Transcripts For CNBC Squawk Alley 20171107

Dom, thank you very much for that good morning, its 8 00 a. M. At disney headquarters in burbank, california, 11 00 a. M. On wall street, and squawk alley is live good tuesday morning, welcome to squawk alley. Im Carl Quintanilla with sara eisen and john fortt on the new york stock exchange. Scott galloway, of course, from Nyu Stern School of business is at post 9. Good morning, guys you can guess what were going to talk about at the top that is acquisition talks sending shock waves through the media world. Disney reportedly held discussions to buy most of 21st century fox, increased competition from rivals like netflix and control of hulu both considered part of the motivation for that deal professor, you first on this, and we talked about how it shows flexibility on both fox and disneys side in adapting to a netflix era, right yeah, everyones bulking up, and because when you think about it, amazon and whole foods, facebook and instagram, the greatest acquisition that didnt happen would have been anybody buying netflix five years ago when its market cap was 1 12 of what it is now, and now netflix is creating some strange f bedfellows everybody is bulking up to compete with netflix and to a certain extent with amazon, whos now the second larger spender in original content, so the ali fraser, George Foreman is netflix, amazon, time warner, cnn, or disney and fox as they bulk up to take on this new era of content were always wondering if its about content or distribution and netflix cracked the distribution model and now is pouring so much money into content. Im wondering how its going to shake out, is it the content companies that are going to be the most vulnerable to these deal tieups i think the answer is, question we seem to see one player move ahead of the other you probably argue that distribution, the gatekeepers are more powerful, but then they need to put content behind those gates. Even if you look at amazon buying whole foods, its an attempt to get high end grocery purchases through the portal of amazon prime, so the answer is would you rather have content or distribution, the answer is yes and the winners will have both strategically you have to pick, mike isaac, dont you . On the one hand you have vertical integration, which is what netflix seems to be doing, comcast, Nbc Universal was about, and i guess time warner, at t if thats right, would horizontal be wrong . Weve seen these moves in tech, as well, apple going vertical while others go horizontal i think its a tough one, especially for companies that are just not traditionally used to integrating both. Im really curious to see how disneys stake in bam tech works, which is, of course, their thing they are going to use to do distribution for folks in the future. And the advantage that they have, as scott was noting, was all these really great content assets, you know, obviously theres the whole marvel franchise that disney owns, if that goes through, so they have the content side i think they have a really strong base there. Im very curious if anyone has a chance at this, seems like disney with its acquisition of bam might have a good shot and i think scotts right, too you kind of have to have both here and im very curious to look at facebook or apple, which are kind of delving into that original content production right now, and they are not really doing that well in the beginning, you know, and starting to really show how new they are at this so hopefully theyll get better over time. Yeah, we had a discussion last hour, guys, about disneys history on the web little bit challenged. Theyd never really learned to crack that, but would you rather have disneys intellectual property, their characters, their history, and have to learn how to do the distribution, the tech, or would you rather have netflixs lead on the pipes and just learn how to make a good show right now the momentum is with Netflix Millennials spend more time watching netflix than the rest of Cable Television combined, so arguably netflix is more important and valuable than the entire Cable Television network combined not talking about content, im talking about if you want to go to disney land, to a cruise, you want access to our content, you want espn, youve got to be a member of our equivalent of prime and it would take earnings way down, but hes in a position to take on netflix and hes also got the credibility to do this hes one of the few ceos that can take those sort of earnings to what were talking about here is a change in Business Models, going from the stopping and starting of selling advertising to the much better saslike Business Model of streaming per month, but the gangster move would be to put it all behind a wall and say you want to go it disneyland, go on a cruise, watch espn, you have to pay for disney prime that would be a bezosian move i like it, gangster, bezosian, ill take any metaphor, but i totally agree. Well continue talking about that for months, if not years. Apple reporting tons of offshore cash from ireland to a tax haven in the english channel. The company saying it adjusted its Corporate Structure when ireland changed its tax laws in 2015 and as we know its not the only tech firm under regulatory fire google, facebook, and twitter are in the cross hairs, as well, although there was some discussion today, professor, their appearance on capital hill was winning for not losing in other words, no major gaffes or fires came as a result of those hearings i would argue prettyserious i thought the moment that was frightening was when the chair of the Senate Intelligence Committee Said youre the front line, we need your help. Thats basically the government acquiescing these companies have become more powerful than the government its scary when we basically acquiesce to these guys and say we need your help. In addition, they poured honey on them, sent them hunting for bears. These guys were thrown to the wolves, everyone got angry it reflected how little elected officials know about technology and these companies arent even willing to commit to not taking advertising paid in north korean juan i think this fanned the fuel of flames against these companies i think this is the beginning of the fall of big tech in terms of public perception. Specifically with this tax issue on the paradise papers, mike, its all very confusing. It does shine a light on Multinational Companies tax practices, nike is mentioned, as well i cant tell if its nefarious or Just Creative i think its sort of depending on who you ask i think apple came back really strong with the argument, look, everything were doing is legal and we are the largest taxpayer in the world i think they pay Something Like 35 billion in taxes annually, and they are doing it legally. Whether you can sleep at night, i guess you go to sleep at night on a large pile of cash you saved from finding all those loopholes and the lawyers have done a good job at doing that, but its more of a question, again, as scott was eluding to, are we going to continue to allow that, you know, where it is legal, and, you know, thats an argument theyll keep making until they have to change it and i do think thats right, the sentiment around these companies in general is shifting right now, so does that affect policy outside of the realm of political advertising or sort of things that might shape elections and go over to changing tax laws, and i dont know, maybe. Scott, i just dont understand why people expect anything different i mean, if youre going to criticize apple from having, you know, cash in jersey, then show me what where the money should have gone where should the revenue have gone is that clear . Just sort of expecting companies to hand out tax dollars out of largess doesnt make a ton of sense. Yes, they are going to seek the best legal deal possible thats what shareholders expect them to do john, youre absolutely right. If we want someone to blame here, its the man in the mirror we need to elect officials to ensure the most profitable, Successful Companies in the world pay their fair share and dont legally figure out a way to pay a tax rate at 5. 5 on profits, quote, unquote, made overseas this isnt apples fault they are doing everything they should legally its our fault for putting in place a tax structure so the most Successful Companies in the world pay less tax, which means the less successful and Smaller Companies pay more tax but even the narrative, give these guys a tax holiday to bring it home, why wouldnt the narrative be put punishment on overseas revenues that shouldnt be there why wouldnt we tax this cash overseas at 1 a month until they repatriated it because it was earned here . Its a failure on our citizenship to elect officials that are going to have the back bone to hold these companies to the same scrutiny the rest of business endures every day i thought it wasnt earned here, i thought that was the point. Sorry i thought it wasnt earned here, thats the point defined earned. Suppressing the revenues here and inflating the revenues in low tax domain to me that is technically not earning they earn the revenues here, but werent taxed here mike scott, well get to a lot more next time good to see you both, thank you so much. Waymo is making some headlines this morning, announcing big plans to get in on ridesharing. Phil lebeau is in chicago with the news good morning, phil good morning, carl. Waymo is getting into the rideshare business, as many people have been anticipating, theyll be using their modified Chrysler Pacifica mini vans with no drivers in the front seat let me say that again, no driver in the front seat. These are selfdriving mini vans the public will be able to order, just as you order an uber or lyft. No safety driver in the front and the phoenix area is where this Rideshare Service will initially begin. Lets run down who the partners are with waymo right now, and this sort of gives you insight into where this company is headed in terms of mobility. Fiat chrysler provides the mini vans, they are a partner, autonation announced theyll be servicing the fleet, avis is working with them on fleet management, and lyft is also a partner, which is interesting, because they initially said, look, were going to get together and share rideshare technology as you look at shares of google, keep in mind that this waymo Rideshare Service will not be part of lyft, it will be a separate, independent company, so while they are still partners with lyft, they are starting their own Rideshare Service again, initially in phoenix, and we cant stress this enough, this is not some safety driver in the front seat, these have no drivers in these vans. Were going to have to make a trip to phoenix, phil, in the near future. Phil lebeau in chicago, thanks when we return, if content is king, will a fox disney deal pose a threat to streaming giants whats at stake for netflix, amazon, hulu, and others the weird iphone glitch is driving texters crazy. And the president is on north koreas doorstep pushing security what that could mean for odtsheerofefseen pruc wn squawk alley comes back stocks setting new intraday record highs this morning, up over 20 in the last year since election day joining us now is paul chryst fer, wells fargo head Global Market strategist and u. S. Chief equity strategist. Nice to see you both thank you we talk a lot about the big rise in u. S. Stocks. Weve get to talk about the fact its gone global and actually in most markets like germany, south korea, japan, hong kong, their gains are even bigger than ours. So jonathan, what do you chock it all up to couple things here. One is were seeing this Global Recovery thats going on where gdp in europe is stronger and china and japan and in the u. S. , and so thats kind of story number one story number two is the signs that this rally, or this recovery is over any time soon are just not there theres no signal that youre going to see a recession soon, which means this could go on for longer and thats why this thing is as powerful and global as it is you dont buy the argument that valuations are stretched and that theres too much hope riding on tax policies and other fiscal policies that might not come to fruition i dont on any of those i think valuations are absolutely high, theres no question the question is, will they stop getting higher and i think the answer is no i dont think the fed with the next hike or two are going to beat up on this, and i dont think the market is being driven by donald trump and tax policy i think its being driven by really good economics. Paul, is the next leg up going to be from m a because there seems to be a lot of actual m a attempts or rumored in the market over the past few days. Does the market need those things to come through to justify some of the levels thats part of what could drive the markets higher certainly, and we definitely agree with jonathan that the economy is quite solid, we see it broadening and we like the synchronized recovery around the world. So, yeah, that could be another move, another way to drive the market higher, but we are looking for first a pull back of some size as we think liquidity will have to be reevaluated going forward. The fed will be one factor to look at, but just a general growth of liquidity here in this country is going to become less positive going forward, we think. Youre talking Balance Sheet or what specifically do you mean we mean what you might think of as economic liquidity that has been slowing and we think it eventually reaches a level where people have to be more cautious with cash and then youll begin to see some more interesting choices being made m a activity will drive, i think, another leg higher. We dont think the market cycle is over. Im going to take the other side of that trade right now with volatility so low, even if you get a pullback, youre talking about 20 basis points a day is the average daily move, so you get a pullback of 2 or 3 is it really worth playing for that as opposed to saying the trend is your friend right now, the underlying fundamentals are good, and as a pullback its likely to be small, so i wouldnt be waiting for an entry point right now. I wanted to bring up something i dont think is getting enough play. We learned that dudley of the new york fed is going to step down early dudley, yellen, who we assume is going to step off, she does have the potential to stay in as governor until 2024, fischer, these are not just any Monetary Policy economists. They are some of the superstars, some of the most experienced, and they are ones that have been there during the Balance Sheet expansion and the financial crisis and, yes, the market seems very happy about jay powell and he seems to be agreeable and not too idealistic, but im wondering if investors, jonathan, are underestimating the shakeup at the fed were going to see and whats going to come next during a crisis. I think theres another part of that story, which is weve never seen any Central Banks successfully unwind qe, so youre going to have a new guard there, but more importantly a fed thats going to that doesnt know what it looks like when you unwind this paul was just mentioning before about liquidity. I think its abundant, but hard to know how much Balance Sheet runoff and how much move in fed funds and getting that exactly right could very well be a risk, so i think its going to be a problem in the next six or nine months, i dont think so, but i think its absolutely volatility ahead. We have to follow it. Certainly something that will be an issue under powells term, right . 100 . He may flinch and say im uncomfortable with this and pause, but hes going to have to own the unwind of yellen and r bernanke policy and nobodys done that before hes the antiregulation guy yes, theyve been exposed to the fed, but they are not exactly yellen economists. Got to leave it there, thank you, guys. Jonathan and paul chryst fer when we come back, qualcomm takeover by broadcom might be a bit of a game changer for apple. Well discuss whats at stake. Plus, watching shares of priceline plunging after the Company Posted weak guidance stocks down now better than 11 . Squawk alley is back after this im aditi roy in San Francisco with this market flash for you. Blue apron shares are hovering at record lows at 3. 23 a share, down from their ipo price of 10 a share back when they went public in june, after comments from the companys ceo at an rbc conference earlier today in the comments he said, today a new Fulfillment Center is performing as our worst margin operating center because its very new. He went on to add that the company has had unexpected costs related to this center in getting it up and running and they are still training hundreds of new employees this is not new news, they mentioned this during the Earnings Call last week, but again, shares are down 17 right now. Back to you, john. Thank you, aditi. Quite a drop there meanwhile, what would be the biggest takeover deal ever in tech is what broadcom is attempting, making this unsolicited bid for qualcomm, but what does the potential deal mean for one of its biggest customers, apple josh lipton is in San Francisco with more. Hey, josh. Well, john, sources tell cnbc that qualcomm is resistant to this bid, but one company surely closely watching this story would be apple thats because apple and qualcomm are, of course, now in this legal fight that just keeps getting uglier the brawl is about how much apple should have to pay qualcomm for its patented technology, which covers a variety of basic smartphone functions, so what would a broadcom deal mean for qualcomms fight with apple . A combined company would be a tech giant and that means it could have that much more pricing power, perhaps squeezing customers like apple for more money. Some say the more likely outcome would be the ceo striking a new deal with apple. Tan could be more open to settling this legal fight because he seems to be trying to build a company here based on market dominance, which will make money on the kpoens it sells and that is very different from qualcomm, which makes the argument that it invented the very foundation of Smartphone Technology and, therefore, deserves a percentage of every iphone sold. Guys, back to you. All right, that apple piece very interesting part of the puzzle, josh, thank you. When we come back, big buzz surrounding that disneyfox deal, but would regulators even allow such a sale to go through . Well discuss with a former fcc commissioner whesawaly tus. N quk le you cant predict the market. But through good times and bad. At t. Rowe price. Weve helped our investors stay confident for over 75 years. Call us or your advisor. T. Rowe price. Invest with confidence. 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. And i am a senior Public Safety my namspecialist for pg e. My job is to help educate our First Responders on how to deal with natural gas and electric emergencies. Everyday when we go to work we want everyone to work safely and come home safely. I live right here in auburn, i absolutely love this community. Once i moved here i didnt want to live anywhere else. I love that people in this community are willing to come together to make a difference for other peoples lives. Together, were building a better california. Europes going to close in about 45 seconds lets get to seema mody at hq with the european close. Across the pond, stocks are generally lower. Some of the names dragging down on markets in london include associated british foods, which did warn of a decline in sugar profits due to lower eu prices now that news overshadowing upbeat results at its prime mart clothing chain also take a look at Security Firm g4s after reducing full Year Revenue Guidance due in part to flat performance in the middle east and india. That stock down nearly 5 . Lets also talk about luxury autos. Bmw reporting a decline in Third Quarter profits and rising costs will weigh on results for theory minder of this year as it spends on electric cars, selfdriving technology and upgrading its conventional lineup of cars. That stock down about 3 and disappointing earnings from priceline and tripadvisor, weighing on a pair of european travel related companies, both thomas cook and tui are in the red in todays trade and we finish with a survey from the uk office of national statistics, which shows brittic citizens are happier since last years brexit vote, despite real incomes being squeezed by higher inflation and a weaker pound guys, this is average ratings of Life Satisfaction on the rise. On the upbeat note, carl, back to you seema, thank you very much. Lets get a news update at this hour with sue herera, also at hq indeed i am, carl, thank you very much. Heres whats happening at this hour President Trump speaking to a military audience of troops from the United States and south korea. He was at camp humphries south of seoul and talked about the current tensions with north korea. Well be meeting with the various generals, general brooks, and the various generals, about the situation in north korea. And i think well have a lot of good answers for you all and ultimately it will all work out. It always works out. Has to work out. The Boat Owners Association of the United States estimating that more than 63,000 recreational boats were damaged or destroyed by the hurricanes harvey and irma. The combined dollar damage about 655 million most of that damage coming from irma striking floridas keys and the west coast and russians are celebrating the 100th anniversary of the 1917 bull va shik revolution, which saw the fall of the last russian czar and the creation of the soviet union crowds watched a parade along red square, which is in moscow youre up to date, back downtown to squawk alley. Carl, back to you. Sue, thank you very much. Cnbc reporting disney has held talks with fox to buy its entertainment assets whats that mean for hulu, which both companies own a stake in . Julia boorstin is in l. A. For a look at that good morning good morning to you, carl b disney buying fox would give it a shot at turning the streaming service into a real player, allowing it to build out hulus on demand service to better compete with netflix and hulus new 40 a month skinny bundle to rival youtube tv, as well as the traditional tv giants. Nbc, fox, and nbcjuner ha univen stocks of hulu, but gave up its rights as a conditional sale to comcast, so disney would entirely control hulus direction. Citi writing this transaction would allow disney to rapidly achieve direct to consumer scale and effectively compete with emerging ott platforms hulu has 15 million paying subscribers and is only available in the u. S. And japan. Amazon doesnt report official numbers, but by one estimate it has 90 million subscribers to its prime service, which includes prime video analysts say it would boost disneys app in the works in 2019 fx and fxx channels wouldnt fit with disneys core brand or app, but could be on hulu john, back over to you all right, julia, thanks very much so theres distribution part of this and the content part, as well for more on these talks were joined by former fcc commissioner Robert Mcdowell, now a partner at cooley llp and joining us the founder and ceo of tap tv, a subscription video on demand platform welcome to you both. Robert mcdowell, going to start with you, do you think this would even go through . It could, of course, we dont know what the terms of the deal are, exactly which assets might be traded, but it could go through, very much so. Obviously, combination of the movie studios would get extra antitrust scrutiny, but whats interesting cyclicly as you look through history, early administration, in the first year of any administration, especially when you have a change in parties at the white house, you have a lot of trial balloons floated, a lot of Companies Want to test the waters and sometimes you need a marquee approval, say at t time warner inc. Or sinclair tribune, as well, to sort of prime the pump and have the dam break and then you have a bunch of other deals coming after that. So i think thats where we are in history right now and this could be very, very intriguing also the administration might be looking to redefine what competition is and start to modernize those views based on the rise of over the top Media Distribution and content production right well, john, which is key and which is king here is it distribution or is it content . There are a couple ways to look at this potential deal and others like it julia just pointed out in her report the importance of a global footprint for netflix, and look how nicely a fox combination with disney would give disney a footprint in asia, in india with star, in britain, which murdoch is now trying to own a bigger stake of, so the distribution is really important and in a lot of ways the content is fungible. Everybodys got a library of movies and tv shows. Consumers are going to find a way to get their hands on all of them so one thing that netflix has got to be concerned about is not becoming the aol of streaming. That is the early mover who popularized a new habit for consumers and then had its munching, the question they have to answer is how dispensable are they well, a global disney suddenly makes netflix, whose growth has been driven lately by their international expansion, a lot less although these libraries are not created equal, right and even if disney can do this, whos to say that anybody else can do it, as well, right . Viacom assets as valuable as disneys library that ebbs and flows with time you cant count on that, xmen may be popular today, but the vast majority of content that millennials and gen zers are watching is highly personalized, highly informal, authentic candid footage and none of these players is focused on that you know who is . Verizon is trying to reach younger millennials without a ton of success so far. So now that fox says rung the dinner bell and said our content may be for sale, i wouldnt be surprised to see verizon lining up, as well. The whole media landscape changing before our eyes relates to the antitrust case here, if there was one. First of all, you said we need a marquee deal not sure were going to get that for at t time warner there have been questions raised on that front lately, but also how effective is the argument from these companies that with netflix and amazon and facebook as competitors, combining two of the biggest film studios, for instance, wouldnt be anticompetitive . Right, and so its a matter of what you put in the denominator and how imaginative you want to be to stereotype a bit, democratic administrations look at a stat ti ic sense republicans have looked at what would competition be like in five years, what do we see developing, and if they take that view, we see a lot of new players producing new content, whether thats amazon or netflix or others, and so there is more in the denominator, but you also have User Generated Content that the traditional players are competing against, as well so, yes, you have these combination of fantastic libraries that would sell well, very well globally and actually provide a lot of competition to these other over the Top Streaming Services and so that actually presents a tremendous upside for these companies, but from antitrust perspective its a matter of how to define competition and are you looking to where the puck will be, are you skating to where the puck is right now, to quote Wayne Gretzky kind of. This puck is moving quickly john, what are the risks in this environment for consumers . We like to talk about the possibilities, you know, the titans battling each other, but as these Companies Get bigger in these various ways, theyve got more sway over what consumers actually experience, do they not . Absolutely. If theres only a handful of providers, they have control over the pricing if theyve just spent a fortune to acquire one another, then your bill is going to go up. And they have your billing and credit card information and that will just, you know, youll open your envelope every month and suddenly that what about your data, what youve been watching whos protecting your data, what are they doing with it, and thats where the real value in all of these deals digitally is, because for the first time a content creator can know exactly whos watching them and specifically what they are watching data privacy collection is one thing, robert, but on the last point, we have this talk all the time regarding antitrust and amazon how much is anticompetitive when your entertainment costs at home go from 100 cable box to 11 Netflix Subscription exactly right, its a bifurcation of the markets consumers, though, are voting with their feet. Youre seeing linear cable channels under tremendous pressure when they have to compete with over the top and especially for scripted entertainments or sports even. So i think youre going to see an analysis that will have to be imaginative to get some of this through, but i think its very doable and approvable here no offense taken. Thank you, Robert Mcdowell and john kline when we come back, the president continuing to push security in asia military equipment makers may have something to gain from that dow is down 13 points. Rick santelli, what are you watching today you know, we have ed lazear coming up. Head of the council of economic advisers whats interesting these days . Tax policy we talk about synchronized global growth. Heres what i want to ask ed, what about global tax ar baa tros every hear much talk about that . Were going to discuss it after the break. Im scott walker coming up today, Halftime Report top of the hour. With just 36 trading delays left in this trading year for stocks, why is jim paulson saying next year is going to be a whole lot harder for investors hell tell us live and face the panel. Plus, has under armour finally hit a bottom we will speak to the analyst responsible for the call of the day. And the stock andrew left told you on our program to avoid and why it is down 30 today Halftime Report top of the hour carl, we will see you in 15 minutes. All right, scott, thanks a lot. Lets get to the cme group in the meantime and get the santelli exchange. Hey, rick. Hey, carl im excited, its tuesday and i have ed lazear ed, thanks for taking the time pleasure, thank you, rick all right of course, we just had the jobs, jobs, jobs report. 261,000, not bad we could debate that on another day, but year over year average Hourly Earnings moved from the nice looking 2. 9 back to 2. 4 on a month over month, half up 1 , back to unchanged. Listen, ed, is there any real way were going to see the pressures of those that study the labor market actually metastasize into some wages . Well, eventually, yes, but i think your point is well taken look, if you look at the labor market, the Unemployment Rate is 4. 1 looks like we should be tight as a drum, but the reality is, if we were tight as a drum wed see wage growth and we dont see that actually, the best indication that were not really at full employment, that theres still a ways to go, is ironically the fact that jobs are growing too fast now, the reason i say its ironic, were growing at about 160,000, 161,000 over the past three months, and thats been pretty much the average for the last year. Thats about double the rate necessary to keep up with population growth. And when youre at the peak, you dont see job growth thats greater than population growth it should be equal to population growth, not greater. So what that tells you we could always pull back the 95 million, ed we have 95 million that arent counted. Cant we pull them back in i cant believe they all have zero still capability. No, thats absolutely right and, again, the big problem, and you touched on this on the show on friday, i was watching you, and one of the things that you talked about was the fact that we still have young men out of the labor force. Way too high numbers and, you know, the fact that the old are working doesnt make up for that the old shouldnt be working in place of the young thats backwards we want the young to be working. They are the individuals that need to be in the labor force. They are going to be there for the long haul. Its still important to get those people back into the labor force and we have to figure out ways to do that. All right, ed, lets have some fun, okay lets talk common sense economics here theres a relative value trait on treasuries. That means when other securities, sovereign securities around the globe, are going down in yield, makes ours look attractive, brings in buyers, our rates go down. Is there a relative value rate, as well, meaning as we lower our tax rates for corporations and small businesses, isnt that going to create a disadvantage that will have a response by other countries like france doing it and others, where they lower their tax rates, you add in, aka dr. Judy shelton, you get fx volatility. Does the combination of those two issues take away all the golden aspects of the tax policy that were embarking on . I would say no for two reasons. First, other countries are somewhat slow to follow. Look at how slow weve been in following others as theyve cut their tax rates. Its taken us until now and hopefully well do it at this point, but we certainly havent been quick to follow other countries leads in lowering taxes on capital, so, you know, those things take some time. It is possible that they will follow, but even if they do, if all countries lowered their tax rates on capital, that wouldnt be a zero sum game that would be positive, because that would be good for world growth and our growth. Now, it is true, what you said is right the flows of capital into the United States would not be as pronounced as they would be absent reciprocal movements by other countries, but the fact that other countries are lowering their rates at the same time as were lowering our rates on average is good, on total is good well have to leave it there, ed i like youre my shell answer man. I think thats a discussion thats going to get larger as we move down the road thank you, ed lazear Carl Quintanilla, back to you. All right, rick, thank you very much. Rick santelli. When we come back, live from the center of the u. S. Militarys missile production. Morgan brennan is in rocket city, alabama. Morgan hey, carl well, get ready because were going to show you stuff that has never before been seen on television case in point, this missile vertical launch system missiles get loaded into there, missiles that are destined to the pacific to fight against the threat of north korea. Were going to be talking about the technology and how all of Net Technology stands to beficompanies when we return the north korea threat is certainly front and center as President Trump continues his trip through asia. Weve heard him pushing allies to purchase americas military equipment which, of course, could help the companies manufacturing those Defense Products our Morgan Brennan is in huntville, alabama, with a look at that angle. Good morning, morgan. Reporter hey, good morning, sara well, take a look at these these are vertical launch systems behind me. The raytheon standard missile variants are loaded into these and then sent out to u. S. And japanese warships in the pacific. They are canisters that have the missiles stored in them vertically until its time to launch so these missiles are part of the Lockheed Martinmade aegis system which experts say is likely a First Defense against a potential north korea attack on guam aegis is one of four u. S. Missile Defense Systems in use along with thaad and raytheons patriot. Raytheon has a hand in all of the systems which are used against different types of Ballistic Missiles and target their different phases of flight its so important that you have to have the assets distributed to the right places around the world they have to be integrated or connected together, and ideally they are layered so that you create multiple shot opportunities to ensure 100 success. Reporter so demand for these systems is soaring, both internationally and domestically thats benefiting raytheon, Lockheed Martin and boeing and other. Part of the reason for the stocks record runs this year. In addition to patriot which was used to destroy a missile in saudi arabia just over the weekend, raytheon also makes the radar for thaad and also makes the kill advocates that can destroy a warhead in space they are the vehicles that sit inside interceptors that are part of the boeingmade homeland system to protection against an icbm attack whats called hit to kill technology. The kill vehicles are made here at the Redstone Arsenal in huntsville, alabama, and so are, of course, these missiles for the aegis system including a next generation standard missile 3 made by raytheon that will begin delivery to the u. S. And japan next year. Back over to you. Not only International Security story but obviously a huge economic and market story, morgan fascinating. Morgan brennan, thanks for bringing us that. When we come back, that strange iphone bug thats plaguing some apple users when squawk alley returns in a moment whoo woman class, lets turn to page 136, recessive traits skip generations. molly i reprogrammed the robots to do the inspection. Its running much faster now. See . Its amazing, molly. Thank you. theres a bug in the iphone thats leaving users frustrated, including this one some apple customers have discovered a glitch that automatically corrects the lower case i into the letter a and then a box with a weird question mark sim poll in it. Its impacting people with the ios 11 though apple hasnt offered an official fix, there is a workaround. Can you go to settings, general, keyboards and Text Replacement and set it to replace the lower case i with an upper case i. Thats working for me but a producer says its not working for him when hes on instagram or not so maybe its a gen x fix. I think the problem is the camera makes you look so ugly because the camera is so good on this phone i know jim has raised this before. A Common Thread on social media today. I hate the pictures of myself on it, terrible. Everybody likes them so, sara. Its like theres not enough bronzer in the world. The downside of technology. Speaking of downside, dow is down 53 points, close to the lows of the session. Of course, we set record highs early on in the session this morning. Dont forget snap reports tonight. Coming off of that outage yesterday which made a lot of news marriott and zillow also will have snap doesnt have a great track record when it comes to reception on wall street after reporting the last two quarters. Down about 20 each. I think the question, john, here is what innovation do they have because there are concerns about slowing user growth and concerns about slowing Revenue Growth even thought the street is looking for those sales to rocket another 85 believe it or not, thats actually a slowdown. The first innovation might be a change in tone on the call theres some criticism that they have been a little too flip about competition from the likes of facebook and instagram. Perhaps they have managed to recalibrate that, and and come back with a different take. A number of stocks, text stocks seeing some gains today and comcast, the parent comof this. All the media stocks. Yes many media stocks and that one in particular up better than 3. 5 im seeing snap ahead of earnings up a little better than 2 as well. Retail obviously not participating today along with travel priceline and trip adviser, the worst s p lag yards, but target, gap, cignet, coles, raffle lauren and a bunch of others in the red. Even after Ralph Laurens solid quarter last week and decent results out of tapestry today, though sales were a little bit light. And after a much better quarter from michael kors on back of the jimmy chiu acquisition, blue apron down 16 , a record low for that company after those comments. Indigestion in lyndon continued, long running indigestion. Had to get that in there. Yes. Lets get to wapner and the half. And welcome to the Halftime Report. Im scott wapner our top tried this hour getting defensive. Why one wellknown stock strategist says its about to get tougher or investors even as the major averages hit record highs once again with us for the hour, joe terranova, josh brown, jon najarian and the ubs private wealth manager advisor dow, s p and nasdaq all hitting new highs before pulling back. The dow is now down 60, s