tv Squawk on the Street CNBC November 3, 2015 9:00am-11:01am EST
after an announcement of a ta takeover. a lot of money left overseas because of tax reasons, that's why deals like this make sense. that does it for us today. make sure you join us tomorrow. right now time for "squawk on the street". ♪ >> good tuesday morning. welcome to "squawk on the street," i'm carl quintanilla, with jim cramer, david faber at the new york stock exchange. premarket giving back some of that unexpected rally yesterday which has the dow positive for the year. the s&p within a percent or so of an all time high. we will juggle auto sales, earnings and m&a. ken-year at 2.2 for the first time since september 22nd. factory orders in about an hour. a $6 billion gaming deal. king gaming purchases
activision. >> aig out with results after the bell. earnings and revenue were a miss. this as carl icahn has taken that large stake calling for a breakup. ceo peter hancock will join us at post nine in about a half hour from now to talk about the results and the activist. >> and a strange turn in the fight over the keystone pipeline. transcanada, the company behind the project, now looking for a delay asking the government to suspend its application. first up, activision blizzard, the home of games like call of duty and world of war craft buying king digital, $5.9 billion. a 16% premium to king's closing price on monday. earlier on squawk, the ceo said it's more about broadening the company's reach into mobile gaming. >> mobile is important, but also attracting women to gaming is an important part of our strategy. with king, 60% of the audience
is now female, which is a really great expansion opportunity for us. and they're in 196 countries around the world which is something that's exciting. >> combined active user base, 550 million. >> i had kodia on in 2015. has simply delivered. got this at a great price. i think the woman angle is good. anything gaming -- this is like ea reported a number that people don't like. you look a few days later it's up. gamestop, that stock is worth $ $10, $15 more. grand theft auto is the greatest single intellectual property dollar amount of anything sold. 50 million. >> you mean on an roi basis? >> my god, it's snow white -- snow white and grand theft,
probably not -- i was going to say -- it's all those disney products together. i stepped in that. >> you're all over the landscape here. >> i am, indeed. i love the gaming business. >> the biggest deal they ever did was the blizzard deal wi, pulling that off. a savvy operator. >> when he makes a move and tells you this will be a very good additive formula, it will be. >> apparently they spoke as long as three years ago. he was sitting and waiting for some time. also interesting to see a company that sells itself below where it went public not that long ago. we all remember that day with toes people in the foam suits. >> yeah. >> wasn't that foam suit day? >> that and grub hub.
those were two tops. k2 and everest. i think he made a good move. >> on that day we had a long discussion about whether it was a one-hit wonder. there is worry that it's losing its relevance, if not in the u.s., then in asia. in japan, it's falling lower and lower on the list of downloads. >> you have to think bobby is able to rejuvenate it. i thought the women -- this is one of those things you sit there and learn about it. 60% are women. i listen to becky, she says her family plays it. >> you have ridden the subway in the past two years? everyone on the phone playing this game. >> really? i do the "new york times" crossword puzzle. >> a lot of people are still playing this game. >> they are. >> or solitaire on their phone. >> i see people -- >> not a lot of reading going on which i find upsetting. not a lot of reading. literacy rates -- >> there was a stat on the percentage of americans who read
a book the past year, it's like 19%. >> that's not possible. >> we're giving you our -- you know, i see it. it's true. >> on a day where amazon is opening a physical book stostor. >> i love books. i'm reading "redeployment" and lucitania. >> that was good. larsen, that guy. >> he's good. geez, as have a couple books going. have some books going. >> let's start a book club. >> i'd love to. >> or we could play video games all the time and get dumb. we could get smart or dumb. what's the right thing. >> steve wynn helped put him in business, did you know that. >> steve wynn? i still love steve wynn, though it's jim murin who is in ascend
dan ance. >> aig reports quarterly earninearning s below expectations. they plan to cut a number of upper level jobs this after carl icahn said they should break themselves apart into three pieces. we will speak with peter hancock. i think he'll walk over, sit down on the post nine set and discuss those matters. >> curious, other than hartford, almost other insurer did great. ace, chubb. >> that's a huge deal that's still in process. >> much more synergy there than i think they let on. i'm seeing fabulous numbers out of insurers other than heaartfo and aig. >> the numbers were just not
good. they cite market volatility. we might get more detail on what that means. icahn and paulson would like to see the roe be 10%. talking below that right now normalized 5.9% for the third quarter. 6.9% for the first nine months of 2015. the operating r.o.e. even lower. 3.5%, 7.1 for the full year. not a good quarter. >> i had the late ben mochet on. what a fabulous guy. >> he helped stabilize. >> he put up fabulous numbers with that company. i've gotten spoiled by what he did. he was an amazing manager. hancock, by shoes to fill. >> he does. been there about a year. they have quite a few reasons. some of which they detailed on the call that was taking place moments ago, still may be going on, about why they don't feel
it's appropriate to split the company up. we talked about it the other day. it's not about the sifi designation, it's the regulatory insurance that would still impact them. they believe that you would not be able to return as much capital to share holders if you broke the company apart given insurance ratings and things of that nature. we'll get into it with him when he's here in about 20 minutes or so. >> that will be great. that has been such a recovery story. >> yep. transcanada, the company behind the proposed keystone pipeline is asking the u.s. to suspend its review of the project. a delay would likely push the deal to the next president. transcanada says it still expects president obama to make a decision on a permit before leaving office. this is according to most reports an attempt to get out of
a near rejection. >> there's no room for that heavy crude. none. don't need it. there is refinery capacity, because they built refinery capacity to make this the oil pipelines are losers now. i prefer the natural gas pipelines, natural gas fuels the future. an oil pipeline? we're full up, guys. we don't need no stinking patumin oil. we're full up. a lot of the pipelines being built, we don't need. this may be another one. i know that we overbuilt for oil. >> you supported keystone along the way. thought the jobs would be good. this is one of those controversial situations. if they can't solve the environmental issues. i'm saying economically i don't like it. >> you're saying environmental issues aside, you wouldn't sign it. >> no. >> just on a supply basis. >> look at all those companies canceling projects. >> in the time that's gone by,
wti went from 100 down to where we currently are. >> the most expensive oil in the world. who needs it. >> and we have a glut. >> we can't even find places to put the bacan oil. >> still overflow? >> you can find out anywhere now. >> i've got to tell you, economic transcanada may say jim, that's ridiculous. we have a place for it. it's not ridiculous, there's really no place to put that stuff. >> you're still hoping 45-ish? >> yeah. longer. i got to tell you the action in chevron and exxon shows that you that model where you have t the upstream and downstream -- look at those stocks. horses since the bottom, horses since the end of august. oil pipelines are nonstarters
right now we're overbuilding oil pipelines throughout the country. a lot of those partnerships who thought they could make money on oil, they will not work, those deals. look at kinder. kinder is largely natural gas. even there there's concerns that maybe that pipe is not going to be able to hold the building. the capital may not return. rich kinder, i think, with the negatives referenced in barron's this weekend. i do think that we have -- the oil pipeline build in this country is too aggressive. >> kinder ended up doing common stock, correct. >> mandatory convertible preferred. incredibly haiku upon, 10%. but it's a three-year. that was viewed as a disappointing piece of paper. >> they filled in the blanks. >> look, i have historically loved the group. i i have you have to -- remember, there's the natural gas pipelines and the oil. oil, heavy oil, these guys, they're picking it up at 70 and
selling at 30. last i looked, that's a bad do. >> friends are tweeting in, the guanis shale. >> around foods, that's good. other than that, people dipped their toe in. >> you can swim in it. >> when they made it -- >> you'll never come out of it, but you could swim in it. >> you could die in it. when they designated super fund that was the end. you will die if you swim in there. >> i won't swim there. >> i just want to be sure. >> okay. when we come back, fitbit's results beat the street but that news not helping the stock. we'll talk with james park about why. and netflix's read hastings set to speak at "new york times" conference later this hour. there's andrew on stage. we'll bring it to you live. look at the futures.
dow is positive for the year since july 23rd. the russell decisively out of correction territory. who do you work for? your boss? yourself? your family? our financial advisors are free to realize a plan to fit your family's unique needs. we'll listen. we'll talk. we'll plan. baird. awe believe active management can protect capital long term.
. getting auto sales today. we have gotten chrysler, now ford's turn. phil lebeau has that. >> ford coming in a little lower than expected. sales last months increasing 13.4%. the estimate from edmonds.com was an increase of 14.2%. so ford falling short of estimates. we should note, however, when you look at where the strength was for october sales for ford, it continues to be with suvs and crossovers. sales last month of those utility vehicles up more than 12%. we'll get gm in about ten minutes, see if they're close to or above expectations. most analysts expect to us have a sales pace of 17.7 to 17.9 million. >> thank you very much. fitbit is down in the premarket despite better than expected results. the wearable fitness device maker ending lockup restrictions and announcing the secondary of 21 million shares.
we'll have a live interview with james park later in the hour. i know that will come up with you. >> i got to tell you, until you knew, you heard about the secondary, this is 7 million insider -- 7 million for the company, 14 insider. the stock was screaming. it was maybe the best beat of any expectations. there's a tremendous 40 -- some say as high as 44%, i try to get the number off the short position. the professionals are heavily bid against this. people on twitter -- this is like a twitter, tesla, shake shack situation where they love the product, so they buy it. it is really one of the greatest battle grounds i've seen. is this the wellness tool of the future, or is it gopro? that's what everyone fears that it's just another gopro. i don't think it is. i'm playing my hand. i think it's better than that. i think it's also not apple.
there is some really good -- this was the best call they've run. they answered a lot of questions that they didn't mean to be cagey about this time. they're a forward company. i can't wait to hear the interview. if the stock with be put away, if they can put away the stock you will see a bottom put in. there are people gunning for this, not unlike shake shack when it was 90, went down to 42. park is under heat for doing nothing it was an amazing quarter. >> they said on the call that they have seen no impact from what's on your wrist. the apple watch. as i refer to it, the big black hole. >> thank you. >> does it end up expanding the market as opposed to being a threat? >> no. i think park -- i'm quoting, apple had an excellent quarter. this reinforces our belief that the apple watch and fitbit watch are cater two to different segments of the market. not only on price point but
products. they're not the same. one is a pc, you know, let's call it -- not pc. you can't even call it that. >> that's an insult. >> one is a timex -- >> someone a blackberry? >> no. >> that's a joke. >> they are synergistic. >> yes. >> you have worn them together. >> i have. i have. coming -- i find that there is a level where even the battery time -- these are different machines. but people want to say that apple's gunning for them. i do not see that. a lot of people are gunning for them, not apple. >> we'll get cramer's mad dash and count down to the open. tonight, cbs, tesla, zillow. back in a moment. and can you explain why you recommend synthetic over cedar? "super food?" is that a real thing? it's a great school, but is it the right one for her?
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all right. about eight minutes before the opening bell. wasn't that long ago, an israeli company, so many technology companies come out of that country. mobileye one of them. >> it's a funny day. tesla, mobileye, fitbit, these are all big retail names. you'll see, you go to jim cramer on twitter, if you can stand the guy who hacked me recommending penny stocks, you will find mobileye is a company people want to hear good things about. they came out with 15 cents versus 30. let's put it this way. there will be institutions that will say it's not good enough. individual investors say it doesn't matter.
it does collision avoidance, when you pick up a new car it's filled with mobileye. i like -- these are victor kaim stocks. i like the collision avoidance so much i bought the stock. that's not been a fruitful way to invest. ask the people who bought gopro. i think mobileye is fine, not great. you needed a big blowout. >> justify the multiple? we're talking about a high multiple high growth stock. >> you, you. you got it. when you look at the auto sales would have thought they would have done better. i will be tarred and feathered for saying they should have done better. but these high multiple stocks, you know they have to take your breath away with numbers. all i'm saying is mobileye had a good quarter. did not take your breath away. >> all right. >> also, don't forget to vote. in new jersey we vote. got to vote today. we have a big election in new
jersey. >> you. >> . >> it's important to vote. >> democracy is an important thing. >> taking one second out of stock trading to say please vote. >> glad you did that. >> thank you. >> shocking how few people do vote. >> read books, voting. >> we're trying. doing the best we can. >> all right. we have more coming up including a live and exclusive interview with peter hancock, ceo of aig. won't want to miss that.
you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in about 2 1/2 minutes. the dow positive for the year. first time since july. s&p about a percent from an all time high. transports and utilities still in correction territory. >> yesterday i saw norfolk southern starting to roll over. i didn't like that call. i thought they were too bullish about the prospects. i had spirit air on the other day.
the airlines, there's some good, some bad. truckers, horrendous. horrendous business. federal express, not that good. i'm a big old-fashioned transports guy. i think they're just signaling to me, don't get too excited about this economy. economy is on a downshift other than housing and out to i would love it. delta is good, american is good. i can -- a handful of transports. >> we're potentially looking at the sixth month of 17 million run rate, people say the retail season, warm weather, warmest in for years for this winter. a lot of downgrades. traffic last week was not good. >> let's give leslie wexler, his due. this l brands number, he reinvented this company. he doesn't want to be talked
about. he's quietly giving a lot of money to charity and running a great company. i'm putting it in that order because that's the way he is. they reinvented themselves by getting away from apparel. look at how that stock is doing. up big because they preannounced a better than expected quarter. they're in the mall doing a lot of cool stuff, not just victoria secret. >> a lot more than that. there is. >> yeah. >> big week for media earnings. disca out, 47 cents. beats by 9 cents. u.s. ad revenue up 6. international up 12. >> i think this is the revenge. it's like estee lauder. had a bad quarter last time. will not have another bad company. cbs will not have another bad quarter. disney will not have another bad quarter. >> you think so? >> yes. >> we talk about the re-purchase of stock. what did strike me in disrecovery, not just how much they purchased recently but they
bought back more than 30% of outstanding shares since 2010. >> even more than aig, which is a remarkable number. >> that is a lot. some say it's also a sign of not necessarily strength. >> cbs. these guys are confident. they're confident! >> there's the opening bell. the s&p 500 at the bottom of the screen. at the big board today, hull tactical funds. and at the nasdaq, rock the vote, encouraging youth to vote. >> i just -- you know. which you have already done. >> i was the number three guy. i got there 5:06, i thought no one will vote before me. two guys got ahead of me. >> let's get gm, having already gotten chrysler and ford in the books. phil? >> big number from general motors. an increase in october sales of 16.0%. well above the edmonds.com estimate of an increase of 12%. leading the way, chevrolet up
16.7%. last mon trucks and suvs the main components there. gm is estimating the industry sales pace will be 18.2 million vehicles for the month of october. if that happens f that happens, if will mean september and october both above 18 million. only one other time in the history of the u.s. auto industry has that happened, back in january and in february of 2000. gm well above estimates comesing in with a gain of 16%. back to you. >> federal reserve, don't hear that. they'll raise rates now. >> all right. thank you very much, phil. aig reporting earnings and r revenues that were below estimates that was after the bell and it took a half billion restructuring charge as it tries to simplify it's business.
this after carl icahn publicly urged the company to break itself apart and bring down costs as well. peter hancock is ceo of aig. he joins us now to shed light on the company's plans going forward. glad you could be with us. >> good morning. >> mr. icahn last week in a letter says, hey, do a tax reseparation of life and mortgage, and pnc, have them be three separate companies, you'll no longer be designated a sifi and your cost to capital will improve but your ability to return capital will improve and you'll cut costs. why isn't that a good plan? >> we agree everything he says exit for the splitting of the company. we think cutting costs is an important priority for the company and returning capital is important for the company. to do so, however, splitting the company would increase the amount of capital required. because the rating agencies are
the binding constraint as opposed to the designation as sifi. our focus is on growing the company, cutting costs, and splitting the company and removing the sifi designation is a distraction. >> your point simply is it's not about sifi, it's about the ratings that apply as a result of being an insurer what would happen if you were to split them? let us understand a bit why would be constrained in returning capital from a split as opposed to the other? >> as moody's and s&p have said in recent publications, having a life and property casualty business together and the international diversification we have as a company reduces the amount of capital we need to serve our 90 million customers around the world. splitting them, it would require more capital in each of the component parts. we are not averse to simplifying the company, but certainly that split between property and casualty and life would not release any additional capital.
it would require more capital. >> have you had any conversations with mr. icahn? >> we plan -- short, brief conversations, but the first time we'll sit down together is this thursday. this coming thursday you'll talk to him. >> that's right. >> any expectations? we know what's on his agenda. you know as much as we do. you got a letter, you saw it, you read it. >> exactly. i look forward to hearing how le elaborate on the views and hopefully he'll listen to what we have to say about the company. it's a large company with a lot of moving parts. we have important tax issues that he needs to understand to understand the pros and cons of different choices. >> another reason you may not want to pursue separation is taxes? >> yes. >> why? >> we have significant foreign tax credits as well as a net operating loss to carry forward. we would endanger up to 5 billion out of our total $15 billion of tax attributes if we
were to split the life and casualty company. >> john paulsen was quote in the this letter. are you going meet with him? >> he's been a shareholder for some time. i meet with all of them quite frequently. >> let's talk about what they are talking about when it comes to costs. in the end of the letter, the icahn letter, they said listen, the goal to have a 10% return on equity is great. but saying you'll do it by a half percent a year, you're turning this quest into a half decade journey. one thing we do agree on is aig's lack of competitiveness. do you honestly think now is not the time for the inevitable aig transformation. >> i think you need to look at what aig has accomplished over the last five years. we sold over 30 companies. we've returned over $26 billion of capital to shareholders. it's anything but a slow march.
we are focused on areas where we can grow profitably, focused on efficiency and investing in profitable growth, leveraging data assets and return capital. >> stock right now is at $60. i presume maybe the best investment is in yourself. >> absolutely. we've been buying back stock at a pace ten billion in my first year in the job. and we have sold companies that are non-core, picc, the remaining stakes of air cap and spring leaf all narrowing our focus on our core competitive advantage. >> peter, you mentioned some not great results from hedge funds that you're invested in. can you talk about that? you know, it's been a tough year
for hedge funds. >> we have a substantial investment portfolio like all insurance companies. the vast majority is in corporate bonds and mortgage backed securities, agency mortgage backed securities. we do have an allocation to head funds and it did underperform dramatically in the third quarter. overtime it's done well with us. with our new chief investment officer he will look createlycr at those funds. >> some would say a week after an activist comes out after you, it's not great your report quarterly. it was not a strong quarter. you seem to be blaming market volatility. i would love to understand that more. we're talking about a net after a realized capital loss of 215 million and some other things as well in there what does that
myanmar kean market volatility. that's a big part of the miss. we were the first ones to admit that the operating results were not what we liked. so we certainly were not pleased with the results in the u.s. commercial casualty space but pleased with the growth in the international property underwriting and the first growth in the japan auto business in over a dozen years. that's been a turnaround situation where we are seeing good progress. >> the extent you're not pleased with some results what are you doing to make sure that's not repeated? >> i think we are investing in the data analytics, to provide more precise risk segmenttation. but we're also investing in the technology to reduce our costs so that we can be a more automated company.
so, cost is our most important current priority and we're urgently looking at how we can rationalize the diffused cost base of the company. here today, we're down 6% on net costs while we invest in growth. so we're making substantial head ye headway. we are taking costs very seriously. we'll be eliminating this% of the top 1400 leaders of the company as we narrow our strategic focus on the areas that we can win. >> a billion to a billion and a half of net general operating expenses is what you're talking about taking out of the company. >> net. >> we're urgently executing on it. >> you're confident you can get there? >> yes. why? >> we spent a long time planning this. this is not a knee-jerk reaction. we've taken the year to get alignment on strategy between
employees and management and the board. at this point it's all about execution and we're very urgently executing on those priorities. >> any others? >> bob immochet, great american, great character of all time. i thought he cut out a mhuge amount of cost. what was the company doing before bob came in and you came in? >> bob, i'm a dear friend of, did a wonderful job. his top priority was repairing the u.s. taxpayer in full on time. that was his priority. i think it was the right priority to get this company back on its feet, growing again. we retain 92% of customers through the process and bob was focused on repaying the customers. >> icahn likes to have dinner
and a few martinis. are you having him down to headquarters? >> we agreed to meet in his offices. probably late in the day. any idea how much he owns? on apple we know what he owns. on netflix -- >> i'm not sure what has been disclosed. we are always engaged in talking to all of our shareholders. we've been very engaged. as we hear from all of our shareholders we have a clear strategy. we're executing on it. we understand the need for urgency. so, we welcome the fact that he thinks this company is worth $100 a share. there are no short cuts to t however. >> you may be speaking a different tune if he decides to run a proxy fight. that can be distracting. i'm sure you know that. >> are many distractions. this is a company that kept its eye on the ball through a lot of distractions and we delivered for shareholders. >> thank you very much for coming by. >> thank. when we come back, we are
fitbit shares moving lower as the company announces lower lockup expiration and corporate earnings better than expected. great quarter. joining us exclusively from san francisco is james park. james, good to see you. >> good to see you. >> james, i'm wondering about the narrative here. people want to track your -- they want to pigeonhole your company as being a device company. i keep hearing basically it is a wellness company that happens to sell devices. how do you get that narrative to flip so that some day you don't wake up and no one is wearing fitbit. >> i think it's based our execution. we're a digital health company, all about health, fitness and wellness. our mission is to help people reach health goals whether through devices or software and services. our execution over the past two
quarters has proven the growth story of the company. >> you point blank said, look, apple is doing great. you say it. apple had an excellent quarter. it's clear from what you say, these are apples to oranges. you shouldn't even think about comparing these two. >> absolutely. as results show, the apple watch and other smart watches have not had a material impacts on our business. and these two products go to two different parts of the markets. we have different styles, platforms, capability and it's the software and social layer on top of hardware that allows people to compete with friends and family to reach health goals. let's talk about the competition. the other outfit doing this is under armour, kevin plank. we know nike and apple are
affiliated. come into stores, come into chains as you already are, as a package and say we'll lower your healthcare costs, lower insurance, this is a combination. any chance that you can do a good cooperative agreement with under armour like you did with thermos? >> for us, we're all about partnerships but we're doing well in corporate wellness business. last quarter on our own we signed over 20 marquee clients including barclays, target, et cetera. we have over 70 of the fortune 500 signed up. that part of the business is doing well. >> once you're in, it's not like someone will come in with the chinese version of a competitor and strip you out. i imagine these are sticky clients. >> it's a pretty sticky business. british petroleum, this is the third year they reupped with fitbit corporate wellness. this past year they bought over 45,000 units from us.
these are all long-term partnerships. >> i know you've been in the past, i think some people said you haven't been giving enough information. thank you for giving us so much. guidance has not been your style. i wanted to ask you, is there a possibility that will you have some products -- you go point blank in the conference call saying we listened to our customers, we keep developing products. can you tell us what else they want from fitbit? >> yeah. absolutely what we've heard from our customers is that they want to track even more deeper metrics about their health. so as i said on the earnings call, we'll be releasing new products throughout 2016 that will have new sensors, the combination of fashion and technology. we will be making our deviceses more personalizible and a firm
equipment to increases software and services capability throughout 2016. >> now, i would be remiss if i didn't talk about international. it's clear that you -- someone like starbucks expect china to be a gigantic market. the china take up is rather amazing. where do you think you'll be three, four years from now, china versus the united states? >> it is hard to tell is the exact numbers. look, this past quarter, china and india grew 314%. it's a region for us where we are seeing explosive growth. >> why is everybody selling stock? >> there's a couple reasons for that. one, there's going to be a lock up expiration in mid-december any way. the plan for this offering is to provide an orderly transition and soft landing as we transition from venture capital shareholderers to public
investors. >> given the run up in the stock, is your anticipation that this will be it? that the soft landing you're describing will be sort of circle all of the stock for sale in the near to midterm? >> i think in the near-term, the benefits of the offering is that the larger shareholders in the company will be relocked up for another 90 days. that's a key point. >> james, you're one of the few companies i've heard which literally said, listen, we are spending. we're spending to win. spending on research and development. another company last week that point blank said we're not spending enough. we have to, which is gopro. is there a way you're trying to distinguish, listen, we will not sit here and sell the current product. i never heard someone talk about how much they have to amp r & d. >> look. we have 88% dollar share in our category. that's a pretty dominant position. the way we've gotten there is investing in growth. so, we'll continue to do that.
we beat guidance two quarters in a row. we raised guidance for q4. that's a testament to the growth story in fitbit. >> thank you very much, james. i know that the stock -- i have to tell you, david answered my question. if there was an insider stock for sale, obviously secondary primary stock that you're putting in, i think the stock would have been up 10% 15%. james park, ceo of fitbit, thank you very much for coming on. >> thanks, jim. jim, long day ahead. what's on "mad" tonight? >> i have a -- i'm going to -- i have to tell you, i have spencer rascoff. i stole him from our show. >> you'll be hearing from our people. >> can't we all have him together. grig sillers, one of the great income stories. and this oil story, i have to talk about it more. exxon, chevron, these stocks are soaring. independents are soaring. the price of oil is doing nothing. i may ask spence to be my
co-host just to get this off my chest. let's have him have his second life. >> he can do your color commentary. >> we'll see you tonight, "mad money." reed hastings has taken the stage at the deal book conference. the future belongs to the fast. and to help you accelerate, we've created a new company... one totally focused on what's next for your business. the true partnership where people,technology and ideas push everyone forward. accelerating innovation. accelerating transformation. accelerating next. hewlett packard enterprise.
netflix ceo reed hastings speaking in new york city. let's listen in. >> our debt to market cap ratio is very low compared to s&p 500. so, we have a lot more debt capacity. in general, silicon valley doesn't do much debt. then the culture is you look at what your peers are doing. they're not doing much debt. there's an aberration of low debt compared to the rest of the economy. >> right. >> we look at it more compared to the general s&p 500 in which case, again, our debt to equity is low. >> let me ask you about your shareholders. do you think after your shareholders as long-term shareholders or short-term sh e shareholders? in today's market the best providing stocks are with accountability in the distant
future. red ink is the new black. that is from a shareholder. >> we're profitable, that doesn't apply to us. depending on the day -- we had earn ings a couple weeks ago. the number were very good. we were a little low on domestic, a little high on international. spot on on global. the stock traded down 10%. i can say it's short-termism, for netflix, we're a billion negative free cash flow and 50 billion market cap. if that's not a testament to long-term investing, i don't know what is. it's an incredible backing. i think it shows that long-term works. that's why the big pension funds, the big investments do it because there's differential advantage. i'm not anti short-term. when i see high volume short-term trading, i think the liquidity is helpful.
so i'm not sure -- people try to make money where they can. many investors in this room and otherwise are differentially good at long-term because it's different from the crowd. the crowd is too short. >> as a result, in terms of incentivizing employees, how much do you have to focus on the short-term nature of the stock even though you think your share holders are long-term. >> you're dead if you do that as management. if you try to manage the short-term stock price, you're chasing your tail. the key in management is you have to have your stable, long-term, successful picture and motivate people both employees, suppliers, investor s towards that picture. there will be uneven amounts of execution towards it, potentially doubts if it's achievable but you can't get concerned. what you want to do with employees, what we do and what i think everybody does is teach them because the market goes up or down 5% 10%, 20%, it's not
correlated to the long-term. >> right. i want go back to tv for one second. we were talking about competition in the marketplace. one big decision that came out was hulu, owned by disney, fox and comcascomcast, they decided will allow hulu to launch an ad-free product. i assume you think that's great for your business, but do you think that will mean they will eat their own lunch, cannibalize their own business because people will punt on the ad dollar? >> no hulu has been a successful competitor to us, growth in the market. their big advantage is they have the major broadcast networks current shows. cbs, abc, nbc current shows the day after and commercial free. that's because of the ownership structure. they have a unique proposition. we have original content. they have current shows day after. i would say -- i've said that hulu is much more the cord cutter's dream. keeping you on cable and satellite is those new shows
from big broadcast networks. i'm surprised at the structure of it. i think it's just -- >> surprised because you think it would cannibalize their business? >> yeah. if i was an owner of current cable networks, i would not be having hulu be my cannibalizer. i would have it be abc.com as a tethered application. so you get to watch abc.com news shows if you're on cable versus hulu. i think there's a strategy error on their part. they're working through that. hulu is doing that, doing more personalization. we're learning from them, they're learning from us, amazon, the whole industry segments are learning from each other. you mentioned sports and then abc which got me thinking about espn. espn, disney stock dropped over the summer because of concerns about sports. sports rights, and whether they
could remain as profitable in a cord-cutting world. was do you think will happen to espn? >> i'm not a close follower. depends on what they paid for those contracts, the underlying content. they have an incredible franchi franchise and sports is not something we spent time on. we're working hard on getting more movies, more tv shows. >> do you look at the economics of sports broadly either both sports networks or even teams, which depend on the carriage fee? >> no, i don't look at all those economics. i have so much to learn about the global movies and tv show picture we stay focused there. >> can you see a day where you would offer sports? >> no. i don't see that. >> but you do see a day where you off every news. >> looking for a job in public. >> touche. >> chelsea handler is an amazing talk show host. she was on e! we're bringing her
on a netflix show starting next year. and it's talk show about entertainment. so it's close to home. it's not really breaking news. it's creating news, doing interview pieces. in a way that's like -- it's the sort of edgy, you know, we'll try to reinvent the format a little. that's something that vice should think about, vice is very good at those things. that's where the confusion that came in, this is something like vice in a brand sense but not -- vice is really in the news business we're not. >> do you see yourself doing live programming? >> again, chelsea handler is pretty live. we're not opposed to that. that's just different from big ticket sports. >> but you don't ever see yourself doing an evening newscast or some other kind of news oriented programming? >> no, you don't want to invest in things that are dying. >> oh. oh.
okay. new subject. >> you're on demand. your viewers read you all the time, 24 hours. but the newscast at 6:00 p.m., that thing is going away. >> let me ask you about the relationship that you have with so many other players. i'm thinking of apple tv, of google, amazon. you have historically relied on their boxes in some case to distribute netflix. recently, don't know if you saw this, amazon stopped selling apple tv and google's chrome cast, the actual box. do you see a day when you guys are in competition with each other so much that you can't get distribution over those boxes? >> no. the internet proposition when a company sells broadband access or has internet applications, it's the underlying cultural assumpti assumption.
on apple, when they block a certain app, even them with their brand power they have to be careful what they block and don't block. they wouldn't block google maps because they want you to use apple maps. why? that's such a brand violation. in europe most of the cable companies integrate us on the settop, integrate netflix in a settop and sudden link in the u.s. does that. >> what do you think apple will do with apple tv for real? nobody knows. that's the cool thing about apple. they're good at that whole secrets thing. i learn more in reading the "new york times" than i do from any other source. >> let's talk about regulation. you successfully blocked or were one of the many that sought to block comcast from buying time warner cable. when you think about distribution over the next 5, 10
years and wireless, and you think about the connections between a directv and at&t and comcast recently may have gotten together now with verizon. how do you see that all playing itself out? do you see yourself trying to block those further? is that good for your business? bad for your business if ultimately you need distribution? >> fundamentally our societal interest and netflix's interest is around a fast and open internet as possible. so that's the north star, figuring out what policies generate that. one view on internet is it should be fiber to the home, like utility, water, sewage, power. and that the basic architecture is not that suitable to a competitive framework. we as a society are very much in love with competitive frameworks, and there's some home that wireless, you know, will eventually be a competitor framework at high speed. right now the physics of that are extremely challenging.
so i think what we and other players are trying to sort through, in the meantime how do we get to high speeds, great access, and open internet for them to be lots of competition on top of it. that's our sole interest. >> do you ever see a day where wireless takes over from cable? meaning the broadband speed is fast enough physically that people are getting the equivalent of tv buy lte and does that pose a threat to the cable operators which always were thought of owning the railroads? >> it's just a cost advantage. right now data costs on wireless, you either have to double the bandwidth, get more spectrum or put more antennas in. >> ultimately you get to a situation like wifi in everybody's house, wireless. you just extended it all the way to the home. it's a continuum. no, i don't see an existential threat. i think the physics of wired fiberoptic distribution are so
phenomenal and powerful, once you lay that, it's like a highway, open for all. >> i want to talk real quick about culture. one thing that's so unique about your firm and your company is the culture. thinking about the long-term. i want to tell you about two things they've done, one recent one less recently. you have an expense policy at the company that's literally five words long, it says act in netflix's best interest. that's it. what does that mean? >> fundamentally you learn the lessons of your past. my first company in the '90s, an innovative software company. every time there was a mistake we put a process in place to make sure that mistake didn't happen again. we were tinkerers building up this perfect machine. eventually the market shifts on you in some way and all you have is people who follow process and follow rules. you don't have the dna to change. it's deception because it's super efficient until the market
changes. in our case it was c plus plus to java. but markets always change. if you don't have the dna, you are overoptimized for one ecosystem. for netflix we realized we should be sub optimal in many cases because ultimately flexibility was more important than efficiency over the long-term. in the short-term, efficiency, you know, getting out error is right. if you look over the long-term, you want to work towards flexibility. one little aspect of being very flexible is that expense policy. there's many other aspects that we have. the north star is if you're building for the long-term, you need to tolerate some chaos and you need to have lots of creativity. because markets do shift. new competitors arise and you need to have enough dna of that to survive as opposed to what happens many firms.
y >> you recently announced a new policy that permitted unlimited parental leave after the birth of a child. how did you get to that. >> we had unlimited vacation for 10, 15 years. i though parenting is not a vacation, but, you know, it's just an extension. okay. if we're going to have unlimited vacation, you know, why don't we have unlimited parental leave and give people permission. we find that a wide variety of things. people come back, fathers and mothers sometimes early, but come back part-time. they'll come back after an extended period. what we're trying to do is earn loyalty and trust that they care about netflix in addition to caring about their family. and that they find successful ways to integrate it. remember, that most of the conversation is sterile, it's about work life balance. you put a pound on this, this scale -- it's one or the other. for all of you and our other employees it's about work life
integration. it's about successful work life integration. so, you don't sit down at dinner, you know, with your husband and suddenly you're on your mobile phone all the time. you make certain rituals. other times you do keep a flow. you can get up late at night and do some work because you care about the firm. that modern successful integration. we are all learning as a society how to do it and not have us become neurotic, controlled, overworked and find ways to integrate work life. again, that's all part of this trying to figure out what does a creative business do. >> how long do people take on average? >> we don't track it now, we just started it a couple months ago. there's a twin set of dangers, one is we say unlimited vacation and parental leave, but if you take it your career is toast. we want to make sure we do what
we can to make sure that doesn't happen. i take a lot of vacation, i'm open about it internal limit. >> how much vacation? >> six weeks a year. >> good for you. >> it's helpful. just as you would expect, you often do your best thinking, off hiking in some mountain or something. >> right. >> you get a different perspective on something. so, you know, the other danger is -- you can take your worst case, somebody joins netflix and their wife is having a baby, they take a year of paternal leave, then another year and another year and then six years they worked three months. it's not going to happen. again, coming back to the underlying thing, flexibility is more important than efficiency. so many of us are wrapped around efficiency in management that we don't sufficiently value flexibility. we're willing to take some inefficiency narrowly in order
to create an environment that's extremely flexible because we think that outperforms in the long-term. >> final question for you. in 2009 you wrote an op-ed in the "new york times," where the title was "please raise my taxes." you said that a starting place for tax would be creating a top federal tax rate of 50% on all income above $1 million. how did that happen? what was your think bei about t? >> the thinking six years ago as to today, my personal view not a netflix view. we're not coping well with the unequal rewards. if you're highly educated in society, do you have incredible rewards. compensation above $1 million, i think you can give up 50% of it on a federal level. to support the investment as goes the rest of the op-ed in better schools, better services,
giving people more opportunity. you can argue schools are inefficient, that may be true, but we're working on that side of it in parallel. but the big surprising thing to me is if you look at how wage earnings -- basically you're a wage earner, i'm a wage earner, we're labor, even though we're high-end labor. capital, the way super rich people make money is taxed so much less. that's this long-term capital gains thing. what is incredible is that, you know, wage earners, high end and low end pay 40-something percent yet it's 20-something percent if you make money on capital. almost like it was designed by the canpitalists. >> you go. let's open it up for questions. >> that was netflix ceo reed hastings at "new york times" deal book conference. in a wide-ranging interview about the future of streaming.
kayla tausche is there. he even took some shots at hulu. >> he called hulu a cord cutter's dream because it has the network tv shows as soon as the day after they air. he said as far as a competitive landscape goes, the companies that will get crowded out are those not making good shows. when andrew sorkin pressed him about whether there's too much content out there now, hastings said, no there's not nearly enough. the theme of this morning and this whole day at deal book conference at the whitney museum of american history is investing for the long-term. positioning a company for the long-term? hastings said the fact that the company is barely profitable has negative $1 billion in free cash flow, still is awarded a market cap of $50 billion. he said if that's not a
testament to long-term investing, i don't know what is. speaking of long-term investors, the first speaker this morning was larry fink of blackrock, $4.5 trillion under management. he has been speaking about building for the long-term and shareholders to invest for a long time. he criticized activists pushing for buybacks and dividends. he said that can't last. called it bad management but for investors he said the prodding for them to go long-term may have to come from washington. here's what he said. >> we should be looking at tax policy as a carrot and a stick. we misused tax policy as a stick, and i believe we need to rethink what long-term is. and i do believe if you reconstruct how we design long-term capital gains, i believe it will add to more long-term investing. >> of course part of what he has
espoused in the past is taxing gains for fewer than three years as ordinary income instead of capital gains. andrew asked him whether he would take jack lew's job, he said calmly, he loves what he does every day. one day he probably didn't love was august 24th. incredible volatility on a day that we're now referring to as a flash crash. some criticism over the performance of etfs that day. the fact that when the new york stock exchange halted trading or suspended trading in some stocks, the etfs based on some of those underlying stocks were not halted. he said that etfs in europe didn't have the same thing. that it's a market structure issue. and that the exchange and the s.e.c. and blackrock are all looking into that. that's latest from the deal book conference. back to you. >> so no extra intervention on the etfs but extra intervention on the tax code? >> perhaps. we will see.
polaroid's parent company filed a patent infringement suit against gopro. joining us is jon fortt with more on that breaking story. jon? >> yes, cma marketing which has the exclusive long-term license to the polaroid brand is suing gopro saying that the hero 4 session, which gopro came out with just this summer, it is basically a rip off of polaroid's cube which came out 18 months earlier, january 2014. they filed this suit in new jersey. they include their patent, the d-423 patent. for context, this comes after gopro had a really rough earnings report. the stock fell some 16% after that report. so part of the problem was the hero 4 session. gopro saying we mispriced it we came out with this camera, this cube shaped camera at about 400
bucks it should have been 300. it's selling better now. they gave an outlook for the holiday quarter that was lower. this adds another wrinkle. these are both cameras that are cube-shaped with rounded edges. reminiscent of a way of apple's suit against samsung with the rounded corners of the iphone versus samsung's galaxy line. no way to know how jurors will respond to this, if it gets that far. gopro sure to argue, look, it's a camera. of course it has rounded edges. people have to hold it. there are only so many different shapes it can be as you shrink it but we have this patent suit, c in cna marketing suing gopro, they want all the profits from the hero 4 session plus damages. quite a case here. >> jon, thank you for that. jon fortt. when we come back, automakers reporting strong sale numbers for september. will the success continue? we'll talk about that when "squawk on the street" continues.
. automakers are pointing to strong numbers for october today. phil lebeau is in chicago with details. >> much better numbers than expected. let's run down the big three. we'll get toyota numbers in just a bit. the big number here, general motors. an increase of 16%. well above the estimate that came in from edmonds.com of an increase of 12%. fiat chrysler better than
expected. ford was the lone disappointment coming in at 13.4 when a gain of 14% was expected. nissan reported sales increasing by 13%. what's been driving sales in october has been the same thing over the last several months, suvs and crossovers. jeep up 33% last month. gm up 30% for utilities. ford up 12.4%. when you look at overall sales pace, annual sales pace, prior to today, most people were saying, okay, we might come in at about 17.4 million for the year. now some are saying it will be higher than 17.4 million. gm is out today saying the october sales rate will be 18.2 million. as you look at shares of general motors, keep in mind if the industry sales pace is above 18 million, it will be the first time since early in 2000 that we had back-to-back months with the sales pace above 18 million. sara, we'll get numbers from toyota which is expected to be
what does the millennial generation think about stocks and investing? steve liesman has a special millennial editioncnbc american surve all america survey. we oversample e >> the first thing you know about millennials and stocks, guess what? they have less of it. 18 to 30 years old, here is all adults, around the 50% area with some percentage below 20%. call it 18% having less than 50%. then you look at the millenniums over here. what's funny about this, i went back seven years in our survey. this number varies between 30% and 40%. it goes up and down in terms of responses that we can get. you can see a larger chunk have
below 50,000 that doesn't mean they don't like stocks. look at relative to others, a good or bad time to invest. i don't see a whole lot of difference. millennials maybe a touch more optimistic about stocks, about the same when it comes to negativity except they're not as negative as strongly negative as other people. 15% of all adults say this is a bad time to invest, just 9% of millennials. looking at what they think is the best investment you see an interesting economic paradox. they're younger but they like stocks less. let's look at real estate. a little less into real estate, though it is their topic along with all adults. 34% to 39%. gold, just like everybody else, the millennials number two pick for best investment. here's where it gets interesting. not as high on stocks either but high on savings accounts. 21% to 14%. this is the kind of risk
aversion that when you talk to financial planning experts is probably the wrong thing for these young adults 18 to 34. we talked to one guy on "squawk box" this morning he said millennials in that age group should be 100% stocks. there is the preference for savings account and cash instruments which is a risk aversion for young folks that they may pay for in years ahead. >> yes, but probably endemic of what people see across society, people are -- appear to be more risk adverse. >> absolutely. having grown up in the financial crisis, some of them living through the popping of the nasdaq bubble. these folks will have a certain risk aversion and aversion towards stocks. >> next time add bitcoin as an asset. >> we do have that in other surveys. i can go back and look and we can ask it again in the future. good idea.
send me an e-mail. >> okay. straight ahead, stocks seeing solid gains already this week. will jobs friday change that? how shoe play the markets ahead of that number when we come back. awe believe active management can protect capital long term. active management can tap global insights. active management can seek to outperform. that's the power of active management.
tand that's what we're doings to chat xfinity.rself, we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. good morning. i'm sue herera. defense secretary ashton carter
arriving in kuala lumpur, he is discussing the ongoing dispute in the south china sea. john kerry is traveling to tajikistan. he emphasized the u.s. commitment to the country's economic and security issues while meeting with his foreign minister. a second plane with victims remains from the russian plane crash in egypt which killed all 224 people on board arrived in st. petersburg. that plane also carrying personal items found at the crash site. authorities will begin analyzing the black boxes that were found to determine what happened. amad chalabi who pushed to overthrow saddam hussein in 2003 by pushing forward false allegations of weapons of mass destruction has died of a heart attack.
he was 71 years old. watching the markets here, relatively unchanged on the major indices. the nasdaq and s&p 500 both red slightly. the dow held up by chevron and visa. let's talk about what to do next in the markets. bo ben, with the persistence of the rally, the dow is back in the black, the nasdaq near 15-year highs what does that tell you and what is driving it. >> what is remarkable about the date fa tod data we're seeing today is the divergence in economic performance between producers and consumers in the u.s. so we had a bit of positive survey yesterday on production,
let's be clear. it's been a terrible year for u.s. manufacturing and production but you have a positive view for u.s. consumers, solid fundamentals. so we're seeing today is exactly that. factory orders that were relatively weak and auto numbers shooting up. so that's one that can persist in an environment where the u.s. is chugging along sort of mid cycle. >> christina, we see that tale of different economies in the s&p 500 sectors. it's been a tale of various sectors. you liked technology, consumer discretionary and healthcare. those have been the strong ones. the question is will we see some sort of turning point? has all the easy money been made in those groups? >> a lot of the easy money has been made. this is an opportunity for discernment, being more thoughtful about individual stocks. because what we're going to see as we normalize monetary policy is that capital market also
normalize. so it's not going to be a rising tide that floats all boats with easy money. what it's going to be is fundamentals. stock also rise and fall on that. there will be greater differentiation amongst stocks within sectors. >> ben, the three bearish arguments i see a lot today are strength -- seasonal strength getting pulled forward, loan standards tightening, cni loans endangering jobs. then a weak retail season in part because of weather. do those all sound legitimate to you? >> they sound legitimate. i don't think they're suffici t sufficiently large in magnitude to derail what we're seeing. our job as analysts in some sense boils down to being students of the business cycle. we're seeing that we're still in the middle of the business cycle and where we're having debate on the economic front is whether we're early or mid rather than
mid to late. so there's a lot of -- that suggests room to run over the course of the cycle. >> christina, can i come back to the comments you made where uf said we no longer lift all boats in the market and people had to be more discerning about the stocks they pick, is that the same as saying some stocks will fall but others will make gains? >> our expectation is a trading range in the near-term. we don't think we'll see a november like this past october. in the near-term we need earnings to catch up to stocks. it will be very much a differentiated market where active managers can outperform. >> but they don't, do they? if you look at the hedge fund managers recently, stock picking has not been that successful even with highly remunerated people. >> well, it does work and it doesn't working but at least when you have greater differentiation among stocks you have created the opportunity to
outperform. what you saw until last year was a highly correlated stock market. so there was not an opportunity for active managers to outperform. now we're seeing more of an opportunity. doesn't mean all active manager also outperform but some will be able to. >> my question is whether the world has sped up so rapidly and there are so many variables that you can predict month to month what might win. let's go back to what happened in august. those china stocks or international stocks just completely fell out of bed. then they were rallying with energy the top gainers again today. it's so sudden, the moves are so great. can you really activity succeed in this environment? >> yes. as long as there's more differentiation among stocks, there's that opportunity to actively succeed. having said that, there will be periods where correlations will go up. typically that's when monetary policy is dictating risk and reward profiles for asset
classes. the september decision not to hike rateses by the fomc was the start of a period where we saw more correlation among stocks because monetary policy became more important. >> since we're talking about e divergences in the markets we are seeing ing ing a divergencee markets and the u.s. does that go forward with the fed putting december back on the table? >> december is a likely outcome. you have the ecb, they have eased policy. the world's two most important banks going in opposite directions what that means in terms of em and everyone else is what sphere of influence do you fall in? europe where they can ease monetary policy, on the other
hand are you in the u.s. sphere of influence where you are most affected by a hawkish fed and then springing into action? we see bank of mexico for example, has come out with relatively hawkish rhetoric recently. it will be a tug of war between those two. >> a lot of divergences. always good to see you. ben and christinchristina, than we are getting volkswagen auto sales. i see honda on the tape as well. phil? >> carl, volkswagen for the month of october, the first full month since the diesel emission scandal in september, sales were up 0.2%. volkswagen could not sell about 20% of the vehicles it usually sells because there's a stop sale order on those diesel models effected because of rigged emissions. volkswagen, it's estimated, had to put about 29% greater incentives on those models that it could sell in order to eke out a slight gain.
volkswagen for the month of october up 0.24% in the first full month since the diesel emissions scandal erupted. back to you. >> thank you very much. we are exactly one year away from the presidential election. a new nbc "wall street journal" poll shows ben carson surging into the lead in the republican race. our chief washington correspondent john harwood has the details. carson'ses assent is fascinatin. according to pew survey out this morning evangelicals still make up 38% of the gop. >> they're powerful in iowa, powerful around the country. but a year out is a good point to take stock of this race and see exactly where we are and what guide posts along the way will be. first of all, let's look at the critical nomination battles. we're three months out from the iowa caucuses. they take place february 1st.
those are critically important. then the new hampshire primary, february 9th. then super tuesday on march 1st could be the kind of event that settles a nomination fight. don't know if that's going to be the case. we'll see. when you look at where the race stands now, there's a new boss in the republican race, as you said. it is ben carson with 29% of the vote. replacing donald trump who led this race since mid summer. trump's at 23%. marco rubio at 11. ted cruz at 10. jeb bush at 8%. on the democratic race, much more fixed. hillary clinton has stabilized her position with a strong debate performance and other developments. her bengahzi testimony. she's at 62%. two to run over bernie sanders, her democratic socialist rival from vermont. martin o'malley at 3%. after we get the nominees selected, it's party time next summer. party nomination conventions will occur in july. the first is the republicans in
cleveland. second the democrats in philadelphia. we have numbers in this poll that shows us where the political parties will start out that debate. right now democrats have a significantly more positive image than republicans. it's fairly mediocre, just barely positive, but republicans are 15 points under water with 44% of the people viewing them negatively compared to 29% positively. the next guide post, after the conventions, is the fall home stretch. that includes general election debates in september and october. election day on november 8th. the one thing we can say for sure now, is that will be shaped by the discontent, the anger in both parties. when we asked do you think the economic and political systems in this country are stacked against people like you? 54% majority say yes, they are. that is a reflection of sentiment in both parties. shake it all out, shake the desire of change, the clinton brand name, we have a close race to start one year out when you
ask voters which party do you want to come out after president obama's two terms with presidency in 2016, 44% say republicans. 43% democrats. >> of those candidates within the gop that are likely to solidify that view and get the big money backing -- i don't know what assumption is about jeb bush, of those anger candidates, who do you think is likely to pull forward and get the funding? >> we're still in a position where the two leading candidates in the republican race, donald trump and ben carson, not in that order, are people completely outside the mold from what we've seen before. and most other candidates in the race believe that they are simply going to fade of their own accord as we get to iowa and new hampshire. we don't know if that's true. that's their belief. if they're correct, then you have a race that pits cruz, who is the angriest of the establishment office holders, rubio, bush, kasich, maybe chris
christie could get in there. it's a very unusual race because the people who are actually leading now are not ones that republican strategists believe will be there at end. it's been unpredictable and still early. up next, the last two months have not been kind to tess lach tesla. the stock down for 2015. will this afternoon's earnings report help turn things around? and can you explain why you recommend synthetic over cedar?
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barrel now for the wti crude. exploration and production is the stand-out industry group. pioneer, noble energy, devon energy, murphy oil. energy is still the worst performing sector year to date, down about 11%. still some interesting moves on the heels of what's happening with energy prices overall. >> for sure. tesla will report third quarter earnings after the bell today. all eyes on the number of cars or shipments it can deliver before the end of the year. colin langand is auto analyst working for ubs. is he cautious about tesla's outlook. nice to see you. the stock is down 20% over three months. still you have this target of 50,000 to 55,000 cars they said they would deliver by the end of the year. how sensitive are we to that figure given the stock price
move we've had? >> it's still a critical figure. people want to see that the ramp and growth is on target. he would clearly think that's a risk. consensus is 17,000. we're at 15,500. consensus is at the low end of their guidance for the full year. i think it's going to be a challenge, particularly with the model x being a new model and that ramp taking some time. they only delivered five or six at the end of q3. >> with 25,000 people apparently waiting to get their hands on it. how rapidly do you translate the problems they're having on producing two cars on one line to their ability to become a major automotive manufacturer? are these just teething problems? >> yeah. clearly the model s, model x are not what investors are buying, they're buying the long-term story, but people will be looking at data points to see they're on track. is it material saying we're on that growth trajectory?
when you go into the quarter this will be a cautious one. >> tesla doesn't have a demand problem, it has the prestige, cache, but you suggest there's increasing competition when it comes to luxury electric vehicles. who do you see as the biggest competitor and threat to tesla, and do you think it will slow them down from a demand perspective? >> you will see it over the next couple years, if you looked at the frankfurt auto show, audi, mercedes, porsche. >> colin, if apple decides to get into automobiles, we're still waiting for a decision on that, how many of a game changer
is that. if they go into the automotive sector will they make an operating system for a car that other people will compete to supply hardware for? >> i think you're right from the model historically, they don't really make things. they do the intellectual property and the software design. that's probably going to be the model go into the auto industry. they've been incredibly closed-mouthed about it. again, apple would be a threat to tesla. they have tons of money, and i would think they would be moving into a similar market. they've been reportedly hiring a lot of e.p. experts. >> you feel that tesla in the production of the vehicle has advantages that nobody could remove from it if you are overlaying an apple type system across the industry? >> i'm not sure i understand the question. look at gm investor day. it would imply they are in line with where tesla is today. where there is a huge competitive vaj, and you are seeing others trying to copy it. >> we'll see what elan mask says
today. no doubt it will be spun well. colin joining us there from uvs. >> still ahead on the show, today is a big day for air b&b in san francisco. voters heading to the polls to decide on whether to limit short-term rentals. "squawk alley" will be taking this issue up with san francisco supervisor who opposes the measure. we'll be right back on "squawk on the street."
this after the company reported earnings and revenue after the bell yesterday that were below the street consensus. new ceo, or relatively new, he has been in the swrob about a year -- peter hancock joined us on "squawk on the street" discussing the cost cuts underway at the company as well as various activists that are after the company. carl icahn one of them, of course, but john paulson as well has been a longer term shareholder and has been pressuring the company to split itself up. in fact, this morning i have a quote from the partner handling the aig position at paulson and company saying the company is trading at a 40% to 50% discount to its peers and the status quo is not acceptable with these poor results.
aig is slow-moving, difficult to manage, high costs and inherently complex. they need to break up aig, de-sifi through spinoff devest tours and capital returns to become smaller leading, focused insurance business. bernstein says it could be worth $100 per share. paulson says they agree. he put a general question of this type to mr. hancock when he sat with us on set about an hour or so ago. here's what he had to say. >> having a life and property casualty business together and the international diversification that we have as a company reduces the amount of capital that we need to serve our 90 million customers around the world. splitting them would require more capital in each of the component parts. we are not averse to simplifying the company, but certainly that split between property and casualty and life would not release any additional capital. it would actually require more capital. >> that's the key argument being made by the ceo of the company.
you heard it right there. splitting is not a way to actually get them to return more capital, but, in fact, less would be conceivably returned. aig has been returning a good amount of capital to shareholders. mr. hancock made the point about $10 billion in buy-backs just last year. 30 businesses asset sales over a short amount of time. they certainly are under pressure with these numbers that we came out late yesterday to get the return on equity up to the 10% level he has identified, but perhaps more quickly than mr. icahn or more quickly than mr. hancock has says they will. both icahn and paulson seem to be pushing in that direction. in addition to a split, he will be meeting with mr. icahn, sarah, on thursday. >> not over dinner. >> not over dinner. at mr. icahn's midtown offices apparently. much later in the day. >> it was a weak -- why was it such a weak quarter? they're going to go up against activists, it's hard to put out numbers like this. >> they sited market volatility, generally, had simply means they
did not get the return on their investment portfolio they were looking for. >> they promised cost cuts. >> they did. big numbers, simon, given their base. >> when we come back, ibm ceo jimmy at the conference. "squawk alley" up next. (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done? (patrick 2) that's the kind of control i like... ...and that's what they give me at national car rental. i can choose any car in the aisle i want- without having to ask anyone. who better to be the boss of you... (patrick 1)than me. i mean, you...us. (vo) go national. go like a pro.
good morning. 8:00 a.m. at activision head waters, and it's 11:00 a.m. on "squawk alley." >> good tuesday morning. kayla live at the "new york times" dealable conference in new york city. here at post nine for the hour. sarah eisen is joining us, and dan rosen -- the president and ceo -- the former coo atta hue.