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tv   Street Signs  CNBC  September 7, 2016 4:00am-5:01am EDT

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welcome, you're watching "street signs." i'm carolyn roth. >> i'm nancy hungerford. these are your headlines. industrial data. kud oil also trading higher. despite iran announcing it will increase oil in line with customer's need. shares reports an rise on operating cost ahead of what is expected to be a stormy shareholder meeting.
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>> apple investors hope the iphone 7 will make a bigger splash than recent updates. appeal tax ruling. we'll speak exclusively later on cnbc. >> good morning, everyone. it's wednesday and we're roughly one hour into the trading session. the stock 600 is not moving nir at this point. we got the very week ism numbers out yesterday. that is once again lowering the odds for a rate hike from the fed in the month of september. the odds are now down to 15%. let's have a look at the embassies one by one. we're seeing the xetra dax up 0.1%. did get some weak german industrial output numbers. steepest drop down 1.2%.
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that comes on the back of their weak factory orders. the cac 40 is flat. the ftse mib is up 0.1%. quick look at the sectors. travel and leisure down .5%. similar decline for banks. >> thanks for that one. we continue to watch the debate around the fed rate hike expectations of course. we did get comment from williams yesterday. pushing for a rate hike sooner than later. said the economy has climbed back to full strength and therefore makes sense to move monetary policy gradually back to the normal. join us how, paul, head of research at northern trust securities. thank you for joining us today. interesting to hear the fed comments because it was ism that really pulled back the september rate hike. then with have the ecb this week
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expected to extend stimulus. the search for yield continues. you have an interesting strategy to bring about yields. >> the environment we're in is a low yield environment. we can easily observe this $13 trillion of fixed income asset with negative yield. we saw european countries yesterday actually raising money with negative yield. it is what it is. the question is with equities how are we going to make money. we developed a striking relies on returning investment capital. find kwhag is dependable yield. if you wanted to identify a good company, you could use return on investor capital to assist the barriers. slightly more nuance than that. what we're also finding was capital business the reinvestment rate is very, very high. that's the nuance. if you can find a company where not only the barriers to entry are high, the ability to
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reinvest after very high capital provided nothing changes and you can continue to reinvest, then you get the compounding effect. it's the compounding natch which works over the long-term. hard to appreciate. >> so what are the companies or at least the sector you prefer. >> it's interesting when owe look. when you coa screen and assess companies that generate cash, don't have any aggressive accounting issues. you find a whole range of companies in all different sectors. these aren't all household names. it what you find at the perhaps some of the names that have underperformed this year, wh smith. we understand that. that's moving and we are focusing on the travel sector. much higher returns. that is very much a stock that we like. at some of the stocks that have done very well which perhaps the average person on the street
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wouldn't know it. a lift operator globally. kone. or makes toilet systems. what you find is this companies that have great economic moments and the ability to reinvest at high rates. they occur everywhere. it's a matter of finding them. >> aren't that expensive in the first place in you look at pe ratios. >> absolutely. that's the first line of push back you will get from an investor. your telling me to invest in a company which has just done trading at premiums. i think the point there is that you have to pay for quality. you have to pay for businesses that are going to generate high growth, high returns, but i think the thing we like to come back to is that at the end of the day, we can sit there with various models and discounted cash flow assumptions et cetera. all valuation is relative. yields and fixed income market at levels that i never thought i
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would see in my career. certainly when the fed launched qe, they didn't think they would be running ilts for many, many years and literally trillions of dollars sitting at negative yields. the scarcity is in yields that is dpentdable. if i can find an equity business that is dependable and not disresulted by regulation or technology and grow 2-3% yield, that's attractive compared to other asset classes out there. >> what are they, that was mna play? to what extent were you just lucky in that perspective. >> in terms of the actual transaction, we remember lucky. you can argue there is another theme out there in a low growth world given that good companies can raise money pretty much at zero, zero whole list of mna targets out there. there might be an acquisition
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roleout strategy. that was really just luck. plays into some of the other things. it was really a very high quality business. really high returns on cash puts. in the end, someone thought they would rather own and leave to it the market. the stocks in the bracket, that's been a good performer. >> paul, we're going to keep you for another chat. head of research at northern trust capital market. meanwhile, iran has announced it will increase oil gradually to meet customer needs. said iran is going to hit the target of 300,000 barrels per day in two or three months. >> number of bizarre aspects to this ruling. ultimately, the european commission doesn't have responsibility for tax says matters. they're asking ireland over a long period to be the tax
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collector for every member state in the european and the united states government. never happened anywhere in the world and irish people and irish politicians are rightly exercised about that process. the government has always had a hand in the approach when it came to apple. companies here will continue to invest. >> that was in fact a sequence. julia getting on the ground there. dublin reacting to the upcoming debate in parliament over the apple. >> it's also quite interesting, but not quite what we want. very interesting debate taking place there. we will bring you more on that in detail. meanwhile, saudi arabia foreign minister says his country could expect a freeze in oil output, but warned iran could stop any attempt to reach an agreement. italian prime minster matteo renzi announced the constitutional reform will be held on a sunday between november 15 and december 5.
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he said earlier it would likely be held in october. the leader reconfirmed he would quit politics if his proposed reforms are rejected by the public. all right. e-mail the show. do let us know whether you are scared about that italian referendum. a lot of people are telling us this could be the big risk event for europe. a lot of voices there saying that should backtrack on a promise to step down. very interesting. we also want to hear your thoughts on apple. not just the debate in ireland, but are you excited for the iphone 7. are you getting excited for this one? >> not really. we're not expecting any major tweaks. >> except the headphones. i don't need that. >> also coming up on "street signs," the seeds are planted. the soil is potted, but did the
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monsanto buyer deal is yet to germinate. shed light on what is delaying the chemical reaction. and coming up. speaking in an exclusive interview on squawk on the street. you certainly don't want to miss that one. we have to be very precise. if we're not ready when the planets are perfectly aligned, that's it. we need really tight temperature controls. engineering, aerodynamics- a split second too long could mean scrapping it all and starting over. propulsion, structural analysis- maple bourbon caramel. that's what we're working on right now. from design through production, siemens technology helps manufacturers meet critical deadlines. i think this'll be our biggest flavor yet. when you only have one shot, you need a whole lot of ingenuity.
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good morning and welcome to "street signs." monsanto. a final price of 135 to 145 seems less likelikely. that is a level some have suggested. bayer would have to increase deal. monsanto may not take $127.50 that was announced yesterday. saying that price seems less likely as the firm would fail to get shareholder approval to
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issue more equity to fund the deal. as you can see there, bayer shares off .25%. we talked about a level in this range yesterday. at least 130 a share would have to go through in order for monsanto to accept. then we heard from bayer yesterday saying we still don't accept this deal. >> what if they take on more debt. that would be workable under the low interest rates then on the other hand i read in a recent note their debt is currently maxed out. 4.9 is the debt ratio. that story certainly has legs. we'll try this again. iron has announced increase oil output. speaking to cnbc, director of oil said iran is going to hit the target of 300,000 barrels per day in two or three months. >> we are going to meet that
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level because as i members of the jury mentioned right now we are over 3.8 million. everyone knows in the market we're going to introduce a new crude oil to the market at the tend of the year. at least with a minimum 300 barrel a day. capable to match that production, very soon by two to three months. >> so we could see 4 million barrels a day by the end of the year. >> i hope so. >> our colleague is at the conference this singapore and filed this report. >> reporter: i fair degree of skepticism here amongst delegates as to whether russia and saudi arabia can really translate the pledges aimed at cooperation on oil production when opec meets in algeria at the end of this thomonth. a lot of people saying it was aimed at talking up the market and talking up the price and seems to have served the purpose
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when you consider the pop we saw on monday. what a lot of people are saying is perhaps this does improve the atmosphere. perhaps it paves the way for some kind of substantive action come algeria at the end of september this month. still a lot of skeptics remain. including climate. >> join the market and remain extremely skeptical. whether we're going to see any barrels taken off the market as a result of the meeting. this agreement is totally devoid of details. so a freeze wouldn't be a big stretch i think given how well the oil price responds to every single murmur or rumor about looming agreement, why not go ahead and have another meeting. it works very well. >> so a lot to take stock of when you consider that opec are still fighting this battle for market share and the theater for
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that battle is increasingly being fought over here in the asia pacific region. what is interesting a lot of people are talking about where we stand with the great rebalancing act and when we will see a meaningful equilibrium. telling me it should happen towards the end of this year, possibly early 2017. others are a bit more kept skal and bearish. see a two-year time frame until question see a real balance restored in the oil market. cnbc. >> and that uptick we've been watch b over the last few days has been supportive of global equities. watching asian stocks hitting one-year high in today's session. follows nasdaq move to all-time high during tuesday trade. equities were responding to weak data out of the u.s. which further diminished expectations for a fed rate hike. goddy lox back drown is unlikely
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to last. let's bring paul in, head of research at northern trust capital market. it's not just goldman sachs warning here, stocks seem to be celebrating mediocrity. just waiting for the fantasy land trade to end. what is your view? >> we have a saying internally that stocks not the market and the market is not the economy. what we're at the end dealing with is an environment where there's a huge scarcity out there. we need to plug that gap somehow, and, of course, pension funds and wholesale are going to move from fixed income to equities. they can't. there's still opportunities in good stocks. from time to time you'll also see bad stocks or stocks that don't make the cost of capital or have structural challenges very strongly in the market highs. it's very difficult to make a call in the market. we try not to. at the tend of the day to quote
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from northern trust asset management, we do agree. the cycle sl low. we have huge central bank support at the same time we have low growth, a lot of debt and a need to save. i think you're seeing that played out in markets across the board. very small moves on a day toy day basis. largely going sideways. some things are down a lot. some things are up a lot. within that period, just like buffet in the 70s. even in the sideways market you, you can find things to invest in and make great returns. >> don't you think there's also a levelf complacency in the markets. if we're moving sideways and the nasdaq is still hitting record high after record high, don't you think that people are ignorant of some of the big shocks that could be around the corner. maybe an uptick in inflation or the next rate hike. >> people aren't come pla aren'
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necessarily. they're worried about the down tick. what if we're in a situation where there's nothing more they can do to stimulate growth and end of the road. we're not there yet, but if you have that sort of thesis which grabs hold, everybody panics, the market is down 15%. i don't think people are complacent about that. that's always a risk, but we're not trading like that. >> a precurious one. whenever we have poor data, people look at that as a positive still. it means stimulus for longer. yet serious questions over the transition mechanisms as you just touched on. >> very serious consequences. the ability of the ecb to stimulate more and create extra demand. aggregate demand in the economy, we're at the end of that road. we need structural reform, we
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need fiscal. we're not at the end of the road in terms of policy, but certainly directs how people think. if you look at a fixed mcmarket, i checked european triple b corporate index yields four years ago, they were 4%. today their 64 basis points. it's very little you can get in fixed income. so there's a natural affect that people will migrate to areas of investment, be it private, property, stocks, where they can get some of that scarcity they're after. the dependable yield. it's still there in markets. you're right. it's high. multiples are high. it's the world we live in. >> what percent of clients say i want to stay in cash because i don't see any major opportunities throughout and you have to tell them, look invest into something because it's better than not being invested at all. >> it's very mixed. i would say of most of the long earning community, they have to
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be invested. the levels of cash are quite low. hitch fund community can go to cash if they want. i think we've seen some of that. a hesitants to investing. worrying about down shift in market. when they're on highs, there's always that risk. that's reflected in the way the hedge funds are thinking. >> appreciate that. head of research. let's get back to corporate stories this morning. drl keith has been asked to remain in his role of chairman of sports direct. offered to resign. the company apologized for failings and pledged to fix shortcoming around issues like worker's rights. mine while mike ashley says he has no intention to take the company private. shares in the company down by 11% almost this morning.
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volkswagen ceo ma tay you mueller said further production delays cannot be ruled out. suffered major problems with two suppliers which stopped parts delivery after vw cancelled contract. looking into supplier strategy to prevent similar disputes from happening again. meanwhile chinese media report thad volkswagen is working on poesht venture. aimed at making electric cars, sales more than kwquadrupled in china last year. >> gypping has been granted temporary bankruptcy protection sending shares higher. creditors can't take action of ships, which are docked in the united states as they've done elsewhere. the world's seventh largest container carrier will go back to court on friday.
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last week filed for receivership. the government in seoul said they may step in with a bailout. however spokesman told reuters it is unclear whether the funds will actually materialize. business as usual, that's the message from developments. it is encouraged by higher saelsz in july. the biggest house builder posted a jump in profit on the back of disciplined volume growth. let's devil deeper into the home builders. good morning to you. thank you so much for joining us. it's like brexit never happened to home builders. are you surprised in some of the commentary. >> it has been surprising. positive surprise. you have the post-brexit shock and i think people kind of seem to be coming back in. heard from barratt this morning. very consistent message. that people are still buying new
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homes. it's been reassuring. >> isn't that a false sense of security because the big hit in terms of the economic picture, the sentiment picture, could still hit us once article 50 is triggered. once uk leaves eu. that could be years from now. >> that's key point. the macro risk is still there. although you've had at this point decision making. people holding back pre-brexit vote. and then afterwards, you know, the shock factor they held off. they're not coming back in. government support. the real bigger question is the macro outlook and impact of brexit. i think that really thrashes what unemployment does. i don't think we're out of the woods. it's been a very positive selling season. you still have risk out there which i would say stems around unemployment and what that potentially does to confidence. >> the macro outlook is something all the players have to face eventually. looking at micro basis is there
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one company you prefer over others. valuations as they stand. >> from a micro perspective, house builders are very good sheet. lots of cash. lots of discipline. paying dividends. different from where they were in 2007 and 2008. the stocks we prefer at the moment are the ones with good balance sheet, net cash, low financial risk. stocks paying out good dividends. we highlight in that big capital equipment program. they've been playing good dividend and huge amount of cash on the balance sheet with a very well kind of land. >> given that the protection timeline is so far out when we talk about the actual negotiations that need to take place, do you think we'll see a cramp down did investment just given this year's uncertainty because we know they've been investing in land when you look at the likes of barratt. >> i think the house wibuilders
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are behaving more cautiously. increase rates just to reflect that high risk. they themselves are uncertain as you say the negotiation can be very long and protracted. they're just monitoring the market very closely. the good thing is they've got land bank and balance sheets and can react quickly. at this point showing caution with a close eye on what the market trends do. >> all right. we're leaving it here. thank you for joining us. nancy. we have to take a quick break. while we're away, you can check out world markets live. blog which runs throughout the european trading day. stay with us, we're expecting more uk data straight after the short break.
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> . good morning and welcome back to "street signs." i'm nancy hungerford. >> i'm carolyn roth. these are your headlines. crude oil trading higher despite iran announcing it will increase oil output in line with customers need. apple investors hope the iphone 7 will make a bigger splash than recent updates. while ireland government appeals tax decision. speak exclusively later on cnbc. heavily overpaid. a top bayer shareholders rejected bid from monsanto saying the german chemical firm would not get support for 135 share price tag. good morning and welcome back to "street signs."
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let's bring you some breaking news out of volkswagen. they have announced the deal with jac a chinese joint venture department. for developing electric cars in china. told you about speculation of this deal at the start of the show. now getting an announcement from vo volkswagen. started talks and goal is for joint development of electric vehicles in china. hot market for electric cars. >> let's get to some macro economic data. in the form of uk july manufacturing output falli inin 0.9% month on month. biggest drop in a year. once again, negative 0.9 on the month. plus 0.8 on the year. manufacturing forecast at a decline of 0.3% so this is a much steeper decline and this really is at odds with some of the recent data points we've been getting which have been pointing to a much strongser
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picture in terms of the pmis in the month of august. posting the biggest drop in a year after brexit vote. this is one of the first hard data points that we're getting about the third quarter so maybe not everything is looking as rosy. steri sterling dollar did rise a little bit. still down 0.3% on the day. now back below the 1.34 handle. >> interesting to know pmi coming in august. bit more of a lag effect coming from the vote. on the industrial output front, point out that industrial outpoint increased 0.1% on the month. slightly better than the reuters forecast for a decline of 0.2. now an an annual basis, industrial output increased 2.1%. that was again slightly ahead of the poll for 1.9%. the data comes as uk chancellor hammond is expected to meet
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senior bankers in london to discuss the shape of britain. also raise government plans to support the economy with the group of banking and insurance executives. the group known as european financial chairman committee has been created to coordinate the response to brexit. and mark carney is due to appear before uk parliamentary party today at 1515 cet. bank of england governor is expected to face questions on the additional stimulus measures passed by the central bank following the eu referendum. the surprisingly resilient economy has led to claims that boe reacted. first given criticism backing up toward carney that he acted too early. do you think he did or was this the intent. was he trying to get ahead of the data. >> i think he was. you have to separate out two factors here. so, as we look to brexit, there
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were kind of two different concerns. one is a longer term macro concern about brexit that triggered article 50. negotiation with european what kind of trade deal with get and what that means. we frankly still have absolutely no idea how that's going to work out. the other concern was about maybe a short-term confidence shock that would just the british consumers massively retrench potentially around housing and retail sales. that sort of thing. only a couple of months in, but the data suggests with the data today that hasn't happened. so i suspect that carney will face a committee, some who are hostile to him. some thing he was gloomy about what brexit would mean. he's going to face tough questions on that. point to a longer term snar know and putting in place conditions to allow the uk to deal with over the next couple of years. >> if question of will he go further as he hinted what's
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possible. you look at the ten-year the extraordinary moves we've seen around 1.38. get a latest check on the tenure there. is there further room to get into gilds or just too crowded. >> i think it is near term. we had a huge kind of outpemps global yields moved lower, but we had a huge outperformance of the uk since june 23 since brexit vote. that's gone a little too far and we could see gild yield come back. so near term because we're taking on that tail risk of that kind of short-term company shock, there's room to move higher, but certainly looking at ten-year you could say without looking at the front end, maybe we could take five basis points, ten basis points to the cut we have priced in. it's going to be difficult until we understand fully what the relationship with the european union will be. that's going to be a long time
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away. >> talk about bonds. we've seen very poor german data over the last few trading days. the manufacturing sector in germany seems to be in a poor state. is that the brexit effect. is that a german story solely and how would you trade bonds. >> what's been happening in germany and europe in general, we see growth momentum start to fall out of the economy. i suspect the reason for that is euro economy did very, very well relatively speaking for the last couple of years. seemed like consumers enjoyed having a few more euros in their pocket and prepared to spend those. as that has come out, we're seeing the economy and momentum peter out and that will go through. as of yet it's too early to say a major brexit effect on germany, but may be there in the
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margin. when you look at look at the ecb not being able to buy. they're having to buy 10 billion euros in terms of bonds every single month. to what extent do you think that will be addressed this coming thursday. >> they're going to have to address it over the next couple of meetings. i hope they address it in tomorrow's meeting. showing my age, i'm old enough to remember when you looked at central banks and think about what the action was for growth or inflation now we think about technology and how many bonds are left. whatever it may be. that's the same for bank of england and ecb. the issue is at the moment the qe program is due to end march 17. that should be okay. although you can see in the data they're having some issues in portugal and ireland in keeping up the capital key, but they've got these self imposed constraints. if they don't remove those. >> that's lower deposit rate. >> exactly.
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they've got the deposit rate issues. they have the issue limits all these things they put in place themselves because they didn't expect when they started qe they would have to do it and the yields would move lower. central bank never wants to put itself in a position where it says effectively there's nothing else with can do. >> is this the new normal dorks you expect more of this to come, selling negative yields. >> we have to be careful. i think we have sticker shop since 2010 give or take. every time we get new yield levels you can't help, but think this has to be it. we're at the end now. when we look at europe, if we look at the growth projections and inflation projections not over the next three months, but one, two, and medium term horizontal. they're very restrained and remain so. big factors around that around
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demographics and what have you. low yields are likely here to stay. as low as this is driven by central bank actions. as long as central banks are in the market buying bonds, they're going to put bonds at lower levels than they otherwise would be. >> andy, thank you for that. europe trader. just want to remind you of the weak data we got of germany. more evidence losing steam. as german industrial output fell, that is the steepest decline in nearly two years and impa compares to expectations of modern expansion. suffering from slowdown in china's demand and a shift away from services. quick look at the european equity market picture. improving just a tad here. seeing the dax up .30%. the ftse and cac tagging on .20%.
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we are close to eight-month highs before we tapered off into the close. at the close down 0 percenta.3% the s&p off just fractionally. the nasdaq hit an all-time high in yesterday's trading session at the close seen up 6.5 points. the big shocker came in ism services at six-year low. that represents two-thirds of the u.s. economy. that is something for the fed to worry about. now hillary clinton has criticized republican rival donald trump for commenting on the fed. this after he told reporters in ohio, quote, rates will have to change and the only thing that is strong is the artificial stock market. >> clinton also took aim at trump's business dealing accusing the real estate mogul of fraud and calling on trump to release tax return. >> he said the american people don't care about his tax returns
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and in fact he's also said that it's none of our business. i just think he's dead wrong. i mean, the reason that presidential candidates going back decades have released their tax returns is because the american people want to know if they're going to entrust a president with the management of our country's finances, they want to know how did this person handle his or her own finances which is one of the reasons why we've released 40 years of tax returns. >> clinton and trump will battle of credentials later on tonight. let's get on to nbc news, tracie potts in washington, d.c. tracie, does hillary clinton do herself a favor by repeatedly attacking donald trump and not pointing out her own strengths. i know the gloves came off a long time ago, but this is
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getting very intense. >> reporter: right and democrats are now getting worried she's doing too much finger pointing on the other side and not enough explaining why hillary clinton should be president of the united states. the polls are starting to narrow. she's still ahead. in our poll by 6 points, but in another poll that came out down by two points and that has democrats worried. if donald trump is so bad so to speak, if he's got so many problems, why isn't she running away with it. what's slowing her down. they are starting to talk about whether or not she needs to take a different turn in this fall election and spend more time talking about herself and less time talking about donald trump. >> tracie, this tax issue clearly not going away. once again hillary clinton pressing donald trump to release taxes. do we have any indication of when he will. of course we heard from vice presidential candidate promising they would come. >> and vice presidential candidate mike pence says he's releasing his this week and
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donald trump will release his at some point. may be after the election. he's given no indication, trump hant that he's going to release them before the election. he's under an audit. he'll do did after that. he said he'll release them when she releases the rest of her e-mail. the e-mails she has are all out there. we don't have any sort of nail down on donald trump at all on a date for releasing tax returns. >> all right. tracie, thank you for that one. we look forward to that commander in chief forum. we will be with you tomorrow hopefully for some reaction. meanwhile, 21st century fox settled gretchen's lawsuit for $20 million. issued an apology to the former anchor saying she was not treated with the respect and dignity she and all or colleagues deserve. led to the resignation of fame ed fox news chief roger ailes.
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also in settlement talks with others. chipotle shares rolled high offer after disclosed a 9.9% stake in the burrito chain. engage in discussions with chipotle's board and management. adding the stock is undervalued and attractive. told cnbc in a statement, quote, we just learned today of acquisition of chipotle shares. we welcome their investment and appreciate the confidence they've expressed in our brand. differentiated offering, strong growth opportunities. coming up on "street signs." does an apple a day keep the eu commission away. we find out about the big tax vote right after this. don't go away. everyone thought i was crazy to open a hotel here. everyone said it's so hard to be a musician, but i can't imagine doing anything else. now that the train makes it easier to get here, the neighborhood is really changing. i'm always hopping on the train, running all over portland.
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good morning, and welcome back to "street signs." big day for apple fans. several accounts. first off ireland is getting set to appeal the decision of the tax decision by the european commission. let's get out to julia who joins us from dublin. getting reaction to the case all morning. high julia. >> reporter: good morning. parliament set to debate the decision to appeal this tax ruling from the european commission, but it doesn't matter because the government has already made the decision and this appeal will go ahead. they're going to hand over hundreds of thousands of euros in this appeal case in order not to receive that money. we have heard this morning that if ultimately they lose this appeal, they will except that 13.5 billion euro plus interest. what we have heard is from both sides of the debate, we had the government saying we've got an investment story to protect
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here. one in six jobs are provided by multinationals in this country and a broader issue here of ser rememberty they want to protect. they see this as the european institution overreaching in their capacity here. in tax policy in ireland. shouldn't be the case. you've got the opposition party saying this is a blatant attempt by the government to cozy up too big business at the expense of the irish taxpayer. listen to both sides of the debate. >> number of bizarre aspects to this ruling. ultimately the european commission doesn't have responsibility for taxation matters. they're asking ireland over a long period to be the tax collector for every member state in the european union and the united states government. never happened anywhere in the world and irish people and irish politicians are rightly exercised about that prospect. >> the government has had a hand in the approach when it came to
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apple. company wills continue to invest because of the low tax break. that's clear. this is fear mongering. trying to justify why this government is going to fight tooth and nail to ensure that apple don't pay a penny of this tax. >> a lot of questions here whether or not these legacy issues still apply here in ireland. this country has done a great deal to address loopholes in tax system and push back on the reputation they got for being a great tax haven. should ireland be an tax collector more broadly for the eu which is kind of what the european commission suggested last week when i spoke to the commissioner. all sorts of questions for the prime minster. i'll be speaking to him later on cnbc. guys. >> can't wait for that. thank you so much for your coverage. meanwhile, stick with apple. expected to unveil a new product and the iphone 7 is in the
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spotlight. how do you trade an apple. stock tends to trade negative 80% and the day after ends up 70% of the time. apple shares are up well over 100% since the first iphone launched january 2007. josh lipton will be live at the event. the tech blogs have become a lot better at predicting what apple unveils at events. so can ceo tim cook still surprise us. we're going to find out. cook is expected to unveil a new phone. improved water resistance and dual lens camera for higher quality photos and removal of phone's head phone jack. that could allow for a slimmer foin apple could believe the wireless head knowns. also might frustrate some
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consumers. love traditional wire headphones. in a survey 64% said the loss of the head phone jack was a draw back, not an improvement. bernstein says investors should focus on what apple does in pricing and how average prices might be impacted looking ahead. he thinks apple will keep current pricing scheme, meaning 649 for the iphone 7 and 549 for 6 s and retire s plus model. apple also expected to unveil updated watch with faster processer, longer battery life and gps. some potential for prize year if the device is considered more attract ichiro ive to consumers >> joining us now, president at ets. thank you for getting up early for us. we're only expecting modest for the iphone. what could invigorate sales.
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>> i think the big driver going forward may not be the actual devices, but new markets. sales in india are up 51%. that's a market they're starting to pay attention to on the iphone side. the beauty of apple as a story as a stock they have great brand and such great loyalty. even minor tweaks will allow them to expand the platform. as a company they has 44, $45 billion in revenue. 38% margin. generate $50 billion worth of free cash flow and the stock trades at 12 times or 13 times earning. you're not paying high-tech multiples for this kind of name. let's not forget about the $200 billion they have in the bank. etf company, it's in one of our etfs. it would probably make the other if they would raise the dividend a little, probably get in our global high dividend because of the free cash flow story. i don't think they need to do dramatic things as a company at
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this stage of life cycle. >> that wouldn't necessarily mean they're still the big innovator out there. they're just expanding into markets and spentdi ingspending what does it say about the innovati innovation. >> it's going to come in ore products like the watch or tv and artificial intelligence and some of the smaller investments that they're making. it may ultimately come long-term in the car. made the investment in didi in china which is the big ride sharing company. they have a challenge. the challenge is what i would refer to as what we would call the mcdonald's or the walmart challenge. once you become the dominant and you get to a certain size, organic growth becomes the big challenge. walmart, for example, you can't continue to open enough stores to get your revenue to grow at the rate it used to you. you see margin compression. that's sort of happened with apple. the fact they're trading at
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12-13 times earnings. folks are starting to see that and discounting massive future growth. that's going to be the challenge. where the stock is right now here with the new roll out coming with all of the positive things that two with the story, you know, i don't think you need to knock anybody's sox off with a new product for this to continue to remain a solid investment going forward. >> you highlight the investment in china's didi. less about ride sharing. we talk about the iphone launch there very interesting to note, reuters put out online chatter has been more muted. not as much excitement as in previous launches. should apple be worried about this? >> well, i mean, it's always about to do business with the chinese. you know, that's a market they've got they eyes on. probably have an easier time in india and almost as many
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potential buyers there. i'm sort of kind of looking at the didi thing and wondering whether or not that becomes a little dish for the car project. if you want to manufacturer driverless cars to go into that market would be a great way to do it. really always hard to tell what's on their mind. on the core businesses, iphone, ipad and then this new launch product, i think they're going to continue to on the margins innovate and can't discount the brand and loyalty people have. it's a cultish following that has been built up over time that's going to be difficult for people to break. >> even sew we continue to see samsung put efforts forward when it comes to breaking loyalty to apple. when you look at the difficulties samsung had with that you are own product launch, issues of the battery and recall there, is that apple's gain as much as it is pain for samsung. >> it could be. i've had both kinds of dwoiss
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and our company we've had both kind of devices as well. we have folks who want to go back to the samsung. we have folks who are real loyal apple users. it's certainly not going to he samsung. that's been the big innovator with waterproof and shatter proof. those are the things i would look for apple to do going forward, but when the phone catches on fire because of battery, that's not a good thing. you need to fix that quick. >> thank you so much for that. i'm neither a samsung nor an iphone lover. i've got both phones. one is work, one is personal. >> you're neutral. >> totally neutral. don't bank on me. >> i have to say, i haven't tried the samsung, but one member of my household loves samsung. i have the iphone mplts morgan freeman, are you a fan?
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>> definitely. >> who isn't. he may be known for legendary preference in shau shank redemption. also a stock picker and he owns tesla. told cnbc why. >> i'm a huge fan of elon musk. i think he's got the most incredibly forward thinking ideas about where we can go technological technologically. he's, you know -- what he's done nobody else has ever done. he's landed a rocket ship so it's reusable. you know what a feet that is? now we're taking off going to be clifring stuff to mars to people who are going to be settle tlg just like they settled the old west and bringing them there and reloading. >> the stock is down 12%. elon musk has recently said he
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wants to throw a pie in the face of all the nay sayers in wall street. >> it's the long division. not getting lost in the solar city debacle. >> we are higher in european markets. modestly higher. xetra dax .25%. we're not far from eight month highs from european equity markets in parts. some upgrades this morning and better than expected company reports. let's give you a closer check on how u.s. markets are set to open. dow on a three-day winning streak. called to open just slightly is lower. nasdaq called higher. that's it for today's show. i'm nancy hungerford. >> and i'm carolyn roth. "world wide exchange" is up next. same time, same place tomorrow.
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good morning. chugging along. stocks rally. chances for rate hike seem to fade. >> the economy, apple is supposed to unveil newest device today. tell you why the upgrade could change the entire eco-system. plus sara is in asia with access to seth curry and under armour ceo. those news making conversations coming up. it's wednesday, september 7, 2016. "world wide exchange" beginnis s right now.


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