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♪ ♪ ♪ ♪ good monday morning. welcome to "squawk alley." i am carl quintanilla with morgan brennan and jon fortt we start with a win for microsoft, beating amazon, oracle, ibm in that $10 billion defense contract with the pentagon known as jedi. morgan has been covering this story from the beginning a lot of news over the weekend. >> a lot of news over the weekend on this. this was a downright dog fight between microsoft and amazon two years, laden with controversy. what is the joint enterprise defense structure. they'll unite the u.s. military within a single data framework, an umbrella cloud for all of the military's current clouds. up to 10 year contract with

ceiling value of $10 billion amazon, microsoft, and earlier in the competition, ibm oracle, even google vying for this microsoft saying we look forward to expanding our long-standing partnership with dod, support our men and women in uniform at home and abroad. with our latest unique and differentiated azure cloud capabilities amazon saying we're surprised about this conclusion. abs is the clear leader in cloud computing and tee tailed assessment purely on the comparative offerings led to conclusion amazon was seen as the frontrunner for this so amazon can protest the outcome. experts say it has grounds to it, given the unusual unprecedented comments by president trump. but amazon hasn't said if it would or not the dod saying for ilts part, the process cleared review by the gao and court of federal claims at the outset, the competition

was four offerers. they put out a long statement. they also added that additional cloud contracting opportunities are anticipated from a financial standpoint really, the pay to think of this, bigger win for microsoft than loss for amazon kind of what's playing out in shares now for amazon. $9 billion in revenue reported for aws last quarter alone for microsoft, it is big bragging rights, according to analysts, a sign that azure is catching up. it is the latest dod win for microsoft. they were also beneficiary of 7.6 general dynamics contract in august to replace it systems with office 365. i think this contract, this competition was closer than some people had been realizing and we're going to see how it plays out. the time line will be long,

especially if amazon protests. you can see it play out in stocks. >> i don't know if it is a bigger win than microsoft and loss for amazon. cloud is amazon's thing. they just put h q2 in d.c. a lot of people expected them to win this interesting, i sniffs around on microsoft's side, trying to understand what it means from their perspective. they found out 3:00 p.m. eastern time friday they won the contract, a little bit before the world found out from the press release. unclear exactly when the revenues start to flow, even when the scope of work becomes clear for the first stage of this, but would expect to hear about them meeting with the government, maybe the end of this week, to start the process going. also unclear what's more valuable, the contract itself, which is as you mentioned enormously valuable or bragging rights associated with it that

allows microsoft to tout the fact they got the contract for other government work both in the u.s. government in the states and abroad, in the enterprise game, being able to put forth your wins as case studies is a big part of it. thomas cureon at google cloud set up a white glove area within the sales force just for handling big customers because of the fallout effects that come from things like this. microsoft will tell you that 18 months ago when the information about the contract came out, they didn't look like they were in the running really strongly to win it, and microsoft really worked on getting certifications, 90 certifications, compliance certifications to edge out -- >> security rankings, yeah >> -- other competitors. we'll see how it goes. the market following. >> dow almost to 146 this

morning, this comes as cnbc reports the president toild jams mattis to screw amazon on that contract according to insider account. kara swisher here to talk more about the deal, what it means to whom, whether you have suspicions about the process >> yes, i do, i do i see lawyers, the force is with the lawyers. i think this will be challenged. >> really? >> i think some statements trump has made, not just in this case which was interesting, not surprising, also online. i mean, he does it on twitter all the time, calling amazon "the washington post" and the links and comments about jeff bezos. they were a frontrunner until the comments started happening you have to wonder if there was any -- same thing happened with trump and at&t around, related to cnn the same kind of meddling, acting as if the government is his fiat.

>> assuming it is a clean process, a big deal for azure. >> it is but if i was amazon, i would want to have some discovery happening, i would imagine, depose people what was said, how it was said. question is do they want to get necessari messed up into it or not this is a big deal this is something that aemmazon was in the front, most certified. not to take anything from microsoft, might not be a fair fight here >> certainly parking lot of the reason amazon was seen as the frontrunner is because they did already have similar contract with the cia as well here. there are a few ways this could play out if amazon protests, they can do through the gao. if the gao votes in favor of the way the competition played out already, they can take it to the court system and basically file a lawsuit, which by the way is similar situation we saw play out with oracle before we got this award

but in general, different analysts have different numbers out there on how much u.s. government cloud contracts could represent in the coming years. numbers as high as $100 billion. it seems regardless this will be amazon versus microsoft for many future deals. >> 100%. the question is is it a clean thing, if trump is there trying to put his thumb on the scale, that's a problem it will be the most expensive jeff bezos paid for "the washington post," it has repercussions. the question is what do they do in the situation, do they try to compete, stay quiet, and what precedent does it set for the president to say things like this, to say screw you, if this is true, if the reporting is true, sounds like he started to do it with the post office, he does it with "the washington post," everything else so the question is are these clean, even if they're not quid pro quo, it is like wow, the president is saying something like this does have the force of something. >> it does put amazon in a tough

position, they're making a big investment in the d.c. area, you know they want to be a federal contract player. >> right. >> do they want to create more dust around this in particular when there's a lot more technology contract work to be had, even around the edges of jedi they could end up being a significant winner, even though they're not the head winner here we're going to learn something about amazon as an enterprise and government player how they respond to this. >> this is how corrupt organizations work this is what happens what if he is in four more years, more contracts. the question is what do you do is a good question for amazon. i don't know what i would do if there's proof of this, they certainly might want to do it. if they don't and move along, say it is okay, start to kiss up with the administration, the whole thing is not great it is not a great way to win that said, microsoft made a lot of strides with azure and kept quiet off to the side, didn't

buy a newspaper, didn't get in the cross hairs of trump, so that's the question. how much involvement is here or just a lot of bluster. that's what they have to find out. >> separate from jedi, the aws numbers last week. >> amazing. >> it is a dog fight in cloud. >> it is for a long time, amazon was by itself google hn google hadn't been there i had lunch with sundar pit awe, and he was like -- does this spin off the question of aws. i interviewed andy jasy and they gave signals no. if it would spin off, would be one of the most valuable companies in the world, right? something like that. so where does that go. there's so much opportunity not just in the u.s. government, across the world the question is who is dominant or laggard >> we'll find out more tonight with alphabet. the picture fills in a little

more thanks for starting with us. >> no problem. >> good to see you kara swisher. the market rally continues this morning another inter day record high for the s&p. we discuss where stocks go from here. later, sir richard branson on virgin galactic debut, facebook, ipos, even wework. stay with us >> i still think the big question is that they have $48 billion of lease obligations, and the way they engineered this transaction was to avoid fallout of that, falling on the off bank balance sheet, this is a precarious company, if there's any down particular, these guys will have a difficult time figuring out how to make the figuring out how to make the economics of what they created restores heart rhythms,

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hotspots and the best lte everywhere else. switch now and see how you could save up to $400 a year. and get 50% off when you buy any new lg phone. xfinity mobile. click, call or visit a store today. the major averages well in the green. who better than bob pisani to join us and breakdown the market action. >> we have a number of things that happened. first, most important thing, trade talk optimism, comments from the chinese side over the weekend they're making progress toward a phase one deal. second, the fed coming up with week these are the two marginal movers of the market, trade talk, federal reserve. i think the fed will cut, i think they're cautious on implying future rate cuts, and the third one, the u.s. consumer

is holding up. we reviewed conference call transcripts. 40% of companies reported. there's remarkably little talk about concerns about recession in 2020. it is about the consumer hanging up richard fairbank, credit card bank, i think the u.s. economy and u.s. consumer is in pretty good shape that's what most ceos are talking about. we scanned for recession talk. didn't see it. zion bank corp we don't see any indications of a broad based recession on the horizon. that's very typical of commentary we saw concerns about slowdown in 2020, particularly on the industrial side, on outright recession, it is just not there. with the consumer holding up, trade talk good, fed cutting, this is why we have new highs. >> we are in the middle of earnings season, you didn't cite earnings as a big factor what does it say guidance is

about q4. >> good point. very good point. the corporate earnings are flattish that's the word i have been using all year i think it is fair to say going into 2020, there were hopes for 10% gains, now closer to 5%. now the bulls are saying can we still advance the market with 5% gains. that may be tougher now. that's why the reisk to the market is down side. you're not seeing a lot of volume, as we hit new highs, old days, we would hit a historic high, there would be new buyers come in. a lot of people see flattish earnings and risk to the down side what would it take to move the market up 10%? a lot of good news what would it take to move the market down 20%? you could get some things out there that could happen. trade, escalation in the trade war, that could happen, move the market down a lot. the point is when you're this

high, the risk is a little to the down side with earnings this flattish everybody says bob, where's the earnings you're all doing happy talk, and we're seeing flat earnings, market is up 18% hard to justify right now. multiples are high. >> not so much the ipo market, how many high flying tech unicorns and other types of highly valued companies have performed since they've gone public certainly discussion around whether the pipeline was closed for the year meantime, i realize it was not traditional ipo, you have virgin galactic up 6% this is not yet profitable service hasn't begun yet you see a pop in a game like this today, what does it tell you how public markets are feeling about these names coming to market. >> the public is rooting for space in general you and i talked about this earlier. i am i grew up in the '60s with the space program and the apollo

mission. we all believe in space. we want mankind to go out into space. generically this is me talking, i'm rooting for the company to succeed. i don't know if it will succeed. i want people involved in the space business to succeed. i want other people to be involved in this and people down here on the floor feel the same way, talk to everybody out there, we want more involvement in space, we want mankind going out, we want mining of asteroids, more things like that. generically, there's a lot of interest in this i also point out, defense and aerospace stocks, a subset here, are doing well this year >> yeah. certainly are. bob pisani, thanks for joining us. still to come. you heard us mention it. virgin galactic going public more of my interview with richard branson, chamath palihapitiya, and white siside next spotify, first one day

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with europe turning back the clocks over the weekend, the euro close moves back an hour until we follow suit next weekend. you can catch more on today's market movers overseas at half past noon on the half. back in a moment my parents never taught me anything about managing money.

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hundreds of thousands asked to evacuate as fires ravage california jane >> reporter: we are fires in southern california as well. the sun is coming up you can see the fires damaged the world famous wineries and vineyards. this is the winery, well known soda rock. completely destroyed one of 100 structures destroyed in the kinkaid fire. 66,000 acres, 186,000 people evacuated. that's unprecedented 80,000 structures still under threat, and zero deaths. zero i want to show you a map of power outages still in effect. in the old days, disaster caused power outage now you turn off the power to avoid a disaster, even though this fire may have been started by a power line that was not turned off 90 minutes before dawn we went driving through the area, through the fire zone and we

took a stop, a well known wine tasting area so many vineyards up in flames we stopped at one, and turns out it could be a good day for firefighters the winds were calm monday morning, temperatures got cold which slowed the progress of the fire but a new wind event is expected to start tuesday pg&e is telling people it will not be worth it to turn on power until the second event blows through. meantime, yes, a new fire, now in los angeles breaking out on the west side in an area by the way that burned two years ago. socal edison threatens 300,000 to have to turn off power, lot of evacuations, lebron james tweeted he isdriving around, trying to find rooms no luck so far he eventually found a room people are talking battery systems. even if you have solar power, you're attached to the grid.

things like tesla power walls are being talked about these can cost well over $10,000. as for pg&e which is in bankruptcy, they stopped taking another hit today. also look at the 15 year bonds they were positive, a sign of faith that maybe the company would last longer in the long term those have turned negative, and the governor declared state of emergency across the state has reportedly asked warren buffett, begging him to try and buy pg&e out of bankruptcy. guys >> it is such a difficult situation. jane wells who has been up early, helping us understand what's happening out west. thanks. speaking of all this, we were planning to bring an interview with snap's evan spiegel today. that has been made impossible because of the fires and a number of road closures in california we're working to reschedule that appearance meantime, let's get a news update with sue herera at hq sue? carl, thank you very much. goo good morning, everyone

president trump is considering releasing video footage of the raid in syria sunday he was speaking at joint base andrews before leaving for a fund-raiser in chicago >> we're thinking about it we may the question was many i considering releasing video footage of the raid, and we may take certain parts of it and release it, yes. >> the driver charged with manslaughter in the deaths of 39 people found in the back of his truck made his first court appearance in britain. maurice robinson didn't enter a plea he will be kept in custody until he appears in a higher court november 25th. nasa released a photo. take a look at that. the sun seemingly in the mood to celebrate halloween. says active regions on the sun combine to look something like a jack o'lantern in space. the image captured october 8th bow the solar dynamics

observatory. you're up to date. guys, i'll send it back downtown to you. >> oh my gosh, i love that sue herera, thank you. >> that's not the sun's good side that looks a little scary. >> it is halloween week, an interesting image. all right. sue, thanks. look at shares of virgin galactic, up big after being the first space tourism company to go public. shares are up 4% i sat down with the founder sir richard branson, chamath palihapitiya, and george whitesides earlier in the first on cnbc interview to discuss the debut. take a listen. >> i think it is a very big milestone. if the public want to take a little -- dabble a bit in a space ship company, they can now do so. we have this wonderful tick. >> i was impressed you got that. >> i love to tell the story. told i am not allowed to it was the generosity of another

exchange that let us have it but no we got off to a great start. share price went up 11% friday another 5% today, and yeah, we managed to completely fund virgin galactic through to when it breaks even so exciting time >> chamath, as an investor in the company, one of the things you've come on and talked about in the past, how impressive gross margins are, given that service hasn't started, how are you thinking of gross margins when it does, what does it mean for profitability of the company? >> i think the profitability will be as good as any of the good software companies around, that's why i was excited you're in the business of hardware but it looks like software and that's very different than many other technology oriented hardware companies that have gone public recently this is a business at scale will have almost 70% operating margins, incredible.

a testament to the billion dollars richard invested before i came, and the team george built that built something ready to derigs beisk. >> what do you think investors want to hear >> i think two vectors matter. the first, describe the demand there are already 600 plus customers that paid $80 million, about 120 million in future business 3 or 4,000 more, after today i suspect many more thousands after that who want to give us money. i think understanding that demand will be important for people to get comfortable around the long term protections. the second is about george's execution and his team's path to getting rockets in the air on a more and more frequent basis >> virgin galactic directly listing today through this merger with social capital, a

special purpose acquisition company, rather than going through the traditional ipo route. i asked about the process, what it means for private companies looking to trade on the public market take a listen. >> this is a really good litmus test and case study of the best of what this can be. pure technology companies founded by iconic founders, built by great people who are sober and just want money to build the business should look at things like direct listings and things like stock. i have been involved in two processes, one is direct listing of stock where i am on the board, now virgin, chairman after this transaction both of these two transactions got everything we wanted don leuhrs we avoided traditional processes in a way that limited management distraction. now we're set up to just run the business this entire process for us start to finish took three and a half months the company got all the money they needed, george and his team have been able to focus on running the business, which is

the most important thing i think these kinds of transactions and processes are the future i think a lot of the traditional monopoly run by morgan and goldman, probably those days are numbered >> it was a wide ranging interview. talked about a number of topics, including long term game plan for virgin galactic which could and probably will involve hypersonic, supersonic travel around earth, and what that could mean, george whitesides, ceo, i asked what he thinks the size of the space tourism market there, whether there are enough people long term willing to pay $250,000 for a ticket to the edge of space. he said globally we think two million can experience this in the coming year at this price point. over time, we'll be able to reduce the price point at that time the market will explode. it will be capacity constraints. that there's enough for them and the most direct competitor in the emerging market.

new origin owned by jeff bezos to take these potential space tourists to space. >> chamath talks about being derisked, it is not risk free. what happens if there's an incident of any kind in the early going, how badly could that derail demand. >> we heard that phrase used over and over, the idea that space is hard in terms of human space flight there's basically no margin for error, you have to get it perfect. we talked a lot, i asked that question talked about how much is going into safety and basically buttoning everything up to start this service which is expected next year. this is probably the chief risk that investors will have to now consider, looking at the first ever publicly traded commercial human space flight company >> it is a moment in time. think about it this is a space ship company space tourism. it has come public wework, a commercial real estate company can't get out. right? >> which we talked about with chamath palihapitiya as well

>> valuations, ambition, kind of where we are an interesting year to say the least. >> meantime, shares are up 3%. highest of the morning still higher for a company that hasn't started service, which is not yet profitable, despite strong forecasts for growth and gross margins that we did here from the investors >> all right i am bringing things back to earth, so to speak >> oh boy. >> we had to transition somehow. first i stopped wearing ties do i have to stop tucking in my shirt next the ceo of untuck it joins us to convince us. first, rick santelli with shirt tucked in, what are you watching today >> what i'm watching is the data hasn't been spectacular. you think about last week's data yet interest rates continue to rise are bonds really the smartest sector in the room 'lta autt tethe any more wel lkbo iafr e break. heading into retirement you want to follow your passions

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you still have service? call the insurance company sfx: [phone ringing] it's them, calling us. it's going to be a week before they can get through on these roads shhh, sorry, i didn't catch that. i said ask how soon they can be here right now? what's now? he says they're surveying our property now they're probably at the wrong house i don't see any hovering his name is hovering? look up? by automating claims with machine learning and analytics, cognizant is helping insurance companies advance how they serve even hard to reach customers. cool ♪ here's what's coming up top of the hour. a monster week for your money, stocks hitting a record high, earnings and the fed taking center stage some say we're about to have a long awaited breakout. we'll debate that. and a call on lululemon, time to book profits and biotech stock making news later today, likely to make a monster move up or down.

meg terrell with reporting to get you ahead of that. see you about noon we're about 20 away. see you then. >> sounds good let's get to rick santelli and get the santelli exchange. rick >> good morning, carl. you know, markets are different than they used to be and they're not different because we use more computers, but there is a difference, platforms make the methodology, how markets arrive at price discovery different, how they act, how choppy they are. in the end, one constant used to always be in the marketplace, traders in the interest rate complex, how interest rates domestically and globally define data that's what you want to pay attention to and that the generic economy isn't necessarily always represented fairly by the stock market all still true but the difference is it certainly seems as though ten year notes like many interest

rates kind of lost ps, whether it is policy, yield curve distortions, but one thing now seems toffee merged that's hard to argue against, that is the stock market and european rates are having an outsized influence on our treasury rates. look back to last week somebody's newsletter, i don't mean to take the phrasing, they said the treasury market isn't taking the bait of softer reads like durable goods last week that's well said what it seems to be paying attention to, let's go to the board. first of all, these charts started july 1st it isn't about dates, it is about patterns we know there was consolidation in august in all markets, whether you look at the s&p, bunds, ten year notes. you see the stock market has glone out inter day historics.

that has a big influence bund deals are where to pay attention. the difference between european credits, the german highest credit, the one we pay attention to with regard to the eurozone, and ten year notes but there's significant differences that could save money if trading or keep risk management nice and tight, if trying to balance the risk between your portfolios on equities and fixed income, consider this. minus 71 basis points, august. this is unbelievable we're basically half the rate. the significant part is here minus 45 obviously we traded through it our equivalent point in ten year note yields is 1990. we talked about this in several exchanges. by blowing through this, you almost assure you're going to test 190 even though the next level is likely above 2%, i can't reference enough how important this is, in the context of

bunlds and with christine lagarde coming in, many of thinking minus 21 isn't going to stop us, the nervousness in the eurozone could get us back to zero territory and maybe lesson negative rates in the long end of the german curve. morgan, back to you. >> rick santelli, thank you. after the break, fdic chair jelena mcwilliams joins us in about two minutes. stay with us the time to do money. without the commission fees and account minimums. so, you can start investing today, wherever you are even on the bus. ooh, like this guy. yeah, i bet he's investing right now. he's taking charge. he's grabbing the bull by the horns! and he - just missed his stop, yeah. it's time to do money, so what are you waiting for. download now and get your first stock on us. robinhood.

welcome back fin tech is in focus as the conference kicks off apple, facebook, amazon are continuing to explore the payment space. joining us exclusively with a view from the regulatory side, fdic chair jelena mcwilliams madam chair, good morning. >> good morning. thank you for having me. >> great to have you there's a lot of talk of the importance of the consumer to the current economy, so much of consumer spending is what continues to fuel this expansion. from your seat regulating the banks with a look at the health of those, including the consumer side, how do things look >> things look very healthy at this point in time that's something that i continuously tell both my staff at the fdic and to the local

bankers i have embarked on a national listening tour going to every state in the united states, i have been to about 24 now. i keep telling them, this is the best of the economy. this is as good as things get. to manage balance sheets appropriately, but right now as we look at the markets and look at the financial conditions of banks, their capital and liquidity level, we're comfortable that we have a strong and vibrant banking sector >> chair woman, i know that you have been engaged with technology companies, fintech companies, how they're trying to operate within the bounds of what keeps the consumer safe as well i wonder what the correct principle should be for that because we see a number of moves, companies trying to become national banks, we see companies parking lot ntnering r savings accounts in ways they haven't traditionally. what's the principle you use for what should happen, what should

be forestalled >> when i think of innovation, i think of two things. one, it is not new we had innovation in banking sector for centuries, we should not stifle that, we should promote, find a path for innovation to make the banking system better and reach to more consumers, bringing better products and services to the general consumer base. i also think of innovation, think of what's the job of regulators in that space frankly we can be the side of no, if you bring me something new, i could easily say no, we are risk averse, not open to new ideas frankly. having said that, innovation is happening, whether we like it and whether we approve it or not. the question is do we want that innovation to be happening within banks or out of banks do you find you have better protection for safe and soundness and consumer protection inside the banking regulatory framework or with nonbanks and technology companies. frankly we need to strike the right balance. i believe innovation will

happen, it is happening, we need to figure out how to make it happen in a safe and sound manner within the banks with consumer protection in mind. >> just to dig into that a little more, the idea that data is the new capital, do you believe that's the case, and if so, how is that dictating how you are approaching big questions around regulation? >> data is the new capital i said that several times. i firmly believe that we used to trade in different assets. now data is one of those for regulators how do we use it, allow institutions to use it what can be done with data frankly, the companies that are not open to considering these questions are companies that are probably going to be disturbed there will be a disrupter in the space. the system is moving to more data sharing platforms anything from core processors to third party service providers to banks need to adjust to the new reality.

otherwise we're not going to have optimization of innovation in the banking sector as much as we could >> jelena, i know it is very unclear at this point where different types of currencies, you may call them crypto currencies, fall within the regulatory framework i know that you broadly think about what's safe for consumers, what concerns there might be when you look at facebook, looking to support libra, the currency it started and now released into the wild, calibra project on the wallet side, are you comfortable with tech companies making those kinds of moves and what questions or concerns would you have before something like that goes live in the united states? >> we learned better than to comment on specific companies or currencies, crypto currencies on air, but i will tell you this much any company looking to engage in something as innovating as

crypto assets, crypto currencies, needs to think carefully about what the regulatory framework and potential for abuse is that's something while the regulators don't want to stifle it, personally i don't want to survival innovation, i believe the united states of america needs to remain the preeminent place for technology and innovation to happen, meantime, we need to consider what things are abusive in the system. there's potential for widespread abuses until we're comfortable that companies rolling this out know the potential abuses for negative things to happen is, we'r comfortable on the regulatory side that this is something that should be rolled out on a broad basis to the consumer base. >> understood. madam chair, appreciate it >> keep your eye on fitbit this morning. i think we do have a halt in the

shares reuters out saying alphabet to buy fitbit smart watchers citing people familiar with that 18% gain there, 18.5 in what is obviously a heavily shorted name that's had a journey that's taken it all around the map. >> i don't know how hard alphabet is bargaining, given fitbit has been trading quite a while, as long as they are not trying to put the screws to the company, have to imagine you have to listen to that getting taken out by google and alphabet is usually an outlet a lot of companies are looking for. >> it's pretty incredible given the fact alphabet is under antitrust scrutiny like big tech companies we're talking about on a daily basis. if this is true and a lot not focused on hardware parts of google's business but it really does speak to the fact that these companies have been on pa

buying binge potentially and that those strategies are continuing even in the face of this scrutiny from regulators here and abroad. >> by the way alphabet reports gopro up josh is looking at this out west. >> interesting on what you're talking about. reuters saying no certainty this is going to lead to a deal we don't have a price either google trying to make potentially more moves in these markets, smart watches and fitness trackers certainly another question for investors, reports after the bell. >> you noted, carl, that gopro is also up about 6%. i don't know if it's related roku is up 8% as well. to some extent, sometimes these stocks trade together. spotify had a good report. some of these younger companies trying to break into newer areas

investors view as risky. sometimes when one moves, others can follow. >> not to mention it's an extremely healthy take today, obviously all-time highs not just in the s&p but big cap names like apple, jpmorgan, united tech, microsoft, all all-time highs whether vmh making unsolicited bid for tiffany, got m&a in the real estate. >> doesn't hurt vma positive on roku. men's apparel company nantucket is growing, announcing its first expansion outside of north america and into london. set to open two stores in the uk ahead of the holiday season. joining us this morning at post 9 is nantucket's co-founder and ceo. congratulations. >> thank you, carl thank you for having me. >> it's nice to talk about expansion in brick and mortar

apparel. what's driving it? >> well, demand obviously. so we grew pretty quickly in the u.s. we went from five stores four years ago to almost 80 stores in north america now. moving overseas had always been part of our goal wh just from online traffic, there is a demand in the uk. more importantly there's a need. there's no alternative shirt in the market that really does look good untucked. >> is it a comment on the brits discover casual wear >> i think part of it is that. there's always been this latent need for what we ultimately provided as more companies shift to the casual like we saw in the u.s., i think it will become more apparent. >> tat the time with all the uncertainty we've seen around brexit, the fact many business decisions, did that factor into your decision to expand in that market specifically or no?

>> obviously we thought about it similar to what we did in the u.s. we launched in the u.s. in the midst of retail apocalypse our stores are smaller, more nimble and we're able to survive and thrive in the uk brexit is an uncertainty we're aware of there's 20% kmors uk online that plays well into our brand like ours there's a need in the uk we're pretty certain of that. >> what have you learned about the way the brand translates to women. arguably women have been looking good wearing shirts untucked for a long time. were women buying for men, women buying for themselves? how did that come across >> women had bln a significant portion, about 30%, buying typically for men. we started to get a lot of requests from women buying for

men to expand our product line most comes from specific requests from the consumer, women's was no different we just needed to think about how to style it a little bit different differently. if you look at the women's line, it is styled differently than men's. >> in terms of sales breakdown, how much online, how much in brick and mortar locations >> we're still more heavily weighted online than brick and mortar the more stores we open, the more that flattens out i think ultimately we'll end up at 50/50 there's in semisymbiotic relationship between stores. you open a store it acts as a geographical gravitational pull for consumers but those consumers find their way back online. it's called the halo affect. there's a lot of empirical data around it. we have our own data we know wherever we open a store, online sales in that market, 30-minute drive time, however you want to define it outpaces sales online where we don't have stores.

>> i was going to ask about your supply chains. are you subject to some of the other tariff issues apparel makers are focusing on >> we are. unfortunately we are we're kind of caught up rutte in that what we've been able to do is shift some of our production to nontariff originating destinations the factories we work with are large enough they can shuffle client base, european moved to china. we moved some of our production out of china but we are not planning on increasing prices as a result it's hopeful temporary policy change. it's difficult to price around policy. >> to what extent does your e-commerce root m's influence how much inventory you keep and what inventory you keep. are you able to be any sharper about that than a traditional retailer >> it's interesting. i would say from an online perspective, yes we grew up online, we're good at just in time inventory as you open stores, it is a

challenge for a brand to manage inventory the way some of the legacy retailers are things like buy online, pick up in store, ship from store, inventory management per sfektive pretty much a game changer. i think d to c brands are lagging in terms of evolution. we'll be there in 2020, shipping from stores. once we do, i think we'll be able to manage inventory very well. >> lastly, plans to go public, do you have any? >> at this point, no we want to grow the business in a way we're not catering to any specific exit and give ourselves hopefully the flexibility to make the decision. >> stuff looks great congrats on that. >> thank you. >> we'll be watching you closely whether you're public or not. >> thanks for having me. let's get back it fitbit we mentioned stock was halting, right around 29% higher at this hour on those reports that alphabet has made an offer we've had a fitbit on many times and they have talked about

themselves as a player not locked into one ecosystem, apple versus android we talked about the fact they do play very well in android where the apple watch does not play. they put out not just your wearable trackers but also a smart watch components samsung has had something like that that ties in with samsung's part of the ecosystem. but as android has gotten more diverse, more complicated, obviously there's room for somebody else if they are willing to make capital investment, make the brand and products bigger. perhaps fitbit hasn't had that. >> this is one to watch especially getting alphabet. continuing to keep an eye virgin galactic holdings, spc ticker symbol

the first ever commercial spaceflight company. it's one to watch as we now usher in this new era of quote, unquote, new space with the first really publicly traded name from this crop of billionaire-backed space companies. >> it's expensive. >> of course, in addition to alphabet, t-mobile before we really start seeing the onslaught of earnings midweek. so with all that, let's get to the judge back at hq. >> carl, thanks. i'm scott wapner, front and center this hour, a another record high for stocks is this the breakout investors have been waiting for? it's 12:00 noon and this is the halftime report. >> announcer: historic highs for the s&p 500. why this market may be going even higher, and what investors do from here. alphabet after the bell, apple earnings and federate decision also on deck. the trader take their positions. a downgrade for lululemon.

is the stock getting stretched it's our call of the day. and it's one of the most anticipated moments of the year for biotech.