tv The Exchange CNBC July 26, 2019 1:00pm-2:01pm EDT
josh, final trade. >> i forgot already. >> steph >> i think it's break out. >> silicon valley bank >> another digital name. >> starbucks going well above 100. >> monday you'll be back in the old place maybe. >> that'll do it "halftime. "the exchange" begins now. thank you, tyler see you soon and hi, everybody. here's what's ahead today. the consumer to the rescue starbucks, mcdonald's, has bro, mastercard, hershey's all with lifetime highs can this keep going? we'll debate that. and is new consumer the new big tech not so fast. google and twitter are soaring themselves on strong earnings but amazon is in timeout we'll tell you which tech stocks you can count on from here and intervention needed or not. home ownership rates are falling.
they have plunged for african-americans. will this prompt the government to get involved and if so what remedies might we be looking at. but we begin with today's markets. seema mody is down at the nyse those consumer names are flying. >> they really are and as the consumer that is the driver today for stocks. it's boosting gdp and earnings starbucks beat numbers on china where same-store sales are up 5% unlike some companies that are shifting production to other parts of asia, starbucks is doubling down on its expansion effort and there is mcdonald's. rose 6 po, 5%. that stock is at a 52-week high in europe both nestle and carrefour boozing earnings beat room night increases. but it continues to see a slower pace of growth that's the homesharing platform that competes with air b&b nonetheless that stock is higher it's worth noting defense
giants, some of the biggest gainers for the week, northrop grumon, raytheon lockheed, earnings have been strong. more central bank easing, kelly. russia the latest central bank to cut rates >> seema mody, economic growth slowing a bit today, but not by quite as much as wall street thought thanks to consumer spending gdp rose 2%. that was down from 3.1% in q1. the president's top economic adviser larry kudlow discusses strength of economy. >> consumers were the hero, they had explosive economic growth, i guess better than 4% at an annual rate. we had an inventory correction, which took a point off that probably bodes very well for the second half. we're seeing core cap orders really starting to steam up in may and june that's great.
also retail sales in may and june, that's good. >> for more let me bring in craigical lan. mike is chief economist at jp morgan our own steve liesman is here as well look, 4.3%, phenomenal confirmed by so much of corporate america in earnings today as well. are people saying that's sustainable? >> i think the way to think about all of this quarter is as a rebounder or reaction to last quarter. there are so many categories where there's been this reversal on the downside inventories, investment, and net trade all reversed from negatives -- strong positives in the first quarter to negatives in the second quarter and the counterbalance to that, the reason why we have this stronger growth was the consumer who went from to 4.3%. it was down around 1% i think in the first quarter. the contribution of the gdp was
a big change, near 3%. >> but it's still, mike, the consumer's 70% of the economy. manufacturing is about 10% and the dilemma right now can basically be summarized as everybody watches manufacturing for signs that the business cycle is slowing manufacturing has been sending some flashing warning signals lately but the rest of the economy not so much. so what do you guys think is the right course here? does the fed listen to manufacturing or do they go with the consumer >> mike, over to you go for it. >> i think for the fed next week, they've already kind of signaled what they're looking at, which is mainly global developments and i think they bought themselves into moving i think going forward, i think it's really neither consumer nor manufacturer i have it's really the labor market and the labor market has been surprily strong lately or hasn't lost any steam in spite of the fact that business investment has slowed. i think if the labor market holds in, then, you know, i think the fed will take some comfort in that, and not really get too bothered by the we are
seeing in manufacturing. >> i so want to dwell on your comment that they have boxed themselves into moving because it's fascinating and a little troubling. but let me ask you about business investment. >> it was down in the second quarter. we know this is a really important part of the economy. was it down because of tariff issues and some of the stuff we've been discussing, mike? or why was it down, and do you expect a rebound >> well, we n't know exactly why it was down, but i think there is a anecdotes and certainly theory that would suggest that uncertainty as it relates to trade policy should hold back capital spending it didn't necessarily happen in categories that were necessarily the most trade oriented. but i think it's reasonable to suspect that trade uncertainty is a major factor holding back capx in terms of the four indicators, maybe we'll do a little better in third quarter as larry kudlow mentioned, the latest add-on orders in june looked better so perhaps we'll do sligly better in the third quarter.
but that said, you know, the surveys aren't suggesting there's going to be a huge rebound. i think the best thing we can hope for is just, some you know, return to moderate growth there. >> sure. so, craig, let me bring you in on that note from the investors' point of view here you've been saying for months stick with consumer discretionary. that's been validated here lately do you still stick with that sector and what about industrials in the business sector right now >> across the board we see stocks at about 12% below our estimate of fair value so we would expect the market to be 12% higher a year from now. you're right we have been overweighted consumer discretionary we still find good value there so we are sticking with it > and when you see good value, we've got all these names, yum brands and the like, are they showing you that their earnings are going to continue to grow? >> yes a survey of analysts calls for earnings in the consumer discretionary sector to grow 12 to 13% per year the next couple of years
so that can raise value, and we think prices will respond. >> what about industrials? i know you like industrials and financials, and people might say that both of those areas look a little bit more challenged why do you think they're attractive >> primarily good value. but there is some healthy earnings growth in industrials as well. so we're overweight them also. >> i've got craig callahan i've got mike feroli saying business is expected to maybe rebound. why is the fed talking about the economy as if it's falling off a cliff right now? >> are you talking to me [ laughter ] >> i mean, i think that they have -- maybe it's a bit like what do you want to call it, an overexecuted pirouette where they pivot it but went a little bit too far. >> it's like when ice skating they overrotate it on the triple axel >> and you know what happens when you do that sometimes you fall right down on your bumpadump
i kind of got that a lot of uncertainty. but then they went a little bit an extra rotation there back to the cut without waiting. about a month or so ago, i put up a thing called the road to the cut. and one of the big stops on the road to the cut was first of all the job's number and then the gdp number and then it comes in higher than expected >> and we were on that road before they even got those numbers. >> they have enough in there to rationalize this they have the capital slowdown they have some of the deterioration in some of the like german and some of the other indicators that are out there to take an insurance cut what my guess, and i'm going to see what feroli thinks about this i don't know if i'll have time to ask him here's my guess. my guess is today's number colors wednesday's guidance. they cut but we're going to get a little less promise of more to come than we otherwise might have if the gdp had been stronger >> all right, mike, final word
on this. >> i agree with this i agree that there are probably a lot of people on the committee that are unhappy that they are kind of boxed into cutting next week i think they would like the guidance after next week's meeting to give them a little more flexibility as it heads towards september because, you know, as steve mentioned, it's kind of unusual that we're in this period where we're cutting rates and all the data's coming in okay. i think they would have been better served if they would have just cut in june when they were really worried about growth rather than cutting now. but i do think they'll probably want to give themselves more flexibility as they go to the next meeting which is in mid-september. >> we saw the declines yesterday. they started to maybe price that in guys, thanks great discussion craig callahan, mike feroli and steve liesman. here's what's still ahead today on "the exchange." >> coming up, from earnings to regulatory pressures, big tech had another big week who was the big winner and who should investors worry about? plus, is virtual reality a
new reality at america's malls and home ownership falling for the second straight quarter. but there's more to that headline than meets the eye. this is "the exchange" on cnbc mr golden opportunity to experience our most advanced safety technology on a full line of vehicles. now, at the lexus golden opportunity sales event. lease the 2019 es 350 for $379 a month, for 36 months, and we'll make your first month's payment. experience amazing. i felt completely helpless. trashed online. my entire career and business were in jeopardy. i called reputation defender. they were able to restore my good name. if you are under attack, i recommend calling reputation defender. vo: there's more negativity online than ever. reputation defender ensures that when people check you out, they'll find more of the truth, not trash. if you have search results that are wrong or unfair, visit reputationdefender.com
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the tech sector despite mounting regulatory pressure from all over the world, the nasdaq hitting another all-time high today on the back of some strong earnings facebook, alphabet, and intel reporting strong quarterly results. amazon posting a rare miss on eps. netflix trying to recover from its disappointment last week and microsoft regaining the crown as the world's biggest company. for more i'm joined by paul, the lead portfolio manager of the wireless fund. paul, what's the takeaway message for you here >> the way i look at this, kelly, is that as i thought it would be this quarterly earnings season has been decidedly mixed. now one of the things that we have to absorb when we take a look at companies like amazon is some companies are delivering and guiding to revenues better than expectations, which is great. but they miss on earnings per share, and i think it's mostly because of a self-inflicted wound, which is the realities of most of these internet
companies. they are going to have to spend more to meet these regulations for privacy. >> in amazon - >> so fizz a company still growing its top line but missing eps for reason of a self-inflicted wound, i think that's okay. >> so in amazon's case it's investing in one-day shipping. i'm sure investors want them to do over the longer run facebook's going to be the biggest employee head count company in the country in a couple of years at this rate so they're trying to get ahead of these problems. but does it fundamentally especially in facebook's and maybe google's case change the economics of the platform if they have to hire that many people >> it's obviously going to dilute the profitability so they'll go from rockstar unprecedented, wild operating margins, to something less but even as they go to something less, kelly, we'll be in a situation where they will still be wonderfully profitable and cash flow generating companies >> so these are companies you'd
hang on for the long run what about netflix >> netflix i'more worried about. this quarterly miss, not only in their domestic subscribers which actually decreased for the first time in many moons but also the dramatic miss in international subscribers has got me worried and this is even before we have a full onslaught of video streaming competition in the october/november time frame. >> and then in the spring we have the office moving to nbc and launching there. are you worried enough to sell your holdings? >> i actually have sold my holdings it never with that big of a stake. but last week's earnings report in guidance really killed me >> okay. on 5g we had some big news on t-mobile and sprint. that merger is going ahead today. i've been told that maybe it's good for the tech giants because it's going to bring another sort of pipe, if you will, into the system so people can stream all of that content, for example, or use their technology how do you invest around 5g, and maybe related to that after
intel's strong numbers last night, is there anything different that you'd be doing in the chips space right now? >> this is interesting so first of all on the t-mobile sprint deal, it looks like it indeed will happen what i worry about is t-mobile is the best in the group, even superior with its subscriber group, to verizon and at&t but it's merging with a company that is a loser. and so this is awesome for the company that controls sprint shareholders because they are getting a bailout. i actually think it's bad for t-mobile >> what about spectrum isn't that spectrum that sprint has attractive to t-mobile in the long run for 5g? >> it could be it's obviously going to be great as you said, kelly, for another pipe also good for the consumer i just don't like this transaction. so when i come to play 5g, i look elsewhere and actually right now today the worst performing stock in the nasdaq
100, bar none, is a company called xilinx. that is two-thirds of its revenues obviously the stock got dinged today when larry kudlow said don't expect anything any time soon from china. but if and when that's resolved, that might be a much better way to play the 5g theme >> and the chips space too paul, thanks have a great weekend >> you too, kelly. >> he is lead portfolio manager at the wireless fund coming up, virtual reality meets retail is this what will bring people to america's walls plus, u.s. home ownership is falling for the second straight quarter. but there's more to the number than meets the eye we will explain coming up when "the exchange" comes back in two. -driverless cars... -all ground personnel...
...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. welcome back to "the exchange." here are some of the movers this hour shares of mattel are up more than 12% on a smaller than expected loss in the second quarter. their revenue also came in well above estimates. and the results, given it's mattel, were boosted by action figures. down 5% on an earnings miss, sales lower across all geographies because of a decrease in global vehicle production meantime, mohawk industry's dropping 16% today and on pace since its worst day since
october. the ceo making strong comments about their weaknesses saying most markets they operate in remain soft, and they anticipate the environment to remain difficult. now to susan herera for a cnbc news update. >> hello, everyone here's what's happening at this hour a california judge upheld a jury's verdict that monsanto's roundup herbicide caused cancer in a california couple but the judge reduced the damages from $2 billion to $86.7 million. monsanto's parent bayer ag says it will appeal the verdict and the damage amount. palestinian protesters clashed with israeli forces at the site of a recent demmission of houses which israel claimed were built too close to its security barriers with the west bank they hurled rocks and stones >> and people in sweden were left scratching their heads after the revelation that president trump tried to secure the release of american rap star from a stockholm jail. trump called sweden's prime
minister and urged him to free the rapper and then followed up with a tweet criticizing him for being unable to act over the case >> my first reaction was that i actually started to laugh because this doesn't surprise me at all it's like a typical trump comment, and, yeah we see these kind of comments from him all the time, like, very egocentric and he does whatever he wants to >> you are up to date. kelly, i will send it back to you. >> all right, sue, we'll see you next hour. susan herera as store closures accelerate, they're set to top 12,000 this year malls are looking for new ways to drive foot traffic. one mall owner is turning to virtual reality. lauren thomas is cnbc.com's retail reporter. pretty interesting >> yeah, no, very interesting. but a movie theater won't cut it anymore, obviously, at the mall. now we're turning to these virtual reality experiences.
so westfield, they have more than 30 malls in the u.s., and we reported yesterday on cnbc.com that they signed a deal with this startup known as the void and essentially they create these experiences where you pay $35, you go and put on a pair of goggles and go into a room, and i've actually had the chance to experience it myself, and it's pretty awesome but you feel like you're on the set of whatever movie is playing at the time. >> and this is the key part probably is that they're basically saying we're going to play off the success of these big blockbuster movies >> sure. >> and from the movies' point of view i'm sure they are saying we'd love to get this content into the quote, unquote, real world. it could be a new distribution for them >> totally when i did the star wars experience i'm like battling darth vader with a blaster gun no, i was very impressed because i think a lot of us when we hear virtual reality, there is still a little skepticism. >> i roll my eyes. i've heard this and that, it never goes anywhere. but i have to say i've been in
the mall lately, and it has gotten a facelift. it is a different experience, and it does offer more if you're trying to get out of the heat, if you are with young kids, if you are just looking for a place that you can kind of go spend a couple of hours, i can understand how even for $35, you know, if the kids are into it, this offers people something to do. >> absolutely. and as you mentioned with the store closures, i think the virtual reality is moving in where, you know, apparel retail is moving out. so i spoke to the president of univy in the u.s. and he said if you would have ask him five years ago, more than 50% of the deals was related to clothing companies and fashion. now that's about 35% so you can see that continues to shrink and will probably go even below 35 give us just one last glimpse as we look to what other kinds of experiences are coming as i mentioned i rode a motorized panda scooter around the mall
>> we're seeing apartments, hotels, co-working spaces. another mall did a deal with industrius last week the mall of america which is the biggest mall in the u.s., they announced they're going to bring an urgent care facility into the mall and they've never done anything like that before. so truly the traditional mall, that template that they used, that's changing. >> well, i hope there are some privileged parking spots if you're trying to get to the urgent care. because in the mall of america, good luck. >> you need an entrance. >> lauren, thanks very much. we've got a news alert from washington kayla, what's cracking >> reporter: kelly, reuters is reporting a white house official saying that the administration is looking at all possible policy tools in addition to an already launched trade investigation to combat the digital services tax that france approved into law earlier this month. this is something that g7 finance ministers were set to
discuss when they all met just a couple of weeks ago. but the white house is now saying that transis moving forward with this tax shows that it is not committed to these ongoing oecd negotiations. it's unclear exactly which policy tools this white house official is referencing in these remarks to reuters but certainly it is clear that the white house is trying to fight back against france and this tax, that it feels unfairly hits american companies. kelly? >> yep and we know what their favorite tool we'll be tuned in. kayla, thanks. kayla in washington. here's what's still ahead on "the exchange. >> coming up, starbucks gets a jolt a down under crackdown for facebook and google. guess who's bigger than more than 20% of the s&p? the president's big "no" for apple. and a cheese in one pairing like you've never seen before. it's all ahead in "rapid fire. prevagen is the number one
and courtney reagan. welcome, everybody first up the consumer is hot, hot, hot and some big names are reaping the benefits today starbucks, this is my number of the day. 7% gain in u.s. same-store sales and they're not the only ones seeing strength. mcdonald's up 5.7% in the u.s. mcdonald's, chipotle red hot as well kate, is anyone not doing well or was it just a strong consumer quarter which we also saw in the gdp? >> we did. so these were the three big names this week. chipotle up 10%. that's another huge number all three of these companies focusing a lot on digital innovation, making sure your experience into the doors is seamless, quick. no matter how you're getting to them is that it's going to be quick and easy they all have fairly new ceo staff. being the most established, been there about four years kevin johnson at starbucks and mcdonald's up 118% from easter brooks' start date in
2015 starbucks up 66% since 2017. chipotle up 144% >> how good does that feel if i were these ceos, i would just leave now how much better can it bet >> they're laying groundwork for things that are really starting to pay off a lot of these tech investments and innovations are really resonating with consumers. you are seeing it in digital mobile order and pickup, partnerships that they have, they're all huge >> my question is with all these digital apps and everything, is it that customers, the existing customers are buying more? can they raise prices or is it just can you through-put more customers through the system and therefore increase revenue what's driving the bottom line >> so there is research that says that the ticket price when you're ordering that way can be about 20% higher i also think those customers are pretty sticky if the experience is good, which i know courtney has some thoughts october. >> i was just talking to kate on this
and kelly you said 7%. >> like, one of the most saturated companies in america >> and i just think my starbucks consumership is fairly steady from quarter to quarter. where is the 7% coming from? it doesn't make me go to starbucks more with the improvement on the app and on the flip side, if i have a bad experience with one of these digital offerings, but with sweet green, tried to do it online, they couldn't find the order when i got there they had to remake it. then i got bombarded with texts and emails and i'm like i'm not signing up for anything ever again. >> speaking of chipotle. final word, kate >> no, i was just going to say it's a lot of innovation, starbucks in particular beverage innovation they saw traffic grow, even afternoon that is notoriously tough. >> that unicorn drink that we tried the other day? >> the cloud macchiato with
ariana grande was their second best quarter >> well, the consumer is anything but boring. how about australia announcing it will create the world's first designated police office to regulate facebook and google today. huge new this watchdog would investigate how the tech giants use algorithms to match advisers with viewers address issues ranging from anti-trust to hate speech. of course these companies, rocket, you can't escape it. you do it in one jurisdiction. we all know everyone's using europe for the regulation now. >> australia's not a huge market this is not going to kill them but them digging deeper into what are your algorithms, are you going to force consumers you can't really change the business model for australia and then not change it for everyone else it's like we're going to allow you strip out all your privacy stuff that you want in australia but nowhere else so i think this is just pressure from everywhere on these companies to do what consumers want which is give them more privacy. >> is it existential pressure because it potentially gets to
here's what our algorithms are is it anything that threatens -- >> what's been unclear in all of this is what do the solutions look like. we've heard from things allowing consumers more choice on how to set their privacy settings but there really isn't some agreed-upon solution because the problems are different depending on the market, depending on -- >> on the company. >> and in the u.s. the republicans and democrats each have different sort of issues with these companies so i think we don't know what the problems exactly are that they're trying to solve. >> but i do like the idea of a police force at least it gives us a sense of these resources are here >> and understand the technology >> if you think about google's initial slogan of do no evil, i didn't understand it for years and now it's like, ah, that makes sense. >> just when they dropped it [ laughter ] >> but i think that's what everyone -- we're so afraid of this artificial intelligence and what are they doing with our
data for so long we didn't understand it maybe as much as we do now. now that wasn't it, we're most are afraid >> and they were signaling it from day one topic three is quite simply a stock chart of beyond meat at the highs of today beyond meat's market cap was over $14 billion. that makes it larger than food and beverage giants like con agra, smucker, or campbells soup but even more impressive to me is that make it's larger man macy's or american airlines. >> i got a bone to pick with all these analysts on the starbucks and mcdonald's calls because nobody asked about plant-based meat we're seeing obviously beyond meat get a pop today in terms of supply chain that they would be best positioned to team up with a mcdonald's in the future if mcdonald's were to ever go there. steve easterbrook said they're looking at it. they have to see if the risk
reward would pray off, like you have to prepare these differently. so i personally think that's why. >> and it's a 236 for anybody who's listening and can't see the chart. i'm calling it the robert frank rally because yesterday, or was it the day before. >> i would go to dunkin' donuts if we have beyond meat sausage it's good. >> it was spicy. there are special dunkin' spices on it. >> the challenge right now is supply and do you think they can really fix that because there's that in the short term, and then long term there's all the competition. and for mcs, supply, the reliability of supply is what's going to matter. >> so mcdonald's this morning in the call and everything. >> there was a lot of focus on the experience of the future >> because if you put a 5.7% combo, nobody even cares about beyond meat. like, whatever you're doing is fine apple is not getting any tariff relief.
the recent decision to move the mac pro to china they will not be given tariff waiver or relief for pro parts as our apple supply chain expert, how big a deal is this for them trying to get this relief, maybe not getting it and have they actually moved supply out of china? >> yeah. on that particular point, listen, it's significant if the leader of the free world, kelly, is tweeting about your company that's significant that new mac pro is $6,000 nobody is expecting that to be a big mover. to your other point, though, does calling into question, we talk about the supply chain here apple supply chain is big. it is complex. the simplest way to kind of think about, kelly is the design work that tim cook's company does all the design work is happening here in the u.s. so that's in cupertino and austin high-end manufacturing to a
company who works with about 9,000 suppliers in this country. the assembly work and there you're really talking about people assembling different parts of iphones and ipads most of that does have in china. some of it happens in india, too. there's been some hot talk obviously about, you know, maybe moving more of that assembly work out of china. that's certainly possible. but my understanding is nothing's imminent on that front. >> this was more -- i mean, for the mac pro, this was a tiny, tiny part of apple's business, but it was symbolic. wasn't this the last thing that was manufactured in the u.s. here's one of the most important companies saying it's going to take one of the last production things out of the u.s. at a time when we're in this back and forth with china >> yeah. i'm not minimizing i think tariffs are really important. i'm just interested to see how it all sort of plays out i think analysts would probably quickly remind you that last year apple and others did successfully argue their case when the u.s. tr ultimately did
decide to remove different devices that would have hit the apple watch and air pods so they can make their case pretty compellingly when they have to we'll see when ahappens. >> and if they have to raise a price on a $6,000 pro, i don't think the price was the point anyway if you've ever thought about enjoying cheeze-its with wine, there is a pairing for that. cheeze-it maker kellogg has rolled out this partnership with house wine to sell house wine and cheeze-it in the same box. the sensation went on sale last night at 5:00 p.m. and sold out almost immediately this is a way of making cheeze-its in our house cheeze-its are always hot but making the cheeze-it hot again we just talked about beyond meat is worth more than all of these companies. this has got to be their way to fight back >> is that not an instagram-worthy photo that's how you do it, right? you're a millennial. you take your boxed wine and your cheeze-it in one box, you
show up at your backyard barbecue everyone wants their picture with it. this is brilliant. one time i went to an aldi taste test and they actually had their different wines and paired it with their different potato chip brands so hopefully they have really thought about how the flavor profile goes together here i'm all aboard this. >> interesting supply chain because, you're right, it's all about the novelty and those viral moments. so for two weeks, robert, everyone will want their house wine with cheeze-its i'm sorry but in six weeks everyone is going to forget about it >> i don't think so. everyone online was like this is genius, i have my next 100 friday nights taken care of. >> yeah. but people online say all sorts of things. >> beer and pretzels are next. tech yale and doritos, the possibility is here. >> i was a big boxed wine fan back in my college days. i appreciate this go
i'm not above boxed wine, okay >> i had boxed rosé the other day. >> it was pretty good. >> the doritos locos taco is another interesting example of this >> where's dom chu dom knows that's my favorite order. >> that was probably a genius move for the doritos brand i just want to know, so if you're campbell's soup, what do you do cbd? chicken noodle soup? >> cbd soup. >> beyond meat in the soup [ laughter ] >> hey, that's a good -- >> italian wedding campbell's soup with beyond meatballs >> those are your millennial mashups who are going to rescue this brand coming up, three school districts getting hit by ran some ware in louisiana this week the governor declaring a state of emergency what can be done to stop these at nt.tas? th'sex
the governor of louisiana declaring a state of emergency after a wave of ransomware attacks have crippled three school districts baltimore, atlanta, and albany why is this happening so often, and importantly what can be done about it for more let's bring in alex hammerstone of trusted sec, a firm specializing in cybersecurity consulting and cnbc technology reporter kate. sort of first the facts. have we seen this happen with a school district before has it gotten to the level of a state of emergency like it is now in louisiana some. >> we've seen a few attacks on school districts but none that seem to be many of them at once that rose up to the level of a series of attacks that would need to be under this sort of state of emergency, which brings in all of the law enforcement capabilities the state has >> which is a great point. what does this accomplish now because if this gets to the
thorny issue of how you deal with these attacks in the first place. >> right so the governor had an emergency plan set up. so there is state police, there's law enforcement that can come in. there is a state technology office that can come and assist hopefully to recover what some of the school districts need of course, it's not within the school year, so hopefully they will have some time to work on it >> alex, what are the main concerns this new raises for you? >> it's tough and we have a number of school districts get hit as well. and it's often times one or two people out there running the i.t. for these districts they're focused very heavily on the availability of the resources for the kids everything's moving online technology's filling everything. and security hasn't always been a consideration. and i think we are finding out the result of that now >> so are people doing this just looking for easy targets and these are ran some ware attacks and they want to be paid in bitcoin or u.s. dollars or are these people looking for information to do something with it >> so they're all types.
there's basically three kinds of attacks. coming in looking to steal money or steal information there's people that just do it kind of just for defacement. schools are subject to that because younger people might be angry at the school. and ransomware is a huge epidemic >> but one thing you've said is that a lot of times prevention can be as simple as having these computer systems updated i get that people aren't perfected. but this is now becoming basically the new crime wave of the 21st century how can we make sure that we're more protected >> so, a big thing is the focus. for one of the things there have been a lot of disparate efforts to try to secure these things. but there really hasn't been anything centralized and so again you have these school districts that are trying to defend themselves the best they can people are working really hard but it's just not necessarily the skillset that the i.t. person may have. so to find a way to provide resources and give them direction and tools to try to
protect themselves is very important. >> kate, as you mentioned you were just at a big fbi conference this week what can they do >> well, the fbi is working on this in fact, one of the school districts did say that the fbi has been called and is involved. i think, you know, to take it out a little bit, one of the things that we've heard cybersecurity pundits warn about for a long time is this issue of a really big scary cyber attack against our water system, our electrical grid. but what we're actually seeing is this sort of slow-motion train wreck of all of these cities being taken off line, school districts >> it's almost more like vandalism. where it's one thing to say we're going to have a department of homeland security it's another thing to make sure that every local police force is able to keep its streets clean, so to speak. >> and it's very difficult for the federal agencies to penetrate down that low to like a local school district. they've made a lot of in roads with this state, at state governments and some city
governments. but we still have a ways to go to make connections that far down the food chain. >> no word if they have actually paid the ransom. coming up, home ownership is down for a second straight quarter if the trend continues, will government intervene. if it does, what could that look like that's ahead here, it all starts with a simple...
at xfinity, we're here to make life simple. easy. awesome. so come ask, shop, discover at your xfinity store today. welcome back we have a market flash 3m shares are falling hard at 3% after the internal investigation of the foreign corruption practices act. coming up, homeownership dropping for the second straight quarter and dropping for the record low for one segment of the population attoth sry and what it means to housing overall after this
welcome back to "the exchange." homeownership declined for the second straight quarter raising questions of the housing market. diana has details from washington >> kelly, the moves are quarterly, but the issue is bigger the crash and foreclosure crisis bottomed out and now turning lower again because of the
different crisis affordability and supply crisis in housing you see it in the household formation numbers. someone living with others and moves out in their own place 1.2 million households in the second quarter the gains were split in the renters and owns that is not the case in the past two years. all of the new houses were owner occupied prices are gaining the most making it harder for renters to become owners. >> diana, thank you. the rate of decline is steeper for african-americans. it dropped to an all-time low. if these trends continue, could we see the government step in to get more buyers? we have mark zandy and joe watkins with us. mark, i'll start with you. do you think the homeownership trends will get worse? by the way, this comes at a time when the economy is strong
>> right right. you have very low unemployment and low mortgage rates there is a lot of headwind diana mentioned the shortage of affordable housing which is juicing up house prices and rents making it difficult for lower and middle income minority groups sale for a down payment student loan debt $1.25 trillion in student loan debt is making it difficult for people when they start to buy their first homes. this goes to the african-american and hispanic. very low homeownership rates large group of minorities that are under-banked or not banked if you don't have a credit score, you can't get a mortgage. a lot has to be done to get them back in the financial system to get a home there is no better way to increase your wealth than to
save and own a home. >> joe, this was a huge push going back to the decade before the housing bubble last time around you pointed out the african-american homeownership rate got almost to 50% last quarter it was 40.6%. it was a plunge. was it unsustainable at 50% or what caused the massive unwind that made the problem worse before we started? >> i said before on cnbc that despite the strong numbers in the economy, overall rate of unemployment as low as it is and so on and so forth, the big challenge is the disparity with whites and blacks in income and wage growth. also in unemployment clearly there are regulatory challenges that being said, you have the fair housing act which was first came into being in the 1960s i would not be surprised if
democrats would not want to look at the house and ways to strengthen the act or enforcement of the act so african-american perspective buyers could see what incentives exist for them to buy. it is still tough because 50% of blacks buy homes are first time home buyers. many are saddled with student debt student debt challenges along with the discrimination challenges >> mark, how do you help that segment of the population without broader distortions like we had the last crisis with not a lot of -- loans underwriting standards out of control this is how you genuinely help the process to fix it over something that is too broad a fix. >> good point. one important thing is we need better information take the credit scores
many minority groups pay rent and mobile home and credit bureaus are not able to use that with the scores. many of the groups haven't been brought into the banking system. they don't have the credit card debt to get the scores we need to change the way we do scoring. another example with regard to income debt-to-income one of the key thresholds for a loan is how much is the mortgage debt relative to income. particularly hispanic groups have alternative sources of income and we don't count that well we have to work on that. finally, the real big regulatory change that is coming. that's around the qualified mortgage role. the role that was put in afternoon tafter the crisis don't make a loan unless you think that person can pay you back it sounds simple one element is to allow fannie mae and freddie mac.
if that is not extended, it will be a problem. >> we are almost out of time and maybe technology can come up with solutions as well guys, thank you both i appreciate it. joe tkins and mark zandi that's does it for the change. tyler mathisen has "the power lunch. >> thank you, kelly. i'm tyler mathisen here is what is new at 12:00 a dollar duel. the greenback brewing inside the white house. we will have details on that straight ahead. plus, did apple just win the 5g war we will explain why the purchase of intel chip service could be a game changer fast food on fire. mcdonald's and starbucks hitting record highs there is one key to keep fueling thisou