>> royal dutch shell we've got to get an auto parts so we can do baba o'reilly >> hey, appreciate you doing this thank you very much. that does it for "halftime." "power lunch" begins now. welcome to "power lunch. i'm melissa lee. a return to normal for the markets. are investors in a reality check for 2018 and tesla takedown, cutting the delivery estimates by nearly 70%. the analyst behind the market moving call will join us and real estate reality. what the potential for rising interest rates and the new tax plan could mean for the housing market in 2018 "power lunch" starts right now ♪

>> good afternoon. i'm tyler mathisen right now you can see the industrials up around maybe a tenth of a percent very small moves for the s&p, nasdaq and the russell as well today. utilities in health care, they are leading the way. energy lagging today good day for semistocks, amd, applied materials. they are among the s&ps top performers retail moving, too ross stores, home depot, all hitting lifetime highs but it is not completely pretty in the sector you've got macy's, coal, l-brands and nike among the s & ps worst performers. caterpillar is up there so far this year. a great year for stocks. unfortunately for investors, that is not normal, it's not even the new normal and bob

pisani, some of the things that made it unusual and we get back to a more normal performance in '2018. hi, bob. >> the question is reversal to the mean they say 2017 can't happen again, but why not many traders say we can't have 20% returns in the s&p because it's just not normal look at the average. it's about 8% since world war ii we hit 62 all-time highs this year, even in years when we hit new highs, the average is less than half of that. again, unusual they say we can't keep up this low volatility we only had eight days when the s&p moved 8% or more the average is 50 days since world war ii and they say we can't have this huge difference between sector performance with technology. outperforming energy and telecom. worst performing sectors by 40%.

why can't we stay at the highs so earnings are not peaking out and, if anything, they are going to go up thanks to the tax cut when the global economies expand and earnings are at record highs, this is exactly the moment that you could justify a higher multiple. as for this low-volatility story, it clears absent an outside shock, we have low volatility period and secular, long-term caused by low rates, etfs, less trading, whatever you want to call it, it's long term. finally, everyone who wants the technology and if you believe in the economic expansion that would argue growth stocks overall. seema, back to you melissa, excuse me. >> thanks, bob it wasn't just u.s. markets that had an abnormally good 2017. take a look at the eem that's up 33% this year.

what's in store for those markets next year? we bring in seema mody >> melissa, this is one trade that did not let up in 2017. the best year for emerging markets since 2009 india up 27% followed by brazil, despite the political headwinds, up 25%. and while china's broader shanghai index saw marginal gains compared to its emerging market peers, it played a driving role in sectors this year now, most strategists say this rally can continue but there is one big risk that could derail the em rally and that's the dollar if we see a rebound in 2018, hsbc says you can kiss your emerging market gains good-bye also seen as a risk is trump's relationship with china. so far, many people say it's

improved following the president's visit to beijing but the burning question is that washington continues to exert more economic pressure on china in hopes of it playing a more active role in countering north korea. that could be a headwind for emerging markets overall, though, growth for china is expected to remain robust and the fears are not seen as a large risk in 2018 as it was in 2017 >> seema, thanks. >> great to have you here. so what global hot spots should investors watch in 2018 joining us now is jeff carbone, co-partner of the financials and john i want to say your last name over and over again. it's fun chief strategist at wisdom industry investments welcome to both of you luchano, you just heard what seema said about the dollar and its potential to dent, if not destroy, gains in emerging markets.

i'd like you to pick up on that and talk about emerging markets in the context of what you see for the dollar >> well, a year ago people thought the dollar was poised to have a very big 2017 it didn't happen it declined about 7% against the broad basket of currencies so i wouldn't worry too much about a strengthening dollar at this point there are fundamentals in place that are really very bullish for the region you mentioned china only being up 5% if you looked at one of the indexes. we have one index where china was up 70% last year just by excluding the enterprises. so if you asked me what was one of the big trends in 2017, i would say it was this biforcation, this variance of returns between state-owned enterprises where the government has a big stake and private sector companies that are not influenced as much by the government and we saw that broadly across emerging markets. >> broadly, not just in china? >> right

you mentioned the broad em index. if you exclude the state enterprises, you pick up 1,000 basis points across emerging markets and that's becoming more of a growth index with a lot higher quality companies >> all right let me turn to jeff and bring him into the conversation with a broad question what do you see -- we talked about emerging markets here. what do you see domestically, jeff is there any reason why the gains can't go on if not necessarily at 2017's pace >> thanks, tyler and thanks for having me on in the italian section. >> that's great. we'll get pisani and santelli in here we'll have a feast >> just like that, we have the emerging markets that did phenomenal and i think you'll see small companies benefiting from lower taxation and we'll have rising rates in the

tightening of the fed which, again, will help financials, consumer discretionary that will continue to run. people have more money in their pockets and they spend a little more retail sales are showing it. domestically in the u.s., we'll have another good year and we would look at energy that's done really well and when you look at energy, look at the refiners as a nice dividend play for those looking for some dividends. >> do you think the rotation that we've seen in the past month or so will continue in 2017 i.e., money coming out of technology and going to the more beaten down areas like energy, consumer discretionary and retail >> i if i if there's a change in sentiment, you're likely to see a rotation out of technology and beta and into more defensive parts of the market and telecom is a good place to look with yields of 4.5 to 5%.

you have exxon and chevron yielding 3.5%. energy is down three of the last four years that's another sector to look at if there is rotation i would say if you're in the u.s., that gives you the best tradeoff between valuation, shareholder yield, growth. and a potential buffer in case you have a drawdown. 2017 was the lowest volatility year in 40 years in terms of interior drawdowns that's unlikely to continue. >> so jeff, you know, interest rates are likely to go up next year that may dent bonds but could play out in the stock market as well what do you think? >> yeah, sure. definitely the fed is basically telling us that they expect three rate hikes for 2018. i would be careful if we have an overheated economy, we could see the fed step in with maybe one more which could put a damper on

the market in the short term if it did but sectors with the tax reform tightening, financials will continue to do well and we've seen it and industrials will continue to do well as well you can look at consumer discretion with money in people's pockets and as long as we're feeling pretty fine, we'll continue to spend. >> fantastic, guys jeff, luciano, thanks, guys. >> chow. taking a look at bitcoin, it's really stabilizing from that huge decline that we saw last friday. also, check out trading above a dollar earlier it was explained what he thinks is the real value. >> the value of a token over the

long term is going to be drived by the utility what problem is it solving how big is that problem and how many customers do you have for ripple we settle utility between banks. >> i think he's sort of touching the nail on the head when it comes to the bear case or any of these currencies and that is the utility of the currency. can you usually use bitcoin and there are cases where you can use bitcoin and countries in which bitcoin is considered legal tender and could be used for legal transactions like in japan but you're probably not going to use your bitcoin if you had any to go and buy soda. >> why would i if tyler's got a car for sale for $16,000 and i offer you one bitcoin and it crashes or goes up, one of us is going to feel very short-changed on this did any of you, over the holidays, what was topic number one? what were people talking about financially? >> bitcoin everywhere all the

time >> and what does that say? >> people got in on thursday because that was a huge time for people to experience a huge swing in volatility to the downside in bitcoins >> it says a lot it says we need new friends. >> and a lot of family and so forth who, like i, like me, that don't understand it though my nephew does and has invested in it he's researched it and he's done very well. a news alert in the bond market five-year notes are up for auction. seema mody is joining us is there anything she doesn't do >> this is what happens during a holiday week let's get you the update from the reasury. just completing the auction of five-year notes.

the yield came in at 2.235%. now, the bid to cover ratio came in at brian, back to you >> seema, i'm sure we'll see you in a few minutes on something else thank you. >> oil prices hovering near $60 a barrel hitting a 2 1/2 year high since yesterday is oil going to roll over or are there more gains ahead and is bin salman demanding a $6 billion ransom from prince allaweed there he is. your new brother-in-law. you like him. he's one of those guys who always smells good.

his 5 o'clock shadow is always at 5 o'clock. you like him. your mom says he's done really well for himself. he has stocks and bonds. your dad wants to go fishing with him. your dad doesn't even like fishing. you like your brother-in-law. but you'd like him better if you made more money than he does. don't get mad at your brother-in-law. get e*trade. i put everything into my business. and i had all these points from my chase ink card. so i bought ingredients, utensils, even made custom doughnut cutters. wow! all with points. that's how i created the ripple. the doughnut, in a doughnut, in a doughnut. suddenly, it's everywhere. i mean, it really took off. what will you create with your points? chase for business. make more of what's yours.

oil is trading lower after $60 a barrel let's bring in somebody who has forgotten more about oil than all of us ever knew. lima croft and looking at the equity side, not to be whatever, but you know it's once bitten, twice shy. i mean, it's been 2 1/2 years but we've been above 60, 70 to see investors hearts breaking in

the past what's going to happen now >> we shall break our hearts again. >> yes production had fallen to 100,000. soits pretty variable and we had a resurgence of isis in the country and it's a country that you want to watch. at the same time -- >> but here's the thing. oil is really a global market. one of the few truly global markets. maybe bitcoin now and gold is the only other one where if we lose a million barrels they are adding a billion barrels.

>> the question is what will it make up for later in the year but the problem is, when the market tightens, geopolitics matters a lot more and when the market is tightening, it moves higher. >> mike, what's your scenario for oil next year in terms of how you're thinking about your universe and what to buy >> sure. so two weeks ago we came away with our outlook and we ran two scenarios. and it's $58 oil for 18. and do you want to absolutely be in the sector. we don't think the market understands howgood these oil companies have become and that's the u.s. producer over the last two years. these guys crush it with $55 oil. the other scenario was what you were talking about, is if u.s. supply wrecks the party and there's a possibility that it

goes that way which is what we have been contenting with here in the last two years. >> most of this year it's been between what, 45 and 55 most of the year >> yeah. we bottomed out. >> countries like venezuela get their act together >> if they get their act together and it's more supply than what is what we've seen the last couple of years, surprising amount of supply to me for nigeria and libya which has kept pressure on prices, conversely, if you take a million barrels off these guys and then it's off to the race as we're talking $70 plus type oil which is obviously massive. >> and venezuela is facing one of the world's worst humanitarian crisis. they are running out of food, clean water and they are going

to potentially have a massive default situation next year. i don't see how venezuela will get its act together in 2018 it's a question of how fast does it fail and that's a bigger question. >> that's what i'm thinking about, is that at some point that country has to fail >> but the question is, they have such a hut debt burden, the opposition is divided and people are leaving the country in droves to right the venezuelan ship is going to take a massive investment from the international community and it will be unlike anything we've ever seen before. >> but when you're in trouble, you keep the power on. you've got to keep the oil flowing. >> if you cannot -- if you basically cannot market your product and not paying your joint ventures, you cannot keep production going. >> we'll get you more to saudi in a second.

this next story is really amazing. mike, any word of caution to the equity investors out there because here's the thing we've talked about these companies, some of these mid-level players and stocks go down 80% and now they rally 60% on short covering in a matter of 90 days. this is not how hoil equities are supposed to work >> yeah. so the word of caution that we tell our cautions is stick with the names that have quality rock and quantity of rock and rock that will provide speier your returns. a few of those names, we like small cap players and ring energy and braxis are s a nais t comes to mind. >> michaelly, we'll let you go mike, have a happy new year.

we'll see you in 2018. >> thank you, brian. >> there was a report that if he gives the saudi's government 6 billion, a third of his worth, that they'll let him out of his confinement, this jail in the ritz carlton can you believe that >> a lot of people are doing this to get out of the ritz carlton. the question is alwaleed said he wants a public trial i think there's credibility to that story they want to get back to some degree of freedom. >> if he paid another 8 billion, could he stay another eight months >> everybody jokes that it's the ritz carlton it's a little rougher now. >> do you find the timing -- we went there, the world went there for the financial forum. looking good on a global stage saudi arabia is coming into the

21st, 22nd century and then all of a sudden they do this why now they look like they are going back to what they are, the shakedown. >> well, what supporters say, it's about corruption, he's campaigned very strongly and if this is shock therapy for the saudi elites who have ill-gotten gains. so it's basically part of a broader narrative that he's going to shake saudi arabia to its core >> and do you believe that he hasn't gotten ill-gotten gains >> it's a good question for the saudi population because he's made significant progress on social reforms like, that was my biggest takeaway from saudi. social reforms are real. people's lives are easier. you can move around saudi arabia, particularly if you're a woman, like you couldn't before. are you willing to trade -- you can't criticize the government and their questions about his own spending but on the flip side of that, you have more

personal freedom than you've had before i think that's why he has a strong basis of support with saudis he's offering them a brighter future whether that materializes, we'll have to see. but he does have a strong basis of support in that country >> we've got to go at the same time, he buys a $450 million painting and he's worried about social control have a happy new year. >> thank you guys, it is the right to call the street is buzzing about. coming up, we'll talk to the analyst who is slashing his tesla 3 model sales estimate by 70%. it's been almost a year, yes it has, for the trump presidency. a lot has happened what can we pe nexctext year that is ahead next on "power lunch.

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i'm contessa brewer. here's your cnbc update at this hour wintry weather may have played a small role in michigan the twin engine jet slid off the runway, went through a fence and across a highway before stopping in a field the pilot and passenger were treated for minor injuries

new york is about to become the fourth state to require employers to provide paid family leave. it will apply to new parents and those who want to take care of a loved one. the new benefits will affect more than 6 million workers. holiday shoppers set records for online purchases and now they are expected to do the same for returns. according to its online shopper survey, ups expects to ship 1.4 million return packages in just one day. that would be the fifth straight yearly record. >> calling all wannabe millionaires, and who isn't, the powerball sits at $337 million with a drawing tonight and on friday there's mega millions which is up to $360 million. i'm seeing a live shot around a powerball machine in my future guys, back to you. >> that would cover maybe half of my holiday expenditures really, your gift mostly >> thank you >> oh, tyler, please

>> here's diana olick's playbook for real estate next year. ♪ >> reporter: 2017 saw a big slowdown in the housing market not in prices but in home sales because there was just nothing to buy 2018 will not be much better sales slow more. sales could become even more sluggish as the supply situation worsens. yes, home builders will continue to increase production but slowly and mostly in the move-up market, not the entry level where millennial demand is highest. that could squeeze would-be buyers back onto the sidelines prices pushed higher all of that demand without much supply will keep the heat on prices and affordability will become a bigger issue, especially now that valuable deductions have been wiped out for property taxes in high cost

areas. mortgage reform. the biggest move in 2018 could be in the mortgage market and the elephant is in it, mainly fannie mae and freddie mac talk is mainly heating up in congress to reform the system and private investors seem not only ready but eager to get back in the mortgage game as for mortgage rates, most predict they will move higher but most predicted that and were wrong. let's get an insider look at the housing market and how tax reform could impact real estate in 2018. web-based real estate data glenn is joining me. good to see you again. >> good to be on the show. >> there's a real concern in high tax states like new york, new jersey, et cetera, that this is going to cause people not to be interested in buying property in those states and then values will go down how much of that is true, in your view? >> well, we've already seen a

mass migration to the center of the country. so even before there was tax reform, you had people leaving california, new york, new jersey, all of these coastal cities that have been financial empires, technical empires are really seeing an exodus where folks are coming to houston, dallas, salt lake city, denver, portland, seattle. tax reform is going to accelerate that. the reason it's happening is because people want to avoid all the taxes that they are now going to have to pay under the new plan. >> if i own a house in new jersey -- if i own a home, could it be concerned and i want to put it on the market in two years, should i be concerned that the value is going to go down >> i don't know that the value will go down that much because there's such an inventory shortage across the united states we've become this landlord nation where most people are not selling as many houses as they used to. they are holding on to those properties and renting them out. that's going to counteract which would normally be a larger price drop due to tax reform

i don't expect a drop but i don't think we'll see the same prices in the last two years in the coastal cities where taxes have been high. >> how does that square with the idea that you're predicting a mass migration those were your words. i see this in terms of cash flow a pinch in the wallet but in terms of ownership of homes, a kick in the asset. >> well, that's been happening already and it's because the coastal cities are so densely populated and prices are so high so people have been able to move because of telecommuting and technology and we can fly as easily as we used to drive so you're just going to see more people going to ohio and michigan and other parts of the country that were economically dead and it used to be in that california we owned the future and we felt like everything was happening here first and now we see that swag ger and confidence in the center of the country

people in detroit, in texas think they own the future and i think tax reform have given a boost to that argument. >> will this mass migration be led by individuals who decide that they want to move somewhere else it would seem to me to have that kind of mass migration, we have to have large employers, big businesses, jpmorgan chase. >> amazon is leaving seattle >> or repatriate large workforce. >> silicon is going to leave silicon valley >> if google can't afford silicon valley, then no one can. that is the most insanely profitable business in the history of technology businesses so i think that is a harbinger of things to come.

the technology companies, wall street companies, they are chasing the talent the talent is chasing affordable housing. we are going to see both businesses and people move to places that are more affordable and it's going to be good for the country. you shouldn't have that many people making so much money in a few cities it should spread to the rest of the country. it will balance things out financially. it's going to be great, america. it's just going to take a few years. >> the capital gains from facebook's ipo could have paid off ohio's budget deficit in its entirety but you know what is funny, if it wasn't for this new tax bill, we would have been talking about higher interest rates. mortgage rates will rise isn't that another big risk to real estate? >> you know, i've been worried about that, too. lions, tigers and bears. i talk about inflation but the fact is, there's these massive deflationary forces.

you have amazon giving people price comparisons online you have robot, globalization. the cost of everything is going down except for one thing. there's one little handcrafted thing where that cost is going through the roof it's houses. houses are the one asset that has seen massive inflation so every year the government prints more and more money and the fed does nothing about it because there is no real inflation threat, except where it hurts consumers the most, which is their mortgage became >> we were showing the markets that you think are going to be the weakest in 2018. los angeles, san francisco, new york i would imagine taxes are a part of that. and in terms of rents in these areas, is there something to be said that the rental market could improve on the notion that owning a hone is less attractive >> i think we're going to see less acceleration in rent and home prices in these coastal cities they are still resirable places

to live. you are not going to see an evacuation of san francisco but you're going to see a lot of people moving to other places. so that's going to take the pressure off rent and home prices and where it's going to go crazy is in a place like vancouver, washington, where you can commute to portland but avoid the state income tax of oregon we have people just clawing through the walls trying to get to commuter cities like that where they can have the best of both world. >> what would be the hottest city right now, in your view >> seattle, san antonio, dallas, denver, houston. houston got flooded. it's still going to be hot people are crazy nothing will stop them from going to a place where -- >> san antonio is a good call. it's the like the biggest city in america now >> wow thank you. >> yeah. they put it on the map >> glenn, we're going to let you go happy new year good to see you. >> happy new year.

thanks for having me on the show all right. it has been a while. first 11 months of the trump administration what can we expect next year more fireworks, perhaps? eamon javers has your politics playbook >> reporter: first, we could see a group of white house aides advising the president in 2018 insiders are watching for signs of departure from gary cohn who publicly split from the president earlier this year. also closely watched is the president's top liason, mark short. and ivanka trump and jared kushner. with investigations swirling, some believe the power couple may want to return to new york second, the special counsel's investigation will continue to haunt the trump team in 2018 robert mueller has gained guilty pleas from michael flynn and

george papadopoulos. no one outside the special counsel's office knows exactly where he is going next how will it all end? three possibilities. more indictments and an impeachment referral to the house of representatives or a full exoneration of the president and his team third, the white house will try to capture legislative momentum after the tax debate one focus will be on welfare reform unemployed people make more in welfare benefits than workers with two jobs. that suggests he'd like to reduce benefits. but a senior official told me the plan would involve getting people involved in the workforce, suggesting an increase in certain benefits either way, the white house will try to get legislation through congress early before midterm election year politics makes progress impossible. >> that was eamon javers. an analyst is changing his forecast of tesla to onl5,y 000. what prompted that major cut

when "power lunch" continues >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade.

tesla model 3 has declined by 70% the note just out after elon musk tweeted "i promised that we will make a pickup truck in the future." joining me now is brad good to see you. >> nice to see you, melissa. thanks for having me. >> you're saying around 5,000 is the delivery number they put out next week or so versus the 15,000 that you had estimated prior. is this a supply issue or a demand issue >> oh, it's definitely a supply issue at this point. elon's obviously been very candid through the quarter of being in production hell and having difficulties in getting all the -- you know, the stop gaps in the supply chain opened up and so, you know, i think this is just a reflection of -- we check with the end market and know how the deliveries are

coming and that's the production capacity at this point. >> is there any sense on your part as to what the delays are in terms of, for instance, model 3s due to be delivered what sort of messages are customers getting who were promised the 3 >> you know, i think they are just now starting to deliver to nose who are not employees so the first group are those who already own a tesla. obvious lease they are getting a pretty brand-friendly crowd with those initial deliveries but the cars that are being delivered are coming off with good quality salespeople didn't speak of any sort of materially higher return rates or anything -- not return rates but people bringing them back into the dealer with questions about defects or what have you so it seems that appearance of quality appear to be solid at this point. >> the other issue here is the slower the ramp obviously the

slower the scale and therefore markets could be under pressure. what are you foreseeing for margins and x demand, what are you seeing >> there are two different things given they are coming up two different, you know, assembly lines and manufacturing platforms, if you will you know, we have model three gross margins ramping pretty meaningfully, hopefully something close to 5,000 that week, maybe by the end of the year so that has to go well they have a few quarters of grace to put up a subpar gross number before they get more penal around that. on the s and the x, we think they are pretty well tapped. the scale is hard to come by and demandwise, it's kind of plateaued there. so it makes it pretty challenging to achieve with the

x and s going forward. >> on a broader picture, brad, do you like that musk is so active talking about other things, the model y, the space program? would you rather he be more focused or do you like that showmanship aspect of him? >> that's him. that's the brand that's his flavor of the companies that he's started here and he insights a ton of passion in the products that he brings that's great he's inspiring a whole generation of people fired up about electrical vehicles which isn't necessarily the most exciting thing in the world. so i think that's fine but clearly they have some focus. they've got to get down to 2018 with delivering on some promises that they've made for several years now. >> and you made clear, this is a good point, not making the estimates for the three and the delivery numbers next week, that may be okay still for investors who own the stock. they are willing to look through that at the same time, you look at

the reception of these tweets and it seems to be that the effect of these tweets has waned. when they were tweeted about a semitruck launch, people were getting really excited about it. he tweets about a pickup truck after the model y and nothing happens with the stock and the stock has basically been doing nothing for the past three months plus. >> yep yep. for, you know, several years now we've kind of gotten used to the narrative always evolving and we've got to stay tuned to twitter to see how that plays out. at some level especially when now we're on the precipice of the company delivering the mass market car, right? the thing on which this thesis is ultimately built, there is going to be an increased need for follow-through and delivery of that statement. >> all right brad, good to see you. thanks for your time. >> thanks for having me. >> brad erickson. just because christmas is over doesn't mean the shopping is now it is time to spend those gift cards, make your returns

and maybe get the more expensive item you really wanted into plus, how traditional storanes c compete with amazon. we will talk retail next on "power."

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the retail rush is not over

just because christmas has passed now consumers will head to the stores to spend the gift cards and maybe a little more. kate rogers is live in union city, new jersey kate >> hey there, that's right it's a big week for returns and we're redeeming gift cards like all you see next to me at rite aid and retailers want you to come in and redeem the gift cards because they can't count those dollars until you actually come in and spend mono wet gift cards in store this year the national retail federation says consumers were set to spend $26.6 billion in gift cards alone consumers are feeling good and they may have been allocating their gift dollars towards other items this season. on average, the holiday shoppers were set to buy four gift cards each with an average of $45 on them the most popular gift cards to buy are those for restaurants followed up by retailers like the macy's and nordstroms of the word like visa discover, amex

and gift cards and coffee shops came in last place we don't know this holiday season did fare very well and sales were up about 5% through christmas eve, but we talked with shoppers yesterday and today. they were mixed on spending more money this holiday season. >> surely, i spent less this year >> why >> why because my kids are all growing up they don't have a big list anymore. >> better sales. so i took advantage of that. >> basically, for my family, my wife, my kids, my nieces, but the grown-up, nothing. >> the given consumer sentiment and tax reform which will be good for consumers and retailers like next year will probably be another holiday season, as well and we'll have to wait and see on that one. back over to you guys. >> kate, thank you see you in a bit people are shopping online in record numbers and we know that and thanks to the fast,

easy and often free delivery they're an e-commerce logistics company that you may not have heard of, but they operate the largest size u.s. fulfillment center behind amazon they have 21 massive sellers, and many other, shoe carnival and stefan white is joining us from seattle welcome. good to have you on the program. >> you have all these fulfillment centers and you know who is ordering what and where based on what's coming in and what's going out of your warehouses should we expect a good season >> i think we should see a very good season, actually. a lot of great purchases and clothing and electronics, shoes. these are all much better than we thought earlier in the season >> people are feeling wealthier then, right, stefan? >> yeah. we're seeing about an 18% increase in sales from last year so definitely we're seeing people spending more money in a more concentrated fashion.

you just talked about gift cards a few minutes ago in the program and we're seeing those get redeemed post-christmas. so really for us this week now between christmas and new year's, a lot of those gift card purchases will be converted from plastic into a healthier product. >> based on that healthy consumer activity and based on the new tax law that lets companies like yours immediately expense new plant and equipment. will you be building more centers in 2018 or starting them >> we do have additional capacity it does come to is real estate available and where is it available? logistic, one of the key things is where you have your centers and making sure we can get land in the right place and get access to a labor market to staff the centers are two critical factors for us in looking at those new locations >> how important are people versus robots or machines in these warehouses and these fulfillment centers and is it possible to order something and were it to not have touched a

human hand pretty much all of the way through. >> that's a good question. >> it depends on the type of product. for example, shirts on hangers, dresses on hangers and they're not good, and you need fingers to do that in many cases as far as something being dispatched purely through robotics, it's possible. they're pre-configured sizes and boxes and that sort of thing i am trying to think of an example. there are certainly smaller products that are pre-packaged in boxes and square, nice dimensional boxes that can go from order to delivery except, of course, from the ups and fedex driver >> it seems like we've gone from zero to 100 miles an hour in your industry. i know that's not true, but it just feels that way. >> that's right. >> how much more advancement is there to go? amazon bottled a robot company and we've seen this happen logistically and we're talking about autonomous vehicles. how much more is there to go in your business? no offense, i don't think of warehouses as the most

technologically savvy thing. >> that's true we have two sides of the business business. we have the warehousing and fulfillment operation and the software which is the fraud product and the payment product and the software products which actually allows retailers and brands to ship products from their stores directly versus going to one of our warehouses and that's where i'm seeing innovation right now, frankly. it's retailers looking at how they can leverage inventory, already in the channel and potentially going to go on markdown postseason and how they can take those products and fulfill orders they're getting from online from those stores. >> all right steven, great to see you thank you. >> in his first year in office, president trump got tax reform and not health care. what else is on the trump agenda for 2018 and kansas state beating ucla last night in the cactus bowl. the cactus bowl? erodng up, we'll tellyou why evyby wins except the schools that actually play the schools that actually play the games.

usually means hospitals aren't very close by. when you have a really traumatic injury, we have a short amount of time to get our patient to the hospital with good results. we call that the golden hour. there's nothing worse than when we're responding to the hospital, and the hospital doesn't have the right specialist. evaluating patients remotely, by an expert, is where i think we have a potential to make a difference. robots can do a lot in medicine these days, but they can't think. they're still machines. for nuanced decision making, we still need humans. we would save a lot of lives if we could bring the doctor to the patient. verizon is racing to build the first and most powerful 5g network that will enable breakthrough innovations to take place. as we get faster and faster wireless connections, it'll be possible to bring those capabilities

to more remote sites, and be able to operate on a patient in a way that was just not possible before. when you think about underserved areas, you tend to think of remote locations. but the reality is, an underserved area is anywhere where the person that you need, who has the expertise for the problem that you have, is nowhere near you. low latency is crucial for things like surgery, because the response time has to be immediate, it has to be real. i could put on vr goggles like these, and when i move my hand, the robot on the other side will mimic the movement, with almost no delay. who knew a scalpel could work thousands of miles away? (dr. vasquez) it's going to be life-changing, and life-saving. it wasn'taking ceasy at first.

she learned how to better communicate her needs. and you learned how to not ignore yours. i discovered how to make healthier meals. and i discovered how much i enjoyed them. narrator: becoming a caregiver is a learning experience for everyone. find articles, tips and tools from experts and others who have been in your place. the caregiving resource center at aarp.org/caregiving. hi, every. i'm tyler matheson here is what's on the hour two menu washington in the year, the administration closing out of a bumpy, but in the end successful year legislative win to conclude the

year can the trump administration ride the momentum into 2018? we'll take a look at what we can expect there, and social showdown president obama weighing in on the debate over the impact of social media on our society. we'll have a face-to-face conversation about this, and apple in the crosshairs. the company facing multiple lawsuits across the country after admitting it slowed down service on older iphones what it means for the tech giant. "power lunch" starts right now ♪ ♪ welcome to "howpower lunch. i'm melissa lee. stocks trying to avoid a three-day losing streak and green arrows across the board with the dow in the lead mcdonald's are your dow leaders and nike and goldman sachs are lagging and there are a number of retailers under pressure after a good day yesterday

l brands, abercrombie & fitch, macy's and kohl's, comcast, via com and liberty interactive trading lower and your bitcoin check falling under $5,000 on the bit stamp exchange brian? >> here's what else is happening at this hour, melissa. if you don't like your gifts, you're not alone ups expects 1.4 million returns on january 3rd maybe that's why consumer optimism slipped just a skosh in december it fell to 132.1 and that missed the bullish estimates, but keep in mind, last year the consumer index slipped in ten years and new jersey governor chris christie will allow residents to prepay portions of their 2018 property taxes, this in response to the new tax bill that limits some deductions. mel? >> bri, businesses big and small are digging through the new tax while trying to figure out what the biggest tax break, will look

at the winners and losers under this new law morgan is up first >> we're finally starting to get some of the high numbers regarding the impact of tax reform among the winners, insurer chubb which expects a bottom line boost. daimler and bmw expect to see net profit windfalls for 2017 though bmw added it couldn't quantify the tax effect for 2018 yet and this after fed eshgs led the charge saying tax reform would add $128 million bank of america and citi which earlier this month warned it could take a hefty $20 billion writedown and capital one and royal dutch/shell. it's all one-time hits tied to valuation by the deferred tax liabilities and or deferred tax assets with deferred assets, companies can use losses to offset future taxes, but those aren't worth as much on paper when the corporate

tax rate falls to 21% for deferred liabilities, which is what big corporations have and the opposite is true analysts are mostly upbeat and companies are mostly upbeat including banks and the taxes they say will help most companies become most profitable it is an adjustment. bottom line, expect big and unusual numbers when earnings season gets under way next month. >> that's one of the things that's on my mind is when the company sticks its neck out and says we'll have $1.5 billion in extra profits traceable directly to the tax law, what if that doesn't happen there will be a lot of estimates that bake that in. what if that doesn't happen? >> and i think that's a big question i think that's why you haven't seen more companies potentially come out a lot of the companies i cover, manufacturing companies, transportation companies and industrial companies they aren't expected to be big winners and have big profit windfalls tied to this you haven't heard a left those

numbers yet and that's exactly why and everyone is muddling through that still >> thanks. >> now the folks who maying getting a big chunk of coal in their tax stocking starting in the new year elon >> brian, look no further than right here in washington members of congress got rid of their own tax loopholes in this new law, and one of them is starting january 1st lawmakers won't be able to deduct payments for sexual harassment settlements i didn't know this was even a benefit, but it is part of the response to the me too movement that has been going across the country. they'll also no longer be able to use their living expenses as a tax deduction. that was a proposal from iowa senator joanie ernst, she called it the squeal act. bicycle commuters are also getting hit. the law eliminated tax incentives for employers that encouraged biking to work. right now companies can

reimburse employees up to $20 a month tax-free for biking and that's an estimated annual savings for workers of $89 starting january 1, that's also going away and then there's tiny barria college in kentucky all of the kids at this school come from low-income families and none of them pay tuition they get a free college degree barria was supposed to be exempted from a new colleges and universities, lawmakers have to scrap this carve out because it didn't comply with senate rules. guys, the school estimates that this could cost them as much as $1 million next year alone back over to you all >> thank you very much, ylan >> i guess i'd be really hurt if i was planning on free college from berea and i can't get it now. if you can't afford college elsewhere, that means no college. >> with the tax battle in the rear-view mirror, it's time to look at what's next in the agenda in washington in the new

year joe concha >> a shell of a name >> and in washington, i got this one. nick johnston. i got that one okay >> what's agenda item number one, nick? >> we've got in must-pass things right when they get back the government is only open temporarily until january 19th, and they need to address that soon and there is a lot of talk about how to solve the d.r.e.a.m.ers issue and that needs to be done during the year, and the talk in town all over in washington after the last week. everyone is sort of going away, and interviews has been about infrastructure and the president wants it and mitch mcconnell wants it, and i think that's where tensions turn and look for the president's state of the union speech to set the stage for that >> joe, what do you think are items one, two and three agree there? >> infrastructure i think is number one and two i think it's going to be that

big and it will be fascinating to see how democrats who obviously have a personal loathing of the president and their constituents do, as well and infrastructure is something that they very much want so they'll have to work with president trump, and then you have republicans who were always -- those democrats don't want president trump to get credit for it. >> right they don't want him to get credit for anything. so they'll have to swallow that pride and have to work with him here it will be interesting when we get to 2018 in the midterms and if the economy keeps purring along with this tax bill, and gdp is expected to be at 3% and jobs adding not all time, but at a 17-year low and consumer confidence is through the roof if the economy is running well the republicans will run on that and democrats i'm not sure what they can run on from a messaging standpoint because they voted against tax cuts, right? and they don't have a leader in the party right now and their narrative can end up being,

given the house and the senate and we can start the impeachment process because many people on the democratic side of the aisle would love nothing more than to have donald trump moved in that fashion. >> that's an interesting point that joe brings up, nick what do the democrats have to run on i think people were banking on the notion that the tax would not pass and the agenda would sort of fall apart, but if they're able to hit another one or bring it across the finish line, so to speak that democratic message seems to be more difficult >> no, joe, hit that tension exactly right on the infrastructure bill. the way i view it is will this be one of these things where trump went to cut a deal with chuck and nancy to try to get something done bipartisan. remember his margin in the senate is one seat smaller so he has much less room to work with on infrastructure. they were talking about the end of the year who said the last thing they would want to do is do something bipartisan with the midterms and you want to completely hammer the other side going into that.

>> is that how low we've fallen nick, where even if it's for the good of the country. we can disagree on taxes and disagree on the best way to provide health care. i don't know if anybody of any party would agree that a pothole would be a bad thing and a dangerous bridge is something you'd want to fix. are we that low that we can't get onboard on something because god forbid they side against you. >> i don't think they'll use politics for political motives particularly in a midterm year >> they're able to get somethin that benefits everybody. every year if it's a midterm it changes completely a lot of people are thinking about the races sooner than they would otherwise and a third of the senate and they can get home and start talking about these things and you can't deny the fact that politics would play a huge role in how infrastructure gets through >> if if anybody here can tell

me what hillary clinton's message was besides that guy stinks and vote for me to be the first woman president i'd love to hear it and even mittromney 2012, tell me what he ran on i can't remember joe biden had it right joe's alive, bin laden's dead. it's the economy stupid, with clinton, that's easy what is the democratic message in elevator talk terms where you will get it off on the second floor after getting on the first. >> maybe reverse the tax plan like the republicans ran on our whole message is reverse obamacare. if the democrats take the house and the senate which is unlikely, but if they did, wouldn't their whole plan be we'll reverse that. >> and tax the wealthy type of thing? money has to come from somewhere. >> 91% gets a tax cut. >> it's hard to win on that when the economy is performing and people are, in fact, getting more money in their paychecks and if that turns out to be right and companies are bringing money back and investing it, that's going to -- i agree with

you. they do not have, to me, a smart, simple message and if it's reverse the tax bill, and the economy's doing all right and people have more money in their pockets, that's not going to have a lot of traction. i wonder how many people will give president trump credit and how many people are giving prdz credit right now and that's just a continuation of his policies because if you look at the real clear politics average with the president, he's only at 39.3% approval so you could say -- >> which is higher than most other world leaders. >> emmanuel macron in france and theresa may. this, nick, 2017 may go down as the year when we realize that polls, most of them, anyway, are not maybe as good as the websites they're printed on. that goes back to 2016 >> correct >> i'll only say the guy polling really high is putin right now >> he's at 99.9% which is

remarkable and t and the .1% for the guy that didn't vote for him. one year from now, we're doing the same thing we're doing right now. what will be the headline of 2018 >> i think it will be who controls the house this is in play now more so than we'd thought before and if democrats are about to take over the house a year from now, we'll be talking about a lot of different things it will not be infrastructure, it will be impeachment >> gentlemen, thank you. have you a thought on that, joe? >> the headline a year from now, what will be 2018 be remembered for? >> the 2020 election started in 2018 we're talking about trump being primaried and the 19 democratic candidates that will be running against him. >> the elections have turned into the british soccer season no end >> it goes on forever. >> there will be 19 democrat candidates and i'll know two of the names probably >> probably, yeah. >> you'll know mark cuban. >> i'll know mark cuban. >> you think so?

mark cuban >> oh, yeah. >> is that true? tweet us e-mail us. guys, thank you. here's what's coming up on "power lunch." auto sales on track to mark their first full year drop since the great recession. will autos pull a u-turn in 2018 we'll bring you the analysis president obama sitting down for some people call an interview for britain's prince harry we have the influence of social media and we'll take you inside the big business of football bowl games all of that and much more ahead on "power lunch. and seamless experience across web and tablet? do you want $4.95 commissions for stocks, $0.50 options contracts? $1.50 futures contracts? what about a dedicated service team of trading specialists? did you say yes? good, then it's time for power e*trade. the platform, price and service that gives you the edge you need. looks like we have a couple seconds left. let's do some card twirling twirling cards e*trade. the original place to invest online.

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it has been a good, but not a great year for the auto industry sales still sitting near record levels from last year. the booming suvs are churning out big profits for the big three and beyond, however, many fear a slowdown has begun and it could accelerate into the new year moody's auto analyst bruce clarkin joining us now from the new york stock exchange. we have the autoparts and the auto companies from a macro perspective, the good news is cars are lasting longer than ever the bad news is cars are lasting longer than ever what state of car sales do we expect in 2018 >> okay. two points i want to make. one is that we have a negative outlook for the auto industry and we've had that in place since october. our concern about the auto industry is that it is going into a sort of a plateau, a slight decline and the industry just doesn't have a good track record of addressing that kind

of change in trajectory. as far as sales for next year are concerned, we expect unit sales of about 16.8 million units. >> when you say the industry doesn't have a good track record bruce, are you talking about a lot of incentives, for instance, making lease terms much more favorable and increasing their own credit risk? what are you specifically talking about? >> all right the concerns that we've got is the industry has been growing very rapidly and it's been a fantastic market when the industry turns down like this it's oftentimes difficult for the manufacturers to demonstrate the discipline that they need interms of pulling back on production, not increasing incentives and not extending the terms on loans a lot of those things have been happening over the past several years and they provided tailwinds for the industry those kinds of things can't continue and our concern is and we're waiting to see the degree to which the industry really does demonstrate the discipline that they need in terms of

pulling back on production, as i said and also pulling back on leasing and the term on loans. >> i'm a little confused are vehicle sales going to increase or decrease next year >> we're expecting them to decrease >> to decrease >> to decrease. >> i think we had the wrong graphic up there because we said something about light sales rising 1.5%. so that's wrong from your standpoint >> from our standpoint the industry is going to have a modest decline in 2018 it's coming in at about 17.1 million units in 2017 and we think in 2018 it's going to be 16.8. >> is the mix of sales going to be more profitable or not? >> it will probably be a little bit more profitable, but again, the concern that we've got is not necessarily the mix. that kind of balance has not been achieved. our concern is the degree to which the industry will find itself having to go back to

incentives that's a pretty serious issue in the past and we're looking to see whether or not the industry can resist that. >> if i'm an autoparts executive or an autoparts investor watching right now is the slowdown good news or bad news reading your research sounds like you think it's a net negative because there are fewer oems and the original manufacturers like -- and if there are older cars in the road would that make up much of that gap? >> i think this is going to be a pretty manageable situation for the suppliers. the suppliers actually have stronger profit margins than the manufacturers and i don't think it will be that difficult for them and the auto manufacturers themselves can get hit very, very badly if incentives get out of hand, and that's the sector that we're most concerned about and that's why we have a negative outlook for the sector and we have a stable outlook >> i want to switch gears a

touch and talk about tesla on your most recent note on tesla, you'll note the different stories that the equity of tesla is projecting versus the credit of tesla tesla's credit, the characteristics are consistent with a deeply speculative grade credit profile which you write is there any concern that tesla won't be able to tap the markets once again it's always been able to do that >> okay. that's an interesting point. tesla has got about $900 million in convertible bonds coming to an early 2019. >> they are not going to be able to generate enough cash internally to refund that. they'll have to go back to the markets and in order to do that they'll have to demonstrate that they're able to hit stride with the model 3. so a lot of the expectations, a lot of the commitments or promises that have been made by tesla in terms of ramping up the model 3 and getting to a margin of 25% they'll start getting close to

that, they don't actually have to hit the ball out of the park, but they have to continue to make progress so that when they have to go back to the markets whether it's the equity market or the debt market to refund those convertibles they're able to do that >> all right, bruce. thank you. thanks for your time bruce clark with moody's. >> thank you very much with the tax reform bill in the bucks, they're looking to entitlement cuts, will political reality get in the way >> plus four big analyst calls you need to know about it's street talk and that's straight ahead on "power lunch." down to the very server. it keeps your insights from prying eyes, so they're used by no one else but you. it. is. the cloud. the ibm cloud. the cloud that's designed for your data. ai ready. secure to the core. the ibm cloud is the cloud for business. yours.

time now for "street talk. >> it says brian >> analyst recommendations on the stocks that you need to know about, melissa. >> first stock, brian. celgene, the analyst pointed to several setbacks in the company's pipeline which they believe eliminates much of the upside it cut from 121 to 125 >> putting a hold in sell. >> united therapeutics, boosted the target to 232 from 212 and said the company's in a transition period from sales growth to more mature treatments, but of a

next-generation pipeline, the analyst thinks the street is largely overlooking growth in one of united therapeutics' key drugs. their target of 232 is 50% upside in uthr. >> wow charles schwab increasing suntrust 2018 estimates following the passage of the new tax law. the analyst says they're cutting fourth quarter estimate for the deferred tax asset which is less valuable, due to the lower tax rate they do see it providings a lift to overall 2018 earnings and the price target raised to 63 from 56 >> your final stock is callaway golf maybe you should short stocks or want >> compass, and the mostly an evaluation call in the golf chain. callaway's 14% stake in top golf now valued at $290 million

they cut their target to 1350 to 1450, however, d.a. davidson reiterating callaway is a buy and raising their target to 18 i guess the point is no one knows the future of golf, melissa, and there's dueling views on the future of golf stocks out there as well. >> certainly is. ty >> thanks, guys. now on the s&p 500 both on track for their best quarter in years, will tax reform and strong earnings keep the markets hot in 2018 we'll discuss thitat, is the question of the week and that's ahead on "power lunch.

hi there i'm contessa brewer. here's your cnbc news update at this hour. chicago is under a deep freeze the national weather service says strong windchills could bring frost bite to exposed skin in less than 30 minutes. today's real feel temperature in the city is 17 below zero. ooh! miami beach police had to be called after a military device washed ashore this morning the department posted these photos to its twitter page officials suspect this was a military flair that device was removed safely by bomb squad members. it's almost new year's eve which means the times square ball is

getting ready for a big night. workers braved the cold to install 288 new try triangular-shaped crystals a zoo welcomed a baby asian elephant the female calf weighed in at just 200 pounds at birth and was standing on her own legs just 25 minutes after being born little prodigy that's the cnbc news update at this hour. back to you. >> and to keep it apolitical tomorrow we have to show the birth of a baby donkey. >> i'll put my order in now. >> order in. >> baby donkeys r us i'm short that stock thank you, contessa. >> meantime, the oil market is closing for the day. let's go to seema modi for the cnbc commodities desk. see this bouncing between stories? >> love being on tv. talk a look at oil prices surfacing the $60 threshold and

today prices slipping as those supplies kr concerns as they largely dissipated the libyan pipeline which exploded and that's expected to be repaired and back online by next week, but today it's copper that is getting a lot of attention, rising to a nearly four-year high after china asked its largest producer of a metal to temporarily stop production for environmental concerns prices of the metal used widely in power and construction up more than 10% in december and nearly 30% in this year, in 2017 in reaction, check out the miners, anglo-american both posting sizeable gains and with the weather hitting the east coast and the northwest take a look at gas prices as more people use heaters up 3.5% >> let's get back to the markets and the dow is on pace for its best quarter since 2011. >> can we expect more double-digit gains for the

markets in the new year or has it pulled back jeff schultzy is a new face to cnbc we welcome jeff. good to have you with us jeff, i will start off with you. you do see a pullback of some sorts happening and it could happen in january. >> yeah. i think the markets have been moving up for quite some time at this point, and if you look back at the last 5% correction we've had, we could make it to mid-january and it will be the longest stretch of performance without a 5% correction since before the great depression, and i think we're overdue and you could see the buy the rumors and sell the news with trump signing in the new tax package and we do think the pullback should be bought because the sime dynamics that made 2017 such a good investment will continue. >> it sounds like you think next year will be as good a year. when i read through your note it sounds like things will be goldie locks and interest rates will rise, but not too much and inflation will bottom. china's soft landing >> it is all good. >> think it will be a goldilocks

situation. >> the one thing that does give me solace is that the fed recently with the fomc minutes said that they increased their growth expectations for the next three years, but they didn't increase their inflation expectations in light of the tax package. so you still have a fed that's going to be accommodative and continue to normalize slowly, but want at a pace that will threaten the recovery. >> what could eat goldilocks, bob? >> i think there's a lot of potential things out there that can upset the market you never know about the bitcoin and that can spread to the overall market. >> hold on, i'm sorry. bitcoin? >> bitcoin has very little institutional ownership and how does that spread through the market >> look at the companies trying to accept bitcoin and goldman sachs opening up a bitcoin desk. folks involved in bitcoin are neophytes and you get a major collapse in that and that spreads the concerns about the overall market there are a lot of retail investors out there that don't know where it ends and so they get scared and start selling out

of their equity holdings you really don't know where that could go, so i think that's one concern, and i think an overaggressive fed that's one concern. if you can't get this infrastructure bill or talk passed, that's another problem i think people will hover out there with north korea and none of these things are going happen in fact, i have a 30, 40 target on the s&p 500 that's 13.5% from the current levels and i think you'll get it through a combination of earnings growth helped by the taxes and people feeling better and corporations feeling better and positive sentiment and more spending and you will see $149.11 on earnings and i think you will see multiple expansion to 20.8 times that gets me to 30, 40, and i think it will abe pretty good year and you will have to be careful of the value trap and a lot of folks have major rotation from growth into value. there's going to be a rebalancing with the portfolio, but if consumers are confident and business is confident, growth should continue and the

companies that represent growth in cyclical areas of the market that's where you want to be. >> i still don't get the bitcoin spread in that i don't get a sense that there are enough retail investors in bitcoin to actually spark some sort of contagion and there certainly aren't institutional investors and they're not leveraged at all to the price of bitcoin and the futures market, one contract is the price of one bitcoin what's your take is there any sort of -- even from a sentiment standpoint impact bitcoin and a bitcoin collapse on equities >> i don't think it will have a big impact on equities at this point. there's a lot of fanfare and conversations about it, but i just don't see a lot of exposure that's out there, and i don't think it will affect the equity markets and quite frankly if you look at bitcoin compared to other bubbles out there and whether it's the tulip bubble and the dotcom bubble and the housing bubble, all of them are small in comparison. >> i don't understand it well enough, bob, but i'm not going

to pooh pooh it too quickly here because i think what you're driving at is the idea that panic begets unease and unease -- >> exactly so it is a panic. >> i'm not calling for a major collapse >> i think bitcoin is actually going to collapse. i'm not trying to start something new here, but i think it's eventually going to collapse and i think people will sell out of it because they're worried and they're weak hands and you'll see a rebound in bitcoin, and people will start to move back >> there's no -- there isn't the kind of systemic risk. >> it's a psychological thing, i think. >> that's basic he my idea there right, bob >> it could have an impact on the broader section of the economy. you know, when we had the financial crisis and it started in housing people said i saw housing coming at me like a freight train, but did they get out of the way when they saw the internet correction? >> there were mortgage

securities and every bank was loaded up on and -- >> well aware of it. >> leave us with the idea, why is kinder morgan going to be a moneymaking stock next year? >> i think it doesn't have to be tied to the price of oil a lot of it has been tax lost harvesting and most people when they looked at their portfolios in 2017, most went to energy and mlps, but if you look at mlp valuation they're low. >> they're very low. there's a tax advantage. >> cash flow perspective, it's just -- if you look at valuations the cash flow% pektsive is as low as it was going into the financial crisis and we're in better footing right now and you have better production and balance sheets are better and the dividend can go from 50 cents to $1.25. >> and it will be passed at a

tax-through. >> thanks. >> thank you all right. tune in tomorrow to "power lunch," because we'll have a special guest that will anchor for both hours it is landry ceo, star of cnbc's "billion dollar buyer" as well as the new owner of the houston rockets. we'll ask him about the -- we'll ask him about the recent surge in nba ratings and the effect of the tax bill on the bottom line and a whole lot more tune in to see the guy replacing me on cnbc watch the show that you're not on >> we'll be here >> you know what that is >> we matter, too, you know? okay >> with the unified control of congress accident presidency, the debate over the deficit has shifted. john harwood who may or may not be here tomorrow joins us now from washington with that part of the story hi, john >> hi, tyler, before i say anything else i want to wish brian all of the best in his future endeavors

>> we'll be back >> what did i do >> leak gone, out of here. i'm off for two days, john i don't want viewers to be afraid >> i understand. >> look. we had a deficit debate during the obama years in which republicans were warning that the trillion-dollar deficits were a mortal threat to the u.s. economy and then in the tax reform debate, democrats tried to raise that issue. republicans dismissed it and said we're going to have growth from our tax cuts, but now with the bipartisan policy center is projecting, trillion-dollar deficits coming back as of the next fiscal year 2019 and the question then is what does congress do about it paul ryan has long expressed the desire to curb entitlement spending, medicare, medicaid and social security, but that is very risky and mitch mcconnell says he's not interested and he runs up against the clearly expressed view of voters which is they want more help from

government and not less which is a squeeze for republicans in 2018 >> when was the last time we had a trillion dollars, because i gather the annual deficit has come down. >> it's come down a lot. when president obama took office we were in the great recession and he had a trillion dollar deficit on day one and we had trillion dollar deficits for one or two fiscal years and then as the economy recovered it came down both in nominal terms and as a percentage of gdp, but since this tax load, tyler is so front loaded with benefits designed to kick in beginning next year when the withholding tables are altered, it will have an immediate hit on the deficit and then the question is how do you deal with it if you're someone like paul ryan you want to make government smaller and deficits provide a lever to make governments smaller, but it is very difficult to do if people have become accustomed to benefits and want to keep them and are feeling under siege. one thing we saw from both

parties in 2016 is they communicated to average voters we know that you've been falling behind while corporate america has been -- and people at the top have been getting ahead and not easy to cut entitlements in that environment >> thank you very much, john harwood in washington. former president barack obama sitting down for an interview with prince harry and offering advice on the dangers of social media. "power lunch" is back in two (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley

time for a power rundown with john lipton he's in san francisco. president obama sitting down with an interview with prince harry. he's getting married and i wonder if obama will be on the list he's making news about what he said about social media. >> the question, i think, really has to do with how do we harness this technology in a way that allows a multiblissity of voices, and allows a diversity of views, but doesn't lead to a balkanization of our society, but rather continues to promote ways of finding common ground. >> now barack obama saying that one of the dangers of the internet is that people can have different realities and they can

be cocooned in his words in ways that reinforce their biases and that's up to the user. you can choose to follow people on twitter that you deeply disagree with, tyler for example, i follow brian sullivan, although i did notice he does not follow me back, tyler. >> do you have a comment, brian? >> he was in a good mood before. >> yeah. i'm not in a good mood anymore for a variety of reasons yeah, josh, do not take it personally i do not follow anybody here at cnbc >> you don't follow me either? >> because i know what they're going to say >> now i'm not in a good mood. >> i'm not there you can't follow me. you can't. you would not find me if you looked for me. >> that's what makes you more interesting and mysterious >> apple, the target of a class action lawsuit after the company admitted to slowing down older iphones to keep them running longer explain this to me because oh, by the way, my wife is so furious about this very matter she feels it's a diabolical

assault. >> well, ty, maybe your wife might not be alone here. there's now eight lawsuits targeting apple about this issue. according to reuters, they've been filed in various courts lithium-ion batteries decline over time so it did introduce this new feature in ios that does throttle batteries at specific times to try to make them last longer, but on cnbc we did hear from technologists who thought apple could have been more transparent in that effort, tyler. >> and was this related to the number of times you updated your iphone and ran, i guess, what were heavier, more juice-zapping operating systems? >> this really comes down most simply, tyler, to just simply battery technology you know, you have these lithium-ion batteries and they do age and do decline.

your older phones will suffer. apple did say we did make this change in ios to throttle that their point is we weren't trying to cripple old phones. we were trying to make them last longer tech analysts said listen, the steps apple took were defensible for technical reasons, but the same analysts have some criticism about apple's transparency about how it communicated all of that. >> all that said, my wife loves apple. i gave her a new iphone 8 for christmas and she's happy now. she's in love again and it'sa good thing. >> with the phone or you >> both. maybe more with the phone. she spends much more time with the phone. talking to it -- >> phone doesn't talk back touching it. touching it. >> finally, apple picking its -- >> hey, siri, why is tyler matheson so interesting? >> happy app that helps people mediate? meditate

meditate >> meditate, tyler yes, yes >> that would be an app if it could mediate. >> how much do i owe her, siri half. >> that's the business idea. >> mediate >> i'd like the mediation app. >> i can get in touch with the -- i can get in touch with the founder and maybe it can do both this app is called calm. it is like a technology correspondent through guided meditations, there are 16 million downloads and 50,000 new downloads every day. its rival headspace, 21 million downloads and that company, by the way, sell me they've raised $76 million from investors the co-ceo says he could see taking calm public at some point. look for that, tyler >> bringing calm public. >> josh, thank you

>> you might need to meditate after mediation, that's for sure >> i downloaded the headspace app and i rollized realized meditations make me mediation. >> right now the big business of bowl games we sent eric outside for the pinstripe bowl that's right, the pinstripe bowl at yankees stadium we're going to dethaw eric and see him. how are you doing out there, buddy? >> reporter: how you doing right here at yankees stadium, iowa and boston college are playing tonight. it's freezing cold, but we come back on power lunch after this we're going to talk about all the money the big business behind college bowl games. back after this. let's begin.

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college bowl games are big business, we know that, even if the teams involved have 500 records. eric is braving the element outside of yankees stadium, home of the pinstripe bowl. to explain, eric >> reporter: that's right, brian. here we are tonight in about an hour and a half, couple hours, it's iowa versus boston college here at the new era pinstripe

bowl, it's freezing cold, people are going to watch, there's a lot of money behind this the teams the last few days made a lot of media appearances across town. they did the opening bell, they were at the 9/11 memorial, there are a lot of media exposure for both schools, the players get a perk and the confidence is the big 10 and the acc want national media exposure new york is the place to do that new era, according to apex media, this is worth about $4 million, plus, it keeps the yankees happy because new era sells baseball caps and the yankees have the most to sell. and if you think bigger picture, all 80 teams, the 40 bowls in total, that's worth $600 million in total revenue for schools and conferences. only $100 million in expenses. you're talking a half billion dollars in profits and finally wonder, who's watching the bowl games? last year every bowl but one had at least a million viewers that's good for the tv partners

and advertisers who want to push their holiday retail sales out on to the customers who are at home watching tv this week back to you guys >> how many bowls are there, eric total, do you know >> reporter: there are 40 bowls plus the national championship game it's 41 total. 80 different schools will play in a bowl game over the next few weeks. >> all right >> that's a lot. >> a lot -- >> it is, and eric, thank you, by the way, our two respective schools will play tomorrow, uva in the military bowl against navy, two-point favorites, and then later on, the camping world bowl, marcus, our friend, virginia tech versus oklahoma state, six-point underdogs i have a bet with boone, whoever loses, the other guy's got to wear the other person's gear and take a photograph. he sent me an oklahoma state hat, somehow he afforded it, i appreciate that if they're watching and i'll put on that orange hat and i've got something special for him, he doesn't have it yet, but he'll like it if virginia tech wins.

win. >> i'm happy virginia's in a bowl game, but there is something that tells me that 500 record team, 6-6, which is the -- you've got win six games to get into a bowl, that 6-6, i don't know about washington bowl with a couple 6-6 teams, oh well >> you're not taking the private plane to annapolis >> i'm not bore u av ber lunch >>efyolee,rian, check please is next (siren wailing) (barry murrey) when you have a really traumatic injury, we have a short amount of time to get our patient to the hospital with good results. we call that the golden hour. evaluating patients remotely is where i think we have a potential to make a difference. (barry murrey) we would save a lot of lives if we could bring the doctor to the patient. verizon is racing to build the first

and most powerful 5g network that will enable things like precision robotic surgery from thousands of miles away. as we get faster wireless connections, it'll be possible to be able to operate on a patient in a way that was just not possible before. when i move my hand, the robot on the other side will mimic the movement, with almost no delay. who knew a scalpel could work thousands of miles away? ♪ the great emperor trekking a hundred miles inland to their breeding grounds. except for these two fellows. this time next year, we're gonna be sitting on an egg. i think we're getting close! make a u-turn... u-turn? recalculating... man, we are never gonna breed. just give it a second. you will arrive in 92 days. nah, nuh-uh. nope, nope, nope. you know who i'm gonna follow? my instincts. as long as gps can still get you lost, you can count on geico saving folks money. i'm breeding, man. fifteen minutes could save you fifteen percent or more on car insurance.

check employee >> all right if you head into 2018 i asked everybody what is going to provide the best percent return on my twitter poll, the dow, bitcoin, government bonds, or gold the dow, it was about 700 votes or whatever, the dow 44% say -- 31, mel, said that bitcoin would be the best percent return next year >> a friend of mine, mark roderick send me information about a latin american real estate etf that yesterday changed it's purpose and is now the first etf dedicated to the cultivation and making money in weed they have all kinds of holdings. it's a very small fund we're going to try and invite one of the sponsors or the managers of the weed fund on and i'll bet you they attract a lot of money, just like anybody who changes their name and includes bitcoin. >> they make a lot of money. >> they got a good ticker.

>> weed. >> exactly reminder that tomorrow, tilman fertitta will be here for two hours. we'll talk taxes, sports, the consumer, and much, much more. brian, you're off for a couple days >> have a great new year >> happy new year to everybody thank you. >> closing bell is up next happy new year by the way. >> hi everybody, welcome to the closing bell, i'm kelly evans here at the new york stock exchanges. >> you're here to say it all week if you want to. retail reversal, consumer discretionary games we're going to look what's behind a move and how gift cards can play into their bottom lines in the coming weeks here >> and companies going public this year have raised double the amount of moneys last year some high profile buffs could spell problems for 2018, the ipo playbook is coming