tv Squawk on the Street CNBC October 23, 2015 9:00am-11:01am EDT
years. right now it's limited to a few places and white guys. that will change. >> sports is more valuable 20 years from now than it is today, it will become central to what a city is all about and what a community is all about. >> gentlemen thank you very much. right now it's time for "squawk on the street". ♪ good friday morning. welcome to street. i'm quinn with jim cramer and david faber. we're looking at the best week for stocks since the february as the s&p will go positive for the year at the open. work in the bulls favorite a surprise rate cut in china. decent pmis in europe and earnings from google, amazon and microsoft. germany is leading a charge of green arrows. ten year 209 up ten basis
points. oil is about the only asset that's not participating today. in our road map this morning tech trifecta, amazon, microsoft beating expectations. and jack dorsey taking one-third of twitter shares and dishing them out to employees. futures up sharply as china's central bank cut interest rates. lowered by 25 basis points. reserve requirement reduced by 50 basis points and comes a day after a rally which included a jump in the dow hints of further easing by the ebc. >> look the communist mean business they won't let this economy slow that much more. they are trying to change thing.
we're getting hints consumer is spending more in china. chinese stock market, we used to talk about it every singling day, had a nice rally. europe, draghidraghi. he manages to get the dollar to soar on just talk. he's the pied piper of higher stock prices. last night some quarters that are thinning like the new york mets. i talked to mr. october last night. saw him at a party. the actual mr. october. >> daniel murphy. >> he gave -- >> reggie jackson. designee gave props. mr. october and i recognize this google, amazon, very real. fabulous. he's an investor. >> he's very into it. >> he gave props to murphy. >> we'll get to amazon, google, microsoft. is this called a junk rally? on the one hand you obviously have a lot of frustrated bears. then there's reports there's a
lot of short covering to be done. people wonder if fang is truly back. >> there were sellers on tuesday and wednesday in facebook, amazon, netflix and google. and i got it from all side every where i went. outside the exchange. in the cafeteria. outside of work from cnbc. is fang done? done? what does done mean? done. you mean like, like a merge which cut its distribution after having a $1.40. done is a company that has $72 billion in cash. done is amazon reporting whatever number as a profit. done is microsoft giving you a multiyear -- yeah they're all done. done. what is done? >> i love that frustration. as jim alludes, three of the tech biggest names up sharply.
googles alphabet getting a lift from video and internet advertising. amazon and microsoft helped by cloud. we talked about cloud on last night's conference call. take a listen. >> while many companies are offering commercial offerings there's only two driving enterprise platform innovation at massive scale. amazon and microsoft. we push each other and we each have a unique approach. microsoft has bet on a strategy to build a hyper scale public cloud as well as reinvent servers as the edge of our cloud. >> microsoft is an interesting story. which of the three is the most interesting? amazon has put together profits in three of the last five quarters. >> about investment, amazon invested, walmart didn't.
now he's got a theme. by the way he buried the lead windows 10 is so good he wants to go zero, the cloud is winning. he's got mobile, social. mobile starting to do better. i'm nominating google. google used to be animal house. >> from what college? >> faber college. it was a -- the google conference call used to be like are you and idiot to own our stock. don't you understand what we're about? we're about moonshots. we're about putting a man on pluto. now they are about earnings, buy backs, brilliance, youtube break out. search. >> do you think they looked at them and said going broke, drunk and stupid is no way to go?
>> i like to have lunch brought to me, okay. she would change that. she would say you get your own lunch. but that would mean going down that 100-yard walkway to the contact if he terrifyia. this conference call report reminded me of the way when i worked at goldman sachs and come in to me and say how much money did you make yesterday for the firm? $2930. that sucks. >> to the quarter itself they saw an acceleration in the google sites in terms of search although youtube they haven't broken i want out. next quarter we get more detail when they fully transition to alphabet. capital returns of course people point to as a great signal. you're making that point. and the idea that slowing revenue growth is no longer the case because mobile seems to be growing even faster than desk top and the c pcs are coming up. i'm having people out there
talking 40 to 42 bucks a share. >> this was a cheap stock going in. google price, here's the price increases by jeffries, by deutsche bank, where are you goldman sachs? this is an extraordinary quarter and i have to tell you it's the first of extraordinaries. >> what's the multiple you should put on that number >> 30. >> 30? >> david it's the fastest growing large cap stock. >> bernstein -- we're talking google. bernstein has a 950 target, 22 times 17. >> i'm just telling you the earnings are still not even being seen yet. when they get youtube right -- >> you're getting up well past 1,000 with your target if you use that kind of multiple on 16, jim. >> yes. >> okay. fair enough. >> obviously the argument here is we all misunderestimated the
surge business. >> they say listen, search is really big. yeah. it turns out ordering the world's information is big. these companies are ambitious. daniel yellen, don't take their earnings to heart. they are wiping out earnings of other companies. >> they are. david what do you think about ibm? >> that's right. ibm, emc, these companies that don't seem to be make it happen. >> k smart, sears. >> pandora down 30%. people looking at youtube and they are ready to squeeze music in addition to apple. >> we haven't heard from apple. pandora they were like in total denial. they whistled right past. >> they had a poor quarter. >> none of these companies are
bragging. amazon conference call replains flat. >> let's talk amazon. i'm taking a look at the slides. people looking at the slides from the earnings presentation also encouraged. they do talk about free cash flow. they generated 5.4 billion in cash flow in the last 12 months. that's always where he's been focused on future free cash flows. but aws, ever since they broke it out that stock has broken out. >> i want a piece of aws. >> $8 billion run rate business now. margins have expanded from 20 to 25%. you talk about ibm. you talk about what's going on there. this is -- microsoft seems to be getting it right on that side. aren't ws -- >> microsoft is really getting it right. >> wow, that's amazing how much money, $500 million in earnings. >> as much as they are making on north american retail, aws. >> they have solved the problem of infrastructure. you know a loot of people are
laughing at kevin saying he's spend go to much. i'll using this knowledge at under armour. he's taking a page from the amazon book. we'll spend, spend, spend and beat everyone. you know what? he's right. >> you got to have an investor base that lets you do that. not everyone does. that's why people who get paid a lot of money and do those things four. if you can get an investor base that lets you do that you can succeed, at least and gives you a lot more room to do that. >> walmart has craterred their earnings. >> they are not a technology company. microsoft and amazon are the only two companies on an innovative scale. now. amazon is certainly one of the only companies that can innovate
at scale. i mean, aws is an example of that. can walmart innovate its scale in technology? i don't know. >> i got to tell you, sat's call, i whsh he first started, it was like new haven before they could bring to it broadway. now this will run for years like "cats." >> that did run for a very long time. >> you know what? we're not talking about windows 10. windows 10, the pcs -- there's so many read throughs about windows 10. windows 10 is selling out. there's a great line where he says i don't want it so you need us, i want it so you want us. who orchestrated that line? this is a thing of beauty. hemingway. >> who are they beating as a result of that. somebody was telling me for example dropbox, right? because it's included in --
>> david that's a -- >> it gets hurt by microsoft. >> microsoft will be a 15 year high today. google amazon will be record highs. >> at one point i got up this morning and i said to myself, i am not as smart as anyone who works at those companies. i just felt very defeated. i was patting .315. >> don't kick yourself like that. you're good enough. you're strong enough. and you're smart enough. >> these are nfl. okay. google is the patriots, okay. all right. amazon is green bay. all right. and microsoft, we're trying to figure out which is real the panthers, are the panthers real? that's who they are. i got to say, i know, i know. >> who is facebook which hasn't reported earnings yet but see its market cap eclipse $300 billion today. >> who comes out?
>> the cardinals. >> carson palmer is real. these are nfl, there's a great piece about pa rrrity in the "n york times". there's two leagues developing. there's the ibm league, no offense because they are sweet and this other league where, honestly, these guys got 840 on their s.a.t.s. do they still have s.a.t.s? >> yes. >> i don't want to be in the room with them. they will suck your brain out. >> we'll get to a lot more. p and g biggest sales decline. stocks still rising. we heard from john monthlier own "squawk". you heard us about buy backs. it's about a give back. we'll talk about that. take another look at the futures. amazon, google, microsoft by themselves will add 100 million in market cap. hello, ken jennings.
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current quarter as the company implements its turn around plan. that organic sales number is the sticky one. >> beauty sales down. grooming unchanged. hearth decreased 1%. fabric unchanged. baby, feminine decline 5%. buy the stock right now at 80. it's one of the most under owned. everyone is saying give me one. clorox at 123. kellogg through the roof. problem, to well down from its high. let me go buy some. this is about underowned stock that's a big stock. this was a terrible quarter but doesn't matter. >> half percent dividend yield doesn't hurt. >> david taylor new ceo will start december 1st. >> did anyone listen to that 3:00 p.m. call. >> i'm sure but not here. >> the analysts were negative. they were critical. they were wondering when he's
going to turn i want around. he was saying i am turning this around. take a look at the numbers. and my back and forth with 3m the stock finished up six. analysts are left in the dust. i like that quarter. health and save haven fire him is very strong. electronics is dropping. when he talks about how you have to change your game because of the terrain he's monster good. they underestimated in that conference call. that will never happen again. >> up just like saying it. like saying it over and over again. >> okay, i do. >> meantime twitter co-founder and ceo jack dorsey looking to give back to the company he founded nearly a decade ago. dorsey sweeted i'm giving one-third of my twitter stock to our employee equity pool to reinvest directly to our people.
as for me i'd rather have a smaller part of something big than a bigger part of something small. i'm confident we can make twitter big. >> i think that's the kind of morale boost they need. i tweeted immediately he crushed with it that. the last down grade to sell the other day, morgan stanley. i like what dorsey is doing. i think it's good. i think it's impressive. i think that guy from morgan stanley ought to do some tweeting, get in the game. he needs to get in the game. dorsey is doing it. >> impressive. not something you often see. >> no. palmer is on. he called jack's move incredib y incredible. >> he's turning himself a friendly activist. >> doesn't apartment board seat.
but said i'll be speaking out. >> maybe he'll do to twitter what he did to microsoft. >> in a good or bad way? >> that's not good. >> i'm just kidding. steve is an old friend of mine. classmate. there's a lot of thing in place at microsoft believe me that satya got a good hand. i think that steve being involved is a positive. why? because he does not get involved in losing situations. you got anthony nuto. i think twitter -- don't you do that. >> i'm talking about palmer. he doesn't get involved in losing situations. what was nokia. a winner. >> he was trying to take back that face making. >> i kmourp. he's not coming on with us. >> that's what i was thinking. >> forget it.
>> move to espn. >> maybe then. >> they can use a few bodies up there. >> oh! >> they are my friends. >> they are your friends. >> is there anyone yet -- who is left. i haven't attacked you yet. >> we're going get some emails. >> comen espn is good guys. >> it's coming, you know who i'm talking about. >> have you seen disney? up 23 points. >> i know. listen, these are 20% this year. >> i said buy it because he was in there buying. >> that will open at 114 today. we'll get cramer's mad dash. get another look at futures. way up on that surprise china rate cut. maybe ge has a chance of cracking 30 this morning. we're back in a moment.
♪ it's a mad dash for this friday. six minutes before the opening bell. at&t earnings would fall into a faber report. today we'll make it a crime reporter. >> that's only because we invoke the faber college earlier. david it was a stand out quarter. of cash flow that has to go to dividend because the cash flow shyer. directv being sold at 2300 company owned stores, free cash flow. looks good. it was still a hard quarter i understand because at one point they were talking about 44% pay out. then talked about a 70%.
>> a lot of analysts say it's a difficult one. they changed the way, wireless they split that. they changed a lot the way they report certain parts of their business, jim and that seems to have thrown a lot of analysts off. >> i want to talk about it as a directv seller. directv which is an incredible package, don't forget despite the hoopla about draft kings and fan duel people want to watch tend of nfl games, out of market gains ever games. the accounting may be difficult, for those worried about the dividend i feel better. >> directv is going only one way. come on. >> you think -- >> top of the cycle. >> i disagree. >> long term. i'm not saying it's going away. >> there's 2300 stores at&t will start taking shares. >> i love those ads.
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you're watching cnbc "squawk on the street" live from the financial capital of the world the opening bell in a minute. keep your eye on s&p 28.59. that's break even for the year. we'll get there at the open. we haven't been positive for 2015 in two months. got to go back to august 20th when things got interesting. we made our way back. the question is now what? >> so many people got short. i keep thinking back to the days. i love karl icahn where he said it's a "house of cards". a lot of people waiting all in short and all covering and then we get a top until they are all done. >> on top of all that, surprised
china rate cut says 7% is still their target for the year even though they just did 6.9. >> ge, north face, all extremely strong in china. mcdonald's, plus 20 number, plus 28. back to where it was two years ago before the bad pr. >> there's the opening people at the big board. american farmland company, recent ipo over the nasdaq. lm funding america specialty finance company celebrating its ipo today. it's going to be a morning of big round numbers surpassed. google above 700, amazon above 600 and jim facebook above 100 for the first time. >> i just continue to think that that's a company whose earnings estimates are way too low. when you speak to ceos about,000 reach the millennials which is
what everybody wants here's a dollar facebook and then you get two bucks back. and they are not promotional either. all these coerce not promotional. facebook is the least promotional of all. and has the northwest say. >> not promotional in what sense >> they don't tell how great -- the large companies are saying listen we like you more than anyone else. they just say listen give us a call. northeastward, they could be trumping, they usually give you and hour how many hours people are in front of facebook versus tv. they are not saying listen we won this. they say we're just getting started. these guys live to compete. they are competitors. >> interesting to note, it's funny facebook and amazon market value right now almost identical around $287 billion. google just for what it's worth approaching close to $500 billion market value. that would make it as number two after apple in territorial of the size of its market value.
>> 72 billion in cash. 42 billion overseas. >> course the return of almost 5.1 billion planned. gives a signal, jim that people are taking very positively that there is going to be more capital return in the future. not just about that 5 billion which may not make much difference it's the idea, the theme, if you will. >> let's understand. when you have a stock up 60, does it make sense to come up 60. no. no. you don't come up 60. these are remarkable companies. when you get a scare, when you have them come on at 237 saying sirius satellite channel 400 through 2085, you'll get a chance to buy these. i'm taking no prisoners today. tnp. >> i noticed. people chuckling at the whimsy behind the buy back number. it's the mirror of square root
of 26. 26 letters in the alphabet. >> that's where the conflict came in. i said oh, my where is my slide rule. i'm just left behind p.m. i'm a t.rex. >> remember that letter we got from google who decided to go with alphabet and talked about delivering alpha. remember. >> delivering alpha. it showed there was an awareness of it. >> macy's under 50. how is hertz? >> are you looking at our delivering alpha names. >> under 50. that one not worked out. >> we got to get to some other names. whirlpool is having a nice day, 345, beats by 16 cents. revenue light. emerging markets, jim, still challenging. >> despite the fact they remain in brazil, in '82 i urged them
to get out of brazil. i did. they are still in brazil and make this much money and the stock is down 40% you're a buyer of whirlpool. yesterday black and decker, another conference call that was just magnificent. whirlpool only up. there's always going a whirlpool, some short saying this is the top and it has. but they did a good job on that conference call and whirlpool and stanley -- you want to go with black and dennis erickson. buy home depot. home depot can go higher. >> record high for depot yesterday. american airlines is out. they come in beat by a nickel. revenues in line. their conference call is talking about low cost competition and their revenue at risk as they have to match these low fares. >> that's fair. we know that spirit delivered terrible numbers. but i would point out they have 30 billion -- 10 billion in cash. they returned 2.7 billion.
you let this come in. let it come in and then maybe you look at it. spirit airlines bringing down a lot. >> that's their biggest problem. >> spirit is coming in on the texas routes. doing so well. but i don't want to give up on the airlines. remember we opened a little too high and a lot of this is the pajama guys, they see europe. valeant. i don't trust valeant. >> what a week it's been for valeant. began where some customers said it seems you're changing your strategy. invest more in r and d. not raising prices. that stock is up for the first time all week is valeant. remember they raised guidance a little bit. that was when they, some say changed strategy. here it is at what 116. it was as low as 88. we'll hear from the company on monday in terms of it, on a conference call refuting that
report from citron research that started the huge decline a couple of days back. >> i don't think we've heard the last of this one. i would say at 88, when you look at the cash flow even if you think it's a total joke, and there's stuff in some of the channel, i know that's a crime, even if you follow those things at a certain price this company is just too cheap. it's not there yet. and, we can laugh. if he got in between 88 and 100 not a dumb play. >> averaging down. another stock that had a big week, is bm. we mentioned emc earlier and microsoft. where would emc be without the deal with bm wear. what an awful week that stock had. off for a couple of weeks. falling off a cliff. 57 bucks. first time i've seen positive
print. >> they are old tech. >> they are not brought back. they are extinct. >> yeah. >> like jason alexander. when i look at these old tech companies and if i worked at them i just worry. i worry because these companies, this cloud, cloud social mobile, if you don't have cloud social mobile, internet of things, if you don't have connectivity i don't know what do you. i think you're bereft. i think that ibm is doing its best to catch up. but some things -- there's a bunch -- through all these comps this notion you got to move faster. these guys are speed light. ibm may be speed of sound. really might be. might be. >> a lot slower. a lot slower. >> finally diamond foods want to
mention it. >> i've been recommending they be taken over and looks like it may happen. diamond foods, the turn around there has been magnificent. remember there was a real problem with accounting, that company made a big come back. good fit for kellogg if it happens. kellogg needs growth. kellogg 52 week high. general mills, that stock had a move yesterday that was almost tech like. reinventing that company on the fly making it more natural and organic. mcdonald's is part of that sustainable beef coalition and they are not caging the chickens. free range thing going. i can't wait to have that kiosk where i can swipe a card and they will bring me my mcmuffin. it's happening in australia right now. easterbrook will do that kiosk. you don't have to wait in the long line where they get the
order wrong. >> if you want the mcdonald's of the future you have to go to australia. they've tool where can you go back and look and see exactly where the meat came from. supply chain transparency. they get all the tools first for some reason. >> i thought it was san diego. i'll say this, if mcdonald's decided to change and chipotle bottomed at 600. if they want to change the whole beef supply in this country they can do it tomorrow. by the way the herds are big so the price of beef are coming down. like hormel they decided they couldn't change the pork situation so they buy applegate farms which was a brilliant acquisition. >> of the three companies that reported earnings we mentioned this morning, amazon, google and microsoft. microsoft is largest gain on the stock market right now over 10%. not too far from its all time
high. the high it hit back in 1999. when it was by far the most highly valued company in the world. >> they made what i thought were outrageous promises of how quickly they can get big. >> the only question will health care ever come around? we have a mixed bag today in health care. but then you talk more broadly speaking about the drug companies, the hospital, the managed care companies. >> yesterday he reiterated. >> stock was down 20% yesterday. >> community health, yesterday they got the hmos badly. came in after the big pharma, little pharma. it's coming. the defenses, the health care analysts they will defend anything. honestly. they come out every day and defend. that money is flowing into the big multinational and
international and pc tech. people don't want to believe intel will have a come back. i think intel is a great way to buy. buy it right now. >> with all that as david said microsoft by far the leader on the dow. let's get to mary thompson on the floor. >> reporter: stronger than expected results from the tech giants as well as china's sixth rate cut. as we helped into today's open all three major indices sitting below their 200 day moving average. all three moving above those levels. suggesting strength ahead for the three major indices. s&p now positive for the year. let's take a look at some other tech companies because as we've been mentioning, google, microsoft and amazon benefiting. we also saw strength in some dow components, apple and intel. they are slightly higher today with facebook and yahoo! getting a nice pop. the halo effect of those
numbers. dow transportation average as well off its best levels of the session. benefiting today not only from lower oil prices but better than expected numbers from american airlines which you guys were mentioning earlier. american beating on the bottom line and forecasting unit growth in 2016, a flat up just 2%. you can see it's turned lower. as the conference call continues. turning to skechers we want to focus on this company. year-to-date it's been a v-very strong performer. but yesterday the company's earnings and most notably its revenue came in below expectations. stock off 30%. year-to-date it was 150%. maker of athletic footwear. finance companies that reported, capital one beating on the bottom line. revenue was flat. state street reporting disappointing results and saying it's making cost-cutting moves. stock down just about 2.5%.
we're focusing on consumer discretionary. the best performing sector. getting a lift from this deal talk. you can see it's up a little bit more than half a percent. >> rick santelli at the cme group in chicago. good morning rick. >> good morning. as i look at the calendar it's two months and two days until christmas. but if you're in the equity markets, it's christmas today, santa claus rally really beginning with mario draghi shining up the old aboutbazooka. all stimulus is fungible. what does it mean? doesn't matter what country, liquidity is liquidity and equity markets loyalist. you look at tens, there's a little love there, but we settle at 203 yesterday. we settle at 203 last friday.
here we are at 20. you see, rates are up a bit today and they are. as you go through the charts you'll notice as you go back to a month to date chart, 2% is the pivot. we're spending a lot of time within seven or eight basis points on top or one or two basis points below. do i sense some divergence. look at the bund yields. they settle at 55 basis points. on the would day doesn't look like tens. they normally track quite closely. let's go back to the last time bund yields closed here, 29th of may. look at that chart. "divergent" could be significant pinpoint doesn't last. back to 148 to 150 spread between the two yields u.s. and european tens. one day two charts. 3rd of august. euro versus the dollar.
see that picture? you know the dollar index is exactly the opposite and you also know the dax is exactly the opposite. yes the dax going quite well, very inversely directly to the euro and nobody knows that better than mr. mario himself. carl, back to you. >> when we come back a closer look at that surprise rate cut in china this morning. we'll get a live report in beijing. health care in the cloud. jonathan bush on his company's latest results. stock is up 16%. dow is up 134. s&p is back to 2074. we're back in a moment. bob dylan. to improve my language skills, i've read all of your lyrics. you've read all of my lyrics? i can read 800 million pages per second. that's fast.
requirement issue by 50 basis points. on state radio the chinese premier said the government would don't make reasonable use of both interest rate cuts as well as triple r cuts to shore up the community. the timing of the move may have surprised the markets but here in china there was speculation that the government would make a move around this time. next week there's a big economic planning meeting where the leadership is going set the economic agenda for the next five years and there's a belief the government wanted to make a strong show in the economy. ironically it could be having an opposite effect. this could be an indication the leadership is much more concerned about the economy than the numbers would show you. the gdp figures for q3 came with in at 6.9% but there's been increasing doubts among the economic community here that the headline number is actually reflective of the economic activity here because of other
indicators that showed lower growth. this move which is quite an aggressive one of a combined interest rate cut and triple r cut is probably going to don't feed those investor concerns but the actual economic performance is a lot worse than what -- >> lost the signal there. our thanks to her for that. comes a day, of course, guys, after the chinese president said growth of around 7 in his words would suffice, that's what reuters picked up yesterday. also said there would be no hard landing. so they have sort of in some sense boxed themselves in. >> they've drawn a line in the sand. remember i believe that things will get better. still don't see the bulk goods coming back. these crazy people who are in the iron business they never stop. i do believe that the consumer, what you get about the consumer is very positive. i saw a bunch of downgrades.
i want to be in that liquor business going back to china. i think steve wynn talked about -- >> again i come back to comments on the blackstone call where their mall traffic was up 17%. >> look at their aviation traffic, their use of the internet, i mean it's one thing to look at sort of industrial metrics and iron ore and electricity but some of these soft er consumer driven metrics are better. >> the consumer is flying to places. i'm very bullish on the chinese consumer. let's hear what tim cook has to say. a lot of numbers you get from the different parts companies they show you they do all this business in company. they have things manufactured. we're getting too many positive comments about like a nike comment, under armour. >> mcdonald's yesterday. >> that was great plus 20.
i know that people didn't like under the armour call because they are spending to win and the gross margins went down. china numbers are fabulous. >> real quick, jim. get your take. crude is 44.35. we're down again. not long ago we were 50. >> make-or-break level. it has to hold this level. it's key in order not to see -- got some numbers yesterday about how the credit was extended to almost every single -- that was negative. >> at that lot of credit. bailing out a lot of companies you think otherwise would stop production. they won't. >> you keep seeing that count go down and the credit cutoff and that's what's driving oil down they all got more credit and that's going to keep a lid. >> with that dow is up 146. we'll get trading with jim in a moment. don't go away. here at td ameritrade, they love innovating.
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caribbean put up a number that shows the cruise business is incredibly strong. i really like royal caribbean. they've done everything right. on a 52 high week list ever since we had the ebola scare that drove it down. very well run company. benefits from lower bunker fuel, fuel for ships. i like carnival and royal caribbean. they are like mastercard and visa. they are well run. very well run. >> what's on tonight. >> the worst stock of the day. the guys who run skechers. >> oh, yeah. >> david weinberg. we'll talk about that move september. see what happened? i think it's terrific they come. they don't duck it. let's listen. great performing stock. everyone wants to write them off. it's down 32%. let's talk. maybe that's an opportunity. there is nosey tron story there.
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good friday morning. welcome back to "squawk on the street". i'm quinn within with simon hobbs and david faber at the new york stock exchange. the bulls are enjoying this best week for stocks since february. positive for the year once again. all three indices above the 200 day moving average. can they hold? we'll see. >> big day for nashts. china central bank cutting rates for the sixth time since november. markets getting a big boost as the s&p turns positive for the year. and amazon and alphabet surging
along with microsoft on quarterly results. we'll weigh in on what you should be doing with those stocks. and vice is launching a tv network. hear from shane smith in an exclusive interview. markets don't rally after china cuts its benchmark rate along with strong earnings from the major technology companies. for analysis on what to do now, james lieu is here. and chief international economist at deutsch bank securities. guys good morning. james i want to kick off with these leaders we have at the top of the market today. a lot of people will be transfixed by the moves on amazon and microsoft and indeed on alphabet. what would you say to investors? >> well the earnings story so far this season it will be week than last year and that's because of the dollar and oil prices. materials, for example, a lot of
companies missed estimates the last few days. overall kind of a mixed quarter so far. but the point is that looking at next year things should improve. i think the markets too often think about next year. estimates are suggesting we'll get somewhere around 15% earnings growth in 2016. i think that's way too high. that should come down. the market is not stretched at this point even if those estimates do come down. >> james, let's slice it another way. we talk so often about the economy and people say this economy here is doing better than others. if you look at sectors performing well it points to something else about this country. technology super. consumer discretionary, consumer staples. two unique aspects to this country. one is its technology base and you don't get technology companies like it anywhere else in the world and the second is that huge consumer base, 320 million people who will consume
feign get it right will get a lot of money. is that a defensive argument or be for growth? >> it's still a growth argument. the consumer, we've been talking a long time, for example lower energy prices helping the consumer. it's taken a lot longer than any of us expected for that to take shape. you're seeing this finally to be reflected in some corporate earnings. the technology story really, i mean it's about margins. it's about growth and it's about, you know, reinvestment in companies and cap x. all those things have been slowed. margins are very high and we think reinvestment in cap x should rise. i think there's a good reason why these are the best performing sectors in the stock market this year. >> let's talk about what china has done. cutting in rates for the sixth time. lowering the amount of cash banks have to hold as reserves. is this enough to stabilize
china and make it grow faster than the last quarter >> we definitely think so. one thing that's very important to remember is if you look at expenditures, actually growing at an annual rate of 25%. not only monetary policy and central bank trying to help the economy. you see a significant boost and that boost should continue over the coming quarters and combined with the consumers in china looking strong, combined with housing market coming back it's clear shift in china is happening but a shift and we don't see this great of a hard landing. >> my two questions, it's accelerating down. i guess you answered that. does it put a floor on commodities? >> it's true and certainly very important we watched this very carefully china is critical for a lot of commodities, so on the down trend has continued. generally speaking every investor here should ask themselves, china for the last
20 years has been making a huge effort of slowly stabilizing their economy got up the side and down side. so if you do expect a hard landing why now? why should authorities now allow this andinflextion point. they are managing very carefully the glide path where we'll have slowing growth over the coming years. >> james you and i were discussing the fundamentals of this economy, this stock market and the sectors here at the beginning of the interview. if you look abroad you're overlaying it not just china. yesterday the european central bank said it would expand qe in december. european stocks are up 6% or 7% some of them now for the week. are they a bet to go for? how do you wait these other international areas. >> the question is about
stability. so for both u.s. markets and also other developed markets like in europe it's about stability out of china and other emerging markets and the fact china has a lot of ammunition both in terms of currency reserves, interest rates, reserve requirements that's helped create that stability. tissue in europe, of course, is that they are worried about the currency and so to the extent the ecb is signalling they are likely to move by tend of year again it's less likely about the economy being in shambles. it's about the future strength of the currency and their export competitiveness at this point. so i do think these are favorable moves from china and europe. >> but i had hoped you might say something more than just favorable. there was a time when a central bank embarked on qe or double down on qe that would send stocks flying and we can capitalize on that. is that going to happen in
europe? >> i still do favor europe. you know, i would have overweight on europe at this point. the problem to your point is this is already priced in. you saw this being priced in with much higher ratios at the beginning of the year even before ecb acted. i still like europe but some is baked in. >> the german dax is up 3% today. thank you both. >> thanks. >> amazon and alphabet fueling a strong rally across tech after both companies beat estimates. are investors likely to see these kind of returns. let's bring in our lead analyst at rbc capital markets who had amazon as his number one pick. good morning. >> good morning. amazon will close to double for the year. almost caught up to netflix as the best s&p name of the year. is this as good as it gets? >> no. we don't think so.
we continue to like amazon stock. i want remains our number one pick. 775 is the price target. so still 25% upside. to trends are going on. prime fly wheels, each spending more with amazon. multiyear trend, early stages on. the other is aws, single most dominant trend in tech. amazon has both of these growth engines working for it. >> aws, 80% growth. almost as much operating net as american retail. that sound difficult to sustain. why is it not? >> it is difficult to sustain except that it's a very large market, except that this company has got eight times the size of its closest competitor. and it's a business that's a commodity business. whoever has the most scale has the lowest cost. amazon set itself up here not
just off one year or two years of investment in cloud executing but ten years. it has a huge lead. more competitors are falling by the wayside. hewlett-packard was the most recent one. >> profit three out of five quarters now, nine out of 15 quarters. for so long the argument has been revenue is up 20 but no earnings. now they've done it more times than they haven't in the past five quarters. should we expect this? >> yeah, we should with one major caveat. there could well be an investment cycle coming up in international markets. there's these clues amazon leaves you when they answer these q and a sessions. india is about to launch a major investment cycle into asia. that could depress earnings. the markets will take a parts approach and look at the ramping profitability in north american retail and in aws. the market will look through that. that's the major investment cycle to worry about.
especially in asia. >> then alphabet. your argument is the be market wanted consistent revenue growth, stabilization and margins, better disclosure and cash back. we got all of those things this time. will we continue to get them? >> well, yeah. by the way, thanks, carl. that's the right set. fourth thing weech not gotten which is that greater transparency, we've heard talk but haven't seen it. we'll get that we think in january. we'll see how profitable the core advertising business is and more importantly how stable the margins are or even expanding the margins. this stock for multiple years has had a discount because of management's unwillingness to focus on shareholders cash returns and concerns over margins. both of those could flip. that's the re-rating could you see in the stock. that's why we think this stock goes well north of 800.
>> why the slow action in opening the i ckimono. >> i think the market has been wrong encore search. the market assumes core search is heading towards single digit growth. i don't know if we'll get that kind of disclosure. i wish we would. i don't think we'll get. we'll find out the core profitability. we'll get more disclosure. better than we had a year ago. it does take time for a company network out new reporting techniques. >> you say of all the things we watch on the web, the shift towards mobile, tv ad budgets moving online, importance of local internet you say google's
share price doesn't reflect this. >> yeah. i think that's true. the stock trades at approximately 20 times earnings for -- you know this is extremely stable revenue growth. that's something misunderstood about google. this is 11 straight quarters where the company has been able to grow its core advertising business somewhere between 16% and 21%. 21% is what they just printed. it's a growth story what we think are expand squabl to core businesses. this stock should trade at a higher multiple now that you removed management discount over failure to give back cash to shareholders. shows things have been addressed. this stock will go through a re-rating. we like the shares. >> cramer suggested 30 multiple. do you think that's too rich? >> i would never disagree with jim cramer, for one. i was thinking more like 25
times. between 25 and 30 i'm fine. >> mark, good to see you. thank you for covering two big stories for us today. >> thanks, carl. >> up next on the program, microsoft hitting new highs today adding about $40 billion in value. helped by growth in its cloud business. can the momentum continue? "squawk on the street" will be right back. [female announcer] if the most challenging part of your day
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pandora not joining in on today's rally, shares are sinking 32% hitting a two year low. the music streaming service matched estimates with quarterly profit of 10 cents per share but revenue fell short of street expectations and the company announced a $90 million settlement involving royalties for songs recorded before the year 1972. the stock is down 27% this year. simon. >> in the meantime back to what's working. microsoft getting a huge boost in its first quarterly earnings as its cloud efforts appear to pay off. >> it wasn't just the cloud. actually pcs, more personal computing group provided lot of the upside versus what we were expecting. that group has a lot of revenue. analysts expect it to come in at $8.5 billion came in over dal$9
billion. bing clocked in at 27%. sharing u.s. search which explains why yahoo! wasn't doing so well. 110 million active devices on windows 10 already and microsoft unlike the quarter before sounded more bullish. they were saying wait a couple of quarters before we see an impact. last quarter. now we're seeing some of that impact. on the cloud, interesting move, nadella clarified his philosophy and outlook on the cloud. he said a word we don't hear him say that often. amazon only we and amazon are potioned in enterprise cloud as platform creators and that's important because we have the technology that's going to able to drive this forward. other players are not going table to keep up. interesting it comes right on the heels of hp saying they are shutting down their public cloud presence. so what satya has been telling
us, what amazon told us days ago, there aren't that many players at mega scale in the cloud. some will have to drop-off. also commercial cloud doing well for them, office 365 picking up a number of subscribers, commercial cloud growing at 70%. annualized run rate, revenue run rate of $8.2 billion. adds to that 20 billion number they are targeting in three years. down side for employees, microsoft cut 1,000 people. a lot of people would argue that microsoft was -- they had some room to trim some folks who were working on legacy technology, things that weren't working, so even as they are growing in certain areas, nadella and his team showing they are looking to stay efficient. >> i was looking at the stock market move. you might think -- the mood music is so good at microsoft you would have thought they would have done better than they have. good move over the year 18% but
not as stellar as some others. from a tech standpoint. >> absolutely. microsoft had not made the case as clearly as they are starting to. but they are doing well in the cloud. what we saw in their cloud growth numbers that 70% commercial cloud number, what they were also able to achieve, you have to read, separate from the server business. >> from a year ago? quite a number of business units, structure change. >> they are reporting fewer business units but getting better at talking about it and the results in the cloud are showing up in a way they western before especially because now that amazon is breaking out their numbers it's a little closer to apple to apple. people are excited about amazon and we're excited about microsoft. it's helping all of seattle. >> good day in seattle. seahawks too. from last night. thank you, john. when we come back a controversial issue around the
kurng legaliz -- country, legalizing marijuana. where do the gop candidate stand on that? we'll talk about that after the break. d. i would indeed. well, let's be clear here. i'm actually a dj. [ dance music plays ] [laughs] no way! i have no financial experience at all. that really is you? if they're not a cfp pro, you just don't know. find a certified financial planner professional who's thoroughly vetted at letsmakeaplan.org. cfp -- work with the highest standard.
>> recreational marijuana legal in four states but tissue is still controversial. where do the republican presidential candidates stand on it. john harwood has details on it having been on the daley show last night. good morning. >> our debate next week takes place at a time when attitudes on social issues and criminal justice are changing rapidly and in a place colorado that was the first state to legalize the recreational use of marijuana. that has brought out some divides in the republican race. let's listen first to lead thing libertarian in the race rand paul who says if colorado wants to do it that's fine with him. >> i personally think this is a crime for which the only victim is the individual and i think that america has to take a different attitude. i would like to see more rehabilitation and less incarceration. i'm a fan of the drug courts which try to direct you back to work and less time in jail.
the bottom line is the states we say we like the tenth amendment still we start talking about this. i think the federal government has gone too far. the war on drugs has had a racial outcome and something that's damaged our inner cities. >> of course the republican party has had a strong stance on criminal justice and law enforcement for a long time. one candidate is new jersey governor chris christie, a former u.s. attorney. he says that if it's still illegal under federal law it's still illegal to him. >> if senator paul thinks the only victim is the person look at the decrease in productivity, look at the way people get used and move on to other drugs when they use marijuana as a gateway drug. their families are victims too, their children are victims too and their employers are the victims also and that's why i'll enforce the federal law. now those aren't the only two potions. carly fiorina, the former hap n
hewlett-packard ceo said she supports the 10th amendment but poses states decision to legalize and tells a searing personal story to make that case. she lost a step-daughter to drug addiction a couple of years ago. >> she did indeed and has written about that and talked about it at length. it will be interesting. one thing, john, to measure some of these long term social costs the way christie does. another thing to measure the incremental tax increase. >> more and more states having difficulty getting the revenue to finance their operations, fast growing medicaid programs, for example, and turning to things like lotteries and gambling revenue. marijuana could be another source. >> john harwood with us in washington. tune in next wednesday the cnbc republican presidential debate live from the university of colorado in boulder. we'll moderate with john and becky quick. >> straight ahead, when it comes to retail and e commerce hard to
retireees on a day trip collided and caught fire in wine country in southwest france killing 42 and injuring four others. france's deadliest road accident in 30 years. eight people including the driver escaped from the bus but the truck driver was killed. hurricane patricia maximum winds of 200 miles can make landfall later in the day. a palestinian man stabbed an israeli soldier in the west bank and shot by troops. both were taken to the hospital for medical treatment. it's the latest round of violence in the region. secretary of state john kerry in vienna for talks with his russian counterpart sergei lavrov to revive the effort of syria's war.
earlier he met with the saudi and turkish foreign minute serious. simon, back bag. >> pilots for u.p.s. announcing results of a vote on whether or not to authorize strike action. morgan brennan has the details. it's worth pointing out u.p.s. is one of the largest airlines in the world as it makes its delivery. this is a big deal. >> that's right. one of the largest airlines. the pilots at u.p.s. voting to strike against delivery giant. this the is a 2,500 independent pilots member association that flies the cargo planes. they have been at odds over wages and retirement benefits. before getting worried about shipping those packages, this is a strike authorization that means the union's board can request a release from federally mediated negotiations with u.p.s. and then strike if so. now right now both sides are scheduled to return to the bargaining table early next
month. on the heels of the vote u.p.s. promises its customers on time delivery but after four years of labor negotiations the company has failed to deliver a contract for its own pilots. the international brotherhood of teamsters, the union covering the drivers and package orders at u.p.s. has said it too will stand by the pilots, it will not cross picket lives if a strike could ensue. this could become a big deal. u.p.s. says it don't negotiate in good faith for contract and that authorization votes are symbolic scripted events common to airline negotiations. the company insists this will not impede service to customers. this is unfolding as u.p.s. is gearing up for peak season which i want needs to go smoothly after we saw two souf holiday seasons. analysts say even if the strike doesn't happen during the holidays, labor uncertainty is a risk here and just as rival fedex has ratified its own contract with its own pilot
union. if some shippers are nervous they might be tempted to take business elsewhere and that's part of the reason you're seeing shares of u.p.s. turn negative. they were up half of a percent before we got these results from the union vote. fedex is up slightly higher. >> no coincidence the events happen this year. amazon shares continue to surge as it continues to come to nature the marketplace. our next guest says walmart trying to compete online when it comes to e commerce maybe they aren't going to get there. joining us now is jim -- i don't know if there's a book in amazon's dominance over walmart.
>> the exonerate shecompetition up. the question is, they said they were taking e commerce seriously back in 1999 and 16 years have gone by since and to just look at the most recent snapshot amazon sales surged 23%. walmart is predicting flat to down revenue for the year. and that really tells you something, i think, that the e commerce is now threatening the core walmart model. and, you know, to a large extent i don't blame walmart. they had the most efficient, most profitable, most dominant retail model. were they going embrace something that would undermine that whole thing? that was maybe asking too much. they now recognize they have no choice. the question is it too late? and everyone i talked to agrees that at best they have a monumental task in front of them. >> they have an incredible distribution network.
they benefit enormously from that. >> they perfected that. that's a key to hair high profit ma begins and dominance. but tech people told me you can't just take, you know, on the ground, in store service and whole network that supports that and convert that into bringing an individual item to somebody's door. i did a little comparison online. i picked some things randomly and compared it at walmart.com and amazon.com. the amazon prices were lower built what really struck me were the delivery times. and to get expedited delivery from walmart into new york city i was going to have to pay almost $25 for a $30 shirt, and then it was only going to get here in three to six days. >> i'm impressed you chose the under armour tactical long ua shirt. john grisham novel as well. >> i saw somebody at the gym in
one of these under armour shirts. i would like to look like that guy in the gym. my dishwasher recently broke. the tv looked very nice. >> we think back to the birth of. amazon. about making books cheaper. than you could get it at a store. now it's about convenience. i don't go there because it's cheap i go there because i can get it fast. >> one analyst pointed out to me price within five or ten years won't be an issue because everybody will be selling at razor thin margins. thanks to the internet. whole issue is going to be convenience, selection, and ability to get the stuff in your hands first. amazon yesterday said they are getting stock in some test markets in one hour. not even same day. one hour. >> they benefitted over these last 15 years since they became a public company frk able to
invest enormously and not be judged on the bottom line earnings which continues to today. walmart has been competing in a different game. now suddenly finds itself having to invest a lot more where they simply have been judged very differently and treated differently by the market lays. >> you're right. amazon has had this halo around it. they had this great story to sell. itches skeptical where were these profits coming from. they are starting to show some profits now and that they are now actually beginning, to you know, draw some blood from a giant competitor like walmart. i think it will work. the market doesn't pretend to be fair. it's not going treat walmart the same way. i sympathize with walmart. if it trepds with amazon their stock would be killed. >> walmart has problems. i wonder if we see it too much from a northeast standpoint.
walmart is still throwing off $80 billion of cash over the next three years. still has 12,000 stores worldwide. still has a dividend of 3.3%. those are powerful metrics. i understand they are under pressure. i under the marginal story is where your. still a very big, very strong business. >> it has a lot of strength. what walmart said to me is it's not fair to take poor kind of upscale items delivered to manhattan and say that's the whole picture. >> you're not a blue collar worker in the midwest that would like to go walmart on saturday morning. >> i am from the midwest. >> your tastes have changed. what walmart is betting on and betting big is that they can still use, physical in store net network create a hybrid internet in store experience which is what consumers want. that's their bet. they got 4,500 stores. they have a store within five miles of 70% of the u.s. population. the question is do consumers
want to shop on the internet, get a selection, get in a car, drive a few miles and pick it up. they can get it really fast. i don't know. that's a big bet. they have an advantage. they can work it. if amazon can get you something in an hour and you don't have to burn any gas or get the car out of the garage that's a tough proposition, i think. >> logistics is where amazon has focused so much of their time and effort. >> people told me this is a big technology issue. and walmart is building its own technology from the ground up. a lot of people are scratching their head why. they are not a technology company. they hired all these people in silicon valley. they are proud of that. there are other technology companies who should be doing that for them. >> would you agree that at 50% more market cap at amazon that maybe that it was becoming
unbalanced. is amazon worth much more? >> that's a good question. if you take the really long term view maybe. maybe. but it's going to be a long time before -- amazon is ahead on market cap. a long time before they overtake them on revenue let alone profits. we're looking decades there. fascinating. >> i know in the long term -- >> i would keep an eye on it. be fascinating to see what happens. >> amazing to watch. just the tale over the last two weeks. walmart last week and amazon today. >> american airlines topping third quarter earning estimates the stock still trading lower after some confidence on the conference call about competing with low cost airlines. phil lebeau has more. >> not about what you've done it's about what you're going to do and there are more than a few investors this morning who are worried that american will find itself increasingly in a fare war. let's talk first about the
record third kwaerngts because they were fantastic anyway you look it a. they beat the street coming in at 277 versus the estimates of 272. a record quarterly profit. not just for a third quarter but any quarter for american airlines. when you look on the revenue side roughly in line with expectations, maybe better than expected. again it's the conference call that people are focused on. some comments on the conference call about the increasing pressure to compete with low cost carriers. this does not mean we'll see a fare war. when we talked to doug parker in the past he said they are not in the business to go into fare wars or lose to low cost carriers in certain markets. that's one reason why when you take a look at shares of american today they are under a pretty good amount of pressure. down more than 4% at one point. as we take a look at shares right now, they are down more than 2.5%. a little bit of a come back, if you will, from where they were earlier in the session.
guys, also remember these numbers for the third quarter driven so much by the low cost of jet fuel. i talked with more than a few people on wall street who have said is this as good as it gets on the cost side of the equation for american airlines and not just them but for delta, united, all of the airlines. there's some concern this is as good as it gets although when we talked to doug parker he said we don't see substantial increase in jet fuel prices until well down the road. shares of american under pressure today. guys, back to you. >> what a week for you. when we come back, vice announcing plans to launch a tv network year. wheel hear what ceo shane smith has to say about that new venture when "squawk on the street" comes back.
more "squawk on the street" coming up next. ney. 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
some great results in big tech in china cutting interest rates today means the dow supis triple digits. >> check out shares of le kperchmark. the company is exploring strategic alternatives and hired goldman sachs to advise it. lexmark has seen a drop in the last two quarters. lexmark has a market value of $2 billion steeng is down 15% on the year. millennial focus vice is continuing its global expansion.
julie boorstin spoke to the ceo shane smith. finally it's doing tv. >> that's right. i spoke to shane smith from london where he's announcing the company vice media is launching a dozen new tv networks over the next 12 months. this continues as global expansion of its millennial focus content will be buying some networks, part nearing and doing joent ventures with other. smith revealed after months and months of speculation vice will launch a vice tv network in the united states next year. >> makes sense to launch a network anywhere because, you know, we're doing three screens, one screen, we're doing a network with rogers in canada, doing networks in europe, doing networks in south america. because we want to be able to go to our brand and say we can do tv month, bill, online, we can do everything. >> smith also revealed some key financial saying profit and revenue have been doubling every
year. revenue on track to near billion this year and to double in the next two years opinion he stayed company is in the midst of acquisition talks with everybody at a valuation of $5 billion. >> valuable, i think right now we have a decision to make because we're sort of topping out the valuation that a media company can buy us and then once you get into next wave it's either major telcos or apple or google. then you have to look are we too expensive for media to we go public. we're at the top end of media today. >> after last week netflix said it's going to take on vice in the next two years. shane smith says this competition valid dates vice''s model. >> when we first started with news everybody said vice is doing news. netflix said we'll do vice news and "new york times" said we'll
do vice news. a year ago everyone was laughing at us. >> now smith tells me he's focused on getting the hbo show that he's doing, that's a "daily news" show ready for launcher and by tend of the year he's expecting that he'll have to make that decision about whether to sell or go it alone and take vice public. certainly and very interesting company to watch. guys, back to you. >> it's the birds we can hear you early morning behind you in the trees that are making the sounds. perhaps inappropriate given what he said. a lot of people want to know what vice is. bring us up to speed. they say they have revenues of a billion dollars and talking about a $5 billion valuation. some will be skeptical. >> they have a very broad business. vice started off as a magazine. they have relationships with advertisers. they effectively have an ad network. they have a wide variety of websites and web latino forms with video, original video for
the web as well as articles, news content, and they are also distributing their content in all sorts of different places. they had a show on hbo for years, now they are in the process of getting ready to launch a "daily news" show that's a big feature of hbo now which is that direct to consumer hbo app. they are serving a lot of different customers with different type of products but what smith is saying nobody is doing this millennial focused news. they have this documentary style that's rough around intelligents and send journalists to all sorts of places around the world. if you go online they have a big audience especially countries outside of the u.s. it's not just a u.s. website. it's really a global media company. what they say to advertisers they can help reach that younger audience that's very hard to reach with traditional tv ads. >> okay. we'll leave it there.
>> let's get into the cme group and rick santelli with the santelli exchange. rick. >> thanks, david. i like to welcome legendary technician -- you think cycles, you think peter. thank you for taking the time. >> my pleasure, rick. great to be with you. >> listen, you often talk about seven-year cycles. you have a lot of ammunition to back it up. we're getting close in your mind to talks we should pay attention to. you're specifically zeroing in on the may s&p highs. 2,130. the may dow highs around 1,8300. considering stimulus and amaro draghi and the rise in equities. does it change your bearishness, and if it doesn't, can you explain? >> no, it doesn't change it at
all, rick. a lot of my indicators have that the cycle has been pointing to 2015 for several years now. so many things came together especially in the middle of this year. is it possible for the rally to extend and perhaps go to slightly higher highs going into the first quarter of next year? yes, but i put the odds of it at about 10% or 15% at the point. i think i saw a very important top in may of this year on the dow and the s&p, and i -- frankly, i'm surprised by the strength of this rally that so far it has not changed my mind at all, rick. >> peter, it's interesting because being a tigs anythings myself, fundamentals in technicals ought to line up at some point. what you're pointing to in terms of a time period where the rally could extend before it fails may correlate very highly with federal reserve activity in early 2015. excuse me.
2016. any thoughts on that? >> wrau. i think there could be that kind of correlation. we can't rule that out because, of course, supposedly we're waiting around to see what the fed is finally going to do. it's going to be anti-climactic because there isn't anything, as you know that, they can do now, rick, to save what is apparently a very poor underlying situation. i'm not a fundamentalist, but i think it's pretty ease where i for someone who looks at the long-term -- the problems are huge. nothing will change them. they could change the psychology, and that's always important. >> market top is not going to be a six-year or one-year top. i'm talking about a top that according to cycles is scheduled to be a top to last a decade or
longer. >> wow. >> and the final few seconds we have, peter, the great thing about writing that you do is that there's always an escape hatch. in a few seconds, how do we know if the pattern gets broke sxen we he extend higher than the highs should we reach them in the first quarter of 2016? >> the trented line currently is around 2151. by the end of the year it's 2171, i believe. >> it picked out the 2007 top and picked out the tops all for 2015. those numbers seven to 13 that you see are the number of months that we hit that line as we were talking. if we were to get well above that, that's the point of -- >> i'm going to make sure that
we get those on cnbc.com. i am out of time. next time you come back before the first quarter, we're going over it in more detail. peter, thank you. simon hobbs, back to you. >> thank you. we are ramping up to the climactic version of "squawk alley" for the week. john can tell you what is on deck. >> what a finish it's going to be. big earnings from microsoft, google, amazon. we'll dive in and see what's next for those companies. also, facebook perhaps in sympathy up above $100 a share, and jack dorsey giving back a big piece of his twitter stake, but to whom? all that and more coming up on "squawk alley."