no fans but i have a page for any fans who would like to be -- i just wrote a piece on why gas prices will not help the economy. during the commercial breaks. >> thank you brian and sara for coming in. we'll see you on wednesday. are you coming back? >> i'm not. >> we'll miss you. "squawk on the street" begins right back. >> good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer at the new york stock exchange. david faber is off today. the month of august refuses to be quiet as we kick off a week of retail earnings, a massive upgrade for tesla and a lot more. oil is hanging onto the low 40s after seven straight weeks losses. our road map this morning, amazon ceo responding to the new

york times article that describes amazon as a bruising place to work. liberty buying zulily in a deal valued at $2.4 billion. and tesla is down. first up, the markets are coming off of a volatile week. oil sliding below 42. data showing japan's economy contracted in the second quarter. another setback for abae. look -- consumption down almost a full point quarter on quarter. >> is there qe really work? their stock market loves it. they don't have growth. this is a demographic issue. japan doesn't have the demographics we have. we have tremendous growth jer us the -- versus japan and china.

china's stock market dedoubled from the economy. our stock market controlled maybe by the fed. europe controlled by the low rates of interest on bonds. so people are searching for markets that are natural and organic and not on steroids. >> it occurred to me this morning, there's japan. there's china, the discussion from last week. we're waiting for the bund and the stock bailout. the world is a tough room if you're ex-u.s. >> you're looking for a country to rely on. people talk about india. you hear it's a growth market but it's for a small group of companies. there's an article that said this bull is tired. i think it would say it a little more negative but we are all kind of waiting for something really good to happen. a lot of stocks are up a lot. but nothing breaks well exempt

for the u.s. and the more it breaks well, the more we have to hear about fed tightening. i keep hoping that, say, europe comes back, you finish the greek comeback. 770 million people in europe can matter. that's our best hope. >> a lot of discussion about the gdp from last weekend, you draug gi must be disappointed. >> it is incredible. you don't think about these companies because what they do is they make rocks. they're saying slow and steady growth throughout the country except for texas. they're talking about the idea of putting people to work. lower oil prices have helped texas and the rest of the country. right now it only reflected negativity on stocks each morning. i say we say lower oil prices can help the consumers and manufacturers who are oil-based. >> today it's about sampson

resources chapter 11. toronto dominion saying it's going to hurt consumption in canada. >> i know there are protections in terms of companies being bought but the canadian dollar is so weak. the mexican peso is so weak. we are strong, but if the fed raises rates, we'll be super strong, and i'm concerned we'll lose manufacturing and industrial production. because everybody wants to devalue and get our business. we have enough business but we like to keep some of it -- you don't want our auto companies to lose. there's a lot of companies that make products here that are competing against z mans in europe. >> boing and air bust, boeing has the luxury of pricing in dollars. i would come back and say we have to be careful that we're going to be priced out of a lot of the world. a lot of people want to devalue.

>> all that said, s&p refused to close below the 200 day. >> incredible. >> right? >> and the oil stocks are not reflecting oil going down. saudi arabia just pumping the most that they've ever pumped. it's extraordinary. it's obviously on retaliation of iran or trying to get our shale companies to do more sampampson. we don't need it. their tankers are all filled. those are million barrel tankers. find a place to put the stuff because we can't. >> we had some hope last week on exchanges with pem ex, but people are expecting things to change in a dramatic sense. >> driving is up but you just don't have enough economic activity around the world to be able to justify how much -- it's ir rational. they're not trying to pump to

meet demand. they're trying to destroy the opportunities in demand. schlumberger, their stocks never go down. we're trying to figure out how to export. we are exporting con den sate. it's light oil. you see as a ruvuelker. this country remains stronger than everyone else which does matter. >> and we'll get numbers on all of those things later in the week to existing to starts. in the meantime, a lot of buzz surrounding a new york times piece describing amazon as a bruising place to work with a culture that encouraging employees to put the company before family, before their health, and work environments that would have co-workers reporting on each other if they were underperforming. one former worker is quoted as

saying nearly every person that i worked work, i saw cry at their desk. jeff bezos is he responding saying the article does not describe the amazon i know or the caring people i work with every day. i strongly believe that anyone working in a company that really is like the one described in the nyt would be crazy to stay. i know i would leave such a company but hopefully you don't recognize the company described. hopefully you're having fun working with brilliant teammates and laughing along the way. >> i'll tell you what. when the times sets their sights on a company, walmart, at&t, it makes ripples. >> i was surprised at this. only because david faber did a remarkable hour on amazon. and the whole kind of undertone was the 13th amendment, people they picked towns without a lot of jobs. they work people endlessly and the documently came out.

to me, the documentary was much more visceral than the times. but the times has that power. but if you want to see exactly the way things work, go watch david's -- his unbelievable report. it has people leaving these facilities in tears and people who are saying i can't keep up with the amount of work but they seem to be in towns where there's no alternative. >> put a distribution center in the middle of nevada where there's nothing else. >> i think in the end people want jobs and. i know people want to work in this country, and i know the amazon that david showed is similar to the amazon that the new york times showed. >> can you envision some investors this morning reading it and going great, i like it better than i did a moment ago. >> no. i imagine all investors saying great. in the end, they're saying, listen, look, i mentioned

something positive about amazon. i was blasted at jim cramer on twitter. that's obviously not from a shareholder. do i want to work at amazon? no. do i want to work at companies that make munitions? i remember from the days we used to protest these companies when i was in college. listen, if you want to play your money with companies that only treat people well and do everything right, it's harder than you think to find. >> that said, we know of some stories where amazon has gone after a new college grad aggressively. >> yes. those things are very hard to judge. i know that -- i was reading an excellent jcpenny conference call. excellent, on friday. really, really an extraordinarily good well-managed call, and what was that about? it was about they always paid their people better than minimum wage. >> they said not a single associate make minimum wage. >> i thought thaft was amazing.

these places all have different elements. costco, i remember it being talked about the strength was how much they paid people so they have no turn over. turn over is training costs. amazon does not have deadweight loss. these people are grateful for the jobs and some people it's going to be working hard. remember when howard schultz was blasted, star bucks was blasted because they were working people too hard. i'm a minor restaurant player. people beg for shifts. a lot of people need more business and are falling through the cracks and then amazon comes to your town and it's not for everybody to do what amazon does, but it wasn't for everybody to work at ford motor and it was $5 a day and it was the greatest thing that could happen for pay but you had to work for it. >> we'll talk to the reporter later today.

>> zulily agreeing to be acquiredly liberty interactive. the deal values zulily at 18.85 a share. some familiar workings there in retail. went public at 22. 26% short interest. so it's been, today is a rough ride whether you've held this for a long time or if you were short. >> i was positive in this company at the beginning. they were trying to be the next amazon and they had exciting flash, you go to the site and there was something every minute. i got caught up in it because i knew the people behind it were brilliant in retail, but obviously to sell your company below where it came public is brutal, and i cannot imagine zulily, anyone who has owned it from the ipo on cannot be all that happy.

>> we'll see what their plans are later on. >> everyone is talking about how to be able to make it so you have omnichannel and you're using every bit of media. i saw when i was watching -- when i was watching the jcpenny situation unfold. the you ceo is talking about buy online pick up store. that is something that walmart is talking about. jcpenny saying we have this great bricks and mortar. you can order it and they'll have it that day. remember macy's. we still have work to do, learning curve. nordstrom, clearly tackled on the learning curve by buying companies like zulily and integrating that with an off price which is rack. nordstrom has an extraordinary

quarter. you have to spend a lot of monemoney nordstrom has spent a lot of money. and i think this will be interesting to hear about the online tv, kwsk, you can get it here quickly. people have to have it many different ways. there's so much shopping. i continue to look at way fair. we spent time this weekend and i showed you the all right w is the furniture that you buy that comes to your house. outfitted my daughter's place all way fair. it's high quality and inexpensive. and that is another thing we expect from the web. >> stocks almost $50. unbelievable. >> he's got the model everybody wants. he has 800 people in customer service. if twitter had customer service so you could say you keep running the same thing about me, could you block them. >> when we come back, we'll tell you what's going high e, tesla,

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tesla is up sharply in the prenarcot premarket. the firm says the increase reflects the potential to lead the revolution in a word i guess we're going to learn more about and that is shared mobility. this idea that in the future instead of calling an uber, you'll call an automated car, a pod, a position on demand service that will jet you around town. >> and that's why they're doing their build out of charging stations. when i read a piece of research like that, are you kidding me? could you be a little more conservative. discounted cash flow. bull case. 6 -- $611. this kind of research i remember

well from the old days. i remember when you were involved in 1999 and 2000 and people would say this company could do x. i am not morgan stanley's research editor but i think that if you really believe in the connected car and you believe that there's a possibility of shared mobility, that's a good reason to be able to say listen, there would be 50, 60, 80 more points. in their defense they'll say netflix was 25 billion and we said someone said it was easily worth 50 billion. we want to get ahead of the shared mobility that -- it's just that it kind of strikes you in a world where malaise has taken over. it strikes you as give me a break. >> they're talking tripling revenues by 2029 and they just finished joining the secondary. it got some attention.

last year morgan stanley was also the one with a big report on how tesla would change the grid. they love the option. >> now, when i read these things and i say bull case 611, i always think was there anyone who thought 609? how about 612? once you're in the stratosphere, it doesn't matter. we have a car that can go 278 miles per hour in the year 2020. let's get ahead of that. they're going to say jim cramer is making fun of it. no. i'm saying there are waying to capture people's attention. you don't need to be the bull case. and i think morgan stanley when you read this, and i love james cormen. i think you read the piece and say did you need to be that excessive and plant the flag after the underwriting was done? and i think the answer is this is a new kind of research, and it reminds me of an older kind but reminds me of a very -- it's

cynical. it's cynical to use these price targets. it says shorts better cover. you didn't get any stock on the deal. shake shack where the deal did not hold. shake shack, i'm using a $248 target because every hotel in the world will have a shake shack and it will take over mcdonald's but it's high quality. i can do that. i mean, i could do that kind of research. shake shack, and then while the show raises the price target to $320 because you thought of another place. the moon is going to need shake shacks badly. the moon has no shake shack. it's white space. >> they have all the white space. we're going to get cramer's mad dash. take one more look at the premarket.

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just about 7 minutes to the bell. walmart reports tomorrow. i thought baird had an excellent piece out today saying that dividend was almost 3% and valuation lowest in a long time. what i'm looking for is walmart, and they tend to be not that forthcoming. that's just their style. they're clipped. if they could ever talk about the idea that the dollar is going to be able to buy more goods, particularly in china, then we would get excited about the story. i think mcmillen is trying to turn things around. you have a problem. buy online, pick up store, everyone is trying to do that. but i think walmart would have

one more down leg and then i think it may be ready. if you can buy that thing at 3.5%, you'll like it. >> this quarter, the macro data has been good and the earnings have been not. >> eventually lower gasoline should kick in. it hasn't yet. and the other thing is jcpenny is back. they have nowhere near the store base of walmart. walmart has four times the store base but jcpenny hurt coles and macy's. >> and a big meeting for micron. >> they make chips that are pretty commodity oriented. they say the worst is over. web bush goes more downside. now, the idea of this stock being cheap, i don't think you

can. i think pcs are a tough category. mobile is so accelerated more everybody that it's just hard for me even though you also have flash to make a case for micron including a takeover case. is it cheap? yes, but stocks in market have tended to stay. >> for a while now. >> we'll get to the hoping bell in just a minute. don't go away.

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>> you're watching "squawk on the street" live from the financial capital of the world. the opening bell in just under two minutes. so much for the sleepy days of august. we're getting earnings from everyone to walmart, lowes, american eagle, target, gap, hue let, fed minutes, cpi, it's bananas. no one is resting this weekend. >> and there are a lot of people out so the market is a little bit thin. this morning, fribor instance, got a number from the empire.

normally not that important but at the same time it's terrible. factory activity is terrible. you keep having the problem of the industrial economy not doing that well. the fed heads keep talking and then in the interim, we have retailers. kohl's was a disaster. home depot never quits because people are investing in their homes. target had a change of a cfo today. i thought that was surprising. given the fact they're reporting later this week. why bother? why not wait. there's a lot of excitement. >> it's curious. the soft data, the surveys have been a little bit weak. we've had good retail and auto sales and the biggest beat. >> when you have united states doing well, the other countries not taking the exports, you see it. i saw the steel workers agita agitating for better conditions. china is wiping out that

industry. we don't talk about it because it's not the focus in washington. donald trump is the focus. >> that is true. after the iowa state fair this weekend giving helicopter rides to locals. he lit up the state fair and people talking about his immigration platform today. there's the opening bell and a look at the s&p at the bottom of your screen. the new york air show at the big board. the new york hall of science at the nasdaq, providing students a hands on science education. you mentioned micron. >> they did a downgrade n. it's funny to have everybody out there for an analyst meeting. my problem with no bottom is this stock had such a multiple year run. i remember where it started the realm. it was lower than it is. and personal computers are just, they're the nightmare.

they're the nightmare. that's just become a business that reminds me of what happened to tvs when tvs, like zenith got in trouble. no margin. >> i remember covering when zenith became the last u.s. maker and then they were gone. >> ibm has to do a little delivery. they're catering to warren buffett and doing the bayback but at the same time people want growth. you're not getting growth from a lot of the old enterprise part of ibm. anything data analytics has a lot of rez sans. this is some week. you're right. >> cisco gets cut today at morgan stanley. >> i thought chuck robins did a remarkable job on the conference

call. i urge people to listen to the conference call. i think it's writing off chuck robins after one quarter. that is not what he intends the company to be. there are certain people who come in and you'll see that their record, it's like football, a new coach comes in. don't write them off. that's a big -- >> their argument is that recycling, they're going into r&d cycles that are tougher. they have to keep reinventing. the growth right now is the result of a product refresh. >> and what happens. let's say they buy three companies in cyber security and the next thing you have a soup to nuts play and you say what was i thinking? they have a huge amount of capital. don't downgrade the ones that are inexpensive. morgan stanley's downgrade of cisco is, to me, as excessive as

the upgrade of tesla. >> speaking of dividends, jpmorgan gets an up grade at kpw. they've not had a buy rating since may. this is now their only buy rating. >> we need to see interest rates have a little more inflection. i think jpmorgan is doing well within the confines of you need a rate hike for those guys. you have something like 18 % of this market needs a rate hike and then a huge percentage that it wouldn't help. housing doing well. there's a scarcity of housing stock. i was looking at brooklyn, the thing called pure house. it's gigantic, and it turned out to be that the apartments are worth so much more than they thought. scarcity value of ownership properties in this country. rather amazing. that's boosting a horton. it can still be a tail wind for

toll and lennar. >> toll made a beautiful bid on urban projects. >> i looked at one for investment. i invest in real estate because i can't own stock. o there's a fabulous park in brooklyn for anyone who visits new york. and just incredible. and i was thinking why not buy one of these units? the price got away from me. these are like stocks. it's tesla-like. >> yes. that's the new benchmark of lunacy of how much to raise your price market. >> estee lauder is down 3%. they guide below consensus on the quarter and the year. stocks up 17 % already for the year. >> it's been best packaged goods story on earth. when you see fragrance, negative impact. skin care, negative impact to

foreign currency. it remind you how tough it is to be an international company based in the united states. these are perfume is something made everywhere. and a lot of their cosmetics you could buy interchangeably. by the way, i know i'm referencing probably is going to say too much. you can't. sephora was the double digit product in jcpenny. he's turning around jcpenny. he's taken good people from target, a good man from home depot, it's remarkable how powerful that space is. macy's commented that perfume is strong. i thought that estee lauder would have a better number. >> bob iger talked at tend of last week. mass i have new projects for disney word and disney land.

star wars themed. not a to mention the veneventua fi film that will now come out. >> i was there the year disney world opened. it reminded me of a six flags. this is remarkable to see, and i think that the focus has to shift away from some subscriber losses, those were the throw terms, three words that killed the media stocks and focus on the upside from not just -- >> vie vie come is having a rough morning. >> viacom, there isn't anything i can't stream my problem with disney, i watch a lot on my cell phone. i have to sneak it. the wife likes to be called the wife. so let's get over that. the wife, i have to sneak my

espn. bob, listen to me. i am pro you. i sneak my espn. i can't put the tv on because i like domestic security in the first year of a new majrriage. don't blame me. >> dow is down a quick 121 here. >> reporter: good morning. in the first couple of moments of trade, we are in quite negative territory. dow down by 125 or so. a couple big themes that are being watched. crude oil. jackie is going to drill into this a little bit more. equity markets are wondering if crude oil is going to break below $40 a barrel. many people think it will happen -- not if but when. right now we're at 42 and change on wti. second thing market is watching today, the empire state numbers. very disappointing, posting negative numbers for the factory situation in new york state. that was unexpected.

so, again, that question becomes raised. will the fed look at it and say data is too weak? the conversation continues here on the floor. checking in at what's happening around the world, asian markets relatively quiet. pretty small moved compared to what we've seen. china set the yuan post close on friday. they did ultimately drift lower as the session has gone forward. greece, perhaps, the one exception after announcing the new loan agreements post close on friday. that market trading at least a little bit stronger than the rest. let's move into individual equity movers. we have liberty interactive kwsk tracking stocks. acquiring zulily. they went public just in november of 2013. not even two years ago at a price of $22 being acquired for $18.75 in cash and stock.

values the company at $2.4. the ceo of the company stays. if we take a look at the analyst up grades and downgrades. one of the biggest, morgan stanley raising the price target on tesla to 265 from 280. j.b. morgan getting an upgrade from kb w to outperform from market perform. cisco getting cut from equal weight to overweight. wells fargo raising to market perform. broadcast stocks and movers this morning. we know now that warren buffett's berkshire hathaway is investing more in charter.

comcast which is the parent company of us having a strong weekend with straight out of compton making $56 million at the box office. >> unbelievable. universal with $5.5 billion for the year. >> streaking. it's a streak business. >> a record and we're not near being done. >> at a certain point, you wonder, it's not luck. there's obviously a lot to this. we talked about it this weekend. the parent company of this network, when you have that big a streak, it's because some people have put a lot of thought into it. >> thank you very much. kourtney. oil prices continue to be a story. let's go to jackie. >> reporter: good morning. that's right. as kourtney mentioned, prices are downright now. trading about $0.39 lower. the session low was 41.64. you have a little bit of a stronger dollar having an impact. traders are mulling over what we found out last week regarding our inventory numbers and rig counts increasing on friday.

these are the issues that continue to concern them and continue to make them think we're going to see more pricing pressure. as a matter of fact, i'll dig into my oil survey later on but we had about 62% of respondents saying we'll see prices between the 30 and $40 range. the focus this week will be inventories on wednesday. traders are expecting to see a little bit of a decline but they don't think it's enough to make up for the fact that production is flat lining to increasing here in the united states. i do also want to mention the fact that anecdotedly, the beginning of the week is when we see more weakness in prices. >> thank you so much. when we come back, we'll talk to liberty interactive ceo. and then amazon's culture blasted in an article this weekend. and david faber's document rary-

>> not only invited confrontation. he demanded it. and whoa to anyone who didn't measure up. >> i remember one person said to me, oh, my god, i was just praying i was going to have a hart attack so this would stop. >> it was a meeting where they had not been prepared. at one point he said, i don't know if this is sheer stupidity or gross incompetence. >> or both. >> later we'll hear from one of the writers responsible for that article and get jeff bezosbezos response. we're back in a moment. ♪

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estee lauder missed on sales. dow is down 124. >> we've had two reports that i think people are focussed on. one is morgan stanley in a more methodical method than tesla. this is a very well-run company. it's breaking out here. they say 20 out of 25 auto makersing have em brybraced the. if you look at this whole cohort of stores that sell natural and organic, they're all up against wise traditional retailers. these stocks just, even though they're stores, i love the fresh market. it's not enough. it's not enough to move the needle. kroger has fantastic natural and

organic and the trader joes. i just happen to think that kroger is somebody you can't mess with. they're well run. >> when a big player decides it wants to do what you've been doing. >> walmart and target but the one i'm impressed with is cra kroger. kroger side by side natural and organic. they keep the price down. when you go, you really kind of are struck. you know what? it's price competitive and that's why kroger does well. >> when we come back, liberty interactive ceo on that $2.4 billion to deal to buy zulily after our break. [ male announcer ] whether it takes 200,000 parts,

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component in the red. a few back in the green. cisco was downgraded at morgan stanley. liberty interactive buying zulily for 2.4 billion in cash

and stock. the ceo joining us this morning. it's good to have you back. good morning. >> thank you. >> we've been watching this chart for a while. and obviously you're getting a much better price now than you could have before. how long have you had your eye on these guys? >> we certainly have been watching all the success that zulily has had even before they went public. we know mark and daryl. we've known them for a while and have been impressed with what they've done. zulily really is the kwsk of the internet for a younger generation. >> i've got to tell you. i think this is brilliant. everybody is trying to figure out how to capitalize on some sort of online channel. is this liberty interactive's version of omnichannel for kwqv? >> we're trying to meet the needs of our shoppers, women,

whether of any age, all the way from the youngest to the oldest, across as many platforms as possible. those who are interested in discovery and experiencing shopping and the entertainment we provide and zulily provides and we think it's a great fit. >> what happened to zulily? it came to public with a lot of fanfare. they have a great model. they slipped up a couple quarters. it's almost like they would be worth more now. was this just a miss of a couple quarters? you would not be buying this company if you didn't think it had a long-term growth path? >> i think they went public to a lot of fanfare and sometimes public company valuations are not necessarily the long-term value. we hope to play for the long-term value. this company has had an amazing growth track record. we think that growth trajectory,

while it may not be as torrid as it have in the early years, it could be strong going forward. >> how does the deal fit with what you're seeing on a broader level regarding consumer sentiment, their ability to spend, all of that. >> well, i think if you look, many traditional retailers are having problems growing and the trends continue to be toward online. this adds to our portfolio there and it's a natural fit in other ways too. qvc is about affordable luxuries, item that's attractive but for a medium end consumer but one that's not a break the bank number. and we think that when that incremental consumer has that incremental dollar, they're going to spend it with qvc or zulily. >> will qvc go more flash ori t

oriented? what will the merger look like? >> that's an overlap in how they do things in terms of trying to sell through and the kinds of items they have that are differentiated. whether you have personalalties on zulily or flash it on qvc. i think this opens up new avenues for experimentation. >> we've been discussing amazon a lot after this piece this morning and talks about their workplace culture. can you character rise thize th rival in this space right now? >> i think zulily has lived in the shadow of amazon and prospered. they're differentiated. it's a different kind of a company than amazon. we have nothing but respect for amazon and frankly want to stay as far away from them as possible, not only in terms of competition but in terms of the business model and in terms of what we're offering consumers.

what our customers want is a different kind of experience. >> have you looked at way fair or some of these companies that are revolutionized the web via customer service and actual humans involved which i know qvc has? it seems to be a natural fit to start gravitating away from the amazon method of not having humans. you're buying of some things that have some worth. will there be humans involved? >> look, i think both zulily and qvc understand how to make shopping an experience that's pleasing, exciting, something to be sought out, to find different kinds of products, different kinds of services in an interesting and fun way, and i think that is one of the key ways that we will continue to work together and continue to differentiate ourselves for shoppers and make the experience better and better. >> greg, in terms of m&a, despite the valuation talk in

the vs space, we are seeing premiums come in a little bit it seems, more talk of take unders. do you think more things are going to go on sale? >> oh, i think a lot of valuations are in the tech space are fairly rich. and, you know, candidly the price we're paying for zulily is not a low price based on the market multiple but it's a price we feel is going to be attractive in the long term for shareholders given what cost savings and more importantly what revenue growth and synergy we can bring together. >> i wish we had more time to talk about media because there are other stories but you caught us at an odd moment at the top of the hour. but thanks so calling in. >> thank you, guys. >> the ceo from liberty interactive. >> so studeopportunistic. they waited for the bid. i think this combination is a

natural. it's where everyone has to have everything. they have to have online and pickup. maybe one day it's bricks and mortar. >> third largest shareholder, alibaba, followed by fidelity. >> this is one, alibaba needs a little joel. -- jolt. >> what's on mad tonight? >> we have black hawk. it's a gift cards you see. a fantastic business. and then cyberark, this whole cyber crime area, the stocks have been deflated. it's not their fault. i love their company. >> we'll see you tonight. when we come back we'll get home builder sentiment. dow is down 112. don't go away.

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good morning. i'm carl quintanilla along with sara eisen and simon hobbs live at post nine of the new york stock exchange. looking at the markets, definitely a case of the mondays with the dax down more than 1 %.

cisco downgrade. almost every dow component in the red. we'll talk about oil in a second. breaking news on home builders sentiment. >> reporter: good morning, carl. home builders sentiment rises 1 point to 61 on the national association of home builders monthly sentiment index. that is along expectations. it's the highest level since november of 2005 and one year ago we stood at 55. the builders stiaying difficult issues. buyer traffic rose two points to 45. current sales conditions up one point 66. sales expectations, though, still flat but at a high of 70. when we look in the west and the south, home builder sentiment is a highest at 63. in the midwest 58. in the northeast still at 46.

this as the home builders starts are anemic. fell in july. up about 15% from a year ago but well above historical norms. hopefully this sentiment will indicate something of maybe a bump in the july numbers on housing starts tomorrow morning at 8:30. >> thank you very much. as we said, stocks are in the red to start the week. even with the yuan beginning to steady overnight, investors turning back to a possible rate hike. good morning to you. good to have you with us. >> good morning. >> michelle, what do you expect the minutes to say this week in. >> i have to say, the market will be looking for signs about september, although, i don't think that we're going to get much guidance from the fed because they, themselves, i'm sure in july felt like the time for raising rates was getting closer, but between that meeting

and september, they were going to be watching the data as well as international development. i think we're going to look for a couple things. we'll look to see to what extent they talk about the dollar. we'll look to see the comfort level they have about inflation because that's been the one factor holding them back. and i think we're going to look to see to what extent they try to push to the markets that going sooner will allow them to move for gradually. for the marketings that's a sign that in july they were thinking much more about the policy normalization process. >> brian, all that has to happen in front of one last nonfarm payroll number. in the end, do you think september is going to come down to that? >> i think that it really will. we've already seen with the latest nonfarm payroll number indicating there's been some improvement. i think we need an additional confirmation that there's some improvement.

t the inflation numbers this week are important. the fed has cleared that hurdle in terms of the labor market. really in the minutes, i'd look for how they characterize the down graft in commodity prices. if it's transitory, i think their inclination is to hike rates in september. >> brian, where is the greatest return on investment at the moment? what area of the world do you think? emerging markets? asia is very worried about what's happening. japan is contracting. china is devaluing. markets aren't going very strongly here. where is the best place to be? >> well, i think that the best place to be is perhaps the place where people have been fleeing from which is from the emerging markets. they were in a bear market territory more than 20% down from the september highs. i'd be looking at emerging markets. but i've been saying that since about last year.

but last year i was saying focus on quality. look for dividend paying stocks. i think it's the same them but you can expand to look at the commodity exporters. >> to coin a phrase, you've been telling people to catch the falling knife. >> no. i haven't been telling them to do that. i was telling them to be in the emerging markets but be selective. and those have held up well, especially on a total return basis. now i'm saying you can open up the set to look at the commodity oriented exporters. a lot of it hinges on commodity. i don't anticipate a further downdra downdraft. if we see decent numbers out of china, we're probably going to see commodity prices find a bottom. that could be positive for materials and energy stocks. >> the other factor that's held back stocks have been disappointing earnings. is your economic forecast for

the second half of the year enough to get continue forecasts to grow again? >> i think so. certainly we've seen the economy gaining momentum in the second quarter and we think it'll carry over to the second half of the year. i've got the economy expanding at a better than 3% pace. gdp may be held down a little bit in the third quarter. if you look at consumer and business spending, i think we could be growing at nearly a 4% pace in the second half of the year. i think the underlying economy is strong. and the truth is while commodity prices and the dollar are near term drags and all of that kind of feeds back to earnings, the bottom line is over the longer term, these are positive developments, i think, particularly the low energy and commodity prices for u.s. companies and more consumers, and so i do think that ultimately that will show itself over the longer run. >> we keep revisiting that story from the spring where we call

talked about the tail wind of low gas prices and we waited for retail prices to show a bump. it doesn't like they did. do you think that happens with a larger degree with the next down cycle in crude? >> i do. and i always point to this research that was done out of the atlanta fed around the turn of the year. it suggested the lags many terms of benefit to consumer spending, they suggested the real benefits to consumer spending from the decline in energy prices in the second half of last year wouldn't be seen until the second quarter and actually the second half of 2015. >> but, michelle. >> maybe some of that. >> but it isn't just gas prices on their own. we've had obama care come through this country. a lot of people would argue they're paying an awful lot more for their health care. rents continue to rise. other factors and the general lack of security still for many people in this economy could increase the propensity to save. it's not a no brainer.

>> you're right. and i think that explains why we are seeing the savings rate rise. labor income is growing better than 4 % and inflation adjusted terms and consumer spending is only growing between 2.5 and 3. there's a lot more that consumers could be doing that they're not. and a lot of the factors you point to explain why we're not getting as much from the consumer. >> we will see what wednesday brings us. michelle, brian, thank you so much. good to talk to you. >> when we come back, how worried is the imf about china. the imf mission chief to china joins us live when "squawk on the street" comes back. at ally bank no branches equals great rates. it's a fact. kind of like mute buttons equal danger. ...that sound good? not being on this phone call sounds good. it's not muted. was that you jason? it was geoffrey! it was jason. it could've been brenda.

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i'm a gas service rep for pg&e in san jose.. as a gas service rep we are basically the ambassador of the company. we make the most contact with the customers on a daily basis. i work hand-in-hand with crews to make sure our gas pipes are safe. my wife and i are both from san jose. my kids and their friends live in this community.

every time i go to a customer's house, their children could be friends with my children so it's important to me. one of the most rewarding parts of this job is after you help a customer, seeing a smile on their face. together, we're building a better california. >> despite last week's decline against the dollar. new information says china's currency is not undervalued. the imf says the world's second largest economy needs to move to a fully market based exchange system in two to three years. the mission chief is china is joining us this morning. >> thanks for having me. >> you released a report over the weekend about china and it seemed like you were actually

commending china for the move to devalue the yuan even though the market didn't seem to like it last week. why do you like it? >> we not talking about devaluation here. we are talking about a move from a tightly managed exchange system to the dollar to something that's more flexible and market oriented. we think it's a good first step. much depends on imp menation. >> do you think if the yuan could trade free he right now, it would weaken? >> i don't want to speak about what's likely to happen to exchange rates. that's a dangerous territory. we would like to see more flexible of the yuan. it may depreciate but the real test will come on the other side. we have large current exchange inflows.

at some point the market will turn and the pressure will be on the other side. we would like to see more flexibility in two ways. whatever the market wants, that should happen to this currency. >> do you, basically, i read the report on china. you expect growth to slow below the 7% target. do you think the central bank and china are in control. they'll be able to manage it so it doesn't get sharply worse? >> the short answer is yes. this is a difficult challenge. what we're seeing here is adjustment. adjustment is never easy. we see that all over the world in europe. in china today, they're adjusting to a numb of problems they're having. large credit growth. an overexposed real estate sector, environmental issues. this economy is adjusting and that means slower growth. this is complicated. it needs to be managed carefully but overall, i think we need to

welcome this adjustment because if it doesn't happen now, it'll happen next year or the year after in a much more disorderly way. they have control over what's happening. for fluctuations going on. this economy is becoming more market oriented but we're confident that the underlying strengths of the economy is weakening but in an orderly way toward something between 6 .5 and 7 for this year and maybe a bit less, hopefully, even next year. >> you've worked in asia for a long time. when this blew up last week as a market concern, a lot of people questioned whether the chinese as individuals leading the economy were to some extent, out of their depth. now, on the one hand you hear how bright and attentive they are. but on the other hand the magnitude and the scale of what they're having to deal with with the culture clashes, economic clashes are huge. can you give us color on the

people you mix with and how they compare internationally? >> you know, i have worked in e asia for a long time. i have worked globally for 30 years. working in china is a fascinating experience not the least because of the people we interact. in government, in the private sector, in the markets. this is a highly sophisticated economy already. this is a highly sophisticated society. most of them are educated in part abroad. they are educated in china in their own economy. i have no doubt that both the leadership, the administration, but also the people probably more importantly, the people in the market, very well-trained. very capable. and if anybody, they'll be able to manage. let's not forget china has faced tremendous challenge in the past. think about the early 2000s. 32 million people fired and reemployed. >> at the same time, if you follow the federal reserve

closely, they'll wear their hearts on their sleeve and say we're reacting to the data. in the case of china, that would seem that was accelerated to an extent that with the best education in the world, it may be physically difficult to anticipate or control. >> you know, this economy is still quite largely controlled by the state sector in one way or another. it is becoming more market or ge yented but we cannot compare it to an advanced free market. many markets of the state's financial system are under control. it's a challenge. weakness of productivity and so forth, but it is also a benefit because they are able to address challenges and crisis in a different way than in a fully marketed economy. it's two sides of one coin. in terms of crisis management

and managing a slow down like this, it may be an advantage. >> we all know they want legitimacy in the eyes of the global capital market, but we also know about their craving for stability, and i wonder long term, once they feel the winds of market forces in realtime, do they get cold feet down the road and turn tail? >> look at the medium term program. the so-called blueprint that came out of the new government early last year. i think the direction is clear. i think the leadership's conception of what needs to be done is very clear. i have no doubt that this is the direction they're going to follow gradually towards more market orientation. there will be ups and downs and new experiences in the stock market that was margin financed and before i think they were tested by that. there will be new experiences in the currency markets and the financial sector.

but don't hesitate, don't believe this economy is not moving towards market orientation. they have it clear in their mind, and they will not get cold feet about their overall long-term goals. >> finally, how much pain do you think is ahead for the commodities markets based on the china slow down? we saw during the chinese boom years, they had an appetite from iron oar to oil. >> i can't predict what's going to happen in markets in the commodities markets. metals and energies have been affected heavily. this is an economy, as i said, that's adjusting. they're coming from period of five or six years when this economy was growing fast. commodity markets which have a long-term investment cycle. we're thinking this might kojt. they have overinvested. we're in an adjustment phase

that's difficult and severe because growth in china demand for those has slowed. i think the adjustment is underway. whether it's finished or not, i can't say, maybe not. but, again, adjustment has to happen. it's better it's happening today than it will than if it were to last and happen in a much more severe way down the road. >> thank you for joining us today. on a brand new report from the imf on china, he is the mission chief. >> when we come back, west texas crude down about 30% in two months. could we see a bounce back to as much as 60 in the next new months. we'll talk about that as the dow has erased a 100-point loss. back in a minute.

>> take a look at the dow industrials. we were down 125 or so at the early going. we got some housing sentiment data, whether or not that's what turned it around, we have almost made our way back to the flat line. should investors start looking out for a rebound? we have the results with cnbc's exclusive oil survey. >> we thought this was a pivotal time to do a sur say. we polled analysts, traders, and major energy fund investors to get their pulse. we found a shift in expectations. revisions down of what people are thinking is going to happen in the price movement. for the short term, settlement, october. 63 62% sa, said the bottom for

is not in just yet. for brent, 71% in a range of 40 to $50. when we looked longer term for the second half of the year, where it finishes, we found the majority said previously that they thought prices would rebound to the $60 and $70 range. now they're split. we have more than half saying they think wti will finish between $30 and $50. when we asked the factors impact pricing the most. most said they think it's a supply situation. they're watching what's happening in united states and also abroad but the dollar was the next most popular answer. so that's something certainly to watch. 10% of respondents said watch the technicals. you're going to see short term movements pushing prices around. when it comes to u.s. supply, 41% of those polled said they believe it will fall by the end of the year but the other 60% are saying we're going to flat

line or rise from here. that's what leads us to believe there are a lot of wild cards that could push oil prices lower. >> okay. thank you very much. still just below $43. thank you very much. in the meantime, kkr resources is announcing plans to file for bankruptcy. kate kelly joins us with more on that. >> reporter: the troubled natural gas samson resources said they would file for bankruptcy. not a huge surprise to people. it follows months of discussions between creditor groups to seek chapter 11 followed the offer from a group of investors. but many other u.s. shale drillers are affected by cheap crowd and samson is more of a gas story. although gas is down over the last 12 months this is something that's been going on for quite a while. they've been troubled since 2011

in what at the time was a record setting lbo. kkr is pretty much wiped out or at least will be in a bankruptcy and other investors including gso group are likely not happy about it. they were opposing the plan, reportedly before the announcement. the silver point and an investment company. unsurprisingly samson paper trading at rock bottom. three or four cents according to the unsecured junior bond i was looking at. it's an unfortunate turn for kkr. not a huge shock to them but there's symbolic importance as well. and let's not forget the other record setting lbu that they were a lead participant in also

filed for bankruptcy last year. >> to be expected i guess as you said earlier. thank you very much. straight ahead, it is a big week for retail earnings. walmart, target, gap, and american eagle on deck. the former ceo of sears canada will join us. by the time police arrive on a crime scene, they could have little to go on. a vague description. a single piece of evidence. a partial plate number. with an app from ibm, officers can now access over a billion police documents to find hidden connections, and identify potential suspects. ibm analytics helps one hundred thousand officers work smarter every day.

good morning, everyone. here is your news update at this

hour. a bomb on a motorcycle exploding just outside a hindu shrine in the center of tielands capital. no immediate claim of responsibility for the blast. the parliament endorsing a report calling for the former prime minister. this in connection with the fall of mosul. it was considered a major defeat for the iraqis. firefighters are battling wildfires up and down the coast. a fire erupted in northern los angeles county burning several structures to the ground. in washington a fire sparked by lightning destroyed dozens of homes and businesses in the central part of that state. donald trump taking time off from the presidential campaign trail reporting for jury duty in new york city. trump arriving among a throng of

reporters. he said he was looking forward to serving because in his words, it'll be fun. and entertaining, i'm sure. that's our news update this hour. >> wall street and silicon valley are buzzing about "the new york times" article describing am don azon as a bru place to work. the ceo firing back saying it does not describe the amazon i know. we have the latest on the back and forth. >> reporter: quite a bit of conversation about this over the weekend in twitter. as you said, this article paints amazon as a bruising place to work where the perks are few, people encouraged to back stab each other. in this era of social media, these sorts of arablticles don'o

unanswered. people disagreed with the approach. one said i've talked with hundreds of amazon vets, men and women over 20 years not one didn't think it's a good place to work. another venture capitalist also had some words in support of the piece but did say that if it's true, that amazon was insensitive to people who had medical issues that affected their ability to work as hard as they worked before, that would be a concern. now, a key element of this piece in the new york times was this. and here's a quote. amazon is in the vanguard of where technology wants to take the modern office. more nimble and more productive but harsher and less for giving pointing to amazon's workplace culture and pointing to what perhaps other business will adopt in the future. i want to give you the response from the ceo. the article doesn't describe the amazon i know or the caring

amazonians i work with every day. i strong believe that anyone working in a company that really is like the one described in the new york times would be crazy to stay. i would leave such a company. interesting piece also by an engineer saying amazon used to be more like this but it's changed over the past couple of years. >> thanks very much. a fire storm really to that amazon article in the new york times. we have a columbia university director of retail studies. they painted amazon as a pretty terrible place to work. as a retailers with decades of experience in this industry, were you surprised? >> i thought the article was terrible. i thought it was an incredible cheap shot. surprising it came from the new york times. retailing is a contact sport. that's not new. i started at a and s years ago with 37 people and three months

later there were three of us and that was the normal course. amazon, in particular, in my experience, and i've worked with them some years ago when i was ceo of sears canada. it's loaded with talented, focussed people. >> that doesn't go against the article. >> they form very, very effective teams. they have an extraordinarily aggressive but fair partner in negotiation. they are tough. they're tough externally and internally but if you're a high performance company and they are the em bodiment of that, you have to be tough. and tough is not the right place for all people. simple as that. >> this week we brought you onto talk about a number of retail earnings we're going to get, target, walmart, gap at the end of the week. all the companies trying to turn around their bids and yet, amazon is the overarching elephant in the room. >> well, amazon's business just keeps growing.

yes, there's a tremendous cynicism about their ability to be profitable. they recently indicated they can be profitable. i'm a big fan and have always been of what they've created and where they're going. i think at the end of the day, this is going to be one of the world's most important organizations. certainly one of the world's largest retailers. and they should get credit for that. >> some of the ones i've listed, the ones reporting, who inspires the most confidence right now in terms of management leading turn arounds? >> i think costco hits the long ball deep into left field. i think nordstrom just knocked the ball over the fence surprising lots of folks because their business was extremely good in all segments of their business, including their regular stores. so the apparel and accessory business was good despite the doom and gloom what has been reported. i think those two had a great

first half and they'll continue to do well for the balance of the year. >> i'm reflecting on you describing amazon as tough and perhaps that was an appropriate thing for them to be given where they are. where the brand becomes everything, whether technology companies aren't going to have this problem potentially again and again. if you're a netflix or an amazon, the brand that you portray to people and what they think of, it may bear no resemblance to what's going on, particularly if you're going to same day delivery. this is going to be a running saw for a lot of these companies, as component manufacturers were for the likes of apple in the past. >> this is a high stakes game. the influence of technology creates a tremendous challenge for virtually all organizations, certainly all consumer organizations. amazon has a tremendously aggressive outward view of how to grow their business, and they have the tremendously aggressive

view of the kind of organization they believe. >> but you're coming rightly but you're coming as an executive talking about the teams you worked with. i'm not sure that's the level within the organization that we're talking about here. or that could cause the problems further down the line. >> i witnessed amazon demonstrated e thoes. back in the day when i worked with them directly which i did for about a year, i saw no difference in culture or outlook through the company. they're much bigger today, but i think the challenge they've taken on is to remain as performance oriented now and in the future as they have been in the past. that's tough to do. it ensures that they're going to have to be very, very self-critical as they are reported to be in the article, and to me that's just simply a by-product of the kind of company that they want to be. >> i think it's fascinating. the response to the times article from viewers is bipolar.

people either believe weir n're focussing enough on the internals or -- as if there's an external standards. with companies if they want to behave on a way that's tough on employees, they'll pay a price down the road. >> the retail business has always been extremely tough. you cut your bones every day in the eyes of your customer. you have to be prepared to face adversity from all directions all the time. amazon has built an organization of people who for the most part seem to love that and are successful at that. yes, there seem to be a few who fed this story who may or may not have been treated unfairly but my view is they're a minority among the total. >> no company should penalize women for having children or health problems.

>> i almost can't believe that story is true. >> thank you for weighing in. there's the latest to weigh in from the retail world on the amazon story. liberty interactive announcing plans to buy zulily. they went public back in november 2013. there was a strong debut but when struggled. here's a look at the performance of other nonso hot ipos or hot ipos at the time that went not so hot. >> they were hot at one point and investors may have slugghru off some of the highs and pushed them off to lows. let's take a look at this. d zulily is one part of the story that playing out to a positive side. you can see from a longer term chart, it's surging but it's not back to where it was when it went back. that was 22 a share. it got us thinking about the other high ipos over the last couple of years.

you start off with a hot one like online gaming business, the candy crush, king digital. they went public in 2014. they went public $22.50 a share. the stock got has high, massively $23.48 and then it went down. it's worth about $4.2 billion. then there's true car for car pricing information. may 16, 2014, $9 a share. pe went public, went to $25, and then a huge fall. then the restaurant stocks. the regional restaurant chain focussed on chicken, it went public at $15 a share. $41.70. it got up there at one point. now back to 14 .5.

traders are still trying to handicap which companies are potential takeover targets from the ipo highs. >> and the name means? >> crazy? mad. >> crazy chicken. one of the reporters behind "the new york times" amazon article will join us live. a huge aex to that this morning. you don't want to miss it. ♪ no student's ever been the king of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop, and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling. you left this on the bus... get it at the place with the experts to get you the right gear. office depot officemax. gear up for school. gear up for great. that's a good thing, but it doesn't cover everything.

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>> many companies have beating their earnings in the second quarter. some are going above and beyond. we have the ten names that have turned the biggest beats on. more "squawk on the street" coming up next.

♪ no student's ever been the king of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop, and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling. you left this on the bus... get it at the place with the experts to get you the right gear. office depot officemax. gear up for school. gear up for great. in asia, tokyo warning the chinese that their currency devaluation could have an enormous impact if it's not

managed well. the senior vice president in credit policy is with us this morning. welcome to the program. >> good morning. >> why do you feel that there's not going to be a big devaluation here and that it won't end up being a big move? >> i think it's useful to look at different elements here. one, there's the change in the way the exchange rate is set by the chinese central bank. and here we have a move toward a more market-based exchange rate. we think that is positive and in line with the chinese authorities overall goal to move toward giving more market influence in the financial market and also moving toward a more open capital account. then the second element is what happened to the exchange rate. so it's depreciated by around 3% last week against the u.s.

dollar. as such, we think the depreciation is not significant enough to have a big impact on either the chinese economy or the rest of the world. >> yeah. >> it is a dpreesh kags takd be -- >> let me pick you up on that. you don't think the move we have or further down the line, it will affect the exports or the growth of china. which begs the question why did they do it? on one side they want to unpeg the dollar in advance of the fed's move but could you talk us through this massive capital flight that is occurring from china. i read somewhere in the region of half a trillion dollars in about a year and a quarter for which obviously beijing has to match dollars. talk us through that aspect if you would. >> yeah. if we can distinguish maybe between the move so far, the 3%, 3 4 % weaker currently.

it means more expansive imports. so maybe weaker imports for china. some of that will be absorbed by lower profit margins from the exporter's side. so in the end, the impact on china's capacity, willingness, ability to import might not be that significantly reduced. so the rest of the world is probably not going to face very significantly different environment there. looking forward, what could happen, we think there could be further downward, that relates to the capital outflows that you mentioned. it seems the investors are willing to move out from chinese assets to other kinds of assets. and that will really depend on how quickly and how significantly that appreciation happens. so far it's really very early to tell. >> okay. nice to meet you. we'll leave it there.

thank you. >> thank you. >> the dow is down 5. apple is down 10% over the past month. today an analyst predicting a decline in iphone sales next year. what it all means for the stock when "squawk on the street" comes right back.

aing touting 25 million streams of dr. dre's new album on apple music in its first beek. the guardian reporting an apple self-driving car is on the way. but apple stock is down 10% over the past month. today, pacific crest saying iphone sales will decline next year but that it will likely remain the most important device in the world, perhaps a statement of the obvious. on the cnbc news drive now, hidden analysis, apple's analyst, ben shack ter. before we go any further into the detail we are getting what is your view on the stock now after this 10% fall? >> we still like the stock because there's a lot of interesting opportunities ahead but certainly, there will be a mixed tape as we head into the

iphone 6 conference, the most important issue this year. >> right. and your thoughts as to whether all takers? >> in general, sought $140 target on the stork the near term, focus are going to be concerned about the iphone comp and that will be what matters most over the next few months but i think after that is really when you start to get an opportunity in the stock. >> okay. meantime what did you think about this guardian article over the weekend saying this quite advanced now in testing self-driving cars, scouting for secure locations, not least the disused second world war era face which is the 20 miles of paved highways and streets in the san francisco area. sounds sexy. >> he covered google as well, remarkable to see how broad the ambitions are of a lot of these companies to see google now as far along as they are in what they are trying to do apple obviously a lot more secretive but certainly the ambitions of so many of these silicon valley companies is truly remarkable. obviously, country simply

dismiss it and say this is not going to happen. it looks like they are really putting very serious resources into this. >> you have got to take -- as an investor, tough take a judgment, whether it's liability potentially on the scale of the investment, new category which may or may not work in an environment where people want the share buy backs, people want the cash flow returned to them or large proportions of the people holding apple stock now. >> yeah. i think in general, with am with going, with some of the others, they all have these cash cow businesses that are able to fund more than one thing. so, investors certainly will want more of the returns back to themselves, but i think you can also have an opportunity to continue some of these investments as long as you don't go overboard. trying to figure out where that line is, that's the key and that's the issue with a lot of these stocks right now >> ben, simon mentioned the dr. dre album hitting. seems like it hit with good reception, people went nuts for the new album on apple music. when do you start to model that out in terms of revenue? >> realistically, apple is not

going to move the needle, really doesn't matter i think for investors, may matter of will it drive more hardware sales over time but i think if you look at the overall mold, apple not going to make much of a difference. we don't think the watch will make a difference either. the a store is one of the most interesting businesses that is not -- not a lot of investors pay attention to. we think that's where investors will focus more after we get through the iphone six conference. >> that will be the next catalyst for the stock? >> i think in a lot of ways it will be, once people realize how big that business is. we mod it will out separately, the company gives some data points, you can get to it, already on a gross revenue basis a $20 billion business, bigger than 80% of the s & p 500 companies as a stand-alone business and most investors don't recognize it is there. i think you will start to hear a lot more about it because it is the fastest growing and highest margin business that apple has. >> it is interesting. we really don't talk about it that much either. you think that it matters what, for margins, for profitability and what can apple do to leverage that even further?

>> i think if you look at the model and assume iphone sales are sort of flattish given how strong they have been the last couple of years, then really, almost all of the operating profit growth can come from this app store that, again, investors don't really pay that much attention to i think over time, because the beauty of the app store business, both google and am benefit from this don't have to count on all the innovation coming from apple or google. they make money if some kid comes up with a small game in his parents' garage in thailand or ee revolutionizes health care with some massive new health care system that runs. >> having said that, ben, isn't the pressure, haven't they said they are going to cut the commissions that they charge? >> they have not said that actually, generally speaking, digital revenue 70/30 split. i think they may invent size companies on the enterprise side, a vast majority of people are nation 70/30 split. >> interesting. ben, leave it there. ben shack ter joining us from macquarry on apple. stocks making a come back today, thin trading now in the heart of

the august vacation season. we were down i think trim digits at the beginning but come back quite strongly nonetheless. >> yeah. and we are seeing a move here by materials and consumer discretionary. those are the big wins. financials are under pressure. yields are moving lower. send it over to jon fortt with a look what is coming up next on squawk alley. sure you guys are buzzing about amazon. >> not just buzzing about it, we have got one of the two writers of that controversial "new york times" piece. he is going to join us. we are going to ask him all the questions that people have about it. also, tesla, a big upgrade stock, up more than 3 1/2%. and finally, drone racing league, yes, as fun as it sounds, all coming up and more on ""squawk alley."" this summer, challenge your preconceptions and experience a cadillac for yourself. ♪

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goods monday morning, welcome to "squawk alley." kayla tausche is with us. jon fortt is with us on the busy days of the market, even though we are on the dog days of august. begin with the piece on amazon by the "new york times" over the weekend. the article called "inside amazon, wrestling big ideas in a bruising workplace" claims amazon has a cruel working environment based on several interviews with employees. mean tile, cnbc obtained a memo sent by ceo jeff bezos to employees saying i strongly believe anyone working in the company really described like one in the "new york times" would be crazy to stay. i know boy leave such a company. joining us this morning one of the reporters behind that article, "new york times" reporter david straightfield joins us. good morning to you. it's good to have you with us. >> good morning. >> it's obviously --