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good tuesday morning welcome to "squawk alley." i am carl quintanilla with jon fortt, morgan brennan. and editor and chief of the verge, along with business, insider ceo henry blodgett good to have you both. a lot to get to today. as you heard a few moments ago, a potential new competitor for netflix, hulu. once again, hi, julia. >> hi again, carl. jeffrey ca jeffrey katzenberg raising money for a new platform they call new tv which they plan to launch toward the end of next year. they haven't announced how much they'll charge for this subscription service but katzenberg telling me the focus on high quality, professionally generated content that's short form and designed to be watched

on your mobile phone and not the television set is a new niche. >> i think what we are building both in terms of what meg is designing in terms of the platform itself and to make this a mobile first product, that is not the case for any of the people that you just named, take netflix, less than 10% of netflix, less than 10% of hulu viewing is mobile. and it is not optimized for it either the content itself which is primarily an hour length is not optimized for on the go, in between viewing. >> now, the one billion investment is coming from a range of different media companies, including disney, fox, sony, nbc universal, cnbc's parent company, alibaba and others meg whitman says they'll benefit from alibaba's platform, they also have their own engineering

team in l.a. as they look to benefit from the next wave of consumer demands >> good news is we've seen a lot of patterns. we're pretty good at pattern recognition, having had two long careers in hollywood and silicon valley we really are i think bringing the best of hollywood and silicon valley together. we just have to stay nimble. >> katzenberg said others could try to copy and create this short term content netflix could copy them. he thinks they have a first move or advantage, and seems like having alienliances with big mea companies will help to create enough content to be able to charge that monthly subscription fee. >> great stuff julia boorstin with that news. all of this against the backdrop of a rapidly changing media landscape. doj filing appeal of at&t, time warner disney reports after the bell tonight with its streaming service waiting in the wings

henry, you know something about short form video from a news perspective. is there a break in this moat on netflix? >> look at what they're getting right. jeff katzenberg, great, huge amount of experience, meg knows a huge amount. not starting with chicken feed all of that is good. that said, there's a huge amount of very professional short form stuff created on youtube, facebook, instagram. many others make a lot of it it may be they're talking vertical video, a relatively new format even that is a year or two old, it is growing rapidly. there will be many, many others. can they create stories that are compelling enough people watch why not. more the merrier and this is media. media is not a winner take all game, it is not technology netflix is 20 years old, has taken that long to get here. >> and let me first say, jeffrey

katzenberg, legend, never count him out. but they're not the first mover. pushing this idea of premium short form content, they were pushing it in europe didn't get a lot of subscribers. then they shut that down, comcast has tried. others have tried. >> go 90 is my favorite one. >> seems like maybe a lot of media players are taking their short form bucks they couldn't work and throwing it behind katzenberg. >> it hasn't worked in a variety of other contexts. these are two seasoned players, have a lot of money, can't count them out the history is it hasn't worked in many contexts, in the competitive set, they point at netflix and hulu we know they're not big on the phone. they're not pointing at youtube.

teenagers watch four hours of youtube every night. they're not pointing at at&t time warner whose these is of the merger was to take time warner high end existing content, repackage it for our network of phones. so they've not only got their big horizontal competitor in youtube, which i think they're basically making an expensive youtube, sounds great given the problems the platform has had, and huge vertically integrated competitor in at&t, time warner. >> keyword there, henry, i'll put this to you, expensive they're putting a lot of money towards content creation, building this platform from what we know so far, but they're not going to own the content, and they're going against the likes of youtube it sounds pricey >> i assume they'll buy exclusive rights to content, which is basically the same thing. a billion dollars, sorry, this is a waltz of elephants now. it is table money, but it is not actually as much money as you think. you look at netflix will spend 10 billion next year

hulu, all of the traditional networks and cable companies have a lot of money. there's money all over the place. what is finite is attention and distribution so again, if they can create orange is the new black, some of the series that netflix have, maybe that will do it. suddenly people will say we have to watch that. but that's harder to do than it sounds. >> pointed out, disney will have a piece of hulu, piece of this their own whatever it is going to be. hopefully hear more tonight. a shotgun approach for a lot of studios. >> spreading their bets. which is wise if you have cash flow coming out your ears and don't know what to do with it, the state of traditional television -- >> it is a bet that you've made. is it in between, these in between moments you're going to want to check in on something specific as opposed to being

distracted by more news, and insiders, video programming is excellent. we make twitter videos designed to pop up in your feed, and you're like done with them you don't have a long-standing relationship to premium content in some of the attention limited moments when you want to sit down and have that relationship. >> and by the way, a lot of this is extremely premium >> could some of these be overbetting on mobile? seems like we went through an era, everything will be mobile, smart phones everywhere, pc is dead, things seem to have shifted. now the conversation is omni channel, over the top. apple tv it is the pc isn't dead. mobile is great, short form is great, but do they have to have a broader, more comprehensive strategy >> this is why netflix has been successful they made it seamless. doesn't matter where you are, watch on tv, pick this up as you're going, continue here. same place, same program

excellent experience i think if it is just mobile, it will be limiting and i'll bet meg and jeff will say we started with mobile, we want to go to other platforms over time. the only opportunity that's new for this is vertical that's a cool thing, uses more of the screen, don't have a bandaid of story in the middle >> wow, i disagree about that. instagram launched igtv. there's activity and use for that i do not think anyone wants to watch "game of thrones" invert calv -- in vertical form i would be shocked if they launched it and it wasn't immediately roku channel in an app. we cover consumer electronics industry all the activity, growth, smart

speakers, home devices, both platforms, android, ios are going to aggressively tell you you spent too much time on the phone. there's a sense the amount of attention you capture from the device is not only finite but going to get smaller i think that will be a challenge. >> i am not listening to alexa when she says too much time on the phone. stop talking about that. >> interesting to see whether time spent is capped >> it is capped by the fact they're 24 hours a day, we have to sleep for six of them >> comes back to sleep on a serious note, silicon valley content dilemma, facebook, apple, youtube, spotify removing content from alex jones, conspiracy theorist as they continue to grapple with how to regulate on their platforms. there's all kinds offe people

weighing in. how do you establish an algorithm to keep it in some range, some manageable range >> i think what's surprising is taking platforms this long to put their foot down and say this is not about freedom of speech, this is a private platform we do not want this stuff on our network. they have already drawn the line with many other things, pornography, child pornography, selling drugs and so forth now they're saying this isn't okay either. and that's a very defensible position anybody that says it is freedom of speech issue. no it isn't the first amendment is about your right to say stuff, and not be thrown in jail for criticizing the government it is not for i have a voice, i want something on nbc. i demand you broadcast it. nbc is not going to do that. you always had standards it is the same thing going on

here >> everybody is focused on alex jones, info wars, the fact that this is finally happening. a lot of folks, myself included, are happy to see something done on this front. it is not the only brand that has an issue around hate speech, misinformation, et cetera. why haven't some of the other examples that have been able to use the platforms been restricted to the same sensorship. >> i was a lawyer before a journalist, excellent transition for other lawyers out there, leave it behind. i can't help but see this problem as all of these companies are now building legal systems, right the history of the american legal system and first amendment jurisprudence is not clean you can't disrupt it they're all trying to do that. they're trying to say here is the rule on hate speech. first thing that happens, someone crosses the line, but not too much and you don't have precedent, you're not having hearings in public if you're a public company, do

you want to start diverting resources to facebook court. do you want to divert resources to youtube free speech forum that holds a hearing on these cases all the time, or do you want 10,000 contractors locked in a room and nobody can see you make those decisions the mechanical choice is how do we make decisions and where they're all going bizarrely, they're building legal systems a company like apple can say we're very clear about our values, but go away. i think they weren't the first spotify was the first. >> to your point, spotify was first, then apple, then google within 72 hours of one another on what incremental new information from alex jones. some argue it seemed arbitrary, it was a collective action process. is that fair >> i think apple throughout the industry across a number of fronts, apple is very ready to be the first mover, say this is what we stand for, you won't

have any ports in your computers any more you can take that right to this is what's on our platform. and then the rest of the industry follows them. happens time and time again. i think in this case we have an excellent case in silicon valley, he writes about it every day, he writes they were all stumbling anyway if apple gave them cover to make a decision they all were going to make, sure, it all happened at once, they all knew they had to do this >> we just had roseanne barr it is far from stuff that alex jones has done and said. isn't this a situation it is all fun and games until somebody gets popular alex jones was popular even though apple doesn't host this stuff, discovery demands you highlight here is most popular on the platform, and suddenly your brand is connected with that, and you have to start doing something about it

>> i don't think it is that he is popular, he is visible, people talk about it apple has always been clear about this private platform, we're choosing, here's what you get. they're unusual in silicon valley most are lib taeertarian if somebody says something that's bad, we're just the perveyors. we built this platform, and we have to take more responsibility how it is used that line has been moving the last several years advertisers demanded it, users demanded it. now it is continuing to move >> really quick, is twitter next >> i would absolutely think so >> you never know. >> i don't know. >> if twitter was going to do it, they would ban the president of the united states. >> i disagree with that. oh, he is violating your policies, he is president of the

united states. >> twitter has taken its own actions, including in june against lewis far a con. >> for viewers, there's no way to understood youtube's legal system is different than america's first amendment. there's no way to understand this stuff that will become more and more challenging for all of the companies. >> finally, two related headlines on big tech and china. china controlled newspaper warns apple may be used as a bargaining chip in trade discussions, setting up possible state sponsored boycott of iphone chinese giant says if they enter the market, it quote will win again. head of drudge says china uses apple as bait. are we overplaying this or no? >> for google's perspective, this is another one of these ethical arguments. do you participate in one of the

biggest markets in the world and play by their rules or say no, we're doing it our way and be banned from the country. that's a tough question for them >> apple considers itself a hardware company, so they're going to have cell phones, strong stance on privacy they turned over the cloud service vendor relationship to a chinese company. i think that's on the ethical boundary for apple in many cases. but apple's commitment to privacy and security, i think tim cook is saying i can manage this because i am not building systems that would let them in necessarily. i think google, they're all about collecting your data, harvesting it, retargeting ads, doing the things they do they have a harder set of lines to draw around where the government will be involved in that i don't think they have been forthcoming as to where they'll draw the lines >> long term question when you start hearing reports about google potentially building censored, albeit censored search

engine in china, reports that maybe facebook is circling the bandwagon in terms of trying to enter that country as well is all of this potentially a bet that it becomes easier for those companies to operate there, depending on how all of the tariff and trade war rhetoric shakes out >> i don't know how related it is to tariffs but i think one thing we've seen with internet brands as opposed to legacy media or retailers, these are global brands being created, google, facebook all of them. china has been walled off, to a large extent, created its own massive brands that are trying to come outside of china and to the rest of the world. i think this tension will exist for awhile these companies all have decisions to make. are we comfortable saying we'll try to change from within, play by the rules, or are we saying no, we're on the outside it is not an easy choice >> mark zuckerberg was on kara swisher's podcast, she said

would you fire yourself, he said not at this time, which was amazing. and then he said if it's not us, it's going to be a chinese company. you would prefer us. so i think that actually is driving a lot of this for these companies. you don't want facebook to hit a cap of growth, flame out, and suddenly it is baidu is the dominant social media provider that's not necessarily a god policy outcome for a variety of reasons, not a good business outcome for facebook there's pride and responsibility for these companies, they have to balance it. we're also exporting american values and they haven't made that case. >> national champions. see if facebook is designated as one down the road. that was good stuff. 20 minutes ofsolid thanks >> great to be here. when we return, the nasdaq looking for a sixth positive session in a row as stocks

continue to rally. up a quarter percent are markets leaning too hell ee on silicon valley? more "squawk alley" after this break. well, it's earnings season once again. >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. yeah... but popping these things really helps me...relax. please don't, i'm saving those for later. at least you don't have to worry about renters insurance. just go to geico.com. geico helps with renters insurance? good to know.

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gain mike joins us. >> there's plenty of reliance in terms of year to date numbers. i wouldn't say it is outsized. it is a nuanced answer rough numbers, u.s. stock market measured by s&p 500 is up. half of it comes from faang. apple plus faang facebook has basically been a push it is really four stocks that have done that but that's only a dangerous situation if a few stocks are winning to the exclusion of everything else, covering up pervasive weak nls this is a cha-- weakness. the equal line is lagging by a percent and a half, 2%, year to date but still up only three sectors in s & p are outperforming the s & p, most of them are up. you have a general upward drift, more up than down. it is not necessarily something where everyone is benefitting

equally. it is selective. small caps are up 10%. i think you have to consider the fact that you have a lot of rotation, a lot of stocks up quite a bit. lot of places to lose. and we have to look at defensive rotation the fact that the market feels defensive, it is a bull market acting like a bull market at this phase, but it is narrowing, getting slightly more defensive. >> cramer is worried about oil and second, cpi number coming friday which could unravel some of this if it runs hot >> it could. seems like this is a walking rally, not a run away rally. we're going up because nothing bad is happening now sentiment is dim i think you can rally a little more there are potholes you could draw a chart, say that's a double top. we're just revisiting it like in 2000, then it falls apart from that i don't think the evidence shows that's happening for sure, but

you have to keep it in mind. >> i love the names for all of the things in charts. >> you like the jargon >> double tops, falls breakouts. >> absolutely. >> for more, bring in paul meeks, chief investment officer and portfolio manager. long time tech shareholder ross gerber, president and ceo of gerber, kawasaki i was looking at this long list of 100 tech stocks that i follow most often the ones up include twillow narrow a faang name in the bunch. how do you separate out the rest of tech and how they're likely to perform >> the way i look at things, within the tech sector, you have to be in the right industry and themes, that could be in large

cap stock, smaller cap stock, domestic stock, could be a foreign stock. the key drivers are what is going to be the most important i continue to like the faangs, and i like them, including microsoft, more than i do apple. ones i like most now are ones beaten up most, the chinese net leaders like ten cent and alibaba. >> you're adding a lot to faang. ross, how do you look at this. you're a fan of the likes of apple and facebook, but beneath that popular faang exterior, what's interesting to you in tech from here >> there's a lot of interesting opportunities all over the technology area. an area we have been very involved in is the chip area we look at internet of things and autonomous vehicle and ai driving so much technology chips have been a phenomenal sector to be in.

there are lots of opportunities in names you mentioned i can't believe how well etsy has done from its low, and we're not in this name and i'm kicking myself for it. we knew it was a great company, didn't buy it low. there are all these great opportunities in technology. ever since i started investing as a kid, i realized that technology is the best thing that america makes you have to be an investor in technology to earn larger returns. what we're seeing in the market is correct these are the best companies in the world and they have monopolies that nobody wants to seem to break up, which make them even more valuable. >> paul, i realize we're a month and a half out from this change happening, but we're about to have some tech companies and media companies rejigger some sectors changed around in the s & p. what's that going to do so to this entire narrative around tech leadership? >> excellent question that you ask. when we carve out this

communication services group, we're going to have big tech names like facebook and google enter that sector, so tech analysts, people like me that have been doing this a long time now have to dovetail, maybe we have already historically from technology into communications, telecommunications, even consumer discretionary coverage. >> ross, i was looking at your notes. says you own facebook, you don't own twitter. why not? >> facebook we found because we think they dominate social media and with video ads and ad business growing, it is a wonderful business for cash flow, although we're not thrilled with facebook right now to be honest, and sold a little bit in the last couple of quarters, but twitter is a disaster i use the service. i like the service, but i've also been attacked by russian bots, i'm insulted daily i have very thick skin twitter is filled with garbage, fake accounts, manipulation.

the media is all on twitter and an effective way to share information with the media, but often times we're seeing stories that are completely manipulated. jack seems completely like not in any desire to clean up the thing as much as it should be cleaned. i think twitter has problems user growth is almost nonexistent or going down. for the most part, most people i know don't even use it >> paul, ross, thanks for that perspective. >> thank you as we go to break, look at shares, strong voice and messaging products nice 20% gain on a day where a bunch of names are having double digit moves up and down. later, what to expect from disney earnings after the bell tonight. dow hanging into a 152 point in more "squawk alley" after the

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hello, everyone. i am sue herera. here's your cnbc news update. the italian prime minister visiting some of the injured in a hospital after a tanker crashed into a truck on a highway monday killing one, injuring 70 more he also spoke to some of the first responders after taking in aerial views of the crash site indonesian soldiers rescuing a man trapped beneath the rubble of a mosque that collapsed when the region was hit by a powerful earthquake sunday's quake killed 98 people. rescuers have yet to reach the devastated areas. firefighters battling a large fire in the spanish region of valencia, some 2500 people have been evacuated. more than 1400 acres have been burned by the fire that started monday afternoon here at home, the west hollywood city council voting to

remove president trump's star from the hollywood walk of fame. it now goes to the los angeles city council the star which was unveiled in 2007 has been vandalized numerous times the latest happening last month. you're up to date. that's the news update this hour morgan, i'll send it back to you. >> knowing how busy it is in hollywood, that is a lot of work to vandalize there's a lot of foot traffic there. >> it happened a number of times though, i think they view it as disruptive to the area, dangerous. we'll see what the council does. >> all right sue, thank you sue herera back at hq. let's get to seema mody for the european close. >> hey, stocks closing higher, euro bouncing from six week lows against the u.s. dollar. auto stocks are leading equities to the up side, names like volvo. energy showing strength. a jump in production and higher

oil prices, that stock is at an all-time high. and danish jewelry maker pandora lower after slashing guidance for 2018 the company's latest profit warning comes as it struggles for market share in china. the stock down 24%. pivot to turkey as its financial situation continues to worsen the country's ten year bond yield surging to historic high of 20% amid concerns over president erdogan's stewardship of the economy and trump administration implication of sanctions. goldman, sachs warning further depreciation in turkish lire could threaten the health of the turkey banks today, the currency is bucking the downward trend after turkish media reported that washington and ankara reached a preliminary understanding on certain matters related to sanctions

there's talk of a turkish delegation having a meeting with officials tomorrow in washington hopes of a deal is helping the turkish country etf move higher. although it is down more than 40% year to date back to you. >> thank you up next, zillow getting crushed this morning, down about 17 and a half percent after missing big on revenue missing a bit on revenue, cutting its guidance we'll look ahead to snap and disney later today a lot more "squawk alley" still to come. stay wh itus

welcome back shares of zillow on track for the worst day in six years, taking it on the chin after a quarterly revenue miss, weaker than expected guidance the company agreed to acquire mortgage lenders of america, a zillow advertiser, for an undisclosed sum. ceo joined "squawk box" earlier to talk about the stock reaction >> anytime the stock price reacts negatively it is painful in the short term. i think the reason the stock is reacting the way it is is because we lowered guidance due to rent alals, missing revenue results. we lowered guidance for the year i don't think the stock market is reacting negatively to the acquisition about which i am very excited >> joining us from one market in

san francisco, lead analyst mark mahaney. great to see you. >> hello. >> stocks down 16.5% now as you heard raskoff say, it is because of lowered guidance. do you think that's the reason >> i think that's largely it you had whatever trifecta, they lowered revenue for core real estate advertising business and new homes business and lowered profitability for the core real estate advertising business and homes business it was across the board. i don't think the acquisition had much to do with it the company is making a sizable new bet. they're going deeper down the funnel as he talked about. it is a good move, but there's a lot of execution risk. what's the evidence of that? already in a short period of time, call it 90 days they've had to reduce the revenue forecast for the new homes unit by 80% that's a tough business to get into, very challenging business to scale as an investor, we're staying on

the sidelines, downgraded this stock to a hold, three months ago for precisely this execution risk zillow has proven a lot in six years. it is a name you want on the radar list i just don't think you need to buy now, not at this price if it comes in or they prove execution in this new home segment, then you can step in. we're going to wait for now. >> execution risk being the key phrase that you mentioned a couple of times. let me make sure i got this right. they have focused on real estate the last couple years. typically higher margin business, it is expanding into new revenue streams, buying the real estate, flipping the homes, and also acquiring a mortgage entity to be able to finance the sale of the homes to some of their customers. sounds to me like a riskier business, lower margins, right >> i think you got the narrative completely right only thing i toggle on is it started as an advertising business, so they're selling

advertising solutions, advertising for real estate agents that was a large market. they gained good share in that market now they want to go down the funnel, become a transactions business there are other companies doing this, but it is early stage. it is also a very demanding, tough real estate market now one of the challenges with the homes business is they're getting sellers to commit to sell homes to zillow, then they take longer than expected to conclude transactions. sellers want to sell to zillow, but they have to buy the next home before they move out of the sold home. these are tough market conditions for home buyers home sales down year over year for something like 35 straight months there are a lot of macro head winds. they pivot into a challenging macro position it is macro markets. it is a hard pivot to pull off easily and they're not pulling it off easily. >> so mark, it sounds like this whole move, the fact they could be holding these homes in inventory, not could be, will be

in essence for months and months at a time when the housing market and rental market may be peaking is the reason for your hold how do you see this playing out. what gets you out of this position back into a buy for them is it limiting the risk here is it the overall real estate market stabilizing them somehow proving they can execute better than they have thus far >> i think it is a combination of all those things plus obviously a lower share price. this thing is trading roughly 25 times cash flow. the core business is probably worth that we think. it is a good core business, built it over a decade, over 12 years now, so they've got a good position, core real estate advertising market whether the next pivot works, it is not a pivot, it is add on business, whether it works or not, it will be a year, year and a half to figure out if they gain traction. we are seeing private companies do well in this space. open door is one of those. if they can do it, i don't see

why zillow can't they can develop those competencies, it will just take awhile they have to make sure the core business continues to grow at a reasonable growth. and they have. >> mark, pivot to snap shares of snap are up 2% now as it prepares to release numbers after close today. the company looking to bounce back after falling short user and revenue growth last quarter. given what you saw in terms of misses for facebook and twitter and downward moves, dramatic in both stocks on the heels of their results. what are you looking for from snap >> i think there's a lot of fear going into the snap print for good reason. twitter had mau's decline, facebook had maus decline. the over under is a flat outcome for snap, whether -- the specific number is 191 million daily average users. that's what they printed in march quarter. the expectation is print that

again in the june quarter in the u.s., 81 million average daily users. if they come in above that, goes up, below it, goes down. they guided to material revenue growth there are a couple of challenges they're working through, trying to improve the application on android devices and trying to improve the auctionify to get more advertisers those will take a few more quarters to play out meantime, it is about daus and see if they can grow them. there's skepticism snap can do it this quarter. >> thank you >> thank you, morgan. when we come back, more on why apple might be used as a bargaining chip in a trade war with china first, rick santelli, what are you watching today >> i'm watching interest rates, thinking about all these states whose debt keeps growing, underfunded liabilities

approaching astro nnomic levels after the break, we talk about fiscal responsibility, from the great state of indiana kayak searches hundreds of travel and airline sites to find the best flight for me. so i'm more than confident. how's your family? kayak. search one and done.

here's what's coming up at the top of the hour. we debate the s & p run to a record and call of the day, one of the hottest sectors, up 29% in three months what do you do now. and answering your questions as always.

send them to cnbc.com/halftime see you at noon. see you in about ten minutes or so. >> i have a lot of questions >> send them in. let's go to rick santelli for the santelli exchange. rick >> good morning. i want to welcome the current purdue president, former governor mitch daniels governor, thank you for joining me today >> hi, rick. >> i tell you, you've written some great op-eds. we had senator simpson on many times. the topic is the same what i would like to discuss with you is what's the end game here, governor we have to provide in these states like illinois services for people who live here now but the money is going out to pay yesteryear liabilities how is this going to end >> not likely to be pretty we're past the point in many, many states of no return, that is to say bills they piled up,

unfunded liabilities they accumulated are beyond, going to be beyond their capacity to handle i have sometimes said someone going to the barbershop, it started with and eventually, i think that it's going to come to roost on the pensioners themselves. very unfair. and who can say, but maybe bondholders, too if some court gets clever enough >> here's the issue the way i see it many of us who work in the great city of chicago and it is still a great state of illinois just not from a balance sheet perspective. we could move to indiana move to wisconsin and many surrounding states are highly aware of the dynamic of happy feet what do you think? >> don't have to guess at this it's going on right now. i confess that for several years, the state in which i live

is actively courted illinois businesses and residents who can lower their cost of living drastically lower their taxes and enjoy a much more confident mu future knowing basic services will be provided, vendors will be b paid and their taxes are not likely to be jacked up yet again. so it's happening. there's a self-correcting mechanism in our federal system. we're seeing it at work but rick, i think it's going to accelerate as the crunch in these bankrupt states becomes worse. >> well, what's this self-mechanism that you discuss? explain that, sir. >> i just mean that as you referred to it, that -- >> leave it to the states. >> services deteriorate and as taxes are raised in a futile effort >> but i can already hear the cries for nationalization, governor, the cries for

nationalization, which is what you write about. see the issue i see and i know california has had some good years, but you say they're underfunded in a rosie snacenar are 250 billion. maybe as large as a trillion nobody wants to touch the entitlements, medicaid, medicare, social security, but that along with underfunded public pensions, these are going to come home to roost. are the courts going to have to get involved in this, governor >> i assume at some point, they will this whole idea of nationalizing the problem has been floated before during the early part of the recession. the piece i wrote made the point that you know, we've got essentially the euro zone situation for greece, think maybe connecticut for somebody too big to fail like italy think illinois certainly california but we have one thing the euro zone doesn't

that's the u.s. senate which protects the interest of smaller and moderate sized states, the more solvent states, genls being plunders by the birg ones that have more population >> i got you governor, we're out of time, but this story isn't going to end anytime soon and i would like to have you back as different issues surface regarding those future liabilities thank you for joining me today morgan, back to you. >> rick, thank you definitely a critical topic. more "squawk alley" right after this break so no matter what you trade, or where you trade, you'll only pay $4.95. fidelity. open an account today. you'll only pay $4.95. tap one little bumper and up go your rates. what good is your insurance if you get punished for using it?

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i graduated from business school in 1979, so there has been change, but there needs to be more focus on women on board of drirectors and giving them te opportunities to prove what they can do >> meg whitman talk iing to jula boorstin this morning about the number of female ceos running fortune 500 companies, which is down right? it was a small number to edwbeg with, but has gotten smaller because the last five women to leave have been replaced by men. >> 40 years ago is not a ringing endorsement of progress. it seems that the case for diversity is not as embraced as it used to be. this kind of move against affirmative action in the courts

being reflected. >> the key is giving them the opportunities to prove what they can do welcome the chance to be at a point where we're beyond this debate and where about the best person for the job >> if the playing field were level. >> absolutely which is why we're having this debate eventually one day. it's a board issue in the end. to the judge and the half. >> welcome to the halftime report i'm scott wapner our top trade this hour, records and risks as the s&p nears a new all time high. are stocks poised to keep climbing even as the trade war worsens? jim, stephanie, josh and cou courtney son, the president of luke capital good to see you. we begin with the markets. stocks higher today. s&p inching closer to the new high dow less