Transcripts For CNBC Squawk Alley 20240714

Ten weeks. But with todays move to the upside in a sector largely exposed to china and ahead of another round of expected tariffs in just a few days, where should investors be looking for protection joining us now to discuss, Oak Mark Fund Portfolio Manager bill nygren and nsz capital cofounder, bill slingerlen brad, you have some thoughts specifically around where is a good place to put money at this point. Specifically as it relates to regulation coming down the pike and semiconductors give us a sense, start with semis. Sure. So you know, we think theres no more interesting spot in the tech sector today than in the semiconductor segment, particularly for longterm focused investors. We know theres a lot of noise and a lot of volatility around the trade war and the trade talks that are going on now. We think ultimately, were entering sort of an ai cold war phase between the west and china. But that china and the chinese economy cant exist without cement conductors and frankly, the entire Global Economy now runs on semiconductors everything we talk about thats happening on the innovation front relies on these ai chips from companies such as nvidia, relies on these chips like microcontrollers from a company such as microchip. And these are largely u. S. Intellectual property. And ultimately, china needs these, the world needs these chips. And theyre priced because of the volatility in the market, as though theyre heavy cyclical and not going to grow, but we think thats fundamentally not true with the big growth thats coming for semiconductors over the next decade. And bill, i look at your top holdings i dont see semis having much of a presence youve got more banks, some other types of stocks. You have a different take on where people should be positioned now, i take it . Well, at oak mark, were longterm value investors. And thats not been a fun spot to be the past year or really the past five years. And thats because the spread in market p\es has just gotten wider and wider. Were at almost unprecedented levels now where the lowest p\e stocks are half the market multiple today and that lowest sector is full of banks we have citigroup, bank of america, capital one, ally financial. They sell at seven to nine times earnings they sell under book value most of them are repurchasing a lot of stock dividends are higher than 30year onds we think, as value eventually makes a comeback, the Financial Sector will lead the way bill, that seems to make sense, i guess, on some of those metrics, but if youre looking at Interest Rates potentially going lower, Net Interest Margin cant be too attractive for a lot of those banks i certainly agree with that shortterm but one of the things about the way we invest at oak mark, were trying to figure out what a company is likely to earn five to seven years from now. When you look out that far, i think its fair to guess that Interest Rates will about match the inflation rate our guess is about 2 on that level. And that thats plenty high for these companies to get good Net Interest Margins brad, within the media space. Do you feel like the consolidation in the u. S. Is over now that weve seen cvs and viacom top i think we could see further consolidation in media and media is an area that were very establibullish on for the longterm. We think that the content producers are becoming more important. Theyre taking back control of their direct relationship with their customers through streaming and were entering this period where these consolidation with the media stoid studios, they can both have their cake and eat it too. Theres a manageable decline in traditional tv subscriptions thats being more than offset by directtoconsumer streaming so disney is extremely well positioned we think that combined cbs viacom will also be very well positioned. And we dont think that will come at the expense of netflix or some of the other streaming properties i think consumers have a large budget to spend on video and its not shrinking and theyre getting more and more value for that budget. So its a really positive setup for the longterm for media. Bill, how do you see the narrative in media and distribution playing out i see youve got charter as one of your top holdings our parent company, comcast, as well the combination of media and distribution was a big story over the past few years. Do you expect that to shift over the next five to ten whats going to determine who has the most value well, we think of both charter and comcast as primarily internet providers and they currently have, by far, the most reliable, fastest Speed Internet and we think that will continue throughout our investment time horizon. I think a lot of investors worry too much about cord cutting. Providing video just isnt that profitable for the cable companies. They make their money from providing Internet Service and with the growth in streaming, we also own netflix and alphabet, two of the largest streaming Video Companies and not valued at all as highly per hour watched as the traditional Media Companies. We think streaming is going to keep growing and it will benefit all of those companies all right we will see how this plays out bill, brad, thank you. Thank you now, apple ceo tim cook has long said that china tariffs would hurt his company and a new reuters analysis helps explain why. The report, and examines apples supply chain data shows a company that is increasingly dependent on and intertwined with the chinese economy joining us now to explain, reuters reporter, steven nellis. Thanks for joining us. Thanks for having me. So an increasing dependency in terms of supply chain on china. Gauge for us the numbers and the level with which thats increasing absolutely. So apple has thousands of suppliers, but every year they publish location data for about 750 plus of those. And what we did is went through about five years of that data and analyzed it and found that a little between 44 and 45 of those suppliers were located in china, as of 2015. And then as of 2019, that actually increased to almost 48 . And the really interesting thing about that is while theyve added a few factory locations where they assembled the products in places like brazil and india to do local tariffs, most of the new locations for factories have been in china foxconn alone went from having 19 facilities, helping supply apple to having 29 in that same time period. And thats right around the time where theyve introduced new products like the apple watch, air pods, home pods. So what we see is apple is really relying on china to help it deliver those new products. And that trend hasnt lessened, even as the trade war has heated up but stephen, what portion of that is in terms of the cost of, say, an iphone so 40 to 45 of the supplies by number, but is that of the lowcost parts or the highcost parts. Well, thats an important thing to put the finger on, because only about 2 to 3 of the value of the phone is in assembly and a lot of those really valuable parts, things like screens, things like some of the most important chips in the phone are actually made in places that arent china a lot of the chips come from taiwan some of them are made in the United States in places like texas or colorado, and a lot of the screens come from places like korea japan is also a major country that supplies a lot of these parts. So its absolutely correct to note that while a lot of the number and volume of suppliers are in china, some really highvalued parts are coming from outside of china. Stephen, how thoroughly were you able to dig into how country of origin is determined . The circuit board, i understand, where thats made is a major factor in determining that so even if a lot of the parts are sourced out of china, will it necessarily be determined as a product made in china and subject to the maximum amount of tariffs . Thats right. So throughout the consumer hardware chain right now in tech, everybody is looking at this shall of what constitutes country of origin for the purposes of a tariff, which is actually legally speaking slightly different from what it might say on the box and a lot of things Many Companies are looking at is where are the Circuit Boards made you take a hassle of chips that could be made into anything, and once you affix them to that circuit board, theyve kind of become a product and that could count as what the folk who is do tariffs call substantial transformation, which is the key Legal Standard for deciding whether its going to face a tariff or not. So that has at least some Companies Looking at how they could shift this around. For apple itself, we dont know exactly what theyre going to do we do know that some of their suppliers like foxconn have the ability to make those Circuit Boards in other countries like india. But the thing to remember is that in china, apple is making hundreds of millions of devices a year thats about 600,000 plus iphones a day, only holding on to maybe five days of inventory at a time. Getting the scale and velocity of the supply chain anywhere else but china is going to be difficult, even if apple and its suppliers have the ability to do stuff like make Circuit Boards in other countries and stephen, that brings up an interesting point because, of course, apple does do some manufacturing in india and in vietnam but their point is they just cant scale the volume that is done in china to move any of that substantial manufacturing and thats the manufacturing thats largely for the devices sold in those country, is that right . Thats correct. So in brazil and india, for example, those factories were very specifically opened in response to import duties and tariffs in those markets in the case of india, its one of the last remaining fastgrowing markets where people are adopting highend smartphones like the iphone at a rapid pace apple really wants to be there theyre pretty steep tariffs, though up to 30 in some cases, if you dont source some of your supply within india so, theyve put those factors there to supply the local market, but youve got to remember, their market share in india is tiny, as it is, because the phones, even without tariffs are still very expensive and its still small just one market compared to apples Global Market of hundreds of millions of devices a year and those factories, while they exist, theyre really just meeting local supply stephen, it seems important to note, with the amount of lead time apple has before december 15th in this case, even though tim cook famously hates inventory, thinks its evil, because it just kind of burns a hole in your balance sheet, theyve got time to build inventory if they want to for the sake of serving the u. S. Market that would be subject to tariffs. If they determine that thats a sort of onetime thing that they would want to do and mitigate the effect of these tariffs, right . Thats right. So remember, their fiscal First Quarter encapsulates the Holiday Shopping season in the u. S and President Trump specifically moved some of those tariffs to december 15th on the idea that it would allow u. S. Companies to get most of that inventory on to u. S. Soil. Now, for most companies that dont churn their inventory that quickly, december 15th to kind of the end of the Holiday Shopping season seems like plenty of time for apple, we know, they hold it as few as five days, so you are left wondering whether they would actually be able to get it all in by then but, you know, this is a very sophisticated company. Its a rare case where the ceo himself actually built out a lot of the supply chain and its probably true that if they want to move that up, eat a little bit of inventory cost to respond to this onetime situation in their fiscal First Quarter, which is typically the biggest, they probably can. Right now they are in the big ramp well probably see a new iphone announcement some time in the second week of september so theyre already getting those phones ready and getting those processes ready right now. And its, yes, very possible that they could do a little shifting of how they normally handle inventory to respond to this onetime event in a big quarter for them stephen nellis, thanks for joining us thank you well, when we return, another big day for retail earnings with best buy, an b abercrombie fitch, dolr la general, and dollar tree reporting this morning we break it down stick with us. Squawk alley will be right back well, best buy on pace for its worst day in almost a month and thats after Quarterly Financial results came in mixed. The retailer gave disappointing sales and Earnings Guidance here so joining us now, ubs retail analyst, michael lasser. He has a neutral rating on the stock and his 66 price target also with us, anthony chakumbo anthony, what do you make of the report this morning . It was mixed, there were things to like and things to be disappointed about how do you put it together i feel like bill murrays character in groundhog day. I feel like this happens pretty much every single time best buy reports earnings these were not mixed results, these were good results. Comp store sales came in a little bit light of expectations, but against a very difficult year over Year Comparison epps w eps was up 19 year over year, beat consensus by 9 cents. And the Earnings Guidance for 2019, they raised it so i just dont really see any reason for the stock to be down 10 today. From my perspective, this is a buying opportunity i am pounding the table with both fists okay. Thats a pretty strong answer. Michael, do you think the stock is down because of the exposure to tariffs i know it could be as high as 60 of their cost of goods sold, although ceo cory barry tried very hard on the call to say, look, its not going to be that high we have a ton of mitigation strategies in effect, but is that what the market is reading for this selloff . The market is reading a couple of factors for the selloff one, as you point out, there is a lot of tariff exposure 60 of sourcing from china means it adds a whole lot of uncertainty to the situation, especially for 2020. This tariff uncertainty is going to weigh on 2020, even more so than its going to weigh on the Fourth Quarter of this year. And two, we did see some volatility in the product category trends, particularly in the gaming area. That seems to be softening at a very rapid clip. As a result, they had factored in a bit more caution into their Fourth Quarter outlook i would also offer the perspective that its going to be a very difficult holiday. Were going to be stacking two good holidays on top of each orr. The holiday is actually shorter this year than in the past six days, so these retailers will have to sell more goods in a shorter period of time and were entering the Holiday Season very heavy on inventory thats been a consistent theme across retail reporting. So we could see some of these retailers blink and make it a very promotional Holiday Season, which could impact a retailer like best buy disproportionately anthony, are you unconcerned about tariffs . Well, its not that im unconcerned. Im more concerned about the uncertainty around tariffs than i am about the tariffs themselves one other thing that ill say about best buy is that, look, this is a company with a long track record of underpromising skbroe and overdelivering and they have a new cfo, so clearly they dont want to blow this guy up. They want to have him beat numbers the first couple of quarters out of the gate, particularly during the holiday selling season one thing i would mention during the holiday selling season, its always promotional and always competitive. Thats not new and best buy now has a partnership with progressive leasing. Theyll be able to offer leasetoown during the holiday selling season that will be incremental buying for best buy michael, give us a sense on how best buy is doing in this omnichannel world. The stock has been on a nice run since, i dont know, mid2015, arguably it used to be all about amazons going to kill these guys, target, walmart in the mix, too. All of them have developed strategy to counter that argument and were talking about best buy now having a bad day its actually not about amazon, right . Yeah, best buy is helping to feed the narrative that traditional retailers, the strong, wellpositioned retailers are fighting back. And theyre going to survive over the long run. Best buy, in the quarter, grew its Online Business 17 . It offers a range of fulfillment options including buy online, pickup in store. If you buy right now on thousands of items, you can pick it up within an hour thats a very convenient offer thats tough to compete with for those who dont have the physical locations so i think this narrative that amazons going to destroy all retail is false. The real narrative should be that whats happening in retail is the weak retailers are going away and the strong retailers are Getting Better and interesting to note, as well, on the quarter, the online sales, it was the biggest quarter for a nonholiday quarter, actually, that best buy has put up and that was on prime day. So they did compete well there thank you very much, michael anthony, for joining us today on squawk alley. Markets back up to session highs. All the major indices up more than 1 as we stand. And one of todays biggest winners are the chip stocks. And frank has more on that from the nasdaq as weve seen those headlines about china staying calm in the trade war, investors have gotten excited about chip stocks, especially those with high exposure to china. That includes korvo. Sky works also up more than 2. 5 that chipmaker kbets about 85 of its sales in china. Micron sales up about 3. 5 as wale that Company Getting about 55 of its sales in china. This also helping out transports so youre looking at csx, those shares up more than 2 you have to remember, the ceo called the current freight environment puzzling perhaps a trade deal would bring a lot more charity also, jb hunt, those shares up more than 3. 5 jb hunt is the nations largest shipper of containers. This business has been directly impacted by fewer exports to china and of course, the trade war overall. Back over to you all right frank holland, thank you and the dow, meanwhile, looking for its third positive session in four. Take a look on the screen at some of the names leading the wee inx gh rback after a quick break vo the ant mindlessly marches on. Carrying up to 50 times its body weight. It never questions the tasks at hand. But this year, theres a more thrilling path to follow. father kids. Change of plans vo defy the laws of human nature. At the summer of audi sales event get exceptional offers now stand up if you are first stand up if youre a mother. If you are actively deployed, a veteran, or youre in a military family, please stand. I will tell you this, Southern New Hampshire university can change the whole trajectory of your life. I felt completely helpless. Trashed online. My entire career and business were in jeopardy. I called reputation defender. They were able to restore my good name. If you are under attack, i recommend calling reputation defender. Vo theres more negativity online than ever. Reputation defender ensures that when people check you out, theyll find more of the truth, not trash. If you have search results that are wrong or unfair, visit reputationdefender. Com or call 18778668555. Should always be working harder. Oney thats why, your cash automatically goes into a Money Market Fund when you open a new account. Just another reminder of the value youll find at fidelity. Open an account today. Welcome back european markets set to close. Brexit headlines very much in focus. And steve cedric has the latest for us from london hey, steve reporter a ferrari in westminster. Unconstitutional that remains to be seen. Unconventional, absolutely the measures taken by Boris Johnson to proeg or suspend parliament has taken many by surprise what happens next, parliament will come back the week of september the 3rd. It will have three or four days to fight against this proroguement and there will be a suspension until when the queens speech is taking place in parliament on the 14th of october. Will the opponents of Boris Johnson have maneuverability in that period remains to be seen what are their options Going Forward . Well, a legal challenge may be a very tough call for many of them, but perhaps a no confidence vote in parliament could take place if that were to take place and the Prime Minister succeeds and has a vote of confidence, then, of course, he will get his way if there is a no confidence vote against him that is successful, it can go either one of two ways one an a caretaker government may well try to be put in place under someone like king clark, maybe a Harriet Harlem or jeremy corbyn, or they will fail to form a government, in which case the Prime Minister, Boris Johnson, could then call a general election, but he could call that for a date after the key brexit date of october 31st. A lot of ifs and buts, a lot of questions about the constitution, about convention, and about the legality of the very bold moves which have divided parliament and divided the country from Prime Minister Boris Johnson. This is Steve Sedgwick in westminster. Thank you, steve. Meanwhile, minor indices in europe, about 1 higher as theyre set to close now lets get to rahel solomon for a news update. Good morning, jon heres whats happening at this hour former fbi director james comey violated policy and his employment agreement by leaking sensitive memos that triggered the mueller probe. This according to the department of justice Inspector General in a report released this morning comey responded in a tweet, defending his actions and drawing a distinction between sensitive and confidential material the Justice Department has already decided not to prosecute comey. Chinese state media releasing footage of military troops moving into hong kong for what they call a routine rotation this is amid fears that the army will intervene in the ongoing prodemocracy protests juul has announced that a new i. D. Verification system has been designed to prohibit sale to underage shoppers juul has said that more than 40,000 stores have committed to implementing the new standards and will not distribute to stores that arent compliant starting in 2021 and apple has launched a new repair program allowing customers to fix their phone more easily. Independent repair businesses will now have the same access to tools and parts that are used to fix phones at the apple store. Im sure a lot of people will be happy about that and that is our cnbc news update for this hour. Lets get back to squawk alley. Wo wilf, over to you. Rahel, thank you very much. Still to come on squawk alley, investors getting their first look at disneys new streaming service. Well ask kara swisher about that next. Meantime, getting a check on where we stand on the major averages back over the session highs for all the major indices, led by the tech sector and the nasdaq, up over 1. 5 were back in a moment theres a mouse in the house, according to ubs, or at least there will be. In pave out this morning, the firm finds that nearly 80 of u. S. Households have heard of disney plus. Thats the streaming service, at least 43 intend to subscribe to that service, whig saying thle t disneys projection have said too modest of the same survey, 57 said they would cancel an existing streaming service to make financial room, presumably, for it weve had our first look of whats going to be on disney plus this week joining us now, kara swisher good to see you. Good to see you so i think a lot of people weve had on air keep saying, theres room for everybody in this streaming game. Netflix will be fine everybody will be fine i dont buy it i think somebody is going to take some lumps here what do you think . We see. Absolutely, i think people dont want to buy a lot of services. I dont know how you act, but i dont want to own like six or seven services you do have magazine subscriptions and things like that, so people are used to it, but the question is will they pin practice be using this Many Services its not a zero sum game, but it makes people make choices that they have over their entertainment. So the question is, will they switch over the way, say, people switched from spotify to apple, apple music, and things like that so it will be interesting to see if that survey, which is very good for disney, actually happens. And i think thats where i want to see if it actually picks up like that. Whats your take, kara, as to whether once we get past this launch, that we start to see content costs come down. In a weird way, this competition for a company like netflix could help in the media more longterm if that does actually materialize. Well, i dont know. You know, you would like many more players in this kind of market, because costs are great for consumers. And its great, you know, consumers get better prices, and on the content cost price, its great for content creators that all of these people are vying for their content. I think what happened is when theres this much fragmentation, though, its going to be problematic for consumer choices, for these companies to figure out, and its all going to be based on hits and the things people want to watch. And disney, to its credit, has so much content. It sort of owns all the really great content. And the question is if it can keep producing more and not just, you know, rely on evergreens because this has become just like a lot of things, a hitbased business so if people are attracted to a hit like Stranger Things or whatever theyre watching, it used to be homeland on showtime or something on hbo like secession thats really where the game is, the new and fresh stuff that attracts people and they have to have the backcatalog of things that are super popular. Kara, i wonder if any of these services will eventually turn us to some sort of contracts, you know, thats what weve had for a long time with cables, with your phone, where you sort of sign up and then youre sort of stuck for a while, to kind of increase the stickiness do you think thats at all a possibility . Theres an interesting concept that Scott Galloway and vi talked about called rundeles, which are recurring revenue bundles, where you trust a company for a range of things. I think thats keeping in the idea whether having stuff jammed together by a Cable Company or Something Like that. Obviously, everyone is used to that kind of behavior where you buy hbo or showtime or whatever and you dont really understand the pricing or anything else so consumers are used to that, but it doesnt mean consumers like it. And you know, in this case, i think that the consumers will sort of choose the things thats best for them, if they have small children, theyll obviously choose disney more than other stuff if theyre younger, im guessing netflix has a much younger demographic. So it will be interesting to see where people settle. But i do think consumers are sort of in the drivers seat here on what they want i think theres a rebundling thats going to happen we see disney with this disney plus, hulu and espn bundle already. If that works, how can they resist finding other stuff to stick in there kara, i also wonder, who else is going to win here . Is it roku that stock has had an amazing run. But tleeclearly there will be pe out there who havent described to netflix, but have done it just through a phone or a tablet who will want to see this disney stuff or these other streaming services on a big stream how do you think they end up paying that . Is roku perhaps due for another run or some other overthetop provider anyone thats offering a service thats really popular is going to do well if theyre on you remember when netflix wasnt on comcast and things like this, these things tend to settle out and people that are sort of against each other decide that they want to be together in order to reach the consumers i think eventually, there will be sort of a coalescing around a few services, a few services that provide all the services. Because i think for consumers, a lot of this stuff is not thinking about what consumers actually want. Its whats good for these companies. And i think the question is, how can they provide something thats a great price and getting what you want instead of having you have to pick, you know, a la carte from everything. So definitely, there has to be something that coalesces at the same time, i think it should think more about how consumers behave, so they can pick and choose what they want themselves because thats the way the consumer is today. Theyre not sort of in a forced stuff that Media Companies force down their throats and kara, before we let you go, a little bit of a left turn. Rihanna, the artist, her lingerie brand savage x feinty receiving 50 million in funding this morning fenty, shes got that done with lvmh, as well. Shes been quite the entrepreneur its really interesting im always fascinated by this. The issue is how much staying power do these things have youve been around a while and have a million of these celebrityoriented websites or Different Things theres been so many of them, there was a one a long time, a Movie Service with matt damon. I dont know where that went so the question is how much staying power do they have and how much is the person involved in it . Whoever, whatever the celebrity is so i worry a little bit about these things being faddish and then they move on to Something Else its really hard to build a brand and keep it going over time that said, this area is so ripe for disruption its been dominated by victorias secret and, you know, millennials and others are looking for a different thing. And so thats where the real opportunity is for a celebrity like rihanna or you know, anybody. Any of these celebrities that have a really strong relationship with their fan base, essentially. Yeah. And she has shown shes serious in cosmetics now moving deeper into fashion it will be interesting to see how this goes. Kara, always good to see you thanks thank you meanwhile, apples wearables could be hit by a 15 tariff in just a few days time. Josh lipton explains from san francisco. Hey, josh. So, wilf, thats right. Remember, there are a lot of fans of these wearables. Apple has now sold an estimated 80 million watches and 50 million air pods so how could apple respond well, it could absorb the tariffs entirely analysts estimate that could cost the company 500 million. Or apple could try to pass along price increases to consumers that, of course, risks denting demand evercores more concerned about levees hitting the iphone. The apple is hit with all potential tariffs. He says the company could take a hit of at least 5 billion to its bottom line, and that is real money, amounting to about 10 of the companys Free Cash Flow on the other hand, we know tim cook seems to have friends in high places. President trump recently praising cook as a great executive and said cook made a great case about why competing with samsung would be tough if iphones get hit with such import tariffs. Tim was talking to me about tariffs. And you know, one of the things and he made a good case is that samsung is their number one competitor and samsung is not paying tariffs because theyre based inform south korea and its tough for apple to pay tariffs if theyre competing with a very good company now, some bet that apple, when its all said and done here, wont be hit with tariffs. Not wearables, not iphones, that it will earn exemptions. Thats gene munsters view he doesnt think when push comes to shove that the u. S. Government want s penalize such popular products guys, back to you. Thank you very much, josh its a story we will continue to follow a very Important Company well talk to the ceo of another Headphone Company on the september 1st tariffs list, that in just a few minutes. But first, Rick Santelli, what are you watching today . I continue to watch the long end. You know, were knocking at the door of 2 in the 30year bond the bond may hold the key to where the markets go yowa tknu nto ow where theyre going . Tune in after the break. I felt completely helpless. Trashed online. My entire career and business were in jeopardy. I called reputation defender. They were able to restore my good name. If you are under attack, i recommend calling reputation defender. Vo theres more negativity online than ever. Reputation defender ensures that when people check you out, theyll find more of the truth, not trash. If you have search results that are wrong or unfair, visit reputationdefender. Com or call 18778668555. Im scott wapner heres whats coming up halftime report. Were debating whether this weeks tech takeoff is the start of something bigger. Many say the markets cant get going again without it so well discuss the stocks you need to own and trim plus, our call of the day hits squarely in the tech space today. Our Investment Committee on whether this apple supplier is worth a look and nascar star kurt busch is in the house. Were going to talk fast cars, fast money, and what he is doing to give back to americas veterans its all at noon on the half cou court, well see you in about 15 lets get over to the cme and Rick Santelli with the Santelli Exchange hi and good morning is it our problem the world just loves our securities, like cake, they just love it and the longdated ones, not only on foreign buyers in love with it, institutions around the globe that need to match their future outflows, their payouts, insurance companies, annuities think about all of the payouts down the road that need to be accompanied with cash flows. And you look at the short end. The short end has the fed, tbill issuance everywhere in sight, especially right before and right after the budget deal. Thats why treasury secretary mnuchin thinking about an ultralong bond is a wonderful idea if they want to eat cake, lets give them some cake to eat because all of these issues ive described have huge lly distortd the yield curve . How do we get our gps back how do we know when the global feeding frenzy that keeps the dollar firm and keeps treasuries well bid and keeps treasury lows making it very hard to handicap how our economy will have to behave, when the thermometers in the mouth, maybe a full onset of the flu were doing pretty well. The issue isnt the inverted curve domestically it has now become a global signal why . Because its Global Players that are giving us the signal but ultimately, it could still be right because the key point to discuss is how can we survive and what would our rate of decay on growth be if the rest of the world keeps pushing us into negative yields and Slower Growth quickly, lets go to the board its all about the 30year i did three charts here quick. Scale doesnt matter since august 1st weve dropped like 60 basis points in a 30year bond so when you take 30s minus 10s, we call that the nob down here, of course it got affected. The spread narrowed. Its coming back a bit but the real key here is this chart. This chart goes back to june of 2016 why . On july 6th, 2016, right around the time were making a double bot around 136 in tenyear notice, we made only one bottom at 209 and 30year bonds and when we traded through that, this really accelerated. The point is, everybody now is looking rightly so at the Double Bottom on 12 and 16 on 10s but the key may be the long bond, because if the long bond can get above 209 before tenyear note yields violate the Double Bottom at 206ish, in my opinion, thats what i call at least a large bottom, so watch 30year bonds and pay close attention to the nob spread. Wilf, back to you rick, if u. S. Treasuries are like cake, what are german bunds like well, german bunds are getting to be less and less like the tastiest cake, because many fear that the ecb and the european economy are toying with too much debt. Theyre taking on too much in negative yields. And what are they getting for it a weak concerns aurrency and a y economy. There are issues of confidence and control. And even though theyre still punching on those like cake, what about the inventory of all the southern Central Banks like italy and greece whats going to happen all of these securities thats an issue and it is affecting the appetite of foreigners to even the highcredit debt in european i like that you got crumby in there, as well im not going to ask what guilds are like buntd cake. How its impacting his business and what if anything ayitustorere ppa st wh stand up if you are First Generation College student. crowd cheering stand up if youre a mother. If you are actively deployed, a veteran, or youre in a military family, please stand. The world in which we live equally distributes talent, but it doesnt equally distribute opportunity, and paths are not always the same. Im so proud of you dad. [man] i will tell you this, Southern New Hampshire university can change the whole trajectory of your life. uplifting music welcome back, we are up at session highs 351 points on the dow. 1. 35 , the nasdaq still leads the charge thats up a healthy 1. 5 , as is the russell, tech, energy and industrials lead the charge. Were just a few days away from another round of tariffs set to go in effect on september 1st. Headpho Headphone Company jlab audio, one of the companies on that list expects a loss of 10 in profits overnight. Joining us is the ceo win cramer good morning to you, thanks for joining us. Good morning to you, and i wish it was 10 , but now were at 15. 15 so gauge for us when what portion of your products are manufactured in china, and as you say, exactly how thats going to shake down on the bottom line . Yeah, we have 100 of our products manufactured in china, about 90 of those products are on the september 1st tariff list, so a big portion of our business is going to be impacted from this. 100 of the costs or so coming from china or is this thats correct. 100 of the cost comes from china. So talk us through your best selling headphones how much do they cost today and will you be passing any of this increase tariff cost to you onto the consumer. Yeah, so we have a range of goods. All of our products in the Value Segment or accessible segmentment, we price them from 50 to 150 in the u. S. Market, and we do plan on passing costs on to the u. S. Consumer, but were taking a wait and see approach, and we think thats the prudent approach because were seeing changes happen via tweet. I mean, look at a week ago friday i woke up and found out that our cost of goods were going to rise 5 in a week and we had no idea that that was coming, so we think a prudent approach will be wait and see, but were certainly going to take a hit on the profit side. So price might go up for the consumer in due course but on september 2nd it will be the same. Some of our peers arent as lucky. They didnt have as large of an inventory position as we did youre going to see the baskets of goods increase over the next 30, 60, 90 days as we get into holiday, and certainly, you know, if your budget is 100, and you now have to spend 115, somethings going to get cut from that basket so win, obviously you sell your products at a number of retailers including kohls, best buy, walmart and home depot. What are the conversations like between you and the retailers . A lot of them are telling us look, were having conversations with our vendors about how this is going to work whos going to take on sort of what percentage of the cost increase what are they asking you to do what are you telling them you can do yeah, i think the conversation have actually been have been really wellreceived by both parties and we have good partners in the u. S. Theyre asking us for help were asking them for help, and were trying to find ways that we can both trim costs to ensure the u. S. Consumer doesnt get doesnt get burned as much if you think about it, all of the jlab products come with a charging cable that is three feet long. Can we trim that charging cable to one foot. We dont ruin the user or the consumer experience, but we trim a little bit of cost that we can pass on through. Were trying to find some creative ways to make this happen to work with our Retail Partners. Win, how does the Holiday Season you think play out differently in a tariff environment . I mean, usually a couple of weeks before christmas you end up with some shifts, depending on how good the demand has been, how steady the traffic has been. When you factor tariffs in, how do you think that impacts discounting in the calculations . Yeah, i think discounting will not be as strong this year because there is a 10 to 15 tariff that manufacturers and Retail Partners are trying to absorb i dont think youre going to see as big of discounts over the black friday period as youve seen in the past if you had 100 to spend for the holiday and now you need to spend 1,515 15 to get the same amount of goods, something is going to get trimmed. When you look at your companys Business Investment plans, have you had to make some changes now that we know these tariff costs are going up, investing in less, hiring fewer people yeah, absolutely. And thats the one thing we can control through all of this is our spend and our investment and its across the board from Little Things like a coffee supplier do we need starbucks or can we get away with folgers to renegotiating with ups everything is on the table in terms of investment and expense including people weve pulled some u. S. Hiring positions off the table due to tariffs, so its certainly all on the table and all being discussed. Win, thanks for joining us. Thanks very much. I appreciate the time. And after the break, amazons burn book well tell you what that is in less than three. Ssing out. Uh. The mobile app makes it easy to manage your policy, even way out here. Your marshmallows. Get digital id cards, emergency roadside service, even file a. Whoa. Whoa. Whoa. Whoa. Whoa. Whoa oops, that cheeky little thing got away from me. My bad. Geico. Its easy to manage your policy whenever, wherever. Can i trouble you for another marshmallow . And let me tell you something, rodeo. 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This is such an interesting document i would love to sort of see who put this together, why they put it together, and how it really factored into their ultimate decision. I have to say i havent seen the movie, but i like the clip. Other thh, you havent as for amazon doing this, im not that surprised i would think in this process if youre going through anything like this, that that team or some kind of consul at that particular time consultants would be doing their due diligence. I wouldnt think it comes as too much of a surprise. My twitter replies are my burn book. Thats where people burn me. I mean, sadly, the same goes for me we dont get to have a sort of compliments book on twitter. We could start one of those that would be nice that would be a really nice thing. I hope that new york politicians and politicians everywhere sort of learn from some of the fumbles that were made if indeed that was some of the reason that was lost. Major indices near session highs, the dow up more than 335 points new tannics on the tech front doing particularly well after reporting earnings where they lost less than the street expected after a couple of disappointing quarters that will do it for us here on squawk alley. Lets get to judge and the half. John, thanks front and center this hour, the tech takeoff, is it a sign that trade is about to be back in a big way . It is 12 noon, it is the halftime report. Tech on a tear after weeks of losses is it time tostart biting on the faang names . Stocks rallying on hopes about trade talks, but when it comes to the economy, which is the bigger threat, the trade war or the fed chip stocks soaring and a big updwrgrade on a major apple supplier why it may go 30 higher from here the Investment Committee is ready to go