good morning, it is 8:00 a.m. at apple headquarters in cupertino, california. it's 11:00 a.m. on wall street, and "squawk alley" is live ♪ ♪ to "squawk alley. i'm carl quintanilla with john fortt, mike santoli at post 9 of the new york stock exchange. joining us this morning at post 9, business insider ceo henry blodget is with us

good to see you. >> great to be here. >> obviously, tax reform bill is first on our list today, waiting for the president's signature. meantime corporate america promising more pay for workers at&t, our parent, comcast, and others unveiling bonuses or an investment in training questions still remains in terms of how the tech world will be impacted by the bill we've had some discussions about how they don't have as much to gain on the rate, per se, as some other sectors, but i wonder what you make of the responses from corporate america in the first day. >> i think a lot of corporations are cashing in on our new personal saver culture and p.r. culture saying, basically, we're onboard with you you had a great idea to raise wages, we're doing that, investing in the united states please, approve our big deals that we want to have and think of us fondly when it actually turns out that most companies don't increase wages from their tax cuts >> so, i know they hint of

cynicism in your answer. >> if any little bit is good going to the folks who actually spend the money that drive this economy. the big problem with the gop tax bill, in my view, it targets the wrong problem. the problem is not the 0.1% don't have enough to invest in new companies. the problem is that the 99.9% don't have enough to spend on all these great products that our companies are producing. we need to get the money to them tax bill doesn't do that, but here, justification for the tax bill oh, companies are going to use all the savings to give people raises it's a nice story. there's no evidence for it, but these companies are now cashing in >> now they got $1,000 more, i suppose, and that's, you know, nothing to sort of sniff at, except that executives don't seem to have a problem getting higher compensation packages year after year, where the middle class worker has been stagnant for a long time and though raising the minimum wage of your workforce is good,

it's unclear what's going to happen for the bulk of workers outside of these thousand dollar bonuses. are they going to see actual wage increases from what we've seen in the jobs numbers over the past couple years it feels like maybe not. >> that is exactly right and that is the problem. and the good news is, there are positive signs we have gone from a much lower minimum wage lots of companies voluntarily raising wages. apple did his, starbucks is doing this that is good $15, you can actually start to consider possibly maybe living on it and we're getting past this culture where at walmart, for example, you have $26 billion of operating cash flow and yet almost a million of your employees are poor even though they are working full time. doesn't make sense that's where we need to drive the economy, and hopefully this drives more of it. >> bigger context, too, we have a somewhat tighter labor market and you have companies having a hard time attracting and

retaining. fits into what they are going to have to do otherwise, perhaps. i was saying last night when the announcements were coming out, people underestimate how much buybacks have been villainized and on cue chuck schumer's office announced the companies with buybacks since the senate version of the bill. it's amazing how the p.r. gesture -- >> although the administration tried to get in front of that, no matter what it is, it's going to filter into the economy >> somehow >> what's interesting, others argue the phillips curve is going to start to kick in and they'll be attributed to the bill, fairly or not, right it's just good timing. >> it would be great timing. if we get the wage increases, that's great if the bill helps, that's also great. >> a lot to watch in the coming weeks and months meanwhile, apple in the news addressing claims it deliberately slowed down versions of older iphones. the company says it does take some measures to reduce power demand in the phones from

preventing phones from shutting down stemming from the fact batteries in the phones degrade as they get older and have trouble creating powerfor certain apps can you explain what this means, john >> kind of like a circuit breaker. some of us have experienced this when it gets cold, when your phone sort of all of a sudden shuts down and apple is saying they've rolled out this to stop that from happening by slowing down your phone when it's working particularly hard under those conditions or when its battery gets old but the problem here, i think, is we're in this culture where big companies are making decisions for us and not just how the technology works, but how our lives, therefore, work to me it's connected to this whole facebook allowing companies to target ads, employment ads, based on age well, what level of disclosure do we need if you're going to slow down my phone for my own good >> and those who had the phone and were driven absolutely

insane last year by it shutting down with 40% of power and no acknowledgment at all from the company that this was happening, despite the fact lots of people were noticing it, talking about it, now we find out it was, in fact, happening and, okay, apple tried to address it. maybe they did, but then had the other problem, which is there's this idea they are disabling and making your phone crappier so you'll buy a new one, which also doesn't look good. the problem also is around the secrecy of the company >> right the fact it can get done centrally. i was trying to think of an analogy, car gets older, you need a different grade of oil, happens at the mechanics office. doesn't happen in detroit at gm's headquarters where they make a tweak and you're not aware. >> like when the kids spilled punch on the kitchen floor and tried to clean it up, you step on it, get the sticky -- did something happen here? yeah, we tried that's great, but tell me first. let me know if you're going to go and try to fix it for me. >> absolutely. >> you're grounded, apple, according to john, you're

grounded >> how many more demands are being constantly put on the devices with all the software and everything else going on >> it's just so essential to life there, great position with the product and, sure, if they can get people to upgrade, that's great this is where it creates the problem. >> meanwhile, there's been a more substantiative discussion about apple from various analysts this week about whether the stock is more cyclical given the point you're at in a phone cycle, right the downgrade earlier this week, arguing that, you know, prior cycles you saw the stock come down 30% >> perfectly reasonable. certainly, i've been expecting that for a long time it's run up for 18 months in advance of this launch of the new one of these, the x or the 10 now the question is, what's next in the past big launches have been followed by this big lull, but i will say there are already rumors that next year they are going to have one with an even bigger screen, which would be this form factor and the nice

large x screen people love their big screens, so that might tide us over >> nobody knows nothing about apple, right for a couple years, oh, the margins on this are just too high they have to go down from here, and then they come out with the x for $1,000 and up and people are buying it. then they are saying, well, how long can this last i don't know apparently a pretty long time. >> that's it but i would be surprised if there isn't some sort of cyclical multiple compression. >> prepare to be surprised, though >> absolutely. >> well, certainly, a strong performer on the dow this year facebook's under fire once again and for that we'll turn to julia boorstin in san francisco today. >> pro publica reporting facebook excludes older workers from job ads, recruitment ads limited to particular age groups the article questions whether this ad targeting violates the federal age discrimination and

employment act, which bans bias against people age 40 and older in hiring. a class action complaint alleging age discrimination was filed in san francisco federal court yesterday. facebook shooting back with a post from its vp of ads entitled "this time pro publica we disagree." we may use pictures of women or older people depending on the context. these ads are part of an effort designed to reach all ages and all backgrounds. we completely reject the allegation that these advertisements are discriminatory facebook compares showing certain job ads to different age groups on facebook and google to running employment ads in magazines or tv shows that target older or younger readers or viewers it's facebook's ability to target its 1.4billion daily active users that's helped its stock grow by nearly 50% in the past year. this past february, facebook expanded into jobs, introducing the ability for companies to

post jobs and applications facebook notes in that blog post that pro publica uncovered a number of problems on racist targeting terms and discriminatory housing ads for which facebook apologized and made changes, but this time, though, facebook is not wavering carl >> julia, thanks for that. julia boorstin at one market today. what do you make of this once again, the targeting ability of a buyer of an ad, right? how much is too much >> well, i think this is part of the larger story, which is that facebook, google, few other companies in the silicon valley have created the most powerful media and communications platforms in world history they are now being forced to take spongs for that, and all of the different ramifications of what kind of content you're distributing, what are you facilitating this is part of it in this case facebook is right this is the advertiser choosing to target specific age groups. facebook is giving you the ability to do that, as julia

pointed out, you could buy ads in a magazine only read by 30 year olds, that's legal, so i think in this case facebook's got the defense. again, most people aren't going to dig into that they are just going to say big, bad facebook, got to get them. >> having come out of the publishing world, we tried to get as specific as possible as far as what readers were going to be seeing those ads the difference is, anybody could grab your magazine again, centrally, facebook can show or not show an ad to somebody, right, so somebody out of that category it's really just about the kind of precise targeting ability and specificity of it and the fact that you don't know if you're not seeing something >> but someone is making an age decision, presumably, to say, nope, we don't want the 50 year olds -- too old. so there is responsibility here, but not facebook >> sorkin brought up a good point, if you're an employer trying to diversify your workplace trying to target a different group, targeting new

college grads. >> here's the thing with that, i think, when i am trying to book travel in my company and i want to pick a hotel or a flight that's not preferred, i get a box that pops up and i have to justify that one wonders in this current era if you want to target certain groups, should you have to document it so people can go back and see is there a problem here in the way this software is working? the way targeting has gone and the amount of data facebook and google and whoever have, they can create situations where they can target outcomes almost assured outcomes while leaving the illusion of choice it's the illusion that anybody can apply for this job, but really you know the way the software is tuned, they are going to get who they want to get. do we as the public, as citizens, have the ability to go back and track what the companies are doing? right now, no. facebook saying take our word for it >> to me, again, there's an analogy, as julia pointed out. hey, which magazines are we putting those in i want to reach the older folks in this. so i think there is an analogy

again, the broader story here, these platforms are just unbelievably powerful, and only will get more so so we as a society are having conversations like these to figure out what's okay and i think in the other area with facebook and fake news, this is where they are just going to have to get more aggressive same as twitter did recently, finally abandoned the idea of free speech, anybody can say anything no, not on a private platform and when it's ruining the experience for everybody else. might want to stop that, and they are starting to >> we know what's happening to the share price as a result. >> i told you that i get enough wrong, when we're down here, twitter in the low teens, there is a future >> fair enough everyone likes to point out your macro market call. >> yes, don't remind me about that, replay of the 1990s for me, except on the other side >> thank you, henry blodget for joining us today let's get back to that tax bill specifically corporate taxes, which really is the centerpiece of this bill and the way i've

characterized it in a column today, guys, as a push for rational recklessness by companies. if you pull apart what exactly the backers of the law are trying to engineer here, it's a domestic investment boom eight years into an expansion. what you're telling companies, if you haven't seen fit to invest with interest rates low, expansion that's gone on for eight years, felt like the hurdle rates were too high, we're going to lower the rates and want you to take on more risk might call this animal spirits i think that's a fair way to put it, but what we don't know is how much of that activity is going to fall down to the bottom line for the benefit of investors. you have variations of the s&p 500 estimates next year ranging from $140 to $160 a share. that's accounting with the tax cuts, because nobody knows exactly how companies are going to behave here and also don't know how much investors are going to pay for the earnings. is it going to be seen as a one-off, and are you going to have more unproductive

investment because you're basically giving people in a sense cheap money with a tremendous incentive to spend it now on hard assets and is it the right time for that >> cash for clunkers dynamic >> and you mentioned, carl, maybe wage inflation kicks in at this exact right time so you're kind of pushing in the direction that the cycle is already getting you. maybe it turns the economy to 11, maybe that's what you want, but unclear what that matters for markets. >> for every inflationary market, story about walmart testing cashier-less storiees >> which could be how they spend it on. i think it's going to be interesting. it's hard to paint it as a net negative in any sense, right you have more money, more energized in the private sector. you don'tknow what corners are going to get into and what investors are going to pay for it >> even santelli says this will have unintended consequences

we'll watch for them when we come back, more on apple deliberately slowing down the iphones. we're joined by the man who uncovered the proof. and walmart is reportedly testing stores without cashiers to rival amazon. in a few days pot will be legalized in the country's largest market, california turns out the state is not ready for that rollout that story when "squawk alley" comes back rhythm of the world. but to us, rhythm of the world. it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it. nasdaq. rewrite tomorrow. hey! yeah!? i switched to geico and got more! more savings on car insurance!?

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walmart reportedly

experimenting with cashier-less stores to take on rival amazon according to recode, the effort is a new york city-based invasion center and to put the move in perspective, roughly 3.5 million americans operate cash registers for a living recode also reporting walmart is developing a personal shopper service for the wealthy, led up by one of the co-founders of rent the runway. if you want to see a cashier-less store in effect, the closest is probably your closest apple store. they took away the cashier counter a long time ago. granted, what amazon and walmart are working on sounds a bit more like you put stuff in your cart and don't have to think about it, but chances are if you want to expedite people, you're still going to need workers to help people find things and get them out the door maybe just not do the transacting. >> is it going to be easier than self checkout at a grocery

store? because there is somebody to help you through the horrible process. >> i have my doubts overall that this is going to work the way they expect. i remember about five or so years ago apple announced you could check yourself out with your phone, just scan items and walk out i've never seen anybody do that anymore. i did it once or twice myself, but always get greeted by somebody, even if i'm ready to check myself out something tells me that didn't work for them the way they thought it might a lot of these efforts don't >> i think to your point, carl, maybe it's going to determine whether it is a good customer experience if it is that headache of, well, the machine stopped me and somebody has to come over and scan their card so i can get through, that's not so great, but if they can find a way to do it where customers before, that's the way to go >> i do love panera, order from your phone, bring the food to you, that's fantastic. bring me that, walmart when we come back, high-tax states are going great lengths to avoid a portion of the gop's

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as the country awaits president trump's signature on the new tax bill, high-tax states are starting to fight back against the elimination of the state and local tax deduction. robert frank has that story. good morning, robert >> well, rather than cutting taxes, governors and legislators of high-tax states are focused on a different response to the new tax bill, avoiding it. the governors of california, new york, and new jersey have deployed armies of tax experts and lawyers to minimize the impact on their most affluent taxpayers. there are two ideas taking shape here the first relates to the income tax side states could replace the income tax system with a payroll tax, where companies could pay the equivalent of the income tax for each worker, then deduct payroll taxes, then take the refund and pass it along to employees at the end of the tax season.

this is a bit of a long shot companies have to agree, you have a lot of issues with progressive tax rates, and it could run afoul of longer term employment contracts now, the second idea relates to property taxes new jersey and california are both looking at the possibility of turning their entire public school systems into 501 c3 charitable organizations taxpayers could then deduct the taxes that go to the schools in new jersey half the property taxes go to the school system, you could deduct that as a charitable gift. 18 states already do something similar where they offer tax credits to scholarship-granting organizations, that's private and religious schools. so far it's not gotten to the point where there will be legislation or a formal proposal, but it's interesting to me the focus for all of these states, these high-tax states in relation to s.a.l.t. is let's find a way around it, rather than let's cut taxes >> and, robert, there's also some talk, i think, of some

states suing the federal government to say this is not allowed. >> absolutely. carl had a terrific interview with the governor-elect of new jersey yesterday where he said we're preparing the possibility of a lawsuit california, new york, and new jersey are in close contact with each other i suspect if there is legal action it's going to be a joint legal action by all of these states together against the federal government, unlikely that they would get any success there, but that also is a big focus. >> so you're saying that before the ink is dry on the new tax law, somebody is trying to find loopholes? i'm shocked. >> the governors are now imitating the wealthy and hiring highly paid accountants to advise them on how to get around the rules, which is a bit ironic also ironic these are democratic, fairly liberal governors protecting their wealthiest taxpayers, because again with the deduction of $10,000, it's the very wealthy that are the most at risk here lots of irony and hypocrisy, but

we haven't seen the end of it from these governors >> good stuff, really informative, robert. thank you, robert frank. when we come back, the news apple deliberately slows down old iphones has now gone viral we'll talk to the man who exposed that truth when qu"sawk alley" comes back. dow's up 105 i think we should do that meeting tomorrow. well wait. what did you think about her? it's definitely a new idea, but there's no business track record. well, have you seen her work? no. is it good? good? at cognizant, we're helping today's leading banks make better lending decisions with new sources of data- so, multiply that by her followers,

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hello, everybody, i'm sue herera here's your news update at this

hour israeli prime minister benjamin netanyahu calling the united nations a house of lies ahead of a vote today on a draft resolution calling on the u.s. to withdraw its recognition of jerusalem as israel's capital. >> to president trump and ambassador haley for standing up for israel and for standing up for the truth. ultimately, the truth will prevail. >> ford and mazda recalling more than 480,000 smaller pickup trucks for a second time to replace takata airbag inflators that can explode and hurl shrapnel that covers 2004 to 2006 ford rangers and mazda b series trucks live expectancy in the u.s. has dropped for the second year in a row, the first time that's happened since the 1960s the average life span is now 78.6 years, a slight decline from 78.7 the previous year, but researchers say it's the opioid epidemic that's largely to blame.

deaths from overdoses skyrocketed 21% last year. you're up to date this hour, back downtown to "squawk alley." back to you. >> such a sobering statistic, sue, thank you very much let's get the european close now, seema mody is at post 9 >> right here, here we go. >> hello >> european stocks are on the rise today ftse is on the leaders with uk consumer confidence hitting a four-year low. markets also paying close attention to a pivotal election in spain's catalonia election. once again polls are about to close in about two and a half hours from now the contest is between pro independence parties and their unionist counterparts seen as too close to call. prime minister rajoy called for the new elections after seizing control of catalonia two months ago while ousting the catalan president and government after the historic referendum. keep in mind since the catalon

referendum on october 1st of this year, the spanish stock market saw a lot of volatility, but only down about 1% since then although when you look at the bond market, the spanish ten-year yield has posted a somewhat larger move, down about 9% during that same time period. and we finish with the stock of the day in europe, and that is nestle, saying it expects to sell its u.s. confection theary business in the first quarter of 2018, amid competition from hersheys and mars. with tax reform making its way through congress, talk on the hill turning to how to avoid a potential government shutdown. let's get to kayla tausche in washington kayla? >> john, republican leaders are still lingering on that tax victory in lieu of his weekly presser, house speaker paul ryan, who's worked on tax policy for 20-plus years shepherded this bill through, he's holding his own signing ceremony here on capitol hill, while elsewhere the wheels are already in motion

on the next pressing item, keeping the government open for the next 30 days the bill would fund the government until january 1th, also have a short-term extension for flood insurance, health insurance, and also a waiver for the president to sign the tax bill but even though that bill is now out and it's being actively discussed, it's unclear whether house republicans have the votes. so that is one group that is in focus here as speaker paul ryan tries to unify his caucus. even being called out by the president, who said that in lieu of dems' support, house republicans need to come together and vote for this continuing resolution to go forward so the government doesn't shut down. the other group in focus is senate democrats at least eight of their votes will be needed to get this through to passage and there were questions about whether they'd put up a fight and try to put up some procedural obstacles

to drag this out until the bitter end based on a floor speech chuck schumer made this morning, it would seem that's not what he's going for. take a quick listen. >> we have to solve these issues together even if that means passing a clean short-term cr extension with some anomalies, we understand there will always have to be some anomalies, but not those that change the structure and continuing the negotiations into january. >> that would seem to be a voice of support from senator schumer. we'll wait and see how that coalesces. we're still waiting on a time for the house vote, though it is expected to happen today back to you. >> kayla, thank you very much for that apple, meanwhile, is confirming what many users long suspected, that the company has been deliberately slowing down older iphones. apple says the move is not to push people to buy new ones, but to keep devices with degraded batteries from shutting down for more, the man who uncovered

the slowdown, john poole, creator of geek bench. our own josh lipton joins us this morning, as well. good to see you. john, hugely influential reddit post here. what led you to the discovery behind this engineering? >> so, we've been hearing reports from our users since around the time ios 11 came out. we always hear some complaints about slow phones and what not, and that's something that's gone on, maybe the phone has been damaged or there's a low power mode setting on or something like that, but we saw a dramatic uptick in reports around the release of ios 11. we dug into it and found there were some -- seemed to be more than expected, but weren't quite sure what was going on when i saw the reddit post approximately two weeks ago, that sort of put two and two together for me and we looked at the distribution of iphone performance. usually what you expect when you look at a performance of a device is you see a peak around what the average performance

would be for the device, sort of a fairly standard distribution what we found is starting with ios 10.2.1, a release that came out much earlier this year, it wasn't just one peak, there was a large peak around the average expected performance, but then we saw smaller peaks at lower performance tiers. >> josh, the company's response to all of this >> yeah, so i think what's important so point out, carl, is what tech analysts are saying is apple's actions were defensible, that you do have this technical issue, lithium ion batteries do decline, so you had iphones shutting down unexpectedly obviously, that's no good. it infuriates users. apple tried to respond here and apple is saying listen, you know, the truth is -- we hear the criticism apple is trying to get you to buy a new phone what apple is saying, we're trying to extend the life of these devices.

it should be noted that those same analysts say, listen, apple's actions were defensible, at the same time apple is being criticized by some saying, listen, it could have been more transparent, they could have communicated all this better in other words, if your phone is going to be slowed down for battery reasons, you could have been more clear about what's happening. we should also note, listen, battery replacement is going to run around $79, it's free under apple care, so there are potential solutions here, too, guys >> john, here's the indefensible part of it for me, from a consumer perspective if you bought apple care and, therefore, you bought insurance to handle these problems but you didn't know the reason your phone is shutting down is because the battery degraded, apple didn't tell you and they are making you pay the price of performance degradation for the fact your battery is getting old. from geek bench's perspective, what would have been the right way for apple to go here, or what should apple do from here on out

>> speaking from my own personal perspective on this, what i would have loved to have seen from apple is apple to come forward and say clearly and very bluntly what they were doing, that there was an issue with the battery, that the work around was to slow the phone down, because the alternative would be to have the phone suddenly crash, so arguably, a slow phone is better than one that crashes. basically, tell the users this is what's happening, this is why we're doing it, and if you want a fix, you have to replace the battery. you know, our users saw a lot of confusion around this. they knew their phone was slow, didn't know why. even my own wife's phone was affected and she came to me, my phone is slow, what's going on, do i need a new phone? i think if apple had been clear by providing alerts on the phone or something like that, they could have avoided a lot of this sort of planned obsolescence theories that like to be bounced around every time a new iphone or ios version comes out >> maybe it's too much to ask, but could there be a user choice

on this, or does it have to be an overall software fix? >> you could expose this to the user through a choice, toggle, saying i'd rather have a fast phone, that sort of thing. i think, though, that sort of apple's fix, their approach with this from a technical standpoint was a reasonable decision, just simply on the messaging round. >> john, some of our viewers wonder if refusing to upgrade to subsequent ios software updates makes any difference if you stuck with the old versions, would that result in any additional computing power >> if you stuck with an older version of ios, what would happen is your phone would be fast, but might crash randomly users reported to us their phone would get to 30%, 35% battery discharge and suddenly crash, you know, full stop and then they couldn't reboot until they plugged it in. so that's not an ideal situation

if you're relying on your phone day to day, like many of us do the other problem is you lose the security improvements and fixes that apple makes with every release, thus putting you in danger of other things. >> sure. >> any issues that might cause, you know, hackers or what not to be able to break into your phone. >> right learning a lot about the inside of a phone, which has not been apple's forte, letting us know much about it. john, josh, thank you guys appreciate it very much. when we come back, how main street is getting a piece of amazon's pie this holiday season and as we head to break, the markets pretty much at the highs. you see the dow on track to avoid its first three-day losing streak in three months "squawk alley" back after this he care of my portfolio, but.. well, what are you doing tomorrow -10am? staff meeting. noon? eating. 3:45? uh, compliance training. 6:30? sam's baseball practice. 8:30? tai chi.

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coming up today top of the hour on the "halftime report," is wall street getting too bullish on the tax reform plan or not enough? plus, what about the unintended consequences of the tax plan cnbc's mike santoli on what he calls rational recklessness. and the call of the year it happened exactly one year ago, and it was so dead on it's going to shock you the analyst behind it with us, as well. hope you bought the stock when he told you to "halftime report" report noon eastern. john, see you in about 15. >> any show with mike santoli is

a good show. thank you, scott small businesses embracing the if you can't beat them, join them model when it comes to amazon kate is in newark with the story. kate >> that's right. it can be tough for small business owners to compete with amazon, but when the two pair up together, it can be a win for both parties in fact, amazon says that more than half of the items it sells online come from small retailers like j.r. william, which ships luxury goods out of this newark warehouse to be fulfilled by amazon fulfillment by amazon lets businesses have access to prime two-day shipping, but they have to preship to amazon and let the company cover customer service and packaging and shipment the owner of j.r. william says he has little contact with his customers, and he also faces lower rankings on the site if he chooses to fulfill items on his own. >> if you're listing fulfill by

merchant on amazon, the chances of you becoming a hot seller is slim to none >> even though they do take a big cut, steve says it can be well worth it. he also says it can be about 30% on his giant greeting cards and signs, but the payoff is exposure and new customers, because many people limit their searches online to prime alone >> people trust it they know that amazon's going to take care of them, and so they use prime all the time now >> and by the way, what do small business owners actually think of amazon? cnbc and survey monkey asked them last quarter if they think amazon is good for small business nearly half think it's bad for small business, but here's what's interesting, only 8% said they actually compete with amazon for customers back over to you guys. >> yeah. hard to compete with a landlord that big thanks, kate now let's take a look at amazon's stock right now, and at

the company let's dig into what holiday shopping and shipping means to the retail giant. michael graham is an analyst and joins us now michael, amazon can lose a lot of money, or at least spend away all of its profit during this season how big a deal is shipping cost in q4? >> well, yeah, i mean q4 is typically a very heavy shipping quarter. it's usually a quarter when all of amazon's infrastructure is running at peak capacity it's the quarter when amazon relies the most on outside shipping services, as well i think the company over the long term is taking a lot of steps to build a lot of that capability in house so that it doesn't have to rely on other vendors, you know, in q4, but it's definitely a peak time for amazon, especially when you think about the prime bundle that was being talked about in that segment amazon is becoming really

ingrained in the shopping habits of households and the prime households that really rely on the service to just get all their holiday shopping done, are using it more and more >> it used to be that prime itself was a moat, now seems they are trying to intensify that is that what investors should be watching this holiday season, how much amazon expands that moat by selling devices? >> yes, i think that's an important thing. amazon is clearly focused on trying to further its device strategy as part of the overall prime bundle you know, the prime bundle, the core of it, is fast free shipping the next important layer is all the media services that amazon offers and the ability to have a household get access to videos and music services for incremental costs and i do

think, you know, amazon is going to over time struggle a bit in the device category against players like apple and even google that's doing pretty well with its android phones. there's been interesting battles back and forth between amazon and google about whether or not youtube can be included on amazon devices, so it's an important part of amazon's current strategy, but i'm not sure they are going to be super successful there >> yeah. bit of a thaw, though, between amazon and apple thank you, michael michael graham from canaccord, thank you for joining us when we come back, california just days away from the legalization of marijuana, but that state is hitting some snags. we'll talk about that. first, though, rick santelli, what are you watching? >> you know, everything you're watching i've been listening intently great programming. you know, there are advantages, disadvantages, unintended consequences of tax policy we're going to talk about a few of those and when it comes to the growth

a xteaage, it's all going to be all after the break. feel that? that's the beat of global markets, the rhythm of the world. but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it. nasdaq. rewrite tomorrow.

getting some breaking news involving boeing according to dow jones and "the wall street journal" boeing has takeover talks with a brazilian company. we'll have more in a moment but "the journal" saying talks are on hold as they seek approval from the brazilian government.

the deal would value them at a large premium to $3.7 billion. >> sort of an interesting move, that segment of the market, everything else. >> considering the trade dispute there. we'll keep an eye on that. lets get to rick santelli and get the santelli exchange at the cme. hey, rick. >> hi, carl, and thank you i really do think it's all going to be growth advantage usa i think that many of the things that we are seeing now driving the markets, and especially tax policy reforms that will ultimately very soon be signed into law, there's a lot of discussion as to how much is built in and there's big debate there. i'm sure, first of all, it's impossible to know if there's a correct answer here. some but i think the real advantage to tax reform is going to be experienced in realtime as time moves on i think that's something not to underestimate. keep in mind, anybody who's

watched bitcoin, you know, i made a bet about a month and a half ago when the futures were coming and it was a silly bet. at the time i think the dow was at the 23,000 handle i bet somebody the dow would reach 25,000 before bitcoin did. the reason for my thinking was that i think markets bring a certain form of religion and we have seen that with regard to bitcoin. the same could be said for the cost of capital. the cost of capital will be experienced in realtime with all the benefits that we will see from some of those reforms and lower regs and that's going to be fairly immediate. now, you can flip it around. europe is slow to change policy and a lot of the policy i think has outlived its usefulness. our fed has certainly realized that and bank of japan today showed no affinity to experience what the u.s. and to a much lesser extent mario draghi is pursuing and that's kind of reversing course i think all of those things are really positive for the u.s. and will ultimately motivate europe

and japan to do this, okay to follow our lead but finally, on the notion of unintended consequences, to me size matters i'll give you an example central bank easy money was experienced by the too big to fail banks and it was not appropriately dispersed but all the other banks and other aspects of society, like the middle class i think the tax policy is different. tax policy is going to affect a lot of those that were shut out, and i don't look at that as easy money. i look at it as more access to capital and i think there's a huge difference. carl, back to you. >> rick, thank you for that. rick santelli in chicago phil lebeau joins us on the phone quickly here to talk about this boeing headline embraire has resumed trading up 23%. >> if this deal were to come through and there are a lot of potential hurdles that will need to be overcome, but if it were to happen it would make complete

sense from the perspective of both boeing as well as embraire in terms of what it would address. on boeing's perspective it would address a segment of the market, that lower end, the regional jet market which is a growing part of the market and it would counter the move that airbus has made with bombardier that move involves bombardier essentially not selling but, you know, working a deal with airbus so that airbus would start building the c series plane at a new plant in alabama along about bombardier this would counter that if you're boeing by getting into that regional jet market as i mentioned, there are hurdles that would need to be overcome the biggest one is would the brazilian government sign off on this kind of a deal. would they say sure?

not likely what's more likely to happen is there would be conditions placed on any type of an agreement. how do you protect the board so that the embraer management is not just taken over by boeing. those are the types of hurdles that would need to be overcome and they're pretty significant so i understand why shares of embraer are up 23% because of the premium it would command, but at the same time these headlines alone, you should look at it and say, okay, it makes sense if it could come together and boeing certainly has the cash to make the deal happen, but those hurdles would have to be overcome. >> phil, what do you think it says about boeing's kind of current priorities the stock is up 90% this year. investors love the fact that it has this huge transparency into its multi-year pipeline and all the rest of it does that mean that they're itching to help build the empire a little bit here or is it just a tuck-in for one part of the market >> i think it's a tuck-in for one part of the market i don't think that they're itching just to spend money to

spend money. i think that this would be a smart acquisition if they could make it come through in that segment of the market, the regional jet market, embraer is a key asset it's a great asset if you can control it, if you're boeing, you want it. the question is whether or not they can make the deal come through or if these were talks that ultimately they'll look back and say we just couldn't make it happen >> phil, is this the type of talk that tends to end in a deal, or is there a type of partnership, business partnership that these two companies might end up doing if they view the regulatory issues as being too high a hurdle that could accomplish the same ends >> i think they could work some type of a deal, although i think that's less likely i think from boeing's perspective that if they're going to make a deal, they want to make sure that the deal is one that obviously is in agreement with the bottom line but it makes sense in terms of extending the portfolio.

doing a partnership just to do a partnership, i don't think that's one boeing executives would look at and say that's what we want to do. >> phil, thanks for your take on this we'll obviously watch it throughout the day phil lebeau. moving on, in about a week marijuana will be made legal in the country's largest markets, california jane wells is in the golden state with a preview hi, jane. >> reporter: hey, mike well, we're not ready, and you'd think we would be. the state has just handed out the first 28 temporary licenses. there are tons of new rules and everybody from technology companies to leisure firms are going over them because they want to get a piece of potentially billions of new revenues >> the regulations were 276 pages long i think there's a lot of people who have been operating in the california market for a very long time and while everyone is excited to have clear rules and regulations, it's going to take some getting used to and adjustment period until everyone figures out exactly what they need to do to be compliant.

>> is california ready for january 1st? >> you know, who am i to say >> reporter: stephen sharin works for american green which spen spent $5 million in of anipton, california there's only one license and they have been stocking up on supply >> regulators understand there are going to be problems at the beginning so there's a transitionary period where people can ease into this new world but there's likely a major shortage come january. >> reporter: jordan lamb says they spent up to $75,000 for one license. if you want to sell both medical or recreational, you have to buy licenses for both because nobody does bureaucracy like california >> jane, thanks so much.

jane wells with a big story for the state of california. finally a note on boeing and this story looking at a list of billion plus dollar acquisitions by boeing, it's a short list. mcconnell douglas, jepson, but they don't do this very often. >> no. this industry is set up as it is. >> we will see you tomorrow. let's get to the judge and "the half." and welcome to "the halftime report." i'm scott wapner our top trade, stocks and the tax plan what the biggest overhaul means to your money as wall street grows even more bullish this hour joining us is joe terranova, jon najarian, carrie firestone and also onset is tony dwyer from toronto as well kevin o'leary, the chairman of o shares etf investments we do begin with the