"power lunch" starts right now. good day, i'm contessa brewer, let's get right to it with boeing recovering after being down more than 3%. phil lebeau is following the twist and turns, what do you have. >> the reason they are rebounding is because ceo just wrapped up a conference call and said we're not cutting the dividend or scrapping the max, we still believe in it the questions that he received revolved around the latest time frame from the company saying it is mid 2020 when we expected the ungrounding by the regulators and why did they make that change here is calhoun talking about it. >> our customers who have really important fleet planning decisions to make, all of whom have reached out to me over the last couple of months to tell me that it's getting to be impossible can we please have something that we have a little more confident in and as you might imagine that has something to do with the new schedule. >> so what was the trigger why did they p push it back to midyear? because they made the decision simulator training is requiring for pilots who will fly the max in the future and once they made that decision calhoun said we automatically had to say, let's come up with a more realistic time frame also he said that in talking with employees, he's out in the seattle area today, it is clear that their confidence is shaken. in terms of whether or not this time frame is realistic, he said that is the key here this is not about trying to set some agenda out there as quickly as possible for getting the plane back in the air that can't be met calhoun talking more forcefully before -- about that. >> without a realistic time frame around how this would ultimately get recertified we kept creating a bigger problem for ourselves and you're right it is hard for anybody to trust us and everything looked like a surprise >> a couple of other pizzas -- r pieces of news, they plan to get an indication that it is time to perhaps start up the process again in terms of building planes, two they will not cut the dividend he was asked why, we have the testimony where withal and there is no within and when you look sat whether or not the max will be scrapped and i know this idea is floating around he said no, they will not ge rid of the plane and they believe in it and they have too much invested in it and even though people have questions regarding what happened over the last 15 months one of the customers, united airlines i talked with the ceo oscar munoz and he sent it wouldn't happen this summer and they reiterated that during the conference call. so the max is off for this summer, could it be moved up if things go better with the faa and regulator, sure. but that is the plan at this point. united saying it will not fly the max this summer. >> so many questions so little time here. phil, there are analysts who are trying to game out in the big picture what this will cost boeing, $20 billion has been thrown around, did he talk about it at all? >> no. he saved almost everybody question and -- and they said off the top, we have earnings next week and in a quiet period and we won't get into that and he said we're not going to cut the dividend that is the only financial question in terms of the charge, it is out for weeks and expected that they'll announce a type of a large charge whether or not that is $5 billion, $6 billion. that remains to be seen. and largely it depends on their confidence of how much they're going to have to be paying airlines as well as others involved in the max for this plane being out of service, what, for the last 15 months, ultimately about 18, 19 months that it is out of service. >> phil, thank you for that. >> shares of boeing are still down about 6% this week. as the aero space giant melez continues. so is there nor pain ahead for boeing let's bring in jim hall from the ntsb and chris holland at long bow research, he is bearish on boeing lowing from 300 to 280 and with your forbearance, i'm going to ask questions to chris first this time. you heard phil le beau saying the chairman would not go to the question of how much money this debacle is going to cost boeing but i assume you can how much is it going to cost them and what kind of charges do you expect them to take and why don't you just walk through some of the numbers >> so today we issued a record that suggested the total charges that are visible amount to roughly $8 billion however, that would not account for any type of airline compensation that still might be issued as well so our modeling is eight now but it could be as high as $13 billion and that will force the company to look to raise debt in the next quarter. >> so he said he was going to keep the dividend because the company has the financial wherewithal to pay it. is he right? >> our free cash flow assumptions are low. we have them doing about $2 billion for 2020. so if they're not going to cut the dividend, they're going to need to raise a considerable amount of debt so that would be the question and how investors react to that. >> so finally what the impact on earnings per share in 2020 what does your model say. >> i think there is two issues out there now ahead of what we think is the kitchen sink issue next week during the conference call the first is a much later than expected starting point for the 737 max which we assume for august now, but what i think investors are not accounting for is when production does start it will be somewhere around 21 to 28 units per month which is below the 42. and that drives our earnings assumption to about $10 per share but it could go lower based on the account -- >> $10 down from what? what it would have been. >> it was around $17 per share at the beginning of january. >> let's talk about how these planes get back into the air when you hear calhoun, jim, say that it is not a wiring issue, it is not a software issue, that it may be an issue of getting the pilots trained on a simulator, how do you factor that into what your expectations are for returning the max to service? >> the way we look at -- >> sorry chris, go ahead. >> well i think -- it is a credibility issue from the very beginning. and that started right after the first event. and i think the chairman is right, i mean, boeing has cried wolf too many times and he's addressing the credibility on wall street. but i think he needs to also address the credibility with his own employees and with the flying public. and i find that gap is bigger than he likes. >> but do you think he did that when he said he got down on the ground and that there has been a hit to the anxiety of the employees there in washington state. >> that's why i have suggested they ought to bring in ali mallaly the architect of the 777, very successful at ford and passed over by the money changers at boeing sa-- and wen to forward ford i would bring him in as a safety czar and give him the responsibility of rebuilding the safety culture and getting the airplane in the air. >> so chris, as you lower the price target from where it is today, you had it at 300 i think dollars it was a couple of weeks, and you do not think that the bad news is already priced into this stock. >> i think we haven't heard the worst case scenario when it comes to the 737 max but there are other factors at play for example does boeing need to cut production on the 787 which is not seeing any orders and how do we think about the 777-x which is having its own problems on top of that. i still there is bad news and the stock needs to trade lower before it goes higher. >> what other bad news could still come out of boeing >> well of course we haven't -- heard from the final investigations and particularly from the department of justice so we don't know what all of the ramifications of the investigations are that have been currently underway. what we know is that boeing has been unable to stop the bleeding we the example this week of the 2009 turkish accident where it had similarities that should have been picked up immediately when they had problems with the 737 max. so it makes you wonder what do they know about safety does the right hand know what the left hand is doing are these comments that were made and distributed by the employees about the dysfunction still in existence. >> so, jim, do i interpret correctly, that you could foresee a scenario where there is criminal charges brought against boeing corporately or against individuals and maybe high-ranking executives there. is that a scenario you contemplate? >> well, obviously i don't know what the justice department is going to decide. all i know is that there is an investigation underway and at some point there will be results of that investigation. >> jim hall, thank you very much for being back with us it seems like a weekly date and we appreciate it chris, thank you as well markets continue to be affected by concerns over the coronavirus. we have more on the stock impact coming up but first to meg tirrell on what the world health organization is saying about it. >> we are waiting any minute for word from the world health organization as they convened an emergency meeting whether to deck hair this a public health emergency. this is the sixth time they've declared such an international health emergency after declaring it about ebola and h1n1 and those level this merit of concern. what we know now in terms of how many cases, 550 mostly in china and wuhan city where this originated we do have one confirmed case here in the united states. and news from wuhan just now that they have suspended local transportation out of the city the buses, the subway, the ferry aresult suspended and the airports and train stations are temporarily closed according to local reports for wuhan city this is a city of 11 million people they are trying to stop this coronavirus from spreading and it already went to other countries and there isn't enough known about how it spreads from person to person but the health authority is saying it does spread person to person. >> one of the most important travel weeks is this week of lunar new year and china had said they expected somewhere in the neighborhood of 3 billion trips which is phenomenal. but when you look at the impact, taiwan has said they will not accept tour groups out of wu hab and groups will not stop in wuhan any more which might be in keeping with this. why the reluctance at this point to do more or is there a sense there is any slowness on the part of the china government. >> the chinese government is being commended more quickly than they did with the sars virus and lessons learned and how important it is to get this done quickly and identify it quickly and moving quickly so they are making a lot of statements about that. but you often hear from the world health organization and in previous outbreaks they don't want to put suspension on travel and trade because that could sometimes deter some countries about being upfront for reporting cases for fear it will impact economies so we're hearing to what the w.h.o. will say today and they make recommendations about what should be done around the world to collaborate internationally to try to stop the spread. >> meg, thank you for joining us >> thank you very much. coming up, much more on the fallout in the markets over that coronavirus. plus more from joe kern's interview with president trump and the president and business leaders are optimistic about the u.s. economy why not? the do you up more than 50% and since trump was elected and e ar there even more gains out there on the horizon we'll be back in a moment. >> announcer: this cnbc program is sponsored by -- there you're seeing the stocks now it looks like we have -- off the highs of the session but this major average is up big since donald trump was elected president. the nasdaq jumping more than 80% and both the dow and s&p up more than 50% the president is at world economic forum in davos where he spoke with joe kernin about how he plans to keep up the pace. >> we're going to lower taxes if you want to know the truth if you take a look at what we've done, we've cut taxes in half and taken in more revenue substantially than we did when the taxes were high. nobody canine believe it but we take in more revenue with the big tax cut. you were paying 41% and we brought it down to 21. >> and that is a priority. >> absolutely. one of the reasons i would like to see the interest rates lower so i could pay off the debt. >> those at davos are feeling great where the economy stands echoing the president's comments about the united states and the consumer here. >> the kpli -- the economy is doing fine and the consumer is strong 70% of the gdp is the consumer and the balance sheet is in great shape. housing is in short supply the economy is up and the wages are up, jobs are up and millions have come back to work and millions more that will come back to work. >> it is hard not to be happy with the economy we have 50 year low unemployment rate in the u.s. and the global growth has held up and the fed has been cutting rates through 2019 and the markets set a record high. >> let's bring in now jim karen, morgan stanley portfolio manager and quincy crosby chief market strategist great to see you both today. so we had all of the data that those thought leaders are talking about to talk up the economy. you're looking at treasury yields why? >> why are yields so low i think part of it is clearly central bank policy has driven yields lower and that has clearly made a situation in the markets whereaset prices have risen, whether it is equity or high yield but when they by the market, why are yield so low if things are so good in the economy when you ask people, what are the risks that are out there, people will name a bunch of downside risks right away and it is very hard to name the upside risk so there is a skew in the distribution of how people perceive risk and if they believe there is more downside than upside risk they'll go toward the u.s. treasury yield to keep interest rates low and this creates what a call a virtuous cycle and the lower the rates are the higher those riskier asset prices could be like equity and high yield and things like that so that is part of the story. >> the president said in davos, if but for the fed, we could be 10,000 points higher quincy, where do you see the markets going and how does what the fed does playing into what we'll see in the next three months >> well the fed is obviously very important because we saw the pivot on january 4th of 2019 and that just changed the direction of the markets the only thing that i'm concerned about is if the -- if they stop putting money into supposedly for the repo market there is a question as to whether or not that is quantitative easing or derivative. >> you're predicting a taper tantrum. >> people are talking about -- call it whatever you want. but the feds benz sheet has increased and that provided liquidity is it the only reason the market is up no but i think it is a contributing factor and if the fed does start pulling rate perhaps we get a pullback the market is overbought you don't have to be a technician to say the market is overbought something is going to pull and cause consolidation and profit taking that is healthy. the underpinning for the market is strong. and that's why we think even with the pullback, maybe because of a pullback, we'll start to see more money coming in from the -- >> jim, i really wanted you to disagree with your boss there, with mr. goreman but you didn't you bought his line. clever move. are interest rates are low because the economy is weak or because inflation is dead. >> i would say in flation is low, not dead. but it isn't going to rise any time soon. and i think this is a big singulairity and i mean this is a point where a lot of information crosses through. low interest rate are driving the asset prices higher. if the rates rise, even a little bit, i think that we can have -- >> froth comes off the top. >> some froth comes off the topper for sure. >> i want to add that even though the summer we had $17 trillion in negative interest rate and it is only $11 trillion, money is still coming in from overseas. the german 10-year bund is up, hoping to go to zero and i think it is minus.2% and money is coming from in pension funds and insurance companies to get a yield in the u.s that pushes the yield in it is not referendum. >> where are you finding opportunities right now, quincy? >> well in the market we're broader than just the u.s. market if the dollar stays in the lower range, trading range, it certainly is helping emerging markets. and if china comes off the bottom which we expect some green shoots, that also helps emerging markets. >> what do you think, jim. >> emerging markets for sure and the yield, even to the triple c's and single b's where the juice is in the fixed income markets. emerging market, that is a boost as well. and i'll dare say the auto sector i think the auto sector is starting to -- as long as the consumer stays strong, it is a pocket of weakness and we think that could have good returns. >> jim and karen, thank you for joining us. chip stocks are breaking records three days in a row of new highs but if history is any indication, the group could hit the brakes and we'll explain why. plus president trump weighing in on elon musk, tim cook and mark zuckerberg we'll hear what the president lkg. that has all of wall street tain much more "power lunch" is ahead. and when you open a new brokerage account, your cash is automatically invested at a great rate. that's why fidelity leads the industry in value while our competition continues to talk. ♪ talk, talk and now for their serviceon to the community,k. we present limu emu & doug with this key to the city. [ applause ] it's an honor to tell you that liberty mutual customizes your car insurance so you only pay for what you need. and now we need to get back to work. [ applause and band playing ] only pay for what you need. ♪ liberty. liberty. liberty. liberty. ♪ with a nation-leading $150 billion commitment to infrastructure, we're creating state of the art, 21st century transportation hubs, constructing new bridges, bringing high-speed internet to every corner of the state, and committing to low-cost clean energy. with infrastructure built for the future, the companies of tomorrow can thrive here today. see your future at esd.ny.gov. welcome back to "power lunch. i'm seema mody here at new york stock exchange we're watching the etf rallies for a third consecutive session ahead of texas earnings tonight. and let's bring in matt. i'll start with you. the sector is up 60% in the past year so do you think the size and speed of this rally is justified? >> well, it's hard to justify it but of course we all know that momentum can take a group of specially in the tech sector, a lot further than people think. and so it could have more upside to go. but looking at the charts, you're getting overbought. you look at the weekly chart of semiconductor, it is at 61% premium to the 200 week moving average and the only time it was more of a premium since the credit crisis. and if you look at the weekly rsi chart, it is at a level that is -- that is followed by significant or fairly decent pullbacks in the group several times in the past. now i do admit if you go back before the credit crisis, 2000, it got to a 260% moving average and the sar got up to 89 and you don't know what could happen but i don't think we'll see another bubble like that in our lifetime so raise your stops and any longs that you have and be very careful on the individual names you want. >> boris, the hope is that the signing of the phase one deal will result in a return in demand for chips do you think that will be reflected in earnings season. >> no. i thinker that trading on hopi and matt is right, shorting mom