tv Squawk on the Street CNBC September 14, 2016 9:00am-11:01am EDT
we want to thank barbara for a great show. >> thank you very much. >> thank you for being here. thank you, sir. "power lunch" a little bit later today. >> 1:00 p.m. eastern. >> hope you join us tomorrow. "squawk on the street" begins now. ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. so far looks like the mildest premarket we've had in several sessions, futures slightly in the green here. plenty to work with this morning including monsanto on mad last night, ford, uber and more. eu giving state of the union, 10-year around 1.7. oil inventories in 90 minutes. start with a big deal this morning, bayer acquiring monsanto in a $66 billion deal,
largest cash bid on record. we have both ceos joining us live in just a few moments. our road map, return of volatility. what investors like carl icahn said how to navigate this market at yesterday's delivering alpha. >> wells fargo's ceo telling jim cramer he will not resign over abuse of account activations. >> apple's new operating system out and update getting mixed reviews. also, tim cook out defending the new iphone 7. the stock saw a nice boost yesterday despite some big losses in most of the market. what will today bring? but first up, futures moving higher after three straight sessions of triple digit swings amid some falling oil prices, concerns about a potential fed rate hike despite tuesday's selloff apple was in fact the bright spot up 2.4 for the best day since july. but then late yesterday at delivering alpha carl icahn offered that blunt assessment of this market environment. >> i think there are tremendous
risks. but i think anyone that's going to tell you it's going to go down tomorrow, next week, even next month or next year, it's sort of guessing game. but you can look at the environment, and i think it's very dangerous. in other words, you're walking on a ledge and you might make it to the end, but, hey, you fall off that ledge you're going to really see trouble. and i think that could well be. >> that theme, guys, whether it was carl or singer or any others, fairly consistent message from people who manage a lot of money. >> yeah. the script was to say dangerous. i don't like that. >> because it's wrong? >> it's been dangerous now for four years. i like the conference a lot. a lot of macro guys making big decisions, have nothing to do with what we do for a living. bill miller, stock picker, okay, maybe that's out of favor. when you take these markets, you say the dangerous, what does it
mean? boston scientific last night, you listen to these guys. all these central banks they pump up all the stocks. how about if you have innovation? how about if you do the right thing? how about if you make a deal? how about if you change your coloration? danger, danger, danger. go listen to bill miller, 9% long bond versus 6% short rate. we've got a short rate that's very low. a 10-year -- oh, my god, i'm shaking the 10-year is at a price if i could have got that mortgage like the g.i. bill when my father got back from world war ii. so when i hear the word danger, i think one thing, these guys must run so much money that they can't possibly own a boston scientific because it's only like $28 billion and they'd have to own the whole company. it is dangerous to run that much money because you are then not able to be able to maneuver among stocks and have to focus on bonds. and are bonds dangerous? when they get into a negative yield, yes. and they're saying i can't help you because i run billions, and billions, maybe i should give
some back if it's so dangerous. >> well, it can be an opportunity for marketing purposes. and they've been very successful at raising assets. i would draw a clear distinction between some of the people we mentioned earlier who raise a great deal of money and have succeeded in doing that and putting up okay numbers. >> right. >> sometimes good numbers this this tough environment, but maybe benefit from that idea that we're going to protect you because we see the end of the world coming, or not really that. >> no, not the end of the world. >> but, mr. icahn -- >> stephen king. >> to give him his due. he's not marketing to anybody, carl icahn, that's all his money. >> you're right. >> when he comes to stock picking, he's also a great stock picker. >> that's what i like him for. >> he's been talking that way for a while now too. but at least i can push out the, well, he's not marketing or anything else. he's telling you from his gut how he feels. >> no, that's not fair to carl. carl say dangerous but say dangerous to like netflix. i'm just regarding danger as
being overall theme of fright, of scare, of central bank intervention that frightens all these guys. and i come back and i am a jack bogle say when you run that much money, hay, you're just the market. >> well, there's a difference between saying that they're just plain wrong, that their macro view is wrong, and saying there will be opportunities even if they're right. >> a lot of markets they have to play in are dangerous. i mean, i would not own a german bond. they're dangerous. but what they play in, and i use the word play, is what bill miller says. he said, listen, these guys are in markets, and they're playing markets, and if they looked at individual opportunities, and let me give you an example of the most plain vanilla in your face opportunity, i would tell you the same thing this morning, amazon. you can say he's simplifying things. i'm saying the markets they are in are not necessarily indicative of what we talk about. >> okay. but what about this market right now coming off a particularly a
bad day? >> i think accentuated the decline. >> you're right. may have exacerbated some fears. i feel it's always interesting to listen to that point of view. and i've been hearing it for many years. i used to attend this conference down at my friend kyle bass' ranch, a lot of the same things. the basic idea you can't keep adding debt to solve a debt crisis. and one day i'm sure it will end badly, but of course we're in the here and now, and investor want returns. >> yes. it's been ending badly since i got in with dow 100 -- >> jim, it doesn't mean it won't. >> i got to be alive long enough -- yes, there was a 30-year bull market in bonds. i am just saying that in the long run as we know from the great advisor are dead. i think when we look at this market we are faced with a situation that is not as dangerous as many other markets that i have seen. >> sure. >> and that's what i am faulting these guys on. i mean, '87 was really dangerous. that was a very dangerous
market. >> in retrospect we can always say that. >> the systemic risk is not as great now. there's like price risk. but i'm just trying to put the danger in perspective. when the dow can go from 12,000 to 6,600, dangerous. i mean, like when you're worried about my paycheck, am i going to deposit my paycheck, maybe i should take my money out of j.p. morgan and put it in treasuries. >> that's a moment. >> i did that. it was dangerous. >> short term you've been saying build cash, sell into rallies. >> yes, raise some cash. >> are you now saying sell into anything? >> sno, no, what i'm saying is don't like this particular market. it could be a down 7% market. i've been overlaying december over and over again on "mad money." but i think the word dangerous is like the word crash, okay? dangerous is sell everything. i went on the "today" show once and said sell everything you need if you need it for the next five years, the dow was about 10,800 and it went down to 6,600, and that call i
regretted, even though i was right i regretted that call because it was so visceral. but then i listened to yesterday and it's like, wow, it's dangerous, it's dangerous, it's dangerous. >> it is. though we should point out those guys say thag are still actively engaged in these markets and in and out every single day. they weren't necessarily talking about the equity markets. >> well, that's -- they're too big. they run too much money. i mean, it's like the only guy who has a solution is musk. >> the biggest short position. >> i know. >> biggest short position -- >> real estate. >> musk is dangerous. >> let's get to wells fargo this morning and the fallout over those alleged abuse of sale practices. last night on "mad money" john stumpf, ceo apologized, he held himself accountable, expressed regret about any situation where a customer received a product he or she did not request. stumpf also told jim he intends to stay on as ceo. take a listen. >> some people say you have to
resign. >> well, jim, i think the best thing i can do right now is lead this company. and lead this company forward. in fact, today we made actually an announcement about product sales goals. we never intended for product sales or any dynamic or any part of a management system to be misinterpreted. >> no plans to exit. the journal today says they don't get it that there's no guarantee it can't happen again. >> boy, i tell you, i disagree with that. i didn't like the journalist's headline which said he blamed all his guys. that's certainly not what i heard. first of all, let's start at the very beginning. he came on. he came on "mad money" and spoke for longer than probably give him in front of the senate, that's a little facetious, but you know what i mean. so you don't come on -- you know, i think it's -- i think it shows standup that he came on and didn't dodge. i also think there were the key points in that interview versus what i heard or read is that he
said the board several times, the board. so now you look at fredric fredrico pena, former department of energy head, but look at james quigley and ceo of deloitte on the audit committee. you say if it's the board it's those gentlemen that will have to speak up before the september 20th hearing. you won't get a press release from them. but the board is making up decisions right now and that's different from everything else i read in the paper. >> what about the stock? $47 down from $50 not a few days back. heading into what given the performance of our equity markets is going to be a higher rate cycle whether it's next week or december. that's a good thing. >> second biggest money after bank of america. >> as opposed to all of the concerns that have been raised as a result of this scandal? >> that's why my chapel trust owns it but also because of the
cross sell. because the cross sell's been so magnificent. now, we didn't, if you like the cross sell and you listen to the change in policy, perhaps you would be like piper jaffry yesterday saying this retail market could stagnate. i asked warren buffett, he is very important to this story, if warren buffett ever were to sell this stock would not be at $47. it has more than a 3% yield. still high quality bank. i do not believe its reputation is so in tatters from this that it will stop opening accounts. that said, i think this was one of those things where the company, i believe, initially misunderstood how powerfully negative this story is. i think they looked at the amount of money that the feds, that bank of america, j.p. morgan, citi paid to the feds and they said this is not that much and that was never the story. i think they misjudged the power of the numbers, the large scale numbers, new yorker wrote an article saying 2 million
admitted fraud, which is not true by the way. it was not 2 million admitted fraud. it was 2 million identified but they couldn't be sure. but it doesn't matter. the fact is that juggernaut against wells fargo is going to plague a cloud over that stock not unlike the whale even though it's not really i think as bad as the whale, the whale is j.p. morgan, there will come a moment when john stumpf will buy stock and the world will decide and a clawback -- let me just say last thing the clawback, the person directly in charge, her conversation has to be clawback, period, end of story, must be clawback if people are going to stay in their positions. >> adds another story for next week, that's for sure. when we come back, ceos of bayer and monsanto on their $66 billion deal. a first on cnbc interview. take another look at the premarket. more "squawk on the street" from post nine in a minute. s been crl being back- so we're constantly going over our data limit. oh, well, now - all of our new plans come with no data overages.
debt. werner baumann is the ceo of bayer and hugh grant is the ceo of monsanto. mr. baumann, let me begin with you. of course the marketplace has known about the possibility of this deal for some time. and that's given your investors an opportunity to make their opinions known. many have been supportive of the deal, particularly as you've sort of talked to your investor base, but there are those who say this is empire building, this is taking the company in a completely different direction. why is monsanto the right transaction given its size for bayer to be doing and doing now? >> well, thank you for the question. and the most important thing and that is what we've really been looking at is what it takes in order to serve our customers and to grow us better in the future. and the great combination of monsanto and us is doing exactly that where we can bring better solutions, faster to the growers so they can help contribute to
feeding an ever growing world. that's what this is all about. >> and you believe that is going to bring stronger growth obviously then would the previous strategy of your predecessor? >> well, this is going to enable both companies to combine their innovation efforts early on in order to develop better integrated solutions for the pharmas rather than doing things conventionally. and that's where the power of this combination lies including the significant competencies we have in both organizations. and that is exactly what is going to be needed in the market going forward. and this is going to be a thing that is going to become more urgent as we move along into the next phase of farming. >> all right. we're looking at the stock prices of the two companies and yours is doing well this morning. perhaps because you paid $128. mr. grant, there are those who believed you would be able to get more for monsanto, more than what i think is about 18.5 times current year ebitda, about 16
times 2017 estimates. why take $128 in cash? why was that the right price? and why was that the right consideration? why not also have gone for some stock, perhaps, to give your current shareholders an opportunity to benefit from some of the things that mr. baumann just identified? >> thanks for the question and the invitation today. so we're really pleased with the deal. it took a long time. the board thoroughly evaluated the whole range of options. and this was the strongest option. it's an all-cash deal. it's a 44% premium. it's 18.5% multiple. so as we looked at the opportunity, it's very strong for our shareholders. and as we look at the future to werner's point, we think the combination of taking the monsanto stable biotechnology seeds and data science and
combining that with chemistry we unlock future innovation growers desperately need at the moment. so it's a great deal for today. and i think a real opportunity for the future. >> and to those, mr. grant, who say you're selling really near the bottom of a challenging ag cycle. yes, you're getting a multiple certainly in keeping what some of the others paid, but we thought there was a greater opportunity ahead here and you're selling too cheaply. what do you say? >> yeah, i don't agree. i think it's really hard to time ag cycles. we've been through 40 years now of depressed crop prices. ten-year low for corn, five-year low for wheat. when you look at a deal like this, you can't try and time these things. you have to take the longer view. and i think when you look at the technologies and the opportunity ahead, agriculture needs some of these new products. so i think this is a strong
deal. i think it's a good deal for our shareholders. and i think it's a mistake to try and time commodity markets. we've seen a four-year trough. who knows how long this is going to take to turn. >> mr. baumann, certainly there were some questions as we might expect about the regulatory environment and what this deal will face both here in the u.s. and the eu. you got some of those on your conference call with analysts earlier. and you actually said you've gotten at least an initial reachout to some regulators. i think i heard you say you had some encouraging feedback. but it's early. >> yes. >> what gives you the confidence that this is going to be able to pass the muster both in the u.s. and the eu when farmers right now are looking at the opportunities in front of them and seeing dow and dupont get together, singeta and now you two together. >> so this speaks to the
combination of the quality we have in front of us. we have very, very little overlay, that is of course going to enable a very, very let's say constructive discussion with regulators about their concerns on where we do have these overlaps, but it's substantially less than in some of the other cases where there are significant product overlaps. this whole transaction and the whole vision we see is driven by growth and innovation and not necessarily huge cost cutting. this combination is going to be driven by highly complimentary product portfolios, and based on the analysis we have done, each of our companies on our own with our antitrust council and advisors we together during the contract negotiations you can certainly see that a lot of the activity surrounding antitrust is all about the uncertainty. we developed a joint level of comfort that the antitrust disposals that might be required can be managed with a
combination of our two businesses. >> have you made -- >> that's what i meant. >> have you made commitments to divestitures in the commitments you will undertake in order to receive antitrust approval or simply your best efforts? >> well, we have made some specific inclusions in the merger agreement to also provide the monsanto board with a necessary level of comfort. we feel comfortable with it. you and his team feel comfortable with it, so we believe we have a base that is stipulated in the contract that we can jointly work against. >> i would just add, i think what makes this unique is a clear view of a pathway to closing this deal because the two businesses are so uniquely separate between chemistry, data science, that's the opportunity on closing this in a 12, 15-month period. >> mr. grant, i've had any number of ceos i've interviewed for deals who also believe
strongly they were fine on the antitrust front. but it's been a tough environment both here in the u.s. and in the eu. some unexpected things have occurred. do you feel like you're being compensated enough? should you not get what you want on the antitrust front, the 2 billion reverse break fee, the company comes out on the other side and be independent is not the easiest thing. are you comfortable monsanto will be well positioned if it doesn't go your way? >> we are. but we're focused -- my personal commitment to this, the commitment of my team is to do two things. number one, during the the 12 to 15 months we'll see two springs and one harvest. so we're going to focus on serving and growing customers around the world. number two, we're going to get this deal closed. and i feel confident when the analysis that we've done with what we've done with our advisors and some of our previous analysis as well that
this is a clean deal. >> yeah. and, mr. baumann, if i'm a farmer, what do you tell me to make me feel better about you two getting together? >> well, if you're a farmer, i would tell you that this combination is going to provide better solutions for you to pick and choose from, or to go for an enhanced offering that we bring to the table with a unique combination of biologicals, seeds, crop protection and analytics that will ultimately enable you as a farmer to take better decisions and to drive higher yields and with that a better farm income for you and your family. >> i would just add -- >> yes, mr. grant, go ahead. >> i would just add one thing. the name of the game in farming around the world whether you're a big one or small one is driving efficiency. and that becomes really, really important in tough times. farmers are starving for innovation. >> right. >> and this through time will bring better innovation to them.
>> and mr. baumann, 1.5 billion in synergies in ebitda, you're confident you can achieve that after three years, why? >> we have a track record of sustainable sustainablely with all the transactions we've done delivering against the cost synergy targets we have set ourselves $1.5 billion is a tall order but we are absolutely confident we are going to reach this. and we have already started some pre-integration planning. we will for sure be working very, very detailed on it and then we will also deliver, rest assured. >> well, gentlemen, we certainly appreciate you're taking the time with us this morning. werner baumann, the ceo of bayer, hugh grant, the ceo of monsanto. carl. thank you. >> thanks so much, david. the opening bell just about four and a half minutes away. d can yy you recommend synthetic over cedar? "super food"? is that a real thing? it's a great school, but is it the right the one for her? is this really any better than the one you got last year?
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two minutes until the opening bell. let's get cramer's mad dash. >> serepta up today very big. that is because the biggest critic of their drug for muscular dystrophy, a man by the name of ronald farkas, he has departed the fda for going to the private sector. and why this is important is that this is kind of one of those binary situations. if sarepta gets approval could go higher, if it doesn't, could go lower. this is a terrible disease. a lot of the people of the parents who had this went to the fda said the safety profile was fine, please give us something
compassionately. i think this is a sign the fda is going to give them something. i think it's very good for the parents, of course for the sufferers. >> medical products and biotech, house oversight going to tackle epipen next week. >> saw that. >> there are some stories out this morning and yesterday about mylan's executive comp and how it compares to almost everyone except fregeneron. >> yeah. regeneron to create tremendous wealth, but more importantly remember you only have to have one injection in the eye per month versus every week with his mack lar degeneration drug. remarkable. i think when you get off the desk you hear mylan, hear teva, valeant, yesterday we had a story defense of valeant by bill miller. then again the stock is down gigantically. these are companies regarded as right on r & d and very aggressive on pricing. those are the ones the industry is like how could you do this to us. they're the ones that the heat should be on. >> let's get to the opening bell here. and the s&p at the bottom of
your screen. at the big board this morning, elizabeth arden celebrating its acquisition by revlon over at the nasdaq financial engines independent investment advisor celebrating its 20th anniversary. got some things going on in retail today, jim. hermez abandons guidance. >> regard to european, again, unfortunately this is they'll cite terrorism which is actually very much plays a role there. but hong kong, hong kong is bad. the readthrough on hong kong, wealthy people, we got the same comment by the way from mes est lauder. and hong kong is not good anymore and that's by the way important for apple too because hong kong had been a great market and then it cooled.
it was mentioned actually in the conference call. but anyone who -- if you sell a product that is very expensive, remember, if you're from the people's republic, you can't go and buy one of these $30 million mansions. they don't allow that there. they have no like, you know, further lane. and they don't have that stuff in the hamptons. >> they don't have 432 park avenue. >> no, but they do have rish mono, that's the way to show wealth. >> coach this is going to be the lowest level since february. >> that note, that morgan stanley note -- >> underweight. >> basically saying that the turn is not for real now. the one that has the for real one is kate spade. i mean, kate spade is back. i don't know, this coach story i just said to my team from "mad money," we got to look into this because the lack of sustainability to turn was one of those notes where you said, boy, i got to get out of town. my daughter has a retrograde coach bag she bought on e-bay.
really cool. they got to get back to being cool. >> didn't stop citi from upping macy's. >> how do you like that? saying there's catalyst ahead. of course they're closing 100 stores, so i think the real catalyst is for tjx. my trust owns it because that merchandise usually ends up out of tjx, but this one said that the quarter could be a catalyst. did talk about a 4% yield. if you look at the cash flows that yield safe, now you're probably thinking, david, that's a 2 for 1 split from last year's delivering alpha, but no, it was 71 on delivering alpha, that was not a 2 for 1 split, that was a decline. >> thank you for clearing that up. >> it's not a two for one. >> i appreciate that. >> it's got derisked. i do believe the inventories are lean around the country. speaking of inventories, you know, we keep forgetting that back to school season was good according to pvh. david, you talked about monsanto and bayer. >> i did.
>> monsanto will not want to go against bayer wants being the same creating new seats but pvh almost has an antitrust issue on shirts and ties. >> they have so much of the market. >> don't forget they have tommy hilfiger and calvin klein. no one has a better look at macy's than pvh. i like this call. i think it's a good call. better than last year's delivering alpha call. >> we'll see how yesterday's delivering alpha call -- >> dangerous. we got to put high voltage signs up. >> yes. >> this is called the third rail -- delivering third rail. i mean, you ever see the third rail? >> we spent a lot of time on it yesterday, jim chenos coming out talking about tesla. corporate governance we've also focused on here in that solarcity deal. but beyond that, jim, we had some pointed questions for him and he came back, stock is up today.
but it is favorite of the hedge fund community. >> solarcity has had -- there's been a big downturn in that solar business since this deal was even announced. that's obviously not what he was talking about. he's talking about how the company is worthless. >> right. he's talking about the fact that they're going to need excessive access to the capital markets for a long period of time given what he believes now they're taking on in solarcity. the shareholder vote hasn't occurred yet. >> didn't you love this moment you asked him, well they have access to capital, he says they have access to capital until they don't and that's often been the story of these companies that are challenged. one day there's no access to capital and people say, wow. jay leno says they make a lot of cars at tesla, but there's no access to capital. >> that's the concern. you've pointed out many times when it comes to tesla there's such a built-in group of believers, i don't know how much they add up to when it comes to -- >> jim stewart. i keep going back to jim stewart's comment on our show, the great "new york times" columnist. tesla shareholders like tesla
stock. and it sounded oxymoronic, but it's true. there's this core group of people like jay leno, like morgan freeman. >> yes. >> morgan freeman, is he necessarily a stock picker? no, he's more important than that. he's a thought lied eader. the reason that's important is because people keep buying teslas. my daughter wants a tesla. i said reach benchmarks and she won't reach the benchmark in time so i don't have to follow through with it. >> speaking of amazon, bill miller had thoughts on its potential next few years. dallas morning news has a piece on how they're opening 21 pop-up electronic stores for the holida holidays. only did six last year. so you're going to see more retail space with the amazon name on it. >> amazon should be careful of walmart because i think jet.com i think they come to play. >> interesting. that would be very interesting if they really were able to
mount a competitive challenge. >> walmart's the only other company with unlimited capital but it's actual money, because the board likes -- >> yeah, and the shareholder base given the waltons own the company that is willing to say invest for the future, we're not worried about quarter to quarter performance which is a great benefit at amazon because mr. bezos has a shareholder base willing to let him do that. >> what did i think about the discussion of chenos, amazon versus what the cash flow might be for alibaba? >> i thought also about tesla. >> yeah. >> amazon didn't really need access to the debt markets although there was a kerfuffle some time back with a lehman brothers analyst who came out and talked about amazon and bezos felt -- i forget when it was, but it's when he made himself available to us. suddenly he was on "squawk box" all the time because he knew he had to have access to the km capital markets. then he disappeared. apple shares are up again. >> well, there's the inventories. >> the sprint and t-mobile news
about iphone 7 activation. >> i think you'll find as t-mobile and as sprint goes so will verizon and att. that the readthrough should be extended. remember he came on "mad money" and said the 7 is going to be huge. we had people figuring he was talking his book because he has a lot of customers, but my understanding is the situation those two bigger companies had a very similar readthrough. it's tough to get this phone. the snap judgment critics may not have been as right as the new layer of critics. there's not a lot of these phones. >> tim cook was on "good morning america" this morning with robin roberts. said the 7 is the best phone we've ever created. take a listen to this. >> wireless is the future. and so when you decide on what the future is, you want to get there as soon as you can. now, why is that important for the consumer? well, that plug, that jack,
takes up a lot of space in the phone. and there's a lot of more important things we can provide for the consumer than that jack. we can provide a larger battery. the stereo speakers i mentioned, those are also enabled because the jack is not there anymore. >> well, that was pretty -- that's a good spot to be able to -- >> a better camera in the smaller phone also. >> right. by the way, i don't know about you guys but all the apps that i have downloaded, i have the 5, which makes me what a triceratops? i need a bigger phone. i need more processing power. i need faster processing power. i want more battery life. by the way, i also don't want a samsung. >> right. for obvious reasons. >> yes. the post dauman era has begun at viacom and the stock is up initially 2.5%, today.
they have a new non-executive chairman at the company, mr. may as i pointed out some time back. of course dauman stepped down as ceo tom dooley filling that role for the rest of this month but competing for the top job. going to have to do a little reporting on that one see what we can find out. but i wanted to note the stock having a nice day in contrast to the rest of the media not doing much. i'm not sure what the news is beyond that. >> well, there are a lot of people obviously who feel now that there's someone there that this is just less of a cbs story. i don't think you can kill it. it's abraham lincoln and vampire, doesn't ever go away. >> finally, speaking of media, see this new twitter app for apple tv. the amazon streaming service. in time for their first nfl game. >> the thursday night football that wrecks everybody if you're a fantasy wrecks everybody's friday. that's why i don't watch the end. but, yeah, that's going to be a big deal.
adam bane tweeting about it. that is adam. i figure he does his own tweets. >> yes, he does. >> but, yeah. they need to be affiliated with the nfl. and the nfl is still generating numbers that are rather extraordinary. did you hear 425 is a big game. >> really? >> the eagles play the steelers two weeks from now 425, could be the game that determines exactly how great they really are. >> definitely hitching their wagon to the league, there's no question about that. >> yes. and you want to do that because it's just thursday night the players will tell you that's a terrible game because they're tired. but america sees two tired teams against each other, they don't care. you're tired, you're tired, put two tired teams together and you get a good game. >> maybe. >> well, not really good. the scoring is so low on thursday because it's like, man, i'm tired, how about you? are you tired? in the huddle they talk about being tired. the front line, man, i'm
sleeping. >> yeah. >> they talk about it. they're exhausted. >> with all that the dow is up 25 points. awfully mild compared to the last three sessions. let's get to bob pisani. bob. >> good morning, carl. much lower volatility in the last hour -- last 12 hours really since the market closed yesterday. lower volatility in bonds. lower volatility in stocks. lower volatility in the dollar. oil was behaving. we did have a smaller than expected build in u.s. crude stockpiles reported overnight, but in the last couple hours oil has drifted lower. so there's your one little weak spot. take a look at the sectors and see energy is the laggard here to the downside. but not by much. banks have turned positive. tech has turned positive as well. interest rate sensitive sector which is have had a tough time in the last few days like reits there and utilities are flat to either side of positive or negative. let's call that mixed. europe is generally positive, but you heard about what's going on in the luxury space with
richemont, which by the way makes cartier, the watches there, the jewelry there, they issued a profit warning, hermes abandoning the 8.5% sales target. richemont expecting 45% lower operating profit than a year ago, that was a lot bigger than people expecting to see down about 4% there. i thought the call on macy's was very interesting. and not just because the stock's dropped about 50% in the last year, but citi upgrading that on the ample free cash flow. but the dividend yield, i think it was important for them to emphasize that because most analysts do not emphasize the dividend yield and i find that a little bit amazing because these companies, many of them act -- offer very attractive dividend yields. this has worked for the oil companies. why wouldn't it work for some of the retail store companies? so you have macy's offering a 4.3% or 4.4% dividend yield if you round it up. but look at other ones, kohl's with a 4.7% dividend yield, gap
4%, l brands, 3.3, coach, 3.7. nobody ever brings this up, but they have made attempts to attract dividend interest or dividend hungry investors out there. take a look at how they're doing here. macy's on the upside, not much movement from some of the other stocks. remember, macy's was a $70 stock just about a year ago, maybe june 2015 or so. so it's essentially cut in half at this point. speaking of the search for yield, if you think the search for yield is over, you see what's going on with the ipo market. we're finally getting some that are coming. i'll show you in the next week or so what's happening, but we had one move forward, actually. noble midstream, comes out of noble, a pipeline company, oil and natural gas. 12.5 million shares, it was supposed to price tomorrow night. now, they tried in december to price. they weren't able to. they had a 6.2% dividend yield. they suddenly announced they're coming and changed the dividend yield to 7.5%. what happened? the thing sells out. they actually closed the book early, which is a very good sign
and announced suddenly we're going to price this thing tonight. i wouldn't be surprised if this prices right at the top end of the market $21 or so. which goes to show you this was the first mlp in a year, more than a year, that if you price it with the right dividend yield for dividend hungry investors, you get interest. the thing closed early. i'll keep an eye on that, talk about that first thing tomorrow morning. ipo market i said this before, but actually we are getting some numbers, some names coming out tomorrow night bank of nt, the biggest bank in bermuda, going to price right down here, lot of interest in that. everbridge also pricing as well. next week valvoline out, alf beauty, which is a beauty company sells cosmetics and the trade desk which is a tech platform -- an ad platform for tech buyers will also be pricing. a number of names in the next few days. see how the market is doing overall, right now dow up 18 points. carl, back to you. thanks so much, bob. let's get to the bond pits this morning. rick santelli at the cme in
chicago. hey, rick. >> hi, carl. you know, when counterintuitive moves reign supreme, it's very confusing to investors, and it ought to be. it's because policy is hard to control when you're trying to control outcomes. i'll give you an example. when we look up at the board, we see yields have moved rather dramatically. this is to the upside at a time where certain central banks have pushed rates negative to keep rates low, played with currencies to keep rates low. but the dollar versus the yen we see it didn't work out well as they had negative rates, their currency was going up. so is it with the long end especially. if you look at the short end first though, everything comparing back to brexit, look at two-year note rates. now, we're not at the highs but we're hovering at the high zone. here's where it gets interesting. let's look at the u.s. 10 and look at all these maturities under the context of off their
most recent extreme low how much have they moved higher? for the u.s. it's about 35 basis points from around the 135 level as we hover at 170. if you look at bund yields, about 22 basis points from roughly about minus 18. for the japanese side of the equation, the jgbs, 28 basis points. from about minus 29 to hovering around 0. but the winner, the winner is the gilt. if you look at the uk 10-year, it's 40 basis points off their low yields. and if you look at the pound/dollar while this is going on, a bit counterintuitive because now the pound has turned down. that double bottom that traders other way. on the dollar index by looking at that chart it would be hard to assess how much rates have moved in the short-term. all this is going on when central banks are doing their darnedest to go the other way. what does that make traders?
nervous. carl, back to you. >> rick, thank you very much. welcome back. when we come back, some tech watchers weighing in on the apple watch series 2. we're going to bring you the latest reviews. and then also ahead, a special treat for us, baseball hall of famer cal ripken jr. on the business of the game. dow up 19 points. we're back after a break.
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♪ the reviews of the new apple watch are out, and the reviews are mixed. "the wall street journal" jo anna stern writes you don't need an apple watch. calling it the first real apple watch. think of apple's new ecosystem like a body, the earpods are the mouth and apple watch is the hand. and lauren good says gps sensor
makes the watch a serious fitness tracker. says it's what the first should have been, a great fitness smart watch. >> i've been thinking about upgrading just because i was fitbit, my family is a fitbit family and i feel this is something i feel i would care about. water resistance very important for me because when i go away, i'm careful not to even put it on. i go away to the islands say i don't want to do that. but the main thing i want is wireless charge and do not have that yet. because i don't like having to carry that other charger with me. >> when the first one came out, we were all sitting here talking about how it would be a high fashion accessory, put the swiss out of business. clearly a u-turn from that strategy, right? >> yeah. and, you know, the price point is so much above it, fitbit doesn't answer the phone, whatever. but i do think that it's much
more sport and that nike is being emphasized, also that nike's involved. but, no, the fashion review is not as important as being able to see who's on the phone and not taking the call. which when i'm with apple executives seems to be -- >> can take it in the pool now. it's fully waterproof, which is good. >> i've wrecked -- i wrecked a brig brightling in a trip i took to barbad barbados. it was like time stopped. it was the most fun i had. no, i broke it. time had stopped. >> you've been a faithful -- you have been faithful to that thing. >> yeah, look who just called me. forget about it. we'll get stop trading with jim in a moment. dow now down 12. s&p virtually unchanged for the week.
but the morgan stanley says you need 275 for copper right now 243 for copper, unless copper goes up dramatically, they just don't like it. this is a carl icahn name by the way. >> he is. large shareholder, board seats as well. >> right. remember, that's a good example if it's dangerous you would not own this stock, but he picks stocks in a backdrop that's dangerous. i want to point that out that's good. how about herbalife? how is that doing? >> i don't know. i haven't looked. >> why don't we look at that? when we get back on tv -- oh, shoot -- >> maybe the ticker won't even be a ticker one day if carl has his way. >> only going to buy 50% of the stock and up $1.90. >> what's on mad tonight? >> we've got toll brothers. i want to ask if they're going to have apple home kit homes built in. i find toll brothers to be incredibly transparent. i love them and i cannot wait to speak to doug. >> jim, we'll see you tonight. >> absolutely. >> a big week for "mad money"
6:00 p.m. eastern time. >> thank you. >> when we come back, apple did rally during that selloff yesterday, as you know, leading the s&p again today. we're going to explore what's ahead for the stock and then baseball hall of famer cal ripken jr. on the business of baseball. we're back in a minute. when you travel, you want your needs to be understood no matter where you go. you want an experience that feels highly personalized. with watson on the ibm cloud, travel companies like wayblazer can apply cognitive analytics to social data to understand what a destination is really like. and who exactly, it will appeal to. today watson is helping businesses create experiences that revolve around you. because that's what the ibm cloud is built for. for fastidious librarian that emily skinner, you.
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♪ good wednesday morning, welcome back to "squawk on the street." i'm carl quintanilla and sarah eisen with david faber at the new york stock exchange. shift of the volatility of the past few days. the dow basically unchanged, s&p almost perfectly unchanged for the week at least, but crude remains troublesome below 45 and inventories in half an hour. >> our road map for the hour begins with that huge deal this morning. bayer acquiring monsanto a $66 billion deal. the largest cash bid on record. we spoke with both ceos. >> stock bouncing back a bit this morning from the selloff yesterday. should investors remain cautious ahead of the fed next week? >> and uber launching its autonomous cars pilot program in pittsburgh. we'll take a look behind the wheel there as ride sharing services take a big step forward
into self-driving cars. as sarah said it's been official as we told you it would be a few times of course, and the price coming in sort of right where it was not that long ago. went up 50 cents a share $128 a share, all cash is what bayer's going to pay to acquire monsanto in a huge deal that is bringing together of course crop protection and seeds and a number of other businesses as well. germany's bayer would take control of monsanto if and when the deal is completed they're looking for that to occur at the end of next year. and of course it is a long antitrust slog that has some concerned perhaps, and one reason why you do see monsanto stock price trading so far below the $128 a share it is agreed to be acquired at, i did ask hugh grant, monsanto's ceo, why 128 was the right price given the company many say is at the bottom of an ag cycle and that
there might have been perhaps an opportunity, at least some would have said, to get an even higher multiple. here's what he had to say. >> we're really pleased with the deal. it took a long time. the board thoroughly evaluated the whole range of options. and this was the strongest option. it's an all-cash deal. it's a 44% premium. 18.5% multiple. so as we looked at the opportuni opportunity. good deal for shareholders. >> bayer will tell you we're really only paying 16.5 times next year because that of course is going to go higher. the 44% premium that's over the price of monsanto and happened prior to any discussion at all of the possibility that it conceivably could be sold. remember it wasn't that long ago
monsantoi monsanto itself was looking to acquire scinjenta. kim china buying and this raises the question what will antitrust regulators think, what will the farmer who buy the products both in crop protection and seeds think about all this consolidation? and will either in the u.s. or the eu or both regulators say wait a second, this is simply one step too far? here's what werner baumann, the ceo of bayer, had to say about that. >> based on the analysis we have done each of our companies on our own, with our antitrust council and advisors we together during the contract negotiations you can certainly see that a lot of the activity surrounding antitrust is all about the certainty we develop a joint level of comfort that the
antitrust disposals that might be required can be managed with a combination of our two businesses. >> and he did go onto say in our interview that they are going to be obligated, it would seem, we haven't seen a merger agreement yet. under the merger agreement at least to divest certain businesses to receive antitrust approval. we'll get more details on that. there is a $2 billion reverse break fee, namely that would be paid from bayer to monsanto should the deal not receive antitrust approval and the two companies have to remain independent. that's the key question here, of course. but it is an enormous deal. bayer is borrowing at those extraordinarily low rates. >> yes. >> issuing bonds in part to do that. also some rights offerings they've done as well of equity to raise the money for that enormous cash portion. i mean, it's $57 billion cash. >> becomes a little more expensive if they have to put the money out. >> it does, or will ecb be buying bonds as they did, funny world we live in. >> they have to buy a lot of
bonds. >> they do. >> that's the program. the other interesting fact here is the backdrop. you alluded to the fact there's been a lot of consolidation, david. i would suggest it's low global gdp for several years, low currency swings and these are international businesses, we've seen that hit dupont and the crop prices are down. >> revenues, as you say, sarah, the top line we talk so often about, you can present bottom lines that being earnings that are better as a result of share buybacks and so many other things. but to get it going they're looking for those kinds of synergies they're talking about here in bringing these two businesses together. providing innovation and they say $1.5 billion in synergies, not from cost but sales after three years. >> top three deals so far this year involve a foreign buyer of a u.s. company, bayer, enbridge,
shire. interestingly everything's coming on sale here selling to other countries. >> especially given a dollar that, all right, it hasn't been as strong, i guess, this year. >> as it was last. but it's still historically kind of strong. >> yeah. >> suggests that u.s. assets -- i'm thinking back to tim geithner speaking yesterday at deliver alpha, u.s. assets are still relatively attractive in the global world, u.s. is still relative bright spot in the global economy and corporations are considered that way. >> speaking more about the markets as stocks bouncing back a bit dow up 33 points from the selloff yesterday. investors still cautious ahead of the fed next week, of course, for more on the markets let's bring in bill smeed, joins us here at post nine along with david kelly chief global strategist at j.p. morgan funds. good morning, guys. >> good morning. >> good morning. >> david, we got the fed uncertainty, we've got the worries about this global unwind of the bond market. we've got median incomes leading all of the major papers today. how do you digest all those
cross currents? >> well, i think the key thing is that there's a fair amount of uncertainty both about the federal reserve and about the election in the u.s. and i think that uncertainty is keeping people on the sidelines, it's added a little to volatility. but if you look towards the end of the year, obviously the election will deal with the uncertainty about u.s. policy. and i don't expect much in the way of policy changes. and as for interest rates, they are low and they're going to be rising. and that is still where we are. i think if anything investors should get ahead of this dissipation of uncertainty, get invested right now. because when uncertainty goes down, equity markets ought to go up. >> you think dissipation of uncertainty, bill? >> yeah, a more important statistic today mortgage applications were up 4.2%, you reported that earlier, on first-time home buyers, not refis. he's absolutely right. the carpeten tnters and plumber the place to be and market is
infatuated with software engineers and computer science people. so the beauty of this is there's a lot of five-year certainty that we're in a 30 to 40-year-old baby boom. and everything that goes with that. and there's very little certainty about what's going to go on in the next three to six months. so you pay a price right now as we have for having the longer vision. but like david says, you get that optimistic trade in place and then let time be your ally. >> david, on this conversation we were just having about the relative attractiveness of u.s. assets, whether it's the companies that carl just mentioned getting bought by overseas corporations or u.s. stocks and bonds relative to the rest of the world, that's certainly been a theme. does it continue here if the fed is ready to make a move? and with so much election uncertainty in the next few weeks. >> well, i think it continues to be a theme certainly with regard to given very low interest rates in europe and japan, global investors are looking for yield anywhere they can find it. i think that is causing money to flow towards the united states. i think they also have economic problems in europe and japan.
but with regard to the buying up of u.s. companies, i mean, another way of looking at it is the u.s. corporate tax code is so unfriendly to many businesses and so complicated that i think a lot of global corporations would like to operate outside of the united states. so i think it is a call to action to make our tax code more favorable so that we have more ownership of corporations being located in the united states. i think that's a mistake we're making here by not really attacking that issue. >> bill. >> we're a bit in the bill miller camp. the 30-year mortgage rate is set off of 10-year treasuries. isn't it interesting out of the last few weeks you've had this very subtle quiet move and then all of a sudden you pop up and first-time home buyers are upping their applications. so the fed does not set interest rates in the united states anymore. millennials will set interest rates. if they borrow the money to buy houses and cars, the price of money will rise dramatically.
and people will have to completely rearrange their investment thesis because capital will get demanded. we've spent the last seven or eight years where kmcapital wast demanded. it all slopped into the common stock and bond market, and the reversal of that trade is going to mean who is making a lot of money on main street, does that translate into common stocks, you know, in the market. and that's a big change. that's a huge change. >> to that point then the headlines in a lot of newspapers this morning is about annual income being up for the first time in a long time, 5.2%. >> exactly. >> is that something that figures into your investment outlook though? >> no. it's just simply this. the best odds on the board are betting on a dramatically stronger economy driven by the maturation of 86 million people between 21 and 40. that's a five-year thing that's pretty simple. they'll be five years older and five years more babies, more houses, better economy from the things that used to make the economy good. >> but don't have all these old
people start taking money out of their 401(k)s? >> no, people live in their houses way longer and today's 70-year-old is dramatically more healthy than 30 years ago. >> look at chart of mobility today, long-term mobility, it's shocking. david, some people want to look at that census data yesterday and argue that it means the consumer's going to surprise us, maybe not this year, maybe next year. is that too simplistic? >> well, the consumer has been surprising us. if you look at real consumer spending, it's grown faster than the economy for seven straight quarters, i think this is the middle of the eighth quarter. consumer spending is growing quietly but strongly. i don't think the u.s. economy is going to boom because frankly we're out of available workers. i think the u.s. economy will, you know, use up what's left in terms of slack, but it's healthy enough and i think it is time for the federal reserve to take us off this diet of monetary potato chips and candy and allow main street to get back into the game. because i completely agree that what we need to do is foster
actual investment spending in things that make us more productive rather than simply financial investment on the back of low interest rates. >> you've been saying that for a while. we'll see what happens. >> i have. >> -- next week. david, bill, thank you guys, appreciate it much. >> monetary potato chips is a new one, we heard candy and morphine. >> lobster on the iwatch. >> and now potato chips. speaking of monetary potato chips, a huge day at the delivering alpha conference and a lot of talk about central bankers. our kate kelly joins us now with some of the highlights. a lot to digest, kate. >> there really was, sarah. but if there were few quick themes i had to point out, certainly an acknowledgment of the low growth environment and the fact that central banks like the zero interest rate policies are largely out of cards, maybe not compared to europe but in general. and the feeling that it's very hard, frankly, to generate alpha in this environment. let's listen to just a few of the highlights and then we can talk about it. >> ever declining rates have not created a sustainable
accelerating optic in growth. >> putting too much emphasis on the business cycle and not enough on the long term bet cycle. >> we need to fix the tax system, close loopholes. >> negative interest rates pose a huge headwind for institutions that have to meet long-term liability commitments. >> the idea that you should raise rates to replenish the arsenal and slow the economy, that's a weird argument to make. it's not true that the major governments are completely out of ammunition. >> so when jamie dimon says to raise interest rates, you think that's wrong? >> that's right. i think that that's wrong. >> you know, paul singer of elliot management, they've had a pretty good year so far up a little over 6% as i recall through the end of july. he's super negative about the macro outlook. and, you know, had a number of pithy lines. one of my favorites though was i think we're in the middle of a close to 40-year experiment in how leveraged a system can be
and in how many ways. and of course he went onto say you should sell any sort of g7 long-term government bonds. they are not a safe haven. anyone who thinks that is out of their minds. he also thinks gold is underrepresented in people's portfolios. i should add bill miller also had a 10-year treasury short, wanted to pair that with an s&p 500 long, he joked that his son told him that trade idea was boring and obvious. maybe it is, but obviously to repeat myself, it's something that these guys yesterday felt very strongly about. ray dalio talking about what a difficult environment it is to operate in. one of my favorite lines from him was that he's trying simply to say stay six days ahead of the markets or even six months would be great, but that's about as far as they can go. and then finally, and we should talk about this, but a lot of concern and skepticism about the political environment, the quote/unquote extremism we're seeing in political rhetoric right now. couple of people directly said they were a little concerned about the idea of a trump presidency.
tony resler on my panel saying trump would certainly add volatility, guys, to the market. so a lot to unpack there. >> sort of depressing, which we were all remarking that this sort of group think that central bank policy has run out of efficacy and that safe haven bonds are no longer safe. i'm just wondering, kate, versus other years whether that group think was more negative. because of course last year there were some doomsday calls and yet market had an okay year so far. >> i would say, sarah, good question by the way. it was both more negative and more macro. you got the sense people really are concerned about the world, whether it's monetary policy, whether it's fiscal policy or the lack thereof, whether it's politics. i remember in past years hearing much more in the way of hard and fast investment ideas. and a few people pressed yesterday basically said i don't have any good ones right now to pass on. i wish i did. one person on my panel talked about that, he's sort of a debt
relative value trader who looks to do two situations at the same time in arbitrage, some imbalances. but even paul singer said, you know, we do situational investing. and it's hard to kind of share that with the public. so a lot of mixed messages, but a general pessimism. >> certainly an educational day for all of us, kate. thanks for recapping it. our kate kelly in new york. when we come back, the reviews are in for the latest apple watch. is it something you need or something you want? we're going to break it down. shares of apple by the way trading up again today five-month high adding about half of the dow's gains, which is up 45 points. we're back in a minute. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face.
not the other way around. reviews of the new apple watch are out, but the new model is getting mixed scores. most major reviewers including those from the journal and usaed to ca-- lamenting its bigger si. and have a look at apple shares. they're up another 3% today more than 8% so far this week hitting a five-month high. here to weigh in on what to do with the stock here, abai lamba and timothy aquary, gentlemen, good morning. >> good morning. >> as we search through the reviews, i wonder how correlated the reviews are to the actual demand given what happened with iphone 7 and the remarks we got
from t-mobile and sprint yesterday. >> i'm not sure apple watch will be the big news here, but it's just expectations for iphone were low and t-mobile and sprint data came in much stronger. as we go from now to year end the focus will be on iphone sales, iphone 7 uptick and the data points are probably going to be much better than expected. expectations are very low. >> yeah, tim, before we move on to the expectations and the numbers for the iphone, just on the watch here, "the wall street journal" still not a need, finally a want. the apple/nike collaboration on the sports watch, what do we know about it? do we know anything about the revenue share or the financial terms of this deal and what it may mean for both companies? >> you know, we don't know the specifics on the deal. it's difficult to say whether apple's paying nike or, you know, nike's paying apple. i don't think nike's paying apple. i think that they have more to
gain from this. i think, you know, this watch -- this is the first real watch. so this is the first product with gps that has a real use case. i think the product is fine. if you sort of look at the wear blg category and look at people who use wearables to exercise, you see apple has about a 20% share of the market. nike has a 30% plus share of that market. so i think if apple can take some of that share that, you know, nike currently has, i think that can actually move the needle. but of course the story really is iphone of course. >> so abay, let's talk about the iphone, now it's kind of a guessing game since apple's breaking with tradition and not telling us the preorders. what do you make of what we heard from sprint and t-mobile? what do your calculations suggest? and what does it mean for second half earnings estimates? >> yeah, you know, it's definitely a bit disappointing that apple's not going to disclose those numbers. when we look at t-mobile and
sprint data, it definitely shows strong uptick -- strong initial uptick of the phones. and at this point we're expecting 44 million units for this quarter. and we think they can get there and up probably within the guidance range. for the next quarter a lot will depend on the sell to and continuation of the sell to. we think the note 7 problems couldn't have come at a better time for apple. i think at this point apple has a chance to gain some more share because of the problems we're seeing in that ecosystem. and the data points can get it to show some growth over the 75 million units we had last year in the december quarter. >> it's just amazing how the sentiment really shifts around this stock, tim. and i think you're a good reflection of this. you got some grief when you downgraded back in july. that turned out to be a good call. and you recently upgraded it i think on expectations, was it of this iphone 7? and if so, what are you expecting in terms of the
numbers? >> yeah, look, to me the story -- iphone 7 is fine. it's a fine product. i think the galaxy issues certainly are a tailwind. but the issue now is going to shift to the install base. right now you have 210 million units that are more than two years old. the upgrade rate within that part of the base very high. and if the street's expectations on the 7 are right, i'm not saying that they are right or they aren't right, but if they are right, you're going to have 275 million units one year from today that are more than two years old. so the setup here really is, you know, every single person i talk to they all say, hey, that's great, talk to me in late october, november once they guide q-4. everyone's still worried about calendar q-4. once we get through that i think the stock is really up, up, up from there. this install base issue and super cycle next year really is the story. >> yeah. the upgrade cycle. thank you both for joining us, abay with a $120 target on apple
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a war of words between jim chanos and alibaba's joe si yesterday. here's what mr. chanos said why he's still short the chinese e-commerce giant. >> it's the chinese model. you never see everything. and yet what you do see is the cash going out the door, not coming in the door. and accelerating going out the door relative to the size even though the business is growing. and that's concerning. >> mr. chanos of course an expert at watching the movement of cash and free cash flow in particular. later on yesterday jim cramer and i spoke with alibaba's executive vice chairman jose
tsai. >> the problem is he doesn't seem to try to understand the business and try to appreciate the power of the digital economy in china. and you can lay a lot of claims, a lot of accusations on our business, the bottom line is on the logistics business we made full disclosure on the profits, loss, revenues, assets, liabilities of the business. so investors can do their own math, whether you're consolidated or not consolidated. >> of course that being a key consideration. mr. tsai did go onto also say alibaba does not want to consolidate or own outright its delivery business, which would mean adding some 2 million employees to its roles of course viewing the company as a technology company as he does. whether there is free cash flow or not, the back and forth mr. tsai of course citing all the stock the company has bought back. mr. chanos countering, well, they borrowed the money to do a lot of those buybacks. so no doubt this debate will
continue. right now alibaba certainly winning it in the stock market. the stock up 25% this year. >> fascinating that it again like in so many chanos trades revolves around understanding the chinese market better than others, right? hard to do. >> it is hard to do. and mr. tsai did say a number of times during our interview, not just about mr. chanos, you know one of the key things they need to address given their u.s. shareholder base is we don't use the product. we use facebook, we use amazon, but we don't use alibaba. and so they want people to try and understand it better. of course the best way would be to actually go to china and use it, but no many people are going to do that. >> it's also reflective when you talk about the macro economy says don't look quarterly, look long term. it's going to be very noisy because for a lot of u.s. investors that's a proxy and take it out when you get a weak number. >> exactly. >> coming up on the show, baseball legend cal ripken jr. on his success off the field right now.
plus, if you live in pittsburgh, your uber might arrive to pick you up without a driver. we'll take a look behind the wheel. much more ahead on "squawk on the street" with the dow up 69 points, stay with us. ♪ mapping the oceans. where we explore. protecting biodiversity. everywhere we work. defeating malaria. improving energy efficiency. developing more clean burning natural gas. my job? my job at exxonmobil? turning algae into biofuels. reducing energy poverty in the developing world. making cars go further with less. fueling the global economy. and you thought we just made the gas. ♪ energy lives here.
i we worked with pg&eof to save energy because wenie. wanted to help the school. they would put these signs on the door to let the teacher know you didn't cut off the light. the teachers, they would call us the energy patrol. so they would be like, here they come, turn off your lights! those three young ladies were teaching the whole school
about energy efficiency. we actually saved $50,000. and that's just one school, two semesters, three girls. together, we're building a better california. good morning everyone. i'm sue herera. here's your cnbc update this hour. german chancellor ak la merkel says she will introduce guidelines regarding a full veil ban in some public places such as the courtroom. in a speech today she said full veiling used by some muslim women is a major obstacle to integration. more than 117,000 households have been cut off from electricity in southern taiwan as super typhoon bore down on the island with heavy rains and wind speeds of 104 miles per hour. it is the strongest typhoon to hit that country more than 40
years. amazon fire tv and microsoft's xbox 1 will allow users to watch the best of twitter, including live streams of 10 nfl thursday night football games. the apps are free. and the governor of the bank of england taking a rather unorthodox approach to proving the durability of the country's new five-pound plastic note, which entered into circulation today. take a look at that. he's dipping it into a stew at a london street market. i don't know what kind of stew, but apparently it held up okay. that's the news update this hour. now over to jackie deangelis with the latest eia inventory report. good morning, jackie. >> good morning to you, sue. thank you, the eia out with weekly inventory record, drawdown of crude inventories little more than half a billion barrels last week and we had a build in gasoline of a little bit more than half a million barrels. bit of a mixed report, but you can see losses in crude oil are
paring this morning. traders were looking for a build this week after we saw that 14 million barrel drawdown last week. so we're balancing out a little bit in the marketplace here getting closer to that $45 a barrel mark. but traders it witelling me we' going to gravitate to that level until we see the next catalyst. you can tell from this number last week was an anomaly. back to you. thank you so much. volatility as you know the past several sessions is back, stocks rallying this morning though dow's up almost 90 points after the selloff yesterday. session highs. ubs director of floor operations art cashin joins us once again onset. art, good morning to you. >> good morning. >> got that draw just now on crude. apple's helping. but you think it's about something else as well. >> i think it was primarily about the yield on the 10-year. during your conference you had people like bill miller saying he thought it was the perfect short. away from that you had jamie dimon talking about the fed should raise, mohammad el-erian
said it should raise, this morning we're back below 7 and that's a sigh of relief. as we heard from jackie deangelis, improved picture in the crude inventory, may put a bid under crude and that will be a further help for the bulls here. >> right. so now near-term support? >> near-term support remains down around 2115. 2115 to 2120. you held up there yesterday on several occasions. so i would look for that on any further weakness. and we get much above 2140 we might get the bulls back in the game a little bit. >> the fed should raise, the fed should raise rk you mention jamie dimon saying it and yet at delivering alpha yesterday we heard so much gloom on the economy. for instance steve schwartzman of blackstone, ceo there talking about what kind of growth environment we're in in the u.s.
listen. >> we've got inhibiters on the growth of the economy, this kind of huge regulatory repression that's going on. sort of like one foot on the brake, one foot on the gas with a very slow rate of growth at 2%. and that's in a world where we probably have close to 1% immigration between legal and illegal. so we're growing net immigration probably the same as europe, which is not heroic. >> so we're barely growing. even though he's talking about big picture type issues like immigration and regulation, what would happen if the federal reserve does increase rates in this environment? >> well, i think it would be not only the wrong call, it could potentially be a disaster. i think the markets are not prepared for it. you can see that by the likelihood that it's still priced down in the 20s, 20% chance. so if they came in and did it, it would surprise the markets and i think have a very, very
negative effect. i don't think they're going to do it. look at congress. we're back to fighting over whether we're going to get the money to run the government. i mean, this is definitely the wrong time to make any moves. >> we have had i'm thinking guggenheim yesterday saying brainard was a preemptive dissent against a hike next week. >> she's entitled to her opinion she sounded solidly on the same course she's been. the markets as i say are not predicting it. almost never in the history have they raised rates when the market had not had at least a 70% chance that they were going to do it. >> so you see a disaster if they actually move in september? >> yeah, i think so. >> a week. >> i think it would destabilize markets greatly. we're about to get a move up in libor. the money markets are going to change in the middle of october. there's a lot of destabilizing
things out there including the election. so they should wait at least until december and maybe not even then. >> one last bid on what's leading all the papers today, that income data from yesterday. did that move you at all? >> not really. you know, it was nice to see. it may change a couple of political speeches. but as sarah pointed out with schwarzman, doesn't explain broken out. >> art, thank you. when we come back, baseball's all-time ironman, cal ripken jr., talk about his success on and off the field. stay with us, you're watching "squawk on the street."
a calmer day in the bond market as the dow rises 70 points. let's get out to the cme group, rick santelli with the santelli exchange, good morning, rick. >> good morning, sarah. maybe only calm because it's pausing. and to that end i'd like to discuss all these issues with our guest today. david, thanks for taking the time. >> hello, rick. >> oh, there you are. sorry about that, david, i'm having ear problems. all right, quickly, with zero interest rate policy, with negative interest rate policy, as you just heard sarah just say smart people saying you can't raise rates we don't have enough growth. it's as if there's no cost benefit analysis done on anything. policy that is keeping the economy from growing, keeping rates maybe artificially depressed, manipulating currencies, it is not a zero sum game, meaning there is no damage done. there's a lot of damage being
done, pensions are one of them. whether it's kentucky, illinois, why don't you explain exactly how much damage is being done to states and cities that have to pay so much of their tax base to past retirees and assumptions they're going to make 7% when 7% seems pretty aggressive. >> certainly, rick. so as you point out, if the fed wants to go ahead and encourage investment on an equity basis, obviously they're going to have to lower rates. which they've done for a prolonged period of time. unfortunately, for investors that rely on fixed income returns like pensions, that has been a no return environment for a long period of time. pension funds in the united states public pensions, particularly states like new jersey, illinois and others, kentucky, are over 60% underfunded on their pensions. that's multiple billions of dollars. there are healthy assumptions that those states have made, very optimistic assumptions
about rates of return going forward and expectancy of life for people. and unfortunately those rates of return are way off base at this point. many are projecting rates of return between 7% and 9%, and we see fixed income returns even on the highest yielding bonds, not even coming close. so obviously when it comes to investment grade where the bulk of the money is going to be in treasuries and so forth, those pensions are going to continue to be underfunded. and one last point, obviously there's going to be a turning point that is going to occur where rates are going to start to move upward at a substantial clip. and those pension funds that are going to be holding investments at that point that have coupons that are quite low are obviously going to be affected to the detriment when that turn does occur. >> let me get this straight, david. let me get this straight. yields aren't high enough to create an investment landscape to make the types of returns to fund the pensions?
and while doing so, they're forced to hold paper that is under pressure right now as rates are moving up? it seems as though it's a double whammy. is that about the size of it? >> that's exactly the size of it. and i'm going to add one more element that makes it even worse, which is there is no restructuring regime. there is no legal regime in the united states to allow these states to restructure their finances including their pension obligations. so at some point, i'm not saying it's soon, this is a very slow moving train wreck. but at some time soon we are going to hit a point where these pension obligations need to be restructured. we have no mechanics for that. and unfortunately our legislators do not act until the absolute last moment of crisis. >> david, thank you very much. that is not very good news, but what many think there is no or little risk to keeping policies in place that don't seem to be correcting what they're supposed to correct, these seem to be the
areas of collateral damage. thank you for your time. sarah, back to you. >> all right, thank you, rick santelli. now let's send it over to our sharon epperson sitting down with a very special guest. sharon, take it away. >> reporter: sarah, cal ripken jr. is baseball's ironman. in his iconic career he played 2,632 consecutive games. he played for 21 seasons with the baltimore orioles and joins me now here in baltimore at the annual conference for the financial planning association. cal, thanks so much for being here. >> it's my pleasure. thanks for having me. >> you are still in the game. you are ceo and founder of ripken baseball. you have a minor league team not too far away from here, a great stadium that they play in, very involved in youth sports as well. how have you been able to make that transition from baseball to business? and what traits are really key for a ballplayer to bring to being an entrepreneur? >> well, i wish there was one or two easy things i could tell you or the viewers of your program,
but the fact of the matter is a lot of the principles that you built your athletic career around applies in business as well. i mean, you do have to assemble a really good team. the people matter the most. it's what comes. and then you have to create a culture that is like minded and you have to be hands on. you just can't have a successful career and say, okay, i'm going to start this and give it to somebody else and let them do it. you have to be right in the middle of it. so the hard work, the preparation, all the structure that baseball gave me and the discipline to do it on an everyday basis, that applies to business too. >> ripken baseball is in three states with young people. you have tennessee, south carolina and here in the baltimore area. >> we have three models that work. >> three models. >> three kids models for tournament experiences. once a weekend model, one's a week long model and one is a hybrid, myrtle beach and aberdeen and woe're looking for opportunities to duplicate or scale those models in other parts of the country. we built the model that works
and now we have to find a place to do it again. >> millions of parents including my spouse spend a lot of money on their kids and sports activities. a recent study out said parents may spend on average $100 to $500 a month per child on sports. are they overdoing it financially? or just pushing their kids too much? >> well, being in the business of that, i don't want to say that they're overdoing it, but i think sometimes the fever to say, okay, i got to have my kid playing more baseball so they can become a professional baseball player. you want to keep that in perspective. you want to say they're enjoying it, they're experiencing it. some of the complexes we have, they go on a baseball vacation and take the rest of their siblings and then you have a family vacation. so if you want to support your child in activities they want to do, it's okay to do that. but i wouldn't layer on the expectations that i'm making a professional baseball player or professional lacrosse or soccer player by putting them in all these tournaments. but we have experimental
tournaments welcome to you, we have camps we can help teach you baseball, but the parent still has to keep the balance that says because my 8-year-old or 9-year-old or 10-year-old is only 8, 9 and 10, i can't make them a professional right now. >> all right, sarah. >> cal, it's sarah eisen in new york. good to see you. thanks for coming on. >> hi, sarah. how are you? >> i'm very good. and i'm wondering if you can give us a stock pick on an industry that you know well and that i cover adidas, nike, under armour. i know you used to wear adidas cleats in the '80s, broke some records in the '90s with nike, and now doing business with under armour. what's your go-to? >> well, the latest and greatest is under armour. we're partnering with them. it's interesting, i'm not a player anymore or an endorser per se of wearing the product, but we have kids businesses that under armour wants to get in front of the kids. it's a great partnership to have. and under armour is the new, the exciting, it's all the stuff that all our kids want to wear.
and it's all i wear as well. so i would have to say under armour. >> you know, you're involved with other brands as well, whether it's oppenheimer where you're a spokesperson, and you have your brand that you're building, that you've built well with your ripken baseball. how do you differentiate between making sure that your brand stays solid and also work with these other brands? >> well, it's careful choice, careful picking. companies are going to carefully pick you so you don't hurt their image, what they're trying to portray, but i kind of reverse it and think, wait a minute what about the company? if something happens in their company, that's a negative reflection on me. so over the years i've chosen my relationships pretty carefully. i remember i had a chance to do a jockey underwear ad when i was 22, and i chose not to do that and did a milk ad over top of it because i felt more comfortable doing milk ads, not doing underwear ads. so, it's who you are and how you choose that's important. and by the collection of those choices, that's your brand. >> all right. thank you very much. cal ripken jr. here with us at
the financial planning association annual conference in baltimore. we'll be here for a couple of days. thanks so much. sara, back to you. >> great stuff, sharon. thank you for bringing us that interview. when we come back, the race to establish autonomous cars taking a huge step forward. we'll take you behind the wheels of uber's new self-driving car, next. much more ahead on "squawk on the street" with the dow up 55 points. stay with us. ♪ shut up and drive ♪ americans are buying more and more of everything online. and so many businesses rely on the united states postal service to get it there. because when you ship with us, your business becomes our business. that's why we make more ecommerce deliveries to homes than anyone else in the country. the united states postal service. priority: you experience the thrill of the lexus is f sport.
uber launching its pilot program of self-driving cars in pittsburgh. our phil lebeau joins us with more and an inside look. we're all curious about this one, phil. >> sara, you know, i've done a lot of self-driving car stories and i've been in a lot of models that are autonomous drive, and some are more intuitive than others. i put the uber one at one of the more intuitive ones that i've had a chance to be behind the wheel of. here's what it was like in pittsburgh earlier this week as uber was giving us a taste of its self-driving car program that it's beginning in that city. it's operating a handful of these vehicles, giving free rides to customers who have said, sure, i'll go for a ride. by the way, there is a driver and an uber engineer in the front seat, just in case they need to take control of the vehicle. also monitoring how it does.
and because the program is based in pittsburgh, the head of the uber self-driving program, self-driving car program, believes this is a unique place to get insight into how these vehicles operate. >> pittsburgh is one of the toughest places to drive, and this is a great place for us to stress test our vehicles. and if you can drive in pittsburgh, you can probably drive, you know, in most places in the u.s. >> all right, so, let's bring you up to speed on all of the different companies that are working towards self-driving ride-share operations. you've got uber in pittsburgh, the chinese company baidu is doing the same thing. you've got gm with its investment in lyft working on this. and then ford has said it plans to have self-driving vehicles, either for car-share or ride-share operation ready to go by 2021. and speaking of ford, it is holding its investor day today. interesting comments from mark fields this week about how much of the market will be in self-driving cars. guys, he thinks by 2025, 5% of
the auto market here in north america will be self-driving, fully autonomous vehicles. 5%. that be about 5850,000, 900,000 vehicles by that time. >> it just keeps moving sooner and sooner. and you just showed us, companies plowing ahead. i wonder about the regulatory framework or any. can they just go on the snrood is there any state, local or federal rules about this yet? >> there is a number of them that need to be worked out. they need to come up with a uniform set, sara, and that's one of the challenges that will be holding back the actual deployment of these vehicles on a full-time basis, without test engineers in the front seats. >> phil, real quick what was the car? what is uber using as the car, actually? what brand is the audible? >> right now modified ford fusions you see with the radar on the roof and cameras, and they also have involvie xe-90s, those crossovers. they'll also be out on the street over the next couple of weeks. >> phil, thank you. bring it on. i'm ready for the era of
self-driving cars. by the way, the mayor of pittsburgh will be on at 11:00 a.m. eastern time to talk about pittsburgh's pilot program with self-driving cars from uber. and that is coming up on "squawk alley." let's find out what else is and send it over to jon fortt. hello. good morning, jon. >> good morning, sara. well, pandora's had a rough couple trading days, but interesting days as far as deals they're making with music labels. we have the founder and ceo tim westerman coming up. plus, apple is up. what is up with the new iphone 7s? we'll dig into them, going on sale this week. and a top former google executive now working on medical. we'll check in with him and a lot more coming up in "squawk alley."
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