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tv   Squawk on the Street  CNBC  October 13, 2016 9:00am-11:01am EDT

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do with the video? >> why are you taking the video? what's the point? >> you get a good shot here and there, but a lot of video. >> i'm not good enough to want to record myself skiing. if you're like a top professional, it's pretty good idea. >> that's a big if. >> that's a big if. wilfred, we want to thank you for being here. kelly, thank you. >> thank you for having me. >> join us tomorrow. "squawk on the street" begins right now. ♪ it may mean some people say that you have to resign. >> well, jim, i think the best thing i could do right now is lead this company. and lead this company for -- 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 form of management system to be misinterpreted. >> one month from that appearance john stumpf stepping down as the head of wells fargo. good thursday morning.
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welcome to "squawk on the street." i'm carl quintanilla, david faber, jim cramer at the new york stock exchange. get to wells in a moment. premarket weak on the back of disappointing chinese trade data, renewing concerns about global growth. europe down more than 1%. yields here falling back to 1.75. and oil still fighting it out just above 50. john stumpf said departure comes amid that scandal that's engulfed wells fargo. tim sloan is now the new ceo. sanger will be nonexecutive chairman. jim, happened suddenly, tensely worded press release. your thoughts after seeing that tape. >> well, first, when i asked stumpf whether he would resign, that was regarded at that moment as a radical question. almost idiotic. people said what are you kidding me? jumping to conclusion. and i just felt that the way went through the crisis the crisis is a very simple lesson. you lose your job whether you know about what happened underneath or you don't. now, you can say jamie dimon
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didn't lose his job, very different situation. wells fargo had a systematic problem, the fact is "los angeles times" when they brought the attention to 2013, and when congress came to it, when warren buffett looked at the situation, there was no way that john could survive. but i think that the bank was totally taken aback because i think they were thinking, listen, we were only fined $185 million. citi was 7, j.p. morgan 13, citi 17 -- i mean bank of america 17. and they kind of felt like, well, you know what, we're not the bad actor. but it was a very easy scandal to understand. and that in many ways was john's undoing. >> and it wasn't long after your interview with him, i think as you said the idea he would resign then. but once he got in front of congress the first time, many people started to believe, you know what, this is not going to last particularly long for him. and what i continue to hear from so many people is the idea he would be a distraction as much as anything and that it might be some time before the board might have moved on him. they may have waited until they got the results of this
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investigation that is still in its early stages by sherman and sterling of exactly what went on. but he believed, jim, that he had become too big a distraction. you have an earnings call tomorrow. what would that have been like? and so it does appear that it was purely his decision to say i'm done, i'm out and mr. sloan, who was appointed about a year ago as the president and c.o.o. and heir apparent, you're going to take over two years early. >> well, look, in john's defense i don't think he actually knew about what the scam, and i'm getting a lot of information from behind the scenes that it was a scam, i don't think he was directed by tollson. that is going to happen. it will happen. and john's going to be interviewed and he's going to have to take the fifth or say it. this is not going away because there was a scam. and that has been not talked
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about. there was a scam at the bank of which many people were in on. and it was done in a very tricky way, i understand. and it's not been spelled out, until it is it doesn't matter. wall street say, listen, you want to be a fed rate hike, you want to be in wells because it's down, but scam. a scam involving how to open accounts and how to close accounts and there were very many people in on it and that's what i think the government wants to find out. >> even though he may not have known about it, is he responsible for the culture? >> there's a very clear line. wall street -- when -- unfortunately i've had many friends in the situation where they go into the head of the banker, go to the board and say, listen, we didn't know, i know i have to be fired, can i have a good package? i know i have to lose my job because of failure to supervise. failure to supervise rules were so clear there was no way john could survive. he either knew about it and fired with no severance. >> by the way it's still unclear or what he did know.
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and the investigation as i said is in its early days. they're probably still just r d reading board minutes at this point. but eventually they will get to e-mails and they will look. from the earliest days when i was speaking to some of their competitors the idea there had to be employee complaints was something i heard a lot. >> again and again. >> so if you start to see there were e-mails from employees working their way up the chain of command that were ignored, that certainly might have make him more culpable. to the point you raise about what they will take or take back, potentially at stake he's not going to do anything with them, he's got six months at least that he's sort of, you know, will see. but if they do find wrongdoing, that could be an issue. >> they have to put sanger out. steve sanger. >> now nonexecutive chairman of the company. >> man of great integrity though you can read in "new york times" a piece that really just outed him as the man who said we're putting sugar in the cereal. why do i mention that? because we're a highly political environment. if he goes out elizabeth warren
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will bring that up, she'll bring that up because she watches the show. >> she's been vocal on twitter in the last 18 hours. >> holy cow, she's taken to twitter too, in a way that is kind of like, you know, you didn't have that before. use a press release no one pick it up. but david raised a good thing. i spent a lot of time over the last two weeks to find out whether she would come out and say i think john stumpf didn't know about it, it's now irrelevant. but the question is let's hear about the scam. because the scam, and i understand some people who have studied it have said that you opened an account on friday, the bank person put $25 of his own money in it, you closed the account monday, you took that $25 back, you got credit for opening the account. >> right. all salesin cent i incentives ak have been ceased. they now notify you when an account is opened in your name chrks is hard to imagine that
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they weren't doing that previously. >> they had the software, all banks had that software. that software did exist. you had to use it. >> now they're doing that. and now it's the sloan administration. tomorrow he gets on the conference call when they report earnings. he's got to deal with these questions. he was the cfo of this company. he's no stranger to earnings calls. >> the wholesale side. >> the wholesale side we'll talk about in a second. >> do you think congress -- remember when lloyd blankfein went before congress he was trying to describe how they didn't participate and congress was like you do mortgages, you do mortgages. tim sloan could say -- >> levin understood everything that was going on when he led that hearing. >> do you think there are not people now savvy enough -- >> b of a this morning, we think the market will view him as relatively untainted from controversy. >> look, guys at wells who have unfortunately been completely out to lunch, you pick someone from outside. that's what you do. when you speak to the other
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banks, which i've already done in the last 48 hours, all the other major banks said the same thing. you needed someone from outside because of congress. because this is not the -- >> but sloan was never in control of the retail bank. >> never. i agree with you. i am saying if you want to please congress. if you want to please wall street, wall street's fine. sloan's a good guy and we love him, c.o.o., only worked with -- >> give me 12 months. >> what's more important? pleasing shareholders or pleasing congress? >> you want to know what's more important? >> yeah, i do, i want to know. >> okay. janet yellen. you buy the stock at 50. >> okay. >> janet yellen raises rates. we're going to say who was that, what was his name? was carrie a woman or man?
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stumpf, i don't know, he was amazing he was -- >> take a listen. >> wells fargo is a company made up of 268,000 team members all across the country and all across the world. and no one individual is necessarily going to make the difference. we all have to work together to restore the reputation of the company, continue to focus on moving the company forward. so one person whether john stumpf or candidly me is not going to make the difference. >> so what's to prevent cross selling of all kinds being clamped down and these banks having a huge profit engine center? >> i think the incentives -- look, you still want to use wells for a lot of different things. there were actually people want to do this without having it jammed down their throat. but here's what i would ask mr.
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sloan if i were senator warren, okay, listen, you were cfo, did you not detect a pattern of incredible growth versus bank of america? now he's going to say i don't know bank of america, but by this point she will have bank of america's numbers. i've spoken to the heads of all the major banks and they all said the same thing to me, which is that this was actually detectable pattern, that money in, money out pattern i just described, this was a detectable pattern in terms of opening accounts. i'm not saying that they knew from outside, but they did all say you mean to tell me there were people who were opening huge amount of accounts and they did not hit the cfo's desk? how could the cfo not know this? >> mike mayo this morning on squawk argued this is all the result of echo of anger from the crisis, even though it has nothing to do with exotic instruments or derivatives, old fashioned retail banks, you agree? >> no. no. this is very easy. like i said, it's a scam. if there was a scam, if there was a way to be able to gain the
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system in order to be able to get a higher commission, that's -- >> so that's a scam that went on for many years and involved thousands of employees and millions of accounts sounds pretty bad. >> that's what i'm saying. look, it's not the echo of the times. it's just a bad scam. no one's using the word scam. it's incredible go back and talk about fraud, but there were people who were opening a huge number of accounts. apparently where people were opening a number of accounts that was like all of us would have said, wow, that guy's the greatest salesperson or that woman's the greatest salesperson in the world or there's a scam going on. apparently there was interest in certain banks, certain branches where people were signing up. they weren't signing up dead people. wasn't chicago election. but there is absolutely, i am told, patterns of abuse that would have been known to anyone in the bank to anyone in authority. but we need to see the subpoenas. we need to see the testimony of
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tolstedt. mike mayo, god love him, but this was a scam that is so easily understood that it's just grist. it's grist. grist. >> for the milk. >> by the way, if you go on to the wells fargo website this morning, stumpf is still on the site. there's his picture. we'll see if that changes in the next 24 hours. >> i expect it will. >> sloan will drive the call tomorrow as we get earnings. >> i think that was just taken down during the commercial. >> they heard you, carl. somebody's on it now. >> that will not be there. >> it's early in california. >> when we come back, a lot more on john stumpf stepping down as ceo of wells fargo including reaction from congressman david schweikert, one of the members who grilled stumpf on capitol hill. first a closer look at the markets and whether apple can extend that seven-day winning streak. nasdaq if it's down today is three straight, haven't done that since early september.
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on what matters to you. morgan stanley.
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. futures pointing to a sharply lower open. weaker than expected chinese
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exports down 10% in september from a year ago. imports were also down and we're watching apple as well whether it can extend its daily winning streak to eight. that drop in exports in china biggest since february, guys. >> yeah, seven-month there, this does not jive with a lot of people. baltic up 85% of the year, ford numbers for the month of september plus 24, gm almost as high. there's no data that jives with this. be it there was a belief also that europe was taking more product. so this has been a -- it's d jarring, this number did not fit the narrative that has driven a lot of stocks up including caterpillar. >> right, the dollar keeping getting stronger. >> i know. right in time for earnings. >> yeah. which some believe will make it even more difficult for the fed to move in december although
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looks like they're pretty much prepared to do that based on those minutes yesterday. >> yeah, i think so. and i do believe we're trying to build in with those numbers that you just said i think we're trying to build in a rate hike ahead of the rate hike. one of the reasons why the bank stocks have been relatively better, but the china figures are for those people who were saying when we went to the delivering alpha we had a panel especially talking about tech resources and why that's up and the stock up almost 300%, that does not fit the narrative either. and csx export number does not fit the narrative. so the narrative had taken hold. if you look bhp and rio have been remarkable performers for the year. they are the real chinese proxies. they're going to roll back some of those gains. >> yesterday you spoke about how the market is trying to understand or getting warmed up to the idea of a house sweep -- or a dem sweep, which would include a house. there's thoughts that as you said it would scare the market on taxes. others argue that physical
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expansion would be some sort of bullish black swan. >> well, i just think when people -- by the way, i'm going to say something i don't think's going to happen but i don't think people are building in a single payer. they're building in this notion hillary clinton is going to put through very radical antidrug pricing policies. i do not think she's going to do that. even if both houses are taken, it's not going to be that easy to do that. but that's what the stocks are building in. you see these drugs, there was a pfizer downgrade today. jefferies, i thought it was fabulous. it's just something -- people are paying -- fabulous meaning it's not really the earnings, it's people going to pay less for this group. david, these hmo combinations, they kind of dead, i think. >> well, again, people look at aetn aetna/humana different than cigna. certainly the way they trade they both have a difficult case to prove. by the way that's going to start soon the cases against the doj
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seeking permanent ability to get together. humana also surprising us with news that wasn't particularly strong. >> status that -- >> trying to cover that star quality rating with guidance to the upside. >> brent saunders put out a blog today talking about eye care. brent's trying to lead this movement within the drug industry saying we're going to be responsible. i think he keeps waiting for other drug companies to follow along. i think they ought to get in line because this is something -- if hillary clinton wants to -- i'm not going to advise hillary clinton on her campaign, but a tweet which says they're not doing enough, i mean, elizabeth warren tweets these guys tweet and these are the tweets that shake the world. a tweet from hillary clinton right now about drug pricing would take that group and roll it really roll it over. >> yeah. >> really roll it over. >> we'll get cross-claim cramer's mad dash and count down to the opening bell in a few more minutes. one more look at the premarket,
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thursday morning, where are we headed? >> periodically a company i talk about ulta salon. mary dillon comes out today. much better than thought. she goes up to $1.35 to $1.38 for next quarter, full year guide -- wow, how does he have all those people? >> oh, chip, he wears jeans for six months. tells you you never need to wash your jeans. >> the 49ers, he happens to love the 49ers. >> but let's talk ulta. >> mary dillon is going to be talking about how business is very good. the last quarter she beat numbers but didn't guide up enough. of course 14% comps, best comps of anyone but stock unbelievable performer. >> what's it going to take to reignite it? >> what's it going to take is the rest of the market realizing there's nothing else working. domestic retail, you see best buy, almost at a 52-week high
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yesterday. money's flowing back into that group. simply because it doesn't have strong dollar worries. doesn't have any worries on valuation because it's come down so much. this one does sell at 30 times earnings. >> okay. but it's got the growth to prove it, right? >> those growth guys like to -- they're willing to pay 2x, so therefore this one could go higher. dillon rocks because remember, david, when you and i go outside -- >> d-i-l-l-o-n or which? >> you take a selfie when you go outside, that's what people say, instagram and -- >> i take mine off before i leave here. do you take yours off? >> makeup? >> yeah. >> i don't wear makeup. this is my natural skin. >> beautiful. like a sheen. >> beyonce and me. >> yeah, i think of her when i think of you. >> thank you. >> got six and a half minutes before the opening bell. a lot more "squawk on the street" stay with us.
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you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in just over two minutes. a busy morning. wells fargo of course john stumpf stepping down, jobless claims a 43-year low, donald trump just now responding on twitter to new allegations of sexual assault. and we're getting ready for earnings season to kick into a second gear. got csx and delta on the tape this morning. >> look, delta stock's down more than 20% going in. so they're consistent with what i think people have been saying which is, hey, you know what, not so great, not so bad. csx once again doing just a remarkable job on operating. they save so much money. i cannot believe how much fat there must be in a railroad. they talk about $341 million in operating efficiencies. still an 8% drop in coal. i was hoping for coal to kind of level out, but that is a good quarter. that's a good quarter. csx delivered again and rails have been one of the bright spots in this market.
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they've worked. i think i saw norfolk southern down yesterday barely nicked it. that's a group -- that's a leadership group. stay focused on that group. >> meanwhile we've talked about the ipo window of twilio, nutanix and now big elephant coming in the room. >> this is a good time. although i got to tell you if you look at the acacia secondary that was done at 100, it looks like that was a short squeeze bust now it's down at 87. remember, acacia, they preannounced a better number when they did this. twilio, same deal. they did the secondary. i think that snap must realize the secondary's not holding up, let's get in there. not unlike the linkedin period, you had to get in there. >> no, could see some big names. spotify is one we're focused on, will they or won't that early, airbnb's still thought of as a possible interim '17. could be an interesting year. >> a small amount of stock, that's what contains it. >> let's get to the opening bell here, s&p at the bottom of your
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screen. at the big board hp inc. marking its first year as a separate company from hewlett packard. over at the nasdaq tech week in new york for its fourth year supporting tech entrepreneurs. >> speaks to last conference call was very controversial. >> yeah. >> this also is 3d play, but the stock's been up a lot in an environment where they've not been that kind to these stocks. >> well, pc to man -- we got numbers yesterday in terms of declines in pc demand overall? >> yeah, i think you got to be -- this group is one of the few unscathed groups in tech. so you just have to be careful. you have to be careful with everything in this group. they've had a big run, but micron i thought would be up more for the last quarter. i'm just saying, look, tech has been one place to be. i'm not making a call on hp. i'm just saying tech had been pretty good and tech is what's not holding n ining up in this
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particular decline. >> not much is holding up today. i don't want to overstate it, but we are down little more than half a percent in the s&p -- >> you're right. >> already this morning. >> i saw netflix give up a lot of its games, i thought it was amazing. alibaba had been one of the hot stocks and kind of cooled there. >> it's cooled off. still 25% for the year. >> got investor letter from ma this morning says, since the ipo the global economy has gone between global despair, sort of describes this manic environment. and then goes onto talk about aspirations in cloud and big data and logistics. things that sound familiar. >> yeah. look, when i was out west social mobile cloud, artificial intelligence, internet of things, virtual reality, augmented reality of which i actually know cloud. >> you know cloud as in k-n-o-w?
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>> i went to a lecture on machine learning. machine learning is if you like david faber, you may like jim cramer. if you like carl quintanilla, well, maybe you'll buy jim cramer. amazon knows machining better. everyone's trying to catch up. >> google has their deep mind project, who knows how deep they're getting. that's scary stuff. >> is it scary stuff? >> to me it is. you know it is. i'm not going on another one of my rants. you worry about this guy sam altman from trying to create this a.i. group that's going to make sure it's not going to kill us all? >> or did you read the obama interview in wired where he talks about a.i. and the big dangers that computers get ahold of the nuclear codes. i mean -- >> once they are smarter than us, we can no longer control them. it's years away. >> they're pretending right now. >> they're not -- >> where is -- >> there's your buddy musk who wonders whether we're all
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simulations already. >> i think he's probably determined that we are simulations. i don't know. >> apparently he's put people on it. >> meanwhile, tesla's solarcity, that's a bit of a simulation of a company. solarcity's a simulation of a company, but he's going to get -- that deal's going to close op cosays. >> speaking of deals closing, here's complete change in tack, rite aid, $7.19 and a $9 deal from walgreens. >> kroger did not come forward saying they were going to create -- >> this is all just in the arbitrage world. just this continued concern that they're not going to be able to find a buyer for the divested stores that's going to be viewed as competitive enough by the regulators, right? you can divest, but they don't want it to be then that company goes out of business a year later. >> i was out in oregon, my daughter lived next to a safeway that was then turned into hagen's, which then immediately folded and that company was basically given all these stores from safeway in order to make
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the albertson's deal. i think the trade commission feels like wait a second, my daughter said i think it's a safeway, backfired so badly. so they need a deep pocketed partner when kroger didn't come forward, kroger's stock ran, i think that showed people wait a second, you know, anyone who buys these rite aids, maybe they're going to hurt and that changed things. so i wish as someone who -- my travel trust owns walgreens, it would be the greatest thing in the world if they walk away they could go back and buy ton of stock. this limbo is killing everything. >> really? >> if you're a manager, stick around more than a year. >> yeah, these things do get tough after amount of time goes by. but you're of the belief they should abandon the deal. >> they should abandon the deal because there's no buyer of these spare rite aids. i thought kroger was going to do it. i thought for sure. local business reports were that kroger was going to do it, but the scrutiny from this terrible
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hagen deal, they had a handful of stores and they suddenly came up with a bid and the ftc has egg all over its face. they have no desire to have huevos rancheros on their face. >> what explains this is this dollar strength? >> i think dollar strength is knocking people for a loop. i also think the china numbers, so anything export questionable. you know, how much can we move on apple taking business from samsung? by the way, one of the undercurrents you've got to watch right here people are saying to me samsung because charges are so bad going to have to cut back on some other parts of the organizations which is semiconductor equipment. what group has been the strongest, applied materials. >> lamb. >> yeah, so that group is suddenly being hurt. the group that makes semiconductor equipment, because people say how can samsung continue to spend. >> right. right. >> maybe they don't have that
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level -- remember they were the biggest customer in semiconductor equipment. number one. >> right. >> so people feel they got to cut back somewhere because the losses here are pretty staggering. >> twitter's not moving a great deal, but they just announced an election night special, a live news special to 3.2 million on the second debate. nfl they've grown 30% week on week for two weeks. this catching fire or not? >> look, i think remember they only added 9 million. if they can get any sort of acceleration at all, maybe they can stay independent. because if the stock gets hit, i think it's going to be very hard to stand. >> the key is they continue to talk to salesforce. it's just what the board is willing to do in terms of what price they're willing to sell at. >> what are you hearing? >> i'm not. i took a day off from it yesterday thankfully. >> really? >> yeah. >> all right.
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>> it was nice. >> that was actually right. >> it was nice not having to talk about twitter. >> i have been doing my calls behind the scenes. and this remains a price issue. it's not going to go off the table. you're not going to stop talking about it. they could bomb on the debate, and they won't, and this is still -- it's not a play on that. all you hear in the valley is it's a play on developers getting in there and becoming machine learning artificial intelligence so they can be able to offer customers a suite that goes from e ma-mail all the way from twitter. the current management wants to be able to mimic sports and watch debates and comment. that's not why anyone wants it. nobody wants it for that. they want it to know the customer. they bring in more customers it's positive. look, david, it's price. that's why you're going to have to get back on and make calls. >> i will. >> are you going to do that today? >> if it's going to happen, they would love to have something get done soon. >> if the stock goes to 15.
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>> the point you made on walgreens, but you don't want this to continue for too long. very distracting as you might imagine. >> well, we did hear there's an analyst -- >> you want to do it before earnings if you can. >> one analyst said the quarter was going to be good the other day. i think this stock if it goes to 15 and the board caves on price, they'll be a deal. >> it's not going to go to 15 between now and then. >> that's a lot of things that have to occur. unlike the rite aid thing where they got to find someone put together a real bid, a real company. and i don't hear anything after kroger. maybe kroger comes back and says listen we want to do it. but that would be the only deep pocketed partner -- >> if they do, you're back to rite aid and walgreens. $1.80 that's a lot on a $7.20 stock. >> david, you have seen spreads. >> i have seen spreads. >> you can drive truckings through these, right? >> yes. >> monsanto, how's that one doing? >> there's still a lot of concern there even though hugh grant was just quoted as saying he's confident.
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>> confident. >> he's the ceo of monsanto. they were confident. >> staples was very confident. >> they had some confidence. >> there was a lot of confidence. >> a bit of confidence. >> yeah, a lot of confidence. >> sysco u.s. foods had confidence. >> i've talked to scott wapner confidence redskins versus eagles. do you have confidence in the jets' secondary? >> no. >> let's talk about everything where there's confidence and no confidence. belichick has confidence. >> i'm checked out of new york sports for awhile now, unfortunately. >> why? >> they'll be growth in the spring. >> going to be a very barren winter. >> of all the companies i follow only belichick has confidence. >> by the way, bill ackman doesn't have a lot of confidence. >> no. >> his laters numbers down 21.4% for the year. >> highly confident on that? not just confident? >> he was only down 18.8 as the
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end of september. a bad couple of weeks. >> confidence is in short supply. >> especially right now on the dow. only two components in the green. down 1.25. let's get to bob pisani on the floor. hey, bob. >> good morning, carl. it is a weak open 5-to-1 declining to advancing stocks. it started in asia. let's look at how the asian markets closed. of course we did talk about that weak chinese export data down 10% in dollar terms, imports down 1.9%. that was worse than anticipated. there was some talk that maybe some of this might be related to the hanjin shipping bankruptcy. not clear on that. bottom line it was disappointing. but notice shanghai was up. shanghai and shenzen markets were up. hang seng down, what this tells you locals there weren't that concerned with the import/export data. hang seng, hong kong, a globalized macromarket was concerned.
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you'll see korea was also down. they had recent balance of payment data also weak. so the picture is flat to slowing global economy at least over in asia. the question is where does this fit in with the yellen thinking. that's why it's important. you can see carryover into europe where bank stocks were weak, some of the big conglomerates were weak, siemens, diamler and autos usually respond to global macro data they respond, also on the weak side. in the u.s., bank stocks, technology stocks and energy stocks, what's down today most? bank stocks, technology stocks and energy stocks. taking little profits on what's done the most. what's the laggard? utilities and telecom, what's up? utilities. taking profits reversing going back into the stuff that's been going to the downside. big bank earnings tomorrow. kind of an unusual day because citi group and j.p. morgan reporting on the same day that doesn't usually happen. j.p. morgan's usually first. wells i, citi group, pnc financial also reporting
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tomorrow. it has been one great second half of the year for the bank stocks as slowly rising interest rates have really moved them. regions, bank of america, suntrust, pnc, j.p. morgan, all up notably just in the last three months or so. these are big, big moves after being in the dog house for a long, long time. two big issues for banks, as always, interest rates and loan growth. so bank earnings on interest rates, the good here rise in short term rates. we've seen that quite notably. that's a positive for loan portfolios undoubtedly. a lot of the nay sayers say that's nice but the yield curve is still flat. that's not great news for investment portfolios. there's some truth to that. i think the rise in short-term rates is positive overall for the banks. how about loan growth here? depends on how you talk to it and look at it. year over year loan growth is estimated to be about 8%, bob albertson at sandler gave that number. that seems to be pretty close to what everyone else has here. but some have talked about lower guidance, particularly in the business growth area, slower
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capital expenditures, less need for corporations to go out and borrow money. so watch the business loan growth overall here. credit quality still remains pretty good. finally, just about wells fargo, take a look at this chart, this is wells fargo since 2007 when john stumpf came in. that is the white line. that bottom line, the orange line, that's the bank index, that's all the other banks. so right now since stumpf came in wells fargo stock up roughly 20%. the bank index is down 40%. i'm not trying to be an apo apologyist for john stumpf, the wells fargo franchise way above. i'll just point that out. carl, back to you. >> bob pisani, thank you very much. let's get to the bond pits. rick santelli at the cme in chicago. >> good morning, carl. all i can think right now looking at the markets is time-out. we've taken a time-out. look at a two-day of tens, eight
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basis points from yesterday's high yields and where we're currently trading. yes, we've given some back. see a chart starting on 6-1, we are comping to high yield close yesterday you can see we're in that zone where sort of breakout, sort of retrenching, riskoff mode back into that kind of low 1.70s, 1.74 is the pivot. bund's no different. same pattern, just a little less aggressive, 0.07 basis points from the 13th of september is where we're getting our congestion. let's look at the chart for dollar versus yuan. this is a biggie. everybody talking about it six-year extreme in favor of the dollar. see it there. heard about the trade figures today. it's very fascinating of course to watch whether it's the pound or the yuan/we are seeing played out on the world stage that we always seem to forget hit periods of traction only to give way this is a pattern we've seen
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for years. speaking of the pound, let's look at the pound/dollar, that's a one-week chart. had a slight reversal, but when you look at a year-to-date, it's a needle in a haystack in terms of major trend direction in the poll. and think mr. carney and what's going on in inflation picking up i'm sure that the brexit vote participants are even less happy today than they were on the 23rd. and finally, let's look at the dollar index and how all that's playing out. it really is only down 0.5 of a cent. it's had a heck of a run. that's still the zone we're hanging out at in terms of dollar strength. back to you. >> thank you very much. rick santelli. still to come, very outspoken former congressman barney frank. you'll want to hear his take on john stumpf stepping down as the ceo of wells fargo. dow is down 137. nearly every component's in the red. back after a break.
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ask your doctor about cialis for daily use. what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? at's the value of a walk in the woods? the value of capital is to eate, not just wealth, but things that matter. morgan stanley
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♪ samsung's attempting to stop the bleeding from the fallout over its exploding phones. the company's offering cash incentives in the u.s. in an effort to keep customers from abandoning the brand. note 7 owners can get $100 if they trade the device in and choose another samsung phone. all part of an effort to keep customers from fleeing to competitors in the wake of that massive recall. we discussed this yesterday on "squawk alley." once you're in an ecosystem, very sticky. people do not like to change things like that. >> true. i mean, apple has a very easy bridge. and the work that i've done in the last three days says it's far more one for one samsung to apple than a lot of the press reports. it's not to the pixel, which is only verizon and isn't in your hands, you can't check it. this is from very reputable sources within the telco industry samsung could offer a lot. but the fact is you can't go
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without a phone. it's not about $100, it's about i'm going to lose my music but i can take apple's music service. everything else is very easy to transfer. i checked it out. you could easily transfer. >> you can easily transfer from android to -- >> yeah, not that apple solved it but they make it really easy. google supports ios. they're not antithet kal to ios in terms of trying to destroy it. so there is an ios, it's an easy switch and i think the telco carriers are actually telling you that is what i'm saying you. telling you an easy switch. >> so are you making guesses as to how many unit sales apple could see come their way? >> i think it's going to be very, very big. and i think the service revenue's very, very big, but i think the stock has had a very, very big move and somewhat reflects that. but i still think don't trade it, own it. there's so many reports that says apple's losing -- you know, it's going to google, going to android. look, i'm dealing with carriers. they're not seeing that. they're seeing it going to
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apple. i'm stuck with the facts. i would love to be able to craft an anti-apple story just periodically so i don't look like i'm always pro apple, but the facts keep getting in the way. >> yes. >> unless everybody today says i'm taking the hundred bucks, which i don't think is as important as the phone, i just get -- i'm getting the facts as i see them and i'm hearing big pickup. by the way, taiwan semi report last night, that is a big apple supplier, they have a lot of intellectual property, and they have great numbers. and great outlook. and that says, you know, we should be talking more about that apple demand. apple has to make more phones. you're not getting your apple phone as fast as you'd like. where's that jet black phone? where is it? >> you don't have yours yet. >> no, i don't. but i'm also hoping that my wife is watching and is going to give that to me, but i know she doesn't. but the dogs the other day watched. everest likes the show. bug on the fence. >> get that. >> maybe apple's working on that, a paw for touch id.
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>> i feed them all the time. >> we'll get stop trading with jim in a moment. dow now down 148. don't go away. man, i'm glad aflac pays cash. aflac! isn't major medical enough? no! who's gonna' help cover the holes in their plans? aflac! like rising co-pays and deductibles... aflac! or help pay the mortgage? or child care? aflaaac! and everyday expenses?
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♪ time for cramer and stop trading. >> okay, there's this double upgrade today i thought was really important. does some of the finest work there is bank of america, she goes from sell to buy viacom basically says operations could get better but there could be a takeout. david, she's a really good analyst. this is not an idle call. >> no, jessica has been top of the field for a very, very long time. she does have the stock up a bit. the question here is, and as i said on tuesday, there's no talks between the two companies yet. cbs is still sort of and leslie moonves still trying to deal with government give up parts controlling shareholder. when they do start talking the question will be is it at market or not, jim. is there going to be any sort of premium as vie come shareholder if they were to get a deal.
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>> i would never bet against jessica in the old hedge fund days, she's been around, she's seasoned and smart. that's a very powerful upgrade. >> quickly i was watching disney, couple bucks from a two-year closing low. >> holy cow. >> we already know it's one of the worst dow stocks of the year. >> it's just the charts bad. you know, longer term, if people could -- i saw good stuff about social media and that baseball acquisition they have in technology. but no one seems to care right now. i do think longer term that's a good story. i know i'm getting in the way of a tsunami of selling. >> times they are a changing. >> yeah. the slow ones now will later be fast. right? >> right. >> mothers and fathers throughout the land. >> can't get anything by him. >> yeah. >> so you got ulta tonight. >> yeah. okay. and we've got, i think it's going to be a very interesting story from dave cote, what happened at that honeywell analyst meeting?
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was it as bad as people thought. and chip bergh, strong, levi strauss strong, of course private. i like scarves, you know highway 64 album -- >> 61. >> 61. highway 61. i'm sorry. we should be playing him all day. >> i think we will. >> we should be playing bob dylan. congratulations to bob dylan. >> nice story. >> isn't it fabulous? >> glad the swedes figured it out. jim, see you tonight, "mad money" 6:00 p.m. >> great to be back. when we come back, john stumpf, more reaction as he steps down as the chief of wells fargo, former congressman barney frank among those we'll hear from. dow early session lows now down 170.
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♪ good thursday morning. welcome back to "squawk on the street." i'm carl quintanilla with kayla tausche and david faber at post nine of the new york stock exchange. sarah eisen is off. weakness to start the morning. dow's down 171 points on some weak chinese trade data, very
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strong dollar, tech having a difficult morning, semis now on pace for their worst day since september 9th. we'll watch all of that. >> but our road map today starts with the big story, stumpf stepping down. wells fargo's chairman and ceo leaving both roles after the bank's sales scandal. we'll break down the future of the big bank and hear exclusively from its new ceo. >> markets and the fed are in focus, jobless claims hitting a 43-year low. import prices edging up all paving the way to a possible rate hike. will it be a december to remember? and donald trump continuing attacks on the gop. how is his campaign impacting his businesses? we have those details. first though, the big story of the morning is wells fargo's john stumpf stepping down from both his chairman and ceo roles. our wilfred frost joins us this morning having spoken exclusively to the new ceo tim sloan. good morning, wilf. >> good morning, carl. yes, indeed, this change of ceo being seen very much as a necessary but not sufficient condition for the bank to be
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able to move forward. so the new ceo, tim sloan, bit of criticism because of the fact he is a company insider. yes, that's true, but he came up through the ranks of the investment and wholesale bank, not the retail bank. so degree of separation there. perhaps more importantly we're also seeing some board changes. the bank now has an independent chairman and an independent vice chairman. that's pretty unique in terms of the big u.s. banks. that's the good news for the company. the changes they've made and the share price has reacted accordingly overnight. however, it hasn't ended the political pressure. senator warren very quick to release a statement last night saying, quote, if mr. stumpf is leaving with all of his ill gotten millions, that's still not real accountability. a lot of millions too, according to ek wi lar $135 million in total, about 20 of that is pension, but the real bulk $110 million in stock. let's not forget he's built that up over 34 years at the company in both awards and purchases of his own.
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no now, either way i spoke exclusively last night to the new ceo tim sloan and he confirmed there have been additional political requests by both sides of congress. but he hopes any po tetential hearings he faces himself will go more smoothly. >> we were disappointed that the hearings turned into a situation in which there were more speeches given than questions asked because we felt like there was more answers that we could have provided. but, you know, those hearings are over with and we're moving on. >> now, the focus now turns tomorrow morning 8:00 a.m. eastern time wells fargo reporting their results. and whether on the conference call mr. sloan can placate the desire that still exists for more accountability, carl. >> wilfred frost, wilf, thanks so much. of course one of the largest corporate governance failures in recent memory is what they're saying about wells today.
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senior associate dean at the yale school of management, larry donald manager at cg analytics. good morning to you both. >> good morning. >> good morning, kavrl. >> jeff, you've spoken to former s.e.c. chairman, board members, labor attorneys, you say stumpf had a tin ear. what else do you know? >> well, it's really a shame. as you mentioned this is a corporate governance scandal. it shouldn't have happened. it shouldn't have happened here. this is a place where the reputation of course was cherished. trust was their most valuable asset. and it says really as vulnerable as liquid cupping in your hands, that's what happened here. this board it one by one really sterling professionals, carl, from audit to regulatory expertise and ceo leadership expertise, truly independent and yet they didn't function as a group. they let the ceo conceal information, concealed information from him -- from them. they didn't immediately begin an active investigation years ago. in fact, they didn't even
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investigate until a week after his senate testimony they didn't hire a law firm, which is incredible. of course the injustice done to account holders, millions of accounts that were set up that created credit problems for people and employees that were damned if they do or damned if they didn't by doing something wrong in this fraudulent scheme. and the s.e.c. chairman tell me they think there are possible violations in terms of attesting to the accuracy of the financial records, which weren't. and also you know other problems in terms of the financial control section 401 is who was minding the shop here. it's very troubling. >> larry, what fallout does remain in your view? and what starts to rebuild that trust? >> well, you know, carl, as someone that -- i wrote the "new york times" best seller on lehman, i never mentioned that, but this is like you said, very wisely, this is the largest corporate governance failure in the united states since lehman. and i look at the consumer
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financial protection bureau that has overseen by the fed with a $600 million annual budget, $630 million annual budget. and i have to say, you know, here we are eight years after lehm lehman, what have we created with dodd/frank, with the consumer financial protection bureau, what are they doing to make boards more accountable? i want to know. >> well, this has been called a leadership crisis by members of the fed. and, jeff, i'm wondering if you think a simple change in leadership is enough to fix that. and if you are appeased by the introduction of an independent chair and a vice chair at the board level or if there's more that needs to happen to fix the governance of this company. >> that's a great question. i do say just to add to my panel's concern, there were hundreds of on site regulators that let this slip through their fingers. so i agree with him on that. but we shouldn't expect regulators to be the solution here. there should be board governance
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and there should be investor pressure put on this board, which there had been finally at the eleventh hour here. but some of these changes this will be controversial with all the governistas watching us, having a strong director would have made a big difference. the former ceo of general mills was lead director and frankly he wasn't tough noenough. now he's the independent chairman, he's a good guy, even stumpf is a nice person -- >> jeff, jeff, it's david. but you know as an expert on boards, i mean, you can only figure out what's put in front of you. most of these board members are not trying to go on missions to understand what's going on in the deep bowls of the company. if it's not put in front of them, they can't act on it. >> david, in the last 20 years every scandal you covered just about already had a separate chairman and ceo, worldcom, enron, b.p., they had it, maybe at the exception -- every other one did. bernie ebbers, when you wandered around there, he wasn't the
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chairman. it was burt roberts when you were interviewing bernie evers. they all had separate chairman. it's never been preventive or predictive. in the uk they have all the same scandals there. but united airlines they had to take out a troubled ceo. it was a very good lead director could do that. it's cosmetic. people like to see that, fine. separate the roles, but that's hardly a panacea. what they need -- and whether or not putting in tim sloan is the right answer. i don't know. i hope so. boards regularly do this, they put in somebody who knows where the bodies are buried. we saw that in fact remember they put in john sijmore at worldcom and turns out mud was splattered on his shoes, same at enron jeff mcmahon, mud was on his shoes too. in most cases the board knew it. freddie mac, same thing there. the baker and -- outside law firm even warned the board you're putting in an insider part of the same scheme. in this case we hope since he
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oversaw the wholesale bank and not the retail bank until the last year he wasn't a party to the problem. but he did have this woman reporting to him, this carrie tolstedt who was responsible for the problem. >> cramer said this morning if you want to please wall street you pick your c.o.o., if you want to please congress, you go outside. did they make the right choice? >> well, yeah. i think the solutions they've come up with over the last week or last week to fix the board are good ones. but you got to remember what carl icahn says. across the country a lot of these boards they belong to two to three golf clubs, they're on two to three boards. these board members. so, i mean, how can you be on three to four boards, collect two, three $400 grand a pop and be effective? what's happening is shareholders are not properly managing this. activists like carl icahn are, but somewhere along the lines the shareholders are not doing their job to enforce better
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corporate governance. >> jeff, larry, gentlemen, we'll be talking about this all day. thank you very much. of course larry the author of let me get the name of this book absolutely rielgt, a colossal failure of common sense. as we head to break look at where stocks are trading. dow touching lowest levels since july. and also delta on the move after reporting a mixed quarter. we'll hear what the ceo said exclusively to cnbc up next. much more "squawk on the street." across new york state, from long island to buffalo, from rochester to the hudson valley,
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markets under pressure today. investors digesting news of potential rate hike, chinese exports down, nasdaq down for the third straight day. let's get more on where investors should be focused and bring in global quantitative strategist at wells fargo. samir, why in your opinion is the market getting hit. >> the stated reason overnight the chinese export and import numbers were weaker, but i think it has to do with something over the past weeks where you've seen the stealth tightening in markets. dollar going up, rates going up in the u.s. and around the world. all that stealth tightening going into probably a volatile period with elections, et cet a cetera, people taking profits ahead of it. >> yeah, concern about rising dollar on multinationals earnings. we're already in a period where people are focused on earnings or lack thereof. should they be concerned?
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>> you know, valuations are probably still fair. that's probably what separates this period from some of the historical times and people point back to say valuations were expensive. doesn't seem much downside to revert back to more normal levels probably be more of a 3% to 7% pullback on the s&p, at least on the earnings number that we have for next year. what we would tell people is take the opportunity if we see volatility, if we see a pullback, this is a good time to buy stocks. >> we've been hearing for months sameer the u.s. stock market was the only place investors wanted to put money because of growth concerns, but we're reminded today the effects of china and concerns could be there on the market. should investors be paying attention to that? >> we think so. the chinese currency has been going down for a few months now really since brexit and you've seen the numbers, the economic numbers out of china be a little more uneven over the last few months and we've been climbing this wall of worry and every day come up grinding higher. we've been surprised that is corrects hadn't been paying more
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attention. absolutely it's right on our radar. >> does the extremity of the election tone this year create dislocations? hedging costs are getting more expensive, people trying to figure out if a democratic sweep is wildly bearish or wildly bullish. how do you model that? >> so a lot of those short-term impacts are on the rhetoric. i think what's impactful from a long term standpoint is in terms of small business optimism, filtered into consumer sentiment. i think that's the lasting impact on this election is what does it mean for investment both before and after the election, i think that's what we're going to monitor most closely because that's been coming in a little weaker than expected. >> all right. so as we head into the final months of the year here, as carl said with an election less than a month away, what are your expectations for the broader markets? >> so we think there's still an upward bias as you get past the seasonally weak period of october. once you get the elections out of the way i think folks will
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refocus on some of the fundamentals. going into next year we've got a 2190 to 2290 target on the s&p. that's a nice 8% to 10% total return. still a good place to put money to work. >> i mean, that's not far from where we are though, sameer, what do you expect to cause a breakout? >> so we still think earnings will be the key. if you look to see what oil is doing, we think the dollar's probably still range bound. i know it's at the upper end of the range it's been in over the last couple years, but with oil stabilizing, gdp growth accelerating into next year, we think it's in the low 2s as opposed to high 1s this year. we think that will drive the top line and rest will probably come from more efficiencies when oil stabilizes. >> well, earnings kind of gets started tomorrow, j.p. morgan, wells fargo. sameer, thank you for your time. appreciate it. well, we did get earnings today from delta. it was a mixed quarter. the airline saying its power outage in august dented revenue and profit. our phil lebeau sat down
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exclusively with the ceo ed bastian and phil joins us with that. >> what's interesting is you look at the reaction of delta shares, yes, overall market is down and that's why delta shares are down as well. but look at earnings for the third quarter. delta beat the street earning $1.70 per share, a nickel better than estimates. revenue was a little weaker than expected. outage hurt revenue by about $100 million. the bigger issue when it comes not just for delta you'll see this with all the airlines as they report earnings, it's the revenue pressure due to the passenger revenue per seat mile, we call it prasm when wall street's tracking it down 6.8% in the third quarter for delta driven by lower fares and capacity growth. you've got cheaper seats that are out there, and as a result delta says it's not going to end any time soon. they're expecting passenger revenue to be down 3% to 5% in the fourth quarter. >> it's hard for us to call the bottom. we've been looking for the bottom for some time. when you look at what the drivers are in terms of the
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challenges, certainly the capacity environment and growth in excess of demand is one of the challenges that we're facing. we're announcing today that we're going to be reducing our growth rate to 1% in the fourth quarter and keeping that throughout 2017. >> and when you look at passenger revenue, here is the problem for the airlines. look at domestic air fares. the average domestic air fare it continues to trend lower. it is expected to continue to drop even lower in the fourth quarter. guys, i know a lot of people -- i get these e-mails all the time from people saying isn't it great there are low air fares out there. it's great if you are flying if you want some of those cheaper air fares. it's not good if you're an airline investor. and that's why they're seeing so much pressure. not just for delta shares but really for the entire industry over the last six to nine months. guys, back to you. >> phil, thanks so much. our phil lebeau in atlanta for us today. when we come back, donald trump stepping up attacks against republicans. plus, is trump's campaign hurting his business? a closer look at traffic at his biggest properties when we come back. dow's down 166.
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republican nominee donald trump stepping up his public feud with house speaker paul ryan and other republicans. here's what he told supporters in florida yesterday. >> the republican nominee has a massive, a massive disadvantage, and especially when you have the leaders not putting their weight behind the people. wouldn't you think that paul ryan would call and say good going? in front of just about the largest audience for a second night debate in the history of the country? so you think they'd say great going, don, let's go, let's beat this crook. she's a crook. let's beat her. we got to stop it. no, he doesn't do that. there's a whole deal going on there, i mean, you know. there's a whole deal going on,
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we're going to figure it out. i always figure things out. but there's a whole sinister deal going on. >> joining us this morning veteran democratic strategist jamal simmons, co-founder and ceo of crate.com and former senior advisor to romney and jeb bush campaigns, david. gentlemen, good morning to you both. >> good morning. >> good morning. >> it feels like this election should be tomorrow. i wonder how you think we sustain this for 26 more days. >> i think there's no way to tell where this thing is going to go from here. it's descended into complete bedlam now. and with donald trump wasting two days of a campaign to attack republicans at a time when he's supposed to be adding to the coalition, it's clear he doesn't know how to win or he doesn't want to win. and maybe he's doing republicans a favor at this point by kind of cutting ties and turning it into an all-out warfare against the republican establishment because now you've got republican candidates who are free to run on their own agendas and on their own issues and don't have
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to be -- hopefully they don't have to be defending trump every day every time he goes on another twitter rampage. >> jamal, just in terms of process here, reports that they're lessening their focus in virginia, trying to make a bet on some core swings. i'd like to hear an argument, maybe you can build one, on how he can put a winning plate together using fewer states like that? >> you know, it's very tough. there are a couple different ways to look at this. we try to boil this down to which states are in play, how do you make this work in terms of the electoral college. but it also is a demographic play. the country really does tell you a lot of the story about the elections in the demographics. and if he is not doing as well with college educated white women, if he's not doing as well with latinos as mitt romney did even, african-americans clearly are not on his side. at some point you start running out of people here for him to be able to win with. and i think that is a big struggle for him. so you see that pop up in state
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after state after state. virginia's in trouble, north carolina, i know you want me to try to find a path, but it's really hard to find a path when it's almost like he's going up a gravelly pit and he can't get a hand hold in order to climb out of it. >> david, what is a paul ryan or mcconnell or any other of these gop leaders supposed to do? what is the calculus? are they thinking more about '18 now? >> i think what they're thinking about now is focusing only on their own campaigns, their own candidates. you saw the resources being shifted out of virginia, and now the rnc will be doing more work in four states, pennsylvania, florida, nevada and ohio. all of those states have active senate races where republicans need to win. so i think the thing to do is what paul ryan suggested, which is just we ignore the trump campaign as they're in full meltdown. and there is no more path to 270. i think that bridge has been blown up a long time ago.
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i think florida is probably not in play, and pennsylvania hasn't been in play for a few weeks now. but i think running as far away as you can at this point trying not to get sucked into every single turn of the news story, whether it's fresh scandal, whether it's a new strategy of attacking the speaker. just turn away from it. focus on the issues that are going to get you re-elected to the house majority and the senate. i think in the house we're probably okay. i don't know that there's enough seats in play unless the bottom really drops out. but it's the trump brand that is collapsing, not really the republican brand. as john boehner said yesterday, he's not really a republican. so it's going to be hard for him to take down the entire party when he's so separate from our brand. and that's one of the favors maybe that he's doing right now for the party. >> right. finally, jamal, it's clear that the wikileaks stream is going to continue. a few thousand more e-mails today. one of trump's advisors said
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you're going to see a constant stream that will expose clinton as a corrupt and incompetent official. that will take a toll over the next few weeks, do you disagree? >> you know, carl, one of the things about hillary clinton is that she has been in public life since 1992. so there are so many voters now, people who are voting who were barely alive when she started working in this. the problem is for the republicans as people are very familiar with what's good about hillary clinton and what they don't like about hillary clinton. so if you introduce more evidence about things that maybe they're not particularly happy about, itiltered in to what they already assume. before now people thought he was a bad boy billionaire who was kind of a good but rambunctious guy who made a lot of money. and we're finding out new information about him all the time. i mean, the thing with the 15-year-olds and the pageant and all that stuff, there's so many things about trump that people didn't know. that's his struggle is that there's new information about him. with hillary clinton, you know, it's already baked in.
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>> we're definitely going to find out what wiki has and what revelations there are on both sides. who knows at this point, guys. thank you very much, jamal simmons, david kochel joining us, thanks as always. >> thank you. >> thank you. while donald trump has been running a controversial campaign, has it hurt his empire? and specifically his real estate business? our robert frank is here to take a look at that. robert. >> good morning, david. well, when trump denounced his run for president, many said it was a giant marketing campaign for his companies. but so far the trump political campaign may be putting pressure on trump inc. now, let's take a look at the data according to to data from foursquare. the share of foot traffic going to trump's hotels and golf courses fell 17% in june and 14% in july. those are the latest periods available. the travel site saying bookings at trump branded hotels have declined up to 27% since the start of his campaign. now, the effect on residential real estate buildings is a little less clear since real estate has much longer lead
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times for sales and listings but an analysis by zillo found trump's 16 buildings in manhattan sound price increases over the previous year while the broader manhattan market saw prices slow 1.7%. so a little bit of a difference there and some showing strength for trump buildings in manhattan. there have of course been some high profile defections from trump buildings including sports caster keith olbermann who sold his apartment for $3.3 million tweeting, now that i've escaped, i can report to you that the market in nyc is in free fall. trump organization didn't return my calls for comment. but according to trump's own fec filings in may, revenues at his company have increased by what the trump campaign said was almost $190 million were the biggest gains coming at his golf courses, his branded merchandise and those big book royalties for all the books.
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he does have the opening of the new trump international hotel at the old post office in d.c. that could give him an added revenue boost regardless of whether he ends up living down the street at the white house. guys, back over to you. >> robert, i mean, as you well know, he doesn't own a lot of the real estate. it's licensing his name that's the most important thing. >> yeah. >> i wonder, he appeals typically to the higher end, correct? but from the way things look it's not clear that that is necessarily the group or the demographic that his most robust area of support, is it? >> that's a really key point. he does always attract that affluent aspirational group of voters that do seem to be leaning toward hillary. the other problem is all the properties and companies are in the most liberal parts of the country. so new jersey, new york, florida. so so far the fallout has been sort of in the low double digits, but i think this latest period of news could be tougher, especially for all the affluent
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women that go to his hotels, his golf courses and his residential properties. so i think the big fallout if there is some is still to come. >> well, robert, there had been an estimate that he had received north of $2 billion in free media coverage and there was a thought that regardless of how the campaign went, any publicity is good publicity. does this buck that trend? >> well, that to me is the most interesting question because when he started, remember, everyone thought he is not serious. this is basically a political campaign aimed at really boosting his companies. and now at least with these numbers that we do have it's kind of having the reverse effect or certainly doesn't seem to be helping his companies right now. we'll see when it's all over whether he wins or loses what effect that will be. but i can't see how this helps the trump business brand in any way. >> all right. will be interesting to see. robert, thanks for crunching the numbers. robert frank back at headquarters. when we return, financials in focus. wells fargo ceo john stumpf
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stepping down ahead of the bank's reporting earnings tomorrow. j.p. morgan, citi also reporting, what can you expect? and how should you trade ahead of the reports? much more after this break. ♪ we're drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments
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good morning everyone. i'm sue herera. consumer product safety commission recalling samsung galaxy 7 smartphone to include replacement phones. it comes day after samsung suspended sales, production and distribution of the phone because the batteries can overheat and catch fire. the u.s. launched tomahawk cruise missiles in houthi controlled territory. it is the first shots fired by the u.s. in yemen's long running civil war. the king of thailand who
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rei reigned for 70 years has died. the royal palace said he died peacefully in hospital, he was 88 years old. and singer/songwriter bob dylan has won the 2016 nobel prize for literature. it's the first time the academy has bestowed that award on a musician. the 75-year-old artist is the first american to win the prize since novelist tony morrison in 1993. congratulations to him. that's our cnbc news update this hour. let's send it over to jackie deangelis with the eia inventory report. >> good morning, sue. we have a double whammy. we've got nat gas a build of 79 billion cubic feet. this is actually a bullish number. you can see that after the report came out prices spiked from 3.16 all the way to $3.29. this number actually was on the low end of the estimates. and it also is less than what we saw at this time last year and the five-year average. remember, over the last couple of months we've been seeing these injections be particularly
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weak and that's why this market has been concerned. still, i would say this, total stocks are near 4 trillion cubic feet and that's a high level in terms of the inventories, but there's a little bit of a rebalancing happening here. remember even nat gas over $3 isn't relatively as expensive as it was two years ago when it was over $6. but there is some nervousness in the market because if we have a rough winter, these stocks could be depleted very quickly. so the level of these injections not being as high as normal is what's concerning to some traders. as i said, it is a double wlammy today. we'll be back at 11:00 with crude oil inventories. thanks, jackie. john stumpf's retirement comes amid scandal that's engulfed wells fargo. coming ahead of the company's earnings report tomorrow along with citi and j.p. morgan reporting whachlt can we expect from bank earnings which get underway in earnest? eric wasser strom, paul miller head of financial institutions research at fbr capital markets.
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gentlemen, welcome to both of you. eric, we heard a couple weeks ago that prosecutors were taking up the wells fargo case. we know there might be more hearings focused on tim sloan now that he is in that role. should we expect another shoe to drop, or do you think the damage has been contained at this point? >> well, hard to know if that information could come to light. but i think in terms of the regulatory investigation particularly from prosecutors regarding what we already know has just begun. and i think there could be some significant finds still associated with the behavior that we're aware of. >> paul, how much more difficult does day-to-day operating for wells fargo become? whether that means there are more regulators in-house, more regulators to answer to outside the company, does this have a material impact on business as usual? >> right now it doesn't have a material impact. we have to see where this all goes, but i can tell you right now this executive committee is not worried about, you know, cross sales right now. they're worried about fighting
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regulatory environments that are going to come after them. it's too early to tell if it's going to have a material impact, but it could have material impact if they continue to, i think, fumble what's going on out there. i think the regulators are going to want to see more changes at executive level. is sloan the right guy to run this company? we're going to have to find out. it wasn't related to the retail side, he's from the finance side, but is this going far enough? we don't think so, but yet again as these investigations work their way through, as regulators work their way through, we just have to wait and see. >> paul, we've heard executives say that revenue in the near-term could be stymied by this investigation or the fact that now people might be more timid about even regular legal cross selling and that some of the internal metrics wouldn't necessarily stack up. are investors pricing this all in at this point? >> i think for wells they probably are at this point given that it's lost some of its luster. wells traded at a premium to the
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group because it's such a great franchise or perceived to be such a great franchise. i just think they pushed that sales culture way too hard to try to maintain that premium. that's where they got in trouble. so i think down the road it's going to be very difficult to reign a lot of this stuff in. i think you got to bring somebody from the outside to run that retail side. and right now we're not really looking at material difference. wells has a big balance sheet, they have a big mortgage company, they have other parts of that company besides the retail side that does very well. but we just have to wait and see. >> eric, i'm thinking back to past quarters and the macro concerns that have swirled around this sector, whether it was the absence of a rate hike, slowing growth globally, energy exposure for a lot of these companies, international exposure for these companies, would you say that we're going to see a cleaner quarter, or is there still a macro cloud hanging over these company sns. >> yeah, kayla, i think certainly some of the items you just mentioned are probably receded into the background.
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but the macro picture still remains very mixed. i think the bigger issue for this particular quarter is that loan growth, which for wells fargo and most of the banks is really the critical driver of current and future earnings has been pretty spotty with cni, which is the commercial lending component proving to be very uneven and actually decelerating sequentially from prior periods. so clearly the macro continues to weigh on bank earnings broadly, i would say. >> hey, paul, we had a discussion earlier this morning about whether net interest margin cures all ills. i mean, if we get a series of rate hikes, do we even remember what tolstedt's name was? >> you know, we need a lot of rate hikes, not just one or two, not one in december, you also need a steep yield curve, you need four to eight rate hikes where you said a lot of this stuff falls into the background. i don't think we're there yet. i don't think the economy's there yet. i would like to see gdp growth rate north of 5% that's going to
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cure all the ills. we don't see that here yet. >> you said a couple days ago on squawk that your long term worry was that cross selling as a practice is tamped down to such a degree that banks are turned into utilities. what probability do you put on that? >> you know, right now i'm going to be putting a 20% to 30% probability. these things are almost utilities already given what dodd/frank has done and the regulators continue to weigh more and more regulations on this industry. and now with this issues with wells fargo, it opens up a can of worms with all the regulators that come in now and regulate how products are sold inside the banks to the point that it's going to be very difficult, i think, for banks. some banks might walk away from it. i think it's a 20% to 30% probability these turning pure utilities. >> finally, eric, give us your pick going into tomorrow because the news cycle today is about wells fargo, but citi is performing the worst because it is the most international in scope. do you think you would buy citi ahead of tomorrow? >> yeah, i'm quite constructive
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on citi. i think part of the real benefit is in fact what's going on internationally, particularly among their consumer lending business in mexico and a couple of other regions, which i think have the opportunity to provide top line upside and positive operating leverage, which many other institutions will have difficulty generating. >> well, we'll see how tomorrow goes for these companies. for now, eric wasserstrom, paul miller, thank you to both of you. >> thank you. >> thank you. as we go to break, look at xerox, news out major shareholder suing to block its split into two separate companies. more "squawk on the street" in just a moment. dow roughly off the high by about 20 points. down 141.
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get this, the financials, the best performing sector so far in october, what can we expect as many of the big banks start to report their numbers. find out at tradingnation.cnbc.com. more "squawk on the street" coming up.
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let's head to the cme group now, rick santelli joins us with the santelli exchange. >> thank you. good morning, ira harris. we're all looking with amazement at the volatility we see in foreign exchange whether it's the pound, this volatility probably isn't going to go away. what is your thought on what it means and will it continue? >> well, i think the volatility goes substantially higher across all asset classes because the markets through complacency through brexit have taken out a lot of political risk, but political risk is the greatest part of the dynamic of this entire global situation. >> you're not necessarily talking about our election in november. >> no. >> you're talking about the political risk meaning the p populist versus -- >> yeah, there's a battle going on versus the global or davos
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crowd because the global ahead of movers, have skimmed all the gains over the past few years and put in their pockets. >> all right. so that's an interesting way to describe it. so we have the most liquid environment, the most stimulative environment from a central banking perspective. at the same time we see nonsustainable hiccups in growth, just like we've seen really over the last four years. >> right. >> so in the end how are the equity markets, for example, going to survive in this mentality? >> well, they're under pressure now. and i blogged the other day that the volatility was going to increase. i thought we'd get through because i think hillary clinton is the more missteps by donald trump the more certainly she -- in a world that's so fraught with different problems, she's a steadier hand than he is. and i think that's at the end of the day, but that doesn't erase that people will -- because her tax plan is not good for investors.
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so i think you're going to see post hillary victory that people who -- they'll take this certainty of the long term capital gains that they have -- >> this sounds a lot like central bank mentality. so what you're saying is the status quo isn't great, i don't see any parades marching forward in any country or any economy, but status quo seems to be the safest bet. central banks aren't getting what they want out of their programs, but they have no alternative. so this is the way we go, the path of least resistance whether it's really equitable on the end in terms of growth it doesn't matter almost. >> and the headwinds are political. forget the data. okay. because the data gets so mixed, we go back and forth. you report on it regularly. this is the politics because you have -- you saw hollande earlier this week or late last week threaten the brits. and basically it was so fascist in the statement going we're going to punish you, why are they going to punish them? because they have to make an example just in case somebody else goes down the same road. >> and they will punish. >> yes.
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>> when they actually implement article 50, they are going to be very tough. but in the end there's a downside here. you know, screening down a well isn't going to help any economy in europe, ultimately. your final thoughts. >> again, the greatest story has been the amount of debt. we're in $152 trillion of global debt, not including financial debt. so that's an enormous number. it's going to weigh and have its impact. it's having its impact now. >> it's having its impact now. last i looked atlanta gdp close to 3.7 now closer and closer to 2%. we've seen this movie before. the growth ends and the debt lives on. >> skpaexactly. you have to be able to service the debt through greater growth. >> so if you're voting for status quo candidates, there should be an asterisks of caution. i understand status quo may be safer, but it certainly doesn't mean it's going to be more beneficial to anybody's wallet. >> that's always -- and we don't know the way these play out. and you've got the afd in
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germany, you've got lu pen national front in france, and these are making real voices. >> not to mention italy. >> not to mention the coming referendum in italy. so the world is fraught with political land mines. >> and i don't see them going away any anytime soon. david faber, back to you. >> thank you very much, mr. santelli. coming up, earnings season will be kicking into high gear. mark mahaney will join us. and max levchin.
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third-quarter earnings season getting under way. what does this mean for internet and technology stocks, which have been on fire this year? joining us is rbc capital markets lead internet analyst, mark mahaney. you say it's going to be a muted print for these companies. is that because the fundamentals have changed or because they've perform sod well already? >> i think the latter, kayla. 6 of the 12 largest internet stocks are within 10% of their all-time highs. this is the sentiment for some of the leaders is more robust, positive than i've seen in two
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to three years. the setup is tough. i don't think you'll have a lot of gap-up trade opportunities, but there are a few where we think there's modest risk to estimates and the stocks are controversial, those are some of the names we most like. >> which are those names where you think there's a risk to estimates? >> oh, we think there's the most risk to estimates, there's three troubled stocks, i think twitter, based on our advertising survey, and you put a lot of deal talk around the company, it almost always leads to distraction by employees and management, makings it hard to close the deals. ocumize, the apples and facebooks are transitioning away from it, and finally trip adviser, going through this instant book shift, this mobile transition, and they've had choppy quarters for the last two or three. that will probably continue for another two or three until fundamentals base out next year. >> the fact that air fares are low and currencies have been volatile and a lot of people thinking about travel and looking into booking it, why wouldn't that help trip?
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>> it would. it would probably, though, be more beneficial to priceline and exped expedia. both companies are much further through this mobile transition, almost surprisingly than trip adviser is. but those trends you mentioned, kayla, i think are very positive, especially for a priceline, and the biggest single factor, we've forgotten about this, but a year ago we had massive currency swings and for an international travel company, that's what priceline is. that was a negative head wind to its business. we think room nights they sell, bookings they sell this year, actually accelerate versus last year. that's what's happened so far. we think it will happen for a full yearitis real beneficiary for the trends. >> three of the top five market cap companies in the world, facebook, google, and amazon. amazon and facebook have had a great year, google not so much. as we head into earnings this fourth quarter and next year, of those three, if you had to pick, which one would it be? >> well, we put in our overall
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pecking order, we would put google, david, the way you set it up is the way we think about it. near term on google there's this kind of great deceleration debate. there's this assumption that google's growth rate has to slow down in the back half of this year because of a tough comp related to this third paid search mobile link that was introduced last year. we're taking the other side on that. there are enough search innovations still going on at google. we think we're seeing mobile pricing rise. and they have these great assets like youtube, google cloud and google play that are almost 20% of the company's revenue and growing materially faster. mathematically it makes it hard to see the growth rates decelerate as much as feared so it's our number two pick in the group. >> before we go, netflix is your top large cap. >> yes, it is. >> stock down 14% this year. do you still stand behind that? >> yes, i am. i'm not moving away. we think if they can settle down that churn in the u.s. market and there's an outlook for accelerated sub growth and 17 versus 16 both in the u.s. and international, given all that
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controversy on the stock, it's got the most gap-up opportunities. that's why netflix is our number-one pick. >> always good to see you, mark. >> thank you, kayla. >> mark mahaney. >> that does it for us on "squawk on the street. ""squawk alley" is next. instead if getting caught up with the crowd, the investment managers at pgim take a long term view, teaming specialized active investing with risk-management rigor, to seek out global opportunities. we manage over a trillion dollars this way, attracting many of the world's leading investors. partner with pgim. the global investment management businesses of prudential what's going on here? i'm val, the orange money retirement squirrel from voya. we're putting away acorns. you know, to show the importance of saving for the future. so you're sort of like a spokes person? more of a spokes metaphor. get organized at voya.com.
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good morning. it is 8:00 a.m. and wells fargo headquarters in san francisco, 11:00 a.m. on wall street and "squawk alley" is live. ♪ jon fortt, kayla, and me, of course. the delayed inventory numbers are out. let's go to jackie at the nymex. >> a build in crude oil industry,

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