dividend yield, $25 billion of free cash flow >> how much debt >> three times leverage going to two and a half don't talk about splabsolute numbers. >> one stock i haven't mentioned yet, first data corp.. >> which you've owned for a long time >> it's gone from 12 to 24 the end of next year, this company, which everyone is worried about leverage, will be buying back its own stock. >> got a final stock >> citi. >> "power lunch" starts right now. >> scott, folks, thank you very much welcome to "power lunch. i'm tyler mathisen this is a volatile day on wall street fears are growing about the fed's the rate hike path and whether it could kill the rally and drive the economy maybe into recession and if so, how soon? we will get clues about the fed's intentions in just under an hour and netflix a bright spot shares up big on earnings and subscriber growth numbers, but can the company keep up the momentum with new competition popping up seemingly everywhere?

>> and betting on a deal, tilman fertitta approaching cesar's about a possible merger. could it happen? and if so, how what would the structure be? investors cheering the deal right now. and it's official, recreational pot is legal now north of the border in canada how this grand experiment could play out and who will be the big winners and losers? we'll explain on "power lunch," which starts right now and welcome to "power lunch. i'm melissa lee. another wild day on wall street. the dow is down more than 300 points earlier in the session, and then went into positive territory briefly, but we are down once again. ibm and home depot, the biggest drags. energy, one of the worst-performing sectors crude oil hitting its lowest level since mid-september, dipping below its 50-day moving avera average. retail is also under pressure.

the xrt on track for its first negative day in four auto parts suppliers leading the declines winnebago are rallying the rv maker beating profit and revenue expectations dom? >> melissa, thank you so much. i'm dominic chu. here's what else is happening right now at this hour elon musk putting his money where his mouth is tesla's ceo says he's buying $20 million worth of his own stock in the electric carmaker meanwhile, reports out that tesla's vice president of manufacturing is leaving the company. holiday hiring is hitting its highest level since 2014 so far, retailers plan to hire more than 700,000 workers this season the number of new homes under construction falling more than expected and mortgage applications plunging as interest rates soar to near eight-year highs now, the etf that tracks the home builders, the itb slammed yet again, on track for its worst month since february a closer look at the health of the overall housing market on

"power lunch," that's straight ahead. >> well, the big swings continuing today seema mody is tracking all the action from the new york stock exchange hi, seema. >> hey, melissa p a choppy session on wall street. weak housing starts. some nervousness ahead of those fed minute meetings. the stocks leading the dow lower. the challenges that it continues to face as it tries to move to its faster-growing businesses like cloud and ai. with today's losses, ibm is down about 10% this year, vastly underperforming the broader tech rally that we've seen in 2018. despite today's move lower, the tech sector is still off 14% this year. speaking of earnings, a lot of positive notes out this morning on csx after earnings beat its management citing positive pricing trends shares reversing course here, down about 2%. union pacific and kansas citi southern report later this week. so far, about 10%, the s&p 500

has reported earnings and more than 90% have surpassed eps estimates. some talk of peak margins, but evidence a as to whether that truly is a headwind for the market now, just take a look at the fed meetings minutes, expected in about an hour, ahead of that, housing stocks continue to underperform on that weak data don, back to you >> thank you so much seema mody at the stock exchange let's talk a little bit about some of the report that we are finding in the marketplace right now. maybe some of the reasons why we are bouncing let's take a look at three charts the s&p 500. first of all, this purple line here, the 200-day moving average, that longer-term trend line we've found some areas where these things have come close and bounced off these area we are right there again around 2767 is that 200-day moving average, something to watch there. on the nasdaq composite side of things, we've seen a little bit

of that support at that 200-day moving average and we have not come that close to hitting it over the course of the past year, but as we look at 7512, that's the trend currently a bit of a bounce from those levels one other place is in that ten-year note yield. the government bond side of things showing signs we are coming off of those multi-year highs. this is the 50-day moving average. we've bumped around a few different times, but 2.89% that's where the 50-day moving average is we're coming a ribbit off of those highs we've recently seen. so interest rates very much in focus. one of the current drivers of the market, whether it be stocks, currencies, or anything else >> president trump doubling down on his attacks against the fed, saying overnight that the central bank is his, quote, biggest threat, unquote. bank of america chairman and ceo brian moynihan taking the opposite side about the fed's judgment when it comes to raising rates. >> the great debate is where

that neutral is. is it around 3ish? most people would say yes. therefore they've got some room to go before they choke off the economy too much but if you were sitting here saying, anything that doesn't fuel the economy adds risk, i can see why somebody might say that, but that's not the way the fed operates full employment, price stability, inflation those things would lead you that they're going to keep raising. so i don't think you need to overread it. you look at what they say. the minute they think the economy doesn't have the growth in it, they'll stop. >> and we're going to interrupt and come back to this segment in just a minute. but now we're going to go to the white house where the president has made some remarks and we're going to pick them up now. >> do more than 5, some of you will say, hey, i can do much more than 5. you know, i've heard about the penny plan for 15 years. one penny every year per dollar. one penny every year, after four or five years, the country's in good shape i'm saying, let's not do the penny plan, let's do the five penny plan

i think you can do it. so i would like to have everyone sitting around the table, your incredible domains that you preside over so brilliantly, in some cases some cases, very well, some cases, brilliantly i would like you to come back with a 5% cut. get rid of the fat get rid of the waste and i'm sure you can do it i'm sure everybody at this table can do it. it will have a huge impact last budget, we had to go -- because of the military, ed with to fix our military. our military is in the process of being fixed planes are being made, boats are being made, ships are being made, missiles, rockets, everything our nuclear is being brought to a level that nobody else can even imagine pray god we don't have to use it, but there will be nothing like what we have and there is nothing like what we have. and that's why i did that. i made deals with the devil in

order to get that done because we had to improve our military our military was depleted. it was in bad shape. our great people in the military hasn't received a wage increase in more than ten years now they're getting an increase. first time in more than ten years. so i wanted to do that and in order to get that done, because the democrats won't vote for the military -- they don't like the military, they don't like law enforcement, they don't like borders we see what's happening with the border, where people are coming up in caravans, and we have to stop them, even though the laws are terrible the laws are terrible. our laws are terrible. they're a laughingstock all over the world. and we're supposed to stop people with laws that aren't very good, but we're doing better than anybody else could possibly even think about. but i would like you all to come back with a 5% cut and i think, if you can do more than that, we will be very happy

there are some people sitting at the table, i'm not going to point you out, but there are some people that can do substantially more than that because now that we have our military taken care of, we have our law enforcement taken care of, we can do things that we really weren't in a position to do when i first came so we'll see you at the next meeting. i'll see you many times before i'm sure i'll speak to all of you during this term, but that's a very, very important request that i'm making of everybody sitting around this table. tremendous amounts of money and it's something that we can do and i believe we can actually do it, easily so rather than go by the penny plan, we'll call it the nickel plan at least it will be a one-year nickel plan. we may do another nickel plan next year, too thank you all very much. to the press, thank you very much >> mr. president -- defense department, sir? >> we know what the new budget is for the defense department. it will probably be $700 billion. so it's 716, we're 700, 716. and that's a very substantial

number, but it's defense it's a very important, i mean, to us, without defense, maybe the rest of it doesn't mean very much but if you know, it was at 520 a very short while ago and the reason i brought it up to 700 and then 716 was to build new ships. we're building new, incredible submarines, the finest in the world. most powerful in the world anywhere, ever we're doing things that we have never done on this scale so that included a lot of rebuilding of our military so despite that, i'm going to keep that at $700 billion, defense. okay >> can i ask you -- >> the saudis are investigating, themselves, essentially. what do you think -- >> no, they're great, very talented people. they're not investigating themselves they're going to cut costs these are all talented people. they have now been here long enough to be able to do this it's a great group around this table.

it's a great group and they'll be able to do it and when you add this and couple this with what larry kudlow said about how well we're doing -- where is larry >> here he is, sir >> i mean, larry has to be very happy when he -- you didn't even expect this, did you did you expect this, larry >> it's actually happening bigger and faster than i thought. >> yeah. this is all part of it i just couldn't do it last year because of the fact that we had to do our military our military was in really bad shape -- >> i'm talking about -- >> we had planes that couldn't fly. you had military that was really in a ridiculous situation. so, uh -- so that's what we had to do. so what they're doing is, they're doing it themselves. >> steve, go ahead >> you said that the chinese want to make a deal, but you told them they're not ready. >> i told them they're not ready yet. because they've made too much. we have rebuilt china, just so you understand

our country has rebuilt china, with their hard work and genius, also but how our country has allowed itself to lose $500 billion a year and much more than that, is ridiculou ridiculous s is ridiculous. so it's hard for them to do a deal we have a very good relationship with china i have a great relationship with president xi and i think you'll see something happen that's going to be good for both countries, okay thank you all very much. appreciate >> press, it's time to go. let's go it's time to go. >>thank you very much, appreciate it. >> we've been listening to president trump making comments about the budget and also fielding some questions from the press. let's bring in eamon javers live at the white house eamon? >> reporter: you heard the president there saying, he's going to be asking all of those cabinet secretaries for 5%

budget cuts going into next year but not clear exactly what that means for the department of defense. he suggested he might ask for only a $16 billion cut in the department of defense, which would work out to about half of 5%, if i'm doing the math right off the top of my head so it looks like dod might be carved out the other agencies will be asked for that 5% budget cut and he said he might do it again the following year that is probably a response, politically here, to the news that the federal deficit has really jumped this year to $779 billion in fiscal 20018 the president aware of that deficit increase, aware of some nervousness up on capitol hill about the high deficit so signaling today, he's prepared to do something about it next year, melissa. eamon javers on the north lawn, thank you very much. eamon javers reporting well, the president has been going after fed policy makers over their interest rate hikes, saying they're going too fast. the question is, is he right to does that, we bring in paul mcculley we're always happy to have him senior fellow and adjunct

professor at cornell law school and the former chief economist at pimco paul, always good to see you i want to sort of fillet the conversation three ways, if i might. one is to ask your view of fed policy two is to ask your view of whether the fed's primacy as the ultimate arbitrator of what's going on in the economy is advisable. and three, get your reaction to president trump. let's take the first one is the fed crazy or is it doing the right thing, given the metrics in the economy right now? crazy or right >> i don't think -- i don't think the fed's crazy at all i think the fed's done an absolutely fantastic job over the last decade. i think they're at a transition point. i think they've concluded, correctly, that the economy can stand on its own feet now, without super accommodatining monetary policy. and i think they've also concluded that the stock market should land to stand on its own feet, as well. so i think that that is

purposefully stepping back from forward guidance that is, you know, for a child. and is basically now, you know, planning going forward to be more adult from the standpoint of how it treats wall street and more uncertainty about what they're going to do. so, actually, on your first question, i give the fed absolutely high marks. now, the big issue is, where is neutral? and we can get into that, but from the standpoint of where they are right now, flying "a" grade. >> flying "a" grade. let's talk about your concern, i think it is a concern of yours, that the fed's primacy, as the kind of ultimate arbitrator of what the rate of inflation should be, what the sort of optimal full employment rate should be, is something that you have questioned in the past. explain that a little bit to me. >> yeah. this is an existential issue for me, when i think in terms of where the fed fits within the mosaic of government and i think the fed has become

too powerful, in some respects, it had no choice, because other arms of the government couldn't handle things in an efficient sort of way. but i think, you know, the essential issue of what is full employment, what is your potential growth rate. what is your inflation target? those are goals, i think that there should be more involvement with congress and the executive branch in setting those goals. i'm a big believer in fed independence operationally, day to day, but in goal setting, i think that they should share the responsibility so i think their goal setting has become too preeminent in our overall government so they just need to morph >> and i infer from what you just said that you're a backer of the idea that they should be independent operationally, but i infer from that, that you have

very little problem with the president speaking up and saying, maybe not in the most eloquent way, maybe in his usual kind of punch them in the nose way, saying what he's been saying by way of criticism of the fed. do you got any problem with the president? >> i don't have any problem with the president speaking on monetary policy. i think there has been too much of this hidden rule that the president is not supposed to speak on monetary policy monetary policy deals directly with growth, unemployment, and inflation. and those are issues that presidents win elections or lose elections on so i don't have a philosophical problem with a president or mr. trump speaking out about monetary policy. i think we should lift that veil of silence and i have no problem about that i wish our president was more articulate and less, quite frankly, uncouth in how he does it >> the veil is gone, paul.

permanently gone the president yesterday in an interview said, quote, my biggest interview is the fed, because the fed is raising rates too fast and independent, so i don't speak to them, et cetera, et cetera. when he says, my biggest threat, i think he's talking about the threat of the u.s. economy how do you see this expansion ending because maybe the president has a point that oftentimes because of expansion and fed missteps, the fed entered the greatest trade on the planet when it entered quantitative easing and it's got to exit that trade right now and there are a lot of questions about that do you have questions, yourself? >> yeah, i don't think that mr. trump is necessarily wrong when he says the that the fed is a threat i think the threat is to his re-election. i don't think that he has broader concerns beyond his re-election, in that there are two more years to go and the fed has more tightening that it plans to do. and the critical thing for the president politically is that he

got into office because of the vote of the uneducated, the working class non-college. and they are finally participating in the economic recovery the trickle-down finally has gotten down to his base. and the notion that the fed is going to throw ice cubes in the punch bowl, just when his base is arriving to the party, understandably frightens him he wants to see trickle-down and he is a trickle-down guy, get all the way to the bottom of the income distribution and he's afraid, i think justifiably so, that the fed might say, that's a little bit too hot to run the economy, because we're running pretty hot right now >> paul, it's dominick here, and i love the fact that you're reporting from my alma mater out there. but here's what i would say. put your hat on. if you were hypothetically the fed chair right now,

hypothetically, what would be the biggest thing that you would do differently tha fed? i don't think that i would do anything as a practical matter, from the standpoint of setting a policy differently i think that i would be a little bit different than chair paul, who's, i think, doing a fantastic job. in talking about the concept of where is neutral they dropped accommodative from their statement at the meeting last week. to me, that was a hugely big deal and he was just basically saying, yeah, i know, it outlived its usefulness. i think that's a really big deal of knowing where neutral is, what's accommodative and tight so i think that while he wants to become a little bit more mysterious and understand his motive, if i were sitting in the chair, i would go the opposite direction and be more explicit, particularly discussing things such as neutral and where the

natural rate of unemployment is. actually, i think it's incumbent upon the fed chair to actually, sometimes, walk 'em a boon and i would walk 'em a boon, because that's the best social policy for the bottom half you can conceive of. >> paul mcculley from the cornell law school dom? >> tyler, shares of netflix higher on better-than-expected subscriber growth numbers. the stock has nearly doubled just this year and the ceo saying the company will continue to spend billions of dollars on content. will that be enough to kp eethe netflix train rolling? that's coming up next on "power lunch. what am i really being charged? and is it eating into my returns? is my advisor a fiduciary? is he always a fiduciary? a good place to start is with an independent registered investment advisor. as fiduciaries, they live by a simple rule: always act in the best interests of their clients.

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all right, shares of netflix popping after reporting strong profits and perhaps even more importantly, subscriber growth was doing pretty well. it was very strong julia boorstin joining us now from los angeles with those details. julia? >> don, that's right the company adding 7 million subscribers in the third quarter. that's 2 million more than its own guidance, and projecting record subscriber growth in the fourth quarter, blowing past expectations ceo rita hastings acknowledged growing competition at at&t and disney work on their own subscribing services, but he's not concerned about that eating into subscriber growth yet or these services hindering netflix's ability to create and license premium content. >> some day, there will have to

be competition for wallet share. we're not naive about that but it seems very far off from everything we've seen. and we're continuing to work with many of those firms where it makes sense for both of us and it's creating a big and vibrant industry >> no comment from hastings on whether netflix plans to increase its content spending next year, beyond the roughly $8 billion it will spend on content this year. and as for where netflix will see its next leg of subscriber growth, hastings points to asia and india in particular. back over to you >> julia, thank you. let's dig deeper into what netflix's big beat means for tech joining us is dan morgan he owns netflix along with many other tech names dan, it's always great to see you. >> hi, melissa >> hi. i know you're a long-term holder, but got to ask you if you're concerned about how netflix is trading off the back of what most analyses on the

street consider a solid beat across all metrics we had the stock up by 13 to 14% in the after-hours sessions and now it's bumping along session lows, granted, up 4%, but along its session lows as the major indices go to session highs. this is not good trading action after a strong earnings report >> well, melissa, netflix isn't a huge position for us compared to some of our other tech holdings, but it is a position that we do have. and i think what you're seeing out there, melissa, what you guys have been talking about we've talked about the burn rate in terms of free cash flow, which is going to be about $3.1 billion. they had about $2.8 billion in cash and about $6 billion in debt so they're probably going to have to go out and get some more money, is so to speak, to continue to gain in terms of content. and then as you guys have been talking about, i think the real pending, you know, we had this merger between fox and disney. they'll probably spend about $16 billion a year in content, which will be double that of netflix that's going to come on in 2019.

you mentioned at&t deal, but i think this disney/20th century fox deal is going to be huge, and that is going to be some pretty stiff competition for netflix, which right now is about 75% of the streaming market share >> why do you even have a small position then, dan you just outlined to me, plenty of good reasons why the bears are in on this game, betting against netflix. why do you have that small position is it small simply because the stock is down 20% from its highs? >> well, melissa, it's a stock we've held for a real long time. it's done unbelievably well. it's one of the best-performing stocks in the s&p 500 and the f.a.n.g. group so, you know, it hasn't been a big stock for us it hasn't as big as some of the other stocks we hold like apple. i've been on with you about that stock in the past and some of those bigger holdings, but we just continue to monitor the position at this time and see how it plays out it still has performed very well over the long haul, just the intermediate, obviously, it's

not trading as well as we would expect after such a great earnings report. >> what does this tell you if anything about the performance of the momentum tech names, where valuation seems to be untethered from what bears might say is reality i mean, a name like amazon, for instance, do you think that this makes the bar even higher when it comes to a amazon report, for instance, for it to knock the cover off the ball in order to get a decent trading result that day? >> well, amazon, melissa, is a little bit different story than netflix. >> i understand the businesses are completely different >> aws, which is huge. they own the infrastructure, as a software market. but i understand what you're saying we're now going to move in, i believe, next thursday, we have google, amazon, intel, and twitter all coming in with numbers. it's a huge day a week from this thursday in terms of the bar being set higher, because the sentiment seems to be negative, i would agree with you, there's just very little room right now for any mate ric that's out there not to be surpassed. so, you know, even though the netflix was a good report, we're not getting the reaction we

would expect we would need those companies to really, you know, hit it out of the ballpark on all matrix to be able to see some positive momentum because, obviously, you have a lot of doubters right now in the group, and we're seeing that in terms of the performance of the tech sector. >> dan, always great to speak with you >> thanks, melissa >> dan morgan, snoefs. ylan mui is down on the farm where the tariffs are it hing farmers, but it hasn't changed their views on the president ylan >> reporter: out here on the farm, farmers don't like the tariffs, but ty hedo like donald trump. that's coming up next on "power lunch.

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hi, everybody. i'm sue herrera. here's your cnbc news update at this hour. british prime minister theresa may says she thinks a brexit deal can be sealed over the next days and weeks, with hard work for the uk and the european union. she was speaking before she

addressed her eu counterparts a as a brussels summit dinner. >> what we will be doing is looking at the issues that we need to address in relation to the backstop on northern ireland. i believe it is possible, while working together, to find a resolution to that issue and a resolution that ensures that we are able to move forward with the full package, with the future partnership as well israeli prime minister netanyahu visiting the border town that was targeted by a rocket launched by gaza. he warned that israel will act with what he called great force if the attacks don't stop. as a first response, israeli military jets pounded hamas targets across the gaza strip. and there was no winner in tuesday's mega millions lottery. the jackpot for friday's drawing soaring to $900 million or a cash lump sum of about $500 million. and that would be the second largest lottery prize in u.s. history. good luck. although the odds are not in your favor but hope springs eternal

you're up to date. that's the news update guys, back to you. >> all right, thanks very much let's get a check on the markets. we have a market that's trying to find positive territory you can see here, as we started off, we drifted down over 300 points at the lows of the session for the dow. we've been now trying to find some positive territory as we head towards the last hour of the trading day. also want to take a look at two other hot spots in the marketplace. first of all, the i-shares home construction etf this stock has been down 2.5%. it has not found any positive territory echoing some of the downside and one more stock to watch here, as well. an etf tied to the semiconductor space. the semiconductor etf down about 0.2% but you can see here, a very volatile trade and it's been very much to the downside over the course of the past few weeks. again, guys, something to watch as we head into the afternoon part of trading. >> to the bond market now, rick santelli is tracking all the action now at the cme.

hi, rick >> hi, melissa lee we are seeing a little bit of a creep in rate. look at one week of twos we've been camping out, we've stretched out a bit to 287 five-year note stretching tout to 383 look at 10-year yield chart. this looks to be the fifth close, all tight around 315. but we are seeing a little 317 action you want to pay close attention. when it comes to our markets, rates are firm equities are pretty firm, at least the last couple of days. not so much in europe. if you look at one week of bunds, a completely different look as it dips down to levels we haven't closed out since the beginning of october finally, a stellar day, actually, a stellar two days for the dollar index yesterday, a big violation of 95, roaring back up a half a cent today it seemed to avoid a technical meltdown with a close under 95 traders continue to monitor. back to "power lunch" gang >> all right, mr. santelli,

thank you very much. the trade war with china has hurt soybean farmers, as their products are facing retaliatory tariffs from china but despite the hit to their bottom lines, many are still supporting the president ylan mui is live in frankfort, indiana. ylan >> reporter: tyler, farmers out here hate the tariffs, but they still love the donald. mike beaird is one of those farmers. we were out here over the summer to talk to him, just after china imposed those 25% tariffs on soybeans he was nervous then, but now he says that he feels better, because the u.s. has been able to strike trade deals with canada and mexico and we're now talk to the eu and japan as well, and that is a sentiment that you will hear in farm states across this region. we got some exclusive data from morning consult that shows that support for the president has remained steady, even as trade tensions have ratcheted up here in indiana, approval ratings for the president have actually gone up back in january, 86% of people

who voted for president trump said that he was doing a good job. that number is now at 91%. we talked to another farmer, brent bible, and he told us that tariffs are just one part of the equation >> he may be getting a "d" in trade negotiations with china from my perspective today, but he's getting a "b" in economics. and he's getting an "a" in judicial nominations still, overall, i think the administration is doing a re relatively good job. >> reporter: so guys, farmers here are willing to give the president the benefit of the doubt. they like that he's taking a tough stance towards china, even though they're getting caught in the middle >> thank you very much, ylan mui for the economy out on the farm. the dow bouncing back from a 300-point loss are the wild market swing results big moves in

exchange-traded funds. joining us is martin smalls, black rock's head of the ishares business, which has $1.8 trillion with a "t" in global assets under management. martin, thank you so much for joining us here this afternoon can you tell us where the hot spots are? where are investors putting money into the market vie the etfs >> i think this is such a phenomenally great time to be an investor i think investors need to take a step back and remember we have definitively exited ten years of steady eddy economic growth and really loose, easy money, and we've been catapulted into this economic environment that i think is driven by two things. one is a much wider range of economic growth outcomes and the second is tighter financial conditions we're seeing this in exchange-traded fund flows, as investors in their stock allocations are looking to grow equities they're looking to industry sectors, things they expect to grow faster than the broad market and in fixed income, they're trying to find etfs that provide

stability of principle >> martin, where are those it seems like those are very optimal things to have, but what exactly would you invest in? what types of etfs are charac r characterized by those on the stock side or bond side? >> in stocks, looking for stocks and parts of the market that have higher economic growth potential, we see investors favoring things like technology, china, and broad emerging markets. in technology, for example, we look at something like the i-shares north american itf. and what you would see are f.a.n.g. and f.a.n.g. siblings there's also the technology leaders of tomorrow, where we see people participating, and that would be something like the i-shares exponential technologies etf, xp that's about the technology leaders of tomorrow. that's going to be nano-infermatics cybersecurity, robotics. those are places where people think there's an economic growth outcome that's going to be growthier, better than the broad market >> a lot of interesting options,

martin but at the same time, when you take a look at the flow data, investors don't seem to want to be in this market right now. the quarter that black rock just reported saw a $3 billion withdraw of funds, net outflows. and for the first three quarters of the year, flows into all etfs were down 46%. so what's going on and what have you seen in the month of -- october has been a rough one for investors in terms of volatility what have you seen more recently >> i think the context is really important. we've had $350 billion of inflows, globally into exchange-traded funds. gn in the united states, we've had roughly $200 billion that is nowhere near the levels we saw in 2017, where we had a near-perfect market for risk assets but the organic growth volumes in etfs that are much better than 2014, '15, '16. we see continued growth in exchange-traded funds marketplace, but this year, where investors are taking pause, where they can find a 3% certificate of deposit yield,

they're a little bit slower to move their money into risk assets and that's really the phenomenon you see in etf flows this year it's not people taking their money out or not favoring etfs as a way of building portfolios, they're taking a pause due to tighter conditions and more variable economic growth youm outcomes >> martin small, thank you so much for joining us this afternoon. >> coming up, high times in canada as the country legalizes recreational marijuana deandra is live in newfoundland where the first pot sales took place early this morning >> reporter: very early. canada has been rolling toward this moment for years. the end of pot prohibition we will show you that very first d lkbothe ensuing celebration, anta aut what this all means for the global pot economy.

it's time to go up north to canada legal marijuana for recreational use is going on sale at midnight today. deirdre bosa is live in newfoundland and those scenes were pretty funny watching people buy the first legalized pot in canada. >> reporter: it was certainly quite the party out here very late last night. lots of people showed up this is the eastern-most part of canada, so the clock struck midnight first here. we were on hand to witness it all. >> five, four, three, two, one whoo >> reporter: from that moment on, there were lots more celebrations, cheering, long lineups. now the day has gone on and it's been more of a slow, steady pace of people coming into the retail store behind me that for the first time is selling legalized recreational pot outdoor in the country, though, there are some signs of a supply strain further west. there's long lineups at certain

stores even some websites have completely sold out of certain strains and they're struggling to bring supplies in and in some cases deliver them on the same delay delivery the stakes are high here, because a lot of the world is watching how this all rolls out in canada. canada's retail pot sales are expected to reach some $5 billion by 2020, but the global market, that is predicted to eventually reach $150 billion. if canada gets this right, its companies could get a major head start and its government could really take a hand in determining some of these regulations. we had canopy ceo tell us this morning that some other governments around the world are visiting canada to see what is happening here now, on the global front, on the american front, we're already hearing from some american businesses that they're a little worried they could be left in the dust this is day one, guys, so lots of questions to be answered and we'll see that as a days roll on and the months and the years >> deirdre bosa in newfoundland, canada

while today in canada marijuana is legal, in the u.s. it remains illegal federally and in the states that have legalized, many municipalities create their own and different regulations wit s and that creas challenges for companies trying to supply the product. our next guest is trying to solve that issue joining us next is eric spitz. great to have you with us. >> nice to be here, melissa. >> so you simply get the marijuana or the cannabis from the grower to the outlet is that correct? >> yes we act very much like a beer distributor. we have a warehouse and when the product arrives at the warehouse, we receive it, pack it and pick it and put it into containers to go to the stores and we drive it to the stores in our licensed vehicles. >> so how does it work, because if marijuana is illegal federally, then you can't cross state lines. so is all marijuana sold in california grown in california,

distributed within the state how does that work >> that's right. everything that shows up on a shelf in california had to emanate from a california farm or a california manufacturer >> what percentage, by your judgment, is recreational use and what percentage is medicinal? >> in california, my best guess is that 90 plus percent is recreational >> and what does it cost how much what does it cost -- >> asking for a friend >> i'm just trying to compare today's prices to the prices some friends of mine remember. >> yeah, so you're still buying eighths and quarters and halves and ounces, if you're buying flour. you're buying pre-rolls that come in half grams, 0.7 grams or full grams and the prices you're paying or

at least the retail pre-tax prices are pretty in line with what you would have gotten on the street when you were younger, adjusted for inflation, of course, but this business in california has been going on for 20-plus years, and there haven't been major pricing changes >> eric, i got to ask, as you look at -- if things go as planned for you in the coming years, with wider spread distribution of marijuana, what exactly will yoube spending your corporate working capital on is it going to be in trucks, is it going to be in other structure? is it going to be in machinery i'm just trying to think, where people can look towards what that next stage is in the marijuana trade? >> i think the answer for us is brands we are going to be developing our own brands we built the middle of the supply chain infrastructure and determined that having built that, the next phase is to

develop modern 21st brands that look like beer brands and alcohol brands, and deliver them to the market, through our on-ramp, as we call it >> is the u.s. going to lose its edge because canada goes legal nationwide and the u.s. is not >> i don't think so, largely due to the fact that, "a" with, the development started here, and "b," the consumers are here. this is a consumer market. this is very similar to the consumer markets of alcohol and tobacco, in that packaging is going to win, marketing is going to win, brand is going to win. and developing that is very similar to what happened over time as you watch these other markets develop. >> eric, thank you so much for your time. eric fitz with c4 distro and trading. coming up, don't miss brian mulroney who just joined the

board of a u.s. pot company, acreage holdings that's coming up, 4:00 p.m. eastern time >> and he was a conservative >> yeah. >> shares of cesar's entertainment jumping today as cnbc's billion dollar buyer tilman fertitta is approaching the company about a merger. appd by a merger. much more on this big bet on casinos and hotels and more when power lunch returns. whooo! want to take your next vacation to new heights? tripadvisor now lets you book over a hundred thousand tours,

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a potentially huge shakeup in the gaming world. sources telling that cnbc that tillman it feritta is looking to buyout chad beynon, does this mean the deal goes through as it's reported right now >> good question thanks for having me on. it's been wild times in gaming we're seeing valuations new five year lows. that's why one of the reasons we're starting to see more activity in the m&a space. stocks are off anywhere between 10% and 50%. despite companies reiterating guidance for the years in

talking about strong fundamentals we're still very, you know, convicted in our $15 price target the fun is just getting started at caesar's. they emerged from bankruptcy a little over a year ago they've been increasing margins predictably. they have nice licensing deals for next year. they're coming to the end of the cycle. you know, we're very confident in our $15 target. i think that's probably a starting point if that is confirmed. we think there's more value than that. >> stocks not even trading up to what is theert ro reported bid. does that tell us it's unlikely to happen? what do you see could be the potential stumbling blocks >> there's been a lot of m&a in the space. i think just in the past two years with some new gaming rates. there's been creative ways to finance deals. let's not forget that soocaesars

were bought at $10 a share they decided to step up. they believe their stock is worth more than, you know, i think what this rumored number is but i think there could be more out there. just last week, penn and pinnacle closed on the biggest deal in gaming history in terms of number of properties. you have a few other deals out there. so i think there could be other partners that caesar's could partner with if they're looking to go this route they also just acquired a company for $1.7 billion that just went into their fold i think they're probably more on the prowl on the m&a side instead of the defensive side. >> you think caesar's is on the prowl? it seems to be the case of a little fox trying to eat a bigger fox if the little fox skeeucceeds, w will the little fox digest it? what, in other words, is likely to happen to caesar's to be fixed, to use the words that are out there, tillman could come

in, and quote, fix caesar's? what needs to be fixed. >> they still believe in the hub and spoke approach this is having casinos all around the country and then sending your loyal customers to vegas, currently about half of the rooms are occupied by these customers. so the goal is to grow the database what tillman brings to the table, if the restaurant business and database is included in this partnership, would be his, you know, years of building these 60 brands i believe he has 600 or 700 restaurants. good locations that also get you into, you know, some of the bigger populated states like texas. also, tillman, began to buy up casinos a few years ago. he has half a dozen casinos. one is in an attractive market in western louisiana caes caesar's does not have a property there what would be troubling is,

obviously, atlantic city exposu exposure from that he would be bringing that to the table. >> we appreciate it. the dow down more than 300 points at one point at the lows of the day making a big comeback. down 20 points right now coming up, more on the markets and the economy as we are just moments away from the fed minutes' release the second hour of power is coming up next is the fund built to sell or built to last? etfs are only part of a portfolio. so make it easy to explain. give me a quality fund that helps me get clients closer to their goals. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully. hi, my name is sam davis and i'm

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as we await the fed minutes, the s&p 500 is up by 2 1/2 points 1.3% is the gain a real out performer compared today the rest of the markets. the nasdaq is down .10%. we're going to take -- actually, you know, the fed minutes are out. let's get to steve leishman with the details. participants anticipated that further increases would be consistent with keeping the expansion going. more so, a number said it would be necessary to raise rates

above the long run rate to reduce the risk of overshooting on the 2% inflation target that's going by a modestly restrictive policy they had a debate about this some favored it, others said we don't want to do that until we see clear signs of overheating looks like the center on this is about going above neutral, with some wanting to wait a little bit longer until they have more evidence of that overall, the fed agreed that a gradual approach to raising rates balanced the risk of going too slow or too fast on the economy, a few saw stronger growth than they had projected. there was a modest impact scene from hurricane florence at the time a number said they saw similar effects of fiscal policy that would likely diminish over the next several years below trend growing coming in

2021 on other hot button issues out there, some on the fed said trade was a source of uncertainty about growth and inflation. there was concern about the strengthening u.s. dollar and the divergence of the u.s. economy with other economies concern about financial stress in emaerging market economies. we get better relates from fiscal policy than currently seen in the forecast back to you guys. >> why don't you stick around. let's bring in david bellows, and we should mark the markets so far, it's not very much of a reaction here. john, why don't we kick it off with you compared to what we've heard in reason weeks from fed speakers, does this line up with what we heard? anything differ? >> it does i thought what was interesting is the lack of concern about inflation. that's been consistent over the last few weeks the fed does not see a big

inflationary threat right here in fact, last week we saw cpi come in under expectations growth is good, but inflation is not accelerating that's a really important point. to the extent the minutes highlighted that, you know, they're not concerned about inflation here. >> if they're not concerned about inflation, why are we looking at a december hike priced in, david >> because the economy is doing exceptionally well we're at full employment and there are some signs that inflation could be out there they're not out there today but the fed wants to stay with the curve, maybe even a little bit ahead of the curve it makes sense for the fed to try to normalize interest rates. >> steve, same question to you. >> can i just say i think that the optimism on growth is ripe, but the implication there is when growth moderates, which is part of their outliook, whether that's due to trade or fiscal policy rolling off, then it will be a lot less clear. december makes sense, given the

good growth environment. but given muted inflation risks, if and when growth moderates, you know, it's not clear they need to keep hiking at that point. >> steve, jump in as you wish here one question i have for you is how much does the idea, unspoken in the notes, unspoken in the commentary, how much does the idea that the fed wants to get back to a place where they have some dry powder to deploy in case they need it. in other words, you can't cut rates -- well, you can, you can go below zero. but they'd like to get rates higher so when they need to be able to cut interest rates, they've got some cushion that will allow them to do that >> you're right. that is not spoken although, some fed officials have said things along those lines. i think when you talk about the word normalization there's a lot of different diagnomensions to t there should be a real price to money, it's something that

animates fed thinking. being at zero, the nominal interest rate is an abnormal state to be in having a big balance sheet is a abnormal state to be in. i wouldn't say as one of the previous guests said there's not concern about inflation. in fact, it's the concern over inflation that animates fed policy right now it animates the drive and the desire to get to a normal rate so as not to -- there is not concern with current inflation i would say. there's that specific note in there which they say that they need to raise rates above the long run rate to reduce the risk of overshooting the 2% inflation target and for those who have the question of why they're doing what they're doing, and why they think they're going where they're going, i think that's the reason. >> all right, let's get a take on this. we'll bring in kenny from o'neil securities for market reaction from the floor of the stock

exchange kenny, i've heard a number of different concerns, the market reaction, the way it is right now pretty much said the markets have absorbed all they can in terms of information about the fed and what its future policies are going to be. the fed is done in that an adequate job of communicating to the markets what it plans to do. is there anything the fed can do that would derail the current market contrary to what president trump says. >> so, the only thing i think they could do is if december comes and they hike rates more than what they prepared the market to do that would be something that would destabilize. even if december comes and all of a sudden they decide to not raise rates, that could destabilize. we've been talking about it for so long now that the fed needs x-amount of rate increases we've been talking about december now i'm sure december is baked in, which is why you're not really seeing much of a reaction. we've got three baked in for 2019 they've done very good in trying

to get investors comfortable with bad ideas the only thing that's going to derail this ischange rate increases. >> rick santelli, out in chicago, and rick, as we go through the meeting minutes, they mentioned a lot of different things that could change their outlook, including tariffs which they mentioned multiple times how are bond traders deal ing with the current fed environment and their concerns about what could happen with the economy? >> much different than equity traders and much different than those who analyze inmarkthe marr a living somehow they think it's going to work out with respect to the fed, same type of thought process. that ultimately jay powell and company will be very respecepti to any signals the markets give if they push it too far.

i think it's evident we all sort of believe that the slight firming of rates today kind of outside their normal ranges of late, and the dollar index would give up some of their gains after the minutes were released. sort of like the knee jerk to equities, but they haven't all along the curve in treasuries >> and in fact, the dollar index is at the highs on the session i want to go back to you, john, since you seem to think that the fed isn't too concerned about inflation. what do you see for 2019 >> i think the idea that inflation might be a problem and could cause the fed to do something different in the future is a debate it's a hypothetical. there are some people on the fed who are advocating quite policy

in the future to deal with inflation. if inflation doesn't accelerate and growth moderates, you don't need that policy it's entirely possible that some moderation of growth and failure of -- >> john, the question becomes in a normal economy c, what's the right real interest rate that's out there? i'm pretty sure the federal reserve sees it as a positive real rate. at this point you need to get the funds rate if that's right. i guess we could argue that you think a normal economy has a zero real rate i'm not sure you'd do that in that case, you almost certainly need to get to a 3% funds rate in order just to get a positive rate relative to underlying 2% inflation. you don't need additional inflation to justify the fed going higher from here, assuming a normal economy.

>> yeah, i think it's an interesting debate we have a positive real rate now, positive 20 basis points. the forward market has us going up to a positive 1% real rate. i think the history of positive real rates is not particularly encouraging. the times where we've seen positive real rates have usually been followed by slowing economic growth and falling inflation. if you're starting from inflationly at 2%, why do you need it lower? it's not obvious at all. that's still very much of a debate that we'll have to watch. absent inflationary pressures, i don't think you need a significantly more positive real rate from where we are or where we're going in december. >> the debate seems to be about whether there are or are not signs of insipid inflation somewhere. where are they, if you see them at all >> there clearly is inflation somewhere in the offing. you have a lot of concerns about tariffs. that's going to impact

companies. we're hearing companies on their conference calls talk about some higher costs you're seeing some labor and wage pressure when amazon raises the minimum wage and others have to follow. the fed really needs to be ahead of the curve rather than behind the curve. it's reasonable to make rates normal in a robust economy you want to be able to have all facets of the economy working and having a normal interest rate environment it actually has positive impacts. you're seeing the banks rally today. we think it's better for the overall banking system and it's better for bond savers there's a mix out there. but we think staying ahead of inflation is good and the fed is actually doing their job pretty well. >> great rate debate continues guys, we're going to have to leave it there our thanks to steve and rick, of course john bellows and david katz as well. two big interviews to tell you about. we've got former federal reserve vice chairman stanley fischer, he's going to be on squawk on

the street 10:00 a.m. tomorrow also tomorrow at 3:00 p.m. on the closing bell, wilfred frost has an exclusive interview with david solomon. his first television interview as the ceo of goldman. you do not want to miss those interviews. coming up, netflix crushed it the streaming giant surpassing earning expectations retail stocks are getting slammed today. what does it mean for your portfol portfol portfolio? the mega millions sits at $900 million i'm going to win it. >> i hope you do. >> will you be at work the next day? >> i would not be. >> ever again. >> we'll tell u erhi yyoevytngou need to know need to know power lunch is back in two something is transforming and our world.. it's the longevity econo

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everybody. and they have such a lead that there is nobody that is going to compete with them at that level. it doesn't mean other people aren't going to have successful streaming services of 20 million or 30 million. but to think that you can invest whatever you think you could invest and ever get up into their numbers is kind of a fool's errand. >> fool's errand joining us now is laura martin is it a fool's errand? can people compete effectively with netflix can it be that company that has the superiority over traditional media? >> the answer is, my seat includes valuation netflix is being valued at $150 billion for 130 million paid subs, which is $1,200 a subasu sub, and they make $120 per sub.

even if no one catching up, is it being overvalued? >> you have a hold rating. >> i do. >> we know the valuations would have to be more attractive for you to upgrade that. what has to happen what does netflix need to do to get to your expectations where it would be a good stock to buy? >> they need to make money they're still losing money they're going to lose $3 billion this year in free cash flow, $3 billion next year in free cash flow. they took down the margin estimates for both years they have $3 billion of cash on the books. if the financial market shut down for six months, this company would bankrupt itself. it is not an ongoing concern if it only has one year's worth of losses in the bank so i would like a more secured balance sheet. i would like margins to the h upside, free cash flow to peak and getting better i would like a better lower

valuation. >> what do they have to do to make money >> they need to cut down on content spending they're spending $12 billion this year. $8 billion will hit the income statement. they're saying their losses are going to be just as big next year they're going to spend more next year barry says it's a fool's errand. disney owns its ip warner says it's going to take its content away from others and have its own streaming service if you only ip, you can do whatever you want. you can price it at zero and then i don't know what netflix does. >> in your model, if you cut back on spending on content they could lose subscribers. >> that's true. >> in your model, the subscriber number has to be static? >> they need to have a higher ratio of hits. they need to make content that costs $6 billion they're making hindi content or south american content

that content doesn't travel as far because it's language constrained. you might be able to add a sub in india but it's not like having a film from the walt disney company that brings in subs all over the world for a single payment. >> they're too nichy >> which means the returns on capital or the subscribers spent are about to get worse competitors are coming. >> they're nichy, and that makes you itchy. there you go. >> that's true. >> we're looking at this wall. the graphic you're seeing is the competition out there. if it's not netflix, who out there is your favorite pick? who is poised to capitalize the most at current valuations >> the walt disney company we've got a reasonably priced ip owner. they are marketers beyond compare. they have all of those cool films that they can drive subscribers by marketing those films as they put them exclusively on their

entertainment service. they have had very good subscriber growth with the espn pay service. it's already up to a million subs so i get that netflix was first. but its best content is about to be ripped away from it and have competitive services i prefer roku which benefits from this proliferation of over the top competitors. >> netflix, still a hold laura martin, thank you for joining us. >> my pleasure, thank you. coming up, the home construction is on track for the worst rates since february could the need post hurricanes turn things around trading nation is next

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welcome back to power lunch. this is trading nation housing stocks getting demolished today the itb housing etf falling it 2% is there any hope in sight for

this group erin, after this scrubbing the group has had, the stock, at least on the surface look cheap. is there way you can see value in these names yet >> not yet when you look at the forward valuations, it sounds super cheap, but they're on a steady decline. we haven't seen any sense of stabilization. when you look at the fundamentals, the profit growth for next year has been cut by 1/3. materials and construction costs are going up, so you're getting pressure on the margin two, we're seeing weaker home sales because there seems to be an unaffordability issue where buyers aren't able to buy the newer homes. and so that's just compressing expectations we just don't see an end in sight just yet

>> yeah, it's an unusual circumstance you have an economy running hot, but the housing economy is struggling a little bit. at least in parts. matt, how about the charts is there any relief in sight in terms of a bounce or maybe a recovery of an uptrend here? >> well, i think we do it's kind of interesting we turned negative on the group in february. two reasons, we saw a breakout in long-term interest rates above important resistance levels when the broad stock market bounced strongly in the second half of february, bounced 7% the itb rolled over. that was quite negative. it's getting very oversold on a short-term basis it's the most oversold it's been since 2011 that line provided record support the last kcouple of years. we're getting set up for a short-term bounce. i agree with erin. interest rates have broken above 3% longer term that's going to be a

problem. however, i think if you want to short the group or if you want to sell the group, you want to wait for the next bounce i think it could be in the 8% to 10% range because it's so oversold. >> all right yeah, it looks like the market is suggesting that the home building cycle might have been better days for this expansion thanks a lot to both of you. for more trading nation head to our website or follow us on twitter at trading nation.com. thank you so much for that trading nation update. coming up, global stocks underperforming as tariffs and growth concerns weigh on sentiment. ahead a four star international fund manager tells us why now is the time to buy. and the retail wreck, investors fleeing the sector after a massive run up this year is it time to go to shopping for bargains again that and more ahead on power lunch.

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hello, everyone, i'm sue herrera, here's your cnbc news update at an economic event at the white house, president trump telling reporters the saudis are important allies of the united states >> they are an ally. we have other very good allies in the middle east if you look at saudi arabia, they're an ally and they're a tremendous purchaser of not only military equipment, but other things. >> the president denying accusations that he is giving saudi arabia cover in the investigation into the disappearance of writer jamal kashoggi. canalo alvarez has signed the biggest contract in sports history. he was signed for 11 fights over the next five years for a minimum of $365 million. the first fight will be december 15th against a secondary world titleisttitlest.

burger king is launching a special burger that has a green bun. i don't know about that. melted cheese, bagcon, you get the idea there it will be available at a limited time. >> i would have gone with ora e orange green with food. >> or black. >> black, yes. >> st. patrick's day is in march, right, burger king? what's the deal with the green bun? i don't get it. >> i don't know. >> i'm with you, sue thank you. let's get a check on the markets on what has been a volatile day we had turned positive but we start today trend lower on the release of the minutes at 2:00 the dow is down by .5% or 121 points we were down about 300 earlier in the session s&p 500 down by .25% the nasdaq is lowerby 33 points let's take a look at today's big earnings movers.

ibm is at a two year low cfx, beating on the top and bottom lines, cost cutting helping to boost the results we do see the stock lower by 2%. united airlines posting its best quarterly growth since 2010. getting a bump higher from deutsche bank on the ratings u.s. bank corp is higher, too as profit and revenue growth hit record levels during this past quarter. >> thank you. the oil market closing now for the day. and kate rogers is covering it from the commodity desk. >> oil is closing lower today. wti down around 3% today marked the first time wti had traded below $70 since septembe september 21 september 21st the stockpiles are inescrcreasib

6.5 million barrels. there is concern about the sa i saudis potentially using oil to retaliate to silence critics back over to you. >> thank you so much for that update on the oil market canada is becoming the second and largest country to legalize the recreational use o. >> reporter: that's right. now we are about halfway through this momentous day one, the day that legalized marijuana for recreati recreational use it's happening in the country. it's been pretty smooth so far but there are some hiccups starting to be felt, particularly when it comes to supply however, the celebrations started midnight here. they've been continuing with crowds there was a large wake and bake event in toronto there's been long lineups throughout the country from quebec to manitoba to b.c. behind me, this is one of just

about 100 retail stores that went live today. and, you know, there's only about 100. there were expected to be many more but many are still awaiting their licenses there is expected to be hundreds more coming online over the next year or so for areas that do not have these physical storefronts, there are websites, but even those have been having problems as well slowed down because of heavy traffic. some varieties have actually been sold out as well. now, as for the biggest pot stocks, they have been sitting out this party on day one. some of the biggest names that have rallied the most leading up to this momentous event are not doing so well today. maybe there are lots of more questions to be asked as we see how this rolls out in canada back over to you. >> thank you very much good to see you. it's another volatile day on wall street, stocks off session lows, but moving lower in the past half hour what is driving the wild moves are they healthy what we should expect. let's bring in darren richards

and ben beneche. did i get that right >> close enough. >> i'm going to start with ben. what do you think has been going on with the market why has it been having these spasms how long will it last? >> we view it as a return to normal what we've seen over the past few years has been abnormally low levels of interest rates what's happening now is not a new forecast, but maybe just a correction of a preexisting incorrect forecast. >> darren, what do you see how do you analyze what you've seen in the markets? how have the earnings results we've seen so far played into mitigated intensified the market activity >> well, when the quarter got off to a start here, we finished third quarter in really strong territory. we had interest rates pop.

i think the market was pricing in lower rates than that we had a bump there. and then we had some trade issues with china, where our exports were actually going the wrong direction again. it looks like companies are importing more in anticipation of the tariffs we had a couple things going on at the beginning of the quarter. it reversed what was a solid quarter. as you mentioned when earning seasons kicked in, i think people refocused back on what was most important we saw earnings, particularly financials rally and hold things up i think we'll see more volatility the fact that we're in earnings season now i think is going to be helpful it should carry us through to the midterms after that, stocks usually hold up pretty well most midterms. >> ben, a lot of your stock picks are not u.s. some china some emerging markets? >> absolutely. >> that's not been the corner you've wanted to be in, that one has generally wanted to be in this year. >> if one takes a longer term

view, it's been a coin flip as to whether you should be invested in international markets or the u.s. market it's clear that over the past year or even past few years, that's not been the case at all. now in the international markets, you're seeing lower valuations, lower multiples. the average multiple in global developed markets is 16 times versus 20 times trailing for the u.s. interest rates are lower and basically we believe there is more opportunity for enterprising investors in the international markets. there are more stocks. you know, active management has been put under severe pressure, particularly in the united states we think that's largely to do with the fact that the number of listed stocks -- >> it's shrinking. >> basically halved. in the rest of the world it stayed broadly flat. 44,000 listed companies listed globally and 3,000 in the u.s. >> name me one or two that you

like, or name all 44,000 we got all the time in the world. >> the good news is we only need to like a handful of them. so one that we like in particular is ctrip.com. it's a chinese company adr listing. now, china's obviously going through this huge shift away from an export driven and investment driven economy, more towards consumption. we've seen a lot of pressure on the adrs despite secular backing. only 10% of chinese people have a passport only 15% of online travel, which is what ctrip specializes in is done online. 15% versus 50% plus in the developed markets. these are long time secular drivers, but we're being hit by more sicyclical issues. >> darren, where do you see the sweet spot in the market right now? >> well, i mentioned financials. i think that's one area that's lagged we had really good performance

from technology, consumer discretionary so far this year but the breadth of the market was very narrow. it was really the fang stocks. that was making me a little bit nervous. we're starting to see financials picking up if we can see other sectors and stocks besides the name brands, that's a positive. i agree with ben emerging markets in particular, the valuations have now reached the lowest level since 2005. there's a lot of reasons for that tariffs, different things, earnings slowed down a little bit. historically, if you go back to 2005, 2006 and 2007, they were fantastic years for emerging markets. >> thank you very much thanks for being with us, guys. coming up, retail stocks are getting hammered today what's behind the declines are there bargains to be had right now? stay tuned

the retail space contributing to today's declines and having a rough ctober. why has the sector taken such a hit?

is this a buying opportunity oliver chen is a managing director with cowan and company. great to have you with us. >> hi, melissa, thank you for having me. >> is it just a case of retailers had done well prior to this past month, and so when there was a market turn people took money off the biggest gainers? >> yeah, that's definitely part of it. stocks have been up year to date macy's and kohl's up about 30% selling into the strength, also there is anxiety we've seen a rotation from growth into safety in addition tariffs, tariffs are a real risk across the retail sector a good source from china could compose from 20% to 60%. that's a few, too. global markets are fears too these are bits of the psychology that factor into this. however, the u.s. customer is very strong. the u.s. economy is very strong with low unemployment, high consumer confidence and wage growth >> is there enough wage growth to then -- you know, offset some

of the increase in price from tariffs? we heard target and walmart effectively say they would take care of that cost. it sounds like they would either through cost saves or eating into the margin, that they will bear the brunt of the cost i'm sure not all retailers are positioned to do that. >> we do like walmart. 2/3 of their business is domestically sourced about 55% of walmart is grocery. and walmart is committed to every day low prices i was just in arkansas i'm wearing an eldp pen. what we like about walmart is they're committed to value that's what customers want there will be some combination walmart did guide gross margins down they will be taking some of that pain away from the consumer. our stock picks in terms of this environment include walmart, kohl's and ulta for different reasons. we think the u.s. consumer is very strong. >> i remember when the markets

were stressed out. we talked about the fact that multiline retailers were the t outperforme outperformers, take us through the reasoning why you think they would outperform in a market that's been stressed out the way it has been over the past couple of weeks here. >> what i think investors appreciate is dividend yields as well as free cash flow yields. at walmart you get a 3% dividend yield, 7% free cash flow yield what we see is the big getting bigger in terms of large retailers having more scale and then the retailers you mentioned are defensive opportunities that cover a broad range of products. that's another great quality, too, in terms of owning stability in a time of change. that's definitely a characteristic in the free cash flow yields and a safer haven are nice positives also, what we like is these

domestic stocks as well. given our conviction that the u.s. consumer is in a good place and we will have a good holiday in our view. >> one of the bigs is getting smaller and that would be sears. i don't know whether you cover it i know you must think about it and have some observations about what is likely to happen there so talk to me a little bit about sears and who the beneficiaries of its shrinkage or demise could be >> in our signaanalysis we do, e the biggest overlap between target and walmart there is 70% overlap with target walmart. and department stores overlap 55%. they all stand to benefit. kohl's may see a one to two point benefit. as sears goes through a liquidation process, that would be competitive in terms of promotions in the beginning.

it will free up dollars for other retailers to compete hard for these dollars, whether it be in apparel or hard lines it's an opportunity in terms orof what's happening sears was an iconic brand and it's sad about it, too. >> thank you oliver chen. >> thanks for having me. coming up on the show, there is one segment of the chinese economy that is showing no signs of a slowdown and it could help prop up the global art market. that story is coming up next. plus, the mega millions jackpot is now the second largest ever in u.s. history get your tickets, power lunch is back in just two minutes

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welcome back, everybody. while some are worried about the state of the chinese economy, there is one area that's showing no signs of a slowdown, and that would be the art market. robert frank is here with more robert >> reporter: you look at the trade wars and the soft chinese economy, and that hasn't slowed demand for art in china. one of the world's top collectors says demand is being

driven in part by new museums. paint collector tom hill says while he can't predict whether the art market will crash or soar, chinese museums will continue to fuel demand for years. >> and this are under 7,000 museums in china, but they are growing at between 500 and 1,000 museums a year, so there is massive demand. >> a thousand a year hill also said to get government approval many real estate developments in china have to build museums, so new museums will actually be mandatory spot business had a record sale of $466 million in hong kong last month, including the most expensive painting ever sold in hong kong for $65 million. now, hill also told us that art remains a favorite of the global wealth and looking to avoid taxes or stash money offshore. >> if you're looking to avoid

taxes, the art market is a pretty good way to do that and because, again, it's really hard to track. >> and also if you look at what's happening with the chinese kurnzy rigcurrency right of the chinese will want to diversify before it goes down. it doesn't make sense with all the bad china news why the chinese art market is so strong. >> to be clear, the china art market means purchases by chinese individuals but not necessarily of chinese art >> correct a lot of it is of western art because they want to attract people to the thousands of museums they are creating every year which is mind-boggling. if it's easiest or momentum players, or are they long-term holders? there's data now where you can find out who else collects that artists and if it's all the pump and dumpers, you don't want that but if it's long-term spec haters like tom that's really

interesting. >> also his comments on how blockchain may help with provenance. >> right, and the idea is should the art market be regulated because there's no transparency on what someone bought something for. blockchain will sort of help you trace the art and get a better sense of, well works did own it before, and blockchain could be instead of government regulation which would be a great solution. >> robert, thank you. >> thank you, guys. >> if you win the lottery you can, too, buy some of that expepsive art that robert just talked about the mega millions jackpot now sitting at $900 million. that's the second largest ever in u.s. lottery history. frank holland is live in new jersey, not so far from cnbc hq. frank, did today >> reporter: good afternoon, dom. you're not the only one. any one of us could be six numbers away from a nine-digit jack pot tonight the powerball that

jackpot about $345 million not too bad, but the meg ark millions is on friday. right now it's at $900 million by then it could be up to $1 billion so if you're thinking the jackpots are getting bigger and bigger, you're actually right, and there's a catch and it doesn't matter when you get your numbers from one of the computers, a quick pick, use lucky birthdays, your chances of winning are actually smaller because the mega millions and powerball changed their formulas they wanted to increase the number of people playing by increasing the jackpots. the side effect is your chances of winning one of those big jackpots is actually lower, but that's certainly not stopping people from playing. >> each one of these tickets could potentially change my life. >> the pot being as big as it is, you obviously want to give yourself a chance, maybe most chances depending on how much money you got in your pocket. >> figure out what to do with that kind of cash once you have it, right? >> reporter: the biggest jackpot in u.s. history was $1.95

billion back in 2016, that was the powerball. the meg ark millions on friday has the potential, not guaranteed, but has the potential to actually top that one tip. the about 90% of the big-time winners do the quick pick, random number for the computers, doin all the other stuff you're giving yourself less of a chance of winning. dom, back over to you. >> less of a chance. i would say this, frank. we're going to maybe get a pool together. >> i'm out. >> melissa and tyler. >> i would rather buy the bag of lays into frank. >> $2 and a dream. >> i'll bring it all back. >> ticket for each one of you and the lays, melissa. the let me take care of you. i'll bring it back. >> what would be the first thing you buy if you win the jackpot >> i would pay off my parent's mortgage. >> good job, frank. >> really good job, frank. >> check, please is next

well, yesterday, cnbc hosted an event in new york city called net net which is basically a gathering of senior finance professionals and we put on a pretty good show with top investors with people like david reubenstein. >> and you hosted it. >> i was there for it. one of the conversations that i had taking place off stage with one of the people who was there really stuck with me, and the person shall remain nameless because it was an off-the-record kind of comment, but he talked about the three big

investment -- investable trends that he sees over the next decade one was sports betting one was video gaming as a spectator competitive sport. >> we're there. >> and the third was cannabis, and he said on cannabis there's going to be a lot of swings and misses, and a lot of ways to lose money, but there are going to be a lot of ways to make real big money, so those three, sports betting, gaming as a spectator sport and cannabis. >> speaking of -- >> do all three at once. >> you can maybe add a golden nugget location or a caesar's. my check, please, is all about the possible reported source-reported deal for caesar's and maybe tillman operations we'll see if anything comes up with that. >> $3 below the bid so markets are not saying it. >> i'm still buying a lottery ticket. >> thanks for joining us thanks for watching. >> and "closing bell" right now. knott ♪

good afternoon and welcome to "closing bell." i'm wilfred frost. >> and i'm sara eisen in for kelly evans. >> no recorded open. someone recorded the headlines had a little late. >> i don't know if that was the problem. >> really, i'm pretty sure it was. >> busy day. >> as usual on time. here is the check in on the markets. >> this -- still on time. >> this final hour of trade, and it's been a bit of a yo-yo final hour or so but certainly well off the lows of the day. the dow