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 thursday morning. welcome to "squawk alley." i'm jon fortt alongside courtney reagan and wilfred frost live from post 9 at the new york stock exchange carl and morgan have the morning off. stocks in the green red higher by tech this morning the nasdaq is on pace for its largest weekly gain in more than

ten weeks. but with today's move to the upside in a sector largely exposed to china and ahead of another round of expected tariffs in just a few days, where should investors be looking for protection joining us now to discuss, oak mark fund portfolio manager bill nygren and nsz capital cofounder, bill slingerlen brad, you have some thoughts specifically around where is a good place to put money at this point. specifically as it relates to regulation coming down the pike and semiconductors give us a sense, start with semis. >> sure. so you know, we think there's no more interesting spot in the tech sector today than in the semiconductor segment, particularly for long-term focused investors. we know there's a lot of noise and a lot of volatility around the trade war and the trade talks that are going on now. we think ultimately, we're entering sort of an ai cold war

phase between the west and china. but that china and the chinese economy can't exist without cement conductors and frankly, the entire global economy now runs on semiconductors everything we talk about that's happening on the innovation front relies on these ai chips from companies such as nvidia, relies on these chips like microcontrollers from a company such as microchip. and these are largely u.s. intellectual property. and ultimately, china needs these, the world needs these chips. and they're priced because of the volatility in the market, as though they're heavy cyclical and not going to grow, but we think that's fundamentally not true with the big growth that's coming for semiconductors over the next decade. >> and bill, i look at your top holdings i don't see semis having much of a presence you've got more banks, some other types of stocks. you have a different take on where people should be positioned now, i take it? >> well, at oak mark, we're long-term value investors.

and that's not been a fun spot to be the past year or really the past five years. and that's because the spread in market p\es has just gotten wider and wider. we're at almost unprecedented levels now where the lowest p\e stocks are half the market multiple today and that lowest sector is full of banks we have citigroup, bank of america, capital one, ally financial. they sell at seven to nine times earnings they sell under book value most of them are repurchasing a lot of stock dividends are higher than 30-year onds we think, as value eventually makes a comeback, the financial sector will lead the way >> bill, that seems to make sense, i guess, on some of those metrics, but if you're looking at interest rates potentially going lower, net interest margin can't be too attractive for a lot of those banks >> i certainly agree with that short-term but one of the things about the way we invest at oak mark, we're trying to figure out what a company is likely to earn five to seven years from now. when you look out that far, i

think it's fair to guess that interest rates will about match the inflation rate our guess is about 2% on that level. and that that's plenty high for these companies to get good net interest margins >> brad, within the media space. do you feel like the consolidation in the u.s. is over now that we've seen cvs and viacom top >> i think we could see further consolidation in media and media is an area that we're very establibullish on for the long-term. we think that the content producers are becoming more important. they're taking back control of their direct relationship with their customers through streaming and we're entering this period where these consolidation with the media stoid studios, they can both have their cake and eat it too. there's a manageable decline in traditional tv subscriptions that's being more than offset by direct-to-consumer streaming so disney is extremely well positioned we think that combined

cbs/viacom will also be very well positioned. and we don't think that will come at the expense of netflix or some of the other streaming properties i think consumers have a large budget to spend on video and it's not shrinking and they're getting more and more value for that budget. so it's a really positive set-up for the long-term for media. >> bill, how do you see the narrative in media and distribution playing out i see you've got charter as one of your top holdings our parent company, comcast, as well the combination of media and distribution was a big story over the past few years. do you expect that to shift over the next five to ten what's going to determine who has the most value >> well, we think of both charter and comcast as primarily internet providers and they currently have, by far, the most reliable, fastest speed internet and we think that will continue throughout our investment time horizon. i think a lot of investors worry too much about cord cutting.

providing video just isn't that profitable for the cable companies. they make their money from providing internet service and with the growth in streaming, we also own netflix and alphabet, two of the largest streaming video companies and not valued at all as highly per hour watched as the traditional media companies. we think streaming is going to keep growing and it will benefit all of those companies >> all right we will see how this plays out bill, brad, thank you. >> thank you now, apple ceo tim cook has long said that china tariffs would hurt his company and a new reuters analysis helps explain why. the report, and examines apple's supply chain data shows a company that is increasingly dependent on and intertwined with the chinese economy joining us now to explain, reuters reporter, steven nellis. thanks for joining us. >> thanks for having me. >> so an increasing dependency in terms of supply chain on china. gauge for us the numbers and the

level with which that's increasing >> absolutely. so apple has thousands of suppliers, but every year they publish location data for about 750 plus of those. and what we did is went through about five years of that data and analyzed it and found that a little -- between 44 and 45% of those suppliers were located in china, as of 2015. and then as of 2019, that actually increased to almost 48%. and the really interesting thing about that is while they've added a few factory locations where they assembled the products in places like brazil and india to do local tariffs, most of the new locations for factories have been in china foxconn alone went from having 19 facilities, helping supply apple to having 29 in that same time period. and that's right around the time where they've introduced new products like the apple watch, air pods, home pods.

so what we see is apple is really relying on china to help it deliver those new products. and that trend hasn't lessened, even as the trade war has heated up >> but stephen, what portion of that is in terms of the cost of, say, an iphone so 40 to 45% of the supplies by number, but is that of the low-cost parts or the high-cost parts. >> well, that's an important thing to put the finger on, because only about 2 to 3% of the value of the phone is in assembly and a lot of those really valuable parts, things like screens, things like some of the most important chips in the phone are actually made in places that aren't china a lot of the chips come from taiwan some of them are made in the united states in places like texas or colorado, and a lot of the screens come from places like korea japan is also a major country that supplies a lot of these parts. so it's absolutely correct to note that while a lot of the number and volume of suppliers are in china, some really high-valued parts are coming from outside of china.

>> stephen, how thoroughly were you able to dig into how country of origin is determined? the circuit board, i understand, where that's made is a major factor in determining that so even if a lot of the parts are sourced out of china, will it necessarily be determined as a product made in china and subject to the maximum amount of tariffs? >> that's right. so throughout the consumer hardware chain right now in tech, everybody is looking at this shall of what constitutes country of origin for the purposes of a tariff, which is actually legally speaking slightly different from what it might say on the box and a lot of things many companies are looking at is where are the circuit boards made you take a hassle of chips that could be made into anything, and once you affix them to that circuit board, they've kind of become a product and that could count as what the folk who is do tariffs call substantial transformation, which is the key legal standard

for deciding whether it's going to face a tariff or not. so that has at least some companies looking at how they could shift this around. for apple itself, we don't know exactly what they're going to do we do know that some of their suppliers like foxconn have the ability to make those circuit boards in other countries like india. but the thing to remember is that in china, apple is making hundreds of millions of devices a year that's about 600,000 plus iphones a day, only holding on to maybe five days of inventory at a time. getting the scale and velocity of the supply chain anywhere else but china is going to be difficult, even if apple and its suppliers have the ability to do stuff like make circuit boards in other countries >> and stephen, that brings up an interesting point because, of course, apple does do some manufacturing in india and in vietnam but their point is they just can't scale the volume that is done in china to move any of that substantial manufacturing and that's the manufacturing that's largely for the devices sold in those country, is that

right? >> that's correct. so in brazil and india, for example, those factories were very specifically opened in response to import duties and tariffs in those markets in the case of india, it's one of the last remaining fast-growing markets where people are adopting high-end smartphones like the iphone at a rapid pace apple really wants to be there they're pretty steep tariffs, though up to 30% in some cases, if you don't source some of your supply within india so, they've put those factors there to supply the local market, but you've got to remember, their market share in india is tiny, as it is, because the phones, even without tariffs are still very expensive and it's still small just one market compared to apple's global market of hundreds of millions of devices a year and those factories, while they exist, they're really just meeting local supply >> stephen, it seems important to note, with the amount of lead

time apple has before december 15th in this case, even though tim cook famously hates inventory, thinks it's evil, because it just kind of burns a hole in your balance sheet, they've got time to build inventory if they want to for the sake of serving the u.s. market that would be subject to tariffs. if they determine that that's a sort of one-time thing that they would want to do and mitigate the effect of these tariffs, right? >> that's right. so remember, their fiscal first quarter encapsulates the holiday shopping season in the u.s and president trump specifically moved some of those tariffs to december 15th on the idea that it would allow u.s. companies to get most of that inventory on to u.s. soil. now, for most companies that don't churn their inventory that quickly, december 15th to kind of the end of the holiday shopping season seems like plenty of time for apple, we know, they hold it as few as five days, so you are left wondering whether they would actually be able to get it all in by then but, you know, this is a very sophisticated company.

it's a rare case where the ceo himself actually built out a lot of the supply chain and it's probably true that if they want to move that up, eat a little bit of inventory cost to respond to this one-time situation in their fiscal first quarter, which is typically the biggest, they probably can. right now they are in the big ramp we'll probably see a new iphone announcement some time in the second week of september so they're already getting those phones ready and getting those processes ready right now. and it's, yes, very possible that they could do a little shifting of how they normally handle inventory to respond to this one-time event in a big quarter for them >> stephen nellis, thanks for joining us >> thank you well, when we return, another big day for retail earnings with best buy, an b abercrombie & fitch, dolr la general, and dollar tree reporting this morning we break it down

stick with us. "squawk alley" will be right back

well, best buy on pace for its worst day in almost a month and that's after quarterly financial results came in mixed. the retailer gave disappointing sales and earnings guidance here so joining us now, ubs retail analyst, michael lasser. he has a neutral rating on the stock and his $66 price target also with us, anthony chakumbo anthony, what do you make of the report this morning?

it was mixed, there were things to like and things to be disappointed about how do you put it together >> i feel like bill murray's character in "groundhog day. i feel like this happens pretty much every single time best buy reports earnings these were not mixed results, these were good results. comp store sales came in a little bit light of expectations, but against a very difficult year over year comparison epps w eps was up 19% year over year, beat consensus by 9 cents. and the earnings guidance for 2019, they raised it so i just don't really see any reason for the stock to be down 10% today. from my perspective, this is a buying opportunity i am pounding the table with both fists >> okay. that's a pretty strong answer. michael, do you think the stock is down because of the exposure to tariffs i know it could be as high as 60% of their cost of goods sold, although ceo cory barry tried very hard on the call to say, look, it's not going to be that high we have a ton of mitigation

strategies in effect, but is that what the market is reading for this sell-off? >> the market is reading a couple of factors for the sell-off one, as you point out, there is a lot of tariff exposure 60% of sourcing from china means it adds a whole lot of uncertainty to the situation, especially for 2020. this tariff uncertainty is going to weigh on 2020, even more so than it's going to weigh on the fourth quarter of this year. and two, we did see some volatility in the product category trends, particularly in the gaming area. that seems to be softening at a very rapid clip. as a result, they had factored in a bit more caution into their fourth quarter outlook i would also offer the perspective that it's going to be a very difficult holiday. we're going to be stacking two good holidays on top of each orr. the holiday is actually shorter this year than in the past six days, so these retailers will have to sell more goods in a shorter period of time and we're entering the holiday season very heavy on inventory

that's been a consistent theme across retail reporting. so we could see some of these retailers blink and make it a very promotional holiday season, which could impact a retailer like best buy disproportionately >> anthony, are you unconcerned about tariffs? >> well, it's not that i'm unconcerned. i'm more concerned about the uncertainty around tariffs than i am about the tariffs themselves one other thing that i'll say about best buy is that, look, this is a company with a long track record of underpromising skbroe and overdelivering and they have a new cfo, so clearly they don't want to blow this guy up. they want to have him beat numbers the first couple of quarters out of the gate, particularly during the holiday selling season one thing i would mention during the holiday selling season, it's always promotional and always competitive. that's not new and best buy now has a partnership with progressive leasing. they'll be able to offer lease-to-own during the holiday selling season that will be incremental buying

for best buy >> michael, give us a sense on how best buy is doing in this omnichannel world. the stock has been on a nice run since, i don't know, mid-2015, arguably it used to be all about amazon's going to kill these guys, target, walmart in the mix, too. all of them have developed strategy to counter that argument and we're talking about best buy now having a bad day it's actually not about amazon, right? >> yeah, best buy is helping to feed the narrative that traditional retailers, the strong, well-positioned retailers are fighting back. and they're going to survive over the long run. best buy, in the quarter, grew its online business 17%. it offers a range of fulfillment options including buy online, pickup in store. if you buy right now on thousands of items, you can pick it up within an hour that's a very convenient offer that's tough to compete with for those who don't have the physical locations so i think this narrative that

amazon's going to destroy all retail is false. the real narrative should be that what's happening in retail is the weak retailers are going away and the strong retailers are getting better >> and interesting to note, as well, on the quarter, the online sales, it was the biggest quarter for a non-holiday quarter, actually, that best buy has put up and that was on prime day. so they did compete well there thank you very much, michael anthony, for joining us today on "squawk alley. >> markets back up to session highs. all the major indices up more than 1% as we stand. and one of today's biggest winners are the chip stocks. and frank has more on that from the nasdaq >> as we've seen those headlines about china staying calm in the trade war, investors have gotten excited about chip stocks, especially those with high exposure to china. that includes korvo. sky works also up more than 2.5% that chipmaker kbets about 85%

of its sales in china. micron sales up about 3.5% as wale that company getting about 55% of its sales in china. this also helping out transports so you're looking at csx, those shares up more than 2% you have to remember, the ceo called the current freight environment puzzling perhaps a trade deal would bring a lot more charity also, jb hunt, those shares up more than 3.5% jb hunt is the nation's largest shipper of containers. this business has been directly impacted by fewer exports to china and of course, the trade war overall. back over to you >> all right frank holland, thank you and the dow, meanwhile, looking for its third positive session in four. take a look on the screen at some of the names leading the wee inx gh 'rback after a quick break (vo) the ant mindlessly marches on. carrying up to 50 times its body weight. it never questions the tasks at hand. but this year, there's a more thrilling path to follow. (father) kids...

...change of plans! (vo) defy the laws of human nature... ...at the summer of audi sales event get exceptional offers now! - 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.

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. should always be working harder.oney that's why, your cash automatically goes into a money market fund when you open a new account. just another reminder of the value you'll find at fidelity. open an account today.

welcome back european markets set to close. brexit headlines very much in focus. and steve cedric has the latest for us from london hey, steve >> reporter: a ferrari in

westminster. unconstitutional that remains to be seen. unconventional, absolutely the measures taken by boris johnson to proeg or suspend parliament has taken many by surprise what happens next, parliament will come back the week of september the 3rd. it will have three or four days to fight against this proroguement and there will be a suspension until when the queen's speech is taking place in parliament on the 14th of october. will the opponents of boris johnson have maneuverability in that period remains to be seen what are their options going forward? well, a legal challenge may be a very tough call for many of them, but perhaps a no confidence vote in parliament could take place if that were to take place and the prime minister succeeds and has a vote of confidence, then, of course, he will get his way if there is a no confidence vote against him that is successful, it can go either one of two ways one an a caretaker government

may well try to be put in place under someone like king clark, maybe a harriet harlem or jeremy corbyn, or they will fail to form a government, in which case the prime minister, boris johnson, could then call a general election, but he could call that for a date after the key brexit date of october 31st. a lot of ifs and buts, a lot of questions about the constitution, about convention, and about the legality of the very bold moves which have divided parliament and divided the country from prime minister boris johnson. this is steve sedgwick in westminster. >> thank you, steve. meanwhile, minor indices in europe, about 1% higher as they're set to close now let's get to rahel solomon for a news update. >> good morning, jon here's what's happening at this hour former fbi director james comey violated policy and his employment agreement by leaking sensitive memos that triggered the mueller probe. this according to the department of justice inspector general in a report released this morning comey responded in a tweet,

defending his actions and drawing a distinction between sensitive and confidential material the justice department has already decided not to prosecute comey. chinese state media releasing footage of military troops moving into hong kong for what they call a routine rotation this is amid fears that the army will intervene in the ongoing pro-democracy protests juul has announced that a new i.d. verification system has been designed to prohibit sale to underage shoppers juul has said that more than 40,000 stores have committed to implementing the new standards and will not distribute to stores that aren't compliant starting in 2021 and apple has launched a new repair program allowing customers to fix their phone more easily. independent repair businesses will now have the same access to tools and parts that are used to fix phones at the apple store. i'm sure a lot of people will be happy about that and that is our cnbc news update for this hour. let's get back to "squawk alley. wo wilf, over to you. >> rahel, thank you very much. still to come on "squawk alley," investors getting their

first look at disney's new streaming service. we'll ask kara swisher about that next. meantime, getting a check on where we stand on the major averages back over the session highs for all the major indices, led by the tech sector and the nasdaq, up over 1.5% we're back in a moment

there's a mouse in the house, according to ubs, or at least there will be. in pave out this morning, the firm finds that nearly 80% of u.s. households have heard of disney plus. that's the streaming service, at

least 43% intend to subscribe to that service, whig saying thle t disney's projection have said too modest of the same survey, 57% said they would cancel an existing streaming service to make financial room, presumably, for it we've had our first look of what's going to be on disney plus this week joining us now, kara swisher good to see you. >> good to see you >> so i think a lot of people we've had on air keep saying, there's room for everybody in this streaming game. netflix will be fine everybody will be fine i don't buy it i think somebody is going to take some lumps here what do you think? >> we see. absolutely, i think people don't want to buy a lot of services. i don't know how you act, but i don't want to own like six or seven services you do have magazine subscriptions and things like that, so people are used to it, but the question is will they pin practice be using this many services it's not a zero sum game, but it

makes people make choices that they have over their entertainment. so the question is, will they switch over the way, say, people switched from spotify to apple, apple music, and things like that so it will be interesting to see if that survey, which is very good for disney, actually happens. and i think that's where i want to see if it actually picks up like that. >> what's your take, kara, as to whether once we get past this launch, that we start to see content costs come down. in a weird way, this competition for a company like netflix could help in the media more long-term if that does actually materialize. >> well, i don't know. you know, you would like many more players in this kind of market, because costs are great for consumers. and it's great, you know, consumers get better prices, and on the content cost price, it's great for content creators that all of these people are vying for their content. i think what happened is when there's this much fragmentation, though, it's going to be problematic for consumer choices, for these companies to figure out, and it's all going to be based on hits and the things people want to watch.

and disney, to its credit, has so much content. it sort of owns all the really great content. and the question is if it can keep producing more and not just, you know, rely on evergreens because this has become just like a lot of things, a hit-based business so if people are attracted to a hit like "stranger things" or whatever they're watching, it used to be "homeland" on showtime or something on hbo like "secession" that's really where the game is, the new and fresh stuff that attracts people and they have to have the backcatalog of things that are super popular. >> kara, i wonder if any of these services will eventually turn us to some sort of contracts, you know, that's what we've had for a long time with cables, with your phone, where you sort of sign up and then you're sort of stuck for a while, to kind of increase the stickiness do you think that's at all a possibility? >> there's an interesting concept that scott galloway and vi talked about called rundeles, which are recurring revenue

bundles, where you trust a company for a range of things. i think that's keeping in the idea whether having stuff jammed together by a cable company or something like that. obviously, everyone is used to that kind of behavior where you buy hbo or showtime or whatever and you don't really understand the pricing or anything else so consumers are used to that, but it doesn't mean consumers like it. and you know, in this case, i think that the consumers will sort of choose the things that's best for them, if they have small children, they'll obviously choose disney more than other stuff if they're younger, i'm guessing netflix has a much younger demographic. so it will be interesting to see where people settle. but i do think consumers are sort of in the driver's seat here on what they want >> i think there's a rebundling that's going to happen we see disney with this disney plus, hulu and espn bundle already. if that works, how can they resist finding other stuff to stick in there kara, i also wonder, who else is going to win here?

is it roku that stock has had an amazing run. but tleeclearly there will be pe out there who haven't described to netflix, but have done it just through a phone or a tablet who will want to see this disney stuff or these other streaming services on a big stream how do you think they end up paying that? is roku perhaps due for another run or some other over-the-top provider >> anyone that's offering a service that's really popular is going to do well if they're on you remember when netflix wasn't on comcast and things like this, these things tend to settle out and people that are sort of against each other decide that they want to be together in order to reach the consumers i think eventually, there will be sort of a coalescing around a few services, a few services that provide all the services. because i think for consumers, a lot of this stuff is not thinking about what consumers actually want. it's what's good for these companies. and i think the question is, how can they provide something that's a great price and getting

what you want instead of having you have to pick, you know, a la carte from everything. so definitely, there has to be something that coalesces at the same time, i think it should think more about how consumers behave, so they can pick and choose what they want themselves because that's the way the consumer is today. they're not sort of in a forced stuff that media companies force down their throats >> and kara, before we let you go, a little bit of a left turn. rihanna, the artist, her lingerie brand savage "x" feinty receiving $50 million in funding this morning fenty, she's got that done with lvmh, as well. she's been quite the entrepreneur >> it's really interesting i'm always fascinated by this. the issue is how much staying power do these things have you've been around a while and have a million of these celebrity-oriented websites or different things there's been so many of them, there was a one a long time, a

movie service with matt damon. i don't know where that went so the question is how much staying power do they have and how much is the person involved in it? whoever, whatever the celebrity is so i worry a little bit about these things being faddish and then they move on to something else it's really hard to build a brand and keep it going over time that said, this area is so ripe for disruption it's been dominated by victoria's secret and, you know, millennials and others are looking for a different thing. and so that's where the real opportunity is for a celebrity like rihanna or you know, anybody. any of these celebrities that have a really strong relationship with their fan base, essentially. >> yeah. and she has shown she's serious in cosmetics now moving deeper into fashion it will be interesting to see how this goes. kara, always good to see you thanks >> thank you meanwhile, apple's wearables could be hit by a 15% tariff in just a few days' time. josh lipton explains from san

francisco. hey, josh. >> so, wilf, that's right. remember, there are a lot of fans of these wearables. apple has now sold an estimated 80 million watches and 50 million air pods so how could apple respond well, it could absorb the tariffs entirely analysts estimate that could cost the company $500 million. or apple could try to pass along price increases to consumers that, of course, risks denting demand evercore's more concerned about levees hitting the iphone. the apple is hit with all potential tariffs. he says the company could take a hit of at least $5 billion to its bottom line, and that is real money, amounting to about 10% of the company's free cash flow on the other hand, we know tim cook seems to have friends in high places. president trump recently praising cook as a great executive and said cook made a great case about why competing with samsung would be tough if iphones get hit with such import tariffs. >> tim was talking to me about

tariffs. and you know, one of the things and he made a good case is that samsung is their number one competitor and samsung is not paying tariffs because they're based inform south korea and it's tough for apple to pay tariffs if they're competing with a very good company >> now, some bet that apple, when it's all said and done here, won't be hit with tariffs. not wearables, not iphones, that it will earn exemptions. that's gene munster's view he doesn't think when push comes to shove that the u.s. government want s penalize such popular products guys, back to you. >> thank you very much, josh it's a story we will continue to follow a very important company we'll talk to the ceo of another headphone company on the september 1st tariffs list, that in just a few minutes. but first, rick santelli, what are you watching today? >> i continue to watch the long end. you know, we're knocking at the door of 2% in the 30-year bond the bond may hold the key to where the markets go yowa tknu nto ow where they're

going? tune in after the break. ♪♪ ♪♪ ♪♪

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.

i'm scott wapner here's what's coming up "halftime report." we're debating whether this week's tech takeoff is the start of something bigger. many say the markets can't get going again without it so we'll discuss the stocks you need to own and trim plus, our call of the day hits squarely in the tech space today. our investment committee on whether this apple supplier is worth a look and nascar star kurt busch

is in the house. we're going to talk fast cars, fast money, and what he is doing to give back to america's veterans it's all at noon on the half cou court, we'll see you in about 15 >> let's get over to the cme and rick santelli with the santelli exchange >> hi and good morning is it our problem the world just loves our securities, like cake, they just love it! and the long-dated ones, not only on foreign buyers in love with it, institutions around the globe that need to match their future outflows, their payouts, insurance companies, annuities think about all of the payouts down the road that need to be accompanied with cash flows. and you look at the short end. the short end has the fed, t-bill issuance everywhere in sight, especially right before and right after the budget deal. that's why treasury secretary mnuchin thinking about an ultralong bond is a wonderful idea if they want to eat cake, let's

give them some cake to eat because all of these issues i've described have huge lly distortd the yield curve? how do we get our gps back how do we know when the global feeding frenzy that keeps the dollar firm and keeps treasuries well bid and keeps treasury lows making it very hard to handicap how our economy will have to behave, when the thermometer's in the mouth, maybe a full onset of the flu we're doing pretty well. the issue isn't the inverted curve domestically it has now become a global signal why? because it's global players that are giving us the signal but ultimately, it could still be right because the key point to discuss is how can we survive and what would our rate of decay on growth be if the rest of the world keeps pushing us into negative yields and slower growth quickly, let's go to the board it's all about the 30-year i did three charts here quick.

scale doesn't matter since august 1st we've dropped like 60 basis points in a 30-year bond so when you take 30s minus 10s, we call that the nob down here, of course it got affected. the spread narrowed. it's coming back a bit but the real key here is this chart. this chart goes back to june of 2016 why? on july 6th, 2016, right around the time we're making a double bot around 136 in ten-year notice, we made only one bottom at 209 and 30-year bonds and when we traded through that, this really accelerated. the point is, everybody now is looking rightly so at the double bottom on 12 and 16 on 10s but the key may be the long bond, because if the long bond can get above 209 before ten-year note yields violate the double bottom at 206ish, in my opinion, that's what i call at least a large bottom, so watch 30-year bonds and pay close attention to the nob spread. wilf, back to you! >> rick, if u.s. treasuries are

like cake, what are german bunds like >> well, german bunds are getting to be less and less like the tastiest cake, because many fear that the ecb and the european economy are toying with too much debt. they're taking on too much in negative yields. and what are they getting for it a weak concerns aurrency and a y economy. there are issues of confidence and control. and even though they're still punching on those like cake, what about the inventory of all the southern central banks like italy and greece what's going to happen all of these securities that's an issue and it is affecting the appetite of foreigners to even the high-credit debt in european >> i like that you got crumby in there, as well i'm not going to ask what guilds are like >> buntd cake. >> how it's impacting his

business and what if anything ayitustorere ppa st wh - stand up if you are first generation college student. (crowd cheering) stand up if you're a mother. if you are actively deployed, a veteran, or you're in a military family, please stand. the world in which we live equally distributes talent, but it doesn't equally distribute opportunity, and paths are not always the same. - i'm so proud of you dad. - [man] i will tell you this, southern new hampshire university can change the whole trajectory of your life. (uplifting music)

welcome back, we are up at session highs 351 points on the dow. 1.35%, the nasdaq still leads the charge that's up a healthy 1.5%, as is the russell, tech, energy and industrials lead the charge. we're just a few days away from another round of tariffs set to go in effect on september 1st. headpho headphone company jlab audio, one of the companies on that

list expects a loss of 10% in profits overnight. joining us is the ceo win cramer good morning to you, thanks for joining us. >> good morning to you, and i wish it was 10%, but now we're at 15. >> 15% so gauge for us when what portion of your products are manufactured in china, and as you say, exactly how that's going to shake down on the bottom line? >> yeah, we have 100% of our products manufactured in china, about 90% of those products are on the september 1st tariff list, so a big portion of our business is going to be impacted from this. >> 100% of the costs or so coming from china or is this -- >> that's correct. 100% of the cost comes from china. >> so talk us through your best selling headphones how much do they cost today and will you be passing any of this increase tariff cost to you onto the consumer. >> yeah, so we have a range of goods. all of our products in the value segment or accessible segmentment, we price them from

$50 to $150 in the u.s. market, and we do plan on passing costs on to the u.s. consumer, but we're taking a wait and see approach, and we think that's the prudent approach because we're seeing changes happen via tweet. i mean, look at a week ago friday i woke up and found out that our cost of goods were going to rise 5% in a week and we had no idea that that was coming, so we think a prudent approach will be wait and see, but we're certainly going to take a hit on the profit side. >> so price might go up for the consumer in due course but on september 2nd it will be the same. >> some of our peers aren't as lucky. they didn't have as large of an inventory position as we did you're going to see the baskets of goods increase over the next 30, 60, 90 days as we get into holiday, and certainly, you know, if your budget is $100, and you now have to spend $115, something's going to get cut from that basket >> so win, obviously you sell

your products at a number of retailers including kohl's, best buy, walmart and home depot. what are the conversations like between you and the retailers? a lot of them are telling us look, we're having conversations with our vendors about how this is going to work who's going to take on sort of what percentage of the cost increase what are they asking you to do what are you telling them you can do >> yeah, i think the conversation have actually been -- have been really well-received by both parties and we have good partners in the u.s. they're asking us for help we're asking them for help, and we're trying to find ways that we can both trim costs to ensure the u.s. consumer doesn't get -- doesn't get burned as much if you think about it, all of the jlab products come with a charging cable that is three feet long. can we trim that charging cable to one foot. we don't ruin the user or the consumer experience, but we trim a little bit of cost that we can pass on through. we're trying to find some creative ways to make this happen to work with our retail

partners. >> win, how does the holiday season you think play out differently in a tariff environment? i mean, usually a couple of weeks before christmas you end up with some shifts, depending on how good the demand has been, how steady the traffic has been. when you factor tariffs in, how do you think that impacts discounting in the calculations? >> yeah, i think discounting will not be as strong this year because there is a 10 to 15% tariff that manufacturers and retail partners are trying to absorb i don't think you're going to see as big of discounts over the black friday period as you've seen in the past if you had $100 to spend for the holiday and now you need to spend $1,515 15 to get the same amount of goods, something is going to get trimmed. >> when you look at your company's business investment plans, have you had to make some changes now that we know these

tariff costs are going up, investing in less, hiring fewer people >> yeah, absolutely. and that's the one thing we can control through all of this is our spend and our investment and it's across the board from little things like a coffee supplier do we need starbucks or can we get away with folgers to renegotiating with ups everything is on the table in terms of investment and expense including people we've pulled some u.s. hiring positions off the table due to tariffs, so it's certainly all on the table and all being discussed. >> win, thanks for joining us. >> thanks very much. i appreciate the time. and after the break, amazon's burn book we'll tell you what that is in less than three. ssing out. uh... the mobile app makes it easy to manage your policy, even way out here. your marshmallow's... get digital id cards, emergency roadside service, even file a...

whoa. whoa. whoa. whoa. whoa. whoa! oops, that cheeky little thing got away from me. my bad. geico. it's easy to manage your policy whenever, wherever. can i trouble you for another marshmallow? and let me tell you something, rodeo... i wouldn't be here if i thought reverse mortgages took advantage of any american senior, or worse, that it was some way to take your home. it's just a loan designed for older homeowners, and, it's helped over a million americans. a reverse mortgage loan isn't some kind of trick to take your home. it's a loan, like any other. big difference is how you pay it back. find out how reverse mortgages really work with aag's free, no-obligation reverse mortgage guide. eliminate monthly mortgage payments, pay bills, medical costs, and more.

call now and get your free info kit. other mortgages are paid each month, but with a reverse mortgage, you can pay whatever you can, when it works for you, or, you can wait, and pay it off in one lump sum when you leave your home. discover the option that's best for you. call today and find out more in aag's free, no-obligation reverse mortgage loan guide. access tax-free cash and stay in the home you love. you've probably been investing in your home for years... making monthly mortgage payments... doing the right thing... and it's become your family's heart and soul... well, that investment can give you tax-free cash just when you need it. learn how homeowners are strategically using a reverse mortgage loan to cover expenses, pay for healthcare, protect investments, and so much more. look, reverse mortgages aren't for everyone but i think i've been 'round long enough to know what's what. i'm proud to be a part of aag, i trust 'em,

i think you can too. trust aag for the best reverse mortgage solutions. so you can... retire better. remember the burn book >> and i have this book, this burn book where they write mean things about all the fwirgirls n our grade. >> what does it say about me >> amazon made its own, a microsoft word document titled new york negative statements during its highly publicized hq2 process that was ultimately

scrubbed the burn book was a record of all the insults they received from new york politicians and labor leaders. this is such an interesting document i would love to sort of see who put this together, why they put it together, and how it really factored into their ultimate decision. >> i have to say i haven't seen the movie, but i like the clip. >> other thh, you haven't >> as for amazon doing this, i'm not that surprised i would think in this process if you're going through anything like this, that that team or some kind of consul at that particular time -- consultants would be doing their due diligence. i wouldn't think it comes as too much of a surprise. >> my twitter replies are my burn book. that's where people burn me. >> i mean, sadly, the same goes for me we don't get to have a sort of compliments book on twitter. >> we could start one of those that would be nice that would be a really nice thing. i hope that new york politicians and politicians everywhere sort of learn from some of the fumbles that were made if indeed

that was some of the reason that was lost. major indices near session highs, the dow up more than 335 points new tannics on the tech front doing particularly well after reporting earnings where they lost less than the street expected after a couple of disappointing quarters that will do it for us here on "squawk alley. let's get to judge and the half. john, thanks front and center this hour, the tech takeoff, is it a sign that trade is about to be back in a big way? it is 12 noon, it is the "halftime report." >> tech on a tear after weeks of losses is it time tostart biting on the faang names? >> stocks rallying on hopes about trade talks, but when it comes to the economy, which is the bigger threat, the trade war or the fed chip stocks soaring and a big updwrgrade on a major apple supplier why it may go 30% higher from here the investment committee is ready to go.