tv Squawk Alley CNBC August 29, 2016 11:00am-12:01pm EDT
it is 8:00 a.m. at fitbit headquaters and squawk alley is live. >> good monday morning. carl is out today but here for the hour. mike santolli and cr of founder and president and tech columnist at the wall street journal joining us from baltimore. welcome to everybody. first up a short-term bounce could be coming from the ipo
market. and including big names. right now 2016 is on track to be the worst year for ipos since the financial crisis with only 63 companies having gone public. raising just under $13 billion. is this the window between brexit and the u.s. election finally opening up? >> it's important to put this in context. one of the reasons 2016 is going to be the worst year for ipos is that these companies don't need our money. so they're sitting on huge piles of cash. there was this incredible round that might and if conditions aren't right they don't want to. >> there are a lot of companies that filed to go public and are waiting in the pipeline. >> 2016, particularly the later
half and 2018 look promising. and on the stick side you have a harder to raise and a lot of these deals have them and record high stock prices and low volatility and a couple of winners and others. >> john a lot of these want liquidity. there's is a whole group of start ups that, you know, couldn't necessarily get more funding so there's some kind of crunch going on. either they have to kwet get acquired or go out and go public. not all of them are flush with cash. what happens to that group in the middle. >> you have 170 unicorns. those value $1 billion or more. >> might need a recount after some pricing action. >> 150 but that's, we're going to see a ton of m&a deal and there's also now a shift where
start up ceos are focussing on revenue profitability and go public. >> do you think that the market will be as accepting for some of the lashlger companies as they might be for smaller hyperfwroeth companies? do you think the market tweaks these differently? >> the market gets a little excited about a bigger company that's actually at a more mature stage with little more profitability. one of the reasons besides the fact that the private companies don't need the cash today that they may have been resistant is a lot of the smaller growth companies have been hit or miss after their reception. they have done great and you've had other example where is they did not catch their audience on the first try. >> do you thits going to be 2017 before we see the big household name ipos like spotify or airbnb. >> yeah. as john said, there are penalties if they don't two public. you're starting to see more
pressure from boards. there's been a lot of talk about uber which would be the white whale. we don't know when these companies are going to go public. it does have to happen because the early investors want to see a return on their investment. something like only 20 25% of companies classified as unicorns in the past couple of years have returned any cash at all so there is a huge overhang and at some point we have to deal with it. if 2017 is positive you'll see some for sure. >> they have certainly been buying themselves some time. meantime moving on at&t signing a deal with hbo for the directtv streaming service. it comes after those that merge last year and julia is live with more on that story julia. >> hey, kayla. thanks to this new deal when at&t launches it's service they'll be able to get it on
their phones at the fraction of a price of a traditional tv bundle. it's the second big content deal. earlier this month it announced inclusion for all of disney's major networks and indicates that the service will have top tier content. it will have over 100 channels and work as an app with no box and no contract required. the company hasn't announced the cost yet but a source close to the company tells me it will be priced in the same range as hulu's upcoming product which is expected to start around $35 a month for the basic service. at&t could bundle directv now with it's mobile service to tap into demand from cord cutters among it's 130 million wireless customers. pacific press projecting that the offering will accelerate directv's subscribers. now time warner and disney signing on speaks to traditional
company's interest in being included in all the new bundles. bob iger said disney will earn as much from directv's upcoming service as from current cable and satellite tv packages. when directv now launches it will have the highest cost bundles as well as for smaller tv bundles and verizon's custom tv fios packages. the cable providers have been offering tv access through apps as well as more skinny bundles to keep their subscribers hooked. guys over to you. >> thank you and coming to at&t
and streaming linear tv. >> should we be surprised at all? the content providers aren't taking any hit here. they're just getting more money from more different places. at&t has wireless customers and dire directv and all kind of ways to monetize this. >> one thing happening here is as the bundle is disrupted we're reconstructing the bundle in a different form it's a chance for the people who are funneling
that to reconsider. companies like at&t this is a way to hold on to people and not lose them to cable companies that are going to deliver this over the internet anyway and to the end consumer all they care about is is this a good price for that bundle. >> $35 a month if it's roughly in that range is that something you think consumers will pay for or have we gone above the point where they say this is something that's a natural add on. >> if you dial back you'll say you're going to pay a bit less to get a lot less. and that's the test. maybe it does actually fly because people say look i only watch x hand full of a week anyway but i still don't think it's necessarily something that if you did cost it out per network then to john's point it's because the content providers are saying we'll sell it to you at a price.
>> even if it is, how long do you think it takes before the price goes up to something else. it's not like at&t ever changed prices on anything or comcast ever offers an introductory price that goes up. >> but you're seeing a ton of competition. >> except in this industry. >> the consumer, espn announcing many streams that they'll go direct to consumer. so you have direct to consumer, the skinny bundles, the fat bundles, there's a lot of content out there and that may bring pricing down. >> finally chris your piece in the journal today is looking at the future of electric cars. why electric cars will be here sooner than you think i mean gas is 221 a gallon. what is it to get people to buy these things?
>> in 2016 the rate at which people are buying electric cars is almost up. they actually doubled from 2015. there's 1 in 100 vehicles right now despite low gas prices so number one there's a lot of demand people have under estimated that's unprecedented. and really they want the vehicles and want the convenience of charging up at home. overall there's competition from tesla and we can't underestimate the importance of regulation so we have fuel standards coming in 2025. the world economic forum issued a report that says the only way auto makers will meet these emission standards all around the world is if in the u. s. 10% of new electric vehicles are
electric. so that's an increase from today in four years so you have regulations driving it. you do have a class of consumers interested in it. probably the mainstream adopters are not interested in it yet but if they start seeing charging stations pop up at the grocery store, at work, et cetera, the lower fuel cost and maintenance, if you're looking at a car that costs the same as a car you would normally buy, you can get an electric car with 2 or 300 mile range with the same a lot of peel will consider that so really the technology is meet where the regulations are and the charging station availability is and it's the perfect storm in four or five years you'll see a tidal wave of these things. >> that for me was the issue a less than a year ago my wife and i bought a new car. we looked at the hybrid version and electric version. it was 2 to $3,000 more and it's pretty much the same car but i pay more. how much are you really going to save on gas.
forget about it, right? is it going to take these car makers facing regulation that makes them put that at the same price for this to take off? >> we are about to see a perfect storm over the next 5, 6, 7, years. performance going up on the vehicle. pricing going down and there's a lot of things going on at once that's going to catapult this. >> tesla is the clear all in bet. >> tesla, a lot of the buyers, the ones on the waiting list that want one now, i don't think they're saying i would love an electric vehicle. i wonder which one i'll buy. they want a tesla.
it's a different market and the key. >> you can't feel like you're doing that to buy the he electric version even if the price is the same. >> is there a big company ahead of the pack on this? >> they're going to beat them. that's the chevy votl. it's unique because it has 50 miles range on electric and a gas engine. they're all in but i talked to folks that run charging networks and have visibility into the product road maps for these companies and they're saying it's going to electroidentify. every vehicle is going to have a plug within 5 to 10 years. more on the shoulder side. the incredible thing is chevy actu
actually was the fastest growing by market share. >> we'll see if they find have way. >> we want to check in on the markets before this rally gets away from us climbing above the 18,500 level recently. nasdaq an underperformer. bio techs weighing on the nasdaq which has been a leader recently and let's check out the price of oil oil is under pressure down 1.7%. t-mobile getting upgraded to out perform at wells fargo. the company will be helped by m&a speculation. >> coming up, fitbit is moving higher after unveiling the next generation of products this morning. they'll take a closer look. plus vm world one of the biggest
cloud conferences of the year kicks off today. the ceo is going to join us in a cnbc exclusive and moving beyond the clouds, the future of space travel. we'll look at the competition between jeff besos elon musk and richard bransen. more squawk alley in a moment. planets are perfectly aligned, that's it. we need really tight temperature controls. engineering, aerodynamics- a split second too long could mean scrapping it all and starting over. propulsion, structural analysis- maple bourbon caramel. that's what we're working on right now. from design through production, siemens technology helps manufacturers meet critical deadlines. i think this'll be our biggest flavor yet. when you only have one shot, you need a whole lot of ingenuity.
>> fit bit is unveiling it's next generation of products this morning. hello. >> hi there mike. well, fitbit has two of its best sellers. now this is the new flex 2. it's 30% slimmer than the original version. it's also water proof but the big change is that it can take that tracker out and put it in a different color band or inside a bracelet like this one. it's one of the new products in a new line of jewelry that includes new bracelets. they wanted to appeal to their female customers. the flex 2 starts at $99 and guys the charge 2 is also giving an upgrade and the most visible
change is the screen size. 4 tiles bigger allowing you to see more information. it will remind you to move, tell you how hard you're exercising and also has a new mindfulness feature right here. it is the relaxed feature right here and basically i can access it by tapping it and the device will walk me through a two minute breathing exercise. shares are down 50% this year and while the company dominates the wearables market it's lead is shrinking. one reason why fitbit hopes to win over new customers. >> we give everybody that bought these products in the past a chance to trade up and get to the next generation. the next level. second with all of these new features now we're making these products more powerful so we're going to attract more people to the fitbit family. >> guys both the flex 2 and the charge 2 are available for presale today. back to you. >> very interesting.
especially that jewelry introduction. thank you. >> up next on squawk alley the ceo joins us in a cnbc exclusive live in las vegas. we're back in a minute. they may want the latest products and services, but they demand the best shopping experiences. they're your customers. and by blending physical with digital, cognizant is helping 8 of the 10 largest u.s. retailers meet their demands with more responsive retail models... ones that transcend channels and locations, anticipate expectations... creating new ways to engage at every imaginable touch-point. it's a new day in retail, and together, we're building the store of the future. digital works for retail. let's talk about how digital works for your business. it's what the national debt could do to our economy. if we don't solve our debt problem 19 trillion and growing
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now. >> great to be with you today thank you. >> let's go big picture to start off. you have a lot of news to talk about but a significant percentage of enterprise customers are not moving the majority of their workloads to the crowd. why is that and where do you expect things to be in five years? >> yeah and you know, john, just a great pleasure to be here with 23,000 of our closest friends and partners here. a lot are on premise and i'll talk about how fast it is and what we expect by 2021 that half of the workloads will be in the cloud but to help customers get there is where you started. helping to solve and being able to run, manage secure and connect any workload to run on any cloud and that's what the essence of our show is about. to be able to announce and roll
it out a first of its kind capability that extends into any cloud. >> some of the conversation about the cloud is moving and a lot of people assumed when you move to the cloud you pick one. you go amazon or microsoft and ibm and then stick with it for awhile. a lot of customers are making multiple choices. different deapartments doing different things and it's difficult to manage. your tool that you're announcing today, tell me when does it arrive and how is it going to solve for that problem without having a big performance hit? >> and your comments are spot on because we did a survey of our customers and in partnership with the economists and on average they have 8 different clouds they're using today across thousands of customers and with that also many differents and how do they manage across that environment. and being able to operate and
manage and being able to secure a network across these environments and present them to the enterprise and it's cloud control. and they want freedom and you want control and how do you have freedom and control and that's what we're announcing today. and this extends the current products. and there has to be a performance here and when you're virtualizing servers there's advantages there and if you wanted to extract maximum performance it seems like with the cloud and if you want the most out of aws. and if you are working across different clouds making it easier to manage, the customer
is going to take some hit on performances. there's some fine tuning on the cloud level. >> what the key issues are around networking and security capability and it's what they're good for. the performance question but how do you connect them together? a combination of maybe some mobile front end that's done nati natively but also records on premis. those are the problems we're solving. just overwhelmingly overcome any gaps in performance. they're really quite excited about it. that's what it's about and why we expect this to be a moment for our ecosystem and the industry. >> i noticed dell which is going to be the majority owner of vm
ware, you guys are a partner with ibm. google on the cloud section of its website as a partner that you can use. you don't talk so much about google. a lot of people talk about vertical integration between you guys. you guys are working with different partners. is that going to come together in a different way down the road. >> this is a clear statement of what we'll call the ecosystem. and michael is here and he's going to be on stage with me this morning. and he is aif i recalling three things. one is the independence of vmware and the broad ecosystem 250 different companies here and also our acceleration as a company. independent and he ecosystem and acceleration and he's doing that and we're choosing different partners. we have a broad ecosystem and
that's an important expectation on the part of our customers mutually that we do work together as we bring together and solve some of today's most challenging problems in the industry and that's what we're all about with the cross cloud architecture today. >> have a good show out there. vm world in las vegas. thank you for joining us exclusively at squawk alley. >> thank you. always great to talk to you. >> clinton campaign. >> this is personal news from the high ranking clinton campaign official who was famously married to u.s. congressman anthony weiner. he had a sexting scandal in 2011 and this morning's new york post carries pictures of him carrying on digital communications with a woman that is not his wife and one of those includes a photo with his young child visible in the photo.
that all reported by the new york post last night in the headlines this morning and now we have this statement that said after long and painful consideration and work on my marriage i have made the decision to separate from my husband. anthony and i remain devoted to doing what is best for our son who is the light of our life. during this difficult time i ask for respect for our privacy and guys in terms of her importance to the hillary clinton campaign and hillary clinton personally i can tell you when you review the daily schedules of hillary clinton she is with mrs. clinton minute by minute throughout every day that she is secretary of state here in washington d.c. and travels around the world. she rides in a limo to almost every event she goes to. this is very important aid to the democratic candidate. >> thank you. we are just having the close in europe and the u.k. and actually is closed for business today.
let's get to seema back at headquaters. >> european stocks moving lower on a day where london markets are closed in observe vance of a banking holiday. it's the biggest decliner with data showing it and sharply in the month of august. and the lowest level since february of last year at the italian market. still one of the only european markets stuck in bear market territory. also a recovery though in germany. and broader markets. and last week's jackson hole speech with janet yellen. those comments sending the dollar higher and the euro lower at 111 against the u.s dollar but the currency headed to 119 by year end. speaking of currencies take a look at the pond. it's also weakening. a broader story played out at 1:30 against tuchlt s. dollau.s.
a contract to design and build high speed trains for amtrak here in the united states. a gain of 2.8% but on the flip side oil and gas sector falling today as brent declines more than 1.5 hours and italy any among the big losers and european commission officials are insisting the eu is on track to finalize free trade deal negotiations with the u.s. and german vice chancellor said that in his opinion negotiations with the u.s. have defacto failed even though nobody is really admitting it. it's interesting comments. the tiling of the comments is interesting given how big of a trade is here, mike. >> thank you, appreciate it. >> when we come back our next guest is bullish on this cloud and two names in well position
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killing at least 45 pro government recruits. they have been preparing to travel to saudi arabia before returning to yemen. isis claiming responsibility. italian firefighters showing massive destruction and one of the towns in central italy devastated by last week's earthquake. at least 290 people were killed by the quake. a truck carrying air bag inflaters crashed caught fire and exploded in texas last week killing one woman and injuring four others. authorities were investigating that crash. and air bags and test dummies. and flying from new orleans to orlando. and forcing a plane to make an emergency landing. no one was hurt and the incident is being investigated. >> that's the news update for
this hour. let's get back downtown to squawk alley. >> thank you so much sue. technology is mock the best performing sector. and our cloud and streaming companies gaining investor attention at the expense of traditional software companies. joining us is joshua spencer portfolio manager and manager of the global tech fund. it's great to have you today. i'm looking at your top holdings. there doesn't seem to be a clear theme. you have the best of the bunch in semi conductors and a couple of momentum names. and we do try to take our bottoms up to stop picking and it's a wide range of sectors but a couple of themes that stand out are the growth of cloud computi
computing. you'll see that with sales force and work day. the growth of the internet. amazon and netflix and i love companies that are selling into new end markets like automotive and industrial where the content is really growing as a percentage of the total cost of the product. and it's fully valued but you do like netflix. google and amazon. given facebook's huge user base that continue growth and high engagement. is this a boat that you missed earlier on and you want to build a position here? what's the thinking behind it? >> it's a little bit of both but in full disclosure it's a stock that i haven't gotten to write and it's done very well. the company and the stock and i haven't participated. we had a lot of other good ideas and at this point i think that the core product, facebook, they have really pushed the ad load
quite far and with respect to instagram they face competition from snapchat. the stock is fully valued and i'm hesitant to buy in at this price. >> you mentioned the kind of industry factors driving your interest in semi-conductor stocks. been a leadership group for awhile now. perhaps the strongest per former in all of tech in the last several month. has it priced in a lot of the good news by now? what are the ways to play at these levels. >> in some cases yes. and years to go with this. and it's not an expensive stock. it trades at 11 times next year's free cash flow and is the supplier to the automotive markets and ian gattis pate owning to much higher levels. >> a couple of things we have
seen is all about saying 2016 seems to be this trade into tech for the dividend income. would you go out on a limb and say cloud would be the trend going forward and it is the prevailing theme. why not amazon. why not google. why not microsoft if a rising tied is going to lift all the boats. and if i look at company and it's 25 to 30% growth. and that's hard to find in this gdp environment of more muted growth. and these companies are benefitting from the growth of the cloud and as to the second question why not amazon and google we do have a big position in amazon and google. i think the company is doing very good things in the cloud.
so i think it's an area where you can spread your positions around but i would say i'm most optimistic about the application software. sales force and work day that effectively sit on top of the cloud an benefit from the growth. >> we're just about out of time and if you're voting in favor with merger city. >> i can't talk about our plans. i can't say i'm very optimistic about the business over the long-term. i'm especially excited about the model 3 and the penetration into a broader sector of the car buying public. >> josh spencer in baltimore. >> thanks. >> up next, mylan as the taken new steps and we're going to bring you the latest. first rick santelli, what are you watching today. >> the way the markets move.
i always thought when i used the term escape velocity it would be that the economy is doing so well the fed will do the right thing. but that's not where the escape velocity seems to be hitting and i'll tell you it's in an unusual place i'll give you a hint. fed up after the break. there are many things you don't want in industrial strength- like cologne. morning! but there's one thing you do. (gags) it's called predix from ge. the cloud-based development platform that's industrial-strength strength!
>> would financials be the markets new driver? and which are likely to be the break up. jim cramer is with us today. all ahead at the top of the hour. >> sounds good scott. we'll see you then. let's get to the cme group. rick santelli and the santelli exchange. >> >> he had an opportunity to meet the federal reserve or at least some members of the federal reserve. much of the debate i see and what does it mean. forget all of that. to me there's a much more basic issue at work here and we talked about it. at the last election and after the 2012 election i said many times that the fed and the
central bank policies of the world are so experimental, so questionable, so far off the motion of what they do they'll be talked about in a political environment. they're going to rise. the escape philosophy is talking about understanding and having people lobbying and getting to debate the fed and having it rise to the motion that it will be in the political arena. maybe this election the tip of the iceberg but it's going to continue to happen especially if they continue these policy choices. let me read something in the end of janet yellen's statement that was last week friday. it's been eluded to many times. i'll go quickly. some may deploy other central banks though adding them would require a very careful weighing of costs and benefits and in
some cases could, could require legislation. for example, future policy makers may wish to explore the possibility of purchasing a broader range of assets. you know, why would the fomc copy the homework of kuroda, draghi, who gets to pick and choose? i'm not saying what is good and bad. i'm making generalities. do you think they're going to buy the corporate securities of companies that make cigarettes or fossil fuel or do you think they would be more inclined to renewable energy securities or healthier things and i'm not saying that there's a bad and good there. i'm just saying they should be involved in this selection process. it's really going to be full of issues that really shouldn't be part of the central bank that has 4.5 trillion on the balance sheet and finally it's all about gravity. if you purchase corporate securities you're creating an environment that we're not really standing on solid ground.
we're walking on air and that's the problem. why they don't want to normalize. they don't know how much difference in height there is between where the markets are walking now and where they should be walking based on lack of or winding down of policy. mike back to you. >> thank you very much. meantime, mylan will launch a generic version of epipen after price increases. >> it's typical for a company when it's anticipating generic competition to prepare to launch what is known as an authorized generic and that is what mylan is doing now. the only difference is there's no actual generic competitor outside of itself so it's going to be launching this for half the list price of the branded version. about $300 for a two pack. the authorized generic will be identical to the branded product and will be ab rated meaning a pharmacist can swap it in automatically when a doctor
writes a prescription for a branded epipen. this doesn't happen very frequently saying that it may be more of a political move than a financial one. you can see mylan stack up a little bit but trying to introduce the generic version down 1.8%. mylan ceo referring to this as an extraordinary response. and cost to patients and we determine that bypassing the brand system in this case and offering an additional alternative was the best option. bypassing the brand system was the key there. and essentially the list price of the branded product after giving out rebates and all the cuts to all the other players in the system they ended up with $274 as a net price. and there's this generic price
and what will the net price be of that. will they be able to reap more revenue potential at $300 as the list price verses the net price at to you. >> indeed, megan. give away the branded version and get a price break versus the generic? >> another question. moving parts. >> yes. continue to follow that important story for us. coming up, future of private space travel. the competition between jeff bezos, elon musk and richard branson. a look at markets. the dow moving significantly higher than the begins of the session up 125 points led by dupont and travelers. the s&p and nasdaq also up fractionally. more "squawk alley" in just a moment.
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9 rocket. >> reporter: commercial space, firing on all engines, two launches forward, one crash back. the saying goes, space is hard, and only dreamers with the greatest passion and deepest pockets decided to both use nasa and bypass it to relaunch america's space dominance. it started with exprize. that was ten years ago, jump-started the space race for richard branson, jeff bezos and elon musk, but progress slow. f tait ali fatalities and momentum picked up. one-second window. elon musk's company is paying the bills shuttling cargo, soon astronauts to the space station, launching satellites and figuring how cost effective to
use one of the booster rockets it successfully landed. testing on the boosters continues, but musk's real goal is mars. >> i think if you're going to choose a place to die, then mars is probably, you know, not a bad choice. >> reporter: he thinks we'll need to eventually leave earth. jeff bezos sees it differently. >> i think we need to explore and utilize space in order to save the earth. >> reporter: both in a game of one ups manship which could decide who changes cape canaveral. spacex won that battle, leased the launch pad. and look, guys, this is an over two-mile long horizontal launch site and this is for branson's verging galactic. the terminal is off to the left in the distance. amazing facility. they still don't know yet when
they are actually going to have paying customers go up, but are continuing to test after recovering from that crash in 2014 in california. >> jane in space port america, new mexico. a place none of us probably knew existed until today, but big enough it has its own zip code. thank you. when we come back, mark zuckerberg meets pope francis. what they talked about and zuck's special gift for the pontiff. that's up next. you may think you can put off checking out your medicare options until you're sixty-five, but now is a good time to get the ball rolling. keep in mind, medicare only covers about eighty percent of part b medical costs. the rest is up to you. that's where aarp medicare supplement insurance plans insured by unitedhealthcare insurance company come in.
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facebook ceo mark zuckerberg wasting no time in in our italy, and this on the gorgeous lake como. zuckerberg also having a whirlwind trip through rome and the vatican meeting with pope francis at the vatican handing the pontiff a model of facebook's solar powered internet beaming drone. he also sat down with italian prime minister matteo renzi before hosting an hour-long q&a that wrapped up about an hour ago. mixes business with pleasure.
>> yeah. hard to get through security. probably found a way. maybe a private jet. i don't know. >> interesting. mike what are you watching going into the afternoon in the market janchts quiet rally. see if it sticks with oil down. >> all right. with that we it over to the "halftime report." guys, thanks. welcome to the "halftime report." i'm scott wapner. top trade this hour, the rebound rally. stocks moving higher just days after the fed signaled higher interest rates could soon be on the way. so are today's gains a buy signal for investors? with us for the hour, joe terranova, sarat sethi, jon and pete najarian and, oh, yeah that guy. jim cramer, host of "mad money." so glad yew with us. >> and that you are back. >> the market to me,