Transcripts For CNBC Squawk On The Street 20141031

After the bank of japan surprises World Markets with additional stimulus. Shares of starbucks heading in the other direction. Lower premarket after Quarterly Sales disappoint. We will talk to Ceo Howard Schultz about that in an exclusive interview later on in the hour. And citi adjusting its previously reported Third Quarter profit, setting aside an extra 600 million to cover legal costs. We are going to explain exactly why. Well, a global rally for stocks on a morning that could see the dow open todays session in record territory. This after the bank of japan unexpectedly announced additional stimulus measures, including plans to buy more japanese government bonds and other assets. U. S. Stock markets on track to finish what has been a volatile october on the up side. Jim, some 2 1 2 weeks ago, would you ever have thought we would be sitting where we are today . The numbers are unbelievable, from the lows, the dow is going to be up 9 , s p 10 , nasdaq 11 . Whats amazing here this is all done within the back drop of how we have been waiting for 7,000 dow points to crash, october crash when the Federal Reserve ends its bondbuying program. It turned out to be an abstraction. Literally an abstraction. It had nothing to do with the vast majority of the points being put on. This last selloff and rally was ebola. Really largely ebola and perhaps russia. Russia ukraine has a deal. It was not profits. Profits were amazing. The Earnings Period has been superb. These are things that are not talked about enough. When youre at home and youre sitting there trying to figure out why is the market going up, its because of the companies doing well. Not because the s p futures, not because of the Federal Reserve, not because of janet yellen. Its time for all those people to recede in the background and the ceos making you big money to go forward. You say best of breeders dont sell off much and dont stay down long. Thats what we see. Honeywell Quarterly Dividend increase. 3m. Got immediately back to a 52week high. Disn disney, ten days ago we are worried about ebola and the disney theme parks. There is a resilience to the American Consumer, resilience to our situation. I need the ideologues and political people, people focused on politics in the marketplace, they need to recede because im tired of hearing people do misdirection plays. You and i are both football, right . Im tired of the read option the countertrade didnt work. Im tired of fooling our viewers. In reality, this was one of the greatest rallies since the bottom. I feel that its been ignored. Its time to stop ignoring it. This does remain a central bankfocused world. We are finding that out today. Yeah, but japan does what it does. Japan, theyre buying everything. Thats a moribund country. There is no growth. We have gdp growth, population growth, profit growth. Im not denying this rally, this is off the nikkei. The insanity of that countrys central bank thats worth talking about. They are buying etfs. I think they are buying coal options. I think they are coming on your show at 12 00 saying were all in. That can ripple. Stocks will come back down if things arent good. Im just saying they perhaps wont because in the end, Interest Rates are ridiculously low because theres not a lot of demand because there is manipulation away from us. We are an honest broker country. We are stand out. Our banks are the best. Our Federal Reserve is most reasonable. Other countries have deflation which we know is historic. I am being positive. I am not afraid to be positive. If nothing else, this is a reminder what the boj is doing today as the fed takes its foot off the gas a little bit. Maybe moves into the slow lane. Boj flashes the brights and they are willing to step on the gas. I sure hope there is gas in their cars. They do, too. They think they are sitting back thinking, we ought to take inventory . Those of us who traded in 1986 to 88 remember when you get the call from the japanese brokers, we are buying tokyo electron. You might want to take 100,000 down. The japanese market historically has not been as rational as ours. Its difficult to be able to effect change. We are a great country for the market. I know the democrats are in power. Were still a great country. There. I said it. Ive broken every orthodox i have to listen to at all times. I am an optimist about our country and the companies. They keep delivering. They are what we are about. Janet yellen did not make honeywell raise the dividend just now. I checked with her. She did not force their hand. Two months left between now and the end of the year. You have an election next week that could bring some change. Do you feel the market is set up pretty good between now and the end of the year . If you care about earnings, and if you care about Interest Rates and you care about the notion of actually a bit of tranquility versus what we had, the craziness, the Government Shutdown . Yes, its a benign environment. Companies that do well will have their stocks go up. We just had a huge selloff. We had if you look at some stocks the world felt like it was coming to an end 2 1 2 weeks ago. I had guys who werent flying. You talked to people who said retail stock because of the cold weather, thank you, we are finally going to get an uptick in retail. I just feel like whats happened is we should have taken our cue from Companies Like apple. They delivered amazing quarters. We should not have taken our cue from ibm. A lot of hedge funds looking for gains between now and the end of the year. They dont go long because somehow they feel that this is illegitimate. Chasing something that is going to run out of gas . Yeah. They think its all asterisks. It was done through smoke and mirrors. Now we are going to find out. Youre making the point that this was not smoke and mirrors. This was done through real profits from real companies, as i said, the best in breeders. Those were your words. Most of the gains, im taking on 3m because its such a Great American company. They would tell you, look, despite the worlds tepid growth, we are going to deliver. Polaris. I dont know if you have an atv or one of his indian motorcycles or one of those things you ride around in your farm to deliver hay. Negative, negative, negative. You dont need a thing that guy makes. Sales are unbelievable. Hes got innovation, technology. Celgene. Do you think the ceo says, you know what . Im worried about that guy plosser. There is a cleveland woman. Do you think the guys at gilead are saying that cleveland fed whatever . Do you think they sit there and say fisher told us we are done. Do you think they say that at regeneron . It doesnt work like that in corporate america. They are making money for you as a shareholder because they are trying every day to beat everyone else. The competitors these guys are about making the playoffs. Making the playoffs . This is a game, note practice. It is a game. Im just saying i am upset because the ceos are giving it all shes got. What we tend to do is say, you know what . This is all about qe whatever. If you sit down with these ceos, we are killing it, man. Talk about how we are killing it. Talk about the innovation. Talk about the discoveries. Why dont you talk about the execution . Why do you sit there and talk about the philly fed . Lets talk about starbucks. Sure. Quarterly earnings in line with street estimates. Revenue just shy of consensus. Starbucks announcing a 23 Dividend Increase as well as plans to launch a Beverage Delivery Service in select markets in the second half of 2015. Later this hour, well have an interview with howard schultz. Weve got to go over why traffic decelerated, whether they have a lead over apple i pay. Got to go over the idea of best of breed but saying they are not satisfied. We have a lot to talk about with starbucks and howard schultz. What would be your first glance of the quarter . You focus on the comps coming in light . We have to talk about the Seismic Shift of the American Consumer who wants to do mobile. Doesnt want to go to the mall. Theres a behavior change in the American Consumer. Howard saw it coming. But didnt see it coming this early during the quarter. This happened last year. They understand the dynamic of people and how they shop in mobil and digital. Can they change fast enough . Thats what we have to discover. China, unbelievable. Europe, major comeback. No one cares because we are a group of negative people. I can knit pick with the best of them. By the way, i have not attacked Herbert Hoover in a pantsuit today. The one person standing in the way of european growth. You know who im speaking about. Merkel. Still waiting to hear about her. She is still with that playing the game 29 to 32 before fdr got in. Maybe that will change next week. They better play ball. I do think we are a moment where she stands in the way of 770 Million People making a comeback. That continent is all hostage to Herbert Hoover in a pantsuit. If youre negative, youre still fighting the rally . Wake up. Wake up and smell the java. Im not talking about starbucks, unfortunately. What does it mean to the market if hoover surprises you and draghi pulls out the bazooka . What does the dynamic duo acting in a manner some people think they ultimately will mean for the stock market . You tell me she will support italy and france and use that incredible Budget Surplus to put people to work . We would be up major. I dont think she will. The fact is if ukraine and russia do a natural gas deal, then i think there is hope. Now lets have growth. All right. Coming up a lot more to talk about. Well talk to howard schultz, a live and exclusive interview later this hour. Expedia is one of todays earnings winner. The ceo on his companys latest results as well as his take on the travel landscape in the wake of ebola. Another look at futures now. Will the dow be at an intraday alltime high off the open . Looks like it right now. Theres the s p with an implied open higher by 23. Nasdaq, look at that. Implied open up 62. 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. An Unprecedented Program arting busithat partners businesses with universities across the state. For better access to talent, cutting edge research, and state of the art facilities. And you pay no taxes for ten years. From biotech in brooklyn, to next gen energy in binghamton, to manufacturing in buffalo. Startupny has new businesses popping up across the state. See how startupny can help your business grow at startup. Ny. Gov theyre dressing up on the floor this morning. How about gopro . S off to the races, strong earnings. Silent some of the nay sayers . I think so. Here are the nay sayers. 100 million shares off a lockup in december. Its going to be a big amount of float. That will help the shorts. This was a fabulous quarter. A joyous Conference Call saying we dont know anything about worldwide weakness. We cant ship enough. They are supply con trained. You have optco saying this is an underperformer because you are going to see things go wrong. Steeple saying dont have enough product. This stock is up a lot. Its one of the great performers. I think if youre in front of this thing, recognize its already up a lot. When it got to 93, i set enough is enough because i saw the go to the riding on the surfboard and that exceeded the big riding on the surfboard. It is an ecosystem. Its about software. The stock can have more room to run. Thats what brings out the nay sayers. It did make a lot of money. They have great margins. 45 . And the hero, the gopro hero, i dont know if you used it, this stuff is explosive. I used it and loved it and im going to get fetch this weekend. You know fetch . No. Its what you put in your dog. Dont you want to see life through your dogs eyes . I dont have a dog. What do you have a goldfish . I have two little boys at home. Im chasing them around enough. Cleaning up after them. Put a grow pro on their heads and enjoy youth. It is going to be a gopro christmas. Are you kidding me . At best buy, you get a gopro and get the hp printer, 1800, hard to find, and youre going to do 3d images of what your dog sees. I have an african tortoise. It lives to 110. Im putting a gopro on its head and well put a time capsule in. The ultimate slomo video. Loves watermelon. Lives for broccoli. I think ive seen that, actually. Youve seen it. Linkdin. Grew 45 , are Marketing Solutions grew 45 . The 40s. You have to have 40s numbers in order to get your stock higher. Linkedin has that. The stock was down. Now its up. The stock has traded down like four out of the last six quarters off the earnings. Right. This time they pulled it off. It was a great quarter. Watching your show yesterday was so interesting. There are pockets of weakness we should you had that great intersil. There are things going wrong, companies that are not doing that well. What im saying, they are in the minority. One that hasnt done well of late that you focused on is twitter. Has anybody left while weve been on . Every what, every quarter . They are so polite. They are changing jobs more than we have nfl football now. You wanted some management. You dont argue with the franchise of what twitter is or what it represents or what it can be. Its the execution. Its a 10 billion opportunity. We make him chief tweet and we bring in a ceo. Then weve got that powerful combination of a chief twit and a ceo. And nodo. Time for nodo to step up. This is a west pointer who worked at goldman. He was the cfo of the nfl. Talk about a job. I bet he would eliminate these games. The first half of yesterdays game was as placid as twitters turnover is. Did you see what they called it in the New York Times . The game of thrones in tweets. When you have a team play on sunday night and then have to play a road game on thursday night tired. Rg 3, welcome back. Great to have him back. Cramers mad dash as we count down towards the opening bell. Stay tuned for a live and exclusive interview with howard schultz. Take another look at the futures. Going to be a big open. Dow could be at a new alltime intraday high off the open. Theres confidence. Then theres trusting your vehicle maintenance to ford service confidence. Our expertise, technology, and high quality parts means your peace of mind. Its no wonder last year we sold over three million tires. And during the big tire event, get up to 140 in mailin rebates on four select tires. [coughing] dave, im sorry to interrupt. I gotta take a sick day tomorrow. Dads dont take sick days, dads take nyquil. The nighttime, sniffling, sneezing, coughing, aching, fever, best sleep with a cold, medicine. [coughing] hey amanda, sorry to bother you, but i gotta take a sick day. Moms dont take sick days, moms take dayquil. The non drowsy, coughing, aching, fever, sore throat, stuffy head, power through your day medicine. With the easytouse suite of tradintrading tools. Tures. 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Its going to be a big open at the new york stock exchange. Dow with an implied open up nearly 200 points. New alltime intraday high from the dow. Time for cramers mad dash. Ahead of the market open. We are talking big oil. Ive got trickortreat going here. Chevron and exxon look like treats when they reported. They are tricks. Oil is down 1. 44. Chevron growth. No, they dont have growth. Look at Production Growth. Earnings dont mean anything. Exxon down 4. 7 Production Growth. We have oils that have 25 , 30 Production Growth. Treat . No. Trick . Yes. You used to be in chevron, right. Chevron. You prefer Royal Dutch Shell . It has a restructuring going on, better yield, good Production Growth and it still doesnt matter. We are watching deflation in this world. Talk to the bank of japan. You will see that these companies cannot at 79, even though theyve got great refining in march, cannot be up a day when you have oil down this much. Dont be fooled. When they knock on the door, be prepared. Its spooky. I remember what the linkster was telling me yesterday. Hes right. Dont let that in. When jason comes to your door, it is jason if its an oil stock. Dont answer the door. Opening bell is just minutes away. 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. You are watching cnbc squawk on the street where the opening bell is set to ring in about 1 1 2 minutes. People yesterday were sort of dissing the move in the market for the dow because it was a visaled rally. Visa accounted for Something Like 140 of the dows 200 points. Visa did kill it. There were other companies, nasdaq wasnt up that much. A lot of that was because of weakness you covered and broke the story of what was going on with intel which was an intersell downgrade. Everything bad with tech started with microchip. Here they issued a mea culpa. Thanks. Where were you three weeks ago . Upon further review, we arent doing that badly. They went under the hood. Another trickortreat. That did start a down draft in the chips especially. I had flextronics on last night. What an incredible company. Video games. Theres so much strength in electronics. Microchip, thanks for nothing. As you can tell, the opening bell is going to ring in a matter of seconds. A lot of green will be on the board, as well. Theres the s p 500. Dow is going to open at a new intraday alltime high. Here at the big board, Hershey Company celebrating halloween today. Up town at the nasdaq, fifth Street Asset Management celebrating its ipo which happened yesterday. Hershey had a tough quarter. Rising costs. Its a Great American name. Clorox reported a fantastic quarter. Got some growth there. Clorox being a bond market equivalent stock that was supposed to tank the moment qe 3 ended. With a lot of other things. Yeah. The world was supposed to end. I think there was supposed to be a 72hour Solar Eclipse when they ended. The whole world will be dark, you know . What we havent talked about yet is citi. Citi. Somewhat of a bombshell after the bell yesterday. Citis up. There is adjustment due to legal costs. Remember what happened . Citi has to reports its earnings, then it has to file its 10q. In between its report of its earnings and 10q, they got the call from doj. We are putting you on the hot seat. There is a big 4x investigation. If you read the 10q, the last thing you see is, oh, by the way, we have this reserve. The reason the stock is not down because everyone kind of knew there was a 4x investigation. What did seem interesting, it looks like the fed said, 600 million. The Justice Department has been arbitrary about how much these banks owe. Its the u. S. Government and in the end they say, all right, well write the check. The ceo has to write the check. Weve got mike mayo on the halftime show. I wonder what he is going to say about management, whether this in any way continues to raise questions about the credibility of management . Had they filed the q wednesday this would have been a Fourth Quarter issue. They filed the q. The doj calls you, 600 million. Its like opening offer, 800 million. Take a look at those negotiations. Thats chump change. Deutsche bank were like i think Deutsche Bank thought we were like the department of justice calls you in, guys, shuffle the deck here. No. They say heres the number. The negotiations i heard, they go like, hey, listen that guy paid 15 billion. We wanted 17 billion. Were the u. S. Government, we dont do that type of thing. Banks set up good . We need rates higher. Part of the visa mastercard rally, you need a faux financial. Who said faux, faux, faux, remember . Moses malone. Come on, man. Im with you. Youre good. A gain of 141 points. Dow jones industrial average right now is at 17,336. Do you think that is legitimate given the fact the fed played a role. Should we do a fedadjusted that the dow is at 12,348 . Should the fed adjust the dow . Or because people own stocks we use the real dow, not the fedadjusted dow . I rest my case. Case made. Thank you. Not at an alltime intraday high. 17,350 is where we need to top the alltime intraday high. There is a lot of green. Even the baddies are moving up. Facebook. Twitter up 1. 5 . Really . Maybe the last firing was a good firing or they fired someone since the show started . They have analyst day in a couple of weeks which will be critical. They better lay out a 10 billion scenario. And stop shuffling the deck. We need a couple of days there where twitter, where its just quiet. Where they have the chief twit tweet. That would be a sign of goodness. Since we are on the topic of twitter and social media, some stocks are so far below their alltime highs. Talking about sales force . Twitter down 44 from its high. Linkedin, down 19 from its high. Yelp down 43 . Groupon down 1 4. Pandora. Bad quarter. King digital. Horrible quarter. Zynga down 60. Miserable quarter. There is a pattern. If you do really badly and screw it up and miss the quarter and you do horribly, your stock goes down. Its only fair. You can blame the fed. I see these guys are blaming stanley fisher. The dow did hit a new alltime intraday high. Will you look at what a 3m can do here . Even boeing which everyone decided was a terrible quarter is moving up. Boeing. Alibaba was momentarily over par. Ge . The industrials are the unhung heroes of this reporting period. They turned out to be doing they were the most pushed down because people felt europe, asia were going to be weak. They came in with the most compressed multiples and they have surprise. Look at dave cody. Look at that thing. 97. Not only that, when we threw a rager next door to him, like an allnight party, he said nothing. He understood it was the business i had chosen. Did he come over . No. Hes come over. Hes a great guy. Bob pisani, over to you. What a rally we have going here. Take a look at where the global assets are now. Japan, sevenyear high. China, shanghai index. 20month high. U. S. Dollar at a fouryear high. Oil at a twoyear low. I dont have gold up there. Gold at a fouryear low, as well. One heck of a rally going on in europe, as well. We had a wild day in germany yesterday. Take a look at france up 2 . Germanys up. Lets call it 2 . Spain also up essentially 2 . A lot of this is due to whats going on in japan. Very important. Two Different Things went on. First we had the bank of japan announcing additional purchases of government bonds. The most important thing is what happened with the government pension investment fund. Thats the gpif. They are doubling their investment in stocks. I am not just talking japanese stocks. I am talking global stocks. Here is the new model. 25 . They had 60 in bonds. Now its 35 . They had 12 in domestic stocks. They doubled it. International stocks, now its 25 . They doubled their allocation to international and domestic stocks. Talking 1. 2 trillion investment fund. Do the math here. They double it from 25 stocks to 50 stocks. Thats why the markets around the world have been moving to the up side. Obviously, youve got a problem with the pensions there. How are they going to match their obligations with 0 japanese bonds . It makes some sense. By the way, the government buying bonds, the government, at the same time the pension fund is getting rid of bonds. You think thats a coincidence . I dont think so either. Lets move on. Talking about one of the great vshaped rallies of all time. Look at the s p 500. It was 1820 on september 15th. Now 2013. On exxon and chevron, forget about all the earnings. The key point here is 10 drop in oil prices. They have to raise 13 billion a year to pay that dividend. Exxons been down 8 this year. Chevron in a similar situation. Important thing, people still paying a premium for exxon. Dow setting another new alltime intraday high. Now to chicago to the bond pits and Rick Santelli. I dont know what you guys are looking at. Anybody who loves todays stock action should think about two things. Capitulation trade on the 15th. Wherever they change Interest Rates for a while bottomed, but right around midnight chicago time you can look at eastern time. When did everything move . When the bank of japan took over and added more qe. Its obvious. Holy cow, was like a rocket ship. Look at the 24hour dollar yen. I wonder if this has anything to do with stimulus. Look at the way it moved. Dont stop there. Look at Interest Rates. Look at the jdbs around midnight. Holy cow brought big time historic low yields. 24hour of our ten year. When did it move . Around bank of japan time. When did the futures get most of the move they are now at the same price level . Right around bank of japan time. They are buying bigtime yen. Thats the only thing that has to do with anything, the central banks. No, but it has to do with whats going on this morning. 80 oil. Lets have fun. When we come back, a live and exclusive interview with starbucks chairman and Ceo Howard Schultz. [ radio chatter ] [ male announcer ] andrew. Rita. Sandy. Meet chris jackie joe. Minor damage, or major disaster, when you need us most, were there. State farm. Were a force of nature, too. 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That is a bigtime jump. 66. 2 really takes us back quite a ways. Ill tell you what, we are going to have alice from the organization that prints this number at 10 20 to go through the internals, but this blows away any type of expectations on this number which were supposed to come out around the 60 level. Judge, back to you. Thank you so much. Something finally moved Interest Rates up. All right. The economy is terrible though. Terrible, terrible. Starbucks share opening lower this morning. Still getting hit down 2 in a very positive take. Why . Because some people didnt like their guidance. Other people didnt like their traffic. Joining us exclusively is howard schultz, chairman and ceo of starbucks. An our cnbc first 25 list. I always play an open hand with you. Thanks, good morning. At 4 00 a. M. I was trying to figure out how i can explain the disconnect between what you think is the great longterm prospects and great Gross Margins and you werent hurt by coffee prices with the fact the stock is getting hammered. I give you the floor. Okay. Thank you so much. Maybe we can try and establish some common language before we get into the specifics of the quarter. Weve been a Public Company for 22 years. That was my 90th consecutive Conference Call as a ceo. During that time we have never had a better year or better Fourth Quarter than we announced yesterday. In addition to that, we had 208 basis points of improvement in operating margin. Now, there was concern that perhaps some people thought we had disappointed on the comp number. We have been begin guidance for ten straight years that our comps would be mid single digits. There was the 19th consecutive quarter of 5 or greater. In addition to that, there was lightness on traffic. Lets just get common language on that. We added 1 traffic during the quarter and that means on average, 500,000 new customers came into the starbucks franchise each week during the quarter. We said we were disappointed with that go ahead, jim. Troy alstead whom you know i think is a fabulous chief operating officer, it was troy that said we are not satisfied with 1 traffic growth. It was not me or the analysts. Troy put it out there. Jim, we are never satisfied. Our entire premise as a company is constantly trying to overachieve and cannibalize ourselves. What we are going to do in the future with mobile order and pay delivery, is take a page out of ubers book and disrupt the coffee industry in the same context weve done over and over again. In the last 20 years, weve constantly reinvented the business. This is no longer a u. S. Story, jim. Theres 1,400 stores in china. We are going to triple that business. Theres 1,000 stores in japan. We are going to double that business. We turned around our European Business that was losing money. It had its best quarter in four years. This is not a story in which starbucks disappointed. We had our best quarter in our history. I must deal with the four walls of the canvas you set in the Conference Call. I agree with that. You start out with the fact that we are in a Seismic Shift where people arent going out as much in the United States. I would have started with china. I would have gone to europe and say only 10 of our stores are mall. You put all the negatives on top. Jim, this is not about the Conference Call. This is about the artificial focus on the optics of what is going on with traffic. It is important i was able to create for people listening the fact we are witnessing a significant cultural shift in the way people buy things in america. As a result of that every bricks and mortar retailer has to find new ways of driving traffic. Mobile order and pay. We are not coming from behind. 5 comps and 1 traffic on a base of 7500 u. S. Stores is a stunning number. Plus all the innovation coming for the year. Its hard to say we disappointed from the fact we say we overachieved. You used disappointment in your call. You know i think you overachieved. What you are doing in china is incredible. The fact you are the only operator of bricks and mortar recognized this coming is terrific. On march 19th, i interviewed you. You talked about how you have a big lead with mobile payments, social and digital, yet we all know that apple since then unveiled a program that may, indeed, be a leapfrog over what you have. I need to know how you feel about apple pay versus what starbucks has. Okay. For those people who listened on the car i said specifically something that people were not listening to. In calendar 13, 1. 3 billion was placed on starbucks congress. We had 90 of that number in our stores. We were in charge of most of that revenue. Apple pay is great for starbucks because here is a company that has the power of the influence to change behavior. What i said on the call and repeat to all your listening, starbucks is going to be in the middle of many conversations that are going to take place with regard to mobile payment inside and outside our stores. Recognize this. We are in the nascent stage and evolution. There will be a number of players and a number of twists and turns. There is no company local, national or global, that has crossed over the chasm and been able to transform behavior the way starbucks has. Apple has not done it yet. We are the only Company Processing 7 million transactions a week and integrated that with the Loyalty Program and stars currency will be relevant inside and outside our stores at some point in the future. This is not about mobile payment. This is the relevancy and power of the starbucks brand on a global scale. Theres 21,000 scores. We are serving 75 million customers a week. This story is so early. Its no longer about 1 traffic in the u. S. That you know i agree. I want to talk about coffee delivery and we were supposed to be worried about commodity costs and they were good. Lets start with coffee. Weve been in business since 1971. Weve seen significant cyclical changes in rise in coffee prices. Not once as a Public Company have we changed guidance as a result of coffee prices going up. I have said ad nauseum whatever happens with the coffee price its not going to affect our guidance. Its about 1. 88. We have 2 3 bought. We have our own farm in costa rica. Take the commodity costs off the table. Its irrelevant in terms of our guidance. Secondarily in terms of delivery, what i said earlier about uber, weve been studying and talking about all the things theyve been doing and the way they disrupted the market. We think delivery is spoton in terms of our customers. We started work on it. Youll see it on the second half of the year and it will be threaded into mobile order and pay that will drive traffic, be incremental and create separation between us and everyone else and linked to loyalty and mobile payment. This is a story that will be threaded into the equity of the brand and experience in a big way. How are you able to turn europe when everyone else told me europe has decelerated rapidly in the last three months . Im glad you asked me that. Three years ago when i said we will transform and turn europe around, people said that cant happen. We went back to the basics and fundamentals of oldfashioned retail, and being the kind of merchant that trains our people well, rewards them and celebrates the kind of behavior that exceeds the expectations of our customer. Uk is our biggest market. It had the strongest quarter in four years. Europe is getting better, not throughout the entire region. We are very confident that we are going to see improvement in europe in calendar 15. Can we just spend one minute on china . The Fastest Growing market we have in the world with 1,400 stores . Significant Unit Economics which the equity of the starbucks brand is second to none in terms of food and beverage and premium position in a marketplace. Most importantly, after being there 15 years, we are beginning to see chinese local people establishing a morning ritual in buying coffee in the morning. We are going to triple the size of that market over the next few years. There probably will be more stores in china than we have in the u. S. We are not done, howard. Please stick around. This is too fabulous. We have breaking news on consumer sentiment. Back to Rick Santelli in chicago. We are waiting the october final read from university of michigan. It should be out momentarily. The midmonth read at 86. 4 was the best going back to july, 2007. 86. 9. The final number didnt take anything back on the preliminary. It added to it. 86. 9. That continues to be comping to the best level weve seen since 90. 4 read in july 2007. Back to you. Thank you, rick. Lets talk about what youre doing for labor. I hear many people talk about how the minimum wage, if you raise it, it destroyed capitalism. Could you give us the other side of the trade . The cultures and value of our company have been steeped in humanity. Beginning in january, we will be raising wages across the board throughout the United States. We think that is important. We want to be ahead of legislation. In addition to that, as you know, we provided health care for many, many years. Equity in Stock Options and most recently Free College Tuition for juniors and seniors. We think Starbucks Coffee company has to be the kind of company that rewards our people and weve always believed building shareholder value has to be linked to building value for our people. Think about this statistic. Since we began providing equity in the form of Stock Options for all our people in the field, including parttimers, we have given 1 billion in real gains to our people who wear the green apron within our stores. We are going to be ahead of minimum wage. We think this is important. This will not be dilutive to our earnings and guidance. This is part of doing business the right way for starbucks. Its scott good. To see you again. You always said starbucks should lead through the lens of humanity. I know youre an outspoken supporter of human rights. Im wondering if you could speak to what it means to you, what you think it means in the greater world here to have the ceo of apple, tim cook, come out publically yesterday as someone who thought about starbucks place in the world and your own, as well . Everyone who knows tim was cheering his courage and conviction. Its a wonderful sign to the world. A year and a half ago i stood in front of our shareholders when i had a shareholder criticize starbucks providing partner benefits and samesex benefits. I thought here is a shortsided view of the world. Starbucks believes in what tim cook did. This is the right thing for the country and right thing for the world. In addition to that, i think we are living in a time right now where we must embrace diversity at every single angle. I think its a very, very good thing tim did yesterday. Man of his word, best of breed, im a buyer, not a seller, howard schultz, thank you for coming on. Great to hear from you howard. Thank you very much. Howard schultz will be part of the cnbc 25 gala special on thursday november 6th. Coming up, more on todays big rally. Dow is up 142. 17,337. Theres confidence. Then theres trusting your vehicle maintenance to ford service confidence. Our expertise, technology, and high quality parts means your peace of mind. Its no wonder last year we sold over three million tires. And during the big tire event, get up to 140 in mailin rebates on four select tires. Ameriprise asked people a simple question in retirement, will you outlive your money . Uhhh. No, that cant happen. Thats the thing, you dont know how long it has to last. Everyone has retirement questions. So ameriprise created the exclusive. Confident retirement approach. Now you and your ameripise advisor can get the real answers you need. Well, knowing gives you confidence. Start building your confident retirement today. Welcome back to squawk on the street. Its a halloween rally on the street. All three indices up sharply. Dow hitting an alltime high. Covering all the big movers for you. We are going to talk to goldmans head of commodities when he joins us live post nine. Earnings winner, expedia beating the street. We talk to the ceo about those results and what is next for that company. U. S. Stocks rallying with the dow hitting an intraday record. S p not far behind after that surprise easing move by the bank of japan overnight. Joining us now chief investment strategist with Wells Capital management. Not only are the japanese going to buy 270 million more of jgbs, they are going to spend more on foreign equities. I imagine a lot of that will end up here. I think so. Weve got the end of qe here, but youve got obanimics picking up the baton. I like those international markets. It will be interesting to see if it will provide support for the u. S. Market, which obviously today, thats the message of the market. They are liking those moves. Im not sure it will continue to be a positive here in the United States. If the sentiment changes from better growth is good to resource markets are tightening up, maybe we have more of an inflation risk than other parts of the world. Well, not according to the fed as things stand at the moment. Why are you not more optimistic about what this means for the u. S. Economy . Surely for the u. S. Markets. Surely, if you had to allocate capital across the world, even though you are in a currency falling from the Japanese Point of view, the dollar has to be the star moving forward, hasnt it . Surely that money ends up here. Im surprised youre not more upbeat. Well,ing lets talk about that issue. I think everyone is saying the u. S. Is the place to be and dollar has only one place to go and thats up. I think the reason behind that is because youve got japan and europe easing and we are starting to tighten. Everyone believes that means the euro is going to go down and the dollar will go up. I think its not so much the act of monetary policy. Its how its perceived. I believe if europe and japan ease and they work in promoting greater growth forecasts and prospects for those regions, that will provide a bid for those currencies. If the u. S. Tightens, but they do it under conditions of panic or they do it under conditions where they are perceived as starting behind the curve, even if they are tightening, if its perceived as a behind the curve move, that will be a negative for the dollar. I think the fed will be behind the curve. Well look at european and japanese easing as a positive for those economies. Youll get a surprise that the dollar will weaken relative to foreign currencies. The best place to be is out of the United States in the next year. That is not the consensus, jim. No. Look at the u. S. For a moment. Earnings are expanding, for the most part beating the street. The economy is expanding. Got that better gdp forecast. The Federal Reserve is accommodative. Its not hinting at higher rates any time soon. It would appear to me you buy the dip on any type of down turn that weve been seeing. It certainly worked in october. It certainly did. I think thats one of the problems. I dont think we had a correction yet. That 8 really didnt have an impact. It didnt refresh values. We are still selling 18 times in this country. We didnt change sentiment as you said. There is maybe perhaps more bullish sentiment this morning than there was the last time we were at these high levels back on september 19th. In other words, i still think we might have to have a correction that actually works in refreshing sentiment and values. It really didnt eliminate the big elephant in the room. The big thing we have to adjust to or just starting it, that is the resetting of Interest Rates in this country, not priced by policy officials on fear, but priced back to the economic recovery. Look, we are growing north of 3 now. Weve got tighter resource markets. You look at the eci this morning, we are going to start to see some inflation evidence thats going to scare people and force a quicker tightening. Employment cost index was higher. The main point you are making is easing from the European Central bank or bank of japan will be seen as reinvigorating their economies. Right. Im not sure we can say qe necessarily did a fantastic job here. Im definitely sure that the ecb cant probably pull a rabbit out of the hat in terms of what they can buy that would reinvigorate the european economies. So far what theyve done in japan hasnt worked. Im not sure the starting point for all your concerns over this market, on the train of logic, is actually solid, with respect. Look simon, the last time draghi came in was september 2012. That round of easing worked. The european markets outperformed the u. S. For the next 1 1 2 years to the period. The bond yields in the region stopped going up and came down. The european economy came out of recession again. I dont know why this time it wont work again. What they are doing in europe is exactly what we have done in the United States. They just started two years later than this. I just disagree. They pulled away, it faded. Im really sorry. It did work for the asset markets but didnt work for the european economy which is teetering on the brink of another recession. Draghi didnt reinvigorate the european zone economy, he boosted asset prices. The same thing said for the United States in q 1 and q 2. We pulled away, failed again. Came in q 2, pulled away, failed again. I think they are doing the same thing in the euro zone. They are coming in and ultimately it will work. It may take several rounds. Right now, they are coming to the rescue. I think its a good buying opportunity, not a sell. Okay. Its good to see you. Thank you for your time. You bet. Up next on the program, markets are clearly in rally mode. Its friday, Pulitzer Prize winning columnist jim stewart will join us with his take on the markets. N you start tomorro . Tomorrow were booked solid. We close on the house tomorrow. Tomorrow we go live. Its a day full of promise. And often, that day arrives by train. Big day today . Even bigger one tomorrow. Csx. How tomorrow moves. Dovisit tripadvisor new york. This is the life. With millions of reviews, tripadvisor makes any destination better. 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. We are watching shares of expedia which is up on the session by about 3 . Off session highs, moving higher after reporting a better than expected 50 rise in Third Quarter profits. This on increased Hotel Bookings. Those shares up again 3 . Rivals up 1 to 3 in a trade. Expedia ceo will be live in the next half hour right here squawk on the street. Its clearly a halloween rally on wall street today. Dow hitting a intraday record after a surprise move by the bank of japan and by the japanese Public Pension Fund overnight. Joining us Pulitzer Prizewinning columnist and cnbc contributor jim stewart. What do you think of the rally . Im impressed but not entirely surprised we had positive developments this week. I think the end of qe which people shrugged at was fine. Underlying message is the economy is healthy enough to pull this out from under it. The 3. 5 looking solid. U. S. Leading the globe here which is great. Surprise out of the bank of japan and we will still see action out of the European Central bank to stimulate which will be another positive here. Do you think it is positive and healthy these rallies are based on announcements of quarter quantitative easing . Some say pushing on a string to try to get their economies propped up . We heard that all the time in the u. S. But it kind of worked, didnt it . The u. S. Is doing quite well. These economies have been stuck in a rut. What is bad about it . We didnt get run away inflation. Lets see a little inflation before we panic. I think qe is healthy for japan and europe at this point as it was in the u. S. Now its appropriate to be taking away here. The valuations are high, but people are looking ahead to earnings growth. These valuations dont look so bad. There is nothing that niggles the back of your head this isnt right . There is always something. What i try to do, we dont know where they are going to go. You cannot predict the future. Where have they been and why . At this juncture, i wouldnt be buying at these levels, but i was buying two weeks ago. You were the first journalists to write about ceos coming out as gay. You and i famously discussed this here. I had no idea so soon the elephant in the room, tim cook at apple, would be so forthright and so frank. A couple of things here. Number one, it takes courage for anyone to come out under any circumstances. But when youre the head of the largest, most valuable company in the world, most admired company in the world, he is under the glare of publicity. He is a leader. For that reason i think was harder for him to do this and the impact will be so much greater. Its always been said he has a hard act to follow with steve jobs. Is he up to the job . I wonder if that increases the question for a lot of people . Or if that hastens his departure or is that the dog wagging the tail . Its a courageous thing in an environment thats been very tough for the sports people that have done it. Absolutely. He made this decision from a position of strength. He did ask the board. You dont want the board reading this in the New York Times or wall street journal or Bloomberg Business week. He came from a position of strength. Apple is in as great a shape. He is laying to rest the question can he take over for steve jobs . I still dont think we should underestimate how hard it is and how important this could be for people all over the world. The world. Thats where i was going to go. If you saw the impact in this country and your column gets to this in a little bit, how is it going to be felt in places that are not as friendly . This will be the most interesting thing. Apple is truly a global company. 60 revenues from outside the United States. We have 78 countries where being gay is a crime. In 1 3 of those countries, the penalty is death. This war is far from over. This is bigger. This is somebody in the mainstream of the business world. This is going to be a personal crusade that will continue behind closed doors. Its going to be on the table and will be talked about. Thats healthy. Its a battle he is going to be facing the rest of his life. Wouldnt you think its important to him to not be onedimensionally characterized as the gay ceo . Absolutely. I made a big point of that. I dont think he should be or will be. His having done this will make it easier for him to be seen as multidimensional. And for future gay figures in the world to not be tagged as the gay this, gay ceo, gay cfo. More importantly kids can see this. Its very, very important and the global audience is huge. Jim, good to see you. Have a great weekend. Thank you very much. Jim stewart for the New York Times. Chevron and exxon bouncing back in recent weeks. 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. 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The panke already budgeted about 1 billion for those legal costs. This time citi says it will cut the prior quarter earnings by 20 cents a share due to rapidly involving regulatory increase. Much of that cost is expected to go toward a settlement involving charges of manipulating Foreign Exchange rates and an investigation that involves several other firms. Citi has the biggest market share this year but Deutsche Bank, jpmorgan, barclays and rbs collectively announced nearly 6 billion in legal charges socked away expected to be tied to that probe. It is believed a settlement with cross parties is believed to be close. They didnt say which multicountry investigators were looking into this issue. Analysts dont see this as an indicative issue of broader problems at the bank. Analysts still rate citi a buy and say a potential settlement would be yet another step forward on the legal front and shouldnt have an effect on the biggest task ahead. That is passing the stress test and finally increase the capital that is returning to shareholders. I saw a global figure of 40 billion for Foreign Exchange investigations. Deutsche bank, the most affected potentially. Its incredible how big this market is. I was talking about this earlier this morning. We see these massive settlements, over 10 billion where just mortgages in one country are concerned. When you talk about multiple banks, multiple jurisdiction and the market for Foreign Exchange rat rates, better than anyone. That is a benchmark used to set so many prices worldwide and manipulating that is not going to be taken lightly. It will be very difficult to prove. Do you know when we are expected to get details . You have to think the way citi disclosed this made it seem it received this number yesterday. Building. Yes. It came into possession of that number recently. This morning we got rbs and hsbc coming out with their numbers. You have to feel its close. Thanks, kayla tashi. Lets go out to chicago. Rick santelli has the santelli exchange. Good morning, sara. We had an important number that was out within the last 30 minutes. It was the chicago pmi. We have alice. That was a really good number. It was a strong number. We view this as the perfect number. Barometer up the best since last year. Key ordering components, new orders, backlogs and productions all high. Also we saw the key numbers we wanted to see some relief in like supplier deliveries, inventories come down and that sets up a nice situation for november and december. Since we are getting close to the Holiday Season, lets look at past, present and future. If we look at the past, i look at the inventory number. The inventories dropped 8. 8 to 62. Still the best since august a couple of months. I find that fascinating. Explain that. Right. What happened here, it looks like a big depletion. We had that. They are all excited several months ago about the inventory build. Right. Now thats being taken down. That is a good thing. Keep in mind you are coming to year end. You dont want a bunch of stuff on your shelves. They are depleting inventories. If we get a cold snap you are getting ahead of me. Okay. Past, present. If i look at right now. Weather is getting colder and Holiday Season is coming upon us. How is that affecting the num r numbers . Right. We went from shorts to snow this morning. That will require an inventory rebuild. You will see a second wave of inventory. Sweaters, coats, apparel, maybe holiday gifts. This is all in the brain of many of the respondents. We saw the impact in october. This year its three weeks later, we will see that impact in november. One left. The future. What do you see in these numbers if they are solid for 2015 . Looking forward to very strong bookings in november and december. Year end looks solid. The problem is going forward. We have a lot of uncertainty surrounding the elections. What im hearing from the purchasers, there is little interest getting loans to do Capital Expenditures to expand business. Same dynamics we saw in the gdp number. Correct. 2015 doesnt look like a strong start. Thanks for breaking it down for us. Sara eisen, back to you. Thank you, Rick Santelli. We are watching shares of exxonmobil and chevron. Mixed after both oil giants released Third Quarter earnings before the bell. Both a bit higher. Exxon reporting earnings of 1. 89 per share on more than 107 billion in revenue. Lets bring in Pavel Molchanov from Raymond James for reaction. The story seems to be chevron and exxon beat earnings, but lowering production. What is happening at the major giants . Yes. At exxon, production was down 1 year over year on a clean basis. That is better, much better in fact than year over year changing in q1 and q2. I would say thats generally as expected. I think the real take away from both of these companies is not so much that the earnings themselves, its the change in capital intensity. Both these companies and their european peers, bp and shell, have been under enormous pressure from the market to reduce capital spending. For exxon, capex was down 11 . Chevron was down after being higher in the half. Capital intensity as these companies are moving out of peak capex mode and into more of a moderating spending environment. They are still making insightful investments. Taking their foot off the pedal. Is it a good time ultimately to be buying these stocks . Are they oversold on this emotional reaction to oil . Are you confident they are pulling in capex prudently and will result in higher earnings . I love the fact their capex is peaking and showing signs of moderating. That is very important for improvement investor sentiment. Look, their earnings are affected by lower commodity prices. No getting around that fact. But even if we, in our model we are assuming 90 brent, 70 wti next year. Those companies are still trading below their tenyear average pe. The multiple come preciopression its course. Obviously, oil will stay volatile. These are two defensive names with improving Free Cash Flow characteristics, which means more dividends and more Share Buyback over time. Exxon specifically, what did we learn about the plans to drill in the arctic waters off russia impacted by u. S. Sanctions there . What does that mean for exxon . It means virtually nothing in the short run. The arctic would not generate any commercial production until the next decade. Its one of these extremely longterm exploration projects. It just would not move the needle any time soon. As it stands, clearly, there are Technology Transfer restrictions on arctic as well as shale drilling in russia. Exxon is covered by those. This has zero impact on earnings estimates. What kind of returns are they getting at oil at 80 a barrel . What does that do . Like i said, its going to reduce profitability across the board. Let me give you an example. Chevrons return on equity last year was 15 . This year we are modeling 13 , obviously thats with a partial year of lower oil prices. Next year we are modeling 10 . 10 roe admittedly is not fantastic. These companies costtocapital is probably in the low to mid single digits. They are still more than amply profitable on that basis. I think there is room for roes to pick up. Pavel, weve got to leave it there. Thank you for weighing in on these two movers. Both getting a rebound here with the overall market. Straight ahead on the program, expedia trading higher as Hotel Bookings by its customers rise more than 20 . Well talk to expedias ceo about those results. Anything worth pursuing requires precision and attention to detail. It takes knowledge, hard work and a plan. At baird, we approach your Wealth Management strategy that same way. 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Expedias stock is building on a 60 gain over the last year as earnings beat this morning on the top and bottom line. The Online Travel giant is not, however, raising full year guidance because of extra tv advertising to promote trevogo. The ceo of expedia, good morning, dara. Good morning. Its always about the hotels and room nights booked is up 24 over last year. Clearly, you are benefitting from near record occupancy in hotels in this country. What is the fallout for you for what we are seeing in europe and ebola which took your stock down 16 a couple of weeks ago . As far as europe goes, while the European Economic environment isnt as strong as we would like it, the travel environment continues to be quite strong. We are seeing european travelers travel especially into Southern Europe which was a little weaker a couple of years ago. Areas like greece and turkey are up 50 on a year on year basis. We are not seeing the European Economic weakness translate into travel weakness. We are investing significantly in europe. Its still coming online, still going mobile. I think any weakness youre seeing broadly is going to be overcome by more and more travelers coming online, more and more travelers going mobile. Ebola, we look for it. Travel to west africa is down 80 year on year but travel for us in africa is up over 10 which surprised me. At this point, no Global Effect for ebola, something we are watching for. Lets talk about trev efrtri. When it comes to metasearch where you see all the prices from everybody on the same page, trip advisor is your biggest partner, you are saying trivago is bringing you more clicks. What does that mean for investors . From an investor standpoint, its a bullish signal for us. We thought trivago was an attractive brand, great service, great management. We invested behind that management and the growth rates have just been extraordinary. For us, it is essentially, it hedges us against their parties having a huge travel Search Engine like trivago growing on a global basis is a big positive for us. We decided q4 to invest more to accelerate growth in the asia pacific and developing regions. We love the brand and how the service is growing. You are clear this is a highly competitive environment. Priceline is advertising booking. Com on your door step here heavily. We should explain you guys and priceline have hundreds of people realtime bidding to get the inventory up there on google or whatever platform. That is the main stay of the business in many senses. What you say again and again in the Conference Call is that the cost of acquiring those clicks, what youre paying the likes of google continues to rise. People say is there a point where the Online Travel agency model becomes seriously challenged because there are so many competitors . The main stay of the business are consumers who come directly to us. The googles of the world, trip advisors of the world are new Customer Acquisition tools for us. We bring those customers to us and we introduce them to our Loyalty Programs. Its a big, big program once we get the customers loyal they come and repeat to us. We think its a very, very good formula. Prices are increasing, but the big players who have great service, who are able to bring those customers back again and again, ourselves amongst them are the ones gaining share in this marketplace. Its competitive. Youve got to be on your toes. You have to execute well. We think we are up for it. So far, i think results have shown we are. Dara, the biggest market in the world now for travel is the chinese wanting to travel internationally. They crossed that about two years ago. Credit suisse says that market itself will grow threefold over the next five years. That is clearly the market to be in. If i read what your cfo said last night, its still only 3 , 4 of your business. Now you are going to double down. Its a fragmented market that involves couponing. Should you be there or give it up to priceline with ctrip or alibaba that has a huge presence there. Weve been a significant share gainer in china. We have a local Management Team there. Its 100 billion Fastest Growing market in asia. Every one of our partners wants access to the chinese customer. We are in fully, investing behind that company. It is a very competitive marketplace. What we are able to do is take some of the profits we are making in the u. S. , et cetera reinvest in china. We are quite confident and well invest behind it. Its good to see you. Thank you very much for your time. Thank you. Crude oil continuing its slide down about 20 in the last six months. Goldman sachs cutting its forecast for brent and wti prices making a bet on u. S. Shale production. Goldmans head of Commodities Research will be joining us live post nine to talk about that somewhat controversial call. Theyre coming. 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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. Welcome back to squawk on the street. The debacle of the day is Aegerion Pharmaceuticals reported Third Quarter losses on weaker than expected sales and decreased its 2014 full year guidance significantly. As a result jeffries downgraded the stock from to hold from buy and lowered price target to 24 from 61 a share. Those shares down by about 38 so far in the days trading. Back to you. Thanks, Goldman Sachs cutting its oil forecast next year. A global swoon in prices that is well under way. We have kate kelly with a firston interview with a man behind the controversial report jeff currie. Thank you for joining us. This has been quite a reversal in the markets from a bullish period to an incredibly bearish one. Why cut your forecast now . Havent these dynamics been in play a few months here . You look at these dynamics, theyve been in play going back since 2012. Weve been longterm bearish for quite some time. Our target going into this was 90 a barrel. We just gained more confidence in that longer term bearish story. There are three key reasons. One, the forward outlook on growth weakened substantially. Not so bad today but took down expectations on china in europe going forward. Libya came back. They are producing 900,000 barrels a day the third fact is the u. S. Has been surprising to the up side in shale production. The u. S. Creates each year the equivalent of a libya. It recreates a libya each year. In growth. Overall production is much more, about 9 million per day . 9 Million Barrels per day if you look at crude. All the liquids in, 13 Million Barrels a day. Your view is we are effectively Energy Independent at this point . We are still short 4. 5 Million Barrels per day, but if you put mexico and canada into the mix, that number drops below 2 Million Barrels a day. We are very close. You got a lot of attention when you put out this call. You were bullish with 150 price target for brent. Drastic change. Why the 180 . Just you did not appreciate the u. S. Production . To have 150 price forecast, we have to go back to 2008. It was the spring of 2008 when we had our max price forecast was 148. We capitulated on the longterm bull story back in 2012. October 2012 is when we actually fully capitulated on the story. You put out a note saying near term you were constructive on prices because the selloff was overdone. We were sitting around brent 180 a barrel. We are now back 186. What was driving that, the market got so short. When we look at brent, it is outright short the first time in several years. What i found interesting in your report was you seemed to be suggesting as far as the swing producers, those who would change their volumes, stabilize the market, it was no longer opec but the United States. I dont understand how that could be the dynamic. Clearly, they are not going to do anything. Is it just projects no longer economical . I think thats the real controversial point of the piece. We are not arguing opec is not going to cut. What we are arguing is opec needs to be a second mover strategically. Wait for the u. S. E ps to cut. One is when you look at shale, shale can go up and down significantly, very easily. Shale is opecs friend. It supports prices 80 above and 0 a barrel on a brent basis. But third, the supply curve for shale is incredibly flat. So if opec tries to move around that supply curve, it doesnt do much to price. Thats the real key here. They lost pricing power. Back to the domestic market, at what point does it become uneconomic for drillers to continue what they are doing. Your Research Suggests 75, but they might keep going at a lower price. Obviously, there is some shale relatively low cost and high cost shale out there. The average is somewhere around 80 a barrel. Well have to get down in the Second Quarter 70 a barrel on a wti basis to see a reduction in capex. Thats what opec wants to see. The period which well see evidence of that will be some time in the early first quarter. I want to emphasize this morning, exxonmobils announcement, they actually cut capex from 43 billion to 40 billion. Do you believe opec is engaged deliberately, allowing the price to fall and chasing volume and not price is directly aimed at the United States . Is that what youre saying . Im not arguing its aimed at the United States. Strategically, the u. S. Is creating a libya every single year if you keep prices in that 100 range. Some are around 80 wti begins to slow that growth. I want to ask about your gold call. Youve been bearish. Now that the dollar set to have this sustained rally on the divergence of central bank actions, are you going to lower that gold call more . No. But i would argue gold was hit by a perfect storm. First the sec meeting where yellen came out mildly more hawkish than expectations. The big move was yesterdays gdp. And the third issue is look at the technicals. We broke through resistance that goes back to 2006. Significant. And that trade is working out. Thank you for having me. Thanks so much as well. I know this is the subject of your book. It is. I love talking commodities. Thanks for having me. Market check, up 164 on the dow. More after the break tigers, both of you. Tigers . Dont be modest. I see how youve been investing. Setting long term goals. Diversifying. Dip you got our attention. We did . Of course. Youre type e well, i have been researching retirement strategies. Well thats what type e s do. Welcome home. Taking control of your retirement . E trade gives you the tools and resources to get it right. Are you type e . Are the largest targets in the world, for every hacker, crook and nuisance in the world. But systems policed by hps Cyber Security team are constantly monitored for threats. Outside and in. Thats why hp reports and helps neutralize more intrusions than anyone. In the world. If Hp Security Solutions can help keep the Worlds Largest organizations safe, they can keep yours safe, too. Make it matter. Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. And often even more. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 89. 95 a month. Comcast business. Built for business. All three equity indices in the green right now. Benn willis, dollar yen hits 112. This move was propell eled by jn overnight. Absolutely. And its not over yet. We are going to continue to move and go back to numbers we have not seen in generations in my opinion. The whole function ive been saying ux what were seeing in this market someplace a fight, a war of currencies from central banks. The u. S. Led the charge to devalue. Why do you celebrate that . Shouldnt that be destabilizing . The United States is somewhat handcuffed but we have no choice to move higher. We stopped the quantitative easing and japan will start to lose its predominance in the marketplace because of its devalued currency. If im at home i have no idea what you are talking about and the relevance of dollar yen. Why is that relevant to my holding in ge or trip advisers. The value of the holdings of the s p 500 stocks you hold. If your exposure is more in the in russell 2,000 it is not as important in the discussion at least initially. I has more a subcurrent to it. But the whole currency discussion is part of the global trade. And if the companies you like to invest in, they have to adjust that you are books and earnings based on the global trade and currencies and you are going start seeing the quotes, as we have, from Different Companies that have exposure throughout the United States. But in general. It is not exposure to earnings within japan. No. If your companies that you favor, and i try and avoid mentioning specific companies but if you look at toyota and sony and japanese based companies and those are the companies you had been investing in. You have to understand that while they may see higher sales volume it may not translate to the bottom line. It has been a ferocious rally back from lows in october. Just the numbers here, the dow up 9 and a half percent from the october bottom. S p up 10. 6 . You say there is more legs to go . I do believe as a matter of fact when we were at the trough in 9. 5 i was sitting there and i told sue herrera this is a buying opportunity. The s p in particular i believe will end on a high note for the year. Will there be volatility, absolu absolutely. It may not be the case when. Volatility is here. Thanks ben willis. Princeton securities. John fortn fortt. A lot of stuff on the table. Weve have kevin oleary joining us and of course weve got gopro and linkedin in to look at. Both up more than 10 after earnings last night. And if you like ads in your instagram, if you are a facebook investor, you probably do. You are going to want to tune in. Squawk alley coming up. Etireml you outlive your money . Uhhh. No, that cant happen. Thats the thing, you dont know how long it has to last. Everyone has retirement questions. So ameriprise created the exclusive. Confident retirement approach. Now you and your ameripise advisor can get the real answers you need. Well, knowing gives you confidence. Start building your confident retirement today. Good morning. 8 00 a. M. At gopro headquarters, 11 00 a. M. Here on wall street. And squawk alley is live. Happy friday everyone and thanks for joining us. We brought the big guns in this morning. John steinberg, ceo of daily mail north america and kevin oleary will be with us the first half hour as well. We want to start with the markets in full on rally mode. Right now the dow is up 175 points after breaking through what had been its prior closing high. A ton of