tv Squawk on the Street CNBC November 17, 2014 9:00am-11:01am EST
bet on recovery in the u.s. and everyone should be fine. >> thank you so much for joining us. >> thanks for having me. >> so calm about things, i love. thank you. appreciate it very, very much. make sure you all join us tom. "squawk on the street" begins right now. good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange, big week getting started with a major m&a deal, halliburton/baker hughes. on the lookout for more. futures are down, perhaps on this miserable japan gdp number, down 1.6 for the quarter, back in recession. nikkei down 3%. crude oil around 75, even as the dollar does rally this morning against the yen. road map begins with concerns about the global economy as japan dips into recession. oil, equities slipping lower this morning there on the m&a front, blockbuster energy deal,
it's official, halliburton buying baker hughes for about $35 billion, and we've got more on activists and the fight for allergan. >> forget wasting time at work. menlo park reportedly developing facebook for your office? moving in on google, microsoft and linked in's turf, down 3% in the free market. numbers inside japan's recession, gdp down 1.6 following contraction of 7.3% in the prior quarter. this week japanese prime minister abe expected to announce delaying plans to race the country's sales tax and call for parliamentary elections in december. estimate was 2.2, to the upside. no one expected this to happen. now a bunch of policy decisions to make. >> do you suspend sales tax? this felt like 1937 in our country where they thought, you know, we've done enough to make it so we're coming out of the great depression, let's start raising taxes, be more
conservative. there are a lot of people saying that, you know what, this was just being prudent because the country itself is so in hock. i saw these numbers and i said, here we go, another country that i had thought kind of felt like things were getting better along with india. that was wrong. and i can understand why the futures are down. >> yeah. brazil's in recession now. russia, of course. italy. france and germany not doing much to stay out of it. i mean we are with the exemptcen of india ahead of the game. we're not a big trade partner, as well as other countries. we have a big market here. i think that it's been so long that we have felt any self-respect that i think people don't believe, you know, the united states, i mean, if it -- if we don't have china, japan and europe going we're nothing. 85% of business is done with business people in america, it does mat. >> in japan, what do we expect will be the outcome of this? there's talk of a new
government. >> yeah. >> he'll still be in control new york doubt about that. but to resolve any issue about the second part of the tax increase, which seemed to have a dill tear yus effect on americans to spend money. kuroda buying anything and everything they can in japan. or outside japan, too. >> look, i think that what -- when we saw some numbers, retail sales numbers out of japan after this happened most of the companies i deal with in japan are saying double digits. everybody who moved into japan thinking this is the nirvana moment has gotten fooled. by the way, a lot of the auto company interests japan have been moving up, up, as well as ours going down. curious to see whether that can continue. >> meantime, japan had a nice run off october runs, 10% in 4 days. jpmorgan cutting u.s. to under weight. they think that europe is due
for a period of relative outperformance. a weaker euro to work with now. >> some stocks have come down a great deal. but did this include the g-20 stomp out by putin and the idea if anything, things did escalate this over the weekend? the g-20 move was a bust. it wasn't like -- did we get the final photo opportunity? >> i don't know. australia's prime minister talking a big game about confronting putin. not sure that ever happened. >> britain joking with him about the need to have a naval force off of the coast of australia. he was the butt of man n. jokes things got worse, not better. >> but got some things accomplished in beijing. >> another failing country. kidding. china decelerating and say i wish we had that kind of quote still. trajectory's not great. >> two of the world's largest oil services firms hooking up,
halliburton acquiring baker hughes, $34.6 billion in cash and stock. halliburton says it's confident the deal will be cleared by regulators and expecting to close that in the second half of next year. big divestitures, big breakup. >> on friday, i had said so much has to happen i can't imagine they can pass it. they did everything zbrp i think key things are the willingness to divest $7.5 billion of revenues, 7. 5 billion of revenues. >> $31 billion in sales. >> gives you a sense. 7.5 billion off of 31 billion. the breakup fee far larger in a deal typical of this size, representing 10% of total conversation. that very large, goes to their confidence, jim, that they'll get it done. speaking of people close to the situation, they point out, antitrust lawyer, extraordinary
experience in dealing with these matters on the antitrust side in government. they feel comfortable about it. and with it. and, therefore, the expectation is they will be able to pass muster with the antitrust authorities but it's going to be interesting to see. it will take a year as many people handicapping it will take. but the big picture that i'm hearing from those who advice on the deal, putting numbers two and three together, to certain extent in certain areas, they're good at certain things we're not. they're good at artificial lift and we're not. >> getting the energy out of the well with a fluid column is not a bad thing. schlumberger, wow, evil giant, does have a fabulous glosser. go there. >> thank you for explaining that to me and to our viewers. you mentioned schlumberger. the goal to become the equal, if not exceed, schlumberger technical expertise and in their
multiple. they want premium multiple. >> that's the goal. that's the goal. schlumberger's fabulous company. halliburton's done great things. i want to caution everybody this is a declining group. we've got -- there needs to be consolidation. $75, there is -- the conference call last week said at $75, projects get killed. so, if you want this to happen if you're ahalliburton shareholder, halliburton's doing the right thing. >> energy 9% at the s&p. nearly double that a couple of decades ago. halliburton's biggest acquisition ever. second biggest u.s. energy deal this year. 274 billion. energy the second-most active sector in m&a 2014. >> you'll see it more active now. what this is saying we've got a new reality, take advantage of. i was going over the bottom ind
thursday, friday, they reflect the notion that we're going substantially lower than 75, that we can be going to mid-60s. >> you believe that's true? >> the stocks reflecting. i think it will hold at 70. and there's so much conspiracy go on the united states does very much want saudi to keep pumping because russia gets blown up and with that financially. i keep coming back and saying monthly numbers that come out, they are showing -- it's like they discovered a prudhoe every three months down there. incredible how much oil we didn't know we had, in part artificial lift. a very important thing. a very important thing. >> by the way, on the m&a tactical side of this they made the first approach five weeks ago. they moved fairly quickly here. however they tell me they've been able to identify $1.8 billion or more, 2 billion synergies. >> there's no doubt about it, you want halliburton to get those. >> now, in five weeks, i'm not sure, but there's the number, 2
billion, that's a big number. put a multiple on that, decide by the number of outstanding shares of halliburton, you get a pig per share number. >> 3. 5 billion, explain, what if dollar general were to do something like that? >> it's not just a break fee for dollar general and that family dollar. it's certainty of close which these dies guy guys are priding by a willingness to divest that much. family dollar, dealing with antitrust concern, once again, they want more certainty and therefore say you've got to be willing to divest more stores. >> to me what baker hughes and halliburton are saying, justice department, tell us what to get rid of it, we'll get rid of it, we want the deal done. >> last week you thought regulators would be fools to approve. you still feel the same? >> new york i saw a huge overlap. i look at one quarter of the
revenues they're willing to give away, what they did was say, yeah, there was a huge overlap and don't worry about it, we're going to get rid of the overlap. this is astonishing. i don't think people realize how much business halliburton is willing to give away. it changed my mind about the deal. you can say, cramer, you're an idiot. no, they changed my mind. >> another deal, people close to the situation indicate to me that in fact, allergan is getting bought for $219 a share. >> wow! >> $219 a share by activist, the deal is worth $66 billion, it includes $129 a share in cash and .3683 of actavis shares. talking about 1.8 billion in annual synergies starting in 2016. double digit eps accretion in 12
months. the ceo, look, they did forest, they have so many deals. >> they're good. >> two allergan directors will join the actavis board. the number is $219 a share. >> staggering. >> which is, wow, so far beyond what some expected. also this 129 in cash, synergy number larger than people anticipated. the cash number here, which of course they'll be taking on a good amount of debt at actavis but paid down a lot of debt, a significant amount of cash in excess of what people had anticipated. all of this, of course, conceivably closing the chapter on this long running battle under which valeant when it teamed up with hedge fund purchasing square, made an unsolicited proposal for cash and stock way back in the spring.
that teaming up, if you will, of course, may have spelled valeant's doom, when you look back. if they had chosen to go, jim, for the annual meeting, they would have made it, gone for a slate and challenged immediately, they conceivably would have been in a better position, valeant having lost se cephalon and this deal going by the way side. my sources and people close to valeant indicated to me a price of this nature, $219 a share, by the way it could om down if the stock price weakens which it may, you'll have a lot of shorting, nonetheless, they don't feel they can compete but cited synergies higher than those cited by actavis. >> first, congratulations david pyott. the company's valuablen when i had saunders on, they were saying if david wants a deal, david pyott, we'll get a deal, guest the most on "mad money" of
all time. >> you think the good guys win. >> ackman does make a fortune on this. >> ackman 9.7% holder of allergan. valeant has the opportunity to participate to the tune of 15% of his profits them walk away with some money as well. but they walk away conceivably here, we don't know what they're doing but they walk away without what they had wanted. >> maybe go after zoetis. pyott, i think he can do 17 bucks in 2016. posted number was 16. there are more uses for botox. i talked with david, we can't believe what's coming for botox. things that he doesn't know that are going to come for botox. this is a remarkable drug. >> 44 shopping days this year. >> for botox? >> u.s. m&a deal value 1.5 trillion. closing into the kind of year we had in 2000 with aol and time
warner. >> why do people think the s&p is up? look at health care stock, all breaking out, every one has another one if they bought them would be great. can you believe actavis will pay this price? i'm saying it's great for actavis ultimately. >> many would be surprised if you told them, even not that long ago, they'd be able to come up to 219 a share. obviously cash and stock, but 129 of it in cash, we will keep an eye on the shares. they had been aggressive. it's funny, because of course one of the criticisms of valeant that you heard constantly from allergan's camp from the earliest days was, serial acquirer that needs to keep the engines of acquisition going, benefit of a low tax rate. valeant hasn't done a big deal in a year. actavis their third big deal. >> all of the deals have worked. they're an amazing acquirer. i have to say if you look at
allergan, they have this great franchise, not just botox, and degrowth is they had the highest percentage of r&d of any major company. and i know actavis is anxious to improve on r & d. >> it's a big day. santelli at cme. >> good morning. october read for industrial production comes out one .1. we were looking for up a couple of tenths. last month's very aggressive up 1% was now degraded to up .8. utilizati utilization, 79.3 expected. we arrived 78.9. that 79.3 which was the bef since 2008, lost steam. we lost a little bit of steam from there the market is reflecting this, as the ten-year
note is about ready to slip under the 2.30 level. remember, we've had 14 sessions, not days, sessions, where we've been in a very tight range of 2.30, to 2.38. today may be the day we break that range. carl, it's all yours. >> thank you, rick santelli. the press release out from actavis and allergan. >> dollar amount is enormous. 1.8 in synergies. so, that's a number that i think is higher than people anticipated as well. >> saunders, longstanding relationship with david. >> we are going to be able to speak to both gentlemen. >> here. >> they are joining us. >> here? >> coming here. >> i don't need an ifb? >> no. >> technical term. >> in 14 minutes from now. >> nice. >> mr. saunders, mr. pyott will join us as guests here on cnbc. >> they're both great guys. look, pyott came on, when that
stock dropped to 80s, he said, can i come on and tell viewers not to lose hope? 88, let me come on and tell them why they shouldn't sell? no one's ever done that. give me a shot with your viewers, wow. >> other news, facebook and mark zuckerberg taking aim at linked. linked in is down. one look at futures. lot of m&a activity. futures are lower on that weak in japan gdp number. the country back in recession. we're back in a second.
facebook working on a new professional website to compete with linkedin, dole and microsoft. the ft reports it's called facebook at work, allow user to keep personal profile separate from work profile and enable them to chat with colleagues, connect with professional contacts. interesting wrinkle here for a name up 53% this year. >> that's been a stealth rally and then a stealth stall. i saw the ft played this thing up really big. my charitable trust own temperatures i believe in the company, believe in a lot of things they're doing. everything alibaba overshadowed by alibaba/yahoo!. people have stopped talking about facebook and still talking about twitter, but only in a way
that says you know what? twitter's starting to monetize things. a great tweet this within about how twitter's monetizing a lot of the nfl stuff. nodo is public face. >> do you think facebook's at a point they can pick off competitors at will? >> yes. >> like linkedin? >> yes. i don't know if they want to. yahoo! needs it more than they do. facebook has so much internal momentum and yahoo! has a war chest and they need to buy some. i've been working on who they might buy and acquire. yahoo! is the one that is most challenged, facebook is not challenged for growth. >> yahoo! when it looks at the opportunities in front of it in terms of what it could buy, it would seem for the highest quality assets, it's going to be competing with facebook or google or -- >> google in particular. >> google in particular which may make it difficult to do something monumental, if you will. >> right. but they've got to get out of this display advertising. don't get out of it but
recognizing it, it's a terrible business out 0 of nowhere. three years ago it was a pretty good business. >> incredible deterioration. cramer's mad dash. the deal of the day. live interview of the ceos with actavision and allergan on their merger. premarket as we get this monday started. when change is in the air you see things in a whole new way. it's in this spirit that ing u.s. is becoming a new kind of company. one that helps you think differently about what's ahead, and what's possible when you get things organized. ing u.s. is now voya. changing the way you think of retirement. tdd# 1-800-345-2550 even on the go. tdd# 1-800-345-2550 open a schwab account, and you could earn tdd# 1-800-345-2550 300 commission-free online trades. tdd# 1-800-345-2550 so when a market move affects one of your positions,
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smaller but significant, pfizer buying a drug from germany's merck. >> right. this is important to recognize, this is not mrk kind. could be $250 billion for a cancer franchise. i think wasn't that what pfizer wanted from astrazeneca. >> great point, jim. that was -- oncology was the key franchise there. we can rule out at this point, you never want to say 100%, but rule out pfizer going after astrazeneca. with the purchase, they're moving in a different direction. change in inversion rules as well probably prevented pfizer from another deal, from what i understand, which was actavision. >> what? >> and that also is something that is not going to happen. but pfizer was thinking about doing one, its attempt to take over astrazeneca failed. >> pfizer might have been interested in actavision to get
growth? >> absolutely. >> the change in inversion rules from treasury changed the land escape in terms of what they're looking at. >> you know, one of the best performing stocks in the groups since they dropped shire. they figured out their hepc franchise. >> other things coming up including ceo of actavision and allergan at nyse when we ring the opening bell. ♪ the mercedes-benz winter event is back, with the perfect vehicle that's just right for you, no matter which list you're on. [ho, ho, ho, ho] lease the 2015 e350 for $599 a month at your local mercedes-benz dealer.
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"squawk on the street," like from the financial capital of the world. opening bell in less than a minute's time. i think it's probably fair to start our interview and then get to the bell within a minute or so? want to get started? >> sure. joined on set by david pyott, of course, chairman and ceo of allergan. bret saunders as well the man who runs activision. the big deal today, we are going to get a lot of applause around the bell here, not applauding your deal. >> as jim just said, when you do a deal, you announce it here. great to have you guy. by the way, a look at s&p at top of your screen quickly.
who's doing the honors here at the big board, nyse, etf provider wisdom tree doing the honors and at the nasdaq, tkai pharmaceuticals. [ bell ringing ] >> one of the biggest deals of the year, one of the biggest in pharma coming after a long battle between allergan and valeant. we are joined by david pyott and brent saunders. i spoke to people close to the company, disappointed in their failure to acquire allergan but said 219 is a big number we had a bigger synergy number they are paying a price we could not pay. how could you justify it? >> fairly negotiated. but most importantly what does it create? one of the fastest growing pharmaceutical companies in the world with top line growth
accretion and bottom line accretion. >> again, back to my question, why do you believe -- why are you comfortable playing a high price, one certainly that many of us might not have anticipated a couple of months ago. >> this is the best run company in pharma. i think juf mentiyou've mention many times. for us combine our company with this great company that david and his team built over the years, is a fabulous long-term opportunity to create value for our shareholders. we overlap in three of the four therapeutic areas in which they operate. international operations move into scale, we're able to achieve $1.8 billion of synergies, industrial logic is incredibly sound and yet, we have accretion to growth. how han many deals of this accrn and growth for the long term? >> are you taking on too much? i mentioned it because forest labs deal didn't close that long
ago. you're piling them one after another after another. by the way, a criticism you lodged at valeant. is it apt to say the same about your merger partner? >> well, i think the big difference is here we have great cultural fit, very large number of common goals. of course, brent and his team have a great track record, not only in their successful commitment to r&d, they have seven mdas pending fda for 2015, quite an achievement. great track record of building great franchises and brands. we have that in common. brent has shared he thinks the combined company will be made off an amalgam of activists and allergan management teams. we feel really good about that. >> you feel comfortable intergrating all of those businesses? >> we do. to be fair, we've completed most of the forest acquisition, and warner chilcote has been well done. by the time the deal closes,
forest will be done. >> one of the things you've emphasized to me is that the r&d budget is the biggest per sales and that's how you've done so well. assurances here versus valeant that that budget is going to continue in its size. >> i was happy when we got into detailed discussions that brent and the press release has pointed out that the combined company will invest $1.7 billion in r&d, reductions across two companies are modest. and i know he has a very dispassionate approach, just like we do. and it's going to be a great future. >> if i could add, $1.7 billion in r&d is a huge commitment. we're -- i think valeant put out a press release that said $900 million cut in r&d. we're talking about half of that, or less than half of that in cutting because r&d is the lifeblood of our industry. we have one of the greatest
combined late-stage development portfolios in the industry. which was sustain growth for the foreseeable industry. >> revenue synergies, i'm really excited about those prospects, given the good business overlaps we have. therapeutically and also internationally. >> 1650, i've been using 17 for next year, how much of this is botox, how much is op-ed mow logical, how much is what we don't know? >> 17 is for brent. >> when you look at your numbers, what did you have -- you had a lot up your sleeve that you've been very conservative. >> yeah. >> but there's a quantum leap in the amount of earnings power for allergan that both of you are taking into account. what is behind the quantum leap? >> well i think we have such a great number of growth between now and 2019, but seven products led by botox therapeutic. you know all of the conditions very well. migraine, bladder, spacticity
and restasis and cosmetic, and the filler's going through the roof. as we got into discussions, we were impressed with growth prospects for their major brands. >> with strong double-digit accretion in the deal, we have an aspiration of $25 of eps in 2017. >> for the combined company? >> for the combined company. >> david, for ceos and managers who find themselves in the spotlight of actavis investors, advice? >> perform, perform, and perform. our team, all of the employees worldwide, have done a great job. you've seen the acceleration and growth. last quarter, 17% growth. a testament to their commitment, to focus delivering r&d pipe lean, customer satisfaction. and if there's one happy thing for me to talk about, since the day before the bid came and now, we've created $20 billion worth
of value for our stockholders. >> valeant had something to do with that. they helped you along in terms of creating that value. >> some of it was inherently there. you saw a tremendous acceleration in value. but when put into this, i'll call it, uncomfortable position we're put into our discomfort zone, and that really came to our fruition in term of savings but the delights with our customers. we've received, as you know, hundreds of letters, comments, position community supporting us. as brent and i walked into the set, we're talking about our common experiences in ophthalmologist in the past. i'm convinced our physicians will be really happy brent back into ophthalmology but for me to introduce him to other specials that i know well mr. valeant put a statement out moments ago saying they can't -- they could
not justify a $219 price. sort of along the lines of my first question to you. you chose not to engage with them at all. you've delivered quite a price for your shareholders, nobody can argue, above what they would have paid. but why in this end game here when you decided okay, we're going to move towards poe sente sale, why not have engaged with valeant? >> our view was that the offers never came close to the intrinsic value of as of friday $103. $11 billion give or take from what actavis is willing to pay. i feel it's a fair price. i know they've had expert advice from their investment bankers on their signed i think it's a fair deal for both parties. >> looking at some things that botox can do that we haven't
thought of yet? i know that even five years ago i didn't think migraine, i didn't think certain incontinence product. is it probably the great wonder drug when it comes to spaz itches, when it comes to muscle problems. are you seeing much larger possibilities for the drug than we think now? >> that's one of the reasons we feel this price is fair. we've got into due diligence, in the pipeline, all of the things that will drive value in the future. botox is a very large part of that. there are many other applications for botox. it's a drug and suite of products all in one. >> david, you said over and over, listen, you don't play for dinner. you didn't need to do this. you felt it was great for shareholders. what's next? >> my first focus to make sure we complete this transaction. tremendous focus on passing the olympic torch to the new team, and of course as we said earlier, it will be a
combination of people from actavis as well as some members of the legacy allergan team. i feel really good about this. not only for stockholders but our employees as well as our physician communities. >> you've gone from being a company that few people were that aware of to being -- will become with this deal when it closes -- one of the largest pharma companies out there, certainly in terms of market cap, not to mention revenues. are you ready to take on an args organization of this size? do you feel management has abilities to run an enormous organization with a very broad product line? >> absolutely. combined management from allergan and actavis is ready to do this. the reality is, our goal was never to be big. our goal isn't to get bigger. our goal is to be the fastest growing. that's what this transaction is all about, to create growth pharma. >> part of your strategy to be fast growing relies on
acquisitions, certainly it has. >> we've done a few act si significanc acquisitions. last quarter was a great demonstration, 83% growth. you look at our branded products we had 14 of 17 brands growing in double digits quarter over quarter. we have a durable platform. great diversity. great long lived assets. >> we haven't heard from bill ackman, 9.7% owner of the stock. i don't know if he's going to hold the meeting december 18th. what are your expectations? >> we'll see how that unfolds. but of course, the goal of any a actavis investors, that goal has been achieved and of course this is a sideline, our litigation on insider trading suit that continues. >> that will continue? >> it continues. >> why? >> well, at the end of the day, i personally am quite disturbed about the shareholders that sold
their stock in the period not knowing that there was a bid coming from the other side. i think we have a fiduciary obligation to protect those interests. >> talk about alzheimer's franchise, how underinvested, how was forest labs not thinking about the big picture versus what you had done. >> we have 100% share, we have a great -- we have at the fda a combination of nimenda. we're in the alzheimer's gape for the long term. one of the things you see us do is learn from new colleagues from allergan, about dtc. we've done it on our irritable bowel syndrome drug and we'll launch consumer advertising in the coming weeks. >> will we all take it?
no one -- anyone seems to be vulnerable to alzheimer's? can you prove if we took it, not a lot of downside and perhaps maybe forestall it? >> it's no in the label. it really is more fmoderate to severe alzheimer's. >> 1.78 billion of synergies, focused on investors and able to deliver that will be important. have you delivered on your previous synergies? >> yes, absolutely. we have a track record not only delivering of it, but delivering them faster. our belief when you do synergies you do it as quickly as possible, helps employee, helps create a better morale inside the company but creates more val up the faster you get a synergy, the better. when you look at forest, we announced a billion dollars of synergies, we have this year a billion dollars of synergy. we're going to try to
overdeliver that. we have a great team. we'll work with allergan to do this. and we've got do it and grow the business. that's the key. anybody can cut costs. but can you cut the cost and grow the business like we have demonstrated time and time again? >> right. of course, allocation of capital also important about your business. you're taking your leverage ratio up here. where? >> a little over four times but maintaining investment grade rating. committed to delevering, down to 3 1/2 times within a year. >> david, regeneron has a powerful franchise, too. where are you in terms of competing with them on 2015-2016? >> as you know we recently got the approval for diabetic macular edema, brought the label in the united states beginning of september, and sales have take ain't remarkable uptick since then. we believe somewhere between 30% to 40% of patients with diabetic
macular edeem ma are insufficiently served alone. given our product dosed every four to five months you can imagine the convenience. further out, we have a great program, that's one i think is a sleeper. >> you've said that's -- the stock was at 80, david telling me, darpen valued less than zero. >> that was another point i had to make to brent to say, you know, you're getting this free of charge, to make him feel about 219. >> well, it's -- >> we're excited about darpen. >> this is a difficult battle i argue for you. you've been fighting here against valeant, ackman for some time, a great deal of vitriol to a certain extent from both sides. was there a point of which you realized i'm not going to be able to stay independent? >> not really because, you know, i was committed to creating
stockholder value. my biggest goal was to prevent the company from being sold far below its true value i think that would have been a failure of myself and the board. and the bore hard has been grea hard working, cohesive, make sure we're driving up the values. i think we've done that in the right way. and that's finally the goal of all company -- we're a public company, to do just the right thing and i think our stockholders, brent and i will be seeing allot this week, should in general be pleased. >> gentlemen, thank you both for being here on this momentous day. david pyott, brent saunders. we expect to be hearing quite a bit from. thank you. >> thank you. >> s&p moved within a tenth of a point last four days. today's no different. let's get to bob pisani on the
floor. bob? >> all right. we'll go to rick santelli at the bond pits instead. rick? >> always ready here. you know, lower bands of tens and 30s have gone close to 15 and 20 sections, respectively. today's no different. look at intraday, you can see around 9:15 eastern, the market was disappointed wiindustrial production. two-day chart shows you rates did go down and tests 228 level. remember 230 the lower band on a closing basis. it held for now 232. upper part is just a shy of 240, you can see it on a number of tests from the up and down side. next chart starting in august. you want to know what's going on, there's a couple of other places that we should start. why don't we look at how bunds -- excuse me, look the 10s
versus 2s. hovering at the plflattest leve in a while. if you monitor this trade it goes back to summer of 2013, before we've seen levels of around 180 flat. if we look at the bunds versus tens, a bit of enlightening picture here. it's going to retest high levels going all the way back to summer of '99. why do you care? the defense between our yields and their yields one of the reason is it's going to be difficult for our yield to move higher as they hoover low 80 basis points. foreign exchange, a lot of the action is at. think, prime minister cameron g-20 meeting said red lights are flashing on the global economic dashboard. you have money man in the form of carney talking about we can't get traction on prices because they couldn't get traction on growth. pound versus dollar, lowest level sense summer 20130. if you look at euro versus
dollar trying to official up. dollar versus yen, and everybody is because of the poor gdp performance and the quantitative kingdom of all time we could see that that extreme goes back to october of 2007. carl, back to you. sorry, bob pisani, i think we're all ready to go. hit the button and see. >> thanks, rick. absolutely right. baker hughes/halliburton, big stock story. everybody here talking about japan and that big gdp miss. japan lost 2%, nikkei dropped about 2% overnight on that. hang seng also down. japan gdp, down 1.6. everyone expecting up 2.1%. this is a miss of epic proportions. nobody had a loss amongst people who make skiestimates. you can say it wasn't as bad, things are improving but that's not the way most people saw it. the sales tax, second sales tax hike unlikely.
japan produces a lot of machinery for china. what's behind this? concern that china's slowdown is more noticeable and showing up first here and slowing orders in gdp. remember abe's three arrows, fiscal stimulus, monetary easing, structural reform. people are saying this isn't working. he's liable to ignore that and double down. hear more about structural reform soon. nobody i talked to thinks that mr. abe will abandon abenomics now. we talked about the shanghai/hong kong stock linked. david freeland says it appears to have gone off without a hitch. you you can own 560 china shares. you never could before. this will open up the chinese marks and bring mainland chinan. this is a big little start for opening up the china a shares
all over the world. shanghai, not a bad move, that was a terrible performer for years, underperforming. it's done pretty well today. baker hughes, 78.62 per share. 1.2 shares of halliburton, 19 for each bhi share. people talking about the speculation of other targets that might be out there in the oil services field. so national oil comes up a lot, weatherford, rpc, c&j energy come up, yet, other than a slight move up thursday, stock like national oil well, really didn't move much. mostly to the downside, as you can see today. there has not been a lot of upside speculation in a lot of the names that may be targets in the future. tyson, earnings this morning, stock's up, beat on earnings. decent guidance for 2015, 3.30, to 3.40. up 3%.
talked about higher beef, pork, prepared foods. finally, happy birthday gld. the gold, cdle, spyder gold trust went public, november 18th, tomorrow, but came here on the new york stock exchange. i had two burly guards here, speculation this would never succeed. gold etfs have done well. height in gold september 2011. not as much assets under management before but the gold etfs sturdy vehicles for people who want to invest. >> i remember that day. thanks a lot. >> great fun. >> so with that, s&p flat at 2038. stop trading with jim in just a minute. ameriprise asked people a simple question:
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symbol hot, and marriott. marriott's been an amazing stock. i don't nope about this call. i think on weakness you want to go back into this group. a lot of valuations calls that worry me, they're going keep people out of very good stocks. >> thinking allstate, kbw cuts to market perform. >> insurance stocks up huge. again, proctor, that call says that everything's that's going to be done has been done. mistake to sell the stock. merck, charitable trust name, came out with study for vitorin, able to cut back on second heart attack, anti-cholesterol drug, big, new market, regeneron's got other things in the pipe. merck is not an expensive stock. i kept listening to david pyott and what brent saunders created. it gives merck and pfizer, everybody a run for the money. >> interesting to note, actavision share up this morning, people going into this
would not have expected if you pay $219. >> 219 is not an expensive price. >> you believe that? >> i'm telling you, what they've got in the pipe line is revolutionary, what they can do with botox. i can't say they can double sales in three years but discoveries and uses off label that people only dream of and haven't capitalized on them yet. >> six years ago, botox the only thing terms of consumer cosmetics, all we talked about. >> wrinkles are a minor business in 2016. you won't believe it. the most controversial stock i've ever had on, globalstar, the ceo is coming on. i was call calling it a battleground. he begs to differ. it's a very big long. i think people are going to want to watch this interview. this is $2 stock where if you don't want "mad money" you have
no idea what to do with this. if you like what he has to say, double or nothing. >> i'm there. >> double or nothing. >> see you tonight, 6:00 p.m. eastern. simon, what's coming up next? >> look at recession in japan. why did that happen? what are lessons here for the fed? also ahead, halliburton buying baker hughes, who is next within oil services? also take another look at who's winning now as the price of gasoline comes down. restaurant stocks look to be top of the list. there was a nice house that lived with a family. one day, it started to rain. the house tried to keep out all the water, but water got inside and ruined everybody's everythings. the house thought she let the family down. they just didn't think it could happen. they told the house they would take better care of her... always. announcer: protect what matters. get flood insurance.
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it's reliable. just like kung pao fish. thank you, ping. reliably fast internet starts at $89.95 a month. comcast business. built for business. welcome back to "squawk on the street." road map begins with deals. actavision buying allergan, $66 billion, hear what the ceos of both of those companies had to say about the deal in an exclusive interview. >> halliburton buying baker hughes in nearly $35 billion deal. find out what the deal means for stocks and the future of others in that industry. and as the markets hoover near all-time highs, jpmorgan says dump u.s. equities and buy europe instead. we'll talk to the strategist who made the call. japan, the third largest economy, unexpectedly falling into recession after gdp shrank in the third quarter.
cnbc's chief international correspondent michelle caruso-cabrera has more on that back at hq. >> shrank more than expected, simon, and way below what economists were forecasting. decline of 1.6% when economists looking for a gain of more than 2%. i show you japan's growth rate back to 2012. you can see they've spent a number of quarters in recession, one of the reasons why abe, the prime minister, trying with various measures to improve the economy. if you look at the japanese economy in terms of yen, it's still at levels we saw back in the late 1990s. that's how long they've suffered with a weak economy. that's the impact. show you what the nikkei did. fell nearly 3%, because it was so much worse than expected. when you look at the yen, if there's bad economic data, currency weakens. not so in japan. the yen strengthened there 116 yen to the dollar. oil fell as a result, because
remember now, we're talking about numerous economies in the world being weaker than expected. and japan supposed to be one 0 the economies getting better because of three arrows, right? fiscal policy, monetary policy, and reform in japan that was going to make things better. why did things go so badly? economists think because they raised sales taxes april 1st from 5% to 8%. supposed to be another increase so the sales tax would go to 10% april 1st next year. this data's going to delay that as a result. back to you. >> i think there are two big takeaways, if i may, for our economy here. the first is, you could create inflation expectations because the bank of japan did that. but people may not spend money because they may feel that they're going to be permanently squeezed, as happened here. the second thing is the power of a tax increase vastly outweighs power of massive qe. and you can argue that round at other way in this country. power of a tax cut in this
country or fuel, gasoline prices falling, would outweigh power of qe, the two pointize would make. >> that's interesting. a note put out and the title we did all of that qe and all we got was a lousy recession to the point raising -- the core question you're asking, or the point you're making, quantitative easing does it necessarily work? also, if you have a mixed policy, one hand you say you're going to do fiscal spending, deficit spending, use fiscal policy to revive the economy, at the same time you raise taxes all you have done, inject money with one hand and take it away from the other, you just moved it from the private sector to the public sector. it's a bit of a mess. they are similar to europe. >> parts of europe. >> michelle, i'm wondering how this is going to play out politically in japan.
because all -- historically, if you have a disappointing -- disappointment like this, abenomics proving to be not working. >> right. >> what that means for him and his reforms and the fact he hasn't gotten through much structural reform. >> it would mean another government potentially for japan, can you imagine? italian-like almost in constant changing in leadership there with one point you make, sara, also one of the reasons to suggest why the yen may be stronger today. looks like abenomics may be going away you don't get the same policy that was pushing the yen far lower. >> that's the only policy choice they have, i would think. the yen is turning around now, starting to weaken. >> thank you. >> turning to a major merger deal of the day, halliburton buying rival baker hughes for $35 billion. the deal valuing baker 78.62 a share. joining us on the phone, michael lamot.
before we talk about the deal, do you expect it to go through? do you expect the antitrust regulators to allow those happen? >> i do, i don't think there's going to be issues of pricing power. most major products and service lines. halliburton and baker hughes mentioned today on the analysts call this morning that they had identified up to 7.5 billion of consolidated revenue that might be an issue from a regulatory standpoint. i actually think the number will end up being lower than that. so i think this will get through without any issues. >> do you think it's a win/win for both companies? >> i do. i think this is the right point of the business cycle to be doing a deal of this size, we're heading into a soft spot as a consequence of lower oil prices. so the entire industry's going to be looking at structure and doing what it can to manage margins through a weaker time.
i think this deal allows both companies to get ahead of the markets, so to speak, on the cost curve and emerge from the softer spot, i think a stronger entity. >> shed light on what happened friday where it would appear the talks completely broke down, then halliburton was going to go hostile, and then two days later, over the weekend, they struck some sort of deal. does it mat that baker hughes management may feel extremely angry and defensive about what has happened here? particularly with a view to getting it past the antitrust authorities? >> i think the issue, as i understand it, initially around price and value to baker hughes shareholders. clearly over the weekend they were able to negotiate a higher price. i think fundamentally management, both management teams, were aligned in terms of the logic of the deal. and as i mentioned from a business cycle standpoint, it makes great sense, it was more
about price and clearly that was what got resolved over the weekend. >> in speaking to people who were advising on this deal, i can tell you, their hope is that they create a combined entity that is compelling to own as schlumberger. do you think that's a realistic goal? >> i think it certainly it's an ambitious goal, but given the scale of the combined entity, i think that they will accomplish something together that neither company could do on their own. >> given the backdrop that you laid out of sharply lower oil prices, do you expect more consolidation in the space and if so, can you name any names who might need to find a seller and who might need to find a buyer in. >> one of the things -- one of the consequences of the shale revolution here in the u.s. was really an explosion of the number of companies participating in various segments of the oil services industry. for example, hydraulic fracturing mark was consolidated
heading into the shale boom with the three major players, bj services, acquired by baker hughes in 2010, halliburton and schlumberger controlling about 90% of the market. today, those three companies control about 60% of the market with upwards of 45 to 50 players participating in the other section. so i think we will see a lot more consolidation of these smaller players as the market begins to rationalize and recalibrate around the lower level of activity next year and possibly even in 2016. >> finally, michael, does it tell you anything about the company's outlook for oil prices, about whether they expect them to stay at super low levels? >> i think it's really a function of being nimble to response to any pricing environment. as we listen to the emp
companies talk about their plans for 2015 on third quarter earnings calls, it is a bit prematu premature, most heading into the budget season right now. so we'll get better clarity on what 2015 will ultimately look like, probably beginning in the january time frame. but meanwhile, the services companies are kind of sitting tight, waiting to hear what their customers are going to tell them. and i think remaining nimble is the private. >> thank you, michael lamotte, joining us on the phone for the $36 billion deal. >> even /* ebola making head leans, a surgeon has died. meg tirrell live with details. good morning. >> reporter: good morning, carl. that's right, dr. martin sala was further along in the course of the disease than many other
patients flown here. he was extremely critical condition when he arrived at nebraska over the weekend. and because of that his outlook wasn't as good. he reportedly received negative tests for ebola before symptoms persisted and then received a positive test. some of the tests aren't as sensitive in early stages of disease. it's harder to detect virus in patients' blood and it highlights the need for better and faster diagnostics. nebraska medical center gave him every available treatment, including blood plasma from a survivor and zmapp, the name of a drug we haven't heard in a while than was administered to dr. kent brantly and nancy writebol, some of the early american survivors, but we thought it was out of supply. we should be receiving more income, whether a few doses left over or a new supply. the u.s. is working to ramp up the supply. there's a press conference for noon. we should be learning more about
that. the outbreak in west africa continues to rage. while the u.s. did contain the cases in dallas, more than 14,000 cases have been reported in the 3 countries in west africa and more than 5,000 deaths. we know clinical trials are expected to start in the next month in the west african countries being run by doctors without borders. those are another drug and blood plasma. here at the conference in new york city, talking later with mike mill kin and francis colins. >> thank you. send it over to kate rogers for a quick market flash. the dow down 17. >> simon, check out dreamworks, the stock taking a hit as negotiations between and it hasbro has been hamped by issues regarding the structure of the qup company. two the companies had a hard time agreeing on the price. dreamworks trading down 15%. hasbro trading up over 4%. thank you. when we come back, lower gas
prices mean consumers have more cash in their pockets. which areas of the economy stand to benefit the most? how can you make a profit? more on that when "squawk on the street" returns. ameriprise asked people a simple question: in retirement, will you outlive your money? uhhh. no, that can't happen. that's the thing, you don't know how long it has to last. everyone has retirement questions. so ameriprise created the exclusive.. confident retirement approach. now you and your ameripise advisor can get the real answers you need. well, knowing gives you confidence. start building your confident retirement today. which means it's time for the volkswagen gn-then-drive event. for practically just your signature, you could drive home for the holidays in a german-engineered volkswagen. like the sporty, advanced new jetta... and the 2015 motor trend car of the year all-new golf. if you're wishing for a new volkswagen this season... just about all you need is a finely tuned...
lower prices at the pump are giving consumers more spending cash. which retail sectors stand to benefit the most? chris christopher an economist at ihs global insights. good morning. >> pleasure being here. >> to a certain extent you can see this beginning to show up in the figures of course on friday. we saw the food services, in particular, are now up over 7% on where they were last year. it's already beginning to feed through, isn't it? >> yes. and not only food services, and that's fast food restaurants, but big box stores, discount stores going to do very well. >> why would you say that? why do you argue that? >> there's a lot of people living paycheck to paycheck. times are rough for majority of the americans. when the pump prices fall a bit, they have a little extra spending power. now those in the upper income brackets, this doesn't mean too much to them. >> i guess a big question is whether you believe that gas prices have fallen permanently
or whether it's something that's going to put a bit of extra cash in your pocket now but may not be sustained. >> well, for the most part, how people react to falling gas prices is they think it's sort of perment. they're careful. the longer it lasts the longer they think it's going to, you know, be in the future. so kris out in people are cautious but the holiday retail sales season is looking bright because of falling pump prices. >> the caveat, obviously, chris, talking about the baker hughes deal here, people believe that's a defense everybody deal. we can debate that another time. some believe parts of the shale industry, in this country, can have a hard landing. that takes the edge off of the optimism because some may lose their jobs here. yes. there are parts of the country that depend on energy prices being relatively elevated. however, overall, the average american consumer will benefit.
>> you laid out sort of the consumer. can we break that down further? low income, you say, does that mean a restaurant would benefit more than a department store? they have input costs. this helps them further, having a low price of oil. which sectors within consumer get the most? >> those sectors that depend on lower income households should benefit. however, one little hitch to this story is that food prices are relatively elevated and the pump price relief is not giving enough, you know, juice to low income households to spend more. now one thing is everyone has to eat but not everyone has a car. especially in lower income brackets. >> chris, i want to take a lesson that leaf leawe've learn japan. they've created inflation expectations. if you do that the textbooks say people go out and spend. in this case, it didn't happen
in japan i wonder if the point that you make about food inflation in this country is similar. people believe that they will be squeezed permanently now and it done have the effect that you expect it to. >> food inflation in the united states, at least is different than pump price inflation or pump price relief. for some reason, pump prices have undue influence on the american consumer though they spend a less than the percentage of the disposable income on pump prices. so, psychologically, pump prices play a big role. >> we'll leave it there, crisp chris christopher from ihs globalen sights. breaking news out of huber. a partnership with spotify. joshly. ton has details. >> new partnership announced between huber and spotify. the point trying to bring spotify's streaming service to
hub huber customers. if you're an huber company and and request a ride, inside the car you're able to listen to music from your own spotify play lisp the point for huber to try to distinguish itself from rivals like lyft. for spotify a big partnership, a chance to get its service in front in front of many people. huber is active in 50 cities worldwide. spotify does have 50 million active users but of course increasingly competitive field here, pandora, apples, beats, and youtube's new service. on the call, which is ongoing, huber's ceo not willing to get into the details of the financial parts of this deal simply saying that this is a win/win for the two companies. carl, back to you. >> interesting stuff. competitive space. thanks so much. >> one of the biggest deals of the year being announced more than an hour ago. actavision agreeing to acquire
allergan in 66 plus billion deal in cash and stock, 129 a share in cash. remainder of actavis shares are up. people saying, wow, that is a big number when you look at multiple to ebitda, when you look at multiple to earnings it's paying for allergan, it's talking $1.8 billion of synergies but some may say that seems to be quite a stretch. none of that seeming to dissuade investors from buying shares of actavis up over 4%, sending the val ue above 219, coming after battle between allergan and valeant, which pursued it but failed in fact in actually getting to the finish line. this morning valeant telling us that $219 a share price can't be justified, at least in its opinion. valeant did have more synergies than currently claimed by
actavis. the question is, okay, why are you comfortable doing a deal at this price right now? >> this is the best run company in pharma. i think, jim, you've mentioned that many times yourself. and for us, to be able to combine our company with this great company that david and his team built over the years is a fabulous long-term tune to create value for our shareholders. we overlap in three of the four therapeutic areas in which they operate, international operations move into scale, able to achieve $1.8 billion of synergies. industrial logic is incredibly sound. and yet we have accretion to growth. >> remember, of course, they also have nice low tax rate as a result of inversion they did not that long ago when they purchased warner chilcote. that of course being actavis which not only bought warner chilcote but forest labs. so a good deal of integration that has taken place mr. sauners said, a lot more to come with
the acquisition of allergan. for valeant it may have to move on and try to identify another target, perhaps, part of its roll-up strategy. one shareholder who will be quite happy, bill ackman, having taken that very large position of 9.7% teaming up with valeant, if you will. he walks away with a huge profit, 15% of that will go to valeant. but when you look at their strategy, clearly a failure on their part. i would argue, failure comes from their actual partnership with mr. ackman. if they had not done that and gotten to it when they wanted to, they would have made the meeting, been able to nominate a slate, actavis was nowhere in sight. >> there's a lawsuit. >> a lawsuit that mr. pyott said will continue. >> all right. some confusion, i think, as to whether this was a win for bill ackman because he didn't get valeant deal through. but clearly he makes money either way. >> more money than valeant, his
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welcome back to cnbc. i'm michelle caruso-cabrera. the breaking news desk, mario draghi has said the following, buying government bonds is an option if the ecb decides to tax additional easing steps. we'll roll through the european markets and show you the immediate reaction we've seen in major averages there there's the board. you will see they moved higher in the last few moments, as this headline crossed. and i think you might see a positive response in the u.s. markets as well this is significant, he's at the european parliament. he testified, it looks like he may be answering questions afterward. he has said in the past, we'll do everything it takes, et cetera, but when he was asked specifically about buying government bonds at last meeting at the ecb, he would not specify. i think this may be the first time that he actually does that hence why you're seeing the market respond the way that it
does. and of course, remember, guys, just because he says it done mean the germans will go along with. back to you. >> it doesn't mean that it can't happen though, without the germans. >> that's true, that's true. >> still get a majority to push it through. some people believe he can only increase the size of the balance sheet by a trillion euros by buying government bonds. that's the scene of mario draghi in the european parliament. the ceos of allergan and actavis speak out on this show. hear what they had to say about the deal and what in the future holds for them when we come back. who do you work for? your boss? yourself? your parents? your family? at baird, what matters most to you... matters most to us. as an employee owned firm, our financial advisors have the freedom and resources to realize a plan to fit your family's unique needs.
which hedge fund performed the best this quarter? cnbc hasek clusive data who's at the top. kate kelly. >> an interesting, new analysis shows that when it comes to stock positions, it's not necessarily the household names that are performing the best among hedge funds this quarter. some of the less recognized fund managers that are. take a look at top five stock pickers. whale rock capital management, $850 million, based in boston, number one. thanks to picks like alibaba and assuming they own those names all of which they disclosed in regulatory filings dated september. other big hitters matrix capital
management, par capital, senator investment group and starboard, star board is terribly high profile. senator actually is invested in partially by blackstone. they're more on the radar as well. managers benefitted from names like yahoo! allergan, delta airlines and results are intriguing at a time when, according to the study i'm citing as well as underwhelming hedge fund performance numbers we've seen, stock picking prowess is in short supply. according to symmetric, only 30% of manage have been able to select well-performing stock names, particularly sectors beaten down. the average manager over the year has demonstrated negative stock picking skill, carl, according to the survey. back to you. >> interesting stuff. kate, thank you. as the dow hoovers near all-time highs, jpmorgan says dump u.s. equities, start buying europe. the firm cut its ratings on u.s. stocks to underweight from buy. the global equity strategist for
jpmorgan joins us this morning from london. good morning to you. you mentioned the credit cycle beginning to bottom out. you talked about the euro being a tailwind. what are the real dynamics at work here. >> hi. thanks for having me. i say, first issue, that europe down 22% from the s&p 500 this year. and if you look at the differential between the two regions, it's at the top of the range. from here you have to see some kind of reversion. if you think of sentiment, excited about europe, about now, if universally shunned. i think therefore you need to be contrarian and buying europe now. >> any worries that the divergence can't get worse, that europe's troubles can get even worse, as either as ours get better or same the same? >> of course. europe shown time and again it can always disappoint on the downside.
but that would say if you think about the flows, u u.s. is crowded, money has gone into the u.s., money has left europe. thinking over here is risk/reward from here, what do you want to do. i think -- >> draghi just on the tape, mario draghi, talking about possibility of buying sovereign bonds. would that help your call or hurt it? is this rally predicated on qe or fundamentals of the eurozone recovering? >> our view that is ecb will not act, we think probability is less than 50% of sovereign qe. so the story here that is there is a fundamental bottoming out in the credit cycle, supplies bottoming out. obviously, if you give us qe as well the call would be more powerful here. >> mislav, the problem that is you're talking primarily to an audience in the united states and is therefore dollar
denominated what it does. you could have a rally on europeani equities in outperformance but erased by the fact the dollar would rise and that europe would fall. what specifically is the trade-off there? >> so, i would say if you take a step back, we still think that u.s. equities will go up in absolute terms. this is a call that we were underweight europe, overweight u.s. this year, for example, we think it should be changing. yes, one of the arguments behind our call that is euro will fall further which will help european exporters, european earnings and activity. >> but, mislav, if i see the european equity market through the eye of the dollar, if the dollar's rising that's going to reduce returns on the equities. it's different for you. you're in london. >> that's my point that euro will weaken but i'm not looking for european equities to be
overshadowed by that. i think european equities outperform u.s. equities in dollar terms as well. >> are you suggesting 10% move lower in a trade weighted euro, boost growth by 1% over two to three years. doesn't sound like much of a bargain. >> it's a starting point. if europe given a bit of growth that would mean a lot because we are -- the point is that if you think about the big picture, big picture u.s. has been printing money for a few years. fed has been acting. that story's largely done. now it's ecb which is not going to do sovereign qe, we think but expand balance sheet by 35% over the next one or two years that's going to be meaningful. >> on the news of the day, japan entering a recession, a shocking negative print on gdp. does that mean abenomics is failing? >> i would say that the key
function for us is that bank of japan will do over the next few years five times more than what fed has done. and if you think about the third arrow, that is very, very low moving. the key is about asset deflation and again competitiveness through the currency. one silver lining of what happened today is that the hike which is scheduled will be pushed out. so japan will have still some support as well. >> provocative call. a lot of attention this morning on this side of the pond, mislav, thanks for your time. >> 66 plus billion the largest pharma deal of the year and one of the biggest transactions we've seen in a very robust year for merger and acquisition activity. actavis ending long saga allergan playing off as it fought off valeant. $219 a share purchase of
allergan. that deal worth more than $219 a share because, as you see, actavis' shares responding sp positively to $1.8 billion in synergies by 2016, a number above what many analyst whose investigated the possibility of this deal had anticipated it would come in at. earlier on cnbc we had an opportunity to talk to both men who run these two companies, david pyott from allergan and brent saunders, who will run the combined actavis/allergan. >> this the best run company since pharma. for us to run the company that david and his team built over the years a fabulous long-term opportunity to create value for shareholders. we overlap in three of the four therapeutic areas, our international operations move into scale, we're able to achieve 1.8 billion of
synergies. industrial logic incredibly sound. yet we have accretion to growth. how many deals of this size and scale to do you see accretion to growth for the long term. >> your company's so busy. are you taking on too much? the forest labs deal didn't close that long ago, not to mention warner chilcote. you're piling them one after another. by the way a criticism you lodged at valeant. is it apt to say the same here about your merger partner. >> i think the big difference is here we have a great cultural fit, very large number of common goals. of course, brent and his team have a great track record, not only in their successful commitment to r&d, they have seven mdas, pending fda for 2015, and also great track record of building great franchises and brands. we have that in common. and brent has shared with me he
thinks the combined couple will be made up of an an al gum of actavis and management teams. >> you feel comfortable integrating all of those businesses? >> we do. we have completed most of the fore forest acquisition. by the time this deal closes, forest will be done. >> one of the things you've emphasized to me the r&d budget, it's the biggest, per sales and that's how you've done so well. any assurances here versus valeant that r & d budget will continue in its size. >> i was happy when we got into detailed discussions that brent in the press release has pointed out that the combined company will invest $1.7 billion in r&d, the reductions across the two companies are pretty modest, and i know he has a very dispassionate approach, just like we do, and it's going to be a great future. >> if i could add, jim, 1.7
billion in r&d is a huge commitment. i think valeant put out a press release or slide deck that said 900 million cut in r & d. we're talking about half of that, or either less than half in cutting because r&d is the lifeblood of our industry. we have one of the greatest combined late stage development portfolios in the industry which will sustain growth for the foreseeable future. >> one thing that wasn't picked up on revenue synergies, aren't the actavis numbers but i'm excited about those prospects given the good business overlaps we have. therapeutically and also internationally. >> those comments certainly helping to sent shares of actavis higher, perhaps something of a surprise given the very high multiple it's paying although, to be fair, you hard some of the conversation behind those synergies. the big winners here, well, certainly allergan shareholders, david pyott having delivered along the way realizing he was
not able to keep the company independent but not selling to valeant as he seemed to vow throughout a very difficult and hard-fought battle to avoid the clutches of that company. bill ackman walks away, simon, happy as well. you heard kate kelly on hedge fund performance, his is one of the top performers. >> every twist and and turn reported by david faber. next big story. up next, the fed is meeting with wall street's biggest banks. we have details from jerome powell. "squawk on the street" will be right back. hi, i just signed up for your credit report site and i have a problem. i need to speak with your fraud resolution department. ugh, we don't have that.
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check out merck, moving higher after it said cholesterol-lowing medicine met its main goal after adding to another drug could reduce heart risks. that stock trading up 1%. jerome powell meeting with big banks in new york to devise an alternative to the scandalous and controversial libor interest rate. powell sat down with cnbc's steve liesman for a rare interview. >> we don't get a chance to talk to fed governors much. he's in the meeting, including citi, barclays, to come up with an alternative to libor. the bank industry paid $6 billion, that's just so far in fines, to settle charges of manipulation, and one trader in england is going to jail. fixes made to libor the fed wants banks to find a new reference rate for pegging
mortgages, loans and derivatives, one where the rates aren't made up. >> the point of libor reform is to assure that libor's grounded in real transactions rather than someone's judgment, which will make libor more difficult to manipulate. the specific piece today is, we have convened the global dealers, 15 largest swap dealers and national regulators from around world and we're going to start the process of choosing a risk-free rate and the idea that is over time we can move new derivatives to the risk-free rate. >> powell mentioned the treasury rate, possibilities for the change. now this rare, exclusive interview with the governor. he said recent news that japan had two quarters of negative growth is of concern to the fed. the issue for us, it really is global growth is weakening in a number of jurisdiction. europe is weak, china has weaken, there's weakness in latin america. we haven't felt na in the united
states yet. the risk is we will begin to feel it through the trade channel or other channels but not yet. >> powells cautiously optimistic about the u.s. economy and said the fed is on track to raise rates next year, perhaps around the middle of the year. but he's sticking to the fed's script of the timing of any rate hikes is data dependent. >> thanks a lot. steve liesman. when we come back, google's head of global agency sales, joins us live. that's coming up later. "squawk on the street" returns in a ploemt. ♪ for tapping into a wealth of experience... for access to one of the top
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i'll summarize, you said you saw it, for viewers who may not have seen it, charles was saying that big dynamic of printing money and recycling it into the hands of investors that buy their stock back in essence creates less tradeable stock and the price goes up. that movement isn't a bad thing, but to one-to-one core late that with upward mobility in the economy is where everybody is going wrong. do you agree? >> i agree on that. you're buying the stock. now the bigger part of that, we've talked about this before, is they're borrowing money to do this because the tax laws benefit that. they're borrowing money. when rates normalize, whatever normalize means, the fed likes to throw that around but we don't have any definition, i have my definition, i'm sure if john taylor was here from stanford he would have that, that would come back to haunt. that's what charles' point. you will pay the price, when, we don't know. >> well, charles beaderman was pretty clear. i read the transcript twice. basically saying once you raise
rates, okay, that that's going to be an issue. now i contend by looking at the market that the market driven rates are not raising, they're not rising, they're not moving higher for this very reason. the only question that matters, to really put people on notice, and i'm going to do that to you, yra, is janet yellen going to raise rates in 2015? if everything stays roughly where it is. >> as they say, no. they'll look to the world and that's when the fed will start looking as we've seen and as i told you, we'll have to look at the fomc minutes to see what the discussion was about the global phenomena. if the global economy stays as it is, i don't think the fed is going to raise rates. >> another angle, very few talk about this, what is the real issue with the central bank in the old days not talking ate things like foreign exchange? they had a mission and they stuck to it. >> they did. >> now janet yellen and company they're much more activist going out to the population at large
and digging down into the dynamics, for example, of where the wealth is distributed. is this a good thing for the fed to do? >> well, this is my opinion, because there's no clear answer here, so it's only my opinion, i think that they overstepped their bounds and it's a slippery slope as you would say, for them to do that. because when you start to get into the wage discussion, listen, i happen to agree with janet yellen. i think that -- >> i do too. but it's question of, is this an area they should be going? isn't this where the policy of the politicians, this is the fiscal side. should there be this much bleed through? >> i think this discussion is a fiscal policy side is and the fed gets itself in trouble when it bleeds into the fiscal side. stick to the monetary. stick to the mandates. >> this could turn into a full gruber. it really could. because in -- the notion of the end justifies the means in everything, including central banking, is going to get us in trouble in my opinion. >> listen, that's exactly right.
and that's why when people say well, because that bleeds into the gold argument. it -- why does gold hold here to go higher. it's not inflation. anybody who says gold is an inflation argument is missing the bigger thing. it's an issue about what central banks are doing globally. >> hence the swiss referendum. out of time but quickly, weren't the japanese better with less debt and a little deflation than trying to promote inflation with no growth, where the end doesn't go as far and the middle class is behind the 8 ball. final comment? >> i'll be afraid the middle class will get squeezed. a wonderful piece in the "ft" about this in the election because the populace is feeling squeezed because they got higher prices because of the imports with the weaker currency, but wages haven't gone up. they're getting squeezed. this may be what the snapple action becomes about, how they will distribute that corporate money out. >> one thing is for sure, many exchanges like this one are trying to get the bank of japan to trade more. back to you, sara?
>> all right. thanks very much, rick santelli. with the dow fluctuating above the flat line, let's send it over to jon fortt with what's coming up on "squawk alley." >> lots of stuff, facebook, at least a team inside, has its eye on the works place, should linkedin worry? two of the biggest names in mobile commerce, teaming up. uber and spotify. what's it about and what impact will it have on consumers. youtube has built out impressive space here in new york city. we'll tell you what it's for coming up on "squawk alley." ♪ there's confidence... then there's trusting your vehicle maintenance to ford service confidence. our expertise, technology, and high quality parts means your peace of mind. it's no wonder last year we sold over three million tires. and during the big tire event, get up to $140 in mail-in
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>> thanks very much. taking a look at the major indices here and little movement on the dow. it's up about five points. s&p 500 also limb change, but there are mover beneath that. >> despite the fact that mario draghi has boosted european markets you have not seen the follow through. i want to mention robin at ubs, downgraded starwood and marriott from buy to neutral. not calling an end to the lodging cycle but people should avoid paying higher than historic multiples. on the upside, tyson foods on the basis of beef and pork prices, one of our top gainers in addition to those involved in the m&a today. >> procter & gamble under pressure after they downgraded p&g on concerns. over to you for "squawk alley." >> 8:00 a.m. at facebook headquarters in california, 11:00 a.m. on wall street, "squawk alley" is live. ♪ taking care of business
♪ every day ♪ taking care of business ♪ taking care of business ♪ taking care of business snoths working overtime ♪ ♪ happy monday. welcome to "squawk alley." joining us this morning, john steinberg, ceo of the daily mail north america with us post nine, jon fortt, back after a couple days off, kayla tausche is here. what a day it's turning into for facebook. going corporate. facebook secretly working apparently on a new office version of the social network called facebook at work. the new site will supposedly let users chat with colleagues, connect with professional contacts, and collaborate over documents competing with the likes of google drive, microsoft office and linkedin. facebook