Welcome, everybody. Im tyler mathisen. Little oscar joke. Too soon, perhaps you . Can see a lack of direction for your money. Dow down 13 points right now. Right now the dow, not doing a whole lot. Even if we fall today, this has been the dows longest win streak since all the way back in 19d 87. Of course, all eyes will be on the president s big speech tomorrow night. Melissa . Im melissa lee. Busy monday at the white house. The president making his first Budget Proposal, talking with ceos of a number of health care companies. Eamon javers is there. Eamon . Reporter obamacare, which he calls a failure, disaster and teeing up his own plan to replace obamacare later this year. Hes meeting with Health Care Ceos at the white house this morning. Here is what the president said in teeing up his criticism of the obamacare act. We must Work Together to save americans from obamacare. You people know that. Everyone knows that at this point, to create more competition and to bring down the pries substantially. Reporter we didnt hear a whole lot of specifics from the ceos who came out to talk to some of the reporters at the white house after that meeting. Here is what joe swedish said, ceo of anthem. See if you can get any detail in this sound bite of exactly what they talked about in this meeting today. Were very glad to be with him today, to hear that message and certainly are willing and wanting to witness how this will all transition to a workable plan for the United States. Reporter so, were still waiting on specific details here from the Trump Administration in terms of where we go with obamacare. Obviously, there are deep divisions up on the hill, including with republicans. At some point this Trump White House will make very tough decisions about where it goes in terms of repeal and replace of obamacare. No details yet on where theyre going to land. He shot back at people like larry kudlow and steven moore who said you should do tax reform first and he said no, we cant. And he actual ly started to articulate that he understands how the legislative process work zblrg he said they need to do obamacare and then rule out tax reform and other details later in the year. This president seemed flummoxed, saying nobody knew how difficult it would be. Its obviously a very complicated subject. Getting into the weeds is where you have to go, though, if youre going to come up with a proposal to repeal and replace obamacare. Thats the struggle that this administration has to face, to come up with what they promised on the campaign trail. In politics you have to make choices. And that means you have to make enemies. Thank you, eamon. We heard from President Trump and also Warren Buffett, spent three hours on squawk box with becky and joe. They talked about everything from the new president , tax reform and the health of the markets even. You can buy a barn, apartment house or part of american business. If you buy a tenyear bond now, youre paying over 40 times earnings for something whose earnings cant grow. And compare that to buying equi equities, good business, i think theres no comparison. If Interest Rates were 7 or 8 , then these prices would look exceptionally high. You measure everything against Interest Rates, basically. And Interest Rates act like gravity on valuations. Last year in our annual meeting, it was clear i was for hillary, but i got asked a question about the market based on who got elected and thats not i said america is going to do fine economically under either candidate as president. People who mix their politics up with their investment activit s activities, i dont think that makes sense. Border adjustment tax is an import tax, a sales tax. The store, in several buildings, does over 400 million a year. 75 of what you see is imported. If we pay an import tax on it, our customers are going to pay for it. Lets bring in buffett watchers to see what the oracle had to say. Author of the Warren Buffett ceo. And ceio of Greenwich Wealth management i dont want to call Warren Buffett a tech hater. He has invested in ibm, big tech. Are you surprised that Warren Buffett recently bought 120 million shares of apple . Yes, im surprised, because he has been a longtime critic of investing in it can nolg because he cant see where it will be in ten years. Ibm, very consistently over ten years, consistent revenue, consistent earnings when he bought it in 2011 and its since struggled. Apple, he followed in one of his Investment Managers in his office. He purchased most likely purchased apple and then followed him in. Do you think that this is a sign that Warren Buffett is doing apple maybe not that much as a Technology Company and maybe more of a cash company . Yeah. He is viewing it as a Consumer Products company. He said that the iphone is very sticky, that he doesnt really know a lot about the technology, but he knows that people love their iphones and will continue to buy them. But, you know, i would argue that its not like another type of consumer product. Iphones are not toilet paper. The Technology Changes quite quickly in this field. It wasnt too long ago when everybody thought that blackberry was the best product. Look whats happened to that today. Robert, youve been a buffett watcher for quite some time. Are we getting glimpses of what the Berkshire Hathaway might be without buffett at the helm . Sure. Cash parts brought to him by todd cones and now with these two recent additions to his portfolio, both apple as well as the airlines were brought to him by his coInvestment Managers. So, i think were seeing wholly owned acquisitions as well as partly owned equities being led now by some outstanding Investment Managers. You said stocks are cheap because Interest Rates are low. Do you agree . I dont agree. I think weve had a tremendous runup since the election. In my opinion, a little bit unjustified. I think investors right now are focusing on what i would call the good aspects of the trump policies, which include deregulation and tax reform. And theyre ignoring some of the bad aspects, such as the possibility of creating trade wars. I think theres quite a bit of risk in the market right now. I certainly agree with Warren Buffett that stocks are a better bet over the long run, especially when Interest Rates are so low. If i had to choose between the two, i would rather be in stocks than bonds. But in the portfolios that i manage for my clients ive recently been trimming some positions, because i think weve seen too much of a runup. Interest rates still are low, though, right . You look what the tenyear yield is doing, its not budging, even as we talk more and more, as the markets price in everhigher rate increases from the fed. Correct. I think its inevitable, though, that the fed will continue to try to normalize Interest Rates. At the short end of the yield curve i think well see higher rates. Whether that translates into longer term Interest Rates going up or not is a different question. I think if we do see some of the inflation that could be created by infrastructure spending, for example, then we could see bond yields move higher and it would be a mistake to be in longterm bonds. It is hard, robert, to criticize Warren Buffett, for many good reasons. But im going to try. No. His hatred of Financial Engineering i find a little baffling, given that he supports buybacks, which many people will say is a form of Financial Engineering. Can you square those two things . Well, i think share buybacks are a way to very efficiently and cost effectively return capital to the shareholder, far more productive than to use dividends, which are taxed twice at the corporate level and then at the individual level. So, i can square share buybacks as a very effective and if you study, as we do at the university of nebraska of omaha, all his previous investments, one barometer he looks for are share buybacks. Its a very effective way of investing. Which apple does, by the way. Yes. Yeah. But, brian, can i point out hes actually not that much in favor of buybacks . In fact, in this years letter, he pointed out that Share Repurchases make sense only if the stock is selling for less than intrinsic value. So, hes not in favor of Companies Buying back stock just to prop up the price. I want your take, vahan, on why rates are so low. He said Interest Rates are a gravitational pull. If you think theyre artificially low, for a number of reasons. It could be because there are many shorts in the bond market and theres a short squeeze or short rally holding bonds up and rates lower, that could really educate you as to why you might not think that stocks are cheap right now. What do you think is holding bond yields down . I think theres still a lot of accommodation coming from Central Banks around the world. The u. S. Central bank, for example, is trying to normalize Interest Rates but is still plowing back a lot of money into buying back bonds and thats providing accommodation. I also think that many bond investors, anyway, are a bit skeptical about whether the trump policies will actually create as much growth as Equity Investors expect. Mr. Miles, Berkshire Hathaway at an alltime high today. Nervous at all about that stock considering the run its had along with the rest of the market . No, im comforted as a longterm shareholder. I didnt buy or invest in Berkshire Hathaway to flip it because its gone up 10 or 12 . Im a longterm shareholder. So, im comforted that its in great hands. Its enjoying 70 million a day flowing into omaha, which are reallocated by the best capital allocator possibly in the history of capitalism. But that change is coming at some point, right . Yes, it is. About who the capital allocator is . Yes, but i was also comforted to hear an 86yearold on television this morning, on cnbc that was very sharp and recalled figures and facts better than most mortals. So, im comforted that his were in good hands. Especially at 4 00 in the morning. Yeah, whatever time it was and his fourth diet coke of the day already by 4 00 or 5 00 in the morning. It was a very good morning on cnbc. Robert and vahan, thank you very much. Do appreciate it. Thank you. Thank you. Netflix taking stage. Moments ago, look at what he said. Plus two analysts who couldnt be more divided on where they see the Company Going and the biggest loser at the oscars could be the company who was responsible. Sean spicer is expected to hold a press conference at any moment. Say carl, have a question about your brokerage fees. Fees . What did you have in mind . I dont know. 6. 95 per trade . Uhhh and i was wondering if your 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 what schwab is offering . Whats with all the questions . Ask your broker if theyre offering 6. 95 online equity trades and a satisfaction guarantee. If you dont like their answer, ask again at schwab. Its not just a car, its your daily treat. Go ahead, spoil yourself. The es and es hybrid. Experience amazing. Netflix ceo delivering the key note address. Jon forte has more. Reporter he talked about downloading, the importance of that. Before november, you couldnt really download netflix and take it with you. You had to stream. In order to expand internationally, for example, you kind of need to download. It can get really expensive to try to take data with you. He also talked about making buffering as acquaint as dialup. The idea that you wont have to see that circle spinning around and our kids will ask us, what was it like back when you had to buffer. He talked about the fact that netflix shows are able to get to audiences globally. One of the most important points he made that data plans, in the u. S. Specifically, are a boone to video. He talked about netflixs Technology Efforts to capitalize on that. Take a listen. What weve done is invest in the codex, video encoders so that at half a megabit you get a quality picture. Now were down to 300 kilobits in some cases and were hoping to get down to 200 kilobits. Then youll be able to stream netflix without busting your budget. Thank you, jon fortt from barcelona. Two guests that have very different outlooks for the company. Bob sanderson joins us. Michael packard joins us with the sell rating, 68 price target. Michael, i will start with you. Netflix is a couple of bucks from its 52week high. What is Reed Hastings doing wrong . Hes doing a lot right, certainly growing subscribers like crazy. What hes doing wrong is losing money. They have gap profits but generated negative 1. 66 billion in Free Cash Flow last year and lost 17 per subscriber last year. Theyre projecting losing more this year. Hes burning cash. I think a lot of investors, and im ascribing the greater fool theory here, take a leap of faith that theyre building this amazing content library. Yet if you actually explore whats in that content library, its hard to find any owned intellectual property that justifies adding 3 billion to their content library last year. Michael, its a young company, right . Its supposed to invest now and eventually it gets to profitability. Thats the rationale that will be for a lot of people. And if they were building a big plant in nevada like tesla, maybe i could believe it. If theyre building 40 or 50 Fulfillment Centers like amazon, i absolutely would believe it. Theyre building content that nobody is watching. After Stranger Things an owned original, you cant name a netflix owned original anybody has told you to watch. They dont have any. Theyre building flaked, the ranch and lady dynamite. Nobody cares. Theyre capitalizing the stuff but it has limited value if nobody watches it. Do you agree with michael that theyre making investments that wont pay off in the end . Thats essentially what michael is saying, investments are being made in content that nobody wants and so there wont be a return on that investment. I dont agree at all. Couple of things. One, theyre building a very substantial brand and subscriber base. Whether they own the ip outright or not, look at the franchise value of espn. Theres many examples of a very substantial business being built on licensed content. I dont think that diminishes their earnings power or devaluation of the company. Can you name a series that netflix actually owns that you would recommend aside from Stranger Things . Has there been a hit . Sure. Again, i think whether they own or license is not the does not determine their ability to drive earnings power and cash flow from those titles. I think the franchise value is really in the brand and the subscriber base. So, michael, netflix is maybe short because i just got it last month and did that specifically to watch the crown. To me thats a netflix product. Distinguish why its so important that they own it rather than just something that they thats why i got it. If they own a property, they pay once. If they license, they pay every single time they show it. So, house of cards is something they dont own. They have to pay for season one again when season five launches next month. Thats the problem. So, yes, its got tremendous value. Just not on their balance sheet. Its got value as they run it through their income statement as an expense. So, what im saying is their earnings are vastly overstated by literally three or four bucks a share unless the stuff they own has that much value. It doesnt. The stuff they license, they have to pay for again. Thats going to run through their income statement. The stuff they own doesnt have 7 billion of value. Thats whats on their balance sheet. Rob, clearly, you see this, too, so why does the math work right now . What needs to happen in order for that math to continue to work . Revenue less expenses and whether the spenexpense is lice or owned, as long as youre growing, 100 million subscribers and i think theyll get to hundreds of millions of subscribers. When are they going to be profitable . Theyre profitable now. Theyre financing bigger and bigger content investments so theyre cash flow negative but theyre turning the corner on very substantial investments made going to the rest of the world. Historically its taken them three to four years to turn profitable and theres a significant amount of increment al contribution. Michael laughed at your response. You get the last word very quickly. The value of any company is the present value, their future cash flows. Cash flow is the basis for valuation. Negative negative 1. 6 billion this year, negative 2 million last year. There is no value here. Im at 68 because i believe there is brand value and to their subscriber list bough not in their content. Not a chance. Rob and michael, always a good discussion. Its interesting. He is 68. He he is easily the low estimate on the street. They go all the way to 175. Youve got about 40 analysts who see the company somewhere between 68, although michael is sort of out there, and 175. Thats a market. Thats called gap in earnings. That is a gap. Beer, handbags and oil. Just a few of the movers this hour. The names, next. Im only in my 60s. Ive got a nice long life ahead. Big plans. So when i found out medicare doesnt pay all my medical expenses, i looked at my oions.