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tv   Power Lunch  CNBC  April 3, 2017 1:00pm-3:01pm EDT

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>> nestle's, roche, anheuser-busch is in here. $2.68. >> sweet. >> that is a great idea. >> thank you so much. >> guys, love it. "power" starts now. i'm melissa lee. here is what's on the menu. hitting the skids. auto sales tumbling, is there trouble brewing in auto land? we are digging in. an incredible set on tesla to tell you about. are too many suppliers putting all their eggs in one basket? the painful looking chart that got us asking that question today and buy me some peanuts and crackerjacks and now a coke. mlb's big bet on bubbles on this opening day. batter up. "power lunch" starts right now. ♪
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and welcome to "power lunch." it is opening day for baseball. actually it opened yesterday, but here in new york the mets are playing in about 15 minutes against the braves. welcome, everybody. i'm tyler mathisen. stocks in the red to kick off this new quarter. right now the dow down about 74 points. the dow, get this, it's not seen back-to-back gains since the end of february. more than a month's time. meantime the nasdaq did hit a record high at the open. as you see right there it, too, is down about a third of a percent or 23 points. shares of panera spiking on reports of a possible sale right now. pamera is up. let's check. about 10% as you see there. brian? >> big move there, tyler. thank you very much. hi. happy monday. i'm brian sullivan. we have a jam-packed show coming your way. let us start with the markets and your money. bob pisani is on the floor of the nyse. i saw an interesting report that the first quarter was the least
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volatile quarter for the dow jones industrial average in more than 50 years. the dow on average moved only about 30 points per day. it looks like we're starting the second quarter with a little more volatility. >> reporter: a little more but volume is still on the light si side. that may continue. we're down but well off the lows, brian. we were as low as 2343. earlier today. we're almost ten points higher on that. volume is still on the light side. not a lot of rush to the exits even though the market is down. what's moving the market? two things going on. number one is this battle we've got between, let's call it the hard versus the soft data between, for example, auto sales which were disappointing and the ism number which is a soft data point down a little bit but still very, very robust. that battle has been going on for a while. then that washington calendar and the trump agenda going on here. so hard versus soft data and the washington calendar used car sales we talked about this before. prices were down. the overall issues have been a
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big problem. let me show you what the major indices are doing right now with the nasdaq 100 down, the s&p 500 on the down side, but the russell 2000 biggest mover to the down side once again. that's been a problem. gold up, bond yields are down and the vix up as well. guys, back to you. >> thanks very much, bob. i'm michelle caruso-cabrera. here is what else is happening at this hour. russia's anti-terrorism officials say they found and deactivated a bomb at st. petersberg subway station, this after an explosion tore through a subway train in st. petersburg earlier today. back here in the u.s. some 40,000 homes from texas to georgia are without power after a string of powerful thunderstorms ripped across a large part of the south. and two more democratic senators are vowing to block president trump's supreme court pick. senators mark warner and dianne feinstein say they will vote no on neil gorsuch's nomination, meaning the democrats could have enough votes to block a senate vote unless the republicans
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decide to do what they call the nuclear option, go with the 51 version. automakers reporting monthly sales results largely disappointing. we'll dive into those in a moment. check out shares of tesla, the stock hitting an all-time high after record deliveries last quarter. elan musk reporting within the past half hour, stormy weather in shortville. and here's a staggering stat, the market cap of tesla a 14-year-old company has surpassed the market cap of 113-year-old ford. cnbc's phil lebeau is with us with the story. phil? >> reporter: and when you compare them in terms of profit and losses there's no comparison. ford making $9.4 billion. tesla has not reported a profit but the sales numbers that the company reported over the weekend, that's one more factor behind people saying, you know what, i think it's time to push the stock even higher, at least tesla is feeling that way delivering more than 25,000 vehicles in the first quarter better than most analysts expected. by the way when you look at tesla's deliveries for the full year remember that they have not
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given guidance for 2017. they delivered a little over 76,000 last year. what they have said is that they expect to deliver at least 47,000 in the first half of this year and they appear to be on track to hit that. so as you take a look at shares of tesla over the last year let's once again put this into perspective. tesla sold 76,200 some vehicles last year. ford sold 6.6 million vehicles last year. and yet tesla shares now the market cap of the company now higher than ford market cap and, as you mentioned, melissa, elon musk basically taunting the shorts out there saying stormy weather in shortville. interesting day if you are a tesla investor. certainly a good day if you are a tesla bull as they inch closer to $300 per share. >> if you believe that the future of cars is self-driving cars, they seem to be the most advanced at this point, right? that has to be some of the
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thinking there. >> reporter: they're mopping the leaders. it's hard to say who is the most advanced in terms of the future it technology, michelle. they certainly are among the leaders in terms of the work that they're doing into autonomous drive vehicles. >> and certainly mind share. >> reporter: the shorts, absolutely. the shorts have been in stormy weather but if tesla sells 100,000 cars a year, it has a $47 billion valuation, that values tesla at $475,000 per car sold. gm is valued at $5,000 per car. i'm not making a case for or against tesla. i love the product, but you can understand why the shorts could potentially make the valuation argument. >> and they have made it for the past $100 a share. it's been a tough one. and that's why elon musk is out saying, you know what -- we've had a number of shorts on our program. short tesla for a long time. not sure what his position is at this very moment in time but he
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has been a vocal critic for valuation. >> i think the appropriate it term is road kill for the shorts. the big three monthly auto sales numbers across the board are out. what is your takeaway? >> reporter: they're not very impressive. a couple of things to keep in mind, we knew that march -- it was a weird month compared to march of last year but the numbers as you take a look at the major automakers, with the exception of ford, they came in lower than expected. gm was up 1.6%. the expectation close to an increase of 10%. keep in mind a number of automakers did cut back on their sales of fleet vehicles, vehicles that go to rental car companies, corporations, et cetera, they're the less attractive of the new vehicle sales out there. so that's part of the factor that's here. the other thing is that you're looking at a market right now where you have used prices falling. so for people going out into the showroom might sit there and say why should i buy new when i have a three-year-old vehicle coming off lease. cutting into the profit share or profit margin and you have
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inventories rising. general motors inventory, what, well over 90 vehicles, 90-day supply, i should say, those are all those factors that weigh on the automakers when you look at march sales. again, we expect the pace when it comes in a little bit later today to potentially be under $17 million. the latest estimate i saw from one analyst was $16.85 million will be the march sales rate. keep in mind what you're looking at on that wall there, that's full year annual sales. as of right now the pace for 2017 is going to be about $17.4 million, $17.35 million. time to catch up to where we were last year. not a huge falloff. >> phil, thank you very much. here is a bigger question about the auto industry and the economy in ygeneral, is that seven-year auto boone coming to an end? dave, the numbers are pretty
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clear. we haven't grown from 2015 to 2016 and we may contract this year. but with the average age of a car on the road at about 11 years old, can you make an argument that peak auto is not here yet or do you believe it is? >> i do believe it's here. i think 2016 was the top. what i've been telling clients, though, it's not an immediate peak and then crash. it's more sitting along the top probably down a little bit. i'm looking for low 17 million for the full year. that's not a reason to panic by any means. it gets tricky in the cycle. you can reduce volume and it looks great on sales day every month. it's about profits not market share. that remains to be seen. volume wise down 1.5% for the year and looks like in march so far. >> to your point, dave, incentives have been very high. the most recent that i read for the overall industry is that in
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march it was 10.4% of the sticker price, incentives were, and it crossed that barrier. in terms of the number of days a car will sit on the lot before it's sold, the highest level since 2009. those are scary statistics. that brings back memories of the financial crisis just days afterwards. so give me a sense where we see the auto industry right now. >> incentives have creeped up. you mentioned looking at it as a percentage of adp, you have to factor in the mix between light trucks and cars and that's favorable for the industry despite us topping out so that gives you a little more wiggle room on dollars spent on incentives without causing your profits to go in the tank. these are still very healthy levels even if we fell below $17 million that's not a recession by any means. recession is more like $17 million. it's a data point to watch. >> what explains the slowdown? you have consumer confidence.
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everybody is confident. >> fair point. >> is it tapped out? >> i think so to a certain degree. 2016 was the seventh straight year of growth and then i think phil a minute before i went on the air talking about you supply -- that supply is very much an important number that's going to -- it impacts both new and used sales because as you've gotten more supply that makes consumer's trade-ins worth less but it hurts sales which is 30% of new vehicle sales which i've argued for a couple years is inflated and was going to eventually cause new vehicle sales to plateau out because the finance arms don't want to take on that residual value risk if they keep up with the leasing. you've seen it in toyota's numbers. >> dave, great speaking with you. shares of imagination technology is down more than 60%.
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that after apple said it no longer needs their technology. what other apple suppliers are out there that are completely dependent on apple? let's get to dom chu with the story. >> reporter: this is an international story. no surprise there because they make their supply chain spans all over the globe. we asked a team of analysts at rbc that covers tech hardware, the more levered companies to apple and its supply chain. so, first of all, there's one company out there that does audio chips, that sort of thing, digital audio chips, sirius logic. according to his team about two-thirds of their revenue comes from apple. also sky works. about 44%, maybe less on estimates wise from them. sky works about 44% of their supply chain revenue from there as well. qorvo, broad cam chips as well 15% to 20%.
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if you look at the supply chain, a lot of companies are levered to this particular stock, apple, and these are some of the ones that have the most exposure. back over to you. >> thank you very much, dom chu. investors getting too addicted to the company now also? let's bring in michael who has an overrating. great to have you with us. >> good morning. >> i know you don't cover the supply side of it. to this point apple is trying to cons consolidate the number of suppliers it uses and bring some of that manufacturing in house which is why it's yanking that contract with imaginations. it makes sense given tim cook's background in supply chain but is that what you want to see as an analyst to have them bring some of these capabilities in house? >> i think it's it's a good move. they have in house r&d horsepower to do that and in general it can drive margins higher if you're able to in source more of those products. there are certain things they're not going to be able to make and
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have the roi related to certain components that it makes accepts to outsource to others. we think insourcing some components is a good idea. >> when you look at the iphone 8 and some of the developments and the features that are rumored to be part of this, are there certain kinds of companies or technologies that you think that's going to be part of this new phone and that could be an interesting thing to watch whether it be the ability to read 3d features better? >> we do look at significant changes to form and function for the iphone 8. a couple of things we would focus on is 3d sensing which can help with augmented reality or facial recognition. we are expecting, of course, a screen for the higher end version of the phone. remote wireless charging and other things.
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i think this phone will have more changes for form and function than we've seen of any iphone. >> i can't wait for wireless charging. i am so tired of cords everywhere. that's going to be fantastic. what do you make of this report that apple is trying to bundle showtime, hbo and stars to deliver through their apple tv unit i see reaches 5% of households. do you even care or is this still just a phone company? >> i guess right now we would put it in the category we don't care, but i would say look at apple today at 80% of revenue is tied to iphone between services which is almost entirely iphone related and the iphone itself. but when you look at content, it's an important part of apple's future. today apple tv, the device itself, is less than 5% of revenue, probably far less than 5%. i do think they'll get more real on content. today they only have an a a la
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carte service. an on demand library along with cloud and dvr. today they don't have any of those components. we'll see what comes. >> got it. thank you, mike. still ahead, millennials leading the way in one specific and surprising area in the housing market. why that could be trouble coming up. a major deal in major league baseball. will be the players involved be batting 1,000? live at citi field next. and at $4.95, you can trade with a clear advantage. fidelity, where smarter investors will always be. and at $4.95, you can trade with a clear advantage. [vo] quickbooks introduces and her mobile wedding business. she travels far and wide to officiate i do's. and quickbooks automatically tracks those miles. she categorizes with a swipe and is ready for tax time. find more than $4000 in tax savings.
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major league baseball and coca k coca-cola announcing a brand-new multiyear partnership that will make coke the official drink of major league baseball. mlb's president of business and media and sandy douglas of coca-cola north america. i guess you would say for coca kco co-la. when i ask you first, bob, with major league baseball they get some access to your digital platform they get to call themselves coca-cola, that is, the official soft drink of major league baseball but does it mean necessarily that coca-cola will be served in all of the
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ballparks? >> well, first of all, it's great to be here on opening day, what a great day to be at citi field. obviously we have a better job than you because i'm here and get to enjoy a baseball game. sorry about that. that's what we'll continue to do. each team picks its own partner and they have chosen coca-cola along with mlb. both fun things to do every day. not just with coke but with sandy. >> sandy, how long does this deal run? >> we've signed our agreement for five years today. we're thrilled to take our over 100-year partnership with baseball to the next level.
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part of a marketing passion for over 100 years. working with bob to take it to the next level. >> would you like to see coca-cola's logo appear on major league baseball uniforms, sandy, and then, bob, would you like to see it? >> up to the players and the teams and the fans. in the end where coca-cola likes to celebrate are the special moments of attending the game with family and friends. >> personally would you like to see it? >> i don't think so. i think baseball uniform look great the way they're made. >> are you open to that, to having coke or anybody -- ford -- >> you can't be a great brand or activity unless you evolve. that may be too much evolution but we'll see. under armour to be our partner
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on the field. i think we have to do first things first. we'll take a look at that well down the road. >> on a different topic, this may not be for you, i took my daughter to her first baseball game her last year, my beloved angels against the sox up in fenway. about the sixth inning she wanted to go because she was bored. can we speed the game up? it's gotten faster and i know you will be talking today or tomorrow about it, how do we get it faster for the short attention span generation? >> well, i think the great thing about baseball is whether you watch it for two or three innings or the whole nine innings it's enjoyable. these are the best athletes playing the greatest game in the world. you're right. the commissioner has made it a point to get rid of the slow time, the pitching visits to the mound, the breaks, try to make replay faster.
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i think he's concentrating on those things. this is a great game that people enjoy. not everybody can do six innings and seven innings and eight innings. when they're there, they have a great time. i see it firsthand. >> sandy, it's michelle. i wanted to ask you about the philadelphia soda tax which i'm sure to the people there it at the city council are thrilled with it because soda consumption is down but the revenue from the tax is nearly double what they expected so they must be thrilled but it's bad for consumers who would like choice. there's another company out there that makes cola and they have said they will lay off 80 to 100 people in the philadelphia area because of the soda tax. do you think that that's a possibility for you guys? how are you reacting to that? will you have to respond in the same way? >> michelle, today's opening day and we're here to celebrate baseball and america and a great baseball game today between two partners of ours, the atlanta braves, and the nosew york mets. clearly we have said that we don't think beverage taxes are good news for the consumer, for
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the people who sell our products, for the retailers that sell them to consumers, and we think there are so many better ways to raise revenue and also to help people make healthier choices. but today is about opening day. in the future we'll have to align our business to the circumstances on the ground, and we'll continue our conversation with public health and government and everyone else who tried to find ration ways to promote the good work of the government. but today is opening day. >> i've got it. you mentioned that. thank you. >> a new partnership, a beautiful day for opening baseball at citi field. i think i speak for all my crew when i say i look forward to an 0-162 season for the mets. breaking news out of washington, d.c., john harwood has more. john? >> reporter: brian, we have just crossed the vote threshold of democrats saying that they're going to filibuster neil gorsuch's nomination to the supreme court so that republicans will not have the 60
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votes. chris koonce of delaware got them at 61. not enough to get the eight they need to have a 60-vote threshold in order to push him past that filibuster. i don't think this is likely to make a difference if he winds up on the court. why? mitch mcconnell said he will change the rules of the senate to make it go on simple majority vote. that's what harry reid did for lesser court appoint. so democrats at least are going to make mitch mcconnell pull the trigger on that rules change. >> how much, john, of this is a principled stand about mr. gorsuch and his opinions and his qualifications as a jurist and spite because the gop wouldn't allow garland's nomination to come to a vote? >> reporter: like all of these court fights it is both.
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democrats and republicans disagree about a lot, and they make different arguments depending on who is in power. no, this is democrats -- they would do this even if garland had gone to the supreme court because they are going to oppose a republican president as a republican president would o oppose a democratic president. this is the polarization of our politics and the natural progression of how that polarization plays out in actual voting. >> and so tell me a little bit about the rewriting the rules which has been done before, i believe, several years ago. harry reid did it with respect to some non-supreme court judicial nominations. how does that work? >> well, the senate can rewrite its own rules whenever it chooses to and you need a majority of senators. republ republicans have 52 seats in the senate. the fact that mitch mcconnell has guaranteed that neil gorsuch will be on the court by the end
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of the week indicates that he is confident he has 51 republican votes to change those rules. if you had republicans saying, no, i'm not willing to change the filibuster rules, then democrats would be able to stop this. but that does not appear to be the case and this partisan warfare has just taken it to the next level is that both parties have been moving towards for some time. >> okay. thank you very much, john. let's go to your colleague, eamon javers. the president of egypt is there today and we expect to see continuing commentary from president trump today throughout the day as a result of that. >> reporter: that's right, michelle. we'll see in a few moments the president and the president of e egypt having lunch here at the white house. interesting behind the scenes here a lot of the access that we've had to the two presidents today here at the white house was not on the schedule but suddenly sort of an improvisational way. the white house has decide d to
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allow reporters and cameras in. >> let's go to that tape that a eamon was talking about. >> okay. thank you very much. thank you. thank you very much. [ inaudible ] >> terrible. terrible thing. happening all over the world. absolutely a terrible thing. >> did you discuss [ inaudible ]? >> all right, back to eamon. we were talking about the bomb, the explosions in the st. petersburg subway that have left more than ten dead. >> reporter: the president responding to a question flanked by the vice president, the secretary of defense, treasury, secretary of state in the room there as well alongside one side of that table and facing their egyptian counterparts.
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a whole lot to discuss. number wone of which from this trump white house's perspective is the battle against isis. they would like to have more allies in the region, more support in the region for that fight. they think there might be something to be gained on that. also to be discussed here is foreign aid by the united states. remember the trump budget schedule is in a big cutback in foreign aid. the egyptians are the beneficiaries of a lot of u.s. military and economic spending. will the egyptian side sit across the table from president trump and push for a little bit more money for their country? you can expect that would be the kind of thing they might have an interest in asking for here at the white house today and, as you said, a big week on foreign policy. we have the king of jordan coming on wednesday and then the president will meet with the president of china on thursday and friday. a whole lot of global affairs on the trump administering's plate this week, guys. >> thank you on a very fluid
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news day, appreciate that. up next we'll go back to the markets and your money and talk about one pharmaceutical stock that is absolutely flying. the name and why when "power lunch" returns. yes? please repeat the objective. ♪ thrivent mutual funds.
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welcome back to "power lunch." the good, the bad and the lug i. first to the good, the drug maker posted positive results for experimental cancer
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treatment. on to the bad, o'reilly automotive, the stock is down, that's down by about 5%. and united therapeutics, an ugly day. it is lower by nearly 9%, melissa. >> thank you, michelle. millennials in the housing market. why that could be trouble coming up. ming up. [car engine failing to start] [clicking of ignition] uh-- wha-- woof! eeh-- woof! wuh-- [silence] [engine roars to life] [dog howls] ♪ dramatic opera music swells from radio ♪ [howling continues]
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hi, everybody, i'm sue here herera. here is your update this hour. president trump's son-in-law jared kushner flew into iroc ei get an assessment. he left germany en route to iraq. authorities agreed to transfer south carolina church shooter dylann roof to federal custody. this follows an agreement that he plead guilty to state murder charges to avoid a second death sentence. the u.s. postal service has a new and free service called informed delivery. it lets you see what will arrive
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in your mailbox that day. you sign up for the service and each morning you'll receive an e-mail with black and white images of the front side of the mail to be delivered that day. hopefully it's not a lot of bills. and the white house releasing its first official portrait of the first lady, melania trump. it was taken in the white house. she issued a statement saying that she's honored to serve in the role of first lady and looks forward to working on behalf of the american people. that's the news update this hour. michelle, back to you. looking good. thank you very much, sue. >> they're calling it an assertive stance. >> yes, thanks, sue. >> you're welcome. see you later. before the financial crisis hit the fed's balance sheet was just under $1 trillion. now it's more than four times that. according to another guy with af assertive stance, steve liesman. it could be the next big threat to the markets. steve? >> reporter: yeah, look, for a similar picture, me and melania. fed officials are finally
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starting to talk gently about the $4.5 trillion elephant in the room, the balance sheet. four times the size before the financial crisis. at least three fed officials last week speaking about the possibility of the balance sheet running off this year. the balance sheet soared as they bought bonds to bring down interest rates. it's been the elephant in the room. nobody has been talking about it until now. the most likely move will be this. announce a long -term run-off plan. it would not reinvest the proceeds. it would likely halt raisinging interest rates during that time period. and the fed would most likely allow more mortgages to run off either first or faster since people on the fed really want the balance sheet to go back to the way it was, which is all government treasuries. the plan fraught with risk. the reason the fed is raising interest rates before reducing the balance sheet it admits it doesn't know how to calibrate a decline in the balance sheet with effects on interest rates and the economy. what we know?
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not much. studies suggested bond from was reduce d interest interest rate. that is a wide margin and, by the way, it's why people don't kick the elephant out of the room so quickly. they never know if it will fit through the door or take out a wall when it leaves. brian? >> can i ask you a question? they haven't been buying for a while, correct? >> reporter: it depend on how you define brian. they haven't been increasing the size. >> got it. >> reporter: securities have rolled off, they have acted to replace those securities. so they have technically been buying bonds just not increasing the net amount. >> a big buyer would be leaving the market bottom line? >> it would be. and the question is how. $20 billion a month, $30 million, $40 billion. it's never been tried before. >> there are other ways to get the elephant out of the room but it would probably be too gross to go into on the air. >> reporter: i know what you're thinking, brian. you should keep those thoughts to yourself. my advice to you as your attorney. >> thank you very much, counselor. i appreciate it. well, president trump has expressed much concern about borders. that talk has not dissuaded deal
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makers from stepping right over them and buying companies around the world. global m&a may have dropped by deals still getting done over the past three months. and in his career blair efron has advised on $1.75 trillion in deals including big deals like k kraft/heinz and pepsi for wimbledon. >> thank you for having me. >> we have a president who is, you could say protectionist, maybe not truly protectionist but has said we want a fair playing field. we've seen a huge amount of deals ramp up from at least a couple years ago globally. do you feel like global m&a, a company in brazil buying company in america is going to be, or vice versa, will be neglect it tifl impacted by the current political environment? >> i don't. in fact, i think, if anything, it will be positively impacted. i think fundamentally you have several factors going on.
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one, strong macros everywhere. we know about the u.s. look at europe, growth. the first time it's grown in several years. emerging markets for the first time brazil, argentina, showing growth. 4.5% generally emerging markets. when you have strong macros, that's what drives m&a and fundamentally companies want to do something they know the first 12-18 months after getting something done they have some tail wind. >> does the president matter at all -- not just president trump but any president matter at all for things like deal making? >> of course it does. we're in a situation generally where there's a confluence of politics and economics. it all matters. that said, most people in business think we are in a very good business environment aided by governments globally. yes, they're more protectionist, but fundamentally appropriately protectionist. most companies that are big have a domecile in a country and a small part of a business in a
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company. they are a u.s. company. >> you are hinting at what was one of the big controversies which was about foreign companies buying u.s. companies. much lower corporate taxes there leading to potentially inversions, hillary clinton when she campaigned she campaigned against this, et cetera. bernie sanders. how low does the u.s. corporate tax rate have to go to disincentivize that kind of activity so that now the u.s. company is more likely to buy a foreign company? >> i think it's less about how the rate goes and more about do you have tax -- i won't even use the word reform, tax modification modifications. fundamentally a corporate tax system which is disadvantaging u.s. companies. there will be changes. everybody believes that. and even at a rate in the mid-20s you will see to be a good leveller. you combine that with territorial tax and it's very strong. >> are companies wait to go do deals right now because they want to see if corporate tax reform happens or do they think
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it really is going to happen and they're gearing up for that? how do they think? >> companies have been preparing for what a new tax environment will look like. the process for preparing takes a lot of time. that's measured in months not weeks. i think as you start to see what happens with tax reform and where it heads through the spring and summer, you will start to see it pick up. >> they are waiting? >> yeah. you'd want to get -- you know it will be a positive. you want to have that data point in hand before making a very important transformational move. >> is repatriation going to be a big deal in terms of deal making? the chairman of biogen last week said that within biotech he didn't think that it was going to be a big deal. a lot of cash here in the u.s., but i'm wondering what your perspective is and if that's the bigger determinant, if they can bring the money back at a lower tax rate or at no tax. >> i think it's more the first which is the idea of tax reform. repatriation important overseas.
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that said it's resting with the fortune 50. they have been active. they can figure out how to get things financed. it's having a long-term change and competitive tax environment. >> what do you see as the possible effect of antitrust regulation on deals that have been announced or deals that might well be announced like t-mobile and sprint? the president has said i don't like time warner and at&t, don't think it should happen. >> i think it's the biggest factor to the negative in terms of deal making generally. we've seen it the past several years. we will continue to see it and anybody thinking about something at that is, quote, strategic automatically implies there's some sort of element of regulation involved. you want to be very careful that you know what the solve is and be very careful that you can manage during a very long period of uncertainty. >> blair effron, pleasure. thanks for coming on "power lunch." let's take a look at the bond market right now. that's today's bond report it
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says right there. that was fast. >> that's a lot of windup for this pitch. i'm telling you on opening day. look at that. there they are, green. that means the prices are higher, the yields are a little bit lower. flattening yield curve with the 30 year just a shade under 3%. and that is today's bond report. >> and it was a good one. wolfgang puck and cuisine go together. now he's taking a bite out of the big apple. >> avocado on a pizza, what kind of pizza is that? >> delicious. we'll talk to the legendary chef about that and the state of the restaurant business. don't move. >> only meat should be on a pizza. pizza. for decades, investors have used a 60/40 stock anbond model, with little in aernatives. yet alternatives can tap opportunities
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just months into his first restaurant opening in new york city. it's called cut. it opened in october in the heart of the financial district. what does it take to open and maintain a restaurant in one of the priciest cities in it the world especially with skyrocketing real estate, rent, and the fickle consumer? wolfgang puck joins us now. good to have you here. >> thank you. so good to talk to you. >> mr. puck, can i call you wolfgang? >> for sure. >> how is your first restaurant in new york city going, and i ask this in the context of, for example, we have tillman on frequently owner of landry's, says, wow, rents in new york city are very tough, wages are very tough. he thinks we're one of the toughest markets in the country. >> well, you know, i love the market in new york, why, there's more money in new york than in any other city and i really believe we have the customers. we are associated with the four season hotel which brings in
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customers and, you know, i'm really surprised downtown is booming especially at night. we are packed every night. you have so many young people who like to hang out and i think, to me, downtown was really a big surprise. they're going to be busy for lunch because of wall street, all the financial institutions, but we are really, really busy at night. >> are you saying then that in essence only a high-end restaurant would do well? talk to me about the other issues if you have a cheaper restaurant. >> you know what, if you are on the lower end, it's okay, like a shake shack or something like that might be really good and then the high end. it's the middle who always is difficult because when people make the decision to go to a restaurant they would much rather go once and have a great experience than go to a mitd-class restaurant where you really don't know if it's going to be great or not so great. so i believe there's always
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going to be great hotels, always going to be great restaurants around. >> so, wolfy, what's your average check size these days? >> wolfy? >> he said call me wolfy. this is my one shot to call him wolfy. so i'm call wolfgang puck wolfi. >> okay, that's what they used to call mozart. so that's okay. >> what is your average check these days? and are you seeing what's going on in your restaurant mirroring what we're seeing in terms of business optimism and consumer confidence, which are at highs? >> really, the average check at cut is high, because steaks are always expensive and they always go with good, red wine. so you can spend the money, but you can come in for lunch, frerfreror example, and get the lobster club sandwich or a pasta or a risotto, where you don't have to eat a steak and spend $40 or $35. it's really up to you. you want to spend $60 or $160, we don't have a pre-fixed menu, we don't have a set menu.
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so you choose what you want. >> can we go back to the lower end? wolfgang, you are in airports. wherever i'm at o'hare, you've got your little stand there with sandwiches. because it's that generally or fast food, you've probably been eyeing this mcdonald's/wendy's beef, pun intended, with a little bit of joy or glee, because that's a totally different world. what do you make of the problems that chipotle is having and mcdonald's are having? do you stay out of the way or do you think that fast food is over? >> a giant mcdonald's, that might be different, but i really believe that people today are more knowledgeable about food than ever. and they want good quality. people really want to know, is the lettuce really fresh? is it really a little bit different. if you have a pizza, is it cooked right? is there fresh ingredients on top? or if it's a soup, well made. so i think people are tired of having these pre-fabricated foods, which have no taste, full
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of preserves, full of things you really don't want to have in your body. >> i would love to eat your food every meal, wolfgang. >> it's not that far. >> thank you. always good to have you on. a real pleasure. >> thank you. good to talk to you. >> so if you go with the wagu, the japanese beef, $25. when i saw it, i thought, that's reasonable. then i realized, that's an ounce, minimum 6-ounce purchase. so you're in it for a buck foo. tyler gets a couple of johnnie walker blues. >> i bet that doesn't come with any sides, either. >> as long as comcast is picking up the check. the four big stock calls that you need to hear about today, including why one analyst pumping the brakes on a media stock. your daily dose of "street talk," you zoedon't deserve it,t we'll give it to you anyway. we're back after this. if a basketball team hadve..
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all right. time to find out just for you. we don't have a lot of time. let's go. >> first up, netflix. caution on netflix's french quarter results. its quarterly u.s. subscriber
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shows net additions. it seemed to lack a strong universal new hit. the analyst does acknowledge that international growth could still be strong, but bear still sticking with its neutral rating. >> all right, your second stock and by the way your last stock is retailer j. jill. many analyst ratings are coming out today because the quiet period after the ipo has ended. cowens and company started coverage of j. jill at an $18 target. they called the note the thrill of jill, digital plus data. love j. jill's use of management decision to enter the best locations. something they have alled the conversion tunnel. apparently maximizes transactions. check out what's in your cart. j. jill, now selling nearly half its stuff directly online. and the analyst, oliver chen, likes the fact that j. jill has fewer stores, not more, fewer than most of its competitors. that target applies about a 20% upside. >> abbreviated street talk for you. tyler? >> thanks very much.
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coming up, president trump says if china doesn't help, the u.s. will go it alone on north korea. and as tensions rising, "nightly news" anchor lester holt heads to the dmz. his report is next on "power lunch." plus, this may be the most expensive diamond in the world and it goes on sale tomorrow. we'll tell you how many zeros you'll need on the check when "power lunch" returns. er lunch". ♪ proaching medicare eligibility? you may thk u can put off checkingut your medicare options until you're sixty-five but now is a good time to get the ball rolling.
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and welcome back to "power lunch." 2:00 eastern time. thanks for sticking with us. here's what we're watching at this hour. president trump's foreign policy skills will be put to the test. he's meting with egypt's president today, this leading up to the first face-to-face meeting with china's leader at the end of the week. and ahead of the visit, some tough words about trade. and wendy's turning up the heat on mcdonald's, after mcdonald's came out with a product directly aimed at stealing wendy's customers. and under armour investors
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underwater again. shares falling as an ans saalys says you've got to dump the stock. stocks are down off the lows. the nasdaq did set a record intra-day high before pulling back. leaves the nasdaq down by about 21 points. it would finish lower for the 11th time -- excuse me, if the dow -- no, no, if the dow finishes lower, that would be the 11th time in 13 sessions it hasn't had back-to-back gains in a month. panera bread soaring 10% to record highs on reports of a possible sale, hiring different firms to explore strategic differences. carmax and o'reilly plunging. let's go to bob pisani on the new york stock exchange floor. >> ten points off the lows. the s&p, 2143. banks have been low down 2.4%. below that on the ten-year low. that's a problem.
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there's your reflation stocks. tech was the big leader in the first quarter. it's been lagging as well. so gold's up, predictably. bond yields are down. fix is elevated just a little bit. not too much. what's going on? i think this is, again, that battle between the hard and soft data. sentiment data, which is the ism numbers, generally pretty good overall. and we've got that washington calendar next week. april is not starting off well, as you heard from melissa, but normally pretty good. kensho tells us we're up nine out of the last ten years. look at that 2.5 to 2.6% gains for the s&p 500 and the dow, normally in april, tyler, believe it or not, april was one of the best months of the year recently. back to you. >> all right, robert. thank you very much. big week for president trump, when it comes to his overseas agenda. he met with egypt's president, el sisi today. you may recall, mr. sisi became the first foreign leader to congratulate mr. trump after the election. the big one everyone is waiting for is on thursday when the president has his first
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face-to-face with china's president, xi jinping in florida, at mar-a-lago. and mr. trump already turning up the rhetoric ahead of that. nbc's lester holt reports from seoul, south korea. >> reporter: president trump's remarks today suggesting the u.s. could take unilateral action against north korea if china doesn't climb onboard and step in in some form or fashion. will certainly not diffuse the sense of growing tensions here on the korean peninsula, especially at a time when north korea is trying to enhance its nuclear weapons capability. it also puts a focus on the 28,500 american service members here and the risk of hostilities. ready to fight tonight is the slogan at osan air base. its fighter jets, just a thre three-minute flight from the north korean board. >> the jets are ready for combat mode, we are ready for combat mode. >> reporter: also at osan air
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base, we got a rare peek inside the air operations center, where operators are the first to detect the north's ballistic missile launches. their missiles already putting millions in the region at risk, including tens of thousands of american military personnel. but what's casting a chill all the way to washington is north korea's claim to be working on an intercontinental missile, and a smaller nuclear warhead capable to have reaching the u.s. >> this is a threat of both rhetoric and growing capability. right now, it appears to be going in a very reckless manner. >> reporter: secretary mattis will get no argument from a high-ranking north korean diplomat who defected last year. >> and when i was asked this kind of indication, i always tell them that kim jong-un is a person who did not even hesitate to kill his uncle, even his half
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brother. so he's a man who can do anything. >> reporter: there are an estimated 300,000 u.s. citizens living in south korea. most of them here in seoul. i attended a briefing today with u.s. military planners who say one of their big challenges is how to get those americans out, if, in fact, war were to break out. we'll have more tonight on "nbc nightly news." for now, i'm lester holt in seoul. we'll send it back to you. >> and we're looking forward to that tonight. thank you. how does the president plan to deal with north korea? the "financial times" got the chance to sit down with president trump this weekend, to discuss this, and much more. jilian tet, one of the reporters behind that interview joins us now. hi, jilian. >> hey. good to be on the joe. president trump speaking with conviction and off the cuff sometimes. he said to you, if china is not going to solve north korea, we will. my question to you is, how did he say that? was that fist on the table or
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was that shrugging his shoulders? >> well, like so much with president trump, it's very hard to tell, as you say, what is off the cuff and what is carefully crafted. but i think what is going on here is two important points. firstly, for the first time for a long time, the u.s. administration now is very focused on north korea. we spent the last couple of years talking a lot about iran, about syria, about russia. and frankly, in some ways, that's a side show if you look t a the key threats to the u.s. right now. the fact that the u.s. is focusing on north korea ahead of these crucial talks in mar-a-lago is very important. and it reflects the fact that the national security council has actually accelerated a review of north korea, ready for that meeting. >> yeah, the concern about whether or not they're going to have intercontinental ballistic missiles that could hit us, hence why it's the u.s. -- in the u.s.' interest. who -- who does he listen to when it comes to foreign policy?
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we haven't heard much from the secretary of state, rex tillerson, at this point. but we know steve bannon has influence. we know jared kushner has influence. who do you think really matters when it comes to his decisions on these kind of cases? >> i think there are a number of voices around him. and i think what is clear right now is the nse's report, and the nse officials, are indeed, having a lot of influence over the president ahead of this meeting. because the second point i want to make is that the fact that he's coming out with these seemingly off the cuff remarks is part of a wider attack he's been using, which is basically to talk tough at negotiations, plais maybe later on climb down and find some kind of deal. but you have to view this within the prism of his art of the deal approach to the presidency. >> he said, elsewhere in your interview, i would not be surprised if we did something that would be very dramatic and good for both countries, referring to his meeting later this week with xi jinping. what was he hinting at? >> well, what he's hinting at is the fact that inside the foreign
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policy circles and security circles in the white house right now, we did talk to a number of officials there, there is a hope, you might call it naive, that precisely because both the u.s. and increasingly china are very alarmed by north korea and the fact is incredibly close, it seems, to getting these kind of intercontinental ballistic missiles, the sheer fear of that might actually bang heads together and force them to work out some kind of broader, strategic alliance pap, a g-2 d. >> could he marry, the president, could he marry his trade concerns with china to the military national security concerns that we share with china, with respect to north korea? >> absolutely. and it's crucial to emphasize that the people around the white house are very much seeing this as part and parcel. that's partly because they hope to use a trade issue as a negotiating chip to persuade china to actually help them contain north korea.
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and if there was some kind of deal to try to contain north korea, there may be, just maybe could be part of a longer term plan to deal with the korean peninsula more broadly. that's the hope. it may be naive. >> we'll find out. ji gillian, thank you. part of the team that interviewed president trump this weekend, over the weekend, with the "financial times". >> thank you. the second quarter getting off to a bit of a wobbly start for investors. so what should you do with your money as the months ahead unfold? let's bring in portfolio manager at the cal state teachers retirement system. $202 billion in assets. welcome to "power lunch." ayesha, good to have you with us. so what should i do? >> well, good afternoon. thank you for having me. well, actually, at calstrs, while we monitor what's going on in the markets in the short-term basis, we really focus on the long-term. which is why we think engagement of our portfolios is so important. >> so when you take a look at
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governance, one of the poster children, these days, for governance would be snap. what do you think about it? >> well, snap has definitely drawn a line in the sand and we're very concerned about the governance structure there. we're very concerned about the no voting shares. it's, you know, a lack of accountability to who sits inside that board room, representing our interests and shareholders is very concerning. and while there are some stocks currently in the index that have no voting rights, what we're really concerned about is a precedent that snap may be setting. >> would you ever invest in a company like that? with that kind of structure? i assume you wouldn't. >> well, unfortunately, if it becomes part of the index -- >> you would be in by default. >> yes, exactly. >> are you campaigning against that, then? are you going to indexes and saying, don't do it? >> we are in conversations with many of the index providers. many of our peers. the other pension funds.
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we're having conversations to understand, you know, what is the criteria for being part of the index and hopefully be able to stop, you know, what could be a very dangerous precedent. >> ayesha, to the markets overall, you're 53% global market invested. how has that shifted over the past couple of months or quarters? are you investing more in america or more around the world? what micromarket trends you seeing and acting on? >> because of our size, we can't necessarily switch strategies on a dime. we have over the last several months been slowly exiting, taking some profits in the u.s. and deploying that to the non-u.s. markets. but we're doing that in a very strategically and very cautiously. >> what non-u.s. markets? >> globally, throughout the world. >> how much of your total powerful is indexed? and what is not? >> so, you have the statistic there about 53% is in global equities. about half of that is managed
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internally. >> what does that mean, though? >> indexed, to the index. >> is managed to the index. >> and where do you go outside of -- where do you -- where do you think that going outside of an index strategy works best? >> well, at some of those, we hire active managers, and those are managed through our global equity area, and they have various, you know, strategies. but for the most part, the bulk of our assets are invested in the index. you know, we own the whole market, because of our sheer size. it's very difficult to move, you know, quickly. >> let me make sure i understood you right. more of your global or non-u.s. stock investments are actively managed? am i understanding that correctly? >> well, no, we've been bringing a lot of the global indices in house, mainly from a cost
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perspective. we can manage it internally. but we do have active managers that participate in markets around the world. >> all right. aeisha mastagni of calstrs, thau thank you very much. coming up, the burger beef. plus, bar rons says under armour could rebound. one analyst keeps t s falling. all of that and more next on "power lunch." "power lunch." tools, right at your fingertips, you have access to in-depth analysis, level 2 data, and a team of experienced traders ready to help you if you need it. ♪ ♪ it's like having the power of a trading floor, wherever you are. it's your trade. ♪ ♪ e*trade. ♪ ♪ start trading today at etrade.com
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we're on the move. hey rick, all good? oh yeah, we're good. we're good. terminix. defenders of home.
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[ [ screams ] ] [ shouting ] brace yourself! this is crazy! [ tires screeching ] whoo! boom baby! rated pg-13.
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[ screams ] 30 years ago, wendy's famously asked, where's the beef in a new legendary ad campaign. well, it looks like we found the beef. a big fight brewing between wendy's and mcdonald's over who has the best meat. susan li joining with the latest on this blood feud. >> maybe not best meat. freshest meat? how about that. we'll go with that. so it's heating up, all right, downright sizzling, and i'm going to use every pan we can. so the trash talking on twitter erupted after mcdonald's said it was going to start using fresh beef in its quarter pounders across the country by the middle of next year. wendy's then tweeting, so you'll still use froze, beef in most of your burgers in all of your restaurants? also, we'll stick to our fresh beef. they can have those ice chips that they're serving. and out here, trying to melt those frozen fools. wendy's has prided itself on being the fresh beef burger and
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credit suisse predicts they will probably experience the biggest impact from mcdonald's move. some test markets have already reported a 35% jump in demand for the new fresh beef quarter pounders. so you know that's what the competition is on. >> so this only pertains to their quarter pounders, not other meat? >> not big macs, no cheeseburgers. >> hence the trash tagging. >> just wanted to be sure i was understanding it there. >> let's bring in the ceo of wendy's, great to have you with us. >> thanks for having me. >> was it a hard decision to go on social media and go after mcdonald's like that? >> it was quite an easy decision for us, if you think about our brand, right? we've been created on fresh, never frozen north american brief since 169. and we have been freshing fresh beef in all of our restaurants for all of our hamburgers for almost 48 years. when we saw that message come across, it was an easy response. and what we want to be is a challenger with charm and continue to have some fun when folks come into our territory
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around the fresh beef. >> certainly a sense of humor. going back to that credit suisse note that susan had referred to, i'm sure you've read it. you know, they assume if 15% of the gains that mcdonald's sees comes from fresh beef comes from wend wendys, that would be a 30-basis points headwind to your u.s. same-store sales. have you done any back of the envelope calculations? 30 basis points headwind? that's quite a bit if that does come to friuition. >> we haven't done any calculations yet, but when you think about the timetable we have, knowing they're only going to be in most of their restaurants on one of their hamburgers by the middle of 2018, we have a lot of time to talk about fresh, never frozen north american beef. and what we do in our restaurants and the care that we put on preparing fresh, made-to-order hamburgers, you think about the, you know, roadway we have over the course of the next year or so to really scream from the rooftops, we're the original fresh, never frozen hamburger chain.
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and you think about all the news that fresh can bring. that's a big positive for us. today, about three in ten consumers really understand that wendy's is fresh, never frozen. we've got a great opportunity to amplify that message. >> todd, your stock trades at a heavy premium, a significant premium to the rest of the market. and analysts have said that your guidance for 2 to 3% sales growth this year is more goal than actually achieving it, so maybe your stock is a little overpriz overpriced? >> we're coming off a year where we had a two-year growth rate of 2.9%. 16 consecutive quarters of same-store sales growth. the renovating we're doing on our restaurants, seeing nice lifts, nice returns. all of that complicated around the strong messaging of what wendy's is all about, with food that i love in a restaurant that you love to enjoy at an affordable price with an experience that brings you back. those are all elements that we can continue to bring -- >> but todd, you're late to the game when it comes to digital.
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right now you're just testing out kiosks and aiming for maybe a thousand at the end of this year. panera bread is also in the news today and we know how well they've done with their 2.0 strategy and they're well ahead of someone like wendy's. >> and we don't feel like we're late to the game in traditional kiosks. and we're still really getting the consumer to understand the world of mobile ordering, mobile payment. the kiosks, as you said, will have a thousand restaurants by the end of this year. the great news, anybody can get folks in and get their orders taken fast in an original restaurant. because we are fresh and made-to-order, full cu customizati customization. >> we have a guest coming up, todd, on automation in a few minutes on the program. how close is wendy's to a fully automated restaurant with no or almost no employees? >> that would still be a ways off. i think -- >> but is it going to happen? do you see a day when one or two people in the restaurant? >> i don't see a day where it's fully automated.
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we're still in the people business with wendy's kind of people. and we want to make sure you have a good customer experience. there are things in the front of the house, kiosks, mobile order, mobile pay, there are things in the back of the house when you think of inventory taking, temperature checking, scheduling, that we can fully automatic. and the repetitive tasks in the restaurants, we'll look at automaticing overtime. but we want to have a great-tasting hamburger, hot, juicy every time with a great customer experience. >> by the way, we don't have any burgers on set, fyi. but you've been pretty adamant about staying firm on price, but how long can you do that given at-home food inflation, the gap between that and away from home food inflation is the widest it's been since 2008. in other words, it costs a lot more to eat out and a lot less to eat at home. >> our biggest competitor is food at home. we need to have a compelling value proposition. qsr has been designed for speed, convenience, and affordability.
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and our opportunity is, how do you differentiate on the quality of the food that we have? and we have that in our restaurants. so we're going to continue to stay very disciplined on price. we'll take it selectively where we need to, especially in the higher wage markets. but we'll be spatter about it. we feed to continue to bring in more customers for often to drive our franchise economic moll. >> great speaking to you. thanks for coming on. >> todd penegor and our thanks to susan li, as well. a huge pink diamond is coming up for auction. it could be the most expensive diamond ever sold. we're going to guess the price, that it might eventually sale f for. and you can play along next on "power lunch." "power lunch." that college experience that i had. the classes, the friends, the independence. and since we planned for it, that student debt is the one experience, i'm glad she'll miss
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when you have the right financial advisor, life can be brilliant. ameriprise
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what if we could bring you by having better values? at blue apron, we work directly with more than a hundred family farms. so instead of spending on costly middlemen and supermarkets, we can invest in the things that matter most: making farmland healthier.
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cutting down on food waste. and bringing you higher quality, fresher ingredients for less than you pay at the store. because food is better when you start from scratch. get $30 off at blueapron.com/cook diamonds are a girl's best friend. and what girl wouldn't like a 60 carat pink diamond? well, lucky for you, one is coming up for auction. robert frank has that story. >> lucky for someone. the famous pink star diamond comes back on the block tomorrow morning, and it's likely to become the most expensive diamond ever sold at auction. now, sotheby's set to sell the stone for over $60 million.
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now, it weighs, get this, 59.6 carats. it's an internally flawless, fancy, vivid pink. and the rough stone when they found it in south africa back in 1999 weighed in at 132 carats. so a lot of diamond left on the floor just to create this one. the current record is held by a 14.6 carat blue diamond. that was sold by christy's last year for $57.5 million. the pink star was sold by sotheby's back in 2013 for $83.2 million. it auctioned in geneva, but the buyer never paid up, so sotheby's took it back, kept it on their books with a value of $72 million. and with diamond prices strong, it will now go back under the hammer in hong kong tomorrow morning. all right, guys. so we're going to play a little price is right. you're going to guess the price without going over and tomorrow's show, we'll find out who won. brian, start it. >> $91.3 million.
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>> you think it's strengthened since then. >> you just said the diamond market is stronger. >> i think it's lower so $57 million. >> $57 million. in that case, it wouldn't be the most expensive diamond ever sold. melissa? >> i will go $53. >> wow, even lower. we're bearish on this pink diamond. >> melissa didn't go $19.4 -- >> $110.3. >> all right. i am going to say $71. >> you're probably texting with the auctioneer right now. >> i'm not. i'm not. >> is somebody writing this down? no. but, look, it's tough whether it's a diamond or anything else, once it's had a tough auction history, it's tough to top that price. >> whoever's the furthest off goes to wendy's and buys lunch -- we never have lunch on the show. >> i can agree to that. >> i'll have to go find a wendy's. >> hot and juice my. >> melissa?
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bring your card. you're going to be the furthest. >> thank you, robert. if robots are coming for our jobs, we might as well make money off of it. we'll talk to the ceo of a company that stands to profit from the trend, at least until someone invents a robot ceo. that's next on "power lunch." po" your insurance company
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for a free quote today. liberty stands with you™. liberty mutual insurance. hi, everybody. i'm sue herrera. here's your cnbc news update this hour. president trump welcoming egyptian president an da fattah el sisi to the white house this morning. the president saying the u.s. will be a strong ally of egypt. >> we'll fight terrorism and other things and we're going to be friends for a long, long period of time. we have a great bond with the people of egypt and i look forward to working with the president and we have some interesting conversations going to start effective immediately. bill cosby arriving for his pre-trial hearing outside of philadelphia. the judge in the case says he expects the trial to last about two weeks and hopes to have a jury in place before the proceedings begins on june 5th. he says the jury will be sequestered. fewer children are dying of
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diseases, worldwide. washington university researchers say that 7.2 million kids and teens died in 2015. that's down from 14.2 million in 1990. most of the deaths occurred in south asia and sub-saharan africa. that is the cnbc news update this hour. michelle, i'll send it back to you. >> huge improvement. >> yeah, it is. good news. >> yeah. all right. we are 90 minutes from the closing bell. stocks are lower across the board, but off the worst levels of the session. and we are watching the health insurers, cigna, humanna, aetna, united health, they are all lower at this hour. >> oil prices under pressure today, closing around $50 and a quarter, which what it looks like right now. some of that dawnward pressure coming from the fact that the libyan production that we were worried about is slowly coming back online. and also some doubts that even if opec does continue its output cut throughout the rest of the
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year, that that 1.2 million barrels is really enough to boost prices. we did get back over 50, because we're getting ready for that summer driving season to begin. that's a seasonal effect. and traders say we could be in this range before we broke 50, about 50 to 54 for quite some time. a little frustrating for those of you out there who are trying to make the moves on this. that's probably where we're going to be, at least for the next month. back to you. >> jackie, thank you very much. well, one of the hottest economic debates right now could be defined as, well, with man versus machine. whether increased automation will hurt jobs in america, ultimately. one company at the forefront of robotics is terriadyne. and the ceo is in chicago for a conference looking to highlight the economic benefits of automation. he joins us in a "power lunch" exclusive. mark, thank you very much for joining us. you have something you like to call cobots.
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you say this is automation that exists and works alongside humans. automation has in many ways has almost become a four-letter word these days. how do you ensure us that the majority of american jobs are ultimately safe? >> well, you know, technology for the past hundred years has always raised the question about whether or not it would affect jobs. but over that period of time, the societal benefits and job growth has been pervasive throughout the world. and this area of robotics and specifically, collaborative robots, which is where teradyne and our subsidiary of universal robots is specializing, this is a class of robots that's very different than anything that's existed before. it's designed specifically to work in collaboration with humans on a factory floor. so this, by its own nature, requires the human touch, in order to make it effective in your factory. >> the idea, mark, is -- i guess the economic theory, those who support increased automation will say, hey, we're more productive, and therefore we can produce more goods, which will
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ultimately employ more people. that's the optimistic, bull case for this. have you seen that in your career? >> i absolutely have. teradyne's history is founded around the manufacturing and testing of semiconductors. that's a highly, highly automated endeavor. yet it's produced thousands and thousands of jobs throughout the economy and the u.s. and elsewhere. and in the world of robotics, if we look at what's happened with our installations of collaborative robots, more often than not, these are companies that are expanding production, trying to get higher quality, trying to remove the sort of the dull, dangerous, dirty, repetitive work from the human endeavor and let the human do more creative work. >> mark, i wanted an example. so to me, it seems very obvious that the minute you have more robots on the factory floor, you have fewer employees on the factory floor. it sounds like the trade-off is, yes, you hire more people, but they're people that are further along on the skill set, and that -- the skill set curve.
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and as a result, they're still the working class of america still suffers as a result of robotics. is that an incorrect way to think? or is that correct? >> i think it's a little incorrect. a classic example was a case of a machine tool company, this one happened to be in italy, that took our robots and installed them in the manufacturing of hand sanders and hand drills. this company, the people that used to be doing this work were repurposed to train the robot how to do the work and supervise the robots doing the work. what was the benefit? in this case, the benefit was much higher quality of output, much lower defects. and the same people that were doing the screwing and the drilling before were now simply supervising the robots doing that work. >> mark, your universal robots unit is certainly driving the growth, even though it's not your core business, which would be chips for other things, like smartphones, for instance. one analyst is predicting it's going to grow 57% year on year. does that sound right, and can you do anything to lift the
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margins? because as i understand it, universal robots is a lower margin profile than your other core businesses. >> fufrl, the growth rate is very high and we expect it to remain greater than 50% for quite some time. this is a new platform that we see for the next 20 years can grow like the semi-conductor industry grew, if we look back 40 or 50 years. so i do think this is a platform more growth. on the margins, the margins compared to the rest of teradyne in this business are few points lower. i expect over time with more volume, that will move more toward the norm. but i don't think it's a very different margin business. >> back to robots, what will robots do in ten years that we almost couldn't imagine them doing today? >> well, it's interesting, with all the advances in artificial reality and virtual reality and artificial intelligence, you would think that robots would be easy to teach to do something. and our cobots turn out to be very easy. you can take the cobots by the
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hand and teach it to do a task. however, it can't be trained like you or i would be trained. it can't watch you and understand what you're doing and then repeat it. i think the ability for robots in the future to perceive its environment and make intelligent judgments, and we're talking maybe 10, 15 years from now. but that will be the next revolution of the application of robots. >> they can watch me and mimic me. >> yes. >> i don't know why they'd want it. but anyway, mark, thank you. great to be with you. >> all right. thank you. a major shake up at retailer j. crew. courtney reagan here with the details. this is a big one. >> this is a big one. this is a name that a lot of us probably know. jenna lions is actually out as president and executive creative director after 26 years at the retailer. she is staying on as an adviser through the end of the year, because that's when her contract ends. lyons has been the face of the brand for some time. she's really a fashion icon herself. she's credited with somewhat de-prep afying the brand, mixin
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sequin shirts with a collared shirt. she brought j. crew to fashion week for the first time in 2011 and the brand was a michelle obama favorite under her direction. but lately j. crew is struggling. total comparable sales have down 7% in the first seven weeks of this year. comp sales dropped 7% last year. some say j. crew's head women's wear designer will be promoted to chief design officer, but j. crew says they actually aren't directly filling the roles that lyons vacates. so this is an interesting move. it's a retailer that's struggling. she's been there for a long time. very public face of the brand. very much the spokesperson, as well as the head designer. >> do we know what happened? four years ago, fast company had her on the cover saying how j. crew remains white hot, with her -- the whole cover was her. less than four years later, she's out. >> we don't exactly know what happened with her, but we know that the business isn't great. and she's been heleading it.
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>> they went super boheim. >> and i think there's been a lot of fashion misses at j. crew and a number of places. they tried to put j. crew nordstrom. that hasn't helped so much either. so i think there's probably just a need to change it up, to do something new. beyond that, we don't know exactly the details. but certainly, the strategy wasn't getting them where they wanted to with sales in the most recent couple of years, at the very least. >> courtney, thank you. coming up, home values are rising. we'll tell you which homeowners are tapping into that equity the most. and tesla shares higher today, back to hitting a new record high, while automakers, the other ones are moving lower. what's the best bet in the auto nation right now? "trading nation" is next. natio. natio. excuse me, are you aware of what's happening right now? we're facing 20 billion security events every day.
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ddos campaigns, ransomware, malware attacks... actually, we just handled all the priority threats. you did that? we did that. really. we analyzed millions of articles and reports. we can identify threats 50% faster. you can do that? we can do that. then do that. can we do that? we can do that. so we know how to cover almost alanything.ything, even a coupe soup. [woman] so beautiful. [man] beautiful just like you. [woman] oh, why thank you. [burke] and we covered it, november sixth, two-thousand-nine. talk to farmers. we know a thing or two because we've seen a thing or two. ♪ we are farmers. bum-pa-dum, bum-bum-bum-bum ♪
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and a news alert. the president has decided there's the interior secretary ryan zinke announcing that the president has decided to donate his first quarter's salary to the national park service. that's the interior secretary zinke speaking about it right now at the white house daily briefing. if my memory serves, that's about $100,000 in salary. to the housing market, where fast-rising home prices over the past year are giving homeowners more equity than they might have
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expected. and they're now tapping that equity at the fastest rate in eight years. but who's cashing out the most? d diana olick knows and it's surprising. diana? >> it's millennials. not only are they finally buying hom homes, but those who bought in the past years have more equity and are tapping it faster than their parents. the number of borrowers with tapable equity up to $40 million according to black night financial services. those borrowers have at least 20% equity in their homes. nearly half the refis last year were cash-out, as homeowners withdrew a collective $31 billion. that was the most since 2008 and represented a 50% increase from the same quarter of the previous year. but interest rates are higher since the election, so borrowers won't want to refinance. instead, they're using home equity lines of credit more now and millennials are leading the pack. more than one third of millennials surveyed by t.d.
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bank said they're considering plying for a home equity line of credit in the next 18 months, which is more than twice as many as gen-xers and more than nine times more likely than baby boomers. why? because they want to renovate. they're leaving about 35% equity in their homes, even though banks will allow them to take out more. a lot more of this online. real realtycheck.msnbc.co realtycheck. cnbc.com. if you took out an equity line to buy equity, don't do that. but if you had to buy one auto stock, which would it be? rich, you made a great call a couple of months ago on tesla, you made your clients a lot of money if they followed your advice. can they still make a lot of o money buying tesla? >> yeah, brian, regardless of what you think about the valuation, this stock is not going to get beat by a spread
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sheet. this is a great technical setup and it's only gotten better here. let's go to the short-term chart first and i'll show you exactly what i mean here. back in february, we talked about that textbook 38% retracement, right to the 50-day moving average. up 20% since then. we have a divisive breakout of that trading range. that gets up to 320 in the short-term. but the real magic of the setup is unleashed when we look at that weekly chart, brian. and you can see this very bullish, decisive breakout from a multi-year trading range. let's call it 280 on the high end, 180 on the low end. tack $100 on top, that gets you to 380 over time. so tesla, there's still food on the table here. i still like the stock. in fact, i like it even more on the breakout. >> okay. there you go. eddy, you just heard a very bullish call on tesla, continuation of one. what auto stock would you buy? >> i think rich is exactly right. i like tesla here. and he's right that it really
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defies any conventional metrics. today's the day that we find out that tesla is now more valuable than ford. >> it's valued at more than $500,000 per car sold. >> yeah. >> cars sale for $75 to $100,000. just saying. >> wait until down the line. we could say the same thing with amazon. this is where the future is going. all these metrics don't work. all of those metrics would have been true a year or two ago. but tesla has fought the shorts every way. as the ceo tweeted today. and this is another key thing in tesla's favor, is the 10-cent deal. tesla was burning through tremendous amounts of cash. now they have one of the largest companies in the world. the most valuable company in china, backstopping them. and giving them a foothold into the chinese market. tesla's an excellent buy right now. >> if you missed it, elon musk tweeting out, throwing some shade at the shorts, stormy weather in shortsville. for more "trading nation," you
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can head the to tradingnation.cnbc.com. under armour shares have lost a third of their value this year. one analyst expects to it fall even further. we'll talk to her next on "power lunch." >> announcer: now the latest from tradingnation.cnbc.com and a word from our sponsor. from oh
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liberty mutual won't 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. it's been brutal 2017 for under armor, it now appears to be a big battleground stock. barons looking bullish saying the company could rebound by 30%, but fdr capital does not buy it. downgrading to under perform today, saying lack of competition. let's bring in the analysts who made the call. the price is $14 a share, about another 25% downside from where we are now. susan, sounds like a big part of
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underarmor's weakness is inability to compete on price. they can't afford to do that for many reasons. >> correct, yes. one of the biggest concerns that really drove our downgrade was the price for that, we're seeing that out there between nike and underarmor, and it started to happen when they went into kohl's, and nike responded, and under armour had to respond. it's going to be difficult for nike to play the price game. they don't have -- for under arar armour to play the price game. >> what it does from here, you say that surmting don't want to pay up for the new shoes, they don't like to. >> we have not seen a lot of new products on the footwear side over the past year, and nike has really ramped up their
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innovation. they have a new vapor pack coming out, vapor revolution, so i think it's going to take a good nine to 12 months for them to come out with more new and exciting products. they need high profile sponsors, which if they have a few that, you know, people really like, such as curry, but even the curry shoe plateaued, and that helped to drive the growth last year. >> what would happen to under armour with a border adjustment tax? is that light's out? you have a negative view of the company currently. if that was another head wind for the company, what's that do to the company, in your view? >> yeah. so it would be worse for them than nike because they don't have as much international exposure to buffer that. they are springing to ramp up for u.s. manufacturing, but that's going to take a long time. it's small right now. they are both doing that. it would be very difficult. we continue to see margins decline without a border tax. >> you know, the barron's bump does not appear to exist.
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the stock is down today. did you read the story? what's wrong? >> well, you know, they are looking for double digit top line growth to return basically this year, which i think is, like i said, it's going to be very difficult, and you need that double digit topline growth to justify, you know, almost a 40 times multiple. the price target is based on a 30 times multiple which is a premium to the peers, nike trading in the low 20s, most trading in the low 20s, so i think that's where there are differences. >> i take the point about maybe underarmour needing high profile sponsors. i know the 11-year-old buys a lot of sneakers, and he buys the name on the sneaker whether it's lebron or kd, and i don't think that the other guys, under armour has that roster. the question is, has all the apparel become really
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fundamentally co lly comities? they have the same stuff going on. >> yeah. you know, it all worked well seeing athletic apparel growing in the high single digits. that growth for the overall industry has come down. so i think it's made everyone become more price competitive. we saw lulu see some weakness in their sales when they recently reported, and so i think it's making it tougher for everyone, which is putting pressure on prices, and, you know, terrorist bringing underprices down, and it's probably more than they expected. >> all right. susan, thank you. appreciate it. susan anderson. >> thanks for having me. >> a golf controversy and a compliment for president trump. at least we think it was a compliment. check, please is next. k, please. ♪ predictable. the comfort in knowing where things are headed. because as we live longer... and markets continue to rise and fall...
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watching panera shares on reports it hired companies to explore unique alternatives to put itself up for sale. we asked, and they said potential buyers could be starbucks, looking more to get into food. and also jab holdings, a private equity group that owns krispy cream and pete's coffee. that makes sense, he said, when there's smoke, there's fire. shares up 8%. >> that's a lot. you two?
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my favorite story of the day, one story across the wires when the president of egypt, this is what it said, egypt tells trump he has a deep appreciation of his unique personality. >> so rich. >> sounds about right. >> all right. golfer lexi thompson. did you see this? >> i saw it. >> disgrace. penalized four strokes, would have been her first major win. she placed her ball less than an inch from her marker. okay, you police it on the markerment here's the thing. that was saturday. a viewer sent in a clip of the tv saturday night or sunday morning, the officials watched it, and then told her on sunday, oh, by the way, we're adding four strokes to the game. she started crying because she thought -- on the 12th hole, led the thing, a disgrace to golf. as woods said, viewers at home should not be officials. reinstate -- she got robbed.
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>> a viewer sent in the video? and then they made the call? statute of limitations. >> officials on the greens missed it. >> all right. patri patrick, the possible new head coach at georgetown on this day that the men's college basketball season ends, a new era at georgetown perhaps. "closing bell" starts now. >> hello. we're going to have so much more on these picks shortly. >> raring to go. >> welcome to the closing bell, everybody. i'm kelly evans. happy monday. >> happy second quarter, too. stocks kicking off in the red, although, it's one of those days where the dow was down 145 points. now down just 26. as we get ready for a big week for the trump administration. the president has his big meeting with china's leader xi, and that's coming up later this week. the senate supreme court vote happened in the judiciary

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