tv Squawk on the Street CNBC November 27, 2018 9:00am-11:00am EST
well got a little bit of a time left 1.32 now on the dow. nasdaq gaining back some of yesterday's gains. about 46 or so s&p is down 14 in change we'll be here with the 3:00 a.m. alarm clock tomorrow make sure you join us. "squawk on the street" is next ♪ >> good tuesday morning, welcome to "squawk on the street," i am carl quintanilla with david faber and jim cramer coming up, greg hayes. futures are weak, dow looks at 130. the president says it is highly unlikely he'll leave on chinese goods. watch bonds today, home prices
are up 5.5 from a year ago road map begins with renewed china trade fears. apple rout, the u.s. could slap 10% tariffs on imported iphones and laptops. utx announcing spin off into three independent companies. greg hayes will join us exclusively onset in a few moment >> apple among the names under pressure the president is telling the journal that the u.s. could place tariffs on iphones and laptops depending on how this weekend proceeds >> i think it is important to distinguish between the transcripts and the headlines. there is this moment in the interview where the president seems to be caught up a little
off gouuard, how about apple an tariffs? the stock is down. i have been waiting for the big wash out from apple. if things go well, that won't happen and if things go badly, it will. people are starting to presume the worse. we node eed to presume the worst of the white house these days if we get an end to this phase. >> he said maybe when asked about it iphones, people can stand another 10% easily do you think that's not true >> the answer is look you got to take numbers down. this is a take numbers down event. the price increase does not accrue to you. it is clearly a negative we'll be speaking to greg hayes
soon he's going to tell you tariff is not good for business. i don't think it is any difference at all when you talk about apple. >> it is not good for business and apple. we should learn to take these contemporaneous comments not seriously. >> you are looking at me funny >> on the one hand there is clearly not any meditation occurring. all of his words are contemporaneous. >> who said that >> jp morgan >> dimon is back >> no, it is unclear who writes it it is reflective thinking among
traders, that's the way they think these days you need to take in the context of two years of these comments and see what happens >> i disagree with it. the president is now regarded as a clown by the premirror institution on wall street a clown. >> i think that's going a little far. >> they use the word, a name >> i don't want to draw too much into this. >> it is not from t"the simpso s simpsons." >> i use it simply to argue the point that's the market sometimes. we have seen it how many times reaction >> is it the beginning >> of what >> of what we all expected at a certain point, major firms calling the president out is not
a serious individual >> it may be >> i am not sure that was consensus when we are going to the moon and cuts are being passed >> exactly this is not. some left wing it is not elizabeth warren, right? >> it is just reflective of the way traders and people are looking at the market on a day-to-day basis trying to view these things we have to cover, they are important. it gives a sense of a miepd sndf the most powerful man on earth but it does not mean anything is going to happen. on china, there is a belief that it is unclear of what's going to happen there whether there is progress with xi and if people approach the president at
mar-a-lago, you go up and ask him, he said i am a tariffs guy which is what he said to the journal. >> i want to walk back the noin empathies i have with david. jp morgan is a distinguish firm. their word carries about a grain amount of weight is it unofficial >> it is trading desk note here is what's happening >> everything going on in the world. >> it does not help us get to it we do in advance of this weekend. >> no, i do point out that what we are doing is trying to devine a man who's not making sense a much more diplomatic than jp morgan i am choosing a different word i read that interview, is he talking about eli/apple?
he started doing better. >> as you tweeted. >> the whole thing is in comprehensible >> he says what he's going to do -- raise interest rates on china. he made that point twice >> really? >> did you read that >> he meant tariffs. >> you are the president, you got to be mindful. >> i am just saying that was ill advi advised interview. >> when we come back, greg hayes is going to join us. take another look at the premarket as we are virtually flat for the year. right around 26.73 back in a minute this isn't just any moving day.
and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. ladies and gentlemen, you are in for a treat make the volume louder utc completing the biggest deal ever with rockwell collins
closing. joining us exclusively at post nine is greg hayes it is indeed great to see you. >> thank you for having us >> let's go over this. in 2002 in your annual report we read that the aerospace business decline but it was saved by carrier. the chief executive magazine, two ceos ago says the secret of the company is the balance paragraph of the busineof business if we have this tremendous conglomerate that has a higher in the market, why did we break it up? >> it is the great thing to do we can go back and look at commercial business is out performing the air business. balance work at utc. i have gone out and spoke with all of our investors over the
last year. there is the -- we don't get pa for the diversity and consistent earnings of the way we did ten years ago. what investors told us is let us diversi diversify. if we want to buy commercial h-back business, we'll buy that. utx is so complicated because of the different markets we operate in and business cycles that business go through. it is simpler for people to think about what's the story around the 2 million elevators that we service around the world or carrier business, over 100 million air conditioners installed in the u.s., we'll service those and replace those in the next ten years. phenomenal growth. with rockwell, $60 billion revenue. there is no weak sister here we are doing this because we
think it is the right thing for our employees and customers and shareholde shareholders >> you thought this deal with rockwall collins going to close. there were issues with china what happens with china of the relation of our country and china? >> the chinese have always told us they're not going to approve the deal until doj approve the deal they want to make sure the condition we signed up for in china is the same condition with doj and e.u. the doj did not happen until the first of october with holidays in china, we did not notify the chinese until the eighth of october. they say the process will take four to eight weeks. >> they told us this all along there is no political issue. the new agency responsible, very
professional, very forthright and again no political agenda. >> you were confident on the conference call a few weeks back >> between two and six weeks, it took about five. >> it was well played. >> i don't think anybody believed me. >> you gave us a more or less a road map of this is becoming, i love to understand your revolution in terms of this being the right strategy back to jim sort of yes and qued to your point that we don't get paid anymore for being a diversify conglomerate >> i have been a ceo for four years now. the first thing we do was the hardest thing. we sold socorsky, it did not fit in where we want the business to go it did not have the growth
we did it back in 2015 in march. the learning for us and the board during this process and we studied 74 different spin transactions occurred in the last ten years what we looked at was one of the cash flows of business overtimes and can business support itself with cash flows and make enough investment of sustained growth you needing cash flows to pay for investment in the aerospace system you are going to bill $10 billion. you need cash coming in the cash flows from the aerospace business more than covered all of the r&d and all of the cap ex and their share of dividend i think that was the magic moment when the board said we don't need to be together.
the question is should we be together as we started looking at the other spin, 74 spin that occurred, what we saw is a high preponderance, 80 plus percent of these businesses that you spin off doing better of the three to five years. i attributed to one thing and that's focus we can talk about capital structure and allocation and different investor base. the focus of a management team on that business is what will drive the results. >> what's the argument for the modern conglomerate? what's left? >> you have to talk to mr. buffett about that >> or mr. culp >> larry is going through the same process ge is different animal than utc. much more complicated. our split here is quite simple, complex in the tax restructuring but in terms of separating, we already have three businesses that run by themselves
our goal now is to set of three public companies headquarters to support those businesses >> it is going to cost more than some anticipated that's why the stock is looking down some of the opening. can you run us through why that number is seemingly larger than some is anticipated. >> you break it down, there is three pieces of that cost. there is about $500 trillion of the one time cost. that's to set up the i.t. and tech structure for all of utc, you got to replicate that three times. one treasury system, replicating the tax system a huge amount of i.t. investment the second big piece is tax restructuring. we have been optimizing tax structure to minimize taxes globally all of a sudden you got to restructure each one of those twelve entitieentities
that's going to take a long time about 18-months. it is probably $2 billion of cost >> wow >> there are transfer taxes to be paid in almost every jurisdiction, the reason it is going to take us 18 to 14 months is we are trying to minimize that cost. we don't want to surprise anybody and coming back hey, there is more than half a billion dollars. >> i can't believe ed greene is saying it is coming lower. i have to believe you will be able to give your history, do better than that >> under promised, over delivered. >> you are a person that can answer this with boots on the ground you are a huge buyer of some of the materials that have tariffs on how is it working for america and how is it working for us >> i have been cleared of this issue on tariffs for the last couple of years. tariffs benefit no one we are going to spend
$150 million in the coming year to pay for these additional tariffs. tariffs become a tax on consumers. we raise prices three times at carrier this year to cover the tariffs costs coming in. tariffs don't bring jobs back and don't accomplish what -- >> what leverage do we have over the chinese and 2025 destruction of america what do we have? >> we are a multi national company. we got 26,000. we manufacture for the european market and the u.s. for the u.s. market for the aerospace business, we operate globally china will take one of every four aircrafts that's built in the world this year. china is an important part of the world in the economy i am not a politician, i am not going to get into that debate
how best to do that. tariffs don't work if the idea to bring jobs back, it ain't going to work >> are you worried of your business, given the prospect of 25%? >> do i worry about tariffs? of course. you can only raise prices so much before you infringe on demand and create inflation on the economy and all those things we try to avoid doing. i think trying to find a rational and reasonable solution is imperative here in the near term >> whether it is tariffs or cost inflation or rates, is the buy back picture changing overall than corporate america >> there is a lot of cash out there. tax reform has freed up a ton of cash, we brought back more than $5 billion this year we are using cash to deleverage many other companies or using it to buy back their stocks the valuation while they look heavy today, i look forward earnings is going to continue to grow and all three of our businesses for the next three to
five years are pretty slick. valuation, there are still opportunities to buy back stocks >> that's the plan now is there a possibility that you could participate perhaps in mma or via or one of the spins and there are some talks that you are firing business carrier. could you sell something out of the division >> the carrier side, we have a process of looking into our field business it is $2.5 billion 10% margin business, it is not innovation business or product driven business. we have been talking about a potential -- mma goes, i would go back to the play bloook. if somebody comes forward with a compelling offer, we'll certainly listen the hard part for both carrier and otis elevator is the markets
are relatively concentrated and antitrust risk is tough. what we thought was a straightforward combination of 14 months, you have to go in eyes wide open in terms of the risks. >> let's say jay powell i is -- any impact on the u.s. economy becoming so strong, we got to worry about those rate hikes. >> there is full employment in the u.s. my fear is not rate hikes. we'll spend a billion dollars in interest expense next year and $10 billion even it is not that big of a deal for us but, i am concerned of full employment that there is inflation on the horizon we got 5,000 jobs opening today, we are trying to hire 35,000 people here in the next five years. it is tough to do. there is inflation in the background and i think labor will lead the way if we can't
figure out a way to solve that >> well. ceo and chairman united technology is coming out for more rate hikes be you less tariffs. >> take your poison. >> greg hayes, congratulations on the deal and the stock is down i would say buy. >> thank you so much gentlemen >> we'll get jim cramer's mad dash and count down to the opening be whllucl one more look at the futures before we get that opening bell in about seven minutes complicated, you know?feels too well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade
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we got alittle bit over a minute before we get started on the opening bell here at nyc bristol meyers >> this morning another setback. this is for small cell lung cancer this combination failed to meet overall survival the stock should be down again these are good >> it is great success >> i always say when you see this and you want it, you buy merck. merck is not promotional >> this is not good news and numbers have to come down. >> we'll look for that let's get to the opening bell here, take a look at the s&p 500
at the cnbc realtime exchange. we mentioned earlier, we closed last year 26.73 and we are closed yesterday at 26.7345. almost exactly from december of 29 >> well, i think if anything when i heard yesterday, i am now a believer they're starting to tie us down. but, the president with tariffs. greg hayes, he's a straight shooting guy, ceo of technologies he's basically talking about the problem of tariffs i tsee positives so we don't fud the expansion plans. if it goes from 10 to 25 and we do three rate hikes, you are going to have to sell all the retailers and sell the
restaurants and you have to sell a lot of domestic companies. we don't know what's going to happen we know there is a tax -- that's going to slow the economy. >> by the way, at the big board today, based in argentina, it pledged 1% encouraging companies to give 1% of products and equity to any charities of its choosing jim mentioned greg hayes and we asked him the impact of tariffs. take a listen. >> tariffs benefit no one. we are going to spend $150 million in the coming year to pay for these additional tariffs. ultimately tariffs become a tax on consumers we raised prices three times at carrier this year covering the tariffs cost coming in tariffs don't bring jobs back or
don't accomplish what we are trying to do >> of course, critics of china will say well, what else can we do that's my view and i am not against a very tough position with china i do believe they're 2025 is bad. i think the belt road initiative is the way to get hooked on chinese debt but, i don't know what else to do >> the president keeps on talking about bringing jobs back i have not spoken to one ceo and those reporting from china, among them who talk about bringing manufacture back to our country. what they do talk about is changing the supply chain away from china and help potentially our leverage to get them to change and open up their market and perhaps stocks and intellectual property. >> that's important, when you hear statements that's coming
back we got the opposite yesterday. i think that there are a lot of companies searching for cambodia and vietnam is a winner of our policy >> yes >> but if your belief is and vice president's belief, we are in the cold war and we need to contain the chinese, maybe non trade related or non jobs related then tariffs may work. if you are trying to make it so apple has to choose between making products in china and moving well, that's bad for china he's on the tenth. we don't play a long view? 1800 they long view, they became economists at the end of world war ii communism has not had a great
record i am tired of hearing on air and reading that china is playing a long game. so i mean i get it and we should stop talking about the long game now mass murder - i don't thikn how long of a game is that we are talking about 60 games? i like that my game is on hamels >> as you are talking, bullard is on the tape, seeing possible cracks in growth could shape the fed's debate in the coming year. slower growth the next two years will make it tougher for the feds >> i happen to think that mr.
boeing is thoughtful they do i am peem pe imperically he matters >> what are you reading there? >> i am reading of amazon on cyber monday and all things they sold 18 million toys and more than 13 million fashion items on black friday and cyber monday. it is the trend overall for most of faang at this point they went into some details of the rise in power that amazon is in advertisement something we have not discussed here certainly coming into the same sphere as facebook and alphabet. it is only going to increase dramatically very profitable we are talking about ads they
sell on the home page and ads they sell when you go on the platform and the search. it is a platform alibaba, they're a platform purely and the way they make their money was from companies marketing and to a certain extent that's what amazon is becoming and there is the u.s. which is incredibly profitable. the advertising business contribute the bulk of provety given the margins higher >> when you read a piece, they talk about walmart and target, it does seem that amazon gives you better results what a prisoner's dilemma for us >> as an advertiser, talk about intent somebody going to amazon looking to buy something you have to pay a lot for that >> that's why i like google, too. >> they took the plunge and we
are getting to see why by the way, the biggest day in history, cyber monday. according to adobe, overall, we never had a bigger day of online shopping >> my hats off to o' ryan he does have his hand -- >> the ceo of adobe. >> they are competitors. i have a question for david, did you know that jack ma was a member of the communist party, when did you know it >> i did see a story yesterday who wrote that story it was unclear to me in terms of where it is coming from. >> in america in the '50s and when you are an communist is a big deal >> he walked a fine line in overseeing alibaba and what it can or can do, i don't read too
much into it i am not expert of the internal of chinese politics and what it means to be a member of the communist party there verses being a patriot. but, your overall view, i agree. we have been talking about this tripod for amazon. i think they shut it down. >> they did. the web service business is just crushing it. i think that when you saw that shake up of google alphabet. that was a task. i think dell is doing great business with azure but jesus, t to go around the whole theme of decline and bear market is all about the data center. when i hear about cyber monday, how do i think that data center
is slowing >> you mentioned microsoft yesterday. you guys got a lot of those e-mails in your inbox? microsoft verses apple market cap wise >> some conflict yesterday given share counts today everybody is on the same page that apple is still as larger at least right now. >> what it does highlight is the market cap of apple which had a $1.1 trillion market cap and it lost $300 billion, that's really tough. >> as between fishing and trapping and cyber fraud, do you get more cyber fraud from so-called apple or so-called microsoft? i got four this morning. they're not that smart i think these companies have a major cyber problem and it keeps on getting worse >> ask jamie dimon
it is always a risk. >> i want to ask you something, jim, the weird mix of oil names doing down relatively speaking today. >> we did get an upgrade and on v conviction by marriott >> that's an important issue timeshares are interest rate risk i know greg hayes is sanctioned of great hikes who am i to tell that he's wrong of rate hikes entirely >> are you not -- i don't know you are cramer, you say whatever you want >> there is something going on at jp morgan of that stock going on it was very strong yesterday some people think it is -- you
see goldman sachs? >> did you see united technology >> yeah. >> this was not a surprise, we discussed the strong possibility that the company would make this choice of splitting into three and quickly than anticipated the stock is down 5% part of that is 3.5 cost that greg hayes went into details explaining all the tax jurisdictions of what they got to do of the next 18 months and when it comes to information system and putting everything on the different platform it is not going to stop him from believing despite a 5% drop today. that's going to support what they say will be greater agility. you heard him talk about it. flexibility for each of these companies. you are a believer in this >> i am a believer i had breathe on since the ceo of duponte and that stock is
down frankly there are government, a lot of government that you have to answer to they seem to drag on and on. there is a lot of people just say okay, we had the pop and now i want to take the profit given the fact that we had the pop in dow duponte. you will get the first one >> we dade complete round trip on the round thing, not happy. i think people who buy united technology here will be rewarded and not like when cigna bought, cigna fe cigna immediately fell >> it was a good call on your part, i remember the day >> that did not get mentioned in the piece today in "the new york
times. >> kind of an interesting piece. my wife she must learn that i have a morning show. >> we shout out to g.e. and ibm and campbell and sherwin-williams is in there >> i know. there was an upgrade, the upgrade for the curing of dr. pepper ibm stands by the fact that it has much more cash flow. i do not have an answer for g.e. >> answer being what campbell soup can be like kraft. >> we don't talk enough of the disaster remember the brazilians? they run everything better can we put up a long-term of
kraft time maybe we can't because we got to show you the market here round trip on both of them the question is whether it can participate in the industry, and of course been expected the name that would come to campbell or shareholder's aides at campbell and ibm. look at that i would have put kraft pine in that list. >> brazilians can do no wrong. >> that deal was a deal too far. >> one that we always talk about. did at&t did the right thing with time warner and the cash flow is off at&t
>> that's a sign of how at&t was. >> it is more of direct tv pro provacatively. >> yesterday's rally being unwound. let's get to seema mody. >> one day does not make the trend. the dow jones and industrial is down about 200 points. blame apple for the weakness shares of apple is down nearly 2% that iphones and laptops could be hit with tariffs. over night, stocks in asia were lower and europe is lower as well for the month of november, it is notable that stock market outside the u.s. have done fairly well in the face of tariffs andthe rate hikes and emerging market is up 3% though the shanghai composite is off by 1% ahead of the g-20
meeting on friday. moving along right now is united technology of the company splitting into three marriott did get added to goldman sachs and take a look at tiffany moving lower ahead of its earnings report. investors want to know how tiffa tiffany/china business is holding up and how it is performing in luxury space like prada. lastly, the fed, very much in focus, he would be receptive of a faster rate hike if the data came in stronger we are looking at gold trading down, the dollar is maintaining its strong note. bitcoin is seeing a bit of gain here consumer confidence do at 10:00 a.m. eastern, that's something traders here will be watching closely
for now, carl, back to you >> watching oil as well. not a lot of action. jackie deangelis >> the dow took the second lower down 200 points, that's when crude turned negative. there is a strong correlation here of what the market does and what crude does. it is important to know on the levels that wti is holding well over 50 and brent is holding at 60 remember crude oil, and wti is down 30% that's because the market is evaluating things closely. seema pointed out the dollar is stronger, that's something to watch with fed implications as well and saudi arabia, record out put, these numbers have been creeping up in anticipation that some of the iranian barrels would come off
they never came off the market is saudi arabia going to cut production and scale back. that's one of the big questions that vinseinvestors will be loo forward to in the opec meeting back to you. >> dan akerson is still to come and his reaction to the president's response yesterday as we go to break, as we await powell tomorrow, dow is down 180 and s&p is down 12.
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unstopand it's strengthenedting place, the by xfi pods,gateway. which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. let's get to jim and stock trading. >> really interesting deal, canada goose the stock is down badly but i have to tell you, they did have a great quarter and if you're
bullish on retail. this that quarter was the strongest i've seen and canada goose is good in direct to consumer use the weakness to do some buying. >> good business in china, too. >> remember, they're canadian so they're not covered by tariffs. >> not to mention weather came their way this season. >> yes, and they opened a place in the short hills mall near me where they have a cold room. >> really? >> yes. >> so you try the coat on in a frigid room? >> yes not bad. smart. smart. they should have a meat locker, right? lock you into a meat locker. see if canada goose is better than, say acres t-shirt. >> what's on mad tonight >> sales force that group has been in the cloud has been in big decline.
marc benioff comes on talks about a boost, things are good you'll hear a lot from keith over the course of the next few quarters. >> you've got marc and -- >> really? if these guys say positive things, the bear market in tech could run its course for a second unless the president -- well -- >> you're right, for a second. >> salesforce, marc benioff? doesn't matter we're going to raise interest rates on china, david. >> sounds like a good plan, boss. >> what, did you call me a name? >> i did not. hawahat was that >> tt s in print. >> we're back in a minute. we so and through retirement. so you'll still be here to help me make smart choices?
fab er f faber and mike santoli sara is off today. the president threatening to slap tariffs on all chinese imports, that would include the iphones. breaking up, biggest laggerd on the dow ceo greg hayes exclusive on the deal. >> general motors under fire after announcing job cuts. dan ackerson is with us exclusively this hour. >> let's get to steve liesman with conference board numbers. >> consumer confidence right around 135 a drop. some economists say this number is sensitive to stocks also the idea that it remains at
a very, very high level. it's worth pointing out that these numbers, even reduced numbers are quite a bit lower. just looking for the expectations number, 111 down from 115 and the current number is the one that is the one that if you were going to follow for any kind of look at all about whether or not there's any recession or downturn indicators, that's the one you would find and that looks down just a little bit from where it was previously richard claret, vice chairman of the fed, was speaking earlier, saying rate hikes are still necessary but the real funds rate is just below the run ultimate destination for the policy obviously, carl, listening to fed chairman jay powell tomorrow for any sense that he's willing to push the pause button if not in december, then 2019. carl >> markets, as we said, are lower, following yesterday's big
rally as trade tensions with china continue to escalate the president speaking about potential tariffs with the wall street journal saying, quote, if we don't make a deal then i'm going to put the $267 billion additional on. jp morgan, interim director at fidelity david, we've got not just clarida, but any color changing from those four? >> you're looking at fiscal policy, the economy and this dynamic and they say we think growth will slow down next year. inflation is not even a problem. wage growth, that's consistent with inflation around 2. i think the fed is saying, look, we think growth is going to be okay it doesn't feel like inflation is going to be a problem we're getting very close to our estimate of neutral. perhaps over the next couple of months they'll begin to signal some sort of pause
that's been our view all aulg and a hike in december, two hikes next year brings them to neutral and we get a breath of relief from our friends at the fed. >> they're still out there with calls for four more hikes, five in the case of goldman did today change your view is it changing the overall consensus, the rhetoric we're getting this morning >> it does, you know ultimately, everything comes down to the same three things i always talk about. earnings, liquidity, commissions and at what valuation those two realities are reflected. back in january when the markets sold off, it was just the stock market credit spreads were well behaved. isms were making still new highs. so that was never going to be enough to sway the fed but now in recent weeks, you know, credit spread s have gone up not in a huge way but from 300 up to 425. stock market is down tips break, dropped meaningfully
as david just mentioned, inflation is not an issue. the fed has much more cover now to, you know, not stop its hikes but to slow them down and maybe instead of five, as the dots suggest, maybe go to three or four instead of doing four over six quarters, they do three over eight quarters and, you know, one lesson we've learned over and over in this rate of change world is that less tightening is the new easing, right? in 2016, the fed kept tightening, but it slowed down its track. and that was enough for liquidity conditions to ease up, the dollar to come down and the markets to reflate if the fed does the same thing now, that would be a significant lift for the market in 2019 and, you know, the 1994 cycle, even though that was a very long time ago, was instrumental in how that dynamic worked out. >> yeah. you know, david, the 1994 example, i think, is the one people are looking at .2%
corrections. it's also the one time when the fed paused and it worked out great. >> exactly. >> greenspan probably earned his whole reputation in the first half of '95 by cutting rates six months later i wonder to what extent the market has built up its expectations and that's all that's really needed is a slowing down of the fed and everything else will be fine. >> it does feel like a little bit like the market is expecting the fed to get it right. to your point, the historical record shows us the fed more often gets it wrong than right when it comes to normalization of policy. the biggest consideration where we sit in terms of what the fed is thinking, given that inflation isn't really a problem they'll be watching any wobbles in growth and i think we can come back to the lessons we learned in 2015 and 2016, that while the global economy and the stability of the global economy isn't necessarily a direct mandate of the federal reserve, it is something they pay attention to if you see further slowing, that could cause the fed to take its
foot off the gas it could potentially affect the u.s. and i think all eyes will be on the u.s. economy it's been the star performer this year and the fed probably quite sensitive to that. >> what should i make of the plunge in the price of oil is it reflective of expectations that david's at least question there that global growth is going to slow from here? >> i think part of it is, you know, demand it's just the market it may not even be actual demand but certainly growth has slowed globally, especially in china but also in europe and also in the u.s. isms are down in growth, next year maybe closer to two, down from three or so so, clearly, that is being priced in. there's been some supply issues. but i think, you know, all of that may be explained as $10 price of oil but the technical selling, there's a fundamental story, pricing in lower growth and trying to figure out what the fed is doing there's a technical picture. back in january, february,
everyone short the vix that got basically a big margin call this time it's everyone long the momentum trade but also the bank loan space, which was a very hot space in credit and also long crew if you look at the commemorative traders data, the net longs are way down a good chunk of the $25 decline in oil can be explained by technical selling. certainly part of it is fundamental. but, you know, to david's point, it does come down to where earnings growth is going to settle next year vis-a-vis where the fed is going to end up earnings growth estimates for 2019 are at 10% in terms of its growth rate and they're starting to track the typical progression, which is downward, because estimates usually start too high and then go down from there. and if history is any guide, we may be at 5% or 7% earnings growth next year
and so that, in the context of a fed that maybe instead of five more has three more and a pe that's at 15 you know, there's a lot -- there's not a lot not to like about that picture even though it's a far cry from what we were enjoying, you know, six, 12 months ago. >> i wonder, david, i would love to get your take on household balance sheet stuff. yesterday in minneapolis, fed does a piece on farm bankruptcies, double the level of a few years ago the journal does his piece on refi cashouts. that seemed to come out of nowhere. what's going on? >> i think what you're seeing is this backup in rates is beginning to cause a little bit of stress. to jurrien's point we need to watch what's going on in -- >> even with confidence? >> i think it's tied much more to the job market than the stock market as credit spreads move higher and it becomes more challenging you'll see these things bubble up to the surface. >> are we not kind of overanticipating them getting to an extreme that cashout number -- look at
the mid 2000 numbers in terms of the volumes people were taking it was vastly higher and even the gapping out of credit spreads it's interesting that we think we have to hunker down it till the end of the cycle not only is the cycle going to go more but we can get three hikes in next year and not be too hurt by it >> it's popular thing to say that we're at the end of the cycle. i am of the view there's still more room to run. >> you mentioned earnings estimates. where are yours right now? >> i don't have my own earnings estimates. i track the consensus numbers and how they progress over time. that's where the value is because the market reflects what is known that's the efficient market theory obviously, we have 24% growth rate in 2018 q3 was at 26%, far outpacing what i think people were
fearing. 2019 was at 12, it's down to 10. if i add -- if i average the progression of the past five years we'll end up at 5% or 7%, and that's the historical trend growth rate. so, again, vis-a-vis, where liquidity is, easing where the fed gets closer to the end and 15, 16 multiple, that's the value proposition for the stock market it's not gang busters but it's not terrible either by any stretch. >> i think some people would be happy with it. we'll find out we'll know more pretty soon. david, jurrien, thanks, guys. >> thank you. >> cyber monday sales surging to a new record high. courtney reagan has a full retail rundown for zblus you're not sick of retail yet, david? shopping season off to a really strong start, e-commerce heading records almost every day here, traffic softness in store we've
seen so far. cyber monday made history, largest ever online shopping day in the u.s., growing 19% last year to $7.9 billion but that growth rate is lower than the rates on thanksgiving, black friday and even small business saturday, according to adobe amazon is a big part of that online growth. around half of online sales go to amazon on nonholidays consumers bought 180 million items over the five shopping days that started thanksgiving through cyber monday becoming amazon's biggest day in its history. kohl's calling out thanksgiving and black friday as record online shopping days online sales are good, of course, but typically lower margin, especially if the retailer is paying for the shipping one offsetting factor is buy online and pick up in store, which target and kohl's have said grew by large amounts while we don't yet have a total
for physical retail, shopper track says store foot traffic fell about a percent still, jeffries says, quote, the consumer is strong in trading up and holiday results are tracking in line to better than expected thus far we're only at the beginning of some of these results and details, carl. we'll bring you more when we have them. >> a lot of data to curate thanks, courtney, back at hq. united technologies going from one company to three. we'll explain the move and impact to tariffs coming up next. gm in the hot seat after announcing those layoffs and shuttering five factories in the u.s. and canada. >> we don't like it. i believe they'll be opening up something else and i was very tough i spoke with her when i heard they were closing and i said, you know, this country has done a lot for general motors you better get back in there soon. >> what's next for gm and the future of american industrials
i am a techie dad. 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. welcome back to "squawk on the street." united technology announces plans to split into three companies by 2020. the biggest deal ever completed in aerospace with the closing of rockwell collins we talked about the deal, m & a, the fed, rates and how tariffs
are impacting consumers. >> china will take one out of every four aircraft that's built in the world this year, right? china is an important part of the world economy. we have to figure out a way to deal with the chinese. i'm not a politician i'm not going to get into that debate, how best to do that. i will just tell you my own view we've seen this before, is tariffs don't work if the idea is to bring jobs back, it ain't gonna work. >> are you worried about your business then, given the prospect of 25% to 10% in the not too distant future >> look, do i worry about tariffs? do i worry about that? of course. i think you can only raise prices so much before you impinge on demand. you also create inflation in the economy. all those things that we try to avoid doing. i think trying to find a rational, reasonable solution is imperative here in the near term. >> really quick, whether it's tariffs or cost inflation or rates, is the buyback picture
changing overall in corporate america? >> there's lots of cash out there, right tax reform has freed up a ton of cash we brought back more than $5 billion this year. we're using cash to deleverage many other companies are using it to buy back their stock i think, you know, the valuations, while they look heady today, next three to five years growing business at a pretty good clip there's still opportunities to buy back stock. >> back to the spins themselves, that is the plan now, but is there a possibility that you could participate, perhaps, in m & a, via one of the spins? and there's some talk that carrier could be attractive. would you sell something out of one of the divisions >> couple of points. carrier side, we are in a process of looking at our field business, about $2.5 billion low-tech business. about 10% margin business but
not innovation business, not a product-driven business. we've been talking about a potential divestiture there. as far as m & a goes, we announced the spin in march and three months later we announced the sale to lockheed martin. if someone else comes forward with a compelling offer we'll certainly listen the hard part for both carrier and otis elevator is that the markets are relatively concentrated anti-trust risk is tough 13-month process, we're very -- what we thought was a straightforward combination. i think you have to go in eyes wide open in terms of the risk profile. >> last question before i let you go jay powell, rate hike, three, four next year any feeling that the economy will be humming that there's no worry about those rate hikes >> my fear is not rate hikes
it's not that big of a deal for us but i am concerned with full employment that there is inflation on the horizon we've got 5,000 job openings today. we're trying to hire 35,000 people here in the next five years. it's tough to do so i think there is inflation in the background and i think labor will lead the way if we can't figure out a way to solve that. >> ended the interview, david, by saying pick your poison, rates or tariffs you have to deal with something. >> you do. making the point that it's only 10% of their overall even. stock getting hit seemingly on what was a number that was higher than people anticipated in terms of the cost of spinning all these businesses, separating the company which they estimated between $2.5 and $3 billion. couple of investors telling me that is more than they anticipated. he provided details on that, talking about all the different tax jurisdictions, things that have to take place, the hope
that perhaps they will be able to come in below that number, mike but information systems, just a lot of things that need to go on when these spins occur of course, also, that gives you a sense as to why it's going to be 18 to 24 months. >> duration is another thing, right? it's a limbo period for the company. it gets to be about when and how much the spins are going to cost i don't think the market's verdict saying this is not a good idea. it's obviously just now kind of what do you do now for the next year and a half? >> it is sizeable. we talked about the conglomerate model, carl. when you think about it, they're creating three companies that will roughly be s&p 200 companies, sales 204 current rank and carrier 138 at 18 billion in sales and utx, which includes the collins deal and utx. 39 billion in sales will still be a number 71. >> i love this line about investors told us, look, we'll handle the diversification don't try to handle that for us.
>> that's been the line for a little while now i think they're coming around because each of these have such scale. of course, with the m & a happening in aerospace it did make sense. >> well, mr. buffett, ask him. ge is in the process of at least unwinding itself to some extent. >> the exception to every rule, buffett. but also 3m, a different animal in a lot of respects you always wonder when it's going to get a little bit of depression shares of apple under a bit of pressure after president trump threatened to slap tariffs on all chinese imports, including the iphone apple and microsoft neck and neck for the most valuable company in terms of market value. apple still holding the tospp ot by $6 billion. "squawk on the street" back after this
energy sector spdr has been tracking crude lower, down about 15% from its high. joining us now post nine to talk about oil and the stocks, managing director tim resvan also with us, head of energy resear research doug, how do we characterize where crude sits are we working through russia supply or is it a new range for oil? >> we don't think it's a new range. we think that price is headed higher on the demand side these edis have declined in six consecutive months i care about that because they're pretty good proxies for all demand and that's a headwind. make no mistake we have to have better economic growth for the oil market to do better. simultaneously, we have north american supply surprise to the
upside, with the expectation that we see lower flows from iran, and we think opec is aware of the situation, that their market committee meeting a couple of weeks ago suggested 1 million barrels a day of production needed to be cut for 2019 i think they'll cut at least that amount next week at opec. if that's the outcome, i think energy stocks will end up doing pretty well but it could take a while for the market to rebound. >> tim, do you feel that way as well, that oil is somewhere near a near-term low at this point? >> sure. i think what's interesting for the sector right now is the theme that people are looking at is resiliency. we look to 2019, these companies have talked a lot about free cash neutrality and improving growth with the commodity under stress it's going to be interesting to see which companies can deliver on that message. it's a very easy dialogue from corporate management when oil is
65 to $75. now that we're here at 50, it will be very difficult and execution will be paramount and they're anticipating how budgets will be and how companies are going to plan a strategy. >> does 50 stress a big number of players >> it does not stress. look at 2017, wti was at or below 50 for much of that year companies have learned to position themselves for that environment, but the big mantra, again, has been about returning capital to shareholders, being prudent. you don't see a lot of free capsule in that environment. >> does that mean production maybe stays the same or goes down in the u.s. where are we, 11.7 million barrels a day or something right now? >> we are pretty close to that it doesn't mean that production isn't going to increase. it is going to increase. after having said that, i think investor focus has shifted away
from growing production and instead to growing value, which is what the industry hasn't done during the past decade to tim's point for those companies that have been more disciplined with their spending, promise to increase value and returns on capital, their valuation has increased. they're being rewarded in the stock market these are the pledgers we refer to we still like bp and shell here and conoco phillips on the production side. those will work well next year. >> downgrades on some mega caps because of weak correlation to the underlying commodity, right? >> yep. >> you don't chase exxon automatically? >> we think these stocks have decoupled from the price of oil. so higher oil prices were negative for a lot of these companies, not positive. for the pledgers, higher oil prices were positive not negative that's the reason they've out performed and will continue to out perform. the big oil companies, shell and bp at 6% dividend yields they're repurchasing shares,
what's there to be afraid of >> credit might be one thing i'm afraid of, tim, should there be concern on the credit side >> no. we think there's very select -- where companies had maybe been on life support and have started to emerge. companies that didn't have the strong asset base generally filed during the downturn. the company that have emerged, companies have largely been able to term out debt we don't see a lot of imminent issues for companies in the small and midcap space. >> this investor focus on being disciplined and returning capital, things like that, does it reflect the fact that there's an overarching fear that this is the last energy cycle that's going to look like this? we just don't know coming out of the next downturn what demand is going to be like, what the industry structure is going to be like? >> well, so, i don't think it's the last cycle that looks this way. we think that the price of the
industry is probably 60 to 70. that's probably where we're going to head simultaneously, companies have to be more judicious with their share of funds or they'll not be sponsored by the investment community. we think that's what's changed creating economic value and if so they get rewarded on the stock market for those clinging to the growth of their predecessors they've been disowned and i think that's going to continue. it is different. >> little more of a maturity in the industry. >> i think so. >> doug and tim, thank you appreciate that. >> you're welcome. over to sue herera now back at our headquarters for a news update at this hour. sue? >> good morning, david good morning, everyone here is what's happening at this hour u.s. military says three american service members have been killed in a roadside bombing in afghanistan's eastern ghazni process identities were not provided pending notification of their families three other service members were wounded when an improvised explosive device detonated near the city of ghazni, the
provencial capital. releasing video of three crew members of the ukrainian vessels seized on monday they were charged with illegal border crossing. saudi crown prince mohammed bin salman arriving in cairo, welcomed by the egyptian president. it is his first trip abroad after facing international outrage over the killing of journalist jamal khashoggi back here at home, the fda says it's now okay to eat some romaine lettuce. the contaminated lettuce appears to have come from the central coast region of california the industry, meantime, plans to put harvest dates and regions on the labels to help consumers that is the news update this hour i'll send it back downtown to you, carl. >> sue herera. quick programming note as we go to break. former snap chief strategy
officer imran khan will be with us, his first interview since leaving the company and then we'll sit down with andy jassy, an exclusive right here on cnbc. each day our planet awakens with signs of opportunity. but with opportunity comes risk. and to manage this risk, the world turns to cme group. we help farmers lock in future prices, banks manage interest rate changes
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welcome back to "squawk on the street." i'm carl quintanilla with mike santoli and david faber. dow down 224 we've recovered some of that s&p briefly went green before dipping briefly, shallow into the red. >> because of utx being down, 6% after that rally yesterday let's bring in art cashin. we were talking before this. it's an interesting week in the sense that we have news we know is coming toward the end of the week and/or the weekend. >> right. >> between xi and trump, china
being a key concern and fed talk coming as well. >> absolutely. you get clarida this morning he had sounded somewhat dovish in his first presentation before that this morning, it was the two-handed economist on the one hand, this could happen on the other, that could happen. so they got nothing out of him the feeling had been if he was dovish again, that might compel powell tomorrow to either rein him back in or let him alone if he let him back in, that would have people looking. the general feeling here -- and i'm not just talking my attitude -- you guys know that i'm a bit of a bear on yields. they're locked into the december hike f they walked away from that, everybody would think they were capitulating to the president. they're locked in to december. i don't know what's going to happen after it. you're beginning to see groups like the home builders and
others saying hey, wait a minute you know, we're in the lead for this we're already starting to see cutbacks please take careful note of who we are and what's going on and, of course, after general motors move, what's going on in the automobile industry is getting high profile and a lot of talk about the loans there. and then as you alluded to at the weekend, trump and ge will get together trump is talking tough but we've kind of seen this movie before, okay as he gets closer to the late negotiations, he seems to talk tougher and tougher and hoping you can bluff the guy into moving a little bit. for that reason, even though he spoke rather gruffly, the markets didn't take stock except for apple. >> other than that, not too much. >> right. >> you mentioned it's a tough week to get some kind of
capitulation in the market because we have the fed speaking and this other known catalyst out there. do you think the market is in need of a full capitulation? friday's low in the s&p, low octobers and saying maybe it looked like it was less selling intense sbit maybe yesterday's rally means something? >> traders are always looking for the easy out so if you have capitulation selling i wouldn't have to think too hard about it and i could say things are okay. the market doesn't usually gev you the easy out but nonetheless we're always looking for it. so, no, i think you're right i think they're in relatively good shape the analogy i used before is a patient after the heart attack i feel better but do i feel well enough to walk five blocks let me see i walked two yesterday so they're kind of taking their own pulse, checking their own temperature. if we get further pullbacks, the first thing the viewer should
look for is do we make a lower low than this morning's low? and that will be a sign that okay, you're vulnerable to a little further selling if, on any pullbacks, they hold above that low, that will encourage the bargain hunters and others. >> your thoughts on rates overall? i think back to last year, the year before where consensus was for several hikes. you said they would be lucky to get one. you were right what's stopping you now from saying the same? >> you know, you've got -- powell, i think, is trying to be very open. others, his predecessors and some people on the fomc had talked about the plan of getting to neutral, having several hikes. powell is kind of shrinking back from that. he is already talking about going back to data dependency. let's see how the economy moves. let's see how things go. so i think he is there do i think that they may wind up
being handcuffed yeah but we'll wait and see they're all looking to do something. they don't want to get accused of letting inflation get away. the more i hear people like the housing people beginning to cry already, i think rate history is going to be on my side. >> art, thank you. >> my pleasure. >> art cashin. when we come back this morning, closing up shop general motors announces its plans to close multiple plants, thousands of job cuts, obviously. we'll talk to former ceo and chairman dan ackerson about the future of atth company and the u.s. automaker economy at large. chasing after short-term returns? instead if getting caught up with the crowd, the investment managers at pgim take a long term view. uncovering opportunities for alpha across public and private markets, while anticipating unforeseen risk, has powered our rise to a top ten global asset manager.
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>> keeping a close eye on defense etf, ita, that ticker on pace over the past four. united technologies, no surprise, leading that way to the downside take a look at other key defense names pushing that industry lower as well. northropgrumman. raytheon looking to snap two straight weeks of losses, very much a focus today. back over to you. >> absolutely, dom thank you. shares of gm giving back yesterday's gains. that company will unallocate plans, cease operations in two more, reducing its workforce, about 14,000 employees the president sounded off on that news. >> we don't like it. i believe they'll be opening up something else and i was very tough. i spoke with her when i heard they were closing. and i said, you know, this
country has done a lot for general motors you better get back in there soon, that's ohio. and you better get back in there soon we have a lot of pressure on them, senators and a lot of people they say the chevy cruz is not selling well i said then get a car that is selling well. >> canada's prime minister trudeau weighed in on twitter, saying he spoke to mary barra to express his disappointment dan ackerson, appreciate you coming on to talk about it today. good morning. >> good morning. how are you? >> good. i'm curious, you know, some people are reading this move as some kind of comment about a coming of an economic slowdown we talked to lutz on the air who said it's more about changing tastes, consumers preferring crossovers how do you read it >> two ways to look at it. a, the sar average, sales per year, is declined by 1 million units in the last 12 months. there is some weakening.
that might be an indicator leaning forward but fundamentally, this is -- the industry is oversupplied right now. gm's plants are running at about 70% capacity you can't produce cash to fund your future ambitions, moves that are necessary to position the company for the long term. so it's more complicated than one might think. >> i guess i'm asking would this have been any different if these plants made the sierra instead of the cruz or the impala? >> well, there's another dynamic that's going on at the same time if you go back just five years ago, four or five years ago, about 50, 60% of the vehicles made in america were cars. that's now dropped to 20, 25, 30%. it's a precipitous drop and suvs, crossovers and trucks have
gone from 50 to close to 70% you have to adjust and that means there are certain plants that have been focused on cars it isn't the cruz specifically, but to give you an idea, just five years ago when i was in place, there was a three-shift effort put on at lordstown today they can barely support a one shift. and the dynamics, the decisions aren't made in the oval office or the board room or on the factory floor. they're made around the kitchen table. the consumer is driving these numbers and the market drives the decisions by the company and the company is just -- they're adjusting to reality and that's sometimes a hard decision it's very difficult to sort that through over the long term. >> dan, do you think this series of measures gm announced yesterday then, given the industry overcapacity that you mentioned are going to be sufficient for gm? are others going to have to essentially do the same kind of
shrinking the manufacturing footprint that gm is doing right here, especially given, obviously, steel price is up and the overhang of tariff threats >> well, already, ford and chrysler have announced similar actions and i think gm has taken it a step further because the second dynamic besides the marketplace is operating is the future you need free cash flow in order to fund the future of the company. who knows what the new marketing dynamic will be? we don't know how the millennials will use mobility generally. and gm has had to put half a million dollars in the lyft, funding cruz, and looking at alternate forms of ownership so, not only the dynamics of today's shift to trucks, suvs versus cars, because what happens is the industry is so evolved that trucks, suvs and
crossovers give you the utility and at the same time they've been upgraded where they give you the luxury of a car. so there's a lot of moving pieces on the board here and i think gm is playing it for the future and they're going to -- this is something that old gm didn't do. they kind of stood by and waited for the obvious to become patently obvious and what's happening now is that the company is trying to anticipate change and its dynamic i don't know that management knows precisely how it will play out over the long term they need to become a leaner, faster, more sxonsive company. >> the there were some who have seen autonomous vehicles significantly mitigating a need to actually own a car and, therefore, having real pressure on overall sales
is that a future you could envision >> i think it's inevitable you'll see autonomous vehicles much more prevalent, factor to play for over the longer term. and ownership itself i mean, you know, you can -- you've got uber, lyft, mavin, partial ownership. it's hard to guess where it's going to go. you have to address different aspects of the problem and i think that's what the company is trying to do. >> dan, how is the company -- how are investors supposed to respond to a president who says -- who tells the journal that they're playing around with the wrong person, that they better damn well put a new plant there very quickly >> at the end of the day, we have a free enterprise system
and the decisions will be made, as difficult as they are, for the long-term survivability of the company. these decisions weren't made back in the 1990s and early 2000s and the inevitable came to pass and the company went into bankruptcy as i used to tell the management team, we went bankruptcy as i told the management team, we went through chapter 11, not going through chapter 22, i.e., another bankruptcy regardless of politics involved, you have to make the best decision to give you the best prospect to succeed in the marketplace. again, this isn't a decision made in the oval office or board room, it is being made in the showroom with customers and you can't ignore consumers and what preferences are for the type car, crossovers, trucks, suvs are clearly driving the marketplace today, and the company is simply adjusting to that i'm sure -- >> dan -- >> i'm sorry, go ahead. >> sorry what are the other challenges that the industry is facing, a
backup in interest rates, the industry has been in this treadmill for a long time. people buy as much car as they can finance. is that something that you think is a lasting issue now is there going to be a big change in how cars are bought along those fronts >> well, again, there are alternate forms of ownership you can have shared ownership, maven, a lot of different variables. about 20, 25% of the car buying public today as i speak are credit challenged. one of the first things the new management team did post bankruptcy, we reestablished a financial arm, gm financial. it has been a successful acquisition. again, you have to play the game that's on the table today and you've got to try to anticipate what the games will be played, how it will be played in the future. >> about the future, you're
indicating how gm is positioning itself to compete, but that future is joined by uber, lyft it is different than they played with major manufacturers for years. any sense what or who will be the winner >> i think the winner is going to be the company that's able to adapt as fast as possible, anticipate the future, and be right. so it is like a game of cards. you have to play the hand you're dealt. right now, gm is trying to change, they're looking for a couple more cards, trying to show more flexibility, trying to free up cash flow in the future so they can play the electric game, so they can play the shared ownership game, and it is critically important that the company position itself while healthy, not in crisis that was the past behavior of general motors, i don't mean to be too critical here, but they
let events overcome them i think this management team is doing absolutely the right thing, they're trying to anticipate the future and they're trying to take bureaucracy out of the management team. at the same time, they're trying to address that 71% of capacity, that's what is being used today in their plants. you can't run a company this size, this magnitude, of this global reach and the primary market is only 71% of capacity >> dan, good comments. really appreciate it hope you'll come back. the story is going to evolve in the coming weeks and months. appreciate it. >> thank you. let's send it to morgan brennan for a look at what's coming up on "squawk alley." >> hey, david. shares of apple are lower again today after comments from president trump that he might put tariffs on iphones and laptop computers more pain for stock that's already down 20% just since the start of november. one of the things we're going to be talking about today, tech,
trade sensitive sectors are underperforming. let's drill down on materials. among the names leading to the down side, nucor and paint giant. uyck downtown to you gs. >> dominic chu "squawk alley" is next don't go away. there's a lot to love about medicare. there's also a lot to know. part a that's your hospital coverage,
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