Transcripts For CNBC Power Lunch 20170222 : vimarsana.com

Thanks to Courtney Gibson for being here and all of you for watching. Power lunch starts right now. We wont let money be wasted anymore. Those word weiss just heard from President Trump. A big budget meeting is being held right now at the white house. Well talk about that and so much more with Grover Norquist. Americans for tax reform. Are we finally going to get it . Get ready for serious sticker shock at the Grocery Store. Imwill President Trumps immigration plan hit as hard as some may think . Made in america is alive, but far from well according to one sector. Two busy hours of power starts right now. Once again, welcome to power lunch. Im tyler mathisen. Down. 7,. 6 for nasdaq. In the green today. Today is the 51st session that s p has failed to move in either direction. Heck of a stat, tyler. Thank you very much. I am brian sullivan. Exist i existing home sales, number tripling expectations. Wow european antitrust regulators are set to okay dow chemicals 130 million merger with dupont. Despite warm weather in the east, it may hit 70 degrees in new york city tomorrow. Reports of winters death are being greatly exaggerated. Massive storm taking aim at the midwest and plains, minneapolis could see its heaviest snowfall of the year. Take that, pete najarian. You just saw some brief remarks from the president who said our nations finances are, quote, a mess. Eamon javers is standing by at the white house. Eamon . Reporter that meeting still going on here at the white house between the president and his top aides. We want to know exactly what theyre contemplating in terms of the federal budget, tax, trade, obamacare, all of those details will play into what theyre deciding here behind close doors. The president did give us a bit of a preview in terms of the timing of when all this will roll out. Here is what he had to say. As you know, before we do the tax, which is very well finalized but cant submit it. Health care moving along well, some time in march, early to mid march well be submitting something that i think people will be very impressed by. Reporter there you have it. Presumably, well get some kind of Obamacare Repeal and replace effort middle to early march. The president says. And after that, theyll move the tax reform piece of all this. That doesnt mean we might not get any leaks. The president is going to give an address to joint session of Congress Next week. Typically, you do get some leaks before that of whats in the president s budget and what the tax details are that hes contemplating. Well be on high alert. A lot of people trying to figure out exactly how the math is going to work out. Brian . Yeah, good question. Weve got this event, state of the union next week we might get some clues and this interview you have to see tomorrow morning, steven mnuchin, first big interview since taking the job. Well ask all those questions eamon just raised. He made very big headlines on taxes here in november here on cnbc. There will be a big tax cut for the middle class but any tax cuts will be offset by less deductions that pay for it. Donate to charity this year then . What are you going to do . It will still let you do charities but other deductions will be absolutely limited. How about mortgage debt . Again, well allow well cap mortgage interest but allow some deductibility. Maybe thats some hints of what theyre thinking. We still have no tax reform plan as we just heard from President Trump. The republicans are going to get it done this year . Joining us is Grover Norquist president , an organization that long existed before there was any hope of tax reform. Grover, good to have you here. Good to be here. First, lots of skepticism about the pace in which things are going, that tax reform can get done. By the time we get to the fall, will tax reform be done in the United States . Yes, it will be. You saw the president today say were on track both to abolish 1taxes and obamacare and Reform Health care policy and then to do the significant tax cut, rather sweeping tax reform. The outlines have been there for some time, both the Trump Administration and the republicans in the house and senate have continually been moving closer to each other so that the outlines of what will happen are clear. And this will all be wrapped up in the same amount of time that the reagan tax cuts took. Which took how long . Before september. Okay. Just so i understand why theyre doing obamacare first, the issue is that its going to reduce the cost of the government, right . And its going to reduce tax in flow. You need to know those two things in order to have a really clear view of the budget and what kind of taxes youre trying to raise through Corporate Tax reform. Right . But you reduce the expected revenues by 1 trillion when you get rid of obamacare permanently, decade after decade. When you do tax reform, you dont have to raise that trillion dollars next time out. We already reduced it 600 billion when we made the tax extenders permanent. Its a lot easier to stay within the requirement you have to make it a permanent tax cut through reconciliation. Its technical but very important. The president is right, trillion dollar tax cut first, then the second tax cut. Border tax, border adjustment tax is this. Yeah. Numerous places saying it is dead on arrival. Is it . No. Were going to get rid of the death tax, all consensus issues. The whole package fits together. In it is border adjustable. If you want to remove border adjustable, fiddle with it, reduce it you need to come up with either savings in spending, lower spending, thats fine, or taxes somewhere else. And so they dont like that piece of it. So they say okay, then what . The Business Community, house and senate, the president really want overall tax reform, the lower rates. The border adjustable is a piece of that, can be replace bid something else. Thats not impossible. But youve got to bring that to the table. Am i hearing you, that youre agnostic on it . That you favor it or dont favor it, but if you have it, you have to come up with another way to keep the tax reform revenue neutr neutral, which i gather say principle of yours. Or is it . It only takes 51 votes. It has to be deficit neutral in year 11 out. After the first ten years, it has to be deficit neutral. This bill that the house and the president have been putting together does that with border adjustable. If you want to take border adjustable out, you need to put Something Back in. It could be spending restraint, entitlement reform or a different tax. The overall package is so sweeping, so dramatic, so progrowth, so helpful to american exports as well as american jobs in the United States that its going to be a power political power as well as an economic power. Youre not going to be able to stand in front of it and say no unless you have an alternative that is equally impressive. Grover, you heard the sound bite we played from Steve Mnuchin right after he was named by President Trump before he was confirmed, does that still stand . Do you believe oh, its my favorite topic and the feed went down. Darn it. I was going to ask if he thought that would still stand about the upper middle class not getting any tax cut in terms of that it would be offset. Right. Grover, youre back. Is he back . Taxing satellite feeds. Thats what happens. You tax something more, you get less of it. We got let grover. We only got grove. Grover . Yes. Steve mnuchin was saying ultimately the rich will pay the same amount because deduction also go down dramatically. Do you believe thats true . I dont think he means dollar for dollar in terms of static modeling. In dynamic modeling if we cut taxes, both the corporate rate and the individual rate and make it easier to save and invest, the government will both get more money from the entire economy, but also from higherincome people because there will be more investing and more jobs and more opportunities. When reagans tax cut passed, the total budget funded by the top 5 , 1 , 10 , all went up with lower tax rates. Not from some offset on credits or something, but lower tax rates and more growth. The president said it repeatedly. His goal is growth, jobs and a stronger economy. That gets you more revenue. If you grow at 4 for a decade, as reagan did, rather than 2 as obama did, you actually net 5 trillion in higher revenue from growth. Thats what we want to be targeting, growth, not nickel and diming tax reform. How do you feel about capping minimums . The reason i bring this up were already in tax acronym hades. Weve got amt, bmt, wmt. Not the ticker for walmart. Am i correct in hearing that this worldwide minimum tax idea where corporations would also have a minimum tax that they would pay is gaining more steam again . A, is that possible and, b, would you be in favor of that . No. The whole point of going to a territorial tax system is not have the United States government tax activity outside the United States but in a territori territorial. Its a destinationbased tax and so you but you have to if you dont get the border adjustable tax, im just wondering, is the wmt thing i have heard about it. Do you think its a real thing or is it literally like the lochness monster . Were going to hear about it, but nobody is ever going to see it . It was an obama play thing. I dont think it survives in a Trump Administration. It was never going to pass as legislation. The Business Community doesnt want it. It undermines all the other parts of fixing the tax code. Grover, what do you want to hear from Steve Mnuchin tomorrow on cnbc . Whats the message he has to get out . That theyre on track, give some sense of how house and senate conversations are going. Theyre going well but he needs to speak to that for people. He also needs to let people know when this is going to take effect, particularly for expensing. A business decides im going to invest a billion dollars here. Should i wait until the bill passes or is whatever happens going to take effect starting now . Allowing people to know when this tax reform will take effect, hopefully january 1st of this year, not when the bill passes. You dont want people waiting to make investments based on the bill. You want them to feel they can do it now, safely, and take advantage of progress. How will this treat individual americans overseas . Weve talked about how we treat businesses overseas, but not the millions of americans who live overseas. All the efforts to double tax americans who live abroad. That needs to end. But were not sure thats happened yet. Got it. Grover, thank you so much. Grover norquist. News alert in the bond market. Fiveyear notes are up for auction. Rick santelli is all over it in the pits. Rick . Tyler, dont you just love auction days . Second leg of our 8 billion in supply this one 34 billion fiveyield notes. 1 1. 937. The bid issue was 1. 93. Higher yield, lower price. You never want a lower price when youre auctioning something off, even a dutch auction. We gave this a d, as in dog, plus everything was weak on it. But not huge. Just a little bit. 2. 29. 58. 2 indirects. Both of those were the softest since july of 2016. But one good bright spot, direct bidder, 8. 4 , the best since may 2016. 3. 3 . D plus. Tomorrow, of course, will be the last of it with sevenyear notes. Brian, tyler, michelle, the whole gang, back to you. Rick, thank you very much. On deck, forget fang. Why power lunchs own g. U. M. P. Trade is making headlines. One industry in particular feeling the pressure. That story and much more, still ahead. Lieutenant dan did take care of my bubba gump money. He got me invested in some kind of fruit company. So then i got a call from them saying we dont have to worry about money no more. And i said thats good. One less thing. That was in greenboro, alabama. We show you that for a reason. We know how much investors love investing acronyms. Youve got the f. A. N. G. Trade, face book, and then a few months ago we came up with our own, g. U. M. P. Play, goldman sachs, u. S. Bancorp, Morgan Stanley and pnc bank. Of course we made it tongue in cheek but it played out. G. U. M. P. Stocks as a group are up nearly 9 . Outperforming the broader sector as a whole. Over the past three months, the trust g. U. M. P. S are up more than 15 . Not bad for a madeup acronym, tyler and thats all ive got to say about that. Run, forest, run. The dow on track now for a nineday winning streak, if it can close positive today. Right now its up about 29 points. Jp morgan Asset Management and david bianco, americas chief investment strategist at Deutsche Bank Asset Management. Thats a mouthful of titles, guys. Thats just a lot. Michael, let me start with you. Youre a bond guy but say you like stocks better right now. Why . Explain. I like Corporate America. I think there is theres a lot to like there, isnt there . There is, right . Go back to the financial crisis since then. So for over eight years, the only thing Corporate America has done is take out cost. And, in fact, earlier in 2016, the top line wasnt going anywhere and the bottom line was improving because of all the costs that have come out. Ive been doing this 35 years. I dont remember a time when Corporate America has been as lean and efficient as it is now. You put in you have some growth. Final demand, it looks great. Im in the bond markets. Thats why i like Corporate Credit as well. Because the economy is healthy. There is growth there. There may be top line growth. So why worry . Default should come down. Thats what im most concerned about. And i think high yield spreads at around 400 basis points, still overcompensate you from where defaults and earnings are going. David, do you see it this way . In other words, bob has basically said so much cost has come out of the system. When you get a little more growth coming in, boy, the leverage to the bottom line will be terrific. Thats right. Theres no doubt that the s p 500 is an efficient ly run set f companies. Im expecting growth to pick up a little bit more and expecting this to be a longlasting cycle, which would allow industries to show us their ability to replicate and grow their Business Models. I think weve got an environment thats ripe for growth stocks. Lot of health care, technology stocks. Theyve come back to life early this year. We like financials, too. And we still like them within the value space. Thats the only part of value we like i think thats health care and technology thats going to leave this market higher the next two, three years. Even with a gain of 21 so far this year . Its interesting. One guy on set who kind of says, okay, stocks or bonds. Youre mostly a stock guy, right . You like stocks right now. But do you like them at this moment . Do i wait for a pull back . Weve had such a very strong year. Uncertainty about whether or not well get Corporate Tax reform out of d. C. . Deutsche Investment Management strategist. I do like stocks. I think its also important to point out, i think Interest Rates, longterm yields rise but rise very, very slowly and im skeptical at the tenyear treasury yield gets above 3 by the end of this year or even early next year. There are still ate lot of spot notice fixed income market, particularly when theres a credit spread available that i would find attractive, too. Most attractive part is still the equity market where valuations at these Interest Rates, it should be 20, provided the risk stays davids point on Interest Rates, where do you see rates going . Rates look stupid where they are now. If you think about the tenyear treasury, 2. 4 , we just had headline cpi come out. Core was at 2. 3 and, by the way, year over year wage gains. So youre getting a zero real yield for the tenyear and the fed has to get moving. Were talking as though the fed is at some sort of neutral level. If i were them, i would raise rates in march, go every other meeting until they go to 2 . Then we can have a real conversation of whether rates are appropriate or not. And i think the fed is behind the curve. Robert, thank you very much. We shall see. Well learn more when those fed minutes come out in about 35 minutes from now. David, nice to see you as well. Good to see you. Gps. Pizza sting. All in the good, bad and ugly in todays trade straight ahead. Fees . What did you have in mind . I dont know. 6. 95 per trade . Uhhh and i was wondering if yr brokerage offers some sort of guarantee . Guarantee . Where we can get our fees and commissions back if were not happy. So can you offer me at schwab is offering . Whats with all the questions . Ask your broker if thre offering 6. 95 online equity trades and a satisfaction guarantee. If you dont like their answer, ask again at schwab. Whether youre after supreme performance. Advced intelligence. Or breathtaking style. Theres a cclass just for you. Decisions, decisions, decisions. Lease the c300 sedan for 389 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. The first stock index musicwas createdughout over 100 years ago as a benchmark for average. Yet many people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Its time to bench the benchmarks. Welcome back to power lunch. Time for the good, the bad, the ugly. Garmin fitness wearables offset the weakness in gps device they sell for cars, up 7 . The bad . Papa johns lower by 6. 5 after reporting weaker than expected samestore sales. Ugly day for texas roadhouse after the company missed on both the top and bottom lines, that stock off 13 . Ryan, sometimes you get the bull. Other times you get the horns. Where is that vid