Transcripts For CNBC Squawk Alley 20170728

Good friday morning. Welcome to squawk alley. Were at post 9 of the New York Stock Exchange jon fortt is off today ed lee joins us. A lot to get to tech took a item thbl morning. The nasdaq continues to slide amid that selloff that began in yesterdays session. The index set multiple record highs earlier in the week, mike. As we know, we hit critical levels on market cap on unit performance. Nasdaq getting 28 year today. We were talking about jeff bezos being the richest man alive. I think also a couple other things working against tech which is this month the market has been inclined to sell the winners. The year to date winners are the worst performers this year and then earnings season, youve had to have absolutely across the board blowout numbers to get rewarded on the first day. So you saw alphabet. You had a little pullback on generally good numbers amazon the same effect i think all that is causing people to wonder whether its time to take some chips away from tech. I think, especially looking at amazon, i mean, its been great growth stock it always trades at a super high multiple people take some profit taking off that i think there are psychological markers, right, like when you hit that 500 million mark. I think we maybe thats the limit there. So i think logical versus fundamental catalyst. Amazon traditionally the bottom line is not the thing you want to look at. They have given a weird range in the estimates. We could lose 300 million or profit 400 million that, kind of thing descent want you to look at. That he wants you to look at is our business growing which it is aws is growing like crazey the retail part of the business, 25 growth, astounding given how the rest of the sector is cratering. So positive signs on the top line we had a long discussion this morning about aws margins coming down is it possible that microsoft is a bigger threat in cloud than we thought . I think so and google and their Cloud Business lets look at am zorngs the reason they miss on estimates is theyre spending more to hire more sales people specifically for aws. Meaning, there is more competition in the marketplace with microsoft azure and google cloud. They need to do more selling they need to do more pitching. And i think thats a sign of first of all, theyre spending money the right way but it is getting more kpetive in that space. I wonder speaking about Competitive Pressures on margin whether we can draw anything from Competitive Pressures from walmart on margins of amazon its always hard to tell amazon is spending so much on warehouses and planes and got knows what else. But walmart is ramping up ecommerce and theyre the king of low prices. Right theyre playing a similar game as amazon. Wanting to be a price leader i think that a lot of people have looked at amazon and said all you really have to know are the very, very broad picture picture things theyre getting an increasing piece of a growing segment of retail but, yes, i think its i think the easiest part of that is probably over now that you have full commitment from the likes of walmart now, what does it mean for grocery once the whole foods deal is closed then you, once again, set up against walmart. Are they explaining enough about what theyre investing in, how theyre going to approach the grocery business, how theyre going to sacrifice all of this margin profitability not a lot of visibility into that as is traditional for amazon i think, however, i said this on the show before, a big part of the whole foods piece is delivery, right . I think for amazon, for any kind of ecommerce play, its a delivery hack. The faster you can get it to the customer, the more it feels like going into this its not as really as if it diskorn disgorged a huge amount of the up side. But amazon for this run its had over however long a period you want to look at, it almost every year had a double digit pullback you havent had one of those in a long time. Thats been the case for the market as a hole it does show that you even on this huge trajectory up, there was pretty some jagged parts of it so now add that we got the clearer picture of f. A. N. G. Earnings, we had facebook this week, alphabet, how you would summit all up . Are they good enough as a whole to keep this as a Market Leader . Minus twitter i think facebook did great there were really positive signs. The challenge Going Forward is finding more places to put ads theyre saturated in terms of how many ads they can place on the given servers. Thats why theyre blowing it out for messenger and whats app. I think there is more upside same thing with amazon in addition to aws, advertising is a new sort of business for them that theyre growing even faster, really small right now but thats another thing theyre going to sustain. One of my favorite pieces is in the journal about Procter Gamble they cut 100 billion in digital ad spend and they dont feel a thing. Largely ineffective taylor says. What an indictment of the digital space, dont you i yeah, i did its a nightmare scenario long term. Because the promise of digital edge is always that you were going to have more precise measurement. You knew where you were going o waste your money. Its good for tv. Thats where the money is going back to or sustaining. Because the sort of returns on that are more obvious. A lot more data. Like, yeah, 50 years of data on how tv works and given really small markets, if i spend this much in advertising, i spend this much in sale. The irony around Digital Advertising is there is almost too much data. There is too much information. I know it drove some sales i dont know where i should apply that to. Was it facebook or goiogle they got the biggest bang for their buck, p g specifically wlchlt they do emotionally and powerful ad on a high profile like the super bowl, they are there. Theyre the top advertiser in the world. Im thinking about the always like a girl ad, for instance those are the success stories. And so this incremental figuring out digital ads spend, theyre going to be a player theyre going to do that but its going to be about targeting some of the bigger ads. That is significant they spend the most on advertising compared to anyone else they know more they actually have done so much work on this that might trigger other big spenders to follow suit. Revert back to bigger brand plays, bigger brand messages like that on things like super bowl and traditional tv. Also an issue at a time when autos are such a tremendous source of ad dollars and rethinking how heavy to go as well. Remember gmfacebook is one of the early questions after the ipo. And the drugs, viagra and the others pulling back. Sure. Dont go anywhere, ed we want to get to tes l. A. The mass market car, the model 3, is finally set to ship today. Our phil lebeau is following that story and joins us with more hey, phil. Carl, its d day for tesla. The first deliveries happening of the model three, a select number of them could be as many as 30 but most people think it may be fewer than that will be delivered to tesla employees threes employees who ordered the model three. That will happen tonight in california it will be a chance for us to also hear from elan musk two numbers that will stand out in terms of people looking at this event and looking at tesla right now. The 35,000 price point is the first number thats going to get a lot of attention. This is tesla saying we believe there is a mass market for electronic vehicles starting at 35,000. Though everybody admits, look, price point is likely when its all said and done to be closer to 48,000 or 52,000 once they configured how the car they want it to be the other number, production will they get up to 150,000 vehicles being built this year thats the estimate thats out there on wall street with about 20,000 of those happening in december for the model three thats the run rate then but more importantly, can tesla hit the target of a half million vehicles being produced next year thats a huge jump going from just over 100,000 to a half million in one year. Take a look at shares of tesla, remember, the Company Reports earnings next week but this is one of the cases where we never say that earnings dont matter but in this case, its what is happening with production not only with the model 3 but into the second half of this year and next year thats going to get the most attention during that earnings call. And finally, i get this question a lochlt wet and were showings chart. The number of electronic and plug in hybrid electric vehicles expected to be sold in the United States. While its growing, were way behind what is expected in china this year. Almost a half million are expected to be bought in china just over, what, 215,000 something around there for the United States and there you see france and germany as well guys, all eyes are on tesla today as the first model 3s are delivered. And then we start watching what is happening with production thats really now the clock starts what a story, phil. This is going to be a historic day for that company as they make this turn our phil lebeau is in ft. Worth today. That will be fun to watch. The impact on i mean how they market this thing, what the charging infrastructure looks like, how that changes there is supposed to be his model t moment you want to have everyone buying these things or make it affordable enough you can hit a larger sector of the market. I think 35,000, 40,000 is still pretty pricey. This is a big test case for that if, however, if it does work and if he does get the cars on the market, the real play is autonomous, right . Now that the hardware is out there, he can update the software to make, you know, autonomous play with a wider group of cars. Thats how hes building a lot of the things. I just update the software and it becomes a different car. Interesting how everyone takes for granted that there is demand for the half million if they can make them that probably is the case. I mean without a lot of incentives or discounting like other traditional car makes have to do. It seems to me that existing tesla models out, there it wasnt so much people going around saying i want to own an electric vehicle i wonld cher one ill buy. No, you want to own a tesla because of all that represents in terms of luxury and performance. I wonder how that translates into a basic transportation, a lower priced car its not like gas prices are crushing the consumer. Yeah, its not driving that way. A lot of people want to own a tesla. I dont know why anyone would expect them to meet the Production Target after the track record they have proven the last few years of missing them. Its not a tech solve its a traditional solve, right . Its producing cars is really hard theres a lot of, you know, theres a lot of things along the way the supply chain that always break down. Its a different skill set, really, in terms of managing a company. Hes actually been able to throw it out i think the smart play that hes made is with the luxury vehicles first, really great branding pel want it. And if i can get one for 35,000 or 40,000, thats the attraction more so than the electric, you know, aspect of it he says production is growing. Well find out if that is true et, good weekend. Thank you when we return, well have more on the amazon Earnings Report why the ecommerce giant missed and i didnt think matters but first, a quick check on the markets this friday. Dow is in a tight range, down less than a point less than two points were back in a minute where to get in. Where to get out. 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. Hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Stocks are falling today the s p 500 is down. 6 . Tech is parnlg of the charge lower. Financials are staying flat. These two sectors daily divergence is the subject of mike santolis recent column which means it may be a key theme emerging it has been the case for a few months basically the two sectors, financials and tech which if you look way back have almost always moved together theyve been on the opposite end of the seesaw tech up is on days when the bond market rallies and yields are lower and growth in question they are the place people gravitate and thats basically exactly when financials backed off. This is something that a lot of observers are saying it cant necessarily last for that long but does it tell you how investors feel as if its almost a zero sum proposition either we get an economic acceleration and higher yields and financials are good or we have to hide in tech it also is one of the things that is really suppressing index wide volatility. The reason the vix is around nine is because you have the push and pull on a day to day basis with the index it doesnt mean its this compressed spring and then volatility is going to bounce. But it does give you a little bit of a window into investors priorities now and what they worry about and care about most on a daily basis. I wonder which one is going to win out we did get the 2 , 2. 6 Economic Growth number today. That was sort of didnt really give us a signal of whether were going into a stronger momentum economy or not. Exactly it is still in the middle. Earnings noises it up a little bit, too i think its a relationship to watch. Goldman sachs which looked at this closely is saying for the back half the year, they both can outperform the market for different reasons. So well see if that relationship comes back into tune the way its been j. P. Morgan on the nas 100 says they see consolidation where 6,000 once again becomes resistance that would take you back to levels we saw months ago, right . Nasdaq 100 is incredibly concentrated top heavy index it is the closest major index to f. A. N. G. Thats what were talking about when you say you look for an extended group looking to pull back lets talk about it more and bring in some guests on the topic. Were heading into the end of the trading month. So lets talk about this overall market pullback that weve seen in the last two days the busiest earnings week of the year for more, joined by ray monld james head of fixed income and matt jones, j. P. Morgan. I feel like im on fast money where they play the game, would you rather financials or technology do you think this keeps up we think both can outperform. Technology, funneldamentals aren place. And we think that, you know this is a group that can continue to see earnings move higher if you look at it, there is noise arent quarter revenues are accelerating, you see cloud and semi and internet and search all showing accelerated Revenue Growth there is a little fatigue in the semisector and tech in general, we think that is short term. When you look long term, we think that theres continued outperformance there and then in financials, for different reason this capital return story is real we think that its going to continue with short term Interest Rates gradually moving higher and capital return dividends, buy backs, we think that it is setting up for a multiyear outperformance as well. What is happening with Interest Rates, kevin . Mike mentioned it as a big signal for the stock market and certain sectors outperformance and underper forpance. Were stuck around 230 here on the ten year what sort of nall are ysignal au getting . Its been about inflation so the combination of kind of problems in washington combined with whats plaguing the fed and lack of inflation continues to keep the long rates especially low. And the fed is not going to continue to act when were seeing roughly 2 growth and the equivalent inflation todays number prove that out even further until we get a real push towards higher prices than lower rates are going to be here and theyll be here probably through the rest of the year or at least until september when the fed acts on the Balance Sheet or at least proposes tooblgt act on Balance Sheet. That is driving the treasury markets and the currencies i wonder what the thoughts are on the Corporate Bond market the credit mashgtsd arket and so rates, thats great for us and people piling into the credit markets you know, at levels that dont necessarily seem to leave tremendous amount of value yet it is supportive of the equity markets right now how does that play out you right people are clammering for long, long bonds at low rates. Corporations have done well. Earnings have been in their favor. That makes this a perfect scenario for them. Spreads have been tight. Theyll remain tight until we see real big change. Theres been a benefit to corporations issuing debt. Matt, i know you mentioned you like that along with financials should investors be cautious here with the kind of gains theyre sitting on well, i certainly think in the short term were not anticipating another 40 move for a lot of the names in the back half of the year. Theyre in positioning and expectations look to have maybe gotten a little high but as i said earlier, when you look at the fundamentals, the emerging technologies like artificial intelligence. When you look at the growth of the cloud and the amount of spending and growth in infrastructure and scale, thats happening in the technology space. We think over the long term this is a group that can continue to move higher as those numbers move higher. Short term, theres there looks to be a little fatigue expectations were certainly set high over the long term this is a group we believe will outperform the market the earnings are certainly double digits. Its the best sector Earnings Growth we see in the market x energy they look to add exposure. How do you decide which though, kevin . All the secular trends that matt mentions are totally true. I think most people agree with that but as we once again point to howard marks note earlier in the week, even in the juice promises weve seen, i doesnt mean every company is going to execute perfectly even though the opportunities are huge youre right. The credits that you buy and in some of the debt products that are being offered. I think while we have a way to run, except at some Point Washington is going to get their act together the fed is going to have the ability to raise rates again and some of the credits are going to be under pressure. Energy, material stocks, copper making a run here do you think its just kind of a standard bounce or more to it . Well, i think thats a great question i think over the last week, crude prices rallied 15 from the lows equities are starting to see that rotation maybe out of tech. And some of the sectors that have outperforms and into energy and we think this market is tightening very elevated inventories. If you look at the doe numbers over the last several weeks, weve seen significant draws out of inventory there are people looking for value. I think this energy trade has a little bit of ways to go we like the mlps and midstream infrastructure names there is a lot of building going on in the pipeline spice aace. And in the low cost producers, i mean were looking at a 50 oil price over the next 12 months. You want to own the low cost producers. You want to own the guys that in 50 can earn a real healthy margin well, we are seeing a nice boost in crude oil wti pushing towards 50 a barrel well leave it there thank you guys kevin and matt, thank you. We are looking at some headlines out of nhk regarding north korea. Lets get to sue herrera for details on that. Indeed. Thank you very much. This is according to japans nhk media. It says that north korea appears to have fired another missile. North koreas apparent missile may have landed in what is called japans exclusive Economic Zone which is in the sea where there is a lot of trade and a lot of shipping going on and fishing going on. Japans chief cabinet secretary is expected to brief the news media shortly. Excuse me, peter confirmed by Prime Minister abe apparently that just happened thank you, peter so we do have another Missile Launch apparently by north korea. We expect a Media Briefing shortly. And apparently it hit where the last missile did which is in the Economic Zone in the sea ill keep you posted guys. Back to you. All right continue to follow this breaking story. Looks like the yen is a bit firmer it was stronger to day well keep an eye on it. Sue, thank you when we return, meg whitman reiterating her noninterest in the uber ceo role via twitter. Well tell what you she said and which other ceo is at the forefront of speculation for the job. And next, amazon reporting disappointing profit numbers after the close yesterday. More from the companys quarter after this because, when you really, really want to be there, but you cant. At cognizant, were helping todays leading Media Companies create more immersive ways to experience entertainment with new Digital Systems and technologies. Get ready, because were helping leading companies see it and see it throughwith digital. Hello once again, everybody. Senate republicans failing to pass the socalled obamacare skinny repeal bill early this morning. Senator john mccains no vote decisive in helping to sink that bill he joined fellow gop senators lisa myrrh you could ski and Susan Collins in defeating the measure. So, yes, this is a disappointment a disappointment indeed. Our friends over in the house, we thank them as well. I regret that our efforts were simply not enough. This time two women accused of poisoning the estranged half brother of north Korean Leader appearing in court today the women face a possible death penalty. They say they were duped into thinking that they were playing a harmless prank and honolulu passing a law banning people from texting while crossing the street. Becoming the first major u. S. City to do so. People can be fined up to 35 for the first offense, 75 for the second and 99 for a third violation. You are up to date at this hour ill send it back down to you guys im just seeing a headline crossing that japans Prime Minister abe is going to convene an emergency meeting of officials after that north korean Missile Launch. So sarah, were following it closely. All right thank you. And well turn to you as news warrants sue, thank you lets get over to Michelle Caruso cabrera for the european close. European stock markets lower across the board the ecb is going to talk about unwinding the bond sales come this fond. German bond sales are higher on that data i told you about too when you dig into specific markets and sectors, starting to feel like death by 1,000 cuts for the german automakers. Emissions fixing scandal does not go away. Its getting worse the manufacturers are now being accused of collusion there is the euro at 1. 17 lets move on to the stocks and german dax porsche dealing with a massive recall for the cayenne recalling 22,000 cayennes for having software that allows them to cheat on emissions. Volkswagen owns porsche and down 1 this week daimler is not doing any better. Ditto, down roughly 1 , 4. 5 in the last week. And bmw lower by 1 , also nearing 5 declines for the week worthy of note, the decline in the swiss frank against the euro here i believe were showing this is daimler. Were showing it against the swiss frank. It is weaker against the dollar but particularly against the euro the swiss frank is still overvalued theyre sticking with negative rates. Also currency interventions. So theyre even more ultra easy than the ecb mike, back to you. All right michelle, thank you very much. As weve been talking about of, amazon reporting a Second Quarter miss continuing to push ahead into invest ment. S in video is it time for investors to pull back an analyst joins us. Well talk about it with these guys john, you know, you obviously have a little bit of a pullback in the stock i wonder if you characterize this as really a disappointment in terms of what was expected in the general tone of what amazon does as i mentioned, the stock is back to where it was a few weeks ago. So how do you think the street is going to be positioned going into the Third Quarter yeah. No, i mean the stock up is 40 this year. Its given a couple percent back today. It was like the top line, all the signals for top line and demand were great. I mean they beat Second Quarter revenue. They came in the high end of the range. North american ecommerce growth is plus 26. 5 , 3 acceleration from one 1q growth rate the prior five years weve only seen on average 1. 5 acceleration for that data point. Paid unit growth globally accelerated. Aws Revenue Growth is better and then the 3q guide is way ahead of the street. All signals on demand were g youre right, they missed on the cost side and its because of Significant Growth in fulfill ment and prime video and a laundry list of other things, head count growth, aws infrastructure but we still like it here. We kept our price target at 1125. Stock is trading at 19 times forward. The peak to trough is 13 to 25 times. So still, you know, its amazon. Theyre playing the long game. And were in a bit of an investment cycle at this point rob, i wonder just, you know, the question has always been to what degree investors along the way are willing to play that long game with jeff bezos here even the next quarter guidance for top line, i mean, this is a 2. 5 billion range there and obviously 700 million range in terms of operating income so not only do they not sort of plan for the short term results, they seem not to really want to give you a very focused idea of what theyre going to do so you think as investors, youre willing to accept the fact that they might actually have this more intense investment cycle than what theyre expecting . Yeah. Part of it is you have to trust jeff bezos and his Management Team and i think the track record that amazon has delivered, especially with the top line growth, the markets that theyve gone in and taken over and just wiped out the competition, i think theyve earned that. If they just met expectations, we would be having a completely different conversation the stock is up now 36 year to date its a good time to, you know, take a pause and prepare for that investment cycle and prepare for longer term growth john, you know, ever since whole foods was anounsd, everyone played this parlor game where they ask what category is next what could be amazon besides grocery . Does do these results suggest to you that their appetite for being inquiztive also takes a pause that we can stop having at least that discussion for a while . I think so. You know, obviously, they way favor building versus buying so, yeah, i dont think there is any big acquisitions to come as we talked about on the show and as we write in our research, we think grocery and apparel very big Retail Markets are going to be key drivers of amazons Retail Business growth over the long term but, yeah, i dont think theres any big acquisitions lets get through the whole foods deal lets close it and, yeah, i agree with that yeah kind of intergrated and execute and continue to execute. Rob, you think within the sort of reasonable investors time horizon right here youll have to have to think hard about regulatory threats whether its, you know, with regard to grocery and the whole foods deal or just, you know, more broadly speaking . You know, the bold case for amazon it is takes over all the industries the bear case is the government may not like that. So any one individual industry i dont think its an issue. Even with the whole foods acquisition, maybe thats one, 1. 5 of the grocery market but i think as amazon gets bigger and bigger and has market power in all of the industries across the board, then the government might take notice and thats always going to be a risk Going Forward. All right well, well see how it plays out down the road. Rob and john, thanks very much appreciate your time. Thank you thanks. And when we come back, snaps lockup on shares set to expire making about 85 the total number of shares available for sale well tell what you that might mean for the stock coming up i think youre on me. There is an export in this country up 60 youll never guess what it is. Ill give you a hypothetal Paris Climate Accord youll learn after the break the babys room wont build itself. And her paw wont heal on its own. Were all working forward to something. Synchrony financial can help your customers make it happen sooner. So she can plug into her dreams. And theyll have a new addition for their new addition. Whatever youre working forward to, even if its chasing squirrels, Synchrony Financial can help you get there. 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. Jack knocked over a candlestick, onto the shag carpeting. And his pants ignited into flames, causing him to stop, drop and roll. Luckily jack recently had geico help him with renters insurance. Because all his belongings went up in flames. Jack got full replacement and now has new pants he ordered from banana republic. Visit geico. Com and see how affordable renters insurance can be. Two key analysts souring on starbucks. Is it time to get out of that stock . Were also going to have a live and exclusive interview today with the American Airlines ceo doug parker, his first interview since a major battle with Qatar Airways broke out. Have to find out what he thooz say at the top of the hour on half sarah, well see new just a bit. Thank you looking forward to it. Lets get over now to the cme group and Rick Santelli for the santelli exchange. Hi, rick hi, thank you, sarah. You know, energy is a big deal as i look up at the board, hey, were almost back up to 50 for crude oil. I can remember when it was multiples higher when i think of that, i think of stephen chu. He was the first secretary of energy for barack obama. I thn he ran from 09 to 13 in that post. The reason i remember him so well is because he seemed to have this fascination with europe he loved their 10 price for gasoline matter of fact, he wanted 10 gasoline here. Wanted it. Use that notion in speeches. Because he knew what was best for us in you have 10, you make things that are not feasible feasible things like renewables this is about bridges. Im talking about bridges here because its hard to argue with the nakt we afact that we all wo take care of the planet and hard to argue that no society that has an active manufacturing presence can be a great economy without energy and the cheaper the energy is, the more profit you make, the bigger your manufacturing gets it isnt only manufacturing in, you want to curl your hair you want to do anything, you pretty much have to plug things in so i find it so ironic in a when i was pa ruesing my roiters news feed is i found an export up 60 you want to know what it was it was coal boy, you talk about something that has been berated on every front. The ridicule the president had just basically saying, listen, let the economies and economics of scale and choice, lets do it the Old Fashioned way. If there are things better than coal, they will develop. We have given many of these industries a lot of help thus far, subti i dids for things like electric cars the real eastern irony is a big chunk of the command was coming from europe and germany. Theyre dune with nuclear. The kill owe watt hour manufacturing is way more than ours coal and then after the president pulled out of the paris accord, they ridiculed them. Thats where the coal is going listen, we all want a bridge but the bridge is what we make our power from now, nat gas. So this is important and another issue this week quickly. The repeal, it failed. Listen, im a big movie buff Stanley Cooper did 95 takes in a movie with tom cruise just having him move one foot through a doorway. In the current Political Landscape we have, theyre supposed to make this movie of health care 20 of the economy and theyre supposed to film it in one take. Yeah, right. Back to you. Rick santelli at the white board again. Rick, thank you very much. As we head to break, take a look at shares of American Airlines much the company beating forecasts on earnings and revenue this morning the stock is down almost 2 , the entire group is down today and for the week and the month phil lebeau as scott mentioned will be speaking to americans ceo in just under an hour from now. And next here on squawk alley, facebooks cafeteria employees offial uonin cilyniizg. The fda announces a new plan to reduce nicotine in cigarettes to a nonaddictive level. Joining us now joe agnici, he covers the tobacco names a lot them are off the lows. Altria is still down 9 . Philip Morris International is pochlt i doesnt have the u. S. Business but what does this actually mean for the companies . In the long term, its seen as a negative and reduce the addictive nature of smokeable cigarettes which will most likely affect the younger smokers, not so much the older smokers. But we also see this as a potential positive for manufacturers of Electronic Cigarettes as it encourages the development and use and availability of an alternative to combustable cigarettes. I just wonder about the consequences of this could this create a black market for cigarettes whats going to happen i think it surely does encourage us a black market for cigarettes but we dont see any near term impacts. I think this will take a while to be implemented. For people that are currently addicted, changes that take place. And nicotine levels are reduced. If theyre dakted, theyll smoke more that may be supportive of volumes for people that are not addicted it is the younger smokers that will be addicted you saw this coming and remind viewers that not all of these Tobacco Companies are trading the same because not in part sell cigarettes in this country, right well, thats true so altria has the exposure to operations Reynolds American closed yesterday. So they have exposure. Philip Morris International is doesnt have the domestic exposure theyre less exposed to the actions. Altria does have the right to Philip Morris Electronic Cigarette. So we think the actions are actually supportive of future demand for that product which altria is seeking to gain fda approval and by the statement today, we think that this is actually very encouraging sign for the long term future of the Electronic Cigarette market while it does have that negative impact on the combustible smokeable cigarettes. How does that look for these companies, to a world of more ecigarettes i would assume the economics are not as good until several years down the road for ecigarettes i think thats correct. I think the economics are not agood right now. But as the market develops and perhaps with changes, therell a greater push and acceleration of growth in Electronic Cigarettes, that longer term, the economics could improve. All right, well leave it there and continue to monitor these stocks, which are all still trading lower on this fda announcement joe, thank you for joining us. Thank you facebook cafeteria workers are officially unionizing in an effort to increase their hourly wages, as many struggle to afford living in the valley. Facebook, for its part, issued a statement saying our vendor workers are valued members of our community. We are committed to providing a safe, fair Work Environment to everyone, including contractors, regardless of union status for more, were joined now by the head of that union, unit, here is enrique ferfernandez good to have you with us good morning thank you, carl a pleasure to be here. I dont think anybody needs an explanation about the difficulties in, a, just finding basic housing in an area of the country thats become so cost prohibitive, right correct its been horrible for many years and were trying to make a difference about three years ago, we created a Silicon Valley rising with teamsters, united, faith and labor organizations and were making a difference, trying to tackle that horrible reality of Silicon Valley. And it is a person who would have to make 41 an hour just to pay for a twobedroom apartment in menlo park, where facebook is so the good thing about this is that we are creating partnerships and this partnership, the reality thats happening today, workers are coming together, forming a union, having a voice. That voice is realized by some of those companies so i think that we are in our way to tackle that challenge of living in Silicon Valley and im very, very optimistic that were going to be able to do it. The first step is always to form a union. And thats whats happening in Silicon Valley thats whats happening with facebook and this contract 500 plus workers got together and we are now awaiting our firsttime contract there. Ewrawe read the statement frm facebook have they tried to talk you out of this move no, not at all. I think that there is a partnership between the contractor, i think there is an understanding in my view of these Tech Companies that there has to be a dialogue and we have to bring the Service Workers into this conversation otherwise, we are going to be leaving a great part of Silicon Valley on the side while we are struggling right now in our industry, in the Service Industry, is how to tackle housing i mean, workers are having to drive 2 1 2 hours to work in this cafeterias. I mean, we have been successful at unite here, creating these partnerships and i think we are on our way to make a difference in the Service Workers. We are on our way to organize 10,000 were halfway out of those 10,000, 3,000 security guards, 1,000 drivers, and now over a thousand food sfs workers who are actually having a voice in what the future will be. Were going to be talking about wages, health care, pension, housing. So thats the only way to actually make a difference, when we get together, form a union, and we sit down with this company. When youre talking, enrique, about the issue of housing how is that going to translate into bargaining . Essentially, is it just about getting wages up to a point where they can afford something more local or actual help with specific sort of housing subsidies or new housing or transportation to housing . I mean, what set of solutions do you think you should be looking at well, i think its a matter of, you know, creating a Wage Structure that a person can afford to make a living and pay for rent i mean, the majority of facebook workers are renters, and we see workers living, two or three families in a house, living in garages. So i think that there is an understanding in the industry, im talking about the tech industry, that we have to sit down and find a solution if you ask me today, i think, there are many avenues, but the dialogue that we are starting and the voice that the workers are getting to bring to the table, their issues and bringing the Service Industry into the dialogue is what is making the difference today and i am certainly that we are going to find an answer. Were going to be able to fix this in one day or one week . No i think its a big problem but the fact that we are actually talking in Silicon Valley rising is bringing all these people together, companies, workers, i think thats going to make a difference and i believe it starts with ages, yes pip mean, thats what were going to be talking about. Its also health care. Its also access to pension, access to an Affordable Health care enrique, appreciate the time. Well be watching the story as it evolves enrique fernandez, a business ernager at unite he. Dow again in a tight range down a point well be right back after this you too, unnecessary er visits. And hey, unmanaged depression, dont get too comfortable. Were talking to you, cost inefficiencies and data without insights. And fragmented care stop getting in the way of patient recovery and pay attention. Every single one of you is on our list. For those who wont rest until the world is healthier, neither will we. Optum. How well gets done. Hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Uber has reportedly approached jeff immelt for the job previously held by Travis Kalanick thats according to the journal. This as meg whitman flatly denies her interest in the position ubers ceo will not be meg whitman. And as the company attempts to rebuild their imagine, chief brand officer sat down with cbs and was asked whether kalanick leaving was difficult for her. Was travis leaving the company difficult . Yes yes. I think its difficult anytime there is real significant change in a culture you know bad or good. So, you have to recalibrate people have to find new direction, new ways of mofing, ways of working. I see potential, i see opportunity. There are certainly things that have happened that i dont condone, that im not comfortable, that im not okay with but i think representation matters, too the Search Committee over at uber includes kalanick and Arianna Huffington the immelt news raised a lot of eyebrows he is only 61. Unlikely to just go off into the pasture. Certainly, the ability to undertake some other new project like this i just think that the names being thrown around tells you what a tricky spot it is to be looking for a replacement for a founder of a company at this stage of its development. When its still in kind of this hypergrowth mode, but it still has to get its arms around all of these big corporatetype issues and immelt had a great reputation around fellow ceos and ge has faced a number of macro conforms, but its the worstperforming dow component so far this year, down 19 and his tenure was marked by underperformance of the shares versus the broader markets so that could raise some questions, too flannery, by the way, the first day on the job is the 1st, august 1st, next week. Meanwhile, obviously in a tight range, were going to watch for developments out of these north korean headlines the pentagon has a statement out right now. Abe holding this meeting with officials. And next week, guys, this has been the heaviest of earnings season, but it will continue next week. Its still going to be the story, i do think. Plus, you have end of month, which has always got an little bit fun in the markets the last couple of months its been nice to get you back this week, as well. Thank you, its good to be back it was way too long. Lets get over to headquarters scott wapner and the half. Half repor report. Are stocks about to pull back and give investors who have missed this rally a chance to finally get in with us for the hour to discuss the state of this market, several notable market watchers are questioning whether stocks are too expensive and if the lack of volatility is a giant warning sign that was part of howard marcks