possibly for profits for you. first let's check in with sue at the nyse. >> we are going to start with small caps. >> let's look at the russell versus the dow up 5% in six months. and then the nasdaq composite up almost 6% and then the s&p up 6.5%. morgan brennan is at the nasdaq for more. hi. >> that's right, the dow the s&p and the nasdaq are all up this year but not the russell 2000 which includes smaller cap companies down about 3% year to date versus the gain of nearly 8%. an 8% increase for the nasdaq, a stark difference there. the russell 2000 dropped 1.5% yesterday and hit a cross with the 50-day moving average falling below the 200 day. that is the first time we have seen that since august 2011 something that could be a bearish sign. strategists tell me this is part of investors rotation out of the high momentum smaller stocks into the less volatile larger cap blue chips, a defensive shift in light of the likely move to begin raising interest rates. small caps are much more vulnerable to changes in rates. we have seen a similar move among momentum needs in the internet. chief market strategist at jones trading says how small caps perform over the next few weeks in light of this will have more meaning than it did in 2011 since this time markets are near highs. chief market technician at mkm partners thinks this selloff could begin catching up with the rest of the markets, that there are enough warning signs to suggest a modest pull back or consolidation likely in the coming weeks. so looking and listening to all of that and looking at that the russell 2000 right now is trading down along with the broader markets down a little less than a quarter of a percent. >> thank you so much. perfect setup. will the slump in small caps drive down the rest of the market? joining me is david ellisson and andrew slemen back with us, managing director of global investment solutions at morgan stanley. morgan really laid it out beautifully, do you agree that the small caps have further to go to the down side? what is the impact on the overall market? >> they are more earning sensitive than larger cap earning company. in the financial sector they under performed because they think rates are going down. the spread is a big part of the revenue. as rates moved up the stocks rallied back but are generally down for the year. >> how do you feel about the market overall? >> i think the market is following the economy. the fed wants the economy to get better. i think this year i thought wasn't going to be as good as it was back in january. that's why. i think generally the market is where i think things are priced fairly. if you look at the bond market you have rates very low, negative yields in parts of the world. i'm not sure people understand that as well. i think the market we see here is priced every day. you can be more comfortable that the prices reflect what is happening. >> the overall market, you were watching valuations and earnings very closely and then i turn you to technology. >> i think it is just a classic september. we had a very strong august and september is usually a little bit of a risk off. i wouldn't look too much into the small cap trade. i think fourth quarter after this month fourth quarter should set up for a very good quarter for the market. and i see no reason to think this time will be different. >> before i turn you to tech let's go to rick santelli in chicago because the two-year note just went off the board. how did it do? >> a for apple. remember two-year note yields are basically hovering at three-year high yields to begin with. the yield at 29 billion two years was 0.589. the bid to cover 356 well above 342 since faeb of this year. we are really solid was close to 41% on indirect. you have to go back to november of 2011 to find a better number there. . 42% went to dealers which means 57% went to the end users. that really we are monitoring we are closest. apple has been funt and center in the news. you have liked apple but you like it a little bit less now. >> remember a year ago we were talking about a product cycle company. it is going through a period with no new product. everybody was predicting the demise of apple. it is up 100% from last summer and we have forgotten it is a product cycle stock. you have to be a little more cautious. i believe you buy good quality stocks. apple is back into favor. >> what about google? >> google hasn't performed as well as apple this year. that spread has come in. the differential is much more narrow. i think google is a much more attractive buy. apple is not the same opportunity it was last summer when it was very depressed. i think google is getting to depressed levels. >> what would you put money into right now? >> i think you put money into the domestic depository institutions in the country. that is where the safest balance sheets are. if the economy gets worse they have a strong balance sheet to survive that. >> thank you very much. appreciate it. >> the united states and five arab nations began air strikes against isis in syria last night about 8:30 p.m. east coast time. results are unclear but the attacks came from the air and sea, command centers and training centers and grounds in eastern syria were targeted. president obama made his first comments on the air strikes this morning. john is live in washington with some of what the president has to say. >> i'm here at new york at the clinton global initiative where president obama is coming this afternoon. before he left the white house he addressed the air strikes that began last night, what his critics have been wanting him to do for some time. he warned the results were not going to be immediate and this struggle will go on for a while. >> the overall effort will take time. there will be challenges ahead. we are going to do what is necessary to take the fight to this terrorist group for the security of the country and the region and for the entire world. >> the foremost challenge is getting boots on the ground, not american boots as the president has said repeatedly. he wants moderate sunni allies, the people saudi arabia, united arab emrates who cooperated and participated. the acid test is who will supply boots on the ground to join the free syrian army rebels. the treasury department introduced legislation to those who buy overseas companies and move the headquarters overseas and you avoid u.s. taxes. details on what the treasury announced. on the stocks that could be most impacted and many of them right in meg's wheelhouse in pharmaceutical and medical. >> presto is pretty much it. the idea that the the treasury department announced targeted things to do to make inversion deals more expensive for companies and lower likelihood that companies are going to want to do it and they can't eliminate them all together without an act of congress. that they say is unlikely to happen. the obama administration move while criticized by some republicans and some in corporate america got an endorsement from bill clinton talking to our becky quick. >> everything we are doing now including these inversion rules i have no problem with what -- i understand the treasury department is legally obligated to get as much revenue as is owed but we are bailing water out of a leaky boat. only two things to plug the leaks either we undertake corporate tax reform or every other country says we are wrong and we go back to doing it the way we used to do it. >> every other country is not likely to say we are wrong. >> thank you very much. to meg now. pharma industry could be most heavily effected by this. what is the status of deals we heard about and what is next? >> a number of these companies pursued inversion deals and their stocks are taking a hit today. we are looking at abbvie. the deal was expected to close in the fourth quarter. both of those companies have been down today. another is medtronnic which announced a deal to buy in june. medtronnic says it will release statements following the review. that deal is expected to close in the fourth quarter or early 2015. others affected include mylan, salix. other stocks getting hit included astrozenica. a lot of uncertainty over how this will effect deals. one banker tells me this is likely to chill activity but too early to make predictions. analysts like terry haines suggests companies could put up legal challenges including whether it is exceeding authority under the tax code and whether the plan meets legal requirements. they note the treasury hasn't stopped inversions but created uncertainty around them which at least may curb the practice. >> thank you very much. we will be watching that story as it unfolds. another one we are watching is a developing situation, police say three people have been killed in a shooting at a ups facility in birmingham, alabama. the gunman was an employee of ups and apparently was killed along with two other people in the gun fire. we, of course, will monitor the situation and bring crow the latest developments as we get them. as the housing market weakens where are the buyers and sellers markets? who has the had leverage in which neighborhoods? which neighborhood you live? >> reporter: it is important to know because two of the biggest american cohorts are being to be moving in the coming years. we will tell you which ones and who might get the best deals. given the state of the housing market do you think it is better to buy or rent right now? join the conversation. give us your vote at cnbc.com/vote. speaking of real estate, cadillac is moving. where? phil lebeau knows. >> out of detroit. it is ironic that as we speak one of the vice presidents for general motors is in michigan giving a speech about keeping detroit the epicenter of the auto industry. we will tell you where it is headed when "power lunch" returns. ♪ like, really big... then expanded? ♪ or their new product tanked? ♪ or not? what if they embrace new technology instead? ♪ imagine a company's future with the future of trading. company profile. a research tool on thinkorswim. from td ameritrade. a research tool on thinkorswim. in a we believe outshining the competition tomorrow quires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. we are taking a look at shares of lane bryant, dress barn. the company posted weaker than expected results for fiscal fourth quarter and an outlook below analysts estimates. the reason the company is citing challenging at justice as well as inventory concerns at lane bryant. the u.s. and five arab nations began air strikes last night. for the first time the u.s. used a new weapon in those attacks. jane wells is on the defense beat for us joining us from l.a. >> it's really not a new weapon, it is just the first time it has gotten to do something that it was built to do. the most expensive fighter has been a jet without a war until now. published reports say it made the combat debut. the jets were used in the first wave but the pentagon won't say how many were used and what bombs were dropped. this is a long overdue introduction of a stealthy jet which costs about $150 million a piece. it has not seen action since nine years ago. in 2011 it wasn't used in the no fly zone because it is so stealthy. it is mostly meant for air to air combat. there hasn't been a lot of need for that though it can do ground attacks. it was made. there haven't had much need for air to air which has been the problem with f 22. now, the whole program has been wound down. they delivered the last one i think 195 of them two years ago as lockheed began transitioning to the more capable f 35 which has yet to go into any action. it is still going through testing at this point in training. back to you. thank you so much. let's get a check of the markets for you. the dow jones industrial average, the last trade on the dow is just modestly to the down side but now it is down 85 points. s&p 500 off eight. for more on the trading action bob joins me once again. the fundamentals don't seem to justify the type of selloff that we are seeing. >> we got very good news out of china. a lot of concern about slower growth in china. the numbers we got on manufacturing in china was better than expected at least in positive territory. china was up. take a look at emerging markets. didn't help the rest of the world. we were expecting a bounce in emerging markets like brazil, south africa. there is not a lot of energy. i think there is disappointment on that. we are expecting some kind of bounce in the commodity complex. we have been talking about this for days on end. crude, copper, nickel, commodity markets put them up. generally it has been weak. we have been waiting for europe to do a little bit better. germany didn't have a very good day. their manufacturing indexes in europe in general were disappointing. that closed at the lows for the day. these slow growth concerns are weighing on our markets overall here. a couple of sectors are weaker. the auto complex is weaker. car max with a bit of a disappointment. that is down 10%. they had uncomparable car sales and auto nation to the down side. the only thing with a bounce is finally energy complex after having a generally horrible month. they are finally starting to see a little bit of life today. >> people are looking for value and those stocks have been hit so hard that perhaps they provide a little value. >> i am waiting for them to start picking on the bodies of some of these. the lower crude prices make it hard to justify the prices. >> absolutely. >> if you get bouncing crude they bounce for sure. >> thanks. . >> the u.s. housing market still on shaky grounds. some parts are strong and others still weak. which areas are a seller's market and which ones are turning into buyer's markets? first we want to know do you think it is better to buy or rent right now? go to cnbc.com/vote. where are the buyers and sellers markets? >> you need to know this if you are looking to negotiate on either side this fall. definite surprises and some markets changing as we speak. let's define parameters first. zillow did the survey. a seller's market is not necessarily one where home values are rising but rather one in which homes are on the market for a shorter time and homes are sold at close to or above list price. a buyer's market is where homes stay on the market longer. there are more price cuts and homes generally sell for below list. the top sellers markets are in california. seattle, dallas and denver round out the top five. interesting that river side california and las vegas are in the top ten. these markets had huge inventories but investors plowed through and wiped them out. providence, rhode island took the top spot. cleveland, milwaukee, chicago. these are markets where prices are still weak and investors didn't help that muchh the distress. demand is relatively low which gives buyers the upperhand. the two biggest cohorts expected to move in the coming years will be first time home buyers and millennials and your down sizing baby boomers. depending on the market we will see who will do better and where. we have all of it online. >> the collision of the boomers and the millennials again. i love it. >> lock in the viewer vote. is it better to buy or rent? it is a split ticket. 49% say you would rather buy. 51% say you would rather rent. >> thank you very much. new real estate for cadillac. the auto maker is leaving motown for the big apple. phil lebeau has the details. >> the french explorer cadillac found detroit and no brand has probably been identified with detroit more than cadillac over the years. now the headquarters is moving to soho in manhattan, the new headquarters in new york city. the brand under its new president is looking for a little more autonomy from the parent company, looking for an area where they have greater upscale taste and more influences in the luxury market. when you take a look at what is happening with the luxury market here in the u.s. cadillac is the only luxury brand down this year. they have some issues with the lineup but that says something with the market. new head of cadillac is looking to upgrade the brand especially among luxury competitors coming in with a new upscale top end model. this one will be coming in above other models out there. we will see that probably roll out towards the end of 2016. take a look at shares of general motors and compare it with bmw. i know it is not an exact comparison because general motors has a portfolio that includes chevy, gmc and buick. gm has not performed as well. starting next year cadillac will be calling the big apple its home. >> it will be a little more expensive for those people who have to move here. >> i think they can afford it. >> let's see. if you want to know what the iphone 6 is made of you have to tear it apart. that is what we did. we will tell you what is in it. plus josh lipton will tell you how you can trade it. apple says it has already sold 10 million of the new iphone 6 and 6 plus devices. what are the companies making the components for the smart phones and how are the stocks performing? coming up next on "power lunch." with chantix. g people who know me, to this day they say, "i never thought you would quit." you know, i really didn't either but chantix helped me do it. along with support, chantix (varenicline) is proven to help people quit smoking. it gave me the power to overcome the urge to smoke. some people had changes in behavior, thinking or mood, hostility, agitation, depressed mood and suicidal thoughts or actions while taking or after stopping chantix. if you notice any of these, stop chantix and call your doctor right away. tell your doctor about any history of mental health problems, which could get worse while taking chantix. don't take chantix if you've had a serious allergic or skin reaction to it. if you develop these, stop chantix and see your doctor right away as some can be life-threatening. tell your doctor if you have a history of heart or blood vessel problems, or if you develop new or worse symptoms. get medical help right away if you have symptoms of a heart attack or stroke. use cautiowhen driving or operating machinery. common side effects include nausea, trouble sleeping and unusual dreams. i'm a nonsmoker; that feels amazing. ask your doctor if chantix is right for you. means keeping seven billion ctransactions flowing.g, and when weather hits, it's data mayhem. but airlines running hp end-to-end 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 what's coming - and are ready for it. make it matter. before the break we were talking about cadillac. same store sales rose less than expected. stock is not rising. it is down 10.7%. >> one of the most anticipated electronic devices in years. what exactly is in the new iphone 6? we got our hands on one and tore it apart. let's take a look. ♪ ♪ ♪ >> here is a new one right here. is that your baby on there? it just went dark. there is the new one. the first time i have seen it, 1:29 here in the east. that is beautiful. >> senior director at ihs technology and did a tear down of the iphone 6. what did you find and specifically did you find any really new component makers in that phone? >> yes, so thank you for having me. we have torn down the iphone 6 and the 6 plus. what we found was a lot of what we expected to find. in fact, the rumor mill is very efficient when it comes to iphone products. we know relatively well in advance what is in there. of course, there is a larger display. the iphone 6 has 4.6 inch diagonal and 6 plus has 5.5 inch. you are talking higher resolution. you are talking lg display and japan display. in terms of processing power of course there is a lot more power in the new iphones. you have an a-8 processor. that was previously where you had the a-7 you had samsung of the sole supplier in previous generations. now they are splitting the business with taiwan's and so they are split. >> i am going to interrupt for just a moment for breaking news. we will come back to you on the other side. >> health and human services is putting out a new report today looking at what it is going to be like in terms of insurance offerings on the federal exchange market place and the state market places. they say that for 2015 they are seeing 25% more insurers going on to those exchanges to offer plans. they say that there are 77 new insurers who will offer plans on the market places and insurers like united health last year only offered plans on a handful of exchanges and this year will up it to two dozen or so. they say the competition is strong and prices are going down and secretary of hhs making comments at the brookings institution says they are also working on the market place itself. she says we are prioritizing the most important items and areas to improve and focused on giving ourselves the appropriate time for testing and very focused on security. >> thank you very much. back to andrew now on what is inside that new iphone 6. let me come back to my first question. are there new vendors that are big winners here? are there former vendors to apple in the iphone 5 or 4 whose positions have been eroded in the new architecture? >> that is a good question. in some of the smaller components we see new players coming in. a censor seems to be displacing sd microelectronics. you have a new position with the nfc, the fact that apple has added nfc. you have nxp for main controller but a new chip from ams with nfc booster that we haven't seen in any other design so far. >> so the nearfield communications that enabled the payment system, is that correct? >> that is a new addition to the iphone line. most of the vendors that we see in the new iphone 6 and 6 plus are the same vendors that we have seen for years. so the incumbents have maintained their positions. >> what are you going to tear down next? >> so next we are doing the tesla s. we have that in our garage, so to speak, right now. >> love to see you working on that. inside the model s next week. thank you very much. i appreciate your indulgence on the breaking news. how do you trade them? josh lipton has the ideas. >> there is no question that apple is selling its new smart phones around the world at a blazing clip. stock story behind what is behind the iphone 6 and 6 plus is more of a mixed picture. corning is down 5% since the september 9 announcement. there was a lot of speculation that apple would migrate to sapphire glass but they did not and thad stock down 32% since the announcement. you want to look at the chips inside the new iphone there was a big switch as your guest was mentioning apple used samsung chips but now looks like apple is going with taiwan semi conducters. that stock hasn't done much since september 9 but still up nearly 20% for the year. finally a lot of excitement around these new iphones is about new services such as wireless payments. nxp semi conductor makes the nearfield communications chips to assist in wireless payments. that stock flats it september 9 but that could be because investors aggressively piled into this name up 55% so far in 2014. thank you very much. let's check in on the bond market on the back of the two year note option. >> it was a good auction and gives us a lot of info. we are close to 40 month highs interms of the two years trading. everybody shows up for the auction which may mean they feel it is safe to put their toe in the water. let's look at a ten year because it is a little bit better chart. you can clearly see yields drop after the one ended. we are hovering at 15-month highs at the dollar index. back to you. alibaba down for another day. the babagetting drained. stock off 5%. has baba already hit a top? join the conversation. go to cnbc.com/vote. we will be back in two minutes. whenwork with equity experts who work with regional experts who work with portfolio management experts that's when expertise happens. mfs. because there is no expertise without collaboration. virtually all your important legal matters in just minutes. now it's quicker and easier for you to start your business, protect your family, and launch your dreams. at legalzoom.com we put the law on your side. is the downward move in the small caps enough to drive down the rest of the market? joining me -- >> the russell seems to have hit key levels that technicians look at. is the broader market strong enough to survive that kind of turn in the small caps? >> yes. >> okay, then. >> yes, everybody loves it because the term death cross was brought in everybody loves listening to that term. the fact of the matter is i was chatting with mark before i came over. it has been a good indicator that the lows may be in with that kind of movement. that being said i think what we have been seeing since the beginning of january is a market of stocks. the consolidations or corrections have not been in the stock market but in the stocks. in this case the russell 2000 is going through its correction phase down 6%. also the s&p down 6%. if you look at the chart the other thing that is moving this market is the central banks. the dollar is up 6%. i think that is what you have to look at. >> the broader market, the russell is down 6.5% or whatever it is. the broader market is off the dow and s&p are off 1.5%. i agree i think it is happening in the one sector. i don't think it flows to the broader market. i don't think people panic about coke and ge. >> the market went down 85 points. following europe there doesn't seem to be fundamental stuff to hold on to. >> i think it is last night, the bombings, the geopolitical stuff, a lot of noise right now. and it feels a little bit apathetic. it doesn't feel like people are throwing everything out the door. >> the market is nervous in september. that is typical. september traditionally is a much worse month than october. it is really september. >> i have been around as long. >> thank you. >> my pleasure. >> thank you, kenny. >> alibaba down for yet another day. the stock off 5% since its ipo last friday. has it topped out? join the conversation. go to cnbc.com/vote. facebook making a new move to take on google. will that pay off? julia has that part of the story. >> facebook is unveiling new tools for advertisers next week. i will tell you why they could give a big boost to facebook's bottom line. it's monday. a brand new start. your chance to rise and shine. with centurylink as your trusted technology partner, you can do just that. with our visionary cloud infrastructure, global broadband network and custom communications solutions, your business is more reliable - secure - agile. and with responsive, dedicated support, we help you shine every day of the week. centurylink your link to what's next. that's keeping you from the healthcare you deserve.. at humana, we believe the gap will close when healthcare gets simpler. when frustration and paperwork decrease. when grandparents get to live at home instead of in a home. so let's do it. let's simplify healthcare. let's close the gap between people and care. bed bath and beyond downgraded saying the retailer faces pressure from online competition. phillips planning to split the 120-year-old company in two creating a stand alone lighting business. stock is up 3.5%. and burger king says it is still going ahead with its plans to buy canada's tim horton's after the treasury announced new moves to make it harder for companies to make so-called trax inversion deals. sth stock is down better than 2%. facebook is set nout to release a new advertising platform to take on google. the move comes as brands reconsider how much they want to invest on the social media giant. >> on monday sources tell me facebook will unveil a new ad platform called atlas designed to better target consumers. perhaps most important facebook will unveil tools to help brands buy ads on facebook but targeting facebook members when they visit other sites across the web. facebook says they won't comment. this move will help facebook take on google's dop nns of online advertising and has advantage of detailed information about consumers and the ability to target ads across devices and track behavior from the desktop to mobile devices to offline brick and mortar purchases. the upcoming launch comes as brands shift resources away from facebook brand pages like this one and towards their own sites. the social video company reports that the share of clicks that are driving consumers to brands own sites more than doubles from 2012 to 2015 while share to clicks fell over the same period. ad industry sources tell me though brands don't want to build up hubs on facebook the way they once did that should not hurt ad dollars because they see facebook as a valuable way to drive traffic. sarah jessica parker made them famous. jimmy choo shoes. seema mody is live in london with details and how luxury stocks are performing. >> luxury shoe maker jimmy choo planning to go public on the london stock exchange. the ipo would value the company at $1.1 billion. jimmy choo will use proceeds to expand presence into asia specifically into china but is strengthening presence in china a step in the right direction for jimmy choo. prada citing weakness in china. european luxury players are up during the same time period but down on the year all of which had benefitted from an influx of chinese consumers as well as buyers from russia and india. analysts say fewer russian tou tourists and week economy could result in luxury stocks using their glits. jimmy choo was made popular by the show "sex and the city." in china "love from a star" played a big role in making the shoe popular there. alibaba shares down again in today's trading session by almost 2.5%. the chinese giant off 5% from closing price on friday. has alibaba already hit a top? go to cnbc.com/vote. is alibaba's jack ma worried? he spoke at the clinton global initiative today. >> people have high expectation of you to make money. but society has expectitation to solve social problems. i think we as the internet company if you think about making money think about how you can help the others and people would like to get closer to you. >> so what do you think? has alibaba hit a top? go vote at cnbc.com/vote. now to mary thompson with the market flash. quick look at the weather. nice day, beautiful tomorrow. tomorrow is full of promise. we can come back tomorrrow. and we promise to keep it that way. driven to preserve the environment, csx moves a ton of freight nearly 450 miles on one gallon of fuel. what a day. can't wait til tomorrow. there's a difference when you trade with fidelity. one you won't find anywhere else. one-second trade execution. guaranteed. did you see it? in one second, he made a trade, we looked for the best price, and the trade went through. do the other guys guarantee that? didn't think so. open an account and find more of the expertise you need to be a better investor. health can change in a minute. so cvs health is changing healthcare. making it more accessible and affordable, with over 900 locations for walk-in medical care. and more on the way. minuteclinic. another innovation from cvs health. because health is everything. in a sea of red welcome green, best performing stock. the fertilizer company in merger talks with norway's yara saying no guarantee that a transaction would result but still is up 6.25%. power run down time. john ford is here. morgan brennan is there. the voting continues on cnbc.com/vote. do you think alibaba shares have hit a top? of course, it opened way up from its initial offering price and peaked in the 90s. now down a little bit. down $2.19 from the open it is down 5%. has it hit an intermediate peak? >> i would say yes but then i remember singles day november 11, 1111. alibaba typically puts out numbers and say how many billions of dollars they did on singles day. >> what do you say? >> i say that ipo price is $68 and even though we saw it run up to 99 on friday you can make the argument we are in correction territory it is still up $87 i think right now investors after a frothy debut i think investors are pulling back and taking profits and basically assessing the company a little better. >> let's lock in the vote. 53% say yes it has hit a top at least for now. and no 47%. let's move to another tech stock. apple has sold a record number of new iphone 6 and 6 pluses. so desirable fightvise broken out at stores. should apple be providing security or local police be laying it all in their laps? >> having been at the iphone 6 launch in new york city last week i saw a lot of this up close and personal. i didn't see anybody duking it out but there was a lot of apple staff and they were keeping people pretty much in check. there were actually a lot of police officers, as well. i think this is more indicative of a larger trend that we saw at the flagship store, the fact that you are seeing the phones flip on to the black or gray market in places like china. according to some of the reports out there in places like connecticut at the apple store a lot of the arguing and fighting is between some of the well organized flipping groups. >> the flippers. >> we don't want to see anybody hurt. but they really want to hire dawn king more than security. people want the phone so badly that they are in line fighting about it. let's talk about the nfl naming dawn hudson as new chief marketing officer. she spent 11 years at pepsi co where she rose to president and ceo of pepsi cola north america. a good move by the nfl? some might ask what took them so long? >> let's keep in mind that all of these scandals have erupted to the level they have come to in just over two weeks. in the last week alone the nfl either appointed or promoted five women to executive positions be it advisers or this new one with dawn hudson. i think this is definitely a step in the right direction as far as putting the focus on bringing more female voices to the nfl. >> that is really the critical point here. if more women had been in the rooms where the discussions were being had about what to do on ray rice or prior instances of domestic violence maybe the outcomes would have been different. >> there is title and there is power. the organization will show over time that it is doing more than window dressing by giving the women the power to change the organization and show they are hiring the right people in those positions. >> would you drink beer flavored coffee? starbucks testing it in florida and ohio. no alcohol in the dark barrel latte made with espresso. i like beer and coffee. i think they should taste like themselves. >> i don't get diet cake. i don't get decafcoffee and i don't get nonalcoholic beer. i don't get coffee that tastes like beer and has no alcohol on it. sdpl this confuses me. is it an upper or downer? both are acquired taste. >> i guess they both could be foamy. >> they could but -- >> doesn't work for you. >> you got to show me on this one. >> let's see what is coming up on "street signs." are the markets at risk or do problems offshore make the u.s. look a whole lot better? we will debate that. the stocks will hurt the most and airlines all lined up for most profitable to least. lots of things coming up on "street signs." "power lunch" is right after the break. it takes knowledge, hard work and a plan. at baird, we approach your wealth management strategy that same way. as an employee owned firm we have the freedom and resources to create customized financial plans built to last, from generation to generation. we'll listen. we'll talk. we'll plan. baird. (shouting) location. here's the location that matters the most. here. or here. or here. it's wherever this is. to get customers to come here and stay here, you're going to need an app that connects to all your systems. so they can bank, shop, do what they need to do, and you gotta do it fast. before the competition does. it's tough out here; you better be on the right cloud. today there's a new way to work. and it's made with ibm. markets sold off a bit since we came back. dow jones was briefly down 99 points. s&p 500 -- there are three winners right now. cf industries and pioneer natural resources all have significant percentage gains. >> thank you very much. it's been another busy day on "power lunch." that will do it for this tuesday edition. >> "street signs" begins right now. are investors way under estimating risk? treasurely after mergers, all of that topping your headlines today. >> two hours left in the session. let's get right to our market report. what are we seeing in the treasury? seeing safe haven flows? >> you are seeing safe
today's battle for control and all of the issues at stake in just a few minutes. but first, we have a round up of the morning's other top stories. joe talks about it. oil prices falling sharply, expanding losses for a fourth session. check this out right now. you thought this was bloody yesterday, down another 2.6% this morning. 76.70 for wti at this point. saudi arabia cutting prices to the united states. the exporters battling for market share here in the world's largest energy consumer, nation, also weighing on prices. signs that opec is ready to curb outputs. oil prices are down more than 20% from this year's peak in june and, andrew, this is a huge deal because, in saudi arabia, they can produce that oem oil for about $30 a barrel. here in the united states, if you start looking at fracking and some of these other techniques, it's more complicated, it's more expensive, and it costs somewhere between $ 6/0 and $63 on average to get some of that oil on the ground. >> we've got the number of stocks on the move to talk about this morning. online coupon company retailmenot is announcing its cfo has resigned. no word on why. the company's quarterly forecast falling short of estimates. sprint, we should tell you, reporting a bigger than expected quarterly loss. it's also announcing a 2,000 job cuts, as it tries to trim costs. of course, that company has a new ceo. still, 86 days in, they've done a lot of things. we'll see what they end up doing at that company. hopefully we'll see them in the next quarter or two. some of the things that they're doing coming to fruition. herbalife's earnings and revenue missing the mark and the maker of weight loss and nutritional products slashing its full year forecasts. aig reporting better than expected quarterly earnings. the results helped by performance at its core insurance operations. the company authorizationing more share buybacks. and one more corporate story of note this morning, jpmorgan says the justice department is conducting a criminal investigation into its foreign exchange business. the bank is setting aside more money for legal costs to almost $6 billion, more than it had previously reserved for that category. so they're still in a legal suit. it ain't over yet. >> it's like she loves me, she loves me not. and retail, capital m, and they didn't put it in there, right? >> let's check on the markets this morning. yet, sort of up, sort of down, but not too bad and not too bad today. i don't -- if you think the markets wait to see what happens in the election -- >> >> yeah. and wait to see what happens in oil, too. >> there is a saying if you want to live like a republican, vote like a democrat. you've heard that saying, right? yesterday they were saying that a couple guys were saying if the republicans win, i expect a big bounce in the markets. the democrats argue that it's always better to have a -- >> always. >> democrats argue that it's always better to have -- somebody hit a correlation of all of the ways the government has been organized since world war ii. the market has done best when you have a democratic president and all-republican congress. >> you know, a lot of times i think that there's lags, there's leading things. you never know the composition. most people don't take it that far. they just take it democratic president or republican president and they look at things based on that and come up with all these numbers that i don't think necessarily are -- >> when you have a small number of cases, it doesn't necessarily prove that. >> the ten-year is at 232. 237 by the end of 2015. here is the dollar against the euro, 1.25. pound, 1.59. finally, let's check out gold. some people say it's gold with us moving one way and the rest of the world moving the other. >> a number of races are too close to call at this point, so john harwood joins us in the studio. i said my number is 58. 58 republicans and you agreed with that. >> no. >> you did not agree with that. >> how did you get to 58? >> you could get to 58 if republicans win every tossup seat. there's ten of them. >> that sounds good, yeah. >> and if they win virginia, that gillespie stages a miracle comeback to beat mark warner, terry wins in michigan and somehow al franken gets taken out in minnesota. >> there's no way minnesota is going to let a comedian -- from -- i love "saturday night live," but serious think? >> i mean, he is quite likely to win. >> no, i know. >> it is a breeze, not a strong win. you said last week definitely not a wave. you could surf this wave at this point, couldn't you? >> well, you know, it's a little bit of a distinction without a difference. you've got a bunch of close races. it looks as if republicans are going to win most of them. they're likely to win the senate. i'm thinking 52 seats or so. >> 52, 53, yeah. >> that is a very good night for them. and a wave, you know, in the house, we're always talking about small numbers of seats changing hands because there aren't that many contested. so how do you call something a wave if you only win a few house seats and in the senate you have a lot of close ones. >> did biden, is he speaking for the administration the last couple of days, do you think? >> that didn't come from the president. you remember gay marriage, that started with biden. >> i think biden has his own ideas. >> the question is whether they can get a compromise. >> that didn't happen in the last six yearses. >> well, it actually did. >> so you think that that was not a news item you led with, biden saying that in the last couple of minutes? >> i mean, who says they won't compromise? ted cruz and that's about it. >> yeah, no, i was thinking of the other side. i don't see the president moving a lot one way or the other. he's not going to abandon his principals just because the republicans win a couple of seats in the senate. >> but his principals aren't necessarily at odds with things that compromising would be -- >> or corporate tax reform, something like that, you mean? >> yeah. you had 16 republicans vote for that immigration bill. that's a pretty large number of the republican caucus. the problem is with the house. it's not with the senate. >> how can how would they compromise with the house on that front? what kind of an immigration bill be something that could pass both chambers and that the president would sign off on? nothing.. >> i don't see that happening and i think the president is going to take executive action to legalize a substantial number of people unilaterally, which is a remarkable thing that we haven't, you know -- we hadn't entertained that possibility that a president could do this. he's really going to push the edge of -- depending on what the final order is, but most people think it's going to be several millions of people granted legal status. i think it's going to be tough. it's obviously going to go to court. there will be a constitutional issue raised against it and -- >> so where do we come up with compromise on legislation that both sides can actually agree on? >> very few. trade deals are a possibility. you have a president's negotiating a trade deal with europe and one with asia. i think you can get the two sides agreeing on that. corporate tax reform in theory is something they can agree on. but i don't expect it to happen because of the larger political dynamics where republicans want to link it to personal tax reform, which is much more difficult to do. you could have some infrastructure spending. you have the republicans who want too much some infrastructure, not on the scale the president wants and that's a potential area. but i don't see a lot. >> the runoff stuff is hard to understand, obviously, because it -- you know, you see them where the democrat has a higher vote on the first round and then someone leaves and you add the two together -- >> you have two conservatives running against landrieu in louisiana. she's not likely to get to 50. you'll have a runoff in december and she would be favored to lose that race. >> georgia looks like it's possible it's a tide turndown and maybe purdue wins 50 on today. >> could be. i wouldn't expect it. >> really? >> i would expect georgia goes you to a runoff. that would be in january. but purdue will also be favored in that runoff. >> that's all we need. that's going be like hanging chads. >> and maybe like tonight, because there are three seats that republicans are favored to carry, that may not be resolved tonight, alaska takes a long time to count votes, very far flung rural, you know, voting precincts. we could have a -- we could be pregnant with a republican senate, but not have it delivered for several weeks or months. >> you're going to take this again, aren't you? is that where you're going with -- the pregnancy, because they couldn't get birth control from the republicans, is that why? the republicans didn't let them have birth control. >> just be a little late. >> i like the analogy. >> and there's no pitossin for that. >> you know it's coming. >> i'm offended by it. >> did you see this morning money today, anthony chan and jpmorgan, did you see the report? >> no. that's what i was reading. >> i saw that, but 6% when the incumbent in the white house gains seats in the white house? >> i'm sorry, what? >> not that the s&p soared 11.9% in the final two months. >> oh, yeah? you said those words? >> 12%, yeah. i didn't think you were listening. >> tlit was. i thought i was listening, but then i saw 11%, 12%. >> you don't lisp to becky? >> no. i try to listen to becky. i try not to listen to joe. >> do you listen to joe more than electricky? >> no. >> i think you are admiring your new tie, your new election tie. i do like it. it's my holiday tie. i thought you were mention -- >> i like you. >> okay. i'm done. >> a happy idiot. no, i'm not -- >> but i am a happy idiot. >> a new one? >> yeah. a new song. we have to play that if we can find it. >> thank you, thank you. i know you have a very long day. >> and we will be here all morning. >> we may not have an answer by tomorrow morning. >> we'll be back tomorrow morning to discuss the pregnancy. >> it sounds good. when we come back, we are going to head to ireland for the dublin webb summit. some of the biggest names in technology are on hand. after the break, we'll catch up with eva langoria. she's been doing a bit of sight seeing and eating ahead of this big event. and later, if there's any doubt steve jobs was a big personality, another actor turning down the chance to play the big tech on the screen. we'll find out on who and why when "squawk box" comes right back. big day? ah, the usual. moved some new cars. hauled a bunch of steel. kept the supermarket shelves stocked. made sure everyone got their latest gadgets. what's up for the next shift? ah, nothing much. just keeping the lights on. (laugh) nice. doing the big things that move an economy. see you tomorrow, mac. see you tomorrow, sam. just another day at norfolk southern. a little shot of the nation's capital under construction. renovation right now. another actor playing down the role of steve jobs. christian bale, ee krauing from apple movie, deciding he wasn't right for the part. leonardo decap reno pulled out of consideration. the project was expected to begin shooting this winter. the screenplay is written by my namesake, but unrelated allen sashgin. sarkin. >> at first i heard ashton kutcher was doing it, i thought no way. >> the book was great. the film that's ashton did was based other books and other things. >> christian bale is -- i think he's insane, but he's great. i would have been perfect. >> you saw american hustler? he's fat with that comb over and -- not that there's anything wrong with a comb over, anyway. >> let's check on the markets this morning. if you're taking a look at the futures, you're going to see right now, at least, that things are under a small amount of pressure. dow futures down by about 28 points below fair value. s&p futures off by 5 and the nasdaq down by 10. oil is the big story, though. this could determine where a lot of markets end up trading. another down day today after falling below $80 yesterday. you'll see a decline of another 2.7% this morning. all the way down to 76.66 for wti. that is something that's going to move a lot of different markets today if we continue to see these pressure. seema mody joins us now with a special star in dublin, ireland. she's there covering europe's hallmark tech event. seema. >> that's right. we've been speak to go several entrepreneurs as well as tech titans about whether entrepreneurship is the answer to europe's economic woes. we've also been exploring and discussing technologies that have been presented here at webb summit and the important role it plays, not just in corporations, but to media personalities. we're going to bring in eva langoria, a well known media personality. thanks for joining us. >> thanks for having me. >> how important is that to you as a media personality and in building your brand? >> well, it's absolutely important. i mean, when they asked me to come here and speak about my philanthropy and my entrepreneurship, i thought, that's so great because i've always tried to unite the two and the way you do it is through technology. if it wasn't for social media, i wouldn't be able to get the message out about all the philanthropy i do. technology has pretty much disrupted every other aspect of our lives, except in the classrooms. we still sit at desks, we still look at a chalkboard. it's my hope we can integrate more technology into educational systems. >> and you think in order to be a successful media brand or actress, you have to accept the fact that we live in this visual age? >> yeah. i think you have to accept the fact that we live in a global community. you no longer just live in the united states. we are affected by everything that goes all over and around the world and so i think once you accept and acknowledge that, you're able to understand the way to reach the rest of the world is through technology. >> you're the executive producer of food chains, which debuts on november 21st. it explores the current -- of farmers in the u.s. tell us why farmers are such an important issue and something that you decided to make a film. >> this is my second documentary about farm workers. agriculture is the backbone of many economies in the world and it's still very important, obviously, in the united states. sometimes when people think of exploited labor, they think of china, they think of the ivory coast, but they don't think about the united states. and so for me to be able to humanize the issue and what's happening in our own backyard in the united states with the exploitation of cheap labor and we have an entire industry completely depend i can't answerant upon immigrant labor and this film shows the food chain, how a tomato specifically gets from the harvest on to your table and what happens then. >> you know, it's interesting because at cnbc, we've been covering the economic data that's been coming out of the u.s. which suggests that the u.s. economy is improving. but the research you've done with your documentary on farm labor and that argue, of course, plays a big role in u.s. gdp, would you say that the economy isn't, perhaps, allude to go or the economy isn't improving as much as the data is suggesting? >> well, i can't answer that because i'm not an economist. but what i can say specifically about the documentary, about the farm workers is we are the most well fed nation in the world and the people who pick our food goes to bed hungry. they do not have access to that economic mobility like others may have. >> your foundation recently partnered up with warren buffett's son. can you tell us about that? >> yes. howard is a farmer so howard and i do a lot of work together in central america, in mexico for farm workers there. but also we partnered on an entrepreneurial program. we have the buffett/langoria fund that helps women gain access to capital and business training to start their own businesses. >> okay. see va langoria, we'll leave it there. guys, back over to you in the studio. >> great, seema, thank you. that was great. >> i heard her speak recently. she seemed very concerned about farming issues. america has been worrying about. you're not eating organic, you're eating food that's been sprayed and therefore all the workers who are working on the food have been sprayed. >> right. >> you were listening to her, i noticed. i mean really closely. >> i listen to everything that becky says. >> in that case, i looked at you and i was going andrew, andrew. >> compelling television. still to come, we're minutes away from alibaba's first earnings report.. trading now above $100 a share. la alook back at the man behind the mega chinese company. as we head to break, check out the list of the most clicked names on cnbc.com. more squawk in just a moment. ♪ there's confidence... then there's trusting your vehicle maintenance to ford service confidence. our expertise, technology, and high quality parts means your peace of mind. it's no wonder last year we sold over three million tires. and during the big tire event, get up to $140 in mail-in rebates on four select tires. ♪ for tapping into a wealth of experience... for access to one of the top wealth management firms in the country... for a team of financial professionals who provide customized solutions... for all of your wealth management and retirement goals, discover how pnc wealth management can help you achieve. visit pnc.com/wealthsolutions to find out more. no question about that. but your erectile dysfunction - that could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a free 30-tablet trial. good morning. welcome back to "squawk box." i am joe kernen along with becky quick and andrew ross sorkin. it is election day, timely, and beyond the battle for congress, there are some interesting ballots, ballot initiatives in california. there are votes in berkeley and san francisco to raise taxes on sugary drinks. supporters say the new one cent per ounce tax would reduce consumption and battle obesity and diabetes, but the american beverage association and its members are spending big to stop it, at least $2.1 million, or $27 per eligible voter. >> hmm. >> i think that's cheep to prevent it. >> so tax it, don't just outlaw it. >> might be okay with that. >> we've done that with cigarettes and other things. >> cigarettes, sugary drinks. how do you feel about that? >> i don't like that at all. >> what are you going to use the tax for? >> yeah. >> okay. so goes. anyway, we've been watching stock markets, the stock market today, bites really the oil market that's been getting a lot of attention. the price of crude oil plummets once again this morning. it's down by another 2% at 76.70. voters heading to the poles today, markets may continue taking a wait and see approach at least until there's some clarity after the midterm elections. the outcome of these elections may determine the market's direction for the next few days, months or even years. joining us right now is john lynch, regional chief investment officer at wells fargo private bank. right here on set with us, karen cavanaigh, senior market strategist. karen, i know you look at what's been happening with washington. and your basic advice is telling people don't pay too much attention to washington. pay more attention to other things happening in the markets. >> well, absolutely. the fundamentals are going to be the driving force of the market. but in the short-term, everybody is going to be looking at washington. >> and the government shutdown. and in the end, it's a lot of noise. but the market plows ahead based on the fundamentals and those are the corporate earnings. corporate earnings are doing just fine. in fact, they're better than expected and coming in strong. >> what happened a few weeks ago? why did everyone panic and bring stocks down by almost 10%? >> they did panic. i think they're doing a little too quickly. the fundamentals were strong. it this wasn't like a 2008 scenario where corporate earnings were falling apart. in fact, corporate earnings were trifkt and we just started earnings season and investors panicked because of global growth. but that's not really a big story. we've been looking for global growth. i think the turning point was really when we saw the numbers that were not very good and the ebola and investors do, when there's a little bit of volatility, they head for the hills. and instead of looking at those underlying fundamentals, which are still strong, and, in fact, the u.s. economy is getting stronger. the manufacturing numbers we had yesterday were very good and those are indicative of a better economic back drop. so with corporate earnings, we're going to continue to forge ahead and there will be more volatility as we exit from qe and the fed is not guiding us as much any more. so the investors have to be -- of that. they have to know that that's what they do. instead of looking for a place to hide out, they say i want to be broadly diversified because then i don't have to worry about that. they keep getting gains. people keep buying and selling and it's a long time looking for that best performing asset class and really broad global diversification. it's huge. >> john, which stigma do you pay the most attention to? because as karen just laid out, a lot of different ways that you could look. if you were watching ebola, if you were watching some of the numbers coming out of europe and germany in particular, if you're watching china, those are numbers that could spook investors. but there are underlying strengths particularly here in the united states. what are you watching? >> absolutely. good morning, becky. i think karen made some supplements points. when you see the strong manufacturing number yesterday, you know, ebola and the germany numbers, certainly accelerated the decline a few weeks back. but, you know, 5% revenue growth, 7% earning eggs gains, that can make up for a lot of sins. we saw a pretty good recovery. i think going forward, continued 3% economic growth in the fourth quarter appears we're tracking for that. looks like we'll do about 3.5% gdp in 2015. i have to think if you're looking at numbers like that, 75ish on oil should be a bottom. >> $75 should be a bottom, but we may test that today, skraun. what happens? >> oh, i'm aware of that. i'm painfully aware of that. and i just think that the saudi arabia news threw everybody for a loop. but on top of that, the bank of america news threw everybody for a gain last week. when you look at 3.5% global growth, i think the situation not as bad as investor feared just a couple of weeks ago. >> when you say painfully bad -- >> yeah. that's exactly what i was going to say. i'm sorry, john, got a lot of money still invested in that group, i guess. what do you mean painful? it's not painful to us. it's painful to saudi arabia. did you think 85 was the bottom when we were at 87? yeah, i could call bottom at 75 when it's at 76. >> well, yes, thank you for pointing that out, joe. >> i'm sorry, i was asking. i didn't know -- >> production costs. production costs and when projects are viable in that $75 region, i think that's really the demarcation line, if you will. >> so would you change your mind? i'm gegs you've been long energy stocks. would you change your mind at this point? >> certainly not, certainly not. we think energy and the commodities space in particular, we recently upgraded that maybe four or five weeks ago. and i think giving -- again, 3.5% global growth, looking at the earnings numbers i've suggested earlier with 6% or 7% earnings growth, 2% yield, we think equities can climb to 2200, 2250, 14, 15 months out. >> i guess the different situation with oil right now is that it trades only in dollars and the u.s. federal -- >> right. >> the u.s. central bank has been very clear that it's moving away from quantitative easing towards higher rates eventually. and you have the rest of the world, including the bank of japan who are all getting much more involved with quantitative easing at this point. that may explain some of the disconnect between oil prices being down, even as global gdp continues to climb. is that something that changes all past looks at oil, all past trades? >> i don't necessarily believe so. i think we have to reframe the discussion on the currency on the dollar. i think the dollar is less weak. i don't think we should consider it strong just yet. if the dxy is 85, 87, on that level, i don't consider that strong. it may be a convenient excuse that we thought many companies would use in third quarter earnings and thankfully we were spared that issue. i think if you get to 1.20 like we were 10, 12 years ago, 110 on the dxy, i think that's when the strong dollar begins to impact overseas opportunities. but i do believe, you know, if we're simply less weak on the currency right now. that's simply a pretty good opportunity. much like we've seen in the past couple of years. it's good, not great for domestic and global growth. a slightly stronger dollar, if you will, a less weak dollar. i think bodes well for the energy space. >> karen, how about you? do you have any thoughts on the dollar or how we make sense of all this given the central bank being so active and moving in different directions? >> the fall in the price of oil is a good thing for u.s. consumers, a good thing for u.s. companies, it's a bad thing if it's an indicator of slowing global growth. i think we're going to see some good things for the forurth quarter. i think we'll see an increase in consumer spending. latest retail sales number we had was not good. i think its will be good for the overall u.s. economy at least for the fourth quarter. we don't expect it to fall that much more. a lot of these projects, people are worried about all the shale oil projects. the big point now has gotten lower. and it used to be the break even point. >> and now it's like 66. >> yeah. as technology comes on board and the break even points get lower. so it is concerning if it is a predictor of lower growth global. but right now, i think there's a lot of surprise and kergsz going on. so it's going to be a good thing right now for the short-term and for the u.s. consumer. >> karen, thank you for coming in today. john, thanks for joining us. >> thank you. let's talk about some auto news rite real quick. hyundai and kia will be paying $350 million in penalties to the u.s. government. the carmaker is accused of overstating fuel economy ratings. u.s. rel laters say it will examine whether honda failed to report deaths -- >> is it honda or hyundai? >> i'm going to get you the right answer because maybe it's both. but we should -- we started with hyundai. >> the faulty takata parts are part of a massive review. record sales in the u.s. over-shadowing the impact of a slowdown in china forney san. coming up, his company just went public. now he's part of cnbc's next 25 list. a profile of alibaba's jack ma, china's richest man. and a tight rope stunt drawing big ratings, but is this a trup troubling sign for where television is head is in the is the entire industry jumping the shark? and as we head to break, a quick check off what's happening in the european markets right at this moment, next. not much happening. from fashion retailers to healthcare providers, jewelers to sporting good stores, we provide financing solutions for all sorts of businesses. banking. loyalty. analytics. synchrony financial. engage with us. sometimes they just drop in. always obvious. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. welcome back, everybody. dow is down by about 28 points. s&p is off by 5 and the nasdaq off by 10. in earnings, dickinson beating the street on both the top and bottom lines. earnings at dish network, falling short of estimates of revenue. revenue was basically in line, but you see this morning, that stock is trading higher. time earnings and revenue topping estimates. that stock at this point is unchanged. and 2014 marks cnbc's 25th anniversary earlier this year. we revealed our list of the 25 rebels, icons and leaders from cass lows to steve jobs. they had the most impact in the world of business over the past quarter century. now, though, we're turn to go our list of the highest 25 of the future. in his own words, here is jack ma. ♪ ♪ >> the internet is a great treasure island for people. and we need a path for them. they can invest in alibaba, definitely. we focus on heallping small business, we focus on helping them make money. by helping other people making money, we make a lot of money. there are lucky people at this stage that are using internet, internet is something that you can change people's lives, we can create more jobs. what we want to see, the computer and service that a lot of human lives, a lot of the hopes, that is the key. >> we hope in the next 50 years, we say this is a company like microsoft, like ibm. they change and shape the world. >> i believe in an entry. if you want to be a successful company, you have to learn how to solve a problem of society. instead of catching one or two opportunities. everything should be transparent. everybody should be connected to each other, help each other in the ecosystem. we are entering the century of the small. the last century, big was beautiful, big amount money, big, larger skills. now it's small, practical, tailor made for the futures. and as a small business, not only creating jobs, it's creating hopes. we are creating innovations that take a lot of dreams. and they are the future. it's always scary looking far away. oh, my god, this is difficult place. go there, test. you never learn to win until you are in the waters. >> today, alibaba will be posting quarterly results for the first time as a publicly traded company since e-commerce giant's first day closing price is stock is up nearly 9% in shares. now we're more than 20% above its post ipo low. in total, we're up nearly 50% in the total gains. and the numbers come up at 7:00, 45 cents on earnings per share is what the expectation is. $2.61 billion in terms of revenue. we'll see whether they beat or they miss. kind of think they're going to beat, potentially in a big way, but -- >> i can't believe it was such a great opening and people who bought are making money. >> definitely and i think you will see profits, but i don't want to -- >> i know it is, but then you've got all the worries about exactly whether it's apples and apples, the way we report here, right? >> oh, there's always going on to be accounting issues and questions about relative china versus -- but my point is, you look at an amazon and the valuation that amazon has and the valuation that alibaba has and a company that has a huge profit margin and a company that doesn't. >> so a profit margin that looks too good to be true. >> i'm not sure. >> but the decision between what alibaba does and what amazon does is remarkable in that they don't actually hold inventory. it's a totally different business. we often talk about it as if it's -- it's more like ebay. >> and it's kind of an incubator, too, which gis gets that premium based on this nebulous. >> they're going to start investing in media and other things. >> what is the situation? what does it trade at? >> you've got to use the right earnings number. >> earnings for last year. anyway, those numbers are hitting and we expect at 7:00 today. we'll keep you updated as those numbers roll out and give you the instant reaction. when we come back this morning, pushing the envelope on reality tv. whether it's walking a tight rope at hundreds of feet above the air or trying to survive in a forest naked and afraid. where shock tv is headed next. and will all these stunts start to turn off viewers and tirzs? we'll talk about that next on "squawk box." welcome back to "squawk box" in morning. the price to the death of tv viewers is reaching new heights with nick wollenda's death defying high wire stunt. my heart was pounding as this man was walking on that tight rope. 6.7 million viewers tuned in to see wollenda walk blindfolded above the streets of chicago. it's nowhere near the 13 million would tuned in to his last stunt where he crossed the colorado river near the grand canyon. the question, though, is whether viewers are finally start to go sour on these extreme life or death events and what they all mean. here to help us with that question, the future of television, michael wolf for media companies also the former president and coo of mtv networks. first of all, did you watch this thing? >> is an element where you watch this and you think to yourself, this is -- is this what tv is always going to be? we're going to try to -- people are watching basically to see whether the guy's going to fall. that's what it is. >> i think there's more to it. i think first of all there's a whole narrative around him. his family, the number of people who died in his family, his faith. and in a lot of ways it's a calculated risk on his part. he's not just doing this for the first time. he spent a lot of time practicing it and with the blindfold, knew the wind conditions. but more importantly everybody looks and says is this the future of television? the audience is hungry for events. and tv networks have to nourish them. >> be are advertisers one of the -- when he successfully crosses the wire, an advertiser is the desperate to be associated. if he falls, i'm wary. >> they mainly ran commercials for their own shows. they were respectful about it. >> they were respectful about it or is that a function that certain paid sponsors didn't want -- did not necessarily want to place ads next to it? >> i think that -- i don't think it's that advertisers didn't want to be there. i think on the contrary. >> they wanted to be there and discovery said we don't want that. >> discovery ran ads for advertisers, but they also -- it's such a big event, it helped their own ratings. that's part of the challenge. part of what we see going on today is with the advent of netflix and hulu and others. people aren't watching as much dramas on tv, they're watching it on netflix. >> or they are watching it on dvr and they don't get credit for it. >> the stakes are too high. i was mentioning discovery is going to do is show where a man is going to be eaten alive by an anaconda. >> it's much more dangerous for the anaconda than the man. but two years ago think about how many people watched felix baumgartner as he did the jump from spacex. that got huge ratings. 80 million people have watched that on youtube. this is what people want. it's especially important as the reality tv format is -- it's really getting worn out. >> that was discovery, too, wasn't it? >> yes. >> what do you think happens if something goes wrong? thus far not much has gone wrong. knock on wood. >> discovery canceled a series this year. >> up at everest. >> right. i think people are going to watch and see what happens. but -- >> isn't there a nascar element to all of this? >> or circus element. when you're live. you've seen people fall. >> we've seen it in nbc with recreating "the sound of music" that they prmerform live. >> people are watching these shows over and over again on places like youtube. they travel way, way farther. >> that's interesting. the show you just mentioned has a repeatability factor. >> are people going to watch nik wallenda over and over in the future? >> yes. you want to see the drama of it. if you look at youtube, one of the most popular videos today is nik wallenda's grandfather's fall. >> i watched that over the weekend. it's horrifying. >> a lot of this is, once again, it's about a narrative. it's about a story. it's about this guy's family. they want events and they want stories. >> i don't know if you know the answer, but maybe you can help us at least speculate as an insider in this business. how much do we think wallenda paid for something like this and how much does it cost to put on a production like that given the helicopters, the wiring, the rigging. >> the numbers will come out soon. but much more it pays for itself. recognize he was going to do this anyway. it's not like discovery asked him to do this. whether it was discovery or somebody else, he was going to do this anyway. >> i'm not sure he would have done it without a camera and money at stake. >> yeah. absolutely. >> i don't think it would cost that much. just hook a cable up between two buildings. >> no, no, no. millions of dollars worth of rigging. >> this was a massive production. the numbers he got paid aren't public. >> do you expect the netflix of the world or the amazons of the world to ever get into live event broadcasts? >> absolutely. in the same way they're already getting into dramatic programming. they're doing their own reality programming. of course. they're going to want events also. recognize what gets ratings on tv are not only live, but it's things like sports. it's events. i mean, a lot of ways in -- >> the question is when does netflix decide they're doing stuff live? because the whole premise of netflix is that you can watch them any time. it's that live doesn't matter. >> we're way far off from that. they're just producing a couple of shows right now. as they get more and more viewers, expect they're going to do things that will replace large scale tv networks. >> michael wolf, thank you for coming in. appreciate it. when we come back this morning, it is your money, your vote. senator rob portman on the republican quest for control of the senate and the future direction of his party. and then gas prices are falling. so is the suv's come back here to stay? brands like jeep would suggest the answer is yes. mike jackson here when "squawk box" comes right back. act i. scene 3. open port twenty-two-oh-one-seven on the firewall for customer db access. install version two-point-three of db connector and ensure verbose flag is set in case of problems. (clapping sound) isn't the cloud supposed to make business easier? get the one that can connect to the systems that you already have. today there's a new way to work. and it's made with ibm. who would have thought masterthree cheese lasagna would go with chocolate cake and ceviche? the same guy who thought that small caps and bond funds would go with a merging markets. it's a masterpiece. thanks. clearly you are type e. you made it phil. welcome home. now what's our strategy with the fondue? diversifying your portfolio? e*trade gives you the tools and resources to get it right. are you type e*? 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. you're promised one speed. but do you consistently get it? you do with comcast business. and often even more. it's reliable. just like kung pao fish. thank you, ping. reliably fast internet starts at $89.95 a month. comcast business. built for business. election day is here. let the voting begin. we tackle the midterm mayhem and the gop agenda with ohio senator rob portman. >> the comeback of the suv. america's love affair with bigger gas guzzling vehicles has been rekindled. autonation's mike jackson tell us what's behind the suv surge. >> that's entertainment. when giuliana rancic is not on "e," she's building her brand. the second hour of "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm becky quick along with joe kernen and andrew ross sorkin. take a look at the price of oil this morning. if you thought you saw red arrow yesterday, look at this. now trading at $76.69 a barrel. over the last two days things have really stepped up sharply. oil fell sharply yesterday after saudi arabia cut export prices to the united states. in an attempt to gain market share. there are no signs that opec will be curbing output. the group of petroleum exporting countries is reluctant to seed market share to the united states. we talk all the time about how saudi arabia and other companies need oil to be up to $100 just to meet social needs. but they can pump it out at $30. >> doesn't this increasingly not look like a demand thing. doesn't it look like a supply thing that we're producing a lot more here and elsewhere. >> that's why it's a less scary situation. >> and it's like, you know, positive positive. instead of a negative positive. >> you get low prices and it's not because the world's falling off of an edge. yeah. good news for the consumer. >> a little bit of both, maybe. with europe. >> some of it. but not the last two days. it's not those declines. >> andrew swb it hitting? is it out? >> alibaba is supposedly out. my computer is not updating as quickly as i'd like it to. do you see it on yours? >> i'm waiting for alibaba to hit. but no it's not. becky, to figure out the p.e. we'd have to -- on first call we have next year. 2015. looking for 222. so you can figure it out from there. >> you can see right there alibaba is reporting total users of 307 million people. which is an unbelievable number. >> that's about the united states. in fact, they were looking for 298 million active buyers. i am getting a hold on this now. >> i see why no one's flashing the numbers. because it's -- >> it looks like eps is the same in terms of expectations. and looks like slight growth on the other side. >> up 49%. around 46%, 47% is what consensus was looking for. >> i finally figured this out on the revenue side. they are being reported. revenue came in at $2.74 billion. that is better than the street had been expecting. they'd been looking for $2.61 billion. those numbers you see of 10.9 billion is not in dollars. that's where you're going to see people taking time to get this through. obviously chinese companies said the reporting numbers in both. the analysts are only giving estimates based in dollars. >> 555,000 million. that comes out to 90 million american. >> also looks like earnings came in at 45 cents a share. the earnings per share in line at 45 cents. revenue better than expected. $2.74 billion better than the street was expecting. and the number of annual buyers better than expected. 307 million annual active buyers. that compares with what they were guessing of 298 million. some numbers also coming out from the company showed something that jon called gmv which is gross merchandise value. they grew gmv across their china retail market place by 49%. hard to compare with what that'd be out there. but that is showing some acceleration. it shows they are growing faster than they had been in previous quarters. >> did you see an ebita number? >> yeah. 1.48 billion. the consensus was 1.346. so that's also better than expected. >> my favorite stat, active users on their mobile commerce applications. that means they added 29 million people in one quarter. which is the size of texas. basically. so the scale and scope of this thing is kind of an out of control situation. >> the stock is trading higher. trading above $105. $105.74 which is up about four dollars from where it closed yet. >> trying to see if they say anything about the holiday quarter. >> this is the first time ever getting an earnings release from alibaba. it's going to take us awhile how to read them. >> do they give guidance, not give guidance. it's like opening a gift. >> right. on live it was. see? like nik wallenda. >> yeah. we're on the high wire our hearts are pounding. >> and i'm about to fall off. just hanging on. >> all right. well, i don't see any guidance either and i'm scrolling through this whole thing. but again, it looks like very quickly those earnings are better than expected. i'm guessing this is better than you were anticipating. >> yeah. the most important things are the gross merchandise volume. that being up 49%. also the active buyers being above $300 million up at 307. i'm getting a version now of this release that's better formatted. >> ki throw out one number that that i just highlight because it's interesting to me? general and administerive expense. long-term they're going the have to spend a lot more. it's gone up. so now it's 11.6% of revenue in terms of their general administrative expenses. that compares with the same quarter in 2013. the question is what that line looks like on a long-term basis. >> the graph above that is the sales and marketing expenses. they do point out that grew from about $285 million or 10.4% of revenue to -- that's what it grew to from about 6% of revenue in the same quarter. they say that increase was primarily because of an increase in tactical advertising and promotional spending to promote the china retail market. when intense interest in alibaba enhanced. they spent more money to do it. that gufs you a sign, don't know if that trend continues too. if they will spend more to get more eyeballs. >> a little bit here about cash as well. $17.9 billion at the end of the quarter after an ipo you would expect that to be way up from before and it is. net cash provided by operating activities is $955 million, up 29.6%. compared to the year before. and cash used in investing activities looks to be mainly included dispersements for short-term investments. $2.25 billion. so they're making lots of investments. bringing in a lot of money. a lot of money going out. >> thank you mr. fort. we're going to talk about the battles of online retail dominance. later on "squawk on the street" david faber will have an interview with alibaba vice chairman joseph tsai. republicans as you have heard by now are hoping to take control of the senate. joining us with more on what the gop's agenda would look like if the party retakes the senate, senator rob portman. vice chairman of the national republican senatorial committee, member of the finance energy budget. and homeland b security committees. and the first question you ask in our pre-interviews, what does the gop stand for? rob, that grand old party, it's an old term. from years ago, i would have thought you would have known that. >> you're taking him literally. >> you're right. and in fact, that is what we keep hearing again and again and again. it's got to be more than the party of no. there are people that paint republicans as obstructionists now. i don't think that's necessarily a fair, you know, accounting of what's happened over the past two or six years. but what would you say is a positive message that the gop should have right now? >> first of all, it's exciting. . we do get the majority which we've talked about, it's an opportunity to actually move the country forward on some fundamental issues that we have left behind for too long. why not get the keys to an xl pi pipeline done. why not do something on tax reform? we talked a lot about these companies that are going overseas. the president and everybody else says the fundamental problem is we've got the highest tax rate among all the developed countries. let's deal with it. the budget issue. we talked about the fact we don't have budgeting anymore in congress. there aren't appropriations bills, there's not the oversight on the administration that's needed. let's pass a budget. that's supposed to be what congress does. it's exciting, i think, to look at these opportunities. trade is one we've talked about on this show before. we do not have the ability to negotiate trade opening agreements. it's the first president not to have it since franklin delano roosevelt. let's give the president the authority and opening more marketing for our workers and farmers. this is what the gop stands for and the majority would stand for if the voters choose to give us a majority. >> do you -- you must see polling from inside the gop. can you give -- shed any insight into what we may not know? we've seen real clear politics. we've seen "washington post," "new york times." some of the closest races. what are the ones that you are kind of watching thinking, wow, this could really be something since it seems to be going the republicans' way but may not be expected. >> look, it's going to be a close election. but if you look at the states where there's been early voting, we've seen a lot of really good results for republicans. in colorado, for instance, about 120,000 more republicans than democrats. in iowa, a lot more republicans have voted compared to what happened in 2010 when we did well there. so it looks like there's more energy and enthusiasm on our side this year. that's what the polling would show also. two states i would watch are iowa and colorado. those are purple states. and they're states that sometimes during a presidential year seems to be blue. but this year they may well be red. i think early on, you'll see what happens in north carolina, georgia, new hampshire which will be interesting. but i think there's a very good shot we get the majority. and i think it's because people are sick and tired of what they see going on in washington. they want to see some change. the republican majority reflects that -- represents that change. and as i said it's an opportunity to have more administration. and to get stuff done that people care about them and their families. >> so senator, i guess we might take a couple only days to try to figure out what happened in this election. you know when that's finished, we're going to talk about that selection. we had senator cruz and jack welch on yesterday. there's already a bit of -- i don't know. people say different things about how to win in 2016. some say don't run a candidate that's trying to, you know, sort of being in the middle and you're not sure what he stands for. run someone that has clear cut republican credentials. because it didn't work the last couple of times running moderates. do you have a feeling on watching what's happening in this election? what would work best in 2016. >> i think what works best is pretty simple. people, you know, want to see some progress. they want people who are going to help them in their lives and the economy and jobs is the top issue. it was in 2012. it will be again in 2016. it is this year. so i think it's laying out a clear agenda and saying, look, if i get elected what i'm going to do to help you. the republican party needs to reach out more too. there's this notion that republicans plan to keep doing the same thing. we have won a couple elections because of that. we've got to attract more voters who understand the policies we're talking about, pro-jobs policies actually affect them. if we do that, there's a good shot of getting a republican president. one reason i'm excited about what's happening this year, until now we haven't had the ability to have a republican agenda because the house passes a lot of legislation. it's not the republicans obstructing. it's the democrats in the senate who have refused to take up any of the house-passed legislation. there's been 12 republican amendments debated. there's only been eight democrat amendments voted on. it's just blocking the process. now we'll have the ability when the house passes something, for the senate to take it up. some will go to the president. some he'll sign, some he won't. but it shows people the republicans are not the party of obstruction or the party of no. that we've got an exciting pro-growth agenda. i think that's the most important thing going into 2016. >> so the disillusion right now, is it with progressive policy or is it with washington in general? >> i think it's all of the above. i think people are sick and tired of the bickering and the fighting and the partisan gridlock. but they also don't like the direction president obama has taken the country. look at this approval rating today, it's far lower than it was in 2010 when there was this republican wave. and some of it's isis, some is ebola, some is the economy and irs. but this is still a country that is a common sense conservative country. they are looking for people who want results and want solutions. >> senator, i think you're 100% right. i think people lose track of what happened when, who insulted who, who didn't come to the table, who did things along the way. but how does that change? my question has always been, how do you change that environment in washington? that seems like it has been for the last six years, a really bad place to try to get work done, a really bad place to try to reach across the aisle. >> it starts with leadership. look, i think the president is more likely to come to the table if there's a republican senate. but it's also incumbent upon republicans to come to the table too and talk about these issues. we have a broken tax code. we haven't changed it since '86. every other competitor has. we're falling behind there. we have a broken regulatory system where we're not applying regulations in a smart way. cost benefit analysis. we have a broken trade system. not being able to negotiate trades since the '30s is crazy. we should be out there negotiating more openings for our farmers and workers. so these are things that we can and should do. and they don't have to be partisan. we're going to have differences. that's fine. let's work out those differences and find common ground and begin to move the country forward. that's what people are frustrated about. we're not had moving forward. we just continue to have partisan gridlock. >> senator, thanks. you'll still say bengals over cleveland? >> absolutely. look, they're my two favorite teams in football. but the bengals are still my favorite. >> oh, that's cute. so you do like one child more than the other? >> yeah. and both of them won last sunday which was awesome. bengals barely, but they did win. and looking forward to the game on sunday. >> i don't know. i'm looking for a new team. anyway, after that indianapolis game. thank you. >> thanks, guys. up next, the comeback of the suv. big sales in october of those gas guzzlers. is it more than just cheaper prices at the pump? more after this. gigs for the sa. 30 gigs? wow - that's a lot. you don't have to do that for me. oh, that's ok... no, seriously, i wouldn't want you to get in trouble... it's the same plan for everyone. families...businesses...whoever. riiiiight. 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(yelling) there really isn't any celebrity treatment. just a normal guy, getting a great deal. we're just saying it loudly for some reason. now get 30 gigs of data to share with family or your business. for a limited time, starting at $160 dollars a month. welcome back, everybody. the nation's largest auto retailer reporting for the month of october. they rose 8% from the same time a year ago. plus how successful has america's car rerival been so far? joining us is the chairman and ceo of autonation. great to have you here. >> thank you. wonderful to be here back in new jersey, my home state. i was born and raised in south jersey. but the auto industry had another solid month. autonation was 8% retailing under just 25,000 new vehicles. but the story is the short memory of the u.s. consumer around gasoline prices. we already had had a migration towards trucks this year. with gas dipping below $3 a gallon, it's turned into a stampede. the poster child is chrysler corporation. its sales are up 22%. jeep sales are up 50% which are all suvs. the ram pickup truck is up 33%. and for chrysler sales, 75% of the vehicles chrysler sold this month were truck based. >> and you attribute that to the reduction of the cost of fuel. >> there was a migration towards trucks anyway, just on some cycle things. but there's no question that the drop in the price of gasoline changes the type of vehicles that consumers buy. >> do people trade -- >> it doesn't change b the total number of vehicles sold, but it has a tremendous impact on the mix. and it's hard to believe, but i've seen this movie many times. that someone who's buying something that they're going to keep five, six, seven, eight years is buying it on the basis of that month's gas prices. >> do they walk in and think to themselves, okay, gas is going to be this price for the next -- they're not making that bet. >> i'm always saying don't look at what the american consumer says. look at what the american consumer does. all the research says fuel economy is their number one consideration in purchasing a vehicle. we're there at the moment of truth when they write the check. i'm telling you, when they write the check, they're in the euphoria of gasoline been $3 a gallon. and off they go. >> i wonder. are they trading in hondas and toyotas and vehicles that get better gas mileage to buy some of these things? and what happens if gas prices go up? will they swap out again? >> if gas prices were to go lower, you would then see priuses traded on pickup trucks. if gas prices were to move quickly to $4 a gallon, people would be bringing in their cadillac escalades and trading them in for a smart car. it's like a cannon rolling back and forth and the deck of a ship, a loose cannon. and of course if we had a rational energy policy. >> that's what i was going to needle there. you're not running for anything today, are you? >> no, absolutely not. no need. >> how much of a mike jackson gas tax would you like to levy on a gallon of gas right now? hoe u how much? >> i would ease in. i would rebuild is the roads of america. >> so do the gas tax. >> yeah, i would do the gas tax. >> raise taxes. so you're not running for anything. >> we as an industry have been mandated by the federal government to sell fuel economy and we're making billions of dollars in investments in fuel economy technology. and you need an economic rationale for that. >> you love this. >> when i met with the epa over this regulatory mandate and i said what if gasoline pries go down, they assured me gasoline prices will never go down again. so i have that assurance from the u.s. government. unfortunately it's not working out that way. and with gas prices going down, of course a gas tax should be put in place. but that's not going to happen. >> thank you. >> thank you, joe. always a pleasure to see you. especially you, becky. you too, andrew. coming up, the drop of oil and the midterm effects on the markets. what to expect at the opening bell. 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(all) awesome! i love logistics. still to come this morning, the midterm effects of the market. plus definitely no free lunch for travelers anymore. we'll reveal the staggering amount of money that airlines are making on fees this year. is it $30 billion? is it $50 billion? or even $70 billion? the answer is coming up next. so ally bank really has no hidden fees on savings accounts? that's right. it's just that i'm worried about you know "hidden things..." ok, why's that? no hidden fees, from the bank where no branches equals great rates. welcome back to "squawk box" this morning. talked to alibaba. there are a number of others out with quarterly results. the revenues fell short on archer daniels. and michael kors announcing a $1 billion stock buyback program. but its sales guidance giving some investors cause for concern this morning. and a top and bottom line beat at cvs health is raising its outlook. burger king matches expectations. revenues falling just a bit short. they expect its merger to close late this year towards early 2015. so they don't seem to be having nearly the same problems mcdonald's was. and the home of nick wk wallend tightrope walking out with numbers. the company was helped by a 32% jump in international sales. but a big question mark. >> if you are irritated by all those airline fees for things like wi-fi or checked bags, sit down for this. phil lebeau is here with the staggering amount of money that the airlines are making on fees this year. earlier we asked you what do you think it is. $30 billion? is it $50 billion? or even $70 billion? phil's here and he has the details. phil? >> becky, do you have a guess? >> i'd guess 70. >> you're a little more optimistic than really where the numbers are for the industry. the answer is almost $50 billion. this is new analytics coming to us from idea works. they track this internationally. and the numbers for 2014, the airline industry is expected to bring in $49.9 billion in ancillary fee revenue. that's a 17% fee increase compared to last year. and if you factor in all the people who are flying around the world, average it out. it comes out to all of us paying in ancillary fees when we are taking a flight. but here's the numbers that you really have to pay attention to. look at how much ancillary fees have jumped over the last four years. in fact, over the last five years it's more than doubled. it's staggering to think that it was basically $22 billion back in 2000. $32 billion in 2011. and it's ratcheted up by double digits every single year. and most people think this is going to continue over the next couple of years. because the airlines are becoming better retailers and the international airlines, they're now getting into the game. that's why we saw the jump up 17% in the last year. people look at it and say they're benefitting because of lower jet fuel prices. it's not just because of jet fuel prices. the airlines are becoming better retailers. particularly at the front end when you are booking a ticket. i know this because i was booking a ticket last night for my daughter. boy, they are getting much more sophisticated. and much smarter about selling you fees and services in advance. and that's why we're seeing record revenue numbers when it comes to the ancillary fees. >> when you said it's only about $15 a person who flies, that shocks me. i pay 25 bucks for a bag one way. 50 bucks to go round trip. if you want to get upgraded to economy-plus, that's another 35 to 55 bucks depending on the flight you're taking. >> keep in mind, becky, that's just averaging out worldwide. there are millions of people who are taking flights where they're going from one destination to another and they don't have any bags. so they're not paying anything. they are offset by most other people who are checking a bag, paying for the fees. i understand what you're saying. but that's the worldwide average when you take the number of people who are flying this year with the revenue number. >> all right. let me ask you this. if we're talking $50 billion, that more than the net income of the top ten airlines in the world? i mean, would these airlines have any profits if it weren't for this $50 billion? >> this is where their profits are coming from. they generally -- the general feeling is that they would be slightly profitable, probably around break even to slightly profitable. this is what makes them profitable. when you look at e the numbers they racked up in the third quarter, almost all of that could be attributed to the fact they were doing much better when it comes to the ancillary fees. >> and how much angrier are consumers compared to ten years ago? >> nobody likes it, but we buy it. >> it's like buying a car. just tell me the price. >> well, okay. you will say that. but these guys are in the business of bringing in greater revenue. so they're trying to become retailers. and you may not like it, but you're going to pay it. what are you going to do? if you're going to fly -- >> i would just pay it if it was the price. just tell me the price. don't trick me into things because that makes me madder. >> well, i understand what you're saying. but their answer is going to be here is the price. here's the airfare and here are e the taxes. now would you like something more? it's going to cost you. >> nickel and diming. phil, thank you. >> you bet. stocks coming off a flat start to november. joining us is mike ryan, chief investment strategist at ubs. and head of ubs wealth management research america. that was something to watch. and i don't know whether it's calming down about ebola or earnings, but that was an incredible snap back from down 10% on the s&p. did we engender enough? did we shake out the complacency enough to go higher from here? >> i think we did. look, joe. i think when we go through the periodic growth sars, we're around geopolitical issues. but what do we see in profits? the trend is higher. as long as we continue to see an environment where the concerns about global growth don't wind up triggering slower growth in the u.s. then i'll see as a better outcome in terms of u.s. equity markets. >> today we decided that oil we view it a little bit more half full than empty right now because it's related to supply than to a slowdown, a global slowdown. more related to demand which would be positive, i think. do you view it that way? or is it still part demand, part supply? >> i'd agree with you. i think it is more supply than demand. we're not only seeing this is, but we're also seeing energy sources coming from the past where we would see costs. usually when prices begin to break down, saudi arabia cuts production. they're not cutting production now. when i look at it globally what i see is what you're seeing. it's more of a supply story than a demand story. here's the issue is that when oil prices fall, at least in the past, we've gotten a huge benefit from that. it's like a consumption tax in the u.s. we're less energy intensive now than we were. since we're now the marginal producer than consumer of oil, it doesn't have the same positive effects it did. >> it could be negative to our -- although the integrated oils are benefitting on the downstream stuff, but for the first time since we're, you know, more involved with the production, lower oil prices almost start hurting us. it's not purely good news for the consumer. it hurts some of our earnings in the s&p. >> again, i think it's going to be sector by sector. there are certain areas that will be vulnerable in lower oil. but i would say aggregate when you look at it, is this a a positive. >> are there other -- have you rejiggered the type of companies that you think will benefit from all these -- i mean, things are a little different than your forecast a year ago. what makes sense now to own? which sector? >> first of all, in terms of it's not just purely tied to energy, but i think if we tend to get the growth that we're looking for and we're looking for the economy to kind of hit this higher growth point, in the 3% range than the 2% range we've been in. i want to be in the mid-cycle stocks. i want to be in the areas that are levered to growth, that are less vulnerable to fed tapering. so that includes the cyclicals. so it is going to be the technology industrials. it's going to be consumer cyclicals but also the small caps that are benefitting from more domestic growth. >> all right. mike, thank you. what do we do next year? do you think we add another double digit advance? or we've already had our day in the sun? >> i think the gains next year will be much more measured. i think they're going to be much more despaired. we're looking for earnings growth at 8%. that's our view. and i think we've seen the rerating of stocks. we're no longer going to get the fed providing massive accommodations. so i think we're likely to see the gains in the upper markets will largely be by the growth. looking for high single digits. >> okay. thank you. we'll see you later. you're not running for anything today? you're not in any elections or anything? >> no, no, no. i'm keeping my day open for the markets. >> okay, thanks. see you later. coming up, attention walmart shoppers. a new wine offering hitting the shelves from an e! news star. giuliana rancic is making her way to the set right now. she brought some of her new vino with her. we'll talk about it when "squawk box" comes right back. many americans who have prescriptions fail to stay on them. that's why we created programs which encourage people to take their medications regularly. so join us as we raise a glass to everyone who remembered today. bottoms up, america. see you tomorrow. same time. another innovation from cvs health. because health is everything. there is no car because there was no accident. volvo's most advanced accident avoidance systems ever. the future of safety, from the company that has always brought you the future of safety. give the gift of volvo this season and we'll give you your first month's payment on us. welcome back to "squawk box," everyone. we've been watching the futures this morning. they've been under a bit of pressure. the dow future still down by only by 17 points. nasdaq down by ten points. and the s&p down by three points. alibaba matched estimates in its first report. came in with earnings 45 cents a share. revenue came in a little better than expected. if you were looking at the size of the user base also and the gross merchandise volume. those numbers both better than expected. stock had been up by $4 earlier. right now still higher but only by about 30 cents. juliagiuliana rancic is expg her brand's portfolio with today's release of a wine. i'm holding it here in my hand. it's a stackable wine and comes in a pack of four and was just launched in 1200 walmarts. giuliana rancic is founder. she joins us more with her entry into the wine industry. >> xo, g. that's how you sign you have. >> you love everybody? come on. >> i really do. hugs and kisses. >> men can't do that. women can do xo. we can't. >> it's geared towards women, so it makes sense. >> tell us the history of how you got involved with wine. >> someone sent me the technology. and i thought this is the coolest thing i've seen. it's four tackable cups. they're shatter proof and it's a bottle of wine. it's for women who just want one glass of wine. if i go home and bill maybe wants a beer and i want a wine. and i don't want to uncork a nice bottle. >> can we show people how this works? if i undo this zipper here? >> all right. i'm undoing the zipper. >> you just peel the packaging off which by the way is cute. and it's little xogs. you just snap one off. >> this seems like it's perfect for the beach or something. but the question with some of these wines has been the wine itself. do you want to drink the wine that's in it? >> it's delicious. we created it to be a $15 bottle of wine. and when we took our very first meeting ever with anyone which happened to be walmart, and walmart the next day not even 24 hours passed and they said we want this in 1200 stores. we were able to offer the wine at under $10. >> because of the bulk? >> because of the bulk. what's inside is a $15 bottle of wine. >> do you tell you the price? you went down there with your husband bill, friend of the show. >> yeah. we went to corporate headquarters and we pitched just like everyone else does in a room. it was bill and myself and our team. and, yeah, they bought it pretty much in the room. and they just loved it. they got it. they're very savvy. they're trying to attract millennials. they've got a great wine selection to begin with. but they want to really boost it and get some of the younger people in. >> what do you. to -- >> by younger i mean 21 and over, obviously. >> right. i went on the website, they ask you if you're old enough. >> that's right. >> because you have some younger viewers, i'd imagine. >> i do. >> so what do you want to put this brand on next? >> that's a great question. thinking about it. bill always says i'm a big dreamer. i always come up with big ideas. like this, for instance, this was only nine months in the making. when i saw the packaging i mi immediately thought this solves a problem. women want to take it to the beach or a picnic or a concert or a portion control is a big thing too. so i found kind of a solution to a problem that was in the market place. but i don't know. we'll see. >> would you -- i mean, ryan seacrest just came out with clothes. >> i do have a clothing line on hsn. >> i like the design. i like splitting up the cups. i will go $30,000 for 10% of the company. >> wait a second this isn't "shark tank." >> have you gone? that's an idea. do you need any seed money? andrew has got a -- >> not right now. you know, we're sitting pretty -- we're looking good right now. sitting pretty right now. but we'll see. i would -- >> so my offer was way too low? >> your offer's a little low. talk to bill. >> would you do liquor? >> no. i think the idea is maybe food. yeah. >> you have restaurants too. >> we have restaurants. so if anything, i've been thinking about this recently. maybe getting into some sort of a, like a skinny type popcorn and snacks with the xo, g label. that hopefully could be at walmart. >> wine does kind of go bad when you put the cork back in after you open it within a week or so. >> exactly. you come home at the end of the night, have one glass. you almost have to commit to having a glass every night. >> or one bottle and one glass. >> for some people. but it's nice to not have that orphan bottle in the refrigerator that you just end up pouring down the drain. so this really, it's great. it's great packages. we source everything from france and italy. >> and you're marketing this on your social media accounts like crazy? >> absolutely. >> how much time do you spend on social media? >> a lot. >> how much do you have to think about what's going out on twitter? >> a lot. >> is that a huge part of your life? >> it is. we have so many young viewers who rely on social media. and so therefore i rely on it as well. that's how i communicate. but i do all my own tweeting, all my own instagraming. i have 3.5 million followers on twitter. >> that's what started it, right? an instagram of the packaging. >> that's right. >> do you spend an hour a day doing that? two hours? >> on my way out here, the last thing i'm doing is tweeting to tell people that i'm going to be on. so it's just a constant thing. taking pir which you ares of things. showing my outfit. i do look of the day. it's engaging people. i'm not just constantly promoting things. that's not the way to do it either. but i'm engaging people. i'm asking what do you want to know. if people ask me questions about celebrities. >> and the instagram about the packaging here got a huge response. >> 10% of the people who saw my post felt the need to comment say b i love this. wrote do i get this. and that's why i reached out to the company. the company didn't reach out to me saying do you want to do a private label. i reached out to the company and said is there any way you would do a private label. we created this to be in just a few beverage stores. we never anticipated it to be in something like walmart. and like i said, it was our first meeting and it was a dream come true. i moved to this country when i was a little girl from italy and i watched my father achieve the american dream. i'm trying to contain my excitement here. it is very exciting, though, to be in the largest retailer in the world. i mean, i still can't believe it. i can't believe i'm sitting here talking about it because it just happened. we're rolling out this week in walmart. >> well, congratulations. >> thank you. >> we will all drink a bit of vino. >> i'm being told that reds are more fragile too. even overnight. >> see. they can go bad overnight. >> and you can get them in a mixed pack too. great hostess gift. >> thank you. >> $35,000 for 10%. >> talk to bill rancic. >> are you moving to chicago? >> all right, i'm out. >> i am moving to chicago in the summer. >> i watch the reality show. >> chicago's a great city. >> thank you for coming on. >> thank you. when we come back this morning, you won't believe what some of the unusual domain names michael bloomberg just bought. and in the next hour of "squawk box," tenant health ceo trevor fetter. and senator ben cardin of maryland will join us. "squawk box" will be right back. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. can you start tomorrow? tomorrow we're booked solid. we close on the house tomorrow. tomorrow we go live... it's a day full of promise. and often, that day arrives by train. big day today? even bigger one tomorrow. csx. how tomorrow moves. you know how fast you were going? about 55. where you headed at such an appropriate speed? across the country to enhance the nation's most reliable 4g lte network. how's it working for ya? better than ever. how'd you do it? added cell sites. increased capacity. and your point is... so you can download music, games, and directions for the road when you need them. who's this guy? oh that's charlie. you ever put pepper spray on your burrito? i like it spicy but not like uggggh spicy. he always like this? you have no idea. at&t. the nation's most reliable 4g lte network. well, the former mayor of new york mayor michael bloomberg has some new web addresses. about 400 of them, in fact. the law firm representing bloomberg's foundation purchased several hundred .nyc addresses related to his name. some are official but some aren't as flattering. like mike bloomberg is a dweeb. many others were vulgar. a spokeswoman said they only plan to coop the straightforward addresses. >> if you buy them, it means nobody else can use them. >> that's why you buy them. >> i'd keep all of them. >> i would keep every single one of them. that's what i think. i think after the show we should probably buy some. we should get in the market. >> that was an idea. of our own, you mean? >> correct. when we return, alibaba or amazon? who's going to be winning the global e-commerce war? plus we'll run through alibaba's report. and trevor fetter joins us in just a moment. (shouting) location. here's the location that matters the most. here. or here. or here. it's wherever this is. to get customers to come here and stay here, you're going to need an app that connects to all your systems. so they can bank, shop, do what they need to do, and you gotta do it fast. before the competition does. it's t here; you better be on the right cloud. today there's a new way to work. and it's made with ibm. so ally bank really has no hidden fethat's right. accounts? it's just that i'm worried about you know "hidden things..." ok, why's that? no hidden fees, from the bank where no branches equals great rates. tigers, both of you. tigers? don't be modest. i see how you've been investing. setting long term goals. diversifying. dip! you got our attention. we did? of course. you're type e* well, i have been researching retirement strategies. well that's 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*? twhat do i do?. you need to catch the 4:10 huh? the equipment tracking system will get you to the loading dock. ♪ there should be a truck leaving now. i got it. now jump off the bridge. what? in 3...2...1... are you kidding me? go. right on time. right now, over 20,000 trains are running reliably. we call that predictable. thrillingly predictable. the e-commerce war is heating up. alibaba now worth more than ebay and amazon. we break down jack ma's success and what it means for investors. tenet's healthy outlook. trevor fetter talks about life with the affordable care act and soaring revenue. and it's midterm mayhem. senator benjamin cardin joins us as the final hour of "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with becky quick and andrew ross sorkin. it is election day. it's tuesday, november 4, 2014. some have already voted. some key races are taking place around the country that's going to decide who stays and who goes in washington, d.c. we'll have updates all day long on cnbc. the futures at this hour have been marginally weaker through most of the session. that's really sort of what they looked like yesterday. and sort of a race as the day went on. let's check out oil. these -- that should be up based on this. 76.35. but as we have pointed out, it's a lot of s&p companies and others that are in this business now because we've increased our production so much that it actually affects us in some ways negatively when oil prices go down. not just about the consumer. >> exxonmobil is indicated down after closing at 95.26. that's a dow component. >> just so hard after all this not to take some satisfaction in saudi arabia having to cut prices to get market share. and what that does to all the other guys that really don't like us all that much. maybe they like us a little bit more now. >> much cheaper than we can. the people hurting the most are american drillers. >> we have to think about it. we should stay even. just not take too much satisfaction. we'll talk to an analyst about it. you don't really care, though, on gas prices? >>time trying to drink this. her wine. >> you're going to open it? it's 8:01. >> it's the red stuff. and you got a tough name coming up here and you've already started drinking. >> today's top corporate story, alibaba reporting quarterly results for the first time -- >> you'll relax. >> i'm so relaxed. since the e-commerce giant's first day closing price. stock up about 9%. revenue above forecasts. the size of its user base also topping expectations. jon fortt joins us now with the numbers. we have the analyst later. >> yeah. just got off the call. they're going through q & a right now. there are two major takeaways from this call. it would be that mobile is working when it comes to monetizizatio monetizization. that was way up from what was expected. they had been just below mobile. how much money are they making on people who went up on mobile. the blended m ee eed monthtiziz rate. taubau was more popular and a lot of that is free. not as much money coming in. but the other big takeaway besides mobile growth was alibaba is starting to sound like amazon in a way. they're all about the top line. they say we're not managing, we're giving numbers now. by the way, we're not managing to margins either. they're good, but we're not managing to that. what we are managing to is gmv growth. total value of the goods that are being sold that are transacting through their network. and also use for growth as we mentioned off the top when those numbers initially came out. very strong. up above $300 million. and they're continuing to try to push those numbers. that's why you see the marketing expenses up in terms of capital expenditure. they're spending on building out their cloud. they are clearly being aggressive. >> is that why -- i was trying to figure what they were saying on the call. this point it's up by 15 cents. is that the message of growth before profit that you think trickled out to wall street? >> i wouldn't be surprised if that's what it is. because we've seen a numb of stocks this earning season respond to that. when companies have said like facebook did, we're going to spend money to pursue growth. we're going to invest in the business. >> not popular on wall street these days. >> not as popular. >> okay. let's stick with the alibaba theme. does the e-commerce giant represent a new wave of online shopping. joining us now is the director of the center for tech and innovation at kellogg school of management. good morning to you. >> good morning. >> so the real question -- we set this up as an amazon versus alibaba question. i guess there's a larger embedded question is do we actually think that alibaba is really going after amazon? >> well, i think you made a comment now on the show that alibaba is starting to look like amazon from a top line perspecti perspective. that's true but it's a very different company. it represents the next generation of e-commerce companies that don't have to biltd out as much of the infrastructure as they did. connects buyers and sellers. that's why their profit margins look very different. that's the interesting question. now what happens is what should alibaba do? should they continue to focus on china or build out their business in the u.s. and the western europe market? >> how do you feel about when you hear rumors and speculation that jack ma is looking to buy a film studio or he's trying to get involved with some of these other businesses, clearly that makes it look a little bit more like an amazon and takes away on the margin. >> absolutely does. in fact, i would say growth is very seductive. because there's so many opportunities before alibaba. they've got a stock that is very valuable currency. and they've got their eyes on the global price. but they've got to be careful. because getting into unrelated businesses to that part of china is going to be a different ball game. the i was alibaba i would be focused like a laser beam on the core chinese market which has a lot of head room to grow. if they take their eye off that ball, then our competitor, that may take away from market shares. so i would be really focused on the core market in china. >> glad you mentioned that. what would you say to the argument that we have in fact seen this before in the u.s. e-commerce market when it was first taking off. we had ebay. we also had a number of e-commerce mork networks. then amazon which looked less interesting because they were spending money on logistics, on building up the warehouse networks. how is that different from what we're seeing with jd now in china? amazon trying to build out infrastructure in china. and alibaba looking like its model is better because they aren't doing that stuff. won't they have to do it in the future? >> yes. i think at some point they have to build that infrastructure. the good news of the alibaba model is it's light and enhances the profit margins. the bad news is they have limited control over the customer experience. amazon has built an excellent customer experience. so they are to play this game carefully. they really have to think about balancing their profits and their margins with their growth and the customer experience. i think as -- and i met jack ma and i think one of the things i like about him is he is focused really his number one priority is the customer experience. from a customer experience standpoint, they may have to head down that route. they'll take a hit on margins at that point. at this point they have built a strong model. >> professor, as american investors, should we have any worry about the accounting of a company like alibaba? >> it's a good question. there are -- you know, there's some opaqueness with respect to the books and there's also a strange ownership structure. you can't see that even at facebook and google. so i think there is a little bit of uneasiness with businesses operating out of china. but i think investors can look past that. and really focused on the growth opportunity. alibaba finds itself in the place of sitting on the largest market in the world. >> professor, thank you for joining us this morning. >> it's been a pleasure. later on "squawk on the street" david faber will have an interview with alibaba vice chairman joseph tsai. let's look at other stocks on the move this morning. a lot are stocks under pressure this morning. online coupon company retail me not is announcing the cfo has resigned. the quarterly forecast also falling short of forecasts. that stock is down by 23% this morning. sprint also announcing 2,000 job cuts as it tries to trim costs. that stock down by 12% this morning. and herbalife stock down by about 13%. you can catch the company's cfo coming up on "half-time" later this afternoon. trevor fetter on the latest obamacare ratings. obamacare helps this company, this hospital company. we'll have much more. then later, midterm elections, that's today. we're going to speak to senator benjamin cardin about the possibility of the democrats losing control of the senate or keeping it. and the republican agenda. "squawk box" will be right back. tenet health care out with results. revenue soaring 74%. admissions continuing to improve. also stocks up 37% year to date. here to take us inside the numbers, trevor fetter, president and ceo of tenet health care. there was an acquisition, right? even obamacare can't do 74%. >> that's right, joe. good morning. yes, we made an acquisition. a material acquisition last year october 1st. sop that's in the numbers. but still on an apples to apples basis, we've had a terrific quarter, strong growth across the board. >> and is it that simple, trevor, that it used to be it was difficult for a hospital to collect payment from certain patients and now there are more people coming in with insurance and you're able to collect, it's that simple? >> it's not quite that simple. we've had a material shift. in this quarter the admissions in the states that expanded medicate are down 59% and the medicaid in additions up about 24%. but we still have a hard time collecting from people with insurance. they have huge deductibles and copays and that's not changing under the act. >> that's interesting. you're in dallas and you have hospitals in dallas, trevor? >> we do. >> so you need to give us an anecdotal idea of what's happening. we all realized how difficult it would be to mobilize when you haven't seen it before. but having seen another hospital going through that, i imagine you had a couple of meetings about your hospitals, didn't you? >> there were more than a couple of meetings. we had that activated and -- really we're proud of the team. at another hospital presbyterian medical center. and we -- within a very short period of time we doubled all of our training efforts. whe secret shoppers go into our emergency departments, you know, exhibiting symptoms and being able to answer questions about traveling overseas. of course, none of them had illness. we had protective equipment staged all over the country, stockpiles in different places. what happened at presbyterian could have happened at many medical centers in the country. it was certainly a wakeup call for the entire industry. >> and the industry is awake now. you would tell us that we should take solace in that? we're ready now, do you think, as a nation? >> you know, you never know whether you're completely ready and you don't know what exactly you're going to get. but i think because of the incident at presbyterian, the industry is so much better prepared. some of the weaknesses that wouldn't have necessarily been expected have been exposed. presbyterian is an outstanding hospital with a great reputation locally. and all of us in the industry are very sorry it happened to them. but they were transparent about what was going on in some of the mistakes that were made. and that helped the rest of the industry be better prepared. >> trevor, you know, since the affordable care act and i'm calling it that. because it's election day. >> i know. i'm surprised. you're feeling charitable today. >> i am. i'm feeling very down the middle. but this affordable care act, one of the reasons that people say costs have at loost for utilization have sort of stabilized or stayed low is because of a weak economy. not necessarily because of the affordable care act. the economy is getting better. is utilization going up as far as you can tell? >> well, the economy is getting better. this quarter in terms of patient volumes was the best one we've ever had. certainly across the board. a little of that is the economy. about 40% of it is the affordable care act. so 60% of it is not. we've been making substantial investments in our facilities. we've had all sorts of strategies to build volumes. i don't think it's just an environmental factor, joe, that's driving this. and the fourth quarter is the one that will give us greater insights. they tend to consume more in the fourth quarter than any other quarter. >> health care there's a lot of differents a p aspects to healt care. i think that, you know, your answer might depend on that. . but if the republicans win, should they try to fix this law? is it fixable? is there something -- you wouldn't throw the baby out with the bath water. there's a way to make it positive for the country in the future? >> of course i think it's a positive for the country to have more people have access to insurance and have good quality insurance. so if you were the republicans trying to strategize about this, it's a little late to try and pull it apart. we've seen a substantial increase in the number of insurance companies that are participating on the exchanges. the enrollment is up. the prices are reasonable. the quality of the insurance is very good. the remaining question is what about medicaid? and we have some very substantial differences across states. there is interesting math in "the new york times" yesterday showing the differences between adjacent states. texas and new mexico, for example. that's what really remains to be seen about the implementation. >> there is a -- there is an individual, i'm told, on your board named jeb bush. any relation to the former florida governor? >> one in the same, joe. >> same guy. >> for more than seven years, yes. >> and is he running in 2016, trevor? >> you know, i don't know. >> i know. let me ask you this. he said he won't be on the board anymore in 2016. has he indicated anything to you that he might be tied nup the next year or the year after that? >> i can't say. we're having a board meeting and he's on his way. >> you'll know then. give me a call tomorrow. let me know. >> he has been an outstanding director. he's a person of the highest integrity. smart, authentic, genuine. i hope he runs for the sake of our country. >> here's a different way to slice that question. at what point would he need to tell you or you need to tell him that he needs to leave the board? >> that would be after he would declare his intentions to run. but until then, it's a private matter he's sorting out with his family. he's been very open and transparent about that as i would expect. >> thanks for playing along. we appreciate it. >> thank you. coming up today, oil now sitting at a three-year low. actions by saudi arabia yesterday pushing prices lower. that trend is continuing today with wti down another $10.15. we'll find out how low it will go right after this. as we head to a break, check out the markets in europe at this hour. 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[ mexpanded minuteclinic,sh for walk-in medical care.ealth. and created programs that encourage people to take their medications regularly. introducing cvs health. a new purpose. a new promise... to help all those wishes come true. cvs health. because health is everything. welcome back to "squawk box." we have breaking news. the september read on the trade balance which of course is the deficit. minus $43.03 billion. so we'll call it minus $43 billion. what were we expecting? about minus $40 billion. the last time we were under $40 billion was the first month of this year. and minus 39. a high read for the year so far is $46 billion from april. we see interest rates after toying with one-month high yields yesterday have reversed a bit. the nikkei was on terms of equities. and of course it's election day and in chicago we say go dig up a friend, vote early, vote often. back to you. >> thank you, rick. we are going to change subjects and talk a little bit about michael kors. they had their earnings and revenues come out and topped expectations. but it's sales guidance giving concern. here to break down the numbers is courtney reagan. >> so looks like on first blush at least investors should be happy with kors. the top and bottom line, improved. plus the $30 billion buyback. but the sales forecast isn't quite as bullish as some had hoped. kors had been dominating the luxury space for some time. kors has strong international growth, north america makes up more than 3/4 of total sales. that growth is slowing. comparable sales in the region improving more than 10% for the quarter. that's quite short of last quarter's growth rate. ceo said north american traffic was slower than anticipated. michael kors handbags are still the top choice with gaining share for a year and a half at that group. but there's a fine line when it comes to popularity for high-end goods. ahead of earnings, his team is concerned about the risk of over-distribution. you want it to be cool but not so cool that everybody has it. >> and does everyone have one now? >> that's what the fear is. >> do you own one? >> i don't. >> becky? >> i think i do. >> okay. >> i bet joe's daughter wants one. >> yes. >> see. >> is that why the stock's down? >> it's the sales growth guidance and the sales growth is really slowing. and so it's this idea that is michael kors potentially a bubble. the sales growth is stronger than other players. >> cleaner, crisper isn't it? the beer? >> coors. i got it. >> don't drink it if the mountains aren't blue? >> exactly. >> thank you, courtney. >> you got it. we've got some other numbers that are out too. paychecks out right now with the latest small business job index. it's showing that small companies continued to hire last month. joining us right now with the details is marty mussy. marty, what are the exact numbers and how much it grew last month? >> we're about 100.84. so we saw very little change from september. but we're maintaining momentum. we feel there's still sustained job growth. >> i guess that's good news considering how much turmoil there was in the markets last month. if you were looking for anybody following what was happening here, that's when we had sars. there were a lot of awful headlines that came out. stock market dropped almost 10%. if you were going to see a lag in hiring based off of the nervousness of just a few weeks ago, would that show up last month or expect that to show up november or december? >> i'd actually -- i think it would have showed up in october. we didn't really see that. so we're continuing to see steady job growth. higher than last year. and certainly higher than the index rate. it still seems to be centered around the middle of the country. and it's around energy. which with the oil prices now will be interesting over the next couple of months. >> we've had some people on the show, some producers here in the united states, some of the shale and fracking guys that say this wouldn't at this point with the oil prices being at $75 to $80, that wouldn't cause them to shut in the wells, but they might keep themselves from adding additional jobs down the road with additional wells. is that something that if we get below, you might expect you lose jobs in those regions? >> i think you might see the growth slow. we haven't seen it at this point, so we'll be watching that. the east coast in particular still slows job growth. but in the central part of the region, both south and north have the highest change in job growth for those businesses under 50 employees. and of course washington state looks good in the seattle area with high-tech jobs giving a higher growth rate. >> why do you think the east coast is struggling a little more? >> well, i think new jersey in particular, you know, between atlantic city and the gambling sues there, the change and decrease in jobs, it just has not seen a housing boom either where you've seen housing start to come back in the south and in the west coast a little bit in certain areas. they just haven't had had the push for jobs that have come back. >> okay. marty, thank you for your time today. >> thank you. coming up when we return, voters heading to the polls today for midterm elections. the balance of power in the senate at hand. we're going to speak to democratic senator benjamin cardin when we come right back after this. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. dad,thank you mom for said this oftprotecting my future.you. thank you for being my hero and my dad. military families are uniquely thankful for many things, the legacy of usaa auto insurance could be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life. welcome back to "squawk box," everyone. oil prices dropping again this morning. check this out. you'll see right now wti, it's down by about 2.25%. that gets it down to 77.03. we've seen it down to 76 and just a little bit of change. so we'll see where things head through the rest of the day. also shares of the nation's biggest energy companies. exxonmobil and chevron, they're each down by more than 1%. conoco phillips down by .9%. it's election day. democrats are hoping to maintain control of the senate. history has shown regardless of which party comes out on top, the markets have faired well post-midterm elections. returned an average of nearly 18% the calendar year after there. thank you for joining us, it's great to see you. >> it's good to be with you. >> we had someone you've worked with in the past on earlier. senator rob portman. and some of us are counting on senators like you two gentlemen. to maybe bridge the gap that's been missing for the past couple of years. is that possible if your view regardless of who wins the senate? >> we need to do this. regardless of who controls the united states senate, democrats and republicans need to work together. we have a divided government under any other scenarios. yes, i'm proud the record that senator portman and i have had had on pension reform and energy issues. that's what we need to see. we need to see democrats and republicans recognize it's in our national interest to solve problems and work together. i think there is that core view among many of the republicans and democrats that we have to do that in this coming congress. >> because i was thinking that, you know, even if the republicans do win, the president's still got the veto pen. so nothing really changes that much. so i've heard vice president biden say if the republicans win, we'll compromise. i don't know why you couldn't do it either way. since the president can stop it anyway. both parties got to grow up and, you know, do some -- there is common ground on corporate tax reform, isn't there? >> absolutely. i agree with you. and i hope we'll use some of that time during the lame duck session to get some of these issues done. look, we need to deal with these national problems. and i think most of the members of the senate recognize that. so, yes, we've missed opportunities in the past. let's not miss opportunities in the next congress. look, i'm hopeful that the democrats will control the united states senate. but whatever happens in the united states senate, we still need to work together, bring our policies into the center where most americans are and give us some long-term predictability on our tax code, on our budget, on our transportation programs, on our energy programs. if we do that, our economy will take off and americans will do much better. >> it has been something to behold, senator. i guess you got to admit. and do we ever get just so, you know, just so discontented with the whole process? you're watching some of the things on both sides being said in individual races. i mean, every issue you can bait in some way whether it's race, sex, everything is being used as a last ditch attempt, you know, to try to eke out a couple of votes here and there. can we really come back and start working with the people that did this to each other? >> the answer is yes, we can. i'm smiling a little bit because i'd rather be here in america than any other country in the world. i'd rather have our political system rather than any of the other political systems around the world. and yet we know we can do things better here in america. and we must do things better here in america. >> i know that there has been a -- lots of polls show dissatisfaction with government in general. okay? with washington. and i know that, you know, your side likes to blame the republican house. but on the other hand, the president has largely not been invited to any state that was the slightest bit conservative. i mean, he had very safe places to go. what about the policies that we've seen over the past six years has the country at this point where it's not safe for him to go to a lot of places in terms of helping someone win votes. >> well, i think you got to look at the record. we've seen now 55 consecutive months of job growth. >> so why don't people -- then why can't he go to a -- >> i think he can. i think he can go anywhere he wants to go. we had him in maryland. >> candidates didn't want him to come. he's only -- you -- that was one of the things i was laughing about. they said he's only got two years left. he's irrelevant. that's half his term. how can people in his own party be saying that? >> oh, i don't think we are saying that. i'll tell you what this senator is saying. i spoke last night about president obama's agenda and that it's important that what happens in this election will affect his ability to move this country forward. absolutely. i agree with you. i'm proud of the record we've been able to achieve. should we have been able to do more? yes, i agree with you. the democratic party is proud of our heritage of supporting the middle class. that's why we've made our priorities investing in affordable college education and gender equity on issues to deal with matters of a tax fairness. all that's important for growing the middle class. president obama is our leader and will continue to be unified in that regard. >> i'm just surprised. you said you were proud of what you achieved. i wouldn't be dismissive of that. there are certain things you did achieve over the past couple years, but there's not much anyone in the house or senate has achieved at all to a large degree, no? >> well, look at the bottom line. the bottom line is 55 months of job growth, 10 million new jobs. is that enough? no, but that's the right path we're going down. we are moving in the right direction. yes, i am proud of our record. i would like to see us do more. i'm disappointed we weren't able to help the budget. tax reform. all that needs to get done. i'm disappointed we haven't accomplished more. but i think under president obama's leadership we're on the right path. >> senator, one last thing just to pause at the question. you said in certain cases you wish you had done more. i think maybe that means certain programs that the president had put forth for -- but growing government even more than it's grown already. do you think any of the notion that the country has that we're on the track, maybe the wrong track, the 70% numbers that you hear. do you think there's a feeling that we've grown the government too much at this point? and that that might be part of the backlash you're seeing right now? that some of the idea that government is the answer for everything, that this might be a little bit of a reaction to that? >> i don't think the democratic party today is for growing government. we're for smarter government. we're for priorities and setting priorities and investing many the right type of programs for our future. that's why on the budget agreements we're seeking to reduce the growth of our budget deficit. we want to bring our deficit under control. but we also want to make sure that we invest in the programs that we have a growing middle class. so, no, we're not for growing government. we're for smarter government and priorities that help the growing middle class. >> okay. all right. senator, we appreciate your time today. we're going to watch for little pictures of you and portman walking around together and talking. >> absolutely. >> okay. we look forward to that. thank you. up next, we have jim cramer from the floor of the new york stock exchange. we'll get his reaction to alibaba earnings and other moves as well. tomorrow on "squawk box," your money, your vote. reaction to midterm elections. former house majority leader eric cantor in his first television interview since leaving office. plus we head to dell world and speak to the company's founder michael dell. 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>> remember there were questions what would happen after? would the whole world embrace it. we want the world to embrace it. >> that's comical. >> i think there was a comment a russian politician made about it. globally, we've moved far. >> it's not even tim cook. >> it's steve jobs. >> pretty uptight over there in that country. i'll tell you. what's the text book thing going on now? putin? >> that was a fascinating story in "the new york times." basically, they shut down all the other text book companies to funnel the money to his friends who runs another text book company. >> that's a good job if you can get it. and this man, if you could get this man's job, you have to know what the hell you're talking about. jim cramer joins us now. it's the election, as you know. that doesn't necessarily affect stock prices, i don't think. how about that oil at $76? >> i think it's confounding people. people want to say it's the saudis wrecking our fracking and they should pump less, but the numbers we are getting out of the united states are back to where we were in the 1980s. you are seeing a huge flood of oil hitting our market from domestic. look, i'm no fan of what the saudis are doing. it's like a tipping point when the united states got to this 1986 level of 8.68 million barrels a day. it really is just a storm of oil coming our way. >> jim, if it was 80% positive ten years ago because of the consumer and that the tax cut for consumers, how much is positive now for our country given that it's the consumer, but also we have producers that will get hurt and it will hurt their earnings? 50% positive? >> 34 states have no exposure to it. they are pure consumption states. 16 states are producers which probably about half are definitely impacts employment. texas is a big state and that's one of them. i know we can sit here and say this industry is going to be hurt. a lot of companies have a $70 level where they still pump. i still think this is fabulous for retail. natural gas is going to collapse, by the way. when you have heating bill down and gasoline down, i'm not going to say this country is going to be worse off. i do think we obviously don't have an energy policy, which doesn't help. >> how about alibaba. take it at face value? do you have a much higher target? >> alibaba, i wanted to know more. they put in this one -- finally they say there is a page in the release which says we don't care basically about margins. everyone says we've got another amazon. amazon wishes for that profitability. a lot of people in the end are going to say maybe we have to readjust the idea these guys are going to blow away earnings and revenues. the revenue growth is amazing. if you own it, you didn't want to see that. that is very bezos like. >> i don't know if you bet, but i now you love sports. >> i don't bet. >> i'm not going to ask you. do you have a long shot political bet today? do you have a prediction that no one is thinking will happen on it? do you follow any close enough? >> i think the problem is this is not the nfl. i think the favorites win in this game. it's just like -- it's not like the old days where you say, holy cow, how did that happen? dewey defeats truman. these are etched in stone which changes the coloration of the election. >> remember the college vote whether they would pay athletes? we wouldn't hear -- they don't tell us for four months? we may not know for months. >> no, we don't. colts giving three to the giants and cardinals -- there are some strange lines going on, but they are not in politics. >> all right. see you in a couple of minutes "squawk on the street." >> thank you. >> not only jim cramer, but also alibaba's executive chairman vice chairman joe tsai. plus we have news from the magic kingdom coming up. disney's cloud base movie service expanding purchases made through google. disney movies anywhere launched in february. it allows users to buy disney, pixar, marvell films through the app or website or the itunes store. welcome back. we want to bring your attention to a worthy cause. tonight at the museum for the city of new york, the lulu fund is hosting a benefit to the art of healing. some items up for auction include set visits to shows like "the black list." you can attend all three triple crown races, come to our set and watch "squawk box" and have breakfast with us. visit jim cramer, matt lauer and the "today" show team, a private gymnastic session. all to benefit the lulu and leo fund which helps foster creativity and build resilience. check out the auction and enter your charity bid at charitybuzz.com/lulu&leo or if you want to donate go to the site itself, lululeofund.org. >> it's an awesome event. they had kids come who sang were amazing. they would make you cry, make you laugh. it's amazing and a great cause. >> it's an amazing organization. >> near and dear to cnbc, obviously. there it is. >> that does it for us today. have a great day. see you back here tomorrow at the same time. right now it's time for "squawk on the street". good tuesday morning welcome to "squawk on the street," i'm carl quintanilla, jim cramer and david faber. alibaba earnings are out. ten-year yields steady. crude oil is anything but, below $77 as the saudis cut prices on oil sold to the u.s. we are closing in on a 30% drop from crude's high back on june 13th. our program begins with alibaba's first earnings report as a public company meeting expectations.
one of note today, walgreens -- >> we will give it up too. >> items of note, the indian prime minister meets secretary kerry in washington, he's really doing a full-court press. from madison square garden to central park -- >> to dinner last night with the president. >> where he drank only lem none water. a hearing in washington on those white house security breaches and finally just want to point out microsoft is introducing windows 9 in india. we've got him here in the u.s. and microsoft c.e.o. in india opening up a new data center. >> the white house breach is something. >> how did they depth that far in? >> the damage of it, like everybody else i've opinion in the green room who's done a tour of the white house and it's spiritual, it's part of america that this guy got into. >> have you been in the lincoln bedroom? >> no, i did not sleep in the lincoln bedroom. >> clearly you didn't give enough money to the clinton administration. >> $47. hillary said to me something, tom, you'll love it. let me do a data check right now and we're going to double barrel the terminal with the euro and the move, futures up 7. a higher yield, that euro we add 125 plunging euro. onto our next green quickly, 39.4, some stability, rocky mountain and gold again threatens $1200. i'm going to do two monitors today. this is for you scarlet. this is the comparison of hong kong's g.d.p. with china. here's the insent of hong kong, here's chinese independence in 1997. then here is that improvement in mainland china. >> and there's the steady decline. the dissatisfaction rising. >> this is the tension here. but this is still five times the per capita g.d.p. in hong kong versus the mainland. hong kong is very wealthy and not equivilent to china. >> on a per capita basis, but the wealth gap in hong kong is pretty extreme as well. >> markets on the move, i can do this, adam, you can type it in. here's the euro coming down bam and that's it, economic data that you talked about. mario draghi i guess is happy. how can you be happy over economic data that's lousy. in heory, you asen experter europe -- >> in theory. there it is. let's go to front page. we go 12 time zone hours away. >> to hong kong, a warning from leaders, they say the demonstration will escalate if demands are not met. another night of protest, but peaceful. police did keep their distance. tomorrow is national day, october 1, the 65th anniversary of the founding of people's republic of china. there's a lot of anticipation of what could happen tonight into tomorrow. demonstrators are still blocking road in some parts of town. sfrans, next to the central business district. the index down once again, the biggest decline since february. >> well, there's so much unrest, so many questions, it's hard to put capital to work in china right now. >> the chief executive, protesters want him to resign. he has actually just spoken out insisting that protesters go home immediately. >> within your perspective, what is the power of the students right now? >> it's not clear because they're younger, university and high school students. there's that contingent versus democracy veterans. we'll be speaking with the founding chairman later on. >> you know what's amazing to me. you pointed this out yesterday, scarlet. the residents of hong kong have never been able to elect their own people. for 156 years, it was appointed by the queen or king, and now more recently under chinese rule, it's a central committee. >> a lot of grievances according to the people of hong kong. the u.s. is said to become the world's leading producer of liquid patroleum. this is on the cover of the f.t. in june and again in august, the u.s. is in a virtual dead heat with the saudis. >> isn't that incredible. we produce more oil than saada arabia and close behind is russia. >> we're not there yet and saudi's point out they can boost production. >> in theory they could boost it up to 15 million a day, which we cannot do. >> we've seen oil prices have stayed stable even with all the crisis. third front page story, company news story, george clooney is not company news story, he's all encompassing. shares of ford falling 8%. it will miss its 2014 profit forecast. weakening sales in russia. deflation in south america, $900 million loss larger than forecast. and recall expenses in north america reducing income by more than a billion dollars. yeah, it's a soberering reality check from the new c.e.o. >> 7% down yesterday afternoon. you wonder how many other multinationals will be coming up with ideals like this. >> currently in europe we'll be looking for those. >> absolutely. >> those are front pabling stories. >> there it is, september 30, third quarter ends with a new global distraction, student leaders draw a line across a cause way in hong kong. the u.s. is the locomotive. us l strategies, he joins in this hour, i guess as we look at hong kong. how disruptive can this be to some form of asian economic growth, that's been obviously evident? >> i think hong kong, if that was a window to which china looks at the rest of the world, tom. from the rest of the world, china is actually a magnifying glass. hong kong is what you're looking through when you look at china. so the things that magnify and even though as adam said before, china and hong kong have been together and in the last 150 years, hong kong has not had free press. keep in mind, those that are protesting, many of them were not born in 1997, so they've seen a fairly smooth movement towards democracy and there's dissatisfaction because the chief executives who have been nominated by china since 1997 have not been much to the liking of the public. >> does hong kong and the others change the strategy, rob? >> well, i think from our protective what we're looking in hong kong is to see what the reaction is by the chinese government in the developments in hong kong. very important to us that hong kong remain a vibrant financial center and a gate way to china. we think that's a key part to the current financial set up. to the extent we saw that come into question through actions by the government, that i think would be a major event that would impact our view on china overall. >> within your deployed assets, how do you respond to the idea that hong kong could be shang high. is that feasible? >> clearly the it is to get shanghai more like hong kong. we don't think you're at the point where you can really repress hong kong from a financial center perspective. we believe hong kong still has a vital role. >> we should mention that these are live shots of the the admiral t. district. >> 6:00 on a tuesday night. >> it's not dark yet and the build-up continues as we head into national day for china. >> into their midnight is the beginning -- >> and a national holiday in hong kong. >> now in its second week of protest. >> certainly after a violent weekend. >> rob, here's the one thing. we look at these pictures live from hong kong, we talk about what's happening there. there's isis, et cetera, but we bring it back to the u.s. where g.d.p. just credited 4.6%. how long can we have a situation where all this concern about what's happening around the world has pushed people to buy 10 years and yet we've got strong growth. when does that push yield back to both 3%? >> i think that's a great point. we think there's a couple of factors going on here. one is the global growth outlet keeping it slow. we also think the long term trend growth rate for the u.s. is below where we are now, so closer to 2%. that long term trend rate is very important for long term rates which is certainly keeping rates down. we ne of our viewers today, see 4% luss g.d.p. looks for 3.3% g.d.p. for the quarter ending today, you don't agree. >> i think it is going to be elow 3% for the quarter today. one reason is what adam talked about before. global growth is slowing everywhere. the united states is not an island. we can't continue to grow here. >> so what we saw with ford motor we'll see affect individual companies. >> over to america and then again to be seen in future quarters. >> and what you're also saying then is 4.6 g.d.p. from the second quarter was a one off. >> it was a one off and when you consider that the first quarter drop was much more than has been anticipated, adam. the pull back was not as much expected. >> ok. >> we'll continue with our guest hosts for the hour. coming up, pro democracy protesters continue to take a stand in hong kong. we'll be speaking with the ounding chair of china's democratic party. we'll be right back. >> good morning everyone, coming up, he did not get married in venice but we've got another great actor for you, kevin spacey, at 1:00 p.m., on some of his interests and what they have to do with technology. >> and "house of cards." >> he was not the actor alma married. >> no, he's not. > i got that straight. >> hong kong's chief executive has spoken making his first public remarks since the city's pro democracy protest turned violent. they gathered in the central hong kong district today earlier today. protests swelled overnight. they called for demonstrators to go home immediately on the eve of china's national day. where does that leave the moment. joining us is the founding chairman of the city's drt democratic party. the shock of hong kong police using force against demonstrators capturing the world's attention. the fear is there will be a violent crack down similar so what we saw 25 years ago. what happens tomorrow? will protesters go home as he has urged? >> no, unless they deliver something to hong kong people. actually, what we're asking for is already promised to us, we just delayed and delayed and delayed. so we're asking for something which we're entitled to. and it's up to our chief executive to get it for us. but also denying it to us. that's why the people are clamoring for him to step down. a very reasonable request. >> there's no indication that he will step down so far. is there any evidence that beijing directed the use of tear gas on the protesters or the chinese p.l.a. are involved? >> i cannot believe that the decision was made by the senior officer in charge at the scene. no way. such a decision could only come from beijing. there's no doubt about at all. nobody in hong kong dares to make that decision. >> that being the case, i want to put this into context because student led protest tend not to end well. how do you project this playing out in the next few days, beyond october 1? >> well, the world has seen how peaceful our demonstrators are. i mean, they raise their hands, and the policemen are fully armed. many police vehicles were abandoned and surrounded by the protesters, anywhere in the world they would burn the police vehicles or turn them upside down. but these vehicles in hong kong were not even touched by the people. they're such a peaceful, loving crowd. they just want democracy and they have demonstrated with peace and love as they were taught to do. certainly the decent thing for the chief executive to do is to sper swayed beijing to deliver democracy in hong kong as promised and hopefully one day china will take that route and the world will be a much better world is china is democratic. >> mr. lee forgive my ignorance speaking as an american and looking at these images of tear gas being shot at the public, you yourself, have been hit by tear gas. why is it that chinese leadership is not willing to grant citizens effectively the right to elect the leader of what is effectively traditionally been a much more democratic type of society in hong kong? >> i think for two reasons. one is hong kong government is not on our side and the international community has not spoken up in our favor either. i think the international for us to speak up because both beijing and london appeal to international support where the joint decoration was announced in 1984. international community did give them its support. it is up to britain, up to the rest of the world to speak for the hong kong people and they have seen how lovable these otesters are, young and keen and peaceful. certainly the international community should speak up. >> mr. lee, our guest host has a question for you. > mr. lee, now you've had 15 years of this situation with three different chief executives. how happy have you been with the transition. or do we have this long time coming. the question with the chinese main land often says, after all hong kong people have never had democracy more than 150 years, why should they be changing now? what would you answer to that? >> simple, the british government never promised us democracy. the chinese government did. it is their obligation to give it to hong kong instead of postponing it. nd instead of moveing -- the chinese government made it its commitment to give hong kong democracy. >> martin lee, thank you so much for joining us this morning, this evening your time. the founding chairman of the hong kong democratic party joining us live from the city. >> coming up, actually i think it will be in the next hour, we'll be speaking with the congressman about his unique relationship with the indian prime minister. his by the way was the first again y. the first 30-year-old elected to the house of representatives. he's a kid and he's got a very unique relationship with the indian prime minister. we will discuss -- >> ahead of his time. >> which you are watching on bloomberg television. perhaps you are even streaming it on your phone or tablet. we'll be right back. ♪ >> good morning everyone, new york city, the fashion capitol of the world. who's celebrating this morning as we look at a gorgeous end of september morning in new york city. that would be one oscar dela renta. she wore a dela renta dress. oscar takes the trophy at top of the fashion industry this morning. not wearing dela renta, scarlet few is. >> we're going to stay with hong kong democracy protesting because -- he says why shanghai won't replace hong kong anymore soon. china should be learning from the first world institution. it should emulate the rule of law and free willing media environment that under pin hong kong's success, not stamp them out. >> that's a curious interpretation. rob wilder, help us understand about a 30 year capital deployed overseas, china's down periods. opportunity or just too cloudy and need to stay away? >> we think there are quite a few opportunities in the global market and china is one of the drivers of those. if we think about rates and currency overall, clearly and i think we reference this earlier the u.s. economy continues to have momentum. we see it slowing to some extend and we expect to see more stimulus. what's going on in hong kong is only likely to exacerbate that but i think feeds into the trends that we're seeing which is relative strength in the u.s. versus asia and europe, and the performance of the euro today i think down after a percent i think this morning -- >> 126.07 right now. >> on inflation, i think it's a good indication of that trend. >> rob, very quickly, what do replacing the central governor? >> i don't think we have any insight there, but we think the economy clearly needs stimulus. in our view, low innation in china gives them the ability to continue to lower rates. we know they need to free up the financial system to support growth. and also to support popular demand. so, we think they will ease policy and response low inflation. >> so easing is on the way, at least at some point. >> certainly with the markets on the move today, futures up 7, but euro again crushed this morning. coming up, the indian prime minister promises job creation. we'll talk about the nuances of india's democracy. ♪ >> good morning. our question of the day -- to the banks still need to answer for the financial crisis? talk about upsetting the cocktail party. do they still need to answer? >> a lot of people are asking this. it is a worthwhile question. >> we need your responses. this is "bloomberg surveillance." is top headlines -- here adam johnson. >> a fragile truce threatens to collapse. at least nine ukrainian soldiers dead after russian fighters launched attacks. it was the highest casualty count since a peace deal was signed earlier this month. kim jong-il and is in the hospital. it is happening after he underwent surgery on both ankles. he cracked bones in his ankles after sustaining undisclosed injuries in june. he has not been seen publicly in nearly a month. microsoft is building data centers in india. to offer 365 services. satya nadella he said that both will be available for the end of next year. those of the top headlines. your -- the idea of india in 10 years or 20 years, where will it be? yearsking about 10 to 20 is easier than talking about where will be one year from now. there are a lot of uncertainties on whether or not he can implement many of the promises he has made. the indus in -- the indian bureaucracy would allow him to do that. they have a young population. they have a vibrant demographic outlook. it isn't one country, but they require the british to make it into one country. before that, they were a series of kingdoms fighting with one another. despite the differences and some 25 different languages, the .ountry comes together >> here's the question. theything he has done over past week has captured our attention. what is his goal? to modernize the country reduction in corruption, but he wants to get out of that country a really modern country. he said he was emphasizing the , democracy,d's demography, and the demand coming from the huge population. he has to get to a whole lot of infrastructural problems with the corruption and red tape among us. tohas he come to the u.s. say i need your help to get this done? mutual --.it is a you talked about him being everywhere and making presentations, the president obama and secretary kerry are quoting him for his support. he was treated like a rock star. here is a spectacular view. it is my morning must-read. about our to care relations with india to read about it this morning. thoughtful -- he brought a ball he would fannie c2 madison square garden. tapped into the insecurities of indians with the potpourri fantasies with defiant if undereducated hindu nationalism. this is an emotional op-ed piece about indian americans and how they look back on their india. mr. modi andreat the future of their nation? >> you talk about it being divided in terms of languages and religion. many of them have americanize themselves. they are settled. they have very little to do with the whole country, or some of them, especially children born here have very little to do with it. on the other hand, now that the country is opening up, a lot of them are looking back in terms of investments and then going back. the situation is changing over the last 10 years. >> it is hugely dynamic. >> this is and influential diaspora. he was speaking to them, but how does he lever that? >> he is asking for two things. give a good part of your investments into india because the indian americans are among the higher income groups within the american population. he wants the money to go back. for everyone of you, and if you know a couple of americans, send them to india. we need a tourist money. those of the different ways in which he is hoping to tap into a. >> are you sold on it? >> i am sold on a. a 10 yearon it over time horizon. is this a nation that has moved on from the congress party and from the paternalistic view of the gandhi family and their supporters? >> the country is decisively move. thisis with the elections year showed. there was so much corruption and bureaucracy with the previous government. i used to think with the previous administration that the indians learned iraq received from the british. >> how should we treat the foreign policy between india and china is to mark the borders are controversial. the u.s. advise or assist or get out of the way of indochina relations? >> you said something critical. stay out of the way. if you look at -- recently in the last 10 days, at the same time, chinese forces were facing each other. the amount is investments that he wanted to make into india was just about a fifth of the amount he came in with. i think there is an economic military-wise, there's more discord between the two countries. the best thing american do is let the two powers settle it and stay out of it. >> you can understand why he is meeting with john kerry today. there is pakistan. it is more complex than wanting to port u.s. business. >> you are right. if you look at the times today. they have had a serious objection to what he is doing. it is clear it is not going well in terms of dealing with pakistan at the moment. >> a lot of ambivalence. >> i want to break some news. this headline just crossed. this is the publishing unit of news corp. that rupert murdoch owns. they are buying move. it is a leading online real estate business. this is for $21 a share. that is a premium over yesterday's they are paying with cash. rea group will own the remaining 20%. it is an online real estate company. we know that new score, despite the deteriorating business overall, there is very steady cash flow. thinkers look at the and the others, as we go when saddam, we will talk to gerard cassidy about banking. within newspapers, there is a new panic going into this. a lot of newspapers for sale. new sweat out there right now. >> we will keep you posted on this. coming up, china clamping down on online conversations as pro-democracy protests gain ground. ♪ >> good morning, everyone. let's get to our single best chart. working overtime to suppress conversations on hong kong's pro-democracy protests. this is our single best chart. it is the censorship monitoring project. it goes back four months. the july 1 protest march the establishment as a -- region. central protest, which has spiked up. >> it is the growth of social media. posts.d allow some such as those critical of the protests. there are ways around this by codifying what you're are saying. >> people get around the censors by coating -- coding what they say. >> you might use a series a , a character, a semblance of words that does not look like his name, but has a secret message. >> you wonder what else is happening. talk of the whole shadow lending in china. are there two systems? you have lending, shadow lending, you have what you can fan what you are codifying. >> and there are various things taking place. it is the chinese system. you have one that is official and one that is very significant. the problem is when it comes to is not ast significant overall. the shadow banking in the big expansion, it becomes an economic issue. the chinese have to be concerned about the domestic situation. go around the world. afghanistan. and very emotional issue. we consider we're doing in syria and iraq. this is a signing between the fored date in afghanistan troop reductions of the united states of america from 100,000 the number of years ago to 24,000 troops right now. this agreement will take american forces down to 9800. pastis on a presumed the 20. that is from afghanistan. >> the administration has no intention of doing that, it is the critics who are saying -- the former secretary of state commented in retrospect, he thought it was a mistake to pull the u.s. troops out of iraq. that turned a lot of heads. you ready for photos? >> please. >> we have three of them. this is celebrating the upcoming national day. these flowers you see in this huge -- it is not a float, it is a sculpture. they were 3-d printed. >> that thing looks ginormous. a 3-d everyone who thinks printer can only produce a little part, think again. >> such a contrast to what we see in hong kong. two, ash atop the cottages of the mountain. recovery efforts have been suspended. we have been talking about eruptions from the volcano. 12 bodieskilled, retrieved. unknown people missing. >> this is different than iceland. plates are butting together and bam, explosion. we are going to bring it back to the u.s.. >> how do you like that? >> you can take the campaign staff and move them aside. the former president with the former secretary of state and ir new grandchild. it is reminiscent of the duke and duchess of cambridge. >> baby charlotte. english name, isn't it? >> i'm going to go with that. >> she is even wearing a blue dress. >> there are more cameras here for charlotte clinton. pimco, they will consider their future without mr. gross and how the bond market adapts and reacts to redemptions. "surveillance." look for our videos. bloomberg politics coming october 6. good morning. ♪ >> this is "bloomberg surveillance." this is the capitol building. are we less than 40 days away from the midterm elections? >> 34 days. john kerry, he will be meeting with the prime minister of india later today. >> time for our top headlines. detroit nearing a deal. usa today citing a person familiar with the matter saying the city is in talks with a bond insurer for a $1.1 billion claim. the settlement will be a major step ahead for motors to the who is defending its bankruptcy exit plan in federal court. the days of blacked out nfl games could be coming to an end. since 1975, the league has kept games off the local tv when games are not sold out. a ruling on the policy is expected today. pay attention, scarlet fu. to "crouching tiger, hidden dragon." the movie will be released globally in select imax theaters. simultaneouslye released on netflix. >> she does it without paying attention. >> the single most stunning headline here a bloomberg. joins janusoss capital. i did not believe it. there was the headline. the ramifications reverberate. the fixed income industry and to you as we figure out what to do with our fixed income investments. we should say, i am doing an in fullth invesco, disclosure. we should also say that you are not an executive of invesco, you do not speak for management. should our viewers be worried about volatility wherever they own the fixed income? i am not an executive. i am the strategist. when we think about markets, we would like to take a step back. there is the diversions of central banks and the economies. we think of that as continuing to have impact on volatility going forward. expect volatility to be higher. >> they are written by media people and they are responsible and important. have you seen changes in the last 48 hours? >> we have seen credit sectors underperformed. if you look across the financial markets, high yields underperform relative to normal volatility. you cannot subscribe to that any particular player. fundamentals are positive. >> here's the backdrop. this chart speaks to the -- we forget what it was like for rob at invesco and mr. gross said janice -- i cannot believe i am saying that. great moderation of lower interest rates. >> six months ago, mr. gross said the great bull market that has powered my career is over. that, is this a coupon market? >> going forward, we are relatively positive on fixed income. the key messages over the last 30 years, you had coupons that average about 2%. we think it argues for taking a much more active approach. >> you take the coupons out of the equation and there is a stealth market. >> thank you. we appreciate it. we greatly appreciate that. the forex report, the euro on the move. this is something to watch. weak economic data. oneearnings announcements, .2594 on euro-dollar this morning. do banks need to answer for a financial crisis? tweet us. ♪ . . >> this is "bloomberg surveillance." >> student leaders say their protest will spread if their demands are not met. for now, it is quite in hong kong. retail america -- well, they face mega-destruction. garden.adison square minister modi reaches out to thpeoria. good morning, everyone. this is "bloomberg surveillance." i am tom keene along with scarlet fu and adam johnson. we have gerard cassidy of rbc. let's get to our morning brief. here is adam johnson. >> a lot happened overnight. japan's industrial output falls unexpectedly. china's manufacturing covers and european inflation just .3%. meanwhile in the u.s., we have three key items. case schiller home prices at 9:00, consumer confidence at 10:00, earnings one of note, walgreens at 7:30. we will bring that to you. indian prime minister modi of stateecretary stat carry in washington. mark soft introduces windows 9. >> this is breaking news, scarlet. >> a huge deal, something activist investors have really pushed for. ebay will be supporting ebay and paypal into two separate public independent company starting in 2015. they will be separately traded. they will be public and independent of one another, so giving in to what activist investors have been pushing for. >> and we have the right guy with us. >> exactly of nyu stern school of business. >> this is a juggernaut. ebay is one of those conglomerates. investors will find the least attractive business and a sign that valuation to the entire thing, so i spending -- spinning paypal, you have the whole, not some of the parts. >> here is the headline, folks. success. google, success. what with the continued track record for ebay, does anybody know gekko 1.9% for the year. does this all for this moment for ebay. paypal has been a massive over performer. there are very few companies in what we call the new economy that are as dominant as paypal. has 800 million credit cards. nobody has been able to touch paypal. this will be much higher than ebay. >> by the way, one third of what was the overall ebay business. is this also an attempt to go head to head with alibaba's alipay? >> absolutely. it was a third of the overall business, it but i would bet -- and we will get more stats throughout the morning -- i bet it was more than halve or maybe two-thirds of the growth. this is a threat investors see as light. they like to be diversified with a number of assets. -- investors do not need ceo's to diversify for them. they can diverse a fight on their own. they need to be accountable for one business with one core mission and one quarter brand and let the best assets go out in the marketplace and could be shareholder return they deserve. who are the biggest winners here? carl icahn because he will do a victory lap and then those who work specifically on paypal who will now get options on paypal stock. >> what does this mean about using off forecast because that is a big issue for not just ebay but all of these companies you go finding out a way to use this cash that they have built up overseas. >> they should jump on the grenade and that is paid taxes. [laughter] cassidy, mr. shulman will join from american express. it is different from the banking industry you cover. >> american express is really a travel card company -- >> transactional business. >> you got it. and their credit outstanding is nowhere near the level of a typical bank. they do have some cards like regular credit cards, but it is a transaction business. >> dan shulman will join scott galloway and really get out front with this announcement with a major executive change to lead paypal forward. review for us right now who paypal's competitors are. >> they have a lot of people, whether it is square, the payment systems. probably the scariest brand right now for paypal is apple. , 250 million credit cards on file. apple -- 850 million they have been collecting with itunes. >> that is exactly where i wanted to go. i think sam grobart's work on "bloomberg businessweek," on the executives of apple -- did tim cook and his team jumpstart this the combination at ebay? that is the most under hyped announcement of apple's big announcement is that they are getting into payments. that is probably the most powerful part of the ecosystem. >> we have been fixated on the size of beef on. that is not a full stop it is iwallet. >> management with ebay have been telling positional -- potential candidates that they will split up the two companies. this preceded the actual apple announcement will stop having said that, they all knew that apple while it was coming out at some point and would be a big threat. >> gerard cassidy, this goes to what you study, since andrew jackson in the failed bank of the second united states. these executives at ebay, they have to respond to activists. large,ve to respond to institutional shareholders looking at 1.9% per year. >> i think that is absolutely true and you will see more activism in the u.s. banking industry, particularly amongst our universal banks if they are unable to deliver return on equities greater than their cost of capital. i think this'll be a big story. >> scott, you teach at nyu stern's, this is almost a new finance in at there is a new group of people making the rules. carl icahn to some extent makes the rules. >> yeah, these guys have been the rock stars, and you also have ceo's with tremendous pressure to perform. i also think activists have gotten smarter. i think they are trying to be more constructive. if you look at the returns come activists have outperformed the rest of the marketplace. >> we talk about splitting the two businesses and where the growth has been coming from, scott, you made a point. a pell since 2011 has grown 50% whereas the rest of the business only 30%. >> to visa, do you cover visa? >> yes, we do. ex is paypal a threat to visa and mastercard? >> it is something they have to be conjures up and as paypal continues to grow, i think that whole payment space is in great turmoil. ask if i buy $100 at amazon, i want to get scarlet something -- if i want to spend $1000 on scarlet so she can dress like -- who is the actor? >> mrs. clooney. >> how much does visa get on $1000? >> it is a processing fee, and every merchant has a different one, but it is a very small percent come anywhere from 2% to 4%. x does paypal get less? >> paypal has negotiated a decent deal. but you know who has the best deal? apple. apple has no shoe to some of the best terms of credit cards of any brand in any retailer. it shows you the power of apple. who is the first person to get " on"new york times: on itun itunes? it was apple. >> this is what we invented "bloomberg surveillance" to be. galloway and cassidy. awesome. youo dress, but we will buy coffee. >> ebay has given in to activist that will demand separate ebay and paypal into separate, independently traded companies in the second half of 2015. and the american express chairman will be joining paypal as president and ceo. >> you will get shares in both of these companies, 4015. >> ebay shares were suspended from trading. we will keep you posted. "surveillance" will be right back. ♪ "bloomberg surveillance >> good morning, everyone. ." -- >> good morning, everyone. "bloomberg surveillance." ebay will split u apart. expressman of american will join paypal. adam, you mentioned, this is a tax-free transaction. if you areans currently in ebay shareholder you will ultimately be a shareholder in newco, the new paypal. well as >> dramatic news in hong kong. scarlet has it for us. >> we have tens of thousands of protesters continuing to gather in the central business district in hong kong, taking to the streets earlier and continuing into the evening. hong kong's chief executive making his first public remarks since the city's pro-democracy does -- pro-democracy demonstration turned violent. news'"e, "bloomberg andrew davis joins us from hong kong. mood, at mr. over the weekend to something more foreboding. what is the sense, what is the feel out there. our people worried about a a tiananmenere -- square-like crackdown? >> no. the tear gas was two days ago. last night, they let the protesters have their way in three parts of the city, and the protesters unlike the demonstrations we tend to see in the europe or u.s., they are not looking to provoke the police at all. there was no violence. festive last night as a matter fact and people seem to be having a good time and the police were nowhere to be seen. >> tell us about the character of the protest and the protesters. these are university, high school, and college students, but also some of the veterans of the democracy movements in the past, refreshers, politicians who make up occupy central have now joined them, haven't they? >> yes, this occupy central movement means they were going to begin their occupation of central tomorrow for the holiday. the students got out ahead of them and the students are the ones really bringing the numbers. occupy said initially they hoped to get 10,000 people. last night there were probably more than 100,000 between the three different points and that is mostly because of the energy of the students. what i saw last night when i was out there in the main protest area -- it was overwhelmingly young people. the complexion could change a bit more tomorrow because it is a holiday both tomorrow and thursday, so more people that may have been in their office that might have wanted to participate may very well be out there tomorrow. if it stays calm like this, it could see quite a turnout. >> andrew, your description as the last few hours being an almost festival-like atmosphere is an obvious contradict into what we saw 36 hours to 48 hours ago, which was tear gas. why did police change their tactic? they saw howcause miserably it failed and how quickly it turned the public against them. the hong kong police -- there is not a lot of resentment toward the police here. this they very low crime city. there is not a lot of violence. there is very little violent crime. there is not a lot of antagonism generally with the police will stop they are seen as civil servants. when they fired tear gas, and made a lot of people think that those orders must have come from beijing because the hong kong police would never do something like that on their own. that remains to be seen, but it really change the tone in the complexion of the demonstration. they realized and quickly backed off. lee said the international community has not spoken of in favor of hong kong. who within has not spoken up in favor of these protests? who is holding back their support? >> i am not quite sure if it is so much that people have not spoken out. we saw the white house make a statement, cameron made a statement in the u.k., other countries have spoken out, but i feel like the democratic voices here feel like there has not been enough of a response, not just in the protest but the whole run-up to the decision by beijing to kind of vet the candidates for the next election, particularly u.k.. u.k. was involved in the handover. it prices often being one of the founding democracies in the west and they really have not spoken plainly.hat >> all right, andrew davis, thank you for joining us, your evening, our morning, andrew davis of "bloomberg news." >> big news of the moment -- ebay is going to split off paypal. this is going to happen in 2015. there will be a separate paypal stock. it looks like mr. carl icahn, activist investor, is getting his way. he has been calling for this will stop in theory, this will unlock some valley. we will be right back. >> ebay will resume trading at 7:30 a.m. ♪ >> this is "bloomberg surveillance." i am scarlet fu here with tom keene and adam johnson. in case you are just warning us, the breaking news this morning is that ebay has announced a plan to separate its payments unit, paypal, from its ebay main business, so there will be two separate publicly traded company starting in 2015. we want to bring in erik schatzker, host of "market makers," to join us in this conversation. activist investor carl i for this.ush ceo john donahoe had resisted. agitated, very aggressively for a spinoff of paypal. he and donahoe sorted out their distances. -- their differences. a dinner was brokered at carl icahn's apartment where was decided that that the chairman of cvs caremark would join ebay's board as an independent forctor and mollify icahn the time being, but it appears that carl icahn gets his way even if it takes several months to happen post-up he remains one of ebay's largest shareholders. several things that happen in the intervening months to up explain why donahoe -- >> you are looking at a lot of the people involved. >> well, david marcus used to be the paypal president. highly regarded. he left a couple of months ago to go to facebook. in july, ebay warned third-quarter shares would fall short of estimates, and it does appear that that is largely related to ebay's marketplace, you know, the online this is as opposed to the paypal business, which continues to grow at a 20% clip. more and more it looked as if there was value in paypal that was not being realized in the ebay stock price. >> that needed to be unlocked, as they like to put it. >> it was a day early in august 4% --the stock's short of >> on speculation -- >> yes, and at the time, the corporate communications person from ebay said we will look at all possible alternatives. >> anymore that kind of thing happens, the more kind if pressured the ceo comes under to make the decision that the market clearly wants. >> scott galloway, you are nodding your head activist investors and what they will get out of this. >> listening to erik, carl icahn is going to get credit. he catalyst if anything is a jack ma -- >> of alibaba. >> nothing will shoot a stock of more than a suitor out to dance with a lot of money. we have alibaba with a stock price that cannot be supported with its organic growth for stop it has got to make acquisitions. both of these things are more adjustable as separate companies than they are together. isyou are saying that ebay setting up to have paypal bought by alibaba? >> we are here. >> let's not forget apple pay also lurking in the background. was the first payment alternative to the visa/mastercard, you know, bank oligopoly. it has never fulfilled its promise. could have become the bitcoin of the 1990's -- did not happen. you have the background apple paymentpay, alibaba's business not included in the ipo. they have just thrown into sharp relief what ebay, web paypal could have been and has yet to become. what does this also really mean for your banks, cassidy? >> avery has processing sides that would be impacting by this, but most of the bank profitability is driven by good old-fashioned lending, and that is the real driving for the banking industry rather than these processing numbers. >> right now from rosenblatt's security, somebody that follows blackberry, apple, brian blair joins us. where will ebay stock open? us about away told premium. $52, $53 close. where will you presume to put a valuation combined ebay this morning? toughs is going to be a one because a lot of people have been very bullish about the paypal business given the growth rates we have seen over the last five years. i think there are some new competitors in the market right now. ebay is clearly going to trade up several dollars on this. this is a huge positive. a lot of investors have wanted to see this, but there are new competitors. he mentioned earlier apple pay. bitcoin has made some headway into the digital payment market. is becoming very meaningful in asia that could spread around the world in years to come, so while there is growth and opportunity still there, there is competitors in the market, five think the valuation is going to be a little lower than what it would have been 20 months ago. >> when you write your research, are you willing to say that tim cook caused this de-combination? >> i will be willing to say it certainly influenced it. landscape seen the changing, and that has marked a significant change and the ability for paypal to raise some money and to try and grow right now ahead of apple pay's launch i think is the right move, but yeah, definitely influenced it. does a paypal trading on its own look more like an amazon, which trades at two times shares or alibaba, which trades at 18 times shares? >> i think it probably looks more like an amazon. i don't know if it is going to garner a premium that we have seen with alibaba. it is not growing at the same rate. the opportunity does not feel quite as big because of the competition. alibaba in many ways within china has no competition, so i do not think it will garner that same type of a premium. >> brian blair with rosenblatt security, thank you. i want your comments on the idea that ali baba can jump in here. marry twins.ts to conglomerates are hard to take over. you can valuate them on their own merits. paypal despite the competition is the leading brands 20%. that is a good rep. >> does this mean the end to several companies that have several businesses under one roof? >> it means ceo's are going to have to earn their money -- look at the value, single brands with a focus and a mission -- google, apple. the conglomerates of the world, they are, the png's, all splitting apart. >> we are continuing coverage this morning on bloomberg paypal.on on ebay and >> erik schatzker, thank you for joining us. we will be back with more "bloomberg surveillance." ebay sales suspended following the news of the split. ♪ >> good morning, everyone. "bloomberg surveillance." we await premarket trading on ebay. they will separate paypal. scarlet fu looking for that first and trade as we begin the 7:30 half hour here on "bloomberg surveillance." >> it just happened, last trade was $58.50 a share. $58 a share? >> up 10%. >> there it is. we will go to washington now. of course the prime minister of india greeted at the white house. he had an intimate dinner. the major theme of mr. modi's trip as investment. caterpillarhoulip more bulldozers. a revolving continent from. -- a republican congressman from peoria has been an early supporter of new indian relatives. congressman, lovely to speak to you this morning. what is your fondest wish of this trip? a script to write two days, three days from now, how would you want this trip to and? things, america's commitment and the primates or's commitment to work on long-term trade agreement with india and the united states will stop india is the largest democracy on the planet. over one billion more people than the united states will stop 800 million of which are in poverty moving into the middle class hopefully in the century, and they provide a lot of households for us to seed and sell american products two. india historically has been a very protectionist country, but prime minister modi made his mark as chief minister of gujarat as being a very pro-trade, pro-business guy, cut out the corruption. he can do the same thing nationwide in india, it will be a huge boon to the indian economy and american a economy as well. >> mr. schock goes to washington, and any american would congratulate you for that. as a member of the legislative branch, what production would you like to see from the president and the secretary of state? how urgent is it for them to go to india and continuing to advance this theme? number of reasons -- number one, in that region of the world, it is not only important for our economy but also for our national security. when you look at the other players in the region -- i was in asia earlier this week. japan, our closest ally over there and south korea are very worried about the puffing of the their the spreading of wings in the asia-pacific, and india is a great counter balance to them as a member of the brits country but also as someone who borders afghanistan and pakistan, the largest democracy seems to be a much more able ally for us, and that matters to us from a military, geopolitical, strategic standpoint for us to close in our ties and build better foreign relation bridges of their as well. economically, the president thes to go there and tell indian community that if we can level the playing field, if we can truly create free trade, we can look up people in india to the middle class and beyond. certainly they have a lot of folks who would like to come to work in the united states and around the world, and the immigration law that passed out of the senate would be very harmful to the indian economy, and prime minister modi i know has not only spoken to me personally about that but i believe will speak to the president about that if he has not already during this trip here it he hopes that if the house of representatives passes a similar immigration bill, it would be much more generous in its work visas and allowance for foreign workers like those from india to come to the united states. >> congressman, with one of the reasons you have a unique view and relationship with prime minister modi is that caterpillar is in your home district in peoria, illinois. can you speak to how companies like caterpillar can do business in india whether they are getting assistance from the politics? andt is a great question, it is one that modi ran on when he ran for prime minister of india, and india, if you know of any u.s. businesses in particular that do business is in india, they will tell you it is extremely bureaucratic. there is a lot of red tape but also a lot of corruption. when i met with the head of ford india, which is headquartered in modi's home state of gujarat, i met with the heads of laboratories, and they said they located in gujarat primarily because of modi's leadership. he said he is a straight shooter. he capped the electors young, built the roads he said he was going to build, and in much of india that is not the norm. if we are going to build more infrastructure to sell more caterpillar tractors, we need to have more certainty in the court, more certainty with intellectual property, certainly in india a democracy is much more certain i would argue that even china, which has less property rights, human rights and the like. india has so much potential if they can create some certainty in the rule of law and courts. >> congressman, thank you so much, republican from the 18th district in illinois, aaron schock. scarlet, we have two corporate stories. one is a front and back of the store as well. walgreens. >> which did not go for the taxing version has just reported -- the tax in version just reported earnings. sales of $19.1 billion in line with what analysts were looking for. comparable sales rising 5.4%, which is actually lower than its initial preliminary report of a 5.6% increase. >> i do not see much forward guidance. maybe we will get that in a little bit. >> the other thing we want to highlight his shares of ebay are trading in the premarket after eb announced it will split its business into ebay, the pure market-based business, and paypal. ebay shares are rising. $52.66 yesterday. it rose to as high as $59 in the premarket. we will continue to monitor those headlines for you as well. >> a lot happening this morning and some the very important happening later today, football fans. today is your day in court. the sec commissioners may finally vote down the 1970's blackout rule which prevents football games from airing when the games are not sold out. scott galloway founded ellison partners and also teaches marketing at nyu. viewers like me want to know what it took so long to strike down such an incredibly artificial barrier? business,, $9 billion which have a lot of power in washington here it this is archaic legislation. it will die a peaceful death. good riddance. nfl sunday get ticket on my phone for $300, watch any game all season long. that is cheaper than taking a family of four to the game. have owners price themselves out of the market? is that part of the problem gekko >> when the legislator when you do affect 40 years ago, ticket sales, gate sales were the lion's share of revenues. now they are not meaningless, but nfl equals tv. do you know how many games were blacked out last year because of this? ee.two or thr it is meaningless legislation and it is time to go away. >> the yellow line is the new york jets [laughter] >> the white line shows monday, sunday night football, live games. >> football is everything. gerard cassidy, you are smiling. >> that his rifles although i live in portland, maine, i grew up in new york, so i am a giants fan. that would make a lot of us happier if they could do better. that is for sure. >> scott, it is her mark what what has happened in the last four years or five years. why is sports on tv? is it just that hunger for the immediacy of it? >> that is exactly right, tom. what is the last time you bought "breaking bad" or "house of cards"? you cannot even watch "house of cards" live? there is on the about trying to on ears onands your way home. people watch the world cup at 3:00 in the morning. it is the only time we watch commercials anymore, sports tour to >> that is true for stop what about roger goodell? he shouldquestion as step down in the league go through a challenging period because of all of the demented abuse scandals -- how does this fold in, the decision? >> i do not think it is a big event. they have much bigger it issues to deal with. they have their lobbyists on it. ity have commissioner saying will go away. if the biggest issue is the crisis management. they violated the number one of crisis management -- that is they did not acknowledge the problem and they did not over correct. we love to forgive, but you have to apologize, and the nfl did not apologize quickly enough. >> scott galloway, one of our guest hosts of the hour along with gerard cassidy of rbc capital markets. a quick note, ebay shares rising 11%. >> the galloway affect. >> after announcing a plan to separate its payments option, paypal. "bloomberg surveillance" will be right back. ♪ ♪ >> a good morning. we are watching shares of ebay climbing almost 11% in the $58.40et right now to after eb announcing it will split up paypal in 2015. i bought on the close for like a dime. >> alibaba shares also trading higher, $89.29. guest host,ay, our saying maybe alibaba's jack ma looking at paypal. >> walgreens topline, five point something percent. bank managers are planning to plan for calendar year 2015. can they assume of banking is normal, or will the disruption, the rightsizing continue? has seen all of this before and he knows the prices of lobster in his portland, maine. you have written courageously. we will give back to normal. is normal finally here? >> not yet. we need the interest rate environment to really bring back normal, so should the fed start raising rates next year, tom, i think over the next two years with a steeper yield curve, that would be normal. >>'s energizing, rightsizing -- will layoffs continue, particularly in new york wall street? >> that is steadily one of the things we have to watch carefully because the revenue growth for the industry is not that dynamic, so driving probability. we are talking about the paypal and earlier today, the mobile technology is going to revolutionize retail. >> full disclosure, you used to read cassidy like this, trying to front run all his mergers and acquisitions. that was a great party. why are we seeing more m&a now in small and midsize banks? >> the m&a party was enormous in the 1990's. you and i both remember. one of the reasons we are not seeing it today is the federal reserve is suggesting they are not certain if they want -- it is also a technology issue because of the bank secrecy act and anti-money laundering, the banks have to get over this hurdle to make sure that their systems are in place. as we have seen up in buffalo, new york, amity bancorp is going on almost it's heard you're trying to close this deal in new jersey because of aml issues. that is a big constraint right now you know monks the smaller banks. now even amongst the smaller banks. >> what you see from portland, maine that analysts here don't? >> i grew up in long island, new york. there are two words -- metro new york and the rest of the united states. i see a lot of mainstreet if i stay where i grew appearance huntington, long island, i would have been caught up in the new york rush. >> by contrast, what do they worry about? that you do not see as an issue for the industry. >> our business, the day-to-day trading volumes, the day today him in a activity. there?oan demand >> loan demand is picking up. credit card outstandings have turned up for two consecutive months, and if the consumer can come back -- >> ok, but scott, are they at risk because of paypal? or what is it called, iwallet? >> apple pay or alipay. >> the credit cards are for our largest banks. >> i do not have my wallet on me, but if i used a blue card last, that means apple wins, right? >> at the and of the day, aren't most of these guys putting out loans? isn't that the white meat of their business? >> absolutely. that is the basic backbone of banking, the spreads, and 70% plus -- >> real quickly, would you allow only regional banks out there in indiana making loans as opposed to money center banks doing wall street stuff? >> weaver for the money center banks because they are cheaper and when rates rise, they have multiple ways of generating revenue where is the regionals are primarily spread. >> we await these "surveillance" hat tricks by scott galloway. the white meat of their business. >> i have a better question -- we have talked about credit card fees, who uses the discover? sears. and the sears made the same argument donahoe has been making to hold onto paypal, and that is to have a captive customer. it made no sense then come a makes no sense for paypal now. then ebay shares in premarket. we will continue to monitor that development. we will be right back on "bloomberg surveillance." ♪ >> good morning, everyone. "bloomberg surveillance." ebay capitulates. they will separate paypal. premarket up about 10%. this is "bloomberg surveillance." let's get some other techy-like company news. >> we will start with apple. the new apple's got the -- the new iphones got the greenlight in china, that smug after agreeing to enhance user security and privacy. the devices will hit the market october 17. netflix enters the world of feature film production. it is teaming up with the weinstein company to release a sequel to the oscar-winning "crouching tiger, hidden dragon" next august. the movie will be released globally in select theaters and also on netflix streaming service. microsoft plans to build data centers in india. this initiative comes as the company hold an event in san francisco today to raise the curtain on the latest version of its windows operating system. that is the latest coupling is from the files of "bloomberg west." now we go back to paypal. this news it% on is spinning off paypal in 2015. as it turns out, our very own emily chang actually spoke with the founder of paypal back in august. here is what he had to say about a potential spinoff." >> should paypal be spun off? >> there are large and synergies between paypal and ebay and maybe it is something ebay should consider at some point in the future. i think ebay was right to resist carl icahn. we do not want them to be dictating what silicon valley does. --groups, it turns out that oops. it appears that carl icahn got his way and since the stock is up 11%, he was right. >> take a brand like williams-sonoma. you see a lot of counterfeit on ebay, and that has been primaryrs and brands' concern with ebay because they do not respect brand integrity. who do they not work with to punish ebay? they don't work with paypal. within three month at this span, you will see huge retailers decide to accept paypal and their growth will celebrate. donahoe sojohn resistant to the idea of spinning off paypal? what was his argument? >> it is the reason you probably own more than one stock -- diversification is the right strategy for investor come in if you are a ceo, you would rather grow 8% one year than 12% one year and 4% the next. 1.9% perd point out, year return for the last 10 years. you wonder why the ceo is still the ceo. how are you teaching this in your classroom at new york university? everybody ate and what you used to go to gerard cassidy's business come out the door to banking, american express, or hulman's company? >> do you know who the number one employer of m&a graduates are now? tech. the number one is amazon. >> i am glad you bring this up. i thought of it earlier -- how does mr. bezos react to these transformations in the business? he does not have an iwallet, does he? >> amazon has been rewarded with more access to more chief capital than any company. >> how can they be a chief stock echo data not make any money. >> i am saying access to cheap capital. >> two times sales versus four times sales. >> as a multiple, we never see any retailer trade like that for this long. the strategy is simple -- every nyu stern graduate, every mobile phone, 40% off for amazon because they have access to cheaper capital than anybody else heard amazon is doing more revenue now than walmart was in 1990, and it can issue 1% of the company, and get what, $1.6 billion? anderard cassidy visa american express the big banks, how does mr. bezos in ventas paypal or his iwallet? >> even if he does not, he will get the best of terms. >> he does not need to do a paypal? >> they seem to be on a collision course reiterating around each other.; amazon has one click pay. >> i think it is great. i use it too much. are you a dinosaur? it is likely summer for a 14 is the summer of dinosaurs. we are finding dinosaurs everywhere. are you a dinosaur? >> i don't think so. the banking industry is being attacked by technology, you are lending money and taking in money and is positive and you live off that spread your it it has been around since even before i was. >> around hockey at the weekends, i still using my bank card. >> you are a dinosaur. >> thank you. the secretary of state with the premised are of india. mr. modi, mr. kerry. that is on my agenda. kong agenda, the hong pro-democracy protest taking place. national day is tomorrow. >> ebay. that is it. you look at the analyst coverage -- 29 buys, 19 holds, zero sales some the stock is up 11%. buy here, scott galloway? >> what did they think the value on paypal will be? >> scott galloway, thank you for joining us as guest host, gerard cassidy, thank you for joining us from portland, maine. "in the loop" on bloomberg elledge and is up next. ♪ greg good morning. you are "in the loop," and i'm i'm betty liu. after denying this breakup for the better part of the year, ebay has made a full about safe this morning, saying it is putting off paypal. it is a big win for carl icahn, who earlier this year settled with ebay after lobbying for this exact split. we will be staying on this story, and bring you the latest headlines as well as guests to talk about this transaction. in other top headlines, pro-democracy dead -- them as traitors in hong kong -- pro-democracy demonstrators in hong kong. china's government has given apple the go-ahead to start selling the iphone 6 and the iphone 6
releasing games to mobile users. >> they have a huge, installed base. tons of connected devices. we don't have content on those devices. we are focused on providing great experiences on the home console. >> a pretty order for a new game called super smash brothers are breaking nintendo records. marissa mayer makes another aduisition, buying a video platform. it will strengthen advertising making it the largest in the united states. they paid $640 million to get it. a comeback for space hosting. big gains in quarterly revenue and profit. wasfuture of rackspace confusing. alibaba smashes records for china single day sales. in billion dollars in sales 24 hours. billion,hat to $2.9 those are big numbers. here is the vice chairman talking about making it a global event, not just a chinese event. >> we have international strategy that is focused on cross-border. you see a lot of evidence of that on singles day-to-day. a lot of retailers from around the world are selling to 300 million chinese consumers are shopping on our platform. we have chinese companies that are manufacturing products that can sell all over the world. we are seeing cross-border flow as well. that is exciting for us. >> international expansion could depend on a lot of things, including the possibility of a partnership with paypal. an interesting possibility for ali baba. joining me as gordon chang, to talk about this possibility of singles day, and what it might mean. the author of the collapse of china. gordon, the single day phenomenon is simply amazing. i know anytime we talk about anything chinese, the numbers are just so big. over $9 billion in a day, that is incredible. >> we have to put this in context. the national bureau of statistics in china reported that online sales in the first nine months were up 49.9%. what we saw today for single state was up 61%. that's really good. but we've seen other retailers report very large increases in online sales. the other thing we have to remember is this is not just one day. retailers on alibaba have been taking preorders since october 15. we've been talking about 28 days worth of sales. >> they record all those sales on that date, so they goose the number. >> that's exactly right. we are talking about heavily discounted products. the discounts were at least 50%. some of them were in excess of that. this is the teaser day to get a lot of people in the door with these crazy sales. >> in regards to these crazy sales, i figure that any company, if they really want to move the top line, they can. profitability is key. in this case, the number is so big. when they made a big deal about it last her, they were trying to hype the ipo. this number suggests some serious changes in the world of e-commerce in china. >> it certainly does. e-commerce is doing very well in china. on the other hand, consumption and retail sales altogether are probably falling. the national bureau of statistics as in the first nine months of the year, retail sales were up 12.0%. that's probably not true. for instance, walmart reported that in its most recent quarter, its international division had same-store sales growth every country in the world, except china. same-store sales fell 1.6%. unilever says q3 china sales fell. their sales fell around 4% for the first nine months. that shows consumption overall is in trouble. the retail sales are doing very well. >> alibaba is eating their lunch, it sounds like. jack ma was talking about what single day had to say for him. >> i want every type of enterprise, be it small or big, urban or rural, to be able to dissipate. -- to participate. >> interesting that's not having as much of an effect on global markets as much as chinese specific products. >> this is the first year alibaba made a big push to have foreign products on sale for singles day. i will see this rolled out for next year, and clearly, we have companies like costco and tesla are selling on alibaba to try and test the chinese market. they're going to be additions to the alibaba platforms with new products coming online. i think that is where the real growth will be, not in overall consumption. >> one wonders if this is what the chinese government wants. a civil company dominating 80% of the commerce. >> probably not. there is another company that is better managed and has a marker -- has a much more coherent strategy. they are also having double-digit sales increases. they have an easier path to success than alibaba. they are the social media king, and it is easier for them to monetize the social media base that it is for alibaba to take its e-commerce space and go into social media and sell to new social media customers. this is a really interesting contest between these two companies. i think $.10 is probably the better company this point. >> jack ma isn't as good a manager, but he is trying. working so hard he doesn't have time. listen to what he had to say about his ability to shop for clothing online. >> my clothes are all bought online. my family does a lot of online shopping. i don't have time to shop. >> do you feel bad for him? >> i feel really bad for jack ma. he's charismatic, he has wonderful ideas. he is taking alibaba away from e-commerce in china. i think he realizes that e-commerce only has so much to grow. he's going into hollywood, doing all sorts of things. that is going to be interesting to see this company diversify. it has to diversify. it's not aggressive, it's really defensive on his part. i think he has some pretty good ideas. i wish he had more time to buy close. >> thank you. president obama give is big news yesterday, putting pressure on the fcc for net neutrality. saying it must protect the open internet. what will the fcc do? we talk with an important vote on this ongoing debate. don't miss our interview with david marcus, later this half hour. ♪ >> i'm cory johnson, this is "bloomberg west." president obama's party suffered losses in midterms. he has been speaking out recently about net neutrality, calling on the fcc to lay down the strongest rules possible to protect the open internet. he is urging the fcc to regulate the internet the same way it regulates phone companies. joining us from the techonomy conference is fcc commissioner jessica. this issue of open internet has resonated like nothing i can think of entelechy medications -- in telecommunications. why do you think it is striking such a nerve? >> i think the internet is a part of all of our daily lives. whether it is wired or wireless, everyone is using it everyday. this feels personal for people. can you define for me title ii, that says -- what's this back of the envelope -- what is it mean? >> the fcc operates under a bunch of laws, including the telecommunications act of 1996, and the communications act of 1934. the challenge is finding a legal home for those services in those laws. >> there has been criticism about the fcc getting involved in any way. senator ted cruz was out yesterday saying this is the obama administration trying to regulate the internet. is the internet already regulated? >> are internet economy is the envy of the world. what has made it that way is the foundation of openness. until january of this year, the fcc had policies in place to make sure that openness was sustainable. and that companies could continue to be successful. i think with the fcc is trying to do is reassess how to put those policies back in place and make sure that openness continues. >> i'm not going to ask you what your vote is going to be, but what do you think the timing is here, and what is the weight for? >> i hope we do this as soon as possible. 4 million people have written the fcc to talk about these issues. when i was appointed to the agency, i'm not sure i would have been confident that 4 million people knew what the fcc was doing. i think we have had a lot of people speak up on this issue, including the president. i think we can move forward without delay. >> what you think of john oliver's bit on this? >> i think i will just say it was entertaining, and leave it at that. >> there is a lot of lobbying money spent on this as well. when you make these decisions, do you consider the effect on the existing players? or do you try and imagine a black slate of what the world might be like? >> that is a good question. when it comes to the internet, and its future, we are all invested in it's vitally important that the fcc listen to every stakeholder of every stripe. that means the 4 million americans who have written us. that means big and i companies. -- big internet companies. it also means the providers of broadband service in our economy today. >> why should companies that invest the money provided to them by investors and shareholders have to be regulated at all? why shouldn't we let them decide what is best for their consumers, and if people don't like it, they will pay? >> i think we are talking about a light touch regulation. nothing overbearing. it is an honest acknowledgment. these merit some oversight. >> do think it's more necessary for a big existing company or for startups we haven't imagined yet? >> i think that oversight is about making sure that everyone has access to the internet and all of its functionalities. it is becoming an essential elements of everything in our civic and commercial life. that speaks in the near term to the companies who are present. it would be a terrific thing if we could develop more competition in our broadband markets. that is something i hope we can do as time goes on. >> let me ask you about that. on the local level, there isn't much competition. in certain locations, people don't have a choice if they want high-speed internet. are there things the fcc can do, or is that a technological constraint? or a constraint of comedy bulldozers can terra, need front -- how many bulldozers can terra how many front yards. >> it is a tougher question. it involves technology, economics, and the law. we want to make sure the law is in a position to welcome new providers of services, no matter what the technology. we want to make sure that the expense of building out to those locations can be lowered through changes in policies. we have to ignore knowledge that we do have challenging areas in this country, where the population densities are limited. the number of providers interested in making a business case and serving them is going to be limited also. >> between us, you want to tell me who you are going to vote for for title ii rig elections? -- regulations? >> i support network neutrality. >> jessica rosenworcel, we appreciate her time. "bloomberg west," will be right back. ♪ >> welcome back to "bloomberg west." i'm cory johnson. companies are leading a charge in the private sector, into space. with two rocket disasters in the last month, investors and -- investors are positing. we sat down to talk about the future of space exploration. he joined emily chang at the techonomy conference. they talked about satellites connecting the worlds of the internet. >> something that didn't make business sense 20 years ago now does. hundreds of satellites in orbit continuously, circling overhead -- no one is staying fixed overhead. they provide broadband. the latency is shorter. you can provide broadband to the entire planet. every village and school, every well platform, every plane come -- every plane, every boat during. >> who wins -- google, facebook? >> they all win if someone provides it and it is net neutral. all these companies would agree that if somebody provides a pipe to the home in every village that is independent of the television companies and cable companies, it's just a third way to get to everybody, that will be wonderfully democratizing. no one can charge a price premium. >> if it doing it, will they put a facebook in your face? >> every engineer within facebook and google realizes that wouldn't be right. >> you are an investor in spacex. you're a space enthusiast. how concerned are you about the recent crashes. how much does that set back the private space industry? >> it was a tough week for those companies, and some of the companies launching satellites on their vessels. my heart goes out to the test pilot that perished. it is those brave folks that have the greatest risk that have made the development of airplanes and rocket ships possible. if they weren't putting their lives and the lines, we couldn't advance the science. the broader industry isn't impacted. in both cases, the failures were idiosyncratic. every evidence from the early investigation says this was an unusual wing structure that released too early, and unfortunately, to disaster. it is easily fixed, but it is unique to that vessel. no other rocket airplane uses that technology. so it is not a failure mode that is generalizable. they will fix it. they know how to make sure that never happens again. >> we talked about timing in the future. when our tourists owing into space -- going into space? >> the question is how long will elon musk live on mars? you already have tourists, but they are playing a high price -- paying a high price and flying on russian vessels. going with in the next 10 years to orbit, mars the next 20. some may say earlier based on they are handicapping. it's kind of like in the early days of apollo, some people scratch their head and said is it possible? it is possible, and the longer you wait, the safer and cheaper it gets. it will be no more expensive or dangerous than flying in airplanes. it should be cheaper to fly a rocket around the earth then to fly an airplane around the earth. >> this is a matter of decades? >> decade. i fully intend to be flying around earth, and within 20 years come around the moon. i want to fly very low. you can be in orbit on a spacewalk, just 5000 feet above the surface, like you were shooting through canyons, and you can see everything. weightless, for as long as you want. that is going to be accessible and affordable to just about anybody who dreams big and wants to make it. >> have you been to space? >> i have been in zero gravity. i love weightless this. it is a lot of fun. the photography of there is breathtaking. >> that was actually a fireside chat with steve jurvetson and emily chang. david marcus, transforming facebook messenger. ♪ >> you are watching bloomberg west. i'm cory johnson. facebook messenger has 500 million monthly active users according to david marcus, who .oined emily chang today emily started by asking why he thought being a ceo is overrated. >> it is overrated because most of the things you do every day are not actually that much fun. that is the truth. that is what you do for a living. there is nowhere to go. , if that's you do for a living, you get to a place where there -- if you are an entrepreneur, you would rather go build things than manage things. that's why i couldn't resist the opportunity to go build something large, at the scale of one billion plus people. i wasn't able to resist that. >> you are managing 15,000 people at paypal, 100 people at messenger. >> that's great. >> how do you feel seeing everything that has happened in ebay spinning off paypal? how do you feel about this decision? >> i feel great. when i'm happy, i go to work every morning. we have a phenomenal team of young people who don't know what is impossible yet heard. we have an opportunity to build something that we ship every other week to hundreds of millions of people. the feedback loop is extremely short. the impact is huge. honestly, i am super happy. i have no regrets. >> when you got there, how many users did messenger have? >> we don't raise the timeline. 200 million users, was in march. now we are at half a billion. >> half a billion monthly active users on facebook messenger. it was controversial him as we discussed. facebook basically shut it down within the app, and forced people to start using messenger. your job is to make that worth wild. -- worthwhile. >> i don't see it that way. messaging is actually a core product. it is not a feature of another product. if you want to be best in class, world-class to messaging, you need to have a destination. a single-purpose app to perform that for you. i think moving messaging out of the core facebook app was the right decision. half a billion people use it monthly. they like it. we are just getting warmed up. there's a lot more we will build in the app that will make it really good. hopefully, it becomes the best way for you to communicate with the people you care the most about. and we will build tools for you to express yourself the best you can. >> your goal is to make it a richer messaging experience. what more can we connect -- expect to make it stand out from the other messaging options? >> if you look at basic texting, it is very transactional. i will be latecomer i'm late. i'm in traffic trade. -- i am in traffic. don't forget to buy milk. it is very transactional. you can't have an enjoyable and rich conversation using text messaging. that is what we want to do. if you look at messenger right now, we have high-definition goals, selfie cams, you can send video, you can send voice clips. there are many ways you can interact with the people you care about. we are aiming to make that richer and richer in the next months and years to come. there are a bunch of ways we can do that. we are hard at work building those things. >> where do you see the most potential for growth, when it comes to geography and demographics? >> think growth in users is -- we are strong in north america. in western europe and nordic's. we are big in brazil and india. we will continue developing. i think what happens -- what's the really important thing is for you to actually take those conversations you care the most about, from whatever messaging app or text messaging, and bring it inside of messenger. you can have a richer experience. if we do that well, the volume of messages on messenger will increase. the number of people on it will increase as well. >> you have companies like snapchat focusing on younger users. might you make this available to younger users? >> by design, we are not going to design a specific thing for a younger demographic. we will figure out ways to open at messenger to more people over time. that can take many different shapes. we will see how it plays out. >> what about china? is that something that could succeed in china were facebook is not? >> we need to sell the fact that we are available in china as a company, not just on a product basis. in the years to come, we will figure out a way to end to the market. the messaging landscape in china is already extremely competitive. we chat is very strong there. we have a lot to do, and we have our hands full right now. in western europe, north america, and brazil, india, lots of countries. we are head down, working on that. >> have to ask you about paypal. how supportive are you of paypal being spun off as a public company? is this the right decision? >> it deserves to be a standalone company. the big question is will it remain an independent come in the after it is spun off of ebay. >> paypal is not a partner with apple pay. how big a problem is that? >> braintree works with apple day, i do not think it is a big problem. >> you have been clear that whatsapp and messenger will be separate. can you envision a future where they are not? >> we don't spend a lot of time thinking about that. whatsapp is on the path to get to one billion monthly users. once they passed a half-billion mark, next up is one billion for us as well. we are approaching this in different ways. i think, thinking about rationalizing this right now would be a mistake. whatsapp is fairly independent. they are in mountain view, on campus. we are building different product experiences. i think some experiences will cater to some users, others to others. we will see how it plays out. >> in the future, do we have as many messaging options? or do we use just a few. >> i think we use just a few. right now, most people use just a few. there will be fewer in years to come because the market will rationalize it. you have an app that is supposed to help you communicate with all the people you have in your address book and beyond or awesome for communicating with the people you care most about. >> how surprising is it working with mark zuckerberg? >> he is impressive. even more than you may think. the combination of being a --ionary and executing whale executing well is rare. generally you are one or the other. he is both. he is an impressive person to work with. i am grateful i am here to witness those things. >> where is messenger five years from now, 10 years from now? that's a long time. >> let's focus on the five years. succeed,ears when we messenger will become a more central part of your life. you will be able to communicate with more people and build an ecosystem around it. the ecosystem, it will matter more than it does now. >> the facebook vice president of messaging products. company found a new way that gesture control devices more accurate. that story is next. ♪ >> i'm cory johnson, this is "bloomberg west." 2014 winding down, sam grobart traveled the world to get an exclusive look at the technology and innovations that are set to -- disrupt business in 2015. imagine being able to control your computer and apps with just a flick of the wrist or wriggling your fingers. new technology is making it possible. this is the year ahead. >> when you think about how we interact with the rest of the world, we evolve to use our hands and interact with every thing around us. i think that intuition, to move and expect a result a happen in the virtual world is just the natural evolution of that. what is the mouse as you move away from the desktop to the future? >> stephen leicht is the cofounder of a small tech company outside of toronto, that's preparing for a future where our interaction with technology will move beyond all of this pointing and clicking. their solution is this armband, with gets its name from the greek word for muscle. >> the myo armband is a new type of computer interface. it allows you to control any electronic device through hand gestures and motion. >> gesture control is not a new concept. most existing systems require a camera or proprietary sensor. making them only useful in very specific circumstances. myo detects what is happening under your skin. >> these are the sensors. >> each one of these pods is one sensor. that picks up the muscles in that part of your arm. the different muscles correspond to different parts of the armband. >> myo measures the unique muscle signatures you generate every time you move. >> we pick up muscle activities, it's tiny signals. in the medical field, it's a $15,000 machine. we need to put eight of those sensors and an armband, and it cost $150, that anyone can slide on without shaving your hair and lying gel, and all that area. >> this represents what is going on in part of your forearm. if you make a fist, and squeeze quite hard, you are seeing -- what that means is that all around your arm, the muscle is being activated in different spots. >> this information is sent from the armband to a bluetooth enabled device. the device can decode the permission into useful commands. it interfaces with existing applications. >> you have the software, you can open a powerpoint, itunes, you name it. >> flick your arm to the left, your video rewinds. tap your fingers, your music plays. myo works well with simple gestures to do pretty straightforward commands. like this video, specifically designed for myo. if you think about replacing all of the things you do on a device with hand gestures, things can get cap located. -- complicated. for that reason, myo may never replace your mouse. but they don't want it to. >> the idea is not you were sitting at your desk, and there should be a better mouse. it's those scenarios where you are away from sitting in front of your computer where myo really shines. >> they see a future where wearables enable us to an with machines seamlessly. >> 10 years from now, these devices will be all around us, even wearable computers. what is the mouse of the future is a question we are trying to answer. >> our history of interacting with technology has always required us to use and hold some sort of an object. myo is the first step towards an object less interface, something you can wear on your body all the time and use in new and different ways. in the future, the perfect interface may just be you. >> that was sam grobart. make sure to turn ahead to the year ahead special. we will be looking at 10 innovations that could change everything you know about technology, food, and medicine. alibaba's jack ma led his company to a record-breaking ipo. how do you choose a bank to underwrite it? next. ♪ >> welcome back. i'm cory johnson. alibaba's record-breaking ipo is in the books. the searches on to find china's next big tech company. credit suisse was one of the lead managers of alibaba's ipo. they have been involved with nine other chinese ipo's this year. how did they build their clout in china? emily chang asked how they developed a relationship with alibaba. >> we had a long-standing relationship with alibaba group and their senior management. i think i met joe almost seven years ago. over time, they have done a few things with them. we advise them when they bought shares from yahoo!. we also helps them raise $1.7 billion deals. we have built a relationship over many years. >> credit suisse has six chinese ipos? >> 10. >> how are you getting those? >> we have a great team focusing on technology space. really excited about the internet space. as a global team, we work very closely with china all the time to work with my partners in china. they are incredible bankers and they do a really good job. it's fantastic to be part of that team. >> you have been leading teams to china, bankers to china, for years before people realize how big china could be. >> if you think about internet business, internet is a volume game. when you have a lot of people, and a growing economy, those markets are great for internet companies. you have a lot of micro-transactions. china, with their 1.3 billion population, $9.7 trillion gdp, it's creating tremendous amount of growth. that may bode well for technology companies. >> it was credit to bash quite -- quite a coup for credit suisse to get you. >> i think they have a great corporate culture. they have very strong bankers. it's a joy to be a credit suisse. they are very thoughtful bankers. some of the best bankers i have ever met came from credit suisse. i learned a lot from them. it's a good entrepreneurial culture. >> credit suisse missed facebook and twitter. how you make sure you don't miss the next thing? >> we have to be focused. it is a competitive business. we have great competition, great bankers. we have to be extremely focused and spend time with the coveney's early on, to do what we did with alibaba. we just had one of the biggest ipos out of new york. i try and see as many companies as possible. it is an exciting time. i'm excited to stay focused. >> what do you think about a company raising money at a $40 billion plus valuation, rather than going public? >> i don't have an insight about that. it's a private company and a private transaction. i think xiaomi is a company that's exposed to the china market. they are really confident in many ways. i think a lot of companies are trying to stay longer private, because markets are very short-term oriented. by being private, gives them the opportunity to focus on long-term objectives. and if you saw alibaba waited 15 years before they went public. i so yesterday the average internet companies are waiting more than seven years before they go public. in 2000, the company's within two or three years would go public. >> does that make your job harder? >> it does. it takes more time. you get to work with this company for longer, when they are private. they do a lot of transactions when they are private to. >> is china the next silicon valley? >> it is a great question. i think chinese companies are innovative. i think there is great talent there. a lot of engineering talent. culturaly very entrepreneurial. we are seeing great companies everywhere. i went to berlin many times last year, and ever; there, i see some exciting companies. >> i thought your in miller would say yes, it is. instead he says there may never be another silicon valley? >> i think what's going on here, it happened to create a culture of entrepreneurship for many years. going back to when these old to knowledge economy's were founded, companies like hp or cisco. even before that, intel. i think that culture created a lot of people who have very good mentors. they are mentoring a lot of younger companies. in many other places, it would take longer to do that. it takes years and years of development for what we have in silicon valley. >> that was imran khan. you can get the latest headlines at the top of the hour and all the time on bloomberg.com /technology. we will see you tomorrow with more "bloomberg west." ♪
base. tons of connected devices. we don't have content on those devices. we are focused on providing great experiences on the home console. >> a pretty order for a new game called super smash brothers are breaking nintendo records. yahoo ceo marissa mayer makes another acquisition, buying a video ad platform. it will strengthen advertising making it the largest in the united states. they paid $640 million to get it. a roaring comeback for rackspace hosting. big gains in quarterly revenue and profit. the future of rackspace was confusing. alibaba smashes records for china single day sales. the e-commerce giant racked up 9.3 billion dollars in sales in 24 hours. compare that to $2.9 billion, those are big numbers. here is the vice chairman talking about making it a global event, not just a chinese event. >> we have international strategy that is focused on cross-border. you see a lot of evidence of that on singles day-to-day. a lot of retailers from around the world are selling to 300 million chinese consumers are shopping on our platform. we have chinese companies that are manufacturing products that can sell all over the world. we are seeing cross-border flow as well. that is exciting for us. >> international expansion could depend on a lot of things, including the possibility of a partnership with paypal. an interesting possibility for ali baba. joining me as gordon chang, to talk about this possibility of singles day, and what it might mean. gordon chang of course, the author of "the collapse of china." gordon, the single day phenomenon is simply amazing. i know anytime we talk about anything chinese, the numbers are just so big. over $9 billion in a day, that is incredible. >> we have to put this in context. the national bureau of statistics in china reported that online sales in the first nine months of this year were up 49.9%. what we saw today for single state was up 61%. -- singles day was up 61%. that's really good. but we've seen other retailers report very large increases in online sales. the other thing we have to remember is this is not just one day. retailers on alibaba have been taking preorders since october 15. we've been talking about 28 days worth of sales. >> they record all those sales on that date, so they goose the number. >> that's exactly right. we are talking about heavily discounted products. the discounts were at least 50%. some of them were in excess of that. this is the teaser day to get a lot of people in the door with these crazy sales. >> in regards to these crazy sales, i figure that any company, if they really want to move the top line, they can. profitability is key. in this case, the number is so big. when they made a big deal about it last year, i figured they were trying to hype the ipo. this number suggests some serious changes in the world of e-commerce in china. >> it certainly does. e-commerce is doing very well in china. on the other hand, consumption and retail sales altogether are probably falling. the national bureau of statistics as in the first nine months of the year, retail sales were up 12.0%. that's probably not true. for instance, walmart reported that in its most recent quarter, its international division had same-store sales growth every country in the world, except china. same-store sales fell 1.6%. unilever says q3 china sales fell. their sales fell around 4% for the first nine months. that shows consumption overall is in trouble. the retail sales are doing very well. >> alibaba is eating their lunch, it sounds like. jack ma was talking about what single day had to say for him. >> i want every type of enterprise, be it small or big, urban or rural, to be able to participate. >> interesting that's not having as much of an effect on global markets as much as chinese specific products. >> this is the first year alibaba made a big push to have foreign products on sale for singles day. i will see this rolled out for next year, and clearly, we have companies like costco and tesla are selling on alibaba to try and test the chinese market. they're going to be additions to the alibaba platforms with new products coming online. i think that is where the real growth will be, not in overall consumption. >> one wonders if this is what the chinese government wants. a single company dominating 80% of the commerce. >> probably not. there is another company that is better managed and has a much more coherent strategy. they are also having double-digit sales increases. they have an easier path to success than alibaba. they are the social media king, and it is easier for them to monetize the social media base that it is for alibaba to take its e-commerce space and go into social media and sell to new social media customers. this is a really interesting contest between these two companies. i think $.10 is probably the better company this point. >> jack ma isn't as good a manager, but he is trying. working so hard he doesn't have time. listen to what he had to say about his ability to shop for clothing online. >> my clothes are all bought online. my family does a lot of online shopping. i don't have time to shop. >> do you feel bad for him? >> i feel really bad for jack ma. he's charismatic, he has wonderful ideas. he is taking alibaba away from e-commerce in china. i think he realizes that e-commerce only has so much to grow. he's going into hollywood, doing all sorts of things. that is going to be interesting to see this company diversify. it has to diversify. it's not aggressive, it's really defensive on his part. i think he has some pretty good ideas. i wish he had more time to buy clothes. >> thank you. president obama give is big news yesterday, putting pressure on the fcc for net neutrality. saying it must protect the open internet. what will the fcc do? we talk with an important voter on this ongoing debate. don't miss our interview with david marcus, later this half hour. ♪ >> i'm cory johnson, this is "bloomberg west." president obama's party suffered losses in midterms. he has been speaking out recently about net neutrality, calling on the fcc to lay down the strongest rules possible to protect the open internet. he is urging the fcc to regulate the internet the same way it regulates phone companies. joining us from the techonomy conference is fcc commissioner jessica. this issue of open internet has resonated like nothing i can think of in telecommunications. why do you think it is striking such a nerve? >> i think the internet is a part of all of our daily lives. whether it is wired or wireless, everyone is using it everyday. this feels personal for people. >> can you define for me title ii, the portion from 1934 that says -- what's this back of the envelope -- what is it mean? >> the fcc operates under a bunch of laws, including the telecommunications act of 1996, and the communications act of 1934. the challenge is finding a legal home for those services in those laws. >> there has been criticism about the fcc getting involved in any way. senator ted cruz was out yesterday saying this is the obama administration trying to regulate the internet. is the internet already regulated? >> you know, our internet economy is the envy of the world. what has made it that way is the foundation of openness. until january of this year, the fcc had policies in place to make sure that openness was sustainable. and that companies could continue to be successful. i think with the fcc is trying to do is reassess how to put those policies back in place and make sure that openness continues. >> i'm not going to ask you what your vote is going to be, but what do you think the timing is here, and what is the weight for? >> i hope we do this as soon as possible. 4 million people have written the fcc to talk about these issues. when i was appointed to the agency, i'm not sure i would have been confident that 4 million people knew what the fcc was doing. i think we have had a lot of people speak up on this issue, including the president. i think we can move forward without delay. >> what you think of john oliver's bit on this? >> i think i will just say it was entertaining, and leave it at that. >> there is a lot of lobbying money spent on this as well. when you make these decisions, do you consider the effect on the existing players? or do you try and imagine a blank slate of what the world might be like? >> that is a good question. when it comes to the internet, and its future, we are all invested and it's vitally important that the fcc listen to every stakeholder of every stripe. that means the 4 million americans who have written us. that means big internet companies. it also means the providers of broadband service in our economy today. >> why should companies that invest the money provided to them by investors and shareholders have to be regulated at all? why shouldn't we let them decide what is best for their consumers, and if people don't like it, they will not pay? >> i think we are talking about a light touch regulation. nothing overbearing. it is an honest acknowledgment. these merit some oversight. >> do think it's more necessary for a big existing company or for startups we haven't imagined yet? >> i think that oversight is about making sure that everyone has access to the internet and all of its functionalities. it is becoming an essential elements of everything in our civic and commercial life. that speaks in the near term to the companies who are present. it would be a terrific thing if we could develop more competition in our broadband markets. that is something i hope we can do as time goes on. >> let me ask you about that. on the local level, there isn't much competition. in certain locations, people don't have a choice if they want high-speed internet. are there things the fcc can do, or is that a technological constraint? or how many bulldozers can tear up how many front yards. >> it is a tougher question. it involves technology, economics, and the law. we want to make sure the law is in a position to welcome new providers of services, no matter what the technology. we want to make sure that the expense of building out to those locations can be lowered through changes in policies. we have to ignore knowledge that we do have challenging areas in this country, where the population densities are limited. the number of providers interested in making a business case and serving them is going to be limited also. >> between us, you want to tell me who you are going to vote for for title ii regulations? >> i support network neutrality. >> jessica rosenworcel, we appreciate her time. "bloomberg west," will be right back. ♪ ♪ >> welcome back to "bloomberg west." i'm cory johnson. companies are leading a charge in the private sector, into space. with two rocket disasters in the last month, investors are positing. we sat down to talk about the future of space exploration. he joined emily chang at the techonomy conference. they talked about satellites connecting the worlds of the internet. >> something that didn't make business sense 20 years ago now does. hundreds of satellites in orbit continuously, circling overhead -- no one satellite is staying fixed overhead. they provide broadband. the latency is shorter. you can provide broadband to the entire planet. every village and school, every well platform,every plane, every boat during. >> who wins -- google, facebook? >> they all win if someone provides it and it is net neutral. all these companies would agree that if somebody provides a pipe to the home in every village that is independent of the television companies and cable companies, it's just a third way to get to everybody, that will be wonderfully democratizing. no one can charge a price premium. >> if it is facebook doing it, will they put a facebook in your face? >> every engineer within facebook and google realizes that wouldn't be right. >> you are an investor in spacex. you're a space enthusiast. you launch rockets in your backyard. how concerned are you about the recent crashes. how much does that set back the private space industry? >> it was a tough week for those companies, and some of the companies launching satellites on their vessels. my heart goes out to the test pilot that perished. it is those brave folks that have the greatest risk that have made the development of airplanes and rocket ships possible. if they weren't putting their lives and the lines, we couldn't advance the science. the broader industry isn't impacted. in both cases, the failures were idiosyncratic. meaning, every evidence from the early investigation says this was an unusual wing structure that released too early, and unfortunately, to disaster. it is easily fixed, but it is unique to that vessel. no other rocket or plane uses that technology. so it is not a failure mode that is generalizable. they will fix it. they know how to make sure that never happens again. >> we talked about timing in the future. when our tourists going into space? >> the question is how long will elon musk live on mars? you already have tourists, but they are paying a high price and flying on russian vessels. going with in the next 10 years to orbit, mars the next 20. some may say earlier based on they are handicapping. it's kind of like in the early days of apollo, some people scratch their head and said is it possible? it is possible, and the longer you wait, the safer and cheaper it gets. it will be no more expensive or dangerous than flying in airplanes. it should be cheaper to fly a rocket around the earth then to fly an airplane around the earth. >> this is a matter of decades? >> decade. i fully intend to be flying around earth, and within 20 years come around the moon. i want to fly very low. you can be in orbit on a spacewalk, just 5000 feet above the surface, like you were shooting through canyons, and you can see everything. weightless, for as long as you want. that is going to be accessible and affordable to just about anybody who dreams big and wants to make it. >> have you been to space? >> i have been in zero gravity. i love weightlessness. it is a lot of fun. the photography of there is breathtaking. >> that was actually a fireside chat with steve jurvetson and emily chang. david marcus, transforming facebook messenger. ♪ >> you are watching "bloomberg west." i'm cory johnson. facebook messenger has 500 million monthly active users according to david marcus, who joined emily chang today. emily started by asking why he thought being a ceo is overrated. >> it is overrated because most of the things you do every day are not actually that much fun. that is the truth. that is what you do for a living. there is nowhere to go. if you are an entrepreneur, you would rather go build things than manage things. that's why i couldn't resist the opportunity to go build something large, at the scale of one billion plus people. i wasn't able to resist that. >> you are managing 15,000 people at paypal, 100 people at messenger. >> that's great. >> how do you feel seeing everything that has happened in ebay spinning off paypal? how do you feel about this decision? >> i feel great. when i'm happy, i go to work every morning. we have a phenomenal team of young people who don't know what is impossible yet heard. we have an opportunity to build something that we ship every other week to hundreds of millions of people. the feedback loop is extremely short. the impact is huge. honestly, i am super happy. i have no regrets. >> when you got there, how many users did messenger have? >> we don't raise the timeline. 200 million users, was in march. now we are at half a billion. >> half a billion monthly active users on facebook messenger. it was controversial him as we discussed. facebook basically shut it down within the app, and forced people to start using messenger. your job is to make that worthwhile. >> i don't see it that way. messaging is actually a core product. it is not a feature of another product. if you want to be best in class, world-class to messaging, you need to have a destination. a single-purpose app to perform that for you. i think moving messaging out of the core facebook app was the right decision. half a billion people use it monthly. they like it. we are just getting warmed up. there's a lot more we will build in the app that will make it really good. hopefully, it becomes the best way for you to communicate with the people you care the most about. and we will build tools for you to express yourself the best you can. >> your goal is to make it a richer messaging experience. what more can we expect to make it stand out from the other messaging options? >> if you look at basic texting, it is very transactional. i will be late, or i'm late. i am in traffic. don't forget to buy milk. it is very transactional. you can't have an enjoyable and rich conversation using text messaging. that is what we want to do. if you look at messenger right now, we have high-definition goals, selfie cams, you can send video, you can send voice clips. there are many ways you can interact with the people you care about. we are aiming to make that richer and richer in the next months and years to come. there are a bunch of ways we can do that. we are hard at work building those things. >> where do you see the most potential for growth, when it comes to geography and demographics? >> think growth in users is -- we are strong in north america. in western europe and nordic's. we are big in brazil and india. we will continue developing. i think what's the really important thing is for you to actually take those conversations you care the most about, from whatever messaging app or text messaging, and bring it inside of messenger. you can have a richer experience. if we do that well, the volume of messages on messenger will increase. the number of people on it will increase as well. >> you have companies like snapchat focusing on younger users. might you make this available to younger users? >> by design, we are not going to design a specific thing for a younger demographic. we will figure out ways to open at messenger to more people over time. that can take many different shapes. we will see how it plays out. >> what about china? is that something that could succeed in china were facebook is not? >> we need to sell the fact that we are available in china as a company, not just on a product basis. in the years to come, we will figure out a way to enter to the market. the messaging landscape in china is already extremely competitive. we chat is very strong there. we have a lot to do, and we have our hands full right now. in western europe, north america, and brazil, india, lots of countries. we are heads-down, working on that. >> have to ask you about paypal. how supportive are you of paypal being spun off as a public company? is this the right decision? >> it deserves to be a standalone company. the big question is will it remain an independent company after it is spun off of ebay. >> paypal is not a partner with apple pay. how big a problem is that? >> braintree works with apple day, i do not think it is a big problem. >> you have been clear that whatsapp and messenger will be separate. can you envision a future where they are not? >> we don't spend a lot of time thinking about that. whatsapp is on the path to get to one billion monthly users. once they passed a half-billion mark, next up is one billion for us as well. we are approaching this in different ways. i think, thinking about rationalizing this right now would be a mistake. whatsapp is fairly independent. they are in mountain view, on campus. we are building different product experiences. i think some experiences will cater to some users, others to others. we will see how it plays out. >> in the future, do we have as many messaging options? or do we use just a few. >> i think we use just a few. right now, most people use just a few. there will be fewer in years to come because the market will rationalize it. you have an app that is supposed to help you communicate with all the people you have in your address book and beyond or awesome for communicating with the people you care most about. >> how surprising is it working with mark zuckerberg? >> he is impressive. even more than you may think. the combination of being a visionary and executing well is rare. generally you are one or the other. he is both. he is an impressive person to work with. i am grateful i am here to witness those things. >> where is messenger five years from now, 10 years from now? that's a long time. >> let's focus on the five years. in five years when we succeed, messenger will become a more central part of your life. you will be able to communicate with more people and build an ecosystem around it. the ecosystem, it will matter more than it does now. >> the facebook vice president of messaging products. one company found a new way that will make gesture control devices more accurate. that story is next. ♪ >> i'm cory johnson, this is "bloomberg west." 2014 winding down, sam grobart traveled the world to get an exclusive look at the technology and innovations that are set to disrupt business in 2015. imagine being able to control your computer and apps with just a flick of the wrist or wriggling your fingers. new technology is making it possible. this is the year ahead. >> when you think about how we interact with the rest of the world, we evolve to use our hands and interact with every thing around us. i think that intuition, to move and expect a result a happen in the virtual world is just the natural evolution of that. what is the mouse as you move away from the desktop to the future? >> stephen leicht is the cofounder of a small tech company outside of toronto, that's preparing for a future where our interaction with technology will move beyond all of this pointing and clicking. their solution is this armband, with gets its name from the greek word for muscle. >> the myo armband is a new type of computer interface. it allows you to control any electronic device through hand gestures and motion. >> gesture control is not a new concept. most existing systems require a camera or proprietary sensor. making them only useful in very specific circumstances. myo detects what is happening under your skin. >> these are the sensors. >> each one of these pods is one sensor. that picks up the muscles in that part of your arm. the different muscles correspond to different parts of the armband. >> myo measures the unique muscle signatures you generate every time you move. >> we pick up muscle activities, it's tiny signals. in the medical field, it's a $15,000 machine. we need to put eight of those sensors and an armband, and it cost $150, that anyone can slide on without shaving your hair and lying gel, and all that area. >> this represents what is going on in part of your forearm. if you make a fist, and squeeze quite hard, you are seeing -- what that means is that all around your arm, the muscle is being activated in different spots. >> this information is sent from the armband to a bluetooth enabled device. the device can decode the permission into useful commands. it interfaces with existing applications. >> you have the software, you can open a powerpoint, itunes, you name it. >> flick your arm to the left, your video rewinds. tap your fingers, your music plays. myo works well with simple gestures to do pretty straightforward commands. like this video, specifically designed for myo. if you think about replacing all of the things you do on a device with hand gestures, things can get complicated. for that reason, myo may never replace your mouse. but they don't want it to. >> the idea is not you were sitting at your desk, and there should be a better mouse. it's those scenarios where you are away from sitting in front of your computer where myo really shines. >> they see a future where wearables enable us to an with machines seamlessly. >> 10 years from now, these devices will be all around us, even wearable computers. what is the mouse of the future is a question we are trying to answer. >> our history of interacting with technology has always required us to use and hold some sort of an object. myo is the first step towards an object less interface, something you can wear on your body all the time and use in new and different ways. in the future, the perfect interface may just be you. >> that was sam grobart. make sure to turn ahead to the year ahead special. we will be looking at 10 innovations that could change everything you know about technology, food, and medicine. alibaba's jack ma led his company to a record-breaking ipo. how do you choose a bank to underwrite it? next. ♪ ♪ >> welcome back. i'm cory johnson. alibaba's record-breaking ipo is in the books. now bankers are searching high and low to find china's next big tech company. credit suisse was one of the lead managers of alibaba's ipo. they have been involved with nine other chinese ipo's this year. how did they build their clout in china? emily chang asked how they developed a relationship with alibaba. >> we had a long-standing relationship with alibaba group and their senior management. i think i met joe almost seven years ago. over time, they have done a few things with them. we advise them when they bought shares from yahoo!. we also helps them raise $1.7 billion deals. we have built a relationship over many years. >> credit suisse has six chinese ipos? >> 10. >> how are you getting those? >> we have a great team focusing on technology space. really excited about the internet space. we as a global team, we work very closely with china all the time to work with my partners in china. they are incredible bankers and they do a really good job. it's fantastic to be part of that team. >> you have been leading teams to china, bankers to china, for years before people realize how big china could be. >> if you think about internet business, internet is a volume game. when you have a lot of people, and a growing economy, those markets are great for internet companies. you have a lot of micro-transactions. china, with their 1.3 billion population, $9.7 trillion gdp, it's creating tremendous amount of growth. that may bode well for technology companies. >> it was quite a coup for credit suisse to get you. >> i think they have a great corporate culture. they have very strong bankers. it's a joy to be a credit suisse. they are very thoughtful bankers. some of the best bankers i have ever met came from credit suisse. i learned a lot from them. it's a good entrepreneurial culture. >> credit suisse missed facebook and twitter. how you make sure you don't miss the next thing? >> we have to be focused. it is a competitive business. we have great competition, great bankers. we have to be extremely focused and spend time with the companies early on, to do what we did with alibaba. we just had one of the biggest ipos out of new york. i try and see as many companies as possible. it is an exciting time. i'm excited to stay focused. >> what do you think about a company raising money at a $40 billion plus valuation, rather than going public? >> i don't have an insight about that. it's a private company and a private transaction. i think xiaomi is a company that's exposed to the china market. they are really confident in many ways. i think a lot of companies are trying to stay longer private, because markets are very short-term oriented. by being private, gives them the opportunity to focus on long-term objectives. and if you saw alibaba waited 15 years before they went public. i so yesterday the average internet companies are waiting more than seven years before they go public. in 2000, the company's within two or three years would go public. >> does that make your job harder? >> it does. it takes more time. you get to work with this company for longer, when they are private. they do a lot of transactions when they are private to. >> is china the next silicon valley? >> it is a great question. i think chinese companies are innovative. i think there is great talent there. a lot of engineering talent. culturaly very entrepreneurial. we are seeing great companies everywhere. i went to berlin many times last year, and ever; there, i see some exciting companies. >> i asked that same question to yuri milner and i thought he would say, say yes, it is. instead he says there may never be another silicon valley? >> i think what's going on here, it happened to create a culture of entrepreneurship for many years. going back to when these old to knowledge economy's were founded, companies like hp or cisco. even before that, intel. i think that culture created a lot of people who have very good mentors. they are mentoring a lot of younger companies. in many other places, it would take longer to do that. it takes years and years of development for what we have in silicon valley. >> that was credit suisse managing director imran khan. you can get the latest headlines at the top of the hour and all the time on bloomberg.com/technology. we will see you tomorrow with more "bloomberg west." ♪ ♪ >> here's johnny. >> from the moment he stepped on stage to the day he said goodbye -- the king of late night was johnny carson. >> he went right into the homes across america. >> mom, i am on tv.
see extremely cold weather hit the country this week. road map begins with markets trading in record territory. investors eyeing retailers, many set to report earnings this week. speaking of retail, what is the biggest day in e-commerce around the world, singles day is tomorrow, alibaba could rake in $8 billion in one day. we'll go live to china. mcdonald's october sales down, key figures across the board but better than what the street was expecting. u.s. stock markets aiming to extend their weekly winning streak to four. the dow and s&p each hitting new record, closing high on friday, despite the jobs number coming in below expectations. this week, investors bracing for a number of earnings reports from likes of walmart, macy's, jcpenney, retail sales, abactual number friday, with a lot of fed speak. >> alibaba is the focus. i'm glad david's over there this is a stock, you're also buying yahoo! how brilliant marissa mayer held back, more than 120 million shares from the ipo, this is a stock that has captured america's fancy, in part, we didn't follow singles day beforehand. this is 11/11. singles day equal to day one on this alibaba, it's equal to bigger than the entire cyberweek here. so you're talking about a company that's dominant and yahoo! remains a great way to play it. >> you've been saying, i think consistently for a while -- well, you didn't like baba above 90. now you say 120. >> yeah, lucky enough to break -- you say split hairs, wanted 82, traded down to 84, but i've been use 120 target because that's where it's equivalent to facebook. you get superior growth and profitability to facebook but it's the same multiple as facebook. we've got to relook. post-singles day it's a letdown. >> by the way, single biggest online shopping day in the world kicks off in just a few hours in china. alibaba looking to break online sales records. david, as we said, live at alibaba headquarters for the big event if he can hear us. david, good morning to you. >> good morning, guys. yeah, pardon my right hand over my ears. there's presentations going on that are fairly loud. i can hear you fairly well, as well. they're all leading up, of course, until midnight here when singles day begins. the what is it '09 when it first started. it's the sixth singles day they've had since alibaba basically started the holiday, if you will, started the tradition of giving yourself a gift if you're single, or if you're anybody else. steep discounts available on its two main platforms, those be t-mall at higher-end merchants and millions of merchants on tabow. 137,000 participate. last year amounted to $5.8 billion in gross merchandise value and this year, as you said, carl, the outset of the broadcast, may be as much as $8 billion. not only increased what they're doing domestically in china, but try to bring the idea of 11/11 around the world. it's interesting, we spoke earlier today with a handbag maker that sells on t-mall and they expect to do 20% of online sales on this one day. as well, you have a huge downdraft in traffic online at all in anticipation. shoppers know the day's coming, so they don't go online in the days before they're able to get those very large discounts which can be 50%, 60% on certain items. 150 million packages were shipped last year, as a result of singles day. again, logistically, the challenge will be an interesting one for alibaba and all of its partners. remember, it owns 48% of china logistics but it doesn't own any of its distributors outright. it's not in the business of distributing packages, of holding inventory, selling direct or competing with merchants on its platform. very different business model than amazon. one, of course, jim, as you mentioned reward since it went public of 68 six weeks ago, $280 billion market value. when i heard carl mention walmart earnings, i thought it's incredible, this company is marriag larger in market cap than walmart. it's approaching well over $300 billion that will be sold off of its platform this year. >> david, great that you're over there. you're going to be interviewing jack ma. what i'm trying to figure out with the stomach moving is, is there a dramatic drop-off in sales historically after singles day? most wonderful time of the year and december 26th, you just stop buying because if that's the case, alibaba, about 120, where i expect it to be tomorrow, might be place to trim. is selling season over november 12th? >> there's no doubt, jim, there's a huge decrease before and obviously the day, again, to put in perspective, sold $5.8 billion last year, they did 297 billion for the year. that gives you a sense as to the importance of the day for the business. yes, things -- they expect them to fall off. the same time, bring more and more traffic to the site and therefore generate a lot more revenue overall. that's part of the success here that they're trying to at least redouble each year. and so it's not clear how much they will fall off. certainly they will, but again talking about a company that increased what was it, by over 49% when we got the quarterly numbers last week from the company. that's expected to continue through this year. mobile, of course, becoming a much more important part of their overall platform with, what, 35.8% of people buying, using a mobile phone to do so. we'll see, i think it will be important to judge how this day does. we'll start getting numbers at midnight in the middle of of the screen in terms of dollar numbers how much is being sold right up to the second. >> david everybody can't wait. it's a great day today and tomorrow. david faber, we'll talk to jack ma of alibaba tomorrow. david, we'll check in with you later. in terms of retail, usa today, falling gas prices pump up consumer spending. average price of gas has not had an up day since september 24th. >> extraordinary. it's not like oil's gone down in a straight line. oil's very low. this is a week where the retailers have to talk about two things in the future, not the past. that it's possible we're going to see a lot of disposable income coming forward. this is when i feel like has been driving walmart. second, the polar vortex, if we can get a combination of cold weather, therefore, removing inventory overhang that a lot of the guys brought in -- >> for fall. >> for fall and we get the lower gasoline, they can say, look, our quarter wasn't so hot but you know what the future looks bright. if you sell it on the previous quarter, you may get bush whacked going ahead. >> favorite names in the space? looking at discounters? we know about those general deflation in apparel. >> right. charitable trust owns macy's. ma walmart higher. but you know what? if they have this, coats, h high-end stuff, burlington coat factory could be good. uggs, they have needed cold weather. they said the weather does matter, if it's just stays warm, brady as a buy, that hurts them, brady's the spokesman. >> there are land mines out there abercrombie cut, back to neutral. stevele upgraded it on the hopes maybe a turnaround there. we know after last week that's not the case. >> you can't own teen apparel. one of the themes has been, mall stores are doing badly but then l brands -- barclays saying you can't own soft goods. what i'm looking for is a discounters doing better, expectations low for target, walmart. i also think -- don't forget home depots come in, that's not associated with gasoline but it should be and it certainly associated with cold weather given the fact their inventory's geared toward winter. >> good point. the other interesting story is that investigators are looking into october 15th, date we sat here and watched the treasury market go through ridiculous volatility. we asked lloyd blankfein about that day a couple of days after the fact. here's what lloyd said at the time. >> there's el mentes in the market start too look like elements of the equities market where automatic auditors are put in, you get gappy kind of moves and we're seeing that in the treasury market compared to a -- you know, ironically, maybe less efficient in some ways, but often more orderly market where dealers with a sense of responsibility to their clients stand in smooth out the flows. that's an element that also, in other words, sociology of the market has moved not just the regulation or -- and maybe they're related. >> now, two, three, steady over the past week. >> there was a criminal investigation a long time ago into someone knowing in advance the government was going to get rid of 30-year -- boy it seemed like this is like that. just it was the government went after the people who got the -- got a couple of seconds advance on the 30-year going away, government put people in jail. it was criminal prosecution. shocked people there hard to move $12 trillion market. >> it can happen. it can happen. if you have enough of a head start, they'll go for it. >> when we come back, new numbers from mcdonald's show the fast food chain can't shake its sales slump. >> i like these numbers. >> why are shares of the dow component rising this morning? we'll fill you in. also a different type of organic growth. share of whitewave foods up 80% in the past 12 months. we'll talk with greg engels, ceo, later this hour. another look at market. s&p has not had a losing streak longer than three days all year long. we'll see what kind of action we get when we start this session in a few minutes. ♪ ♪ mcdonald's reporting a drop in same-store sales across the board in october, including global comps down a half percent, u.s. down 1%. sales, though, not as weak as street expecting. when compared to september, u.s. down 4.1 global down 3.8, numbers investors would prefer. >> my charitable trust bought a lot when it got killed because the management, remember, thompson's putting through new people. clearly there's an emergency there. could it the beginning of a turn? obviously, natural organic we talked about to gregg engles for whitewave, they are against the natural, but numbers, someone could say, this is the beginning of a trend because good managements come by, they've done good stuff. >> in the comments, thompson says wreeshg moving with a sense of urgency. so you -- are you loading up on mcd? >> no, bought a lot i couldn't believe that -- i either felt that thompson gets it right or the board says enough. if tompson put big changes in, we're all pulling for thompson because thompson got a hand so high it was hard to beat. >> when jim skinner retired? >> yeah. everything was systems go and then we got hit, like the sea change went on about natural organic. it would be great if the change his put in personnel changes, u.s. personnel changes are starting to take hold because this is a dow laggard that could go quickly because it's so inexpensive. >> 3% yield, down 2% for the year. >> balance sheets so fabulous, lots different levers to pull. every one of the markets looks good. >> yum, pizza hut, did you see, expanding menu? some of the sauces, sweet sriracha, barbecue bacon cheese burger, curry crust. pizza hut took a big step, live november 19th. >> that was a division that people didn't care about, they only cared about kfc and china. so therefore, people took their eye off the ball. the stock has stopped going down in part, china's more benign. i don't know about switch my domino's pattern, like the app. >> you like the technology. share of gilead rising. merck's attempt to shorten hep c treatment to four weeks came nowhere near the desired efficacy. >> up 5%? >> could go to 115 on this. this is big, because there's a couple of competitors out there lurking. gilead is -- they're on fire. >> mirra raised target to 152, dividend could be on the way in 2016. >> they have a lot of cash. plenty of interesting, smaller biotechs out there for merck just so we're clear, my charitable trust owns that for other reasons. very big drugs in the pike. if you're selling stock, be careful. these are -- some of these -- this bristol-myers, some older line companies have more game than you think. but gilead is doing a lot right, celgene is doing a lot right. regeneron, and argala, regeneron. >> dendreon, filing for chapter 11. >> a situation where retail investors became fascinate the with the drug provenge and it didn't work. it didn't price work. you have to recognize whether the diet pill, something that is just kind of looks like it's the magic bullet for the diseases, there are no magic bullets other than gilead's hep c. it cures. >> 180 million people around the world? >> it's been one of the things where the insurance companies are praying for alternative. they just keep thinking, if we can pit gilead against someone, if we can make it gilead doesn't have a monopoly, but a lot of the guys, listen, we're not paying but it's hard not to pay for a cure. it's a fatal disease. >> it is. meg tirrell, by the way, in boston, we might hear from her lateren on cramer's mad dash. one more look at the premarket on this monday. more "squawk on the street" from the nyse straight ahead. ♪ there's confidence... then there's trusting your vehicle maintenance to ford service confidence. our expertise, technology, and high quality parts means your peace of mind. it's no wonder last year we sold over three million tires. and during the big tire event, get up to $140 in mail-in rebates on four select tires. ♪ ♪ we begin to rock steady >> just about eight minutes before the bell on this month. cramers "mad dash." gopro is under pressure. >> i've been waiting for the secondary. we -- a lot of people thought it was not going to happen until the middle of december, late december. 800 million of stock coming for sale, the giant short squeeze, it's thought the shorts would cover. this will boost liquidity insiders. the quart was great, i think the holiday season's going to be great. selling through to china's going to be great. i would like to use this -- i had taken it off at 90 as a stock i love. this when i saw the boar and go ride option the surfboard, enough is enough. you want to buy on the secondary. >> what level this is going to get interesting? >> right here. i don't think the deal's priced that much through. short's, it's a monster short squeeze. it's the product of the holiday season. people who fight it have never use tpd got to use the ecosystem. so exciting. >> they did not list either an offer price or number of shares. >> new yoo, just 800 million. waiting for this, waiting for this after having it gone to 90. i think the holiday season's a great one for gopro. >> toll brothers. >> toll brothers is good, this is a prerelease. i've got to tell you this, pulte home upgrade, inspires me to buy horton, horton reports tomorrow. america's largest home builder. home builder chart excellent. if you're looking for a catch up group, this might be the one. >> interesting. in a period where we have a feeling rates might be lower for longer than we think? >> yes. and i think the that mortgage politics are good refis are better. what's mattered to the group, people are desperate for something that hasn't gone up. talking about numbers about the rally, how few days there have been. people are looking for something to hold on to. home builders make sense. >> and the toll is a high-end product. >> toll, the contract price went up, talking about low 700s. bob toll delivers once again. i think this company is the most inexpensive in the group, but don't forget, horton tomorrow. horton has not done that well. i think they could have good things to say, too, about orders. >> the market right now, feeling your temperature? >> i think you have this rolling bull market going ever since that we were able to take ebola off the table. people are saying earns weren't good this quarter. i think that's a kinnard. what matters is the future. and gasoline controls. some people you, had some numbers about disposable income and the not as well off and how much went to gasoline. >> 13% for the bottom fifth of american earnings goes to gas. >> those people, whether it be dollar stores, walmart, target, walmart dow stock, whether it be mcdonald's, disposable income on the table and there's cold weather coming. cold weather is answer to retail. last week it was 50 degrees at night. we get the cold weather, people say i've got to buy uggs. >> kid needs a new coat. yes. >> revenue right there. we'll get the opening bell in a couple of minutes. do not go away. 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(announcer) at scottrade, we share your passion for trading. that's why we give you the edge, with innovative charting and trading features, plus powerful mobile apps so you're always connected, wherever you are. because at scottrade, our passion is to power yours. you're watching cnbc "squawk on the street," live from the financial capital of the world. we'll get the opening bell in 2:30. a lot go on ahead of a big week of fed speak, but mostly it will be about retail and taking the consumer's temperature, jim. earnings, macy's, jcpenney, walmart, with retail sales on friday, we mentioned low gas prices. you think the cold weather plus gas price decline? >> yes, i do. what you -- having grown up in a retail environment -- >> as you have. >> if you have that warm weather and it go through to thanksgiving and these guys are caught and they have start discounting heavily, it's not too late to get the cold weather. i'm keen on that because the combination is so, so buoyant for retailers. also, the election, i lot of people felt there would be a spirit of compromise. when i watched the president this weekend i felt he's not bulging. that's okay because it means that nothing will happen. i know that's a cynical view but a view which says, if we don't have to get washington the business pages we're free to talk about earnings, disposable income story with gasoline and cold weather will put a lot of emphasis going to the mall, which has been a problem. the mall numbers have been weak. people will flee to it. >> some discussion on "squawk" whether the dollar's due for a pullbakken riding a three-week win streak. a lot of speculative positioning in the dollar. >> even though the miners have increased amount -- miners have been insane. they don't stop. it's like china's going to move. oil is so clearly depressed, and a lot of people ask me, does oil go to 80 before 70? cold weather helps nat gas, nat gas the hottest it's been since 2000, straight up, that's polar vortex. i believe oil will try to test lower and not succeed through that level. >> really? >> things are breaking for oil if we get the dollar to stabilize. >> keep our eye on that, as oil has not been able to get back above 8 on still in the 79s this morning. opening bell at nyse. s&p 500 at the top of the screen. here at big board, st. jude's children's research hospital, highlighting fund-raising event and over at nasdaq, inc research, provider of clinical development services for the biopharma and medical device industry, celebrating its recent ipo. we have not done fireeye. jm morgan adding. >> fireeye, number was good. obviously, cyberterrorism very much in everybody's mind. if you go over the conference call, what you saw was a company that united statwas conservativ outlook. money will go toward the buy. i like cyberarc, palo alto's gotten too high. >> target, stifel takes it to a buy, channel checks traffic. >> when i sit down with a company i'm impressed about a sense of urgent sip the stock has lagged. i think they're omni channel strategy is good. i want to see a couple of quarts of brian cornell. the stock's very inexpensive. if you think cornell can execute -- >> unknown commodity. >> come from pepsico. no one thinks pepsico isn't a great training ground. but sap's club, nice man. can he make changes in target? sure has to. i like his sense that, look, i knee what we're doing before is not good enough. articulate about a strategy going forward? no. not to my satisfaction. but that may be irrelevant given gasoline and cold weather. >> transocean finally did have earnings they delayed last week. that's a big gainer today, 2%. >> now this is one -- this stock dropped as far as it was going to go, i think. when they reported that -- when they preannounced the gigantic, gigantic charges, what was incredible, the stock went down and rallied, down two bucks and rallied and finished off a little bit. people thinking think is the end of the big sell-off in the oil drillers that are offshore. i'm unwilling to make that call, if only because rig is -- rig's not that great. it's just not a great company. again, if oil goes above 80, rig's okay. rig needs higher prices because -- >> but you're not confident -- >> no, i think -- the permian is five times what is producing just a couple of years ago. saudis have not pulled back. a lot of people, if they don't raise oil venezuela will collapse. the leader has ha political issue. i think oil's not going to soar but not go down much. >> norfolk, a big gainer. >> warren buffett, we know stole burlington northern. norfolk is a great gauge, does have a lot of coal, people feel that with natural gas going this high switching to coal. fantastic for norfolk southern. >> nat gas as we mentioned -- >> understand -- >> it's the high in denver on wednesday, 19 degrees. >> i've got to tell you, natural gas companies are laying off like mad, selling futures like mad. to lock in some gains and therefore help balance sheet. the whole idea that all of this complex is going under. there are guys weaker. but i don't think that it's the death knell for the oil surface and oil groups as the stocks are acting. >> nike did get a price target upgrade, not moving a ton. >> if are you want cold weather gear, go back to the man we talked to and met, you were the emcee of the fantastic gala, 25th, i have to tell you, under armour is set up for a gigantic holiday season. kevin plank, kevin plank, you kn he -- he's a bare nuclearings guy. he didn't have many good things to say about nike. >> no, or anyone they compete with. >> mastercard, not a lot of good things to say about visa. this is like the nfc, you know, afc -- i was going to say nfc -- even the cowboys are gentle menially compared to the really rival in afc -- plank hates nike. i mean, it's so visceral that i think -- i thought you were going to intervene and say, nike guys -- mark's not that bad a guy. i think there's a t and p attitude, take no prisoners. >> the president's making comments on net neutrality which we'll get to. first up, sifma hosting its annual meeting in new york. mary thompson has the chair, mary jo white. >> delighted too have mary jo white, chair of the sec, joining us. first, an opinion piece critical of the sec in "the new york times" earlier this summer saying it's sluggish and ineffective. people were disappoint because you're a hard charging prosecutor and expecting a more aggressive s.e.c. how do you respond? >> first, i say, look at the facts in terms of what we've done in the first instance, which since i've been chair in april of 2013, we've been firing on all cylinders very strong, effective, rule making. i think over 25 significant dodd frank and other financial crisis rule makings have been done. we've proposed or adopted essentially all of the jobs rule makings. enforcement enhanced a record year last year over $4 billion in civil penalties and innovative cutting-edge access. looking at core programs, the market structure in equity and fixed income. effectiveness, the disclosure effectiveness review. making great use of technology. criticism comes with territory in washington. and i think that some of what you hear is people feel differently about our rules, often. but what you're seeing is i think criticism of a strong regulator, strong leader. listen to the crit sfrp, be constructive but you can't lead or regulate to criticism. you do what you think's best for investors and best for the markets and that's certainly what i and the s.e.c. is doing. >> there was an article this weekend saying why hasn't the s.e.c. written rules on mandated by dodd/frank on executive compensation with regards to claw backs. when can we expect that? >> yes, we were given a dozen mandated rule makings, we've adopted six, proposed three others, some jointly with other agencies and we have three or four yet to finish which includes the clawbacks. important rule making. it's not as simple to do, which is often the case with rule makings as it might look like at first blush but important to get done. since there are eight priority areas as i define it aunds dodd/frank, executive compensation and swaps are ones to yet to finish, the rest were done. so i'm pleased with that progress. but also focused on finishing those rules. >> you closed up fiscal year recently. what are top three priorities for the new fiscal year? >> again i think we need to complete our mandated rule makings under dodd/frank and jobs act or work on doing that. very focused on the comprehensive review of market structure, equity and fixed income markets, continuing the disclosure effectiveness review and making progress there. always focused on making enforcement, even stronger than it is. but lots of priorities going forward and i think we're doing them in the right order and very well. >> anything specific you can tell us to look for in the next section months, as far as market structure, whether equities or bonds? >> i think you've seen some things already happen. i spoke in new york, in the late summer about both as to fixed income and equity area in terms of near-term initiatives and far term, you know, respect to the fixed income markets, working closely with msrb and finra. msrb has put out its best execution rule, which is very important for comment. it's with the s.e.c. staff. i expect to see finra after that adopted working closely together to give guidance to brokers how to best execute and what it means, you know. clearly down the road we're looking at pretrade transparency. number of near-term measures that i publicly talked been ots equity side have either been done now or in the process of being done. one comes to mind, ask the exchanges to do a real comprehensive audit of their order types which is related to the conflict of interest issues that people have been focused on they've completed those, the staff at s.e.c. is reviewing them. also expecting some of the rule makings that i indicated that i'd asked the staff to come in this year and beginning of next. >> just about a minute left. i have two questions. first one has to be answered quickly. first thing a change in congress. the relationship with the s.e.c. has been contentious in the past. how does the change with the republican control in the house and senate impact you? >> i found our relationship with congress to be quite good since i've been there as chair. i don't expect a change in that. i'm -- i welcome the oversight rule. it's congress' job to do that. you have a lot of experts in congress in the security space, so i look forward to progress and a continued, good relationship. >> next question, president obama has nominated loretta lynch, she works for you at one point what happen can you tell viewers about her? >> excellent. a prosecutor's prosecutor. has a strong, moral compass to do the right thing, very good with working with people, managing people, excellent choice. >> chair white, thank you for joining us. >> thank you, enjoyed it. >> mary jo white, chair of the s.e.c. back to you. >> mary thompson. bob pisani on the floor with the dow flat. >> a mixed open, carl. thanks very much. great overnight session in china as well as hong kong. shanghai up over 2%. announced a date for the formal linkage between shanghai and hong kong stock exchanges, that's november 17th. you'll be able to trade most of the shanghai stocks. a lot dual lists but state-owned enterprises. small companies you can't trade. you'll be able to link in to them through the hong kong exchange beginning november 17th. that's a big change. number of companies that nobody's traded before, essentially are going to become available. we'll talk more about that as we get closer to that. toll brothers, i think toll brors were good enough, orders up 10%, below expectations but revenues stronger. on a dollar level, orders were pretty good. i think it's good enough, up 3%. transocean, transocean reported earnings above expectation but was, remember, on friday they announced $2.6 billion write-down, value of the rigs are left because day rates are down. that's was a way to bifurcate everything. today they said, this quarter we finished better than expected. friday's news is more important but you see transocean on the upside. waiting for retailers this week. muted expectations. remember for walmart they made $1.14 this quarter last year. this year they're only going to make $1.12. they're lower than last year. and same-store sales flat. nobody's expecting much from walmart. slightly better for jcpenney. last year, horrible, they lost $1.81. now they'll lose, the estimate, 81 cents. they'll cut losses by 60%. that's good. but still a long way to go. you can see, jcpenney down about 5% today here. i want to point out, overall earnings now, not only are they at record levels, we're at up almost 9% from the third quarter but margins at record levels. people don't talk about this enough. everybody's afraid margins are slipping. i'm not seeing that, 9.7% for the s&p 500. ten-year average 8.5%. everybody said margins will fall apart, that's the beginning of the end. as of now, not seeing that. let me talk about the earnings and the gainers and losers. dean food doing well, up 12%. kellogg on the flat side. barron's positive on it over the weekend. juniper networks disappointment. at&t talked about cap x budget and that was on the disappointing side. obviously a major customer of juniper. right now the dow down 12 points. >> thank you very much, bob pisani. notes out of the white house this morning the president's making astatement on net neutrality. if you cover media, you understand some of this. arguing the s.e.c. rules, to protect net neutrality, prohibiting paid prioritization. and reclassifying broadband consumer service to regulate like a -- >> netflix, the quarter not overwhelming but, wow, you know, that's what people had been most fearing, the buffering, netflix, buffering. so that does help them. that's the easier play. i would never recommend people get rid of the cable stocks because they did well. >> we'll see if the commissioners hooeds what tcommr s heed what the president's saying. rick santelli. >> good morning. a lot of people on the trading floor. a lot of traders on the trading floor. the "wall street journal" article, what happened october 15th? after watching a lot of football and junkie bear football yesterday, they call it offsides. i think that suffices, a lot of offsides players mid-october. if you look at one-day, look likes interest rates pop back, as we came to our time zone. no. if you look at two-day, it says the whole story. post nonfarm, pretty much all of the top tiered economy, markets moved the same, rates lower. foreign exchange, dollar giving up ground. every futures contract against the dollar marginally higher. ten-year rates towards sum, you can see what we did is we held the 2.35 closing basis. technically, it shouldn't be shocking that rates are back down, potentially, to test 2.25. if you look at two-day bunds, similar dynamic. yield curve, the flattest it's been on 5s to 30s, going back to early 2009. we need to continue to monitor that. it's been a dynamic all year, along with flatter curve, lower rates. if you look at dollar/yen since october, it's a breathtaking move. and that isn't even the whole thing. basically from 105 to 115. although we see the dollar giving back. today the same said for the euro versus the dollar. we hoover around 124.5. it wasn't long ago we were at 139. about a month, it's truly impressive move that the dollar's had at weakness of many of the developed economy currencies. carl, back to you. >> rick, see you in a bit. rick santelli. when we come back, exclusive interview with whitewave ceo gregg engles here at post nine. the company behind verizon organic, silk and land o lakes posting earnings. tomorrow, 10:00 a.m., david's interview with jack ma taking place in china. dow's down eight points. ok, if you're up there, i could use some help. smart sarah. seeking guidance. just like with your investments. that sets you apart. it does? it does. you're type e*. and seeking another perspective is what type e*s do. oh, and your next handhold... is there. you don't have to go it alone. e*trade gives you the support and guidance to make informed decisions. are you type e*? ameriprise asked people a simple question: in retirement, will you outlive your money? uhhh. no, that can't happen. that's the thing, you don't 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. whitewave foods, wwav, the maker of silk almond milk, organic milk, earnings beat, helped by strong performance in north america but let's not rule out europe which is pretty good. you have something to talk about with that. joining us here post nine for cnbc exclusive is whitewave ceo gregg engles which has been a big winner for people. greg, i know that people are selling down the stock after it opened but, to me, it seems like that maybe it's just currency, conservative guidance. this was the highest organic growth of any package food company. >> 12% organic growth in the quarter tremendous. 50% operating income growth. categories are strong. european business has been phenomenal this year. we have 24% top line growth in europe which is unique, i think, in the marketplace today. >> but people are, i think trying to figure out holy cow, thought we had an american company. we have a euro translation you have to be aware of going forward. >> q4, two points of top line related to fx, right? you had euro and high 130s last year at q4. dow noun in 120s than will take steam out of the top line from a reported basis but organic basis, trend continues of high teens to 20% growth. >> one of the things that, carl, this man has been very conservative, that's very important, because i don't see in the release talk about china where because of the food chain they desperately need plant-based milk. >> i think plant base is a tremendous opportunity for us in china. we sell first products there in the first half of december, we'll have a launch, we're excited about what that holds for the future. and if you see the same kind of trends in china and plant bases we have in north america and europe, it will be great for our shareholders. >> raw milk costs up 24 ye year-over-ye year-over-year? >> raw milk costs significant cost inflation for us in the u.s. they rolled over and started to come down. dean foods probably talked about this morning on their call. last month, start to be a significant drop in milk input costs. that will be good for everybody across the spectrum. >> now let me ask you about brand extension of verizon. a desperate bid to get growth, are you taking that space away from milk? >> we are doing terrific jockb x extending the horizon brands. my kids are all over the horizon brand, mom trusts it. so we are taking that to meal occasions and snack occasions that are family and kid focused. we think that's got tremendous room to run. repeat purchase on that brand is terrific. >> momentum versus peyton manning. >> you know, i think we got peyton on the ropes, right? just consistency. but. >> maybe we can beat payton maybe they are new england. >> oh, that hurts, that is painful. >> we had whole foods on last week. thoughts on the retail channel and who owns that space in terms of your categories as some of the bigger, broader retailers try to get a piece of that pie. >> look, the whole consumer environment is moving towards better for you and health and wellness, everybody's going to play there. everybody has an effort there whole foods is a uniquely positioned retailer in that space, incredibly high quality, seems like they've got momentum back, that's exciting for the overall category. >> best s&p name last week. >> they have technology, you are so right you've done right with kroger. but i like that whole foods. >> they're on the move again. >> they are. >> it's good for the whole category. a big sign. >> thanks. good to see you. gregg engles. we'll get stop trading with jim in a minute. 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(clapping sound) isn't the cloud supposed to make business easier? get the one that can connect to the systems that you already have. today there's a new way to work. and it's made with ibm. i'm just looking over the company bills.up? is that what we pay for internet? yup. dsl is about 90 bucks a month. that's funny, for that price with comcast business, i think you get like 50 megabits. wow that's fast. personally, i prefer a slow internet. there is something about the sweet meditative glow of a loading website. don't listen to the naysayer. switch to comcast business today and get 50 megabits per second for $89.95. comcast business. built for business. it wasn't instantly visible, the hit that cable stocks are take on the president's comments about net neutrality. comcast, our parent, and time warner cable, both slapped to the tune of 5% to 6%, as the president said he wants fcc commissioners to sake steps to protect what they call net neutrality. >> i think it could matter. as i said, i know people feel it's self-serving because i work for comcast, but you know, all breaks in comcast stock has been a win. i think that the group is going to be fine. >> all right. what's on "mad" tonight? >> saluting veterans, one of my favorite live shows. 75 west point cadets coming in. i wish we had anthony nodo, cfo of twitter, hope move up within that organization. we have the -- the most to hire veterans of many of executives i follow. clorox, one of the things about ebola, clorox kills it as don kn knauss says color r clorox kill everything. go ahead and put your bag right here. have a nice flight! traveling can feel like one big mystery. you're never quite sure what is coming your way. but when you've got an entire company who knows that the most on-time flights are nothing if we can't get your things there too. it's no wonder more people choose delta than any other airline. so open an account with schwab. and when a market move affects, say, a cloud computing stock you're holding, we can help you decide what to do. with tools that help you see how market activity is affecting your positions. so when the time comes to decide whether to scale in or scale out... you can make your move, wherever you are. and start working on your next big idea. ♪ and start working on your next big idea. for tapping into a wealth of experience... for access to one of the top wealth management firms in the country... for a team of financial professionals who provide customized solutions... for all of your wealth management and retirement goals, discover how pnc wealth management can help you achieve. visit pnc.com/wealthsolutions to find out more. getting breaking news from the united states postal service on some employees' data that might have been compromised. brian sullivan at hq the post office hacked. up to 500,000 of its employees personal information, including possibly social security numbers, have been compromised in what it calls data intrusion. the biggest employer in america, saying as many as 500,000 employees may have had not only social security numbers but contact information, addresses, whatever it might be, hacks into by somebody. again, no indication of who may have done this yet but the post office, in a statement saying, that the fbi is indeed leading the investigation. they make a note that no customers of the post office, none of the kiosks should have been at risk. purely internal post office systems, including employees, guys but 500,000 people in a possible data breach in the post office, employees, including social security numbers. the post office becomes the latest victim of allegedly cyberattack. >> the social security numbers the key there. brian, thank you for that. more trouble for gm. new report says that general motors ordered new ignition switches two month before the official recall. phil lebeau. >> we have seen e-mail at the heart of this report, we can confirm that general motors did order at least a half million replacement ignition switches long before vehicles were recalled the e-mail sent from general motors to delphi, which made replacement switches, highlights urgency of the issue with general motors telling delphi essentially, we need to see shipments asap. put together an aggressive plan and i can adjust the schedule accordingly from gm executive to delphi. why is this important? look at time line, the e-mail sent on december 19th of last year, on december 17th, top executives at general motors, met discussed the recall issue but did not issue or discuss the ignition switch issue but did not issue a recall. it wasn't until february 7th that an actual recall was issued. and that was initially for 800,000 vehicles. we reached out to general motors this morning, for some comment regarding whether or not this is an indication that general motors new about the ig anything switch problem earlier. gm saying, this highlights the problems that we had with the situation and the system. that situation and the problem of highlighting recalled parts has been identified and corrected. as for the ignition switch recalls, 1.29 million ignition switches have been replaced so far from general motors. in other words 1.07 still need to be repaired. and general motors hasn't heard from 700,000 owners of these vehicles that still need to be repaired. they're sending out gift cards, trying to entice owners to have them fixed. shares of general motors, the stock down, oh, about 14% over the last year, down fractionally again today. guys, we're going to see this as lawsuits play out over the next six months to a couple of years where e-mails are going to start coming out and it really highlights the question of how far in advance did general motors know about these problems. >> phil lebeau, thanks very much. meantime, president obama asking the federal communications commission, fcc, so set what he called the strongest possible rules on net neutrality. want to check on the cable stocks here. obviously the white house and administration taking a hard line on this idea of paid prioritization, the content providers actually pay the internet companies here to ensure that they get a smooth delivery of traffic. reaction here? >> yes. it took a while but we are seeing comcast, time warner cable take a hit. netflix hasn't responded to the upside as you might expect. but the president did say, the fcc commissioners to a large degree that he's appointed should prohibit paid prioritization, implement the strongest rules to prevent net neutrality, regulate it more like a public utility. the president says net neutrality built into the fabric of the internet since its creation but also a principle that we cannot take for granted. we cannot allow internet service provide to restrict the best access or pick winners and losers in the online marketplace for services and ideas. los angeles is strong. the reaction of the stocks strong as well. >> that cuts a number of income streams in the future for internet companies that they may or may not have done deals further down the line. the question equally as important, comcast's takeover of time warner cable still go through? there's a lot of talk, carl, you know better than i, 0 you do this all the time on "squawk alley," a possible grand bargain where the deal go through but further conditions attached. the pipeline key for the future. >> various terms used in media like blocking, throttling, when basically the types of service from your isp, the speed is slowed down or sped up, that's what paid prioritization is. the broader public will get familiar with arcane names and tools used but that's where the debate is headed now. >> president obama says it's part of his plan to have a free and open internet, something he's been promised since campaigning. interesting to see whether he can get the rules down. this is the decision of the fcc, not the administration. >> and something that's going to take a long timing to clarify in the least, though the stock reaction immediate. sales falling at mcdonald's and al regions last month. stiff competition on fallout from the supplier scandal hurting the fast food companies numbers not as bad as the street expected. 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. ♪ welcome back to "squawk on the street." check out the shares of merck, moving lower after data from a mid state study showed its attempt to shorten hepatitis treatment to four weeks by adding gilead's drug to its own drug coming bin nation showed disappointing results. gilead, it's moving higher on that news. back over to you. >> thanks a lot. mandy drury. shares of mcdonald's doing okay. global comps down a half percent, domestic sales down 1%. joining us this morning sam anderson, steve anderson, miller tabak's restaurant analyst. >> thanks for having me on. >> is this a sign of progress or getting easier comps? what's the dynamic now. >> it's a bit of both. starting to see the fact that the companies have been cycling through very tough same restaurant sales in 13 of the past 19 months negative sales. however, we see some progress, and i think the management talked about simplifying operations, reorganizing management structure, the basics, first with lower gasoline prices, seem to be helping the sector overall. mcdonald's no exception to that. also a popular monopoly promotion, something they haven't done since start of 2013. that helped get people into the restaurants. still behind wendy's and burger king but i don't think mcdonald's is out of the game yet. >> gas prices and job growth, which we know heavily leveraged to, are one thing. but are you telling me there's a danger, this was about monopoly, in other words, a one-off, because the contrast to september is dramatic. >> that's a possibility. but we think also the thing that has to help them is that you have to focus on executions at the fraunt level. i think if they get that, get core customers back, defected to both wendy's andburg king, i think the danger for mcdonald's is going to rely more on discounting the core lunch and dinner day parts, you know, some markets we've seen them offer extra value meals for as low as $3.99. that has to have concernsome of the larger peers in the burger quick service space. >> i can't tell you how many articles i've read about the return of the mcrib, what is the meat in. is that a big deal in terms of sales for mcdonald's, does that signal the direction they're going into? >> the mcrib hasn't been offered in about two years then wouldn't be offered to every mcdonald's, 25% won't offer it. it's a cult favorite. there's a website that shows where mcribs are offered on a year-round basis. i think it will be a traffic driver. besides one-off promotions, they have to focus back on squugs and that's the thing that's going to drive people back. >> on that subject, people that i talked to, analysts within the sector, are concerned for thompson's job. almost 2 1/2 years he took over from jim skinner. >> i think the onus has to be on him to return same restaurant sales to positive in short order. i think what makes it challenging is that overseas looks more challenging. i think the u.s. consumer environment is improving. that's a bit of a contrast. with operations in europe, still negative, same restaurant sales probably another quarter before we see them return to positive on the wake of the supply chain concerns. >> what are burger king and wendy's doing better than mcdonald's? when it comes to the trend towards fast casual, chipotle, a challenge for fast food in chelg general but you mentioned outperformance of burger. they have seen positive same-store sales. >> there are two different strategies unfolding. burger king has take ain't value centric approach, offering two large sand wimps fwiches for $5 wendy's focused on higher quality items. they may be more expensive than burger king and mcdonald's but they've succeeded but even there, i think the onus is on wendy's to turn around. they last week reported disappointing still positive same restaurant sales and some of the more competition in that core lunch of the day part is now starting to affect some of the quick service peers. >> on the stock, is 90 a firm floor? does it trade between 90 and 100? what happens now? >> probably going to stay here for a while. i think you're not going to see it fall below 90. i think there are a lot of coupon clippers who will keep the stock up, at least at 90. >> the dividend yield does protect it to some degree. see what november looks like, steve. thanks again. >> thank you for having me. >> over to eman javers. >> carl, that's right, the president a little while ago putting out eight statement, though the president's in china, the white house releasing the statement, also video to go with it. they expect this to get a lot of attention on the internet. let me read you the key points here that the president's making in the statement. he says, so the time has come for the fcc to recognize that broadband service is of the same importance and pluft carmust ca same obligations the other vital services do. to do that the fcc should reclassify consumer broadband service under title ii of the telecommunications act while forbearing from rate regulation and other provisions less relevant to broadband services. he wants broadband services to be brought under the fcc's regulatory regime but done want them to regulate rates, that is go into details of prices, whether the fcc will do that or not is going to be the next question. but this is a broad assertion of what president obama thinks ought to happen on this issue of net neutrality. interesting moment here this morning for fcc chairman tomorrow wheeler, who woke up at his house here in washington, d.c., to the sight of protesters in his driveway. they were blocking him from leaving his house this morning. these are pro-net neutrality protesters, blocking the chairman of the fcc from getting in his mini cooper there, heading off to work here in washington. he is viewed, wheeler, that is, somebody who is not necessarily as friendly to net neutrality as these protesters would like. he had a long dialogue with them and they're saying they're going to continue to try to block his ability to get to work throughout the day today. >> although he did seem friendly, actually, chatting with them. >> very nice moment in terms of aggressive protestering here in washington. >> the latest on net neutrality. take a look at broader markets. dow down seven. mixed picture. s&p and nasdaq in positive territory barely. still digesting the jobs report on friday. chief strategist and economist joins us toronto with more comments. blending in your analysis of the economy and what we've seen in earnings, 9% gain from october 15th bottom. can that continue or have we seen big gains already for 2014? >> i think the big gains off the lows have been locked in. sara, the reality is that some of the impediments to the market that caused that corrective phase in september, part of october, which was valuation, technicals and sentiment, have all gone back to where they were back then. this is right now, look, the news on the u.s. economy's good. but at this stage, looking at valuations, more than fully priced in. >> retail i in focus this week, retail sales friday, a lot of the big retailers reporting earnings. state of the u.s. consumer, you and i have gone back and forth about athis, $3 gas price at the pump, how much is that going to stimulate the u.s. economy and the u.s. consumer? >> light now nationwide, i think that number's down it $2.95 a gallon and every penny at the pump counts. depends if you want to look at this, from june, it's like a 70 cent decline, that translates into roughly 100 billion of crash flow relief at annual rate to the consumer sector. i think going into holiday shopping season, when you couple that, not just gasoline price relief but we continue to chug along with over 200,000 jobs per month, even without big wage increases that will help out aggregate personal income. the outlook for the consumer, especially the beaten down low end group is constructive over the course of the next few months. >> one reason, of course, trading close to record highs, the journal this morning chooses to have a very large article about revenue growth for these companies, suggesting that some people have long-term concerns about stocks because while you have profit margins at a record level of 10.1% of sales the overall revenue isn't growing, they're concerned how much deeper companies and ring out further market expansion. is that a central concern or is it kind of over here left field? >> well, it's almost a double-edged sword, we don't have -- we haven't had through the cycle -- very good top-line growth. and part of that is because of the contours of that payroll number as the microcosm on friday. we don't have a lot of wage growth. we don't have a lot of wage growth but at the sam time it helps contain cost. so that's how you have margin expansion or sky high margins. my sense that is you are not going to need to see a lot of revenue growth because we just basically imported from the softness of the overseas economy what the saudi arabia has been doing, opec in general in terms of oil prices, the big drop in raw material prices is a godsend for a lot of u.s. manufacturers that use raw material as the primary source of input process. >> on the subject of the wage growth, everybody talking about friday in the employment report, do you think we overemphasized th that? that is a lagging indicator. as you create jobs now at the fastest rate in the last ten years, presumably wages will pick up down the line. that will be a natural cycle. >> no question. wages lag the cycle. usually by years. i'm actually looking at it with amusement. the whole focus, like on friday, never mine all of great parts of that overall employment number, everybody focuses on wage number. the fact of matter is that when you look at 12-month trend in average earlier weekly earnings during the great reagan sigel in the 19 0s that everybody longs for, rates growth according to that measure didn't bottom until 1986 and we were in the fifth year of the expansion. you can get long periods of time where wages lag the cycle but the labor market will operate under losses of supply and demand. it's just that the information transmits into the labor market much more slowly than it does in the market for stocks, bonds, commodities, real estate, talking about human beings here and it take is along time for people to realize bargaining position with bosses is improved materially. don't forget it takes time for contracts to roll over. i agree with what you said. i wrote about it friday. if the big surprise in the past year was wages tepid, i think the big surprise will be the mean reversion trade the other way, prize people to a large extent to the upside in the next year, including the federal reserve. >> after years of being bearish, sounding bullish, as you have been and right, on the economy. david rosenberg. next on the program, it's a big week for retail earnings, both macy's and jcpenney set to report. who will come out the big winner on this holiday season? who is set to profit the most from us shopping? more on that after the break. today could be the day. the day we give you hope. relief. a cure. today, we believe every life deserves world-class care. as one of the top four hospitals in the nation, over 100,000 people from around the world come to cleveland clinic for care each year. and we're ready for you with a second opinion or a same-day appointment today today today and everyday. call today, for an appointment 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... startup-ny has new businesses popping up across the state. see how startup-ny can help your business grow at startup.ny.gov kicking off a week of tail earnings with jcpenney starting off. how do they line up in advance to the all-important holiday season? stacey witlet, good morning. >> good to see you. >> i think the danger is here pessimistic going into the holiday season i know they report but the third quarter is not as important as what will happen over the next three months. gas prices low, highist consumer sentiment and consumer confident in seven years and creating more jobs. in the economy this year than we've created for last 15 years. that to me would indicate a strong surprise to the upside. >> all of those are very true but concentrated toward the high-end consumer. sentiment driven by the high-end consumer. yes, gas prices help when they come down and that level is sustained. but last year in q3, gas prices incredibly low and comps were disappointing. so, you also have to take into account there's been food inflation, so maybe some of the gas prices has help and maybe some food inflation has sucked that up. >> what is your advice? what are you telling hedge funds? they'd love to play this. >> i have been quite negative for holiday this year. we've seen blowups already. we've kohl's, walmart, abercrombie, a massivement of preannouncements. interesting because most of the street was positive going into the second half of the year as inventories had been controlled. but it's just not panning out. it's not the case. the consumer is waiting, they're focusing around times where there are heavy promotions, we're going to see that again this year, on black friday, and see margins sufficient somewhere disappointing sales with only a few outliers like limited brands and tjx being winners. >> what about walmart matching prices with online retailers like amazon? it's a big deal. something we have not seen from walmart. are you not optimistic it will make it more competitive the holiday season? great point. think what the retailers are doing. they're -- target, free shipping, they were the first to fire the warning shot. walmart's going to match, best buy's going to match. everybody will match and drive margins down, the major issue. >> stifel is raising target today. interesting word out of adobe, went to get the best deals. they've gone through trillions of visits, data points. black friday isn't day to find the best deals last year. it came the sun before thanks giving. >> absolutely. what we saw last year was so interesting. black friday, i would say, officially, is dead. black friday started the week before black friday last week. if you went into macy's, best buy, amazon, having deals every ten minutes. get out early for the best deals. don't wait until black friday. >> thank you for coming in. speaking of black friday, cyber monday, the largest online shopping day in the world one you might not know about. find out why singles day could mean billions of dollars of sales for alibaba when we come back. ♪ there's confidence... then there's trusting your vehicle maintenance to ford service confidence. our expertise, technology, and high quality parts means your peace of mind. it's no wonder last year we sold over three million tires. and during the big tire event, get up to $140 in mail-in rebates on four select tires. ♪ transit fares! as in the 37 billion transit fares we help collect each year. no? 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>> what 'amazing, you mentioned last year 2 1/2 times cyber monday in the u.s. if you look at last year's cyberweek starting from thanksgiving to the week out, it's going to be larger than that entire week in the u.s. we think 8.5 billion, which would be 45% grower off of the 5.8 billion last year, which is tremendous because you think last year 80% year-over-year. tough comp but tremendous groer. >> is there any other number to suggest investors play this? does amazon get a piece of pie or retailers that alibaba's working with on this day? >> yeah, it should be some retailers. you had t-mall, first year, difference between last year and this year, first year where you have brans going global. used to be chinese-only holiday. now seeing it global. that's going to help the growth rate. jd.com will participate in china has well. what about, i mean, the stock has been -- it came out with earnings, investors love the fact it's profitable, love the margins. is it already priced into the stock? we know this is a record day for alibaba or can they take this the traffic drivers into sites on this day and keep momentum going through the shopping season and into next year? >> the last quart, the first quarter they rearted, acceleration in active users, in mobile, you see this strong growth in singles day on the 11th. you see as a proxy for how well the quarter may be able to outperform and people have to readjust estimates. >> robert, as the valuation of alibaba approaches $300 billion, we're struggling to make sure we cover this in the right way, this is the first time the singles day has had prominence in this country as it has in at the moment. i wonder over time whether we'll be less gung ho, in particular what happened to the weeks in advance of singles day is that alibaba offers rock bottom prices that they can lock in for small downpayment according to "the journal" and complete the purchase on the 11th of the 11th to boost figures. in other words, it doesn't give a us a clear idea on margins, valuation. it's a metric we may learn to take more with a pinch of salt as time goes on. >> i agree, one of the risks going into. first time you're seeing it go global, that's a big part right there seeing brands embrace this. their coo said they think it could be a global phenomenon in five years or so. when you turn towards margins, a company that has 50% ebitda margins and you look at last quarter and back out acquisitions, they had 54% margins, right. >> compares to amazon, mid single digits. the profitability here has a big influence on the valuation. >> obviously the numbers are dazzling for ordinary investors. you like the stock. what would you tell those on the sideline concerned that the structure of alibaba gives an extraordinary power to the management in making decisions that the chinese government is obviously key swing factor here and that the chinese economy is slowing. factors that are persisting and overhanging on this stock and on some chinesen vestments. >> two big risks in our report, one, chinese gdp, how fast that grows over the coming quarters and years and number two, chinese government. as far as control, structure of the organization, we've seen very successful examples in the u.s., facebook, google, et cetera, being among those. >> robert peck, thanks for joining us to preview gigantic numbers we'll see tomorrow. don't miss david faber's interview with alibaba's jack ma, tomorrow, "squawk on the street," 10:00 a.m. eastern. if you have a question, send it to us #askjackma. wonder if he'll quote famous american movies as he tends to do when he interviews. wall street expecting big bonus payouts but for most it's likely to be another disappointing year. kayla tausche joins us more. >> a survey comes out every year closely watched by the financial industry and it comes from johnson and company, and it is forecasting that bonuses on wall street will drop 10% when they are paid out at the beginning of next year. payouts will vary widely, though. investment bank willing see the most upside due to, of course, record m&a activity, more bonds and ipos underwritten, as we've seen a lack of volatility in the market. the lack of volatility helping asset management where high net worth clients investing more of their money. and those banks have been seeing balances rise. but onhe fp side, senior management earnings will suffer, of course, margins for banks under fire. traderers in both equities and fixed incomes see bonuses drop, as much as 10%, johnson survey says. many traders i've talked to pinning hopes on the recent volatility to provide a last-minute boost in the next couple of weeks before managers of banks decide what payouts will be. banks determine compensation by a set percentage of revenue, they pay between 35% and 40% of revenue in compensation. the more revenue, the more employees take home. jpmorgan at top of the investment banking heap, but morgan stanley 20% jump in fees from last year. so that should give you a sense where earnings shake out. outside banks, it's a different story. hedge fund will suffer due to poor performance, private equity for multiple-year running, employees will see a fairly even rise in pay, up to 15%, according to johnson on the back of banner years in that sector. guys, people say, why do i care what wall street's go take home? that is to make me more envious of what they're getting? no, there are two reason it's important to the economy. one an xatindicator of people moves, people leaving the industry and going elsewhere. secondly, bonuses taxed at 50%. an important revenue generator for government. >> are there big lay-offs happening? we haven't seen big, big headlines but as i understand, it's in a mode where there are lay-offs and those that stay, higher-ups get the bulk of the bonus pot. >> lay-offs are coming from changes in the business model, we're still seeing banks trim the number of branches they have. there are tellers laid off. given the falling mortgage applications people give lay-offs in mortgage banking. we've got numbers on that on friday. it's about the change in the business model. very careful not to make rash decisions on year-over-year changes in trading activity but some effects given the volume. >> thank you. dendreon filing for chapter 11 bankruptcy today. stock falling 70% on that news. the company could pursue reorganize of its drug. mig tir rel live in boston. meg? >> sarah, the latest in a long soap opera that saw the market cap, more than $7 billion at its parq peak. the technology was a breakthrough for prostate cancer. it's run into a number of problems including taking on more debt. the breakthrough nature of the technology may have contributed to its downfall. it's expensive and complicated to manufacture and administer. the sales are taken out of each patient's body individually, then sent to be re-engineered to better fight cancer and reintroduced to patients and they're fragile el whys. it's difficult and expensive. dendreon, when approved, wasn't facing as much competition in prostate cancer as now from johns johnson & johnson. >> the downfall a lot of things, competition, low profitability, difficult to make, difficult to take, and so you know, nothing wrong with immunotherapy, there's a story that didn't work out perfectly. >> reporter: so the question now becomes, who will buy provenge and dendreon to keep manufacturi manufacturing? the company will stay on the market, we hear from analysts it's used in 3500 patients per year but question who wants to take this on. will they be able to afford the manufacturing, make it profitable? companies with prostate cancer sales forces could fold it in. however, i spoke with eric schmidt, it could be difficult to fit into anybody's portfolio. will we see provenge stay on the market? >> next on the program, david stockman, former director of the omb under president reagan, joining rick santelli live on the fed. "squawk on the street" will be right back. ameriprise asked people a simple question: in retirement, will you outlive your money? uhhh. no, that can't happen. that's the thing, you don't 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. 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... startup-ny has new businesses popping up across the state. see how startup-ny can help your business grow at startup.ny.gov ♪ check out sotheby's. the stock moving higer as its third quarter loss narrows. last week posting a record $422 million sale of impressionist and modern art, as we can see, the stock is trading up by over 2% at 40. 28. for the year, the stock is down about 25%. back over to you, carl. >> thanks a lot. over to the cme group, check in with rick santelli. >> hi, carl. we have a special guest this monday morning, in the '80s called him the wonder kid. i call him the wonder man now. david stockman, former omb director under ronald reagan. thank you, sir, for taking the time. >> happy to be with you, rick. >> all right. three topics to cover. first topic, infrastructure spending. i personally think that after the whole shovel-ready debacle, that trust is the biggest issue to welcome true infrastructure spending that it doesn't get slush funded and contracts award fairly. having said that, what is the deal with infrastructure, we not spending not as much as we have historically? what's the real numbers, david. >> that's not correct. infrastructure is just another thinly veiled excuse for more deficit spending, as if 18 trillion of national debt is not enough. we're spending 3.5% of gdp on infrastructure more than we ever have historically and, frankly, that compares to 3.0% in europe na progressives are saying more in light than we are. if you look at high roys and transportation, spending $150 billion, more than ever before. but the one that i think demonstrates that this whole idea that we're starving infrastructure is a myth is to look at d.o.t. budget, which is the infrastructure agency in washington, when bill clinton left town it was $50 billion in today's dollars, no one said that he was starving infrastructure. today it's $80 billion and rising, nearly 70% more. so, we don't have an infrastructure issue. the thing the federal government can do is maintain the interstate highway system, 90% of it's in good shape. if we need more money, it should be financed with gas tax, user fees, and congress is simply unwilling to raise taxes to spend more. if we're not going to raise user fee, let's not add to the national debt by buying shovel-ready projects that we don't need in the name of infrastructure, which is, you know, vastly exaggerated. >> all right. in our final minute and a half, quantitative easing, we put at least for this rendition a tombstone on. but we've had three other renditions, so when we came back and had the fourth, which was called the third, because of the twist, are we really done? and what has it accomplished? and if it wasn't such a great idea, why is the rest of the world trying to mimic it whether japan who mimicked it times five or europe trying to get it front and center with regard to the burner of finance? >> because i think the entire global economy is impair, imperilled by outbreak of monetary madness among a handful of central bankers. we saw the evidence of that with kuroda a week ago in the october massacre. i mean, he's a mad man to think that with the central bank of japan having 50% of gdp on its balance sheet already that he's going to add 80 trillion. that's the equivalent of 3 trillion annually in the u.s. scale economy. draghi is driving europe in this -- towards the same disaster. how could anyone think that europe, where governments have 100% debt to gdp, where total debt, including private is 400% of gdp, needs lower interest rates or even negative interest rates. that isn't the problem. the problem is there are cost structures too high, economy's are too riddled with status taxes and regulatory interventions in other impediments to growth. the central banks can't do anything about that. here we may be off qe after $3.5 trillion of bond buying accomplished very little. but we still have interest res in the money markets at zero, we're in month 70 of zero cost money. it's a massive inducement to speculation in the kerry trades. it's accomplishing nothing for the mainstream economy. and simply fueling the mother of all financial bubbles, which one of these days is going to burst and take the economy right back into the sewer. >> we hope it doesn't weep hope somehow that the growth in our economy will lead the rest of the world but that certainlies a dangling participle with regard to the factual awareness now economies improve and not on the back of debt. david, a pleasure, thank you. simon hob, all you'rs. >> we hit a fresh record high on the s&p 500, all three indices of course seen significant gains this year. begging the question, how will we trade in the last two months of 2014? bob dole will join us live with his forecast after this break. requires precision and anattention to detail.g it takes knowledge, hard work and a plan. at baird, we approach your wealth management strategy that same way. as an employee owned firm we have the freedom and resources to create customized financial plans built to last, from generation to generation. we'll listen. we'll talk. we'll plan. baird. edit score...again. you should check out credit karma...they're like free. how? ads. credit karma? yeah. credit karma. really free credit scores. toasty or frosty? exactly the way you want it ... until boom, it's bedtime! your mattress is a battleground of thwarted desire. enter the sleep number bed. right now save $400 on the c4 mattress set. he's the softy. his sleep number setting is 35. you're the rock, at 60. silent night not so silent? elk bellow sleep number's even got an adjustment for that. give the gift of amazing sleep, only at a sleep number store. where you'll find our lowest price ever on the c4 queen mattress plus 36-month financing. know better sleep with sleep number. 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. you're promised one speed. but do you consistently get it? you do with comcast business. and often even more. it's reliable. just like kung pao fish. thank you, ping. reliably fast internet starts at $89.95 a month. comcast business. built for business. ♪ stocks relatively quiet as we open up for another new week although the s&p 500 did just edge to a fresh record high. for many 2014 has been a year of surprises, many firms starting now to publish their year end thoughts and look ahead for 2015. moving asset management held its year-end round table discussion this morning and chief equity strategist and senior portfolio manager bob dole joins us now. welcome back to the program. >> thank you. >> it was a candid round table discussion. what did you forecast? >> the good news was because it was intimate and a round table it was more long-lasting as opposed to anything between here and the end of the year. we talked about how the environment from an economic standpoint is getting better here in the u.s. how most non-u.s. areas continue to struggle. how good the earnings progress has been. volatility has certainly picked up but we've enjoyed the good side of that for the moment. they were the subjects we talked about among others. >> you've done this for 34 years. 34 years you've been a portfolio manager. obviously various other firms, big firms, as well as the one you're in at the moment. how do you structure a portfolio for 2015? what wins next year? >> i think it's going to be a pick up from the cyclical sectors because there were lots of back and forth in the global economy, many of the defensive sectors like utilities did well again this year, simon. i think next year, as the u.s. economy gets better, as we begin to see some non-u.s. economies responding to policy, cyclical stocks to include technology, some industrials, even some consumer cyclicals will do better and the bond like equities utilities, my example, will lag. that will be the first place i would start. i would focus on free cash flow, geography, where do the earnings come from. the more from the u.s. the better, for now. >> i hate to always have to end up talking about when the fed will raise interest rates, but i guess we have to. in particular, of course, janet yellen decided to be very clear on friday when she was traveling outside of this country to say that there could be or there would be or people should expect volatility as they begin to raise interest rates here. i don't know, why did she do that? who is that directed at? is that at the emerging markets? do i need to worry if i'm investing here as you suggested i should? >> we've been through a period notwithstanding the last 30 days of unbelievably low volatility thanks in part to the massive liquidity provided by the fed and other central banks. and what miss yellen is saying, that's not going to last forever. we're heading back towards something more normal and normal is more volatility than with we've been. i think she's suggesting that to everybody. policymakers, bankers, investors. she could have said think the world's heading back towards a bit of normalcy compared to where we've been. that's the message, simon. >> you alluded to this when you were talking about utilities and other stocks with bond like characteristics but the sell side got the bond call completely wrong in 2014. is 2015 the year we see the 30-year bull market in bonds come to an end and see sharply higher interest rates? >> you're right. the sell side got it wrong, many on the buy side did as well, as you well know. here's what i would say. the low in interest rates was 2012. the ten-year treasury was below 140. the most recent panic low in yields last month was 186. we're making higher highs and higher lows and i think we will look back and say, july of 2012 was the low for interest rates and since then, we've been working irregularly higher and i think that continues next year, correct. >> we could talk for hours, bob, but the clock beats us. we have to leave it there. thank you for coming. >> thank you. >> bob, chief economic strategist and chief portfolio manager. >> to jon fortt with what's coming up next on "squawk alley." >> good morning. do you know what tomorrow is? 11-11 not just a cute date, it is singles day. this is a bigger deal than a lot of people in the u.s. might realize. especially for alibaba. we'll get into that. also the white house, out with a position on net neutrality. that's stronger than some might have expected. we'll talk to mozilla's chairman mitchell baker about that and more on the tenth anniversary of fire foxx. and the chairman of x-prize will be with us with the latest winner. don't miss that coming up on "squawk alley." 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... startup-ny has new businesses popping up across the state. see how startup-ny can help your business grow at startup.ny.gov but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's 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. sensing. good morning. it is almost midnight at alibaba headquarters in china where singles day, the largest on-line shopping day of the year, is beginning in just a few seconds. it's almost 11:00 a.m. on wall street. "squawk alley" is live. ♪ ♪ welcome to "squawk alley." just past midnight in china which means singles day has kicked off. it is the biggest on-line shopping day in the world. 24 hours of deals and p pro motions. our own david faber is in china where he will interview alibaba's founder and executive chairman jack ma tomorrow at 10:00 a.m. eastern time. good morning once again. >> well, carl, we've just started, of course, the biggest
failing the latest stress test, and the biggest was in italy, while spain, france, and italy. ms. is a pretty big blow for italy. it is a good bank. greg yes. 1472. worst is absolutely the cap the lies. again, that it is not stringent. ratios, etc.. >> yes, the bank authority from europe, there was the ecb report that found that 25 banks failed. failing.t of 24 banks tougher. they have got nine months to fill these gaps, where as we said before, the 25 lenders from the ecb, no french, no german, no spanish banks or belgian banks failed. this was a big concern. now, the comment right asset quality review. this also involves the contraction. rising unemployment. ecb president was talking about the asset quality review. and 25 billion euros was found again. there was the 2.1 billion euros. that is the impact. >> you mentioned the string in c of these. how stringent were they? you said they may have been more stringent than the previous stress tests. >> they had really tough stress tests. these are the same as those. the bank of england is going to come out with their results on december 16. that is the crucial test. therefore, this is really about the euro. it is also about the eu banks. now, is in the eu, with a debate going on, but the bank of england are going to have even tougher tests. for example, they will have more of a decline in house prices. also, thef england static balance sheet will be compared to their dynamic balance sheets, really changing the structure of how banks are looking ahead with their vision. british bank may be got off this time around, but the big one is in 2016. and the reaction. it is difficult to find a reaction in asia, but if i walk around the corner, the markets are up. the bank picture, which is really this. first, we go to australia. this is currently the australian story there. the banks are up a lot. and the u.k. banks when they open, they will have a little bit of a lift. the report is very encouraging. banking there is extremely well capitalized. report reaction to the of the ecb looking at high-level transparency, positive vibes. and we will show you the japanese banks. and we have financials. the banks are marginally higher. again, no decliners. no gainers. in australia and, of course, in japan. there was the hsbc opening price. perhaps it is the only bank that really relates to the european banks. it is definitely an upbeat story. on the euro. quickly. as you can see from this, the euro, there it is. see, slightly changed 1.268. >> some investors are taking this as a signal to buy, actually. of the the real pulse investor? >> it may be time to get back into the market. some investors are saying that equities have reached their lowest. the fear is that there are are extremely high levels and that back.ay be time to get history is on their side. bloomberg data looking at an average 9.7% over the three months following searches in bearish bets. now, we have seen a lot of that. this jumped to the highest on record this month. this isx tumbled, and from a six-year high in september, and now we do have a more positive outlook for corporate earnings. we are seeing that the central bank may be adding stimulus. next the pessimism, the recent pessimism, coming from the lackluster economies, actually. >> exactly. lackluster economy and also fact is from overseas, ebola, a slowdown. all of this leads to jitters in the market. volatilitynikkei index, where investors view what they could expect when it comes to fluctuations in the market, that surged two and eight-month high on october 17, and now we have the yen. that is bigger losses in japanese stocks. but investors are now saying that this may be the right time to get back into the market, because markets are not euro pessimistic about japan right now, and when it comes to corporate profits, they are going to see a surprise maybe on the upside, so we are expecting to see what happens with that. >> thank you for that. ticky and with some other stories we are following for you today. office onerm in after a campaign was deemed too close to call, and beating an opponent by 51.5%. was the election runoff with executive social change with more business friendly policies. and the indonesian president says members of his preview government and state-owned his first cabinet and fulfilling a pledge to appoint technocrats and others to the lineup. and one man is charged with running the largest economy, and he was deputy finance minister in the previous government but has now stepped up. and the monetary advisory committee expecting a slowdown. this is down from the past three months. this is as domestic demand weakens. this comes as they predict next year's expansion will cool to 7%. that is, of course, unless the government steps in with stronger than expected stimulus. they're also looking at property development. well, construction bank last week posting its weakest growth since 2009, and we have got other chinese vendors out with their numbers, so what can we expect here? let's bring in our analyst. let's start off with the construction bank. it is not all going well for the rest of these banks. >> right. the third-quarter profits, 5% year on year. it is as low as since 2008. and the income fell about 4% year and year, due to the regulator, and we also see funding costs going up, as reflected by a 17% increase in the interest expense, and lastly, we have to focus on rent. we do see an increase by 73% in the third quarter compared to only 32% in the first half. is theat is -- that issue, isn't it? credit quality when the banks come out with their numbers? >> a primary focus for most and this, i believe, could be coming from manufacturing loans and other loans, and that could still be a problem for the banks. companies set up this. why does china want to this? itshina may want to expand political influence. in fact, china does have deep pockets and provided most of the initial capital for the new bank. we look at the banking system in china, it has a low deposit gives a lot of excess funding to lend to other countries. and then more funding offshore. >> thank you very much, indeed. >> yes. >> and there is no chance of double-digit growth for the sector. we will explain when "on the " returns. ♪ ♪ >> we are back with "on the move ," and we have big chinese banks releasing data. jim is with me now. jim, china construction bank. bigll we need is one more bank in china with a result like that in the third quarter. earnings up 5%? >> no, totally inadequate. we were on the cusp of having double-digit earnings growth in this sector. one more big bank report like this, and you will not have it. >> it is a huge bank, isn't it? >> it is. it is china, basically. talking about? is it the credit quality that people are talking about, and if so, what do they see? upthe cost of credit went 73% year on year in the third quarter. this is pretty devastating. now, about half of that -- well, some portion of that is related to their investment in brazil, but underlying it is the fact of the deterioration in china is not slowing down. it is going at the same pace we have had all year. we are not done with the credit crunch in china. >> 70 odd percent. >> 72%. this is also a very worrying approach, because as they said thatconference call, ccb, they did not have any access to anything other than public information. >> so why did they buy it? >> it is hard to understand, and the thing is about 5.5 billion worth of bad loans coming from that investment in this quarter -- >> ok. i think you are saying also that concept now.whole >> and why would a chinese bank buy into a brazilian bank? it does not pay off. and i think the fact that they had to recognize so much from this subsidiary that they just had at the end of august, it shows what is wrong. the bank m&a does not look very well. hsbc.sk and the last three or f3 we were years, trying to unwind it. >> where do we go from there, and what will be the highlight? we watch out for? if one of them has a really poor result, will that particularly one really set off the alarm bells? >> if it is similar, we are in trouble in china. >> i suppose what is happening there is that the banks are reflecting what is going on in the broader economy. still going that is some. >> it is still going some. if you believe the number. there is no way to correct for reality here. the problem is that banks reflect directly how the economy is doing. results show the economy is not doing that well. to the honge on kong exchange. in october, we are going to be given two weeks notice. it is not going to happen this month. we do not know when it will happen. what is going on? >> the cover story seems to be the tax issue between the mainland and hong kong. it is a cover story. ,etting up an escrow account and you hold the money for six months and refund it after six months. it is easy. so it is either politics, or it is something in the operations. if it is politics -- >> in terms of operations, it should not be that much. people are trading currencies globally and trading stocks globally, as well. why would there be an issue hong kong,nghai and operationally speaking, jim? is it is very complex. you have got foreign exchange issues. you have got cross-border share issues. you have got tech issues. you have a lot of issues. hundreds of participants. and it could be very difficult. >> quickly on the politics side. >> yes. is politics, then maybe the through train never arrived in hong kong. >> jim, thank you very much. always good talking to you. right. as we have been saying, no start date for this. it was supposed to start by the end of this month, at least. we have no sign of it happening. there is also speculation that it could be happening because of the occupied protests going on. we have more. >> yes, and maybe one of the biggest setbacks that we have had since the occupied protests began, but a pretty big blow from the hong kong exchange, releasing that statement that says no start date for the shanghai. and then no timeframe on when the is, and they said that preparations are complete, but the one thing that is missing is the final approval from chinese authorities and regulators, and it may be because what is going on. the occupy protests going on a fifth week, and they say the delay and the stock exchange might be a way to show how displeased they are that hong kong cannot put an end to these demonstrations. as you know, the program will give international investors never before access to buy chinese $4he trillion stockmarket knowledge has been very tightly restricted in the past, and it also gives mainland investors a chance to buy stocks in hong kong. this is adding more pressure to restore social order and get the city back to order again. >> well, i mean, of course, this is something which has been highly anticipated. there must be a concern, right? >> yes, i mean we are talking about six months of preparation, and still no set, or they yet. and the shanghai composite taking a bit of an impact. they posted their weekly loss partly because of some of the concern about when all of this is going to start, and mainland shares are down the most since march compared to the hong kong counterparts, and the chief executive mentioned today that there are no set time frames. he also said he is kind of out of the loop in terms of these decisions. joining us from central hong kong. still on the way, one of the most important events of the week, the fed decision that may and the stimulus program. that is, of course, dominating our foreign exchange headlines. that is coming up. ♪ headlines this monday, october 20 seven, and i am john dawson. the fed meats, and no changes seen. to the the end quantitative easing bond buying, and the question is, will it be? the russian currency is the biggest loser, and this after standard & poor's said their rating concern was mounting and that may lead to a selloff. moody's cut the rating one level only last week. and in asia, the yen. we look to the bank of japan meeting this friday, but before .hat, we have tomorrow this is again in august. and here is the yen. you can see a bit of a dramatic shift. crucial one. that is the japanese yen. and obviously, the ecb looking at the bank authority, and you can see the waiting for the european banks. 8.10% change. and the euro. those are the forex markets, the stories running markets this morning. as john hascourse, been mentioning, talking about the health of the eurozone banks, the ecb with the latest results of the stress tests. here is all you need to know in 60 seconds. now, it is even easier for you to stay in touch with us. you can follow was at bloomberg tv. you can also go to my handle, tv, as well,ishad and we have about a few minutes to go before the start of the trading week. let's look at the prospects. aboutere was a loss of 1/10 of 1%, and features indicate we could have a steeper loss than that. and some positive signs, something for the bulls to put their hats on. a solid session in new york. not much of a solid session in new york, where we saw many of the equities on the way down. effort you are straight weeks coming to an end on wall street. come, a mix of old and new. after the break, we will take a look at some of the leading picks. ♪ >> asian stocks extend games after seeing their best week since march. gains aftereir seeing their best week since march. tim cook used to meet jack ma today. today.o meet jack ma let's have a look at things, john. a negative start of the session in hong kong given the premarket. delay to the can the shanghai, that is crucial. -- the delay to the connect, that is crucial. here they are, right now, you can see the markets close. that is new zealand, the rest are seeing opens. hong kong is falling as well. hk exchanges, the biggest decline or. .-decliner the big one is this. we know about it but we do not know why it is happening. to the delay long-awaited joining a forest with hong kong and also shanghai. other markets are opening as well. taiwan, you can see that. malaysia. , bank of japan on friday. the fed meets tomorrow and also friday. the question is, will they ended again? james talking about is a easy time to end it. -- is it the time to end it there it's australia's number one on the charts today, you have retail and food. this corporation is rising -- corporation is rising, the hong kong is the story because of the exchange. i will show you again. jar, there is no graphic detail, here it is. -- again, the chart, there is traffic detail, here it is. 4.4%, the biggest fall in hong kong. this, it is aon story that is developing. the crucial one is, how long will it be delayed again, and is the reason because china is angry, frustrated it the occupy hong kong process. that could be the reason, no one knows why. that is the hong kong exchange clearing system. rishaad. >> indonesia's new president has named his cabinet. it's the lineup is a mixture of technocrats and old government hands. let's go to haslinda amin. tell us about this, this is the first cabinet, what surprises were there? good morning. the surprise is that jokowi managed to line up a credible cabinet. never mind it he does not have a majority in parliament and has had to barter, make concessions. are to bes choices competent in on the last even those chosen from other parties. they say that his picks are signs of principal and compromise. i want to show you his top posts, finance minister. safer hands, they say. head of theice ministry of finance, a professor of economics at the university of indonesia. the coordinating minister of economic affairs, a former state owned enterprises administer. jokowi also tapped the railways cheap to be -- chief to be the transportation minister. >> tell me about women here in the cabinet. how did he do in his choices there? >> you know what, he did pretty well. .e gave key roles to women he appointed the first woman foreign minister in indonesia's history. the state owned enterprises minister, also a women. the minister of fisheries, also a woman. >> we will continue with all things indonesian. now. connelly joins us a very good day to you. what do you make of the choices overall? >> i thought it was an interesting cabinet, as has linda said. said.inda there are signs of compromise. in the areas where he has shown pushing specific reforms, we have seen him appoint technocrats in business when with a record of success -- businessman -- and businessman with a record of success. bag. a bit of a mixed >> in your research, you saw that there are four ways to look at this cabinet. tell us about that. >> rate, so again, on the issues that he really cares about, his appointed technocrats with a track record of success, that on issues where he has expressed less interest, he is appointed a mixed bag -- has appointed a mixed bag. the minister of foreign affairs comes from the foreign ministry and is very much a career diplomat. while she will be the first indonesian -- female in the nation prime minister, she is my much an orthodox choice in terms of coming from the ministry and the mindset -- very much an orthodox choice in terms of coming from the ministry and the mindset that that represents. hard-line stance that made it more difficult to come to a negotiated settlement as a indonesian government was able to do when you left power, and he is the minister of defense. that is a less positive sign. >> i know that he is a close confidant of the chairman of jokowi's party. how about her influence in this? >> her influence is seen throughout the cabinet. there was some speculation last week that jokowi was trying to use the vetting process by the corruption eradication commission -- a new innovation -- that he was trying to weed saying that ity is not that i do not want these folks in the cabinet but they could not pass the vetting process. but many of them do appear in the cabinet. just to name a few examples, some people very close to him. the minister of state owned enterprises. that is a political patronage position. it is known for being a position from which parties distribute political patronage. a lot of influence in this cabinet. >> you mentioned the technocrats who are essentially the ones who have been appointed for some of these so-called signature policies, the one that his -- ones that jacoby is most interested in. -- jacoby is most interested in. minister still lives in rome, where he was an official with the agricultural organization. that is a really key , whoization for jokowi want to focus on maritime affairs in indonesia. that is not a foreign policy position for jokowi. remember the indonesia is an archipelago. for him it is about better connecting the islands, but he easier to trade. it is a very critical position for him. we are also looking at transportation, where he is appointed he had -- i am sorry, the former head of the rail , who is notndonesia your typical leader. importantother very one for jacoby, who wants to increase funding for infrastructure and transport infrastructure in particular. >> you also have these expositions which are being filled up through patronage, party patronage. how does that set with his avowed goal of clear politics? we saw the reaction last night from the volunteers who supported him throughout the election campaign, particularly when his party was not supporting him. they were disappointed to see a number of them in ministerial positions. some of these not known to be the cleanest individuals in indonesian politics, that was alarming to the volunteers who spat their blood and sweat and tears to get him elected. it'll be interesting to see how they react to the cabinet over time, with a become disillusioned or redouble their efforts. -- whether they become disillusioned or redouble the efforts. >> but have a look at some of the other corporate stories we are following this morning. panasonic's latest plan to shake up its money-losing tv business. we're hearing the company is selling. they may agree on a deal by the end of the year. we may find out more when panasonic reports this week. another company reporting, sharp reports on friday. results may fall short. a newspaper says that net income may miss the bloomberg survey i-64 said in the last half. 60% in the last half. a spanish cable operator is looking into tax fraud. the issue concerns tax declarations made before idea was closed. it was bought for nearly $10 billion to boost tv and internet services across europe. those are the top corporate headlines from this hour. tim cook is continuing his trip into china today. he is excited to meet with alibaba's jack ma. our tech group is here with me, she is the best to talk to on this. what would we expect on a meeting of these two? >> expect the conversation to be a two-way flow. alibaba wants to expand the u.s. as much as apple wants to expand in china. if you look at what tim cook says, they want to double stores in china. they already have the flagship store. >> they are saying it will be the biggest market. >> yes. and they have a flagship store on alibaba. it is essential for apple to have the cooperation of alibaba for intellectual property rights and because alibaba dominate such a large sector of the e-commerce market. having that would definitely help them. they does seem as though are swapping countries, because we did have jack mine california last week talking to the entertainment industry. >> he is shopping around hollywood, according to our sources. he is meeting with big studios, shopping for content and also distribution deals. even a possible state investment in some studios. the reason it -- stake investment in some studios. the reason is that he is expanding in entertainment. >> content is king. thank you. tim cook and jack meeting. up next, the cloning scandal that shook the world. the disgraced scientist involved and the whistleblower that feared repeat. this is "on the move." ♪ this is on the move, coming to live from central hong kong studios. south korea has become payments for its high-tech products and internet connectivity, before a country with such a tech savvy reputation, has had trouble cashing in on the web. we take a closer look in today's global outlook. >> when you think of south korea, offbeat top of your head, you think of tech companies like samsung. they have been built on exports. and now boast one of the worlds highest internet connectivity's and speeds. wideningwonder that a gap is in trouble for the government. the deficit has tripled since 2010. the globalt to leader of e-commerce, the u.k., which has a $1 billion surplus. what is holding back south korea's reach on the web? one, the choice of internet browser, or the lack of it. south korean financial regulators say that they favor microsoft internet explorer. that means that payment systems are often incompatible with other popular browsers like chrome, firefox, or safari. get onto the right browser, you will have to install activex security software, online security, digital keys -- you will end up going out to shop. the south korean government is taking notice of the challenge. they have called on policy makers to remove hurdles to web aced exports. -- web-based exports. where will they be focusing? china. want to take they advantage of chinese spending power online. to have 800ected 50 million people on my next year, and k pop idols are popular. but attracting shoppers will not be easy. although analysts a there is huge money to be spent online, the purchasing process needs to be much more simple to attract the shoppers. if south korea follow through with plans to streamline, that will be key. that is your global outlook for today. >> a scientific scandal that shocked the world. in 2005, a south korean scientist claimed a right through in the cloning of human stem cells. the work was proven to beef bake --be fake. clinical calm of this hospital lab is removed from the scandal he found himself involved in 2005. in those days, he was a junior researcher for a stem cell scientist. he had become the first to successfully cloned dogs and was working on cloning human stem cells. when plans were announced to cry and external procedure on a paralyzed 10-year-old boy with the promise he would walk again, delete details to a journalist -- he details to a details tol --eaked a journalist. >> stopping the test was what everybody wanted, and they were happy that they could. >> the pioneering work had made him world-famous and a national hero. eventually, the truth prevailed. in 2006, he admitted the fraud. i, as the report author, take the full responsibility for using fake data related to the stem cell thesis. --cknowledg all of technology all of that and apologize once again. >> hwang was found guilty and his license to experiment was revoked. he was handed a two year prison sentence. he offers a service cloning dogs at 100,000 a puppy. he has a degree in bioethics and is concerned that history could repeat. >> all the facts that started scandal still exist. researchers are tempted, and if somebody gets tempted, another scandal could happen right now. >> paul allen, bloomberg. >> we're heading into a break, but on the other side of it, abba sang about a rich man's world, but the guitarist wants to can sign up money to history. we'll find out why he is changing his tune. ♪ some of the other stories making headlines around the world, britain has ended combat operations in afghanistan. flag was loaded for the final time in the base was handed over to afghan forces. it has been the center of british operation since 2006. british troops are expected to head home by the end of the year. japan is showing off the strength of its air defenses in a campaign for winning support for giving their military a broader international role. government has andted the defense budget is reinterpreting the constitution to allow the military to defend allied forces under attack. the leaders of a hong kong's democracy protests have apologized to supporters for calling off a vote on strategy and the poll was postponed because there were too many opinions inside the disparate campaign to make the referendum possible. the street protests are in their fifth week, with campaign leaders returning to court today to defend their actions. museum in stockholm is symbol of theely drive to a cashless society. visitors cannot use cash to get inside and the bassist has made it his personal mission to consign cash to history. i am a former member of abba and always a member of abba. i am standing right here in the heart of the avenue of museum in stockholm. -- abba museum in stockholm. people look at the outfits and all of those vinyl records that we have from all around the gold here -- globe here. you cannot pay your entry with cash here. in sweden, we have our own currency, and we are very quick to adapt to new technology. sweden would be the ideal country to make cashless. the whole thing began because my son was burgled. i thought to myself, what would happen in a cashless society? what would they do with that , if itr, that smartphone cannot be transformed into cash? i have gotten into it, the more i think that it will add benefits to a society that goes cashless. and i want to find out what those benefits could be. , andted to make an example i thought of this museum it should be cashless -- that this museum it should be cashless. the economy today is digital anyway, and we are going that direction whether we wanted or not. week away the metal. -- take away the paper and take away the metal. nothing is going to happen. it is an abstract symbol. a museum where people can go and look at coins and bills, i think that should be the future. bloomberg app to your tablet, it is available on android, apple, or windows operating systems. audiences were looking for a thrill over the weekend with a horror flick before halloween. "ouijaernatural thriller " populist. -- topped the list. we have the canada research and in second.wick" eves action film "john wick" coming in second. ♪ >> hello everybody, this is "on the move." they can handle i financials -- a financial shock heard europe's biggest banks passed the stress test. the hong kong exchanges taking a tumble. also, buying japanese stocks. the next 50 minutes are going to be live in jakarta, singapore, and right from hong kong as well. , amongsturther ado them, the oldest one of the world. wer and -- andand julie germany all past. the federal reserve had their tested the u.s., if you recall. this is on the same level. there were two that failed. one was a central bank, twice i failed out of the 30 being tested. the authority had their test as well, a bit smaller. the eba was 50 pages long. 24 failed, 123 were tested. as you mentioned, .5 billion euros was the gap at the end of 2013. the italian banks failed significantly. they said that it was the middle of a recession so it is unfair to test us, but hey, let's move on from that one. the stress test >> -- what did they look at? >> the new risk was the asset quality review, that made it harder. they factored in the contraction of the european economy. falling house prices. >> worst-case scenario. reaction, they wrote, very encouraging. the bank system in europe is well-capitalized with transparency. a high level of transparency. they are convinced that this is a good report. >> let's talk about the stringency side. how stringent were the tests? do we have reaction on the markets? >> today, they opened the union banks. watch hbc, when it opens again, that is the relevant one. hbc being a british bank, or a hong kong british bank, there is a tough test to come rid the bank of england will have 17th, and that will be tougher rid the bank of engla is looking at what they called the dynami balance -- the bank of england is looking at what they call the dynamic balance sheets. moving is tougher to look at. the british banks got off lightly in this one and past. come december, it could be a different story. >> anything market wise? >> i will show you the euro. nothing dramatic, but let's look at the euro, let's look at the charts. the yen, ignore that, look at the euro picture so far. there it is, back it up there, you can see the euro. very positive. that is the performance today, that is the reaction you can see. it was the reaction as the figures came out, and you can see that as the markets digested it, that was encouraging. the hbc story, and look at the markets overall. the nikkei, the hang seng. to one of the biggest, hbc, there it is. u are asking is what does it do, the answer is not much. the banks in a japan and australia are seeing a collective gain. of course there are ties to asia. passing stricter, stringent rules, does it better medicine i'll apart from the italian story. better apart from the italian story. what we have at a moment, gilead 4% loss so far. -- what do we have at the moment, about a 4% loss so far. the occupy street protests may have something to do with that. yvonne is joining us from the street protests. what we know so far. -- what do we know so far? a day aftercomes the hong kong exchange chief executive released a statement saying that no start date yet on the shanghai hong kong stock and it, saying that technical preparations are done and what is missing is the final approval from regulators and chinese authorities. some are signaling that this may be the chinese way of showing how displeased they are at how hong kong cannot put men to these occupy protests. they say they have been going on for too long. it is starting to show an impact. the chinese state council of italy holds the key to when the stock and it starts. the program will give international investors never before granted access to buy on china's stock market, which has been tightly restricted in the past. it also gives mainland investors chances to buy stock listed in hong kong. this is adding pressure to the hong kong government to restore order and get the city back to normal. to be a concern. a lot of people have a vested interest in this, it has to be a concern for them. you're are talking about six months of preparation here. a lot of brokerage firms have added more staff as well as more resources into this program. they say that something new to be done from the chinese government. clearly what they are saying here. they are saying that may percent drop in the first 30 minutes of 8%ding in hong kong, -- drop in the first 30 minutes of trading in hong kong, a cap be a coincidence. -- it can't be a coincidence. will be focused on the street protest in a few moments from now, talking to the chairman of the new people's party. gina joins me shortly, you do not want to miss that. let's have a look at other stories that we are following, and academic member of the monetary policy is expecting a china's economic growth to slow to 7.2% this quarter, down from the last three months. that comes as domestic demand weakens. it also comes after a research institute for next that next year will slow down to 7% unless the government steps in with stronger stimulus. this is due to decreasing exports and property development. the number of people giving up u.s. citizenship has jumped since the announcement of new tax laws. andnew rules take effect make it harder for xp address hide assets from u.s. tax authorities. there is a warning of more car recalls as car companies fight for customers they have a tendency to announce recall whenever there is a question about quality. cars offfter they take the road over potentially be valera bags made by a japanese -- potentially be both airbags made by a japanese manufacturer. some people say that the weakness represents a counterintuitive buying opportunity, but here is a look at the prices. >> this is certainly helping it today. you can see the decline, gains their 80%. this is the overall map for japan. i will show you the picture for the nikkei 225. there are declines in the gas industrials. there are gains in technology. the european stress test, we are seeing banks rise on that. nothing dramatic, but the stocks are rising. mitsubishi financial. a slight relief. since we are talking about japan, bets are piling up against japanese stocks, but some are taking the as a signal to buy. sherry is taking a look at that, and what have we got? >> they are saying it may be time to get back into the market, equities may have reached lows. that this may be the time to get back into the action. history seems to be on their side because bloomberg data shows that since 2009, shares have rallied over the three months following a scourge. we have seen a lot of that happening recently, shortselling in tokyo jumped to the highest on record this month, closing 7.7% from a high in september. we have higher corporate earnings and a better outlook, the central bank saying that it may add stimulus. investors saying that it may be time to get back. thank you very much. thank you very much. the construction bank posted its growth. let's have a look at what we can expect. francis, we had jim on and he replicatedhis is across the board, forget it, they will not get double-digit growth for this industry. >> i would say that many of the negative banks and you have seen, the china construction bank, you have seen avoidance. because of the ban on products. callsalso seen widespread for the bank reflected by the 17% increase in their interest expenses. of course, on top of the credit authority. the firstrsus 32% half. in the first half. and they rose 20% in september. in the third quarter, only a 10% increase. so no good for most china banks. >> it is all about credit quality, and the rise of these bad debts. the ccbu look at results against other banks, they are lending happily to retailers. china, another bag of importance, it has the sharpest increase -- and of importance, it is the sharpest increase among the china banks. i think the key concern is that credit quality is getting worse and worse, even after multiple runs of targeted using by the central bank. bank.ing by the central we cannot see a turning point yet, that is the worrying part. >> what about the infrastructure bank? what is in that for china? expanda wants to political influence. china has deep pockets and it would provide most of the initial funding for the bank. if you look at the china banking systems and the loan deposit ratios, they do have access funding to lend offshore. that could help to relieve the appreciation pressure. >> thank you very much. francis from bloomberg intelligence. up next, hong kong protest. the review strategy as they enter a fifth week. ys theyty share sa should -- party chair says they should engage with the government and compromise. ♪ >> the leaders of the democracy protest are promising a rethink on strategy after calling off a meeting on where they go next. organizers are going to the court today to defend their actions. they say it depends on how the authorities react, and that does include beijing. >> it all depends on how the government will handle the problem. that includes the chinese government in beijing. because this movement would not have been there and were not have been that successful without the decision made by the sending committee -- standing committee on the 31st of august. what are they going to do about the decision? it is quite unconstitutional. they have gone much further than they should have. according to their own interpretation. joining us in the studio is the new people's party chairwoman. thank you for coming in. we army with -- where are with the fifth week on this? >> the government is waiting this out. they are waiting for the review of the injunction order. last week, a temporary injunction order was granted. it is being heard in the courts. because it is waiting for that. -- the government is waiting for that. >> is is counterproductive for the students? >> they are losing public support. there are people that are badly affected by the occupy movement. i think that the great majority about the movement to end. >> but not what they necessarily believe in. where do you stand on what they believe in? they want democracy, they need to return to rational discussions of the details. beijing's decision in august allows room for democratization within the framework. the students could ask for their representatives to be represented. >> exactly. they were talking about putting more governance into the parts of china, that is giving more wiggle room. why can't be committee make a different decision now on this? >> the framework decision allows room for new organizations to be represented. of underrepresented elements our society to have a voice. but listen, it is only a framework for decision. the power on hong kong's democratic process is distributed between the beijing, .ong kong chief executive people like us play a big role, but we cannot get the work underway until the occupy thing is out of the way. >> what do you want? >> i want competitive elections. that would strengthen the mandate. that has notne necessarily had a hand-picked nominee? >> i do not think any nominee will be hand-picked, because i think the voting will be by secret ballot. you cannot rule out some members out of the two or three votes to a moderate democrat. >> which way would you go? >> i am happy to go along with that. i am not afraid of competition. >> what happens next? what are the next steps if the occupy movement goes off the streets? there needs to be dialogue, duster not? -- does they're not? studentsk of the should consider -- i think that the students should consider their dialogue with the government. there could be different channels. i am sure that the government is also talking to the students through back channels. one way or another, they should return to the conference room, the forum for rational discussion. tothey can write a letter beijing saying that the situation has changed and have a review of this. what are the chances? >> i'm sure that beijing will take into account what is happening in hong kong. the government does not really have the power to change the decision, but they know what is happening, and will factor that into their consideration. >> but there has to be a way for there not to be a loss of face on either side, or all three sides. >> the government has made specific t concessions on the televised debate. the students should grant that the government has said that there will be ongoing dialogue. democracy is a work in process. how would you rank leung during the stewardship of this story. >> the chief executive works very hard. but the government as a whole could do more public munication. -- public communication. people's is the new come,chairwoman still to cloning issues, we examine those, next. ♪ here are stories making headlines around the world trade the brazilian president has won a second term in office after a campaign team to too close to call. --ma rousseff peter opponent beat her opponent. this was a decade of social change versus the business friendly policies of her opponent. britain has ended combat operations in afghanistan. the union flag was lowered in cap bastion for the final time and the cap handed over to afghan forces. this has been the center of operation since 2006. a second basis to be handed over soon and all british troops will ead home by the end of the year. japan has shown the strength of its air forces in a campaign to give it a broader international role. they compete with china and russia to dominate these guys in asia. -- the skies in asia. a scientific scandal that shocked the world. a south korean scientist claimed a breakthrough in the cloning of human stem cells that was later proven to be fake. we'll have a report on what the disgraced scientist is doing now. the clinical calm is far removed from the scandal he found himself involved in in 2005. he was a junior researcher for the now disgraced stem cell the first tong, successfully cloned dogs who was working on cloning stem cells. when plans were announced to cry an external procedure on a paralyzed in-year-old boy, with the promise he would walk again, he leaked details to a journalist. and theournalists citizens group had a strong motive, that boy. stopping the clinical test was what each member wanted and they were happy to stop the test. >> there was a powerful back ru. against but eventually the truth prevailed. hwang admitted fraud. >> i take the full response ability for using fake data related to the stem cell thesis. i acknowledge that and apologize once again. >> he was found guilty of embezzling government money and his license was revoked. he was handed a suspended two year prison sentence. he works in china, where he offers a service cloning dogs at $100,000 a copy. is a phd in bioethics and is concerned that history could repeat. >> all of the facts that started the scandal still exist. to this day, many researchers are tempted by those facts. and i think, if someone gets tempted, another scandal could happen right now. >> paul allen, bloomberg. way, joe cole we fix team and it is a mix of old and new. we look at the leading names. also, the drop in asian equities. getting cues from new york on a friday. this is "on the move." ♪ market disconnect. it markets tumbling with no date for the shanghai link. stoxx's with technocrats and old government hands. the bosses of alibaba and apple meet today. but sticky look at the biggest decline is out there, and it is about the hong kong stock link or the lack of it. what do the markets say? >> uncertainty. even the man in charge does not know what is going to happen. because china is distracted or angry because of the protest, no one knows why, but he has been delayed and there's no start date given. that is a blow. as -- getl by as much rid of that, that is not a nice color. as much as 5.1%. , it jumped up, it is not dow -- now down by 3.5%. you can see the reaction, it is quite clear to see. look at this, overall, the pie chart. pull up the hsi, there it is. stocks,see that tech the financials of the key ones to watch out for, one of the biggest declining sectors today. look at financial services, look at this -- look at that, first of all. 3.8%. we know why. stock is,ess what the there we go, hk exchanges. that is the impact it is having on hong kong. it is a heavily weighted company. can see the hong kong is the biggest falling index, down 5% because of the weighting of the hong kong exchanges. to the overall pie chart to the overall picture shows the hong kong is the biggest decline because of this delay to the connect between shanghai and hong kong. 9:33 in indonesia, where the president has named his new cabinet, a mix of technocrats and old government hands. in jakarta. some old, some new what is the reaction to this -- new. what is the reaction to this? >> the reaction is mixed when he unveiled's cabinet. -- unveiled his cabinet. he turned to members of previous cabinets and the head of state owned companies. businessmen and technocrats to lead his economic industries, hoping they would intimate policy and chemical solutions for problems inherited from the previous administration. the subsidy is slowing investment and shows the lack of infrastructure. the cabinet has eight women, twice the number of the previous . he also appointed an ambassador to the netherlands. >> the thing is, we have a lot of promises made in the campaign here. what is the overall opinion about this cabinet? get help them keep the promises? -- can it help him keep the promises? he he wants to modernize= -->> wants to modernize the indonesian maritime sector, and he has appointed a very competent hand in the industry, the former director. this new ministry is the only one not filled with technocrats -- entirely filled with technocrats and not allocations read it gives an indication of how serious he has. she has a lack of experience in the field. back to you. >> were going to go from indonesia to have a look at tyler -- we are going to go from indonesia to have a look at thailand. reservoirs around a 15 year low and agriculture is drying up, but there is a silver lining. aminnda allman -- haslinda has more for us to just a few years ago, we were talking about floods there. how can there be any good news out of this? >> there has been an oversupply of rice in thailand. rumor that the government was buying rice directly from farmers at above market rates. that is part of a government program. that led to record stockpiles accumulative. another large clock -- the community. -- accumulating. this may be a good thing, just not for farmers whose livelihoods are at risk. and not for the economy. the banks are forecasting the slowest growth rate since 2011. that is when thailand had record floods. here's the thing. agriculture accounts for a percent of gdp. -- eight percent of gdp. be big, but ind terms of rice production, it is per the good news. -- it is pretty good news. >> what about the government turning off the caps and cutting off supplies>? ? >> one levels in thailand or a 15 year lows. -- water levels in thailand are at 15 years low. the government wants to conserve so they are turning off the taps for now. it is a complete reversal of what happened years ago when floods swarmed the factories and submerged parts of bangkok. the prime minister has said that he is seeking cooperation from the farmers from now until the middle of next year. he says that thailand will not have enough water for both consumption and agriculture. it is a difficult situation and it will have to turn off the taps. >> think a lot for that. as the -- thanks a lot for that. panasonic is shaking up its money-losing tv business. they are selling their u.s. operations. they may have a deal by the end of the year. we may find out more when panasonic reports later this week. sharp out with numbers on friday, results fall short. -- results may fall short. they may miss the bloomberg survey by as much as 60%. this is due to sluggish sales in the solar power business. alegations of tax fraud at spanish cable operator. this concerns about you out attacks declarations made before the deal was closed. they bought them for nearly $10 million to boost internet and tv services across europe. apple's chief executive, tim cook, is in china. he is set to meet alibaba's checjack ma. what is this expected meeting likely to be about? >> it looks like both parties have something to bring to the table. jack want to look to the u.s., apple wants to expand in china. go to the u.s., apple wants to expand in china. market, a huge growth driver for the company, and this is the part of the region and the role that they are looking at. also, in terms of online, alibaba plays a very important role. they are the dominant market player. apple has a flagship store on them. in that sense, alibaba will be playing a role in helping apple to protect intellectual property rights online. knowr ali baba, we do not what these psivida corp said they are going to do, but tim cook has said that they want to cooperate and that is a part of the conversation that will take place. jack ma was in california meeting with some executives in the search for content. >> that is what we learned. it appears that they want to buy movie content from hollywood because the content costs have gone up so much in recent years due to competition in china. you have several companies competing for the same business. if they were able to strike some deals that would give them a competitive advantage, that would help them get further in the business. at tim chen with a look cook and jack ma. next, special encounters of the financial kind. we be talking to a chief executive. ♪ a big week for earnings. we have a bunch of bits and bobs of economic data out. all the key events coming out of the u.s. the next few days. week ahead ofig us. on monday, u.s. health officials will begin monitoring travelers from the west african nations of guinea, liberia, and sara lyons for ebola as they come into the country through five major airport. it is the latest up to keep the virus from spreading. they will be monitored for 21 days and will have to check in with health officials daily and take their temperatures twice a day. also monday, twitter, buffalo wild wings help to kick off a week of earnings releases. on tuesday, basketball fans can rejoice with the return of the nba, and we will get earnings from the likes of facebook, pfizer, burger king, and bp. of qe3.sday, the end policymakers say they intend to cut monthly bond buying purchases from the current $15 billion to zero. ending the economic stimulus. the bank is also expected to leave the benchmark interest rate near zero. isa and metlife will be among those posting profits, and the u.s. will post their own version of earnings. the economy likely expanded at a 3% annualized rate according to a bloomberg survey of economists. a pickup from the pace in the first six months of the year. mastercard, starbucks, and conoco-phillips also among those reporting. chevron and hilton release earnings on friday, and personal spending will likely show a slump in september, while incomes will show an increase. that is according to a bloomberg survey. we'll have more right here on bloomberg television. that was the week ahead, including the key fed meeting on the decision to end stimulus. our next guest runs one of the top online trading companies. tim is the ceo and he joins us from singapore. ending decision on stimulus is something that has been front and center of people looking at the markets at the moment. now that we see an end coming up, how much is it priced in, in your view? >> i certainly think that one of the effects of the qe has been to shore up the markets and suppress volatility. what you have seen over the last few weeks is an increase in volatility as he has come to an end. -- qe has come to an end. >> i was your business? -- how is it your business? people were complaining that dirt was no volatility and now they have the ins beta full -- adefulls. >> investors like volatility, it is what drives them to trade. >> but there was very little going on, essentially. certainly, our first quarter, up to the end of august, was relatively quiet. a lot quieter than the equivalent quarter in the previous year, which was the first time that you heard the fed start to use the tapering word. 15 months ago now. since then, we have seen a pickup in volatility, and a pickup inclined activity. -- in client activity. haveropean equity markets had a tough time lately down to the european slowdown. of the people been overplaying those concerns? >> those concerns are very real. i do not think it is a mistake to look at europe as a single block. the european union consists of 28 separate member states, and some of those are in relatively good economic shape, germany. some are in poor economic state, let greece or italy. -- like greece or italy. >> you're in singapore, first of all, what brings you there? what interest are you seeing in chinese equities? how do you get people involved in that? >> we now operate in 17 countries around the world. including one here in singapore. i try to get to all of our offices as often as i can. i'm doing a tour of asia pacific at the moment. i'm heading for australia tomorrow, and then off to japan. in terms of access to the chinese markets, certainly some of the big names have been very popular with our clients. we offer clients the ability to as a grayalibaba ipo market before the ipo, and the close ipo as well. both were phenomenal. i think that clients are inerested in stocks that are the internet space. an internet stock from china is particularly interesting to them. >> i want to move on to the foreign exchange business. what portion of your income comes from that? also, i believe you have unlicensed for exchange brokers operating -- foreign exchange brokers operating in singapore. it is something of concern. >> yes it is. across the world, 22% of our revenue is foreign equities, the rest coming from commodities and individual stocks. different regulators take very different attitudes towards unlicensed operators. to stamp themkeen out, others are of the opinion that if people are foolish that is our own lookout. that is the attitude here in singapore. i do wish they would take a tougher line for the production of singapore consumers. >> tim, 40 change trading is notoriously difficult. it is a difficult market to predict. -- foreign exchange trading is notoriously difficult. what percentage of your clients make money on it? >> on a trade by trade basis, more than half of trades are profitable. if you look at are more established clients, they tend to be successful. it is true that it takes some time to learn the ropes, and they are generally less successful. but there is a trend of epilogue or someone is with us, the more likely they are to be profitable theall -- a trend where longer someone is with us, the more likely they are to be profitable overall. they are finding it hard to cash in on the web. we have a special report coming up. "on the move" is back in a couple of minutes. ♪ >> south korea has become famous for high-tech products and internet connectivity, and we report, it does have trouble cashing in on the web. why is that the case? >> when you think of south korea , of the top of your head, you probably picture tech companies like samsung. the company has been built on the export of tech products, and boasts among the world's highest internet connectivity and speeds, so it is no wonder that a rising trade deficit in e-commerce is a sore point for the government. this has tripled since 2010, and last year it stood at $685 million. compare that to the global leader of e-commerce, the u.k., which has a billion dollars surplus. what is holding back the south korean reach on the web? for one, the choice of internet browsers, or the lack of it. south korea's financial regulator says that banks favor microsoft internet explorer. payment systems are incompatible with other popular browsers like chrome, firefox, and safari. even if you do get on the right you will probably have to install activex security software, developed by microsoft. add to that the online authentication certificate that you need, the digital key that you need, and also the installation of security software activex, and you will end up going out to shop. the south korean government is taking notice of the challenge. the president has called on policy makers remove hurdles to web-based exports. where will they be focusing their efforts? china. year, the president suggested taking advantage of the chinese pending power online. they are expected to have a hundred 50 million people online by next year, and k pop idols and soap opera stars are hugely popular and help to boost korean brands. attracting shoppers will not be easy. analysts say that although there is a lot of money, the purchasing process needs to be much simpler. back to you. >> thank you very much indeed. stockholm isum in a rather unusual symbol for the drive for a cashless society, but visitors cannot use cash to get in. bassist has made it his personal mission to consign cash to history. , a former member of a la. -- of abba. i'm standing in the heart of the abba museum in stockholm. here, people tend to stay for a while looking at the outfits and all of those vinyl records that we have from all around the globe year. -- globe here. you cannot pay your entry with cash. in sweden, we have our own currency, and we are very quick to adapt to new technology. sweden would be the ideal country to make cashless. the whole thing began because my son was burgled. i thought to myself, what would happen in a cashless society? what would they do with that computer, that smartphone, if it cannot be turned into cash? the deeper i have gotten into it, the more i think that it will add benefits to a society that goes cashless. and i want to find out what those benefits could be. example, andake an i thought that this museum should be cashless. the economy today is digital anyway, and we are going that direction whether we wanted or not. -- want it or not. take away the paper and a metal, nothing is going to happen. it is an abstract symbol. there is a museum in stockholm with a can go and look at coins and bills. i think that should be the future of money, in the museum. >> that is it for this monday edition of "on the move." stay tuned, "asia edge" coming up. angie will do that with me. we'll be joined by the chairman and founder of a private plane company. we will ask him how his plans are taking off in this part of the world. that is coming up next. you're watching bloomberg television. ♪ >> it's the middle of the trading day. you're watching "asia edge." one country, to the markets. the hong kong-shanghai tie up facing delays. tim cook in china but a possible meeting with alibaba's jack ma. the ecb list of weakest banks. i'm angie lau. expecting big numbers from toyota. it will go a long way to settling the global pecking order. we are live for you in tokyo. something old and something new. government. welcome aboard. the vista jet chairman is here as we take a look at the market for private planes in this region. all that and more in this monday's edition of "asia edge." >> i'm john dawson. across asia, the u.s. also had the best in two years. a foundation with some very different sectors. more on that later on in the show. a five taiwan and china is down, part of the connect delay. as you can
the company says setbacks and legal delays may push the start of drilling passed the 2017 expiration. plans were set back in late 2012 by mishaps involving drilling rigs and spill containment systems. the company has been sued by environmental groups seeking to block exploration. microsoft is cutting the price of its xbox one by $60 ahead of the holiday season, moved to it attempt to win back customers switching to the sony playstation four. it will sell for $349 from november 2 through january 3. uber rival, lift, is losing more executives. it has confirmed the director of products is leaving less than a year after first joining the company. it follows a string of executive exits including the vice president of operations and the vice president of engineering. lyft declined to comment on the departures. ceo dick costolo struggles to add new members to twitter. third-quarter revenue was up 114% year-over-year, but a third quarter net loss. the number of active users on the site grew, up 23% year over year, but the growth not coming quickly enough for some. shares were down as much as 10% in after-hours trading. almost a year since twitter went public, it was the first glimpse at the company's performance since costello shook up his team to speed up the launch of new products. joining me are cory johnson and paul kedrosky. paul, i will start with you. obviously there continues to be this fascination with what is happening with user growth. is that fair, and is that the number we should be focusing on? >> i think it is fair. i think it is frustrating twitter. it's clear from the call, you asked the question about daily active users and timeline growth and all of a sudden there is a sense of, i heard this question too many times. the company is clearly frustrated with the investor fixation with those numbers and wants to tell a different story, but it's the only one that customers understand. >> i think at this stage, the company should be growing. we've criticize a lot of companies in silicon valley like the snapchat model, which was once the google model. let's get big and figure out how to make money later. 284 million users is a lot. the growth rate is lower than it has been. after the ipo, the growth rate was coming down and coming down in the december quarter, but then it picked up. you want to see that rebound continue. but it did not. it's a disappointment for this business. that is quarter over quarter base. i don't think that is the right number. how big is the audience, and hasn't gotten any larger? they didn't really grow that much, and it is a concern. >> paul, how big a concern is it? when you have big events like the world cup, or an amazing week by ellen degeneres. >> i think the company would discourage it, thinking that way about the company. it deserves to be thought of in a broader term than that. the numbers we are seeing suggest that even if you do think of it in those terms, they're not seeing huge bumps from any major event like football or the brazilian elections or anything else. the analyst look for that, to be deducted by the numbers growing more or less than it should have. the fundamental problem remains, this has been the story with twitter for three years now. the experience when you join the service as a new user, it's not really obvious what you're supposed to do. as a non-logged in user, there's really no experience for you at all. >> what does twitter do about the mom problem? my mom uses facebook but she still doesn't understand twitter. >> your mom follows me on facebook. we talk about the facebook issue. facebook loves the mom's, facebook business has never been better. everyone should love your mom. twitter needs a bigger audience. it needs the moms, dads, kids, cousins, and goldfish. there are some numbers that did not stink here. the revenue per timeline view, the monetization of the timeline views, that pic that, but those numbers are so small, it's a very low number. it's better than it was, but the problem there was the timeline view growth, the number of timelines that people are looking at was also coming in quite small, 4.3% sequentially. so slow growth in users, slow growth on the timelines that were viewed. in the u.s. in particular, use all very slow growth. i was talking to matt miller about it earlier and he said i'm on it all day at work, i'm always broadcasting and tweeting out. how much more can you be on it? >> i am on it as well. they have made pictures larger. how much can twitter actually do when it comes to a product respective to re-accelerate user growth, or to a certain extent, is that out of their control? sometimes these things just happen organically, or they don't. >> i think there is a lot they can do. in some sense because the product has not evolved much in the last couple of years, it's in part because there is an uneasy tension between the company and developers on the platform. twitter has sort of reembrace the developer community. if anywhere that's where you'll see a lot of the changes the company needs in terms of new products to drive things. they are the ones that do the new crazy and interesting things to attract users. if twitter could, they would have done it already, and they haven't. >> what kind of products should twitter make? should be about partnerships with other companies like sound cloud, for example? >> it should be all of those things. they should look at some companies that need to become rapidly obsolete. why do all these companies exist that are at the margins of doing things people expect should be happening inside the core twitter product? the whole ecosystem needs to change. >> dick costolo will be with us tomorrow. you do not want to miss that interview. coming up, we're talking about google and larry page turning the page. ♪ >> welcome back. google has a new product czar. larry page has handed the reins over to long-time google employee and product executive, sundar pichai. six executive's will now report directly to him who has overseen android, chrome, mobile apps and a lot more. it's one of the biggest executive shakeup since page became ceo. what does it mean for the search engine giant? will it help them keep a competitive edge on facebook and amazon? joining me to discuss it is cory johnson and brad stone. you recently interviewed him for a big story on business week. what's he like? >> he's great to talk to. he's incredibly modest and has a deep knowledge of all of google's business. he knows everyone's business, even when he's not responsible for and he's just endearing. nice guy with a perpetual smile and very likable. i talked to him twice. i talked to him before this debut of the new version of android. he had someone with him who was responsible for android and chrome and clearly the android and chrome divisions are well tended to and that's how he's able to scale himself. >> is it more symbolic or is it real? >> he can now be the chief innovator. when tech companies get to 20 years old, they might naturally split up. google is 16 years old and the disruptor has been disrupted by mobile. now larry page will go and think about how to keep up with these businesses. >> there is an anecdote that he would sit outside of marissa mayer's office waiting to argue on behalf of his team. >> he's proven himself to be a tenacious negotiator. going toe to toe with samsung to make sure samsung was playing nicely. >> does it break the agreements? >> i think he has proven himself to be a good diplomat as well. maybe laying down the law but showing them some why it is a win/win relationship. >> he's very modest and says this is larry's job. he is clearly the number one deputy. i don't know if there would be any question if larry retired tomorrow that it's not a role he would want. >> and youtube does not count in this. google has always had this second layer but do you see a rising second-generation of leaders? >> that leadership team is all veterans. >> most of them have been there since the beginning. it is a leadership team that is incredibly loyal to the company and i don't see them going anywhere anytime soon. >> let's talk about his track record and how successful those products have been. >> and has been successful. you got the toolbar that started google's move into the browser and then you had the chrome browser, the market leader today, making up a lot of ground on internet explore your. >> and crushing safari and mozilla. >> and put in a difficult position when andy rubin left to pursue his independent robotics project, taking over the leadership at android and chrome, doing things like comcast and bringing out lollipop, reducing on the low end with android one. the new nexus six smartphone -- a lot of responsibility seems to be a good manager and larry page seems to trust them. >> politically, it was not about making friends as much as not making enemies. he is hard to dislike. >> we will be following as he embarks on this new phase. thank you so much. still ahead, why is it taking so long to find a cure for ebola and how long has the tech for experimental drugs that around? that story is next. ♪ >> i'm emily chang, and this is "bloomberg west" streaming on your phone, tablet, apple tv and amazon fire tv. the team treating craig spencer for ebola is considering any and all experimental drugs that could help, but the technology for antibody cocktails has been around for a few decades. that's according to a professor of microbiology at tulane university. why has it taken so long to get an ebola vaccine and why are there so few doses on hand? for more, i want to bring in the author of "the naked future." is it true this capability has been around for decades and only now we are trying to take advantage of it? >> the ability to very quickly produce lots of experimental drugs is something that has been an ongoing area of research, particularly in military research for a long time. the methodology is not too difficult. it's causing the delays is the cost of human trials. typically it will increase the cost of producing a drug by as much as 90%. some of them are obtaining records for the different people you're going to include in the trial. there's a lot of observational cost and it can take as much as $5 billion to run an experimental drug through clinical trials. z-mapp was developed with military money, not $10 million just to put the things together to put this drug together that has been effective in monkey trials and was effective in the first two american ebola victims. there's a difference between saying they recovered because of z-mapp and say that they recovered and were given z-mapp. that's why we need the clinical trials and that's why we need to incur the delays and costs. >> why were these trials not conducted before now? did they just not think it was this big the threat? >> the head of the nih has said we would have a treatment and a vaccine, if not for cuts to research and development funding. we have known about different therapeutic options and have been working at nih since 2001 but because of cuts to our funding, we were not able to get any of them in place for these large-scale trials. there were not a ton of commercial entities interested in partnering to create an ebola vaccine that wasn't seen as a moneymaker, so that gives it -- that leaves it up to government to push this stuff through and i would say it did not become a priority and it's not something they could justify spending limited resource dollars on developing and a bowl of vaccine or a cure when they already had some that were in place but the entire effort stalled out because of funding cuts. >> what other funding technologies are out there that are optimistic and you look good in terms of being a cure or in terms of becoming a vaccine? >> there are a couple of different vaccines they are looking at right now. the hope is they will have something available by january. january is when the who has projected the outbreak could reach a worse case scenario threshold, like 1.5 million cases. those two things happening at the same time suggested a huge amount of urgency. it looks like z-mapp has been effective in monkey trials and they are looking to ramp up production as quickly as possible and that's why map pharmaceuticals has received 30 -- excuse, a 45 million dollars to help increase production as quickly as possible. in many ways, we think we have the components in place to treat and cure this and now it is scaling up to meet demand, which could be huge. you and i have talked about how technology can help. how are these things actually helping? >> let's take screening. we were talking about a particular screening technology that was in place in texas presbyterian but wasn't being used and had not been cleared to screen for ebola. just this weekend, the fda announced they were going to allow emergency use authorization to screen for ebola in hospitals across the country, including in the tri-state area where there are quarantines. and it's going to give you a readout in about one hour. that suggests things will get more firm and understandable from here on out. >> patrick tucker, thank you for keeping us up to date on everything going on with the to fight this disease will stop -- this disease. jack ma is on the hunt in hollywood -- could he play a role in getting access to the chinese market? that is next on "bloomberg west." ♪ >> you are watching bloomberg west. alibaba's jack ma is here in california today, meeting with silicon valley and tech elite. he is leading a team of alibaba executives through hollywood this week, hoping to strike deals that would host its online content offering. he is set to meet with studios, like lions gate, disney, viacom, and time warner. what could a partnership with alibaba mean for l.a. studios hoping to expand in the second-largest film market in the world? christopher spicer joins us now via skype, he specializes at the school of theater and television. how big a business could entertainment being for alibaba? what would this mean? >> it could be huge for them for a number of reasons. primarily, they have a huge online platform, obviously. and they are looking to grow our that platform -- growth that platform for the biggest way they can do that is grew that content, and international content is here in hollywood. that is reasonably what he is meeting studio executives to talk about. >> talk about what chinese consumers want. i lived in china, there are a lot of pirated copies there. how much of a demand is there for streaming content? >> a long answer to that question. but with the growing middle class in china, the theatrical business is booming and expanding. my guess is within the next 3-5 years china will, i do notice a crackdown, but there will be a viable streaming market. obviously alibaba is in a position to take it vantage of that. the chinese middle class want international movies, they want to see big hollywood productions, they will have the capacity to stream international shows, film, content, as we do here. >> the chinese government has also cracked down on streaming. they pulled the big bang theory, which was getting 120 million viewers, streams per month. what kind of challenges will alibaba run into here with its own government? >> censorship across all platforms, you are going to have to get past the boards. presumably alibaba and jack ma are in a better position than anyone else to take a distributor and do whatever they need to do to have that content distributed in china. >> how big a deal would this be for the studios? such as lions gate? >> there is a long history of hollywood studios, wealthy, high net worth individuals who've done well in other industries investing. there is a big deal that they are huge numbers. jack ma $20 billion. it is also going the other way from u.s. to china. it is easier to get a film distributed in china than it was three years ago, but it is still challenging. it is important to have key relationships if you want to be in china and grow your business, and it is the second largest market in the world. >> online video is a hot growth area, and the chinese version of youtube has been reaching out to u.s. entertainment companies for help. what kind of progress to receive their -- could we see there? >> it is the same thing. that is a mature market here, and the studios that produce that kind of content have the expertise. it is a huge market in china, that is largely untapped as of now. companies here see it as a huge growth opportunity. >> chris spicer, thank you so much. android is the operating system most use to access the mobile web, but does it draw the most mobile revenue? ♪ >> i am emily chang. this is "bloomberg west," live on bbg television and streaming on your phone, tablet, and at bloomberg.com, now on apple tv and amazon fire tv. android users count for 56 percent of all mobile traffic users. still, ios dominates mobile revenue with 21.2% of the 51.2% of the market. those are part of the state of mobile advertising report. >> this looks at 90% of the top global advertising who run mobile campaigns. i am so fascinated by this. how these two devices that are so very similar, the iphone and the android smartphone, have very different demographics and user numbers about how they use the phone. what is the biggest difference? >> in the united states, we see that iphone users tend to skewed toward more consumer usage, while the android devices skew a little more toward enterprise customers. this is reflected of the big change that has happened over the past five years. blackberry users moving to smartphones, and moving more to android. >> you can see that through data consumption, the volume of data that these users yank off the internet. >> absolutely. if you look at overall numbers, the android devices way outnumber the ios numbers. but in our business in the advertising space, we find that almost 60% of the impressions might come from an android device, but over 50% of the monetization happens on ios devices. >> is that because they are rich, spend more? are there demographics about those ios people? >> there are some brands that value ios users more than android users and it goes to what type of brand image that they are trying to build. >> rolls-royce? beers? >> the high-end automotive guys. there tends to be this inference that ios users are a little more affluent than android users. we do not have a great view and -- into that, but from an advertising standpoint it seems to be paying off. >> it is not certain that they have more money, but they target at ios, and do not spend as much money on the android use case. >> correct. ios users actually spend more times with their ads. there is more engagement, particularly on the ipad. >> the tablet, which is a much bigger market share, they spent your time on it than their phones. -- more time on it than their phones. is that because the experience is more geared toward reading and slower use? >> it is more lifestyle oriented. the ios users just spend more time in more applications. they probably use the browser more than the typical android user. it just leads to more opportunities for them to engage with those ads. >> from a business perspective, what is the stake in this? >> we are a market enabler. we service both the publisher side and the advertiser. whenever there is a great economy, and there is more spend going into the economy, we benefit. we are a transactional-based system. no matter, android or iphone, advertisers want to reach a consumer audience. >> may be advertisers have a great opportunity to get more bang for their buck buying ads on android. >> that certainly is happening. but let's look at a new format like video. video is really blowing up in mobile today. and again, ios is showing much stronger engagement for those video ads, and advertisers are looking to leverage the spending they are spending on tv and bringing that to a digital media because it is cheaper and more measurable and have greater access. unlike a tv ad which is about frequency, a mobile ad is about driving some type of concerns version. >> so do you see more of these paired ads, tv combined with ios, or do you see them moving advertising dollars away from tv to this measured online video ad? >> we are seeing both. there is this pillar spend on tv, desktop, mobile, we are in the middle of the world series. you look at mlb that can leverage a lot of tv spend, and then build these companion experiences. you might be watching tv and watching the world series, but you might have your ipad on your lap and connecting those at experiences. -- ad experiences because what you see that is not interactive on tv can be made interactive on a tablet. >> thank you. >> as device makers prepare, some tech giants hope to snag consumer demand for devices they launch earlier this year. we will look at three products you probably forgot about, next. ♪ >> welcome back. with apple and samsung launching new devices, we talked about how these could sell during the holiday season, but what about the products their competitors launched as well? let's talk about three products you probably forgot about. always great to have you back on the show. we don't want to make any assumptions. we are saying this is likely. start with google. >> the nexus line has been very well received. it's one of those things google has set the bar for everybody else. the software has become the operating system through the cloud. if you imagine 10 years ago, we are buying hardware and prices of software 10 years ago. no platform is complete, because it's like having heart of your software and operating systems. >> i would like to add that you actually have all of these things. you have tried them out. is it fair? are these guys not getting enough attention? >> moto x is a pretty good phone. it pioneered certain things, but there's not enough to set these apart. the same with a fire phone. how often do i really need to buy something in ship it to my house? >> this is something you plug into your television. you've already bought that as well but you haven't gotten it yet but are they walking down the same path potentially? >> the thing about amazon, google, it and apple, they are competing for that same thing, the operating system of everyday life a bit people want to watch content on their television. it's a standalone line of products. if you think about it that way, it doesn't make sense. >> chrome cast, is that something we forgot about? >> amazon is saying, these guys are eating our lunch. so they undercut the chrome cast. >> tell me about the fire phone. can it come back from the dead? >> it absolutely can come back. you look at microsoft from the early 1990's when netscape was dominating the browser scene. amazon came out and it was a dud. google is doing the same thing with their android device as well. the first device was terrible, and now it has gone amazingly better. >> they just got a huge promotion at google. he has generally a very good or well respected to track record. is he not doing enough? >> google has recognized the operating system of the world is now the cloud. and to actually win the operating system game you have to have a person with a vision in charge of the connect of products together. >> can he actually do it? >> can apple do it better? >> apple will make better money. google is saying let's make the hardware commodity. we will sell you the hardware. apple can do that because they have figured out how to make better hardware. >> let's talk about market share versus mind share. android has most of the market share, but apple has most of the mind share. is that a fair assessment? why would that be happening? if there is all of these people using android phones? >> you have seen this from the engineering economy, to the creative class. new innovative apps come out on apple first, because it is the platform for the creative class. you do not have to be the first, you just have to have the right ecosystem. >> would you say that apple is not the first, but the best? >> they are the most creatively -- they foster the best creativity right now. they are the ones that people think of when they want to release an innovative product. apple is going to have to keep that market share up. >> thank you. it is time now for the bwest byte. what do you have? >> 1 to 20. one in 20 germans have a credit card, compared to the average america who has 2.2 per person. why would the credit card companies allow apple to piggyback on top of its rails? if you think globally, credit card companies will get a general benefit from having better biometric security. but apple pay could be an and evangelist for the credit card company in europe, where they have such small market share for a variety of reasons. credit card companies could get a lot out of this partnership because it could compel europe to use more credit card. >> they are using debit cards. could that be the future? >> the why is that credit card companies, because merchants have limits on how much they can charge, they are pushing for them. they used direct debit and paypal in large numbers in germany and other parts of europe as well. they have a very large payment system over there that they are trying to get into. >> that's an interesting way to look at it. thank you all for watching this addition of bloomberg west. all of our headlines are on line all the time at bloomberg.com. ♪ >> the following is a paid program. the opinions and views expressed do not reflect those of bloomberg l.p., its affiliates or its employees. >> hi. i'm little anthony.
authority in the system of government that we have. we believe these are based on science. >> both new york and new jersey have impose mandatory quarantines. a five-year-old boy who recently right in the west from west africa has tested negative for ebola. the boy had been admitted to a new york hospital with a fever. oil prices keep falling. west texas intermediate trading below $80 a barrel. goldman sachs cut its price projections. we will find out tomorrow morning when the government releases its latest data. oil has dropped 21% from its peak in june. when opec meets late next month, it is a likely to cut production to prop up the price, which brings us to our twitter question of the day -- >> twitter is starting to panic. the number of active members on twitter group in the third quarter, but at a slower rate. bloombergy ceo tells the company's number one priority is adding users. the company's losses increase. shares of twitter down as much as 12% in the premarket. the ceo and the cfo have been replaced. also, don't forget dick costolo will be on bloomberg television today at 12:30 p.m. earnings came up short at the largest bank in switzerland. ubs posted third-quarter profit that missed analyst estimates. ubs is preparing to settle investigations in the currency rigging. bloomberg spoke with the ceo. >> we are making progress towards a resolution of these matters, although, we're not notling the timing -- we're controlling the timing. i think we're in a position that better estimates about how to address those issues. they estimate ubs may end up paying more than $4 billion in fines. gardenson square considering splitting into two companies, one of the reasons wouldeven ballmer, msg, put the sports teams and cable networks in one company. that would be real estate and entertainment assets. the other idea would be to unlock value in the rangers and ballmer clearly the catalyst, paying $2 billion for the l.a. clippers. rumor has it miss fu will hangiate for the rights to the new york rangers on a weekly basis? a daily basis is fine, too. >> unlock the mystery that is pinned station. please, will somebody do something? focus on the realestate. >> for those of you worldwide, penn station, the destruction of it, really beginning the urban preservation in the united states. >> it is like a rat hole. >> one used to stride into new york like a king, and now you scurry in a raccoon stew -- like a rat. >> let's do a data check. 10 points.a nice some volatility, oil, under $79 for a good part of yesterday. comes back one dollar. on to the next screen. let's walk through oil. print accrued 85.63. nymex, 80.9. there is five dollars spread. the russian ruble weakens out 42.57. uglier and uglier for the russian ruble. let's look at a chart that was interesting and has become really interesting. this is american oil. west texas intermediate. all you have got to see is how elegant this is. up, up, up -- no, i don't think so. up, up, up -- no, i don't think so. it is not that this is the bloom, it is there is no bid. the only thing that will stabilize return oil around is the idea of opec action, some drama. >> and there's no indication saudi arabia's per pair to do anything. -- prepared to do anything. it is all about the u.s. >> there is no indication that opec even has the pricing power it used to. that is the scary part. >> you mentioned gasoline under three dollars a gallon. is that where we are? >> not new york. >> not on long island. >> there a disk. it will be one of our themes this morning. this morning, the union bank of switzerland reports swiss banks have been the too big to fail rome for over the last two years. this would spikes have been deleveraging. charles calaveras is one of america's experts on why their banks are not like our banks. also joining us, michael for tech. swissld me once has four bank accounts. a making that up. professor, we honored to have you here. in the generalization, why are our banks clearing markets better than the european banks? >> i think the european banks are not in as good financial condition and they are in an economy that is still heading south. so it is a pretty tough environment right now. looks within that, why can't they go out and do a secondary offering? our banks were struggling and when out and re-primed the capital. can't they do that? >> absolutely. and they have been. what would you rather play wit, your own money or somebody else's? i think the key player is the political environment of the countries in europe is the local governments, the national governments are still sort of captured other local banks and their providing effectively taxpayer protection. the henry kaufman professor at columbia university. dr. kaufman is talked about going back to a partnership structure where banks have skin in the game. are we anywhere near that? >> for the biggest banks, that is a hard thing to do. the proposal is he wants to drastically downsize the banks, which would fit without partnership structure. ofyou're looking at the size the banks that we're talking about, i don't think that is going to be so feasible. >> you asked whose money now want to play with. i want to play with tom's money. you sent us some research out of nyu that looked at the asset quality review, the other part of the stress test. your feeling is, look -- >> it is a protectable disappointment. the ecb was put in an impossible independent,be the a political entity in an apartment that is gripped by politics, so that were put in a position of having to stand behind, to sort of put their perimeter around something that was unlikely to be honest all along. as you pointed out, the study basically says that the ecb's estimates are off by a factor of 20. >> i want to bring michael in on this on technology. we have a stratified banking service, the sclerosis in europe that we all about. they don't do tech like we do tech. do you link that is to just capital spirits and finance spirits? >> nobody does tech like we do tech. my friends who are ceos of tech companies in europe they give europe as basically a couple of sections. there is northern europe will just doing quite well in southern which is hurting and the u.k. which is -- >> what about germany and france? >> france would be sort of training to southern europe. germany is north. tech companies are known to go for two major reasons. the french really want a french office, french employees and french business team and also it is very, very hard to hire and fire in france. but the entrepreneurial spirit, technology capabilities, never the same. london is benefiting -- chiefly, by the way, from our bad immigration policy in america. our immigration policy is a donation to the british technology community. >> this is a third rail with you. >> something michael has pointed out about the french. the new joke is, what is the second largest france city echo the answer is, london. >> all the french opera dinners -- entrepreneurs -- i got it. shares of twitter down about 11% in the premarket. slowing growth in users is the big theme. increased 23% in the last quarter, but that is a slowdown from 24% the previous quarter. i know you have some advice. what does he need to fix? >> he is a very good ceo. twitter, i think the secret is out. twitter is having a growth problem. it is not going to become facebook. the bet that twitter is made is on a new technology called fabric of the which, by the way, has nothing to do the twitter feed that you and i use every day. fabric is a set of technology developers to build their apps and make them were available inch more quickly and seamlessly. it is a tool kit. if he gets adopted, the twitter will get huge amount of data that it can then turn into a much more attractive app platform -- ad platform. i think the secret is out and the answer is in, twitters for power users, not for the mainstream. >> that spring and brendan greeley. >> twitter is focusing on becoming a platform. is a successful platform, but it makes no money. don't they have a problem if they move backward and open up their api for more other apps, they're letting that revenue to be on the platform in exchange for more users? is they will own the new html. if one company owned the new html, it would be very, very lucrative. all of the bet is on fabric. >> twitter tries to get its act together, facebook just keeps advancing. we see facebook this afternoon. what will you listen for her mr. zuckerberg and company? >> mandarin. >> i think facebook is going to keep crushing it. in here is why. the word on the street in silicon valley, if you look at the data, facebook advertising data are so personalized, so good, so detailed, so unique that they are better than google . i think that is going to be the big story coming up. i believe facebook's advertising platform will continue to be google. >> charles calomiris, all of that, coming up. onk costolo will be bloomberg today. look for that at 12:30 p.m. on bloomberg television. looking for to that. what is it, 9% down? >> 11%. coming up, as oil prices come down, we look at the economics of oil exploration in the role north dakota plays in the place -- price plunge. our twitter question of the day -- back. be right ♪ >> this is "bloomberg surveillance." texas have been following for days. demand is down for oil in saudi arabia is open the taps, but even the core opec countries don't have the pricing power they used to. the state of north dakota and the republic of texas or exporters, too. the rosten is sustainability of bloomberg and wrote the book "the carbon age." has opened just completely lost control over the price of oil? >> that is probably an exaggeration. there are still the 800 pound gorilla. that gone from having monopoly power to what is called dominant firm power, which means they are huge and more influential than anybody else but they can't produce enough oil to drive the u.s. out of business. >> what is happening then, as oil becomes cheaper, changes the economics of the very expensive exploration we been doing offshore. >> and that is the key question everyone is watching now from the arctic exploration to canadian oil fans to some of the shale, we're seeing really estimates because nobody knows for sure what the price points for how cheap oil can get before that the shutdown. >> rush is not part of opec, correct? >> correct. >> with your great work on carbons and that, how big of a mystery is the supply and demand of oil? we break through 80. all of the drama yesterday. $79 a barrel. smart guys like you, what is the confidence in that marginal supply and marginal demand dynamics? >> it is changed. the goldman sachs report they cannot yesterday has really sparked conversation about how long these low prices may persist. goldman sachs is projecting we may see $75 wti, $85 bridge prices. >> do you agree with that? >> absolutely. you can see it is possible. i have a couple of questions for you about that. >> well, pick a good one. oilhere does brazil's exploration figure into all of this? they're taking it on the chin from a variety of perspectives right now, obviously. and i will sneak in the other one. >> excuse me, is this a presidential press conference? is he talking to the president? >> related to russia. >> is ill is bouncing back. we are seeing increased exploration. they have been played for a number of years. local labor issues in the same sort of offshore paralysis that we've seen everywhere since the deepwater horizon. russia, i think is more contained than a lot of people would have thought. the west siberian sort of mature fields are doing their own thing, and sort of the rubl has been fluctuating downe with that output. so that sort of codependency of the west siberian oil and the falling ruble -- >> could this not get more volatile? >> that is part of the conversation. this idea the dynamics of dollar currency movement with oil. talks it is interesting you say the goldman report that really moved this market. we have a table from the goldman report that looks at the breakeven points like country when they start to get in trouble. we have russia at $100 a barrel. under that is when things get dicey. at $60.kuwait they can keep pumping. >> they can at least sit and watch to see how low the prices get before he was producer start to feel pain. >> i would to go back to fracking. when we think about fracking, it is usually for natural gas. i just want today you also do so for writing the crude oil as well. >> that's right. particularly, in north dakota and two fields in texas. the same horizontal trolling techniques and fracking technologies that have freed all of the gas, work for more complex hydrocarbons as well. chart ofbring up the opec. this is well adjusted for inflation and rising real incomes, showing a far less gloomy chart. this goes back 60 years. when you look at this chart and remember 1986 and the collapse of opec and how close are we to 1986? >> i don't think anyone is expecting that level of drop. we've seen over the last five euros, a gradual lifting and what has become concrete, particularly in the last few weeks, the u.s. show production has reached a plateau where it is sustainable for a number of years ahead. is that maturity is what consequently reducing -- >> professor, did you drive a vw do so -- diesel? -- i drive one now. i drive a passat diesel. i was going to change to vegetable oil. we're going to give you a jumpstart on our twitter question. yes.itter stil>> they are not the monopoly we are used to historically, and it is been controlling the market really since 2008. >> air crossed and, thank you. you can put your chains on again. , thank you.en you configure chains on again. >> volatility of a week and a half ago, whether or not eating to load the boat on on mobile this morning. futures up 10. tell futures up 70. stay with us. it is bloomberg surveillance. ♪ >> this is "bloomberg surveillance." it is time for our morning must-read. gilbert --om mark mine is from mark gilbert. charles calomiris, should the ecb jump with both feet into sovereign debt? >> i would say i don't think there will be able to avoid it. i think the main reason they will not be able to avoid it is the economy's. it is an existential moment over the next year for europe, i would say. >> charles calomiris, that , in your course, your teaching out of michigan stacks book. monitor solution to lousy growth. does that work? >> no, it is not sustained growth. but it does have some wonderful affects on financial balance sheets and it can also bailout sovereign -- >> so you support what draghi is doing, the rhetoric that make it to passive accommodation in europe? ok. charles calomiris, columbia university. we will talk about the fed coming up. we have a double promotion. what you need to know about twitter and the first derivative. and they are firing more than all tesla. the conversation tonight on "bloomberg west" at 6:00 p.m. how did is that? -- how good is that? stay with us. ♪ up 10. morning, futures american oil, back over $81. a veritable surge in oil from below $80 a barrel about 23 hours ago. it is "bloomberg surveillance." scarlet fu and brendan greeley with me this morning. scarlet has the top headlines. >> federal authorities announced a new governments for treating people with ebola by governors andrew cuomo of new york and chris christie of new jersey say the public is not safe enough. the new policy calls for people who have been in contact with ebola patients checked in person by local health authorities. new york and new jersey have both imposed a mandatory quarantined. amazon plans its first facility in illinois. the online retailer says it is in the process of site selection and 75 nine dollars best or will create more than 1000 jobs by the end of 2017. the new facility expected to open next year. youtube works on a pay subscription model according to "the wall street journal." google has been exploring ways to generate more revenue from the site. in 2006.ed it those are your top headlines. >> we're thrilled to bring you michael fertik them who does a number of things, including my reputation on the digital space. what is in my head right now, michael, is google in the next two to five years. everyone assumes they are dominant. is that correct? >> they brought back one of the great -- >> he is a real splash in your world. >> he is one of the early employers -- employees of google. the golden goose of google, the ad platform that had forever -- >> is under threat. under threat. >> i'm on google less that i used to be. are you? >> how are you finding all of your information? >> i just use the search engine, and that is it. >> he has people to google for him. are probably interacting with google products more than you used to. chrome, nest will come to your home. google is blowing up its platform. the golden goose come the thing that has been feeding it is indeed slowing down. is the -- my thought facebook platform is so good that i think they're going to start to really challenge google. >> michael fertik on google. let's move back to the fed. .il sinks, treasuries rise the fed dives into a two day meeting in washington. investors brace for the end of qe. although stubborn economics at home, abroad? what will janet yellen do? i want to frame right now what would happen if they raised rates. this is a major debate to me. would you support a nominal rate increase just to signal a return to normalcy? >> i would like to see it be announced in advance. i would not want to shock the market. but i think that people are way too scared of her return to a normal monetary policy. what we know from history is, when you're in the middle of a recovery like this -- which is now an established recovery in the u.s. you should not be afraid to raise interest rates or to depart from this monetary policy. right now the fed is so spooked and adrift, it doesn't seem -- i would guess they are not going to act. is there too much information? right now in your world, are there too many people yammering away? >> well, of course, we always worry about too much talk. what is coming from the central bank, and in a confusing way, that is the problem. the problem right now is, if i went through, for example, what the fed has said about labor market indicators over the past year, it would be just massive confusion. oh, we are targeting the unemployed it right but now we are targeting the labor participation rate, wait a minute, we're thinking about the wage rate. a strong dollar, maybe that is bad news. which, it is in. that isoil prices, bad -- which it isn't. the fed is going from one indicator to another sending mixed signals in the end result is mass of confusion. >> they're moving the goalposts as they talk. they told michael mckee may fed should hold back on ending qe. do you think it will perhaps lead $5 million in monthly purchases? >> no. and there's a very funny blog yesterday about my friend ben stiller says he now wednesday award for the most uncertain central banker in the world. have great respect for president bullard, but he is really moving around within that continuum. >> your criticism is too many indicators. should the fed have a much simpler dashboard? >> it should be able have a consistent message based on intelligent indicators and not moving the goalposts unpredictably. a great example, we target unemployed rate. the actual and implement rate has fallen, the natural rates of the fed targeting keeps going down, too. it almost looks like the fed already knows what answer it points politically and it is just trying to follow. >> and that is the heart of the matter, the fed is a political beast. the word of the moment is slack. is there still slack for chairman yellen to be slackey in this two-day meeting? >> we don't know, honestly. i was at a group discussion last night where there was a lot of disagreement about this. i would say there's a lot less slack than chairman yellen believes there is. >> but the slack is not in michael fertik's world. should the rest of america be cautiousto a slack-driven policy, or do they have to pay homage to michael it, 42 people is in silicon valley that have all the money? >> about 44. >> how do you dovetail his entrepreneurial war -- world into america? >> they're two different worlds. the fed is not going to be able to use monetary policy to solve some of the structural problems that you're really alluding to. the reason why uncle's is different is a structural reason. -- why michael's world is different is a structural reason. hurton't translate to the in certain sectors in america. >> we are seeing how silicon valley has stepped into the cap coming up with it appear lending companies, for instance, what is the name of the company going public? lending club. >> what is that about? valley's attitude toward this is, we don't really understand what is going on in new york or d.c. or the fed and we're going to behave accordingly. it is a problem because as the butterfly flaps it's wings, do we feel the hurricane? we will see -- >> 10 seconds. in greece, the new higher yields? >> i think what is interesting now, what is different, greece is not the loan it was four years ago. >> charles calomiris and michael fertik with us. we will continue this conversation. beingwhat extent is ebola affected by media? ♪ >> good morning, "bloomberg surveillance." gorgeous across all of new york city. ratio ofstance, the anna, preparing3 for halloween. bruinsut to the boston who visited children's hospital in boston yesterday and they all dressed up as "frozen" characters. bunch of snowmen? sas.hey all came as el that gets us to a serious moment , a losing race against ebola with perspective on that, here is scarlet fu and our single best chart. >> wraps the media construct of the disease. it tracks the number of stories published on the bloomberg professional service with the word "ebola" in it starting this year. there are four points. the first was in late march when the cdc announced the outbreak in guinea. the second, late july when the cdc raised the warning to level three out of three levels. the third when we highlighted is when the cdc confirmed the first case here in the united states. then you go want to win the dallas stars tested positive and of course last thursday when a new york doctor tested positive. just to show you how this coincided with market turmoil, we're going to layer the vix on top of this chart. that is the yellow line. we're not saying there is causation or even necessarily correlation, but it does show a certain amount of emotion. what do you think, michael fertik? >> i think it is the fear about the fear. the fear about the aversion behavior. this rational behavior, hedge fund guys, major investors come all of the people in silicon valley baby considering what investments to make, their concern the aversion behavior of the public will increase if ebola gets to the western world or the developed world. it is the fear on the fear, not the actual -- it is related to the volume of content which also tracks the news. i don't think this is an over cover topic. >> a self-sustaining cycle. a week and a half, people say maybe ebola was the x factor. rehearing a lot on the west coast? >> i think the more news we have, the more discussion, the better. speaking for the internet, it is a self-healing mechanism. the more discussion we have, the more rationalization that follows the fear. i like the discussion. i think it will heal itself. >> people in nigeria would agree. they could better contain if they had better internet. they were talking. one of the things i'm whirring of -- thinking about, there is a cottage industry in the media, media making fun of media for making too big of a deal. sometimes i think are making too much of a circus about ebola in the u.s. and not enough over ebola in west africa. does that worry you? >> i think i really don't know. i think that is what the honest answer is about ebola for most people in america is, you know, are weve a feeling, why all doing more to actually contain the outbreak in africa -- what aren't we all doing more to actually contain the outbreak in africa? don't you feel like you don't know what is going to happen? >> i've seen some articles to your point about the world bank out of time at college, major, major abilities and it did in the elegy and you are -- epidemiology, & poor or money into it and saying, no, we need a measured and analyzed response. you can't have both, can you? can we throw a lot of money at it and have a constructive response it west africa? >> the problem is, wanting all that happened very quickly. i think you can imagine if we had a couple of years to figure out how to throw a lot of money at it, i think you could figure out a way to create the right kind of the centralized mechanisms -- >> who else? >> all help all alan. -- all hail paul alan. >> michael fertik eying drinks at jobless. --michael fertik buying drinks at davos. andll hai capitalisml silicon valley. it works the donations from china. i think it is great we have this radical -- the culture to give it away in moments of crisis. >> i have to say from reporting on his earlier in the fall and the people who work inside the government are terrified. they sadly agree with charles calomiris, we're in a place where we don't yet know the answers. we've not been here before. >> we will be right back with our guest hosts michael fertik and charles calomiris. is it another tech bubble or continued boom? ♪ >> good morning, "bloomberg surveillance." futures improved. not on the 17,000 watch yet, but there it is. we advanced. >> twitter once to find new members. the ceo tells bloomberg that top priority is adding users. the number of active members grew at a slower rate last quarter in the company's nadal scott bigger. shares are down as much as 12% in premarket. atk costolo will be on today 12:30 p.m. boosting its 2014 subscriber forecast. the number four u.s. wireless carrier added 1.4 million carriers -- users. costs, came at a cost. t-mobile reported a loss. the ceo of t-mobile will also be on bloomberg television at 12: today. interested in working with tim cook, speaking at a conference in california where he was asked if it makes sense for his companies alipay want to team up with apple pay. that is today's company news from the files of bloomberg west. mutual admiration society. our guest host this hour is michael fertik, of reputation.com. whether it is alibaba and twitter or private companies airbnb, our tech setups in a boom or bubble? 90, decide above one play dollars right now -- valued at above $1 billion right now? >> a year ago, there were 30. we're seeing interesting behavior. other signs are on the pocket not. parking lot. they were known and described themselves as storage companies, but the value of storage came down, the price of storage can down, margins game down, and they started to reposition themselves as the middle layer api to the cloud, whatever that means. they're repositioning themselves were different kind of position because yes, we're in a bubble, but it may be we hope a selected bubble. long may beny, bubble continue. there's a difference this time. number one, we have a lot of companies like ours that have real revenue, real margins, real growth, real customers. you do have this 15 years ago, google, facebook, e bell, apple, large public companies that are buying smaller companies. 6, 7, 8 only4, 5, public companies in tech that are valued in the same way as the privately held companies, you start as the question. on the lower end, starting to see a different behavior as well. there's a very technical field, raising their a round. amazing. there raising money. is,feedback they're getting hey, we're seeing copies like you in every large venture fund is getting in investment in your field. what does that mean? the investing on the basis of momentum perception. that is a bad sign. not on fundamentals, but the perception. that is a bad sign. >> having so when the market turns, we will see who is swimming naked, essentially. >> i do not want to see him swimming naked. >> that always feels a little disingenuous for me. we had a warning when it was like, kids, you be careful with my money, spend it well. it is his money. he gave it to him. there was an interesting piece we were talking about minute ago, asking whether most companies that are very valuable aid to be started and silicon valley. i think they're touting the fact you can start your company in europe, too. notink the report -- i'm sold on that report. i think you are an e-commerce company in india, you to stay in india. if you are an e-commerce company in china, you have to stay in china. most of the great entrepreneurs are moving to silicon valley as well as the investors. -- you stopped shy of northern europe. do you see that as a source of new ideas? >> what is amazing about estonia, finland, scandinavia -- you have a deep technical excellence and expertise and very good command of english. that, nation makes you very attractive to global markets and that the same thing, use the small countries and focused on the u.s. markets. big mistake french and german companies make, these their own countries as first market and then go to austria. >> professor, you travel internationally advising central banks. english is common language is to profound. i think of the japanese with all of their wonderful heritage. even the brazilians with portuguese. not a limited use of english, but english is still the currency of the moment, isn't it? >> and it a great example of that. it is a question i have for michael. where does india fit into this whole high-tech surge and how does that dovetail -- just picking -- >>'s india could get out of india's way, it would be the next major -- technology is there. the entrepreneurial spirit is there. the connections to america is there. the market itself is large enough. the only thing that gets in the way is the massive regulatory lock eight. we have a subsidiary in india, my company. i think we're filled out something like 20,000 pages of paperwork to hire a dozen people in india. can you imagine? big stamps like you're in egypt. theichael fertik, answer internal question. if you could go to one place that is not silicon valley to start a company right now, where would it be? >> israel. maybe boston. harvard and m.i.t. are still generating major returns, but nobody is paying attention to boston. diego.an israel has figured it out. they have figured it out. they focus on the american market. >> professor calaveras, when does the fed raise rates? >> when would i like to see them is a lot earlier -- >> sooner rather than later. >> i think they're going to wait. unfortunately, i think we may not even see it in 2015. >> thank you so much. ruvell will out 42. -- ruble will out over ♪ . . >> this is "bloomberg surveillance." >> politics, science, and law clash. quarantine rules, they are in chaos. opec.barrel in and twitter, they are #desperateforgrowth. good morning, everyone. york world our new headquarters online joining me scarlet fu and ben greeley. >> a battle over who's ebola guidelines will work better, new rules stop short of mandatory quarantines, not good enough for governors of new york and new jersey's. both states have mandatory 21-décor and teens for anyone forsed -- 21-day quarantine anyone exposed to ebola. we arecdc thinks that being too cautious. i understand that. >> still, new york and new jersey have back up somewhat, the quarantines can be served at home. the u.s. is stocking up on oil and that is likely to keep the price falling. west texas intermediate was trading below $21 a barrel this morning. there is also speculation that sincecan fall the highest july. we'll find out tomorrow when the government releases its latest data. when opec meets next month, it is unlikely to cut production to prop up the price. number one priority right now is finding new members possible. the number of active users on twitter grew in the third quarter but at a slower rate, plus the copy's actual loss got bigger. ceo dick costolo said he wants to build the largest daily audience in the world and to do that, twitter would have to quadruple its audience to challenge facebook's 1.3 billion users. costello has shaken up's twitter's executive ranks. he is throwing spaghetti at the wall. today costilla will be on bloomberg television at 12:30 p.m. eastern. --are going to stay at west today, dick costolo will be on bloomberg television at 12:30 p.m. eastern. we going to stay west, jack said a good marriage needs both sides hard-working. tim cook was at the same conference and said we are going to talk of a getting married later this week deadline those goes -- later this week. in a pot. are peas >> considering whether to split into two companies, one of the reasons may be steven balmer, msg put the sports teams and the cable networks in one company real estate, the dogs of entertainment would go in another. the idea would be to unlock value in the rangers and knicks. balmer would not pay that for the new york next. -- knicks. >> if the l.a. clippers are worth $2 billion, than the new york knicks are worth $5 billion. it is all funny money. >> can we make an accurate valuation based on steve ballmer's ego? >> probably not. >> how about our guest host this morning. under 79 yesterday morning him on west00 a.m., $81.36 texas intermediate. belowober 16, oil dipped $80 a barrel, and there is a 20% plastic line with change. it will affect all of the hydrocarbon world including your next gallon of gasoline. i is with bloomberg intelligence. tobias levkovich is with citigroup as we look at saudi arabia and north dakota. tobias, what is add more say about this recent decline in oil -- what does ed morris say about this recent incline and oil? >> it is regional geopolitics king between the saudi arabians and others. he things maybe we will get a bounce and settle around $75 over the next several years. >> vince, i look at others who have been calling for a pullback from the 100 level. can you bring up my morning must read? the fight for market shares become a bareknuckle affair, call it oil price war three. prices will be allowed to decline until some producers have to cut production or shutdown. what is the ball case for oil right now? think about the demand supply dynamics right now, you have the eagle, the bob can, and you have the permian basin -- >> that is supply coming on. thees, and you look at general averages, but returns are still reasonable in the $70 range that wellt's talk about shutdowns, like midland, texas 30 years ago. shutdown levkovich number three? ballgamea different today versus 30 years ago. you have different efficiencies that are captured today that were not being captured many years ago. >> you do not have the threat of 30 years ago? >> if you think about these returns, returns are still reasonable and that $70 range. it is when you get to the low 70's, decisions have to be made. the real issue here is -- producers are the low production for fear of disappointing the sell side, for fear of disappointing the investors, so they tend to produce even below those levels. >> let's pull up a chart from golden, the breakeven point for various countries. report. t >> if we look at them as countries, we have got them at a breakeven point of $70 a barrel, just above kuwait. >> you do have that advantage, and you do have the advantage that you have various producers serving various constituencies as opposed to opec country that has to meet social response abilities. meet social responsibilities. large oil marginal producer in chaos? >> tobias, i want to bring you in here because you noted in your latest research that the plunge in oil prices is linked -- and the credit markets as well, and that is because of the high-yield credit market. 500 ist 8.5% of the s&p energy sector, 4.3% of the russian 2000, 17% behind yield index. it has gone from 8% back in 2008 2 17. up of these mlp's have built pipelines and things like that, and widening and high yield, there's a function of what is going on in the energy market, and people are taking that and a tripping into the broader economy and the broader market. >> do you think that is value? >> not really. about 13% of earnings comes from energy, 20% comes from consumer staples and consumer discretionary, so you have got this offset on the earnings front. >> how much of that 13% of the s&p 500 energy copy will be of concern not just this quarter but looking up for because of the falling oil prices? >> the next 12 months will not be because of the energy prices shipments. on the cap exide, and that is where i think the great fear is, there is so much investment energy, so much investment people, going up to north dakota and the permian basin, all of edge of thehe margin, we will lose some of it. we are looking at a 4% decline in anticipated capital spending based on what companies are telling us for 20 just in the energy sector. when we talk about that, we talk about a single decision for production. i am looking up at your report on the permian basin, there are six companies here. is there any kind of tactic coordination where they control price together? or are they competing frantically with each other? >> i think they are serving similar investor bases, but for the most part when you take a look at those returns, in general those returns are still advantageous in the $70 range, so again you want to please the investor base that wants to see that production, that wants to see that reserve growth, and you are hit pretty hard if you raise your hand and say i am cutting back. moments,side of the all the blather from people like me, what is your number one insight right now and hydrocarbons? >> i will give you one, if you take a look at the bi oil equity p or group, the valuations are approaching where they were in 2008. >> very cool. nce, thank you so much. we will continue with tobias levkovich. >> we going to talk about earnings. we are going to check in with our twitter question of the day. is opec still relevant? we talk about the republic of texas, the state of north dakota, how about opec, tweet us @bsurveillance. >> i are ready have my quote of the day, you are hit pretty hard if you are the hearse person to raise your hands. that is the dynamic right now in the permian basin. >> it is 1986, i say. >> don't panic. "bloomberg surveillance" will be right back. ♪ >> "with all due respect," there is nobody in washington, they are all fighting out for their little lives, it about one week, let's call it next tuesday, don't forget, the focus on washington, the capital, mark halperin in john heilemann. they are loving this moment. we have not gotten much scoop on midterms done >> i am looking at that shot. that is gorgeous. i miss maryland. >> let's bring about to wall street, though, where earnings season is in full swing. sales increasing at about 5% clip, but the data has confidence, the key outlook for 2014 has yet to be provided. does that mean we are going to meander from here until the end of the year when companies start to give us hints for next year? >> i think so. andhave the fed out there, what will get investors comfortable will be the earnings, but nobody will give you the kind of confidence you need for 2015 this early. i think it is january time frame when companies can provide an outlook that people have confidence in. >> you have got the stronger dollar but also falling oil prices that should provide some kind of boost, right? >> keep in mind 70% of s&p 500 sales are u.s.-derived in the sense of canada and mexico so heavily influenced by what happens in the u.s. about 11% or so is direct to europe in half of that is nondiscretionary, things that include beverages, tobacco, jobs, the things he will not say wow, if the economy is really tough come on taking half of lipitor, if it is doing great, i will take three lipitor. the amount of sales in europe are pretty to minimus in terms of the overall s&p, so overall, people are taking it a bit too far. >> tobias, i did you the small favor of reading your research know. [laughter] >> that is a "surveillance" exclusive, one of us actually read the note. it challengingnd to be that nervous about u.s. trends barring a new shock. you are a laid back guy. "eh."sence was >> i think people get a little too hyper at any point in time. people get frothy excited about fourth-quarter rally, santa claus is coming to town, that kind of idea. markety say wait, the was up 7%. so you never got to see the rebound, and that is why i am kind of cool about it. >> tobias levkovich with us. we will continue much more on the equity markets coming up. atf moffett, we will look what you don't know about ceo's. stay with us. "bloomberg surveillance." ♪ >> good morning, everyone. "bloomberg surveillance." scarlet fu and brendan greeley with me. dow futures up 71. let's get to our company news this morning. here is scarlet so. >> federal authorities have new guidelines for treating people with ebola. governors andrew cuomo of new york and chris christie of new jersey say the public is not safe enough. new york and new jersey have both imposed mandatory quarantines. now we have got company news for you, tom. amazon plans its first facility in illinois. the retailer says it is looking for a possible site selection and a $75 million investment will create more than 1000 jobs by the end of 2017. the new facility is expected to open next year. harvard gets top billing in u.s. news & world report first ever global ranking of universities. the list of 500 schools have m.i.t. and second place followed by the university of california at berkeley. u.s. schools took eight of the top 10 slots. >> i really have issues with those. ucla.k of anderson at >> that is a business school. underrated because they are three time zones away. we will rip up the script ofsively, james moffatt deloitte, do you really care about magazine-picking lists? >> no. >> thank you. what do you do with those magazine thing is do they go in your head order you throw them in the trash bin? >> they are in the head, but we target different schools -- >> exactly. what is the culture of your anderson at ucla? >> very collaborative, heavily analytical. >> and pragmatic. >> you have got to be in hollywood, right? >> absolutely. >> how does their football team look? but they're are certainly underperforming. i have high expectations. >> he leaned into that, tom. >> i had no clue. moffatt's chairman and ceo of deloitte and the reason we brought you here is because the dynamic is watch what they do, not what they say, and you guys just released your inaugural report on executive confidence. executivesf american say their confidence, but a must have expressed doubts in their ability to address issues like growth and innovation, so there disconnect. are there at external factors or is this management? >> i think there are external factors that companies are having trouble rebounding from the downturn, and the number one issue that we have seen it for the last three years has been growth. the ability and willingness to invest through down torrents -- through downturns has been a struggle. >> cannot be managed or to you need good old gdp to jumpstart the spirit? >> i think it is both. uncertainty is the new abnormal, and if you are waiting for the markets to rise and washington to get stabilized and peace in the middle east before you ask, you will get left behind, and leaders need to take bold steps, invest in a long time, invest through uncertainty. building the muscles for organization is going to be a skill that is required. >> is the common theme an unwillingness to spend or inability to fix the problem? will money fix the problem here? >> it is both. one of the interesting things -- we surveyed the executives and there was a lack of competence in action and investment in the long term, so over 50% of the executives admitted that they did not display confidence over long-term investments. to drive growth, you were going to have to invest. we have seen a lot of money sitting on the sidelines. >> does that surprise you, tobias levkovich? i am wondering -- and it is more of a question -- the idea of how much of that lack of willingness is kind of the courage of that ceo to do something because if he fails, it will get bounced off his position as opposed to underlying economic data? thatthink it is that, confidence through the uncertainty to make those investments. to drive growth, more and more we are seeing requires differentiation, and that oftentimes requires innovation. those are muscles a lot of organizations do not have today. >> just to come back to the you watch capital spending, s&p 500 companies have had record capital spending in 2011, 2012, 2013 and look like they're on their way in 2014 -- >> this is to your point. >> i'm going to pluck a detail that jumped out at me -- nearly three quarters of ceo's do not prioritize investments in both technology and infinite response. i feel like i just had explained to me a years worth of cyber risk headlines. >> that is one of the things we saw -- disconnect between obstacles to growth and then corollary investments, and fiber was one of them. another is around emerging markets. they are not investing strategies or talents. >> this is the key question with transnational investments, tobias, citigroup with your global projection, are you seeing a rational expiration of what we do in malaysia so we can do misery because we have to do malaysia? >> i think it is the reverse today. e.m. has actually been the area people are most worried about >> do you agree with that, jim? >> absolutely. i spend more time looking at the global economy than just u.s. economy. the markets are so interconnected, people are moving to where the high areas are. >> i know you pose an interesting question, if innovation is natural or needs to be taught. was there any consensus on the answer to that? it was actually split. i think it is a little bit art and science but when you look at the data, most innovation exercises don't fail because of a lack of idea, it is a lack of execution. >> lack of execution, all right, jim moffatt, chairman and ceo of deloitte. >> coming up, the election is upon us. "with all due respect" tonight at 5:00 p.m. ♪ >> our twitter question of the day -- is opec still relevant? tweet us @bsurveillance. brent and in terms of debbie t i have turned positive. havey i trading at -- wti turned positive, the latter trading at $81. ubs posting third-quarter profits that missed analysts' estimates online ubs is preparing to settle invest igations into currency rigging and have already paid $4 billion in fines. madison square garden considers splitting up into two companies that not it will put sports teams and cable networks in one company and real estate and entertainment assets in another. the idea is that it would unlock value in the rangers and knicks franchises. r paid $2melme billion for the clippers. google has an looking for ways to generate revenue from youtube, which it acquired back in 2006 4 $1.7 billion. that is the latest company news. >> this matters now to our guest toes, tobias levkovich, chief strategist at citigroup, he is focused on buckets, not binders full of concerned but rather buckets full of concern. what is a concerned bucket? >> it is what people are most focused on. people are most focused on the fed and what they might do and now they are focused on oil prices, european economic activity, potential disinflation, becoming deflation. >> the cardinal rule is you cannot drive higher on a blended basis unless you have that. climbing the proverbial wall worry, i prefer clips of concern when they get really extended and people get really worry. that is one of the things that has also changed the investors six weeks ago were pretty frothy, and now they are what we call more neutral. i use the description, they are a deer caught in the headlights rather than hunker down in a bunker. they are not panicked, but if they step right or left, they will blow up. >> are equities sustained because there is no place to go ? you do not want to be in bonds or cash. >> it is one of the factors that what is the yield you're getting on your 10-year versus evidence? do you believe markets are overvalued or not? this,as not even aware of tobias, february 2009, up 18% per year. that is a bull market. no one call for that double-digit euphoria. do you model every day a single digit world? >> we are seeking more of the 7% return world, but it is a little bit unfair to kind of look at this extraordinary downturn and then what has been a nice rebound. >> i want to talk about that later in this hour with you. for right now, on the concerned rockets, how do you dovetail that into how you use economics? morris of the economic team at citigroup? >> we think hawks are the most important factor in terms of cost of capital for investors to make decisions. extraordinarily attractive right now. 30% rates have to get of return to make an investment pay off. they need to get 10 and it is probably going to be very good. if you are a ceo and cannot figure out how to make 10% return on your money, you probably should not be in that position. >> would you turn the tv off at citigroup in terms of investing? >> i think there is danger to get caught up in the hyper sensationalism of anything. ebola is an example of that right now are you have a couple of very limited cases that people have gotten very, very fearful of. you pretty much calm your innards about it. >> what is the number one concern right now? >> europe. europe is kind of sliding, fighting with the ecb and the bundesbank and things like >> is your team suggesting rescue again? toi think the ecb will have do some sort of qe. >> tobias levkovich of citigroup looking at buckets of concern, one of the major teams each and every day here. >> futures are higher right now, indicating a stronger open for u.s. stocks. we have a lot of data this morning including durable goods at 8:30 and s&p case schiller with housing prices, a lagging indicator for the month of august on futures up by 9.8 princoints. the 10-year yield inches up higher, 2.28. >> this is "bloomberg surveillance." withbrendan greeley scarlet fu and tom keene. we have some news this morning -- swiss medics, a private coming based in zürich, has an ebola vaccine in trials that will go immediately to west africa to begin those trials and it has been approved on a rapid basis by the swiss regulator. there did not used to be a market for ebola vaccines, but there is now done jeff jonas, you have been tracking pharmaceuticals for 10 years for gabelli funds, is there a real for-profit market for ebola right now? >> i think they are doing it because it is the right thing for society. they will get funding from the various governments, united nations, bill gates, and paul allen, but i do not think it will be a huge financial driver for the company. >> this is really pr for them. >> yes, again, it is the right thing to do for society, it is great for their image, especially that they can rush the investment and get the products in the clinical trials today, but no, it will not move the needle financially dynamite >> i was intrigued by the fact that the swiss regulatory society approve it on a fast-track basis. do you see the regulatory environment changing in light of a rapidly inventing virus -- advancing virus? >> i think this is a one-off event, and we assume the usda in the u.s. allow a fast-track as well. >> what companies are now working on this where six month ago there were none? >> the first thing you will see is a rapid diagnostic test, so if someone like an associate can bring that to market in six months to 12 months. with vaccines like johnson & johnson are working on, in trials now, but really that is going to be three years to five years. >> the diagnostic tests are huge because what has that happening doctorse in these without borders hospitals are waiting six hours for a test. >> right, it is you can get coming in 90 minutes, that it's usually -- >> when will that be available? >> six months to 12 months. withu are the pro here pharmacology, and we talked to the doctor yesterday from baylor, what is your framework of numbers of people that will be involved with ebola? if you were to say to glaxosmithkline now, hey, you have to get ready for 50,000 markets, what number do you work with? >> i think it has largely peaked here. nigeria is now free of ebola, and we have had a crash course here in the u.s. about how to isolate these patients, how the workers should -- >> you do not think the w.h.o. estimate of 10,000 ois valid? >> no. >> can we keep him for the next set? optimistic. >> my morning must-read us from elton john, the musician, who writes in the "new york times," don't forget about aids. americans need to recognize aids for what it has become -- a crisis of stigma, marginalization, and inequality. medical advances like prep can get as close to the end of aids, but only if enough people can afford them. >> that is always going to be a problem here. the rmb clinical trials can cost $1 billion to bring a new drug or vaccine to market, so they absolutely need a return on that. >> is there an ethical responsibility to coming up with unaffordable treatment at least at the start to stem -- that could become a much bigger pandemic. >> we do it differently around the world. in the u.s., we end up paying very high prices because we are essentially subsidizing india, africa, and other countries where he essentially give it away, so there is that tension between the developed countries and the developing markets. the pharma companies just need to get a return. >> tobias levkovich, what a jump is that? >> we are underweight them. valuation, earnings revision trends have spiked up to very high levels. >> do you agree they are richly priced? >> the valuations have definitely risen. i think that can support these valuations at this level. >> jeff jonas, real quick, one of the things we have been hearing on background is that ll pharma companies are not spent enough on our indy. -- on r&d. if ity fund that our indy works out, then the big companies will just acquire it, and the way the accounting world works, that is more favorable to their earnings as well. funds, jonas, gabelli thank you very much for coming in this morning. this is "bloomberg surveillance." >> we will be right back. ♪ >> this is "bloomberg surveillance." i am scarlet fu here with tom keene and brendan greeley. we have been talking about reports up there that mst may split their entertainment ventures into publicly traded companies that betty liuop" anchor joins us. theohn faler his groups, hedge fund manager, got into this company a few month ago and made public that he wanted this company to split, so i was talking to some sources last night who said this is how it kind of went down with nelson peltz eventually joining the board. he will be officially joining dickoard along with parsons and scott sperling. the executive chairman at msg, him and nelson peltz go way back. they love hockey, they have been colleagues as well, so they go way back. jim approached nelson a few months ago when it was known that john taylor was wanting some change and said look, i need your help come i need to bring us some independent directors, will you join my board and help me assess what to time,ut mst, and for some he was thinking about splitting this company, none of these ceo's or billionaires ever want to feel like they are being forced to do this, so he has recruited nelson tells to help him along, so nelson is going to be joining this board. apparently it was generally a pretty easy and simple discussion and in fact nelson apparently has talks to john faler and gotten his approval for this move, so it appears that this copy will be splitting and buying back about $5 billion worth of shares. and the ballmer purchase of the l.a. clippers for two bullion dollars masonry pretty nice price tag for the new york knicks as well. >> it makes it much more attractive. --io batali, his office think that anybody who buys a sports franchise aspect is going knicksetting the essentially for free. a topic asmsg is well. is this good for the stock market in terms of valuation? >> some of the most attractive valuation or the really big companies, so you look at the s&p 500, the top 25 companies, look at their pe relative to the rest of the market, they are standing at standard deviation lows. part of it is the sense that they are so good you cannot move the needle and there is crony capitalism on the board, so you can't force it, and the activists have change that. >> i totally agree, and msg is the card-carrying example on that based on people like mr. gabelli. the family shops with its own rules. how do you get the decent tickets at ragngers' games? >> friends, who are really good friends because i cannot afford to pay for some of the really good ones you saw the picture of me when the canadians lost. activist thing was picked up a while ago saying it has really changed in the u.s. >> yes, and it is causing companies to split up. betty liu "in the loop" begins at 8:00 a.m. for 11:00 a.m. this morning on "market makers." stay with us in new york city, "bloomberg surveillance." ♪ >> good morning, everyone. "bloomberg surveillance." we welcome all of you. brendan greeley, scarlet fu with me. >> twitter needs to find new members fast. ceo dick costolo says it is adding new members and to be numbers grew at a slower rate in the third quarter. as 12%. s down as much by the way, dick costolo will be on bloomberg television at 12:30 p.m. eastern time. t-mobile beats estimates and the 2014 subscriber forecast. the wireless carrier added 1.4 million subscribers, topping analysts' projections, but it came at a cost. reported a net loss of $.12 per share. and tech titans kick around possibilities, alibaba's jack ma says he is interested in working with apple's tim cook on mobile payments. he said it makes sense for his company's alleipay to team up with apple pay. tim cook called ma a brilliant guy, the kind that apple likes to partner with. >> i feel like there is too much high school crushing and gossip in tech. do you remember when eric schmidt and steve jobs went out to lunch? it was reported they were having a bromance. tobias, do you they attention to this at all? points, as the industry has matured -- >> yes, of course, even when we talk about excessive valuations in certain areas of tax, at least in most cases the company is profitable, which is way different from back in the late 1990's that >> tobias levkovich with us from citigroup. within the new mediocre, the imf's message on tepid global growth, a struggle for global animal spirit with all of that whethered, you invest it is a 401(k) or you are an institutional pile of cash, tobias knows. he knows the market is up 18% per year in the last half decade , and now we look to your investment future as well. it has been such a ride the just to begin the discussion, are we back in the markets now? >> we are, but we have got to temper our expectations. yield environments, don't expect to pick up 18% in stocks every single year. you have to moderate 7% a year for a number of years is a nice return, and nothing to sneeze at what they are fearf of is they have missed -- to sneeze at. what they are fearful of is they have missed the slow and eventually they will get dragon but they will probably get dragged in at higher levels. >> there is a psychology of nifty 50 long ago and far away. who are the nifty 50 today? >> it will be in the more exciting tech growth stories. >> johnson & johnson is not a nifty 50? >> know, biotech might be, but not general pharma. boring tech is probably very interesting areas, underinvestment. >> microsoft? specifict going into companies -- >> but companies that pay dividends, buy back their shares -- >> i think you have to get a --tle deeper >> tobias cannot do that as a strategist. i will putadio plus, this out on bloomberg radio plus, and it is simply the s&p 500 back, and you can see the movement higher, brendan, and a goes to the idea that it has been up, up, up. >> i am fascinated that we will just have to come to terms with 7% growth year on year because that is about culture, not economics, and the other part is that people are going to have to put more money away. we don't like to hear that, right you go >> not at all. there is a great discrepancy between the haves and the have-nots, and unfortunately the have-nots have gotten to a point where they don't know how they are going to retire, especially they want to continue spending the way they have done that is a difficult aspect for people to have a lot, you can enjoy both worlds, savings for retirement and living up to standards you want. we have got into a kind of a payment system if you want to think of it -- it is not how muchois a car, it is how $299 afford the $199 or issue. by thethere was a report "new york times," when you think about that when you buy furniture, and it ends up costing seven times, 10 times as much as it would if you banned with cash. >> writes but nobody wants to wait. t, but nobody wants to wait. >> and corporate profits depend on it. companies come out with new phones and making sure that people upgrade their hardware. >> i got made fun of yesterday in florida because i had an iphone 4. not even 4s. i don't need my phone to talk to me. free, tobiasi- levkovich. >> it is good to frame the markets right now. am i naïve, tobias, that part of this is i need my driver to talk about the markets and i am not hearing that? >> go back six weeks ago, and on del we wereo flirting with euphoria. we were at 68% -- i'm sorry, 16%, which nobody has heard about macro, and now we are at 68% where people do care about macro. doing see what people are and take away from that. they were much more excited six weeks ago when the market was sitting at its highest, and they got a little shaken insert if you want to get james bond-like more recently. >> the fact that you have an uber driver means you are already on one side of the divide. >> people who drive uber cars and take an uber ride are on two sides of the devide. >> today we have the half, have-nots, and the have-yachts. .001%. 1%, the 3 >> university of california dr. save has done phenomenal work that it -- >> he is the picket he that did not get the promotion. >> he went west because he wanted to surf -- twrue story. >> i'm keeping an i on facebook and mr. mark zuckerberg, reporting earnings after the bell. he probably will not be hosting the conference call in mandarin. those results cannot after the bell rings after market close is that >> i am really interested in what they do. havee got to admit -- i failed at facebook twice. >> and of course sheryl sandberg will be joining lumber television -- pardon me, i misspoke. that is not happening. >> i'm looking at ebola theater today. in west a real problem africa, one we have no idea how to solve, then we have not a real problem in america, when that we know how to solve. what you have is governor after governor, politicians upping the ante to see who can be the strictest on ebola. agree, brendan, but in their defense, these guys are just trying to do what they think is right. you say it is more political. >> these people are tried to do moreno, of what they think will look at politically. >> i don't disagree, but i want to be more thoughtful that governors are doing this for the right reasons. [laughter] are you laughing at me? itto be fair, brendan, is wrong to say that politicians are responding to reactions of their -- >> yeah. >> i do not have a vested interest in this -- i am not a politician, but you have governor christie who says ok, he is tried to run for president, so you have got to be tougher, and you have cuomo who has a democrat, and the governor of maryland has now joined -- >> georgia is involved. "with all duelug, respect," 5:00 tonight, i know they will talk about this with the midterm elections as well what am i looking at? oil prices. that was something, we will have much more on this. >> and that brings us to our twitter question of the day. we asked you all -- is opec still relevant? here are some of the answers. yes, let opec drop production and you will think it is october 1973 all over again. saudi arabia has not done anything and they have remained silent. next answer, still relevant, but with a limited lifespan. yes, opec has- not figured out that $86 is the new floor. is this the new floor? >> let's go quickly to ed morse, not optimistic on the price of oil. >> no, he think that is the mid $70's. >> that one area of support. thank you so much. tobias levkovich with us from citigroup. futures up 10, dow futures up 79, oil $81.48, a comeback off the brazilian elections. >> we will continue to keep an i on that, oil still in a bear market. "bloomberg surveillance" on radio continues. "in the loop" on bloomberg television is up next. have a great rest of your morning. ♪ >> good morning. it is tuesday, october 28, you are "in the loop," and i am betty liu. we have a great show line up for you. a view from the top, a ceo powerhouse lineup on the current state of the american consumer. we will get housing ahead of those 9:00 a.m. eastern case schiller numbers, ara hovnanian. and then how is the autonation faring? me,michael jackson joins and we will be rounding out the show with the hotel and services industry, airbnb disrupting hotels, as usual among and choice hotels ceo steve joyce might have some choice words on airbnb. he will be joining us and i like a.m., but first, here they look at our top story this morning, president obama has a czar, butr, an ebola right now the response is anything but coordinator. the governor of new york and new jersey have their own policy on dealing with ebola. they have mandatory quarantines in place. the federal housing
causing the hesitation at the moment. a much betters housing market than it was a couple of years ago. into highsn't kicked gear yet, even though you expected it to based on demographics, jobs, and rates. ismadison square garden considering splitting into two of locally traded companies -- two publicly traded companies. it has been considering the plan since a july which would separate its support steams and cable networks in one company and move its real estate and concert entertainment to another. time warner hbo is illuminating more than 150 jobs. the parent company time warner is under pressure to return to investors after turning down a $75 billion buyout offer from rupert murdoch's 20th century fox. network security firm fire ice says the russian government may be finding a hacking group. the report says the group known in times8 operates consistent with russia. apple ceo tim cook says apple's new mobile payment system had over one million activations in the first three days after it became available and is now more widely used than any competing payment system. while apple has partnered with major chains like macy's, walgreens, mcdonald's, tim cook is now eyeing one more partner over in china. in an in your view during opening night of a three-day conference come a tim cook says he plans to talk with alibaba's jack ma. >> we are going to talk about getting married later this week. we will see. leave?k now, he is still here. i have the most respect for jack. we love to partner with people who are wicked smart that have flexible teams, that our product-based, and that pushed us. and we like to push them. best partners we work the with dan jack as a company that is exactly like that. what he has done. he has brilliant guys in the company. if we can find some areas of common space, i love it. i love partnering with people like that. >> just a little context. went on stage after jack ma who referenced mary j couple of times in his keynotes her. what could a marriage between alibaba and apple actually look like? >> let's assume we are talking about a hands-off marriage and not a full marriage. it would be a tremendous opportunity for both companies who both have strong positions with the chinese consumer yet both have increasingly competitive headwinds in their face. high end oft is the the phone market and for alibaba it is the increasing competition in the e-commerce market. a vertical integration of the two where you have more of tiedba's payment options into actual payment options tied into the iphone would be powerful for both sides. apple, which is trying to sell more phones into china and is trailing in market share substantially,, i get what they would get. pay get outlibaba of an apple pay partnership? while apple is strong in china and their are johnny phones and android phones that have increased market share, everybody carries an iphone. apple, the tie into paymentecosystem and systems base would be powerful. what is going on with alibaba, their greatest internal cognition is tencent internal to china. is much stronger on mobile than alibaba is. anyway they can get more deeply integrated into leading handheld devices, mobile platforms, the better for them. just done deals with retailers in the united states, basically being the payment arm for companies like macy's. if they can attack to that people in mainland china are on the website, the macy's website, they can give them an option to pay with alipay. how pivotal is something like this? >> it's helpful but i think the western retailers have lots of challenges in front of them before they are going to be successfully getting that consumer to the bottom of the funnel and i on the macy's website using alipay. melee, they have to have chinese line was websites. they have to be thinking about chinese merchandising and other things. but it's a helpful first step and increases the friction for those consumers to ultimately lie -- ultimately buy. it is a good opportunity for macy's but they have a long way to go. >> in a partnership with the state companies, we are not talking about payable to use alipay at the short hills mall. this is an online opportunity for apple? >> they are looking at it as off-line integration as well. alibaba has broad plans in terms of what they're tried to do in china. alipay is like paypal in that you can use it off-line as well as online. there are both components. the is not about going to short hills mall. it is not going to the short hills mall to visit sex without visit saks fifth avenue. thanks for the call out. >> jack ma didst the at the same conference where tim cook spoke here in he talked about alibaba's plans for expansion. >> we invest a lot in the states. we are going to invest more. it is very important that people say, hey, alibaba is so big, why not come to the usa? well i've come to invade the usa. i got my inspirations from silicon valley 15 years ago. to the to the usa silicon valley, they lies, all the car parks packed with cars and people working hard and i know the internet. and chinack to china dreams to build alibaba. silicon valley right now. he is going to hollywood. are these jack ma investments into lions gate or is this alibaba investments? they are investing in marketplaces, in western media, in platforms to help them start to gain market share without actually having to make the alibaba move. but really, they are gaining western know-how. they are getting in bed with western executives to get the u.s. market, to get the european market, get the western consumer and i think this is what i call a rolling thunder strategy. we will see me more of these investments over time until they actually get their feet wet through acquisitions and then potentially through a buildout of alibaba outside of china as well. >> all right, thanks so much for joining us today. we will continue to follow this meeting between tim cook and jack ma. tim cook also blasted his home state of alabama yesterday for slow progress on granting gay rights. what did his comments reveal about how the tech world treats the lgbt community. stay tuned for my interview with dip costs low -- with dick costolo coming up. ♪ >> this is "bloomberg west." criticizedim cook his home state of alabama for its track record on racial inequality and its inaction on granting gay rights. >> there is little, if anything, that matters more in our country than arm basic tenets of equality and human rights. i have long promised myself to never be silent in my beliefs in regards to these tenets. as a state, we took too long to take steps toward equality. and once we began our progress was too slow. too slow on equality for african-americans, to slow on interracial marriage which was , andlegalized 14 years ago still too slow on equality for the lgbt community. pointed out that employees can still be fired for their sexual orientation in alabama and expressed hope that the future would be different. comments make an impression in the lgbt community, what do his statements mean for the tech world? i want to bring christopher fromjoining us .c.hington, d also willie brown. what do you make of tim cook's comparing it to segregation in alabama? >> that's not new. time, we have been equating discrimination between gays and lesbians in the same way that this country has a long history of discriminating against african-americans. so it's not unusual. but i'm pleased that it is coming from somebody with so much power and authority in silicon valley. abouttalk so much discrimination against women, blacks, latinos in the technology community. companies like facebook and google have released their diversity numbers and are not satisfied with these numbers but they never focus on the lgbt community. is the stateu say of that community and technology, in the tech industry? >> it is really important that they do take a look at the rgb to community. they are focusing -- look at the lgbtq minute he. they are focusing on inequality and they really need to look at that. . it is not out of the realm of possibility for these companies to take a look at that. microsoft and apple have for a long time supported their lgbt employees when the state did not require them to, providing them benefits and services. so why would they not include them now and make sure they are equally proportionate in their hiring. >> from a political standpoint, to have business leaders taking a flag and leading this kind of charge about equality in the workplace, to me it seems like a very different thing than what we saw in the civil rights movement even back before my time when a lot of changes happened. >> absolutely. was virtually no corporate participation in the civil rights movement. you recall that martin luther king jr., who became the symbol, really did confront america on that question in the corporate world when he was arguing that the business of fair salaries and regular pay and promotions and all those kinds of things -- there was not anybody doing what cook just did on behalf of that issue. they did not believe that it necessarily meant any great benefit. mr. cook is fully aware that we ex staysin the same-s world where it is commercially good sense to be an advocate. although i think it is sincerity on his part. i don't think it is a business of dollars and cents. but it is clear that it constitutes good dollar value judgment just as it did african-americans to be right on this issue. >> absolutely. ofyou have vocal supporters governor gavin newsom's support to get same-sex marriage licenses here in san francisco. how was the business community at that time and how does it differ to the reaction to diversity focus on african-americans? >> i cannot recall anybody in the business community stepping up and standing next to mayor newsom at that time and saying what a great idea. as a matter of fact, the political world condemned mayor newsom for doing it on the basis that we were putting at risk the potential success for democrats on the political side of the aisle. so he severed for a long time as a solo act. suddenly, that solo act has evolved with the whole world saying, yes, the courts saying, yes, multiple states saying, yes good but he lived for a long time by himself on the little island. >> in terms of what gay people want in the workplace from corporate leaders -- so many corporate leaders watch this show who surely want to help. what should they be doing? >> i think it is important to recognize that, in many states in this country, i can get married on a saturday and on monday be fired from my job because i identify as lgbt. i think it is important for tech leaders, leaders in any organization, to take a stand, stand up and showed to their employees that they care about this issue, that they care about their well-being and care about their equal rights. i think it is extremely important for those leaders to make changes in their organizations but also stand up to stay at the delete is to make sure they are making changes that their employees want as well. we have seen for far too long lgbt communities have not been a and it is really important that, if those policymakers aren't going to be was to make the decision, that our business leaders are. >> is there a difference here or are there more challenges for the lgbt community? it is not something that you can see. it is not a way that you can outwardly identify someone. up as anabout growing lgbt individual. you use the internet to self identify, to being coming out, to begin figuring out what is going on with your life. technology plays a crucial role in that. it is important to realize that lgbt came in -- of dbt individuals in this country do not have similar family structures. they do not have kids that will be able to take care of them when they're older. having employee benefits, having ome benefitsnd s that heterosexual couples enjoy a really important to us. it is important that the a bit -- that the business committee steps up and forces posse makers to make these changes because we are at a huge is advantage across his country and quite prickly around the world. >> -- and quite frankly around the world. >> i think mr. cook's performance should be repeated by other persons throughout the business world. and in particular the world of technology. after all, the world of entertainment for a long time has been very upfront on this particular issue. the world of business has not been up front on this issue. when you ask the question, this business of how you actually identify, how you -- you know when some is black, but you're not sure when somebody is gay. that ought not to be an issue. you ought to treat everybody equal. >> former mayor willie brown, thank you very much. very important conversation. think you for having it with us today on the show. dick costolo says at new users is the company's number one priority. >> welcome back to "bloomberg west." twitter reported third-quarter of 114% year-over-year but it's third-quarter net loss widened to 175 million dollars. the number of active users on the site grew to 284 million. cory johnson back now with more. the stock reaction has come up a little bit from the open. what is your take on what this company needs to be focusing on? 's at this stage in their growth, it is all about users. how many users you can add in the pace of monetization. 284 million,he while it is up from what it had been the previous quarter, the pace of growth has slowed down a little bit. when you see those numbers, you see a sizable user base. growthre was a slowing going into the ipo in terms of the user growth rate. but those user growth rates turned around and started to pick up the last recorders. that changed -- the last few quarters. that changed as we saw yesterday. this is a matter if 280 million user company and that is all it is? >> yes, they want to be the place that people go for news and information all the time. when you see the user growth slowing and you see the timeline growth slowing, which is how often people will pay, that is not an incredible story that will continue to grow. that we will see them us that we are going to see. >> my interview with this -- with the dick costolo coming up and his answer to all of these questions. >> you are watching "bloomberg west." .'m emily chang twitter's user growth is slowing. dick costolo struggles to add new members. third-quarter revenue is up. to onee net loss widens two $175.5illion -- million. woman to go, i sat down with dick costolo and started by asking what wall street is getting wrong. >> we take a long view about the business and trying to build a lasting enterprise. when we think about our aspirational goal to build the largest in the audience in the world, it's all about that audience composed of our monthly active users. beyond that, there is the hundreds of millions of people who come to twitter and don't login. there is the world of syndicated audience. it will reach across the entirety of the web. we reach into the mobile application ecosystem. it's the combination of the core or mostly active users who create the content we use throughout the system and the logged out audience and our syndicated audience. >> how do you measure the logged out audience? we know and measure how medical come to our properties and don't login and what they do on the site. we have an understanding of the reasons they come to the site and how to use the site and service. same for the syndicated audience. >> can you give numbers on it? >> we have percents of the size. you monetize these eyeballs? >> so many of them come to the service through some expression of interest or intent. they have done a search for some #or a particular user. , a large number come to twitter and a login. they have a specific intent or interest they have expressed and we believe we can monetize those. >> is the revision for promoted tweets everywhere? beyond just my feed. >> sure. the acquisition of our mobile ad exchange in the way we take it out and monetize those users is all about the scalability of the native ads. >> your push to developers -- you are giving them tools to build out the twitter ecosystem. how will you know that it worked? >>'s fabric becomes part of the foundation of the entire mobile application landscape -- it is the best way to help developers build across platforms. towe are the one they go to -- if we become part of the fabric of the mobile application infrastructure, we will be successful. >> how does it drive growth and change the business? how involved are the developers in bringing more users into the ecosystem? >> there are two ways to think about that. one is the immediate term. it helps us grow our syndicated audience. developers can invest twitter content in their apps. it's one line of code and they can embed tweets in their apps. long-term come if we become part of the foundation of the entire mobile application world -- around the >> why not just say we are not going to be like google? >> we have a vision to give guidance. it's about credibility and helping investors high you think about the business. i don't want to be hopping around on a we don't like the way you are reacting, we are going to take our ball and go home. i don't think that's appropriate. we are try to build credibility .ver the long-term >> let's talk about the medium term. 6-12 months. where do you want twitter to be? you wanted to move faster. what changes make that happen? >> three priorities. strengthen the core. that group of 284 million active users. we want to continue to focus on growing that. priority number two is reduce the barriers to consumption. for all those users who come to twitter and a login, make it easier to create quick, fast consumption experiences for them that don't force them to have to search for them to get them the moment they get there. , beyond that, adding new applications and services like fabric and our investment platform and beyond. >> when it comes to the user experience, i know you guys have been working on products. the username can be confusing and difficult to search for people. what about doing away with usernames? of distanta set priorities we want to focus on addressmmediate term to what i've laid out as our priorities. that includes things like organizing content for new users so the moment they come to the platform and sign up, they get a great timeline. easy todes making it move fluidly between the public conversation on twitter and the private direct messaging channel. conversations into the private channel. >> more of my interview with dick costolo coming up, including his plan to get more moms tweeting. you can watch a streaming on your tablet, phone and bloomberg.com, apple tv and amazon fire tv. ♪ welcome back to "bloomberg west." errorso conference roger company likeurs -- salesforce and tivo have used the event to launch new products. -- thisemo conference is a conference for years that has been a big technology community. this conference has been so important. it's a lot more than a gadget conference. it's a place where you see the manifestation of a lot of big trends. >> half the companies are enterprise companies. demo has been around for 25 years. havenies from salesforce launched -- i've scoured of the world looking for the next great companies that are using technology to solve big hard problems. the big thing we are going to see this year? >> a lot of companies around the internet of things. it means a lot to different people. everything from wearables to smart home to even smart factory devices. it's a post mobile world we are entering. on what to call this a post mobile device. at a motorcycle helmet that does a lot. >> they launched last year at demo. they went on to raise more than $1 million. they ended up raising $2.4 million. >> because of the heads up display. >> there is a heads-up display, navigation, a panoramic camera on the back. it doesn't look distorted. the most dangerous part is when you look over like that. you get your navigation and music. >> i get the gadget appeal of this. but is it about this helmet? >> all of these devices from helmets too smart stethoscopes to smartphone monitors, they are taking advantage of the smartphone dividend. all the sensors and chips that have come down in price because they are being manufactured for smartphones. the scale of that has driven the price down and those components are available to other device manufacturers, even startups. you have a startup they can create something like this that would have cost millions of dollars to produce. >> take a company like apple that decided we are going to make an accelerometer chip and .rop that into a phone >> exactly. we have nest coming in. all these smart devices in your home, the nest thermometer and carbon monoxide and all these different devices controlling different parts of your home. do they all talk to each other? is there a hub that controls it all? apple would like to be that have. there is a battle over who will control that home. all these devices are throwing off old data. world.enting the real on the back end, because of these enterprises and companies that are try to make sense of data dish how do you make sense of all of this data exhaust we are seeing from these devices? demo. all of that at you should come and see it. >> connecting the dots. should i? >> go for it. >> i just need the motorcycle. there we go. >> looking good. cory johnson. bottom line begins at the top of the hour. mark is in new york with a preview. >> detroit's bankruptcy reorganization plan is now in the hands of a federal judge. will learn november 7 whether they can finally begin the process of moving forward after decades of poor fiscal management, financial planning and corruption. we examine the proposal and look at what lies ahead for detroit with jane woodley, a senior director at standard & poor's. >> thanks so much. my interview with dick costolo coming sure to tune in later today for my chat with john ledger. ♪ >> i'm emily chang and this is "bloomberg west." twitter has had its share of criticism. not just by investors, but also new users who find the platform confusing and cup located. -- confusing and complicated. what is dick costolo doing to enhance the user experience? if we execute against our plans and strategy, the twitter should be valuable to every person on the planet. we absolutely care about all sorts of demographics. it's incumbent on us to make it for and obvious and simple those users who come to the platform and get value from it right away. whether they log and start tweeting or whether they just come to the home page. >> can you give us specifics wherewhat demographics you would like to see more? are atcountries where we scale, the demographics of the platform mirrored the demographics of the country. the countries where we are getting started, the population might end up one way or another vis-a-vis the overall population. in the country's at which we are scale, the demographics mirror the population. >> china is a place you are blocked. how optimistic are you that twitter will ever be on china one-day? >> we would love to be unblocked in china. is used by developers around the world. it's used i application developers in the u.s. and u.k. and china. there's lots of ways to think about the business we are building and how we think about the way we work in china. ,> when it comes to revenue your average revenue fell about half of facebook. you could show more promoted tweets if you wanted to. why not? >> we have always been careful about the way we have grown the business. , in the day we started april of 2010 when we first launched our advertising prop been methodical about the way we grow the business. any sense of needing to change the way we approach that. twitter to you want be opportunistic. flexibilityancial this twitter have to make an acquisition? think the debt funding enables us to be very opportunistic about m&a. when we raised the money but we did not have a specific opportunity we were thinking about. be even more us to opportunistic. >> could you make a billion dollar deal if you wanted to? >> i don't want to speculate. it enables us to be opportunistic and to compete for deals we want to be involved in. >> you have brought in some new people. how confident are you that this regime is a lasting regime? >> management teams grow and evolve and change over time. that is always the case. i love the team we have in place p we have developed all sorts of tremendous leaders across the company. i could go on and on about the folks who aren't on the front page of the media every day but who have helped grow the company. i like the team we have. we have a variety of leaders across the product now. we have daniel and kevin who are responsible for the very foundations of our revenue product. guy that led to the product side of the fabric launch. at host of emerging leaders. >> you guys are doing experimentation with the product. how much experience a are you --ng on a daily basis experimentation are you doing on a good basis? >> on very involved in the way we take the product market. i'm very involved in that. we always have a number of experiments. the way we think about on boarding new users and driving engagement within new users. there are a host of those at any given time. what is one thing that surprised you most? >> i think the things that surprising most when you look at are thaten experiments it's sometimes completely rethinking a way of laying out an interface that you might think won't have some sort of lasting impact but drives tremendous impact. profiles team came to me and said we want to -lay outly relay output , i thought that would be beneficial. when you look to the actual data behind the results and the tremendous increase in the volume of views those pages get, the volume of engagement people remarkable.'s the numbers on the call the other day. those changes are important. >> what is the best way for us to ss the future and long-term potential of twitter? >> we think about the total audience across monthly active logout circle beyond that in the syndicated audience beyond that. if we are successful, we will build the largest daily audience in the world. >> my interview earlier today with dick costolo. it's time for the bwest byte. 20.9%. that was the pace at which t-mobile added new subscribers in the quarter they just announced last night. the non-burner subscribers. improving the growth rate from 18% the previous quarter. that's the growth rate that is really impressive. t-mobile is growing real fast. >> cory johnson, thanks so much and thank you all for watching this edition of "bloomberg west ." we will see you later. ♪ >> from bloomberg will headquarters in new york, a mark crumpton. this is "bottom line." -- from bloomberg world headquarters in new york, i'm mark crumpton. this is "bottom line." to our viewers here in the united states and those of you joining us from around the world, welcome. we have full coverage of the stocks and stories making headlines today. matt miller is following stocks as federal reserve officials begin their two-day meeting. julie hyman tells us why amazon is searching for a few good moms. pe