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 about a delay of getting product from other places than china because foreign imports could not handle the excess capacity overall the fed monitored manufacturing activity as slightly down. half of the districts reported a slow down in manufacturing rather than lay off workers, companies in cleveland were opting to reduce overtime and cut shifts in st. louis declines in production, new orders and capacity utilization for the first time since 2016. but, guys, there were still several districts such as philadelphia and minneapolis that were reporting strengthening in manufacturing activity so, there was still somewhat of a mixed picture across the country. back to you. >> thanks very much. steve liesman joins us now with more on what the beige book, steve, is telling us about a possible slow down >> you see the continuation of the krkz we had in the last hour about the mixed message in the fed.

did a great job covering all the different, you have one place where they're cutting back and another place they're expanding. very hard to figure it out we do know on balance nationally the latest data showing the industrial sector is shrinking and raising concerns about the other side of the coin so, let's go in. we talked to a bunch of people what is behind this factory slow down that we are measuring trade uncertainty everybody says is number one. global economic weakness related or not is number two or a close one. work force limitations you heard her talk about that right there. they can't find the workers to get the job done all this uncertainty creates dollar strength which makes u.s. exports more expensive, which hurts the manufacturing sector chief economist chad moutray says the manufacturing sector is contracting right now in large part because of slowing global growth and uncertainty on the trade front. another possible factor, the

slow down on boeing plane production unclear how that could be impacting the national data. we do know that it's unlikely it's all domestic issues by his count manufacturing is in decline in 11 of 12 countries that are major export markets for the u.s. canada, mexico and germany, as well what economists can't know, how much of this was happening anyway how much can and should be linked to the trade war which mean s whether we can undo the damage is unclear. >> when you hear the mixed messages on the beige book, i feel like it's a test whether you're a pessimist or optimist do you see the consumer potentially being hit. like we're at a point now where it is starting to cause factories to reduce shifts and reduce overtime. >> i think that's right. i think, look, we had an argument with josh brown and does the stock market create all the wealth or does jobs create all the wealth i'm a guy that think jobs matter

a lot and if you have this uncertain uncertainty which has shown up and uncertainty about hiring employees and on top of that, people become uncertain about their job prospects, that's when you can have a problem consumers doing well i think the consumer should continue to do well. >> unless overtime and shifts continue to get cut. >> that's right. >> thank you, steve. despite the slow down, dow is up for the fourth time in five days. is another rally in store? paul is co-founder and, scott, i'll pose a question to you. a continuation of the conversation we're having. are you concerned at this point that the consumer may start to feel the impacts of this manufacturing slow down? >> not yet we haven't really seen it hit the consumer yet i think steve hit the nail right on the head. turns out when the tough gets going, the tough go shopping you heard that in the last segment or half an hour ago when

you talked to the retail ceos who spoke to that quietly not to jinx it. but everything we see says the consumer is in good shape. where it might get tough if and when companies begin to pass through the impacts of tariffs in consumer prices we haven't seen that whole sale yet. that could have an impact on consumer sentiment that's not a projection. >> i wonder if that channel is already happening. you saw the consumer sentiment number last week and people talk about it in headlines whether polled about politics or the economy, could that be a channel, in fact, this zillo survey anecdotally talking about bidding wars and real estate, some people are worried about the recession headlines they're seeing >> the beauty of this whole economic cycle is how modest it has been a rather broad silver lining and dark cloud of the slowest economic expansion on record and also the longest on record those are two sides of the same coin what this economy has lacked in

vitality for the past decade, it's made up for in durability that's not a bad tradeoff for investo investors. >> at the same time, paul, what we have seen in the markets is a defensive positioning. we see, you know, utilities, reits and staples do well. how are they looking at this point? >> well, i think, i mean, just getting back to what steve was talking about earlier. i think the word of the day here is mixed, not only in the beige book and among fed officials, but the economic signals that we're seeing are extremely mixed. the back and forth contradictory tweets, headlines and reports over trade with china are mixed. and, you know, what does it leave us with? a market since the beginning of august has been moving up and down below 29.25 and over and we lost count of it the market is stuck in a range here and as far as what will break us out of the range we'll start to get some clues towards the middle of the month here not only with the fed meeting,

but also when we start to get reports. the ism manufacturing was one of the first august reports, but in our consumer pulse surveys this month when we talk to people in august, the headlines really did cause a little bit of damage to the psyche of consumers, so we'll see how that pulls through. but it's just a waiting game to see how we do pull out of this range and i think at this point, you know, i would say if in the longer run, i would say to the high side here, but, you know, day to day, it depends on the headlines with the market here >> scott, are you defensively positioned >> not from an asset allocation. because the fundamental story is still pretty good. you've got decent economic activity leaving aside the trade war. you can't do i know that. if you leave that aside and look at the underlying fundamentals, a pretty good pictures for equities slightly more conservative and with an exposure to those

companies that are exposed to the robust strength and consumer spending we see being robust >> it's just interesting to me real estate surpassed tech as the best performer of the year what does that tell you? >> investors are hunting for yield. and they're going to sectors that are providing it. and to scott's point, you can't dismiss the trade war here but in the beginning of the year, you know, the two biggest worries that we were looking at were the trade uncertainty over trade and the yieldflattening. now, that's all you hear about is trade war and uncertainty usually when they are worries front and center hence the, mat going no where over the last year so, those cons are well known here, but looking at other factors. sentiment has become really depressed. you know, we've been seeing below average sentiment and not only stimulative to the consumer

which is good, the consumer facing sectors, but it's also lowered borrowing costs and made homes more affordable and in years when we have seen fixed incomes and treasury do this well the equities tended to perform as well, if not better than bonds going forward. >> all right going to leave it there. paul hickey. thank you. hi, rick >> hi, kelly well, the beige book is always interesting but not a big market mov mover. but there's some action here look at the two-day of two-year note deals we're down on the day, which means should two years close here another fresh cycle, low yield if you look at a two day of our counterpart overseas, they're drifting higher. look at the two days of our tens guns hot look like we're going to be establishing a potential, another new low cycle yield

close. and finally, if i look at our counterpart. bund yields have crawled up. not crawling up a lot, but seems to be a new whisper september 12th meeting might not b energetic. you'll see the first high there. yes, this is one of the biggest pull backs since the 5th of august but hovering not far from the high ahead on "power lunch" google under fire. the company being fined $170 million and now facing a potential anti-trust case. we'll bring you the latest. cannabis inc the market for marijuana could be worth $83 million by 2025 should the federal government legalize it? our panel will debate it. we'll sit down with the ceo n fiesnet tns. cait handle growing competition? all this when "power lunch" returns. d at airports.

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google paying $170 million fine it collected data on children from youtube. josh has more on this story and the other issues facing google. >> let's start what was announced today. youtube will pay $170 million to settle these allegations by the ftc and new york attorney's general that it earned millions

by illegally collecting personal information from children without their parents' consent julia borstin raises a question, will content creators shy away from youtube we also know that more than 30 state attorneys general are preparing an investigation into google, too, for potential anti-trust violations. that investigation set to be announced on september 9th google saying we continue to work constructively with regulators, including attorney's general and answering questions about our business and technology sector. suntrust says the potential risk here for google include fines and also more broadly, changes to its business model possibly impacting profitability over time still sculley is an alphabet bull saying it is attractively valued and the company will continue growing faster than the overall online ad market kelly, back to you >> thanks very much. for more on what is next for google and the other big tech giants lits bring in jim and

gene is with loop ventures great to have you both here. jim, will this have the effect that josh raised on people using youtube as a platform? >> i don't think it will cause people not to use youtube. we all want what we want and youtube is a great place for engaging video content >> what about just the attractiveness of that platform and whether this regulation and more that might be coming, is it making it so it is less attractive >> still, it has the scale that advertisers really want? i think they got a little bit beyond their skis saying, hey, we have children here and violating the online privacy act for children and that's where it comes from they have massive scale and i don't see that changing in the near term. >> if they want to reach children, gene, how do they say to mattel or hasbro we have

children within that massive scale? people don't want just numbers but specific information about the demographic they're going after. doesn't that change the way alphabet does business >> absolutely, melissa this will impact that segment undoubtedly and i think it's probably important to think, too, about the context this is a very small segment and we all know the wheel house of advertising dollars is the 30 to 50-year-old demographics people in that age group spend for their kids, that gets pulled into that. but ultimately, some changes in and the biggest change you will see here is in terms of how they are going to allow messaging in some of the targeting. i want to put some quick perspective on everything going on the concept of google getting a fine is nothing new. over the past two years the eu had three fines against google totaling $9.4 billion. this $170 million fine is

probably definition of a slap on the wrist. and i think in the context of the bigger story here going forward is google is becoming an expert at dealing with these fines. and this is essentially a scenario where there is a whack a mole approach between regulators and the company and who knows what we will be talking about next week. some other demographic and some oth other -- >> that doesn't have you concerned at all about the stock. jim, if that's who they are after, they want to know where these young viewers are, for example. in order to market the products more effectively anywhere else to go? what is going to happen now to everybody who possesses this information? f >> the same problems befall anyone who target children with advertising on the internet. famous "new yorker" cartoon and it says nobody on the internet, nobody knows if you're a dog or if you're under 13 either.

google probably didn't know for a fact that they were under 13 and they didn't ask enough questions and they had an idea that they were under 13. >> gene, you mentioned all these fines from the eu and this fine from the ftc and there are investigations by state ags and federal authorities and i'm just wondering, you know, from a headline perspective, doesn't this sort of cloud the way at least regulators will view alphabet in terms of alphabet being a real target and then spill into how investors perceive alphabet as a stock >> yes we're going to see more regulation around google it is going to come in different forms. we're talking about one example of that today. something else that is kind of brewing around targeting in the uk and europe also simultaneous with this. so, collectively, these do have a negative impact on google's multiple if you look at the company's fundamentals unprecedented 20% rock solid

one quarter over the last four years where it dipped below 20% and in june it stepped back up this company is a predictability machine and, ultimately, should drive a higher multiple, but that is being compromised by this open ended question one more piece on the regulators this is great theater. great advertisement essentially for regulators to boast for their own political gain so, i think that there undoubtedly more to come and that needs to be reflected in google's multiple. >> how much reflected, gene, quickly? >> i think it's fractionally reflected. i think google will not be the outperforming fang over the next year that is apple's role in part because of this. >> thank you, both appreciate it. >> thank you up next, slack is higher by 6% today and 7% now and it reports its numbers after the bell we'll get one analyst's take coming up on "power lunch.

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lyft is mishandling what it calls a sexual predator crisis failing to use its own technology to protect passengers and not doing enough to respond to reports of sexual abuse filed on behalf of 14 women who say they were sexually assaulted by their lyft drivers in 2018 and 2019 a press conference just got under way. it's being held by the attorney in this case steve etsy and two of the victims he opened by saying none of this had to happened and one of the victims asking for more comprehensive safety measures like random drug and alcohol testing and fingerprinting melissa, this is just the latest on how lyft and uber are curbing sexual abuse and assault by drivers. this case against lyft you're seeing the press conference right here saying the implementation has been flawed and the company is putting profits first. in a statement to us, lyft says we do not tolerate harassment or violence on our platform and such behavior does result in a

permanent ban from our service they said they made it a priority to invest in features that put riders in control of their experience melissa, back to you >> deidre, thank you let's get to mike santolli for trading nation >> thank you, melissa. public debuts gearing up to report reviews slack as a public company which happens after the bell today and still down 20% since the stock's june listing let's bring in mark senior analyst at bernstein mark, good to speak with you here what do you think investors are most going to be looking at in terms of this first batch of results. what are the key swing factors in this number >> thank you very much for inviting me. couple different factors obviously, investors will look at revenue and they'll be looking at the guidance to

assure that the revenue growth will continue at a similar rate not a massive deceleration coming and then looking at key indicators they will look at information such as net dollar retention and how much of the customers when they renew, how much more are they paying and daily active users and how is that increasing they'll look at paid subscription count and they're going to be looking at customers with over $100,000 in revenue. that's a big driver because those are the big enterprise customers thatt are signing up for the solution they want to see those numbers all growing. >> you mentioned daily active users. what would represent a strong or not so strong number that, obviously, some concern about microsoft's competitive threat to slack >> right, microsoft very recently for the first time gave information on the daily active users. it's interesting microsoft is really focused on the area of team collaboration and ways they haven't with other stocks. other launches of other new

technologies this is a very important one for them and they gave out a number of 13 million daily active users people are going to want to see slack come out with a similar or better yet a larger number than that $13 million number. >> and pretty fully valued stock. no one knows when profits happen a market perform rating and $31 price target is that correct? >> that is correct >> all right we will see how the numbers play out later on thank you very much for joining us for more trading nation head to our website or follow us on twitter. kelly, back over to you. >> mike, thanks very much. coming up tomorrow on stewart butterfield that's tomorrow around 8:00 a.m. eastern time. marijuana legalization is sparking a nationwide debate we'll look at the potential benefits including one man who said it helped in his battle with cancer. also, the potential downsides of this booming business when "power lunch" comes right back

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welcome back, everyone i'm sue herera here is your cnbc news update at this hour. the trump administration stepping up pressure on iran hitting an iranian shipping network with sanctions and offering cash for information that disrupts the finances of iran's revolutionary guard >> we are announcing a reward of up to $15 million for any person who helps us disrupt the financial operations of iran's revolutionary guard corps and kud's force. the state department's rewards for justice program. michigan is set to become the first state to ban flavored e-cigarettes the governor ordering a state

health department to issue emergency rules that would prohibit the sale of nicotine vaping products. and a judge has set an april 27th trial date in r. kelly's federal case in chicago. he is accused of child pornography and obstruction of justice. but the judge says that date could be moved since the 52-year-old faces similar cases in three other judicial districts. you are up to date that is the news update this hour melissa, back to you >> thank you very much, sue herera. we do have green arrows across the board and the dow is higher by almost 200 points and the s&p up by 0.9% or 25 points and the nasdaq is up most of the three 1.1% is the gain. and the oil market is closing for the day. let's go to dom chu at the commodity desk. >> started to gain steam at 6:00 a.m. eastern time this morning and off to the races ever since. we were talking about west texas

up 4% and brent crude prices up 60 and 4% gains there. a big part of that gain comes from better economic data out of china with risks out of hong kong also an expectation that traders will see a drawdown in oil inventories. remember, we get private sector american petroleum and weekly data out this afternoon, the official energy department data comes out tomorrow and each delayed a day due to the labor day holiday. the treasury department added more names to a list of companies and the shipping network supporting the regime in syria. to put today's rally in context, prices for wti still down 15% or so since april melissa, back over to you. as more states legalize marijuana, the cannabis industry is booming in america, not just recreationally but medicinal medical experts don't agree with

how effective it really is >> i was diagnosed with my cancer in july of 2013 i was just gutted. i mean we're talking staying up at night to write birthday cards to my daughter for every year i wouldn't be alive and talking to my wife about who she should marry when i'm gone. >> what was the decision >> the decision was to go to the cannabis >> ethan stewart is a natural skeptic. >> to be totally honest, i didn't think it could help me. >> really. >> oh, yeah. >> when faced with few options to treat his cancer, he made a bold decision. >> i dove off the deep end and went into doing full extract cannabis oil and that's when i got scan results that were pretty wild. i had no evidence of disease in my body. >> no evidence of disease. >> in my body. >> incredible as it is, stories like ethan's aren't unique cannabis, a drug vilified for so

long -- >> the most dangerous drug that is in use in our country today >> is now being touted as a serious medical breakthrough you know, the notion of being able to treat a vet with ptsd with cannabis like a host of pharmaceutical cocktails is really exciting. >> my uncle has parkinson's disease and he tried cbd and in the first two hours he said this is the greatest thing that ever happened to me >> that is the beautiful thing about the drug that we're talking about. a number of issues where even now the fda says cannabis works. cannabis is medicine >> except for one thing. >> well, it's not medicine this is a very dangerous national experiment that we're conducting right now >> former fda commissioner dr. scott gottlieb. >> no evidence to support any of the medicinal claims being made that would rise to the satisfaction of the food and drug administration. >> because cannabis is a

scheduled one drug in the u.s. alongside heroin and lsd, it's nearly impossible to run clinical trials. in fact, only one fda approved cannabis-based drug, which treats a rare and specific type of seizure disorder. beyond that, nothing which raises the question, is cannabis the miracle drug that consumers and investors are banking on or simply the product of misleading marketing by the industry itself? we've got much more on the cannabis industry, including the best ways to invest tonight at 6:00 p.m. eastern on cnbc. do not miss "high risk, hireward cannabis inc.. the medical benefits has been one of the driving forces for the path to legalization, but not everyone thinks pot is a miracle drug joining us now for a blunt debate, is melissa moore, new york deputy state director at the drug policy alliance and

chief of staff and senior policy adviser at smart approaches to marijuana. great to have you both with us that clip dealt with the medical benefits that is one aspect towards the path of legalization but the recreational use is a much bigger part of the market and projected to be the much bigger part of the market. are we conducting a dangerous experiment and we don't know what the effects will be societial if we legalize marijuana, allow you to go smoke it and drive and what not. we don't know how that will play out. >> i think, in fact, we've seen the dangerous experiment in prohibition play out and it's totally ineffective in use across the board and hasn't kept people safe in our communities and we know it is time to shift to something else. key studies of the states that have legalized that we can look at and we know that, in fact, in colorado and in washington, for example, dui arrests have decreased since legalization and

youth use has remained stable if not decreased among certain populations. we can look at the data we have available and then make some decisions about what makes sense overarching regulation for the country. >> is it too early to test if i pull you over and i think you're driving high, it's nearly impossible for me to do a test to determine whether or not you are high >> what we've seen the drug recognition experts that do work with other substances where we also don't have tests are able to make determinations they look and assess people's abilities, cognitively and signs of impairment and they have been specially trained. >> do you think that california and colorado, for instance, have had pot legal for a long time now. we know what the implications are. >> i think it's way too early to tell we are only six years in i'm here in colorado and this is where i am from. being from colorado, i can tell you that we've seen a massive industry take hold that now, unfortunately, the

united states surgeon general is very concerned about what is happening. the united states surgeon general just released the first ever advisory on marijuana for the u.s. surgeon general in 40 years. and it all has to do with the fact that, as he said, this is no longer your mother's marijuana. the 3% potency joints of the '70s are now 99% potency concentrates and come in the shape of gummies and candies we are seeing youth rise and pregnant mothers using at the most alarming rate this country has ever seen. we are moving way too fast right now. we're six years in we should be looking at the harms of this and looking at the data and making sure we really get this right at the end of the day, re legalization is not throwing some kid in jail over a joint, but what this is really about is a massive industry that wants to make money big tobacco told us that their

cigarettes are medicine and opioids are medicine and they're being prosecuted we're looking at marijuana being a serious subject of lawsuits here in just the next couple of years. we really need to be careful >> why not go slower, melissa? why the rush >> we know that over and over again this has been the case 400,000 people in 2017 croacross the country were arrested for marijuana. luke is talking about the fact that this is not affecting people very much and we do not want young children, teenagers having their lives upended and being thrown in jail that is not the case in terms of what our country is doing. >> criminalize other schedule one narcotics. >> we can just decriminalize this so youth and these communities that are harmed by the war on drugs that they are no longer arrested >> that doesn't actually work. new york state in 1977 decriminalized marijuana and yet still was the marijuana arrest capital of the country throughout that entire time.

we had 800,000 arrests in new york here where i work >> decriminalize it further so these communities are no longer impacted and it overwhelmingly rejected -- >> luke go and then melissa. >> new york rejected in favor of decriminalization because they didn't want to let big tobacco and big pharma and all the major drug industrials that have taken over states like mine, colorado, to allow legalization. they didn't want that in new york connecticut rejected it and a lot of it was by members of the black caucus and members of the -- >> that is 100% not true in new york >> that's really what i think the big concern is that this industry is trying to make social justice a profit ploy they're trying to make billions of dollars off the backs of minority communities, which is exactly where they're putting all the pot shops. i think that personally is

disgusting anyone who wants to make a profit off of our low-income communities, we have to be careful when it comes to legalization >> that is a mischaracterization across many fronts that we don't have time to get into here >> it's all in the research and the facts. >> what happened in new york is that people were debating where the tax revenue should be reinvested and looking at how the communities most harmed are the ones that see the benefit as we move forward into a policy that centers well being and public health in a responsible way. >> let's take a look at the board rooms -- >> i'm pretty sure it doesn't have to equal commercialization. >> legalization leads directly to commercialization >> an industry and a framework that centers small businesses, farmers, co-ops and people in communities that have been impacted >> that's what they told us in denver and it didn't work out

that way all our pot shops are being consolidated by these massive wall street firms and we have the fourth biggest tobacco company on the planet imperial brands from the uk is in for hundreds of millions of dollars and, of course, pharmaceutical companies are in, too. this has nuthing to do with social justice >> i think we could probably debate this literally until the cows come home but i have to ask you both this because you're affiliated with different groups melissa, drug policy alliance. where do you get most of your funding? >> from private foundations. >> are they associated with any interest in the cannabis industry >> they do not have direct business interest as a general rule like the vast majority of oour funding is from individual foundations. >> luke, same question to you? >> individuals, families with history of addiction and some of our biggest donors are people who lost loved ones to addiction. we are in this because we really see the impact it will have on

society. we don't want to see another addiction epidemic >> and drug policy alliance works on the crisis, as well another huge area of work for us here in new york and we recognize the benefits that marijuana poses in terms of people being able to transition. >> that's what they said about tobaccooxy, as well. >> thank you for having me >> fascinating debate. coming up on the tasting menu, starbucks and a very wealthy cowboy up next, phil lebeau gets a ride in the new electric porsche we have been hearing about. >> how much power does porsche have 0 to 60 in 2.6 seconds and believe me, you feel it. here we go at fidelity, we believe your money

should always be working harder. 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. spent years coming up with an electric car worthy of the porsche brand and the porsche sticker price will become a threat to tesla. phil lebeau joins us from niagara falls. hey, phil. >> the reason we are here is because this is where porsche

decided to unveil the new porsche taycan we were on the canadian side of the falls when they opened up the doors and said here is the porsche taycan the price tag will get a lot of people talking coming in over $150,000. last week we had a chance to go for a test ride in the all electric taycan. 2 to 60 in 2.6 seconds 80% charge of its battery in 22 1/2 minutes when it does fast charging we have 20,000 people who are interested in buying it. >> interestingly, we have seen that 50% of this interest people not knowing the porsche brand. >> are many tesla owners >> we welcome them >> it will be interesting to see how many tesla buyers say i would like to get the taycan

instead. i get this question all the time how many electric vehicles have been sold in the u.s. and how many are teslas? two-thirds of the electric vehicles sold since 2015 were tesla models a good chunk in the last year and year and a half. but this is, in my opinion, the first electric vehicle that truly is a threat to tesla in terms of performance, in terms of styling this is not the chevy bolt, this is not the nissan leaf this is a vehicle that the wealthy are going to look at and say, i like it i am going to take an interest in it. we'll see how much of a threat it is to tesla in terms of that really upper end of the vehicle market >> that acceleration, phil, looks like you really felt something. >> oh, my photographer bob pollack almost got sick in the back seat. >> wow >> poor bob. >> phil, thanks very much. phil lebeau at niagara falls.

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let's get to bill at the new york stock exchange. >> the bill aimed at tying prime minister johnson's hands preventing him from pursuing a no deal preexisting has just passed the final stage in the house of commons it received 327 points in favor, 299 against. a healthy majority of 28 votes it does still need to go to the lords, almost impossible to be blocked in the lords but can be delayed a couple of days in the house of commons, they have successfully said to boris johnson he cannot pursue a in deal if october 29th he hasn't secured a deal he has to receive an extension beyond the october 31st deadline. that was a vote today and last night. pound up significantly over a percent on the day because of

the victories in the last 24 hours for the remain camp. the focus on the next night whether boris johnson is given the snap election he sought late last night rather than having his hands tied, he wants a fresh election instead. that requires a two-thirds majority at the moment it doesn't look like he'll be granted the election tonight possibly in the next week or so. as to when the anti-no deal bill past the reading is formally given royal ascent then they may grant the election looks likes we're heading to an election short end last 24 victories, pound up. >> wbur ilross, stick around planet fitness ceo coming up next i can. the two words whispered at the start of every race. every new job. and attempt to parallel park. (electrical current buzzing)

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welcome back the fitness industry is getting pretty strong. more than 71 million people in the u.s. used health clubs last year profits are up 8% but competition is heating up, too not only are there countless gym chains but we've seen huge growth in boutique like soul cycle, boot camp and peloton in the middle fitness flexing serious muscle, stock up 25% this year despite worries about the economy. jeffries called the company recession resistant. joining me now, ceo chris rondeau. fascinating business model obviously on membership dues from all of our locations.

are you seeing any slowdown in signs of a nervous consumer out there? >> no, things have been really great. keep selling memberships every day. 14 million members and growing each year. we're almost 20% of the industry with our member base we went public four years ago with 7 million members flywheel keeps spinning. a lot on the market flywheel i talk about a lot. >> how much is marketing you're splashed everywhere, you're ubiquitous, important staying front of mind. how much to market. >> 9% of every membership dollar goes back into marketing every day every member, 9% goes back new year's eve times square sponsors 7% locally billboards, postcards, local radio. >> what's important to know about your business from an investor standpoint is you don't actually offer the clubs you have franchising

is that correct? how exactly are you making your money? >> we have franchising we grow with franchisees we've franchised 17 years. we have great seasoned operators, passion oat about the business, know the playbook. average franchiser has 15, 20 stores. >> a lot if it's a million or two, $2 million. >> $2 million, 9% au v unit volume. >> that's annually. >> 35 to 40 ebitda margin. >> sounds good to investors. >> you don't hear that. >> in terms of price sensitivities we hear kurp don't want to pay higher prices for a variety of reasons how important is that membership fee and where you have it set. >> we invented this in the '90s, 26 years ago, with the membership really what it was, getting the first timer off the couch, casual gym user. 80% doesn't have gym membership. >> started at $10 and it's still

$10. >> even in manhattan, atlantic city and arkansas. >> how big can you get >> we have unit potential of 4,000 domestically we're at 1800 today. we're on pace to break 2,000. >> there's competition peloton, soul cycle, how difficult is that for you. >> a different customer. the media gives people awareness. $10 with us, probably a perfect place to start. >> in terms of investors, are you worried your investor base will say i want to invest in peloton maybe not planet fitness, it's a competitor in terms of that way. >> i think the whole category is invest for everybody as many customers as people go after, they are different customers, the price points and clientele, almost like they are going same 20% orange theory and others are going after we're going after 80% that in some ways is kind of neglected no one giving them resources,

price points and equipment for them. >> how many times are you working out a week >> depends if i'm traveling or not. but four to five. >> pretty good. >> at planet fitness. >> yeah. >> kelly, obviously. >> i have a black card i can go to all of them. >> chris, thanks very much chris rondeau. >> appreciate it. >> thanks for watching "power lunch." >> closing bell starts now. >> welcome to "closing bell. i'm at slack post. current listing up a healthy 7.4% ahead of aerpearnings, bro market up, near session high 59 minutes left to trade. >> i'm sara eisen. welcome, everyone. let's look what's driving the action, a global rally led by hong kong as we see a step toward resolving political crisis helpful signs out of the uk on brexit, likelihood of a no deal brexit decline and the beige book just out.