good morning it is 8:00 a.m. at apple headquarters in cupertino, california 11:00 a.m. here on wall street and "squawk alley" is live. ♪

good morning welcome to "squawk alley." i'm jon fortt with sarah brennan. carl is on assignment. we start with apple. the stock moving higher after reporting quarterly revenue boot at $84.3 billion more important, guidance that was a lot better than the street feared that's above lower wall street estimates. apple saying all of the decline, well, in a way, was driven by performance in china, where the company saw a near $5 billion loss in revenue last year. issues in other areas were from a revenue perspective. a lot of that can be explained by greater china joining us now to discuss, wedgwood cio david rolfe as well as bmo capital managing director and senior analyst, tim long good morning, guys tim, is this all about not as bad as feared? is it about the services number, which is also pretty strong. other data they gave 5% is a pretty nice bump >> yeah, it's pretty good.

i'm a little bit surprised by, we've seen a lot of technology companies have bounces like this, particularly semiconductors and cyclical type of companies, so it applies to me that people think the worst is over. but the focus might start moving to, what's the next product cycle going to be. and at this point, we don't know anything compelling until later this year. it's a little harder for me to make a cyclical call on the stock here, given how much numbers have come down our numbers compared to two months ago are down 16%. we've seen a real gap in valuation and fundamentals, which makes me a little bit more concerned right now so david, what's the new investor thesis for apple? if you believe in it, if you're long now, is it still about the iphone, more about services, just consistency >> i think consistency and certainly services.

step back and think where we were, when the stock was up in the 230s and it declined dramatically, down to 140. we've had a significant reset of earnings expectations. the numbers right now is about 11.5, maybe 13 bucks a share in 2020 but i think what we haven't reset are street expectations. i think, i'll take the other side of the debate, with your other guests i don't think street expectations have been fully reset. if we don't have anymore earnings cuts, and we start focusing on that 13 number, as we get through the balance of this year, no more cuts. right now, the stock's at 162. that's about 12.5 times 2020 that's not taking into consideration the cash i think this stock slowly moves higher as street expectations come around, that the stock is

still cheap and we've had a significant reset. so we're bullish and we expect a higher stock price through the year >> tim, the company is cutting prices on iphones outside of the u.s. due to the stronger dollar, repricing in local currencies. what seems unclear to me right now is whether you see that begin to push through to services and the prices on services if that happens, what does it do to the shifting narrative towards the growth in that business >> yeah, it's very complex math here, because on the one hand, the services were a little weaker on a growth standpoint than most expected, largely because there is a component that you need new device sales so, obviously, there's a price elasticity issue here. so the company, at some point, is going to need to lower prices but i've covered stocks for over 20 years they're very sensitive to that gross margin line. the gross margin guidance below 38 is kind of a psychological level. now, whether or not they cut it on services, we'll see but there are certainly other pressures on services where some

of the app developers and content providers are trying to bypass the iphone in the process, to avoid that payment so there are certainly a lot of different pressures on that services line, other than just new phone purchases. >> i mean, we've asked this question so many times about whether apple should be valued as a services company, but now that we saw the profit margin and the continued growth, despite the iphone decline, does apple deserve a different valuation on the services business, to be valued more like other services competitors >> i think it's still 15% of revenue, so it's a small percent. i covered 20 some-odd hardware companies and that's the lowest i cover. so it is a component zpand it's growing faster than some others. gross margins have come down, operating margins have come down so despite that positive -- >> it's just not big enough? >> it's not big enough and i

would not do a sum of the parts valuation, because they're not going to strip that out and sell it so it's harder for me. i think it's a nice thing to have, the wearables, so they have some good goethe businesses, but they add up to 25% of total revenue unfortunately, people want this to be more than an iphone story, but ultimately, it still is. >> very much and david, it seems to me that the number we really want from apple on services is paid accounts, right? they talked a bit about paid accounts, but they keep giving us this overall active advice number, even active iphones. 900 million is an impressive number but just because i get a new apple device doesn't mean all of a sudden i'm going to start paying for more services if i already have five or six apple devices in my home, don't we care about how many individual paying accounts there are to measure services growth >> sure. and it's a portfolio of services we start thinking about all the subscriptions that apple users and other device users under tvs

are subscribing to, it's starting to add up and apple needs to get in the game, even a little bit more particularly on to video streaming. you start looking at these individual subscriptions, and all of a sudden, you've create your own bundle and at some point, and we've already seen it, that some of these services have to compete more on price and so, yeah, i think you make a very good point. >> tim, apple is still sitting on a mountain of cash right now, returning to it shareholders through buybacks and the like, does that still make the most sense, or should they be putting that capital to work in other ways, especially if they are looking to grow that services business >> yeah, the company has been unwilling to make a large acquisition. they've believed in developing themselves i think the narrative, at some point, needs to change here. so, we've seen a lot of companies, particularly i cover some big hardware names that have a lot of cash that was offshore that have done big buybacks, and it hasn't

necessarily resulted in -- if you look at the stock price of what apple bought back the last three quarters, it's been very negative for use of that capital. so if they're unable to invigorate on their own, i think, yeah, they could use a push >> but is there anything, even in retropespect, you can look at and say, boy, they really should have bought that it would have helped their story, it would have helped margins. isn't part of the problem, they're so profitable to begin, anything they buy is going to be dilutive to that >> yeah, it's going to be dilutive i think, ultimately, they're going to need other legs to the stool. so, i think, ultimately, they have it in services and wearables, but they probably need a little bit more to move the needle further >> finally, david, you're a shareholder in apple, anything in the numbers yesterday that would change your investment thesis >> no, i don't think so. expectations were so low, i think they hit the trifecta. the -- it looks like the guidance was -- you know, for the next quarter, 55 to $59

billion in revenue, i think there were some fears there may have been a four handle on the lower end. a lot of positive boxes checked, in my opinion, on the services side and finally, the ceo himself said that there's terrific value in apple's stock and again, i hope at these valuations, i would much rather buy back a lot of stock, give existing shareholders a bigger relative piece of the pie. and i'm just leery of a really big acquisition. i think that particularly in the technologies space, it is littered with big, sexy deals that were a disaster i like they current strategy of buying back stock. >> yeah, and so far, this morning, stocks up above 160, trading at 162 guys, it's an ongoing story. appreciate your insight, david, tim, see you soon. >> thank you >> now let's take a look at shares of amd. they are surging again this morning after posting strong earnings results ceo lisa sue joined us earlier on "squawk on the street" to

talk about the quarter and the impact of trade tensions and talks with china take a listen. >> we're watching, you know, those discussions very closely clearly, we would all like to see a resolution skand, you kno, we're somewhat encouraged by the talks that are going on now. but we have to plan for all scenarios. china is an important market for us we have a lot of customers and, you know, both end users as well as partners in china so, you know, we would like to see this be resolved as soon as possible >> the stock was on fire last year it has been on fire of late, too. up more than 15% since the start of the year. up more than 16% today that's, as i mentioned, after being the best-performing stock in the s&p in 2018 guys, it's not that the numbers themselves versus expectations were so great, it seems to me that amd just showed that it's got a whole separate story from nvidia, from intel, because

they've been an underdog for so long, they can have a shared gain story, despite whatever's happening in china can in the z data center. >> stocks up now 75% again over the past 12 months and i think the color and the details around the second half of the year and this idea, we've been having this debate on this show for weeks now, about whether this slowdown is bigger, going to drag out longer, or whether we're going to see a turnaround and it's essentially a blip right now according to her commentary, the second half of the year. >> wasn't the market share gain the story of last year so is what today's results confirm, is that that continues to be the story? isn't there a new competitive landscape out there for the chip stocks right now >> well, it helps that amd has been such a perennial underdog, they have 7 nanometer that continues to come out. we'll see how much share they can gain in gaming and particularly in data center.

that's a big area if they can continue to grow there, guys >> it's the top-performing s&p today. we had a big show, "squawk alley," continuing after the break. former treasury secretary larry summers is going to sit down with us next dow's up 325 points. stay with us ♪ hawaii is the first state in the u.s. to have a hundred percent renewable energy goal. if we don't make this move we're going to have changes in our environment, and have a negative impact to hawaii's economy. ♪ verizon provided us a solution that lets us collect near real time data on our power grid. ♪ if we can create our own energy, we can take care of this beautiful place that i grew up in. ♪

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welcome tobacback to "squaw alley. after the bell, we have another big slate of earnings, including facebook sheryl sandberg, ceo, is going to be sitting down with our own julia boorstin at 6:15 p.m. eastern tonight. you can catch that live streaming on cnbc.com. >> and on cnbc asia, if you want to catch it there. if you're in asia. >> tomorrow on our air >> of course a big earnings report from them, given all of the volatility that we've seen in that stock >> it's up 2%, heading into earnings, down more than 20, though, over the last 12 months. a lot also expected out of washington today investors keeping an eye on the fed, of course, expecting to hold steady on rates in its announcement this afternoon. and there's a new round of trade talks going on china's vice premiere arriving in washington for high-level talks amid growing concerns over china's slowing economy. with us now for thoughts, former

treasury secretary, national economics council director, larry summers. he also has penned a new op-ed in foreign policy magazine with former cea fed chair jason furman with washington's obsession on budget deficits larry, welcome back top nice to see you, secretary summers >> glad to be with you >> so there's a lot of worry right now. our budget deficit reaching $1 trillion big boost from last year i mean, howard schultz has been already talking about that one of the reasons and one of the pillars of his campaign, it sounds like, if he does decide to run, is that growing deficit. how worried should we all be about it >> i don't think it's our biggest problem. when we've got life expectancy diminishing for middle class men, when we've got an opiate epidemic, when our major airports in new york city are crumbling, when americans are paying 75 cents a gallon in extra automobile repair costs because of potholes in highways,

when we are lagging increasingly in key areas of technology, like artificial intelligence behind china, because of underinvestment, we've got deficits, but the budget deficit, which we can fund for 30 years at 3% in the currency we print ourselves, that's not our biggest deficit as a country. and so the first priority needs to be fixing that investment deficit. >> so, when does the budget deficit actually become a concern for ninvestors? isn't that the real risk here? that the bond vigilantes descend upon the u.s.? >> it is -- it is a risk but there are many risks another risk is that the economy will slide into recession. another risk is that with very

low interest rates, we'll have major asset bubbles. another risk is that because of underinvestment in education, our kids won't be prepared to compete in the mid-21st century economy. you have to judge the priority of risks and, you know, the market makes a judgment about that when it prices long-term instruments than when it prices short-term instruments. and the fact that markets are pricing long-term interest rates at such a low level is telling you what the current market judgment is. so, would it be better to have less debt? of course. would it be better to have a smaller deficit? yes. but if we find a way of generating extra revenue, which is a higher priority paying down a bond on which we're paying 2% interest or investing in the future of

the country? whether it's in infrastructure, whether it's in science, whether it's in our people i just think we have many higher investments that pay much better returns than the 2, 3% we can save by paying down debt >> larry, when you talk about an investment deficit, that sounds like more spending and adding more to the current government deficit right now. unless you're doing a major overhaul of how the government operates in general. is that what you're proposing? >> no, exactly i think what the article that jason furman and i wrote puts forward is that we should operate broadly on a pay-go basis. that is, if we want to do new things, we should figure out how to pay for them with higher taxes and there's plenty of room to do that by adjusting aspects of trump tax cut that has done zero, nada, for investment and

economic growth. i mean, heck, business only wanted the rate cut to 25% and it was cut more than business was originally asking for, down to 21%, and that's brought a lot of stock buybacks. that's brought some increase in dividends. there is no evidence of any kind that it has brought any increases in investment or employment of any significance so there's things to do to correct the trump tax cut, there's tax shelters to close. why should it be that a billionaire is far less likely to be audited in america today than they were ten years ago that can't be a sensible allocation of resources. >> all of this deficit stuff has made me even more cynical, if that's possible, about our, just political lay out and situation here it used to be, we had people who seemed to care about deficits.

there were deficit clocks and we were stealing the future from the children now some of those very people are saying, well, it turns out deficits don't matter. probably until the other party is holding the pursestrings, and then they're going to matter again. so ways the reasonable ground to stake out? i guess you're getting at it partly in this paper, on how to really talk about this, in a way that's going to get something done, that's good for the economy long-term. >> so first of all, the other party is in power right now. and i'm saying that the deficit isn't the top issue facing the country. so i'm not -- >> i wasn't criticizing you, i was criticizing everybody in the party -- >> so i'm not doing the partisan thing you were describing. look, i think you have to make choices and you have to make moderate choices and the doctrine that furman and i laid out i think is the right, moderate doctrine. if you want to pay for things -- if you want to do new things, you have to pay for them but if new revenue comes in and

you have to make a choice between investing that revenue and using it to pay down debt, if you've got investments that you can make that have a return far above 2 or 3%, you're better off making those investments and that's the value judgment that i'm prepared to make. that is not a judgment that it wouldn't be better to have lower debt and lower deficits, it's just the country, like a family, has to make choices about what the most important priorities are. and if you're a family, it's good to pay down the mortgage. really, it is. but it's probably more important to send your kid to college. and in the same way as if you're a family, it's good to pay down the mortgage, but better to fix the leaky roof, i think we've got high-priority areas where

government has stepped back and it has to step forward p i mean, think about it at a moment with all of this concern, with all of this concern, with equity and fairness. why should we be opening up new tax shelters and why should we be be ramping down tax enforcement on the wealthiest people in the country? it doesn't make sense and that's why there's room for us to do better and i have to say, and i know this is not the view of many of your listeners, that when i hear very wealthy people, many of whom fly on their own private planes start talking about how we need to find the courage to cut social security benefits, when the maximum social security

benefit that anyone in the country receives is about $40,000 for an individual, that just seems a very misplaced kind of emphasis. >> so, this is all getting at the current debate right now for the hopefuls of 2020, secretary summers. are you supportive of senator elizabeth warren's wealth tax proposal that would only affect, i think, 75,000 households, taxing the uber rich with over $50 million in assets. is that something -- >> there are a lot of things that should be looked at i am for an increase in progressivity. the places i would look first are to closing shelters, broadening the base, increasing compliance, equalizing upwards the rates on capital income. fixing the estate tax loophole

those things, i think, have very large potential. and i would be looking to realize that potential before i moved into whole new areas of t taxation i've been trying to study the wealth tax since senator warren put it forward and it's too early to reach definite conclusions. i think we do feneed to study pretty carefully why it is that most of the european countries, who usually are more progressive than we are, and who had wealth taxes, have decided over the last 15 or 20 years, to eliminate those wealth taxes, and why almost none of them get anything like the kinds of revenue that senator warren is aspiring to get. so, those are questions that i think need to be looked at, regarding the wealth tax >> are you advising any of them? any of those democratic

hopefuls >> you know, i give advice, including on your show, to people who are interested in thinking about economic policy but at this point, the only judgment that i've made is that the current administration has really been quite dysfunctional in its policies in the economic area and that i hope an administration more committed to support for working with allies, more committed to a bubble up economic philosophy rather than a trickle-down economic philosophy, and it just believes in using the honest laws of arithmetic in thinking about economic questions that's what i think the question needs going forward. >> okay.

thank you, larry, always good to get your take. >> good to be with you >> larry summers, former treasury secretary of the united states >> advice and opinions as we head to break, session highs for stocks, 320 points higher for the dow right now take a look at the best-performing names in that average. and today, so far in the session, boeing and apple both higher post earnings and microsoft up 2% ahead of its report following the bell later today. we have a lot more "squawk alley" straight ahead.

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welcome back, everybody. i'm sue herrera. here's your cnbc news update this hour. u.s. and chinese negotiators starting two days of high-level talks in washington aimed at settling a six-month trade war u.s. representative robert li t lighthouser welcoming the trump administration beijing has retaliated with import taxes on $110 billion in u.s. goods

a deadly arctic freeze blasting the midwest in minnesota, schools, businesses, and the state senate have all closed their doors along with the postal service. windchills approaching minus 50 degrees. two people were killed and four more injured when a grenade was thrown into a mosque in the southern philippines where muslim teachers were sleeping. it is the second explosion at a religious site in that area this week and german police arresting three iraqi refugees on allegations they were planning an islamic extremist bombing attack they were taken into custody in an early morning raid by a s.w.a.t. team in a town near the border with denmark. you are up to date that's the news update this hour i'll send it back downtown to you, sarah >> sue herrera, thank you. it's time for the european close. seema mody here at post nine with more on today's sort of mixed action >> mixed day of trade for europe a lot of focus on those trade talks coming out of washington between u.s. and chinese

officials. the question is, will we get some type of commentary on structural reform? we also have some data on the economic front in europe inflation in germany holding at 1.7% this month. that's in line with what we saw in december. but it is below the ecb's mandate of 2% today's trade, you did see germany as the notable loser, down about 0.5%. uk markets, mostly higher following a round of brexit votes. the pound holding steady at $1.30 against the u.s. dollar. broad-based gains against the miners, glencore up 2.5% given the rise we're seeing in base metals this morning. and let's pivot to earnings. a lot of focus on lvmh's earnings, citing strong momentum in china across multiple units from spirits to apparel. management, there, though is cautious about the rest of 2019. you're looking at shares of lmvh

up 7%. it's the best day since july of 2016 i guess the big question is whether this is a company-specific story or whether other companies like caring and beurberry are seeing similar strengths. >> maybe not as bad as feared on the chinese market >> exactly >> thank you take a look at shares of apple, speaking of china, as we head to break. they're rocketing higher today off the back of its results, almost up 5% is the worst over for this stock? we'll tell you whaticot m ok told cnbc about the quarter and china's impact on sales, next. ♪

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declining iphone sales continue to be an issue for apple, following the company's earnings after the bell last night. our josh lipton talked to ceo tim cook about the quarter, joins us now with what he said josh >> john, one big pressure point there for the iphone franchise, a weakening chinese economy. apple's total sales fell 27% in greater china to $13 billion, but cook suggests there are signs of improvement, telling me, as we got out into january, things have improved, from where they ended in december and that gives us some optimism. of course, you don't know what will continue, but i would also point out that seems to map to trade tension, if you will now, there's a bit more optimism in the air, i think, in january. i certainly feel that, anyway. and i'm encouraged by the comments that are coming out of both countries right now

now, some wonder whether it's just macro economic conditions in china, although could it also be intensifying competition from local names like huawei and jaoume but cook says that's nothing new, he has been dealing with that for a while, saying, i think the competition is very tough there, but that didn't change in the december quarter, it's been like that. finally, given these potential signs of improvement in china, i asked cook about his guidance, conservative at least relative to the street's expectations cook telling me, we don't attach our guidance to what the street is looking for, we attach it to what we think we can do. and we think we can do $55 to $59 billion, given the currency situation, he told me, he thinks it's strong guidance guys, back to you. >> josh lipton, thank you for those headlines and that color from tim cook. shares are up about 5% right now. coming up next, we are just hours away from a fed decision expected to hold rates steady. former fed governor and deputy treasury secretary, sarah bloom

raskin is going to join us next. don't go anywhere. in the u.s.tate to have a hundred percent renewable energy goal. if we don't make this move we're going to have changes in our environment, and have a negative impact to hawaii's economy. ♪ verizon provided us a solution that lets us collect near real time data on our power grid. ♪ if we can create our own energy, we can take care of this beautiful place that i grew up in. ♪

welcome back to "squawk alley. a fed decision just hours away joining us now from washington with more. former federal reserve board governor and former deputy u.s. treasury secretary, sarah bloom raskin she is currently a reubenstein fellow at duke law sarah, thanks for joining us today. >> happy to be here. >> a lot of expectation that we're not going to get a rate increase today, which really

puts two other things squarely in focus balance sheet reduction and the path for future rate hikes to that second point, i think, let's start there, first what would you anticipate in terms of the language and the policy statement that is released today >> so it's actually a tricky kind of maneuver to make today and you're exactly right, morgan, that the language of that statement is going to signal, really, what kind of pace the fmoc is going to be on for structuring and timing those two or one remaining federal funds rate increases so it's tricky, though, because, of course, if the fed does a lot of, you know, happy talk and actually paints picture -- paints the picture in a way that's too rosy, then i think

people are going to get possibly confused and surprised regarding when and if those fed funds rate hikes become necessary and of course, if it's too grim a statement, that also is going to have to some problematic features, as well. because it might imply that there needs to be, in essence, a different kind of timing so that language is the language to look at and then we'll see. the fed's in a tricky place, because, of course, it wants to get to a place where it has a lot of ammunition, should it need it, if case, in fact, there is a downturn of significance. the fed wants to be further away from the zero lower balance, so it has the space to react, should it need to. on the other hand, it doesn't want to trigger prematurely a recession and make this a

self-inflicted kind of wound >> which brings us to the other sort of key focus for markets and investors today, which is the reduction of the balance sheet. should the fed be close to finishing in terms of tapering right now? >> so, the balance sheet has turned out to be something that markets are focused on and it makes, i think what jay powell does in the presser, after the meeting, really important, because what the pace turns out to be, is something that needs elaboration. i think people have to -- especially the public, needs to understand a little bit more about the importance of the fed's balance sheet. and of course, we know that after the financial crisis, this was the tool that was used to actually bring the economy back up to actually get the economy moving again, was the use of the fed's balance sheet. now, of course, we are further

away from the financial crisis and the fed is very interested and has been on a path of so-called normalizing the balance sheet. so bringing the balance sheet back down to levels that might have existed prior to the financial crisis yeah >> no, i want to follow up on that point, because, you know, just a few weeks ago, that program was on out pilot and then, i think jay powell got the message loud and clear from the market that, you know, that that might not be the right policy you were there, what, 2010 to 2014 so you oversaw a few qes, at least, i think, qe2, qe3 >> yeah. >> if part of the purpose of that easing was to boost asset prices and the wealth effect, wouldn't it make sense that shrinking the balance sheet would do the opposite? because we're getting some mixed messages from the federal reserve on that. >> so, it is tricky and the fed

doesn't like to do too much on auto pilot, because it wants to stay responsive to what data and what economic conditions might be emerging. so auto pilot is never something that the fed wants to do, you know, blindly to knowing what the data points are showing. on the other hand, and you pointed this out, morgan, we need, in essence, a predictab predictability in a sense, markets need to know what is the fed, what kind of path is the fed on here. so that there can be really a smooth transition. and so it's, again, it's a balance. but you've got it exactly right in terms of how the fmoc members, you know, what they're debating, right now, and what they are thinking about. >> well, thank you so much for your insights today ahead of this meeting and this decision later. sarah bloom raskin we're going to bring in steve

liesman now, as well, who's at the fed about the key thing to watch for today. steve? >> yeah, i think it's an issue of a lot of what sarah just said, the issue of patience, is something the market's going to hear the market's behaving a lot like it already knows it's going to hear what it wants to hear today. and it comes down to whether we hear that word, patience on rates, patience on the balance sheets and i think sarah's right about the fed really trying to thread a needle here. on the one hand, on rates, it wants to tell the market it's not happening soon, but doesn't want to sort of foreclose the possibility of it. markets right now are priced for no rate hike this year, but our fed survey suggests that it could be as much as -- it could happen soon june also, on the balance sheet, the fed -- i don't think it's quite ready to say, we're getting off of our plan, but i think what powell is going to indicate today, guys, is that they're willing to think about changing the plan, as such as it is, the sort of auto pilot idea of reducing the balance sheet by up to $600 billion, but it would probably end up by $430 billion

this year. >> all right steve liesman, thank you and when we return, shares of royal caribbean rallying this morning, up 6.5% after strong earnings ceo richard fain joins us exclusively, next. "squawk alley" is barrack aftcka quick break. so, servicenow put your workflows in the cloud, huh? mmhm. your employees must love you. [ chuckles ] thank you. you could say that. i love you. servicenow works for you.

i'm scott wapner here's a look at what we are working on for the half at noon today. what today's strong earnings reports say about the economy and the markets. plus, a rare double downgrade for a tech name could be in your portfolio. we'll explain that in our call of the day we'll also tell you what the trades are on facebook and microsoft ahead of their big earnings reports tonight after the bell it's all coming up on "halftime" at noon, top of the hour sarah, we'll see you then. about ten minutes away >> all right scott, thank you see you then we are watching shares of

royal caribbean, seeing a nice pop this morning after beating the street on earnings, boosted by rising demand for cruises, while also seeing a big increase onboard spending for the quarter. the stock already up more than 20% so far this year, coming off of a rougher end of year last joining us now from cnbc exclusive interview is richard >> thank you fresh off the earnings call. thank you for joining us today on squawk alley. i want to talk china because a number of companies from apple to caterpillar is citing weakness how have you been able to grow in the face of what seems to be a broader slowdown in that market or is it that next earnings report will tell us the real story >> i thinkyou got it quite right. our experience in china right now is we're doing extremely well we're obviously very aware of

both the trade war which is not good for anybody we do see the issues with the economy. i think there's some specific things affecting the crews business which are helping us. even though the economy may not be doing as well as people hoped, the middle class continues to grow and one hypothesis is it's growing faster than the economy slowdown that helps our business. the other thing that's helping us is we put a lot of effort over the last few years into our distribution model how we work with distributing our product in china and we think we've gotten that formula pretty good. that's developing and helping us i would say we're doing well despite that >> what about back home? there's a number of travel agencies that says the consumer is becoming a bit more price sensitive.

if that trend translates to the cruise industry, how flexible can you be with your pricing structure? >> well, obviously we'll deal with whatever the pricing structure is right now i can tell you that the enthusiasm for our products has been excellent our bookings, we've never had such a -- so many booked at this time both in terms of numbers and in terms of price. i think what people are finding is that although we may not be the cheapest option, we have the combination of a good product for a reasonable price and more people are buying it we're seeing over all a very strong start to the year >> richard, i'm wondering to what degree is a value argument driving that do you think even though you say you're not the cheapest option, is cruise marketing managing to drive that value message in way that's benefitting you in terms

of expansion of the middle class and people looking for how much can i really get for this amount of money >> first of all, you mentioned the degrees. i can't help but point out that it's 73 degrees here and you all should be enjoying it. this is the perfect time to be taking a cruise. actually, i think people are willing to invest more i don't think we're seeing this as a value proposition driving it i think what we're seeing is people want more experiences and they're willing to pay for a better experience. on the contrary, i think we're seeing people willing to pay for something that gives them memories not the next computer or the next telephone but the memories. we're the beneficiary of that. it's our sweet spot. that message is resonating >> richard, just to dig into demand here in the u.s. a little bit further. we had a consumer confidence reading. it's another one softer than

expected through the lens of the cruising industry, how would you rate the health thof the consumer as we come into 2019 given there's so many uncertainties out there right now. >> there are uncertainties our experience is that the economy and the consumer hates uncertain uncertainty. we all find that disquieting this has been a time with a lot of disquieting news and information. it's not that's not happening, i think what's happening is that the message about how great a cruise vacation is and the sfre strength of our brand is over coming those things. it's not as if we're immune from changes in consumer confidence it's that the unique attributes of our industry and company are over coming them as people begin

to be aware of what it offers. >> a record amount of ships hitting the industry this year about 18 across the industry are you confident you can fill these ships if we continue to see more evidence of softness in the consumer and other data points that signal the consumer is pulling back. >> we ordered some ships as recently as a few months ago we're a long term business the economy will go up and down and we will at certain points will feel that over all, the direction is upward and on ward and so i think the answer is i feel very good about the growth of the industry and i definitely feel very good about the growth of our individual brands. >> richard, thank you very much for joining the show >> thank you for having me > ua ank you

>>sqwklley returns in less than three minutes with the dow building on its gains.

welcome back to squawk alley. a story on facebook getting some pick up this morning facebook has been paying people

to install a vpn called facebook research that allows the social network to collect the users phone and web activity it's similar to one apple banned last year from the app store facebook confirmed to tech crunch it was running the facebook research program that tech crunch alleges is in violation of apple policy but it clearly disclosed the app to its users. facebook reports after the bell this afternoon chief operating officer sheryl sandberg will sit down later >> ick paying users ages 13 to 35 i got to dig into this a bit manufactu more i think the biggest question for earnings is is the crisis which was really the story of 2018 showing up in growth numbers of users and engagement we know it's driving up costs

but really what's going on with the underlying business as a result facebook continues to be a money machine. >> it's been a two horse race in digital advertising between facebook and alphabet. does that change with this >> with that squawk alley is about down the dow up 345 points. let's send it over to the judge? the half thank you very much. i'm scott wapner does today's boeing blow out prove it's no recession in sight and it's the right time to buy stocks this is the halftime report. >> boeing beats estimates. so does mcdonalds. is this a green light for investors and another sign this is over? the top analyst on apple toni sacconaghi is on halftime the halftime report starts right