tv Squawk Alley CNBC September 21, 2016 11:00am-12:01pm EDT
ahead of the fed decision this afternoon. we're going to watch that. apple news. according to "the ft," apple has approached british carmaker mclaren about a possible acquisition. apple reportedly considering a full takeover or strategic investment in the company. mclaren reportedly valued around $2 billion, which would be apple's largest purchase, as you probably know, since beats back in 2014. joining us this morning with more, ceo jason capital cancer, josh elman, a partner in greylock partners, joining us as well. good morning to both of you. we're all sort of digesting this now, jason. but what does it mean? does it add fear to the factor that they are truly serious about project tighten, or a car project? >> yeah, well, last week, we found out that project titan was being reorganized and that maybe they were changing their focus on becoming a provider of software and autopilot and that kind of stuff, so it felt a little bit weird. why can't they get a car out the door? why can't they get a partnership
done? and now i think we're finding out they're going to buy mclaren. and listen, this is a sexy car company that makes high-performance cars, and that makes sense, because they could make a very compelling product with mclaren's assets and high performance and materials. it would be a very big acquisition for them, right? $2, $3, $4 billion, who knows what the price will wind up being. but this is for sure the strongest sign we're seeing yet, aside from hiring 1,000 engineers that we'll see an apple car. how long will it that he? i don't think we see it before three, four, five years. but you know, if you have all those apple stores seeing a beautiful, sexy, p-1 type car, hopefully an electric one, not a gas car, would be pretty amazing. and i think people will buy the car. i don't think tesla has anything to worry about. i think this is, again, a four, five, six-year project, but this certainly starts them on second base. >> but josh, we had thought that apple's ambitions for cars were maybe in the dashboard. it was the software. it was the way that you would actually power the car, not
necessarily the body, the steel, the hard assets behind cars. does this change your view of what apple's ambitions in the auto industry is? and how much do you think they would prioritize this? because $2 billion for a company with $200 billion and more in cash is just a drop in the bucket. >> well, look, i think apple is in this really interesting position right now that they've sold, you know, a billion-plus iphones, kind of the luxury phone item, and they're trying to figure out what other luxury type of items that's correct expand to. car sure seems like one. i, too, thought it would be a software play, providing a different apple-like experience when you get into the car. but it certainly makes sense that the focus in design and staying at this very high end of quality would be where they'd want to be. and look, as you said, it's sort of a drop in the bucket to them to try to get into a, you know, $1 trillion market like the auto industry. >> the way apple tends to talk about this stuff, it makes me
think, having followed the company for a while, that they really, ideally, like to control the entire experience from the store where the car is sold, though we know there's controversy around dealing with dealers, to selling and making the entire car itself. i mean, when you think about what tim cook has really accomplished, just sort of as a businessman and really as a technologist, it's the mass production of extremely intricate and powerful technology just at a scale that we hadn't seen before as far as consumer products. so, if they can do that with cars as well, there's a huge amount of potential in it. we see these little moves or glimpses of these little moves and think we know what's going on, but it sort of makes sense they'd reorganize a project as it rolls along, if they're planning to incubate something, then figure out what bigger they need to buy, perhaps. >> but it's one thing to buy a start-up and then fold it if it doesn't work out or the project doesn't proceed like apple expected. to buy a company that has a brand like mclaren. you can't mess that up. >> sure you can. >> well, you shouldn't.
>> give it time. give it time. >> jason, does it -- >> well -- >> people are checking tesla's price action today to see the level of disappointment, and it has crossed into the red. but i wonder how much people had emotionally invested in the idea that it would be tesla, or will be tesla. >> yeah, i mean, i think tesla is probably, when they got those 400,000 preorders for the third-generation car, i think the train left the station. there was no way apple was going to be able to pay a premium on top of tesla's stock price, and tesla has escaped velocity now. they have a bigger vision of becoming an energy company, from the solar panels to putting the battery packs on and to having the car. anybody who's been to the gigafactory realizes the ambition level that elon and the team has is much greater than just cars. but you know, apple now is going to become a house of brands. they're getting comfortable with the idea, post steve jobs, i think, that they can buy brands and become a steward of the
mclaren brand, become a steward of the beats brand. so we're going to see a house of brands, and i think that's a great evolution for apple. because listen, they're not putting out all-star products anymore. in fact, they're trying to catch up to samsung and fitbit on their current launch of the iphone 7 and the apple watch 2. so, this is a good choice for them, is to put that huge stack of cash to work buying incredible brands around the world. they were going to buy some watch brands as well, so i think they should put that chip stack to work. and we might starts seeing $10 billion, $20 billion acquisitions from apple, which would help them catch up to facebook, which obviously has no problem spending tens of billions of dollars, and microsoft buying linkedin. this is what apple needs to do, and i think it's a great sign for shareholders that they're getting this bold, if this is in fact happening. >> clearly. let's stick with apple. the eu's commissioner fmarguerie spoke with sara eisen about the tax bill. what is the latest? >> hi, guys.
she was in new york and washington this week to try and defend her case where she has faced a wave of backlash against her ruling a few weeks ago, ordering apple to pay a record $14.5 billion in back taxes to the irish government. europe says apple got a sweetheart deal and that it's unfair, it violates competition rules. apple, of course, disputes that, as well as ireland. so, i asked margaret vest jaiga about this argument. when you said at one point pay 0.0005%, a number that tim cook has called political crap. what is your view of that? >> well, i've never seen math categorized like that, because we are obliged, of course, to do our case work-based on the facts of the case, not only because it can be appealed and go to court, but also because we have to do a good job. we have to make sure that we get it right and do the right thing. >> but isn't the heart of the matter really, especially when it comes to apple and these
technology companies, the intellectual property of their sales, of iphones and other products, happens all in the united states. it is produced in the united states. so, why should the irish government claim the income tax on it? >> well, this is for apple. because we don't question where they book their profits. what we see is that they book a huge portion of their profits in ireland, not in the states. with the apple inc. of the u.s., they have this cost-sharing agreement where they pay every year, some years like $2 billion for the research and development. but the right to use the ip, and therefore also to book the profits, you'd find that part of that is in ireland. and that, of course, makes things much more simple, because this is not u.s. profits. these are profits made in europe, generated in europe, and therefore, i think, obviously, also to be taxed in europe.
>> but aren't those fees related to distribution and manufacturing and not intellectual property? isn't that -- shouldn't apple's earnings on intellectual property be a matter of u.s. corporate income tax? >> well, that you have to discuss with apple, because we were not the ones to organize this. we were not the ones to question how they book their profits. that we take for granted. what we see is that you have these profits which are generated in europe and booked in europe. and in europe, we have a very simple principle, which is that profits should be taxed where profits are generated. >> by one calculation under your ruling, it would compel apple to pay 40% of ireland's corporate income tax on a given year. does that sound right and fair? >> but i don't think you can make that calculation in any meaningful way, because apple is a huge company. they make huge profits. and that's the ups and downs
here. because the ireland corporate tax is very, very low. it's just 12.5%. so, in that respect, it's not a big number, not for any company who generates profits in europe, book them in ireland, and therefore, to be taxed by the irish corporate tax. >> did you expect ireland to fight this, as they are doing? >> well, in my experience, both my own as a commissioner, which is now two years, but also looking back, actually, this is a very common phenomenon, that member states who have been given out illegal stata would challenge this in court. also happens with the netherlands and lux yum bourg and belgium. so this is actually very much as expected. >> can you see why people look at this and say it's politically motivated? >> well, sometimes i can understand the feeling, but it's very hard to substantiate it, because when you look into the statistics, both when it comes to state aid control, antitrust,
you cannot find a u.s. bias just as well as we do not find a european bias when we see the fine on deutsche bank or pnb paribas. because one of the things we have in common, all the differences taken apart, is that these two unions build under the rule of law, and i think that is the most important thing. >> i think it was the number that was so eye-catching, because the last time i think that there was a fine from the commission when it came to a tax, it was a german racetrack company and it was $1.3 billion. this goes way beyond that. >> yeah, but the thing is that, actually, it's the principle that's the interesting thing here, because the number is an illustration of the fact that apple is a huge, very successful company. it's global. and this is just part of the profits that apple actually do make, being booked, generated and taxed in ireland. >> our sara eisen talking to vestager earlier this morning. we're going to continue that conversation. but quickly, we want to check in
on scott wapner and get more on this news concerning the s.e.c., omega and leon cooperman. >> these are the insider trading charges we just learned about 15 minutes or so ago. i did just get off the phone with mr. cooperman, carl, who told me the following -- "i've spent 50 years developing my reputation in a proper manner. these charges are without merit. we will be vindicated." mr. cooperman also told me that the s.e.c. offered a settlement which he called unacceptable to omega and myself, those words coming from lee cooperman. i do have a letter, a four-page or so letter they've just sent out to investors. i'll read quotes directly from it, where mr. cooperman says "we are highly disappointed with the commission's decision to file charges and strongly disagree that the firm or i have engaged in unlawful conduct. we have done nothing improper. we categorically deny the commission's allegations." as we've already said, carl when news of this broke, this
surrounds trading in a company called atlas pipeline in the summer of 2010. that is where the commission appears to be focused here. but again, omega is sending out this letter and say that none of the trading at issue is indicative of someone trying to position themselves ahead of an anticipated market-moving announcement or to reap profits from insider information. they say their counsel will vigorously defend us against the commission charges. they have paul weiss working with them, well-known law firm to many of our viewers. but that is where we are at the current time. lee cooperman sending out a multipage letter to his investors and telling me directly just moments ago that we've done nothing wrong, we will vigorously fight these charges, and i've spent 50 years building a reputation the proper way. carl? >> scott walker back at hq. we know you'll have more details coming up on the half in just about 45 minutes. thanks so much. >> josh and jason, back to apple and the conversation that sara had with vestager about the
taxes. how much do they need to worry about these liabilities and the opportunities? i mean, it's interesting to hear from the eu on taxes and then on the same day where they're apparently expressing interest in a british carmaker. >> you know, we're sort of at unprecedented scale right now where these companies like apple, you know, let alone google and other ones, are just operating globally with their ip that's generated in one place, where they're not actually operating physically in all these other countries. and so, i think we're starting to see what happens in this kind of new, global, multinational world, where the countries like europe and ireland are starting to go, wait a second, if you're really going to operate here or say that you are, maybe we need to take a closer look. some of the things we might have promised you a few years ago aren't coming true. i think apple's going to have a real fight on their hands. >> jason, i want your perspective on this. companies like apple have options on where they invest, on where they go on how they do business. is the eu really shooting itself
in the foot here by going so unilateral in these types of demands? the commissioner kept saying huge, very successful, to describe apple to justify the size of this fine and the taxes they supposedly ought to be paying. >> yeah, i mean, this is shenanigans all over the place. if you look, the whole concept of putting your intellectual property through multiple, you know, countries, it's shenanigans, right? but it's been an established shenanigan that has been accepted. to go back and the eu to look at apple's huge pile of cash and start salivating and say, hey, let's retroactively tax them for ten years, it's really unfair, right? so, the eu wants to get some profits here, and they're going to fine google and they're going to look at these companies that have huge amounts of, you know, war chest of capital, and they're going to start to extract some of it. and the people -- this is all part of the trend we see here in
the united states, whether it's the epipen or wells fargo yesterday, or even bernie sanders and donald trump. the people have spoken. they want companies to pay their taxes. they want to see the minimum wage go up. and so, we're seeing a balancing of consumer interests and corporate interests. and the corporate interests have gotten ahead. this whole double irish tax stuff, it all seemed like a scam to all of us. it's also unfair to retroactivate it. so, i think this is part of the cleanup process. it will probably be a negotiation. you'll probably see a third of a penalty, and going forward, people will pay their taxes. >> josh, interestingly, the reason why banks don't disclose the amount of money they have in their reserves is because they don't want that to basically be where regulators start when they're determining these price tags. i'm wondering if you think we'll see these companies stop reporting how much cash they have overseas or within the u.s., because it has been such a lightning rod issue. >> well, i think this is totally right that companies are going to try to figure out how to bury some of these profits as much as
they can. part of the challenge has been we know the incredible profit margins that they're making on these products, what they're making on their phones, what they're hopefully going to be able to make on their cars. so, we know all this cash has to hit somewhere. the u.s. has salivated to get it back and wants it all repatriated, too. i think we're right in the middle, as jason called them, shenanigans, to try to figure out how the money's really going to flow back to where taxes should be paid and where the laws are actually, you know, right to protect this stuff. >> josh elman, greylock, jason calacanis, appreciate the insight. we covered a lot of ground. >> thank you. ahead, what to look forward to in the fed decision. plus, apple's car strategy announced it has approached mclaren about a possible acquisition. we're going to break down exactly what that deal might mean. and the co-founder of lyft on his plans for self-driving cars when "squawk alley" continues.
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focus. so, is the fed ready to make a move? joining us now is bob mcteer, former dallas fed president and economic adviser to commerce street capital. our steve liesman joins the conversation as well. bob, i'll start with you, because we tend to look for tea leaves in the market on days like this. we are seeing the yields on the two-year notes policy-sensitive, rising a little bit. but the dollar index is lower, fed funds futures are chocking up a 20% move. same assumption it's not happening? >> a week and a half ago, i was pretty sure they were going to move, but since then, all the economic data have been bad. we have industrial production, retail sales, the two ism reports, wholesale prices. it's all been contrary to what they would hope for. >> but the fed speak, steve, had been pushing against that, with so many members of the fed saying in recent weeks that perhaps it's better to get this over with.
and then you have little brainerd come out with a pretty dovish speech last week and now a lot of people are saying that's the fly in the ointment here. >> look, kayla, we all focus on the first line of their statements, but a lot of times we all ignore the second line. the first line is, i think it's okay to hike. the second line is, it's data-dependent. i'm right with bob mcteer on his analysis. i thought all the conditions were there for a hike. i even thought the jobs data was enough for the federal reserve to hike, but that recent round of data, if you put that in context of a federal reserve that's cautious, i think what they'll do is wait to see if the data claired. what i think happened here was we had a decent start to the third quarter, and that results, by the way in gdp that could be running as high as 2.5% or 3% for the quarter. but it looks like things trailed off in august. at least that's what the august data show. so, my guess is the fed waits here and they go with the data-dependent line, which is that we will hike, we think the
case is strengthening for a hike, if the data support it. and i don't think the data support it right now. >> but bob, there's some sense in the market that we could get such hawkish language from the fed in the press conference today and in the statement we get this afternoon that the market could behave as if there had been a hike, even if there isn't a hike. so, if you were investing into this market going into this afternoon, how do you think the market's going to play? >> well, i'm afraid you may be right. we may not get the action, but we might get the reaction as if there had been one. of course, in my portfolio, i'm like a deer looking into the headlights always. i just accept what comes and hang on. i wouldn't know how to time the market to take advantage, even if i knew what they were going to do. >> steve, from the sidelines, it sort of looks like we end up with these situations where people think maybe the fed's going to move, then the data
doesn't look perfect and they don't move. and then in hindsight, it's like oh, maybe they could have moved. brexit wasn't that big a deal, et cetera, et cetera. and then at the end of another quarter, it's like, ah, well, the data doesn't look perfect, maybe they're not going to move. i mean, is there a danger after a while that it's that last person who won't take the bungee jump, even though they went, climbed up all that way, and everybody expects them to do it? >> well, i think, you describe it as a bungee jump, they shouldn't do it at all. to make take your metaphor too far. i would hope the making of monetary policy is a little less of a danger than taking a bungee jump. that said, you're right. and i think there's a lot of criticism of the fed's credibility. and the criticism comes from this, that the fed looks to be making what are essentially medium and long-term decisions based on the latest economic data and that the federal reserve is too responsive to markets. in fact, one of the reasons why i think the fed is not going to go today is because the market's
not prepared for it. when you look at the way fed funds probabilities are priced for this meeting, it's down below 20%. if this number had been somewhat higher, even up to 30% or 40%, i'd say there was a better chance. so, the way these things work is that there's no reason for the federal reserve to surprise the market. i've tried to think if there was some reason, and the fed has no particular gain to be had from that or benefit. >> we will get some answers in a few hours' time. bob mcteer, formerly of the dallas fed. steve liesman. our thanks to both of you. >> pleasure. and up next, apple might be looking to put at least some of its massive cash forward to work, this time in autos. we've got all the details. but first, check out shares of adobe, rallying after profit beat estimates, and it also gave some upbeat guidance for the current quarter. we're back in just a moment.
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talks with mclaren about a potential takeover or major investment. apple has declined to comment. for more on what could come out of this, our phil lebeau joins us on the phone. phil, maybe you can give us a sense on engineeringwise what mclaren is particularly good at that apple might be interested in here. >> well, it's the onboard computing systems. that's a big part of what mclaren is good at. they've also worked as they've developed these supercars, the formula 1 race cars, carbon fiber. they work with that, those systems, lightweighting a car, bringing the performance of the vehicle to a whole new level. we should point out, mclaren has not yet commented on this report from "the ft." but it brings up the question, why would you be interested in mclaren if you are apple? and you have to look at it from the perspective of the real value if you're apple and you go into the automotive business completely, the real value is the software, it's the engineering behind the physical car. that's where the real value
lies. and mclaren brings something to the table if you're apple. and the other element of this that might be intriguing if you're apple -- and again, we haven't heard a comment from them on this report -- if you were going to buy an automaker, you would not buy a full-scale automaker that cranks out a couple million vehicles a year. you would buy a niche automaker, and that's what mclaren is. they only built about 1,600 vehicles last year. so, if you wanted a little bit of capacity where you could work on vehicles that you're developing for the future, mclaren would give you that if you're apple. so, there's the value there if apple were to go forward with this. and again, we have not heard from mclaren, and apple has declined to comment. >> so, phil, you think it's more about the software than, say, the metallic engineering, the aluminum, the production logistics, that kind of thing? >> there is value in the production. if you're apple and you want to build a car, you would like a production facility, and that's
what you get with mclaren, and the fact that it's a niche automaker allows you to say, look, i'm not committing to building 2 million vehicles next year if i were to buy an established automaker. i can work on whatever future vehicles i want to at our own pace. and so, there is value in that production capacity. but in terms of does apple want to go out and start building vehicles for $1 million apiece, which is basically what mclaren is known for? i doubt that. i think what they're really interested in is that software and really the guts of the vehicle. >> phil lebeau. we'll keep our eye on this. certainly a developing story. we appreciate you coming to the phone to walk us through it. meanwhile, we are counting down to the close in the uk and across europe. it just happened. seema mody's at headquarters with that. >> hi, kayla. european stocks poised to finish the session higher ahead of the fed's decision on u.s. interest rates. and as we await that fed announcement, there's now a wider discussion around the
boj's implications on the rest of the world, specifically europe, which, of course, is also betting on negative interest rates and qe to kick-start growth. the bank of japan tweaking its monetary policy in a way that should help mitigate the cost of negative interest rates, which has helped japanese banks rally. the question now is will draghi follow the lead of kuroda in steepening the yield curve? that's been helping the financials which had been hurt by subzero rates. outperformer, europe's index posting the biggest gain in more than a month, up 2%. and if we just break down where we're seeing the gains in the banking index across europe, commerce bank up more than 3%, barclays similar gains, and bnp paribas also up about 3%. sticking with financials, italy's largest lender unicredit is higher after three bidders are said to have emerged as contend yirz to buy the bank's fund management arm.
the stock up 3.5%. reuters also reporting that spain's banco santander has pulled out of buying the williams and glen lending unit. the disagreement said to be over the price tag. shares higher on the day. >> thanks, seema. when we come back, the co-funder of lyft on his vision for self-driving cars and rumors about a possible sale. this after a quick break. stay tuned. ♪ [chains dragging]
good morning, everyone. i'm sue herera with your "cnbc news update." syrian opposition activists releasing video that appears to show an air strike on a syrian town in the central homs province. it says two people were killed with more than 30 people injured. it occurs as the syrian army declared on monday that the cease-fire brokered by the u.s. and russia was over. the chicago police department plans to add 970 new positions over the next two years as it struggles to deal with a violent year full of killings and gun crimes. the department opportunity are currently has more than 12,000 officers but hasn't had a hiring push this magnitude in years. a new study by the national institute of health says smoking can create long-lasting effects
to dna that may increase the risk to chronic disease. researchers found smokers had changes in more than 7,000 genes linked to cancer, heart disease and stroke. as of this week, panera's bacon will no longer include additives like sodium nitrate, which was used to cure the meat. instead, celery powder will be used. it's also removed artificial flavorings in its bacon. that's the news update this hour. let's get back downtown. jon, over to you. >> all right. thank you, sue. and lyft co-founder john zimmer says autonomous driving with a human could be a reality in the next five years, but will lyft still be operating independently then? i asked him earlier this week. take a listen. >> lyft is not for sale. you know, as we're responsible to our shareholders, we have to review any opportunities that come our way, but we're focused on growing the business, and we've done that 3x year over year across the country and 10x
in new york alone. >> in the short-term, while we're talking about people still driving cars, what is the lever toward profitability that snuv i mean, volumes have gone up dramatically, but there are still losses, no matter what company you're talking about, in this ride-hailing, ride-sharing market. when does that tip and actually start to show the profitability that investors, longer-term investors, expect? >> yeah, everyone right now is investing in the massive opportunity ahead. every year, $2 trillion is spent on car ownership in the united states. and as that transitions to transportation as a service, that's going to be a massive opportunity. where people purchase transportation like they do netflix and spotify on a monthly plan. >> but even once that happens, if we're, in fact, moving to autonomous as the method for people getting around, doesn't that entail even larger costs? i mean, i imagine you don't expect drivers who won't exist, in fact, to be buying the cars
that operate autonomously on the road. won't that be a capital cost that the company itself has to assume? >> yeah, i mean, actually, that's one of the advantages that being a transportation network has, is that we have the ability to monetize this asset instantly. and so, that would likely be through more normal financing, rather than through equity financing. >> so through debt, then? >> yeah, through debt, or you could imagine a third party kind of bank financing these mega fleets, or it could be us paying a finance fee. so, i think there's lots of different structures that you've seen in other industries to, when you have an asset that's being paid back in such a quick period of time through something like lyft, you're going to see lots of different financing options. >> so, do you then end one a situation where the traditional business model of drivers and the cash flow coming in from that is paying for the model of
actually financing these autonomous vehicles that are putting the drivers out of business? >> well, on the financing side, absolutely, you'll be able to finance the new opportunity, the new business. on the driver side, look, this is a ten-year transition. 80% of our drivers drive 15 hours or less. 20% of our drivers drive full time, but we're going to be able to manage that transition responsibly over that ten years. >> and you've said that between five to ten years we'll see this transition take place. what sort of movement have you seen as far as regulation, both at the local and national level that gives you confidence that we're going to get there? because it seems it will take a lot of help from politicians up and down the chain. >> yeah. so, first, just to make sure we paint the vision. you have ten years from now, we believe personal car ownership is all but over in major u.s. cities, and about five years from now, the majority of our trips we believe will be in timeless vehicles. in terms of regulations,
thinking back to four years ago when lyft got started, people thought what we were doing was crazy and now we do over a million riders every two days and we worked with regulators then and will work with them now to create a whole new form of transportation as we did over the last four years. >> and finally, how do you characterize this rivalry with uber? people tend, perhaps just in the media, tend to view it as a death match, only one will survive. do you think that there's a future profitably for multiple car services in the u.s. and globally? >> yeah. as mentioned, there's a $2 trillion opportunity here of spend every year on car ownership. we think of this like a transportation network. in phone carriers, you have at&t and verizon, and there's likely to be -- once you hit a three-minute eta, which we now have on average across our major cities -- it's similar to three bars of coverage. and then what sets us apart is the experience that we offer our
customers by treating our drivers better than any other company, passengers are getting better service. >> our thanks to john zimmer for coming on. this is tough math to me, kayla. i mean, how many human drivers does it take to service the debt on an autonomous car? >> well, there's other math, too. if people are paying for transportation like they're paying for netflix and spotify, does that mean they're only willing to pay 10 bucks a month for that? how do you run a car network on that? there is a lot of figuring out exactly what the consumer demand is and how to price this on a monthly basis, if in fact, that's the direction they're going in. >> plus, there's the fact that china, the government, wants to have drivers employed, so they're more interested in green technologies than driverless technologies, at least for now. >> maybe some of the dd drivers will have a mclaren in a couple of years. we'll find out. when we come back, take another look at adobe leading the s&p today, having a great day, new all-time high on earnings.
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♪ energy lives here. coming up today on "the halftime report," the latest on leo cooperman, charged with insider trading from the s.e.c. i spoke with mr. cooperman a short time ago, and he is firing back against the government. we will have the latest. mr. gloom, boom and doom, marc faber says the dow could hit 100,000, but at some point, the market will run out of
steam. he'll join us live. and another big name as well, mario gabelli is here. viacom is one of his top holdings. they cut the defensive dent. the interim ceo is leaving. what does gabelli think about the whole thing? we'll ask him. and will the fed surprise everybody today? it's a big hour on "halftime," noon eastern. see you in about 15 minutes. >> sounds good, scott. let's get to the cme group, rick santelli and "the santelli exchange." good morning, rick. >> good morning and thank you, kayla. well, i got a lot of e-mails between about 1:00 a.m. eastern and 2:30/2:45 a.m. eastern. of course, the latter was the comments by the japanese regarding what they had done earlier in their monetary policy meeting. to me, the only way to kind of consider what's going on is to think that the fix is in in fixed income. they want to fix the ten-year. their jgb, japanese government bond, they're sovereign at zero to steepen their yield curve.
so, let's ponder this. let's look at their two-year, because we look at 10s and 2s to be a reflection of the yield curve. looking at the two-year note over 20 years, we can see that even in the minus 20s, it has been more negative. if you close that chart up to year-to-date, you can see in were at some point minus 35 basis points. and today, actually, on the announcement, subsequently we did see that two-year note yield move less negative. now, this is key. this is key. because in order to steepen a curve, if you're going to nail to the wall the ten-year, that steepening has to come at the expense of the shorter maturiti maturities' yields moving lower, potentially in negative territory in this case, because i don't think an advertent curve will be anything they're going to strive for. but here's the problem -- what price are they going to pay for this steeper curve if negative
maturities become cemented, engrained in their financial landscape? we already know insurance companies and pension funds around the globe have issues. we know what the demographics are in japan. i mean, at what price? i had mark olson, former fed governor, as my guest today, and he immediately jumped to the notion that japan's a special case and he doesn't believe that fixing anything, meaning fixing it to a certain rate with regard to their fixed income sovereign market, is necessarily a bad idea for them. he doesn't agree with it, but they're unique. he said they need to weaken their currency. is that what it's really about? let's look. let's look at a july 1st chart. a dollar/yen, euro/yen, pound/yen. it certainly has had that effect, but it's had some counterintuitive moves as well. we certainly hope we don't see a counterintuitive move in their yield curve, because inverted curves by the short end have a tendency to be called lean in moment. but in the end, all of thez things will have an effect on our fed. why? because the more negative rates
are if the fed normalizes it puts a real crunch in foreign investors and their structures trying to find those dollars! so, once again, it becomes a dollar issue. pens the fed in to other central banks' bad policy. kayla, back to you. >> all right, rick. rick santelli, thank you. when we come back, the fight against isis and extremism is happening on social media. former white house middle east adviser marc ginsburg joins us next to discuss. - we had to think a little more seriously about saving money for
we thought, "well this airbnb is actually a great way to pay those extra bills." - every bit of extra money helps these days. we have a retirement fund of our own and i take a draw on it. i don't want to take too much either because i don't know what life is going to bring to me. i get to keep 97% of my rental price. the extra income i get from airbnb has been a huge help. - airbnb has helped me so much financially especially starting my own business. san francisco is such an expensive place to live. the way people work and travel is changing. the guests are now able to stay longer, stay five days, enjoy another day in san francisco and spend more money in the neighborhood. my guests are able to extend their stay and spend more money on activities and restaurants. - the extra income that i get from airbnb has been a huge impact in my life.
>> we need to work for closely with silicon valley and other partners to counterterrorist propaganda and recruitment efforts on-line. not only to take down terrorist propaganda, but to do everything we can to intercept and prevent radicalization and recruitment. government cannot do this without the close participation of tech companies and experts on-line. >> when it comes to balancing privacy and security, what do social media platforms like facebook, twitter, and youtube need to do when it comes to anti-terror efforts? joining us this morning former senior white house middle east policy advisor, ambassador mark ginsberg. good to have you back. good morning. >> good morning. >> i wonder what you think clinton or trump for that matter expects from silicon valley and what they are prepared to give. >> well, the problem of lone wolf radicalization is egregious.
over the last 15 terrorist attacks in the united states, the on-line radicalization largely through the deceased yemeni cleric. the fbi has disclosed that most of the radicalizations have occurred because of watching youtube videos. if you go on youtube, you'll see that anwar al alaqi has the says most egregious calls to the murdering of americans. now, facebook and twitter have been more cooperative voluntarily, but i have to say this with all due respect to my friends in had silicon valley that google youtube is complicity in aiding and abetting terror because it has failed to voluntarily do what is necessary to remove the most egregious calls for murders americans by home-grown lone wolves. >> ambassador, where should the line be? what is the line that twitter and facebook are drawing voluntarily that you think is the acceptable line that youtube
itself should adopt that doesn't trample on civil liberties at the same time? >> i think it's very clear here that because civil liberties and terms of service first amendment rights clearly need to be protected, but there's no first amendment protection or terms of service protection for the calling of murdering americans. there are youtube videos where anwar al alaqi directly encourages the killing of americans. take down that stuff. take down the stuff that is most egregious that actually calls for the harm and insightment coming to americans. you can put this stuff up directly in black and white and no one can disagree that that's the most egregious stuff that youtube has propagated. >> the more you allow some of these actors, some say, to participate in on-line conversations, the more data you get about them, the easier it is to track them. what would you say to that? >> not true, because the encryption technology that now
bars us from being able to monitor what is being watched on-line and the communications that, for example, on what's app and telegram and the other services, app willing ths that t encrypted makes it impossible. we're not really able to do that. what we're able to do is encourage social media to be more disciplined in its approach and to use the new technology that is available to it to remove the most egregious insightful hate speech. >> you point out that to a large degree, youtube is relying on a 96 law that shields social platforms from third party content liability. how difficult is that to rescind or to find work-arounds from? >> well, i'm convinced that congress is going to have to re-examine that act because the communications decency act was passed long before the outbreak of home-grown terrorism, and it's really inappropriate that youtube in particular hides behind the cda and content
liability -- content liability from being able -- being forced to, in effect, voluntarily cooperate. i want to see the communications decency act at least amended to encourage and require social media companies to use their best efforts to remove the most egregious content. right now facebook and twitter are doing great. google as far as i'm concerned is unpatriotic in its approach. >> certainly i think we understand the spectrum of concern as it regards different companies, mr. ambassador. we're going to watch that. thank you for your time. >> sure. >> ambassador marc ginsberg talking about the issue of silicon valley and tech. we'll find out why adobe is hitting all-time highs. a basketball costs $14. what's team spirit worth? (cheers)
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welcome back. adobe shares in rally mode. up 6.5%. trading at all-time high levels back to its ipo back in 1986. this comes after earnings topped analyst estimates and the company gave upbeat guidance for the current quarter. adobe saying its creative cloud software package is adding more subscribers, guys. adobe has become in my mind the poster child for cloud
transition. i mean, of course, there are companies like sales force, like work day that were born in the cloud, but adobe was that package software company, photo shop, illustrator, acrobat. they took this risky move to push consumers, to push creatives into the cloud, and it has absolutely worked. they have this balanced revenue stream, recurring revenue, creative cloud revenue wasn't as high as some analysts expected. document cloud is surging. their marketing arm. >> it's leading the s&p. the world has moved its way, right? we're all interested in doctoring, editing, on-line, sharing accounts, working a photo, working video. that's what they've been building toward this for decades. >> yes, but the world is also moving against them because people are using instagram filters. they're not necessarily going to photoshop to do that stuff anymore.
that bet that was made on the marketing cloud on buying omniture and becoming a data repository is paying off in spades. a lot of people thought he was cra crazy. >> no one has been able to truly -- it is still best in class. >> the nasdaq is the leading indexes of the three major indexes. big day here. let's get back to headquarters. scott wapne and "the half." >> thanks so much. welcome to the halftime report. i'm scott wapner. we begin with the stunning news surrounding one of wall street's most celebrated investors. owe mega leon cooperman charged within the last hour with insider trading by the s.e.c. the commission focussing on trades made in a company called atlas pipeline summer of 2010 saying mr. cooperman generated "substantial i will lift profits in securities in that company in advance of a deal it was involved in." "t