And welcome to power lunch. Stocks are cutting their earlier losses the dow was down triple digits, but the s p 500 having its worst day since may 17th tech, materials are leading the declines as you see by nearly three quart oers after percent me slay . Here is what else is happening at this hour Steve Scalise undergoing his third surgery after being shot yesterday. He remains in critical condition. The senate stepping up sanctions against iran and russia. The house needs to vote on it. More and more ceos speaking out, urging President Trump not to reverse u. S. Policy on cuba. The president is set to speak about it tomorrow. More on that story straight ahead. All right, thank you very much, melissa. Lets kick it off with your stock story of the day and that is the all mighty Amazon Company in the headlines again as a report surfaces that amazon might be willing to pay up to 9 billion bucks for the messaging app slack. Now along with much of tech lately, amazon is down today off about 5 in the past week. Despite this, or maybe because of this, your next guest just raised his price target at amazon to 1,100 of 975 per share. Lets bring in anthony deically menty. Anthony, i imagine if you like amazon, as you obviously do, and the stock is down a couple of percent lately, you must like it a couple of percent more than you did last week . I think thats right. I think in this market where you have a little bit of anxiety, some technical rotation, that investors are trying to get a handle on what is amazon worth and its really one of the more humbling tasks as an analyst to try to tackle that question. So people want to know, is there valuation downside to amazon if it pulls back, 5 or 10 . Is this anthony, maybe, the hardest stock in your coverage universe to properly value because they dont tell us what theyre making on prime or on all their businesses we just know the big number. Exactly this is a company that everyone knows they take their profits and reinvest it for future growth so you really have to try to understand what sort of growth rate is the stock demanding at these valuations and because they dont trade on traditional metrics like earnings, for example, you have to look at the Addressable Markets and say, what are these different segments worth what is aws worth . What is amazon north america worth . What are these other big opportunities like advertising, like medium video . How do you get to 1,100 snen. So its going to be too difficult to be hon toast go through all these methodologies here on set, but weve got weve developed three different angles of how to approach amazons valuation if you compare each business to other businesses in their hay day, an example would be comparing amazon to walmart or costco in the 90s and early 2000s and comparing aws to oracle, sap and micro soft and those multiples when they were at this point in their companys growth cycle, the multiples that the market is putting on amazons businesses are not too demanding. Hey, anthony. You know in this environment in which investors are questioning technology specifically and more specifically the thank stocks. Is amazon more defensive than the other stocks or given its high valuation, would other stocks like maybe an alphabet be more of a safe haven, quote unquote, would be the complex . So that word defensive is interesting to me. Is it defensible is a different question from is the stock defensive . How is that going to do do you say to investors stick with amazon in particular because it will hold up better than the others or will it suffer the most because it has the highest valuation . I think what gives informsers and shareholders comfort is unlike advertising orienting names like the ones youre suggesting, the Addressable Markets are more than 465 billion Addressable Market cloud enterprise and advertising and retail and potentially alexa and ai so when investor looks at the Growth Opportunity for amazon, theyre seeing multiple massive global Addressable Markets versus another member of the fang who might be focussed on subscription video or advertising and thats what gives people the ability to find amazons valuation defensible. You talked about comparing the multiples of the different segments to other companies during their hay days. Right. But their hay darys ended why do you continue to assign a hay day multiple when that could change and how do you decide when thats going to change so, thats really an astute question and clearly when growth rates slows for a company like microsoft, the valuation multiple of the investors pay compresses aws, we look at amazons current multiple and say what was microsofts multiple during a time sort of five years into its business where aws is and we ascribe that multiple to aws clearly microsoft is a slower grower and thats why its valuation multiple today compressed for amazon, weve gone out to 2020, 2022 and weve made that comparison as i described. Quick question here, anthony. What are the chances amazon splits, do you think oh, you know, i think thats a fairly low probability i just amazon is a company thats very focussed on customers. It split before it split three times during the bubble days. Yeah. I just dont know. I mean, i just dont know if its a relevant question, right . You talk about stock split yes. The stock split is not inherently creating value. It makes it a candidate in another index namely the dow. Yeah. Look, im a fundamental analyst and thats a technical move that might be geared towards appealing to a different investor audience. Thats probably ten thats a very low on the totem pole of what management is focussed on at amazon. Thank you, anthony. Thanks for having me. The word of the day on wall street is rotation with technology and this week real estate industrials and utilities, lets bring in the founder and chairman of axiom, guide on Global Founder and ceo. Guys, great to have you with us. I will start off with you. How do you assess what is going on in the markets, in particular that sharp move out of technology that weve been seeing for the past few days now . So, theres been a lot of crowding into those names as you know weve accounted for the vast proportion of the move in the index. I think this is a classic case of shortterm technicals i dont think anything fundamentally has changed in these names, but market reactions are going to be swift and fairly severe over a very short term when they quantitative systems and socalled computerdriven systems gang up on these stocks when they make shortterm down moves like that. I think that exacerbated the move i think there are reasons for that to happen just purely on the level of price appreciation and the sleracceleration they appreciated this year. Sean, ive been looking through the notes and looks like youre questioning valuation for most parts of the market you s p the price to book 100year average 100year average is about 2. 2, many of the sectors are now well above that. So what are you recommending to investors overall . Well, yeah. Four of the s p 500 sectors are well over four times price to book and it seems that no one tends to Pay Attention to that much anymore one of those, of course, is Technology Although amazon, which was just talked about in the prior segment is in the cyclical sector at 15 almost of that sector so, there is a tremendous valuation problem in the equities market. So youre saying move to cash i mean, what does that mean . How does that educate investors on how they should allocate . Yeah, i have been raising cash all year. You really have to make a decision on what you think the Federal Reserve will do with Interest Rates thats informing the valuation level that the stock market will trade at and if you believe the fed is going at least 2 by the end of next year on fed funds, you have to reevaluate what you think market multiples should be. But you know i see on the list that you sent the price to books and i see industrials and tech are, you know, above 4 when historically the average is 2. I see that financials and energy are below 2. So, thats are you buying those because theyre trading below the rest of the market yeah, i am long financials, although that also requires you to be fairly confident that the long end of the yield curve is going to rise. I do own financials. I have not stepped into the energies market. Ive been out of that. Im waiting for the next leg down in the oil price probably before i do that which is also a function of where the u. S. Dollar goes from here. You made an excellent point before the show began. We have the memory of a sand trap two seconds we talk about yesterday and ten minutes ago. You made the point that we talk about how stocks have gone up, up, up, up we forget that last year, last january was the worst start to a year ever, i believe it was, or one of many stock fell 20 in the s p 500. Was that the correction that many seem to be looking for now . I think so. I mean, take it a step further, the russell average had an average stock decline of over 32 . S p was average stock was down 26 . Those are bear market type conditions for the average stock. Even though the index came down 11 from the high. I think that relieved a lot of pressure remember, the longterm money is really geared toward a couple of big things 2 nominal rates on the tenyear, 2. 1, 2 type gdp growth, no inflation out there that just keeps aloe caters locked in. That keeps money in the market theres nowhere for it to go if the conditions change because we have so much price appreciation and profit taking sets in or theres some type of event that unglues that, that will change the picture. But for now it looks like were having a normal bout of profit were going to leave it there. Shaen johnson and liam dalton, thank you for coming on. Well get you back on soon thank you. Coming up the special counsel starting to investigate President Trump now for possible obstruction of justice we have the latest. Plus to say april was a bad month for Airline Customer service would be a huge understatement well tell you why ow lchisacinwo minutes. Welcome back a developing story we are watching this hour, special Council Robert mueller is starting to investigate President Trump, for possible of obstruction of justice amon jaifrs live at the white house following this story. Thats right. Reporters tried to ask the president about this at a public event couple hours ago at the white house. He did not take any questions from the reporters who were in the room here is what we know as of right now from nbc news including the fact that the special counsel Robert Mueller is investigating possible obstruction of justice by the president himself mueller requested the interviews with the director of National Intelligence dan coates, the nsa director mike rogers about their conversations with the president. Mueller also wants to interview the former nsa Deputy Director richard legit regarding a memo he wrote on rogers conversation with President Trump so thats the second official we know who has been taking detailed memos of president ial conversations. Coates, rogers and legit all agreed to be interviewed by the special counsel. The president s personal attorney, however, putting out this Statement Last night when the Washington Post initially broke the news saying the fbi leak of information regarding the president is outrageous, inexcusable and illegal. The president himself going further than that on twitter this morning issuing this statement saying they made up a phony collusion with the russian story, found zero proof, so now they go for obstruction of justice on the phony story. Nice second tweet, you are witnessing the single greatest witch hunt in american political history, led by some very bad and conflicted people. Makeamericagreatagain at this point we are expecting an off camera briefing thats not for broadcast from Sara Huckabee sanders, the Deputy Press Secretary here at the white house. So we wont get anything from the white house on camera today, but we might get a little bit more sense about what the president is thinking about all of this from her although, to date, the white house has been referring every single question about this to the private attorney they simply wont comment until now on any of this russia matter they wouldnt comment to me earlier today when i asked them about the president s tweets, who is it he thinks is bad and conflicted in all this does he think that that applies to Robert Mueller or not the white house simply not saying at this point, brian. All right, thanks so much good run down there. Here now to break down the latest developments with the president s agenda, the fed, china, much more, jillian touch, u. S. Managing editor of the financial times. Good to have you here. Great to be here. Markets seem to be nonplussed with whats going on with President Trump, the special prosecutor, et cetera. Why do you think that . Is. Markets are fantastically complaisant in my view theres three reasons. Firstly, they know that all this talk about impeachment in some ways is premature because its going to be a political issue, probably not a legal issue, that will probably take some time to play out at the moment the republicans are standing behind the president. Secondly, the perception that even if the president is in trouble, the core elements of his agenda are still going through and the markets love that the tax cuts, are repatriation of corporate overseas earnings, infrastructure the third thing issing this i like to call the normalization deviance program its the idea that actually when you have a situation where an chamber of people have lots of little weird things happening every single day, a point comes when people just kind of start to take it for granted inured. Inured. Normalization of deviance, normalization of tweets, weird things happening were living in house of cards we cant really get surprised anymore. I heard another explanation also which is so if donald trump got impeached, then we have mike pence, who is actually probably better at getting legislation through and may be would be bullish for the markets because you would be more likely to get tax reform. You are so right there. Because the issue is the markets have rallied on the agenda, not on the man thats the key thing to realize. And the agenda is basically what many investors, many ceos still like i am amazed because i go around talking to a lot of ceos just two weeks ago in washington, theyre still drinking the cool aid. Theyre still really excited. Jillian, welcome, by the way. Thank you do you believe that the market has rallied on the agenda i would push back a little on that and say the market rallied for six or seven years after the financial crisis took about a year after for the campaign didnt know what to do we lit early were sitting up here nothing to talk about politics i wonder how much this is confidence not taking anything away from the administration, versus just a continuation of things Getting Better. You have the economy steadically improving. You can arguably whether its growing fast enough or not you also got in many ways the Global Economy doing quite well as well. Youve also got and lets not forget a lot of money, cash, stimulus, swirling around the Global Financial system. Yes, the fed came out this week and said it was going to have another 25 basis point hike. But has anyone noticed the bank of japan is pumping huge amounts of support into the system theres a lot of fuel right now, a lot of dry tinder thats being lit around the world thats helping markets, too, for sure. Its almost a blessing in disguise in terms of the accomplishment of the trump agenda and the perception of it still being somewhat on track that theyre in the midterm elections. No matter what happens to President Trump, what happens with an investigation, theyre still midterm elections and still the fear of mutual rale distrux if something does not get done. Unless you think its an awful like the cartoon, the figure goes off the cliff and pedaling midair and look down and plunge that in my mind is a danger right now that something will suddenly cause con stance to crack and everyone will raels just how much theyve been taking on trust. Taken away in china, no body is quite sure why, very little explanati explanation. They want Foreign Direct Investment in china, taking away a key ceo without any explanation is hardly the way to instill confidence that you have rule of law there. Well, that sounds almost like a bit of a british understatement there it is lousy for confidence lets get it straight there. You know, if you go around and talk to Central Bank Governors and ceos quietly these days, say, what is the issue that could really shape the Global Economy and markets going forward, they come back to china over and over again. Because so much is resting right now on this belief that china will just keep growing if something ever caused chinese economy to crack and faith in the system to crack that would be terrifying. Now, i dont think this is remotely it at all what we had right now is a combination of pattern of the chinese authorities clamping down on key political figures, key ceos thats partly because the pry mere is trying to assert his power and there is an issue of them trying to clean up the financial market. I wonder, jillian, the story to me also is just almost an allegory for a lot of other things because when the first off, for our viewers, on bang was a tiny car insurer who bought the waldorf mistor yan manhattan, the fate of that place is up for grabs. Then made a 12 billion bid for Starwood Hotels trumped by marriott, and the day that that bid was announced i called on bang nobody answered the phone. I called on bang in china, no one answered what time was it . I was hosting squawk box