allowing people to trade it comes bundled with free or discounted trades. go to cnbc.com to read about it. by the way, we mentioned this report that elon deleted or suspended his instagram. he has twitter acount bass-- act based on what i'm seeing here. >> okay. this is you. >> i can't see i don't get the top line of the prompter. >> i have a picture. >> hey, we're out of time. we got to go see you tomorrow. >> "squawk on the street" begins now. ♪ good morning welcome to "squawk on the street." i'm david faber along with jim cramer carl quintanilla has the morning off. all right.

there's the u.s. futures we're expected to have a higher open european markets were fairly strong last time i looked. let's give you a look now. of course, they'll be closing a couple of hours from now continues across the boards. and italy having a strong day. 10 year note yield did tick up a couple of basis points after four down yesterday. we are 2.835 crude oil is up 1.5%. >> weaker dollar. >> yeah. weaker dollar. >> which gets, of course, to the president. that's where our road map starts he renewed his criticism of the fed pushing for lower rates. that did help weaken the dollar a little bit. >> yeah. >> and the price is right on jpmorgan getting ready to roll out a free trading app trading as in trading stocks sending shares of brokerages sharply lower this morning. >> what is the prince point? >> two big names in retail tjx

and kohls are moving in opposite directions we're going to discuss why and whether retail is a new leader in this market. >> yes. >> all right we don't need to talk about it anymore. >> no. the s&p heading into today's session 16 points off a record high that's less than .06 meantime, there's focus on comments from the president who told reuters yesterday in an interview he's not thrilled with the fed's rate hikes adding he doesn't expect much progress from this week's low-level trade talks with china going to be meeting with some of his opposite numbers we'll see how things evolve from there, jim. >> it's exhausting. >> it's exhausting but it is not unimportant. >> no, no. look, it's important it's just

that you hear the low level talks. they're low level. he's going to try to be a little -- >> the idea is to pave the way for another series of talks. then gets you to november when xi and trump, i think, are scheduled to a sit down. can try to put something together you're dubious. >> we don't know estee lauder was about the 25% tariff on cosmetics. there's a lot not sourced in america. i check now, david is it sourced? where? and companies are trying to distance themselves from, to some degree, the united states but some degree china. it's something to watch. because it's wholesale shifted

the way business is done around the world. >> yesterday you were talking about movement of chains i think the journal saying nobody in this kunduz it you have to start from scratch somewhere. >> we don't make aluminium aren't they going to dislocate to a certain extent supply chains and the ability to get product where it needs to be and a price people are willing to pay. isn't there a risk here beyond just getting china to try to agree to what we want? >> yes we have an interview tomorrow with brian cornell kohls have been sourced to china. you can pull out we know from many -- manny tirico talked about the ability to shift relatively quickly from where you're getting materials

you're right relatively quickly means there's a period where you're going to pay more and will the consumer feel it? david, the consumer are going to feel it, why are the numbers going up buyers are saying don't worry. yesterday there were furious buyers in the drug stocks. people say you should worry. but the group is underweighted the cross currents of the ancient bull market, it morphs into something new every day and we can sit here and we can say china is the big concern, but there's many investors who don't seem to care. >> no. you're right and you have at least been somewhat outspoken in your belief we should continue to take into china and try to actually extract real confessions. >> my view since 2001 when i disagreed with larry kudlow. >> i wonder and i think i'm not alone from many people who allocate assets for a living

there's a risk we ratchet it up. it could be anywhere from helping north korea in a way we don't like to not allowing other deals to occur to militaries and stuff. >> it would not normally be technology. >> right. >> just saying. >> i don't know, i mean, disney said i think it's unconcerned. >> unconcerned. >> with getting it. >> i would be concerned with anything that needs chinese approval it's going to hurt but i went over starbucks the other day and they had a third party delivery problem it's being solved by getting together with alibaba. apple remember when we were worried about the buy cot? then it goes up 17 points. i want to hear about tjx listen, a lot isn't sourced from here >> i hear you.

>> i keep going over and over. i see kohls down 3 buy it it's the same thing as macy's. >> could have sit here and worried for the last three months and would have missed opportunity. >> auto, auto. and you managed because auto is important you managed to sidestep forward and not take the debate we felt that's what you should buy. the three losers we have autos. they're not doing well okay we have a sense that apparel was not going to do well apparel is the hottest group right. apparel is sourced in china. and today toel brothers reports. that group has been horrible but it's one of the best quarters for toll brothers. >> save it for a mad dash. >> i have ton of things to

matter fourth quarter sga is going down california is not as hot as a year ago nobody cares. >> i chose to sleep a little last night to get it right let's move on to retail. >> yes tjx up. >> yeah. kohls falling. >> let me read what it says so we can introduce. >> i've got it in my head. >> coles is falling in the premarket despite quarterly earnings revenue and comps that exceeded analyst guidance. as jim told you tjx beat the second quarter results 2% with a period and the stock is looking higher. >> merrimack is plus seven these are incredible numbers is it because of tax reform or

employment but look the most heavily shorted we haven't seen five below yet. that's massive a lot of people look at where the stuff is sourced when you go to your dollar tree like this weekend. it's rather market the stuff is from china. by the way, it hasn't happened yet. >> before it happens you're supposed to be a seller. >> david, i have five pairs of sunglasses i lost my mind for a second. i bought five pairs of sun glass in this case look just like ray bans you cannot tell the defen-- difference other than they fall apart if you touch them. someone said i didn't know ray bans had screws. >> are you not concerned about kohls. >> it's been one of the best performers that stock is like macy's.

macy's holds up big yesterday has retail taken over for a lagging technology >> yeah. technology needed d ramps to go up in price. flash is going down. they needed it to go up. david, they needed deals. >> deals as in m & a >> yes. >> because of moffcom and china you lost the bid what everybody wanted to be brought by broad com and qualcomm wanted to buy nxp. >> broadcom is buying ca they are moving on

we're watching toll brothers today. we can turn that we can turn that around. it could start flying like till ray and canopy. >> yeah. >> coming back to them. >> yeah. we can talk tesla. >> we're going to hit tesla at some point or another. we'll share some. >> what matters because the big stake of canopy. i've been waiting for it to go above the stake. that was at 37 till ray is the next one someone is trying to take a stake in till ray. prohibition is ending. ends september 17th. you're there or not. >> you're going to be there. you going to canada? >> kohls says all the initiatives resulted -- from the conference calls improved inventory metrics

going to the kohls conference call that began ten minutes or so ago at 9:00 we'll share more as we get it. >> the netflix, though, is starting to get a lot of percolation. >> okay. netflix yesterday you lamented how low it had gone. >> yeah. that is over. >> really? >> yeah. >> hold that thought let's get it in here we're going to -- >> i've known you for like 50 years. no one has called you that, dave. >> some people grandfathered it in some of my older relatives go with dave. i'm like all right. >> focus on tillray. >> how do you spell that >> tilray. >> where are you from? >> queens. >> oh. isn't that where the goats are jamie dimon is another guy from queens. >> he's from queens? >> i think he is if i recall. >> no! >> no way!

jpmorgan is about to launch a new app including free trades. you may have seen the news on "squawkbox." it's putting online brokerages under pressure why it is and whether it's warranted. here is another look at futures as we're 17 minutes away from the opening bell ckomg k on the street" cin ba we have a question about your brokerage fees. fees? what did you have in mind? i don't know. $4.95 per trade?

uhhh and i was wondering if your brokerage offers some sort of guarantee? guarantee? where we can get our fees and commissions back if we're not happy. so can you offer me what schwab is offering? what's with all the questions? ask your broker if they're offering $4.95 online equity trades and a satisfaction guarantee. if you don't like their answer, ask again at schwab.

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♪ jpmorgan is set to roll out a digital broker age service this week or next week, excuse me that includes a new investing app as well as free and discounted trades. that's according to cnbc.com anyone who downloads the app or uses the company's website will get at least 100 free trades in the year jamie dimon hinted at it two years ago citing amazon prime as his inspiration. all of which you can see are down rather sharply on this news, jim >>well, it is surprising we have a really good story on cnbc.com about it. and, you know, i've got we lob a grenade. i'm thinking about fidelity.

what their pricing is for index funds. it looks like that the gross margins have to be coming down, david. especially -- >> mike santoli points out in fidelity cut by 40%. but over time, as typical, they came back. it's about assets. it's not necessarily about trades and whether you're charging $8 for a $10,000 trade or nothing wouldn't necessarily seem to change somebody's opinion and your decision. you don't know >> because millennial's. >> you're trading a -- who are the people trading a hundred times a year >> millennial's this is targeting millennial's, david. when we see millennial's it's usually people in their 60s deciding what the millennial's want the millennial's want pizza delivered and they want video games and don't want to leave their couch unless they want to buy frozen food in the

supermarket aisle. that's what they want. not that cheap trading. >> all right. >> david, they want ca"call of duty." >> turn it into a stock market trading game maybe they would like it. >> it's hard to do and the feds don't like it. >> no. the millennial's want to text each other never talk to each other and send things by venmo so there can be emojis. it's not going to work >> no. >> yeah. it's a price war. >> listen, i think -- jpmorgan should not be the discounter jpmorgan is considered to be supreme. >> it's worth noting, i mean, charles schwab's market value $70 billion. it's not as though they've been making missteps. >> i remember when goldman may be a -- remember when goldman was considering to buy. >> yeah. >> in order to participate in

the dot com era, which they didn't do. they made an acquisition that wasn't so good since then, they haven't been that inquisitive i think they need to make an acquisition. i think they need to raise their price earnings multiple and something more visible in vin tech. >> you don't like marcus >> you see anybody that said i got a lot from marcus. >> they say, jim, it's because you're a rich person. >> square has the best loan process because they see your receipts marcus could be blown out. but right now it's niche it's a niche business. it's not moving the needle do i like it of course. it's niche and we don't like niche. >> back to the brokerage question we were talking earlier, though, you were talking about balances and what you get paid on. >> that's what i care about. if you have a low credit balance and jpmorgan doesn't pay a lot on that and gets the assets,

that's fantastic if you go bank of america merrill has high rates so i don't know. so. >> by the way, david, under armour sales accelerated quarter to quarter and kohls and nike crushing it, too shoe business and apparel is on fire i've been saying this jurnunder armour is a buy. people don't believe me. those people are wrong but they're protected by the first amendment. >> they are. >> the stock is up 50% since you were talking about that. >>well, that's okay. >> and now you can buy it with your jpmorgan app. >> jeez. >> down scale, david down scale. >> dimon is from queens. i was right. >> you get a piece of gum with that. >> that's not all you get. >> i think i'm paying them. >> yeah. definitely. >> i think they're charging me something. >> i like that

god bless them it's a great business model. >> he told you earlier he has a mad dash we'll find out what it is as we count down to the opening bell about nine minutes before we get started trading on this tuesday. it looks like we're going to have a higher opener for the broader averages more "squawk on the street" straight ahead imagine traveling hassle-free with your golf clubs. now you can, with shipsticks.com! no more lugging your clubs through the airport or risk having your clubs lost or damaged by the airlines.

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♪ it's interesting we're going to talk about apple today. i just think, you know, can i run the show for a second without you interrupting it? apple is amazing this morning bank of america increased confidence in diversified revenue growth not just gaming. gaming is viewed as cyclical they're talking about secular growth to the revenue stream that's why the stock is moving one year 37% this company is a juggernaut we used to talk about apple all the time. >> we just spent an entire day and a half talking about it. >> tesla. >> of course. >> elon musk's emotional state increased confidence in earns. that's like, you know, crying

per share. what is the crying level per share. i'm not interested in the per share crying level i'm interested in per share earnings this is far more substantiative than how much he cried when he talked to jim stewart. >> doesn't that scare you? that almost parabolic move >> scare me? yeah. >> i am concerned. >> yes. >> but at the same time we're still talking about a stock that is relatively inexpensive. hey, david, we're talking about 14 times earnings. remember, once we get to august and turn the page. so, no, i don't want to see it straight up. let it come down a little. like in vnvidia i would let it come down and that's my dog for heaven's sake let nvidia come down. >> know when we talk about when

we get the opening bell? i think we're going to talk a little tesla because we haven't. >> i want him to be healthy again. he's not sleeping because he, you know, i don't sleep because i can't sleep. >> all right we got an opening bell my mike is working the employee of the year, anna.

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the opening bell is sponsored by u.s. bank, the power of possible you're watching cnbc squawk on the street. we're live from the financial capital in the world the opening bell in one minute from now which is is a good opportunity for me to turn to you and say, okay, give them what we know thus far this morning. what is the key to the market's trading? >> okay. it's going to surprise you because we haven't talked about it yet i'm steeling myself for it there's a device company and they're part of what i regard as incredible move not being talked about. it's a move inpharma

[ applause ] highlighting the etf over at the nasdaq virtra. a provider of training simulators for law enforcement and for the military. >> david, have you been following the price of coffee? >> sorry >> the price of coffee >> no. >> 12-year low. >> stock up on coffee! >> margins will be up for starbucks. i think the third party delivery problem will be solved in china. i think the u.s. comps can turn up. >> oh, boy i know what i'm hearing here. >> what? >> i haven't heard you say good

things about starbucks in awhile. >> i'm changing my tune. last quarter was terrific. we have a roastery opening in the beginning of september and the buy back the facts change the facts changed. >> okay. >> because third party delivery was the problem for china. >> yeah. >> i think kevin johnson solved that third party delivery problem. get back to where we're going to see -- >> actually have comps that look good because they went to basically nothing. i think they were down. >> yeah. >> yeah. and with the price -- >> it's about store openings in china. and store openings in china, you have to worry. >> david alibaba partnership we know it better than anyone on-air it does matter. >> i think it insulates. >> yes i think it insulates

more importantly, david. i drink a cappuccino with a skim wet costs $5.30. the price of coffee at a 12-year low know what the gross margin will be? >> they're not passing on the savings to the customer? >> that's right. >> so i say starbucks is interesting. and remember the buy back has been following the stock up. and i think the throughput issues which have been a stickler are not good. better than it were. >> and you think they're going to figure out the afternoon. >> what to do if i ran starbucks. and i can't come up with it. >> you can't >> because the rewards program is important to them. >> the rewards program. >> and the connectivity. >> since k.j. got involved, the rewards program skyrocketed, david. they have that so they solved the -- got the rewards issue turning from problem head wind to tail wind now you've got the price of coffee is a huge tail wind.

>> all right. >> i like it at 52. >> i'm going to mark it at 54. >> i beat you. >> you do it a lot i have a whole list. >> it's what you do. >> i have a certain set of skills my skills are a nightmare for many people. not you. >> it's true all right. we have -- >> i didn't kill my wife >> no, you didn't. no. >> you're supposed to say "i don't care." if. >> i don't care. >> i know. every time it's on, though, we'll watch it. >> david, there's a lot of talk about cybersecurity. i think if you take a look at the palo alto networks, those are stocks i want you to watch i think hacking -- russia denies the hacking. please please russia denies the hacking. >> i know. the latest, of course, is that microsoft took down some

websites that were for phishing for conservative organizations but those particularly that were opposed to and are very much, you know, an adversary of the current government. >> at lot of people that satya nadella is behind on it. >> behind on it? >> that's why i've been recommending palo alto networks. i think it's going to have a stunning quarter. >> jim, i want to get to tesla it is up 1.6%. i think the end of squawk when you're talking sorkin. the guys were talking about morgan stanley. >>yeah. >> but you're going to get banks that want to be interested in doing it because they'll be able

to rack up fees in the likes of which they have rarely seen between the capital and the equity side. the debt financing will not be a part of this, if they get it done and the advisor fees and everything else. yes, goldman sachs, morgan stanley. morgan has typically advised in certain areas for tesla. goldman sachs has underwritten a number of their raises in the past they'll be there it doesn't mean they'll get anything done. don't read too much into it. >> that's what people are doing. reading a lot into it. they're saying, look, these firms will be involved they're going to find money. try to figure out any number of different structures that somehow can do this. but when you read musk's letter where he sort of outlined his views beyond that initial tweets, he's talking about, what, two-thirds of the current shareholders deciding to -- where did he come up with that

>> i think that one of the things we found out -- >> decide to go public. >> however he is, a man who defies the odds oftentimes and there are going to be any number of banks that want to try to help them do that so okay most likely morgan stanley got hired along with somebody else. it doesn't mean they're doing much or going to be successful why not give it a shot. >> we haven't talked about amazon amazon was supposed to destroy the drug stock market. they're supposed to destroy the auto parts market. people felt they were going to destroy a lot of stocks. >> tjx and kohls. >> i'm thinking amazon is amazon webb services and advertising. i don't see them destroying. did they destroy j.c. penney

>> well, i think they did kind of destroy it. >> yeah. i'm worried. i would ask about it they didn't. i don't know why maybe they're not close enough to the situation. >> yeah. >> but your point is interesting. and after the last quarter with am zoo amazon, we spent time about higher margin businesses namely aws which is growing at an incredible rate and for the first time, really, we've talked regularly now we were starting to prior to the quarter, of course, about advertising on the amazon platform and how power tfl is and what the competitor it's becoming to the likes of facebook and alphabet. >> facebook dropped it vmware is important this week.

i think housing you'll see lenore follow toll. >> we referenced toll at the top of the show. >> one of the interesting things about toll brothers, it's a new world, david we talk about the negative first. california contracts down a percent. california not as hot as a year ago. what people are liking is the rest of america is doing incredibly low well, david, remember, these are $800,000 homes community is above expectations. sgna going down. back on the highest third quarter in a dozen years all these things that beat the number very big. bob toll talking at the end. doug doing the conference call bob talking at the end he's kicking in what he's talking about is the

shortage of homes. which we know. a lot of people like, wow, homes are -- there's a shortage. toll brothers will supply the homes you need i like the group i like the group ever since lenore said we have a home shortage but the group needed lower interest rates interest rates were going 2.5 to 3. no one wanted to touch housing i know there hasn't been a big increase in getting new mortgages. >> no. >> or refies but the fact is, rates are low enough for toll. people who buy $800,000 homes, david, they're not going to buy one of those homes for half a percent interest we have to watch the group it had been written off and dead once again, a group that has been declared dead is coming back this market is amazing. >> speaking of groups or stocks declared dead for a period of time that come back. i hadn't noticed until recently that verizon is up 3.5% for the

year. >> talk about coming back. >> merrill recommended that. >> and verizon is widely held, of course. >> verizon is a component of a lot of people's portfolios since the break up of at&t. >> i mean, david, t-mobile has been doing great since the quarter. verizon has been doing great since the quarter. at&t a lamented quarter. comcast. it has come back talking about maybe quarter cut not so bad these are all going. yes. it goes back to stocks and people hate it it buys them 40% of the s&p's move is 7% move up this year it's basically amazon, microsoft, and apple. >> yeah. i like that. >> and no thanks to facebook.

>> no thanks to facebook, which is down again. even though we have an early going. 10 minutes in we have the positive in terms of technology. >> i think people are trying to get their arms around how bad it is. >> yeah. >> it was for sale most of these oil companies have been reluctant to sell you can combine. that's why it's the stock of the oil. it was about 17. i don't know watch to see if these people other oil companies will somehow, somehow be able to buy and save money okay

>> okay. >> up over 7% of the year. the nasdaq up over 13.5% we'll get to bob you have more on what is moving this morning. >> yeah. it's the powerful rally. the combination. we have the laggard like the semis moving along with the market leaders we're six points away from histor historic highs the dollar has been helping a little bit don't normally talk about the dollar but it's moving the stock market a little bit. yesterday we moved the dollar down down about a percent take a look at sectors here. that helped emerging markets, which have finally come out of their funk metals and mining stocks which had terrible performance for the past couple of momts they, too, come out of their

funk semis today turned around. that's been a weak sector. you have a rally of retail which has been a market leader all along has been strong here in terms of where we're at now, we hit historic highs yesterday on the s&p small cap at 6600 we historic highs on the s&p mid cap. we're essentially records on the transport. we're standing at the door and the s&p 0.5% less than that. we're 0.2% in the last ten minutes. the nasdaq lagging almost down about 2% that's been interesting. but the key to the market has been the rotation. we keep talking about this and how we've been doing here. but by and large, take a look, while semiconductors were weaker recently we had an rally in the airline stocks we had a huge momentum in bio tech and pharma. retailer the xrt hit historic high yesterday staples rallied about 10% since bottoming. that was back at the end of may and the beginning of june.

so this rotation is one part weaker and stronger. it's been the key to the market's success we're about to enter into the longest running bill market tomorrow the bull tomorrow will turn 3,453 days old that's kind of silly but the old record was october, 1990 into march 2000 that was almost 10 years we're about to beat that march 9 was the bottom 676. people ask me what matters this is actually because the s&p is market cap weighted, there's a small group of stocks that did push the markets forward not by themselves. but if you take look at the ones with the biggest contribution. apple is 4.1%. the s&p was up a hundred points. four points would have been contributed from apple that was the biggest single contributor. microsoft was contributed 2.5%

jpmorgan, believe it or not, general electric talking from the 2009 numbers here and wells fargo, also and the meetings about whether or not 20% matters and what matters in bull markets. if you want more about the new bull market, tradertalk.cnbc.com. right now we're only six points from a historic high on the s&p 500. david, back to you. >> thank you, bob. time to check in with rick santelli in chicago. rick >> good morning, david one week of tens we're crawling up a little bit. where do we stop yesterday well settled at 282, as you can see on the may 1st chart

that's the lowest yield close since the big drop you see since the end of may that was 278 that defines, in many ways, technicians say where the markets starts to run into potentially the shorts covering and we've talked about how you have record speck short positions on the long end of the market tens and 30s now the shots overseas, that's the two year negative look at a two day chart. for awhile it was minus 60 that doesn't sound like a big sell-off pushing rates up. but, actually, it was, to some extent it's eased back bit. one of the reasons kind of the safe harbor trade for the sovrns on the other side of the pond. if you look at the italian ten year, you can see why. that's a may 1st start it's now below 3%. so maybe the rating agencies will come through in a way that isn't the worst case scenario many are watching and observing. if you look at the dollar index,

bob nailed it. we keep creeping lower not in a huge way but keep an eye on 95.5. we had big move upward didn't really pause in that area that's where traders are going to be watching they'll use it as what we call a pivot point. finally, knowing the dollar index is giving up ground where do you think the benefits are going? they're going to europe. as there's a bit of reversal the european banks and many of the european companies have bigger issues with the emerging markets. it is moderating, to some extent you can see that the euro versus dollar is popped on the chart starting in june and at 10:40 eastern they have doctor coburn. you remember senator coburn. oklahoma's senator in a previous life we'll talk to him about the issues of the day at 10:40 back to you. >> all right looking forward to that. thank you, rick. coming up, weighing in on

president trump's comments about twitter is walter isakson. as we head to break, we'll take a look at the morning's top performers on the s&p 500. tjx after earnings having a strong morning and medtroni and netflix

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this wi-fi is fast. i know! i know! i know! i know! when did brian move back in? brian's back? he doesn't get my room. he's only going to be here for like a week. like a month, tops. oh boy. wi-fi fast enough for the whole family is simple, easy, awesome. in many cultures, young men would stay with their families until their 40's. >> it is time for jim. >> jm smuker, the gross margins missed and lowered four-year sales. it somewhat reflects divested banking. there's both in ped food and coffee and snacking but people

aren't buying it jm smuker, you hear how it may be kraft heinz, give me a break. on the earnings alone, they weren't what i was looking for i was looking for a better quarter. the their snacks business is pretty good. >> i think we've got neilsen data out on the consumer product names. campbe campbell's also -- >> terrible. >> a quad weekend being the 18th for package food grouping, 6.9%. everybody is sort of taking a look at the specifics on them and i know with campbell it was pepperidge farm and soup. >> they paid a lot of money. and ulta is up. >> the entire bull market is ulta at one point dave laughed at me about ulta

tractor supply has come back too. >> three or four years ago, used to do that all of time. >> i had people make fun of me for -- i don't give a darn what do we got on "mad money". >> the humanization of pets is a great story. if you check the labs, you see the lilly and stock was worth ten points and there he is, no price that people won't pay to make it so that their pets are happy. >> what does pet iq do >> they have supplements and help animals. >> like they help their iq what are they doing? >> i kbes i have to watch. >> supply stuff to animals does it help their i.q.? i don't know. >> pigs know 300 words pigs know 300 words. >> pigs are smart. >> my dog is nvidia and saying don't buy me yet wait, shake out the week this dog told me this last night.

>> did he? >> he's amazing. >> with his eyes. >> paws. >> communicate so much with their eyes. >> i wasn't in my bed, which means nvidia will end up down. let's be careful. >> more on jp morgan getting ready to launch a new app that includes pretrading. that sending brokerages lower. keep it here we're back in a few minutes. ron! soh really? going on at schwab. thank you clients? well jd power did just rank them highest in investor satisfaction with full service brokerage firms...again. and online equity trades are only $4.95... i mean you can't have low cost and be full service. it's impossible. it's like having your cake and eating it too. ask your broker if they offer award-winning full service and low costs. how am i going to explain this? if you don't like their answer, ask again at schwab. schwab, a modern approach to wealth management.

♪ >> good morning, welcome back to "squawk on the street qufrt. mike santoli from the new york stock exchange and carl has the morning off. rally mod second day in a row. dow is up a third of one percent and nasdaq is leading, haven't seen that in a few sessions, up .60 the dollar is lower. our road map for the hour begins with president trump renewing criticism of the federal reserve. what if anything could derail this rosecord rally.

>> j.p. morgan getting ready to launch a new brokerage app with an appealing price tag, it's free what it means for th competition straight ahead. auto parts maker in the cross hairs of the trade war we'll take you live to michigan for that story. >> president trump criticizing the fed in an interview this time with reuters, which is weighing on the u.s. dollar this morning, throwing cold water on trade negotiations this week despite it, the record rally in stocks rolls on. 113 months of the bull market. the value of u.s. stocks has tripled and record levels of corporate bonds sales. one group largely left out though, the banks and mike, this is the theme you're looking at today with news out of jp morgan, certainly playing in the trade. >> the wall street oriented banks, the ones that were around before the financial crisis and bull market got going. it's been striking, any other bull market you could look at, especially one of this duration and strength wall street firms would be where you're seeing most of the proes pert, thriving the most and

finding new ways to make money if you look at goldman sachs and morgan stanley shares of the previous high before the crisis, 2007, the s&p 500 up about 80% since then those stocks are either flat or down 30% so clearly the business model has changed and the jp morgan news today reflects what happened the crisis in the aftermath accelerated changes and the business has become auts toemated and cost sensitive and the middle men have been cut out along the way pretty much across the board. the retail firms though, the sh wabs until today, the schwab's and black rocks that give low cost access to investment, they've done fine. but goldman sachs, been cut in half in the last ten years because they had to become more lean, less trading and easy money to make the profitability of wall street on a return and equity basis has been cut in half this is kind of of the world

we're in it seems as if things haven't got better for this industry in the old ways at this point after an almost 9.5 years, you have to imagine the game is pretty much changed. nobody wants to pay for research. >> a lot of that is not using leverage and that's what we're talking about in terms of that significant decline. it's interesting numbers had not seen those in a 10-year period being cut in half that way. >> they still manage to change their businesses to at least be able to compete. i don't think obviously goldman and charles schwab have fnothin to do with each other. >> except in areas they are investing in jp morgan is saying we -- to access these markets and make it efficient to trade everything, and so we can give you a little piece of that, a little access to that for free and what goldman is doing on parnl investing site too there was a story this weekend how you're not a trading at goldman anymore if you're not also coding.

it is not just living by your wits and flipping things for eights and quarters. >> how early can you start your child on coding school >> very early if you want to. >> i'm bearish on the coding. >> i think machines will do the coding for you. >> someone has to operate the machines. >> you're talking about psychiatry dindustry dynamic, hasn't it been been the interest rate market and everyone expecting that to get up that gets to our conversation around president trump i think this time is tripling down on his fed criticism and whether that means anything for the market. >> it's been the big pressure point in terms of whether they can get the interest rate spread and the question is, are we really in a steady march of shorter and high term yields and stay the course or going to be a cycle that gets cut off along the way because the world economy demands it. >> jay powell thinking friday at

jackson hole we'll be all over that one record highs on the dow, transports, russell 2000 and s&p 400 mid caps getting close to the s&p 500 record the bull market running out of steam? doesn't appear that way today. dom chu looking at the bull and bear case for stocks >> the fed does play part of that discussion markets are a one way street these are among the reasons the bull market could be ending sometime soon. we talked to economist and looking at five big reasons why this bull market may be ending sometime soon. first of all looking at the job market there aren't enough skilled workers out there to fill all of the open jobs we've got which means the job market has hit a wall so to speak that's why we're a wall of worries. second, we're going to stick on the unemployment theme it means higher wages at some point soon that does kind of sound okay if you couple it with price inflation because of things like higher tariffs, you

get conditions for tighter fed policy that could tap breaks on the economy. third, a slowing growth rate of money supply real growth rates of money supply, that's cash, checking department deposits and savings account, all of those consistent with an economy downshifting to lower growth fourth, what looks like a peak in the housing market. you can see that in home builder stocks and one other thing as well, the appearance of a peaking in the credit cycle with at least cracks evolving in the investment grade bond universe we know the bull arguments there. i want to show you a couple of charts, we know home builders rallying on good news, it's carrying the entire space to the upside look at the longer term, third to five year chart you can see there that peak about a year, year and a half ago and then relatively flat since. we'll see if that holds up and whether that home construction story remains one of those

cracks in the wall for the bull market, back over to you >> dom, thank you. new highs makes a sense to keep an eye what might go wrong joining us for a closer look at this record run is co-founder tom lee and well fargo asset senior portfolio manager, margaret patel the market in the u.s. seems to be kind of leave tating again, just kind of going up a little bit every day as it does last year, reproaching old highs. on the other hand in late january if you said you're going to go six and a half months and get a couple of scares alock the way and earnings -- and stocks aren't going to get upside which side is more important to focus on >> well, i think the last week has proven you've got to be looking at this market half full, right? we've had attempts to really undermine and weaken the bull narrative around equities and it's been short term and i think fundamentals are

great. we have a lot of breadth, and then things like small caps and rallying now are really bullish signs. i think between now and year end, investors should be pretty optimistic we've got a pe lower than it was at the start of the year so -- >> i guess the question is, even if we do have a lot of tail winds for the shorter term in a few months, where are we in the cycle as far as you can tell stocks and bonds, what do we have to be looking for in terms of the durability of these trends >> i think we have never seen a period like this i don't see it as a cycle where we'll peak and go down and have a big market correction. i think we're on a steady ramp upward in continuing economic growth, higher equity levels and i think interest rates will be very benign for the market we really haven't had this growth due to an explosion in leverage, which we've had in previous cycles.

>> tom, to dom's point, you can always find a bearish case and that's been one of the hall marks of this rally that is now going for a record period. the wall of worry, the lack of conviction, the bears have always had their case. what are those that have called out the staying power of this rally got wrong and how do we know when that turns >> yeah, i think we have to appreciate what the last nine years looks like because we had come out of a financial crisis and i think a lot of folks were writing about this, we established a bubble of pessimism. and i think even this year, it's been popular for people to call the top right. but no market top has ever called -- no one has called the top before the top but what's interesting is i think there's a demographic argument too we're seeing it millennials, the largest generation ever in history, median age 26 1/2, hitting their prime income years

and we're seeing robin hood and jp morgan target ads and they are going to account for 72% of the growth in the purchase of financial services in the next ten years. so that -- the biggest reason we are in a bull market now, millennials are making a lot of money. >> you say interest rates for now remain benign for stocks and presumably for the economy should we not be concerned about why interest rates might be kind of stuck at lower levels >> no, not at all. i think we have a fed that is very transparent in what they are doing. i think that takes a lot of the uncertainty premium out of interest rates, inflation after practically a decade of recovery is still very well behaved and we haven't had any excesses in lending in any sector. that says to me i'm not treelry looking for interest rates to go up a lot even if growth stays at 2.5, 3%, which is what we'll see in the u.s. >> so we also have a fed that's transparent and we have a president that's very

transparent in his thoughts about the fed. investors brush it off now for a third time when it comes to the fed criticism. is that the right take yes, this is maybe a bit unconventional and taboo but there any serious implications for market and policy? >> i think the fed has shown throughout history to be very independent, which is the appropriate course but in some ways, i think the president's sort of issues with rising rates reflects how some of the investors feel i actually think it sort of reflects the mood of the market. the markets not like higher rates but history has shown in a period of accelerating growth, rising rates don't kill an equity market. i don't think it's a threat to the bull market. >> you know, on the corporate level, i mean corporate bond yields, obviously that's been a big support for equities is the health of the flow of corporate credit are you seeing cracks there at this point is that where you might see the

impact either of pockets of global weakness or you know, just the march higher of fed indicated rates that's going to make it more expensive for an overleveraged corporate sector >> i don't see the corporate sector being overlevered and signs of stress. the yield spread and yield advantage between treasuries and corporate bonds either investment grade or high yield junk bonds is near its historic lows, which says to me the market is not worried about stress defaults are only around 2%. that says reflecting the rest of a very good economy, we shouldn't look for problems in the corporate bond market. even if yields go up a bit and there again we may see relative stability. i'm not expecting any big spike-up in rates or a big blow-out in high yield spreads, fundamentals are too good for that >> tom, before we go, you always track something that i always ask you about, haven't in a while, active managers versus their indexes. >> i thought you were going to

say bit coin. >> where are we on that as we head into the last few months of the year. >> there's been a few phases the volatility in the past couple of weeks is actually undermined a lot of performance because at one point people who are long in faang were doing well but people repositioned and we have clients using value benchmarks suffering it's an okay year but active managers have not done well. that's one way you're seeing it in wall street with investment banking fees. >> yeah, etfs and everybody's preference. >> that's been years and years now, this year looking pretty good for a while what you're saying but recently with netflix falling and the libeling ke -- >> the volatility, when you own something that's been good for so long. we've had some people get terrorized by the volatility >> sticking with the bit coin, 25k call not looking too hot. >> it's not looking graeat but s

you know, bit coin reduces almost all of its returns in ten days in any year we haven't had any good days for crypto this year but there's a lot of good news coming in november, the new ice joint venture. we'll see. >> i guess that's a yes. >> we'll see and wait for the 10-days. appreciate the time. >> when we come back, too big names in retail out with results. i'll look at tjk and cole's moving in opposite directions and new job with a very appealing price tag, free. we have the details on jh morgan's new service and the impact on competition which we're seeing play out in the stocks dow is up 79 points. don't go away.

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this wi-fi is fast. i know! i know! i know! i know! when did brian move back in? brian's back? he doesn't get my room. he's only going to be here for like a week. like a month, tops.

oh boy. wi-fi fast enough for the whole family is simple, easy, awesome. in many cultures, young men would stay with their families until their 40's. another win for retail, tjx sending shares higher, 3.6%. it's been a series of wins for the sector as retail has led the recent leg of this rally joining nous the senior retail analysts and wells fargo senior retail analyst with the lowest price target on the street can you remember the last time we saw so many comp store sales beats across your industry >> no, maybe last quarter i guess. i think what's interesting is looking at these comp store sale

beats, certain ones are driven by traffic getting more people in the stores and selling more units. that sweater can go for a higher price. we think there's a distinction there but across the board retail is doing well. >> do you have a bone to pick with tj maex, from home goods to marshall's >> i think this is one of the best quarters in a long time if you look last year in 2017, off price had a good year, tj kind of choppy a couple of quarters of bad results. this is the best comp they put up since 2012. margins are good and then across the board home goods and canada international all good i've got to give them credit, this is a great start to 2018 for them. >> you're going to change your call on the stock? >> i think the stock has had a great run. but i don't think this is that

different than what we're seeing across the space we've seen nine months of improving trends in retail and tj has continued to outperform and department stores are doing better. >> what's the big picture takeaway in terms of -- is it we're in this period where consumer is relatively flush and the companies have kind of gotten more lean, or is it something structural that has gotten better for brick and mortar >> we think sick lickal gets attack to retail a lot so at the end of the day, for years after the recession, it was just a story of who's promoting more i go 20, you go 30 off they had a come to jesus moment in 2016 and across the board they said we need to bring inventories down when they did that everyone across the board benefited able to take a better price. at some point now we're two years into that. if we look at that group, inventories have been ballooning and normally that's a bad thing.

we think that's good for them. we think that gives them a lot of supply and at the end of the day we also question what that's going to do to the retail environment and ability to take that price if there's more off price product on force >> what happened to the decline of the mall and amazon eating everything >> so amazon is still eating and tj is off mall. >> i think it's also interesting, the improvement in retail is happening simultaneously with amazon's domestic growth, accelerating remaining at robust levels we can kind of have a world where we co-exist and amazon does their thing and retail kind of chugs along xbl if the consumer is particularly strong, which it is which they are right now, correct >> deflation and inflation are going to be interesting because at some point clothing is a staple it's a decembiscretionary but i staple we have to be clothed, hopefully. if there's a lot of product and prices come down it's more

staple right now it feels we're more in the discretionary edge. >> are either giving commentary what a real trade war with china would mean for price and sources? >> the majority of our companies have moved away in terms of production from china. the companies that have commented on it thus far are telling us it's very demin mus part of the business and apparel is not mixed in. >> i thought 40% of the apparel was made in china and way more percentage of foot wear? has that changed >> the companies we're talking about right now, low end entry level pricing, more of that katd gory tj specifically for what we're talking about is sourcing other people's clothing. they are not actually manufacturing anything from china. there's different elements let's go back to -- >> from a supply side in your universe >> the reality is we don't cover the broad line namesif you think about the largest of big box retailers and low price entry level, names like those

big box retailers would come to mind. >> we'll talk to talk tomorrow. >> target, macy's. >> walmart still even though they are saying -- >> we're trying to fill in the blanks >> sim on, thank you good to see you too. >> when we come back, a long time tesla bowe ways in on the private road ahead and strategy. quts squawk on the street" is back right after this. at&t provides edge-to-edge intelligence, covering virtually every part of your manufacturing business. & so this won't happen. because you've made sure this sensor and this machine are integrated. & she can talk to him, & yes... atta, boy. some people assign genders to machines. and you can be sure you won't have any problems. except for the daily theft of your danish. not cool! at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & this shipment will be delivered...

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time for our etf spotlight we're joined by cathy wood, rang the opening bell this morning in recognition of the arc etf crossing $1 billion in assets under management welcome back. >> happy to be back. >> got to start with tesla for months now you have said this is a $4,000 stock, given all of the drama over the last few weeks, do you still think that >> yes, actually our conviction has increased recently because of their new

chip we think they are three years ahead of any other auto manufacturer in two ways, one very importantly is the chip and the other is their battery technology so yes, our conviction has increased. >> what about leadership, whether they are going to go private and the tweets it's endless. >> the $420 price. we're writing a letter to elon and the board explaining actually showing our models, top down and bottom of models, showing how we goat et too 4,00 would be $2,000 today and that $420 price to us is -- >> too low. >> way too low. >> stealing the company if he were to get it at that. >> and i also think think about this if he goes private, what does this mean? he's showing us quarterly statements, right? he'll have to show private equity monthly and they'll be coming through each line item

and i guarantee he will not be able to scale the company the way he wants to. china and trucks and energy storage, he'll have to curtail those and i don't think he wants to do that. >> wants everybody to roll with them would you do that. etfs, given what we know of the structure -- we can't do it. and so he would be depriving his biggest advocates and fans, the owners of his cars of participating in this ride. >> i guess the model that gets you to 4,000, right? what is that a $700 billion market cap >> yeah. >> roughly speaking. >> there's a distance between here and there can he execute -- because it seems basically like the cars are a trojan horse or this bigger world domestic nation strategy for moving people around and energy storage but can you actually get every step along the way to bridge to that future even if you thought it was going to happen >> we think he's arguably google

is doing a good job. but we think tesla is way ahead of the game. they've got 10 billion miles of data plus. this is an artificial intelligence project and it is going to take tesla from 20% gross margins to 80% gross margins. it's -- software is a service and transportation is a service model. and we don't think until very recently and i know there was a big occur fluffle around the conference calls but finally we had good questions around autonomous and trucks. trucks is another very big opportunity. autonomous truck platoons we think will transport freight more cleheaply than rail trucks and rail are the same size market. another huge opportunity. >> they are big ideas but then you have to look at questions like, why doesn't he have a number two when he's staying up at all hours of the night and tweeting things that may or may not be fully true or fully

compliant with the sec what about the board do you have confidence that it is being well run? the track record is its had a history of missing production targets and these things you're excited about. >> we were very interested to see it has 52% of its market its market share kbgone up from the low 30s to low 50s and one of the most -- the -- there are five trade-in that are the most popular. one of them is a honda civic he is enlarging his market so we think he's doing an amazing job. i think it does seem according to suppliers they are ramping to the 6,000 model 3s per week. so time will tell. when steve jobs -- if he had twitter and if he could have tweeted, what we would have heard was -- and this is -- he did say this he said, i'm going thermol nuclear and will spend every

penny of apple's $40 billion to destroy android. android is stolen software so you know, that probably would have played the same way theser visionaries and passionate and they see how they are going to change the world and make it a better place and how much shortsidedness in the market i think it would be hoof him to maybe help us understand and help more understand the way we hope to with this letter, how this model will scale. >> where is this letter? have you released it yet >> we're about to either today or tomorrow. they'll kill me tore saying that either today or tomorrow. >> a letter you sent to elon -- >> not yet but that is the message. >> obviously 4,000, would mean a lot of upside for here. >> thank you for coming on and sharing your case. cathy wood of arc, in defense of tesla. >> let's send it over to sue

herera for a cnbc news update. >> good morning, mike and good morning everyone here's what's happening at this hour a 95-year-old former nazi concentration camp guard was deported to germany overnight. he had been living in queens he was last known nazi collaborator living in the u.s a judge ordered his expulsion 14 years ago but he remained in the u.s. because no country would accept him his fate in germany is unclear as there may not be enough evidence to bring war time charges. protesters in north carolina stoppled a statue of a confederate soldier last night more than 300 people marched to the base of the statue which is called silent sam, calling it for its removal. protesters first sectioned off that area around the controversial statue with large banners blocking it from view. then two hours after the rally started, the statue was on the ground and people were dheering. it had been standing on the

campus since 1913. a white house study whether to impose tariffs on imported autos is reportedly being pushed back commerce secretary wilbur ross told the wall street journal that ongoing trade negotiations with europe and mexico and canada are delaying the completion of that report. ross declined to set a new timetable for its completion and yesterday service was briefly delayed by those guys on the new york city subway a pair of goats found their way onto the tracks in brooklyn. in the end, former daily show host jon stewart swooped in to take part of the rescue effort transporting the animals to an upstate farm sanctuary no word yet on how the goats got on the track a couple of bad boys that's the news update for this hour i'll send it down to you >> that's good >> just a normal day on the commute. >> exactly, in new york, yes >> in new york who knows what you'll see down there. sue herera when we come back, the price is

right. jp morgan unveiling the new free brokerage app. what it's going to mean for the firm and its competitor schwab, all falling on the ns.ew dow is up 75 don't go away. your digestive system has billions of bacteria, but life can throw them off balance. re-align yourself, with align probiotic. and try new align gummies, with prebiotics and probiotics

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welcome back, i'm sara eisen and mike santoli at the new york stock exchange a little into an hour into the trading session and we're seeing strength in the overall markets. dow is up a third and so is the s&p 500, the nasdaq outperforming up more than 0.60 right now. record highs on some groups like the trps and small caps which have beenout performing and mid caps doing well and we're continuing to be on record high watch for the s&p 500. >> >> we are, five or six points from the record highs on january

on a closing basis for the s&p 500. >> energy strength is helping, higher yields helping some of the groups like financials. >> all right, well, it's an auto parts maker that has found itself in the middle of the trade war. lessly picker has more on this company. hey, leslie. >> reporter: hi, david, you can see coils of steel working their way into these machines which are then pressing them into parts that go into autos and go into door locks and industrial supplies but this company has been impacted by the tariffs as the tariffs on steel increased by 25%. hitting their bottom line about 10%. and so it's become a hung ige ie for them most of the steel they bring, in the spri supplies are from do, not importing thep

90% of these on to their customers but they are worried in the long term these customers will defect to their competitors overseas >> the parts we produce here, we have competitors both in asia and europe that produce very similar components the price of doing business is the most competitive price on marketplace and the simple fact is they are like taxes to our business we're not as competitive as we were six months ago. >> now, suppliers have filed for exemptions but so far none of them have been approved yet. the executives here tell me they are considering moves if the tariffs last for the long term, including ramping up production at their overseas facilities in china and mexico, which would mean less investment here in holland, michigan, rolling back up hours for workers here and potentially even job cuts and to add insult to injury, executives here learned a few weeks ago that china was considering

retaliatory tariffs on some of the products that they produce here that they then export to china. so yet that would be another thing that would impact their bottom line, guys. >> david has got a part. >> we're holding it up here, i think this is something involved in a door locking mechanism or something of that type but this is what we're talking about here i'm assuming you can hear me, i know it's loud where you are. >> i can it is. yes, i can hear you, david >> what are we -- i know you've gone through it. do they have expectations in terms of how much they have to raise price? >> reporter: so they have been passing these costs down to customers which have been $1.5 million so far that's for 2018. they said 2019 though if the tariffs continue, the cost could increase from there because the customers won't be able to

absorb as much of it they would have to offset it in some way on behalf of their customers, to make the exact same products in europe and asia. >> leslie, thank you very much with the story on manufacturing from holland, michigan and to this whole idea that president trump is doing this from a position of strength, it is notable that we're coming off of the best 12-month period for manufacturing jobs since 1995. a huge source of job creation, under president trump's policy -- >> it's been a big incremental gain in jobs but not particularly important part of the economy. >> true. >> you can say it's growing, why not? because from a position of strength -- >> but confidence levels and hiring levels and investment levels within the manufacturing sector are elevated right now. >> absolutely. no. >> doubt about it. >> as a percentage overall. >> we're only at 12% basically of the overall economy we're still consumer spending economy. >> thank you for that update

hasn't changed >> i don't think so. >> let me know if it does. >> spending is strong right now. >> online brokerage taking it on the chin today and toll on the stock prices after an exclusive report saying jp morgan going to offer a new digital investment app that will have free trading to those who use it, starting nest week. we'll look at the action one hour into trading today. you can see major competitors are all down schwab paired its losses we saw earlier in the season. joining me now, devin rhine, covers the major brokerage firms and gir ard cassidy can sweep up the large cap banks for us as well is this response appropriate given what we know about the jpm, the jp morgan effort? >> i think it's appropriate. i don't think free is necessarily a new thing but jp morgan is one of the largest

financial services companies out there and spending billions on technology any time you see a big firm kinds of make a splash like this, it's a little concerning i wouldn't say it's surprising we've been talking about commission pricing for the industry being commodityized and it will come under more pressure there are firms like schwab underwriting new clients and have promotions for individuals at zero commission so it's not necessarily a new thing. i think that's why the market is taking it in stride. we talked to investors about this but i do think it's indicating the direction here that pricing is coming under pressure in areas like commissions and areas like investment product fees. parts of the market that are kmod tiesed. so it's something that i think we're going to have to continue to watch and really what type of reaction do we see from some of the competitors here do sthe rethey reactor see if growth is impacted at all. not a positive given the muscle

that jp morgan has. >> gir ard, what is the play longer term for jp morgan here obviously they are not in the business of giving away financial services the argument has been that customer acquisition is very expensive, no matter what products you want to offer to somebody they'll put balances in with the firm or enable you to market them where do you see it going, either with jp morgan or other integrated banks >> you put your finger right on it what this is all about, the jp morgan's way of growing their customer base, so if they can attract new customers with this type of product, and then cross sell into those customers other more profitable products, they come out ahead the company has done a very good job over the years in using -- sometimes in commercial lending for example, they may not make their internal rate of return on the first loan but when they cross sell other products into the corporate customer, they make the money. you're going to see that here with this type of attempt to

capture more consumers with this type of product. >> isn't this devin, where the industry was going anyway? we saw fidelitity cut fees to zero and van guard has been doing this on etf. how long before investors won't have to pay fees >> that's a knowing question but clearly we're going lower. right now a lot of the stand alone brokerage firms are generating operating margins of 40 to 50%. when you're at the really high left of profit you can take that and invest into your platform adding new products and services and also invest into pricing i think that's what we're seeing here and the fact the backdrop is so favorable today, you're seeing that pace of evolution access rate. what's happening really, technology as the backbone is allowing firms to provide offerings to their customers at price points we've never seen before but it is also a scale gain.

you have to have scale and got to find ways to add customers at a low price point because you're going to be giving away a lot for free and having to cross sell other products into them. so a long witted way of saying we do think this is the direction of the industry and you know, we'll see how some of the competitors react here but clearly i think the market is comfortable underwriting some customers at zero and that's where we're going probably over the next several years here. >> finally, gir ard, i mean digitization is an important part of this overall effort, right? using the app itself has jp morgan been particularly good at this or ahead of its competitors or have we seen the advances across the industry from the bigger banks when it comes to the use of apps for example on their phones? >> david, i think what we're seeing amongst the biggest banks, the apps are very similar. but the real differentation is coming before the larger banks

and smaller banks and that is quite material but when you compare a jp morgan versus a bank america versus a citigroup or wells fargo or even the regional banks like bbt and pnc, all have comparable apps and nobody really has a significant competitive advantage. however, compared to those smaller banks, the advantage is huge i think you're going to see more of it as we go forward >> sure, given the investment they can make in technology. we're going to leave it there for now. appreciate you're taking time. thank you. >> thank you. >> you're welcome. >> don't forget, check out the entire story we've been talking about, it is on cnbc.com >> good scoop. we'll talk to him next hour. as we head to break, look at toll brothers, shares are rising up 12% after a beat on the top and bottom lines and lifting forecast on higher demand for luxury homes this had been a group that had been beaten up lately.

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let's go to the cme group in chicago. rick santelli with the santelli exchange. >> thank you, tssara a special guest is a medical doctor and former senator of the great state of oklahoma, dr. tom coburn. >> good morning. glad to be with you, sir. >> here's the big deal, i read that we topped 21 trillion with a "t", recently on the national debt not a good place to start but yet there's a lot of fruit involved in this story, apples and oranges and everyone wants to blame the tax reform. tax reform is paying for itself,

revenues up over 1%. the problem is spending is up four times that amount dr. tom, what can we do about this and how did it get out of control? >> well, you're not going to do anything about anything about it because there's not the political will in washington to actually make hard choices and the thing that ought to be scaring people, awakening them is the bid to cover ratio decline from ten years ago to now, what it says in confidence for us to borrow in the future treasury said they're borrowing three quarter trillion dollars more this year than last year. most is associated with spending increase so there's no discipline we have a structural problem in washington doesn't matter which party is in charge what happens is we keep spending money we don't have on things we don't necessarily need and the consequences of that in the long run is a bust in terms of our ability to borrow money.

>> you know, senator or doctor, the problem i have is this president pushed tax reform, many believe that's a good thing, it jump started the economy. but the issue is in the route to getting that done, he signed a bill that was too big with respect to how it contributed to the debt your thoughts? >> i think what he did is set a pattern for congress that they can push him over on spending and so he has to reestablish the fiscal discipline, which means if they send him a bunch of appropriation bills above what they were last year, what he has to do is veto them, and he has to say no, we're going to hold the line we're not going to increase spending we're going to eliminate waste and duplication and fraud, and he he can do that. -- and he can do that. the thing was signing that first supplemental bill.

>> is it practical, possible in other words, part of what is jockeying for with the current minim is not go through that process for military that those on his team will add the things you don't like, so what is the strategy to get it over the goal line >> the only ultimate strategy is to have a constitutional amendment that requires fiscal discipline for washington which means you're going to use generally accepted accounting principles which they never use, they cheat all the time, are not accurate on numbers. and give them a period to balance the budget then have a supermajority say you can add more we have to have structural change on how we spend money in washington. >> dr. coburn, thank you for joining me, airing thoughts on the debt david faber, back to you

>> okay. thank you mr. santelli time to send it to jon fortt, look at what's coming up on "squawk alley." >> david, would you rent your car to strangers we have a company peer to peer car rental nine years old, just raised $300 million. find out what they're going to it with some amazing technology, coming up on "squawk alley. ♪ experience the great lengths we go to in testing our performance line. at the lexus golden opportunity sales event. lease the 2018 is 300 and is 300 all wheel drive for these terms. experience amazing at your lexus dealer.

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mike does an unbelievable job with that, having the fabrics incredibly breathable, functional, useful. >> i want to push the needle forward to see the brand seamlessly transition between on the court, off the court >> that of course was tennis legend serena williams and a fashion designer, teaming up with nike. asked the designer about the relationship with kanye west, they're best friends kanye has his collaboration with adidas, easy line. turns out he was watching. tweeted in response, just on cnbc like, and a picture of a chart we had up. and then tweeted 2015 feels like just yesterday adidas is a great partner.

david, you know i have been all over this, purely from observing the stock chart and turn in business the cool factor that adidas got, the halo effect from launching that line and virgil launching his first collection, the ten last year. the chart tells the story. kanye west watched it. >> you said it made a difference i checked with my 16-year-old. >> teenage boys are the key. >> kanye west watches it, you can watch it david will be here today "clong bl"siel at 3:00 p.m. eastern. "squawk alley" is up next. dow is up 72 welcome to at&t innovations where we give you more for you thing. and here's where we shrink the biggest names in entertainment so we can fit them into our unlimited wireless plan.

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