tv Squawk on the Street CNBC November 15, 2018 9:00am-11:00am EST
let's take a final check of the markets. the future has been bouncing around. the s&p off by five. the nasdaq up. we'll see how this shakes out as we head towards the opening bell and the closing bell later today. right now it is time for "squawk on the street." ♪ good thursday morning. welcome back to "squawk on the street". futures unable to hang on to gains again despite good numbers from wal-mart, decent trade news regarding china. brexit chaos weighing on sentiment and the pound as may faces more resignations from aides. retail sales are strong.
our road map begins with a bit of powell pessimism. stocks are flat ahead of the open. >> wal-mart ups the forecast expecting a strong holiday season. apple down nearly 20% from the october peak. why one top analyst says the pullback remains a buying opportunity. stocks are coming off another down day. gains from the early november rally have been wiped out. all major indexes in the red. last night in dallas jerome powell has said he is seeing signs of a slow down in global growth. >> i think this year has seen a gradual chipping away at the picture. you still see solid growth, but you see kind of growing signs of a bit of a slow down. it is concerning.
>> you know what you have to be careful. there are are signs of the economy slowing whether it be because of tariffs or economic activity seems to be cooling off. >> jim, so you were waiting to hear from him obviously. did he give you what you needed? >> yes. i think it was very interesting. this was not -- this is mr. cap. this is a heavyweight guy. he asked questions that were directly scripted, i think. not scripted in the sense of powell being a puppet master. are you aware of this and that yes. i'm concerned. the economy is strong, but yes i'm concerned. until this, he didn't seem to be concerned. if they wanted to, the conversation would be aren't you worried about full employment and inflation. that was a terrific interview.
of course, i heard even from our own network he is as hawkish as ever. this is not a bird issue. this is not -- i'm not the audubon society. >> good for him. when you retire you have to find things. >> he was working then. >> here is what is happening. this whole dichotomy of dove and hawk was never the issue. is he paying attention to the data or doing one plus three. he put all the people out including journalists. we need it because the economy is strong. this was not that speech. this was a q&a among two thoughtful people saying i know i can't walk it back. that's not right.
what you're saying is what i care about. >> he did say that financial conditions matter. he said it is one of many factors in the economy. >> he didn't include it as a factor before. i think he only cared about unemployment. he completely dissed the president by not taking him seriously. >> the revisit is far from neutral. i have seen commentary here. >> you bought into it? >> i am just reading. >> whoever you are reading is wrong. we are in the 480th inning. everybody who is rich is smart. did you know that? except for tepor because he bought apple. >> everyone of them have their own mythology. >> they want to keep people who are not rich from having money. i learned this.
>> there is asymmetric risk. the fed needs to look at asset prices before they look at the overall economy. >> what kaplan was giving him when he was serving the softballs -- by the way with three outs in the ninth -- do you want to be part of the late cycle or prolong the cycle every hedgefund that is rich who wants to keep you in your chains of your s&p funds. some say seventh and some say eighth. baseball ended already. he doesn't want to be the guy who put us in the end. >> 2,700 the floor or no floor >> if apple breaks today they come out with the same stuff and believe it. i'm dumb enough to believe it.
if wal-mart breaks like home depot broke and macy's broke and if apple breaks then it is like we are going to have to start over for a while. it is also because president trump is he letting up on the chinese? >> i don't know. why do you say that? >> he is not letting up at all. >> i thought maybe something happened that you were aware of and i wasn't. >> it's the ninth inning. >> i'm using hedgefund analogies to keep you poor. >> if you are rich you right. >> the investors are probably a bit frustrated. they are rich. >> you remember the winter palace >> yes. >> you remember the village? the rich people are so out of control in this country. it's the late cycle. powell listens. does he say i'm going to end the
cycle right now? the market, the stock market, the algos are set for when oil goes up. they like it and they are set. this morning i was watching the futures. when a man named -- >> former brexit secretary. i'm saying he quit. 24 hours ago i didn't know who that was. >> one of the trading notes said the market hasn't cared about brexit for months. you get resignations and they will use it as an excuse. >> i had to take a red eye and i wore the same suit because they told me to come back here to opine on brexit. i said here is brexit. i'm really tired. >> i don't know where you -- >> portugal -- >> why don't you focus on
income. >> i took seven courses on communism and tried to get a masters degree on communism in city college. everybody was a socialist in that class. >> let's focus on the issue at hand. when did turkey destroy us it was spain that destroyed us. remember that? now it's -- >> we will keep our eye on it. >> i'm watching dom chu. >> the bigger picture is the world economy which is the continuing tension with china. 25% tariffs are going into effect. we'll see what happens. >> everyone is trying to get that. chuck robins spoke on mad money.
every hedgefund has said late cycle which means you own nothing and should be short. i can tell everybody -- what value is that? everyone should be short. >> you are really casual today. >> robins talked to you about tariffs, something that wal-mart cfo has echoed. listen to what robins told jim last night on "mad money." >> we didn't see any difference in the momentum before we did that and the momentum after that in the quarter. obviously, we would prefer that the tariffs don't get increased to 25% january. my belief has been once we get through the mid terms that the administration would begin to focus on this. we are beginning to hear positive sound bytes around this. i'm optimistic that we will get to some resolution. >> some positive sound bytes.
>> eight percent revenue is very strong. that was a reference. marlon brando said that. >> thank you -- i don't take offense. >> that's good. >> it's only personal. chuck robins, the kind of growth that he had and the fact that he is shifting whatever he can from china manufacturing was greeted with the stock actually being down when he was talking. i said what does he have to do the stock was trading down in after hours while he was talking. what was he supposed to do i just got a takeover bid from facebook. >> we are going to talk about the times piece today. >> that was nixon in his bunker. >> that is brutal reporting on facebook. >> it's great reporting. >> that picture, too. look at the way they shade him. >> they are paranoid psychotics
living in nixon's bunker. >> the facebook management team? >> yes. it's hilarious. >> there is nothing funny about that piece. >> this is great reporting. that's why this stock deserves to be down. wal-mart here, third quarter earnings were above estimates, revenue just shy of consensus. wal-mart raises the full year guidance and doug mcmillan says we have momentum in the business. we are accelerating inoeration and utilizing technology to shape the future of retail. buffet selling out the last of his stake. 16 quarters of comp growth. >> it was a great quarter. it was down initially when it was reported because there was a gross margin line that was lighter. people felt revenues were lighter. it was clearly a good quarter. if it goes down today that is
bear market behavior. i am on bear market watch after what happened to macy's. if wal-mart goes down and apple goes down, these would be signs that we are in a pure bear market. the hedge funds control the internet. everything is put through that prism. i went over macy's. it wasn't that bad. wal-mart is the test. if that closes down then we have to start saying -- the note said it will not be as bearish as they should be even though they will be bearish. that is the kind of notes i'm reading. this stuff is really bear.
it's not middling. it's bear market. >> okay. >> the verbiage is bear market. i don't agree with it. who am i >> you are just a man. >> i'm gloria swanson. >> you are not bob dole. you are just a man. >> the other day the president did -- it's a town over -- don't you wish you were in that facebook board meeting >> we will get to the piece on the times. apple venturing into bear market territory. a very prominent wall street analyst does see the stock as a buying opportunity. take a look at the premarket. we will watch powell, brexit, wal-mart. the president talking about powell on twitter and some
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i am a techie dad.n. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. > apple shares up after falling into bear territory. now morgan stanley's katie
huberty reiterates saying overreaction has created a buying opportunity. she says the things we have heard from just reflects what apple told us on november 1. it doesn't affect her service that investors are hyperfocussed on units and unit growth. my reporting is that the lowering -- if you parse the words that the cfo gave you, it does jive with momentum. so you can continue to have this same narrative that the analysts have which is that shocker in the last seven hours sales have broke down or you can do some work and recognize that they told you this. she is going one step further and say tg is time to pass the growth baton from devices to services and not to be narrowly focussed on units.
she is saying that the analysts are not getting the story right. i predict that she will have at least 95 minutes of directional action on this stock. >> that doesn't sound like a particularly constructive scenario. >> i think she is right. the charters are in control. somebody told me i'm so tired of your analysis. don't you know how to see a head and shoulders pattern when you look at it i saw the head and shoulders in '93. it is different this time. if you knew how to read a chart you would stop doing this work. i am addicted to the work. the work says it is okay. there are heat seeking missiles that are ready to pounce and fire on this, patriot missiles to bring you down.
i'm aware of that. i don't know how to change the story line. then there will be an analyst who says now i have my chance to downgrade it because still one more supplier. >> isn't behavioral chart work a classic sign >> yes. >> everyone is talking about not oil fundamentals and inventory. it is positioning and negative gamma. >> i couldn't say it better. all we are trying to do is figure out who is going to push us over the cliff first? president trump and 25% tariff or jay powell. he doesn't want to be the one who pushes off the cliff. the president gave the tax cut. he wants to contain china. if you read the note, what was the wildcard china. it's probably about 1/100th of
the note of the wildcard is china. i think that is what -- it's two-note trump. >> she does have a line about how services holds up in a recession. >> i know. >> it's a brilliant note. she does rigorous work. she does the reporting that i know i do. our reporting draws the same conclusion. by the way, warren buffett is not panicking from what i can tell. there are analysts who are anxious to get out of the stock and identify themselves with the cohort that says there will be one more supplier. there will be a supplier that says apple is cutting back. my reporting confirms this, too. the low info. and the service revenue stream should transcend. against that is shampoo. head and shoulders.
about seven minutes to go before we get started with trading here. kb homes is going to be down. >> this is the final one that was doing well. california is rolling over fast. there was a conference yesterday, a very smart guy talking about it. he goes ever since the interview -- he is saying we have bipeen affected by this pae particularly in the last five or six weeks resulting in a year over year decline in net orders year to date. where is the boom? i say caboom. this is why powell is pivoting, because the evidence dictates he should. the interview is now in the past. this is the deal. this was the one that did --
this was when we felt that the world was our oyster. this is actually salmonella oysters. >> where does it go from here? >> lower. >> okay. what was mr. -- >> forecast calls for pain. >> you probably say we have enough pain in the bear market, david. >> there he goes again. he is on thefloor. >> i have to be careful with my jacket. >> you like the floor lately. >> i like the floor. because there is one. >> coming up.
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♪annuities can provide protected income for life. ♪ ♪ ♪ the difference between possible and impossible? it's a person who believes they can, surrounded and supported by others - by us - who believe it, too u.s. bank - the power of possible. you are watching "squawk on the street." opening bell in 90 seconds on this busy thursday morning. we covered wal-mart and apple today. a read on ge credit and the
degree to which they have a couple dozen revolving credit lines. >> that was pretty brutal. >> they are still three notches above. you brought this up yesterday in terms of the investment grade bond market potentially not investment grade that much longer. they have only taken down two of the 40 billion. they just raised 4 billion from the sale there. there is liquidity, but there is concern. >> i think g.e. will spin off health care. they will announce the people who are going to run it. i think they will announce the people who are going to run it. >> it has been like that. >> no doubt dupont decided. i believe they will announce a
new management team and actual board of directors. i think that when it happens people will say wait a second. maybe they have something going. i think that can help the story. i think that when they announce the board of directors people will say he was behind the game and i think he goes ahead of the game. i'm not saying own the stock. i am saying that he is in motion and he's not deaf to what is happening. look at this. this market was up big before -- >> some guy in italy said something about leaving the eurozone if the league wins. >> he gets the majority in the next elections italy will exit the eurozone.
>> italy exit. you saw the big board. ringing the bell at the nasdaq -- >> president trump, does president trump know that as he tries to contain the chinese they bring a subprime auto lending company? >> they know the window will close. >> they are like soybeans. >> i think that is true. prc. >> like pushing them out. >> we couldn't bring this company public if it was u.s. >> i say congratulations to the chinese.
>> you got that. >> how did you figure that out >> it is the obvious. >> captain obvious. >> cisco is going to lead the s&p at the get go. i saw credit suisse took the target to 44. >> we didn't get to ask you about -- europe was -- >> europe was very strong for robins and cisco. what happened when i talked to analysts after, they said that was the last good quarter that is going to be strong. i said how do you know that? >> maybe they are looking at german and japanese gdp going negative just as one data point. >> i said it.
it's all late cycle at this point. i'm looking at the transport to see -- i'm grasping at the preverbial paper straws. >> late cycle, late cycle which means what we will have a recession next year >> that is what the hedge funds are telling me. >> i know you are very focussed on their wealth today. >> aren't you confused about david tepor? >> apple, i thought it was pg&e. >> which gets a downgrade today after yesterday's -- >> negative situation. >> pg&e is down another 11% as every lawyer possible in the state of california has been either hired or contacted by a hedge fund to advise them or figure out their way through what is going to happen here in terms of the state regulations and where the blame is going to
be laid for one of the fires. >> you said everywhere. there is one more in california that is not focussed on it. >> eah. really you went there >> i'm going everywhere today. i'm taking no prisoners. i like the fact that the v.i.x. is spiking. >> you said in october you wanted to get it to 25. >> let's get it done, guys. hedge funds, just go home. >> you want a retest of the octobers >> we need that. >> is it different than october given what credit, what high yield has done >> i know everybody wants to say besides g.e. there really aren't. g.e. is suing generous. i got the arms doing right. i got the tick going right at
1,000 down. i like it. i want everything -- i want all hope removed. he who enters here please no hope. this is what you really want. if you are a bull, you want it to crater on the day that we learn that warren buffett buys 35 shares of jp morgan. >> bought a lot of oracle. how did he do with ibm can we just make it so there are still people who buy stocks that are not morons >> buffet did take it to 35 million shares. that is about one percent of the flow. boosted his goldman stake. our friend pointed out half of his top tens are banks. >> i guess he sees value in what
people don't. goldman sachs, there was a piece this morning. he made it sound like the company i worked out. goldman sachs not thurn s. >> i wouldn't use any of those in the same sentence. >> i just did. if you listen to the commentary around the water cooler, i'm focussed on g.e. did you read the book? i'm looking at the article about goldman. this is one of the most negative moments in my career. >> there may be a good book on the malaysian fund. >> it's a documentary that came out that is supposed to be very good. this is a big give up. 1,000 on the tick. i wish the vix would spike more because there is not enough
fear. service now is knocked down. we need to see everyone agree with the ninth inning thesis. that is how you get a rally going that is insane. >> a couple of separate situations we have been watching. i want to talk about campbells. i.s.s. the proxy adviser is influential. it recommends all five of third point nominees. we told you last week from what had been the entire board of campbells down to five directors. we recommend three of the third point nominees, the ones not affiliated with third point. they say take three of the five. that is pretty good for third point. five of five at i.s.s. if you go to the vote here given
the family's opposition you are going to lose more likely than not. percentages are very, very small. this helps their argument. given what campbell's has been saying and what they said that we would have taken two of the nominees. you are going to figure this out. there is going to be a settlement here. it seems close to it. maybe you get three that leave off the two third point. they rejected him as an appropriate director. you have a release out from campbell and they have third point. everybody is paving a way towards a settlement prior to the vote. it looks likely. they aren't there yet. they just kind of are compete wg press releases. you want me to help? i will help. i can do that. it's a separate service but i do
offer it. >> they were almost funny. it was like they -- poor execution of mergers, lack of focus on the core business. campbell substantially trailed as a result of these missteps and these factors presenting a compelling case. the change at the board level is warranted. that is powerful for them. the way these things go and given the verbiage from both sides, i would be surprised if they didn't figure something out in the next few days. >> it used to be a giant. campbell's soup was talked about in the same light as pepsico and coca-cola. j.c. penney was in the same vein as wal-mart. there are 98,000 people that
work at j.c. penney. those are jobs. those people do things. >> comps down. they see fiscal '18 ucomps down inventories were down. >> saying minus five is okay. >> minus five is the new flat. >> do you remember merry go round? they had minus 29 once. they told me this is a vast improvement over what we thought we can do. they were back up within six months. >> obviously, dow down on pace for the worst stretch in about five months. let's get to bob pisani. >> four to one declining to advancing stocks at the open. a lot of cross currents for the market to deal with. let me show you the futures. we have the powell speech late last night. we had reports that china had issued a written response to the u.s. trade proposal ideas.
not clear about what the response will be. then we got resignations from a couple of cabinet offices. that seemed to have dropped the market a bit. then we have the recent thing with the italian economic adviser. italy might exit the eurozone. that came out just before the open. that dropped the market a little bit. there is a lot to deal with and a lot of cross currents. look at the u.k. stocks where you get noticeable obvious moves. the real estate companies all down. here in the u.s., tech started up. apple was up. cisco was on the upside. you see retail down two percent. wal-mart is the thing to watch. wal-mart did well. j.c. penney withdrawing the guidance. i know they have a new management and trying to figure
out what is going on. comps down 5.4%. dillards miss by a wide margin. comps were good. inventory issues were very noticeable. this is as good as it gets in the economy. they are having inventory issues right now. where are we in the retailers? i think the key here is look at macy's yesterday. what we have is a handful of retailers doing well. wal-mart is doing well. macy's is doing well. tjx reports next week. then there is everybody else out there. this is as good as it gets. the economic environment, the comps are harder in 2019. if you have companies going on like j.c. penney and dillard's with the inventory issues that is not a very good sign because they are not going to get a lot better in the near future here. let's talk a little i.p.o.s. you saw the numbers. just note here that you have a company with revenues up 38%,
very impressive. gross bookings up 34%. they still lost a billion dollars. it is sad and unfortunate to see the big, big companies out there, these unicorns going through an entire life cycle of growth and then mid life issues without ever being public. has the time passed for these unicorns i know we are waiting for them. they have lostthe growth multiples. if this company would have gone public two years ago the stock would have rallied and been down 25%. one trader has been around for 30 years said there has been a lot of wing flapping but not a lot of flying. we are waiting for a company to go public, big chinese company down here. a lot of young chinese people down here, always nice to see them. we'll see what happens there. they have the largest auto backed financing in china. >> thank you, bob pisani on the
floor. want to get to a faber report on dell. we had significant news involving the company. i didn't know when to talk when i don't see my thing. increasing the offer substantially. they go from what would have been an offer containing 9 billion in cash to 14 billion and increased the ratio and introduced a collar of a ratio. some of the headlines here overall. it is 120. it had been 109. now it is 120 bucks a share with 14 billion of that consideration. and importantly perhaps most importantly they have a bunch of funds to sign on.
a number that adds up to 17% of the total outstanding. i can tell you that black rock not a part of a voting agreement is in support of the deal. that is ten percent of the stock. you start getting the math there, get to 27% of the unaffiliated shares. carl ikahn owns nine percent. it was going to be the case. it is a little less than five percent. we'll see what he has to say. at this point it would seem dell is most likely gotten their deal done. it's an interesting one from their perspective. of course, it takes off the table the idea of doing a straight ipo. a lot of people said it would be coercive. there was potential for
litigation in delaware about this. what it has done is sort of set out a price that it would seem in a very difficult environment a lot of hedge funds would be happy to take. icahn has made a lot of money since he came in. we haven't heard from iss. we haven't heard them weigh in. this would seem to help the recommendation that they may offer here. the exchange ratio mechanism is an interesting one. it's not like a typical deal where you have an acquirer and an acquiree. here you have to have a catchup mechanism. so if you are interested in an a.c.t. type question this morning or kids are taking standardized tests, take a read at this and there will be a quiz later. the exchange ratio adjustment will be a number of shares equal
to a multiplied by b the lesser of x and the amount which may be zero but not less than zero -- >> thanks. >> there will be a quiz later. >> i gave up. >> it means as if it goes down in a period they have identified after the election you are going to get a larger percentage of dell. now, it is still less than the original deal which would have been 20.9% of dell that you would have received as shareholders. the most it could be if you look at the table on page four of the release, the most it could be is
19.8% if it falls below 104.55. dell and silver lake will end up owning a larger percentage than they would have under the previous deal. they are adding 5 billion in debt. they are almost adding debt to their balance sheet to buy back stock is the way i think about it. most likely a done deal. we kind of knew they would move. >> you said it would go up. that was just great reporting. you made money. >> you did. let's get to rick santelli at the cme group in chicago. >> good morning. two day of tens and two day of twos tell you pretty much all you need to know. we continually are losing ground trading below previous lows of the previous session. that's never a good pattern. i know that many of course were
paying particularly close attention to powell last night. the issue is investors once again depend on the fed to guide them to the promised land. does anybody watching right now unaware that there is a bit of a global slow down going on? to think that powell's comments in that regard are considering so earth shattering gives you all the information you need to know. markets have corrections. if you look at the ten year chart starting in september, this is a chart that gives you boat loads of information, double tops, treasuries love reversals over double tops. does it mean it is the reversal? too early to tell. right about the middle of the chart you will see the one dip in between the tops is 308. that is where you want to watch because the double top would have more to the down side. dollar index you see the two-day
chart. pretend you are looking at it the other way. the next day is pretty much the reversal of that. all things considered the dollar trade is still strong and has many outlets to bring buyers into that marketplace. carl, jim, david, back to you. >> rick, thank you very much rick santelli. look at apple this morning as we keep our eye on key names after katie's note up about 1.25%. got a decent bounce on the opening bell szhau down 84, s&p down eight. back in a moment
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that's what you want watch because we're in the grips of technicians. it has the head-and-shoulders pattern and they will say don't buy it but what matters is there are things -- con ed has been a great, great stock for many years. this is an opportunity to buy it at discount but remember, we are in a serious bear phase and you have to see things that are doing well take two on the show this week probably the company that's done the best of any company. cisco, they have to withstand this bearish onslaught if they can't, well, it's the 11th inning and there's three outs but it's still looking good. adon,", see you tonight. "m mey 6:00 p.m. dow is down 88 (indistinguishable muttering) that was awful. why are you so good at this? had a coach in high school.
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welcome back to "squawk on the street." rick santelli with the last of a litany of breaking news today, that's september business inventories expected up 0.3%, exactly as it turns it to be up 0.3% the up half a percent last month stands unrevised a week away from thanksgiving, this is a third-quarter leftover this is september number so, of course, it may figure into any revisions the third
quarter gdp but being unchanged probably not big ones. carl, back to you. >> all right, rick, thank you. rick santelli. welcome back, everybody, to "squawk on the street. i'm carl i can't glquintinilla d faber at post 9 at the new york stock exchange, sara has the day off. the dow is down 112 as we watch walmart and powell and brexit and china and more our road map begins with this debate over the health of the economy and what it means for stocks powell cease global worries on the horizon but we got strong numbers out of walmart what's the real growth story >> brexit backlash the pound plummeting, several of theresa may's cabinet resign we'll bring you up to speed. and we have warren buffett's latest holding they reveal a new stake in j.p. morgan why he's betting big on the banks. >> stocks are lower amid growth worries and continued declines in technology. fed chair jay powell says the economy remains strong but ceses
krj si concerning signs after a global slowdown take a listen. >> we don't see much of course, we hear a lot from businesses about higher costs, about loss of markets. we see a rising chorus of concern. in theory you could see slower growth to the extent more and more products are subject to tariffs. >> with us, seen your portfolio manager bob dahl is here at post 9. john rutledge also, thanks for coming in. bob, did he tee up a hike in december and did he tee up a pause after that >> he teed up a hike for sure. i think he said business as usual so i don't think he's pausing. the economy globally has been slowing, this is not new news. in the u.s it's three this year, probably two and a half next year, there's still good numbers relative to trained growth but that's decelerating the earnings growth that has people worried. >> what will it take the move
him off of this gradual trend? >> a lot worse than we're seeing he's still in the process of normalizing because he recognizes inflation is no longer zero. it's creeping higher wages are higher, we hear people complaining about they can't find workers, it's not serious but it's moving in a direction that will keep him going. >> the other point of suspense for the markets has been u.s./china trade back and forth. we have a report that chinese have come back with something on paper in the form of some kind of proposal perhaps in advance of the g20 meeting but the big concern for the markets is the state of the chinese economy and efforts to stimulate it to maintain growth. where does that stand from your perspective? >> well, rumors of the death of the chinese economy will exaggerated like they always are. but it's slower and tougher
there. for my contacts the chinese leaders in both business and government are hunkering down in their bunkers for a long war of siege over trade and many other issues with the u.s. there are big changes happening in the south with manufacturing moving out there's attempted stimulus but i agree with bob, the world is growing, the u.s. is growing pretty darn well the real issue for us and the chinese is the rising interest rates. i was with 500 endowment managers yesterday in boston and rising interest rates long term is their biggest single worry. >> on the trade question here which we did get these reports of this proposal you say in china there's a hunkering down for a long standoff here, but in a more immediate basis, do you think there's an appetite to have something in the form of a deal
that both sides can at least declare progress on? >> i think both sides would like to show that there's a deal because, remember, the covering of these meetings is done for domestic consumption in both places xi would be well off to show some progress inside china there are a lot of people worried about u.s. relations ther there. it wouldn't hurt trump following the midterms to show some kind of progress. i haven't seen anything black and white and i haven't heard any details but it would be nice at the g20 meetings in buenos aires. >> we're all brexit experts again today. how much does that matter? >> it's negative no question about it this has been noise for quite some time, disruptive. they don't know what the answer is, problems internally, rumors that they have to vote again
the bigger deal is china both presidents need something and they'll agree on something it might just be the sky is blue, we agree but they'll find something to agree on for consumption purposes. >> perhaps red. >> maybe disagree on what shade of blue. >> carl on brexit, we had some moves last night with the cabinet there. i thought for some time that this thing is going to end up with another vote and brexit will lose. in the uk we're interested in acquiring assets and that's where this is going to end up. >> on these 13 filings we're getting, buffett, j.p. morgan heavily into financials now. how can that happen when sentiment is supposedly so lousy. >> you know how warren is. he likes to go where people aren't going we shouldn't be
surprise surprised. loan growth is happening outside the banking system now, the stocks are cheap and we will get nice rallies. but a sustained up move, i'm not sure. >> has that been your play lately, financials >> we're not playing the game, we're looking far trade. i don't think we're there yet. >> brexit, it matters because the markets are in a vulnerable state. fed, china are we at a point where it's all surfacing, we're all realizing these challenges in the markets have been trying to grapple with, where are we in that reckoning process, do you think? >> we have a list of issues that are not fun to deal with that's why pes are under pressure stop market is up 5% year to date, earnings are up 25, that means pes are down 20 and that's classically modestly rising inflation rates and a long list of other things.
many of us were not happy on the bottom, we didn't like the rally, it didn't show strength so we're going back and testing, i hope we find the bottom. >> john is the for instance between any retest of those lows in october and now, is the difference credit? is it different in credit this time four or six weeks later >> in terms of credit numbers you mean >> spreads, high yield, prices, some of those lows >> absolutely. and i think i've seen actually managers inside companies for the first time worrying about how to raise their prices to offset costs and that's what the fed is seeing as well in their company reports and so it taxz managers a long time to figure out how to raise wages and increase prices but they're working on it and that will give you this upward trend and push for interest rates for some
time remember, it's the asset prices that rise interest rates and they're still rising >> if this is a retest for the markets right here, obviously it hinges on the duration of this cycle and what it will look like from here. where do you come in on that >> i think we have a ways to go as we talked about earlier, the economy is decelerating to a good number. the problem is the upside is much harder to see because of these problems it took seven months to make a new high for a call. i think it will take long they are time. >> guys we'll watch closely. see you soon bob doll and john rutledge going back to brexit, pressure is mounting on frame as she tries to sell her plan to parliament pound falling after several key cabinet members resigned wilfred frost has more details for us. >> that parliamentary vote will
be crucial and it doesn't bode well for frame in her prospect there is that some of her key allies in cabinet aren't supporting her already most notable brexit secretary dominic raab resigning this morning but given frame is having a defiant tone, she won't stand aside from inside her cabinet so the focus turns to whether she faces a vote of confidence triggered by mps outside of the cabinet. on which note jacob riis has submitted his letter of no confidence and said he thinks it's likely enough will follow to trigger a vote. what is enough 48 of the 316 conservative mps are needed to trigger a vote and 50% of them are needed to oust the prime minister that could happen within 24 hours and a new leader could be installed within a matter of weeks but the prime minister has
received backing from high profile brexiteers the uk pound is down sharply it would likely fall further if the prime minister faced a vote of confidence and was ousted an uk banks are off sharply as are uk property firms. we have seen european banks respond and bmw down the likes of ryan air and european airlines also falling sharply. >> there's the question of may's leadership and then there's the question of banks that have real estate and operations within the uk and how they play this. it isn't just currency traders trying to find the edge here. >> absolutely right. i think we would have seen the u.s. banks off a bit more than that i think it's a bit of support shown from that investment from warren buffett that you were talking about but that
considered i have spoken to a senior source at one of the u.s. banks with a present in london saying they've been preparing for brexit for a long time, they won't alter their plans already, there are plans in place to use their eu offices more from the start of the next year and put more personnel and activity through the offices and they said don't know what happens long term but said we don't think any u.s. bank is underprepared in the near term when it comes to brexit. therefore unsurprising to see uk banks selling off more sharply. >> what a story. we'll come back to you wilfred frost on brexit today. when we come back, walmart posting mixed results. the big box retailer gets a boost from e-commerce. looks at a good holiday season ahead. stocks down 1% and something we've not said in a while -- crude oil is higher, snapping that record 12-day losing streebak the question is whether the worst is over. as we go to break, look at
you'll only pay $4.95. [ready forngs ] christmas? no, it's way too early to be annoyed by christmas. you just need some holiday spirit! that's it! this feud just went mobile. with xfinity xfi you get the best wifi experience at home. and with xfinity mobile, you get the best wireless coverage for your phone. ...you're about to find out! you don't even know where i live... hello! see the grinch in theaters by saying "get grinch tickets" into your xfinity x1 voice remote. a guy just dropped this off. he-he-he-he. walmart losing some of the early gains, you can see down 1% earnings report from the company was somewhat mixed the dow component seeing its e-commerce sales jump 43%. it also raised full-year guidance you have warren buffett exiting a long time position in the world's largest retailer oliver chen has an outperform on
the stock. scott mushkin remains neutral. oliver, let me start with you. do you like the quarter? >> we are encouraged that e-commerce growth is very impressive also the comm store sales momentum is underscored by traffic. so 1.2 traffic traffic number being very good is great in terms of getting physical people into the store also digital innovation across the board. curb side pickup, 75 million skus, they're well prepared for a holiday. we think they're well-prepared for tariffs and it's a great value low-beta stock so we think it's well positioned in a consumer environment that's somewhat mixed but a very strong u.s. consumer which is underscored by low unemployment as well as wage growth. >> all right scott, you heard it. oliver says they're well prepared for the holidays, well prepared for tariffs do you agree >> i think walmart has done a
wonderful job and thanks for having me, hi, oliver. so i think walmart is prepared for the holidays the question is what will the holiday look like in consumables? we're already running hot on promotions so we have some concern that way and then as you look at walmart going out, their u.s. business is fantastic i think the challenge is if you look at their financial performance it continues to struggle to a degree five, six years ago ebit was $20 billion. we're forecasting 2020 on $21 billion. so our challenges with walmart are love the u.s. business, we're concerned of overall franchise financial performance. >> oliver, you mentioned the stock is defensive, low beta, high quality play within retail. obvious it's benefited from that in the last several months and i wonder how much you think that's where the investor base is in other words, not necessarily
owning it as much for the fundamental story, for holiday or anything like that or even the long-term strategy but just hiding in walmart. >> i agree we're living in uncertain times and retail has been very difficult. also the amazon threat is real about 80% of walmart shoppers also shop at amazon so is walmart a great long-term idea we think it is because we believe in the power of stores plus digital 90% of america is within 10 miles of a walmart 4800 locations and as you know, the global environment, the caution around china and tariffs, these are big issues. walmart will always offer everyday low prices, they have a lot of bargaining leverage in this changing environment and they won't be undersold so we like it for that positioning, we like it for the value positioning of the customer. offering a dividend, a lot of free cash flow as well as as well as low beta, we think those are good characteristics but scott is right, the margin profile is a question and
earnings growth relative to pe, because it's an elevated pe. so you have to pay for this defensive spot we think it's the right trade as we look across the retail landscape where we love retailers. >> how's the investor base >> it's interesting, e-commerce throws their grocery base in there and they're kind of amazon-esque e-commerce business is smaller but i want to come back to something oliver said because i think it's important walmart isn't a chief equity if you look at its pe, it's trading above historical levels and also well above relative to the s&p so you are paying, i think oliver is right, a lot for safety and paying maybe for future growth or future profits
in e-commerce which we're not sure are going to show up. if you look at walmart as an equity, it's darn expensive. >> oliver, the cfo talked about tariffs and said they're not good for the economy and that prices will go up. if there is erosion to their image as a low cast -- cost distributor of goods, who pays far? >> keep in mind, 55% of their business is food and grocery also, walmart won't be undersold relative to others so it will offer the lowest prices and we think they're very well positioned to bargain and negotiate with vendors as well but this will happen on an item-by-item basis and still walmart will offer a very compelling value as we zoom out, we see walmart target amazon as retail superpowers and there will be have and have-notes in retail.
we think walmart is repositioned in robotic supply chain speed, food supply chains these are all very difficult to recreate that's another reason we like walmart. in the tariff situation you want to be with the biggest players in this environment and walmart is the biggest player in grocery which is a nice position to be in. >> guys, thanks to you both for sharing your insight after we got those numbers. >> happy holiday, thank you. >> thank you for having us. getting breaking news out of treasury eamon javers has that. good morning, eamon. >> good morning, carl. the treasury department is announcing sanctions on 17 saud disfor what the treasury department says is their role in the murder of the saudi columnist jamal khashoggi. the 17 the treasury department is saying they were directly involved in the murder this is the senior officials involved and the operations team most senior official named here
is saud al qatani, saying he's a senior official of the government of saudi arabia who is part of the planning and execution of the operation that led to the killing of mr. khashoggi in the saudi consulate in istanbul, turkey, on october 2. they're naming other saudis who the u.s. government is accusing of being involved in the operations team that led to the murder of mr. khashoggi. on on the list is mohammed bin salman, the crown prince of saudi arabia there's been speculation about what his role right have been in that apparently targeted killing. now, though, the united states is sanctions 17 saudis not including him on this list we'll see whether that placates critics on capitol hill who say that mbs, as he's known, is unstable and unreliable as a u.s. partner we'll see whether those senators want to go forward with additional measures. for now the treasury department is sanctioning 17 saudis for
their role in the alleged murder of jamal khashoggi back over to you. >> eamon javers at a snowy white house today. head winds ahead federal reserve chairman jerome powell talking about the state of the economy what slowing global growth might mean for stocks next dow down 137, vix has the highest level of the month walmart trying to hang on to 100, "squawk on the street" is back in a moenlts.
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welcome back to "squawk on the street." time for etf spotlight dom chu taking a look at apple with warren buffett expanding his already big stake in the company. >> the biggest out there has apple stock fallen enough to make it attractive to add or start new positions like warren buffett did? the early price action, at least for the time being, suggests that we might be seeing some dipping of toes into that trade to buy the dip but the damage done has been substantial after hitting the record high on october 3 shares lost 20% of their value through yesterday's close prompting some analysts like katie huberty at morgan stanley
issuing a note to her clients reit rating her overweight rating saying recent down side price action was an overreaction we also got the regulatory filing showing that at the end of september hedge fund titan david tepper took a stake in apple and apple the biggest holding at warren buffett's berkshire hathaway so who are the biggest etf holders of apple shares? well, one of them that we don't talk about very often is the vanguard megacap growth etf. particularly there mgk it has around a 9% stake in apple. we're seeing some kind of price action but it's up 2.5% during the year to date period so now the i shares morning star large cap etf, we don't talk about that often, ticker jkd, has around a 13% stake and those shares are off by 2% so far this year to date and the spdr tech select fund, the ticker xlk, we mentioned it often, a 19% stake
holder in the iphone maker and you can see shares up 4% year to date so, carl, as we talk about apple exposure, we cannot forget the fact that it's the biggest weighting in the spdr, the s&p 500 etf and the qqqs as well when you're the biggest company out there, it makes sense, right? back over to you guys. >> very good, dom, thank you. meanwhile, jerome powell outlining the head winds he says are facing the economy steve liesman joins with us more on that good morning, steve. >> there's quite a debate about the comments made by fed chairman jerome powell is he signaling a change in rate hike policy from the head winds or just a willingness to change if events force his hands? powell says the u.s. economy is strong but that the global economic outlook at had worsened from the upbeat news of 2017. >> i think this year has been -- has seen a gradual skmipping away you still see solid growth but you see kind of growing signs of a bit of a slow dodown.
>> there's strong earnings and guidance the u.s. consumer is in excellent shape. powell said the u.s. economy is at a point where it has to go too slow and too fast. krishna guahar write there is may be a hint of policy optionality here though this is very different from signaling a change of tacks. there are brexit concerns, the downdraft in stocks and they reduced the chances of rate hikes not so much this year but next year. december trading at a probability of a rate hike, 76%. that's down from where it was. still a pretty good percentage there banking on that rate hike, and next year may it shows 49%, that that had been a march hike of above 50% so that's been pushed forward and down and now we can't even get to 50% or
everyone 40% for that second rate hike next year. we'll hopefully get some clarity on the outlook for fed policy this year and next when we sit down with the fed vice chair at 8:30 tomorrow on "squawk box." back to you, carl. >> i got you there. >> somebody had to make the joke. >> it will be made again i'm guessing let's get other to jackie with inventory numbers in the energy space. >> good morning, michael waiting for that number, you can see natural gas prices are trading at 4:27. this is decline of 11% it's been an interesting week or so far natural gas prices. up 23% in one week up 34% in one month. probably short squeeze happening. you've seen this happening on the wrong side of the trade looking for a mild winter and seeing that the temperatures are are cold natural gas trading over $4.
we haven't seen this in four years time so this is significant but traders are looking to position themselves now as we go further into the winter i will say this, we don't have the number just yet. we're approaching 10:31. so i'll send it back and we'll come back when we have it. >> when we come back, the $5 billion liquefied natural gas export industry is expected to double next year our brian sullivan is in corpus christi with a look at what's coming next on sweet. >> well, you heard jackie's report on natural gas. we'll tell you why that ship behind us marks a first for the american natural gas industry and why this one little ship -- well, not very little -- one big ship behind us could help build ties with china and bring down the trade deficit. that sryto live from corpus christi, texas
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good morning, everyone, i'm sue herera here's your cnbc news update saudi arabia's top prosecutor announcing he is recommending the death penalty for five suspects charged in the killing of journalist jamal khashoggi. separately, the u.s. treasury announcing sanctions on 17 saudis for their roles in the killing of khashoggi russian president vladimir putin says he discussed washington's plans to exit the intermediate range nuclear arms treaty with vice president mike pence when the two met at the asean summit he told reporters they discussed relations with iran. the marie antoinette diamond and pearl pendant is selling for more than $36 million including fees at a sotheby's auction in geneva it was the highlight from the queen's jewelry collection that went on sale, some of which
hadn't been seen in public for 200 years. the buyer remains anonymous. and today marks the american cancer society's annual great american smokeout, a day when smokers are encouraged to quit even though smoking rates are at record lows, the society says nearly 500,000 people still die every year from smoking. you are up to date that's the news update and i will send it back downtown to you guys mike >> sue, thank you very much. oil higher again today after breaking its record 12-day losing streak yesterday. still trading under huge pressure, down more than 20% from its recent two-week high. joining us for a closer look is the chief oil analyst. rita, i would love your explanation of what we're seeing in the market for what caused
the sharp rate is there something more fundamental going on. >> i think it's both opec members are expecting they wouldn't be able to buy iranian oil, now they can so there is anover supply. that is very much the part of why the physical market started to weaken. on top of that you had much more concerns about the trade war, the global economy you have ctas maxed short but this is to do with the options market
producers such as u.s. shale producers and mexico they hedge. there is a massive amount of negative in the market and that's why the move was so viole violent. >> the futures curve is looking more like it's back into a mode where maybe the market is trying to find a floor. >> we think the market was overheated last month. we have demand and supply-side factors at work. readings on economic growth and demand have been weighted. then on supply u.s. production was higher than expected opec increased output because they expected significant losses from iran and venezuela which
won't materialize. we don't think this is the end of the world, though, we think we need a million barrel a day adjustment to rebalance the market and opec will manage supplies in the level they see we've got an opec meet iing on december 6 we think production response is likely and we'll head back to $75 per barrel which is close to our estimate for 2019 so we think this is an overreaction and if the oil market moves to that degree this will be a good place to buy energy stocks and we're recommending them. >> we've been trying to get people's take as to what price on crude brings about a more definitive line between the commodity price and credit concerns, whether that's investment grade or high yield, goldman was on our show and suggested 50 you got thoughts on that
>> i'd say it's around 55. i don't think we disagree too much with the number you threw out there. >> and, doug, you mentioned that assuming we do get a rebound here in the commodity, where would you get to the aggressive end of the spectrum in terms of expiration types or more the majors >> we think it's both. today shell and bp, two of our favorite pledger stocks offer 6% dividend yields. the cash flow break even at $50 per barrel so those are great opportunities and we also like conocophillips and the expiration production space and when you think about what the big oil stocks are discounting today if that type of economic situation unfolds, then that
portfolio manager probably has bigger problems in their portfolios than energy stocks so we like shell, bullpen and conocophillips. >> doug, am rita, thanks appreciate your time. >> thank you. >> the race for global energy dominance taking another big step today as natural gas exports mark a first for texas brian sullivan is in corpus christi, texas, and he has more on that story. >> listening to your conversation with the analysts i was thinking i wonder if it was a view point where lng is shale oil 20 years ago the beginning of what could be a multiyear or multidecade boom. here's why we say that there were three export terminals for liquefied natural gas in the united states beginning today there are four and that's why we're here. the facility in corpus christi, in a few day this is ship will be located with lng and shipped
to a customer. this is the first shipment from the continental united states from a purpose-built export facility ever. you think how big could it be? so far there have been 70 of those ships delivered around the world. 28 more ordered in the last quarter. the idea as china tries to wean itself off coal, it will have to grow so massively that it's not the only hope but a best hope is liquefied natural gas so china will go up to about 40% of global imports, they will be the biggest importner the world. the united states, which is the sixth biggest exporter of lng and we have 17 more of these facilities in some stage of planning or production will become the second biggest
exporter in just five years. now if we have a crisis, those are the risks. but there's so much optimism around the lng industry that it's hard not to make the shale comparisons back in the early 2000s. or what would wilfred call them? the ougaughts. >> no one explains that better than you brian sullivan in corpus christi. when we come back, delay, deny, deflect. facebook is under pressure after a bombshell "new york times" investigation. we got details on that plus, one of the authors of the ground breaking report, cecelia kang of the "times" will join us. dow down 260 as 10 downing says they will have a statement from n stn meooeaerti we're back in a moment i wanna keep doing what i love,
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welcome back a shocking report in the "times" revealing and detailing leadership unrest at the very top levels of facebook julia boorstin joins us with more. >> good morning, carl. this lengthy exposé of facebook's mismanagement sending facebook shares down about 1.5%. the "new york times" reporting that mark zuckerberg ignored warning signs of election manipulation and the spread of fake news and, quote, sought to conceal them from public view. the "new york times" reporting the company tried to mask the extent of its privacy issues and that sandberg has overseen an aggressive lobbying campaign to combat facebook critics, shift
public anger towards rival companies and ward off damaging regulation the article also saying facebook used d.c.-based consultants definers to tie george soros to an anti-facebook movement. and that the firm lobby add jewish civil rights group to cast criticism of the company as anti-semitic perhaps most striking is the fact that a lot of this information could have come from facebook's highest ranks, indicating disord of the company's most senior levels facebook responding that there are a number of inaccuracies in the story, including allegations they were slow to investigate and report russian manipulation saying, quote, leading up to election day in november, 2016, we detected and dealt with several threats with ties to russia facebook also saying they did not discourage former chief security officer alex stamos from looking into russian activity facebook also refuting that it used d.c.-based consultant definers to write articles criticizing google and apple's business practices saying, quote, the "new york times" is wrong to suggest that we ever
asked definers to pay for or write articles on facebook's behalf or to spread misinformation facebook last night saying it ended its contract with definers, also saying they're proud of their progress on safety and security. guys, back over to you. >> julia, wherever i read things like this or hear about them i always ask -- i always remember zuckerberg controls 66% of the vote he controls the board. if you're an investor you're thinking god, i'd like to see a different voice, somebody in the board room, you can't expect that, can you? >> i mean, i think it's worth noting this is a company that is controlled by zuckerberg he does control the majority of tho thosevoting shares but when there is pressure like this on the company as there has been in recent years, it really pushes them to invest more in security and to make sure they're doing everything they can to try to prevent russian manipulation and have more transparency about how they're doing everything but as you see with the stock now down
over 2%, zuckerberg himself must be thinking what can i do to try to fix my corporate image problem and the problem of russian manipulation as well as the spread of fake news. for investors as well as consumers. >> interesting, yes. stock hasn't quite broken the 140 level it did break back in october but down 2%. >> down 2% i think a lot of people were saying maybe there's not a tremendous amount of volume of new stuff in here with the stocks and so far not yet. >> julia, thanks we'll talk to the "times" reporter cecelia kang in the next hour. meantime, dow trying to find legs here, down 200 points once again, theresa may will make a statement at noon stn, don't know what about but we'll watch for that back in a moment [ phone rings ]
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welcome back to "squawk on the street." i am dominic chu stocks mostly lower to start the day, all three major averages in negative territory for the month. consumer discretionary the worst performing sector not helping matters, home builders all down more than 3%, this on the back of kb homes slashing the fourth
quarter outlook among weakness in home sales and rising mortgage rates that stock is on pace for the worst day since 1989 they also took down a lot of average selling price forecast for this quarter and the next one as well. home builders to watch back downtown to you guys at the stock exchange >> thank you already ugly getting uglier. now let's get out to the cme group in chicago with rick santelli hi, rick. >> thank you, mike i would like to welcome purdue university president mitch daniels. as former governor of indiana, sir, the national association of state budget officers, nasbo released a report saying state spending topped 2 trillion in 2018 one of the big rises was medicaid, down close to 30%. 10% higher than a decade ago what do you see in your crystal ball as former governor with regard to that trajectory and
some costs that states have very little control over? >> well, i wouldn't agree they don't have control some of them have made choices that are going to lead to a loss of control in the future there's nothing new, rick, about in too many states, medicaid devouring a large portion of the budget, crowding out education, higher education, transportation, and other important functions. and many states have made deals under the so-called obamacare legislation which are going to cause their costs to escalate dramatically in the future so this trend that the organization points out today is likely to accelerate, not be temporary. >> all right let's move higher up the food chain, shall we? go state to federal. as former omb director, the last budget for this president required a deal with the devils on spending. basically it was bipartisan
because the military and taxes, everybody walked away a winner for the upcoming budget in february, the president said 5% cuts on domestic agencies across the board. a, do you think that can happen, and b, is it enough? >> b is easy to answer no, it isn't close to enough it is probably a good idea, in many cases you ought to go deeper, identify things that are obsolete or failed year after year but the fundamental reality and everybody in washington knows it, you're not going to do anything to avert the debt disaster until you reform and save the safety net programs anybody that cares about senior citizens, about the future of medicare should be demanding major changes right now in those programs otherwise they're going to go broke and fail the people they are meant to serve meanwhile, they'll take this nation over a niagara of debt that's going to lead to some
very unfortunate reports on your show in the future economically. >> you know, that sounds much like senator allen simpson who is also a frequent guest of mine governor, thank you for taking the time today, and of course after february when we get a look at the new budget, i would like to have you back and do a bit of forensics thank you again. carl, back to you. >> rick, thank you rick santelli. when we come back, a lot more on the bombshell facebook report in the "times." one of the authors joins us in a couple of minutes. dow down 174 really want to be there,
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♪ good thursday morning. welcome to "squawk alley." carl quintanilla with morgan brennan, jon fortt at post 9 of new york stock exchange. getting some breaking eia data >> carl, taking a look at this now. we have a build in crude oil inventory of 10.3 million barrels. i want to look at the production number 11.7 million barrels a day that's up from last week remember, one of the reasons we saw crude oil drop so drastically is that u.s. production number continues to climb. and again, it is climbing here crude oil trading 56.57. a little rebound yesterday massive losses in the trade.