tv Squawk on the Street CNBC November 11, 2015 9:00am-11:01am EST
consumed word wide. sabmiller in miller coors will be sold to the joint venture morris coleson in order to appease veterans. happy veterans day. thank a soldier today. make sure you join us tomorrow. "squawk on the street" begins now. ♪ good wednesday morning. welcome to red s"squawk on the street"s is, i'm carl quintanilla with jim cramer and david faber. steve easterbrook is here following his company's investor day. later, jack ma, more than 12 billion in sales and counting on singles day. ma is at beijing's national aquatic center. we see him on the right where alibaba is hosting its global shopping festival. he will ring the nyse opening
bell remotely from beijing. we'll get that in about a half hour. tim farley of the nyse on the left there. mcdonald's wrapping up it's investor day yesterday laying out a performance day for last year saying it expects a pick up in sales. shares of mcdonald's hit an all-time high yesterday. joining us at post nine is steve easterbrook, ceo of mcdonald's. great to have you here. >> great to be here. >> street liked what you said. you said the words gaining traction. analysts trying to pin you down on whether we're building in q4 versus q3. you didn't go there. >> the analysts are persistent. i'll give them credit for that. we moved away from monthly sales reporting at the end of june to now quarterly. it was tempting to give everyone the inner detail. we will stick to the quarterly reporting. we signaled we could see sales growth across all four segments
around the world through quarter four which is what we achieved in quarter three as well. we could reinforce that. i did say october's trading and the first week of november helped support my confidence in that. is part of that getting back some share or stemming share losses in the u.s.? >> yeah. initially the focus on the turnaround is to win back the share we've given up. we've not been delighted with results. we have given up market share. win back in the near-term competition, as we build we will take more ioe share. in the midterm, the focus is on taking share. >> the customer wants this, they want it all day. how much does it really mean? september sales were great it just continues, huh? all-day breakfast. >> i'm glad you're enjoying is that. we launched 6th of october. so the third quarter performance we had and turning the business around in the u.s. was before we launched all-day breakfast.
a number of components to what has helped us gather momentum in the u.s. business. the most exciting one for me is customers are telling us we're running better restaurants than a year ago. we get a lot of customer feedback. activity search for customer feedback, we're running better restaurants. >> you've been adamant about not telling us what's going on with the future. you have 130 experience the future restaurants in the united states. you can tell us how they're doing versus the rest of the chain. >> we have about six test markets up now. we are gauging consumer reaction to how we can -- >> are they liking it? >> they enjoy -- what we're offering is different service options and different menu options. can we allow customers to more personalize and cust miomize th experience at mcdonald's. we give more control to customers. they love it.
>> getting people to come back to the restaurants enforce is key. a number of investors have been focused on costs. that's an important part of what you've been discussing. >> i would say we have been focused on costs as well. >> they seem they can do more. they always want more. when you talk about the $500 million number you targeted, do you think you could do a good deal more as at least some of the people i've spoken to this morning believe could be the case? >> no we stretched ourselves. that's a net savings number. we will continue to invest in the business. that will add incremental cost. the net savings is 500 million. that's 20% on the cost space. we think that's a stretch target. the right target. what we don't want do is impact our ability to grow. we do not want to disrupt the momentum in the business because that is where the greatest value creation is for all stakeholders, including shareholders. >> the reit headline yesterday. it seemed like you took pains to say it was a robust debate.
you were challenged by the board. was it a close call? was there no question this was the tact you were going to take? >> the significance of the decision warranted a real deep dive into it. we did take it seriously. the implications of it, which ever way you go were significant. when we actually had -- we got independent assessments to make sure we were objective about it as well. when you balance out the potential value that could be created versus the value that we lost over the short, medium, long-term and the disruption to the underlying fundamentals of the business, we were confidence in the decision we made and unanimous in that. >> is there a sense that you disappointed some? why did speculation about it gather so much steam over the past several months? >> are other businesses looking to monetize real estate. and in other sectors as well. when you're a business like ours, the quality of the real estate and the dynamic of the
franchise agreement is so fundamental to their confidence in the long-term, and our ability to grow together, it's a different dynamic. the decision set that we face is different than some others. clearly there's interest. there's huge value in our real estate. the greatest value is by running mcdonald's restaurants and serving more customers. >> let's talk about the increase on return in capital. you talk about low rates. from the previous one, 2013, you're doing almost double now. what kind of debt will you take down? floating or fixed? what do you think about the rating agencies downgrading you, given the fact you're refranchising, which would be a big spout of cash. >> we expected it. we felt over time that we have been on a minus, we thought triple b plus would be a good resting point. for us it was more a matter of timing. we wanted confidence back in the trading. the optics would be that
business is on track, interest rates are at that point. we got -- we assessed our capital structure. by the way, if you're buying back stock, there is -- the stock will increase over time. you want to buy at the bottom, right? >> so you're doing -- big bond deal? >> well, we'll be raising money across the world. we're raising different currencies, that's effectively where we manage our balance sheet. >> though, a year ago, stock in the 90s t might have been better to buy it then. high class problem to be buying your stock back at a higher price, but it did take you a while to get there. >> we've been buying back any way. we've been buying back through the '90s. that's been smart. the reality is the business was not in the shape it is today a year ago. it may not have been the right decision to make. it would not have been viewed for the right reasons. now we're confident in the underlying momentum of the business. we're confident in 2016. that means that the timing with
interest rates where they are, the strength in the balance sheet, and our outlook on trading, just a smart business decision. >> people want to build the argument that the new re-franchising targets, let's capital intensive, has implications for the long-term dividend payout ratio. would you wave them off of that? >> we generate a substantial amount of cash. part of the management responsibility is how do we distribute the cash we have? we will have sufficient funding for dividends as well. >> i want to talk about this -- the ethos. i see you're having a great time. terrific. >> i'm thoroughly enjoying it. you talk and say we want to be a great burger company. >> that's what we're about. >> why does the mcdonald's, the ceo of mcdonald's say we have to be a great burger company. why is it that's news you want to be a great burger company? >> many leaders across any business sometimes fall into the trap of sounding too
intelligent. i don't suffer from intelligence, so i try to keep stuff simple. we're a great burger company, all we want to do is become a better mcdonald's. we had a phenomenal run for over 60 years. i'm in position to set up the next phase of growth. that's bag being a better mcdonald's. >> we know throughput is an issue if they're doing lobe center rol lobster rolls in the northeast, isn't that going to slow us down? it's the mistakes that slow us down in the caroline, at the register. how do we know there won't be more mistakes if you go regional? >> we have simplified our menu significant to allow us to innovate and have fun, whether at a national level or regional level. customers want to be excited come in. they want to see if there's anything new on the menu. they love their favorites.
trying to keep that balance right. not making it too complex for customers but also for the team and the standards we hold ourselves accountable to. it doesn't mean we won't try new things. if we do, we have to take other stuff out of the way to clear the way for it. >> when we talk about shake shack for instance all the time at this table. headline the other day about a premium burger in the uk. is there a sense that mcdonald's needs to get fancier than it is? >> i think it's a case of balance across the menu. we serve the vast majority of the population in all the markets that we operate. some will come in who are price sensitive who will want something for a buck or two or a pound or a euro. actually as we build the business, as we improve the experience, we can also innovate at the premium end of the menu if that gives us a chance to capture a customer that would go other places, not a bad thing to do. >> jim mentions breakfast. everybody said -- you said yesterday, it's a creed to
margins. >> it sfrnlis. >> i wonder if it's something in the coffee and juice or the protein. >> both the food and the drink associated with it. we're seeing incremental purchase of the breakfast products across lunch period and evening period. it's growing margins and enthusiasm with customers. >> you threw a technological bomb out. you said there has been a hf billion dollars point of sale, but then you didn't say what you were going to do. you left it out there. you didn't give us a sense about what kind of innovation you'll do. >> what i try to do a good habit of is act first and talk later. as we land these things, i'll be the first to come forward and excited i will tell but it. watch this space. we have deep ambition to help make consumer's lives more
convenient and more fun in the way they interact with mcdonald's. >> curious on your view on wage pressure as we move into an election year. it being on the agenda in a lot of states in terms of minimum wage requirements. is that built into your model? could you get a surprise at some point that things move up more than you anticipate? >> it's built into the model. we've seen this trend over time. as the company in the u.s., we made the conscious decision on the 1st of july to go a dollar above the local minimum wage for company employees as well as training programs, other opportunities that develop. our operators are absolutely expert at managing their local pay scales, they're independent operators. they set that themselves. is there information along that line along with healthcare? yes, it's tough. that's why we have to get the top line growth to absorb
increases, and owner operator cash flow growth. >> can you envision setting a floor, ala walmart for employees? >> we only make those decisions for the company-owned restaurants. our thing has to be to go a dollar above local minimum wage. we have seen a reduction in crew turnover. gives us more stability in the restaurant so we can have a better customer experience what was initially an investment, we're beginning to see the early signs of that. it's helping us run the restaurants better. >> when i talk to the people at chipotle which was started by mcdonald's, i was surprised to hear that when you started talking about embracing some of the sustainability initiatives, that they're in favor of that what they told me was that if you guys decided that you wanted the food chain in this country and around the world to get better, you could do it yourselves. you're that big. how about a five-year plan right now to be able to make it so
that we are natural and organic this country and that our farmers know that's where we have to go. you can control that more than the department of agriculture, more than the pentagon, more than any country. do it right here. >> well, one of the fun responsibilities we have is our impact on society in all areas. so, take up your challenge, you may have seen me eventually make the announcement to go to cage-free eggs in the u.s. the cage-free egg market is not developed enough to meet our demand. we order over 2 billion eggs a year in the u.s. so it's going to take us ten years to get there. what's really important, the underlying point in your question is important. when mcdonald's signals they'll make a change like that, industries will come with us. we believe we can be a force for good. we do have that ambition to do so. >> so many of your restaurants are franchised, even more will be. prior to your arrival there was some frustration to put it mildly on the part of the franchisers with management in
terms of the complexity of the menu, things of that nature, the cost structure. how would characterize your relationship at this point with your key constituency? >> it is a key con cities wency. our owner/operate othors are wonderful. that's an animated bunch. they help us make better decisions, we help them make better decisions. we have had a lot of robust conversations. part is how can we simplify the business in order to grow, how can we get their alignment? the best example is how are they now? when we took the all-day breakfast promotion or decision to the field to get the operator vote, we got a 98% approval. and that is unheard of in mcdonald's. that's an aligned group that carries through to the way we execute in the restaurants and hence for the customer's benefit. i would also say we took that back to the field now, i think we would get more than 98%.
>> really? >> yesterday you referenced the half billion or so that's gone into convenience, food service delivery in silicon valley, were you hinting at some sort of uber for mcdonald's? >> what i'm hinting at is traditional industries are getting transformed whether it's hotels, all sorts of travel, supermarkets. and we should not be blind to that. so, yeah there are delivery concepts now which are changing peoples eating habits. can we play a role in that? are we already testing delivery concepts? we have a bigger than billion dollar delivery concept in asia at the moment. the business model works out there. not so easy to transport here. we have a lot of deep knowledge in how we can serve customers. >> we want to have this, i want to order it. i don't want to be in that same window as everybody else. i want to cut the line. let me cut the line being a
preferred mcdonald's customer. we are building up that program. initially we launched our -- >> can i be a member of the pilot project? >> if you download the app, we launched our global mobile app. we will start to offer more ordering, more payment options, more loyalty crm, a whole heap of fun with it as well. we do have access to lots of fun assets that we can share with customers from sport, film, the rest. >> last one, mozzarella sticks? >> yeah. >> was there a cry out for mozzarella sticks? >> it's amazing. you can have four, five hours worth of presentation on investor day, that's the headline. >> yes. >> a number of regions have been testing them. they do sell well. just watch this space. maybe early in the year. >> steve easterbrook of mcdonald's. almost a 20-minute interview on set. thanks. >> pleasure. when we come back, alibaba's jack ma will join us live from beijing to talk singles day, online retail, shattering sales
records, and what he's saying about the chinese economy over the next 5, 10 months. look at the pre-market as we get this wednesday underway. (vo) what does the world run on? it runs on optimism. it's what sparks ideas. moves the world forward. invest with those who see the world as unstoppable. who have the curiosity to look beyond the expected and the conviction to be in it for the long term. oppenheimerfunds believes that's the right way to invest... ...in this big, bold, beautiful world. at ally bank no branches equals great rates. it's a fact. kind of like ordering wine equals pretending to know wine. pinot noir, which means peanut of the night.
anheuser-busch inbev has formally agreed to acquire rival sabmiller for 106 billion in cash and stock. this will bring about a brew their will control one-third of the world's beer, and sab will sell 58% in molson coors. we have a lot on both the deals themselves. first, timing-wise, it's going to be some time until the big deal closes. you won't get the little deal, as in the $12 billion purchase of the 58% stake in joint venture closing until the big deal closes. both are some time away. a couple quick things to share. on the miller transaction, on the sab's 58% sale to molson coors, they're talking about it being at only 9.2 times in terms
of the multiple to ebita. they say the 12 million is well within the speculated range. they're makie ing it seem as thh they're not paying as much as people thought. there's a big tax component that had not been factored in the synergy numbers a bit less than people anticipated. the headline multiple, 11.5, with the tax benefit, 9.2, with the synergies, 7.7. you get the spin. we'll see how molson coors performs. that had been a key way people were planning on playing this deal all along, jim. >> absolutely. >> when they thought it was possible you would see the big deal. as for the big deal itself, better than expected synergy numbers come out. >> yeah. they're talking 1.4 billion at least by 2020. also the cost saving targets at sab went up. we'll see how that stock reacting. ab inbev how that reacts to a
higher synergy cost saves number coming out of that company. >> the scale of something like this is incredible. they can go to the can companies and say this is what we'll pay now. the can companies have no choice. like mcdonald's with food, these guys own their food chain now. they can dictate terms. everybody, advertising, tv, whatever. >> the company itself is going to be enormous even with investors. 64 billion in revenues. 24 billion in ebita. one of the largest consumer companies in the world. i should mention, molson koor al coors will do an equity raise as a result. when they hit the market? probably not until '16. keep that in mind. they will try to stay or they plan on staying investment grade at molson coors. you have the huge deal and then a $12 billion deal that's a part of it. >> incredible.
good for everybody. >> yeah. >> i would buy any one of these. >> you would? >> you all right? you wolfed that thing down. >> enough of that here's what i think about the deal. i don't think that equity deal will come this low. >> maybe it won't. >> i think the equity deal comes higher. that's how great this is for tap. >> all right. >> when we come back, the tally keeps piling up for alibaba. billions of sales on this singles day. a live interview with executive chairman jack ma. we'll get cramer's mad dash in a moment on "squawk on the street."
a few minutes time. as alibaba not only does a billion in gmv in the first eight minutes, but possibly could be 13.8 by the time we're all said and done. 50%. much more than some people were expecting. >> they were at 9.3 billion last year. >> holy cow. >> well above 13. >> we'll see what they get to. they still have 2 1/2 hours. >> it's like a telethon over there. >> that's exactly what it's like. we're about three minutes from opening bell here. let's get to our mad dash. >> david, i need your help on this. >> i'm here for you. >> apache. >> yep. >> typically we have these stories where we hear there is a takeover bid. we get the takeover bid, there's haggling. david, apache, they got apparently a bid. the bid walked away. all within the con type fines o
rules? are you allowed to do that? >> anadarko said we made a bid to apache, we had no real discussions of any significance. they rejected us, that's the end of that. >> if i'm an apache shareholder, i might have liked that offer. >> the question is why did anadarko put the release out. stock was down yesterday, because of reporting on this possible bid. they may have wanted to reverse that. they succeeded in doing so. the other question, jim, why were they making the bid in the first place? >> right. >> you tell me, when i mention anadarko, tell me what comes to mind? >> okay. >> what's the name that comes to mind? >> when they got in trouble with bp and transocean, they were a quarter of it, it was a poison pill. it acted like poison pill. stock went down, down, down. i felt if they got that clear,
exxon would bid for them. i always thought it would make so much sense for exxon to do it. >> i don't think you're alone. this thing raises speculation, none of which i can confirm at all. were they in some way acting defensively because they think exxon might be there? i don't know the answer. they made some changes to mare bye laws. made is harder to get the director directors to call a meeting. just a few things there. interesting goings on. apache down because doesn't look like there's a chance there's going to be a deal. anadarko up after being down yesterday. but the real question, why did they choose to come public with it? are they trying to put pressure on apache shareholders to reengage? why did they do it in the first place? was it defensive or were they playing offense? >> i have to tell you. apache used to be dramatically higher. apache shareholders suffered it would have been amazing to put these two together.
they would have gone up. that's what we need in the oil patch. a little more togetherness. >> more togetherness. >> two drunks holding each other up. >> the opening bell. the s&p at the bottom. at the big board, as we said, ringing the bell from beijing, alibaba's jack ma, ceo daniel zhang, and tom farley celebrating singles day. the annual global shopping festival on 11/11. we'll talk to ma momentarily. over at the nasdaq, over 60 companies supporting veterans hiring initiatives. some encouraging data out today about the unemployment rate for veterans of iraq and afghanistan. in some cases better than the national average, which is a beautiful sign. >> yeah. it makes so much sense. we had the cadets, a salute to veterans yesterday. these people -- who has more decisionmaking under fire? certainly not some guy in a
regional office. >> organizational, discipline. you name it. >> we have not gotten to macy's. busy morning. the miss, the revenue miss, the guide lower. missing the comp guide by 400 basis points. we heard terry lundgren on "squawk box" this morning. customer has not come back. has not come back for apparel. >> bad for real estate. they point blank said no to delivering alpha. david, now 30 points below where we heard they might do real estate. 30 points below. >> that was a monumental nondelivery of alpha. >> look, he's speechless. >> not just because of the mcmuffin? >> they see q4 comps down two to three, last year it was up by that amount. >> warm weather, because of that. who even wants to look at an overcoat. the flagship store is unique.
but i think jcpenney had a decent number. people will draw conclusion that macy's is losing customers to jcpenney. i have wayfair on, leonard w. not a small thing. wayfair reminds you that amazon, everyone is nipping, nipping, nipping at macy's. >> this is a 10.5% decline at a stock that is at a two-year low. >> because -- >> what happened here? macy's was the star? suddenly somebody shut it off? >> jcpenney came back on line. target came back online. a new ceo at target. amazon. these shoes i'm wearing now, okay? they're available at mace sy's, bought them at macy's, much less on amazon, so i had them delivered to my door. the american consumer is -- amazon goes up pretty much every day. big price target increase.
>> to 800. >> yeah. when you think of amazon you think of macy's. macy's once again is trying to figure out it's -- it's omni channel. so, i think they have to invest more which is the kiss of death. everyone hears a company has to invest more for earnings. and there was hot money in this thing. people who were hot moneyish were seeing if the cfo agreed with them. clearly not the case. >> move towards a real estate transaction. >> cowen looks at short interest on retail names. climbing into october. they charted out anf with the highest and tjx with the lowest. >> had berman on yesterday. >> he was negative on the earnings season. >> yet when i was at that homegoods, the lines to get the stuff for thanksgiving, david, don't even go there. don't go to homegoods if you're getting stuff for thanksgiving dinner. >> do you know what home goods
is? >> i do, actually. yeah. i do. i've been in one. >> you've been in one? >> i have. >> they have the best stuff. tjx has been the one. she's been the one figuring out the american consumer. now people will start saying has macy's lost touch with the american consumer? i don't think they have. i have to tell you the stock is saying stay away. it's getting cheap. >> cheap? cheaper than i thought. there was a body language thing from a great american retailer. >> inventory, up five. the plan is down three. you're not -- are you excusing because of the weather? is that -- >> no, you can't. you just can't. it's a competitive world out there. it looks like they missed it. to excuse them is to say that ellison -- jcpenney is not doing
right. and that cornell is not doing it right. i think we'll see kohl's not be that strong either, but others are doing better. my father worked at gimbel's, macy's wiped them out. it was not the weather. >> amazon, $313 billion market value, new high. facebook above 300 million. one of the largest companies on the planet at this point. just -- >> google, microsoft -- is amaz amazon bigger than exxon? may be. not quite. >> the note on the price target, this amazon web services -- we should be running your documentary all the time. i'm not kidding. you don't realize -- >> then somebody might actually watch it. >> my father and i watched it over and over again. >> i know he did. >> my father said slave labor. david is talking about slave labor. i said no, dad that violent late
13th amendment. describe it. they pick towns -- >> where there's obviously a lot of people who want to go to work. they pay halfway decent wage. they work them extraordinarily hard. those warehouses. when you're ordering and clicking, somebody is still going and running around a warehouse 13 miles a day. >> i got to tell you, it's working. it's working. >> big piece in the "washington post" this morning about a robot who will go down the aisles and scan skus, manage inventory by its. like a roomba. go up and tell the managers what they need to stock, don't need to stock. amazon highly robotic. >> the only thing with the robots, they can't -- scanning through something, picking it out, they haven't been able to perfect that yet. by the way, to the larger issue of jobs, when they do and get to that kind of point, these things are fully automated, there's a
lot of other jobs that go away. always -- >> no feelings. they have no feelings. >> those robots. >> robots have no feelings. they don't complain. i won't be doing interviews with a number of robots. >> that could be us. >> are they hurting themselves? back hurt? they don't care. >> ail i ordered a book yesterd. three other books. yeah, i have to get that book. with kl, bought that book. downer. terrible -- sad, sad, horrible book about the concentration camps. they have three others that are exactly like that. it's like netflix, when i got that. i asked them for help on the final days of berlin. world war ii. they have four other movies. this is -- it's genius to get inside your head and predict what you want. netflix does it. amazon does it. i always do what they tell me. i, too, am a robot. apple meantime, speaking of technology, the ipad pro reviews
are out today. not over the moon is the headline. graphics people will love it. i'm sticking to my ipad air. also apple music available for android devices. stock down for the third day. >> skyworks solutions announcing a buyback. they're tainted by the apple call from credit suisse and now this luke warm notion that apple lost momentum. how could skyworks, corvo and cirrus logics say things are terrific? india could get single store status and start opening apple stores in india. a lot of people want that. let's ask jack ma it looked like the apple phone sold well. on the one hand people saying apple not doing well. on the other hand, customers buying it hand over fist? how do we rationalize it? >> i don't have the answer. it's a good question. i look forward to coming to
terms with it. you do seem like a robot right now. freaking me out. valeant is up, joe -- >> joe? joe? joed me? he joed me. >> i don't know what i was thinking there. i was having a flashback to 1999. i got to go. that's a bad flashback. >> stop it. gave me hair for a second. >> valeant up? >> for how long? >> 12 cents. >> let me take a selfie of that. still a key to the market or not? >> yeah. look at horizon where xpress scripts is having a fight with horizon pharma saying we're not accepting some of your formulations. there's a wholesale rebellion in the chain, you know who the winner is? >> who? >> brent saunders, allergen. brent saunders, those are worlds
colliding. >> it passes. valiaeant is down. >> you had to say something. >> pfizer, no update on where they stand with merger negotiations. some think they want to move this as quickly as they can. avoid political firestorm that might be ignited as a result. >> firestorm? >> of this massive inversion. that said, they're going to fit 40%. we'll see. >> seem done me. >> speaking of retail, which we have done this morning with macy's and amazon. another big retailer over in china, alibaba. it's broken its own sales record for singles day. it exceeded last year's 24 hour total of $9.3 billion in half the time, sales at 13.3 billion dollars for their big 11/11 promotion. eunice yune is live in beijing
with jack ma. take it away. >> thanks. the chinese consumer today greeting each other with the question, did you buy? the transactions are just amazing. massive, massive numbers. as you had said, the chinese post office expecting 760 million parcels to be shipped out today. alibaba alone has already seen over 430 million transactions on its sites. i don't know if you can see the board behind me, it's $13 billion in sales. that's already a record. of course the man who has done it all is here with me now, jack ma. the executive chairman. congratulations on singles day. >> thank you. >> big question, what do you think the numbers from singles day are telling us about future growth for alibaba?
>> yeah. i think it's -- i would not say it symbolizes the future growth of alibaba, but definitely symbolizes the future growth of china economy and china domestic consumptions. china has a huge potential of domestic consumptions. he would believe in 15 years we will have a half billion people in middle class. we believe the demand for high quality products is huge. singles day allows us to do something. >> at the same time the economy is slowing down. what is the outlook for the chinese consumer as the economy slows down? >> i think the economy slows downs because of the traditional way of exporting and investment is getting slowing down. and a lot of business rely on these two methods, exporting and
domest domestic -- investment of infrastructure. domestic is always a big headache for china in the past 20 years. today because of the internet, because of e-commerce we are getting us out of that. i think today we see the demand is there. the opportunities, the potential is there. we are lucky that we are the company to be the first engine of that economy. >> jack, some of my colleagues are going to be jumping in now from the nyse. >> thank you. >> jack, it's david faber, good to see you. sorry we're not in the same way. appreciate your joining us. jack, on the economy, there's been a focus among some people on the crackdown in china on broadly speaking corruption. welcomed as it is by many, it does seem to have an impact on economic activity and ostentatious displays of wealth. do you see that in your
business? do you believe that crackdown is depressing economic activity? >> well, i think china is taken firm stand on anti-corruption. i think it's good for china. china in the past 30, 40 years grow so fast. a lot of things coming with it. i think that this current leadership of the government, doing the right things. only the china economy is clean and transparent way. the china economy can be sustainable. i believe the next 515 months will be tough for china there is reasons. the anti-corruption has some effect. next 5, 10, 15 years for china economy should be good. will be good. >> setting the stage for growth. let me follow up on that. you mentioned it you mentioned it when you spoke to the local media. you've been saying chinese economy could face big problems
in the next 5, 10 months. how big are we talking about? you are expecting a significant decline? >> i don't see there's a significant decline because the government realized, the business realized, all the people realized the situation we're having now i think 7% of growth of china is still reachable. even 5% or 6%, even a 5% or 6%, this economy is still big enough. i think the problem of china is we have to know it's not -- it's impossible to keep growth of 8%, 9% every year. the problem is how we can make better use of the money, the 5%, 6% in the right way, in the right area. in the right field. i think next year -- this economy is transforming. so, what we see is next 5, 10 years that china should pay much more attention to the quality
instead of quantity. if we pay attention to quantity, the environment will be terrible. even if you work hard, this 9% can never sustain. >> jack, a year ago i was with you, $9.3 billion in sales for singles day this year it's going exceed 13.5. you also increased your user base from, i think, 307 million a year ago to 387 million now. how much higher can that go? you mentioned the growth of the middle class. you know what will it be a year from now or to your point 5, 10 years from now? >> well, i think 810 years ago when i came to the states, the silicon valley, i said one day china internet users will be bigger than america. people did not believe that. i said china internet users, mobile users will be biggest in the world. people said, wow. today our users, active users of alibaba online shoppers are bigger than american population.
today most people still like 20, 25 years old. we believe ten years later, when they are 35 to 40 years old these are the people breathe the internet, drink the internet, move everything on the internet. we think the number might go to 600 million, 800 million. people who are spending money on that will be each person, will be much higher. by the way, i think based on the one road policy, as we think one internet policy, we want to serve 2 billion people all across the world. we're doing globalization, not only china. that's why we are in a lot of nations, we're in europe, we're in southeast asia, and india. i think we want to use our model to serve more people. serve more small business and consumers. >> jack, jim cramer. it looks like unabated demand for nikes, for apples, anything
apple. you're able to see what is being bought during this singles day. how are american companies faring in their goods in the last 24 hours? >> well, i think, you know, the good products -- not cheap products, good products, high quality, even very expensive, people buy all of them. you see the slowing down in the late afternoon because most of the manufacturing, most of the shops, they stock enough products. even that, they still sold out. and i think the apple, nike, the brands, the companies in the states and europe, they're excited. a lot of customers. they have to prepare for next year. >> jack, you and i -- it's david faber again. you and i spoke extensively a year ago, also in chicago in june about the other challenges facing china. one you focus on all the time, the environmental challenge.
is there progress being made in your country at this point? are you still perhaps disappointed with the lack of progress on that front? >> well, i think this problem has been there for years. so, it's impossible to solve the problem within one year or several months. the thing is china is aware of that. the government, the people, the business. the government is taking efforts, we are taking efforts. that's why apart from my job as an e-commerce company, i spend a lot of time doing -- telling people, xlcommunicating with people, working with paradise foundation, i think hundreds of thousands of people in china really worry about it. they make actions. i'm confident in three, five years we will -- i said if china has the apec brew, we should
have a brew every day. this could be done if it has been done before. >> jack, something else we talked about a year ago, certainly, that got attention was -- at the time at least you seemed to be somewhat frustrated, if you will, with being the wealthiest man in china. it seemed to be a weight on you to a certain extent. i'm curious, you've been buying a lot of real estate lately. you've been putting that money to work. you bought -- 28,000 acres here in new york state, thank you, in the adirondacks. i think it's reported you spent another $193 million for property in hong kong. is it making you happy buying all that real estate? why are you doing it? >> well, i'm happy about buying big land in north new york because this is something that i'm passionate about protecting the environment. especially such a wonderful forest there, wonderful
freshwater lakes. i learned the story about the area last century, in new york, a lot of pollution. but america made this thing clean. i bought that land. i wanted to learn the history, how american people make that thing happen. what china's people can learn from that. this is what i bought the land for. i'm happy about that. in hong kong, i bought the land because i think i need -- some day i also would love to stay -- when i get old -- as i said again and again, my business, my job, i was a teacher. i'm a teacher. i was a teacher. and my job is to train and develop young people. i want to make young people have more opportunities. so, i want to retire early. not because i want to enjoy life, but i want to give this opportunity of running the company for those young people. by the way, if i have to retire, i have to prepare for retirement
life. buy something. it's a way to prepare for my future. >> finally, jack, back to the day itself. very successful, of course. the numbers keep rising on singles day. does it have an impact of pulling forward sales that would otherwise take place? >> no. i don't think it's -- people challenged me. i also realized on the meter people said why on the one day? it might be squeezing all sales. we don't believe that. the potential is huge. we just are testing this day to test our payment capacity. yesterday we crossed 869 -- 86,08 86,000 transactions per second. so the transaction capacity and logistic capacity, operation
capacity of that, we need that capacity for ten years later. also, by the way, if we have a bad product, we wiould not sell more today. if our logistics could handle, we could sell more today. >> thanks so much, david. just one more question from me, jack. i understand that you want singles day to become a global event. at same time a lot of luxury brands, such as keurig are concerned about the number of counterfeits across your site. do you worry those concerns can get in the way of your global ambitions? >> am i still online? i don't hear it. >> that's the question from me. >> this is a big challenge. we had the challenge in the past 15 years, we are dealing with this every day. i would say in the past 15 years, i had a lot of meetings. there's only one meeting i never
be late, never cancel. that's about anti-ip or counterfeit products. this thing has been there for almost 30 years in china maybe longer. the war is fighting against human nature. so, we have been working with a lot of branded companies in europe and america. what we need is we need people who really understand the business, know how to fightcoun. now we are 30% less about counterfeit problems in china. with the technology we have, we can chase who's selling, who's buying, who's manufacturing. last year working with the china ministry of police we arrested close to 500 people. we will continue to work. i think f we are not the best,
we are the largest troupe in fighting against these counterfeit products. i will continue to work. give us some years. give us three, five years, we will give the world a wonderful response. good result. >> thank you very much. >> thank you. >> that was jack ma, executive chairman with alibaba. david, over to you. >> all right, thank you very much. our thanks to jack ma as always. very nice to have him whether it's thousands of miles away, here on set, or me being over there. he's always an interesting man to speak to. >> she's a big thinker. always come back thinking -- he wants to be the heir to rockefeller, carnegie. he just thinks about american iconic great americans, and wants to imitate them. such a capitalist. >> he is. he is a capitalist. long-term thinker, of course. you heard his comments on the short-term economy. that does seem to have perhaps
pressured alibaba stock's price to take it to the here and now. >> with that said, he's always been thinking about the longer term. we saw so many times how he wants his company to extend through three different centuries, the last one, this once, the next one. >> what was the high for alibaba stock? >> a year ago around today. >> singles eve. do they call it that? >> mm-hmm. 120? >> 120. >> 120 on singles eve, the day before singles day. put -- the algorithms are programmed to seat belt stock. >> that's quite a distance from here as we see behind us. 40 bucks below that high. interesting, amazon is well above that now in terms of market value. there was a time they were -- >> amazon all-time high today as macy's and nordstrom are at 52-week lows. >> macy's, everybody is buzzing
about how do you get that back on track? whether there's something really wrong there. i'll spend a lot of time on that today. >> what's on "mad" tonight? frnlg>> our friends at citron w say not a battleground, wayfair. friends at citron, you like that? we have friends everywhere. zebra had a disappointing quarter. the bar code. and robert ward. radius the best osteoporosis drug. wayfair, don't know if you used them. i used it for furniture. very popular. some people feel the stock is over stock. >> one of our favorite charities, lulu and leo, one of
the items for auction? >> dinner with me and my wife at bar san miguel. you can bring a bunch of friends. i want people to read what the cause is. even if they don't want to contribute and bid for dinner, they understand this is something worth contributing to. >> charitybuzz.com/supportlululeo fund. >> hgood hour. >> yes. >> we should do this more often. >> jim cramer, "mad money." when we come back, hany nada. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that.
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get interest-free financing until 2019 on tempur-pedic. plus, helpful advice from the sleep experts. but mattress price wars and this special financing offer - ends sunday. - ♪ sleep train ♪ your ticket to a better night's sleep ♪ good wednesday morning. welcome back to "squawk on the street," i'm carl quintanilla with david faber, simon hobbs. markets relatively flat action as we get disappointing numbers in retail, ie macy's. retail sales in china come in okay. looking at copper at a six-year low and the dollar maybe set for correction. >> huge day today with alibaba and mcdonald's ceo ps.
tomorrow, we have john malone from the company's investor day. >> right to mcdonald's, steve easterbrook speaking out on this show earlier about the decision to increase the dividend and share a buyback plan. >> we've been buying back any way. we've been buying back through the '90s. that's been smart. the reality is the business was not in the shape it is today a year ago. it may not have been the right decision to make. it would not have been viewed for the right reasons. now we're confident in the underlying momentum of the business. weir confident in our plan force 2016. that means that the timing with interest rates where they are, the strength in the balance sheet, and our outlook on trading, just a smart business decision. >> big deal when you have a company of this size increasing the three-year cash target ending '16. didn't seem fazed by s&p's
decision, called it a nice resting point for the company's balance sheet. tried to pin him down on how comps are coming in for q4, all he'll say is they're positive. definitely trying to underpromise and over deliver. which he's taken six monthses before he wanted to start talking about things, carl, in terms of focusing on the operations of the company. to his point, getting the main things going in the right direction, the top line. >> and reinvigorating the franchisees. the reit has been ruled out. i guess that's yesterday's news. that's where the animal spirits lie within the business, the franchisees. he says they're excited. who knows. if he have reinvigorated them, that's where the top line growth will come from. it's interesting that he's telling the story for the first time in a long time for mcdonald's. that in itself will make a difference. >> franchisees, as he called it, a spirited bunch. not always easy to get on the same page, convince them to make
capital improvements to their restaurants. in the case of all-day breakfast is stemmed from a group of franchisees in san diego who said we'll do that. it resulted in the rollout now that he said is not just about beverages, people ordering breakfast all different parts of the day. >> i think he said 98% of the franchi franchisees approved of that plan to go all day breakfast. a high level. though he says he thinks it would be 100% now. to your point earlier, they are buying back, increase in the buyback, in the dividend, increase in the leverage on the balance sheet. all of which they were push dodd to a certain extent by investors who said they were not properly capitalized on the balance sheet and not using enough leverage. moving in a lot of the right directions. he comes back to the main-point, you have to get the business
moving in the right direction. >> stock hit an all-time high yesterday. >> not bad. an hour -- less, actually, about an hour left in alibaba's singles day. the company earning over $13.5 billions so far. we talked to executive chairman jack ma about china's overall economy. take a listen. >> i don't see a significant decline, the government realized, the people realized the situation we're having now. i think 7% of growth of china is still reachable. even 5% or 6%, even -- even at 5% or 6%, this economy is still big enough. i think the problem of china is we have to know it's not -- it's impossible to achieve 9% every year. the problem is how we can make better use of the money, the 5%,
6%, in the right way, the right area. i think next year-this company is transforming. what we see the next 5, 10 years, china should pay much more attention to quality instead of quantity. if we pay attention to quantity, environment will be terrible. even if you work hard, 9% can never sustain. >> jack, a year ago, of course, i was with you. $9.3 billion in sales for singles day this year it's going exceed 13.5. you also increased your user base from, i think, 307 million a year ago to 387 million now. how much higher can that go? you mentioned the growth of the middle class. you know what will it be a year from now or to your point 5, 10 years from now? >> well, i think 8 or 10 years ago, when i came to the states, the silicon valley, i said one day china internet users will be
bigger than america. people did not believe that. i said china internet users, mobile users will be biggest in the world. people said, wow. today our users, active users of alibaba online shoppers are bigger than american population. today most people still like 20, 25 years old. we believe ten years later, when they are 35 to 40 years old, these are the people breathe the internet, drink the internet, think the internet. move everything on the internet. we think the number might go to 600 million, 800 million. people who are spending money on that will be each person, will be much higher. by the way, i think based on the one road policy, as we think one internet policy, we want to serve 2 billion people all across the world. we're doing globalization, not only china. that's why we are in a lot of
nation. we're in europe, we're in southeast asia, and india. i think we want to use our model to serve more people. serve more small business and consumers. >> jack, jim cramer. it looks like unabated demand for nikes, for apples, anything apple. you're able to see what is being bought during this singles day. how are american companies faring in their goods in the last 24 hours? >> well, i think, you know, the good products -- not cheap products, good products, high quality, even very expensive, people buy all of them. you see the slowing down in the late afternoon because most of the manufacturing, most of the shops, they stock enough products. even that, they still sold out. and i think the apple, nike, the brands, the companies in the states and europe, they're excited. a lot of customers. they have to prepare for next year.
>> jack ma from alibaba speaking to us live from beijing within the last half hour on the program. for more on alibaba single days headline success and what investors should be focused on now, carlos kershner joins us the number one alibaba analyst. welcome to the program. >> thank you for having me. >> why is the stock down today? >> it's hard to tell what expectations were. i think people are still trying to take stock of what singles day will mean. what's the situation in china, and how it plays in the next several quarters. >> the interviews as the guys conducted and and he replied is all about the macro situation is that what moves the alibaba stock? despite the rallies out of the august lows, you are still down a third of the market cap this year. >> yeah. i think the market situation will move up china stocks, with
them alibaba. on the fundamentals, macro is less important for alibaba than other china what matters are the fundamentals, consumption. and consumption in china is doing quite well. we'll have to wait a few quarters to see this play out. the consumption driving from e the -- the macro disappointing, in a few years this will probably clear out. >> there's no doubt about it, the chinese consumer is getting stronger. alibaba is at the helm of that. >> it's a very, very important part of chinese consumption. becoming larger and larger. the infrastructure in china retail infrastructure in china
is much poorer than what we very in the united states. thousand of villages in china have no stores. some have one store with very few skews. alibaba is helping china leapfrog what is happening in the west. the e-commerce will be a much larger component of chinese consumption than it is of western consumption. >> carlos, we didn't talk to jack ma about it that much. he made one reference to globalization. these are the cornerstones of his view of the company longer term. ize globalizing it and beyond shopping, watching movies on alibaba and other things. do you think both of those are efforts that he will succeed at? are they important to how you view the company's long-term prospects? >> they are different. i think globalization has two aspects. one is to bring, you know, foreign products, foreign brands
into china i think that will succeed as the chinese middle class increases, western companies already use the mais l to sell to chinese consumers. i'm less optimistic about their ability to expand internationally in the broad sense. they can sell chinese goods, but those are mostly in growing markets. they don't have an upscale play in the united states or western europe. >> i'm sorry, carlos. carry on. >> on your second question, which was the portfolio of products and services, all the investments, this is the largest internet company in china. it is in the middle of a revolution. if you look at the internet companies in the west which arguably have fewer, they are investing a lot. it's the right answer for this business to be investing in new
opportunities. they all have about 400 milt li users at the end of the quarter, they have a strong partnership and ownership of the largest online payment platform in the world, alipay. they are investing -- probably have the largest cloud business in china, similar to amazon, of course the largest internet company in china should invest in different areas, the question is will they invest widely and succeed? given what they accomplished to date, they should be given some benefit of the doubt. >> your price target on the stock is 110, $30 upside. carlos, we have to leave it there.kirjner joining us. coming up, the ipad pro
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last night in milwaukee for the fourth gop debate. our chief washington correspondent john harwood joins us on set about who won and who lost. >> i don't think we saw anything that changed the trajectory of the race that emerged after our debate a couple weeks ago which is marco rubio and ted cruz both ascendant in the race. you saw it in a couple
exchanges. first, here is marco rubio rebutting rand paul who went after him on levels of military spending, on entitlements and foreign policy interventions. >> i do want to rebuild the american military. i know rand is a committed isolationist. i'm not. i know the world is a strong and better place when the united states is the strongest military power. >> marco -- marco, how is it conservative to add a trillion dollar expenditure for the federal government? >> are you talking about the military. >> how is it conservative to add $1 trillion in military expenditures? you cannot be a conservative if you're promoting new programs that you can't pay for. >> rand paul may think you can't be conservative and do that, but republicans are a pro defense party. it appears marco rubio got the better of that exchange.
you saw jed bush again on the round side of an issue with conservative primary voters on immigration when he criticized donald trump's proposal for sending 11 million undocumented immigrants out of the country. >> 12 million illegal immigrants to send them back, 500,000 a month, is just not possible. it's not embracing american values. it would tear communities apart. it would send a signal that we're not kind of country that i know america is. even having this conversation sends a powerful signal, they're doing high-fives in the clinton campaign right now when they hear this. that's the problem with this. we have to win the presidency. >> i want go back to the discussion we had a minute ago. you know, what was said was right. the democrats are laughing. because if republicans join democrats as the party of amnesty, we will lose.
>> why was that effective for ted cruz? donald trump built a front-running candidacy on that issue. he is counting on trump to erode in this race and inherit that group. >> we know the debates are getting all kinds of scrutiny, we're testament to that. is that going to continue on the democratic side as we go to cbs? >> sure. i think all the moderators are under the gun now, as you noted that we've experienced that. fox took a low-key approach last night. they didn't challenge the candidates in ways that caused the candidates to rebuke them except in one or two times. democrats are going to have that sa same -- democratic moderator will have the same skrcrutiny. >> the big money backers, their aim is to win the white house. they'll listen to what jed bush
has to say on immigration with great intensity. how does that play out? what the primary voters desire, what they feel is a hot button issue, and what on immigration grounds may win or lose them the election next year? >> they'll make a practical choice. the donors bet heavily on jed bush, he hasn't done well. you never know. he still has $100 million through his super pac to put on pe television, but they now have marco rubio the favorite, even though he has less than half of the support of donald trump and ben carson? >> because of the immigration issue? >> in part. >> because that's the way you can win the middle ground? >> because of appeal to la teti, the immigration issue.
>> going through all my different press releases, having to do with the big beer deal, which got officially signed. you know, it appeared, of course, a few weeks back when they announced their deal, that being amb inbev's deal to acquire sabmiller for about 105 billion, 106 billion in cash and stock that it was done then. they had under uk law, took a while. now we have a definitive
agreement and another large deal that goes along with it. something that had been widely rumored and reported on, but now inked. the sale of the 58% ownership in the joint venture between molson coors, and sabmiller. molson coors will pay $12 billion to buy out that 58% economic interest. 50% voting interest in that joint venture, which sells miller all over the place, in the united states and actually has some global parts of it as we well. the multiple they're going with on that deal is 9.2 which would seem to be very, very low. they are including, of course, the tax benefit that people had not been figuring into of 250 million bucks spread over the next 15 years. or i should say 2.4 billion overall in net present value tax benefit. the synergy numbers were lower. molson coors is up a bit. also going to be an equity offering from the company at
some point in the not too distant future. all they said was 20%, 25% of the purchase price they will fund through issues of equity. they also will be issuing debt as you might expect and levering up their balance sheet as a result. they intend to remain investment grade. people seem to be applauding that deal. as for the big deal, they seem to be applauding that as well. when we got the release this morning we did seem to get cost savings and synergy numbers that were a bit above what had been anticipated. let's look at shares of ab inbev. i was looking noor particular piece of paper. it's escaped me. molson coors up as well, responding positively to the deal. the terms are the same as they were reported when we first heard about them reaching agreement. almost a month ago at this point. it will create a behemoth around the world. china remains an important component of this. will they get trust? how long will that take? you won't see any of these deals
get inked until quite some time. 64 billion in revenues. 24 billion in ebita, up there with the likes of all the huge consumer global brands. it's a big one. >> 105 billion? >> yes, the purchase price also puts it up there. >> thanks. for a sixth session we're finding it difficult to get traction on the market to the upside. let's get more detail on that. bob pisani joins us from the floor. >> we lost momentum because of oil. put up the oil names. oil dropped below $45. has been in the $45, $50 range. when that happens, you get pressure from the usual suspects. the energy sector the weak department. let's talk about china internet. alibaba down a bit. ctrip, had a good year, e-commerce travel services, they had a good year overall.
that's up, baidu fractionally the side of positive. and soufun, a real estate and home furnishes site also on the upside. you can own that. there's a whole chinese eco structure. the kraneshares china internet, kweb, that's one of them. the biggest holdings are alibaba and tenset. a mixed bag on the economic stats on china. traditional china, industrial product shun up 5.6%. that was disappointing. october retail sales up 11%. that's above expectations. maybe they are actually able to do this, transition more to a consumer oriented economy. just on alibaba, i wanted to note. they went public at $68 a year ago, october a year ago. though were around $60 just last month. they have made a real recovery above the original offering price as china stabilized.
another thing weighing down the market besides oil stocks, retails. macy's down 13%, trades just behind me. dillards, nordstrom, jcpenney on the down side. real issues for them here. macy's, of course, hope you saw terry lundgren on with us. comp sales down 3.6%. guidance was below consensus. they talked about warm weather and weak tourism. apparel and accessory sales are not doing it. the consumer is spending, just not on the stuff they have, on the electronics and travel stuff that they don't necessarily have. a slightly different story at jcpenney. they preannounced some numbers. they'll report later this week. they came out and said q3 comps would be up 6.4%. consensus is 5.7. gross margins and earnings would be ahead of expectatioexpectati.
everybody including macy's was talking about excess invntories, pressure on the margins. markdowns coming . terry lundgren said the consumer will have a field day this because of price reductions. guys, back to you. >> bob, thank you very much. when we come back, a new ipad pro could cost you upwards of $1300. that's almost as much as a brand-new apple laptop. is the price tag worth it? scott stein of cnet is with us after the break.
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good morning, i'm sue herera, here's your cnbc news update. the san diego chargers and oakland raiders reached an agreement to have bob iger become chairman of their bid to build a stadium in carson, california. it could pave the way for both teams to play in the l.a. market by next season. israel says it is shameful that the european union will label products made in jewish settlements in the west bank. the eu move, which came after months of procrastinating, underscores that bloc's unhappiness over israel's continued expansion of settlements in that region. slovenia has begun erecting a razor wire fence along croatia
to control the influx of migrants. a pink diamond fetched a record $28 million at a christy's action in geneva. it's said to be the largest of its kind and was the showcase gem at the action. it was purchased by a private buyer in asia. that's the cnbc news update at this hour. back to you, carl. wouldn't go with my outfit. that's why we didn't bid. >> sue, thank you very much. >> $28 million. could you ever wear it anywhere? no. >> sue, thank you. as preorders begin, so do revie reviews. despite report that's tablets would not be available in stores until later this week, the ipad pro is already in several apple stores. scott stein wrote a review on it. he's senior editor with cnet. good morning. >> good morning. >> a dream machine for graphic
designers. is it anything more than that? >> right now it's really tough to spread beyond for the tools that i need. you have the keyboard which is for typing. it doesn't have a track pad. if you're talking about working on web tools, which we do all the time, it's not the same thing. so, i think you go back to a laptop. you have to. this pencil which is sold separately, is great for sketching. great for graphic art. you have to have the apps that support is. it's not a laptop replacement. not for me and not for anyone else who tried using it. >> you said at first the idea of a nearly 13 inch screen might seem absurd, but overtime it grew on all of us. >> it did. if you set it on a desk, even though that's not the way you normally use an ipad, it's like half the laptop. feels like a macbook screen. you put it in your lap and are sketching on it, it feels like a sketch book. when you carry it around for other uses, you go, wow, the ipad used to be portable. >> can i hold it?
>> it's light. but it's cumbersome. >> enormous. >> the thing about size with apple products is that -- is that you get used to it over time. for example, when you went from the 5s to the plu6 plus, you ca go back to the 5s. >> i went back to the ipad air 2, the best all around, i missed this size for movies. but you need the accessories. you need something to put this in. there are some keyboard cases which are about $150. i want something, if i want to turn this into a laptop, i could. >> everything you're saying sort of flies in the face of what tim cook said about the pc, right? why is he saying that if this is all true? >> it's a good question. the ipad has strived to become that replacement. and to be the future of computing. but it seems like -- as opposed to microsoft, it's baby steps. taking cautious steps.
building something that does what it does, but not -- has not crossed over. they need to unleash the beast. >> what does that mean? what needs to happen? >> it needs to do all the stuff the processor can do. ios needs to allow you to split and customize windows more. if you're working on things at the same time, you say where are my files? where is this? this is for use in an office environment? >> i think so. some people may have the apps that support it. others may not. usually you're entrenched in certain tools. this is about adopting new tool sets which you may not have. that's usually the point at which you say i can't use it for blank yet. >> nonetheless, i can imagine people using it as a monitor for sheet music in an orchestra, using a speech. the size is quite useful for a number of things that you are using the naked eye for in every-day movement. >> the size is great. when you split screen apps it turns out to be useful. it starts to feel like, hey, i'm
working on a computer. you forget you're on an ipad. you say i want to do this. this goes not quite. you do have those limitations. yeah. the size is great. again, if you're using this as an art tool, the style of the pencil, apple has been talking about this, too, is great. people will want to adopt that. >> so, the debate that many industries are having at the moment is the degree to which apple, facebook or google will become the interface through which we do everything in our lives. that is an interface i could have in the lounge that i could do a lot with my life through. it's the right size to do that, whether that's playing with the television, writing e-mails or buying stuff. it is living room size. it's passable. >> it is. the hardware is right. that's exactly it. it's the software. microsoft is working on making apps compatible with this. >> the point i'm making, it doesn't matter. the hardware is the correct size. i could sit on google with it
moving forward, sit on facebook and buy travel arrangements. >> you can. >> that's the direction in which we're traveling. >> i think so. i would like to see that browser feel more fluid to the point where if you have to live in that, you can. >> finally -- it's called the pro. >> yeah. >> do you feel it will be an enterprise tool? not a mass market consumer -- not a holiday gift? >> it's funny. if you think about what the pro does, it could happen in a smaller size, too. i think it's more of a concept. eventually all the ipads can be pros. they all are based on the similar hardware. i think it's pro for the graphics professional. i think for everybody else it's not really that different in terms of what it's built on. hopefully, again, ios just keeps growing. that's the key. >> good to see you, scott. >> thanks. >> go jets. up next, the start up that is out to prove that american manufacturing is not dead. if you do it right. the ceo of american giant will
welcome back to "squawk on the street." let's take a look at energy and consumer discretionary. the two sectors lagging the most today. consumer discretionary is the s&p 500's best performing to date, but today retailers are dragging that down. macy's, urban outfitters, kohl's and nordstrom down between 5 and 13%. the xrt which tracks the sector is down about 2%. it will be interesting to watch the sector with the october retail sales out on friday. of course as we head into the holiday season. simon? >> thank you. up next on the program, christie's setting new records at the sale last night, other sections were nervous. leaving people wondering if the
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of mouth and internet buzz to sell clothing. actually, let's just check on the market. we're down 57 points. we're hoping to talk to the ceo of american giant. okay. joining us right now is the co of american giant. we were just saying how you were making a big bet on american manufacturing here. why you are convinced that's a unique selling point? >> i think there's been a big narrative over the last 40 years about the lack of competitiveness about u.s. manufacturing. we just have a different point of view. we think there's a great work force here. with innovation and leveraging some of the technology stuff what's happening in e-commerce, you can unlock american manufacturing at scale that can harken back to the days of
making stuff here. >> it's interesting. on the plus side of course you don't have to go to giant, where if you're a relatively new player it's difficult to know who to trust in order to get things right. do you think the american consumer really cares where mid-priced or lower priced clothing originates from? american apparel didn't do well on that promise, did it? >> i think that the american consumer -- i'll leave it up to the consumer to decide whether that's important or not. we believe we can get much higher quality, much faster times to market and eliminate the soft costs that are part of overseas manufacturing. for us, really it's a business decision before it is a marketing decision. i think that's really the core of what we're trying to do. we think there's more efficiencies and quality that we're able to obtain by staying
domestic than manufacturing stuff that's a long way away in countries that we have a harder time and interacting with. >> the other main stay is you're trying to sell directory to people online. you're not the first clothing company to do that. to take the bricks and mortar out of the equation is where many people think we will be 5, 10 years down the line. what is working now for you in being able to connect through all that? >> a few things are working. you're right that the advent of e-commerce eliminates a big part of the cost structure for businesses that have been locked in that cost structure. that's part of it. the other part of it is as we grow and invest further in domestic manufacturing, we're realizing a lot of efficient ci on the manufacturing side. as far as what's working, consumers are moving past the
fast fashion of the last 10, 15 years and moving towards slower fashion, ones that can anchor your closet. for us the -- our relationship with our customers, which is deeply rooted in the value proposition and the quality of the product we are making is fundamental to our success. customers talking about the brand. that's a long way to say we will not give that up because it's fundamental to how we are growing. it's a lifeblood kind of issue for us. that kind of intersection of quality, value, and u.s.-made that we think is really a window on to scale in this kind of new
apparel economy. >> it's good to see you. thank you for the time. bird winthrop who is joining us live from our iconish conference in d.c. the christie's auction -- the egg shaped paint, sold at $29 million that net steven collin a profit of about $10 million, they say, on what he paid for the painting just three years ago. selling for less sort after works was arguably nervous. one andy warhol he remained unsold with christie's reportedly taking a big loss on its guarantee for another. that's led some to question this morning if parts of the art market are overpriced in this what arguably the first big test of the art market since we had that global market selloff back in august. we're delight to welcome christie's chief auctioneer and
president of the business. >> good morning. >> before we go anywhere, i just need to get everybody on board here. the immense amount of effort it takes for you and sotheby's to persuade people to bring their art to the market and, therefore, the need for guarantees, and then to get people in the room or on the telephone and to connect everyone together, and we should mention, of course, that louise, which made the giant spider had a record last night at $28 million. there are things that clearly worked yesterday. when we last met here in may, i sold the picasso for $180 million. the market at the very top is strong. it's a terrific record paid in the last two days. having said that, there's a little bit of readjustment. people looking at market objects that are not necessarily fresh and they're reconsidering price points for those. last night we had an 87% sold
rate, which is a little down on may, which gives you an indication that people are a little more rationale. perhaps a bit more cautious, which i think is a good thing. >> a lot of people are talking about the warhol for maryland which was smaller than i might think when you see it on the stage. you sold it for $32 million, $36 million if you include the fees. yesterday, it's said the guarantee you gave the turb irk seller is $40 million to $45 million. therefore, you have made a lot on that. talk me through how he feel about that. >> it was on the market a few years ago. it was sold in the sale as a front cover lot. it's known in the marketplace. the fontana egg, the growth is $10 million in three years. checks and balances. these things happen in the market, in any market, and it's completely understandable. >> what about that central concern that maybe the middle of the market is turning? >> well, we have sales, further sales, this week, which would give us a good indication. i think an 87% sold rate is very
firm. i'm expecting the middle market to do quite well. all the properties that we had last night and on monday did incredibly well. the call to market, for example, absolutely on fire. you witnessed it yourself in the sale room. huge. i think actually the story may be slightly different, and people will see it differently. every season. you know, the market holds its breath wrush at the end of the week one can judge. at the end of the christie's week, one can really have leerns about where the market will stand for next february and london. >> obviously, are you very, very proud of that. can the -- the central question comes back to can you repeat that? can you persuade people to sell and therefore price in real-time their works of art? clearly you have to put the guarantee up there, but will there be another painting like this near term? >> it's a fascinating question. it's a peculiar question to ask
me. i've sold four of the most expensive paintings ever sold at auction in the last 18 months, and it seems that collectors with making infantry september works of art come to christie's to discuss them with us. of course, it's for us to advise them whether now is the time. >> what a tremendous success for them. >> therefore, they will also say to you, you see, i want to you sell it, but i want you to guarantee me the type of price that you say it will sell for. therefore, you put christie's and sotheby's will be in the same position, of having to guarantee much higher levels or with less margin arguably and, therefore, take the loss that we saw in the warhol. as the market turns, that may be you that feels the pain. do bare in mind that it was guaranteed.
it made $170 million we stick by our valuations, and the guarantee process is part of that. if we believe a picture is worth $100 to $150, it makes $170, we're comfortable in guaranteeing the pricing that we put out there. >> thank you for your time. >> thank you. >> now, let's send it over to john with a look at what's coming up on squawk alley in four minutes time. hi, john. good morning. >> hey, simon, good morning. tim cook says the ipad pro could kill the pc. walt says something different. also, what singles day was a big party for alibaba. we'll look at what's coming next, and then finally, daily fantasy. rough one in new york. all that and more coming up on squawk alley. i (state your name),
stwlirchlgts this is a live shot of arlington, virginia. the president laying a wreath at the tomb of the unknown soldier at arlington national cemetery in arlington, virginia. it is veterans day. bond markets closed because of that. if you see or know of a veteran, be sure you thank them for their service today. in the meantime, dow is down
about 40 points. oil has come down a bit. almost $1. s&p back to $20.77. it is midnight in beijing. squawk alley is live. ♪ john fort, kayla, and myself at post nine, and early alibaba investor haley nada, the founder and managing director. haney, it's good to see you this morning. speaking of which, first up is chinese e-commerce giant alibaba. breaking its o