california. 11:00 a.m. on wall street. and "squawk alley" is live. ♪ my name is ♪ my name is ♪ my name is ♪ slim shady ♪ hi, my name is, my name is, my name is ♪ ♪ slim shady ♪ hi, my name is who ♪ my name is huh ♪ my name is slim shady ♪ my name is, my name is, my name is ♪ ♪ slim shady good tuesday morning. as always, jon fortt,ey." kayla tauschee at post 9. the top news of the dpa is google announcing that massive reorganization, creating a holding company called alphabet. also elevating product chief sundar pichai to ceo of google. sergey brin and larry page will be heading the group alphabet. the investor community likes

this move. shares of google are in the green on a pretty tough day overall. kara swisher's the co-executive editor at re/code and joins us to shed some light on this. kara-g morning to you. >> how are you doing? >> you called it wacky monday at the board. what should we know about this move? what does it mean? >> i think we're all making a big deal of it. all they're doing is moving chairs around and calling them different things. they're trying to give transparency. that's the larger story. is wall street's been perplexed by google the way they've been perplexed by amazon and things like that. and amazon just recently gave clearer numbers around aws and its cloud services platform. google's trying to clarify the situation probably under the new cfo, ruth porat who's been sort of this idea of more transparency and information for wall street. and again, it's also a way to hold on to talent, giving them ceo titles, being more nimble i guess because they want to pretend they're like a startup even though they're the most

powerful company in the world, one of them. it's a range of things and it's just to clarify what's already happening, was in place at google. it's a new name but it's the same company. >> but kara, it might be the new cfo that might signal transparency, but from the looks of it this is just two big baskets of brands under google, one being a more classic basket, one being more of a negative cash flow moonshot basket. what in that carries more transparency? >> i doubt we're going to get very good numbers out of the moonshot stuff. they're spending a lot of money on it and they probably don't want too much information about what they're doing because some of them might work, some of them might not. but wall street will focus on the google part of the equation, which is where the money is made. essentially in search pretty much. and in other areas. what's in that basket there. you know, it will be interesting to get more clarity into what's going on at youtube, which is in the google basket. but you know, again, this is a structure that's been there before. it just clarifies it more i think. and again gives sundar, for

example, a ceo slot. i suppose tony fidel gets to run his part, which is the nest part, which he was already doing. so to me it's a tiny bit perplexing but you know, moving things around is always good for news and good for wall street to get slight more clarity. and again, they're trying to sort of act like they're a startup. alphabet has five executives attached to it right now. it seems to be the same thing to me. >> kara, it occurs to me, though, there's a ton we don't know about this structure. wall street is initially taking this as unambiguously good. but is alphabet going to spin out companies in ipos? is alphabet going to spin companies into google inc.? is alphabet going to acquire enterprise companies and leverage its infrastructure that way? and also it could be, if you look at this in a critical way, maybe it's a bad thing you get this founding team, larry,

sergey, eric schmidt, david drummond, ohmid kordastani. they're back away and saying we're not going to pay sole attention to google anymore, we're going to look at all this other stuff. would they really take that team and spend less on moonshots as a percentage of google's overall revenue or are they really going to spend more? >> you're sort of using the board billionaire argument. they do like the stuff that they're doing over at -- the more interesting stuff is the moonshot stuff. and it's -- you know, the nest stuff is fascinating. the drone stuff is interesting. larry particularly seems to like the drone thing. it's called wings. again, it's not a different structure. so i don't know -- it's a different name is what it is. i find it fascinating to take literally the best-known name outside of coca-cola and just change the name. and that's typical of google to do something like that. you know, they want to pretend they're a startup. i'm going to write something later today. everyone in silicon valley likes to try to deal with bureaucracy

and age. and page referenced it in his memo about being too old as a teenager and keeping innovative. it's a desperate fear of people in silicon valley not to be innovative and not to be young anymore. as is with everybody. so i think this is an answer to that, i guess. >> yes. >> i like being old myself. >> well, there's some benefits i guess. people are wondering, though, kara, why this move which you basically explained as largely cosmetic is worth 25 billion in market cap today. >> because wall street is just so deep and thoughtful about these things. they think they're going to get more information out of google. i don't know. >> is it about -- >> why did it go up when they said the word transparent. they're getting more information so they can judge better i presume. >> someone tried to read into the mention of alpha in larry's letter that somehow investor relations are more important now than they were a week ago. >> no. there's five people running alphabet.

and there's no pr person, by the way. there's five people running it. so you know, i guess so. i don't think you're going to get more transparency on the top for sure. but you're just going to get more -- presumably you'll have more access to sundar and the executives running the different divisions. but again, it's the same google. it's the same people at the top. they didn't change executives. i think the most interesting move is omid kordasani the head of sales and now that's being spread among three people. that's the most critical part of google is is the sales executives selling search and advertising. and now it's split among a number of executives, very good executives, all of them terrific. but omid is stepping back and he's become adviser. with an a. that's with an a, by the way. >> it's sounding like it's more and more complicated than maybe the news we woke up to. i'm wondering if there's a clear comparison that we should be thinking about. you mentioned coca-cola. people have been trying to draw comparisons to berkshire hathaway. to general electric. and maybe even to citi and citi

holdings, cathy a bad bank of certain assets that maybe are less investor friendly. you made the comparison to beyonce and sasha fierce of all people. how should we be thinking of it? >> that didn't work. yeah, that didn't work so well. didn't she get rid of it recently? i think everybody wants a little bit of change. people get bored with their world. some people don't love the conglomerate thing. google's been pushing everyone toward the berkshire hathaway metaphor, and reporters are repeating it because google said it essentially. you know, conglomerates are very difficult. it's very difficult to get a handle. what happens with a lot of these companies is they morph. facebook is not just in social networking anymore. it also owns oculus. amazon is not just -- you know, it owns lots of things. all around the interests of the ceo jeff bezos. they have phones, they have readers, they have cloud computing. and so when things get complicated because the leaders get complicated or are more interested in other things except their core business, which in amazon's case is

retail, which in google's case is search, which in facebook's case is social networks, when they get interested in other things besides what brought them to the party, you have to create a conglomerate i guess. it's just a way of organizing. i think we'll see how much transparency they do. i don't think they will. they're not a transparent company. they never have been. and i think they do what they want. and wall street's been fine with that. we'll see if they're more friendly. i don't believe it. but we'll see. >> there's a lot that we're going to wait to see about. kara, thanks for your insight. good to see you again. >> thanks a lot. >> kara swisher joining us from out west today. we do want to get a check on the markets which are close to session lows riot now. the dow is down 211 points. that's about 1 1/4%. s&p 500 is down 21 points. nasdaq down 50. each of those indices down by about a percent. we did get some positive data stateside. wholesale inventories were up more than expected and now some people saying that could lead to a gdp revision but it really is that devaluation of the yuan.

a surprise move by china that is only causing further strengthening in the dollar and of course that is hurting multinationals. that's also hurting oil, which has fallen below its 2015 closing low, 42.03 was the low of the session this morning. jon? >> and google's not the only one innovating for better or for worse. insider trading entering the 231st century. nine people being charged this morning after allegedly hacking into company press releases to trade on data before it was made public. mary thompson is back at headquarters with the details. mary. >> hi there, jon. the group seems to be bigger than we initially thought. according to a 61-page complaint from the securities and exchange commission, an international group of 17 hackers and traders from ukraine, russia, pennsylvania, and the state of georgia along with 14 firms netted $100 million in illegal profits, trading on non-public information. so how'd they do it? well, the hackers infiltrated various wire services through malware and employee log-ins, gaining access to corporate information that had yet to be

made public. the information was then sent to the traders before the release, who traded in and out of the stocks or options, sometimes within minutes of that release. among the companies whose news releases were impacted, caterpillar, panera bread, verisign, and edwards life sciences. the releases mostly concerned quarterly earnings and forward-looking guidance. starting back in 2010, hackers living in ukraine were paid a flat fee or percentage of the illegal profits by those traders. from 2010 to as recently as may of this year they accessed over 100,000 press releases before they were made public. now, the three wire firms that were targets of the attack include business wired, market wire and pr newswire according to the filings from regulators. in a statement businesswire says it's cooperating with the government and while security is the company's top priority it said recent events have shown no one is immune to the highly sophisticated cyber intrusion that's are plaguing every aspect of our society." the other two firms have not

returned calls or e-mails seeking comment from the s.e.c. the s.e.c. filing the complaint alongside federal prosecutors in new jersey and brooklyn. prosecutors in new jersey charging at least five of the 17 in the s.e.c. complaint on 23 counts, including securities fraud, wire fraud, and identity theft. prosecutors and regulators will be holding a news conference starting at 11:30 eastern time this morning. and we will be carrying it live here on "squawk alley." kayla, back to you. >> thanks so much, mary. we will have that presser as you mentioned just a little bit later on this hour. meanwhile, a quick air travel news alert for you. phil lebeau live in indiana with that. phil. >> kayla, we've gotten the report card for june on-time arrivals for the airline industry. and as usual, hawaii leads the list with an on-time performance of greater than 90% of its flights landing on time followed by alaska, delta, virgin america, jetblue, the remainder of those all above 80%. but what's really interesting is when you look at those at the bottom of the list. look who did the worst in june. spirit. and it's not that spirit was at

the bottom. it's the percentage of flights that were on time. just 49% of its flights on time in june. united 66%. frontier 67%. envoy and express jet, they round out the bottom five. the industry average, by the way, in june, 74% of the flights on time. just two tarmac delays of more than two hours and no delays of greater than four hours. guys, back to you. >> thank you very much, phil lebeau. when we come back, why youtube could be the biggest winner in google's massive restructuring. top vc roger mcnamara's going to weigh in. plus shares of apple down this morning and some tepid interest, says ubs, in the watch may be to blame. we'll take a closer look. dow down on session lows. down 208 points as oil threatens to break 43 and the airlines are flying too. "squawk alley's" back in a minute.

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with google overhauling its reporting structure could high growth you be more important than ever? julia boorstin live in l.a. >> this move shines a spotlight on youtube, which is an increasingly important part of google's core business. though youtube tells me that its revenue will not be broken out from google's results, investors are applauding this new structure, shares trading higher this morning on confidence it will provide better insight into the growth and profitability of youtube as well as google's

other ad-driven businesses. youtube was credited this past quarter by cfo ruth porat for being a key driver of google's growth. now, though she didn't reveal financials she did say that watch time on youtube is at its fastest growth rate in two years, up 60% over last year. she also said that youtube's top 100 advertisers are spending 60% more than they did in the year ago quarter. analysts are bullish that this new focus will be beneficial for all of google's divisions and they are hoping to get a better serns of how margins are at youtube and also how well youtube is faring against facebook, which is making a big push behind its new video platform. it is worth noting that youtube, which has always operated with its own ceo under the google umbrella, has functioned with a similar model to what google and alphabet are now doing to various divisions. and sort of underscores the success that google has had with

that operating independence. guys, back over to you. >> julia boorstin talking about the google restructuring. for more let's bring in roger mcnam nii, the co-founder of elevation partners. roger, good morning foup rog. roger, can you hear me? i don't know if he has his ifp plugged in quite yet. we'll come back to him in a bit. people have been talking about the breakout of some of these youtube numbers for years. >> we're still not going to get it. there's a big reaction to this as if google's going to provide a whole lot of transparency. the only thing i can see that people are going to get is how much google is spending on some of this non-core stuff. bun all the non-core stuff. the hardware division including nexus is still going to be part of google. a lot's being made of this. i'm not sure there should be. >> so we're saying even the berkshire comparison is not a good one because berkshire doesn't report every segelment each quarter.

they choose what to report. still a lot of answers to get from google. i do believe we have roger mcnamamee back with us. roger, can you hear us? >> i can indeed. it's a lovely morning. how are you? >> we are doing great, thanks. your thoughts on this google move to have a parent company called alphabet and separated into two baskets. >> well, first of all, the really important thing for investors here is that this may lead to separate tracking stocks for the various businesses inside goggle, which would be a sensible move for everyone. and if you look at this, simply breaking things out, providing more transparency has some value but i think it's quite limited. but in the long run as the advertising-based internet businesses, which is to say search and youtube and all, begin to slow down they're going to have very different investment characteristics in the rest of google.

they're going to be more than one kind of investor that's going to own google. you're going to see that value-oriented and growth at a reasonable price, investors are going to prefer the search. the, if you will, traditional google. and there are going to be other investors who want to get involved in the moonshots. and to me that will be the significant move. this is a preamble. they don't necessarily have to do that. maybe they don't have to do it. i do hope they will because that will be good for everyone. >> it occurs to me, you look at apple this morning. it's down pretty much -- more than most stocks in the dow anyway. google is up. google's up based on speculation of what they might do. sure they might do tracking stocks, whatever. but even since earnings it's not so much based on the fundamentals aside from some cost controls that that stock is up. you look at apple we know the iphone cycle has been strong. their loyalty is stronger than samsung. there are certain other metrics including the early upgrade

plans that seem to be in their favor. but people are bearish on that one. why is it that with one company people are so hopeful investors based on what might happen and on the other they're pessimistic based on data that would seem to be positive. >> don't you love the market? i think it's pure emotion. i think apple has been the most powerful stock in the stock market for the last eight, nine years and google's obviously been a very strong stock. but apple's been the driver. and because of china and the yuan news this morning i think really adds to that, there is a legitimate reason to worry about apple's growth rate. we are very late in the iphone cycle and there really isn't anything on the horizon that is going to have that kind of scale. that said, no matter what you have, apple's going to be an enormously profitable business, and it's trading at a very reasonable multiple compared to the s&p 500. so to me the emotion that's involved in the stock now is

understandable but i think probably going to -- at some point people are going to look at the fundamentals and go wait a minute, this is a value stock. on google i think what you see here is the triumph of hope over experience. the notion we're going to get more transparency i think is good news. but as you say, it probably isn't worth as much as it's going into the stock. but there's an emotional thing going on. and that's just how markets work. and i think as a professional investor one of the things i always try to remind myself is that there's a limit to how far you can go with analysis. eventually you have to have some intuition. and when people's intuition gets really juiced up the way it is now in google you get very big moves over very small pieces of information. and i just think that's market emotion going on here. and you know, it's part of what makes the whole thing fun. isn't it nice to have a stock that's up a ton in an otherwise lousy market? >> roger, you talk about them

attracting more value-oriented investors. two questions. is a dividend in their future, then? and second, if on the one hand they're this value play, on the other hand they're this moonshot play, their motto used to be do one thing incredibly well. so why try to do everything? >> but hang on. we have to cut them some slack here on two things. first of all, they haven't separated the thing yet. so it's not going to be attracting value investors, i don't think, until the moonshot thing can be purchased as a separate bundle. but from google's perspective they didn't have a choice. their success has essentially caused a proliferation of search products. as you pointed out, i mean, youtube is a search engine and it is an enormously exciting one and one where i think the growth goes on for a long time. i mean, they have established a position in that business that is at the moment at least unassailable and they've created a business model there that i

think if you will has some moral questions to it because they're taking huge pieces of the pie for content created and owned by others. but it is nonetheless a spectacular business. and i do think from an investor perspective google remains a -- it remains google. i don't think value investors are rushing into the stock today. i think it's the growth investors sitting there thinking a-ha, maybe we're going to see tracking stocks, maybe not, but whatever they do they're clearly putting the kind of resources behind some of the new efforts that may lead to -- into some kind of success. >> roger, maybe i'm a skeptic but are there any antitrust implications here? is this a bigger chinese wall they're trying to build between businesses like search and mail and fiber and nest? >> it's a great question. i don't know. the one observation i would make is u.s. antitrust law has been

enforced in what i can only describe as essentially a random way. there really isn't any policy behind it that makes any sense to me. i look at this and i go enforcing antitrust in tech is something i understand intellectually but i think in practice the wall moves so slowly it just hasn't worked and the market is taking care of these problems much faster than the justice department ever could. i think in practice we should assume no. but you never can tell. there's always a politician looking to make a name and google is a bright shining light. >> finally, roger, this ubs note today seeing tepid interest in the watch, cutting their estimates again, counting on iphone growth as the primary driver of stock performance. i'm assuming that the stock's down because all their phones just got a lot more expensive in china. >> yeah, my response to the ubs thing is whoop-di-doo. it's like welcome to the party,

pal. the thing with the phone is when you've sold 300 million of anything that's a really big deal. you can't expect unit volume growth to be sustained at that level. so that's the real story. on the watch i think it's way too early to write it off. it's also completely inappropriate to worry about it as a financial issue. the one thing that we have seen is the watch has had a huge impact in the watch market. you know, there's been an 11% decline in revenues in the u.s. watch market in the june quarter, 14% decline in unit volume. the watch certainly had an impact in the watch market. now, apple's such a huge company, it doesn't make any difference to apple. so i look at this and i go apple is a value stock today and right now it's under pressure. eventually the pressure will abate and that's when you're going to want to buy it and own it -- >> nobody's downgraded google because google enterprise hasn't taken off, right? >> exactly.

and that's just emotion. and i sit there and i go is it rational? no. is it natural, though? absolutely. >> roger, good seeing you. thanks again, as always. roger mcnamee joining us today. >> up next the dow trading down 226 points. at session lows. s&p and nasdaq down 1% as well. we'll get you the day's biggest losers so far. that's coming up next on "squawk alley."

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all right. let's move to the markets. selling off. with the dow down triple digits. the s&p and nasdaq also down more than 1% each. and bob pisani is on the floor with some of the biggest movers. bob. >> everything that was up yesterday is down today, basically. take a look at the sector moves. it's china, and it's energy, materials, industrials, all the stocks rallying yesterday are to the down side today. i want to point out specific exposure, though, because people say what does china have to do with us? a lot of u.s. companies have significant exposure in china. so look at wynn, the casino company.

70% of their revenues in china. yum, 50%. and a lot of the tech names. broadcom and micron. qualcomm have significant exposure. and even apple, 16%. and if you look here, those exact names are the ones that are down the most here. there's a lot -- markets reflecting some -- auto companies have significant exposure in china. delphi gets nearly 20% of its refunds in china. and a lot of the german companies, volkswagen, bmw, daimler all have double-digit exposure to china. our companies ford and gm not so much but even here today if you take a look at these names here, delphi down, volkswagen down, those trade over in germany, down. ford also down 2%. general motors also down 3%. i always talk about the big industrials and their exposure to the global growth and the global slowdown story. same story here. 3m, double-digit exposure to china. so is dow chemical. ge 7% of its revenues from

china. johnson controls 6%. and again today as some logic here. they're also reflecting that weakness. 3m, dow chemical, ge and johnson controls to the down side. also china stocks are understandably down. chinese airline stocks are down rather noticeably as you can see here, double digits. the one positive i would note is with the 3% decline in oil u.s. airline stocks are the one-r notable winner we have. carl, back to you. >> bob, thanks very much. speak of china one of its biggest companies alibaba set to report before the bell tomorrow. ceo daniel zhang will be on "squawk on the street" 9:00 a.m. eastern time. uk is across europe today stocks falling sharply no surprise on china's devaluation of the yuan with major sectors down across the board. a number of luxury names sliding including swatch, lvmh, hermes. and greece and its creditors

have agreed on terms of a new bailout. if approved by eurozone governments. officials say the deal woun lock about 86 billion euros in financing for greece over three years. the country of course has to make that 3.2 billion euro debt repayment to the ecb a week from thursday. news of the agreement gave athens a much-needed lift as you can see. up 2% after a rough week or so. when we come back, we've talked a lot about google's restructuring this morning but according to kevin o'leary the company still has not gone far enough. hmm, i wonder what he means. his prescription for growth, dividend included, when "squawk alley" continues. the dow down 218. 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. it's your idea

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good morning, everyone. i'm sue herera. and here's your cnbc news update at this hour. a federal appeals court declining to review the case of former virginia governor bob mcdonnell, letting his conviction on public corruption charges stand. a three-panel judge -- three-judge panel i should say of the court of appeals unanimously upheld his conviction in july. dutch investigators say some of the debris recovered from the site of malaysian airlines flight mh 17 that was shot down over the ukraine last year may contain fragments of a russian missile.

they claim the fragments are possibly from a russian surface-to-air missile system and they are being studied by the dutch safety board. the u.s. consulate in turkey reopening just a day after an attack at that site. amid heightened security. assailants opened fire on the building yesterday, sparking a gunfight with police before fleeing the scene. and democratic presidential candidate bernie sanders campaigning in los angeles last night in front of a packed l.a. sports arena. the vermont senator telling the crude he will fight harder than anyone to end institutional racism. not many people outside of tech know about new google ceo sundar pichai. josh lipton is live outside google's headquarters in mountain view with a closer look at the man. hey, josh. >> reporter: well, carl, so far sundar pichai staying relatively quiet on his role on twitter just offering congratulations.

those well wishers include a range of people including the prime minister of india and ceos like apple's tim cook. the 43-year-old pichai was raised in india, we are came from humble beginnings. his family reportedly didn't have a car, tv, even a telephone. but at google pichai has enjoyed a meteoric rise over the last decade. came to google in 2004. introduced chrome in 2008. five years later became head of android, instantly becoming one of the most influential tech leaders in the world. and last year larry page naming him product chief. rbc's mark mahaney saying he was the most logical strong choice for this job. mahaney saying pichai's challenges ease takes the helm include mobile monetization, making sure youtube continues capitalizing on that broad trend of tv budgets moving online and encouraging strong top and bottom line growth at google play. now of course, pichai has been

on our radar for some time. cnbc naming him to this year's disruptors list. guys, back to you. >> all right. thanks so much, josh lipton. we're going to be learning a lot about mr. pichai in the coming months. let's stick with google and whether it's time for the tech giant to start paying out a dividend. who better to ask than kevin o'leary, who has been beating his chest for a dividend for quite some time. of course "shark tank" investor and chairman of o'leary financials. so kevin, what say you? will we get a dividend from google in the fourth quarter when this split finally happens? >> i don't think so. and i'm kind of disappointed, kayla, in this restructuring because there's two i think risks that google i believe hasn't taken into consideration. i don't own this stock for two reasons. it's a dual voting class structure. that means i don't get one share one vote. and i've never owned companies that put that in place for a wide range of reasons, this being one of them. and of course it doesn't pay a dividend. what will occur now in the january quarter is that i can

look at this and say potentially the king has no clothes on all the moonshot that's you're spending 5 or 6 billion dollars of shareholder money and the outcome is unknown. if i want an investment like that i would put my money into venture capital of which there's many different structures i could choose. great venture capital firms. in fact the opportunity i thought would have worked and for me would have made me a shareholder this morning would have been if you separated these companies, google, which makes about 912% of everything in that company. and separated it and took away the dual-class voting. so it became a standard common share with a 2.5% dividend. instead of going up 4.6%, that would have gone up 10% to 15% because the most coveted asset in the world today is a growth equity with a dividend. bar none. this would have been one of the premieres on earth, giving exposure to tech, advertising and social media all in one.

what a missed opportunity. and that everybody else that wanted to be part of moonshots and venture capital could have stayed with the original founders and worked with all that other stuff that has no interest to me whatsoever until it too becomes investable and not a speculation. >> kevin, i hear what you're saying from an investor perspective on wanting the founders to give up control. but as a refugee from the newspaper era, newspapers absolutely got destroyed during the dawning of the internet era because investors weren't patient. it would have been better if, say, knight-ridder had probably kept its controlled structure. so yes, as an investor i understand why you don't like it but can you also allow that founder control and dual class shares can help a company that's facing growth and needs to make some difficult decisions that investors might not like in the short term? >> that's true. and it's a good point. as long as the jockey has the same skill set that actually founded the primary asset.

and what you're seeing across all assets is every ceo as time passes loses a little bit of their edge sometimes. and i'm not saying it's going to happen to the google guys but my point is if you go to one share one vote then you don't have to worry about that anymore. if things go off the rails, the shareholders, the institutional shareholders at least and the board itself can make changes. you can't really do that here. and i'm not saying this isn't the greatest team on earth. it's just that as this company matures and its founders mature they may not have the same magic they once had. and every time you take shareholder money invest it in a new startup, which is essentially what the moonshot deals are, that's a whole different risk profile. and if you're going to separate them out and be more transparent why not actually do the whole thing? split it apart, pay a dividend. you've got a fantastic new ceo. let that person makes decisions and let the market be the market. i don't know. it seems to me inevitably this is going to happen anyways.

why not -- having done it now would have been better. even apple went through this just a few years ago. eventually all roads lead to me. the value investor who wants some of his capital back. just bring it home, daddy. it's coming to me anyways one day. too bad it wasn't this quarter. >> kevin, there is one similarity between the two units of this company, though, and that is the cfo ruth porat who just joined in may. i'm wondering if you see her bringing a further perhaps banking sensibility to this company and continuing to transform the structure of google and that what we're seeing today is just beginning. >> yeah, maybe. and i hope that's the case. i think the team there is absolutely spectacular. they just didn't go far enough. i'm going to speculate what really happened here was a few months ago this young ceo was made an offer somewhere else in the valley to become a ceo at a very large company. and it's natural if you're as good as he is that you're going

to take that. that's the progression of your career when you're in your late 30s and 40s. and in order to keep him he needed a ceo-ship. so we're doing all of this contortion to give him what he wants, and of course he deserves it. but why not go the whole way and make this something that value investors would covet all around the globe? believe me, i said it earl yes. an asset that pays capital back to shareholders that's growing is a rare thing. and this would have been highly valued. it's a huge missed opportunity, and it's going to happen anyways. i'll be investing in this company one day. i'm just waiting on the sidelines till it becomes a real investment, not a speculation. >> well, it's working really well for larry and sergey up to this point. guaranteed returns for them certainly. you say you don't invest in anything with a dual-class structure. i understand the discipline. but take a look at facebook. founder control. dual-class structure. some pretty nice growth over

time. can you separate your willingness to invest in facebook with your outlook on its prospects for the future? >> well, it has two marks against it. it doesn't pay a dividend and it's a dual voting class share. so it's a long time before i'll be touching that one. and it's a great company. what i find so remarkable is people come up to me on the street all the time because they hear us talking about this. i never change my mind because i go back in history and i look at over 42 years of data and see as hot companies like facebook come and go, and i'm not saying it won't be a fantastic entity for some time. the majority of the market returns across all sectors, jon, not some of the sectors, not tech, all of them. came from dividends, not capital appreciation. so i may miss the hot new whatever. i couldn't care less. the majority of my money's invested in companies that increase their free cash flow across all sectors. i look at my portfolio like a chicken on a spit dripping cash, and i like it. >> kevin, finally, i've got to

get your take on china's move. currency wars obviously take another leg up. does this make you more net pessimistic on global growth? >> no. it to me say move by the chinese to normalize their currency. they are attempting to have it become a reserve currency. they're not going to get there on this move because it's not free floating but it's a step. it's a baby step in the right direction. the only thing i really look at about china and i can actually glean these numbers from u.s.-based investments that are doing business over there. the lowest growth story for that country in the next 18 to 24 months is 5.5%. and that's the lowest. some are as high as 7.5%. i can't find that anywhere else on the globe. so i continue to invest in companies over there. and here's the one difference. it used to be an infrastructure story, and it was all about commodities. but you've got this massive middle class that are eventually going to be buying goods and services from us in the united states. china is probably the best

growth story there is on earth right now. even though there's a lot of volatility. you get these days of 3% to 5% moves. you have to stomach it. the way i'm looking at it for the next two years, and i've been doing it for the last few months, i'm repositioning my portfolios to 25% asia exposure. 25% europe. and trimming back my gains on the s&p to 50%. that's my new mix. i'm going to ride my pony for the next two years with that blend of equities. >> well, we'll see what direction this recently soft data points to, kevin. 25% in asia. we're going to hold you to that. we'll have you back to talk about it. >> you got it. >> sometime later. kevin o'leary, our thanks to you. and up next keerngs an eye on the market. with the dow now down nearly 1 1/3%, the nasdaq and s&p down 1%, we're back in a moment. i can help you choose the right portfolio. monitor it. and even rebalance it. i've been called innovative. revolutionary.

and just plain smart. i'd blush at the compliment if i could. but i can't. so. i won't. say hello at intelligent.schwab.com

some breaking news. homeland security secretary jeh johnson among those speaking at a news conference on charges that nine people hacked into company press releases and traded on the data. let's take a listen. >> in new jersey the u.s. attorney in the eastern district of new york, the s.e.c., the secret service, the fbi, for working so hard on this case. i am here because i want to highlight the good work of the united states secret service, which is part of the department of homeland security. the secret service was formed in 1865. originally it was solely a law enforcement mission. bank crime, counterfeit currency. i came to know the secret service when i was a young prosecutor and assisting united ates attorney in the southern district of new york, working a counterfeit case in 1989.

the secret service picked up the protective mission in 1901, which is the mission most people know it by. but the secret service has historically been involved in the investigation of financial crime. and over the last several years has built up a remarkable cyber security, cyber crime capability. and so for example, earlier this year we brought to justice the defendant in the pending case now, vladimir drinkman, which was also a secret service case. an alleged international cyber criminal. so this case here again highlights not only the good work of the secret service in cyber crime, in the investigation of cyber crime but also it's a testament to how we can and should cooperate at the federal level in the investigation and in the

prosecution of very sophisticated criminal activity. this case is a testament to how the s.e.c., the fbi, the secret service and the department of justice can and should cooperate together in these can and should cooperate together in these types of cases. i want to congratulate all the people up here with me and in the back of the room who worked very hard to bring about today. thank you very much. >> thank you, mr. secretary. i'd like next to call on mary jo light the chair of the s.e.c. i want to thank her publicly because the s.e.c. has been a terrific partner for my office, not in just this case but we worked closely with her and other folks, with impact for investors not just for new jersey, but all around the country. >> thank you very much, paul. it's an honor to be here today to be invited to be here today. i also want to congratulate all of the law enforcement agencies

represented for their extraordinary efforts on this groundbreaking case to safe guard the integrity of our markets. i will focus my comments on the securities law violations alleged in the s.e.c.'s complaint which shows how cutting-edge and important this case is. it also illustrates the risk posed for our global markets by today's sophisticated attackers. now, the s.e.c. has uncovered and successfully litigated hacking and trading schemes in the past. today's international case is unprecedented, in terms of the scope of the hacking at issue, the number of traders involved. the number of securities unlawfully traded, and the amounts of the profits generated. over the course of five year, the 32 defendants named in this complaint are charged with carrying out a brazen scheme to steal nonpublic earnings information for hundreds of publicly traded companies.

and then placing thousands of trades through a network of u.s. and overseas traders located in the russian federation, ukraine, malta, cyprus, france, new york, pennsylvania and georgia. geographies electronically connected by this illicit network. according to the s.e.c.'s complaints these traders located across the globe executed thousands of illicit trades on the basis of this material nonpublic information. concealing the scheme by spreading the transactions across multiple accounts held in the names offal individuals and entities. and the traders were market savvy, using equities, options and contracts for differences, to maximize their profits. two ukrainian hacker, charged with spearheading the scheme, ivan kutinov and along with 30

defendants collectively alleged to have made more than $100 million in illegal profits by trading based on prereleased corporate earnings announcements stolen from multiple news wire services. they charged the defendants in the complaint unsealed today, with multiple securities fraud violations, seeking disgorgement and penalties and obtained an asset freeze against the overseas traders which secured thus far at least $20 million of the defendants' ill gotten gains. and the s.e.c.'s investigation is continuing. the complaint charges that they used malicious programming code and other deceptive techniques to hack into the computer systems of the news wire services that stored corporate earnings announcements unpublished. these announcements were slated for public release the a preslated date and time. and the hackers took advantage

of that time gap. according to the complaint, the two hackers brazenly intruded with the video showcasing the ability to steal and transmit earnings information before its public release. now, this case highlights a number of important points. it demonstrates the enhanced training surveillance and analytic abilities that the s.e.c. has developed. >> mary jo white of the s.e.c. unprecedented scale. 32 defendants. thousands of trades, $100 million in illegal profits. mary thompson has been covering this all morning. this is interesting. >> it certainly is. mary jo white with the unprecedented case with members of the fbi and prosecutors, state of new jersey the u.s. attorney's office in new jersey, as well as brooklyn. of course, she was highlighting this inside trading case which essentially involves hackers

based outside of the u.s. and ukraine, gaining access to pr news wires and other news wires and nonpublic information, before it was released, and then giving that information to a number of trader who then profited $100 million from this on making trades from those sto stocks. she called the case being unprecedented both on the number of participants in the scheme, the number of securities involved in the illegal trades as well as the profits generated from that. that being, $100 million. so, again, mary jo white saying there was a great deal of cooperation with law enforcement officials in taking down this scheme which lasted five years from 2010 to as recently as this year. >> thank you very much. some reports say the first to bring this to the fbi last winter, when they saw these things as hacking in financial

crimes sort of intercepting here. >> yeah, the detail that blew my mind. the hackers using videos to recruit traders and prove to them that they have the methods to do this. meantime, dow is down. and s&p hanging at 23. [ male announcer ] eligible for medicare? that's a good thing, but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan,

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seeing the worst of the selling that we've seen all morning long with the dow down almost 250 point it's. below 20 on the s&p. not surprising, verizon, largely domestic, mostly the money from the u.s. worst performers in the dow, cater ti caterpill caterpillar. the worst in that is apple. >> as reported earlier, apple gets 16% of its revenues from china. that's of course were the alleged lay. >> and the gd ecommerce play, also invests in logistics down about 7%. more than 7%. linkedin, a new 52-week low. >> u.s. steel we knew was going to have trouble getting out of

the gate, down 9%. as demand for commodities, steel, oil, barely above 53. >> oil at a five-month low. of course, we get alibaba tomorrow morning. >> let's get to scott wapner on "the half." all right, guys, thanks, welcome to "the halftime show" stocks at this hour under significant pressure. is it a sign that the economy there is worse than investors thought. with exposure to china, apple included getting hit and hit hard today. we're going to discuss all of it what it means to your money with your panel of experts. steph, joe and pete on it with us on the desk. and also joined by the group terry