good morning. 11:00 a.m. owe ferlt reserve in washington. it's 8:00 a.m. out west. squawk alley is live. ♪ welcome to "squawk alley." joining us john fort, kayla, myself, and post nine. john steinberg is here. the ceo of the daily mail north america. good morning on a big day. a special fed day, of course. our mike santolli joins us this morning from headquarters, and, mike, you are looking at how

markets typically respond to rate hikes and whether this time will be any different. obviously we've heard how the playbook usually goes in this time. look, the fest rate hike usually is absorbed okay by the stock market. there's that old saying, you know, three steps and a stumble or three jumps and a stumble. i have been focussing on the fact that in general we're farther along in economic and the market cycles than we typically are when we get to the first rate hike like so many others things. this element of this cycle is different. you have profit margins that have already been higher and profits have been falling for companies. obviously stocks are somewhat more expensive. we're actually down a couple of%. i hi a lot of this kind of fouls the picture a little bit in terms of whether history can be a decent guide as to how the markets deal with this. >> you make the point that unless some -- if no immediate rupture occurs, post-hike, you

might see some buyers come in and you decide the water is "fine". >> that's a short-term play here. i do think that some unenable percentage of people have been saying, wow, i really just don't know if we can handle this, and if, in fact, you do get that expected hike right now and maybe if the language is somewhat as expected and not really too alarmist about future rate hikes, yeah, it seems to me that the path of least resistance might be higher, but i have to say it's been amazing to me the last few days how the markets have gotten themselves into a remarkably neutral state heading into this announcement. we lossed last year at 2058 or 2059. we could be right around there when this deal comes. we were oversold tuesday, and we had the rally. the market is basically saying jump ball come 2:00. >> what does it say about where we are in the market, mike, that we're not only having the conversation about the fed hiking today, but the conversation is about when in the future we will get back to

zero. is it two or three and what is the fed's path? is it one and done? is it one and wait? do we get three jump brz we stumble? >> all very good questions to. to me people are dialing ahead a little too far to say when do we get back to zero. let's see how this path develops from here. i think that a couple of additional complicating factors are that i believe that fed policy makers would be kind of dovish in their language in their approach right now. whether they intended to be slow or not next year, they want to get this one out of the way. they don't want to alarm the markets, and so even if they kind of hope and intend that the data will be there for them to be able to more aggressive next year, they're not going play that hand right now. the other element is if you remember, the fed was unusually predictable in the last tightening cycle from 2004 to 2006. every single meeting a quarter point. they have explicitly said they don't want to be that predictable this time around, so they're basically telling you, look, we're not going to lay it out for you in any great detail. >> in terms of 2:00 today when

we're walking into the exhang today, i said to one of the traders, well, it's big, isn't it? he said, john, the only thing that's big is four guys in the kitchen baking the cake. like, for the market it's going to go crazy at 2:00. i don't know how it goes crazy at 2:00 because everybody knows it's going to be 25 basis points. >> i don't say it's going to be crazy. i do think that there is still -- i don't think there's awe lot of mystery about what is actually going to be decided. if we get a surprise, it will be -- it's just almost the novelty factor of it and how things get price from there. i think the market will do after this meeting probably what it was going to be do the last couple of weeks in the year no matter what. you know the whole thing. the first move is often the wrong move. you get a lot of head fakes and a lot of people sitting in reserve not doing anything until this thing is out of the way. that's why i think it could be some sparks no less. >> yeah. it's definitely the absorption of a lot of information in a

compressed perd period of time. we're going to see you for the next few hours and then some. be sure to stay with us for our special coverage of the decision. leon cooperman, jeff gundlak and jim gross. jim grant and some others. that's all coming up on cnbc. up next, another day, another bearish note on apple. this time it's credit suisse. they say a supply chain problem persists. that's enough to take apple's target price from $155 down to $150. apple, you may know by now, down 5% in the last five days. i like the bear note, john, because they say we take supply chain estimates with a heft where i grain of salt, but then they say our semiconductor team suggesting 20% cut in procurement. >> yeah. the question is how is apple managing its inventory based on we know that the woshgs weeks of inventory that they're keeping crept up, but they hadn't last year, but they hadn't actually reached that amount of inventory

in stock. i think all of the supply chain stock as we've often said on squawk alley, you do have to take with a shaker of salt. not just a grain. the two issues are one is the stock action overdone? this is still not an expensive stock. even if iphones don't grow in 2016, apple, where he, has to just transition to a world beyond the smartphone. i don't think it's clear to anybody what that is. i mean, over the top tv not leerl defined aside from the content part. smart home doesn't seem to be working. wauchlz a watches are out there, but not that exciting. what hits? not just for apple, but for everybody. >> it's not a cheap stock. it's being used as a piggy bank traditionally in the market when people either want to take some profits or invest in something else. maybe that's even cash. because there are no near term catalysts until we do get earnings next quarter, what do you make of it? >> i think it is a cheap stock. it's 11 times forward year

earnings. to me the big concern going into this year is the bear is a cut from 2 from 243 million to 234 million units. to me the projections are so far ranging for where it will come in, we will have a very volatile 2016. financial year 2016 for apple. 2017 both notes are fairly consistent that with the new iphone you'll see a return to growth 7%, 8% growth. if the next we're is going to be rough and tumble i think for apple. >> that's the crux of it, john. we're all obsessed about the march quarter. oh, my gosh. what if it decelerates. they think by this time they this d -- >> also, there's a 20 million unit disparity between these. i mean, you think about that for almost any other company, look at microsoft. 20 million units would be a great year. >> yeah. >> that's the disparity in this apple -- they don't know how many of these apples will sell, and honestly, apple can't know either because a lot of it

depends on how the chinese markets are going to shake out. there are a lot of things that go into this. i think, you know, investors, apple watchers, need to take the longer view and think is apple figuring out the subscription model both for services, content, and for phones themselves and think about how much revenue per unit is apple going to get and how well are they going to be able to build that path to the future. sn. >> the watch did $1.7 billion for the last financial year. the other category which is basically watches and apple tv will go from $10 billion to $14 billion in the next year. i think it's possible that you'll see calls to break up apple. that it's basically too big -- it's too big. >> come on. >> you have a $10 billion or $14 billion le new line business. you have a $1.7 billion watch business that john is calling a failure. there are the high multiple businesses trapped inside of apple. it's -- i said -- >> i didn't say it's a failure. i said it's not the kind of hit that a lot of people -- it's not an iphone scale hit. the reason why it's crazy is because the way apple operates,

you can't break it up. you have one design team designing all of this stuff. you've got one os team and software team that's building ramps. you can't just peel off a couple of these products and say, hey, they're a whole different company. the company just doesn't work that way. >> it's obviously never happening. i said that you could see calls for it, and it would make sense, and i don't think it's being fairly valued. i think these double digit billion dollar businesses that they have, people are calling losers. >> donald trump should call for that. along with closing up the internet and -- >> i know. well,ly make a bet that sometime in the next two years some activist hedge fund says they need to do this. >> activist hedge funds. >> i didn't say it will be happening. i said you'll see calls for it. >> you win that one. >> internet privacy, security concerns continue to be a political football for the campaigns. the focus of the debate last night and news out of germany that facebook, google, and twitter have all agreed to delete hate speech from their sites within 24 hours.

here's trump from last night's debate. >> we should be using our brilliant people, our most brilliant minds to figure a way that isis can not use the internet and then on second we should be able to penetrate the internet and find out exactly where isis is and everything about isis, and we can do that if we use our good people. >> we should be able to penetrate the internet. how much of this is engineering-wise possible? >> it's not engineering-wise possible. we could create our own china-style version of the internet that's closed off and where you can detect what everybody is doing, but isis is probably not going to use that version of the internet. i think this shows there's a gap in the politician's understanding of how the most basic technology that we're using works. i think the american people should be concerned about that. i think we need to engage more. sell convalley needs to engage more in public policy and explanation about what it is

that we're doing here. that's frightening language to me. >> that was exactly the point that carly fiorina tried to make and leverage her experience as an executive running a technology company. she said all you really have to do is ask silicon valley for their assistance in doing this. it can't be that easy. >> well, there has to be, to job's point, to donald trump's comments a week ago where he is going to call up bill gates and get him to do this internet fix. bill gates hasn't touched a computer in 20 years. if that's who donald trump thinks is he going to call up is scary. i think with technology being a fundamental part of our safety and growth in our economy, it's a real issue we have a bunch of candidates that don't know anything about this. carly fee or even wra is the best informed probably, but donald trump isn't well informed on internet right now. >> bill gates is back at work for a significant percentage of his time that -- he was called up and asked his good people to come back and help. >> i think donald trump is thinking about windows 95 bill

gates, not like nodella bill gates. >> people are loving your prediction, by the way. >> i prefaced it with being crazy. >> you dwemt bring the crazy. >> we're going to have self-driving cars in two years. apple having to spin out the other line is not that crazy. >> maybe they'll spin out their self-driving car. >> absolutely. absolutely, john. >> daily mail north america. when we come back, after a break, walt mossberg on, as he puts it, the top feature that our digital devices need but will not get any time soon. another analyst lowers their target the outlook on apple. they'll join us later on that. of course, more on the fed. what could be an historic announcement and news conference today? full coverage begins 2:00 p.m. eastern time on cnbc, lug an st. louis with bill gross of janus.

>> another day to watch vrx. here's a look at stocks up better than 8% even though they cut their outlook for 15, warrant for 16. journal has some stories about its books and how different they are from rivals, but brx enjoying a bit of a bounce today. >> up 25% in the last week. we'll continue to watch it. meanwhile, your iphone gopro or laptop, many of the electronic devices we've come to depend on have at least one thing in common, and it isn't good. they all depend on batteries, which as walt mossberg writes has become the weak link in the system. here to explain is walt mossberg, executive editor at

the verge, editor at large at re/code. >> said this isn't an investment column, but if anyone can produce a top of the line battery, buy the stock. why? >>. >> because it's the weak link in technology. it's jonathan ehs pain point for everyone who uses a smartphone, a tablet, a go pro, whatever it is. it has potential to hold back the next wave of -- it's more power over an extended period of time. is it's been a very long time since we've had a truly fundamental improvement in the battery, kayla. 1991, actually. >> what's the measure of a good battery? a smartphone that lasts all day? how would you view as quality battery? what are the attributes? >> right now given the constraints, the smartphone that

lasts all day or a laptop that lasts all day is -- you're right -- is for reviewers like me we look for that. sometimes if it's a wearable, you can find ones that will last a couple of days. there are a few phones that have giant batteries that bulge out of the back that are specifically sold for this and those last a little longer. i want my phone to basically last so long that it's not on my mind. i want it to last a week, and, you know, in the column i wrote just wrote that, you know, apple put up some numbers last year when they brought out the 2014 iteration of their phone processor that they had increased performance by 50 x, but if you go back to the beginning of the iphone, they haven't improved battery life by

even 2x. this is a chemistry and physics problem, and it's extremely tough. >> i'm talking about, say, electric vehicles, right? certainly -- >> right. >> a battery technology there has gotten better. it has in other spaces. what is it if a phone battery that's so tough? >> it hasn't gotten better in electric cars. it's gotern better in the same sense that they've gotten in phones. it's the same battery in a tesla as in an iphone. there are some small chemical differences, and there are thousands of them in a tesla versus the cells versus, you know whatever is in an iphone. it's not a fundamentally new all type of battery. it's a lithium ion battery at the moment. someday it will be something else that can do much better. >> walt, it's john. when i look at this, isn't it a

fundamental issue of trade-offs. if they were still making a phone that was as powerful as a couple of years ago and they chose to focus on battery life instead if they were using the screen technology and decided focus on battery life instead, we would be getting days of life out of these phones, right? some of the phones in india that micromax is making have much longer battery life than we get here, but one way or another, the major phone makers have decided we want brighter screens, higher resolution, lighter phones. not the battery life. is it just us making that choiz in the trays-off? >> you know, i think you're absolutely right. it's all a trade-off. much of the improvement we've seen in battery life or at least the stability, the fact that you -- that each year the devices get better, and the battery life stays about the

same, that has to do way lot of engineering around the battery. what i'm complaining about is i don't see why we can't have both someday if somebody can invent a better battery, and going back to cars, john, i think cars and stationery batteries for renewable energy give another big boost to the incentive to invent a new battery. i'm not snapping my fingers and saying please invent a new battery tomorrow because it's really hard. we're getting to the point where we need somebody to come up with a dramatically new battery. >> well, you essential laid out the challenge today, walt. we'll see which tech company picks it up. walt mossberg from "the verge" and from re/code. our thanks to you. >> coming up, a new development on cyber security legislation and what it means for corporate america. plus, just a few minutes until the close of trading in europe. just about nine minutes, as a

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>> a huge bunl and tax deal coming together overnight. the massive wreeld includes a surprising victory for corporate ameri america. >> they basically tucked an entire bill inside the bill, and it wasn't until about 2:00 m last night that people who were watching this closely knew it was inside there. it's the cyber security act that passed both the house and senate earlier this year. they merge those two bills together, put that as one bill, and put it inside this massive omnibus spending bill. it's a win for corporate america and any company that has large amounts of data and wants to share that data with other companies and with the federal government. here's what's in this provision. starting with liability protections for companies that

share intel with each other. they will not be subject to lawsuits for doing that or for sharing it with the federal government. it also insures that companies remove sensitive personal detail from the data before they share it with the federal government is then it's skrupd again. all that about trying to protect personal privacy. then finally, it establishes the department of homeland security as a portal for sharing info between the private sector and the federal government. a lot of that is being done already, but what advocates of this legislation say will happen now is that companies will feel a lot more comfortable moving forward with sharing a lot more cyber security information. they'll be less afraid of an anti-trust prosecution, for example, for sharing information among themselves, and also with the federal government. all of that to the good, say the supporters of this legislation. we're going to see this move now in two pieces. the tax piece of this massive deal is likely to be voted on thursday here in washington. friday the omnibus spending piece of this, speaker ryan is calling it a big win for

republicans up on capitol hill, but obviously a lot of things that republicans and democrats wanted and they didn't get out of this legislation. this cyber security piece, a big win for those that have been pushing for it, guys. >> big story for tech. of course, as we you will know. thank you very much. wrurp is about to close. quite an eventful day. more eventful for us. there's a look at the mixed picture, simon. >> what's really strong is the manufacturing compoen ebt of that pmi, and that is partly because -- we're up at a 20-month high. partial because the youro has declined during the course of the last 12 months, and that takes time to feed through to the real economy and the pricing

within manufacturing. that's arguably what you're seeing now. stocks have moved negatively during the course of the session. i can't see immediately what is driving that, but it's noticeable that they have moved down and led by the dutch and then arm holdings in the u.k. top gainer today, this will amuse patrick drahi who is the billionaire who has been borrowing money and teaming up with people to buy the cable companies on both sides of the atlantic where are he got an upgrade from deutsche bank with this. "altice is like the alien force in star trek, the motion picture, which absorbs all that it encountered before threatening world order with unlimited ambition and power." analyst robert goes on for suggest that both will evolve over time, and if they get any where near the chunks of synergy that is they'll after at altice, the stock could be worth substantially more. the stock is still down on this 30%, 40% gain. still, it's lost a half of its

value just within the time frame that we're showing here. that's six-month period. very quickly, must mention airbus. after a briefing that they hilled last night in paris, it would appear that they're now on the verge of naming their defense electronics operation and that could come arguably before christmas. the french don't usually like to work actuallying krltz anded new we're. >> on cable land, wouldn't miss it for the world. >> simon hobbs. when we come back, speaking of science fiction, the star wars reviews you're looking for. mostly positive across the board. we're going to talk to the chief film critic at variety. plus, coming up on a halftime where "leon cooperman and jeff gundlach in a few hours. we're back in a couple of minutes. come on in pop pop.

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tell your doctor about bleeding, new or unexpected shortness of breath, any planned surgery and all medicines you take. i will take brilinta today. tomorrow. and every day for as long as my doctor tells me. don't miss a day of brilinta. >> good morning. i'm sue herrera, and here's your cnbc news update at this hour. donald trump clashing with the political leaders in cot land after britain's supreme court threw out his bid from building a wind farm near his luxury golf course. he denounced the scottish government as foolish, small-minded and parochial. one person said it's a three-time loser. the deadline to enroll in health care coverage that kicks in on new year's day. that extension comes amid unprecedented demand. the ceo of the federal marketplace says hundreds of thousands of americans have picked plans in just the last

two days. no patients were on board. and the pope turned 79 tomorrow, but he received an early birthday cake from the faithful and his start of this weekly general odd wrens at the vatican. they also sang happy birthday as he made his way around the square. we wish him many happy returns. that is your cnbc news wrupt this hour. back to squawk alley and carl. back to you. >> all right. thanks very much. some news. the dow has turned negative for just a monument. session high was up 165 or so. meantime, dominik chu has some news on what appears to be a short call. dom. >> it is, carl, a short call. we want to call your attention on what's happening with shares of mobile eye. this is the israeli-based company around --

>> we want to point out here that citron research has written about and focused on mobile eye multiple times in the past with regard to short call here. again, mobile eye shares, john, just calling your attention to the fact that they're now down about 6% on relatively heavy volume. this after a call from short selling research firm citron that they believe. >> we'll keep you posted on more as we know more on our side, john. back to you. >> thanks, dom. the clock struck midnight, and embargoes for reviews were lifted. rotten tomatoes meter has

already racked up a 97% frustrating by reviewers. keep in mind 94% was the high mark for star wars and empire strikes back as anticipation builds for the movie's nationwide release this weekend. joining us now is justin chang, cheech film critic with variety who was at the los angeles premier on monday night. >> because this is like my childhood racked up in this. you're a professional. where does this one rank in this star wars universe? >>. >> it's at least the fourth best star wars movie and probably better than that. i think i would rather watch this one than return of the jedi. that's not small praise. i think this movie bears such a freight -- such a weight of

audience expectations. expectations have been lowered by the awful, awful prequell trilogy of ten years ago in which is hopefully a fast receding memory. swrchlt j. abrams has restored a sense of beauty and of wit and of humanity to the series, and there's something really wonderfully fun and unpretentious about it. are sdmroo are kids going to be as into it as kids were in the 70s or 1980s ooshgs are will it be tough to process some parts of this movie? >> yeah. i mean, i think kids will certainly enjoy it. it's a good question. i think that, you know, the people who are going to enjoy this the most are, of course, the people who grew up with the original trilogy and certainly today's generation of kids is growing up with it no less than the preceding generations.

there's something about seeing there's power that will resonate for adults and for kids. if there's a weakness here, wron if it's a weakness, but the new cast here of daisy ridly and -- these are the new characters that are being kind of groomed to take over the series, and it's a tricky balance that i don't think a film completely sticks the landing in that regard. there will be more movies in which you get more invested. they're setting it up right now, and they do a good job of setting it up. 12 your sense they have set a precedent where people will give the future films the benefit of the doubt? >> i think so.

>> it will be disappointing if it's not the most successful commercially successful movie of all time. i think we are going to see those two films. it's coming up after this. it's interesting after this. unlike a franchise like the hunger games or lord of the rings, these films are still being brin. there is an incredible sense of freedom and spontaneity as people -- they see what audiences respond to and they don't respond to. i think that in itself is kind of exciting to see, you know -- it's worth remembering, of course that in the 1970s and 1980s star wars was sort of making itself up as it went along. >> ryan johnson, by the way, is directing the next one. you've seen his films "looper" and such. he has a really ingenius mind, and i think that i'm actually a little more excited for that one than i was for the film. to be fair i have homework still

to do as the viewers of this show well know. to be the most commercially movie of all time it has to stand against titanic and av tar. can it do that? >> titanic and av tar. i think people are expecting that yes, it can. >> the film had already -- >> yeah. >> we got to leave it there. unfortunately, justin, thanks so much for your insights, and i got to say that button this one up. this might cement bob eiger r's legacy as the best media ceo of all time. think about it. pixar, right? marvel. now this. to be able to breathe life into things and recognize value and then nurture that over time. never seen it done before. >> and the $4 billion price tag for lucas film might look like one of the most brilliant acquisitions too. very good point. >> coming up, we'll speak to the analyst cutting his price target on apple, but, first, rick

santelli. i think i have an idea of what you are watching today, but why don't you go ahead and tell us. >> where he. we all know. we're all looking for the fed and nimization. we're going to talk about some other economies in countries that tried to come off ultra low rates. maybe more important, the clock is ticking, but not in the way you may think. come back and we'll talk about what you should be paying most attention to.

>> coming up on the halftime show we are counting down to the fed decision with two of the best minds in the markets. leon cooperman, chairman and ceo of owe mega advisors and jeffrey gundlach, founder and skoer. we talk stocks, bonds xwshgs so much more. plus, our traders game plan. what do do after the fed announcement no matter what chair yellen does today? carl, we'll see you in about 15 minutes or so. big show coming up. >> soupdz good, scott. thank you very much. r.w. baird lowering its iphone estimates for 2016 and the price target for apple due to, guess what, recent supply chain worries. will power, the senior research analyst, and he is out with a note today, and he joins us. it's good to see you again. >> good morning. thanks for having me. we were just talking about your note and the line you use that you tend to take some of the channel checks with a hefty gain of salt. why is this bandwagon getting so crowded now? >> well, look. i mean, it's a fair question. as you know, you say this to a degree i guess in front of every quarter. i'm sure as you recall you had

concerns going into the december quarter guidance, and i think guidance ended up quelling some concerns. i think there is an element of when there is smoke there's fire. i think the supply chain checks have been somewhat concerning. in fact, even baird's own semiconductor team said recently they were receiving a 20% cut in prokrurment orders. there was enough noise in the marketplace that it made sense to be a little more cautious at least on the march quarter shipment number. >> at the same time apple is investing in retail locations in chi china. >> they should also trying to transition iphone buyers into a compressed upgrade cycle which should also lead them higher average selling prices of phones as people perhaps buy higher capacity phones. where does that factor into expectations on this cycle and perhaps if this cycle will be more profitable than others

passed on a per unit basis. >> there is no question that esp's have been impressive now going back really since the iphone 6 and continuing through the 6s cycle. particularly as you think just about the competitive landscape. i think it really speaks to their positioning at the high end of the market where samsung and others have really taken a back seat. we look longer term, and we continue to like the growth story. the overall positioning. again, we're just become a bit more cautious near term, at least on the march guidance as they report for december quarter results. >> you whan irks me, though, is last time apple was hitting around 700, which is, i guess, the 100 left now, the knock on them was samsung is going to eat their lunch. look how well qualcomm is doing. they've got their own chip that is are working. that's not going to world war i now. apple seems to have beaten back

all of those criticisms now that apple is back above the $100. mark, we've oom up with, well, they can't keep running for this long. i mean, could we just be wrong again about the endurance that this stock has? >> well, we could be. certainly longer term. i think there are still opportunities for them to take share. the smartphone market is maturing, as we know, and for them to continue to gain share will be increasingly difficult over time. i think one of the ongoing opportunities, which you have all talked about in the past two, it's just the overall strength of the ecosystem, and one of the additional things they can do to strengthen that, is we're still excited about the tv opportunity, if and when that develops. the problem is that continues to get pushed off.

>> we want to give the santelli exchange and rick, good morning, rick. >> good morning, carl. well, i think for this segment we're going to call it it was released yesterday late after the markets closed. i found it very fascinating. keeping track of the selling of treasuries and various financial assets of the united states, we had the biggest one month net selling since the inception of the data in 1977. of course, it's always two months in arrears. it was october. there's time left. we're to date we see net selling of notes and bonds depending on how the rest of the year goes.

that balance sheet will be integral into the process of normalization. in terms of cap, i think manufacturing super important. it could be a canary in the coal mine. many say 12% in the economy. let's worry about the service sector. of course, it's the bigger part. when you have somewhere between 2%, 2.5% growth, 12% is nothing to ignore, and it can leverage up. it's got a good multiplier affect. the capacity rates today were the lowest since january of 2014. it doesn't end there. i release these data points at 9:15 eastern. industrial production, if you look at the year so far with 11 reads, what you have is eight negatives, two poz, and one zero unchanged. i think slow may be the most important of the three words.

many are saying, you know, the one and done. we're going to have a very dovish statement on the first time you've tightened close to ten years. listen, i can't say. i haven't read it. what i can say is there have been many economies in the world, japan comes to mind, who have been playing with ultra low rates. thief had very little success recalibrating their economy to higher rates. why recalibrate? look at growth. look at productivity. look how much we're pulling forward and look at bubbles. normalization must occur. it's occurring late in the game, and that's going to be very significant. carl, back to you. >> all right. we'll see you in a little bit. rick in chicago. when we come back, a top vc on forbes immediate yas list making a big investment in the cloud. plus, getting closer to the fed and the news conference from chair yellen. the dow has lost most of its gains. hanging on to the flat line. more squawk alley in just a moment.

i'm a customer relationship i'm roy gmanager.ith pg&e. anderson valley brewing company is definitely a leader in the adoption of energy efficiency. pg&e is a strong supporter of solar energy.

we focus on helping our customers understand it and be able to apply it in the best way possible. not only is it good for the environment, it's good for the businesses' bottom line. these are our neighbors. these are the people that we work with. that matters to me. i have three children that are going to grow up here and i want them to be able to enjoy all the things that i was able to enjoy. together, we're building a better california. >> it just announced its 100th investment in the cloud. let's head out to one market in san francisco where our josh lipton is joined by bessimer's byron dieter wrshz. >> byron, thank you for joining us. >> my pleasure. >> i want to start with actually box today, byron, because you guys were early investors. you see the stock popping this morning on this partnership news with sales force.

they have performed well. the market is going through the understanding process. we look oot that as a positive data point in the sense that they're trading at $1.6 billion to $2 billion. they're a successful company by all measures. it does cause us to be very sensitive to entry valuations, particularly for late stage investments. knowing that the public market is fairly conservative right now about these investmentsed. >> have you seen byron, in your portfolio, these private cloud companies, have they when thief seen how box has been treated, have they adjusted at all their businesses? do you see a response there? >> there's some sensitivity to cash spend for the later stage businesses in particular. it's a cost of capital equation, and these businesses have a lot of dials to maneuver, and in terms of sales and marketing rate of investment, when they see their cost per capital go up, naturally they'll pull back a bit. particularly when they're doing the crossover as the public market premium only profitability chshgs we saw from the last ipo as well, they have that in mind, and will you see

them pull in those horizons intentionally to hit those marks. >> over the last few months we've seen a fairly dramatic pullback, and we expect that we'll continue. they won't necessarily converge because the fwiss are growing faster, and wills some dynamics at play where they deserve a premium valuation, but it's hard to justify the spread that's existed in the store. >> one big conversation as you know out here, there are some big names, including, you know, mark benihoff that said, start you weres, you guys need to start making these public debuts. are you waiting too long. what are your thoughts? do you agree? >> i agree with most of the statement. i didn't agree with the comment that people have been manipulating private markets.

these are smart investors. the wellingtons, t. rowes and they aren't novices. they've been eyes open about the investments. to be transparent and the liquidity that comes with public currency for their employees, for their investors, and ultimately for acquisitions for the bess stage. it's been a natural progression. >> last question. all eyes on the potential rate hike. not something start-ups founders think a lot about. should they be? >> it's a second order issue for them. interest rates are a small component. primarily they're raising equity capital. debt for them is a leverage vehicle, which is a meaningful people wrum to the fed rates. really it's customers down stream and how it impacts their

business. if they're buying slows, it will impact start-ups up stream, but it's a late affect, and we think very modest in terms of the cloud industry. given that the mac egrowth is so -- >> kayla, back to you, guys. >> all right. thanks, swrosh lipton with the special guest out west. up next, just how big is the federal reserve? we will break down its massive balance sheet when "squawk alley" comes back.

>> you are looking at a live shot of the federal research, awaiting that announcement in just two hours time from chair yellen. we will have live coverage when that happens. our eric is in the meantime looking at the size of the fed balance sheet, which has only been growing since the financial crisis. >> that's right. here's the thing, once we start talking about numbers like trillions and beyond, people mentally lose perspective on how big these sizes really are. let me give you some numerical illustrations to think about another way. the fed's $4.5 trillion balance sheet could value the top 14 companies in the s&p 500. it's actually so big that it would buy every single tech

company in the s&p 500 and have floer $600 billion left over. now, if we leave market cap and focus on annual sales, the fed's $4.5 trillion is simply apple's annual sales times 19. or amazon's 12-month revenues times 50 or netflix revenues times 800. the fed's balance sheet where its own national gdp, it would be the fourth biggest on the planet behind only the u.s., china, and swrapan. it would be larger than every country in europe. when it's wriz to get lost between billions and trillions, just remember how much money we're talking about, kayla, and how unprecedented a situation we were in. back to you. >> yes. the journal called it a policy experiment. thank you. >> hash tags on twitter, the fed awakeerns putting together woets from star wars making them period of time independent to a monetary policy audience. somebody points out wre8en

doesn't have an opportunity or is not scheduled to speak post-decision. there will be no sort of clarifying this aside from the presser. that's going to be about. >> perhaps because it's priced into the market she won't need to. we'll see what happens. >> buckle up. that's it for us. let's get to whopner and "the half." >> welcome to a special halftime report. i'm scott whopner. we counts down to what could be the first interest rate hike in nearly a decade. you'll hear from some of the brightest minds in the markets. leon cooperman, chairman and ceo of owe mega advisors. swrefry gundlach, the ceo of double line capital with $80 billion in assets under management. our panel of traders front and center as well. swrosh brown, swrim levanthal, and john and pete are here. here are how stocks look right now.