good morning it's 8:00 a.m. at apple headquarters in cupertino, 11:00 a.m. on wall street, and "squawk alley" is live. ♪ good wednesday morning welcome to "squawk alley." the market is up 167 but take a

look at f.a.n.g., down as tension between china and the u.s. continues to escalate between new tariffs. joining us this morning, co-author of "zucked," roger mcmc mcnanee joins us today what does today's action suggest to you >> carl, i think that the politics of faang have become an issue really for the first time. we've historically looked at these talks for their extraordinary rates of growth relative to the market and i think for the most part that growth is still intact but a couple of weeks ago google failed to show up in front of congress for a hearing, which was in my mind politically stupid on their part apple has, i think, done an amazing job at working with the administration to try to protect

its customers and its products from the trade war that is beginning with china facebook is somewhere in between. they were making a lot of mistakes, now they're doing better politically, but i think that's a sign we need to be cautious, we just need to be careful because there are factors other than earnings that are driving these stocks and that frankly hasn't been the case until very recently. >> roger, at the same time you mentioned facebook seems to be doing better amazon is getting -- >> politically. >> -- is getting ready to head into the holiday season, which is big for them. netflix just did well in the latest round of awards apple has these new iphones coming out, charging higher prices are there any fundamental roadblocks for tech right now, despite the fact that a lot of people are worried that what goes up must eventually flatten out if not come down >> carl, i think that's a really, really important

question i think for facebook there are fundamental roadblocks the changes that they're making right now are indisputably affecting usage. and we don't yet know if and to what degree that will affect earnings my impression is that google is really playing with fire relative to the european union, and now maybe even the united states, and that that is likely to have some impact at some point, although not in the next few quarters i look at what apple is doing. i think that the new iphones are fantastic, but that's not the big story. apple is really differentiating itself on privacy and protecting its customers from an increasingly hostile digital environment. and it hasn't trumpeted that story as aggressively as i would if i were in their shoes but the things they have done with apple pay, the things they have done with maps, the things they have done with their facial recognition and now an ios 12, the stuff they're doing to block tracking bits and to protect

consumers from third parties fingerprinting phones so they can follow them around as they travel around, those kinds of things are a huge deal and they're super different from android. i think increasingly justify the premium that apple phones have over androids. and so i think we're going to see some interesting things. i think fundamentally apple, amazon and i don't know about netflix, but apple and amazon i think are going to have really excellent earnings over the coming period here and i assume that you'll see the same thing from google, but i do think that it is appropriate to be concerned, because google is acting as though they aren't responsible to anybody that's not how it's going to come out. >> roger, in terms of apple, just to dig in a little bit more now that we have these new devices ahead of the holiday season, the fact that the two higher-priced phones are available right now, it's going to be ear month or so before the 10r is available, do you think that's going to drive higher average selling rices?

>> i don't honestly know what's going to happen but i think that's what they want to happen. you know, at the end of the day from apple's point of view, putting out three phones in a line, that's a new game. and i think their notion is, yes, let's put out the more expensive ones first let's get the really energetic people to sign up when those are the only alternatives and then we'll come for the mass market a month from now we'll have to see how that turns out. again, to me what i think is intriguing about apple right now is that because the os is being more and more protective of its consumers relative to android, they have a chance to gain some market share whether consumers are going to care about this or not enough to pay the premium, we'll have to see. but i think apple's differentiation on software is increasing quite dramatically, even as the time that the hardware differentiation gets harder and harder to make. >> do you think apple is vulnerable to nontariff-related

actions by china, supply chains -- >> i do, don't you >> public perception >> yeah. >> i'm asking you, roger. >> this whole trade war thing is so unnecessary and so unhelpful. i mean you sit there, we're ten years into this economic and market cycle you know, we're built on global trade and we've had this really good relationship with china that's been based on essentially giving american consumers the broadest array of choices for products at the lowest possible prices and now we're essentially putting a tax on american consumers. and we'll have to see how that turns out, but i think the whole tech sector is at risk over this apple would be showing it much sooner were they less politically adroit than tim cook has been over the last year or so. >> roger, that's the part to me, apple has got more than 40 retail stores in china right now. >> yeah. >> when tim cook took over, it

was just like knock-off stores that were selling what looked like apple products over there but when you think about the scale of that, how many american brands have that many stores owned and operated stores in china, just kind of employing employees, spreading their culture through the place. i mean that has to make them a little bit hesitant to put too much pain on apple because they're a premium global brand that's actually invested there. >> listen, i'm with you, but i don't -- i don't understand why we're having the trade war in the first place, right this is -- it's sort of like we're -- you know, we're hurting ourselves to make a point that i don't even understand. and so i look at this and go i think we're in dangerous territory here for all of these stocks and obviously not just tech, the whole economy is built on sourcing products in the lowest cost places, doing manufacturing in the lowest cost places, and

china is a huge factor on both of those counts. i just don't see how this ends well it's going to hurt china too at some point they -- there's not that much china can do, but the things they can do can really hurt us. >> although i'm sure you'd see to see some behavior modification on the part of the chinese, roger, right? as it pertains to everything we talk about every day stealing of intellectual property. >> you play the hand you're dealt, carl, right we've been through this before china has built its economic model on manufacturing and export we've built our model on providing capital and then consumption. there's a simbyosis. right now we're going to force that to happen by forcing

interdependence. doing that at the top of a market cycle strikes me as nuts. a headline trump's tariffs won't by apple the way he's met with and discussed all of this with the administration and president trump directly, does this create a template for other tech and corporate ceos to potentially do the same, especially when the president does things like takes to twitter to attack certain companies? >> i sure hope so. i mean seriously, i think anything anybody can do to reduce tensions in trade is really good for the market, really good for the economy. and so i hope that that playbook gets adopted by everybody and that the president is as smart in dealing with the rest of the economy as he's been with dealing with apple and so fingers crossed on that >> roger, i've got to get your take on cannabis today till ray is one of the stories

of the morning the stock surges 1200% since the july ipo take a listen to tilray's ceo on "mad money" talking about growth in the cannabis space. >> you've got far less cash than canopy, they have $5 billion isn't this the time to strike and raise capital, which by the way there would be nothing wrong with saying, yes, we need more capital. >> we obviously need more capital, which we should in our prospectus the intent is to build a global company. we're in 12 countries today on five ontinents it's very clear that we'll add additional countries in the coming years, so that requires us to increase our capacity substantially as we introduce products such as these and medical products around the world. >> roger, i don't know if we've had a chance to ask you about what you make of the whole movement, about the price action, the limited number of

players, the ways to play this, the change in national law in a neighboring country soon. >> so, carl, this is not an area i spend a huge amounti of time o but i was involved for civil rights reasons in california's adult use legalization program so i'm very familiar with the folks at privateer who are the biggest investor in tilray and they are smart people. i think they have nailed a core issue. we're dealing with a crisis around opioids right now, and there are elements of the cannabis industry, cbd is the form of it that people talk about, that can be used as a substitute without the risk of addiction, without the risk of abuse. that, i think, is such an obvious thing that it should be embraced globally. tilray, i mean they absolutely have built that thing the right way. you look at the market enthusiasm, right? right now the problem is there's just not enough supply of companies, and the rules are so

nuts around the world. i mean the rules are the way they are for political things from 40 years ago that have literally nothing to do with reality. you know, the medical applications of cannabis are huge tilray is a leader in that whole space. you know, they deserve to have the success they're having now i hope brendan goes out and raises a pile of cash while he's got the valuation. let's face it, that valuation is nuts relative to where the business is today, but some day it's going to be -- it's going to be a real industry. >> but does that mean you buy here with a five-year time horizon? >> i don't, but maybe somebody else does. you know, i look at the world today, carl, and i think the issue that you've got is because of the politics in this space, the industry largely operates in the united states as a cash business there's no credit, no banking, no nothing i mean those -- it keeps it in a

preindustrial state. it's impossible to grow the industry appropriately when you're not allowed to use any basic business tools like distribution, like brand you know, in canada, which is where tilray operates, things are moving into the 21st century, slowly but very steadily they're going to have a nice base from there and they can export it to other, shall we say, countries where the politics are more reasonable but it's going to take a long -- i think a lot longer than five years to grow into that valuation, but who knows markets get to make their own choices. i'm going to just enjoy watching it and wish brendan and his team just nothing but good luck because they're great people and they have done an amazing job there. >> just to dig into that valuation a little bit more, roger, i'll use tilray as an example, but we've seen this throughout the pot stocks in recent weeks and months. tilray went public in mid-july and the stock is up 1200% since

then it's getting compared to things like bitcoin and this idea that maybe it's fast turning into a bubble >> and i think that's demonstrably correct in my mind one of the questions i have is whether some of the speculation that was going on in crypto has moved into the cannabis stocks during this collapse in the crypto space i think we've talked about this before having all the retail speculation in crypto was really good for the stock market, right, because it meant that the stock market was basically trading on what sophisticated investors thought the market was worth, which is not a perfect indicator, but it's better than having something nutso going on. i just wonder if the collapse of crypto hasn't brought some of the speculative fever into the stock market and that's all basically gone into cannabis that is certainly how it looks to me, but who knows >> so you're saying that the

unsophisticated investor is getting lured away from the mainstream market is perhaps a good thing >> well, i'm saying if you're an investor in the public market and you want the bull market to continue, you don't want crazy speculation going on that creates bubbles that have to blow up. bubbles are fun when they're going up but they're no fun when they burst whereas, the kind of slower, steadier gains that we've seen in the market over ten years have been fantastic for investors. there's no obvious reason why that has to end if we don't do something dumb on trade or don't have a bubble. you know, cannabis is a tiny littlecategory, so you can hav all the speculation you want there without hurting the market. >> tiny, but getting bigger. >> getting bigger by the instant. no, that's right if you keep going up 1200% every six months, it's going to be the size of global domestic product within a couple of years >> roger, good stuff we'll talk to you soon thanks. >> take care president trump is in north

carolina this morning where recovery efforts have begun. let's get over to seema mody for more. >> reporter: morgan, residents say they welcome any support from president trump and the administration as you can see, new bern, one of the hardest-hit towns from florence is in recovery mode this is a truck at a disaster relief center that is unloading cargo, critical supplies including cleaning supplies, food, as well as water let's make our way inside the disaster center and you can see a number of residents here are lining up, waiting to come inside the problem is even though the up to is in recovery mode, power outages are stubbornly high. across the region, about 267,000 residents still do not have access to power. duke energy says full restoration of power won't come until september 26th, which is about one week from now. that's a lot of time to go without power. in the meantime, they can't keep food at home so they're

prompting them to come here to get water. you can see these volunteers here are organizing the tables we had water over here, hygiene products, wipes for babies, food, macaroni and cheese, so it's really a collaborative effort that also includes home depot. earlier this morning we spoke to a number of emergency personnel, including the red cross, fema and the national guard so this has really extended -- or become an extensive effort on behalf of a number of organizations to help out with the recovery efforts as the carolinas really try to get back to a state of normalcy guys, it's going to take quite some time. you saw that note from moody's analytics. they say that the damage incurred by this hurricane could cost as much as $22 billion. >> seema, thank you. seema mody in new bern, north carolina. coming up, amazon's jeff bezos taking center stage at the air force association conference later today, where space is a big focus. we'll have an exclusive interview with the air force

secretary, heather wilson, on the future of the space force and expanding the air force. the stocks at session highs near all-time highs as well we've got the dow up 200 pois. quk le will be right back this isn't just any moving day.

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trump says he's willing to tax it all the white house is watching to see how beijing responds one weapon that china says it will not use is its currency overnig overnight the premier said the recent fluctuations were intentional and said that is not true and would do more harm than good to china. >> instead of engaging in competitive devaluation, china will work to create conditions for keeping the value of the yuan stable. >> still no word on whether china will accept the invitation from treasury secretary steven mnuchin to re-engage in trade talks. while that's on hold, the u.s. is moving forward in its negotiations with canada president trump spoke with prime minister trudeau last night. a spokesman said trudeau reaffirmed his commitment to a deal that works for both

countries. trump just yesterday pointed to canadian dairy subsidies as one of the remaining sticking points now, we just saw foreign affairs minister chrystia freeland arriving at the u.s. trade representative's office for talks. she said negotiators had been working through the night. she was spotted at the airport, guys, wearing a t-shirt that said "keep calm and negotiate nafta. that is good advice for all of us back over to you >> thank you for that. big annual conference from the air force association is under way just outside of d.c. jeff bezos speaks later today. meantime, i did catch up with the secretary of the air force, heather wilson, for an exclusive interview. take a listen. >> what we had to lay out and what we were asked to lay out is what do we need to implement the national defense strategy given the return of great power competition. in the past really for the past two decades the air force has designing a budget year by year and it was the air force we could afford, not the air force we need. we need to set out for our

countrymen what is the air force we need to do the job that the nation has asked us to do. >> and now in terms of how you are building and fortifying the air force right now and given also the fact that there is a focus on cost throughout the broader department of defense, how are you looking to do this >> well, the congress has given us some new authorities for prototyping experimentation and to move things faster and weaver doing that across the board. in space we have a half billion dollar consortium where we have 188 companies, 124 of them have never even done business with the air force before we put out a solicitation and we're going from solicitation to contract to award in 93 days we're about to change the way we engage small business where we do a solicitation, they give us a short concept, we invite them in and it's one day from they do their pitch and they walk out with a signed contract, a one-page contract and the funds. so if you get a paypal account,

you should be able to do business with the air force. >> and how about the role artificial intelligence and other new emerging technologies are playing in the air force >> certainly artificial intelligence and machine warning is the way we're going to have to innovate faster than an adversary but also in the way we are doing software we set up a new software factory in what we call our program digital. it's based out of boston but it's nationwide and we're delivering apps much faster, everything from distributing weather information to pilots to doing scheduling for tanker sorties. >> i have to get your thoughts on the other big news of the week, the plans to restructure and create this stand-alone space force. your office put out what is being called the first official estimate on plans to do this, $13 billion over five years. how did you get to that number >> a new department has costs associated with it you've got to have all the budget people and people who recruit and all of the things that an independent department

does we put forward what i think is a bold idea to dominate in space that the president is going to have a proposal that's tied to his budget next year we also don't have to wait until then the air force has a lot of authorities now to continue to accelerate defendable space so that we dominate and win so we are supporting the president as he developed his proposal for the congress and we are not waiting to continue to accelerate our ability to dominate and prevail if called upon to do so. >> of course this establishment of a space force, this proposal to do so, has been somewhat of a controversial issue. the air force association put out its talking points on the topic this week as well saying, quote, today to split up the well integrated set of air and space capabilities that have been organized seamlessly to contribute to america's military capabilities would result in more harm than good. is that the case >> our objective as the air force is to continue to accelerate dominance in space.

the president will put forward a proposal with his next year's budget for the congress and executive branch to consider are there ways to improve things, and what are the problems we're trying to solve and then how best can we solve those problems that will be a debate that takes place over the next six to eight months. >> how do you assess the risks globally right now, and how from an air force perspective would you rate readiness in terms of being able to counter that >> morgan, the united states has returned to an era of great power competition. the national defense strategy recognizes this and we have to see the world as it is, with a rapidly innovating adversary in china and russia you're right, last week they conducted the largest exercise, military exercise in russia that they have had in four decades. so we have to see the world as it is and be prepared for that that means enhancing the

lethality readiness of our force. it also means as we did with this project that we announced this week, we look at what is the threat doing, where do we project it to be in the 2025, 2030 time frame, and then what is the air force we need to meet that threat. >> so, guys, secretary wilson putting out this plan this week to grow the number of squadrons within the air force by 24% through 2030 obviously talking about the space force and the proposal right there to carve out space as its own separate stand-alone entity within the military that's been, as i mentioned in this interview, a very controversial issue. the air force has publicly got on board and put out their first numbers we've seen in terms of $13 billion is what it's going to cost the next five years. >> what does that buy you, the $13 billion? >> the $13 billion is going to get you your own sixth branch of the military i've got to go through the

numbers, they're in front of me. but it's tens of thousands of people -- >> additional satellites more training? i'm just wondering where they -- >> about 90% of the military space capabilities take place under the air force right now so it's going to be taking those out and taking other space capabilities out of other areas of the department of defense and the intelligence community and basically making them stand-alone. >> we're not sure if it's $13 billion in new incremental spending it's money coming out of other's budgets as well? >> i don't know the answer to that i've got to go through the details. >> kudlow is talking about addressing entitlements next year how much do we really have to spend on space >> i suspect the air force is not looking forward to a multi billion dollar reduction in its budget in order to give birth to the space force. something tells me they'll figure out a reason to keep their budget as high as possible it is government, after all. >> and of course this conversation is happening as we get this new defense spending bill moving through congress or

actually on pace for the first time in a decade for that to be passed in congress on time so we'll see. coming up later today, i'll be sitting down with the deputy secretary of defense as well and jeff bezos, his keynote today. that will be happening during "closing bell. stay with us. and up next on "squawk alley," amazon under the microscope european regulators opening an t obagnsthe ait e e-commerce giant we'll be right back. office. we lacked the technology to be flexible and productive. then cdw orchestrated a collaboration solution for us. using the lenovo x1 carbon. powered by intel core processor technology. now we can access our network and work together from anywhere. hey! hey everybody. you coming back for the team building? mobility by lenovo. no? it orchestration by cdw. ♪

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the market closed a couple of minutes ago across continent so let's get to dominic chu. >> the european markets edging higher again today, delivering four straight days of gains. a volatile session for the british pound, jumping against the dollar after inflation data

came in a little hotter than expected prices jumping for the second time in as many months but the currency gave up some of those gains after reports that uk prime minister theresa may had rejected an improved offer from eu chief negotiator michelle barnier that pound trading roughly flat against the dollar ahead of that key meeting with the european leaders now in austria later on today with regard to brexit. among the corporate names in focus, the ceo of denmark's largest bank is out after a year-long investigation revealed $230 billion in illicit transactions flowed through its eston estonian branch. moving on to some of the other stocks out there, german chemical company linde group secured its merger with praxair. they are close to selling more than $200 million in assets to

relieve regulatory concerns over the deal. and amazon moving to session lows after eu regulators have opened a preliminary investigation into whether they could disadvantage some smaller merchants selling products on its platform they have faced heightened calls for more regulatory scrutiny and intervention back over to you guys. >> dom, thank you. dom chu. let's get to sue herera and get a cnbc news update good morning again, sue. >> good morning, carl. good morning, everyone here's what's happening at this hour president trump says that he will have to, quote, make a decision, endi quote, if supreme court brett kavanaugh's sexual assault accuser makes a credible showing before the senate judiciary committee on monday. christine blasey ford alleges kavanaugh assaulted her decades ago. he denies it the senate panel has invited her to testify but she said she doesn't want to appear before an fbi investigation takes place. a fast-acting school bus

driver got a student with a gunshot wound medical help in florida this morning the high schooler was shot in the chest while walking to his bus stop in jacksonville he managed to board the bus, then the driver headed straight to a nearby fire station the child has a wound described as life-threatening. diabetes is still an epidemic in the united states. a new report from the cdc estimates one in seven adults now has the disease and nearly a third of those patients are undiagnosed. diabetes is most common in men, older adults, hispanics and blacks and tired londoners can now grab a quick nap at a sleep pod for $20 an hour. the rooms come with dark walls and a lavender aroma to help with relaxation. each pod is supplied with ear plugs and an eye mask. we could do with some of those here's on those longdays you're up to date, guys. i'll send it back downtown to you, carl. >> we'll talk about how they

clean them later on, sue. >> well, that's the other issue. ew when we come back, the reviews are in why some say new health features are making the updated apple watch a must-have. the dow up 202, is now about 170 points from its own all-time high "squawk alley" is back in a minute

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amazon now in the eye of the regulatory storm, or closer to the eye. european commissioner for

competition marguerite bestier speaking about the company saying she is probing potential antitrust abuses >> they're both hosts and they also do the merchants themselves the merchant business themselves and the question here is about the data, because if you as amazon get the data from the smaller merchants that you host, which can be completely legitimate because you can improve your service to these smaller merchants, well, do you then also use this data to do your own calculations? >> i don't know that we've seen data enter the equation in quite this way before and that comes on the same day we got e-marketers saying that amazon has moved into third place in share of digital ad spending, now following facebook and google sorry, mike microsoft. joining us, guys, welcome. is this bad for amazon

it seems that the european commission looks at everybody. ed, i'll start with you on that one. they looked at apple over itunes just because they're looking doesn't mean you're going to get hit with a massive fine. >> not necessarily but if you see what they have done with google, the big fines they levied against them and are taking a close look at facebook. these are european regulators looking at u.s. companies. there's always been a natural tension between u.s.-based companies and regulators outside of the u.s., so that's a normal thing. the thing about amazon, however, it's not just in europe, but in the u.s. as well, legal circles, a lot of people are looking at do we need to revamp our age antitrust laws to take into account how companies are creating a monopoly that the current laws don't know how to define in the case of amazon, it's always in terms of, well, is it better for consumers yes, it's better prices tend to be cheaper, more veengt but another customer is the vendor if you think about the raft of retailers on amazon and at their

behest, i think that's another aspect that isn't fitting into the current antitrust laws and that's one way people wanting to look at it, whether it's the eu or u.s. >> marguerite seems to be saying that there could be a problem if amazon is using the data it gets from smaller retailers in order to eventually crush them, because it's in so many of these areas itself it's a novel antitrust argument. do you think it has a big impact potentially on amazon? >> i don't think it's novel. the european union when they looked at google search a while back, they said google can collect this data, because they have this vast amount of data incoming, they make search better it is harder for a new search engine to show up with that amount of data and compete and levied some fines against google so their antitrust policy is on maintaining competition. the supreme court just said we don't really care about

two-sided markets as long as prices for consumers stay low, you can do whatever you want that standard is in fact under a little bit of attack right now people are trying to change it "the times" just wrote about it actually i think that's a really interesting place for the european union to look at how big tech giants work they collect more data, they get bigger and it's harder to compete with them. >> i'm curious what you make of these e-market numbers today is that bad from an antitrust standpoint because they're even more powerful than we thought or is it good from an antitrust standpoint because they're breaking up the facebook and google duopoly. >> we all do it on our websites so i think it's good to see competition in the market. amazon, if you look at where they're doing it, it's on their site they're not doing ads across the web like google. they're focused on that bottom of the funnel, you have purchase intent, we're going to show you some ads when you search for a

product. i think they have a user experience problem there when you go search for kinds of products on amazon, you get pages of ads before you see that list of things that you might be looking for. they'll have to balance that. >> any thoughts on that? >> i think that's exactly right. another context around amazon is if you're an advertiser, it's just another safe space to advertise, unlike youtube where you might be next to a terrorist video. so if you're in the mindset of buying, it's a good place to be. the other context is that amazon is selling ads for products it doesn't sell either. so verizon service, there are banners across their home page for that so i think marketers are looking for more regular safe spaces amazon is clearly one of them. i think there's a lot of untapped potential in terms of how they could exploit that in the best possible way. it's only going to get bigger, that's for sure. moving on to talk a little apple. compared to some of the more restrained new iphone xs critiques, reviews for the watch

are glowing. perhaps the more important question for investors is whether the watch can ending up pulling in a significant amount of revenue whan do you think of this new watch and the potential for it to become not just a sidecar to the iphone but something that has more of a life of its own? >> i don't think it's a sidecar, it's the best-selling watch in the world even before these new upgrades. >> but it's not even broken out in apple's earnings results. people looking for the next hot category like iphone/ipad haven't been able to point to the watch as of yet. >> i think that category is, hey, don't look at apple music yet. that category covers up a lot of things but it's driven by the watch. apple doesn't have another china to unlock with iphone sales, so i have the iphone xs max here. it's a huge screen, people are going to buy it. i think it's great and peep will like it a lot.

that's not going to drive massive growth in sales. apple is going to say, hey, you bought an apple watch. now it's much harder to leave the ecosystem. hey, you love those blue bubbles in imessage, you're here forever. that means they can continue to drive up average selling price of the phone they can make sure they have steady demand for every phone model that comes out they can push phone technology at the very high end with products like this, even higher, while maintaining that new iphone xr model which pushes the price up to $750 i think that's the game that they're playing. i don't know -- you have to have an iphone to have a watch, so i think it's inherently tied to the phone until they completely break it apart. >> we keep hearing that health care is the holy grail and sort of the next big domain for tech companies. when you look at the health care upgrades on this watch, does that make the case >> they're clearly moving in that direction it's something that tim cook, the ceo, is personally very

invested in. he sees -- he's hoping to see a way that technology can improve your health. this is certainly one way of doing that i don't think that's the reason why people are buying the watch. i think they're buying the watch because, oh, this looks really cool now or i like the upgrades and like the bigger screen i railroad have -- already haven iphone and this is the next thing to get that's not the reason people are buying it. >> i was hearing yesterday about people who wear a regular watch and an apple watch on the other wrist. have you heard this? >> yeah, i actually have heard this, but i don't understand it. >> my favorite is people who have an apple watch that haven't set it up and they're just wearing it when it first came out there was a great picture of carl loggerfeld and it was just the setup screen on its wrist. that's perfect that's what you want. >> that's like wearing a dollar bill just to do it always great to have you guys

here with us. >> thanks. before we head to break, rick santelli, what are you watching today >> of course i'm watching higher rates and i'm also reading about the bank of japan. you know, prime minister abe tomorrow most likely will be looking at another three-year term find it odd. we're looking at our rates, being nervous about them going up, and prime minister abe is just hoping maybe they can do some normalization before his term ends. crazy, right magic number today 48. tethbrk.it afr e ea hi i'm joan lunden.

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here's what's coming up on "the halftime report." we are tracking the path to new highs. less than 1% from an all-time high in the s&p. the dow is up triple digits. here's the question. come on, is there anything at t? plus, your call of the day is on an energy stock in an oil space nobody is talking positively about. we're going to dig into that name and that call and find out why. and supermodel and philanthropist petra nemcova recovering from hurricane florence and still thinking about the damage that was done last year in the caribbean as well we'll see you in a couple of minutes. meantime let's get to the cme and "the santelli exchange." good morning, rick >> reporter: good morning carl the bank of japan met today and other central banks policies and how they proceed with ultra low

and ownership of securities when it comes to euro zone and the bank of japan. lots of ownership. how will it end? i know that 7 to 2 vote today to keep monetary policy unchanged what does that mean? minus 10 basis points with regard to the rate and target their japanese government bond right at zero percent. and contrast that with the conversation in the states oh, my god, rates are going up well, of course they're going up stocks are going up. the economy is looking pretty well many metrics measuring things like confidence or more than a decade plus, like a decade and a half, 14, 15 years, we have a lot of things positive in the economy on the jobs front, wages are starting to move although they haven't really impacted inflation. can you imagine where the discussion would be if rates

weren't going up maybe there's a problem with how the curve is moving. but contrast all of that with why they're not going up faster. i bring out the bank of japan, the ecb, the relative value trade. see, the issue that makes it complicated high rates make the dollar very expensive to own and hedge. so therein lies the conundrum. let's look at something interesting. here are treasury rates the last day of 2017. 2.41 on 10s. the fed was 1.25 and they'll add another 75 where are 2s, 10s, and 30s now 2s are 93 up 66 on the 10s. and the magic number of the day 48 basis points on the 30-year bond is it really that shocking with 50 basis points higher on fed

funds, 25 on the way that this is up 48 basis points approaching 3.25 i don't think so carl, back to you. >> rick, thank you very much we need your guidance now more than ever. rick santelli. let's check on the markets, dow is just off session high the s&p is up almost five. this isn't just any moving day.

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investors are not seeming to mind the action in f.a.n.g., the 10 year and ongoing tensions today. >> f.a.n.g. is not looking great. facebook went positive a bit and interestingly stocks linked to china getting a bit of a bid as we approach the halftime of trade. jd, fitbit, thought to be hit by tariffs, alibaba up better than 3% at this point >> that f.a.n.g. weakness is the reason the nasdaq is the underperformer but, guys, we have in addition to looking at the markets we've got more coverage from the air force association's conference later today as well. deputy secretary patrick shanahan will be sitting down with me on "power lunch" to talk about military readiness, geopolitical risks and then jeff bezos in closing bell in a fire side chat we'll be tuning in to that as well. >> that's going to be huge as the race heats up.

>> definitely taking a more high-profile stance. >> i wonder who he will send around which interplantory body. >> probably a few people he would like to send into space. and probably less regulatory trouble for him there. >> brian is filling in on "the half." thanks, guys welcome to "the halftime report." i am brian sullivan in for scott today. your top trade this hour, u.s. stocks, what else. they are closing at new highs once again the s&p 500 outperforming every major global market this year. will the u.s. continue to fade it is noon and this is "the halftime report. it's the rally that won't quit stocks are closing in on a new high is there anything that can stop this bull market three bullish calls on three tech stocks. what the street says lies ahead for