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tv   Squawk on the Street  CNBC  February 23, 2021 9:00am-11:00am EST

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we've seen in the past >> that's right. that's why we looked at the charts in the one-year >> i would ask you why you're not in front of the wall, but we're out of time. you escaped. we'll see you tomorrow you? got it all right, everybody we will see you back here tomorrow at this time. have a great day right now it's time for "squawk on the street. bye, guys. >> good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla s&p is trying to avoid a sixth straight loss as investors await powell on the hill farm execs on the hill talking supply a host of reopening headlines. the road map begins with a big tech tumble. apple, amazon, microsoft all falling. >> lucid motors. yes, they got to deal done it was a highly anticipated spac deal
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the stock plunging this morning. why? we'll explain and the ceo of lucid will join us in a few minutes. and speaking of electric vehicles, tesla shares continue to slide the shares are now below their s&p 500 entry level. >> all right guys, jim, it's not often you get the dow higher and the nasdaq 2% plus down. how much of this is going to continue to bite the high multiple names does it accelerate from here >> i think it can. i went back six years. the selloff from 1124, 2015 to february, first week of february, 2016 is almost a blueprint for this what happened then, that was when janet yellen said we may have to put a rate hike through because things are better than expected it turned out that the market couldn't handle it and the stocks that were faang stocks bottomed but a long time before you bottom, and i think that one of the things i think people have
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to be ready for and i talked about one of my favorite prognosticators, mr. t, that there's pain that's pin ahead, and david, there's pain ahead because when you have the so-called reflation trade. a word i hate. when you have a sense that there's a boon, it's hard to hide the boom amidst the people who are unemployed >> meaning what, though, jim >> well, i think that jay powell is acutely aware of how many people don't have jobs. >> 10 million still. >> but at the same time, if you're going to flood the zone with more money, and people are going to be able to spend, then you have a roaring 2021 for some, and for others you have nothing. and i think that the roaring 2021 may be the collateral damage if you want to be negative, of trying to get it so
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people go to work. so we end up with a situation where you don't need high growth stocks because you have stocks like freeport that are high growth >> right right. well, given the move in copper in particular. freeport which has had a strong move carl, listen, we're going to talk about it a great deal and listen closely to powell's testimony later today. we're going to keep an eye on congress and see how far that $1.9 trillion bill with get. perhaps the minimum wage gets reduced. or maybe even the overall number but so jim's point, there are a lot of questions here in terms of if we flood the zone as jim just said, are we going to end up with real inflation and a boom at the same time and perhaps overheating? >> it's true, guys it's going to be a real conundrum for the fed chair. if we go by the recent comments, he'll probably continue to say
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we're not thinking about raising rates that unemployment is higher than reported, that inflation spikes are expected and will be transitory, and as said yesterday, there is this creeping belief in disinflation that's going to anchor prices over the long term just a lack of conviction by -- in mass of inflation really being a problem. >> well, if you go back to this period i'm looking at. this is a period where sales force went from 82 to 53 microsoft is the only one who really held up apple down a quick third and what you had netflix going up 48, 49. you had an overreaction, and pretty soon almost in january after yellen raised, you had a collapse in oil. you had a recognition that perhaps the rate hike, we weren't ready for it and the money came roaring back to growth. so what i'm advising people is to say let's stay the course, make sure you have some of the marriotts and southwests and make sure you have some of the
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disneys. this period will end, but we're at the beginning of it, and i think that today, david, today is such an important today why? because today is the day where we discovered -- i think there was some lucidity that came to the market >> there was we got some -- yes we got a clear sense as to value, at least, as it is viewed on behalf of those who are making a pipe investment in churchill capitol for loosucid motors now, and overall, we got a sense to your point as to just how large this company is on a market cap basis let me go through it we've been watching this for quite some time. this was the gme of twitter, if you like, if you watch twitter on cciv. >> a spit take >> it's true and i mean, you and i both -- i certainly came in for a great deal of criticism. ten weeks ago i said it wasn't
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necessarily a done deal which, of course, it wasn't at the time but learned a lot since then and certainly the enthusiasm of those in the stock has been undiminished but they finally got the deal. we know there are going to be 1.6 billion shares outstanding the pipe investors who invested at $15 a share are -- there's one value for them let's call it a 24 billion or so and then you've got roughly still based on this current stock price, 1.6 billion times 37 close to 60 billion. right? >> right >> last night before the close, the company was valued at let's call it closer to $100 billion 95, 100 billion. bigger than gm and ford. but we do now have a sense as to what it's worth. that said, we're going to talk to the ceo about the views of the future they'll say they traded enterprise value over revenue.
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that's below that of tesla and neo and a number of other big consumer names car itself looks beautiful we did get to your point, some lucidity when it came to lucid the deal has been announced. the pipe investors have to be lucky. you wonder how many will hang around once they're able to sell given they got in for 15 at something that's still trading at more than twice that. >> i thought i was in some sort of history lesson with my twitter feed because i kept bringing up churchill. i was waiting. we will fight on the beaches no, we're fighting right now about a $50 billion value. there's 100 billion with the bloomberg leak 100 billion is a lot of billions >> it's a lot of billions. >> and churchill, okay a great man. church hill, the stock now we find out that when you buy a spac late in the game, you don't necessarily make money >> no, but the enthusiasm for this name, i had a number of
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conversations late yesterday with hedge fund managers thinking maybe it's time maybe now that the deal is at hand, it's time to short it. who would? you never know you could have argued this morning there would have been even more enthusiasm that 90, $100 billion is right or maybe more given what they're looking for, what's the number in terms of ebita. it was 2 .8 in 2006, i think >> david, it's so cheap versus neo. >> and versus tesla they would tell you as well >> tesla which -- yeah we haven't even mentioned tesla is red for the year. below the s&p entry price this morning. guys, we'll take a break and
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talk to rawlinson after the break. upgrades of xatens and downgrades of spotify. back in a moment
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lucid motors confirms it is going public the merger with church hill capital. it's a spac deal that will bring
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4$4.5 roughly billion in cash t the balance sheet. joining us is lucid motor's ceo peter rawlinson. based on where the stock appears to be poised to open this morning, you're going to be overseeing a company that will have roughly a $60 billion market value does that make you nervous do you feellike you can delive on that kind of expectation in the marketplace? >> i think first, the great news is that lucid is a tech company. and we're bringing the world's best technology to the market this year here in the u.s. and i think that the valuation is a reflection of our technology i think that that has been validated and endorsed through the due diligence that church hill capital have undertaken they're thrilled with the product. everything they've seen i'm confident we've got world class tech we need to humbly execute and
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get this into production, and that is what will truly drive the value. >> yes it will. and it is behind some of the numbers that you're putting out there. and let me just share some of them because they're impressive you are looking for generating as much as 2.885 billion in ebita by 2026. so within the next five years. what gives you the confidence, peter, that you can ramp up production and sales, obviously, to the point where you're going to be able to deliver on that kind of a target >> well, i think we've got an ambitious to get a realizable plan we've shown that we can execute if you look at the factory that we've built to date, we did that in record time the first green field purpose-built ev factory in north america. so the team i've got and surrounded myself with are consummate professionals and we've got the expertise and the track record at delivery
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what's really important now, though, particularly the next few months, is to get our first product into production. that's the great litmus. >> okay. so peter, you say you're a technology company i share that and on page 37, it has everything people should know. leading charging speeds. i happen to think the differential for many people and cars is how quick you can get on the road and how quick you can charge give us what you can do versus the other guys >> absolutely, jim i couldn't agree more. it's a huge differential do we have a charging speed where we can put 300 miles in the car in around 20 minutes and we're doing that with ultrahigh voltage over 900 volt charging through our partnership with electrify america this is next generation technology and we are doing that with our wonder box boost charger. and not only that.
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we've got two-way charging on board. so we can go vehicle to grid you can run your hands off the car. >> well, i also like as someone who has kids who drive, i see that you have 32 sentures on board, a comprehensive suite i always ask my kids how many sensors. this is the most, right? maybe the safest car on the road >> so the best -- to the best of my knowledge, it's the most comprehensive and most intricately -- we fused long and short range radar, surround radar with long-range and a 120 degree solid state lighter in the nose >> peter, one of the things i think our viewers are excited. they wanted a piece. they bought churchill. when you try to figure out a price, did you say listen, you know what? we're every bit as good as tesla
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but we're priced under so anyone who thinks this is overpriced as a stock is missing the big point which is we have more technology and faster charging and a better car and cheaper than the stock of tesla >> i think there's a gross misunderstanding in the market actually, the acquisition price of lucid from churchill was $11.75 billion that was a snip. it was a great deal for churchill. but there was a quid pro quo churchill brought this incredible array of the bluest of blue chip companies to invest in us. with long-term commitment, with a lockup and a commitment, and those companies provided -- there was -- we were oversubscribed for the pipe. so we actually expanded the pipe, and the pipes sell at $15. and this is unprecedented in the -- in the history of spacs
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so this is why i'm so -- that so many of these savvy investors, blue chip companies could see the long-term value potential, and that lies in lucid's technology >> yeah. and peter, i mean, to that point, you did sell 16% of the company to cciv shareholders and to your point, the pipe holders will own about 10 % at 15 which is 50% more than those who invested originally in the spac at 10 have paid but that said, you still sold 26% of the company at a discounted value when i say that, i mention it because you might have just gone public the traditional way there seems to be great enthusiasm for your stock and product. why did you choose to go this way? >> i think that this is -- to secure our future. we've raised over 4 $.5 billion. this means we can accelerate our
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business model and in a secure manner and this is really important because the whole world needs to move to sustainable mobility with technology, and this means that lose id can be at the forefront of this new movement the world cannot wait. this has given us security, commitment from long-term investors and we've been augmented as a company by the alustrous roster that has been aacceptableabled it provides a new dimension as we grow the business going forward. >> yeah. well, growth is, of course, what everybody is going to be focussed on. you say by 2030 you anticipate run rate production of more than 500,000 units. that would represent roughly 4 % market share of a 2030 of 15 million overall units. it doesn't appear to be too much of a reach, i guess.
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in some ways, but at the same time aren't we going to get -- aren't you going to get significant competition from the likes of high-end automobile makers who move in to ev in a very significant way and here we're thinking, for example, of porsche and many others audi on and on. >> that question has been posed many times over the last decade. and that was the question that was posed of tesla's run they haven't come any time soon. i mean, only last week we learned that january good sold a new extra electric vehicle program. you know, as far as i'm concerned, we have to take a preeminent position. this is a tank race. i believe only two companies realize that and recognize that. tesla recognizes it. that's led to their preeminent position lucid recognizes it. we welcome the competition bring it on. i can't wait for mercedes to launch eqs and for that to be
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head to head against lucid air we welcome that competition. everybody wins the planet, the customers, you win. >> peter, there's another page in your deck again, i'm urging people to understand the deck. why? because churchill the stock, it may be confusing to people, but lucid the company, 19 top execs. 8 went to work from tesla. three from apple this is a technology company what do the apple people add to the tesla people to make it so you've got the technology of the future car >> well, that's an easy one. the car is a computer on wheels. this is a fusion of art and science and hardware and software we've got the best of the best and lucid becoming a mecca for talent for top scientists, designers, and lead. we've got fusion of apple executives with tesla executives these are the two worlds that make the new modern era of
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automobiles. it's a computer on wheels. but it's still a car we're a tech company and a car company. >> it's a computer on wheels but it still needs to plug in somewhere to get its energy. is the infrastructure going to be there, peter, to support what you need in terms of people being able to find the places they need to charge their cars in the 20 minutes or so you say it will take >> absolutely. the infrastructure is already in place. electricity is everywhere. most charging is done overnight in one's garage. and with our wonder box technology, we can charge the car at nearly 90 miles per hour at home. that's a game-changer. that's when most charging is done and -- then we've got the great partnership with electrify america. it's growing exponentially so we can have this thousand
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volt, up to 350 kilowatt capacity it's the 90 miles nearly 90 miles in one hour at home charging level which i think is a game-changer >> yes back to the balance sheet for a moment you're going to be free cash flow positive you say in 2025 is what i see here. >> yes >> between now and then, obviously, significant losses. are you going to need to raise more money beyond the $4.5 billion you currently have on your balance sheet? >> absolutely. this is a capital intensive business our balance sheet will secure our runway into 2023 we'll have built out phase two of the factory that we can get the economy to scale ready for the launch of project gravity. we'll have gravity very close to production this secures our future for a very long runway but this is capital intensive. and i'll tell you why. because there is no substitute
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for vertical integration tesla recognizes this. we cannot outsource or entrust manufacturing to a third party it is too critical to our existence. nor can we entrust the precious relationship with our customers and so the sales and service network, and i'm here in our beverly hills studio this morning. this isn't a virtual background. this is real and this is the customer experience we need to invest in these the asset heavy, but we can be asset light with our relationship with electrify america. we don't have the capital burden than tesla has encountered with rolling out its supercharge network. although, i applaud them for doing it >> peter, david faber introduced us to a bunch of battery companies. including quantum scape. i'm looking at lucid single piece brick injected molded
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battery. and you're talking about the ability to manufacture millions of units that's a game changer. >> i think it is it's truly designed for mass production in a way that others haven't when i look at the current products that are out there, frankly, they look like science projects that have been industrialized what we've done is create design for manufacturing that applies to all our electric power train. and what you've seen the picture you've seen is a single shot plastic injection molding where all those elements, those electrical characters and bars are encapsulated as the plastic flows. and that pops out of the mold. it's a single shot deal. that's revolutionary it's like a lego brick >> peter, soon enough, i think jim and i and carl maybe want to get a ride, want to test drive that lucid air and hopefully we'll be able to do that in person with you at some point
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>> that's a date i will personally bring one around and you must drive and experience driving is believing >> all right well, we will be watching closely. always appreciate you joining us and again, congrats on getting to the finish line with churchill capital for peter, the ceo of lucid >> thank you so much great discussion, guys we'll take a break here, get a look at futures and the opening bell on the other side don't ay.gowa
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home depot shares opening down about 2 %, jim. 265. a three-cent beat. comps up almost 25 and although there's no formal guidance for the year, they do add that if the demand environment persists, you're looking at comps that are basically flat, up small >> this is the curse of success. we've seen this the last couple days if you've been doing great during the pandemic, it's very difficult for you to come out and say we're going to continue to do great. housing has been tremendous. they obviously are saying listen, things could be less brisk. there's an article today in the
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paper about how stanley can't meet demand, and we know that lumber is very high. but in the end, i want to point out that if they have a good spring, then you're going to be able to say you know what? this is still the one to own, but let it come in let it come in, david, because what's happened is that the expectations for every single one of the essential retailers are too high the nonessential retailers, the expectations are low so you'll have a john duskin come out and talk about coals. it's up from the teens to 55 because nobody expects anything good from kohl's and home depot, everybody expected good things from them saying when we open in america and we're vaccinated, it's going to get better. why? >> it won't. the comparisons are going to be difficult for a number of areas that benefitted from the people being home and the move to digitizing
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it's going to be tough comparisons. it doesn't mean they're not doing well, but they had a gap up, didn't they? >> i'd rather go to disney than home depot >> me too. >> disney all-time high yesterday. we'll talk about some of the reopening stories, jim and as for camps, grocery stores are going to have a tough too. b of a cuts kroger today 28 target as they see more promotions and tougher margin risk there's a look at the s&p and the nyc and the nasdaq it cuts all different sorts of ways starbucks is named a top reopening play this morning. >> you know, i've been waiting for starbucks. starbucks was always the situation where when china opens up and the united states opens up, it's going to do well. a big move off of china, not that much off the united states. this says the technology is going to start working starbucks reminds me a little bit of chipolte. there are a lot of people who said it's fine it's fine. it's fine. i'll be there.
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and now we've got someone recommending it and people are saying you know what it's been there. it is not a southwest air. it's not a united. it's not a theme park. it's something that's been there, and it continues to be there, and i don't -- my semi trust owns it, but i can't get excited about it david yrksz the only stuff i'm really excited about are things that make it so that we are able to have a great time because we've been modernaed and pfizered we've been astrazenecaed and we're going on the road, and we're going to go to california. and we're going to go to europe one day. and we're going to see things. and we're going to do go, david, on a carnival cruise >> i'm not going on a carnival cruise, but you're going to make me cry i'll go anywhere else. >> would you be willing to have dinner with me >> you said no this weekend when i said i want to have dinner with you >> the we you keep talking about is you
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you're the one that's been vaccinated we haven't been yet. >> come on will you please let me go out with you >> i -- >> carl -- >> i'm trying to find an underlying condition i don't have the bmi i need. >> body is a temple. what are you going to do it's your temple >> it's my fault >> don't smoke i don't do anything. i don't know >> moderna changed my life >> i'm glad. and i can't wait >> moderna a couple years ago, i gave the guy a hard time i apologize. >> it is worth pausing occasionally because a year ago when we were just and we showed that clip yesterday of us talking about how people wouldn't shake hands. we were just moving -- >> we? >> we. >> you shouldn't shake my hand >> you had a mask on already rightly so >> i had them up the wa zoo. >> my point is -- >> i never hoarded masks >> we had to pause to recognize
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the incredible advances science made in -- it's a miracle. >> it is >> it really is. >> and these vaccines work >> there's no doubt. >> warp speed. >> guys, it's a good point, david. the pharma execs today are probably going to be overshadowed by powell but pfizer is going to ship $13 million doses a week look at august sands and wynn and mgm. vegas is going to start going back to 24 /7. restrictions lifted. to your point about carnival, pricing what was it, pricing 40 million at 2510 as they take advantage of the continued belief in rebound. >> wynn is run by a man, maddox. this fella, when you talk with him, fella, that sounds like my dad. what he did when i spoke to him is said it's an air problem. they have spent more money and
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time and experts to make it so that you feel safe at wynn that i would go to wynn at now -- dave, i know you don't want to go on a cruise would you be willing to go to the blackjack tables at wynn >> sure. once i get vaccinated, i'll go anywhere i'd rather do something else than a cruise right now. how about i'll go to your house in italy will you invite me >> italy is hard to get to right now because of issues they have. >> when that opens up? >> and we had a very big storm don't worry about it the olive oil -- >> i'm hearing a no. i'm not getting the yes i'm looking for here >> the germans booked it the whole year the germanss, they're like we're on my wife -- she learned italian it's a hard language there's seven different versions of "is". >> guys, back to the market. churchill capital is down 45%. >> what? >> yeah. we could have anticipated that might be the case to some extent given the valuation numbers.
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we didn't know we didn't know how diluted the pipe would be or how many shares the company would have now we do. it's going to have 1.6 billion outstanding shares when the deal with churchill capital and lucid is completed you can get a market cap there as of yesterday's close it was close to 1 billion there's a realization that was more than it should have been even on 2.8 billion on anticipated ebita in 2006, that's a hefty on the number the stock is dropping dramatically age other spacs with it. >> i want to make a point to people at home david faber did not kill churchill. david faber did not say the churchill was too high david faber has continuously said the price may not be right. okay and for those who were saying that the cnbc killed churchill, give me a break. this was one that david suggested may be out of whack with where it's going to trade
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and i'm defending you, david from the beginning you suggested that perhaps this stock had too much enthusiasm. >> it had a great deal it became a poster child for speculation in the spac space. by the way, it's still three-fold what the issue price was for the spac itself. it's still an incredible success story. michael kline, the sponsor onto churchill capital 7 has become a billionaire with other deals and potentially with this one as well the pipe investors are in there at 15. they have a double on their hands and they just committed to that yesterday why would you? conceivably, it's not free money, but it's the prospect of it you can't forget about the options markets here, either and what the role they play. i mean, this thing, the march '60 calls are 25,000 contracts as of yesterday. the calls are trading at 1386. you had the march 50, 30,000 contracts. the options market here is also active and i mention that other spacs are getting hit. there are other names now
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starting to sort of see their numbers come -- the spac price come down because this was in many ways a reflection of sort of the best of the best, i guess. >> yes well, we got to go back, carl, to something a strategist at jpmorgan said. he said the people who get in early, good. the people getting in the pipe, good the people who come in later, maybe good, maybe not. and this is one, carl, where we see that not everything is golden in the spac world >> that's true i mean, look at the nasdaq right now. we're on pace, jim, for the biggest two-day decline since early september, and it's not just tesla's, of course. it's a host of ndx names that we're doing extremely well last summer look at kathy wood's arc down i think at least 14% from the high >> well, those of us obviously you get the 6:00 report.
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it reminds me, by the way, of when i used to listen to bob protector. >> the elliot wave >> yes and it's like what did she buy today. she came on the unbelievable halftime show where she talked about stocks that are cash equivalents that i regard as some of the most dangerous stocks in the market but that's okay. because when you have the myidas touch, it's great. there was a song, king midas in reverse. >> yes >> that's today. >> that's turning gold into -- >> it's a song >> it was? >> carl, he doesn't know >> sometimes i don't know. there's gaps >> good song >> you might have me on this one too. >> if you got him, that's impossible that guy, he could win that -- whatever that was. the name that tune >> she's fabulous because she loved tesla. shut up. >> you know what's first on her list this morning is discovery i wouldn't have expected that. she bought 179,000 shares.
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has anybody taken a look, did you see the move in discovery and viacom disney and fox up dramatically a lot of people scratching their heads. discovery did have a strong numbers, 11.7 million direct to consumer subscribers this only after a few weeks after the launch of discovery plus look at the move in that stock price. and by the way, it is backing off a bit today. look at viacom as well and viacom is going to have their analyst meeting tomorrow or investor day meeting is what they call it and let me give you a quick -- just barclays comes out and says listen, 2021 likely the last year viacom, cbs can try to change the streaming narrative crash flow around 1.5 billion. maybe 2.2 billion after that that's versus the 3.5 billion that we were hearing pro forma from when they were getting together with cbs. to give you a sense as to what they're dealing with
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one year, that's an all-time high yesterday the stock hit at viacom an incredible move this year alone was up almost 80% until today's move we'll keep an eye on that investor day finally, speaking of companies and what can happen from high fliers, well, ge, i got to come back to it i had that long conversation with former chairman and ceo of ge and it's on the web if you want to watch the entire interview. we can take a look at what happened to ge stock over a long period of time i did ask what was his best day and what was his worst day take a listen. >> my best day was i think october first, 200 8, when we completed the equity raise in the middle of the financial crisis it was a very difficult decision it was a very difficult day. when we completed that, i really felt with keith and mike and
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everybody, like we really accomplished something in a very brutal time. >> i bet your worst day was probably right around then too what was it? >> i would say my worst day was maybe five days before when washington mutual went bankrupt and our credit default swaps blew out it's hard to describe how frightful the financial crisis really was >> sometimes we do forget, jim the question was could they roll their commercial paper they did but it was awful lu close at ge. >> i remember the days when you went to the cafeteria and people would say did you cash your check? are you okay and carl, when you talk about worried about cashing your check, i think it is kind of like let's say that's a in a deer when it comes to working for a company. >> uuh-huh i remember like yesterday. i was on squawk at the time. we had some discussions premarket that were truly harrowing. that's an incredible recollection by immelt
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nasdaq pronounced weakness ten-year 136 let's get to rick santelli >> hi. 136. it's back in the flurry to 140 look at a one-year of tens we're at one-year high yields. the important part is look on the right side you see the right hand side, the last maybe one sixth of that chart? we're basically turbo charges from the end of january. that was the last fed meeting. if anybody doesn't think that jay powell and company are uber to the 50 million power dovish, that chart say it. they may not want to raise rates, but they aren't necessarily the only voices to be heard investors have something to say about that look at 30-year bonds. they are over one-year high yield now going 13 months. let's look at the nod. notes over bond. notes over bond at a five-year wide that tells me everything we've been seeing with rates will most likely continue. and if you look at tens minus bunds, it's at a four-year bide.
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we're leaving europe in the dust with respect to rates and that's significant. especially considering we're spending the most. we want to spend another 1 $.9 trillion do we need it? the markets are augering a different scenario than the political side if we look at what's going on in bunds, the last time they were positive, they tested 29 base points in the middle of 2019 we're coming up quickly. and jgb, the least negative since november of 2018 and that's what yield curve control. carl, jim, david, back to you. >> all right rick, thank you very much. rick santelli. when we come back, we'll talk to medtronics ceo, his company's quarterly results and where the pandemic fits into the picture in the meantime, watching closely the nasdaq below the 50-day for the first time since november 3rd don't go away.
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medtronic reporting a quarterly profit above estimates. stronger demand for ventilators amid the pandemic and many other things the gross margins were extraordinary. the medtronics ceo joins us. first on cnbc. i'm going to go right to it. your mitg, which is the minimally invasive therapies group had an extraordinary 4.6% organic growth that's huge. how? >> this quarter some of that came from ventilator sales and pulse ox sales that helps patients with covid that's a relatively small part of the company's total revenue in the mitg is our surgical business that's our largest business, and it had a really strong quarter and took market share. >> people don't understand your neuro modulation business. it's extraordinary
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we've talked about it off camera you own it no competition 3% organic growth. explain to people the wonder of this division. >> as you mentioned, it is a wonderful technology it does so much for patients i think it has a bright future medtronic invented it over 20 years ago. we're in a couple secmgment. one is a brain modulation for diseases like parkinson's. pain, using a stimulator to alleviate back and leg pain. and then another one which is not talked about a lot, but is a big market probably 800 million, almost a billion dollar market and growing double digits right now is overactive bladder. you know, incontinence for women in particular. and this is a business that people don't like to talk about it very much, but it's a huge need out there
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and that market is growing in the double digits. and we stimulate a nerve, the sacral nerve to control overactive bladder in overall, what you're seeing is between the miniaturizing of electronics, the introduction of data, and the ability to personalize therapy through close loop we are moving to the front of the line here for therapies for these conditions >> jeff, is this the year you can go up against dexkom your diabetes franchise was first along equals i know you're champing at the bit to be able to compete. >> absolutely. diabetes is probably the biggest area we're focussed on and getting back to the market growth we compete against those guys. we're the one company that has the complete solution. the insulin delivery, the continuous glucose monitoring.
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the algorithms and the drive of the technologies as well as the customer service because it's a heavy patient interaction business and we're global and we are the one company with that total solution versus the piece parts. and our weakness has been the continuous glucose monitoring we are launching a number of products in that area that will get us back to a competitive position as a matter of fact, we just launched our new, what we call our 780 g closed loop system in europe, and we are gaining share there. it's not in the united states yet. we can't wait to get it to the united states. we are gaining share the patient feedback is phenomenal and the time and range, which diabetics like to manage, is at levels we have never seen before so gives us optimism for the future for that division >> speaking of the future, geoffrey, time has a piece out this morning talking about the
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health effects from a period like the pandemic where you had a dramatic tropoff in preventative care, doctor visits for an entire year, and the question is, how does that manifest itself as we come out of the pandemic. do you think that although it's tragic for the patient population, that will drive depanned in the back half of this year? >> well, first of all, let me address the patient situation. it is a tragic situation medtronic as well as some of our competitors are working with the different physician societies and the hospitals to get campaign, public messaging out there. medtronic with the american heart association sponsored a campaign called don't die of doubt. you know, encouraging patients having symptoms to get to the hospital because we are seeing patients present themselves further down into their condition and it is a problem. and so, yes, it will drive demand there will be a pent-up demand and patients will be hitting the
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hospitals. we are seeing hospitals gear up for that in our quarterly earnings we talked about our capital equipment sales. we sell equipment tied, directly tied to these procedures, and hospitals are buying this capital equipment. things like consoles that power surgical tools, surgical robots like we talked about for orthopedics, in our case spine, navigation systems for surgery we are seeing that capital equipment sales at record levels because they are preparing for this patient, you know, rebound. >> geoff, look, it's remarkable. this is done when many people don't want to go to a hospital to be able to do tests geoffrey martha, wonderful quarter at medtronic there thank you. >> thank you we will take a break hear. watch the nasdaq as we look at the ndx here nasdaq is down 450 points. biggest two-day loss in several months, below the 50 day and now
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♪ we are moments away from fed
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let's get to jim and "stop trading." >> the stock of macy's is down inventory is down big, but the number that i like to look at is credit card. 258 million. why credit card? people get started shopping at macy's they did a good job and i think that macy's is one of those companies that i talked about that is the opposite from tivo stock has room to go i like it. >> yeah. some of those delivery costs are biding margins an interesting quarter how about tonight? >> i have charles river, a way to design new trucks sean connolly at conagra and doug pertz they use cash for marijuana, for dispensaries, marijuana stocks are getting
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killed chaos there. marijuana trades with david churchill. did david kill churchill no well, who knows what's going on with cannabis after the new jersey legalization. we will see you at 6:00. "mad money" at 6:00 p.m. eastern time good tuesday morning, everybody. welcome to another hour of "squawk on the street. powell starts in a few moments steve liesman has a look hey, steve >> good morning, carl. fed chair jay powell with testimony on the hill, will say that the economy is a long way from our employment and inflation goals, a sign that he is not ceding any ground to those concerned that fed policy is loose or worried about inflation or higher yields it will likely take some time for substantial further progress those three words are the words that the fed is looking for, substantial further progress to figure out whether or not to change the asset purchases of
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$120 billion a month saying we are not close to that but the fed will communicate any progress towards those goals well in advance of any changes in its purchases a sign or clear comment by the fed chair they are not about to do it now. when they do, you will get plenty of notice on the issue of inflation, taking a confirmation stance saying the pandemic has left a significant imprint on inflation. his idea there that the effects are not going to be short lived. and then some three particular points he makes. for some sectors he says prices remain particularly soft he says that inflation remains well below the fed's 2% inflation target, and reiterates that the fed is aiming for inflation above 2% in one hopeful sign in this testimony he said vaccine offer hope for nor mmal conditions lar this year. and the resurgence of the virus right now though is weighing on the economy and on job creation, economic momentum has slowed
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substantially, and the pace of improvement in the labor market is also slowing. one more thing recovery mains uneven and far from complete with a downturn fallen unequally on americans. to the question of would powell be giving any ground at all suggesting any quicker return to nor more normal policy or an end to the monetary policy, i think the resounding answer from fed chair powell is no in his testimony. >> wow stocks certainly reflecting that, steve, as we are off of the initial lows and we'll come back to you as we get that the testimony, into the q&a. that's our steve liesman meantime, balancing that with some eco data. rick santelli has confidence hey, rick. >> yes, carl, and the data coming out is february data. some of most real time data. consumer confidence for february expected right around 90 improved over that expectation 91.3 this is the best read since just under 93 that was in november,
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and there was a revision from a little over 89 to a bit under 89 if we look at present situation, 92.0 that really jumped and 90.8 on future expectations. when it comes to the fed, this is a february number, expecting 15.15. we ended up with 14. back-to-back 14s both of those numbers are the lowest levels going back to july when we were 10. back to you. >> rick santelli, thank you. joining us now as we await the start of the hearing is the president at ardani research gentlemen, thanks for joining us as we await powell ed, we are trying to make sense of what the bond market is telling investors. there are since of the economy improving. the unemployment rate dropping over the last couple of months but there is still no clear
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evidence that this economy is in an upward trajectory so i'm wondering whether the argument around inflation running too hot is premature >> i don't think so. i think the bond market has it right. the bond yield would be at 2% today if it wasn't for all the intervention that the fed has been doing for the past year for the past year the fed's bought basically all the bonds and notes that the treasury has been issuing so i think that's kept the bond yield down nevertheless, it's been trending higher since august, and, i mean, you're right about the economy still being frail when you look at the labor market and that's what the fed chair is focusing on, is he believes that the unemployment rate for all practical purposes is more like 10% than 6%. but when you look at real gdp and other macroeconomic data, we have had a v-shaped recovery and many indicators are almost back to where they were before the pandemic so they have done a very good job up to here i think the bond markets concern
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about more stimulus possibly overheating the economy in the second half of the year, especially with the likelihood that there will be a semblance of normal once the vaccines kick in. >> we heard some of the introductory remarks from powell from steve liesman there how do you think powell hand ushandles the questions around inflation does he downplay the risk and say if it heats up the fed is ready to act >> i think the fed will be ready to act if it heats up. our expectation is that as we're seeing an upward trend this inflation it's not likely to persist the duration of 2021 we believe that repositioning portfolios into what we call complementary asset class like infrastructures help insulate investors' portfolio from inflationary pressure along with natural resources to provide high quality income. so we still see inflation as being sort of transitory and sort of at some point
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stabilizing and actually if you buffer the portfolio appropriately clients and investors should be able to weather any significant increase in inflation through 2021. >> why do you expect inflation to be transitory >> if we look at some of the supply demand dynamics, one thing driving this upward pressure is we've had a limited supply due to coronavirus sort of stoppage. and as expectations are coming in in the demand cycle will be probably fairly high and outstrip that. at some point suppliers will get in like and start to produce and come this line with demand so it should dampen slightly as we move through to 2021. a lot of this is a covid issue so as that dampens, we get better inoculation, better vaccinations, better vaccination ralts, we should see pressure start to come down on inflation as we move through into the
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later parts of the year. >> ed, similar question to you you mentioned the second half of the year and inflation fears twha is your prognostication in terms of whether we will get it? >> i think we will see inflation-finally sustainably for six to 12 months go over 2%. this has been the fed's wish since january 2012 when they officially said that they want inflation to be around 2%. now in august of last year they said that actually they would like to overshoot that because they have undershot for to long. i think the fed will tolerate 2.5, maybe 3% the second half of the year and that will be the year over year comparisons beyond that i kind of agree that productivity should kick in hear to keep a lid on inflation sort of on a longer-term secular basis. on the near-term basis, i think the bond market's got it right >> yesterday, yellen told "the times" she would judge the
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success of the biden covid relief package in terms of how quickly or how well it was able to get employment back to pre-pandemic levels. do we believe that powell feels the same way about the fed's package of tools right now >> it's hard to speculate on what chairman powell is thinking what we can signal from the fed is that there is a belief that we can get back to pre-pandemic levels and so i think that's pretty consistent with the fed action at this point. >> ed, does that mean that this divorce from growth into value is going to be short lived or do you think investors are going to sort of see through whatever transitory effects we see in the first half of this year? >> i think ever since september of last year the stock market has broadened. prior to that, really from 2017 to september of last year it was the magnificent five, the s&p five stocks that were dominating, and now they were
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highly valued and with interest rates going up somewhat in the bond market, you are seeing re-rating of valuations in the growth area. i think that's a healthy development because we are seeing money going to the value area, and that includes some of the infrastructure plays, it includes financials, energy, materials. i think it's a healthy development and i think it continues, small cap, mid caps are all doing well. >> do you agree if the high growth technology names are more sensitive to the move in interest rates, would you be putting money elsewhere? and where would you put it if you look at industrials, caterpillar and deere are already trading at record highs and energy already the best performing sector for 2021 up 12%. >> yes cyclical stocks should fare well in 2021. tract of earnings growth as well, that should bode well for value and dividend payers. you think about rotating into asset class, we have actually
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increased allocation to xus and u.s. markets as well xus, as you know, has a decent amount of cyclical stocks. those should bode well to tea2021 as infrastructure and natural resources, i mentioned earlier in the segment, infrastructure should definitely increase and actually allow high-quality income for clients, for investors as well. so anything around that value chain will benefit from what we're seeing right now in the cyclical changes from growth to value. keep in mind, thwo things could drive value really, a lot of allocation of value, is a significant drop in growth stocks we don't see a significant drop. we see some of that translating to value as investors seek to take on a little bit more risk in their portfolio and increase in rates as well should also play well for value stocks and dividend paying equities as well. >> and apple, which has a bit more bond, like, characteristics, down 5% today ed, the move in bond yields is
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worth noting not just confined to the u.s an uptick in bond yields in japan, germany, china, india what do you make of this global phenomenon and what does it mean for investing in stocks in those countries? >> this is all signaled by the v-shaped recovery in commodity prices it's been an extraordinary rebound. it's comparable. so much steeper than what we had coming out of great financial crisis in 2009-10. this is a typical business cycle, reaction. what is unprecedented is we had a two-month recession in march and april of last year followed by an unprecedented v-shaped recovery for real gdp. we will be back to where we had been before the pandemic probably either this quarter or next quarter, and on a global basis it's been surprising recovery that's all clearly demonstrated in the price of copper and lots of other commodity prices, and that, in turn, has an impact on
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the bond market. the bond market pays attention to these developments and is reflecting the boom in the commodity markets, which reflects the amazing recovery in the global economy. >> some of these countries have been faster with their vaccine rollout than the u.s. as well. perhaps that's part of the story. great discussion thank you for joining us today thank you. well, ev lucid motors confirms they are plan to go public via a spac. we spoke last hour on that company's future as well as what they view as the key competition. >> as far as i'm concerned, we have to take a preeminent position this is a tank race. and i believe only two companies realize that and recognize that. tesla recognizes it. that's led to their preeminent position lucid recognizes it. we welcome the competition
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bring it on. i can't wait for it to launch eqs and for that to be head-to-head against lucid we welcome that competition. everybody wins the planet, the customers, you win. >> ever since bloomberg reported the possibility of a merger with lucid a number of months back it captured the imagination of many investors and shares of cciv is something we talked about a lot, in part because it reached as high as a $15 billion value just for the spac alone remember, they raised the money at $10 but once the transaction had been announced, you can see what's happened. it had been down actually as much as 44% earlier. it has bounced off the lows and it is still, obviously, an incredibly strong performer for those who invested originally. the pipe investors are at 15 that's not something we have typically seen, but still more than double for them at this point. the most important number, carl, was, well, in some ways at least
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from an investment perspective, was what's the total share count going to be? what is the dilution we know. 1.6 billion shares outstanding that's how you can figure out the market value and so yesterday with the stock trading close to $60 a share, lucid would have had a $100 billion market value, roughly. it is now down, as you see but still a significant value for a company, obviously, that is not going to be free cash flow positive for a number of years, although they are pointing at as much as $2.8 billion in ebidta by 2026 when they say they are going to be selling an awful lot of these high-end electric vehicles >> yeah. although those projections, david, as you said during the interview, depend a lot on people's availability to charge and batteries supply as well phil lebeau has been working on a piece about the number of batteries being so low that they are having to recycle or learning how to recycle
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batteries. the supply chain is going to continue to, i don't want to say haunt, but dog those who are in line with the very high-level projections going out several years. guys, interesting here we are well off the lows as we said and nasdaq at one point was down 450. as you can see, we have recovered quite a bit. watch bitcoin sliding again as well we are still awaiting the start of q&a over at senate banking with fed chair powell. when that begins, we will take you there live goent go away. d go away. he bgo . . . . [music: “you're the best” by joe esposito] [music: “you're the best” by joe esposito] [triumphantly yells] [ding] don't get mad. get e*trade and take charge of your finances today.
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realology, coldwell banker and sotheby's realty out with earnings this morning. joining us to discuss the numbers and the covid recovery is realology's president and ceo ryan schneider great to see you thanks for the time this morning. if we have to cut it short for powell, i hope you understand. thanks for being with us. >> thank you for having me absolutely understand. >> a lot of metrics to look at here transaction volume i mean, revenue very low leverage ratio the lowest since 2012 could you talk about the moment we are in and how long it will fast if, in fact, the rising rate environment continues >> we are in a pretty exciting moment for the housing market. it started with covid but remote work las accelerated serious changes in the housing market shows up in huge volume of home sales which we benefit from not just in 2020, but
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strong momentum starting the month of january, for example. and for us it led to a lot of ita delivery on ebidta, debt paydown and staek progress we like the momentum we have public health and macro uncertainties. so we are watching it closely. the low rates we have had have helped and fact that rates are still projected to stay lower compared to historical averages is, obviously, good, but we are all watching, you know, chairman powell's testimony pretty closely. >> yeah. could you talk about some of the geographic differences in the markets? are you seeing a smoothing out of markets in general as people migrate from high-cost areas to lower-cost areas, or blue states to red states, however you want to look at it? >> the acceleration of people going to these attractive tax and weather geographies is huge. it's been massive in places like texas and florida where we have some large positions are
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incredibly benefiting from that trend, and it is absolutely accelerating it was already happening, but it's happening even more right now. you are also seeing a lot of suburban benefits across the country t started in the new york city area but it's happening in every geography effectively of people leaving the urban core and more strength in the suburban market. and then the biggest headwind in the country had been new york city for pretty much all of 2020 in our business at least, january in new york city turned to positive von millerlume compo january of 2021. we like that the tax and weather acceleration is a huge positive trend and we expect that to continue. >> in the housing space, open door, which went public via a spac can you reflect on how you view these direct home buying platforms that are well capitalized and are growing their share in the housing market and the risk they potentially pose to your traditional broker model
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>> well, the interesting thing i find is that all of the models that are trying to do put direct housing purchases are either hiring agents now or partnering with agents. and agents have shown in 2020 that for all the talk, they remain quite central to the transaction. we like that position. we also like our ability to go head-to-head with those folks. we have done a joint venture with home partners of america, a company that bought 18,000 homes already. probably more than anybody else, is my guess. i don't know that for a fact and we operate in 11 markets, and we think that between our distribution of agents and that kind of home buying experience, if that model becomes a much bigger piece of the market we are as well, if not better, positioned than anybody to capture it the fact that there is a lot of capital out there going after our industry, we welcome, because it shows we have a powerful position in an attractive industry and we think we really demonstrated it with our ebidta growth and our debt
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paydown in 2020, and so, you know, we welcome the competition and we want to innovate from our leadership position, including, you know, in the way open door others are approaching the market. >> open door zillow has their own push into buying homes your thoughts on the area in travel that did well last year, short-term rentals airbnb's vacation rentals. has that incentivized people to buy a home >> one of the trends along with this urban to suburban rotation and the flight to tax and weather attractive destinations has been accelerated, is second home purchases we saw second home purchases go up very substantially in the last half of 2020. we have seen some of that momentum continue into january, and, you know, whale the other trends probably -- >> our thanks to you on the quarter. let's get to chair powell.
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>> researchers in minneapolis fed say the pandemic is forcing mothers of young children out of the work force, that some 3 million women have been forced out of the paid labor market in the past year, everyday families facing chasing between paychecks and caring for their children. the biden rescue plan provides the funding we need to get americans vaccinated as you suggest, it's the right policy and that will help kids go back to school, help working moms get back to work safely what can the fed do to make sure women especially those with young children can return it the work force so we don't end up with an even bigger lasting gender gap in the labor market >> so the it tools that address specific groups, for example, women who have temporarily dropped out of the labor force, those are really fiscal policy tools. those are not tools that we have and i today will, you know, stay away from fiscal policy and talk about what we can do and i think the main thing that we can do is continue to support
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the economy, give it the support that it needs. we are till 10 million jobs below the level of payroll jobs before the crisis. there is still a long way to go. to full recovery and we intend to keep our policy supportive of of that recovery >> thank you for acknowledging in your opening statement and your comments to many of us and public comments, frankly, about how much we need to to to fight racism and increase diversity that we know historically the fed's monetary policy has benefitted wealthy and homeowners, decades of discrimination in the financial system we talked about it from red lining to the sub-prime mortgage crisis specifically targeted black, brown, and other vulnerable communities is clear the fed's policy and failure to regulate predatory actions in the banking sector have contributed to the racial wealth income and home ownership gaps you said that the fed's tools
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can't address the underlaying causes of racial injustice or income and wealth inequality in our economy. i think you give up a little too easily when you say that so how does the fed, how can the fed use its supervisor to, supervision authority to enforce anti-discrimination laws and fight racial injustice and income inequality? >> we do have responsibilities and authorities for fair lending, for example, under a number of statutes, and we take those responsibilities very seriously. i think carry them out robustly. that is an important part of our mandate. and so that is something that we can do and i think we do aggressively in addition, through our consumer community consumer affairs division and through the federal reserve banks we don't spend, you know, public resources, but which to attract private resources around initiatives that will address
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issues of economic issues of low and moderate income communities and racial intolerance. >> i think we can to more. but we will discuss that later chair powell, in the middle of the pandemic bank regulators have loosened capital requirements at the biggest banks and one of the changes to the capital rooms the fed stated the rule was meant, and i quote, to allow banking organizations to expand balance sheets as appropriate to continue to serve as financial intermediaries rather than to allow banking organizations to increase capital distributions. unquote. in other words, the fed reduced capital standards so banks would lend more, not so they would pay dividends. but as you know, it's not what's happening. the biggest banks have gotten larger, more profitable, but haven't increased lending. dividends, however, have remained steady. my question is, mr. chair, will you promise to the committee that you will not extend any exemptions for capital requirements for baings and bank holding companies that continued
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to pay difz rather than invest in the real economy? >> so we're talking here really about the temporary mesh aurs we took with respect to the supplemental leverage ratio, and those expire at the end of march. we have not decided what to do there yet. and we're actually looking into that right now i am not going to commit to connecting that decision to the payment of dividends as a separate matter, as you know, we intervened to require the banks to limit their dividend growth to zero and also to limit their chair buybacks and the result, what you see now is a banking system that has higher capital than it did going into the pandemic, and particularly for the largest banks, and one where the banks have taken very large reserves against losses, and so have proven themselves pretty resilient. >> perhaps
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but i also -- we also understand that they have not been supporting the real economy to the degree that we hoped they would, and we will continue that conversation and i will send a written question to you on climate that we wanted to talk about. senator toomey >> thank you, mr. chairman on this topic, let me just state, i certainly hope that to the extent that banks have adequate capital for the circumstances that they face at any point in time, any capital beyond that should absolutely be available to be returned to the people who own those banks in the form of dividends or stock buybacks or whatever mechanism is suitable and anything to the contrary is a terrible constraint on our economy and on economic freedom also i want to observe briefly, and i am not asking for a comment on this, chairman powell, but if i could summarize and characterize your opening comments about the economy, i think it's fair to say that we
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have many areas, sectors of our economy that are performing extremely well housing and the good sector, i think you referred to, and then we have very concentrated problems in certain relatively narrow sectors like hospitality and travel and entertainment, which are extremely depressed because of the circumstances i think that clearly makes a very strong case that if there were to be further fiscal policy, it should address where the problem is, and not where the problem is not but to address monetary policy for a moment or so, i think the fed's current forecast for growth for this year is 4% i think the consensus is well over 5%, with some thinking it could be considerably higher than that. the unemployment rate is now 6.3, which is about where it was in 2014 when we were not contemplating multi-trillion dollar bills and i don't think we were buying
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$120 billion worth of securities per month. my concern is that the last two recessions were, i think, caused by asset bubbles that burst. 2001 the stock market. 2008th mortgage credit market. in both cases monetary policy contributed a great deal to the formation of those bubbles the fed president recently acknowledged there is a link between the record amount of liquidity being pushed into the system and these unprecedented asset valuations that we're seeing in a whole range of assets, be it gamestop or bitcoin or real estate, commodities. across the board, we are seeing quite elevated asset prices and signs of emerging equations. so i guess my question is, do you believe that there is a link between the liquidity that the fed has been providing and some these unprecedented asset prices >> so there are certainly a
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link i would say though that if you look at what the market is looking at, what markets are looking at, it's a reopening economy with vaccination it's fiscal stimulus it's highly accommodative monetary policy, savings accumulated on people's balance sheets, expectations of higher corporate profits which matters a lot for the equity markets there are many factors contributing to, you know, to what's happening in markets right now. monetary policy, i would certainly agree, is one of them. >> yeah. i would just suggest -- right. i agree all of those things are happening. all of those indicators of growth and increasingly indicators of rising inflation, as you know, the tips ten-year break even on inflation is now over 2%, up from 0.6 of 1% my point is at some point we've got too much liquidity going into the system. the economy is recovering very, very well, problems are isolated
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and should be addressed narrowly, and i hope that $120 billion a month of bond buying doesn't become a permanent situation. one of the things i'm concerned about, i wonder if you could comment on, the risk that we would have an increase in inflation, an incretase in bond yields but without being backed at full employment, what would that imply i think that's a very plausible scenario for later this year what does that imply for the bond buying program? >> well, what we said about the bond buying program it will current at least at the current pace until we make substantial further progress towards our goals. we also said as we monitor that progress, we'll communicate well in advance of any actual decisions l purchases. so that's what it will take for us to begin to moderate the level of purchases, is
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substantial further progress towards our goals which we haven't been making for the last three months, but expectations are that will pick up as the pandemic subsides. >> well, thank you, mr. chairman i would just suggest that there are a lot of warning signs that have not been worrisome in the past, but now are certainly blinking yellow. with that, i will yield. >> thank you senator menendez. >> thank you, mr. chairman chairman powell, at the end of this pandemic, we need to ensure that we have a more equal society. unfortunately, we are not on a path to an equal recovery. as of january, the black unemployment rate is 9.2%. the hispanic unemployment rate is 8.6% compared to 5.7% for white workers. according to the new york fed, over the course of the pandemic the black labor force exit rate has increased dramatically while the white labor force exit rate
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has returned to pre-pandemic levels doesn't this mean that the black unemployment rate is likely misleading the low compared to the white rate >> well, this, as you point out, this pandemic was particularly bad for these long standing disparities that we have in our economy. the job losses were heavily concentrated in public-facing service sector jobs. those tend to be more skewed towards lower-paid and in many cases minorities and women and so that's really where the big pockets of unemployment remain and you're right so the burden really has fallen more in the low and moderate income communities than it would typically be the case. it's always the case to some extent this particular event though is very somehow precisely aimed at those people, and we're well
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aware of that. >> well, i appreciate that acknowledgment we know from the bureau of labor statistics over the course of 2020 the labor force participation rate for black men and women fell nearly twice as much as it did for white men and women. so you agree that minority families are bearing the brunt of the damage caused by the pandemic >> yeah, along with others at the lower end of the north carolina spectrum. the bottom quartile. >> would you agree that addressing this disproportionate damage needs to be a central priority in relief efforts >> i would have thought so. >> yeah. so would i now, as part of the federal reserve's mission to ensure maximum employment, what's the federal reserve's plan for maximizing employment for low-income and minority workers? >> so we look when we say maximum employment as a broad and inclusive goal, that means
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not just at the headline numbers. we also look at different groups and we try to take all of that into account in making our assessment so we will take into account the headline numbers, but also those for other groups as we think about reaching maximum employment >> well, i hope that at your, in your mission, that the federal reserve looks at this because a federal reserve study showed that while high-income jobs, most recovered to pre-pandemic levels, unemployment among low-wage workers remains 14% below pre-pandemic levels. and this is in spite of the fact that almost half of all low-wage workers are essential workers. the people who actually let us stay home when we were told to stay home to avoid the spread of the pandemic, and to be infected but they were risking their lives in the jobs that they did.
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and so i believe we have the tools, and what we -- to try to make this an equitable recovery. so would you commit to working with congress and the treasury to help low-wage workers and minority workers be able to recover just as strongly as others >> we will do that i will say, though, that monetary policy as a tool is a famously a broad -- it's a broadly effective tool it doesn't enable us to target particular groups. it lifts the entire economy, but we're going to be mind though of the disparities that exist as we make our decisions. >> and finally, as of february 1st, an estimated 13 million adults were not caught up on their rent another 10 million adults were not caught up on their mortgage payments our country is very clearly in the midst of a housing crisis. what would be the effect on the housing market and our overall economy if congress doesn't
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provide additional resources to help families struggling to pay their rent and mortgages >> well, if those people, if we were to get to the point at which people were evicted and you are talking about people's lives being disrupted in ways that are sometimes quite hard to recover from, for renters and owners so it is important, and i think the single best thing we can do about that, of course, is to keep monetary policy accommodative to do what we can to speed the recovery so that it will be robust and complete as soon as possible. >> well, losing -- millions of people losing their homes would not only affect the rateable basis and single most aspect of wealth so i hope you keep your eye on that thank you, mr. chairman. >> thank you. >> senator shelby. >> good morning. chairman powell, thank you for your service for the a number of
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years and how you, i believe, have done an outstanding job as chairman of the federal reserve. i would like to associate myself this morning with a lot of the questions that have been asked already by senator toomey, a concern of inflation, the concern of a balance sheet, where is the economy going when we get over this covid, which we all hope and pray will be sooner than later, and as i would like to add, mr. chairman, what is your view of the world economy tying into ours, because it's an important factor as we go forward, assuming in the next, say, six months that we get a handle around covid in the country and europe, for example, gets -- does the same thing? >> so, i'll take those one at a time on inflation, let me say that we do expect that as the -- a
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couple of things first, as the very low readings of last march and april drot out of the 12-month calculation, we expect readings on inflation to move up. that's called base effects that will be a temporary effect and it won't really signal anything more importantly, though, with all of the factors we have been discussing, you could sea spending pick up pretty substantially in the second half of the year, and that would be a good thing, of course, but it could put upward pressure on prices i would just say that essentially it's not -- it doesn't seem likely that that would result in very large increases or that they would be persistent we have all been living in a world for a quarter of a century where all of the precious were disinflationary, you know, pushing downward on inflation. we have averaged less than 2% inflation for more than the last 25 years inflation dynamics change over time, but they don't change on a dime
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we don't really see how a burst of fiscal support or spending that doesn't last for many years would actually change those inflation dynamics i will also say there is forecasters need to be humble and have a great deal to be humble about, frankly. if it turns out that unwanted inflation, precious arise and they are persistent and we have the tools to deal with that, and we will. shall i -- so on the balance sheet, you know, we are going to continue to -- we are at a stage where, with 10 million people, payroll unemployment is 10 million below where it was before the pandemic. we are a long way from maximum employment the balance sheet is congoing to continue to provide the support we think the economy needs over time the growth of it will slow but that decision is the one that we talked about earlier where asset purchases will
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continue until we make significant further progress towards our goals. you ask about the u.s. economy and the world economy. i do think and many forecasters agree once we get the pandemic under control, you know, we could be getting through this much more quickly than we had feared and that would be terrific but it's not done yet. the job is not done. that's the thing i keep coming back to. we have to finish the job with the pandemic, get it under control so the u.s. economy can really reopen. other countries around the world have the same set of issues. but there is -- we can -- people will get vaccinated and we can get the disease under control properly, the second half of this year, and the year after, the economy could be very good and it could be good elsewhere in the world, as well. >> and the fact that there is the savings rate has gone up tremendously in america, it does that bode well down the future, in the future as far as perhaps economic activity?
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>> so a lot of that just is that people have not been able to spend. they haven't been able to travel, go to restaurants. so it's forced savings in a way. so they will spend some of that going forward. you are really thinking, i think, about the fact that, you know, the u.s. needs more savings so that it will have more investment and more productivity it would be nice if we had a higher savings raytheon. it also would be nice if we didn't have dis-savings at the federal level. a lot of it is these budget deficits require a lots of assets that's something we need to turn to again but i think this is not the time to be thinking about that. but that time will certainly come >> thank you, sir. >> thank you thank you, senator. >> senator tester. >> yeah, thank you, mr. chairman i want to start by thanking chairman powell. i very much appreciate your frankness. i very much appreciate your fight to keep the fed independent.
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i know that has been difficult over the past number of years. but you've stepped up. certainly don't want a bunch of politician determining monetary policy and so i'm glad you are at the helm. i also think that we're going to have a debate over this $1.9 trillion package in front of you on probably every damn committee i am on and a bunch of others some of that is, well, all of it is necessary but i do want to talk to you, because everybody makes point, going, yeah, that's a good point. it's true. housing, the housing market, in places like montana, is hotter than hot it is quite, frankly, booming and there is another problem i want to talk to you a little bit about, the housing thing but there are other industries and there are folks out there who, quite, frankly, don't have the job they used to have and may never get that job back. and there are business people out there that are up against
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it some of those businesses will go broke and never reopen others will. i just kind of want to get your perspective on, if you were not the head of the fed, but in the united states senate, where would you pay most of your attention to because i agree. any money we spend needs to be focused where it does the most good where is your focus? where would your focus be? would it be unemployment, hospitality businesses or something more global than that? >> that's an interesting question maybe the grass is always greener. our work really relates to managing the business cycle in a way. so but what i always think i would focus on is more what we call a supply side, which is really investing in things that will increase the potential growth rate of the united states economy over time and make that prosperity as broadly spread as
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possible so let me be more specific it amounts to investing in people that means education it means training. it means all those things. and that enables those people to take part fully in our great economy, and i really dothink in a global economy people who are able to use and benefit from technology, there is no limit on the amount of those people who can be working in the united states because it's such a global economy i also think it's important for businesses as well, that they have a climate where they can trust, you know, that inflation is going to be under control and that business conditions are going to be good and they can invest and i think the f federal government investing in science. more generally, i think focusing on things that will make a longer run difference to our economy is what i would do. >> i appreciate that now i want to go to housing
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because i don't -- i talk about montana. i think this is true all over. we don't have enough affordable housing, not enough work force housing. i think that short-term and long-term, by the way, this is going to be a drag on the economy. do you see the fed playing any role or do you think they could have a role in increasing the amount of affordable housing that's out there if you think the fed plays a role, what would that role be? >> i don't really think we do. when it comes to a set of policies like that, that's targeting, you know, the fiscal power of the federal government to what is seen as a worthy cause. it's not really something we can do we can come bat housing discrimination and things like that in lending, but i don't think we are in a position to be able to allocate credit to worthy beneficiaries that's really fiscal policy. >> okay. getting back to the pandemic you have implemented a lot of
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monetary tools during this crisis in your opinion, have they been sufficient, and if they have, yeah, that's the first question. have they been sufficient? >> i think they have i think the difference really this time is that fiscal policy has really come to the table that's made a difference. >> moving forward, have you looked at any changes to that, to the policies, the monetary policy, the monetary tools that you used moving forward? >> not yet we are looking into that of course, we will do -- right now it focuses on providing the economy the support it needs we will be turning to an evaluation of everything that happened in the crisis and answering that question. >> thank you, mr. chairman thank you, chairman powell. >> thank you, senator. >> thank you, senator tester senator scott. >> thank you, chair powell, for
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being with us here this morning. certainly an important time to engage in a conversation about the future of employment in our nation and one of the core responsibilities of the fed, of course, has to do with unemployment there seems to be so few issues right now, chairman powell, that actually unites the left and the right. i am always stunned in washington when we find something that unites both sides. frankly, the minimum wage issue is an issue that has umenyiora nighted republicans and democrats on opposing having the $15 minimum wage as a part of the covid relief package it's good to see my friends on the left coming to the conclusion that in the middle of a pandemic that according to the congressional budget office has already shuttered -- the $15 minimum wage would shutter 1.4 million jobs the earlier estimate 3.7 million jobs in the middle of a pandemic that has eliminated 10.7 million
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jobs this seems to be common sense from the perspective of democrats and the congressional budget office. my question for you, sir, is has the fed economists conducted research on the potential impacts of raising the minimum wage to $15 an hour? >> i don't know that we've looked at that that question, in particular we have great labor economist who's have done a lot of work on the broad area >> yes, sir. you have to conclude, are there conclusions similar to the conclusions of the congressional budget office as it relates to the negative impact of raising the minimum wage during the pandemic >> let me say, as i must, that this is a classic issue that the fed never takes the position on it i'm not going to take a position on it here today it's fiscal policy most of the research still says there is some tradeoff between job loss and those whose wages
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go up, but actually, this sort of unanimity of that finding of 40 years ago is no longer in place. in any case, it's an issue where we don't play a role or express a view i can share with you the research we have done. i'd be happy to do that. >> probably. >> that will be very important especially if you think of the fed's responsibility as it relates to providing a sustainable economy that includes keeping unemployment as low as possible the fact that the fed isn't taking position on an increase of the minimum wage that is obviously, according to congressional budget office, going to eliminate the minimum of 1.4 million jobs i think is an important engagement from the fed on that issue. i'll ask you a different question as it relates to the covid relief package of $1.9 trillion it seems to me that over the
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last fiscal year, we spent right around $6.5 trillion addressing the pandemic my question for you is, as we see another $1.93 trillion on top of the 6.5 we've already spent, what is the impact on the issue of rates of rising inflation in excess of the fed's longer-run objective of 2% >> so, of course, as i said at the beginning, i'm not going to comment today on the proposal that was mentioned, the fiscal package, not our role. i will say on inflation there perhaps once was a strong connection between budget deficits and inflaths. there really hasn't been lately. that doesn't mean it won't turn. again, my expectation will be that inflation will probably be a bit volatile over the next
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anywhere or so to a significant amount to particularly things to do with the pandemic for example, we'll see a slight increase in inflation in a few months because of the base of the things i mentioned we will see perhaps, we don't know this, we may see upper pressure as the economy fully reopens, it's a good thing to have i don't think those effects should be large. we've had decades of well anchored expectations meaning that we had a very volatile economy for the last 15 years and inflation didn't go up >> thank you very much, sir. i appreciate the fact that are you unwilling or able to get into the policy of the 1.9 billion package. i don't blame you. if i were you, i wouldn't want to get into the politics as well i will use my few second to
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simply say that the congressional budget office, some democrats, or republicans all agree that raising the minimum wage is a way to destroy jobs and an economy that is looking forward to a fragile recovery thank you, chairman brown. >> thank you, senator scott. senator warner >> thank you for holding this, chair powell, thank you for your work i think in response to the senator's questions and when you were talking about the kind of investments we ought to be making that are long-term, thinking about infrastructure, one of the areas in understanding what senator scott said in your answer, you don't want to weigh in on the recent plan i would like you to load a comment whether you believe that
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broadband investments fall into that category of long-term structural change we would need. i would argue over the last several months, broadband is absolutely covid-related i hope the current package can be changed to actually include a sizable investment in broadband. as good as our four packages have been to date, the broadband investment has been non-existent, experts like tom wheeler have said somewhere in the 40-to-$50 billion range, with 97% coverage along with better affordability so i guess i'm asking, would you agree immediate efforts to close the broadband gap not only represents long-term investments but also has some direct relationship to the current healthcare crisis? >> as you and i have discussed on a number of occasions, that i
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would agree that broadband is kund of a classic 21st century infrastructure and one of those things that can support it i, of course, don't want to go anywhere near the question of what you included in the package, if that's okay. >> what about the question from a macro-economic standpoint, broadband and trying to close the digital divide, if we have such economic groups, could you speak to the question of the necessity of broadband to be ubiquitous if we're going to have that kind of ro bust recovery and comments of whether broadband is at this point a nice to have-of-or an economic necessity from the telework, telehealth, teleeducation? >> as you and i have discussed on a number of occasions, i
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would agree it's a classic piece of infrastructure for the modern economy, for the service economy, for the technolaogicaly available economy, to have it as available is a significant benefit. >> if not broadly available, are we going to be able to see the kind of broad-based recovery that i think we are all looking for? >> i think we have a longer, a bunch of issues to deal with that relate to these persistent disparities we see to do with education and training and all those hings. but that would certainly be one of those things. >> senator scott in his previous line of questioning raised the inflation issues i know we've seen about a 41-basis point increase on some
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of our bench, ten-year benchmarks it's still relatively small. i tend to agree, i think we do need to make a sizable investment right now i'm not sure the inflation risk with you i agree, potentially mate be could you briefly give some of the tools you got available as reserve chair as you started to see inflation rise at a level that you feel comfortable with >> well, those are the classic tools that we have and again i really do not expect we will be in a situation where inflation rises to troubling levels at this point the committee is seeking inflation running moderately above 2% for some time so the real question is as we go through this, will we find ourselves in a situation where inflation expectations are
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de-anchored and deflation is moving up and it's persistent. i think 23we are all acquainted with the history how we got into that situation in the 1970s and in the 1960s we have no intention of repeating that so we, central banks and the feds have learned how to keep centrality of keeping inflation under control. we know how to do that that's just by not allowing the economy to just ignore constraints over time but i think this is not a problem for this time as near as i can figure and if it does turn out to be, then we have -- >> the last 20 second, let me just, you want to make some general comments and i would argue the pandemic was the first major real stress on our fiscal system since 2009. how do you think overall the system has responded and recognizing, mr. chairman, the last question, obviously, you may want to take that from the
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record and make general comments >> you meant financial system, correct? >> yes >> well, i think the large financial institutions that are at the heart of our financial system proved resilient. they did and they have been able to keep lending and their capital levels have actually gone up during this period. as i mentioned, their liquidity levels is. so i think that the work that we did over the course of the last decade and then and some has held up pretty well so far and i expect it will continue to >> thank you, mr. chairman thank you. >> thank you, senator warner senator rounds of south dakota >> thank you, mr. chairman chairman powell, it's good to see you again and appreciate you being with us today. i'd first like to ask about the


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