tv Squawk on the Street CNBC October 16, 2015 9:00am-11:01am EDT
wine that tastes like that. also, santa claus isn't just coming to town, he's joining the city council. this man leading all write-in candidates for the north pole alaska city council. santa claus is his legal name. >> yeah. that's randy quade trying to sneak across the border again. >> that's in our ear. >> bye, everybody. >> have a great weekend, great week. make sure you join us on mondays. "squawk on the street" is next. ♪ ♪ congratulations to the mets and the david who's celebrating today. good friday morning. welcome to "squawk on the street." i'm carl with jim cramer at the new york stock exchange. october is the best month so far. closing out a busy week. macro data is on the way.
industrial production. michigan sentiments at the top of the hour. there's a look at crude back about 47. our roadmap begins with ge beating the street on earnings, but what about nelson peltz? >> companies such as yung, wyn. >> alibaba making a multi-billion dollar play for china. >> general electric up 29 cents a share in the third quarter held by demand for jet engines and power turbines. ceo jeff emmeltz said ge performed well. oil and gas revenues down 16. power and water up 1, aviation up 5. >> i like the quarter. plain and simple. when i see 4% organic growth, that's going to be among the highest of the big industrial companies. it's been the best performing industrial so far this year. i think jeff immelt, the
transformation is truly happening and it is real. this is obviously conference call, we have the date, we have our reports here. i mentioned that because the goldman sachs hadn't been on that and the stock jumped 7 points after we talked about it on "squawk." >> important to mention. things happen on conference calls that move stocks, no doubt about it. >> this is solid, it's clean and i'll tell you something, i don't have to look through and wait to hear what ge capital says. i'm looking at what ge industrial says and i like what i see. >> right. it's very different. there are headlines. the call has begun. europe appreciably better says immelt. reconfirms 15 outlook. they have the synchrony exchange. when we get back to 11 days ago the bullish outlook from nelson peltz, they say this is a transformation that's being ignored. that's yet another part of it. the synchrony exchange will happen next week.
they'll return 30 billion to shareholders. synchrony already public. >> share count will be reduced by 6 to 7%. talk about the allyson deal closing in a few weeks. oil and gas, remember, oil and gas in china only 19% of the company. i question whether oil and gas we won't look back maybe they're premature. just this european theme is resonating throughout the earnings quarter which it's better and i think that's really important because europe is 717 million people. a lot of us, we get a little concerned about china, but this europe is beginning to become an under current of positive in some of the industrials. it's been going on now since the earnings season began and ge is, i think, front and center telling you you can't have 4% revenue growth without -- >> yeah, for every deflationary, you know, price metric or zed w decline, september up 9.8.
that's 25 straight gains. >> it's very strong. now the auto sales, by the way, there was a conference call, sometimes you have to really dig down, ppg, fabulous conference call, china auto, this he have actual read of china auto because they do the codings for all the high end cars. october very good. europe, better for ppg. i just like it because codings are so instantaneous. you get the information. i felt again, heartened. autos are strong not just here but they're getting stronger in europe and they're coming back in china. they cut a surcharge, a tax on small engines there. >> right. >> but i am getting more, yes, sa sanguine. >> we're going to be talking dmien in a moment. mention on ge, this is the first opportunity that immelt will have to comment on the trion investment if he choose toz do so. in particular, while it's all
coombaya between these two, they did ask them to increase leverage by $20 billion remember in terms of increase one turn of leverage and consider increase in the buy back in a significant way and consider alternative structures to continue to reduce the size of ge capital's balance sheet over time. there were some asks from trian that we haven't heard ge respond to. i don't know that it will be asked on the call. i want to put that out there as something that we might hear about. >> i think the stock's a buy, but obviously it's on the run. it was interesting that this is another one of these stories of this quarter. the numbers come out and people are chatting about weaker revenues. the revenues were fine. this is that kind of pre-market chatter that is just faking out people left and right. this is about organic revenue growth. it was much stronger than a lot of people thought. it's about margin improvement which was really rather dramatic. i don't know how nelson is going to get more margin, but maybe he can do it. it's a good quarter and it's a clean quarter. >> i'll tell you what, some of these names on the dow, ge year
to date, they're almost 13%. mcdonald's 12. we were not saying this in the summer by any stretch. >> i've been saying that easterbrook, i don't want to call him a miracle worker, how about a person who knew how to turn around europe and is turning around the u.s. i don't know what mcdonald's numbers are going to be. he's talking about real estate. these are ceos who are very focused. a young ceo may be focused soon. >> he's going to be focused on this. they have no idea what they're actually focused on. >> no. they're not in focus. >> they've got to be big picture watching it go all over the map. >> mcdonald's, easterbrook, i've wanted him to come on very badly. very talented man. he's from the can't be take no prisoners school. >> meantime, a number of companies reporting concerns about china this week, including wyn, yum, necessarily and hugo
boss. see what steve nguywynn had to about mccau as to the impact of government policy on planning for employment, promotion, hiring and compensation. none of us are really clear on what our environment is going to be like going forward, and it makes planning and adjusting almost a mystical process. >> quite the conference call last night. there's a look at wynn down today for the month down for october, 39% gain, even 86 cents meets and the forecast disappoints. >> people thought that junkets were going to come back. i've got to tell you. i'm watching, i'm watching the mets, congratulations. >> thank you. >> i'm watching some of that insane falcon game. i thought this was entertaining. then i listened to the wynn
call. my favorite line for steve, this has been the most satisfying quarterly phone call we've ever had but at least it's the most candid and the most honest one that we could possibly give everybody. this call is an indictment of the party. it's an indictment of the way mccau is run. >> chinese people's party. >> yeah. when i call the party, i'm he not talking about the party i'm hosting tonight. >> yeah. >> private, by the way, so don't you dare crash it. >> i was thinking about it. >> what's real interesting about this is he's saying, listen, there's a lot of corruption in china. president xi is cracking down. we're not allowed to have as many tables as we thought. we can't prepare if we don't know how many tables and the tables, as he called them, the cash register is the casino. he wants to build people and put people to work. steve wynn is a great american capitalist. the chinese capitalist party ought to get back into the game and talk to steve because steve is a businessman. >> we're aware of the crackdown on corruption and on ostentatious displays of wet both of which have hit mccau.
>> yes. >> in the call, if you had any idea how many years he's been in the business, steve wynn, in my 45 years of experience. in my 45 years of experience. in my 45 years of experience i've never seen anything like this before. he says it over and over again in this call. congrats on 45 years, steve. >> i told you the call was entertaining. >> it is. i was reading it this morning and very much enjoying every minute of it. >> frustrated man. i'm going say this for steve. i don't want to embarrass him. you've talked to people who work for wynn. you have a health issue, steve wynn's there. he talks about talking with employees. it is not gloss. he's not dross. he's real. he's real. in his 45 years people love steve wynn. >> love steve wynn. >> do they love yum brands? corvex owns part of it. china is the key. jim, they provided an updated
outlook for full year china division. they're going to start reporting same store sales for the next few months in china. they're going to start telling us. it continues to be difficult to forecast through the ongoing volatility. they now see the china division same store sales could range from flat to up 4% although pizza hut's going to be down, f kfc is seen up. we will release sales on november 12th. >> people will say there's going to be a restructuring. steve says it's going to come before december 10th, china spin. a china spin of a company that you don't really want reminds me of the occidental spin of the california assets. it's not what we want. you want a spin of something you want. you know, kimmors. >> you don't want that. >> cc given to you by dd. >> you don't want that. >> no, that was an ff. >> it was an ff? >> yeah. grade. >> got it. double f. >> double f.
>> you know, china overalthough, because nestle also is talking about china, i did note yesterday on the conference call from blackstone which controls a lot of real estate in china, particularly malls, these comments from steven schwartzman, the company's ceo. he said, while china's definitely growing, still growing faster than the rest of the world and certainly faster than the doomsday scenarios that i sometimes see on television. >> come on, man. >> our chinese shopping malls, which will shock you, are reporting same-store sales growth in the area of 15 to 16%. global recession, go figure. this is yesterday's call after blackstone reported. >> nike, very strong. do you really need new jordan's? 30th year. do you still need new jordan's? do you need to pay $5 for a triple cappuccino? no. apple is strong. the ppg comments about autos. the benz numbers?
the bmw numbers? >> 40 with populations over a million. >> that is the best of times for a consumer and the worst of times for industrial. >> yeah, we're going to watch that one. the auto sales you mentioned and others. feranos under scrutiny regarding the lab tests. and then danny meyer eliminating tipping. he'll join be us to discuss that decision and what it could mean for the future of dining and payments in this country. take another look at the pre-market. more "squawk" in a moment.
getting industrial production here. let's get to rick santelli in chicago. rick? >> i'll tell you what, when we see industrial production, it's down .2. that is as expected, indeed, it is. here's the interesting part. this means six out of eight turns into seven out of nine. negative. this is september read. nine reads. seven out of nine are negative. now if we look at last month, it did have a subtle revision from
down .4 to down .1, but that's still a minus sign. on the utilization side we did see something a little bit better than expectations. 77.5. 77 1/2%. it's about .2 of 1% better than the expectation which matches the upward revision also of .2 of last month which turns into 77.8. so we want to continue to monitor the ten-year note. down seven beeps on the week but lightly above 2%. david faber, $100 to your favorite charity. the cubs sweep the mets! >> sweep? sweep? >> we're going to bet. >> 100 bucks to your favorite charity. i know you will and i'm crazy enough to offer it. >> i love you for that. yeah, listen, they're going to be tough. if they win, i'm rooting for them all the way. i wish it wasn't the cubs, rick, i really do. obviously. >> david, you're a lot younger than i am, but '69 ruined my 13th year on this planet and we
are out for revenge. >> there you go. >> only been 108 years. maybe a little more. it's only been 29 years since we've won a world series. i take that. i take that all the way. thank you. let's get back some of our stories this morning as well. alibaba offers to buy the remainder of chinese video service youku that it doesn't already own. alibaba already owns 18.3% of youku. it bought it at a higher level. in sort of the $30 land. it does say the digital entertainment company will be core to its strategy of promoting consumption of virtual goods and services. interesting deal. they already have the support of youku's ceo. he's on board. so they're at about a 60% vote where they need 67% support. so this deal is more or less going to happen. it is still subject to due diligence, of course. $26.60 is the price.
youku is the youtube of china. it isn't as though there isn't competition of buy dou has a digital platform, ten cent has a platform. consumption of video on mobile devices is around the planet, certainly in china, is exploding. you don't have as many movie theaters. you don't have as many people going to all of those things. you can imagine essentially why alibaba wants in. they've talked many times in our interviews about the fact that people spend a lot of time on the platform, not just shopping but other things as well says jack ma. this gives them an opportunity to stay on the platform. >> very unusual that a ceo issues a mia culpa letter saying he's going to do better. >> you're talking about the baron's story and the stock's performance since then? >> yeah, and gentleman ma's
lett -- jack ma's letter is very important. steve wynn was hoping they would have more tables in order to be able to take advantage of that. i do think the consumer is making a turn in china. we don't have the kind of numbers that we get here, but this is more anecdotal. but eventually it will be empirical. we'll all realize that china turned for the consumer in late september when it looked like that the stock market stopped going down. notice, the stock market -- actually, the last week of august was when you begin to get the turn. anybody who got in before january has done quite well, and they can cash out. this china stock market, i don't know if you watch it. it's like the mets. it's not quitting. >> it's not quitting. there's no quit. >> analogize to the mets constantly. >> everything is a mets metaphor. >> i appreciate that. good morning. great night, too. thank you for keeping it going. >> your point about -- you said they were resolute about maintaining 3,000, which they did. >> yes. they just didn't let it go
through. the party had more divisions than the short sellers. the party made -- the communist party, not the majam pajama par. all of us laughed. real buyers have started to come in. the valuations is very hard to understand. i did a big report. the pes are unclear. the fact is -- it could be down tomorrow, but right now the shanghai comp is 300 points, almost 400 points above the level and it's held there. >> right. >> i think that's emboldening people. >> i think volume is way down, right? they don't have the level of participation. >> it's kind of a thermometer. it doesn't reflect. a lot of people came in, five accounts per person. the fact is there is something to be said that late september was a turn. ppg again confirming codings. now we have alibaba numbers a little bit better. nike numbers got better. the apple numbers got better. at what point do we say that kfc is an outlier. i think kentucky fried chicken is an outlier. >> all of those conundrums.
whatever happened to the chinese selloff of treasuries. that hasn't been the story. >> it has an impact even if they aren't selling. now it's happening. >> copper's turned a little. the freight keeps going down. no bottom in iron ore they keep overproducing. the copper market has pulled back a little bit because of freeport. i have to tell you that it's the industrial side, if you look at the steel side, no. the industrial side is bad. chinese export number, absolutely critical. i thought it was okay. the import number, bad because they're not bringing the stuff in. the export numbers showed me a sign of health. people say how can you get that read through? i talk to any company doing business in china and they just say it got positive at the end of september. got positive. >> got it. >> except for steve wynn because of the table restrictions and kfc, because it's fattening. i don't know. have you had the stuff lately? >> we will get mad dash with jim after a break. don't go away. here at td ameritrade, they work hard.
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♪ ♪ all right. there it is. some music. a mad dash for a friday. we're going to go to -- >> again, usual caveat. trying to get the bits and pieces when you talk about a conference call. a really thorough release. i regard these guys as the single best company in oil and gas. everybody knows it, fantastic. give you a glossary. slumber's a lowered the boom saying however for world
services the market outlook for the incoming quarter looks increasingly challenging. they expect activity to further reduce confirming jeff immelt, 10 to 15% down for oil and gas next year. it's not done. what's the read through for oil and gas. if you get more and more shutter, then your price will start going higher. carizo, crzo, second done unbelievably in the hole. if you take a look at the concho secondary at 92, went to 116 immediately. the read through for the negative slummer is the oil service not good. oil will be good. if this many people are going to cut back and not drill -- >> still waiting on halliburton. >> oh, my god, david. you have to do more work on halliburton. it's the greatest buy in the world. they get that deal done or sold to you. that deal is everything. everything. >> all right. we've got opening bell coming up, talking about everything. we'll be trying to get to it. we always do here.
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you're watching cnbc "squawk on the street." just a reminder of what we've been through in the past four sessions. dell emc, bud sab, all those bank earnings, netflix, intel, the chinese import/export data and we're just really getting started. >> chinese, this is the quarter of three. like garry in the u.s. spots. you have to get up at quarter to 3 in order to do the job during this period. this is a lot of clever stuff. >> then there's the s&p for october. s&p for october is up 104 points. to be the best month of the year it needs to beat february which is up 109 points. just 6 more points and we're there. >> it is incredible. i have to tell you this is a month that everybody said get out ahead of it. and one thing we've got to remember, september they want to get out of october.
it's a great month. remember all of that calendar stuff tends not to work out. >> let's get to the opening bell and look at the s&p at the bottom of the screen. at the big board today, it is first data, a payment processing company celebrated its ipo yesterday. a big marketing push as they ring the bell. and then the nasdaq it's boxers, oscar della hoya. >> henry cravicz up on the platform. kkr still 30% owner of first data which did break bid. >> it did yesterday. obviously mr. cravicz has been dealing with energy in their portfolio not doing particularly well. this one, they've still got a shot. >> it was more expensive than visa and master card. organic growth base zblisbasis.
>> first data was? >> yeah. comparing it to the cohort. if you bought visa and master card, those were the two best. there was private equity and how much public, look at the core growth. it is such a tough cohort. anybody who goes up against those two companies realizes that they are just the masters of the game. >> every now and then you get a big move in ge. this is one of them. almost 2%. the best performing dow component by far. >> they already ran up just beginning two weeks ago when they had an announcement two weeks ago, they remembered it was not last monday but the monday before. >> 11 days ago, the 5th. 5th of october. >> it laid out all of the things that could happen that was good. a long piece saying, just go by the stock. it was down premarket. what an opportunity. i know people don't trade premarket. the conference call, jeff is being very up front talking about oil and gas not being strong. no one seems to care. why? it's not a big portion of the portfolio. there's a big, big buy back to go with peltz. >> he did respond to one
question about their new investor, that being trian. all mr. immelt would say is this, he said the white paper lays out their thesis. we don't agree with everything, but it is pretty consistent with what we're done and what we're doing. we're laser focused on costs and margin opportunities. that lines up with trian's white paper. that is his response, jim, to their question of the $2.5 billion. it's more than that. they're up over 10%. >> give us a ten year, guys, on ge. we're pennies away from taking out the highest level of the year but if it gets above $28.68 which it's about to do, you have to go back to '80? >> yes. when we had the company's farmer's financial. without a doubt, the 40 to 45 number that peltz is talking about, 2017, i'm going to go out. i think it's doable. i think it's doable. i think that the estimates have to come up here. i think the business is -- now, look, if you had some headwinds
going to tailwinds, that's how it's really doing. you have to get the china comeback, but so much is good. by the way, remember earlier this weekend dell talking about the wide body glut of airplanes. that's been refuted by a lot of people. honeywell, people were worried about the revenues and worried about aerospace. people are saying, hey, listen, full speed ahead. the industrials are back in favor after a two-day pause. dave cody, are you looking at the quarter on the surface. on the surface the quarter looked ah, but, wow, people like the industrials today. >> mattel, 7% gain. barbie continues to be weak but we' we're heading into a toy season, jim. there's a lot of hopes on what disney will bring. >> mattel was down $1. i said, geez, could you wait? they're working with developing the next generation toys. don't laugh. they had fallen behind with all of the stuff with the barbie, kind be of conventional.
i think mattel is doing many right things. i think the dividend is safe. it represents a decent opportunity. not saying to sell hasbro. i don't want to go against "star wars." disney keeps up, step by step, inch by inch. >> disney is coming back from mem mediageddon. >> i like that term. a lot of people suddenly started questioning the business model in terms of how quickly the cord is going to be chopped, broken, cut, shaved or anything else you want to do to that cord. i would like to get to theranos if we can, jim. >> okay. >> this is a private company, if you haven't been following it, of course, wall street journal today, very negative piece yesterday, seemingly well researched, in which the ceo did not offer an interview, but last night on "mad money" jim was able to interview theranos's ceo elizabeth holmes about her
company's testing methods, how it will stand up to those regulated by the fda such as quest diagnostics. >> we've done it absolutely and it's published in our fda decision summary from this summer from a 900 patient study where we got fda clearance from the system that journal is questioning. it was 889 patients for that test and we've done that over and over again for every single test. >> jim, again, this is a $9 billion valuation of a private company that police with lab corp, competes with quest diagnostic. being questioned by "the journal" in terms of what they're doing versus what they're saying. where do you -- you know, you conducted this interview. the only person to have interviewed her. what are your thoughts? >> at the end i said you have to read the article and listen to what she said and try to rationalize it. after my interview ""the wall
street journal"" came up with a new story which said that only one of the tests, so to speak, uses this particular kind of technology. that was not my read through of the interview. so that raised some serious questions for me. and i think that while i think that elizabeth is very forthcoming to come on and has -- raises -- you know, changed the industry somewhat quest diagnostics updated by wells fargo. i don't think that's idol. the questions by the journal are serious and i wanted to know walgreens did not respond to their inquiry about whether they're switching away. got to find out with the cleveland clinic what the real partnership is there. the credibility has been hurt. there are more questions that need to be answered because of that second article that came out. if i had had that article when i interviewed her i would have had a different set of questions to ask. sometimes you have to praise other journalists. that was a good story and it came right on the heels. they quoted me twice and really explained what they felt she had
said. it raises eyebrows. >> not only is inc. magazine called elizabeth the next steve jobs, the board, "fortune" takes a look, kissinger, sam perry, bill frist? >> these are very serious people. there's jeff sonnenfeld talking about the ancient marin report so to speak. the investors in theranos are fabulous. you look at them. listen, "the journal" doesn't know what it's doing. "the journal" it's well-documented. elizabeth, anonymous people. "the journal" only one test is approved. hearst, hundreds head to head. it was only herpes. >> 800 patients for one test. >> right. maybe that's the one test that's being done. so i come back and i say, listen, you have to make up your own mind. walgreen, walgreens is the
customer. what is walgreens saying? they kick it back to theranos. what does cleveland clinic say? what is the substance of that partnership? i explained to her when i interviewed her, "the journal" is not idol. it's not the national inquirer. they vetted and vetted and vetted. she responded well to the things that they raised but then they raised new questions. those have to be answered, too. by the way, this reporter, pull li litser prize reporter. when you see that kind of work and that paper which you worked at, you know, that that a recall does not appear out of nowhere. >> no, a lot of work goes into that. really quickly, airlines taking a hit. american is down 3%. interestingly today u.s. air will take its final flight, a red eye tonight from san francisco to philly. after that the brand is -- american takes over the reservation system completely. >> i took that flight once to get back for an eagles game. i want to say that this is spirit that is causing the weakness. symbol save because of a
downgrade. two downgrades. the morgan stanley downgrade is an indictment that says the best numbers are over for the short term. it's taking everything down. i thought your tweet this morning reminded me if you follow this group very closely. spirit is a very different business model from the other guys. delta just reported a good number wednesday. i'm not willing to write off this group. doug parker did come on "mad money", the ceo of american, and said this is going to be a difficult integration. that starts tomorrow, i guess? >> yeah. >> got to watch that. >> yeah. did want to mention we mentioned first data ringing the bell. that stock has not done well. priced at 16. it's now $15.56. that's not the way you draw it up to go on paper if you're an underwriter. that said, they got it done. they will deleverage the balance sheet. that's an important component, of course, if they're trying to win over investors, refinancing their continued maturities as they come due at much lower rails. that's not the way it wants to go. albertsons, jim, we'll see where we get that one. it's not going to be priced any
time soon. >> why are they holding it at $20 level. cut this albertsons coming up. not a good balance sheet. not as good an operator as krogers. if they price that, it may be down 14, 15, holding at 20. 14, 15 would be ideal level to go buy that stock. that is more important deal than first data. we want somebody else besides kroger and whole foods. people want albertsons. they want that deal but not at this price. not at the 20 price. break price, get the deal done, move on. >> at this moment october is the best month for the s&p in four years. let's get to bob on the floor. bob? >> the important thing is overall let's just call it a modest move to the up side today. let's take a look at the sectors. health care is doing well. that's a leadership group. consumer staple is doing well. financials are okay. very good week so far. tech is lagging, however. i do want to note industrials, two big industrials today with
good numbers here. essentially affirming their outlook for the year. honey well, take a look here. excellent numbers from them. operating margins on honey well. 19.3%. remember, the s&p average operating margins maybe, i don't know, 10%. outstanding numbers overall. up almost over 200 basis points for them. i want to point out again the effect that the dollar is having on earnings. look what happened to honey well. now there are several divisions for honey well, three of them essentially. aerospace, biggest division here. organic sales were up 2%. reported, reported is what the real numbers are including the effect of currency. we're down 2%. this is what the strong dollar is doing to these companies. it's just killing them. same thing with -- look at the other one. automation and control. they do the environmental controls and the security products and all the scanning devices and things. it's a big division for them. organic sales up 3% but the reported numbers, which includes the effect of currency, down 3%.
these are enormous swings and it's really impacting the companies here. so that's what -- my point again on the currency issues. let's turn to the banks. sun trust had a very nice b here. tax items here. up nicely today about 2% here. i think the important thing if you look at their loan growth, this is what everybody is trying to figure out what's going on. this is very typical of the industry so far here. quarter over quarter, the average loan growth is flat. commercial industrials kind of flat. nice move up. little better than everybody else in the consumer division. here's my take on how banks have done so far this quarter. this is just my look at the earnings this week on them. net interest margins have been mostly flat. hovering around 3%. no real expansion there. investment banking definitely is slower. the loan growth has been kind of modest. i think it's okay but not great. credit quality overall is excellent. i haven't heard anybody complaining of credit quality. here's the banks. here's what's important going
on. banks have had a great week overall. usually banks will sell off in the first week of earnings. they sell off going into them. that's not happening this time. they're all on the up side. some people have been surprised by that. finally on ge, you have been talking about ge. the only thing to note about this deal, the synchrony share exchange next week is going to significantly reduce the number of stock outstanding. synchrony will operate. gdp on china sunday night. that's going to be a market mover. right now the dow up 12 points. carl? >> have a good weekend. >> you too, bob. let's check in on the bond pits as well. rick santelli in chicago. good morning, rick. >> good morning, carl. we are really camping out at this 2% level. many traders are getting a bit brave playing the notion that it's going to continue to camp there. i'm not sure if it will or it
won't, but we can let the charts speak for themselves. two day of tens tells you a lot. first of all today, not a lot of price volatility. doesn't mean there isn't volume going through, but it isn't moving a lot. even the seven out of nine negative numbers on industrial production seem to not phase the traders much. if we look at a may 1st start to ten year, maybe that tells us more. tells us to be careful. we're knocking at this 2% door. the pattern, the longer we camp there in many ways starts to deteriorate. if we look at an august 1st of tens minus 2s, this gets fascinating hooks. normally that kind of flattening bias has something to do with the fed. but truly it seems to be more of a growth issue on the long end along with the idea of parsing data on pricing. you know, if you don't have growth, you don't have pricing pressure, ppi expressed that. cpi was more of a debate. if you wanted to find some issues, you could, like service
sector, but many traders don't. i think that accounts for some of the activity on the long end. if you look at a may 1st of the boons, this is fascinating. first fall the pattern is identical to our tens. what you want to pay attention to is how highly correlated they continue to be. they're down one on the day, seven on the week. tens are down eight on the week. if we look at tens minus boons, if you really think our ten-year is going to slip under 2%, watch this chart. if it starts to trade much under 144, you're going to get your wish. the last chart is the dollar index. this is a tough call. patterns are very similar. low end of a range but it does seem to be camping at a range of 94, kind of 98. so maybe it will continue to stay in a range especially against the euro. carl, back to you. >> rick, we'll see you from michigan at the top of the hour. when we come back, how much is uber really worth? we're going to get an assessment from the dean of valuation. but, first, tom brady.
>> who's to say i saw a prototype of it? yes, i did. it's magnificent. i'll be wearing that one. >> brady collaborating on a smart watch. we're going to find out which one. after the break, dow hanging on to a gain by about 1 point. back in a minute. when you're not confident your company's data is secure, the possibility of a breach can quickly become the only thing you think about. that's where at&t can help. at at&t we monitor our network traffic so we can see things others can't. mitigating risks across your business. leaving you free to focus on what matters most. a 401(k) is the most sound way to go. let's talk asset allocation. sure. you seem knowledgeable, professional. would you trust me as your financial advisor? i would.
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♪ ♪ announcing new england patriots quarterback tom brady is its new brand a.m. bass so door. tag planning to unveil its smart watch next month. here's what brady, who is collaborating on it, had to say. >> am i supposed to say that i saw a prototype of it? >> yes. >> yes, i did, and it's magnificent. i'll be wearing that one. those connected watches are amazing. that innovation and how we're moving forward with this type of technology into the future, i mean, that's exciting stuff to be a part of. so we're working on some designs and it's been a lot of fun. >> tag is partnering with google
and intel on its watch. you hear companies like under armour and nike saying you have to expand the base of athletes to sell apparel and wearables. endorsements like this are not immaterial. >> tom brady, best season ever start and it's funny because he was going to be banned for four games. i salute him and the krafts. this does matter. under armour, by the way, apple is lined up with -- tim cook's on the board of nike. under armour has done the most in this area. their whole fitness connection program is good. a lot of people worried about under armour, the transition of the manages the at top. i like under armour and their endorsements. they've been the best at selecting people who endorse. niko had jordan which is the greatest of all time. >> yes. >> g-o-a-t. greatest of all time. who quoted that? >> i know the acronym but who has it. >> muhammad ali. >> goat, greatest of all time.
we will get stock trading with jim in a moment as we continue to watch the s&p off the highs, $20.26. very interesting. back in a minute. ♪ i built my business with passion. but i keep it growing by making every dollar count. that's why i have the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy for my studio. ♪ and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business...
that's huge for my bottom line. what's in your wallet? dad: he's our broker. he helps looks after all our money. kid: do you pay him? dad: of course. kid: how much? dad: i don't know exactly. kid: what if you're not happy? does he have to pay you back? dad: nope. kid: why not? dad: it doesn't work that way. kid: why not? vo: are you asking enough questions about the way your wealth is managed? wealth management at charles schwab and i am a certified arborist for pg&e.ughes i oversee the patrolling of trees near power lines and roots near pipes and underground infrastructure. at pg&e wherever we work,
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not clear that if you take the underlying real estate. >> garden. >> start to franchise more of it. >> sometimes when i say the answer to that is that miles white is smarter than i am and easterbrook is smarter than i am. i just have to see. i don't know what the same store sales numbers are, but these are very smart people and i'm not going to sit there and tell them, listen, i don't think it will work. i want to learn from miles white. >> they up their same-store sales for q4. they survey franchisees that breakfast is helping and price increases is helping. the guest counts aren't really helping as much. >> i can't turn immediately. the stock is up from the 80s. it's up from the 90s. i think you have to take a more than a five-day period. this guy is turning around a great american chain. it's been done before. remember when skinner got in and i think that easterbrook is backable. i hope he's going to be sitting there. >> talking about turn arounds
and what a week it's been, no turn around in walmart as they tried to turn it around. >> none. >> jim. $58.78. >> no, i think we were talking about, i mean, i think it's the yield that's going to stop that one from going down. it's closer. the balance sheet is still good. a $20 billion buy back. i had an interview with mr. mcmill lon, the ceo, until i felt the stock was right. listen, you don't go back with your buy back. you wait until it settles down and wait until you're further in the term. he says, listen, this is a great opportunity. you should use every dollar to beat amazon. they're going to need every dollar to try to do that. >> fans get spun off eventually? >> i don't think it's a financial story, i think it's a story of death by 1,000 cuts. they had to do what they did for taking the cuts. >> what's on "mad" tonight? >> one of the areas that's been kind of weak is hotels and travel. we have marriott vacation
worldwide, private company. danny mars is on the board. a lot of people are saying be careful, air bnb, home away, the disruption theme is happening. let's find out. steve weisz. jim, rest up this evening. >> monday night. >> i won't be here tuesday. i'll be here tuesday unless the giants win. sorry, guys. i'll be so down. or if the eagles win because i'll be so high. >> so you won't be here on tuesday? >> could be a tie. >> can't figure it out. when we come back, breaking news michigan sentiment and danny meyer in a moment.
good friday morning. welcome back to "squawk on the street." i'm carl and sarah and david faber at the new york stock exchange. market is doing its best, at least the bulls are to add to yesterday's rally. a little sluggish on the opening. dow is down, s&p is up. rick santelli has breaking news. this time it's university of michigan. rick? >> yes, october preliminary and
it is 92.1. better than expectations. sequentially blows away 87.2 but, remember, that was a final read and how does this stack up? it's the best read going back, well, not that far, to july. and also remember, very first month of the year. a lot of data have their extremes first month of the year. 98.1 was the best going back to 2004. jolts. waiting for jolts. jolts is out actually 5.37 million job openings. following an unrevised 5.7 million. 5 3/4 -- they just revised it. 5 3/4 million now dips actually a bit to 5.668 million. not huge. suffice it to say, all these numbers are historic. i remember first jolts number came out in the beginning of 2001. it was december 2000 read. we have never been higher. these are historic numbers. the key is just because you have
job openings doesn't mean you have the skilled personnel to fill them and that void may not have enough leverage to put pressure on rates. we're going to talk about that later on today. carl, sarah, back to you. >> that's a good point, rick. still, that job openings number looks pretty good. thank you very much for all the breaking data. we're going to talk about the impact on the markets right now. stocks in the green here. the dow is up 30 points. the s&p 500 is less than 3 from its interday high. steve wood, chief market strategist and stewart freedman, co-head of global strategy at wells fargo investment institute. steve, you just heard the numbers. consumer confidence comes in better. that's a good sign. it feels like we're in this goldilocks scenario again where the economy is doing okay. not good enough though to yield higher interest rates and that's a recipe for the stock market rally. >> yeah, we think there's not a lot that's changed in the economic story. this has been a slug i shall mid to high 2% real gdp growth rate
for some time. i think the data right now are coming in to the point where we think the fed still could lift off in december. that's still very much live meeting. we saw dudley comments, even bank of england comments this morning. i think the fed going in december would be the first baby step on the path to normalization. i wouldn't call that a tightening. that might be aggressive. you're right, the data are mixed slight bias as we go into a december meeting. >> stewart, are you excited about this rally? do you need to see more follow through to believe it and see it be sustainable? >> no, i think we're seeing some good fundamentals here. what's driven the economy is consumer sentiment, consumer income, consumer spending and that's okay for our economy because the non-manufacturing part of our economy is the biggest portion. and what we've seen lately, the last two initial claims numbers have been very good. two in a row. not as concerned about the lower job numbers we saw last week.
this jolts number was good. >> isn't that why the market has been so vibrant over the last few days and weeks? >> yeah. inflation number is going to continue to be pretty modest, i think. rates are going to continue to be modest. the fed raises rates once and then again in march and then doesn't raise it again in december and then march. i think that we're still looking at a relatively low inflation environment here in the u.s. so i think the market certainly is focused on the fed but i don't think the fed's getting ready to feed us something that isn't expected. >> steve, i don't really understand this conversation at all. >> okay. >> it looks to me as if the markets are rallying to an eight-week high because the fed isn't going to move on interest rates. at the time when the new york fed president dudley is saying that the economy is slowing. so we have a fundamental problem with economics. we have a fundamental problem
with earnings as is beginning to be evident from what is coming through. so it is not a goldilocks scenario at all. the earnings may fallaway. we may be supported by central banks. where eventually does that take us? >> yeah, i think that the fed is likely to move in december. it doesn't matter what i think they should or shouldn't do. >> actually, the fed isn't likely to move in december at all. that's becoming increasingly unlikely. that's why the market is rallying surely. >> that could be a piece of it. i think underlying all of that is going to be the path of rates going forward. in this economic environment, in this earnings environment with a global volatility that we've seen the fed is unlikely to go off of a glacial slow path of hikes into 2016, 2017. that's going to be the back drop that i think investors are going to need. >> i mean, it's still very early data on the earnings season. there are clear headline disappointments that we've got. in an environment that stocks have a punishment, what does that mean for leadership in the market? where does that take us?
>> i'm sorry, was that to me? >> it was to you, stewart. >> oh, i'm sorry. i'm sorry. i had trouble with the noise in the background. >> in an environment where clearly some stocks are beginning to be punished for what they're saying in earnings season and therefore the leadership arguably becomes thinner at the top of the market, what will that mean for us coming into christmas? >> actually, i think as we're moving ahead what we're seeing now is some better numbers from the drivers of the economy. that's the consumer. we're seeing today for october anyway was preliminary capacity utilization numbers that was actually a little bit better than expected. we just came out of a pull back in poor seasonality period of the year. nothing dramatically had changed in the four months from -- you know, to august and now we're -- now we're mid october. the market's looking into next year.
and i think that, you know, we're now in a seasonally positive period for the year and i think from october through january, february we have opportunity for some lift. we're seeing some good consumer numbers here, and that's driving this thing. >> you know, if you look for where the earnings growth is going to come from, it's such a different story across industries. consumer, discretionary, health care and technology. the question, steve, is that already priced into the market? >> i think to some degree it is. part of the issue in the united states we've had for well over a year is valuations. monetary policy is accommodative. valuations have been a challenge. the upgrade of europe was not exclusively but large part driven by valuations looking at japan. i think it needs to be multi-asset fixed and equity. i think global exploration are going to be imperative. >> very quickly bottom line, steve. you say we're at the end of a ten year story of interest rates. 20 year story of china growth. this is the inflection point. can stocks continue to rally with both of these coming to an
end? >> that 20 year chinese story, period, full stop. i think equities go back in the united states. give him his valuation to something approaching the mid single digits, maybe a little bit higher. that speaks to active management. security selection will be more important. globally being nimble will be far more important. >> we got through a lot of themes there. thank you guys both for chatting it through. steve wood from russell investments, thank you very much, stewart freeman from wells fargo investment institute. >> thank you. bellwether ge reporting third quarter results. jeffrey immelt reporting. mary thompson has details at hq. >> in the midst of a massive restructural, what jeff immelt called the environment, strength in aviation helped them. margins improved by 100 basis points. revenue missed though. organic revenue, however,
organic revenue growth rose 4%. that's a rate that immelt expects. ge stock rising to the best levels in six years. building on gains seen in the last six months. that's since nelson peltz took a stake in the firm. cost cuts and capital returns are pretty closely aligned. >> i think the white paper kind of lays out their thesis and, you know, i think that's -- that's -- you know, we don't agree with everything but it's pretty consistent with what we've done and what we're doing. >> ceo jeff orenstein says the debt to buy back stock won't be addressed unless it can come out from under federal reserve oversight. something it's applying for in the first quarter. taking a look on the call, immelt reported it will deliver $3 billion in synergies, a share exchange for the private credit card firm synchrony is set for
next week. that will have a $20 billion buy back. lastly it's at its wind down of its finance arm is ahead of schedule. it has slightly better than exekt pd prices. ge is expecting operating profits in the oil business which is a growth driver to be 10 to 15%. the growth management is still delivering improved margins in what is a very tough environment. carl, back to you? >> mary, thank you very much. mary thompson. when we come back, uber's valuation, as you know, close to $51 billion but the dean of valuation says it's only worth half that much. he's going to join us live when "squawk on the street" comes right back. your boss? yourself? your family? our financial advisors are free to realize a plan to fit your family's unique needs. we'll listen. we'll talk. we'll plan. baird.
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the latest round of funding puts a $51 billion price on uber. a famed professor says it's worthless than that. a rock star. we've heard a lot from you during the facebook ipo. good to see you again. >> good to be back. >> you are at $23.4 billion for uber and venture capital market says it's worth 51 billion. you're less than half. what's the big discrepancy? >> i think the big difference is in the story we tell about uber. i think uber's story is they want to be everything to everyone.
they're going to be a logistics company globally. if you buy that story, they'll be worth a lot of money. here's the biggest catch. i think they're going to show the revenues of a big company. whether they can make money off those revenues is i think the tough call challenge. >> you're talking about profits? >> exactly. >> it hasn't been the formulation in the fast growing tech startups. >> you have to provide a pathway to make money. right now when you look at uber it's a business where you don't see those economies of scale paying off. some companies you can say if the revenues grow at some point in time the profits will come. the way uber is structured i don't see that happening because the competition is constantly going to push the cost structure up. >> apply that to amazon. it's been 20 years going. it's working. >> the field of dreams model works in terms of pricing. if you can get people to buy into the story, that was the amazon success, they basically
said we'll get the revenues, trust us, the profits will come. investors are willing to wait a really long time. uber might very well be able to convince investors, but i think the biggest challenge they face is unlike a year ago where the competition was small and splintered, they're now playing against big boys in their own game. i think the fact that lyft and dd has partnered is not a great sign for uber in terms of the cost structure. >> the fact that there are taxi cab protests all over and legal headaches and challenges and governments going up against uber, does that help the valuation in making it a disrupter or does it hurt it being a big challenge? >> it helps. to me, it's good news. the fact that there's so much anger on the other side suggests to me that uber is working. cab drivers would not be going on strike and regulators would not be regulating if they weren't worried that uber was eating their lunch. >> come on, that's actually wiping out markets for them,
tubi particularly with uberpop. i know they won a victory in london. they were doing a complete disruption in brussels. they have problems in the netherlands, italy, germany and spain. they're actually doing u-turns in the face of that now. it's not just a fight. they're pulling away. those in markets they won't have surely. >> i think they're fighting 100 fights. in a sense that's why i said uber's profits are going to be slow to come. it's expensive fighting all these fights. it's actually interesting to watch lyft draft behind uber. let them fight the big fight and in a sense take advantage of it. there is change coming to the car service business whether the taxi cab companies want it or not. whether it comes from uber or somebody behind uber is the question that we're really facing. it's not whether change will come. but i think the point you make is a good one. you can't fight 100 fights and expect your costs not to show that. >> speaking of the car business,
we're all awaiting the ferrari ipo possibly next week. they're looking at a $12 billion valuation. you've looked at this. so that 12 billion looks like 12 to 14 times ebida. obviously 49er rar ri has a strong brand value. >> i'm valuing it at 2 1/2 times of a typical auto company would trade at relative to revenues. here's the challenge they face. they have huge margins. those margins are as high as they are because they're scarce. if you had 15,000, 20,000 ferraris being sold a year, i don't think they could command be a premium. to keep the premium they have to in a sense keep growth low. they can't allow growth to pick up to 10, 15, 20%. if they do that scarcity that made them so special would not be there anymore. >> where are you verse that is 12 billion? >> i am at 7 billion. >> a lot less. >> a lot less partly because i don't see the combination of growth in margins you would need
to get to 12 billion. i can see 1/2 of the equation but i can't see the other half coming through. >> do you have an update on tesla? i know it was kind of a big deal when you valued it at 67 last year when the stock was trading at 170. >> i revalued it about a year later at 130. i said i'd be a buyer of tesla at 140, 150 because you're getting that option at optional. i would be back on cnbc when i buy twitter. one of these days tesla will be in my portfolio, not at 220. >> for those who see revenue projections, revenue valuations from the sales side, how is your model different from what we normally see out of analysts? >> it's probably not different in the sense of looking at things. i try to carry the logical end games. the young company looking at revenues next year is a very small piece of the puzzle.
you've got to play this out and think about where this game will end. that to me is what drives the value piece. >> what about the stock market in general? where are you with the s&p at 2025? >> i'm always scared with stocks. if you're not scared about something happening with stocks, you're not in the right business. >> that's what you get rewarded for? >> that's what you get rewarded for. what scares me is not the fed raising rates, it's the fact that earnings and cash flows will come under pressure next year. i think that is the biggest worry to me when i look at stocks collectively. >> what's been your biggest hit? apple calling apple. >> facebook made me a lot more money over a lot shorter time period so i got incredibly lucky with facebook. that's the way i see it. when i make a big hit it's more luck than anything else. >> overall tech valuations now that they've come down a little bit. >> i think it depends on the portion of tech you're looking at. all tech looks like a bargain to me for a long time. it's the new tech that's always been testing the limits and some
of the new tech is starting to mature. i mean, i think facebook is starting to look like a regular company now. you can no longer use those metrics we were able to get away with two or three years ago. >> it's good to see you. thank you for joining us. professor at nyu. the stern school of business. coming up next on the show, an extraordinary turn of events. danny meyer is doing away with tipping and raising in his restaurants. he'll be here live at post 9 to talk about that decision next on cnbc. ways obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.
let's get over to the cme group with rick santelli and the santelli exchange. hi, rick nkts i'm certainly glad none of you could hear the conversation before the camera turns on. first of all, we have mr. cub, ira harris here. we were looking for a broom. in chicago you can't even buy a broom today. ira, here's the way i see it. mr. meyer in his restaurants and no tipping gives us a glimpse as to how economics in a free market society just the intelligence there isn't what it used to be. now what do you see when you see that there's no tipping? >> listen, i know that it's going to show up on your bill.
>> of course it is. >> because we're going to pay the way. >> this is a sensitive issue for me. my daughter is a chef at a high line restaurant. you're going to pay for the help. >> absolutely. as a matter of fact, everybody on the restaurant side, i have no problem with it, i think they work very hard, but people like you and i are probably going to throw a little extra tip. the other part of the tip's built into the check. that's the way it is. >> yeah. >> now let's talk about central planning, central banking and the fact that you can't get a ten year under 2%. what do you think? >> well, again -- >> at least for now. >> we've talked about this for five years already. i know that they've broken the mechanism of what the bond markets are. you're seeing it in europe. i'm not sure with the ecb being so aggressive it makes the u.s. and you absolutely pointed out, it's 150 points. we probably went down to 147 differential? >> exactly. >> on the bun to the treasury. that's all because ecb keeps the
rates artificially low which of course we know. the fact that the french ten year trades at 83 or 84 or 85 basis points is a joke. who would lend money except that you have an artificial stimulus to the system. >> foreign exchange, a lot of traders on the floor, they continually look at the euro. they want to be long. they think they're going to make a lot of money. maybe they will. i look at it a little different. where is this trade going to go? europe obviously wants the euro weaker because they're not confident in our economy. they want us to raise rates. our fed isn't confident. it will ping pong and stay in a range. your thought? >> absolutely. when euro was 108 three months ago. >> that was a trade. >> the dollar is going to paris. not so fast. now we're up at 115. the ecb came in yesterday and, again, currency wars, i don't care, whatever you want to call them, all of a sudden they start talking and they get nervous that the euro is at 115. the japanese are going to bow out. >> stop. i want you to get credit for this. you're saying something huge.
after decades of lost economic activity, after cumulative compounding loss of productivity, they've tried everything. it still isn't working. you think they're going to call it a day? >> i think they're going to stop for a while because they don't want to keep going. they're worried about the chinese especially. we've seen a history of this. the chinese do not want the yen weaker. they got the message. >> they have way more bullets. >> they can answer the call anyway. we don't want to start that end of it. everybody else is involved in it. you have the bank of england, the fed whether we like to believe it or not. now we certainly have the ecb. i think the japanese are going to step back. everybody is looking for them to do more on october 30th. >> cubs in four, you think? >> you know what, i just want to see the cubs in the world series. >> i'm sticking with my brew. >> thank you. sarah, back to you. >> go mets! thanks. speaking of danny meyer, he joins us on set next to talk about the no tipping policy.
i built my business with passion. but i keep it growing by making every dollar count. that's why i have the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy for my studio. ♪ and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... that's huge for my bottom line. what's in your wallet?
destinations. dozens of palestinians throwing fire boms. palestinian, i should say, security forces extinguished that blaze. over the past month eight israelis and 31 palestinians have been killed as violence escalates in the west bank. pope francis visiting the vatican's new homeless shelter last night. he greeted the 30 or so men who have taken up residence near saist. pete ter's square. new surveillance video have been released of lamar odom's arrival at a brothel. he paid $75,000 and was getting ready to extend his stay. and that is the cnbc news update at this hour. carl, down to you. >> sue, thank you very much. starting next month union square will be eliminating tyng. danny meyer is the ceo at shake
shack. good to have you back. >> good, carl. >> you've been thinking about this for a while but certain things have happened recently. >> for 21 years it's troubled me that the tipping system is antithetical for professionals who want to take their profession seriously. you don't tip your doctor or the pilot. it's a demeaning practice for people. what's changed right now are two things. the biggest labor shortage that we've ever seen. people cannot afford to go to culinary school and take a 9, 10, $11 job. secondly, with fast food minimum wage on the rise why in the world would you ever want to be a cook in a fine dining restaurant when you can get paid more serving tater tots. if we don't do this this very minute, we are absolutely going to look at the end of fine dining as we know it.
>> essentially you were seeing people walk? >> not seeing them walk, it's hard to recruit. the average american doesn't understand what happens to their tip. you leave a tip on the table. not only is it not necessarily just going to that waiter, the waiter may share it with all the other waiters and bartenders in the restaurant but they may not share it with the cook, dishwasher, florist. the greatest competition is to get the best talent. if you're not the best place to work, you don't stand a good chance of staying in business. >> it's always fun to go out to eat over seas, places like europe or japan, because they don't tip to begin with and they have sort of different restaurant culture. bloomberg had a great op ed piece about how the michelin starred restaurants overseas are all in countries that don't tip. do you think this will lead to
higher quality restaurants in the u.s. if it becomes a movement and others pick it up? >> i do. i think what it does, sarah, is shifts the onus for leadership to the restaurant and out of the hands of thousands of different patrons. we need to be accountable for the level of service and your food if not we'll go out of business. it's a complete fallacy to think that my tip after a meal is the reason someone was nice. think of the difference between taking an uber where you don't tip and taking a taxi where you do tip. does the taxi get you better service than the uber where you didn't tip? i don't think so. >> let me just say that they do tip-in europe but they will tip at 7 or 8%. there's no doubt that the service is far better in this country as a result. have you raised the service salary by 20%? are you raising your prices by 20%? what are the figures here? >> in order to make this work
because, simon, we're not going to even have a tipping line on our check. you're going to see the exact same price on your check as you will see on your credit card. it should be almost exactly what it would have been if like an average new yorker you were leaving about a 21% tip. >> you're going to raise prices by 21%? >> in the low 20s. it's a fine balance. we can't raise our prices beyond which you would have come to the restaurant in the first place, but here's the thing, americans ended up paying over 20% more 15 years ago when we went to sustainable food. >> you're honest. this system is open to abuse. there are federal laws that the tipping can't be passed through to the kitchen. . there are state laws that it can't be passed through to the kitchen. you're going to pay the kitchen staff more, i have no doubt, but
actually if it gains ground what you'll have is a lot of restauranteurs who will be taking the marge gyp for themselves. >> guess what they won't get? they won't get the best cooks, this he won't get the best managers, they won't get the best waiters. >> i'm not sure it's a free market. let me say something else. there's something very unusual that somebody goes into a position of service for you. for most of us, that doesn't happen very often. to be able to explicitly give that person money in response, i think for a lot of us is very valuable. it kind of scarce -- >> i want to offer you something and that is that the nicest thing you can do for great hospitality and service is look that server in the eye and say thank you. the best thing, most constructive thing you can do if the service or hospitality is off just like if your steak is overcooked, tell me about it, i'll make it good. >> what's going to be the wage for a waiter in a restaurant that's not tipped? >> our waiters are going to be making $9 an hour and on top of that they're going to share in a
variable compensation plan so that just as it is now, when the restaurant does better, they'll do better as well. >> there's some sort of profit sharing? >> we've been doing a side-by-side analysis and learned that in 75% of the times that we've done it the waiters ended up better with our new system. all of the cooks ended up better. even our starting level managers ended up better. hospitality industry has one of the lowest bars for getting a job in the first place but one of the worst records for actually promoting people and turning it into a professional career. >> that is comparable. the medium pay for a tipped worker in new york including tips is $9.43 an hour. i was surprised at how low that was. >> that's not a livable wage. >> walmart's raising the minimum wage. you're doing this. apple, a story today, they're giving stock to hourly employees. is this all a function of employment being in the 5s and maybe headed to the 4s? >> i think it's a function of people understanding that where you work is probably the most important affiliation in your life today and i think that
forward looking companies understand if your place is deemed to be the best place to work, that's the biggest competitive advantage you can have. >> you operate a lot of high end restaurants. is it your expectation that this practice may spread to others that are your -- in your peer group and/or will it spread much more widely sort of down a few levels in terms of -- >> well, we'll see how it happens. i think with respect to things be like organic food and sustainable proteins, it started with the fine dining industry before it got to businesses like shake shack and chi poll tepotc. i'm pretty sure you're going to see this cascade. >> pretty engrained in the american psyche though. it won't be wiped clean. >> i think you're right about that but i also think, again, if you use the uber model, first time i took an uber it was odd nod to tip and after that i liked it. >> you mentioned shake shack. let's talk about it. stock's 41. close to the low since the ipo. is the street missing something
on margins outside of new york, competition from chick-fil-a, something else? >> i think if anything what the street's missing is when we registered our shares, which was a natural thing to do for post lockup, somebody wrote an article saying, aha, danny meyer is cashing out of his stock. that is not even remotely true. i intend to be a great-grandfather and still involved as chairman of shake shack if i can possibly do so. i think that's what they missed. you know what, we're not big talkers. we like to let the brand speak for itself. i've never felt more confident in our team and excited about the future of the company. >> are expansion plans moving one way or the other? are you reining it in thinking bigger? >> no. we announced that we were expanding our expansion plans by 20% and we have a history so far of doing exactly what we say we're going to do. >> can i just follow up quickly on something you told me a few
weeks ago in cincinnati. you were rooting for mcdonald's and their turn around with the all-day breakfast, mura was talking to the franchisees how it's messy and difficult. do you have any insight on what mcdonald's is doing right now and are you still hoping they are coming back? isn't that going to be a competitor? >> first of all, i don't have any insights on what they're doing, sarah. i don't feel any differently than i felt before, which is that when the restaurant sector does well, a rising tide lifts all boats and i'm proud that shake shack's mast will be flying just as high as any of them. >> there is a lot of discussion about beef prices coming way down in the future. >> isn't that nice for a change? >> yeah. there are a -- a lot of these stocks are moving on would-be tail winds. do you think that's true? >> i think that's true. i think that any benefit we get on the food margin is going to be necessary because we all know that in every state in the country labor is only getting
more expensive. >> coming back to labor. danny, we really appreciate you coming by. >> great to see you all. >> danny meyer joining us there talking about shake shack and a lot more. up next, we'll hear from the ceos of two energy giants, bp and total. they're both making bold claims now about the future of the oil industry. more "squawk on the street" coming right up. let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this.
are japanese stocks the world's most overcrowded trade? we discuss on trading nation.cnbc.com. >> more "squawk on the street" coming right up. ve money with t? dad: yeah, 20 something years now. thinking about what you want to do with your money? daughter: looking at options. what do you guys pay in fees? dad: i don't know exactly. daughter: if you're not happy do they have to pay you back? dad: it doesn't really work that way. daughter: you sure? vo: are you asking enough questions about the way your wealth is managed?
wealth management at charles schwab. so wi got a job!ews? i'll be programming at ge. oh i got a job too, at zazzies. (friends gasp) the app where you put fruit hats on animals? i love that! guys, i'll be writing code that helps machines communicate. (interrupting) i just zazzied you. (phone vibrates) look at it! (friends giggle) i can do dogs, hamsters, guinea pigs... you name it. i'm going to transform the way the world works. (proudly) i programmed that hat. and i can do casaba melons. i'll be helping turbines power cities. i put a turbine on a cat. (friends ooh and ahh) i can make hospitals run more efficiently... this isn't a competition! the dow is up 12 points. health care leading the way. dom chu back at hq. >> happy friday, sarah. health care leading all s&p 500 sectors. the sector took a hit yesterday
after united health shaved 35 points off the dow jones industrial average on some of the down beat guidance. powering today's gains, tenant health care, yesterday's loser, hca and express scripts and universal services rebounding from losses yesterday. this despite credit suisse analysts downgrading the health care sector overall to an underweight rating based on recent weakness and possibly more pain to come, this is certainly going to be a sector to watch as we head into midday trading. simon, the third biggest sector in the s&p. back over to you. >> always worth reminding us, dom. thank you. meanwhile, oil prices clearly under pressure this week. crude down under 10%. steve sedgwick sat down with two giants of the industry. the ceos of bp and frans's total. hi, steve. >> yes, simon, really good
speech. something interesting has happened here and our viewers need to know with it. despite the pressure of oversupply and concern about opec and the battles of the u.s. versus opec, there's even more concern for this industry coming down the pipeline, and that is cop 21. this is the latest state in climate talks. in advance of that, something unprecedented has happened, simon. actually, the big oil majors of the world with one or two noticeable exceptions have gotten together. we're going to try to set the agenda. we're going to say hydrocarbons have a place. if they don't, they're terrified of what will happen, about the punitive action on regulation and tax. major players like bp, total, saudi remco was here. ten of them talking about what their priorities are for the climate change talks. i put it to bob dudley. there were two massive names
missing. exxon mobile and that was chevron as well. john watt sovereison as well. it wasn't cohesionion without exxon and without chevron as well. this is what he had to say about them missing. >> if you listen to what rex said, he made a lot of sense. this is a voluntary effort. not every company is going to join into this. we're not completely misaligned in terms of our views on this. >> reporter: so very interesting. he says they're not that far away, but they wouldn't get involved in this initiative. simon, bank of england governor, mark carney, head of the fsb, the financial stability board, is very worried that hydrocarbons could become uninvestable, unburnable, unusable and a black hole for investors if this doesn't go right over the next few weeks. i think everyone needs to wake up. it will be a very, very big few
weeks coming up in paris end of november, early december. back to you. >> a statement for which mark carney took an awful lot of heat. steve, thank you very much. for more on the oil markets let's bring in douglas terason. he joins us on the phone. douglas, let's continue with where steve has left us here. a lot of people in this country will not be aware of the density of the climate change conversation that occurs internationally on the threat that many people think it does post hydrocarbons. are you in that camp where they think that ultimately investors could be trapped in resources that fall massively in value? >> well, i guess they could be trapped over a very long period of time, but let's try and put this in perspective. i mean, there's no question that a lower carbon environment or transition to a lower carbon environment has been underway for many years and it's probably going to continue, but at the same time it's unlikely that there's a going to be enough progress over the immediate term that the regulations will affect
the supply and demand balances that ourselves and others have and are going to affect the outlook for the oil market over the next couple of years. longer term possibly. let's not forget that petroleum based fuels are the most significant transportation fuels out there and we'll be using them for a long time. >> because the united states and china won't agree with everybody else? >> i think that's probably right. i think it's clear that they have different perspectives and it's pretty easy to understand both sides. >> okay. let's talk about more immediately where we are on oil. $46 give or take now. rough week for crude. what did that teach us? >> well, you're right. it has been rough recently. today our theme is called life without opec. and, you know, the themes about how global oil supply is still protected from marginal cost pricing, life without opec is pretty hard. it's hard in opec because we have crisis type conditions in some of these countries and not opec. a lot of these usa and p
companies face financial stress. pressure is clearly building in the sector and also on the oil market. >> yeah. i'm warning from slumber shay. doug, we'll leave it there. thank you for joining us. getting back to earnings season, a number of companies reporting concerns about china this week, including wynn, yum brands, necessary lee, hugo boss. wynn the hardest hit stock down today hit sharply. hear what steve wynn had to say about being hit by mccau on the conference call. >> it's become a major issue in mccau as to the impact of government policy on -- in planning for employment, promotions, hiring and compensation. none of us are really clear on what our environment is going to be like going forward, and it
makes planning and adjusting almost a mystical process. >> a mystical process. i guess you don't want to hear that from the ceo when it comes to the they don't know. i mean, there's so many -- >> at least he was honest, right? he said that at the end of the call. >> these guys are in the wind wonder if anything they're going to change the rules on smoking. there are so many things going on. a broader conversation about china, i think, is a different kettle of fish. the head of hsbc, the ceo, was suggesting you're not going to get a hard landing in china. many of the market moves may arguably be overdone. the market has moved ahead of the corporate announcements you could argue. >> then you have yum brands, david. >> saying this morning in a press release in which it also told us, of course, yesterday, i should say, it's one of the largest shareholders.
sales in china, sarah, they say continue to be difficult to forecast due to ongoing volatility. though the company will release estimated october same-store sales and others beginning with october through the end of the we're. we'll give us monthly updates on what's going on. >> yum is not representative of u.s. companies in china. they're all feeling china differently right now. i was just in beaverton talking to nike. listen to what mark parker told me about what he is seeing in china right now. >> that's been a noteworthy as nike's performance in china, how we've done quite well amidst, i think, a lot of concern. not within nike, but within the overall market. >> you're not seeing any of the slowdown in the chinese consumer? >> we're not seeing it. in fact, our brand is accelerating. >> they're accelerating. they're not seeing any of the slowdown. they're seeing double digit growth. 30% revenue growth in the quarter. >> it's about product. if the fast food companies are challenged, sports wear
obviously not. >> there are not that many companies set township compete in the shoe market in china. there are a million places to go and get fast food that are not corporate owned by any stretch. >> yeah. steve schwartzman on blackstone's call. they own a lot of real estate, including shopping malls. they see same-store sales growth in the area of 15% to 16% from many of their chinese shopping malls. >> apple is seeing strength. these different companies are feeling it in such different ways. anyway, a conversation that we'll have throughout earnings season, i'm sure. up next, though, new york's iconic twa terminal at jfk airport is getting a brand new makeover. we'll hear from the man in charge of this very cool project right after the break. [ male announcer ] some come here
here in new york somewhere fk airport is to get its first on site hotel, and it's about as iconic as it gets. the port authority agreeing to a 500 room hotel being built around the site of the former twa flight center, which has laid dormant for 15 years. it opened in 1962. the flight center's arching concrete shelves became an instant landmark to the advent
of mass tourism. it enclosed passenger jetways and included baggage carousels and closed-circuit television. it remained a flagship for this country's second largest airline until it filed for bankruptcy in 2001. now, way too small to service modern larger aircraft, the site will be redeveloped by ncr, one of the largest hotel owners in this country, for a reported $1 billion. ncr's ceo says its landmark spaces will be preserved to create 10,000 square feet of observation decks. plus, a state-of-the-art museum to the jet age. >> these are private investment dollars going into this project, so it's very exciting. this is, i think, the way the country should go. the port authority of new york and new jersey, the governor's office, the faa, we all worked together to accomplish the project that brought a great amenity and great infrastructure to jfk airport, but it's funded with private dollars. >> in the meantime, if you are
in new york this weekend, you can actually visit the site. one of the last times that's possible under the new york open house scheme. >> luxury hotel. jfk. >> sunday afternoon. >> let's send it over to john fort with a look at what's coming up next on squawk alley. good morning, john. >> good morning, sar wra. al, alibaba wants to buy out the youtube of china. nevada says that fantasy sports, daily sports, is gambling, and there's a unicorn in trouble. we're going to talk about all of that and more coming up on "squawk alley. " hi watson. annabelle, your birthday is tomorrow. i'm turning seven. what did you ask for? a princess. and a pony. you like things that begin with p. i like pink frosting too. will you have a cake? yeah. i was too sick to have one last year. the data your doctor shared shows you are healthy. are you a doctor? no. i help doctors identify cancer treatments. i want to be a doctor someday. i can help with that too. watson, i like you.