tv Squawk on the Street CNBC October 29, 2015 9:00am-11:01am EDT
somehow getting his tax rate down to be able to invest in r&d as much as some of his competitors can that aren't domiciled here in the united states. >> that does it for us today. make sure you join us tomorrow. right now, time for "squawk on the street." >> good thursday morning. welcome to "squawk on the street." i'm carl quintanilla and david faber at the new york stock exchange. investors digest that hawkish spread from yesterday. firms work off the inventories, ten-year is around 2.11. oil is roughly flat. the gop candidates on figure phrma. the fed lowering taxes and that
showdown between political allies. >> it would be one of the largest tickers of all time. pfizer and allergan are in preliminary discussions about getting together. >> our first look at third quarter gdp, coming in at 1.5, slightly lower than estimated as yesterday is in the red first up, a lot of action during last night's republican presidential debate. the candidates discussed numerous topics, the economy, taxes, the fed and entitlement reform. one of the biggest moments involved former governor jeb bush and senator marco rubio. >> marco, when you signed up for this, this was a six-year term. you should be showing up to work. literally, what is it like a french workweek and you get three days where you have to show up. you can campaign. just re-sign and let someone else take the job. there are a lot of people living paycheck to paycheck looking for a senator that would fight him each and every day. >> i don't remember you
complaining about john mccain's vote record. someone has convinced you that attacking me is going to help you. >> you were there as was i. we are part of the discussion today as people review the debate. what did you hear from the substance of the candidates? >> substance. >> did you not hear any? >> i was there. i heard that they hate the government. if they came in, you would like the government. that the government is the source of all problems and the source of all evil and if you want to know how to make things work, you just let private enterprise work unfettered. rubio and bush, take that outside. go behind the casino. whatever they want to do. i look at what we asked. i am going to go right here. i look at what we asked. we had very well-reserved questions. the kind of thing you would have to ask the answer to if you were president. not if you are running for president. maybe they are two different things. when you run for president, you
don't have to answer anything. when you are president, this is exactly what you are stuck with. dr. carson, what do you do about expensive medicines to save lives? they save lives. those drugs cost a fortune. >> the government has to get out of the way. >> they are going to price it to whatever makes it so that your father just lives, which is a lot higher than if there was no government. >> on drug pricing. >> dr. carson, in recent weeks, a number of pharmaceutical companies have been accused of profiteering, for dramatically raising the prices of life-saving drugs. you have spent a lifetime in medicine. have these companies gone too far? should the government be involved in controlling some of these price increases? >> well, there is no question that some people go overboard
when it relates to profits and don't consider the american people. what we have to start thinking about as leaders is what we can do for the average american. what we are going to have to start doing instead of picking on this group or this group, is we gonna have to have a major reduction in the regulatory influence that's going on. the government is not supposed to be in every part of our lives. that's what's causing the problem. >> i'm stuck with the granularity of what i do for a living. an excellent company, how they are able to sell this life-saving pill that cures hep c. listen, it will bankrupt us. we can't afford how to pay you. the united states, blank check. why? pharmaceutical is very powerful.
gilead spent a fortune to buy that. >> incredible deal for $11 billion. they got suvaldi, one of the best selling drugs of all time. >> i didn't go to carson to trip him up. you are both a doctor and in government. maybe certain people shouldn't get it that are older. maybe we should be like europe. it's kind of like, could you help us, you are both a doctor and a politician? the problem is the government and regulation. fine. if that's what people want. if they want to think it is government and regulation, they have to deal with every single government that is struggling with this pill. no one should afford it and everyone should have it. tell us how to rationize. i didn't say, hey, doc, and you are a clown and let's have a
tequila shot. why are you attacking me? >> it leads us to the big news of the day. >> pfizer and allergan are in preliminary discussions about a potential deal that would bring the two giant companies together. our viewers who may have focused on the conversation that takes place at this desk, many of you, most of you, do do that. may have heard us discuss thg as a possibility any number of times over the last few weeks and months particularly as it relates to comments that have been coming from ian reed. the ceo of the company who has made no secret of his attempts to figure out a tax jurisdiction for his company that would better better enable it to compete and has talked openly about the potential for deals. jim and i have had the discussion many times. jim, pfizer reported numbers on tuesday. you and i were here. they had the call.
on that conference call, mr. reed said, this management team is not afraid of taking bold steps. when we make our decision, we will move. he went on to say, one needs to be very careful on the legislative changes involving inversion. if there was a deal to be done, an acquisition, i prefer it to be done under the present congress than the new congress. if you were pfizer and wanted to do a deal that would be treated as an inversion under the current regs per treasury, you want to get it done by the end of calendar year 16. allergan fits. allergan and glaxo were the two that fit. it would require pfizer to do an all stock transaction, a 25%-30% premium on it and you would fit the 60/40 split you need to to get through the fairly narrow window that is still allowed for inversions.
pfizer would no longer be a u.s. taxpayer in the sense that they would be paying taxes on what they sell. all the companies still pay taxes on what they do here. there is a way of moving all of that overseas. they would have access to their overseas cash and many investors on both sides might want to think about it. one final thing, pfizer and activist did engage in discussions. activist, the forerunner to what we now call allergan. they bought allergan, the name. they abandoned those discussions once the change in inversion treatment by treasury happened, because activist was too small as it was currently constructed for them to get through the new window. that's no longer the case. >> this whole thing is somewhat accelerated beyond what i thought. saunders comes on "mad money" a deal to speak to us. it is a gem of a company. this new allergan has a generic
drug business that is very important in terms of health care and health care payers. this generic business is being cut to shreds in 2017. he is selling it for $40 billion. i can't believe anyone has talked to this company before they get the cash in hand. i also do not understand why pfizer doesn't say, we have a great quarter and we are delivering. i guess they just want to take advantage in the same way all these candidates, if they were a little more substantive, it would be easier. he is saying, we are going to take action, because you are not. allergan is a vehicle for him as opposed to a great company with great drugs. >> that's an important thing here. what would brent saunders and the management team at allergan's response be? >> 360. >> you are going to have 60/40
ownership. pfizer and having a lower tax rate. you might be able to return capital and a lot of it to shareholders, post any deal. this will create a political -- during a presidential season, a political punching bag, no doubt. the idea that pfizer is going to invert, no longer and take itself out of the u.s. tax. this is why i have talked about jim about it so often, deafening from the hedge fund community. they have been focused on this highway bill that might have included the provisions to have a change in the tax code. once that was clearly going to die, which just has happened. many people thought that's when you are going to move from pfizer and at least make a phone call. that's where they are right now. i don't want to draw too much here. >> the stories made it sound like i'm going to wake up on monday and -- >> no, no.
>> violence to the eagles. i could have a very good monday. >> they can move fast but i don't see them moving that fast. this is preliminary. that is important for people to understand that. >> you can't necessarily say that. >> they could if they felt like it, structure it. it is no the a possible that allergan wouldn't buy pfizer. we have seen so many of these. foreign companies buying our companies, because the tax code is all screwed up when it comes to corporations in this country. >> i am not running for president. are you? >> no, i'm not but it is true. >> would you like to have a shot at the show? >> i don't meet the high requirement. >> oh, shoot, i'm out too. >> i was in three years ago. >> you keep shrinking and you are going to be in the wizard of oz. >> mgm resorts, one of the big
winners. gopro plunging on that. an exclusive interview coming up. we'll get to sherwin-williams and etna and time warner and a lot more when we come back. good. very good. you see something moving off the shelves and your first thought is to investigate the company. you are type e*. yes, investment opportunities can be anywhere... or not. but you know the difference. e*trade's bar code scanner. shorten the distance between intuition and action. e*trade opportunity is everywhere. we heard you got a job as a developer!!!!! its official, i work for ge!! what? wow... yeah! okay... guys, i'll be writing a new language for machines
mgm reporting quarterly profits of 12 cents a share. the stock is up. not the only reason the stock is up. the company announcing it plans to create a real estate investment trust that will contain ten of its properties and also assume $4 billion of mgm's dealt. now, mgm has been looking at such a deal for a long time. some of its investors have been encouraging it to take that propco operating company route. it is not your typical split here. i spoke to mgm chairman and ceo jim murran about the decision and details behind it. here is what he had to say. >> about a year ago, david, we got together with our advisers
and thought about, how do we create the most amount of value for all of our share holders. we wanted to create not one but two really healthy companies that had great balance sheets and great growth potential. in evaluating our real estate, the key is to figure out what your tax basis is and what the growth prospects are. we decided to take ten of our assets, most of our las vegas is strip resorts and all of our regional resorts and put it in a new company we are going to offer shares to the public in the first quarter. they will still control mgm properties and it will come public early next year. they expect to have the offering done in the first quarter of 2016. he referenced 10 properties. they do not include the mgm grand or the bellagio of which
mgm will continue to retain 100% noern sh ownership. that does not mean they won't conceivably be sold to the company. that doesn't mean they won't sell down the ownership stake. it is an interesting way to go about the pressure and not paying the huge breakage cost they would refer to in terms of all the taxes because of their tax basis in various properties. we are going to have a lot more from jim murren. >> he always understood the industry better than anybody else. it is one of those things where you say, he should be in the industry. he is a dominant player in the industry. steve wynn. he complained vitally about what's happened in mccal.
shel adelson, didn't see him. he said we are not going to try to stop creating value. >> he represents about 15% of the ebitda of the company. they have been penalized for not having a larnler operation. they do have a new project underway. in china, net revenue, $529 million. it was down 33% but viewed better as might have been anticipated. you are seeing the stock up rather nicely on the announcement of this read and the earnings themselves. we are going to hear more from mr. murren. >> that was a spin and that needed irs approval. this is not. this is a public offering of a in you company that they are creating that will be a read.
>> they are going beyond their own properties. atlantic city, all things come back to the debate. it is true. >> the fact that you duis are here to me is the most miraculous thing. >> the fact that joe and i slept in the back of the plane together. >> i don't want to hear anymore. earmuffs. >> i play with an open hand. everybody knows i play with an open hand. >> we will get cramer's mad dash and count down to the opening bell. we will dive into some of these eternals as well on this initial gdp print. we are back in a moment. you wouldn't order szechuan without checking the spice level. it really opens the passages. waiter. water.
it is time for a mad dash for this thursday. want to start with the big loser this morning, jim. >> a lot of people think the problems today are a hangover from yesterday's big rally. two stocks in the news. the first is nxpi along with skyworks solutions and corvo, represent the high mobile text. they are selling to apple. apple had a great quarter. the guidance was so bad i found myself thinking maybe it was a typo. $1.6 billion. they got it to $1.3 billion. they are doing an acquisition. this is an excellent company. they are doing near field communications. >> what gives? >> i don't know. that's what a lot of people don't know. when scratch heads, you sell a whole group.
you will see avago and skyworks down. a great company. they just kiboshed it with the guidance. >> horrible. >> this next one is a shocker. buffalo wild wings. david, the sales show remarkable deceleration. they missed on almost everything i'm looking at. you very rarely see the digital buy to hold the sale. their cost for chicken shall not going down. real estate, a lot of people, including chipotle, talked about higher real estate. they could get hurt by that. a change in the schedule for the nfl that hurt them. they were rosy. the analysts were anything but rosy. that's how you get that kind of weird dichotomy between a company saying things good and the analyst saying, i am
scratching my head here, sally smith. what happened? >> you have been a fan of sally smith. any sense as to what happened? >> i think the the people have turned on the restaurant group to some degree. people are worried about longer term considerations, particularly labor. this is the conundrum. i don't know why same-sales -- that's a tremendous deceleration versus domino's which did a big buy back and has great same store sales. the dichotomy between a costco in retail versus a walmart. a buffalo wild wings versus a dominos, is making people really concerned that maybe it is so inconsistent. this tells a bad story. and then comes around and starts telling a better story. we are at wit's end with the restaurants and the retail. we don't know which way to go and, therefore, we sell. i think we will look back and say there are some great
opportunities here. this has to rest before we can find a bottom. commodity prices for food have not come down given the fact that the whole ad complex is so bad. the food costs haven't come down with the consumer. that's worrisome to me. we are just getting started here. i mean it. we have opening bell a few minutes away. here at td ameritrade, they love innovating.
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you are watching cnbc "squawk on the street." the earnings parade continues tonight as well with starbucks, linked in and some others. >> it worries me you just gave two eas and starbucks. what's happening this quarter is the ones that have been fantastic have not tended to deliver. starbucks and the charitable trust owns it for ages. e.a. has been the greatest secular story of this period other than dental work and the
article in the "times" reviewing the apple tv as very good for gaming. am, close apple, close to a bre. >> i believe in deerfield communications, because i love apple pay, wireless pay. skyworks is the brains behind almost every single cell phone. you had apple blowing the doors off. you are trying to figure out, what am i missing? i'm not alone in asking this question. there are people all over wall street who have billions of dollars saying how is it possible that nhi did badly when apple did well and we are seeing cirrus logic do fabulous when we don't get good numbers out of corvo. the inconsistency is so maddening it makes people worry they aren't doing enough homework. we aren't getting advances.
gopro, it decelerates. >> we are going to hear from woodman later on this morning. >> you should wear goproand get mobile eye for collision avoid dance. >> s&p at the bottom of your screen. tony award-winning actor, james monroe egglehart, on broadway and over at the nasdaq celebrating myocardia company. >> that guy is great. >> he is a force of nature, that guy is, absolutely. >> we haven't touched on the gdp number, 1.5 is below the 1.6 estimates. personal consumption, a shade below the 3.3. >> you read what the feds say. what is the problem? is it employment, end sales, retail? i keep coming back to employment. they have an out.
the employment number may not seem so good next time. rick santelli asks straightforward questions. as always, terrific. enjoy his company tremendously when i finally get to see him. these guys want to raise rates. you are also stuck with this. kind of a worrisome trend. so many different major american companies are not doing well. they are not doing well because of the strong dollar. after yellen's statement, the dollar screamed. it screamed. you would see a lot of these companies that do international business down if it weren't for china changing its one child policy. >> they are the second biggest gainer on the s&p. >> mechlt mead johnson is
another one of these companies. procter & gamble, you want to talk about globalization. you may think we lose manufacturing jobs here. they get better earnings there. the strong dollar should sent that back to 71, 72. paypal not having a particularly good morning after the company reported earnings. we talked about paypal, recent split from ebay. a $44 billion market cap company. not an insignificant player at all in the payments world, jim. always talked about as a possible candidate for being purchased at some point. that's not where the focus is at all today. it is simply on numbers that did not at least meet expectations. >> let's take this. m my charitable trust owns this. there are people, i'm not a conspirator on this one. every analyst says buy this except for jean munster from piper. i went over that fine tooth
comb. it was very, very good, thealler began discussion with pfizer. >> irish takeover law requires allergan to confirm if they have had discussions. they have confirmed they have been approached by pfizer. they are in preliminary friendly discussions regarding a potential, business combination. no agreement has been reached. there had be no certainly these discussions will lead to a transaction on the terms of which a transaction might be there. they were under obligation to comment under irish takeover law. again, that's exactly what we have reported, which is preliminary and friendly. it has to be friendly if you are going to try to do an inversion.
you can't be unfriendly. >> allergan was in a bear market tracking very closely with values. i have always felt that value was a price raiser. a company that raises price pretty serially and cuts r&d. the old allergan was the highest r&d of any of the major companies. i don't believe that brent saunders is going to sell this company for anywhere near where it was trading before values started breaking down. >> when you look at allergan and to get near its 52-week high was $340 practically. remember, he is always using that aspirational number. when you get the money from teva, you can buy another company. the teva money, $40 million. balance sheet, crystal clear. nothing. >> when they get that deal gone. the stock is up. david, this isn't the folcrum of where we are right now. this is not involving great
drugs. it is not what they want. >> the wave of inversions that already took place before the changes from treasury made it more difficult changed the landscape for so many companies in terms of their competitive position. if you have a competitor that has access to cash they have earned overseas, because they are no longer u.s. tax jurisdiction. that changes what they can do and their flexibility. it has been an unrelented focus of ian reed, the man that runs pfizer, sort of ahablike. >> he has one of the great wonder drugs of the year, lyrica, if you have nerve damage. it is not just amgen that has new drugs. we have new drugs. >> if you are going to structure this deal, it would likely have to be an all stock transaction that would result in 40% of ownership by allergan share
holders of the combination. if you can't get to that number, throwing a premium of allergan. >> in their statement, they say preliminary. that is my full understanding. as we go along, hopefully, with he will have more things to tell you. >> extraordinary, extraordinary. i am looking at one of the great companies right now. vertex reported great numbers. they have a great cystic fibrosis drug. hundreds of millions of dollars in that sales. you have to pay a fortune for that drug. is that right? >> people that have cystic fibrosis, there is no amount of money you wouldn't pay. pfizer wants to cut tax trits bring back money to do what? you want to know why you can't afford drugs. let's say the market is irrational to some degree. >> we are waiting for john boehner to give his farewell speech on the hill. we are going to take a peek at that. in the meantime, we have this. do you want to listen to this,
guy sns. >>. >> i just want to let you know it is happening. in the meanwhile, a "b" from amgen. ver win williams beats even though they are cut. >> if anyone was on the ppg quarter, they talked about a difficult paint season. home depot said it is great paint season. ppg did a fabulous job. there was a difficult paint season and they still did well. sherwin-williams came down a lat off of that. this is a stock that has been a fantastic bull market and housing stock. remember, it is housing and it is autos. by the way, the auto paint for all the high-end is ppg. they have their own stores. sherwin, this is a very good number for the u.s. economy. housing. >> that's been a bright spot, housing and autos. >> that's part of the economy. >> today, you surprised me with
that "r" word in terms of the industrial economy. >> the conference call was such a downer. september was so bad for cummings, their greatest american manufacturer. caterpillar and cummings are two of the greatest american manufacturers other than intel. i was aghast at how their quarter was. >> two days left in october, the dow and s&p remain on track for the best point gain ever. >> isn't that something? >> regardless. gopro, we are going to hear from nick woodman later this morning on "squawk alley" and revenue. >> that was disappointing. you know who was the most disappointed. woodman in the conference call. he said, here is why we don't deliver. the 4 is not good. we underinvested. this is a continual theme we are hearing a lot about. walmart, did they underinvest. now, you have to overinvest.
put your gopro on and look at that. >> you need 16 gopros and give us a little. >> with a close-up. >> go out to kansas city. i'm sorry. i mentioned a city. >> too soon. >> i know it is way too soon. >> it is not over yet. >> take three. >> we lost to the red sox in '86. we came back. >> what is this "we" kimosabe? >> bob is on the floor watching what's moving. >> great job last night. wonderful to watch you guys in action. i want to point out allergan has been halted, pfizer has been halted. you see the crowd gathering here. obviously, we are waiting for some news and let's see what actually actually happens here. no indications right now, no. >> let's just move on.
we have a weak open. part of the problem is that europe has been weak. it wasn't great overnight. deutsche bank came out and scrapped their dividend. 8 billion in projects. barclays didn't have a great night. they complained about the regulatory environment in the uk. so europe has been down throughout most of the morning. baby products, mead johnson, they get 30% of their sales in china. kimberly-clark, that's huggies. proctor, that's pampers. china is their second largest market. my thanks to my friends at cnbc
profor doing so for doing some earnings on that. you get weak global growth on the strong dollar and it hurts you. look at bunge, the big grain food company. the food business in brazil, a big problem, the strong dollar. good year tire, almost 60% of their sales outside of the united states. they beat but noticeably light on revenue. look at the automotive business. great in the united states but when you go outside the united states, a little bit more of a problem. johnson controls beat on the top and bottom line. their guidance was a little bit on the light side. they get about 60% of their business outside the united states. all the benefits in the u.s. aren't accruing to them as well. delphi, the same story. they are about 70% of their revenues outside of the united states. they lowered their full year guidance a little bit. they are down about 4%.
borgwarner, they get 75%-80% of their sales outside of the united states. their full year guidance was lowered on the top end. europe is a big market for them. that hurt them. o'reilly automotive, 100% in the united states. been firing on all cylinders for many, many years. they just came out with excellent numbers. dramatic, 7.9% increase in comp store sales. that stock has been a monster all year. this has been an earnings grower for several years on the back of the diy market. every year, up ruffle 20%. look at this going back to 2011. i could go back several years before. this is one of the reasons that o'reilly is such a favorite. 100% u.s. exposure and consistent exposure to the diy automotive market, one of the
few truly bright spots in the u.s. no information on allergan. the news is not out yet. >> the news is out. allergan did confirm their discussions with pfizer a while ago. we are still waiting on the halt. >> no indication, david. >> allergan is going to be up sharply as you might expect. we have confirmed it. they have confirmed it, to the irish takeover panel ta they are in preliminary discussions with pfizer. keep an eye in terms of pfizer. that will be as important if not more to see how they react to that. give a check to how they feel about the possibility of moving ahead with a potential deal for allergan that would involve issuing a lot of stock. >> talking about issuance and new issuance, i want to get back to mgm. a relatively quiet response, something its investor base has been looking for in a long time. it is not doing it in the way
other companies have when they split into operating companies and property companies. a bit of a different approach in part because they felt like the cost of doing it the way others have would simply have been too high. here is ceo jim merre nechlt concluding. >> we concluded if we took all our assets and put them in a new company, a spinoff taxable or nontaxable, it would have resulted in hundreds of millions or billions of dollars of costs, refinancing debt and paying taxes and other transaction costs, which would have been value destructive to the shareholders. why it is we did not put bellagio and mgm grand into the read was simply we looked at each individual asset and discussed what assets could we leave in mgm reports that would result in the best tax answer. >> two of the most high profile properties, bellagio and mgm
grand, not part of this read but others are. the results from the company which were better than expected and even with weakness in china, which it only derives 15% of its ebitda from. a bit of a better sign. i did ask about recent tensions there between competitor wynne and his chinese government. >> wynne on his conference call was outspoken and vehemently angry at the local government and the regs and the confusion he says reigns. are you sharing any of his frustration? >> my macro view of macow is very constructive. the bridge from hong kong to macow is clearly underway. pension island is growing
rapidly. there is no reason they don't want it to flourish as the whose petality center of asia. i look at it as painful. i look at it as a maturation of a market but i don't view it as, the sky is coming down. i think he will be fine and i think we will as well. >> in about 20 years, they are going to have a lot more potential gamblers. >> he will live to 100. >> yes. wynne is what, in his mid to early '70s. >> we have to talk about the chinese communist party. wynne is not afraid of anyone. he took on the party. you never take on the party. you can be the life of the party but you never take on the party. when we come back, fact-checking what the candidates said last night during the gop presidential
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scott joins us with what they found. >> both carly fiorina and hillary clinton want to be president. carly fiorina is a hypocrite. >> every single policy of president obama has been demonstrably bad for women. 92% of the jobs lost during barack obama's first term belonged to women. >> at best, she is using some dated statistics, repeating a claim mitt romney made in 2012. that ignores job gains later that year and for the rest of obama's presidency. it is true that women were
initially slower to return to the workforce since then but since then, the trends have evened out. women make up 45% of the 9 million jobs added. a clash early on between fellow floridians, jeb bush and marco rubio over rubio's senate voting record, missing nearly half his votes, called the question of the florida sun sentinel. rubio said other candidates from worse. >> john kerry missed 60%-70% of his votes. the sun sentinel endorsed him. barack obama missed 60%-70% of his votes and the same newspaper endorsed him. >> rubio also said skrjohn mcca had a worst record. john kerry missed 65 percent of his votes and john mccain had a worst record than rubio at 59%. rubio is at 47%.
president obama, the best of the bunch at 30%, contrary to his claim. we have a lot more of our fact-checking online at cnbc.com, donald trump's bankruptcy, jeb bush and jindal on their state budgets. >> our scott cohn back at hq. we want to get to bob pisani with an upgrade on allergan. >> they are still halted. they said, we are in discussions. normally, the way this works, the company would call the nyc and say all the news is out. you can open the stock. it is not open and it doesn't look like they are getting the okay to open. the only thing i can speculate happened right now is the company is not comfortable with the idea that all the news is actually out. that's what we have to find out, if there is any more news or anything else. right now, we are just waiting. back to you.
already with this allergan and pfizer, this is a little one, rv&c. is up 6. one is up 12. competitor to botox. allergan's bread and butter is wrinkles. competitive botox does cost a lot of money. people have to recognize these drug companies, a lot more competition coming in. revance has something that might even get rid of my wrinkles. that would be monumental. >> i don't think you need to worry. >> i love you guys. >> avnet is going to give me the answers. and then ivex, a great company
in maine. i'm honored to be on the debate last night with you. >> you brought it home. >> see you tonight, jim, "mad money" at 6:00 p.m. grover norquist will react to what the candidates said last night at the republican presidential debate. >> the exclusive at gopro's nick woodman after they take a big bite out of the stock today. we are back in a minute.
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good thursday morning, welcome back to "squawk on the street." i'm carl quintanilla, sarah eisen and david faber at the new york stock exchange. market coming up a little bit. the s&p, back to 2085. watching oil back above 46. getting some housing data. >> let's get straight to diana olick in washington. >> breaking news on pending home sales. >> pending home sales down 2.3% from a downwardly revised august reading. that's amiss. the street was looking for a slight gain. pending home sales still up 3% year over year in september. these are based on signed contracts.
it is a forward-looking indicator of sales over the next two months. this is the second straight month of declines. we are now seeing the second lowest level of pending home sales for the year. the realtors blaming a dearth of available listings in lower-end properties for first time home buyers. they are also blaming rockyness in financial markets. this comes after a steep drop in pending sales of newly built homes in september as well. we seem to see a slowdown across the board. sales down everywhere but worst in the northeast. down 4%. down 2.5% in the midwest. down 2.6% in the south and just slightly down 0.3% in the west. back to you guys. >> with the new home sales report, wasn't housing one of the bright spots in this recovery at this point? >> it had been a bright spot over the summer for sure. stronger sales in spring and
summer. most people are blaming the high prices, that continue to rise because of the lack of inventory. >> this morning's gdp report, somewhat disappointing. 1.5 growth last quarter. a sharp deceleration from the previous quarter. economists were expecting 1.6% growth. the spin on the positive side is that consumer spending beneath the hood was kite good. >> what do businesses see that we don't? that's the question we have to ask and we will. >> certainly. >> our other top story. the republican presidential candidates squaring off in boulder, colorado, for one of the night's most heated moments was over the issue of taxes. we want to talk more about the issue. grover norquist, presidents of americans for tax reform. thanks for jumping on the call, grover. >> absolutely. glad to be with you. >> i thought this was one of the most substantive issues. clearly, candidates have sharp differences over their tax
policies. governor kasich says they are all math. magical thinking. i assume you do not agree. whose do you like the best? >> the thing i think that is interesting first is that they are all on the same page. kasich is as well with his plan. they all reduce rates. they all move towards a flat tax. they all recognize that our corporate and business rates are way out of whack with the rest of the world. much too high compared to europe or canada or even china. they all want to move towards a territorial system. they differ in how they get there. the healthy thing for the republican party is the agreement on direction. that said, i don't think one is powerly over the others. they move in exactly the right direction. the house and senate are thinking along the same line.
any of these guys, you will get lower rates, lower business rates, a flatter system, expensing and territory. >> you would also get more debt according to the tax foundation which analyzed six of the presidential plans? they would each add at least $1 trillion to debt. >> tear are two things. you would have to look at how much growth would help. if you grow at 3% a year instead of the 2% a year that we have been doing under obama, you end up with $2.8 trillion each year. for ten years, you get 2.8 trillion dollars more revenue coming in. you can cut taxes quite a bit if those tax reductions get to higher growth up to 2% or 4%. while we are talking taxes, of why usually, obviously, the regulatory additions under the obama and bush years sadly have slowed economic growth down. one of the ways to get faster
growth, is to focus on regulations. >> as the "wall street journal" points out, you had great candor on entitlement reform in sharp contrast to what you would hear from hillary clinton. clinton and push honest in saying, as the journal puts it, there would have to be means testing moving forward. the question remains for the party. who is the best person to sell entitlement reform to the middle ground, to the independents in this country? >> well, the answer to that was just made speaker of the house, paul ryan. paul ryan has done on entitlement reform and overall budgeting what jack kemp did on side economics. it was a 1 m project under jack kemp to convince the party and the world about reducing rates and it was a one man project with ryan, who is convinceded that the entire republican
caucus in the house could move towards those reforms. >> but he is clearly unable to run for some time presumably now that he is speaker. >> my question really is about outside the party, who do you think can best sell entitlement reform against hillary clinton presumably to everybody else? >> oh, well, this is going to be one where there are going to have to be 1,000 voices. it is not going to be one person. every single republican in the house less about 7 people have voted up to five times for the ryan budget plan which does all of these entitlement reforms. you have whole platoons out there talking to people. this is where the tea party could come back together with a focus that was completely helpful and forward looking. i think the outside groups and
that, this is the perfect project for all of us larry kudlow is a plan of donald trump's plan that lowers the corporate tax rate to 15%. what is a realistic lowering that most argue is not competitive with the rest of the world? >> correct. we are at 35%. the european average is 25%. we need to get at 35% federal, 4.9% average state corporate income tax. we are really at 40, not 35 when you include state and local. we need to take our federal level down at least to 20% to be competitive and the brackett from 15% is actually where we need to go. 15% is a better number than 20%. >> grover norquist, thanks for joining us to talk taxes as always. americans for tax reform. president grover norquist.
speaking of corporate tax here in the u.s. and the desire of some companies to at least get out have of that tax jurisdiction. allergan has confirmed it has been approached by pfizer and is in preliminary potential discussions regarding a potential business transaction with pfizer. pfizer and allergan getting together would create one of the largest pharmaceutical companies on the planet as part of a potential deal and a key part of it, pfizer would do a so-called inversion. allergan is an irish-based company. it would structure the deal so that, in fact, it would fit the current regulations on the books or being applied by treasury as it relates to those corporations that want to do so-called inversions. it would be able to pay for allergan and pfizer stock at a significant premium to allergan's price prior to news of the preliminary approach and, hence, end up with a company
that was split roughly 60%/40% and would meet the regulation as they are currently composed by treasury. the hope has been. by the way, they have made no secret of this. interestingly, both these stocks are still halting. it has been a long time. this news came out about 38 minutes ago. they are still halted. i'm aware of nothing further from the companies. again, maybe they forgot to call and say, okay, let it go. maybe they just want this to des sem nate for quite some time. as they work towards a potential deal. my reporting and their confirmation of such under the irish takeover panel rules, it is early. this was a preliminary approach by pfizer. it was, in fact, earlier than some of us who have beenle toing this closely anticipated. if you listen to ian reed, pfizer's chairman and ceo, he has made no secret of his desire to invert. they tried to biuy astrazenica.
when the changes took place, they abandoned those talks. mr. reed made no see kres of his desire to have a more competitive playing field. on the conference call on tuesday after pfizer reported better than expected numbers, said, and talked about taking bold steps and not being afraid to do so. many who followed the company closely and follow allergan have at least anticipated the possibility. however, it did seem it came a bit earlier than some had thought it would. it is here. we will be following this very closely to see whether they, in fact, can get to a deal. it is not without plenty of impediments, whether it be social issues in terms of who would take over a combined company and or how they would go about doing that.
i sh yould say pfizer has put i own press release out. perhaps that was what we were waiting for, confirming the sacsame thing. i haven't seen the language of pfizer's press release. there can be no certainty. these discussions will lead to a deal, which is funny. i was just saying that. there is probably no certainty at all. they will be working towards it. composition of said deal will be difficult. what is the appropriate premium they will be willing to accept? how do you continue to maintain to structure it to get through the inversion window? it is pretty narrow. they can do a lot of different things. they think the combination makes a great deal of sense. it is not impossible to imagine that allergan can end up buying pfizer should they find this becomes such a political football over the course of the presidential campaign that we are going to see here. >> an inversion. >> i imagine they would take a lot of shots as they go and try
to put this together. >> from any number of people who continue to say, well, why are we allowing our u.s. corporations to do this? >> let's get to bob, actually. bob, we were just waiting for pfizer to put out a similar release to allergan. i would assume they will open soon. >> that may be it. it looks like they are stirring. remember, what the procedure is here. the company has to notify the nyc. all of the news is out. they get the okay to open. we haven't gotten that okay up until now. everyone is wondering if all the news is actually out. this may be it. hold on, dave. >> it looks like they got the okay now to open it there is a period of three minutes they can go out into the crowd. they are getting ready to open it. this is a very old-fashioned
process for the people here who have a lot to buy and sell of allergan and/or pfizer. they are putting in bits and offers. it looks like we are going to open in about three minutes. this is now going to move ahead. three minutes, this is going to open. you can hear the noise around me. they are standing right over there, yelling into the crowd. a very old school way to do it. exactly what they are hearing in terms of bids and offers. he is asking for people to put in other bids and offering. >> right now is 3:15. i think we are going to do it in less than two minutes. >> it is somewhere around 3.10,
3.15. it is hard to get the exact numbers. it is sounding somewhere around 3.15 or so right now. this could change. the last price was 287, 310 to 317. that's the indication. >> keep an eye on shares of pfizer. that will give you a better sense to the market's desire to see a deal. what does pfizer's stock do? will it be up and how much? >> simon. >> let's fit in a commercial break before we get those trades. markets seeing solid gains over the last week, over the last month, despite the fact the fed put december on the table yesterday and the gdp disappointed this morning. where do we go from here? more on that when "squawk on the street" comes right back. (vo) rush hour around here
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the news is out. pfizer and allergan confirming the hour in friendly negotiations. preliminary approach made by pfizer in the last couple of days and we'll see whether, in fact, they can reach some sort of a transaction over these next weeks as they try to negotiate what would be a monumental deal for its size, its importance in terms of pfizer potentially changing its tax jurisdiction and what it means for the
pharmaceutical industry overall. pharmacy opening up a bit lower. >> pfizer to be relatively stable at the open. that's an extraordinary comment, isn't it? that's a huge amount of money they are going to have to raise. >> it would be stock. it would not be a cash deal. they want to structure it as such as a result of getting through the treasury regulation as they apply to inversions. it would be very ecretive and save them a lot of money. there are a lot of reasons why they conceivably would applaud such a deal. right now, they seem to be taking a wait and see approach. >> let's look at the broader market. dow down about 34 points after yesterday's market moving fed decision and statement tha. our senior reporter back at hq with more on that.
how does this morning's gdp report influence the fed thinking. >> that's a great question. that statement yesterday and today's gdp report, eve thon th it was a step down, putting it back on the table. >> a fickle attitude today. i have guys that tell me every grader wants the fed to hike and others say it would be a disaster. this is how the fed looks at it. q-3 gdp 1.5%. a step down from the 3.9 in the final quarter. final domestic demand up and consumer spending up and equipment invest up and housing investment up. the inventor drag took away 1.4% points from gdp. nothing new says high frequency economics to make fed officials regret the slightly hawkish tone of yesterday. indeed, fed officials are going
to look through the top data and see an economy that is undergoing an inventory correction where domestic demand is okay. average growth over the last three-quarters, guess what, folks, 2%. that might be enough for the fed to go. here is a take on what it could take. growth around 2%, average growth. stable inflation. at least not falling. as little as 150,000 jobs gains per month. that's what could keep the unemployment rate steady or even falling a bit. steady global economies and markets. goldman sachs saying bottom line, the statement. focusing on possible liftoff at the next meeting. we continue to expect it to follow through with a rate hike in december. barclays takes another take on this. >> we believe that soft inflation data and ongoing turbulence in emerging markets will keep the fed on hold this year. the new language is not a rate hike guarantee.
the default position is for the fed to hike, simon. >> let's get more from lindsey, chief economist and david leibovitz. welcome to you both. thank you for taking the time to talk to us today. let's first of all, lindsey, understand what is happening here so people can make their own decisions. this is a very sharp deceleration of growth. we were running at 3.9% in the second quarter. we have more than half that in the three months coming out of the summer. what should people make of that as a fact, lindsey, the real economy is doing so much worse? >> well, it certainly was a disappointing headline number but as steve pointed out, the composition underlying that top line decline was telling a more positive story. consumers were still out spending. businesses were still investing, albeit a slower pace than the
second quarter. the big question remains, are we going to continue to bleed momentum. hiring has taken a step in the wrong direction. it is going to be' struggle for the economy to be able to maintain this near 2% pace as we round out to the end of the year. that's going to be a major concern for the fed. >> let me double-check that, then. on the one hand, we were concerned about international trade. international trade isn't really the issue in these figures here. it is, as you say, the drawdown on inventories, to put it another way, that ceos who surely are as plugged in as anybody into this economy are nervous about holding too many stockpiles. why do you think that would be lindsey? what do they see? >> they are concerned about the consumer being able to maintain this modest pace of spending. the consumer is right now at about a 3% pace. without continued gains and a ma markedly higher pace.
businesses are saying, we have been carrying forward back to back quarters of above 100 billion in inventory bills. the consumer is going to fall short of expectations as we move into that key spending season at the end of the year. >> david, let's come on and talk about about consumer diskegs nary in a moment. if you look at what they said, there was a down grade to economic assumptions but it wasn't that dramatic. they actually put to steve's point december, if you believe it, back on the table. what is happening within the fed? what do they see, do you think? >> when the fed looks at the growth numbers, we have already hashed this out. it is primarily due to a correction in inventories. the bills tend to overshoot and inventory consolidations tend to undershoot. what we are seeing here is a normal economic cycle with respect to inventories. what that means for the feds, they have a dual mandate for
employment. the unemployment level has declined from 10% to 5%. today, the missing piece is the inflation portion. the fed has said they understand trance torey effects are depressing inflalgs, a stronger dollar and lower energy prices. these are trancy torre effects that are holding back commission growth. as the year over year prices on energy become more reasonable, we should see it approach the 2% target next year. i think that means that december is definitely on the table. >> the request he question is, you think stocks can continue to climb where they raise rates in december. not just raising rates at the same time when europe's central bank and china's central bank are in big-time easing mode and the dollar is strengthening. we see what it is doing to corporate profits and our trade data. can stocks withstand that environment? >> i think they can.
>> the one thing i would say about the dollar. if you look at the past five fed rate hike cycles, the jury is out as to how the dollar behaves before and after a rate hike. we have seen it strengthen into the first rate hike. i am not assuming we should be assuming a stronger dollar is a base case if the fed does go in december. in terms of what that means for stocks, however, as we look back, the way the equity market has behaved when the fed has moved for that first time, the short-term reaction is a pullback. they had that knee-jerk reaction and hit the panic button a little bit. it is important to take a step back. they are hiking rates, because the u.s. economy is healthier. this is not a 3% economy. it is a 2% economy. i believe that data will get priced in and stocks can push higher even if the fed does go. >> let's pick up the analysis that we got from lindsey that ceos are concerned about the consumer within the stock
market. this is consumer discretionary this year. it is up 14%. is it priced correctly given the conversation you two have just had. an assumption on the part of investors that wage growth begin to pick up. we may not see that accelerate until march of 2016. the consumer discretionary sector may be ahead of itself. the fundamental story is still there. consumption has been the silver lining to growth over the past few quarters. the consumer has been very strong. a little wage growth is only going to accelerate the trend. >> inning that you both for your time. gopro crashing after that earnings. later, an exclusive interview with nick woodman, gopro's ceo.
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new lows as we speak after promoting new sales and guidance. josh lipton, live in san francisco with the details. josh, down 60% in three months. >> sarah, listen, analysts who cover gopro, they were braced for a bad quarter. what they got was a lot worse than expected. that stock dropping hard this morning. now, down about 60% so far this year. on the conference call, ceo, nick woodman, blamed that poor performance on initial weak demand for the hero 4 session. that's the company's new camera due to a price point that he said was just too high. also, he said the company made a mistake by not putting enough money to work into marketing, which also hurt and impacted demand. the question for investors, is it really just hero 4 section. is there a broader selection with a range of gopro products. if this is true, how can he be
sure he can get this company growing at a rate his investors have come to inspect. can more television ads really help drive demand for the cameras. after all, that's what gopro's huge media presence is supposed to do. how should they think about these higher marketing and advertising expenses? >> they are going to join us for a live and exclusive interview on "squawk alley." he is going to be here to answer all these questions at the top of the hour. stay tuned for that interview. guys, back to you. >> thank you very much. josh lip ton, looking forwardto the interview. we want to take you to the nymex. >> natural gas certainly in focus this week. this number has been highly anticipated. the eia reporting a build in natural gas stocks of 63 billion cubic feet. this is slightly lower than what the analysts were projecting.
the issue with nat gas is the fact that total storage, that is, going towards that record of 3.9 trillion cubic feet. some analysts think we could surpass that within the next couple of months. demand is coming off on the nat gas. trade, because people aren't using it as much with some of the temperatures becoming more mild here on the east coast and the west. we were trading around 233 before the report came out. this was a bullish report taking us up to around 237. people expect these conditions to persist at this point. watch this trade. i do want to remind you, november expired yesterday. we are trading december is the front month now. back to you. >> jackie, thank you very much. straight ahead on the program, mgm announcing plans to create real estate investment trust. that stock is up sharply today. hear from mgm's chairman and ceo, jim murren with an exclusive interview with david next on cnbc. want bladder leak underwear that moves like you do?
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republican presidential candidates taking the stage in colorado. let's bring in john harwood. was rubio the clear winner? >> i thought he did a effective job. he went after the media, which is a popular thing to do. he also went after jeb bush, who was teed up to attack him on the votes he has been missing in the united states senate. watch this exchange.
>> marco, when you signed up for this, this was a six-year term. you should be showing up to, would. literally, the senate, what is it like a french workweek? you get three days where you have to show up. you can campaign or just re-sign and let someone else take the job. there are a lot of people living paycheck to paycheck in florida. they are looking for a senator that will fight for them each and every day. >> i don't remember you ever complaining about john mccain's vote record. the only reason you are doing it now is because we are running for the same position and someone has convinced you that attacking me is going to help you. >> marco rubio, you can see there, very effective communicator. that was an excellent moment for him with his former mentor in florida, jeb bush. >> he and other candidates, chris christie, ted cruz, they got a lot of mileage with republican primary voters by going after us. >> for sure. on the substantive points, how ill-advised was bush to go after rubio in this way. suggesting they should sack
whoever suggesting he sh yould this. is this an important turning point for jeb bush? not only did he not gain tracks but he made a faux pas against one of the other candidates and quite an aggressive one. >> when you go after somebody in a debate, you better be effective in that exchange. when people look at that exchange, most people think that marco rubio got the better of him. it is going to be up to voters to decide how concerned are they about marco rubio missing votes in the senate and running for president partway through his term. >> john harwood, thanks very much. want to go to washington right now. we have breaking news on the speaker's race. hampton pierce son has the details. hampton? >> yes. paul ryan is well on his way to being officially elected as the next speaker of the house. the roll call is not complete. he has more than 224 votes. 218 is the magic number. once that roll call is complete,
the outgoing speaker, john boehner, will announce the official results. he with will see paul ryan come to the podium, get the gavel from nancy pelosi and make his remarks as now becoming the 54th speaker of the house of representatives. in terms of the roll call vote, by voice, the representatives have to all show up in person. paul ryan has passed the magic number to guarantee his election as the next speaker of the house of representatives. back to you. >> thanks for the update. hampton pierson in washington. for more on last night's debate, let's talk about the issues right now with ben white, politico's chief economic correspondent and cnbc contributor. we have jonathan allen, chief political correspondent. ben, on this point about governor jeb bush, which don harwood was bringing up. this is supposed to be his debate. he is the policy guy with an opportunity to talk about taxes and entitlements. why on earth did he go after rubio with this weird alpha male
fight? >> it did not work out well for him. the bush camp is obsessed with rubio as the biggest threat to jeb. i feel like they thought they needed to slow his momentum. it backfired total will i. i thought rubio completely destroyed bush on that question. you are right. this was the moment for jeb to talk about 4% growth. to talk about his optimistic vision for the future of the country, give sharp, concise answers and show to donors that he is the guy for wall street, for the establishment, for business types. he just didn't do it. he did not have a breakout debate. he had very little time speaking. his campaign was upset about that. you have to make it happen yourself with strong answers and he didn't do it. i got e-mails all night from people on wall street who are bush supporters. maybe we should think about rubio. he kind of crushed it in this debate. does it start to shift away from jeb and to rubio. i think that's going to happen unless jeb figures out how to stop it. >> is the momentum shifting at
least with this debate where there was a lot of heavy talk on taxes, on entitlement, on growth toward the professional politicians and away from the outsiders. or were they able, ben carson, donald trump, car lee fiorina, were they able to defend themselves? >> we haven't been hearing a lot about donald trump and ben carson, despite them being one and two in the polls. they weren't prepared to go into detail. you heard ben carson's exchange with becky quick last night, an amazing display of ignorance on the federal budget. the federal government spends more than that. the 2.7 trillion. there is an $800 billion gap there that he couldn't explain. i thought it was a bad moment
for him. the professional politicians did much better, marco rubio was very strong in terms of defending himself against attacks on his tax plan. questions about his tax plan. i did think things moved more towards the professional politicians last night. >> hey, ben, let's talk about where we are now with paul ryan being elected speaker. does this, for want of a better expression, mark a watershed but potentially a kind of golden age or a honeymoon for the gop, not just within the house but with the united politician, in calming everything back, better able to attack the opposition but also the idea that grover norquist brought to the table about half an hour ago, that paul ryan is potentially the master of articulating to the rest of the nation the need for entitlement reform, which lies so much or lay so much at the heart of last night's debates. >> as far as a communicator
goes, sending the message about reforming entitlements and changing the tax codes, there could be a golden age. in terms of making it happen in congress, the chances are zero in 2016. he got a huge gift from boehner in taking off the debt limit as a problem and the threat of a government shutdown. he doesn't have to worry about that stuff. conservatives grumbled about it, didn't get what they wanted. they can go into 2016 and focus on messaging and social security and medicare and entitlements and tax reform. they don't have to worry about shutting down the government. he will make it possible for them to govern. no big things are going to happen in washington next year. >> things that were interesting abouts la the nighthing about l night. governor kasich, we heard a lot more from him. he defended his record in the state of ohio. i thought he did that wonderfully against a trump
attack, that it was all because of fracking. he talked about his experience with lehman brothers. a lot of people joke he is going to be a good vp candidate. did he pick up any momentum and any money last night or what's the trajectory for governor kasich, jonathan? >> the other thing people are talking about is perhaps a show on cnbc or msnbc in the future. he has handled himself well and has the experience to talk about how you do budgeting. you made a good point about ben carson and donald trump, some of the others living in fantasy land. he said, should have some private sector experience. that dovetailed into what carly fiorina was saying, in terms of her h.p. experience, not being about her getting fired or other people losing their jobs but having taught her a lot of other things. i don't expect kasich is going to pick up a lot of support outside of new england liberals within the republican party, new hampshire, perhaps. this is not a candidate likely
to win the nomination. could he be a vice-presidential candidate? certainly for somebody who needs to shore up the idea they can do the economics in washington. >> or the state of ohio. thanks for talking us through some of these key issues. ben and jonathan, thank you very much. >> shares of mgm trading higher as it plans to spin off ten of its properties to reach a real estate trust. here from jim murren in an exclusive interview when "squawk on the street" comes right back. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪
many investment stores are big fans of stock buy backs. the companies that buy back the shares have underperformed the market. we will discuss. more "squawk on the street" coming up next. is this really any better than the one you got last year? if we consolidate suppliers, what's the savings there? so should we go with the 467 horsepower? ...or is a 423 enough?
plan to create a real estate investment trust. they will put ten of their properties on the las vegas strip. it is expected to take place in the first quarter of next year. i did have a chance to sit down the ceo jim murren and ask him how they had the chance to do this deal and why it includes some properties and not others? >> at the end of the day, we came up with the structure which we are excited about, because it basically allows mgm resorts share holders to make more informed and more specific decisions. i have some large share holders that have said to me, jim, i love your as assets but i don't know if you are a valued stock or a growth stock.
shareholders can self-select, do they like mgm resorts growth products? it had a great quarter, doing well in las vegas, the convention business is booming. do we want a yield-bearing instrument that unlocks some of the value of our real estate. that's been the frustration of mgm share holders for a while. they have known for some time we have great brands and a tremendous amount of real estate. how that gets valued in the marketplace has been a challenge. i think we have solved that riddle with this transaction. >> that won't stop some from saying, you should save the 50% of city center you own and/or you should sell crystal palace. >> that's right. >> you named some of them. there are plenty that you are not wholly owned that your shareholder base says, just sell it. why don't you? >> let's be clear on one thing. we are not in love with any
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talking about those difficult results that the company reported. also, paul ryan, the new house speaker, set to begin remarks any moment, and walt mossberg will join us on the new apple tv. all that and more coming up on "squawk alley." ♪ 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?
these are live pictures of the house where, of course, paul ryan has jug been elected the next speaker. the job really that he didn't want, taking over the gavel from john boehner. he got 236 votes just a few moments ago in the house. that means that some of the hardline conservatives did vote for him. he, of course, is going to speak any moment. >> says he was able to unite the different factions of the republican party to get behind him as speaker. the big test will be whether he can unite the party against policies like immigration, like health care, like the economy, taxes, planned parenthood. >> it's worth pointing out in an environment where the business and the finance, he is the guy that knows the numbers inside out on the deficits, on the federal budget. if anybody is going to articulate what the gop needs in
2016, this is the guy. particularly on the need for entitlement reform. it's him and others around him that potentially could sell that to the nation. >> consolidating programs, overhauls medicare. we have hampton pearson live from washington. hampton, as we watch the next chairman of the house getting ready to speak, what will -- the speaker of the house, excuse me, what will you be listening for as he tries to unite the party behind actual policy? >> i twha we'll be listening for is for paul ryan to amplify his message of pledging essentially that the house of representatives will -- if you will, obviously now the passing of a two-year budget deal buys them some time to reform the rules as far as the budgeting
process, get an agenda together. let's see if ryan can get an outline of how his speakership will be different than that of his -- of john boehner who, by the way, in his farewell remarks, emotional. fought back tears on a couple of occasions. his advice to his successor, believe in the long, slow struggle. john boehner's words to his successor going forward. boehner, a man greatly relieved, and you see him getting now the appreciation of a lot of his colleagues. we have a little more ceremony involved. actually, nancy pelosi will get to speak first before handing the gavel over to paul ryan. >> as we watch speaker