Transcripts For CNBC Squawk On The Street 20141030

A bit yesterday in yield. As for crude oil which has been the key to the stock market of late, you can see we are down on the allimportant wti crude. Lets get to our road map this morning on squawk on the street. Markets set for a lower open. Even as gdp comes in above estimates. The fed outlines the end of that bondbuying program. Visa and mastercard both higher premarket after reporting results ahead of the streets expectations. Both companies citing higher volumes. One of the most high profile executives in the world, apples ceo tim cook announces he is proud to be gay in an oped this morning. The Commerce Department says gdp expanded at a 3. 5 rate the Third Quarter. Stronger than expected results aided in part by a jump in exports and increase in military spending. Meantime, jobless claims rose last week by 3,000 to 287,000, but the fourweek moving average fell to levels not seen since may of 2000. The data coming out one day after the fed announced an end to its bondbuying program, otherwise known of course as qe. Qe, may it rest in peace. They still have 4. 5 trillion on their Balance Sheet. Thats not going anywhere. They are going to keep that there. Its a shame. We could use that supply. I think when you look at what people are buying like the junk, it would be better if they were buying treasuries. If the fed would supply those bonds, the yield curve would get better and the banks would do better. They are not going to do that. They dont need to hold on to those bonds. You dont believe they do . The world wants that paper. The demand for bonds overall remained strong. Despite what is going to be the absence of this buyer there because where else are you going to go . Bonds are up. Its great to emphasize this because its so easy to talk about. I dont mean that to be too damning. Obviously, this is an issue. I just think what happens is the economy is okay, gdp is strong. You would have a lot of reaction from the ideologues who hate what the fed is doing if they didnt do this, given the strength of the gdp and jobless claims. Right. Lets talk a little about gdp. 3. 5 for the Third Quarter. The estimate was 3, there was a 4. 6 increase in the Second Quarter. Remember our decline of 2. 1 in the First Quarter. There are some saying at least the components, personal spending and investment mediocre, not great. Right. What i thought the big change in the economy was nonresidential construction coming back. The thing i was confused about gdp, military spending, were up . I talked to general dynamics, raytheon. Lockheed martin, Northrop Grumman and boeing. All had trouble with the military. Maybe its black opes. That budget is quite large. Yes. Right. Special forces, whatever is going on there. Its certainly not trickling down to the major defense companies, which by the way, like lockheed martin, they had a poor earnings announcement, by their own recognition. At the same time, stocks up. They keep buying back stocks. I love that company. I love that stock. Why . I cant believe how much money they can make despite the ridiculous sequester which was done automatically. We thought it would be undone. At the same time, there are hot spots everywhere. Wouldnt shock me if defense spending did go up given russia cant agree with ukraine. Theres a lot. 7. 8 rise in exports and Government Spending also, as well. Where is that stuff going . By the way, higher dollar. This is last quarter, lets not forget. Dealing with higher dollar now. Conversely Lower Oil Prices would seemingly prime the pump for the consumer. We are a huge exporter of gasoline. Coal is a big part ever since fukushima. Europe is a huge user of coal. Theres something going on in the economy that shows, lets say activity. These numbers are fine. They are fine. Theyre fine. While on the subject of the markets though, talk about economies that are not showing great signs of life, europe. Right. This morning, i think youve got europe getting hit again. Except for germany. Banks in particular though. They did stress tests. There seemed to be a positive response. Banking is now 4 this week. Germany, the economy is better. You can understand what merkel is doing. That economy has incredibly low employment. Volkswagen came out today. German companies are gigantic. Volkswagen had good numbers. Merkel is saying our economy is so solid you could overheat it if you did anything. When the numbers came out from germany, thats when everything started to unravel overseas. Again oil, boom. Soon as it ticked down you saw every market including our futures come in. Oil ticked down 4. 30. Final thought on the Broader Market with the end of qe, Balance Sheet at 4. 5 trillion, considerable time still in the statement, with earnings season more or less wrapping up now or getting towards its end im taking my cue from a couple of stocks. Clorox reports this week. There is a good test case, 3 yield. If the stock comes down, because that is a bond market equivalent stock. Kellogg reported today. Terrible numbers, but said versus what people thought. Very good. They created the expectations better than expected. I look at the kellogg quarter. That will tell you whether the bond market equivalent story lives as i get my notes out i know, so much paper. Ive got to do this. It is so much George Orwell here. Talking kellogg. Yeah. They say, sales are down 2. 1 . We are pleased to have announced results ahead of expectations. Bought back 690 million of stock. We are talking about the power of breakfast. I would have thought you quoted vonnegut, the breakfast of champions. Very, very good. Two debit and Credit Card Networks in the spotlight this morning. Visa posts Third Quarter operating profits of 2. 18 a share above wall street forecast. Dow component also announcing a 5 billion stock buyback. Mastercard ahead of the street with its quarterly results. Reporting higher payment volumes. Thats got to be a good sign, one would expect. These two companies are fabulous, okay . They are duking it out. Mastercard, good to see them catch them. Visa Conference Call i suggested everyone listen to it. Charlie sharp is a sharp guy. They talk about this was the blow away number. High double digit to triple digit growth. How many times we are lucky to have high single digit in the economy. Thats 19 of their business. Thats people buying things on their mobile device. Right. This is why in the end the hideous action in facebook, incredibly discouraging action in twitter what about amazon . Yes. And google. Google is moving in this business. That was very encouraging. They wanted to be agnostic. People wanted to talk about apple pay. I wanted to talk about apple substance before we talk about other things. Apple pay signed up 600,000. The other was visa. Russia is going to its own payment system. They have 100 million cards, doesnt matter. Then china said they are going to allow these card companies. That was very important. There was so much take away. You should go by veriphone. Dont buy veriphone. Yeah. Single pay. Does the increasing use of mobile in terms of, as weve seen from visa, what does that say for brickandmortar . Mobile is much more secure. They are saying youve got to go to mobile. You get far fewer rejections. They talked about apple pay. Someone had a question whether you know you spent something on apple pay. You immediately see it. If someone with else is using your card, it hits your apple account. I am not right now in rio d dejannero buying a printer. How could they do that given the breach . You must offer choice. Freedom of choice is driving apple pay. We are all in favor of that. Walgreens. Why did he do it versus rite aid very good numbers today, 5 i was looking for 3 . Why did he do it . Hell say freedom of choice. Its freedom of choice to sell cigarettes and cvs, stock up a tear since they took cigarettes out. Thats why he embraced apple pay. To tim cook who says that he is proud to be gay. Coming out publically saying he wants to be supportive of others who find it difficult to reveal their sexual orientation. He also wrote, which he arrive in my office each morning, im greeted by framed photos of dr. King and robert f. Kennedy. I dont pretend writing this puts me in their league. All it does is allow me to look at those pictures and know im doing my part, however small, to help others pave the sunlit path toward justice together, brick by brick. He says, this is my brick. Very moving essay from mr. Cook. My first reaction was, thats good, but hows the quarter . When you read the things hes saying, there are still a lot of people that make these judgments. That was the shocker. Maybe we are terrific we live in an area where i dont feel it, dont see it. I thought this was amazing that there is so much. Its a shame that its a deal, but it is a deal. Its interesting he chose to do this now. Its been no secret in the Business Community that tim cook is gay. But i just feel what a shame our country still discriminates. Its just a shame. What a shame that you have to make a statement rather than just say, what color, what race, whatever. Diversity in the country is still not great. Does it impact the sale of apple devices anywhere around the world . No. If it did, wouldnt that be horrible . You could conversely argue there are people who will embrace it in a way they might not have. Thats not why he did it. How do you like that rfk and mlk. You read their stuff . That was america. Guys doing brave things. Hewlettpackard ups the ante with 3d technology. What the incoming ceo of hp ink told jim. Sara eisen has the exclusive with Rodney Mcmullen, kroger trading at record highs. Another look at futures here. 3. 5 gdp. Bond buying done. Well probably open lower. Hewlettpackard unveiling its own 3d echo system with a platform designed to create an easier handson experience. Jim cramer sat down with the soon to be ceo of hp inc. On the 3 d printing side we announced breakthrough technologies. We werent satisfied with currently where the industry is sitting. Theres problems with speed and cost. We say well never get into the market until we solve those three fundamental problems. We now have launched with multijet fusion a product that prints at ten times it does with unbelievable accuracy. Is it ten times the expense of the current . Absolutely not. It has breakthrough economics. Three things really make it revolutionary. I want to make sure people understand. This is the man that is going to run hp ink. Sale of pcs and printers. Thats the easiest way to do it. Its very important to point out 56 billion company, 5 billion profit, this is a needlemover 2016 17. Will go on sale this weekend selected best buy. Time to do an ecosystem. I dont understand what youre telling me. You can build something. Ultimately what will happen, you can make something thats 3d on your computer. Then print it. Right. They took my bobble head. It looks too much like vlad lennon, but thats okay. They took the head. They put it on the piece, on the actual printer. Put it down. It then generates a 3d likeness that you can send over to the 3d printer. I could not tell that the head was made by the printer or made by the company that makes our bobble heads. It was that identical . Exactly. It was identical. Then they had chains, plastic chains that could lift 10,000 pounds. The 3d is corporate. Going to the corporate market. The sprout is going into the consumer market. If you have great things youre making, right now you have to go to xc and cant see it. Restoration hardware would tell you the screen is flat. Its tough to sell on your pc. This makes it possible. It is very exciting. It is more than a gimmick. Yesterday, a number of the 3d Printing Companies saw their shares decline. Rightfully so or is this something so many years out in terms of being a real competitive threat there was an overreaction . I think the numbers would be ten times as fast and much cheaper. Might be in some cases multiple times faster. The hp product . The hp product will be tested with corporations. Its a slower rollout. It will be with corporate. Individual Distribution Centers where you will be able to use it as an individual. It is light years ahead and much cheaper than current. According to hp. 35. 38 up 26 this year. Nine times earnings. The cheapest stock of the cheapers major company. No topline growth. No. This product splitting the company will take a year. Yeah. This product when we break things away, because it would be buried within the confines of hewlett, you wouldnt see it. I thought it was very good. I want people to make their own judgments. Go online and look at it this weekend or go to best buy and see it. All right. On the visa we were talking, im talking mobile adoption, but its really online. I want to be clear about that. 19 transactions were online purchases. Right. That was my bad. The triple digit they are talking about. Mobile is moving up sharply as a percent of online. I dont want Charlie Sharpe to call me and say did you bother to read . I was too glib. You are moving like the speed of light. Charlie watches the show closely. I think he is a giant fan, too. San francisco. Not new york. Ones 34 and the other won four. Again. Again. Congratulations. Im a suffering mets fan. Up next, it is cramers mad dash as we count down to the opening bell. 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The idea is everything is filmed, no one can claim, wait a second, the police did this. They list all the cities doing it. This is multiyear rollout. Theres a lot of red tape. This is very good news for taser. Its a multiyear adoption because people want the taser, they want the camera and they want the record keeping. They introduced it on mad money. We have this ecosystem. I said this is the greatest story in the world. Nothing happened. Then ferguson happened. Lets move on to where are we going . Harman. I dont know how closely you listened this morning to the interview with one of my absolute favorite ceos. This is one of the best performing stocks of our era. The numbers here are extraordinary. Plus 22 in sales. This is auto adoption. What happens is, they are the brains of your car. You cant dislodge them. People kept thinking apple car would come in. No one can touch these guys. They have a beautiful factory in mexico i went by. That is where all the major german and japanese Car Companies have moved their manufacturing to mexico where its the cheapest. A german car 48 per hour there. In our country around 22. In mexico much lower. Harman follows wherever the japanese luxury and german luxury cars are built. I was out with neil young last night, total name drop. They are going to use pono. That was a heck of a name drop there. That was a huge name drop. I dont care. Hes it from Buffalo Springfield on. Look at all these cowboys. All right. Who knows what could break out here. We are back after this. Where the reward was that what if tnew car smelledit card and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com you are watching cnbc squawk on the street. The opening bell will be ringing in 30 seconds. This is one of those days where we dont need more cow bell. No more cow bell. We have an exciting day. It is. The nasdaq, one of my Favorite Companies today. Ring the bell, buddy. Ring the bell. Thats interesting. Its 9 13 18. Ring the bell. Maybe they are just doing cow bell. Well take it. Here at the big board. It is boot farm. Over at the nasdaq the restaurant group. They had me confused there. The cow bell was the bell. We have to talk about one of my favorite stocks. Bristolmeyers. You can see the stock flying. This is for pretreating advance nonsmall cell lung cancer. Its a very big drug. The results are good. Theyve got a great pipeline. You also pointed out the multiple is not exactly cheap or hasnt been on bristolmeyers. Why would you want to own bristolmeyers . They have an incredible franchise. Its amazingly well run. There was a second rate Management Team. Their cancer franchise is undervalued versus others. Its allergan and then maybe bristolmeyers is the innovators. Its time to throw out that Management Team. Youre being sarcastic. Greed is good. He would certainly say that. As we close in, december 18 not that far away from that allergan special meeting. The court case in california not concluded whether they will be successful, unlikely, in validating mr. Ackmans 9. 7 stake. At the meeting itself, i would point out it is going to be majority of outstanding shares. Not the easiest hurdle. I hate to bring up the fundamentals of allergan. The o pfrn tfpthomological are. And botox. There is a lot of offlabel use of botox that. Company is doing really well. Time warner cable being acquired by our parent company. Regulators have yet to fully weigh in here. Thats why i hesitated to say is definitely happening. However, of course, the expectation is it will happen. Time warner cable lost 184,000 video subscribers in the Third Quarter. That was better than last year when they had the feud with cbs and lost 306,000, but its not good. Its not good. They did have broadband additions of 108,000. Voice subscriber additions that were well below what people were anticipating, 14,000. What does this say to you . They are losing video subs. Its happening. Its slow overall for the industry. Talking about 100 Million People who have cable in this country. Next year will be less than that. People love their video online. They love it. By the way, visa up 19. We are talking about a market cap of 134 billion plus. Mastercard taking out the 80 level. They both did great. Both companies had been we were questioning how much growth there was. The answer is, david, this is still a moon monumental papertoplastic society. Debit card doing well. Next year this will even be stronger. Its another reason i think about apple pay. You like that apple pay. I do like apple pay. You havent used apple pay yet. Walgreens takes it. I heard that the first time. You and walgreens and apple pay. 1 million signups like that . Thats almost as many twitter followers you have. Dont get me started on twitter. Im not that crazy about management. A couple of guys left yesterday. They should be making fortunes. Im trying to be a diplomat about the ceo. Im looking askance. Heres the ceo, what is this . Raised eyebrows. Got it. Twitter, by the way, is down again another almost 2 this morning. Been a tough week for that stock after earnings were less earnings . You call them earnings . All right. You have a point. My trust owns it. Im aggrieved. My Charitable Trust was scalded by twitter. Youre aggrieved. Yeah. Amazon is up. Baba up. Yahoo seems to follow baba to a certain extent. Why would that be . If they can get, if you can get the Corporate Tax rate down for yahoo then youre really getting yahoo for free. I dont think yahoos worth nothing. A lot of research on yahoo saying similar things. Will you get improvement in the core business . Its not going to happen tomorrow. When they get around to it. The appreciate of yahoo under myers. The long knives never stop. I want to look at financials. Its kind of a mixed bag. Im curious. End of bond buying. Goldman sachs, Morgan Stanley up. Nothing much going on. What should i think about the financials . All the ideologues who constantly talk about what will happen. When qe ends, stocks will go down really big. Turns out no. The banks need Interest Rates higher. You do have a high level of activity for those who have significant investment banks, both in underwriting and ipos and secondaries and in advising on mergers and acquisitions. Lately, that seems to have slowed a bit. If that volatility was only for those couple of weeks, the guess is things are going to stay on track or come back and we may see significant activity in this quarter towards the end. What is interesting, in our country there are people who somehow are shocked by this. Market got hit and rallied. Overseas they seem to not know what the fed is up to. Wow, really . Europe, really . Emerging markets. Whoa. Ecb bought 2 billion worth of something for their asset purchases. Meg terrell says its squeamish. I learn something every day here, as well. Meg wanted to be sure i got it right. Shes good. Yes. Somebody else is pretty good is bob pisani on the floor. Hes got more whats moving this morning. Its interesting. We are up by 80 points here a lot of people parsing those gdp numbers. The headline number was better than expected. Personal consumption seemed to have been a slight disappointment there was a lot of government defense spending in that number. I think a lot of people are concerned about that. Want to see more personal consumption here. I want to talk about a lot of people coming in was a country western band playing out front. Everybody is wearing cowboy hats. We have Boot Barn Holdings coming in here. Indications 17 to 19. Its 80 million. Its the focused deal that investors really like. About 158 stores that sell western boots and apparel. 2 million strong base of loyalty reward members. And very good growth. Again, the worlds paying up for growth in a slow growth environment. Earnings growth of 20 a year. Back by a successful Venture Capital firm, thats the same firm behind they did pollo loco. Oil companies have been reporting the last couple of days. Weve been looking for comments like Capital Expenditures and oil production. I wanted to put up a couple of comments. Penn virginia, we are reassessing our previously announced preliminary guidance and our level of Capital Expenditures for 2015 in light of the current and projected oil price environment. These are one of the First Companies to make comments about this. Generally theres been a lot of happy talk, people saying we dont think prices will stay in the low 80s. They had a loss there in line with expectations. Murphy oil just came out. Earnings were impacted negatively due to lower average realized oil sale prices near 9 per barrel. They are putting a number on it. Take a look at penn virginia, murphy. Whiting Petroleum Beat on earnings, but sales on the light side. Penn virginia down talking about reassessing their Capital Expenditure good nightians. If you look at conocophillips, you want to see the impact of lower prices. There is a classic exploration and production company. They beat on the top and bottom line, but their earnings were down 12 from a year ago and 20 sequentially. There is the impact as oil prices started slowly declining. They talked about a modest cut in Fourth Quarter production guidance. Another one has come out here. Most of their overall projects seem to be largely intact here. National oil, they are big into rig businesses. 50 revenue comes from renting out rigs here. Orders below expectations. They are down 2. 75 . The ceo Clay Williams said we are closely monitoring the potential impact of Lower Oil Prices on our market. We are slowly starting to get some indications there is concern out there on lower prices, particularly Capital Expenditures. In the industrial areas, a little bit of disappointment today. We had johnson controls. Heating and ventilation, car interiors, car batteries. That is trading down fractionally. They beat on revenues, on the light side. Beat on the earnings side here. Borgwarner was an outright disappointment. They cut their guidance. This was big in the automotive area. We are talking about power trains there. Right now dow up 80 points. Our indication for Boot Barn Holdings, 17 to 19, pricing at 16. Back to you. Yeeha. I wanted to come back to arcp. Its still a developing story, if you want to call it there. American Realty Capital properties which yesterday remember, if you may recall, announced nonreliance on previously issued Financial Statements. Stock yesterday down as much as 35 . It did come back, not to close near flat, but to be down less than 35 . Getting hit again today. Late in the day yesterday with over 1,000 people on a call, they held a Conference Call. With the ceo david kay. They didnt take q a. I did want to share a few things. This is a story that sometimes its helpful to come back to something we just mentioned. Here are a few things. Would love to get your reaction, as well. Wanted to reiterate the gaap accounting numbers for the First Quarter are not impacted, does not impact earnings per share, net income, net operating income, expenses, et cetera. The analysis and investigation and forensics, said mr. Kay, there was no intent to overstate affo for the quarter. It was characterized as an error. This the Second Quarter the calculation included a number in order to conceal the error from the First Quarter. Always tell the truth. You make a mistake, you make a mistake. Dont try to cover up the mistake. That was the take away there. What he says is we dont have bad people, we had bad judgment there and we had two employees, which have resigned as a result of the effects of that c calculation and nondisclosure of the error. Ive been asked about Share Buybacks. We have a Share Buyback plan in place. I continually evaluate the share price which is tremendously undervalued. They say they looked at hundreds of thousands of emails, hard drives, preliminary results were communicated to nonimplicated executives late friday of last week. He said the process the companys gone through, Audit Committee has gone through to thoroughly review how we compile and produce Financial Statements has been very thorough. What people are most concerned about, is the diffident safe . There was nothing that led me to believe it isnt, but i dont recommend stocks with accounting errors. Its hard to cotton up to a company that did anything wrong. But i do think the cash flow is there. A number of companies were hurt yesterday. Just on fears. I read that and said it was a very visceral Conference Call. The Audit Committee did all the things. The rest of the Management Team let the Audit Committee do it. It was jarring to the point where it obviously second day sell. People say i cant be involved with a company, even though when you look at the millions of dollars, versus the right. It was disconcerting they made the error then hid the error. Very challenging. Lets head to the bond pits. Rick santelli joins us from chicago. Thanks, david. We settled down. Its been wild after that statement yesterday. Nothing shows that more than maybe a twoday chart of 30year bonds. Boy, before statement 3. 05, after the statement, 3. 10, well after the statement before the close around 3. 06 . Now testing 3 . Its been about curve flattening. Look at the next two charts. Looks at tens versus twos hovering around 1. 80. This chart goes back to the last time we were hovering around that level. You can debate about the interpretation. Historically its usually a downer of the future outlook for the economy. Maybe things are different with a big fed Balance Sheet. Look at this one. Fiveyear yields are up, 10 and 30year yields are down from after the statement. This spread moved 14 basis points flatter. That is a huge move. Lets go back to tens. 24hour chart of tens, about 3 30 a. M. We are at 2. 33. Now we are under 2. 30. You see on the charts starting in august of this year how significant 2. 33 to 2. 35 is. If you look at this chart since the beginning of september, its up a dozen basis points. Thats a big move. On the Foreign Exchange market, one chart takes care of this. The dollar likes the end of qe. Look at twoday of the euro versus the dollar. David, back to you. Stronger dollar. By the way, lindh versus air products. Linde, terrible numbers. Stock getting hammered. Air products, fabulous numbers. Sara eisen with an exclusive with kroger ceo Rodney Mcmullen. Youll want to hear what he has to say about walmart and other competitors taking on that successful supermarket chain. Lebron james prepares for tonights Season Opener. [ bell rings ] hi michael looking good trying to keep up with you i told my producer karen that i take metamucil because it helps me feel fuller between meals. Its just one small change that can help lead to good things. Now shes breaking up with the vending machine. Nope. I call that the meta effect. [ female announcer ] 4in1 multihealth metamucil now clinically proven to help you feel less hungry between meals. And promotes heart health. Experience the meta effect with our new multihealth wellness line and see how one small change can lead to good things. There is a reason i dont follow the dow. Visa is a part of the dow. Its a pointweighted index. I know. Its having a huge impact on the dow. 115 points alone from visas huge move up. Its an amazing quarter. S p is down. Remember china. Big. Coming up next. Trading with jim. Theyre still after me. Get to the terminal across town. Are all the green lights you . No. Its called grid iq. The 4 51 is leaving at 4 51. They cut the power. Itll fix itself. Powers back on. Quick thinking traffic lights and self correcting power grids make the world predictable. Thrillingly predictable. Ameriprise asked people a simple question in retirement, will you have enough money to live life on your terms . I sure hope so. With healthcare costs, who knows. Umm. Everyone has retirement questions. So ameriprise created the exclusive confident retirement approach. Now you and your ameripise advisor. Can get the real answers you need. Start building your confident retirement today. Twhat do i do . You need to catch the 4 10 huh . The Equipment Tracking system will get you to the loading dock. 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You have to pay a nice premium . And rock star. This is an amazingly well run company. People dont give straus credit because ea is so good. People play video games that are just different from the way we its an obsession. I played pong in my time. Weve got jim foster and they are running the ebola trials. Flextronics ive been following. February 10, my birthday, evolve will come out and ill buy that video game. Got it. My nephew says thats the big one. Evolve. February 10th. Birthday. What an hour. Jampacked hour. Thank you. Weve got a lot more. Sara eisen has that exclusive Rodney Mcmullen coming up. An Unprecedented Program arting busithat partners businesses with universities across the state. For better access to talent, cutting edge research, and state of the art facilities. And you pay no taxes for ten years. From biotech in brooklyn, to next gen energy in binghamton, to manufacturing in buffalo. Startupny has new businesses popping up across the state. 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The number 1 doctorrecommended frequent heartburn medicine for 9 straight years. One pill each morning. 24 hours. Zero heartburn. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. This morning starts with the stocks mixed. A hawkish tone from the fed. Well tell you how to play it. Also ahead, cigna beating estimates and raising its outlook. The ceo will join us in a first on cnbc interview with his reaction to his own quarterly results. Then lebron james returning to the cavaliers in the team Season Opener tonight. The ceo of the Cleveland Cavaliers will join us tonight to tell us what lebrons return means for them. Plus our own sara eisen is live in cincinnati where she will have a couple of very big interviews later on. Good morning, david and simon. Live from my hometown of cincinnati. Im going to be talking to two of the biggest hometown ceos, the ceo of kroger and fifth third. The story with kroger, look at the stock price. Go back ten years. For a decade this stock doesnt move, last year out of nowhere it bursts out. The stock doubles. The story is taking market share to become americas second largest grocer and eating the lunch of walmart which is number one, not to mention whole foods. Well talk to the ceo. This is his firstever television interview. Well find whether momentum can continue and whether he is investing for future growth, how he will take kroger to number one. Also, fifth third, ohios largest bank. Well talk to the ceo. There is a branch right here in this kroger. Hes got all sorts of thoughts on fed policy, super low Interest Rates hurting the regional banks not to mention the new Regulatory Environment coming off a tough quarter. It will be great to get the pulse of the midwest economy. A lot coming from here in cincinnati inside kroger. For now, back to you guys. Sara eisen with her homeys later in the program. We should mention the boot barn just opened. It priced at 16 and has opened now at 18. A strong pop at the open there the fed announced the qe will end on friday. Steve liesman has more on that. Stronger than expected 3. 5 growth number puts gdp above 3 in four of the past five quarters. There is a lot of debate how much to project this strength into the future, the Fourth Quarter and beyond. Growth number does go along with better Consumer Confidence weve gotten, improved job growth. Gdp north of 3 should be sufficient to lower the Unemployment Rate and reduce labor slack. Above the 2. 5 trend of the recovery. It was down from the prior quarter. All these numbers were down from the prior quarter. Consumer was stronger than expected at 1. 8 . Business investment 5. 5 . Housing. People think that number is well overstated and should have been lower. People dont think a big surge in defense spending will be repeated. Unclear of what happens there because of the strength of the dollar and inventories big rise falling off in this quarter. Heres some of the commentary we got. Growth above 3 in four of the past five quarters starting to look like a trend. The surprise was in defense spending. Unlikely to be repeated. Gain from exports should alleviate concerns that growth is weighing on u. S. Growth. Remain firmly below 300,000. Gdp and claim support, maybe that is more hawkish tone in the fed statement yesterday suggesting labor market slack was gradually diminishing now. There is talk the fed could move earlier than expected if these numbers continue apace. Perhaps in the spring 2015 rather than the summer. Steve, thank you for that. For more on these figures and the fed, lets bring in deutsche banks chief economist and contribu contributor. Good morning to you both. Good morning. 3. 5 growth is what we achieved for four of the last five quarters. Does this look like an economy that needs excessive monetary accommodation from the fed . Absolutely not. I thought growth would be at 4 . My guess is well get there. In 11 of the last 13 quarters, the advance number has been revised up an average 70 basis points. To me the trend is sustainable. Clearly the economy does not need excessive monetary policy. Well have this fed continuing to pursue extraordinary occupation until its obvious that inflation or inflation pressures rise. For people who hold your view, a breath of fresh air from last night. She does push back against the doves. Rate hikes to come sooner. Youre right. They almost have to acknowledge it. The Unemployment Rate is 5. 9 they had not thought it would get to 5. 9 until 15 or 16, if you look at the most recent set of forecasts or a few forecasts back. The economy will generate 3 million jobs this year, the strongest showing since 99. Real rates are negative. They did the right thing. Lets face it, this was not a tough call for them. What does this mean for investors . In the short run, it could be some instability within the financial system, in particular on the credit side. 3 to 5 down side on the market. In the long run, this bodes well for the u. S. Economy. Bodes well for earnings. Its very good sign for investors. We are looking for maybe perhaps over the next 12 to 18 months an 8 to 10 total return with the s p. What about that prospect, if joe is right, that rates do start to, i cant believe im saying it, rise next year at some point . We agree they are going to rise. We think it will be out in q3 next year. 25 basis points here, 25 basis points there. They have an issue here. Inflation expectations like joe mentioned are coming down. They are not rising even with the Unemployment Rate moving along the continuum. The underemployment rate which is around 10. 8 , 30year average is 2 less. Weve been waiting for a long time for the day rates are going to rise. Some argue talking that way is understating what will be a massive shift in investor sentiment. There is underlying illness to the overall economy. I am bullish. But you still have that deleveraging cycle happening on the private side, the household side. Shortterm credit dynamics within the u. S. Economy are still not at normalized level at a normalized growth rate. Why you are not having this real follow through with inflation. The one thing beginning to shift is the dollar. Suggestions that qe might be extended, we put a cap on the dollars rise, but last night it seemed to move again. Do people watching the television invested in stocks need to worry about that . The stronger dollar will lead to Lower Energy Costs which will help people. My guess is the fed mentioned the dollar because they are worried about market volatility which the snap back may be why they were more hawkish yesterday. Everything came back there was no need to worry. My guess is the fed is being clever. It keeps pressure on the ecb to follow through with quantitative easing so the burden of helping the Global Economy doesnt rest solely on the fed. Its got to be dollar positive. It will be. Our firm view is that the dollar is a multiyear upward cycle. The tradeweighted dollar is only up 7. 5 . Inflation in the u. S. Isnt about goods prices but more about labor. Well test the thesis how low this Unemployment Rate could go. Good to see you. Joe lavorgna and chad morgan. Another big story of the morning, tim cook says he is proud to be gay. The apple ceo coming out publically in a Bloomberg Business week essay. Josh lipton is live outside apples headquarters in cupertino with more on the story. Reporter tim cook has never spoken publically about his sexual orientation. That changed starting today. Writing in an oped, while i have never decide my sexuality, i havent publically acknowledged it either until now. So let me be clear, im proud to be gay, and i consider being gay among the greatest gifts god has begin me. Cook has always tried to maintain a certain level of privacy in his life, not seeking to draw attention to himself. Why really write this oped now . Cook says hes drawn inspiration from the words of dr. Martin luther king who said lifes most urgent and persistent question is what are you doing for others . Cook saying hes always challenged himself with that question. I thinks by writing this oped, maybe he can make a difference in peoples lives. Cook writing specifically, so hearing that the ceo of apple is gay can help someone struggling to come to terms with who he or she is or bring comfort to anyone who feels alone or inspire people to insist on their equality, then its worth the tradeoff with my privacy. Its still early here on the west coast. Already we are seeing some of the tim cooks colleagues responding. Phil shiller said cook was courageous and proud to be his friend and glad putting out a statement saying apple has always been a leader when it comes to inclusion and this further that role. Back to you. Thank you, josh lipton. Lets bring in john fortt with more on this. In the community, it was known tim cook is gay. He made that decision now to let everybody know and plant a flag in the ground. What does it mean . This is the first time that a ceo with this kind of profile has not only said, yes, im gay, but has said here is what i think about that and what it means within the context of not just of america, but of business. Here is why i think its important to embrace individuality, to embrace diversity within business. Weve seen him at state of the union, tweet about social justice issues. He marched in the gay pride parade in San Francisco this year. People knew what was going on. This starts a different kind of conversation, lots of different kinds of conversations. My immediate question is how will this play across this country and affect sales of apple. Things havent gone so well for michael sam at the nfl or Jason Collins of the nba team. Things have gone very well at chikafilet which came out with homophobic statements. Great day for the Lgbt Community but what about shareholders . Bottom line is nobody knows. With michael sam, Jason Collins, these are not athletes in their prime. Tim cook and apple, compare that to more like a Michael Jordan or Something Like that. I would say there are lots of racists in the world. I dont know they are not buying a big mac because the ceo of mcdonalds is black. It depends how tim cook plays this out from here, particularly in international markets. Does apple push a political agenda, a cultural agenda . He is clearly not going to do that. He says he is not an activist. He is not coming from that position at all. Certainly not internationally. His voice nationally has been far beyond what apple and steve jobs had done in the past. His tweets about social justice, having his face on the screen during state of the union, pushing policies of equality across all sorts of different groups, elevating executives within apple who dont look like executives within apple have traditionally looked, white, male, over 40, et cetera. He might not think of himself as an activist. He is making lots of change within apple and looking for change domestically. As you said, i would be surprised if he goes far beyond that at this point. I would think with a younger, so to speak, very affluent customer base, it could be very positive. Absolutely. This is one of the quintessential california companies. You think of it like hollywood. Its northern california, innovation, cutting edge. I dont think there is a shock for anybody that the culture of apple would be one that embraces thinking different. Thank you. Well have a lot to talk about during the course of the morning on this subject. Tim cook is the third ceo of a publically traded company to speak out. Well speak to one other ceo up next and in a completely unconnected manner to krogers ceo Rodney Mcmullen. This is the first tv interview hes done. Sara eisen will bring that live from her home city next on squawk on the street. Means keeping seven billion ctransactions flowing. G, and when weather hits, its data mayhem. But airlines running hp endtoend solutions are always calm during a storm. So if your business deals with the unexpected, hp big data and Cloud Solutions make sure you always know whats coming and are ready for it. Make it matter. Its a fresh approach on education superintendent of public instruction Tom Torlaksons blueprint for great schools. Torlaksons blueprint outlines how investing in our schools will reduce class sizes, bring back music and art, and provide a wellrounded education. And torlaksons plan calls for more parental involvement. Spending decisions about our education dollars should be made by parents and teachers, not by politicians. Tell Tom Torlakson to keep fighting for a plan that invests in our public schools. Welcome back to squawk on the street. Trulia posting a loss of 20 million in its Third Quarter which matched wall street expectations, but sales came in weaker than forecast as a result. Shares down by 4 . Trulia will be acquired or is planning to be acquired by zillow later on this year. Its trading down by about 3 . Back over to you. Thank you. We have a big interview. Kroger, one of the fastestgrowing grocery chains in this country and taking on walmart and amazon for consumer dollars. Lets bring in sara eisen joined in an exclusive interview by krogers ceo. Hello, simon. His first interview on television since becoming ceo at the beginning of the year Rodney Mcmullen. You are a lifer at kroeger . Correct. How many years . 36. You have an amazing story to tell here. That is in the last year or so the stock has exploded. You become the nations number two grocer. How are you taking share from the big guys like walmart and whole foods . Its our associates are doing it. Our associates do a great job every day improving our customers experience. The shopping, the products we offer. When you look at all those things plus a great price, its done a great job. When we do a good job for our customers and associates, that creates good earnings. People thought of it like a sleepy cincinnati grocery. You defy the odds and the heavyweights. How has it been taking market share from walmart, the number one . And do you have aspirations of overtaking them as the number one grocer in the nation . I dont look at us as sleepily. You are continually trying to get better. When you look at the store we are in here and the great fresh products, those are the things that our associates are doing to keep getting better. You keep improving one customer at a time. Its not trying to aspire to be some size. Its trying to take care of every customer and every one of our associates are doing that. Pricing matters, too. Absolutely. Weve invested over 3 billion in pricing when you look at over the last seven or eight years. Theres a lot of customers still, their budgets are tight. That allows that customers budget to go further. Price is just one element of it. Our Customer First strategy. People, products, Shopping Experience and price. Walmart is shifting strategies going from supercenter to neighborhood markets, directly competing with you and safeway. Are you threatened at all . They are known for the lowest prices. We have a lot of competitors. You named a few of them. Restaurants would be a competitor. We dont look at it in terms of one competitor. Its trying to understand from our insights what does a customer want . Then how do we deliver against that desire and do it better than our competitors . We think one of the things thats really important is doing all four elements, not just one element. When it comes to expansion, you havent increased store count beyond acquisitions. Is that something in the plans . Heard a little on investor day about plans to grow. Where are you looking to open up new stores . If you look, we are increasing Capital Investment by 200 million a year. This year well spend about 3 billion. That will start increasing our store count slowly. As we develop people to open stores. New markets where you are not currently, like chicago or florida or is it in places you are already . There are markets where our market share is 10 or 15 . We find by getting market share higher than that creates a good return. What about amazon fresh getting into online groceries. They dont care about making profit. That has to be a challenge as you, too, try to enter the ecommerce market. We competed with amazon fresh several years in seattle. We look at it in terms of broader than that. We think its important for a customer to engage with us the way they want to engage with us. If you look at it from a digital standpoint when we merged with harris teeter, they had a strong clickandselect operation that we started testing and well start rolling that out. You can deliver it to home. And we have an app that is one of the best in class apps that is having 50 to 100 growth. Its broader than one direction. I want to ask you about lower gas prices, whats happening with energy. Does that help you, earnings overall . I know you are in the fuel business. Usually fuel prices are going down, it helps earnings some. What are you seeing out of the consumer right now . The consumer reaction, you have some inflation and some commodities. By fuel going down, it helps the customer on a budget to balance all those pieces out. We think inflation and commodities is short lived. We think the whole piece is helping the customer. We talked about the gdp out this morning, 3. 5 . Does that tell the story you are seeing across america . Absolutely. When we released Second Quarter earnings, the consumer continues to spend more, be a little more comfortable. We continue to see that. If you look behind the numbers, its still very mixed. If you look at mainstream and upscale customers, they are spending like it was before 2008. A customer on a budget, they are strained. One thing we are trying to do is help them stretch their food budget. Everybody is buying natural and organic. You say thats here to say . Absolutely. Its a huge growth category. All the innovation and our teams are doing great jobs. You are investing in your own private label brand. Talk about the growth you see there. Yeah. We introduced a product called simple truth. Less than two years ago. This year it will be a billion dollar brand for us. Its growing significantly, double digits. We continue to add product. It helps the customer from a budget standpoint. And its easy to understand in terms of free from 101 ingredients and good for you, as well. 43 straight quarters of samestore sales growth. You dont like to brag, but that has to be pressure Going Forward to keep that momentum. Its our whole team. We have 370,000 associates taking care of our customers every day. Thank you for having us here today. The flagship cincinnati, high hometown kroger. Well talk later to another hometown ceo of fifth third. Thank you, roddy mcmullen, the ceo of kroger. Back to you. Thank you, sara. Another big story of the morning, tim cook says he is proud to be gay. For more reaction we welcome trevor burgess, ceo of c1 bank in st. Petersburg, florida. He became the first openly gay chief executive of a public bank. Thank you for having me today. What is your reaction to what tim cook decided to do this morning . I think today will go down as a real seminole moment in American Business history. Because what he has done is put down a brick toward equality. Its incredibly important as apple is the most valuable business in the world. As the leader of the most valuable business of the world, he can be a tremendous force for change. And really, thinking about how young gay and lesbian, students, kids can dream an American Dream and how they can rise through the ranks and be a leader. Why do you think so few are out in American Business . I think this is generational. Im 42 years old. Ive been openly gay since what is 19. My entire business career, consulting, managing director of Morgan Stanley and now as ceo of a bank. Ive been openly gay my whole life. There have been many, many openly gay and lesbian executives who are just below the csuite and will now enter it. It will quickly become a story of the past. Do you think in the meantime it will harm the business . I dont know how they feel about homosexuality in china . But there are pockets in this country very concerned about it, very concerned about gay marriage, do you think there will be less apple products sold as a result . I dont think so at all. If i look at my own experience taking my Company Public two months ago, my business was only helped by the experience. Im in florida where its legal still to fire someone for being gay. In the state of florida where i operate. This definitely has conservative elements. The reaction was universally positive and i gained more clients it from. Fundamentally, i think thats because people care about the quality of the product and service you deliver to the consumer. Apple is better at that than anybody else. I noticed there is an impact when you get a black ceo at the top of a company, a woman ceo at the top of the company in different demographics inside the company. Other women stepping forward, forming affinity groups. What is the experience you have had inside your company stepping forward as the first gay ceo of a publically traded bank . Whats been the impact of the culture, on the culture among employees in general . Do you have expectations on what this Public Statement might do for apple employees . Whats been exciting for me are the number of people who contacted our bank, contacted me about wanting to come work at c1 bank. They want to work here because they know its a place, no matter if youre gay, straight, black, white or woman or a man that you can succeed and you can xcel. Listen, america is in a fight for talent. We are looking for the very best people worldwide to come to the United States, within the United States, to work in our company. If you are excluding large segments of the population, you are not going to succeed in the long term. What ive been most excited by is the number of people that have contacted us wanting to come and work for a fair minded company. Mr. Burgess, i should put a personal note here. We had a discussion in the summer about whether tim cook was gay. It got a lot of attention at the time. I had a lunch with an analyst a couple of weeks ago which he said to me, dont you feel slightly hypocritical talking about whether tim cook is gay when you did not mention on television youre also out. I said i am not sure its ever really relevant. It is probably relevant in this instance that i make it clear im an out gay man and my colleagues and family have known that for the past 25 years. My question would be is there a way in which as a community we should connect with one another, without wanting to out people, without pushing people, but there is a maximum opportunity for this to be done so that young gay and lesbian people when they log on to a computer, if they google it can see a torrent of people in many Public Places that might encourage them when their lives are oftentimes still quite tough . I think there are groups such as the one headed by todd sears focused on out leadership, focused on wall street executives, Bank Executives being very clear about who they are. I think this tim cook moment does go down in history making it really okay. If the most valuable business franchise in the world, the leader of that franchise can be openly gay, i think that many others will follow suit. Again, i think this is a great day for america. Its good to talk to you, mr. Burgess, thank you for joining us. Trevor burgess, ceo of c1 financial. We have breaking news from the nymex. Lets get to Jacqui Deangelis for that. Good morning. We are waiting for the department of energy to release its build on natural gas inventories. We got a build 87 cubeies feet. Less than traders were expecting here on the floor. We are looking at prites right now of 3. 81. Remember, these prices have risen over the last few days off that 3. 65 low. Especially in the anticipation of Colder Weather to come. Traders are looking for builds in the next few weeks to try to make up that deficit from the extremely cold winter last year. Not necessarily so confident that we are going to get there. After this report right now, the price is staying flat. Back to you. Judge, thanks, Jacqui Deangelis. Strayed ahead the ceo of fifth third bank. The bank struggled with lending and low Interest Rates. What is the plan for the future . Well address that after the break. Opinions. Theres no shortage in this world. Who do you trust . Whose analysis is accurate . How do you make sense of it all . A simple, unbiased stock score consolidated from the opinions of independent analysts. Is that too much to ask . Nope. Equity summary score, powered by starmine, will help you execute your ideas with speed and conviction. And its only on fidelity. Com. Open an account and find more of the expertise you need to be a better investor. Regular viewers know this marks the 25th anniversary of cnbc. Weve been revealing rebels, icons and leaders in our past and future views of this economy. And the world economy. Andrew joins us back at hq with another name to watch. Good morning. Good morning to you, simon. The name to watch tracy brikuel, a protege of Warren Buffett, only 30 years old. She convinced warren to take her on virtually out of school. She is on the board of heinz and was just named the ceo of pampered chef. This is tracy in her own words. I grew up in manhattan, kansas, on a fruit and vegetable farm. Probably when i was 15 years old i had my own Farmers Market stand. I hired friends, set their wages, set the price of fruits and vegetables and realized i liked all those aspects of business. Thats what i wanted to go into. I met Warren Buffett in 2006. When i graduated from Business School i wrote him a letter, not for a job. I told him i would do anything in the if i could really pick his brain about various investment topics and business topics. Fortunately, he said yes. At the end of the summer i went back, had a fulltime job lined up. I started that job and he called up a few weeks later and said he created a role for me to join berkshire hathaway. I thought investing allowed me to think about business in so many different ways, the strategy, the marketing, the opportunities, the best companies are ones where you have a great combination of team and talent, then you have a product or a service that is really necessary for the long term. The primary advice i give to companies is to try to learn from those outside their own businesses. There is a lot of knowledge within a business and industry, but there is a lot of learning that can come from other companies. You need to learn every single day. If you dont go to bed smarter than you woke up, it wasnt a productive day. If i look over the next 25 years, id Say Technology is a critical component of businesses. Its not just Traditional Technology in terms of i. T. And fulfillment centers, but the whole Customer Experience and personalization and tools that companies can offer and can really use to help the Customer Experience. Im very excited about the future. There will be lots of changes. New businesses. Businesses that are disrupting existing businesses, tremendous opportunity to work across borders. I think it makes sense begin a global population. We are more connected now than weve ever been. It will be amazing to watch what happens and what unfolds. She may or may not be the successor to Warren Buffett, but either way, we imagine we are going to be hearing a lot from tracy britt cool over the next 25 years. Fascinating stuff. For the last six years, if you havent been tuning in, you might have missed the fact the Federal Reserve shelled out trillions to help stimulate the u. S. Economy. Yesterday the fed said its recent bondbuying campaign is coming to an end. What is the impact going to be at the end of qe and what will it mean for lending and growth of regional banks . Sara eisen is joined by the ceo of fifth third bank. Here with kevin kabat in the fifth third branch here in kroger, cincinnati. Good of you to join us this morning. Welcome back home. Thank you. Happy to be here. David was talking about the changes we are seeing at the Federal Reserve. You have two major headaches, low Interest Rates, regulatory burden. Are you happy qe is over with . Its the Natural Evolution of the next step, wherever thats taking us to. If it gets us to a path down to more normalized environment, yeah. We are happy that they feel Strong Enough about the economy recovering that they can stop. We dont have a clear sense of that path to a normalized higher Interest Rate economy. Do you want to see that now . Look, i think that as the fed has articulated that rates will return to a more normalized environment as the economy continues to recover. Most folks have a gdp around 3 . Maybe a little bit north of that. If that continues and all the other metrics continue, then i think do you feel that, youre ohios largest bank, you have a huge presence across the midwest. Do you feel that normalized Recovery Period to prepare for higher rates . We are seeing kind of what youre reporting, which is a continued, moderate slow growth environment, better than yesterday, not as fast as what everybody would like or probably expects in terms of what a normal recovery represents prior to this time period. But better. Yeah. And improving. Mortgage revenue has been hurting you. What are you looking at in terms of the outlook for housing and for mortgage lending . Housing for the most part, as you know, about a year ago the refi boom ended from that standpoint. Weve seen a lot of volatility in the ten year. We base pricing or the mortgage industry bases pricing off of. So we continue to see that housing is going to be a slow climb back to a more normalized environment. How many years out until it feels like a normal housing . Hard to say. The good news is some of the early metrics are beginning to show. Housing appreciation and value is coming back into the marketplace. Employment, unemployment continuing to improve. Thats better. All these things will add up to a more normalized and better environment for mortgage business. Beyond rates your other giant headache is the regulatory burden, the stress test. There is a meeting this week according to reports with the Federal Reserve with the banking regulator. Regional banks what do you say to your regulator right now . I think for the most part, everybody is adjusting to the new world, right . Putting together kind of that spend and infrastructure around how we are going to continue to improve, i think, has been a good thing and good outcome from that standpoint. I think now, though, we are further along from the reception, from the crisis where we can begin and hopefully our regulators can begin to recognize it. There are differences within the industry that you may be able to continue that prudential standard, but different, by size of the institution, by complexity by things that can make youre not in the business of Morgan Stanley, therefore, you do not want to have to undergo the same regulatory tests . We dont have the same complexities or the same risks. Our threats to the Financial Stability of the u. S. Economy is very different than what some of the largest institutions represent. We make loans. We are middle market corporate america, consumer. Why arent we seeing the kind of loan growth we should be seeing several years into this recovery . I think there is still some reflection and some cautiousness about where investment needs to go. Youve still got some of the metrics that the fed has talked about that is reflected in the economy, that does put a little bit of a dampener on that growth. Getting better, coming. We are seeing some important segments really do well. Energy. Manufacturing. Auto continues to do well. You think having a Republicanled Senate will help confidence and will help you deal with some of the regulatory issues youre dealing with . From our standpoint, i dont think not trying to be predictive over whats coming. We are agnostic from that in the sense that i dont think it has a great direct implication for our business and what we are going to see. The economy will continue to track along, continue to move along. I think that will be beneficial to us and our business. Slow going. Kevin, thank you very much for the snapshot into the business and the local economy. Kevin kabat, ceo of fifth third here at his branch in a kroger in cincinnati, ohio. Back to you. Safe journey back. See you tomorrow. Thank you. Up next, cigna easily topping analyst estimates today thanks to fee revenue and growing customer base. Well talk to the ceo about the results and the state of health care in the wake of obamacare. 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It is one of the worst performers amongst the s p index today. Dom chou is back at hq with more on that. Energy is the weakest sector, at least in the trade so far as Oil Prices Continue to fall, the biggest loser in the s p 500 sector is National Oil Well varco followed by nabors. Other Big Oil Companies lower. Chevron, a tough day overall for the energy sector. They will be in focus as they report earnings later this week. One stock gaining today, cigna. The Insurance Company reported a Third Quarter profit of 1. 95 a share. Joining us now in a first on cnbc interview is david cordani, president and ceo of the cigna corporation. Welcome back. Good to be with you. We missed you last quarter. Your stock fell in fact wake of the figures. One reason was your margins, and aetnas, too, were in difficulty. How have you been able to reverse that situation on your medical loss ratios . Relative to 2014, we are completing a good year. We are increasing revenues by about 9 and overall Earnings Growth is positive what we saw different between the second and Third Quarter is the performance of the individual business that are tied to the public exchanges improve somewhat. Beyond that, the core of the business remains strong continuing to grow. Net net, a positive quarter, strong growth from a topline basis and strong growth from a bottom line basis for us. Is that comparison about redirecting the buffers or 3rs or a genuine measurable phenomenon from the real economy . I think its important from a cigna standpoint this only represents 3 of the company. In the Second Quarter there was a lot of fixation around that. Our Second Quarter results were strong, as well. Third Quarter Results continue from our international business, group business, employer business in the United States. The fundamentals improved some what and contribution from the 3res, as you pointed out. David windily at jeffries tells me during the Conference Call you just completed, you gave some fairly longterm outlook, seven or eight years down the line. Can you tell us what youre telling investors with that . Sure. Strategically over the last five years, if you look at it, weve grown our top line of our company by a compounded 15 . 10 of that has been organic, 5 inorganic. We indicated to shareholders over the next seven to eight years, well double the company because we have organic growth objectives of 8 to 10 . The businesses weve chosen to be in outside the United States, inside the United States focus on Health Service and productivity as well as seniors care. Our growing business is based on our capabilities. We are bullish on longterm growth outlook. Youre bullish on the size of the company and revenue. What about the margins . So from a margin standpoint we are proud of the fact we have industryleading margins today. As a result, outstanding cash flow. As we look forward, the businesses that are growing ten forward tend to be relative will our sector high margin businesses. Mid to high margin businesses. Those will stay in place. There will be some head winds. Well see to off set the majority through continued innovation and efficiency. Innovation has been and will continue to be key by focuses on individuals and positions here. Where does that leave you returning to cash to shareholders, and dividend and so on. Some would say you have been at the back of the pack for that. Weve chosen to invest back in ourselves through the last five years through inorganic expansion thats resulted in us doubling the size of our company. Over the last 12 months weve raur returned a significant amount of cash flow to shareholders. The nature of our businesses produce a significant amount of Free Cash Flow to either be used at one of two items. Accretive acquisitions or returning to shareholders. A lot of value in either case. We like having you on the show. Maybe next time down on the set with you. Youre welcome. Even if its a bad quarter. Ill be there. Not there there are really bad quarters o at cigna. Thanks simon. All eyes on lebron james as he makes his storied return to the city he left four years ago. Now with the Cleveland Cavs ceo on this big day. Downtown cleveland in front of the quicken loans arena where the first game of the season is going to be played tonight against the new york knicks. Ceo is with me now. Thanks for joining us. Huge game tonight. Lebron is back after so dramatically leaving fur years ago. What does this homecoming mean financially. Its been a major impact for the city as a whole. Indroebl have a lebron and love and irving on the floor. And off the floor this city is alive. For our community its been uplifting. Not only financial but also the fact that you are here and the spotlight of the world is here is something money cant buy and helping the change the dialogue about our city. And i want to talk oto you about ticket prices. Uno you capped seasonal tickets at 12,000. And created a lottery. And most importantly perhaps you decided not to raise ticket prices this season in a meaningful way. Yet when you look at the secondary market for tickets they are soaring right now. Is that revenue you feel you are missing out on. Money doesnt lead. It follows. And to that extent it was really inin deference to our fans. We have the best fans and we went through a rebuilding process and the last four years have been a challenge. In terms of we continued to work on our gm David Griffin dade terrific job collecting assets and setting the table for what happened this summer which is really truly spectacular as far as what took place there. But really we felt it was the rights thing to do with our fans and dans commitment and getting as many tickets into the hands of the real fans out there and not into the hands of the brokers but the hands of the real fans. But it is really for us we think really taking the longterm view with our team. And talking more about your business strategy. I know you have been doubling down on dujtal. Just launched a new app for the cavaliers. I also hear you have been revamping your effort ossen the sponsorship front. What does that mean in terms of who you are targeting on the consumer side and the corporate side moving forward. Its really the curb to everything outside to inside how can we improve the overall Fan Experience and the engagement with fans. We think it is spectacular in terms of the launch and offering there. But with our Corporate Partners and the evolution there. Not only have we had incredible engagement with longterm partners here within cleveland and northeast ohio but now on the National Landscape and even evolving internationally. The dialogue has continued and grown again as cleveland has asserted itself more on the map. Just one more kwe for you. That is the fact that this is a huge game. All eyes as you mention are on cleveland, on the cavs into this season. A lot of buzz across the country looking at the team. What happens if you dont live up to the hype . All we can do is focus whats ahead of us. One game at a time. One day at a time. And we have a tremendous group of people, an owner in dan gilbert who gives us the resources and vision and leadership to do whatever is possible to be successful. And we will find a way to move forward and to put ourselves in the best position to succeed. Not only for what we have going on here at the q in the cav but the city of cleveland. Crow of the clevelaeo of the cavaliers. Just a smidge of whats coming up. Kara swisher from re code talking about tim cook and the impact of his announcement on the valley and tech in general. Microsoft has a new wearable. 48 hours of battery life. And the ceo of f 5 is here. Exclusively on squawk alley. Tune in. If yand youre talking toevere rheumyour rheumatologiste me, about a biologic. This is humira. This is humira helping to relieve my pain and protect my joints from further damage. This is humira giving me new perspective. Doctors have been prescribing humira for ten years. Humira works for many adults. It targets and helps to block a specific source of inflammation that contributes to ra symptoms. Humira can lower your ability to fight infections, including tuberculosis. Serious, sometimes fatal infections and cancers, including lymphoma, have happened, as have blood, liver, and nervous system problems, serious allergic reactions, and new or worsening heart failure. Before treatment, get tested for tb. 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And didnt do anything in the wake of the fed despite the fact you have movement on the Constitutional Rights and the dollar. Who knew you were so tall. Right. That is yeah. Lets goat squawk alley. Good morning simon. 8 00 a. M. In cupertino. 11 00 a. M. Here on wall street. And squawk alley is live. And welcome to squawk alley on this thursday morning. Joining us for the hour this morning, henry blodget, founder editor and ceo at business insider. Good to see you this morning. Thanks for being here. We start with the big story of the morning. Apple ceo tim cook writing he is proud to be gay. He came out publicly in a Bloomberg Business