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Alibaba sliding as growth slows to a three of year low. Macys volatile ahead of the estimates. Well have comments from the ceo who was on squawk box. Thats coming up with us. And getting ahead of cisco ease first report. First up, futures are down following tuesdays sell off off the lows of the morning. China devaluing the yuan. According to reports china intervened in the final minutes of trading. We got to some interesting levels. Fits in with what youve been saying for a long time, jim. These guys know what theyre doing and theyre doing it systematically. They have to. Theyre an export nation. When they came out its interesting what happened. When they came out, it was like it broke up the chatter even at the club. Thats how important this was. People werent necessarily all financial guys. Then monday is nobody is paying attention . They have to cut. I was waiting for germany to be able to fall. They sell bmw, mercedes. This is a big market. I was shocked. And the germans are still fooling around with greece. This is a delayed reaction there. Were going to have a second day because, i mean, they devalue again. You have to be careful. The second day you start thinking about companies in america that arent impacted. Midday you see General Mills be impacted. Does it make you think some things are worse than we know . The idea that they were a totalitarian country with an economy that was a command economy, what are they commanding . I think that stock market, its still kind of bothering people that they were trying to prop it occupy because its so anticapitalist. They still have a trillion dollars in treasuries. Yes, they do. We all thought they were going to do infrastructure, fix the roads. Their sewage system is very old. But they have a lot in infrastructure. If they come here, they laugh because were laughable when it comes to that. They can laugh all the way to the great wall. That country is in a little disarray right now. I do think this is going to help them at the expense of everyone else. Japan took it down 30 . They took the yen down 30 . It helps because it hurts us and we sit there and take it. Yesterday secretary kerri came out and said if we dont do the iranian deal, itll hurt the dollar. Isnt that good . Speaking of china, lets get to alibaba, one of the most important companies, shares are down this morning. This after the Company Reported what is kind of a mixed Second Quarter. Growth was at its slowest in three years. They also announced a Share Buyback. Joining us, the ceo of alibaba. We always appreciate their willingness to come on with us. Daniel, let me start off with the macro environment which seems to be pressuring your stock price this morning. What are you seeing on the ground in china in terms of the willingness of the Chinese Consumer to spend money. Is there a dim you in addition . Actually, we do like all other companies do, and we closely monitor the chinese economy and the Consumer Behaviors. And as we reported this quarter, we have active buyers of 360 million, and when we further analyzed the consumers behavior, we observed that people, averagely speaking, buy more than 50 times a year on a platform. Basically, what they buy covers a large variety of things, and they buy all these things for their daily lyes and most importantly, they come to our platform not necessarily for the specific purpose but more like a lifestyle. So our company has very clear long term Growth Strategy, and we believe the short Term Movement wont affect your long term strategy. And to those who look at the devaluation of the chinese currency over the last couple of days and says it makes goods more expensive for customers of yours on t mall. Is that going to be the case and do you believe that will have negative consequences for your ability to grow sales . As i said before, we are confident for longterm growth, but at the same time well closely monitor the Consumer Behavior and chinese economy as a whole. Well, the gmv was below some estimates of the analysts who follow you, the many analysts. Some are wondering whether that was due to your continued crack down on counterfeit goods. Is that the case . Actually, we reported a strong gross, and our gme gross was 30 year over year. If we dr off the suspension of the lottery sales, our gme would have grown by 36 . On the other hand, we continue our ongoing attack on counterfeit. We believe this is for the long term of our Long Term Benefit of our consumers. And we want to build up a continued gross and to maintain high quality marketplaces. There is always an interest among your investors in your socalled take rate. As the business migrates more and more to mobile, can you tell us at least what your expectations are in terms of the take rate on mobile and what that will mean overall . For this quarter, we are observed an increasing rate to mobile. We made progress in the mobile transition. In this indicator yarquarter wer retail marketplace was from mobile and the 51 of revenue are from mobile. So but today if you look at the take rate on mobile side, we have made very big progress in the mobile tech rate but it has a cap. But we are confident that mobile tech rate will continue to grow. I was not surprised at the end of the mobile tech rate came close to pc tech rate. Okay. Were keeping track of the various economic numbers that have been amiss this week that have not been as big as expected. Exports, auto sales, retail sales now. Industrial production and fixed asset investment. Are you arguing that youre not seeing any of that weakness reflected in your business . As i said before, we closely monitor the chinese economy and the impact on our Chinese Consumers behavior, but what we observed, consumers are still coming to our retail platforms to do their shopping because of the lifestyle change. So we are confident for our longterm growth. Theres a growing concern that perhaps the Chinese Communist party has lost a bit of control over its own economy. I know its difficult to assess what the party has going and what it doesnt. But when you see devaluation and propping up of the stock market, we begin to worry the government may not have as close a handle on the chinese economy. Youre very heavily levered to the chinese economy. Are you concerned things are in a little more disarray than we think . Well, we have a very Clear Strategy for the longterm growth, and we try to keep the creative value for our customers and merchants and to build up a robust eco system, and we believe this Certain Movement in the stock market and in the currency market wont affect our longterm strategy. Daniel, the stock price today is going to hit its lowest level since it went public right here at the new york stock exchange. Is that upsetting to you . As we always said, we dont manage our business by share price, and we manage our business for the longterm, and we are confident for the lon longterm growth. You announced a deal earlier this week, one of the larger retailers, sort of the best buy, to put in perspective for u. S. Viewers, buying 9 and it turns around and buying a small percentage of alibaba as well. You have a sharing agreement. Why did you do that deal . The deal marks our commitment to chinese strategy. Together with them, we want to render our consumers an integrated online offline experiences, and after this investment, that company will first open their store in our retail platforms, and they have very good expertise in Consumer Electronics and home appliance. And they will bring a lot of selections to our retail platforms. I think our consumers will benefit from this. On the other hand, over years, they built up an expensive network. Now they will open their network to our her chanmerchants, and w work with them to get services, including twohour fast deliveries to the consumers in a lot of cities. And they have over 5,000 after sales, a service station all over the country. And what we want to do is to share this capability in the service stations that consumers in t mamall, they can enjoy th sales in the service stations on the ground. Having said that, we can do a lot to lempverage the expertisef each other. Daniel, ive spoken to a couple of your investors this morning. Some raising a question as to why you instituted a 4 billion Share Buyback. Its not something we see that often for a Growth Company like yours. Why do a Share Buyback . The Share Buyback program is for the purpose of antidelusion. For example, for an incentive program. Okay. And finally, mr. Evans, Michael Evans, announced as part of a Global Initiative that you have to, well, continue to try and move across other borders, what exactly is his responsibility at the company and what are your ambitions when it comes to your business outside of china . Well, Michael Evans as a proven leader with Extensive International experience. It marks our commitment to the global strategy, which is the most important strategy in the coming decades. As president of alibaba group, hell lead the execution of international strategy. And also help alibaba to expand their business outside china. Daniel, we have to leave it there. We always appreciate your willing toness to come on. Dani daniel zhang is the ceo of alibaba. Its hard to now how much is on message and how much is lost in translation. Hes not talking his native language. Hes not, although hes a good english speaker. When terri comes on and says my sales are disappointing, its more straightforward. I heard longterm. Thats what they want us to focus on. The stock is going to hit a new low today since the ipo as a result, i would argue more because of the macro than a micro. You can look at the take that didnt hit the estimates. The business is moving to mobile, over 50 now, but it is the great pure play on consumer demand in china and if you start to question that yeah, and i think that the idea that see, i think no one wants to come on and just say all is not well in china. Right. And yet, all is not well in china. Its great. He said stock market short term, dont worry about it. The longterm is very much in the case. But the destruction in wealth here is extraordinary. A lot of viewers frustrated at the interview saying should have gotten ma. Nothing more than i knew ten minutes ago. Jack ma when i sit with him is more open than virtually any ceo or chairman ive ever interviewed. Tell me. You know thats true. Youve seen the interviews. You can talk to him about the mood and how hes feeling. That was not the case. No. It was a press release in the form of an interview. It was better than nixon. It was fascinating to watch, if nothing else. Operation total victory in vietnam. Thats it. When we come back, macys posting an earnings miss and a cut to guidance. Terri lund grun calling that a close quarter. And take another look at the futures. This would be a third day, today, maybe, of a 2 00point move on the dow. Number of times weve done that since the crisis . Zero. More squawk on the street in a minute. Macys missing on earnings and revenue comps down 2. 1. The Department Store lowering their guidance. The ceo earlier this morning on squawk box, here. Its a tough one. Theres no question about it. Were seeing that the consumer didnt shop in our categories to the degree that we thought the consumer would. There are a number of reasons. Were against our best quarter last year. The european chinese tourist, the brazilian tourists around the world, theyre just not coming to the country, and when theyre here, theyre not spending in our category. The third miss in five quarters. The largest. Even though they guide lower on comps, theyre affirming on the fear. Terry lundgren is the polar opposite of daniel zhang. His critical of his own merchandise. And this Harold Square, some people think its one fifth or one sixth of their sales. We know tourists arent staying away but theyve been hurt very much by the strong dollar. I also felt referencing david of the starboard interview we did at delivering alpha, hes not embracing for rejecting the idea of monetizing the sale of real estate of vacant real estate that didnt matter in brooklyn. They did, and they will help the stock price this morning. They indicated they have retained specialized Real Estate Advisers to study their portfolio and find out where further opportunities exist. Its not as though theyre going to say were going down that road but theyre not saying no. Theyre saying were going to look at it and they may attack advantage in certain instances. Do i think theyre going to turn around and sell Harold Square or anything else of that nature . No. And we should point out after that runup after delivering alpha an mr. Smiths comments and analysis, the stock is lower, i think than when it began. Once again, were not delivering that alpha anymore. It was 67. 50. Went up to 72. 50. Now its back to slightly below where it was for delivering alpha. Its important to recognize that the kinds of things theyre selling, lets say its perfume. Thats the biggest gross margin. Theyre not selling that. And then well talk about way fair. They buy it through the letter w, not the letter m. When we come back, well get to cramer. More squawk on the street from the nyse is straight ahead. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Can a a subconscious. Mind . A knack for predicting the future. Reflexes faster than the speed of thought. Can a business have a spirit . Can a business have a soul . Can a business be. Alive . Dentist appointment when my teeth are ready . Can it tell the doctor how long you have to wear this thing . Can it tell the Flight Attendant to please not wake me this time . The answer is yes, it can. So, the question your customers are really asking is, can your business deliver . Man, we have so many things to cover. We have a mad dash for this hump day. Theres so many ways to spin retail. Zhang could have told a story that things were good. Terry lundgren talks about how its disappointing. Fossil looks fabulous but its not fabulous. And a lot of this is because they have multiple overhangs. A lot of different lines not selling but they were the first people who addressed the idea that the apple entry has disrupted the watch business which is fossil. This is very big. People have basically said listen, the watch isnt doing well for apple. If its not doing well, why is it being referenced by one of the largest watch sellers in the world. I know everyone has decided that apple is now just dead as a door nail, like a fish that you bring in and hit it over the head and its floching arouapping aroundt stops. But this is a reminder that you may count the watch out but fossil doesnt. So its fossil nokia . Remember, nokia during the early days of the iphone was like, what, us, worry . Fossil addresses it directly. Youre right. I was thinking about nokia. I was thinking about steve balmer and that great buy. That was one of the great purchases. Put that in with snapple and aol, nokia buy. They had to write off more than they paid. Almost. We havent gtotten started on squawk on the street. Were going to talk oil and gas and were going to visit a lot of names that are down. Some pain out there. Were back after this. Female announcer sundays your last chance to save big during sleep trains triple choice sale. For a limited time, you can choose up to 48 months interestfree financing on a huge selection of tempurpedic models. 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The opening bell in about a minute on another day where the selling will continue in stocks. The devaluation continues in china. The gold is catching a bit. Oil, actually, jim, despite the worries about a supply glut continuing into next year. The big report, the iea said negative things. I usually hate the set up these days. The dollar is strong versus the euro. Oil is not getting killed. Im not going to say i love the market. We just had an interview with macys, one of the largest retailers in china. Its not bullish. Not everything is wrong today. Not everything is wrong. Thats important. We have the greece deal done. Is that the bright side . Well, i think that germany, to get them to stop trying to kill the euro, which is what theyve been doing, is a major win for the united states. And the rates are down again. So i like that General Mills im a buyer of General Mills. Theyve taken out the artificial flavors. Tricks are trix are no longer for kids in i think General Mills rallies today. Down 0. 43 on the buyer. Theres the s p and the opening bell at the big board, its fis, a banking and finance company. Were going to talk to the ceo later on in squawk alley. Over at the nasdaq, Concordia Health care doing the honors as well. Europe, theres a lot of talk about what this means to the u. S. China exports 1 of Economic Growth but for the dax and the kak, now 5 in two days. That makes sense to me. Theyve been the guys who really took advantage of chinas luxury market. And their business hasnt been on fire, and germanys been a great place to invest. And im now saying to myself, you know what . Why have we been hit harder than them and now thats not the case. This market is making some sense to me. Remember apple, yes. I mentioned apple watch. But apple has a lot of exposure. Remember 18 months ago they were saying to tim cook, why arent you bigger than apple, and then he answers it. I do think that not everything is as bad here as it is there, provided that stanley fish who are understood the contagion in malaysia and korea 1977 and 199 stands up in ses you know what, this contagion must be stopped. Were not going to raise rates. And then you have a rally. And oil, lets watch inventories. You see a draw down in refining and crude. Right. By the way, natural gas, how about that being up 3 while oil is down 30 . Although, that hasnt stopped the slaughter in a lot of the oil and gas names. I mention it because the pipeline natural gas business is doing better than the pipeline crude business. Understood but when you take a look at, for example, chesapeake yeah. And by the way, we can show you some of the equity but the real story in energy is in the high yield market where spreads have been just blowing out and where theres now a question again being revisited. We talked about at the beginning of the year and late last year when it began that slide, which is who are the survivors . What gets really stressed here . We talked about private equity portfolios, sampleson energy, a huge deal down. An American Energy partner with billions raised there in the debt market but no equity. This is a big story that i think bears revisiting yet again. This time, actually, it does. The first time it was a t bhe b who cried wolf. Oil went to 60, and some sold when they could. It didnt develop into a dire situation. Now it is, isnt it . It kind of feels like it. Energy is a huge part of the highyield market, although lesser as a dollar amount because the value of the bonds has come down so much. You look at chk or iet, like a look at intercon. He owns a lot of chesapeake. Hes going to be the chief negotiate or the with china according to trump. He is . Yeah. Thats one clip ive seen. If were not focussed on the smaller oils, i see, sanchez, stevens comes out and says im not just mentioning him because im thinking about geno smith. Im saying this is the kind of company im concerned about. They spent a lot of money at a high price. Fcx, i havent looked. It was down 12 yesterday. How much more could it be down . Its a 10stock. Some of the others not doing too bad. And a reverse yesterday. L, i think its cheep to sell at 51. I see things, thats why i say, i dont want to be as negative. I want to see the inventory numbers. The inventory numbers have impacted oil. Well get those later today. You got to fossil at the board. The second worse performer is yahoo who had a chance to sell alibaba. They didnt want to because of taxes and since then its down 40 . I think that would have covered their taxes and then some. Never be afraid to pay the tax man when you have a gain. Yeah. They are going through a lengthy process of putting it in a separate company that will represent that roughly percentage of alibaba. Alibaba is down 7. 5 . Theyre down since they went public in september. That day many people are going to look back and see of the peak in the power of the china story. Even though it peaked much earlier. This is the alibaba was the tipping point, so to speak. We did ask the ceo of alibaba a number of times earlier this morning about the health of the chinese economy and the Chinese Consumer. Heres what he had to say. We observed that people, they buy more than 50 times a year on a platform. Basically what they buy covers a large variety of product assortme assortment. And they come to our platform not necessarily for the specific shopping purpose but more like a lifestyle. So our economy has clear longterm Growth Strategy and we weve the shortTerm Movement wont affect our longterm strategy. We dont want to be too critical in the sense that china was a great growth market. It could come back. Its just that i keep thinking about the people who bought the stock at singles day. And they have double digit losses if they bought on singles day. They have an enormous amount of shares that come out under the lockup. Many of those are not expected to be sellers. Yahoo, we know what theyre doing with their stock, but at least its worth watching. On the call, i think they said jack ma is not going to be a seller at all exemcept for tiny amounts for his charity. What do you think about mobile . I would have talked that up a little more. Yeah. Thats important. I dont feel like i dont want to justify buying the stock. Im not doing that. Its just that there were positives that were that should have been stressed more than the long term, but i think everyone is trying to catch their breath about whats going on in china. Macys is on the call. The cfo saying bloomingdales also had a disappointing quarter. The pressure is on tomorrow for the states. If youre the fed, youre trying to say other than raw stores, the only retailer hit for the 52week high, now youre kind of stunned. Way fair up today. Its discounted. Theres rdisarray in retail. I know that theres always going to be a story that people are going to want to go to the macys, the physical store, but we are this ecommerce is turning everything again. When you look at way fair, all right w, i had them on. This is how you buy furniture these days. You go, whats the matter, josz and main . I buy the furniture. You buy a lot of things. The pulse of the consumer is right here. Sorry. Thats apple watch. Thats a mulligan. Youre allowed one. Ill give you an example. My daughter gets an apartment. You used to go to macys or target. Now you go to way fair. It comes right to you. This is the way they have 7 million shop keeping units because they dont really have the inventory and macys was a great furniture seller. This is anecdotal. The way people shop has changed. And this is something we have to acknowledge is that bricks and mortar is not so hot. The mall is not that hot. I did want to mention at t. Shares of which are down. The company are holding an Analyst Meeting today. This a few weeks after it closed the deal to acquire direct tv. It continues to expect 2. 5 billion or better annual rain rate synergies from that transaction. They say it does not include other various synergy opportunities. But it doesnt appear that at least investors this morning are particularly taken with what is now an adjusted eps in the range of 268 for this year. Double digit consolidated Revenue Growth they say expected. They say its an improving Free Cash Flow dividend. That was one of the key expectations of the direct deal, Free Cash Flow, making the dividend more secure. And people arent regarding it like this. No. Its a high pay out. Its not being taken particularly well this morning. Again, they are just beginning what is going to be a long presentation. 9 00, it actually began, the analysts day. Stay focussed on the stave havens, verizon yesterday. All the components are in the run. Dividend yield of 5. 6 yesterday on at t. Why isnt that a safe haven . People dont like the payout. I like verizon and at t. Some people question the strategy. Youre buying a company direct. Broad band is the key product and how much does it help you with that . But let the market come in. With china, alibaba news was very disconcerting. So let the market come in. Let stocks come down. Accept the fact that its not a great moment, but i still dont see. The question is do you see Systemic Risk from china. A lot of people do. I think theres positives. You have to wait until the s p takes everything down and then to begin to look at the companies that are largely domestic. I know thats not a giant group, but it does work. Its not polly anna. Well, with all of that, dow is down 170. Apple is getting near 110. Bob is here this morning. Across the board weakness. I want to point out whats going on in emerging markets. The currency has weakened over there and a lot of concerns about the Competitive Position against china. All over the world no matter where you go, you can look all over. Everything was pretty much down 1 to 3 . Vietnam was a little bit of an anomaly there. Here in the united states, all ten sectors, carl is right. All ten sectors opened to the downside. There was a special weakness in Consumer Discretionary and technology. The retail sales numbers, you think you cant blame everything in the world on china but people try. Its remarkable. Macys obviously disappointing and lowered the overall guidance for the year. They had a sale to one of their stores in brooklyn. If you take that out, its down. Macys gets 100 of its sales in the u. S. Not canada, not brazil or china or europe. You think you can you blame the chinese for macys, but Terry Lundgren made a comment talking about ternings saying the strong u. S. Dollar has led to Lower International Tourist Spending. He claimed it was a factor in why they were having problems. Obviously lower apparel sales in general was the major problem for them. Lets talk about what was going on elsewhere. If you look at what the Department Store heres, you can see the impact on macys informal everything is down roughly 2 . The other thing i think is interesting is what fossil said last night and the important thing is their sales were short of expectations. They notably lowered the numbers and here you cant blame china. Their sales are there relatively small. Really its u. S. And germany that makes us the majority of their sales. The problem with fossil was a big slow down in urine. Germany was flat on sales. That was a surprise. Were supposed to be getting a discovery in europe. Were questioning whether the european recovery isnt that strong at this point. Heres a classic example where you should see it. The other one, and i hope youre listening to jims comment about the impact of the apple watch. Hes right. Look what they did. Im putting it in constant dollars. Thats what you want to look at. Watch sales were flat for them. Leathers were up 9 and jewelry was up 11 . Those are nice moves up, and the flat watch has something to do with apple. They didnt break it out specifically. And even though people were saying sales of the apple watch are disappointing, its impacting other watches and watch companies. The other thing that matters is the strong dollar. Weve been harping about this for months. Its killing these company. The revenues were down 4 . But if you take out the effect of the currency and put it in constant dollars, revenues were up 2 . Thats amazing. Carl, thats a 6 point difference in revenues just on the dollar here. Look what youve got here. Youve got very uncertain consumer demand and uncertain growth in china and the impact of a strong dollar. Its Little Wonder that most of the Retail Companies have a hard time forecasting any kind of earnings right now. Back to you. Bob, thank you for that. Well watch all of that. Bob on the floor. Tenyear just have a shade below this morning. Reporter we are hovering just below the boiling temperature. 2. 11 yield. Lets go to may and look at that tenyear note. You could really see how we are putting what is arguably a very solid top on the market. How much further into 2 or sub 2 territory . Hard to say, but i will tell you one indicator you should pay very close attention to. 30year bond yields. The only part of the curve whose yield is above, whose prices are below where they settled last year, exempt for look at the twoday chart. Everything i said was on a closing basis. On an intraday basis, we not only traded at 2. 75. We traded around 272 basis points for the third year. It popped back up but you want to Pay Attention to 2. 75 on a closing basis. Lets go to the short end. Lets go to the european twoyear note. Take a look at that chart. Its a oneyear chart minus 21 basis points. Many are looking at that and pairing it up with our twoyear note and continually assessing whether were going to get a close that has more than 100 basis points of difference between those two maturities. If we continue the theme of europe, lets look at a twoday of the bunds. They dabbled under 50 and came back. Its the short end thats getting most of the eyeballs in europe today. Lets look at tenyear u. S. Minus bunds in europe. The only reason i bring it up is its testing the bottom of range. Its an unusual charmt. We continued to be tied at the hip. We need to watch the trends. They cross fertilize each other a on the moves. And i find no better chart than the dax. Look at the dax. Looks like were flirting with 11,000. We havent settled there since the ninth of july. Last chart dollar index. A real reversal today. Theres a lot of recalibrating going on. The markets have a lot to sort out. Back to you. Rick santelli in chicago. As jim said, well get inventories later today. Jackie is here. Reporter oil prices right now seeing a little bit of a rebound after hitting a sixyear low. Up about 0. 58 at this point. Wta trading at 43. 66. We had a slight draw down of inventories. Also supportive the decline in the dollar. This is a little bit of a twofold story. You have china and the fed bringing the dollar down. And the lack of demand or the perceived lack of demand that traders are worried about. We got monthly reports out from all the agencies conflicting nuggets here regarding crude. Opec raising its 2015 demand forecast lightly but then you have the eia cutting theirs. At the same time the iea came out with numbers saying they think the oil glut is going to persist despite the fact that they think demand will be stronger. Traders looking at it and saying nobody knows whats going to happen with crude. I also want to mention the products that are strong. Also sportive of crude prices. When we come back, more on the fallout from chinas devaluation of the yuan. Well talk with the president of the council on foreign relations. Back in just a couple of minutes. In the us, three in ten College Students drop out. But how can you spot whos at risk . The one who lives far from campus . The one who works the night shift . The one with new responsibilities . One thing cant tell you, but the right combination can. Universities are using ibm analytics to understand pressures in and out of the classroom some expect to cut dropout rates by twentyfive percent. Ibm analytics is working to make education smarter every day. When youre not confident your companys data is secure, the possibility of a breach can quickly become the only thing you think about. Thats where at t can help. 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Were going to get inventories on oil and then cisco later on. Youre going to talk to chuck robins. Yeah. First time hell be the fulltime ceo. I think its important. They have a lot of worldwide business. The yield is 3. When i see that, im telling you with the treasuries where they are, i hesitate. Could the stock go down . I just really want to everyonetize watch yield. Watch yield. General mills at 3 right today. I trust General Mills di denvi. If you dont get negative, you get negative on monday. Well get to stop trading with jim in just a moment. Shopping online is as easy as it gets. Wouldnt it be great if hiring plumbers, carpenters and piano tuners were just as simple . Thanks to angies list, now it is. Were making hiring anyone from a handyman to a dog walker as simple as a few clicks. You dont have to be a member to buy their services directly at angieslist. Com but members save more on special offers. Angies list is revolutionizing local service again. Visit angieslist. Com today. Cybr had an amazing Revenue Growth. They had fabulous earnings. Some say they didnt guide up enough. Fire eye, if you take a look at what the u. S. Attorney from new jersey did in terms of cracking the case and getting the numbers ahead of time. The ukrainian scandal, fire eye was in there. Fire eye did the forensics. I know everyone is giving up on ski cyber security. This is a great longterm theme. Watch that one. Im not calling the bottom. But im saying theyre doing well in a bad day. What else do you have tonight . I have novavax, and then i have a company, fresh pet down whofully today, and Richard Thompson is not going to come on. I like a guy who is cut down and he still wants to come on. Operation total victory. Yeah. Just go with it. Well see you tonight. When we come back, a lot more on the selloff this morning and the china effect with the dow down 188. Dont go away. Of the campus on. But youre armed with a roomy new jansport backpack, a powerful new dell 2in1 laptop, and durable new stellar notebooks, so youre walking the halls with varsity level swagger. Thats what we call that new gear feeling. You left this on the bus. Get it at the place with the experts to get you the right gear. Office depot officemax. Gear up for school. Gear up for great. Welcome back to squawk on the street. We are at the new york stock exchange. Dow is down almost 200. That makes it two days in a row of that kind of move. Something weve not done all the way to the financial crisis. Chinas devaluation continues. Crude holding up and well get inventories in about a half hour. Alibaba down sharply today as the companys growth slows. Hear with the ceo had to say ant the quarter and the increasing shift to mobile. Macys is one of the biggest losers today after missing expectations. Can they bounce back from here . And it has been a record year for deal making in the u. S. Already. So how much more is coming . Morgan stanleys vice chairman and global head of m a joins live to talk about it at post nine. Chinese authorities ordered intervention to put heavy losses in the yuan. The order to sell dollars and buy back yuan, the dollar is up almost 3 in just two trading sessions and theres talk chat chinese might be prepared to guide toward a 10 move in order to help their and ailing exporters. Joining us now, head of u. S. Economics, and a chief investment strategist. Mark, i think and well talk about whats happening with the fed. Well talk about the impact on this economy. But i think we should point out what the eye of the storm is here. And that of the asian competitive nations who are either selling stuff into china or competing if w theith their factories abroad. Countries down 7 in stock market terms in just two days in the dollar. How concerned should we be about that area of the world now, mark . Well, i think it is a legitimate concern. I mean, after all i dont recollect youre talking about the fact that china is the engine for emerging market activity at large and emerging markets represent about 50 of gdp. Taking a test of whats happening in china as repercussions around the world. And so right now the big concern is are they pulling on all of the levers sufficiently to be able to drive Economic Growth and reflat activity to where investors are get out. Just as we move on, these Southeast Asian nations are not Systemic Risks as far as youre concerned . In the agate, yes, they are. The fact is what is likely to lead to is a currency skirmish as others have to devalue. Lets cut to this economy and whats likely to happen here. Lets say they go for a 10 moveover all and thats debatable and theyve not said that. What would that mean for this country . Not much. You dont go to a barber in beijing. At the end of the day, the u. S. Inflation landscape is pushed by things that are firming. During the time weve been talking about this, i think whats gone unnoticed is the fact that core inflation is accelerating in the u. S. This year. We went into the year with a Downside Risk is market is not telling you. I get that argument. Youre getting the opposite message from the market. For those who say china doesnt effect us, look at commodities. There are spillover effects, even a company like macys is feeling the impact globally. And consumers just blew out auto sales. I mean, i think oftentimes in Financial Markets, shortterm developments come at the expense of longerrun thinking. I think thats happening again now. At the end of the day, the fed, you know, you get into pingpong games with the Financial Markets. The fact the fed hasnt tightened has probably forced china to do what theyve done. I think you get into these circular feedback loops. I think thats going to end badly for the fed if they get cornered by the market. I dont think its going to happen. Youre saying something strong and powerful. And there can still be a rate rise in december . I think if you saw janet yellen on the street and you asked her is september still on the table, she would probably tell you its a 50 50 proposition. And i think that should be the case. So if you saw every couple of days, the u. S. Dollar appreciate 3 against the yuan, youd still believe in a september hike . Not if it happens every couple of days but as i say, weve seen a 10 to 15 in the real traded dollar and core inflation in the u. S. Has accelerated. So, again, you have to look at the Financial Markets dont represent actual data. They represent expectations of what people think may happen. Actual data is not confirming with the Financial Markets are saying. That could happen. But i dont think that should be the baseline scenario. That means a lot of the moves were seeing are going to be shortlived. Mark, your reaction . I would urge a little caution in here. I mean, were of the view that this isnt necessarily enough to derail the bull market that we think remains in intact. Nonetheless, on a nearterm basis were finaling seeing the indices reflect the broader market. About 60 of the stocks in rustle 3,000 are down 10 from highs. I think we need to digest cross currents, including facing what the fed is about to do, and i agree in terms of a september lift off. I think thats going to cause further consternation for kwoilkwoil equities on a shortterm basis. Thank you for your time. Lets go to Rick Santelli in chicago. Details on breaking the key jobs figure. Absolutely. Dont you love jolts . What a cool name. The openings remained at 3. 6 . Theyve hovered there for three straight months. It dipped a bit from historic levels. We havent seen it since this data was created in early 2000. Last look was slightly revised. Were at 5 million, 250,000. Separations up 3. 5. Kwids 1. 9. All the day is steady but its showing us no matter your assessment of the economy or the large pool of unemployed that arent counted, these numbers are hard to reconcile and square with zero Interest Rate policy which makes the feds job in september and december that much complicated. Why . Just look at the board. Think china and recalibration and volatility. Carl, back to you. Thank you very much. Lets go to dominique and get a update. A settlement with u. S. Regulators over charges over a secret trading desk that used confidential information. The sec said theyve agreed to pay and admit wrong doing as part of the deal. The activity shares around off exchange dark pools operated by broker dealers. In this case, they found that itg operated a proprietary trading desk that accessed confidential order and trade information for trading against its own clients. They say the 18 million penalty portion of the settle remits the biggest one against an alternative trading system. They said it was not our finest hour. Weve brought the legacy issues to a close. It says its going to work to regain the trust of clients but still a big deal for those people who trade equities on the institutional side. Itg settles with the sec for over 20 million. And they got rid of their ceo as well when this was first announced. Itg shares are down, about 6 . Shares down today, alibaba has paired the losses. At one point it was down over 7 . Now down 5. 5 . This after reporting earnings. There was give and take in terms of the take on the numbers. And alibaba may be suffering from the simple perception of the slowing of the chinese economy and what that means for demand amongst consumers for the various items on the t mall and other websites that it controlled. We spoke to ceo, daniel zhang earlier on the show. Heres what he had to say about the chinese economy. We closely monitor the chinese economy and the impact on our Chinese Consumers behavior, but what we observed that consumers still coming to our retail platforms to do their shopping because of the lifestyle change. So we are confident for our longterm growth. Continue to say, of course, there was confident there, perhaps less so among the investment company. They put in a buyback. Earlier this week they announced the deal with a large retailer in china for similar to best buy. Mobile as we know from Monitoring Companies in the u. S. That are focussed on ecommerce is the critical way that people access so much of their buying. No no difference in china. Mobile has taken over from desk top in terms of the majority of purchases. This quarter we observed an increasing shift to mobile, and we make big progress in the mobile transition, and in this quarter, we reported a 55 of gnv of our china mobile marketplace was from mobile. And 51 of revenue are from mobile. So but today if you look at the take rate on mobile side, we have made progress in the tech rate but still has a small gap between pc, but we are confident that it will continue to grow, and i was not surprised at the end of the day, mobile tech rate came close to pc or even pc tech rate. Thats an important point for investors who look at that as a key gauge of success of the overall platform of t mall and the like. Alibaba down and yahoo follows suit in the plan to send it out to shareholders in the form of an independent company. Couldnt get him to predict where the chinese yuan would end the year . Couldnt get much on the reflection of the chinese economy. Awfully close to the ipo price. Down 23 from the firstday close. If you think about who gets hurt from the chinese currency actually weakening, its those like alalibaba . We asked that question and the expectations. All he would say was theyre focussed on the long term. Macys shares dropping on earnings but what habit the retailers new venture into ecommerce. A new season brings a new look. A chance to try something different. This summer, challenge your preconceptions and experience a cadillac for yourself. The 2015 cadillac srx. Lease this from around 339 per month, or purchase with 0 apr financing. Macys missing estimates on sales and earnings. The ceo was on this morning. And he addressed the quarter. It was a tough one. Theres no question about it. We are seeing that the consumer didnt shop in our categories to the degree that we thought the consumer would. There are a number of reasons. Were against our best quarter of last year. Thats one issue. The european, the chinese tourist, the tourists around the world are not coming to america, and the strength of the dollar is impacting that. And when they are here, theyre not spending in our categories. Back at hq with some of the internals on the quarter. Reporter good morning. It was a rough quarter for macys. For the Second Quarter they missed expectations of 0. 76 per share. Revenues also shy of expectations. Now, comparable sales fell more than 2 and the retailer cutting guidance for comparable and total sales. Macys points to a number of reasons. Lower Tourist Spending cutting into comp sales. The absence of the friends and family, and higher medical expenses for employees and a shift in where consumers are spending. It was discussed in a little more detail this morning. Youre seeing an up tick in consumer spending. A little bit better. Its in automobiles and housing and health care. Its in certain apps that youre down loading, and theyre going to get to our at gocategories b they werent where we expected them to be in the last quarter. They are piloting sellingon line in china on an alibaba china. Theres been a discussion around the value of macys real estate. The retailer is selling part of its brooklyn property. Macys often discusses the constant evaluation of the real estate portfolio and mow itnow further exploring those opportunities. Inventory was also higher. The cfo on the Conference Call said it was to get better set for back to school. She also said the season so far is starting off well. Coming up on the program, currencies in focus for many people. Here you see the way the chinese have engineered an increase in the yuan against the dollar. How low will it go . And why stop what youre doing to find a bathroom . Cialis for daily use, is the only daily tablet approved to treat erectile dysfunction so you can be Ready Anytime the moment is right. Plus cialis treats the frustrating urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use. Insurance coverage has expanded nationally and you may now be covered. Contact your health plan for the latest information. Down 233 points on the dow. Chinas being felt around the markets. Lets bring in a strategist with an asian focussed bank. Whats going on here, in essence . Look, theres two points i want to make clear. Number one, i think the change in the fixed mechanism reflects a more market based fixing system. This has been a criticism from imf recently in the stock paper. U. S. Treasury has been critical. Thats what weve got. Its caused a lot of anxiety and uncertainty. How is this fix now going to be a, calculated and how is it going to affect the on shore market and the other markets more broadly . I think weve seeing a lot of uncertainty. Weve only had one data point. The fix came out largely as they described it would. It was going to be driven by the close of the on shore market the night before. Plus a little give and take depending lets get into technical aspects of that. I think the Bigger Picture, and people are lining up to say china is manipulating the currency. The Bigger Picture here is they kept the peg to the u. S. Dollar. In this way, that the yuan has appreciated 30 against a basket of currencies. Its a strong currency relative to where the market would let it float to. Correct. In the context of, you talk about currency wars a lot. China over that period of the last three years has been strong. Its actually been playing the peace keeper . Yes. It doesnt matter. Isnt the feeling that everyone is going to have the follow in move and devalue and its going to cause a spiral effect, even with good intentions . Youre right. Moving to a more market driven, the yuan is weaker, and i think it will stay that way. I think the fix will stay high. The market will calm down in terms of how high the fix is going to get away and where dollar china is going to trade over the next week or so but implications, it is going to put pressure on asian currencies, that ones that export to china and compete with china. Thats going to be the big narrative here. Japan, korea, taiwan, obviously, closely linked with china. Theyre going to feel the pressure. Despite thate fact that its mo market driven. But theres a fallout. Is the cost the fed has to wait . I dont think at this stage this is going to materially impact the feds decisionmaking as it stands. Weve had a lot of little mini shocks over the course of the summer. Greece, for instance, as an example and it hasnt knocked the fed off course that much. The focus is the dmes you can side in the u. S. What if it changes . If it goes to 10 , it will wipe out the de facto appreciation that theyve allowed. That becomes more destabilizing. What does it do to this country if the yuan falls 10 against the dollar . Its going to be destabilizing. From an inflation standpoint, the next theory is china will export deflation. It has to be a big number by our estimates for it to really move the needle in terms of inflation in the u. S. Do you think theyre committed to the marketbased world that were talking about or is this simply an opportunity for them . Well, the its an opportunity for them. We can argue about whether theyre being expedient in terms of the timing of this. I think, personally, it could have telegraphed the change in the fix a little bit better. No one saw it coming. They didnt prepare the markets for it. But this was going to happen. I think we had to go back to 2013 when dollar china, the on shore rate was below the fix. On that point, the view is that this fall is 8 fallen export figure that came out over the weekend prompted this, that theyre being hounded in to this. Or they saw what the rest of the data would be. Its no good. I dont think its purely data driven. Its been poor for some time. Its not a shack and awe moment. I do think it has probably more to do with the imf paper that came out last week calling for we want a more marketdriven the imf came out last night saying it was welcome and they were moving toward market opening. The imf gave them the blessing. A lot of people wonder why were making such a big deal when you look at other countries that export to the u. S. And what their countries have done. China is a big economy. Everyone knows that. I think small change is there. I think the fear is that this was going to become something, like a maxi devaluation as you were saying. To your point is fear is theyre going to export inflation. The s p is down on those fears. You think its overblown . I think so. The amounts were talking about in terms of a dreeepreciation o the next couple of weeks is small. Unless were talking about an extreme example simon highlighted, 20 devalue. Why would you start if you didnt want to take it somewhere . We have to leave it there. When we come back, markets in the red. Not just for today but for the year. Well talk to art cashin about this 265 point move to the downside. Back in a minute. At ally bank no branches equals great rates. Its a fact. Kind of like shopping hungry equals overshopping. Good morning, everyone. Here is your news update this hour. Hillary clinton is turning over her personal email server to the justice department. Thats something the republicans have been calling for for months. Investigators are trying to figure out if she had classified information on an unsecured system. Jeb bush calling out the secretary at the reagan president ial library in southern california. He criticized her on iraq and her record saying she ignored the threat from isis. Police outnumbering protesters in ferguson. A crowd of about 100 protesters were mostly calm and peaceful. There were no arrests or injuries. A u. S. Military Helicopter Crash landed injuring seven people on board. Officials say the chopper was conducting a Training Mission at the time. Thats the update at this hour. Now back to squawk on the street. Reporter thanks for that. We are standing on the floor. The iea out with the report. A draw down in crude inventories. This is in line with expectations. Up about a quarter right now. Gasoline inventories down 1. 3 million barrels. That is supportive of prices as well. Ten the distillates seeing a 3 million barrel build. Lets look at cushing. Inventories were down slightly too. A crude oil trade is losing ground. 43. 26 a close under 43 is key today. A new sixyear low, perhaps. Still trading higher. Were looking at stocks here. The dow is down about 250. This is a broad market sell off. We have art cashin here, director of floor operations. And were looking at the low point of the Dow Jones Industrial average. This is starting to look worry some. Is it all the china fears . Its 90 china, yeah. Theres a secondary concern here. China says all theyre trying to do is move the currency to be market moved, to unpeg it, and there are some who feel thats part of theyre trying to get the imf to approve them as a reserve currency. Why is that so scary . I think whats scary here is people are beginning to doubt the sophistication of the chinese officials, whether they are adept enough and clever enough to know where to move. They didnt look very adept when they were trying to save their stock market, and theyre in an area here where it can be a little dangerous. Youre seeing its having negative implications to the south asia markets and currencies. Theyre having trouble and its spilling over here. Were doing technical changes to the market. We went through the support band that saved us at the end of the july. Twice this summer we fell foto the 200day moving average, and we bounced convincingly. At what point do you say its not held . The fact we breakthrough it on itself is significant, but is it lost . No. Not completely. You have to watch on your rally attempt. Now, that broken support becomes resistance. So if you rally back to that level and cant get through. 20. 74. If you rally back and cant get above that, that will tell you thats a conclusive break. Everybody loves reading stuff at sock jen. Hes been bearish for a long time. He looks at the china news. He says were one misstep away from depolice station in tflati. Are you going that far . Im cautious. You only survive 50 years in this game by looking for an exit sign when you enter a room. I would say hes probably not too far off. I think were reasonably close to that. You guys had a debate around here and the Service Economies and whatever with inflationary pressures but clearly commodities and other things are near or at multiple lows. The crb index is at a major low. Thats why i say people are nervous about how adept the chinese will be. Many are convinced the fed is still going to move in september. Those economists believe the fed is still going to move even now. I find that hard to believe. But theres a credibility issue, right . I mean, they have to move on the u. S. Labor market and u. S. Inflation. And if the labor, dt Unemployment Rate continues to fall, dont they face credibility issues if they dont move . Thats why fischer gave himself a way out the other day. And the rest is temporary. Right. And theyre going to be data driven. Now, you know my argument. The imf and the world bank have said to them, dont do it this year. If they do it in september and something happens, theyre going to lose all credible. Do you think anybody cares . They dont care what the world bank says. In central bank circles, those are minor organizations. If youre the chairman of the federal reserve, this world bank imf thing is getting out of hand. Theyre not that wbig. Theyre not brazil or south korea. That would indicate that the fed agrees with you and theyre rather presumptive and say we dont have to listen to you and if something goes wrong, theyll lose credibility. If most people had to put their money on one or the other, i know where most people would go. I understand fully what youre saying but im saying if they go ahead and something goes wrong, their credibility will suffer greatly because people will say you were warned. Why did you do that . You saw what was going on around you. How credible is your leadership . And thats a very dierngs thing. You cant do that is what youre saying. The biggest losers in the s p, the tiffanys, there is a theme here. Anything with china exposure, commodity exposure, stay away from. Any other tips . The big exporters are suffering. Even in europe youre seeing the same thing. Youll see it in the auto section, particularly being hit by concerns about the currency and automobile sales in china have slowed. Its going to be an interesting three weeks. Yeah. We saw that ugly number yesterday. Thank you for joining us. Art cashin from ubs. Up next on the program, Morgan Stanleys vice chairman and head of m a. He will be live to talk about a recordbreaking year in deal making. Will things continue and will it support the market . Squawk on the street will be right back. No students ever been the king of the campus on day one. But youre armed with a roomy new jansport backpack, a powerful new dell 2in1 laptop, and durable new stellar notebooks, so youre walking the halls with varsity level swagger. Thats what we call that new gear feeling. You left this on the bus. Get it at the place with the experts to get you the right gear. Office depot officemax. Gear up for school. Gear up for great. I know, mommy, but its time to let the new kitchen get some sleep. If you want beautiful results, you know where to go angies list. Now everyone can get highly rated service even without a membership. You can shop special offers or just tell us what you need, and well help you find a local company to take care of it. Angies list is there for all your projects, big and small. Pretty. Come see what the new angies list can do for you. If youre looking for earnings growth, maybe you should go shopping for retail stocks. Well check them out on trading nation. More squawk on the street coming up now. Welcome back. The cast parts deal earlier this week, global m a activity now on pace for the highest level on record. Beating the record set in 2007. How likely are we to reach those levels. We have rob kindler for more on this. Good to have you back. A market like this and yesterday always can give pause to a deal, especially if youre trying to negotiate a price or a ratio. How many days like this do we have to see before you get word we wont hit the records . Its not great. The fact is we were on the pace to be higher than 2007. Mostly driven in the u. S. We would probably be on pace to do over 2 trillion in the u. S. Thats the highest ever, but if you have a down draft or volatili volatility, it could effect. Havent seen it yet. Will you know it when you see it . Thats the thing with m a. Its always a good time for m a until its not. I think the conversations have been active. Its a cyclical business. If something happens, a market break, we can see it shutting down. We have not seen that yet. And. I hear the opposite in speaking to people like yourself. You have no peer, but someone who would be your peers indicate theres just stuff coming in and, frankly, as big as you might imagine it could be. Is that what youre seeing . All driven by strategic deals. If you look at the flow for this year, i think over 40 of the volume are deals over 40 billion. These are large deals happening. And youre seeing more coming in that havent been announced . Yes. Theres a good flow coming out. Whats been driving it has been a lot of things. Whats primarily driving it is that people see they cant get growth in their business but more importantly, the market has really liked deals. They asquare a stock thats up when we look back at this time, i think well see a lot of deals paid much too high a price. I think there is a bit of a deal frenzy now and people need to step back. When i talk to boards and managements and say the stock price might return well or not, it all comes down to equity and intrinsic value, and the multiples people are paying is hard to justify. I had someone on last week signing a note of caution because of the same feature and wondering if were getting at the end, if this is the big blow off and then things are going to quiet substantially . It could be, although the basic drivers, which is black and organic growth, very low inflationary environments, and low Interest Rates continue to be there. They do but theyve been in place for a long time. How much of it does come back to this gold old ceo confidence that we hear about . Its true. Also the other thing is that people are finally figuring out that stock buy backs are not a cure for everything. They have their place, but i think institutions now, and you saw black rock coming out and saying it. Institutions see that m a or investing capital is a better way than buyback. Not always the case, but that is also driving a lot of activity. We have talked for years about hostile deals and youve schooled certain people on how difficult they are to accomplish. Not to mention cross border, but we have a bunch out there. Monsanto san jen a. Were involved in that. A hand full of others that dont seem to be any near tore g nearer to getting done. Any lessons here . I think if people believe its a dream deal, it may be the only way to accomplish id. Were involved in all of these. Perrigo, m perrigo, monsanto. If you look at our record this year, we did succeed at xr and pinnacle and many others. You did. I guess weve had a pretty good track record. You have but in shire im struggling to understand the path. Are you personally involved with that in. Im not personally involved but the firm is doing that. You can walk away from that one . Never. Activism continues to be, we saw mondelez. What was your reaction to that. 5. 5 billion . Ackman has been super smart, but i think it shows that the opportunities are getting more limited in activism. I think the sector has much too many assets in it. Over 150 billion. If i could short that asset class, the activist asset class, i would short it in a second. Why . Too much money chasing too few opportunities . Inefficient capital structure, fortune brand Type Companies where you can spin everything off, a lot of that has happened. I think its less and less on the opportunity side, but well see. The other thing on activism is its getting to the point where generally these things are being resolved pretty early on. We just brought this guy on, david rose water. He was one of the key guys who was advising activists over the years. He has a unique perspective. In a world where people are resolving these things earlier, a lot because the activists are putting up good directors, having that kind of perspective is helpful. As we move into the last four months of this year, possibly a record year. Any particular sectors . Surprise me with something i havent heard. Are we going to see an energy where we havent seen any or is it going to Keep Health Care and technology . Weve had a lot of utility deals. Weve had lots of insurance deals including the advising of chase in the hub deal. We did a cross boarder deal. A lot in the insurance deal. Theres a lot in insurance. A lot in power utilities. But there is a big, big focus in health care. I think there will be more of that. You do . Yeah. Glad to have you. Head after global m a. Google wants to bring low cost internet to cuba but the cuban government isnt keen on the idea right now. Before the break, a look at the market sell off. The dow is 234 poibnts. The s p is down 1. 3 and just went negative for the year. S p down 27. Well be right back on top of the market action. Every dollar count. Thats why i have the spark cash card from capital one. I earn unlimited 2 cash back on everything i buy for my studio. And that unlimited 2 cash back from spark means thousands of dollars each year going back into my business. Thats huge for my bottom line. Whats in your wallet . En friday, the u. S. Flag will be raised in the front of the u. S. Embassy in havana for the first time in 50 years. One of the companies watching closely, google. Our chief International Correspondent Michelle Carusocabrera is live in havana with that and more. Yeah, cuba is one of the leastconnected places in the world and the people of cuba are desperate to get on the internet. Up until last month there wasnt any legal way for most of the population to actually access wifi. Then on july 3, 35 wifi hot spots went up across the country. Like this one in havana. Which is constantly busy with cubans eager to gets on the internet. Even though it costs 2. 50 an hour, which is a lot of money when most people only make 20 a month. Im here trying to connect via wifi with my children this is one of the places in havana where the connection is good. Its the possibility to have the connection. Overhead, you can see the routers for the traffic, they are chinesemade walway devices and therein lies the big challenge for American Tech Companies that want to be here. One of those companies, google, their executives have been to the country at least twice. Eric schmidt himself came here last year. And according to those who have seen the document. Google has offered some kind of big expansion of the internet here in cuba at very little cost to the cuban government it could perhaps even be free. So far the signals coming from the cuban government are not positive. For example, this was leaked last month. This is what appears to be a copy of the cuban governments plan for expansion of the internet here in cuba. It uses chinesemade devices and it would offer 260,000 homes access to the internet by 2017. Keep in mind theres 11 Million People in this country. The second blow against cuba say the locals, is an interview that appeared in the local cuban newspaper last month as well. That quotes a cuban government official. Listen to whey says. He says there exists people who want to give us the internet for free. But they arent doing it with the goal of allowing the cuban people to communicate. Rather, with the purpose of penetrating us, to use it as one more way to destroy the revolution. Not clear if thats the final nail in the coffin for google or just maybe a volley in the negotiation. Google declined to participate in the story in any way. You can read more on the internet, if you can access it back there in the united states. Back to you, sara. Thank you very much, live in havana where john kerry is there to raise the u. S. Flag. Lets get to chicago to the cme group, Rick Santelli has the santelli exchange. I would like to welcome my special guest, lacy hunt. Thanks for taking the time this wednesday morning. Glad to be with you. Im going to ask you a question that has nothing do do with markets. If you have a roof that needs repair and avoid it when do you address it . What conditions of weather probably would occur for to you address fixing that bad roof . Well they need to be addressed immediately rather than postponed. And the reason that choicen is in problem and the u. S. Is that we have too much debt, too much of the wrong type of debt. The action by the chib hes is that their debtinduced policies are faltering. Now theyve taken the risky maneuver of deesh appreciating their currency. Which is not a wholesome development. Im right with you. I think that the argument of liberalization may have many grains of truth in it like in our roof analogy. Its important when you take action. When it starts to rain and your roof starts to leak. So i think as much as liberalization may figure into this. The real issue is the timing as youve described. Listen, the big story is that we dont import enough from china to leverage up the several percentplus which may grow in terms of lower prices, but i count that. What about trade, global trade . What about vietnam . What about south korea . What about india . China of course. Recalibrating trade, not to mention the eurozone. Thats the dynamic to Pay Attention to, isnt not, lacy. Absolutely. What will happen is is it force others to depreciate their currencies. Its a way of stealing gains and Economic Activity from others. We call it will race to the bottom. Its very destabilizing. And it also perpetuates a deflationary process. Now, the deflationary process this is just such a tough issue for many to wrap their arms around. But the actions of central planners and Central Banks have created a dynamic where in their medicine, they do things like china, with regard to their currency, which forced prices lower to artificially create growth. And the aftermath of that is more lower prices, is this spiral going to continue, sir . Theres nothing to stop it the, china public and private debt is four times greater now than it was at the time of the lehman crisis. The world probably has on the order of 55, 60 trillion more debt now than at the time of the lehman crisis, the debt is inflationary. In the final 20 seconds that you have, sir. What would you tell investors . I know many are looking at the equity markets and saying, this is it, were running right into the last chapter of the book. I dont think thats the case. I think this could drag on for years and years. Your final thoughts . It already has dragged on for years and years and what happens in these circumstances is that economies grind lower, standard of living stagnates and growth does very poorly. It leaves us all very unsatisfied. Excellent, lacy, not a pretty picture. But in my opinion, its an accurate one. Thank you, sir. Simon hobbs, back to you. Thank you very much. Lets find out more about the show that does always satisfy. Squawk alley and jon fortt. Quite a show coming up. Were watching china and the reaction, u. S. Markets, the nasdaq down 1. 75 . And alibaba, revenues disappoint. Well dive into that and why, apple down again. All of that and more coming up on squawk alley. Them so diffe . Did you hear that sound . Of course you didnt. Youre not using ge Software Like the rig on the right. Its listening and learning how to prevent equipment failures, predict maintenance needs, and avoid problems before they happen. You dont even need a cerebral cortex to understand which is better. Now, two things that are exactly the same have never been more different. Ge software. Get connected. Get insights. Get optimized. No students ever been the king of the campus on day one. But youre armed with a roomy new jansport backpack, a powerful new dell 2in1 laptop, and durable new stellar notebooks, so youre walking the halls with varsity level swagger. Thats what we call that new gear feeling. You left this on the bus. Get it at the place with the experts to get you the right gear. Office depot officemax. Gear up for school. Gear up for great. Good morning, it is 11 00 p. M. At alibaba headquarters in china. 11 00 a. M. On wall street and squawk alley is live. Good wednesday morning, joining us as always, jon fortt, Kayla Tausche at post 9 that was an interesting cold open on a day where we, the focus should be on the markets, the dow is down 237, stocks selling on Major Concerns about the economy in china. The s p turning negative for the year. Bob pisani is going to join us in a little bit. But ben willis joins us here at post 9 to make sense on whether or not this is about china no longer being the marginal taker of

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