down to 1 to 2 of this country being cash paying. We now have 50 of americans that look like a cashpaying customer until they hit their deductible. They walk in, look uninsured, being exposed to this list price. Weve asked consumers to get engaged without giving them any information or the tools necessary. So, transparency is one piece of it. Making pharmaceuticals work like a market is the other. Over the counter. You walk into a pharmacy, you choose the brand, generic. You can shop. Were the best shoppers in the world. For prescription drugs, we give you no information. Moms, ceos of households zero information and theyre making huge decisions on significant dollars, to your point. Do you think with this new administration, which has tried to rollback epa regulations, do you think this administration will rollback the process and maybe the cost of drug approval from the fda . Are you optimistic at all . So i think you have to look at these as two Different Things. I am optimistic with this administration. But i dont want to misguide anyone. More fda approvals is not going to change the dynamic for that patient at the pharmacy counter. How about faster, cheaper . The generic side has always been very competitive. That supply and demand has worked on the generics with retail pharmacy. The problem is that that patient doesnt feel the difference. What i would say about this administration, what i am optimistic about, to your point, to his speech on tuesday night, he referenced artificially high prices and we need to do something about it. I think this administration is solution Oriented Administration and this is a huge problem. As he said, its complicated. So, its going to have to take bold action to be able to really look at this holistically. Theres a graphic on the screen right now. If youre listening on the radio ill explain t stock is up 22 since President Trump was elected. I think a lot of viewers and your investors are probably confused. Wait a minute. Ive got a president who says hes going to bring down drug prices yet your stock price has done well, one of the best performing stocks out there, especially in your space. How do you square those two . Because we are primarily a generic company. We have over 630 products here in the United States. Last year, we sold 22 billion doses. One out of every 13 scripts in the United States is filled with a mylan medicine, more than the seven Largest Pharmaceutical Companies combined. You look at we are part of the solution. Generics are part of the solution and mylans role within the United States as well as the Global Health care is a huge part of bringing health care down. You dont feel under threat as much as maybe some of the branded fapharmaceutical compans should . 90 of prescriptions dispensed are generic. Where we need to fix it is that Patient Experience at the pharmacy counter. Thats where the system needs to change. To your point, mylan, wednesday we were able to have an investor day and really an opportunity over the last three years our company has almost doubled. Look at the global footprint we have today. 50 of our revenues are outside the United States. And inside the United States, we have an extremely diversified and differentiated portfolio. We dont have one product that makes up more than 5 of revenue. What do you think is going on then with your competitors . I mean you far out perform them. Perr perrigo has issues. So if the scenario is so good for generics, whats wrong with that . So, look, i think that if youve got a niche portfolio or just operating in one country, like the United States, your ability to absorb the volatility is much less. Mylan, over 55 years of providing access to medicine, weve been built to not only have huge volume, capacity to make 60 billion doses across the globe we sold last year. That ability to supply, the capacity, the highquality medicine needed and make it accessible to people is what i think is resonating. And not only do we have a differentiated and diversified platform, were across generic brands as well as overth overthecounter medicine. Were able to bring an offering to the market, to every local market we operate in, in a very, very different way. Its compelling. People are starting to understand, all Generic Companies arent created equally. We believe mylan has a unique Global Platform that right now is being able to shine. What tax rate . A lot of talk about Corporate Tax rate. Your fathers a senator. What tax rate would make you come back to america . Is there any tax rate where mylan would say lets move the tax headquarters back to pittsburgh . As you know, we were out there, fighting for tax reform years ago. We were the last person in our industry that was u. S. Based. We said its not a level playing field. We cant compete. We actually perversely the only way we can grow in the u. S. Is to invert. So we did. How about israel, ireland everybody is outside the United States. We looked at that opportunity to be competitive. Here is what i would tell you. We didnt lose sight of the role we play in the United States. 80 of the doses we sell in the United States, we make in the United States. Weve got one of the largest facilities in west virginia. We have grown since we inverted here in the United States. We went from 4,000 employees to 7,000 employees. What i can tell you is were continuing to do our part here in the United States. Heather bresch, ceo of mylan, thank you for joining us. Wilfred . Thank you, brian. Also to you, were still waiting for fed chair swranet ye janet take questions. Shes speaking right now. Well bring you the q a. Power lunch will be back in a couple of minutes. 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 worldclass innovations. Like in plattsburgh, where the most advanced transportation is already en route. And in corning, where the future is materializing. Let us help grow your companys tomorrow today at esd. Ny. Gov so beautiful. What shall we call you . Tom name it tom studies show that toms have the highest average earning potential over their professional lifetime. See . Uh, its a girl. Congratulations two of my girls are toms. I work for ally, finances are my thing. You know, im gonna go give birth real quick and then well talk, ok . Nice baby. Lets go. Here comes tom 5 nothing, stops us from doing right by our customers. Ally. Do it right. Whoo look out. Ally. Do it right. The first stock index musicwas createdughout over 100 years ago as a benchmark for average. Yet many people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Its time to bench the benchmarks. Hi, everybody. Im sue herera. The u. S. Carrying out one of the heaviest attacks on yemen in years, 120 raids using drones and helicopters, targeting al qaeda militants. These raids are a result of new orders from the white house, according to Senior Intelligence sources. Hernando county deputies seizing more than 200 pounds of pot worth more than 3 million. Two men flew their plane into florida packed with pot. Deputies through see the men still apparently looking for them. 900 migrants arriving in c sicily. In this case, keep your eye on that bat. Marlins shortstop lost control of his bat. Casually reaching out, caught the bat with one hand and threw it back, all without cracking a smile. There you go. I hope i promise proe announced his name correctly. Probably not. However you pronounced it today is how its pronounced. There you go. Michelle, thanks. Well show you this live picture again, Executives Club of chicago, janet yellen of the Federal Reserve is speaking right now. We already know what she said. We got a copy of her speech. Steve liesman gave us the highlights. She suggests a march rate hike would be appropriate if all the Economic Conditions stay in place, et cetera. We will carry her live when we get to the q a to see if theres any additional news. Another big interview on cnbc, mylan ceo heather bresch. Stock basically flat on the day. Jim cramer joins us with his viewpoint here. You just heard heather bresch. How do you think she did . I think she did well. Its important to put as much distance between when there was the firestorm with the epipen and now. The company does more value added than people realize. I thought she represented the situation about where theyve come from and where theyre going pretty well. Look, i think the problem is that in the end somehow perrigo, mylan, theyre all regarded as safe. And when she comes on, she makes it so you start thinking maybe were being too judgmental. Maybe they deserve more credit for people say you just bought this, didnt do anything with it, and jack up the price. And shes like no, actually, we changed the pen. We made it better, invested in it. The other guys had a high price point. Good she points that out. Bio similars, whole new way to make drugs. She affiliates herself with some of the more innovative parts of the pharmaceutical industry, when she talks about them doing, lets say, some organic growth, more than the other guys. Its not just a commodity business. Then you do feel better about the stock. The stock is not expensive. Do you know what i wish she would do . What would that be . I wish she would say we have to make at least 20, 50 a pen. If we dont, we dont have profits. If you dont have profits in the industry, you dont have new products. Like own the situation. She always sounds very, very defensive. And uses a lot of words to say, look, we gave 100 to the pbm, 100 to these people. We have to keep something for ourselves or you dont get new stuff. When youve had the firestorm, its difficult to come out and be as confident. I point out brent saunders, at allergan now brent comes out and says theres a social contract. Were the guy. Its going to be not going to do more than 10 . I know heather feels strongly that all that depends on the the percentage doesnt matter as much as what the actual we dont want to jack prices up and were going to make our rate of return. And some would say, okay, look. Do you think epipen has damaged the stock brand . Absolutely. Not the Company Brand but the stock brand because 7. 5 times earnings. They never get theyre generics. You and i could set up a generic factory. Does microinform get the same multiple as nvidia . No. They make a commodity product. Anyone else can come in and do it. That said shes making a case for 2017, 2018 to have more substance, proprietary. If thats the case, you should pay more. At the same time, i think that she also is but a lot that have is organic growth has been relatively slow, to be fair. Thats right. They made an offer for perrigo. Do you think they should go after them again . Its very damaged and its hard to figure out what its worth. People at perrigo are trying to figure it out. Wil, youre making a face. Starting at 501, you saw me. Youre puzzled, looking puzzled. Im enjoying the conversation, being educated. He comes from the land of the nhs, so our Insurance Company system must be like flabbergast you. His group is a lot like mylan. The banks have not traded on earnings per share for ages. This industry has not traded on earnings per share because of the government. The banks are still below that historic, despite the runup. I dont think jp morgan should sell at seven times earnings, nor should this thing. Doj, doj, doj, headlines. Doj does not play a role anymore so your company is getting an earnings boost. Final. I one day this industry will not be doj. Michelles favorite topic, border adjustment tax. Ill tell you why. Stick with me for a second. I dont endorse t i like talking about it. Stay with us. Stay with us. Morgan brennan hold on. Here we go. Stay with us. Mylan is based in america but tax based overseas, 80 of its products in america but makes half its products out of the u. S. It may be a litmus test if we get a b. A. T. , they will be impacted. We think it will be caterpillar tractors that will be no, no, no. The drug industry could be hurt. I imagine teams of attorneys and cpas are trying to figure out what might happen. Border swruchlt tax, key part of its design is to eliminate the incentive for inversions. Thats why i asked her getting rid of base erosions. Would you come home . Why merck keeps getting a higher and higher multiple. Theyve really been a star. They have been. Can you a frazier bully . Huge. Lifesaving drugs for everybody as another company did. No, he never promises on the real issues he can under promise on earnings and over delivery but never over promises on what his drugs can do to save peoples lives. Trying not to be sentimental about it. But my mom died from cancer. This guy had it. He hes the real deal. They only used lilleth, in that show, frazier, should have brought her in more. Its a long story. The most Exciting Company on earth, im not kidding. Peleton. One day it will be public. Have you been . Have i been on peleton . Its in the bedroom. Dont tell me you own a peleton. No, but ive been on one and was exhausted. Up at 3 00 am. Peloton you like it . No. I love it. Do you have one as well . Rachel w. And if fit instructors could be instructor. If you say your peloton name on the air, ill say mine on the air. Beethoven. No way. You have a handle. And people will know who you are. Up and up. New york state, just a huge believer. Its right in our bruchlt itedr. Its a beautiful machine. I know this is a company that we won will soon be trading. Interactive. Its not a go pro. No, no, but when youre watching your body change . No, im on my precor. Because youre still able to tweet and watch. I have to get off the precor to tweet. Buy Cycling Company where you can do live class . Its so exciting. Hip hop. Do the interview on the peloton. No, they dont have one. I do good whats called b roll. I have a real question. Youve done it. You can do these recorded rides. Thats right. Through italy. But the camera how do they do the camera work . It doesnt move up and down. Thats the secret. It looks like a drone or something. People see it coming, they get out of the way. Take the classes. In the studio. Where they actually do classes. I wanted to see how they were made. And i tried to get in the video so i could watch the class and then see how i did from the other side. It was really but im a weirdo. Im just telling you, that this is i know people have seen the commercials but this is an ecosystem. City starts to go pro with the cell. Thanks for nothing. But this is a very inventive, disruptive way. And if i were soul cycle, fly wheel i would be worried. Great companies. Lori b. At fly wheel and rachel w. At soul cycle are so good. Only if their classes were jammed would you get on a peloton. Listen, i have a video question, though. Thanks, jim. Always fun. Sneak in a quick break. As soon as the fed chair begins taking questions, well take you there. When she gets to q a, thats the fun part. Were back after this. 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, its easy to turn your vision into action. Its your trade. E trade. On a perfect car, then smash it into a tree. Your Insurance Company raises your rates. Maybe you shouldve done more research on them. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. And if you do have an accident, our claims centers are available to assist you 24 7. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. Welcome back to power lunch. Janet yellen is delivering her prepared remarks that we already gave you. She confirmed the march rate hike odds rise was justified. Not Much Movement on the back of that on yield. Current market moves, fractionally down on the day. Story of the week is resilience in the face of rising expectations of fed rate hikes, banks the best performer at this hour. Were back in a couple of minutes. You totanobodys hurt, new car. But there will still be pain. It comes when your Insurance Company says theyll only pay threequarters of what it takes to replace it. What are you supposed to do . Drive threequarters of a car . Now if you had Liberty Mutual new car replacement™, youd get your whole car back. I guess they dont want you driving around on three wheels. Smart. With Liberty Mutual new car replacement™, well replace the full value of your car. Liberty stands with you™. Liberty mutual insurance. Welcome back. Youre looking live. Fed chair janet yellen preparing her remarks. When she gets to the q a, we will go to that live as it begin. Maybe the rest of the year looks like. Thats where investors should be a little more concerned b this one is pretty much expected. If there are going to be two more rate hikes that will impact a lot of equity prices especially. Ron, do you think rate hikes can destabilize the market or is it more political policy that are the risks . There are risks on both fronts. With Liz Ann Sonders at charles schwab, she did some studies on the pace at right hikes. Stock market has had a favorable response. If the fed quickens the pace in the second year, it means the economy is Strong Enough to withstand it. That could be a good sign insofar as the fed is now normalizing rates. Whats the go slow rate versus not go slow . They raised 425 greenspan . How long ago was that . Greenspan to bernanke. Owe long ago. That was going into the crisis. Right. The fed may screw up and, therefore, everything will come crashing down or maybe the economy is doing so well that the fed can raise faster than we expect and everything will be just fine. Which do you believe it is . I believe the fed thinks the economy is getting the strength it needs to absorb those rate hikes. Like ron said, go slow mode, i dont think it will be that impactful. If they want to rush this into place and put it in, say, in the june meeting and then into september or maybe like a shorter timeframe, that could have some impact. Im not saying that its going to knock the u. S. Economy off its rails. But i do think its going to impact corporate earnings. Its going to impact a lot of things. Its going to be i think they should go slow. And i think they should let personally, i felt they should let the economy build up some momentum before they have the start of doing anything. Even in the face of this market . Right. You have momentum. Look at the way the economy turned, the way the markets turned, starting for the economy in august and more so toward the very end of last year, were seeing an accelerating economy domestically and globally. And prospects of fiscal stimulus if theres no problem for the Trump Administration to move forward on tax reform and other items, the fed is fully justified. Quite a strong correlation between bond yields and stock moves, 2. 5 seems to be the sort of ceiling on the ten year. Does that limit stock upside until that breaks higher . It depends how quickly it breaks higher. If we were to suddenly shoot to 3 , you would have a pullback thats somewhat meaningful. At the same time to the extent the yield curve flattens that may take air out of the financials. Thats not my favorite way to play bank stocks but histo historically, in recoveries, Interest Rates and stocks tend to move up together gently. When one moves too much faster than the other, thats when you start running into problems. To look what happened to the market, ron, since the election, to me it appears the biggest risk is if there is a failure on Corporate Tax reform. Absolutely. I mean, if that if all these the market clearly doesnt believe all these headlines about all the risks to the trump agenda. But if it starts to believe that maybe Corporate Tax reform doesnt happen that, to me, seems to be the biggest problem. I wrote that on cnbc. Com. Thank you for having read that, i think, is where youre going with it. Right. Softball. If you dont get to were almost there, by the way, baseball season. If you dont get deregulation, tax reform, no increase in military spending, all these stocks have run up, all these things happening. 10 to 12 increase in corporate profits in the coming year. That, too, is a double whammy. Under the market. Yeah. Snap has gone well, peter, and going well on day two. Do you think weve seen a wave more of ipos hit the market . I would think so. One of the reasons you havent really seen that many tech ipos, these companies are being very well funded on the west coast and east coast as well. I think the timeframe of Companies Going public is spread out. It used to be a much shorter timeframe. Once they got some legs under them, they would start looking to go public. Now they have capital. They have cash coming in from venture capitals and private equity. It becomes a point of, you know, timing is a little bit longer out. I do think this ipo has definitely helped some companies that were on that on the edge, trying to decide if they were going to do it or not. I think its a good time for it. They can also exit by selling themselves instead of going public. Yeah. Investment today from a company were familiar with. Ron insana, peter, thank you very much. Janet yellens q a, seconds away. Well be right back. I work with people everywhere on sea, on land, and in the air. Inspecting towers way up high avoiding turbulence in the sky. Personalizing treatments with dna and recommending who should play. A dress that thinks, which crops to grow, tax prep to help keep payments low. You can find me on an oil rig i answer questions small, and big. Hello, my name is watson. I love to see businesses that just started from ground up grow into further success. It just feels good to know that im helping someone else. My first goal is to learn about their business, what theyre currently doing in their advertising. Pull some research, create a great story. Trying to figure out some way of building some kind of trust in a very quick moment. You have to love to work with people. Our goal, without a doubt, is that all customers are satisfied before they leave. Lets listen in. Also have spillover effects and spillback effects to our own economy. So, we do talk regularly. We confer on the Global Economy and try to provide one another with a clear understand iing of our changing economies and how were likely to address them. We definitely talk regularly. We meet through forums like the g20, g7 that include bank governors, finance ministers, regular meetings of the Imf World Bank in washington and Central Bank Governors meet regularly together at an Organization Called the bank for international settlements. But while we try to improve understanding and Exchange Information and opinions, i would not say that we generally try to coordinate policy and certainly we dont generate policy actions. In most cases that would violate our own governmental mandates. There certainly is close coordination and discussion. So, in your opinion, as you look at the changes that were seeing in labor force, baby boomers retiring, millenials coming in, what will the effect be on Economic Growth . What can you do from a Monetary Policy perspective . So, theres not very much that we can do to effect growth. There is a tendency in this job market for people who may have become discouraged and dropped out of the labor force because they felt there were inadequate job opportunities. There is some tendency for people to join the labor force and to get employment. And we have certainly seen that in this recovery. Unfortunately, the underlying trend in Labor Force Growth has slowed substantially. The most dramatic impact comes from the baby boomers entering the retirement years and, although more recent cohorts of retirees are working more and participating in the labor market, more than earlier cohorts did, still there is a marked dropoff in Labor Force Participation when people reach retirement years. Growth and labor force has slowed. I would say immigration contributes a substantial amount to Labor Force Growth as well. So the population growth with these demographic trends and immigration are the main ones shaping Labor Force Growth. And thats part of the reason why our economy, it looks like its potential to grow at this point, unless theres a pickup in Labor Force Growth or activity, looks to be in the neighborhood of a little less than 2 , which is really lower than where were accustomed to by historical standards. Thank you. So lets talk about the tradeoff between waiting and anticipating in fiscal policy or waiting and then responding with Monetary Policy. Should the fed take action in participation of changes in fiscal policy or wait until they are in effect and then see the impact on the economy . Just what policy changes will be put into effect, changes that affect fiscal policy, its size, composition, timing is likely to be. How thats going to affect the economy. I think most of my colleagues and i have decided that we should simply be patient and wait to see what happens and alter our Economic Forecast and views on appropriate policy until we have a clearer understanding. And i think if you think about my comments today, ive hardly referred to possible forthcoming fiscal policy changes and tried to explain what i see as the appropriate evolution of policy based on the trends we see in our economy right now. Theres nothing that i said that would be a response to possible impending policy changes. But let me emphasize that fiscal policy is only one of many factors that affects the economy and there could be other factors, shifts in developments in the Global Economy. So, fiscal policy and other policy changes could matter but were going to wait to see just how that evolves. So, be a bit patient. But as you think about all those other factors that impact the economy, what would your project would be the biggest challenge to the u. S. Economy in the next five years, for example . Actually, you know, the Global Economy has been, as i indicated, a very positive at this point looking at the Global Economy, at least over the next few years, i see the risks as more balanced than i have in some time. The european economy is growing at a more solid pace than it had earlier. Inflation is moving up some. Data on growth on japan has been somewhat positive. China, although its growth has been slowing from the breakneck, doubledigit pace it enjoyed earlier, and thats long been expected, its economy partly, as a result of chinese policies, has continued to grow and management of its currency has been better understood. Of course, brexit remains and what will happen with european integration is an issue thats a ri risk. China, while its growing at a solid pace, has seen a very rapid growth in credit and increase in bad debts and developments in real estate prices that do pose challenges. You know, my guess is that the tools are there for policymaker s to deal with these challenges. But they are risks that affect with their outlook as well. You deal with a myriad of stake holders on a daily basis. We just talked about some of the forces, the impacts, internal and external. What does the day in the life of chair swranet yellen look like . Can you take us through . So a typical day in the life of chair yellen has many hours blocked off that say meet with staff, meet with staff, meet with staff. So we have a wide range of responsibilities. Weve talked about Monetary Policy today. But we actually have many other responsibilities. And, importantly, responsibilities in supervision in regulation, in consumer and Community Affairs and the other governors and i, we are privileged to have a wonderful staff, both at the board and in the reserve banks, highly professional staff, highly motivated staff, staff who are highly devoted to public service. And we meet with them to discuss a wide range of responsibilities in our purview. Days like that i really enjoy and that is what is the most fun and rewarding part of the job. But there is lots of other stuff. Im responsible with meeting with congress and making sure that members of congress understand the issues facing the fed and the economy. So, a typical day might have a meeting with a member of congress, one on one meeting. I testify periodically. I have press conferences after our regular fomc meetings. We have wonderful Federal Reserve system with operations throughout the country and i talk to and confer with my colleagues in the reserve banks. And i meet with other government officials. Its been a longstanding tradition that the fed chair and treasury secretary meet on a regular basis. The board of governors meets regularly with the council of economic advisers in the white house. So, we meet with members of the executive branch, with congress and lots of staff meetings. I should say we have stakeholder groups that come to visit us. As david mentioned in his introduction, he served in a group called the federal advisory council, which is a group of banks representing each of the 12 Federal Reserve str t districts. And we meet once a quarter and have discussions about regulation, supervision, revision that we discuss with this very able group we meet with home builders, community groups, representatives of labor. We try to meet with people with many different aspects of the economy. We look at lots of government statistics in evaluating the economy. But the firsthand contact that we have with individuals who are operating businesses and households in the labor market, theres no substitute for that kind of context. So typical day will have meetings with outside groups. Then theres dinner time, right . We talked a little bit about that before. Many of you may not know that chair yellens husband is actually a novel winner in economics and that their son is also a professor of economics. So, how do discussions at your dinner table go like . Also, what happens when you dont agree . Do they give you advice, too . So, you have guessed correctly that when three phd economists eat dinner together, the odds are pretty good that economics are going to be an important topic of conversation. Now my son lives in england now so theres a time difference. But as it turns out, he will often call us at dinner time and we will set the telephone on the table as my spouse and i eat dinner. And so even though he is far from us, we continue quite frequently to talk to one another about topics over dinner. Fortunately, my son does not do macroeconomic. He does microeconomics. That gives me a little bit of relief. But they have lots of opinions about my business. And they dont hesitate to share them. So im sure they do. Now, can you take us a little bit to meet little janet yellen in brooklyn . Im sure you were not 6 or 7 and said i want to be the chair of the Federal Reserve. When people asked you what you wanted to be when you grew up and i would not have said i wanted to be an economist. I was interested in math and science. When i went off to college i anticipate i might well major in math. I took a course in economics in my freshman year and that was love at first sight. I really macro or micro . I took a survey course that included both. Okay. And i really liked the form of reasoning. I liked the fact that economics is a logical subject. Peoples lives, how to make them better and understanding the kinds of developments. And, of course, my parents have lived through the Great Depression and their discussion of that experience was part of what was my childhood growing up. So i knew that it was possible that there would be economic events that could cause massive disruption to an economy and great harm to many individuals. My love of math and economics found a great marriage and i have enjoyed using those tools and working on the problem ever since. Since this question came from so many people in the room can you comment on the strategy for improving the u. S. Balance sheet . The strategy for improving the u. S. Balance sheet . Theres the profit Balance Sheet and also the government Balance Sheet. I will assume that you mean that the question pertains to the government Balance Sheet. Correct. So at present, the u. S. Debt to gdp ratio stands at around 75 . By global standards, thats a high but not frightening level. Its not a level that is associated with financial crisis. But it is a bit higher than the financial crisis. It was a long crisis. It depressed the economy. Revenue was depressed and social payments, transfer payments rose and because at least for part of the time, there was active fiscal policy that provided stimulus so it rose quite a bit from before the financial crisis to now. Now at this point, u. S. Fiscal deficits, federal fiscal deficit s are at a level that should keep the debt to gdp ratio roughly constant for the next five to ten years. So, its not moving down under baseline projections. And its also not moving up very rapidly. But after that, as the baby boomers retire and we see an increase in medicare and Social Security payments as a share of gdp, all the projections this is not new. This is something we have known for at least 20 or 30 years. The projections and its mainly because of health care expand turs because of medicare with both an aging population and a trend in which medical prices have swrenl been rising more rapidly than the price level in general. We see an upward trend in debt to gdp ratio. Thats an unsustainable course for the economy. It requires some changes in either entitlement spending or the tax system to address it. To me, its very unfortunate. Weve had 20 or 30 years to prepare for this by making changes. These are not pleasant changes to have to make. And really, nothing has been done about it. That is a trend that exists that will eventually have to be dealt with. So to my mind, that is the Balance Sheet challenge that people should be thinking about and recognizing is there and requires attention, eventually. Thank you very much, chair yellen. On behalf of our boards, our members and our guests, i would like to thank you for an extremely insightful conversation and bringing this weather. Thank you very much. Thank you so much. Chair janet yellen wrapping up the q a session after her economic out look with executives in chicago. More there than many wanted to know about her family life. Steve liesman, beyond the original thing you reported from her speech about her anticipation of whether or not well get a fed rate hike in march, anything else in the q a that would affect Monetary Policy and our thinking for the markets . Not really, michelle. What is remarkable to me i think we are witnessing a remarkable story here. Whats happened is watching the markets reaction to what chair yellen said. She said as definitively as anybody that i can remember there will be a march rate hike. She confirmed the three rate hikes and said well have faster raising the confidence in the march rate hike which you see in the 83 probability up 10 points. Essentially you got no change in the twoyear. And the stock market has been around the zero line. It was just a little green. Now its a little red. The main point there, not a lot of reaction. Yellen has done a good job of threading the needle, more confidence in the fed rate outlook but not making the market think theres going to be too much. She has this balance going here, fascinating to me to see the market essentially shrug it off. We were down a couple of basis points from before when yellen was speaking. Then you had fisher come along at this conference here and say you know what . If people are out there making a campaign to say theres a march rate hike i want to be associated with those remarks, the vice chair. Theres that 85 probability. Some people asking the question why isnt it even higher . One of the risks out there will be the report which comes a week from today and maybe some of the other data. Very little now to derail the march rate hike. And the fed chair saying those three rate hikes are on track for this year. Michelle . Steve liesman joining us from chicago, thank you very much. Coming up on power lunch, 5 trillion reactions to chair yellens comments and are businesses taking the same risks that backfired before the financial crisis. This is a great story. High school that made millions off the snap ipo. Well talk to the principal of that school. That and much more on power lunch. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Welcome back. Lets get reaction to Janet Yellens comments. Rick rita, cio Global Fixed Income at blackrock. Rick, let talk to you first. She essentially just confirmed a march rate hike. Very little reaction in the bond market. Massive change in direction from a can couple of weeks ago. Exactly right. Markets have started to anticipate. In fact, it was interesting wednesday when the equity market traded up alongside of it, which is not an unnatural dynamic. Markets have started to anticipate where youre seeing the pressure is longer on the yield curve, out to the 10year, 30year space. Because the front of the yield curve has started to move and react what the fed is rightly doing and creating what will be a move in march and probably three or four moves this year. Jamie dimon said, quote, someone is going to get hurt when bond yields rise more meaningfully. Does that happen very soon now with these rate hikes on the cards . Do you agree it will cause some significant issues . Rate hikes, if you look at bond funds, most investors will be fine. As long as they stay invested and their timeframe is longer than the duration of the fund. I worry more on the equity side. The bond market seems to be more rational right now than equity markets. Weve all been justifying these high pes given historically low rates in the environment. Now that rates are going up you would expect pes to be coming down. Hays not quite the case. Because the economy is going to be so strong, because of all the changes. Right . It may well be that growth could be amazing. Huge. But youre still dealing with huge debt issues in china. We havent really addressed brexit yet. Europe hasnt addressed brexit. Productivity issues in the u. S. You have to get everything going right coming out of washington. It better happen sooner rather than later so that the economy can catch up to the market. Weve seen the yield curve flatten a bit over the last couple of weeks. Whats your take on that . Will that change in shape continue . You priced in an awful lot of the what the fed will do on the front end. Curve has flattened an awful lot. I would say thats right. That comment of people are going to get hurt, how do you evolve your portfolios and own more, spread assets or inflation protected assets. That will be determined where the downside of fixed income going forward. Where do you own fixed income will be more important than just how much fbied income you have. Dont just pose the question. What do you do . First of all, one thing one thing i agree with a bunch of what time said. If you go and track when the bank of japan was more hawkish and how the markets reacted positively because the Banking System moves more aggressively, more effectively, Pension System is more in equilibrium. Same in the u. S. I think this is the right reaction. So take that. What do you do with fixed income . Some of the credit markets will continue to do well. We think emerging markets as a tactical part of the portfolio has done extremely well and should continue to do so. Some inflation protection in the portfolio and tuckly like assets in the two to fouryear part of the yield curve that dont have a lot of Interest Rate exposure to them. Rick, tim, gents, thank you for joining us. Jamie dimon, overall, has been very, very bullish. Just a side point on the bond markets. Hottest time of the year for home sales are around the corner. Buyers are making the same risky bets just before the housing crash. You have to hear about this particular story and you will, when power lunch returns in a couple of minutes. Here is your cnbc news update at this hour. Joining forces to denounce antisemitism. Rallying with Community Leaders demanding federal action after several antisemitic incidents throughout the country. Six years after rth quake and tsunami caused meltdowns at the Fukushima Daichii plant. Staterun newspaper of china, the peoples daily, is taking inspiration from President Trump. In response to allegations that a human rights lawyer detained in the country had been tortured in custody, the newspaper tweeted foreign media reports that police tortured a detained lawyer is fake news, fabricated to tarnish chinas image. Nashville zoo, welcoming a clouded leopard cub, the first of his species to be born from artificial insemination. Using frozen sperm. Theyre among the rarest cat species in the world. Michelle, back to you. Everybody go oh. Yes, exactly. I had to switch it out from pandas. I had no panda today. We went to the clouded leopard. I hate clouded leopards. Oh, would you stop it . Thank you, sue. Give me a regular old leopard. Dont move. Well have more on the markets after this. Plus, well talk to the principal of a high school that invested in snap chat and made a ton of money. Dont move. Over our neighbors 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 . Its you. Everything in one place, so you can travel the world better. The market. Redict but through good times and bad. At t. Rowe price. Weve helped our investors stay confident for over 75 years. Call us or your advisor. T. Rowe price. Invest with confidence. What are you doing . Getting your quarter back. Fountains dont earn interest, david. You know i work at ally. I was being romantic. You know what i find romantic . A robust annual percentage yield thats what i find romantic. This is literally throwing your money away. I think its over there. That way . Yeah, a little further up. What year was that quarter . What year is that one . 98 thats the one. You got it nothing stops us from doing right by our customers. Ally. Do it right. Lets get out of that water. A new report shows home buyers are once again making the same risky moves this a will the of them did before the crisis. Reporter ever since the epic housing crash, homeowners have been historically conservative with their home equity. Now that prices are rising so fast, homeowners are changing their home again. Two signs worth watching. Home equity lines of credit. Usually second loin loans that allow you to pull cash out of your house when you need it. They dropped dramatically but now theyre up to the highest level since 2008 according to moodys analytics. More cash out refinances and down payments on recent home purchases are dropping. Before the last housing boom, it was down over 7 . Then dropped to 3 , then shot right back up to 7 during the recovery as lending tightened up. Now payment down payments are s again as more lenders offer low down payment products. Add it up and homeowners are leani leaning to more leverage again. Home equity is still rising, due to rising prices. If prices are overheated and ripe for a correction, homeowners could see a pinch again. Prices wont go down nationally but increases could shrink and some markets could actually go negative. Back to you guy. Diana, thank you so much. Lets bring in president and ceo of the independent Community Bankers of america. Are people being stupid again, camden . No. Not yet anyway. The old hennie wyman line. Home equity lines of credit were down in the fourth quarter. Down payments are a little lower but not like prerecession levels. In relation to what . Were not near ly to where the o go days of early 2000s were. Were in pretty good shape. Fair enough. Fair enough, camden. I think it was ray dalio, Legendary Hedge Fund manager who said something to the effect credit is borrowing from your future self. Correct. Whatever the ratios, is there ever a good time to use a home equity line for anything but the most dire emergency . You shouldnt get wild on home equity lines of credit. Because you are eating into your future. I dont think that thats out of control yet. And i know its not out of control in the Community Banking sector, which is still using very tight lending guidelines. When we look ahead in terms of potential deregulation to come from the Trump Administration, camden, what particularly are you looking for . Theres talk we might see things like definition within the vulker rule change. Would that upset you . Were more focused on what we can do for Community Bank lending and Community Banks. We would like to see qualified mortgages be totally all Mortgage Loans held in portfolio called qualified mortgages under institutions under 50 billion. We would like to see some of the thresholds raised. Theres no the what thresholds . I dont know what that means. Threw out you threw out a random acronym. Home data mortgage act. We think that that doesnt make sense for Financial Institution that maybe originates only 2,000 loans a year. If the bank has assets undered 50 billion excuse them from having to do all that paperwork and make only the larger banks do that, is that what youre saying . Absolutely, yes. Are you fearful whether this will happen or not . Are you envious that they have such representation in the room, whether its gary cohn, Steve Mnuchin or jamie dimon, is that unfairly weighted tour the bigger banks . Community banks have a seat at the table. We have strong bipartisan support in the congress. I have three Community Bankers meeting with President Trump at the white house. So, we do have a seat at the table and our voice is being heard. Yes, wall street always seems to have a seat at the table. So do Community Banks because we are vital to this nations economy. We originate over 60 of all Small Business lending comes from Community Banks. Small businesses create two out of three new jobs in america. All of that is being financed by your local Community Banks and, believe me, washington policymakers know that. Before we let you go, quickly, this trump meeting, did you ask for it and get it or did he demand you guys come in . The white house reached out to us. What did they want to talk about . Small business lending. They want to talk about Regulatory Burden on Community Banks. They want to talk about the icba plan to help spur more lending at the local level. Do us a favor, cam. Come back on and let us know how the meeting went. I will. Be happy to. Fascinating. Camden fine, thank you. Have a good weekend. Thank you very much. Technology certainly has been tops the past few months. Are certain parts of the market starting to look a lot like 1999 . Well lay it out. You decide if you want to sell. Coming up on trading nation. Ectg our brains so we can share our amazing trading knowledge. Why dont you just go to thinkorswims chat rooms, where you can share strategies with thousands of other traders . Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. Attention homeowners age sixtytwo and older. One reverse mortgage has a great way for you to live a better retirement. Its called a reverse mortgage. Call right now to receive your free information kit with no obligation. It answers questions like. How a reverse mortgage works, how much you qualify for, the ways to receive your money and more. Plus, when you call now, youll get this magnifier with led light absolutely free wh you call the experts at e reverse mortgage today youll learn the benefits of a governmentinsured reverse mortgage. It will eliminate your monthly mortgage payments and give you taxfree cash from the equity in your home. And heres the best part. You still own yohome. 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Get symbicort free for up to one year. Visit saveonsymbicort. Com today to learn more. Is princes legendary 1999 song, there are a few similarities in the market. Im not trying to scare anybody, matt, saying this is pets. Com all over again. Snap chat may turn out to be a Great Company but you point out there are some things in the market, to quote another 90s song, that make you want to go hmm. What are they . Valuations, which, of course, are huge alltime highs. Not theyre not at alltime highs. Markets overbought. The ii data, investors intelligence, over 63 , highest number since 1987. We do have signs that things are getting frothy. Matt, that doesnt mean were necessarily going to fall either. There is part of the market where its like alltime highs. Nowhere to go but down. You have to make newer highs to make newer highs at some point down the road. No . Absolutely. High levels of leverage in the marketplace. Thats been going on a couple of years and could go on for longer. Look at some of the tech stocks, theyre getting very extended in terms of a shortterm basis. Longer term, the qqqs, almost a 45 premium. But it had to get over 40 of its average. So, we could still see more upside. Ari, our viewers, if they own e etf, should they buy, sell or wait for a downturn to rebuy . They should be sticking with this. Yes, we are near term overbought. But all of our indicators are pointing to very healthy, bull market activity. Thats the important point here. We do expect higher prices through the course of 2017 and technology in particular. Its been very broadly based. Semis, internet names, hardware coming back to life as well. Signs of a healthy sector. Rallies that usually continue. If you look at it relative, back to relative levels from 2002, that relative breakout suggests to us that tech remains leadership through the course of 2017. There you go. Tech remains leadership. All right. Ari, matt, just take note. There are some things out there. Matt and ari, thank you very much. For more trading nation without song references head to tradingnation. Cnbc. Com. Well go live to the high school that made millions of dollars in the snap ipo. The principal and the man who made the investment on the schools behalf when power lunch rolls on. The future of buness in new york state is already in motion. Companies across the statere growing the onomy, with the helof the lowest s in decades, a tanted workforce and worldcls vation like in plattsburgh, where the mostanced transportation is already en route. And in corning, where the mostanced tranwherthe future iseady en materializing. Let us help grow your companys tomorrow today at esd. Ny. Gov on a perfect car, then smash it into a tree. Your Insurance Company raises your rates. Maybe you shouldve done more research on them. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. And if you do have an accident, our claims centers are available to assist you 24 7. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. Despite all the naysayers, shares of snap rallying again today. Our parent company, Nbc Universal making a big investment in snap. Julia boorstin has that story. Thats right, Nbc Universal, parent of cnbc, invested 500 million in snap during its ipo, part of a strategic investment in partnership, making them the only Media Company with a stake into the ipo. Such appeal to big media is its remarkable hold on millenials. 24 and under visited snap chat 20 times per day and spent 30 minutes in the app on average, which may make the stock more appealing to firsttime investors. Robinhood, stock trading out popular with millennials said 32 bought snap stock, behind only apple and amd. It appears that consumers may be swapping pacebook for snap. The day before snaps ipo, there were 54 more sales of Facebook Stock than the prior day. Its not just robinhood seeing this trend. Transactions on stockpile yesterday were 10 times their daily average all because of snap chat and 56 of users buying snap chat were millenials or younger. One millenial finance expert we talked to said they have low risk tolerance for the stock market and snap could drive an individual wave of new stock picking. Lets see. Viewers of cnbc, thank you, jewela. Lot of people made a lot of money on the snap ipo. One high school made a smart investment in 2012. Get this. That investment has now turned into 24 million. With us now is the pren aincipad president of that school, simon chu, st. Francis high school and barry eggers, he convinced the school to coinvest along with lightspeed. Have you here. Nice to be with you. Hi. Mr. Eggers, tell me how this happens, youre a parent of a kid in this school, right, and you go to them and say, i have a hot one here and you ought to coinvest with me . Well, you know, they put together a venture fund back in the late 90s and i was part of it in the 2012 time frame and still am, but at the time, i had gone home and my kids were sitting around the table with a bunch of their friends and they were engulfed in their phones and look at them wondering why they werent talking to each other and they were giggling an laughing and my daughter said have you seen this app called snapchat. I asked questions about what it was and what it did. My daughter said you know, we send pictures to our friends and they disappear. I asked her what kind of pictures. She said its funny goofy stuff between friends. And they showed me some examples. I asked them how much they used it and my daughter said i started using it about five times a day but now i use it 30 times a day and all the other girls nodded. Mr. Chu, listening to all that, and its a school with an endowment, lots of money, put in by parents, and theyre convincing you to invest in something that helps kids do funny pictures. How did that happen . How did it sit on the other side with the board saying yes to that kind of thing . You know, weve got an Amazing Community and some amazing parents who give us great wisdom. At the end of the day were a school, im a school leader, thats my area of expertise. Im not an investor. We really trusted in all of our parents who were on that Growth Fund Committee to send us really great investments to make and we were excited. Obviously this one worked out well for us. Simon, you guys have a wonderful school, i looked it up on the internet, beautiful facilities, and youre a that guy is roberts english teacher who sits on the cnbc news desk. I had no idea. Graded him too tough, got a cminus. Im kidding. You are a school of the holy cross. Will you be giving some of this money away . Well, you know, certainly were going to invest it in all the things we want to do in terms of our Strategic Plan and grateful we were able to complete that process in the fall after a ninemonth process and so weve got three areas that we want to invest in here in our school, our endowment which funds our Tuition Assistance and our Financial Aid programs and our faculty and staff to make sure they have the resources they need to get their job done, and also in our innovative programs and our building restructure. We want to make sure weve got the best learning environment possible for our students. The most important part is being able to fund our endowment and making sure the catholic, holies cross education is accessible to as many families and students as possible. Broadly and bringing in the broader light Speed Investment into snap but what percentage of the Overall Investment the company made, have you let go at the ipo and cashed in at the ipo and whats your plan with the remaining holding . I dont think i can disclose that. Were talking to mr. Eggers. Go ahead. Yeah. Sorry. I think thats disclosed in the s1, but i cant disclose what our plans are going forward. Were under a lockup period today. How about you, mr. Eggers you, mr. Chu . Are you going to hold on . You cashed in and made a ton with the 17 price. Its gone up quite a lot. Are you nervous or going to sell at any point . Were locked up as well for the remaining one third of our holdings and after the lockup, ill turn that same group of really smart people who got us into this investment and ask for their advice and figure out what were going to do with it were not investors here to sit and play the game and check the stock markets every day. We got a job educating our students here at Saint Francis. Are you the richest high school in america now, do you think . I dont think so. No . Im pretty sure were not. Are there high schools that have a bigger endowment a than 24 million or more . Absolutely. Really . I didnt go to one of those. Lots of schools with a bigger endowment, yeah. The at high school level. Were very blessed. At the high school level, absolutely. Wow. With all due respect to snapchat which nbc is invested in, facebook, sort of my space, facebook the next myspace and twitter, whats the next snapchat . Like the money has been made, what are you investing in now . The next cool thing . Im watching what my kids are doing because, you know, young people are the early adopters here and Consumer Tech has become pop culture, so i watch what theyre doing. Theyre still doing snapchat quite a lot. Theyre addicted to it. They are. My 13yearold if i want to reach her i have to snapchat her. But shes spending time on something called musicly. There you go. If you watch what your kids are doing youre going to answer the question for yourself. Thats what i do and im glad i listened to my kids and watched what they were doing and had a chance to get ourselves and Saint Francis to be a part of the snapchat story. Do you give the children at the School Specific investment and stock lessons . No. You know, we really want our kids to foes cuss on their work here at school and get themselves a really great college. I think what we want our kids to know f you work hard, and good things will happen to you. If you work hard and do the right thing, good things will happen to you. This is a blessing for us at Saint Francis. An incredible opportunity. 330 million, hodgekiss. You have a lot of work to do, mr. Chu, if youre going to catch up. Throw a party for these kids or anything . Anything celebratory as a result of this investment . Im going to leave that to our principal to figure out. For us, were excited to get roll our sleeves up and get working on those tims in our Strategic Plan and find an opportunity to celebrate in terms of our faculty and staff. Our kids are just excited because its something they can relate to, something all of our kids use and theyre really excited about it. Were grateful barry gave us the opportunity to get into the investment. I bet. Was robert hum a good student . Simon . Hes sitting 50 yards behind us. Thats a little bit before my time. A little before my time. Thank you. Thanks, guys. Good to have you on. Simon and barry, congratulations. Aint america great. Thank you. Thanks. Follow what your kids are doing. All you need is millions to invest and its easy to make money. With e trades powerful trading tools, right at your fingertips, you have access to indepth analysis, level 2 data, and a team of experienced traders ready to help you if you need it. Its like having the power of a trading floor, wherever you are. Its your trade. E trade check please. So im picking out the biggest money gainers of the Investment Banking side from the snap ipo yesterday. Here are the figures, top of the list, morgan stanley. Morgans and Goldman Sachs that really won this battle out, 25 and 21 million the fees they earned. Jp behind that in terms of the big three u. S. Investment banks. Overall, this could spark a lot more ipos. Certainly. Congratulations to a high school out in california for making it big. I think thats a fantastic story. I hope they can make it through another tough mountainview summer. Thanks for watching us. Have a great weekend. Snapchat away. Closing bell starts right now. Welcome to the closing bell, everybody. Im kelly evans at the new york stock exchange. That would make me bill griff fets. After the 44 gain yesterday shares of snapchat, the parent the parent snap, soaring again today, up 12 . We have more on whats behind the move and which investors are buying the stock right now. Airlines are popping on reports that the department of transportation is suspending obama air regulations that would have required more transparency over fees. See gains in the range of one to