good thursday morning. welcome to "squawk alley." i'm carl quintanilla with morgan brennan. obviously, got to start with netflix today, getting crushed after posting weaker than expected sub numbers this is reed hastings on the call last night. >> we're having a lot of new competitors enter over the next year and i think our position is excellent. we're building amazing capacity for content. our products have never been in better shape and our rate of investment is extremely high so if investors believe in internet television, which i think is an easy one to get there, then our position in that market is very strong. >> cowan's john blackly with us along with lee horowitz to talk about a story where investors aren't -- is this part of the normal post-print volatility or is it something different this time, lee? >> obviously, it was a big subscriber miss in the quarter and it brought about two very important questions for us that

we think investors are contemplating today. netflix's ability to raise price in lieu of rising competition. you saw evaluated churn in this quarter from price increase, as well as its ongoing need to invest in content. the company called out their inability to mute their subscriber estimates based on what was seen to be a weaker content slate. so to ask that shows the need to continue to invest heavily in content. do you think price hikes from here on out are just going to be too hard to do >> we don't think they're too hard to do, but perhaps the magnitude we saw in that quarter won't be as large as we move forward and the time between the next price hike might be a little bit longer. >> or maybe, john, as one of your sellside colleagues said earlier in the morning, maybe you don't do a price hike in a content-weak quarter >> yeah. i mean, that was the thing about it like, if you look at it, netflix has beaten 10 of the last 14 quarters, but missed three of the last four years, and two of

those years, they had price hikes. in the past, in 2016, they missed off of price hike and they had said that they went to another price hike during q2 again and the reason they probably shouldn't have done it is because 2q is seasonally the lowest quarter for subnet ads. so i think they'll probably think about the cadence of price hikes relative to what quarter they should do it going forward. >> lee, do we think this happens to amazon and hbo, when they have a quarter that's not so strong as far as either sales, you know, not a big holiday, or there's not a "game of thrones" that subscribers actually drop that much -- we don't get that kind of visibility into their subnumbers, but is this unusual? >> it's a great question for hbo, we could see that happening in terms of how the content slate lines up amazon, obviously, a much different animal they're really monetizing their subscribers through ecommerce channels and much different than, say, one title on amazon instant video. >> but maybe that's why they came up with prime day

>> certainly not a bad idea >> hollywood's got to be saying, welcome to the party in terms of just how hard it is to create hits, right? you think that's something that netflix is figuring out now? >> i think that's the right question and in hollywood, content is king and netflix's subscriber numbers continue to prove that out and you know, if netflix is going to be a more hitch-driven business, investors will be asking themselves, what multiple do i want to put on that >> john, is the idea of an ad-supported tier for netflix in the future just off the table now? >> yeah, they -- in their letter, they said they're not going to do that and they have been consistent. i've covered the company for ten years. they've been very consistent that they're not going to do it via advertising. i would say that reed hastings also said last night that net ads in 2018 will 9 will be grean 2018 and we think there's a path for that the sub trends to start q3 are

very strong. probably led by "stranger things" and higher retention, and an incredible content slate in the back half of the year, but they have a lot of great returning episodic shows and also big feature films and the other thing is, they're through the pricing increase largely through most of it, across 150 million global members. so that's not going to be a friction point as we round in the back half of the year, and that's why we're still positive. >> so jon, talk me down here why shouldn't i look at these results and think, maybe netflix isn't as necessarily as i thought? a price increase might cause people to behave similarlily to disney plus showing up some people are going to say, maybe i can go for a less expensive disney plus and borrow somebody's password for netflix. >> it's a good question. on disney plus, our general view, a couple of points firstly, broadly, we don't view

video as a zero sum game historically, it never has been. as consumers shift from linear to streaming services, multiple platforms will win second, we don't view disney as a substitute for netflix netflix's content is much broader, definitively, initially when disney launches its service in november. and then third, it's not -- disney is not going to have an impact on netflix internationally for some time, because they still have zmooe-- disney has a bunch of output deals in various international market which is will limit the quality of their service initially. they'll obviously get through those output deals and add it to their service. so, no, video is not a zero-sum game netflix, you know, kind of is definitely a platform in the leading platform and we think with what they're doing on the content, et cetera, user experience, they'll be there for it >> lee, are all subscribers created equal? meaning, are international subscribers as lucrative as

domestic ones? >> a great question and something that came out of the quarter. you saw netflix announce in the third quarter they'll be releasing the $599 tier in india. it's a lower value subscriber, because they're coming at a lower arpu. >> last night, hastings said yet again, forget about ever getting into the ad business what's wrong with the ad business why are they being so reticent about that >> i think it is consistent over the 12 years of the service that, you know, they're focused on the user experience and they don't want to insert ads and confuse you know, what they view as their value prop, which is, you know, no ads for at least the last 12 years. i would say on the india mobile lower price point, people in india that pay for tv, they pay $3 for tv. so i think the company is just playing to that market

they have different price points and this is just one of those price points -- and i don't -- and they said last night that they have low expectations for -- it's not going to be a big part of their 3q sub guide or 4q net ads. >> lee, just to go back to the point you just made, if all subscribers are not created equal, at least from a financial standpoint, why are investors so focused on that absolute subscriber number? are there other metrics they should be looking at more closely as this company continues to mature? >> yeah, so right now, we think netflix is stuck in between this debate is it a growth investor who wants to be involved or is it more of value-oriented investor? and we think that's what's kept the stock sideways for the past year subscriber growth has been the metric that everyone's focused on and wiprobably will remain a you saw in the quarter 19 could be peak net additions and as that slows down into 20, growth managers a little bit concerned. >> some concern today, but we're

used to it coming out of earnings and especially with these guys thanks, lee, appreciate it when we return, this week marks the 50th anniversary of the apollo 11 admission. nasa administrator jim brid bridenstine joins us right here next moving is hard.

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place across the nyse nasdaq this morning with assetmark financial just opening for trading in the last hour, getting a nice pop in its debut. now assetmark's ceo charles goldman joins us here at post nine you've got an interesting mix of challenges and opportunities your controlled company owned by a chinese company, you list in your risks in the ask one, cfius is going to look at all kinds of things when you potentially try to expand. what's the first thing you think investors should know about your company? >> i think investors ought to focus on what we do and the vale we create. we work with independent financial advisers and our focus is to empower them with a full platform of capabilities and to serve them with white glove service that allows them to scale their practices and focus on investor needs. >> how much turbulence do you

expect in the stock, just given the trade situation between the u.s. and china there are a number of china-based stocks that tend to move based on not necessarily the results, just based on what trade tensions you're doing. >> assetmarkis a u.s. company, we're a u.s. company, all of management owns shares in asset mark there's no connection at all between hstc and ourselves they're great shareholders, but that is what they are. they're shareholders so we operate as a u.s. entity and i would add, we're highly regulated and focus on data security and capabilities. and we've had no connections between the two firms whatsoever so in answer to your question, i don't expect any turbulence whatsoever >> when you talk about being an end-to-end platform, how much of that is people and how much of that is technology >> it's both asset mark is unique we definitely build a lot of technology we try to deliver everything an adviser needs to operate their business, but we surround the adviser with people. if you think about an

independent adviser, they're in the people business. they are thinking about investors and trying to solve investor needs, and they're looking for a trusted partner to help them do that. >> we spent a lot of time talking about the war between active and passive has this year done anything to inflect that balance, maybe to the benefit of active managers >> you know, we focus on building great portfolios for the long-term. we definitely look at the active/passive argument. and the way we think about that is, let's put the lowest cost instruments that do what is needed for the investor. and use portfolio construction in an active way so that the investors' needs can be best bet. at the end of the day, it's all about investor needs, investor risk tolerance we all know that keeping investors in the markets is what matters and doing that is what we try to accomplish >> what about u.s. exposure versus international >> we do both. our fixed income is primarily domestic, and that is really the choice of dwiadvisers and their

clients and equities are generally global in nature >> is this an ideal sort of market to be going public in the u.s. market has been doing extraordinarily well, but then at the same time, you say you have a global view there are a number of other markets that aren't. >> you know, from an assetmark perspective about going public, we're going public we're at that stage in our life cycle. we're at a point where we have reached scale. trying to broaden our shareholder base we think it's a great time to be doing what we do, which is supporting independent investment advisers. so for us it's the right time to go blpublic we're not focused on what the stock is going to trade today or tomorrow, we're focused on the long-term. >> there's a lot of focus on cryptocurrencies and these ideas of digital coin with facebook testifying two days in congress around libra the concept of distributed ledger technology, crypto, is this something you're looking at closely? and how do you expect it to affect the industry more broadly

in the coming years? >> our clients and the adviser and their end clients are really focused on long-term investing they're not looking at trading and cryptocurrency >> i mean the underlying technology >> i was going to get to that. >> okay. >> in terms of trading and portfolio construction, it's really not an issue. but the underlying technology is important. data security is obviously important. every company is listed here at the new york stock exchange is attacked every day and so that kind of capability is going to be important and particularly in financial services >> charles, thank. charles goldman, ceo of assetmark. >> thank you after the break, nasa administrator jim bridenstine, right here at post nine. stay wh itus these folks don't have time to go to the post office

they use stamps.com all the services of the post office only cheaper get a 4-week trial plus postage and a digital scale go to stamps.com/tv and never go to the post office again. but we're also a company that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes,

and keeps you healthy your whole life. from the day you're born we never stop taking care of you. that's one small step for man, one giant leap for mankind. >> that never gets old

a giant leap for humanity, indeed 50 years ago, the apollo 11 mission became the first successful space flight to land humans on the moon joining us now to commemorate that anniversary and discuss the future of space exploration is jim bridenstine right here at post nine. thanks for being here. >> thank you great to be here >> so to the moon and back 50 years from apollo 11, nasa is looking to go back to the moon why and why now? >> there's a lot of reasons to go back to the moon. there is so much about the moon that we still don't know in 2009, we discovered, for example, that there are hundreds of millions of tons of water ice on the south pole of the moon. water ice represents air debris, it represents water to drink it is in fact, life support. it is also rocket fuel h20, hydrogen and oxygen, crack it into hydrogen and oxygen and that's the same rocket fuel that powered the space shuttles and the same rocket fuel that took buzz aldrin and neil armstrong

to the moon. so it's available. hundreds of thousands of pounds on the south pole. so we want to go back, live how to live and work on another world. president trump has said he wants to plant an american flag on mars. and that's what we want to do. the moon is the proving ground for how to live and work on another world where it's only a three-day journey home where eventually we can go to mars the challenge with mars is that earth and mars are on the same side of the sun once every 26. so when you go, you've got to be willing to stay. the moon is the proving ground, but there's tons of science and discovery we still don't know about the moon and we need to get back to make sure we don't miss anything else 1969 up until 2009, 40 years, we thought the moon was bone dry. what else do we not know and by the way, since we're here on the floor of the stock exchange, there could be tons and tons of platinum group metals on the moon, rare earth metals, which are tremendously valuable on earth. the challenge with the earth is

it has a very active geology and a very active hydrosphere. so it's in trace amounts, these rare earth metals. well, these are asteroid impacts from billions of years ago and the moon does not have an active geology. whatever hit the moon a billion years ago is going to be right where it was >> but harvesting that is a next century story, right >> i don't think so. i think it's a this century story. look at the investments that the space community is making with jeff bezos and elon musk and sir richard branson. billionaires are investing in space and exploration. and nasa can benefit in that they are our partners in what we can achieve. and we can become one customer of many. and that lowers the cost and increases the access and we have numerous providers that are competing on cost and innovation so we're at a very, i think, pivotal moment and we need to take advantage of it >> we talk about public/private partnerships and infrastructure here on earth, but that's really what you're looking to implement when it comes to the moon and

the final frontier and how we're approaching space. one of the numbers i've seen out there, it's an aggressive timeline to return to the moon, right? >> yes, five years >> very ambitious. i've seen estimates that it's going to take up to $30 billion in additional funding for nasa over the next five years to get there. where's that money coming from >> so there's a lot of different ways to read this, at this point. remember, we have commercial partners that didn't exist historically so they can help offset the cost they're making their own investments, because they want customers that are not necessarily nasa that's a good thing for nasa and i think that could drive down our cost. you could see it be in my opinion well less than $20 billion. the other thing that exists today that didn't exist in the 1960s are international partners we now have 15 countries that have been operating the international space station for almost 20 years. each one of those countries is interested in going back to the moon with us that, again, drives down our cost so i think it could come in well less than $20 billion, but it's also important to note that we

do need to go ultimately, so that we can go on to mars. >> when i learned about the moon landing, it was in the context of national pride and innovation these days, when we talk about space exploration and the innovation, more often than not, it's bezos, musk, you know, like you were saying, branson is that okay or do we need to recapture that sense of american branding and ambition, when we talk about space even more? >> it is absolutely both so, remember, nasa is a partner with these companies to achieve what we're trying to achieve that's to start. so it is an american agenda. but also, it's important to remember what nasa has done with what we learned in the apollo era. a lot of people are going to watch this on directv or dish network. a lot of people are going to watch it on internet broadband from space these are technologies that have been commercialized. we're talking about multiple hundreds of billions of dollars worth of exports for the united states of america, born from

this program called apollo that had nothing to do with directv or dish network, just to say but it's the way we communicate and navigate, gps, the way we produce food and energy, all of these things, weather prediction, the way we understand climate >> gps >> right >> nasa has been involved in all of these and so i hear a lot as the nasa administrator about tang or i hear about velcro. don't get me wrong, we love those products but it is also true that we have evaluated the human condition with this tiny little piece of the u.s. government called nasa in ways that most people don't recognize. >> can i ask you, if you were going to prioritize moon, mars, orbital tourism, zero gravity manufacturing. what needs to be -- what's most important? >> zero gravity manufacturing is -- we're talking about pharmaceuticals, we're talking about material sciences. we are learning how to print in 3-d human organs in a microgravity environment you can't do that on earth because of the gravity, but you

can do it -- so i'm saying, there is a market there for microgravity capability. what does that mean? that means we can take the resources that the taxpayers give us and we can do those stunning achievements that we can celebrate 50 years later, like today, we're celebrating the apollo 11 moon landing that next stunning achievement in my view is mars and i'll tell you why. we are getting, i believe there is a stronger probability of finding life on mars than ever before in the last year, we have discovered liquid water 12 kilometers under the surface of mars what does that mean? liquid water anywhere it is on earth, there's life but it's not just liquidate water. we have found complex organic compounds on mars, the building blocks for life are on mars. they're not on the moon at all, but they're all over mars. and the methane cycles of mars are commensurate with the seasons. we need to go find life on another world. and i know the probability of finding life on mars is going up >> which is an pretty incredible thing to say right now

the fact that commercial space is really on this precipice of becoming a very big and very prominent industry now you've got virgin galactic poised to be public by the end of this year, i'm wondering what you think of that. and i think the idea of having a first-ever commercial human space flight company that's publicly traded. on the one hand, it brings a lot more attention to the sector and how far it's coming. on the other hand, we know space is hard and human space flight is even harder there's a lot of risk associated with it. >> nasa cares a lot about risk, but there is risk involved in space flight there is also risk involved in rock climbing and there's risk involved in hang gliding and in the private sector, people are allowed to take risks that we as the united states government are not going to be willing to take. all of that being said is building these markets ultimately enables nasa to have more access. we want to be a customer, but we also want to have numerous providers that are competing

against each other on cost and innovation and, in fact, safety. and when we have that competitive marketplace, everybody benefits >> you know, lastly, just to go back to 50 years ago and the apollo program, you just mentioned satellite communications, broadband, technologies, but there is so much that was born out of that program, including, by the way, the first silicon chip silicon valley started from the apollo program if you could wrap this up and just sort of tell people on earth how their daily lives have been affected by what's happening in space >> absolutely. and there's so much, it's hard to even know but one example. the camera that we right now have on mars, the curiosity rover, which is a robot on mars, the camera on that rover is the same technology that's in your cell phone it was born by this little agency called nasa and now it's been commercialized in a way that has transformed the human condition but yet again. but yes, it's cell phone technology and the way we communicate, the way we navigate, the way we produce

food we are proving right now that we can increase crop yields by looking at the earth in every part of the electromagnetic spectrum, increase crop used by reducing water use, at the same time, preserving nitrates in the soil for clean water and clean air, which is something that we are very keen on as an agency. but the transformation that came from apollo is unquestioned. and it's good for the human condition. >> nasa administrator jim bridenstine, thanks for joining us >> always. >> speaking of space, do not miss my live coverage from the kennedy space center tomorrow, all day right here on cnbc meantime, european markets closing shortly. seema mody has today's action overseas >> european markets mostly lower after yet another group of multi-nationals are citing the trade war for weaker profits europe's largest software company saw revenue and earnings disappoint then there's volvo, seeing their profits come in below

expectations its chief executive referencing two main drivers, pricing pressures and tariffs. that stock down about 2% but check this chart out asos, the online fashion retailer warning that profits would come in a third lower than expected due to a supply issue involving one of its warehouses. shares are down over 20%, but now down over 60% over the past 12 months as these operational issues continue to hurt the company's ability to grow. speaking of retail, uk retail sales unexpectedly rising in the month of june. sales grew 1% versus the 0.3% drop that analysts were anticipating you can see the uk grocers are trading higher and the uk pound also coming off of its lows. morgan, back to you. >> seema mody, thank you let's get over to rahel solomon now for a news update. >> good morning, morgan. here's what's happening at this hour monsoon flooding and landslides dona continue to wreak havoc in nepal with the death toll rising to

78 soldiers used helicopters and roads to rush food, tents, and medicines to thousands of people hit in the flooding. a key suspect in the manchester bombing which killed 22 people made his first court appearance today he was extradited from libya yesterday and arrested for murder france's l'ouvre museum becoming first major institution to remove the sackler family name after protests erupted against the family that's blamed for the deadly opioid crisis in the u.s they covered multiple placards bearing the sackler name and governor of hawaii has declared a state of emergency after the arrest of 33 protesters near the monoto kaio volcano. they gathered to stop the construction of a telescope on what they consider is sacred land >> rahel, thank you. still to come, it's the story of the morning netflix getting crushed on weaker sub numbers

early investor paul lld hoan joins us next with his take. stock's down 11% we're back in a moment what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade

shares of netflix do continue to fall in today's trading with following those disappointing results. joining us this morning is paul holland, general partner at foundation capital and early netflix investor as well as our own julia boorstin paul, you're always good at explaining what they're up to, really, and defending them is that going to get harder, do you think, in the quarters to

come >> well, it's -- it's, i guess, nice of you to identify and defend them from that perspective. i just simply try to, you know, identify the people, this very large trend that's happening around media and, you know, you're going to see with a company like a netflix that's a growth stock, you're going to go kind of quarter after quarter after quarter that they're going to do great and you're going to do some quarters that are going to be a bit of a speed bump or a divot. and apparently they just went through one of those but i lookat the existential trend, the secular trend i thought about this one, i was thinking about yesterday when i got the call from you guys really over the last 50 years, we've seen two kind of huge things impact the media market we've seen the internet and we've seen netflix and the netflix story is still unfolding and kind of one quarter doesn't make the story >> julia, i wonder if any analyst or netflix watchers are

talking about just hold up netflix handles q2 we've wondered this price hike before a weak con alternate quarter. was that maybe a mistake to do it i'm kind of wondering, was it maybe on purpose, so they just know q2 is often garbage, so why not kitchen sink it? >> that's a good question. i think if this, intentional, then they probably had not forecast that they were going to add 5 million subscribers in the quarter. there certainly was an element of surprise netflix itself but i think one thing that's interesting as we looking going forward, what happened in q2 and what could happen in the second half of the year is one analyst, one morgan stanley analyst said they're less concerned about the loss of shows like netflix and "the office" and more concerned about making sure they find new hits like "stranger things." the model seems to be shifting and subscriber additions are really all about having those big flagship shows that can bring people on to the platform.

>> paul, is that part of the risk when you talk about netflix, losing some of these legacy shows like "friends" or "the office. yes, that frees up money for them, but creating hits can be, well, hit or miss? >> yeah wing there's always going to be the risk of that, right? netflix made a huge shift over five or six years ago in terms of the focus on original content. they've been rewarded orders of magnitude in terms of increase of the value in the company and their ability to have an impact by going out and doing even more of the original content. but i would point out something, i think it's kind of interesting. and unfortunately, i'm pretty sure i'm the oldest person on this interaction here. but for any of us who remember what it used to be like when you would take old shows like "the office" or "friends" into syndication. it was considered the also-rans, the leftovers. whatever people will bid for it, it will show up on some channel 85, you know, on uhf

i'm using terms that don't exist anymore. but i think that's sort of the way it used to be. and i think at some point or some level, you have to almost look at the value of the leftovers of "the office" and friends as almost like an homage to netflix look at the amount of value that was created around that content. but i think your fundamental point is certainly accurate here they need to be in a position to continue to innovate and when we look at companies like this and say, okay, they're in this big, huge rush over a multi-year trend, can they keep kind of going back to the well and coming up with new ideas, new concepts, even new frameworks around their business. and the thing that we always look for there is the strength and the ingenuity of the management team. and as you have heard me say many times, this, i think is the strongest management team in the united states today. and the strongest ceo. we continue to have faith in the fact that they're going to find ways to be able to innovate. and netflix is just one of those companies that every quarter,

there's some new dire prediction oh, apple's in the business, disney's in the business, so-and-so's doing this it used to be block buster and walmart. these guys are very, very strong they stub their toe a bit. they'll come back from it. i have no concerns about the long-term here with netflix. >> well, one thing -- >> julia -- >> go ahead. >> reporter: i was just going to say, one thing interesting, hastings has made it very clear he doesn't want to do advertising, and although we've seen a lot of product placement-looking things within the shows, he says they see that more of a way to get promotions for things like "stranger things," having all of these brands that have placement in the show and are promoting both netflix and "stranger things" itself they see that as a great promotional vehicle, but not looking to make revenue from that it's interesting to see them experiment with these different things like brand partnerships

without trying to make them new revenue streams, because they are trying to figure out ways to drive eyeballs to create new marketing venues when it is going to become so crowded, especially in the next year as these new services launch. >> and paul, to that point, i guess the question is, everything you're saying makes sense, up until the point where the other players ought up to the technology and once you bring parody to that, everybody's just after the same-old hit-making machine, right? that's a different scenario. >> yeah, i think that's probably, with all due respect, a little bit overly simplistic remember what they did for years and years and years up until doing that is they built up that subscriber base. you all know these terms, but they were the pioneers in this field of espot, video on demand, now seeing disney and apple

having to come into that market. is now is that sere going to ben advertising video on demand market we have a company doing very well in that marketplace but when i think about a group like reed and the team at netflix, they're zealously guarding what that experience is like and i think the analogy you made about this notion of like product placements within the shows, that's actually a very goodnolo analogy think about it if movie theaters, all of a sudden you're watching a movie, it's that two and a half-hour movie and they interrupted the movie four times so you could watch some advertising. that's actually not going to provide a good experience for people but yet if there's a coca-cola or something else in the movie, it doesn't really bother people too much >> paul, we're going to watch this one closely it is a great, fascinating story. paul holland and julia, thanks >> thank you so much

>> and just ahead, the head of dell technologies venture capital arm. he's got a warning on tech valuations meantime, take a look at shares of ibm, posting its fourth straight quarter of revenue declines, but cloud outperformed it's up almost 4% today. a lot more "squawk alley" still ahead. all in one place. because when it's decision time... you need decision tech. only from fidelity.

i'm melissa lee in today for scott wapner today at noon eastern on the "halftime report," the netflix debate is on is today a great day to buy the

stock or do you need to wait plus, battle of the banks. which one's your best bet? and we're debating the industrials as one wall street darling plummets and a double call of the day for you on apple and a key supplier halftime starts at the top of the hour we'll see you then jon? >> all right, see you, melissa and soaring tech valuations have played heavily into the market's long bull run, but are they now a cause for concern longtime tech executive and venture executive scott darling now with dell technologies this week at our @work event that the trend is flashing some warning signs. >> this is a source of great debate these days. i would frankly say that we probably are in one of the frothier times it's dangerous to product these things, you know one of the ways you can lose out is to be overly value sensitive in a company that goes on to be a great success. but you do have to pay attention to this and we are and we have passed on deals recently due to

valuation. >> what would you compare this period to froth wise >> well, you know, again, i've learned over the years through scar tissue to be very careful about predictions. this year or last year there was about $130 billion worth of venture capital invested the prior peak was during the year 2000. we know what happened after that and it was about $110ish billion. on the service, you might look at that and say, uh-oh, we're approaching dangerous times. but the reality is the economy is 60 to 70% bigger than it was then and it doesn't feel as frothy i remember back then when i was doing investing, there were a lot of things going on that on the surface were silly that's not quite the case today. that having been said, i think things are a bit frothy >> a bit frothy, not too frothy, guys maybe not.

>> great stuff when we return, ripple's brad garlinghouse injos us next with his take on libra and what comes next for facebook. we're back after a quick break

libra's got a lot of work to do before we're comfortable, but if they follow the rules and regulations properly and it's

regulated, including potential financial stability issues, that may or may not be something that we get comfortable with. >> and that was treasury secretary steven mnuchin on libra earlier today, following two days of hearings on the hill over facebook's crypto play. joining us now to discuss facebook's libra and more is another player in the space, ripple ceo, brad garlinghouse. brad, good morning >> good morning, john. good to be back with you >> good to have you. so what do you think facebook and all of the libra consortium really have to do to make this good for the world >> well, i think at the most macro level, it's been good for the world because it's brought a lot of attention on a set of technologies that really can benefit mainstream banking, mainstream consumer experiences around banking i think there's a little bit of, perhaps, arrogance, and perhaps silicon valley arrogance with how facebook approached this and somewhat brazenly running into some things without checking some of the boxes. and i agree with your intro

there, that secretary mnuchin, in order for these to be used well and taken advantage of, it has to be done in a regulatorily compliant way. whether it's terrorism financin, these are things at its core ripple has made sure we are partnering with the existing system. >> what do you mean by arrogance? i know facebook and libra, they published a white paper but they've not rolled out a service or any kind of product yet they said they did it to begin a conversation with regulators what would have been a better way to go about it >> well, i think, morgan, that's a good question. i think the conversation with regulators and facebook started sometime ago and they heard loud and clear some of the reservations and i don't think they took the time to address some of them a surprise to me, for example, in the 28 groups that are signed on to the libra white paper, you have zero banks. you know, i think it is a stark contrast to where we think this world should come from

there is a huge opportunity to change the way financial systems work that is very beneficial to consumers, businesses, et cetera, but, again, it is not competing with the banks you know, david marcus came out when he announced libra and said this spells the end of western union. that was a huge call to action to banks around the world that have been watching big tech players that they're fearful are going to come into this space. >> so is this an us-or-china situation? because marcus seemed to wave that familiar flag we have seen from facebook and maybe others in silicon valley recently, somebody is going to do this so it might as well be one of our own? >> look, i think there's no question there are elements that are, you know, relevant to u.s. national policy here technologies like bitcoin are really controlled by chinese miners chinese technology like ether is

controlled by chinese. it is decentralized and open and more of a democracy as it works as compared to those technologies there's a lot of strategic foresight coming from china and they're aware these are new technologies upon which a lot of transactions will be enable, so they're investing in that. they're enabling it to thrive. i think the u.s. needs to stay ahead of that much the way we did the internet, in the earliest days of the internet in the mid '90s. >> how do we stay ahead of that? what does smart regulation to look like to continue to spur innovation but to protect what i imagine will be increasing numbers of people and institutions that use these technologies >> i think that's where secretary mnuchen was coming from in that we need regulatory clarity. even what you saw from facebook with libra, the white paper articulates a plan of going to switzerland to have it regulated out of switzerland although they haven't spoken to the swiss regulator, i think it was the right thought of, hey, there's regulatory clarity in switzerland. i think the u.s. in the late

'90s created clarity around how the internet should be regulated, and so i think the same thing can happen around block kman there are some areas where there's not certainty, but the secretary is right at the core the fundamental financial regulations around kyc or know your customer or aml, anti-money laundering, there has to be a level playing field both for new entrants as well as legacy entrants i think it is really -- that i think is a fair playing field for everyone to play within. >> so you're in a position to tell, so give ups a peek at what you consider to be a worst case scenario what potentially happens if you move too fast and break too many things with money versus just with data? >> well, i think you see that, and the reason it is called tariffs and financing and money laundering is when we lower restrictions, we lower regulatory dynamics around financial transactions you find that money flows to illicit activities you know, frankly, even the earliest days of crypto were born of things like silk road.

the good news is we have come a long way from silk road and those illicit use cases and we're talking about solving real problems for real customers. you know, there's still lots of speculation in the crypto market, that's clear, but i think as you and i, john, spoke about on cnbc a year ago, the long-term value of any cryptocurrency is going to be derived from the utility it delivers i think as time goes by you are seeing more and more real world use cases and real utility and i think it is good to be beyond the hype, even this libra white paper to some degree as morgan pointed out, we are a long way of knowing what that actually looks like and what it may be because it is about a year away is their estimation of when it might launch >> yeah. obviously it could be longer >> indeed, particularly with the regulatory stuff. >> exactly thanks for being with us. >> thank you later on today, don't miss the ceo of chewy on the closing bell the company reports first results since going public begins at 4:30 p.m. eastern

time meanwhile, the major averages, dow down 135, s&p down 2974, as we got good manufacturing data today. maybe some fed hesop getting eroded "squawk alley" is back in less than three minutes key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity. i felt completely helpless. trashed online. my entire career and business were in jeopardy. i called reputation defender. they were able to restore my good name. if you are under attack, i recommend calling reputation defender. vo: there's more negativity online than ever. reputation defender ensures that when people check you out, they'll find more of the truth, not trash. if you have search results that are wrong or unfair, visit reputationdefender.com or call 1-877-866-8555.

so this segment is not

getting old. following the face app craze, senate minority leader chuck schumer is asked for both, the fbi and ftc to open an investigation into the russian company saying the privacy concerns over shared user data were, quote, deeply troubling. that said, morgan i were subjected to this yesterday. because john was on assignment -- >> i like the way you put that. >> -- it doesn't mean he gets to escape the treatment bring it on. let's see it okay >> all right >> you think that's okay >> not bad i've seen worst. >> that's the ghost of christmas future i saw yours -- >> by the way, none of us downloaded the app, which i think is the key. >> yes, yes. >> that's the key. i do not -- not that we have privacy around who we are and what we look like anyway. >> thank you. >> we are the people that i guess could download the app the russians know who we are in any kay. thank you for putting that up again. >> yes. >> fast track that inquiry to chuck schumer. >> would you warn people against playing with this? >> i would, yeah if you have some anonymity, keep

it morgan, i mean they probably think you are 12ers u years old anyway so they aged to around 55 there. >> that's just because that's how i act. meantime, another story to tell you about instagram running a test in certain countries that hides the total number of likes and video views after teasing the concept earlier. australia, brazil, canada, ireland, italy, japan and new zealand will be first to pilot the feature. we have talked about this before, the idea of what does it do to the cachet around instagram, especially with influencers and how does it change the metrics i mean there's essentially a whole social media economy that sprung up around this type of interaction. >> we asked the guys from resolve, they were on the other day. you regard heavily on influencers and likes. >> they're going to figure out a way to hack this, you know in the comments people are going to put a number to show how many likes there really are. >> such a cynic. >> that's right. people figure out. i'm an old man, carl

you didn't see the picture >> that's right. we have a picture. by the way, tonight we'll look for more results out of microsoft. that will be a big talker as we head into friday obviously the dow and chewy tonight as well. with the dow down 129, we will see if it is a false breakout or more consolidation let's get to melissa lee and the half the big debate on the day focuses on a faang stock, 72% off its 52-week high is there opportunity in netflix? >> the great netflix debate is on is today's drop your chance to buy in or does in company have an over saturation problem plus, another big bank beats this time morgan stanley but is something lurking underneath the surface for the financials one "halftime" regular has a serious warning about the group. the double call of the day, apple and a key supplier the investment committee i