tv The Exchange CNBC July 25, 2019 1:00pm-2:00pm EDT
options come into there. we see it today. large options buying up side the 145s this is a winner i own the stock. now i own the calls. >> thanks for watching the "halftime report." scott hopefully will be back tomorrow "the exchange" with kelly evans starts right now thanks, melissa. see you soon hi, everybody. here's what's ahead. it's a race to the bottom. europe signaling more easing, sending global bond yields to new record lows. is the world economy really this bad, and what does it all mean for stocks we'll get into that with the fed's own meeting coming up next week plus, the ceo of american airlines joins us exclusively. profits impress, but the company took a hit from boeing's max grounding. we'll talk about how southwest and american are dealing with this spiraling disaster. and spiked seltzer is bubbling up. the trend that's taking over parties and refrigerators across the country is giving big stocks a lift we'll have more on that in "rapid fire. i've already learned a lot
today, dom dom chu is here with the numbers. >> a little bit of spiking in the markets yesterday, giving some of those gains back today the dow industrials now hovering just above the worst levels of the day. down 200-plus points at one point down 185 at this stage. the s&p 500 staying right at that 3k mark right there and the nasdaq composite, the real pacer in terms of weakness off by a percent a lot of tech earnings factoring into that trade. large-cap technology oriented stocks they've been powering gains in large caps versus their smaller cap cousins. a long way over the course of the past year. we did see a bit of a bounce in small caps yesterday giving some of that back today and that gap continues to be fairly right on a one-year basis. it's a 1200-basis point difference in terms of performance. if you are looking for a stock of the day, there's a positive story out there. and that's masco a building products company up 6.5% they are behind baer premium
paint. housing a big part of that story. 52% since the lows we saw back in december. and there were slowdowns in product sales across most of their portfolio except for kelly, behr premium paints and other architectural products could be a sign of the housing market >> welcome to "the exchange," everyone i'm kelly evans. there was some better u.s. data today durable goods jumped 2% in june after two straight months of declines over in europe, the german bund yield hitting a record low of 0.12% on the ten-year after the ecb signaled a rate cut. a possible relaunch of stimulus. let's drill down on the market's reaction to this with tons of earnings as well today bob pisani is at the new york stock exchange bob? >> hello, kelly. it's all about china and trade as we approach the halfway mark in earnings, one thing is very clear. there is an impact on earnings from the slowdown in china and
the trade in tariff issues but it's not really uniform. it's complicated caterpillar missed on earnings and guided towards the low end of the previous range here partly blaming china weakness due to what they call competitive pressures. las vegas sands, they noted lighter than expected cash flow in macaw and contraction in the vip business there and invisilign saw lower shipments to china than expected citing a tougher consumer environment and more competition. but there are plenty of positives as well. lvmh, the biggest luxury goodsmaker in the world said demand remained strong in asia, particularly in china. texas instruments saw growth in 5g products and saw nothing unusual going on in china. also higher sales from coke and united technology in the asia-pacific region as well. is there a pattern here? generally, the consumer business in china seems to be okay. but old industrial businesses, including a particularly
automobiles, are definitely not. and kelly, it's, you know, we're seeing growth all across europe as well as slowing down as well. on top of that it's a very, very tough, complicated picture. the important thing is the big decline in the second half guidance that people were afraid of has not happened at all and i think that's a real positive and why we're holding up so well right now. back to you. >> bob, thank you. the complicated picture dripped up mario draghi today talking about whether the ecb would be easing more or not it's not just europe growth concerns are causing central banks all over the world to ease policy lately. seema mody joins me with a look at all these moves ahead of the fed's meeting next week. >> the imf cut its global growth forecast four times already this year so it's lower growth plus a subdued inflation environment that's pushed a number of central banks around the world to cut rates since april a number of emerging markets have tried to preempt the fed. south korea, turkey, malaysia,
india, among others have eased and the list is expected to grow with russia and countries in broader asia and latin america expected to join force in total, 15 central banks have cut rates in 2019. of those, 10 are expected to lower rates again, while an additional 9, including the fed, are expected to move before the end of the year. that's according to bank of america, merrill lynch and, yes, economics a big factor but also politics, too as we see a rise in nationalist, pro-business leaders around the world back to you. >> seema, thanks such an important point. we'll talk more about this a race to the bottom around the world. we have bond yields globally plumbing fresh lows today. spain nearly flat. even greece dipping below 2% on its ten-year yield today that's lower than the u.s. let's bring in craig hodges for more and andrew, senior portfolio manager at morgan stanley investment management.
great to have you both here. you have 15 central banks have already cut. ten are expected to cut again. if the fed doesn't cut, then some other currency intervention probably rises because our dollar strengthening as a result what is the foed to do >> if the fed were not to cut, the equity market would go down. >> so what do we really have to we were at ten-year highs. >> but i think expectations of a fed cut is embedded in the market there's down side to that. but i will say this. look on this network in may, warren buffett said if rates were to stay at this level, stocks are very cheap you know what? rates are lower today. so i think all of this argues, despite the market is a little overbought is that the rates are going to support equity prices here if the fed were not to cut, that would be a bad sign. >> the real issue is not the
valuations in equities or, i would think, you guys tell me, it's the valuations in fixed incomes right now. when you have everybody basically being pulled down by a german tenure that's this deeply negative because of what the european central bank may or may not do, doesn't that making pricing of even private debt in this country out of whack? >> it's very odd that here we are at all-time highs in the equity markets and you look at the bond market and you'd think, you know, you'd think that things were terrible here. >> right exactly. >> so it's somewhat confusing. and how many times have we been at market highs when the sentiment is so bad? people are taking money out of stocks there's very little investor enthusiasm out there >> the most crowded trade right now is the ten-year u.s. treasury for the first time ever, you know, it's not tech stocks it's nothing like that >> it's bizarre. >> as you sift through this landscape, where do you think people should be you have some individual names
do you still think there's valuations overall look okay in the stock market >> absolutely. the valuations are good. the current p/e is almost the exact average it's been since 1990 it's not high or low and we're -- but yet we're hitting all-time highs in fact, the p/e now is lower than it's been through 15 through '18. so you know, there parts of the market that are very extended and inexpensive, but there's such a big part of the market and at hodges capital, we're doing -- >> you deal with small caps, too. >> 2600 company touches over 850 companies. and things are good. a lot of these stocks have been totally forgotten about. >> norwegian cruise lines, united rentals, commercial metal. so there are opportunities out there. andrew, zooming out from that, you have a landscape where a lot of investors have to be in fixed income because of their life cycle or just in order to balance their portfolios or what have you is it the kind of landscape where you say to them, get out, or is it the opposite where you have other mainstream banks out there saying we think the
ten-year treasury is going to zero because of all this bond buying that -- >> tragically it's going to hurt retirees and it's going to push them into equities i think the reason why -- the reason why there's so much anxiety about the market is because you could get a 2% to 3% cd, right? and the market really hasn't done much over the last year and a half well, as those rates come down, if the market moves up, i think it's going to push people into equities maybe not in the next month. i'm a little worried about the market near term, but it's going to push the multiple higher because it's the only alternative right now. >> so you're worried that people will pile in and create, you know -- create the distortion that we're not seeing yet anyway >> correct i think the market is heading higher maybe not near term because it's overbought but over the next 12 months, the market is going to be higher. >> if you think part of that is because they are pushed into this by the central banks. i understand the german economy -- >> over half the s&p yields more than half of the ten-year.
>> people aren't interested in buying that and owning that. >> you haven't made a lot of money in equities over the last year and a half. >> but made plenty of money in the last decade. is there not a generational fear of the stock market because of '08-'09? sovereign wealth funds >> craig, exactly right. $240 billion has gone into money markets. $153 billion has come out of equities that tells you a lot of cash sitting around on the sidelines, right? >> when i first got in the business, in the mid'80s, there was a generation of people that went through the early '70s and they just wouldn't buy stocks. and i think there's an '08 element throughout where there's people that just wouldn't buy stocks >> absolutely. guys, thank you both appreciate you being here. craig hodges and andrew slimmon. let's talk about shares of tesla today. they are tanking after the company reported disappointing results. the stock is down about 14%, a little less than that right now. is it the end of the road for tesla as a growth stock?
that's what the journal's heard on the street column says today. joining me is the author of that article, charlie grant the reason why being the end of a growth stock is important is because it means the multiple on tesla could come way down. >> tesla trades at a huge premium to the rest of the automotive industry. now its growth, revenue is actually expected to fall year over year. we have a declining top line in a tough business, and the story is getting worse and worse, and the balance sheet continues to be very rickety. i see big trouble ahead. >> what do you think is the main reason the stock is down so much today? >> i think that record deliveries did not produce profit it's really that simple. tesla reported 95,000 cars delivered in the second quarter. take that, tesla bears revenue was 10% below the record set in the third quarter last year when they delivered way fewer cars that is a textbook sign of a
demand problem tesla is cutting prices to move metal, and that's great. that can -- you can do that for a little while not a sustainable business tactic not a reason for -- >> we talked to tim higgins, your colleague, yesterday, about his reporting on the substitution that's been happening where the model 3 pricing. it's the newer car in a way it was about the same price as the model s maybe some cannibalization there. is that reflected in these results, or do you think that the -- some of those margin pressures are coming from the fact that tesla is trying to differentiate that product say it's the lower end product from the model s and x >> fewer s and x sales are a huge problem elon musk said on the conference call last night that it's insignificant in terms of total delivery volume. yes, that's true but that's completely irrelevant. that's how tesla has made what money they have over their long history. it's not a start-up. it's been 15 years they made money and it's been here and there and on the back
of the s and the x you can dismiss that going away all you want the margin pressure and issues that hampered tesla are only going to get worse, and demand is probably from the infinite for this product model 3 has been around awhile now. >> the stock went below 300 bucks. and since then it's had a sharp comeback what happens now we've both had the bears as you said hurt by the delivery numbers. the bulls suffer for the same kinds of reasons now that we have this information, how do you think this sets up the stock for the back half of the year? >> you know, i think it can hang in there a little bit because tesla still has the ability to raise more cash if they need, but lower for longer the growth story is gone and you look at -- how the stock has performed. it's not even a momentum stock over the last five years, the nasdaq has outperformed tesla by 90 percentage points 9-0. so you can buy the nasdaq and get a whole lot less drama and you can get that growth element
in your portfolio for much cheaper. >> fascinating charlie, thanks for joining us charlie grant, heard on the street writer for "the wall street journal." here's what's ahead on "the exchange" -- >> an exclusive interview with the ceo of american airlines the company's profits topping estimates. but it took a hit from the grounding of the 737 max we'll talk about it all. plus, despite looming threats, will the tech giants still dominate the ad market this is "the exchange" on cnbc ed to form the stock exchange which brought people together to invest in all the things that move us forward. every day, invesco combines ideas with technology, data with inspiration, investors with solutions.
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welcome back to "the exchange." as facebook's earnings showed last night, tech giants continue to dominate the advertising market, despite the looming threat of regulation from washington but there are some signs that their growth could be starting to slow. for more, i'm joined by sarah fisher, media reporter at axios and julia boorstin we're going to hear from amazon and google after the bell tonight. are you still seeing overall a picture of these guys gobbling up major advertising market share? >> they're expected to continue to grow their ad businesses. google's expects to have slowed growth which means it's not going to be growing as fast as it used to be. but at the end of the day analysts predict google will end the year taking 30% of the digital ad market for the entire
world. amazon a little smaller of a business but it's expected to grow faster because it's not as mature >> julia, what jumped out to you about facebook last night which, again, put up -- just showed the business continues to execute despite all the headwinds it's facing >> facebook growing as revenue faster than expected what i thought was so interesting, kelly, was during the earnings call last night there was a moment where the stock turned around. it had been higher and reversed and went into the red. that's when the cfo warned that they expect revenue to have a pronounced deceleration in the fourth quarter and going into 2020 and he said that's because of uncertainties around ad targeting. i do think facebook is not entirely out of the woods yet, and they don't entirely know how some of these changes in terms of a regulatory standpoint and in terms of consumer behavior around privacy are going to impact their ad business >> which raises the larger question, is their efficacy driven by the very practices that regulators are trying to
crack down on? >> it's going to be a huge impact on their business to julia's point, one of the things they were saying around privacy, they've been saying forever to expect news feed revenue to decelerate because they're saturated, which is a good problem to have this is completely different this is them saying we may not have as many options for advertisers to target their users, which means they might go elsewhere to a rival platform like a google or maybe even a tick tock or snapchat. that's what investors should be worried about and why you probably saw that stock go into the red. >> or maybe happy to worry investors for the sake of getting regulators off their back if they say there are other platforms and places you can go. i want to compare and contrast this to what we're hearing from kind of the legacy media world we got comcast numbers and at&t yesterday. they are showing a lot of video subscriber losses still. are they going to try to evolve to catch up and match what the tech giants can do or are they going to try to say we offer something different and people are going to see our value
longer term? >> i think what we've heard from comcast and at&t is they are losing video subscribers, but that's not the metric they want to be measured on. for comcast, it's about their broadband relationships and their overall number of relationships with consumers and comcast says they're enthusiastic about the potential for their direct to consumer streaming service set to launch in april to really benefit from everything they have, which is the premium content and also those consumer relationships without counting too much just on those video numbers which are going to be shrinking. >> right i mean, we know they've been looking to the internet for growth and it was interesting that the comcast ceo brian roberts said their biggest category growth in up front sales came from the likes of facebook and google so these companies, which are in a way cannibalizing their business are also advertising still on that platform what does that tell you? >> ironic, right >> tv ads are still going to bring you scale and still be effective. google and facebook know better than anybody the types of
efficiencies of advertising on mobile platforms and yet they're still spending a total of a billion dollars on advertising with their television platform that tells you there's room for growth in tv advertising because you'll have more digital first businesses beginning to invest and it's worth noting that nbc universal has invested in creating products so that they can get more of those types of advertisers and the small digital companies like a casper or everlane or even the big digital companies to spend more on tv. >> thanks, guys. appreciate it for now. sarah fisher and julia boorstin. a growing number of home builders are saying back off to investors. we explain why coming up plus, shares of american airlines are dropping today after earnings we'll speak exclusively with ceo doug parker about those results. 7 d about the impact of boeing's 73max grounding. that's still ahead legacy? its show of strength... or its sign of intelligence?
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...or trips to mars. $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. some headlines coming through regarding amazon the dow jones reporting that it's hunting for more office space in new york city after abandoning its hq2 plans, of course also saying that amazon has discussed taking over as much as the entire 12-story building that could fit thousands of workers. this is coming from dow jones citing sources also saying that amazon has discussed leasing lord & taylor building from we work in new york so this is an interesting development. of course, amazon abandoned its plans for an hq2
it was going to receive tons of tax breaks and subsidies to do so, but it looks like amazon still looking potentially to take up some major office space in new york. back to you. >> diedre, thanks very much. let's get over to sue herera for a cnbc news update >> hello, guys here's what's happening. democratic senator ben cardin and republican senator lisa murkowski holding an event to push forward a measure to ensure ratifying the equal rights amendment. 37 states of 38 needed have already ratified that amendment. >> since world war ii, there hasn't been a democratic country that has not put the equal rights amendment in their constitution that have drafted the constitution this is the year to get it done. the 100th anniversary of the passage of women's suffrage. >> what we are doing is working to expressly prohibit discrimination on the basis of sex in the united states
constitution what's crazy, in my view, is that this is 2019, and we still have not yet ratified the equal rights amendment and americans are having fewer babies the cdc says the birth rate dropped 2% between 2017 and 2018 marking a new all-time low and the number of teen births also decreased by 7% you're up to date. that's the news update kelly, back to you >> sue, thank you. coming up -- airlines in focus today. southwest and american both reporting this morning and both seeing an impact from the grounding of the 737 max we'll speak exclusively with american airlines ceo doug parker on the other side of this break. "the exchange" back inwo t woman: my reputation was trashed online.
american's future? let's send it to cnbc's phil lebeau with the ceo of american airlines, doug parker. phil >> thank you doug parker, chairman and ceo of american airlines. you beat the street, raised your guidance and every question is about the max. where do things stand when it comes to you guys and the 737 max and bringing it back on the schedule >> we remain in limbo as everybody else does as we wait to hear from the faa as to when they come to the conclusion that the aircraft is ready to go back in service >> you said through november 2nd, november 3rd, cross town, gary kelly is saying this is not going to fly until the end of the year, beginning of next year why not just push it back? >> we may. the reality is i believe -- i'm certain we're working with the same information and our information from boeing and what they said publicly is they know what needs to get done they'll have it done and believe the faa will have the aircraft certified and ready for flying by early in the fourth quarter if that's the case, we'd like to
be able to provide customer service as soon as we can, and we think november 3rd is still the right date for that. we'll reassess we're getting really good at this, delaying it as we get more information. if we have to make a decision, we'll make it in plenty of time that passengers aren't affected in a material way. >> you're putting on the brave face and saying we'll be ready when it's ready. you were trying to run an airline where you don't have a full compliment of airplanes, not sure when it's going to fly again and this has to be the number one question that your crew and crews and other people get when they are seeing american aircraft. >> frustrating, yes, but we understand it. and what we want as much as anybody else is to ensure that the aircraft is safe to fly. and we rely on the faa for that. the faa we know is the most credible source on this in the world, and when they determine it's safe to fly and when american airlines pilots are trained well enough to fly it, everyone can know that that
airplane is safe to fly. that's where we want to get to there's no rushing that process. when it's reed, it's ready doug, kelly has a question for you. >> hi, doug. southwest told us it's taking flights out of newark, moving them other to locations where they need that aircraft more because their customers on other routes are saying we need more flights. we need more seats where are -- and how are you guys going to have to redeploy planes yourself if at all? what flights, routes might be affected >> well, we're doing that today, of course. so there's nothing major going forward. we would just continue to fly much more than we're flying today. we'd certainly like to have more aircraft and grow as opposed to stay the size we are we've added part of the good news out of this quarter is the 100 flights we added into dfw have come onto service and producing above average profitability results as soon as we have them we have more markets like that
we'd like to be adding once we have more aircraft but for right now we're not able to do that but we don't anticipate you'll be seeing any market closures or any airport closures from american airlines. just not as much growth as we would like >> gary kelly this morning also said that he hoped southwest will be starting in 2020 back up running, hitting the ground running and ready to go. he said to his competitors, watch out. we're coming what would you say about your plans for when these aircraft are fully back in service? i guess what i'm asking, is there a way to benefit competitively off what's happened here? is it just a headwind where we can expect you guys to also come out, and i don't know if we're talking about discounting seats, promotional activity, those kinds of activities starting in 2020 >> yeah, again, from our perspective, we would agree there's much more up side for us as we bring them into service. more about our ability to expand
the markets where we can fly profitab profitably certainly no need to do discounting. there's great demand for airfare out there. we can't meet as much of it as we'd like. once we're able to, i'm with gary watch out. there's a lot we can do that we're not able to do right now and we're really excited about our prospects for 2020 for that 18 and many more >> one last max question what was your reaction to dennis muehlenberg saying we may just shut down the max production line we're not sure if we'll do that but we may do that what's your reaction to that >> i believe that something dennis needs to be telling the market if, in case, there's a possibility of that to take comfort in the fact it didn't make it sound like he thinks that's a real possibility. certainly not the case if what they are saying they are -- is going to happen, happens that's the airplanes are certified and ready to fly nearly the fourth quarter. but, you know, i, again, i can't speak for dennis but the way i took that, he needs to let people know if for some
unforeseen reason this does continue beyond that, at some point they'd need to come to this decision. >> your plan if this extends further into 2020, do you extend the life of aircraft 42 planes you plan to retire, you'll be extending their life does that continue next year >> we'll keep looking for ways to find it for our customers not expected or anticipated and not easy to do, but we will look to mitigate this but again in our case, mostly prohibiting our ability to grow as much as we'd like and meet the demands that people have for air travel so it's more that than needing to cut back. but we'll work to meet those issues the best we can with the fleet we have. >> paint a picture of the consumer in the u.s. your routes in dfw and charlotte. you're seeing strong demand there. what are you seeing overall forever tfor the consumer >> really strong demand. we can't meet the demand that's out there. wish we could. the routes we added in
dallas-ft. worth are a good part of the reason that we perform better in the quarter than we thought we would three months ago. good part of the reason we were able to raise our guidance they come in, not as marginal profitability, but above average profitability because they are flying them in and out of our top hubs and there's more of that we can be doing >> doug parker, chairman and ceo of american airlines, on a day where you raise guidance, but as you know, right now almost all questions in the airline industry revolve around the 737 max. back to you. >> i notice they have the weather channel on in the background if you're an airline, that makes a whole lot of sense >> key operation center. you got to do that >> and our own doug parker thanks very much here's what else is coming up on "the exchange" -- >> ahead, the future is unassigned for align technology. investors are raising a glass to dud's earnings and samsung isn't folding when
dow down 158 points. let's catch you up on a few stories on your radar today. time for "rapid fire." dom chu, diedre bosa and bill griffe griffeth welcome, everybody yesterday we talked about irobot today we talk about align technology the maker of invisalign they missed on shipments by citing soft innocence chness inr taking a cautious approach for q3 not so much a tariff story, per se >> sounds like a consumer story
in china >> or a story about competitive issues >> that's what i might argue >> there are other players who do this as well. >> there's smile direct. i just spoke to the founder of that company recently. >> i am seeing these ads all over the place now it's like, you know, what would we call it, a warby parker for -- >> that's what we called it. great minds there. >> so much competition a lot of vc money in this space as well. and it's a little different model. the warby parker model pay $100 they ship you a box. you outfit it and they send you your teeth mold. >> is that the total cost? >> no. the total costs are so much lower than what it's like to go to the orthodontist. they are the ones really upset by this but they work with invisalign it's for people with major issues and these others ones are for people who don't have huge issues -- >> or lost their retainer 15 years ago. >> what's interesting, i was looking at a long-term chart of
this i went back ten years. for years, this was a sleepy slow growth company, and two years ago -- >> it took off >> it absolutely took off. and it's been on this incredible roller coaster ride. >> it was the best performer in the nasdaq >> it's a brand awareness thing. it wasn't until the last three years that people started to really become aware of this idea that you did not need massive orthodontic work, which i received when i was a kid. i remembered my parents complaining about the thousands they were spending on putting braces on me, retainers, headgear and everything else and now this idea that you can do it from a cost-effective standpoint >> my son -- both my kids -- only my son had the braces when he was a kid and then he got the visalign even then, years later they are selling it both ways right now. >> interesting you saw the stock take off two years ago. the ivisalign patent expired in 2017 and you saw a lot of the competitors.
you wonder if they made a bigger push before then is the roomba struggle a china tariff problem or unique to the roomba >> china is the new weather. >> i hear jim cramer has mr. visalign on tonight? >> that's right. jim is going to speak with joseph hogan on "mad money" at 6:00 p.m. eastern time we'll see how he responds. >> i bet he's got very straight teeth. >> he better >> next, ab imbev shares, better than expected earnings for q2 and the highest expected volume growth in more than five years parent company of budweiser. the market share saw a big jump helped by -- okay. now this is -- we need to talk america about spiked seltzer and that's why frank holland, come over. our resident -- >> with props. >> i'm not understanding >> can't stop by without bringing drinks. >> i am not understanding the initial eye rolling at the beginning. >> it's this zgeneration's zima.
i'm in my, you know, 40s, and i remember when zima was a thing >> do you know -- >> i have no idea what you're talking about. >> the wine cooler >> it was -- think about it like the crystal pepsi of malt liquor beverages, right >> wow, there's a combination. >> people used to mix it with like grenadine >> so that was when i was younger. >> here are three of the most popular brands this is another coors offering very popular this year these other two, i have to look at them. this is the bon nand viv. it's seen double, triple white claw if you talk to anybody under 35, they know what this is. this has been really a booming hard seltz zer and it's similar to zima, but zima, a little different had a lot of sugar in it >> you know what i'm talking about. >> kelly is laughing >> geared toward people more health conscious
>> and truly i see at the beach. >> their hard seltzer sales are up 97% in the last year. diageo up 123% boston beer which does truly, up 183% and mark anthony brands, i don't know if that's related to the singer -- >> it is not >> it's up 256%. >> are we allowed to drink these on camera? >> i was going to take a sip >> i think it may be a bad idea for you. >> so my question, is this another fad? >> oh, i give -- >> like zima or whatever you were talking about >> i give this two years >> beverage alcohol is cyclical. there are ebbs and flows >> how fickle is the drinking public >> we have to remember, cbd-infused drinks may be coming there's going to be another trend. right now this is hot and people are enjoying it. it's more for the health conscious person a few less calories, less sugar than non-beer drinks
>> craft beer has been slowing and there's an opportunity for something else to step up into the marketplace. it's spiked seltz zer. could have several years runway. this is it spiked seltzer which is essentially, what, soda water, vodka with a little natural flavoring. >> what are you saying you can make this at home? >> i would never suggest that. >> watch your 8-year-olds around the fridge who may not differentiate -- >> my wikid wants to drink my wife's >> thanks, frank thanks for the drinks. >> you guys going to hold on to these? >> you bet we will >> i think so. hard turn from that to the boeing 737 max groundings. a southwest airlines announced today that it's extending all max flight cancellations through the end of the year and end its operations out of newark because that was underperforming and they need their existing planes elsewhere. the ceo gary kelly was on "squawk on the street" and
voiced his frustration over the situation. listen >> we're unhappy it's taken so long, and we're in the dark on -- just like you are, on a number of technical matters. our flights are down from a year ago. our customers aren't happy our employees aren't as productive so we're muddling through. >> muddling through. thousands of flights and multiple carriers have been canceled as a result of these planes being canceled. >> the acting faa administrator said there's still no timeline for bringing the 737 max back. i just think it's unconscionable that they are not providing more guidance to their customers. the airlines so they can have a better sense of when these things -- >> it may not be because they can. this is a regulatory issue they'll have to work with the faa on >> there's the bottleneck? >> it could be -- >> boeing has come up with the software fix already so you hand that to the faa and they test it they were supposed to have those test flights months ago to see if it was going to be the fix. >> new issued emerged about a
month ago -- >> i understand. you heard doug parker and gary kelly said the same thing. we're in the dark. >> not a good look when your biggest customer says we're in the dark right after a bunch of missteps when the whole thing happened, right? >> and they were also trying to be as kind about it as they could. if boeing weren't such a partner with all of these airlines, i think the pressure on them would be tremendous with what it is now. finally, before we move on, we've been following that samsung fold story it's back. the galaxy fold. samsung has fixed the issues that affected the initial release and will launch some time in september. this is a $2,000 phone that was supposed to be the first with a foldable display we remember all those screen issues the tech reviewers found. it's only been a couple of months they say they fixed it >> and it's still $2,000 >> go ahead. you buy it first >> you buy it first. >> no, no, you >> what about testing it i'll believe it when i see it. they didn't even get to that point. >> todd hazelton had one in our building, and it broke >> amazing with amsung
it was not that long ago when they had the phone that was exploding. it just -- how can this keep happening? >> this product -- people who want a larger screen but still want to put it in their pocket that dilemma still needs to be solved if they can get it right, i think buyers would forgive them. >> i don't find the need to have a massive screen i can fold up into my pocket >> plenty people do. >> willing to pay $2,000 for one? >> that's the question >> we've hit peak gadget i think. all te innovations the iphone was coming up with that's leveled off now what they're trying to do is come up with a whole new display possibility. i just think they're getting carried away >> i disagree. i think samsung, this is the next big innovation. we haven't had -- >> the foldable phone is >> yeah. it's a really interesting innovation other smartphone companies are taking their time with it. yes, maybe that's a wise thing to do. but we've been talking about it for months maybe samsung will get it right this time around and it will be a big success. there's a reason they are the
number one smartphone. >> rather than folding, i'll wait for the one you can rolled up >> like those old slapl bracelets. >> thanks, guys. enjoy the seltzer. builders aren't just building anymore some are venturing into an area of the housing market that's been on fire we'll tell y wt eye in aer this.'r
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welcome back to the exchange a new twist in the build to rent housing market has some deciding to become the landlords themselves diana oleic is in san antonio, texas with more. >> you're looking at the fastest growing segment of the housing market single family build to rent and this is one of the first rent only gated communities 250 homes with two-car garages are going in here along with the full amenities you would find in a luxury apartment building. the pool, gym, clubhouse, dog
washing station. the builder here doesn't intend to sell to investors he is staying on as landlord >> we believe in the long-term cash flow game so if you hold these properties for ten plus years or seven seven plus years, the residual cash flow is worth more than the sale one time. >> last year, about 43,000 homes were built to rent according to the u.s. census. the highest in nearly 40 years investors are pouring into the space which is why big builders are now building homes to sell to them. now renting used to come with a social stigma, home ownership of course the american dream, but the average income of renters in this new community is in the six figures. many of them can buy a home, they simply choose not to. >> stay right there. we want to bring john burns into this conversation, too he's the founder of john burns real estate consulting i was floored to read these cap rates for traditional single family detached homes yields in order, can be 6.5%
>> why not i mean treasuries don't pay much and now you get a yield backed by an asset and the single family rental guys who took off this cycle have prooued proved it's successful. >> instead of the builders saying wait a mimpb, why would we sell this off if i'm an investor in one of the major home builders, should i n anticipate something like this could become a part of their future business model? >> only two of the public builders have ever really built apartments before. you mentioned both right now, they're building these for others to hold they may get into the business, but i would expect it's probably just those two, maybe another. the stockholders have a lot of clients who say i want that product. i'm going to go buy some reefs they tell most home builders we want you to build homes and sell them >> sure if the builder is arguing that the cash flows over time are worth more than the one time sales price would they be
silly to turn that down? at a time when the rest of the world is going to subscription services, this is effectively the oldest one around. >> i think it makes a lot of sense. a different bucket of capital i think that is chasing this sector than people that traditionally chase public home builders we're seeing the private home builders get into it they've been in the apartment business for a long time all these guys are mostly private. >> and diana, for the most part, this is still largely a you know, a single family rental property type of market. in other words, the investor piece is pretty small. want the people who say isn't this the sign of a froth or top in the market, that everybody's now getting into the rental space. >> well, i think there's a lot of room to grow here this is one of the first communities you've seen like this that is just single family rental homes they are building several others and in another community sh one
of their investors is american homes for rent they have had many different homes across the country now they're look iing at communities of just rental homes. when you have them that just want more properties to rent, you'll have more properties to come >> john, word. the question and whether a space investors should be getting into now or have missed the ride. >> 13% of america lives in a unit like this and they've never had an opportunity to live in something new or luxury. i'd look at it like luxury apartments there's room in every city for a luxury apartment for something like this. could it get overbuilt some day, but not in 2019. >> and dine in in san antonio, looks like this is the beginning not the end. >> absolutely. there's a lot of development going on here. it's amazing when you look down these roads. just more and more construction going up >> thank you both. appreciate it. on this trend of builders
keeping the homes they're bui building and renting them out. that does it for the change today. i'll join tyler and melissa for "power lunch" which begins right now. >> kelly, thank you very much and we'll see you in a moment. look forward to that welcome, everybody here is what's new at 2:00 on "power lunch" for thursday big tech on deck amazon and alphabet are get itig ready to report after the bell we'll set the table ahead of those important numbers. plus, central banks around the world releasing the doves. but is it enough to keep this record rally roaring and as global auto sales stall just a bit, the ceo of the third large auto dealer will be here to explain why his stock is not getting stuck in the speed trap. "power lunch" begins right now >> and welcome to "power lunch." stocks sitting jusof