welcome back to "squawk on the street." real estate is standing out at the best performing s&p 500 sector and by a wide margin. nearly all components are positive with kimco and simon property among the leaders now back downtown for the start of "squawk alley." >> good morning. 9:00 a.m. in jackson hole, wyoming. 11:00 a.m. on wall street. "squawk alley" is live ♪ ♪

good thursday morning. i'm carl quintanilla with jon fortt, sara eisner and with us is henry blodgett. amazon officially closing its acquisition of whole foods google and walmart are teaming up on a voice shopping nasdaq slightly up this morning looking to avoid its fifth negative session in six. a retail analyst on yesterday who called the day of that announcement amazon/whole foods a day that will live in retail infamy now getting one step closer to -- they're going to close this thing in the second half. >> yeah, which is great. a lot of us amazon and whole food shoppers are exited another bold step from amazon. we'll be excited how they do it. >> how your characterizing the responses companies have >> you take your hat off to walmart. they're being very aggressive. they made a huge bet acquiring

jet. they are being superaggressive it's a smart idea with google. does it immediately counter amazon no but the whole idea of ordering stuff through your home voice device, walmarts are something like an average of 10 miles or fewer to pretty much every american they've got this network in place. there's a lot they can do together we should salute walmart for being as aggressive as they are. >> it's interesting on the fringe but i don't think anybody would argue that ordering with your voice is the battleground it's the logistics, things like prime they need to figure out and neither google nor walmart has that right now and getting together isn't going to make it any simpler i think there was a lot of this antitrust chatter out there around amazon, even though the way the law has worked up to this point, it wasn't clear to me how that was going to play out. the fact this is off the table and we're talking about giants clashing again, that is

interesting. and at least, for me, somebody who likes to see competition and markets work, it's a little bit of a sigh of relief. >> absolutely. the antitrust argument never made any sense you look at the percentage of commerce amazon has, it's tiny a big percentage of digital but not commerce in general. and that's really the market here >> i think the big opportunity for walmart and google is going to be in grocery because walmart is the largest gro esst grocer e country. something amazon hasn't mastered they are trying to figure out the grocery delivery of the future when it comes to logistics and changing consumer habits around this, this is something that amazon is not light years ahead of walmart on. walmart has the food capability there. i think the grocery war aspect of this will be key. >> and very interesting. big opportunity. >> amazon's now down 12% since late july. we'll watch that >> call me when it's 50%

you want to be an amazon investor, take the long view the stock has gone straight up since the fire phone disaster -- >> it's a good opportunity to load up? >> this is a very expensive stock, seemingly you've got to be in this for a long haul, not a quarter to quarter stuff. uber continues to show growth even as it suffers through some pr trouble and that extended search for a new ceo. gross bookings up last quarter while increasing more than 100% year on year we were just talking about whether or not there are issues in the media, the press have any bearing on how willing a user is to press the app >> i think that's the real message here there's a huge scandal around uber in corporate circles, business scandal investors it is not affecting the business people love this service, clearly. they're growing 100% net revenue year over year they have a huge loss on the bottom line. it's still $2 plus billion a

year the next project for the company will have to be to actually slow the top line growth, move toward break even it's a very different phase of both and the new ceo question saul around that who is best to do that but the big message here is people love uber >> yeah. >> they are losing $7 million a day. $645 million in the quarter. which is a narrower loss but it's still $7 million a day. i don't think the issue was ever so much, people thought they were going to stop using uber but the momentum that not only lyft but also global services like dd and grab have. it seemed crazy when carl icahn invested in lyft several months ago because, you know, it looked like uber was running away it was a winner take all market. i don't think many people think that anymore this global network that lyft is a part of and it seems to have some real momentum

i think it's an open question how uber is going to answer it >> it's not the winner take all market a lot of people expected where you shut everybody out of the market and uber does have to act fast they are in limber they need a clear leader, have to pick the new ceo. may even be travis coming back but you're right absolutely it's not a winner take all >> it's all a question of how you value this company there's so much talk about how the valuation has been marked down amid this series of corporate scandals, lack of a ceo. when you have bookings growing 17% in a quarter, what happens >> folks are, obviously, reporting that some institutional investors have marked it down but call me when it's 70% down, not 12%. it's a company going through a terrible scandal, uncertainty, limbo and the stock is marked down 12% so what. still $70 billion trading at ten times its run rate of revenue

which somewhere is reasonable. you have to figure out what they can do when they cut that $2 billion loss how fast are they going to be going? >> who would you like to see run it >> jeff immelt is a great name >> really? >> we hear he's the front-runner or one of them that would be great. i think travis can come back >> even though garrett says he is not coming back >> yes, everybody says that. but clearly what is going on is travis rethinking it now that he's saying, look, had a lot to learn. a lot to change. i think there are roots back and the worst thing for the company would be in limbo for the next six months >> do you think the battle between benchmark, the big investor on the board and travis gets won by travis >> i think it's possible travis is playing brass knuckles here clearly he's going to do whatever he has to do. he has to sign off if a new ceo comes in and hasn't totally backed that person, the person is a toadie travis is still ceo even though

he's not ceo in name tra travis has to be on board. >> a ceo coming from the outside has to be assured that's not going to happen. >> you have to have travis agree that if immelt is going to be ceo, he's going to be ceo. it's a very interesting situation that has to get resolved fast. that's the key >> fascinating example, a case study in corporate life. finally investment firm social capital files an s1 for a new business that looks to help emerging start-ups go public without the help of big banks or a traditional ipo. former facebook executive behind the effort that could change the way tech companies go public they like to bust open old models this one looks interesting >> facebook's original growth hacker i don't want to discount anything he's planning a lot of people are comparing this to what warren buffett has done with berkshire hathaway a lot of the businesses he

really looks at are mature businesses for this to work, chemothen and his team have to look at businesses that need a lot of growth and this is what reid hoffman was talking about yesterday in linked in we're going to hear from reid later. businesses that need a lot of capital to grow and compete but grouping them together in the structure, i wonder, are they going to have enough capital to deal with all the uncertainty that comes with being a tech company. can the berkshire model work >> this is all about the story that he tells and whether institutional investors will give him a $500 million blank check to buy stuff we have a problem with the ipo market in the 1990s, companies used to go public with $10 million of revenue. you had the ability to invest in a much earlier stage if you are right and the company worked, a huge up side now you have to sit around waiting while the private markets capture all of the

value. whb the company goes public when it's completely mature that's not great for investors either >> how much of it is the traditional bankers versus one of their own take them public? >> if chamath is good at selecting the right companies and buying a nice chunk of them and nursing them along and keeping the founding team in place, suddenly you as a public market investor can have the ability to invest in those companies or a group of those companies. almost like a public firm. these things in the past can be complete disasters so you really have to trust the guy running it berkshire would be a disaster if it weren't for warren buffett and charlie munger it's all a bet on the intelligence of chamath and the team there will be appetite for this. >> that $500 million, enough to fund uber's losses for 72 days >> that's the thing. $500 million in silicon valley right now is couch change. it's a start, but not much you talk about the old days like it's a golden age.

people who bought globe.com thinking they were getting in early, too >> it depends what you think the purpose of the public market is. if the idea is to protect savings, of course, have companies go public later. there's a lot of demand for investors that can afford to speculate in start-ups and smaller stage companies to actually do that and not have to go through the hassle of private investments and so forth so for those investors, being able to access companies earlier, is a positive >> we'll see where it goes good stuff today, henry. >> henry bl rery blodgett, busi insider. paul ryan set to tour a boeing plant we're joined with more ahead of her exclusive interview with the house speaker this afternoon good morning, ylan >> good morning. paul ryan's tax reform road show keeps getting interrupted. first by fears of a government shutdown and now by the potential of a debt ceiling

crisis president trump blaming ryan and his counterpart in the senate, mitch mcconnell, for failing to attach a debt ceiling increase to a v.a. bill, as he says he requested them to do now president trump says everything is a mess lawmakers are facing a september 29th deadline to raise that debt ceiling. that's just a day before the deadline to keep the government running. so these are some of the political land mines facing ryan once he gets back to washington, d.c. out here in washington state, ryan will be touring this boeing facility that's behind me. he'll be talking to employees and also be joined by boeing's ceo dennis muellenberg as well the whole idea is to show that businesses are getting behind the possibility of giving up some of their special tax breaks or reductions in the hopes of getting the corporate tax rate brought down but tax reform could be a moot point if republicans can't keep the government open.

can't raise the debt ceiling if they can't do the basics of governing. i'm going to be speak with speaker ryan about all of this >> very timely conversation, ylan when we return, what linked in executive chairman reid hoffman has to say about vul valuations, diversity and gender equality in silicon valley first a quick check of the markets. up about 14 points on the dow. the s&p and nasdaq about at break even fading up and down above that break even line at this hour as we approach noon on "squawk alley. we'll back in a moment

the president flat-out threatened a government shutdown over his border wall >> the story of the year so far has been distraction after distraction from policy. >> with profits growing the way they're expected to in the abence of any trump agend athis

market is fully supported. >> if it only supports about 20% of taxpayers, why is it so

linked in founder reid hoffman sat down with me yesterday. take a listen to what he had to say about diversity in silicon valley, valuations and the next big thing in technology that isn't being hyped enough >> as you get to more and more of a network world we get to larger and larger companies. one of the things that's interesting if you contrast the top five most valuable companies now versus ten years ago, ten years ago it was more oil companies. now it's more tech companies in terms of how the whole thing works because they benefit from this global scale in a network world. like oil companies have always benefited from but as the technology companies.

so then you get to all these other valuations and the question is, are they going to be one of these huge ginormous companies that benefits from a network world. high probability than they are, they're probably undervalued moderate probability, they're probably valued appropriately and low probability, they're probably overvalued. what it does mean is probably most of the valuations are probably too high because only a small number will be defined the next platforms, next tech companies. when that risk adjustment, i took a portfolio of 100 of them, probably 90 or something, were overvalued and 10 are undervalued or 5 are undervalued and that's the challenge for being a professional venture capitalist investor and so forth in trying to discern those companies. >> when you look at various ethnic groups, when you look at women rising up and saying, hey, the system as it works right now, whether it's in public

universities or in silicon valley, with venture capital isn't working for us how do you think that's likely to play out? >> we have more african-americans in prison than were under slavery it is a set of things. and so you have to start with a recognition that we are not yet the meritocracy we want to be or the diverse and inclusive society we want to be and we should all work towards that together then you go it's the right technique in order to make that work what are the right kinds of things in order to make that happen >> you were part of the paypal mafia. what we call people like you, elon musk, the youtube guys who came out of that really pretty phenomenal group of people you've also said that because of your paypal experience, even though you're in charge of making payments released investments at greylock, you

haven't made any because you see all the things potentially wrong with payments companies. so -- >> not yet not yet. >> what is the range of benefit and i guess problems that your experience has brought you >> the specific problem with paypal is payments is a very difficult thing. it's -- most of the payment infrastructure was built decades ago. fundamental to all business. if you could build a payment center from scratch you'd build it all kinds of different ways but getting them established is really hard. you have to get to a minimum of a billion dollars of transactions to even have an interesting payment. it's a billion dollars of transactions flowing through the system that's a lot of money. by the way, people don't want the payments to screw up they want to go with what's tried and true they want to have it very reliable and so knowing all of the ways that paypal almost died in

getting its creation makes me know what the checklist of is, well, how are you on all these mine fields, and, you know, so i didn't invest in square, which is obviously a mistake i didn't invest in stripe which is obviously a mistake great founders great, interesting companies and it was my own ptsd from paypal >> be sure to check out the ft. knox podcast coming up over the weekend. i'm going to post the full conversation with reid talking about his path to get to where he is. some of the most interesting comments he made in the debate earlier with tim o'reilly, around this topic of diversity i'm hearing a depth in the types of solutions that people are thinking about, and the familiarity with data in silicon valley among titans like reid hoffman that i didn't hear a decade ago >> the comment about

incarceration rates for african-americans and how the conviction rates for things like marijuana possession are so much higher than other groups yes, he's a scholar. almost an academic before he decided to go into business. there's a real focus being put on some of this data and how does he bring people into the community and into companies with a diverse lens. and greylock has a lot of work to do on that front, but he's working on it. >> for a company that says data leads you to the best choices and outcomes, certainly you'd expect them to lean heavily on it >> he certainly makes start-up investing sound intimidating trying to find 5 out of 100 that are undervalued. amazing. >> i certainly couldn't do it but glad we get to sit down with folks like that and get the view >> the ones i should have done the miss jon, we'll check out ft. knox to see more check at shares of amer kb r

abercrombie and fitch. it's called the netflix of emerging markets the co-founder and chairman of i-flix will be joining us next

leasely picker has some news on this adp battle >> one of the most contentious going on a new letter from bill ackman to pershing square saying there have been misunderstandings over the past weeks which have clouded what should have been a productive relationship from the start. this comes after earlier this week adp published a filing, a proxy file chicago detailed a background of solicitation on what went down between adp and bill ackman. some of the highlights included what happened surrounding that extension of the deadline and

pershing square saying it and the company were at war. this is according to the proxy filing he said according to the proxy filing that he was committed to a proxy fight. and would not consider any kind of settlement in that it kind of explained what he was looking at with regard to ceo succession and that he had been under the impression mr. rodriguez had been looking to step down anyway, which is why he was looking at other candidates to take his place at adp. a lot of interesting stuff here. it will be interesting how things turn out from here. >> yeah, and whether or not they can reset on this thing. thank you. netflix is focusing more and more on international growth as media and streaming companies attempt to capture eyeballs overseas i-flix is already there. millions in saudi arabia and egypt. joining s ining us is patrick, e co-founder and ceo

>> good to be here >> it's a fascinating issue. on the one hand, you're dealing with an area of the world where piracy is much more common where bandwidth is a lot different here than in the states how do those things help growth, hurt growth? >> we built the business from day one to cater to those two things people say i-flix, like is glets flix a competitor, cable a competitor none of those are competitors. piracy is our number one competitor digital and physical piracy in 95% of households in those countries you mentioned, that's who we've got to be better than. build a product better than pyrearipyr piracy every day of the week >> and make it as cheap. how cheap do you have to make it to compete with a pirated dvd. >> whatever is the price of a physical pirated dvd, which is usually about $1.50 u.s. in vietnam or thailand or saudi arabia, that's the price of i-flix per month so you can go from getting one

pirated dvd or 10,000 hours of the best local shows, regional shows subtitled into your local language >> what is your relationship with disney, which very publicly recently is pulling its content from netflix to launch its own streaming. it feels like you are building this relationship with disney, going the other way. >> we have a great relationship with disney. we just announced that we're launching disney branded channels on, i-flix throughout southeast asia we're probably one of the only services in the world where we'll have a marvel channel. a pixar channel. so you'll go to the service, click on marvel and see all the great disney stories from that brand. click on pixar, disney kids and everything from the house of dusdu disney i'm sure disney has different strategies for different parts of the world we're proud to be their partner to partner >> patrick, you say netflix isn't a competitor but

international growth in their sites. they'll be a competitor sooner or later how do you expect that to play out. netflix just ahead their first acquisition and it was i.p are you going to partner with amazon or apple or google? is there any benefit in your type of business to other sorts of partnerships in growing >> so as we -- we just want to build the greatest streaming platform in emerging markets without a doubt. it goes with different content, different price point, different strategy some of these companies are great western brands and may or may not be the best partners in these markets. look at something like netflix they are a phenomenal company. what they are building is a very, very first world product that tells great first world stories with first world storytellers and if we go to vietnam or saudi arabia or thailand, you know, the majorities of our customers have never heard of netflix. the majorities of our customers

don't speak english. something like "house of cards" wouldn't resonate with our customers. that is the business that we're building in these local markets. >> does it mean your strategy on original content has to be different? can you afford to do that? >> completely. we've already launched original productions. already launched in malaysia, in the philippines. we launched local comedy series. they have it on hbo or netflix of you get a public comic and build a show about it. this is a format that's never existed before >> stand-up? >> stand-up in a broadcast format whereas comedy is central to every culture and every group in the world. we've got 5 million users watching i-flix on their own every month. how do we get them great local stories and comedy is something we're betting really big on. we've launched original productions. >> you have 5 million viewers?

>> 5 million customers >> how fast are you growing that >> the business is launching tremendously in 20 countries right now. another 20 in the next two to four months. >> you have to come back next time you're in town. really fascinating story >> we could go to vietnam. >> i would love to host all of you guys in any of our markets >> do the show in the middle of the night. >> thank you paul ryan, house speaker, touring that boeing factory in washington he'll be sitting down for a one-on-one conversation. the topic is tax reform. see what he has to say about d a olnd the president's tweets anwhe lot more more "squawk alley" coming right up with this level of engineering... it's a performance machine. with this degree of intelligence... ...it's a supercomputer.

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i'm sue herera the u.s. navy is confirming the ident aift sailor killed aboard the "uss john mccain" as 22-year-old kenneth aaron smith. the navy also said it is susp d suspending its sea search instead focusing on recovery efforts. lyft is sending a message on how to stay safe during white

supremacist rallies. it gives advice on how to respond to what it calls hateful intimidation and harassment. a new study finds apple tv is losing in the living room a sampling of 10,000 homes with at least one streaming player found apple's device lost market share year over year falling to 15% from 19% roku was the top choice with a 37% market share and it was almost one for the history books. l.a. dodgers pitcher rich hill had pitched nine no-hit innings but when the game went into extra innings, a pirates hitter bombed this walk-off homer, the game-winner and a dlaeheartbrear back downtown to you, carl >> we were sad to see that last night. >> i know, right let's get europe's close here seema? >> european stocks modestly higher ahead of the jackson hole speeches tomorrow by janet

yellen and draghi. it will be on tapering and any concerns about the strength of the euro now up 12% against the u.s. dollar so far this year retailers rallying in the u.s. but have very different story in europe look at dixons car phone of the uk they plummeted after cutting full-year guidance customers keeping their handsets longer duck growth slowed at its fastest rate in over a year. growth in consumer spending at a three-year low higher prices, weaker pound since the brexit vote is taking its toll we finish with wpp, the ad giant recouping some of wednesday's loss following the advertising giant's second warning of the year which cast a dark shadow on the sector oil refiners on the gulf coast tracking the path of

harvey which has been upgraded let's gk to jackie deangelis. >> that tropical storm off the coast of texas is intensifying it's expected to make landfall tomorrow near corpus christi could be category 1 or category 2. the impact on the energy market will depend on how big of a punch it packs we haven't seen a storm like that in that region in almost a decade it tends to spike crude, gasoline and natural gas prices because a lot of the facilities are down along the gulf coast. a bad storm could shut down refineries and cut off imports and exports as well. on the refinery side, six main regions that represent a little overhalf if it's category 1 and a refining center is hit, a week to get up and running. category 2, one to two weeks category 3, even longer than that right now the energymarkets ar not in panic mode. investors are waiting to see how the storm develops if you think to past storms and

remember when there was damage, prices could run up very quickly. crowd held under $50 a barrel because of fear of oversupply but a bad storm like this could be a game changer. even though we still are dealing with a gas glut as well, could see a big spike there. if harvey just ends up passing through, there's always that if, you actually may see lower prices, potentially, after labor day. back to you guys >> all right, thank you, jackie. stocks losing steam at this hour as global bankers make headlines in jackson hole. let's bring in bank of america merrill lynch head of u.s. equity also david kelly, jpmorgan asset management chief global strategist sabina, i want to start with you. stocks down a bit. there's been a lot in terms of headlines lately what do you see if anything driving these markets. what should we expect as we get

closer to jackson hole on friday >> yeah, i think the name of the game here is volatility and interest rates you know, potential for fed balance sheet normalization. rate hikes i think all of this spells some potential for leadership to shift from low interest rate plays to rising interest rate plays. and i have three words for you that i think are the way to navigate the market for the rest of the year. those three words are dividend growth stocks. the reason i say this is, if you get interest rate volatility, over the last 12 months we've had a massive reversal in interest rates, but the one consistently outperforming strategy that we've seen is dividend growth stocks stocks that have the highest dividend growth have outperformed over the last one month, six months, 12 months

they've been steadily clipping along and outperforming the market we have some sector ideas for you based on this theme. the name of the game is to avoid some of the leadership that we've seen over the last bull market which have benefited from falling interest rates that's my best advice to investors at this point. >> david, you agree? you turning a bit cautious >> not too cautious. i think that the market is being held in place a little bit wby worries out of washington and the debt ceiling and shutting down the government. and i actually think, looking at the politics, despite the seeming chaos if you look at it logically, we will get tax reform but also significant tax cut which will be positive for equities and negative for fixed income and the reason is that's the one thing that both the republican congress and the white house, it's kind of an easier win if they have a big tax cut as part as tax reform. i don't think they'll run into

enough objections in terms of deficit and politically it will work for them. if we get that result, despite the confusion right now, they'll be positive for the equity market and bit of a negative fo fixed income markets >> so a lot of people are watching the dow transports which are lower again. often a broader signal for the economy and the markets. 1% slide they're flat for the year. so is the russell 2000 index you have some bullish signals. copper has been making a nice move higher. how do you make sense of these mixed messages and what it means? >> it's a great point. you're right lots of mixed messages and we're sticking with our target for the s&p of 2450 i don't see great gains or losses for the overall benchmark from here. but an internal level which you point out, that's where it gets interesting. economically sensitive stocks

like industrials may not be doing as well. i would look at where you're going to get the best bang for your buck on a groat pwth perspective and valuation perspective. i like health care and financials now health care is not an economically sensitive sector. the rule of thumb is, if the economy is slowing down, you still have to eat and buy your drugs and health care looks fairly cheap nobody owns the sector because they're worried about all the political risk around obamacare, repeal and replace, and, meanwhile, the sector has posted the best earnings growth, sales growth, great sales surprise and earning surprise statistics and it's almost as cheap as it was at its valuation i like health care a lot as a play against, if we're later in the cycle and the economy starts to slow down, buy health care. the political risk is overblown in the sector. and financials

financials sounds like an economically sensitive sector. the reason i like financials has nothing to do with interest rates. it has nothing do to do with the economy. it's basically we've reached peak regulatory constraints on the sector which are likely to flat line or nullify and financials -- >> let me stop you there and quickly -- >> yeah. >> quickly, david, do you have a couple of sector picks >> yeah, i am more from an asset allocation i agree with the basic idea of being overweight cyclicals versus defensives. if you look at the flash pmi numbers. the world economy is growing fast in the u.s. the gap is rising. valuations are more normal overseas a little richer here so i think people should -- the biggest play is being a little overweight the rest of the world right now. >> okay. great insights from both of you. savita, david, thanks. when we come back, the

co-founder and cio of beauty box subscription birchbox joins us dow has been dipping in and out of the r aedll morning we're down 25 points so we're back after this.

rick santelli on the floor of the cme. jackson hole say big deal to those enamored with all that is central banking. like any kind of convention,

there's not going to be a lot of tiger ki tire kicking at this one the issue with central banks in my opinion is they did everything they could. but there's a difference between creating something organically and trying to create it artificially now i want you to be looking at these three charts i talked about it before the first is balance sheet of the federal reserve. ten years. if you look at ten years of the dow n ten years of the dax, you've seen me put those on top of each other. it's unbelievable how they line up but the real issue should be now that we have come to the end of the line i don't know how it's all going to get orchestrated or the dates it's going to begin but we're somewhat at the end of the line. so as the u.s. tries to get things more into a normal, tight zone the way it was pre our lost decade, are other central banks going to go along? it's always assumed they are,

and i can't believe they won't in the end, you have dollars, euros, yen how they've been deployed over the last ten years we all know about risk/reward. more of this, more of that you take less of this, you get less of that but, really, since the credit crisis, a lot of the risk has been sucked up through policies by central banks and who gets the reward? the biggies. the bigs the big banks, the really big companies. ones that can afford to use the market, especially low interest rates and get as much dough as they need. avoid the banking system completely that's a whole other story but buyback stocks is at the epicenter of all the things going on so the real issue is, if we follow central banks up as they start assuming all the risk in buying so many financial assets, are we going to follow them down it seems logical that this should be something we all worry about. but there's another case here. i call it the redeployment case.

because, in my opinion, no matter what group of people you assimilate together, you give them an easy way to make money and a more difficult way to make money with more risk, sometimes just take the risk, the less risky road and you do okay and i think a lot of institutions have done that. you are biderman, biderman today. capital expenditure by businesses are going down but they have a lot of money redeploying that where more risk is taken, it isn't necessarily on the tape from central banks and all the benefits therein in that could be a major healing process that could give us a real growth spurt. even though it seems we have to come to the end of this journey and kweeequities have to sufferm not necessarily buying into that it's a matter houof how the cenl banks fight the issue. jon fortt, back to you thank you, rick santelli

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markets moving in and out of the red all morning long on thin volume teklehaimanot helping out today. we did get a high. dow is do you know 19 points back in a minute chances are, the last time you got a home loan,

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side by side, for free. it's like shopping for hotels online, but our average customer can save twenty thousand dollars. at lendingtree, you know you're getting the best deal. so take the power back and come to lendingtree.com, because at lendingtree when banks compete, you win. beauty box subscription retailer birch box has been rumored to be in talks for an acquisition by retailers by walmart. katia is the founder of birch box. welcome back. >> nice to see you. >> can you give us an update on the status of talks between your company and walmart? >> birchbox has obviously been

around for seven years and one of my primary jobs is the long-term financing, the strategic future of the company so we've always been in talks with everybody from the financial side and strategic side nothing new there. nothing really imminent happening. >> a lot of people wondering because we've seen walmart recent recently snap up a lot of retailers. >> i think a lot of retailers are looking at other retailers they're looking at them as ashby terse -- arbiters of change >> what is the status of the beauty subscription business and yours in particular? because we followed it for a few years, super hot, and then it seemed to hit a rough patch last year. >> it continues to besuper hot for consumers. i think what has happened for all retailers is that financing opportunities changed for anybody who's doing retail, both

publicly and privately i think there's starting to be skepticism about how much basically could the retail industry change. now what you guys are seeing is there's a lot of change. the consumer loves disruptive products they're extremely loyal to birchbox it's an exciting year for us because we're successful and self-funding all of the conversations we can have from our own terms. >> is pricing under pressure we've been having conversations all week long about cody's results versus e.l.'s results. >> right. >> we don't know whether the high end is being pulled down. >> i don't think it is at all. >> like in footwear. >> i don't think so. for prestige beauty it's a unique category technically accessible to a lot of people even though it is a higher price point than mass point. we definitely are not seeing customers pull back from purchasing prestige. we are seeing higher quality products enhas which masse

you see that sold like alta. customers are getting savvy. there is a huge appetite for prestige quality product, particular interest in hair care we have a massive hair care business and naturals. naturals the customer has a higher willingness to pay in that category for sure. >> how do you engage how much you can up sell? there seems to be great interest in selling consumers boxes of stuff. >> yeah, right. >> amazon doing it with wardrobe as well. >> so with birchbox, we have 50% of our subscribers that sample shop for the full size purchase, the full size product. it's a massive opportunity still in the early days. beauty is still 90% purchased offline. we know the momentum is there to see consumers buying the full sized product. that is one of the biggest confusions over subscription industry people think of it as one catego category, one industry it's very different if you get a box of things that is the product versus you need to upsell in order to get the consumer to be loyal

that is our focus and always has been our focus. >> i know you sort of worked around the walmart question a little bit if you were to describe the future of this company, can you see yourself as remaining independent? >> absolutely. we're very focused on being a stand alone company. that is a critical aspect of why we made all the changes we had to make to be profit annual and to reaccelerate our own growth we are focusing on how do we keep the product relevant. we're focused on the casual beauty that's very different than the beauty whole sale. we think women are having a sub par experience we are investing in that experience for her and we're evolving the product we launched a test of birchbox select where the customer can have more controls we launched an evolution of birchbox man if they want to have a $10 grooming product, have some sample choice with that, or if they want the $20 product which

we really needed 5 years ago because it had a lifestyle item to make them feel more comfortable. >> katya, thank you for coming in, giving us an update of the business >> thank you. >> she's the ceo and co-founder of birchbox. watching the markets in thin volume keep your eye on energy as we get the potential upgrades to the haeb forecast. let's get to wapner and "the half." >> welcome to "the halftime report." i'm scott wapner rally or retreat where stocks are likely to head next and the best places for your money no matter what happens in washington. joe is with us today as is jim laventhal, josh brown, we begin with the markets major averages still negative for the month. i'll go to you first are the fundamentals of the bull market still intact or not >> i think they're