Moment right now the dow is down by 33 points take a look at what happened to equity markets overnight in asia youll see that the nikkei was flat the hang seng was down by. 8 and the shanghai composite up by. 1 in europe theres active trading taking place in the markets. Youll see its a little bit of a mixed picture. Three major averages are weaker with the ftse down by. 5 . Italy and spain are seeing stocks higher and then finally check out the treasury market here in the United States. This has been the thing we started watching so closely yesterday. You did see an inversion of the yield curve with the ten year yield challenging the 2 year yield. Right nowits slightly above the 2year as it should be at least. That inverted slightly yesterday late in the session. Right now 10year is yielding 1. 581 the two year is yielding 1. 561 . Were getting close on that again. That and maybe this as well investors suffering a bit of whiplash this morning as President Trump changed his messaging on tax cuts and economic stimulus. Here are his comments over the past couple of days. Payroll tax is something that we think about and a lot of people would like to see that. Im not looking at a tax cut now. We dont need it we have a Strong Economy. A lot of people have been talking about indexing for many years and its something that i am certainly thinking about. Im not looking at doing indexing and i havent been seriously looking at it but certainly it is an option if i wanted to. The president wanted to shutdown the tax speculation frenzy in part because of the issue that he suggested that the economy was strong and there were questions about it President Trump talking on california over auto emission rules and auto makers are caught in the cross fire. The white house proposed easing, obama era economy fuel standards freezing them at 2020 levels through 2026 now auto makers called the obama regulation too strict and lobbied President Trump to change it but the roll back pushed by the Trump Administration was so extensive that Car Companies became worried it will set off a legal battle with california and could force them to manufacture cars under two different set of rules. The president said henry ford would be disappointed if he saw his modern day decendants wanting to build a far more expensive car. When this administrations alternative is no longer available california will squeeze them to a point of business ruin. The only reason california now talking to them is because the feds are giving the far better alternative which is much better for consumers. Ford responding say it supports the 150 state solution for fuel economy standards. Ford says its focused on acting to protect the environment while also protecting the affordability of cars and trucks so a lot going on in that debate but huge implications. Ford is saying they would support one. One. Is there one standard now so you were saying that like theyre ignoring we want a National Standard thats the biggest problem. Changed it in my mind for when theyre saying no were going to stick to the one we have or look, you want a National Standard but if it will switch from administration to administration, how do you do that when building plans over the longterm . I was struck. The president said Something Like the two would be rolling over in their graves if they like i think you just say they are rolling over would be if they are dead but they are dead. Its not they would be if they are, if theyre going to be rolling, theyre rolling because theyre already able to roll, are they not good point. Anyway. New developments you didnt see some of the movies i have seen. Developments in the u. S. China trade war this morning, the latest is from the china Commerce Ministry. A new statement. Its august 22nd today, the tariffs go on september 1st. We keep thinking they have been talked down its been a paired down list its a paired down list. And when and if they are levied on september 1st, china saying in part its going to have to retaliate if the u. S. Persists on its current course and any new tariff measures will lead to escalation comments came hours after President Trump made this statement. Somebody had to do it i am the chosen one. Somebody had to do it. So im taking on china im taking on china on trade and you know what, were winning really . Were going to do that stocks to watch today. L. Brands Second Quarter profit fell hit by a one time charge and continued weakness at victorias secret. Adjusted earnings beat forecasts but same store sales slipped by 1 sales of victorias secret dropping 7 that was worse than expected that stock you can see up then theres results from another retailer nordstrom reporting better than expected Second Quarter profit even as revenue missed they were able to cut cost and clear out more inventory nordstrom invested heavily in ecommerce Digital Sales rose by 4 although weaker sales in its Department Stores and Nordstrom Rack dragged down total revenues still the street was impressed by what they saw that it wasnt worse i guess stock was up by over 11 . Coming up, more retailers, much more on the retailers later. Thats what gave us that good session yesterday. And later a tariffproof company that could weather a prolonged trade war. First the fed effect on stocks and treasury yields. Well get you ready for the closely watched summit in jackson that starts today as we head to break. Heres a look at the biggest market winners and losers in the dow. We are watching the bond, the yield curve and the ten year and the two year briefly inverted again yesterday they got real close yesterday and a little over a basis points and last month that rate cut is part of a recalibration. And our coverage at jackson hole kicks off with Esther George and then over the next 48 hours, cnbc is going to bring you interviews with fed heads from philadelphia, dallas, st. Louis, and cleveland. Its all leading up to fed chair powells speech tomorrow and im not really sure. We see chaos unleashed from jackson hole. When the fed sort of takes this moment and uses it to issue a statement that surprises the market, a lot can happen. I think they were all out the night before knocking back a few. Dont you think . So anything could happen. Anything could happen. Maybe he can give us the heads up its the senior portfolio manager. Well get to you for some actual actionable stock ideas once it starts, hans, the cutting that it continues but actually they just said that it may have been a one off. You think that once they start they continue . From the notes, you think you think its a good idea since you didnt like the first cut. I didnt think that the first cut was necessary. We had achieved i thought what was a normal relationship between Interest Rates and inflation. Since 1987 there hasnt been an instance where the fed embarked upon a one and done type of cut. Its generally the beginning of more cuts to follow. So if you think of it as a mistake, then you think that the december hike was not a mistake . I dont think the december hike was a mistake i think they could have used if they wanted to help engineer it they could have done something with the Balance Sheet i thought they had achieved what normal would look like i didnt think they needed to do more but that last hike was relative to where inflation was. It was fine. I think it probably represented the end. It was fine as long as theyre not long stocks and i dont know, maybe youre not you saw it happen in december in the markets in hindsight since they came all the way back to new highs. It looked like that was one of the i think theres almost consensus that that was a mistake, the hike. You are just going to stay stubborn and say no it wasnt. It was the right thing to do yes i am. Really . Yeah. I think, what was effecting that, it was really more sentiment driven and the economy has remained in good shape earnings have gone from a much higher rate of growth and that had nothing to do with the Interest Rates and when you look at employment and the hard data and soft data, earnings, they all held in thats not the result of a rate hike in december that was Larger Forces already in place okay. So kevin, i dont know whether you want to micro analyze the fed or what youll talk about now. And in your view, there are opportunities to rebalance given the brock drop that we have. Your long but low volatility stocks in certain sectors. Sure. I think you do have to microanalyze the fed to some extent because its driving so much sentiment in the shortterm one of the things that was striking yesterday when you went through the minutes is the decent in the fed was something that we hadnt seen before and its interesting he wants to telegraph the Forward Guidance its not this one and done but what are we going to do and the delima they have is the others are saying its good you dont have to do anything right now. Can i bring up the point that these minutes were from six weeks ago and a lot could have changed over that period of time six weeks may not seem like a long time when this was steady but this has been anything but a steady six weeks. The economy has sort of continued to shug along. The economies look good ill give you that but when you look at things like the bond market, thats where right so i think the reason were microanalyzing the fed is were worried about the yield curve inversion. And you have about 22 minutes before a recession the fed to some extent is the sentiment indicator of the central bank of the world or so much higher than everybody else. On the stock side were seeing solid fundamentals we have this thesis that the consumer cycle is lagging the corporate cycle in a positive way. And especially on the low end consumer side which is seeing wage increases with higher disposable income as well. To get back to the question we still want to be overweight. Some of the more secular growing sectors Like Software and Consumer Discretionary low volatility stocks is a hedge. But if you look at utilities or staples its not a good place to play defense right now. How much defense are you playing . Are you saying theres no defense to be played were trying to play it as down the middle as we can. A big picture for example is growth in value. Were trying to say we want some growth sectors like in tech which upgrades fundamentals but want low volatility in select areas of Consumer Staples so i think making that beta tilt either way is fraught with risk right now for the remainder of the year. Hans, where do you think we end up well have more cuts but where will we end up and will there be will that avoid recession . There was never going to be a recession . What do you think . I think inevitably there will be a recession. You know what i mean . We all understand, thats a sentence. Will it be in the next 12 months the next 18 months or no. I dont think well see the next 12 or 18 months i do think this notion of the fed really struggling with the limits of monetary power and how to communicate that. Thats really what theyre struggling with and i think thats what were going to hear coming out of jackson ole. The old days when you werent really sure what greenspan was saying, was that is that better old days. Well, its interesting greenspan ushered in. The transparency. Well, transparency actually sort of was a dance partner to the market the market lead, the fed followed and prior to that you had these about faces where you had a one cut and then they reversed themselves shortly there after that hasnt been the case for over 30 years. Its a very different relationship between the fed and the Capital Markets now. So kevin, just to wrap things up, the other thing that we had talked about constantly is trade. And you expect that to change anything that you do over the next 6 to 12 months . It could get bad. I think it could get very bad. We have been trying to look for more Service Companies that provide services the administrations tact is one. Its been obviously telegraphed. Its not just a trade negotiation. Its a larger strategic relationship that extends the horizon of this. The position is the longer this goes on the stronger we get relative to china. Thats a risky gambet. If we do sputter and the trade negotiations break down then were in a bad place its a higher risk gamble. It may be why you start hearing potential for payroll tax cut down the road. Putting those things up on the shelf to pull off again is why the administration has been doing that. Keep looking. Im going to stop. I keep looking at it because theyre so close theyre a basis point and theyre going to move. The market is going to youll see it. Then what are you going to do about it were watching closely. Put the two year and the 10year all back like we had before. Oh my god is that less than a like 1. 5 basis points. Yeah. All right a little arrow system. When they invert. We should they like flip. We should just all hell should break loose if it happens. Break in, all kinds of animation, sound, people at home the inversion. All right thanks well see both of you again soon. When we come back, are your devices spying on you . Thats the topic of a new cnbc Investigation Called hiding in plain sight. Well bring you our findings right after this break im professional stylist calyann barnett, and i know that style starts from the ground up. For a lot of teens, shoes matter. The right kicks, make the outfit. Kids like to make a statement, they want that wow factor. And for parents, you want to pick shoes that theyre going to wear over and over again. So i put together some of my favorite kicks for the new school year. When it comes to back to school shopping, your year starts at dicks. All of them can be hacked and used to gain access to sensitive business data or cause damage thats the subject of a new cnbc investigative piece called hiding in plain ight evacuating. Founded the Cyber Security firm red balloon here in new york city. This is where the magic happens. The goal is to make imbedded devices more secure. And exposing flaws. 100 of these devices can be compromised in some way. And inside almost everything that you can power up. And at every Financial Exchange power plant, air Traffic Control and almost every company in the world. This is probably the most important Cyber Security threat that we have today these control every single aspect that we do every single day. According to a report by Market Research firm, the Global Market is projected to be worth 214 billion by next year this is a small version of the air filtration system thats in a lab that the team is working with right now. This computer will allow that to happen. They hack devices inside the controller not only forcing the dirty air in the direction but ultimately shutting them down. That goes up in smoke. Thats awesome. It goes way beyond this demo the team recently uncovered major vulnerability in more than 100 devices made by sis coe. The largest manufacturer of equipment. According to red balloon, were talking about a potential attack that could sell for millions they let cisco know what they had found and the Company Published this critical advisory cisco turned down a request for an on camera interview instead releasing a statement saying in part, cisco is committed to transparency and is not aware of any malicious use of the vulnerability subscribed in this advisory fixes are available for half of the affected products. We wanted to find out what other Industry Leaders are doing to protect their imbedded devices and reached out to hp and huawei both companies were not part of red balloons findings hp is the largest manufacturer of printers which contain imbedded devices andy rhodes is the global head of hps commercial pc business we put this special code into the printer so that its always looking for malware and devices. Huawei did not agree to an interview or provide comment. And now back to cisco we asked to know if a device has been hacked. Cisco telling us an audit tool is not currently available and we recommend customers review the security adviser to assess the best way to protect the network and the bottom line is you have to protect action takeo protect your privacy whether its at work or at home all the devices can be attacked. Its amazing to see the white hat guys going in to see the vulnerabilities. Its great to do that and do you know how often this is happening that somebody is trying to take advantage of the vulnerabilities . We talked to red balloon about that and theyre saying its happening a lot more than we know. Its great that these guys are out there trying to hack in and instead of trying to sell it on the streets theyre calling up cisco and saying this is vulnerable. Whats the worst example of this so far . The targeting hack. No, if you remember that is the famous article a year ago in bloomberg magazine business week and its a million devices and apple came back and said that it wasnt and there was a big fight. I was just trying to understand, we hear these stories all the time and yet we dont i mean, what you dont know is sort of how far its ever gone. Listen to this too, you dont know how far its gone and red balloon did a demo for us, your office phone, your ip phone thats hooked to a network, that can be hacked to the point where theyre listening in to your conversation and you will have no idea that its happening. So a lot of people dont know that these devices have been hacked its not something thats actively being reported. Youre thinking about the situation where it was the Nuclear Power plant that was shutdown a situation on a grander scale where you coul