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tv   Squawk Alley  CNBC  October 27, 2017 11:00am-12:00pm EDT

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sector following strong earnings from the likes of microsoft, alphabet, intel, all hitting fresh all-time highs today, also helping to lift the ticker slk popping 2%, hitting its highest level since the height of the tech bubble march 2nd of 2000. that does it for this hour on "squawk on the street. let's send it down to the start of "squawk alley." back over to you >> thank you good morning, it's 8:00 a.m. at amazon headquarters in seattle, 11:00 a.m. on wall street, and "squawk alley" is live ♪ ♪
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>> little homage to netflix as "stranger things" debuts i'm carl quintanilla with michelle caruso-cabrera and john fortt at the new york stock exchange joining us, scott galloway, author of "the four," and with us, as well, lead internet analyst mark mahaney obviously, guys, we know the top story. shares of amazon, alphabet, microsoft, intel, soaring across the board, pushing the nasdaq to another all-time high. we had a parlor game this morning about which move this morning is the most impressive of those four. what would you say >> of those four, let's see, just had the acceleration, at least in the internet names, and it was pretty clear and even across a bunch of geographies and product lines, whether amazon with retail and cloud or google with advertising, even search advertising is accelerating and also with their
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cloud business and maybe with their hardware business, so another word for these names is acceleration stories and stocks typically go up with that. both are aggressively investing in new opportunities that's a good thing for long-term investors. we like them both. >> scott, for me the most impressive is microsoft, because, intel is in there, too, sure, but this is a name that a lot of people had given up for dead, thought they missed mobile, that they were going to miss the cloud, yet engagement user numbers appear to be up pretty much across the board for them, even in the pc category, where intel did well, as well. scott, away from the amazons and googles, what impressed you about these numbers? >> yeah, you're right. downward momentum is really hard to reverse and just as best buy's turnaround in retail a couple years ago was impressive, microsoft's, hard to call it a turnaround, but microsoft is
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arguably now punching in this weight class and continues to get stronger and stronger and is not befuddled prey waiting to be attacked by amazon they are attacking amazon with the cloud. i thought the most interesting number, and i'd love to get mark's view on this, is google reduced their cost per click by 23%, meaning that if you're selling advertising on tv or print, you're now competing with a competitor, google, for ad dollars whose product has not only got better, but lowered their prices 23% pity anybody selling television or print advertising right now >> mark? >> that's true i think another word for internet has been deflation in a variety of areas, whether that's advertising, retail, travel, media, and these sort of low-cost providers that are coming in and disrupting industry after industry. scott's right. look, the biggest risks on some of these platform names, there's government, maturity, and competition and you're seeing
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these companies increasingly swim in each other's lanes i worry about amazon getting more and more into advertising, which is google's bread and butter >> worried at all about amazon getting into nearly everything else saw the pharmacy benefits managers, cvss of the world get hit yesterday when we heard amazon is talking about now prescription drugs and when we see the deal with etna and cvs, one of the reasons is they want to bully the ramparts against amazon what do you think about amazon getting into this space? is there risk of them overexpanding into too many spaces >> one of the fundamental tenants of business academia was core kpen ten competency, you n focus op one area. i'm worried for other companies. if you look where amazon is bumping up against the other three, apple and voice, they are literally kicking the butt of
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siri they are the most innovative hardwa hardwa hardware production now, i believe their amazon media group is growing faster thangoogle and almost as fast as facebook they are number one in the cloud and the mother of all celebrity death matches coming our way in 2019 is going to be amazon as it runs head on into netflix. that's going to be a real ali/fraser of the information age. >> scott, would you argue amazon fears that battle more, the amazon video versus netflix, or is it more of an aws/azure battle >> i don't think they fear anything i think amazon is feared my sense is they are not scared of anybody right now >> they are afraid of making phones, or should be this is the day where we see six-week lead times on apple's
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thousand-plus dollar phone so i don't think we can say amazon is the unchallenged in hardware by a long shot. >> most innovative hardware product, apple watch, apple pods, what was more innovative than the amazon echo what product has changed the business world more than the echo >> apple sold more units and made more money. it depends what we're counting, but point taken. >> two different points. >> ask alexa >> mark -- >> alexa is a good thing >> mark, let's talk about cost we know q3 is usually expensive as you roll into holidays, but amazon costs up 35 how much of a free rein do they have to spend as much as they think is necessary >> from a wall street investor perspective, if they show revenue growth acceleration, they get a free rein i think the company knew this.
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i have a sneaking suspicion they realized they were about to hit a pocket of acceleration they can see the stuff in advance. they knew that, so they entered into another investment cycle knowing they'd get a pass. you know, history has told you, i think, that they usually get a two-year pass, maybe three years from investors because of all the investment, you know, benefits they've gotten over the years or the new products, categories, areas they've gotten from investing successfully, but make no doubt across the internet, whether it's netflix, google, facebook, amazon, none of these companies are going to show you margin expansion in the next two or three years. they are all going to invest for new growth opportunities i think that's a good thing. don't count on margin expansion. >> mark, any of these stocks cheap or too expensive >> well, look, i'll make a real strong point about being cheap we refer to these companies as internet staples you know the term consumer staples. google, i think, is an internet
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staple 30 straight quarters of 25% operating margins, very consistent, and you can buy this at a modest premium to the market if you adjust for cash, it's like 18 times earnings there are consumer staples companies really well known that trade at premiums to the market that will give you 3% revenue growth the market is giving you google at a modest premium to the market i think the valuation is very compelling just watch for the government risk >> it's certainly being noticed today, but overall it's been restranr restrained guys, thanks so much scott, mark, see you soon. >> thank you >> thank you we were just talking about the latest iphone x, watching latest from apple and the huge demand for its newest iphone x josh lipton is out west with more josh >> michelle, the iphone x became available at 3:00 a.m. eastern and shipment lead times quickly surging for the device in a statement to cnbc, apple saying we can see from the
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initial response customer demand is off the charts. we're working hard to get this revolutionary new product into the hands of every customer who wants one as quickly as possible on the company's u.s. website, the lead times quickly stretched to two weeks, then three, now around six weeks investors don't know for sure whether that's all due just to strong demand or also in part to reports alleging there were production issues, though apple, remember, completely smacked down a bloomberg report this week saying the company downgraded the accuracy of face i.d. to boost production excitement about the device has helped drive a surge of stocks this year, now up nearly 40% on expectations of a big upgrade cycle. iphone x comes with the larger display, facial recognition, wireless charging, and a battery that lasts up to two hours longer than the iphone 7 starting price $999. how will consumers react
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will they switch to a rival device or just wait patiently until they can get their hands on this new iphone x guys, back to you. >> all right, john, thanks so much for that. we're watching those headlines when we first come back, a first on cnbc interview with the cfo of intel a lot more on cvs's reported bid to take over aetna and a showdown between the u.s. and russia this time it is over oil when "squawk alley" continues. alerts -- wouldn't you like one from the market when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today.
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watching for developments this morning in that search for a fed chair. for that we'll go back to steve liesman at hq. steve? >> a source telling cnbc the president is leaning towards jarome powell, but that source also emphasizing the president has not fully made up his mind, it could still go either way let's look who jay powell is republican nominated by president obama as part of a deal to bring a republican and democrat on to the board federal reserve governor since 2012 concentrated a lot on the inner workings of the market in the post crisis world. he was a former partner at the private equity group carlisle and favors rolling back some, but not all financial regulations. one thing that could attract powell to the president, he
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defends the fed, which some republicans have criticized, but also sees a limited role for monetary policy overall. >> well, monetary policy can contribute to growth by supporting a durable expansion, it cannot reliably affect the long run sustainable level of growth >> okay. let's take a look at the predictive markets jay powell surging on these reports up 27% to 80 that means 80% probability john taylor falling now to 15. yellen at 9, up a bit, and warsh and cohn above 4% there. let's look at the two-year, you can see yields fell. john taylor, the other sort of candidate here or main candidate, seen as being more hawkish, but just down a few basis points remains to be seen. the question you asked earlier if john taylor would accept the vice chairman's role on the one hand i think he wouldn't on the other hand, a request from the president, sometimes very hard to refuse.
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michelle >> got it, steve, thank you. >> pleasure. all right, when we come back, the cfo of intel on the company's earnings beat. the stock is moving higher plus, it would be the biggest deal of the year, cvs looking to acquire aetna. if it happens when "squawk le rurns she's nationally recognized
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intel reporting a third quarter earnings beat raising full year guidance the company saw record revenue from data center, internet of things, and the memory business. bob swan is the cfo of intel and joins us now first on cnbc. bob, good morning. >> good morning, how are you today? >> probably not as good as you are, given how the stock is performing after that report quite a few areas to get to, but first what you're calling data
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centric business everything but the pc pretty much you say it's now 45% of revenue, up from 30% five years ago you're calling it the growth engine for the future. what are the two primary things driving that business? >> well, it's interesting. over the course in time the industry has evolved such that the demand for compute capacity and data and the need to store, retrieve, analyze data is a place where we believe we're uniquely positioned to compete and win. the data-centric businesses are, essentially, the collection of businesses between the data centers, fpgas, memory, internet of things, this collection of things that individually each business over time has solved a particular customer problem. but collectively we believe we can solve problems that no single business unit or single product line can
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and as a result we've been investing both organically and inquisitively over time in this collection of capabilities that today has demonstrated the fairly dramatic growth that we highlighted yesterday. >> i want you to dig in -- >> almost approaching 50% -- >> i want you to dig in on what you're saying about fpgas. a lot of investors might not be familiar with what exactly that is basically, you have chips that are more customizable for customers. you called out microsoft's plan to use that for artificial intelligence you guys invested in fpgas before there was all this talk so much about ai talk about how that's playing out right now. >> yeah, it's an area of growth to your point where there's very specific applications and work loads that need custom chips that will enable you to operate and run those work loads in different ways
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a couple years ago we had partnered with alterra for a while as leveraging our cpu capabilities and their fpga chips to deliver a better and better solution, particularly in the cloud environment. we made an acquisition alterra has been a very important part of putting the collective capabilities of what intel has to deliver higher performance in both generic and custom oriented ways for our customers, so it's been an important acquisition for the company and together that is a key element of what you asked before, this data-centric collection of capabilities that has really driven the growth of the company going forward. >> bob, is it time to do more m & a? you've done big buys, they appear to be successful. investors perhaps can give you some leeway here
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>> a series of organic investments and the acquisition of alterra and mobile eye, we've expanded our overall served market from roughly $45 billion to today $260 billion, which has a much larger growth opportunity for the company. alterra, mobile eye, as i said, have been very important parts of that strategy today we're really focused on leveraging the collective capabilities of those companie and integrating those companies into the ebay portfolio. that's where we're focused now, getting the benefits of the acquisitions that we've made going forward. >> bob, it's michelle here we've spent a lot of time talking about crypto currencies. what do you think it's going to do down the road and what do you think when you hear jamie dimon
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dump on bitcoin or prince alwaleeb do they understand it? >> crypto currency is not a major driver of our business performance. our business performance is about chips, software, hardware, to solve solutions for those who may be mining or analyzing things like crypto currency. today it's not a big growth driver for our business, and that's not where we're focusing our time and energy. >> bob, a few quarters ago you did a strategic shift about how to treat pcs, even somewhat the mid range. now the pc business is performing better than a lot of people expected. is intel correctly positioned to take advantage of that, and are you making adjustments because of what you're seeing in the
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marketplace? >> yeah, the pc business has been the bread and butter for the company for a long time, but over the course of the last five years, unit volume in the pc market is down almost 25%. at the same time over that five-year time frame, our business has generated increasing profitability in a market where the tam is down 25%. and that has been a continuous focus on innovating around higher performance chips that are being used more and more often in more exciting applications like gaming and two in ones. so as a result, even in a declining market, our pc business has continued to hold or gain share, segment its products for the higher end, where customers are prepared to pay for what intel does so well, which is high performance. it's a very important part of our company. it's been executed extremely
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well, and we're excited about the continued growth and profitability in a fairly tough pc/tam environment >> yep well, investors especially seem to like the margins you're able to maintain in this environment. bob swan, cfo of intel, joins us with the stock up about 5.5% bob, thanks. >> thanks a lot, appreciate it so just about 20 minutes ago venezuela announced its oil company paid a bill today. this is significant, because it means they have dodged a bullet. here's the story, this had a basement of nearly a billion dollars due today. what's significant about this bond in particular is that it's collateralized against citgo, and if they hadn't paid it tlrks no grace period. the bondholders who control 51% of citgo in the case of a default, literally venezuela could have lost control of its crown jewel. this thing is so important
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what's super important, add to that the collateralized the other 49% to russia, somebody who's seen that paperwork says that there's a cross default in there. in other words, if venezuela failed to pay the bondholders today, russia's rosneft could have said we want the 49% of citgo, that would have set up a crazy situation, where they'd not allow rosneft to control u.s. refineries. the cash flow, you can tell from the video on the ground, is just terrible, but 20 minutes ago they sent out a press release saying they had transferred the money. so they appear to have dodged a bullet and look how the yield has dropped just in the last, you know, six months here. >> only 18 >> only 18%. big improvement from where it was. >> great story, thank you, michelle why one analyst says cvs's
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move to keta over aetna takes control of its own destiny don't go away. she thought it was a fire. it was worse. a sinkhole opened up under our museum. eight priceless corvettes had plunged into it. chubb was there within hours. they helped make sure it was safe. we had everyone we needed to get our museum back up and running, and we opened the next day.
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watching the market here this morning, as the dow's up 20 obviously, a big night for big tech last night. let's get an update with sue
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herera hey, sue >> good morning, carl, thank you very much. here's what's happening at this hour, everyone the spanish senate has authorized the government to basically take control of catalonia. that move, of course, comes shortly after catalonia's parliament declared independence from spain the u.s. economy grew 3% in the third quarter, better than economists expected, and growth was driven by an increase in inventory, investment, and a smaller trade deficit. apple fans listen up, as you probably know, today's the day customers can preorder the iphone x the first models are set for delivery next friday the 64 gigabyte model starts at $999 in the u.s., although you can pay in installments. apple reporting robust demand and that's moved shares up today. and uber is launching a new feature to make sharing a ride with friends easier. riders will be able to add up to three stops along their trip users can tap where to and then a plus sign to add the addresses of multiple stops. and i'm assuming you're all
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going to split the fare. that's the news update at this hour carl, back downtown to you >> all right, sue, thank you very much. we are getting some breaking news from the council of economic advisers on tax reform. ylan mui wee is monitoring that from d.c >> the white house unveiling new research that shows their tax proposal would boost gdp by 3% to 5% over baseline in the long run. now, this analysis only looks at the changes to the corporate side of the tax code that's lowering the rate to 20% and moving to full expensing however, white house chief economist kevin hassett said it's unclear how long it would actually take to realize these gains. the data shown can be anywhere from three to five years to six to ten years to see that growth materialize. these new numbers come after the white house argued tax reform would also boost worker wages by about $4,000 annually and they called that a conservative estimate many economists have seen that prediction as way too high, but
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today hassett doubled down on the calculation, so we'll see how the projections on gdp are received the one thing they do hammer home in the research is the connection between the downturn in business investment in recent years and weak gdp he says there's a 1 to 1 relationship between tax rates and demand for capital, so if you lower the cost of capital by 10%, demand for capital will rise by 10%. and he says that's a crucial channel for spreading the benefits of a corporate tax reduction across the broader economy. guys, back over to you >> yeah, hassett v. summers is getting to be legendary, at least on the pay hike and maybe now on gdp ylan, thank you very much. let's get the european close here this morning with seema mody at post 9 seema? >> carl, we are ending the weak on a positive note with the german dax hitting a record intraday high. levels in paris rising to levels not seen in almost ten years, but we continue to see volatility in spain over today's surprising vote. prime minister rajoy announcing
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the spanish government will hold a special cabinet meeting to enforce direct rule over catalonia. this after the catalan parliament in barcelona voted to move forward with their declaration of independence from spain, almost four weeks after a referendum rajoy deemed to be illegal. lawmakers that oppose this move departed against the secret ballot supporters of the independence movement celebrated outside the catalan parliament once the vote was announced, eu's president said the eu will continue to deal with the central government in madrid though today's vote, as you can see, puts spain into uncharted territory. the spanish banks, which were higher yesterday, now down, under pressure here, lower by around 1% to 3%. the spanish ten-year yield is also on the rise it was above 1.6% earlier today. remember, catalonia represents about 25% of spain's total
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exports. let's also take a look at currencies the euro continuing to fall against the u.s. dollar at 1.15 after yesterday's ecb decision to scale back on the bond buying program, while also extending purchases until september. with that all in mind, eventful week for european markets, but we are ending higher the stoxx 600 posting its sixth positive week in the past seven. important to note, not just the domestic rally, we have seen a global resilience, not just in europe, which is up 23% over the past one year. asia at a fresh 22-year high >> yeah, amazing stuff underlines, too, spain thus far isolated to that market. >> yeah. good point all right, possible $66 billion takeover in the works. cvs looking to acquire health insurer aetna for nearly $200 a share. joining us now, morning star senior health care analyst and george hill, rbc capital market
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analyst over the phone good to have you here. if these two companies do get together, they are going to look similar to unitedhealth. largest insurer for americans in the united states. they already manage pharmacy benefits, they have pbm called optimum, other consumer outreach why do other companies in the health care space vishnu want to look like unitedhealth >> it's a good model they can integrate up and down the vertical supply chain, control tens of millions of lives in the u.s. and key parts of the health care services chain. not only on the insurance side, but also on the pharmaceutical side but one key asset cvs has that no other company in the supply chain has is its retail pharmacy that's a key point here and their opportunity to leverage those assets and also medi clinics, as well >> george, if i understand correctly, say we're going to role play here, i'm a big corporation. most of them right now go to one
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company for health insurance for their employees and maybe a different company to manage the pharmacy benefits of their employees. this would be a one-stop solution for potential customers. do i understand it correctly >> yeah, you absolutely understand it correctly, and i think a key part of the selling proposition here for integrated cvs and aetna is it can deliver an integrated care delivery model probably up 60 to $70 per month less than the separate model of the managed companies delivering the benefits. >> $60 to $70 less than what the number is right now if you have to pay separately. what is the average total number now? >> the numbers that we use in our model is generally somewhere between $10,000 and $12,000 per beneficiary per year, so figure about $1,000 a month >> in savings, wow, okay >> george, you have in your note
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what is the government do, you believe very little. can you explain? >> i guess we think about that, what happens with respect to government, the government and health care reform, what we see thus far is transigence as it relates to repair, replace, reform, repeal obamacare just don't see the government getting anything done meaningfully as it relates to health care reform it impacts the way the care is delivered right now. we think it's going to wind up being up to the private market early and deliver quality. >> vishnu, are you sanguine about government intervention stepping in at all >> i don't believe so. you already have another entity that looks like it, you pointed it out already this is not like a couple years ago when we had the major companies looking to merge, also some of the companies. here you're dealing with two companies that do two different
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services, pbm and mcl work, and i don't think the government will have an issue here from antitrust perspective. look what the government has done historically, allowed companies to merge and become larger because if it becomes cheaper to provide the services, ultimately that should lead as they believe to lower premiums and costs overall to u.s. consumers. >> vishnu, what about data we're thinking about that a lot these days, especially post-equifax this company combined would have a lot of data. should that be a concern and are there other things that consumers should be concerned about with two companies of this size and space getting together? >> data is always a concern, no matter what market or space you're talking about that's a prime concern for any company. but it's up to the company to put in their own security measures and make sure they are complying and really set up to be -- to store this data and keep it on track
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as far as -- >> yeah, are we sure we're comfortable with that, or is that something where the companies need to proactively make a case for how they are going to do that, especially in light of the environment we're in >> that could be a possibility for sure they have to show and really execute on storing the data properly as you've seen, huge data breaches in the past this needs to be done perfectly. >> george, we're running on the screen threatened by amazon with a question mark. should there be a question mark there, are they threatened by amazon is this why this deal is happening? >> i think there's several ways to think about this from cvs's perspective. number one, their business -- i wouldn't call it under attack, but they are definitely seeing a heightened competition from walgreens on the retail side and optimum on the pbm side. when you think about the attack to cvs, you also have to think about the attacks that are equity value as it relates to amazon we think the ability of amazon
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to impact cvs's business is pretty small, but we're watching the irrational impact of the threat of the encroach of amazon on cvs's equity. so part of the impact is the business strategy of doing the deal part of it is cvs's need to control some destiny and have the ability to do deals in the future >> got it, guys. thank you, vishnu and george on this big and possibly transformative deal. when we come back, shares of china's largest search engine bai-do under pressure. rick santelli, what are you watching >> foreign exchange. what a week for foreign exchange what a week for the dollar, but maybe it's an important week for the euro wt 'rgog tk toal about after the break.
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coming up today half-time report top of the hour, what a day for big tech as microsoft, intel, alphabet and amazon lead the sector higher. we'll trade all of them and look into next week with apple and facebook on deck plus, a twitter fight you cannot miss the analyst who calls the stock a strong sell goes up against our own twitter bull, josh brown. and with jcpenney shares plunging, will they finally sell or double down today carl, see you in just a bit. >> scott, sounds good.
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let's get to the cme group in the meantime and get the santelli exchange. good morning, rick >> good morning, carl. listen, we only have so much time there's about ten charts i'd like to share with you i really enjoy them and, of course, you really need to try to make a strategy as to how the formations of the past, where they are today, and what they may look like in the future. you have to have a plan. so we're going to pick three zero cross trades, start out with the euro versus the dollar. this chart starts around june, ends today we talked about this whether you look at the euro versus dollar or flip it around look at the dollar index, couple things zoom out at you we have a head and shoulders look to it the time distance of the left right shoulder and head is rough roughly similar et rik, so you want to look at four, four and a half weeks in the future based on the way this thing broke out, certainly seems 1.14 is kind of your big goal here. so that's the euro versus the
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dollar now let's go to the euro versus the pound, and this is interesting, because this is not quite soup yet, unlike the last chart. so if we go back to june, it's a bit rougher formation, but you could clearly see -- maybe call it a neckline, call it a trend line, it doesn't matter. certain things, this congestion and this right side aren't quite equal yet, looks like it has more time, but the point is right around 88 even or 88.5, it's going to get an area where it either is going to hold or do the same thing we saw in the euro versus the dollar, so you really want to pay attention to that particular area and the last one is my favorite. remember, with regard to the end, the next meeting is on halloween, so there may be a real halloween surprise here, because this isn't like the other two charts remember, we have duelling central banks here lower for longer, stay on a cost for longer, maybe less weighed in in terms of the mound or girth they are doing, but the
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other central bank here, bank of japan, i know, it's interesting, isn't it, guys the other central bank is probably more sinful than the european central bank, so i had to go all the way back to april to give you a look here. it's like a rolling over scallop, upside, upside, upside. the difference is, each one of these is getting a little bit flatter, but it's still a pattern that looks like it actually wants to go up versus down, and my guess is, is that the liquidity that is not going to be taken away by the central bank of japan is most likely going to give this another leg up, so this is the one that's kind of odd man out. no matter how it turns out, a lot of volatility and many say rates are going to go up if the dollar index and euro versus the dollar continue on its current path, it's difficult for me to think rates are going down now it's a question of how much higher john fortt, back to you. >> all right, thank you, rick. still to come, china's dominant search engine baidu struggling, apparently to grow
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in the coming quarter, though the current quarter's results were a beat on the top and bottom line. investors not ppy ishath morning. details when "squawk alley" returns. i was playing golf days ago... love golf. i used to love golf. wait, what, what happened? i was having a good round, and then my friend, sheila, right as i was stepping into the tee box mentioned a tip a pro gave her. no. yep. did it help? it completely ruined my game. well, the truth is, that advice was never meant for you. i like you. you want to show me your swing? it's too soon. get advice that's right for you.
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chinese search company baidu down this morning after reporting weak guidance. the stock still up almost 50% for the year for more on some of these asian internet companies and baidu in particular, let's bring in joseph burger, ceo at pacific epok, a firm focusing on china's
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digital economy. joseph, good morning so i can't figure this out google's not in china. baidu's got something like 75% search share last i saw. why are they having growth issues into q4 >> yeah, thanks for having me. so clearly from what we heard yesterday china's 19th congress put some pressure on baidu in october. we're still looking at that data and seeing what that impact might be for the month and then the overall impact for the quarter, but clearly this has been an issue for them, and that's why they announced that yesterday. and why i think the stock is -- is down the way it is today. despite the pressure in october though we did see -- we have seen through our survey work strong interest their feed advertising and ite business, strong subscriber growth so we
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anticipated a reasonably good quarter despite the pressures that we heard yesterday. but as we look out to 2018 we do see some headwinds for baidu, and that's coming primarily from alibaba. as you look at their platform and search spending, we have heard from our survey work that advertisers are looking to -- to allocate money out to alibaba, so that's going to put some more pressure on baidu in 2018, but overall recall to your earlier point. >> joseph, i'm wondering, we just had the ipo here, lather ten cents named a lot as well as al baba as far as the investments they are making in some of the chinese and asian startups s.baidu doing enough investment i mean, you look at what they have tried to build and invest in over the years, an it seems like they are pretty much
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copying the google "playbook." this they done it well enough, or should they have done something differently? >> again, from what we're seeing they have made some investments. if you look their 020 delivery system clearly that was not a great investment they are investing in ai, trying to find ways to better optimize the spending, so clearly it seems like they are struggling with respect to their investment strategy that said though ite has been a good investment for them clearly a platform that's doing quite well so i think there are some misses, but there are also some gains there as well >> stocks getting really hit very hard, and yet you sound like you're not telling anybody to jump in here. this is not a buying opportunity? >> well, the way we see it on the fundamental said is that baidu is struggling as a search engine platform, a paid search platform, and there is a lot of competition out there. so as you look out to 2018 it's going to be, you know, not as
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strong a performance as we've seen in previous years. >> the president goes to asia not too long from now, and there's some reports out this morning that a bunch of companies are going to be in tow, ge, honeywell and terex and i wonder how much baidu's fortunes are tied to the trade relationship that the white house is setting up with beijing. >> well, baidu is primarily focused on the domestic market, and that's where their revenues are derived, so the way we track it, you know, china and baidu are closely linked together. foreign investment is probably -- plays little into their overall performance. they are really targeting the china consumer in mainland china. >> so you mentioned at the beginning that some governmental pressure might be affecting baidu's results. any parallels that investors can or should draw between the impact that regulation and government policy can have on a
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tech company in this environment? >> well, i think baidu certainly in past years has been impacted by government regulations and obviously we've seen it again with yesterday's announcement, but by and large, the government has not really been impacting from what we've seen the performance of the likes of alibaba, ten cent. i think bayda has been particularly sensitive to that given the market that they are in. >> to put a finer point on it, i know you covered china, but should alphabet have one eye open given what's happening there? >> well, clearly, if they are interested in getting back into that market, that's something they have to contend with. i think that's been the issue for them, and clearly if they are going to enter back into china, they have to be sensitive to that. >> well, you have a very tight focus on china which we appreciate thank you, joseph. >> thank you, good to be here. >> more on the rally in tech stocks coming up amazon and microsoft, alphabet all jumping after strong earnings "squawk alley" back right after
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this
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computing more natural than ever before compute remembers reacting to people rather than people needing to react to computers. fundamental to this experience is google search and our assistant. we introduced our assistant last year and it continues to get better every day helping people get things done in the real world. walmart and target have recently integrated with google home which means you can order everyday items from them much more easily. >> that's pete last night on the call for all the attention amazon is getting today, we're reminded amazon's operating margin 8/so and alphabet's 28, a world of difference. >> can you drive a truck through that gap. >> sundar sounding a little bit like a robot himself are we sure that was really him? it's interesting how much ai plays into so many of these diplomacy' growth projections. we heard it from intel, certainly heard it from microsoft and azure and its plans in the clouds from google.
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i would take a little bit of issue with how he characterized ai we're still having to adapt to technology for sure had. i spent a little time with my parents trying to deal with their password issues. lots of adaptations taking place. >> amazon with echo, i think, i don't think of ai reaching the consumer quite as much via microsoft as i do with amazon and the echo we can scott galloway talking about thinking it's the most innovative product of the last couple of years. these things are doing tremendously well today, all of them their results are quantifiable, right? what is not quantifiable is what is coming when it comes to the regulatory headwind. google last quarter. they paid a $2.7 billion find to the european commission so when they hit they can hit hard. >> we haven't really mentioned the europeans but talking about our own capitol hill which is by the way where a lot of companies will be next wednesday. >> lost in all of this, apple up better than 3% today perhaps on those long lead times
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now on the iannone x some people were worried nobody would want to pie a $1,000 phone but apple telling us that demand is off the charts. which charts, i'm not sure. >> i read be worried that the lead time is only going to take two weeks and now we're up to what, six? >> next week is the phone. tax legislation, the social media companies and earnings, so rest this up weekend let's get to the judge and "the half." and welcome to "the halftime report." i'm scott wapner the top trade. the tech takeoff, some of the biggest names in the space surging on this hour on earnings is there still time to buy, or have you simply missed your chance to get in with us for the hour, weiss, jim lebenthal and kevin o'leary here with us as well. microsoft and intel, shares higher leading t

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