of where everything was going to be and how great it is. today the market's nervous and when you're nervous, you don't know how big the growth is and you're nervous about the political environment. that's what's hard and, yes, you've had economic growth and it's a lot of what everybody's been talking about, but at the end of the day, that nervousness, makes you wait and when you wait you don't buy and when you don't buy, prices go down. >> great having you here today. >> always a pleasure. any other titles >> i'd like a lot more but they won't give them to me. >> that does it for us. thank you so much for watching. "power lunch" begins right now. thank you, scott. i'm kelly evans and a battle royale. president trump getting into a heated exchange with nancy pelosi and chuck schumer in front of the whole world right in the oval office just moments ago. the president saying he'll shut down government if he doesn't get enough border wall funding. it was the definite of must-see

tv. the rally was fading before that trump tip but could be -- the president calling on the military now to help seal the border. could that be another reason the defense seconder is rallying for the second straight day? "power lunch" starts right now. welcome to "power lunch," we got a couple of more great hours of reality tv for you. welcome everybody. i'm tyler mathisen. stocks losing their gains. they had them in the morning. now they are in the red as you see there for the dow except for the nasdaq. nasdaq is still positive by .3%. the dow almost up 370 points at session highs. we're off the session lows now down about 90 points. boeing, travelers, pfizer, those are the weights on the dow. microsoft the biggest gainer. check out two movers. dsw, one of my wife's favorite

stores, soaring on its earnings beat, stitch fix is down, rip in the seams, more ahead on these two stocks. there's dsw up almost 10%. kelly, over to you. >> you got a fan over here of that one, too. we begin at the white house where just a short time ago the president got into to a public shouting match with democratic leaders of nancy pelosi and chuck schumer about avoiding a government shutdown. eamon is standing by. people's heads are reeling after this. >> reporter: it was intense and heated. the two democratic leaders were here to talk to the president about possible solutions to prevent a government shutdown after december 21st but it devolved into a heated argument over funding for the president's border wall. here's an exchange between chuck schumer, the democratic leader in the senate and the president over that border wall, both of them disagreeing, schumer trying to place political blame and to stick the president with political blame for any shutdown as comes as a result of a

failure. here's that moment. >> and you want to shut it down. you keep talking about it. >> the last time, chuck, you shut it down. >> no, no no. 20 times. >> and i don't want to do what you did, but -- >> 20 times you have called for i will shut down for the government if i don't get my wall. >> you want to put that -- >> you said it. >> you know what i'll say, yes. if we don't get what we want, one way or the other, whether it's through you, through a military, through anything you want to call, i will shut downtown la the government. >> okay. absolutely fair enough. i disagree. >> reporter: so the president there suggesting he'll take the mantle of blame for shutting down the government on the issue of border security. republicans here the president trying to pin the democrats political little as weak on border security, soft on crime saying he's willing to shut down the government in order to get that result of a border wall between the united states and mexico. just after the private session of this meeting, the off-camera piece, the two democratic

leaders came out to the white house z-ridriveway, chuck schum had some more words for the president there. here's what he said. >> in this trump shutdown, this temper tantrum that he seems to throw will not get him his wall and it'll hurt a lot of people because he will cause a shutdown. >> reporter: you heard the democrats talking about a trump shutdown, a trump temper tant m tantrum. what we saw there is very heated and wild moments inside the oval office but also a preview here of what the next two years of divided government are going to look like here in washington as democrats prepare to take over control of the house of representatives making nancy pelosi speaker in january, kelly. >> ten days to go, eamon, is that right have the odds just shot way up that it's going to shut down again? >> reporter: sometimes you get the squabbling most intense before they come to a deal. the question is whether the president's is prepared to double down on that statement that he just made as he'll take the mantle of shutting down the government. that can be a loser for a

president but he feels that the border wall is a winner for him politically. it's a calculation the president's going to have to make. meanwhile all of these other elements going on inside this presidency, the search for chief-of-staff, the mueller investigation, the preparations for democratic investigations next year, all of that on the president's plate here over the next ten days or so, kelly. >> thank you. well, the stock rally that was fizzled as that white house meeting played out. you could say it hit the wall. bob pisani is at the new york stock exchange, robert >> reporter: i think the important thing here is there's a new dynamic playing out here. i think the fed and trade are starting to play out a bit as an issue. let me just show you the futures. the markets rose preopen when the president tweeted out to watch for an announcement on china. we opened strong throughout the day and then we started drifting lower very, very quickly by about 10:30, well before the president had that extraordinary meeting with nancy pelosi and chuck schumer.

that didn't help things. we drifted into negative territory on that. take a look at goldman sachs. i'll show you a two day chart. goldman opened at 183. new lows for goldman. look at that. it went straight down right there well before the meeting with the president. that stock was already basically flat. caterpillar another trade related name opened well, 128 and you see, again, straight down now in negative territory, again, before the presidential meeting. exon mobile, it too drifted down. these are two day charts. apple held up safety after that extraordinary move that we saw in the middle of the day yesterday. so what does it all mean i think this trump discussions about trade are starting to play out. a lot of traders now believe that this constant stream of tweets no longer has the magical effect on the markets. good news coming on trade, the markets sell right in to it.

traders have realized in the last several weeks, every time they buy on a positive tweet, it falls apart. so i think some of that magic is wearing off and maybe we're entering a new phase of all these negotiations on tariff and trades. guys, back to you. >> bob, thank you. the president just said he'd be proud to shut down the government to secure enough funding for a border wall. what's the chance he gets that money and what impact would another shutdown have? let's bring in james with the american institute along with john harwood. john, let me start with you and your reaction. frankly as a citizen, it was wonderful to get this fly on the wall perspective to how these negotiations typically go. i just wonder if the president will regret what he just said. >> in fact, there isn't going to be a shutdown and that the president had been signaling all morning long that there won't be a shutdown. this was a public performance display trying to project an

image of strength for a situation where he doesn't really have much strength. what we heard from the president early this morning is, people don't realize how much of the wall has been built and if i don't get the money from democrats, the military's going to do it. he repeated that in that comment to chuck schumer. i'll shut down the government if i don't get it one way from the other either from you or the military. there's a big out in that, which is can declare victory and say, well, how is he did this morning. we'll bulk it up in different ways. i think that we're not going to see that happen. he's not going to get the money for the wall. there isn't going to be a wall built, but i think the president's trying to project to his base at a time when he's in some difficulty that he's still in there fighting. >> what about the facts that he cited about how where there are sections of the wall built, john, the cross border flows have been reduced dramatically.

what do we know about those claims >> well, first of all, there has been no wall built in his administration. there are stretches of wall across the border, the question has been are we going to have solid wall extending the entire border. i think that border crossings have been declining since the midpart of the 21st century. i don't know about those statistics he cited. nancy pelosi came out in the driveway afterwards and said that that data wasn't real, so i don't know how to specify, you know, he named yuma, arizona. can't really assess those claims by the president, but we do know that there has not been a wall built. >> jimmy, what do you think the odds of a shutdown are and is this important enough to the president that it gets done, is there another way for this to get done whether from pentagon funds or elsewhere

>> i think john's probably right. we don't see a shutdown. it wouldn't be a very long shutdown. democrats will take the house in january. they can pass a continuing resolution bill that will go the senate and dare the senate not to vote for it. the president just doesn't have any real substantial cards to play, so you get a lot of this street theater in the oval office. every time they talked about the wall, what i was really thinking about was boy oh, boy we still need congress to pass -- i'm not going to use that other name the nafta 2.0. those are not great signs. those are not great signs and boy, this does not seem like the pairing chuck, nancy and donald that are going to pass a trillion dollars infrastructure plan. anyone counting on that? that's a rough road to hoe. >> what do we know about the economy and how the markets have reacted historically when the government has shutdown?

we've seen this movie a lot of times before both of you. jimmy, take it off the top and john jump in. >> it's a political event. it's fundamentally not an economic event. it's not a market event. we're such a small portion of the government where actually would get shut down. where it has mattered where it's gotten all tangled up with the debt ceiling. that's not the issue right now. i don't think there's much of a market impact one way or the other. if there's a shutdown, it won't last too much. >> i agree with jimmy. we had a shutdown in 2013 over the implementation of obamacare. that became a political setback for republicans. we had a more consequential standoff as jimmy alluded to in 2011 over the debt limit. that ended up with us getting a credit downgrade. that had real economic consequences. this is only a part of the government and i don't think this -- even if there is a very

temporary shutdown, i think it would go quickly and we'll be in a whole new ballgame in january. >> go ahead. john had suggested, do you think the president will be able to somehow point to victory without getting the $5 billion or does he need to secure those funds? >> well, if the president has a super power it's claiming victory where there is none. so he very well may be able to claim victory and base republicans will think that something is happening on the border and somehow the troops are involved, but for everybody else looks at the fact and we're not getting some giant "game of thrones" style walls for the southern border. >> look, they are very focused on this issue. big segment of the country is going to know whether he's delivering the goods or not. they're not going to be able to pull the wool over their eyes. i think he really has to deliver this. >> listen, and the president may actually believe that wall is being built and they can point

to some of his decline in immigration figures that gee, something must be happening if there's fewer people crossing the border. reality will come through. that's not happening. he's not getting money for the wall. there's the shutdown that's not going to last very long and boy, can we please do something about infrastructure. >> he's been claiming all morning that the wall is, in fact, being built and that he will get it done even without money in this bill. that is setting the stage for him to declare victory -- >> that can't happen. >> work is being done, you know. the semantics over wall versus whatever structure is being worked on, there's clearly been some forward progress. >> there's been prototypes of the wall and there's some wire and troops reinforcing the border, but there is not a new wall on the u.s./mexico border. there is existing wall and

there's been some modernization of existing wall but it's not new and so he is -- he was out this morning in a series of tweets claiming that much of the wall has been built and proved impossible for the caravan to get passed that wall. there was no such collision between a caravan and that wall. there was a minor set of squirmishes on the border that involved tear gas. the president can claim what he wants and he's doing it but that doesn't mean it's correct. >> army's not going to build the wall. >> it doesn't seem like they're going to be doing that. john, let me ask you one final political question. is the country on the president's side on this in other words, if the country -- apart from congress and those that representatives of the people, but apart from congress, is the country, say, the pressure right here. we need border security.

we need a wall as part of that and if it means shutting down the government so be it? >> no, the country's not on the side of the president. the polling is pretty consistently showed lopsided majorities against constructing a wall. cbs did a poll in october and it was 60% said they oppose a wall on the border, 37% in favor. that is a pretty close approximation of the president's approval and disapproval. he was in gallup poll at 40% approval, 56% disapproval. the country's not on his side. the country just elected a democratic house and you can bet with the political momentum that they have, nancy pelosi and chuck schumer are not going to strike a deal with the president to build a border wall. >> i still -- i still think they might get something done on infrastructure but we'll save that for another time. >> hope so. >> fingers crossed. the rally was fading as bob pisanipointed out before the clash in the oval office.

now, the dow has turned negative by about 87 points. how could a government shutdown play into your investing strategy if at all let's bring in kate warren and david sauer. welcome. kate, let me ask you, does a government shutdown matter to my investments at all >> it doesn't matter if you're a long-term investor. it may matter if you're worrying about the next few days because it does add volatility just like we've seen today. it doesn't matter in terms of the economic growth or the earnings growth and those are the fundamentals that drive stocks over time. more uncertainty but not a long-term impact. >> david, is it so much the specific dispute over government shutdown versus wall or is the uncertainty that kate refers to more about the coming clash that is going to characterize the next two years between democrats who are more empowered on

capitol hill, they own the house now and the executive branch is that the uncertainty? >> you're right. markets always have a huge distaste of uncertainty. we know historically that divided governments generally are good for stock prices in specific to today's discussion in the oval office, it is simply noise. i remember a 1995 when we shut the government down not once but twice in november and december and yet in november and december in 1995 the s&p 500 returned 6% and then in the first six months of 1996, it returned 10% and guess what the economy was doing just fine then as it is now, interest rates were headed higher as they are now. fundamentals will prevail and this is simply noise. stocks went higher. >> kate, same question to you. we often say divided government is good and going back to the

infrastructure point. one place they could have a meeting of the minds is over the need to spend. the border wall we're talking about more spending. he knows that's that's going to juice the economy into 2020, right? >> well, who knows, but i would say that people have been talking about the trump administration working with the democrats on infrastructure spending ever since the election more than two years ago and nothing has come of that. in fact, he's been much more successful with other parts of his program not with the infrastructure spending. so i would also say divided government has historically been good news for the stock market because little changes, while there were some things that i think many hope would get delivered out of washington. i think it is a lot of noise and markets will ignore it accept on days of headlines or days like today where it's a short-term negative reaction but i don't think it carries forward very much and as a result, investors really should be looking at the fundamentals and not paying much

attention to the fact that the noise level has gone up. >> so david, spin this film forward into 2019 for me, what kind of year do you think it's going to be for equity investors, up, down, flat and how can i beat the market? >> tyler, great question. this is the year everybody trots out their forecast. the one thing to remember in a single calendar year is it's either to bet the over or under. in a single year it's usually less than 5% or better than 13%, it's never in that 9 to 10% sweet spot given what we've had in 2018 when nothing's worked. i think in 2019 it'll be bet the over, it'll do better than 13%. >> interesting. what makes you say -- that's interesting. what makes you say that? because lately we've been hearing an awful lot of people not betting the under but being much more cautious than they have been. >> then i'm going to be more comfortable being the contrarian, that's always how you make more money. if you factor in valuations now

are back to where they were in february 2016 lows, sentiment is unusually washed out, that's a good thing, profit margins and free cash flow margins are still quite healthy. i'm seeing more insider buying of small and midcap stocks given management's belief in their own company. i roll it all up from the micro to the macro and it means bet the over. >> thank you. >> thank you. a news alert in the bond market right now. we're keeping an eye on interest rates amid all this talk as well. three year notes at auction. how'd they do? >> reporter: i gave it a b-minus and above average auction, let's go through it. 38 billion of three year notes first of 78 billion in supply when you add in tens and 30s yet to come, the auction yield, 2.748. pretty much in the middle of the bid offer of the when issued market, 2.59 bid to cover is the

only metric that was a bit light, but do keep in mind i use ten auction average. the last five have trailed off in that regard. 55.5 in june of this year, 12.5 on directs best since february of '2016. dealers take 37%, b-minus tomorrow. we have 24 billion in ten year notes. back to you. >> thank you very much, mr. san telli. yesterday an early 500 point loss turned into a small gain. the industrials pairing their losses down just 23 now. we're all over these big market swings. get ready for more volatility. congress finally getting their hands on google's ceo. we've got the best moments from sundar pichai's testony timonhe hill. "power lunch" returns right after this. place, the xfinity xfi gateway.

and it's strengthened by xfi pods, which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. welcome back to "power lunch." sundar pichai on capitol hill this day facing tough questions if lawmakers about consumer privacy. google's controversy strategy on china and regulation of big tech and that's not all. we're live on the hill with the details. >> reporter: tyler, pichai signaling that google plans to pull back from its intent to operate in china.

it called that dragonfly project a limited effort internally and said that no discussions are happening around it at this time. >> right now we have no plans to launch in china. we don't have a search product there. our core mission is to provide users' access to information and getting access to information is an important human right so we are always compelled across the world to try hard to provide that information and but right now there are no plans to launch search in china. >> reporter: republicans also repeatedly pressed pichai on the potential for political bias within google, pichai repeatedly denied those accusations, also lawmakers focused on privacy, exactly what data does google collect and what does it do with this and that led to this testy exchange with a republican congressman from texas. >> does google through this phone know that i have moved here and moved over to the left?

it's either yes or no. >> not by default. there may be a google service which you've opted in to use and -- >> so google knows that i am moving over there. it's not a trick question. you make $100 million a year, you ought to be able to answer that question. >> reporter: now google says 160 million users access their privacy data around apps over the last month. they said they are committed to increasing transparency and that they do support a national security framework. >> thank you very much. let's talk about automakers. they are moving higher right now on hopes that china may cut tariffs. is this another head fake or something to believe in? plus the latest twist of goorls ghosn. now there's an apartment in t, a tsetocked with cash and arllho details are coming up.

welcome back to "power lunch," everyone. i'm sue herera. here's your cnbc news update at this hour. british prime minister theresa may arriving in berlin for a meeting with angela merkel on brexit. she will visit several european countries seeking support for her position. earlier her spokesman said they intend to hold a postponed brexit vote by january 21st.

in yemen, media say that at least six people are dead and 12 others injured after an air strike struck the port city. they are blaming the saudi led coalition from that. representatives from both sides are meeting in an attempt to wind down the civil war. the kremlin has rejected the criticism of two russian bombers in venezuela. it was two corrupt governments squelching liberty and freedom. the kremlin called them undiplomatic and inappropriate. and sales for michelle obama's memoir have topped $3 million and the former first lady is extending her book tour into 2019. "becoming" which was published four weeks ago is among the fastest selling nonfiction books in history. you are up to date. that's the news update this hour. ty, back to you. >> thank you very much. time for the power rundown and we love to do this will phil

lebeau. what can you tell us, phil >> reporter: there's a report that the chinese are moving to bring the tariff for imported vehicles, those built in the united states and shipped to china, bring it back down to 15%. its currently at 40%. they slapped an additional 25% on back in july. if this report is true, guys, this is good news certainly for bmw and for mercedes-benz. they're manufacturing plants in alabama and south carolina ship so many suvs over there and that's why you look at shares of daimler, bmw and gm, they're up on this news. take a look at shares of tesla while its fractionally higher today. this is very good news for tesla because this is a company that wants to sell more electric vehicles in china, the number one ev market in a world, a 40% tariff, their sales dropped off

considerably. >> these were the retaliatory tariffs that china imposed and i guess this was the reference that the president made to reduce -- that the president made in the wake of that dinner a couple weeks ago, right? >> reporter: right. exactly. it would eventually come back down to 15%. ford betting on pickup trucks to turn around its sales. that's all they have left, right, phil? >> reporter: right, but for the last three or four years as the midsize pick-up market has gained momentum, ford hasn't been able to play in that market. now it will be starting next month with the new ford ranger. we've had a chance here in southern california to take it out for a test drive, do some off-roading with it. ford needs this vehicle to do well. this is a growing part of the market. yes, full-size vehicles and suv -- take a look at the transaction prices for full-size pick-ups. they're getting close to $50,000.

that means that smaller market, that market between 25 and 35,000, more people are going to be gravitating into that and that's where the ranger looks to play. >> i had a ford pick-up called a sport track years ago and i loved it. it was a stubby little thing. >> reporter: oh, my, you're dating yourself. >> i'm dating myself. hard to do. nissan chairman carlos ghosn the story keeps getting woollier and woollier, an apartment in rio stocked with cash and arts. tell us about it. >> reporter: he's accused by nissan and we don't know if this is actually part of the charges in japan, he's accused of perhaps having a number of properties around the world that the company paid for that they weren't aware of. we're in that he said/she said argument. there is art, cash and other valuables in ghosn's apartment in rio and that the company nissan does not want him to have access or his family to have

access to it. remember, carlos ghosn is detained in a japanese jail at least for the next ten days. they rearrested him when they filed the charges on monday. this is going to play out and it's messy not only for carlos ghosn but also for nissan and the nissan executives who by extension will be implicated in this. >> thank you. coca-cola has been around for more than 100 years but new leadership is taking over and the company is facing new challenges to innovate and keep up with the times. and ten years since bernie was arrested for the massive fraud. are we safer now or ulcod something like that still happen "power lunch" is back in two.

welcome back to "power lunch." another volatile day on wall street. the dow wiped out its earlier gains. it was up almost 370 points this morning, faded before president trump's heated exchange with nancy pelosi and chuck schumer at the white house and went further into the red following that epic meeting. the dow falling more than 115 at the lows today. the s&p moving between highs and lows. we have seen a lot of changes at the top of major

consumer products and foods companies lately. james quincy took over last year and will become chairman. sara eisen sitting down with quincy to talk about coke now and if the future. hi, sara. >> reporter: hi. wall street is optimistic on this story. the stock outperforming the market and even other defensive consumer staples names lately after basically going nowhere for years. here's ceo james quincy on the move in the stock. >> we've had a good 2018. i think what people are starting to see is out growth story coming to life. we've now got five quarters in a row where we've had our top line in the range that we're looking for in the long-term. so i think people are starting to see that we're getting traction coming off the refranchising, coming off the reinvestment and as we lean

forward into a broader portfolio, we're starting to get the growth. >> reporter: that broader portfolio, diversecation has been the story on wall street. six deals announce this had year, 3,500 new products launched. coca-cola is trying to accelerate the diversification of its business away from soda. the whole industry has been seeing this trend. here's the story. the yellow bars there represent the decline of soda consumption going back to 2002. the blue is the growth of bottled water, so clearly the growth is coming outside of soda. you're seeing it in juice, dairy, coffee and energy drinks, all places where coke and pepsi are going. two key questions, though, for investors from here after the outperformance, can coke diversify fast enough? 36% of revenue is still core coke according to rbc. that's a global statistic and can they do it in a challenging

macro economic environment with growing dollar headwind as the dollar has strengthened against all currencies and the political uncertainty rising. quincey told me that before an exchange issue is clearly a problem and that's why he's focused on things he can control, like the portfolio innovations, m & a and really just keeping the diversifying total beverage company going. >> i like that body armor. you know what i don't like, the machines with the buttons -- i know people like to mix the sodas, but it's glitchy and i press it and then it takes time and then you press the wrong thing and i got to go back to the start and i get frustrated and i walk away. >> reporter: you're talking about the free style, so that's very nonmillennial of you, kelly, because where this industry is going and it's not just coca-cola, it's nike, any consumer company right now is thinking about personalization in terms of products and that is built in to the free style and

built into this very cool new machine that we got a look at. athletes and coaches can actually design what goes in to their power aid beverages in terms of electro lights -- it happened to her. >> it happened to her. she had to press it again. >> they're working on it. >> reporter: i think it's getting faster. to your point, the point here of course is to speak to a new younger consumer. it's not a revenue driver for the company yet. quincey tells me it will be. it's really about collecting data on the consumer, what they want on their preferences, on their habits and working with that to come up with newer, faster innovations and get an edge over the competition and that's another big reason they're investing and focusing so heavily -- >> i like that old machine behind you. that's cool looking.

>> they should bring that back. >> reporter: there's a lot of cool looking old stuff, yea. we got a look earlier which will show you on closing bell" of the old bottles, the first bottles ever that coca-cola had, took a trip to the archives to see that and the gum. did you know the first licensed product of coca-cola was gum i tried it. i wanted to try it but it turns out it's worth $10,000 so i want allowed to. it goes back to 1913. >> i don't want those old bottles. that can stay in the archives. thank you very much. >> reporter: thank you. an all new episode on the profit. here's his reaction when he shows up to that company's warehouse. >> what the [ bleep ]?

[ phone ringing >> amanda marcus. >> hey, marcus. >> where are you guys? >> what do you mean? >> i'm at the warehouse and it looks like you guys got ram sacked. it doesn't look like a place that has much profit, that place. >> i think that's why he's there. it is the 10th anniversary of bernie's madoff massive fraud. others are having to pay back money. is it a tale of two victims, when "power lunch" returns with the chase ink business unlimited card, i get unlimited 1.5% cash back. it's so simple, i don't even have to think about it. so i think about mouthfeel.

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and we're watching the markets. the dow now down 172 points this morning. this time its lower. yesterday we had big losses turn into big gains and today it's the flip side of the coin. nasdaq slightly in the positive but here's a look at capitol hill right now and google ceo sundar pichai. >> he's leaving after having a hearing that went on for much of the morning today and they're talking about -- >> mr. pichai, is dragonfly down are you worried about regulatory risks? >> guess not. >> reporter: should consumers have to opt in to sharing their data

are you concerned that google will be broken up, mr. pichai? >> it looks like the cat has got his tongue there after a long morning where he was obliged to speak. >> i was thinking he might have appreciated the focus on the white house this morning instead of squarely on him. it is the biggest investment fraud in history and ten years later thousands of victims of bernie madoff's epic fraud are still struggling to put their lives back together. scott cohen led our coverage of the scam of the century and he's back now catching up with some of those victims. good to see you. >> on the surface it sounds as if madoff's victims are doing okay after they're getting 6 cents back on the dollar. the figures only begin to tell the story. on the one hand there are investors like joyce greenberg of houston who says she's gotten

back about 60% of her multi-million dollars madoff investment. >> well, i consider myself very fortunate. >> reporter: she says part of that is due to good recordkeeping on her part. more important, she didn't withdraw any more from her madoff account than she put in. according to irving picard, the trustee rounding up funds for the victims that makes greenberg a net loser at the top of the food chain for recoveries. for greenberg a pleasant surprise. >> when madoff confessed, i thought i would never see the money again. >> reporter: but on the other hand our clients like the kent family from georgia, like thousands of victims eileen kent's parents withdrew more money than they invested believing the returns on their madoff statements were real. >> it was shock and disbelief, it was distressed. >> reporter: under the formula upheld repeatedly in court, the money the kent's withdrew beyond their investment which was based on fictional brokerage statements was not theirs to take making them in the eyes of

the law net winners. >> we're not a winner. how can you be a winner when, you know, everything you worked so hard for has been taken away from you >> reporter: add insult to injury, those net winners are subject to clawbacks by picard and less like the kents they could plead hardships. that sets a precedent for fraud to come and sets the stage for more unsuspecting investors to get scammed. you can subscribe now to apple or wherever you get your podcast. >> are we safer today and is one of the lessons that if you deal with a money manager, you should never deal with one who actually custodies your account the account should be custodied by a state street or a schwab orr bc or something? >> that is a lesson and it's one of the things that the law

changed in the regulations in the wake of madoff. there's now an office of the whistle-blower at the fcc so they'll listen more likely to harry or somebody spent on compliance on wall street firms it's like the big area now, probably the only growth area in many respects. but crooks get around the laws, they get around the rules. as sure as bernie madoff did it ten years ago, someone will find a way. the key lesson is, yes, this can happen again it's been a rough year for defense stocks all the big names are lower but the president's budget requests would be a boone to those companies. after what happened today at the white house, is there any hope the democrats will give the president what he wants? could these fee mpiedenscoans be caught in the middle of a political tug of war that's next. ines. ines. morning sir. chief, the blade isn't passing quality gate.

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this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. welcome back the dow down 200 points this afternoon, about an 0.8% decline. it's the worth performer of the major three today. the nasdaq down 15 and the s&p

down 15. >> it really has tumbled quite a bit. we'll find out what the intraday swing is, about 500 points >> yet another one defense stocks, 550 is the swing today. hit along the rest of the market has been the defense sector but it rallied beginning yesterday on news that defense spending may not be coming down. the white house is willing to spend more can that keep the rally in the defense space going? let's bring in the senior vice president of aerospace and defense equity research. welcome. >> thanks for having me on. >> we talked briefly about the defense stocks yesterday today a little bit more of the same the big item, i guess, is the president wants $750 billion in the pentagon's budget. is that right? >> yeah. so we had a consensus reset to $700 billion and now we're seeing the administration wanting $750 billion the timeline is really we'll see what the budget request looks like in february. >> it might be a bargaining position, if you will, so who knows where it shakes out. defense stocks as you know

better than anyone have had a rough go of it lately. could this be the beginning of a turn-around? >> we've seen 30% multiple compression since the start of the year the stocks are no longer trading at 20 times p.e., they're somewhere around 15 times p.e. when you look at the budget outlook, it's probably going to be in the $716 billion which is flat to fiscal '19 levels, at least that's our house view. given midsingle to high digit single growth, they deserve a bit of a market premium. >> some look at the meeting this afternoon between the president and democratic leadership and say, wait a minute, they're fighting over $5 billion on a border wall. how likely is it that a democratic congress will allow for more spending on defense going forward? >> our view is short term. over the near term you get a positive move in defense stocks but over the longer term as you look at the deficit, you have to think 700 is likely the sustainable level in the defense budget. >> i take the point that

democrats are not necessarily excited to spend more on defense and let's say they take the white house in 2020, maybe you get an even more tightening of the purse sprintrings regardless of the party, there's more and more talk about america and a cold war and pulling out of the nuclear treaty with russia and that causing a global arms race. if we look beyond some of the politics, is there potential for a lot more defense spending to come >> i think 700 is the sustainable level. the safest place to be, the two names we like are northrop and harris northrop you have safety and programs of record, two large programs of record and a 30 -- 30% of their business is in classified so when you talk about cold war comments, that's the safe area to be in harris, they're merging with l3 and we think buying your way out of a potentially consolidating budget is helpful. >> we'll see if it turns around the year anyway, sheila. >> thanks. stocks sliding throughout the day after a strong opening,

even turning negative as the president clashed with the top two democrats in congress, but the slide began before that, as you see very graphically right there. we're now close to session lows. d.c. dysfunction once again may be costing you a little money. two hours till the close on wall street stay on "power lunch," don't go anywhere

hi, everybody, i'm tyler mathisen if you're just joining us, welcome. if you've been with us, welcome back it was a battle royal at the white house as the president clashed with pelosi and schumer with mr. pence looking on. will this public display of a divided d.c. play out for the 2019 agenda? will it play out in the markets? we will explore that this hour. plus, the dow down 200 points following that heated debate but the slide had begun before that. we'll take it apart. we're at session lows. how big of a blow to market confidence is all of this and what is going on. sentiment on apple low, and the stock in the red right now some say the valuation is too good to pass up and you ought to be snapping it up. we will dig into the apple

debate as "power lunch" resumes right now. welcome to "power lunch," everybody. i'm kelly evans. another volatile day on the street the dow losing its 368-point gain this morning following that fiery exchange between the president and democratic leaders. we're hovering near session lows the dow now back in correction territory. staples and real estate are your leaders right now. the consumer staples financials and industrials lagging again. over on the dow, travelers and boeing are the laggards while verizon and nike are leading the way. semi conductor stocks seeing a nice pop again their etf on pace for its best day in five weeks. we talked about the weakness in financials that sector just 1% away from a bear market. wells fargo, suntrust and goldman are all lagging. tyler. extraordinary meeting playing out at the white house this afternoon between president trump and the democratic leaders on the hill.

our own eamon javers was at the white house and has the latest details. >> reporter: this meeting came ahead of a december 21st funding deadline to keep the government open the whole fight here was about whether or not democrats on chill would provide any politicpli political support for the president's border wall. the democrats offered $1.6 billion for border security. the president insisting that money needs to come to fund a wall proper, although the president also saying that a lot of the sections of the wall have already been built the two sides simply couldn't agree on the basic facts underlying this debate and also on the policy here of where we should go in terms -- as a nation in terms of border security here's the exchange that caught a lot of people's attention. this is where the president said he's prepared to own the political blame of a government shutdown if it gets him the

border security that he wants. here's the exchange. >> yes if we don't get what we want, one way or the other, whether it's through you, through a military, through anything you want to call, i will shut down the government. >> okay, fair enough >> and i am proud -- >> we disagree. >> and i am proud to shut down the government for border security, chuck, because the people of this country don't want criminals and people that have lots of problems and drugs pouring into our country so i will take the mantle. i will be the one to shut it down i'm not going to blame you for it the last time you shut it down, it didn't work i will take the mantle of shutting down. i'll shut it down for border security. >> you shouldn't shut it down. >> reporter: the president there saying i will take the mantle, i am proud to shut down the government for border security that may be the sound bite that democrats were hoping to elicit from the president of the united states, calculating that a government shutdown is politically bad for this administration, particularly heading into a year in which democrats will take over on capitol hill and the president

will be forced to negotiate with them more often than he has in the first two years of his administration meanwhile, the white house putting out an official statement from sarah sanders, what they call a readout, calling today's session a constructive dialogue. there may have been some of that we didn't see much on camera, but there was also an off-camera piece in which the democrats say they proposed two potential government funding solutions to the president. we'll see if any of that behind-the-scenes negotiating worked better than some of the stuff that we saw on camera here today at the white house. >> it was two very fiery new yorkers and one fiesty san franciscan in the room. >> and one very quiet vice president. >> he was a choir boy in there let's talk a little bit about the political calculus here, because my guess is that the president's base likes what they saw today. >> reporter: sure.

>> and they would say there go those government-loving democrats again, fighting to keep open the government they love the government bigger government, the whole business and we believe in border security strongly. >> reporter: yeah, that's right. that's why you've already seen lindsey graham, senator from south carolina up on capitol hill, signaling his support for what he saw from the president in that session, saying he applauded the president for holding firm on border security. that's the calculus that the president is making here he can stick the democrats with the political blame of being soft on border security. the democrats are hoping conversely to stick the president with the blame for any government shutdown that happens at the end of this month. >> i'm sure the fact checkers are all over some of the facts that the president laid out there today about the decline in border crossings and the amount of wall that has been built. i'm not an expert in border security or that particular issue, i haven't seen it yet, but i'm sure that will be coming later today, right >> reporter: absolutely. we've seen some of that already

in terms of whether or not any border wall has been built to date the president suggesting that a people aren't aware of the border wall that's been built and ultimately it gets down to a debate whether you consider some of the barbed wire and 7fencing, does that count as wall or not but the president seemed to be positioning himself for a political situation where he said, look, we built a lot of the wall already i don't need that much more from the democrats up on capitol hill. >> thank you very much, eamon javers at the white house. stocks hitting lows. we were down 200 points a moment ago, a 10% decline for the dow from its recent highs. let's get to bob pisani. still roughly a flat year at this point. >> yeah. this is the first time we've seen that since 2015 on a flat year let's take a look at what happened today two important events number one, the market rose preopen when the president tweeted out to watch for an announcement on china trade.

it didn't last song. you saw we were moving all the way down by the time we hit that famous oval office clash you just heard eamon talking about, the market was essentially flat and then took another leg down on the ramifications there between that clash between pelosi, schumer and the president. i just want to show you some stocks to indicate how the overall market dropped goldman sachs, new lows yesterday. they opened up nicely, 183 basically was flat by the time of that meeting and now is negative same with the other industrial names, caterpillar and boeing. caterpillar opened around 128. down flat for the meeting and essentially negative exxonmobil, big oil names, same thing, all opening up and then moving to the downside exxon was near 78, now down at 75 so you see the pattern here. my point here is that there's something new going on here. there's some question about whether positive talk on trade really is a market mover anymore.

it doesn't last very long. they sold right into the president's tweet this morning art cashen, i was talking to him and he was saying the markets are saying we need more than that that these constant stream of tweets on positive trade negotiations is not having the magical effect that it used to this is a sign that the markets are looking for something a lot more substantive. >> bob, thank you so much. how much is a risk of this white house turmoil to the markets? let's bring in the managing director at serian jason, let me begin with you incredible afternoon again, just to watch the politicking process play out, what's the takeaway for investors? >> i think in a broad sense, the markets are still grappling with this idea that we're in late cycle and the recession risk, while we can't really see a clear picture of a recession around the corner, i think investors have a little sense

the growth is slower, next year will not be as good as this year and the recession risk is rising we actually agree to some degree with that. our model comes up with a 35% probability of recession in the next 12 months the basic thought there is there's a likelihood, base case is this expansion keeps going. 35% is a meaningfully enough number that you have to start thinking about positioning around that. that's what the market is grappling with is investors are trying to position portfolios for the slightly higher risk environment that we're in today. >> my only suggestion to you would be is that's exactly what's already played out. if you said that three months ago, i'd say i get it but now that's what we've seen the market do. the valuations for the likes of facebook and google, we spoke about this yesterday, they're down 18 or 20 times. you know, look at the financials goldman is trading at its lowest since november of 2016

is now really the time to be getting defensive? >> i think there's a reason to be slightly defensive in this market given this risk there's the possibility that it goes on longer in fact i put it as a base case that we continue going through this expansion but to build in defense appropriately darreltoday relat what was going on a year ago makes a lot of sense a lot are coming off extreme highs in valuations and arguably unjustified in terms of where they were priced getting back down to more reasonable levels just makes sense and pricing in a little bit or positioning a little bit given the risks also makes sense for investors. we think that's a wise approach. it's probably going to play out for people over time they should continue moving that direction, not taking it too far, but getting a little bit of defense position in portfolios. >> let me flip the story a little bit we spent a lot of the afternoon talking about this oval office

confrontation between the president and democratic leaders, but our bob pisani points out and picks up from the floor talking to traders that the sell-off in the dow stocks and elsewhere had really started to take root before that, and specifically despite some sort of favorable sounding tweets from the president earlier today, look for a major announcement later today, possibly involving automobile tariffs and the chinese. and he says, bob that is, that maybe this -- the positive rhetoric is not or is no longer having its positive or salutary effects on the major markets do you see it that way is that part of what's going on here that we've heard enough of the positive rhetoric and this is crying wolf? >> i would agree i would say this is just one more ingredient for this recipe of volatility. if you didn't have enough with the fed and with china and now you've got d.c. as well, that's

a whole other reason to be concerned about volatility i think investors need to be prepared for more of this, frankly. we're actually in the short term a little bit positive. i think you're going to get a softer tone from the fed next week, and i do believe you're going to see more clarity out of this deal with china, but i agree with jason i think investors need to use any lift we get in the next six, eight weeks, which are seasonally strong, to reposition for what could be a more challenging backdrop in 2019 because the pace of good is slowing and investors need to realign their portfolios as such. >> reposition from what to what, greg >> really revisit the allocation is it time to take profits in areas in the stock market and look at areas that have been out of favor growth has outperformed value so much over the last several years, but the last several weeks, value stocks have really come back strong we think that trend continues. we also like disruptive technologies in life sciences, biotech, gene therapy,

immunotherapy. we think these will benefit an aging population investors need to be keenly aware of their fixed income portfolio because these rates, while the pace may slow, rates will go higher investors need to own stable individual bonds to protect the portfolio and have a risk averse component there. >> i wondering if any client has said, you know what, i don't want to go defensive, let's get crazy and ramp it up and throw me into faang. it always sounds good, doesn't it, greg >> it does, but i think people -- we had two 10% plus corrections this year so far and i think that's a wake-up call for what's to come. i think some people remembering back to 2008 who simply don't want to relive that. we've had a great ten years. reversion to the mean is inevitable why not get a bit more defensive given the backdrop we've had over these last seven or eight years. >> as long as they are actually defensive. gentlemen, thank you greg sarian and jason pride.

fears of soft iphone sales and trade turmoil behind apple's recent slide is apple now technically a coiled spring or should you hold the phone before buying? we'll debate that. and hawaiian airline stock has been grounded, falling more than 23% can the company turn it around in '19 we'll talk to the ceo. and another day, another whipsaw move for your money. this 2:00 p.m. hour has been the telltale time for the markets. right now the dow is down 172. another day, another 500-point swing or thereabouts "power lunch" will be right back

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this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. welcome back with a check on the markets today, we are near session lows. the dow dropping 166 points this afternoon after a 350-point rally this morning the dow about 10% again off its recent highs boeing, travelers and goldman all lagging. tyler, this after this morning the president had some positive tweets about a deal with china. >> yeah. >> he talked about help for the auto sector in all faded away. >> let's take a look at chip stocks could a rebound for the chips signal a broader recovery in technology we'll talk about that straht eaonpor nch.

stocks turning lower as president trump clashes with senate minority leader chuck schumer and the incoming house speaker, presumptive speaker, i should say, nancy pelosi

we are off the session los, down 116 right now. the president says he's not afraid of a government shutdown over the wall. so what could a public battle like this mean for the trump agenda and how much does it hurt investor and public confidence with us, tony fratto, former white house press secretary. tony, tony, tony, have you ever seen anything like that? >> i have seen a lot of scrums at the white house usually one of those guys standing in that room watching these things and i've never seen anything like that at all. there's usually a method to how you communicate in those things where you talk aboutprocess an the things you're going to discuss but you don't try to have the debate in front of the cameras. it's not usually the best place to have the debate that said, it was kind of fun to watch, wasn't it, tyler? >> it was. if mike pence would just shut up, you know >> i think he knew -- >> he knew better.

>> yes back from the line in that one and watch along with the rest of us yeah >> a very polite indy ianan in there with a couple of new yorkers and a san franciscan my point is that investors would be less concerned over a political spat over a border wall and a government shutdown, but they would be more concerned this is what's to come over the next two years let's face it, president trump is an atypical politician and does not -- actually seems to relish these kinds of confrontations. >> there's no question he likes a pugilistic style i will say this about nancy pelosi if there is a question in her caucus as to whether she is strong enough or energetic

enough to be pugilistic with trump, i think she dispelled that this afternoon. i think it was probably good for her. investors are wondering, you know, if things are going to change i think most investors are not actually looking to washington at this point for big changes in things they don't want to see government shutdown. they don't want to see am railway mo -- acrimony and more trade fights that doesn't have a lot to do except for the passage of the new nafta bill >> hey, tony, on that point, i wonder how much investors are trying to discount the democratic party simply being a spoiler for the president's agenda if they have liked some of the deregulatory stuff and otherwise. >> they do like that but most of that is happening at the agencies themselves. the trump administration put in place a lot of people that are not looking to add to regulations. in fact they're looking to roll back a lot of regulations, and they're doing that very, very successfully and the business community and investors are really happy about

that and they're showing it congress -- you know, congress needs to pass legislation to make any changes in either adding regulation or further deregulation and that's not in the cards. >> right if they get in the way of that, does that speak to a larger -- there seems to be two concerns in the market. any time the mueller probe gets closer to the president and any time we saw a display like we saw this afternoon, i wonder if the common thread is the street saying, look, we do place some value on trump's agenda and we're concerned he may not be able to move forward with that. >> i guess the question is what are the pieces of the trump agenda that still need to get done so they should actually cheer gridlock if you like the tax cuts and want to keep the tax cuts in place, you cheer gridlock. if you understand that the regulatory policy is largely run by the regulatory agencies with the leadership of the people who are directors and commissions on those agencies, they probably feel pretty good about that.

there isn't a whole lot of big regulation out there that still has to move. investors will not like to see gridlock on things like budgeting. budgeting we knew -- we didn't learn anything new today because we knew that was going to be confrontational. we knew that a shutdown was very likely he confirmed it today. the president probably also gave a gift to democrats by essentially saying i am taking shutdown on my shoulders, and you can go ahead and blame me because i'm going to hold out for a border wall. >> and that in itself is a rewriting of the playbook. >> no question about it. >> this is a president who does it all the time to varying degrees of success anyway, tony, thanks very much >> thanks. >> now let's get over to mike santoli. i know you're kelly, for trading nation. >> tyler, thank you very much. semi stocks off their session high, still up a bit after an

impressive start to the day. at the day's peak the group was nearly 3% higher, now barely hanging on in the green. that big reversal coming after a 6% drop so far this month. we're joined by matt maley and stacy gilbert. matt, obviously semis, we've talked about them before they were a leadership in the nasdaq, going up into the highs in the spring, have given a lot of that back what do we make of these comeback attempts? >> well, it's funny because right now we are at a key juncture at least on a technical basis for this group as you mentioned, it's been a key leadership group in the past and it did top out several months before the xlk by several months the key is right now, as you mentioned, we've seen a little bit of a bounce and it's made a couple of minor higher highs and higher lows. that's good. the problem is it has to

continue if you look at a longer term chart, it's made a classic rounding top it has the saucer formation. but this rounding top, if it breaks below the november lows of just a few lows ago, that's going to be very, very negative. the thing about this situation is that if you go back in time, it's not just the past year, this group has been a leading indicator for the entire tech sector which has been a key leader for the entire market so what happens really the next few weeks will be very important for the group. >> you turned the saucer upside down and it makes a mess, right? so stacy, on a value basis, on a positioning and sentiment basis, can you make the case for anything in this group >> we certainly can't make a case for the group overall fundamentally we remain cautious on semis here as our semi cap and hardware analyst recently published, things actually look worse

rather than better and there's real concern q1 earnings could be much worse than what current expectations are pricing in. as chris roland has noted, there's really few places to hide data center demand may be declining. pc shipments have been moved up, potentially creating air pockets. auto sales are slowing in china and not to mention the crypto hangover for the gpu so it's too early to move into this sector, we believe. that being said, one area where we see secular growth is in the ai space chris roland recently upgraded zylinks. so this is a name if we have to pick a name in the semi space, go with individual names xilinx is a place we would look. we certainly wouldn't look to buy the sector as a whole. >> always a cyclical group and maybe a little on the wrong side of the cycle at this point matt and stacey, thank you for joining us for more "trading nation" head

to our website or follow us on twitter, @tradingnation. i was going to talk about aliens with that saucer formation. let's check on apple shares. their valuation below the historical average talking about 12 times forward earnings is apple just too cheap to pass up or is sentiment on the street still bearish. stocks giving up a 368-point gain this morning. we'll look at what is taking us lower and why. there's the dow right now trying to make a comeback it might go back into the green before the end of the hour "power lunch" is back in two and now the latest from tradingnation.cnbc.com, and a word from our sponsor. >> daily price fluctuations of individual stocks can offer trading opportunities. however, if you're unhappy with your returns while trading actively, consider taking smaller positions over a greater investment time frame. evaluating trends over multiple weeks rather than hours can help

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welcome back to "power lunch," everyone i'm sue herera here's your cnbc news update at

this hour. first lady melania trump participating in a toys for tots event for needy children with a marine corps reserves at a washington area military base. she welcomed santa claus who handed the children be bes totes and they were filled with coloring books, pencils and other gifts. >> as a mother, i feel children are the most precious gift of all. they provide so much joy in life as first lady i have made it my mission to shine a light on programs that provide more opportunities for children to succeed. >> the search is on for three people missing in a west virginia coal mine rescue workers initially looking for four people, but one emerged saying the others were in a pocket of good air, but about 1,000 feet deeper than rescuers have gone so far. and in australia, get a lot of that lady she's 102 years old. she is irene o'shea.

she became the oldest female skydiver when she took part in a jump over the weekend. family and friends surrounded the grandma when she broke her own record to raise money for a charity. this is her third jump since 2016 god bless her. >> good for her! >> good for her. unbelievable feel good story of the day, ty. >> a lady with good bones, sue thank you. >> you got it. a volatile day for the markets, folks the dow traveling in a more than 500-point range. 384-point gain at the peak earlier today, down more than 200 points where now? 25 points higher, the s&p is also positive as is nasdaq consumer staples and utilities are the leaders right now. industrials and financials the biggest laggards it's a tale of two retailers dsw jumping higher after positive earnings. on the flip side, stitch fix sinking after weaker than expected holiday guidance was issued.

take a look at shares of ge. that stock hitting $6.66 at one point during today's trade 6.79 now meantime the oil market closing for the day. to cover it all, we've got dom chu. >> we've got oil prices closing higher, though off their best levels of the day. wti crude about $51.69, brent crude $60.30 prices had been helped along earlier in the day with relative weakness in the u.s. dollar which still sits near highs of the year we've also got a shutdown in production at one of libya's biggest oil fields that's helping prices, but traders not as convinced gains could hold after bullish positions in oil futures have been cut to their lowest levels in around three years. analysts at bank of america and merrill lynch are more bullish and predicting brent crude prices to average $70 per barrel in the coming year on a

relatively balanced oil market, kelly. back over to you. >> just hanging on to $51. dom, thank you. it's been a brutal past couple of months for investors in apple the stock down about 20% about 25% in the quarter it's its worst quarter since 2008 could the stock be ready to take a technical u-turn or more josh lipton is here with the details. >> kelly, apple has given up all its earnings for the year. given the warnings we've been hearing from apple suppliers valuation has moderated. apple is trading at 14 times earnings, a discount to its five-year average and the broader market wall street sentiment has moderated too. 54% of analysts rate apple a buy and that is down from 82% a year ago, perhaps showing a lot of the challenges are known and acknowledged and the head of technical research at strategis says apple

is oversold and we could see a near term bounce at year end back to the 200 level. the street has taken down their numbers. everyone from ubs to citi has been slashing estimates. qualcomm won a ruling in china against apple that bans several older iphone models in that country. morgan stanley says that injunction appears limited in scope but does add to greater headline risk for the stock. guys, back to you. >> josh, thank you very much apple in a bear market now, down around 27% from its 52-week high but at these levels, is apple ready to bounce back is it now cheap enough to jump in joining us now is a senior analyst at bernstein and wall street's top apple appenalyst tony, it feels like it wouldn't be a day without having you, my friend. >> thanks for having me. >> you point out that there have been very few relative occasions over the past decade where apple

has underperformed the market. this is one of them. what do those prior instances tell us about what could happen next >> yes so we've looked back and this is really the fourth instance in the last eight years where apple has underperformed the market by 15% or more. the key takeaway for us when we looked at the prior instances was that ultimately the stock did not begin to outperform or did not cease underperforming until posted sale side estimates stopped going down so ultimately the question is are sale side estimates low enough they have only come down about 1% or 1.5% and i think the fear is that the slowdown in iphones could be more pronounced and accordingly estimates still need to go lower. historically what we found is if estimates go lower, ultimately the stock continues to go lower.

so if we operationalize that, apple is likely to report its calendar fourth quarter earnings around february 1. if the company misses or the guidance is weaker than what's in consensus numbers, you have 55 analysts who are lowering numbers, and typically the stock doesn't work in that light that's what we found historically. >> so when does that bell go off? when the lowering stops. how do you know when that happens? >> you know, that's very difficult to know because i think the big question mark is how weak will iphone units be. here we are still only in early december, and, you know, this is a very seminal month for not only this quarter but also in dictating the pace of sales for the year so that's a very tough call. i think directionally people know it's more likely to be disappointing, but by what magnitude is ultimately the

question. >> we see you have a price target and they have come down a little bit rosenblatt has a $165 price target no wums is near the price that it's trading right now that has some room to drop still. if apple starts to tell us or suppliers start to tell us there's good news, but indications that sales of the legacy phones, they may be surprising to the upside the new one isn't selling. what would that mean for apple >> you know, the devil is really in the detail in terms of how it balances it out. so you're absolutely right, kelly, we have heard anecdotally there being better strength in older phones but the majority of phones sold in a typical cycle, about 75% are the new generation phones. those three new models don't appear to be selling well. they carry much higher selling

prices it's unclear that weakness in 75% of the business in much higher prices can be made up for in terms of strength in older products. >> everybody seems to be focused on the unit sales question and many answered by saying, yes, but the revenue per unit sold is much higher than it used to be so don't overfocus on that i'm not saying you say that, i'd love to hear your thoughts on that but there is a way to juice unit sales and it usually involves cutting prices could that be -- that has really never been their playbook that i can recall you can correct me on that but is that part of the playbook now or one that ought to be on the table? >> typically what apple has done is try and address new price points at the low end. so what we did see historically is that apple introduced a new low end model called the iphone se during the success cycle when units were weak. and apple came out with a new price point and a new device

that was really trying to open up incremental buyers for the iphone and it had some success in driving units. and so certainly that's something that apple could do. >> is the xrthat >> no, it's not. i mean we'd likely be looking at price points under $400. when we talk about a low-priced phone, the xr is a $750 phone. so we'd really be looking at dramatically lower price points which can create elasticity at the low ending so i think that's more likely than having apple cut price. they have run some promotions on trade-ins, but apple historically does not cut price. some of its partners or wireless carriers might off promotions, but those are driven by those partners and carriers. apple historically has not cut price. >> i can just tell you guys, i went to get a new phone a couple of weeks ago, and i got the 8

and that felt like a splurge because the 7 was fine but they didn't have the right case size or something the 6 basically would have been fine why do i need the new one with all the headaches that come trying to use it without the push button. >> the bigger screen tony, thanks very much. >> thanks for having me. fuel prices are low. americans have more money in their pockets to travel, and that must add up for better times for the airlines, right? not necessarily. ahead we'll talk to the ceo of hawaiian airlines about the headwinds facing his industry and his plans for growth that's in two minutes.

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despite lower fuel prices, 2018 has not been a great year for most airline stocks. take shares of hawaiian holdings, down more than 25% this year. the broader airline index down 15%. is a rebound in store with the new year with us is peter ingram, ceo of hawaiian airlines and hawaiian holdings peter, welcome you'll be ringing the closing bell at the nasdaq today, so congratulations. >> thank you very much aloha, it's great to be with you. >> aloha so lower fuel prices we understand the concern is that that means airlines cut fares, that cuts profitability. what pressure have you guys felt

so far >> well, you know, we have seen some lower fares in the marketplace this year, but that was in the context of a time when fuel prices were actually rising earlier in the year i think if you -- if you look at what goes on in the marketplace, i think it is really more a combination of supply and demand that makes a difference. we saw some extra supply of capacity into the hawaii markets this year. that's been what's driving some of the price action, i think. >> and you're getting some more just now, right? southwest moving in. that's got to have you a little nervous. >> well, you know, i think we're really prepared to compete our business is focused on serving the needs of travelers to, from and within hawaii and we do that better than anyone else. it is the entire focus of our business and we're very prepared for our competition wherever it comes from >> i was going to ask, you fly not just from the west coast to

hawaii, you fly much more broad network of flights than that do you see yourself expanding that network over the next few years, whether to asia or into other domestic cities? >> actually if you look over the last eight or nine years, we've expanded a lot. >> yes. >> our revenue base is now about 50% between the u.s. mainland and hawaii just under 25% from international markets with japan being our largest market and then 25% flying within the hawaiian islands so we've got a network that really spans where visitors to hawaii come from and we're well positioned to take advantage of opportunities wherever they occur. >> peter, you guys have any problem with comfort animals these days delta just said it's banning them on long flights it seems like people are now showing up with all sorts of dogs and cats and lizards and what have you. >> well, i think that's been something that carriers

throughout the industry have seen over the last couple of years. i did have the opportunity to read a couple of articles about delta's announcement today we haven't had some of the worst problems with it, but i do think it is important that we manage that and frankly it's an area where it would be useful to have a little more clarity on some of the regulation on what can and cannot be on an airline. service animals we think are absolutely important they're trained to help people and certainly we don't want to do anything to restrict people's ability to have service animals. but i think there is some examples of comfort animals on airplanes that have gone a little too far. >> comfort puppies -- don't get me wrong, i'm going to get e-mails on this, but it does feel like that you need some governance there obviously so if fuel prices stay where

they are, is that going to be great for you, or what >> i think fuel prices where they are is quite a manageable level. you know, we've had prices higher earlier this year, over the last couple of years prices have been lower. what we really lik we do have call options to allow us to participate but give us some protection if fuel prices go up very quickly in the short term >> thank you so much we'll look for you at 4:00 p.m they will be ringing the nasdaq morning bell >> up 368 points at the high of the day. it went down a couple of hundred. what are the market signals

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all right. welcome back he is here to explain why the rallies seem to be getting pu punkier and punk dpier. he is a fast money trader. you're worried about liquidity >> you can't put any stock into what you see and pun intended. when you start to see the rallies you have to understand where are we in the county here? we are approaching year end. you funds that are either going out of business or have managed to stay above water or flat on the year so they are on a relative basis no one wants to do anything. what does that result in volatility people sit on their handles. people are lucky enough to survive and going out of business they have nothing to put back in the market >> so they sell them

>> okay. >> continue. i'm sorry. >> so that's why you see these volatile spots and they trade off of headlines we are up. we are down. we rallied 20 handles or so off the lows this should be sold as well this morning. when you look at how we traded over the last couple of months i always look at it through this trade up to 2940 we crash here. this is an ekg if your lucky yesterday we had a 2583 low and the s&p cash look for that level. apple was rewarded with a bounce off the bottom everyone said it was the attributed rally watch apple as well. apple we faded yesterday

163 was the low. see the last sale. i would fade that as well. 170 is your level you want to look at. these are all technical pops you're seeing. the market is telling us it's sick and the market is telling us it wants to go lower. don't get sucked in. >> very clear explanation. appreciate it. >> good to see you check please is next when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today. fidelity. whai tell clients, etfs can follow an index, but which ones target your goals? it's not about quantity. it's about quality. no trendy stuff. i want etfs backed by research. is it built for the long-term? my reputation depends on it. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence.

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take a look at canada goose. the maerker of those coats is down as one of the biggest markets, china, apparently people there are so upset over the arrest of the chief financial officer in canada they are taking it out, it seems, by putting their goose coats away and not buying them. the stock is down in response in part to that >> the only thing i would say on that too, you live by the sword you die by the sword this is an example of how it could go wrong any time we get that it plays into that. the state department according to sources considering a travel advisory for china to caution u.s. scitizens from heading that way. >> you wonder if there could be

some sort of retaliation there it will be an eventful day >> we will be watching goose >> we will be watching goose >> thank you for watching power lunch everybody. >> closing bell starts right now. >> the dow erasing a nearly 400 point gain after of a heating meeting between democratic leaders. >> the last time you shut it down >> coming up we'll discuss for a year ends rally is fading and the risk they are warning wall street about >> no parly men tear vote. instead rumors of her threats as european leaders give her the cold shoulder as she intended to renegotiate. that's coming up this is what coca-cola looked like back i18