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tv   Squawk on the Street  CNBC  October 19, 2012 9:00am-12:00pm EDT

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we'll take some time to remember black monday and hear from those that kept it from gets any worse. futures reflecting more than half a dozen earnings misses in the last 18 years or so. our map begins with a slew of earnings disappointments. is the problem not so much the timing of that release but the content? in the meantime, g.e. light on revenues as it maintains a conservative outlook. >> and microsoft a another high profile miss. but we're going to check in and see if his long-term bullish thesis is in tact. >> and does mcdonald's need a new game plan? >> and we're remembers the '87
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crash. as you know google losing more than 9% off it's market cap yesterday. the disappointing numbers coming out hours ahead of schedule. google is blaming the misfire on an unauthorized filing by r.r. donnelly. >> they're also admitting some fault on this one as well with the ceo saying that human error is to blame for this report going out early. i wonder if it's normal for the print tore have a draft release so early in the day anyway. it would have been less important if the numbers had been more in line. some of the currency head winds seems to be that google's investment is causing a near
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term squeeze. cost per click, how much money does google get per average. turns out they don't monetize as good as desk top. then there is the nexus 7 tablet which google is selling starting at $199. it's open about the fact that it's not making any money on just telling the tablet. finally there is motorola, a half billion dollar operating loss in that division was not just the phones, it was the set top boxes causing to lose money too. others maintain their bullish ratings, but as i wrote months ago. this is an issue motorola for how google will manage this integration. google executives were telling
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me that they don't plan to proactively shut those down, just let the feature phone business wind down overtime. if that's still their plan they could have pain in this area for time to come, guys. >> thank you, john. when i look at other headlines about google that we have not paid so much attention too, i wonder if we look at what happened with motorola and wonder if they're still trying to throw spaghetti at the wall, are they unfocused? does the press release early reflect a little scatter brainness? >> i will let you answer too, john, but my first sense is no. the release was related to r.r.donnelly. it's a black box to some extent,
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isn't it, john? how much are they spending or losing on the nexus are questions that a number of investors have, and the mobility, $500 million in losses, it's hard to quantify the benefits given the patents and things of that nature, but we certainly see the losses mounting at this point. >> yes, a big company with a lot of costs. they're moving a lot of the brain trust in motorola to silicon valley where it used to be centered out in the chicago area. you can take a look at the alternative way of handling the shift to mobile contrasting with the way that micro soft handled things. you could argue that microsoft was not aggressive enough. didn't throw enough spaghetti at
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the wall. >> i think your point is well taken. here is the two page add looking at that $49 laptop. you talk about doubling down on hardware. if search is really a problem, maybe you have to go somewhere like this. >> you brought up microsoft. what occurs to me is 20 exact decline, and stock is down, but it's more of -- people have grown used to that we talked about it allot. you're going from an 11 inch screen to a four inch screen. their click rates were up 44%. that's not bad, the problem is they get paid a lot less for mobile ads. so you had some foreign exchange
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as well, and everybody reacted very quickly yesterday. i think most will choose not to sell, but we'll see what the reaction is today. people will have heard the conference call and everything else. >> but a 2% decline verses 10% for google. so clearly much, much higher expectations. >> the stock had run up about 34%. it was in part because people believed they were the changeon of at least figuring out so far mobile. >> and that market cap reverse yesterday now. >> got to talk a little ge that broke, of course this morning. results relatively strong, but weakness on the top line. revenue misses. 36 cents informs line. people took to heart that the
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release did not lower forecasts for the year, but lowering their 2012 total revenue growth. a lot of that is g.e. capital getting smaller. >> i know there has been conversation about that and it's a little hard to figure out where analysts are. >> g.e. capital revenue should be down 10% for the year. >> that would be 2012, not 2013. we only have one quarter left for the year and we're in it. shares have been moving up sharply. you'll see that. but also because of belief and strength. an 8% revenue numbers is not bad. i can remember plenty of dwaurters whedwaurt -- quarters where we haven't seen anything close to that. and you said it's a result of ge
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capital. >> and it paid a nice dividend to the parent. you mentioned the stock, 41% in a year. that is almost double what the dow has done. >> it's all the way back to 22. >> you want to go back to 60, don't you? >> i would like just a few of those very old options. >> maybe like 2007, five years ago, it was approaching $40 a share. that day, i'll never forget, we have keith sharon on. we were there together. >> yeah. >> and we were all pale, the whole world was pale that day. >> yes, they have significantly shrunk g.e. capital since that time. it's become a different company. >> that wind turbine thing is
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not working out so well. >> yeah, energy infrastructure up 20%, but wind has been a problem, and we'll talk more about g.e. in a moment. he said europe is weak, but no weaker than we thought it was going to be, so investors have been listening for a change in that language. >> and expectations that there is an additional dividend increase this year. twice in 2010, twice in 2011. we'll see if the earnings will get them to raise the dividend as well. >> asia, middle east, africa, europe was the only bright spot for the fast food giant. he has a target of $104, welcome, the bigger news is what they're saying about october and how far some of these comps have
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to fall. >> october is only one period, and what you have in there is a calendar shift. if you normalize for losing a couple weekends and gaining a couple weekdays, it's in line. i think the success where we were surprised the most on the same store sales front. and i think that's weighs on the shares a little bit. >> yes, people talking about david eihorn calling taco bell res resurrogent. >> there is really no share being taken from chipotle. whether it's jack in the box, sonic, or young brands taking it
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from mcdonald's right now. >> can you just clarify you're attributing that, that's due to calendar shift? >> i'm concerned about it, i think it's factored into most models that they expected the next couple of quarters, you are going to see a gradual slow down here. you're not seeing momentum drastically slow because you have to adjust for those days. they need to catch up to those peers. >> and these are the tough comps that result from the mcrib, right? and they were trying to move around a place and time for the mcrib this year? >> that is a little bit of it, and also i think they made multiple years of rolling out the beverage product. their coming to the end of that now, and they're looking for more momentum.
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and certainly taco bell with their advertising campaign is pretty new news and refreshing. >> matt, we talked a long time about the pipeline of this kpaechb. they continue to point at things like a new premium burger coming out not too long from now. is that what is needed because a lot of people are saying their longstanding plan to win, as they call it, the same plan that rescued them from really dark days is running out of gas? >> i think it's how they deploy their capital. it's a barbell strategy. have something premium for the user that might be thinking they're ages out of them, and have a value proposition as well. the real thing is how much more can they drive their comp from the remodel campaign. it's early in the u.s., will it have that same push that it had in europe. right now it's not showing it's lifting their comps above their peers. >> you're not changing your
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target, right? we saw on the last weak number it came back below 90 and it had a pretty nice bounce. >> i think it's a good safe haven. even on this slight earnings miss, it still grow earnings 4%, and this was the politic year as well. if i look ahead to 13, you only need 5% more in growth. so in an environment where 2013 is going to look like a double digit earnings grower, i have no no problem putting a historic marker on it. that gets me the $104 price tag, so i think it's on the lower end of fair value. >> we're looking back at of the stock market crash of 25 years ago pl we'll talk to some of the people on the front lines of black monday. and james stewart.
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that's coming up at 10:40. you talk to some of these guys about what that day was like before wires were really the way we know them now. before you could only watch the tape as quickly as it came. >> i was working then as a banking reporter, and we had one of the last ticker tapes, essentially, and it would do exactly that, and eventually the entire news room was layers back -- >> i called my father that day to ask if i had to leave college because of the decline. under 30, that ticker you see at the bottle of the screen, that's a privilege. >> you compare it to what happened on twitter when google broke yesterday, it's like night and day the way information is spread regarding the markets. >> blue chip feeling the blues.
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down almost 2% here after a good run up. has it reached it's peak? one more look at futures, you might expect some red arrows. mike rowe here at a ford dealer with a little q&a for fiona. tell me fiona, who's having a big tire event? your ford dealer. who has 11 major brands to choose from? your ford dealer. who's offering a rebate? your ford dealer. who has the low price tire guarantee... affording peace of mind to anyone who might be in the market for a new set of tires? your ford dealer. i'm beginning to sense a pattern. buy four select tires, get a $60 rebate. use the ford service credit credit card, get $60 more. that's up to $120. where did you get that sweater vest? your ford dealer.
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g.e. shares are down in the
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market. mary thompson is back. i just want to correct myself earlier, i said revenues have been up 8%, but it's 6% overall if you x-out foreign exchange. >> yes, the miss there, the disappointment for them now expects revenue growth. the reduced forecast related to the shrinking capital. industrial revenue is still expected to increase by 10%. here is the ceo on the company's third quarter results. >> we had a good third quarter in a challenging environment. europe is tough, and the u.s. had pockets of growth but still some uncertainty. >> there was weakness a couple
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segments including in health care. still, all of the firms industrial businesses including energy and aifuate had positive earnings for the first time in 2005. they're margins improved to 146.4%. industrial orders did decline, but take out wind turbines, and the impact of currencies and they rose 4%. six of the nine growth markets are expected to generate double digits earning growth. g.e. stock close to a 52-week high. they got a very big assessment. a rally that could be challenged by today's revenue miss. michelle, back to you. >> all right, thank you. >> that's a good point to remember as mary said, industrial revenue projections
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remaining in fact. it's largely about g.e. capital shrinking in size. >> and it's 2012, not 2013. >> will window's eight help microsoft bounce back? who better to ask than rick shurland. first, we'll be at post nine with the firsthand account of the stock market contractor that happened 25 years ago today. governor of getting it done. you know how to dance... with a deadline. and from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above, and still pay the mid-size price. this is awesome. [ male announcer ] yes, it is, business pro. yes, it is.
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if you own ibm, you lost $33 a share, if you own dupont, you lost $18 a share, kodak down $27, a shattering six-and-a-half hours on wall street. paper losses more than $500 billion. wall street's black monday. >> tom brokaw said it all in his report 25 years ago today. our director of floor operations was here when it happened. he joins us now. i hope you don't mind me saying nobody tells the story better than you do, but it begins with a year that looked good up until
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august. >> it looks spectacular from new years to labor day, they were up about 43%. it was stunning. it changed the culture to some degree. no tree grows straight to heaven, and the young junior partners would say are you kaz, there's another rally right behind it. it lasted until about august. they became worried about the dollar, and things started to ease back slowly. >> things got ugly, it was bad thursday, friday, and talk about coming into work that monday morning, you see hong kong down 10%. >> we knew something would probably happen with all of the
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rumors on the weekend, so i got up pofbl before dawn, and checked around. we didn't have all of the news services we have now, so it was a little difficult. hong kong was down 10%, and it looked like we would open 10%. i came in, i wanted to check out the systems and make sure everything was running, and put out feelers to the staff to please come in early. i found time to go get a cup of coffee, and i was a table or two over from the chairman, and he had several floor directors with him, and every ten minutes something would run up and whisper in his ear or hand him a note, so you knew things were deterioratin deteriorating.
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so i got up and put my hand across my chest and said the salute of the gladiators. and he just nodded and did not smile at all. i don't want to miss the opening bell, we'll come right back.
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it's just common sense. from td ameritrade. there is the opening bell on this friday. here on the big board, the turkish minister of finance. and the nasdaq independent broker l.p.l. financial. we have earnings to cover, disappointing from last night and this morning, do you want to cover a few of these? >> earnings season looks to be playing out like a lot of people expected. the major numbers caused the major industry kals to be
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negative at this point. >> typically it might be down this morning if they had released the earnings when they were supposed to. we'll see how it looks after that. a number of people coming back and saying all right, it was not good at all given the black of growth in profits, but at the same time, perhaps a bit of a overreaction. they are high fer you can get pricing up, things can turn pretty quickly. >> and that one year chart we showed people and they were expecting a lot. >> it rallied all the way into the numbers themselves. >> a lot of the big losers, mcdonalds, baker hughs have been misses on the bottom line. chipotle is down 12%. a miss by three cents.
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more importantly they see low single digit comps for a company that was really in the mid to upper single digits. it's no longer that kind of a growth company. if cramer were here -- >> he would be talking about it, yeah. another good one there in terms of questioning that growth rate, carl, and it looks like at this point they're right. that's what happens when a growth rate -- >> and there's talk of taco bell being a resurgent, but it's a dollar menu verses a $7 or $8 menu. >> it seems like the disappointments are grouping around technology.
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industrials that are temid. it beats revenues kind of light. prior rang was 440 to 455. nothing is hitting it out of the park except for housing. >> we'll have to see when you know the expectations were low and people started to depress their expectations, will they get worse. >> and on the face of it, it does not feel like it's been a particularly good quarter. bob, you know better than i, perhaps, exactly what we're seeing when it comes to these numbers and what expectations were, what's your take? >> i just want to -- i want to show you something. you have seen this many times. this is a plaque they keep down here to remember that day.
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it's a screen shot of the closing prices, and i know it's hard to see, but disney, $46 down 18 7/8. apple down 11 3/4, and down here is where the volume numbers are, 2 million shares to the upside, down value 603 million. 300 to 1 downside to up side. that is a debacle of a day they remember -- >> and merrill lynch -- >> yeah, you can see down 42, so
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when you say this is imparted into their memory, you know what's going on. when i talked to the old guys about this, and there are min still down here, the biggest worries were not on monday, it was on tuesday when the dow opened down 100 points. these were mom and pop operations and they were in serious trouble because of all of the sell orders. the fed said open lines of credit for these guys and that was a big part of the turn around, and that was a scary moment for them. let's talk about earnings and we hit a bit of a rough patch. the financials have been doing well. now, it was okay until google.
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microsoft missed as well. we expected to group to be up a bit. and industrials, well, revenues are really the problem. the 2012 guidance, ge was in line, but the revenues were light. overall the industrials are not helping move twrard the eaforwa earnings at all. so it's now flat. g.e. talked about a challenging environment. so the bottom line here, flat so far for q 3 earnings, but nothing really moved on these numbers today. and we'll talk to three guys down here on the floor 25 years ago and they will reminisce with me at 10:30 eastern time. >> thank you, both. >> you want to bring art back in?
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>> yeah, bob was talking about what happened that day, it took three days for some people to find out how bad the damage was. >> in those days it was five days for the ultimate clerns. and when the day ended, after you put your records together, you would worry because it was all verbal trading. i look in your eye and you said i sold 50 million, and you said take it. so you had to worry that the person on the other side of the trade didn't go broke and could still live up to whatever that trade was. so a very, very difficult time. >> you went through 1987, and 2008 and 2009, what was scarier?
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>> probably 2008 because it was for a more extended period of time. it just kept coming back again and again. it did look like capitalism might be dieing in '87. particularly the next day. and the big banks had gone around in the big market, and there were like 50 or 52 specialists at the time that said let us be your financier. we'll lend you the money, establish a big credit line for you. as often happens, when the -- when you had a big day like monday, and we're down 22%, when the chairman of the bank got in the back of his car and say anything interesting happen yesterday, and the stock market was down 22%. they inserted themselves.
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he was brushed aside and the chairman began to look at it because they were talking billions of dollars, and they all just said we don't want the exposure, shut down those lines. and we had bankers calling saying you have no more credit. interestingly enough, the night before, the specialist in u.s. steel made too good a market, and the bank called and said you used up all of your credit, and he had to be sold to merrill lynch that night. it was a corporate error, the deal was done, it was later settled in court. >> before we go, there's talk about dynamic hedging back then,
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and high frequency trading today, the times today takes a crack at it saying we haven't learned a lesson about the under reliance of the market, it's needed -- >> i certainly believe it's needed. we saw that in the unfortunate situation with night trading. on the opening bell, the guys were saying this is wrong, these orders don't look right, and they had some difficulty finding out who to call to get it intercepted, and that's been a big problem. the flash crash the same way. they had things built to go to where they might get a rebate on sending orders, and they sent them to venues that people had long vacated. i said they would have been better off sending them to a cigar store in new jersey.
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human intervention is always important. >> thanks for coming by. >> let's shift to bonds and the dollar, rick santelli at the cmt group in chicago. >> if we look at short term charts, we can see we're off a couple basis points, it's really not a huge deal, we slipped back briefly under 180. we're back to 181, we closed at 183. just to put a little historical perfective, the thursday before the 19th monday crash, we were eight-and-a-half higher. and the rest is kind of history. if we look at the foreign exchange back into the here and now, the big steler performer of late is something we don't talk about every day and that is the
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dollar yen. look at this chart going back to august. a couple weeks ago the japanese looked like they were talking about intervention, and now the dollar is close to the highest levels since the beginning thof chart in august, really making a big comeback. there's a lot of talk there may be more easing coming out of japan, i think that's probably pretty accurate. we'll have to wait and see. ultimately today, the biggest news is to continue to digest some of the wee morning hour comments about banks. back to you. >> thank you, two weeks ago, we were talking about google aiming for the $800 mark. it's back below $700 now. what is wrong with the company and can it's upcoming product launches turn the tide? also, ken feinberg with his take on wall street pay.
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okay, with the dow down now, you see every component in the red, being led largely to the downside by mcdonalds which was down almost 3.5%. >> it wasn't the early earnings release that shocked wall street. it was earnings that brought shares down 8%. it was back below $700 per share. it now has a cap lower than microsoft. he maintains his buy rating. good to see you, we had a lot of time to look over these numbers. revenue per click, when you look at these numbers, what was your biggest concern and why did you cut your price target? >> we cut it because i think some of the fundamentals are a little lighter.
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i think on the affect side. they took a hit. as well as some of the nexus seven margins came in lower than expected. i think overall fundamentals still remain in tact for the business. >> the snafu, the earnings release, does that speak to any larger issue for the company in your mind, or is it just a whops? >> it sounds like it was just human error. i think that's why earnings are released after market open so they have time to digest a lot of the numbers. >> but no concerns that google wasn't in control of the process? >> no, it seems like a one off
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issue. sdplt big question, of course, not only for google but for so many other companies, how do you get tiszers to pay for the same rate as they pay for the pc. the rate is going up, but the prices aren't. how is that going to change to google's favor in the future? >> i this in the near term we're going through that transition phase. it's not like the desk top is going away right now. we still expect desk top to grow at least 10% growth for desk top based revenues. the mobile cycle is still early and it's increasing as a percentage of the queries. so it is rising, and i think that is a time that the company
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will benefit from going forward along with the continued disk top revenue growth. >> so give me just a little more sense on that cycle then. if it's following that cycle, when do we get to an approximate rate? >> they're giving us an updaut. they don't break out the full mobile search revenues, one thing they did break out is they're doing $8 billion in mobile revenues today, up from 2.5 billion last year at the same time, so it is growing. i think at some point, in maybe late 2013, we'll start to see some of that mobile thing start to break up and komp against easier pricing growth. >> they still don't get a big -- >> even with our numbers lowered, the quarter was a little lighter, we're reflecting that in our numbers, but the
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stock is still trading at 15 times 2013 numbers. that's not ekts pensive if you look at the entire media group that is at 13 times. so for a company benefit frg for the mobile theme, android, search, product releases, product listing ads, or the nexus ten inch screen, i don't think that's too expensive to pay for a stock participating in those themes. >> an explosive op-ed does not necessarily lead to on explosive new book. look at this morning's s&p 500 losers.
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here to tell us what's coming up at 10:00. >> we're going to talk about chipotle. we're also going to talk about microsoft easternings last night. we'll have rick sherlund here. he thinks there is 30% upside in microsoft stock. we'll also talk to james stewart. thank you simon, do want to check on mcdonald's. we were curious to know when the last time comps were negative. prior to that you have to go back to april of 2003 before you can find negative comps globally when they were doubt.8. >> and they're seeing them be negative for the first time
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since 2003. general electric is up 6%, and the company says the growth for the year will be a little less than people were expecting. we should say transportation profits, energy infrastructure up 13%. g.e. capital is one of the reasons why they had to pull back that number for the year as well as they continue to shrink that. >> the took in a very significant move. it's not that long ago and it's about the industrial businesses for which remain in tact. >> back in september it was a big structure day and people walked away extremely bullish from that. >> so, all right, there are new details today about goldman
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sachs memoir. more of his op-ed that was out months ago. he gives insight into the muppet context. being a muppet meant being an idiot, or tool, manipulated by someone else. he outlines a time when an intern was publicly embarrassed because he ordered the wrong lunch. and also when he saw lloyd blankfein naked in the locker room because he was, quote, air drying. >> grow up, go to the gym
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occasionally. it's not the only place you'll see a grown man with no clothes on. >> how do you think mrs. piggy feels about that. >> there is a cultural confuse for that word in europe. >> but it still derives from the muppets. >> kermit is very smart, as well as ernie. >> when we come back, what's the state of the housing recovery. market reaction at the top of the hour. plus, rick sherlund. at optionsxpress we're all about options trading.
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welcome back to "squawk on the street" existing home sales fall to 4.75 million units. that's exactly with expectations. that's the 15th straight month of year over year increases in home sales. down .9%, and down 3.4% out
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west. median and existing home price. that is up 11.3% year over year. but remember, this is due to the change in the mix of homes selling as fewer distressed properties are selling and higher priced homes are seeing. regular prices of regular homes are not up that high. we see this because homes priced under 100,000 out west are down 47% year over yard. that's your mix of distressed properties moving in and out of the market. 2.32 million homes for sale right now. down 20% from a year ago. that's the first time we have been under a six month supply since march of 2006. we're entering a season of inventor declines anyway, and we're coming back from a very low number, carl?
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>> thank you for that, diana. the dow was off triple digits not too long ago. the s&p is down 8, but it is also down again yesterday. let's get to the road map for the next hour. microsoft showing evidence of weakness. will windows eight come to the rescue? and chipotle, cash strapped customers will find out if this is a buying opportunity or if you should take the company off their menu. and he won the prize for his articles on the market crash. and google bouncing back after yesterday' debacle. one investor thinks the company could disappear in the next five years.
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we start with microsoft. slower sales an the company's current software. could upcoming windows eight change? it has been following the company. ami believe that the day the pc is open, and the numbers bear it out, 8.6 decline in shipments in the last quarter, how do i few microsoft and believe it has a chance to continue to grow. >> pcs have been declining. it was unusual. people want to work down existing machines. this new product, windows eight, allows microsoft to deliver office and windows compatibility on to tablets, and all tra book touch devices. they will be in fairly short
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supply, probably only five to 10% of the machines shipping in the quarter be capable of touch. so i think it will ramp a little slowly until you get more availability. i think it will be exciting for people to be able to have the persons like an ipad, only on a device that had word, excel, and outlook on it. i think we will see the markets develop a few tiers. android at the low end, higher price from apple, and similar price products from microsoft, but with more compatibility. >> will the user experience be as good on that tablet and as seamless as the ipad. >> yes, i think it's very similar. you won't have the library, it won't be as easy as apple, so i would not suggest it's a battle
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of microsoft against apple for the consumer market -- >> this seems to me like pepsi saying we're going to become a pepsi company forgetting they make a lot of money from selling soda to people. only 5% to 10% of the laptops loaded with windows eight at the end of next week will be capable of handling the operating system properly. they don't have the hardware -- the hardware will not be aligned to the new operating system into the future, and they hope to lead the charge to where windows eight already sits. so there will be 90 to 95 people that are not satisfied with the way that it operates. that's a huge effect risk, isn't it? >> because people can't touch the screen and move stuff around.
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>> wind does eight is designed more for touch and tablets. . you go into the desk top mode and it runs much like windows 7 does. there will be a change in the user interface and experience. i'm not sure people are remotivated to learn to run it on a mouse and computer system. if you buy an ipad, it's like relearning -- >> microsoft has to launch those new products and then sell them to profit from them. >> it ships, at the moment it ships laptops, that's what mi o microsoft does. you put in something that's not optimized for those notebooks, how can you call that higher? >> you survey people, and they don't know what you mean. i think you first have to ship
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the surface tablet, that ships next friday, so you'll get from microsoft, the apple-like tablet. you'll be able to get a tra book touch devices from the hardware manufacturers, so they'll start shipping, you're just not going to have high volume right away. so i think if people review windows eight, they'll say why do i want this? it did you want deliver a lot new to me, but if you buy the touch devices for the future, that's where the growth is in the industry. so you're laying the foundation for growth in the future as the market begins to adopt the touch based future -- >> ibm, micro soft, google, amd, can you remember a quarter where tech was uniformly as disappointing as this time. >> not only is it disappointing on the pc side, but they're server business, a $20 billion a year business, they did 20%
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billings growth. so it's quite a nice business, but the server business had revenues that were soft, so it kind of confirms what we saw from ibm, and check point, and for this past week or so that there is something in the enterprise spending market. so i think people are worried about them coming out with results next week. >> back to microsoft verses apple, did microsoft, are they late? apple struggled for so long to go from the consumer to the corporate side. and the iphone was good enough they said i really want this, and then the ipad came along, and now suddenly, a lot of corporations -- before they would tell their employees, sorry no apple products, now
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they do. that's a crucial shift that moved in apple's favor. the answer is, and simon, you're not rude, everyone beats me up on this. >> no, on this issue, i think the conventional wisdom in microsoft loses, apple wins. so if this were to work, everybody hates it, apple can do no wrong, microsoft can do nothing right, so if they they they can do it, and it people
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would brefr that you have a win dope's cop patble product that they can manage, we need to look at what it will look like when it's a more compatible playing field, and you have compatible products, and it's not as cemented as it is right now. >> you were a manager at goldman in 1987. >> that's correct. >> any crazy stories. >> probably not enough time. >> did you see lloyd blankfein air drying in the gym. i used to see hank paulson in the gym, but every lloyd there. >> thanks for coming in. >> nice call earlier in the week, it happened just as you said. we were back triple digits, and now we're down just 95 on the dow. good morning, let's talk
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about athena health getting hit after missing earnings yesterday. a nine cent miss on eps. revenues 105 million verses a 109 million expectation. under cutting to perform today. so we're down more than 11% at 7107. >> thank you, chipotle within down at the lower left hand side of the screen, but put it in the ticker because they're getting pummelled today. the stock is off by more than 40 points down 14%, the company saying it's considering raising it's menu prices. we have top analysts to dig deeper into the numbers. and 25 years ago today, wall street suffered the pain of a stock market collapse. we'll talk to james stewart. our schools...
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chipotle falling today. the stock has been down because of slow growth in customer
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sales. steven anderson in a restaurant ann list. he has a buy rating of o $335 price target. jeffrey joins us with the neutral waiting on the stock. steven, let me kick off with you. it is $100 higher than right now, that's 40%. that's a very bold call to maintain after what they told us, isn't it? >> certainly days of 40 multiples are not over. we think chipotle is making market share gains. and we think it was a bit conservative. >> how can they raise prices? how can they possibly raise prices, steven, when taco bell is already there with a lower price men you and potentially eating their lunch if you like.
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>> we disagree with that. it really did not change. so when taco pell introduced their new menu -- >> they have not raised prices yet. >> no they have not. >> so how can they raise prices and maintain their competition with tack toe bell. >> it's a different product. taco bell is coming from the same kitchen and condiments, chipotle offers a different product that is a different customer experience. >> it's a difficult story here because it has been one of the best stories in restaurants, but that's the big challenge is managing them -- >> i eat at chipotle, and i like it, but i think it's expensive, it's luxurious fast food. >> i think in the near term they
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side with you. they will wait and see how the macro and competitive environment plays out, so with traffic slowing, it will be difficult to drive growth which is what people have become accustomed to. >> do you still think it would move upwards? that fair value is where we are now? >> yes, i think they are just reassessing the story. we expect a lot of this is macro drive n. >> let's pick up that macro point then, we had a very bad drought last year that will show up in the cost space in 2013, who wins and who loses in your view. >> typically the winners would
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be twofolding with the fast food franchises, and the other winner is the one that has very strong traffic trends, and that has historically been chipotle. >> here is the cfo on the conference call last night. there was a lot of noise about somebody taking market share away from us, they, referring to yum, did a lot of very, very heavy tiadvertising. does data bare that out? >> we argue that the cantina bell mean you comprises less than 5% of their menu mix. and the doritos taco -- >> do you really see them as competitors? to me their totally different
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market. >> it would be like a panera to a subway or a mechanic donald's, and we agree with that. >> just before we leave you, how dangerous is a, the value proposition potentially, and this huge amount of advertising, this summer, doing mcdonalds, of course, which is disappointing overnight. and europe very big in this offer across western europe and raise that as an example. or try and persuade people they have value with very expensivetizing campaiexpensive ti advertising campaigns. >> we have seen campaigns come and go yum has been doing weapon. burger king has been doing well, and mcdonald's had been the star for that decade, and right now we don't see much in the
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pipeline that is new, especially compared to the mccafe. >> thank you, it's good to see you both. have great weekends. >> thank you, you too. >> i'm sure you perform taco bell. >> i do have a -- own. i don't think i ever ate at taco bell? >> you're missing out, it's so great. >> a woman that does spin class every morning would field her family of 12 taco bell. >> i don't have a family, that's why i can do spin class every morning.
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>> when we come back, we'll have ken feinberg. and where is the beef? up. a short word that's a tall order. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim. we're raising the bar on flying
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i was in the ambulance and i was told to call my next of kin. at 33 years old, i was having a heart attack. now i'm on a bayer aspirin regimen. [ male announcer ] be sure to talk to your doctor before you begin an aspirin regimen. i didn't know this could happen so young. take control, talk to your doctor.
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welcome back to "squawk on the street." baker hughes reporting their top line was light. the bottom line missed too, 73 cents verses 84 cents. the margins were impacted by the north american drilling business. the ceo also saying he is expecting a 25% reduction in capx spending in 2013. take a look at this stock down 4.4%. >> jackie, thanks so much. two-and-a-half weeks to go, and we're out in a couple key battleground states, and the candidates in the race of presidency showed their hue mouse sides last night in new york city. john harwood joins us from our nation's capital. were you at the dinner last
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night? >> i was not, i have was catching up on some sleep after long nights for the debates. we have a litting serious and b a little funny in the race for president. we're talking iowa and wisconsin. in iowa, president obama leads 51 to 43, that's a significant lead, and in wisconsin, the president leads by sixth. republicans have been hoping to make inroads, and it underscores some of the divide between national polls showing mitt romney doing much better, but in the electoral bottle grounds, we're talking about the eight or nine states that obama carried, romney has work to do, but last night, they were both doing stand up comedy.
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this is a traditional event that both candidates come to, both of them brought their humor. >> he knows how to seize the moment. >> the unemployment rate is at the lowest level since i took office, i don't have a joke here, i just thought it would be useful to remind everybody. >> as president obama surveys the waldorf banquet room. so little time, so much to redistribute -- >> and the one that we didn't have in that clip was the president said you may have noticed that i was pretty vigorous and energetic in the second debate, he said that's because i was rested from the nap i had in the first debate. >> and i like when he said that it gives romney and chance to
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wear what he and ann romney wear around the house. >> this notice that romney could win the popular vote but lose the electoral vote, is that increasingly likely? >> i would say it's unlikely, carl. i'm conditioned by the experience of covering past presidential elections to think that the national vote is evenly distributed enough that it's not likely you will have that great despairty. the gallup poll showed mitt romney ahead seven points nationally. that feels too high to me. obama is ahead in every region except the south. and he is down 22 points in the south. i question those numbers, but if they are near right, you could find a situation where the votes have so unevenly distributed that obama could get to 270 in
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the battleground states, but that would not be good for the country given the polarization we have right now. it would not be governing in effective ways. >> only 18 more days fighting about the polls, john. get some rest. see you on monday night. >> in today's million dollar minute, we're all about the meat. we have a look at $1 million worth of steaks. >> welcome to the stake lovers faradice. >> it's well over $1 million worth of meat. >> the primest of the prime. >> this is about 456 days aged.
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>> shethese seven stakes her ar about $1,000. >> the humidity is always less than 90% so the air is cool and dry, and the million dollars worth of meat ages perfectly. and as it ages, it getting more expensive. >> this just got put up today, it's about $15 a pound, now it's about $25 a pound. when we come back, it wasn't just the early earningings release that spooked google investors. we have someone that says google could disappear in the next five years. also, we'll look back at the stock market crash 25 years ago today. >> if you're going to play the game, you know it's going to happen to you sooner or later.
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>> the people brought 100 shares of shock and they're all excited now. >> i'm doing a lot of buying today, i have been waiting for this.
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here are the stories we're
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squawking about. good morning if you just joined us. existing home sales 41.4% in september, but the average home price rose more than 11% from a year ago. the largest annual gain since november of 2005. and sony says they're going to tweak their restructuring information but cutting. and starbucks, opening it's first store in india. in a tea drinking nation, will they turn to coffee? >> with the election looming, there's no more important data than jobs. jean we'lls has the details on that, good morning. >> big change from a month ago. last month, most states were reporting job less rates
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increased? not in september. only six saw them rise. much better than august. states with the highest unemployment are nevada, rhode island, and california. the biggest drop was in california, and while texas added the most jobs in september, california added the most jobs this year. they're being created in all areas. it is coming from start up businesses. is the election on ceo andy moeck's mind? >> in the equation we have to hire or not hire someone, who is in office is zero input. >> chevron was interviewing engineers this week to see if
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they're willing to move to bakersfield. >> you have to go where the jobs are, you have to follow the work, you can't restrict yourself in an kmie like this to something that's just close by. >> then there are the swing states in this election. michigan which lost the most jobs, followed by ohio with job losses for nearly that much, and while ohio showed gains of almost 90,000 jobs, there remains there long unemployed people like mark jacobs, searching craigslist every day. >> right now i'm applying for temporary holiday work like department stores and stuff. i tried that last year, got interviews, but not a position. people are saying jobs are number one. for me that's true. i don't give a damn about the deficit, we need to get everyone back to work, especially me. >> he says he's getting buy on
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his investments and calls jim cramer a rock stair. north dakota had the lowest unemployment rate again and that was at 3%. >> on this day 25 years ago, the dow sfel 2 -- dow fell 22% in one day. and david, a day to remember, i talked to three veterans yesterday, i took them down to harry's bar to remember innocence. >> the brokers on the floor that you saw as iconic, their knees were quaking. >> what sticks in my mind is that the marketplace was very physical back then. i remember black monday working all day and sweating to death all day long, and at the end of the day not knowing where things were at. >> there was a huge delay in the tape, sometimes one, two, or three hours, how did that affect
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you and how did you get information to the outside world? >> the volume was extraordinary, so when you go to settlement, and you're flying this plane blind, people didn't know their exposure for three days. >> the computerized trading back then gets blamed for the crash, and people still blame computers, can we draw any conclusions about today verses yesterday? >> i think on tuesday morning, which was the scariest day for me, there were tremendous selloffs, and the market proved that day that people would make bids, make offers, and continue the marketplace and show the market works. it is electronic, but it's still
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a good market. >> harrys bar is still there. people were used portfolio insurance where traders hedged by shorting stock index futures and they were doing it electronical electronically. it was an exacerbating factor. david, you know the amazing thing is is the dow ended up for the year about 2%. >> that's funny people forget the vicious lally that took place. a lot of buying. >> and google today bouncing back after falling nearly 10% on yesterday's massive earnings debacle, are the underlying problems still too much now to overlook? we'll talk to one investor worried that the company could disappear in the next five years, that's next. [ male announcer ] you are a business pro.
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the cnbc realtime exchange market snapshot is sponsored by interactive brokers. ♪ the professional's gateway to the world's markets. >> let's get a market flash. a positive spot amongst all of that red. we're looking at seadrill partners. it's more than 12% higher right now. it was supposed to launch next week. the shares pricing at the top end of our range. simon? >> thank you, google as well was
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trading at all time highs. and the third quarter earnings rewas was released. it wasn't really the missed trigger, it was the numbers. users begin moving away from pcs to tablets and mobile. so how did the internet giant. we have dennis berman, let me kick off with you and cut to the heart of what is happening here. they sold 33% more as. that isn't the much. by those website advertisers to google per click is down 15%. why, as they move to mobile, are they getting a lower price per check? it's basic geometry. there's not enough room on the
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screen for a advertiser to put it's ads on the screen. it puts pressure on people like google and apple to push it more marketing solutions on location-based platforms. that means long term here, the inflationary impact, probably a question a lot more about privacy. where you are at that moment, gee graphically, they'll pay more for that. >> that's the point isn't it. they would say look at google maps. look how much we invested in knowing where you are. the future is mobile. the future is google maps and knowing your location and monetizing it. >> right. and notifications, they know more of you from what they call their knowledge graph. so they're going to be able to put more interesting things in front of you.
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i think the bear case is just sure that's happening and paid clicks are going from the mobile world in more screens, but it's not as profitable as world as goosele. and if facebook saw a deceleration in their sales and growth leads to having their stock price, why wouldn't it also be something very negative for google as it continues to play out? >> it's a big leap to get from there to the idea that they might not be around in five years, eric. they might not exist in five years. >> i said they would disappear in five to eight years in the sense that yahoo used to be the king of search, right, and now for all intents and purposes yahoo has disappeared. i think there is an opportunity for someone to step forward and assert themselves for a new way of getting people information. i don't think typing in the blue box is the ideal format for a
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mobile world. i think the best opportunity out there to displace google is apple's siri. >> they have a high cost structure because they're trying to find all of the new advancements in technology, so it can outrace eric's prediction. but people talk about our internal rate of change has to be greater than the external rate of change, and when you're buying google stock, you're paying for that ability for them to experiment in what's going on. >> and the basic premise that you write about, is you go through the litany of dead or semi-dead companies and they don't survive because the world changes under their feet and they don't know what to do.
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>> yeah, obviously everybody is focussing on cpc, right? profitability is way down for five quarters now for google. paid clicks, the rate is slowing. the rate of growth is slowing, and something interesting happened in september that ben shackner pointed out, organic search queries declined. so we're facing a scenario where we might hit peak search. >> let me point out what the time social security saying, the cash return on total sas sets in the past year is still more than 24%. the price to earnings ratio is just 14, hold your nose and keep buying, eric, it's not all doom and gloom, surely. >> no, they're doing a lot of good things and you tube is accelerating growth. and they're doing things like
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they just changed google shopping so it's now only showing paid results in that. and they'll make a lot of money from doing that. the question is is that move also going to start to degrade the service? is that the tip of the iceberg and we're going to start seeing paid search results in other areas. >> i have to say that other companies died in the past and a company in the future might die. i don't think it makes a lot of sense. google as we have seen it, and simon i any you really demonstrated the numbers there is still an incredible profit machine. eric, rightfully brings up the challenges to that, but the question is is there a culture inside the place that's really adaptable enough to understand it. i would say right now, yes, there probably is. >> in the meantime, they continue to make money.
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when we come back, we reflect on the anniversary of black monday with james stewart. good morning, carl, younger fewers and listeners don't remember bang, zoom to the moon alex, that's when we gave birth to the ralph cramden effect, and we're going to talk about that, computers, financial engineering and all of that. that led up to what we know as the 1987 crash. ng tools for all. look at these streaming charts! they're totally customizable and they let you visualize what might happen next. that's genius! we knew you needed a platform that could really help you elevate your trading. so we built it. chances of making this? it's a lot easier to find out if a trade
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markets choosing a heck of a way to commemorate black monday's anniversary. for more insight on the crash of '87 i want to bring in jim stewart, columnist for the "new york times". he joins us on the news line. jim, good to talk to you again.
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good morning. >> good morning to you. >> i'm just going back and reading the story you wrote in the "journal" a month after the fact and you quote felix rodden, quote i think we came within an hour of a disintegration of the stock market. i wonder if you think that lesson has been lost over the past 25 years? >> well, when you see something like the flash crash and that sort of thing you have to won. i mean i reread the story myself. boy did that bring back a lot of memories. it was a catastrophe. we relied on the old specialist system in those days on liquidity. they stepped up and kept buying but they ended up with these massive vince of stock and didn't have money to pay for it. that's why the next day they couldn't keep going. the fed weighed in, put pressure, the white house intervened, and it's fascinating move in a thinly traded index that to this day saved the
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entire market. but today, you know, we have a lot more liquidity down there yet you still see with the computerized elements in there without having a steady human hand over the process, i still don't think the flash crash has been adequately explained nor do we have the mechanisms in place to protect if something like that happens again. >> you had humans back in 1987. isn't it human nature, the moment everybody is trying to get out the door liquidity always dries up? the bank run can happen. go back and look at jimmy stewart, not you but the other jimmy stewart, the movie. it happens at the wrong moments. >> that's why they put in the circuit breakers. that was the big step. that was the reform element to break this panic that you're talking about. machine versus human, that's deeply embedded in the wiring of our brain that element of panic. the circuit breakers were meant to halt that.
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and, you know, i think what you've seen is they eased away from some of that, liquidity has improved. those did work pretty well, at least in the immediate aftermath of all of this. >> jim, i wonder you talk about memories coming back reading that story again. what's the most vivid memory for you. obviously you and hertzberg had a month to reconstruct the day. but i suspect your reporting started that afternoon. >> i'll never forget that day. maybe i had an advantage. i was on vacation. i was in a small town outside of paris and i went to the train station and there was these tablet newspapers in french, giant headline saying dow jones had fallen, however it was 25% or whatever the percentage was. i thought to myself, oh, the new york stock exchange fell 25 points. they got something wrong. i said wait a minute why would it be a major giant headline in france if the stock market only
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went down 25 point. i said oh, my god it's real. here i was, the biggest story maybe in my life and i'm on vacation in france. when i came back i had a fresh eye. i wasn't there in the minute to minute, you know, frenzy of what was going on. so i kind of stepped back. i started to ask broader questions and that's what led me into minute by minute account of that tuesday. the other point i want to make, i made an important lesson. since i was away i was on vacation, i couldn't panic, i counsel. i didn't have a lot to sell at that point but i had been putting money in a mutual fund for a few years. oh, my good i can't sell. about a month later it took another plunge. people remember. like an after shock. and i panicked and i sold and to this day i've taken away the lesson never sell into a panic. >> jim, knowing how closely you
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watch your portfolio that's a lesson many people will listen to. jim stewart of the "new york times". >> he was ten when he cover that story. >> go back and read the story on the front page of the "journal". it's a great read. straight out of james bond a bike that turns into a jet ski. we got "first look" at a new toy that is i monday already has and how you too can own one. that's me on the right. >> take me for a ride, simon. ♪
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up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim. we're raising the bar on flying and tomorrow we will up it yet again. boproductivity up, costs down, thtime to market reduced... those are good things. upstairs, they will see fantasy. not fantasy... logistics. ups came in, analyzed our supply chain, inventory systems... ups? ups. not fantasy? who would have thought? i did. we did, bob. we did. got it.
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the next hot item for the wealthy sportsman could very well be the quad ski. it's a quad bike that converts into a jet ski without stopping. that's right. brian shactman has a look at the quad ski. >> we had to show this to you because it might be the coolest thing on earth. it looks like a regular atv. when it goes in the water these wheels rotate up and in a matter of seconds it goes into the water. there's a professional driver showing you how it's done. it goes from a water bike and becomes an atv. what's special about this is no
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other amphibious vehicle can go more than 10 miles per hour. i want has a bmw engine. 175 horsepower. the key is they will make 1,000 of these. retail price at $40,000. interest is high. even people who own yachts are retrofitting their yachts to fit these on it. at 2:00 on "street signs" i'll get on one myself and talk to the founder alan gibbs one of the richest guys in new zealand. back to you. >> i tell you what, the early reviews are in from the control room, brian and they are good. >> awesome. we'll see you at 2:00. >> michelle great to see you. if you're just joining us here's what you missed earlier on. welcome to hour three of "squawk on the street". here's what's happening so far. what you don't do tax reform in three weeks or five weeks or entitlement reforms, so congress
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deserves a little bit of a break here. >> the race is fluid and ohio remains a swing state because we're basically a microcosm of the whole country. the enthusiasm is behind romney right now. >> by the way, the click through rates were up 34%. that's not bad. that's pretty darn good. the problem is they get paid a lot less for mobile than they do in the pc which seems to have peaked. >> we had multiple years of rolling out a better product which has been a horse driving the same store sales as well as the remodel campaign. they are coming to end of that in europe right now. they are looking for more punishment to push same store sales. >> the markets going to develop a couple of different tiers so there's android private to low end, higher priced products from apple and then similar priced products from microsoft that have a lot more compatability.
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>> it's expensive for fast foods. >> they are not in a rush. they want to see how the macro plays out. almost made to it the weekend. happy friday. good morning. we're live here at the new york stock exchange. the markets in the midst of another severe pull back here. dow down triple digits. 110 points or so. s&p is down 11. nasdaq is down 31 after a miserable day yesterday. mcdonlds reporting a deeper than expected contraction in third quarter earnings warning its same store sales continuing into october. conference call is starting right now. sandisk is the biggest winner. our road map for this morning
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goes like this. google's quarterly report revealing it's suffering from the same problem essentially as facebook and that is monetizing mobile. can they get it to work? an investor with a short position in google gives us his take. ken feinberg here to talk about compensation on wall street and pandit surprising exit from wall street. and then gerald kaminsky, managing director, your might know his son. the start up that manages social media for the biggest companies in the world, sprout social is two years old and revenue increasing 750% one of the industry's success stories. ceo will join us live. first, though, after shocking investors for its filing error yesterday google reporting disappointing earnings as users search the internet on their mobile devices. shares have been bouncing above
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and below 700. on the news line is dan niles senior portfolio manager at alphaone capital partners. dan, good morning to you. >> how are you? >> good. you've not been shy about making controversial calls. how resolute are you? >> are you using your cell phone more now than before or your tablet now than you were before. if that's all true relative to your usage of the pc then google don't have a problem because its simple math. your pc has a much bigger screen size. there's more advertising that can be put on there. relative to your cell phone. they make about half as much on the cell phone just because the screen size is a lot smaller, optimistically half as much. you have the iphone 5 out, great phones from samsung and a lot of tablets out and specifically the ipad is selling very, very well,
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and google has to pay a much bigger traffic acquisition cost to apple for the searches that come off of that which people tend to forget. they don't have much share in the tablet market. >> is that as big or a bigger problem than motorola and the degree to which they are bleeding cash? >> that's a great question. that's something that investors have really forgot enabout. this is not the same google that it was three months ago. motorola is now 25% of the total revenues of the company. and for those of your viewers who are familiar with oracle after they bought sun, sun management anchor around oracle's neck during this whole period of time. motorola was struggling before google bought them. and so that's also a huge issue going forward for the company as well. >> if you're short google, when does it get attractive to start to cover then, given what happened yesterday? >> well i think what you have to look at is fundamentals.
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i mean there's not a price because, you know, as you can see for companies that have got structural challenges, trying network their way through. i mean people have been saying it was a great time to buy facebook all the way until it got cut in half. so i think with fwoogle the thing you have to look at is when can traffic acquisition costs, when can that start to stabilize, when can the cost per click stabilize. that's down 10%, 15%. it's the metrics. the stock ran up for no good reason other than people, they like goolg, the took went to a new high so portfolio managers tend to chase things that are sitting at new highs because they assume the stock price tells you something about the fundamentals as opposed to the other way around. that's the big problem. the stock has had a great run and it didn't make a lot of sense. now you have to have a lot of people re-evaluating why do i own this if the metrics are getting worse and as you pointed out motorola is 25 puerto rico
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of the business and you can't ignore that. >> finally, dan, there are some given all the weakness in tech over the past week who are hoping apple can stem this tide. it's down more than a percent today. it's also in your universe. >> it would being a great to take that view. we own some apple partly because we think the ipad mini will be a great product. i mean there are a lot of women out there, my wife included that go, the ipad is too big to stick in the purse, et cetera. it's a good form factor. they don't have anything down at that size that competes with, you know, the nook or smaller other tablets that are out in the market space. it's one where they are giving up a lot of profits. i think hats is going to be good for them. don't get me wrong. i got concerns around apple as well because they got some pretty strong competitors out there and it's going to be a much more competitive market
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this year in tablets than it was before and there are also supply constraints. so in the short term i feel good that, hopefully it does pretty well at least in the near term off this ipad mini launch but it won't surprise me if they also have an issue when they report revenues later. but i think the longer term for them is a lot better. they don't have these advertising issues that google or facebook does. for them they are just trying to sell products. if you love their products they will make a lot of money. >> we'll get some clarity on that next week. dan, thanks for coming to the phone. dan niles at alphaone. a lot of hype by the book released by greg smith. the book doesn't deliver much. gary who brought the family down. >> yes. good morning. i am here at the goldman sachs booth because i did want to talk about that, what is now being thought of as a yawner of a book coming out. i brought a special guest. come on in here. my mother is here with me.
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she told me to take the glasses off. i don't like the classes on tv. she will make sure i do this the right way. when this op-ed was put out many months ago in february i first said at the time you have to wonder why the "new york times" did not go and at least ask goldman sachs why they did not want the 360 reviews. everybody knows everybody is a manager at goldman sachs has to do 360 reviews. they get reviewed, they to the reviews. what's come out here is in fact greg smith and no surprise to me if you remember what i said back then, he reviewed almost everybody who he had interact, into direct contact with the firm in a positive way. so shame on the "new york times" for allowing that op-ed to run when they did. as i said it back then and i'll say it again today big mistake because this was propaganda by one individual. it was a shame it happened the way it did. carl, as you know, mrs. smith will be appearing on "60
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minutes" on sunday night. my mom told me to watch it. there was a great documentary coming out about rodriguez that same night. but remember this if you watched "60 minutes" a couple of years ago when you listened about the municipal bond market and you listened the way they portrayed that specific piece you lost a ton of money. so be very careful the way this is presented on sunday night, remember mr. smith all his 360 reviews positive for his co-workers. back to you. >> all right. great to see mrs. k here. thanks a lot gary. let's get to the cme group in chicago. rick santelli this morning with the santelli exchange. >> i'll tell you what. the ralph kramden effect and hopefully we can see a picture for young people who don't know who ralph kramden is. you can see the chart and the spikes where the thursday before the crash and you can see of
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course how it happened. there's a lot of 9% and 10% handles. i don't know if we'll see them again in my lifetime. the ralph kramden effect is simple. computers and financial engineering were born in the 50' 80s. talk about people that were in options. computers opened things for a lot of things not the least portfolio insurance and the notion of dynamic hedging. wow that sounds pretty complicated. it really wasn't. what started out as a theory to adjust portfolios of equities by having things like puts really morped into something more simple. with the notion that portfolios of equities deteriorated that we would sell or they would sell for the portfolio insurance programs run in many ways by early computers which start selling the indices or buying the puts or a combination of both. the problem was is that it's the
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same problem we have today. liquidity. flash crashes are just the grandkids of what happened in 1987. because in theory as well as all this work in practice those bids weren't there to hit and the options, well, between limited up moves you couldn't dynamically hedge because the places you kneed to put the positions doesn't exist. how does that transfer today? think about moody's warning on german banks. still they have problems in their portfolios. we don't talk about -- think about our banks. think about where the stock prices are. think about where bond prices are. we'll probably see a lot of liquidity issues in the future as we try to see the same type of interacshine a hedge or liquiditiation james moffett like we saw in '87. >> when we come back the former special master on executive pay to way in on pandit and state of executive compensation on wall street, ken feinberg with the
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dow at fresh lows, down 132. we're back in a minute.
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with the departure of pandit from citi two of the nine original ceos that still lead the banks that received 125 billion in bailouts after the crisis. four years later how much pay excess remains part of the debate. ken fine berg worked close with ceos including pandit. he joins us from washington this
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morning. welcome back. good morning to you. >> thank you. >> we've been going through comp disclosures all week long, morgan stanley and goldman. it looks like the squeeze is on. is it enough to a tree that you think is appropriate? >> i think it's appropriate. i don't -- when we were at treasury doing this, we recognized that pay was excessive and we took steps to correct it. every company is different. every company has a different compensation culture. and you got to look at each company without painting with too broad a brush. >> let's talk specifically about pandit. obviously we know wish we suspect compensation may have had something to do with his departure but he was paid $1 a year for a very long time. severance isn't very generous if any at all. can you make a judgment as to how he was compensated for what he did for the bank. >> pandit avoided any of that tension between private companies and top treasury by
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reducing his pay to nothing. he was never a factor in any of this. i think the problem there has to do with the more conventional relationship between a ceo and a board and the chairman of the board. that's the way i read that in the newspapers. >> wonder if it would have been any different had he been the chairman of the board at citi. >> that i don't know. i think executive compensation has much to do with this. >> you look at survey, ken, and unscientific they may be but the traders and bankers still believe that their comp is going up for the most part not down. are they delusional? >> i think they are delusional in this economy with this political, not economic and financial, just economic and financial, with this political uncertainty. my advice would be to executives and boards and et cetera be careful because there's an
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election in a month. it's a very volatile political atmosphere. and it's fair game executive comp in times of financial uncertainty. >> yeah. so you think that's the bigger factor -- most of the people on our air point to return on equity and the economic engine that drive earnings at these banks is not what it used to hence comp has to come down. do you think it's the fair if thoerp raise salaries and bonuses there would be hell to pay on the hill >> there's some concern about that. i do agree with you. i agree most of this discussion about executive pay is driven by conventional traditional market forces, competition, the volatility of markets, financial uncertainty, i don't think much of it has to do with treasury regulations or the ongoing role of the pay czar or agency activity.
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i think right now it's more the free market and the impact of the free market on pay. >> right. finally, ken, one of the knocks on pandit reportedly within the bank, in other words one of the things that his political enemies used against him was in order to take this bank farther down the road we're is going to need someone who has a better relationship with regulators, the dividends episode was embarrassing. the smith barney episode was embarrassing. did you fine him hard to work with. did he have less legitimacy with government officials? >> not at all. first of all i didn't deal much with pandit, i met him a couple of times. citi group was very fortunate in dealing with treasury and our office most of it was done by one of the vice presidents at citi and lou caden had a keen political ear and instinct how to deal with treasury. we had no difficulty with citigroup at all. >> an interesting time in
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banking in this country. appreciate your fwidance. see you soon. >> any time. markets continue to decline. dow is down 133. the big weakness on the dow continues to be names that reportedly are mcdonald's, microsoft and ge and now aig joining the ranks of companies that are down almost 4% in their case. when we come back it's been 25 years since the stock market crash known as black monday. we'll talk to the man who helped make sure all those trades at the cme actually got leader that day, the former chairman of the cme, jack sander. you should know that axiron is here. the only underarm treatment for low t. that's right, the one you apply to the underarm. axiron is not for use in women or anyone younger than 18. axiron can transfer to others through direct contact. women, especially those who are or who may become pregnant, and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur.
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all morning, it's the 25th anniversary of the market crash of '87. >> absolutely. jack sander was chairman of the exchange during the crash but chairman of the crash for two decades. he's an accomplished lawyer. a golden glove boxing champion
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and he's a tough guy when it comes to exchanges and he's first in the industry. he had to deal with the aftermath of the $50 hunt brothers fiasco in silver in 1980 the first year he was chairman. welcome, jack. it is just a pleasure. >> this guy was a trader also. we don't talk about that. >> all right. let's set the stage. it's friday. 1987. we see some deterioration in the equity markets is going into the end of the day. maybe you can give us a historical rendition of how things unfolded. >> the week before what you call the actual crash of the 19th on a monday, the wednesday, thursday, friday leading up to that you could see nashts were in a precarious situation. friday the market broke open on the weekend in the pacific rim people forget that, that you could just look sunday, you know. see the pacific rim starting to break and you know you'll have a waterfall on monday morning. i spent the weekend down here because i expected these things to sort of happen.
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and they did happen. and we come in here monday morning and opened the market and it was a 24 hour market but we didn't have the electronic training where you could have egress and ingress of the market to get in and out so those orders kept building up and building up. we opened the market and the crash happened. and the pays and collects were the big issue. >> let me interrupt you. pays and collect. we're talking margin as and futures. let's go back in time. the big issue is that you have to come up with this money right away. we won mention any names but there's a lot of large investment banks still in counterfeitens today they were giving you a hard time on the money. tell me that story. >> in the middle of the night because there were huge pays on collection from the vest banks because they had huge positions, the ones that wanted to collect were looking for the pays. on the other side the pays were not being paid, it froze up. the money is there but they just weren't used to pushing that button. >> selling huge amounts of money
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in hick for the margin on the s&ps. >> no debt system. you pay as you go. not like the new york stock exchange. >> you headed a big investment firm if you don't send the money right now that's it. >> here's what happened. middle of the night i'm on the phone with some of the big banks and i said the money has to flow. the money started to flow and one didn't. they sort of froze. they said -- why can't we do it the next day. you can't. it's a no debt system. the thing that moved them, the chairman of a big investment bank about 3:00, 4:00 in the morning, i said here's the headline. your firm, name the firm defaults and whatever happens after that you're going to be blamed for it and you don't have to do that the money is in the bank. >> we have to go. we can talk about these stories and he's the man. you never apartment march about in guy if jack is the guy trying to collect it. >> great stuff. european close is coming up next.
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despite the profit taking i would argue that you're witnessing here. we're talking about the anniversary of the wall street crash 25 years of equal importance i think for you making money now is it's 2 weeks since draghi said he would do everything to save the euro. take a look at where we are today on the italian 10 year yields. this is important. did you see monday through thursday italy sold 18 billion yourios of debt, four year debt in order to basically fund itself to the end the year and it did that at a yield that was at a seven month low precisely because this put that we got from mario draghi seems so real and precisely because a line has been traun in the sand. i think that's the takeaway. that's my twaik from the week. however that's not exactly the news flow. we had a summit that's wrapped up in brussels and at that summit they decided there will be the ecb in charge of banking next year and as we came out of the summit angela merkel through
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a couple of sparks in the work by saying there may not be any capital injections until after the elections and countries like spain may not get debt off their balance sheets. none of that is good. the spanish prime minister came through and said he hasn't decided whether he'll ask for a bailout. that's an issue. you can see it reflected in the markets. you had a slight sell offof its own spanish and italian debt. you can see the way in which the yields have risen. they were down because of these successful auctions. let's get perspective on what's happening here. we're a couple of ticks higher on yields overall. let's remember where we have been, what the journey is on that spanish debt and clearly as a result of this 12 week anniversary of the we have a major move down, almost two percentage points give or take in the spanish debt and that's important to mention. the spanish market is selling off. i don't think it's selling off
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in response to merkel. it's response to profit take. take a look at the ibex, rightfully hoof, this is merkel move. it's really very gradual. that's the point to ram home there's profit taking here. let's remember where the spanish market has been. it's up 32%. get a perspective. come on. it's up 32%. let's have a look at the main losing stocks in europe as well and perhaps there's some perspectives. it is the banks. commerzbank is down. there's concerns about ratings on the german bank. look at that commerzbank down 5%. look at where we've been in the last 12 weeks. look at bank. since mario draghi said he would do everything to save the euro,
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bankia is up 12%. commerzbank is up 30%. >> people are looking for a sign as to whether the sale will really move for a longer period of time. final mcdonald's stock talk about that kind offer to one pressure after a disappointing third quarter. company holding its conference earnings call right now. phil lebeau has been listening in. >> you realize that typical this company when they are having a rough time in one part of the world they are offsetting it with strength in another part of the world. a few minutes ago mcdonald's executives said we're seeing pressure all over the world. first, they are saying that they are gaining market share in all of their key markets. most of their key markets. that said they are likely to see a challenging environment for the next few quarters ep when you compare their results compared to where they were the last couple of years. that's a pressure. that was expected by wall street
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but stronger than expected not surprisingly input costs whether talking about food inflation or labor, those things are expected to go up over the next couple of quarters. the conference call, it's in mid-swing right now and they are talking about what they are expected to see for the next six months globally. carl, they are facing a lot of pressure particularly in europe and everybody is facing pressure there. they are also seeing it in china. tier one and tier two cities they are seeing softness. we'll hop back on the call and have more a little later on. >> the question might be not whether they are gaining share but how much share relative to past periods. looking forward to some more details. want to bring in bob pisani. interesting day. >> 4-1 declining to advancing stocks. the euro dropped and germany was down a little bit. that's why we had this little move to the down side. the problem with today is earnings. we hit a tough match. the bank earnings came in better
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than expected. now we're getting industrials, materials and as well as tech names and it's a little rockier right now. look hats going on. microsoft obviously we had some weakness overall. personal computers. business software, that was a little bit of a surprise. weakness there. advanced micro, exposed to the pc business and after you saw what was going on with microsoft, video is a big rival to amd. down 14%. advanced micro is laying off 15% of their workforce. put up the industrials and materials. we got a lot of them in. air products they make industrial gases. good company to watch. their numbers -- the guidance was very much on the cautious side. parker hannifin a little bit on the light side.
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ingear soldier ra ingersohh-rand and honeywell were okay. overall for the week it hasn't been too bad. spain has held up very well. not too great today but overall pretty good. we're trailing most of the rest of the world, brazil is on the flat side. i just want to point out that the whole issue of volatility is very interesting right now because all of a sudden this week i've gotten a lot of emails about the fiscal cliff and the impact on the stock market. my point is start took a concern for the markets overall. you can see this in the vix and how it's being impacted. right now we're on 15 at the vix. notice, go out a few months and you're up near 22, 23 and it starts moving up in january. that of course reflects differences of opinion. most people think short term volatility will be lower. but suddenly they jump up into january and when i called around, i asked why are we getting high further out they are arguing people are betting fiscal cliff could be a problem potentially. majority of people are betting
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the fiscal cliff will be resolved but this obviously a little bit of anxiety here. once you start getting further out a small number of people are starting to bet that this could be an issue. here's where it's starting to show up in the stock market the fiscal cliff. >> that story is getting more interesting. a little more immediate. >> as we said the dow is down triple digits. down 134. we want to get some reaction from steve massocca. was this about tech, industrials, is it about the fiscal cliff? 18 days until the election. what's happening in. >> i think what we're seeing today is about earnings, and we've had concerns going into many of the last quarters that earnings would be disappointing and every time it hasn't been, earnings have been very, very good. but in this -- we're off to a terrible state in this quarterly earning season, ge, mcdonald's, microsoft go one level down to companies like amd who were playing the weakness in the pc
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business, a company like align which is in the business of straightening people's teeth their numbers were lousy. starting to see a lot of companies come in and report disappointing earnings. this is one of the major props moving the market higher, corporate america has been very profitable and doing very well well and these numbers are starting to be disappointing. >> we've tested that s&p 50 day moving average. managed to get a nice bounce off of it. does that appear to you to be short term support? >> short term. but we're just scratching the surface of this earnings season so we're going to have a lot more companies coming and if the news continues to be like this i think we're going see some more lower levels. that said we don't have a huge sample size we're very early into earnings season. it will unfold over the next two to three weeks and it will be crucial to see how the rest of corporate america reports. >> the big story is the nasdaq
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which in the past half hour has broken below last week's loss. i wonder if you think -- we'll get apple next week. there's a possibility that they provide some leadership here but that's where the center of pain appears to be today, right? >> right. a lot of people pointed to google this morning and said google turns around and rallies. perhaps the google numbers are very currency related and that the stock might bounce and i think the people i talked to said google actually breaks down and starts going down today that's a bad sign for the market and that's a bellwether people have been watching and as google is now down close to ten bucks that's scaring people as well. >> i think what's interesting also, steve, is the fwuargument for the bulls worked for them earlier in the week. retail sales pretty good. philly fed not a disaster. not that those stories have gone away but they are not carrying the weight. >> but i think it harkens back
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to what i said earlier valuations have been based on excellent corporate profitability, increasing profit margins, companies able to exceed their revenue estimates. so you're taking away a major prop. the other major prop which stays in place which is going to help is incredibly easy money. you got these central bankers doing quote-unquote whatever it takes and that is going to, that's going to stay around and central banking is not going to change their position so that's going to help easing money and low interest rates will continue to help this market, but concerns over profitability is the problem here. >> steve thanks so much. steve massocca joining us on the phone. let's get a market flash from jackie. >> another bright spot. river bed technologies, third quarter earnings jumped 28%. the company reported revenue
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group across all geographic regions. and strong sales in europe. it upgrades the stock. we're up more than 13%. 23.46 for river bed. >> thanks. there's a very special fweft gu the trading floor. jerry kaminsky. he's here to talk post-nine. we'll get those two gentlemen up here in just a moment. with the spark cash card from capital one,
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coming up at the top of the hour on halftime stocks are sliding today. is it time to buy the dips? is that the smartiest move you can make right now? mobile tripping up the biggest names on tech. chipotle and mcdonaldess getting grilled. any safe places to hide in food stocks. now back to "squawk on the street". good evening. investors are consistently reeling tonight after a selling frenzy sends the stock market crash snooping there was panic on wall street. the dow plunged 508 points. >> good evening.
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it is a day that will be in bold print in history books. black monday. october 19, 1987 when the stock market went into a free fall losing more in one day than it did on black tuesday in 1929. >> some of the news reports from this date, 25 years ago black monday. our capital markets editor remembers the crash with a special guest and that's his father, gerald kaminsky, managing director of team kaminsky. great to have you at this desk. i assume you told gary this story many times. right? i assume you heard it many times. knives in california at the time. i graduated college a couple of years earlier. i was en route to come back here to go business school. i heard some crazy stories. tell us what it was like on that day. >> as we look at pictures like this. >> look at that.
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>> gary's graduation from college. >> earlier on the show jack was talking about what happened at the cme in the days before and i had been involved overseas for quarters and there was a real problem developing between germany and the u.s. meeting up earlier that week. >> over the dollar and deutsche mark. you saw something in the market and especially friday. and you knew this was bad. then because of the way things worked there wasn't instantaneous 24 hour trading. things were building. you knew it was going to be bad on monday. nobody knew how bad. we came into work early. as soon as trading started, prices went down. the word went out the people. we worked at that time downtown here. and we had at least three or four people get on the subway, come down to our office and sit in the office and as the
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afternoon went on they panicked and started selling everything they owned. >> did that come in the form of a phone call? where was your moment of later if there was one on that day either monday or tuesday? >> other than one person who i met earlier this week who said that he was buying in the last hour, somebody did buy. this person seems to always have, you know, he's always right, which i never found out to be true in my career. the people we knew panicked. now people would call us. it wasn't emails, there weren't blackberries or things like that. as i said a few came down, sat in the office and as they saw prices go by, they start say sell me out. >> up told me earlier '87, absorbed it much worse because there was the kennedy
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assassination which is another time people became concerned. since '87, that marked 25 years in the business. the last 25, you had numerous other things, the technology bubble collapsed, 2008, 2009. put in perspective what happened in 1987 the biggest percentage top to what you've seen in the last 25 years in terms of major market corrections. >> the biggest thing is down 23% in one day. these are the crashes that took place, bear markets, depending on who calls what. they didn't happen in one day. i tried to get from creighton and pete and we had a screen at the end of the day what we were following. there were a lot of wise guys in the market. as "new york times" had a column about portfolio insurance and what was going to happen, the fact is that there were a lot of people doing stupid things because they thought it riskless. using futures and options.
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and the end result was they had margin calls and unlike the firm that jack referred to that could meet its obligations, they got wiped out. >> let's take a quick look at a hart. i think we have carl the dollar invested chart. you tried to instill in people clients as well as me the idea for a longer term perspective. even with the various crisis, there it is, i'll give you that. that looks beautiful. the dollar versus the s&p. tell carl and i what your telling clients right now in terms of how you see the world and how you see investing and what you're doing in terms of that strategy. >> let me tie that into one thing that happened 25 years ago. this is an e-mail from one of my close friends whom gary knows. it says 25 years ago i came down to your apartment. we have an apartment down in tribeca. we went to the bar around the corner. you told me things would come
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back in our lifetime. that's what the chart shows. the chart hose if you're really investing there has to be volatility, sometimes it's worse than others. if you have a long perspective and if you've got your capital allocated correctly so you can with stand volatility, which is greater today than you would have thought, there are a lot of reasons why if you direct yourself as an investor you end up ahead and what the chart says is team k that particular thing is the highest it's ever been. pre-'07 and all. so our experience is that. now today i think in a nutshell if your asset allocating after the crash there were great tupts in fixed income. there are not now. i don't know when the potential risk in fixed income comes. we do manage a billion and a half in fixed income. we've changed duration. we shortened it. things like that.
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we've been a net buyer of stobs since the spring. now the fiscal cliff is coming. all this stuff, but well run companies and what's going on here is going to create a better return for somebody. it's worth the risk. >> come back any time. any time you like. thanks so much. >> that's up to gary. gary is the family's tv star. >> we'll talk google and tech after our break. ♪ [ male announcer ] how do you make 70,000 trades a second... ♪ reach one customer at a time? ♪
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welcome back to "squawk on the street". a quick market flash on some of the fast food stocks all taking a hit on mcdonald's earnings. take a look at yum, jack in the box and sonic. they are trading lower. >> let's get to the nasdaq. bertha coombs with a top. >> the story this week is tech is now scaring investors between ibm's results, intel's results, google's results, a big slew ahead next week. microsoft today also another disappointment coming after the bell. interesting on that conference
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call everyone kept asking microsoft to give them any sort of metrics on their surface tablet and they would not go there. fwoogle started the day off a little higher, bounce ad bit but has not been able to hold on to that momentum. you got a downgrade on the back of those earnings. chips are the worst performers of the day. really dragging things down. a big mess at marvel. those are moving things lower. sandisk had good flash sales. getting upgraded over at piper jafry. a lot of big names on tap next week including apple and facebook and as you can see those guys right now don't seem to be inspiring much confidence with investors. >> no. this is the worst intradie date for the comp since july 23rd. thanks so much. not just tech and the nasdaq under pressure we'll tell you what other stocks are dragging down the markets when we come right back. don't be modest, bob. you found a better way to pack a bowling ball. that was ups. and who called ups?
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you did, bob. i just asked a question. it takes a long time to pack a bowling ball. the last guy pitched more ball packers. but you... you consulted ups. you found a better way. that's logistics. that's margin. find out what else ups knows. i'll do that. you're on a roll. that's funny. i wasn't being funny, bob. i know. when you take a closer look... the best schools in the world... see they all have something very interesting in common. they have teachers... ...with a deeper knowledge of their subjects. as a result, their students achieve at a higher level. let's develop more stars in education. let's invest in our teachers... they can inspire our students. let's solve this.
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[ horn honks ] hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers for accounts receivable today. i mean i know that this is important. well, both are important. let's be clear. they are but this is important too. [ man ] the receivables. [ male announcer ] michelin knows it's better for xerox to help manage their finance processing. so they can focus on keeping the world moving. with xerox, you're ready for real business. boring. boring. [ jack ] after lauren broke up with me, i went to the citi private pass page and decided to be...not boring.
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that's how i met marilyn... giada... really good. yes! [ jack ] ...and alicia. ♪ this girl is on fire [ male announcer ] use any citi® card to get the benefits of private pass. more concerts. more events. more experiences. [ jack ] hey, who's boring now? [ male announcer ] get more access with a citi card. [ crowd cheering, mouse clicks ] take a look at what the dow is doing. the camp where most of the pain is being felt down 51 points. a lot of this being led by tech but dragging some other things down it. >> my father was on earlier. he told you about the
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correlation. keep your eye on the junk bond market. it's a great tell tale. >> because of the aggressiveness of the deals. >> where yields have gone what the correlation is between stock returns and junk bond returns because the junk bond market always gets it right. always gets it right first. >> thanks for coming in. have a great weekend. that does it fours. let's get back to headquarters and "fast money" halftime. thanks very much. an ugly first half to this game today. welcome to the halftime show. four hours to go until the close. stocks ending the week with quite a wimper. lows of the day, the dow almost 150.. take a look at the s&p and nasdaq falling hart. trillions and tech leading the way lower today. by the way for the nasdaq it's the biggest intradie drop since


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