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tv   Squawk on the Street  CNBC  October 14, 2016 9:00am-11:01am EDT

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open. tyler, you'll be joined by janet yellen later this afternoon. >> she's talking at about 1:30, and i think i know what i'll be doing at 1:30, which is watching janet yellen. >> that's what i'm going to be doing. >> yeah, of course. >> and watching you. >> i'll be there. >> waiting for analysis. >> i'll be there. >> thank you both for hanging out with us. >> great to be here. >> make sure you join us next week on monday. "squawk on the street" begins right now. ♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. we cap the week off today with the busiest agenda so far for big banks with earnings, macro week on data running hot, muster, rosengren, yellen all set to speak, china's cpi comes in hotter than expected as well. watch the ten-year, yellen speaks just after lunchtime east coast time. road map begins with the parade
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of bank earnings. wells fargo, j.p. morgan, citi all beating estimates, but it's not all good news from those financials. we'll dig through the reports and hear what the ceos are saying. the samsung saga continues. the company saying billions more in losses are expected. and now some airlines are using fire containment bags for overheating phones. >> like an airsick bag? are you kidding me? where's the tsa? >> and honeywell ceo telling jim on "mad money" last night he was astounded by the market reaction to the company's presentation earlier this month. we'll get the latest. first up, wells fargo out of the first earnings report since the bank's unauthorized account scandal. quarterly results beating the street despite drop in net income. in the company's earnings release new ceo tim sloan says, quote, i'm deeply committed to restoring the trust of all our stakeholder including trust and shareholders community partners, we know that it will take time and a lot of hard work to earn back our reputation, but i'm confident because of the caliber of our team members we will work
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tirelessly to build a stronger and better wells fargo for generations to come. meantime, j.p. morgan chase also beating expectations with their results. j.p. morgan doing their own deep dive into cross selling practices. they say they've found no systemic issues so far. >> got to look wells fargo would have done well to take someone from j.p. morgan. they've got an insider. and i think that until we hear about what the scam was and how it was perpetrated and how you did it and which branch offices did it, we're going to continue to say, well, i don't really care. whatever you say about trust. i want to know who to mistrust. should i trust my executive at my bank? was my bank one that cross selled the hell out of people? did my bank put $25 in on my account friday and take it out monday and get credit for cross selling? is that how the money was figured out about how to put money back in people's accounts? how about we find out what the scam was, find out who perpetrated, i see they clawed back money from the person who ran retail, but the scam's not
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been revealed. it was a scam. >> well, at 10:00 mr. sloan will begin his first conference call with investors as the company's ceo. >> right. >> one day into that job. i know in the script he's going to talk about, you know, something went wrong and we're going to fix it. but the question will be the questions that he gets on the call itself. and i would assume you will hear at least some about what are we seeing for new accounts. >> right. >> how is business being impacted right now on that front? i don't think people pull deposits, necessarily, but when they're making a choice of where to make a new deposit or open a new account, is wells fargo starting to suffer and does that actually bleed into their results? >> well, you have to see how many accounts per person they're going to open up that have been their stock and trade. this was the quarter where it paid to have the old business model. j.p. morgan some remarkable numbers that we're seeing and the things we've kind of given up on. my travel trust owns citi and wells, wish we didn't open wells, but citi had a remarkable
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quarter in credit cards because they got the costco business and bond trading. a lot of this might have been brexit. there were some ipos coming back. a lot of good stuff for traditional banks. but wells, i'm tired of like wells reporting not great quarters and instilling trust that they don't have. i bank with wells. it's super duper, it's not like new bank group wells, wow, i'm banking with -- >> all the stocks are up. j.p. morgan's call began at 8:30, so there may be some news coming or at least some more detail coming from that. >> really? >> but wells doesn't start until 10:00. you got to expect they're going to get questions. i mean, it's an analyst call. it's not like he's in front of congress again. >> going to suck up? >> i'm sure they'll have to be asked at least to give some sense as to where do things stand now, current quarter, what are you seeing? that could impact the stock. >> for j.p. morgan record bank earnings, net interest better than expected, trading results
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terrific, used deposit -- >> you're doing a lot of check marks. you're checking it all off. >> look, far be it for me to say what a good quarter is. it's a good quarter. >> return equities only 10% down from 12% a year ago. >> there. >> total assets $2.5 trillion, up 4% year on year. >> i like that. why don't we talk citi for a second since that's now mr. goodbar versus what they were before. $64.70 book value and that book value is real. they got that am ex business for costco and i think they're adding like mad. i wonder how much it is because this costco thing worked out for them. spending a lot of money in mexico, i think it's going to come back. i like -- look, am i dumping on wells? i'm just saying there was a time when what would happen is we would sit here and talk about wells and how great it was. and the other guys, yeah, fortre fortress, fortress, fortress, fortress, fortress, fortress. >> corvette's four-year
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anniversary sunday. >> is it really? >> and talk about costs, down 2 at citi, down 6 at j.p. morgan. some tailwind on expenses along with this notion that somehow reserves aren't being added to settlements are dissipating. >> i was happy to see oil and gas to be a non-issue for j.p. morgan. new citi headquarters kind of like when you go to silicon valley, it's no longer they consolidated it all and it's no longer a palace. it's no longer one of these things where you say wow, this is imperial. it's kind of like regular business. because corbat may be a regular guy. i understood he could have played in the nfl, i said, nfl -- no, i mean, the guy's a smart guy who could have played in the nfl. he could have been tom brady. >> he's got nice hair. >> what does that have to do with it? >> i don't know. you just said tom brady. really, what does that have to do with it? you say he could have been tom
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brady, of course he couldn't -- >> i'm here he could have played in the nfl that maybe he's a fella -- he turned the worst bank, the worst bank -- >> we remember. >> that was the worst bank. can we stipulate that was the worst bank that survived? >> okay. >> you go with me? >> none others are coming to mind so i will agree. >> well, i will think the fdic likes this bank more than the other banks and i think a lot of that is corbat is a guy who's led the bank out and citi holdings is almost gone. j.p. morgan's always been good. did i mention they have a fortress? >> head count. >> like ft. knox. remember operation grand slam? >> i do. >> what was it? >> what do you mean? what was it? it was going to ft. knox and getting all the gold and making the gold radioactive so then -- >> so grand slam against jamie dimon and it wouldn't work. >> meanwhile -- >> testing my bond knowledge? come on.
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>> we have elizabeth warren sending this letter to the president arguing that he needs to replace mary jo white as the head of the s.e.c. that she's tried to get her agenda pushed in other ways and says it's simply not working, time for a change at the top. >> are you kidding me? she's doing a good job. that's not just because she hired me once when i was in law school. she's doing a good job. elizabeth warren is -- i don't know, she's hard to please. >> yeah. >> she's hard to please. >> you would know. >> you want to go there? >> no. >> wife isn't watching. >> where is david cote when we need him? there was a $2 billion tax gain on the j.p. morgan -- >> yes. yes. we were aware of that, i believe. that somehow they get very upset. they're on it. >> they're a stickler. they like facts over there at j.p. morgan. >> they do. well, i think we did mention j.p. morgan's revenues in terms of trading jumped 33% year over year. expenses rose 6% but declined 6% from the second quarter of 2016.
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>> okay. >> i think we've done enough there. stock is up. >> okay. back to mary jo white. >> yeah. >> mary jo white is a public servant whom i think has worked very hard to do a good job in a very difficult situation. and to just slag her like this, i don't know. look, but i don't know, we got a guy running for president -- i think you belong in jail. so there's a whole discourse that's changed. mary jo white is very serious, very respected lawyer who i think has done a very good job at the s.e.c. and deserves better than just say fire. she's a pretty rigorous individual. >> one more thing on wells, expenses there were up 7%, as a percent of revenue almost 60% and they say that's probably going to continue. it's going to be more expensive to run wells certainly than it is at some of these other banks. >> well, i don't know. i mean, that was some compliance there. i'm still struggling. i'm completely struggling with wells. >> yeah. >> i just want to hear clean thing how you can do this how
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you can have branches that obviously were opening up more accounts than were -- >> there's a lot to come with wells still. >> yes. >> first of all, you've still got to see what the actual investigation that's being conducted by sherman and sterling uncovers. >> right. >> to what extent was senior management aware of things? what e-mails were coming up the chain and really were read or not read? how many warning signs were ignored? what did the board know? is it a function of where the board was presented with some of this data and chose to ignore it, or really had no idea because nothing made its way into the boardroom in the board package that typically most of your people go over? we'll see. and that could lead to does mr. sloan stay, because he was anointed some time back expected to take over of course two years from now, not immediately. or is there pressure as a result of this investigation that leads to something else? we'll see. we have no idea. >> is there pressure from u.s. attorney. >> right. >> if i were an enterprise u.s. attorney i would say open the business since the subpoena's
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out there. look, it's been a terrible stock, but what i'm concerned about is that we don't know how this cross selling occurred yet. we don't know how aggressive cross selling could occur and how you could not at a top level not see that some branch was just opening. it'd be like if easterbrook looked at his mcdonald's and one mcdonald's is doing like $7 million and the rest are doing like $2 million and he must be thinking, well, are they selling like whiskey or something? what are they doing there? easterbrook would be like that mcdonald's probably something wrong. >> yeah. >> and that's what i think -- >> but mcdonald's has incentives to get their salespeople to have larger numbers, right? we have barney frank on yesterday saying that's the problem. when you give people a motive to do something more to make money, they will abuse it. >> well, i think if you have what i call supervision, it doesn't happen. i mean, like if i called you in, carl, i said -- look, i was at goldman and every week they reviewed my performance.
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every week. if i did a really good job, they knew it, if i did a bad job, they knew it. they looked at it. they didn't say, listen, they only had 2,000 employees at that time, but i do think there should have been a run that hit that said, wow, that guy opened up an awful lot of accounts this week. how'd that happen? and then the 2013 "los angeles times" article was very damning, and i think you would have called an internal investigation saying we have to figure this out. then just like we're opening too many accounts. i love the cross selling because i figured wells was getting all sorts of your business. now i feel like they got your business they didn't know you got. >> i was looking at the performance because wells had been one of the better performers -- >> it was the best. >> well, look that up against the s&p 500 and tells a different story still. you don't want to own the banks. >> no, warren buffett he was trying even as early summer petition to own more because -- they did such a buyback that once you get up to a certain level government doesn't want you to own more than 10%, but he
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wanted to own more. i would like to know if he still wants more. >> i wonder. >> we're going to find out eventually. >> but j.p. morgan, that was -- that was a fortress. >> fortress. >> fortress. >> fortress, fortress. >> even the first line is fortress. i'm calling jamie fortress dimon. >> when we come back, honeywell's ceo refining his message about the company's outlook. stick around to hear what he told jim last night on "mad money." also ahead -- >> i think that that is actually going to be a bit of a wakeup call. >> what's jack lew talking about? we'll find out when we bring you sarah eisen's exclusive with the treasury secretary. take another look at the premarket. more "squawk on the street" from post nine on this friday in just a moment. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities.
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shares of honeywell took a hit earlier this month, and reaction to the company's guidance. but ceo david cote says he should have done a better job of delivering his outlook. here's what he told jim last night on "mad money." >> we also bought a business, we sold a business, we did a bunch of restructuring. so we had a lot of moving parts. we said let's clarify all this so earnings day it's not going to be a problem. and i have to say i was astounded by the reaction.
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and if you recall, we actually had in there, hey, 2017, this is what it actually looks like, it actually looks good. >> says a lot about the surprise we got earlier in the week. >> right, but he did say, listen, i was wrong in the way i presented it. the document that was filed at 4:52 last night was a document about how inexpensive the stock is, talked about how 2017 is going to be really good, talked about how the aerospace is a hiccup and then all the other great secular trends that are going their way. and the document that was filed read a little bit contradictory, but really what it was is here's the other side of the story. the 2016 quarter is a mixed quarter. you can't take away the fact aerospace has had a dip down. but the actions he just described set up for a very good 2017. and they did not guide down, even though if you go look at the press headings of when they were reporting they did not do the revenue number i was looking for in terms of organic. but it was a case of dave cote basically not telling a good
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store and wanting a chance to be able to tell the 2017 story, which is pretty good. >> are we going to hear the same thing from dover or alcoa? any of the other industrials that have worried people? >> you know, if you go back over the alcoa quarter, they talk about both the outside of a plane and inside of the plane and how it's weak and talk about how wide bodies are really hurting. when you talk about what was going on with honeywell, it's more internet of things and what's in the plane. new planes you'll be able to stream, be able to download movies. ever been in gogo? that's where you watch -- >> it was very frustrating for you. you couldn't watch the super bowl. >> have you ever watched game cast? that's all you can watch on a gogo. it's like fumble, and then a seven-minute wait. what happened? he's building the infrastructure for the inside of a plane, and those orders are going to be very good in 2017. i think honeywell -- or dave did himself very well last night, this is his last quarter for being able to be the analyst
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because he's retiring as ceo. but i felt much better. i was agast. i mean, that stock was right to be down ten based on that presentation. and the stock is right to be back to 110 after last night when he came on "mad money." just better story. >> there he is. >> left us speechless, jim. >> all of us. >> this is when -- we can't run what he said. it's just not right. actually, what he said was i was wro wrong. we're still doing that. this is kind of an interesting moment in tv. you got any idea where to go with that? >> we don't hear that a lot from public companies. >> i don't know what that was. >> i think he was talking about a fortress. >> i'm sure he was. >> no, he was basically saying i got it wrong. it's very rare to have a ceo to come on say i got it. that's why the sound would have been dynamite. >> we did hear it at the beginning. >> no, that was him saying about 2016. this was like the mea culpa, i wish i told a better story. you can't hear, can you?
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>> sometimes things are better left unsaid. >> when we come back we'll get cramer's mad dash. we'll count down to the opening bell. take another look at the premarket this morning. more "squawk on the street" from the nyse in a moment. guess what guys, i switched to sprint. sprint? i'm hearing good things about the network. all the networks are great now. 're talking withina 1% die
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♪ it's friday. we got an opening bell about seven and a half minutes or so
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from now. where do you want to take the mad dash? >> many people hear the name boss and they think of springsteen, right? >> yes, they do. >> when i hear boss i think of matthew boss from j.p. morgan. he's lowering department store numbers across the board. jc penney miss minus 2 comps, macy's six-cent miss on minus three, kohl's, ten-cent miss. this is going to color what we think and one of the reasons i believe that the futures are not up as strongly as europe because these are all kind of shocking. >> does he share a thesis with us as to why this is happening? >> no, just the checks really. >> just the checks, doing store checks, talking to management, deciding same-store sales are not going to measure up. saying so in a report that has stocks down. >> look, one of the things that happened is remember they all did badly and then they kind of percolated up. now they're all going back. but what does it say about the american consumer? >> well i feel like every time
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we try to paint all of retail with the same brush we regret doing so. >> you need to focus on cosmetics, look at ulta yesterday up $27. you need to focus on what's about the discounters, but i mean like apparel discount, burlington, and home. home is not slowing down. >> right. and of course we really want to look at these as a barometer for consumer spending. we're probably not looking at the right thing. >> wow. >> right? >> you're right, it's not the old days. you've got venetian blinds at jc penney before i went to college. >> now where would you buy them? >> i don't think they sell them anymore. >> they don't sell them anymore? >> i don't know. blinds to go, i don't know. >> exactly. on the internet you would buy them. >> i would buy them from tim cook. the apple has open and close venetian blinds now. >> they have a home kit. >> home kit. >> home kit. you use home kit. >> i make sure all my venetian blinds have a chip in them so they can be part of home kit. >> i have the honeywell system. >> do you? >> yeah, controls all handheld.
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>> there you go. got to get me one of those. >> i can get one for you. it's called going to the store and buying one. >> oh, well, that's not going to happen. we got about five minutes now before the opening bell. i know you're excited. i am too. stay tuned.
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you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell in a couple minutes. busy day, 650 billion worth of market cap in bank earnings today. just a record day for bank earnings as valued by market cap. a lot of the macro data ran hot, ppi, retail sales now 2.9 for the year-to-date. >> is it ironic that china we want ppi data to run high? >> i was going to say china cpi is the best since june, and shanghai's going to turn in their best week since august. >> that's incredible because yesterday remember we had bhp and rio going down because we heard there was a commodities slowdown. they are up exactly as much as they were down yesterday. this is part of that instant
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revaluation stewing in the market which makes people at home crazy. it's like how could bhp be down 3% and up 3%? the answer is the china data changes every day. china data has no consistency except autos sold great in september. >> rosengren with steve liesman earlier this morning basically setting the table once again for december as the minutes did. >> yeah. that's what they're building in, that's why we've been having so much trouble. that rebound yesterday was oil turning again. and delta and csx having very good conference calls in terms of being not as bad as you think. >> tweeted this morning stupid is as stupid does, as what, equities followed crude. >> the stocks that did the best and turned the hardest yesterday, when crude went up, were the companies of the biggest users of crude. so i still struggle over this market. but there's no jail for stupidity, right? >> usually. usually. sometimes you do. >> well, with all of that, the
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30-year yield now 2.53 is the highest since june 23rd. you can watch that, watch the 10-year, watch the short end. here's the opening bell. and a look at the s&p. at the big board energy provider exelon celebrating being named fortune magazine's list of the world's most admired companies. we talk with the ceo in the next hour. over at the nasdaq mammoth energy services, celebrating its ipo today. >> i think when you go back to all the billions of dollars in banks, i mean, we can't forget that we have often had banking as being the disappointment of the earnings season. and this is not. i mean, we got a lot of good quarters from banks. that's a nice versus say alcoa. i mean, look, alcoa, look, there's not a great quarter. they're splitting the company up which can bring up value, but if you said earnings season started today, you would be quite hard because j.p. morgan was great,
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citi was great, pnc was great, wells fargo was -- you know, not horrible, but i think that does matter. csx was very strong. i was shocked at how well they can do with coal being bad. and if delta follows through and doesn't add all the capacity, then you're going to look and say the bottom was reached in the airlines and you had to get in them, particularly southwest doing quite well now. >> traffic was well for september. >> yeah, i mean, that's important. >> citi's now the best performer on the s&p. >> really? >> along with bank of america, schwab, lincoln national, goldman, pnc. >> goldman? i've got to tell you, this bank rally is important. i've been very pro apple, we know that, right? i don't trade. morgan stanley is calling for a supercycle. that's the kiss of death when you hear that term. fourth quarter earnings raised with stronger iphone demand, obviously the kingsford guy has trouble there, but the supercycle, when i see -- kingsford, that's a joke. >> yes. >> can't joke about it anymore. my wife says stop joking about
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the samsung. it's exploding. but the supercycle is too bullish. you never want to hear that. because what that says is people in the retail environment they're going to plow into the 20 -- the next iphone supercycle. just take your time buying apple. stock is doing quite well. don't go nuts because the market itself is just okay. >> yeah. samsung now saying the effect is going to stretch into q-1 '17. >> it's bad for kla tencor, be careful. there's mixed picture in tech. and i'm following twilio and acacia. and those both did -- twilio announced they had a 40% short position, and acacia did the second down ten and it didn't hold though snapped back yesterday. >> right. >> ericson had a really bad number. >> erikson had a rough quarter. >> very bad. >> yeah, a lot of loss there. they're waiting for 5g, they're
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investing but there's no revenues coming their way yet. >> that was a terrible quarter. >> and e rickson, when it comes to that country -- >> acacia's moving up, but i think the banks can color things in a positive way. you see the know about ge? little more negative ge. i continue to say that the part of the plane that is really challenged is the engine. ge actually is doing better in engines than others, but united technology, there's pratt and whitney problems, rolls-royce has problems. so a lot of this teething -- the one teething by the way was actual quote, that was the word that united technology used. so be aware that aerospace is not robust. and also if you listen to the airlines, they don't want to add capacity. that's also not good news. >> yeah. >> i want to mention hershey. john billbury the current ceo announcing step down from that
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position in july. so aways from now. they're going to undertake a search, interestingly, though many believe that michelle buck is the expected successor. she's currently the c.o.o. of hershey, ms. buck, but she was not appointed to the ceo position or as his successor, so they are undertaking at least it would appear a search. said by j.p. morgan at least not to be a lock. that certainly appears to be the case. see hershey shares are up. of course this comes after the failed attempt by monday louiol even buy the company. could there have been a deal done at 120? possibly there could have been most likely, but mr. bilbrey is in a difficult position. anybody who takes the job at hershey is. it's not typical ceo job because you have the trust on one side that essentially controls the company. and you've got your shareholders on the other, and their aims are
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not aligned. and it's difficult. >> that is important. >> i'm sure that is difficult. >> i read that and said, geez, was this ceo intransigent about wanting to sell and david said, no, it's the trust. >> but as a ceo you can perhaps want to sell, or think it's the right time strategically to look at other options and to explore. but your trust may say no way. the trust itself is in some timult. getting new members as the end of the year, i believe. a lot of change at hershey including change at the top job. he will remain nonexecutive chairman after july. >> that group has been very challenged this last few quarters, the food group just terrible. and with more for consolidation. i don't know if you've seen campbell's lately but the stock is terrible. >> what stock? >> campbell's. >> oh, yeah. >> general mills not doing that well, kellogg's rumored -- >> always rumored. >> which i'm tired of.
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>> yeah, it's getting tiresome. they keep coming around. speaking of food, bank of america takes domino's to a buy after a 37% year-to-date gain. >> boy, that was a suboptimal call if there ever was one. they have hated the stock. so at 150 they like the stock? honestly, i mean honestly, at 150 they like the stock? >> target is 175. >> but where were they for the last 120 -- where were they for the last 140 points that patty doyle has put on that stock? 140 points. >> yeah. >> pizza's a $34 billion category. >> right. >> my favorite is the five-year on dpz, which is essentially a straight line. >> remember he said pizza tastes like cardboard and -- you know, i love domino's. >> company has a $7.3 billion market cap. >> it's a cash flow machine, david. it's really a technology
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company. you can order pizza from your watch. i'm set. i have my pizza profile on my cell phone because i order the no cheese pizza with banana peppers. it is delicious. >> who orders pizza with no cheese? >> vegetarian daughter. >> that's the saddest thing i ever heard. >> if you have a vegetarian daughter, you don't put the cheese on. >> can't you get vegetarian cheese? >> do you do anything? what do you do besides swim? >> basically i'm in the water or kind of walking around aimlessly. that's my day. >> i'm a consumer of everything. >> yes, you are. >> i have to tell you the domino's app is my favorite app. it's my favorite app. >> really? >> yes. >> domino's is your favorite app? >> yes. >> better than google maps? >> i use the -- all right, in a top ten. >> better than uber? >> top 12. >> my favorite app. we mentioned airlines earlier, united is not really
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reacting to what was a pretty severe outage, which canceled thousands of flights apparently now resolved but sort of part and parcel with operating an airline these days. >> yeah, i think oscar is doing a really good job. i mean, he's really raised the morale, which does matter. i think that on-time numbers have been terrific. i like that stock. i like oscar, i liked him at csx. i think he's doing a really good job. >> i'm almost loathe to mention it but shares of yahoo up 1% this after reports yesterday reports general council of verizon raising possibility there could be material change after the massive breach that took place in 2014 that we just learned about from yahoo where really passwords weren't actually compromised. it's more complex than you might have thought, but 500 million people's accounts in some way were at least accessed by state actor thought to be russia
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probably getting stuff so they could use to hack the democratic national committee and everything else. >> is that what you think? >> but as for yahoo stock, it is up -- it's only those who are playing the arb here, in other words those arbing out the alibaba position. if you just own yahoo outright, it's a blip even if they were to renegotiate because alibaba's what matters. >> baba has come back. baba, saw up last night, good news out of china, baba goes up, very much a proxy for china. have you noticed bank of america haven't reported yet but almost back to book value. brian moynihan, i had him on last week for "mad money," that bank -- there's some banks doing quite well because there was a lot of activity in bonds. this was a point of turmoil. remember these international banks do well in turmoil. >> i do. >> can you imagine if we get a rate hike? like rosengren said imagine if you get a december rate hike,
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you're talking billions of dollars to the bottom lines of these guys. so now every time you get in front of these guys something bad happens. they've cut your heart out. kind of like "indiana jones and the temple of doom," remember that? >> one of the darkest of the three. >> every time i hear rosengren i'm thinking rosen krants and gilden -- >> no time for love. okay, shorty. >> yes. >> dow up led by goldman by the way as we were just saying. let's get to bob pisani on the floor. hey, bob. >> and a big sigh of relief down here on the bank earnings. we're strong almost 70% of the stocks are on the upside down here. asia closed strong. take a look at europe. they've had a very nice session in europe. they opened gap up in europe, bank stocks have been strong and the autos have been very strong because new car sales in the european union rose 7.3% in september. those are great numbers. so a good day for the autos. when the autos and banks are up in europe, the whole markets are going to be up over there. here in the u.s. you can see the
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influence of the banks here today. and remember financials are the second largest sector in the s&p other than technology, so they move, the s&p moves here. technology's strong as well, so you can see just these two groups together why the s&p is moving and of course defensive names like utilities are to the downside here. talk about the big sigh of relief because loan growth was pretty solid. i just want to use and i know we've talked a lot about the banks this morning, but put up j.p. morgan's revenues here. revenues up 8%. remember $24.7 billion, that was almost $1 billion more than anticipated. that's a big beat, noticeable. so interesting comp up 6% or so, strong loan growth, we knew commercial loan growth was going to be sluggish but wasn't as bad as some people feared and commercial loan growth was pretty good. non-interest income up 10% and that was largely because trading activity, particularly fixed income, was very, very strong. much better than anticipated. so across the board in terms of what you're looking for, which is revenues, they were generally
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better than expected and commercial loan growth sluggish but not as bad as some expected. put up banks and some mentions they help move the markets, j.p. morgan up, all beat on expectations here. wells fargo did note that the commercial loan growth had decelerated but consumer loan growth picked up a bit relative to the last quarter. pnc had an increase in both consumer and commercial lending, maybe citi group not as spectacular in terms of the internals as everybody else, but still nice move on the upside. retail sales, well, you know, it's been a tough year for retail sales. we did have a good number in line with expectations. so we had positive april, june and september. soft in may and july, flat in february and negative january, march august. put it together basically six of the nine months were pretty hohum so far this year even though we've had consumer confidence at a nine-year high. look at september retail sales numbers, i like to look at it year over year. what you see here is internet still strong, people still going out to restaurants and bars,
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health and personal care, jim talked about ulta influencing everything. there you see but there's your electronics, appliances down 4%, department stores down 6.4% overall, so you can see what's been going on, a continuation of the trend here, fairly ho hum overall. and retail put up some of the major retailers, remember we had j.p. morgan making comments on estimates and price cuts at some of the department stores. so kohl's and jc penney down, lowe's, chico up, about 70% of the stocks on new york stock exchange up on the week. back to you. >> thank you very much, bob pisani. let's get to the bond pits this morning. what a busy morning for rick santelli at the cme. hey, rick. >> hi, carl. indeed. you know, the data was fascinating. retail sales definitely rebounded, but there's certain aspects of it of course that are still lacking, no surprise there. we see that the growth numbers really aren't impressive, but
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they're impressive enough at least that's what traders are saying for today. let's look at a june 1st start to 10-year, you can clearly see that we continue to trade through some of these very significant tops you see on that chart. and, you know, this 1.74, 1.75 level, we had a bit of a reprieve yesterday which maybe helped the 30-year bond auction but those who participate in the auction probably aren't happy today. look at real action, look at one-week of gilts. boy, 1.12, two weeks ago we were talking about if it gets through 90 it's going to be a quick trade. certainly was. now stick with the uk theme, look at a one-week of the pound/dollar, very fascinating. one could argue that it isn't as impacted as it was, but it's still hovering at levels that are somewhat surprising if you consider where it was just four months ago. let's look at the euro versus the dollar, a big week there. boy, we lost a lot of handles from 1.12 to where it's
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currently trading. and all of that of course translates into, let's look at a one-week of the dollar/yen, shall we? i'm sorry, the dollar/yuan. dollar/yen was actually stable this week, it's the chinese currency six-year low against the greenback that's raising some eyebrows. when we look at how all of that translates into the very euro centric dollar index, no surprise it's had a big week. and i'll tell you, if you want a handicap how the softness in equities earlier in the week was impacting the psyche of rates, look no further than this dollar chart going back to march because it's strong. and if anything's going to reverse in rates, that's where you're going to see it first, so say traders. carl, back to you. >> all right. rick santelli, thank you very much. when we come back, an exclusive with jack lew. we'll hear what the treasury secretary told our sarah eisen about corporate tax reform. meanwhile, dow now up 159. back in a moment.
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u.s. treasury announcing new rules. our sarah eisen sat down with secretary treasury jack lew. >> i think the european commission has put a bright light on the fact if congress doesn't act, others are going to start doing things we think are unfair. we agree with the europeans that it's wrong for companies to be able to avoid taxes almost completely. what we don't agree with is that the u.s. tax base should be, you know, used by another taxing authority and another government authority. i think that the political situation in the new year is going to be an opportunity to deal with this. one of the things we said in business tax reform was you should do two things at once, tax the income that's overseas. >> uh-huh. >> but you can't use that money to cut tax rates because it's a one-time tax. use the money to pay for infrastructure. >> a lot of tax offices in general counsels trying to get their arms around this one. >> yeah, look, the tax code's such a mess. jim stewart with a fabulous
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article today in "new york times" about the real estate. i mean, i know he's talking about corporate, but the tax code is just impossible. it's impossible. who can possibly understand it? >> yeah. >> 3 million words at least, right? >> yeah. >> longest in the industrialized world. >> i think there's uniform belief that if we were to really reform taxes in a significant way, including of course corporate tax reform would be a real positive. certainly those who invest in the stock market see it as that. >> totally agree. >> but the prospect for it in a new congress with a new president, who knows. >> but look, we had this add version situation, think back jack lew said at delivering alpha there wasn't much they could do. >> actually they issued earnings stripping regs. they did make allowances because it was so broad it would have impacted a lot of industries that do move cash in different ways that we're not in any way trying to avoid a u.s. tax bill.
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>> is there anything in there, david, that will create an environment that there could be more deals or really just codifying. >> yeah, i think it's tough to do an inversion now. it's tough. >> it really is. >> you may choose to, but the economics behind it are not going to be nearly as fruitful. >> i just wish that you could -- geez, real estate, we all should have gone into real estate. if you do poorly -- look, i think that the difficulty that we all have is that you have to hire someone really expensive to understand this code. and that's what's happened. you can't do it yourself. i spoke to people at intuit last week, their business is just booming. it's booming because no one can figure it out. it's too risky. >> sort of like banks and compliance, right? >> yes. it is. >> a lot of people understand what's legal and what's not. >> the businesses i'm in, geez. >> we'll get more from sarah and her exclusive with jack lew
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later on this morning. we'll get stop trading with jim in a moment. dow's up 140.
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time for cramer and stop trading. >> struggled to pick about what i should say. there was a downgrade estee lauder pretty critical. i think costco when we hear that citi conference call you'll hear a lot of cards being opened. but i have to focus on under armour overweight on hold from a survey from piper jaffry. this has been a horrendous stock. and kevin plank is a competitor. remember sarah eisen did that great piece in asia with kevin blank, they're saying inventories are low and this is teenagers really liking it. this would be something if under armour came back because it was a loved stock by retail. and it really, really fell out of favor. and so maybe it can come back. nike's still not doing well. >> wells upgraded it earlier in the week. >> yeah. >> basically saying the mess of sports authority was all going to start to disappear. >> yeah.
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i think one of the things that we all forget is sports authority was 400 stores but it cast a pall upon everything. the ravens have a tough game this weekend to play the giants. >> broncos had a tough game last night. what was that about? >> you know, that's tired night football. >> apparently. >> tired night football. >> what's on mad tonight? >> we have stock that's been just horrendous, we have to find out what's going on, we're going to -- i got to take a hard look at -- what the hell happened to the restaurant business? we have some other terrific private companies, but the restaurant business has gotten -- it's horrible. >> restaurants have a larger share of retail sales than ever for the month, but it isn't reflected in comps or certainly the stocks. >> i just can't find a restaurant that's doing better than the previous month. i don't know what's happened. people are staying home. mccormick spice, staying home and cooking. >> i guess, i don't know. using those --
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>> groceries are this cheap. >> those apps you can deliver to your door the ingredients. >> you never go to the store. i go to the supermarket. >> i try not to. >> did you see -- i bought some mozzarella cheese the other day, shredded mozzarella, it was like $35. that's why i don't like cheese on my pizza. >> bingo. >> jim, we'll see you tonight. good weekend, jim cramer. when we come back more on wells as tim sloan gets ready for his first earnings conference call. dow's up 139. don't go anywhere. guess what guys, i switched to sprint
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with risk-management rigor, to seek out glal opportunities. we manage over a trillion dollars is way, attracting many of the world's leading investors. partner with pgim. the global investment management businesses of prudential ♪ good friday morning. welcome back to "squawk on the street." i'm carl quintanilla with kayla tausche and david faber at the new york stock exchange. sarah eisen is off today. busy morning. dow's up 130. best gains for the three major indices so far this month. yellen speaking, ppi, retail sales, bank earnings including some conference calls that are coming up in a couple of minutes. speaking of which, wells fargo of course this morning earlier today reported earnings that
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beat estimates, comes amid the fraudulent account scandal and the ceo stepping down earlier in the week. the conference call getting underway right now. we'll get to that shortly, but wells is not the only bank reporting this morning. we've also heard from citi and j.p. morgan, our wilfred frost is monitoring all of that for us and joins us with more. hey, wilf. >> hey, carl, indeed, the earnings so far is a strong bounceback in trading revenues and loan growth staying surprisingly long as have been in q-2. trading beat for citi and j.p. morgan in particular was focused to fix interests and rates. both companies cfos explaining reason for high client volume sparked by brexit reaction in july and then continued through the quarter due to lots of debate on possible central bank action. a side point on fixed interest commodities and currencies, citi cfo said that over time market share gains, quote, could be in part down to deutsche bank. an interesting side point given their recent trivials.
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loan growth, which had been expected to settle after strong first half yet j.p. morgan hit 2% for the quarter, wells a little behind that yet fee income for them delivered an eps beat overall. but the bigger reason for wells' share price lagging the others today is that it doesn't have that same trading exposure as j.p. morgan and citi group. the main headline from the j.p. morgan call with the cfo is that marion lake confirmed j.p. morgan had identified some cross selling issues of its own, though nothing systemic and reiterated they always put customers first. the main message from both citi and j.p. morgan on that front they've not identified anything of the sort of problems that wells has had. focus now turns to wells fargo's call, as you said, that's due to start any moment with the cfo. carl. >> wilfred, thank you very much. stay wus, we want to bring in gerard cassidy on the phone, gerard, good to have you back. good morning. >> good morning, carl. >> let's take the banks ex-wells for the moment, looking at some
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of these revenue jumps at j.p. morgan and even citi. what's your grade? >> i think what you saw in the quarter was a very strong capital markets number for both of those banks, particularly when it came to the debt capital markets, i believe -- >> gerard, really quickly, i think sloan is actually coming to the phone. let's take a quick listen. >> sure. >> this week john stumpf announced that he was retiring from wells fargo and the board. he made this decision because he believed his leadership had become a distraction and therefore the best thing for wells fargo was for him to retire. this action demonstrates the dedication john has had to wells fargo throughout his 34 years with the company, including successfully leading us through the financial crisis and the largest merger in banking history. as a new ceo, my immediate and highest priority is to restore trust in wells fargo.
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as you know, on september 8th we announced settlements with the pfcb, occ and los angeles city attorney related to sales practices in retail banking. i know that this is not the type of activity you expect from wells fargo and is certainly not what we expect from ourselves. we let down our customers, our shareholders and our team members. we simply failed to fulfill our responsibility to all our stakeholders. our vision of satisfying our customers' financial needs in helping them succeed financially is about building lifelong relationships one customer at a time. the core values of wells fargo are as true today as they were a month ago, a year ago and 164 years ago. however, we had serious problems in our retail bank where products became the focus rather than the relationships with our customers. our senior management could have and should have done more. i'm fully committed, along with
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the entire leadership team, to fixing these issues and taking the necessary actions to restore our customers' trust. we have a specific action plan in place to lead our company forward during this period, which is focused on outreach to everyone who has been impacted by retail banking sales practices including our customers, our team members, our investors, our regulators, elected officials and the communities that we do business in. it includes being transparent in our communication, and we've included a lot of information in this quarterly supplement for you. on pages three and four we provide some background regarding the sales practices settlements along with details of the account review that was completed by price, waterhouse coopers, i believe most of these facts are familiar to you, but let me highlight a few key points. the $2.1 million consumer and small business accounts that were identified as accounts that
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may not have been authorized cost wells fargo much more than the $2.6 million of fees we received, which we have fully refunded. and let me clarify that these accounts had a dminous impact we report on a quarterly basis with the maximum impact in any one quarter of 0.02 products per household or 0.3% of the reported metric. at no time were all of the identified accounts included in our reported cross sell ratio because unused deposit accounts rolled off. while the revenue generated was small relative to our annual income, and the impact on a cross sell ratio was not material, the implications for our company and on the trust of our customers are significant. we've made several changes to enhance our oversight, expand customer transparency and improve the customer experience, which we highlight on page five.
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effective october 1, we eliminated product sales goals for our retail banking team members and next year we will introduce a new performance plan based on updated metrics around customer service, growth and rich management. we want to make sure nothing gets in the way of doing what is right for our customers and the elimination of product sales goals has been positively received by both our team members and our customers. and we've made system and process enhancements including sending automated e-mails, application acknowledgments and multifactor authentication. we expect to spend a total of over $50 million this year on enhanced quality assurance monitoring. we've implemented an independent third party mystery shopper program targeting 15,000 to 20,000 annual visits to our branches to test actual product purchase interactions. we've added risk professionals to provide greater oversight and
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significantly expanded our customer complaint servicing and resolution process. we will continue to invest in process enhancements and product monitoring -- or proactive monitoring, and we're committed to getting it right for our customers. we're reaching out to all retail and small business checking, savings, credit card and unsecured line of credit customers. and we're asking them to contact us if they have any concerns about their accounts or any aspect of their relationship with wells fargo. we have dedicated resources available 24/7 for inquiries and questions. in cases where customers believe they have received a product that they did not want or authorize and they are not satisfied with our resolution, we're providing an option of mediation through a third party that is convenient and free for the customer. our team members are proactively calling and meeting with their customers in all areas of the
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company. additionally, we've been working on contacting the credit card customers identified by price, waterhouse coopers as a reminder their analysis included all credit cards that were opened but not activated. there are a lot of reasons why customers don't activate their cards, so we're trying to contact all unactivated credit card customers with open accounts to confirm whether they want their credit cards -- >> newly appointed ceo tim sloan as of this week on this morning's third quarter earnings conference call. we still have gerard cassidy of rbc, our own wilfred frost with us to talk about what we just heard as tim sloan tries to shore up confidence in the bank. gerard, we just heard tim sloan go through a laundry list of things the bank is doing. he said they're spending $50 million on an enhanced quality assurance program, secret shoppers, expanded customer complaints. do you think that's enough? >> it's certainly in the tone of
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sloan's comments are very positive. they seem to be contrite. they recognize they have a very serious problem. and they're addressing it very aggressively. so i think they're going in the right direction under this new leadership. >> wilfred frost, who is still with us now, normally we get the top of these conference calls discussing the strength of the quarter and the health of the business, but obviously wells has a different agenda this quarter. do you expect analysts and investors still have a lot of questions for the company at this point, or do you think they'll be able to turn the page and talk about the business itself? >> well, i think very, very fair question, kayla. some early reaction from analysts has already come out before the call. i think they do applaud the transparency that mr. sloan alluded to and suggest they were delivering. and they have given more information than they typically do. an example of that, on page nine of the report they say that 143,000 fewer new consumer accounts over the year, you
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could say that's bad, but it's from a base of 33.2 million. so it's not drastic. the citi analyst saying, quote, so we don't see it as impactful. that kind of detail was the kind of thing analysts were looking for, that specific impact on the earnings. some headline big numbers in absolute terms but not in a relative sense. so that's why encouraging. generally speaking the transparency's being applauded, but rightly as you say the tone of this opening statement very different from the two i just listened to from citi and j.p. morgan. he said top my immediate and highest priority is to restore trust. he also said senior management could and should have done more. of course he's in a position now to be able to slightly point the finger a little bit because we have had the change in management. i do think it's gone further than before. of course the share price relative to the sector is underperforming today, the main reason for that is because they haven't got that trading exposure that citi and j.p. morgan did so well on. >> gerard, a lot of people on the street were going to be looking toward litigation reserves and how much wells fargo is actually having to put
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away to potentially tackle future settlements if they did drop in the coming months. what did you think of the number of what wells actually disclosed for litigation? was it higher or lower than you expected? >> it was about right. and the important part is no one really knows for certain what the ultimate cost will be. we certainly saw in the financial crisis the cost for the settlements was extraordinarily high. nobody expects that obviously to be the case here. but it's very hard to get a good handle on what the numbers should be at this point in the process. but as the quarters go by, clearly they'll have a better handle and understanding of those costs and along the way they will be building those reserves to handle the ultimate payouts down the road. >> the stock is up less than its peers this morning, gerard. do you think it's hit a bottom?
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>> it's going to be interesting because the fallout is probably not completely here yet. particularly on the consumer side. this is all been relatively new in the last 60 days. and so it's hard to say, but the primary reason that it's underperforming today relative to the other two large banks is clearly the other two large banks capital markets businesses were very strong, in particular the dead underwriting and the fic trading areas were extremely strong for both j.p. morgan and citi group, and of course wells fargo is not in those businesses. >> gerard, thank you for that. apologize for the interruption, but it was good to hear sloan draw somewhat of a map for the way forward. that's gerard cassidy from rbc. our wilfred frost. wilf, thanks very much to you too. tune in later today "closing bell" 3:00 p.m. eastern time they'll speak with wells fargo
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cfo john shrewsberry. rick santelli has numbers on confidence. >> we want to make sure we bring you the viewers this. it's pretty important. our preliminary october read, so it can change, came in at 87.9. now, that is the lowest level of confidence from university of michigan this year. as a matter of fact, you have to go back to september of last year to find a lower number. so of course we want to monitor that and try to put ourselves in investors' minds that fill out that survey because we know the equity's been a bit squeamish lately. carl, kayla, back to you. >> thanks so much, rick santelli. we'll see you again soon. when we come back on "squawk on the street," corporate tax loopholes, our sarah eisen sat down exclusively with treasury secretary jack lew to break down the new inversion rules and much more. plus, we'll hear from the ceo of energy giant exelon straight ahead. you're watching "squawk on the street." ♪
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the obama administration unveiling new rules on corporate inversions, softening earlier announced crackdowns on certain tax practices. treasury secretary jack lew sat down for an exclusive interview with sarah eisen to talk about this and the current political climate's impact on the economy. >> i think there's an important final rule that we're putting out today. it takes the earnings strippings rules that were part of the announcement we made in our third round of administrative actions on inversions.
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and it makes them final. you know, it is an important statement that tax avoidance that's used to support inversions will be stopped. and tax avoidance that's egregious will be stopped. >> how much corporate backlash was there to the original rules? >> well, i think the original rule was put out in a form that was quite broad, and we understood there would be concerns about unintended consequences. happily a lot of the concerns also came with proposed solutions. and we had hundreds of comments, but they mostly concentrated on six issues. and you could look at those six issues in depth and come up with solutions between some exemptions and some fine tunings to take care of the unintended consequences. i think that the purpose of this rule is to really demonstrate that while we need tax reform legislation to really fix our tax code, to really stop the push that is driving inversions and to make it by law possible
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to invert or strip earnings, we need to also in the meantime use the administrative tools we have to stop the erosion of our tax base, our corporate tax base. >> i know you encountered some concerns from republican lawmakers, members of the house ways and means committee, for instance, warned that the rules would have a significant adverse impact on the american economy discouraging investment and hurting american jobs and workers and urged you not to pass this prematurely. >> i think that when people study what the final rule does, they'll see that we address a lot of the concerns that were raised about normal business practices that are not designed around tax planning strategies. which we've tried to address. >> donald trump has proposed cutting corporate tax to 15%, 10% for those repay traiting overseas profits. that certainly would discourage inversions. >> look, our proposal for business tax reform would reduce the business tax rate, the corporate tax rate, statutory
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rate to 28%. we did that by eliminating loopholes and deductions. i don't think we ought to be losing revenue when we lower the business tax rate. if there are more loopholes and deductions that could be eliminated, you could perhaps bring the rate down a bit more. but it becomes a trade-off then as to when are you taking away provisions that do real good. i think that the challenge on international, you know, earnings, is to get to a political space where we can work on a bipartisan basis to legislate. i've talked to a lot of republicans and democrats who want to do something about it. and if we could have a minimum tax on foreign earnings and decide what that rate should be in a negotiation, it would be a good thing. it would stop this problem. >> but it can't get done -- there's not with this congress and this administration. >> i think it can get done.
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i think the european commission's action has actually put a bright light on the fact that if congress doesn't act, others are going to start doing things we think are unfair. we agree with the europeans that it's wrong for companies to be able to avoid taxes almost completely. what we don't agree with is that the u.s. tax base should be, you know, used by another taxing authority, another government authority. i think that the political situation in the new year is going to be an opportunity to deal with this. one of the things we said in business tax reform was you should do two things at once. tax the income that's overseas. >> uh-huh. >> but you can't use that money to cut tax rates because it's a one-time tax. use the money to pay for infrastructure. >> do you see the election as having the uncertainty around this coming election hurting the economy right now? >> i think there's a lot of uncertainty in the world. you know, at the imf meetings last week you heard more discussion of political risk and geopolitical risk than economic
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risk. the optimist in me sees political risk as being something that ultimately policymakers can resolve. good policy can reduce political risk. obviously, you know, elections matter, referendum matter. >> i guess i'm wondering if we're risking having the best economy in the world and the safe haven status of the world reserve currency and the treasury market by what's going on right now on the campaign trail? >> look, i think that elections are always uncertain times. this year is no exception. i think the u.s. treasury markets remain unique in their depth and liquidity. ultimately the political gridlock is something that contributes to that uncertainty. we've seen how many times in my tenure moments of near shutdown, near default. every one of those moments became a kind of setback to an economy that was starting to gain momentum. i hope that with a new congress
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and a new president we'll turn the page and not see a repetition of that. >> we'll have more from sarah's exclusive interview with treasury secretary jack lew coming up at 11:00 a.m. eastern time. carl. when we come back, energy company exelon ringing opening bell after being named to the fortune 100. we'll talk to the ceo after a short break.
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joining us now is the president and ceo of exelon, chris crane. chris, people may not remember, it's a large company you've got there. the pepco deal closed not that one ago, you're one of the second largest generator of energy in this country, i believe. >> yes. >> nuclear, we never talk about that, but you still run a bunch of those plants in this country. is it increasingly unprofitable to do so? what's the future? >> so there are certain plants not only in the exelon fleet across the country that are economically challenged right now, we have low, low growth. we have low natural gas prices. and we're competing against subsidized renewable generation. so there are plants that are not getting compensated for their
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reliability or their environmental benefits they provide. >> and will that be the case into the future? do you have to rely on particular state commissions that may be more favorable in how they're dealing with it than others? >> yeah, there's a lot of competing regulations right now. you have the environmental protection agency heading towards a clean power future. but you have markets that are not designed for that. so right now our approach is to work state by state to create, which we have done just recently in new york is a clean -- or zero carbon benefit for the plants and be able to get compensated for that. >> you mentioned the epa's clean power plan of course being challenged by quite a few states across the country as well. how does that leave you in terms of response when you're trying to plan for not just this year but the next and the next? >> not only for nuclear operators, for coal operators, gas operators it leaves an unknown. >> right. >> i mean, as litigation goes through, the investment thesis
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is being questioned. so we have to be very careful on what we do and where we invest and have to work within the states to preserve the potential for these plants to operate for many years to come. >> what's your forecast on nat gas? >> well, the near-term depends on this winter. you know, we've got some pretty good storage numbers in, if we do not have a cold winter, we're going to continue to see suppressed prices out on the forward strip we get a little volatility into the winter with a cold snap we could start to see the increase as exports are continuing to go. >> what about security at plants and the grid? because we keep hearing about sieb cyber attacks of other industries, financial industries, people say the doomsday scenario is what happens to our energy companies and utility companies. >> the industries cross, this is publicly traded public power.
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we all work together through the homeland security electric sector council sharing best practices and working to mitigate the potential. there's been significant investments that have been put in for cyber and physical security and we'll continue to perform that. many of the systems are isolated from the internet so it's a little bit overstated the probability and the impact on the system, but it's something we all take very seriously and we're investing in and have a very good relationship with the government on sharing the risks. and across the sector, the financial sector, the utilities sector, they communicate together through the government and make sure we're sharing best practices. and knowing where to make the investments. >> was that something you were not doing? i mean, have you made a great deal of progress? >> well, with the technology changing, the risk changing, the investment increase ten years ago we didn't have the same risk profile as we had today. as with the financial sector.
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so we have a cyber control room, we have constant 24/7 on our operating systems. we have detection programs that are now up and running that have just been developed in the last couple of years within the i.t. community. so it is something that's growing, as the risk grows. >> all right. well, we appreciate it. congrats on the fortune 100 list as well. >> thanks. >> chris crane of course ceo of exelon. thank you. >> thanks. coming up, wells fargo beats earnings amid its banking scandal. ceo stepping down this week. we'll hear from the former president and ceo of the american bankers association, former governor frank keating. much more ahead on "squawk on the street." ross new york state, from long island to buffalo, from rochester to the hudson valley, from albany to utica, creative business incentives, infrastructure investment,
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nchs good morning everybody. happy friday. i'm sue herera. here's your cnbc news update at this hour. a london based trader accused of
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contributing to the 2010 wall street flash crash by placing bogus orders has lost his legal appeal in britain. he traded on the chicago merck from his parents' home will now be extradited to the united states within 28 days. samsung says the discontinuation of the galaxy note 7 smartphone will cost the company about $3 billion bringing total cost of recall to at least $5 billion. samsung slashed third quarter profit forecast by $2.6 billion earlier this week. an overnight computer outage at united airlines delayed more than 60 flights worldwide. while that problem has been resolved, the impact of the outage is expected to last throughout the morning. and the american psychological association says the majority of americans are stressed out by the 2016 election. the survey was conducted in august among adults 18 and older living in the united states. the age group with the most anxiety, those aged 71 and up.
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that's the news update this hour. back to you, carl. i think i'm one of those who's stressed out. i'm not in the older age group, however. i'm still stressed out. >> you're not alone, sue. you're not alone. our sue herera thanks. senator elizabeth warren calling on president obama to fire s.e.c. chair mary jo white. our eamon javers joins us this morning with more on that. hey, eamon. >> hi, carl. a sternly worded letter this morning from elizabeth warren to president obama. what elizabeth warren is upset about here is she's concerned that mary jo white is head of the s.e.c. hasn't moved quickly enough or at all on a rule that would require public companies to disclose their political contributions. elizabeth warren and a lot of people on the democratic left would like to see that rule put in place under the obama administration. of course time is running out. here's what she says in the letter. she says, this brazen conduct is merely the most recent and prominent example of chair white undermining your administration's priorities and ignoring the s.e.c.'s core
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mission of investor protection. now, carl, this letter is addressed to president obama, but it might as well be addressed to a potential incoming president clinton. and the reason is this, barack obama is unlikely to fire his s.e.c. chair between now and the end of his term at the end of the year. but think of this as sort of working the refs here by elizabeth warren to an incoming clinton administration sending a signal of what kind of direction they'd like to see at the s.e.c. next year. remember, there are only three out of five commissioners in place right now at the s.e.c. there are two vacancievacancies. elizabeth warren sending very much a signal of what kind of role she might play in a clinton administration. a lot of democrats here in washington simply assuming now that donald trump is heading for massive defeat and that hillary clinton will be the next president, and this is the beginning of the jockeying to shape that clinton presidency, carl. >> eamon, fascinating topic for a number of sectors. our eamon javers. for more on this we're joined this morning by former governor
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of oklahoma frank keating who also headed the american bankers association from 2011 to 2015. governor, welcome back. >> thank you very much, carl. nice to be back. >> reading from the letter here, chair white has made clear she's concerned that companies disclose too much to investors. how much of this do you agree on if anything? >> well, it's all very subjective, as you know. i think eamon's report was absolutely accurate. elizabeth warren can be difficult on occasion, but she is a united states senator. my fellow oklahoman by the way, but mary jo white and i are both former united states attorneys. and obviously when you're dealing with the jurisdiction the section has, you have to move carefully, you have to move precisely, you have to move -- you have to make sure you don't spook markets. and what you do is accurate, legal and subject to obviously appropriate congressional and/or public oversight. but you need to be very careful. and apparently she is. she's going to be gone anyway,
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the new president will more than likely select their own person, so i'm surprised with just a few days left, if you will, before the end of the term that the senator is so insistent she step down. >> but mary jo white's term doesn't end until 2019, governor. i'm wondering if you think it would take that long to actually confirm her replacement depending on the makeup of congress? >> well, no, my understanding -- and i may be wrong, that she can be replaced after the election. but she is a competent woman. i think she's done a reasonably good job, obviously i'm on the other side of the fence as a republican to her democrat antecedents. but if you are in a high visibility position like that, people are going to be pounding on you all the time. but you have to be careful, you have to be prudent, you have to make sure you don't fire before you aim. and obviously hopefully that's what miss white is doing. >> is there a line though at which a chair is too passive? and if so, what would that look like? >> well, obviously a lot of
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people can accurately or certainly arguably say that we as a country, certainly the s.e.c. was too passive before the crash of '08. you have to have an enforcement operation. you have to have your team in place aggressively pursuing what the law expects and intends you to pursue. but that doesn't mean you try to make headlines. you aggressively pursue what the law and the facts expect you to pursue. but i -- you know, elizabeth warren is always unhappy, god love her. as i said she's a fellow oklahoman. but if she's mad at mary jo white, i would think that mary jo would take a look at what she's doing. but it's not an easy position to hold. >> yeah. part of this discussion got started when senator warren was addressing john stumpf as he was on the hill talking about wells fargo. i wonder what your view of wells is given everything we know so far and given the new road map
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laid out this morning for how to fix this. >> carl, in the interest of full disclosure, i'm a wells fargo stockholder, i'm a wells fargo advisor's customer, and my law firm has done work for wells fargo. but that said, i have really been puzzled as to how this could occur. how quite truthfully you could make any money on in effect playing games with your customers. but i think that it's a huge institution. obviously john stumpf is a fine human being. and he built that bank into a great institution. but there apparently was people not watching the food in the kitchen. and it got spoiled. i'm really disappointed, as i said, as a wells fargo customer and client and stockholder. and i think, by his resignation, his giving back the money to which he was entitled, basically taking the fall when a lot of folks haven't taken falls is the right and prudent thing to do.
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but the culture itself requires a complete diuretic. the focus ought to be on customers. wells fargo is a community bank. and for me as a community bank customer, i want to make sure that i and i alone are what matters in this conversation and not the banker is bottom line. >> governor, the company this morning has said that consumer checking account openings were down 25% in just the month of september. what do you think the bank can do to retain consumer trust in the company? or do you think that is too far gone at this point? >> no, i think that that trust can be reclaimed. this is a big country. wells fargo has a very fine reputation. i mean, those of us from the west think that that wells fargo wagon is kind of a cool deal. but the reality is, again, the advertising focus, the outreach focus, the humility focus, the
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i'm sorry this will never happen again and should not have happened focus should be on customers. for me as a customer, that's all the company should care about. making it possible for me to do well with them as my financial advisor or the person i deal with for my banking. but remember, people are growing much older, people don't have defined benefits. banks will be in many cases their sole way of finding out am i doing the right thing with my money, give me your guidance and advice. you can't flimflam them and try and make money off customers unless customers want it. and you certainly don't want to lie about what you're doing with their funds. so it's not unexpected to have people very uncomfortable and very suspicious. but hopefully wells will get back on its feet and do the great job that it has done under john stumpf. i'm just so sad that all of this occurred. it should never have occurred. and to the extent those people who are responsible are still
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there they should leave. >> yeah. finally, governor, 25 days to the election, you're a republican from an historically red state. you said back in july you supported donald trump. is that still true? >> well, i've inched my way there. i voted for mr. trump in the absentee in oklahoma where i live. but the reality is both choices are difficult. the courts mean everything to me. and i don't want to see the republic disappear because of a radical leftist court system, particularly the supreme court. but the behavior of mr. trump is terribly disheartening. you need a president of humility and grace and goodness. another ronald reagan if you will, or another abraham lincoln, and i'm afraid this year we just have two difficult choices. >> and your choice remains trump? >> well, i've already voted for him absentee. there's not much i can do about that. >> governor, we covered a lot of ground. appreciate your time as always. >> yes, sir, carl, thank you for having me. >> have a great weekend. >> same to you.
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>> by the way, make sure to stay tuned for "closing bell" this afternoon 3:00 eastern time they'll talk to wells cfo john shrewsberry, stay tuned for that. when we come back on "squawk on the street," look at where stocks are trading this hour, dow up by 149, still in positive territory. and on monday ceo exclusive with pep co-chairman and ceo indr indra nooyi. much more when where he return. instead if getting caught up with the crowd, the investment managers at pgim take a long term view, teaming spialized active iesting withisk-manament rigor, to seek t global opportunities. we manage over a trillion dollarthis way, attracting many of the world's ading investors. partner with pgim. the global invesent management busisses of prudential are you all right? i was in a roofu of light. you were there. you were fincially secure - it was glorious.
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how do you know that? i work at ally - it's my job to know about finances. what else did you see? did i have a speedboat or anything? toss me back in, i'll check. he's finding out if i have a speedboat! nothing stops us from doing right by our customers ally. do it right. negative on the speedboat.
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one banking expert says regulation and technology are creating a hidden risk for the market. what is that risk? go to to find out. more "squawk on the street" coming up.
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let's get to rick santelli in chicago at the cme with this morning's santelli exchange. >> thank you, kayla. i would like to welcome our last guest of the week. peter boockvar, thanks for taking the time, peter. >> thanks for having me, rick. >> we had some points today, why don't you speak to them, maybe
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start in reverse. we had a weak michigan, you tell me what you thought about retail sales. >> michigan, is it the election? maybe, i think anybody watching the two prior debates would get rather depressed and that maybe impacts consumer confidence. but most noteworthy was the decline in confidence for those making less than $75,000 who are a lot of them unfortunately living paycheck-to-paycheck. retail sales if you take out auto sales and building materials was very mediocre. on a year over year basis, core retail sales are running at half the pace we saw in the mid 2000s and late 1990s. and ppi a little hotter because we're recycling the sharp declines in energy prices and commodity prices generally over the past five years. >> all right. peter, you just said something i find interesting. you said maybe some of the disenfranchised respondents on that weak survey for sentiment with michigan were those making less than $75,000. so let's play a game here, peter. if you're making less than
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$75,000, would you want small inflation, small deflation or 2.5% inflation? >> i would love deflation. it would raise the cost of the purchasing power of my money -- h >> you know what, peter, they're going to rip up your card to talk to fed officials now. i agree with you. now let's take this game even a little bit farther. if you're making $10 million a year and own a bunch of property, what are you going to be hoping for? >> i want higher real estate prices, i want higher stock prices, i want higher bond prices. i want asset inflation. >> 2.5 or higher inflation, right? >> particularly asset inflation would benefit. >> i got ya. which is exactly what we've had. now, let's take this game to a whole other level. okay. peter, you see what's going on with the pound and the yuan among just two currencies losing ground rather quickly that have big export economies. you see that, right?
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>> yep. >> so howry di ridiculous is it our fed thinks their policy within their borders is going to staunch the tsunami of lower prices coming? >> right. the idea of wanting 2% inflation which seems to be a global goal -- >> in a world with prices going down. don't they need a little global recalculation? why are they still driving cars with fins on these models? >> right. well, price stability is really stable price is not 2% inflation. 2% inflation is only to the benefit of central bankers that feel that gives them room to ease. it certainly hurts the consumer. it hurts those particularly that make less than $75,000. and this all comes in the context of an epic bond bubble. so the last thing that central bankers should be rooting for is higher inflation. and i think mark carny's getting a little taste of that with the sharp rise in gilt yields over the past couple weeks. >> he's getting a little taste. the average worker in the uk may
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get a big taste. i know we're out of time, but i don't care. i want to ask you one more question. today's money market reform, the more i think about it, talk to people, here's the conclusion i arrive at. when you have two sets of rules, one from primerules, one for prime funds, one for money market, aren't we creating another safety net that can blow up in the taxpayer's face? >> no question. imagine people having money in a money market account, thinking it's a bank account equivalent, something happens, a gate pulls up and they can't get their money out. >> i think those people already got out. they're going to the government money market side. they're in the big pasture of the government again. >> then it drives up the commercial paper market. we've seen the rise in lobor for trillions of dollars of dollar based loans. >> peter always a pleasure to talk to you. i'm sorry, you will get a lot of nasty e-mails from people who
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think deflation is devilish. when we come back, jim stewart. and coming up on squall alley, a huge partnership with vmware.
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we're continuing to monitor wells fargo quarterly investor call. john stumpf stepped down this week. our next guest says that's an example of corporate governance working the way it should. joining it's is "new york times" columnist jim stewart, who had a lot to say this week, not just about wells, but taxes. >> a busy week. >> let's deal with wells. you saw it as a positive. he did decide on i had own to sthis own to step down. saying he thought it was a distraction. >> i want to learn more, not saying that's wrong, it's often more complicated than that. the ceo doesn't decide without board consultation. let's give him credit for that. i think it's the right thing to do. people have been saying since the financial crisis, there's no
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accountability at the big banks, no upper level person pays a price. here we have someone. i will say wells fargo still has a lot of work to do. he wasn't the only one responsible. he may have been at the top. there's a management chain that leads down to the retail workers, we never heard who is in there. some of those people need to be held accountable. if you read the stories about the individual retail workers who tried to blow the whistle and wrote letters to stumpf, their supervisors ended up firing them, black balling them and then those people got promotions. you have to deal with some of these people. that's a cultural problem. >> the fed called it a crisis of leadership, when your main regulator loses faith in a company, no executive stands a chance. bob diamond lost the faith of the bank of england. any executive, you have to maintain that faith. >> absolutely. i'm still puzzled that wells fargo was so slow to see this.
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i was talking to them and they seemed to be on another planet. very isolated. like an eco chamber talking to themselves. that's always a problem. the ceo is the one who is supposed to have the vision and perspective to break out of that. i think it's for better, he definitely had to go. >> taxes. of courts you were one of the first to write about the fact that mr. trump very well may not have paid taxes. that was months ago. the paper you work forgot ahold of a couple pages of his '95 tax return with that enormous loss and speculated that he didn't pay for at least 18 years, which he seemed to confirm in the last debate. now, jim, you want to fix it all and tell us how to change the tax code? >> trump said i can fix this. it's not fair. i took advantage of it, it's all legal, i will fix the tax code. i asked both the clinton campaign and trump campaign and i did my own investigation. it's not hard. you limit the use of those loss
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carryovers for individuals, not businesses, which i think need to do them. the rest of us, we don't get to soothe out our income. do something with the passive lawsu lawsuits, lengthen the depreciation schedules and you've solved the problem. it's easy to fix. trump would have to pay the tax. the clinton campaign said they would do a few of those things, they want to study the other. i think they were as shocked as the rest of us that you could have a loss that big and no income. because clinton's idea of taxing the upper bracket, trump is not in the upper bracket. based on his adjusted gross income, he's at the poverty level. those things have no effect. they were surprised. they said we need to study that. they said raising the estate tax would help, because you would catch these people finally. the trump campaign, which seemed eager to engage with me on this
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when i first contacted them last week went radio silent after the tape. and as far as i could tell, that campaign is in chaos. any way, they didn't respond. >> you were unable to get a response from them. >> as i pointed out, trump has not said a word, has not proposed repealing or reforming anything he takes advantage of. >> don't you think we're so far removed from issues. we could go back in 25 days and go back to some of these things. campaigns are no longer about it for better or worse. >> call me old-fashioned, i am more of an issue person, but you're right. the personalities, the sex harassment, cultural wars are in full spring. i'm a business journalist, these are important issues to me. tax and tax policy are one of the handful of the most important issues in a presidential race. i'll keep the spotlight on it.
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before the election i want to visit the congressional republican plan for tax reform. they basically parted ways with trump. they have their own approach which is quite interesting. >> you do know, however simple it may be to put down on paper, getting something through congress, regardless of who is the president would seem to be extremely difficult. there is hope that next year, with a new president and a new congress it will happen. do you think so? >> you're absolutely right. why are these loopholes there? the real estate industry is incredibly powerful. they have effective lobbyists. i assure you, because i've run in other big real estate developers who are furious at trump saying he's put a spotlight on this, the whole tent will come down, they're gearing up for major battles to protect the favorite status they've enjoyed for decades. >> you're not arguing depreciation is a ruse, right? properties deprecate.
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>> well, yes and no. depreciation in the real estate area is a special thing. i kind of agree that this needs more scrutiny. how many people sell real estate at a loss? they deprecate it over the 39 years, and then when they actually sell it, that didn't deprecate it overall. there is a disconnect between the notion of depreciation and the reality. a lot of economists say it does depreciation but it's much slower than the schedule allows. >> how about of thmuch of this interest? >> the thing about carried interest, which trump and clinton said they would end. trump does not benefit from that. carried interest is treated as a capital gain. he had zero capital gains. >>ve


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