all the time. okay with me. >> chemicals and ammunition. olin. seeing some unusual today. bought it today. >> defense, the itas, etf. 2% increase in nato spending, plus trump in the white house? >> good having you on the show. got to run. "power" starts now. i'm melissa lee. she's all mad. president trump headed to mar-a-lago at this hour where he will meet with his chinese counterpart, xi jinping. there is a lot at stake in this meeting between the two world powers. also a bold call on tesla. one top wall street animal cyst says the stock could lose nearly half of its value. we'll press him on that forecast ahead. and hats off to today's mystery chart. can you name the stock? a hero this year, up 22%. our answer in the exclusive interview with the ceo coming your way. "power lunch" starts right now.

♪ welcome with bei, everybody "power lunch." glad you could be with us on this rainy thursday. i'm tyler mathisen. stacks hi stocks higher today after yesterday's midday swoon. here's a nice stat. four dow stocks have gained more than 10% this year. apple, boeing, visa and home depot. those names are mixed in today's session. twitter under some pressure on news that one of the company's founders, evan williams, is selling 30% of his shares. there you see that chart reacting, in part, to that news. home builders, a notable standout. home builder etf, hxb, having its best day in about a month's time, since march 15th. i'm michelle caruso-cabrera. here's what else is happening at this hour. devin nunes temporarily stepping

aside from the house committee's intelligence committee after the house ethics committee announced it was investigating mr. nunes for possibly disclosing classified information. representative nunes calls those charges entirely false. jobless claims falling by $25,0 25,000 last week, the biggest drop in nearly two year. and sunoco is selling its 7-eleven. there is a lot going on today so let's start your coverage with the most important meeting, president trump's term so far, the one with china's president, xi jinping. the two are about to meet as the president's members-only resort in mar-a-lago, florida. that's where we find kayla tausche. >> reporter: the president is wheels up from washington, d.c. on the way to palm beach, florida, where the high-stakes meeting between the president

and his chins countese counterpl be taking place. president xi is expected to arrive in 20 minutes, met by secretary of state rex tillerson. remember, rex tillerson and president xi had a meeting in beijing last month when tillerson went on an asia term when tillerson used the term "win-win" in terms of how he wanted to pursue a u.s./china relationship. it was a phrase directly borrowed from the bay beijing had hoped to approach it. we will see exactly how that changes when the president lands and the two are set to meet for the very first time. president has said it will be a difficult conversation, of course, given all of the criticisms that each government has been lobbing at each other. we're told by the white house here's what's on the agenda. first and foremost, north korea, defuse ugg the situation with china's neighbor as it gears up its nuclear ambitions and continues to build up this program and fire test missiles

of varying degrees. then, trade and tariffs. of course that has been a controversial talking point of the president. finally, the south china sea but we are told by the white house not to expect any resolutions on any of these issues in one day. this is merely establishing the relationship going forward. president trump's first face to face meeting with president xi could be tense, as kayla noted. the president's china rhetoric over the past year-and-a-half. >> we don't have victories anymore. when was the last time anybody saw us beating, let's say, china in a trade deal? they kill us. we are going to enforce all trade violations s against any country that cheats. [ cheers and applause ] this includes stopping china's outrageous theft of intellectual

property. we're going to stand up to china. we're going to stop their currency manipulation and product dumping, which is killing us. and they don't follow the rules. and if they don't, we're going to institute tariffs. they're going to obey our rules so quickly, you have no idea. >> let's bring in the president of the u.s./china business council. sir, good to have you here. >> good to be here. >> i don't know if you saw the president yesterday in the news conference with king abdullah but he was clearly a man whose position had evolved when it came to syria. do you have any sense that he has evolved in any way on china, given what he said while on the campaign trail, and now the reality of being in office, and also knowing that they're his best hope when it comes to dealing with north korea. >> well, there's that, but i think there's also an enormously important american economic interest in the relationship with china that is being looked at and realized. it has a lot of complexity. look, klein is a $400 billion

market for the u.s. economy now. it is our second-largest overseas market after canada. trade with china supports about 2 1/2 million american jobs. >> you don't have to convince our audience of any of those things. but do you think the president knows that at this point, and is that going to change what would have been the dialogue otherwise? >> well, what i was leading to with that is i think that the president has realized that the relationship is much more complicated and he is taking, i think correctly, the time to understand all the complexities of the relationship before deciding who you to proceed with policy to get the results to the very real issues that are out there. >> what do you guys want the most? you want them to be labeled a currency manipulator? do you want them to stop dumping? do you want tariffs in order to protect u.s. industries? what do you want? >> i think for the american business community the two most important issues are greater access in china given that it is the fastest growing economy in the world, delivers more to global growth than any other

economy, including the united states. market access is extremely important. but the second thing is to have that level playing field. i think in terms of this summit, what we would hope is, given that it is the first meeting, it is early in the administration, it is important for the two of them to establish a relationship. i think this summit's going to be more about tone than substance, but they ought to be setting up the process to deal with the very real issues so that second meeting does address more of the substance. >> you heard the tape where we had soundbites of then-candidate trump talking about china and perhaps some sound bites when he was actually sworn in. what is your greatest concern in terms of an issue that he could sort of misstep on? he's wanted to call china a currency manipulators. he says we are going to make them -- abide by the rules -- they won't even be able to handle it, they're going to abide so quickly. what are some of the missteps they are looking for in terms of particular issues? >> well, i think the important thing is to make sure on something like currency we

follow the procedures that are in place as the treasury secretary has said. he, by the way, will be down in florida as well meeting with his counterpart. it is not just the two presidents who will be meeting. there is going to be a large entourage with them that will also allow a lot of side conversations that will be helpful. as far as across-the-board tariffs, we have to be careful not to do more harm than good. getting into a trade war won't help the chinese economy or the u.s. economy. what we'd like to see is them addressing very real concerns not just retaliatory, defensive moves, but more of a proactive effort between the two countries to try to put a better framework for dealing with what's the most important bilateral relationship in the world. >> don't want to get you out of your comfort, john, but is there a possibility, a way for president trump to marry his concerns about north korea to the trade issue? in other words, if you don't

cooperate with us to address north korea, there will be trade consequences. >> u.s./china busy counciness c is we'd like long-term separated from political issues. we have a history of china sometimes blurring that line, with south korea more recently in regards to the place of missile defense in south korea. and then china taking actions against korean companies. you start to marry those issues tocchet, i think they can quickly spiral out in ways that will do more harm than good. >> john, thank you very much. we appreciate your perspectives today. john frisbie. earlier today on "squawk box," black rock ceo larry fink spoke about the market in somewhat ominous terms in light of the possibility that the trump aagain today may take longer to play out. here is his bottom line. >> because of the uncertainty, then i would say the market is -- the u.s. equity markets are probably higher than they

should be. >> higher than they should be. so says larry fink. but what are the charts telling us? dominic chu has taken a look at that. >> tyler, there's no doubt that the markets here are, again, near record highs and pretty extended by sta titistical mesh shus th meshmeasures. one level that some traders are watching right now is the 50-day average price for a stock. we've put a few examples up here on the board just to give you an idea of what we are talking about in terms of support for the overall market. dow first of all, that pink-purple line is the 50-day average price for the dow. you see we have been trading right around it, above it. it's holding that level of support. something to match. maybe if it can hold that, the trends stays intact. watch what's happening with the s&p 500 as well. the same pinkish line there, we're holding right around those levels. if we can hold there, perhaps things are still intact for the bull market there.

the nasdaq has been holding fairly solidly above the 50-day average price as well. one place we do see some concern is in the second biggest sector out there, the financials. we have seen a breach of that average price over the course of the last 50 days for this big etf that tracks financials, the xlf. one part of the market to watch, financials, for sure, to see whether or not we can hold these levels -- the 50-day average price just one factor traders are watching. >> dominic, thank you very much. given all this information what should you do with your money right now? let's bring in dennis gartman, ed itor edit editor. richard, let me start with you. looks like the mark is riding along on a nice, high plateau, not moving very much up, not moving that much down yesterday even when there was a dramatic falloff. what should i expect the next few months and what should i do as a result of that? >> a large part of the market

move since the election, as we all know, has been anticipatory. the new administration and tax reform and potential deregulation. so that's baked in the cake. obviously the markets are going to be watching and seeing how quickly that takes place and what the bottom line is. but the market is clearly gotten ahead of itself in that regard. if you look at the economy, no major forecaster in the u.s. globally has increased real gdp forecast for the u.s. since the administration came in. we have not seen any clear evidence of real economic growth so far, and we won't until, if and when the new policies come in to play. so we've been doing and recommending for our clients is to take a more prudent, conservative approach. we are not buying into this run-up in equities, so-called trump-up. rather, we're taking the profits, rediversifying, preferably overseas. >> i hear what dennis says.

but i also note apparently profits this quarter will be as good as they have been in many, many, many quarters. is that already baked in to stock prices. that's one. i know you know currency. weigh in on this debate whether china is a currency manipulator or not. >> tyler, the second question first. the answer is the president is absolutely wrong. chinese are not manipulating their currency downward. if they've done anything -- i've argued this for months and months -- the chinese have been supporting their currency instead. if they are manipulating to weaken their currency, they're doing it 180 degrees in the wrong direction, and somehow i don't believe that the chindz are that illogical and that silly when it comes to foreign exchange. they are not currency manipulators in the manner that the president would have us believe. let's put that one aside for right now. >> what they are, dennis, is major holders of u.s. treasuries. the thinking is, how much leverage do we really have over the chinese, no matter how ticked off we may be at their

trade policies. do you really believe that they've kind of got us where, if they start dumping treasuries, they're going to spike interest rates. that's always been their sword over us. is that a false tell? >> i think that that's an improper concern. they hold a huge -- they are -- i think they are the largest holder of treasury securities in the world outside of the federal reserve bank at this point. well, do the chinese have any intention of dumping securities to do damage to their own portfolio? the answer is no. they will probably do exactly what the fed does whether it comes to ramping down its balance sheet, which if they get -- if they become disturbed about what's going on, they will let those securities roll off. there would be no chance -- i shouldn't say "no chance." my wife always says, never say never and never say no. but in this instance i think the probabilities of them dumping securities in anger would be illogical and ill defined and probably not going to happen. so i don't lose sleep at night worrying about that. what i find interesting is everybody is concerned about the fact that they hold so much of

our paper. let me think. what a great trade. we buy goods from them, and we give them paper. that's a great trade in my opinion. i think we're on the strongest side of the question, and that's a part of the question that people don't seem to understand. >> dennis, you do lose sleep over the n.c. state wolfpack. i know that. >> yes, i do. >> dennis and rich, thanks very much. we appreciate it. on deck, the bold call on tesla that sees the stock nearly losing half its value. that's right. half. the analyst who made that call coming up. how one of the smallest and most isolated countries in the wlorld world is leading the world in one of the most important aspects of research. live to iceland, next. but first, our mystery char the of the day. this stock up more than 20% this year. it is a software company and it is based nowhere near silicon valley or even seattle. can you guess what it is? the name and the ceo interview next.

who do you work for? your boss? yourself? your family? our financial advisors are free to realize a plan to fit your family's unique needs. we'll listen. we'll talk. we'll plan. baird. i'm vern, the orange money retirement rabbit, from voya. i'm the money you save for retirement. who's he? he's green money, for spending today. makes it easy to tell you apart. that, and i am better looking. i heard that. when it's time to get organized for retirement, it's time to get voya.

dothe only thing theyut can't handle...t you.

dominic toretto just went rogue. i don't know what she's got on him, but that wasn't dom. it ain't too late to stop this. come and get it. [ grunt ] now i know what it feels like to be every cop ever chasing us. dom! is that a torpedo? take the wheel. [ grunt ] rated pg-13. experience it in imax. welcome back to "power lunch." we've got breaking news on lyft, the company. ride sharing service has raised a new round of financing of about $500 million which now values the company according a private stock market site at $7.2 billion. investors in this round include fortress investments, and carl icahn as well as chinese ride hailing service. so again, interesting

development here. a new $7.2 billion valuation for lyft. >> big news there, thank you very much. time to reveal today's mystery chart. shares of this software stock on a tear up more than 20%. hats off to those of you who guessed it. redhat, the north carolina-based software company, up 50% in the 90 days, doubling since its '13 lows. jim, two questions for you. one business, one political. i'll start with business. you are -- a lot of people probably don't know this. you are the arc connectihitectu amazon.com. how much of amazon's run has benefited you? do you think your stock or business is tied directly to amazon? >> i would say our business is tied pretty closely to the growth in cloud overall. certainly amazon is a great partner and amazon.com on the retail side's been a great

reference customer for us. more broadly, our technology runs on all the major clouds. when a large enterprise wants to move their operations to a cloud, it is easiest if they run it on our technology stack. our technology stack runs across the clouds. certainly public cloud and the growth of public cloud has been great for red hat. it is one of the reasons we continue to see accelerated growth rates. >> this is 2017, so you aren't getting off without a little bitle ka question. of all the things the president has spoken about, corporate tax reform, immigration, whatever it might be, is there anything you would heard that would either be very beneficial to red hat or perhaps detrimental to red hat? with that i'm thinking any limits on immigration. >> well, when i look across the things that he's doing, i do think corporate tax reform would be helpful. when i say "reform," i'm not even saying cuts. but i do think balancing a

corporate tax system where we and others aren't motivated to move around where we do operations for tax reasons so we can really work to make sure that we put our operations in the most efficient place would be very, very helpful. certainly immigration reform could be helpful, especially to visas. we're going to hire people wherever we need to hire them. we're global. we'd like to require more people in the u.s. and that will require dealings with the immigration system. >> you rekecently reported your fourth quarter results. analysts are excited about the momentum in the large orders. your first deal, over $100 million. what are you seeing in the beginning of this quarter and do you think that there is momentum specifically because of the animal spirits, the optimism readings at record highs, is

that translating to new and big deals? >> it is hard for us to directly tell what has to do with just our momentum. we're in the secular right places around cloud computing and a move to software defined architectures and how much of ha is due to the fact that our customers have more dollars to spend. i will say in general, investments in technology are growing, and part of that i do think is due to the fact that there is a sense of optimism, and therefore investment. a lot of those cap x dollars do go into technology now. temperatures the new infrastructure. that certainly ben if iefits us some degree, at the same time we are seeing growth around the world. across the world, in europe not quite as much optimism as we see in the u.s. with brexit and other things. we are seeing strong growth there as well. i do think it is a mix of secular trends, as well as certainly in the u.s. a clear sense of optimism. >> you do business in china, i assume. the president is meeting with the chinese president today. are you concerned at all about some sort of trade war that could impact you or impact either the flow of goods or the

flow of people from china and visa versa? >> well, china is an important market for us. it is both an in market, as well as we have a number of red hat associates there where we do core development work. any type of a trade war would just be bad all around. directly from red hat and just the nature of software, it is less about a flow of a good. but in general a trade war that then starts to just cause splits and reduced business in other categories ultimately -- >> what about intellectual property? is that a concern we hear from a lot of software folks. >> well, i laugh. red hat is the only company that's fully based on what's called open source software. >> that's exactly why i asked. >> we give away 100% of our intellectual property. so we have no intellectual property concerns. it is one of the reasons we're one of the larger companies that actually has engineers in china doing work, because we honestly don't have the same intellectual

property challenges that most software companies have. >> interesting. okay, thanks, jim. coming up next, we're talking corn. cornflakes, actually. chips and chicken. it is a food edition of "the good, the bad and the ugly" in today's "power trade" when we return.

stay with me, mr. parker. when a critical patient is far from the hospital, the hospital must come to the patient. stay with me, mr. parker. the at&t network is helping first responders connect with medical teams in near real time... stay with me, mr. parker. ...saving time when it matters most. stay with me, mrs. parker. that's the power of and.

will your business be ready when growth presents itself? american express open cards can help you take on a new job, or fill a big order or expand your office and take on whatever comes next. find out how american express cards and services can help prepare you for growth at open.com. welcome back. quick market check here, we got the dow at session highs, up by

84 points. s&p also at highs. time for "the good, the bad and the ugg. >> i kellogg is under some pressure again today. . the stock a big underperformer this year, down 1.6% today down by less than .5%. an ugly day for advanced micro devices. goldman citing intel and nvidia as big competitive threats. up next, one analyst says, hey, buckle up, all you tesla investors, because that stock is about to crater. why he sees the stock losing -- get this -- nearly half of its value. you'll hear from the analyst straight ahead. plus, pop the bubbly. one big booze stock is having a

great day. why it is up when "power lunch" returns.bu ilt with passion... but i keep it growing by making every dollar count. that's why i have the spark cash card from capital one. with it, i earn unlimited 2% cash back on all of my purchasing. and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... which adds fuel to my bottom line. what's in your wallet?

hey. pass please. i'm here to fix the elevator. nothing's wrong with the elevator. right. but you want to fix it. right. so who sent you? new guy. what new guy? watson. my analysis of sensor and maintenance data indicates elevator 3 will malfunction in 2 days. there you go. you still need a pass.

i'm courtney reagan and here is your cnbc news update at this hour. by a 52-48 vote along party lines, the senate's been triggered what's been called the nuclear option barring filibusters of supreme court nominees clearing the way for neil gorsuch to serve on the supreme court by allowing the vote to go forward on a simple majority vote. devin nunes says he will temporarily step aside on the commit into the investigation. >> devin nunes was earned my trust over many years for his dedication to the intelligence work to keep american community safe. he continues to have that trust. hundreds gathered in moscow at a memorial for the victims of

the subway attacks. that's your cnbc news update at this hour. stocks hitting session highs. let's get to dom chu with a market plas"market flash." >> dow's almost.5% up, almost at session highs. dow components, caterpillar, stock also near its best levels today standing up as the top performer around contributor to the point gains. dow shares up for a third straight day gaining nearly 4% just over three sessions. caterpillar, up 13% since donald trump's election in hopes of increased spending on infrastructu infrastructure. up 28% over the last 12 months. shares of carmax are jumping after the company reported an earnings beat. shares down more than 10% though because prices in the used car market are falling. tesla shares have been on a hot streak up 40% this year.

the automaker get iting a ratin meaning it is no longer in danger of a ratings cut. one analyst is sticking with a sell rating. brian johnson, senior auto analyst at barclays. he reiterated his underweight rating on tesla and his $165 price target which is about half of where shares are now. you being a knowledge this is mostly momentum driven stock, that investors have sort of taken a leap of faith and that the stock could actually have another leg higher go into the launch of the model three, yet you are sticking with a sell rating. how stuff to stick with a sell rating knowing that the stock is being driven by something else entire? >> we lived through the '99 through 2001 nasdaq bubble bursting. >> wait! that's a dangerous comparison you are making, brian, to say tesla and nasdaq bubble in the same sentence. >> it's tough as an analyst

because our $165 price target actually gives them a lot of credit for becoming one of the world's major automakers. we just discount that back and we get to what we think is a fair value for the stock, which is, frankly, different for where the market momentum is heading. it is trading right now in datapoints. as we point out, assuming a model 3 is actually laum lly la the expectations are low for volume, expectations are there is going to be some beta testing issues, if you will, with the early launch product, the market seems prepared to absorb that. >> it is hardly a pets.com. you're not counting eyeballs here. they really do make a car and people really do buy it. >> no, but if you look at when the nasdaq bubble burst, even stocks that wound up being great companies like amazon went down. >> tell me about the particular numbers that concern you most here. apart from the stock price. >> well, we think when you get to the 2020s and the legacy

automakers catch up in terms of evs, they're going to close much of the battery cost gap to tesla, and they can use the scale advantages and the other parts of their value chain around manufacturing, procurement, to largely close the cost gap with tesla. second, we think there are a number of players plowing ahead with autonomous driving, we're big fans of what mobilized driving within intel, as well as with some of the other automakers like gm. we just don't think it is going to be the clear out-front leader dominating the auto industry in the 2020s like apple did with the smartphone industry. >> you argue that tesla still lacks the industrial rigor and scale required to be fully autonomous. a lot of people buy the stock for that reason. why do you think they lack that rigor and how much more do they have to spend hard-earned capital to get there? >> it's not just a question of spending. it's just a question of rigorous testing in the products before they go out on the road. we've seen that already with

some things around the auto pilot system. and other companies, both the big ones, the legacy companies, for example, gm, as well as a number of start-ups, including start-ups with hot litigation that tesla has lost key engineers to. it is not going easy for them to maintain that commanding lead that a lot of investors think they have in autonomous. >> it is $300 a share now. you see $165 as a target price. how soon does it get there? >> we really have to see how model 3 rolls off. the only other thing that could send the shares down over the next few months is something major happening with the model 3 launch. >> so you're willing to wait. thanks very much, we appreciate your time. >> thank you. >> appreciate it. steve leisman has a news alert. >> tyler, we have an extraordinarily open letter from the minneapolis fed president addressed to jamie dimon, the j

jpmorgan's chief. he says his comments are "demonstrably false" and too big to fail is alive and well, taxpayers are indeed on the hook. he says jamie dimon in his letter unrealistically assumes the debt held by the debt holders for those banks would absorb the losses that equity is the only real buffer from a taxpayer bailout. finally he takes on dimon's comments that capital standards are not restraining lending or hurting growth. he says dimon is wrong about both of those. he questions why jpmorgan bought back $25 million in stock. we've in the seen kashkari take on the background of this. since kashkari came in office in 2015, he first spent time to create a plan for ending too big to fail and came up with one

that essentially calls for doubling capital standards, something that's really not accepted by conventional wisdom. kashkari's out there and kind of taking on jamie dimon on this issue of whether we have indeed ended too big to fail. >> we've had him on. he's very smart. but he also ran for office. every time i see this kind of thing, i wonder if this is a guy who's actually trying to pave the way for some other future job. i know you can't comment on that. >> no, i can comment it. i wonder what job being too big to fail would -- >> being anti-bank? >> i'm not sure that people are going to vote for the guy who is the big champion on too big to fail. maybe. >> former goldman guy goes after jpm's ceo. >> that's one way to think about it. kne neel kashkari has his thoughts on it. >> he's in customer banking. >> he's come up with a solution

that's "out of sample," i would suggest. >> outlier. >> outlier in terms of how to solve it. but that's his view. >> guys, we have to jump in. steve, i apologize. xi jinping, the president of china, is getting set to land in balm bea palm beach, florida. don't see 747s in palm beach that often. there's two there now. air force one and air china carrying the president of china. >> 25-hour visit expected. so many issues on the table in such a -- gosh -- a visit we have all looked toward because of just the dramatic things that we have heard donald trump, president trump, say about china throughout the entire election process. >>currency, all on the plate today. >> i'm always so interesting

that so many foreign leaders arrive in the commercial flag carrier of their country. air china is a state-owned enterprise, obviously. but they don't arrive in their version of air force one, an air force plane. i remember when the german chancellor came in. it was -- came on lufthansa. >> there are so many countries that still believe in this idea of a state champion. right? remember, every country used to have their own airline. >> swiss air, british air. >> they are the state-owned airline. so this is great advertising for air china right now. what we're going to do here, folks, a is soon as xi jinping -- >> i wonder if if he's sitting in coach. >> i doubt it. >> my guess is this is not a regularly scheduled flight from beijing to west palm. as soon as the chinese president steps off, we'll bring it to you live. still ahead, a legend in housing. blackstone's global chief of real estate will join us live from 5th avenue.

ralph lauren closing a flagship store there, a couple stores down from trump tower. we'll get his take on where he sees retail headed next. a run-up in rates and a run-down. the dollar index intraday is at some of the best intraday levels since mid-march. kind of like yesterday never existed. r-10s, we're holding the bottom of the range. the french 10s, they have elections. it looks a little bit more on the weak side, so say traders. so do the guilts hovering at 110. seems everybody's pretty bullish on everything, even in the u.s.

moments ago, chinese president xi jinping arrived in west palm beach, this for the first face to face meeting with president trump in west palm beach. again, they arrived at an air china fleet, a 747. we are awaiting that door to open where xi jinping and his entourage should be exiting the plane. a very brief visit, guys. 25-hour visit. literally more time in the air than on the ground for the meeting. still, arguably the most important meeting in president trump's young term. >> president trump isn't there yet. we expect him in just about an hour or so. we are expecting that secretary rex tillerson -- secretary of state rex tillerson will be there to greet the chinese president. tillerson's already met with xi jinping a couple weeks ago laying the groundwork for the agenda, especially when it comes

to korea, and their continually firing off missiles showing off prowess for thenuclear system. >> a lot of experts expect something to happen in the next 24 hours. let's transit to the heavy hitters of the world of commercial real estate. they are meeting in new york city to talk trump. interest rates. retail. and a whole lot more. blackstone's global chief of real estate is standing by with our diana olick. >> tyler, we're standing on 5th avenue at the nyu rate conference just six blocks north of the polo ralph lauren flagship store. tell us what that tells you about the future of the retail sector? >> i don't know if that specific incident or closing impacts the

whole sector, but there is broader pressure on retail. what's happening is the share shift is under way from land-based retail to online retail. pretty much all around the world what we're seeing is sales growth of 15% to 20% online and very little sales growth for land-based. what that means for retailers, they have to look at their models. should they do multi-channels, should they go online. that's putting pressure on retailers and retail landlords. >> how does that change your retail strategy? >> i think for us roo he tail in the u.s. has not been a huge part of what we've done but we are definitely gravitating more to things like convenient supermarketing, that's harder to disintermediate. in urban areas, like we own a big shopping center in queens where there is not a lot of retail. overall when you look at traditional power centers that deliver consumer electronics and books, there's pressure there. when you look at malls -- >> and warehouse is a big place

for e-commerce for you. >> so the flip side of this is obviously what's happening on the warehouse side which is people are buying goods more directly, and as a result we are seeing more direct to the consumer through logistics. the last two years in warehouses have been records in terms of demand. we bought 330 million square feet of warehouses around the world. >> that's your anti-retail trade. now i want to get quickly, if i could, to you met with president-elect donald trump. you talked about the economy when he had just been elected. you said he talked about growth. now that we are a couple of months into his term, have you seen what you wanted to see? you are still bullish on growth under a trump economy. >> well, i think it is a little soon to measure things at this point. i actually supported secretary clinton, but i had a greet opportunity to meet with the president-elect and what i took away from that was an intense foe cus on growth. i think they are going to try to push something through on tax reform, on infrastructure. >> will you take a part in

infrastructure? >> no, i don't think i'll take a part in infrastructure, though as a firm we may look at pruk tur as a very large asset lass to invest in. i think there will be a real push. i think there will be tax reform done and that should be a mopos perspective for growth. >> you ipo'd. do you see growth in the sing family rental market even as the housing market is really now recovering? >> yeah. i think single family house something going to do quite while. single family rentals, maybe even better. bottom line is supply and demand, there is about 1,100,000 units built last year. it is driving up rents. inventory out there is as low as it's ever been. i think single family is the place to be the next couple years. >> thanks for joining us. >> thanks, diana. coming up next here on "power lunch," there is one thing iceland does better than any other country in the world.

that story right after this break. iceland's unique genetic makeup has made important contributions to medical research. next up, we tell you how that work is moving from iceland to the world.

e*trade's powerful trading tools, give you access to in-depth analysis, and a team of experienced traders ready to help if you need it. it's like having the power of a trading floor, wherever you are. it's your trade. e*trade

dothe only thing theyut can't handle...t you. dominic toretto just went rogue. i don't know what she's got on him, but that wasn't dom. it ain't too late to stop this. come and get it. [ grunt ] now i know what it feels like to be every cop ever chasing us. dom! is that a torpedo? take the wheel. [ grunt ] rated pg-13. experience it in imax.

it is time now for a look at modern medicine, iceland style. the country draws envy for its natural beauty, periodic volcanic eruptions and the band s gir sigaros. but there's something else the tiny nation does better than any other place in the world. genetic research. to find out, you've got to go to the source. and that's what our meg terrell did, taking a viking ship from new york to the island. >> reporter: countries all around the world are trying to emulate something that started here in iceland. and it's not this beautiful, gray weather we're having. it's actually genetic research. because of some unique characteristics of iceland, including the founder effect, thea population derived from a small number of ancestors, those things all come together to make

it a great place to do genetics research. a company called decode genetics is doing just that, yielding insights into diseases like alzheimer's and amgen bought that company in 2012. now companies all over the world are trying to elm utility a what they've done here from qatar to singapore to england and the united states through the initiative started under president obama. we talked with nih director francis collins about how that work is continuing. take a listen. >> the idea is to take into account the individual things, such as your environmental exposure, your health behaviors, yes, your entire human genome. and lots of other aspects about you, in order to optimize the recommendations about how to stay healthy. >> reporter: and as this technology and these products are spreading throughout the world, iceland is still involved through a decode spin-off. they make the technology that's powering a lot of these big population genetics projects. we talked to the ceo about that.

>> in a way, what we try to aspire to do is, in essence, much like bloomberg did for financial data. bring together the world' genomic information, put it on to a digital platform, and allow the users to query that information, interrogate it, at scale. >> reporter: and even as all of these projects are moving around the world, iceland is still making its mark there, guys. brian, back over to you. >> meg, it's incredible. how much would this really be something other countries could go, given what you mentioned, the relatively small base of people from which iceland began on. i'm sure they've got a unique genetic profile, as you mentioned. so are those who say, it's just iceland. or unless you can find another country like that? >> reporter: yeah, there are a few other populations they call these founder populations, they have the founder effect. that could have sort of similar united states. but here in the united states, they're looking to sequence about a million people, as francis collins mentioned, and trying to use that data along with other data from things like

wearables and our electronic health records to try to use big data to make medicine ever more personalized. while things may pop up more in a population as hi monthahomoge iceland, that's part of the hope. >> and off gene pool that's very consistent and you can look for variants that may contribute to certain diseases, like alzheimer's, and that can really speed up the pursuit for some sort of cure or medicine. >> reporter: that's absolutely right, melissa. if you guys remember last spring, we talked about a discovery that came out of this database here in iceland, of a gene that appears to protect against heart attacks. that's because they found in the icelandic population, a certain number of people who appeared to be protected from heart attack. you can find those when the population is more similar to one another. and they found similar things in alzheimer's, as you pointed out as well. that's why it's a great place to do the research. >> great story, meg.

thank you. just a reminder, the president of the china, xi jinping, is about to exit the plane in west palm beach. he'll be headed to his first face-to-face meeting with president trump in mar-a-lago. there you see on the left side of your screen, still a little bit hard to see is rex tillerson, the former ceo of exxonmobil, now current secretary of state. they were literally, literally rolling out the red carpet from the foot of the stairs, all the way to the airport terminal. that took a bit of time here. this, a 25-hour visit, maybe, guys, a little bit of irony, because the president has been aggressive about china, about trade. and here we see the president of china stepping off, one of america's own best-known exports, the boeing 747. >> mm-hmm. better than an airbus, right? for him to arrive in an american plane. the decision to have this in palm beach rather than at the white house. we read that there was consternation or concern among the chinese, was it important enough -- was the symbolism strong enough here. should this be a white house visit instead? and they were assuaged of those concerns saying, no, mar-a-lago

is important to president trump. and they should see this. it does allow for more casual setting and conversation. >> and that's what a lot of people are saying on the u.s. side of things, that this is naturally a better place for the president. he's more comfortable at mar-a-lago. so maybe this could be a better foundation for a relationship. also interestingly, china is a country that does not like golf. golf is seen as -- >> bourjois. >> exactly. a sport for the rich. you know, there's been a real sort of talkdown of the sport of golf. and so that is certainly not going to be on the agenda at this golf resort. >> wow, that's true ever since moua. >> exactly. >> and xi jinping's own history, he's not a golf fan, that's well known. but xi jinping tea's father wasy powerful and then he was cast out of the party and sent to basically a factory job. so he had a relatively privileged and then rough upbringing at the beginning. so his history and his narrative

is sort of probably defined by that time in his life, when he was sent basically to work and was forced out of communist high school, back when he was 15 years old. >> many of them were forced into education programs, a long history of china and what they were trying to do in terms of the educated elite, and that is a history that many of them share. >> there he is! there he is. president xi jinping and his wife. >> what's her name? >> han lion. >> and she appears to be greeted by secretary of state rex tillerson. we understand the president of the united states is on his way, coming in his own 747 air force one. on the ground now in america, xi jinping. >> there you see secretary of state, rex tillerson. >> first happened sheik on the

grou ground. >>. >> but they have a bit of a relationship, because he did meet with him in china. if there's any relationship at all in this administration, it would have to be with tillerson first. this is their second meeting, which is 100% more than many of the administration so far. >> secretary's visit to china was very different than what you would have seen from previous secretaries of state. secretary kerry always went with a very large entourage. tillerson brought only one reporter with him on that trip, which raised the hackles of the reporters in washington, d.c. but he has made it very clear, he is going to set a very, very different tone as secretary of state. in fact, when you saw his most recent statement on north korea, it was essential, we're done talking. you won't hear much from us about this at this point. suggesting that they're more interested in action at some point. >> you know, one of the things that we have talked about, guys, in terms of china trade, which i think a lot of people probably have missed is that our -- i don't want to call it a

dependence, but our large trade deficit with china is a relatively new thing. we import tens of billions a month, but even just 20 years ago, we imported very reta ee e from china. there are those who say, we need chinese-made good, but there are those who say, for the first hundreds of years, we did not. even in the early '90s, we did not import that much from china. mexico was a far bigger exporter to the united states than china was. and one wonder ifs that will color any of the trade discussions that the two are going to have. >> and i was also thinking, not that the white house does not connate power, but mar-a-lago connates the prooivate power ofn extraordinarily successful businessman. which speaks in its own way to president trump and his business in finance. i wonder when he goes to check in, they ask him, one key or

two? >> as many as you want. >> and certainly when it comes to the issue to have business, we had -- remember the u.s. china business councilman on earlier. he said, they're looking for reciprocity. there's a lot of frustration among american businesses that chinese businesses, except for when it comes to security issues, can pretty much invest as they want here in the united states. it's not the same in reverse. but the president of the united states doesn't want more u.s. company investing this china. he wants more of them investing here sp here. so i don't know if the u.s. business community is going to get out of the trade talks what they're hoping for. >> to your earlier point, michelle. trade is ostensibly the main topic here, but suddenly it's become north korea, launching a missile into the sea of japan, recently. kim jong-un, clearly wanting to either drive a wedge between the two countries or at least distract from the pageantry of this moment, with hey, remember me, i'm here, i'm still a problem. and to your point, michelle,

maybe north korea rattles the saber a little more during the next 24 hours to make sure the news coverage is a combined this plus what's happening on the north korean peninsula. >> there's been speculation about exactly that. >> which would force the president of china to have some sort of response. >> or china has said to north korea, don't you dare do anything while he is here. that i wouldn't doubt. and that may have been why they fired the missile two days ago. not in the middle. >> and despite the tough talk, the hang seng, the chinese index based in hong kong has outperformed the dow over the past couple of months. a lot of tough talk about china, but their stock market has outperformed ours. they've both done well. >> in the meantime, let's get a check on our markets here in the united states with this summit coming up as president xi jinping makes his way to mar-a-lago. we have the dow up 72 points. s&p up by almost 8.5. almost at session highs, about four points below that. bed bath and beyond rallyi inin,

raising its quarterly dividend. the company gave weaker than expected guidance for the year, but the stock is up because that weaker guidance was not as bad as many had forecasts. sonoco shares soaring more than 20%. selling convenience stores and gas stations to the parent of 7-eleven. the ipo of the day, schneider national pricing higher, at 19 bucks a share. the first trucking company ipo in the u.s. since 2010. all right. well, income 2:00 yesterday, the stock market was up pretty nicely. then the fed minutes were released and stocks began to drop. what exactly did the fed say that sent a little chill down investors' collective spines? steve liesman knows and he joins us now. >> if you were honest, brian, you would say, until 2:00 yesterday when i came on tv, right, the stock market was doing -- sullivan is what i'm talking about. >> fake news. >> look, we're still trying to digest today the new information provided by the fed in those minutes of the meeting from march. here are the bullet points that

i think are the ones that surprised markets. one is the fed saying it's likely to reduce the balance sheet this year. consensus from our fed survey, some assignment in 2018, march on to june. second, possible immediate end to reinvestments, not gradual. there was kind of 50/50 in there. was the fed going to do it immediately, stop reinvesting? or do it in a gradual way? here's the portfolio or the balance sheet that we're talking about. it's $4.4 trillion, swelled from action during the financial crisis to lower interest rates and try to get the economy back on track. treasuries are 2.5 trillion, mortgages, 1.8 trillion, other, $200 billion. important here, more than $400 billion of this portfolio is supposed to roll off next year. it's a $400 billion hit. two other comments i want to mention by the fed that were of interest to the market. first, minutes showed officials felt equity values were high, relative to the potential for fiscal policy to deliver. second, it delayed its best guess of when fiscal policy will affect the economy for 2018. all of those were, stand up,

take notice, and because sullivan was on television, sell stocks. >> jobs report? >> nobody's defending this. >> let me ask one more question about the balance sheet. i think i heard you say there, that it would be $400 billion coming off -- >> and not reinvested. >> right. >> is that roughly what it is over year? >> no, next year is a particularly big year and a lot of it is through -- there's about a six-year average life to it. there you go, you can see the rough maturities out there. >> so at $24 billion a year. if their goal is to get it to half its current size? >> right, or so. >> that takes many, many years. >> right, it could take a very long -- it was $200 billion or some years was going to be 400 -- it's a staggered situation. they tried to lengthen to show the operation twist. should short-term, bought long-term. >> but the bottom line, this is additional tightening on the projected two rate hikes.

that's what the concern is here. >> worth pointing out, there is also discussion, not from the minutes, necessarily, but that the fed may stop raising interest rates when it the us the balance sheet. which changes a little bit the -- >> that changes the conversation a lot. >> changes the conversation and the calculus for the calendar. >> one or the other. >> think about it this way. think about the fed now doing june and september rate hikes. and then halting and then announcing a reinvestment plan, and then doing it beginning, for example, in december. notice, though, this would be done ahead of the likely departureture of fed chair, janet yelyellen. >> let me ask a dumb question. >> doubt it. >> when a balance sheet matures, what happens? does the treasury write them a check? >> it's not actually happened. the fed has just sort of rolled it over. it would essentially, i suppose, expire and they would issue a new one. that's usually what would happen. or the fed would go in and buy a treasury on the open market. >> that's what they're not going to do.

>> right. so the treasury would have to go out and there would be this big -- >> i get my principle back. >> get my principle back. right, this -- write 'em a check and it's then transferred, because our financial system is way more complicated than it's worth. they would then transfer this money back to the treasury at the end of the year. >> i love that the interest rate -- >> and there's a fancy name for it. in fact, they just announced today, senior rates. this idea that the fed right now is collecting all kinds of interest from this $4.5 trillion portfolio. it then sends it back to the treasury, about $90 billion a year right now based on this -- and then what they'll have is they'll have -- this is a really smart question. i'm sorry i didn't bring this up earlier, because it's worth thinking about. they'll get that principle and send it back to the treasury. >> a seniorage moment. you're going to have a -- is this the same thing as basically, if i've got debt -- the irony is, they're raising rates on themselves, in a way. it's like sitting around a table and say, i want to jack up my own credit card rate for the

good of the family. >> so you realize what happens to them? it actually reduces the value of their portfolio. higher interest rates. so now they're predicting a lower value to this whole portfolio. in fact, i think they may have lost this this year on or shortly on -- >> which is either a party signal, it's like, what is that one that you do. request >> that's gangnam style. >> that's gangnam style. >> if people didn't have the sound up to that point, tyler doing this almost certainly caused them to listen to our discussion about senior -- >> we've got to go. >> thank you, steve. >> i'll go back and give her some medicine. >> she's our line producer. black rock chairman and ceo larry fink tells cnbc despite the wave of job cuts, he is not replacing humans with stock-picking machines at the firm. he said it this morning. >> what we did most importantly was in u.s. equities. it was more of the large-cap area, where i've stated in the past on this show, we're seeing

a demock k rck ratization of information. let me be clear. we are not substituting humans for machines. we're -- we are reorienting some of the human jobs, in terms of doing more data science and data analysis. >> so, rich covers the exchanges and online brokers for sandler o'neil. welcome to "power lunch". >> hi, michelle. >> he's doing what everybody else is doing, right? far more automation of anything you can automate, because it's cheaper than humans, right? >> i certainly think so. i think you've seen the trend towards automation, you know, not only in the overall world, but certainly in the financial service segments, like trading, investing, and i think we're getting very close in asset management, as well. >> so here's the thing. when it comes to all the companies that you cover, the exchanges, this is good news, right? because it reduces your employment costs. but i also see that all these guys are facing the fact that

they're making less revenue, because they have to charge less and less every day for execution while the stuff that they do for clients. >> yeah, in the asset management industry, i think you've got to balance these forces. there are, as they auto mate mo more, it's more efficient, but there's also some stiff competition on fees, as well. >> yeah, the beauty of the asset management business has been that it was an annuity business. you had a long-term income stream, but now that income stream is turning into a trickle, right? >> well -- >> not necessarily -- i overstate for emphasis. that was a trumpian moment there. >> it may still be an annuity, but it could be a smaller annuity, so to speak. and you see that, you know -- >> what does it do to the values of these companies, then? >> it depends on the margins that thaey're going to maintain depend on the business they're going to maintain.

what are the fees after they automate? but there's one thing, when you see a segment go towards automation, you need to move quickly, because at least you've seen in the trading industries, if you didn't, you were left behind. >> is he getting ahead of it? is he out front? >> i think you've seen movement already. you see etfs, you see what they call smart beta etfs that use automation to sort of tilt or look at certain investment criteria. so i think he is ahead. i don't think he's the first. i think the movement has been started. >> but bottom line, do you buy these things or not? what wins? the cheaper costs or do you avoid them because of the falling revenues? >> i think it's probably too early to play it -- for that to play out. because he's just started. he's just made an announcement. we haven't seen the performance of the funds. we haven't -- >> i meant about in this industry. do you buy any of these things and wait it out? of the stocks you cover? >> well, i -- well, the stocks i

cover in the exchanges and trading companies, they're not going to be impacted by -- there isn't any incremental impact by what's black rock's doing there. they'll still trade. and even the quantitative strategies will generate volume for the exchanges. >> i see, i was conflating. thank you, rich. >> you're welcome. spotify wants to go public, but without all the hassles or expense of actually going public. leslie picker joins us now to explain. leslie? >> that's right. is it too good to be true, you guys? going public without the hassle. so sources tell me that spotify is not interested in doing an initial public offering, but it wants to be a public company. the solution that the company is seriously considering is more of what i would call an initial public listing. now, what that means is that spotify would not sell shares. it would not market itself in a traditional road show. it would not get the same kind of research coverage.

instead, the swedish company would register its shares and compel current holders to sell on the open market. now, spotify has $1.7 billion in cash on its balance sheet right now, according to a person familiar with the matter. and so it doesn'tner need to raise money through an ipo. and simple supply and demand dynamics would determine the price. but the question is, why do something so unkrengs conventio? for one, spotify would save on banking fees. going public actually costs company an average of $12 million in fees last year. and of course, the bigger the offering, the more expensive the ipo. usually spotify can also talk -- not be subject to the same quiet period rules that come with a typical ipo under this model. but experts say the tactics come with some risks, as well. spotify may seen less liquidity, since there won't be a set offering size. and additionally, spotify won't have the same benefit of banker

introductions, and may not get the same type of research coverage, if it's not out there talking to analysts. so if successful, though, others may follow suit, guys. >> so does this imply that no new shares will actually be created? because it sounds like, then, that the founders want an exit and they want to sell their shares. that's why they're entertaining this sort of mechanism? >> it's a combination, that's correct. no new shares will be created through this public offering. they would only be sold by inside investors and the founders and employees. so they actually have this interesting deal that they did, a convertible deal with tpg and dragoneer, which made it, which is from people familiar with the matter, that encourages them to go public at some point. people that i've spoken to say that these documents indicate what's more of a qualified initial public offering. so it's unclear whether this counts as a qualified public offering, which would usually indicate underwriting and -- >> would they split the shares multiple times in order to have enough shares to make it in any way a public float?

>> so that's the -- that's the tricky part about this. and i think that's why people have avoided doing this in the past. because they have to compel current inside investors to actually sell their shares rather than issue them themselves. so they get rid of the control of the actual float size. and it's unclear whether they would be able to actually split their shares in half to create enough of a supply so people would have something to actually buy. but i think that is one of the biggest risks that go along with this -- >> i asked when we were all a little bit stumped -- where are they based? >> they're based in stockholm. >> stockholm, sweden. >> not your people. you're norwegian. >> close, but -- >> big threat to apple music. apple music has 20 million subscribers already. took a year and a half to get there. took spotify seven years to get to the same number. spotify was a big user. i moved over teem music. spotify music is not the most user friendly format. >> i used to and i switched over to apple. they didn't have enough taylor swift for a long time. >> this doesn't ensure any sort of shareholder rights. they're not registered with the

s.e.c. they're not under s.e.c. p purview, so they don't have to do -- >> they would, actually. they wouldn't have to register an initial public offering prospectus. so the issues would be different. >> all right, julia boorboorsti? >> legendary comic don rickles has passed away at the age of 90. this after a six-decade career in comedy. the emmy award winner was best known for his stand-up performances and appearances on late-night. he was a guest on johnny carson that launched his career. most recently, he voiced the mr. potatohead character in disney's pixar "toy story" movies. >> julia boorstin, thank you very much pmplt here's what's coming up on "power lunch." china east president arriving in west palm beach, florida. president trump set to arrive shortly. we'll bring you all the

developments as they happen. plus, a amazon spending a lot of money on content. the latest buy, $50 million for ten nfl games. what exactly is amazon's strategy hear? plus, the company's founder spending a lot to go to space. we'll get a rare look at jeff bezos' space plans. all that and more when "power lunch" continues. stay with me, mr. parker. when a critical patient is far from the hospital, the hospital must come to the patient. stay with me, mr. parker. the at&t network is helping first responders connect with medical teams in near real time... stay with me, mr. parker. ...saving time when it matters most. stay with me, mrs. parker. that's the power of and. ♪ ♪

welcome to holiday inn! ♪ ♪ thank you! ♪ ♪ wait, i have something for you! ♪ ♪ making every stay a special stay. holiday inn, smiles ahead. whether for big meetings or little getaways, member always save more at holidayinn.com

[ [ screams ] ] [ shouting ] brace yourself! this is crazy! [ tires screeching ] whoo! boom baby! rated pg-13. [ screams ]

welcome back to "power lunch." we've got sports news to break for you right now. the world number one golfer, dustin johnson, has withdrawn from the masters, the season's first major and the unofficial kickoff to the golf season. dustin johnson had been practicing earlier today and had been warming up with the attempt to try to play, but in and around his walk to the first tee, our colleagues at the golf channel report that he decided he was not ready to go for this fu first round play. so world number one golfer, dustin johnson, decides as he approaches the first tee he's not ready to play. this all after earlier this week he slipped and fell on stairs in his rental home and injured his lower back. a big blow to so many fans out there, and of course, the masters and augusta national, very big news. >> if he was not the favorite, he was one of the favorites, right? >> i think he was a prohibitive favorite. i mean, he's the world number one golfer. it's a three-tournament winning streak he's on right now.

and the guy's playing some of the best golf of his life. to have this happen is big. >> who does this open this up to? >> spieth. >> jordan spieth and rory mcilroy, always in the mix. jason day. >> andy sullivan of england. >> danny willett won it last year, so you never know -- >> sullivan's got the name, the genetics. >> did you happen to see -- >> obviously, the skill. >> gosh. >> did you happen to see the opening ceremony today where they came out with arnold palmer's green jacket and his widow. it was really something. >> i didn't get to see it live, i watched it on replay elsewhere. i can tell you my wife was not even the hugest golf fan, but even she texted me said she was watching it live and it brought tears to her eyes. it's certainly an emotional time. the first masters after arnold palmer's passing. >> and jabelieve it or not, amad not hit a new record high.

but don't worry, jeff bezos still has plenty of money and he's spending a lot of it, personal money, on the space race. morgan brennan got a rare look at bezos' blue origin. hi, morgan. >> hey, michelle. that's right. so jeff bezos revealing yesterday that he has plans to sell about $1 billion worth of zp amazon stock per year to fund blue origin, at least for now. one area that's getting some of that funding is new shepard. this is a model of the new shepard crew capsule that will eventually carry paying customers to the edge of space. this is going to be reusable, just like the rocket that is also behind me. that rocket behind me that is suborbital has been launched and landed five times. so speaking here from the space symposium yesterday, bezos discussed how being able to reuse new shepard and future vehicles will help to bring down the high cost of space travel. >> if you recover and spend a

lot of time and money x-ray'ing everything, revalidating everything, refurbish everything, it's not actually going to lower costs. you have to get much more like airliner operations. you have to be able to land, refuel, maybe do some minor inspections, and then off you go again. and that's what we're going to get to. >> reporter: and of course, the rivalry between blue origin and elon musk's space-x did arise. he acknowledged that the two are very like-minded. both are focused on vertical landings with rockets and recycling hardware to cut costs. from an engineering perspective, the two are going about this very differently. for bezos, assist focus on gathering more data from his suborbital vehicle to be put to the next generation of rockets that will be reusable from the start, while musk has been aggressively launching orbital class rockets and only just last week reused one for the very first time, but in terms of this

new shepard vehicle, bezos saying that he's hopeful that this will start service late next year, but that they're really not going to push that deadline. it's about testing and safety. it's part of the reason the company hasn't actually opened up reservations yet or even disclosed a price for the trip. guys? >> wow, very cool stuff there, morgan. great opportunity. and bezos looked a little top gun. a little tom cruise, 1985. >> he looked like a pit bull. >> bomber jacket. >> i was thinking maybe patrick stewart from "star trek: next generation," right? number one. let's now turn from bezos' spending on the space race to amazon's spending spree on content, and amazon's willingness to potentially overpay could hurt companies like netflix. danny kernos joins us now. you know, the $50 million for football, when it went for $10 last year for twitter got us thinking here on "power lunch,"

is amazon maybe overpaying and are they may be overpaying on purpose, because they can stick it to their rivals? >> i don't know if they're overpaying on purpose. although, i think for any nfl fans out there, if you can watch the product on thursday night, you can certainly target they overpaid for it. >> good point. >> i think it's really all about monetization, right? twitter pays $10 million for football and they monetize it how? amazon pace $50 million for it and now all of a sudden, you've got takz access to prime, they' winning the living room battle. ostensibly, you have people on their phones that run out of chips during the game. go prime now, they order something. it's really all about the monetization mechanism behind it. and that's what justifies the expense for the content. >> so you think it's a fair price? you don't worry that they are driving up content costs for everybody else? or the whole industry? maybe even nbc, cbs? >> i mean, that's really not their problem, but, you know, look, i think cbs -- >> no, but it's the other guys'

problem. that's the point. amazon is not the problem. it's not their problem. they're the guy on the street, when every home is selling for $300 that comes in with a $750,000 all-cash bid. >> i think that could be a problem overtime for netflix. netflix has its own issue with international and suband pricing elasticity. but, you know, for amazon, as i said, it's all about the justification for it. i think you can argue that studio costs are going up a little bit, you know, obviously, people are trying to find the next great youtube star. and, you know, to the point about netflix, you know, they have all of these original series. once those become hits, that's really when the price starts getting inflated. so amazon is paying up for established content and it's live sports, which is really driving ratings. >> sorry to jump in, dan, we're running out of time with this xi jinping stuff. do you think the space, the blue origin, is going to distract jeff bezos from amazon. is that a negative in any way? >> i mean, between "washington post," blue origin, you name it,

you know, he's spending money in the right places. aws generates a ton of cash. and if you need someone to go over and check on them at mar-a-lago, i'm happy to do so in about 10, 15 minutes. >> you're nearby, funny. >> thanks, dan. >> yeah, thank you. all right, president trump arriving in florida shortly, right up the road from where daniel was there in palm beach. >> that was his point. >> to meet president xi. what each side is hoping to accomplish. plus, you can party like the rat pack in sinatra's desert getaway. we'll show you around the place when "power lunch" returns. listen. ♪

will your business be ready when growth presents itself? american express open cards can help you take on a new job, or fill a big order or expand your office and take on whatever comes next. find out how american express cards and services can help prepare you for growth at open.com. find out how american express cards and services e*trade's powerful trading tools, give you access to in-depth analysis, and a team of experienced traders ready to help if you need it. it's like having the power of a trading floor, wherever you are. it's your trade. e*trade at crowne plaza we know business travel isn't just business. there's this. 'a bit of this.

why not? your hotel should make it easy to do all the things you do. which is what we do. crowne plaza. we're all business, mostly.

i'm courtney reagan. here's your cnbc news update at this hour. turk yis's health ministry says the poison used in the deadly military attack in syria was the deadly nerve agent, sarin. many victims to have the attack were taken to turkey, where autopsies were performed. russia has recognized west jerusalem as israel's capital. the announcement comes as the trump administration decides whether to move its embassy from teleaviva to jerusalem, which

would institute the u.s. recognizes west jerusalem as as syr israel's capital. students faced off with police in san cristobal on wednesday. and construction crews uncovered an ancient roman aqueduct dating back to the third century bc as they rk who had on a rome metroline. it was buried 55 feet underground is more than 100 feet long. it's believed to be the most ancient roman aqueduct ever found. very cool. that's cnbc news update at this hour. tyler, back over to you. >> courtney, thank you. time now for the power house. each week, we take you inside the home of celebrities, sports figures, ceos. and this week, let's go to frank sinatra's desert mansion, where he partied with the rat pack. >> not far from palm springs is a private desert hideaway that once belonged to frank sinatra. named for a character that earned him an oscar, villa m

maggio is locate d 4,700 feet above sea level. the main house has five bedrooms, five and a half baths and two full kitchens. the two-story guest house has three bedrooms, each with their own private viewing deck. there's also a built-in fire pit outside. the property also boasts a swimming pool, a tennis court, and its own private helipad. own the place where sinatra hosted countless dignitaries and a-listers, including members of the rat pack, for $3.9 million. >> we are told the current owners did not redecorate villa maggio. it looks a lot like it did when frank live there had back in the '70s. president trump arriving any moment now in florida ahead of this big meeting with china east president xi at mar-a-lago. lots of important issues going to be on the table with really market-moving possibilities. what each side is looking for and what the chinese are hoping

to avoid, next on "power." anything worth pursuing hard work and a plan. at baird, we approach your wealth management strategy the same way to create a financial plan built to last from generation to generation. we'll listen. we'll talk. we'll plan. baird. ♪ can i get some help. watch his head. ♪ i'm so happy. ♪ whatever they went through, they went through together. welcome guys. life well planned.

see what a raymond james financial advisor can do for you. [he has a new business teaching lessons. rodney wanted to know how his business was doing... ...so he got quickbooks. it organizes all his accounts, so he can see his bottom line. ahhh...that's a profit. know where you stand instantly. visit quickbooks-dot-com.

president trump set to awe arrive in west palm beach any minute now for his big summit

with china's leader. we know president trump has a long list of issues for president xi, including trade, north korea, but what do the chinese want to get out of this meeting? eunice yuan has those answers from beijing. >> reporter: the chinese want to figure out what president trump is all about. and to try to maintain stability in the relationship. the foreign ministry has been telegraphing what president xi and his delegation are likely to emphasize at the summit. that china has contributed greatly to the american economy. the foreign ministry recently rattled off a number of statistics to back china's argument, saying is 40% of china's trade surplus is generated by u.s. companies here. 2.6 million american jobs were created because of bilateral trade and investment, and each american family saves $850 a year, because of cheap chinese goods. the chinese are hoping this message will deflect what they expect to be heavy criticism by

president trump. its a provides a window into what beijing is most worried about, uncertainty in the relationship. from beijing's perspective, what's most important is for president xi to project strength at this summit. china is facing a leadership reshuffle in the fall, so for domestic reasons, president xi has to appear tough. so the worst-case scenario for china is if there's any development that can be perceived as an embarrassment for president xi, signs of open hostility, awkward moments, or a disrespectful tweet. the best-case scenario is if they manage to avoid full-on confrontation and if they're able to get reassurances that the u.s./china relationship is on a stable course. eunice yoon, cnbc business news, beijing. >> all righty. when president trump and chinese president xi jinping meet today and again tomorrow in palm beach, they will be forced to confront a number of hot-button issues. economic, political, military

between the two countries. let's bring in admiral james. gentleman, welcome. admiral, you lay out, at least in my notes, three easy wins for both sides. let's go quickly through what each of those three are, not that they are particularly specific or consequential, but tonally, very important. >> i think the first is a simple statement of agreement that the two nations will work together to contain north korea. it doesn't have to be a specific sanctions or heavy hitter kinds of immediate actions. but i think we've got to at least see the two nations agree to work on the north korea problem. i think a second easy win is on cyber, and cybersecurity. we've already seen a diminution

in the conflict in the cyber realm following a meeting a year ago. a building on that would be good. and thirdly, a statement oar an agreed upon way to proceed on trade issues, not to settle anything, but let's hope the markets come out of observing the meeting thinking, okay, we're not headed the for a trade war or series of tariffs, just a conversational kind of tone. >> so there are three poles the, simon, that the admiral sees. do you see it that way? and could the conversations -- and those sound achievable? they sound tonally sort of very muddle of the road. do you think it could go farther than that? and that there might be some specific outcomes that are -- that derive from this whole meeting? >> i think it's very unlikely at this point you'll see specific outcomes. in particular on the trade

issue. there are a lot of very detailed issues that need to be hashed out. i think the important point to take onboard here is that it is in both sides' interests that the trade relationship proceeds smoothly. if you look at the importance of the u.s. to china, it accounts for about 18% of chinese exports. it accounts for about $20 million manufacturing jobs, producing goods to sell to the u.s. market. china can simply not afford to threaten that relationship at a time when they're facing unemployment issues from state-owned enterprises that are effectively bankrupt. that's a problem they urgently need to solve. if they are forced to do that, they'll have to add additional stimulus to the economy, further increasing leverage in the economy, which again is not something they want to do up-to-the-. >> >> but it doesn't feel like the current president and many in his administration believe that trade is currently stable right now. i mean, they have a very negative view of the trade relationship with china. it starts out from a very different place from where you

are. >> it starts out as they do have a very, very negative view. and i think that view is somewhat jaundiced. i think to say that china has deliberately targeted u.s. manufacturing and u.s. jobs is a slightly jaundiced approach. i say, i think what's happened in china over the last 20 years is you've seen global supply chains mature. you've seen multi-national companies investing in china, because it offers cheaper labor, because it offers cheaper land. those manufacturing supply chains have evolved into that trade deficit. i think the other point important to take onboard here is all the cards do not lie in the u.s.' hand. china is a very important market to the u.s. that market accounts for about 8% of u.s. exports. it's very heavily concentrated in certain industries, if you look at the importance for aircraft, technology, particularly mobile phones. and the important point to take onboard, as well, is that

china's economy is evolving. today, it is a manufacturing and ux fixed asset led economy. but the growth driver of china is increasingly consumption. that consumption market is not something that the u.s. wants to jeopardize and effectively block a market for u.s. goods in the future. >> i want to turn back to admiral stavridis with a final question. i know you think north korea is probably the most thorny issue confronting the two countries. but when u.s. and chinese leaders have met before, one of the issues that has been contentious has been hauman rights. do you think human rights in china will come up at all? >> i do not. not with this administration, nor do i think two other important issues and poeshly very contentious issues will come up. i don't think there'll be any discussion on taiwan or its status or hong kong's status. i think this administration in the u.s. is going to back off of that. nor do i think the south china sea will come up, where the two

nations are on something of a collision course, in terms of chinese territorial claims. i think those are going to be kind of put aside to focus on getting to know each other and building some kind of relationship to address the three issues simon and i have been discussing. >> gentleman, thank you very much. >> thank you. >> so now that we know the issues, how can you make money off of it? investing advice next on "power lunch." yes? please repeat the objective. ♪ thrivent mutual funds. managed by humans, not robots. before investing, carefully read and consider fund objectives, risks, charges and expenses in the prospectus at thriventfunds.com.

he's a nascar champion who's she's a world-class swimmer who's stared down the best in her sport. but for both of them, the most challenging opponent was... pe blood clots in my lung. it was really scary. a dvt in my leg. i had to learn all i could to help protect myself. my doctor and i choose xarelto® xarelto®... to help keep me protected. xarelto® is a latest-generation blood thinner... ...that's proven to treat and reduce the risk of dvt and pe blood clots from happening again. in clinical studies, almost 98% of patients on xarelto® did not experience another dvt or pe. here's how xarelto works.

xarelto® works differently. warfarin interferes with at least six blood-clotting factors. xarelto® is selective... ...targeting just one critical factor, interacting with less of your body's natural blood-clotting function. don't stop taking xarelto® without talking to your doctor as this may increase risk of blood clots. while taking, you may bruise more easily, or take longer for bleeding to stop. it may increase your risk of bleeding if you take certain medicines. xarelto® can cause serious, and in rare cases, fatal bleeding. get help right away for unexpected bleeding, unusual bruising, or tingling. if you've had spinal anesthesia, watch for back pain or any nerve or muscle-related signs or symptoms. do not take xarelto® if you have an artificial heart valve or abnormal bleeding. tell your doctor before all planned medical or dental procedures and before starting xarelto® about any conditions, such as kidney, liver, or bleeding problems. you've got to learn all you can... ...to help protect yourself from dvt and pe blood clots. talk to your doctor about xarelto®. there's more to know.

we are expecting at any moment u.s. secretary of state rex tillerson to address the media about options when it comes to syria and the chemical attack there. according to headlines here, tillerson and russian foreign minister sergey lavrov spoke by phone on wednesday about that attack in syria, according to a senior state department official. we also understand that they're entertaining all sorts of military options, including grounding syrian aircraft or other types of military strikes. that according to officials here, as well as dow jones. >> reuters is reporting that the pentagon and the white house are in detailed discussions on military options to respond to that poison gas attack in syria that clearly president trump was so -- responded so emotionally to yesterday, during the news

conference with the king of jordan. j jim mattis, the defense secretary, is praesumably going to discuss options when he heads down to florida to meet with president trump. he's due to arrive there later today. this is a prescheduled trip, but apparently appears to be new on the agenda. and we're watching the setup for what we appear -- what we believe will be comments from secretary of state, rex tillerson. >> and the president's comments yesterday during the joint press conference with the king of jordan really sounded much more hawkish than he had sounded in the past, saying that the attacks in syria cross a bunch of lines, not just the red line in the sand that praesident obaa had referred to before, and that everything was going to be on the table. he wasn't going to say exactly what he was going to do or when he was going to do it, but all the options were there on the table. >> and i wonder if this is one of those events that -- the event maybe would have been better at the white house, especially when you see this kind of sort of immediate type press conference here, i wonder -- we're going to see

what kind of facilities from a media perspective and access to the global media, what kind of media facilities they have there at mar-a-lago. you know, the white house clearly set up to do this, to get the message out around the world, immediately with little-to-no technical issue. we're seeing the room at mar-a-lago now as we await rex tillerson. >> there he is. >> and i believe he's going to moscow next week. >> tuesday and we say. >> let's listen to the secretary of state, rex tillerson, again, addressing the media about all options for the administration about the syrian chemical attack attacks. >> good afternoon, all. well, first, i want to thank president trump for hosting these very important discussions on facilitating opportunities for members of his cabinet to join him here in florida, mar-a-lago, to spend time with our chinese counterparts. it's going to be very useful to

all of us. it is an honor to receive the chinese delegation at mar-a-lago and build on the dialogue that i began last month in beijing with president xi and other leaders in china if in the past 40 years, the united states and china have developed deep ties. and this murnadministration is committed to ensuring these ties endure for the next 40 years. we do desire to establish policies that maintain a constructive, cooperative, and results- results-oriented trajectory. high on the rilist of our priorities is an economic relationship that is fair on both sides. today will be a time to exchange candid views on the nature of the u.s./china relationship and we look forward to additional discussions in the future on topics of mutual importance. as president trump has said, the chief goal of our trade policies is the prosperity of the american worker. to that end, we will pursue economic engagement with china

that prioritizes the economic well-being of the american people. we're also looking to make progress with china on areas of foreign policy. those that serve our interests, as well as the region's. and we're hopeful that china will find ways to exercise influence over influence other north korea's actions to dismantle their nuclear programs. whether it's using their authority on the u.n. security counsel or utilizing new levers of power, china can be part of a new strategy to end north kor korea's reckless behavior to ensure prosperity in northeast asia. yet, even as we share a desire to work together, the united states recognizes the challenge china presents to american interests. we renew strong commitments to allies and asia and around the world who have been valuable partners in preserving shared values and security interests. similarly, the united states

will product our institutions and other cyber attacks. the united states will be firm to advocate the right of freedom. we remain dedicated to work towards mutual goals of respect, security, and prosperity. we will not shy away from frank discussions necessary to narrow our differences. i hope the delegation enjoys their visit to the united states, and we look forward to our discussions with them. thank you. oofb the events in syria with the chemical weapons attack here in the past day have just, i think,

horrified all of us, and brought to the front pages and television screens as well the tragedy that is part of the syria conflict. there is no doubt in our minds and the information we have supports that syria, syria regime, the leadership of president assad are responsible for this attack. i think further it is very important that the russian government consider carefully their koipted support for the assad regime. assad's role in the future is uncertain, clearly, and with the acts he's taken, it would seem that there would be no role for him to govern the syria people. [ inaudible ] the process by which assad leaves is something that requires app international

community effort. both to first defeat isis within syria to stabilize the syria country to avoid further civil war, and then to work collectively with our partners around the world through a political process that leads to assad leaving. >> would you organize a national coalition? >> those steps are underway. >> talking about that? >> military strikes -- [ inaudible ] >> we are considering that appropriate response for this chemical weapon attack that violates all previous u.n. resolutions, violates international norms and long held agreements between parties including the syria regime,s russian government, and all other members of the u.n.

security counsel. it's a serious matter that requires a serious response. thank you. >> secretary of state rex tillerson not answering the question about a military response at the end thereme. we saw the arrival of donald trump on the plane arriving for his summit with the leader of china, president xi, as well. two topics we heard from tillerson on. first of all, previously written statement, obviously, reading relating to the meeting with china, but prompted on what he had to say about syria as well. we were told this was going to be about syria, specifically. doubling down on what we heard from president trump yesterday. definitively a change in tone and position in terms of being much stronger how they feel about the situation in syria and what to do about assad, and him coming out very definitively saying we believe assad was

responsible for the chemical weapon attack because russia has said they don't know that assad was responsible for the chemical weapon attacks. >> the future assad from his point of view has no role in the governor of the syria people in the future and russia should carefully consider itself support of the assad regime, a clear shot across the bower, if you will, towards putin support of assad. >> let's bring in john harwood standing by. john, characterize that right? ratcheting up of the rhetoric at minimum? >> no question. both secretary state tillerson and u.n. ambassador haley before the attack said the united states was not going to press for assad to be removed from power. now rex tillerson said, suggesting he won't have a role in the future of syria, asking russia to reconsider its support, did not say, as you

guys indicated, what a u.s. response might be, whether there's a military response. we just got wire flashes from air force 1 where president trump said on that airplane flight, he's not yet briefed members of the senate on military options regarding syria, but that is a situation that is obviously fast changing within the administration as the president said yesterday in his news conference. it's changed the way that i think about the situation, and now the question is, are there going to be concrete conseque e consequences and when? >> we have been here before. you were going to talk about the markets? >> a quick take on the markets. rex tillerson started when the markets were at 6358, lost three points, started session highs, syria headlines at 2:00, and that skritaccelerated to the downside. we are flat for the s&p 500

awaiting president trump's plane. >> we are getting headlines from the plane, asked what happens in talks with china about north korea, but said i would be prepared to act alone if china does not step up reiterating what we heard from him in the interview a few days ago. >> think about that, and, michelle, we got two live potential conflicts the trump administration considers now where the rhetoric is strong. we do not know what the next several days are going to be like. >> that was the point to make, john. i mean, five minute's time, we have had a dramatic ratcheting up by the united states, vis-a-vis tillerson about assad's rule and president trump said he's willing to act alone in some capacity, we don't know what that would be, around north korea, and yet the dow is only up six points. the markets are, melissa, reacting, but we're not down a couple hundred points, guys. it is fairly amazing that we

look at those two situations, that the stock market is holding up at all. >> as we await for president trump to come down those stairs, they opened the door, we have more headlines from what was said on the plane. asking whether assad leaves power, trump said what happened in syria is a disgrace to humanity, and i guess he's running things, so something should happen. we have been here before. president obama wanted something to happen. that was the red line. the american people were not ready for another conflict. the u.k. was supposed to come on board. cameron lost that vote in parol limit. french had planes ready to go. they were upset when we backed out. >> mr. trump's rhetoric. >> exactly. >> on twitter -- >> is trump ready for the conflict? >> i suggest one of the reasons the market is holding up right now is that nobody yet knows how seriously to take the words that we've heard from this president. this is a president who has not

been entirely predictable or consistent, and so the way in which we would parse the words of earlier presidents and say, well, he said this. therefore, it means that. we don't have those guys for this president right now. >> i was wondering the same thing. we had the discussion yesterday. i said, well, i don't hear him saying that he wants -- just because he says there's many lines there, i don't know that that means president trump thinks we're going to actually do something today, though. >> sure. >> tillerson, you get closer. >> tillerson's comments, there's no role for him to act, meaning assad, no room to act as leader. what's that mean? >> they want regime change. >> are they -- they're going to do it or -- >> some sort of international offices, and there is the president, waving at the top of the stairs here. these past 24 hours, certainly, have shown that when you are the president of the united states, stuff comes at you.

fast. >> and the role changes you. as we saw yesterday. >> the role changes you. >> absolutely. the s&p 500 is now up less than one point. i caution you that we saw delayed reaction to the fomc action. could see a lot of action on the final hour of trade. with that note, we start "the closing bell." >> thank you, melissa. we're here at the new york stock exchange. i'm bill griffeth with kelly evans. >> good afternoon, thank you for joining us. we're covering the president just landing on the ground there in palm beach, florida, following the arrival of president xi, who we saw rex tillerson, the secretary of state greet a short time ago. rex tillerson, the secretary of state, advanced a press conference, that we carried, on which he roadway marked boyle north korea and syria. a reminder of a myriad of issues surrounding this meeting between our president and the chinese leader that will shortly begin.