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tv   Squawk on the Street  CNBC  November 10, 2015 9:00am-11:01am EST

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as that company is calling to reject such offers. gap shares, an earnings warning. gap right now is trading down, about 7%. i got through all of those. >> well done. >> i still have time. >> and rackspace, if you want to know what that is about, join us. >> join us tomorrow. "squawk on the street" is next. ♪ 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 is weak as the s&p takes aim at a fifth consecutive down session. that would match a streak from september. you heard them talking about gap, smartphones and more. bonds are one to watch. china cpi below expectations. oil relatively steady despite the iea saying it may recover only to 80 by the end of the
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decade. shares of the gap falling hard in premarket adding to the company's double digit stock slump. >> shares of valeant and malinckrodt are lower. still down in the premarket. we'll have the latest on that scrutiny of and by citron. >> and in a few minutes, mary jo white will join us from d.c. what's at the top of the regulators to do list? >> stocks are set to open lower after rate hike concerns helped to extend the s&p's losing streak to four and sent the dow back into negative territory for the year. transports remain 12% below an all time high. utilities down 15. a lot of signs that maybe we lost the momentum we built in october. >> i think we did. norfolk southern up big yesterday on chatter of the possible bid, didn't seem to matter, the transports. >> no. that bid itself may be highly unlikely given the regulatory
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impedime impediments. >> people go, of course, they'll let that go. we need railroad in this country. >> both class ones under the surface transportation board, unlikely. we'll see. >> i said something last night on "mad money," i got a lot of @jimcramer on twitter not understanding. i'm not saying we need a rate hike. there's much weakness. i'm saying we'll get a rate hike. we'll get one because they feel the window is open. china good, europe coming back, employment good. the data i deal with from the micro level from companies, terrible. that doesn't matter. that's not what they're look at. looking at employment. i think people have to recognize the number stocks leading us verse what's happening in the market is ridiculous. when you look at the retail numbers you'll get this week, you'll say i cannot believe they'll raise rates. gap is irrelevant. i don't mean to say mr. peck, people who work at gap, you
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don't need gap. one thing you don't need is gap. you don't need banana republic. this is just what i'm saying. the economy, the real economy is doing not well. the job numbers support the fed hike. >> yeah. >> people have to realize that markets go down on a fed hike. >> you referenced the number of stocks leading us higher. "usa today," where's the br breadth? the top ten s&p names are responsible for 100% of the year to date gains in the s&p. >> i don't like that. i think we have a lot of headwin headwin headwinds. that employment number -- i want people to get a job. i don't favor higher unemployment. the employment number was not in synch with the earnings numbers. earnings numbers coming down, employment numbers coming up. that's sign of angst in the real economy at the manufacturing level, at the -- you can get
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jobs, but that doesn't mean you'll get earnings per share. people have to recognize this rotation into the banks is not over. yesterday the banks fared well. but there's 18% of the s&p that does well, carl. 18%. a lot doesn't do well. >> yeah. people still talking about if the dollar spikes higher -- >> oh. >> maybe it's only one hike. in which case the bullish thesis you built on banks is not quite as strong. >> it's not going to be one hike. you think the people who call for rate hikes on our air are going to say, i'm so glad we got a rate hike? they'll talk about the next three rate hikes. that's what they do. they don't care about -- they don't care about whether stocks go higher and lower. i'm stuck with this stock job. you know what? i'm done. i'm talking about -- i'm going to start a $10 billion buyback of madigliani.
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>> what else do we get with that? >> a couple of picassos. >> literally, when i showed the madigliani, i said there's something to go. i'm buying valeant and buying ro rothco. price attornto earnings multipl exploding. instead i'm buying valeant. rembrandt is going down. they're giving away rembrandts. >> funny you mention valeant. the company has been conducting a conference call that began at 8:00 a.m. still going on is the q & a from the call. a few key things here. broadly speaking, of course, we talked about valeant for years
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now. much of it while that stock was moving up, as i talked about the business model. the fact they grew through acquisition. roll-up, using a low tax rate. also approach to r & d, different from the rest of pharma, to the extent they did not spend much money on r & d. they did raise prices from the drugs they acquired, they also seemed to potentially generate organic growth. they were thought to have run it in some ways better than others. there was always a question about their business model along the way. conversations jim and i have had for years. much of that has blown up over the last two months. last week or the week prior we were dealing with this research firm citron that questioned valeant and how they delivered drugs. in the call they said specialty drugs helped them deal with their original goal to devise
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innovative solutions for a problem they heard about from dermatologists. they worked with fiphillfil phi. mike pearson said we have a large company, we feel good about our controls, but philidor is a large company, the allegations of wrongdoing are not proven, are still allegations, but for a company of this size, it's impossible to have full knowledge of everything. >> the stock was up a couple. down only a little bit now. people are saying wait a second, yet the dermatology business may not be that good, but people will try to rally around this. there's a piece from andrew sorkin about bill ackman. in it bill ackman said the stock, like he was in control of
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herbalife and how that went down, this one he's telling you it won't go down. like the chinese government. >> got that for you. >> chinese government, drawing a line in the sand. ackman drawing a line in the sand. >> ackman is the shareholder of valeant began when he helped valeant acquire allergen. they failed, but he succeeded. took all shares in valeant, ended up being a large shareholder there, bought more in the decline and talks about he believes it's going to go up for some time while it's still going down. the questions i have relate to the board of directors and mr. ackman himself. i wonder how long mr. pearson can hold on to his job. >> wow. wow. >> don't you have to ask the question? >> you think they have, like, a director's -- >> i wonder whether mr. ackman at some point becomes -- this is just me curious about it.
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does he become more opposed? >> he's been issuing statements -- >> he's been supportive. >> behind them 1000 percent. >> then they have the two value act guys in there, mason and the other guy. >> citron, scott wapner has citron. >> andrew les will be on citron at noon. >> you want to go to the piece of tape? >> yeah. the ceo of malinckrodt -- the new strategy is you short tweet. so it's working -- >> didn't hillary do that? >> tweet sends the stock down almost 25% after they say malinckrodt is potentially worse than valeant, even though in the original report valeant was another enron. we had the co on "squawk box" this morning on malinckrodt speaking specifically about some of the allegations. here's what he had to say about the relationship with specialty
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pharma. >> we do use specialty pharmacies. we don't own them. they are a third party participant. these are typically owned by large companies, publicly traded companies. their economics is separate from anything we do. >> they do not own or control in any way the specialty pharmacies. that may be a key distinction, jim, in terms of malinckrodt. >> how about sales which are not that good? >> sales are not that good. but the multiple on the stock is low at this point. talking about 7 1/2 times a lot of people's 2016 numbers, seven times the 2017 numbers. malinckrodt has a billion dollar drug. there has been controversy about it when it was owned by questor. that was bought by malinckrodt. >> right. i don't know. i think these are all -- we're
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in a market if you get the wrong tweet, you're crushed. there was a bat piece about flowtech. that one going down. the negatives will out. maybe we should cut away. >> gloets let's go to white. mary jo white is with mary thompson. >> thank you very much. we are here with mary jo white, chairman of the s.e.c. thank you very much for joining us. appreciate it. >> delighted to be here. >> we are hear at the sifi conference, a lot of focus on the fiduciary standard. the department of labor introducing it earlier this month, the s.e.c. despite years of the making has yet to produce its own. why the delay? >> the s.e.c. has been looking at this for quite some time. certainly before i got here as chairman, we put out a request for additional information. so as i announced for myself, for my long study that we should move forward with the information for the shared
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rulemaking. the staff is working hard preparing those recommendations for the commission's consideration. one has to recognize that this is a complex -- not quick rule making. it's important to get it right. and to calibrate it so that you have the intended positive objective achieved but without impacts to the negative. >> nevertheless, i was speaking with someone who said if the d.o.l.'s rule goes through this will net that firm $150 million of fees on the backs of small investors. part of your -- what your job is is to protect small investors. when you hear this, why hasn't the s.e.c. moved? >> again, you have to recognize, not only are we separate agencies from the d.o.l. and s.e.c., we have separate statutory mandates and responsibilities. the arisa space is important for the department of labor. they are taking comment on their proposal. initially in 2010. in terms of the timing. it's very important to get it
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right. it's very important. we have provided -- the s.e.c. staff has provided technical assistance to the department of labor. monitor closely what they do. take that into account as we do when the fdic may move into the derivative space. >> can you get any kind of timeframe? come on. people have been talking about this for a couple of years. >> not that long, at least from my perspective. it's something we're engaged in. the staff is working hard on preparing that recommendation for discussion with the commissioners. but i don't want there to be misunderstanding. it's complicated. it's not quick. we are full out engaged in the effort. >> i have a question for you about short sellers. a number of them use social media go out and disparage the company they are short. do you think that's an appropriate venue for them to make their views known? >> in terms of short-selling, you want to focus on not short-selling itself, that's part of the marketplace and can be done legitimately.
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but putting out false information, taking advantage of that is -- by whatever medium, can be manipulation. we bring cases, enforcement cases in on that all the time. irrespective of medium, you can't make false statements to manipulate the market whether short-selling or doing anything else. >> it does give you another area you have to -- >> you have to police it. you have to police it. >> i want to ask you about a decision earlier this year to dismiss an insider trading charge against michael steinberg. this was on the heels of a decision by the court that basically changes what constitutes insider trading. understanding that's a criminal case does it change at all the way you will be prosecuting civil cases? >> the newman decision, which is what you're talking about, is a significant case. no question about that. the laws, criminal and civil are parallel. it has some impact.
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assuming that's the law of the land. in our area, in the civil space there are differences. we've been quite aggressively trying to bring insider trading cases in the second circuit and around the country. one must take cognizance of that case in our enforcement of that as well. >> with the dismissal of the charges on mr. steinberg, does it have bearing on your civil case with steven cohen and his failure to supervise? >> that's something i can't comment on. the commission sits in judgment on that ultimately, whatever the recommendation is on that. i can't comment on that. >> okay. let's go to market structure. a number of people and one of the discussions that they were having when you were hear on the panel earlier is what is the s.e.c. or what can we expect from the s.e.c. in the -- let's say next six months to a year as far as market structure? there's -- let's start with the
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equity markets, it's still too fragmented. what are you doing to make sure there's cohesion there so we don't see disruptions on one fl platform disrupting another. >> we are doing several things on equity market structure. i would add, if you look at the new york stock exchange outage, trading went on because you had multiple venues to deal with it. the point is all issues are on the table. our market structure advisory committee is engaged broadly with the staff. the ultimate decision is up to the commission. looking soup to nuts at all the issues with respect to equity market structure. it's the best, most resilient market in the world t doesn't mean it can't be made better. we're also executing on those areas that i outlined last year. we moved forward on one proposal. another i expect to see quick
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action on. greater transparency for a.t.s. you're never at an end at optimizing equity market structure or fixed income market structure for that matter. that would be the wrong mindset to have. we're really engaged broadly and specifically. >> all right. mary jo white, thank you very much for stopping by and speaking with us today. >> thank you. >> carl, we've been speaking with mary jo white, chair of the s.e.c. back to you. >> a lot more from mary this morning, mary thompson in d.c. more to get to today including this call on apple and what tim cook is saying about the future of the pc. we'll see if s&p can see five straight down days, something not done since september. "squawk on the street" back in a minute.
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getting word from chipotle mexican grill this morning that they will reopen the 43 restaurants in the seattle and portland area that they voluntarily closed. they will open in the coming days with a fresh supply of new ingredients. health officials have concluded no ongoing risk of e. coli.
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they tested food and services, 900 results came back with no test of e. coli. >> there was a secondary thought that goes out there with this is the problem with organic, but quick serve, doesn't matter. they're all under fire from labor. chipotle pays more than everybody. it doesn't seem to matter. be aware in terms of the weakness we've seen in the downturn, these stocks have come into play. i happen to like chipotle very much. i think it's important those came back online. those stocks are in the rolling bear market i see. you mentioned -- they call them fight for 15 rallies. a lot of them today. coinciding with mcdonald's investor day, also today. tom we'll hear directly from steve easterbrook.
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>> huge. huge. of the restaurants this is the only one working. it's because of this man who has taken out the menu -- the items too hard to make. trimming the menu, won over the franchisees. has 98% of them back. he's real. what? >> i don't doubt he's real. you tell me he's real, i believe it. >> he's very real. i'm looking at you, he gives me that quizzical face. like when i tell him i go shopping, i want him to come with me to costco. >> i look forward to that trip. i look forward to the costco trip. >> will be a trip. you'll get one of those giant teddy bears. this guy is for real. he's come in with a head of steam. he's come in technologically oriented, but most importantly the throughput, it's easier to go there and they don't make as many mistakes in your orders. because you're no longer ordering the wine -- >> that's more like the uk. >> yeah. he got rid of the difficult things to make, including the
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quinoa smoothie. >> those are tough. >> we'll get the mad dash and count down to the opening bell in a moment. working 24/7 on mobile trader, rated #1 trading app in the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of the other competitors do in desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivative pricing model, honey? for all the confidence you need. td ameritrade. you got this. do solemnly swearame), that i will support and defend the constitution of the united states against all enemies foreign and domestic... ♪
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when we come back, we'll get to some of the names we've not gotten to, including gap, results from the home builders and why credit suisse cutting earnings out of apple by 6%.
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funny, we talk a lot about bill ackman. there he is on the podium celebrating the fifth anniversary of howard hughes, of which he is a shareholder. hhc the symbol there. can't miss that gray hair anywhere. let's get to the mad dash now for a tuesday.
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>> i had the ceo of a company called cyberarc, it counters cybersecurity. did fantastically well. different from fireeye. the business is strong. apropos of this difficult market, bank of america and merrill lynch downgrade saying it's about as good as it can good. this resonates with people because all the stocks with high multiple are getting crushed here. be aware when you see cyberark going down, there's nothing wrong with cyberark, it's the idea they don't want to pay a huge multiple on earnings for a profitable cybersecurity stock. watch cybr, what this market is rebilling against is stocks like this. >> all right. >> let's get to the opening bell. a look at the s&p on the bottom of the screen. at the big board, the howard
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hughes corporation, developer and operator of master plan communities, celebrating their fifth anniversary. at the nasdaq, irobot corporation, designer and builder of robots. overall -- the ten-year has finally run out of sellers, as we come back a bit around 2.32. >> that's important. you know, some of my best guys who are older, been around, we're all worried about this moment where interest rates just -- we saw the great bull market in bonds, it's over. that's important. on the valeant call, mike pearson saying goldman didn't give him time to post collateral. i don't know, when i worked at goldman sachs, we gave you time to post collateral. >> it was a swift drop down.
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it was $100 million loan against the stocks. >> i've taken someone's keys. it can get ugly. if he says goldman didn't give him time. that's an interesting story. also following gaming. just keep getting a bad sense about some of those -- i know the fantasy stocks -- they're not stocks, but a company called amaya, reported a number that wasn't so good. that's a gambling company. that stock coming in. every time i see amaya, i think about watches with the fanduel, the draftkings. i find that an up in the air thing because this amaya is right in my face getting killed. it's a gambling company. >> a lot of discussion about credit suisse's note on apple. they cut their calendar '16 estimates by 6%. they say apple lowered component
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orders by as much as 10%. the company has not commented on any of this. >> for the last 60 points i've been saying this kind of thinking has gotten people out of the stock. you cannot gain the supply chain. they can do supply chain cuts, one reason why i say own don't trade apple is because so many analysts have tried to game the supply chain and they have gotten out of apple, then they can't get in. if you're a longer term shareholder just tough it out. gaming the supply chain of apple has been an impossibility because of the way apple moves orders around. this is a piece that basically says apple, you sell it, then you buy it. it says supply chain cuts weakness and opportunity. that's for hedge funds. if you're a hedge fund, you sold it yesterday, buy it back today. if you're someone at home, you're sitting there saying, listen, skyworks solutions, avago all going down. but we talked to all those
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companies. it's hard for me to believe within ten days everything they said is not true. falling apart. i'm not buying it. but the power of this negative moment in the stock market is overcoming everything. >> cook is in britain launching this new ipad pro, goes on sale tomorrow. marking the death of the pc. his quote is why would you buy a pc anymore? really. why would you buy one? >> pcs, i think, are bottoming out. you will see hewlett, the new hp do okay. intel saying they think pcs are bottoming out. microsoft windows 10 doing well. i'm not going against tim cook here. i want one of these ipad pros, that way i can watch tv without her knowing it, the wife here. we're at a bad moment here for the market. just a bad moment. i want people to be careful for all the reason dsh-- like when started, talking about the
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transports. valea valeant. citron will be on, when i hear there's a short seller coming on, people are worried. mary jo white says it's fine as long as they disclose -- not telling lies. i think the market is more precarious than people realize. i do want to know about the norfolk southern bit. >> let's talk that. >> you have something? >> i have something to put into perspective of this report. bloomberg said there had been an approach from canadian pacific. ackman. >> ackman. >> a big holder there. analysts are coming out, a lot of chatter, i've been talking to investors as well about where this could stand in terms of the regulatory framework. let me share some of that with you. the surface transportation board has enhanced merger procedures put in place not long ago. they place an emphases on demonstrate a potential transaction with improved
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service, enhanced competition and drive greater economic efficiency. in such consolidated rail industry the with willingness of both management teams to pursue such an action would be paramount to addressing these guidelines. let me share a quote from jim squires, chairman and ceo of norfolk southern. in today's political and regulatory environment i think transcontinue innocental mergers would be a mistake. it would be fraught with risks, risk of open access, impositions and other conditions that would detract from the economics of the industry today. in the longer term who knows, politics could change, regulations could change and the synergies may make sense and they may drive consolidation. there's some things to give you a framework in which to consider this approach. it does feel like canadian pacific -- they approached csx a year or so ago. that didn't happen.
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how about this guy, you want to merge? over there? you want to merge? >> i was on the norfolk southern call. one thing they did well is they actually were very good at all the things that you talk bshabo efficiencies. coal wasn't just bad for them. that was good quarter for norfolk southern. i was surprised -- this is a business of getting a product better to another place than a truck. norfolk southern was an excellent quarter. now, they are a little too bullish about coal. everyone is too bullish about coal. there is a base load of coal in the country. i think norfolk southern is saying coal could bottom out. it was a great quarter. they don't need the help of some canadians coming down here and making our trains more efficient. >> we'll see if they get momentum. >> we'll take -- hey, you want to mess with norfolk southern,
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i'll take potash. if donald trump were president, you can't come down here, we'll buy potash. >> canadians are not like the chinese. they're our friends. we're lucky to have peaceful borders. think it's a mistake to allow that deal. so little competition. >> does appear the transportation board could be an impediment. i want to mention lions gate. the stock was looking down after the company reported earnings that were below estimates. some were saying the back half were betterment they'll have new replaces, mockingbird 2, then the stock up now. you can see there. why? on the conference call these companies like to share news on conference calls instead of putting it in writing. >> it's the bukus principle. >> that could be a new movie. maybe lions gate will come out with that, bukus principle. lgf on the conference call said
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it was announcing principle subject only to documentation that it would create a new strategic relationship with discovery communications and liberty global. what do those two have in common? john malone. two of the preeminent programming distributions in the word. they will each take a 3.4% stake in lions gate. this is big. >> as part of an investment that they say in the call that would create some strategic opportunities for and help us continue to ask in our current content business or continue to -- that's a misprint in their current content -- >> they buried that in the call? >> liberty already owned a stake as well. star owned a stake which liberty controls. you get the point. stock's up. >> makes a mockery -- >> everybody talking about continued consolidation. this would certainly at least seem to bring that one step closer. that's why the stock is up. they did it on the conference call. it's the bukus principle.
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>> why did they say that? they could have put something out in the release. that's more important than jennif jennifer lawrence -- >> more important than mocking j. >> that's what it is called. what did you call it. >> mockingbird. >> we want to go to district 13. didn't youed three wi ed threre kids? >> mockingbird? >> no, mocking j. >> my son read mockingbird. not the second one, just the first one. >> i hated the fact they split the last one into two. >> yeah. good for lgf. >> i'm talking about to kill a mockingbird. to hit it again, it comes up -- this mylan perrigo, one day closer.
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we had joe papa on yesterday. nobody seems to know anything, it's liked are hollywood. nobody knows anything. in this environment given all the constraints in healthcare, if you are given the chance to make 10%, it's surprising you wouldn't take it. >> i found him earnest. i liked joe papa in that interview. i like him. >> he's a likable man. this is business. >> dhi the big effort gainer, 64 beats by two cents, revenue ahead, new orders up 18. >> i was surprised that stock held up given the fact that the chatter about a rate hike would -- that was a very good quarter. i'm so glad you mentioned it one thing that's put a bid under today's market is the horton number. it was very, very strong. it showed that i think there could be a blip up in buying
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ahead of a rate hike that will -- guys will come and buy houses. >> it's a miss on the top end the bottom line for evh. >> toll brothers has been under pressure. lennar under pressure. if this can alleviate the pressure and people feel better about housing. housing and autos have been the two parts of the economy that held up. we can't lose them. can't lose them. >> u men shyou mentioned cap ea. everything missed. gap, old navy lower than expected. banana down 15. you have to go back to 2012. >> whole foods, gap stores, they get so low that people say i'll take a shot at it. i think that people feel that gap does have good cash flow. people feel whole foods has good
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cash flow. these stocks don't go down as much. i think people feel that we've been down too much for a lot of these stocks. they want to buy them. i question the raise on debt of gap. >> they lost a key executive to ralph. >> that person was very good. hasn't really started. ralph has been strong. i was at a gap this weekend, gap, banana republic. i look. i look. i don't see. i don't see the -- the raise on debt. i'm trying to get into the existential crisis. >> i like your french. >> did you ever go to the mall? there's 100 stores that look like gap. then you get to the italian guys, they charge a fortune. they get it. i'm going to italy. jim stewart will have to go back. when we get that dollar -- >> lowest since april 20-something. >> time to buy those super tuscans. >> below 1.07. >> this is one problem i have with the market. i like horton can come up with
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the number because they're not related to europe. if the fed raises, all bets are off. >> the dollar gets stronger. it is getting stronger and expectations of a raise. >> there's a battleground stock i want to mention, wayfair. wayfair had a fantastic quarter. this is the company that some people compare to overstock if they want to be negative. others say it's the greatest model for furniture. citron has written this is not -- there's nothing special with this company. the numbers were extraordinarily strong. watch this stock. if someone were to ask me what the key to this market is, it will be wayfair which had a 13% loss, much better than 24 cent loss. direct retail up 9%. cash flow of 35 million. repeat customers up 96%. at the same time i think citron might bash it. not just on the tweet. not just on the tweet. >> short and tweet. >> you know what just hit 30? >> ge. because of the siynchrony exchange is good for them.
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that's being added to the s&p. it's a win-win. >> that picture. >> i have to ask him to shave. ge -- >> would want to short a stock on a recommendation of that guy? >> someone said he earned hundreds of millions, he said don't tell my ex-wife. great line. ge -- whoa. ge and synchrony, two winners because of earnings, orders. a story that's working here. counter acting a lot of negativity. counteracting. >> ge leading the dow, apple dragging it down. let's get to bob pisani on the floor. >> mixed market now. you can see that in the way the major sectors are panning out. very defensive tone to the market. healthcare, consumer staples doing okay. utilities doing okay. the data in china was crummy.
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we see most of asia to the downside. europe on the mixed side. germany on the slight upside. you were mentioning gap, but we have a lot of concerns about what's going on here. kohl's, nordstroms, macy's, penneys down yesterday. analysts lowering forecasts. goldman, ubs, jpmorgan had negative things to say about them. we have all of them reporting -- the big names reporting this week. macy's on wednesday. kohl's and nordstrom on thursday, jcpenney on friday. gap was not helpful at all. gap/navy was supposed to be the bright spot. it was up 2%. expected 5% by some analysts. gap down 4%. that was worse than expected. most had 1% 2%. banana republic, that's the fourth month of a double digit decline for banana republic. gap is not a good leading indicator of how things are
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going. we don't get comparable store sales from nordstrom. look at how things are changing. their q2 numbers were great. almost 5% same-store sales, revenue up 12%. you can see the change. nordstrom rack, the discount 5:is the area that there's real growth in. that's been helping them out. not so much the old school. you can see what a horrible year all these companies have had. everything down 20% to 30% i including macy's, kohl's, nordstrom and gap. it's been a year to forget. reflecting the shift in spending from apparel to electronics. ipos, we have terms for match group, online dating. 33 million shares, 12 to 14. sales of $1 billion, 33% ebita. how fast can you keep the sales up? that's the question for them. valuing the company -- selling about 14%.
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$3.2 billion market cap for that one. that will be next thursday. the same day square, by the way, is supposed to be trading. before that, a fairly big ipo. loan depot, 30 million shares, 16 to 18 bfsh, about a $5 billi offer. what do they do? mortgages. lending club, ondeck, somebody like that. they have higher multiples. the problem is the peer to peer lending platforms have not done well. lending club went public at $15 back in january, they were falling all over themselves for that in the first couple months. it traded on the first day about 22. as you can see now, it's trading below its original offer of price. the dow down 39 points. carl? >> thank you for that. bob pisani. let's get to the bond pits. rick santelli in chicago.
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good morning. >> good morning. it's been two weeks since the first day of our fed meeting in october. so let's start a chart at the 27th. five-year, see what has happened? up 37 basis points since that close at 136. and ten sessions, today is the tenth. the previous nine, 7 of the 9 had higher yields based on previous closes. only two different. today is pretty much a close call virtually unchanged. but the short end unchanged a base point lower. intrad intraday of five. on the long ends, yields rup s . steepening a bit which is not when you pare in the five-year. into these spread trades. as a matter of fact, on the
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30-year to give perspective, 37 base points up on the five since the first day, only 27. ten less on the 30-years. let's take april 1st, tens minus bunds. 170 is the difference. we haven't had a settlement with a 17 handle since may 1st. back to april 1 for the next two charts, euro versus dollar, that's an extreme. always important to consider who is the pro active? who is the active offense partner here? it's the dollar. april 1st chart of the dollar index also shows a comp to april, but considering the direction of our fed versus the ecb, this is the trade that's moving the you'euro. >> rick santelli, thank you very much. when we return, tag heuer teaming up with intel and going toll develop a $1500 smart watch on sale in the u.s. we'll talk about it with
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tagheuer's ceo. ♪ today, we're seeing new technologies make healthcare more personal with patient-centric, digital innovations; from self-monitoring devices that can interpret personal data and enable targeted care, to cloud platforms that invite providers to collaborate with the patients they serve. that's why over 90% of the top 25 global pharmaceutical companies are turning to cognizant. our domain experts, technologists, digital and data specialists, clinicians and scientists are transforming the way clinical research sites collaborate with pharmaceutical companies, and enhancing patient engagement with innovative platforms and solutions. our population's growing healthcare needs present growing opportunities for our clients:
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. tomorrow, singles day. may do as much as $12 billion in
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one day. jack ma will join us, founder of alibaba. chairman. he'll join us from china. "stop trading" next. it's hard to find time to keep up on my shows.
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that's why i switched from u-verse to xfinity. now i can download my dvr recordings and take them anywhere. ready or not, here i come! (whispers) now hide-and-seek time can also be catch-up-on-my-shows time. here i come! can't find you anywhere! don't settle for u-verse. x1 from xfinity will change the way you experience tv. time for cramer and stop
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trading. >> not only do i question the report about the supply chains of apple, it's hard to figure out. piper raises its target from microsoft from 53 to 64. they're talking about games. do you not raise your price target for microsoft unless there is a bottom in pcs. i think people continue to underestimate sacha nadella who should come on here, sit here, we'll all wear black t-shirts -- >> saw him on periscope the other day. >> yes, i did. i've been periscoping a lot. i do a little thing before the show begins. >> you're four fold in viewers. >> i'm up five fold. i'm talking to people in twitter. saying guys, if you get behind this, we can do something. >> what's on mad tonight? >> salute to the veterans. don't forget. i have scott wine of polaris.
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and i have gregg engles. we'll salute the vets. this is a show my dad used to come on. miss my dad. had a bronze star. >> veterans day tomorrow. the anniversary of the marine corps today. when we come back, david kostin of goldman sachs.
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♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪
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good tuesday morning. welcome back to "squawk on the street," i'm carl quintanilla with david faber and simon hobbs. s&p has gone slightly positive. dow trying to get there, down three, four points. apple is the laggard today as credit suisse cuts their earnings estimates. let's get to rick santelli with breaking news on wholesale trade. >> september read on both inventories and trade on the wholesale side, but they're both the same. up 0.5% on both. this is larger than expectations
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by a long shot. expectations were close to unchanged. some revisions to mention. last month on the inventories, 0.1 is now the number versus -- excuse me, 0.1 original, 0.3 now. down 0.1 on sales, now down 0.9. on inventories that half of one percent comes back to the best number of the year, 0.7, in june. kind of interesting. sales comps had the best read of the year as well, except it was april, 1.7. we'll continue to monitor these. who's having the best day? the dollar index, up about a half cent. carl? >> thank you very much. as we said, the markets are mixed today. our next guest says companies are high cash return strategy also outperform in 2016. joining us at post nine is david kostin from goldman sachs. you've been pushing the buyback
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thesis for a while. >> yeah. >> any change in that view? >> historically speaking it's been a great strategy for 20 years. 70% of the time in the last 20 years the market has rewarded those companies that returned cash, dividends and buy backs, as well as companies pursuing cap p and m&a. companies that are choosing to return some of that super high margin of almost 9% profit margins would likely outperform. >> any expectations on cap x. >> they're sitting there with decisions on how to allocate the cash. our forecast is a 1% rise. spending by energy companies willing falling 20% this year following a decline last year. the issue is outside of the energy space maybe 6% rise. but bottom line, modest, slight increase in overall spending on
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cap x, 8%. increase in m&a spending, that's the cash component of m&a as opposed to shared currency. that's investing for growth broadly. less than half returned to shareholders via dividends and buybacks. that's a winning strategy to find those companies choosing to return cash to shareholders. >> all of this sounds like late cycle plays. >> the market at these levels is about 17 times forward earnings, which is expensive. expectation is the fed will begin raising interest rates in september. those will slowly increase over the course of the next year, year after that. that's a more challenging environment for a falling -- more likely to see a falling p multiple, and a falling p multiple environment, returning cash is a good directive. first off, we know goldman has been calling for december for a while. how aggressive in '16 and impact -- what would a multiple fall to? >> if you look at next year,
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perhaps 100 basis points increase is the goldman sachs baseline view. forward market like 60 basis points for next year. a bit more bearish in terms of the rise in rates. that would suggest a pe multiple that falls from 17 to 16, one multiple point decline. you should anticipate as a portfolio manager over the next several years, to see a gentle fade to 15. >> the message that you keep repeating, the main point of the note is that those companies that are returning cash to shareholders will outperform? >> yes. >> for what period of time? >> 2016 likely to outperform. >> i understand why a lot of people -- if interest rates are going to be kept low, we can discuss how low they'll be kept. i understand why returning cash to shareholders would attract investors, and the share prize
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rise. but the flip side of that is those are companies at the margin not investing in their own future but returning cash to shareholders. do they outperform overtime or is it a temporary phenomenon, and you see companies rise then fall away. they have consistently outperformed. 70% of the time over the last 20 years they have been outperforming as a strategy. >> over that period of time. each of them over that period of time? >> if you look at a group of companies, you rebalance that to every quarter, every year, that's a winning strategy. you have a company that is returning at the outer end of the distribution, companying returning 10% cash yield, dividends and buybacks as compared to the market that is 5. getting twice the cash return to an investor in an environment where you're not getting a pe multiple and not getting really strong earnings growth. that environment, that's what you want to focus on. if interest rates rise, how does
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that undermine the thesis? this week, you've had the ten-year yield climb by 15 basis points, it's those dividend payers that have fallen, utilities down 2.5%, consumer staples down 2% in a week. it's a big move in a week. >> you are highlighting some big dividends, they tend to do less well in a high interest rate environment. this is a combination of that return. >> does it make a difference to you as a stock picker whether a company is buying back on leverage or just out of cash? >> then you get into issues about whether cash is located overseas as opposed to domestic, from a tax perspective, getting into policy related issues does it make a difference? >> the flow is the flow. >> the companies can issue debt. interest rates are attractive. this is a good opportunity to
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continue that last gasp of that strategy. >> right. >> at some point rates will be rising and it will be more costly to borrow. right now it's creative to be thinking about issue debt, buy back shares at this juncture. at some point the fact is multiples are high and it is going to come into question, did management allocate their capital in an intelligent fashion at these high multiples? then that leads to the problem what do you do with this high -- all this cash flow? $2 trillion of cash. how did they spend the money? the issue is do you buy back stock, pay dividend, mpursue m&, the companies returning cash to share holders is the preferred way. >> record profits, record return of cash to shareholders, probably a bigger position in u.s. equities around the world for a long time. then a fall is coming because of all the equity markets this may be the most stretched. let me add one thing that came from left field.
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say 40% of the cash earned by the top companies in this country are earned overseas, it's tax-free. now the international community is moving to tax those companies. it's the flip side of those huge cash balances that shift off shore. that's a real threat to a lot of these big companies here over the next two, three years. >> the ones we looked at in our research is the performance of companies with high tax rates compared with companies with low tax rates. the high tax rate companies are where you want to be, not the low tax rate. come are counter intuitive, the risk is that the low tax rate companies will be subjected to a rise in tax rates. if you start out high, that's beneficial. >> one last question, this week your colleague has pointed out things going right, auto sales, services, ism, wages maybe. >> yes. >> what does it take to put those things into a dynamic where the company starts to
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grow, earnings start to grow again? >> there's no question in our view that the economy is doing quite well. you saw that in third quarter earnings. let me clarify that the consumer facing economy is doing well. the corporations in the business doing well, industrials much more challenging. so that would be the issue. broadly speaking, the economy is doing better, but margins are flat. the issue of, y the economy is growing, that drives top line sales. that's good, margins are flat that limits the ability of companies to generate strong earnings. earnings are growing, but the multiple is fading as interest rates rise. >> we covered a lot of ground. good to see you. let's get a market flash with don chu. we have breaking news with action taken by the u.s. attorney, preet baharara, they unsealed charges against a number of individuals me s here
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their role for the largest hacking case in financial history, all charged over the summer with stock manipulation and market manipulation. today they are also being charged with hacking, massive hacking attack of nine financial institutions and the stealing of the personal information of over 100 million customers including those of jpmorgan over the course of last summer as part of their alleged market manipulation scheme. the nine financial institutions cnbc has learned include jpmorgan, the "wall street journal," e-trade and scott trade to name a few. the defendants will not be in court. one may be in russia, a couple others are in israel right now. baharara will hold a press briefing at 1:00 eastern to discuss details of this case. still one of the biggest hacking cases in u.s. history and the next development there. >> all right.
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thank you very much, don. that's very interesting. valeant held a conference call this morning. as it tries to reassure investors -- they don't seem particularly reassured if you want to judge by the stock price down 3.5%. meg was on the call. she joins us now with more. meg? >> that's right. the stock is falling after valeant's call, down about 3.5%. mike pearson starting out trying to lay out kind of the transition out of that specialty pharmacy business, philidor which they said they were unwinding and there's been so much news coverage of in the last few weeks, saying they'll have a replacement distribution chain in the next 90 days that will impact their dermatology business in the fourth quarter. a lot of questions about that. also saying they are confident in their business. saying employees are angry about all of the allegations that have been said about their company. they have put a retention plan in place for employees to keep them around for 12, 18 months.
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but saying in a company this size, it is not possible to know everything that is going on. but saying they do believe there are strong financial and legal oversights in place. they would not talk too specifically about philidor because they have this ad hoc committee investigating what's going on with it. there are questions about how much they knew about it and they are still allegations. up next on the program, it's ban rough couple of months for the home builders. dr horton just reported a big rise in quarterly profit. should you be buying these stocks now? "squawk on the street" will be right back.
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. shares of d.r. horton surging after the company beat estimates, reporting a 44% jump in profit because of rising home orders? joining us now is bob wettenhal from rbc capital markets. welcome to the program. >> good morning. >> this is the biggest of the home builders, arguably the one that's most exposed to first time buyers. actually a stock that's done quite well. what is the recommendation on what you've seen today? >> this is just another example of the whole team at d.r. horton delivers consistently excellent high level of execution. we love the beat. we love the strategy of targeting the first time home buyer. management has done a phenomenal job of capturing the first-time
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home buyer and they have a terrific geographic footprint in california, texas, arizona, nevada. there's been a lot of concern about the impact of lower oil prices on demand. i'm in houston today, we don't see it. >> they are close to your $32 price target. >> yeah. and this is the kind of print you see that gives you confidence that these guys can continue to execute. we'll have to re-evaluate that price target following stronger results today. >> there are two areas of the market i don't understand. one is automotive makers, and home builders. you hear home building is great. kb homes lost a quarter value,
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h hovnanian is halved what happens in this industry that you can have such bad performance against the headlines. >> athere are certainly home builders who have lagged, but d.r. horton is having a phenomenal year. some companies are able to leverage the growth. we see grjob creation, wage inflation, and the return of the first-time home buyer. to management's credit at d.r. horton they captured that demand cycle. some other companies have been less successful. what you're getting from horton is growth. the market is buying growth. you're also getting profitabili profitability. you have a 20% growth margin. >> of the stocks what do i put on my christmas list in addition to this one and what do i avoid? who is not making it who should be avoided? >> i would say the big overhang, which is giving us concern, is a
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fed tightening cycle starting in december. that will impact valuations. if you just want to look at pure fundamentals, d.r. horton is high up. another name which is beaten down and struggled this year is paulte. we think both will deliver strong earnings growth going into 2016. there are some concerns. interest rates, labor shortages leading to construction delays. when you look at the order growth that horton delivered today, up 18% year over year, that tells you the consumer is coming back to housing. >> all right. got it. thank you, bob. >> appreciate it. when we return, luxury watch maker tag heuer releasing its first smart watch using the google operating system. can this $1,500 watch compete with less expensive models? the coe will join us live after the break. cross swiss watch tra
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with silicon valley technology? this new time piece here, possibly a serious rival to apple. joining us this morning, jean-claude vive, ceo of tag heuer, which this week launched its first smart watch with the help of google and intel. great to have you back. good morning. >> good morning. >> let's get to the price. >> the price? >> yes. it's not cheap, right? >> luxury has very rarely been chea cheap. >> 1500. >> it's 1500, which is a lot of money for many people. i agree. >> whose the audience then? >> the young managers, young entrepreneurs, even students.
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the young generation connected to the future. >> features, you want to sell me on it real quick? >> easy. the same as apple. >> is it that simple? >> that's the simple answer. it's true, yes. we cannot do much more. we have intel and google, the two giants. we are more or less the same, same moment, but we will see in future. for the time being, the same. >> selling at a multiple of apple's price point. >> yes. selling like the hermes. the hermes is 1,500. >> really? >> i think the price, of course, is expensive, but still justified. >> you talked repeatedly to us about not trying to beat apple at this game. >> right. >> what part of the market are you trying to carve out that they don't have? >> that is difficult because
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they have from 7 to 75-year-old people, as we do. we have one enormous difference. we find that the watch will never become obsolete. how can technology not be obsolete. it's impossible. because it's impossible we say whoever has bought that watch, after two years and more, he can come back and retransform his watch into eternity, which means we put swiss-made movement in it, it will work forever. that is an incredible advantage. who wants to throw away a watch that he bought for $1,500 in five years because it's obsolete. nobody. he can come back in five years to the shop, we transform the watch into a mechanical watch which is a transformation into eternity. >> were you always a believer in the smart watch revolution or
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did something convert you along the way? >> no, what convert me is apple. th >> they taught you to believe. >> when i saw the success they have when i saw how much young people were wanting to buy it we said we cannot let -- we cannot let it go. we must also offer -- >> it's interesting that you talk about -- you accept that the hardware you're making will become obsolete. those are the words you're using. i'm not sure apple would say the same thing. >> probably not. >> they feel whatever they're generating you can reprogram and it will do what it has to do. you're telling a different narrative. why is that? >> because i have experience with my apple phones. >> right. >> at a certain moment i had to change. and i don't say it will be obsolete in three years or five years, but one day it will be obsolete. one day the screens will be 3-d. one day there will be a camera in the watch. all that you cannot just upgrade.
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you need another watch. >> we had a bit of a scare in your industry this week, maybe because of cartier, there was a warning on full year profits, maybe because of watches, we think, particularly in hong kong, they aren't selling like they used to. lvmh fell because of what was said. >> the swiss watch industry, we might end the year with minus 2% or zero, which is less good than last year. minus 2% on a record year is still not bad. what's happened, you're right especially hong kong, hong kong is bad. hong kong what they did to the chinese, the chinese don't want to go now as frequently as they used to go to hong kong. we have a slowdown in hong kong, but great compensation in countries like australia. now the chinese go and travel to australia, to tokyo.
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to seoul. what we lose in hong kong somehow we catch up in other countries. >> earlier you referred to the apple watch as a success. is it a success? if so, how are you measuring it a success? >> from what i hear. you hear they sell 3 million watches, sometimes 7 million, sometimes 5. if it's 3 million or 7 million, it's a huge number for watches at average of $800. 3 million, 5 million, not many watch brands in the world sell 5 million, 7 million watches. nine months ago they are not watchmaker. they still are not. for somebody not being in watches to sell 5 million watches in nine months, it's huge! it's just phenomenal. >> at least yours tells time. please come back and often.
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jean-claude bive. >> we will talk to a retail hedge fund manager about what is ahead for this season and where you can find a bargain in many senses.
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good morning, i'm sue herera. here is your cnbc news update. british prime minister david
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cameron outlining his goals for reforming the uk's membership in the european union. he said the eu must agree to changes that would realign britain's place in the bloc. >> fast food workers taking to the streets of new york city demanding a living wage. about 300 protesters started in front of a mcdonald's on their way down to city hall. chipotle restaurants that closed after an e. coli outbreak could reopen as soon as tomorrow. health officials say tests of thousands of produce samples turned up negative for the bacteria. a painting by the italian artist modigliani fetching more than $170 million in new york city after a bidding battle.
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very beautiful. that is the cnbc news update. back to you, simon. >> and tonight it's the warhols and picasso, and tomorrow the lead auctioneers will be on. >> excellent. market down 59 points on the dow. the dollar is interesting. the surging dollar in the wake of janet yellen twice putting a december rate hike on the table has been strong. today dollar index up again. somebody told me it was declining. the rising dollar important for corporate profits. put a brake on the broad equity market, also important for reducing the price of commodities and therefor you see a lot of miners around the world negative. a lot of china plays hurting. we have some big interviews tomorrow. mcdonald's ceo steve easterbrook
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will join us live. that's following the company's investor day. expect news on that this afternoon and first reactions tomorrow. also talking tomorrow to jack ma, alibaba's executive chairman. tomorrow is alibaba's singles day. the biggest shopping day in the world. two can't-miss interviews when "squawk on the street" comes right back we'll have even more. hello, watson. you can see now? i can recognize people, analyze images and watch movies. well i wrote a few books, did a speaking tour, i... i've been helping people plan for retirement. and i help doctors identify cancer treatments. is that all? i recently learned japanese... yeah, i was being sarcastic. i haven't learned sarcasm yet. i can help with that.
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u explai"super food?" is that recommend sya real thing?cedar? it's a great school, but is it the right one for her? 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? good question. you ask a lot of good questions... i think we should move you into our new fund. sure... ok. but are you asking enough about how your wealth is managed? wealth management at charles schwab.
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relatively quiet day for the equity market. not so arguably in chicago. let's get to rick santelli for this morning's exchange. >> i'm never quiet, simon. all right. today's special guest, he's my resident expert on the affordable care act, obamacare.
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bob, thanks for taking time this morning. >> hi, rick. >> the easiest place to start was on november 5th in a hearing congressman tim murphy made the following statement. this was a subcommittee on oversight and investigations. that the co-ops have lost about 1.2 to 1.3 billion of taxpayer money. on a different side, that's co-ops. the carriers in general, according to a mckinsey study lost $2.5 billion. tell me what's going on with obamacare as we enter the 2016 time period which is going to have many changes. >> this is the really big year, the really big enrollment period going on now for obamacare. obamacare, the affordable care act only signed up about 40% of the people eligible for the insurance exchanges. we don't know how many we need to make the risk pool, if you will, stable so that we have
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sustainable rates for people. the industry standard has been about 75%. one way or another obamacare has not signed up enough people, insurance companies are losing money, the co-ops are the canary in the coal mine, they're going out of business. they're faltering one after another. >> bob, here's my simple question, i try to be a straight shooter all the time. many pundits to this would say, well, the co's lost money because congress defunded them. is that a true statement? >> no the co-ops lost money because they were a poor business proposition from the beginning. according to the obama administration's own report, virtually all the co-ops had better than average people enrolled. they literally had the healthiest part of the population. these insurance companies had the healthiest part of the population and they were losing money. that's just really a bad
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business execution. these things are failing -- >> you know -- >> go ahead. >> bob, the reason we're talking about all this is every time i ask my sources what is the biggest headwinds facing the economy, i always get about four answers. regulation and obamacare are always included. the final half minute, is this headwind ever going go away? i know we talk about the fed, but this is a big deal. >> this 2016 open enrollment is it for obamacare. either they get this thing up to 65%, 70%, 75% of eligible or this is not sustainable. rick, the obama administration has already predicted that they'll have virtually no growth. the obama administration seems to have lost confidence in their own health plan as far as these exchanges are. they don't think there will be growth. and i think we'll get to a point in 2017 with a new president, new congress, where this is going to have to be completely overhauled because it's not working.
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>> bob, thank you. as we know with fed policy, recalibration sounds easy, repeal or replace sounds easy, but these things are never easy. david faber, back to you. >> i'll pick it up, if i may. controversy still swirling at the university of missouri. the school's president and chancellor both ultimately resigning yesterday. phil lebeau is live on the campus of the university of missouri with what's been an astounding chain of events here, phil. >> it has. and i think what's overlooked by many people is the power of the missouri football team getting involved in this controversy saying it would boycott a game coming up this weekend in kansas city against byu. the financial implications of that certainly the catalyst for the decisions that were made yesterday by the board of directors here at university of missouri in terms of replacing some leadership. just how much money does the athletic department bring in and specifically the football
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department? $83.9 million. that's how much revenue was brought in by the missouri athletic department last year. about 45% of that from the football team. in big universities the football team generates most of the revenue, 32nd most among large universities in the united states. here's the head football coach from the university of missouri talking yesterday about his decision to back up his team on a potential boycott unless there were changes in leadership at universit university. >> they asked me if i support them. i said i would. i didn't look at consequences. that wasn't about it at time. it was about helping my players and supporting my players when they needed me. and i did the right thing. i would do it again. >> in addition to the leadership change, is that were announced yesterday, the university of missouri also is appointing a chief diversity officer, and it will also make diversity classes mandatory for incoming freshmen
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as well as faculty members in the future. by the way, i had this question come up today. people saying, well, what's the percentage of black students at the university of missouri versus for the state of missouri overall? in the state of missouri, 8.3% of the population, african-american. at the university of missouri, 7%. the faculty less than 5%. the change here, we've noticed it over the last 24 hours. it's starting to feel like a more normal day as students go to classes. that's the power of the football team. that's big catalyst for what happened over the last 24 hours. >> phil, thank you. up next on the program, markets on track for their biggest two-day loss in six weeks. the one and only art cashin will join us live at post nine to analyze exactly now where we're going.
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my next guest two years ago introduced a comment for retailing. while retailers may not be doing that well it does not mean consumers are not spending, he called it ssa, for samsuusing d
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buy rather than going to the mall to buy. we're over two years past then. it's a theme talked about a lot. is it still in play as we head into another earnings season for retail? >> it is exactly as we kind of thought it would be. and even accelerated to some degree. what's happening is that the internet shopping is catching on more than back then. especially with mobile devices. mobile apps for retailers, going on to the cell phone, iphone, pads from samsung and moficroso, and they're buying. >> given that so many have this omnichannel strategy, people using their mobile device to buy from that company, maybe it's not amazon, it's macy's. >> you can get the sales, especially with the
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manufacturers, but it's difficult because people have been prefer going to one-stop shopping now. they realize they can get most things from amazon. amazon sales have grown 16%. that is taking away market share from everyone else. they're starting to feel the pain. >> let's talk about the coming quarter that will be reported, that's already ended. is it going to be a particularly bad earnings season in your opinion? we saw some downgrades today from some analysts who follow these stocks. >> 2 1/2 years ago when we spoke about ssa that quarter was really bad one. i get the sense this quarter that will be reported in the coming weeks and this christmas season will be pretty bad. pretty bad across the board. more than we've seen in the past. part of that is because of the inventory work we do. we saw somewhat of a build up in certain subsectors in inventory in the past few quarters. >> you always tracked inventory. that's the reason it's going to be a bad quarter? i referenced the consumer is
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okay even if retail is not strong. is the consumer okay? >> we touch on inventories, yes, the consumer is fine. we summarized the numbs from samsung, apple and samson. we compare it to traditional retail sales. that's the only way you can get an idea as to how it's doing. everyone knows amazon and apple are taking market share. how much is the question. in the last few quarters, total sales for all these companies, starting from the bottom, total sales growth about 5%, then up to 6%, 7%, now back down to 5%. first quarter was 5.5. this last quarter about 5.2. not bad, right? >> not bad. >> what happened is traditional retail has gone from 4% 5% to 3%. we think this quarter sales will be worse because of the move towards the internet. we think total sales will still be pretty strong. maybe 4.5%, 4.7%, still good,
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but it's weaker. something going on in the economy right now that people can't put their finger on. and we are seeing it in the margins and inventories as well. >> this is a seminal change. you talked about it first with us in august of 2013. it's a change that's here to stay in terms of the way you go about analyzing, first of all, the securities involved for the company that sell stuff. secondly, for the companies themselves. how they approach the marketplace. >> a structural change in retail. it benefits the manufacturers as well, like the nikes of the world. >> why? >> they're not retailers. they sell through retail but they can also sell through the internet. some of those guys like nike are doing well. having said that -- and brands doing well. companies doing well, not stocks, bselling well. >> retail, apparel
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manufacturing, sales growth 3%. department stores, home furnishings does better. you shoul shoes does >> macy's tomorrow. s kohl's the next day. dillards and other stores. wholesale foods is weak. apparel will be weak. a lot of these stocks seem to already be discounting the expectation that they're not going to report particularly good numbers, true? >> it's fairly true. what's happened -- these numbers that i mentioned to you came out at the end of july. the end of swrul is when the quarter is for retail.
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they reported end of august. they've all come down since then. it's really a function of what's in the stock price, and it's a function of how bad it ends up being. only if they come down more than people expect. that's not fwood for the stocks. here's the thing. this is really interesting. i have noticed a trend in the stock market itself to move at important times like this when it's before christmas, for example, to what happens in the retailers. i think the impact here is not what's going to happen to the retail or what could happen to the market as investors every day see in the "wall street journal", "new york times". >> cnbc. >> cnbc. >> a broader read on the consumer that perhaps the -- >> terrible. yeah, right, right. >> fast retailers seem to be doing all right. h & m or forever 21. >> absolutely. some people say david, how does kohl's -- it's like amazon? there are certain things affected. number one, you have the fast
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retailers like zara, forever 21. these guys are taking market share dramatically away from everyone else. they always loved big department stores. the same thing is happening in retail. very interesting. if you are using amazon in other ways than to buy stuff on-line, are you spending less time in the mall. sometimes less impulse purchasing. when you are in the mall, you think i want to buy this and that. that's not going. >> you gave us sketch arers. >> i think it's -- it's fairly high right now, and you could argue it's fairly valued. it's hard to find -- who is dol doing well? nike, footlocker. american eagle is an outliar doing really well. these stocks are going to be competing in a world that's going to have big markdowns this holiday season. the big buy is to go shopping and buy things at a big discount. >> david, always always, we appreciate your insight. we'll check in with you after
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the holiday season as well. >> thanks for having me, david. >> good thing, david. >> thank you very much, david. dow down 49 points at the moment, so that's after, of course, we have yesterday's losses. 179, 180 on the big board. art cashin is director of floor operation with ubs. what's going on? >> well, we're playing a little bit of cat and mouse. they began by testing the lows of yesterday. we stayed slightly above them. if weakness really begins to accelerate we're going to look to the area in the s&p between the 200 day moving average, which is 2064 and yesterday's low, which was 2068. for now markets can't quite seem to figure out where they want to go. what's happened was we got a delayed reaction to the good jobs number as seen through the emerging markets. friday, they were kind of inconsistent where they thought they wanted to be, but both yesterday and this morning the emerging markets got banged around pretty good.
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india and even korea past the emerging markets. people are sensing that maybe a december move is not so readily accepted, and that's why you are seeing caution and profit taking. >> interesting. i was going to suggest to you that maybe it's a subjective viewpoint, but the market didn't perhaps reprice for a december rate hike to the same extent when janet yellen was putting it on the table wednesday and then the following wednesday it's something that we're doing as a delayed reaction. are don't think they're going to hike in december. >> it could still work against them. they claim they were data dependent, and nearly five whole weeks of data to come in, and i suspect it will be somewhat weaker. >> where do you think the market will go? >> i'm -- the key here is, again, the internal dynamics. the market is taking its own pulse. if it penetrates that, then we
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could have much further weakness. we'll have to watch and see how far in markets react to what's going on, what is assumed to be going on here in the united states. we'll be critical. you've got draghi coming up tomorrow. there are reports that they're getting ready to cut rates in stem. that's going to make it very, very difficult. it shows these are not long-term investors. they are trying to scout the move of what was turning, what was been fitting from the 12% move that we had to the up side,
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and ah oh, leverage works two ways. maybe i better back out. auto in a word you believe in a sabt kra clause rally? >> i do, but i think we may have eaten up some of that in october. there's a history of that. >> thank you very much. have a great trading day. art cashin there from ubs. >> incidentally john malone, leb either global along with discovery and taking a stake in lion's gate. we will hear from the very man himself exclusively on thursday with david faber. now let's send it over to john fort and find out what's coming up next on "squawk alley" this morning. >> yes, there is a squawk alley coming up where we're talking about tim cook's declaration that the pc is dead. again, at the hand of the ipad. again, might he be right? this time also alibaba's singles day kicks off in four minutes. the stakes are high for a number of brands. all that and more down for you on squawk alley. coming up. here at td ameritrade, they work hard.
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a knack for predicting the future. reflexes faster than the speed of thought. can a business have a spirit? can a business have a soul? can a business be...alive? >> we have some breaking news concerning the federal reserve bank of minneapolis, which has just named neil -- as the president and chief executive officer of that federal reserve bank. that will take affect january 1st of 2016.
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the person who has led that bank since 2009 will be resigning at the end of the year. neil kashakari who ran the tarp program during the financial crisis will now be the chairman and chief executive -- president and chief executive officer of the federal reserve bank of minneapolis. thank you very much, sue. it is midnight in beijing, china, where the biggest on-line shopping day of the year is just beginning. it's 8:00 a.m. out west and 11:00 a.m. on wall street, and "squawk alley" is live. ♪


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