Transcripts For CNBC Squawk Box 20140930

Loss for july. Down in two of the last three months. Its been worse for technology stocks. The nasdaq is heading towards biggest monthly drop since april. If you check out the futures this morning and take a look at was been happening, youll see there are green arrows on this last trading day. The nasdaq up by close to 50 dow jones up by 50 and s p up by 6. In corporate related news out of china, the country giving the green light to apple iphone 6 after beijing addressed security concerns. The iphone 6 will go on sale in china on october 17th. Apple did promise the smartphones dont have any back doors for security that could led u. S. Agencies access data for users. The European Union slamming apple today, saying its tax deals in ireland broke rules. Apple will have about a month to comment. Apple is one of those good names. Its up nearly 8 this quarter. After all of those concerns people had right after the phone came out, about bendgate or whatever we were calling it at that point. Still up 8 . Do we believe the privacy and Security Issues that apple built into the new device, which is to say that nobody can get into it was built for other countries and not ours . Folks in the United States screamed and hollered government folks screamed and hollered about i thinkite smart all the way around, protect yourself from anybody so i am not longer going to be an arbiter. Here is the jibberish. Why would any company want to be responsible for that . Thats the question. I wonder whether they did it for the chinese, when they did it for the government, or by the way, whether there are other companies to say we wont allow this because we want to have devices to this access. And theres been arguments that have been made if a child, for example, was kidnapped and you were the mother of that child and you wanted to be able to find and they knew the kidnappers phone but they couldnt get on to the phone, it would be next to impossible to do it. Thats pretty much the example that folks at the cia and others have given of heart warming example, heart warming stories three minutes in this show at 6 00 in the morning. Im just giving you all of as an objective journalist, all different sides of the story. I thought it was a brilliant move to say i am no longer going to be the gatekeeper you guys have to work this without without going through us without some easy sort of way coming up with this. You would think there would be a you would think there would be an easy gps solution for a situation like that. But i would expect other companies to follow suit. Its going to be much harder over time. The kidnapping example i wonder if apple would eventually offer a function like that to say, okay if this is a phone for a child and you want it turned on maybe you could do Something Like that. I dont know. Oh for a child, yes. No its more if they had the phone number of the kidnapper, at least thats how the example was provided. This whole week has its a liam nieceonasom movie, by the way. A big day for microsoft, the Company Holding an event in san francisco. Thats coming up at 11 00 p. M. Eastern time. Its to showcase a first look at the windows operating system. Windows 8 raised eyebrows when it did away with the iconic start. Remember that and other desktop features. Shares in microsoft are up more than 24 . Ford slashes its profit for 2014 and 15. There are bigger losses in russia and south america. Fords cfo is still striking an optimistic tone. Back over the previous four years, we made 8 billion or more in each of those years. What were talking about in the guidance we gave today, for the reasons mark mentioned, is were looking at about a 6 billion year with very strong cash flow and continue to invest in a future that as we outlined today is going to be much better in 2015 and growing to you know really impressive levels by the end of the decade. Optimistic outlook, shares falling sharply on the news late in yesterday anticipates trading session. We will talk with phil lebeau and a ford analyst in a little bit later this morning about all of that. Lets get a check of the markets this morning. Futures look like they are indicating a higher open this morning. Dow futures up about i about 50 points. S p futures up by 6. Lets take a look at oil prices. Again, last trading day of the quarter, wti at this point up about 19 cents to 94. 76. Certainly off some of the lower levels that we saw last week around 92 and change. Lets take a look at whats been happening with the tenyear note. Yesterday with markets, this morning its pushing back up about 2. 5 at 2. 52 . If you check ott whats been happening with the dollar it is up across the board this morning. The euro trading at 1. 26. Dollar yen at 109. 63. And gold prices, which looked like week like they could potentially hit 12 an ounce, down 8. 70. 1,210. 80 an ounce. Pro democracy protesters in hong kong are continuing demonstrations. This despite calls for the government to cease the civil disobedience immediately. Larger crowds are expected tomorrow, which is Chinas National Day holiday. It looks from the video here from our point of view, it looks like these protests are only growing. Thats right. I was jump just speaking to one of the protest organizers. Given that tomorrow is a holiday and day after, its a holiday here in long coming. Were looking at 100,000 plus tonight to come down to the main protests site. Weve been hearing from the chief executive, as well. A lot of people are saying this could last for a while. The chief executive reading off a sheet of paper which is largely the hong kong electorate basically saying and urging this illegal gathering as hes calling it. Hes saying that theyre going to stick to their guns, beijing is so the executive council, which is a higher parliament here in Hong Kong Beijing itself, the chief executive, will continue to decide how and the leader will be electriced in the future. So hes saying that they cannot offer any sort of solution here and those looking for Electoral Reform will be disappointed. One piece of intelligence i want to pass on one piece of concerning news i just got a few minutes ago was concerns of a chinese gang looks like the protest leaders are warning those on the streets to be careful as there have been some reports of incidents and injuries in other parts of the city as well. Back to you guys in new york. Okay. Thank you so much that. Now were going to get some reaction from the mainlessand. Eunice joins us from beijing. Hey, guys. Beijing is taking more aggressive steps to control the information here about the hong kong protests. In fact, actually, our conversation right now cannot be seen in china at all because of the government today decided to black out all of the broadcasters including at cnbc. That is one of the measures this they took recently. Theyve been vetting the internet. They blocked instagram, theyve been stopping and centering certain terms on wi chat and wave book. These are social media apps. Basically what were seeing in the press is a focus on the costs to hong kong because of these protests. Mainly, theyre talking about how schools have been closed also all these wall street banks that have offices here. Theyve been additionally in inconvenience inconvenienced. Theres been a lot of focus on how the Hong Kong Market has fallen and how theres legitimate teryness because of the protests in hong kong. Beijing does have a huge challenge on its hands. It is not seen as very tolerant to any sort of dissent, especially this group of leaders. And they are faced with tremendously hard choices from their perspective. On the one hand they could decide to back down. But if they were to do that they would be seen as potentially seen as weak potentially im boldening other types of protests across the country. But if they decided to crackdown, they can potentially see International Condemnation as well as alienate the entire city of hong kong. So they from their perspective have a difficult situation at hand. A lot of people have been focusing on national day tomorrow because people are wondering how thats going to factor in. And as susan was saying a lot of people believe that the protesters could be emboldened but from beijings perspective, it could be terribly embarrassing for them to crackdown on a day that is supposed to be about national unity. Guys. Eunice i just wonder i know this has been a long time practice that the chinese block off broadcasters and try to shut down social media on days when they dont like the news flow. Is that a practice that is less and less effective over time particularly as people figure out how to get around those things and find out other information on the internet . Well it is less effective if youre talking about over the course of years. But it actually is relatively lyly effective just because a lot of Chinese People when youre on the street they dont necessarily its surprising how many people dont know whats going on in hong kong. And how effective or true it is from the government to have this apparatus at hand where you start to type in or put in little key words about hong kong or a lot of it just disappears. So it is effective in that way. I thought it was interesting that yesterday there were a lot of terms that were allowed. And there were more controlled social media discussions that were going on. But a lot of that was like i said, its very controlled. But i thought it was an interesting sign that the government knew that they couldnt completely clamp down on the conversation because there are so many people who are keeping an eye on this and wondering whats going on. It just seems to me that suddenly any of the television stations i normally watch were black, i might immediately go to the internet and try and find out why. Eunice, thank you very much for joining us today. Oh do you have time for one more thing . Sure. I wanted to say one other then opinion what was interesting today, too, i thought in hong kong is if you talk to people in hong kong they said that the police were not present. So unlike over the weekend where there was tear gas and, you know theres pepper spray, on the streets in hong kong even though there are these huge protests, there really isnt a large police presence. And so tell you about the hong kong protests versus in london in hong kong the protesters are incredibly, like civil. They wont go into looting. They dont have the republic ewe tagdz. Always picking up their own garbage. There were all these signs that were really i thought kind of cute and told you about the long coming protester, it would say Something Like fighting for democracy, you know apologies for the inconvenience. It was just all of these signs all over the place. And i think what was interesting yeah the polite protest protester. My sense was that the strategy was to because they crackdown so much over the weekend, that theyre trying to push back. Beijing is potentially letting this thing settle on itself. So people say what they need to say and leave the premises and that would be a natural way out of the situation. Polite protesters and potentially polite crack youbs, too. Isnt it quite ironic about how beijing wouldnt let the iphone 6 be sold in china unless they prevented the back Door Security measures. Now we hear from susan and eunice that instagram and others tv stations are being blocked. It happens fairley frequently there. Those images of protesters in hong kong catching the attention of global investors. Could this be the geopolitical event that finally sparks a selloff . Joining us right now with that is lisa challot for Morgan Stanley wealth management. Also patrick chovanic. Patrick has extensive experience in china. Why dont we start with you. What do you think of these protests 17 years later . Its a real standoff. It is a big test for seexi jinpings leadership. Are they patient enough to allow this to develop and maybe ease off a bit or will they see it as such an affront that they have to step in and crackdown . Over this past evening, theres been some good news and some bad news. The good news is beijing has come out and said we have full confidence in the Hong Kong Government which implies that theyre not going to send out to troops immediately. Thats good. But the Hong Kong Government saying theres nothing to negotiate about. This is a settled issue and were not going to talk about it. Were going into a holiday and the crowds are only going to get bigger. And youre heading into a potential much bigger standoff that leads to some bad news down the road. Thats right. Lisa you think this is the situation . We have seen so many geopolitical issues that have surprised us but the markets have kind of shaken off the news. Do you think this is different . No i dont. This is still a political event and its one that from our perspective doesnt have an Immediate Impact on the economy. What folks are concerned about right now is what is the growth rate in china, to what stunt does the slowing in that growth rate going to cause deflationary pressures around the world. I think thats what investors are focused on. Obviously, this is an interesting development, but its very, very early days before we can start as investors worrying about how a Pro Democracy Movement might destabilize broader Mainland China or jeopardize hong kong as a gateway, if you will. Lets add all of these things up if you will. You have china slowing down pmi numbers overnight proved that once again. You have europe slowing down as we heard from ford theyre worried about whats happened there. You had argentina being held in contempt of court. You have potential slowdowns in north america. What happens as you look at the middle east and the chaos there . Whats the Tipping Point . Yeah look i think this is a question of where does Global Growth go . The United States has, in many ways decoupled over the last really two years. And the question is whether we can continue to decouple from some of the slowing and the rest of the world. What are you saying . I think were just at that point. Where if we dont see stabilization in europe if we dont see a stabilization of the china growth rate overall Global Growth could be in jeopardy for next year. But at this moment i think that were still optimistic, that the ecb will stabilize europe and that things actually are going to be better a year from now than they are today in terms of the Global Growth outlook. Patrick, do you agree with that . I agree the big question is where is Global Growth going to come from . But i dont see it as a decoupling story. I see it as a rebalancing story. In china, a lot of people are concerned that the slowdown in china, which is deepening, a lot of people see that as a big negative for the u. S. Economy. I dont. The chinese economy is no more a driver for the u. S. Economy than the japanese economy was in the 1980s. And when it closed actually if china is able to smausht domestic consupgz in the face of that slowdown what opens up demand for driver and u. S. Growth. This may be a bumpy path. I agree the slowdown in china is the bigger story in terms of investors. But while it may be a bumpy path its a positive development that needs to happen. We import a lot more than we export. In fact, its about four times. We ex fort about 40 billion a month and we import about 10 billion a month or vice versa, exactly. So is our bigger concern here patrick, that these protests could spread and disrupt the flow of goods into the United States . Is there any risk of that happening . No i dont think thats really an immediate risk. You know the issue in hong kong with the rising protests are local issues. The income is chinas global city. Its the Financial Center. And that creates anything that happens in hong kong casts a very big shadow on the region. Right across the bay from hong kong is guangdong. Theres always a place where they will play out. Either the protests will fizzle out and go away or they grow and expand. The proximity of where we ship most of the goods from china to here is only about 30 miles from where these protests are happening. Look i dont think were there yet. And i think if there was a decision of crackdown, the result would not be disrupg of trade. The result would be a bloody crackdown in hong kong. Theres no question of who would win. Its just what would be the aftereffects . What would be the impact of that on hong kong as a Financial Center and chinas image throughout the world . Do you agree with that . I do. I think we have to focus on what protesters in hong kong are about and to what extent it is translatable. As best we can discern, the protests so far are about rule and the extent to which youre going to have free elections and a democracy as quote unquote promised in 2017 in long coming. These are not issues that the typical Mainland China would necessarily have a strong cash mitt point of view about that would cause them to take to the streets. So i think, again, very early days, this can go in a lot of different directions. But our take right now is that this is very hong kong specific it is a political protest and one that at the moment were wagering is going to be resolved reasonablebly quickly and reasonably peacefully. Lisa patrick, thank you both for coming in. Coming up netflix making a splash with shows like house of cards and orange, can it do the same with the movie business . Plus the White House Security scramble. I dont know if you guys saw this news. Unbelievable. Big questions for the secret service as new reports of the white house fence jumper making it much much further into the executive mansion than first reported. 21. Could something that small make an impact on something as big as your retirement . I dont think so. Well if you start putting that towards your retirement every week and let it grow over time, for twenty to thirty years that retirement challenge might not seem so big after all. Boib. Morning star cutting its rate on pimco from a bronze level to a gold level, the firm citing reshuffling about outflows and reshuling of responsibilities. Cnbc is going to have an exclusive interview at 2 00 p. M. Eastern time on street signs today. That will be an interesting story to watch. Because there are going to be so many things out of the managers control on that. Theyre going to have to be more liquid than they would be otherwise. I think theyre going to have to get out in front of it. Here is the new ceo, here is the new kri o, here is what were going to bring to the table. Pimco is much more than bill gross. Bill gross was important, but pimco is a Big Organization with a lot of smart and talented people. Theyll talk about dan ivacysn. Its not just about the departure departure. Its much more than just about bills departure. Its about sort of righting the return ship if you will. Although there will be some pensions forced to reassess and take a look at it because of the change in management. Ive learned a lot about the industry in the last couple of days than i probably ever wanted to or thought that i would. From mom and pop andrew if you wanted to rebalance out of pimco yourself, buy Something Else no muss no fuss. Pension funds they have to go through an entire reassessment. Those consultants will issue recommendations. I was talking with and emailing consultants, bills competitors yesterday and they all say that if youre a consultant, probably the smart fiduciary thing to do is go to your fund and i and say rebalance out of pimco just for safety sake because we dont know whats going to happen. If youre looking and trying to figure out how this impacts the overall bond market this is a story that will play out over months, not days and weeks necessarily. The Pension Funds are really slow. Theres a lot of steps, theres a lot of legal hurdles, actually. Youve got to go through credit committees. Here is the other thing. The other aspect of the angle that hasnt been discussed is janice stock soared friday. Was this a rightful move up . I dont know. Time will tell. I got an email yesterday from someone that Morgan Stanley can not sell janice buck and the janice sales rep in the email basically said we are aggressively trying to market our platforms to be able to for you to buy bill gross. I shouldnt say janice Growth Products no janice themselves are all closed. Janus itself ask closed. They havent accepted money in years. You have to go through third parties. And you have to be approved. To get approved not if youre an individual. They to be on these i dont want to say approved lists, but they have to be vetted. They probably have to go through a credit committee. Janus is very small. Its not as if people could put their money with bill gross if they wanted to. There are hurdles that could delay them or hurt them. Pimco needs to use that time to their advantage. 2 00 eastern time. Netflix is preparing to release itself first movie through a distribution with the Harvey Winesteen company. The movie is going to be released simultaneously on netflix and selecting imax theaters. In washington, d. C. , the secret Service Director will be forced to answer questions before the House Oversight and government reform committee. At issue here the most recent fence jumping incident at the white house. A man got all the way into the east room before secret service stopped him. Remember, this is someone who had a knife, who hopped over and made it all the way in through several layers. I think originally it was five layers of security that he had to get through. Even more than that if you break all the way into the east room. That does have a lot of questions as having people start to question just the secret service budget, whether they were understaffed whereaboutses theres been a lot of turn overabout it xwl and whether they lied about it. Well they never gave an official report. But the early indications of how it was explained was they got him right inside the door and the secret Service Never put out something. But yes, you can by omission. Whenever theres a major problem at a Government Agency what do they say . We dont have enough money. The secret service has said that. This guy, whenever the president comes to your town, theres millions of dollars in security advanced security details, motorcades thats part of what they were saying. This guy literally jumped a fence. Thats about 5 worth of security. But thatses what they were saying part of the problem was, this was when the advance teams were all out doing research for when he would be on the ground in new york. So the people at the door were there less than six months. Dont leave the house. Theres a view that some of these people who jump over the fence have mental issues all sorts of things and theyre not told to shoot them, right . What theyre told at best is to send a dog at them. So the question is and theres secret service, by the way, so they can shoot them right there. This they would have shot the guys bsh the dogs werent released. There are fences that you cant jump over. That is true too. They do make those. The question is do you want to peoples house to have fepss that are electrified or anything else . I think part of it is the public i think were well past that point. When we come back throw another global hot spot on top a very full plate in washington. How would the white house and capitol hill tiptoe around the protests in hong kong and china . Financial noise financial noise big day . Ah, the usual. Moved some new cars. Hauled a bunch of steel. Kept the supermarket shelves stocked. Made sure everyone got their latest gadgets. Whats up for the next shift . Ah, nothing much. Just keeping the lights on. laugh nice. Doing the big things that move an economy. See you tomorrow, mac. See you tomorrow, sam. Just another day at norfolk southern. A party . Hi. Im new ensure active clear protein drink. Clear huh . My nutritional standards are high. Im not juice or fancy water. Ive got 8 grams of protein. Twist my lid thats three times more than me. 17 vitamins and minerals. And zero fat hmmmm. You bring a lot to the party yay new ensure active clear protein. 8 grams protein. Zero fat. 17 vitamins and minerals. In delicious blueberry pomegranate and mixed fruit. Good morning. Welcome back to squawk box right here on cnbc. Im Andrew Ross Sorkin along with becky quick. Brian sullivan is in today at the table. Joe kernen has the day off. We often talk about the lasting effects of a recession. But a new study is suggesting some american women living through a recession might mean they will is never have children. The lingering impact of the socalled Great Recession ultimately mean half a million fewer children will be born over the course of a couple of decades. They tied it not back to the women necessarily, but to the idea that men of that age will be never able to overcome the financial setbacks thereby making them less attractive as mates, which is part of the reason. Thats according to the research. Less interested in having children because i will admit i didnt read the report. But the take i heard on it this morning was it made them less attractive so they couldnt support the children. There was a big article in the Washington Post about this. Its a problem and it contributes to the inequality issues. Like people are marrying like people right . Also, if youre single whether youre a parent or not and you lose your job, theres no backstop. If its a twoincome household, one person loses their job, you have a little bit of a buffer. It played out that women of child bearing age, there were fewer childbirths. I believe you are never too old to have a child. Says the man with on twoweek hold at home. Three week old today. Im with you. How are diaper imports doing . Thats why im here by the way. In Global Economic news china Manufacturing Activity Holding Steady in september to suggest the worlds second biggest economy does continue to face risk to growth andrew. Were going to try to make more sense of was going on in china. Foreign policy just got a bit more crowded. The latest headache for the white house struggling to contain isis in the middle east and also in the rogue russian leader Vladimir Putin has a lot going on. What steps should the administration take . Here to talk about it is michael austland. Asian studies and melanie hart is the center for american progresss chinas policy director. Guys, i will start with you. Michael, are we supposed to do anything right now . Well, i think the region is looking to see if the white house even makes a statement more serious than what theyve made before. Look, we have treaty allies and partners and trade partners and everyone looks at america as distracted, moving away from the region despite the rhetoric of the pif yot. And the question is whether we become irrelevant in terms of one of the biggest uprisings and one of the Biggest Challenges to china in recent memories. The idea is not that its going to send in warships and its going to take a stand for democracy. If we dont do that the region is going to be moving away from us. Do you think this should be taking a stand . I wouldnt describe this issue as a headache for the white house just yet. There are two things happening. Tifrt, the chooin hes communityist party has made it clear they view democracy differently than we do. Secondly, there are protests under way in hong kong and the Hong Kong Police got a little bit more heavy handed than we would lining to see over the weekend, but they have now backed down. Neither of those address national interests. Im confident the president is monitoring this issue very closely, but at the moment we have not hit the point which the u. S. Requires a strong response. Michael, for us to put out a press release, isnt that just theater . Yeah i think it is. I disagree with melanie a little bit. Its not that china has a slight i different interpretation of democracy. They have no intgz. Interpretation. I think when you have tens of thousands of young people and middle aged people out in the streets demonstrating for the freedoms that they dont want to lose, it is in the interest of the United States to support that and its more than the Hong Kong Police just getting a little bit out of hand. Sdh what do you want us to do . Well, i think first of all we have to make very clear that we support the original agreement that china cannot back down from it, that its other International Agreements will be similarly suspect, that it is not a trustworthy partner. Hold on. Michael, let me play this out with you. Lets say the president puts out the statement you want him to put out. And the chinese leadership doesnt go along with it because theyre not going to. Does that put us in a better or worse position . I think in the long run it puts us in a better position. Being silent is no position to be in at all. Melanie . Look we are not running the city of hong kong. Its important to look to the people of hong kong and ask them what they want. If you look at the poll results, it shows that the city is split about 50 50. About half the city thinks the best thing for the future of hong kong is to accept the deal thats been offered by beijing, which offers more access to direct thekzes than they have today and hope they can move that process forward in the future. Half of the city thinks they should push back were support the protesters. Under what circumstance should the u. S. Do anything and i dont even know what do anything means . This is a little issue in another country. It is super interesting, but its all about china. Its not about the United States. We should watch closely, because this shows us how innovative and flexible this communist party can be and thats useful information for what we expect to see on Mainland China Going Forward. But at the moment, we do not see Brutal Police crackdowns in hong kong as we have seen in others. Hong kong very small, very densely populated. I guess the fear is the broader space to the Mainland China. How similar are the people of hong kong and what theyre fighting about versus the mainland chinese . Do you expect anybody, any of the coastal export hubs to get involved in this type of protest . They already have. China has arrested one man for posting pictures about the internet. They are censoring the internet. They are afraid for them spreading in china, taiwan. And it is important. Its not a legal issue, it is a political issue. This is just two years into xi jinpings for years. I agree with melanie. It took weeks before the Chinese Communist party intervened in tiananmen. There is no way theyre not going to intervene. The Business Community doesnt support it yet. If they do it will be a very different situation. Thank you very much. Michael, melanie, thank you for joining us this morning. Appreciate it. When we come back this morning, walmart trying to hift the blame on to tracy morgan for the injuries that he received when a company tractortrailer slamped into the limo bus that he was riding in several months ago. Find out what the retail giant is saying about the accident now. And as we head to a break, a quick check off whats happening in europen markets right now. Likes like slightly lower in london, but in france and germany, some free narrows. Thats when expertise happens. Mfs. Because there is no expertise without collaboration. Your customers, our financing. Your aspirations, our analytics. Your goals, our technology. Introducing synchrony financial, bringing new meaning to the word partnership. Banking. Loyalty. Analytics. Synchrony financial. Enagage with us. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Mr. Daniels. Mr. Daniels. Look at this. Whats this . Clicks are off the charts. Yeah. Yoshi, were back. Yes, sir more shipping more shipping [ beeping ] welcome back. Its time now for the squawk planner. The markets, theyre going to be getting ready for prices today. The s p caseshiller index will be released at 9 00 a. M. Eastern time. On the earnings front, were going to get Quarterly Results from walgreen. Oracle open world kicks off today in san francisco. Our own jon fortt will be covering that event. That is todays squawk planner. Becky, over to you. Walmart is respond to go a lawsuit by actor tracy morgan and others in his limo seen that was hit by the retailers truck back in june. Walmart argues morgan and others were not wearing seat belts when they were hit. Walmart and the other plaintiffs claim they knew or should have known their driver had been a awake for more than 24 hours before that crash. The accident left morgan in a rehab center for weeks. Facebook is it now too like for you to buy . Ameriprise asked people a simple question in retirement, will you outlive your money . Uhhh. No, that cant happen. Thats the thing, you dont know how long it has to last. Everyone has retirement questions. So ameriprise created the exclusive. Confident retirement approach. Now you and your ameripise advisor can get the real answers you need. Well, knowing gives you confidence. Start building your confident retirement today. People with type 2 diabetes come from all walks of life. If you have high blood sugar, ask your doctor about farxiga. Its a different kind of medicine that works by removing some sugar from your body. Along with diet and exercise farxiga helps lower blood sugar in adults with type 2 diabetes. With one pill a day, farxiga helps lower your a1c. 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Ask your doctor about farxiga and visit our website to learn how you may be able to get every month free. Welcome back everybody. Speaking of the nasdaq and technology, another record high for facebook. The stock is now up more than 40 yeartodate. Theres news today. Facebook launching a new ad platform this week called atlas. This is really facebooks biggest direct challenge to googles massive ad platform. It lets advertiseders track what you were looking at anywhere on the webb and our yo phone, as well. 2 question is could this be a game changer . Gene is joining us now, he covers facebook stock, he thinks it will hit 90 bucks in the next six months. What is atlas . Why a platform they purchased from microsoft. The reason is it allows users to track you not just on facebook but any website. I guess as an investor the reason why you care is that from an advertiser standpoint it makes the facebook data more valuable because you can use it all over the internet. So that potentially could be yet another catalyst for facebook shares over the next one to two years. Okay. How much of a catalyst and will this be a, a, theft from google of some of their clients . Or b, a new platform bringing new people in . Hard to say what its going to actually add to the business but think of it in terms of midsingle digits. Just rough numbers over the next one to two years. It is something that is measurable. Its not going to take it to a new trajectory but it should add to the street numbers. In terms of google this is more competitive. Google right now has a third of the online ad spent. Facebook has about 6 . The reason is the ability for an advertiser to go to one place and be able to target all these different devices under a consistent campaign. Its powerful. What it does is allow the advertiser to feel more confident about their spend that theyre going to get the ry they want. This is the same thing google did in their campaign. Think of this as facebooks version of enhance campaigns. 90 bucks a share. Raising a price target to 95 on facebook in part because of atlas. It seems like your analyst community, or at least part of it gene continues to become more positive on facebook. Lets try to forget about that for a second. Whats the risk to facebook . Where could you be wrong . The risk is that social ends up being a fluid space. And their content ultimately is user generated. Theres always the risk that the youth or anybody whos using facebook decides to shift to another platform. They had to pay up for other competing others. Its a hitdriven social market. Theyve got to stay a company. Snap chat whatever the latest thing might be. Have you noticed that since weve seen all of these different platforms come out in the last really 18 months or so . Any disengagement by facebook users . We have. And we measure that pretty closely. And what weve seen is a shift a demographic we track is u. S. Teens. We tend to see that theres less usage on facebook. Thats more than picked up by instagram. So theyve it was a really wise move for them to acquire instagram. As far as once we see instagram start to fade thats going to be another question. Will facebook do yet another acquisition. Theyve got a 200 billion market cap. That gives them a lot of flexibility to target some of these up and coming social networks. Yeah. I guess maybe we underestimated Ed Zuckerberg and that deal. He said it was a smart deal. Where would you like to see the Facebook Team make another move . The oakland raiders. Should they buy . I have something here. They acquired this virtual reality. It just went to beta. So you have it . Yeah we have it. Its pretty clumsy right now. But it does work. And ultimately i think if they could get content and developers around this because i think this is something for the next 20 years down the road. Its not worth talking about in an investable part of the story today, but i would be focused on this. This is going to create new experiences for the next 10 20 years. For our listeners stuck on the turnpike or wherever its been i ask if youve used it. Gene is holding up the giant goggles. Its early. Youre in minneapolis. Its a little tough. Theyre a little goofy. Yeah. I can try them on here. Wow. Okay so what exactly happens when you do that . Well right now nothing. Are you seeing rainbows . What goes on inside those glasses . Its the wild west right now. Its open to developers. They are virtual worlds. They are geeky people who build for this. They are unicorns jumping from star to star and youre flying in a spaceship watching this. The reason facebook bought it is for sports concerts getting a ticket, a perfect ticket to the nfl game. Its for learning, going to different places to see Different Things. Ultimately its going to be about video streaming. Weve got to go. Thank you. Were back right after this. You probably know xerox as the company thats all about printing. But did you know we also support hospitals using Electronic Health records for more than 30 million patients . Or that our Software Helps over 20 million smartphone users remotely configure email every month . Or how about processing nearly 5 billion in electronic toll payments a year . In fact, todays xerox is working in surprising ways to help companies simplify the way work gets done and life gets lived. With xerox, youre ready for real business. Welcome back to squawk box. We have some breaking news this morning. Ebay just announcing it is splitting off its paypal business into an independent publicly traded company. Thats going to happen in the second half of 2015. We should also tell you that the new ceo of that company is going to be dan shulman. He was the president of American Express Enterprise Growth group. This coming after a big battle proxy fight with carl icahn for many months where they said were not doing this we shouldnt do this. Back in january he said the distraction and dissynergy would be happening at the wrong time. Were in this window of opportunity of commerce. So it is an interesting decision to be doing this now. Were going to go down to david faber. I spoke to him. I give him credit doing this now given what he hypocritical. The timing makes it difficult for him having been the person who articulated so many of the reasons over this last ninemonth period as to why these companies belong together. That said in an interview we were able to do late yesterday, donaho indicated that was the 2013 strategy that i was ar ticklating in early 2014 the strategy has changed. But i did ask him point blank, after all this time you spent with andrew with myself with your investors telling us why these companies are best together how can you now change course. Ebay and paypal have been Better Together over the last 12 years and certainly over the last 6. But whats changed is weve just come out of our Strategic Planning process. The same process that the board and i do every year where we look forward. We look forward about how to best position the company over the next three to five years. One is as we look forward we see the payment and commerce Competitive Landscape changing at an accelerating rate. Second, we believe ebay and paypal are best positioned to compete Going Forward as independent companies because it gives the strategic flow necessary that will be coming. Third, the synergies i talked about earlier in the year are still there. But they naturally decline over time. When you look forward, ebay will be less than 15 of paypals business three years from now. And we can achieve many benefits of the synergies from relationships. Its funny you list three reasons why. I was looking back at a Conference Call you had when you were at the beginning of a proxy fight. It ended your way against carl icahn. Then you cited three reasons why the two companies were best together. You said first, ebay accelerates paypals success. Second ebay data makes paypal smarter. And third, ebay funds paypals growth. I would assume those things are till true. Theyre things that can be done through commercial arrangements. That drops to less than 15 three years out. So that can be handled through a commercial relationship. Second, the data. The data is something we really dug into this summer about seeing if we could give the benefits of data sharing for paypals risk models and ebays risk models through a commercial arrangement. We became comfortable we could. And third, in terms of fueling the capital structure of paypal weve looked at and can create two independent Capital Structures that can set up for success. Those synergies and reasons that have been there for the last six years having powerful. But as we look forward, we prioritize the value of focus, strategic agility, and the ability to move quickly in a changing Competitive Landscape as being more important. And andrew of course having gone back and looking at donahoes comments and interviews with myself or you later, his tone did change a bit. It did appear his board had their annual strategic meeting, if you will, in the spring and were moving early in the summer to start considering and moving ahead with the plan to separate these businesses. It will take place middle of 2015 is what theyre talking about hoping to finalize it. Just to clarify something, i wonder if were burying the lead. This comes from Brian Sullivan whos looking at the release. Is john donahoe out . Hes out. Hes not done with. Hes there for the year. I asked him about this. We discussed it in great detail. He will not be the ceo of either company. Thats right. Dan shulman who they brought over from American Express will become its ceo on the split. Donahoe and the cf o rks are not going to be part of the management of either company. He expects to be on the board of one of the companies and potentially the chairman of one of them. Then he got forced out . Its hard to get your head around this otherwise. He claims he didnt. And i asked him about that becky. I asked if he was in complete agreement with his board. We went into detail. I asked why he was stepping down. Hes a guy in his mid50s, if that, whos had great success. He says hes been ten years at ebay. The same way meg whitman was there for ten years. Although she was ceo for ten years. There may be more of a story here. Asking him point blank, he said absolutely no disagreements with his board and he will of course remain as the ceo over what is probably going to be a full year before the separation takes place. One thing. Do you buy the argument that somehow he made it to you and i imagine he made it to you. That somehow the world is accelerated or changed over the past six months that they couldnt see it. Apple pay, the ipo of alibaba. All things i would have gambled on two years ago. I dont know what changed except his back was against the wall when carl icahn told him this is what he should be doing. I think it puts them in a difficult position. I did again ask. Our viewers will hear all of this today. Arent you just placating the activists . And he continually said no. This was not a result of that. In early 14 when he was justifying why these two businesses belonged together he had to be out there doing that. Because that was the Strategic Plan for 2014. And that is now changed. That said, i agree with you. I do wonder why now and not then . He continually cited the synergies. The fact in three years ebay will only represent 15 of paypals business. And all the other opportunities paypal was not able to access. Whether it be amazon or alibaba and so many others because they are competitors of ebay. And so it does appear at least in the boards opinion that that outweighed what they have believed were the good reasons why the companies belong together. They couldnt have figured that out a year ago, i dont know. Whatever the cost of fighting that proxy contest unto itself seem bizarre to me now. Not to mention the distraction, right, from separating these two businesses as well. Thank you for brings us that news and interview. We will come back to you over the next hour and a half or more. Big breaking news here. Lets bring in big guests. Weve got steve case on set with us. Gene munster decided to stick around for us as well. We appreciate it. Steve, first to you, your take on this splitup here. It appears that paypal growing 19 a year or so, basically 15 of it will be ebay business. Im surprised it didnt happen earlier. Were you disappointed . Was it a mistake not to happen earlier . No no. They thought there was value in keeping things together. The payment space has accelerated. Hold on. You couldnt have told me that apple was likely to get in the pay space at some point. If you had this conversation nine months ago. Or alibaba would somehow have an ip o rks. If you asked me five years ago, i would say ebay and paypal would would be more separate. The space is becoming hyper competitive. I think a separate paypal will be able to focus on that. The big players are getting more aggressive. New startups and payments are getting aggressive. Its also a big risk because its competitive. I think a splitoff will be more effectible. And said we need to separate that business. I think that was the right time. You think they should have done it before . Probably should have done it before, but theyre doing it now. I think theres some resistance to doing it just because pressure on the outside was telling you to do it. I think when things calmed down they took a rd a look at it and the markets have evolved in a way that splitting it now makes more sense than it did before. I will ask you. Active investors have become more powerful in the last few years. Does this mean they can stand up and Say Something and its difficult for a ceo not to cave to that . It depends on the investor. I dont think its automatically someone gets a stake and starting beating the drums saying something should happen. They should lurch. The logic of separating the entities made sense. Its a great acquisition for ebay. They built paypal up over the past decade. But now was the time to free it up because the synergies work. Less than they thought five years ago. I think they were responsive to the input from a lot of people. If you look at press reports five years ago, there was speculation paypal would be spun off. They feel now is the right time. Gene munster, you cover ebay. You will potentially cover paypal. Is this good news for ebay holders . Its hard to say. Its going to compete directly with apple pay. We recently downgraded ebay based on the competitive threat. Google wallet is going to be more of a competitor over the next year. I think the one element this opens up is the concept that alibaba could purchase the market place. I think overall rb really whoa, whoa. Let me jump in on that. I was going to make a joke about ali paypal. But youre saying if alibaba comes in ebays got a current market cap of 65 billion. Lets cut that in half for giggles sake. Add a little premium on there would be chump change for alibaba. You think its more likely the new ebay could be bought than paypal being bought . I need to step back and think about what my opinion is. I can say from investors that i talked to more recently ive been marketing the past week is that is the suspicion is that if they do break this up so i would say independent of what i think, i think investors are going to think thats going to be in play now. Okay. Fascinating. Now, just to be clear, for paypal you couldnt buy paypal for another year or two, right . Whats the period in which 18 months . Were just going off because thats what people do. You buy a stock, theoretically based on but ebay could be bought quickly. I think its possible that alibaba will do something with either side. I wouldnt be surprised if theyre more interested in the ebay side. They already have a lot of things in the payment space. But we announced this ten minutes ago. I think were ahead of ourselves speculating. When this thing gets were not speculating. To genes point and genes careful not to speculate. He said people hes talked to have suggested if and when this happened that ebay could be an attractive candidate. I think it will probably take a year to separate these companies. Lets see what happens a year from now. A lot could change in a year. Okay. Gene munster, thank you. Steves going to be sticking around. Up next, turning to the market and the reactions of the protests in hong kong. Well continue to keep you updated on the breaking news out of ebay. The Company Spinning off its paypal business into a separate publicly traded company. Shares still halted. Well bring you the first trade as soon as it happens. Back in a moment. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you reach obal markets and drive forward with broader possibilities. Cme group how the world advances. Welcome back everybody. Lets look at the futures. Still looking at the dow futures up by 50 points above fair value. Ebay shares after that news were just plerning about, the companys going to be split off into two companies. Paypal will be a second trading company, were watching that as well. Rising tensions in hong kong affecting markets here and around the world. Joining us with more is david pilot. He joins us right now from hong kong with the latest update there. David, hello. Hello. David, could you give us the latest on whats being happening there in hong kong . Sorry. So at the moment we have a bit of a lull. There were huge demonstrations on sunday night. Those demonstrators, these are students pressing for democracy for universal suffrage. They were tear gassed by police. This is very unusual in hong kong. The demonstrations were very peaceful almost sort of a carnival type atmosphere. And suddenly it turned nasty. Now at the moment were in a lull. Tomorrow is national day. In Mainland China its supposed to be a day of celebration. In hong kong its sometimes a day of protest. Tomorrow were expecting tens of thousands of people. And to pour onto the streets. This is presenting the authorities in hong kong with a real dilemma. Because they dont know whether to let these demonstrators take over large sways of the city or whether to crack down again. Both of those look like bad options options. The world is watching. So were in this lull baa possibly before a storm. Its hard to decide where things will head from here but whats your guess . In terms of a best and worst Case Scenario . Well the best case it depends whether you want the students to be successful in pushing for democracy. I think thats very very unlikely. But in terms of you know levels of violence that we could expect, i think the governments plan is probably to allow these demonstrations to kind of peter out. Tomorrow is a National Holiday as i said. So is the following day. Then friday is a work day. It seems likely that many thousands of people at least will stay on the streets until then. But then you know shopkeepers might get annoyed. Many of the central roads are blocked. You could see the atmosphere turning. Some of the students drifting back. Just a hard core remaining. From the Authorities Point of view it could be they stay on the streets and dont go away. As they say, theyre left with a di lem ma. Do they start tear gassing again, water cannon rubber bullets. Which there were rumors of on sunday night. Or even an extremist, send in the pla. And then in hong kong a city which is governed under the two systems formula would be a very different place once the pla or if the pla were to be yoused on the streets of hong kong. This would look like a very different city. Thank you very much. David piling joining us from on the ground there. Right here on set with us to walk us through the big picture and tell us why these protests are having a huge impact, john bussy. Its great to see you. Also with us our guest host today. John, what does this mean on a grander scale . You have to remember that hong kong is a world city. Its like new york zblooimpbltds of subsidiaries. About 800 u. S. Companies have regional headquarters. About 1300 have some kind of subsidiary to master their plan for china. So whats happening now in hong kong is this promise of universal suffrage made by the Chinese Government is being rescinded. And as a result of that, youre seeing the classic test. Can you enfranchise people without at some point them asking for political empowerment as well . Beijing is looking at this and saying we dont want this to become a petri dish for the rest of china. Theyre trying to convince taiwan to come back into the fold into china. They dont want taiwan looking at hong kong and seeing a lot of rioting and saying no way. Does this give some of those other businesses a pause when they see things like this happening . Or is this business as usual . I think its a good point. It does give them a pause and other things about whats going on. Very, very damaging to a foreign business. Tech transfer requirements all that stuff has been alienating business in china even though theyre very profitable. Lets remember the vast majority are profitable in china. If youre looking for a regional headquarters, thats three hours further away. But singapore is looking at whats going on in hong kong and saying the door is wide open. Weve got low taxes, great Business Environment and stability. Steve, what do you think . As a Business Leader who looks around the world. Went on to shanghai and beijing and had lunch with the administrator in hong kong and Business Leaders. Even 15 years ago the chinese had just taken over a year or two before. There was already some uncertainty how this would play out. Now theyre saying maybe its one country, one and a half systems. They should be careful because the risk here is the world is watching and if they try to kind of crack down in hong kong its going to have a Ripple Effect. The perception in taiwan and other kinds of places. When they took over after 150 plus years, they said well do it in an odd way where its affiliated with china but have a separate there. It is dicey because if they let this go too much theyre worried it will have a Ripple Effect and there will be other demonstrations, other parts of china. But i think they agreed to something and should stick to that deal. John you know hong kong before and after. I wonder if you think its gotten closer to china over the last 17 years or further away. There was always the question whether or not hong kong would swallow up one way. And hong kong feels it. Yes, theres a very distinct change in life between the 80s when i first lied there and the 2000s. But china has been very careful to kind of have hands off on china. And let hong kong be hong kong. Even though it has, we have to remember a garrison of what is their goal . What are they afraid of . What is beijing afraid of . Yes. They dont want this spinning out of control. In 2003 there were huge demonstrations. Against an antisedition law which would have sought secrecy acts that would have restricted liberties in hong kong. The protests were successful. This time they may not be. All right. John again is going to be checking in with us throughout the morning as news warrants on this. Steve case will be here for the rest of the program. Coming up well have more on the ebay and paypal big split. Plus another headache for pimco just days after the highprofile departure of bill gross. Both stories when squawk box returns. Financial noise financial noise financial noise i love having a free checked bag. With my united mileageplus explorer card. I have saved 75 in checked bag fees. Priority boarding is really important to us. You can just get on the plane and relax. I love to travel no foreign transaction fees means real savings. We can go to any country and spend money the way we would in the us. When i spend money on this card i can see brazil in my future. I use the explorer card to earn miles in order to go visit my family which means a lot to me. When we return the big story of the morning. Ebay splitting off paypal. More on the interview with john donahoe. Plus what he has to say about carl icahn today. Squawk box back in a moment. [ bell rings ] hi michael looking good trying to keep up with you i told my producer karen that i take metamucil because it helps me feel fuller between meals. Its just one small change that can help lead to good things. Now shes breaking up with the vending machine. Nope. I call that the meta effect. [ female announcer ] 4in1 multihealth metamucil now clinically proven to help you feel less hungry between meals. And promotes heart health. Experience the meta effect with our new multihealth wellness line and see how one small change can lead to good things. Welcome back, everybody. Our story of the morning, ebay. Deciding to spin off paypal. You can forgive some of the shareholders of ebay for their heads spinning right now after having listened to john donahoe earlier this year and through the yaert part of the year articulate why these companies belong together as they engaged in a nasty proxy fight with carl icahn. Its a fight they eventually won. They did add dave dortmund to the board. But had to stand down because donahoe seemed to win over his Shareholder Base for now. I asked him late yesterday in an interview he did whether he thinks those shareholders are going to believe in him and the Strategic Direction of the company. I think our shareholders have confidence that we will do the right thing. We will do the right thing for our businesses and we will do the right thing for shareholders over the short, medium and longterm. And so i genuinely believe this course of action is the best thing we can do for the company over the short, medium and longterm as well as for our shareholders. So i feel confident theyll support this action. Carl icahn is going to be saying see they listened to me after all. Hes going to claim victory. Is that going to tick you off . No. You know i want to do whats right. Carl said separation he thought was right at the beginning of this and thats the course were taking. I give credit for carl putting input weve acted on. Its not why we did. But hes a smart guy. To those who say you want to avoid a proxy fight. It takes a lot out of you even when you do win. To those saying theyre getting ahead of the next proxy fight, what would you say . Were in a process of trying to do whats right for the company. We didnt make a reactive decision based on a proxy fight. Because we have a long history of being thoughtful and deliberative. From the beginning, had a deep commitment to the longterm. Still owns 10 of the company. Still chairman of the board. And this process has gone through what is the best way to help ebay and paypal succeed over the longterm. I feel confident this is the right direction and thats the reason were pursuing it. And becky, of course those questions will continue. The stock i see has opened for trading and is up over 11 right now. Yeah. That just opening up. Did he give an inch with you on perhaps even making a mistake about not doing this sooner . The reason i suggest it its going to take them a year to actually do this split. So they wont even be positioned, if you will to do what theyre saying they want to do given how fast this business is accelerating or this market place is accelerating. Until some time in 2015. The way that he put it was the reason theyre doing it now is knowing within in year things are going to change. They want to be in that position a year from now. He kept talking about three years from now will only diminishing over time. He came back to that being a reason were looking into the future now. One year from now it will be less. Three years from now a lotless. Do you believe he didnt know that a year ago . No. I wonder if carl wasnt there whether they actually would have done this and this was just an ego trip from moment one in terms of not being willing to do it because you in other words say no to carl fight carl beat carl and then come back and do what carl wanted. I give john donahoe some kind of credit now for doing it after saying for months and months it was just impossible. Im sure they had discussions at the ebay board about whether this made sense at a time it didnt. We looked at it before and decided not to do. The markets changed. They took out ads in newspapers. I mean, they spent millions upon millions of dollars trying to tell the Shareholder Base this was the absolute wrong decision only nine months ago. I believe they should have done it years ago. Maybe they would have done it if they werent fighting carl. They looked at it and said its time to split it off. Schulman is running pay pal. Dan shulman so this space is evolving in a rapid way. One of the things donahoe mentioned to me was actually trying to get dan was one of the reasons to split. Meaning that they and i dont know how much they struck to find a quality ceo to take the paypal business. But as an independently traded business, people would say im going to become the ceo, i dont want to be the head of a division inside a larger company. Put out something internally today that said dans leaving because he wants to be ceo of a public company. That has to do with it. Paypal was a division. So david faber mentioned a guy we havent talking about. Pierre omidar. He still owns 10 . Apparently he lives in paris. He lives on his island. How active is he in ebay . He must. When we brought nate in to bring the company over 15 years ago, he stepped away. Hes a chairman. He goes to the Board Meetings. But he actually for 15 years has stayed out of the daytoday operating point. Thats my point. I hear your point. Very few chairman of the boards walk into a Board Meeting and says lets split the company in half. Thats a ceos job. Even five years ago there were discussions. Whether this made sense. This is not a new idea. They looked it at consistently thought it wasnt the right thing to do, now they concluded it is the right thing to do because of the investment z. Should they have done it two years ago . Yes. But theyre now saying its time to do it. I think it makes sense for the company. Probably john stepping aside running either of them is related to it. But hes also been running it successfully for five six years. Probably felt it was time to split in two companies and play some role maybe chairman maybe board, but not the ceo role. Thats a really interesting point. Just the 10 ownership. I didnt realize that until donahoe said that. Omidiar has been there. Years ago i did an documentary on ebay and sat down with him, hes in there 10 . He will likely be chairman of one of the two companies. What will be interesting to see is whether donahoe becomes chairman of one of the others. I dont know which. He didnt seem to know which either or frankly what his future will be after the split takes effect. But theyve revisited this decision year after year. Starting in 2008 when they decide ed decided not to. My question is why do you think its the right decision and would it have been two years ago given a lot of the positives that are there to be fair in terms of the zero acquisition costs. Extremely low costs to capital that paypal has as a result of being part of ebay and on and on. I think the speed at which the payment space is evolving is accelerating. Its been happening over the last five years. Whats happened in the last 12 months is quite significant. Theres a lot of upstarts going after this market. The large incumbents are trying to figure out how to be relevant taking aggressive steps. I think they just concluded correctly that paypal will be a more valuable entity more successful entity if its got an independent company thats able to do things. And because its part of ebay there are partnerships that paypal has been unable to form because of people feeling like theyre kind of aligning with ebay. Paypal will be able to do more of those partnerships hire more people if theyre separate. All right. Thank you, steve. Stick around. Lets bring in now bob peck. He covers ebay. Joining us by phone. Looking up here the stocks up 11 . But im assuming in your calculation of 58 bucks you did not put in the fact they would split off paypal. Does this force you to revisit your target . Thanks again for having me. I appreciate it. We looked at this scenario when icahn was making his move. When you break them apart and look at each business you can get to targets a little bit higher than where we are today. I think the big question around that would be what are the margin structures going for. And get new customers. And what will be the revenue synergies that one of your guests was commenting on. Theres a lot of things to play with there to get future projections. Okay. So paypal in a year whatever it takes, goes its own way. What is ebay . Whats going to be left . Ebay obviously is a core market place. Its growing just a little bit below where general ecommerce is. But its more of the omnichannel business. It has to get more nimble. Duds it have opportunities with other Payment Companies internationally. Will paypal have opportunities with others. Do this Companies Get acquired later on down the line by larger players. All right, bob peck. Thank you for joining us on short notice. We hit and broke the price point. Congrats on that. Thanks so much. Steve, were lucky to have you here as our guest host today. Great timing. Were lucky to have him here with this news to react to. Steve case is our guest host today. Much more from him coming up. Up next though he got the king to come back to cleveland. Now he is trying to bring Silicon Valley to detroit. Cavs owner and quicken loans chairman dan gilbert will be joining us. And later ford slashes its slowdowns in europe and south america too. That stock was down nearly 8 on the news. Were going to go under the hood of the automaker in just a bit. But first walgreens revenues in line. Squawk box will be right back. 3w4r57 ace. With a smooth formula, free of flavors and colorants. So you get a closer feeling to natural teeth. New fixodent plus true feel. Fixodent. And forget it. Checking the futures right now. You can see the dow up about 50 points. S p 500 up higher as well. Almost six points higher. Nasdaq opening up about 21. 5 points higher. Still to come this morning, more on the big news ebay splitting off paypal. But first dan gilbert will join us along with our guest host steve case. And in the next hour how the hong kong uprising could shake the worlds economy. To what it means for your investments. Well cover it all. Squawk box will be right back. Welcome back everybody. Dan gilbert is betting big on detroit. The 60 buildings owned by his ventures owns some thousand employees. Gilbert is the founder of quicken loans. Hes also the owner of the cleveland cavaliers. And hes featured on this months forbes 400 richest americans. Rewarding Small Businesses across the midwest. And dan, it is great to see you here this morning. Good morning, becky. Glad to be here. We havent gotten a chance to tell everybody about rise above the rest because weve had so much breaking news this morning. If you dont mind for one minute steve tell people who this is. Its trying to celebrate entrepreneurs from all across america. Theres 48 states that dont get the same level of attention from the press or investors. Were trying to lift them up and make it easier to Start Companies all over the country. So it was launched in june. We kicked it off with dan in detroit. Went to pittsburgh, cincinnati nashville. Next week ill be doing in kansas city and des moines and minneapolis. But what dans done taking the lead and then getting companies involved. Also trying to get others in the community, the politicians, and the foundations all working together to lift up detroit is really quite fascinating. Tell us how things are going in detroit right now. We havent talked to you in over six months at this point. They keep ganging momentum every day. Were almost through the bankruptcy. And people are focused on the future. On the madison block alone where steve was in town with his trailer, sort of like a rock and roll tour. Its a great thing to see. That block alone theres 100 Technology Companies with over 500 workers in technology. Thats all in the last three years. And it keeps growing from there. And i think the National Attention has been on detroit in a lot of ways. Some of it was negative of course. People are seeing the real story now which is a positive story and excitement and optimism. A lot of the headlines ive seen sound promising about whats happening in detroit. Theres something that happened last week that caught me off guard with gm saying that cadillac was going to move its headquarters to new york. Were you surprised by that . Everybody here was surprised by that. I love mary and think shes going to great job at gm but i think that was a mistake. I think theyll be back in a few years after this experiment goes on, in my opinion. Thats just my opinion. I love new york city but theres not a lot of people driving cadillacs in new york city. Its a great brand. It is a brand that has detroit all over it. Its embedded in detroit. Theres a lot of great Marketing Advertising sort of gritty new media type people here in this town. Yeah. I think a company that came from texas to detroit to start their business that created a great brand is a great example. I know ford tried that in california and they ended up bringing their people back into michigan. So well see. But people here arent too happy about it. They have the make the decisions they think are best for their business, of course. You start out by saying you love mary barra. Have you told her what you thought about this . A little exchange. But look thats one small part of her position. Thats a smallish type of move. Im sure they have their reasons for doing so. Overall shes doing a great job in that company. Theyre on the right road for sure. We havent got the chance to talk to you since you brought back the king to the cavaliers. How in the heck did you do that and are you sitting in the clouds at this point . Well you know it was its just great because we just started camp a day or two ago. Its great to see lebron back in a cavaliers uniform. Everybody in cleveland, of course, very excited about the season. And were hoping we are able to compete for the ultimate you know, championship. No promises no guarantees or anything, but were certainly going to be there and compete. Lebron coming home ins a great story. Thats where he was born and raised. I think thats a great decision for him on two levels. Number one, he gets to come home. Number two, hes coming home to a team with a tremendous amount of talent and a Great International new head coach. So were excited. I take it the way he came back had to be just absolute redemption in your eyes. Its great. Look, there obviously was a lot of emotions around the events four years ago. Its great that we all got over that and are looking forward to the future becky. So cant wait. First games october 30th against your knicks. Not my knicks. Thats a guaranteed victory. Probably double digits. Quickly, dan, i love what youre doing in downtown detroit. A lot of good optics. Are you really seeing rents rise . Are Property Values rising . Are more companies in discussion to move in . Absolutely. Rental rates on apartment buildings you know, a lot of people dont realize this. Theres 100 occupancy in downtown and midtown. And you really have a hard time finding a place to live. Theres that much demand by a lot of young people from all over the country that are coming in here. Rents are starting to push to two bucks a month per square foot level which is sort of the magic level. So that is a very very positive overall movement in the market place. On office space, the rents definitely have ticked up. Theyre definitely cheaper than where you guys are in new york of course, but theyre more expensive than the suburbs of detroit. So you have a lot of demand. You know theres even going to probably be some new Construction Office buildings now because you cant find chunks of space maybe more than 20,000 feet believe it or not, in downtown. Theres not too many of those available as companies have taken over. We definitely have several more new announcements on the retail side and office side. Momentum continues to build here. Wed love to talk and spend more time with you. I think well lose your shot in about 25 sektdsconds, but we want to congratulate you on everything. Having strong Car Companies is helpful, what dan is doing leading the charge in downtown detroit is luring entrepreneurs there, innovation there, thats the hope for the revival. Dan, thank you for joining us. Well talk to you soon. How much do you think is luring entrepreneurs there opposed to some type of entrepreneurial spirit being generated there . Theres a great entrepreneurial spirit there. There are a lot of people there who want to be part of the renaissance of detroit. But its also trying to attract talent. When we did this rise to the ris pitch competition, the winner moved to detroit from Silicon Valley. But also the cost of living. Everything was cheaper there. The money he was able to raise to build back the company could go further in detroit or these other rise to the rest cities. I think youre beginning to see more of that. Thats why were excited by the rise of the rest. They win 100,000 if you . Yeah. Its trying to shine a spotlight in these cities. We pick eight of Ten Companies to pitch. We have a bunch of judges and one is a winner. All are kind of winners. Theyve been picked by the community and hopefully all will get more funding and attention because they were part of that effort. Not just about that one company. Its about a sense in the region and more national and global attention on whats happening in the city. Steve, i think we convinced you to stay longer. Ill be here. The street reacts to the news that ebay is splitting off paypal. Shares rising on that news. Up about 10 right now. Also a report on the state of gaming industry and how the sector is betting big on millennials. Squawk box will be right back. Appen . Discover a new energy source. Turn ocean waves into power. Design cars that capture their emissions. Build bridges that fix themselves. Get more clean water to everyone. Whos going to take the leap . Whos going to write the code . Whos going to do it . Engineers. Thats who. Thats what i want to do. Be an engineer. [ male announcer ] join the scientists and engineers of exxonmobil in inspiring americas future engineers. Energy lives here. Cute little guy, huh . This guy could take down your entire company. Stay with me. On thursday a hamster video goes online. On friday it goes viral a network choking phenomenon. Why do you care . Hes on the same cloud as your business. The more hits he gets, the slower your business may get. Do you want to share your cloud with a hamster . Today theres a new way to work. And its made with ibm. You know what my business philosophy is, reynolds . No. Not exactly. To attain success, one must project success. Thats why we use fedex one rate. Their flat rate shipping. Exactly. It makes us look topnotch but we know its affordable. [ garage door opening ] [ sighs ] honey, havent i asked you to please use the we dont have a reception entrance. [ male announcer ] ship a pak via Fedex Express saver® for as low as 7. 50. Dad, i know i havent said this often enough, but thank you. Thank you mom for protecting my future. Thank you for being my hero and my dad. Military families are uniquely thankful for many things the legacy of usaa Auto Insurance could be one of them. If youre a current or former military member or their family, get an Auto Insurance quote and see why 92 of our members plan to stay for life. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Breaking up is hard to do, we have some break news this morning. Ebay just announcing it is splitting off its paypal business. The latest on this developing story just ahead. Ford loses traction with investors. The stocks skidding in afterhours trading. What the automaker is doing to get back on track and can the f150 boost sales. And how something happening halfway around the world can impact whats happening here. How it is all likely to play out. The final hour of squawk box begins right now. Welcome back to squawk box right here on cnbc. Im Andrew Ross Sorkin and becky quick along with Brian Sullivan. We have our guest host steve case. Developing story that broke just an hour ago. Ebay spinning off paypal. David faber joins us with more on that story this morning. Thanks, andrew. Of course weve talked about the potential or what will be the split of these two businesses likely to take place in the middle of 2015. You can never fully guarantee in terms of how long the regulatory process is going to be which can be quite time consuming. Also creating a capital structure for both ebay and paypal and other things that go along with it. When the split does take effect one very surprising part of this announcement is that john donahoe will not be the ceo of either company. Devon winnic who runs at ebay will be the new ceo of ebay. And dan shulmanchulman will become the ceo of a newly independent paypal when that takes effect. As for donahoe, hes likely to be on the board of both companies but its unclear what his future holds. I did ask him why that change and what hes going to be doing in the future. My most important responsibility Going Forward is having made this decision to separate over the next year to ensure that we set each business up for success and that these operating agreements get done in the right way. In addition weve got two great leadership teams. Devon winnic has been the president of ebay for the last three years doing a great job and the right leader for that business Going Forward. And as you know were also announcing today that dan schulman will be joining paypal initially as the president and then the ceo there after. And dan brings wonderful qualifications. He has a technology background. He understands mobile and he knows the payments industry. So i feel thrilled about both leaders as the right leaders for these businesses Going Forward. Im not going anywhere. Throughout the next year until we separate. Then ill go on one or both of the boards and im deeply committed to seeing this through. Would you become chairman of one of the boards . If that is appropriate, absolutely. Its rare ive seen a young ceo whos had success voluntarily say i dont need to be ceo of the company that is left behind or the company being spun off. Were there any disagreements that led you to believe or led you to think about this differently . Not at all. The board is 100 supportive of this action. Are you supportive . Absolutely. Ive gotten up every morning in the last ten years with the burning desire to do whatever we can to set ebay and paypal up for success. And thats whats behind this decision. And thats whats behind my actions. And our board is 100 behind that. What after this year do you see yourself becoming ceo of another company . You know, david, i havent given it any thought. I focused 100 on this decision. And i look at ensuring we land it in the right way thats best for everyone. And at that stage ill worry about whats next. You know david, coincidentally i have a good role model named meg whitman. And meg was ceo of ebay. She said she was going to do it for a decade ten years. And she stepped down eight years ago at the age of the early 50s and created opportunity for me for which im enormously grateful. Coincidentally, next year will be my tenth year and i will be created opportunity for two great leaders to be ceo. I want to do whats right for the company and ultimately that will work out whats right for me. Youve heard a number of times this reference to commercial agreements between paypal and ebay. I think thats going to become of great importance. They wont have allegiance to either one of the Companies Given theyre not going to be running one of them. Perhaps shareholders will view that positively. But those commercial agreements were intended to maintain some of the synergies in place. It will be very important as they work through them over the next year. Absolutely. David, you said this process will take them into next year. Maybe a year or more before its really worked out. Yeah. Middle of 2015 is what theyre targeting, becky. And well see. These spins can sometimes take as much as 18 months. They can go on for quite some time. Obviously theyre just at the beginning here as i said in terms of figuring out a capital structure which could become very important from the likes of a paypal. Okay. David, thank you. We will check back in with you with more of this interview. Meantime joining us on the squawk news line is scott devitt. Weve watched the moves. What do you think of it . I think its a positive for the company. John donahoe and bob swan have created tremendous value for this company over a long period of time. My views always been when they felt it was right to split, i felt it was right to split. Would you be buying it this morning . We have a fair value estimate of ebay at 50 a share. We come to 61 a share. The stocks traded premarket, it seemed to be appropriately reacting to the news. How long have you had some of the parts . For years. So are you surprised . Unhappy we the fact it didnt happen earliest . Theres always been a rationale for but there was a reason for keeping the businesses together for a long period of time. Because that was value creating although the longterm initiative which is now being deployed was in place which is more of the payment hauling of paypal coming off of ebay. Increase the strategic value, it will allow the company to focus on specific initiatives in the payment industry. And for ebay in its ecommerce businesses but given how both industries are and how quickly theyre changing. I give donahoe an enormous amount of credit. Talk about a turnaround story. People didnt think you could do a turnaround in the valley and he did it. Nonetheless, what im confused about is why you dont think he should have done this a year ago. I was going back through some of the filings, you know, they basically spent close to 100 million. Some of it relating to proxy related fights with all this. Nine months later they say its not a bad idea. You know i would say there are if you understand the connection between the businesses then penetration on ebay from 2002 to today has increased immensely. 70 of transactions are paid for with paypal on ebay. Given that reliance and also the increasing relevance of mobile and the requirements have those businesses be well connected. It made sense to keep them together. Again until the Management Team felt that it was the right too imto split them. And given the dynamics that are happening now with mobile, with whats happening with alternative payments it feels they feel the right time is now. Thank bs for joining us today. Thank you. Our guest host today is steve case. You know whats happening. Youve been involved with this too and watching the changes and being a part of it. We have a Company Revolution money that was one of the pioneers. So we watched this up close. We did have discussions with paypal five six years ago about different partnerships. And even then there were talks of should they be separate or together. 15 years eeg when we merged aol and time warner we were also in talks about merging with them. Aol yahoo . Where are you . Dan now pushing at yahoo . Dan has agitated yahoo for years. He got seats on the board. Now its starboard. You know the story. We had Tim Armstrong on the show yesterday. Would those make i think theres some logic there. Would you do that . I think both companies seem to be on a good trajectory. Marissa has rejuvenated where are you on marissa . Im a fan. Theres a lot of credit given the stock has run in a big way. Some people say if you take alibaba out, the thing is worthless. Thats crazy. Shes done a great job attracting talent and focusing on the engineering site. Not just the media side of the business. But Tim Armstrong has been looking for a deal for a long time. Is that the one . Its hard to say. I stepped aside as ceo 15 years ago. In internet terms thats a hundred years. Yahoo gets hundreds of millions from partnership with cnbc as well as my daily show on yahoo finance. Oh. Oh i didnt realize we have to be nicer. We have to be nicer. Who knew. Anyway, thank you. Up next tensions and protests growing in hong kong. But will this mornings deal news overshadow the concerns . And later on, ford changing the way it makes its most popular truck. The f150 will now be made differently. Will it have three wheels . Stick around to find out. Know that chasing performance can mean lower returns and fewer choices in retirement. Know that proper allocation could help increase returns so you can enjoy that second home sooner. Know the right Financial Planning can help you save for college and retirement. Know where you stand with pnc total insight. A new investing and Banking Experience with personalized guidance and online tools. Visit a branch, call or go online today. Thats the scene at the capital this morning. Overseas different story. Hang seng losing just over 1 yesterday. And over 7 in the last three months. Markets there are closed tomorrow and thursday for public holidays. Want to take a look at whats happening in the streets there. You can see the crowds are still building. Youre looking at a live picture of hong kong. Peaceful at this time but more and more people swelling into the ranks. Ebay shares surging as weve been telling you on this breaking news that its spinning off its paypal business. Futures pushing higher as well. So is the deal today trumping the concerns about rising tensions in hong kong . Other places around the world . Do we care about hong kong . Is that impacting the markets . Lets get some perspective. Good morning to you. What should we make of whats happening this morning . Listen i think the story largely remains the same which is theres just not a lot of other alternatives for investors that need to make certain assumptions. I know it sounds almost antiintellectual to make it that simple. But theres not a lot of other options. Dollar strengthening puts pressure on commodity prices. Negatively correlated we merging market stocks. All those things together i think mach me continue to be constructive on the u. S. Equity markets. Jason, what do you ascribe what happened late last week. Late last week we had what seemed to be the beginning of volatility. It felt like maybe we were we didnt really know what was happening. And now everything seems ladida all over again. Weve seen these spasms if you will every couple of months. And i think theres a lot of people that are still very scarred by the financial crisis that want to see this as the start of a top major market top. And again, ultimately stock prices are driven by two things are earnings and Interest Rates. When youre looking at inflation and Interest Rates at these levels the valuations become almost any valuation becomes somewhat compelling for equity. So i think loost week if i were going to ascribe it to something, it was a holiday week. So market was kind of thin. Also youre getting towards the end of the quarter. So thats what i would ascribe it to. There were some comments that seem to reflect. There was more ambiguity about what happened mid2015 now. Thats fair. I think its also fair to say, though that globally there are still big parts of the Global Economy that are worried about deflation. And i feel strongly that janet yellen is very dovish. Shes not going to be the person who take the punch bowl away early. Shes going to take it away late. And i think inflation target the fed has is still higher than where inflation is now. Real quick, do you care about hong kong at all . Do you care about isis at all . Do you care about ukraine at all . At this point just looking through the lens as an investor i cant say that it weakens the case for u. S. Financial assets. If anything, they strengthen the case. Especially in a were going to leave the conversation there. Thank you. Thank you. Appreciate it. Still to come breaking this morning. Ebay spinning off its paypal business. We will tell you what it means for the ecommerce space. And today on squawk alley mark hurd. Hell be joining the team at 11 00 a. M. Eastern time. Stick around. Keeping a billion customers a year flying, means keeping seven billion transactions flowing. And when weather hits, its data mayhem. But airlines running hp endtoend solutions are always calm during a storm. So if your business deals with the unexpected, hp big data and Cloud Solutions make sure you always know whats coming and are ready for it. Make it matter. Welcome back. There are a few stocks on the move this morning that we may not have talked about enough or at all. News corp. Is buying move. News corp. Hopes to expand its Digital Marketing business. Meantime walgreens, results up by higher prescription sales. And bank of America Merrill lynch upgrading. Targeted increased to 18 from 16. Lets get more from our steve host guest host steve case. Apple got devices allowed into china in part because they have removed the sort of back door for the government. The u. S. Government has said this is an awful decision by apple and that actually there are going to be instances when u. S. Officials and enforcement officials will want and you may even want to get at that phone. You talk about kidnappings and also other things where there could be a sort of public good. Its tough. I think any company that wants to be successful in china needs to kind of bend to the chinese rules. And its a challenge. I think some of the decisions tough make are difficult and a lot of decisions are you think apples decision was made for the purpose of china . I think apple was trying to figure out ways to make sure they are able to be a Global Player including in china. That likely led to some of their decision. The issue of security and privacy is going to be one of the difficult issues in the next 10 or 20 years. People have learned the power of the internet. When we got started nobody knew what it was. Now its part of everyday life. And they like to have more personalized information. They actually want you to track what youre buying so you can recommend things. At the same time theres a dark side to that which is this Privacy Security and whether it be for individuals or companies trying to figure how to strike this right balance between empowerment. What do you think about the back door issue . Google in their next system is going to be encrypting everything. So theres no way in. In many ways that feels great. Theres still other ways. You could probably get a phone number from Telephone Companies still. But at some point they will scrap that. Trying to look at but do you think the user cares . Do you think the user would select one device over another because of these issues . Some will care. Most will not. Most will go for other features. But some will care. This whole dynamic in terms of personalized information, 25 years ago youd go to a Technology Conference people talk about the idea of ecommerce. And the general conventional wisdom was it will never work because nobody will enter their credit card online. Hackers might steal it. You dont have to reenter it and allow them to track what theyre buying. People basically say the convenience of storing my credit card and the benefit of having people know what im interested in trumps my concern about privacy. I dont recall an opt in for tracking my purchases. I think they just do that. If you want to use the service, you give up and say fine. There were other options. Some didnt track at all. The market evolved in a way that personalization and the convenience that those personalization benefits kind of gave to people trumps other concerns about privacy. I think the overall issue is mounting and there are people now some of interesting startups now focused on texts services where its not stores. Like mark cubans cyber dust. Theres a segment of the market right now. Over time that will probably grow. How much it will be is hard to say. If a company has a product and it doesnt cost anything you are the product. Right . Twitter. Youre the product, andrew. They dont do anything. We do it for them. And they get rich off us. But it helps us too, i guess. They create a platform for social exchange. Gmail. Your emails are basically read. You want to go sailing and then here comes a sailing ad that pops up. Do people care at all about privacy . Some people do. Some dont. Does anybody under 25 care . Most people under 25 grew up with these digital tools. Nobodys going to care until one day someone opens up their bank account even if they get all their money back days later. Thats when everyone will say theres a problem. My debit card just got shut off after a data breach of a large retailer. With the drones now, people say the Drone Technology has taken over. There is a public outcry about drones and spying. Its a technology that empowers people in different ways. You can track whats happening on farms which is a lot more efficient. But theres still a concern with this notion of people spying on you. Theres backlash often with cameras at spotlights taking pictures of people. So there is this growing concern. The tradeoff will shift. 20 years from now there will be more concern about privacy. All right. Were going to have more on this as well. By the way, henry tweeted out that carl icahn made 180 million on the ebay paypal split. Up next were going to talk about gaming. Stick around. Nesss expensethats where pg es onlinetool can relyelp. Your ur t make equipment upgrore even develop a Customized Energy plan for yourpany. K of it as a way to tare control o costs. Se. Find new w and money with pg es Business Energy checkup. Welcome back to squawk box this morning. Among the stories front and center this morning, the eu says tax deals granted to apple in ireland constitute illegal tech support for the giant. Meantime in china regulators giving apple the okay to sell the newest iphones. This after addressing beijing security concerns promising they dont have security back doors that could let u. S. Agencies access users data. And hundreds of thousands of people facing a Health Care Deadline today. They must verify their income. If not, theyre going to risk losing their Health Insurance subsidies or having to pay them back. The drama continues at pimco today less than a week after the abrupt and highprofile departure of bill gross. Morningstar cutting from bronze to gold. Were going to have an exclusive with douglas hoj along with daniel ivascyn. If youre still awake, tune in. Should be interesting. Its going to be interesting. For so many years it was bill gross only. A lot of questions about whats happening. Also we should tell you the Global Gaming expo is about to get underway in las vegas today. Well be talking to the biggest names in the business on cnbc throughout the day. This is a sneak peek on how the industry is changing and what theyre doing to get new customers into casinos. Jane welles joins us with more on that. Good morning to you, jane. Good morning, becky. This is like the ces of gaming. This is where they roll out the latest technology. But its happening as las vegas is evolving. Take a look at this. Mgm is investing half billion dollars in a new arena and park project. Yes. A park in las vegas. They say there are going to be a lot of trees so it will keep you cool. The 20,000 seat arena is a 50 50 venture with aeg. As vegas is less about gambling 70 of resorts revenues. Gaming revenues were down 6 but revenue per room was up 10 . The new arena could accommodate an nba team. None has committed. Is vegas getting ahead of itself . Lets listen to don thrasher. Theres plenty of events that have come to our attention that were unable to accommodate. This will bring luxury boxes and the facilities that we need to accommodate those other events. So you touch to roll. Here weve rolled a seven. Going to spin seven times, land on something. Okay. As for Gaming Technology as theyre setting up the show here, there are a lot of challenges. Valley tech being bought by scientific games. Millennials dont play a lot of slots. They play video games. Because of gambling rules they cant make a skills based video game slot. It has to be numbers generated by chance randomly. So theyre trying to make slots more social. We find that slot players really like to have a community experience. So we develop some games where they share in a bonus. Heres the other thing theyre all looking at. Me mecau. Theyre concerned about whats happening in hong kong. Theyre more concerned about chinese concerned about money laundering. The ceo says china needs them to succeed. Were going to have more stuff throughout the day including the firstever Industry Report on what the Economic Impact is of gaming including native american casinos. One number so far, 38 billion a year in tax revenues to the u. S. Government. Back to you. Wow. Did you purposely try to use that austin powers clip . Because its a Family Program . Do you know what you were showing on . Did you see whats going on there . I didnt understand. Was there something inappropriate there . I didnt did there was austin powers in a tent and a woman ten feet behind him pulling a rope to tie the tent down. I dont know what youre talking about. There was a rope being extracted from austin powers himself it seemed. Im trying to pull a fast one. We now have it on freeze frame. You probably cant see the screen. So thank you, jane. Oh, behave. Very nice. Ropes from a tent, not my bag, baby. All right. When we come back today, ford is taking the wraps off of its aluminum version of the ford f150 pickup truck. Not since cocacola changed its brand has an American Company made such a change. Concerns about the outlook at the point. Phil lebeau will give us his take when squawk box comes right back. Charlie, the demand on this network, it is increasing by the second. Its crazy, huh . And people are relying on it more than ever. We cover more than 99 of all americans. I know, i cant imagine living without it. Its a place where people can come share knowledge and ideas. Its beautiful. Thats deep charlie. My selfie just hit a hundred likes. gasps a hundred at t is building you a better network. If you ware a denture, take the simple test. Press your tongue against it like this. It moves unlike natural teeth. Do you feel it . It can happen with every denture. Introducing new fixodent plus true feel. It helps keep dentures firmly in place. With a smooth formula, free of flavors and colorants. So you get a closer feeling to natural teeth. New fixodent plus true feel. Fixodent. And forget it. train horn vo wherever our trains go, the economy comes to life. Norfolk southern. One line infinite possibilities. Welcome back to squawk box, everybody. Take a look at the futures. Well see right now they are still indicated higher. Dow futures up by about 45. Ford f150 trades in the steel body for the light weight aluminum. This is a big gamble. Hoping its not the new cocacola moment for ford. Phil, i like it because it makes the vehicle much lighter. Are there any purists who are saying it is not going to be as tough as i want my ford to be because apparently their tagline is has tough in it . Absolutely. Theres a lot of purists. Im getting emails from people saying its like an aluminum beer can, which is not true. But you have people with that perception out there. Well talk about the f series in just a bit. But theres a lot of attention on what ford did yesterday in dearborn michigan. It has many saying whats going on here. Heres what ford did yesterday. It is saying that its 2014 net profit will be at least 1 billion lower than previous guidance. Why . Losses in south america and in europe. Particularly coming out of russia. And also 1 billion more than expected in warranty and recall costs. Heres new ceo mark fields on the warning they issued yesterday. First off, 2014 by historical standards, its still going to be a good year for us. But clearly as we mentioned in the session, clearly in the Business Environment weve he did tearuating environments in south america and russia. So i think weve taken appropriate actions to mitigate that. As ford is bringing down expectations on the profit front, it is trying to ramp up expectations when it comes to the new f series. The aluminum f series hits showrooms late in the fourth quarter. The big selling point here because they have added aluminum panels stripped 700 pounds in rate, the fuel efficiency is much higher. Its expected to be in the high 20s although its not officially stated yet. Ford says the fseries capability is not going to be hurt because of the lighter weight. Yesterday we had a chance over the course of several hours to drive the new fseries in a series of offroad courses. We did put it through the paces. And its hard to say the durability is the same as previous models after driving it just for a few hours. But it does perform it as you expect it. It was better than i expected. Well have to see when drivers get in this vehicle and it goes through the paces o efr the next couple of years. I want to show you this comparison. This speaks to how important the fseries is for ford. When you look at profit per vehicle, overall in north america, its a little over 3,100. Overall for all vehicles for ford. But when you look at the fseries and we talked to a number of analysts in the industry. Everybody says theyre making between 8 and 10 grand per truck. And this is the best selling vehicle in the u. S. That speaks to the importance of the fseries. Look at shares of ford. Down yesterday after the warning. They are now trading at a level we havent seen since march. Were back live in san antonio. Let me take you inside the new fseries. There is no lack of technology and features inside of this truck. Theyve packed a lot in here including a 360 degrees camera so you can see all around you. A camera that allows you to hook up more easily when you need to hook up a trailer and go. And the fuel efficiency, thats the big selling point because of these aluminum panels. There you have it. A lot of people sit there and think you hit this and its going to be like a beer can. But thats not the case. Are they doing this because Consumers Want it or are they doing it because they have to get their fleet to lower fuel mileage things . Becky, heres why theyre doing it . Theyre doing it for two reasons. One, greater fuel efficiency they believe is a true difference maker. That if you tell somebody i can buy a pickup truck and i can get 28 29 Miles Per Hour on a highway, theyre going buy it every time. Thats what people want right now. They also believe that the technology theyve been working with alcoa on the aluminum. The technology and durability is all there so you can take out 700 pounds and yet still have the durability you want. You can also tell the haters you know what else is an aluminum beer can . An airplane. Theyre pretty tough. Lets bring in senior auto analyst at citi. I can see your mouth moving. Are you there . Can you hear us now . Yes. I can hear you. Aluminum wires on the microphone. Thanks for joining us. Its a neat thing. Its a technology improvement. Will it matter for ford and its stock which has been struggling . I think it will matter yeah. We are modeling positive pricing and gains from this truck next year from ford. I do think theres some conservatism in there. This is a truck that does get them way ahead of the curve in terms of fuel economy. They want it in the pickup truck segment. Weve done work on this in the past. The payback is there. If theres any segment where consumers are more likely to pay were this its a pickup truck. Theres a lot of demand in that segment right now. Great time to have new technology that addresses fuel economy. Heres the thing about trucks is that you tend to be a dodge person a gm person, or a ford person. Will the f150 wont benefit if old ford guys buy the new ford truck. Will this new truck on your estimations bring in the tundra buyer, the silverado buyer. Are they going to now bring the f150 . This is really more of an exercise we believe in pricing opposed to major market share gains. Typically ford has had a 3,000 to 4,000 Price Premium over their competitors. Its flattish. I think we are modeling in our estimate going back to that old premium weve had. Ford also pretty capacity constrained. Theres a lot of pent up demand in pickup trucks. We think its more of an exercise of bringing technology in early, getting paid for it pricing for it and increasing margins that way. All right. I want to ask you about Something Else. Its an advertisement. Its a little bit sort of i guess off topic, but lets have a little fun here. The new Matthew Mcconaughey lincoln commercials the only way he can. All right, all right, all right. Ellen degeneres had fun with the mcconaughey ad. Spoofed him. Look at this. Whatever you put in these brownies, i dont know what they are, but they are delicious. Now i see it. A little bit of fun there. You get the point. Theyre spending a ton of money im sure to bring in mcconaughey. He aint working for free. Is this going to matter to the Lincoln Market . Theyre rolling out in china. I agree. Were skeptical too. Its been a long journey. What weve written in the past is we want to see ford in the future if this plan does not work we want to see them take more action. Weve previously written an idea of turning lincoln into a Pure Electric vehicle. Theres an upside there and compelling case to do it. Right now theyre in Product Launch mode. Going to be a big test for this brand. If that works, great. If it does not weve written in the past we want to see more direction. All right. We do appreciate it. Have fun out there today, phil lebeau. Looks more fun than where we are right now. On the car side its interesting. Its great to see the innovation coming back better value, particularly lifetime value because of the cost of gas. But the real risk down the road is people now are less interested in buying a car. Car sharing companies are growing rapidly. Other ways to get around. In cities youre seeing less car ownership. Thats not going to be obvious over time in the short run, but over time they could put pressure on. Things like this will push the envelope of innovation. Thats krital to build on the strength of whats happening now in the car business. When we come back we are counting down to the final training day of the Third Quarter and what a roller coaster ride it has been. Swinging back above 17,000 after falling to around 16,300. Where is the next stop . Were going to check in with jim cramer and hear his views on ebay and paypal. Tomorrow on squawk box, one of americas most powerful investors. Billionaire ray dallo is going to talk market success and where hes putting his money to work. Squawk box starts at 6 00 a. M. Eastern time. Profit from it. Can mean lower returns and fewer choices in retirement. Know that proper allocation could help increase returns so you can enjoy that second home sooner. Know the right Financial Planning can help you save for college and retirement. Know where you stand with pnc total insight. A new investing and Banking Experience with personalized guidance and online tools. Visit a branch, call or go online today. It certainly is a critical time for pimco. Trying to retain clients after the departure of bill gross. Morning star cutting its analyst rating to a bronze level from gold, in part because of the uncertainty around management. Keep in mind we are going to have an exclusive interview with the new ceo and new cio of pimco together exclusively only here on cnbc 2 00 eastern p. M. Lets get down to the new york stock exchange. Jim cramer joins us now. Jim, john donahoe, what do you make of this . The split . I find this breathtaking. It was worth much more before apple introduced its combination they made with visa and mastercard. The time to have done this was earlier. Ive been pushing this thing for ages. It made no sense to have these two underneath with each other. Paypal needed to be on its own to be competitive. This is just the classic, what were you thinking . How could you not have done it earlier . You are real nice guys so maybe you get away with less criticism than you normally get. There was a time to make this move and the time has passed. Telling it like it is. Jim cramer well see you at 9 00. Thank you. Today on squawk alley mark hurd will be first on cnbc interview and will join squawk alley 11 00 a. M. Coming up one Portfolio Manager with a major position in ebay stock is going to weigh in. Financial noise financial noise financial noise financial noise in a world thats changing faster than ever we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through we say lets get to work. Because the future belongs to those who challenge the present. Welcome back to squawk box. You are looking live at hong kong and protests. They are massive. Peaceful this time but getting bigger. It could reach 100,000 ahead of tomorrows Major Chinese holiday. The hang seng was down 1 overnight and now down 7 for the month. Our big story, ebay spinning off pay poll. Bill smeed of smead capital. Are you a happy camper . What do you think of . Weve got mixed emotions. We are a Long Duration investor and we like to practice low turnover. The more excitement they get you have to make adjustments. Id like to disagree with jim cramer. Paypal is so much farther ahead. They are pushing it off so people can look at this jewel on its own, number one. Number two, i can make up a list of people that would want to buy this business three of them gigantics that would pay cash and two that are incredibly high pe ratio glamour top tech stocks. Like alibaba . Who are you thinking about . No. Apple, microsoft and google could all buy paypal by writing a check. You dont think for a minute Microsoft Microsoft google spent 300 million trying to create a paypal and failed miserably. This whole idea just because apple wakes up one morning and tries to do something they are going to have success doing it . To me thats youve been a fan of john donahoe. What about, a, he is stepping down and fought this for a long time, and now seems to be embracing it . Well you make four times your money in six years on a stock. You like to get a run. The answer is he is a very solid manager. The idea that you are going to jump up every once in a while and switch your company all around and because you didnt do that i dont think thats fair. Om. We are going to leave it there. Bill smead, thank you for joining us. Lets get final thoughts with our guest steve case. This was unexpected to see this. What do you think of everything youve seen play out . Unexpected in one sense because nobody expected the news today, but not that unexpected because of the idea of separating paypal has been talked about for many years. I think the focus on the payments business and separating that makes sense. Payments versus hypercompetitive. Its gotten hypercompetitive in the ecommerce space. Big commerce is growing like crazy. Both businesses are interesting businesses, but supercompetitive. Having independent companies able to move quickly in the commerce space and payment space makes sense. Security was a question there, too. The chief Technology Officer recently left. Some people questions as whether that was because of the Security Breach there earlier this year. That is going to be a problem for every Retailer Online retailer. Its going to be a problem as the internet becomes more integrated in their lives. The next wave will change education, change health care. I think its going to change how people think about health and transform more aspects of our lives. The iphone has changed the world. I think it could. Well have to see how the initial market receives it. Other ways to be connected, other ways to manage and monitor Different Things is becoming more important. The first wave of the internet, which i played a role in 85 to 2000 is building it. The last 15 years has been building on top of the internet. Apps Product Services twitter, facebook. This third wave will be integrating the internet in every aspect of our lives. Its very powerful. It can also be scary. This debate about consumer features while protecting privacy is a real challenge. Steve case thank you for being with us. Thank you. Watch brian at 2 00 with the ceos of pimco. Squawk on the street starts now. Good tuesday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer and david faber. What a morning with paypal shifting to two separate companies. Well talk to lawyer Robert Shiller to break the numbers down. Premarket slightly higher