Transcripts For CNBC Squawk Alley 20170901

Welcome to squawk alley. Were at post 9. Lets start with the markets on this jobs day the dow crossing back above 22,000 for the first time in two weeks. U. S. Economy added 156,000 new nonfarm pay roles in august. The Unemployment Rate did tick up slightly. Both july and june numbers were also revised Lower National Economic Council director gary cohen joining us earlier. Listen to what he said were look teg trend overall. Were looking at job growth. Were looking at job creation. And we see a lot of very good momentum in the numbers. The one numbers that went down were government. Weve always said government is going to get smaller the private sector is getting bigger we see job creations in the sectors we want to see job creation in. For more, we are joined by wells fargo Senior Investment strategist as well as our very own Steve Liesman. Steve, is thewhite house right to see very solid job momentum continuing in this month of august yeah. I think so i think its well to put the numbers in perspective the best estimates throughout are that the workforce is growing by 80,000. If you told me the number was 100,000, id say its a good number its the numbers over 200,000 that i think are kind of out of sample where they should be. Theyve been very strong lately running over 200,000 150 is in a very good spot and ive been trying to kind of convince the market that these kind of numbers are good numbers. They raise the expectation and put nem a place and the politicians want the 200 number. 150 is a good number especially when you have good dif fusion across industries a lot of Industries Gain jobs. Just not as many as previous months. So we get to hear what the white house thinks about the number we dont get to hear what the Federal Reserve thinks about the number thats one of the challenges for investors these days where are you when it comes to fed expectations they still think december is a month where theyre going hike rates. Market doesnt seem convinced. I think the market needs to see a little more data before it does become convinced. Im also convinced they will likely hike in december at the in december at the september meeting theyll announce that beginning in october theyll start the cap program. Theyll start shrinking the Balance Sheet. But the data itself as steve was pointing out, you only really need 80,000 to 100,000 to nonfarm pay rolls to absorb the expansion of the labor force a number at 156,000, yes, it is shy of expectations. August numbers, tip lick quirky because of back to school, things like that some season alt things but it was still a pretty decent number, especially relative to the growth of the labor force. I think thats what the fed is looking at they said that a number of times before i remember seeing on cnbc a couple weeks ago caplan saying anything above 100,000 is gravy on top of it i think 2. 5 year on year wage growth is okay maybe it could have been a little stronger, 2. 6 . Maybe they want to see closer to he 3 . Nothing in this jobs report suggests that its going to derail their plan to start hiking in december again steve, decent numbers wheres the beef wheres the wage growth . This is the quandary weve been looking at. The job market getting tighter should prop wages to rise. My suspicion is that there is two things happening one is a demographic take. When you roll off higher paid Older Workers because theyre requiring, bring in lower paid younger workers that, puts downward pressure on wage growth evidence of that comes from the atlanta wage tracker which looks at the Single Person year to year thats been running more like 3. 7 so for a Single Person overall, wages have been hotter the other thing i think that is happening here is that more and more jobs wages are arbitraged by Foreign Workers i dont mean the old manufacturing jobs where you can move a job to china. But also service jobs. You can move, i dont know, architecture to the philippines. I think you know more about the Technology Behind this and Technology Revolution thats allowed this to happen i think more and more wages, however tight the job market here is in the states, there say job worker overseas that can arbitrage or put downward pressure on that wage. Brie arngs you kni wondered d on numbers from the past that are not going to come back the street couldnt get used to the idea that ten year treasury yields werent going to go back above 3 sustainbly. 2. 5 job growth when inflation cant get to it 2 maybe isnt terrible in the grand scheme of things s that a way to think about it it s everybody suffers from a little money illusion. We look at nominal terms economist was like people to think about things in real terms. And if youre looking at historical time series and not properly adjusting for inflation, you might think well, you know, the ten year treasury should be closer to 4 that was an environment in which you had inflation that was 3 to 3. 5 f youre in an environment where you have inflation that can barely get to 2 , you have to adjust your expectations as far as what you should see from a nominal perspective. Thats why the ten year treasury right now to me is maybe towards the low end of the range that i would like to see. Our good friends over at the Wells Fargo Investment Institute would like to see it between 2. 15 and 2. 75 . I think that is reasonable so were towards the lower end but not materially above that in the near future. Mark, i want to weigh on that real quickly there are problems with lower case ps and uppercase ps. There are leaks in hoses and holes in hoses the dwlad we have low unemployment with low inflation, it doesnt keep me up at night i wish i understood the reasons for it in termsst kin of the kinds of problems you could have, i take this over the verse. I want to ask you after your interview with the secretary, we tried to move that ball forward with gary he could then morning trying to figure out if there say package being socialized and what that looks like i also thought what was interesting is some of the ideas around the benefit for workers around repatation and Pension Funds, is that argument make sense . We dont have enough time to have that discussion over that argument the idea that it goes to Pension Funds and contradiction the notion it doesnt benefit the wealthy that, is the first time i heard that argument. The argument that theyve been making which is one that is an interesting debate is the idea that ultimately when you cut the Corporate Tax, you give money to workers because there is some notion throughout that workers pay substantially the large bulk of the Corporate Tax. That is refute bid other people. That is essentially the argument from the administration on this, the idea that cutting the Corporate Tax helps raise wages. I thought thats what jon fortt is asking when he asked wheres the beef thats what were waiting for. Well see as we try to learn more details about this tax plan that is circulating congress right now. Well leave it there thank you very much, Brian Jacobson and Steve Liesman on this friday jobs day Recovery Efforts in houston and the surrounding areas are continuing this morning. Our Contessa Brewer is there in houston. Contessa im on a duck boat right now in neighborhood in houston with a group that has an incredible coordinated complex Disaster Response where they go out and retrieve patient whos desperately need dialysis. Skipping dialysis treatments can mean the difference between life and death. So for the thousands of houston people that cannot get to dialysis, theyre going out on a coordinated rescue effort to bring them in for treatment or to deliver supplies to at Home Dialysis patients. And we had just now picked up this patient how many treatments have you missed because of the flooding two treatments so far and how many do you normally have i normally have two per week . How you are feeling im feeling okay right now. Yeah. Im on a balanced diet. They took me to the Emergency Shelter and monitored my fluids and told me what to eat and what not to eat in case i didnt make it to dialysis. Did you have water in your own house or you couldnt get out because of flooding. I couldnt get out because of the flooding was it starting to get to a frightening situation . Yes, maam. And what did you think when you pulled up and theres a duck boat waiting to pick you up . I was surprised i never seen it before yeah. Definitely is an experience for all of us. How you are feeling right now . Im okay. Yeah. I dont know if i stay in for the weekend how i would feel right the company did this and made such a special effort to come get you. Yes, maam. How does that make you feel makes me feel good. They care for people. Yeah. Yeah so here we go. Heres the problem when we got to the situation with high profile military vehicle, we were told the water was ten feet deep. In fact, once the duck boat arrives to get mr. Bailey, we saw guys Standing Chest deep in wear the along the way its hard to remember that some houston neighborhoods are still so flooded that homeowners cant get in, that patient whos desperately need medical care cant get out. Really remarkable that he is sending in the foam do it. Not just by the way the supplies for dialysis, theyve also been delivering groceries to people who are running out of food and water. All the meanwhile they have three clinics still shut down because of the damage and flooding and the like. And they have all the employees who are showing up to work and yet their own homes are flooded, strog take care of them. So its a remarkable effort. I just want to mention the duck boat were in is with gulf coast ducks from mobile, alabama called in for the group to help out with this effort guys all right con tes yash contessa, thank you very much. Thank goodness their getting relief to the patients when we come back, why one of apples early engineers says the next iphone could be the start of an overdue revolution thats a grand statement plus, the ceo of lululemon speaking out about the quarter that stock hitting all time highs this morning, up 8 . And why one analyst says amazon is still a long way from dominating retail. Busy hour still ahead on squawk alley. At fidelity, trades are now just 4. 95. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. And at 4. 95, you can trade with a clear advantage. No, please, please, oh shrieks in terror heavy breathing and snorting no, no. The running of the bulldogs . Surprising. Whats not surprising . How much money aleia saved by switching to geico. Fifteen minutes could save you fifteen percent or more. For years, at t has been promising fast internet to small businesses. But for many businesses, its out of reach. Why promise something you cant deliver . Comcast business is different. We deliver superfast internet with speeds of 150 megabits per second across our entire network, to more companies, in more locations, than at t. We do business where you do business. Oil and gas prices volatile. A quarter of Refining Capacity remains off line in the quake of Tropical Storm harvey. Our guest joins us now with more on the petroleum markets francisco, thank you for being here the pattern is pretty clear. In anticipation of this storm and since pressure on west texas crude. Obviously, increases in gasoline futures as we have shortages issues s this going to persist how far do you think these moves might carry from here . Well, look, i think theres a couple different elements. First of all, the refineries, theres a large amount of refinery capacity off line yesterday we had about 4 1 2 Million Barrels off line which is a very, very harth chunk of u. S. Supply, about 30 or so some of the Refining Capacity has been coming back but i think its going to take a while to get it all to we dont know what the damages are. Thats the biggest question mark remember that we could see a buildup in inventories here of 40 to 50 Million Barrels on the back of this refinery outages which is what is pressing wti prices lower and in the meantime, the u. S. Has become this enormous Petroleum Export torte world gasoline, diesel, you name it. That is going to be challenged as well. So one of the bigger impacts on the Energy Markets from harvey is going to be the full out on all the export markets that the u. S. Is catering to in recent years. Remember, seven, eight years ago the u. S. Used to be a large importer of petroleum products, today its the largest exporter. So big impact on International Markets as well as u. S. Markets. You know, the price now, the spread between west texas crude and brent crude which is more the global price widened out as the pressure on wti has intensified. What are the implications from there . Do you you this brent has to come down immediately . By the way, 47 for west texas, you know, its still above the low end of the range there is a down side to wti as well right i think wti is going to stay weak for a while we expect 40 Million Barrels of the demand loss over the course of the whole hurricane episode it could be 50 it could be 60 depending on what the damage is to refineries. And also remember houston channel is opening up but we have limited export capacity so back to your point, we are going to see some of the imports into the u. S. Being pushed back out in terms of crude oil into the Atlantic Basin and thats going to press the price of brent. Brent will come down to meet it. I do think petroleum markets are going stay tight for weeks if not two or three months here were basically seeing a big hit to what is basically the worlds capital, Energy Capital and particularly refining capital because you have all this chemical Refining Capacity sitting around the houston area. So huge impact in my view. All right well have to watch for still higher prices at the pump then Francisco Blanch from merrill lynch, thank you very much and apple is said to kick off its annual event in about a week and a half this time from its new campus in coopertino for the first time. Rumored to play a big role in the event. We know it will because of wwdc and ios 11 a. R. Kit was announced there for developers earlier this summer. Joining us now is principal of the Neilson Norman group and Apple Employee number 66 bruce this is potentially big. Some of the stuff that were seeing about ar kit and augmented reality if its a huge shift in how we buy stuff. First there is the app store that was big then. Is this going to be the third big shift in how we interact and push this thing through the phone . Yes, it is. And its been a Long Time Coming about 30 or 35 years as is true most technologies how long it took for the mac to arrive thats how long it took for the iphone to arrive it depends on tremendous Computing Power. You dont need the Computing Power on your phone to look up an address you do need it for augmented reality. Its going to be a huge shift. So if thats true, Certain Companies are going to make more money, claw more profits out of this ecosystem because theyre going to move first and move smarter than others. What are the key things that companies, developers should do in order to take advantage of this you are able to communicate brand new level with users for example, ikea will be rolling out one of the first apps youll be able to point your phone at an empty corner of your room and place ikea furniture in your room and see it in your room through your phone or through your tablet and then move it around the room and circle it and see it from every side just as though it were there as you implement that, what is the key to doing it right versus doing it in a way you think that actually isnt going to cause users to convert and buy that couch through the phone that they would have had to go to the store for before . Well, what you what youre able to see, what the colors are going to look like, see the effect on the room youre seeing most people cannot visualize exactly walk into a Furniture Store and truly visualize what something will look like in their home. So when store a is offering this ability and store b is not, people are going to end up going to store a and by the way its really fun to do this. There are a lot of Attractive Properties to it ebay ceo tweeting just about an hour ago over the next 90 days it will be clear that augmented reality, virtual reality, mixed reality goes from an overhyped feature to a major Computing Platform ecosystem you have any thoughts on how we buy every day stuff from ebay from amazon might shift as a result of this new augmented mixed reality . Well, again, youll be able to see what it looks like in your own home. But beyond just what is online the toilet paper i dont need to see in my own home. I know what that looks like. True. What are we talking about its not going to change everything in the entire universe but it also isnt just for buying in your home. For example, you walk into a Shopping Center and you say, siri, where is bed bath and beyond and there it is glowing in the distance. And you walk towards it. Or you see a red stripe on the floor that can you follow around corners and so forth when you buy something, lets say you buy an ikea desk with all four 4 00 parts and you bring it home, when it gets to the point where you put part a together with part b, those two parts are glowing in your pile of parts and you bring them together and it shows you a red stripe on the end of each one where they touch so this goes way beyond just figuring out what to buy its going to revolutionize home repair by homeowners its also going to revolutionize repair by trained technicians where they did see the parts, see labels connected to them and so forth this is big. Its huge. Bruce, i have a terrible sense of direction so i am looking forward to that personally thank you. Sure. When we come back, shares of lululemon soaring on Solid Earnings hear what the ceo ld utos about the athleisure lifestyle after we return. Welcome back to squawk alley. Shares of lululemon soaring this morning. Raising the full year forecast, the ceo joined us in a cnbc exclusive last hour. We asked him about the recent dispinlting results from athletic retailers like foot locker and brands like under armour and whether given his reports and is it slowing or in a recession . Theyre wrong. Listen to what he says its a misinterpretation of what is going on in how people want to live their lives i was in europe a couple weeks ago and going to asia in three weeks. And we see more and more people wanting to live an athletic mindful lifestyle. We see that with the increasing number of studios in paris and munich ive seen that in shanghai and i think that trend is actually very timeless it is true for mens and womens. Its true across generations its true globally so i think were very well positioned and again, you have to remember that our vertical model really allows us to control and deliver our amazing experience for our guest which is really unique when you look at the rest of the Athletic Field the ceo of lululemon zwishing himself, brand and customer from what we see from the likes of nike and under armour. Its a different model theyre a wholesale model. They go to Department Stores and third party retailers. And also in how he described the mindfulness and mindset of his core consumer, less in an athletic way and more a lifestyle kind of way. Being a little skeptical of his explanation there. I mean, some of this might be just that they are small you brought this up. The relatively small retail foot print they v we saw some of that i think from under armour too. Do they get big enough that then they have to appeal to me and mike youre already killing it you guys are behind the trend. I mean naturally me and mike. Yeah. They want to down play the sort of fashion aspect of it. Its not just about a label. Its not just about fashion. But of course you had under armour talking about performance. Its actually technology and performance. Yes, thats true but if the sales trends arent kind of following through on that, the brand associations dont necessarily keep your stock up i think for lulus case, theyre in a good spot lots of skepticism on the street its getting the price target marked up by a lot of the bullish analysts i saw that on this full year guidance raise were going to Say Something about the fashion thing. Its interesting adidas emphasize thats versus the sports under armour is going in on the sports message they launched a new campaign we will today which is heavy. Steph curry and some of the other major athletes. I dont need mindfulness. It needs to feel good. You have tried the abc pants . I havent. Thats the whole thing. Have you no. Which is g by the time they get to me, saturation. Theyre supposed to be very comfortable. And certain areas for men. When we come back, former council of economic advisors chair ed lazier joins us to make sense to have days jobs report. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Good morning, everybody. Im sue herrera. Vice president pence saying the add smgs in con tack with congress and expectses a Harvey Disaster aid package to move quickly. It would send 5. 5 billion to areas hit by the monster storm amateur video showing a rescue boat carrying Six Police Officers flipping in houston it happened tuesday in raging floodwaters. The officers fell into the water but they were back on duty rescuing Harvey Victims later that very same day the german auto maker is retrofitting millions of vehicles with Software Updates to reduce emissions. And the annual pilgrimage is underway thousands of muslims carrying out the symbolic stoning of the devil ritual today in saudi arabia which marnlgz the beginning of the eve celebrations and that is our cnbc news update back downtown to squawk alley. Sarah . All right sue, thank you and it is time to get to seema mody with the european close seema . Hi, sayer yachrah. European stocks kicking off the month in positive territory. August was a down month. A 1 to 2 decline take a look at the euro. Thats getting a lot of attention. We saw the euro move higher as the dollar got pulled down by that disappointing u. S. Jobs report then reports suggested that the ecb and may not decide on the Balance Sheet until december pressure is building to offer intervention on the euro front take a look at bonds securities writing this morning that a more protracted tapering means that European Central bank Balance Sheet is going to grow larger the Market Pricing the first race hike probably potentially moving further out you can see it is at 0. 377 . Lets move over to stocks. Volvo rising as much as 7 on the day. You can see here announcing new financial targets for the year with an improving operating margin above 10 and in the media space, french multinational up just about 5 after presenting the Second Quarter results making media the best performing sector in todays trade in europe. As we wrap things up, lets take a look at the european stock index. Its vastly underperforming the s p 500 year to date up just about 4 compared to the s p 500 which is up about 11 . There are three big events to look at in september in europe we will the german elections with right now polls secretarying merkel will win the brexit negotiations and keep an eye on the growth storey. You see europes recent gdp number, up 8 . That means that greece is growing faster than the uk. A the love people are making fun of the uk for that saying this is what happens when you vote out of the euro its true the eurozone economy a Long Time Coming. The currency effect in the indices diverging as well. Thank you. 3 growth for the last dw t quarter in the uk. Not great. Lets send it to the cme group. Hi, rick hi. How you doing, mike . Id like to welcome my guest ed lazear we missed you for a few reports. Glad youre back legality me welcome you its too what data points we h if you look at the Labor Force Participation rate, still 62. 9 not in the labor force 128,000, darn close to 95 million. If you look at month over month earnings, they were 110. There are two 110s this year you look at year over year earnings, january was 2. 6. February was 2. 8 march 2. 6. Everything else has been what it was today. 2. 5. And finally, i know this is near and dear to your heart, the work week june 34. 5. July, 34. 5 august, 34. 4 thats the lay of the land with 156,000 and two months worth of revisions. Your thoughts on the big report . Okay. Well great summary, rick yeah, i would just pick up on a couple things. First of all on the hours of worked as you mentioned, theyre down. 1 of an hour that never sounds like a whole lot. But when you multiply that time the whole workforce that, amounts to 400,000 jobs. So thats always bad news. Now, you know, obviously you wait to see whether this persists and whether it bounces back the following month some of it can be rounding but i never like to see hours of work dropping. So that i would say is a negative the other negative is the employment population ratio which i look at pretty closely fell again. 1 not a big deal but going in the wrong direction. You mentioned wages. Wage growth has not been strong. Still above inflation but barely above inflation. So real wages are not growing at a significant pace then finally, the negative revisions. So all in all, i would say this is one of the weaker reports that weve seen in the past few months it wasnt a particularly strong report the headline snub nnumber is no as discussed in the earlier show its well above the number necessary to keep pace with population but, you know, again, when you take into account the revision, still not a great number you know, i remember that conversation this morning. Its more than adequate. More than adequate for, what ed . Im not disagreeing with the facts. More than adequate to continue to get subpar growth more than adequate to not come up with an alternative to prop up productivity . More than adequate is not adequate enough. Especially when if you look since the crisis, you know, they always talk about they meaning the media at large about hey we cant do stimulus, we have to pay for the debt all i know is since the credit crisis, Government Spending is just shot multiples through the roof and actually so have tax collections. Dwoen we dont have a tax problem. We have a spending problem as my guests pointed out, spending problems mostly in areas that arent discretionairiy spending are we going to be able to sol of this . Go on. Absolutely right. That is not a political statement. That is true if you use proes s president obamas numbers as well from the office of management and budget or cbo no matter how look at it, a couple decades from now were in big trouble if we dont get spending under control it is on the entitlement side. Thats the largest long run threat in the short run, you mention taxes. The things can you do for an economy to get growth in the short run are primarily on the regulatory front and also on the tax front. The tax issues are important because if you look at those and again this is not a political statement and everybody that looks at this they believe if we cut taxes on capital, well get growth in the numbers anywhere between 5 and 9 total on gdp if we eliminate them completely. So those are big numbers and big effects. And by the way, you know, one of the things that i heard gary cohen talking about this morning is, you know, does that translate into something for the middle class he focused on pensions and certainly thats important but i would say theres a more direct effect. Something that you pointed out and we talked about in the past. And that is productivity if you give investment and capital, you get more growth, you get productivity rising, that translates into wages that does affect the middle class. I say thats the most important consideration. Ed lazear, i always feel smarter after talk toug. Im sure ow viewers feel the same way thank you v h have a happy and safe labor day. Thank you very much and when we come back, why ali baba is the most controversial stocks on wall street. Even as it closes in on amazons 470 billion market cap. Less than 10 away your Insurance Company wont replace the full value of your totaled new car. The guy says you picked the wrong insurance plan. No, i picked the wrong Insurance Company. With Liberty Mutual new car replacement™, you wont have to worry about replacing your car because youll get the full value back including depreciation. Switch and you could save 782 on home and auto insurance. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. Well have key kmebts on the tax reform with gary cohen we have a lot to talk b and lululemon, we have exclusive interview with the retail analyst and wait until you hear about the pumpkin trade. No joke. Halftime report starts at noon well see you then mike. All right thank you. Felt like fall this morning. Well see ought noon thank you very much. In the race to a half trillion dollar market cap, alibaba is closing in on amazon we have the latest on that mike, amazon has had a good year alibaba had an even better one amazon up 30 this year, baba stock though has nearly doubled. Now they have reason to love both they dominate ecommerce in the respective markets and expanding into new businesses like groceries, original content and cloud. Difference is the Chinese Market and middle class is growing much faster some investors see this as a proxy for the growth that is part of the reason that theyre catching up. They also tracted big names in the hedge fund this year they picked up shares. But despite stellar runs for both of them, these are some of the most controversial stocks on the market, especially alibaba which is the most shorted company in the world by a long shot Financial Analytics firm they crunched some numbers for us have a look. Short positions in alibaba totaled nearly 23 billion you see tesla, next. That is the next shorted firm. And it draws less than half of that in Short Interest amazon comes in sixth with almost 5 billion in Short Interest one vin vestors love alibaba, but the very same reason other investors hate it. Shorting baba is seen as a way to bet against chinas Economic Growth and the broader stork markets there. The baba bears are in a world of pain thanks to that incredible run this year. Theyre down more than 10 billion for the year and 2. 2 billion in august alone as baba shares surged 10 just over last month. Now another good month like the one we just seen and it will be worth more than amazon guys yeah. Well see how much amazon is worth. For more on how amazon is impacting traditional retail, lets bring in charlie oshea. He is the lead retail analyst at moodys. I love your recent note because we do some myth busting. I love to be skeptical first prime. You think that actual prime subscribers, not nearly as high as a lot of analysts on the street think why do you think that and what do you think the real number is . I think we put a 50 billion number out there that is very defensible if you just look at the census data which is very its a very simple analysis, there is 125 million households in the United States. Roughly 35 million of those make less than 30,000 in income which is more than the number that make over 100,000 in income so if you strip out most of the 30,000 and under, you got you get to 90 million households 85 million out of 90 is a big number that is hard to get our arms around and then when we take the we looked at the average spend as some analysts have calculated of 1200 to 1300 per prime household, do you more simple math you get way above amazons global Product Sales which have 95 billion last year. It is really math that got us going in this direction. You say amazon is not going to dominate food youve seen this move into whole foods over last few days why do you think that is what do you think traditional to the extent there are traditional grossers are going to do to respond . Whole foods is a small niche grosser at this point. 16 billion in added revenue walmarts 220 billion in revenue. Growinger is 130 billion. Coss he could, 50 billion albertsons is 60 billion its a pretty well developed market right now where amazon was going prior to whole foods was on the delivery side and the whole Foods Acquisition to us signaled that wasnt scaling fast enough for amazon similar to walmart buy jet last year walmart is moving online and decide we have to buy it to get bigger and faster. Amazon buys whole foods. Not a complete reputation of the we dont need brickandmortar but it was telling to us we have a positive outlook on the rating as a result of the whole foods deal we think amazon needs to do more brickandmortar, not less i get your point. I think its interesting both on the retail trend and on the food trend that amazon may not be as dominant as the narrative is or as everyone thinks i think the concern at least for traditional retail and for groceries to some extent is what does this look like ten years down the line . Amazon is expanding rapidly. It is given a free pass in the markets not to have to make any profit or any margin and, therefore, it can compete kit do what did it to the book sellers, to the grocery stores, and some of the retailers. Grocery isnt book retail groceries are really hard business i think my colleague who is our grocery analyst and i debate whether it is the absolute hardest sector of retail and we both think it is books were easier. Sfood tough. Food delivery is a niche business it plays in new york and chicago. It plays up wither end demographics. What did Department Stores . If its not amazon, what is it for food . Department stores, apparel. Amazon can scale apparel fairly quickly walmart and food is going to be tough to beat. Ive covered walmart for 15 years, winlt back to look at where walmarts food share was 15 years ago around 50 billion now its 220 billion. It got big quickly it did it with brickandmortar locations. Online, it will help but it is not an end in and of itself it can augment a great brickandmortar business. I think thats where amazon will go with whole foods. All right nice cold shower for amazon. Charlie, appreciate it. Thanks for having me. Still to come, how disney is bringing augmented reality to a galaxy far, far ay quk alley will be right back other than making me move stuff, what are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. See options data like never before. With thinkorswim only at td ameritrade. Did you know slow internet can actually hold your business back . Say goodbye to slow downloads, slow backups, slow everything. 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Of course, not after all those years like it was in 2015, but the demand is very strong and we saw it across the globe with the force friday events as things unraveled. So r2, where are you . Heres r2. Its not a ball that rolls people arent going to look at it and go, wow, i dont even know how that works. Whats the feature in this that interacts with the app that does Something Special . Whats amazing about this r2d2, its the toy weve been waiting for 40 years 40 years . It is literally a little r2d2 he moves as authentic as possible to the character in the movie. He pulls his leg all the way in. He has all of the animations that you see throughout the episodes, where hes been a star so hes about as lifelike as you possibly can be, for a character. So a ton of engineering went into pit and the new guy is the evil twin to bb8 called bb9e and hes just deadly looking who are you targeting whos your consumer . Someone johns age or younger . Because he seems interested. Were targeting people young at heart and star wars fans around the world its you know, when you look at our demographic and we break it down, it is almost every age category, male and female, from ages 8 to 50 so in order for you to design the new product, the new character, you must have access to the story lines you know everything that happens . You can tell us all. We get access to some of the story elements of course, we dont have the full story, but we have enough so we can bring the character to life in an authentic fashion i dont know how the story unfolds, particularly. But i know how each character acts in the story. Interesting augmented reality, how does it fit into the story around these toys and how people will interact with them so we have one of the things we wanted to do for the fans is give them a look inside the sets used in star wars. So weve created this augmented Reality Experience where youre looking through the eyes of the destroyed as youre moving through the star ships so r2d2 cruises through the millennium falcon. Bb8 cruises through the rattis and bb9e goes through a new ship called the supremacy so youre able to navigate as if youre walking the halls inside the star ships wow paul, lots of fun. Yes, i do want both of those, sara a couple of things cause me to devolve into an 11yearold boy, star wars and comic books. Theyre expensive toys, 100 to 200. You were just telling me how those lieu lieu le those lululemon pants were cheap. All right, squawk alley will be right back immigration and Silicon Valley mixing. Executives from apple, facebook, google, and nearly 300 other business leaders, pushing for President Trump to, quote, protect the dreamers theyre requesting that children brought illegally to the United States be protected from deportation. A continuation on the obamaera policy, deferred action for childhood arrivals President Trump was expected to, perhaps, spend or dismantle that program. Part of the letter reads, quote, dreamers have vital to the future of our companies and our economy. With them, we grow and create jobs they are part of why we will continue to have a Global Competitive advantage, unquote perhaps part of the reason why some ceos were hoping to stay involved, engaged with the president on some of these couns councils to influence policy like this. Those councils in longer exist well see if they listen well, he didnt listen when they spoke out against withdrawing from the Paris Climate Accord or condemning some of his response from charlottesville. Well see. This is a business issue obviously, theres the compassion and human aspect of this issue, but also the fact that these ceos say at least 72 of top fortune 500 companies actually count these Daca Recipients as employees. They pay taxes, its a labor question so well see theres a lot of pressure on the trump but also a fundamental world view difference. These ceos run global businesses many of the founders are immigrants or children of immigrants i really do think this is one of those kind of gulfs between, you know, the white house and leaders of big business who got here by being globalists lets be honest. Now globalist is a bad word in the white house. Quite a bit of whiplash going from pardoning Sheriff Joe Arpaio to this, though though hes been more moderate since being president from the campaign trail. Well see. You never know what President Trump will do. Thats it for squawk alley. Have a great, long weekend guys, halftime starts now. Welcome to the halftime report. Im melissa lee in today for scott wapner the dow crosses the 22,000 mark, we turn our focus to the final four months of the year. A lot for investors to digest today, from the jobs report to cnbcs exclusive interview with the chief white house economic adviser, gary cohn, talking about tax reform with us for the hour, jim lebenthal, josh brown, jon and pete najarian, also here with us on set, Steve Liesman. Lets take a check of where the markets stand right now. We are seeing gains pretty much