♪ welcome to "squawk alley." we begin the hour taking you to the white house set to react in a few moments to this federal appeals court ruling that just crossed in the past 20 minutes or so. regarding the federal subsidies under obamacare. the appeals court ruling that at the federal level at least they are illegal, and the subsidies have to go through various state exchanges. it's characterized in the early going as a blow to obamacare, but we will see what the official white house responses is in a few minutes from josh earnest. meantime, "squawk alley."

and what a night in store. the "wall street journal" says they are preparing for the la e largest ever. an iwatch. senior portfolio manager of the titan fund, apple, a large position in this fund. chris, good morning to you. >> good morning, carl. how are you today? >> good, good. i mean think, journal piece saying they're asking suppliers for up to 80 million large screen phones was called sporty by an analyst on our air in the past hour. do you believe it? >> well, you know, it's typical for apple to tell their suppliers to have a very large amount of buffer stock going into a new iphone launch, but i wouldn't be surprised. we've seen now, very large pent-up demand for bigger screens. the bigger screen prior generations of phones come out from samsung and others, generated popular buzz. iphone a little late in the bigger screens.

i suspect good pent-up demand and i wouldn't be surprised in the 70 million to 80 million range. not at all. >> chris what do you think happens when with inventory here? i mean, we should expect the 5s to stick around after these new phones are introduced. maybe even a 5c. does apple have to draw down inventory beyond where they had it last quarter and is that going to possibly hit the iphone number that people are looking at? or might they keep more of these phones around, because arguably, a blalarger screen iphone is a market, not necessarily something current iphone buyers would had off to get? >> i suspect the latter is more appropriate. i think we've now gone through multiple generations of iphone and ap has a good history. i believe that they believe that the 6 is a different platform that will just generate a different size and category. so i think they will keep the 5 around for quite a bit longer.

it's selling well in emerging markets at the lower pricepoints. the newer phone, not obvious to some, but has a bigger cost. the display is 30% larger. so that is going to be the biggest incremental cost. i have to say that looking out over the next couple quarters, i am a little concerned what that means to gross margins for apple. clearly it's a big benefit for them as far as having a great product cycle, but the gross margins themselves might be lighter on this next jegenerati of phone p. i suspect that's the biggest for investors. >> they've paved the way for an upswing in the product cycle where rhetoric is concerned. think about the last earnings. a bigger buyback, a stock split and financial engineering everyone said this bought apple just one quarter were. when you think about the pressure on the company tonight, to actually deliver on some of the rumors about this bigger screened phone, about potentially an itime product, do

you think the company has to give very concrete detailing about the products or otherwise investors will lose faith? >> obviously, the stock had a big move. right? the stock is right now just a few percentage points away from its 2012 high. so expectations had been going up intraquarter. the expectations going up as far as earnings estimates as welling. the company has to give a very coherent conversation, have a coherent conversation with investors tonight. that will go a long way. the traditional trading pattern for apple is such that it usually rallies all the way into the anaunsmenouncement of the p. early september. after that, investors typically fade that rally and wait to see the data results from the early sales. i think there's an added issue here with apple, and that is conversations about the iwatch. and i suspect that traders are getting a little bit more interested in the iwat because the initial orders seem

to be in the 25 million to 35 million unit range, which makes me nervous, because that is much bigger than i think is the addressable market right now for that wearable device. but i think all is clear for the next six weeks. >> huh. even as we bump up against, as you said, some of these numbers? the targets are generally around 115. do you tend to trade it seasonally? or do you -- are you a passive investor? how does that work? >> well, i think there has been a very clear trading technique around apple, and around the iphone launches. the last few launches, again, the stock has rallied all the way into the product announcement, which is two weeks before the actual release of the product. and the stock usually taps out right around the time of the announcement of the phone. the official announcement, again, should be in early september. >> all right. we'll see if that, history repeats itself or at least echoes. chris, thanks. we'll see what happens tonight.

chris baggini. netflix more than coupled in the second quarter. missed expectations by a penny. the company surpassed the 50 million surscriber mark. on the newsline this morning, a buy rating on shares of netflix and covers the sector better than just about anybody. price argument, 525. tony, good morning. >> thanks. good morning. >> people a little nervous about this international expansion and how much that's going to cost. is that overdone? >> i don't think so. i think it's reasonable to expect this company to actually invest more as they actually succeed more, and when you think about netflix, you have to think about how big can they be and pricing live elivers they can e? last night, getting faster. seeing a good return on the invest. >> tony, the market cap is getting up near 30 billion now. what do you have to believe about netflix' prospects?

what it's going to grow into, in order to think the stock will go significantly higher from here? do you have to believe that this is a platform more than just what it is right now? >> so the simple way we like to think about this is, if you end up getting, say, 50 million subs inside of the u.s. another 50 million subs outside, basically 100 million global sub, 50 million u.s., 50 million international. every dollar increases worth abouts 12ds billion of market capitalization, assume $1.2 billion of ink cran mental ebitda. we're seeing the company trend to the 50 million mark faster than expected in both the u.s. and in international. and the other encouraging sign here is even though they're taking up pricing we're not seeing disruption on the sub base. last night for the first time ever, if you did work, you can see that churn is coming down on the company. >> tony, think about 1.3 million added in the u.s. 36 million u.s. subscribers, 14 million abroad.

50 million seems like a good, round number for each of the markets but doesn't seem like the company will get there all that quickly. despite the company saying international will at least be profitable by 2015. do you think they're overreaching on some of the targets? >> if we sit back and look at another network, like hbo, the vast majority of their subscribers are actually outside of the u.s., of the 40 million they have, and in u.s., 80 million extra subs outside the u.s. a 50/50 scenario is realistic. netflix can get to 52 million subs inside of three years based on the pace they're going at right now. international, it is going to take longer to get there. within frankly nine years could have in excess of 60 million subs. and in fact that's why i think you're seeing extra cost burden. much more successful overseas, accelerating some of their investment. >> a couple of growth initiatives, physical gift cards, he did mention he talked

to mcadam at sun valley for the faster service. it's frustrating. any churn is noticeably due to a lack of service or slow service? >> partly the price increase and the genius of having a grandfathering position in there. people who are going to see a price increase will opt to probably stay with the service, just naturally going to bring the churn down and i wouldn't lose sight of the fact they doubled emmy nominations this year and are stepping up spend on originals. so there's reason to stay engaged with netflix. they're broadening out originals and target a broader demographic, also underappreciated in the stock, and a concern, the whole net neutrality. another element i think might be missed here. >> tony good to talk to you, as always. thanks so much. tony wible, talking about netflix in their quarter last night. look at the markets. a new intraday high for the s&p.

1985. almost 198 and the dow, of course, handedly above 17,000. by the way, just getting a flash out of nbc news that delta air lines has cancelled all of their flights into tel aviv because of rockets near bthe airport. and investors returning out of patience with retailers. bearish comments. netflix what is left in the pipeline? and look at a crowd-funded drone, 3d printer and hard rock hotel when "squawk alley" continues. e

financial noise financial noise financial noise financial noise

herbalist and activist, battling it out. on cnbc earlier today and at akmen presentation. what the argument would be, do we have it now? >> we do have the thrust of the it, kayla. there tr additional details. ackman spent $50 million a number he's not proud of, to do undercover investigations, among other things, into herbal life as part of his short thesis. in this case, he's getting into detail today, he sent what appears to be dozens of people to all sorts of different herbal life clubs in a range of places from queens, new york, where me says at the average club, loses $12,000 we are near to places like venezuela and mexico.

focussing as we speak on details how the training programs work for new potential distributors of herbal life products, in the spanish-speaking world and suggesting that trainees are put through la boborious processes purchasing more products than they want or need, having show up and have attendance marked at club meeting, having to pay out of pocket quite a long time before they achieve club membership and sell the product to others. what he had to say about the overview of what he feels he's uncovered at herbal life. take a listen. >> so if you look at the great frauds of all-time, enron had that fantom trading floor, you know, where they had put a bunch of people in seats and computers taking the banks around to look at financing. you see this in, i forget the name of the company, micro warehouse, one of these, a phantom warehouse where they shipped goods. what herbal life is, it has phantom or fictitious customers.

>> so, in other words, this is really an extension of the argument that ackman has been making quite some time. herbal life requires people to buy the products who might not naturally be buyers, that becoming part of the club costs so much money and costs in this case so much involvement of friends and family, kayla, it isn't necessarily honest marketing. honest sale s participation. >> thanks. kate kel any manhattan. meantime, investors are less forgiving. the headline from citi the mark may down 3 grading amazon saying investors are frustrated, his words, by the company the lack of transparency, jean munster put it, the way they're spending like drunken sailors, we'll be joined friday after earnings bearish on the firephone saying it's not a game changer. more investment is needed from amazon. translation, more spending, more margin pressure, a less forgiven envimt for bezos. talk margins for the quarter

under pressure to the tune of 15, maybe 150 basis points plowing money into the business. >> seems like a stretch, this argument. i look at amazon, the stock is up a bit since may. the firephone doesn't seem to be blowing the doors off by any stretch, but amazon is one of those platform players right now we talk about as being one of the big pillars of this tech renaissance and thus far, investors have continued to believe that overall story. so maybe sort of like herbal life, it seems like a little bit of a stretch. shares coming back after people are -- >> i'm not sure herbal life -- >> turns, in terms of the argument against, i am saying, a little bit of a stretch. a little bit of a stretch. >> you will acknowledge that the price cuts at web services are remarkable. yes? >> but also driven by amazon and their belief they get a certain amount of share and build a business on that. the chief ins sta gate other than instigator on and that and

google changing the game a bit. amazon still the dominant player. look what they're doing with media, with digital media, the lead they're trying to take there. see if that story falls apart. overall, as long as netflix is up as much as it is you have to believe there's a group of investors who believe in companies with this sort of revenue growth. >> and no investor has ever invested in amazon because of its margins. sounding the bell on margins seems to be a little fools error. interesting, the price target, 395. stock's at 361. they believe their upside eastern if the market is under pressure. >> of course, there will be a time when investors will run out of patience for amazon. it's happened before, will happen again, but hard to call when. >> and microsoft earnings tonight, big names trading at levels not seen in over a decade. our dom chu is on what we like to call bubble watch today. >> bubble watch, not in terms of value aces, certainly in terms of values of companies.

nearly at 50 s&p comes by the sek knowledge sector in temples of value. roughly 50 companies in the tech secretarier since the dot com sector in business and still are today, 23 are now worth more in val than back in early march 2000. start with video gamemaker electronics arts reporting after the close also today. the height of the dot com boom,s 23ds stock. now $38. that boom in traditional video games and new consols powered the stock. questions remain about the huge shift in mobile devices and will it leave the stock behind? analysts have a price target here about where shares are traded. up 66 prsz perce%. not bad. and apple, $4, to $5, closing in on $100 now. transforming itself into a maker of te of personal computers and tech devices. specializes in everything mobile commuting. a 2000% gain since then. analysts think it can continue.

$102. 8% upside from kucurrent levels. microsoft, the new ceo trying to transform the company into a devices and services company. shares on a roll. up 20% just this year alone, and that means it's just 11% below the value during the dot com bubble. microsoft shares trading above where analysts expect. finally, just one mention. juniper networks recording after the bell, 80% below where it cass in the peak levels. highly competitive for communication and telecom equipment. in analysts are right, could rally in the coming months. >> thank you. to the white house briefing room. responding to an appeals court decision on obamacare. >> -- visiting the embassy of the nennerlands to sign a condolence book those lost in the tragic shootdown of the

flight shoot down in ukraine. footage you guys will have access to have the president signing that condolence book. you want to get started? >> white house reaction to the federal appeals court ruling this morning that basically invalidates the house care subsidies for states that haven't set up the exchanges? >> well, i know there will be a statement coming from the department of justice on this. they are representing the position of the united states government and administration before the d.c. circuit. i defer that statement and have a couple of thoughts, you won't be surprised to hear. first is it's important for people across the country to understand that this rule sdg not have any practical impact on their ability to continue to receive tax credits right now. right now there are millions of americans across the country who are receiving tax credits from the federal government as a result of the affordable care act making health care more affordable for them. while the ruling is interesting to legal theorists, no practical impact on their tax credit

rights now. the send, there are four different cases of making this point working they're way through the federal court system. two have been dismissed at the district court level. two of them are waiting there, initial rulings. this, of course, is the appeal of one of those cases. so there is decidedly mixed legal opinion about this. but for those keeping score, we're still ahead 2-1 here. what i anticipate the department of justice will do is ask for a ruling from the full d.c. circuit. as you know, this was a decision that was issued just by three members of the d.c. circuit. two of whom ruled against the federal government and the one agreed with the government's position. now, it's important that there is, for people to also understand that some of the district courts that have thrown out this case have had, been decided by judges who used strong rhetoric in doing so. there's a judge in this case at the district level who said there is simply no evidence in

the statute itself or in the legislative history of any intent by congress to support the claims made by the plaintiff. in another case, that was making the same legal argument, a judge wrote that the theory propounded by the plaintiffs was "not a viable theory." the last thing that's important, and this is, there's a lot of high-minded case law applied here, also an element of common sense that should be applied as well, which is you don't need a fancy legal degree to understand that congress intended for every eligible american to have access to tax credits that would lower their health care costs regardless of whether it was state officials or federal official whose were running the marketplace. that is a clear intent of the congressional law. this will work its way through the legal process, and we are confident in the legal case of the department of justice will be making. >> obviously, as the cases work through the legal system there could be a legal impact -- >> the initial reaction from the

white house on that decision out of the appeals court, as josh earnest said, watch for an additional comment out of justice today. eamon javers, we pointed out ensurers haven't been rocked in terms of the price action on that news? >> that's right, carl. obviously, several more procedural steps to go before any bottom lyneham pact is felt by people who are benefiting from these tax subsidies, interesting to know how aggressively, josh earnest from the white house podium, was pushing back, trying to marginalize this ruling say it might be interesting only to legal theorists and pointed out we are still ahead 2-1 here. clearly, the white house wants to minimize this thing. doesn't want people focusing on it, wants them focusing on the other cases. ultimately, a long and drawn out legal fight appealed up the chain possibly all the way to the supreme court. >> thank you.javers covering th us. dow up almost 70 points and

the s&p marked a new intraday high. slightly off that. talk about that. also what's going on in russia and the response to putin today, in a moment. in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present.

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we've been telling you about this appeals court decision basically saying tax subsidies regarding obamacare have to go through state exchanges rather the federal exchange, or health care.glov care.gov. scott, great to talk to you again. good morning. >> thanks for having me. >> was this expected? >> i'm not sure if it was expected. a lot of people speculating the court might go this way. two of the three members were perceived add conservative judges. while it's significant, no, i didn't impact on the law. the justice department earlier issued a legal opinion basically say the obama administration plans to ignore any ruling saying the case only applied to

the plaintiffs in question. >> you think it's headed to the supreme court? >> well, it's headed to the full court. the administration will appeal to the full and d.c. circuit court, perceived more liberal than the three-jump panel with more members appointed by the democratic president. most people, a lot of people, are expecting the full court to rule in favor of the government. if that doesn't happen, and if the full court opposes the decision by this three-judge panel, there's another case in another circuit most people expect to be ruled in favor of the government. that's a similar case to this. if you have a split between those two circuits, that's almost certainly headed to the supreme court. another reason why we're a long way from just having any impact. the decision exposes how poorly crafted the obamacare law was and how it's depended upon coercion. it continues to build i think on negative narrative, in my opinion, about the law, but i don't think it will have any practical effect in the near term. >> talking to you about this legislation for years,

literally. we know where the aei stands, where you stand. in the wake of hobby lobby and now this, how would you characterize the law being at risk, if at all? >> again, i don't think the law -- i don't think these decisions are going to put the basic architecture of the law itself at risk. i think this decision is likely to get reversed by the courts eventually. hobby lobby applies to a narrower aspect of the law. what it does is show how the law is dependent upon coercing individuals, businesses, to do certain things. us a get precedent that peels away the coercion, is weakens the law and makes it harder to execute the law. each part is dependent upon the other parts. when you pull it away, it starts to unravel. the affordable care act won't go away as a result of these rulings. >> scott, thanks for coming to the phone.

europe will close in 20 seconds and same sn here with the countdown. >> three days of losses turned into a day of very strong gains. check out figures on the green here. in part, of course, because the eu foreign ministers meetings in brussels failed to agree to new sanctions against russia. sending diplomats out to work on something further down the line. for now, no additional sanctions against russia. if they come, about future, not now. and the property stocks and home builders are rallying. a lot of stocks rallying. they seem to be moving up strongly led by persimmon. a number of companies reporting in the uk again against armed holdings. a chip designer that stands out for many. a lull in royalties reversed. stock up almost 6%. credit xwoosuisse exiting, and biggest losers in europe today, the french after thie ingiant w

came through with a set of figures disappointing many. partly because advertisers on both sides of the atlantic, cancelling advertising campaigns and that the ceo is honest about because of a $35 billion deal. take a listen. >> fair to say we have been too much focused on the merger, and these have certainly generated a distraction over the day to day business. >> amazing, isn't it? how a deal can fail on personalities in advertising in a way that doesn't happen in phrma. >> and some of the issues happen after a deal a announced. it didn't get worked out beforehand. clearly hurting the bot unline of those companies. simon, thanks. talking about mega moves in tech this morning awaiting a big afternoon for earnings. today's "squawk alley" kicks off a new serious looking at companies on the cusp and crowd funding. a rapidly growing space expected to funnel more than $5 billion a

year to new start-ups potentially elbowing out venture capital. big winners have seen large payouts like a name foom our viewer, virtual company, and facebook buying that company for $2 billion. this week we put two active crowd campaigns head to head and now are giving you the chance to decide which is best. ♪ air dog. it's the first drone designed to

automatically follow you around and film your action. the drone uses a gopro and is controlled by a wearable device and smartphone app. the campaign's goal, $200,000. so far it's raised more than five times that. over $1 million. the new matter mod t is a low-cost 3d printer priced at $249, and allows userses to purchase 3d designs. the campaign's goal, $375,000. it's received more than $650,000 in funding. who should be this week's tech crowd leader? vote now at cnbc.com/techcrowd. logon, please and share your thoughts with us. interesting to see the dollar amounts that come in. this is really a situation where it's not just sentiment around these companies. it's real money that ends up backing them. >> sure. figure which one you think is more viable in the marketplace and that sometimes you have to

dig into these. are they really capable of delivering the technology they're claiming they can? i mean, oftentimes they are, but sometimes they're really not and take years to actually deliver something. put on your detective hats with this one, viewers, to figure which one you think is not just the better idea, but the better business. >> right. and depending whether or not they can keep up with demand, if there is demand. several problems in starting a new business. when we come back, speaking of crowd funding, coming up, the first crowd-funded hotel. a site that let's you actually fund real estate projects across the globe. plus, france might be the new black, according to netflix new strategy. that's coming up on "squawk alley." but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier.

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as you probably know, netflix out with earnings surpassing 50 million members, vowing to grow his international business. julia boorstin has more. >> right. netflix expanse into key european markets, including germ dme and france, happening in sdet driving netflix higher than expected sub describer growth in the third quarter. the stock is traded down this morning as investing in international expansion along with costs, resulted in a q3 earnings per share forecast that fell short of expect aces and is

down from this quarter's results. but hastings is saying the company will be break even or close in its existing international markets and sees huge global potential. >> it's really this growing demand for control and for the consumer to be able to click and watch what they want. so that's why we're stepping up on the original, on the international expansion, because we really see that this is an enormous moment in history as on-demand internet services are coming to the fore around the world. >> hastings reiterating his opposition to net neutrality proposal and to comcast acquisition of time warner cable saying he's hate to see internet provides block out certain websites trying to get payments. analysts were encouraged to hear that the company's recent price increase for new subscribers had basically no impact on subscriber growth. as for today's stock declines, remember the netflix shares are

still up about 65% over the past 12 months. carl? >> i thought it was fascinating, julia, they were worried during the world cup that net ads might take a slowdown. didn't happen. >> exactly. saying, in fact, they thought while brazil might be challenged because of so much focus on the world cup, they saw people actually ended up buying more smart tvs, which helped their results in brazil in the past quarter. what they thought would be a negative turned out to be a positive. >> julia boorstin, thanks, on netflix last night. delta air lines is cancelling flights to tel aviv on reports of rockets or debris in the air. phil lebeau has more. >> carl, show you the flight path of a flight that was going from jfk to ben-gurion airport in tel aviv, over the mediterranean and diverted it. at the very end the flight turns around, goes to charles de

gaulle airport in paris. we also have reports that us airways has suspended its flights, or cancelled its flights, out of philadelphia, and there are reports coming out of israel that american and united are following that course of path as well, and are also suspending their flights out of tel aviv, although we have not independently confirmed that with american and united. guys, no surprise here that any time you have any kind of fighting or rocket fire near an airport, a civilian airport, like this, you're going to see flights suspended. one interesting noted, though, elall, israeli airline, made all of its flights today out of tel aviv. back to you. stocks off a touch from session highs. mostly in the green. dal up about 1% today. back to netflix and bring in jason lynch, contributor, former television eder at "people" magazine talking about the results last night. good morning. >> good morning. >> i was wondering, we were talking about whether the world

cup could have a dent in their additions. didn't happen. do you see original content driving all of this? >> absolutely. netflix is on this phenomenal roll. orange is the new black, and they have so many interesting projects in the pipeline. i see this going on for years to come with netflix. >> jason, one of the most interesting lines of questions, in my opinion, last night on the earnings call, was when executives were asked whether at some point it would make sense to own a studio, to have stage time and some of these resources captive within the company. they said, yeah, advantages to this. could we see netflix buy a studio? when would that happen? >> that's unclear. they want more of a foot hold but that is absolutely something down the line. increasingly we're seeing networks and studios trying to own their own content. "house of cards" is not a netflix production. at some point that goes back to the studio and it's much more luke kra toiv have all of that in-house. i can absolutely see them making a play for that down the line.

>> jason, what's the end game for netflix? and maybe end game is putting it too strongly, but what does this become? making a play for more content? does it become more like a comcast? does it become more like a platform player? like a microsoft? what does it turn into in its next phase to justify the hopes investors have for it now? >> i think netflix itself is trying to figure out the answer to that question. they're oral forays into original programming, more successful than they anticipated. they're stocking the pipeline with even more series and in two years try to go into late night. late-night programming as well. i think depending how that goes, they could make an even bigger play down the line after that. >> i wonder, you mention "house of cards" and "orange" have gone from happy to be here status to front-runner status in terms of awards and emmys. why hasn't anyone else really hit it big on this front? "afl fa house" i thought, most

thought had at least the best chance as any. no one has been able to replicate the success? >> amazon spent a lot of money for "al if a house" resulting in zero nominations. what's worked for netflix, "house of cards" packed with big names. "orange is the new black" the first show on netflix unlike anything else on tv, and i think voters respond to that as well, and audiences. the first -- really the first netflix production where you say, i couldn't see the show on hbo or these characters on showtime or fx and netflix needs to do more of that going forward. >> that's go to cost money. clearly they have some to spend. jason, got very little sleep on his transflight, thank you for being with us. and market's up 66 points on the dow. all of the laggards are the once that reported this morning. travelers, coke, utx, mcdonald's

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investor saying herbal life is it's biggest stock made hooef he's ever made and is buying it aggressively. trading all the name inside the health care and insurance space, that and much more straight ahead on the "half." carl, see you in about 15. >> scott, see you then. over to the cme group for the santelli report this morning. >> hi, carl. an old adage we've repeated many times. at least a couple of months ago, related to the equities market. sell in may and go away. i know may is in the rearview mirror and that whole notion is completely wrong, considering the level of equities. but one market has a very big hook into may, and the saying's a little different. coin this saying -- the range in may is what to play. and it's true for treasuries and it's kept many traders on this floor who look at that particular range in the black, in terms of profitability. i'm talking about the range in

ten year established in a very narrow period from may 12th to the 28th. on may 12, a high yield close of 266. on the 28th, a low yield close of 244. we have been in between those two significant yield levels ever since. as a matter of fact, we've done a lot of work in the 260, 1 to 266 area, even intraday traded through it a few basis points. all predicated, of course, on the closes. i counted, there was about ten sessions that counted for that. if you look at the bottom side, we're working on that right now. 244 from the 28th. we've spent a lot of time in the last several sessions. why is this important? because it fits. today inflation was hotter in the ten year yields popped up, only briefly. the yield curve continues ton flatten. flanting is taking care of all the heavy lifting. why? short rates are reflecting all

the anxieties. about the fed, about rates. about zero interest rate policy, and the long end, traders saying, hey, with that inflation day to day, we should be 25 or 30 basis points high perp maybe we should be at 2.25 and the reason we're closer to 250 is those 25 and the softness is due to the, pimco would say, the new normal. back to you. >> rick, thank you. when we return, a crowd funding remember site to invest in reasset around the world. the founder add ceo is with us next. why is microsoft up and ahead of earnings tonight? we'll talk about that. don't go away. (trader vo) i search.

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so, are you thinking about crowd funding a smart watch. a new movie? how about a hotel. allowing accredited investors to back real estate projects, and wrapped up financing the first crowd-funded hotel. julia helman, ceo, backing more than $100 million worth of properties since their launch joining us from los angeles. good morning. >> good morning. >> all right. so how does this work? if i crowd fund with you, what do i get? do i get equity in this property or what? >> so you're buying into equity in the hotel. this case, the hard rock hotel in palm springs. >> and how does this pay out for an investor? i take it the investors who jump in on the crowd funding model don't really get a say in how this is managed or really a vote. so how do i get my money back? >> so they don't get a say how the property is managed but do

get a share in the cash flows and do get a share in appreciation of the upside on the hotel. we're big believes in cash flow and a benefit at the hard rock hotel, already a cash flowing property. individuals are renting rooms from the hotel. that cash will be paid out to investors on a quarterly basis. >> jillian, what sort of disclosure is an investor aloud in this type of situation? because hard rock, planet hollywood, a lot of properties in these similar sectors have not performed so well. i'm wondering, obviously everyone is chasing yield. how can you make sure what you're putting your money into actually has a good enough return to stay there? >> real estate investing is like any other investment. no returns are ever guaranteed. it all comes down to the asset and to the location of the asset and the management of the asset. in this case, a wonderfully located hotel in palm springs. we feel confident in the management team, who's been able to grow occupancy rates and net income of the hotel.

>> we know it's expensive to build a hotel. $1.5 million, with an m is not a lot of money. why so little? >> so the $1.5 million will be used for renovations on the hotel. increase occupancy through the aing value to the rooms, adding value in a nightclub and bar in the hotel to drive in additional patrons. but the hotel itself was purchased before we got invoefrted in it. doing a refinance to provide them with additional capital to finish renovations. >> not just this hotel and not just hotels in general. residential properties make up 22% investors have put their money into. who sources these properties and how do you make sure they're viable? >> interesting. the idea of crowd funding allows us to do things on the internet. we've had over 2,000 transactions submitted online at real realty. we do a first pre-screen of all investment opportunities and opper up to network of investors

to make their own informed real estate decisions. >> interesting concept. who needs a bank anymore? thank you so much. dow is up 68. trading in a narrow range. we'll talk microsoft in just a minute. ...for the year. hi. sorry. just want to say, i bundled home and auto with state farm, saved 760 bucks. love this guy. so sorry. okay, does it bother anybody else that the mime is talking? frrreeeeaky! [ male announcer ] savings worth talking about. state farm. ♪he cadillac summer collection is here. frrreeeeaky! ♪ during the cadillac summer's best event, lease this all new 2014 cts for around $459 a month or purchase with 0% apr and make this the summer of style.

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all right. who knows who or why, or how, someone replaced the u.s. flag, two on ton of the brooklyn bridge, with what appears to about white flag. some pointed out maybe faint markings of stars and stripes. reports indicate at this hour police in new york city do not know who did this. raising questions. since this is one of the most heavily secured places in the city. >> an investigation has closed one lane of travel on the brooklyn bridge. traveling in that direction, keep ta in mind. not an easy location to get to. >> i want to put cameras on that. >> a lot of cameras on the brooklyn bridge. >> yes. >> almost looks like -- >> they don't know who did it or how -- seems there's should be footage. >> that looks very faint stripes on that flag. >> almost appears as if someone coated them with a layer of

white paint. obviously, answers are forthcoming, one would hope. meantime, you might get answers tonight on both apple and microsoft. a name, jon, trading flat today. >> microsoft, interesting, because a lot of the analysts who put out notes who are concerned are concerned about integrating nokia. of course, we know about the layoffs and the financial perspective, some investors are heartened about that. don't take their eye off of the enterprise. talking about office 365. talking about the server and tools business, ran before he became ceo. with the strength in the enterprise refresh from intel, relative strength in servers, software on those. that could make up for any kind of profitability issues that nokia presents. we'll see. >> analysts are saying now that this is a refocusing quarter, as we've seen. don't expect to see real bottom line results on that just yet jt do you think we'll see something different? >> well, i don't know.

i mean, office has gotten long in but continued to perform. heading towards the back half of the year. interesting things potentially happened with a number of different businesses and including xbox, consumer one. a price cut that seems to have raises revenue. we've see what they say. >> and xbox sales doubled. clarity on that. >> yep. meantime, the judge watching herbal life. scott in the half up next. >> thanks. welcome to the "half time" show. the herbal life saga. the company's ceo speaks to us first, bill ackman takes the stage for what he calls the presentation of his life. following the money and every move in that stock today. and herbal life actually is reversing and is higher here. okay. elsewhere, we are following the markets. we do have jon and pete najarian, and pete, a production issue. apologize. looking at results, guys. look at the food stocks, which are in focus today.