Power lunch starts right now welcome to power lunch. Im michelle carusocabrera. As you can see, negative territory by more than 100 points nasdaq is still in positive territory by higher than 3. 5 points melissa mentioned ge and boeing. You can see ge by off by 2 and boeing off by 2. 5 bitcoin, though, is bouncing back following a few wild days you can see its higher by nearly 6 along with other movers alcoa is down 8 on its earnings you can see it is off by 5 bucks. Brian . Thanks, michelle. Heres what else is happening the race for Amazon Headquarters and the money behind it is heating up there are a number of surprises. Did your city make the cut well have that list ahead speaking of heating up, according to the United Nations last year was one of the warmest records on planet. Some things are cooling off. Dropping sharply especially in the northeast. Melissa . We begin with todays market drop the dow is down triple digits. Bob pisani is watching all of the markets. Hi, bob. Theres two things that worry me here. First is the tenyear yields i dont usually lead talking about tenyear yields but they are moving up. 252 on monday and they are slowly creeping up thats getting a lot of discussions on various trading the second thing is volatility i dont get terribly worried until the vix hits 20. Weve been so low for so long, its notable we were at high nines in the start of the week and now were over 12. Again, up a bit today. Take a look at Interest Rate sensitive stocks bond yields have been up today utilities are act being normally banks are not. Thats interesting i think they are looking top heavy. They had a nice advance and are probably due for a pause here. Elsewhere, the basics of the rally are in tact. The cyclical rally that weve been talking about, retailers, materials, Consumer Discretionary continuing to advance. Oil has sold out around that 64 level. Elsewhere, remember about this Government Shutdown. Ive been asked does this weakness have anything to do with the Government Shutdown and i think the important thing is, remember, this only applies to Discretionary Spending it only applies to museums, nonessential government workers and so guys, we have a debt ceiling issue. If that turns into a problem, you could have more significant issues with the government not payingdebt President Trump is going to talk equipment taxes at a heavy equipment company. Reporter republicans are shoring up support for the plan they put in place this week as well as putting contingencies in place. Heres what the plan looks like that they are hoping has a little bit of something for everyone democrats and republicans alike. It would fund the government for a month and extend funding for Childrens Health insurance for six years and it would delay certain obamacare taxes between 1 to two years and the president tweeted that he wanted the Childrens Health insurance portion to be a longterm solution, not a shortterm solution. The pentagon said he did support this shortterm continuing resolution and continued the partisan finger pointing over what would happen over the very possible case of a Government Shutdown the budget should be handled a lot differently than its been handled over the last period of time, many years and if for any reason it shuts down, the worst thing is what happens to our military. It could happen well see what happens its up to the democrats reporter so republicans have said that it would be the fault of democrats if the government shuts down because they would be holding the military hostage meanwhile, democrats have said it would be the fault of republicans, which controlled both chambers of commerce and the white house. This needs to be a bipartisan effort it can pass with only republican efforts in the house and nancy pelosi has said she will not let any members of her party vote unless republicans pass this in the senate, you need at least nine democrats to vote in favor of this. Back to you. All right kayla, thank you very much joining us now is bill stone, global chief investment straft gist and weve had 16 Government Shutdowns in the last 40 years by the way, the dow is up 71 since that shutdown in 2013. Look at that chart as a strategist and investor, im not saying the Government Shutdowns dont matter for a lot of reasons but the stock market shouldnt be one of them what do you think . I agree its more of a political issue, obviously. Its news headlines. It will probably hit theres no real reason to be nervous about stocks or worried about that somehow impacting the economy. I a i agragree. Theres not much to see there. When youre going through your charts and models and earnings estimates and Everything Else and you think theres a Government Shutdown, it doesnt change anything that youre doing, does it . No. I mean, we say, hey, we could see some noise because you never know, if you know, what upsets the government on any particular day. Its not one that you worry about and its more of knowing that the headlines may hit there could be some noise. But the underlining fundamentals should not be changing based on that youre agreeing with bill on the shutdown matter. Were taking a look right now at the tenyear yield of 2. 611, basically. They said 2. 63 was the danger zone, the fact that that could pose challenges to the stock rally. Where are you getting concerned . I think what mr. Dounlock said, we may migrate away from fixed income weve been expecting Interest Rates to rise for a long time. 220,000 unemployment rates were in a very, very tight labor market Interest Rates should be rising. So were expecting this and shining away from the Interest Rate sensitive sectors and really focusing on growth. So i dont think theres a threshold where im going to get nervous. I think its prudent for rates to move higher when youre talking about rates that youre focusing on and avoiding, sensitive to Interest Rates rising, is things like utilities, for example . Exactly areas of the market where people generally go because they want yield. Eventually they will go back to the fixed income market for a yield. We have a bias towards Technology Stocks and a bias towards financials, which generally do better when Interest Rates rise. Were certainly not in that position defensively, at this point, and certainly not going after a yield right now. Bill, you say that repatriation doesnt affect anything, in your view, of the markets. Why not . Why couldnt that be an impact when it comes to either the halo effect, the effect on consumers, for instance, that they get higher wages or a shrinked share count if they do buybacks. Yes, i guess i probably overstated it because we thought last year and we thought wed get tax reform and if we did, that we would for sure get repatriation but i agree in the sense that, hey, youre likely to see you know, kind of put them in order of what youre likely to see, which is share buybacks, more dividends, you know, may see an increase in capex and also some mergers and acquisitions and what weve seen is we attract a basket of repatriation stocks we have clients positioned there and certainly this year theyve been happy with it. Were waiting on the etf, bill theres going to be some catchy rept or something. Its going to be called cash. Yeah, tax i think that already exists bill and darren, thank you very much, guys. Thank you lets try to get more intel on a threat of a shutdown. Lets bring in james honeman. Good to be with you. Weve heard from kayla tausche. Are they going to be able to get a deal done . I think the probability is higher than the markets think. I think negotiations are fluid but the reality is that someone has to blink right now theres a lot of people on the right and left holding firm more Senate Democrats coming out against the deal nine Senate Democrats are going to have to cross over and vote with republicans here. And basically kick the can down the road for a month but a lot of people concerned. The House Freedom caucus, the tea party guys on the far right, they are negotiating with paul ryan theres some frustration with leadership leadership aides, Republican Leadership aides tell me they think this is going to work out and fall in line on the republican side. But right now, because republicans arent falling in line in the house, that increases pressure on paul ryan to negotiate with democrats to make concessions 80 , do you think no, i dont think that. I think at the end of the day people dont want to shut down the white house. The white house doesnt want this to happen republicans have unified control of government. We havent had a shutdown before when one party was in control of the house, the senate and the white house. So most republicans get that theyre going to end up getting blamed democrats are trying to capitalize on that leverage. When donald trump says hes going to blame the democrats, this is a a foe they havent dealt with hes got twitter and all of those followers and the ability to message and really in an effective way. Do you think he could be successful in saying this is the democrats fault for not going along with some stuff . Yes i think thats important because whats significant is there are ten democrats up for reelection in it states that trumpcare ree trump carried in 2016. Trump is saying that these democrats are voting against the troops and blaming them. Could be a very effective message. I think theres the false narrative that democrats want to shut down. Senate democrats dont want to shut down. Its not necessarily clear cut who would win or lose. I think republicans are nervous theyd get blamed. Certain democrats, more than nine, are nervous theyd get blamed in the senate i think both sides are playing poker right now and they think the other side is going to cave before the midnight deadline on friday the problem is both sides are under pressure not to cave and both sides think that the other side is going to thats a recipe for trouble. James, why isnt the apple news and other vestme investmens like the Washington Post well, were covering it i think that it frustrates a lot of people on capitol hill. This is something that could have been dealt with last week they could have instead of passing a shortterm resolution to keep the government open for a couple of weeks, they could have done something to keep it open for a couple of months. Republicans on the hill are frustrated that they are not talking more about apple and repatriation and they are frustrated that theyve gotten bogged down in this counterproductive unhelpful debate and want to get out of it they want to be able to talk about increased wages, bonuses, et cetera, et cetera right all right. James, thank you james at the Washington Post, good to have you on. To the new tax law and apples big announcement well put aside the political hy apend look at the real Economic Impact when power lunch returns hs. Experience amazing at your lexus dealer. Dynamic performance, so you can aggressive styling, so you can break away from everyone else. The bold lexus is. Experience amazing. Boeing is one of the biggest losers the dow is down 3 the stock has soared and is up more than 100 its a double in the last year more than 15 this year. And analysts have raised price targets on the stock 12 times already in 2018. Joining us now is wall streets top airline analyst. Hunter, great to have you with us. Thank you you upgraded boeing earlier this week . Yes we were just going through how the stock basically doubled since trump has been in office. Yeah. Thanks for mentioning that. So what has convinced you all of a sudden after this huge run that its going to outperform . Yes thank you. A couple things nudged us. Coming into earnings took a fresh look at the assumptions that we used at dsf and in 2027, we had Free Cash Flow ramping. A little bit by margins pushed into the aftermarket and services business. A lot of Little Things that contributed to that. Expect a good quarter coming up here soon in the near term for 2018 a lot of things added up but that must have been something that held you back i read your report you do a lot of mea culpas and you apologize and call it one of the worst recommendations of your life and so youre sad about that, obviously. But why didnt you and whats changed . Like, what held you back and what do you think is happening now that means there is still room left in the stock yes again, great guy but its a fair question what held us back before was a little bit of concern around orders in the 777. To build the production bridge from the current generation 777 to the 777 delivery starting in 2020 they are incrementally positive. Deferred production burning off of the 787 which is future cash flow that is being released from working capital. Making progress on production for that Aircraft Program and just overall better belief that the cycle is going to continue pouring rate increases and its really going to be a big driver of cash flow again, we talked ourselves in that weve missed it, missed it, missed it. Eventually when the stock moves like this, it forces you to get a good look. This is a 435 stock and thats not at all a bad case scenario. Hunter, bows valuation is 29 google is 27 facebook is 26 apple is 14. Why does boeing deserve a forward valuation double that of apple . So p. E. Doesnt really matter for the stock. The markets on a gap basis have almost nothing to do with the cash flow that they generate and so p. E. Is really just optics. If you want to use a multiple of some sort of cash flow metric, i would use the cash flow yields trading at 15 times cash flow in 2020 p. E. Doesnt really matter it doesnt move for this stock even if you wanted to argue for p. E. , its still double digit topline growth in the years to come p. E. Doesnt really matter to us. To get to the 435 price target, you say 15. 3 estimate on your part, hunter. Is that a historical high for boeing its not. Thats interesting. No, its not. Weve seen this go north of 20 times prior cycles it is among the highs, but thats not the primary valuation tool the primary valuation is a discounted cash flow hunter, thanks so much for calling in. Thanks, guys. Speaking of boeing, that stock propelling with just a few weeks left in the competition, the leader board is getting tight essentially, weve got a twomain race. Oleary retaking the lead but tim seymour is high on his heels. Its a little early to call who is going to take home the trophy this is going to be close. So tune in february 5th when we announce the winner of the power lunch stock. It is a show that you cant miss, apparently unlike all of the other ones dont miss that show but the other ones are okay. I dont know this personally, but after a breakup, often someone has to leave, right . Is the impending breakup of again electric going to get it kicked out of the dow . Plus, where amazon could build a new headquarters thats next on power lunch. What we do every night is like something out of a strange dream. Except that the next morning. It all makes sense. Fedex powers Global Commerce with vast, farreaching networks. Deep knowledge of industries. And, yes. Maybe a little magic. Hey. Pass please. Im here to fix the elevator. Nothings wrong with the elevator. Right. But you want to fix it. Right. So who sent you . New guy. What new guy . Watson. My analysis of sensor and Maintenance Data indicates elevator 3 will malfunction in 2 days. There you go. You still need a pass. Amazon announcing a list of 20 cities. Which cities made the cut . Deidra has the answer live from san rancisco. They meet amazons criteria, talented workforce, good Public Transportation infrastructure, access to a major airport. Washington, d. C. , is one of bezos own personal home los angeles. The only city out here on the west coast theres a lot at stake for all of them. 500 billion in investment and 50,000 highpaying jobs. So huge Economic Opportunity but some have warned in the leadup about the less desirable impacts that amazon has had on its first home seattles Housing Market is one of the countrys most expensive. A lot more traffic and some natives. Its taken the citys soul the project is moving into the next phase of the process and for the proposal valuation and amazon working with the candidate cities, am sdplon says t amazon says the final decision will be by the end of the year did apple say well add a new location and give a stock bonus because of the tax cut or would it have done it anyway well hear from tim cook from that plus, could it impact the entire American Economy . Big questions. Some answers ahead Fire Fighting is a very dangerous profession. We have one to two fires a day and when you respond together and you put your lives on the line, you do have to surround yourself with experts. And for us the expert in gas and electric is pg e. We run about 2,500 2,800 fire calls a year and on almost every one of those calls pg e is responding to that call as well. And so when we show up to a fire and pg e shows up with us it makes a tremendous team during a moment of crisis. 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