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tv   Squawk on the Street  CNBC  October 31, 2016 9:00am-11:01am EDT

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vinci code. "inferno" beaten out by "boo" tyler perry's, took in nearly $17 million. >> boo. happy halloween everybody. >> yes. happy halloween. happy trick or treating tonight. >> yes. what are you going as? >> i'm getting a man bun, going as a millennial. >> nice. >> bring a picture. >> bring a picture. make sure you join us tomorrow. have fun tonight on halloween. "squawk on the street" begins right now. ♪ good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. a big deal in energy, ge combining its oil and gas operations with baker hughes. we're going to talk to the ceos of both companies and the ceo of ge oil and gas this morning. meanwhile, final day of the month, a week full of central bank meetings, jobs number, focus on the fbi, futures are
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steady, moderate losses in europe this morning. and consumer spending rises to the fastest in three months. road map begins with ge confirming the deal to combine oil and gas business with baker hughes to create a new entity. we'll speak with the ceos in an exclusive interview. >> we've got a deal in the telecommunications industry. centurylink to buy level3, totals a new record month for u.s. m&a announcements. >> and the latest controversy over hillary clinton's e-mails as the polls tighten just eight days ahead of the election. we'll get you all the market impact. first up in that deal to create what both companies call a new baker hughes, ge will contribute $7.4 billion to fund a 17.50 per share special dividend for baker hughes shareholders. ge will own about 62.5% of the combined company. as we said, next hour an exclusive with jeff immelt, chairman and ceo of ge, and the
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ceo of germanwin oil and gas, i craighead. you said it would be the ultimate buy high, sell low. that's not the case here. >> no, it's funny when you have a view you get a story and the story is that ge's going to sell oil and gas to baker hughes and you're so upset about it. you have to take the opposite view when you hear that ge is getting control of a company that you really do like. i have felt that ge kind of an asset light approach, solutions approach basically saying, listen, when you drill, we can save costs. and then you take a company, a premiere drilling service company like baker hughes and merge the two, and suddenly you get a very good rival to schlumberger. i'm not a crazy big believer in deep sea. and ge had done a lot of deep sea. the reason i'm not crazy deep sea is because deep sea needs 70, 80. we might go back to 70, 80. 40, 50 is the new 70, 80. baker hughes makes if you look at that call they had jst on the
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quarter, they are doing quite well at 40, 50. so the combination of the two is very good. yes, baker hughes guys get a nice chunk of change, as they should. but, david, i look at this deal and think ge has a good upside going forward. i feared a comcast like deal where they split the assets and only baker hughes got to buy the rest. >> no, it's the other way around. >> it's the other way around. >> on friday we were speculating and as i said at the time without any reporting behind it relying on others the idea that perhaps it might be a spin into a merge co where ge shareholders would own it but not ge itself. this is different. 62.5% of the ownership will be like ge. think of the kraft-heinz deal. same people involved interestingly. >> you're so smart. >> that's kind of where you have to come down on this. and it gives optionalty to ge,
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jim, to sell down or potentially buy in well the ownership stake of baker hughes shareholders at 32.5% or use the currency to go out and do another deal. it's number two now, it will be, in oil and gas. >> what a great time. >> after schlumberger. they're talking about synergies, big number, 1.6 billion. so they're capitalizing those synergies at $14 billion present value on those run rate synergies of 1.6 billion they'll have by 2020. >> they're real because there's a lot of -- these were two very separate companies, you put them together. there's a lot of technology overload. baker hughes had moved a lot in the technology. ge has great technology. the offshore stuff i don't know. i mean, maybe they can fill out. but these are a good fit. >> ge's got a huge installed base already. >> yeah. >> and last week you made the point that the break even for shale is half of what it used to be. >> yes, it is. i'll tell you something else, natural gas, people really
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overlook natural gas is good. you know who's really good at natural gas and intelligent pipelines is ge. this deal they have is fantastic. the enterprise optimization for pipelines, pipelines have to be built because shifting from pennsylvania, ohio, all around the rest of the country. because natural gas is a very important fuel. natural gas prices have gone up. so this is a really good deal. i am so -- i was so worried. all weekend i was thinking, oh, my god, going to have to come in and slam the heck out of ge for doing this. >> no, it's the other way. they're doing a deal that actually they control a much far larger asset. >> yeah. >> at this point, jim, with as we said the possibility they could get even larger if they want to. so seller in this environment. >> very smart. >> and parting with $7.4 billion in cash, as carl told you, to pay that kind of a premium and then also buy in some of the stock to reduce the overall
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count. there's not going to be a lot of shares out of this thing trading publicly. >> right. right. but you've got this entity that is such a good call. let's say iran actually does agree with some sort of cutback and oil goes to 60, 65. interesting piece of paper. but most importantly i had felt that ge's assets lacked a kind of core that made it so it couldn't compete against schlumberger. my travel trust owns schlumberger and ge, but i never felt ge had the complete package. they offer great solutions to cut costs chrks is the thing that the oil and gas -- >> i see you looking here at a presentation from them. >> yeah. >> but the ge stores as they put it they're emphasizing now they'll sell more into this. >> yes, they will. >> combined entity. and you were mentioning intelligent pipelines or whatever it may be and predicts, things like that they will sell more equipment into. >> pipelines are much safer than trains. >> yeah. >> but that doesn't -- there are a lot of people who hate pipelines because they think
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they're unsafe. >> been a busy week for pipeline news. >> it is. and i think the pipelines, like them or not, we got to get the natch rag gural gas where it ha. ge has pipelines, on shore, fantastic. look at all these articles about shale. you could say everyone is going nuts in the permian. the fepermian has $30, $40 finding. this is a very good deal for both. craighead, he's good at raising money for big businesses. >> ge and have to get immelt not afraid to do bold things over these past couple years, in particular but throughout he's been willing to sell and buy, the criticism has been that he's sold low and bought high. >> well, he didn't do it on this one. >> although i think the financial services divestiture many shareholders are happy. with the stock price, though, jim over time. >> immelt himself tweeted this. this is video of the signing last night. i think he tweeted this at 4:00 in the morning.
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>> wow. over time the stock price anywhere near coming up from the s&p. >> they waited for the eagles to lose -- >> i thought you said you weren't going to mention it? >> sorry. had it on my mind, i guess. let's quickly get to the other deal we're talking about this morning and that is centurylink buying level3 communication, that transaction valued about $25 billion excluding debt. centurylink shareholders will own about 51% when that combination is complete. and as david said, now a record month for u.s. announced m&a. >> i was concerned about centurylink and its dividend. >> this helps the dividend. >> doesn't this help? >> this helps conserve the dividend without a doubt. some would argue the at&t-time warner deal may have been as much about that as anything, in this case it clearly is. but you can also make an argument these are two drunks holding each other up. >> oh, wow. hadn't heard that. >> we'll take a look at performance from both companies,
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they reported earnings neither of which were very good. in fact, i believe level3, which is considered in some ways at least the was the higher grower had 20 basis points decline in business services, the key market for both these companies, they're also providers particularly centurylink of rural telephone services. >> right. >> but as you might imagine that's not a growth business. the dividend is enormous. it will be over 7%. >> it's going to beat off business. >> yeah. >> it's about like frontier. it's all these the old days, you know, they got left. but you know what's interesting about this? level3 did make an amazing comeback in the end. >> they did. it helps sustain dividend. level3 has a $10 billion net operating loss that can be used very effectively in this combination by centurylink to help them shield profits, or not pay taxes. and it will be fairly highly levered going in at about four times, but the cash flow
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characteristics of the combination are such that it should be delevered pretty quickly. you can see both -- well, level 3 responding positively, centurylink is going to be down this morning. >> but that's just the arbitrage. >> that is to a certain extent. >> not people worrying about the dividend. >> right. it's in better shape. >> yes. >> you might look at 7% dividend how can they sustain it, now they're going to be a better job giving people confidence they can sustain it. >> there've been a series of articles, david, that said att's dividend is in jeopardy from time warner. >> i have not read that. i have read it the other way. >> i know but those articles would not be a correct analysis of the balance sheet of the two is from what i can tell. >> you too, right? i've seen the same. which is in fact it will be enhanced. >> yes. it's a misjudgment of the -- >> they are not damaged at all. >> okay, i wanted to make sure. >> i took two years of accounting, i could be wrong. >> i saw those also and questioned why those were being written. >> maybe those classes were worthless. >> yeah. still searching for sort of
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understanding the rationale behind it beyond the financial rationale for at&t. >> right. >> we're saying we're not in a growth business of any kind and therefore we're going to diversify more. >> those articles all read the same. i'm tired of reading it. like maybe the commonalities that stephenson likes hbo, what did -- he likes "game of thrones." how many times do i have to read that? >> now the question is whether goldman likes "game of thrones," all sorts of elements of that story. >> yeah, let's move on. that's not worth discussing right now anyway. >> the market is going to have to weigh m&a with politics eight days to go to the election. tightening polls in the clinton e-mail controversy in the spotlight. our john harwood has more on that from washington. good morning, john. >> good morning, carl. the question is whether this race, which has been so stable for so long is now going to change in these final eight days. donald trump has been seizing on the disclosure of the fbi reviewing additional e-mails. and using it to reinforce his
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core argument that hillary clinton can't be trusted. >> we all know about hillary's mounting legal troubles, that she's brought onto herself with her willful and deliberate criminal misconduct. hillary clinton is not the victim, by the way. she is not the victim. you, the american people, are the victims of this corrupt system. in every way. >> now, hillary clinton's had a twofold response to this e-mail news. one, her campaign have been going after very hard james comey, the fbi director, for the letter that he sent last week saying that it was misguided and it was unfair. they're demanding more information. the other is that she's reverting to her core argument which is that donald trump is unfit to be president as in this reprees of the famous 1964 daisy ad lyndon johnson used against barry goldwater.
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>> this was me in 1964. the fear of nuclear war that we had as children, i never thought our children would ever have to deal with that again. and to see that coming forward in this election is really scary. >> trump asked three times -- >> flthree times why can't we u nuclear weapons. >> i want to be unpredictable. >> now, let's take a look at the polls. it's always useful to check the polling averages. and if you look at these three national polling averages, you see a somewhat narrower race in the real clear politics average. two points for hillary clinton, it had been five or six before. in the "the huffington post" pollster average it's still six points and "new york times" average it's down to five points. we also had new nbc/"the wall street journal"/marist polls over the weekend that showed hillary clinton in a deadlock with donald trump in florida, that's a state he has to win. but she's ahead significantly six points in the state of north carolina, that is another must-win state for donald trump, carl, so he's still got some work ahead of him. >> john, we'll talk to you later
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in the morning. obviously that's going to be a big story throughout the week. our john harwood. and a question for you, jim, how does the market digest all of this? what did friday's action mean visa vis that news? >> i thought the comeback indicated it was glancing. the comeback was pretty powerful. what's so interesting was that the stocks that got hurt the most were the ones that would indicate that this doesn't mean anything. they were the health care stocks were the ones that indicate sweep. so the markets seemed to take it in stride if you believe that it's going to be a hillary sweep. the action in the stocks that are most connected to if the house and senate went democrat were destroyed on friday. they were destroyed. >> you mean separate mckesson? >> separate from mckesson. you had a health care one-day bear market that is really kind of extraordinary, whether it be merck or abdvi, it didn't matter. they're going to stabilize a little bit because cardinal reported a good number.
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it took my breath away. the movement out of health care into tech and industrials and banks was veracious. and that was a sign that the democrats are going to sweep. so it was hard for me to conclude other than from some polls that the market really bought into the idea that there had been a wholesale switch in who's going to win. >> story's far from over. when we come back this morning, a look at the busy week the markets have ahead including that fed meeting. we're going to get boj, b.o.e., jobs number on friday and later the ge-baker hughes deal, we'll have the ceos and ge oil and gas ceo lorenzosimonelli. back after a break. @!@!
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some data out this morning shows consumer spending up 0.5 in september, that's the fastest pace in three months. the numbers kicking off a week that does include a fed meeting, a key jobs number, the last one before election day. and as we head into the final trading session of october, all three major indices are down for the month. looking pretty much at the worst month since january, which was a
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mess. also looking at a table of months, jim, in which u.s. m&a sets records or comes close to it. s&p's down usually 30 days later most of the time. >> i'll tell you what's so hard, consumer spending has been weak. the numbers -- the aggregate numbers are strong, my problem is whether it be dollar general, dollar tree, the macy's, whether it be home depot, lowe's downgraded today, the weakest part of the companies i follow has been consumer spend, autos, look at ford, look at gm. so you have this aggregate data that makes it look like the economy's heating up, but on the ground floor things are bad. so you go and normally buy health care when things are bad, but health care's been decimated. the conference call to listen to where they said huge price cutting in insulin, human growth hormone. so there's been no place to hide because it is just a rather remarkable feat to try to figure
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out what happened to the consumer, other than the fact we hear from the government the consumer's healthy. >> so what, you buy amazon and banks? >> amazon was unbelievable because the quarter itself was great, right? but the future they indicated going to spend more, so yes, banks. particularly the regional banks. i keep thinking about that keybanc, the key call and beth moony, she came on the show, she's the ceo, and talked about how cleveland is just a juggernaut right now. and i was thinking, oh, my, what an incredible thing. i was up espn and talking about cleveland, there's a rebirth in cleveland. if they take the world series, it's going to be the capital of finance. so there is this kind of -- >> hey, the browns did give it away. >> they did, didn't they? >> that would have been something. >> oh, my, a lot of suicide pools picked them for that day. i do think you're at a moment whether it be bbnt or first horizon or key, the regional banks are the strongest sector
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of the market right now. that is saying something. >> yeah. >> we'll get cramer's mad dash and countdown to the opening bell in a few moments. take another look at the premarket on this monday. more "squawk on the street" from post nine in a moment. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.
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♪ what do we got? about six and a half minutes before we get started here on a monday. how did that happen already? >> i don't know. oh, geez. >> i don't know why i'm a little cranky. >> me too.
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>> mad dash always get me in a better mood. >> david, i don't mean to bum you out but this is a really seminole downgrade. merrill lynch goes to sell on nike, nike. great american growth company. why? remember last week when kevin plank said he had to spend more to get under armour growth? they're saying adidas resurgence in the united states, under armour spending more money, there's inventory elevated, nike doesn't have a fresh iteration. holy cow, this is an extraordinary thing. look, it's been terrible, but nike is one of the great american innovators, and they're saying that they're starved for innovation. could be a full year before nike has something new. this is one that people have always gone to. and i am stunned because mark parker's a competitor, but see kevin plank's a competitor. >> i know, but do you question the thesis? you've certainly been a supporter of nike. >> i struggle.
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yes, obviously you would have liked to have been done here. you know what, i can't write today. but kevin plank, when i heard him last week say, listen, i want this business and he ups his spend, i shuttered because kevin plank is someone i respect so much. he is such a competitor. this group literally has some of the best executives because mark parker's a genius. remember that's phil knight. i never thought that adidas could make a comeback. that stop sign smith shoe, foot locker's the winner because they're the arms dealer. but i got to tell you, david, nike's not right here. it's expensive. you know, on 2019 it's at 18 times earnings but still premium multiple 23 times earnings next year. i don't want to buy it. >> all right. >> i love mark parker. i think they're such a great team. and my daughter lives in oregon and it's nike -- you know, the whole state is nike state. and they do so much for the
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state. doesn't have it. >> okay. well, we'll watch nike of course as we see those shares down about 2%. got some other deals we didn't get to this morning on this m&a record breaker. >> team health. >> team health. is there an i in team health? >> no, no i in team. we're back after this. remember this guy? he's the drug company big shot who raised the price of a lifesaving pill by five thousand percent. said he wished he'd raised it more. prop sixty-one targets drug company price-gouging to save lives. the drug price relief act will save californians nearly a billion dollars a year. join the california nurses association and aarp and vote yes on sixty-one. the drug giants won't like it. and he'll hate it.
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you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell in about 60 seconds. and you're going to have to work hard to keep up this week. three central bank meetings, a jobs number on friday, attention on the fbi, lots of m&a, earnings from the likes of facebook, jim, and starbucks and fox and time warner and more. >> last week was a week where a lot of people couldn't even keep up, and there are a lot of revisions during the day. a company report, people would like it at the opening, then they would hate it during the day, and then come back and like it. be careful. the opening has been wrong a lot. bowling got revised three times during the day, so be careful.
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>> let's get to the s&p here at the bottom of your screen. and look at the opening bell. at the big board today it's adient, automotive seating and interiors business being spunoff from johnson controls. at the nasdaq cancer therapy etf celebrating first anniversary. keep an eye on ge and bhi. >> yeah. gci very good company. there's a lot of industrials that looked very good last week. aerospace made a resurgence because united technology said some good things. obviously boeing said some good things. the boeing call was about how the narrow bodies are doing quite well. so you got ge now doing some oil and gas good. ge, the locomotives, not that big piece of business but that was a downer. because i had norfolk southern on last week, everyone trying to cut back from cap x and buying locomotives. but turbines good.
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a lot of good stuff within ge. i am surprised we talked earlier about where the stock is, maybe the stock is too cheap after they made this deal. >> which ge stock too cheap? >> this has been a running battle about why the stock is -- >> yeah. i mean, it's going to have to settle out. it's a somewhat complex transaction, i think, so tgs going to take a bit of time for people to fully understand the benefits or at least they view there being significant benefits to the combination of ge oil and gas assets with baker hughes embedded within ge now will be a 62.5% ownership stake when the deal closes in this combination which will be number two in oil and gas. that can always take a little time to work through. analyst coming out this morning, guys, saying, well, comps traded between 9 and 11 times ebitda, so off the bat you should assume $62, $65 for bhi, guess what, that's exactly where it's trading. >> all right. >> and synergy number is a big number. big number 1.6 billion a year
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after 2020 that they're talking about. >> they didn't really compete. >> hammer deal did not have anywhere near that. >> no, it didn't. interesting you say that. these deals that come, a lot of this is companies are -- the oil companies are demanding go through the schlumberger conference call, oil companies are demanding great concessions. this was a year 2017 is the year where schlumberger saying we're going to get those concessions back, we're going to make more money which would make it so this is a more profitable company if you look at 2017. >> at the same time confusing headlines over opec over the weekend as trying to get the deal finalized before the end of november now. russia wants to freeze, not cut, iran and iraq want exemptions. that's going to be ugly too. >> yeah, the only thing the saving grace here is china is up 6% year over year. but i have felt that this opec deal was always really never going to kind of come together.
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but if worldwide demand comes back, you're going to need equilibrium. you want to own the oil stocks in the way that goldman sachs upgraded chevron. chevron conference call very, very bullish. 2 million acres -- huge amount of permian for chevron. of course everyone is very gaga for permian. but look, there's a lot of belief that you can make money if you have the right properties, on shore properties, 40, 50, i just think that in the end people got too bulled up so to speak as they always do and iran is a spoiler and iraq is a spoiler. they're always going to be that way. iran can do 6 million. >> they'd love to. by the way, oil touched 48.17 this morning. that's the lowest since october 3rd. >> wow. >> you mentioned chevron and exxon getting flipped at goldman. >> exxon was the great conservative, that was the great defense play and chevron was more aggressive. so there you go. chevron -- that was a monster good conference call.
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i really loved it. >> deutsche flipping macy's and nordstrom. >> macy's and nordstrom has had a good run, macy's has done nothing. the one i've been in awe here is mastercard in terms of things that have been working. fantastic conference call plus 20. some of these companies these are whether it be -- credit cards are very strong. there's a lot of stuff that's very strong in the financials. whether banks, whether it be the credit cards, a lot of stuff that's working, tech, a lot of stuff that's working. just health care not working. >> talk about strong and we mentioned it, m&a, i have to admit i knew it was going to be and i think i said active fourth quarter. >> yeah. >> but to think we have an $85 billion deal announced last monday, we have two $30-plus billion announced this morning. there are a number of companies out there that trade that might benefit from this, although they're not necessarily involved in advising on these deals. >> you mean goldman and jpm?
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>> and morgan stanley certainly. but you've got things like tauchman, evercore, green hill, lazzard, i have a lot of names, you could argue in an m&a market could benefit. what's interesting you have this antitrust regime many people argue as stringent as it's been in a very long time. you've got a presidential election coming up that's brings uncertainty. >> right. >> and yet they're still doing these enormous deals and announcing them prior to that. the only reason i guess that you would is if you got to borrow and rates may be going up. so maybe it's better -- maybe that outweighs any other thinking you're looking at. >> i think that does. i think that absolutely does. although remember we have the most active anti-trust department we've had in many, many years. a lot of these deals are not
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anticompetitive. >> no. i mean, ge, halliburton, again, they were going to be the buyer potentially of divested assets although it was unclear if that was going to happen. >> right. >> so doesn't appear to be a huge antitrust risk in that deal. >> the health care deals are all bad. >> at&t, time warner there shouldn't be but apparently there is because people say there is, but i'll believe it when i see it. the health care deal, yeah. >> i think you're right. i think goldman sachs seems undervalued. j.p. morgan looked like it might break out next week. it still might break out. bank sector is good. >> m&a advisory does not add up sometimes -- i mean, it's great margin business for them. >> right. >> revenue wise it's not as big as really right now you got to call me right now? >> huh? >> i had a phone call. >> okay. >> i'm not taking it. >> but you looked at it and said i don't want to take that one. apple stalled out here. notice that? >> i have. it's on the poise to breakout is deere. >> put that up. >> close to 14-month high a
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dollar away on baird's upgrade. >> and it's a thesis upgrade. it's like, hey, listen, the stock is 40 years old. when i say thesis upgrade meaning there's no catalyst. there's nothing that is in the farm equipment group that makes you want to feel that way, although brazil has made a comeback. no one wants to talk about this brazilian comeback, but brazil is a tailwind for a lot of companies. >> not bud, but some. >> no. but farm group and rial's had a big move and deere's -- geez, if you think deere's going to come back, you have to believe in latin america. >> they are talking about some demand in emerging markets and corn. they say corn is potential tailwind in '17. >> these things can't go down any more than they have. i think deere's a great company, but i also know agco is cheaper than deere. i think this is one i want to be onboard. by the way, i think you want to be onboard cat. but cat did not have a great quarter. but it didn't go down much. remember goldman downgraded cat. >> i do. speaking of agriculture, and
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antitrust bayer-monsanto, did you see that deal yields in europe are the same in u.s. despite their lack of use of herbicides, pesticides and gmos? >> wasn't that something? >> not hurting monsanto's shares. >> no. i thought it was very counterintuitive. i didn't think that was the case at all. the gmo people say how do you feed the world without gmos? that's always been the wrap. i found that stunning. i thought that everyone was going to be talking about that today. >> well, we are, a little bit. now we're going to move on. >> and neil young will talk about it. let's get back to headquarters. scott wapner has some news from those who might have an opinion about this ge-baker hughes deal. >> hey, carl, thanks so much. major ge shareholder nelson peltz weighing in on the ge-baker hughes deal this morning telling me, quote, i think it's a great deal. he said for the first time the new company can now go nose-to-nose with schlumberger,
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that's really what you guys were talking about. he thinks it gives the new company optionalty and a currency, it has great tax advantages for a ge as well. mr. peltz told me he also thinks it creates tremendous new value. jim, you said that you think it's a good deal. mr. peltz says i think it's a great deal. so he is clearly happy. he told me a couple of weeks ago, if you recall on our program, when i asked him if he was going to become more active in ge because the stock hadn't done well lately. he said, well, you know, if they miss this quarter, if they have bad earnings this quarter, who cares. if they miss several quarters in a row, maybe i need to shake the trees a little more. but he is clearly happy with this transaction between ge and baker hughes. and he told me just that when i reached him on the phone. >> scott, i look forward to talking to you on the show. >> uh-huh. >> a tie is better than a loss, by the way. >> i don't know. it feels like an l. >> i mean you should have a tie
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on. >> a tie would be better than this. and a tie feels like a loss. >> nelson did sell some stock, but again, that was just because of a portfolio match. the stock had had a monster move since he bought it, right? >> absolutely has. of late it hasn't done all that well, but he is clearly supportive of the management team. and he made that point to us on the program a couple of weeks ago. and he emphatically made that today on the phone just a few moments ago by telling me that he thinks it's a great deal. and really gives them, as you guys have been saying, this ability for the first time to go head-to-head with schlumberger. >> yeah. look, i completely agree with nelson. this is the kind of thing that i wanted to see, versus the fear of them selling it. no one's ever been able to compete with schlumberger. no one. that's what this does. schlumberger is by far the best in the industry technologically now. this is a run for the money. schlumberger has had the run of
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the table. let's see. remember my trust owns schlumberger. this is one worth looking at. >> all right. >> very interesting. >> all right. thanks to scott. let's get to bob pisani. dow's up six points. good morning, bob. >> good morning, carl. happy monday everybody. modest gains today, but we've got problems with oil still below $50. look at sector leaders here. remember, story's very simple, $50 to $60 oil going into 2017 is what people are anticipating, and we're having problems there. problems with opec, problem with non-opec companies agreeing on production cuts. it's just not there. health care has been a horrible month on concerns of regulation, industrials, technology, technology had a better month overall. earnings not that bad in this sector. behind me we're waiting for adient to open. they rang the bell. johnson controls is spinning off adient, the automotive seating business. johnson is big in that area. johnson will be a new company specializing in construction and energy business. they've always been in those businesses but now spinning off and waiting for adient to open
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at the stock exchange. a lot to be said about the ge-baker hughes deal. the old deal that did not go through, you just had one less supplier. we had ge and baker hughes what you get is an improvement in the overall value proposition. so with ge you get more emphasis on technology. you get more software and less hardware. put up the next full screen. and that's really the key point here, i think. that's why people are really happy about it. you get services from ge that will improve efficiency. you can't just have oil services anymore. you have to improve the efficiency. it's not the number of rigs, necessarily, it's how efficient those rigs are. so you've got a menu of products that ge might be able to offer that will enhance the performance. you can't just sell a commodity anymore in the business. it's not going to get anyone to the promise land. high-tech with the commodities business, that is what people want. and that's what this deal offers why you're hearing people say so many positive things about it. there's adient by the way just
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opening right above me up 1.3% behind me. we're in the last trading day of october. and it has been a bit of a disappointment. we're down 2% overall for the month. the s&p 500 it's the worst showing since january believe it or not. look at the russell down 5% overall. and if it wasn't for financials, we'd be in a lot more trouble. take a look. banks had great earnings overall, that's why they're on the upside. most of the tech stocks also had decent earnings. these are the two biggest sectors and this is why we're doing so well overall. we're not down more, but consumer discretionary, retailers having a tough time, home builders have had a tough time, health care has been horrible. pharma and biotechs been terrible and anything interest rate bearing like reits or telecom stocks have had a very tough time overall here. a number of those trading firms because of this terrible trading environment have had a terrible time. kcg, itg, anything trading has had an ugly time overall here.
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asset managers as well very, very tough month. right now the dow up two points. back to you. >> thanks so much, bob. chicago's pmi's a few moments away. let's get to the bond pits. rick santelli at the cme about to have a very busy week. hey, rick. >> yes, yes. part of that includes the market, not even baseball, right, carl? listen, a two-day of tens you can see we've lost a little bit of ground. the move started on friday, whether it was the news regarding the fbi or a combination of that and the fact that rates had been firming up. if you look at a one-week it's still hovering at the top of the range. look at bunds, yes, they dabbled in the 20s, but they've eased back. still also hovering at 15 top of the range in gilts, same scenario going back to brexit in terms of yields. now, if we look at an etf, look at the lqd, this is an exchange traded fund of course. that's regarding investable quality corporates. and you can see it's turned the hyg suddenly different, but it's
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turned as well. listen, when rates go up in the prime credit, it takes a couple of reasons away to move into areas such as lqd and hyg. now, the next three charts are dollar index. and keep in mind the dollar index really did get hit a little bit on friday. and it continues to play slightly in positive territory up about 0.25 cent. but a one-week chart shows it's going nowhere quickly and the one-week chart is quite revealing basically in a zone at highest level of the dollar index since february, but knocking at the door of 100 huge psychological area. and speaking of chicago purchasing manager, right on cue the october read is out. 50.6. now, this is definitely a miss. we were expecting 54 and change sequentially 54.2 last look. of course this now comps us back at 50.6 to the lowest read, which was sub 50, 49.3 in may. that is the weakest current read since that particular read. and do keep in mind we had two
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months under 50, april joined may. so even though it's still in expansion territory only by the slimmest of margins. back to you. >> thank you very much, rick santelli. coming up, ge combining its oil and gas operations with baker hughes. we're going to talk about that deal with ge's jeff immelt, baker hughes chairman and ceo martin kra iin craighead and lo simonelli. dow up one point. don't go away. remember here at ally,
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♪ a new chapter for tesla and ceo elon musk. musk friday unveiling what he calls the solar roof and power wall to home energy storage unit. new solar panels roughly the size and shape of traditional roof shingles, come in a variety of styles.
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musk says, quote, this is the sort of integrated future, an electric car, power wall and solar roof. key is it needs to be beautiful, seamlessly integrated. announcement comes three weeks before a vote on the proposed merger between those two companies. would you put this on your house? >> yes. yes, i would. i don't like the look of solar panels. i discuss this a lot with my wife. i would. we have solar panels people next to us, and she doesn't like the look. i'd do this, if they can get the rebate, yeah, absolutely. we both feel it improves the price of our home, the value of hour home and the answer is very cool. >> so does it follow if you like the product, ie the car, and now the roof, you must like the stock. >> you love the car. this is a big issue for us. the tesla -- i don't like the financials of solarcity. >> does this introduction of potentially it's the idea of synergy between the car and the solar panels help him get the
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vote of the unaffiliateds. >> it does. >> you think so? >> well, look, this is the great -- i keep thinking about jay leno sitting right there. >> on our show. >> yes. that was a game changer for me. that made me stop bad mouthing musk. it didn't make me like the financials, but i just said jay leno knows cars better than i will ever know cars and he said, listen, just here's something for you to think about. he's successful. and i have stopped it. because leno knows cars. >> the first time we've said that at this table but it's absolutely true. >> right. just shut me up. and, yes, i want the panels. we talk all the time about the ugliness of the panels, versus shingles. >> which house would you put them on first? >> the tuscany house. there. take that. >> oh, you know i'm going to take it. i'm going to take at least two weeks a year there. >> when we come back we'll get stop trading with jim. dow is unchanged.
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trading. >> pharmacy benefit managers that's because cardinal health reported a number and it wasn't as horrible as people feared. so mckesson's bouncing a little. amerisource one started the price war, my fear is this group is still tremendously under pressure. be aware you can have a relief rally, but when amerisource reports it could be in trouble. the price is under pressure, drug stocks are under pressure, money continues to flow into the takeovers, tech and banks. doesn't seem to want to end. just be careful health care. i don't know if it can bottom. >> point's been made. cardinal has a big non-drug division. >> yes. look, these companies are not dumb companies but look at merck lost all of its value after ketruda. >> what's on mad tonight? >> well, you know, alcoa splits tonight. we're going to have them, newell some didn't like after the quarter. and then brunswick had a quarter
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that was hurt by the fact that they have an exercise business. that i actually like very much. so we're going to talk to them. and this week we have so many companies that are onto talk about earnings. i'm very excited about it. and i hope it makes up for last night which was painful. >> that was rough. you had to wait a long time for that result. >> yes. and tonight's day of the day and tomorrow's my wife's birthday so we're going to be up a little too late every night this week. >> that's okay. you'll bring the same energy every time. >> i hope so. >> when we come back this morning, ge as we said merging the oil and gas operations with baker hughes. we got all three key executives, jeff immelt, lo renz o simonelli and martin craighead. back in a minute. - diversity isn't just important for your financial portfolio. it's also important for your life. celebrating, welcoming, and surrounding yourself with people of all kinds is an investment in both you and your community, and we're all the richer for it.
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eisen, david faber at the new york stock exchange. market's not moving a whole lot in either direction, dow is down 12 but what a week we have ahead with m&a, central banks, earnings, a jobs number and of course continue attention being paid to the election. >> our road map for the hour begins with that big deal in energy, general electric combining its oil and gas business with baker hughes. we speak exclusively with ge ceo jeff immelt, ge oil and gas chairman lorenzo simonelli and ceo martin craighead. >> we'll get some political analysis. >> and it's the final day of trading for the month. the fed meeting, jobs number all ahead and of course the e-mail investigation impacting the markets. how you can protect your portfolio straight ahead. as we mentioned we have a large deal in the energy services industry this morning. general electric combining its oil and gas business with baker
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hughes. ge will also contribute $7.4 billion. that will fund a $17.50 per share special dividend for baker hughes shareholders. ge will then o own 62.5% of the combination, baker hughes shareholders will own the remainder. coming up at 10:40 a.m. eastern we will have an interview as sara just told you with jeff immelt, lorenzo simonelli and martin craighead, who decided to take this deal after of course that deal to be acquired by halliburton fell apart after antitrust objections to that combination. they did take away $3.5 billion in cash for their efforts there. and ge was conceivably a buyer of some divested asset ifs that deal had ever taken place. so no stranger the idea there would be a combination concei conceivably beneficial. at least according to the
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companies they will be in a position to compete effectively with schlumberger, the leader. they're talking about as much as 1.6 billion in run rate synergies in 2020. but if you throw a multiple on that it gets to be a pretty big number early on and that is one reason why you see shares -- actually, really baker hughes shares not responding positively at all right now. earlier they were up. >> they were in anticipation of this deal last week. it's been a thumbs up on both sides from investors. we did just get some headlines from a conference call that some of the executives just held in terms of the oil price. jeff immelt, ceo of ge, says the transaction assumes a slow recovery $45 to $06 a barrel through 2019. tremendous opportunity here for customer productivity. and he says this is the right time in the cycle to invest. of course everyone trying to figure out what the big deal means in terms of where we are post oil price crash, opec's deliberating over whether they're going to freeze or cut
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production. clearly ge here is assuming a slow recovery. >> indeed. meanwhile, the election about eight days away and statements from the fbi related to hillary clinton's private e-mail server obviously rocking the campaign trail. our john harwood joins us this morning with the latest on that. hey, john. >> hey, carl. you know, for weeks now prediction markets have been assessing hillary clinton as the overwhelming favorite to be elected president on november 8th. is that now changing? trump campaign hopes so, sees some polling evidence that suggests maybe that's true. after james comey's letter, they were moving before comey's letter, but james comey's letter has given new hope to republicans. donald trump hit it over the weekend saying it reinforces his core argument that hillary clinton cannot be trusted. >> we all know about hillary's mounting legal troubles that she's brought onto herself with her willful and deliberate criminal misconduct.
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hillary clinton is not the victim, by the way. she's not the victim. you, the american people, are the victims of this corrupt system in every way. >> now, the clinton campaign is adopted a twofold strategy in response. one is to discredit what james comey did, say it broke with justice department policy and precedent. the other is to return to their core argument which is that donald trump is simply unfit to be president. they dramatized that in this remake of the 1964 daisy ad that lyndon johnson used against barry goldwater to argue that he was unfit. >> this was me in 1964. the fear of nuclear war that we had as children i never thought our children would ever have to deal with that again. and to see that coming forward in this election is really scary. >> trump asks three times. >> three times why can't we use nuclear weapons. >> i want to be unpredictable. >> what safeguards -- >> now, where do we stand in the polls? take a look at the national polling averages. that's the safest way, the most
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accurate way to look, not focus on any individual poll. in the real clear politics average it is now a two-point race, 45-43 when you factor in gary johnson in that race. when you look at "the huffington post" average six-point spread, "new york times" five-point spread and we had two new nbc news/"the wall street journal"/marist polls over the weekend. one showing neck and neck for them in florida, but he was down significantly in the state of north carolina also a must-win state for donald trump, carl. >> john, thank you for that. our john harwood this morning. for more on this bring in former dnc advisor steve mcmahon and former rubio advisor alex conan. gentlemen, welcome to you both. i like ben smith's line in politico, we've always said wild card investigatory poses the biggest threat to hillary
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clinton win, well, we got one. steve, can we make a guess as to what this impact will be? >> i guess we can sit here and guess which is what i guess we're going to do today. it seems like the race hasn't moved that much. i think the e-mail controversy and the trust issues that hillary clinton has struggled with had been pretty well reflected in the value of the stock. and i think voters have made their judgments largely based on those two things in the background. and i don't think this changes it. there's no question that it would be better for the clinton campaign if they weren't talking about this right now, but i don't think that it's going to fundamentally alter the outcome of the race. >> that is alex, unless there's something explosive that we're going to find out in the next eight days, right? >> that's absolutely right. a week is a really long time in presidential politics. people just found out about this news friday night. i wouldn't expect it to show up in any polling right away. as steve knows sometimes it can take several days for major events like this to be reflected in polling. it is the worst possible way for the clinton campaign to finish
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this election. they don't want to be talking about her own scandals, own problems with ethics, her e-mail problems, they want to talk about donald trump. and this revelation on friday night guarantees that the rest of the election is going to be about whether or not you can trust hillary clinton. that's bad for her, it's bad for democrats running down ticket, it's great for the republican party. >> and on that note the political pressure on james comey konlt continues to rise. this morning eric holder, former attorney general in sort of unusual stunning and scathing op-ed in "the washington post" says that i fear he has unintentionally and negatively affected public trust in both the justice department and the fbi, steve. what does comey do next? when do we expect to hear from him? and how does he handle all of this criticism? >> well, that's a really good question. i don't think anybody is questioning his role as the prosecutor here because if somebody brings something like this to your attention, as a prosecutor you're obligated to look into it. i think what they're objecting to is the fact that he's doing this so publicly. there's a longstanding tradition in both democratic and
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republican administrations, which by the way james comey violated initially in july when he did his news conference, but that tradition says that you don't comment on pending investigations. and you don't speculate. and you certainly don't have news conferences just before elections. in fact, there's generally a rule that's understood by prosecutors that you don't bring any action forward within 60 days of an election because it might impact the outcome. by the way, there's some precedent even here in washington, d.c., a prosecutor did this to vince gray, the mayor, basically suggested that he was corrupt right before a primary. and then vince gray lost that primary, a new mayor was elected here and the charges were later dropped, or the investigation was later dropped. so there's a reason that the justice department has these rules that apply to both democrats and republicans. james comey is a fine prosecutor and a fine man. and as eric holder pointed out, nobody thinks that he would have intentionally besmirched the reputation of the fbi or
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justice, but that seems to be what happened here. partisans on both sides are using the fbi and justice department as a political which should not be. >> do you think serious about the violation of the hatch act? >> i don't understand why democrats would want to go to war with the fbi a week before the election. the fbi is not going to be on the ballot next tuesday. it's going to be hillary clinton or donald trump. in my opinion, and i'm not one to normally give advice to democrats, but i don't think they should be attacking the fbi, especially when all the fbi did was keep its promise to congress. i mean, in essence the democrats are arguing that the fbi should have withheld information from congress that was pertinent to an ongoing investigation that's in the national interest. i mean, i think they should err on the side of having all the information out there. hillary clinton should welcome these developments rather than going to war with the fbi over the last 48 hours. >> alex, i would agree with you that comey should keep the congress -- i'm sorry, alert the congress about significant developments in a case.
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but the fact that the fbi came and said there's another device without anything more is not a csignificant development. it could be entirely irrelevant, it could be entirely -- i'm sorry, entirely outside the scope of this investigation. and what comey did was he basically allowed his investigation to become a cud yul in a political campaign which is against the rules. it doesn't make him a bad man, it makes him somebody who made a bad judgment and now is sort of left with the consequences. >> he's doing exactly what he told congress he was going to do. i don't think there's anything wrong with that. >> yeah. we didn't leave us any time to talk about state strategy, guys. we'll try that next time. >> okay. we'll come back. >> steve, alex, thanks so much. >> thanks. coming up on the show, ge announcing it will combine its oil and gas business with baker hughes. both stocks on the move. ge one of the biggest gainers in the dow. we'll speak with all three executives that put this deal together. much more ahead on "squawk on
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and he'll hate it. we need to be ready for my name's scott strenfel and r i'm a meteorologist at pg&e. we make sure that our crews as well as our customers are prepared to how weather may impact their energy. so every single day we're monitoring the weather, and when storm events arise our forecast get crews out ahead of the storm to minimize any outages. during storm season we want our customers to be ready and stay safe. learn how you can be prepared at pge.com/beprepared. together, we're building a better california. only eight days to go before election day. how will markets react between now and then? joining us now onset ubs director of floor operations art cashin. good morning to you, art. >> good morning. >> are you surprised we're actually seeing some resilience
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in the stock market given heightened uncertainty factor here friday into next week? >> i think what we're seeing is a sign of confusion. people trying to debate what is there a pattern here, are there other shoes to be dropped and what's going on. and without any conclusive moves, you haven't seen anything dramatic in the new polls yet, so i think they're going to be a wait and see attitude over the next couple days. there's a lot of chatter on the floor and in the wall street watering holes that you may see several more leaks. larry kudlow said over the weekend that his sources told him that there was a bit of unrest among the fbi agents and that may be why comey came out with what he did. if that's so, you may get unnamed or anonymous developments in this case. and mark grant and others said that you can well expect something in the final 72 hours.
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so this is going to be one heck of a race. >> yeah, doomsayers are out in force. there are clearly two big risk factors, right, for investors that are not fully priced in, a trump victory and a democratic sweep. so where's the pricing on either of those at this point? >> well, so far it has not believed either of those cases. and it really looks like the pricing is for a clinton victory and the republicans to hold the house and a flip of the coin on the senate. i think that's what they were looking at. and i wouldn't want to say ideal, but that's satisfactory for the market. gridlock, they can't do any damage. if it were a democratic sweep, the fear is that you'd have bernie sanders and elizabeth warren basically running major changes in the economy and financials and a variety of other things. >> why do you think so much
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m&a's being announced so close to an election? >> well, if you think about pair n paranoia, it may be people want to get it in, get it on the docket and get it done or close to done before a new administration comes in. again, the influence of warren and sanders might be a factor. the other thing is if interest rates are going to start to tick up here, you know, money is virtually for free. now's the time to do a deal if you can. so those two things i think are impelling people to try and move in that way. >> on that note we have a fed meeting this week. only about 10% chance that they actually raise rates. and more than 70% now for the month of december. >> as long as it stays that way. i have said on this program time and time again, historically the fed does not raise unless the market believes 70% that they will. so the market's going to preset
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it up saying enough of us believe, you can go right ahead. that can still change. we may get new numbers. for example, the gdp yesterday rather on friday was not quite as strong as it looked. and that may mean that the next quarter's gdp will be substantially weaker. >> we've also got a jobs report on friday. this one's going to have a lot of political implications one would think. >> yeah. >> in the election. >> yeah. i think so. but again, for now, center stage is politics followed by oil. crude is battling to try and hold the 48 level and seems to be slipping below. that's not a major negative yet. we close below 2130, that is a negative. mr. gundlach was saying if we did it two times he would see that as a negative. friday was the second time. that leaves us with some mild resistance at 2130, 2134. and if we start to selloff
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heavily, viewers should look to support around 2114 where we stopped on october 14th. >> got it. and energy is the worst performing sector right now. art, thank you, as always. art cashin. when we come back this morning, the fbi obtaining a warrant for newly located clinton e-mails. we've got the latest on how the political chaos is impacting market street ahead. will your business be ready when growth presents itself? american express open cards can help you take on a new job, or fill a big order or expand your office and take on whatever comes next. find out how american express cards and services can help prepare you for growth at open.com. find out how american express cards and services the wolf was huffing and puffing. like you do sometimes, grandpa?
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the justice department getting a warrant to review newly discovered e-mails related to hillary clinton's private e-mail server. our eamon javers joins us now with the latest and what comes next, eamon. >> yeah, good morning, sara. what i can tell you what we know from reporting over the weekend. huma abedin and her attorney were in touch with the fbi over the weekend telling the fbi that huma abedin did not know that all of these e-mails were on this laptop that was discovered and that director comey notified congress about last week. the total universe of e-mails they're looking at now is 650,000. but ultimately the subset of that that deals with the clinton
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investigation is likely to be much, much smaller than that. the fbi is going through the laptop using software and search e-mails and sort out any previously turned over to the fbi and any that are entirely new. huma abedin had told the fbi and the clinton campaign has said publicly that she has turned over all of the e-mails she had access to. at this point the clinton campaign doesn't expect there will be anything new in there. nonetheless the fbi is scouring it right now. as for what happens next, boy, it's a political race here in the last week. kellyanne conway, the trump campaign manager, was on "squawk box" this morning, and she said that despite all this trump still wants to focus very much on the same issues that he's been hammering on throughout the campaign. here's what she had to say. >> to us the right thing to do is whatever the fbi thinks the investigation is taking -- wherever the investigation is taking them. it's not for us to say speed it up because of the election or slow it down because of the election. >> now, sara, we don't know
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whether james comey is going to come out and address any of this in public in any fashion between now and election day. it's possible though because he's leaning toward this line of transparency in this investigation, which is very, very unusual for the fbi, it is possible that he would give us some indication of what that e-mail search finds if anything. and if any of this material has any bearing on the clinton investigation as of now that is not publicly known, guys. >> we'll see what we can find out in the next eight days, eamon, thank you. >> you bet. despite all the october surprises and pre-election political volatility including that drop in the market friday and a bounceback on the surprise headlines, overall as you can see u.s. markets have remained relatively stable on the month. heading lower, but stable. so just what could impact next week's election have on your portfolio and should you be taking any steps to prepay for it? joining us from boston, fidelity's john sweeney and here at post nine j.p. morgan chase
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chief economist anthony swan. john, what are you telling some of your clients right now? should they make any moves ahead of the election? >> you know, the election doesn't seem to be a big driver. when we polled investors, about three quarters of them thought either the presidential outcome or congressional outcome would have an impact on the market, but in reality that's not true. there are so many other factors that are driving returns, earnings, et cetera that you should keep focus on the long term perspective and not worry about short term inflections on the market. >> anthony, would you advise maybe short term volatility but longer term not much of an impact? >> absolutely. i think over the long term investor haves to ask where are earnings going to be four quarter or four calendar quarters from here and the answer is they're going to be much higher. but i've looked at presidential elections all the way back to 1932, and what i find november historically has been a weak month and then followed by a bounceback in december. in fact, in an eight-year presidential cycle what you find
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is in november the s&p 500 has gone down by 5.2% and in december gone up by 1.5%. so you see some differences between september and december across presidential election cycles. >> i find it hard to believe, john, because the candidates are so far apart on so many issues including key issues for the market and companies including trade and tax policy that no matter how the election turns out it would be okay for stocks. and you wouldn't have your fundamental outlook on earnings and the economy changed. >> so i would have to say fundamental outlooks are going to be driven by bigger longer term issues. i would agree with the other analyst in that you're going to have perspectives around whether it's regulation, whether it's innovation that are going to be driving earnings growth. it's not going short term volatility in november or december in the market. we need a longer term perspective and look at what's driving economy. it's going to be regulation certainly in certain sectors like financials, i think increased regulation there. but you're going to see
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opportunities where technology comes into play and that's a much longer term cycle than presidential or congressional election cycle. >> the other factor here is this whole election has raised questions about the political autonomy of the fed, anthony, and raises some real questions about what happens if trump does win. who becomes the fed chair? he's gone after janet yellen pretty hard in this campaign. >> well, i think it's pretty clear if donald trump wins, he said it publicly he would replace janet yellen. they'll be a little bit of a tizzy or uncertainty regarding that, but the federal reserve has been around since 1913 and it will definitely survive. again, you got to ask what john mentioned, what's going to happen to earnings? over the next 12 months they're going to be going up. remember energy prices were a huge drag on earnings. if you look at brent crude from the bottom of the first calendar quarter, it's up 74%. the only thing that concerns me about earnings is that the drag of a stronger dollar could be a problem. earlier this year down more than 3% on a year tor date basis, now basically that dyx is unchanged. that's a concern for me, i'm
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hoping that doesn't magnify itself over the next couple of months. >> we've also got this deal building, a bumper month for deals record i think amount going back to january 2000. we just beat that thanks to baker hughes and ge. john, are you looking at any particular sectors? do you think the deal activity will continue? >> you know, we look at a lot of companies within sectors. so people are concerned about financials obviously for rising interest rate reasons. when you think about financials that includes obviously money center banks that are going to be increasing their spread revenue if rates rise, that's one area of opportunity. you mentioned mergers and acquisition efforts, those too will drive earnings in an area where it hasn't been that exciting over the last couple years. so i think within sectors you can find pockets of opportunity. those are the companies driving the earnings growth. those are the ones we find attract sglif what would have to happen in this election for you to change your outlook on the economy, anthony? >> i think we would have to have a candidate come in and basically spew out even more messages of uncertainty. irrespective of who gets
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elected, if the candidate basically calms wall street down and says even though i or she appeared to offer some uncertainty, there's going to be less uncertainty out there whether it's a democrat or republican. that would calm me down. but if you get a candidate out there that advertises uncertainty and is proud of uncertainty, that would be a big concern. but the top line for earnings is picking up. we saw nominal gdp in the third quarter going up 2.8% from 2.5%. normally nominal gdp has almost a 50% correlation with movements in the equity market. so at least we're moving in the right direction. again, one concern is in the fourth quarter we may see weaker gdp number. >> so you both like the outlook for earnings and you stay with it on the long term. gentlemen, thank you. good discussion. john sweeney and anthony chan. as we go to break take a look at shares of level 3 being bought by centurylink. and then take a look at where stocks are trading. dow up four points. as we have gone i think 12 sessions without a triple digit
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move in either direction. a lot more still ahead on "squawk on the street" including our interview with the top executives at ge and baker hughes on their block buster deal in oil and gas. stay with us. ♪ ♪ for decades, investors have used a 60/40 stock and bond model, with little in alternatives. yet alternatives can tap opportunities that traditional assets can't. and even though they're called alternatives, they're actually designed to help meet very traditional goals. that's why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. translation? goodbye 60/40, hello 50/30/20.
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and add phone and tv for only $34.90 more a month. call today. comcast business. built for business. hi everyone. i'm sue herera. here's your cnbc news update at this hour. the manhunt is over for accused oklahoma killer michael vance. he was shot and killed during a shootout with police in oklahoma overnight. vance was wanted for the murder of two relatives and shooting several police officers. he posted two live videos on facebook documenting his run from police. secretary of state john kerry meeting with uk foreign secretary boris johnson in london. it's a bid to try and break libya's political stalemate. they were joined by libya's designated prime minister and other diplomats. baghdad residents surveying the wreckage of a car bomb explosion that killed at least ten people and injured 34 others. it was one of several explosions
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to hit the iraqi capital on sunday. and take a look at this. a man snuck into a giant panda enclosure at a zoo in southeastern china on friday. and ended up wrestling with the animal. the man was allegedly showing off to his female friends by jumping into the enclosure to tease the panda. but the panda woke up and began wrestling with the guy. eventually he managed to escape uninjured, which is amazing. all right. that's the news update at this hour. carl, i'll send it back down to you. >> leave the animals alone, sue. >> leave the animals alone, darn it. >> sue, thanks so much. our sue herera. let's get to the cme group, check in with rick santelli and get the santelli exchange. hey, rick. >> hi, carl. like to welcome my special guest starting out the week charles, follow the money, beeterman. hello, charles. alo
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aloha. >> aloha to everyone. >> you're writing is ramped up, you think big things are going on all mostly start with s, one, shift to passive, two, surge in cash, three, slump in buybacks, four, spike of outflows in high yield and fixed income. all right, charles, let's talk ss, you start us out. >> well, the shift to passive is massive. it's as if all money managers or people who with pension funds or pension managers think that the government -- central banks are continue to support the financial markets by printing money. and if they stop there will be no buyers. in other words, without -- there's been a record outflow from equity mutual funds this month. that means there's money going passively, which means that if the market does go down, there are no buyers so the next downturn is going to be massive. similarly we're seeing a spike in outflows from high yield bond funds.
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and for the first time we're also seeing outflows from corporate bond funds, there is money still going into government bond funds which is more of a yield seeking thing. but again, if the central banks stop buying bonds, who's going to buy? there's massive outflows from passive -- from active managers and passive managers don't have money to buy if there are outflows. >> now there's still that stockpile of cash, and it's surging, it's growing. no matter what happens whether it's politics or how politicians whoever gets elected deal with things like regs and taxes, that surge of cash could be the next money wave for the investment. speak tho that. >> except the spike in cash is going to savings accounts, bank checking accounts, to me that's a flight to safety. people are nervous. they don't know what's going on. there are more money going into
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bank savings accounts than into stocks, bonds or any place else. and i don't know if that's money that's being parked to go into the markets, but to me that's money that's parked because people are scared. it's mattress money. >> now, the next and last s really is interesting to me because you were the first, by far the first, to recognize years ago that if central bank policy translated into a transmission that caused buybacks and caused stocks to go up, what you're seeing now is that's reversing. speak to that on your final comments. >> well, we have a record low level amount of insider buying, the lowest since 2013. for over three years corporate insiders are buying the smallest amount of stock that they have. we're also seeing a significant slowdown in new stock buyback announcements. on the other hand, we're seeing a spike in cash takeovers. this month is going to be a record month for cash takeovers.
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and there's usually a spike in cash takeovers right around a market top. so there's a lot of uncertainty that's entering the market. we've been neutral sort of for the last couple of months based on our data and trim tabs investment research products. and if the fed does raise and central banks stop buying, we could have a very volatile 2017. >> charles, thank you for your insights. the four ss with charles biderman, buyerman, biderman. carl, back to you. >> thank you very much, rick santelli. got another deal to get to this morning in addition to ge and baker hughes, centurylink buying level 3 communications 66.50 a share in cash and stock. at least that's where it was originally valued at about $25 billion. that when you don't exclude -- when you exclude debt, when you include it around $34 billion. centurylink shareholders with about 51% of the combination when it's complete, will also
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control the board. i think level 3 gets about four directors. you can see the overall value of the deal coming down in part because centurylink's stock is being crushed this morning. both companies gave us some updates on their financials. they didn't look particularly good. there are those who also say this is an example of what we call two drunks holding each other up. neither business is performing extraordinarily well. they offer both rural telephone services and the key of course in the growth area conceivably is their business services. centurylink for example owns the old quest communications and a number of other acquisitions, embark, helped build that company, where level 3 owns time warner telecom. now they're getting together. centurylink has an enormous dividend and a yield now that approaches 8%. this deal will in fact increase the ability of the combined company to pay that dividend given level 3 doesn't have a dividend at all. there was also a belief that the focus on business services will end up being a positive. but right now, guys, looks
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pretty ugly in the early going. and this doesn't appear to just be pressure from arbitragers setting up by shorting shares of the acquiring company. >> two drunks looking to hold each other up. i like that. >> that's an old saying when you get two companies not coming from areas of strength but looking to create at least more strength as a result of the deal itself. >> not as harsh as it sounds. >> no. >> we use it a lot. >> they get sober, conceivably over time. they won't fall down, then they go home and sleep it off. >> but lack of optimism being priced in. >> there is. interestingly also a $10 billion net operating loss. the key is the dividend. and by any metric this improves the ability to have the company to pay that dividend. not the other way around. >> speaking of dividends, when we come back we're going to talk exclusively with ge's ceo jeff immelt, lorenzo simonelli and
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martin craighead on that deal, big special dividend there. much more ahead. stay wus. you are watching "squawk on the street."
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now that fedex has helped us simplify our e-commerce, we could focus on bigger issues, like our passive aggressive environment. we're not passive aggressive. hey, hey, hey, there are no bad suggestions here... no matter how lame they are. well said, ann. i've always admired how you just say what's in your head, without thinking. very brave. good point ted. you're living proof that looks aren't everything. thank you. welcome. so, fedex helped simplify our e-commerce business and this is not a passive aggressive environment. i just wanted to say, you guys are doing a great job. what's that supposed to mean? fedex. helping small business simplify e-commerce.
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is wage inflation beginning to impact stocks in a big way? tom lee tells us which stocks could be in trouble. that's on tradingnation.cnbc.com. more "squawk on the street" after this. bend me shape me, any way you want me as long as you love me, it's alright... shape the best sleep of your life.
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sleep number beds with sleepiq technology adjust any way you want it. the bed that moves you. only at a sleep number store. welcome back to "squawk on the street." i'm seema mody. markets are mostly higher today, but health care and energy stocks are underperforming. shares of zimmer biomed are weighing the most on the health care sector, stock down about 13%, on pace for worst day since october 2007. the medical device maker cut its sales guidance for the year after we third quarter results. other laggards include edwards life sciences, perrigo, abbvie.
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health care still this year's worst performing sector down about 6%. earnings a factor but politics have weighed on investor sentiment. sara. >> seema, thank you. on that note with health care, the other major market you have to be watching here ahead of the election is the currency market. we have not seen moves across assets like what we have seen with the mexican peso as far as tracking the polls and the momentum on the scale. the dollar is weaker means the peso is getting a bit of relief after a mere 1% move lower on friday after it was revealed that the fbi had sent a letter to congress reopening the investigation into hillary clinton's e-mails. the peso has fallen. it was at a record low in september on the momentum of donald trump as he appeared to gain. and then after all three debates the peso has actually gained. of course, guys, the feeling here is that a trump presidency would be hurtful for the mexican
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economy. trump has threatened to rip up nafta, renegotiate it, mexico has been a major beneficiary. so we watch this carefully as we try to figure out what the market is pricing in. real clear politics still has clinton up by more than three points. and betting odds at least according to that site still remain at something like 80/20, 80% chance of hillary clinton. the peso has gotten a lot of relief over the last few weeks on this idea. but it did take a step back on friday. so we're watching it carefully. >> 538 has the same chances that trump wins as the cubs win the world series. >> oh, that's funny. >> yes. identical odds from 538 on those two things happening. meanwhile, paypal's co-founder and donald trump supporter peter thiel taking the stage at the national press club in washington in less than 20 minutes. our own kate kelly is back at hq with what more we can expect from that. >> hey, carl. peter thiel has been on fire particularly in recent weeks after the leakage of the "access
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hollywood" video with trump and billy bush making very coarse comments about women, groping women and so on. for his support of donald trump he announced that of course earlier on in the game, spoke on trump's behalf at the rnc gathering this summer but did not initially give money to donald trump. now, more recently the "new york times" and others have reported that thiel's planning to give $1.25 million to trump in various ways, both directly to the campaign and through some pacs. those details have not yet surfaced publicly, although they appear to be true. thiel today will speak a very rare set of public commentary coming from him. and he'll talk a little bit, i understand, about why he's supporting trump for ideological reasons, in terms of his foreign policy plans, in terms of his economic plans, in terms as well of identifying really what's wrong here, what's wrong with the country and why in thiel's view we need someone who's not simply a mainstream establishment candidate. interestingly having gotten a little bit of a sense of his remarks, guys, it almost sounds, and i don't want to put words in his mouth, but he would have
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preferred a bernie sanders to a hillary clinton. i don't know if he would have pulled the lever for a sanders, but he really wants somebody anti-establishment. >> kate, i wonder how you think this is going to play certainly in his own environment, and that is silicon valley where he does and has been a bit of an outlier relative to other tech leaders. >> that's right. and i would expect to see him call out silicon valley for not being more tolerant really of views that diverge from what may seem the norm this election year. we've had overwhelming support for hillary clinton within financial services, within technology, some company ceos going so far as to publicly endorse her. and then of course you recall the controversy over facebook, the allegations being that they were democratic leaning in terms of the way that they monitored some of the news feeds. so there's been a liberal thread certainly running through silicon valley and its support for specific candidates as well as the ways in which people view them as presenting their content to the degree that they're in the content business. so, yeah, i think he's gone against the grain.
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>> do we know how much he's donated to the trump campaign so far? i remember for a long time all the articles had peter thiel who supports donald trump but has not given money. and then that changed in recent weeks. >> right. so far, sara, nothing. he did say -- or rather it was told to the "new york times," i don't know if it was him directly or just sources familiar with him, that he would give $1.25 million to trump directly and through pacs as well. but that has not yet surfaced. i checked the federal election commission documents last night. we haven't seen it yet. up until now records show the largest donation he's given this cycle was $2 million to carly fiorina to a pac supporting her in other words. he's also supported down ballot conservative candidates. as well as some other local candidates and conservatives around the country. but so far nothing to donald trump, although those checks may have been written and just not shown up yet. >> kate, thank you very much for helping us along. kate kelly on peter thiel. when we come back, we'll speak
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exclusively to ge's jeff immelt, head of ge oil and gas and baker hughes chairman martin craighead on the deals of their blockbuster deal. dow remains muted range down 7. important than your health. or the freedom to choose what doctor you want to see. so if you have medicare parts a and b, consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company.
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♪ welcome back. i want to take a quick look at the markets there at this point. of course, oil seems to be having an impact, as you might expect. trading at levels it hasn't seen in a bit of time, certainly, having eclipsed $50 for a while, and that is, at least, tempering any gains that we have overall. you see the dow and the nasdaq more or less flat on the session, with the s&p up ever so slightly. >> there was this meeting, informal meeting in vienna over the weekend, didn't look like we got any consensus or country quotas when it came to the price of oil or how they are going to exercise this agreed upon deal
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to either freeze or cut production. we're looking ahead to that november 22nd meeting for opec members, but energy biggest loser. dow, actually, david, you and jim discussed this earlier, but nike is the biggest lager. bank of america with a tough downgrade to sell $46 per share, saying there's an innovation gap at nike and it's going to lose market share and underperform under armor and adidas into 2017. >> none of these stocks have performed particularly well, i should say. under armor down sharply over the course of the year and nike, as well, down over 23%. the competition has been heated. it has not been a great help to shareholders on either side. >> you have two stories. one, adidas is reclaiming market share, especially in the united states, and that is at the cost of under armor and nike. you also have the fact these stocks had run up so much over the last year or two, outperforming the entire apparel sector, and now analysts are
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stepping back and wondering is the at leisure trend, fad, coming to an end, is it going to transition into something else. yes, we all want to be healthy for a long period of time, but these stocks have been working on better results because it's been so trending. >> yeah. shares of nike, as you saw, down over 3%. one of our big stories, of course, this morning, we talked about it all morning long is ge's combination of its oil and gas business with baker hughes. that would create a publicly traded energy services power house. the newly formed company would operate with over $32 billion a year in revenue. joining us now is ge's ceo, as well as the head of ge's oil and gas business, who will run this combined company, and the ceo of baker hughes. gentlemen, thanks to all three of you for taking the time this morning. jeff, let me start with you. why not just buy baker hughes? why pursue this structure where you end up with a 62.5%
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ownership and there's a publicly traded entity that has shareholders out there, as well? >> look, david, by this point, you know, i've seen every different kind of transaction. i think this gives us an opportunity to create all the synergies of a combined ge and baker hughes, which we think are substantial, and at the same time gives upside for baker hughes shareholders, ge shareholders, and allows us to have flexibility around capital allocation, which we think is important. we think this was a tremendously creative kind of transaction to do right now in the cycle. it gives the baker hughes investors 30% to 40% premium, including synergies. gives, i think, a better combined business for both ge and baker hughes investors going forward, so we like the structure. >> all right. why now in the cycle? you just mentioned a good time in the cycle. why is it a good time? >> look, i mean, they call it a
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cycle for a reason, because they go up and down, and i've had a chance to live through aviation and health care and power cycles, you know, the way we look at this, it allows us -- let's say the industry remains tough. this is still value to both investors and a tough oil price environment. if the pricing gets better, it allows us to benefit from that, as well. it's a very diversified portfolio in terms of short cycle and longer cycle operations, so i think it just gives us a chance to weather the cycle better and be able to create more value for our customers going forward. you know, david, customers change during cycles like this. in the case of oil and gas cycle, customers are going to want more productivity solutions, and between the great baker hughes franchise and ge, we can provide that for them now. >> yeah. mr. craig, similar question to you, though, in terms of why this as opposed to perhaps selling the company in its
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entirety. obviously, you come off the failed deal to sell to halliburton, took a very long time to each its conclusion, but why is this structure beneficial as opposed to a simple sale? >> you know, i want to echo jeff's comments, but there's another element here, david, and that is that the timing risk of the, you know, trying to predict where the market's going, is this the bottom of the cycle, do we have another leg to go down further, structuring it that way takes that timing risk completely off the table. and this is so value enhancing, you know, it's a scope play versus just a scale play. it's all about, you know, being able to take it from molecule to megawatt, and our customers, as jeff said, are really changing. they've got to drive efficiency out of their core asset, which is a reservoir. we bring that expertise, that's our domain, whether drilling completion or customization on the mization, so putting the
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portfolio together brings it just an enormous amount of long-term value, and as jeff said, we're very happy for the baker hughes share holder in terms of the premium, $17.50 a share. so this is the right time, the right deal for baker hughes. >> of course, the value created here will be dependent upon the integration being successful between these two companies and the added benefit they can deliver to customers, as mr. immelt just said. i want to read you quickly from a jeffries note this morning talking about those revenue synergies and overall synergies that you're putting at $1 30i7b 6 billion run rate. they say in their note they believe the coordination to make forms of integration work is its own skill set and one that is difficult to develop. they go on to say they see little evidence particularly focused in developing this skill set. love to get your response. >> so, i think i disagree with that comment. if you look at what we've
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achieved and our track record and the amount of integration, we've proven we're able to go after the cost synergies. when you look at the scope of this transaction, we are increasing the opportunity to go after the cost base and, in fact, if you look at the projection, we're only taking in the $1.2 billion of cost synergies, 4% to 5% of the future cost buildup, and that comes in various buckets. when you look at material deflation, which we've proven to get this year at 6%. when you look at the co-location where in many of the same areas of the world we're able to rationalize that footprint, when you look at sgna and the opportunity to go after, again, some of the enabling areas where we have duplication and also providing the product cost out, which we've achieved as we've done through this down cycle and being able to incorporate the digital capabilities of 3d printing into the manufacturing locations, so i'm very confident in the cost profile that we have for sinnynergies and also on th revenue side.
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you've had already the complimentary nature of the products and services we're going to be able to provide. we are introducing a concept of full stream, going across the value chain, and then also providing productivity to our customers by the usage of big data. so the confidence is there. i think we've got a proven track record, and the teams, the cultural fit between the teams, is already there and we've taken a look at those cost synergies already. >> the day we announced the acquisition where we talked about $1.2 billion of synergies, the day we closed it we talked about $3 billion. i think in some ways our track record speaks for itself. the net present value of these synergies is $14 billion, of which baker hughes' shareholders should see 5, ge nine in terms of the value split, so again, i think we're confident and in many ways a great proof point in terms of what we know is possible here. >> jeff, it's sarah. i'm curious about the timing of
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the deal. conventional wisdom as ceos wait until after a major election uncertainty to do big deals. we've seen the opposite this time. was there a sense of you aurgen get this done before the election, before the federal reserve raised interest rates? >> look, i'd say, sarah, i've never tried to think about politics in terms of when i time deals or how we think about deals. i think this is very compelling for the industry right now. when we look at antitrust and getting approvals, this is a very complementary, you know, when you think about martin's company and our company, they are quite complimentary in terms of what the skill set is. you know, guys, look, the times to do these things are right now. it's when there's a level of uncertainty, not when everything is known. and so, again, i've lived through so many different cycles. i look at the oil and gas cycle, we're going to be exactlyn

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