Travellers, withdrew nighted technologies and verizon among many other major companies. As for the economy, one important report of note. September Housing Starts and Building Permits out at 8 30 eastern time. Okay. We have a couple of stories were watching this morning. Apple ceo tim cook making a couple of headlines at a Big Technology conference in california. The tech giants new Music Streaming Service has reached more than 6. 5 million paid users. Another 8. 5 million are participating on the free trial. Are you still free trial. I dont know. I dont know if its been three months or not. Maybe not. My son downloaded 59 songs and three albums. And its good. Its alternative but its good. I got all new stuff to listen to. My music life is good. Changed. Its good. Its more robust. Thats for sure. But millennials like spotify. Thats what i hear. Im still on spotify. But youre a millennial wannabe. I just got there first. Cook suggested orders for a fourth generation apple tv would be next week but it does include a streaming tv service. As for the watch, the big apple watch, cook isnt giving out Sales Numbers but gave a couple of hints. He said that by the way, he said if he gave the numbers it would help competitors but he joked that the company shipped a lot in the first quarter. Even more in the last quarter and predicts even more this quarter. So i dont know what we can get from that. So stocks to watch on top of our list is ibm which for years i refused to call it. I just didnt like the name and now its just not descriptive anymore. Little blue are pills. Arent they . So you cant call it really little blue. Barely medium blue. Well talk to an analyst and see what the problem is. Were short of even pessimistic expectations. 14 years counselor, 14 years in an 8 by 10 cell surrounded by people that were less than human. But 14 quarters. 3. 5 years of revenue going down and in this case down 14 . The number was like they have been trying to shrink by design. Zincage is good. Only 1 organic. It was 1 worse without forex and the stuff they wanted to lose. So they included that then. They got more ways of saying things. Were on track. Stronger dollar and weak demand by china. The company also cutting its profit forecast. More from an analyst in just a bit and my question is ibm going to be what you consider a major player five years from now in providing i. T. To corporations. Thats the big issue. Part of the problem is trying to sell orders to Big Companies. Thats their business but are they still going to be a major player . Thats the problems. Are they going to be ibm in five years. Thats what she is arguing that shes investing for. The entire industry is switching to smaller projects. I think its going to be like digital equipment or by the time theyre all split up. The person i want to talk to about all of this is still warren buffet. We moo. How many walmart shares . Between walmart and ibm, you can go through the list of Companies Hit over the last couple of weeks and how he thinks about all of this. Heres another stock, sap is confirming the Quarterly Results that it preannounced last week. Thats nice. And today the Software Giant says it could top full year financial targets in the fourth quarter. Sandisk shares jumping this morning. The stock getting a list from a bloomberg report which said the flash Memory Company was in advanced talks to sell itself to Western Digital and shares hit hard. The revenue fell short of estimates and announced a Restructuring Plan that would cut about 8 of its staff and lead to about 10 million in savings. The supply Chain Solutions company beat the street on the top and bottom lines. In corporate news, United Continental reporting a interim boss. Phil joins us now on the squawk newsline with more on the story. Phil, good morning. Good morning, becky. This is going to be management by committee at United Airlines. Yesterday, late yesterday, they announced that the acting General Council will step in and become acting ceo while oscar munos the current eco is on medical leave. He is taking medical leave after suffering a heart attack and going into the hospital last thursday. In announcing his appointment, United Airlines talked about how brett hart will be leading the airline with a committee of folks included in the release is a statement from him saying i am confident in the ability of the company to manage the strategy, implemented the strategy of oscars mission bringing United People together around a shared purpose and becoming the best airline for our customers and our employees. For United Airlines this is yet more turmoil in the executive ranks. Just a month ago, five weeks ago jeff was ousted as ceo. Oscar munoz was on the board. Has a strong background in the Rail Industry in terms of operation. Was elevated to ceo but now he is obviously on medical leave following his heart attack and hospitalization. Whats interesting guys when i have talked to people on wall street about the executive bench at united, brett harts name is not one that has come up. So he does not come at this from an airline experience, operational experience. He has only been in the Airline Industry and with United Airlines since 2010. Hes going to have to step into the role right now and clearly hes going to have to be leaning on the rest of the executive team as he steps in as acting ceo. Back to you. I thought he was a legal guy too, wasnt he . He was. And this guys a go ahead. And brett hart served as General Council prior to being with United Airlines. He was with sara lee and executive legal positions and prior to that private law practice. So he does not come at this from an Airline Operational standpoint. Does he become permanent ceo or is that acting really no, i do not get the impression from talking to people that this is youre acting but well probably elevate you to permanent. This is truly acting. They dont know how long hes going to be out. At this point if they do know theyre not saying. All theyre say as good that he is taking medical leave for an indefinite amount of time. Its too early to know the course of treatment and recovery. Thats the phrase they used in their release. So this could be a month, could be two months, who knows, could be a few weeks. As you guys know when people suffer a heart attack there are varying degrees of severity and recovery. Theres no way of predicting how long it will take somebody to get pack back to the level whery can feel confident in taking their old job back. I would say four or five days later we would have more information about this. I understand theres privacy issues and things you want to know but id think theyd want to know more about how severe this was. A lot of those questions will come out on the Earnings Call thursday morning. You can bet that United Airlines will say out of respect for oscar munoz and his privacy and family were not sharing much information here but wall street doesnt know a whole lot about brett hart and theres going to be a lot of conversations today between uniteds Investor Relations team and analysts on wall street but theyll get a lot of questions in on thursday morning. Im not sure theyll be pleased with the degree of clarity theyll get. So 38 days is what that was his tenure. Its not like he got a lot of things started but do we think of him as having a lot of experience at united . So his tenure from that perspective is much longer and hes someone that you definitely want to, you know, if he is going to be, i dont know, weakened to some extent, like you say, we dont know anything about this but is there a reason to want them to come back for united at this point . Yes. There is . Okay. If you look at his background and prior to this he was an executive in charge of the operations for csx, his background, his background is in logistics and in operations in making things move the way theyre supposed to move. Thats the way they have fallen down relative to their competitors. If you ask anybody thats covered the Airline Industry or in the Airline Industry they will tell you that delta and America American are way ahead of united in terms of operational expertise and efficiency of the period operations. Thats what oscar munoz brought to the table and thats why im certain that united is hoping he can make a full recovery and bring that expertise back to the board room. Okay. On another note, phil, well have robert frank on talking about ferrari. I found a ferrari that cost 1. 4 million. Thats in your price range isnt it . Theres quite a few that were 400. He said list price is 379,000 but if you want seats it goes over 400. There you go. Unless its a really short ride, i like to sit down in a car typically. Buses, you know, not so much but i think seats, thats like almost Standard Equipment i would think. Well, these are not Standard Equipment seats. Theyre really nice seats. All right. Are you surprised . Hes our wealth guy. Hes been in these cars too. As opposed to the rest of us. Exactly. Phil, thank you. Lets talk about corporate earnings. Thats probably the name of the game for the markets today. Joining us is the Senior Vice President in the Wealth Management unit at ubs and lindsey is chief economist at stifle fixed income. Lets start out talking about earnings though. We have seen earnings early in at this point but weve seen big disappointments if you look at ibm and Goldman Sachs and especially Morgan Stanley from yesterday. Thing versus come ouft let of l field. What does this tell us to expect about the rest of the reports were getting . Its about organic growth being important and the Third Quarter being really tough on the callpital market trading. They distributed the risk off of the Balance Sheet and on to trading platforms. Youve seen expectations pushed out. Thats a positive. Investors have been selling as price versus been rising. Thats good. We have been climbing the wall of worry so theres a couple of jokers in the deck but the market could try to make a run to return to the highs weve seen before. We havent gotten a lot of great guidance though and the guidance we have gotten has been pretty lousy. Yeah. Well it comes back to the issue of are you achieving top line growth . And in this its important. Where youre seeing top line organic growth and employment and good yield in acquisition youre Getting Company with okay results. Were not seeing that. Were not seeing transitions. Youre getting bad results and the market more so than typical is rewarding on the upside and penali penalizing if youre a u. S. Company were fairly insulated however its harder and harder to find companies isolated. We had terry on yesterday and he talked about how youre seeing fewer tourists coming in and buying at his stores in flag ship areas like the new york flag ship store. Online retail has been a little bit better. I think the domestic story continues. One positive about that i would say is it looks like youre seeing some persistent weakness and that may be result of the fed being on hold. Well see for how long. But if you continue to have dollar weakness youre going to have Better International comparisons to make. Do you think were near a recession . There have been people that worry about what happens to our economy next. A recession is a nonzero probability at this standpoint. From the feds perspective they anticipated the second half of the year to be robust. Further improvement in the labor market. Further improvement in inflation. Further improvement in the domestic Manufacturing Sector and what we have seen is across the board we have taken a step in the wrong direction so were likely to come in under the trend growth rate that we have seen for the past several years pulling the u. S. Economy below that 2 we could see a further depreciation in the overall activity level and that moves us one step further. Its interesting, six months ago the market was pricing in one or two rate hikes this year and now were talking about as you know we maintain our long standing forecast for 2016 but i think the new focus now is potential additional stimulus from the fed. Do you think thats more likely than the fed actually raising rates . The idea that we get stimulus first . No, certainly we could get additional stimulus if the economy continues to lose momentum. But its not your most likely scenario. No, we are looking for continued positive growth but still very modest but enough to get the fed on board with a rate increase sometime next year. But if we are actually entertaining these conversations about whether or not the u. S. Would be more likely to fall into a recession if thats even on the table it seems like its a very difficult time for the fed to raise rates. It is. We have heard theyre now losing confidence in their outlook for overall activity inflation. We see that Committee Members are concerned about the down side risk of inflation meaning further faltering in price pressure. So if the committee had a hard time justifying a rate increase in september i know they continue to tout the idea of a possibility of a rate increase by the end of the year but october is very much off the table as is a rate increase by the end of the year. So i think Committee Members at this point are very pleased with their decision to bypass that september meeting and theyll continue to wait on the sideline for further evidence that the economy is, in fact, on track. Thank you both. Okay. Coming up when we return, Buckingham Palace rolling out the red carpet today for the first state visit by a chinese president in ten years. A love report from london. Before we go to break take a look at this date in history. patrick 1 whats it like to be the boss of you . patrick 2 pretty great. patrick 1 how about a 10 raise . patrick 2 how about 20 . patrick 1 how about done . patrick 2 thats the kind of control i like. And thats what they give me at national car rental. I can choose any car in the aisle i want without having to ask anyone. Who better to be the boss of you. patrick 1 than me. I mean, you. Us. vo go national. Go like a pro. They speak louder. We like that. Not just because were doers. Because were changing. Big things. Small things. Spur of the moment things. Changes youll notice. Wherever you are in the world. Sheraton. Welcome back this morning. Cia directors personal email account has been hacked. Twitter user claiming to have broken into it released a report contact list of thousands of emails and instant message addresses. The fbi has begun an investigation into the matter. Chinas president is making a state visit to the u. K. Today and susan li joins us from Buckingham Palace. Good morning to you. Hi, andrew. Yes, were expecting xi jinping, the chinese president to come through down into Buckingham Palace any time now in a horse drawn carriage. They have rolled out the red carpet for the chinese president and the first lady. Let me show you the thousands that have lined the streets out here near Buckingham Palace just to catch a glimpse of the chinese president and his famous first wife. Were expecting his approach any time now. This is a first state visit to the chinese president to the u. K. Now this is also market contrast to the reception that he got in the u. S. Because the u. K. Has been wooing the chinese. They want to be the best partner for china in the west and they said this before which the u. S. Criticized as being constantly accommodating. In march we had the u. K. Be the First Western nation to sign up for the infrastructure bank. So what do they get for this . Theyre looking to sign a lot of deals during this four day state visit and that includes issuing the First Sovereign bond here outside of the asia pacific. Theyre also expected to sign a nuclear deal of sorts and also possibly some Exchange Cooperation between shanghai and london in the future. We do have xi jinping and his wife, the first lady touching down last night. He will be staying here at Buckingham Palace for the rest of his stay in london and i also want to show you some of the souvenirs you get out here if you line the streets this morning. You get an i love china tshirt. So were waiting for xi jinping. Well see when he gets here. Back to you guys. Susan, looks nice there. Looks good in front of the palace. Kind of royal. Do you want to you got to get this out i think. Well talk about it not yet. In chairs. Maybe in chairs. Hold the thought. Talking about my underwear. And not your undershirt. No, i used to love the under shirts. I still do. So its light and breeze and supportive and everything you ever thought of. We have serious topics to discuss. I know. But more like a boxer or brief. Its a boxer brief. Okay. I have a good picture now but when we go to break, thats all youre talking about so i thought we should share. Share with the audience. And dan and everybody else. Lets move on now to ibm. Shares of ibm falling after i was going to Say Something about you cant make jokes with underwear about ibm. Third quarter revenue that missed analyst estimates. 14 quarters of falling sales. Joining us is the Senior Analyst of technology at fbr Capital Markets and everybody saying the same thing dan and that is the migration of Big Companies away from expensive servers and software to the cloud and to much cheaper vendors is happening faster than anyone thought and faster than ibm can ramp up whatever its going to have. I see bob dylan talking to watson. Revenues that watson is bringing in right now anything. Watson is not even bread at the restaurant. Thats all i see them advertising. Thats what youre going to pass the baton to . Watson . Companies like ibm are in a quick sand situation as large cap is falling behind youre seeing the move. Theyre trying to sell gas guzzlers where Everyone Wants teslas. Theres a lot of rose colored glasses on the ceo and board situation. You see it with oracle, cisco and ibm. Both oracle and cisco will have larger market caps than ibm after the route today. You saw dell and emc. There are people that say that these dinosaurs might be able to survive a little longer if they merge. Is ibm a potential meshlger candidate with another big company . At this point everything is on the table. Its really tech dinosaurs were seeing here. You saw the emc dell situation and the split to hp, right now these Companies Need to figure out the next step to bring growth back and that is the frustration for investors. You dont think there is a fix. You dont think theres a longterm fix three years from now will somehow pay off. Uncomfortable with the first name. Exactly. For whitman, it really comes down to m a. M a if they win big on big data, Cyber Security cloud, that is the only, in our opinion, solution to put fuel in the tank from growth. Its not going to happen organically. We hear from customers all the time. You see the results and really cross large cap tech. Who do you like . Thats when you look at companies that could really move the needle and big data would be like Cyber Security as pal palo alto, cyber arch, cloud, work day, these are situations where these companies now its been shot across the bow, they need to make a move. Theyre on the innovation trade mill. But do the valuations of a workday, people would say its pr pretty high and rich. And if they didnt make some of those acquisitions they want to sell to dell so part of the situation here is these companies now backs are against the wall. They need to either figure out if acquisitions or do they start to split . Do they start to go down the other path . Because otherwise youre seeing a bipolar spending environment relative to the tech guys. All they talk about is currency. They can blame the weather and everything. It comes down to core execution and mature products. All of these companies are passing them and the ferrari is in the left lane. So someone came up with they thought that was a good name . Splunk . Someone came up with that. Yeah. Do you know this company . Splunk . Ive heard of it. Heard of it. I dont hang with the splunks. Yeah. On the other side. Its a strange combination of very weird words. Dan, thank you. Great to be here. Appreciate it. Splunk. Got to get used to saying that. Not for long. Who is doing the buying . Thats the thing. Well, thats really why it needs to be, you look at cisco and hp and ibm. So even at a rich price you reward them for that. The stock is up because investors want to see growth. They want to see hope. Thats why you look at microsoft its been the only large cap tech play thats gone the other way because they looked in the mirror and realized what they need to do. They made tough decisions. These other companies its more smoke and mirror and thats been the frustration. Thank you. Good to see you. I dont know. 14 years counts. 14 quarters down revenue. Three years plus. 14 years. Yeah. When we come back this morning, well talk about your money, your vote. New political poll results today. The headline, donald trump maintaining his lead over the gop field. The full story is still ahead. First as we head to a break lets look at yesterdays s p 500 winners and losers. When youre not confident your companys data is secure, the possibility of a breach can quickly become the only thing you think about. Thats where at t can help. At at t we monitor our Network Traffic so we can see things others cant. Mitigating risks across your business. Leaving you free to focus on what matters most. vo wit runs on optimism. Un on . Its what sparks ideas. Moves the world forward. Invest with those who see the world as unstoppable. Who have the curiosity to look beyond the expected and the conviction to be in it for the long term. Oppenheimerfunds believes thats the right way to invest. In this big, bold, beautiful world. Pubut to get from theand yoold way to the new,d. Youll need the right it infrastructure. From a partner who knows how to make your enterprise more agile, borderless and secure. Hp helps business move on all the possibilities of today. And stay ready for everything that is still to come. This segment got much more interesting. Fans getting a peek at the upcoming star wars, the force awakens. Heres what some of it looks like. The full length trailer aired during halftime of monday night football on espn which like lucas film, think about it, owned by disney. Tickets went on sale for the december 18th opening right after the trailer aired. Heavy online traffic from fans crashed ticket sites for a short time and i still dont there are star trek people and there are star wars people and they are equal. And those of us that appreciate both. Theyre both nerdy and dorky for the most part but i missed the window. You were in college. I was in college. I never caught up. Never caught up. Never caught up. I played some video games i liked but i dont know where i was and then i grew up one of those cars, ive driven in a video game, a lego individual yeah game which is a lot of fun. Harrison ford finally back. I can do it. Thats the vulcan sign. People are excited. And maybe i like this better. At least they dont look like plastic things on strings. At the time it was great. At the time it was out of control. You thought the technology was amazing. If you turn it one way its the vulcan sign and one way is a gang sign. Do you know what this is . Amazon i dont have a lot of comments and my only you know what, im not going to dispair raj the New York Times anymore. So theyre arguing with amazon about this and my only point that i like is the defender of the private sector just wheres my money, i served my time, lying and disembeling. People that dont like who it is they listen to the press secretary and you get infuriated. So now youre more infuriated. Even the guy i watch now, but carney watching him say things that he knows arent true basically and spinning them a certain way and now big bucks huge. Thats why you do it. One of these days this is going to end and im going to cash in so big and i just got to take a little more of these obnoxious press core until im out of here into the private sector that i hated so much. This is a little bit more about you. But its not about the New York Times this time. Its good to see him get out into the private sector. Rooting for him now because hes making bucks at amazon. The stock is done, theres salary involved. But apparently a tough place to work. Thats what is in question right now. Did you read it . Its interesting because theyre going back and forth and amazon is saying that you didnt talk to enough people and New York Times is saying yes we did and amazon is saying this person wanted to work for 16 straight days. Did it on purpose and the New York Times said we never said he didnt do it on purpose. Its hard to characterize an entire work place. The times did a good job of raising questions that are there and threw it out as a reflective this is an example of this is what were seeing across the country now. See, i cant help myself. The times would probably like to promote a french 30 hour work week. So anything above 30 hours is asking too much for employees, right . I cant speak for the piece because i didnt work on it but it reflects the larger issue among Technology Companies and start ups where people everywhere are working 60, 80 its the culture. Its the flavor. Its accurate as far as the culture and flavor but if youre watching what these companies have done and seeing the Silicon Valley mentality, its a good thing. Its the entrepreneurial spirit at its best. You do work hard. These are people attracted to wanting to do this. And i dont theres two sets of the story but the times presented both sides. It raised serious questions. They like the 30 hour work week and three months off in the summer. Im thrilled becky wants to defend the article. Coming up, joe biden inches closer to a final decision on making a run for the presidency. Plus results of a new nbc news wall street journal poll this morning. We have it all covered with john harang getswood, next. It didnt change my mind about amazon. Im trying with your im trying. Today, were seeing new technologies make healthcare more personal with patientcentric, digital innovations; from selfmonitoring devices that can interpret personal data and enable targeted care, to Cloud Platforms that invite providers to collaborate with the patients they serve. Thats why over 90 of the top 25 Global Pharmaceutical Companies are turning to cognizant. Our domain experts, technologists, digital and data specialists, clinicians and scientists are transforming the way Clinical Research sites collaborate with pharmaceutical companies, and enhancing Patient Engagement with innovative platforms and solutions. Our populations growing healthcare needs present growing opportunities for our clients to advance the future of medicine with digital, and improve the quality of lives. Welcome back. Its time for the squawk planner. 8 30 eastern time september Housing Starts and Building Permits and fed chair janet yellen scheduled to make remarks at 11 00 eastern time. Shes attending an honor induction ceremony and this afternoon the ipo of the week ferrari set to price its offering. Thats todays squawk planner. Thank you, a new nbc news wall street journal poll out this morning on the race for the white house. John has the details from washington. Good morning. Good morning, becky. Donald dump has not fallen yet. Thats the top line from our new wall street journal poll. He continues to lead with 25 of the vote. Thats up from 21 in september and increase within the polls 4. 9 point. Ben carson trails with 22 of the vote, rubio 13 . Cruz 9 . Bush 8. Fiorina 7. Huckabee and kasich at 3 and Chris Christie at 1 . Lets look at where that leaves us for the debate in colorado. With two days left for major poll results to be factored in it leaves the same ten candidates on stage for 8 00 p. M. As they were in last months cnn debate all except for scott walker who dropped out. Closer to the line are christie and paul. In the earlier 6 00 p. M. Debate earlier rick santorum, Bobby Jindall qualified by meeting our criteria of meeting 1 in one of the major polls and this morning senator Lindsey Graham of South Carolina also has gotten 1 in the new cnn poll just out minutes ago so the deadline is october 21st. Thats tomorrow. It appears the lineup weve got is settling in to ten candidates in the second debate and four in the first debate guys. One thing i noticed in the poll is the question asked of gop primary voters who they couldnt support, 44 of them at this point now saying they could not support bush. Just 36 saying they could not support trump but youre talking about serious changes in terms of who people say they wont support. Yeah, whats happening is that youve got a band of people available for candidates and were trying to measure the width of that band. You ask how many could support and candidate and how many could not. You have three quarter of the people saying they could support ben carson. But the number that ruled out people really blocks off a large chunk. Its not good news for jeb bush at all. John, have you do you know whether the Huffington Post has revised their approach to following donald trump yet . Is he still doesnt qualify at this journalistic organization . Hes not the type of candidate they think should be in the mix . Do you know if they changed that back . I dont think they have joe. Im not certain about that but there was commentary about that recently that indicated they have not changed. Not that it matters but i guess on the other side there would be people that tonight think a socialist in the eye of the beholder you could pick anybody as not a qualified candidate as far as im concerned. Just cherry pick a few. To me its not about qualification. Really . Well by now so they are in a position to judge every person that supports trump as nonserious entertainment minded idiots. Im not speaking for Huffington Post. Okay. I was talking about the way i think of it which is candidates that actually could win the presidency. That have a realistic path to the presidency and those that dont. Its hard to say as you know because you talked about it many times i have been skeptical of Donald Trumps ability to go the distance. You never thought Bernie Sanders could go to distance either swron. Thats my point. I still dont think he can. Its just a point. It doesnt matter anyway. Its the Huffington Post. But did you see the Washington Post that. I think that is emblematic of the overhyped underinformed coverage that we have been having. If someone presses the wrong button thats what it looks like. Little x p xs. It was totally written. Somebody was playing around with it. It was a fine line through it. Huffington post. I got it. It was a lot of confusion yesterday because of a congressman that tweeted something saying that he had an inside where are you john . Hes going to do it john. You have to change it. Dont wait until the last minute to change your opinion. Are you leaning toward him doing it now . I still think he is not running. Boy. Okay. Its going to be tough if he does. Hes 70 million behind. Hes got electoral votes wrapped up already. Ground forces everywhere and the goods on him too. That shes ready to release ill bet. The clinton machine. Id be afraid. Anyway john, thank you. Well see john tomorrow too. Dont miss the next gop debate a week from tomorrow here on cnbc. When we come back the ceo of sonic will be talking about the fast food chains latest results and consumers appetites for spending. First though check out oil prices this morning. Last week you were watching prices push toward 50. This morning right back at 45. 84 for wti. Stay tuned you are watching squawk box on cnbc. First in business worldwide. Plap jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive for less than the average price of a car, you could be driving an extraordinary mercedesbenz. One that shatters the molds of design. Shatters the standards of performance. And shatters the limits of technology. The 2016 gla starting at just 32,500. Shattering expectations wherever it goes. Welcome back. The countrys largest chain of drivein restaurants, sonic, spiking this morning. The fast food giant beating expectations and raising its Profit Guidance for 2016. Joining us now is cliff hudson, good morning to you. Good morning. So what are your same store sales say about where the consumer is these days . Well, our same store sales for the year ended august were 7. 3 with a strong summer, but, actually, each quarter last year, good, all parts positive. I think the customer, when offered choices and offered madetoorder food as they are in our case and a variety of items that can work for them across many parts, then they are happy to engage you and weve got good traffic, sales, and profits. Mcdonalds changed up the lineup. What do you think of what they are doing, whats it doing for you or not . Well, we continue to focus on the product and service differentiation, which we have for years, and, you know, its worked good against mcdonalds. The advertising effectiveness with the two guys on it was shows very well against mcdonalds for ad awareness on an actual basis, so i cant speak to what they are doing. They have sort of done breakfast all day, but weve done all menu all day forever, so this was not a big deal to us when we heard about it. What do you make of the likes of things like shake shack and valuations ascribed to businesses like that given your own experience . Yeah, yeah. Well, you know, shake shack, they are doing a good job with just about everything theyve done, and the potential for growth, of course, is huge, and its also new york based, which probably gets a lot of investor attention, retail and otherwise, and so it does get a heavy valuation, and its off a little bit in the last six months, so ultimately, once shake shack levels out to a level of growth of performance, my suspicion is it can get on a path of invester attention and investor engagement. Your valuation goes down or everybodys elses goes up . Its not come down on a multiple basis. Yeah, thats right. So i think that they will get with the rest of us over time, and some of us will go up and some of us will not. Lets talk about the drivethrough business for you. Yeah. People think of you being a drivein, but how much is drive through . Well, good question. The newer markets, theres the drivethru windows, and in the core traditional markets, many of the stores do not have the windows, and customers are accustomed to using us in that drivein passifashion. In newer markets, its not uncommon for the majority of the business to go through the window, but back to the core markets, which is where the majority of the business is, people like the relaxation of pulling into a parking stall and having a car hop bring them the food and so its a differenti e differentiated Service Model and more relaxing for a customer who knows how to use it. There are, on weekends, american grafetti scenes across the country . There are different kinds of scenes. People use sonics in fun, sort of ways. Center of a place where people cruise in small towns . In a small town, as a matter of fact, it can be. So cool. And many cases, the old car shows are not uncommon with sonic, which is fun. Never goes away. Nobody on roller skates, though. Well, we sometimes . Sometimes. We encourage that. Wed like to see it more often. Yes. Its up to the individual operator, and interesting thing, when the roller skates, customers say the food tastes better. Wed like you on roller skates next time. Okay, there you go. What is the hot item at the moment . Well, right now, we have the boneless chicken wings that are selling extremely well. We have a monday night how do they make boneless chicken wings . They come without bones, you know, so this is a chicken breast, and its its a nomenclature how its prepared, the sauce and such, and its delicious. They are selling like crazy. Thank you. Yep. Next time, come with food. Okay. Next, a special conversation on the state of investing today and tomorrow joined by top executives from putnam and fideli fidelity. Stay tuned, youre watching squawk box on cnbc earnings alert. Quarterly results from three dow components expected this hour. Well bring you the numbers and instant analysis for travelers, united technologies, and verizon. Plus, a special indepth conversation on future of in investing with three giants remitting 3 trillion of assets under management. Ferrari set to go public this week. But cnbc wealth editor robert frank says it could be a disastrous time for a luxury car ipo. Hes here to explain as the second hour of squawk box continues right now. Welcome back to squawk box, everybody, this is cnbc first in business worldwide, im becky quick, and earnings alert, two reporting quarterly numbers, first up, united technologies, earnings came in at 1. 61 a share, 5 cents better than expected, however, revenue was just short of the forecast largely because of the impact of a strong dollar which analysts know about, but for some reason, they had a hard time figuring out. They reaffirmed the four year forecast, and added 12 to the program bringing the total to 16 billion. Looking at travelers, travellers right now, just out with its earnings, coming in better than expected, and that stock is trading higher. Closed at 106 yesterday, and latest tick up 3 cents, a bid of 107. 50 and ask of 110. They earned 2. 90 a share for the Third Quarter, well above what the street expected, 2. 27. Revenue beat estimates. The Insurance Company benefitting from higher underwriting gains offset by lower investment income, but, again, the stock, the bid that i have, 107, the ask is 110. A billion less than last year in sales. Travellers . No, United Technology. Yeah. Thats what we need to include in all of these rather than versus expectations, so last year, in this quarter, it was 14. 6 billion and 13 14. 61, and this year, 13. 78. A lot is well talk to the guys in a second, and all of these major blue chip companies, revenues are down year over year. This is what, you know, the fed is dealing with and everybody else. This is one of the problems and why theres volatility and why we have not made headway this year overall in the averages, right . Quick headline, by the way, crossing as you spoke, is that yum brands is now announcing its intention to separate 2002 two publicly traded companies. The China Division to become an independent company focused on growth which they say mainland china, and then yum brands will then remain so theres yum china and theres yum brands. Those are the two things going on right now. Looking through this ceo saying over the past year, our managements board thoroughly evaluated value creating opportunities that capitalize on strengths following the separation each company can intensify focus on the distinct commercial properties. Okay. Well keep an eye on that. You see the stock right there. Live by the sword, die by the sword. Up on china, down on china, right, over the last year or so. Been an important part of the world for yum, an understatement. Right. Does this help focus, andrew . Investment banker thought it was a good idea . I dont know if its a good idea. Long term, you dont want to be separated. Long term. Short term, absolutely you want to separate. All right. So. Okay, chicken problems. The other stories making news at this hour. Apples ceo, tim cook, making headlines, according to the verge, cook told the audience that orders for fourth generation apple tv would open on october 26th, begin shipping october 30th. The apple tv is a foundation on which apple will continue to build. Stay tuned for more on that. Cook also giving details on a app apples new Music Streaming Service with more than 6. 5 million paid users and additional 8. 5 Million People in a free trial. Joes not sure whether its free over paying. I think its still free. Well, you know, cook is ready to charge the credit card. You just wait. Youll pay for it, right . Yeah, yeah. The Music Service launched in june, offering a 90day free trial, and people are watching to see the conversion. Arrival spotify has more than 20 million paid subscribers worldwide. Watching shares of irk bm this morning. They reported earnings that topped estimates, but the problem, revenues dropped for a 14th straight quarter, falling start of the most pessimistic forecasts, hit by a stronger dollar, weak demand in china and emerging markets and cut the full year profit forecast. Todays squawk conversation for the next 20 years turns to investing and Mutual Fund Industry, bringing over a trillion dollars worth of advice on how to invest your future. They manage a trillion. I dont know if the advice is worth a trillion. You be the judge. Brian hogan, a big order from you guys, Fidelity Investments equity, and high Income Division president. 25 years of investing experience. 21 years at the hedge fund giant, manages just under a trillion dollars. Fidelity with 5. 2 trillion in manager assets. Robert reynolds, ceo of putnam investments, named ceo in 2008, and putnam has 150 billion in assets under management, and bob was one of the finalists for the nfl commissioner job in 2006. And arthur is president and ceo of openheimer funds, named ceo in 2014, he has 200 billion in assets under management. He served in the air force. Thank you for that. Talking about the future of the Mutual Fund Industry, but we want to talk something about Market Conditions right now, but even before we get to that, i just i want to know about each of your styles and youre in management to some extent, you guys, i guess purely not managing money, but its the three of you, is it across the board, any asset class in any part of the world, is that what youre you need to know . Pretty much, yes. Im responsible for equity and high income, about 900 billion at miy fill fidelity, e manage 2 trillion with 5 trillion of assets under administration. How about you . Around the world, we have two investment offices outside the u. S. And london and singapore. All Asset Classes . All Asset Classes. You guys, at any given time, there are amounts of equities, bonds, domestic versus international, theres all kinds of waitings that you put on these things, right, or the people do that for you, right . Different strategies. Some are dedicated to emerging markets. Depending on the climate . Increasingly theres interest in multiasset strategies that span the globe and Asset Classes. Okay. So all of these things, when we talk about it, we have to ask what are the Market Conditions, for me to ask that, like, which market, which asset class, which part of the world, and which part of the sectors in any part of the world. We have three of you guys, and probably ten things each to talk, so 30 subjects to talk about. Look, i think, you know, from my perspective anyway, while i think bob and art looked across the entire capital structure, ooem focused on equities and high income, but i can say with a lot of conviction that i think the equity market looks, to me, more attractive relative to other places to invest. If you look at where the yields are in money markets, look at where the yields are in fixed income, and you look at where the earnings yields are in equity, i think over the next three to five years its a good place to be. Not just domestic . Exactly right. Around the world. You do have to love the u. S. , whats going on in the United States, we heard earlier multinationals are having a tough time with currency, but the u. S. Consumer is at a strongest point its been in years, low Interest Rates, their Balance Sheets are terrific, and the price of oil has given a bonus to the u. S. Consumer so their spending power is high as its ever been. Bob, harder to find u. S. Centric companies, though, trying to make the point earlier, macys ceo was in yesterday, and you would think ma macys is fairly well insulated, a good situation on whats happening, stronger dollar, paying less for what they bring in. The point is, they are not seeing the tourists who came to stores like the new york flag ship before, and the higher dollar has not helped that much because they purchased these made deals for all the stuff they brought in a long time ago before the dollar was quite as strong. Yeah. U. S. Companies, again, if you have foreign exposure, currency is not your friend right now. I dont think of macys being foreign exposure. Thats surprising me. 50 of the profits of the s p 500 come from overseas right now. Right. Harder to fine domestic you know, its the other side of the sword, right . Live by the sword, die by the sword. The companies charged overseas in recent years, and in part of the storys. The Rising Consumer in places like china, but now, you know, the other side is coming around, so apple, which used to not care about china, now sells a lot of iphones in china. Thats right. I add there are pockets of strength internationally. So youre seeing ge, for instance, reported last friday, meaningful improvement in europe. Youre seeing, i think, japan, theres real reforms taking place there. While chinas an important increptal buyer, part of the globe, slow down there is picked up in other places. Were seeing that. The most important asset class and location right now, the three of you agree, its u. S. Equities . Well, i take a a look at things from a valuation perspective. I think its clear that the driver of growth in the world such as it is right now at the margin is the u. S. , but how are things priced . Right. If you look at the u. S. Stock market, its priced attractively compared to treasury bills yielding 0, but, you know, stocks abroad have recognized the slow down, and they are comparatively cheaper still, so there are bargains to be found, you just have to pick and choose. Okay. So what did you say that yes in the u. S. Or you think they are more attractive because ours reflect the better economics here, and so you its a good time to go abroad somewhere . Yeah. I think there are more bargains overseas. Im not calling the u. S. Overvalued. Its not a bubble. The pe ratios are reasonable and attractive. More undervalued than where, europe . Japan . Where . Europes in the dumps, chinas in the dumps. You know, these are places that have gotten beaten down tremendously. Buy index in the places or do you think it is actively managed . Pick and choose the spots. The indexes are problematic looking at china because of the huge overweights or huge weights to things like commodity base the industries. Andrew, the International Markets are just the the International Markets is Fertile Ground for management. They are less efficient, not as many feet on the ground in terms of fundamental research so i think thats a great place for active management. You know, joe, to your point, im constructive on europe and japan. I think theres real reforms taking place there under Prime Minister abe, and, you know, its going to take time, but i think hes addressing the right issues there, and if he can execute, you know, i think japan, you know, could continue to be finding plenty to do in the country, though, right now . Absolutely. You dont have to look. Absolutely. Japan, saying this for the last three years, and weve not seen seen some move, but do we really think theres something coming, a lite at the end of the tunnel . Whats the trigger . Look, whats beginning on in japan right now is abe is going to be there for a while now. Thats certain. And i think youre seeing real reform, so youre seeing more of a return focused more corporate transparency in terms of having external board members. Is it going to change overnight . No. Theres a long history and tradition there, but i think youre seeing signs of improvement. Yeah. The great thing about the equity market is it doesnt always have to go to great to excellence. If it goes from fair to good, thats Good Movement in the stock, so what youre looking for around the globe is improvement, and as stated before, we see that in europe and other parts of the globe. I would not ignore fixed income. Fixed income is so important to the investor, especially in in country due to geographics, rates hurt, but its credit, theres mortgages, theres a lot of parts of it. I think the bond index is very interesting, speaking of indexing because you look at the bond index, 90 of the risk is at indexes, Interest Rate risk. Is that a bet to make right now . No. I would say no. All the stuff you mentioned will not be well if rates go up. Doesnt matter if you are diversified in credit or any of that stuff. Its an excellent point. The need for yield is strong as it ever was, but traditional bon investment that people make is high quality, governments, and corporates which are dominated by Interest Rate risk. So you have to find yield afar a field from the traditional bond index. It would be nice to be have noncorrelated assets of the target, though, and you dont have that opportunity right now. Its tough. Its tough. I think, actually, youre seeing that. Where in. Youre seeing as Interest Rates backed up a little bit, youre seeing correlations in the u. S. Market decrease, which is actually a fantastic environment what fixed income do you buy . What do you buy in fixed income now with a lot of money . A wrench thrown in it. You can get it in the equity market, and you know, the s p dividend yield is 2 . The u. S. Treasury yield is 2 , and the earnings yield in the equity market is 6. 5 . Youre not recommending fixed income, thats equity. Hes right. I know. Saying that yield you can get fixed income, but thats equities. Im saying there are more there are places to get income other than traditional fixed in income. You can get it in the high yield market 6 . But in general, fixed income is not a place any of you recommend a large proportion of assets . Have less exposure to Treasury Bonds and Interest Rates than you typically might. The classic 60 40 portfolio. You need to look at equities for yield. You need to look at real estate. Look at alternatives like mlps. Theres a lot of things out there that provide income because the need for income is evergreen, but the pickings are slim in the traditional officerings. We have 10,000 americans turns 65 every day. They need exposure to fixed income. How . Corporate credit . Get it through mortgages. Derivatives, and we have portfolios with negative duration, so if rates go up, these portfolios go up. That also means negative yield. Thats the challenge there. If i short treasuries, thats a cost to the portfolio. So how much cash, would you have 3050 . Paid that manage money, you never have cash. When 2009 rolls around, youre at the held hos tamg by what happened to the averages . Kplends on the objectives of the individuals. Would you have 50 cash . I couldnt justify that. We like the invester to make the choice. They are going to get out, its their problem. The way i look at it, most of the investors are fairly diversified, so the money invested is over to the professionals. What if there was another significant break in 2008 . If were wrong about this and we built up all the debt, and mark bobber is right, and market is down 50 , what happens . If you were asleep at the switch in 2008, if you didnt touch the portfolio, youd be ahead of the game than you when are in 2007. Long approaches are critical. There will be another bump in the road. There will be another big drop in the market. I want to be out if its in there. Much easier to call the bottom than it is to call the top. Yeah. The worlds not ending yet. A few weeks ago. Valuations are good and supportive. Ferraris gearing up get it for initial Public Offering this week. Cnbcs wealthy wealth editor, robert franks, joining us now. Prewealthy. Youre not resentful. No. Youre the guy on the hill. You want to be him. You dont want to kill him. You want to be him. Ferrari would build one less car than the market demands, but they are increasing production at a time when demand remains a little uncertain. You got slowing growth in china, middle east, and latin america that could break sales. Revenue in china falling in six months from 107 to 101 million. You got higher emission standards forcing them to change the iconic 12 cylinder end gins and growing competition from bugatti, porsche, and mclaren. U. S. Is still the largest market for ferrari with more than a third of sales, and the company is in a new product cycle with the new 488 starting at 250,000. The waiting list for the quarter Million Dollar car is already two years. Investors i talked to saying these shares, tomorrow, are almost as hard to get as a ferra ferrari. So much demand for the shares. Muscle cars use a lot of gas, but when prices come down, oil prices come down, the way they are hurt in the middle east when all the guys in dubai cant buy cars is much more than the benefit they accrue. Absolutely. Nobody who buys these cars care about the price of gas. No. They are switching to turbo engyps so for purists, this is another sound. Lithium batteries . This is a hybrid. Oh. They dont put the battery l. A. Ferrari. Yes. Its a hybrid, more acceleration in the beginning, its not to save gas. When you buy 1. 4 Million Dollar car, its not to save gas. I think you go 060 in 2. 7. Crazy. Why get three seconds if you can get 2. 7 seconds. Huge difference. Another point to make here whats the game here to help here someday . Theres a four seater thats really expensive, too, and really cool looking. The ff12. It is a four seater, still got two doors. Could you fit in the back . Probably not. Its you could fit small children, a dog. Put your dog in the back. They could fit. All right. I think its going to this may not be as bad this is one we know about the luxury rich people love ferraris. It could pop big. Thank you. Still trying to get my head around a ferrari for the dogs. If youve been to the store lately, retailers are shifted into Holiday Shopping mode. Im not talking about halloween holiday, but christmas, believe it or not, its here. We have new hiring details next. under loud music this is the place. Sustainable tea tree eir boil and kale. Ade from you, my friend, recognize when a trend has reached critical mass. Yes, when others focus on one thing, you see whats coming next. You see opportunity. Thats what a type e does. And so it begins. With e trades investing insights center, you can spot trends before they become trendy. E trade. Opportunity is everywhere. Welcome back, countdown to christmas is on. Amazon is gearing up for the rush, and retailers say they will create 100,000 system jobs to handle the increased demand over the holiday period, 20,000 more than last year. Dow set to release results, numbers and reactions from an ammist and back to the investment joints from fidelity and more to talk about future of investing. Back in a moment. Metimes they j. 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. Among the stories front and center at this hour, yum brands separating to two publicly trade companying spinning off the China Business, this coming after pressure from activist investors. Bear hug this morning, also, they are offering to buy team health for 71. 47 per share in cash and stock. Team health rebuffed the bid. Companies provide outsourced Physician Services to hospitals. Harley davidson, those shares hit hard this morning, earnings and revenue fell short. The company is planning job cuts as it responds to what its ceo calls a heighten competitive environment. We are just getting numbering out from verizon in the quick earnings per share number is 99 cents a share, looking for 1. 02 a share, but revenue higher than expected. Opposite story from everywhere else. Although, i take it back, adjusted earnings per share is 1. 04. Looking through that now. 33. 1 billion versus 39 billion anticipated. Yeah. 5 cents charge is in that 99 cents for pension remeasurement, pension remeasurement. 33. 2, up 3. 1 on a comparable basis after factoring out results from aol. Remember . Forgot about that. Right. Company reaffirmed Revenue Growth guidance of 3 for the year, and mcadams, his words, another quarter of connections growth, expects growth for mobile over the top video including Digital Advertising and the internet of things. We look at fios with them, 114,000 wire line fios connections and 42,000 fios net additions. You watch the fight between our parent and at t directv . Its fun to watch. Comcast direct tv . No, at t you said the battle between comcast, at t, and direct. They have guys saying, were going to do a cable merger, and theres big stars in it. They got guys who have been on sitcoms that are on each side. One says, hi, were merging yes, i have seen that. Dont merge with that company. Theres fred willard and jeffrey i mean, its a big all at once. Playing the ceo on one side and fred willard on the other side, and the guy that was in the late night wars between leno and letterman is a bit player there. Its funny. They are going back and forth hard at each other. Its randall versus brian. Wow. Its followun to watch. Its all in good fun, not mean spirited yet. They merge. Saying, we brought in breakfast this morning, and they go, oh, great, what, bagels, and they dump a big pile of ice and peel and eat shrimp, and everyone goes oh, like that, and its good, though, its funny. Ive only seen it once. Running constantly. You watch more tv than i do. Yes, i do. A lot of sports. A lot of tv. You got more . Verizon, where they say ver ryesons acquisition in june plays a key role in the future Growth Strategy of the company. I dont see real numbers. I was trying to understand. I thought to myself, how is it possible . The deal just closed. I already forgot what the rationale was. Right . Remember, something aol had. Digital advertising. Okay. That they were able to insert the advertising around other content. Thats the concept. Anyway, in the meantime, our squawk conversation for 20 years focuses on Mutual Fund Industry and where it goes from here. Back to the panel, our panel are here, and hes the question. We talked about it during the break, mentioned it, i think, while on the air, and sort of the active ver ssus passive goi on. Which is the right choice right now . Being an index fund has been the right choice for the the past five or seven years, but things might be different now. Well, you know, index fund where . Talking about large cap u. S. , Something Like the s p 500, thats done very, very well over the last five years or so. As you go into longer time periods, as you go further afield, you find the record is much more mixed. Active is better broad ping the horizons and on a longer time frame. If youre a viewer watching the program, and the u. S. Is great, they say europe is great or asias great, and people think, okay, i shout just buy an index, and they think fees are lower on the index, do you think thats a bad idea now . Not necessarily. If thats your goal. This is just to get exposure, but if you try to build a durable long term portfolio, you find that getting as many opportunities to do well as you can makes a lot of sense. You close off one of those opportunities if you say that im just going to get exposure to a passive cap awaited index. To say its an active versus passive i think is missing the point. To me, its utilizing both structures in a portfolio for an individual, and thats where advisers come in. There are period of times where its tougher is it cyclical . It is cyclical. No index fund beat the index, yet, they get credit, for, oh, were an index fund. Excellent point. Theres fees, friction costs, other things involved, so i do think theres room for both in this environment, and especially if the index is doing well, you want to be notary public correlated to what to get diversification of the port foal e owe. You talked fees though. Yeah. Thats the story with actively managed funds and why people argue indexes. Fees are important. I agree with bob, you cant have both, but, becky, the point is you want to, right now, its setting up well. You mentioned, andrew, its a tough environment for the last few years. Its. A good environment, but tougher active. Despite that tough environment, at fidelity, were ahead of the benchmarks, net of fees, and year to date, on a one year, on a three year, five yeer year, and ten year basis, and i think right now, the next three to five years are going to be really fun for active managers. You know, Mutual Fund Fees are performance net of fees, and what happened in the industry, also, is class of shares have changed, and the why share or no load share fees where the adviser charges the wrap. Its changed the whole business, and i do think Mutual Fund Fees keep going down from competition, pressure in the market place, and i see that continuing. We talked about this in reference to what warren buffet said, difference from the industry, and maybe where thats brought in too. Charging 220, thats a different story than what mutual funds charge at that point. How has your job changed over the last ten years as the hedge Fund Industry ballooned . Listen, hedge funds brought an interesting dynamic to the market. We take the long term view. I think thats my advice to your viewers. Dont get shaken out of the market volatility. Take a long term view. What you want to find, either if youre investing in individual companies or if youre investing in mutual fund companies, you know, like the three of us here, you want to let your earnings and your investment compound, and so you need to take a long time horizon to do that. For example, will, he just celebrated his 25th year. You guys just celebrated your 20th year of squawk box. 25 years at fidelity, the head of the s p 500, per year, by 300 basis points, net of fees. Thats amazing. Yeah. Okay, so if you invested 100,000 with will, its worth over 200,000. Is he not available today . No, hes absolutely available today. Absolutely available. Okay. One thing that happened in business too, the socalled liquid alternatives, so the hedge funds concept has been brought to main street through absolute return funds, and, you know, comparing hedge funds to equity markets is not exactly a fair comparison because the goal of the hedge fund is to provide an absolute return, a significant return over cash. Right. Well, you know, the point brian made on long term is critical. The main reason people under perform indexes in the portfolios is not the choice of the investments made, by because they did not take the long term perspective. They sell at the bottom and buy at the top. Thats the, you know, as you see in the studies, for instance, at morning star, thats a huge drag on returns. People just need to stick with their plan. Thats why, for instance, we think partnering with Financial Advisers are important because the advisers are the folks opposed to the diy investors, give investors the backbone to stick with their plan through the inevitable obstacles in the market. You all represent the classic traditional Mutual Fund Industry, complex, if you will. What do you think of things like wealth front and all the new sort of digital platforms trying to focus on millennials. There is no necessarily i think people answer the phone, but its not the same thing. . Well, you know, the easiest thing of app advisers job is coming up with a pie chart how to allocate investments. Robo advisers do than. You put wealth front in that category . Definitely. Who says, look, we made the plan, and when we made it, we knew the market was going to go down, dont panic. Who holds your hand. The robo advisers are not set up to do that. This is better than when i was an adviser. There were loads then. Nobody does loads now. No. Are there back end loads . Fees. And now brokers are load based now getting 1 or something, like a wrap fee, right . Right. So they will only use mutual fund guys that have delivered for them in the past as far as returns, so theres the conflict of interest thats now gone. It used to be that inhouse Morgan Stanley sold Morgan Stanley funds, and they get a Little Something more that way, but now thats been cleaned up, so the wrap fees, they get 1 of the assets, and whoever does best for them, they stick with those. . Thats the way it should be. Zb right. Its the open architecture based on results, although past results are no guarantee. How many times have you read that . If you dont every time if you dont perform, you shouldnt have shelf space. Thats all theres to it. Is there 8 anymore . Can you buy within is there a broker to sell a load . They are out there, but no ones buying or selling them. Its going to wrap fee, especially its the new waffle ball. If retirement, its heavily mutual funds, 401 k and 5 457, those are load waived, and fees make it a competitive market. Thats good. Thank you. Youre welcome. Appreciate it, guys. These gentlemen are sticking around for more of the conversation. Also, when we come back this morning, industrials battered this year, but the sector mounting a comeback this month. Well be joined with the spotlight on industrials after a quick break. Look at that chart. S p industrials just what youve seen, big pickup over the last month. [ girl ] my mom, she makes underwater fans that are powered by the moon. [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] my mom makes hospitals you can hold in your hand. My mom can print Amazing Things right from her computer. [ whirring ] [ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ] my mom works at ge. Industrials taking a beating, down 6 year to date, but in october, industrials up 6 . Is this sector staging a domeback. We are seeing whats going on in the sector. Good morning. Its been a rough year for industrials, slumping thanks not only in collapse to the commodity come pleng, but exposure to emerging markets. Take caterpillar, the Mining Equipment maker down about 25 this year as equipment demand has waned thanks in part to economic weakness in china and brazil, emerging markets represent about a third of the companys overall revenue. Similar story for Emerson Electric down more, over 26 year to date, and the Industrial Automation equipment maker focused on china and growing global appetite for energy in recent years. You can see here, em exposure 34 in terms of sales for that company. United technologies, missed on revenue expectations when it reported a bit aearlier this morning in part to head winds, but they plunged 25 in 2015. Weakening demand in china for the oldest elevator segment is an issue in the past quarter. Interesting to hear what they say this morning. 32 of the United Technology sales are in china and other markets. Still, despite the struggles, look at this. The ishares emerging market etf or eem rallied 9 so far this month, and so, too, as you can see here, have some of the names, all of the names, so the question now, can they sustain that . So were going to find out as earnings season continues to unfold. Becky . All right, morgan, thank you very much. Again, our guests are at the table listening to this as well, and, bob, you had thoughts on the industrials before headed into this. What happens now . You pointed out they are hurt badly because its tied to oil. A lot tied to oil, and, you know, a lot of the associated work they do in that patch, and were starting to see that bottom out. We think. We think. Theres a lead story in the wall street journal today talking hedge funds buying stepping in last year. Right. Thought it was at the bottom at that point. How do we know . Now its really the bottom. There you go. Theres bell ringing at the bottom right now. Your thought is it has to come back at some point . Flattening out here, and probably a good time to buy. Okay. Well, yeah, you understand its scarry, and you dont want to catch the falling knife easy to say, oh, this went up like crazy, must be good, lets buy more, what kind of knuckle head gets in energy now . You know, i want to have more energy than i used to have any portfolio for sure. Why . What are the fundamentals . At 40 bucks a barrel, you know, you reached a floor thats been youve seen that kind of we keep bumping up against that. Stays there. Technical issue . You know, tesla makes gasoline obsolete, but not today. Theres a lot of need finish gas for a long time to come. Looking at a technical call, not a supply and demand picture, 40 at 45 for whats been discounted, right . The growth in china has come down substantially, but china is still growing substantially growing more than the United States. You know, demand is not going to disappear, so we find that, you know, the supply demand is roughly in balance now, at a much lower level if growth picks up from here and anemic around the world, theres upside. Okay. Well, were going to pause and come back with you in a moment. We got best ideas for your portfolio, our panel investing giants tell us where to put billions of dollars to work when squawk box returns in a moment. Everywhere you look, it strategy is now business strategy. . And a partnership with hp can help you accelerate down a path created by people, technology and ideas. To move your company from what it is now. To what it needs to become. Welcome back, back to the panel of Mutual Fund Giants talking of sectors to watch and sectors hitting the industry now. Fidelities, putnam investments, and oppenheimer funds. We talked oil, but talk about the broad calls when it comes to the dollar. Thats probably one of the biggest issues facing the stock market right now. What do you think happens . Yeah. I think the dollars had a pretty good run, and i would say were probably in the later innings of strength in the dollar. If you look at the dollar versus the yen, in the yen, depreciated 50 , and theres regressive qe going on in japan, and i think the deappreciation versus the dollar already happened, so i think that the head wind seen in the market from the conglomerates earnings is probably closer to the tail end of that in my opinion. You agree with that . Relative Monetary Policy is a driver of this. People believe that the fed is going tighten sooner than the boj or the ecb. Thats provided this support under the dollar, but thats been beginning on for a couple years. Its late inings. What if europe shows better than we think and the ecb doesnt keep printing money . Well, you know, that would be the surprise. What if the fed says were not going to hike at all in 2016 . Thats a surprise. Where are the surprises that could be spelling the end of the bull market and dollar . Bob, you agree . Totally agree. Its the 7th inning of the dollar going up, and rising Interest Rates have it up more, but its going to have runway here. Technology, who likes it here . Like it. Like it. Bobs hand up. I like anything related to the internet, and i think this is a Secular Movement going on, big, and these stocks are overvalued right now, and so any company having something to do with the interpret, we like. What about the old classics, though, like ibm. I still have a stock. But ibm wants to be an Internet Company, but are they . They are in the hardware of internet. They are not an Internet Company like google and amazon and some other companies, facebook and things like that, and theres a company in china now that does travel, and its just exploding, so im looking at that type of Internet Company. Art, you dont like the Internet Companies . You got to be careful, but i think bob is exactly right. I mean, theres this whole data deluge, you know, this time around, one of the things thats different is most companies attracting the money are actually showing revenues, and to your point, the other thing is the new shift is the ability to use big data to really drive customer engagement, customer experience, and create more compelling products, and thats very exciting. We are almost out of time, but, quickly, tell me your favorite sector. Brian, starting with you. Sure. I zroehave one, but whats unde appreciated is financials. Financials has been beaten up whether its regulatory, Regulatory Environment has not been cop deucive, the slow down in fixed income trading weve seen last week with some of the brokerage firms, but what i think is youve got a Capital Allocation thats going the right way there, and i think youre going to get relief on Capital Allocation and as the fed raises rates, thats a tail wind. Art . 20 seconds, favorite sector. Capitalization weighted indexes were created with pencils and legal pads. What you dont want you dont want diversification for a lot of stocks, but drivers of return. Data in that sense is a good idea. Maybe a subject for another time, but theres a better way to build portfolios. Yeah. I go with special biotech and wide open, again even with the political cycle picking up and candidates taking aim, Hillary Clinton in particular . I think there is tremendous opportunity there. Okay. Yes mep, thank you, all, very much for joining us, a pleasure to have you here. Thank you. Congratulations on 20 years. Thank you. There used to be another hogan who did that. Well do it for you now. Thank you. Youre welcome. Verizon out with Quarterly Results, digging through the report with app analyst. We got that going for us, which is nice, and then 2015 is still on pace to be a record year for m a. Robert kinler, head of m a at Morgan Stanley. I would like to see andrew interview him. Would you . Promise you i will. Joining us at 8 30 eastern. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Dow component verizon, results out, reaction from the street, and a round table, black rock and harvard economics professor martin feldste initiation straight ahead. Looking for answer, questioning mooirs leadership. Can she right the ship again . A special report just ahead. Plus, we talk travel with the editor in chief of conde nast traveler, and what tops the places to visit as the final hour of squawk box starts right now. Live from the most powerful city in the world, new york, this is squawk box. Again . Welcome back to squawk box here on cnbc, first in business worldwide, im joe with ross and becky, and were less than 9 minutes away from the opening bell on wall street. Yes. Could have said aaron, you know. Ross was okay. Two great writers. Futures down 43, not as bad as it was earlier. You know, a lot of this stems from europe, which has been weak for most of the morning and not sure why europe started out. We maybe ibm did not help, but anybody who tries to extrapolate to any other part of the market, i dont think ibm necessarily tells you anything anymore, does it . Its early in earnings season, big surprises, ibm by itself with the losses makes up two points of the decline. Tells yo you about it too. Right. Think ibm specific. Oh, you never work with me on this, but, you know, bob dylan never did a commercial before, does a commercial for watson and ibm, but a lot of the ibm commercials now resolve around watson, i guess Everybody Knows about it, but thats not ibm. Its not going to help for years to come. May take away, but its ai. Artificial intelligence. Sexier than talking servers. Yeah. Hope he was paid in cash not stock. Exactly. Lets tell you whats going on. Verizon out with results, beating 2 cents with 1. 04 calling on the newsline with reaction. We have the founder and Senior Analyst there. Good morning, craig, help us through the highlights for you first. Caller good morning, andrew. Well, first, you know, as i say, when you have me on talking about telecom earnings, you have to dig through the mess thats a telecom accounting right now because theres so many distortions in the industrys transition from subsidy accounting for hand sets to installment plans. Its a 2 cents beat on the headlines there, and, again, its really hard to compare that to consensus because you dont know what consensus really assumed about how what was going to be the uptake of the new plans and the accounting impact. Netnet this is a company that on the surface looks like its growing at about 45 , and adjusted for all thing thing its probably growing at a negative 3 in reality. The unit metrics here are a little better, and out of all the confusion, i think these results are probably a shade better than what the street expected. In terms of your target on the company . Well, look, i think weve got weve got a buy on verizon now because i think youre starting to see signs that the competitive intensity in pricing is easing just a little bit. 2014, where at and t was significantly repricing Customer Base will probably be in retrospect the worst of it. Again, it was very much obscure by accounting, but had it not been for all the accounting, the whole industry would have seep Something Like a down 15 year. Thats on the wireless side, though. What do you think about fios, in particular, looking ahead to whats happening with ka cablevision and that pricing. Thats an interesting longer term discussion. Even on the wire line side theres distortions. In this case, the distortion is verizons in the middle of the union negotiations, so they are doing being somewhat less aggressi aggressive, i think, on f irios than they otherwise would be. They are planning to radically cut costs, thats probably good for them. On the other hand, they are probably going to raise prices that also would be good for verizon, and so if anything the acquisition is probably good news for wire line business. Okay. Leaving it there. We appreciate your per special circumstance minutes after the announcement. Thank you. Caller thank you. Other stories investors are talking about today. United technologies, earning 1. 61 a share, 6 cents better than expected. Revenue was below forecast, though, due in large part to the strong dollar. The company did reaffirm the full year outlook add 12 billion to the stock buyback program. Travelers earning 2. 93 for the Third Quarter, way above streets expectations of 2. 27. This is a company that routinely beats earnings estimates, 12 out of the last 14 quarters, helped by improved underwriting results, the stock up 3 today. Also, ibm beating estimates by 4 cents with quarterly profit of 3. 34 a share, but the stock is under pressure. Its down by about 4. 5 this morning. The company came in with revenue that missed estimates even accounting for foreign currency and intentional shrinkage of revenue. Also, this was the 14th quarter in a row that revenue was down, and ibm gave a disappointing forecast for the year as well. Lets shift directions and talk the fed. Keeping the markets guessing, investors, though, have plenty of data to digest ahead of the next twoday meeting. Lets get more from our squawk market masters, Marty Feldstein is on set, professor at harvard university, and pall edward here as well, senior Portfolio Manager at blackrock. Gentlemen, thanks for both coming in. Thanks for having us. We have not talked about whats happening with the fed, an opinion on the street that changes weekly now about what the fed will do. We went from thinking we were pretty much sure theyd raise rates in september to being sure it may not be this year. What happened . I think they are going to do it this year. You got the leadership of the fed all saying that they expect it to happen this year. Now, you could have really terrible employment numbers again for october and november to throw them off, but unless theres really bad news, when you had janet, stan, and bill dudley all expecting it to happen this year, they get a d for communication if they dont dont listen to the rest of the fed members out there . There are dove members. There are, including two governors, an unusual situation. They may move ahead with a couple votes against. That couldnt be terrible. But what makes you think by the way, do you think its in october or december . No, no, december were talking about. Why not object . Well, because they want to wait and see that there really arent some terrible numbers coming along and wont get the october numbers until the beginning of november and so on so they will wait. Thats the question. The street watches what the fed says and thinks, what does the fed know that we dont know . The fed watches the market and watches swings, saying what does the market know what we dont know . Is this a big monster in the room that does not exist . No. The fed would like at least janet and the more dovish part of the fed would like to see the Unemployment Rate come down further, and theres no reason why that couldnt happen if they start normalizing. Although, what they really made a big deal about is theyd like to see inflation come up. Its not in the range they are looking at. But shes made it very clear she understands and the colleagues understand that this is all energy priced driven. If you look at the core number, its 1. 4. Thatll keep coming back up with tighter markets. So and, again, were not talking about moving from super easy to tight. Were moving from super, super easy to just a little less easy. You saw ibm and i think that might be more in their minds than the other stuff, strength of the dollar, hurting exports for the big multinationals. If they had gone up in october, i think we wouldnt be at 1. 14 euro, but 108 or something. Thats where they thought we were headed before, and thats where draghi thinks. He wants to see the rate pining for the days of the dual mandate instead of the what is it, the dozen mandate . How many are there . May be more than a dozen mandates now. Its insane, right . It is confusing to put it mildly. I i am not a dual mandate guy. Right, no kidding, yeah. Price stability. Exactly. When i was in the white house, vo voker was the chairman, and, yes, there was a dual mandate, the law on the books, but he, as far as inflation went, he just said, were going to deliver price stability. Were in a period now, in a statist period where its good, we have the smartest people in the world doing everything for us so the fed handles more as well as the rest of the government. They need to for us otherwise all hell breaks loose if we didnt have central planning, right . Isnt that where we are in the world right now and the fed fits . You exaggerated that a little bit. Hyperbole . Yes, yes. Paul, what do you think . Definitely the market and sort of the consensus economists out there are disagreeing. Look at what the market thinks, the markets pricing in march, looking at a survey economist, they say this year. What do you think . I go with the economists on this one. The market is focusing on the deacceleration in the payroll numbers. We have not seen wage pressure that most people want to see to get inflation back, but, you know, i do think the fed has not missed the window. End of this year is likely, october, nobodys pricing that in now. What you mentioned and what marty said earlier, if the markets say its not happening until next year, and you think its happening this year, the fed is doing a lousy job of communicating. And i think thats the reason why octobers off the table, partly, to wait for more data and give them more time to communicate to the street this is what were intending and the deacceleration in payrolls is not enough to pause. Is that just a are we just reading signals wrong . Marty, youre confident that you are watching the leadership, and they are doing this clearly, but its all the other talk we get thats confusing people . Yeah. Its quite clear that when janet wrote the speech that she gave a week after the september 17th meeting, she was writing a speech that explained why they were going to increase. That, to me, felt like she felt like they were not clearly communicating to the market. The market too big the wrong message away, and she was trying to backtrack quickly. Except i think the speech was written before the september 17th, so i think it was a speech designed to explain why they had moved when then, in fact, they had not moved, so there was a clear disconnect and the markets threw up the hands and said, i give up. I dont know what the people are doing. Paul, what do you do with this as a practice caal matter the portfolio . Thinking about the fed with huge implications for the dollar, talking about the moves this month, month to date, you mentioned theres a rally in capital goods firms, metals, and miners, that is because the market priced in the fact that the fed would not go this year in expecting dollar weakness. I think a lot more has to happen than the fed not going this year for the dollar to really move. You know, when you look at the fact that europes got more room for quantitative easing, japan room for that, no one is talking qe in the United States a few people are. A few people, but not a lot of people. Can only hope. A lot has to happen for the dollar to weaken. Whats that mean for capital goods exporters . Well, the fact that china construction demand remains weak and probably will continue to remain week. The fact that the dollar probably remains strong means that this twoweek rally seen month to date is probably all were going to get. Capital goods and metals, i think, remain weak for this year. Wow. Okay. Paul and professor feldstein, thank you for joining us today. Good to be with you. What were you going to say, sir . Bob dylan, ibm was not the first commercial. A car company, right . The super bowl . 2006 . What would it have been . What company . A car company . Nope. Apple . Only one cool enough to get bob dylan. They didnt. Why not . I dont believe i think he was one of many. They had i just watched it, and he plays the guitar, the hat is on, and the ipod is there they show, but the ipod is the size of an iphone in 2006. Remember those first ipods . I have to check this out. In silhouette. Hes cool. I have a commercial break, and coming back, stocks surge after announcing they spin off the China Business, talking about that move, and then the turn around plan hits a bump in the road from the alibaba spinoff, we try to figure out the next move after the break. We return in a moment. Innovating. Trade, the and apparently, they also love stickers. Whats up with these things, victor . We decided to give ourselves stickers for each feature we release. We read about 10,000 suggestions a week to create features that as traders wed want to use, like social signals, a tool that uses social media to help with research. 10,000 suggestions. Who reads all those . He does. For all the confidence you need. Td ameritrade. You got this. Yum brands announce they spin off the China Business after years of struggling to get it on track. Joining us now is david palmer, restaurant and package food analyst at rbc Capital Markets. Dave, what do you think of the move . Caller in line with what we would have expected in the structure as well with them spinning out the China Business as a megalicensee, and the remain is free to be leveraged up with more debt, creating a winwin for two assets more investble for people in the future. A winwin for activists eager to be in and out. Whats it mean for the long term . Caller well, long term, yum brands has been a great performer. Its been the 10 plus eps Growth Company for niep years in a row before having three years of not hitting that. The China Business had gotten large, and, it also had gotten volatile with the supply chain issues that had befallen it in recent years. As they get past those supply chain issues and those shocks, and as this new structures created, the remain code, the global yum, will be more franchised, more consistent in its earnings, and itll be more like the old yum, punching out growth year after year after year, and thats 70 of the income. Thats going to be the more inve investable asset, and yum china is a growth emerging brand with the gap reporting to make investors feel better about it. The stock is up 6. 8 this morning, would you tell people to buy at this level . Caller we would. We want to be following the monthly same store sale updates like everybody else. Theres adjustments to make, how much leverage do you make, and, ultimately, the health of the China Business will have two impacts, and how the franchise income stream, but overall, we find it upside from here. All right. Thank you, david. Caller thank you. Yahoo reports after the bell today, the company is zemplgi in searching for a new direction, stock down 30 this year, and 12 Key Executives left the company, so what is the end game for marisa mayer . You have to give us the end game, josh, do you have it . Do you know . Well, i dont have it, joe, but ill tell you who i talked to. They might have it. Youre right to say her stock is down, key lieutenants have left. What are her options at this point at yahoo . Well, for one, she would try to accelerate the turn around of the business meaning she has to keep the momentum going strong in the companys mobile video native social ads, the area where internet ad dollars are flowing, and in the last reported quarter, the growth jump 60 , but they are still a pretty small part of yahoo s overall business at 30 , and that is why she also needs to stabilize and grow the companys core online ad business. That wont be easy we know because the competition is fierce. Google controls the ad market and facebook took center stage in the display ad market, but even more critically in the near term than the health of the core business, the uncertainty now surrounding ali baba. Yahoo plans to go ahead with the plan spinoff in the speck of ali, but they will not commit ahead time whether the transaction is tax free. The difference between no tax and a 40 Capital Gains tax amounts to billions of dollars. Now, if she cant separate the turn around of the business, neil of securities has a radical option, sell. He says private equity firm could see the value of yahoo s 1 billion users, the company we know, controls the most Popular Properties on the web, yahoo news and finance, and a private equity firm could buy them, strip out costs, and refocus the company for growth, or he says, even spin off part of the business. Guys, back to you. Heres the real question before you go. How long do you think she has . Like, whats the honeymoon period in which investors give her at this point . I think the analysts i spoke to, andrew, said the time is on the clock. The only difference is whether they thought its six months or 12 months. If she spins off the stake by the end of the year, if thats tax free, all attention and focus coming back to the core business. You talked to bulls, andrew, you know, talking to cantor and more, he recommends clients to buy the stock here not because yahoo is a compelling great ad plat tomorrow, but thinks at this price, its reflecting a lot of bad news. Well find out. They report after the bell. Thank you. See you soon, in the meantime, coming back, amazon ready to do Seasonal Hiring for the holidays. Find out how many jobs and what it says about sales expectations next. Meantime, though, futures at this hour. Youre watching squawk box on cnbc, first in business worldwide. I havent seen you since that tv quiz show. Hello, watson. You can see now . I can recognize people, analyze images and watch movies. Well i wrote a few books, did a speaking tour, i. Ive been helping people plan for retirement. And i help doctors identify cancer treatments. Is that all . I recently learned japanese. Yeah, i was being sarcastic. I havent learned sarcasm yet. I can help with that. Prge a manufacturer. Well thats why i dug this out for you. Its your grandpappys hammer and he would have wanted you to have it. It meant a lot to him. Yes, ge makes powerful machines. But ill be writing the code that will allow those machines to share information with each other. Ill be changing the way the world works. interrupting you cant pick it up, can you . Go ahead. He cant lift the hammer. Its okay though youre going to change the world. Go to ziprecruiter. Com and post your job to over one hundred of the webs leading job boards with a single click. Then simply select the best candidates from one easy to review list. And now you can use zip recruiter for free. Go to ziprecruiter. Com. This is bing . We have this album. This is him. Huh . Yeah, all right. Countdown to christmas is on, and i thought this might be the other guy. Im almost positive. This is bing crosby. Really . Gearing up for the holiday rush. Retailers creating 100,000 seasonal jobs to handle increased demand over the holiday period. Someone will survive working in amazon out of the 100,000, and many will, according to the New York Times, will lose their lives somehow. Is that oversaying anything . Im without comment, without comment. That was hyperbole. All are expected to survive, all 100,000 expected to survive. The times didnt say anyone. 20,000 more employees than last year, and the Seasonal Hiring is in addition to 25,000 permanent employees added in recent months. This is a fine american firm. And mom and dad can hardly wait for school to start again. Thats bing. Okay. Breaking news on housing, pushing on investments, and then robert, head of global mergers talking about the art of making a deal. A few seconds from Housing Starts, Rick Santelli is standing by, and, rick, we are waiting numbers. Take it away. Oh, absolutely. Important, housing and all the cottage industries. Well, on the start side, better than expected, very solid. 1. 206 million app newelized, of course, seasonally adjusted units, and even a positive revision on last time. Now, hes where the rub is. Okay. We ended up with a better number than we expected, but when you look at permits, starts were up 6. 5 , permits down 5 . We were working for a number close to 1. 2 million, ending up with 1. 103 million, thats adjusted united. Now, indeed, looking at last time, its sequentially lower as well with a revision, subtle revision last time to 1. 16 on the permit side. You know whats important about this data . First of all, looking at the starts number, this is very powerful, so 1. 20 comps back to june when we have 1. 21, and if you consider that in 2006, starts were 2. 27, and permits in 2005 hit the record of 2. 26, you see the entire picture. Has there. Improvement . Absolutely. It hasnt improved to the same levels as, obviously, before the crisis. A lot of moving parts. Today, big bill on gse reform. Nobody mewants reforms, but the private sector could make money. Forget hundreds of billions funneled to treasury. These are all the issues. Interest rates, 2 preponderate 05, so reflecting some of that, and weve been in a tight range, but closes under 2 have been few and far between, just three since the end of april. Back to you. All right. Rick, technocrats not over until its overing, right . We have a guy talking smack here about the mets. Hey, listen, im shocked that the cubs laid down for the first couple games, have to hand it to their pitching, but, listen, we have are rooting big time at wrigley field. Let the chips fall where they may. Yep. This guy, murphy, cant hit a home run every game, i dont think, can he . The fielding, anything else . No, but they can. All right. Its kpieexciting. Bails back. Buckingham palace rolling out the red carpet, and we are in london, is it afternoon there . Good afternoon . Good afternoon, susan, see how quick i did that . Reporter yep, very impressive, joe, very impressive. Yes, good afternoon to you. The president is inside the palace having lunch with the queen, being brought here by horse drawn carriage as you do. Also 103 gun salute and pomp and ceremony that the u. K. Affords for an important visitor, a full state visit by the chinese president and first lady of china, and later on today, hes going to address both houses of parliament and have tea with Prince Charles and camilla, and later on, we have the state banquet taking place and getting a warm reception here in the u. K. , market difference from the reception he got in the u. S. Because the u. K. Has said they want to be beijings best partner in the west, which the u. S. Criticized saying, well, arent you always constantly accommodating to the u. K. . In terms of business deals, this is what the u. K. Is getting. They get possibly 50 billion in trade deals to be signed over the next four days, a four day state visit, including cooperation when it comes to nuclear energy, an interesting deal. That could be signed of cooperation between the exchanges as well, and shanghai and london, maybe extended trading hours so theres more rmb on clearing, and bonds, themselves, londons going to be the center, the first place outside of the asia pacific to sell and offer and clear chinese sovereign bonds in the future, something the u. K. Is looking forward to. Back to you, a in new york. Thank you very much. Talking m a now, 50 deals announced so far this year, 89 increase putting 2015 on track to be the best year for m a since before the financial crisis. Rob is the vice chairman, head of mergers and acquisitions, and more importantly, the brother of andy. Right . Thanks for the plug. Giving him the plug. When you look at whats going on, you worked on this. Absolutely. A lot of the deals, actually. Uhhuh. Good or bad sign in reality . Look, i think this year is going to end up being probably the best year ever in m a. Good sign bad sign, tough to know. Whats up usual this year is looking throughout history, m a has kind of tracked the market. A little lagging. Little bit lagging, but this is the first year the market is likely to be down at the same time m a is up dramatically. What does that mean . I think people really bloelieve m a is the only way to drive growth. Analysts talking ibm. Do you think the Tech Companies do what they did . Well, look what happened with ibm. They had issues, and they announced big buy backs last year. Everyone said, seriously . Thats your answer . Youre going to do Financial Engineering in we want to see you go out and invest in m a, and invest, obviously, Capital Investments for the companies that are relevant, but, yeah, well go through a period where the markets not going to go anywhere, where the stock market, who knows where it ends, but i dont see rate gains in the next couple years. Some people think thats not capital investment, investing in m a, they through that in with the buybacks calling that Financial Engineering too, and thats one of the problems. Throws off the comps and its going to take awhile to work through it. Anyone investing ceo extending times by confusing people. Anyone investing in plans and in people . Absolutely, oh, absolutely. Yeah . I think the m a, youabsolut right, viewed as a tool for growth, but there are companies that need to consolidate, but were in an interesting time now, because look at the amount of money raised for these deals, amount of money for sab deal, you know, represented sab, and emc, you know, 50 billionplus raised. What do you think of the idea that all the companies you just talked about did these deals from points of waeakness . Defense . I think defense. You take emc, right, what an Incredible Company thats been. You know, people forget that joe bought this for under 700 million. So this was a company that has been extraordinarily successful in time, so is that weakness to say we want to go to the came to you and said, you have to take a buyer in the next month. Well, look, with respect to act vicactivism, its reported t emc is looking at other alternatives for two or three years now, and they recognize that scale, you know, really matters. How much is driven by activists, thinking, by the way, this morning, we had this news that yum brand splits into two, china is in a separate business. Dan lobe announced a stake this year, i dont know if hes bind this or not. Big invester in that. You know, i think, actually, whether its specifically by this particular activist or not, i think a lot of this is driven by activists, and whats been good generally in the board rooms is when people are thinking about doing deals, they are thinking about what the Market Reactions going to be. Thats the right thing, and so were not forming Market Reaction is positive more often. And people are not forming new conglomerates. Youre not forming a new fortune brand. In the rare case when people ignore that like freeport that went back into oil and gas, they rightly got punish for that. Right. What do you think of the yum brands spinoff . You think of the multinationals who always wanted to be in china, are we going to see other companies say, you know, actually, well put china here because we dont know whats going to happen . I think theres a lot of that, and ewe see that thats what its doing is its gravitating where the capital is, and some people want to have pure play chinese companies. Well see how it ultimately breaks out, but as to the question on activists, you know, the its rare that an activist has an idea that a company is not thought about. Right. But my view has always been you never should do anything just because an activist is suggesting it, and you shouldnt not do it because an activist is suggesting it. If its a good idea, its a good idea. Is this deal going to happen . Involved with stuff to comment on, but people believe on the stocks trading on the basis it will. What do you think the wall street had a piece yesterday on just the whats the word that you love to use, joe . Or that you always say that i like to use . I cant use it on the air. Oh, its the antitrust oh, yeah. Come on, whats the word . Two the hs . Yes. Oh. Yes. What is it . Is there a point at which theres too much consolidation . Now to the point theres a problem . Its up usual that in this administration we are seeing a lot of consolidation because this is not been particularly favorable to that, so i cant speak on the specifics of this, but consolidation . Sure, sure, you get to the point with too much consolidation. Do you look at the inbev deal, to the defensive posture, where it works for a couchle years because of the enormous savings, but then you grow the business, and you run into trouble all over again, and isnt that true of the transactions . Well see over time, but thats not a reason to not do it. The fact is, sure, some companies do things for defensive reasons, and a lot of deals have been done for defensive reasons, but at the end of the day, are you driving more value than you would have driven without the deal . Its complicated. Were at zero, and people argue that the reason were at zero is because were at zero so the feds causing this, you know, cheap money because these things shouldnt happen if money was not so cheap, but theres the argument that the demand is so weak worldwide that the feed needs to be where it is, and this is just a reflection of the realities of the world right now. You need to rationalize things and throw lots together because theres not enough to go around. Tahats a fair point. In m a you dont look at the fed because rates have been low for so long. Thats not a conversation in the board room . Do it now because no, its not. You dont talk them out of doing something anyway, do you . All the time. I give honest, open advice. No, of course we give advice not to do transactions, happens all the time, but the fact is rates do not matter much because they are so little. What matters is m a, volatility. If theres volatility, thats a problem. By the way, i am rooting you got to. Plug the mets. We have to have the mets win. Im from queens, mother lives in queens, wife is from queens, brother, andy, is from queens, they have to win. Cubs have not won since 1908. No sympathy. You 86, you had so much already. Its like the patriots. Come on. Its just what i do at Morgan Stanley. Were winners, we pile on. Im from cincinnati, take the mets out, and anyway, thank you. Top cities to visit, and the results are in. Find out if your favorite destination made the list after the break, and futures still down 32, dow down 2 on the zch. 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. I built my business with passion. But i keep it growing by making every dollar count. Thats why i have the spark cash card from capital one. I earn unlimited 2 cash back on everything i buy for my studio. And that unlimited 2 cash back from spark means thousands of dollars each year going back into my business. Thats huge for my bottom line. Whats in your wallet . The markets change, at t. Rowe price, our disciplined investment approach remains. We ask questions here. Look for risks there. And search for opportunity everywhere. Global markets may be uncertain. But you can feel confident in our investment experience. Around the world. Call a t. Rowe price investment specialist, or your advisor. And see how we can help you find global opportunity. T. Rowe price. Invest with confidence. Pubut to get from theand yoold way to the new,d. Youll need the right it infrastructure. From a partner who knows how to make your enterprise more agile, borderless and secure. Hp helps business move on all the possibilities of today. And stay ready for everything that is still to come. Check it out, a 16th Century Church once covered by water, all revealed in mexico. The church appears in the middle of a lake, water levels dropping, nearly 80 feet to reveal the 400yearold church. The last time it was seen was back in 2002. The traveler survey more than 120 travellers on the Top Destinations and services around the world. Coming up, this years Readers Choice award, we have more. Great to see you. Thanks for having me. We have something for both mets and cubs fans because the best city was new york. Yes. But the best hotel was in chicago, the waldorf . Yes. We cant have it all. Got it both, something for every. Exactly. Why is new york i have to see this. New york, for so many reasons, only, development of downtown. I think there are a huge number of new hotels, not just the usual suspects or the big hotels, but actually a number of smaller ones, seeing this is as a big trend in general across the world that Smaller Hotels are taking hold. You know, the and you know the bigger hotels take cues from the Smaller Hotels that want to find their roots in the individual communities of the places, and so on. I would still think that is it individualized service . The bar . The small hotels have i think so. I think its a come by natibina things, people are more sophisticated in the sense they want to feel like they are there, that im not in some, you know, i could be in an Airport Hotel wherever. You want to know if im in, you know, im in rio, im in rio, and im not in atlanta. So which are the ones, then, a lot are new york . A lot in new york, and you know about them like the crosby and grenich. Look at andrew, i dont know these. Or the suri, but the carlisle and these hotels that top the list because they are fantastic, nostalgic, and deliver Excellent Service in the things the hotels are known for, but whats interesting is that, you know, this combination of old world, a return to the old world and love for tradition as well as these Smaller Hotels that sort of are returning to an old world senseability but capturing newness about the communities. Andrew, a lot of the cool cities looking through to see, you know, where to stay. I agree with the Readers Choices. The cool cities are down in the south, you know, the gun toting youre still focused on the u. S. Im already in the South Charleston is huge for us, and chicago, markets that are just they are exploding. I think in general, smaller cities, people are, instead, yes, they are always going to travel to far flung places, but increasingly, we look inward a little bit. Savannah, charleston . Aspen . And chicago. You know, chicagos a big city. Domestic. All right. Go elsewhere. From afar you were with the monks . The philippines. Yes. And thats pretty good. Cambodias not bad. Not bad. Youll take it . Yeah. Its all right. You stopped meditating. The renaissance is good in south africa. It is. Youre such a you know what actually, i know these hotels. Like, yaef, been there, yeah, that one too. Yeah, i dont agree with that decision, but no, im joking, im joking. Its the Readers Choice, right. Its not your choice. Theres a lot of truth, everyone someone jokes, theres always a kernel of truth, a tiny kernel. Thank you. Thats my wifes name. I know. Maybe she came to the party. Anyway, we had a party, my wife did not come. A 20th anniversary show. We divide and conquer, a modern day marriage. Jim cramer rides high after last nights on the new york stock exchange. Well be right back. Lets get down to the new york stock exchange, jim cramer joins us now. The producer wanted to kill you and not even have this segment today, jim. Because he is a giants fan. Yeah, the giants fan. Did you ever lose faith in chip . I thought there was a game there where i had you on where you were shaking a little bit. Im a fan to im supportive. The first drive that was done by manning was perhaps some of the most perfect football i have ever seen. Then after that there was just nothing. There wasnt anything on the eagles offense, either, just the eagles defense. They werent going to let the giants win. The offense still waiting for something to click. Are the eagles good it th year, jim, yes or no . No. The division is terrible, too. I mean, it just there were more there were just as many long throws to the giants by bradford as there were to the eagles. Lets just say that this is a division thats very much up for grabs. If the eagles lost they would be out of t now f they win they are in first place. I know. Theres john paulson walking by the office again. Right there. Say hi. Right there. I will go wave. John. Do you like gold . How much did you lose in gold . What about housing . Hey. He cant hear me. But we digress. Did you get him . Yeah, thats him right there. Are the jets better than the giants now . I think the jets can take the pats, i really do. I think people are underestimating that defense and i also think that the pats dont need t thats the problem with a lot of these teams, they dont need to win, they are up by so much, they can afford to lose that and the jets are so hungry and so good. Do you have advice for ibm . Theyre going to have to fish or cut bait at a certain point and say, okay, look, we have to do a yum . I know they dont want to do a jum where you say, okay, we want the fast growing businesses. Give us a tracking thing because the slow growing just continue to get bad. That was a tough call. That was very tul tough. Do you like the yum spinoff . I think if you want look, you are not coming in at 90, if you do want to chit in china and do think they can turn it around it makes sense but i wouldnt pay up for is it because we found out how bad china is. Bad time for a spinoff. I agree with you. United technologies, verizon. I think verizon a hasnt stick, i think greg hayes if you go through the numbers the organic gross not there yet but positioning themselves for a better 2016, but again, no reason to be able to say, listen, its time to buy. I wouldnt sell it at this point. Verizon i see reasons to buy, its got yield and growth. Do you think we can see new highs before the end of the year . Yes. You do . I think we could see new highs. I really think we have to keep track of the dollar and the dollar does seem to have peaked. Oil and gas has to stabilize. We cant have that go back to the 30s. There are too Many Companies like eaten that are leefrd in oil and gas that you dont realize. Jim, congratulations. You were there. Was this thank you a wheels up jet . What was that . Was that a wheels up . Yeah. Yeah, it was a wheels up. I watched him on your show, i gave them a call. Its a great plane. That was a king air, wasnt it . King with two pilot lots. Great pressurized, great little plane. Fantastic. Thank you. You might with all your travels. Anyway, coming up this mornings biggest movers when squawk returns in just a moment. The great beauty of owning a property is that you can create wealth through capital appreciation, and this has been denied to many South Africans for generations. This is an opportunity to right that wrong. The idea was to bring capital into the Affordable Housing space in south africa, with a fund that offers families of modest income safe and good accommodation. Citi got involved very early on and showed an enormous commitment. And that gave other investors confidence. Citis really unique, because they bring deep understanding of whats happening in africa. I really believe we only live once, and so you need to take an idea that you have and go for it. You have the opportunity to say, ive been part of the creation of over 27,000 units of housing, and to replicate this across the entire african continent. Of fixodent plus adhesives. They help your denture hold strong more like natural teeth. And you can eat even tough food. Fixodent. Strong more like natural teeth. Fixodent and forget it. All right. Welcome back. We have a number of big movers this morning. Check out shares of sonic, the earnings topping expectation, the company raising its Profit Guidance, the shares up sharply, a gain of almost 7 . Also take a look at sandisk shares, those shares jumping after the Company Reportedly is in advanced talks to sell itself to Western Digital. That stock it up by about 8 this morning. Ram bus shares getting hit pretty hard. Rambus also announcing a Restructuring Plan that will cut 8 of its staff and lead to 10 million in savings. That stock is down 17 this morning. Random access memory, i think. Wow. Good. Flex out flextronics shares rising today, up about 3 after they came out with earnings that beat the street on the bottom and top lines for the latest quarter and again thats a gain of about 35 cents. Weve been watching some of the major averages this morning. It looks like things are under a little pressure. Yesterday the markets ended up at the highs of the day, we saw some modest advances and these futures have actually cut their losses through the course of the morning. We were looking at the dow futures down by ties twoois this earlier this morning, s p off by 3 and nasdaq down by 3 as well. I wonder what ibm is going to do today. Make sure you join us tomorrow. We will tell you about it tomorrow. Squawk on the street begins right now. Yeah, it was a nice win last night. Welcome to squawk on the street im carl want knee a. Threeday rally for stocks being val lengd. Ibms results did disappoint. A lot more to get to utx, verizon, harley and for. More. Bonds watching them to hold above 2. Yum brands higher in the premarket on plans to spin out its china unit into a se