i haven't or fast food in maybe 30 years. >> soda pop. now you're showing your minnesota. >> you got this. >> starbucks tomorrow stock's going to be higher than right now. >> buy progressive corp. a great quarter. sell keyside technologies to get the funds for that. >> "the exchange" starts now thank you, scott welcome to "the exchange," everybody. here's what's ahead. it is the final countdown if you will we are an hour away from the fed's first decision and news conference of the year and the main thing to watch is not a change in interest rates we'll explain. you know apple's quarter was a big one and one area of concern of ceo tim cook. we'll dig in. a warning of starbucks, restaurants battle it out over fake meat. facebook faces a big quarter boeing ceo boosts investor confidence but let's begin with today's markets.

in the green once again and dom chu. >> they were in the green most of the day and dip at one point, brian. we are building on yesterday's begans the dow jones up by 115. just about half a percent to the upside s&p 500 at the highs up 16 points at the lows down about 5 and stuck in the middle there. quarter percent gains and the nasdaq up about one third of 1%. a big theme to watch, what growth stocks, technology, communication services, those types of names did versus value more oriented. two etfs that track it more than double performance in terms of growth type stocks versus value the gap wider in first part of 2020 see if the trend continues and then the stock of the day, we are just about 3% away from record highs in mcdonald's shares gone, just about 3% from the record levels. up a huge since this october

area 11% to the upside for mcdonald's better than expected profits sales in line. important part, to you here, mcdonald's, u.s. and global same store sales, establish restaurant sales locations better than expected back over to you. >> thank you very much. all right. let's begin the hour with the countdown to the fed decision. the federal reserve expected by basically everybody to hold steady on the interest rates and focus likely not on rates but the balance sheet expanding like a balloon at a kid's party buying 60 billion in t-bills every month since september. for more on the fed and the markets and the connection, we are joined by brian beleskey, sumatra s ubadtra. everybody thought this is going to be a nonevent, a nonevent fed meeting and then we have the coronavirus kick in and real

global growth worries. does that change the fed's thinking an statement and press conference >> probably not over the near term because i think it is too early to gauge the impact of the coronavirus on the global economy but the bond market is starting to sense clear signals of concern if you look at the decline in 10-year treasury bills, it is intense. break evens back to where they were in august starting to unravel. and also, if you look at real yields, close to zero. the big difference - >> what does that tell you what message is it sending >> the market's starting to price in cuts. for the year it was not in the price a couple of weeks ago now there's roughly i'd say a cut priced in. >> a rate cut this year? >> we won't. in my view because the economy sur proo surprises people to the upside.

>> a rate hike >> not a rate hike f. the fed is smart, i would like the fed to cut rates. i believe the yield curve needs to be steeper. so to me my growth outlook doesn't suggest fed needs to cut but i like a cut market i think is probably too pessimistic on growth. but the key thing is the fed's balance sheet. that needs to keep growing. >> the market has grown with it, brian. a favorite chart, not saying a good chart, is s&p against the fed's balance sheet going back six months and going up evenly with each other. you recently raised the s&p target how much if any of that is only because the federal reserve? >> first off, 3675 the best-case scenario i would say this when you have a market that was multiple led, right? i think we're transitioning this

year we are on joe's camp to head into an earnings driven market the upside is multiple driven last year. especially in the fourth quarter and that chart shows you cheap money, higher risk premium, how models are put together in simplistic ways but we think simply what's happening with the bond market of similar to august is that foreign investors buying dollar dominating equities we are the stability trade. >> it is simplistic. put it this way. for the viewers who may be like the fed and rates. you have a credit card payment of $200 a month. rates go down. you get a new credit card. pay off the balance and now the monthly payment $150 you have $50 in free cash flow companies are doing the same thing, are they not? frees them up to do what buy back equities and drive earnings per share. >> correct >> correct but the key thing on the consumer side that most people

miss, we have had a secular change in terms of how much people saving and smarter on the consumption side and that's the big change on the corporate side we think heading into 2020 and 2021 we'll see a semblance of cap-x we haven't seen in our country over 20 years, a key metric that's also going to help the notion that we believe is that 2020's going to see the earnings trough and more of an earnings driven market. >> the consumer is in phenomenal shape. high savings rate. low debt service burden. >> low energy prices. >> but also, household debt to income is at a 20-year low other than a few specific sectors, consumer looks great. how bearish on the economy if the consumer is in good shape? >> switch gears. no way am i walking you down the political line however, however, we have a trillion-dollar deficit and we have candidates that are promising a lot of stuff to cost

a lot of money do deficits matter anymore if so, how >> well, i think they do matter. the difference in the cbo's projections we got yesterday versus last 50 years is see deficits up and down now for the next ten years we're expecting trillion-dollar plus deficits every year so the deficit to gdp ratio to go up close to 5%. for the last 50 years that was 3% deficits go up really the big difference in the next ten years or at least in the last ten years is that interest rates have been low and debt servicing costs have been quite low. >> my eye started to twitch with those numbers. by the way, we haven't soon the levels since wartime and like 1792 literally, something like that does this mean that the federal reserve and the bond market must at all costs literally keep

rates low for a decade >> well, that's kind of what they -- by default that's what's going to happen and not just the government's debt servicing costs but the corporations tacking on a lot of debt and the servicing costs are for now kept under a lid because general level of interest rates are quite low. that's a reason why it's very, very hard for 10-year treasury yields to rise above 2%. >> but don't look at the supply driven story with lots of deficits and therefore rates have to go up. japan has a debt to gdp that's approaching 300% and yet its rates are extraordinarily low. without the actions rates have been low so there's a lot of factors that go into rates and where the neutral rate is and aging of the population. the view i think to be espoused

is growth. >> where does it come from >> cap-x >> deficits don't matter >> listen. over the last ten years you have seen on a year over year basis deficits increase including the last year of president obama's -- >> doomsday talk going with it. >> exactly you have to remember, ten years after the crisis was the largest asset shift in the history of the country, going from stocks to cash and then cash to fixed income for all intents an purposes we haven't seen that. 8 out of the last 10 years we had people selling equities than buying but i think the key thing from an investor standpoint is look at the pillars of the growth of the united states in terms of sector technology, communication services, consumer consumer discretionary and oh by the way, yes, financials but not all financials. >> five technology companies, 83% of the market's gain in the last 5 years but that's for a different segment. >> let's not get too serious.

>> the rare exchange triple play. >> you bring us back. >> we will great stuff. appreciate you very much. now the latest on the coronavirus outbreak here's what we know at this hour from the w.h.o. they held a press conference in the last hour. there are now 6,166 cases with more than 90 puerto rico % of ta the w.h.o. saying signs of human to human spread of the coronavirus in three other countries. they are positive, though, that the chain of the virus transmission can still be interrupted. on china, they added that the country has a laser focus on stopping the outbreak and the government is willing to take significant economic and other hits to put people's health first. let's get more now on the ground reporting from beijing eunice, we look at the numbers, try to find optimism we look day-to-day, it appears that the growth in the numbers, numbers are still bad but the

growth trajectory seems to have slowed maybe just a touch. >> reporter: yeah. that's right still, though, the chinese authorities are really trying to get people not to travel in fact, just today another province joined the several other provincial governments in trying to discourage companies as well as laborers from coming back to work so both provinces latest ones but of the provinces saying that for the most part they don't want these companies to resume work at least until february 9th for hubei province most affected by the outbreak, they're extending the order to february 13th a lot of this is because they're worried of number of people who would be feeling obligated to continue to travel and go back to offices the centers, though, are all --

all of the provinces are major manufacturing hubs for everything from autos to electronings and household goods and the government turned attention to trying to insure supplies the agricultural ministry calling on farms to plant quick-growing vegetables getting more difficult even in the big cities to have -- find fresh produce, brian another thing to throw out there. they're also trying to be careful of price gouging there's one drugstore here in beijing that was fined $430,000 because it's been charging for a box of three masks it is charging $121 instead of 20 six times more and because of that they got a major fine to make sure nobody else does it. >> wow bad practice an they got hit probably for the good. eunice, thank you very much. all right. here's what else is ahead on

"the exchange. >> apple smashes iphone and sales expectations and hits an all-time high. but the company says the coronavirus will have an impact. we'll discuss. plus, as the saying goes, one man's trash is another one's treasure one restaurant removes beyond meat from its menu while another expands its partnership. and we'll hear from boeing ceo following the latest results.

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welcome back to "the exchange." apple hitting all-new highs again. >> we're thrilled to report apple's biggest quarter ever which set new all-time records in both revenue and earnings. >> driving apple's record quarter? first, a big comeback for iphone sales. and then there's this. monster growth in the wearables decision surging 37% year over year the airpods, apple tv, the watch, reached nearly 25 billion in sale last year. put that in perspective. that apple business which basically cannot exist just five

years ago now roughly has the same sales as starbucks and visa it is not all wine, roses and airpods. might be clouds on the horizon for apple with the coronavirus delay hedging for fiscal 2q. quote, you can see from the range of guidance that it anticipates some level of issues there. otherwise we would not have had a $4 billion range in that guidance for more, bring in laura martin. i think those numbers fair to say, laura, last night were pretty surprisinging to even some of the more bulls on apple. >> yep apple's a convictionless name and all of it was led by over delivery of iphones, iphone 11 and sisters is the number one selling iphone in every seng l week of the quarter. tim cook said and they delivered 56 billion of revenue for iphones versus $50 billion consensus estimate

so that all means that -- they also said that they had a billion five active devices up 100 million devices year over year so we are getting more people into the ecosystem of apple, more devices in that ek quo system i wanted to make a note on the wearable comment that 37% growth in wearables despite the fact they ran out of both watches and airpods. >> amazing. >> amazing. >> out of stock in many of the products the air pod pro i think a couple month wait. >> it is it is even better when they get them back in stock. >> in new york everybody has the white airpods in their ears. i tried to talk to my daughter and she had the airpods in under her hair probably drowning out her annoying father. there was something in the 10k i saw that worried me a little bit saying that net sales overall might have fallen a bit and a fear perhaps the wearables

cannibalizing the phone business any risk there >> i would think of it as an on-ramp and tim cook said some people buy the watch first and then after they get the watch, the phone is wear the memory for the watch resides and that's the on-ramp so i would say no. wearables to me add another form of value, lower cost on-ramp into apple an i think what we are seeing with 480 million subscribers which is 1 year ahead of schedule for them is that they're selling more stuff to each subscriber they would call it an iphone user and lifetime value per user is higher so anything to bring somebody into the ecosystem, apple figures out how to get paid more. >> like hotel cupertino. 499 for apple tv

apple arcade music match, itunes. pretty soon kicking apple a 40 to $50 a month annuity how high can it go >> we continue to think there's upside to earnings and to the valuation multiple as people recalculate the lifetime value per user inside their ecosystem. they're doing a great job at apple. >> conviction buy. a real pleasure. thank you very much. talk to you soon. on deck, starbucks also beating on earnings, but again, cautioning that the wuhan virus could change the 2020 outlook. we'll tack about that. and we believe this airplane is safer than the safest airplane flying today. that's what boeing ceo david calhoun told phil lebeau this on a day when boeing reports first annual loss in more than 20 years phil with an outstanding 15-minute interview with mr.

calhoun. we'll bring you the story ahead. you can also watch or listen to us live on the go check it out how's the it department liking the now platform? every time it takes care of something for us, we celebrate. how often does that... got it. servicenow -the smarter way to workflow.

welcome back to the exchange here's some of the individual movers that the hour shares of l-brands up nearly 13% following the reports of the ceo in talks to step aside and could result in a full or partial sale

of the victoria's secret brands. ge up nearly 10% after beating on the top and bottom lines. results boosted by the aviation business the ceo saying he sees 2020 as a year of transformation investors certainly hope so. shares amd down nearly 7%. that on a disappointing quarter. slowing ahead of the new systems launch and a best performing stock in the market over a couple of months let's step outside the world of buzz and get a news update with sue herera. >> thank you, brian. as the impeachment trial shifts to questions from senators, democrats are doubling down on the push for witnesses they need at least four gop senators to join them to reach the 51 votes required to call witnesses. >> i remain hopeful that four

republican senators will join us in supporting witnesses and documents in this trial. it's an uphill fight as i have always said but the public is on our side and truth above all is on our side. a dramatic scene in los angeles where firefighters are responding to a blaze in a 25-story residential building in the brentwood section of the city authorities say there are reports that an unspecified number of people jumped. as you look at this live picture right now, part of the fire is knocked down but one person was critically injured and people were on the roof at one point as the flames and smoke rose from the sixth floor. some of those had to be rescued by l.a. firefighter helicopters. and a spacex rocket launched this morning at cape canaveral carrying 60 star link broadband satellites, part of the pursuit of creating a network of sat litds for affordable internet

access across the world. a busy news day. that is the news update this hour back to you. >> sue, you and i are both from los angeles and it is a tough couple of days we have to send good wishes to everybody out west. >> absolutely. you know, to the people that were affected by that, it must have been a terrifying experience. >> just unbelievable story sue, thank you very much hopefully everybody's all right. coming up, the coffee could be colder at starbucks gaming in media and warren buffett says good-bye to the newspaper business and more on the restaurant battle of beyond meat rapid fires xt ine about investment decisions? rigorous fundamental research. with portfolio managers focused on the long term. who look beyond the spreadsheets to understand companies, from breakroom to boardroom. who know the only way to get a 360 view is to go around the world to get it. can i rely on deep research to help make quality investment decisions?

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coffee, media meets gaming and fickle fast food it is time for what else rapped fire. here to break down the stories, kate rongers, dom chu, contessa brewer investors concerned about what else the potential fallout of the coronavirus in china starbucks noting in the earnings that the virus affect the fiscal 2020 they have closed more than half

of the chinese locations because of that virus and starbucks ceo saying earlier today that more may close. >> look. we are dealing with this on a daily basis. so when from's a concern we'll close stores and we are going to do it responsibly and thoughtfully. >> kate, not just the closed stores, store that is remain open apparently seeing their sales fall. >> not as many people going out right now. what's fascinating is starbucks said it had one of the best holiday quarters ever in the company's history and had been locking to raise guidance and then when the coronavirus came out now as you said it could materially affect their sales moving forward so potentially going to have to lower the guidance china is their second home market starbucks leaders words about that market for them they're pushing aggressively into it. >> 10% of the sales. >> it is they have a lot of competition and seeing china sales continue

to grow quarter after quarter and important to them and as you said - >> the models would be a bigger threat than the coronavirus. >> fair enough but the transparency is if your 10% of sales adjust. >> more than half. >> adjust the models for traffic so it just means the analyst expectations for comparable store sales is ratcheted down. >> don't they have a partnership with alibaba >> they do but if the stores are closed you can't do delivery there and not able to capitalize on and monitoring it and may close more. >> topic two, the world of media, sports and gambling colliding. penn national gambling agreeing to buy 36% in bar stool sports $450 million penn national with exclusive rights to the exclusive audience most of whom young guys.

having the best day since october of 2001. contessa, really interesting move penn national kind of a mid market gaming company. going with a fairly controversial sort of sports site. >> largest domestic gaming company. they have 41 properties over 19 states their average gamblers in the 50s. they're looking to lower that age. you partner for your sports betting moves with a company that is known for their 20-year-olds, 30-year-olds and 40-year-olds half of whom may think are already gamblers and on average bet more than $51 a pop. this is such a big deal that jpmorgan already -- the analyst already raised the price target by five bucks. to $33 penn could stand to position itself to capture 10% to 15% of the u.s. domestic sports betting market that's a really big deal

and they retain the right to have complete majority stake 50% in 3 years. >> this is a big deal because what it does do is brings an added level to the sports betting franchise, the personalities involved in bar stool sports and media meets gambling but there's a cult following that bar stool has and if you can translate that into additional revenue - >> i think i saw shannon fox of -- two pieces of news sports and gambling coming right together by the way, tune in to "mad money" tonight because jim cramer has a ceo of both penn national gaming and called the stool president. dave portnoy, ceo and founder of bar stool sports will be on with jim tonight. that should be a good one. interesting one. >> absolutely. >> all right it is quite a dramatic 24 hours for beyond meat if you can have

fake meat be democratic. tim hortons pulling it from the menus in ontario and british columbia saying consumers not that excited about the beyond meat menu items as anticipated but on the other side kfc announcing to roll out beyond meat's plant-based fried chicken in the southern u.s. because of strong consumer demand kate, how do we read this? >> it is a confusing one the kfc test they did with beyond meat this summer sold out in less than five hours. i think they're curious. do they like it? do they keep coming back in the case of tim horton's, didn't work out. >> why >> could be a fad. who knows? >> burger king had a huge blastoff with the impossible whopper. >> initially. >> we have seen that momentum fade, as well. so this might just be this idea that there's a fad food element and then we'll see start to see

them fade. >> i think, dom, listen. former mutual fund manager i think when you look at beyond matte, like we talked about a couple days ago, wouldn't you like to see a store have it and then increase the offerings over time because that says there's consumer pickup, people like it enough to eat more. >> here's what i would say right now that the data point to look for now is going to be dunkin brands but they have the sausage patty. if you can see traction there then maybe there is a publicly traded entity that has to report results that is showing some kind of momentum but right now yum brands seems to be the only one showing that sign. >> one other quick thought, mcdonald's, still waiting, they did tease a burger announcement on the earnings call and the new campaign about the beef burgers and how great they look and the great shots of that. if they're doing the opposite of everyone else -- >> they know something we don't.

maybe they were smart to waiting. warren buffett, a sad story, throwing the towel in on the newspaper business berkshire hathaway almost never sells anything a rare move and sign of the times given warren buffett was a big newspaper supporter. >> not just that i still continue to believe that local news is probably one of the thingthat is you want to invest in because it's boots on the ground, places where you get that feel for the real stories in america the fact it goes away saddens us a little bit the issue is whether or not that's favoring things because of the advances like "new york times," "wall street journal," other big ones where people increasingly go to because they have become magnets for eyeballs. >> i see this differently. buffett has a piece of the action lending lee $567 million

at 9% interest and not like it no longer matters because he wants them to pay the interest on the loan taken out. >> that say that is lee enterprise probably couldn't get debt no reason to pay 9% unless -- that's the only place you can go. >> and having worked in local news for much of my career, i'll say this when people go in and they want to make money at local news, what they do is often cut costs and lee says they can do that here they have to watch out because what makes local news valuable is when you are delivering a service that everyone wants and how do you do that quality local news and you can't do that if you don't invest in journalism. >> you wonder where kids get the local news from down the road and even if you don't care - >> social media. >> there has to be somebody behind -- can't be on joe on twitter. >> it is. >> making stuff up

that's scary making stuff up. >> that's scary. >> there's been proof. it raises municipal borrowing costs when crooked politicians are not investigated we need some kind of -- by the way, see your kid in the paper hitting a home run right? >> dom chu's parents - >> my whatever i did in the local news when i was a kid. >> bring them in. >> a shoebox. >> kate wins that round. >> yes >> appreciate it. still ahead, facebook high we are earnings on deck. the key things you need to watch for coming up. plus, you know those facebook memory alerts in the news feed? we'll do the same for facebook we have the good, the bad and really ugly of facebook in the last two years with the surprising outcome december orders for nondefense capital goods fell

6.5% from year ago levels. excludeing aircraft, that figure was down .9%

let's talk about facebook, shall we social giant set to report earnings after the bell tonight. the stock near all-time highs. this march will mark the two-year anniversary of the company's cambridge analytical scandal. the scandal exposed facebook for the vulnerabilities to protect your data. it was the first blow in what became a very rough two years. let's walk through it. in april of 2018, facebook said it was really 87 million people that were exposed. that led congress to demand mark zuckerberg testify and he did. very grueling two days testimony cost that stock and investors another 5% another scandal in june with the phone device makers accessing even more data

fast forward one month and the stock tanks 19% because earnings growth slowed down believe it or not, only got worse from there the exodus began the ftc fined them new york attorney general began an anti-trust investigation which is then later joined by another 46 states attorneys general. throughout this, lots of folks saying that facebook useders are gone they'll leave, delete the account. use it less and less an investors would turn on the company. but the number of users has only continued to grow. bottom line, while the stock may have had the ups and downs two years latter, all that stuff we talked about didn't seem to matter at all. we are joined by kevin and james. kevin, i'm going to start with you. we just walked through this timeline with all these high-profile problems and yet nobody seems to care

how come >> well, i would suggest that it's not that people haven't cared. we have seen volatility in the stock over the last two years but, you know, reality's proven that consumers continue to go to facebook more and more each day. instagram proven a huge engine of growth. and now the stock is back up very near all-time highs so again i wouldn't say that we haven't really thought about this consumers had two years to contemplate risk and came to the view that the earnings growth profile is compelling and the opportunity set ahead is attractive, as well. >> james, does anybody cancel their account or just people say they will do it and then leave it up to see your friend's dogs? >> yeah. look facebook is a phenomenal company. when you think about whether to own the stock or not, you know, you have to call facebook for what it is it is a giant media xeen with a

massive infrastructure and i think to your point it keeps growing. the reason is because the roi threshold so attractive and a thing to look at is how sustainable are the thresholds for ad units, approaching a peak have they peaked there's uncertainty around the roi for the newer ad units like stories the next lever of growth for them and i think you are seeing that in the revenue upside 3% revenue upside versus 30% accretion in the stock price meantime, you have ever-increasing costs. infrastructure, privacy, security, content, oversight of you have to ask those questions as you look into the coming quarters. >> does the election pose a risk to the election? i heard that people think that facebook was involved. i wonder as we head to a more contentious election, are investors nervous about it >> i think investors perhaps do start to think about is this going to be a replay of 2016

but what i would point to is the fact that again this is now three years after the initial concerns of privacy scandals, the lest of donald trump, perhaps the action of bad actors there. and facebook in that time has taken i would say pretty aggressive steps to curb a repeat of that scenario. and as we think through the potential impact between engagement, on the election, seems like that should be relatively benign. we shouldn't really worry as to if the russians will participate again. it seems - >> james, i'm sorry to jump in like this, kevin time ten years ago everybody was on myspace. news corp. paid whatever hundreds of millions of dollars and now it's gone. maybe the risk to facebook is boredom or a better platform comes along. >> that's a risk with even bezos

says that amazon is not immune in the foreseeable future. but ultimately i think facebook engagement is less of a concern as you evaluate facebook i think it's the return structures for example, we have been talking about for years monetization when's that going to happen? is that realistic? what are the returns threshold i think those are things to look at and less so engagement because they are number one. >> i don't know how you put ads on a platform that's encrypted and doesn't know what you're doing. that's another conversation. guys, appreciate that. facebook earnings out tonight. boeing posting the first annual loss in more than 20 years. phil lebeau spoke with ceo calhoun of the culture and transparency and more and phil will join us live next.

tune in at 4:00 with peter navarro, coming up at 4:00 eastern time "the exchange" back in two minutes. just as soon as my audit is over, this gets my undivided attention. you take a lot of trips to the islands, phil? pretty great, right? oh phil's legally dead. fell off a boat. going by denis now. celery. long story. what do we got here. oh. not going to want to see this. i don't think this is going to work. at&t has america's best network, now with our best plans, at our best prices, starting at $35 a month per line for 4 lines. new from at&t.

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shares of boeing irks rare day higher, after the new ceo dave calhoun seemingly gave investors something to believe in he spoke with phil lebeau on a day where the company posted the first annual loss in more than 20 years phil its first loss in more than 20 years 14 or 15 minutes, awesome stuff. calhoun, you came in he came in hot what were some of the main takeaways. >> reporter: there's a couple of things first of all the stock is moving higher mainly because david calhoun is saying the this is a realistic expectation when the max will be back in service. yes boeing did announce it will have costs associated with the max now topping $18 billion. among the new costs paying the airlines, aircraft leasing companies another $2.6 billion the overall cost to produce this over the lifetime of the airplane another $2.6 billion. shutting down and restarting the

line, another $4.6 billion he reaffirmed his guidance by mid-air they hope to have 737 max ungrounded based on conversations with regulators and people working on fixes. here it is he's working hard to get realistic guidance to investors. >> the media, my customers, our employees will judge me every step of the way here i'm not going to predict it will be perfect but what i will do is i will put realism into every one of our assessments every step of the way and i will listen to everybody that's involved directly in the process. >> as you take a look at shares of boeing yes this was first annual net loss since 1997 but, again, brian what people are focused on is what happens with the max and more importantly whether or not they believe in the latest guidance that boeing put out a couple of weeks ago that this plane should be ungrounded by the middle of

the air. >> what stuck out to me is how ada man and forceful david calhoun was i'm not going to say when this plane will fly it's the faa, not me he did the exact opposite of muilenburg >> one other thing there's not this sense of this is what we're doing and the regulators will go along for whatever we're telling them we're doing it's much more in line with we're talking with the regulators we know they will push back on some things we put out there very much working with the regulators as opposed to saying this is what we're doing >> you worked six weeks straight every day. >> i have a cot over here. >> i bet you do. check out phil's whole interview. the whole thing is online on cnbc.com that does it a little bit early for the exchange why are we going out early

the first fed decision is coming up we'll give you a preview at 00 you got that fed decision. we'll see you later. "power lunch" and the fed is next

. welcome back, everybody to "power lunch". we're now just minutes away from the first fed decision interest rates of this new decade and as we await the markets -- as we await that decision the markets are higher the nasdaq, all of the major barometers by a third to a little less than a half percent higher right now david kelly is with chief analyst with jpmorgan. david bellows and month north america. will the fed do anything today other than make some noise in their statement? >> well, i don't think they are going to change anything today, but it's easy to defend that, not changing anything because the story hasn't changed from six weeks ago that much president not so easy to defend the level of interest rates. we're still inflating asset prices when the economy is doing pretty well. i do think we're building long

term problems by continuing to facilitate higher prices -- >> you would like to see rates edge up. >> i would like the fed to do it not facst but gradually you can't always just have asset prices go up and up and cheaper and cheaper government financing because in the end that does cause long term problems >> my guess is one of the more interesting things we're likely to hear about today is what they are doing with the balance sheet and why. and whether that is really qe in disguise >> generally speaking we've seen what the impact has been on risk assets broadly as they moved this balance sheet upwards since september of last year whether or not it's qe the impact on risk assets you could argue has been to add some liquidity to the system. certainly make banks more accommodative. >> do you think we'll hear whether that $4.2 trillion is a

good plateau or maybe it's just going somewhere from here? >> the message will be the fed wants to have ample reserves in the system they are very committed to that. they want the balance sheet to be as big as necessary to have a lot of reserves. they will err on having a bigger balance sheet than lower >> they are making a mistake >> maybe i can just come back on that one of the things that's really important right now is what's going on in inflation. the miss on inflation is what motivated the cuts last year no change in inflation expectation. the outlook is fairly subdued. that's the message from powell the more he talks about inflation the clearer it is what they are doing and the outcome as long as inflation is below target david won't be satisfied. >> you want to cause economic stability. if you look at the things that gone on in the last 25 years,

inflation has never been the problem it's asset bubbles that to me the actually ought to be a part of their objectives not to be so easy to cause asset bubbles. >> you want to meet your mandates and they are not meeting their mandate on inflation. that's driving this. until they meet their mandate they will stay focused on inflation. >> should the mandate change >> that's the key here jerome powell has laid out in order to raise rates they have to see elevated inflation but persistent inflation since the financial crisis we've seen neither of those. if we want that criteria for raising rates we have to change it >> what about the deficit? we had the news yesterday that our budget deficit is going to exceed $1 trillion to say nothing of our national debt is that a concern to you does it matter >> yes in the long run it does matter because right now the average american taxpayer owes more money because they are a taxpayer indirectly than they do

in all the tax in their whole life in the long run it makes us poorer we end up paying for retirement of foreign investors so i do think we should do something about it >> we'll take a pause right here we're seconds away from the fed decisions so let's go to steve liesman in washington. >> reporter: no change in the federal reserve leaving the fund rates at 1.5 to 1.75% in a unanimous decision that included new voters they replaced the four outgoing presidents on the federal committee. monetary policy was appropriate to support the expansion labor market growth and inflation returning to the 2% target rather than nearer the 2% target more ambitious on hitting that inflation target fed watched global