your dreams. don't stop believing. >> joe, finish us off. >> i like liz's comments on small cap energy energy is making a nice risk on move today apache works >> that does it for us "the exchange"begins now >> thank you, scott. hi, everybody. here's what's ahead. it's the battle within the fed as more members speak out on monetary policy they are not on the same page. we'll talk about what it means for chair powell, what it is telling us about future rate cuts and the fed's credibility we'll dig into it. plus, shares of uber and lyft hitting new lows with uber breaking almost $30 a share. if investors are this cold on their business model what does it mean for the looming ipo? and why a senator thinks mark zuckerberg should face jail time a vegan etf on the way and oldies are streaming

>> kelly, we are right near the best levels of the session so far. green across the board we are trying to recover some of the 285-point decline yesterday for the dow. the dow industrials up 212 just off the high of the session. the s&p close to an area of stalling out in the past, 2945ish. that's the range for the s&p 500. the nasdaq composite up by over a percent as well. we are watching three sectors in particular today they are not very sexy they are very, very noteworthy real estate, up 19% in a year. consumer staples up 14% in a year utilities up 19% in a year all three of the sectors in the s&p hit record highs today those three defensive, at least less economically sensitive sectors. why? pepsico, check, coca-cola, check, brown-forman, mondelez, walmart, all green consumer

staple stocks that hit record highs today themselves real estate, consumer staples and utilities, record highs. back to you. >> welcome to "the exchange," everyone the president speaking in the oval office saying china want as deal he says stocks would be higher if he hadn't tariffed china and discussed iran saying they want to make a deal for their part. let's drill down on the market the reaction to this and more today. seema modi is at the new york stock exchange they are getting a boost. >> they are. while the chinese economy is slowing certain parts of the economy may be stabilizing overnight activity in the server vises sector in china picked up. that plus the hong kong development providing relief on the trade front. industrials with the china exposure, caterpillar, 3m, united tech were powering the

dow today. then there is the chip stocks which have been moving in tandem with china trade headlines kla corps, appliedaterials and micron are rebounding. there could be a meeting in september, yet to be confirmed. >> we have been getting a lot of headlines from fed officials in the last 24 hours. one thing is clear the fed isn't united on the rain-out look. steve liesman is here with more. what does it tell us about powell >> if it feels or seems like the fed is all over the place, it is we have divided what we think are all the comments made by fed officials into three buckets let's go through them. the economy doesn't warrant a rate cut yet we got four, five, maybe six people who think that. monitoring the data, ready to act, maybe leaning toward acting is another one finally, we need easing now. let's go through the comments in the categories

eric rosengran yesterday said he doesn't see as much need for taking immediate policy action he says, i got 2% growth i was planning on that that's the potential of the economy. move on until the data change. john williams, vice chair of the federal market committee as the new york fed president says carefully monitoring this nuanced picture and remains vigilant to act as appropriate we read it as leaning toward the a rate cut now to the we need it now group. jim bullard aid i would respect the market signal. better to get realigned now. let's look at the probability to see where the market is priced relative to the three outcomes 100% chance of a rate cut in september. that's where we are. some chance of a 50 basis point cut, not a big one october, 77.

>> 52.er, i can't read it. >> thank you for the younger eyes more priced in todown the road. they are looking for the fed to provide stimulus to the economy. >> lower rates by a full point. >> regardless of the differences out there. >> the market as a unified theme. stay there we want to talk more about it. joining me now to talk about the inconsistency and mixed messages, neil hennessy, chief investment officer and portfolio manager and joe from nitixis appreciate you joining us. neil, we are obviously focused on the market impact here. when you get so many different voices out of the fed at a time like this, what does it tell you about how to be positioned

>> if the fed is going to dictate it, they shouldn't be on the board. look at interest rates, unemployment, look at what the consumer is doing. the market is being toiled with by traderser not investors the bottom line is companies are making a lot of money. your cash flow is huge the buybacks are huge. the dividends are increasing everything is there, but you cannot have the stock market or the bond market dictate what's going to happen with interest rates. you have to look at the economy. >> is there a welcome element of modesty and how many members is it of the fomc >> ten voters. >> having 17 people at the fed, neil's saying the 1 of 7 of us shouldn't decide we are taking the yield curve, listening to the message is there value in that >> the yield went inverted for,

what, ten minutes because the traders inverted it. the reality of the world is we haven't seen in our lifetime interest rates this low, companies doing this well in the economy continually being strong in face of the headwinds that we have been facing if you look at it, really, we are just recycling every headline it could be the feds, tariffs, this if waste management recycled like we are doingthe headlines they would be out of room. >> let me bring in joe on that point. you have a more bearish outlook. i guess you would fall more in the camp that this is the split. this is why the fed is split it's not a clear picture right now for the u.s. economy >> part of it is 17 people now of the fed, two openings there are a lot of people. they talk through social media and cnbc and elsewhere people

want a voice part of it's been the case there's always been disagreements. we just know about it more publicly the reason the fed should go more is the markets are telling us they should i hear neil about the fed kowtowing to what markets want that's been the case for a long time if the fed doesn't move more aggressively markets will basically force him to do so that's what happened last december and this year i would like him to go 75 this month. i know they won't do it. why? the fed funds rate is 2 and an eighth and the ten-year note below 150. even 50, unless they pledge more, 50 won't to it i'm worried they'll only go 25, send a mixed message and wonder if they will cut again in october. >> the reaction to the last meeting tells you the problem with this. by trying to split this divide they came out with a rate cut that tightened financial

conditions which is the opposite of what you would expect to happen again, the messaging about a mid cycle slow down which sounds like powell trying to figure out how to bring everybody here. >> i guess it's my predi election as a reporter i see virtue in neil's and joe's arguments. >> you should be on the fed. >> maybe probably not here's the thing i cannot remember a time when the right move is so uncertain if joe is right that the data is going to deteriorate from here then we ought to move aggressively neil has on his side strong consumer spending, growth at potential. and inflation rate that doesn't bother me much >> actually do you know who else said this? if anybody missed it sam zell was on "squawk box" talking. >> sam prokd disagree with him? >> turned bearish. i'm talking about the bad one.

timed it brilliantly this morning was asked what he thinks about fundamentals. take a listen. >> i think i have been looking for a recession for some time. every time i get a signal that it's likely, i get a reversal. which i have never had that experience >> he's never had this experience before. who has more experience than sam zell there is something difficult about figuring out what's happening. >> negative rates. >> that, too. >> i will tell you how the fed will handle it they'll cut a quarter and wait and see. they are not going to promise you the rose garden of multiple rate cuts ahead of time. if you want the fed september 18

or 19. >> 18. >> to promise you 50 basis points you ain't going to get it you'll get 25 and be happy with it. >> no, he's not. >> a lot depends on the random number generator known as non r nonfarm employment. >> it's been stronger than expected hasn't made a difference neil, we'll give you the last word here and circle back. how would you position in this market what happens with bond yields as this happens >> i would continue. there is quality and discounted value from convenience stores to guardrails and apparel i look at it that, you know, if they cut a quarter point it's going to upset the traders but not the long-term investor. >> appreciate it, guys

here's what's ahead on "the exchange" -- >> announcer: coming up, hitting the skids. shares of uber and lyft hitting new lows does this tell us about the potential appetite for rework? plus, with less than a week to go before the big event, what apple may have to do differently with tariffs, now a factor in the game plan. and why one senator thinks facebook ceo mark zuckerberg deserves jail time this is "the exchange. we're carvana, the company who invented car vending machines and buying a car 100% online.

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welcome back uber and lyft are bouncing back are a wreck yesterday that saw them close at the lowest levels ever uber is down 29% lyft off by more than a third. for more duncan davidson of bullpen capital and stephan of slated great to hear from you both. what's going on with these shares >> the people's republic of california is about to pass a law which is going to hammer their gig economy. it makes their gig workers into employees and hurts their finances tremendously. >> is it something they should

have seen coming >> they have been fighting this all over the country they are lobbying like crazy california is a one-party state. it's likely this will pass both the assembly and the house then it sits at the feet of gavin newsome. the governor wants to run for president in 2024. i'm wonders if he may veto this because it's not going to look good for him to run. he'll get a lot of people saying this guy took away my uber in california, his base is tech. the tech people aren't going to want this either we'll see. >> i'm curious for your thoughts on that before we talk about we work what's happening in california >> well, california is usually at the forefront of social causes and social needs. sort of union mentality. what they are pushing mofor may not be unreasonable.

it will make the unit economics for them less palatable, but everyone will be hit wit all the prices go up what happens is instead of having these companies' losses subsidized by private investors, customer prices go up a little bit more and become more even with taxi services the next question is are the services still going to be more convenient >> and what happens to demand? to me that's a major demand problem, right >> i think less so than you imagine. when i get to the airport or need to go there i still find the apps utility far higher than using the equivalent for licensed taxicabs. >> again, watching those levels closely. this is as we work is launching the ipo road show next week reportedly i want to play another sam zell sound bite from this morning this is what the real estate tycoon said about their business model.

>> the idea that these companies should have multiple votes or a company forever or not being accountable just doesn't make any sense to me. we work is taking it to an extreme that nobody has seen before every company in this space has gone broke. >> how do you respond to that, duncan >> first of all, he's right on the governance this is extreme corporate governance so the market will look at that. i think when you look at his full remarks, he compared it to the s & ls that's crazy they were doing fine as real estate until the government changed the rules in the '80s. then they got in trouble wework is more like the regis company parent iwg which is a profitable company although not growing very fast.

>> it doesn't have a tech -- >> what we have here -- yeah wework is growing fast and has a multiple based on that yes, it's trying to argue for a high tech multiple that could be a stretch. >> would you be an investor, stephan? >> i would say the same thing that people ask me when they said would you be an investor in uber at the ipo. i would say all these money-losing companies are being subsidized by venture capital firms and large equity institutions they are usually at peak valuation at the ipo you have to hold on for multiple years until they prove they can generate profits is wework going to generate profits? i don't think any faster than uber and lyft. do i believe they are reinventing business model sos convenient that customers will like them even in recessions and the answer is yes.

>> thank you both. appreciate your thoughts today stephan patterno and duncan davidson coming up, should mark zuckerberg face jail time for facebook's privacy lapses? one senator says yes. plus, starbucks lower after a profit warning after the ceo ten days ago said they're crushing it. what's the story we'll have it next through the at&t network, edge-to-edge intelligence gives you the power to see every corner of your growing business.

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by the way, she's the it wasnext mozart.g day.

as usual we were behind schedule. but sophie's enthusiasm cannot be dampened. not even by a run-away donut. we powered through it in our toyota prius. because a star's got to shine, no matter what. it's unbelievable what you can do in the prius. toyota let's go places. welcome back here are some of the movers this hour shares of michael's are higher after beating on the top and bottom line. the arts and crafts retailer posted surprise growth and comparable sales about a 7% gain moderated throughout the day shares of blizzard outperforming at bmo they like the restructuring investments and the investments in core games like call of duty

and world of warcraft. jetblue is lower today the airline lowered the revenue forecast citing weak demand for flights to puerto rico and the impact of hurricane dorian the shares are down nearly 5% on the news now to sue for a news update. >> hello, everyone here's what's happening this hour speaking of dorian, aerial video shows the devastation from hurricane dorian on the bahamas great abaco island it reveals mile upon mile of flooded neighborhoods, shattered buildings, boats and shipping containers that are scattered like toys. the death toll for now stands at seven. authorities say the bodies of 33 of the 34 people presumed dead from a scuba diving boat fire off southern california's coast have been recovered. five crew members including the captain managed to escape after monday's predawn fire. nato's secretary welcomes peace talks between the u.s. and

the taliban in afghanistan his comments come as the u.s. plans to with draw 5,000 troops from the country as part of the deal we went into afghanistan together -- united states and nato allies. roughly half of the troops are n n nonu.s. troops from germany, from other nato allied countries and partners we'll make decisions of our future presence together when the time is right we'll also leave together. >> you are up to date on a busy news day that's the update this hour, kelly. back to you. >> thank you very much here's what's still ahead on "the exchange. >> announcer: ahead -- why one senator says mark zuckerberg should face jail time. a vegan etf is on the way. it may not look the way you imagine. when it comes to streaming music, the older the better. that's ahead in rapid fire

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welcome back let's catch up on a couple of stories that should be on your radar today. it's time for rapid fire here to break down the headlines are domenic chu, bill griffith

and frank. one u.s. senator is calling for facebook's ceo to face potential jail time for the privacy lapses accusing him of lying to the american people. this is senator ron wyden of oregon who said, i think he ought to be held personally accountable which is everything from financial fines to -- and let me underline this -- the possibility of a prison term this is the same senator who introduced the consumer data protection act last year that would give the fdc power to crack down on companies including fines and prison terms for executive. >> i'm not going to comment on mark zuckerberg in prison but a day when youtube was fined pocket change for essentially the same thing you feel like something has to be done there needs to be done -- >> you're saying it's not uniform. >> you're fining and the investigations that go nowhere

it still happens anyway. there needs to be something in the back of the minds of the ceos of the companies that there is some consequence to be paid more than just taking money out of the shareholders' pockets. >> wyden made the analogy to the financial crisis but the interesting thing is we saw the companies and shareholders punished but not a lot of individuals held responsible. that, by the way, sent the economy into a horrible recession with millions of job losses we are still suffering the after effects of people barely shrugged at the facebook news. other than us wanting our data protected, these are platforms that are used, well liked. the idea that mark zuckerberg would be in jail because of a headline most people don't even remember, is that the right way to get at issues of privacy? >> do folks even remember the name of the third-party vendor >> cambridge -- >> analytica

the issue now is investors out there, yes, will punish the stock on headlines sometimes when it is a politician looking for headlines based upon a possible re-election campaign or further political aspirations that's different but shareholders themselves now haven't given these guys that much of an issue with regard to the privacy thing. i will say this, by the way. users haven't either we haven't seen a massive drop off in usage of the platforms even with cambridge analytica. >> likes are still there. >> what do you think about the concept of fining executives individually >> out of their own personal finances. >> take it from the company. he'll get paid more next year. shares of starbucks are sinking on weaker than expected guidance for 2020. this is a surprise why? here's the reason. they cited one-time tax benefits realized in the tax year as a

major head wind for next year. now saying they expect earnings per share to be below the 10% of the growth model after the ceo kevin johnson told jim cramer the company is firing on all cylinders and they reiterated the previous eps guidance. it's an odd, out of nowhere move >> i'm not going to say whether he was fibbing or not to jim cramer it seems that this is more of a timing, accounting issue because of the tax benefit they enjoyed. making the comps for this year difficult to achieve they brought back a lot of their own shares making the comps that much more difficult. as far as operationally it sounds like they are firing on all cylinders. absent some of the extraneous circumstances they may make the 10% growth rate. >> those are both things -- the tax consequences -- that's a tax benefit they got in 2019 they knew would not reoccur in 2020

>> that's key to me. >> and with the other issues, the shares repurchasing, that's something they control as well and plan these are two things unlike the pumpkin spice latte. those are things you can predict months ago the stock isn't down much today. it's up 50% for the year. >> this is not a formal takedown of the forecast. these were comments made by the cfo during the goldman sachs retail conference at the hyatt they are not giving official guidance until they have it to give out they ratcheted things down which is probably why you see a tempered response for the stock now. still, it maybe speaks to the idea and starbucks has a significant presence in china. maybe that's playing into it a little bit. >> people want more explanation than what we have been given so

far. vegans will be able to invest in an etf just for them the vegan climate etf is expected to launch next week and aims to avoid companies that harm or exploit animals. names like beyond meat expecting to be involved will be disappointed the names like microsoft, apple, facebook, jpmorgan and cisco how many are shadow indexers >> the top ten -- it could be the diamonds or the spiders. take your pick comes down to the idea -- some people call it esg investing, environmentally sustainable governance, but it speaks to the marketing aspects of what some invest investors want there is an appetite. >> huge. >> and they'll bring supply to market. >> it's not to say the companies wouldn't qualify, but this is so broad as to almost have no meaning whatsoever they are saying the goal of the etf is the to screen out

companies that engage in animal exploitation or whose activities harm animals also avoids those involved in environmentally -- activities or whose activities contribute to human rights abuses. what happens to companies doing business china? >> this is financial services equivalent of organic. remember they put it on everything. it became meaningless. esg is a huge fundamental shift. investors want it. there needs to be a company that can rate and grade what you are holding based on your requirements. >> certified organic. >> that's what you need. >> as my old friend jimmy rogers told me many years ago and he says it all the time, even now the reason you invest is to make money, period. when you start i vesting to make a political statement you're not investing anymore. you are making a political statement.

when you limit yourself -- you know, money is agnostic. >> goes where it is treated best. >> exactly when you start trying to limit your investment opportunities because of your political beliefs or your environmental beliefs or whatever, you are limiting your ability to make money. >> there were mutual fund complexes who did this in the past ave maria funds. they never really caught on mass market >> you have to know what's in it if you're vegan you should already know that. you should be checking what you are consuming. music streaming services like spotify are trying to cash in on our love of classic rock catalog tunes only 18 months old and more account for 65% of all listening. spotify, youtube and amazon music are using classic tunes to

bring in listeners a lot of this is library consumption, not just the new taylor swift album. >> i love the library. the one thing i use alexa for is the music. i don't order things on amazon i use it for weather i say, alexa, what's the weather and play this. >> what do you listen to >> my wife is a huge country music fan. there is a lot of that in my house now like sirius xm, the highway. >> i love it >> that's my wife. the music aspect is driving so much of the smart devices for the home. >> this is the facebook effect it starts with college kids, spreads to older people. spotify wants to make sure when the 50 or 60-year-old is looking at the platform their favorite songs are there. they also want -- and this i have experienced the young people rediscovering old music. i went through a phase in high school where i listened to a lot

of kansas. that was not because it was new for me at the time ♪ carry on >> there we go to have the library for people to rediscover great songs of the past. >> great music is great no matter what era you are from it's no surprise or maybe it was a surprise that this summer one of the box office hits was "once upon a time in hollywood" which is chock full of '60s classic rock. >> great music. >> including deep purple's "hush". >> good. good ♪ >> that was very good. quickly, yours >> my high school days came around and the classics was the eagles doesn't seem that classic now. hotel california, take it easy which is the way i tackle investing. >> led zeppelin. i went through a phase of that >> one of my favorites, september, earth, wind and fire.

you cannot have a party, play this song and have people not dance. >> how old were you when the song came out? >> it came out in '75. i was young. definitely of dancing age. >> finally, apple ceo tim cook highlighted the phenomenal demand for their air pods. but we keep losing them. the new york city subway authority had to retrieve 20 air pods per month for riders. too many people are jumping down on the tracks to get their air pod back might be a good sign for apple since they face tariffs. but there needs to be a better way to retrieve them. >> i didn't realize what a brilliant product it was until i started losing them. then you realize, okay first you don't buy them because they'll fall out of the ear. by the way, you'll be addicted i'm on pair number four. i will never go without them they're fantastic. >> like golfers lose golf balls.

people who wear airpods lose those. the first time i saw my dad with his airpods he felt so cool and hip. we were going out to lunch when he picked me up from the airport and lost one in the parking lot. i get this story >> airpods are the dumbest looking thing ever like something is dripping out of your ear point them up. at least then they have character to them. pointing down, looks ridiculous. >> should apple give people discounted replacements? >> subscription plan all you can wear, antenna up. >> they cost as much as your phone. >> they will the way this is going. thank you, guys. >> the boys are back in town. >> despite fears, retail sales are strong we'll hear how they are handling tariffs and whether they are passing them on to consumers

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welcome back retailers gearing up for the holiday season amid tariff threats and concerns about a recession. courtney reagan is at the annual goldman sachs retail conference where we got the starbucks headlines today. she's got the rest of them for the major companies there so far. court? >> hi, kel most of the ceos here feel like the u.s. consumer is strong. lowe's ceo says the macro environment is supportive of home improvement and not just things you have to replace like a refrigerator but more discretionary categories >> we feel confident that those discretionary categories are holding up really well to levels that give us confidence that the consumer feels good about their economic situation

>> also today tapestry replaced its long time board member jide zeitlin and he says the economy is still strong despite tariffs, a big uncertainty point for the sector and the consumer in general the fear is that if higher prices start to deflate consumer confidence and/or spending, what impact will that have sort of on the broader economy? invially, the retailers are managing through >> what we are seeing is a relatively small percentage of our products are facing price increases from the vendors as they have negotiated better deals or absorb some of it. >> the williams sonoma ceo has a strategy to mitigate the cost of tariffs. she said, look, there were places where we had to raise prices and it proved to us we might have a little bit more pricing power than we realize.

>> music to the fed's ears if not the shoppers you mentioned dick's and walmart has a big announcement about changing gun and ammo sales. did he have remarks about how dick's has changed its own policies >> of course dick's changed a number of policies and it is going through prieilot programs removing the hunting department from a number of stores. started with ten now working on 125 it said it is going well relatively a low margin business so some of the categories they brought in to replace have done well it's an experiment to see how it goes and not in all stores. >> thank you very much courtney reagan on retail for us today. it was a rough summer for the pot stocks some analysts believe they'll come roaring back in 2020. the reasons for that are next.

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welcome back to "the exchange." according to some 2018 was the year of the pot stock. cannabis bulls predict another one right around the corner. the new cnbc documentary "high

risk, high reward: cannabis inc." melissa lee asks why now is a good time to get in >> are we going to look back at this time and think, that was the time when cannabis really took off, where it was really publicly accepted, where the money could be made? >> absolutely. >> oh, yeah. >> for ure when we opened our first store one of our investors was learning jiu-jitsu so that he could better handle himself in the event that he did go to prison >> steve white, ceo of harvest health & recreation, one of the largest cannabis companies in the u.s. what's changed what is it about right now >> historically, for the average investor, cannabis was way too risky. in a couple of years, your question is whether or not everybody will be on board so right now you're in the sweet spot where you can make tremendous returns if you invest in cannabis.

>> we are at an inflection point. the golden era of cannabis investing? >> yes i will say this is the golden era. i believe that >> danny moses, legendary bet a prime mortgages, aka, the big short. >> danny moses, the optimist of the bunch. and a hell of a trader >> that was the big short. >> yeah. >> is this the big long? >> this is the big long. the best macro economic opportunity i've seen within the u.s. markets in my career. >> was there a light bulb situation when you thought, this is it. this could be a huge business? >> i went to a dispensary in denver when it first opened and it was eye opening >> vivian azer the first investor >> there were people that looked affluent and not keep in mind, five years ago it was really tabu. >> in fooib ive to ten years, hi will the industry be

>> cannabis in the u.s. will be as big as tobacco in the u.s >> melissa joins me now. it's interesting because this is all about cannabis and the product i'm hearing about more than ever is cbd at what point does cbd become one part of this industry as it gets more and more legalized >> ell, at this point, even th estimates sky high projections for cbd versus whole plants are much smaller, $16 billion by 2025, versus $67 billion for the whole plant. so, marijuana the plant itself, whether it's used for recreational use or for medicinal use is seen as a bigger opportunity cbd right now, because you're seeing it everywhere, you're seeing it proliferate in creams, et cetera, on the drugstore shelves. it's easily accessible to the consumer, but there are questions about cbd, as well about the medical efficacy >> they can claim it can do everything >> is there research to support that we don't have firm research yet.

and that's why it can't be put into the food supply, for instance >> or it's not supposed to be anyway >> it's not legal if you consume cbd. >> so, for cannabis, so a lot of these companies are canadian what is the pathway to ine investment if they think this is the big long >> they had access to their exchanges and they had access to our exchanges, for instances you hear companies like till ray that went public at the nasdaq with sky high market caps, you know, when they first went public, $20 billion bigger than american airlines. for the u.s. company because it's not federally legal, they can't list they list on smaller otc exchanges, exchanges in canada and not being federally legal or at leastinf infrastructures traditional banking and write off business expenses that handcuffed them to some degree at this point multi-state operators are publicly traded

and some investors like danny moses says that's where the gold is going to be made because there's that potential of when the spigot turns on, the spigot will really turn on. >> they want to be in there. great stuff, melissa, thanks cnbc new original documentary high risk, high reward cannabis inc. that is where you can get all the information you want about this coming up in the next hour as it becomes more popular, not everyone is for the legalization of marijuana we have cannabis clash ahead on "power lunch." apple's widely anticipated product event is less than a week away, a product that could be announced next year mbe tayhe real key to boosting sales we'll talk about that next always three steps ahead. six steps ahead. sixteen. so many steps. you done? a million steps ahead.

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welcome back apple shares are still in correction down 11% from their october 2018 highs as the company gets ready for its big product event in a week and a new report says it may launch a new low cost iphone in the spring let's talk about it with tony at bu bernstein and tony tony, first to you, are they folding in trying to hide or mitigate the tariff impact with these product launches next week

at all >> well, we'll have to see on pricing. you know, our suspicion is that apple will largely hold pricing firm and the good news for apple that component prices have come down dramatically over the last year by holding prices firm and not increasing the storage or memory content in the devices, that can give them an extra profitability cushion to potentially offset some or all of the tariff impact >> so, is the cost of my new iphone going to go up? >> i don't think so. typically what would have happened, kelly, is you would have gotten more storage for the same price but your base cost, i think, will be the same >> steve, what is your expectation and how important is this event for apple, especially when they don't even report iphone sales any more. >> i think what is really important to look at when these tariffs hit when they are expected to hit the iphone in october cozying up to trump and putting out these gushy press releases how apple is creating

all these jobs, kelly. >> they haven't gotten exemptions >> who is better position than tim cook and jefbezos thinks google and facebook is bias against him. he told eamon javers he is engaging with tim cook. >> they're facing onhe watch, earpods. >> the iphones will be the big one. like tony was saying, it is going to be really interesting to see when they do hit if the prices do go up. >> i'm also curious. we got word that apple is doing a bond deal first one since 2017 because rates are low, but they do not need the cash does this make sense to you? >> sure. i think the number one rule in finance if you can get cheap financing, take it apple does have $100 billion plus in debt try to roll over some of that debt at lower interest rates so, again, i think the old adage

makes sense in this case here. >> sure, to the point that steve was making about the tim cook's relationship with the president. do you think that has helped the company? >> perhaps at the margin i mean the story changes seemingly every day and seemingly with every tweet so, you know, there are maybe 10% of the products that are being tariffed today the december 15 teariffs would b the big step up because that is iphone and mac notebooks and that would be really significant and we'll have to see. >> as reflecting your discussion, you have a hold on the company, a price target of $205 and we're just above that level today. thank you, guys, both. toni and steve joining me to talk apple that does it for "the exchange." i'll go join melissa for "power lunch" which begins right now. and welcome to "power lunch" i'm melissa lee.

we have the dow higher by 166 point right now or up 0.7 and s&p up eight points and the nasdaq the best of the three major averages higher by more than a percent let's go to elon for the latest. >> this was a very modest beige book the federal reserve finding that the economy is expanding at a modest pace, that is the same language that the fed used in the previous beige book and that was also modest and wage growth modest to moderate and price increases were modest. even though there was continued uncertainty over the trade war, the majority of businesses were still optimistic about the nearterm outlook a lot of interesting anecdotes on how businesses are adjusting to the trade war and major retail chain in new york that raised prices on furniture and thinking about reversing them because consumers weren't buying it in boston businesses talked