Transcripts For CNBC Squawk Box 20141002

Particular. Dow futures are indicated up slightly higher. Steve, ill send it back over to you. 8 30 eastern, we get weekly jobless claims, expected to rise by 4,000 to 297,000 below that 300,000 mark. At 10 00 a. M. , we go august factory orders for july. In global news, the European Central bank meeting in frankfurt, a policy decision due around 7 45 eastern. And then president mario draghi will hold his usual News Conference less than an hour later. Indefendanters will look to draghi for news of the asset buying program. In europe, it is negative following through on the u. S. , but not quite as much as yesterdays selloff, guys. Its a record 23. 5 billion dollars pulled from its flag shift fund in september. The daily outflow happened on the day bill gross announced hits departure from the firm. Just to put it in perspective, though, its still smaller than i think the number of the year before was like 290 billion. And this is a fund with about 222 billion in it. While that sounds like massive numberes coming out of it, this is a very large fund and still i believe the largest fund around. I believe that is the case by a long shot. Bank of americas ceo he now has a new title, he will be chairman of the board. Two jobs have been combined 2009, voters voted to ship the title from then ceo ken lewis. Chad holiday has been serving for the last four years. I spoke to a couple bofa people. They think it signals sort of back to normal city at that firm. Its interesting. I wasnt sure if they would ever put those jobs back together. Once they split, there has been a movement to split other positions. We have Warren Buffett on today. He does have a stake in the company. Is bofa too big to manage . Why if its too big to manage is it better to put two jobs together than to have it separate . I would generally, by the way, in most instances think separate is probably better. Im not saying its good or bad. In this case, i dont know. Look, i thought stripping jamie comon of the title didnt work. Lee raymond, the head director there. Theyve made the point that its a similar situation where you have someone you can rely on. Active board rather than a passive board. Right. The stock market futures look like lit higher after a big decline. Lets take a look at whats been happening in the oil markets. Yesterday you saw the oil markets down. Wti down 223 to 8850. Nice. Breaking the 90 a barrel. Weve been stuck at about 90 to 100. And there was a lot of resistance or a lot of support at 90 i should say. 88. 44 for wti this morning. That is goc to be a huge help for the consumer. There have been a lot of concerns about the consumers lately. Take a look at the yield on the ten year. Back below 2. 5 . Take a look at whats been happening with the dollar. Youll see it is down against both the yen and the euro. 108. 61 is where it stands right now. 1,213. 40 an ounce for told. The Airline Industry under pressure this week on news of the first confirmed case of ebola in the United States. The president of emirate eggs Airlines Says demands of flights from africa to asia has fallen due to concerns over the deadly virus. Right now, looking at the boards, theyre up just a little bit, but not making up the losses from yesterday 37 the first confirmed ebola patient in the United States was initially released from the hospital before his diagnosis and that is raising some major red flags about the companys preparedness for a major pandemic. Meg joins us right now. Good morning. We have learned the patients name is thomas eric duncan. Getting some details, he flew United Airlines through brussels, then to washington dulles and then on here to dallas. He did seek care on friday. Apparently he had communicated to a nurse that hed been traveling in liberia. Regretfully, that communication was not fully communicated throughout the full team. As a result, the full import of that information wasnt factored in to the clinical decision making. The overall clinical presentation was not dippal at that time for ebola. That was the presentation. So it was sunday that he was then admitted to the hospital and placed in violation. Health officials are tracing his kangts. They are looking into 12 to 18 people, including five kids. Experts say there is a possibility we could see other cases. However, because he was not symptomatic on the plane, there is zero transmission on the flight. The state is well contained to contain this infection here according to governor rick perry. Theres a story in the New York Times saying the u. S. Government the working to ramp up production of zmax. That was experiment al but ther was only supply for about seven people. Therefore different drugs in testing. As weve seen before, central blood transfusions from other ebola patients that have been cured. Meg, that drug, thats the drug i assume that was given to the two u. S. Citizens brought back to emirate university and those are two patients who recovered. Its hard to say whether it was from the drug or from the treatment, but im assuming it was those two . Thats true. And there were some other patients who received it and not every single one survived. Right. The problem is that these yeah. Thats right. And he was older. Its hard to tell whether its the drug, if its the care, if its Something Else thats helping them. Is and so there is a consortium of Clinical Trials be started in west africa however, its imperative that these things get wrapped up sooner than that, potentially for use earlier. I think the scariest news that weve heard is that this gentleman who was in the hospital behind you was in contact with five School Age Children and they attended four different schools. I guess that is probably what just about every parent in the country is thinking. Obviously, the kids have been pulled from schools at this point. I would assume none of them are exhibiting any symptoms at this point, but have they confirmed that . What were hearing is that the children were not symptomatic. The schools are trying to communicate that theyre being very careful. These kids are not in schools and theyre being monitored. However, they are being kept at home and theyre not, you know, coming to the hospital or being quantity teened or anything like that. Meg, thank you so much. Lets see whats going on in asia right now. Tensions rising in hong kong between government officials and protesters. Susan has the latest on was going on there. Were looking at a noticeable dropoff today in the number of protesters around. So from the same time yesterday. Speaking to the protest leader yesterday, they said at the peak we were looking at 2,000 in the streets behind us. Student protest leaders have threatened to occupy government buildings and offices surrounding his own personal residence. These are the placeses which we have seen a noticeable Police Presence at in the last few days. Thats something that were keeping a close eye on. Theres been an impact on the economy, especially with these ongoing protests in its seventh day. We were speaking to the inbound trouble head here in hong kong. He has told us and told newspaper editorials out there. These protests are already impacting the local economy. The protests and the tensions probably adding to the selloff, as well. Back to you in new york. Thank you for that, susan. Global uncertainty and the first u. S. Ebola case really spooking investors yesterday. Markets kicking off the Fourth Quarter in a sea of red. Are Global Concerns timely affecting u. S. Markets or will this soon pass as the other incidents have . Joining us now, drew mattes, deputy chief u. S. Economist at ubs. Before i went on set yesterday theres phil. The producer of the show says, steve, i want you to come on and tell me exactly how many points of this 200 point decline are from ebola. Well, ebola strikes me as sort of bird flu a couple of cycles ago. We always have these concerns about pandemices and eventually the doctors get their hands around it and these issues pass. At this point, theres certainly concern, theres headline risk, i dont think that is going to be a major driver of Economic Activity or stock market performance. What about just yesterday, though . Youve got a number of things going on yesterday. Certainly the noise from hong kong, the situation with ebola. You look at the Economic Data points weve seen in the last couple of days. Auto sales have been very strong. Consumer confidence, was ate an eightyear high . It missed again the other day. The ism was at a threeyear high. Youve got a couple of data points in conjunction with Everything Else at a time when the calendar flips to on october everyone is nervous. So its a reasonable spot to begin to take some profit. Drew, lets talk about that Economic Data yesterday. Ism was a great example. Missing at 56, but still at a pretty high level, pretty robust. The Construction Spending numbers, i dont know what to do with. They were negative, more negative, but revised down and negative as in missing in a big way, as well. Are you changing your view at all about this sort of 3 ish type growth we have in the Third Quarter . No. Theres no reason to. If anything, they should be taking gross estimates up. So the thing that happens is economists get all excited about things and we start predicting growth. In the indicators themselves as opposed to underlying, you know, what the underlying growth pattern is. Economists end up gradually saying, well, it was good last month, it will be better this po because were going to have solid growth. So you get this upward creep in expectations. So the fed has been blamed for almost everything. I dont hear them being blamed for this latest issue. It doesnt sound like its being related to a change in Interest Rates. I was traveling to meet clients the last couple of days. The thing that strikes most people is that janet yellen seems more dovish than the dots, but the dots are saying the fed is going to have to go faster and more aggressively when they start. But janet yellen keeps seeing the back pedal away from that and its leaving the clients confused. They want to believe janet yellen, but at the same time, theyre nervous about the fact the market is pricing less rate hikes. There are about a hundred basis points through 2016. If they correct that, you know, thats not good for markets. So one of the characteristics of the market the last several days has been these triple digit swings. Is there anything particularly you think thats behind that volatility itself and does friday, monday and tuesday have a sympathy theme to you . Certainly there was a seasonal issue. Volumes were low. At any time you get an item that has the potential to spike the movement, the response in the market higher or lower depending upon the item. So were back this week. You had another sort of shot across the you bow at the whole pimco news, that that is unsettled. The fixed income market a little bit. And i think that, again, with it being a september early october situation, just had people looking at the calendar and getting nerve justice. With you, phil, on this next one, jobs tomorrow, give me a number. Were excited. We like the adp number. Im excited. We liked the adp number yesterday. The survey week for the claims was just off the 17week low. Those are both leading indicators for us. Our miles are suggesting a 230 kierchbtd kind of number for september. You get a great number, though . Is that correct be that is the market reaction. I think that reverses the concern about autos yesterday and Consumer Confidence and ism. Everyone is saying, well, okay, the world is going to hell in a hand basket. Its not. As drew said, made a great point. The trend is very strong. We had a couple of 14ri7s. I think the jobs number is fine. I think the economy is fine. I still think were going to be at 2100 on the s p by tend of the year. This will pass. Lets get through the jobs outlook. So were at 250. 250 . Yes. Youre one upping him. Well, its pretty much what phil was talking about, there was a strike. It hurt the retail hiring. You know, ours are about as high as they can get. You have to add people if you want to add production capacity. What about the Unemployment Rate . 6 . It wouldnt surprise me if i had had a five handle on it, though. Phil, you are doing a lot of thinking about the elections. You think its time for investors to consider. Im fascinated by the idea that the economy is doing better, that the president s poll numbers keep going down and down and down. There is no connection in the mind of the public and with the economy and the political situation. How did things shake out in november . Why does it matter for inveters . Well, i think the president s poll numbers over the most recent period of time are falling more so not because of the economy, because of whats going on overseas. Isis, syria, iran, russia, iraq, israel, those are the issues that seem to be resinating as i go out and visit with clients. Everyone seems to be talking about our foreign policy, and that seems to be the issue. From a stock market standpoint, our view is that the we do get a sense in the senate that the senate does go to the republicans. Historically, Deutsche Bank has done the work going back over the last 80 years bhfr both houses are controlled by republicans, it doesnt matter who the president , doesnt matter what party the president is from. The stock market has been up 15 a year over that 80year period in respect and and whats the comparison when its a split house . Less. Less than 15. So investors are looking at that saying, okay, that provides an effective check and balance. 15 and 1r 6 should be relatively strong years if this is the way it plays out. Thank you very much. We have polling data coming on tuesday about the president and the economy. Something to look forward to. Coming up next, directv and the nfl, theyre going to be playing ball. Find out much more about the satellite tv providers deal to pay the league to keep beaming sunday tickets to its customers. Plus, funny man adam sandler strike ago new multi picture deal. You will never guess where the water boy is going to show up next. In his words, here is a hint. It rhymes with wet chicks. Squawk box returns in just a moment. Across the state. For better access to talent, cutting edge research, and state of the art facilities. And you pay no taxes for ten years. From biotech in brooklyn, to next gen energy in binghamton, to manufacturing in buffalo. Startupny has new businesses popping up across the state. See how startupny can help your business grow at startup. Ny. Gov whenwork with equity experts who work with regional experts who work with Portfolio Management experts thats when expertise happens. Mfs. Because there is no expertise without collaboration. Welcome back, everybody. Directv, a big win, it will keep nfl sunday ticket. The news is important because at t had the right to pull out of its deal to buy directv if the sunday deal wasnt renewed. That was seen as a key part of that deal. Netflix does rhyme with wet chicks. Thats Adam Sandlers line. Theyre teaming up. Company expected to announce today, it has struck a deal with the medium. He will star in four films that will appear exclusively. It shows up in some imax theaters. Theyre spending 3 billion in content in the next year, netflix is. I think if youre adam sandler, those movies usually cost 40 to 80 million historically. Its the golden age. Hes had a couple the last couple of films for adam sandler, unfortunately, have not the one he just did with drew berrymore . 14 million i think was the opening weekend. It bombed was the sort of official phrase in hollywood. The producer just said flopped in my ear. Why would you say that, andrew . Bombed, flopped. Youre becoming inside hollywood, you know . Youve become luke a member of the family so you dont want to insult people. No. I just like his hanukkah song every year. I think its one of the great anyway. The tesla chief is tweeting, but its about time to unveil the d in Something Else. An accompanying photo mentions the date october 9th. The sweet lead to go all kinds of speculation. Some think it could mean the electric carmaker is ready to make a new model. Musk has more than 1 million followers on twitter. So t so the d, october 9th. They cooperate do the model s because the other models were the e and the x. Ford or something has an s. What is d . Did we want to do the sex . Yes. Im not making that up. Anyway, when we come back, some big discounts on trucks. I questioneded her. Auto sales surging last month, but could those discounts and questionable auto loans spell trouble down the road for Car Companies . Plus, mega home and mega mortgages are making a big come back. Our wealth editor is here to let us know if we are worrying about a housing bubble. Warren buffett will be here live in studio just about 90 minutes from now. Squawk box will be back after the short break. You know what my business philosophy is, reynolds . No. Not exactly. To attain success, one must project success. 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Enagage with us. Morning. Welcome to squawk box. Im Andrew Ross Sorkin along with becky quick and steve liesman. Joe has the day off. Mk done als is unleashing the halloween version burger in china. When you read that, hearing it makes my stomach upset. Lets check on the markets this morning. The futures were a little stronger. Becky, what do you call that, flat . Is that just flat . Really nothing. Especially after a drop of 264 points yesterday. This is not about that. We havent figured out which way were going. We had overseas markets follow through with yesterdays selloff, but not as strongly. Maybe down a little bit by todays flatness in the states. Everything is flat here. Red arrows, green arrows. Lets take a look at asia now. Lets see if theres anything going on over there. There we go. Here it is. A little bit more. The nikkei following through on yesterday. And hang seng on the decline yesterday. Down 1. 28 on hang seng down 11. 62 . The nikkei in shanghai up just a little bit. Federal and state authorities are reportedly havinging used car dealerships, according to the New York Times. The question is whether dealers are inflating borrowers income. These applications to lead borrowers to fall behind on repayments. Speaking of hes, it was the best Third Quarter for sales in eight years. That came despite a mixed set of results for the kamakers last month. At auto nation, the numbers were very strong. This is the countrys largest ford, mercedes, toyota dealers. Joining us right now to take us inside the numbers is mike jackson, auto nations chairman and ceo. Mike, its great to see you this morning. Becky, good morning. Yes, september was an excellent sales month for auto nation. It was a very good month for the industry. If i look at the Third Quarter, then, for auto nation, reretailed almost 84,000 vehicles, plus 10 . And the city had a run rate of averaging 16,800,000 units for the month, meaning the full year should come in right around 16. 5. Well probably see another 3 increase next year, meaning well be knocking on the door at 17348 vehicles next year. Mike, how do you square up what youre seeing and what the results are from what we heard from ford earlier this week . You take the u. S. , their number one selling vehicle, the number one selling vehicle for the last 33 years, the ford f150, is in a major changeover to the new aluminum structure. And the deere born plant is completely shut down and the kansas city plant is up next. They are at half production at the moment for their number one selling vehicle. They dont need to put any incentives on the steel body going out. We have customers coming in that say, you know, i want the last of the steel body f150s. So that will just patiently sell out. And until both plants are changed over in their number one vehicle is fully up to speed on production, they simply will not be able to supply the vehicles. They admit this changeover will cost them about 100,000 vehicles of production for the u. S. Market. And then they still struggle in europe. Europe is disappointing for everyone. And theres challenges in the emerging markets, but lessons from china are you have to be in the emerging markets early was the Strategic Point of view. Because its going to be Significant Growth over the next decade in the emerging markets. So i have full confidences in mark fields. Weve got a great relationship with ford motor company. Theyre in a major changeover. And i expect well be sitting here saying they simply cant make the new f150 fast enough. Becky read about subprime lending in the auto market. Some news outlets have been worried about this and whether or not its a return to the crisis type lending that it had as it created the crisis. How concerned are you that were creating a credit bubble here . Steve, good morning. About 5 of auto nation sales go to subprime customers. So its a very small percentage of our business. This idea that auto financing is our sales are supported by excessively liberal lending and were doing something that would happen in the mortgage industry, i just categorically reject. What everyone is missing is people pay off their car loans and they pay off their car loans quickly. A typical car loan, even though the length of the contract may be 63, 64 months, its paid off in 36 months. The default race is less than 11 . And within that, an important part of the industry is subprime. You can find used car dealers who have individual abuses that should be looked at. But to say that it is systemic so the car industry, i categorically reject. Mike, do you see and well take your company out of this. But do you see other used other dealerships being more aggressive than you would like them to be . Is this investigation make sense at all . Listen, i think subprime plays an Important Role in the marketplace. You know, i view it as the Second Chance marketplace. And to say to subprime customer you cant have a car to go to work or take your children to school, because you have shake canning credit, and you shouldnt get a Second Chance in life, i just disagree with. So i think theres an Important Role for subb prime in the marketplace. Can you find anecdotal stories of used car dealers who took advantage of the situation or went too far . Yes. Those situations should be addressed. The idea that the theres systemic abuse in subprime, i dont see it. Andrew, i wanted to weigh in quickly on this. People emerge from this crisis with damaged credit and the ability to get it back or to get the a loan, plus people may be unemployed. And to get a job, at the need a car. Its a critical part of getting the economy going again. Steve, thats the point im trying to make. Of course, if theres individuals making abuses, they should be addressed. Steve, youre right. These people need a Second Chance and you cant get a Second Chance without a car. Are they paying higher rates . Are higher rates justified because the losses are higher . Yes, they are. But its a Second Chance for these american citizens and as long as its done responsibly, i think they deserve a Second Chance in life. Have you guys been contacted by any authorities . No, we have not. Okay. And second, we have the ceo of volvo coming up on the program in just a little bit. And i wanted to get your views on that company. They have struggled of late. I dont know if you sell volvos or not, but they have a new vehicle coming out. On up obviously their ownership has changed and i wanted to get your views. Well, we do sell volvos. Theyve deaf in thely been challenged. They have new ownership with the choip hes. This is a very exciting new car that they have coming out. The dynamic in the marketplace thats durch thats different from the marketplace, the volume of cars today, whether its a ford fusion or honda accord have content and innovation features like luxury cars had ten years ago. Then, on the other hand, you have these global Premium Brands like bmw, mercedes, porsche and audi that have astounding Development Budgets and are really created differentiated products with a differentiated price. You have these two centers of gravity, and if youre in between, you have to figure out, are you running towards the volume market or are you going to try to go up against the germans . For a company like volvo, thats a challenge. Mike, let me ask you this, too. I know you said that sales have been really strong and, obviously, that plays out. There has been a lot of questions about Consumer Confidence. I think youve been one of the very early people to notice it when consumers are feeling less confident. Have you seen anything in the sales rooms, anything to make you think that the consumer is under pressure . Becky, i think i had some credibility on this issue because you know me, when i think things are going to go bad, they went bad. So im very optimistic about the Auto Industry for the next several years. The average age is still 11. 4 years old. Theres still tremendous pent up demand. I look at the scrappage rate household formation. You could make the sustainable case forestry sales and high 16 or over 17 million for the next several years. Even as Interest Rates begin to normalize. The only disconnect i see that i worry about is as these gasoline prices come down, the bandaids we have from regulators to sell fuel economy is going to be a gap between what the price of gas is and what weve been mandated to sell. And ill never forget when we were back in discussions years ago with the epa on this issue and we raised this question, they would say, well, thats the last thing you need to worry about, mike. Gas prices are never coming down again. This was three, four years ago when this deal was struck. And lo and behold, here we are coming back down on 3 ra gallon. But as far as industry volumes, theyre very sustainable, even with normalized rates over the next several years and the high 16 or over 17 million. Okay. I see no challenges there. Mike, thank you very much for your help. I appreciate it. Its great talking to you. Great seeing everybody this morning. Up next, a sign of real estate strength of a bubble about to pop. Robert frank inside this 85 million spent in beverly hills. 85. [beeping on the computer] peter come take a look at this. [beeping sounds are more rapid] [beeping sounds are even faster] mr. Daniels . Mr. Daniels . Look at this. Whats this . The numbers they keep getting bigger and bigger. The clicks are off the charts. Yeah the clicks are off the charts. Yoshi, its walt. Were back. Yes sir hi. [spoken in japanese] lets go lets go lets go [spoken in japanese english] i need more trucking. More shipping more shipping i need more trees more trees . Ill get you more trees. Hey take a look at wood pulp. Whoa. Everything you got on wood pulp. Right now yeah he really loves that thing. Making a comeback, but not the avrg kind the average joe can get into. Is this boom in mega mansions a good thing or something we should be afraid of, very, very afraid of, error either . This is either a sign of soaring welling or another high end housing bubble in the making. But the spec mansion is back. Spec mansions, these are homes built for speculation without a buyer are popping up around the country with 30 million and up. Florida, the hamp toips, greenwich and seattle. Now the ultimate spec home has just come on the market. Its in beverly hills, a 53 foot wall of sliding glass pool, a sixcar garage, you can bring your bugatti into the living room and spin it around. The doors on the Screening Room are covered in italian lizard skin. Bruce mccowsky, who built this home, said todays spec homes appeal to the overseas rich would want to move right in without having to deal with construction or decorators. Ive, again, been able to see that people spend 150, 250 million on a yacht that they only use seven or eight times a year. Or buy a private airplane for 700 million. This is their home. After being in california, i havent seen anything on this level thats ready for somebody to move in immediately. Everything in this house is including from the Louis Vuitton furniture to the replica of james deans motorcycle. Get this, theres a 200,000 jelly bean bar. Next to the gym, no less. So you can eat your 200,000 worth of jelly beans and go to the gym. They built a model transformer there. Im not sure why. These cars in the basement or wherever this is those can will it up, go into the the cars can lift up into the living room and spin around. In 2009, when i was in gr greenwitch, everyone was saying, no one will do this again because its crazy. These people put so much money into homes that didnt get sold. It was leverage upon leverage because they were borrowing to build hem and then people were borrowing to buy them. This is truly a Global Market today which we didnt have in 2007. But we know nothing is ever different, right . At some point, theres two and this may be early rounds. But to me, this is the latest sign. That the very high end is not only back, but i dont remember an 85 million spec home in 2007. Is he going to be sold . Hes gotten multiple offers. Zaz has looked at this house twice. So if you want it, folks, you better get in there. Theyve had a lot of interest mainly from asian and russian buyers. Wow. I just heard one thing that does that mean theyre staying together . Well, you know, or maybe its a bachelor pad. Who knows . It is a good bachelor pad, might be the ultimate bachelor pad. Thats clever. If theyre looking together they were looking together. In they were together . Yes. We have confirmed. I am confirming. Where is tmz when you need them . Lets go. Okay. Coming up, behind the while with volvo, the brand seeing lower sales last month, but can a new suv turn things around for the company . The ceo will join us next from the paris auto show. Check out oil prices dipping below 90 a barrel for light sweet crew ud. More on that coming up in a trading block. Squawk returns in just a moment. 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. Whos going to do it . Whos going to make it happen . 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. Welcome back, everybody. A cryptic message from elon musk. The tesla chief tweets its about to unveil the d and Something Else. A Company Photo mentioned the date october 9th. That tweet leading to all kinds of speculations. Some say it suggests he is ready to unveil a new model. Musk has more than a million followers on twitter. We were talking about that before what the d is. I said they didnt have a model s. Its the model e they couldnt get. They called it the model 3. They have an suv coming. When does that come, you know . I dont. Im reading green car reports. Com. Our guess since the photo appears to show a model s, we expect it is new options for the luxury sedan. Who knows. Im just trying to look at you trying to see what you think it could be. There is speculation it could be something more intimate. Never mind. Beckys the one who raised it before. Im not going there. The model x is coming early next year. What we have to talk about. Whats that . The secret service story. The resignation that was tindered by the woman at the head. This is somebody who made it into the interior of the white house. It also came after the revelation that hadnt been made clear earlier that there was an armed gentleman who was allowed to ride up in an elevator at the cdc with the president. When you hear a combination of issues like that, you expect something will change. Now, what was made clear was that these problems with the secret service predated the woman who has just offered her resignation. But the president thought it was the right move too. I heard a lot of things about the president wasnt necessarily informed about all this stuff. Right. Had he been informed, may have been any way he apparently did not know about the guy on the elevator. And i think that whole thing, i dont know what was initially said about the guy who got into the white house. It was suggested that he was caught immediately not before he made it through rooms and into the east room. Not that this may have gone down the way it did anyway, but the idea the president wasnt informed about this or perhaps misinformed. And there were reports Michelle Obama was so furious people could hear her yelling at them through the door. If i was Michelle Obama, i would freak. One of the only things that would matter would be keeping your spouse alive. And the safety and security of your family. The other thing, by the way, is the transition. So now they dont have leadership. Right . So for some period of time theyre going to have no leadership. Not to suggest this leadership was doing so great to begin with, but what happens now . How does it work . Are they more on electrlockdown . Who knows. Lets look at the markets to see whats been happening with major averages. Yesterday was a big down day for the markets. It also happened to come on the first day of october. Its a month that has naturally been associated with spook ji dat spooky days on the market. Its had some of the squariest days its seen. Go back to october of 1929, other huge significant drops. Some of the biggest weve seen came. Yesterday it was a drop of about 264 points. The question becomes today, does the market rebound. Of course the marvegts kind of waiting to take direction to see where thats headed. A lot of big headlines. Scares about the first ebola case showing up on our nations shores. Were going to talk about this and much more trying to figure where stocks are going to be heading as we start out the second trading day of the year. Question is, is this is sign of whats been happening . Stick around. Well be right back. E financial noise financial noise financial noise an Unprecedented Program arting busithat partners businesses with universities across the state. For better access to talent, cutting edge research, and state of the art facilities. And you pay no taxes for ten years. From biotech in brooklyn, to next gen energy in binghamton, to manufacturing in buffalo. Startupny has new businesses popping up across the state. See how startupny can help your business grow at startup. Ny. Gov 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. Sometimes they just drop in. Always obvious. 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. Market mayhem. The bulls scatter as the bulls wake up on wall street. Is this a fresh buying opportunity or is there more fear building up for investors . New ebola details. More learned about the case of the first u. S. Disease. Crude reality. A dip below 90 a barrel. Wheres the next level of supporters. Second hour of squawk box beginning right now. Good morning, everybody. Welcome to squawk box here on cnbc. Im becky quick along with Andrew Ross Sorkin and steve leisman. Well be tackling the markets and see what Warren Buffett thinks about yesterdays big moves. Anything else we can pack into 60 minutes. And what happened with the cocacola announcement yesterday. He was at the center of that. Look forward to that. October is off to a rough start. The major indices falling. Lets look at the futures this morning. They were up a little bit. Gathering a little momentum. But still not ganging back what we lost. Lets get you caught up on some of the Corporate News at this hour. Bank of america naming Brian Moynihan has its chairman of the board. Shareholders voted to strip the chairman title from thenceo ken lewis. And of course so many of the ceo and chairmans titles have been split up. Now this one coming back together. A sign, perhaps. Things are returning back to normal. Maybe well talk to Warren Buffett about that one. Still a shareholder in bank of america, right . Uhhuh. Well see if hes buying that stock. Also a record 23. 5 billion were pulled from pimco. That was the large estes daily outflow happened the day bill gross announced his abrupt departure from the firm. Then starboard is offering to acquire the remaining reald for 12 per share in cash. Premium of 29 to yesterdays closing price. Values the company at about 540 million. The first confirmed ebola patient in the United States was initially released from the hospital before his diagnosis. That is raising some major red flags with the countrys preparedness for a pandemic. Check out the cover of time magazine. Its titled chasing ebola were joining with more from dallas. Good morning, becky. Right now Thomas Duncan is the only case in the u. S. With ebo a ebola. Officials are monitoring about 12 to 18 people he may have come into contact with when he was sympt symptommatic or since he got here. The patient had come to the hospital two days before he was admitted and placed into isolation. Thats despite Health Officials saying they had protocols in place including a checklist to deal with ebola. He volunteered he had travelled from africa in response to the nurse operating a checklist and asking a question. So that information apparently was not communicated to his Treatment Team and so it wasnt taken into consideration when they were deciding what to do with him. It wasnt until sunday he was brought back to isolation. Raising questions about americas preparedness overall. The patient is apparently in serious but stable condition now. Other questions have been raised about preparedness including i think you guys brought this up about waste management. Thats a question about because there is so much waste generated in caring for ebola patients, can they handle it. Reuters is reporting that the u. S. Is currently working to clarify guidelines for hospitals. Experts say we could see more cases of ebola especially as the virus continues to rage throughout west africa. And could other patients not be showing symptoms as theyre getting on planes. Ive been trying to go back and do the timeline. I know this individual showed up from liberia, he arrived on september 21st. I think it was september 29th that he was actually admitted to the hospital. Maybe three days earlier, two days earlier when he went to the e. R. For the first time. I know its a 21day incubation period. It could take as long as 21 days to come down with symptoms, but do you have an idea how early you could show symptoms . Only because when you show symptoms is when you become contagious. I wonder how long some of the people hed been exposed to, how soon they could show up with symptoms. Thats a very good point. The incubation period is from 2 to 21 days. However, the most common period you see symptoms show up is eight to ten days. He arrived in the country on the 20th. Didnt start showing symptoms until about the 24th, maybe the 25th. Initially came to the hospital i believe on the 26th. Thats when he was not admitted, treated and sent home. And came back on the 28th. Meg, i just want to violate a little confidence here. Before the show becky quick who is incredibly calm right now, you were livid this morning about this thing. Well, the idea that he actually told a nurse at the hospital that he had just come from west africa, maybe he didnt say ive just come from liberia, by the way i was handling a pregnant woman who had ebola and who died from ebola. But the idea that the communication broke down. Meg, what i want to ask is if becky 1500 miles away is angry about this, what are you hearing down there in dallas . Are people angry about how this was handled . You know, we talked to a few people. Certainly some people are angry. Other people, theres a lot of miscommunication about how the virus spreads. Theres a lot of misinformation. People worried its airborne. Some people are blase about it. There is a lot of concern there could be that miscommunication. Especially as were hearing how prepared the hospital was. They had a meeting just the week before with stake holders here to prepare for ebola. Then to hear there was that breakdown, a lot of questions raised about that. Compare this hospital to most hospitals in america. You just said they had meetings about it, they were prepared. How prepared do you think the rest of the country is . Thats a good question. You know, governor rick perry speaking here yesterday emphasizing how texas is in a uniquely positive position to handle this. Because its one of just 13 states that certified even to test for ebola. Whether this hospital is more prepared than others, you have to hope that every hospital is taking these kind of precautions. What a lot of experts are saying is this is an important wakeup call to other hospitals to make sure theyve got all of their guidelines in place, to communicate well, so if somebody does come through, there isnt that breakdown to communication. They know how to handle it. Thank you for this. Im sure well be back to you throughout the show and the rest of the day. As weve been discussing today, stocks kicking off the quarter on a sour note. Worst start to october since 2011. Is a scary ride ahead or is this just bump . Good morning to you both. Let me ask you this. We had ray dally on the show yesterday. He suggested, i think, that we are going to be fine. Meaning this ride is not stopping at least for another 18 months to two years. Do you agree with that or do you think there is a bump in the road coming . Jim . Morning, andrew. I still very much believe the bull has very more years to run. I think were going to have maybe one of the longest recoveries ever in u. S. History. I think the stock markets got a ways to go. I think were in the middle of turbulence. My guess is it might get worse before it gets better over the next several months. When you say worse, how much worse . I think we might, you know, finally have a full blown 10 correction. From the top to the bottom. Maybe we get down to 1800ish at some point. And maybe we end the year early next year around 1850, about where we started this year. My big concern, you know, right now weve had a lot of geopolitical risks which is causing investors to worry as that hits the eurozone. Still struggling to get the emerging world going again. Were even getting weak reports here and there in the United States. But i think the real risk right now is the United States is really doing far better than the rest of the world. I think it is growing 3 plus. I think it will continue to show that. And the risk here is the resource markets tighten up. Now that we have this global slowdown fear, if we get a hot wage number in the United States which accelerates the thought the feds going to have to move up their exit strategy quicker and embroils the bond market in moving upward in yields while we have the backdrop, that could exacerbate the selloff a bit. I dont know if that will curve, but thats my fear a little bit of a potential that could still transpire. Brian, take jim on but also help us with this. You know, yesterday was a tough day. Can you explain what happened . Can you ascribe why we had the down day we did yesterday . Essentially it looks to us like a little air has come out of the tires. Change of season, that happens in your car. I think Portfolio Managers are taking a bit of profit considering how strong the markets been all year long. They dont agree with mr. Paulsen. Weve been saying were 5 years into a 20year bull. But the market needs to transition away from the fed and qe. We actually thought it was going to happen in 2014. It looks like its going to be pushed out into 2015. Especially the direction that the fed is implying. So corrections happen when you least expect them. Here comes one in the Fourth Quarter when everybody thought the market was going to be strong. It doesnt mean we cant have strength on a near term basis. But clearly the u. S. Is the place to be. One of the things you really need to focus on when you talk to mr. Buffett today is really have him emphasize how Strong America fundamentals are with respect to cash flow in the earning stability side. I want to go there with jim. Jim, the extreme criticism here is that this entire market is inflated by fed stimulus, fed liquidity out there. Its all leveraged out there and there is nothing beneath the stock market here. Give us your take as to what this fundamental story is or is it just hot air and people should be very afraid here . I think theres a lot of fundamental improvement, steve. What youve got to remember about this two and a half fold increase in the stock market from the 09 low is the big chunk of it was we were pricing the stock market for the end of the world for the Second Coming of the Great Depression that never occurred. So a big part of the advance in the stock market was we mispriced it in the first place. We overestimated the 2008 recession, if you will. The rest of it, theres been a lot of fundamental improvement kbp last i looked we went from 10. 1 to almost 6 unemployment. Weve got bank lending year to date. Housing activity has gone up 50 from where it was. I could go on. But my point is to suggest theres been no fundamental improvement behind this market rally, i think is absurd. What about jim, i got to push back. Because theres people theres a lot of margin debt out there. And the idea the pe ratios are higher. I know theyre not extreme, but theyre certainly above the aempbl that theyve been for the past ten years or so. Brian, you want to address that . Yeah. Steve, im going to push back on the margin debt issue. Thats institutional margin debt. Private client is not playing along yet. That remains low. Number two, if you walk out on the streets of lincoln, nebraska, people dont feel this recovery yet in the private client side. Thats where the real move is coming. Think about this. The Financial Sector has dramatically underperformed this recovery. Financials have not even played along yet. The next five to ten years we think is going to be driven by the recovery. On a fundamental basis in terms of growth to financials. You need financials as part of a bull market scenario. They havent even played along yet. That should make us in america excessively bullish. But Overall Companies in america. I just want to given what jims saying, would you put money to work this morning . Yes, we would. Because at the end of the day the consternation and volatility occurring around the world actually positions america in a better light as we start to see cap and reshoring come back here. Remember, were coming out of a lost decade. We in america have been humbled. At the end of the day were still the Worlds Largest economy and were still positioned to exceed expectations with respect to the rest of the world on a fundamental basis. Brian, you just brought up another criticism here i forgot about. Ill throw this point to jim. Jim, the concept of fortress america. Asias weeker. Chinas down. Can the u. S. Keep going at 3 why the rest of the world is doing zero and change in europe . I think it can. Thats the interesting thing. I mean, look. The u. S. Has gotten better in the last 24 months, pretty significantly so from where it was before that. As china has slowed down over that period. The u. S. Actually accelerated as we were still worrying about the eurozone pulling apart over there. I dont think all of these economies are tied at the hip. Indeed i think weve got more disparity than weve ever had. I look at europe right now at about two years behind where the u. S. Is. Because they spent the first two years with fiscal austerity and we spent it with monetary stimulus. Now theyre doing what we did and i think in a couple years theyre going to be better too. I think the emerging world is going to do a little better. I think were going to see that the rest of the world is going to follow the pattern of the u. S. In the next few years. Okay. Jim, brian, thank you, guys. Appreciate it. Still to come this morning, we are just about 40 minutes away from Warren Buffett live here on squawk box. Hell be joining us on our set just coming up in over 45 minutes. Its an hour your money cannot afford to miss. But next, alcoa making an aggressive move into manufacturing. We get the details from lafayette, indiana. Good morning. Were inside alcoas brand new 90 million aluminum lithium facility. If that doesnt peak your interest, hang in. After the break ill show you whats behind this panel when squawk box returns. E financial noise financial noise financial noise financial noise welcome back. Today alcoa unveiling the largest aluminum lithium factory. Morgan has an exclusive look for us from lafayette, indiana. Thats right. This is alcoas new aluminum lithium facility in indiana. Its one of three the company is building across the globe right now. Take a look at this. This is a furnace filled with molten aluminum that will go through a forging process to be manufactured into plane parts for boeing, air bus, even spacex rockets. This is all part of alcoas aggressive push in aerospace. Part of an expansion that also includes the companys 2. 8 billion acquisition. Why are we seeing this . Aerospace is a high Growth Business for aluminum makers. Backlogs make this a longterm play. And most importantly its a revenue stream that is not hurt by the weak Aluminum Prices that has hit alcoa and its competitors so hard since the recession. If you can be on the cutting edge of Application Development so when a new airplane is being designed or a new engine is being designed and youre the one at the table with the testimony then youre insulated from commodities. So analysts say alcoas been on the forefront from smelter to finished parts producer especially in aerospace which was a 4 billion business for the company last year. The big reason weve shares of aa rebound this year at nearly 50 . But other aluminum makers are also capitalizing on aerospace. Kaiser is also making aluminum for planes. As for this facility, its brand new but already has 100 million in revenues booked for 2015. And analysts say that operations like this are really said to take to the skies over the next decade. Back to you. Morgan, ive been in a lot of factories and i have been struck by how few workers are in those factories. I remember thinking in one tour i did if i had fallen down and hurt myself, i could scream and nobody would hear me. Tell me how many workers are there and how automated that plant is. Its extremely automated. This is part of 170 acre facility. Theyve got other buildings here. 75 new jobs here. Youre right. Were seeing manufacturing come back in the u. S. But productivity level has increased as well. Youre not seeing as many workers as you would a decade ago. A lot of this equipment is computerized including all of the safety parts of it to make sure everything is moving smoothly and to minimize any risk. Lets talk about the risk there. What are your thoughts on that . Yeah, so, the companys pushing more into aerospace and autos. We heard about that from phil lebeau this year with the f150 from ford. But some of the risks obviously rising commodity costs could marginally impact the margins here. Margins are big for these finished products. The biggest risk is electricity. Thats a huge issue, a huge overhang for Aluminum Companies like alcoa. Theyre looking to see Utility Companies to switch to natural gas to see the prices stabilize. Thats been a big overhang for the Aluminum Companies and topic of discussion over the last couple of days hee. Thanks very much. Nice job out there. What a great shot. Coming up, the protests are peaceful right now in hong kong but tensions are rising. An update on that on squawk box in just a moment. Take a deep breath in. And. Exhale. Aflac and a gentle wavelike motion. Aahhh ahhhhhh. Liberate your spine, ahhhahhhhhh aflac and reach, toes blossoming. Not that great at yoga. Yeah, but when i slipped a disk he paid my claim in just four days. Ahh four days . Yep. Find out how fast aflac can pay you, at aflac. Com. Today could be the day. The day we give you hope. Relief. A cure. Today, we believe every life deserves worldclass care. As one of the top four hospitals in the nation, over 100,000 people from around the world come to Cleveland Clinic for care each year. And were ready for you with a Second Opinion or a sameday appointment today today today and everyday. Call today, for an appointment today. 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. I have 40,ney do you have in your pocket right now . 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. Now the answer to todays aflac trivia question. The answer, 14 . Maybe the economy is doing better than we thought. Or not. Or more people in these stores. The wall street journal is saying authorities met seeking a government investigation into amazon. The largest Advocacy Group for authors. Were watching the situation in hong kong today as night comes there. Tens of thousands of protesters are filling the streets. The demonstrators had set a midnight deadline saying the citys chief executive needed to resign by then. That isnt expected to happen which means tensions could escalate. Leaders in beijing appear willing to wait out the protesters. Up next, we are going to be talking breaking news on jobs and layoffs. Plus the handling of the first confirmed case of ebola here in the u. S. Suggests how prepared we are to deal with a pandemic. And Warren Buffett is making his way to cnbc. One hour with the oracle. Its all coming up in this special edition of squawk box. Want to change the world . Create things that help people. Design safer cars. Faster computers. Smarter grids and smarter phones. Think up new ways to produce energy. Be an engineer. Solve problems the world needs solved. What are you waiting for . Changing the world is part of the job description. [ male announcer ] join the scientists and engineers of exxonmobil in inspiring americas future engineers. Energy lives here. Know that chasing performance 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. Welcome back to squawk box this morning as we close in on 7 30 eastern time. Among the stories front and center, the nations vacancy rate rises. Also new construction hitting the second highest quarterly rise in 12 years. Also nike delaying the launch of lebron shoes indefinitely. Steve is very disappointed by this. The reason, apparently theres a small cosmetic issue the company isnt identifying. Sop you lebron james fans out there i like it. Theyre not identifying it. They wont tell the problem. Also activist firm relational to relaunch its fund. As the founder battles health issues. We wish him well of course and the new fund well as well. Roughly 30,000 cuts in september. Thats a 40 drop from the same time last year. Here to break it down, ceo of challenger. I guess its not hip to fire anymore, is that what were hearing . No question were in a period now where layoffs are very light. Companies just arent thinking of downsizing. Layoffs usually come as a result of mergers or acquisitions where companies have duplicate headquarters with warehouses in the same regions. Thats the main force driving these layoffs. John, where have we seen a lot of the layoffs and where are we not seeing them now . In this month, the heaviest cutting was in the entertainment industry. Thats largely by casinos in atlantic. Thats gambling and entertainment kinds of considerations. As that spreads out, the gambling venues spread out around the country. We are not seeing in energy, health care, technology. In fact, right now were beginning to see shortages appear for certain kinds of workers. Certainly programmers and technologists. So were in the sweet spot of the economy from a labor standpoint right now. The last month the Labor Department reported a million fewer longtime jobless zplp were a little pressed for time. Could you go from this report to tell us whats kpapted tomorrow in the jobs report from the government. We think theres going to be a continued downside of pressure puni pushed on the rate. The Retail Sector has been announcing major gains in hiring as they prepare for this new season. That was a weak sector last month. The Retail Sector. You think that could bounce back again this month. I do think so. All the major retailers are either reporting similar hiring plans for the Holiday Season or higher plans than they had last year. John, thanks very much for joining us and for this bit of amazing news. 2014 on track to be the lowest job cut year since 1997. Thats good news. I think it makes people feel, you know, i can be less worried about losing my job. I think thats a big factor in the economy today. Job insecurity. Maybe vempeventually being a to see wage growth. Which could go a lot further than people think before the fed or at least janet yellen is concerned. Its 2 if you were doing threeplus the math works out thats not inflationary, not a problem, and youve got a lot of lost ground to make up. Thats what we heard yesterday. This was a huge point. Move on. Well talk more about that. Well ask warren about this. We will. The handling of americas first case of ebola leaving plenty to be desired. The patient was initially evaluated and turned away from a dallas hospital. That is a mistake that may have resulted in others being exposed to the virus. This morning out of an abundance of caution, Health Officials in texas have ordered four close family members of the patient to stay home and not have any visitors to prevent the spread of the disease. Joining us right now is a former health and Human Services deputy secretary, current president of the American Health institute. Thank you for joining us. Thanks. There are a lot of questions about what happened, what went wrong. I think the biggest question is how wha do we do from here . How convinced are you we can stop this outbreak rapid willly . I think the u. S. Can prevent the spread of ebola in the u. S. But its saying the secret service can protect the white house if everybody does what theyre supposed to do. Not everybody did what theyre supposed to do in this particular case. Thats why were facing the problems were facing in dallas. Are you surprised by that . How big of a breakdown is this the nurse didnt communicate the information to the doctors or the doctors didnt listen . So i wasnt on the ground there, so i dont want to blame a particular actor. But whatever happened, it didnt work pout. It is a very big breakdown. It does not shock me that somebody came into the u. S. That later became contagious with ebola. It does shock me this person went to the hospital, was sympt symptomatic. How concerned should parents in the area be . There are reports this gentleman was in contact with School Aged Children in that area. Should sha be concerned . Well, i dont think parents at large in the whole area should be concerned. But of those five School Aged Children should be concerned. But those children have been at school. Is that a concern if you have children at school with their children zplp the point is youre only contagious when youre symptomatic. One of the reasons we can control ebola if we know what were doing is we have infection controls and track and trace capability. And so cdc right now is working on that track and trace ability. You have written what the u. S. Should be doing in west africa to help with the steps there. What do you think of sending over additional supplies and help . I think it is a good and welcomed step. I think it was a little late. I think were late on a number of fronts including the detection front and recognizing how big of a problem this is. Of course id love to see ebola snipped in the bud not just out of compassion for the people in africa and to pr ekt the Economic Security in africa. But also to protect people in the u. S. And around the world. So i think were making the right first steps. You talked about Economic Security. Were a business network. I made the case yesterday we shouldnt worry only because ive been told we shouldnt worry. But from an economic perspective, do you have did you have any concern about this actually an outbreak of any sort here or elsewhere is that could have an Economic Impact broadly . Absolutely. These kinds of operations can have a huge effect. The sars outbreak had an impact on the canadian and asian economies. And we saw stock market fluctuation yesterday as a result. So there is an important and worrisome economic link to some of this stuff. Its one of the reasons we need to tamp it down. I hate to ask this question but its on the minds of a lot of people. What should we be doing with flights from west africa . Should we do a quarantine . I know were taking peoples temperatures, but is there something more extreme to do here or is it time for that yet . I definitely think we should be considering it. I dont know why the cdc says were going to continue on the path were on. Obviously what were doing isnt working. But that wouldnt be a problem that the person got into the country if the hospital had done its job when he showed up there. He was not contagious when he was traveling, we believe. So that is not the problem. The problem is if you find somebody with this condition, how do you handle it. You need to step in immediately to quarantine the person. What about the Health Workers that first came in contact with them . I believe the balance workers are going to be quarantined or isolated as well. So, yeah. I heard he was vomiting in the ambulance. And in the parking lot before they put him in the ambulance too. Right. But the truth is we have a lot of experience in this country dealing with Infectious Diseases and we have protocols for dealing with them. And our Health Care Workers do know how to protect themselves. Thap is the reason u. S. Officials have been telling us not to worry. But when theres a breakdown in the system, it causes problems. Thank you for joining us today. When we return, the ecbs decision on Interest Rates. And we are just minutes away from a special onehour event. The oracle of omaha weighing in on taxes, and yesterdays big slide. Also talking to us from cocacola. One hour with Warren Buffett coming up at 8 00 a. M. Eastern time. Squawk box will be right back. Guys youre not gonna believe this watch this. Sam always gives you the good news in person, bad news in email. Good news fedex has flat rate shipping. Its called fedex one rate. And its affordable. Sounds great. [ cell phone typing ] [ typing continues ] [ whoosh ] [ cell phones buzz, chirp ] and we have to work the weekend. Great. More good news its friday woo [ male announcer ] ship a pak via Fedex Express saver® for as low as 7. 50. Welcome back to squawk box this morning. Take a look at futures right now. See how the market is setting itself up for this morning. Were going to show you that screen right now. You can see the dow looks like it would open up 32 points higher. Nasdaq up 11 points. And s p 500 over 4. 5 points. The maker of angry birds is planning up to 130 job cuts or 16 of its workforce. The company has been building its assumptions on faster growth than actually materialized. Were waiting for the decision on rates due out in minutes. Further stimulus could mean a slide in the euro against the dollar. Meanwhile, oil continued trading lower. Below 90. I thought id never see that in my lifetime. It was back at 88 and change this morning. Huge. Yesterday i thought it was 91. I dont know when we reached that 90. I guess it was some time during the day. Joining us now managing director and analyst. Matt, let me start with you on oil. I see something below 90 and immediately as an old oil reporter i think opec is going to talk about production. Its completely the opposite what has happened here. Youve had news out that saudi arabia is discounting their oil. You have this situation where opec is the balancing item of the Global Market. And you have saudi arabia with opec. Rather than cutting back on production, theyre discounting their oil instead. So the prospect of supply staying at the same level in the face of sort of growth has pressured down to the low. If the expectation of opec acting leaves the market, you could be talking about a free fall couldnt you . They are meeting next month. They meet on thanksgiving november 27th. But theyre talking about cutting by just 500,000 barrels a day. But were a long way away from the end of november in terms of all trading. So the low where this 17 month low now below last year was 85 on wti. Given the market moves that were seeing on tuesday, you move 3. 5 bucks. We could be there by lumpbltime. Hang on. Ecb leaving on the deposit facility. Unchanged at minus. 2. The marginal ending one also unchanged 37 everything is unchanged by the ecb. Boris, what do we expect from the European Central bank and what does it mean i dont think the euro dollar is that remarkable. Its not the move everybodys been waiting for. Are you talking about right now or j u. S. In general . In general. No surprise here. I dont think draghi said theyre not going to move on rates. I think at this point the euro is so sold out it could bounce today if draghi doesnt provide fresh policy initiative. Everybody is going to look to see if theyre going to commit to an expansion of the balance sheet. To buy more questionable debt. Its going to be a question of whether hes going to commit more capital. He doesnt provide any fresh details. I think we have a bit of a bounce. This is the key thing here. U. S. Rates are going the wrong way for the dollar rally. Were at 2. 45 this morning. Your interview was telling because he said were not going to do anything until were convinced the u. S. Recovery is in full force. I became more dovish after talking to charlie. He said maybe even go later, let inflation run hotter. Im seeing action here in the 10year. But whats your expectation for it. I think frankly he is hampered by the germans. Hes going to try to do some intervention. Its not in ecbs dna makeup to create big surprising announcements. If anything he may prepare for market for future expansion. But i think theyre going to be gradual in their commitment to expand the balance sheet. I dont expect any major fireworks. If he does surprise the market, i think euro could go to 1. 25 off those markets. But these discussions are very related because one of the things going on in europe right now is low inflation. It came in at 0. 3 . Year on year if im not mistaken. Matt, the outlook for oil has to be one of more disinflation in europe in the coming months, right . Thats something thats weighing on growth. Weve seen that tempered in the last few months. We started the year expecting sort of 1. 4 Million Barrels of growth. Thats been basically halved by some expectations. So thats coming through slowing in europe and china and asia specifically. So what is the outlook for demand here . Theyve cut back on the outlook for demand for oil products. They have, but its still relatively strong when you think about it. Were going to need close to a Million Barrels a day this year, next year, the year after. But its really just the tempering in those outlooks as weve dropped from sort of 20 in the highs in midjune. Thats also been driven by the dollar strength, also by easing geopolitical tension. So theres a number of Different Things that play here, steve, which are influencing the market. All right, guys. We have breaking news here. Thanks very much boris and matt. Want to give you the latest update on whats been happening with the ebola dallas situation. Right now we are confirmed that the Dallas County health and Human Services director says there are 80 people who came in contact with the man who has been diagnosed with ebola in the United States. That is not close contact, some contact. We also know the four family members of the ebola patient have been ordered to remain home through at least october 19th. That would be through the 21day period of incubation where they would be sure that the disease hadnt spread to those people. So theyve been ordered to stay home. As we mentioned earlier, we talked a bit about the Health Care Workers who first came into contact with him when he walked into the e. R. Room the first time around. And then the ambulance workers who brought them back a couple days later after hed been released. Apparently he was vomiting on the scene. A lot of questions about whats happened there. The people who have been confined and ordered to stay home just include the four family members of that patient. Thats the latest of what we know. We will continue to keep you updated on what we hear. When we return, how will you watch movies in 25 years . Julia has that story for us. And by the way, look at this shot right now. This is the squawk green room. Thats where Warren Buffett is getting red i do join us. We have a lot to cover with him. So stick around. Much more to talk about. Squawk box will be right back. vo rush hour around here starts at 6 30 a. M. On the nose. But for me, it starts with the opening bell. And the rush i get, lasts way more than an hour. announcer at scottrade, we share your passion for trading. Thats why weve built powerful technology to alert you to your next opportunity. Because at scottrade, our passion is to power yours. 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. From 40 feeters to hightech home entertainment. How you watch entertainment at home can drastically change. With the flat screen in your living room bigger and more hightech than ever, the intheater experience will bring people together for something that will look and feel nothing like your neighborhood cineplex in the future Movie Theater screens will disappear into the walls and scenes will surround you. Imagine that what you see here is a giant seamless crescent that surrounds your complete field of view. To create theaters of the future. Going forward 25 years, you dont just go to the movies. You go into the movies. Youre actually a part of the experience. Youre completely immersed in it. Its hard to make the awareness separation between im in a fantasy world versus a real world. This first of its kind regal theater in los angeles is 4d and hints at the future. In this theater, the chairs jerk and shake along with the action. Theres water and wind effects that range from a gentle breeze to the feeling of a tornado. And there are eight different smells. And this is just the beginning. In the future, a theater like this one could track your heart rate, brain waves, muscle reaction. It will change the narrative in a movie. Maybe we could sit in the same Movie Theater and i would see someone use a cross bow and i would see a slingshot because of our preferences and choices. Because these will be expensive, traditional film wills go straight to thundershower home while fewer big ir movies make it to the silver screen. Theyll lure audiences from around the world with the ability to socially connect with others as gaming and movies converge. This is so fun. Its going to be interesting to see how the movies themselves change to work with all these bells and whistles. It was really fun to shoot this package. I want to learn more about the smells. Good smells . Bad smells . They have one the smell of coffee. For morningtime. Perfume. Burning rubber if theres a car chase. They say soon there will be the possibility to have hundreds of smells. And the ability is to be realistic. Garbage smell ifs youre in the back alley. Some of the smells you may not want. I dont know. Thank you very much. When we come back this morning, folks, it is time for Warren Buffett. A special oneour event with the investing legend. He joins us after the break. Stick around. Squawk box will be right back. Your 16yearold daughter studied day and night for her drivers test. Secretly inside, you hoped she wouldnt pass. The thought of your baby girl driving around all by herself was. You just werent ready. But she did pass. cause shes your baby girl. And now youre proud. A bundle of nerves proud. But proud. 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We have not come close to fulfilling the potential of this country. The nations tax system. No other group has come down more than corporations. And why hes standing by burger king. The final hour of squawk box live with Warren Buffett begins right now. Welcome back to squawk box here on cnbc, first in business worldwide. Im becky quick along with Andrew Ross Sorkin and steve leisman. We are thrilled this morning to have a special guest joining us. Warren buffett is here on set at cnbc. Hes going to be with us for the next hour. Warren, good morning. Its great to see you. Good morning. I know we have a lot to talk about, but i also know you have some news youd like to talk about. You also brought along a special guest with you. Larry, thank you for coming. Why dont you tell us your news. I do have good news. Yesterday we signed an agreem t agreement which is owned and run by larry and weve known each other for some time. Volume of about 9 billion. Car dealerships. Planes, trains, and automobiles now. Took a little while. He has the class operation of the business. I think youre fifth largest. We hope that number moves up. You should let larry do the talking. Congratulations on the deal. This is a company i know that you built up with your father, that is right . Thats right. 62 years. How did you go up from there . Well, we expanded with partners. Our motto is to give entrepreneurial opportunities. Give them the opportunity to be a murnt stake holder in a car dealership. And this is a business we should say thats a privately held business. Is there a valuation on the deal . There is a valuation. Can you tell us . I can tell you the sales are about 9 billion. I cant give you a number. Why did you get into this why did you get interested in this particular business . Larry had actually come to me six or seven years ago. And we didnt get well acquainted at that time, but at that time i was not a buyer. Then, i dont know, six months ago larry came by again. Hed been to our annual meetings. He knew he wanted to do business with berkshire. This is just a very, very good operation. This Partnership Approach he has has worked extraordinarily well. Hes just kept adding dealerships over the year. Theres insurance involved, real estate involved. And he wanted to be sure that van tooil tuyl moved up. You said it yourself, planes, trains, and automobiles. What is it about transport that interests you . Its not the transport. Its the specifics. Weve gone a long time without getting into automobiles. But larrys got an operation that we think could be scaled up a lot from where it is. Weve got the management. Hes got a format that really works. Does that require investment from berkshire . To scale it up . Yeah, sure. I fully expect well buy a lot more dealerships over time. And so this will be used as a vehicle to perhaps roll over more dealerships independent and otherwise . Could you see another acquisition . We could see anything that makes sense. Larrys going to be the judge as to which ones make sense. But he operates with what . Six or seven manufacturers now. His reputation, if you talk to i did talk to mark fields with ford. Everybody knows larrys got the best operation. And people will want to join it. Weve got the capital. So were off to the races. We had mike jackson from autonation on earlier this morning. I suppose this is a direct competitor to autonation. Is that right . It is. What is it about this industry right now . Its not a very consolidated industry. Well, the large groups, or the autonations and mr. Penske and others have about 8 including ours altogether. Altogether. Autonation is 1. 7 by itself. Thats it. So huge opportunities for consolidation of the market. Huge opportunities. See, there are about 17,000 dealers in the country. Interestingly enough, if you go back 30 or 40 years, it was in the 30,000s. But 17,000 possibilities out there. We will hear what larry hears all the time from dealers. I mean, 17,000 units out there, theres somebody that wants to sell all the time. The question is which one makes sense. And thats larrys job. My job is to write the checks. Larry, we did talk with mike jackson today. He was talking about what he sees. He says hes optimistic about the auto business over the next few years. He sees it stepping up next year. How does that match with what you see . I agree. I agree. And its a waterfall for the rest of our business. Our service business, parts business, collision business. It affects all areas of our business. So its a win win. You think the consumer is feeling fairly healthy . Because there have been questions about that recently. I do. The technology certainly is motivating them to want to go buy a new vehicle. Its changed and continues to change. Whether its gasoline, hybrid, you know, teches in the car. Whatever it is. Its just keeping people motivated to come out and buy new products. Can you speak to being a seller. Lots of Family Owned Companies have sold over the years to warren. You tried to sell the company to him six years ago or that was just sort of first approach . I went to talk to him to see how he saw our business. And we are a fully integrated business. So we have autooptions and other things. So i wanted to see if he had an interest or if he thought about it. Thats where we started our conversations. It only takes one conversation with him to say this is the guy i want to talk to to be the custodian of our business for a lifetime. And because ive been in it for as long as i have been, its important to me and my team and who were with. You cant be with anybody better than this man. There are founders who say its this or nothing. Weve had plenty of opportunities to do that. So i actually when i went and talked to mr. Buffett this last time, i said i want to sell to berkshire. Then the question is, is there a discount . Its long been told, you know this, that people want to do business with you and theyre willing to sell to you for slightly less than somebody else because of what they think you will do as a steward of a company. Thats true. And if you take a long view, and thats what we do, hes absolutely again clearly the person you should talk to if you take the long view. Thats what we do is take the long view. The last story i did about dealerships were they were closing them down. Theyve been reduced. So youre buying into a business thats going like this. I mean, why its not a Growth Business. Cars arent going like that. Dealerships may be. That means every dealership is going to sell more cars on average. So the pattern has changed, but the fundamental demand for cars has not gone down. So youre coming in to consolidate in the consolidating business. The average dealership will do a lot more business now than it did 30 or 40 years ago in terms of units. Warren, youve said in the past you like deals in cash. Though you have been doing things in shares. This is allcash deal. With 9 billion in sales, thats a big company. It would be on the fortune 500 all by itself. So when we get this done, we will now own nine and a Half Companies that would be on the fortune 500 companies. That leaves us only 490. 5 to go. This company, though, you dont have to disclose the price of this particular company because im assuming the size of it is smaller than i dont know what the minimum would be for you to disclose. Autonation is worth about 6 billion. So i dont know where number five relative to what is autonation . Autonation is number one. So i dont know where that temporarily. When you look at whats been happening with gas prices, larry, that its been a huge boom for consumers. Mike jackson this morning said he was surprised. You dont expect to see gas price down below 3 a gallon again. What does that do to sales as gas prices come down . Well, i think the combination of the increased miles per gallon and all the new products are getting and the lower gas prices has been and people are going back to suvs, full size trucks, High Performance engi s engines. Because they get better miles per gallon and the gas is cheaper. So its nice. What do you expect the consumer to go into this replacement cycle that everybodys been waiting for. Is that why were at 17 Million Units now . How many cars out there are on the road longer than they should be . Well, if you stand in your Service Departments, the average mileage of a car coming into our Service Departments is 70,000 miles. So thats the highest its been that i can remember all my life and ive been in this business for 40plus years myself. So theres a lot of old vehicles out there that still need to be replaced. Can i get your view on where we go from here . Is 17 million the right number of units per year. Do you have a higher forecast than that . I avoid the higher numbers. I think were going to gradually make our way up to 18 million, 19 million. But its a nice flow. Not by next year . No, no. Id say within the next three, four years. We have a bit of breaking news. Just want to jump in. Maybe warren can speak to this as well. The owner of pimco stepping down this morning. The board resolving that he will step down. Theyre replacing him. There seems to be a handful of switches going on here. What did you make of the pimco news last week with bill gross. What do you make of allianz. The. The two may be connected, may not. I have no yfgs other than what is in the paper. But its a big story. Were you surprised a founder like bill gross would leave his firm or get kicked out of his firm . Sure. A lot had been written about it. Im guessing there will be more. I dont know anything on it. Do you have a lot of founders to work in your portfolio . Right. Have you gotten in a situation where the founder, you got to a point where you say you know what . I thought i loved you and i dont love you anymore . I cant think of one. There may have been one, but i cant think of one. We dont have any retirement age. And so sometimes when theyre in their 70s, maybe 80s, ive had to tell them that their time is up. But i cant think of anybody that was a founder that we had to terminate. Warren, do you and any of your businesses have any money with pimco . No. Not that i know of. There are a couple of utilities we have that have Pension Funds that were hands off with. Its conceivable. But we run almost all of the Pension Funds. Does a change like this, is it something that would make your wary of keeping with a manager like that . No. I would assume that pimco has got all kinds of professionals there managing money. I would not change just because bill gross left. We manage all of our pensions internally. We dont have bonds in our Pension Funds. Not at all . Not the ones we manage. There may be one or two some place. Thats fascinating. Equities will do better over bonds. 100 . 100 , yeah. What about a guy whos 65 and about to yeah, but we have enough cash there hes in the funding pension. Yeah. Warren, what do you think of bill gross record . Hes known as a legendary investor. I dont know how well you know him or what you thought about his track record over time. I dont know him well, but i do know him. But what i know about his record is its been terrific. Its not easy to run hundreds of billions or maybe trillions of dollars. Thats a real task. So to have a good record and it may have gotten more difficult as the numbers got larger. I dont know. Certainly thats true in equities. No question about that. B i have a car question for you. Car dealership question. Theres a story in the paper today we talked to mike jackson about it before. The subprime lending issue and whether it is an issue. Apparently theres some investigations going on. I mean, i doubt youll say you see it in your firm. Are there aggressive practices people need to be worried about . No. No, its a very small percentage of the business. I think they learned from last time not to go do that again. And if you go back and look at the history of car paper, subprime or otherwise, its been one of the best paper performers. I think thats because what we know economically, right, is the people pay off their car loans before even they pay off their house because the car loan and the car means getting to work whereas you have an option, you know, if you should get into those dire straits providing loans to some people. Because you want a Second Chance. Its important. Are there places like subprime where youre reaching and trying to find some yield these days . No. That doesnt mean we wouldnt. Weve owned junk bonds maybe two or three different times. I mean, gone heavily into em the. We would do it again if we liked the math of them. But we dont own any now. What do you see when you look at the bond market today . The u. S. Treasury at 240. I dont start salivating, ill put it that way. I mean, you know youre going to do better than 240 if you own equities over a long period of time. I would just love to take a bet, an why is everybody doing it . Well, i think maybe the fed has a little to do with it. You look at monetary policies around the world, thank heavens you dont live in germany and get 1 on the german 10year. I dont pretend to understand it. The level of Interest Rates around the world, its pretty extraordinary. And if you asked me whether you could keep this up for this period, i clearly dont understand it. Fortunatelily i dont have to understand it. Ive been in business where i dont have to understand why Interest Rates are 2. 40 or what theyre going to do tomorrow. Were buying this business to own a hundred years. And therell be periods where its high and low. Its a basically Good Business with a terrific guy running it. Thats the decision. Larry, we want to thank you very much for joining us today. Offer you congratulations. Thank you very much. Again, Larry Van Tuyl who is the newest member of the Berkshire Hathaway family. When we return, the fight against ebola plus how is lebron james how is he helping lebron james build one of sports most powerful. You see some green arrows. But these are not major bounce backed after such a big day yesterday. S p futures up by 4 points. Squawk box will be right back. 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. train horn vo wherever our trains go, the economy comes to life. Norfolk southern. One line, infinite possibilities. Welcome back, everybody. We are joined by our special guest this morning Warren Buffett. Its a great time to have you here because there are so many concerns about whats been happening in the stock market. Yesterday we saw the dow down by 230 points. Theres been a lot of days where volatility seems to be creeping back in and where investors seem more nervous. Where do you think about where weve come, where stock prices stand now and where were headed. Well, we bought a business yesterday. We would have bought it. If youre buying a business to own it, youre buying a mcdonalds franchise, you have an idea of what the market does in a given day. Its meaningless. You have to look at where you expect it to be 10 or 20 years from now. Its the way they look at any transaction except for stocks. The reason is stock prices can change minute by minute. We actually bought a few stocks yesterday but we bought a business yesterday too. And if you told me the market was going to go down 500 points next week, i would have bought the same businesses and stocks yesterday. I dont know how to tell what the markets going to do. I do know how to pick out reasonable businesses to own over a long period of time. Did you buy those stocks yesterday because the market was down so significantly . That helps. I like buying it as it goes down. The more it goes down, the more i like to buy. So you waited and then put the buy orders . . I just start buying. But when it goes down, it will be more aggressive. The stocks i was buying yesterday i hope go down today. And i hope they go down next week and the week after. Those stocks you were buying yesterday, are they companies you already own stakes in or new . Youre getting close to the bone on that one. Theyre companies youd be familiar with. Thats as far as ill go. But the answer, if you like to buy a business, if you buy groceries you like it when prices go down next week. And you like it when it goes down the next week. If you were buying an apartment house, and then a similar one at a cheaper price. Youd like that. Although there are times when the business is not what you think it is. If you make a mistake. Talking about groceries reminds me of tesco. I made a mistake on that one. That was a huge mistake by me. Im going to make mistakes. But im not going to make mistakes because i buy businesses i like because they go down in price. The idea of buying a stock because it goes up. Theres two things going on here when i hear you talking. I find it fascinating. Youre making a fundamental judge on a company. Its a business judgment. But you also have a feeling about where the markets going to be a year from now, where the economys going to be a year from now. You have this fundamental idea that it goes up over time. It has since 1976. I dont want to start changing now. Just look around you. I mean, there wasnt anything here in 1776. All of this was profit. Where were sitting, manhattan. It was nothing. Over time, you know, values appreciate. Theres no question about that. Not for every single entity, but just take the dow jones average. It was well under a hundred. Close to a hundred during a time when i was alive. But so Many Americans look at the stock market and they feel burned. They feel burned from 1999, 2000, 2001 tech bubble crash. And they feel burned from what happened in 2008. Fundamentally they feel the stock market is not the place to rely on. 2008 was a great time to buy stocks. Anybody that owned a Cross Section of American Business over the last ten years, 20 years, 40 years, 60 years has done fine. Now, if they think they can dance in and out and buy and sell stocks, they ought to move to las vegas. But what they can do is determine a great number of businesses and if you own a Cross Section of them. Particularly if you buy them over time. You cant lose. If you think you can buy stocks and figure out whether this is going to go up next week or month, youre a fool. How do you react when you hear statistics we had a couple days ago, percentage of americans who own stocks declining. Now its below 50 . They own stocks are declining. They come in when other people are excited about stocks. The percentage of american who is actually own stocks has dropped. There arent as Many Americans who own it. Everybody shouldnt own stock. A lot of people arent psychologically suited to own something. They will do the wrong thing. They will get excited when they go up a and get depressed when they go down. With that psychological nature, theyre going to get killed. We had ray dally on the show yesterday. He made a comment about the markets suggesting that things are going to be good. But he said only the next 18 months or 2 years. I dont know what was defining that threshold for him. But thats somewhat longterm. I have no notion what 18 months is going to look like. And i never have. I didnt know on september 10th, 2001, what was going to happen the next day. I dont think anybody does. But the question is whether i can do intelligence things not knowing what going to have next week, month, year. You can do it. You can do it buying farms, buying apartment houses, buying a dry cleaning business. Youre buying businesses when you buy stocks. When you look at matters of business and forget about stock quotations. The person that did the best for Berkshire Hathaway was the one who never talked to a stockbroker. Can we ask you about some news that came out yesterday from cocacola . The company came out and revised its plan for what it will be paying its managers in terms of equity, in terms of options, in terms of shares that theyd be issuing. I know there is a plan that you told us earlier this year you had abstained from voting on. What do you think of the new plan they put forth . I think it makes great, great sense. They are theyre not reducing the amount they pay. I mean, a lot of people will get cash instead of stock. But i think she wrote a letter which i think is a superb letter. She used the word precious describing the stock. Thats the way i look at it. And they reexamined the cost of is the company in terms of giving up shares. And which people would be motivated by shares and which ones wouldnt. And they changed the mix to performance shares. So they actually went from the top of their Comparison Group in terms of what they were paying out . In terms of shares. And by 2016 theyll be in the bott bott bottom. When all of american industry was ignoring who said it was preferable to expense stock options. There were two out of the s p 500 that elected that. Coke was the one who made a change. And they just thought it through. They decided it was the right thing to do. Thats what they did in this case. Mel who leads the committee has been terrific on this in terms of thinking through. Are we trying to accomplish with the options and whats the cost to the shareholders . She weighed all the variables and came up with a terrific plan. David winters was the first one who had come up with some complaints about this plan. He was very vocal about it. He actually sold his shares in Berkshire Hathaway. Right. He was on the closing bell yesterday. Id like to hear what he said about this plan. The comp plan was a bamboozle. And this new release, you know, is an improvement. But theres more to go to improve cokes margins. We deserve as cocacola shareholders to have the best ceo in the slot. And the current ceo is the one who delivered a plan that was masively diluted. That they told the world that they had all the support. And in fact, they didnt. I think thats a problem because trust is the basic essence of investing. What do you think about that . I dont think ill ask david to speak at my funeral. I think its remarkable what coke did. You know, they took something that had gone out to the public and they said did we really do this exactly the right way. They decided no. They didnt do it through gritted teeth or anything. And mel went to work. She talked to other companies as to what theyve done. She talked to me. And she came up with something that was totally logical from a shareholder standpoint and from the standpoint of motivating employees. I tip my hat to her. And david is doing Something Else with his anatomy to her. Warren, quickly, we did have a big drop in claims jobless claims just hit the wire. Its not the lowest weve seen, but its gone the other way and is now firmly below the 300,000 mark. And that could be seen by the market as another good sign. 287,000. At the time you remember, im sure you have not forgeten there was criticism. There were people who wanted you to vote against it, to affirmatively say that you were upset about this. Do you think now that the abstention helped get us get coke to this place. You think had you voted against it, they would have had their backs up against the wall . Take us through what do you think happened. I thought at the time the abstention was the right thing to do. Because it didnt express disapproval with it. But i also said at the same time coke got terrific management. And terrific people which i believe. So the abstention carried the message. And but there was no need to go. And you can talk about the objectives of a compensation plan, whats the best way of getting why is coke in some ways about the particular business operation. They made nothing but sense. And so i think we had some shareholder talk about suing us because i abstained from voting. I mean, i just welcome him doing it. Id like to have a little side bit on a suit. But somebody else might have voted against it, but i dont see any reason to do that. Right. You like the people youre working with. These are people that are managing in effect 17 billion of berkshire money. You know, you dont want to be an adversary but also want to be able to speak your opinion. So you trust these people. David is out there. They have zero credibility. The board, the cop committee, the ceo all said how can we make this plan better in terms of both motivating employees and conserving shares . It couldnt be better. They did make a point of saying yesterday they had made these changes after having conversations with many shareholders including you. They specifically named you. How much of a seat did you have at the table . How involved were you with these changes . Only when they asked me. I had two conversations and i had as i remember two conversations with mel. And but they were not adversary i cant tell in any way, shape or form. So they listened. I sent them some material id written in the past about using stock as compensation. They read them. I feel good about my coke investments. Warren, i feel like i won that lunch with you. Its random im here with you this morning and youre here. So i want some Investment Advice here. You wont give us companies. When you look into the u. S. Economy and the way the Global Economy is changing, what sectors interest you . Where do you see interesting change where somebody brings you a company in that sector, youre interested . Well, larry came and talked to me a few months ago and said hed really like to join Berkshire Hathaway. I understood enough about autodealerships and his operation to think it was a good one to be in. Going from planes to trains, same thing in santa fe six or seven years ago. We look at opportunities as they come along and way try to figure out the aspects of the business. A lot of times the answer is no and we forget it. Were not making any judgment while the market is going or not looking at any macrofactors. My partner and i have been working together 55 years. Weve talked about every business you can imagine. And stocks. We have never had one decision that involved a macro factor. It doesnt come up. If i talk to charlie about something were going to buy up in alberta or anything, we dont get into macro. It doesnt make any difference. We do decide whether we think the business will be in ten years. But we really dont care whether the fed is going to increase raises on it. Put a dagger in my heart, warren. Let me ask you about the Energy Sector. Is the Energy Sector a place that has your interest . Well, we do a lot of business there. I mean, we have a railroad that carries a lot of energy. We and were in electricity bigtime. These will be transmission mines up in alberta. We look at business. I didnt know whether i was i sit there and analyze a Business Group and say box chocolates. It doesnt work that way. I got a phone call and the guy says box chocolates and i run up to this thing and think i can understand box chocolates. It isnt going to make a difference whether unemployment goes to 10 or 4 if im going to own for 50 years. Im going to own it during terrible Economic Times and good Economic Times. Its the same attitude as buying a private business. Or a farm. Or an apartment house. People, when they buy an apartment house, they decide what the rents are like lie to be and whether its kind of well located. Whether theyve got somebody who manages it decent. Those are business decisions. Thats what we make. Policy question. I dont think weve talked to you since the burger king transaction. And theres a lot of questions about inversions. Youve seen what the white house and Treasury Department have come out and done. Youre helping finance this deal. Right. Do you believe that you are patriotic, unpatriotic, how do you think about this . Well, i would tell you that overwhelmingly, most inversion deals have had a huge tax motivation in doing them. I can tell you this one didnt. And its fascinating to me. There was all this rift about how tax motivated this purchase might be. All kinds of comment. I did not read one article any place. Never. Where anybody looked up and saw what burger king was paying in federal income taxes. The highest figure. Nobody knows. All they know is it must be a tax deal. The highest number in the last three years that burger king paid in taxes was 30 million. Now, this is an 11 billion deal. If anybody could imagine paying 11 million for a business. It was not a tax motivated deal. It may not have been a tax motivated result, but thats still 30 million not going into the u. S. Treasuries. Why would you set it up like that . They bought tim hortons and kept it right here, they would have wiped out the 30 million of federal income tax anyway. Incidentally if you read the 600some pages of the deal, you will see theres absolutely no out of any kind legislation in the United States. It doesnt have anything to do with taxes. I mean, it has to do with the fact that tim horton earns twice as much money as burger king does. And the deal has to be approved by the canadian government. Has to go before investment group. And they have to see a benefit. What is the benefit to canada . If some company that earns twice as much as they acquire is going to be bought . Wait a second. Thats an argument were not doing it because canada has these rules set up to make sure it is protecting its own businesses. Is that obviously canadians feel that way. Generally speaking, the americans although when china wanted to buy, the u. S. Congress came back and said you cant do that. So we can get a rouse too. And they were buying autolink up there in alberta. We had to go before the investment canada and agree to invest certain additional money. The president has called it unpatriotic. Inversions broadly. Have you been in support with him on that . I agree that the tax code should really be changed. The interesting thing is youve got ron wyden and orrin hatch. Patriotic. They could write a better tax code than exists right now. If they write one and its revenue neutral will increased. The steps the white house have talken thus far without the need for congressional vote, youre a fan, youre not a fan . Theyre trying to call a timeout which im fine with. Im fine with it as long as they really write something once they get through. This is designed as a timeout. Give us a too many and a better tax score. I dont have any objection. Ron wyden wrote a piece in an oped piece. So im putting you on notice, corporate america, that ill go retroactive to this period that im giving you this notice now. Match does not agree with that. So that could be a point of contention. But i dont see anything wrong with putting people on. But we dont care at burger king and tim hortons. It wont make any difference. How likely is it you think for us to get Corporate Tax reform . I will guarantee you that ron wyden and orrin hatch disagree significantly on a lot of points but i think they could write something they would both agree is Something Better than what we have and not what they would like. And i would love to see them do that. And then i would love to see Congress Take it up. But if youre talking about anything thats revenue neutral. Youll have people who pay more. They will make occupy wall street, itll be occupy k street is what will happen. I actually think theres some chance of it getting done. Because it should be. I think the four of us at this table could write a better code. Were going to continue this conversation with Warren Buffett. Monitoring draghi here, im not seeing new programs. Hes saying the recent data confirmed that the outlook is weakening. And were just going to monitor this as we go along. Because the idea of additional liquidity will have an impact. Were looking at the euro. Well monitor this to see if he goes any further. The kind of news Warren Buffett has told us he does not care about. Were going to continue this conversation with Warren Buffett in a moment. He is a trustee of the gates foundation. They committed 50 million to battle ebola. Plus check out the futures. Yesterday we saw a big decline for the markets across the board. They are barely rebounding. At this point almost flat. Dow futures down by less than a point right now. S p futures 1. 5. Squawk box will be right back. , organic food stocks, schwab can help. With a trading specialist just a tap away. Whats on your mind, lisa . Id like to talk about a trade idea. Lets hear it. [ male announcer ] see how schwab can help light a way forward. So you can make your move, wherever you are. And start working on your next big idea. Welcome back, everybody. Weve been speaking with Warren Buffett this morning. Got a lot to talk about. Ground we havent covered including news out of bank of america last night announcing the ceo Brian Moynihan will also take the role of chairman. That is a role that had been split apart back in 2008. 2009. Ken lewis they tripped him of that title. Then brian didnt have it until now. You have an interest in the company. What do you think of the move . I think lewis had had done a sensational job. He methodically cleaned up the problems of the past and looked at the bank, looked at its strengths. Hes getting back to the things that the bank of america has done well for a hundred years. And will do well with another hundred years. He got rid of a lot of hes still got things to clean up, but hes cleaned up a lot of them. From a policy perspective, do you care if the chairman and ceo titles are separate or together . Do you have a general view one way or the other . I dont have a general view. I think after im out of the picture, i think they should be separated. The one advantage to having them separated is if you get a mediocre ceo, its easier to do something about it if you have a separate chairman. In terms of bank of america now or the financials broadly, would you invest in them again . I dont know if youre continuing to buy into any of them. Weve got a lot of money in them. Our Biggest Holding is wells fargo. Weve got a lot in that business. The problem has been public said a long time ago there are more banks than bankers. There were people that were in the banking business who had no business being there. And the when you get a ceo like Brian Moynihan, its a Good Business. Still attractively priced. You got into wells when things were not where they were today. Right. But i regard wells particularly, if i look at the whole group of american equities, i look at that among the ones i can understand as being a very attractive investment. Can i just ask you for a broader view on the economy right now . One of the Amazing Things weve seen is weve seen better gdp numbers, but people arent feeling it out there. Its just not a sense this is a robust economy. Whats your view . Its amazing to me. Since the Third Quarter of 2009, looking at our businesses, theyve improved at a rather constant pace. Now, we heard you talk about double depths. They never decelerated much, they never accelerated much. Autos are doing better than average. Housing is doing worse than i anticipated. Its been remarkable consistent overall. The mood swings having substantial, but it has been five years. But this was a this was a recession like none wed ever had. This was a recession where everybody throughout the country just got plain scared. Now, weve had a lot of recessions when some people got worried or Something Like that and we knew we were in one. But you had our baseline here was people wanting to put money under the mattress. That is a sort of different recession than weve had in my lifetime. Were coming back. Were coming back this month just like we have for the last 60 months but it has not taken off. One of the great criticisms out there right now do you have a view on that . No. Thats probably why they never asked me to be on the fed. I wouldnt know what to do. Different question. I know you own farms. A reader said what is your view having real estate as part of your portfolio . You want onto vest in things you know. I know businesses. I dont know all businesses. There are thousands i dont understand. I know enough. You want to invest in things you know. If you dont invest in things you know, youre gambling. You look at your circle of competence. It may be real estate, farming, it may be businesses. Mine overwhelmingly is businesses. Every now and then i do a little Something Else, i dont think you can answer Something Like that categorical. You are shouldnt buy anything where you dont have a reasonably good idea where it will be five or ten years. Says the same thing over and over. Why cant i do it . He makes it sound so easy. You can do it, steve. Calpers recently decided they are no longer going to be in the hedge fund business. I imagine theyll invest in equities. Do you think that is the right decision for Pension Funds across the country . I made a bet seven years ago. I made this offer to anybody in the United States. I said i would bet 1 million they could pickney group of hedge funds and i would take the s p 500 run guy vanguard. The winner will pick the cherry the money went to. Im quite aways ahead on that bet now. Hedge funds after fees are not going to deliver, in my view, a return as well as a lowcost index fund. I ma they made a lot of money for the people who run them. We had dan gilbert on. He talked about how he brought lebron back. Did he speak with you before he made that decision . No. I sent a congratulatory note after. I know lebron and dan. For the city of cleveland, i feel good, too. Im glad lebron went back. He doesnt need advice from me. Another one of the headlines weve been focusing on with great interest is whats been happening with ebola. The first patient with ebola found here in the United States. Youve got a mathematical mind and analytical way of thinking. What do we do with this at this point . If you play it through from the actuarial tables, what should we think . I dont have a medical mind. I would have to ask people in the medical field the chances of a pandemic arising from that. Everything i know about it is the chances in the United States are so close to zero you cant see daylight. The conditions here are not like in africa. Im the wrong person to ask on that. Turning back to other stocks you like, in the past we talked about ibm which has been a favorite. Surprised a lot of people when you got into that. You avoided Technology Stocks to that point. We watched with interest what jenny rametti has been doing there. What is your thought . I think she is doing the right thing. We own slightly over 7 of ibm. At the time we bought it i think they had 1. 6 billion shares. Now they have under a billion. She is making the right moves. Its a big company. Making changes is not easy. And the strong dollar hurts them like it hurts coal coming in. They get hit by that. Ibm has a lot going for it. Your stake has been going up because theyve been buying additional stock or you bought additional shares . I think we bought a few shares last quarter. Not loads. They keep repurchasing shares. They follow very, very shareholderfriendly policies and done it aggressively. I admire very much the way they handle it. They still spend 6 billion on r d and buy a lot of small companies. Its a wellrun company. It is a changing industry. Another technology question. I know you dont like onto vest in technology broadly. Over the past two weeks we spent time talking about the ipo of alibaba. Have you focused on this at all . No. Any of your guys investing in it . No. I dont think we bought an ipo that i can remember in 50 years. Maybe we have. Is that just a rule . Yeah. That is not we are not going to buy an ipo. What did you think of jack ma as far as being forrest gump . Call me don quixote on this thing. Youll trap me. No im sincerely interested in your real answer. You dont look at stocks. One argument about the stock market right now is its inflated with fed liquidity. Excess fed liquidity. Zero Interest Rates are underpinning the market right here. When the fed withdraws its stimulus, all stocks fail. I know you enough to say you are not going to comment on the stock market. When you look at your stocks youre interested in, when you look at stock valuations, do you worry there is a bubble out there, that its all hot air from the Federal Reserve . Well, Interest Rates to valuations are like gravity is, you know, to physical objects, basically. If Interest Rates are 10 , everything is worth less than if Interest Rates are worth 1 . Everything is a function of Interest Rates. Everything. Any financial asset. If Interest Rates were to be 10 , all our stocks would be worth a lot less, no question about that. So in that sense, went rates as low as they are, that has caused all other Asset Classes to go up in value. Whether you are talking about holding oil, you name it, anything. That will always be true. Every asset is worth the present value of all the cash its going to deliver between now and judgment day. The problem is figuring out how much cash will deliver between now and judgment day. When i say present value, that Interest Rate factor as part of that equation becomes a huge element. There is no question low Interest Rates caused asset prices to increase. Judge, one more in the news question for you. The aig case, Hank Greenberg claiming the aig bankruptcy, not bankruptcy, but the bailout was confiscatory. They called you trying to get to you help. They called me. If you were the judge of this case wouare you with hank pauls . Hank greenberg is a friend of mine. Tim geithner is a friend of mine. I would say this, i got called. Aig was going broke within a 24hour period of when that loan was made. There wasnt anybody in the world that could come up with the money, including us. Fair, unfair for the government to the deal they made, thats for a judge to sort out. The factual matter about whether aig could have lasted more than another 24 hours i think is pretty clear. Whether the terms are right, all that sort of thing, that is a matter of some judge is going to have to work out. Warren, well end this interview where we started it. You announced at the beginning of this interview you were making a purchase for the van tile auto group. We heard from mike jackson who runs autonation. He says congrats on the transaction, mr. Buffett, and welcome to the retail auto business. Points out as you know bill gates is a 15 shareholder in autonation. He is sure the two of you discussed the business, but thrilled to have you here. Thank you. I watch him every time he is on. He is a very smart man and hes built a Great Company and bill made a lot of money out of it. Apparently the control room asked him if he would be open to a deal with mr. Buffett. I didnt answer that question. I know i wont buy us out. Well probably both be buying more dealerships. The dealerships you are looking at at this point, you pointed out only 8 are held by the top five. Thats a lot of room for consolidation. We will hear, i predict, from hundreds of dealerships in the next year. Warren, again, we want to thank you very much for taking the time with us to stay here on set with us. We really appreciate your coming in. Congratulations on the deal. Thank you. Always a lot of fun. We got so lucky because he happened to be in town. It all worked itself 0 out. Bigger than the job reports. You dont care about that stuff. No. Except demographics say things will get bigger. I predict gdp will be 20 higher 20 years from now. Since im 84, you can deal with my executors. Thank you, Warren Buffett. Thank you for being here. Well see you tomorrow. Join us tomorrow for that jobs report. Squawk on the street begins right now. Good thursday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer, david faber on the new york stock exchange. Stocks trying to steady themselves from the worst start to october in three years. Ecb holds steady. Claims werent bad. A lot of analyst upgrades. Warren buffett on squawk box. Our road map begins with that ugly day for the markets. Monitoring the ecb news coen