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tv   Squawk on the Street  CNBC  October 27, 2014 9:00am-11:01am EDT

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>> yeah, i mean a lot of things are in the -- smoking, all kinds of stuff, all kinds of things are in life insurance. you have none? >> no, i have some. >> you're going to live forever. i was there once. thanks. >> thank you for being here today. join us tomorrow, "squawk on the street" is next. ♪ good morning, welcome to "squawk on the street." i'm david faber with jim cramer. live from the new york stock exchange. carl is on assignment. a look at futures as we begin our week. we are looking for what may be a, yeah, a bit of a lower open this morning. i forgot, of course, having some trouble. for the ten-year note yield around 2.2, call it 3, somewhere in there, 2.27. below italy's yield, we've got that going for us. >> from the italian banks and the stress test -- >> the ecb stress test.
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>> can you imagine if we failed that many banks. >> when we think about the stress test they were an important milestone for our capital markets coming back to life. >> belittled by most commentators, 1930s-like structure by tim geithner. probably one of the better treasury secretaries. >> key moment. for ecb stress test, we'll get to that and the markets. of course, oil falling below $80. again, goldman sachs with a view 75 bucks next year. for our road map, it does start with the markets shaping up for what could be another volatile week april slew of big earnings coming in. as i said oil price forecast slashed. valeant tells allergan it's prepared to raise its offer to $200 a share. more details ahead of allergan's ceo appearing on "mad money." two of the largest drugstore
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chains disable apple pay. >> good luck. >> why, what it could mean for apple'sests as well. stocks losing a four-week streak. jumping 4% for its best week since january 2013, that was last week, of course, this morning we have merck kicking off another busy earnings week with third quarter profits that did exceed street forecasts but revenue was light. in other words, wasn't up to what the consensus was. goldman sachs cut its oil price forecast for 2015. the firm expects wti crude to fall to 75 a barrel. brent to $85 a barrel. each down 15 from the previous forecast. >> i mean, look, first, i'll dispute this call because brent i think is trading with west texas, that's what's going on. so i thought this call -- i was kind of surprised about this. surprised being code for like what are you talk about? there is a series of downgrades.
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boxen one at risk, using rail because they haven't built a pipe, so the price differential is not much differents. the parts of the call, they are questioning continental. i question the downgrade of anadarko because anadarko's got great international resources. >> anadarko eventually, if there's consolidation, will be takeover. it is a takeover candidate that would get taken about there's a wave of consolidation that hit as among the majors. >> you'll see exxon report on friday, show no growth. people will fawn all over it, except me, because they have no growth. chevron will have some growth. both companies need to do acquisitions as total but we don't know what the new ceo is thinking. it needs growth. i'm not going to overrule the fact you oversell, quarters
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won't be great but look back and say wow. >> what about broader issue of oil prices which have mirrored our own fall in the broader market as they started to come down? that is linkage still there? >> look, one of the reasons why i think this call's a joyous call, so to speak, the american consumer's going to havenhave a rnds the world i'm was shocked to see airlines have no ebola follow through because they gave you a look at october. we could talk about ebola every day and i think that what would happen is we would be stoking a fear that seems incorrect to me. only thing that -- the tension with ebola, we've got two governors who went ahead of the federal government. >> and followed to a certain extent your advice from last week. you joked in part but serious in terms of at least suggesting this idea, hey, we should quarantine people. cuomo says you can stay in your home and christie, in new jersey, it's a different matter. >> i have a feel --
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>> whether that stops, helps professionals from wanting to go over and help fight in west africa, where really it needs to be fought, is a key concern. >> why wouldn't you want to be monitored for 21-days. the civil rights for a worker versus the rest of the 317 million i don't know. cuomo, talking about two governors from two different party as degreeing with something. cuomo, rigorous thinkinger. christie, obviously, i think he is a rigorous thinker. >> i understand. perhaps one of the billionaires, whether zuckerberg or paul allen who both come out and donate a lot of money, maybe donate money to any help worker comes over, comes back, quarantine at the waldorf. you know what i mean. they make it nice for you to actually do something that needs to happen. >> the nation states that our billionaires are helping more than other countries. cuba, nation state billionaires, they are showing themselves as being terrific.
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billionaires, people who made a lot of money during the market. china, the freest rider in the world, again, free rider, you don't call out the chinese. you want to sell a lot of shampoo and cars. why is right wing people attack yellen? why don't they attack the chinese? the chinese are dumping everything everywhere, getting away with everything. these ngos flying chinese flags because there are people who want to attack china, because china gives out money privately. they're the disgrace. got to sell a lot prell. >> wanted to build their own chip making business. >> no luck whatsoever. >> but stealing secrets with espionage and making tough on the likes qualcomm, trying to extract concessions and/or get other companies to partner. when you partner in china, it can be dangerous. >> right. my sources in the capital equipment industry saying,
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absolutely not, we're not going to play ball with chinese because it's stealing secrets from powerful company. never mentioned on air, outrageous. >> the broader market before we get to allergan. oil, as we said, below 80, you heard about that from goldman sachs as well. ecb stress tests are now passed. and the new president, the old president in brazil. >> and -- >> we seem to be in a market that inflicts the most pain on the greatest amount of people, hence a lot of people short right now. so it will probably go up. >> i think -- you see the market down 10% and say to yourself, these stocks are down hideously. petra bra, you can't take over pet pet p petbros. so you continue to short stocks. i go back to an interview that
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we did if you remember, for delivering alpha untimely called by brazil. brazil is going to be down huge. they have the olympics. it's obviously agovernment that is pro-socialist. venezuela not able to sell citgo. south america is horrendous in terms of government but people want that market so they don't go away. how many companies have lost money in venezuela over and over because they think one day something good's going to happen. >> steve te nechnnebau saying - >> we can't find our health care czar. he's somewhere. but they've got a czar in venezuela. when you talk to the consumer package good guys they could not believe someone worse than chavez. >> and they did. >> yeah. it's like when michael realizes he's going to lose all of the casinos in "godfather ii" you do
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not want to buy venezuela bonds. >> excuse me. move on to valeant. valeant pharmaceutical says it's prepared to raise it's a cash and stock offer to allergan to at least $200 a share. the ceo pierson said allergan shares wouldn't be trading at current multiples. allergan raising full year guidance, posted getter than exed. q3 earnings. we got a preview of the earnings a few weeks back. david pyott one of jim's guests on "mad money" 6:00 p.m. eastern. i've been following this closely. also joined later by robert kindler from morgan stanley, the banker representing valeant in this offense -- >> what a great interview. i'll be listening to everything you say. one of the precepts in the valeant deal, listen mr. allergan, david pie out, your stock would not nowhere if we frankly weren't around. >> they want to say, we apply 15 multiple to your stock, we'd get
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into allergan. it's probably worth more than 15 multiple, allergan, given numbers putting up. >> they asked this growing large pharma -- >> they'll say 140, 150, it's still not -- they believe that valeant should be priced higher, obviously they believe that. >> right. but the key this week will be the litigation in california, insider trading charges against bill ackman, trying to not allow him to vote his 9.7% stake in allergan in a special meeting december 18th. >> explain why gravitas. you can leave the enforcement and go with the higher gun. we're a great country. you can play for anybody. i'm being facetious, great country means this guy should be out. he should not be the lawyer. but that's okay because we are such revolving door society, no one thinks. but why does that lawsuit have any chance of winning? >> it has some chance but not a large one. >> okay.
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>> you don't know. it would -- precedent -- it seem likes a tough argument and the judge has given some sense it will be for them to make that being aller gan here. those are not invalidated, my question becomes, does allergan say, okay, writing's on the wall, figure out what we're going to do, break the glass, call activists? do we -- >> break the glass, what is that? >> like the break the glass scenario. >> like a wedding? >> not like a wedding, not stepping on the glass. break this glass, get out the envelope and say, who are we selling the company to? >> i've got to tell you -- >> it's not j.&j. their ceo said they're potentially not interested. is activists interested? do they believe, curious to hear his answers, they can simply put the stiff arm up, heisman valeant. it would seem unlikely if they lose the lawsuit. >> we have merck reporting today. it used to be called st. merck, that was during the days when
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vag vagi vagilis was the chairman. we'll look at merck and say merck is good. allergan is so much better. growing so much faster. but valeant decided allergan was vulnerable. i think it's a shame, david pyott had the best growth. >> and put up numbers. way back when this started we questioned valeant's business model over and over. they've had strong numbers as well. roll up with low tax rate, eviscerating r&d. first letter written by pierson as opposed to ackman who continued to have the barrage. >> are they at odds, buddies? >> they're not buddies. ackman saying we've got to do this, bid more, higher. >> not going to break the glass either. >> they're not clinking glasses. they say valeant's letter a tactic to distract investors
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from allergan's outstanding third quarter results. it does not disclose a mix of conversation. it goes to great less to defend its stock price. there you have it, the latest back and forth. >> listen to kindler, pyott. it's funny that best performing -- the best of the fastest growth of the major pharmas was allergan and that's being picked on not pfizer, where they know how to buy back stock. what's pfizer's real strength? knowing how to buy back stock. merck? what's lili? nothing. i saw no growth. bristol-myers, a little bit better growth, allergan hitting on all cylinders, botox, a wonder drug, but amazing eye care franchise, and that's the one they went after. >> yep. >> no good deed goes unpunished.
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>> coming up, looks as if there's bad news for apple pay, courtesy of two national retailers. we'll fill you in. also ahead, a live interview with consumer advocate ralph nader, who has a bone to pick with apple and its ceo tim cook. >> tim cook. >> another look at futures. set up for a lower open again, lower oil prices, brazil's election. a lot to digest. more "squawk on the street" after this.
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welcome back. a look at crude oil. if you want a sense for where the market may be headed in the early going, that's your key. >> yeah. >> you even tweeted, market can't sustain itself. >> oil in charge the whole way. it's been in charge the whole way. watch oil. algorithms set for when oil drops below 80, machines sell. that sounds counterintuitive. >> we don't talk enough about it, the funds that are what we call quantz run on algorithms and one of the inputs is oil and changes their approach conceivably, and they sell the market. >> now people -- >> or do other things. >> goes to 250, there's a gigantic factor, the machines don't factor that in. they say, listen, oil down, bad for s&p, sell. that's what the opportunity comes in, because if you sell
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all of the restaurants and the retailers on this, because they're part of the s&p that means you're playing some machine game. that's where you circle back and buy and that's where the opportunity for individual investors comes in. pick your best individual retailer restaurant, go against the machines. not talking about terminator ii "rise of the machine" talking about individual being able to profit from the stoupidity of te machines because they're underperforming. the they'll say, new york machine say -- >> they've been getting hurt, meant oftentimes part of the hedge fund strategy, paid 2 and 20 or. >> think about -- >> hedge fund are underperforming significantly. so many different strategies. we say that but -- >> but the strategy says oil under 80 sell, s&p why the futures dropped dramatically. you can say, that's stupid. machines are on a short term more powerful than individual investors. >> apple pay, a setback, cvs and
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rite aid disabled apple's new payment service over the weekend. the chains didn't give a reason for blocking apple pay but they are part of a consortium called merchants customer exchange developing a competing payment system. importantly, jim, walmart is also not adopted apple pay, the largest retailer in the country, publicly -- public retail represents 20% of all sales from public retailers. they want the data. i think this goes back often times to being able to actually know the customer and capture data, which is extraordinarily valuable and use apple pay, apple, that data goes to them or nobody. >> walmart, rite aid, these all remind me of the record companies that fought steve jobs. you're fighting visa and mastercard here. fighting the major banks. so in the end, cvs, you know, i absolutely love, great company,
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rite aid, making a comeback, i don't know if they'll have the wherewithal to defeat apple pay. >> if the consumer votes with their feet or makes it clear that they want this as an option, one expect they perhaps have to adopt it. right now, and not that apple hasn't seen this in the past, it may be slow going as they try create this echo system if they're successful could conceivably be worth a great deal to them. >> how about if walgreens says usele apple pay, we'll give you 10% discount. what does that do? cvs riding high, they took tobacco out. walgreens suffering from a lot of bad news, not dug oing inversion, cfo leaves. david wassen -- greg wassen listen, this is your chance. watch the show. you offer discount, make a deal with apple, you go in and you should be making that call now to chicago, it's probably too early but when you make the call, come on my show tonight,
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we'll talk about it. >> okay. we will watch apple pay, of course, as it tries to gain traction with retailers. so far, not so much. >> true. >> cramer's "mad dash" as we count toward the opening bell. we talked about the impact of lower oil prices on the market. poised for a lower open but that doesn't mean we don't have a lot more. "squawk on the street" right ahead. you can bring back a lot of things from a trip around the world. but you can't always bring back customer data. because many customers don't like it when their data moves around. can i go now? if you're going to do business globally, you need a cloud that can keep your data where it needs to be. today, there's a new way to work and it's made with ibm. an unprecedented program arting busithat partners businesses
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opening bell on this monday. a little "mad dashing." start with alibaba. jeffries rolls out a buy. we've had rolling buy recommendations. they aren't using street high for 2016. under $3. i regard alibaba as amazon but also has earnings. >> amazon with earning. >> and i different business model, no inventory, no warehouses, no delivery trucks. >> amazon likes to spend, spend, spend. how about 100 million on movie. alibaba, this is a piece called connecting half of china. that's because half of china's already connected. the chinese are spending like mad. david, singles day is a day you and i have to celebrate though we're not. >> right. november 11th i believe when singles day -- >> you want to get ahead of that. >> the largest single day of commerce on the planet. last year they did 5.3 billion, some huge number. assuming they'll do bigger. of course, going into it, jim, they find that buying slows as people wait for singles day, so
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they always say don't take a look at our quarterly numbers prior to that which they will be reporting. >> right. >> sometimes that's a lull before the big fourth quarter number which includes singles day. >> is this christmas, hanukkah, valentine's day together. >> rolled into one. >> wow. >> a holiday created by them. >> when le we we adopt singles . >> i hope never. >> good. second, wayfair, piper jaffray, wells, all recommend it today. it should be up a litt. this is joss and main. i've used it for tables and chairs. >> in the restaurant or home? >> in home. >> okay. >> i think the company's over -- the fact that everyone starts with a buy is a little daunting but understand, this is regarded as being the second william and sonoma, cheap. i like the pricing. i like king's lane more than joss and main.
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i'm a big kings lane user. but for a beach house, it's ideal, that's wayfair. the catalog. >> lost on me. it's made in china, right, the furniture? >> i hope so. >> we've got the opening bell in four minutes. we have got a lot more to talk about. shares of merck. twitter reporting after the close. we haven't talked about that. >> watch brazil bounce. i tell you. i was woken up by a call about brazil. brazil's falling apart. i said, buy it. >> we'll see, whether it's a good move. opening bell after this. ♪ decay. it's the opposite of evolution. the absence of improvement. and the enemy of perfection. which is why you can never stop moving forward. never stop inventing. introducing the mercedes-benz gla. a breakthrough in design,
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street." live from the financial capital of the world, opening bell will be ringing in wow, look at that, 35 seconds, jim. applause starting this morning. >> loving it. and we'll see how we start this week. after a positive week in the market last week, we're only 3% off the s&p high after all of that, that volatility. but it does have a negative effect on certain things including merges and
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acquisitions activity, perhaps. it's a monday without any big deals, i would point out. >> that's a good point. >> october usually a big month. >> this is the height of when there should be deals. >> it can have that feick on deal making. at least for a bit. [ bell ringing ] >> watching the s&p real-time exchange, back at hq, more red on the board. here over at the big board, rsp permian, oil and natural gas. >> schlumberger had a great quarter. you'll just be all day these oil and oil drillers will be just hit and hit and hit. is a sense, by the way, david, that there's some that won't get -- some of the smaller oil companies will not get through this. i don't want to pick on anyone. that by yourself is saying like sears won't get through this. i'm not going to play that game. >> over at the nasdaq, retail opportunity investments, a real
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estate investment trust did the honors. >> i have not seen sanford bernstein's ibm. >> talks about -- >> tony, right? >> yes. i mentioned, we like his work. >> gives them a tough time on the conference call. >> he's saying more downside than upside risk. this is, again, the warren buffett decide he doesn't like the stock. the buffett halo. >> i would point out, it's a week ago we got the dreadful earnings from ibm. you may recall, the abandonment as well of the so-called road map in terms of earnings. i spoke to the ceo about a week ago. the stock suffered that day and every single day after it. today it is, let's call it, up 13 cents, at 1.62. >> obviously, there's a lot of people saying "new york times," i'm not go to say myself, a 5-year-old boy who returned to new york from guinea treated for
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ebola after rushed to the hospital with symptoms. we can stoke this, i don't want to stoke it. "the new york times" does have the story. futures dropped a little bit more when that story's reported. >> got it. so far, so good in terms of bellevue here in new york and how they're dealing with patients. craig spencer, the doctor who has been diagnosed. >> people using the blood, there are drugs involved now. you know, i think raising the survival rate will be regarded as a very important thing, if they can do that. >> absolutely. >> all right. i'm taking a look here, jim. kind of a mixed bag. more red than green on my screen at this point. i wouldn't mind coming back to merck. stock's not dead. call it down 1%. up 14% for the year. >> merck is just regarded as being kind of a quintessential you can -- you can't go wrong owning merck. that's kind of the people situation. they want a large pharma and merck has a degree of growth
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versus pfizer, versus lilly but pressures on merck that has to do with drugs coming off patent. >> right. >> that's one of the reasons why i like bristol, it's already been through that situation. and allergan has been a fave, it doesn't have pressure. we'll here from gilead which has the cure for hep c. keep track of celgene. with the crohn's disease tease and, gee, an incredible anti- n pancreatic cancer drug. >> merck, by the way, 90 cents a share. a bit ahead of estimates. but the revenue number was shy of analysts who follow the company expecting. and it did narrow full-year earnings forecast patent expirations weighing on the company as well. that's why you're seeing that,
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gain na generics. >> micron. the innards of pcs, one of great untold stories microchip reported bad quarter and everybody fled, everybody company that had to do with semiconductors. i think people will compact and say pcs were very good. by the way, apple, 1, rite aid and cvs zero. >> why? >> apple can rule these companies. tim cook, visa, mastercard can rule these two outliers. >> why do you believe that? not a lot of people -- not a lot of retailers signed up for apple pay. >> who wants to lose customer who says, can i want? can i wand? now you have to put in your pin number, no, put it in again, oh, hold, there's a dollar for charity, yes, i like that, i always do it. put your pin in again it didn't renlster. put your pin in again? no one -- and cvs has machines,
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those machines, call for help. that's because i'm a certain age, i don't know how to swipe. >> i swipe sometimes. >> i'm not a swiper. don't call me a swiper. walgreen walgreens, this is a major opportunity and they'll make hay. >> they have their own system trying to introduce the retailers will aba part of. >> so did a&m records. >> data is money, understanding buying patterns of your customers. know how much data apple has, facebook. >> here, rite aid. rite aid and cvs, they're powerful companies but, apple is -- how many divisions does rite aid have, to quote my friend buddy, pal, josef stalin? >> yes. thank you for that historical reference. let's talk energy here because, as you might expect, energy complex, i like saying that,
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energy complex is down this morning. >> hideous. >> with oil falling below $80, with a bearish report from goldman sachs for the near term what they see for oil. gee, thanks for that. >> 34 states beneficiary of oil going down, 16 not. a lot of employment created by oil there will be companies that have to scale back drilling. a lot of this is because of demand. everyone trying to figure out demand/supply, demand/supply. united states pumping another 1.1 million by the year-end that you didn't expect. we are flooded with oil. there's no way to get to the market, get the oil to market fast enough. and remember, the trains and pipes are getting increasingly more difficult to use in this country. people don't want fast trains coming through their towns. they don't want to bill the pipes. so the oil's land locked in a lot of places. if they can get this stuff out of colorado, you have more oil coming to the market.
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we can't -- our refiners are operating 978%. >> they're full. full on. twitter, down 15 cents, reporting after the bell today. i don't know if you'll be covering it. >> my charitable trust owns. expectations got high here. i believe twitter is another stock that you don't trade because twitter will be your personal news service but people on twitter used -- some of us get frustrate with twitter because it's difficult to wake up and find out how stupid you are. >> jim, you're particularly stupid. you have to show them my grades? >> you could put your transcript on twitter. do you have that? i don't know if i have -- do you have -- >> undergrad. you got a law degree, didn't you? >> eighth in my school. >> eighth. >> my concentration. >> eighth? really, seven people ahead of you. >> my father was none too happy. >> i don't blame him. >> none too happy.
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you go on twitter and i find out i'm an idiot every day. completely rolling back, 100% of whatever accomplishments i have. >> you cannot allow it to bother you. >> don't let it get unmy skin. >> roll after your back. >> the person that said jimmy, restaurant is closed. i have to go over towel in hand, people don't leave so much food on your table, pouring water, behind the bar, and i'm missing the 1:00 games. >> yesterday? >> yeah, i had to clean. i had to -- i gave all of the tips to the bartender. whatever. let me put it behind me. last time i had to it that i was 16, david, it's humbling, and my heart goes 0 out to servers because, boy, are you treated terribly. >> everybody should do it wouldn't in their life. >> now it's like the tenth, whatever. >> put it behind you. >> customers are always right. >> a lot to put behind you. >> i had to run out and get coffee. >> grab me some, too. oil touched a low 79.44, lowest since june 2012.
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wanted to share that with you. also on the conference call taking place with allergan, which reported numbers this morning, dave pyott, ceo of the company, a guest with jim laterilater on manager mad money" and i'm talk to kindler, leading valeant strategy for trying to acquire allergan we'll talk to him in the 10:00 hour. conference call, pyott asked, remember doing a strategic acquisition and also you had certain views about allowing us to vote on that acquisition or they wouldn't have been -- remember, they were close to doing a deal to buy salix and it fell apart. >> i haven't mentioned europe. >> wait. i've got to finish this. >> sorry. >> pyott had a response. >> sorry. >> that's okay. he said, given the passage of time you appreciate some conversations may have been initiated long ago, from the outside difficult for you to determine where we are in the process of buying another
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company, if indeed we are looking at making strategic acquisition, feels stringent criteria for value creation. you said it well in terms of shareholder votes and some stockholders have been vocal but we speak to all stockholders and many in private have expressed different views in terms of value creating deals. didn't say very much. >> the people at allergan -- >> 20 plus percent risk arb signs. valeant side, big long onlies are gone. they left. they took the money and ran once that stock ran up. >> even though there's no oi loyalty. >> no loyalty on wall street. i stopped you from making a point. >> i thought -- a lot of people thought germany on the verge of relenting. german business sentiment fell in october. a lot of people, again, are wondering when will merkel blink? putin with a lot of hard line
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comments this weekend. european economies are still going back down. once again, stress test, italy's under the begun. we do not have germany yet saying, we will use our considerable fire power to help the countries who have been accepting all of our merchandise, you buy our bmws, buy our audis, buy our mercedes but we're not helping you. that may be italy and france after the stress tests combined with the fact that the putin ukraine russian tension has brought the gdp down in europe. merkel must relent. if merkel relents that can get oil back up. >> interesting. there is conversation about this policy divergence that could take place when we see considerable time out of the statement, it's not going be the next meeting but maybe december for our fed. meanwhile, abbi nomics, open up more qe. to your point in the ecb, you know, everything they can do as well. it's interesting to see that
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divergence and what happens as a result. some investors obviously, a stronger dollar, what is the impact of that both on trade and in japan and versus europe. >> the feds this week, but i think that more important issues are ebola, i wish that weren't the case because i think that is not -- it's factory and decline p/e but i don't want to stoke that. but germany, european weakness, oil, the machines saying oil under 80 makes the whole market a sale. coming back to companies doing quite well, airlines, the restaurants, retailers, buying those stocks, because they're being brought down because they're part of the s&p, may be the trade of last two months. >> to bob pisani on the floor. more on what's moving this morning. >> it's largely about oil. you guys are hitting the right notes. the oil service index down 2%, take a look at oil. he's right, you are right about your discussions. models go in at $80, when below $80 you make a different kind of trade i'm think you're absolutely right to point out,
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lower gasoline is a great news for the united states. remember the oil shale bloom has been a boon to jobs in the united states and to the extent when below $80, it might impact viability of the shale plays. certainly plays into this here, may affect jobs here. citi had a good story two weeks ago, analyst report talked about the full cycle cost of shale. drill a new oil drill, the coastal cost gets marginal in the $70 to $80 range. definitely some of the plays, new play, when drill a new well might be marginally less feasible and impact jobs. that's one of the reasons we're seeing a concern. but of course lower oil is good on the gasoline side. effect on the big names. look at oxy, conoco, exxon, that's ten points on the dow for exxon mobil. osx down 2%, as i mentioned but halliburtons and schlumbergers
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hit more because they're concerned about capital expenditures in 2015. if it stays down at 75, if it goes to 75 and stays for three, six months you're going to affect capital expenditures. brazil's bovespa, hit noticeably, big names there there is was not priced into the market. polls were close going into the elections over the weekend only thing i can think good news, good for brazilian exporters, the real is down 2%, but obviously that's not reflected in the markets now. meanti meantime, european stress test, impressed, only, what, 24, actually failed, you can see the names. unfortunately nine of them are in italy, thanks very much. but they're down. but most of the other ones did a pretty good job and a tougher stress test than a couple of years ago. here in the united states not a lot of earnings today. we'll get the rest this week. armstrong, big in vinyl flooring, that stock's down. they had concerns with customers moving away from vinyl products.
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good margins. also north american business pricing competition hurt them over there. you know despite the down day, entering a seasonally strong period. a lot of comments over the weekend, november, december, seasonally strong. the week before midterm elections, a seasonally strong week. buy backs resume in november. a lot of companies stop in october. note steve whiting's comment, u.s. stock market has seen 29 declines at 10% or more since 1950 but only been ten recessions, his point, guys, stock market declines that are noticeable are associated with recessions. a lot of noise in between that. we are not in a recession. back to you. >> all right. thanks, bob. that's reassuring. a closer look at decline in oil prices. jackie deangelis is at nymex. >> good morning to you, david. traders not surprised that we're under $80 a barrel here on wti. they've been calling for it for weeks, as a matter of fact. and they are saying that they're looking at goldman report saying
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2015 forecast revised down to 75 a barrel is realistic but could get worse than than goldman, of course, citing the supply/demand equation but traders saying watch the dollar because as the dollar strengthens, that is going to hit crude. they're saying that we could see that $75 this year. also, what's paramount today is a close under 80. we haven't had that in over two years. if we close under 80, oil could continue to get whacked. you've mentioned the impact on the consumer, positive. gas prices four-year low. national average now $3.08, down 18 cents in the last two weeks alone. in the tri-state area a lot of people talking about paying less than $3 a gallon. and of course, every time filling up, if you're saving $5, $10, $15, maybe you will spend that money elsewhere. so that's a positive sign as well. also want to add to that, not related to crude, but nat gas prices getting whacked. for consumers going into winter, a lot of good news. back to you. >> jim's been saying, a lot
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lower bills means more spending in restaurants and the like. >> but goldman -- looking at a piece, goldman could rally at $150 since 2010. they've been the big bull in oil. >> goldman has been the bull until this report this morning. >> right. you could argue, well -- >> they've been wrong. >> they've been wrong. so you take the other side. >> correct. >> that would be something that a lot of hedge funds will probably be thinking, this guy, because he liked it going higher, maybe he's just a moan tum pl momentum player. >> you'd go against goldman on the call. >> they loved it, now -- >> now they don't like it. >> you've got to deal with earnings and earnings are subpar. >> coming up, morgan stanley's head of ma&robert kindler. talk valeant, allergan, maybe family dollar also. >> really? >> in addition to broader m&a environment.
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welcome back. we want to go to meg tirrell following, of course, the --
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leeing our coverage of ebola. she has news as well on a nurse in new jersey. meg? >> hi, david. that's right, the nurse in new jersey we've learned is being discharged after testing negative for ebola. and being symptom-free for 24 hours she'll be discharged from university hospital in new jersey at her own request, she's being transported privately to maine. new jersey says she's still under the mandatory quarantine order because she came into contact with ebola patient when treating them in west africa but able to do that at home. the news we're learning is that the nurse who has been in new jersey is being discharged from the hospital today. david? >> meg, you know, things move fast and furious on this front. you're out there in front of bellevue, anything about the 5-year-old that apparently has been admitted with ebola-like symptoms? >> reporter: yes, we do. we just heard from the new york city health department that confirming details that were coming out earlier, the child was transported to bellevue last
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night, didn't develop a fever until this morning, did develop a fever, testing the child for ebola because he or she was in west africa in the last 21 days. they're investigating not just for ebola but other potential causes of fever, of course folks come down with things, it could be anything. we don't know yet it's ebola. mary basset the new york city health commissioner said there's a newly approved fda test that can get results back quicker but saying we should get preliminary test results on that person in the next 12 hours. >> thank you very much, meg. >> i'm wondering whether ron klain will look at records of who came from these countries in the last, say, month, and do background check or whether it will be up to christie and cuomo because the czar seems to be jammed. >> i don't know what the czar's doing. lot more people are going to die of the flu. >> true. >> a lot more. >> you can't scare people about
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the flu. >> no. >> they get a shot or not. >> get your flu shot. did you get yours? >> i went last week and there's a 20-minute wait. >> got to get it, especially as you get older. >> i didn't need to hear that. >> next, stop trading with jim. "squawk on the street" coming right back. then there's trusting your vehicle maintenance to ford service confidence. our expertise, technology, and high quality parts means your peace of mind. it's no wonder last year we sold over three million tires. and during the big tire event, get up to $140 in mail-in rebates on four select tires. ♪ chocolate, soybeans, thisand apricots. made with what kind of chef comes up with this? a chef working with ibm watson, on the cloud. ingredients are just data. watson turns big data into new ideas.
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cramer and stop trading. >> people can continue to revile marissa mayers, behind scenes is worse but what a stock. they own a lot of alibaba. alibaba goes to 210. a dropped to 84 during the ebola whatever scare. alibaba, look, if you value it againstment it goes to 130. i'm not playing that game. if alibaba goes to 110 and, david you do more work on the corporate tax, yahoo's! going higher. i think it makes sense. >> could be $10, $12 a share. >> that's big. intermediate oils continue to go down. goldman call, the man who said it was going to 150 last year, now it's going half. we'll use that guy as the bellwether because he was so wrong last time, he should -- i
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mean -- wall street's so stupid it's scary. i'm too old for this. >> but not old more "mad money" tonight. what else do you got going. >> okay. we have unified -- why is unfi important? natural foods, and styker, a company i have to ask about then version, they make hips, they make everything other than heads, shoulders, knees, toes. remember that? we were -- ankles. >> we need them all. see you. i'll see you later back at hq. pending home sales after the break. she inspires you. no question about that. but your erectile dysfunction - that could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently.
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well, knowing gives you confidence. start building your confident retirement today. welcome back to "squawk on the street." i'm diana olick with breaking news. pending home sales flat in september, up just 0.abo3%. expectation for 2%. that's a miss on the month. they are up 1% from a year ago and that's the first annual gain we've seen in this index in 11 months. pending home sales based on signed contracts in september, not closings. we do know that existing home sales in september were up 2.4%, but those were contracts signed in july and august.
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we did not see the bump in contracts expected in september. realtors telling us 6% more listings on the market than a year ago, those do not translate into more sales. 15% of their agents report trouble with the sales is that their buyers cannot obtain financing. once again, credit problems. though mortgage rates went lower, those rates slipped to lowest level in october. still low in september but not as low as they were this month. regionally, the pending home sales index increased 1.2% month to month in the northeast, down 1.2% in the midwest, up 1.4% in the south, flat again in the west, down 0.8%. the expectation had been for a gain, because we're seeing prices ease, mortgage rates low somewhere seeing more homes on the market. but again, flat out there. real estate agents telling me, it's been a very, very quiet fall so far. sara. >> yep. more evidence of the lumpiness of the housing recovery. thank you. it's a whirlwind year for
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bond funds with exit of bill gross from pimco to swings in the ten-year. there's another fund that has been outperforming them all, guggenheim's total return bond fund outperforming peers over the last year over seeing almost $200 billion in assets, are you branding yourself the new bond king? how many bond kings can thereby? >> i don't know. i'm not sure if it's bond king, bond prince or prom king. >> when you look at the flows. >> right. >> obviously pimco has seen tons outflows before bill gross left and picked up after. some clients coming to you. >> over the last three years, we've not had any periods of out flows and so we just continue to get more and more money in and you know we have seen an acceleration of flows over the last few months but, you know, we can't say whether they're coming from pimco or somewhere
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else. you predicted 2 to 2.25% for the ten year in august. i remember you wrote that your cio letter. you weren't surprised to see the ten-year drop below 2%. that is where we are? is that going to stay, low levels? i think so for a while. the era of low interest rates with us for some time given what's going on in europe and the capital flows coming out of europe, out of japan. in all likelihood, this is going to put a ceiling on rates here in the near term and we're going to be prone to some sort of shock or bad news that could potentially push rates lower. but i think that we should think of something like 2 to 2.25 as the current normal rate for ten-year notes and outside of that, actionable area. >> how does it end? rates are higher here, just to spell it it out, you're sucking in capital from around the rest of the world because the rates
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are higher than they would be in europe and the dollar's going to rise. >> right. >> goes the story. where does that end? >> first off we're a long way from the in. >> right. >> qe's just getting under way in europe. there was -- i had an op-ed in the f.t. that talked about the fact the ecb doesn't really have a good plan right now. they have to do a lot more than what they're talking about. and so, i think we're still in early innings of this and that at some point obviously the music will stop, but you know, the problem's been the fixed income investors have been talking about this rise in rates now for the last three years and we have had, you know, periods where we got spikes up but reality is that we come right back down. >> all of the bond bears capitulated? where are they in. >> i don't think so yet. when they do, i'm going to get nervous. even now people forecasting over the next 6 to 12 months we'll
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see higher ten-year note yield. i'm not sure that's a forgone conclusion. i don't think it is. >> there's a school of thought that says we're going to see a policy divergence in the not too distance future than the central bank and of japan and we are ending qe and start to tighten, let's call it some time next year. >> what is the impact of that going to be since we're not in tuned any longer at all? >> strong dollar. >> first off, well, that's an interesting point, sara. first off, i think, david, given the appreciation of the dollar and the deflationary pressure coming out of the europe and asia, i think it's going to cause the fed to wait longer before they start taking action. and so, i'm starting to believe, you know, we've always believed this was going be to a fourth quarter 2015 event. i think now that we may be looking at something in 2016,
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and you can't rule out the possibility that we could get it pushed out even further. >> even -- i mean 0%, even with unemployment rate falling to what would have been as low as it possibly can be seen to go and the fed conceivably should be raising? >> yes, but missing on inflation. >> right. >> i'm asking him the question. >> she's pretty good. >> you know, look, i'm old enough, and i hate to admit this, to have been educated in economics back in the '70s. and the big debate when i was in undergraduate school was the natural rate of unemployment 3% or 4%. you know, then all of a sudden it became 5%, during reagan years 6%. for people who remember greenspan, a period under the greenspan fed where he pushed unemployment below 4. dr. yellen has made it very clear to us that she thinks that the natural rate of unemployment is not really understood
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completely and that there's a risk that we're misestimating and may be 5.2 to 5.5, the number we've been talking about as too high. so she believes we should wait until we see wage pressure. and so given the fact that that we have so much deflationary pressure coming out of europe, it's likely that wage pressure could be put off for quite a while and so we might find that the fed might not think that it's time to act even if rates were -- if unemployment were to fall below 5%. so the other thing that sara mentioned is, when you look at pce, which is the preferred inflation gauge the fed uses, given what's going on with gasoline prices, with commodity prices, with the effect of the appreciating dollar on traded goods, it's very likely we're moving back toward 1% which is the opposite direction the fed's hoping for, you know. currently hoping move to 2.
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with inflation dropping, with the lack of wage pressure, we might find the fed remains acometive longer than we thought. >> it's depressing to hear a bond guy talk because it's in the nature of things you believe bonds will do well therefore the economy's going to be tough. that's the space in which you live. what are the long-term consequences of mispricing interest rates? >> right. >> because clearly this isn't where interest rates should be. what the fed is doing, what the ten-year is doing. >> i was educated at university of chicago, and i have to confess i am a monitorist, i believe in milton friedman's work. and a lot of my good monitorist friends quote friedman and says inflation is always and everywhere a monetary phenomenon. there's a lot of my friends, who i won't mention, two or three years ago said we've got qe going, in a year or two we'll have double digit it rates and inflation would take off. i don't see it.
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the reason i don't see it, friedman said inflation is everywhere and always a monetary phenomenon subject to long and variable lags so, we're living in this period of a long and variable lag. but the end game, you know, as i tell people, inflation is the problem for the next decade, not this decade. and ultimately all of this money printing is going to be inflationary. >> just not for a while? in just not for a while. you expect qe to wrap up wednesday and that's it, final, good-bye, quantitative. >> i think so. i think the bar will be high to get to qe 4, qe 5, whatever we call it. >> forgive me for interrupting, we're running out of time, if your analysis rates will stay so low for so long when the cycle turns, what do they do? how do they inject something into economy if it's not qe? >> i think once you start to see rates turn, simon, that we're
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going to have some sort of confirmation in terms of rising inflation. with rising inflation the economy will be able to tolerate rising rates more some the risk is the fed will do exactly what it's doing now, which is lagging. and that could set us up for some maybe a bear market in the next decade in bonds. >> thanks for joining us with all of your predictions on everything going on. scott minerd of guggenheim. >> a possible second ebola patient here in new york as the white house pushes back on new state quarantine rules. details with a live report outside the bellevue hospital in new york when "squawk on the street" comes right back. e financial noise financial noise
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welcome back to "squawk on the street." shares up, wendy's taking a hit in trading, down 4.5 after analysts cut their price target on the fast food chain citing lack of success with wendy's introduction of pulled pork sandwiches and stiffer competition from other chains that tot attractive value menu offering. wendy's share outside of the energy sector today. >> thank you. 5-year-old boy under observation in new york city today, after returning home from guinea on saturday prompting more ebola
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concerns. this, as dr. craig spencer, who of course tested pos tv last week, remains in isolation in new york. make t meg tirrell with the latest details. >> reporter: that's right. we've learned that that child was transported to bellevue hospital last night. this morning developed a fever because the child had been in west africa, in the last 21 days they are testing him for ebola. the new york city health commissioner said there is a newly approved test the fda they're planning to use. fda approved two tests, biofire defense which gets results back faster. expecting to hear about the test results in the next 12 hours. when we heard that thursday, we heard a lot sooner than that. as a precaution health department here is tracing all of the child's contacts to identify whether anybody else could have been at risk. that's just a precaution. also looking into other causes of fever. we don't know whether it's
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likely to be ebola. now we have learned that the nurse who was quarantined in new york is being discharged today. she has been symptom-free for 24 hours. privately escorted back to maine. dr. spencer in serious by stable condition. we hope to get updates later today and bringing you all of that. >> thanks for the update. tracking cases for us. investors wondering what the economic impact of an ebola squa scare may be, if any. it does have a direct effect on consumer behavior and local business. in dallas as ebola spread from duncan to nurses who cared for him, local residents stayed home. a firm that tracks these trends, hospitality, found that traffic dropped significantly in dallas bars, restaurants and hotels during the first two weeks of october. a few statistics for you. hardest hit, traffic to bars and
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clubs, fell 11% from that time last year. lodging traffic dipping 7% from a year ago. and if you look at the tabs and which they did, beer sales volume down 10%, spirits volumes down 8%. in no mood there, that negative impact in dallas, we should say, proved to be short-lived. but simon, it's revealing, es sessi especially as places emerge in bigger places, find more findings, these number on traffic and volumes from guess metric on >> two thing, first the fact the rebound was solid in the thr week of october as it became apparent those with duncan, who was the gentle man that died like, his fiancee, as they rolled out of quarantine, those come back strongly. point of sale data does conflict with what we've seen from the lodging industry, that held in strongly, certainly for the first two weeks of -- it rose above the urban average in
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dallas the first two weeks of october. you expect that to fall off had there been major cancellations. >> especially if the traffic numbers did fall off. interesting to see. but clearly trying to get some quantifiable number how this is impacting consumer sentiment and that's what we have. >> next, the world's three largest social network set to report earnings. twitter, facebook, linkedin, will the stocks deliver? moderate rheumatoid arthritis like me, and you're talking to your rheumatologist about a biologic... this is humira. this is humira helping to relieve my pain and protect my joints from further damage. this is humira giving me new perspective. doctors have been prescribing humira for ten years. humira works for many adults. it targets and helps to block a specific source of inflammation that contributes to ra symptoms. humira can lower your ability to fight infections, including tuberculosis. serious, sometimes fatal infections and cancers,
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down 31 points, s&p down 7. the hardest hit names, energy stock. watch that price of oil go lower. s&p energy index group down more than 2.5%, following the price of crude oil. wti crude oil dropping below $80 a barrel. we saw that earlier in october but before that haven't seen that in years. brent under pressure. wti below 80 still, 79.85. the latest catalyst, goldman sachs bring doupg their forecast
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for brent. >> 75 for the first quarter, they say. 800,000 barrels of oil need to be taken off the market next year in order to balance it for 2016, according to goldman and believe swing producers will be shale operator here this in country rather than opec, an interesting development. >> later in the hour, we'll talk about how those low gas prices are influencing. >> in the meantime, facebook, twitter, linkedin reporting earnings following an earnings beat from yelp last week but two investors punished for low forecast. mark mahaney, at rbc capital markets and joins us. >> good morning. >> it's twitter tonight, it's facebook tomorrow and linkedin in later in the week. i see from the notes, and you have outperform rating on all of them. you're an optimistic guy. it's actually twitter that you think has the most potential upside for people here as a stock, 30%, i think, is the call
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from where trading now? >> yes. i would say it has the greatest risk for the quarter. twitter trades off of metrics more than any other name, that tripped up yelp last week. people looking at mau number, last year added 14 million ma u.s. from june to september. that's the bogey they have to beat. if they beat it stock goes up. if they don't, stock goes down. >> yeah. and of course you've got a 22% last quarter when they came through with earnings. where are you on facebook? the defrifference between the t facebook is a huge success again so far this year. stock's up 47%, 48% above $200 billion in market cap. how did they move the needle on tuesday night? >> yeah. facebook's been our top pick in the space since that march, april, may correction, that carnage, maybe going through that again. but that's been our top pick. we think that numbers look relatively reasonable for the
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quarter. the demand, the bar, isn't as high set on the mau numbers on the metrics names, for a name like facebook. and the advantage you have is even if there's a miss the expectations result on tuesday night, you've got upcoming catalysts, streams like auto play, people want to buy the stock before we see that roll out. it rolling out in the next three to six monthed. >> what about in the holiday season? that the most important fact of all, that is in the stock from what you're saying or not yet. >> i don't think it is. it's in the stock in terms of multiple. i don't think we see much more multiple rerating. i think the stock caps at 40 times earnings. it's the earnings numbers we think the street underestimated the impact. we think there's at least 10% of street estimates next year, that
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causes the stock to go higher. >> the defense between twitter and facebook you alluded to the fact its monthly average user, twitter nowhere near what facebook has. facebook adding 41 million users in the second quarter. does twitter need to get to that place? i'm thinking about the article this month saying perhaps twitter should buy growth, make an acquisition, use its cash to get those kind of numbers. >> boy, it's hard to see what they would buy that would easily allow them to get to those numbers. think about a similar type of service -- >> they were looking at messaging apps or asian messaging apps where the growth trajectory is large. >> something that increases functionality overall of twitter a theme we've had on twitter since the beginning, they need to mainstream the service. doing a lot of things to do that but they need to continue to do that. twitter as a stock doesn't work if this is capping out at 300 million user worldwide, just a quarter of the size of facebook. stock won't work from here.
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if there's a path through reacceleration to get to a half billion users the stock can work. >> on the subject of messaging apps, 8.8% of facebook's outstanding stock becomes available to sell from the whatsapp later in the week. is that an overhang that should concern people? a lot of stock that could hit the market. >> the stock that the employees, 32 of them, something like that, that got those shares, i'm surprised a lockup's this quick, simon. but that's something that you have to imagine those employees would be eager to look to sell. i think that's an overhang at the end of the week. >> can the market absorb that easily or could we have big moves. >> i think -- my guess that is move will amplify, if there's a negative surprise, that lockup at the end of the week will amplify the downward move. there's positive results the stock's holding in you won't
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have a major hit to the stock from the lockup. it will only amplify on the downside. >> straight ahead, apple pay available for a week but it's already sparking controversy. two big retailers shutting it off. more details when we compact. being a keen observer of the world has gotten you far, but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running. ok, if you're up there, i coulsmart sarah.elp. seeking guidance. just like with your investments. that sets you apart. it does? it does. you're type e*.
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u.s. stocks posting modest losses, following last week's
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rally, the best rally for u.s. stock of the year. is the volatility behind us? let's bring in brian belski with bmo capital market, hank smith, chief investment officer. you were looking for a prd period of volatility among your bullish market call which is supposed to last a few years. have we seen it? is it done? >> sure feels like it, sara looks like it, too, considering the comments that we're seeing from clients as we speak with them. earnings coming in pretty well, like we thought, and investors in general, i think, are starting to become a little bit more, let's say, calm after the fears in the last couple of weeks. it done mean we can't have periods like today when the market's down. but i think the market in america will be higher at year-end and next year, it looks to us so fargoing to be a repeat of last couple of years considering with slowdown in
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europe and em, it doesn't look like america can be too aggressi aggressive with respect to where interest rates stand. 2015 could be a repeat of last two years. >> hank, drill down into energy right now because i have here according to the notes, that you see buying opportunities in chevron, exxon, some of the names that are getting hammered today with wti falling below 80. >> right. good morning, sara. this is not a trade per se but for long-term investors worried about the fact that the market's near all-time highs, here's a sector that's had a correction and in some cases, in certain areas a bear market, where you have a woon dwonderful opportun a name like exxon close to 3% dividend, as a good entry point for a long-term position and you're going to get better than bond yields and you're going to get growth of income with
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dividend increases in the future, we would take advantage of this sell-off in energy. >> all right. think long term, focus on the relationship between the price of oil and the s&p 500. go around the floor and ask, why are stocks down? they point to the price of oil. why is that? shouldn't that be a big benefit to our economy? i get it, not as many oil jobs or manufacturing jobs are created but net-net, if you look back, it's certainly a positive for this economy. >> very much so. i think that we're still acting and feeling and trading like the last cycle which is all about commodities and all about emerging markets and we have to see a structural behavioral change that shows we're heading back into an '80 and '90s type environment where america will be, see rising dollar, slowly rising interest rates, slowly improving economy and in fact, we think that over the next five to ten years you see flat to slightly down energy prices as more supply comes on, thanks to
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energy independence here as we've turned the pipeline on, become more aggressive with respect to what's happening in both canada and the united states in terms of natural gas and oil, and i think it's a real trend. it will actually help increase the repeat idly in on shoring and bringing capacity back to america and canada in terms of real manufacturing. that's the trend for the next ten years. >> hank, so many big things seem to be happening. it's just as you look forward into next year, what are we down in oil? we've lost a third, 30% on oil? >> 25% on crude oil over the last five months. >> hank, oil's down 25%. we've just heard a call that maybe the yield on the ten-year could go to, say, 2%, as money's sucked in from the rest of the world into treasuries. when you've got a market that's trading on 18, 19 times last year's earnings when the long-term average is 15, can it
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sail on? can it continue to make gains when so many big things are happening and we're not sure of what the consequences may be. we won't get an interest rate rise from janet yellen until 2016? >> well, simon, i'll remind everyone that bull markets don't end because of geopolitical or exdone gift events if they did this bull market would have died quarters ago. bull marks die -- >> that's not -- i'm not talking about geopolitical events. speaking about repricing of assets in each of those cases. >> right. well, again, two very important determinants to valuation are inflation, which is benign, and interest rates which are very low. i think the market can support higher -- excuse me, yes, higher p/es and on top of that, you have an economy that's going from what has been a 2% recovry in hour view to something closer
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to 3%. that manes corporate earning should be better and so we think the market is fairly valued, too attractively valued. >> big week ahead in terms of earning, the federal reserve decision out on wednesday, gdp, first look at third quarter on thursday. anything have potential to really upset or surprise the market? >> i don't think so, especially the gdp front is going to continue to be on. the key thing, as we start to see earnings come in and surprise people because we're all in the bunker, all negative, we get positive news that will support upward stock prices and mercury mains the place in expanding fundamentals for stocks. >> all right. there you go. two bulls. good to see you both. thank you. >> apple pay is only available for a week but already two big retailers are disabling their pilot systems. mary thompson. >> cvs and rite aid not among the retailers apple signed on as
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partners for apple pay. but they are among retailers with a contact list technology that accepts apple pay. industry experts speculate their decision to disable these communications may be more about the retailers' testy relationship with some of the apple pay's partners like visa, mastercard, american express than apple pay itself. retailers have been complaining for years now about the fees they pay to processors to complete a customer's credit card payment. so few year ago, 58 of them, including rite aid and cvs, formed a group called the merchant customer exchange, mcx. next year expected to launch its own app, currency, accepted at 110,000 outlets and offer clients discounts and promos but more importantly for retailers, the payment it processes will be from a client selected financial account like a prepaid card or bank account, meaning retailers won't be paid visa, mastercard or amex credit processing fees.
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some speculate mcx pressured firms to stop accepting apple pay. mcx didn't make anyone available for comment. rite aid doesn't accept apple pay but it's always evaluating mobile payment options. keep in mind there's a lot ride on this for credit card processes as well as retailers. forester research estimates mobile payments in the u.s. will reach $90 billion. so retailers want to trim the cut they give to card processors, press sesers on the other hand looking to expand their share. back to you. >> therein lies the problem. thank you. the valeant/allergan patil heats up with valeant saying it will be willing to boost its offer. next, valeant's banker, the vice chairman and head of global m&a, will join us live. "squawk on the street" will be right back. to live life on your terms?
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update in the allergan take overbattle. prepared to raise its offer to $200 a share. join me now at post nine, valeant's adviser, robert kindler, vice chair and head of global m&a at morgan stanley and working it on the offense for some time here. >> it takes timing. >> it does take time. they had a lot of time but time is sort of getting more scarce, december 18th a special meeting. why the decision to send this letter? >> well, first, as far as the timing overall, these things attack a long time, you know, hostile bids. i advised sanofi, it took nine months. valeant laid out four months ago exactly the time schedule, which was having a meeting at the end of the year. so they're on track for exactly that. >> all right. again, why the decision? bill ackman's always writing letter, yapping about something on your side. why the decision to write a
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letter today? why tell us we're. >> willing to go to 200? we've heard that before, going to raise, not going to raise. seems a little schizophrenic. >> you haven't hear anything schizophrenic. there were news stories but the news stories were totally wrong. >> nothing i've reported has been totally wrong. >> david, always totally right, exactly right. i think we're in the time frame of all of this where it was important, remember valeant hasn't written a letter to this board in over a month. and we've gone through a lot of things that have happened in the last month, including putting our earnings out, et cetera. felt it was time to say, let's set the record straight on our willingness to increase our offer. i've told you before, at least in my view, it's hard to do hostile bids, particularly involving stock, right? when you think one side's winning or losing, and the stock gets played and it ends up that the acquirer's stock is art fishlely low, but i've always
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told you that, over the years, i've told people when to do hostile bids and when not. the only time you should ever do a hostile bid is when the target has gaps in its defenses and when you believe that there is a reason, a real reason, why you can pay more than anyone else. and i think that's what valeant believes. obviously gaps in defenses, we'll have the meeting december 18th. obviously valeant believes because it's a perfect fit, great strategic fit, great synergies including tax synergies they believe they can provide more value than anyone else if allergan would say, we are for sale and turn to acti activists and try to to a deal, would allergan be in a position that activists could pay. >> rational prevails. i think valeant has clear strategic benefits, 2.7 billion worth of synergies. i can't believe, and the letter today, that anyone else can pay more. >> what would a consideration
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look like where you were to raise it? include a collar? is it more cash? give people a sense as to what this 200 means. >> look, frankly, mike pearson was telling shareholders and it was reported we have to see where the stock is and certainly could be a cash component. >> a lot of this is designed to get your own stock up, isn't it? >> everything you do in a battle, right, is they're trying to get our stock down, we're trying to get our stock up, but the fact is that by any measure, any measure, valeant stock is way undervalued and allergan is overvalued. >> allergan says all of this is a distract to get people not to focus on what are great numbers from us. >> it looks like it worked, that's what we're talking about. >> you're a busy man. also advising the board of family dollar which set a meeting date december 11th. >> december 11th. >> to vote on the dollar tree deal. >> right. >> that board has notably rejected dollar general's bids,
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saying any trust wise we don't think you can get through with vestee turs you're proposing. any change coming before the deal is voted on? >> look, we'll see. clearly, dollar tree has said, and we've said, that we expect to be able to close this in early december. and we have substantially complied with the second requests, and so the timing, certainly look like dollar tree will be able to close the first week in december. we'll see what dollar general -- >> even a shareholder with dollar general out there with a higher dollar bid. >> remember, the higher, quote, dollar bid i by their own admission is 9 to 12 months away from closing, the a shareholder protect. >> m&a, monday without big deals, something of an aberration of the year has been robust, did the recent volatility of the market put a lot of ceos and bordens on the
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sidelines. >> absolutely. last time i thought m&a would be up 40%. but the inversion deals, some in the works off the table, some already announced off the tables, about 5% of overall volume if those things are on the sideline. volatility is one thing that you can't -- just can't do m&a deals with. i'm not surprised there's no mergen monday today. >> do they get pushed or -- i mean pushed -- obviously time is the enemy trying to negotiate a deal. do you see a lot of it coming back if the market remains up. >> i think m&a has to come back. the fact is that it's very tough to get growth in your business without m&a, and these things are not really -- don't relate to cost of capital, that's the case for a long time. they relate to being able to show growth in your earnings, genuine growth in earnings. the other interesting thing, a lot of transactions are spin-offs. paypal being spun off and h.p.
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spinning off businesses. that is what we're going to see a lot more of. it's people getting back to their core business with or without activists. abbott broke up last year, there wasn't any activists on the scene. market wants corporate clarity. >> treasury's actions on inversion seem to do what it wanted, stopped them. >> absolutely stopped them, yeah. >> all right. december 18th the vote. going to win it if it goes to vote? >> you know, i -- what do i think? >> on valeant. >> i think if i am a portfolio manager, sitting there on the 18th, it's very, very difficult not to remove directors when you have year-incoming up and the stock would go down precipitously, but we'll see. >> if you lose the case in california against ackman, does valeant drop or respond to that in any way? >> i don't think the case in california has any relevance. i don't think it has any bearing on anything. >> good to see you. >> thanks. good seeing you, david. >> talk about actual deals going
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on, although not seeing that many new ones yet. rob kindler head of all things m&a at morgan stanley. >> thanks very much. next, the u.s. gasoline prices are the cheapest they've been in nearly four years. this as crude oil falls below $80 a barrel. finds out what it means for the consumer and the economy after the break. how do you beat the number one seed? you just have to win 70% of your points at net.
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. to people focused on oil, crude oil below $80 a barrel, dipping to the lowest levels since june of 2012. joe is mccantor partner founder and former gulf ceo. patrick also joins us he's gas buddy's senior petroleum analyst. welcome to the program. let's talk about gas prices first of all. in advance of this latest leg down on oil, and obviously gas prices react with a lag, we are suggesting that the average family in this country was saving $50 a month. how much will they save if this continues? >> you know, it's tough to tell how far the bottom will drop but motorists could by christmas be looking at $50, now looking at
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maybe 60 or 65, some states now 19 states below $3 a gallon on average. it could continue to get better, a perfect time of year. >> can you give us an idea of when the oil market will bottom out? ? >> i think it will bottom out at $65. >> wow. >> maybe -- >> 65 on west texas? >> right. that will shut off new production, but it won't stop existing production. but anyways, i think it's $2500 per household. heating oil prices are below $3 in the northeast, which is 75 cents cheaper than a year ago. that alone given the average homeowner is 1200 gallons, is 75 cents a gallon there. so that's $800 a year. and then you factor in a 12% shift from heating oil to natural gas in the markets where
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they can get natural gas to the consumers and natural gas equivalent to oil is a dollar a gallon. so the savings is well over $2,000 on an annual basis per household. >> patrick, i mean that is an exaggerated sort of low forecast, but already prices are down so far so fast in the last five months. the impact of gas prices, we understand how it can help the consumer, puts more money in their pocket and lets them spend more driven by a 70% consumer economy that's good, but what about the cost given that shale boom has produced so many jobs, high-quality manufacturing jobs, more cap ex spending, is it that direct of a positive given now that we are a major oil producer than it was? >> well, you know, we're not talking about any risk of loss of this oil supply yet. i really don't see a big hit or any major change with, you know, what we're talking about, development in north dakota. we have to see oil prices drop
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quite a bit more to see any risk to any development in north dako dakota. >> joe, i would like to ask you the same question. >> i would like to comment. >> carry on. >> i think the capital spending last year in our gdp in this country was 1 trillion of which 275 billion was energy related. i expect to see at least a $10 billion increase in capital spending on pipelines, new power plants that are gas fired. >> joe -- let me ask you this. one of the reasons that we're down today is because goldman has cut its forecast, suggesting 75 on west texas for the beginning of the quarter. you're down i think you said to 65. the debate is, at what point does investment in this country in shale, become uneconomic. we had a note from citi that said don't worry until you hit $70 a barrel. and goldman is further to that
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saying in the future the swing producer the one that has to cut back, because of excess supply, will be this country no longer opec. joe? >> the investment in new shale is probably $50. existing shale it's not going to see decrease below 60. you're forgetting investment in pipelines, new processes to actually lessen the cost of taking gas out, vinyl plants, the reindustrialization of america, our exporting plants, all that investment will go from e and p to processing, but we'll still see capital spending. >> okay. >> very positive to gdp. >> we're out of time. good to see you both. joe and patrick. >> let's send it over to john fortt with a look at what is coming up on "squawk alley." i have a feeling you guys will be talking apple pay. >> that's right. sara, "squawk alley" is going to be money today. ralph nader not happy about what
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apple pays manufacturing laborers in china. he's planning to call in. cvs, rite aid, not happy about apple pay. dropping that. we'll talk about what it means for the future of that technology. shakeup. somebody comes up big in this. it's coming up next. i know what you're thinking... transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right. you're thinking of the 1.6 million daily customer care interactions xerox handles. or the 900 million health insurance claims we process. so, it's no surprise to you that companies depend on today's xerox for services that simplify how work gets done. which is...pretty much what we've always stood for. with xerox, you're ready for real business. i have $40,ney do you have in your pocket right now? which is...pretty much what we've always stood for. $21. could something that small make an impact on something as big as your retirement?
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u.s. district judge temporarily blocked a new jersey racetrack hopes of offering betting. what happens now, morgan brennan back at hq with more on what's next. >> how a lawsuit from major sports leagues against the state to make the ban permanent will proceed. new jersey governor chris christie signed a law repealing the state's ban on racetracks. sports leagues responded with a suit to plok the new law and the judge sided with the leagues for now. why does this matter? new jersey would be only the third state behind nevada to a much more limited extent delaware with sports betting. those two states are exceptions to a federal law banning the activity. officials have been arguing this is a much immediated lifeli --
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needed lifeline particularly atlantic cities casinos to close with the fifth trump tank on the brink. the irony has been the fact that none of the casinos are building sports books. it's racetracks like monmouth making those investments right now. analysts say the casinos are less prone to adopt this because it's unlikely to be a major revenue driver for them. sports betting is 2% of gaming revenue in nevada according to fitch and 1% in delaware. so right now, the fear -- with the fear of legal blowback on a federal level the risks don't outweigh the benefits for the casino operators, but it is a different story for monmouth. the racetrack had expected 5,000 to 10,000 additional patrons this weekend. keep in mind racetracks had been hard hit in recent years as well. the state stresses this is a temporary restraining order and only allow plies to a handful of sports. theoretically wagers could be placed on soccer, golf, tennis,
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boxing and mma fights. no plans to do so yet. back to you. >> all right. darn. morgan brennan thanks for the story. was going to go out in new jersey and bet on the bengalss. just kidding. i don't know anything about football. >> to "squawk alley." it is time, kayla tausche. good morning. >> good morning. thank you, simon and sara. it is 8:00 a.m. at google headquarters in mountain view, california, 11:00 on wall street and "squawk alley" is live. ♪ good monday morningp. welcome to "squawk alley."


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