Good morning, welcome to squawk alley. Were at post 9 of the New York Stock Exchange joining us this morning, re ric executive editor kara swisher joins us a lot to talk about including Apple Earnings after the close tim cook tempering expectations especially when it comes to iphone sales as more Customers Put off buying new devices in anticipation of the tenth anniversary iphone which may arrive as late as apples december quarter kara, a lot has been written about this particular cycle. Both the features and phone and the timing of the release. What are you going to be watching for tonight well, i think nobody is paying attention to this quarter. Theyre anticipating the next quarter. Projections will be happening in the december quarter thats whether they start selling the phones there is some stories it will be release the later and theyll be in limited quantities. I think everyone is focused on the phone and not you know this is the midyear trough as dan wrote today on recode. But i think everything is about the next phone and how much theyre going to sell and how much they anticipate and how much theyll have available. They do rack up a lot of gains in the last month. The christmas month for this iphone which should be fascinating to see what they say about it some odd cross currents in the language around what is happening. On the one hand, analysts like to point out look at all of these people who are right for an upgrade who had phones for go years or longer. Then on the other hand, tim cook is saying well dont expect much from this quarter. Can we really have it both ways . Even though there are a bunch of old iphones throughout that people have to upgrade so the quarter should good or people just are not buying iphones like they used to im anticipate thchlgt ive had a phone for the same phone for a while. Im not going to buy until the new one is out but i will buy it so through have it. I think this quarter is really not the point, as i said its whats coming next. I think theyve got a lot of other things arent watch and the home pod and things like that but thats also thats so much peripheral compared to the phone which is always been the juggernaut at apple and its going to be in the next in two quarterers from now. Not this quarter but next quarter. While were speculating on what we can expect from the new iphone, kara, what are you hearing and what are your thoughts on this idea about apples willingness to push a 1,000 plus high end smart phone . Well, i mean, its the tenth anniversary phone. Obviously apple changed the entire equation when they entered into the iphone. You never know what theyre going to do. They have a group of people that like the phone its a very expensive phone. There will be subsidies, presumably but i think its an expensive phone. A lot of people are using their phones i know i use it pretty much for almost everything now. I was out yesterday in palo alto i used ut for stories. I used it for everything i was struck that i didnt touch my laptop for 24 hours which is interesting to me. So the phones matter a great deal i mean, at least im willing to pay up for it if its a critical device in my repertoire for my job. So well see but it should have a lot if its going to be that expensive care yashgs youve been all over the executive search for ubers sikceo. You told us that meg whitman would not take that job. Your column jam packed with news jammed. He said hes going to seek jobs and now dede continued this partnership. Who is going to want this job . Wow i dont know do you want it, carl i dont know im okay. I suggest its scaramucci now that hes free i dont know i think that its a really difficult thing. Theyre down to a few people theyre all men who theyre looking at in the finalists. I have not been able to determine exactly who those are. Ive gone through i literally called almost every possible ceo in america at this point to find out. One is supposed to be a person of color i keep getting little clues. But, you know, theres about three or four finalists. I have some thoughts but i will write them on recode once i confirm them but it will be interesting to see whos going to take on this because of all the problems, one, major one being what is travis you could ens role Going Forward . And when he is done in the past . I think thats really i think thats a focus of everybodys talking to uber is concerned about that issue kara, is there a risk of this becoming sort of twitter all over again in a sense of a some what dysfunctional board starting to steer what happens with the executive and thus, you know, the new cycle with the economy . I think the problem is that it has been built around this founder. The founder is quite controversial on lots of things. Then its attached to all kind of xanldals. Its not just Sexual Harassment xanld scandals, whoever gets this company has a basket of trouble that they have to work on. Obviously at the same time, they dont have much of a staff. I mean many of them, even though this excellent people at uber, most of the senior positions remain empty so youre going to have to have the board step in in some way just because issues of management seessentially. Im trying to figure out what google is doing in this. Alphabet is suing uber over issues around the one of the employees going to uber. But at the same time, google has a major invest ment. I think its 300 and some Million Dollars it in. And someone at google said to me, who do we call there they dont know. There is no cfo. There is no pins principal pers. Its a fascinating company with a great product but a lot of as i wrote in the piece, a the hoff hair on the dog i was going to ask you whether you have any intel from inside the company about what actually is going on there since he left. Whether thats been good for morale or difficult to have such a rudderless ship. Well, mixed a lot of people love him theres a bunch of employees that signed a letter about it. Other people that driving him crazey hes still in there. The senior employees dont know what to do because hes still involved even though he probably shouldnt be and, so you know, theyve been trying to put the word i used one of the quotes i used from someone close to the board is theyre trying to put guardrails around him but he keeps driving right through them in a driving metaphor but its a really problematic situation. And they got to get a ceo in there even as the rivals get more funding, they join up all kinds of things. The world doesnt stop because uber is in a, you know, a meltdown essentially and its, again, its a great product. And its a Great Service that people love. And so it should, unlike twitter, the sky is the limit nor company. The xwe can they get out of their own way . And well see. Well see if they can. Obviously, if they get a great ceo, it will make a big difference for them. Care yashkara, the idea that shot ceo given guarantees about autonomy that travis wont try to make another run, do you that i is unlikely . That kind of a carrot . I just dont believe it i mean this is a very aggressive founder. And they have not side lined him. I mean the jobs thing is not a verb, it was interesting jobs went away for 12 years from apple. I think its something like. That im not sure if im completely accurate. He did next and a bunch of other things and then he came back to am a mature man. Travis is over 40. I think this is his baby and he doesnt want to let it go. The question is will he hurt it by holding on to it so strongly . Or does he think hes the best person for it so he wont leave . Its a really interesting psycho drama going on there at the same time, this is a company full of employees who need a leader. And need a lot of leaders, not just one and a team thats really the critical part. Like you compare it to apple, april sl such a team of people apple is such a team of people. Google is a teechl people. Facebook is an amazing team. Theyre so cohesive. And this group, i dont know i compare it to the Trump Administration theyve got like, you know what i mean theyre getting in their own way a lot. And well see if they can get themselves a psychologist and work it out and then move along and do what they do which is provide a Great Service to consumers. Yeah. Anyone who wants to understand the search as it is put out the major call a few days ago. Thank you, kara swisher. Thanks a lot. I have an update on Procter Gamble the Company Filing an official proxy announcing the date of its shareholder meeting. That is october 10th and urging investors in an extensive letter to Share Holders from the ceo, david taylor, to vote against the proposal to add nelson peltz to the board. Here is the argument that we picked out noggin kreme nothing incremental the why not excuse appears to be the extent of the reason for Board Membership which the company says is simply not sufficient it outlined a juicy tick to being of peltzs engage ment over the last few weeks and months with management and the board and some cnbc scoops along the way and new revelations about a dinner, for instance, between the Ceo David Taylor and nelson peltz all sorts of conversations between peltz and the Board Members and outlined a friendly and constructive dialogue between the company and between this investor which ultimately is resulting in a nat ot so friendly fight over peltzs bid to joint board further escalation here. They feel like they have an argument they lay out more specifics one of the advisors is a former cfo that hasnt been at the company for more than a decade peltz can combat this in a white pape cher he paper which he is prone to do. This whole idea that hes not offering increment alval advices going to be the question with the stock underperforming. Yes, a lot of analysts are aplaugd the recent earnings release. There is plenty to pick through there like the fact it was built on cutting sg a cost and advertising, digital advertising. Something that a lot of people think is a nono for Consumer Companies and lots of other ways to pick it apart so this continues and its heading for a vote on october 10th clearly both sides are reaching out to shareholders. Its going to be costly. And going to get a little messy in the process from which is awkward. Its been friendly so far. Yeah. Stock up is almost 5 in a movement outpags the s p 500 well see what happens from here on out when we come back, a lot more on this mornings rally as the dow closes in on a new milestone 22,000 is close lln luion rkng in on the 2 biiovaatma with a new round of funding well talk to the cfo when we come back. Your brain is an amazing thing. But as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. For years, centurylink has been promising fast internet to small businesses. But for many businesses, its out of reach. Why promise something you cant deliver . Comcast business is different. We deliver superfast internet with speeds of 250 megabits per second across our entire network, to more companies, in more locations, than centurylink. We do business where you do business. The dow closing in on 22,000, hitting yet another record thigh morning on the first trading day of the month of august. If the dow holds the gains, well see the first the 30th record close for the year. For more, lets bring in jeffrey klinetop from Charles Schwab gentlemen, good morning to you good morning. The fact that the dow that is in now record territory and its been driven by some old school stocks like boeing and chevron right now. What does that tell you . Well, it just shows how broad the rally s i think some people worry about maybe that the internet retailers run ago way with the entire market the truth is this is a broad rally. A lot of the stocks that participated and well based in funnel fundamentals the all country world index, the vast majority of those are showing year over year gains in earnings and it is lifting stocks across the board. Very much so global Multinational Big Companies like the one you mentioned. Yeah. What did jim cramer say . Boeing is the new thing. Does that mean its time to make Portfolio Adjustments . I dont think so. But the leadership youre seeing or more importantly just the level of the dow and the market overall sitting at records tells us that weve been through a tremendous time. Investors have become more willing to take on risk. Asset prices are up. We think that net worth for household United States is going to get close to 100 trillion by the end of the year. But for us, our data seems to suggest that things might be set to moderate somewhat so even though the economy is growing at a very good clip and reflected in asset prices, we actually took the money off the table just thinking that a tlost good news is likely to price in and weve gone from an overweight position in equities to a more neutral position waiting to see what happens next yeah, jeff. How important are Apple Earnings you think going to be . Its the biggest market cap certainly and weve had quite a run from 21,500 up almost to 22,000 in the dow. And are Apple Earnings going to matter i think for apple, i think for all the companies in the dow, earnings really do matter weve got valuations above average here weve seen as just pointed out a pretty solid rally remember this is the second solid quarter of Earnings Growth for Dow Companies as a whole very important they deliver. That is essentially what is really lifting this market its not about politics. Its not about the fed its really not. And more, its really focused on the earnings numbers thats why this quarter companies do have to deliver and well see later today what apple shows us kevin, you look for some moderation is that going to be the result of any one event or anticipation of an event . Was it a dead ceiling thing in september . Does it have to do with Balance Sheet normalization or Something Else no. I just think this is a natural ebb and flow of a company that gone through turbulence and youre dealing with structural things that will be a drag for a while. So you still have very low productivity growth, labor force is still an issue. Capital. Theres a big question mark as to what happens to growth and call tall formation Going Forward from here. So the 3 number were seeing on the economy now, were very happy to see it. It explains the growth, it explains the pickup in asset prices but were not convinced that those structural issues have been addressed and consequently, we think its more likely that this is a this is a temporary situation and we moderate back down towards the 2. 5 growth rate ill say one more thing. The earnings expectations for next year are very robust f we dont get those numbers, those numbers have to come in too and that could affect equity valuation. Will is this constant question, jeff bshgts Federal Reserve and will they kill off the recovery by raising Interest Rates and now starting to shrink the Balance Sheet. So far its been pretty smooth sailing in terms of fed policy how much of that is a risk does that hurt well, yeah, its a genuine risk but its probably not a risk for 2017 it may be a risk for late 2018 as we got quite a few more rate hikes under our belt the yield curve flattens a bit more and Credit Conditions begin and financial conditions begin a lot more than they are now we still have the bank of japan pumping liquidity and pouring more punch in as the fed tries to take that punch bowl away i dont think its an issue in the next six or 12 months, but further out, absolutely, expansion is going to die of old age number doubt thats when this is coming but still a year and a half away thank you well leave it there when we come back, we have to talk some under armour well get the stock reaction off the lows still down 7 . 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Were watching shares of under armour today the stock down 7 . The company reporting the quarterly loss of three cents a share. That is pretty much happened while wall street was expecting. Sales did beat the street. But one point of disappointment is under armour cut the outlook and the Restructuring Plan that will include job cuts. About 280 of them. Guys, analysts were disappointed to see that footwear growth slowed its been doing well and the fact that that the expectations as the company has gone very far. There is execution risk to worry about. I remember that Misty Copeland commercial is like wow take a look at the lineup. They have steph curry. I was with the family at a water park a few months ago. I saw a lot of nonathletic suburban kids in under armour, im like i dont know if i want to wear that nonathletic suburban kids thats the market. They have gone no kohls its market. But that shouldnt be like the image, the main image. Its not the kind of aspirational image that youre getting from nike. Its the fifth biggest loser of the year on the s p 500 but also not far away, stocks like macys and foot locker, like elle brands and kroger, so theyre also in this larger worry about retailing in general. Absolutely. Thats what they would say and point to when it comes to the restructuring. All the companies are going through a right sizing of the business right now in terms of employees and store count and everything else. And under armour is growing 9 the market got used to and expected a higher rate of growth and profitability. Yeah. Still to come, the bold case for apple heading into this afternoons Earnings Report and the ceo of reddic is going to join us on his new funding round and how he plans to revamp the front page of the internet squawk alley will be right back they are the natural born enemy of the way things are. Yes, ideas are scary, and messy and fragile. But under the proper care, they become something beautiful. Charles schumer calling to block chinese investments in the u. S. To pressure beijing to reign in north korea n a letter to the president , he advised him to use his authority via the committee on Foreign Investment in the u. S large antiindia protests and clashes led by students erupted in the disputed area of cache me kashmir. They demanded the end of indian rule china establishing its First Overseas Military base in africa it held a ceremony to launch the base in jabuti in the horn of africa where the red sea meets the gulf of aden it is for peacekeeping and here at home, cleanup beginning for the residents of Central Florida after Tropical Storm emily dumped heavy rain on the region lakeland, florida, was flooded in low lying areas emily was downgraded to a depression youre up to date. That is the news update this hour lets get over to seema mody at hq. Take a look at the screen european stocks are off starting august after posting two consecutive months of losses were look teg german dax. Up 1 . It is a key lagger the euro, remember, stocks are down 1. P 7 over the past month. Italy the standout of 4 and the banks and nonperforming. And there is growth accelerating at the best in five years. Theyre rising to 2. 1 . That according to euro stats this as the ecb is expected to discuss. The currency and euro and the highs against the dollar but still the green back which really getting a lot of attention is the british pound hitting its highest level against the dollar since mid september on some data manufacturing showing strong growth in july helped about it biggest jump in export orders since 2010 1. 32 against the u. S. Dollar. Lets talk earnings as well. Bp with a Second Quarter profit. Oil prices and cost customering helped the bottom line and take a look at rolls royce a first half earnings beat, the aerospace, Defense Company citing increase in production and keep in mind the stock is up already 47 in 2017. Jon fortt . All right thank you, seema meanwhile, apple set to report earnings later today with the stock already up almost 30 for the year for more, lets bring in managing director at goiogenheim rob, i think it hasnt been until the iphone 6 psych that will we saw apple stock rally so strongly into the announcement is that a risk for investors given how strong the stock has been and how weak relatively speaking the iphone has been theres always a risk, i guess. You have to sell the reaction. But were expecting a pretty big iphone cycle coming up part of it is, as you said, youre coming off apple of two relatively weak iphone cycles. I think part of the excitement is just, you know, were after two weak cycles you should have penlt up demand. And in combination, were expecting a new high end iphone with new features. So there is actually more to get excited about this time than the last couple years. Steve, do you feel the same way. How you are factoring in the risk for investors given that the stock has been on the run that it has and there is such High Expectations for this tenth anniversary iphone we agree it is a pig and the python there are people that have not upgraded yet we think the features will be sufficient to get substantial upgrades people are going to be looking for the revenue guidance for september quarter. The assumption is there are not a lot new iphones shipping so were looking for perhaps disappointing guides so there is ris income this quarter. That is going to get pushed into next year. And our survey works just as youre seeing a lot of people looking forward to the new phone. The asp is moving up there is more shift towards the larger plus and the next iphone. Rob, how expensive can apple go, do you think i mean there are rumors about it being 13, 1400 at the high end. Are people going to buy that i think you can see the new high end start around 1,000 and go higher from there it seems high. But if you look historically, you know, even when the iphone launched ten years ago, people thought it was expensive and the price has actually gone up over time and, in fact, if you look at the only real disappointing iphone that apple has launched was the 5 c which wasme meant to be the cheap iphone they dont want cheap iphones, they want more expensive iphones. Weve been hearing about augmented reality for a long time its been the star of shows like wwdc are we going to Start Talking about it in the morning . If not, when are we going to really start discussing it in practice and things that drive actual sales and units . You know, it is something that tim cook talked a lot about. The company made a number of acquisitions in the field. They announced the Software Development tip a few months ago. So i think youre going to begin to see with the new phone some elements of that its going to take a few years to play out. Theyre now saying that not only can you see it in the phone, but you can see separate glasses that apple may introduce like the google glasses weve already seen we think this is going to pri provide the next wave of phone growth for the company its in the sweet spot of what apple does in terms of integration of software and hardware. What do you expect for china . That is the focus for investors. Today and in terms of the guidance and are there implications here of this new iphone being the first major upgrade cycle in the china installed base youre right to focus on china. I actually think the june quarter we should that theyll report tonight, we should see better comps from china solely because the comps start getting easier apple is coming off of last year some really strong china growth. That starts getting the comps start getting easier now looking forward, its the second or Third Largest market dpenlding on how you want to measure it clearly china will matter. I mean the Chinese Market not to generalize, but the Chinese Market does seem to be attracted to whatever the latest and greatest technology is and really havent seen the latest and greatest from apple the last couple cycles. This one hopefully should drive more interest in the last couple i think. Yeah. Well, ill be watching that for sure thank you, rob and stephen thank you very much when we come back this morning, the rising cost of cage free eggs and the impact on producers. Our jane wells will have the hard boiled facts from a chicken farm what are you watching, Rick Santelli im watching the whole setup between global equities, the dollar index, and whats going on with Interest Rates were going to go back to 1989 in japan see if we can find some similarities all after the break. The dow closing in on 22,000, that milestone, does it mean stocks keep flying higher or is a key indicator suggesting a pull back is coming . Shares of under armour are getting slammed again. The new forecast for the stock is coming up and there is unusual activity in the semistocks could mean a big pay day well tell you about that at halftime report. Well see you then well see you then. Thank you. Lets get to Rick Santelli and get the santelli exchange. Hi, carl. You know, it was about 28 years ago that the japanese stock market was darn close to 40,000. The exact number, 38,900, somewhere in that area its currently in the 19s. So half way back and about 28 years. Now granted, back then many lost decades ago. There wasnt the hit a button move, money move capital and hit three buttons and trade on four different continents but there is still some lessons to be learned. All right, these are some monthly charts and they go back a long time as a matter of fact, all of these charts start around 1985 and they all end roughly today the black is the nikkei. There it is. 38,900 december of 1989 and now, like i said, under 20,000 about half way back. The red is the Dow Jones Industrial average the blue is the dax. The point of this is its not perfectly accurate but it gives you a very good idea what im trying to prove here and that is i dont see any major flight to safety i dont see that one this is going down investors were running to the dax, running to the cac or the dow. Different time im not sure well have to wait and see, i guess. The jgb, japanese government bonds, when this was at 38,900, they were over 8 . Theyve rarely been over 2 in years. They currently trade. 07 . If 1 is like a dollar this is 7 cents. Has it helped . Were still 20,000, 18,000, 19,000 away. So, you know, low Interest Rates arent necessarily the panacea of fixing what is wrong with economies because its a short cut. Okay what happened here was when the banks got in bed with the government, got in bed with Property Owners and theyre still paying the price you know, you want to know why deflation is considered the enemy by Central Banks because of the Property Values up here. Thats why to try to make it whole. Okay so what happened to the dollaryen well, dollaryen was trading 2. 40 around the time of the peak in 1989 its now less at 1. 10 and that 1. 10 acts as a bounce what is the point of all this snt point is im not sure how this is going to end, whether Allen Greenspan is right this is a bubble in the fixed income market or bubble in stocks, bubble in Foreign Exchange in the euro in particular i cant tell you that. But what i can tell you all this tells me is youre using test tubes to create growth, you need bigger test tubes. Jon fortt, back to you all right thank you, Rick Santelli straight ahead, reddic is getting close to that 2 billion valuation rkith a ma wnew round of funding were going to speak with the ceo when squawk alley returns. Youre gonna have dizziness, nausea, and sweaty eyelids. And in certain cases chronic flatulence. No sooooo gassy girl. So gassy. If youre boyz ii men, you make anything sound good. Its what you do. If you want to save 15 percent or more on car insurance, you switch to geico. Its what you do. Next next for years, centurylink has been promising fast internet to small businesses. But for many businesses, its out of reach. Why promise something you cant deliver . Comcast business is different. We deliver superfast internet with speeds of 250 megabits per second across our entire network, to more companies, in more locations, than centurylink. We do business where you do business. Social news site is offering a 200 million round of funding bringing valuation to 2 billion. The cofounder and ceo of read it and joins us now. I understand some of this funding is going to be used to kind of give readit a face lift. I describe the current look as craigslist chic. What are you going to do here . I dont even know if i give us the chic part, built that is in the works readit, the web product is pretty old going on a decade now. And so one of our big endeavors this year is to make readit more welcoming and appealing to new users so a big step towards that end is rebuilding the website. Were looking forward to getting that out later this year, for sure how important is the web anymore . I mean ive used your mobile app and it, too, is a little bit well, challenging to navigate. Kind of feel like you need to be an insider is the web still that important in this mobile era it is for us, in fact so while a lot of our viewing happens on the phone and the ratio is increasing, it is almost around 50 right now id say. A lot of the content is created on the desktop a lot of content on readit is text based people talking about what is interesting to them. And a lot of texts are traded on computers because of keyboards and furthermore, where people use readit when their bored at work or classroom, they often have the lop tops in front of them relative to the peers, i think well have a longer life on the desktop. And thats probably final tops for sure talk to me about long term Business Model youve got some ads and, of course, youve got readit gold which is a little more like a subscription model is that enough it seems like there are Certain Companies that traffic information, core yashgs for instance that, have fallen a bit short when it comes to building up long term businesses. Which area of raevenue generatio are you more focused on now . For us, its ads. There are a lot Business Models hiding in readit we have Interesting Data the Predictive Power of readit is powerful. We drive a lot of ecommerce i tell our team as often as i can, dont be create about Business Models, were selling ads. Revenues weve grown 5 x in the last two years and we still have a long way to go and were spending most of our Creative Energy an improferring the product and making that more welcoming for old and new users alike and we have a very nice axis and well continue to draw on that. It is hard to attract mainstream advertisers given some of your content, the fact that it sort of all over the place . Its not your typical sort of mainstream news site and theres a lot of controversial stuff there. There is a lot of controversial stuff. Were the most trusted source of news from millennials. And so we also have to talk to the issues with advertisers. Our top advertisers are all blu cant find anywhere else online or even in the real world with which is a forum to make a real connection with their customers. And reddit instead of just yelling your message over and over and over again, you can have an actual conversation. And that has worked out pretty well for advertisers which is why they keep coming back. To jons question about long term Business Model, weve seen some unicorns with down rounds, you need a tougher time when they finally come to the public markets. Do you see that as a cautionary tale, does it affect the way you think of things like cash burn of course were raising a big round certainly for us, but that wont change the fact that were a relatively thrifty company were only 230 people right now. Which is relatively to our size and our peers is a very small number of people so well keep running the company according to our own dna, which is generally pretty spend thrift and of course companies that have had to take those down rounds, those are painful, those are Cautionary Tales and we do watch those things and try to learn from the mistak ta tak ttf others how do you thrive in an era of targeting where so much of the internet advertising business seems to be dominated by facebook and google i mean, we target just like everybody else does except we have an orthoginal set of foor on reddit, we have communities that represent every interests news, politics, funny stuff, but we also have forms that may not exist elsewhere around relationship advice and people struggling with addiction and debt and all those kind of support groups and pretty ever every hobby imaginable so within that, there is plenty of data that we collect that is relative to advertisers to enhance their targeting. All right steve, thanks. It will be great to watch. Steve huffman from reddit. As we go to break, the dow closing in on 22 k just about 25 points away. But first, jane wells. What is coming up . Yeah, which came first, the chicken or the egg record low egg prices, up next we have thdi ie rtn the real squawk alley. [ sirens blaring ] [ dramatic music playing ] cameras. Introducing the newly redesigned gla suv. [ indistinct radio chatter ] at a price thatll make you feel like youve gotten away with something. The 2018 gla. Mercedesbenz. The best or nothing. Egg producers ins u. S. Are feeling the pain from the rising costs of cagefree jane wells is in california with that story reporter hey, carl, yeah, im at chino valley ranchers egg prices conventional are so low now, a buck 33 a dozen, that consumers are balking at higher cagefree prices egg producers and consumers are playing a game of chicken over prices and consumers are winning. Last year was a bad year for us we lost a lot of money reporter america is awash in eggs there is a glut two years after prices sky rocketed when avian flu killed tens of millions of birds. We had a lot of farmers put chickens back in, in fact too many and now we have an oversupply. Reporter its really bad to producers like Chris Nichols who runs a cagefree operation called chino valley ranchers these cost 1 to 2 more per dozen and people arent buying them we have had to reduce our overinventory, you know, we should get a certain price and were having to discount it below my production costs. Just to get it out the door. He has about three quarters of a mip million chickens, but this year he will reduce that number 30 until demand bounces back its the law in california that all eggs produced here must be cagefree and despite promises by retailers and restaurants to convert to cagefree, nichols says some are starting to change their minds and that is no yoke. It that happens, i believe that all the rest of the players will follow suit unless they truly believe that cagefree is the future. Reporter okay. So adding to the problems in the supply and demand equation is since the avian flu outbreak a couple years ago, a lot of food manufacturers have reconfigured their recipes to use fewer eggs and because of better a genetics, these hens are more productive than ever this is amazingly clean right out of the girl. Its really loud in there unii dont know how jane can even hear us im used to people squawking. We do a lot of squawking here on cnbc. It must mean cheaper price he at the grocery, as well reporter not on the cagefree side r side. They have lowered to try to compete, but when youre in kroger and you see conventional eggs for a buck 33 and cage did, free for 3. 50 or 4, a lot of shoppers are saying never mind and a lot of retailers are saline maybe after all this, maybe we shouldnt get into cagefree. And mcdonalds is still all in in transitioning to cagefree. And one last question the fact that they actually are out of cages as we can clearly see, does that result in more costs in and of itself reporter oh, yes everybody who has california compliant and actually you dont have to be cagefree in california, they are here, you just have atohave a larger area in the cage, you have to build bigger facilities, you have to feed them more because they are Walking Around all day, so they are burning offer more c offer more calories. And this place could be as big as the rose bowl and they would all be in one corner. More calors and this place could be as big as the rose bowl and they would all be in one corner they flock together. That is fascinating since a lot of couplers have questions about what cagefree actually means when they buy at the store. Fascinating stuff. Our thanks to you. Jane wells in Northern California we do have headlines from now. Meg tirrell has the latest reporter i just got off the phone with pfizer ceo ian reed and we talked about potential tax reform because a lot of the questions for pfizer are about potential m a. He said that there is a reluctant to make Significant Business Development decisions before they see tax reform, but he does expect a hard push for tax reform by the administration before the year end. He says he does expect a form of tax reform that will remove some prerks those are the headlines from pfizers ceo back over to you no the wht what some are preg but an interesting take. Lets get to wapner and the half well do tto the halftime ret another record high, the dow moving ever closer to 22,000 even as one key Market Indicator suggesting trouble could be ahead for stocks with us for the hour today, joe terranova, stephanie link, it is a good trading day for investors. 20 points away from dow 22,000 and then what