just reported a great quarter. $13 billion recurring revenue. >> home depot. no exposure to china growing. new development in america that's the name. >> doc >> xd. unusual activity >> zogenix >> "the exchange" begins now thank you, scott hi, everybody. an end of summer rally as the president says talks with china are now at, quote, a different level. but with tariffs looming, is this yet another head fake or true breakthrough the markets can trust? we'll debate that. plus, value is king. the discount stores have been a bright spot in retail. we'll look at two standout plays headed two different ways today and how investors should play that and we'll hear why one analyst says disney plus could be a much bigger hit than even disney is expecting. and what that means for netflix and the rest of tv that and more ahead in "rapid fire." the markets and seema mody

is here with those numbers >> here's where we stand at 1:00 p.m the dow up 349 points while the u.s./china trade war has escalated. in the last 48 hours, the tone has changed. china today saying that it remains in touch with the u.s. on trade and that it also suggested it won't retaliate against the latest tariff increase we were up 361 points at the highs. currently up 345 and up 3% for the week here are the two sectors contributing to the move we're seeing in the markets. first, it's tech a lot of semiconductor names that have that high exposure to china. nvidia, micron and apple shares up about 1.5%. let's also pivot to the industrials. one sector that hasn't really been hit by the ongoing u.s./china trade tensions. a number of these companies have been mentioning the competitive pressures they're facing on the ground inside china. like caterpillar, 3m these shares of these major industrial joints are higher and the airlines playing a big role today, too

american airlines up 4.5%. the trael associate up 3.2% for the week on track to break its four-week losing streak. kelly? >> seema, thanks welcome to "the exchange." i'm kelley evans revised gdp dipping slightly to 2% today consumptsion was stronger than first thought. overall gdp grew 2.6% in the first half of the year pending home sales did come in weaker than thought last month they dropped 2.5% versus the unchanged reading that was expected and the treasury secretary steve mnuchin saying that ultra long bonds are under very serious consideration right now. while at jpmorgan, a survey finds investors would prefer a 20-year note to a 50 or 100-year bond let's drill down on the markets with bob pisani. >> all the beaten een up sector have been rallying semiconductors, transport, energy

no one has much confidence at all this is going to last. the market is stuck because traders can't figure out what the earnings outlook is going to be like for the next six months. earnings are looking flattish for the year up or down a couple percent. that's flattish. not a lot of confidence in the future estimates because of all the uncertainty. first and foremost around the direction of trade and tariffs second around the stability of europe and the asian economies independently of tariffs and finally, what the right central bank policy response should be to weaker growth it's not clear that just cutting rates is the panacea without a meaningful trade deal, we're essentially struck in a trading range. look at 2020 earnings for example. who knows what's going to happen there. we get a trade deal, maybe we can go up 10% in earnings and the markets are going to rally on that. we could have no earnings growth in 2020.

that would be a tough call for the stock market for prices. a big global slowdown or even a recession. could be down 10% or 20% in earnings and that is fairly typical in a garden variety recession it's not unusual to see a 20% drop in earnings a lot of uncertainty back to you. >> bob, thanks very much the dow and the s&p are on pace now for their best weekly gain since the first week of june this after china says they want to resolve the trade war with a calm attitude. and hinting they don't plan to retaliate for our latest tariff hikes. should investors keep this as a true turning point heading into the fall joining me are the chief u.s. economy at oxford economics and janet johnston, portfolio manager at trim tabs asset management you are quite bullish on the chinese consumer at least. what do you think happens with these trade talks? >> well, it's hard to tell if they're going to escalate or if things will continue to be calm, which is what we hope.

there needs to be a resolution what we've seen in both the u.s. and in china, the u.s. consumer has been on really solid footing. what we've heard from companies is that the chinese consumer has continued to deliver i think some of the old statistics, the macro statistics coming out of china reflect more of the industrial economy than their consumer economy and so the messages we're hearing from companies are a little bit different >> so you'd stick with companies like alibaba, those with chinese consumer exposure. does that mean for the u.s. companies with that exposure, starbucks and the like >> well, china is the growth engine for starbucks the u.s. is steady, but their comp store sales were up 6%. i think their stores are growing 16%. if you saw the costco video that went viral yesterday, that gives you an indication of the pent-up

demand for high quality u.s. products costco is very smart they put some of their signature products on alibaba for a good bit of time before they opened that store >> trade war or no trade war, that's one way to play all of this greg, the president tweeting again today after the gdp numbers saying the economy is doing great with tremendous up side potential if the fed would do what they should, we are a rocket upward what do you make of all of that and this back and forth between the pressure on the fed to lower rates and their sort of long discussion about whether to continue to do so. >> i think the president in general put a little too much lipstick on this morning's gdp report we have growth that's currently trending at about 2.3% year over year that's a significant downgrade from where it was a year ago when we were growing above 3%. we've seen a number of headwinds coming from the global environment that's weakened

quite tremendously we've seen the erosion on business investment from lingering trade uncertainty and from additional trade tariffs. and now we have business investment that contracted in the second quarter and it's not looking much better yes, there is some encouraging news coming from china tt it's willing to negotiate and that it doesn't want further escalation of trade tensions but i don't really buy that. what we're going to see going into 2020, it's further tensions between the two nations that will continue to erode private sector confidence and weigh on business investment. >> and there's been pressure on the fed to respond to that bill dudley wrote earlier this week they should basically let the president take the political hits that come from that larry summers was on our air responding forcefully to what mr. duddley, the former new york fed president said >> for a trusted former official of the fed whose thinking is inevitably going to be tied to the fed, to recommend that they

raise interest rates so as to subvert the economy and influence a presidential election is grossly irresponsible and is an abuse of the privilege of being a former fed official >> and, greg, this was so striking because larry summers is no big fan of the president so his criticism carries a lot of weight here, doesn't it >> i think the op ed by dudley was not only misguided but very naive. having, at this juncture, a statement saying that the fed should influence the elections by essentially going along with the trump trade tensions and accommodating these increases in tariffs is completely misguided. i think the argument that trump would react differently if the fed were to essentially loosen monetary policy is naive i think the argument that the fed needs to remain independent

and as such should essentially go along with this tariff is also misguided and pushed back against further accommodation. the economy is at a point where it is weakening where global headwinds are influencing the economic pace of activity. and in that environment, the fed should react and should prevent a further tightening of financial conditions and, therefore, loosen policies >> you think one more rate cut two more what's your thinking >> we have three more rate cuts. september, october and december. >> i know the market is headed your way thanks, gregory and janet. turning to retail. best buy shares are down more than 8% after mixed results today. the company saying all the proposed and implemented tariffs affect about 60% of their cost of goods sold. for more i'm joined by michael pachter from wedbush why do you think this disappoint want was so striking what is it telling us about the tariff landscape >> i think bob pisani said it

really well a few minutes ago. investors just don't know what to do. they don't know where tariffs are going. they don't know how manufacturers are going to respond. they don't understand the supply chain and how quickly manufacturers can shift production elsewhere and, you know, you look at best buy shares look at the price. it's been as high as 80 and as low as 50 in the last year we're kind of settling in the middle which is telling you investors don't know where things are going and best buy, they don't control very much of the supply chain. they control their private label stuff which is maybe 10% of sales. accessories are 10% of sales and that's all china and a big chunk of consumer electronics, phones and tvs and computers are made in china they can't control it. they'll have to likely raise price. that's going to dampen demand and kill margins i think the guidance is right, and i think management threw their hands up and said we don't know what to do. >> what conclusions should we draw about the impact these tariffs are going to have if

this is one of the best performing stocks throughout the whole transition as amazon came to cannibalize their ability to execute has been phenomenal. what should the company be doing and what should investors do with the stock >> this is a good management team, and i had a sell on this thing for years because i was convinced amazon would put them out of business. they've been really astute and i've been quite surprised how many consumers don't want to shop online. best buy is the destination for those consumers and best buy has been consumer friendly in creating solutions for smart home, helping people connect everything they'll continue on that path. and i think they probably have another 20 or 30 years until that generation of consumers dies out and our kids who do everything on their phones replace them so they're going to be around for a while, and what they're smart about is they're returning all their cash generated to shareholders their share count keeps dropping which means on flattish revenue,

they can keep growing earnings that's what we're seeing it's not a value-less stock. there's real value there and it's a really good management team just hard to put a premium multiple on it >> you have a $71 price target shares just under $63 today. if they'll struggle to do as well as you've described, is there anyone you downgrade to a sell given what they've just told us? >>. >> i think the market is telling you they'll make about six bucks and it's worth a ten-ish multiple because of uncertainty. and if tariffs get more severe, i have to rethink whether they can earn that kind of number if tariffs go away, i've got to rethink whether they'll earn a lot more let's see what happens with tariffs. >> and aren't those the truest words in the market right now? michael, thank you so much here's what's still ahead on "the exchange. >> coming up -- king dollar. no, not the currency

the retailers. a look at how deep discount stores are winning over customers and delivering for investors. plus -- one wall street firm says disney is underestimating how big its streaming service will be. and there's a tariff tug-of-war going on. not just between the u.s. and china but between companies here at home. this is "the exchange" on cnbc

welcome back it's a big day for discount retail today dollar general is surging to a new high after a blowout quarter. dollar tree shares meanwhile are lower after the company missed earnings estimates both companies still beat on same-store sales and are raising their full-year guidance despite the threat of tariffs and in contrast with what we just talked about with best buy i'm joined by rupesh from oppenheimer and lauren thomas. great to have you both here. how can these stores be executing so well when best buy is faced with such profit margin pressure >> yes, as you look at the retail landscape you see consumers migrate toward the value channels i think you continue to see that shift within the retail landscape. >> going the other way today as

well is olly's which had been one of the best performers is now is down 32% in a month is it not executing well or is there -- are they facing unique challenge that tells us anything >> olley's, i don't currently cover. i think with the dollar source, dollar store saw 4% comp it's really largely driven by the company initiatives and the management team at dollar tree has embarked on a number of initiatives to really accelerate that business. i think it really speaks to the strength of the management team and execution versus other macro factors out there. >> and that's what makes this so striking right now these companies were one of the first to be mentioned as feeling a direct tariff hit. profit margins which shrunk. so many product comes from china and yet dollar general's earnings were 25 cents better than expected and revenue came in $100 million higher than expected quite incredible >> nod go back to the olly's point. i think that spoke less to weaknesses in the tire

industry i think that's more of a one-off thing. the ceo said on the earnings call we might have gotten too ahead of ourselves in opening stores they actually were -- one company to take advantage of the opportunity with toys "r" us going out of business. they went in and took more than a dozen toys "r" us stores and moved into those so maybe they realize, or what they said was those stores ended up cannibalizing existing stores might have gotten too ahead of themselves back to your question. overall what we continue to see and what i cover a lot of is the separation of whether you're at the mall or are you off mall dollar general, ollie's in line specialty apparel retailers that continue to struggle >> and we've talked for years about tjmaxx and that cannibalizing the department store and the trend there. walmart, another great example of a company that's always put walmart first and seeing those

efforts pay off. so when people look at the tariffs that are coming in september and in december, is that going to be tougher sledding from dollar general from here, though? >> as i look for for dollar general they've incorp raikorcoe next round they import about 6% of their foods internationally. my guess is china is right now about half that business they've already mitigated a good portion of that exposure we feel good about dollar general's ability to manage the tariffs. if you go to 25% tariffs in tier four products, i think they'll resort to taking some pricing. >> who is more exposed in a bad way in the space that you cover? >> i think dollar tree would be more exposed they import significantly higher amount of products from china. if you go from 10 to 25 you'd see a bigger impact. and the other key difference in why dollar tree is down and dollar general is up, they did not incorporate the impact of future tariffs

i think dollar tree, still a risk of earnings revisions >> thanks. appreciatet. coming up -- did the fed miss its chance to preemptively take a recession off the table one of my next guests says yes he's going to talk about what he thinks they should be doing next plus, they're paid to find the addresses of airbnbs to help cities crack down on illegal short-term rentals the companies hired use shady tactics. we have that story coming up

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welcome back look at treasuries which are on the move we want to head to the cme where we just closed up a seven-year auction. rick santelli is here with those details. >> they brought the seven-year back out in february of '09. on that auction, the first one, we had a bid to cover 2.11 the next worst bid to cover was today. 2.16 this auction was really a dog. i gave a d-minus 246 the 10 auction average 216. 50 points, the worst since december of '15. the only thing even decent with this auction was still below average was direct bidders a little over 16%. dealers took a whopping 33.8 and here's the linchpin. the yield was 1.48 nine at the dutch auction. the high was 1.47. not only did we tail, we tailed

into territory that one issue never even traded in what does that mean in english d-minus. we brought the 10s to 2s back to unchanged. it's been minus 4 and minus 5. and not that i think that's so meaningful, but what it did was threw a bit of selling wrench into a market that's been overbid with regard to yields. so we want to pay close attention for the rest of the day now that $113 billion supply is in the rear-view mirror >> you think it was the more hawkish talk from the ecb this afternoon? did the yield just get too low >> yeah, i think it was more the latter i think yields have gotten to a point they're low. questions as to, does 97% quarter point really mean they have to deliver? can the fed push back at the market there's a zillion questions. when there's that many questions, investors usually pull back, and they did today in a big way at that auction. >> that's the worst mark i've seen from rick in a long time. a d-minus for the seven-year thank you, mr. santelli. let's get over to contessa

brewer now >> here's what's happening right now. a 6.3 magnitude earthquake struck about 150 miles off the coast of oregon this morning u.s. geological survey says no tsunami is expected from the underwater quake no reports here of damage or injuries federal authorities announced charges this morning against a 20-year-old ohio man accused of threatening a jewish community center in a video. police say james reardon posted a video earlier this month shooting a semiautomatic rifle he's been charged with transmitting threatening communications via interstate commerce a lawsuit has been filed on behalf of a west virginia transgender man who is accusing an assistant principal of harassing him when he tried to use the boy's bathroom the aclu says the suit is a last resort, an effort to prevent the assistant principal from contacting the kid's family. and the number of people killed by drivers running red lights hit a ten-year high according to aaa

the latest figures from 2017 show 939 deaths, which is a 28% higher percentage than 2012. and aaa says it's not clear what's behind the increase but notes there are more people driving more miles since the great recession. that's the cnbc news update this hour back to you, kelly >> and whether distracted driving plays a role in that as well contessa brewer, thanks very much here's what else is coming up on "the exchange. >> ahead, bitcoin's bizarre two-day fall wall street even more bullish on disney plus than disney. jack ma says we'll eventually see a 12-hour workweek and rihanna continues to woo the venture capital world. that's ahead in "rapid fire. woman: my reputation was trashed online.

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welcome back let's catch you up on stories on your radar today time for "rapid fire." here to break down the headlines are seema mody, robert frank and courtney reagan. we should be talking about bitcoin surging to new highs it's a safe haven trade. bonds are up gold is up but it dropped back below the

$10,000 mark again extending declines from yesterday. it's still up 150% for the year. >> that's the big story. you speak to some of these exchanges that manage money. they'll say big picture, still up 150% so far this year i spoke to michael moore at genesis capital. no real news to speak ofs too why bitcoin has underperformed normal volatility in the bitcoin land i will say that we have seen this risk off rally. the dow up 340 points. 3.2% so far this week. has that made other assets less appealing for the week silver did stage a major reversal as did gold >> i like it because people can't figure it out the way they can't figure out gold. sometimes it rallies because it's going with inflation -- >> it had that run up when markets were really going crazy. i and others thought it was the safe haven trade where a lot of chinese and others just said

yuan is going down maybe the pound is going down. let's put money into bitcoin then it's just hard to figure out. >> if you go back to the original time when it -- >> did it ever cross 20,000 or just got close >> around december of 2017 >> that was the top of the mark. people were saying bitcoin is a sign it's an early tell for -- stocks were rallying. >> now the complete opposite i think the answer is it's just in its own world >> extremely volatile asset, if you can even call it that. but what the technical analysts are saying is every six weeks you'll see some type of breakdown in bitcoin this is what it's experiencing now. >> well, moving on, a new report from ubs says 43% of u.s. consumers that surveyed planned to subscribe to disney plus. that's more than disney itself has predicted. disney has forecast somewhere between 20 and 30% of broadband households will be subscribers more than half of those who would sign up are telling ubs they'd cut at least one other service. pay tv being the first service

they canceled with other streaming services closely behind we talked about netflix's under foermance this year. you have to think they're worried. it's a reminder the pie doesn't keep growing forever >> you have to think they're worried. the most interesting thing about this was that we know disney plus is going to be very popular. they're saying 20 to 30 million in the u.s 60 to 90 million overseas. who are the losers what's interesting about this is only 13% of respondents said they'd have three or more streaming services so three is the number three is going to be the number of how many of these services can people have? three will be the number amazon probably one. netflix is probably -- >> you think amazon? >> those could be the three. netflix, disney plus and a third. >> what about hulu >> nbc will be the third >> nbc hasn't even launched yet. >> it will be number one >> what happens to hbo now

>> facebook has its own offerings. if it's three then there's only room for three that's where it's going to get tough. >> most other industries, they consolidate to three, four major players. >> if your trying to cut the cord and get rid of your cable bill, how many subscription services are you going to want to pay for where you still feel this is a worthwhile investment for my family and we're still saving money off of that pay tv subscription >> and you're still using it how much can you watch >> disney, i think, is obviously, if you have a family with young children and they watch the same movies and cartoons over and over, i see a lot of value in disney for many u.s. consumers perhaps more so than some of the others >> you aren't necessarily going to binge watch the lion king 150 times. >> that's because you don't live in my house where we do do that. >> if jack ma is right, he'll have plenty of time to stream the lion king. while on stage with elon musk in shanghai, he predicted that artificial intelligence should enable people to work for just four hours a day three days a

week 12-hour workweek sounds great but this is the same guy who endorses the 12-hour work day six days a week for the time being. >> this was crazy. he's talked about that 9, 9, 6 9:00 to 9:00, six days a week and he endorsed that and artificial intelligence, i don't know, may make our lives more efficient but will it really allow us to cut back and work less? isn't it to allow us to be more productive and to do more? >> i hope he's right >> wouldn't that be great? >> let's see if he is right. the context here is also that china has been doubling down on its investment in artificial intelligence it's really had that first advantage where the u.s. is behind when it comes to innovation in ai >> china is going to run out of workers and the u.s. is not. >> they need the robots to step up >> this idea that technology would allow us all this leisure time there was a book that said by 2030 we'll only work 15 hours a

week because we'll have so much time on our hands. guess what it had the opposite effect we all work a lot more than we used to. >> exactly my point. another prediction of leisure time just not going to -- >> going out the window. >> he also made the case that artificial intelligence will be a force for good he says, i think because of ai, people will have more time to enjoy being human beings and dance and karaoke. >> they can dance with the robots >> no, the stuff is all neutral. it can be good it can be bad. you can't decide now that it's going to be fine and he's talking to elon musk who foretells their takeover of society. let's go back to rihanna she has a lingerie line called savage x fenti this line is now worth $70 million reportedly thanks to $50 million in fresh funding the collection only launched in may of 2018. it's been steadily gaining market share on the likes of victoria's secret. we know how those shares have been doing this is one of her many

investments. why is this one doing so well? >> she's got lvmh, first with makeup and then she's got now a new truly new fashion house. first time they've done that in decades. and that's yet to launch and she's now worth around estimated $600 million this is a woman wha decade ago was bankrupt or nearly bankrupt. and it's just incredible how smart she's been about her fan base and what matters to her fan base and reaching intoes the in a way that the current leaders aren't so victoria's secret is based on this model of woman that rarely exists in the real world and rihanna said, i want to make lingerie for real women. and it's working and she's in touch with that fan, and that fan base >> i understand you can only buy this direct, right this is not like going through stores that's another interesting wrinkle in all of this it keeps reminding us, the disruption is coming to the traditional players. >> kylie cosmetics they were able to go direct to

consumer 50 before they experumted with some brick and mortar that's the power of a celebrity brand. not all celebrities brands have staying power. yes, you have the honest company from jessica alba and goop from gwyneth paltrow. >> have any of them lasted -- >> with controversy for each of those. >> exactly exactly. we're talking about taking market share from victoria's secret it has to be taking market share from someone and victoria's secret is struggle bug they're still a multibillion dollars in sales every year still relatively small >> victoria's secret is donating share to a lot of places right now. >> third love and adore me and all these other start-ups in the lingerie category. this is sort of -- >> are those direct -- >> i've never heard of those >> sort of ground that is up for the grabs. but also folks that -- their level will tell you it's hard to make a really good bra you have to work really, really hard at that the product will speak for itself i haven't seen the product in person so i can't speak to it

for rihanna's. >> she's been successful in this regard is she doing something different. we were talking to shaq yesterday. he thought about, what do i want my brand to be i want it to be fun and partner with products i like what is rihanna doing? is it that authenticity or going super high end >> from what i understand is part of it is just her pure reach. her social media reach which is the defining marketing characteristic now but it's also that she really does launch products that from a price point view of and from a value point of view and from what the consumers want, it's the right thing. it's not just her fan base, what she's been able to do is broaden that appeal to noncore rihanna fans to just be a good product whether it's the milwaukakeup or lingerie >> she's not just this detached celebrity putting her name on a product. she's been partnering with puma and perfume with dior. fast forward to this year with

lvmm and fenti and this lingerie brand. >> got give her props. and you guys thank you. seema, robert and courtney the fed has missed the chance to preemptively take recession risk off the table my next guest joins me to talk about that, straight ahead - stand up if you are first generation college student.

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. welcome back richmond fed president tom barken said he isn't convinced that low inflation warrants cutting rates lower. my next guest says falling inflation is the elephant in the room and the fed needs to pay more attention to it you guys have a lot of proprietary gauges and you think -- we all think of inflation as this super long cycle thing. you say, no, it tends to move a lot more than that >> it's cyclical there are cycles in the economy. there's the economic cycle cycles in growth we're in a slowdown.

that's been going on for the better part of a year. we're also in a separate inflation cycle downturn that began just over a year ago, okay it's that elephant in the room even if they saw the tools and your future inflation gauge there, it's been falling since the end of last year can the fed wait that out? they say they should move back up by the end of the year. >> cycles will turn. it will eventually turn but what happens between now and then and when we look also separately around the world at leading inflation indicators around the world, it's not just a u.s. problem. there's -- it's part of this global slowdown that predated the trade war. and so there's a lot going on which i think the fed is a little wrong-footed on, playing catch-up on and inflation is, you know, undeniable that we're having this cyclical downturn in inflation and it is not over the same indicators that nailed the downturn that the fed and the bond market missed at the

beginning of last year those indicators haven't turned up so it's going to continue easing in front of us, and that is playing out in the bond market look at that >> do you say markets are right to push the fed to cut rates a few more times are they looking to cure a problem they can't cure >> they are very late because the inflation cycle downturn was very evident last fall and they maintained a tightening they tightened two more times. and so some of our research, this is not definitive, but empirically interesting that that lagged time before they begin a rate cut is linked to higher recession risk. now quite separately, probably the most important thing, any time you have a growth rate cycle down turn, you're moving toward recession risk, okay? this has been going on for a year >> but we've seen these sort of cyclical slowings.

2016 being a good example. we've seen the economy slow and then speed up again. >> we've had three since the last recession 2010, 2011, 2015, 2016 and when you look at any of those times the fed tries to tighten when -- in the slowdown stops them in their tracks and that's happening again, but it's happening when rates are quite low. and what's particularly interesting is that this time around, something that's a little different, there's a third cycle. we have a lot of different cycles we're watching. there's a cycle in jobs, in jobs growth and the employment cycle and our leading employment index, the growth rate there, is at its weakest reading in ten years. so there's -- >> any chance that's because there's a shortage of workers instead of a, you know, you are picking up sort of the cyclical downturn versus -- >> this is a deceleration. is the vector changing in growth is the vectsor changing?

absolutely we'll see a cyclical slowdown in jobs growth which becomes very important when you think about like the bullish case, right there's no recession if you are looking at that as very often, hey, jobs are solid. the consumer is solid. what are you -- >> if you lose that underpinning which i think is starting to slip it's starting to slip here that's a real issue. >> ironically, that would make their rate cut job easier because they only like to do it if they see evidence the economy is slowing >> in the rear-view mirror >> that raises one final thing i wanted to ask you about this bill dudley column earlier in the week where he said the fed should let the president take his hits politically for this trade war if that's what's causing growth to slow down. how does that feed into everything going on? >> first, like everyone else said, it's shocking that this is happening outside the room, in public and that's pretty different. and i, you know, from a cyclical point of view, we think that the fed has been wrong-footed cyclically and structurally as

to what's going on the last ten years with this economy. and so here we are, they've got a recession. why is it armageddon we've had 47 since 1790 and survived them all. why is this one freaking everybody out so much? >> yields are already so low >> so they're going to q/e it reveals, it exposes the fed plan, a, is all they have, this low are rate, this q/e they don't have any plan b i think that's where the freak out part comes >> thanks. i think. >> well, hey, we're going to survive the 48th it's not a done deal but i think you've got to be on recession watch. we're slow walking towards some serious risk here. >> appreciate you joining me i want to draw your attention to the markets the s&p and the nasdaq, they are shrugging this off at session highs the dow up 350 points. s&p up 39. the nasdaq up 126. here's a quick look at the transports on pace per their

best day in seven weeks, up better than 2% today coming up, two very different takes on tariffs josh lipton has the first. >> kelly, apple's wearables could be hit by a 15% tariff on september 1st. a look at how much that could cost the company and potentially the consumer now to ylon mui in manhattan beach, california. >> out here on the beach, surfboardmakers are telling me they are totally stoked about president trump's new tariffs. i'm going to take you inside the mi uneksp der shop worho congp xt rowing business. from using feedback to innovate... to introducing products faster... to managing website inventory... and network bandwidth. giving you a nice big edge over your competition. that's the power of edge-to-edge intelligence.

welcome back from wearables to you are surf boards, tariffs mean different things to different businesses josh lipton is live in san francisco with a look at apple embracing for tariffs while elon is in manhattan beach with a business begging for them. >> apple's watch and air pods could face a 5% tariff starting september 1st. these products are a bright spot for the company. apple has sold an estimated 80 million watches and 50 million air pods

apple could absorb entirely and it could cost the company $500 million or they could try to pass along the price to consumers. some are more worried about possible tear i haves hitting the iphone on december 15th. if they're hit with theariffs, t could cost it about $15 billion, but tim cook seems to be on good terms with president trump who praised him as a greatting here the end, apple won't be hit with tariffs because the u.s. government doesn't want to penalize such popular products >> and at least they have deep enough pockets to deal with it so, you have a business that's hoping for these tariffs >> right out here on the beach, truch's tariffs are making waves and that's the break that legendary surf board maker dennis jarvis has been hope iing for.

>> then it becomes competitive for me >> so forget 15% he wants to take them up to 70% because he say that chinese imports are undercutting his boards on quality and on price many of the novice surfers out here probably using boards that have been made in china, but jarvis builds boards for celebrities like taylor swift. he's got a petition that's been signed by 100 domestic manufacturers and thousands of his customers and even made a special make america great again surf board in hopes of capturing president trump's attention. >> i don't have all the answers. i'm just trying to shake the tree and see what falls out and try to work with people that are compassionate about people losing their livelihoods and having to leave towns or even california to find work. >> he says this industry either needs higher tariffs or federal subsidies. the alternative he says wipe out. back to you. sxwl would he get hurt in any

way, think about cost of goods in general or i guess everyone if the whole economy slows down? >> well that's the interesting part about this. is that he not only makes surf boards, he has three retail surf shops that sell many products import ed from china. so he is potentially facing paying these tariffs, but b he says that building the surf board, that's the nucleus of his industry and if that dies out here on the beach, the entire culture could go away. >> wow that is fascinating. thank you guys very much coming up, you can call it the air b and b police sort of how rise of the home rental business has given rise to a new profession tracking down the homes that are renting them illegally that story is next memory support brand. you can find it in the vitamin aisle in stores everywhere. prevagen. healthier brain. better life.

air bnb is one of the most anticipated companies, but there's a budding industry of companies policing these listings reporting that cities are enlisting the services of contractors to expose addresses that are violating laws at the cost of people's privacy

joining me now is joseph cox with this story and basically, to use a term people are being paid to docks folks. to out their addresses and share them with local authorities. is that right? >> yeah, so there are these companies and they'll say they have a high-tech solution for finding the real address of an airbnb and give that to authorities. but what we found from documents and videos and chat logs was that for at least one of these companies, it's actually contractors who are working at home and are being paid $2 per address, sometimes more depending on how hard it is to fipd, but they are ordinary people who have to find these addresses. >> one of those companies that you're talking about is called host compliance. it's a platform based on amazon's mechanical marketplace where as you've said, there's a lot of this kind of work happening that feels a little skruf fi i don't know how else to put it. is it illegal, this behavior >> no, it's not illegal.

i just don't think this many people would necessarily be aware there's this sort of hidden workforce that's being hired to find addresses like this the company when i spoke to them as you say, they did say though they are transparent about how the information is attained, they have no idea it was humans going through and doing this and the it is public information. they'll look up additional phone books and maybe facebook profiles and that sort of thing, but it's still unsettling in a sort of post cambridge analytic world. >> an airbnb spokesperson told you that it is concerning to see rogue third party sites using shady tack the ticks to unearth private user information and sell it to cities. is there more that airbnb should do here? >> they don't appreciate any sort of industry coming in and

messing with their business. it's not fulfilling all its roles or obligations because the industry is now coming up in the first place. if airbnb was more forthcoming, this industry wouldn't need to exist at all so there's clearly a gap in the market even if it can be in a serp tishs way >> why do you think these cities where this is happening, napa, ft. lauderdale, virginia beach >> any of these areas across the united states are going to have their own issues when it comes to policing rentals. maybe we want to only have them in one area of the city so it doesn't increase prices elsewhere and push our residents. maybe they want to make sure that regulations are being enforced, but this is going to be on the up and up. as airbnb, rentals as well as these companies expand, we're going to see this sort of

secondary industry blow up as well >> yes we just had no idea, at least i didn't, that it was so sophisticated and that my home address might only cost $2 to unveil joseph, thanks very much for your reporting that does it for the change. i'll go join melissa for "power lunch" which begins now. >> i'm melissa lee the art of the trade deal. china hoping for a calm e r resolution and that's fuelling the rally for today. is the turmoil finally coming to an end president trump pounding the table on the federal reserve to cut rates in september, but we will explain while powell was stuck between a rock and hard place. and e sports euphoria. the growing market isn't just a fd and investable. she'll tell us how she is getting in the game. "power lunch" starts right now