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tv   Squawk Alley  CNBC  March 20, 2019 11:00am-12:00pm EDT

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good morning it's 8:00 a.m. at apple headquarters in cupertino, california, 11:00 a.m. on wall street and "squawk alley" is live ♪ ♪
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good wednesday morning welcome to "squawk alley." i'm john quintanilla with morgan brennan and jon fortt at post nine of the new york stock exchange we begin this morning with some regulatory headlines with tech google hit with a $1.7 million fine and facebook announces an ad overhaul of its targeting position joining us with big positions in big tech is noted tech investor, bill nygren, u.s. equities ceo for harris associates, more than $16 billion under management bill, welcome back good to see you again. >> thank you, carl >> what do you make when you wake up in the morning and you find that this fine has come down, even though partly expected has it truly become the cost of doing business for some of these global players >> well, i hope it isn't just
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the cost of doing business, but when you look at the scale of the fine relative to what we think alphabet is worth or its current market cap, it comes to something like a tenth of 1% so clearly they can handle this. but i think the important part about the positive case for alphabet is just the strong tailwind of more and more advertising moving online and alphabet's in a perfect position to capitalize on that. >> what did you make of staidya yesterday, and how should investors start paying more attention to their playing in the game space >> well, i'm certainly not an expert on the gaming space, but i think it's an example of a lot of the venture capital-type investing that alphabet is doing, which penalizes the income statement and it's one of the reasons that oakmark is a value investor finds alphabet attractive. you know, it looks like it's selling at somewhere between 25 and 30 times expected earnings
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it would be pretty easy to pass on it, if that was the end of the story. but by the time you look at the value of those venture cap investments, add back the losses to the income, look at a couple hundred dollars of cash on the balance sheet, a youtube asset that isn't fully monetized yet, and we think for the search business, the business we know as google, you're actually paying less than a market multiple and we think it's a great business with a really strong tailwind >> bill, as you kind of alluded to, this eu fine looks kind of like a hangnail to me, for alphabet and google. i mean, given that it doesn't include any need to change their behavior, they've already done that, what sorts of changes for the likes of google, throw facebook in there, too, if you would like, would actually start to cut into the muscle if some of this government regulatory attention started to require changes in how they do business? >> well, some of the political candidates are talking about breaking up the large tech
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companies. i don't think that would be ideal for alphabet, but when you look at our reason for owning it, we think the most attractive part is that investors are not giving full credit for the other bets and for youtube, if they had to be split up, it might actually make the stock go up, though we don't think that's long-term in the company's best interests. i think most important is the companies like alphabet and facebook are incredibly good at giving target -- giving advertisers access to a targeted market and if politicians get in the way of that type of advertising efficiency, i think that would start to be a negative for these companies. >> bill, as a value investor, i was surprised to see netflix, one of the top holdings in the fund, you don't usually think of it as a value play how do you think about it? >> yeah, i was surprised when carl introduced me as a tech investor
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i think of oakmark as a value investment firm who occasional finds value in the tech space. we do own netflix. we think about it very similarly to how we looked at the cable tv companies almost 30 years ago, figuring out how much a subscriber appears to be worth, based on a present value of cash flows, and then looking at how much value is being created in the business netflix, today, has a market cap that's south of 200 billion, including its debt, which comes to a little over $1,000 per subscriber and they're adding, what, 20, $25 million subscribers a year that we think are worth $1,000 if you think about it that way, you could say that netflix is selling at something like eight or ten times earnings. >> how do you think about some other companies in the content space, as far as that goes you know, disney has got fox
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now. is that creating more value? is it moving it closer to your universe or less looking at a disney stock chart, you know, it's been more than three years since the stock sustainablely moved in a consistent direction >> well, we end up not owning any of the additional cable programmers or network tv companies, because we think relative to the amount of viewing that's done on the streaming services, like netflix, like youtube, that the traditional cable stocks look -- the traditional cable content companies look expensive we do own charter and comcast, but largely there the argument is based on their internet access >> bill, all eyes on the fed this afternoon how are you thinking about central bank policy, both here at home and globally, given the fact that you're invested in quite a number of financials, as well citigroup, bank of america, aig,
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capital one. >> we do own a lot of financials, which probably puts us in the camp with most value investors. the companies like citi, ally, capital one sell at about eight times earnings, small premium to book value the market is treating them like they're well below average companies and if they end up being close to average, those will be great holdings for us. at oakmark, we're long-term investors, we typically hold for five to seven years. so the monthly fed commentary to us kind of fades into background noise. >> well, that sort of reminds me of what we went through in december, bill there's been a lot of talk about institutional investors who were caught off guard and really haven't re-risked after the december lows. that is one argument that we would put together at chase later in the year. how did your thinking evolve, or did it move at all in the lows of december?
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>> well, we thought our stocks were getting more attractive unfortunately, mutual fund investors weren't flooding companies with new capital to invest at that point in time, so we generally run fully invested. we think stocks are almost always the right long-term bet for investors. and because we were fully invested, all we were able to do was reposition the portfolio a little bit, selling some of the stable companies that weren't getting hit as hard and putting that capital to work more in the financials and cyclical space. >> interesting so that would -- so examples of that are the b of as and the citigroups >> right, those are names we've owned for a long time, but we did add to our banking exposure in the market, in the fourth quarter. >> so, bill, overall, bottom line, you think markets are going higher this year >> yes, but i always think that. and it's not so much this year, but it's long-term stocks have
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done so much better than other asset classes. you know, somebody who's been a 25-year investor has averaged something like 11 times return on their money by just putting it in the s&p. we, of course, think we can do better than that by finding stocks that are out of favor, undervalued. but, yes, we're almost always positive on the long-term outlook for stocks >> bill, always good to get your take, whether it's in tech or elsewhere. see you next time. thanks for the time today. >> thank you very much >> yep bill nygren of oakmark meantime, the business roundtable publishing the results of its quarterly ceo economic outlook survey. our kayla tausche has that in washington and we'll break that release. kayla? >> after peaking a year ago, ceo optimism is on the decline the barometer for sales growth, investment, and hiring over the next six months, they remain above average but have all dropped to levels seen in the early days of the trump administration outlook for g dp growth for the
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second and third quarters fell to 2.5%. josh bolten, the ceo of the business roundtable that conducts the survey says tax reform and deregulation have helped investment, but, quote, as we encounter a potential softening of global economic conditions, it's all the more important to advance policies that will promote american innovation and strengthen the u.s. economy for the long-term on the policy front, each survey includes a specific question in the past, it's been on trade policy but this quarter, it's on data privacy. and 80% of respondents said it's important for congress to write a national consumer privacy law. the brt conducted this survey by polling 139 ceos between february 20th and march 1st, or march 8th, rather. it's chaired by jpmorgan ceo jamie dimon. we'll sit down with him and american university president sylvia burwell to talk about workforce initiatives and the outlook overall. that's happening in the 1:00
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hour >> really interesting results there in terms of consumer privacy and potential for relations. kayla tausche, thank you for bringing us those results. speaking of ceo confidence, shares of fedex getting crushed this morning, cutting its full-year guidance for the second time in three months. fred smith warning of a global slowdown, only the latest chief executive to raise a red flag on the topic. all right. we're going to bring in steve liesman to talk about this and what it means in terms of economic growth globally and here at home, as we await more details from the fed later today. steve? >> yeah, morgan, i don't think the last two stories you had are unrelated. in fact, i'll say, they're actually related let's talk about it, brt survey coming down. and it came down in an interesting way, back down towards the levels of the early trump administration by the way, that parallels the nfib, the small business survey, which also came down and then you have fedex saying
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that, hey, it's the global slowdown that's hurt so i think there's two things in here one is obviously that you have to wait and see what happens with the global slowdown the second ones are these trade policies, both in our fed survey and in other vase vaisurveys. a lot of businesses are complaining about these trade tensions and how they've upset business there's a bit of a wake-up call here, i believe, for the trump administration when it comes to this issue they've done a lot to help business on the tax cuts, a lot to help business on the deregulation are they throwing it all away with these trade policies and these trade tensions >> yeah, it's a key point, right, in terms of all the uncertainty around trade, whether it's u.s./china trade talks or some of the other talks we have going on with other nations, also, the uncertainty around brexit and what a resolution there will look like. how much of this do you expect to color the conversation in terms of the fed this afternoon and the press conference with fed chair powell >> yeah, good question i think it's one of the major road blocks out there. the global slowdown --
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but we have to ask, how much are the tariffs part of that and the fed would certainly like to see a little more clarity on the issue of the global outlook before it has resumed its fed rate hikes i think a big important issue here is, how much that knocks on to the u.s and in our cnbc fed survey from yesterday, morgan, what we found is that economists expect about 0.4% of a percentage point to come off of gdp this year because of the global slowdown by the way, the last year or so, it may have added a half a point. i think the fed is factoring that in. it's an uncertain relationship, but certainly you can expect some effect on u.s. gdp to come from u.s. global weakness. and you see it may be magnified when it comes to the earnings of s&p 500 corporations what could be a half a point to gdp for the u.s. economy could be more for individual companies
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like, for example, fedex >> steve, we talk a lot about u.s./china trade tensions. interesting to me that fedex specifically pointed out europe as a weak point in its report. how does that fit into the broader economic narrative the way you see it >> well, you know, look, a lot of american companies, they may have a lot of growth in china, but they do a lot of business in europe that's a big factor. also, fedex has been in europe for decades now. so it's a huge factor. and i will say one other issue that's out there is that there's some concern that let's say we do do a deal with china, and by the way, 80% of our respondents expect a deal to be done this year, there was a couple of comments about, hey, what if the trump administration pivots and does -- gets into another trade battle with europe on auto so the idea that this could be over with just the u.s./china trade deal, we may move the focus no a battle with europe right after this
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>> yeah, certainly something to watch, steve, especially when in addition to fedex this week, we've had comments from bmw, ubs, samsung as well that have been pretty cautious, to say the least. steve liesman, thank you >> thanks. plenty of new product releases to get to this morning including apple's new airpods, including a new product from oculus at the game developer's conference and josh lipton is there in san francisco. what's going on, josh? >> reporter: so, morgan, oculus just now making some big news here at the game developer's conference, introducing their new vr headset it is called the oculus rift-s and we're going toell tyou all about it when "squawk alley" returns.
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and see how you can have an even better x1 experience. simple. easy. awesome. apple announcing the second generation of its airpods this morning. a couple of the new features include the ability to summon siri with just your voice rather than needing a tap also, it's got a new wireless charging case. apple says battery life is 50% longer, they connect better to other apple devices. the new airpods start at 199 bucks with the wireless charging case, $159 without it. these airpods took a long time the initial version, to come to market we'll see whether they've fixed that issue i mean, like, literally, months. they were supposed to come out at the end of the year and it was like several quarters going, when are they going to have supply of these things >> and of course, it's been a growth area for them, as well, in terms of wearables. >> it has.
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i mean, so much focus on services in apple right now in this event coming up they've rolled out a ton of products ahead of this announcement i mean, new i mmax, new ipads, these. you could have done a whole spring event just around the hardware they've been putting out press releases about this week >> it's because they're greer g i gearing up for those streaming services >> it better be hot. meantime, facebook's oculus announcing a new product this morning at the game developer's conference our josh lipton is there with more josh >> so, john, this is big news for fans of virtual reality gaming oculus did just announce this new headset. let me show it to you guys this is the oculus rift-s. it's a pc-powered vr device. it has a higher resolution display. it's got an improved lens, even stronger visual clarity. it's going to launch officially in the spring and it's going to cost around $399
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i did catch up with facebook executive and oculus co-founder, nate mitchell. and asked him, what exactly is going to excite consumers about the oculus rift-s. take a listen. >> if you're out there and looking for sort of the highest, highest end of vr gaming, you're going to be tough to beat the rift-s experience. rift-s over rift features a much higher revolution display, which obviously makes the whole image a lot clearer and more immersive and also features our oculus touch controllers, which give you a natural sense of real hand presence, being able to reach out and interact with the virtual world around you >> reporter: now, it's not just new hardware oculus this morning also announced some new vr games. one called "beat saber," this game now optimized for the oculus crest and you can see me playing "beat saber" and showing off my amazing vr skills for america. how big is this market it's still relatively small.
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i checked in with longtime tech analyst bob mcdonald over at analyst research he actually just completed a recent survey. bottom line, on the able 6% of u.s. gamers right now have a vr or an ar headset there's a couple of reasons for that, but one challenge, there still just isn't enough compelling content out there that really motivates a lot of gamers all around the world to go out and buy this hardware i actually ran that argument by facebook's nate mitchell and he agreed he acknowledged that's an issue, they need more compelling content. at the same time, he said, that's exactly why the company keeps investing in content guys, back to you. >> joshua, were you playing "beat saber" there, is that what we saw happening >> yes, that is, indeed, john, me trying "beat saber. >> you're like breaking a sweat there. >> i was out of breath, john i broke a complete sweat on that game i don't know if that says more about me or "beat saber," but it
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was a workout. >> well, you won we're just going to say that you won. it was worth it. now -- >> reporte >> reporter: appreciate that >> you gave some interesting stats there in the end about vr and ar, how it's not catching on it seems like the gaming industry is bifurcated on the one hand, google is trying to do this streaming thing, which requires less hardware, zero hardware, cheap hardware on the other hand, facebook and others, still trying to push this expensive vr. is there a sense of there being a tipping point, when they're going to figure out whether this is going to work in vr or not? >> reporter: i think that's such a great point, john. we were here yesterday, and you're right with that google streaming service, we checked in with google's phil harrison and that was exactly his point he sort of said, leave it up to us and we'll stream that aaa graphics-intense games right to your device, your phone, your tablet, your tv. obviously, this is a different tech and which one really ultimately takes off, we'll wait and see. obviously, vr and ar are very
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different experiences. and on top of that, you have tech companies taking a totally different role i know yb john, you've done a lot of reporting on microsoft and hollow lens. and when that companies talks about hollow lens 2, they're not looking at gaming, they're talking about how it can help people in companies. so we'll see how this space plays out. >> i know we're talking about this new oculus headset in terms of gaming and what it would mean there, but i've come in contact with a number of these in some more unusual settings, industrial companies, factory floors, with a logistics and transportation company just recently that's looking to use these to demonstrate the services that they offer to their potential customers. it seems like there's much broader applications >> reporter: well, you know, that's an interesting point. so i mentioned, i talked to oculus co-founder, nate mitchell my question to nate was, listen, there could be some right now, morgan, who think, really vr seems kind of narrow and deep. what i mean by that is, is it for hard-core gamers and tra
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training simulations, a deep but narrow audience. i asked nate mitchell that and he sticks to his guns, long-term, they don't think it's going to be narrow and deep. they think it's going to be broad. that it's going to have a lot of applications that's their forecast for this device that's why they're putting so much money and time into it. >> josh lipton there in san francisco, thank you and as we head to break, take a look at the worst-performing stocks in the dow so far in today's session. they include goldman sachs, united health,alee wgrns boots, nike, johnson & johnson. a lot more "squawk alley" still ahead. don't go anywhere.
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welcome back, everyone here's what's happening at this hour united nations appeals judges have upheld the convictions for
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former bosnian serb leader karadzic for genocide and war crimes they also increased his sentence from 70 years to life in prison. he will now spend the rest of his life behind bars new zealand police say they believe officers stopped the gunman who killed 50 people at two mosques on his way to another attack but they wouldn't say more, because it is an active investigation. >> we're not going to go into those details. you know, i don't wish to traumatize others. so that will form part of the court case but we absolutely believe we know where he was going and we intervened on the way. >> the damage to nebraska's agriculture from this week's floods is estimated to be nearly $1 billion bankruptcies are on the rise, as farmers are already struggling to survive the trade war and stiff international competition. you are up to date that's the news update this hour
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back downtown to "squawk alley." carl, back to you. >> sue, thank you very much. as you know by now, disney closing its $71 billion content deal with fox, but will it be enough to challenge the likes of netflix and amazon dow down 74, cutting its lseoss for the day almost in half we're back in a minute
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welcome back facebook overhauling its online ad targeting system as big tech continues to feel regulatory pressure, both from washington and abroad of course, as we've mentioned,
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the eu has fined google again this morning over anti-trust violations in the online ads market our julia boorstin is back at headquarters with more on facebook's ad overhaul julia. >> well, john, facebook making a major change the targeting that's central to its business model to prevent illegal discrimination facebook will prevent advertisers in the valuable categories of housing credit and employment to target people based on race, gender, or age group or even by zip code. so credit card companies can advertise their products to only right users or an apartment building can't exclude african-americans or even target based on where people are living this ad targeting overhaul is part of facebook's settlement with the aclu and other civil rights groups. there is still a pending complaint by the federal department of housing and urban development. now, as for the cost of facebook's targeting change, needham gloria martin says the real risk is if facebook loses the small businesses that need to reach microtargeted demographic. she said that could pull down ad
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pricing overall. facebook is putting these issues of discriminatory targeting behind it as it continues to draw a range of attacks. the house committee yesterday asked facebook along with twitter, microsoft, to brief them how the new zealand mosque shooting was live streamed and shared on other platforms. and yesterday president trump crisesing facebook for bias. and yesterday, david cicilline called on the fcc to investigate facebook for anti-trust violations today, stifel issuing a note on that op-ed piece, saying that these attacks on facebook maybe more than a fad warning that they're seeing powerful people attack facebook in ways they haven't seen in stifel's two decades of covering internet companies. guys, back over to you >> julia, thanks meanwhile, the broader media and content landscape officially shifting this morning, as disney closes its $71 billion acquisition of fox's
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entertainment assets but, is that going to be enough to compete with the likes of netflix and amazon and now apple, as big tech continues its own spending spree on content? joining me here at post nine, joanna coles, as well as joe kalina thank you to both of you >> thanks for being here >> so these companies are getting bigger and the argument is they've got to be huge in this age of digital to have heft, but it seems like the kind of thing that five, ten years from now we can all see unwinding, when everybody is justifying why they need to be smaller again when are we going to know if this was strategically the right move what do they have to accomplish? >> i think reality is, it will take at least two to three years to see how this industry shakes out, especially in the content game and online streaming. and it could get messy you have a lot of big players stepping into the space at the same time. it's kind of a roll of the dice
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to see who's going to come out for everything to be seamless and everybody to be a winner, that's probably a little bit unrealistic. and netflix, what they've done over years, spend, spend, i think disney and some other players are going to find out, it's going to ding their profitability. >> for content providers, how do you expect this to change the game disney is huge in theaters, but also huge in tv with this acquisition. >> it's incredibly interesting, you now have disney and fox, which is a colossus. you've got netflix and you've got apple. and they each bring something different to what is really now a content arms race. so you have disney with phenomenal content, sort of swagger now, and they're taking a lot of their content back from netflix, but they have zero subscribers. so this year they're going to launch disney plus, but they have at the moment zero subscribers. some with the spm, which they've spun off into a streaming service, but they're weaning
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themselves off cable you have netflix with 140 million subscribers, but a business model that needs to get them to 200 million. and then you have apple, who comes in with a billion devices. so a fantastic distribution system, but so far, they've only spent $1 billion on content, which is a drop in the ocean when it comes to what everybody else is spending so to give you context, that's less than abc is spending, abc, the network, less than cbs or nbc is spending. and netflix will probably spend 12 million on original -- $12 billion on original content this year so apple, it's got $200 billion sitting somewhere offshore in cash, right? it could really step up. but we're not actually seeing their commitment yet they've got five shows that we know they've finished and are ready to go. bu but you could binge that in an afternoon. so they're going to have to do
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some binge spending if they're going to keep parallel, i think, or really enter the race properly against disney and against netflix. >> interesting "variety" has a story about a memo that iger wrote today where he writes, i wish i could tell you, this is to employees, that the hardest part is behind us. that closing the deal was the finish line rather than just the next milestone he seems to be acknowledging, the hard part is coming. >> the race is just beginning. >> is that why the stock has been stuck km. >> i think so. and we all know, from an execution point of view, iger and disney, they've really struggled with their cable business their content on the main networks has also been struggling, as well, as the shift to streaming just continues to accelerate. and also to shift back to apple, i agree 100% they're going to have a hard time to differentiate in an increasingly crowded landscape >> and it's a question i keep coming back to, what's going to be more important for all of these different services it's quantity, the amount of content they have, or the quality of the content they
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have >> it's a really good question, and the great news is that for consumers, this is fantastic remember when we were having that discussion when the internet really caught fire and we all said, there's never going to be anything worth watching, it's all full of nonsense. actually, this is great for consumers. i do think it's going to come down to randing. and what netflix has going for it is that netflix is cool with gen-z and millennials. they like it it doesn't feel like part of the regular entertainment landscape. and it remains to be seen if gen-z and millennials actually want to download something called disney plus does that remind them of their childhood? do they like the idea of something more edgy, which is definitely what netflix provides and how do they feel about apple, this sort of omnipotent force in our life now, getting involved in the content game but for content creators, it's fantastic. because it means there's much more, much more competition, huge numbers flying around, right? ryan murphy, shonda rhimes going
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to netflix for unheard of contracts. so this is very good for content creators, in the short-term. >> how long before we see, joel, subscription aggregation i expect it has to be that somebody is going to have the most loyal user base, they're going to have the lowest churn twb greatest number of subscribers and they're going to say, all you little guys who are struggling, losing subscribers, i'll bundle you in, but you have to make concessions, you have to give me the power. >> the obvious player is probably amazon, they have tentacles everywhere across the economy, globally they're expanding, as well >> not apple >> potentially, you know, apple just scarce es me. obviously, events coming up. they may bundle their content product with music to some to go, but spotify is hands-down the best service out there when it comes to music. i think a lot of people agree. i think apple's a little bit
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little, too late >> before i let you both go, i just want to shift gears really quickly. because it's not getting as much attention, but there is an expectation that we're going to get a bundled news service rolled out of apple next week, as well. joanna, could this usher in a new era for print media? >> for print media well, apple has texture, which is the big magazine app, which is a fantastic way to really absorb what's going on in magazines. i think a lot of the news -- getting into the news requires a different kind of mind-set than we've set seen from either netflix or apple or amazon and we know they don't actually want to get into that business, because it puts them in political conflict in markets that they're trying to expand in so i'm very curious to see what they do. apple are fantastic at making announcements. let's see what the quality and the quantity of the content actually is. >> yeah, absolutely. and i'm old enough to remember when these tech companies didn't want to be involved in content at all >> right >> you know, after microsoft and
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nbc, they're like, no way. now, my, how the story has changed. >> thank you still to come, what to expect from levi strauss, that ipo is tomorrow. stay with us see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade
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plus, the call of the day says it's time to throw out a popular restaurant stock we'll tell you which one is getting sliced today and both jon and pete are here with unusual activity. the names that could be about to move based on what those guys are seeing in the options market we'll do it at noon on the half. we're about 15 minutes away. >> sounds like a plan, scott thanks for now, let's get over to the cme and get the santelli exchange from rick >> before we get to today's topic at hand, and that's the fed and what we're most likely going to be discussing, much more in the future, which is the word composition, i want to go to the whiteboard. this is the s&p 500 and this is important. this chart starts on october 1st. and what many have been paying close attention to is these three tops these three tops were 2809, mid-october. early november, 2814 and early december, 2790
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obviously, everybody realizes that last week, we started to close above these levels we've come down a bit. we're currently right around 28, 21, 22 on a closing basis, because, obviously, this is live we want to view closes in the context of those three tops. should we start to do more work closing below them the momentum drains. we start doing more work above them, look for momentum to build to the upside. and remember, investors never like to watch the train run out of bull station without being onboard. that's key now, as for the balance sheet, i think the word for the rest of the next several quarters is going to be composition. why? because composition of the balance sheet, what securities has in it, how sensitive it is, meaning duration, big fancy word if you have the duration and a portfolio of six years, that means the sensitivity, how the portfolio moves will mirror a six-year security. but the important thing is, having this discussion at all, at this point in time, should that be the topic, especially
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press conferences, future minutes, questions and answers today. that leads me to believe that is the type of discussion you have when you're comfortably in neutralville with respect to the fed. idling, thinking more about what your next plan is going to be down the road. why? because as new york fed doubly said, and it was quoted today as a great piece in the journal about this exact topic, that the sensitivity of the fed's portfolio would be very important, should they want to do quantitative easing again ah-hah if you are now monitoring how much life insurance you have, most likely it's because you are thinking of a possible event in the future that might come into play could it be recession? maybe. you have to have country sooner or later the point is, if you do more qe and you didn't get your balance sheet as small as you optimally would have preferred, the best bet would be to have it so you can extend your duration during a crisis to give it more
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stimulus kick. an important thing to remember jon fortt again, back to you >> rick, thank you so much when we come back, the president's pressure on big tech and silicon valley's relationship with the military founders funds trey stephens is gog s dintoitown with us next "squawk alley" back after a break. dow is down 109. $4.95. delivery drones or the latest phones. $4.95. no matter what you trade, at fidelity it's just $4.95 per online u.s. equity trade.
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no matter what you trade, at fidelity all of you. how you live, what you love. that's what inspired us to create america's most advanced internet. internet that puts you in charge. that protects what's important. it handles everything, and reaches everywhere. this is beyond wifi, this is xfi. simple. easy. awesome. xfinity, the future of awesome. welcome back to "squawk alley. the president traveling to lima, ohio, this afternoon to visit the sole remaining tank plant in
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the u.s. it's an army facility that had been at risk of closing just over five years ago, but has since seen a revival with billions of dollars now allocated to the making of more abrams a1-m2 tanks i was at the joint systems manufacturing center reporting on the resurgence of tank manufacturing just last month and guys, the fact that president trump is visiting there today is noteworthy. the last time we seen a president make a trip like this, he'll be doing it with the army secretary was george w. bush to give you an idea of the time line here and the significance of this trip is, general dynamic is the company that produces the tanks. as cerecently as 2016, they wer up one a month they are expecting to be at 34 a month. what that has meant and in a key state like ohio in terms of manufacturing is an increase in jobs from about 300 to now 600
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they are expecting to have about 1,000 people working many this facility next year >> just a few years ago seems like there was all this talk about lighter warfare and moving away from tanks and now this surge. is that sustainable? >> i think you're looking at tanks that are getting refurbished and updated. in general, the geopolitical risks have changed we're at risk of being revived in this way. it will be one to watch. when it comes to defense, president trump taking aim at silicon valley and google in a tweet saying google is helping china and their military but not their u.s. terrible the good news is they helped crooked hillary clinton and not trump. how did that turn out? president trump called out google, facebook and twitter for
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siding with the radical left democrats yesterday. joining us defense start-up tre stephens and the board member of the pentagon's defense innovation unit. thanks for joining us today. i have to start with the comments specifically about google those came from testimony on the hill by general dunford last week, the share of the the joint chief who said the work that google is indirectly benefitting the chinese military and went onto explain that statement. when it comes to industry partners for the u.s., is the military right to be calling out soc some of these companies in place like china >> sure. people tend to think of china as
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a strategic threat i think it's a blend of those two things it's policy those two things are simultaneously true. i think the tech community can do a better job recognizing the threat they pose >> i think it gets at what seems to be a growing schism between some tech companies and silicon valley for broadly and the u.s. government how do you remedy that the history is intertwined between these two entities and see such posing viewpoints now, really an area of controversy. >> the public belief is somehow the entirety of silicon valley is against working with the u.s. government or the military in particularly i think that's not true. i would argue that the vast majority of people would love to work on this important mission the challenge kind of boils down
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to a very vocal minority that's doing everything they can to make it unpalettable to do that work i think there's cultural parts on the industry side that needs to be corrected. it's a reframing of how we think about bringing innovative new companies into the department. >> how do you do that? >> wow how much time do we have it seems like a huge problem we tend to have this kind of non-concentrate ed investment strategy if we have a hypothetical budget, our strategy is to write, 400, $250,000 checks. china has a different strategy they is the same hypothetical budget they right four $25 million checks the outcomes you get from those two different approaches are wieltdly different the only two multibillion dollar venture backed companies in the
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last 30 years since the end of the cold war that are focused on defense have spacex. it's about the lack of concentration in the way the pentagon thinks about working with new entrance into the market >> i know navaro has this piece in times about national security being economic security. here we are looking at ramping up production of tanks even as the president talks about reining in exposure. what's the policy? >> the proposed budget for 2020 is something like $750 billion and there's a lot of people, including the secretary in which he said getting ai right is critical we're only spending one billion in the proposed budget on ai
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which is 1/750th of the total budget there's a big difference between resource intensive, material intensive projects and software which is a different skill set >> we appreciate you taking the time today definitely a big topic i expect we'll talk a lot more about it love to have you on the show >> i challenge josh lipton to battle because that was pathetic >> fighting words. thank you. session lows here. dow is down 159 and ths&bae p ck to 2817. we're back in less than three minutes. hey there people eligible for medicare. gimme two minutes. and i'll tell you some important things to know about medicare.
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bill gates fortune crossing that threshold this morning making him and jeff bezos the only centi billionaires in the world. fascinating. the fact that bezos is mostly amaz amazon wealth. gates is different interests
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>> gate has managed to stay out of the news for personal reasons with his money besides for philanthropy >> you have two companies been around since before the dot com boom let's get to the judge thanks i'm scott wapner is the powell pivot enough to carry stocks to new highs or will a weak global economy ruin this this is the halftime report. >> it's fed day. there's a lot after stake. will chief powell make a move to push the rally forward or pull it back? plus, several big name companies sound off with specific fears about a global slowdown the chips are in focus the group is leading the market up 23% in three months today


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