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welcome to "squawk alley." i'm carl quintanilla live with morgan brennan at post 9 of the new york stock exchange. jon fortt has the morning off. the markets have lost some gains as all eyes are turning to jackson hole steve liesman is there as the fed's two-day annual economic symposium kicks off. hey, steve >> hey, carl this is from our icon. but the september fed fund futures has now flipped from a small probability of a 50 basis point cut in september to a small probability that the fed remains on old just to be clear, a 98% probability that the fed does cut by a quarter, but it was like a 2% probability of a fed now it's a 2% cut that the fed remains on hold in september maybe some of that coming from the sort of hawkish talk or less dovish talk we've gotten from two federal reserve officials here in jackson hole so far. i say "so far," because there's a lot yet to come.

i'll get to that in a second before we get to that, i want to show all of this sort of emphasizes the challenge of federal reserve chairman jay powell who has a market screaming for rate cuts, which it has been for the last couple of months, a president screaming for it, and jet a board that's a little more reluctant to cut rates than perhaps the market wants. here is philadelphia federal reserve president patrick harker in just the past hour talking about where he thinks interest rates ought to go. >> i didn't think the cut was appropriate necessarily, but i went along with it to get back to neutral but i'm on hold right now. my forecast is to hold where we are, and one of the reasons is that we run the risk of creating too much leverage in the economy. >> reporter: the host here of the kansas citi federal reserve puts this symposium on every year, we got to talk to her,

talked to her this morning, and esther george is a person who dissented from the rate cut and she doesn't think the fed ought to go anymore, and part of her reason is because she sees the economy as being pretty good >> my sense was, we've added accommodation and it wasn't -- it wasn't required, in my view so i'm observing the downside risk and right now, i'm really focused on what the federal reserve has to do to achieve its mandates and in my view, with this very low unemployment rate, with wages rising, with the inflation rate staying close to the fed's target, i think we're in a good place relative to the mandates that we were asked to achieve. >> of course, you have the president this morning talking about how german interest rates are negative and i asked both federal reserve presidents about that and they don't really see that that should have a major affect, not no effect, but they don't see it as a determinative or major effect on where the u.s. should put its rates. they both point out that u.s. growth is stronger and inflation is stronger than it is in

europe we're going to get a chance to talk to several other officials today at 3:00. we have robert kaplan coming on, the dallas federal reserve president. tomorrow morning we'll have the keynote speech from federal reserve chairman jay powell. and later also that morning, we have horrloretta midwester and a gopnof and at 5:00 or 5:30 tomorrow afternoon, we'll sit down with the bank of england governor, mark carney. carl >> steve, i know, obviously, powell is the main event, but do you expected bulllard's comments to offset or be markedly different from what george and harker are said today? >> well, i think jim is one who wants to do additional rate cuts and i think it's worthwhile for everybody to take a step back and say, wait a second, there's a lot of commentary to come.

one of the great things about jackson hole, all of these presidents do speak and we get a snapshot in time of how the federal reserves s do feel ab things it seems like powell's a little more oriented towards taking insurance cuts out, whereas some of these other members are not bullard may be a person who's a little bit more on the side of where powell wants to be and woe'll see how things develop. ultimately, i think it's the data that's going to determine what the federal reserve does in september. we'll have a jobs report, a better idea of where third quarter gdp is headed. right now, it's above 2% and all fed officials we talked to that say, we don't need to cut rates, they say, 2% was our forecast, 2% is potential growth of the economy, and 2% is the number that we're running right now where is the need to cut rates >> yeah, steve, this idea of too much leverage, this idea of the downside risk of easing and easing too much, too fast, that

has come up in your interviews this morning, how should investors be thinking about that and i guess what's the assessment how would that show up in the data if that were to happen? if you were to have the fed cut and that were to be the result >> right so, i mean, every person who takes economics probably, depending upon how much attention they were paying in college, walks away with maybe just one line in their head, that there's no free lunch if there was a free lunch, we would have zero interest rates, we would all go negative forever, and there would be to no reason to have a positive interest rate. well, one of the reasons why you want to do that is because you don't create excess leverage companies that don't deserve money, don't get money, companies that cannot service their debt, would otherwise go out of business. that's part of a healthy economy. so there's concern about that and i think the fed knows, they're not really good at pointing out these bubbles and knowing these bubbles ahead of time it's why going back to fed chairman alan greenspan, it's

been essentially the m.o. of the fed to address bubbles once they pop and not to try to find them beforehand that's changed post-dodd/frank where they would try to identify bubbles more but that's never really been proven yet it's just an idea that's out there in the new regulations that exist, morgan i wouldn't necessarily hang my hat on the ability of the fed to find these pububbles. one thing they say is, let's not have a crazy low interest rate to keep away from three type of bubbles. >> looking forward to the rest of your interviews, this star-studded lineup over the next few days. for more on the fed, let's bring in john stoltsfis as well as mark john, i'll start with you. your expectations from the fed chair tomorrow, especially given some of the commentary we've heard so far >> i think what he's likely to say in a fed that is highly

transparent, maybe not quite as much as it was under bernanke and yellen, but he will say that there is discussion and i think they're going to be data dependent. i think the fact is, we've had good jobs numbers, we've had mixed economic data that sides to the plus side for the economy and the resilience of the markets underscores that as well i can't help but think that there's a real chance here that we might not see a hike in september -- >> you mean cut. >> i'm sorry, cut. >> it happens to all of us >> for decades, we've always been -- >> at least one decade >> it's the counterinflationary trend that we have to watch. and the thought here is that they likely don't need to based on the economic data so far. and the weakness in manufacturing represents a small part of our economy. i mean, manufacturing is around 12% of our economy versus, you know, other countries, germany, 47 to 50% of its economy is

export driven. a lot of that time to manufacturing. so our situation is decidedly different because of very important factors. >> last year at jackson hole, fed chair powell emphasized the importance of inflation expectations in determining monetary prices. so with inflation priced in as far as i can see, my leaning is towards a fed rate cut in september. and i do think this federal reserve has shown a hesitancy to surprise investors so the fact that it's 98% priced in by the markets to me is a sign that a cut is likely next mont month. >> john, what is your take on markets right now and what would you be most aggressively buying, if anything? >> morgan, i would say the word "aggressive" will temper somewhat because of fact that we have the trade war rolling but our expectations are that we are going to see a deal in terms of the trade war

we think both of the united states and china have big reasons, both from a position of economic growth, as well as from pressure that the leaderships are feeling from business and consumer interests in both countries, to make a deal. and we think that when that happens, we'll see things turned around so we are decidedly favoring cyclicals versus defensives. and we've been that way for some time >> counting on one before the election >> we would hope before the election >> we would all open, of course. but the thought here also is just about every day, you keep hearing of more companies diversifying their supply chain away from china. now, china is very big on five-year plans. and as you -- the more time it takes for that to build momentum -- and it's not easy. >> "the journal" piece about vietnam and it's going to take time but remember, when world war ii started, the united states was decidedly unprepared to battle the axes and yet within five years, they defeated germany

>> mark, how are you positioning yourself or how are you counseling investors to be positioning themselves right now in this market, especially given the fact there is all of this uncertainty. whether we're talking about the fed, global economy, trade, all of the above >> i do think there are times to invest more aggressively and there are other times to be more conservative and to me, given the heightened level of uncertainty today, as you mentioned, with the trade war with china, the upcoming election, the yield curve and credit markets, which are beginning to flash red in certain areas, to me, err on the side of caution. i will say, though, that there's been a real flight to safe haven in parts of the equity markets, utilities in particular. and to me, those are no longer safe haven assets given their valuations today >> john and mark, thank you for joining us today >> thanks for having us. >> a lot more to come from jackson hole, obviously, as steve said earlier, the imf's chief economist will join us tomorrow on "squawk alley." in the meantime, books ceo aaron

levie is here at the new york stock exchange we'll check in with him with the dow down 16. we believe in education built for all people. - [woman] snhu was the best experience of my life. - [man] without snhu, i wouldn't be the leader i am today. - [woman] i graduated high school 19 years ago. i still finished. - [man] in the military, you feel that sense of accomplishment. that's what snhu is. - you will march from this arena and say to the world.. i did it. - [woman] you did it. i love you. - [graduate] i love you too.

with data privacy and security proving to be a flashpoint for big tech, box is introducing a new feature called box shield, a set of tools designed to give users a better sense of what content they're sharing and with whom. joining us this morning here at post 9 in a new chair, box ceo aaron levie. good to have you back. >> thank you >> we talk so much about companies retrenching, saving

capital, it's nice to see some innovation and new products. tell us about it >> yeah, so, at box, we work with 95,000 companies globally that use our platform to be able to securely share and collaborate on their data, both in and outside of their organization there's a tremendous amount of content, whether it's banks, life sciences companies, federal agencies, that need to be able to share with their customers, their partners, and their supply chain. so we're advancing the way that companies can handle the security around that data by bringing more intelligence to data security. so if there's anom lis alies inw content is being accessed or what device people are accessing their files from, we can alert the security teams of those organizations to be able to identify possible threats in how that work is being done. box shield is our brand-new product for that >> when you say intelligence, are you saying artificial intelligence >> machine learning that maps the organization of that user and can alert the security team when there are aberrations in

that usage pattern so it's a breakthrough product for us and dramatically enhances the security story for our customers. >> would this be a premium on to what they're already pbuying and how much more can you charge >> it is an advanced solution, so we are selling it as an add-on product the ability to bring together work flow, our platform, and this and advanced security solution as well as data governance all in one solution >> just to shift gears a little bit here, we've had some analysts on our air recently who have made the suggestion that with all gangbusters growth we've seen in cloud, cloud spending, adoption overall, that maybe potentially we're starting to hit a peak here what do you think about it >> i think in some of the latest earnings, there can be mixed messages around that when we sort of zoom back and think at a 10,000 foot view, i think we're in the very early stages of the cloud. if you think about theamount o businesses globally that are still going through digital transformation, the amount of employees that are going to need

to be able to work in a much more modern way, the amount of customer experiences that are left to be transformed never industry, from the signals we're seeing in our customer base, we're in the early innings of cloud transformation i think we have years of growth ahead. i don't know the particular growth rate that we'll see that will obviously always be dependent on the size of companies and the size of the market but there's still years and years of transformation left within the enterprise. >> we've known you for so long, well before public -- well before box had a ticker symbol, we had a discussion yesterday pant what's happening to early funding rounds year on year. >> yeah skblp what's going on? and does it reflect nervousness in the value or not? >> i'm sort of seeing the opposite i think that the funding rounds are getting bigger i think the earlier stage companies are ending up with larger valuations. i think what we've actually seen from the public market is that there's a tremendous amount of excitement when you look at recent ipos of zoom or slack or

others it was actually showing that the companies were actually mis-valued as private companies, where they probably could have had higher valuations as a private organization >> if they didn't wait too long. >> if they didn't wait too long. so i think you're seeing companies are trying to find that right balance of when to go public but when you look at the amount of innovation that's both coming out of silicon valley and the tech industry globally, we are still seeing a tremendous amount of upside and i think that's being represented by the valuations that are growing at the earlier stages right now >> what is your sense -- >> we've been talking about this from a macro level lately, but just business, ceo sentiment, consumer confidence, the fact that there are all of these macro uncertainties out there and how it's affecting business spending right now have youseen any impact? >> i think in terms of direct business spending, particularly in i.t. and technology spend, we're not seeing much of an impact from a macro standpoint i think the general volatility of the market, trade wars, tariffs, all of that is never a good thing for business. i think you want to be able to sort of rely on what are our

gloel partners going to look like we want our customer base to be able to trade in a very efficient way. that means they'll adopt modern technology to do that trade. so we would prefer to have a lot less volatility and noise in the market however, we're not seeing that directly impact i.t. spending in any particular way yet >> do companies in the valley want to sell in china anymore? >> i think that the nachk about being a software company or an internet company generally is that your reach is and really should be global the ability to impact every consumer or business around the world is the real opportunity and vision for most start-ups and software companies the ability to do business in china and all across the world is an importants a% of being a software company >> there's no sense that we're going to enter some kind of digital cold war and we need to start picking sides? >> i think it would be a disaster if we end up in that direction and i think we should be doing everything possible from a security, a global, a

geopolitical standpoint to avoid that i think these platforms are global by nature i think we don't want to create an internet where you're doing business on a per-country basis. i think it would be better if we could have global policy around cybersecurity, around trade, around data privacy. and these are all massive topics of great importance right now. >> a lot of attention has been paid to this dinner last week between president trump skpf tim cook and the president coming out saying he'll figure something out about apple regarding the tariffs and calling apple a great american company what do you think the response to this has been in the valley and i guess, do you think that this is a template, a management template that more companies might adopt? >> i think in general, it would be great to not have trade issues that are driven by very particular one-off conversations or organizations' issues i think we should have a global trade policy that makes sense, you know, on behalf of the broader economy.

i think it's fantastic if apple has been able to make some headway in terms of educating the administration around what these issues need to look like and how we need to resolve them. but in general, i think that what we would be looking for at box, selling to our customers and i think what the tech industry generally is looking for is more stability and more long-term thinking around these approaches and, you know, hopefully, tim was able to make that case and hopefully we'll see some positive progress on that dimension and i would just want to -- while we're talking about this topic, i think the other issue that's really important around this is immigration. and all the noise around immigration policy that's not helping america's ability to be innovative and be able to, you know, bring on the best talent. i think trade, immigration, you know, cybersecurity, privacy, all of these topics are incredibly important for the health of the digital economy, and we do have to kind of work through them >> chris sacca had an amazing thread a couple of weeks ago about the companies he's worked for and how much they've been drich

driven by the hard work of legal immigrant. but who's carrying the water on that front for the industry in washington do you guys think you need to speak out more forcefully? >> i think there's a lot of conversations around this topic. unfortunately, they probably don't raise to the same level as some of the other areas that are generating a lot more noise right now. you know, hopefully, in a more maybe stable political environment, we would be able to have much healthier conversations around talent and education and what's the future of s.t.e.m. look like and how do we make sure that america is competitive for the next generation of talent these are the issues that i think every, you know, technology company is going to be dealing with for decades to come zp come >> and if you had to rank the conversations you're having with your peers, do they center around immigration, trade, or anti-trust what's number one? >> probably anti-trust it's the most dramatic and interesting of the topics. but i think that sort of this idea of how do you regulate big tech, how do we think about whether it's, you know, breaking

up properties or just ensuring better cybersecurity and better data privacy practices from a regulatory standpoint, these are absolutely very active topics right now in the valley. >> does big tech need to be regulated or reigned in some fashion? >> i think all tech needs to be regulated in some fashion. thing idea of big tech versus small tech is a little bit of a red herring. i think that we need to be able to have, you know, practices and standards around data privacy and the protection of both consumer and enterprise data and i think this is no more of an issue for big tech as it is any kind of small start-up and i think these are going to be really, really interesting issues that need to be resolved in the next few years, or else both consumers and businesses aren't going to be able to place their trust in these platforms so i think when you look at what apple is talking about around encryption, what you think about sales force or amazon or microsoft on data security, what we're focused on with box shield and other security products, hopefully, this is a little bit

of a view into where the direction of the industry can go, where customers can control their data, you know what's happening to your information, you have the ability to evacuate access to that data. these are going to be, i think, important principles and rights of any user on these internet platforms in the future. >> trust is going to be a big theme. it's great seeing you. >> cool. i'll have a lot more gray hair next time. thank you. >> well, the dow is coming off its fourth positive session in five, but we're back in the red right now. though just barely, down about eight points here are names that are trying to turn things around today. boeing, jpmorgan and goldman are 'rba ia meenre wee ckn mont announcer: fidelity is redefining value with zero account fees for brokerage accounts. and zero minimums to open an account. at fidelity those zeros really add up. ♪ maybe i'll win ♪ saved by zero

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european markets are going to close in a few minutes here seema mody has a breakdown of today's action overseas. >> hi, carl. a negative session for the european markets with the exception of spain which was higher fractionally on the day what's also getting a lot of attention is the british pound spiking to a three-week higher after german chancellor angela

merkel said a solution to the border with ireland is possible before the looming october 31st brexit deadline. boris johnson is set to meet merkel later tonight, so we'll see what kind of influence she could have on the larger brexit topic. a mixed picture for manufacturing. france's industrial sector unexpectedly returning to growth nont, but the bleak outlook continues to germany still contracted for a seventh consecutive month, factory orders falling the most in more than six years and it comes as minutes from the european central bank's latest meeting were released, showing that the central bank is considering a number of options, including lower rates and targeted asset purchases jpmorgan's european team, they're expecting the ecb to unveil a ten basis point rate cut and a 30 billion euro quantitative easing package per month plan to be announced in the september meeting. it's not just the fed that we're focused on, the ecb as well in the next policy meeting in

september. morgan, back to you. >> absolutely, seema thank you. let's get over to sue herrera now for a news update. hey, sue >> hello, morgan hello, everyone. south korea's deputy national security adviser says he expects u.s./north korea talks to unfold soon and go well his comments came after meeting with u.s. envoy steven begun in seoul, but a north korean spokesman says a recent u.s. missile cruise test and plans to deploy f-35 jets around the korean peninsula were, quote, dangerous. iranian president rouhani says talks are use less as the nuclear deal crumbles further. in a speech today, he says iran's enemies do not accept logic, so they cannot respond with logic high school students rallied in downtown hong kong to call for political reforms. hundreds of teenagers wearing black and holding umbrellas in the oppressive heat turned out for the rally. reports of severe lung disease linked to vaping

continue to rise according to the cdc, there are 153 possible cases in 16 states. the illness initially looks like a bad respiratory infection, but it does not get better with normal treatment you are up to date that's the news update this hour back downtown to "squawk alley." morgan, back to you. >> sue herrera, thank you. when we return, a master piece of obfuscation that's what one wall street analyst is calling wework's ipo. we'll discuss that after the break. and later, why tesla's largest shareholder outside of elon musk thinks he shouldte sp down as ceo. "squawk alley" returns in less than three so, every day, we put our latest technology and unrivaled network to work. the united states postal service makes more e-commerce deliveries to homes than anyone else in the country.

welcome back to "squawk alley. two stories to get to on tesla, both out of germany. phil lebeau is in chicago with more hey, phil. >> hey, morgan no shortage of news when it comes to tesla today and the stocks, while they moved earlier today, they're not moving much now. let's begin first off with the second largest investor in tesla. that is bailey gifford there is a report out of germany today where some of the leadership of bailey gifford questioned whether or not elon musk should remain as ceo of tesla, essentially saying, look, is the company better served if he's not there day-to-day and with some of the volatility. we've reached out to tesla for a comment on this. they have said nothing but when you look at elon musk, he's not stepping down as ceo. this is his company. there is no suggestion at all, there is no indication at all

from anybody i've talked with in leadership at tesla that elon musk will step down as ceo and the other story also coming out of germany is a report that the vw ceo, herbert deese, might be interested in volkswagen taking a stake in tesla. that report earlier today said that dees is interested in tesla's software and batteries we did finally get a comment from volkswagen, which almost immediately shot down this report officially, the company said the media speculation about a volkswagen investment in tesla is unfounded so tesla shares have not been as volatile over the last hour, guys, as those two reports have come out and essentially, people have looked at them and said, nothing's really changing here when it comes to tesla >> phil lebeau, thank you. we've got a lot to unpack there. let's bring in ceo editor henry blodgett >> great to be here. >> let's unpack it what do you think of these reports? it was just over a year ago that we were talking about the possibility, thanks to that tweet from elon musk about tesla

going private. the stock's down more than 30% over the past year >> and flat for five years >> yep >> this is no longer this big growth story that everyone's got to jump on it's the future. it's a company that needs twork from, yes, we did the amazing thing and created the first successful car company in what 75 years to now we're going to be a profitable, steady company that we can rely on. and the problem is that the story changes constantly, the messaging is never permanent every quarter, it's now we're going to be profitable, now we're going to try to be profitable what they need is somebody who is highly visible, who is basically just handling the operations of the company, in my view and you go back to apple, steve jobs had tim cook, even before steve jobs left, tim cook was a master at producing devices. everybody knew who he was. everybody knew who the rest of the management team was. at tesla, it's still just elon and this is a huge company

even if he stays ceo and he can do whatever he wants, doesn't actually have to do anything, you need to build up more folks on the management team who investors know and trust and who are consistent and who deliver on what they say they're going to deliver on. >> you've been saying this for years. he needs a strong number two but i don't hear you saying that another large player like volkswagen might be interested in buying it at this stage of maturity >> well, buying it i mean, they want to invest. it's not -- volkswagen presumably has a huge chunk of cash, sticks them into tesla, you get a nice look at batteries. strategically, why not take a look at that that's not a big deal. buying the company would be a different thing. i don't think anybody was speculating about that >> why do you think there isn't, i guess, sort of a bigger, more prominent circle of management or executives around elon musk at tesla he has it as spacex, right why not tesla? >> i think that's a very good question and i think part of it is that the story keeps changing all the time and i think it's a red flag not

to have some seriously experienced people who can come in and talk to their prior car-making experience and the financial experience that goes into that and just say, look, we're going to build the controls into place and the consistency that you deserve, being a shareholder of a company of this size and scale and it wants to be a car company for the next hundred years >> i think the other thing that catches my attention in all of this, we talk so much about dual class share structure and how many companies, including companies that have now are going public have implemented them to keep their founders in place. tesla doesn't actually have that i know he has a super majority vote requirement that gives him veto power over shareholder proposals, but he doesn't actually have that dual class structure. do you think that's something that tesla would ever think about, re-visit, reconsider, or need to? >> i think it's too late now i don't think he needs it. and i don't think anybody smart is suggesting that elon should leave tesla. i think that would be bad. he is extraordinarily gifted at doing things that most people

think are impossible he's an incredible visionary he should definitely stay involved it's just, the question of whether he should be spending most of his time figuring out how to make cars profitably. and the companies at this scale, they really need that. somebody who's great at it to do it full-time >> let's move on to wework >> there we go >> because we have seen a slew of negative headlines out this week on the coming ipo, including from our friend scott galloway, a business insider who writes, quote, any analyst who believes wework is over $10 billion is lying, stupid, or both >> scott, never one to pull punches. but i was surprised in that quote that he said, you know, it's worth $10 billion ten years ago if you'd said a little real estate start-up would be worth $10 billion and go public, you would say, what a tremendous success and he's not saying it's

worthless. i thought there were some positive things. >> what did you make of the s1 and this contribution margin where they basically exclude every recurring cost >> earnings before costs >> to get in the black >> wework is a story and you look at the s1, that just radiates story, right from the first sentence there's no question that they are where they are because of the power of that storytelling >> and whe are a customer they do sell a service that people will pay for. they are helpful they have a lot of flexible office space everywhere. our folks are happily working in wework so there is something there. they're doing it, but it is a real real estate company. and the fact that people are debating that shows you just how good they are at telling a story. >> so unlike uber, where it is a tech story, you need the software, you need the access to the phone, anybody can do this >> so there are many companies that do this you take a building and you chop

it up and re-rent it to people it's not a complicated businesses and wework does have a veneer of cool stuff on that they're more flexible. it is cooler i rented a regus office a few weeks ago, not as cool i wish a wework office had been available. i could work with the hipsters but this idea that they're completely kbreimpregnable goin into a recession, they'll be totally fine, give me a break! >> i think in the prospectus, day basically used the word tech company. they use the word technology i think 110 times in the filing. so that is definitely the story they're looking to tell, but the key question here is if it's not a tech story, if it's not actually technically a disrupter, how does it get valued by the market when it does go public >> and we have seen with uber and others that there is a limit to the market just saying, oh, yes!

sign us up the stock's going to go to the moon people who were not cautious about bidding for uber got hosed in the ipo and this could certainly happen. and i was actually going back to scott galloway look, it is worth something. it is. it's a good service. but it is a real estate company that uses technology >> finally, is there any -- the countercylicality thing, is that legit? where if we do go into a recession, you would go to wework rather than buy real estate outright? >> but everybody will be cutting back on office space every office space vendor of any kind will be reducing prices to induce people to pay and as a more strapped than normal business operator, you're going to go, cost is very important. so, sure, if wework says, hey, we'll do it for 50% less than everybody else, sure, their offices will be full, but they will be getting creamed on their leases, unless they have some huge pricing power on the

leasing side and we haven't seen that yet >> henry thank you for joining us >> great to see you. >> obviously, a little bit of churn here dow has made its way back into the green as the market tries to digest some of the hawkish commentary we've gotten out of jackson hole this morning. two big earnings movers to get to in retail rick santelli, what are you watching >> of course, i'm watching what's going on in interest rates globally and thinking about jackson hole with the y?tion, context matters. tethbrk.wh

i'm melissa lee. here's what's coming up on the "halftime report" at the top of the hour fresh fears about whether the ked will continue cutting rates. is the street setting up for a big letdown? and apple shares up 10% in just the past two weeks what the tech giant may be preparing to unveil. and this stock is down 20% in the past two months, but it just got a huge upgrade. it is our call of the day. we'll discuss that and much more at the top of the hour on the "halftime report." carl >> all right, melissa, we'll see you in a bit melissa lee. let's get to rick santelli with the santelli exchange this morning. hey, rick? >> hi, carl. you know, jackson hole has to be 110% totally preoccupied with all the strange things going on in the world and the yield curve inversion. this has just gotten to monumental proportions and i understand and i also understand that

should it invert more and the rest of the curve invert more, more of the flatness it already has, indeed there could be a recession. but that isn't the danger. the danger is making this a poster child for, you must have a recession. i'll tell you why. the inverted yield curve is easy as pie, right? and i'm not saying pie like you eat, i'm saying pyrite, fool's gold context matters. because in jackson hole, hopefully they're discussing all the issues, and believe me, there are a lot of global problems that are getting exported here and it is affecting us but trade is affecting us and it's affecting us because it's the policy of the current administration to go after it, so it's a variable that the fed really shouldn't neutralize. if this isn't a good thing for the country, the next election, vote out the administration. i get that but to talk about this inversion and ignore the herd of elephants in the room with regard to negative rates, think about i

this way ef-inversions and we have subversions. we may have inversions, but europe, japan, they have subversions. negative rates, but look at the european yield curve it's a positive 22 with a minus 86 two-year shots and a minus 64 ten-year bound what, that is a better precipitation for their economy? context matters. and with regard to what is at the end game if we slow and we do go into a recession recession has been turned into hades to the 50th power. but i don't think that's the way it should be and i think in many ways, alan greenspan, by trying to take out recessions, a noble endeavor, ended up with a notion that the cleansing process has been removed from the system. if you look at all of the policies and all the negative rates and all the strangeness that's gone on inversion, subversions, against the normal financial rules of the road, what you the end u

with is toxicity that keeps building and building. so the equity markets are right to be a bit frightened this toxicity has never been purged from the system and a recession would do that. but a recession also could pull the legs out of the stock market, because maybe it's built on some of this toxicity and how it was addressed, the policies that tried to address it today, germany says, don't look for any physical stimulus. it doesn't really make sense, but it is the cards that everybody is dealt and i certainly hope that in jackson hole, they start to think outside the box a bit, because it's really, really easy to make everything pyrite, but in the end, fool's gold isn't the real deal. morgan, back to you. >> rick santelli, thank you. when we return, why and how the office items you interakct with on a daily basis from the phone to the printer can be hacked eacnbc investigation after the brk. dow is down nine

the s&p is down nine as well stay with us free access to every platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪ - stand up if you are first stand up if you're a mother. if you are actively deployed, a veteran, or you're in a military family, please stand. i will tell you this, southern new hampshire university can change the whole trajectory of your life.

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the dow session high this morning. it was up 186. we lost all of that and then some the marketdos wn 22, s&p down almost 10. we're back after a quick break woman: my reputation was trashed online.

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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. the phone in your office, the industrial fan system in a lab. the printer. all these devices contain tiny computers that can be hacked and used to gain sensitive business data or cause damage to networks cyber security pros say more needs to be done to keep these devices secure some manufacturers are listening and making security a competitive advantage. andrea day has our investigation, hiding in plain

sight. ♪ >> reporter: no demo is complete until we've tried to physically destroy the device. >> when you interview this ceo, you may wind up evacuated. >> all right let's get out of here. >> get out of here. >> reporter: he founded the cyber security firm red balloon here in new york city. >> this is where the magic happens? >> this is where the magic happens. >> reporter: this makes devices more secure, that means breaking in, taking them apart and exposing flaws. >> yes 100% of these devices can be compromised in some way. >> reporter: 100%? >> >> 100%. >> reporter: they are like mini computers, everything you can start up from smart home devices and cars and every financial exchange, power plant, air traffic control and almost every company in the world >> there is probably the most important cyber security threat

that we have today because these computers control every single aspect of our critical infrastructure we depend on every day. >> according to a report by market research firm, radiant insights, the global market is projected to be worth $214 billion by next year this is a small version of an air filtration system that's in a lab the team's working with right now. >> you don't want the dirty air to come out ever this computer will allow that to happen. >> reporter: they hack devices inside the fan's controller. not only forcing the dirty air in the wrong direct but ultimately shutth it down and it goes up if smoke. >> that's awesome! >> reporter: but sway says the issue goes way beyond this fem demo the team recently uncovered a major vulnerability in 100 devices made by cisco. the largest manufacturer of network equipment. according to red balloon, we're

talking about a potential attack that could sell for millions they let cisco know what they had found. the company published this critical advisory. cisco turned down a request for an oncamera interview, instead, released a statement saying, if part cisco is committed to transparency and is not aware of any malicious use of the vulnerability. fixes are available for half of the products we wanted to know what other leaders and reached out to hp and hauwei both companies were not a part of red balloon findings. hp is the largest manufacturers of imprinters, which contains embedded devices andy rose is a head of the business they claim to have the most secure printers. >> we put this special code into the printer so it's always looking for malware and devices.

>> reporter: hauwei did not agree to an interview or provide sxhent and we asked the company if the tool existed right now, to know if a device has been hacked. cisco telling us in part an audit the tool is not available. the bottom line here, you guys, that you really need to take action to protect yourself to protect your privacy, at home and at work. because these embedded devices are here they're growing and as we can tell, they're hackable >> you know, it's amazing to me. we talk about the internet of things on all fronts, whether it's coming into your home i look a lot on manufacturing floors as well, but the idea of all the positive rounds increased connectivity but when i hear an executive like this that say 100% of devices can be compromised it's staggering. it speaks to how many different

ways we don't think on a daily basis there can be security issues >> exactly pa lot of times we don't think about the fact that there are so many embedded devices or things we don't know. like a monitor, for example. red balloon took us and showed us how they can excise a computer network held up to a network. this is not attached to a computer, but a monitor, itself, has maybe three or four embedded devices, all of them can be hacked so what they did is, they were able to change what was shown on the screen so imagine you are in a plan right. it's a power plant and are you in charge of all the security. you see on your screen, these green dots that show everything's fine. they've hacked into your monitor and now they're all turning red. so you are starting to change things are you turning off power. you are running around, are you changing everything. you are running around and then they can come back and you look at the screen again and magically it's all back to

green. so you are going, am i crazy those are the things you wouldn't think about necessarily, a monitor on its own. >> crazy, whether it's for the enterprise and corporations or individuals, that's a really important story. and yellowstone national park thank you for bringing that to us as we continue to watch some turn in the markets, we'll see what powell says in the morning. let's get to mellissa. >> welcome to the "halftime report." stocks giving up fears of more rate cuts. what will powell say it is 12:00 noon this is "the halftime report." >> the fed on deck will jay powell signal more rate cuts ahead or a trader setting up for disappointment? getting ready for apple. reports say the tech giant may unveil an iphone probe your next trade on the stock ford under fire from president trump. the risk facing ceos and their stock. the investment committee is ready to