Move what youre trying to do welcome to power lunch. Im melissa lee. Stocks are lower, but steady, headed in the long holiday weekend. Nasdaq trying to scratch out gains. Dow 20,000, will have to wait. Still on track for its seventh week of gains. Health care, by the way, the leading secretarier in todays session. Heres what else is happening this hour. A developing story were watching closely, the fbi investigating a hack at the fdic which regulates the big banks. More on this story ahead. Reports that u. S. Government is now requesting select foreign visitors provide their facebook, twitter and other social media accounts when arriving the in the country. Consumer sentiment on the rise and new home sales rising 5 . We also have jon fortt here with us for the hour, riding shotgun. Welcome. Thank you. Good to have you here. President elect making waves today when it comes to russia. Our Nuclear Weapons arsenal and the future of our air defense forces. Both stories front and center this hour and being watched by the markets. Eamon javers, morgan brennan. Donald trump may be at his beach place down in florida, but certainly not shy about making news today and over the past 24 hours. Lets start with this letter that donald trump released today, after this controversy over the past 24 hours about Americas Nuclear position in the world. Donald trump releasing a letter from Vladimir Putin written last week, trump releasing it today. In the letter, Vladimir Putin says please accept my warmest christmas greetings. Donald trump put that out with his own statement saying, quote, a very nice letter from Vladimir Putin, his thoughts are so correct. So what prompted all this . Well, it began with Donald Trumps own tweet yesterday talking about Americas Nuclear capacity. Trump tweeting, the United States must greatly strengthen and expand its Nuclear Capability until such time as the world comes to its senses, regarding nukes. We also had a tweet just last night from donald trump, which is making news, particularly in the defense contractor space, that tweet about boeing and Lockheed Martin, donald trump saying based on the tremendous cost tremendous cost and cost overruns of the Lockheed Martin f35, i asked boeing to price out a comparable f18 super hornet. So clearly donald trump trying to put some pressure on the defense contractors, and trying to reshape his relationship with Vladimir Putin here this morning by putting out this Christmas Wish that he got from putin last week. Thanks so much. Also tweeted about the Nuclear Capability of the United States. Lets dig into both those issues now. Latest russian reset and all the military posturing. With us is jack jacobs, and valerie insinnia, reporter for defense news. I want to talk tactics with what the president is doing, and get to the underlying core issues here. Valerie, let me start with you. He talks about the f35 cost overruns, is he right . Can you give us context about this particular weapons program, the fighter jet program, and where it fits in . Sure. I think that it is no secret that the f35 had a lot of cost overruns back in the day. A lot of scheduled delays as well. But over the last couple of years, it made quite a lot of progress. This year there was a contract, and prices for a model went down to 102 million per copy. And the head of the program says that he wants to get prices down even lower about 6 to 7 lower in the next batch, which theyre going to negotiate next year. But he also said just this monday that the Program Needs about 500 million more to complete the development. Now, only about half of that is an actual overrun and a lot of that has to do with new requirements. It is a little bit of a mixed bag. There has been a lot of progress made, but still have work to do. Colonel, when he tweets a comparable super hornet, is that even is that even possible . It is my understanding that the f35 is meant to be super advanced, very stealthy, stealth fighter, and the boeing super hornet isnt that way. They made it stealthier, but cant be as advanced. It is not the same and cant make it the same aircraft any more than you can take trumps 57 and turn it into air force one. Cant retro fit it. Yes, it is stealthy. F35 is stealthier. Has a capability to integrate all the tork traelectronic trans from everybody in the theater so you can coordinate both air defense and air to ground attack in a way which assists the overall campaign. Cant do that with the fa18. No matter how much money you spend, might as well stick with what you have. One more thing, part of the cost overrun were new brandnew requirements to extend the life of the f35 program. And all those costs also include maintenance and Operational Requirements that go well into the future. Yes, extremely expensive, and, yes, yelling about it will bring the cost down a little bit. Valerie, how common is it for the president i mean, i know this is rhetorical, how common is it for the president to tweet about such issues and get so deeply involved in contract negotiations like this . I think it is pretty unprecedented. And i think i think colonel jacobs hit it right on the head, i think that it is pretty impossible for boeing to retro fit a fourth generation aircraft to become a super stealthy fifth generation aircraft. I think that maybe what trump is trying to do is force lockheed to back their unit prices down even further, but thats something that the government is already working on too. If we do see a sharp decline in unit prices in the next batch, you know, i think maybe trump deserves a little bit of credit for that. But not as if it is impossible to retro fit the superhornet to become the f35, it is an empty threat. Everybody in the business knows it is. Ridiculous thing to threaten. The bad news is hes jawing and thats not really going to have any impact on anything except public relations. Hes jawing and it has an impact on those who might shave, you know, 50 basis points off the total price. It is not going to save zero money. 50 basis points on billions and billions and billions is a lot of money. It adds up. Is there a chance that folks stop taking him as seriously. Once we look at boeing and lockheed and then this, if you know that these are two completely different products that hes putting into this negotiation, i mean, do we start to dismiss it and say it is pr . Yeah, i think at a certain level, yes, he is dismissed. But dont forget hes also the president of the United States, can have a very big impact on missions that are sent to the Defense Department who contract with prime government contractors. There is not there is at least a little bit of trepidation among them. They dont know what he can do. The fact that he jaws all the time as you can take it with a grain of salt until you submit you respond to a request for proposal. And then you might take it into account and shave those also tweeting about the Nuclear Capabilities of the United States. You see all these new nuclear arms race. Correct me if im wrong, arent the chinese and the russians upgrading dramatically theyre Nuclear Capabilities while we have not in. Yes. And we have to. Dont forget both Delivery Systems and Nuclear Weapons themselves deteriorate over time. Were going to have to spend a trillion dollars just to keep what we have. We will save money if everybody reduces the number of delivery vehicles. Technology also costs money, if you want them to be more efficient. You want to reduce the number, you want to keep the same number of warheads but reduce the delivery vehicles. Has he changed policy is what im asking . People are making it sound like if you read front page of certain newspapers, it is like there is a new nuclear policy. Well, i think the Incoming Administration walked that back a little bit. Hes not talking about reducing the number of warheads, were still going to be able to blow everybody up if we want to. But we do need to spend a lot of money on refurbishing the systems we have and replacing some of the systems that are t outmoded with new efficient ones. Yes, the russians and the chinese are doing the same and we definitely have to keep pace. We dont have to increase the arsenal. Thank you so much. Valerie, thanks so much for joining us. Appreciate it. And Lockheed Martin shares with the rest of the Defense Sector under pressure at this hour. How much damage can be done to these stocks by the president elects 140 character missiles . Morgan brennan is here with that. So shortterm at least expect some carnage with Lockheed Martin. Several analysts do say, though, it is still a buy, as we get the dips, this is an opportunity to continue to buy this stock. Why . The idea that boeings fa18 super hornet can replace the f35 joint Strike Fighter is, as we just discussed here, unrealistic. Thats one reason that boeing stock is not trading higher on this news. The f35 stealth uses advanced electronic capabilities, analysts say that cant simply be built into an updated super hornet update. That said, the less expensive Super Hornets have already snagged some defense dollars that otherwise may have gone to f35 purchases. We have seen that with the navy as well as canada, which announced an f18 deal last month. But what this tweet does, it tees up competition or the optics of competition and does so on the heels of the dod invoking a unilateral contract, the biggest such contract in history on the ninth lot of f35s. But thats just one factor to watch in defense here. And the other, you also just touched on this, the Nuclear Capabilities. The comments about strengthening Americas Nuclear capability, analysts say it is a signal that the administration will make modernizing the aging Nuclear Triad a top priority. That could benefit general dynamics, replacing the ohio class submarines. And it could also mean that the administration will move forward on the new Ground Based Strategic Deterrent system to replace the landbased minuteman 3 muscle. It is going to put raytheon and many others into focus. Morgan, thank you. Morgan brennan. Lets bring in Robin Schweitzer at kalyn Washington Research group. Rowan, in your note, you said it is Lockheed Martins time in the barrel, which would imply if you go back to the old adage that it is a fish in the barrel, it will only be a matter of time before it gets shot. What exactly would that mean for lockheed . I think the important thing to consider is that, you know, president elect trump is taking a very unusual tact to inject some competition into what is really a pretty uncompetitive Industrial Base. In many cases you have one or two or three large cap defense primes that are able to compete in these areas. And really the government cant afford to let coke or pepsi go out of business. They have to figure out a way to sustain that Industrial Base longterm to preserve some element of competition. I think what president elect is doing is by picking out boeing and Lockheed Martin, hes picking up picking on the two biggest kids on the block. If he can get them to change the behavior, it will flow down through the other dmcompanies i the group. Lockheed martin would have more at stake, correct . 78 or so from the u. S. Government, 20 of its revenue in 2015 was from the f35 program. So doesnt it have much more at stake in terms of negotiating with the president elect versus a boeing which has a commercial business as well . Correct. I think the president s tweet, though, really, when you consider what some of the other people we had on talked about, within the f35, there is about 3,176 of them plan to be purchased and the navy buy, which would be eligible for replacement, is about 340. Youre talking about 11 of the buy, the navy is the only piece of that. Certainly lockheed would not like to lose that business. But this is a one area where you can actually compete that l the program. If you did away with the program entirely, he would have to build more Lockheed Martin aircraft, probably f16s or restart the f22 program. Were in this situation where hes sort of limited in what he wants to do. I think right now as one of the people mentioned, lockheed is actually negotiating for that contract, this is what i meant by this is their time in the barrel, boeing on the president ial aircraft replacement, that negotiation comes up sometime next year and the president is in a bit of a bind. Is he really going to contract with airbus to build air force one . Thats really the issue that is unique in this defense Industrial Base. That would be a problem. So what is your take . Is this posturing but nobody can call it posturing because they dont want to lose business down the line . Or what . Look, i really, you know, i worked in defense acquisition previously and ill tell you that i think there are a lot of uniform and civilian officials in this town doing back flips over the president elects interest in this. As someone mentioned, this is really unprecedented. When the secretary of defense gets an interest in the program, it moves the entire pentagon. When you have this being done from the oval office, it really changes the game dramatically. And i think this second, third, this will embolden government officials to go out and pursue aggressive deals and it is going to perhaps sharpen the demeanor of Corporate Management who know that theyre going to get twitter spanked by the president elect or the president if they are too greedy. Twitter spanked. Yeah. Absolutely. I think it is a funny phrase. Roman, thank you. Thank you very much. Happy holidays. To Jackie Deangelis for a news alert. We just got the numbers from baker hughes. We saw we added 13 oil rigs back online. Eight straight weeks of increases here. Remember this is one of the biggest risks to the oil trade right now. U. S. Production coming back, these prices are higher. 9. 6 Million Barrels was the peak in june of 2015. We came down a Million Barrels, since the summer, were back up another 400,000. I just want to point out that we also look to where we were at this time last year. We only have 15 less rigs online. So that deficit is quickly shrinking. Oil prices are a little bit lower today, taking a little bit of the breather. Trading just under 53 a barrel. Back to you. Thank you, jackie. Stocks stuck in neutral, perhaps in an oil slick on the final trading day before christmas. Will next week be the week we breakthrough the 20k mark . Airlines flying high this year, led by hawaiian air. That stock up 70 . The trends in the friendly skies for 2017 when this First Class Program we call power lunch returns. Hey nicole. Hey i just wanted to thank your support team for walking me through my First Options trade. We only do it for everyone gary. Well, i feel pretty smart. Well, were all about educating people on options strategies. Well, dont worry, i wont let this accomplishment go to my head. Im still the same old gary. Wait, you forgot your french dictionary. Oh, mucho gracias. 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So i think there is a lot of complacency too. You see that in the sentiment, volatility measures and theyre discounting the fact were going to transition next year from the about benign Monetary Policy environment to what you talked about, the uncertainty of political decisionmaking and finally i think there is three things that are going to temper that, higher rates, stronger dollar and hotter inflation. When that backed up, you want to buy dips in the First Quarter rather than buying right here. Barry, would you agree with that advice . Craig is saying na were not getting a big rally here, not crossing 20,000, but doesnt look like well decline a lot. Why would you sell any winners here . Wait until next year, which could bring on selling in q1, right . Well, as we look at things right now, we dont want to be underinvested in stocks for sure. We had a great deal of pessimism right before the election that is starting to burn off. But not all of it has burned off. And the other thing is, if really we see those tax cuts for corporations, youre ta