we do begin with the fed and the markets and the realization that the free money mania of the past six years could be about to end. most importantly, investors seem ready. stocks taking off after those fed minutes appear to lay more ground work for a december rate hike. >> the reason that we at double line are cautious though, when you look at broad indicators today, we're worse off than in 2012. at the end of 2012 gdp -- want only gdf was off by 1%. now it's around 3-esh. moderateties are at all-time lows in some indicates. china is slowing. it just doesn't strike me that things are so hot that you have to accelerate. >> are they so bad you have to be at zero? >> i guess the fed -- price stability. with regard to the price stability, we're nowhere near the 2% inflation target. with unemployment by conventional measures, 5% it looks like we're there. however, what i thought was jarring is when you parse through the numbers of the last unemployment report, 271,000 jobs added. that's great. it was shocking to me jobs added for workers over 55 years old. 378,000 swrobs. the cohort between 24 and 55. a loss of 35,000. the quality of the jobs being created is suspect. >> just so we're clear. jeffrey told us in the past he didn't think there should be a rate hike this year. he didn't think there would be a rate hike this year. has he changed his view at all? i mean, does he now believe as well that there will be a rate hike in december? >> he does believe there will e be. >> how could some people be so confident that we're going to see 100 to 125 basis points move higher over the next 12 to 18 months. is that a flawed expectation? >> the fed is going out of its way, and. >> i think she made it pretty clear that they felt like a rate hike was needed, but that did not really mean that you would run a glide path for higher rates on a consistent basis. >> i laid out the beginning of the program investors are ready for this. the market yesterday wasn't that the statement that the minutes come out, they're hawkish, more ground work, fed speak yesterday lays more ground work. market goes up. big-time. is that a sign that investors are ready? are we finally ready? >> i think we have the majority of people, even convincing miss baha and jeffrey gundlach that here going to make this move. the consensus has moved strong this that direction direction. it's a minority of people that they will move. >> tell me how to play it then. into december, what happens? >> they're going to go into december, and it's going to be a quarter point in my plea of. if you are in the nurielrabini camp, you think it has to be at least half a percent based on what his outlook is for three rate hikes to get to us -- i think we get a quarter percent. nothing happens, judge. we just go about our business, and then the next one, how fast the next one comes and how big the next one is because if the next one was that half point move, then i think it's a different story. >> just saying does the market continue to rally? that's what i'm trying to get at. help me out. >> is that a sell on that news when the realization finally happens? >> i do think i agree with john. i think it's a quarter point. when you look at what everybody was talking about, including this morning. richard fisher was talking about he expected to be way back in sept september, and now he absolutely expects it. the market expects this to happen is it in december, approximate if it doesn't, there's going to be huge disappointment. that would be an even more aggressive sale. i think you asked the other question as well along the way, scott, which is what's going to be working? financials. look at the way the financials absolutely rocketed yesterday. look at the way the technology names rocketed yesterday as well. i think there are certain sector that is will respond to this rate hike in the way that obviously most of us would hope the entire market will, but i don't think the entire market will. i think there will be segments of the market that won't be able to respond very well. >> i think leaders continue to lead. i think laggards continue to lag. i don't think you picked the bottom in energy. today is a classic example. you have the u.s. dollar down. pulling back, okay, .8%. oil is lower. i think that's telling you all you need to know. >> i think they're going higher. certain segments, unfortunately, got weight on them right now. >> we think rates are going to go up sooner rather than later now. do you sell bonds? >> well, no. in fact, the bond markets basically have done the fed's tightening for them. ever since that employment number came out, you know, treasuries have been on a tear higher. now, what's interesting is that really if you look at the shape of the yield curve and on the short end of the curve, tightening started four years ago. it's really that ten-year and then the 30-year that's still an out liar. >> now to the latest in the paris terror attacks. french authorities confirming that the alleged mastermind of those attacks was killed in yesterday's raid in saint-denis. michelle caruso cabrera live for us again today. michelle. >> scott, we're going play for you a new piece of videotape that has surfaced, which was recorded during that raid. it's pretty compelling. we now know that raid, as you said, killed the alleged mastermind or the alleged architect of friday neat's attacks, and the piece of audiotape that we're going to play for you is recorded by a neighbor who was there. it is a recording between the female suicide bomber before she blew herself up and one of the members of the swat team. take a listen. >> once again, you are hear the tremendous amount of gunfire, and can you hear this woman's voice wrosh who is she? three police officials telling the associated press she's 27-year-old abdel aimmediate abaaoud's cousin. sne say they have three police officials who have confirmed this. this was obtain bid french broadcaster, and once again, it was reportedly recorded by a neighbor, and it must have been an incredibly frightening moment for that person as they listened this unfolding and the tremendous amount of gunfire that was going on. >> that is for certain. michelle caruso cabrera. >> one stock, one ceo. jack dorsey is now doing double duty with twitter and square. knee both rallying today, but which is a better bet for your money? the largest u.s. health insurer is getting cold feet about the affordable care act. what united health is warning about the insurance exchanges means for the sector, and the retail disaster of the day. best buy tumbling after its earnings report. top portfolio manager from citadel joins us with his take on the retail rut. you're watching cnbc first in business worldwide. ♪ and then santa's workers zapped it right to our house. and that's how they got it here. cool. the magic of the season is here at the lexus december to remember sales event. this is the pursuit of perfection. nobody's hurt, but there will you totalstill be pain.new car. it comes when your insurance company says they'll only pay three-quarters of what it takes to replace it. what are you supposed to do, drive three-quarters of a car? 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>> well, i don't know if you get another chance to get back in right around 11, but, i mean -- >> you wouldn't buy 13. >> no, i wouldn't. i'm going to give it some time to see if we can get it in at 11. >> it's a business that i don't really understand well enough to understand why i'm going to be involved in this. some of the profit losses, maybe. >> i mean, you know -- >> rocket science stwrsh. >> well, it is sort of. it is like holding up a crucifix to dracula for these guys because this is absolute -- that was a horrible lead-in for this match to have basically interactive and trying to bring the companies out after ashley madison is out there with all these fake sxkts things. now, people have not said that about match. it does raise concerns and so that's one of the reasons i think that it's not as high. >> i like the idea of sorry, joe, but square. when you are looking at square, though, the problem i have with it, compared to what john is saying is competition. we just heard about it yesterday. you know, when hardib was here talking about the different motifs. that is such a competitive world right now that whole world of -- >> they have a place within it, right? >> they have a place within it, but there's so much competition. how much is that going to drive things down? how will the margins be going forward is this. >> both of these companies have lots of competition. the only difference is one has fat profit margins. the other has no profitability at all. i mean, i'm not sure what the compelling thesis is to invest in either of them. i mean, i'm with you. i think it's kind of an unsavory business. no thank you. >> you have limited visibility with ipo's. you need to hear multiple quarters of earnings. kind of what you got from zucker berg and facebook when they had the turnaround. you don't have the visibility. you don't know exactly what you're buying. you think about match. what do you think of? you think about barry dillon. that gets you more excited about potentially buying because you're investing along with barry. he has a long track record. >> can he run both successfully. our guys pushed him in the interview. he didn't give were, but we're used to that at this point. >>ed paultd space and the fact that this is burning money in the payments area, yes, everybody -- the user square tebdz to love it. not just like it. love it. >> i like using it as somebody who charges a lot of tough tough stuff. however, they're not making any money. what's the road when pay pal and all the others are out there. >> p that willing dorsey is taking another company public and it's going to deserve a lot of his time. he suggests i can run between buildings and stop at coffee and use my -- >> you asked that question a while back, and my answer would be you wait a couple of quarters for twitter and see if twitter, a, starts to get any kind of -- >> haven't we waited? >> yes, we have, but -- let's remember, we just brought in dorsey again to take over as the ceo. he was, you know, in a position a while ago, came back, and here he is. i think you have a little bit of time for him to actually get his feet back into this company the right way to be able to get this monotization working in terms of growth. the monthly active users. it's been stuck at 300,000 for -- 300 million for how long now? that number has to change. that number has to change. it might take a couple of quarters for jack sitting that n that ceo seat to get that turned around. >> there's nothing exciting in the earnings yet. pete nails it. what have they told you at twitter and in earnings report that gets you excited that you see visibility in terms of prochts accelerating. >> exciting things going on. >> great. those are ideas. ideas, right? those things aren't out there yet. >> what about the users? they can't figure out how to grow their users. that's the bottom line. >> you are right. >> coming up, the unaffordable care act. that's what united health care is claiming after cutting its guidance. sending the insurance stock and others in that space reeling. we'll explain what it means for your money. plus, how one of the most respected hedge funds in the business is investing amid the retail sell-off. we'll talk consumer stocks with a portfolio manager inside citadel. a place tv cameras don't often go. we got one there today. kate kelly is coming up. ♪ i built my business with passion. but i keep it growing by making every dollar count. that's why i have the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy for my studio. ♪ and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... that's huge for my bottom line. what's in your wallet? 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>> well, i think it does, but actually it may force you to think about getting back into the hospital at this point. let me just put numbers to what's going on here. this has been -- jim is right. it's shocking that you nh is doing at this point. >> of course, the point is he makes that point because they just guided higher in july. >> right. that's what's shocking about it. the hospitals actually led you to -- because of this and because of the aca. what happened was when the affordable care act first started, you saw a big pick-up in interest. >> that was a criticism when it came into being because it's health care socialism. the people that couldn't afford care before or were uninsurable, now we're taking our health care whereas the one thats that don't need it initially took it because why not? it's fairly inexpensive. now they're saying i don't need it. they would rather pay the penalty. the penalty for not taking health care insurance out is a cost to the bronze plan. if you took a bronze plan, it's basically going to cost you 300 a month if you are in new jersey. plus out of pocket can go up to 7,000. they're paying the 300. that's why they're not doing it. that's why people are excited. >> you are kind of our man on the hedge fund perspective here. >> it's become -- particularly for the hospitals. the hery in the hospitals was that, okay, the government is not going to guarantee all the bad debt. that's now changed. you have a lot of uninsured. in terms of the -- in terms of the health insurers, you are seeing mass consolidation. part of this may let the governments go ahead and allow them to consolidate on one hand, but that's going to drive prices up. they need those economies to scale. let's just see those consolidations continue, you don't want to be there yet. more than that, you also have allergan that's down today because of what may happen with off shore being able to -- >> bbz hit in the milgtsz of the month, and you have to give 45 days notice. you will continue to see selling. probably into next year. it will be a hot campaign issue. >> we'll catch you back on the set soon. thanks. >> thanks so much. >> live from citadel, we go to chicago for a rare interview with a portfolio manager at the hedge fund. more "halftime" coming up next. hi watson. annabelle, your birthday is tomorrow. i'm turning seven. what did you ask for? a princess. and a pony. you like things that begin with p. i like pink frosting too. will you have a cake? yeah. i was too sick to have one last year. the data your doctor shared shows you are healthy. are you a doctor? no. i help doctors identify cancer treatments. i want to be a doctor someday. i can help with that too. watson, i like you. welcome back to "the halftime report." atlanta fed president dennis lockhart making a speech right now saying "i'm comfortable with moving off of the zero rate soon." lockhart says it is appropriate to begin a new policy phase. does it nail down september? doesn't say specifically. he says the economy is on a reasonably solid trajectory, and he expects once rates rise there to be gradual rate rise tlafz. he says he has thought about the low inflation risk. he has thought about global risk. he has thought about the issue of resource slack. he does not find those arguments persuasive. he says the rate hike should affirm that the economic outlook is positive. i guess i go back to cot now. scott, you can capture the centrist. lockhart had been on board with the rate hike. then had his doubts after the flare-up in august with markets. now back on board with what looks like a december rate hike. scotts. >> steve, thanks. >> conceal discuss that in a moment. first, sue herrera has the latest headlines. >> scott, thank you very much. here's your cnbc news update this hour. a police raid is underway in the town about 230 miles north of paris, about 150 miles. it's near the border of belgium. there was an explosion in order to open the door of a home there. it is not yet clear, though, whether that raid is linked to the paris attacks. >> the house debating a bill that will make it more difficult for syrian refugees to enter the country. yesterday president obama vowed to veto the bill. a vote is expected later this afternoon. democratic presidential candidate hillary clinton is laying out her plan to fight the islamic state. in a speech in new york she says the goal is not to deter isis, but to defeat and destroy it. she says the u.s. should encourage arab nations in the -- to defight the militants. >> county officials say a police officer who was shot to death last night was targeted. officer richard galvez was in his personal car at the downtown police department parking lot where two gunmen opened fire. there had been no arrests so far. you're up-to-date. that is the news update, scott. back to you. >> sue, thanks. it's not often that investors get a view inside the secretive hedge fund citadel. it's all changing today, though. our kate kelly live in chicago at the firm's headquarters where she joined exclusively today by one of $25 billion funds top portfolio managers jack woodruff. take it away. >> hey, thank you so much, scott. as you said, whoer here in chicago at the risk center of citadel's headquarters, and i'm here with jack woodruff who is a consumer portfolio manager at surveyor capital, which is part of the overall equities platform. jack, welcome. thank you for doing this. >> thanks for having me. welcome to citadel. >> thank you very much. you guys have been very hospitable. let's start right off with sort of a macroview if we may. i know that you focus on consumers which has a lot of subcategories the way you organize, but give me your high level view on the u.s. markets. is the four-year equity rally finally starting to fizzle here? >> well, we really focus on the stories within our consumer book or, you know, other sort of areas that we also participate in. you know, citadel has 70 equities teams. we cover 3,500 stocks. we don't spend a lot of time thinking about like the general view of the market. we're more focused on our stories. that being said, there's a few things within the market that i've got my eye on. you know, first is obviously the fed. we're concerned about the direction of rates and how that's going to impact affects. that will have an impact on earnings. we're also worried about the level of corporate profits. in 2007 and 2008 as we enter the financial crisis, these companies had a lot of fat on these income statements, and eight years later with earnings being pretty strong over this time, we don't think there's that much fat to cut. if we already had any kind of demand, speed bump, or shock or even a recession, which we don't believe is going imminent, we do think that would cause real down side to earnings. >> if anything, corporate earnings are starting to contract just a hair for the first time since twooirn, right? we're starting to wonder if the valuations are going to come in here. >> well, it's been interesting. i mean, the breadth of the market is actually quite weak. it's only a few names that are really leading the indexes, so if you actually look like underneath the surface, the market is -- it's not as pretty. >> how healthy and confident is the consumer right now? that's something you obviously focus predominantly on. >> right, the consumer has been actually pretty food. we're pretty confident in, you know, what we're seeing. the big picture macroindicator that is we focus on, employment, wages, housing, confidence, they're all moving in the right direction. >> but the money in the wallet, it's going in a different direction than it would have five, ten years ago. >> we've noticed a pretty big shift in spending trends just in the last few years. one thing that we've noticed is. >> being improved. what's your overall take? >> well, they set the bar pretty low going into earnings. last month wal-mart had their analysts day, and because of the fact that they have been overearning for the last several years, they haven't really invested in gross margins. they haven't really invested in their people. their sgna has been flat for, gosh, in the u.s. i want to say in the last seven or eight years. >> define sgna. >> it's really just the operating expenses of the retailer. they haven't really made the necessary investments they needed make on their on-line, and they've really lost their price advantage over the rest. >> time will tell if these investments leave them out of the doldrums, but they have a lot of wood to chop. >> they have shown that they can make a profit. are they overvalued, though, here? >> it's hard to say. amazon gave us much more insight into the aws business, and i think that the profitability and the growth metrics of this business were far in excess of what anyone was really anticipating, and that has been a pretty big part of the outperformance of the stock. within, you know, their e-commerce business, the trends are good. they continue to take share. the margins have been strong, and, you know, prime is a real differentiator in this fight for consumer market share. >> in terms of pockets of strength, how do you like athleisure, and are there any names that you would single out in that as stronger than others? >> it seems like pure speculation that under armour might take over lulu? do you expect to see more of that chatter? >> athleisure is a strong category, and it goes back to what i was talking about with health and wellness, and it's one of the areas where consumer dollars are going. people are working out more. you've got nike is doing fantastic. lulu lemon, their stock has been under pressure, but it has a lot more to do with lulu lemon. if underarmour wanted to make an acquisition, its stock is in pretty good currency right now. it's something to watch. i have no opinion on whether or not there's anything out there. >>. >> you don't tend to put too much stock into holiday retail sales. why not is this. >> at this point everything has sort of been said. you know, there's a lot of guys that will come out and talk about promos in the market and all these things. these guys don't plan these things a we're in advance. we're much more focused on 2016. we are interested to see how trends play out in the holiday and whether or not any of those trends lead us into adjusting what we think will happen for 2016. >> jack woodruff, thank you so much for being here. scott, back to you. >> news alert now on intel. that company's guidance, dom chu, what's the -- >> the investor outlook here, they're saying they expect full year 2016 sales growth to be in mid single digits. that's solid compared to what analysts were looking for in terms of a 4% gain in revenues for the full year of 2016. that's helping things. also helping matters out, scott, the idea that intel says that in the starting of the first quarter 2016 they will raise their quarterly dividend to 22 cents per share. it was 24 cents before. a dif debbed hike. perhaps we'll call it solid sales outlook here for full year 2016 helping to put those shares up by 2.5%, 3%. intel shares currently the best performing percentage gainer in the dow and the third biggest contributor to today's gains. >> highs of the day. right now in intel -- >> we talked about certain areas of the market. we talked at the top of the show about looking at the financials and looking at technology. take a look at microsoft, for instance, right now as well. one of the names that's pushing towards 52-week highs. obviously this big bump on this positive coverage in terms of the outlook for 2016. you can understand why those areas is where people are putting those money and people are going towards some of high flyers. >> be good to get non-fang x moving, right? >> i'm with you. >> facebook, apple. >> amazon. >> netflix. alphabet. >> yeah. >> google. >> yeah. excellent looking below the surface, researching a hunch... and making a decision you are type e*. time for a change of menu. research and invest from any website. with e*trade's browser trading. e*trade. opportunity is everywhere. coming up at the top of the hour on "power lunch" a big blow for obama care. one of the nation's biggest health insurers threatens to pull out of the public exchanges. what now of the health care? russian stocks are up more than 10% this year. is it time to be looking at the emerging markets once again? this is a shocking story that you need to hear. isis setting up a 24-hour help desk for terrorists. how far-reaching is it? also, the role of -- we'll discuss all that. make sure you join us at the top of the hour. back to you. >> thanks. >> another bad day for crude. oil sliding more than 1%. sima and the futures now have more. hi, sima. >> once again, we're seeing oil futures struggle to hold at $40 level. >> ultimately i think we have brokenness in the market so to speak. volatility index spiked above the 45 level i've been talking about. i think we're starting to see a little bit of disjuncture taking place between supply and demand, which ultimately a longer term i think sends oil to about $36, $37. temporarily, yeah, we can get a bounce off of 40. >> what stinz would you look for to tell you where oil is headed from here. >> well, the first thing i would actually look at is gasoline. crude oil and fwas lean today going in absolutely different directions. if you look at the gasoline market, monday was a really fascinating day. gasoline, we got a key reversal in that gasoline futures made a contract low, and then rallied through the course of the day about 4% to finish higher on the day. that's really important. continuing today, it's gasoline higher, crude oil lower. that makes me wonder if we haven't seen the bottom in crude oil. >> interesting trend to watch. get more from scott and brooirn on our live show where tom lee will give us his bull call on what the market has in store rash that's live at 1:00 p.m. eastern. futures now.cnbc.com. scott. >> sima, thanks. we'll be there. keurig green mountain following soaring erjz. 62% this we're. we have that trade coming up in our blitz and just one week until thanksgiving. that's why jane wells breaks down the cost of all of the fixings. we look forward to this, jane, every year. here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. doc, goldman sachs. >> yeah. and take a look at what that means. just like with apple a day or two ago, judge. you add something to the conviction buy list. >> they did that yid. >> turnover is dramatic. it's already traded about 170% of normal volume. obviously that's not all goldman. >> more up side. wendy's or mcdonald's. >> wendy's. for the next 12 months. >> next 12 months. >> he just qualified. >> bonnie. >> keurig green mountain. joe. >> well, it's perculating for one day, but it's not going to last. this is nothing more -- >> it was okay. >> it was okay. a little bit of a relief rally. earnings were not as bad as folks expected. visibility going forward over the coming quarters, i just don't see it. $2.51. two pie shells. >> there was also deflation. a gallon of whole milk is a full 51 cents cheaper than it was a year. miscellaneous ingredients like condensed milk, coffee, eggs down 30 cents. whipping cream down 6. cranberries, peas, relish trays all down a nickel or less. why cook? go out and take out a second mortgage, guys, if you plan to go to the old homestand steakhouse in new york. champagne, ruffltruffles in ins the bird, a diamond engagement ring. don't eat it. give it to her and she will be very thankful. >> i'm in. >> that was dr. j, not surprisingly, jane. >> don't eat it. >> jane wells, thank you very much. >> that's a lot of money that's just going to go to waste, if you know what i mean. >> yeah. >> yeah. i want to talk to bonnie before we go about part of that note of what i saw that you said yesterday about this potential accident from the fed. but you also make note of m&a. >> yes. >> you say there's been a lot of m&a but bad m&a. what do you mean? >> a dollar of debt is not the same depending on the final usage. what has us concerned in the credit space, m&a activity is up according to deal logic 89% year-over-year. only 13% of the credit that's been issued so far this year has been for capital expenditures. most of it's been for doing things that, you know -- i'm a bond dealer so i know you stock guys love this, issued dividends, buying back stock. i mean, when you issue debt to build something, to make something, to hire people to generate income to repay the debt, it makes a lot of sense, but this is just dead money. that's a very worrying concern. >> so-called financial engineering. >> yes. give it whatever name you like. it's sort of like let's borrow a bunch of money and give it away. it's the corporate version of helicopter ben, i suppose. >> high yield energy debt, where are you looking forward into 2016. >> before you answer that as it relates to emerging markets, is that part of the ripple of an accident that you would see as a result of what the fed may do in december? that the emerging markets which are already having a bit of a tough time could have a worse time whether it's currency, debt -- >> definitely on the currency side. and again a lot of emerging markets going back to energy are, you know, energy producers, consumers. the energy space is a space that we're underweight, and i know that there's been a lot of press lately about hedge funds in particular putting on this big trade and thinking they were buying on the cheap. just because something is cheap doesn't mean it's a deal. i'm now seeing some pundits looking for oil to go to $60 a barrel in like 2018. i tell you, there's a huge, huge oversupply and declining demand. >> wow, so where do you see oil in 2018? like way lower? i mean -- >> in 2018? >> 2018, do you have that visibility for us? >> i mean, i get the point you're making here. you're scoffing at that. >> this is somebody else's forecast, and, again, what was oil? over 100 bucks a barrel a year and a half ago. that's quite the decline. wr >> we have to take a quick break. retailers reporting the rest of the week and set you up for the second half of the day as well. proud of you, son. ge! a manufacturer. well that's why i dug this out for you. it's your grandpappy's hammer and he would have wanted you to have it. it meant a lot to him... yes, ge makes powerful machines. but i'll be writing the code that will allow those machines to share information with each other. i'll be changing the way the world works. (interrupting) you can't pick it up, can you? go ahead. he can't lift the hammer. it's okay though! you're going to change the world. time now for the second half trades. got some earnings after the bell today. ross stores, williams sonoma. who has a thought on williams sonoma? >> they've been doing phenomenal over the last couple quarters. when you look at this name. i actually would go back towards ross stores. i like what we heard from tjx. they're very, very similar, not exactly the same but very similar. they don't have carol in charge either, but this is a company that's been basically doing very similar in terms of its sales growth, and i think they will once again. i think the earnings i would expect to be very positive. >> okay. before the bell tomorrow, footlocker, abercrombie. >> i would go footlocker with that one rather than abercrombie. i was just out at mall of america, i didn't see as much traffic in the abercrombie as i'd like. >> you were doing some channel checking? >> yes. >> that's really reliable. >> thank you. >> you did make a move with jci? >> i did. bought johnson controls, air conditioning. been checking up on that, too, as well as for automobiles. heating and cooling and air conditioning. this one today for my account as well as the portfolio. >> best thing to do in fixed income right now is what? >> stay diversified. stay diversified. >> what's the most attractive area right now? >> you know, jeffrey was on the tape talking about a particular breed of investments which i think is very interesting, closed in funds. certainly they're trading a the a discount. you have some cushion there because of that in the case of a rate rise, but as a manager with closed in funds that are invested in credit -- >> right. >> -- a rising rate may hurt your net asset value but it helps investment managers reinvest the proceeds at higher levels. >> thank you for being here. "power" begins right now. scott, thank you so much. welcome, everybody, to "power lunch" along with mandy drury, i'm tyler mathisen. a big blow for obamacare. one of the nation's largest health insurers threatens to pull out of the public exchanges. the news taking down health care stocks. what now for the affordable health care act a
week of the year. certainly big story of the day. the mega deal between pfizer and allergan, the largest ever in that industry. now, what does it mean for one of the most widely held stocks around in the form of powerhouse that the deal creates? our reporter has been right in the center of the reporting of the story, joins us now. hi, meg. >> standing outside their headquarters where today they announced the deal for $363 per allergan share. being structured as allergan buying pfizer. but allergan shareholders get the premium. this would create the largest drug company in the world. that is also the largest deal to move for tax purposes. the combined companies new tax rate will be about 17% to 18%. this is bound to attract political scrutiny, i believe already is this morning. pfizer ceo sat down with us, saying there's more to it than taxes. although the price may have been different if the tax benefits weren't there. you can see both stocks are trading down today. some analysts saying shareholder also may have expected more, up to $400 per share. allergan ceo joining us, addressing that point. take a listen. >> we're getting 11.3 shares for our shareholders. when we negotiated that price, that would have equalled over $400. you can't look at spot price. what you get is a pro forma ownership of 44% of the fourth largest company by market cap in the world. you get access to 100 new markets. you get access to a deeper pipeline. you get access to $25 billion in free cash flow. and you get access into a dividend for a shareholder. when you put that altogether, the value creation is immense. >> now, saunders will join the combined company as chief operating officer and president. potentially setting him up to be reid's successor. both men expressed confidence the deal will get done, despite political uncertainties. they did say the break-up fee would be up to $3.5 billion. though they haven't disclosed all the details of that break-up fee just yet. deal expected to close in the second half of 2016. of course all of this now leads to questions about a potential split for pfizer it the company saying they will make a decision on that why the end of 2018. >> meg, thank you so much. pete, you own this stock, maybe others do as well. you've certainly talked about it. >> i will continue to own it. i think this isn't something in the very short term you're going to suddenly jetson your positions and a lot of selling over the last couple of days in front of what we've seen. a little bit of more pressure on the stock. >> why are both stocks lower? >> on the allergan side it doesn't make as much sense to me. i think there will be some going on there. where we'll start to see some buyers come in there. it's significantly lower than the number they put out there. >> as meg was saying, some thought it should get. >> looking closer to 400. look at the pipeline allergan has. they have 70 different compounds in mid to late stage. there's a lot of reasons why this makes sense in the longer term. it's not just about inversion. but since you want to go to the inversion world, i would just say this, jack lew and the rest of these guys ought to make a decision on how they want to handle this. rather than complaining about it when companies do go overseas. they need to make this a much better fit so people don't have the need to go overseas to be able to get these tax benefits. >> i think it's smart to do this deal, especially before -- >> you own pfizer? >> we do not own pfizer. all these companies are consolidating because they know they need to find growth, they can cut costs, they can have better distribution, a better balance sheet going forward. especially when you get a new administration potentially. >> anybody else own it on the desk? >> i don't own it on the desk. i certainly would own it. looking where pfizer is relative to where it has been over last year, i think 36, pete, this time last year was the high, and 30 was the low back in july. now you're at 31 and change. i think it does bring the potential where you're talking about the con duet to split the two companies. to me, very compelling to do so. >> you'll have to wait a while it appears, if you think that's going to happen. as meg said, pfizer's going to make a decision by the end of '18. now there are notes now filtering around wall street saying now it's 2019 event for a potential split rather than '17. >> i don't know if i agree with that. i think they're right on track if they want to get the split done. think they can get the split done. i also think this is not addy shire. i think reid has done a phenomenal job going out and doing the due diligence. i know there's some suggestions he'll talk to the white house tomorrow. i think this deal does get done. i don't think there's any obstruction like we had with addy shire. >> i think this gets done regardless. even though i also agree with pete about jack lew and the treasury, they don't make law. i mean, the president can occasionally wave a magic wand and pretend he can make law, but he doesn't make laws either. congress does. so until that changes in congress, you're not going to see the tax consequences of this deal change by something mr. lew tries to strong arm. i'm not saying he shouldn't try to strong arm, i'm just saying it won't be effective. these guys want to do this deal, billions of dollars to be saved. congress should do something. if they don't, this deal's done. >> as a guy who owns a good basket of big fapharm names, wh do you look to now? do you start gaming that? if pfizer makes it a massive deal, biggest deal of the year period -- >> well, let's go back -- >> does it put pressure on the others in the space to do something big? >> pressure's already been there. if you look, what pfizer's done this year going alone, they've made acquisitions. we're talking about multibillions of dollars trying to build themselves up. they've done exactly that. now you're putting these two huge entities together. you look at the cash flow. look at what they're able to do. look at the pipelines. there is potential for this to be massive. i tonigdon't think you can game and say i think merck is going to buy this company. there's been talk about bristol myers for months now but i think it's impossible to determine who that is. >> the m & a activity in 2015, biggest year ever. everyone says 2007, that means 2008 is coming. that's not what it means. >> in some respect, trying to get out of the door before the low rate window closes. >> right. on the other side of that, who's the beneficiary of the visery fees? who's vising on this? on the allergan side? jpmorgan, morgan stanley. on the pfizer side, goldman. >> on the table for a long time, talking about exactly that. it's been the m & a that's been feeding it this time. when we start to see those rates going up, then we -- >> i want to stay on the idea of what washington is thinking about this. we know feathers on the hill are going to be ruffled as a result of this. ayman looking into the political angle of this deal. >> obviously democrats really don't like this deal. we're getting our first reaction from the presidential campaign trail. here's bernie sanders, the comment he made such a short while ago, calling this deal a disaster. he says this is a disaster for consumers. that's the wrong graphic. berner sanders on the campaign trail is calling this deal a disaster for consumers who already pay some of the highest prices in the world for prescription drugs. there you see the statement from out on the campaign trail. also, capitol hill, we have a statement from sander levin, the top democrats on the house ways and means committee. what about levin is saying is tax motivated corporate inversions have cost the u.s. tens of billions of dollars and place an increasing burden on american taxpayer. what democrats on capitol hill would like to do is have a bill that just addresses these tax inversions and prohibits them, where a parent company has to own the acquiring company and all the technical details that would block the inversion process. republicans meanwhile up on capitol hill say we don't want to do just tax inversions, we want a broad package. because democrats don't control capitol hill, it's likely the republicans will get their way and likely republicans will wait until 2017 when there's going to be a new president in the whuz and possibly a republican president in the white house depending on how 2016 goes. that everyone is talking about, everyone expects at some point, but it's not going to happen right now. >> i wonder how the comment by pfizer's ceo ian reed, that the deal is great for america, is playing on the hill. >> that's going to go over like a led bal loneloon up on capito hill. treasury taking some steps to tighten the rules on inversions. pfizer ceo saying on our air they've looked at that and they feel the deal gets through the window. battalions of lawyers have been scouring those rules. >> eamon, thanks so much. live on the hill in the aftermath of the announcement. can you throw up a chart of the euro? i appreciate you doing that on the fly. i apologize for calling for it like that. call your attention to the fact -- thanks to our michelle caruso car brar ra. the euro, it's a seven-month low against the u.s. dollar. the dow, which was modestly positive as we ca cayman the caymcaymamcame on the air. not only corporate earnings but everything else in the weeks ahead. i want to call your attention to that. up next, carl icahn turns up the heat on aeg. plus, christmas coming early in canada. what amazon is doing to attract shoppers ahead of black friday. and why the 2016 presidential election may be bad news for u.s. stocks. the head of strategy at wisdom tree weighs in with the political trade. santa has a magic snow globe for every family. and this year, look at what he put in our driveway. the lexus december to remember sales event is here. lease the 2016 es350 for $349 a month for 36 months and we'll make your first month's payment. see your lexus dealer. nobody's hurt, but there will you totalstill be pain.new car. it comes when your insurance company says they'll only pay three-quarters of what it takes to replace it. what are you supposed to do, drive three-quarters of a car? now if you had liberty mutual new car replacement, you'd get your whole car back. i guess they don't want you driving around on three wheels. smart. new car replacement is just one of the features that come standard with a base liberty mutual policy. learn more by calling switch to liberty mutual and you can save up to $509. call for a free quote today. see car insurance in a whole new light. liberty mutual insurance. welcome back to the halftime report. we're watching shares of two companies because of activist investor headlines. on the move on these new activist calls. carl icahn putting pressure on the insurance giant aig to separate into three companies saying it's too big to succeed. disclosing he owns shares of aig. icahn says he may push for a new director as the ceo is unlikely to, quote, sincerely consider his suggestion to split the company into three. next up, first reported by our own david faber, elliott management taking a 6% stake in alcoa. shares of alcoa which have declined more than 40% in 2015, up by about 5% on this bit of news. these activist hedge funds getting attention in today's trade. >> you own alcoa. you must be happy about. >> it's been a painful trade because we've owned it for a couple years. they just had an analyst meeting last week. think what they're doing is splitting into two different companies. that's the part is the gem within alcoa. commodity piece as the dollar gets stronger and you see weak demand, that's bringing down the stock. when you get a separation, the debt goes down to commodity, there will be growth. we own it. we've been buying it. we're aggressive with it. >> aig and icahn, no surprise, he's not going away. >> stock has performed well. a lot of argument about what the company should do. the singular argument he makes is how do you take aig and remove the stigma of them being systemically financially important? that's where the costs come in. that's where the challenges are. so that's where i think dividing the company into three units they're suggesting, life insurance, property, casualty and mortgage, i think makes sense. however, what's working against him is where the share price is. the stock is doing incredibly well. that's usually the ultimate catalyst to get this stuff done. >> i agree. i think, judge, as we saw, carl can be very effective when he basically articulates a strategy, which he's done here. however, the stock, without the engineering, without the financial games that people have played with other stocks, i'm thinking in particular of dupont, this stock has just, you know, continued to migrate higher. so i don't know that he has quite the hammer that he can hit them with. i think it's really just a question of basically he's going to to be very patient to get this board to do anything. >> all right. let's move to our next conversation. why election years could be bad for u.s. stocks. our guest is the chief investment strategist, he joins us today from 30 roc. luciano, welcome. >> good to be here. >> i guess that's what we sort of need to turn our attention to, what's going to happen over the next 12 months. why should we expect it's not going to be a great year for stocks? >> there's a difference between an open election year. the stock market has done just fine in election years. it's up on average about 10%. in an open election year, where the democrats and republicans have to nominate someone and they contest it, that's where the market historically has run into trouble. you've seen the dow in the last 100 years decline in 1 out of every 2 open election years. if you just look back historically, the odds of the market going down in any year are usually 1 out of 4. the probability starts to weigh against you in open election years. that's just one more hurdle we think you have to add to the wall of worry for 2016. >> what do you make of -- inguess where investor sentiment has been over the last few months. we had the big downdraft and then the nice comeback of course. and the activity in etfs tells us what about where investor sentiment is today? >> one of the big stories this year has been the outperformance of momentum over the other factors. there are indexes that just track momentum stocks. and what we've seen this year is the excess return, the momentum index versus the s&p has about about 6.5 percentage points to the upside. momentum stocks are getting about 10% returns this year when the s&p is getting about 3.5%. to the contrary, value is down for the year. we haven't seen this big a divergence between momentum and value since 2007 and before that since 1999. we start to get to the outer ranges of what i think is palatable before we start to see some meaner version. >> if the belief is 2016 is a little bit of a struggle, do we return then to the bond proxy type of etf holdings or possibly emerging market etfs? >> no, i don't think it's emerging market. you will see, we expect, some tightening up in the short end of the curve. that should put some pressure on the higher yielding stocks. i would say you probably likely will see more of the same through the first quarter, maybe through the first half of 2016, where they continue to lead. amazon is up 115% this year. netflix is up 150%. the s&p is up about 3%. the real risk is the contraction in the multiples of the high flying stocks. i don't think the market's going to take a hit on earnings growth but i think it's beautiful on p/e contraction because of the momentum stocks have been on a tear the last six years. >> we have obviously noted the two hedged etf products, that wisdom tree has, the dsj and the hdgg, both which hedge different currencies, the euro or the yen. at the risk of having you talk about your own book, do you think, though, those types of trades, focusing heavily on currency and the impact on overall market moves, are going to be a big theme in 2016? just given what i was talking about ten minutes ago of the movement that continues to be the euro lower and the dollar, which is expected to accelerate higher as the fed move also? >> i think the same drivers are there. they meet december 3rd. they could do additional qe. and the big story for '16 is the pace of the fed hikes. so there's still life left in the dollar rally. the thing that was interesting this year is the japanese small caps were up 18% this year. and the european small caps were up 10. so this is a time where small caps in the u.s. didn't do much but size worked very well internationally. i think that's interesting to take a look at for 2016. particularly japan and europe. >> it's good to talk to you, i appreciate you coming on. have a good thanksgiving holiday. we'll talk to you again soon. are these the types of trades that you want to be making into 2016, ride those types of etfs we focused on? >> i think we've talked about the fangs for a few weeks here. you have to be careful because you need to get out when the things start to turn south. if any one of these top momentum stocks miss earnings, they're all in this basket, they'll all get tied in together. >> mocking jay falls short at the box office. plus, split decision on chipotle. getting a downgrade and an upgrade on the heels of more news of e. coli outbreaks. surprise!!!!! we heard you got a job as a developer! its official, i work for ge!! what? wow... yeah! okay... guys, i'll be writing a new language for machines so planes, trains, even hospitals can work better. oh! sorry, i was trying to put it away... got it on the cake. so you're going to work on a train? not on a train...on "trains"! you're not gonna develop stuff anymore? no i am... do you know what ge is? it's time for our trader blitz. first up, mallinckrodt. >> even with some of the headlines about how specialty pharma maybe had played some games, this is one of the stocks of course that got hurt on the valiant downgrades by sit tron. here, you've got a very nice pop today on turnovers. strong report today and the gross margins were out of the park. >> amazon canada, black friday starts today. >> everything working their way. the all-time high i see. listen, the only thing you do with amazon is look when momentum fails. when do you get a piece of good news in amazon and the stock goes down? that's when you have to be concerned. until that, they have all the momentum. you know when you lose momentum what happens. >> i don't know what that means. >> oh, it's just not -- >> are you referring to that awful call by the officials yesterday in the football game? >> yeah, you were pretty upset about that. >> sarat, amazon, you think the trade still works? you mentioned the fang stocks earlier. >> you don't change it. like you said, absolutely right, wait until it breaks, then you get out. >> game stop, pete? >> well, if you look at why this thing's down, you immediately go, hey, how are the global sales? then the hardware sales, down 20%. the software sales, down 9%. things are not going great now. the report was awful. this is a stock that was trading very well year to date, seeing some punishment today. i think there will be a moment in time to buy it, just not today. >> this is baked in. if this deal didn't happen, these stocks would have sold off. you own it because the products, not because of where it's going. >> going steady with match. the analyst who says the online dating company is an attract itch stock to buy right now. we'll talk about that after the break. .. steve, other than maki me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this. hi, everyone, i'm su herera. belgian police launching new raids in brussels and beyond in their hunt for the fugitive suspect in the paris attacks. the lockdown on the capital entered its third day. more than 1,000 security personnel have been deployed as schools and some transportation remains shut down. francois hollande, the president of france, and british prime minister david cameron, paid homage to the victims of the paris attacks outside the beta clan theater today. they visited a makeshift memorial where dozens of people were killed by isis gunman. back home, ford recalling some 450,000 midsize cars because the gas tanks potentially can leak fuel. that recall covers 2010 and 2011 model years ford fusion and mercury milan sedans. walmart says it will begin offering cyber monday sales the night before. it will post some 2,000 online only specials begin at 8:00 p.m. eastern time on sunday night. industrywide, cyber monday sales are projected to hit $3 million for the very first time. that would be up 12% from last year. that's the cnbc news update. get ready to shop, scott. >> not me, but thanks. >> oh, now, you're going to do a little shopping for some special -- >> maybe a little. sue, thank you. >> you got it. >> three big calls on the street today. first up, barons says p & g, that being procter & gamble should split. >> i agree. company's gone nowhere for the last couple of years. they sell their really good small products that they don't have enough resources to put into. why not really get the growth in the company and focus on the growth. >> they say, one, beauty, two, health care and grooming. >> you look at the one year the three year, the five year, all of those in terms of revenue growth, there is none. there are all kind of products out there, billion dollar products everywhere. i think over 20 some billion products. the question is, how do you extract some of that growth? when it was up towards 90, i remember we talked about this name, talking about, how long can it trade at that pe? now you understand why the discussion is there to pick it up. >> chipotle's been under pressure because the e. coli being in the news. we have two opposite calls today. desk has been bullish. >> i think you buy this one on dips like the e. coli outbreak stretch which took about 10% off the value of the company like that. and they have the second one of course just days ago. today, it's got the leading analysts. we've got dana tesle's firm going positive. >> they cite the substantial pullback recently in the shares and an improved risk/reward scenario. goes downgrades to neutral. say, look, maybe better off waiting on the sidelines until we fully understand what the story's going to tell us. >> i've never seen people cutting back at this particular -- at chipotle at all. pete talks about it all the time. you see people online taking calls from family and friends to pick them up additional. the tickets per person in line is much more than just one. i think this continues. i think you buy it on dips. >> we're talking about a momentum stock that has lost its momentum in an environment where momentum is favored. if that continues in 2016 and they buy enough time to resuscitate the strategy so to speak, then it's going to be favored once again. yes this turns to be a good buying opportunity. the strategy in 2016 has to align itself with being a strong momentum environment once again. >> okay, let's talk match group. went public last week. today, got a big buy call from axiom capital management. victor anthony is the analyst behind the call. he is with us live. victor, welcome back. >> thank you. >> i should also note btig has initiated with a sell. i want to talk about both of these. in some respects, you're talking about the same catalyst for each call. why your call today? >> well, you know, if you look at the online dating business, it's a high income cash flow business. i see margins going for the next two years. they're benefiting from multiple tail winds. chief amongst those it's a lot more single people. if you look at the census data, shows over the past two decades, the unmarried population in the u.s. has increased significantly. also benefiting from mobility. also benefiting from the aging of the population. those two things i think makes for a very attractive storm. cheap multiple stock. to benefit them from tinder. tinder is the growth diver for the next several years. by my math, think upwards of $150 million in ebitada when match lays on the advertising for tinder. i think they'll get those subs towards the end of this year. >> i hear you. most everybody i've heard loves the tinder part of the business. the btig note says look, it's great, the problem is what if it can balizes the other part of match's business as it continues to do all the things you just said it will? >> well, you know, i think the thesis, which is tinder will cannibalize the core business, i think that thesis is misguided. essentially shows a fundamental lack of understanding of the evolution of online dating businesses. i think what tinder's really doing is expanding the adjustment market. they're bringing new people into the fold who otherwise would not have tried online date. as they try tinder, i think they'll move on to more mature matt f platforms like match. ultimately the core business will go back to growth. i think that cannibalization piece is misguided. >> what about core competition in general? you have to imagine this is not going to be the last service and there are already other services that are competing now. >> the competition is one of my biggest fears on the stock. there's thousands upon thousands of online dating websites around the globe. they have about 4,500 different brands. they serve just about every single ethnicity, every single i think religious group almost. just about every single demographic. they have a service for just about everyone on the planet. and so i think that keeps them competitive. they have a first move advantage. they address significantly in technology. i see competitors come, i see competitors go. i think the one constant is match ultimately i think continues to lead and dominate the space. >> victor, appreciate you coming on today, thank you so much. no one wanted a piece of this thing at the ipo? >> nope. >> wanted to hear the story. wanted to hear a couple of quarters of earnings, what the forecast would be. you got to listen to the management first. >> competition. i just think longer term, as you said it, there's going to be other sites there. >> what's the barrier to entry? >> exactly. right. >> making sense of the drop in copper hitting a six-year low today. we'll head to the future space for the best way to play it heading up. as we head to break, the s&p sector. the s&p right now is up 2 points. ell, directv beat us in customer satisfaction again for the 15th year in a row. but we have a plan. 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"star wars" coming out in a few weeks. everyone's going to be focused on disney to see if they beat the numbers. >> you think disney stock already reflects the expectations of "star wars"? >> i do. >> you sell it on the box office number? >> we have been trimming it just because i think so much is already built into the stock. i know they had a good call. but i think longer term, there are trends against disney. "star wars" going to help on short term. i think it's a big dip. >> only a few trading weeks left. in our competition, take a look at the leaderboard. josh brown is still in first place. stephanie is in second, followed by our defending champ. >> and john made another trade. >> three actually. i got out of two stocks and bought one. >> what did you get out of? >> state street. made a nice pop. trying to make the trade short term now. try to give them three or four days, they work and they don't, and i'm on to the next one. johnson controls. got in today to anardarko. a preview of what might be hot tomorrow, judge. >> what do you think of the move? >> i like it. i like energy. like what we heard from the saudis this morning. i think that supports energy prices. you want to see follow through over the next couple of days, so john's strategy of being patient, not putting that name on it just yet, let's make sure he's got the evidence of oil prices rallying. >> you've got some moves, you've got plenty of moves to make. >> yeah, i do actually. one of them, i'm going to give you a little preview, just like john did. i'm talking about volatility. we talk about volatility. it made that huge move, the beginning of november. we made that move from 14 to 20. now getting back down again. i think that will be where i pounce next. i think volatility will see another spike before the end of year. >> the s&p and dow are nearly flat on the year after recovering from august lows. could a sideways market be good for investors? our commentator live today from the new york stock exchange with his take. michael, flat is now the new up? maybe that's how we should view it for a while? >> well, for now. actually, this flat period extends beyond the beginning of this year. if you go back to july of last year, the s&p was first running up against the 2000 level. we're basically right there now. it's about 16 months, give or take 100 or so points around that 2,000 level. if i look at it, if i'm sorting these factors into what's positive for the market outlook, what's negative, i think this long flat period when basically digesting huge gains from the 2013/'14 run and you weathered this profit recession the last couple quarters, it's probably a net positive. a look at history of these past extended periods of basically flat markets says on balance they tend to break to the upside eventually but not right away necessarily right now. >> sort of your point, you in a sense give investors a chance to digest, to take a real world view of everything that's going on. and then make your investment decision based on that. >> yes, exactly. you had a relatively overvalued market after you had a 50% gain from late 2012 to mid-2014. you've kind of had to metabolize that a little bit. a lot of sectors have not participated. they've been having their own little mini-bear markets. that's been the process. i think of a stock market where you didn't have -- a lot of money didn't want to leave the market because people don't see a recession in the u.s. on the horizon. and you had that scare in august and september that really flushed a lot of the excesses out. so now what does it mean? it basically means a lot of people are thinking it's somewhat fairly we're going into most likely a fed liftoff phase. let's see if that creates at least the excuse for a break in one direction or the other. >> mike, it's joe. i really enjoyed reading the piece. i like the part where you talk about the game building played between the 30 yard line and eventually something breaks. when something breaks it usually means the crowd or the masses are wrong, u.s. centric focus, rates rising, emerging markets. if you had, you know, to have a look into 2016, where do you think the crowd is going to be wrong? >> i think at least in the next few months -- i have this nagging idea that once we do get the fed rate increase, wherever the market is the day before, once he get it, presuming that's not going to necessarily break the market, i feel like that's going to be an excuse for people who have been skeptical thinking somebody goes wrong, maybe that creates an upward flush. that could be one area. also i'm very intrigued by the industrial sector, basically the u.s. market sectors tied to global growth. the industrials have behaved a little better. they had a horrible run through the summer and fall, and i wonder if that's going to be that area. nobody has an excuse to like it but they've not set out the last part of the rally. >> we appreciate it. >> appreciate it. >> mike santoli for us. you can check out mike's piece on cnbc.com/pro. he's going to have a new article, by the way, every single monday so make that a regular part of your daily reading. think of the premise here of what mike is saying. >> he actually talked about goldman sachs when he was referring to david costen and his projections for the year that we were going to be flat. he's predicting another flat year next year. i think there will be some areas we'll see a little bit of shifting around. we all know this year it's been about rotation. different sectors always in movement. i think next year the key will be which sectors are the ones leading the market for the majority of the year. i think there's a couple different categories and i would go to the financials once again. >> i think some people could get caught flat-footed, judge, going in 2016 because they will be waiting to see exactly what the reaction is to this interest rate increase and how many we get and that might keep them on the sidelines longer than they should and, thus, they could be chasing rather than participating. >> i agree. i think you need to start positioning your portfolio for next year now. absolutely right with industrials that have been shut out, retailers, some of the stocks that have had a bear rotation coming down. the psychology is i don't want to touch these things but when rates rise, that's where the money will flow. >> when the market doesn't give you much, money managers don't want to make a mistake. >> people are afraid to pull a lot of money out but there's not a lot of conviction to put a lot of money in. >> and you're not going to recover the losses. ultimately when we break out, it is going to be on a macro theme being wrong in the marketplace. i don't know which theme it's going to be but it's going ton on the expectations for something, the masses are going to be wrong. >> already, trading the little blue box. we're looking ahead to tiffany earnings. we'll set you up with the game plan for the second half next. welcome back. want to show you a couple big movers in opposite directions today. first to the bottom of the screen. lululemon is up nearly 5%, pete, on not really any news. just more peculati speculation chatter. >> we don't want to throw any fuel on the fire. there's been stock -- >> that somebody, somebody -- >> somebody might have some interest in them. >> maybe. do you look at lieu lulu as an acquisition target? >> yes. >> would you buy the stock for any reason besides that? >> i like the company, yes. do i own shares? no, i own other names in the sports leisure space. there are reasons you could be interested in somebody like lulu. the transition has been very strong. they're doing a great job once again like they did in the past but when you look at the stock, 52-week high versus where it is, if somebody were to step in, they're going to have to pay a pretty interesting price, scott, because where it is based right now on the low end i think that they will want to look towards that higher end. >> joe made note of sort of what happens when momentum goes awry in a momentum stock. go pro is now 20% below its ipo price. just last week i think it broke below it for the first time. now it's 20% below, and it's 80% off of its all-time high. people have been sort of concerned about heavy discounting. you see it on -- you find it on groupon, other places you used to not see go pro products for. >> just in terms of product, we've talked about this in the past. they don't have a product for the holidays. i don't understand that. and this time last year they did have that product. so that's where you lose momentum is when you don't give the consumer a new product for the upcoming holiday season. >> this is not overdone you guys don't think? momentum -- >> i thought it was overdone at 25 -- >> momentum hasn't gotten out of control. >> i think technically you have to wonder. if you bought this at a higher cost, you're just going to dump it to take the tax loss. >> a lot of people dig. 80% below the high and 20% below the ipo. tiffany, palo alto networks. give me palo alto. >> i like where it's positioned. the expectations are low. i think the stock will make a run before the end of the year and this could be the basis. >> tiffany? >> it's got $3 off the 52-week low. i don't own it. i'd like this buy this but i don't have it. >> i don't own it but i have been following it because you saw with macy's and you saw with nordstrom's and a couple retailers they got hurt for a couple reasons especially because of the strong dollar and tourism. tiffany leveraged to the tourist coming to the u.s. and buying their product. >> as we're talking about the euro breaking below 106 for the first time in seven months. >> this could be a chance to buy tiffany. you get it every couple years and this could be a good chance. it's a great company, great brand, good chance. >> how about the market just in general this week? you're coming off the best week of the year. got most of the previous week's losses back. >> we didn't have a chance to talk about this but everyone keeps talking about copper and it suggests something ominous for the economy. i think it suggests the new economy. it is an economy that's consumer oriented and technology oriented and that economy doesn't utilize copper, i don't think that's a bad thing. >> i like with opec meeting next week and december 3rd they started with some parties, i think it really gets going on the 4th. i'd watch energy stocks. >> all right. guys, thanks. we'll see you tomorrow. all of you as well. thanks for watching. "power lunch" begins now. scott, gentlemen, thank you very much. along with mandy drury, i'm tyler maststhisemathisen. welcome, everybody to "power lunch." today, leaving the usa, what could the government do to stop american companies from re-establishing a base overseas to cut their taxes? we have five hedge fund favorites. these are stocks being gobbled up by the big money players, but are they right for your portfolio as well? and shut down. brussels, europe's capital, shuttered over terror fears, schools closed, the train system not running. we'll take you live to
here of countries like brazil -- and some of the euro zone countries are still really teetering and so i think there's a lot of potential sources of chaos. i think that just suggests to me that as equity investors we should not be expecting big returns this year. this is where you will want to pick your spots. if you have something you like, you're going to own it. if you don't have something you like, i think it's really important to just keep a low profile because it's going to be a tough year. >> but when we think about, roger, the fact that it's the worst start to the year for the dow since 2008, s&p since 2001, 2008 and 2001 we know what happened in those years. if you are not going to be comfortable playing in equities this year, where do you go? i can see the scenario where the u.s. market does provide a modest positive return. what i don't see is the backdrop for a great equity year across the board. dow think you'll have to pick your spots. there are sect orzors of the economy, the technology sector that i cover would be one of them. there are players that are going to do well. even in the environment we face right now. it will be hard for the largest parts of our economy. i'm talking here about autos and banks and i'm talking about pharmaceuticals. those industries are not going to be putting up monster growth years against the back drop of what i expect economically in 2016. >> roger, we just had dick fisher on, former fed president, and a pretty candid interview, we thought. his argument was and i'm quoting here, "at the fed during his time at the fet "we front loaded a tremendous market rally of very digestive period that's likely to take place now. do you see that? as the cause for this period enter entering in your view? >> i way i look at it is we had this tremendous dividend from lower oil prices, and i don't see any reason why oil prices should go up. for that reason i think it's going to be a tough year. much as 2015 was. you know, there are things that could go wrong. when i have no idea. >> guess what, that kifr stuff happens. it happened in 2015. i think it will still happen in 2016. you know, i happen to like facebook. i happen to like apple. >> you have been directionally correct as we like to say, at least lately, roblger. ford plans to triple its fleet of autonomous cars up to about 30. ford says it will work with amazon giving people access to connected home devices like the amazon echo right from their cars. we talk to mark fields this morning on "squawk on the street." here's what he said. >> we see a huge opportunity in growing our business and emerging mobility services market, and for us whether we do that in some cases on our own or whether we do it with partners, we're going to do it in a way that satisfies consumers, that provides value. value for the company and enhances our brand. >> in light of the gm lift news yesterday, the big three waking up? >> well, i think so. >> when you were 16 you got a driver's license. yet, many people are avoiding that later and later in life. instead of 80% or 0 pirz of people having a driver's license at 19, we're under 70% now. that is a huge headwind for the car industry. in the presence of lyft and uber and the other ride sharing services complicates their life because the world doesn't need as many cars if a meaningful percentage of the rides were taken through ride sharing services. i think this is an incredibly smart move by the major car companies to get involved in autonomous vehicles, but i don't think it's going to be a silver bullet. i do think unit volume will be a harder thing for them going forward, and that industry is going to change a lot. it's not at all obvious to me whether you want to be the manufacturer of the cars or whether you want to be uber and lyft, the guys that own the cars. i think that it's going to be really interesting to watch that play out. i'm not sitting here diving into car companies. that for me seems like something you might do in the future, but i'm not going to do today. >> roger, it does beg the question of whether detroit is conceding that perhaps sell convalley can do the software side of autos better than it can right now. >> that said, let's remember the first thing that happened, you know, with the google self-driving cars. when they made a mistake, it was that they had their cars follow the rule of the letter of the law rather than behave as humans behave. my guess is the folks in detroit have a lot more experience about how humans behave and interact in cars. i don't think they're totally out of the game. they obviously -- these are not software companies. >> finally, another black eye for yahoo. the company confirm it shut down its video site, yahoo screen last week. it was home to a lot of content, including the new season of "community." reruns of "snl" the recent streaming of the nfl and game overseas and it follows a $42 million write-down on some original content back in october. shares are trading a little higher this morning. some have tried to portrait it as a bit of a white flag here, roger. what do you think? >> well, i look at the -- in a very, very simple way, which is the mega trend is that video is going mobile. that is a monster, monster trend with huge implications. unfortunately, in a change like that, not everybody wins. it's pretty obvious that yahoo is one of those not winning. i don't know what they do from here. i think that everything seems to be too little too late. honestly, i have so moved on from this company, it just isn't one of the ones that i worry about anymore. it's not because they weren't great or have a lot of great stuff. they do in both cases. i just -- life it too short, and there are a lot of companies out there, and i just -- i don't see a scenario for yahoo is a must own stock for me. >> i think that is precisely the problem. we'll just have to watch and see what they do, but honestly, i'm going to watch from the bleachers, want from the front row. there are a lot of really compelling things going on in silicon valley right now, and i just don't see yahoo doing any of them. in terms of content and delivery, what names are interesting right now? >> look what's going on around us. to me it's really amaze, first, what netflix --s and now am sdwlon doing a similar strategy, doing very, very well. i watch what they've done with hbo. you watch what apple is doing. there are a lot of really big very smart companies with strategies that have been gaining at a minimum mind share, and in most cases also revenue dollars. so, you know, i don't know how this plays out exactly, but, you kno know. >> dwoent lack for distribution alternatives today, and, you know, let's just face it. i mean, for yahoo, it might well have worked, but it didn't, and so time to move on. >> is there still an opportunity for yahoo to partner with one of the names that you just mentioned to try and make another run at video? >> of course. i wonder what it will do. yahoo has a lot of great assets. they have a lot of great people. to me whatever it is they do they could do without pulling a lot of mind share from me just because i don't see it moving the needle that much. >> some good candor today from you as well, roger. >> some things just don't matter, right? some things don't matter, and i think this is one of them. >> it's always good to see you, man. thank you so much, roger. >> my pleasure. take care. happy new year. >> same to you. joining us from out west. when we come back, stocks mix this morning with investors still worried about that slowdown in china. we're going to look at some tech names most exposed to the action overseas. plus, connected tech company harmon. a new partnership with under armor. harman ceo will join with us a closer look. here's a live shot of the east room of the white house. the president is set to announce new executive actions around 11:40 eastern time. we'll take you there live when he starts to speak. back in a moment. >> this just about 120 minutes time president obama is expected to announce new executive actions on gun control. john harwood is live at the white house with what we should expect, john. >> hi, kayla. aloha, carl. i just -- we've got a president who in his last year in office is determined to do everything he can to move his priorities forward. this is an example of that. we all remember he was thwarted two years ago or three years ago after newtown when he tried to get expanded background checks enacted into law. congress did not go along, including some democrats who opposed him. what he is announcing today are executive actions that expand the number of gun purchases that will be subject to background checks. in particular, some of the gun shows and on-line dealers who did not fall under the background check provisions of the law. he has decided he has the executive authority to expand the definition of who -- to which purchases background checks it applies. other steps to expand hours of the day in which background checks take place. all these are attempts to buy the president to make some difference. no one is arguing, including the president, that that's are going to make it possible. some of the mass shootings -- or all of the mass shootings that we've seen. he is determined to do whatever he can to -- >> there are ten separate provision that is are expected to be a part of this announcement. do you expect that all of them will be able to be put into affect by the president by the white house, or do you expect there to be some give with congress? >> i expect the give is going to come into play in the courts. republicans have indicated they believe that these actions are unconstitutional. you can bet that there will be legal action to block what the president is trying to do. >> without theability to get much through congress, he is trying to use the power that he has and the courts will decide how much power that is. >> he said he returned from his vacation reinvigorated. we are seeing some of the first steps of that reinvigoration for 2016. now we'll take you to that announcement live in just a few minutes time. thanks, john. we'll see you soon. up next, crude oil is falling today despite continued tensions between iran and saudi arabia and a new war of words in the middle east. we'll take a closer look. crude down 1.5%. plus, the ceo of connected tech company harman will join us to talk about its new partnership with under armor. squawk alley will be back in a moment. i asked my dentist if an electric toothbrush was going to clean better than a manual? he said sure. but don't get just any one. get one inspired by dentists. with a round brush head. go pro with oral-b. oral-b's rounded brush head cups your teeth to break up plaque and rotates to sweep it away. and oral-b delivers a clinically proven superior clean versus sonicare diamondclean. my mouth feels super clean. oral-b know you're getting a superior clean. i'm never going back to a manual brush. >> this year's consumer electronics show. all of you making a major announcement. company nounksing a partnership with under armor on wireless heart ray rate measuring headphones and microsoft's office 365 into the car. dinesh is the ceo of harman, and he joins us from ces in las vegas. good morning to you. it's good to have you. >> good morning. good to be on your show. >> when we think of harman, a lot of people think automatically of cars, but it sounds like you're going to try to make sports, fitness, and wearables the next big thing. >> we are looking for a seamless connected lifestyle, whether it's sports or musician or working office. whether you are in the car or going around. that's what we are all doing. it's actually part of -- it's totally connected. we don't want any streaming wires. it's a wireless smart headphone. the partner of under armour, we couldn't have asked for a better company. fast growing and extremely innovative, and driven to excellence. we are bringing the heart rate monday stores and the headphones. also, a lot happening. you saw the announcement of cyber security company. security is becoming extremely important, whether in home or in the car. particularly connected car you cannot have an autonomous connected car or whether you have a cyber security. people always say that the car is another device on the wheels. well, when your smart headphone has a bug, it's a headache. when your car is at 65 miles an hour, it's more than that. we are so thrilled that now we have complete solution. >> for holland to bring your technology to work in some of these cars that maybe don't have it already. >> it's a great question. you see all the research is pointing to all the -- >> the only thing which has been keeping up these rates office technology apart is simplicity and keeping them up-to-date. last year we bought a company which solved the problem of wrupting and keeping the software and hardware current in the car and now we watch the security company so consumers like you and i are feeling good that i can have productivity in the car. i can feel personalization of all the devices around me, and i'm protected. that's the rates going up. we feel very good we're behind the pole position of nine of the large companies. we're deeply involved with, and we also announced a big partnership with microsoft this morning where we are bringing the entire suite of microsoft office 365 with a prompt of the voice saying connect me to the voice, or skype. >> it's shown here for the first time. i'm excited about what's happening and how fast paced penetration of technology without sacrificing the secur y security. >> 57le is also a very good partner for us. so is going and so is microsoft and many others. nothing exlose anything. i think where i'm focused and so are 29,000 people will really push the envelope on the technology and take our industry forwa forward. >> iraq's president saying saudi arabia cannot cover up its crime of executing a leading shiite cleric by severing diplomatic relations with the republic. his comments came as he met with the danish foreign minister today. the other news, kuwait is the latest company to side with saudi arabia. the country announced it has recalled its ambassador to iran over the attacks of saudi diplomatic missions in iran over the weekend. speaking of those attacks, we now have fresh video of the events on saturday. this is moments after iran wran protesters attacked the saudi embassy in tehran to protest the execution of that shiite cleric. the protesters raided the building and then set fire to it. that's what led saudi arabia to cut diplomatic ties with iran and ask all iranian diplomats to leave within 48 hours. that proxy war in yemen between the two countries, it's heating up again after weeks of relative lulls. saudi-led air strikes targeted military positions linked to rebels backed by iran. this is a 9-month-old war, and residents telling the wires that there has been an intensification in the attacks in the last 24 hours. we just have the december production numbers from opec. just remind everyone saudis are still the biggest producers by far. more than ten million barrels per day. iran limited, of course, still by economic sanctions producing just under two million barrels per day. carl, they're hoping to get that up to four. back to you. >> all right. michelle, thank you very much. michelle caruso cab rare wra. >> when we come back, stocks once again on a bit of a roller coaster in and out of negative territory. currently down about 48 points on the dow. the next catalyst for today's action, i don't feel, will be europe's close. we'll get that in just under four minutes. stwloo good morning. i'm sue herrera. here is your cnbc news update at this hour. nbc news citing a senior defense official says one american soldier was killed and two others wounded in the helmand province in southern afghanistan. the incident occurred during a special forses counterterrorism operation. a u.s. helicopter was sent into the scene to evacuate casualties, but it did not take off because it came under mortar fire. the occupation of a federal wildlife refuge in oregon by armed anti-government protesters now in its fourth day. the group calls themselves citizens for constitutional freedom. they believe the federal government has too much control over western land. israeli security forces shot and killed a palestinian who stabbed an israeli soldier in the west bank. the soldier was slightly hurt with stab wounds to his face. this comes after the surge in violence in the region enters its fourth month. and ben baldanza led the industry push for more and more airline fees is out as ceo of spirit airlines. it transformed spirit from a money losing operation into an ultra low cost carrier that charged for extra basic amenities, including seats that didn't recline. that's the cnbc news update this hour. back to "squawk alley." to you, carl. >> thank you very much, sue her air wra. europe managed to avert another down close. we've got some green arrows, simon. >> i'm actually just eroding into the finish line. there was a disappointment coming coming through on inflation for the euro zone. it didn't rise from 0.2%. >> have you orange making an offer for weed. this is draghi's play here. taking the number of -- in fact, weed rejected the offer previously. you see the french telecoms are relatively active overall. the other stop that's doing well is altice. it's better because it's the vehicle through which buying cable television operations here in the wraits. >> it's whether this alternative dial might face some difficulty. it's a much smaller deal that draghi is attempting. a sixth or seventh as big. the cost savings are huge. $900 million. who that get rejected? it's translated to about an honor stock that is otherwise relatively depressed. meantime, voerlgs is in negative territory. equinet came through and put effectively a sell rating on volkswagen overnight. this after the do somewhere yesterday announced its suit. its law action against them for, of course, their cheating on emissions. $90 billion is the ask on that. nobody thinks they're going to get $90 billion. however, it has some loirss suggesting that actually it's anyone's guess as to what they'll actually aim end up tea from vw. what is clear is that the u.s. is determined to make use of vw's misconduct and to further weaken vw's position in the u.s. that is a controversial statement clearly. our own auto reporter phil lebeau has suggested within the last hour of the program that vw doesn't have much of a position here in the united states, selling under its own brand roughly 300,000 cars last year in a market of 40 million or 50 million. vw's coo and the head of brand are on their way here to talk at cs, to talk in detroit, and to lobby politicians over the next few days. back to you. >> we'll be watching for that. simon, thanks. shares of alibaba, meanwhile, reversing course. seeing some is gains earlier today. right now the stock is up more than 1%. that, of course, follows yesterday's 7% slide. stocks in asia, however, they have been pretty volatile in the session. opening lower. now you can see they closed about a quarter of a percent lower in shanghai. >> when you see them pumping -- it's really hard to tell the difference. what would you tell us now? >> well, i think -- look, i think you have to look at china's economy and stock market. i think the word for the stock market that's going to be consistent throughout the year is volatility. this is the first time, first open market exchange to try and stem the flow and trying to moderate the stock market fluctuations, and it's having sometimes proper affects and negative affects. i think it will take some time to really figure out how to make sure the market is smooth in china. in terms of the economy in chooirn, i think you have to look at the economy in china as a giant escalator. it's been growing and going up quite rapidly. 15 plus percent depending on where you are, and even segments, whether it's the first year cd's or tech companies that have been growing faster, a lot of companies that are slow, inefficient, will have a hard time with the escalator slowing down. i think many inefficient businesses in many of the inefficient companies in china are struggling right now with the slowdown in the moderating of growth in chinese growth. there are a number of segment that is are very efficient markets, efficient with labor and capital, efficient with technology that are doing quite well, and they're able to exploit the weaknesses of the smaller lessee efficient players and grow at a much faster rate. running up the escalator, if you will. alibaba and many of the tech economy in china are doing that. they're going and taking share away from the slower, lessee efficient players in the marketplace. >> alibaba and others depend on the chinese consumer's desire to spend. that's sometimes intertwined with confidence and how that consumer reviews the health of the overall economy. would you say that that is still impact going into this year? >> i think the risk -- first of all, there's plenty of head room in terms of consumption patterns for the chinese consumer. they come half of what the u.s. consumer consumes on an average year based on the gdp. there's plenty of head room for the consumers in china to extend and grow their consumption, and we haven't even talked about consumer credit yet. doesn't exist in china. i think there will be some movement there as well. i think the thing you touched on is that contagion from the slower lessee efficient businesses, job growth, inflation, how that is going to hurt the chinese consumer that's the one rescue. what's the contagion from the slower parts of the economy to the faster growing tech economies. >> certainly, haney, the yuan is tied to every part of the economy. it's dropped as much in the last six weeks as it did in august when we were talking about this crisis of confidence. on one hand, it makes exports cheaper rsh on the other hand, it moves cash from the country. how does that play out, and is it helping china as much as people here in the u.s. say it's hurting our exports? >> well, i can't comment directly, and i'm not an economist, but i do believe that the devaluation of the rnb will hurt the chinese economy longer term and will force the slowdown even further. right now we're talking about 5.5%, 6.5% growth. it may go lower than that. i mean, the positive side of people moving money out of the country is obviously you're seeing asset prices in places like the u.s., western u.s., and even parts of europe going up as chinese consumers buy hard assets. i think they've got to figure out a way to keep the confidence in the rnb intact in china. >> certainly not the last of the conversations we're going to be having about the yuan. we appreciate your time this morning. >> han where i nada from ggb capital. >> any moment, the president is expected to announce these new executive actions on gun control. we will go live to the white house as soon as he begins speaking. the dow down about 33 points. we're back in just a moment. >> are you looking at a live shot of the white house. any moment now the president expected to announce some new executive actions on gun control. gun violence, one of the more frustrating elements of his tenure, the president has said. john harwood is live outside the white house with more. john, a lot of this is aimed at making it easier for the fbi to do background checks. i saw some statistics this morning about the number of checks they did last year. the most in the agency's history. >> that's right. you think there should be more. he wants money for more agents. he wants to keep the background check facility within the government open 24-7. that's not the case currently. so he is doing what he can, and we're right on a moment ago when you said this was an especially frustrating thing for him. i think he believes this is the most frustrating issue that he has dealt with as president. remember, he has said on more than one occasion that the day of the newtown massacre was the low point of his presidency since then he tried legislatively very hard in early 2013 to push congress to expand the number of back ground checks. he could not get that done. especially from more rural gun-friendly states. the president has been watching a continuing succession of mass shootings trying to figure out what can i do? he announced yesterday with loretta limplg, his attorney general, that they spend some time research and concluding that he had the authority to redefine what it means to be a gun dealer to bring more purchases in under the background check provisions. republicans say that's unconstitutional. they're going to challenge him mritly and legally and we'll see whether he can stand his position. >> that is the managing director at sandy hook promise who lost his son in the sandy hook shooting that john was just referencing. you might keep your eye on the gun manufacturer stocks. smith and wesson going all the way back to the ipo in 2001, and, john, that is a cycle that has become a little familiar as the administration makes moves in this arena. the manufacturers see a bounce. here is the president approaching the mike. >> thank you. thank you. thank you. thank you. thank you, everybody. please, have a seat. thank you. thank you, everyone. thank you. thank you, everybody. please, please, have a seat. thank you so much. mark, i want to thank you for your introduction. i still remember the first time we met and the time we spent together and the conversation we had. that changed me that day. my hope is that it would change the country. five years ago this week the sitting member of congress and 18 others were shot at at a supermarket in tucson, arizona. it wasn't the first time i had to talk to the nation in response to a mass shooting. nor would it be the last. fort hood, binghamton, aurora, oak creek, newtown, the navy ya yard, santa barbara, charleston, san bernardino. too many. thanks to a great medical team and the love of her husband, mark, my dear friend and colleague, gabby giffords, survived. she's here with us today with her wonderful mom. [ applause ] >> thanks to a great medical team, her wonderful husband, mark who, by the way, the last time i met with mark -- this is just a small aside. you may know mark's twin brother is in outer space. he came to the office and i said how often are you talking to him? he said usually every day, but the meeting was the day of the call, and i may have not answered the call. that made me feel kind of bad. >> i told him if his brother scott is calling today, he should take it. turn the ringer on. i was there with gabby when she was still in the hospital with & we didn't think necessarily at that point that she was going to survive. that visit right before memorial about an hour later gabby first opened her eyes. i remember talking to mom about that. i know the pain that she is her family have endured these past five years. and the rehabilitation and the work and the effort to recover from shattering injuries, and then i think of all the americans who aren't as fortunate. every single year more than 30,000 americans hundreds of thousands have buried their own children. many have had to learn to live with a disability or learn to live without the love of their life. a number of those people are here today. they can tell you some stories. in this room right here there are a lot of stories. there's a lot of heartache. there's a lot of resilience. there's a lot of strength, but there's also a lot of pain. this is just a small sample. the united states of america is not the only country on evert with violent or dangerous people. we are not inharptly more prone to violence. but we are the only advanced country on earth that sees this kind of mass violence erupt with this kind of frequency. it doesn't happen in other advanced countries. it's not even close. as i've said before, somehow we become numb to it and we start thinking that this is normal. and instead of thinking about how to solve the problem, this has become one of our most polarized partisan debates. that's why on thursday i'm fwog hold a town hall meeting on thursday morning on gun violence because my goal here is to bring good people on both sides of this issue together for an open discussion. i'm not on the ballot again. i'm not looking to score some points. i think we can disagree without impugning other people's motives or without being disagreeable. we don't need to be talking past one another, but we do have to feel a sense of urgency about it. in dr. king's words, we need to fear the fierce urgency of now. because people are dying. and the constant excuse for inaction no longer do. no longer suffice. that's why we're here today. not to debate the last mass shooting, but to do something to try to prevent the next one. [ applause ] to prove that the vast majority of americans, even if our voices aren't always the loudest or most extreme, care enough about a little boy like daniel to come together and take commonsense steps to save lives and protect more of our children. i want to be clear at the start. i've said this over and over again. there's a ritual about what i have to do. i believe in the second amendment. it's there written on the paper. it guarantees a right to bear arms. no matter how many times people try to twist my words around, i taught constitutional law. i know a bit about this. i get it. but i also believe we can find ways to reduce gun violence consistent with the second amendment. i mean, think about it. we all believe in the first amendment, the guarantee in free speech we accept that you can't yell fire in a theater. we accept there are some constraints on our freedom in order to protect innocent people. we cherish our right to privacy. we accept you have to go through metal detectors before being allowed to board a plane. it's not because people like doing that. but we understand that's part of the price of living in a civilized society. what's often ignored in this debate is that majority of gun owners actually agree. a majority of gun owners agree that we can respect the second amendment while keeping an irresponsible law-breaking few from inflicting harm on a massive scale. today background checks are required at gun stores. if a father wants to teach his daughter how to hunt, he can walk into a gun store, get a background check, purchase his weapon safely and responsibly. this is not seen as an infringement on the second amendment. this hasn't been the first step in some slippery slope to mass confiscation. contrary to claims of some presidential candidates apparently before this meeting, this is not a plot to take away everybody's guns. you pass a background check, you purchase a firearm. the problem is some gun sellers have been operating under a different set of rules. a violent felon can buy the exact same weapon over the internet with no background check. no questions asked. a recent study found that about one in 30 people looking to buy guns on one website had criminal records. one out of 30 had criminal a criminal record. we're talking about individuals convicted of serious crimes. aggravated assault, domestic violence, robbery, illegal gun possession. people with length where i criminal histories buying deadly women's all too easily. this was just one website within the span of a few months. we've created a system in which dangerous people are allowed play by a different set of rules than a responsible gun owner who buys his or her gun the right way and subjects themselves to a background check. that doesn't make sense. everybody should have to abide by the same rules. most americans and gun owners agree. heats what we tried to change after 26 americans, including 20 children, were murdered at sandy hook elementary. two united states senators, joe manchin, and pat toomey, both gun owners, both strong defenders of our second amendment rights, both with a grades from the nra. that's hard to get. worked together in good faith consulting with folks like our vice president who has been a champion on this for a long time to write a commonsense compromise bill that would have required virtually everyone who buys a gun to get a background check. that was it. three commonsense. how did this become such a partisan issue? republican president george bush swrub once said i believe in background checks at gun shows or anywhere to make sure guns don't get into the hands of people that shouldn't have them. senator john mccain, introduced a bipartisan measure to address the gun show loophole, saying we need this amendment because criminals and terrorists have exploited and are exploiting this very obvious loophole in our gun safety laws. even the nra used to support expanded background checks. by the way, most of its members still do. most republican voters still do. how do we get here? how did we get to the place where people think requiring a comprehensive background check means taking away people's guns? each time this comes up, we are fed the excuse that commonsense reforms like background checks might not have stopped the last massacre or the one before that or the one before that. why bother trying? i reject that thinking. we know we can't stop every act of violence, every act of evil in the world. maybe we could try to stop one act of evil, one act of violence. some of you may recall that at the same time that sandy hook happened, a disturbed person in china took a knife and tried to kill with a knife a bunch of children in china. most of them survived. he didn't have access to a powerful weapon. we maybe can't save everybody, but we could save some. just as we don't prevent all traffic accidents, but we take steps to try to reduce traffic accidents. as ronald reagan once said, if mandatory background checks could save some lives, it would be well worth making it the law of the land. the bill before congress years ago met that test. unfortunately, too many senators failed theirs. in fact, we know that background checks make a difference. after connecticut passed a law requiring background checks and gun safety courses, gun deaths decreased by
higher and how many, a lot, are lower now. >> at least there's some green there you take a look across the dow, pretty much everything in the red. a look across all the indexes, with that russell 2,000 thrown in as well, having another day, off more than 1%. the nasdaq, the underperformer, apple today could be playing into that, down 3 1/2% as some concerns about the new phones, the new operating system continue to swirl. >> let's figure out why it's all happening. by the way, the 10-year note, there it is down to 251. >> yes. >> key levels here, got levels on the equities, also got levels on the ten year to watch carefully. >> you see there, "closing bell" exchange under way, peter anderson, doug kote, heather hughes, peter costa and rick santelli. peter costa what's the bounz the florida? why the selloff, what's going on? >> there's a list or a plethora of bad news. this is more like a bowl ya base of bad news. this is a possibility of having the interest rates go up earlier than expected. >> up? >> yeah i have been saying that by december and two of the main reasons, we don't have a lot of volume, the market was right for this and continue to see this volatility for the next probably the next couple of weeks vix traders happiest in the world. >> so, too are the bears in this market, short sellers haven't had much this year to hang their hat on. >> do now. >> this the -- are you is a in the camp this is because fisher was making hawkish comments today? >> obviously, we have had an ultraaccommodative monetary policy and richard fisher is alluding to some of the financial stimulus, perhaps creating bubbles in the high yield market and the junk bond space. look, we have embarked on stimulus for the past five years continuously, whereas financial conditions have somewhat normalized, markets are still near all-time high, even with today's drop. disinflation is -- deflation is no longer an issue. and -- >> no longer an issue? >> not right now. and we are not seeing that an issue relative to the rest of the world. you're seeing deflation in europe, in japan and you're not seeing that play out yet in the u.s. that is another concern why the fed may hold back on raising rates, not seeing that inflation yet. gas prices are lower and food prices somewhat high in the core, i guess, cpi, consumer price index and pc that they look at, still somewhat low at this time. >> peter anderson, last time you were with us, you were talking about how you would like to buy things when you find value there. are you finding more of it this week as a result of this, in other words, ready to buy this dip yet or do you think there's more to come? >> i don't think there's much more to come. i think that, you know, the idea of the rates increasing finally is roosting and i think that people are catching up to the fact that rates will rise and i don't know if they will be -- >> why are we all talking about rates rising on a day the ten year is moving lower? [ overlapping speakers ] >> well, sooner or later, she is going to raise rates, right? i think the economy is strong enough that we will see that in the first quarter. you see window dressing on long-only managers now. what's going to happen, managers will see round trip trades, they are going to be selling into this weakness and next quarter, just going to be buying the same stocks i'm doing -- i'm buying right now, because i do think that this is just a temporary weakness. >> doug, i would like you to weigh in here as well, i no he we are going to talk about stocks with you, but i'm surprised this there's so much -- unless we are thinking through in the fed is going to hike rates and that's gonna hurt the economy and so as a result, the ten year's moving lower rather than higher, otherwise, i don't really understand why the -- those concerns be weighinging on the market here today. >> first off, we are having a whiff of normal volatility, all coming out, today's durable goods number minus 18% hid the underlying strength in that report on business investment and look for tomorrow's gdp, the final gdp report, going to get a surprise close to 5% and that's what's gonna set the fed in motion, fed tight thing and i think is getting the market anxiety. >> you think that good news would be bad news, chances of a rate hike seener rather than later? >> yes are i do i think the fed is increasingly behind the curve and we have strong fundamentals on manufacturing, the consumer, corporate earnings, corporate earnings next quarter is looking fantastic. rick, we have teed up an awful lot for you to respond to i can feel it, from chicago here, waiting to jump in, what's on your mind here? >> well, first of all, let's clear up something, if charles evans would have said what richard fisher said, that would have moved the markets. >> yes, thank you, rick. thank you. >> wait until next year for a long time and i really have great respect for him and agree with what he said, but i don't think that moved the market at all >> once a hawk, always a hawk, richard fisher? >> give him some credit, rick. >> another issue is about raising rates orates rising and you kind of hit on it, kelly. listen, anything beyond the overnight rate or repo rates, you know, those are market driven, god only knows what those can do when the fed has to normalize. canada has 1%, raz rates three quarters of a point, really doing nothing, but it does have to begin at some point and i think today's a great case study that we could see rates rising a couple of 25 basis points, you can see the rest of the curve still flat with rallying our weakness in the economy because the economy does have some weak areas but not weak enough, they have a zero interest rate policy for this many years. >> let's remember -- >> i was going to say this is all relative, i don't know why we talk about these revels as if they exist in a vacuum. the market signal seems to be indicating, equities moving lower, ten year lower, this is a classic risk off kind of environment, why are we talking about rate hikes? >> well, because, kelly, i think -- [ overlapping speakers ] >> not a perfect market right now the mathematics i don't always work out. i think we are expecting too much correlation right now that if the equity market trades down, because interest rates are supposed to be going up, why are interest rates down now? and i think if you look at it too closely, like within the day, you're going to be disappointed, the longer term, say a month, you start looking at longer trends, you will see that mathematics play out. i just think it's a little bit naive for us to think that in these day intervales are, you would actually see the theoretical relationships between those two markets. i think we are looking just -- >> fair point, just saying we have seen days in this market, we know what they look like, days when you get a strong number, a ten-year move to the upside. today feels more like the environment we have seen when the end of qe, the last couple of times around hasn't allowed the fed to totally back away from the market. >> you start looking at the technicals, i think that's very different from looking at the fundamentals. if you have noticed, most of today's news has been on the technicals, the relationships between those two markets. and to me, that's not a real fundamental, with all due respect to the technical analysts out there, it's no the a fundamental reason why we should be analyzing the markets, look at true value to get insight, i think. >> heather? >> inflated, driven policy mark that's we are undergoing right now, in terms of propping up the market with stimulus, you're right, the math kind of is thrown out the window from an academic economic standpoint. however, important to remember between 2004 and 2006, we did increase rates by 25 basis points 17 times, yet the markets still headed higher. so, that is something to also pay attention to. >> peter, what are you watching here in the last minutes of this trading day? what do you want to see here? i mean, we were down 262 points on the dow, well off that low right now. do you want to see us go out on the lows? see some strength come in here? what do you want? >> honestly, low of to see this blow off a little bit. i would like to see the markets sell off, get it out of the way, not really at a volume level it's that significant. you could look at the dow and say, yeah, it's down 260, 270 points, but the volume only 700 million the end of the day it's not really -- not confirming it. i would like to see some sort of significant selloff toward the end of the day. i don't think we're gonna see it i would love to see that i would like to see that start putting, you know, getting the people out that don't want to be here anymore and give you an opportunity to buy. >> peter, your three, you're in control, go press some bunts. you're on the floor. i don't do much from d.c. >> thanks. >> everybody chip in now. we will leave it there for now, about 15 minutes to go here and the dow off 234 points. thanks very much. appreciate it everybody. >> thanks, guys. wisdom tree's chief investment strategy over there, speaking with us exclusively. wait until you hear if the downturn will be short term or not. and how to navigate the choppy markets when interest rates start to rise. a doubleheader, also coming up, jim grant, founder and editor of the influential newsletter bearing his name will stop by. we will get his reaction. dallas head president, richard fisher saying the central bank could raise rates next spring and the way the market is react, speaking to the evolving outlook. >> jumping are the gun but jim has a wonderful book coming out in november. >> yes. >> some of us had an opportunity to look at it terrific book, maybe we will get him to talk about, do that coming up as well. also coming up, chugging higher, our dominic chu highlights railroad stocks which have been defying gravity lately the past year. we will find out how much upside potential they may have left in the tank when we continue on "closing bell." stay tuned. cute little guy, huh? this guy could take down your entire company. stay with me. on thursday a hamster video goes online. on friday it goes viral - a network choking phenomenon. why do you care? he's on the same cloud as your business. the more hits he gets, the slower your business may get. do you want to share your cloud with a hamster? today there's a new way to work. and it's made with ibm. sfx: ambient park noise, crane engine, music begins. we asked people a question, how much money do you have in your pocket right now? i have $40, $53, $21, do you think the money in your pocket could make an impact on something as big as your retirement? not a chance. i don't think so. it's hard to imagine how something so small can help with something so big. but if you start putting that towards your retirement every week and let it grow over time, for twenty to thirty years, that retirement challenge sfx: crowd cheering might not seem so big after all. ♪ selloff on wall street today, we will point out the dow from the all-time highs of just last friday is down 2.3% from that high. the nasdaq is down 3 -- what did i say, i threw that note away, 3.1% off the 14-year high set last week. the s & p down 2.6% thereabouts, russ the one that suffered the most, hit an all-time high in july, down 8 1/2%. was it earlier than that, hit the all-time high? feels right, doesn't it? down 8 1/2%. those secondaries. >> four trading sessions base dploirt dow to give up 2%. >> an eventful week. that's for sure. >> one of the issues we haven't discussed, isis on the move near baghdad today, this just hours after the u.s. and its allies bombed oil refineries in syria to cut off financing and fuel for the terror group. >> our john harwood has the latest on that story for us from washington. john? is >> bill, on the heels of his big u.n. speech yesterday, president obama continues to try to recruit allies to the u.s. offensive against isis, but increasingly that focuses on the oil raise fineries in syria, that air campaign does, following the principle of follow the money. >> these small-scale refineries provide fuel to run isil operations, money to finance their continued attacks throughout iraq and syria and they are an economic asset to support future operations. producing between 300 and 500 barrels of refined petroleum per day eyes sill is suggested to generate millions of dollars of revenue from these refineries. >> the most important thing in iraq is trying to hit isis on the ground and roll back their advances. ultimately, ground troops are going to have to although the president says they won't be american ground troops, are going to have to take and hold the territory that isis has claimed. that's going to take a long period of time, guys. >> all right, john, thanks very much. and typically, when there is trouble in the middle east or some geopolitical i shall a you that could affect the price of oil, you get an instant reaction in the oil markets. >> and that's not exactly the case this time around. >> nope. >> in fact, crude oil has been moving lower steadily, today, around $92 a barrel. joining us now with his thoughts on where it goes from here is dennis gartman from the gartman letter. dennis, good to see you. >> welcome back. >> always good to be here. thank you. >> how weak underlying all of this is the oil complex, dennis, if despite all the unrest we have seen across the middle east, it's -- continues to move lower and lower? >> actually, kelly, in the past four or five days, crude oil has actually started to turn slightly for the better, not dramatically slow or so, but what we've seen is the front spreads, the nearbies gaining upon the deferreds which is a difference than we have seen in the past month and a half. crude oil was coming down, the term structure was turning very bearish, the front months were losing relative to the back, now in the course of the past several day the front months are gaining relative to the backs and that's where the footprints are left of what i used to call informed money. so, it was easy to be bearish of crude a while ago, i don't think one should be terribly bearish of crude down here. what's interesting, too is that the headlines that we've seen from the attacks upon refineries, we get this vision of refineries, such as the ones we see on our east coast or down in the gulf, massive refineries, what we are talking about in syria are literally nothing more than small pots, very small black market-type of activity, not the type of refineries that we've seen. and that's -- go ahead. >> i was gonna say, they are -- it's -- isis has been using them to finance their operations but it's not in the scheme of thing also, not that big an interruption to the flow of oil, that's for sure. but what about this mindset in the price of oil lately and why -- you know, we talked about this geopolitical premium that was in the price of oil for so long with brand above 105, our own wti above $100, suddenly, that was evaporating here and we are not seek the kind of response to geopolitical issues this we would normally get in oil. so, why the turn in the mindset? is it fundamentally based or what's going on here? >> bill, i think two reasons i think you can take a look at, one, everybody should know this by now, we are, in act if a, creating a lot more, finding a lot more, producing a a lot more crude oil here in the united states than anybody might have ever guessed a mere two years ago. fracking is very real. it's taking place. it's ongoing. it's going to continue. two, we are really not paying much attention to the fact how much less we are driving in the united states and how much less demand there is for gasoline, which had heretofore been the real product, driving prices on to the upside. so, demand is falling, not because the economy is weakening but because we are learning how to use our cars better and more and more shop to make it a simple statement, doing more and more of our shopping online and having fedex press bring it to us rather than going out and doing it on our own. >> a lot of these newer vehicles are more fuel efficient. >> absolutely. >> dennis irk bring this hup, i don't know if you saw this report from wood mckenzie, they think because of the production boom in the u.s. and the fact that we are basically not exporting any of this oil, the u.s. benchmark, 30 bucks below the international one is a spread like that possible and what point did the economics mean that u.s. producers begin to shut down this capacity instead of pumping endlessly? >> kelly, got a very good point and you actually -- all you have to do is take a look at what canadian crude oil has been at times. there was a while back, several years ago, when canadian crude was $45 below wti. so you can get those sorts of circumstances where cash crude oil, depending upon where it is being produced and whether it can be delivered upon, can get to huge discounts. i'm not surprised to see somebody make that statement at all weekend we are probably going to get, before it's done, a year and a half ago, i made the statement that i thought before it was done, we would probably put pressure upon the frackers and the only way we will put pressure upon the frackers is to take wti on the board down to about $85. maybe we will get there. i'm not going to be a presser of that issue, but that's what it's probably going to take, probably going to take $85 on the board and then a large discount for the basis for spot crude to shut off that sort of production. whether that's going to happen or not, i'm not sure. >> before we let you go, dollars, still gonna go much higher from here, do you think? >> i think this is the start of a protractible market, bill, in the dollar, i think money wants to move to us, i think money wants to move to canada, i think money wants to move to safer place, today, we are actually seeing a move to japan, which doesn't make a great deal of sense to me, but i think this has the look of what happened back when reagan took over and and the dollar went on a 2 1/2-year long protracted run to the upside, i think we just started to be honest. so as -- as other members of the cnbc family have said, king dollar seeps to have gotten recrowned. >> with janet yellen. >> yes. >> as well. >> queen dollar we call her. thanks, dennis. >> downward pressure on crude, which as we mentioned the last can um of days holding up a little bit better but here, not the case for the market. >> down 245 points right now and the industrial average decline of 1.4%. >> today's selloff could, could it present a buying opportunity in that's going to be the question, especially the railroad stocks. they have been surging big time over the past year. our dominic chu looks at where they've been and where they could go from here after the break. also ahead, wisdom tree's chief investment strategist, i always get that wrong, luciano. also, jim grant of the wisely read newsletter bearing his name, speak with us exclusively, talk markets, fed policy and more coming up on "closing bell", stay tuned. siracusano. all the way until the am. new aleve pm the only one with a sleep aid. plus the 12 hour strength of aleve. the smartest or nothing. plus the 12 hour strength of aleve. the quietest or nothing. the sleekest... ...sexiest, ...baddest, ...safest, ...tightest, ...quickest, ...harshest... ...or nothing. at mercedes-benz, we do things one way or we don't do them at all. introducing the all-new c-class. the best or nothing. 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. 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. this is charlie. his long day of doing it himself starts with back pain... and a choice. take 4 advil in a day or just 2 aleve for all day relief. honey, you did it! baby laughs! what used to be known as classic red off day, dow off 250 points, near the lows of the session, ten year moving lower a bid in gold. >> dollar's higher. >> dominic chu has mother and where the gains may have been. >> transportation stocks a hit with the rest of the overall market today, they are up, you know, margin ally, the course of the last few weeks here, this he have been showing signs of strength, at least recently, we will call it, specifically, if you look at the railroad companies, like said, since the end of august, traders and investors have been slowly bidding up shares in the bigger names in the industry, even with the pull back today, the road and rail industry group is still one of the best performing in the s & p this month, of september. so, union pacific, first of all a positive performer since the end of august, shares up 2% in that timeframe, that's much better than the 1 1/2% drop for the broader s & p, the same for norfolk southern, csx, kansas city southern, those big names. now, kansas city southern is actually up around 3% and since hitting a low of around we will call it 88 1/2 dollars back on february 18th, shares rallied by over 30%. as for the professionals seeing some of the stocks headed, norfolk southern, analysts have a price target, $17 per share, around 6% higher than current prize. analysts split with a 46 buy rating, call on 54 from having a sell or at least a hold rating. for csx, average analyst price is $32.75. that's just 3% above the current price here, one-third of analysts have a buy rating and two-thirds have a hold. as for union pacific, analysts expect $113 and change, or 6% above the current price. 70% have a buy rating here and shares, we will call it, 30%, have a hold. no sell ratings for any of these three rail companies but unless these target prices are lifted, you could say potential upside may be limited as those target prices are within, bill, kelly, 3 or 6% where current levels are now, guys. back over to you. >> dom, thank you, ties together with the story we were just discussing about oil. any hiccup in the boom, rails carrying the stuff could get hit. something to watch. >> like the lower ploos i to fool their trains but they like the higher price to move the stuff at the same time. >> yeah. we are heading to the close here. we have got, what, 33 minutes left in the trading session here. the dow's down 250 points now. exchange traded fund volumes have been soaring. we are asking going to discuss that and how to read gains from today's selloff with wisdom tree's chief investment strategist next. >> that would be luciano siracusano. jim grant will be joining us. fishers a comments that a rate hike could come next spring may have sparked selloff today. get jim's take on that coming up as well. stay tuned. whenwork with equity experts who work with regional experts that's when expertise happens. mfs. because there is no expertise without collaboration. you can't get any thbetter than that. trains. siemens trains are not your grandparent's technology. they're something that's gonna change the cities we live in today. i find it so fascinating how many people ride this and go to work every single day. i'm one of the lucky guys. i get to play with trains. people say, "wow, we still build that in the united states?" and we say, "yeah, we do!" that corporate trial by fire when every slacker gets his due. and yet, there's someone around the office who hasn't had a performance review in a while. someone whose poor performance is slowing down the entire organization. i'm looking at you phone company dsl. go to comcastbusiness.com/ checkyourspeed. if we can't offer faster speeds or save you money we'll give you $150. comcast business built for business. welcome back, just joining us, yes, a selloff day. fourth consecutive day the dow has seen a triple digit move, three have been to the downside. yesterday's may have been a head fake, we had that 100-point gain, in i rate, down 248 points right now on the industrial average. >> maybe just the autumnal equinox. we will get into that later. >> yes. >> all eyes on this market selloff and so let's bring in wisdom tree's chief investment strategist, luciano siracusano here joining us at set to explain why you should pay close attention, especially to queen dollar. >> the dollar. >> today. >> you think that's the big move we should pay attention to? >> yeah, i think one of the drivers for returns the next two to three years, most important thing happening in the global financial system is the fact that the bank, central bank in europe, has got rates at zero and starting to print euro there and more accommodative, bank of japan continues to do it very aggressively and they are going to have zero rates there, probably for a few more years a at time when we are going to start to probably raise interest rates on the short end some time next year. that differential in interest rates is going to be the next driver, think, of dollar strength and starting to see it reflected in the market, particularly the move in the last six weeks. >> so, where are you seeing -- what are the ways to play it from an etf view and where are you and how much are you starting to see people, whether it's retail, institutional, hedge funds doing this already? >> well, i think the first thing to think about if you're internationally invested in stocks across-the-board. a lot of the equity markets are up year to date in their local currencies, you adjust it back to the dollar, they are down. the reason they are down is because their currencies are down. euro down 8%, yen down recently. i think the way to think about it, if you have international equity exposure through an etf or mutual fund, think about hedging out the currency going forward. >> i see where you're going with. this you guys have a big etf on japan that does exactly this. >>ize recall, we do have one in europe. so do others, the important thing to appreciate the impact currency can have on your total return of your equity port foal' and -- portfolio. it helps the big multinationals who rex sporting around the world. makes them competitive. that's what drag guy and kuroda are doing, fighting inflation and trying to get their economies competitive through an indirect currency manipulation, the net impacts is the's going to depreciate their currency while hopefully ours strengths, not just because of what we are doing in washington but because of what the economy in the u.s. is doing. >> the same time, our rates will eventually go up, which will contribute strength of the dollar here, the rate do go higher, plenty of people who fear what the market response will be at that time. what do you suggest people will do? >> a short-term haircut, haven't had one in two or three years, likely see some selloff, not at the end of the tape but october, people think the first rate hikes come, there's still a lot of margin in the system. people are borough at zero to invest in the market. some access out of the market, short-term rate goes up, the equity market can continue to really, two, three, four year, after the rate hike. don't get a market top until years in after the first fed hike. >> i wonder, and you know this better than anybody, you see the numbers come in, so many people have piled into these bond funds anticipating a rate hike frankly not getting, i understand make around the corner, how much risk is there if i'm sitting in one of these funds now, big are these funds, again what kind of losses could people be facing if this whole scenario doesn't pan out? >> depends the duration of the bond fund, seven-year duration or two-year duration? impact sensitivity to interest rates, the other vicks how liquid is underlining security, invested in treasury, credit or invest in some of the bank loans that don't settle as quickly. some legitimate concerns in parts of the fixed income market, not because they need to have structure, because of liquidity of the underlying instrument. >> we have seen so many stories if i'm looking at my etf, what is the most important thing to look for, the presence of these loans instead of other types of assets or what? >> interest rate exposure through duration and do things to shorten duration and the second thing is the underlying investment capacity of the instrument, invested in u.s. bonds, investment grade bonds, high yield bonds. trade over the counter or by appointment or someone is faxing a document to someone else? the more liquid the market i think you want to turn to, particularly as rates start to rison at equity side, i would say probably more large cap than small cap going forward. internationally, definitely, if you can, figure out a way to hedge out the currency impact because if the dollar rallies, anything you are getting on the stock side gets taken away on the foreign currency side moves against you. >> people turning to high yield bonds, used to call junk bonds, those funds to take advantage of them because that's where you could get something in return, but ahead of liftoff, as the fed's gonna call it, they start raising rates, junk bonds have been lagging here lately, do you look at that or -- >> i think you need to make some distinctions between the real, real junk, distressed junk. >> the junk jer it is, the higher the yield. >> you might want to tilt toward the higher quality junk bonds, the junk bonds, they can help with you higher income but as strengthens, some of those companies, their default risk is lower. the economy is improving, the time to get very concerned about your junk bond exposure is when you think you might be headed into recession, when you really want to pull back, because that's when default risk goes way up. >> just a last question on these etfs, because we know there's no such thing as a free lunch, if i want to get ex-poesh this you are to japan or europe without the currency risk, what kind of risk does that itself entail? how do you hedge? how do you get rid of that effect? what else does that expose me to as an investor? on opportunity risk, today, the yen rally, the yen get stronger, you were neutral, you would lose the benefit of an appreciating yen, but if you want to get long in the end because you think the yen will appreciate, get long in the yen, don't get long in the yen and the stocks of japan, the stocks in.gentlemanen do better when the yen's depreciating you. wisdom tree has etf thanks shorter, neutralize the currency within the et. if itself so you're not taking on the currency exposure. the easiest way i know of a way to do it. others that do the same. >> good to so you, luciano. thank you for joining us today. appreciate t as always. heading to the close, 23 minutes left here, the dow holding steady. art cashin came by and gave us an astounding number. >> said there were a lot of buy orders on the close. fee that makes a difference. >> not moving it at this point. we will see. >> also happening after the close, we have got nike reporting results, big dow component, there's not many in the green today. and i don't think any, in fact, nike down 1.25%, tell you which numbers to watch out for next. we will also give them to you. the second thing at the tape, right after the bell, keep it here. >> also later, jim grant of grant's interest rate observer talks bonds, interest rates, today's telloff, king dollar, much, much more coming up here on "closing bell." stay tuned. s difference when you trade with fidelity. one you won't find anywhere else. one-second trade execution. guaranteed. did you see it? 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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. know that chasing performance and fewer choices in retirement. know that proper allocation could help increase returns so you can enjoy that second home sooner. know the right financial planning can help you save for college and retirement. know where you stand with pnc total insight. a new investing and banking experience with personalized guidance and online tools. visit a branch, call or go online today. welcome back. pressure across the board today, the financial he is especially taking on the chin, weighing on the dow. the nasdaq hurt by apple's underperformance, it was off more than 3% at last check. >> morgan brennan's here to track some of the movers for us, cannot forget about the nike earnings coming out, radio sit in >> we cannot forget about nike, first, kick it off with one of the few stocks popping today, shares of swift transportation up about 10% right now. swift reaffirming higher third quarter earnings, guidance in a company release. another winner, travel port, that's up about 4%, nearly 4% today, the travel services company showing a strong debut in its first day of trading on the new york stock exchange, but a different story for blackberry, those shares taking a tumble, those are down about 5%, bgc down grading the smartphone company to hold from buy, saying that tomorrow morning's earnings results could be underwhelming and finally, check out nike, trading lower ahead of its earnings, due after the bell, analysts expect fiscal first quarter earnings of 88 cents per share on revenue of 7.8 billion dollars. right now, that's trading down about 1%. should be getting those results in just a little while. back to you, guys. >> indeed, morgan, thank you. 18 minutes to go here and still, we have got oil, do you want to say it? >> what's that? >> coming off the lows. >> there's a drinking game going on out there, apparently, with some viewers. there you are. welcome. first time today. >> tivo. >> not 5:00 anywhere in this country at this point. nasdaq feeling the brunt of the pain today. we will have a live report from the nasdaq market site in times square coming up in a moment. stay tuned. ai use helps you be ready anytime the moment is right. cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. 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. welcome back. we are coming back a little bit, heard from art cashin that there was a lot to buy on the close, may be one of the reasons we are starting to see a little bit of levitation here, the dow still down a hefty 226 points or one and a third percent. >> nasdaq, bertha coombs, off today 2%? >> yeah, it's been 2%. that has been led by apple, the story today as goes apple, the worst performing sector in the s & p 500 and certainly the nasdaq 100 today has been among the leading sectors to the downside because of apple's massive weight. the big apple today, you could say, it has caused about 16 to 18 points to the downside, depending on trading. apple, meantime, has not traded below $98 or closed below $98 since september 9th, date before they announced theism phone 6, effectively seeing the shares give up all of the gains since the launch of the iphone 6 with all of the issues that have arisen since then. but a couple of stocks, we are seeing a little bit of buying, have come into the green, lifted up a little bit off of the lows, broad com one of them, lower much of the day the ceo in an interview this morning says even though they are not going after 4 g, still thinks that broad com will be included in a lot of wireless technology, so it's one of the few nasdaq 100 stocks in the green. discovery communications has been the other that has held up much of the day, a little bit weaker here at the end of the day, discovery buying 60% stake or taking a 60% stake in a new channel that is going to be a family-oriented cable channel. so it is just holding up positively. and today, what's very interesting, on a massively down day, got some tech stocks today that hit all-time highs, not all of them held on to the gains, but go pro notably continues to march forward, you have your doubters about that very niche product. facebook today hitting an all-time high, vertex pharmaceuticals and sell gene an all-time high, along with the biotech index, guys, even though we are seeing big profit taking here, some of the stocks technically still look pretty strong. back to you. >> all right, bertha, thanks very much. joining us as we head toward the close, bob kaiser from s & p capital iq and one arthur carbon from ubs financial services. your spider senses started to sense something was up last friday, didn't you? >> yeah, it was -- this week has been traditionally one of the weakest in any year, after the september expiration and the autumnal equinox and wd genn said more reversals occur on the 22nd. >> the note on that was fascinating, when you wrote about t. >> all came together. >> as odd as it may sound, historically held up, hasn't it? >> absolutely, may see more volatility tomorrow. >> bob, if you had to cite a reason underlining the volatility, what would it be? >> a couple additional point to make to what the a mentioned. [ inaudible ] hasn't been able to come anywhere near the highs made in march. now, look at september, the 18 trading days, including day, eight of those days so far this month have been plus or minus three points of the 2000 level, momentum is fading. now you layer in on top of that, how to macroin the landscape, changing quite dramatically, stronger dollar gonna weigh on profits, europe weakening more than thought, been reasons for people to reassess portfolios. >> my question would be is this -- should we be surprised we are having a weak september, autumnal equinox so often in the past sore this a game changer, as far as you're concerned? >> we have been one of those bulls who thought there was a like had ihood of a correction, thought it would come earlier, market gets down to the 1950s, buying opportunity, closer to the 200-day moving average, overall, the fundamentals still very solid, people are reassessing the macrolandscape and questions in the marketplace. >> i was going to ask you what levels are you watching right now? >> i think very near term, the 1963, 1967, if we go beyond that i think this may become a bit more protracted, maybe even move into the month of october. and we know when they move into the month of october, that's rarely pleasant. >> so, i mean, i don't want to get ahead of ourselves here, this could fine lib the beginning of a correction, i will use the c-word here. >> people are starting to avoid risk and one of the components of this selloff that we had were remarks by richard fisher of the dallas fed warning there was a real risky profile building in the high yield and that spilled right over into the russell 2000. >> by the way, that russell off 8 1/2%, i think? >> by far, the laggard, as you point out. secondaries have really lagged the blue chips here. >> and add one more thing that has only recently come on to the radar is keep an eye on sovereign risk spreads in europe, because draghi announced, he admitted that the european growth scenario is unwinding faster than anyone thought. see sovereign cds spreads move higher, could be more on the downside on the risk off trade if that starts to develop. >> if this is the market pushing central banks broadly speaking for some kind of response to call it collapsing inflation expectationser whatever is it possible that it comes in the form of ecb and phil blaine, uk-based investor, was saying, look, maybe it's the european central bank that's going to buy u.s. treasuries here? >> they won't buy even if yields go up, that's definite. i think the u.s. fundals are very sold. new home sales this week was the strongest level we have seen in five years and new home sale prices are 5 1/2% higher than the peak of the housing bubble in 2007. could be a little whiff of inflation coming down the road. >> arthur, you were telling us a while ago, a lot to buy on the close. that's starting to narrow here. but we have come off lows pretty -- >> over $1 billion to bion balance. >> that's lot. >> now, under 200 million a lot has come in. and i would just add one thing, we may be getting to the point where mr. drag hi has his clara pela moment, where's the beef. he has been talking for some time and now got to put up. >> yes. >> we will do whatever it takes, maybe it's time he did it. >> we will see if that he is at case. gentlemen, thank you both. see you later. coming back with the closing countdown. you guys are stick around, see how we do close here in a few minutes here, but we do have that big earnings report coming up. >> nike reporting earnings after the close. the dow component could set some of the tone for tomorrow's markets here. stick around for those numbers, coming up. plus, jim grant talks interest rates, bonds, previews tomorrow's gdp number that final number for the quarter. we will talk about that coming up. you're watching cnbc first in business worldwide. 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[ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade. making our way into the last four minutes of trading here, the major averages as they stand at the moment, the dow's down 1.3%. s & p down 1.4%. same thing for the russell. it's the nasdaq that's getting clobbered today, down 1.8%. let me show you the dow for this week. we had those two big down days on monday and tuesday. tuesday especially, we were talking about that mythical death cross on the russell 2000, where the moving average was crossing the 200-day moving average but rallied back yesterday, turns out that was a head fake, at least for now, move to the lows of the week, down 230 points right now or 1.34%. what has gone higher continually has been the dollar and today, it's up at least on the dollar index here, up to 8520. what about the dollar? how much higher -- are we in for a real bull run here, do you think? >> i think so. i agree with what dennis gartman said, you have got the central banks obviously trying to get the yen cheaper, trying to get the euro cheaper, it's an uphill fight. it will be a little while, and going to hear the multinational squeal ask ms. yellen, we need help. >> put pressure on the multinationals, bob pisani joins us, what a day. >> earlier in the week, concerns about lower china growth, now we have concerns about no growth in europe and potentially, if the russians actually do start enacting sanctions or seizing property of foreigners in russia, as was discussed today, the possibility that could throw europe into a recession. that's very serious issue. on top of that we have got mr. fisher talking about higher rates, but what he is doing is reminding us all, wait a minute. >> richard fisher talk about higher interest rates is not new. >> more, aggressive from him. >> i get t. >> he definitely moved the high yield market today. is there any question about that, ar this you are? absolutely not. that spilled over into smaut caps. on top of that i think he is reminding everyone that we have had problems in the past when the fed ended its program, we did this twice before, we have had problems, i think that was a little gentle reminder, too, that everybody said, you know what, good point. >> gdp, get that number tomorrow what are you guys expecting that? we had a guest on a little while ago, he thinks we could see a 5% number for the quarter. >> i think north of 3% with some confidence, 3 1/2 to 4, 5 is a little bit of a reach. i want to point out coming back to the dollar, macrolandscape is clearly shifting, the gdp differentials favor the u.s. versus europe. the interest rate, monetary policy differentials favor the dollar as well so the dollar strengthening, makes perfect sense, starting to see evidence the macrosituation changing, starting to bleed into other markets. now, concerning the fed, i'm gonna back up bob a little bit. janet yellen herself said that considerable period is highly conditionable. so we have probably one strong panel number away from a spike in yields which will also feed the idea that the macrolandscape's changing and the stock market is the most forward-looking of the markets perhaps, starting to sense a little bit and maybe protecting itself a little bit. >> sensing the end of the morphine drip here. >> just a safe evaluation until things get a little clearer. >> earnings start to come out, we get nike at the bells, as a matter of fact, and then start in ernest, of course, after the end of this month, what do you gays at. is and p capital iq expecting? >> third quarter consensus, 6.8%, companies typically beat 2 to 3%, looking the a number 9 to 10%, sets us up well into 201 a, through year end this year into 2015, 10 to 12% earnings growth, fits well the u.s. economy improving. >> a hot gdp number tomorrow, might not be good for the stock market, right? >> might not be good for the stock market. you will have to see how the yield, particularly the ten year react as, they begin to spike up, be a tough day. >> look at the volume here, arthur, not physically unusual, but volume in the s & p futures very heavy today, clearly were some sellers around. >> thank you, guys, all of, appreciate your time. as we go out here with a decline of 255 points, very volatile week, what happens tomorrow? we will find out coming up, we got the nike he wererings and jim grant on the second hour of the "closing bell." i will see you tomorrow, kelly. >> thank you, bill. welcome to the "closing bell," everybody, i'll kelly evans. it looks like we are going out on the lows of the day for wall street, the fourth day in a row of triple digit moves, this time, sharply negative direction, in fact, giving up 258 points on a close of 1 1/2%. look at the nasdaq, going out with a loss of almost 2%. the s and p giving up 32 points. this is important for a lot of people watching the charts here, closing at 1966. a lot of guys were hoping earlier today would hold that 1970 level. not only did it breakthrough it but look like it is going to close on the road this there the. the russell, lagging, weak, off 8 1/2%, might be more now from its peak this year, giving up 1.6% today or 18 points to the level of 1110. talk it out with the panel. joining me now is elon moy of the walks post, rebecca patterson, michelle caruso cab bra ir -- cabrera and jim najarian. >> everybody is focused on the tide going out and figuring out who is going to be naked at this point, right? so, we saw an emerging markets, right? we are going to see the dollar strengthen, if the fed is going to be relatively speaking, the tightest ship on the block. and then you're going to see all over the place. gone up every day for years now, a 2% pull back isn't to be unexpected. >> sign of a healthy market or something -- >> i don't think it's a big deal that we pulled back this much in one day. less's normal. healthy we get pull backs along the way, i think the fed, do the degree we get next year, come along side a healthy economy, saw that today, durable goods, look under transportation was good, jobless claims were good, i think this was much more technical today than anything truly fundamentally changing. >> i have to agree with rebecca. i think the extent the markets are focusing on what richard fish said this morning, this afternoon out of mississippi said exactly the opposite. he is not looking for a rate hike until may 2015 or later. he is explicitly ruling out an earlier move. that's really important. what we have heard this week from the fed is not a pocket signal but a developish push back. >> they are going to stop buying. that's it right? quantitative easing is ending. [ overlapping speakers ] >> we have known that for months now, why is that driving the market? >> because you don't have a physical buyer in there going after treasuries. >> dr. j, what do you think? >> you know what i think, kelly, if you're gonna lead me down that path, we are not the only determinate for the direction of our interest rates. global pressures and demand for what appears to be a great asset class denominated in dollars would be our treasuries. that's why you're going to continue to see downward pressure on interest rates in the short term. whether it's mid-2015 or perhaps even in the spring of 2015, before we start going up, again, that will be determined by global pressure also not just our fed. otherwise, people are missing the big picture. >> oh, sure, it's an important point. look, we talked the other day on this program with steve liesman about how europe is exporting deflation to some extent. rebecca, talking about better prospects, maybe the sign of a healthy market. what happens if you have inflation expectations dropping and lower today by some measures in any other point when the fed has stopped and tried to exit from quantitative ease.? >> one thing that was mentioned earlier and also by bob pisani earlier on the show is what's going on in europe and i don't know what to make of the russian threats today, if these just bluff, if that's posturing. but the thing i would worry about, if europe continues to get worse around that plus a stronger dollar affects guidance from u.s. multinationals the earnings season, which kicks off in a week and a half that could be something that just keeps a lid on market enthusiasm. now, what's funny about that is small caps should do better in that environment. small caps are more domestic, more dollar centric, yet a really rough ride this year. the m and a and the dollar aren't helping the small caps the way they should. >> i can't by live we are coming up on earnings season again, did have erin gibbs remind us of this point yesterday, surprised we haven't heard more companies issuing negative guidance because of the effect of the dollar combined with some weakness overseas. >> this is when you start doing the screens of, okay, who's got more than 60% of the their revenue coming overseas and where you'll start to see the warping signs. why are we in the quarter right now? has it been enough? the dollar very strong for the last several weeks. >> very recent. >> but very recent. so it may be the next earnings sea season. >> nike one gauge, after the bell today, i'm sorry, it is after the bell, get that any minute now in fact, a company that does have a lot of global exposure also, albeit in a different kind of market, not necessarily the most economically sensitive. >> bring the conversation back to the concerns over inflation, what i would say is that, you know, you have seen the fed sort of be worried if unemployment rate falls too low, force the hand, tighten sooner rather than later, now starting to hear federal officials talk again about the concern inflation is not going to be high enough and that is going to be a reason to delay the liftoff even longer, so, even if you have the unemployment rate falling, as long as inflation remains below target and below trend, that's going to be, you know, another force holding, staying their hand. >> dr. j, what happens if the conversation happening with bob kaiser and art just a couple of minutes ago if the market's kind of forcing mario draghi's hand here, will that do it? >> certainly could. and one of the best things to come out, by the way today, kelly, it's never good for anybody unless you're a bear and short, not good when the mark it's down 255 points. or 260-some-odd points to the dow. but now, we won't have to hear headline after headline, read those headlines about how people are overly optimistic, how bullish sentiment is at an -- because it hasn't been, it wasn't and it isn't. that's good thing for the markets, sos's not good that the markets went down, none of my customers that want to be long markets for long periods of time are happy about that, but there are some opportunities, it's also the end of the quarter, and i think people were getting ahead of what they were worried about next week and that's why they are selling today. >> fair point, dr. j. what about the -- go back to what happened there there on the close. the last hour of trading, we went from kind of moving off the lows of the session with some strong buy orders to closing apple. i know technically speaking or whatever, that is just not the best signal usually. >> no, but it's also something that i'm sure the bears would rather have had us rally 60 or 70 points into the close, finished down 180 instead of 260s, because when you get the wash into the close it sets us up for what's going to happen tomorrow morning in europe r i think we could get a spike in volatility out of germany and if we get that and a denial out of russia, that sets us up for a nice turn into tomorrow afternoon. >> i was just gonna ask, michelle, talk about russia and some of these rumors, word that was going around. >> actually not a rumor. they published literally the words for potential lull, they could seize assets in russia this is tat for tat, what happened to one of putin's very close friends in italy had several homes seized by the italians, wealth seizures. so we could see -- they said that is a possibility. whether or not they are going to actually do it remains to be seen. >> why would that account for, for example, europe? >> you got me. germany trades a lot with russia, right, we have gone over that over and over again, start to see germans a sets seized by the russians? i find it hard to believe, maybe italian assets seized by the russia reasons, since they punished his judo partner. >> rebecca, to that point, a last word with an eye what we need to watch for now and the days to come. >> i think in the days to come, we are going to have an ecb meeting, do we get more talk, more job owning, try to get the euro lower, russia uncertainty there, cause europe to underperform the u.s., in my view at least, we have been under way european stocks for a while, think even with that european central bank report under there, bad news/good news, i think a while before we see a catalyst for growth for europe that makes we want to add. >> continues to be a headwind for us as well. responsible for some of the selling pressure we have seen today, talk more about it straight ahead. dr. j, thank you very much for stopping by. appreciate it. >> thanks, kelly. >> catch him with the rest of the "fast money" crew at 5:00, going to be talking to senior portfolio manager dan niles about his tech stocks to biin this selloff. don't miss t reminder, apple was down 3 1/2% today, that went on the nasdaq a sea of red across all quarters them up next, going to go to all the major market floors and hear what was the mood of today's traders and whether or not they will be feel willing the same way tomorrow. still ahead, i'm also going to talk exclusively with the ceo of magnum hunter. despite today's massive selloff, this stock was up 10%. we will tell you why, straight ahead. you're watching cnbc, first in business worldwide. ers a diffen 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. cozy or cool? exactly the way you want it ... until boom, it's bedtime! your mattress is a battleground of thwarted desire. enter the sleep number bed. designed to let couples sleep together in individualized comfort. he's the softy. his sleep number setting is 35. you're the rock, at 60. and snoring? sleep number's even got an adjustment for that. you can only find sleep number at a sleep number store. right now, save $400 on our most popular mattress. know better sleep with sleep number. welcome back, we begin with morgan brennan. >> shares of micron sinking 2, 3% in the afters, coming out with their quarterly earnings, they beat earnings estimate by one penny and revenue better than expect and the 4.23 billion versus sometimes of 4.16 billion, but gross margins came in light and that could explain why we have been seeing a drop in that stock coming in at 32.8 and analysts were expecting 34.5. so, take a look at that stock that, that's trading down 2 1/2% in the after hours. >> look for the guidance too, thank you. the major indexes suffering major losses today, cnbc's market pros are here, bob pisani, rick santelli, bertha comes a and jackie deangeles here to tell us what the move was on the floor today guys and what to watch for breaking down this selloff. bob, start us off? >> smack on the lows, rather disappointing, coming off of them, looking at the s & p 500, frankly, hopeful there could be buying but no buying energy throughout the day, see ending at the lows, richard fisher, dallas fed, reiterating rates might rise sooner rather than later, spring 2015, he is a hawk, took aim at the high-yield markets, saying we were seeing extreme risk taking, look at these high yield etfs drop on that and that pled into the overall market. there were also risk off here, emerging markets were down, biotechs, solar, the high beta stuff all on the downside. then we had some reports that the russian government may enact, may enact a law to seize foreign assets, certainly not good for europe, you can see what happened to germany on that don't want escalation concerns. no growth already. maybe negative growth if that continued here. that was a big issue overall on the day, the two issues wayen at market. rick santelli in chicago. i think mr. fisher reminded everyone there has been problems in the fast when the fed ended its qe program. >> having that in traders' minds paints a picture of question marks, maybe that's what it was about, question mark. no question on things in treasuries, five and seven year auctions didn't go well, the two year did and when you consider that we were down three basis points in five, five basis points in tense and seven basis points in 30s, you get an idea that the curve flattened today and flattening of late gets associated with the risk-off-type trade. we talk about yield and the tens, roughly three-week low closing yields an of course jerk have a weak durable goods number, the weakest month over month change ever, but to be fair, it was following the strongest, 22 1/2% change that we had last month, so really wasn't the data and speaking of data, tomorrow, we will probably have close to a 4.6%, second quarter gdp, final look around the block, of course, and our final look at september, michigan sentiment and that will lead me to the nasdaq, which had a huge day. what did you see, bertha? >> real negative sentiment. it's interesting because we started the week with negative sentiment when it came to the small cap concerns about the technical break down in the russell 2000. today, a big cap story all the way and it was really centered around apple, the trading in apple on a low-volume day, saw twice the volume that you normally see over the last three months, more than about 100 million shares having traded hands and apple, after having hit that all-time high ahead of the iphone 6 launch, well, the technical woes have hit the stock technically today, closing at the lows of the session, also closing at its 50-day moving average, so, starting to see a little bit of weakness, giving up all those gains it has seen here in september. the other sector to watch is biotech. bob talked about that. biotech this year has been one of those real big sentiment movers, started off the day at an all-time high for the btk index, ahca index, biotech index, some of the stocks starting at 52-week highs today, they moved down along with the rest of the market, see if we continue to see that sale through on the biotech sector has been among the best performers this year. over to you at the nymex, what did it look like? >> a volatile day at the nymex in lockstep with what we saw in the equity markets, a couple of key reversals i think are important to note. start with energy prices, because domestic crude was down -- pardon me, up most of the session but then closing lower at the end of the session. 52753 a barrel. then gas beat up as trades expecting a bearish report on inventories, got the bearish number they were looking for, but bid up nat gas at the close and finished over $4. switch gears and talk about metals, gold was lower earlier on in the session. but then as equities started to sell off, you saw the gold market started to rebound, recouping some of those losses, gold closing the 1221.90, up 2 1/2 dollars, not safe haven buying here, not enough of an upswing for traders to be convinced that the gold trade is going to work out. rest of the metals, of course, grieve lower and because of the stronger dollar that we saw. the dollar expected to strengthen even more. if there's one thing to watch, that's what traders are saying it is. kelly, back to you. >> jackie, great stuff and great timing, took because nike earnings are now hitting the tape and our dominic chu has the headlines. dom? >> nike shares very much a focus for investors now, the health of the global consumer, at least a read it on it from nike earnings, the numbers coming in pretty good here. the numbers, 1.09 a share, that appears to be comparable to the analyst estimates for 88 cents a share if so, a pretty handy beat on the bottom line. the top line, we have 7.98 billion dollars worth of sales versus analyst estimates for about 7.84 billion dollars. also, one of the thing that a lot of traders and investors look for, it comes to nike's numbers is the declaration or the estimate of global futures orders, an indication of the future business coming down the line for nike. on a currency neutral basis, those globals futures orders are up 14% versus analyst estimates for a gain of 9 1/2%. so, again, 2350u67 churs orders coming in better than anticipating, earnings per share coming in better than anticipated and sales coming in better than anticipated. you can see why that stock is up 5% on a nice spike in the after hours session, kelly, more details as the conference call kicks off this afternoon, a beat on the bottom, top and future orders for nike, up 4, 5% in the aftermarket, kelly. >> nice pump there, dom. thank you. robert plaza from key private bank for his reaction with numbers and the panel. 5% is a big move for a company this large. >> given the numbers that dominic read off, i don't think too much to say sounds like a good quarter from beginning to end. >> isn't nike stock that has 70% of the analysts community positive, a lot of the expectations priced in to there are world cup quarter. why do you think it is they will manage to move 5% high otheren a huge market cap? >> it really comes down to how many levels this he have to pull, dominant global brand, they are shifting -- trying to shift from being known for just a wholesale business to retail direct-to-consumer business, higher security margins, faster growing regions outside the u.s., also the potential to deliver higher margins, then with the global scope of their business, they are creating efficiencies in production that's flowing to higher gross margins. >> said the gross margins increased 170 basis points, saying attribute to a shift in the product marks, higher average prices, continued growth in the higher margin dtc business, should we read that as the consumer is able to afford more expensive product or a product line this quarter that, in particular, was particularly good for them? >> they are in one of the best areas of apparel and retail, the athletic leisure, don't see too many people walking around wearing denim anymore, but you see yoga pants. >> with imin leggings. >> yes. yoga pants. you see -- >> a lot of sneakers. >> moisture-wicking shirts. and it's just translating. walk through any high school, what you see all the kids wearing you. >> robert, just a last question, nike paying a significant amount to keep i think kevin durant, who almost signed a big deal with under armour for $100 million, something like that. in any case, does this suggest to you that they have no reason to slow down or back off on some of these mega,ing me da deals with the biggest athlete he is and stars out there? >> i think it's important that they find the right athlete to have endorse their product and kevin durant comes with a -- you know, he is one of the more popular players in the nba. there's nothing bad. there's not a rap sheet coming out. so, he seems to be worth that type of money, just to avoid any of that bad publicity the other athletes in the news lately brought. >> at some point do you start worrying about the doll will aer? how much exposure do they have in terms of strengthening currency? >> growth drivers is moving outside of north america, there is going to cause some noise around their currency, you hear them report, it's always what the number is and then a currency neutral number. in order to try and show what the undereder lying strength is. and over time, the currency fluctuations really kind of even out. so as long as the underlying strength is there i think the stock will respond positively. >> right. robert plaza, thank you, as nike shares move higher by aer 5% after hours on a strong quarter, including that world cup spend. appreciate it. there's a new apple headache today, already battered by today's selloff often heels of benn bend gate for iphone 6, apple plagued by fake ads telling users the iphone 6 can be recharged in a my croak wave. details ahead. the next -- also next, gary evans, the ceo of magnum hunter resources, joining me exclusively as we look at the state of the imaging markets after today's selloff. we 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. stocks may have taken a beating today, but magnum hunter resources held its own, even gaining 10%, how did the company manage to stay in the green today and has the recent i don't.in oil had any impact? joining me now a cnbc exclusive is gary evans, magnum hunter resources ceo. good to see you. welcome back. >> good to see you, kelly. >> so, today, the news has a loot to do with your natural gas developments, you guys are gonna have another boom, it seems, in production, but i wonder, as other -- others in the analyst community are lowering their price target, i'm thinking of morgan stanley in particular, how can these project he is be economical in the long term? >> i think we stood out from the crowd because we announced yesterday one of the largest shale finds, people are excited about the large acre position we have and the fact that we can produce the large quantities of gas. markets hurt, a gravitation of a lot of investors out of our sector now for some reason. $92 oil, $4 gas, i will take it all day long, happy with these price. >> what i was gonna ask. 75 next even, there is a lot of financing involved, for example, that may mean if we hit the level of, say, $75 should we get there, we could fold even further. a lot of the middle eastern countries have now got their economies dependent upon $100 oil. so, we all know saudi arabia is the big spigot over there and they have the ability to crank down oil production and they have done it many, many times. >> i apologize for breaking in here, have breaking news, may have to leave it there the president is also about to speak. we will let you no he in just a moment, gary hunter, thank you. phil lebeau has breaking details on general motors. what's going on, phil? >> kelly, i will make it quick, standard and poors has just raised general motors' credit rating to investment grade, going from bb plus to bbb minus, the second credit rating agency to put gm in investment grade. moody's did it not long ago, standard & poor's raising gm to investment grade. >> fill, thank you. gary evans, if you're still there, under stastand we have ho let gary go, a couple of developing events we are following, guys. general motors shares they were up about a quarter today o >> one thing gary was talking about how and you mentioned as well, with oil prices, really important, i think to remember the social economic political kind of triankle with the middle east. saudi arabia needs oil at a certain price so it can balance its budget so it has the cash on hand for subsidies, those buy them peace. [ overlapping speakers ] >> geopolitical effect that could have significance. >> oil recovery on -- hold that thought. president obama coming to the podium now. as one of the longest serving attorney generals in american history, eric holder has borne that burden. and over the summer, he came to me and he thought six years was a pretty good run. i imagine his family agrees. like me, eric married up. he and his wife, dr. sharon malone, nationally renowned ob gosh gyn have been great friends to me and michelle for years and i know brook and maya and buddy are excited to get their dad back for a while. so this is bittersweet. but with his typical dedication, eric has agreed to stay on as attorney general until i nominate a suckers is and that successor is confirmed by the senate. which means he will have a chance to add to a proud career of public service one that began nearly 40 years ago as a young prosecutor in the department that he now runs. he was there for 12 years taking on political corruption until president reagan named him to the bench as a judge. later, president clinton called him back, so all told, eric has served at the justice department under six presidents of both parties. including a several day stint as acting attorney general under george w. bush's first term. through it all, shown a deep and abiding fidelity to our shared ideals as a people that is equal justice under the law. as younger men, eric and i both studied law and i chose him to serve as attorneys general because he believes, as i do, that justice is not just an abstract theory. it's a living you and breathing principle, how our laws interact with our daily lives. it's about whether we can make an honest living, whether we can provide for our families, whether we feel safe in our own communities and welcomed in our own country. whether the words that the founders set to paper 238 years ago apply to every single one of us and not just some. that's why i made him america's lawyer, the people's lawyer. that comes with a big portfolio, counterterrorism, civil rights, public corruption to white collar crime and alongside the incredible men and women of the justice department, men and women that i promise you he is proud of and will deeply miss, eric has done a superb job. on his watch, federal courts successfully prosecuted hundreds of terror cases proving that the world's finest justice system is fully capable of delivering justice for the world's most wanted terrorists. he also rooted out corruption and fought violent crime. under his watch a few years arc the fbi successfully carried out the largest mafia takedown in american history. he has worked closely with local state and law enforcement officers to make sure they have got the resources to get the job done and he has managed funds under the recovery act to make sure that when budgets took a hit, thousands of cops were able to stain at beat nationwide. he's helped safeguard our markets from manipulation and consumers from financial fraud. since 2009, the justice department has brought more than 60 cases against financial institutions and won some of the largest settlements in history for practicing related to the financial crisis. recovering $85 billion. much of it returned to ordinary americans who were badly hurt. he's worked passionately to make sure our criminal justice system remains beth in the world, he knows too many outdated policies, no matter how well intentioned, perpetuate a destructive cycle in too many communities, so, eric addressed unfaired sentencing disparities, reworked mandatory minimums and promoted alternatives to incarceration. thanks to his efforts, since i took off, the overall crime rate and the overall incarceration rate have gone down by 10%. the first time they have declined together at the same time in more than 40 years. eric's proudest achievement might be reinrig is rating and restoring the core mission to what he calls the conscience of the building and that's the civil rights division. he has been relentless against attacks on the voting rights act, because no step, including our service members, should have to jump through hoops to exercise their most fundamental right, challenged discriminatory state immigration laws that not only risked harassment of citizens and illegal immigrants but harder for law enforcement to do its job. under his much walk the department has brought a record number of prosecutions for human trafficking and for hate crimes. 'cause no one in america should be afraid to walk don't street because of the color of their skin, the love in their heart, the faith they practice or the disabilities that they live with. he has dramatically advanced the cause of justice for native americans, working closely with their communities and several years ago, he recommended that our government stop defending the defense of marriage act, a decision that was vindicated by the supreme court and opened the doer to federal recognition of same-sex marriage and federal benefits for same-sex couples. a pretty good track record. eric's father served in the army in world war ii as an immigrant only to be refused service at the lunch counters of the nation he defended. he and his wife raised their son to believe this country's promise was real. and that son grew up to become attorney general of the united states. and that's something. and that's why eric worked so hard, not just in my administration, but for decades, to open up the promise to have this country to more strifg and dreaming kids like him to make sure that those words, life, liberty and the pursuit of happiness, are made real for all of us. soon, eric, sharon and their kids will be freer to pursue efforts of their own, thanks to eric's efforts so will more americans, regardless of race or religion, gender or creed, sexual orientation or disability, who will receive fair and equal treatment under the law. so, i just want to say thank you, eric. thank you to the men and women of the justice department who work day in and out for the american people and couldn't be more grateful for what you have done, not just for me and the administration but for our country. [ applause ] >> attorney general eric hold letter step down, remain in office until a successor is found. eamon javers, how long do you expect that to take? >> it is not going to be today, that's for sure, the white house telling us they are not going to name a successor, in fact, the president has not decide who had he is going to pick for successor. earlier today, speculation about deval patrick, governor of massachusetts, his aides pouring cold water on that later in the day. solicitor general don var rely, another name seems to be coming up close to the top of a short list here, but anybody's guess when that will happen and how long that process will take in terms of confirming the next head -- next u.s. attorney general in the united states senate. that will be a battle as well. but boy, you can really tell the depth of personal feeling and the warmth that president obama feels for eric holder here. clearly, it's going to be a tough spot to fill for this administration, but also, somebody who has been involved in a lot of the most contentious pieces of the u.s. -- the u.s. law enforcement, including the fast and furious program, which has attracted a lot of controversy, the jpmorgan settlement and other areas were this attorney general has served as sort of a heat shield in many fire in the president that's going to be a difficult role to replace as well, kelly. >> plenty of speculation who might take his position and where he might be headed for now. eamon javers out of washington, thank you so much this afternoon. we are looking for positives after today's massive selloff, get back to markets and the final reading october second quarter gross domestic product tomorrow. also an exclusive preview from jim grant of grant's interest rates observer coming up. we are expecting within the next few minutes more "closing bell." stay tuned. ♪ time and sales data. split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade. we do? i took the trash out. i know. and thank you so much for that. i think we should get a medicare supplement insurance plan. right now? 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[ male announcer ] don't wait. call today to request your free decision guide and find the aarp medicare supplement plan to go the distance with you. go long. welcome back, a deep solo for markets today, tomorrow could be brighter, second quarter gdp, show an adjustment. joining me now in a cnbc exclusive to comment on that and other things going on, jim grant, founder and editor of grant's interest rate observer. great to see you. a strong gdp tomorrow, can that turn market around? >> i don't know. the gdp and i simply don't talk. very large number. billions of dollars. >> i hear it's going to be 4 or 5% or something, we know it was so weak in the first quarter of the year that the question just simply boils down to how strong is the recovery and what is the fed's next move here? >> the fed is the most curious position. is it in charge of so many things in our daily lives, kelly, it taken upon the duty of keeping us stable, the stock market going up and it simply is implausible it can do all these things. i think the question about inflation is one that's front and center in our markets. the central bankers are talking about if, if would you pardon the expression, the five-year, five-year inflation rate. >> so glad you're bringing this up. >> that's how the central bank, certainly the european central bank is preokayed by this number. that is inflation rate getting five years for now and extending five years. kelly, say we were sitting here 100 years agoing, you and i living in germany, we are living large, first world war not yet begun, you ask me, because i am a knowledgeable financial observed, you ask me what is the five-year five-year inflation rate 1914, starting in 1 919, what might the inflation -- it has been next to nothing, right, germany, so i say, well, kelly, it's looking awfully good. kelly, it did not look awfully good in the event there was a sinkhole, hyper inflation, 1923, the inflation rate was like 29,000% in one month. so, i think that we all ought to -- central bankers ought to give a little bit more respect to the element of uncertainty. >> understood. but here's what's happening in the market, as a background for people who aren't following this along, but you should trial, the market every day in the same way economists or anybody asks tries to estimate what inflation is going to be going ahead. lately, it's estimate, thanks to a stronger dollar, falling commodity prices, global uncertainty has been falling precipitously and lowered by some measures than at any other time when the fed has been considering what to do. so, this conundrum, stronger growth, a better stock market and yet, and yet -- >> except, i would urge everyone not to become hysterical about deflation when we have rate of inflation 2%. in europe, the five year, five year thing, 1.7%. here, 2.25. there is no deflation, there might be deflation, be assured, there might be aing great big collapse in our debt structure. that is possible. but for the time being, it seems to me that people -- banks are fanning this, they say unless we have a lot more inflation, which by the way, we cannot very well measure, unless we have more inflation, we will not be safe. well, kelly, so old am i, remember when people say can we not please have stability and how about this? what's wrong with no inflation? >> let me boil this down for investment from the point of view of what people do, do you buy the dollar, think it's going to keep going? so, in other words, okay, fine, things very uncertain, maybe the fed should sticks with the current plan, what does that mean then, where are the best places? >> i think so much investing has to do so much not with what the central banks are saying, gdp, one lo must look for bargains, they present themselves these days of levitated and arguably inflated asset levels. grants were looking in places where few seem -- few others seemed to be looking for, looking in argentina. there's going to be a change of regime and we think a constructive one the wicked witch leaves. russia is for sale, too horrible to mention, stocks three and four and five times earnings, at least in my opinion, investing is principally a bottom up rather than a top-down thing, i think the risks come from the top down, central bank bankers, manipulating markets, fixing price and generally are confusing what value really s >> well, jim, thank you for the reminder. >> welcome, kelly. >> especially at this juncture, you have got a big investment conference coming up, a book coming out, please come back, there's a lot more still to discuss. >> pleasure. thank you, kelly. >> jim grant from grant interest rate observer and despite today's selloff, investors are still betting on the stock market but maybe with some less long-term conviction. you can blame it all on exchange-traded funds. up next, cnbc.com's jeff cox is going to join us to explain that investors maybe on thing for short-term bets on atfs rather than long-term mutual funds. we will be right back. there's no shortage in this world. who do you trust? 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>> high yield in the u.s., 17 etfs alone, just for u.s. high yield. there's everything from a spdr to a small-cap russian etf in spider. you need to do your due diligence and know the liquidity of the etf. when you want to hit the sell button, we've seen the premium to get out of an etf could be 1% or 2%. it's not as cheap as you think. so if you're doing it because you want to sell it cheaply and quickly, just buyer beware. i think etfs can play a great role, but you need to know what you're buying and what you'll have to deal with. >> this concern i've heard over and over again that individuals don't understand the liquidity issue. so much volume going in and the door is going to be really tiny going out, depending what the underlying assets are. >> what do you do, jeff? >> i think the point is a great point about knowing what you're doing and knowing what you're buying, because -- when you look at where most of the traffic is going, it's in the bigger etfs. it's in the spy. the big class of families. a lot of times it's hedge fund guys using this to hedge their portfolios which is important as well and i think there's probably some -- as far as the mutual fund goes, it's transitioning from equity into bonds for people who are retirement age. they tend to be the people who use mutual funds more. but i think just as far as what the behavior is, you really want to be careful here. volatility is going to pick up, 38% increase in the vix this year. just as an investor, i think you really want to be nimble here and be careful of setting into any long position. >> perhaps not a bad idea. we'll see if the mutual fund industry responds. jeff cox, thank you very much. there's more information on this with jeff's piece on cnbc.com this moment. from big box stores like target and home depot to regional chains like jimmy johns, it seems no retailer is safe from a cyber security attack. there's new data suggesting that smaller businesses are much more vulnerable than the big guys. they just don't get as much attention. we're going to break down those numbers next and tell you how you can protect yourself in the future. stay with us. 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. it seems no retailer lately safe from a data breach, be it a major player like home depot or regional sandwich shop like jimmy john's. which companies are at a higher risk for a cyber security attack? kate rogers joins me now with those details. >> those hack attacks at big names like home depot are the ones that often grab companies, but small companies shouldn't think that they're in the clear. the latest example is jimmy john sandwich king confirming that credit and debit card data was potentially compromised at 216 stores. but in 2013, target attacks at businesses with 250 employees accounted for 30% of all hack attacks. this is up 6.6% from 2013. the threat often originates through employee web browsing on computers that are connected to corporate accounts. this entryway makes it easier for hackers to drop malicious code on to company computers and if those computers are connected to point of sale machines, personal credit card information can be compromised. so mom and pops out there should invest in up-to-date software patches, meet pci security standard council's merchant guidelines and keep browsing separate from those accounts. just because you're a small business, it doesn't mean that your customers' information is any less valuable. back to you. >> important information for everybody, and more "closing bell" right after this. we'll be right back. "fast money" starts right now. i'm melissa lee. our traders tonight, pete, ron, john, and guy, a sea of red on a week of five lows. and we're covering all the angles of the selloff tonight. ahead, why one prominent tech investor feels the most confident he's ever felt about apple. plus, could the s&p 500 soon follow suit? a look at what the charts are saying later on. today marking the worst week for stocks since july. the dow ending the day down 1% along with the s&p, but it was the nasdaq, of course, that felt the most pain. nearly a 2% decline on the session. pete, what happened today? >> the pain was in often and early. john could take about how much and how fast they hit some of them. but really technology and financials two of the areas that have been so strong, finally really took it on the chin today. because of that, we started to see the entire market follow suit. all of the major indices following along as well. i looked at a few of the names that were getting sold off. it was very few that really stood out, because when i looked at the big cap tech names, i looked for the names that were really getting sold all. i saw names like microsoft, intel,hewlett-packard. i love the stories behind them. i think they can go higher, but if they go lower tomorrow, i definitely would -- >> reaching a critical point. >> i've been saying i thought it would trade down to 108. i still think tough double tops in place. i think we're going to test 108. i don't know what happens if and when we get there. the s&p basically closed around support levels, i believe. but if we breach that 108 level, things get really interesting really quick. then pete and john can talk about volunteervolatility. to pete's point, i do think some of these big cap tech names are still in vogue and still in play. the stories still make sense. but again, the russell to me has been the key and will continue to be the key. >> you're saying the vix is not nearly high enough to be panicked at this point. >> not yet. i think it could happen tomorrow. as i said with kelly leading into our show tonight, i thought that if i was a bear and holding a short position, which i am not, i would want the market to rally in that final 15 minutes. i would like for them to be right and see that surge, that market on close lift the market by, like, 70 points for the dow jones industrials. didn't happen. we finished at the low of the day. that's not so good, in my opinion, for the bears. so i think we still get a flush, mel. i think it could come out of europe tomorrow. a lot of things going on. the high yield, we had no bid. putin rumors and so forth, as well as subway threats. there were so many things. i mean, we've had to deal with things like malaysian jets being shot down and so forth, but we didn't have six things lined up one after the other on any other session this year. >> speaking of bear, i turn to brian kelly. we've got a lot of questions on twitter. >> no, no, no. you can't zip up the bear suit until the dip isn't bought. so we still have to see this go down. see if people buy it. guy's been all over this russell story, and what's happened is the broader market finally paying attention to what the russell's paying attention to, which is a flattening yield curve since april, which is wider credit spreads. these are things that are unraveling a bit. i think it gets worse and it gets better. what's interesting to me is in the morning, we had the apple selloff, we had the tech selloff. then apple rallied, but the s&p couldn't go anywhere. so it really broadened out as the day went on and i do think we're going to test much lower levels here. when we get down to those levels, then a dry cleaner will see if they can dust off the bear suit and we'll take a look at it. >> i don't think it's any coincidence that we also saw the dollar index hit a four-year high. we're entering
inversion. they would operate as a stand-alone brand. two points on the burger king deal, even though it is an inversion, this deal likely a little bit more like a real deal in terms of strategic merit, both in terms that 50% of the company would be based in canada. there are reasons to keep it there, but more importantly from a 3g perspective, the guys that own burger king, we saw what they have done with inbev and heinz. this is sort of their approach at taking a restaurant company and using it as a platform to buy a lot more. i would argue to everybody that this is just the beginning. we should see the transaction cross the tape later this week, probably tuesday more likely wednesday. we'll talk more about that in a moment, but for now we'll send it over to michelle. >> i'm dying to talk burgers and donuts. >> i think it has more to do with fries. they finally said, you know what? the fry situation, the fry problem was too big for us at burger king. >> you're right. >> tim hortons has a track record of making things that taste good. >> when deep fried. >> when deep fried. and burger king, again, the latest failure, what were those things? fries that were like lower calorie or something? >> the lower-cal fries. >> why even try? when you order fries you know what you're getting, don't you? >> yeah. >> so i think this is a more strategic move as you said, but it's about the fry. i think tim hortons is going to jump-start the fry. >> it is extraordinary that canada has lower taxes. >> that's what i thought. i wasn't going to say it to andrew. i wasn't going to say it. >> guys -- >> their health care system is more free market than ours is, too. >> no. >> but the notion that they have lower taxes than we have here is why. >> i don't get crazy about this deal. >> i'm sure the people doing it are going, wow, thank god. sorkin is not mad. >> burger king is unpatriotic. >> they have a tax rate of 27%. >> i have not upset sorkin, so let's go forward with the deal. he's not upset. i'm sure they care, andrew. i'm sure we care, which we don't. go ahead. >> thank you. >> let's stick with the food theme. california's really struggling to clean up today after the largest earthquake to rock the bay area in 25 years struck at 3:30 yesterday morning. here's what we know, 6.0 magnitude on the richter scale located six miles south of napa, 60 miles north of san francisco, and one of the most press prest communities. >> reporter: this is an area we think of the world class destination for wine lovers and foodies, but now they are dealing with a big cleanup here. as you walk through the streets, you have to really watch your step between the glass and a lot of rubble here. certainly when you look around, there's now actually 33 buildings that have been red-flagged as uninhabitable. and these are the buildings that everybody in napa uses. so we are talking about the post office, the library, local courthouse where a really big hole was torn into the facade at 1:00 a.m. i saw them roping off the entire area around the courthouse. and a big church here had the windows blown out. when we think of napa, we think of the worldwide vineyards. david marcus tweeted out photos after the quake. this is sort of what we are seeing here throughout this whole area. those rack after rack of wine bottles have been smashed. those toppled barrels. we actually caught up to marcus to ask him about the quake and the impact. here's what he had to tell us. >> we make a blend and blend together different vineyard sources and make a beautiful consistent wine every year. and so these were those individual components of our blend that we bottle a few bottles of to save them to taste them over time. instead, those are completely priceless and one-of-a-kind wines now gone. >> reporter: napa is home to about 800 wineries that produce about 50 million cases of wine here. the industry's association saying right now they are focused on the safety of the members and security. we'll be here all day, guys, to bring you information and headlines as we get it. back to you. >> josh, we appreciate that. thank you. stocks are coming off their best week since april. three straight weeks of gapes now for the dow, the s&p and nasdaq. two economic reports say we should pay attention to them today. 10:00 a.m. eastern, new home sales. and 30 minutes later the dallas fed survey. we'll check on the markets and where they indicate this morning. well, that's not up usual to see that in recent sessions up 30 to 40 points. i don't think they seem very talkish overall. and then, andrew -- >> yes, sir. >> i know you don't write the op-ed section, but what do you think it is with liberals and progressives and zero interest rates in just wanting to stay there forever. did you see the lead story? >> i have seen that, yes. >> did you see steve liesman's protester he interviewed? >> i didn't. >> the people that think maybe -- i mean, obviously, if you're just really stupid and know nothing about economics, you would leave interest rates at zero forever. that way everybody can always borrow. if you had no idea how things actually work, how bubbles form, how you miss price risk and capital allocation can get missed up, then of course you would leave it at zero. so i think "the new york times" has no idea there's a counter -- >> i think there's a timing issue. >> five years after it is zero? >> that's the question. look, he has a nobel prize, i don't. >> they are not real. they give four out every year. alfred nobel did not designate economics. you want me to find one on the other side of the argument? >> there's a dime of dozen on all sides of the argument. i don't know the right answer, but i'm suggesting there's an argument by -- >> are you ever going to take ownership of this? whenever i talk to you, you always say it is not me. when are you going to take ownership for this? you know this stuff. when you see him walking around, can't you say, hey, buddy, come here for a second. let me tell you what could happen. do you ever do that? >> it's a chinese wall. >> between what? >> between the new sign, which is the side that i anticipate and the op-ed page. >> the opinions on the op-ed are never reflected on the front page of "the new york times." >> you can make all the comments you want and i cannot engage, unfortunately. >> i saw two things about golf over the weekend. one was -- i thought it was funny but michael goodwin in "the post" said this, i like this, even the president's media guard were appalled. and that's usually what he has. he usually has people everywhere and then i read a political piece where they said, you know what? the president needs to decompress. when he is at work, he's doing so much trying to bring congress together. >> it's very stressful. you have seen how he's gotten. >> stressful fund-raising? every night having three to four fund-raisers? >> what is stressful, you can't get that little golf ball in the hole. >> is that why he's gray? >> anyway -- we have the medal of honor here. we are making weight. you go ahead. we'll tell you about the geopolitical news. the british officials believe they identified the map who killed james foley. the person who beheaded foley in a video released by isis last week had an apparent british accent. meantime, a different terror group released an american that was held for two years. the american air strikes continue. that's great news, by the way. continuing in iraq, the u.s. carried out two air strikes yesterday. now washington is debating whether these could expand to syria where isis is based. we were just talking about colonel jack jacobs, a medal of honor recipient and msnbc military and list. >> which we still allow you here anyway. >> that sounds like an oxymoron. >> i almost had a show my passport to get in here. you were talking about interest rates, and you were talking about risk, but one of the big problems with low interest rates is that you have a lot of organizations like pension funds and insurance companies who are having a hard time. >> terrible. >> imagine that. >> there are people who say as long as cop rations have low interest rates, that i will just buy back stock and don't want to invest in the future. >> what is scary about the investmentis they say we should use a regulation to solve these systemic issues, which is like regulation has ever worked to deal wall this. >> michelle, they also say in the absence of another $800 billion stimulus program that worked so well lining the unions and congress passing more stimulus, so to continually redistribute you need the fed to do the redistribution instead of congress. >> anyway, did you win the medal of honor or the economic prize? >> i used to be the manager of bankers trust and lehman brothers, neither of which exists anymore. >> that has nothing to do with you, though. here's the latest, colonel, are you surprised that we really are -- there was a time when we could have gone into syria, maybe when it would have been preemptive rather than reactionary and we didn't. now we probably -- >> do you think we are now? >> we are always reactive. and when we were going to go in and could have gone in, we would have been on the wrong side. i mean, people were saying we needed to go into syria to help the rebels overturn assad. and putin said, hey, do you know who these guys are? >> but there are different groups of rebels. >> i read something over the weekend that assad all along knew that if he let isis flourish, the good guys that we wanted, the free syrian army, that isis and those were opposed right from the start. so he sort of led isis along to get rid of the people -- and then he knew they would finally come around to say we have to get rid of isis. >> any operation on the ground, just dropping bombs on guys, even if we knew where they were, is not going to eliminate them. >> dempsey wants everything back. so late thursday we wake up friday and read the papers and think, holy smokes. looks like we might be going to war in syria. yesterday he's on a plane with journalists and walks everything back. what happened? >> i think he got his backside chewed out for being as forthcoming as he was in public. i knew dempsey years ago when he was a cadet of mine and i was teaching the international relations at west point. he was one of my cadets. very bright and forthright. you ask him a question, he'll give you the answer. and i think he gave the answer but the national command authority didn't like the answer. >> you have seen the mission creek side of things, right? people don't want us doing anything in syria. >> there are. i have a different question. >> you can't weigh in on that, you're in manhattan going into the gray lady, give us that side. >> let me ask you a foley question, which is has the british government or any government put some of the other people who are being held hostage at risk by announcing or at least indicating they know who this person is? >> no, i don't think so. these guys are at risk in any case. i'm astonished any of them are still alive. they want them to squeeze money out of them. they asked for 100 million euros for foley and his family and friends were trying to put together $5 million u.s. >> if they know who he is why don't they say who he is. >> it may put at risk their sources of information, the intelligence, which is by the way where we are sorely lacking. what we really need is information, we don't have the mechanisms for gleeping information on the ground. so you can't kill bad guys unless you know exactly where they are and who they are. and you can't do that by satellite. so releasing that would indicate perhaps where we get the information. >> what about the other information? >> because it's fairly complicated but if you release the actual names or release anything like the names, you have a higher degree of confidence and know who it is and who released it and gave the information to government. >> there's an exercise to say to tell the people even though we know. >> the second is what are your sources of information? if you divulge the name, the second thing is, once you release it, do something about it. nobody is prepared to do anything about it just yet. >> on that note, this is going to sound like a really heartless question. what should really be done on half of journalists who make the choice to go to these areas? >> what should be done by anybody who gets captured whether a journalist or not. >> it makes a difference, they have made the choice and know the dangers and made that choice. >> military people make the choice, too, but we made and effort to release them. >> but that's competely different. you would expect the u.s. military and members of the military to go and get other members of the military. >> i don't want to come down too easily on your side, but the fact of the matter is, the forth estate has a role to play as well. and if you make a big mistake by going into the region and get captured, and you are not protected by the military people and get captured, to the extent of not putting too many people at risk, we aught to go ahead and do that and we tried, actually. >> why can't we go after the money? >> that's a brilliant question. why don't we go after the money? because i think that is our information, too. >> are we talking about the original sources of money? we are talking about farther down the food chain. why not go after the rest of the money sitting in the accounts. we can do some of it. i don't see why we don't do some of it. and i think one of the reasons we don't do something about it is because people in the gulf, for example, we have to mullify before we go ahead and do that. >> these guys are in syria on an air base. we are going to be on assad's side before we know it. >> we are on assad's side. >> but the present political base doesn't want us to go into syria. is he -- usually he finally comes around and sort of tows the line. he's the last guy in the world to want something to happen domestically. this could force his hand to do something in syria. >> there's no way you can affect what happened in syria by going after the bad guys in syria. we should go after the bad guys in syria but doesn't want to do it because of domestic political pressure or getting ready to go with the midterm elections. but everybody hates what he's doing and not doing. so it doesn't matter at the end of the day whether he does it or not. he aught to just go ahead and do it and risk the program. >> i thought to you that i didn't understand because he's not in the optics anymore. and it's hurting where there are close races and people are tied to him. it is hurting in the midterms, but does he not care? he's not up for election, so he may not care so much. >> i think he does care but the people who say he shouldn't care are the people who were surrounding him. the three to four people he talks to all the time. rod, his wife, valerie jarrett. >> dempsey on friday night made it seem like we face a threat on the country as a group. yesterday he said we have no indication that we are dealing with that. we don't know what the specific threat is and he doesn't want to be an alarmist and doesn't want to be and alarmist, but the fact of the matter is there are hundreds of people from western countries who are fighting from syria and in iraq now. >> and their passports give them mobility. >> correct. and what everyone is worried about is for everyone to trickle down and be appalled somewhere. looking in there, we need to increase our vigilance and stronger intelligence gatheri gatherings. we don't have that at the moment but aught to be scared about it. >> we have to go. is the ticker, is all of it from four days ago or just the baseball scores, do you know? atlanta beat cincinnati 8-0. it's been four straight days. it's a nice score to watch if you're a reds fan. when they just beat the braves the last two games, so i'm just watching 8-0, 8-0, just rubbing it in. coming up, chasing away the dog days of summer. how will the global flares turn out? and it's a bird, a plane, no, it's superman's first comic book appearance. that's next right here on "squawk box." welcome back to "squawk box." we have super news, the auction for "action comics" number one. the first appearance of superman went for $3.2 million. that was a million dollars more than the issue that sold at auction in 2011. and there are as few as 50 known copies of this so-called holy grail of comics in this condition. a portion of the proceeds will be donated under the christopher and dana reeve foundation. janet yellen said, i have nothing to do with this either. >> were you a comicbook reader? >> i was not but we are now in a big way. >> you are now? >> yeah, i had a few. i had some "ritchie rich." and "archie." i had a few of those. >> not big into superhero. >> i had some like this back in the day. billion there were. who was the one before her, julie numont, i believe. frank orson. >> my generation. >> wasn't halle berry one, too? >> yeah. how much will global numbers weigh into the futures? what do you think this week? >> we have a lot of geopolitics working in the background as far as the u.s. scheme is released. we had the new home sales, first gdp revision. and at the end of the week we have the pce, the income spending and inflation measures. so it is all very important. the stock market is pretty much ignoring all of the geopolitics. as we move up to new highs, the one thing i think is the most important as far as the stocks go in recent history is the qe. even though we knew it was ended. we knew it had trouble. six months later we were told more qe2 was on the way. then this time we'll see if we rally up to the end or well beyond the end but that's important to watch. the interesting thing on the -- >> tell us what janet yellen said on friday. >> i don't think she changed anything on qe. we'll see the changes tomorrow. as far as her description of the labor market, she is discussing how the labor market is acting and what to look for in the future. the important thing is not that it will eventually correct itself, but at what level of success will it correct itself. how much of this is structural and how much of it is just cyclical? in the key discussion she stalk ed talked about being satisfied with the less than economic performance which reflects on the long end to keep the rates lower than they would be in a previous regime of the economy. the interesting thing about the long end is when the qes have ended, yields have fallen each time. this time the yields fell once the taper started. now we'll see what happens when qe ends. >> thank you, lou. we'll talk to you soon. appreciate it very much. coming up, a fresh take on the state of the u.s. economy. plus the boys of summer are rattling up this week. we'll be right back. ♪ so what ya got on deck? skyfall. lean in, then some pinterest, you? twitter. minecraft and then some hunger games. boom. wow, you guys are all set, huh? oh yeah, new amazon fire phone. it comes with amazon prime - tons of cool stuff for no extra charge. really? it comes with amazon prime? yeah, there's so much to watch. i've been on this earth nine years, i've never seen anything like it. the new amazon fire phone, with a full year of prime included. exclusively on at&t. from safety, to fuel economy, to quality, today's chevrolet has it all. and it's a good time to see for yourself. this labor day, check out great lease offers on chevy's award-winning, fuel efficient lineup. just announced, get additional $500 bonus to lease this 2014 chevy malibu lt for around $189 per month. find new roads at your local chevy dealer. good morning. welcome back to "squawk box" here on cnbc. i'm joe kernan along with andrew ross-sorkin and michelle caru caruso-cabrera in for becky quick this week. engine capital in a partner control of 1% of stock in the company. i've always known them as ann taylor. if they want to make it more than that, because they have other stuff. do you remember? it is not just ann taylor. >> they have a whole bunch of brands. >> now they just call it ann, but i don't know. ann inc. they believe the buyer would pay between $200 and $250 per share. a denial of service attack overwhelmed the system with traffic. the attack didn't access information of any of the playstation's 53 million users. twitter claimed responsibility for the attack saying it was meant to pressure sony to spend more of its profits on the network. also, the cme resuming electronic trading today after a glitch delayed the open. technical problems were to blame. you may remember the cme had a similar but bigger glitch back in april. the traders said the delay would only have a limited impact particularly because volumes are thing at the end of august on this monday morning. both the dow and s&p having their best week in four months last week. that's despite rising tensions in europe and the middle east. plus, the national association of business economists coming out with the latest findings today on fiscal policy. a number of other hot topics, more on the report and what it means for interest rates is joining us doug dunkin, chief economist at fannie mae and jeff sought, chief advantage strategist. when i look at this, 50% believe the u.s. monetary policy is on the right track. jeff, do you agree? >> i do agree. i think the economy is strength anything from here. you saw the numbers that came out last week. housing looks better to us and you look like you're in the hint of the cap cycle. things will strengthen going into 2015. >> 39% feel the current economic policy is too stimlative. how do you feel about that? >> that's up a little bit. the headline number who agree with it is just down a little bit. i think it's reflecting the market's posture that they expect to tighten sooner rather than later. and i think some of the other data in the survey supports that. >> some people say they are behind the curve, what do you think? >> i think the respondents suggest slightly behind the curve if you look across the full data, but if you listen to what took place in jackson hole, i don't think that's the view of janet yellen. >> what is your view, though? >> we have the fed and the fannie mae forecast not moving until the third quarter of 2015 at the earliest. >> jeff, what is the implication for investing then? >> i haven't waivered at all. i got it wrong on the pull-back here. i was looking for a pull-back beginning of july and thought it would be more than the 4.5% we got. but when we travel back up above the 1950 resistance you have to call for new highs which is what we are going to get here. we are in a secular bull market, i have not waivered on that in years. it has years left to run and most investors are woefully under investing in equities. >> congratulations for saying you got it wrong which is so rare. >> he's sort of saying i may have gotten the correction wrong but i've been right about the bull the entire time, and he has been. so he's sort of -- >> he was expecting 10% correction. >> that's like saying, well, i did just buy this -- but jeff, do we know, again, that the most important thing in investing is don't fight the fed? they are still qe'ing. how can the market go down 10%? where are we -- i forget which month it is, but we are not finished with qe yet much less going up from zero. of course the market is going up. there's money coming in with nowhere else to go except for comic books. >> you see in the survey that people would like to see the fed start advertising the portfolio sooner than they actually expect them to do that. >> but jeff, they are still adding, aren't they? >> yeah, the fed's balance sheet is going to increase by 9% to 10% this year, but there's a pretty tight space as the numbers go up. they say it is probably 10% to 12% this year, still sticking with that. >> that's why you got it wrong then, right? to joe's point, why ever fight the fed until this thing is done? >> well, it's not just the fed, michelle. the markets, all the markets care about is -- >> it feels like it is just the fed. i cover the geopolitical issues, you get one day of action on what would normally be incredibly scary headlines and bam, we are back to the races. move along, nothing to see here is what this market says every single time when there are these huge issues that i think historically -- it sounded like we were going to war in syria last week and we got a flat trade on friday. i mean, it's unbelievable. you think it's only the fed right now? >> i do not. i think earnings have tripled and next year's s&p earnings numbers, if they are correct, they will continue to come in better than most of us expect. so that's the story going forward. the fed is capable of stepping out of the picture with qe and think the markets will do just fine. >> i'll take the silver lining. >> russia invades ukraine. that happened last week. >> it did. by the way, which we have not even mentioned today. >> because the convoy backed out. >> the ukrainians say they have established a position and are shooting. >> we'll act as the headline itself will move the market, but ultimately if all this activity happens but doesn't actually impact the economy. >> but it does. >> that's the question. but the question is whether it does. we are not just looking at the headline unto itself. >> that's why gaza didn't move the markets, which is understandable. >> but it is possible russia/ukraine doesn't move the markets, if you will. >> go ahead, doug. >> i don't think that's completely accurate. i think you have seen some downward rate movement as a result of flight to equality to the u.s. capital markets. i think you have seen an international market impact. >> when you see germany go below 1%, for example. >> right. and that was one of the things in our survey, we asked, what do you think about the european policy. two-thirds of economists say they have not done enough to get the european economy going. so if you pile on top of that the geopolitical issues they are facing, you are still going to see a benefit in the u.s. capital market on flight quality. >> got it. thank you. see, they do matter. >> it does, i don't want to say it doesn't, but it's a question on how much. coming up, a tropical storm forming in the caribbean. its name is cristobal, but will it reach u.s. shores? a quick forecast coming up next as we head to break. and here's what's happening in european markets right now. you have a little bit of green across the board there. tdd#: 1-800-345-2550 trading inspires your life. tdd#: 1-800-345-2550 life inspires your trading. tdd#: 1-800-345-2550 where others see fads... tdd#: 1-800-345-2550 ...you see opportunities. tdd#: 1-800-345-2550 at schwab, we're here to help tdd#: 1-800-345-2550 turn inspiration into action. tdd#: 1-800-345-2550 we have intuitive platforms tdd#: 1-800-345-2550 to help you discover what's trending. tdd#: 1-800-345-2550 and seasoned market experts to help sharpen your instincts. tdd#: 1-800-345-2550 so you can take charge tdd#: 1-800-345-2550 of your trading. thank ythank you for defendiyour sacrifice. and thank you for your bravery. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can 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. chocolate, soybeans, thisand apricots. made with what kind of chef comes up with this? a chef working with ibm watson, on the cloud. ingredients are just data. watson turns big data into new ideas. and not just for food. watson is working with doctors and bankers to help transform their industries. today there's a new way to work. and it's made with ibm. welcome back. u.s. equity futures suggest that we would have an open higher. the nasdaq would open higher by 17 after a stronger week last week. tropical storm cristobal is drenching the bahamas and could turn into a hurricane over the next few days. this is the third named storm of the hurricane atlantic season. joe? you okay there? >> something went down the wrong pipe right before that. i'm excited. where are you on boardwalk empire? >> i need to get up-to-date first. >> your thing went to showtime, your big deal, but why are you still friends with -- >> hbo. >> too big to fail. >> they are too big to fail. >> if people don't know, we are going to have lunch together, maybe hang out together and workout together. >> i didn't know about working out. we are going to the gym? >> yes. then we are going to get ready together and then go to the boardwalk empire. >> premier? >> yeah. >> wow, snazzy. >> maybe we'll do the show from new york the next day. >> you have the whole schedule. >> is that cool with you? >> do you workout? >> he works out. you should see him. >> joe, this is a big day. that's exciting. >> i'm doing the countdown. at michael's -- >> is that on wednesday when you have lunch at michael's? that's the day they put the map on the internet, who sat where. >> it will be leaked. coming up, a feel-good story from the world of sports. and it happened on the golf course. that's next along with all the other big stories impacting the sports and business world. we'll talk about his beautiful little daughter. did you see that yesterday? we'll be back. where the reward was that what if tnew car smelledit card and the freedom of the open road? a card that gave you that "i'm 16 and just got my first car" feeling. presenting the buypower card from capital one. redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac - with no limits. so every time you use it, you're not just shopping for goods. you're shopping for something great. learn more at buypowercard.com lots of big news over the weekend in the golf world. south korea's team won the little league world series. and the u.s. open in tennis is kicking off the day with us. we have cade briggs with us. i don't watch every weekend. >> sure you do. >> hunter, that putt on 17 was manly. >> that was amazing. he birdied five of eight coming in. it felt like jim furyk, he had a 53-yard lead and lost. hunter went out and won this thing. for his first win, this is since 2012. so it was nice to see. you mentioned in the tease this scene here with his wife and baby that surprised him, although if we can hang with him, hunter doesn't look as thrilled as i would have thought he would have. i would have jumped a little quicker, but you can't judge. >> this is a new part of his life here. >> i remember he had on a lead at the canadian open. he had a lead and he left the tournament instead of winning a million dollars to go for the birth of that child. so it was a nice -- now he's number one in the fedex cup playoffs and could win the $10 million. he has the game to make a run. >> you know who i was pulling for, the guy who i have played with three or four times that i love, stewart. i love stewart. >> he also shot a 65. he was outstanding. >> did you see him, he kind of made a mistake and then rattled it out of the bunker, like a 30-foot putt and hit it and finished with a par. >> unbelievably. >> you stewart is now married with kids, and you remember that horrible thing that happened to him, that tragedy in this life. >> this is a nice story for marriage and for kids. because rory, as we know, ditched the -- >> she's really good. >> went on a run. so it's nice to see a guy going on a run -- >> i want her to win. >> with a wife and kids. she's done very well. maybe she could win the u.s. open. >> i didn't know the details. there was a big article about her over the weekend in the times. >> she's done very well. >> there were -- >> there was a cover of sports illustrated. >> she had all the details about that. he didn't even -- they had been to the three years. invitations for the marriage were out. he broke up on the phone. >> yeah. it was costanza-like. >> yeah. >> -- when he was -- >> i did not though i saw -- >> that would make you mad? >> that would make me mad. >> and the little league world series. >> little league world series? >> i did not see any of that. >> i love it, though. >> a fantastic loss, although for chicago. i mean this ask a city that desperately needs some good news. with the crime rate murder and everything else, and hey they also have the cubs. they lost to south korea. but this is a team that will be celebrated with a city parade on wednesday. and it's all african-american. major league baseball has gone from 27% african-americans in the '70s. mlb is trying to recruit urban areas, get more african-americans playing. this should help in that and this was one of their initiatives in chicago. sifx the guys played in an mlb type system. south korea a lot of fun to watch them play. they celebrate like pros. >> our ticker was not right. i don't even know what -- it's preseason okay. >> the bengals won. >> they did win? >> but they didn't look great on offense. defense -- >> what about carson palmer threw an interception early on. >> for six. terrance newman took it back for six. >> i don't really like him. >> i think it was sweet for the bengals to see carson palmer struggle. your former guy. >> right. >> dalton just looked okay. >> jekyll and hyde. >> the offense in general. >> when is the first real game coming isn't it? >> a week from thursday on nbc this season kicks off. >> what network? >> nbc. >> say it again. >> thursday night, september 4th, on nbc. then sunday night, too. >> sunday night. >> we have both. >> you know, i am sort of a homer but collins worth is the greatest guy in football ever. >> he's the best. >> he is. >> because i don't know, he's really smart and he's a great player and he's funny and he just -- i think that's why i think we should get thursday. >> i wanted to ask about -- >> -- benched. >> they both have stunk. >> you never start right away. you can't go from college right to -- >> i think the way jacksonville handled blake was perfect though the guy's been brilliant in the preseason telling a guy he's going to sit and take some time and take some patience that's the way to handle a rookie especially a punk like manziel who wants to flip off the redskins bench, get fined $12,000. but they both looked terrible, he and brian hoyer should both be on the bench. >> calling him a punk, that's way too subject up. >> is it? >> -- on this show -- >> as the redskins -- >> did you do time at some point in your life? i mean a punk? >> i'm horde core, joe. >> a punk. >> hey. >> the breaking news here -- >> is that too strong? >> yes! >> why? >> a punk is what you call people when you've been out in the yard and picked a fight with you. >> this is going to force me to do it. >> we need a breaking news banner that says sorkin will do -- >> you want to ask about -- >> my wife who is responsible for forcing me to do this. >> october 12th, it's a sunday afternoon, i'm going to go through the mud, i'm going to get electrocuted, go through fire, joe. you'll appreciate this. >> he'll back out of this. >> i'm going through ice what's called the ice enema or something like that -- >> painful. your brain just shuts off. >> you know you -- >> it's not an actual enema. >> no but that's what they call it. that's the obstacle or something. >> no actual enema. >> you did bring up real quick -- >> sam bradford torn acl two straight years for the quarterback for the rams. that is devastating for him personally. guy that won the heisman trophy and for the rams organization who really thought they were going to take the next step. they had an incredible defense. and to lose your quarterback two years in a row just brutal. >> who plays in that thursday game? >> seattle/green bay. >> no way. >> and then broncos/colts on sunday. >> no! oh, my god. an embarrassment of riches for nbc. that's, that's -- >> wow. >> it is good stuff. so -- >> we'll write both of those things down. >> always great to have you. >> i'll make sure to text you. >> in case you can't see this at home, this is -- >> it's not tacky. >> no, it's good. >> it's close enough but it's not the same. >> tacky if it was identical. >> if you have the shirt -- >> exactly. >> then you got -- >> the same pattern. >> oh, you would never -- >> then that came together and anybody that -- >> oh, yeah, look -- >> no, no, no! that's a pete peeve of mine. >> what's in there? >> nothing. nothing! >> oh -- >> it doesn't open? >> it does but it's sealed shut with starch. it's sealed shut -- >> i've never seen anything like this before. >> this is a specific special -- >> i won't even put a pen in there because i don't want to mess it up. >> you know like when you get a blazer and the pockets are -- >> yeah, exactly. >> very strange. >> have you ever seen -- >> i've been watching it for years but it never occurred to me. dave briggs thank you for being here. >> i'm not anal, sorry. >> picking up the pieces in napa valley. we're going to talk about it. northern california's wine country was rocked over the weekend by the biggest quake in a quarter century. the fallout and the impact on the region, that's coming up next on "squawk box." did you know a ten-second test could help your business avoid hours of delay caused by slow internet from the phone company? that's enough time to record a memo. idea for sales giveaway. return a call. sign a contract. pick a tie. take a break with mr. duck. practice up for the business trip. fly to florida. win an award. close a deal. hire an intern. and still have time to spare. go to comcastbusiness.com/ checkyourspeed if we can't offer faster speeds - or save you money - we'll give you $150. comcast business. built for business. earthquake in napa valley. northern california rocked by the biggest quake in 25 years. the epicenter is on one of the most exclusive places to live on the planet. now the region is picking up the pieces. >> isis on the move. the islamic militant group captures an air base in syria. how should the u.s. respond to the latest threat? and deal making monday. roche for more than $8 billion and burger king shopping around for doughnuts and coffee. the second hour of "squawk box" begins right now. good morning and welcome to "squawk box" on cnbc, i'm joe kernen along with andrew ross sorkin and michelle caruso-cabrera. no. >> no pocket? >> but i'm going to get it done next time. >> becky quick is off today. our guest host, we're talking off camera about -- i don't -- it just comes this way and then i don't like to open it at all. founder, chairman and ceo of nbc partners, and the always controversial mtv video music awards didn't let the public down. i didn't see this. >> nicki minaj. >> really? >> her hit that i've never heard of. >> anaconda. >> some very explicit dance moves. >> there was a wardrobe malfunction. >> i bet she planned this. >> it was almost -- it was almost janet jackson -- it was almost janet jackson-like. >> super bowl -- >> that's what you want to ask. is that real? that's always my question. >> we'll have more later. but did it involve -- >> if you're going to ask -- >> it's cold. the air conditioner is on. >> we'll get back to that in a little bit. >> is that what it was? >> we have miles on as the vma expert here. >> all right. >> so comment on that. >> it was deliberate last time. that was so rehearsed. >> i think so, too. >> miles doesn't know he's the vma expert. >> the futures are good this morning. we had three straight weeks of positive gains up another 58 points today. the fed is, i don't know, they talk about getting out but they're not out yet and the market keeps going higher. let's check out the ten year. i still argue that europe has given the fed a lot of cover with less than one percentage earning. you don't feel like you're out of whack when you've got countries that can barely pay their bills with the same yield it makes, you know, then you can maybe feel like you're not -- >> what's incredible is based on their expected inflation rates, you actually might get a better return at a 1% yield in germany than you would in the united states. because real interest rates are you know, too high still. >> germany doesn't like inflation. >> oh, they're terrified of it. >> let's talk to you about what happened over the weekend in california. because california cleaning up today after the largest earthquake to rock the bay area in 25 years truck at 3:30 yesterday morning. here's what we know. it was a 6.0 magnitude located six miles south of napa, 60 miles north of san francisco, in one of the state's most prestigious communities and home to the nation's most expensive wine country. more than 200 people treated for minor injuries in the area, hospitals there less than 10,000 people are still without power following the quake. there have been at least 50 aftershocks so far. let's go right to josh lipton who joins us from downtown napa. josh, good morning to you. >> good morning. yeah, guys, we're going to start by showing you some really powerful footage. now surveillance cameras actually captured the moment when this quake hit when the earth started to roll. what you're looking at here is actually inside a 7-eleven store and i had the chance to talk to locals here, people born and raised in napa and they told me they've been through earthquakes before, but this one they said really felt different. one woman told me she really felt like a shoe trapped in a dryer. i can actually tell you guys my own parents, my mom and dad, who live about a full hour and a half from here, my dad said it was still powerful enough it woke him right up in the middle of the night. one question is, what this is going to mean for local businesses. one henry kiln company, a bonded wine warehouse caught up with its own bill hill and he was really visibly emotional when talking about the quake, its impact and what it's going to mean for his business. millions. it's significant for a small company like us, it's a big blow, no question. we're trying to figure out what we have to do today to protect what's left and then later i will have a chance to think about what this means for us. where we go from here. >> now hill tells us that he lost about 20% of his wine. that's valued in the hundreds of thousands of dollars. he also said he has more barrels of wine trapped under this roof that's collapsed. and like a lot of small business owners he did not have earthquake insurance. guys back to you. >> wow, that's pretty tough. i was going to ask did he have insurance? that is tough, josh. thanks for that. appreciate it. in geopolitical news british intelligence say they've identified the man who killed american journalist james foley the person who beheaded foley in a video released by isis last week had an apparent british accent. mean time a different syria based terrorist group released american author peter theo curtis this weekend. he had been held for two years. and american airstrikes continue in iraq. the u.s. carried out two yesterday and now washington is debating whether the strikes should expand into syria, where isis is also based. all right let's get more on the isis situation and the ongoing hur mail in syria. joining us is general barry mccaffrey, president of mccaffrey and associates and military analyst at msnbc. >> good morning. >> what do you think? are we going to do something in syria or not? thursday night the head of the joint -- dempsey made it sound like we were going to do something in syria for sure. bombings. and then yesterday on a plane with journalists he walked everything back. what do you think is going to happen here? >> well, i think they've -- they came -- walked up to the edge. they know they could go after targets of seized you armor vehicles that were abandoned by the iraqi army. now many of them are in syria and being used against both the syrian armed forces as well as the iraqis. but i think they've decided to think about it. dempsey clearly said en route to afghanistan they don't now see an active threat against the united states. which probably is correct assessment. this is a regional ethnic and religious war so far. >> colonel jack jacobs when he was on last hour suggested that perhaps dempsey had gotten yelled at by the administration for sounding so hawkish and was forced to walk it back. do you believe there's politics involved? >> well, i think they're all in very close coordination. they've -- they're having daily meetings the national security council. i don't think there was any missed signaling on the part of anybody. i think they've thought more carefully about it. the brutal murder of this one brave journalist really was not something that should have called into question a fundamental policy. if we attack these isis rebels, in syria, essentially mr. obama ends up supporting the assad regime. so it's a real dilemma, and i'm sympathetic to them. they're doing the best they can, which is so far protect the kurds. and that's about as far as they've gone. >> darrell, have you been able to offer an explanation for -- i mean, grateful that it happened with this other journalist, but, you know, if it's an al qaeda affiliated group they've never wanted to look reasonable. i would think that in that circle you don't want to show mercy or compassion. what was the whole point of right after foley releasing a hostage? have you been able to figure that out? >> well, you know, it's clear to me that the majority with the possible exception of isis are primarily thugs and criminals, closed in this so-called jihadist movement. so i think basically if somebody paid them, and that's more than likely the reason they let him go. very surprising move. we've got to remember, there may be as many as 20 journalists still being held hostage, and there are hundreds of foreign fighters in syria or in iraq from nations like the united kingdom, european -- other european countries, and the united states. so the big deal to us is what's the spillover that will directly affect our interests and those of our two european allies. >> do you think members of the military should be putting themselves on the line for journalists? >> oh, yeah. well i mean if there's american citizens anywhere in the world at risk, obviously the full sort of capability of the u.s. government, diplomatic, overt action, military, ought to be considered in the balance. but, you know, many of these cases getting in to syria with direct military action, particularly air power, just isn't going to solve these problems. and it's unlikely this administration is going to want to put itself back into the middle east in an active combatant role. nor will our allies join us. >> general, real quick, couldn't we control the situation if we went after the money? meaning, we went after the accounts. we tried to talk about this a little bit in the 6:00 hour but we really didn't get a firm answer. is there a way to do that? >> probably not. >> to lock down these bank accounts? >> you know, i was in the strategic planner for the joint chiefs of staff, took part in a lot of efforts to strangle economically various regimes, the serbian government, the iraqi government, it never seems to work, and remember isis grabbed maybe as much as a billion or more dollars out of banks in mosul. and they're now taxing oil production in certain parts of the country. it's going to be very difficult -- they're also not consuming giant amounts of resources, as most state actors are. so, i -- you know, i think we ought to try and affect the money but that's probably not the vulnerable.. the vulnerable point is going to be when do other nations, jordan, saudi arabia, the gulf coast states turn on them as a threat to their own interests. so far that hasn't happened. >> accusations against bnp paribas by the u.s. government when it came to enforcement of sanctions you discover how difficult it is to get bachs in the rest of the world to help you do exactly that. you think it would be so obvious. and yet. thank you, general. really appreciate you having you on. martin dempsey, head of the joint chiefs of staff. >> yes. >> sorry. brain freeze. >> martin. >> martin. >> martin. >> satin, manhattan -- >> deal news, burger king is in talks to acquire canadian coffee and doughnut chain tim horton. he was the hockey player tim horton. we have a guy to talk about this. the combined company would be based in canada making it the latest tax inversion deal. tim hortons and burger king would operate -- what did you tell me burger king's tax rate is 27 here? >> so statutory rate in the united states is 35%. burger king's current rate in the united states is 27%. >> 15 in canada? >> statutory rate in canada you're saying 17.5. he's canadian. i'll take that to the bank then. the only thing that's interesting in terms of the inversion issue on this is that 50% of the company would already be based there -- this isn't someone taking advantage strictly of the tax code. >> she already nailed the most interesting thing. canada has a low -- has a 15% tax rate versus us at 35. canada is more business friendly than us. that is pathetic. that is sad. that is -- >> i would argue too this transaction is being driven less by taxes and more by the -- >> stop -- >> why are you not addressing the key point that canada is 15% and we're 35? >> i'm not going to dispute that. we have to fix that. >> the other big issue. >> go for it. >> the -- of cash -- burger king has a billion dollars of cash on its balance sheet. 80% of it is outside the country. they repatriate that at 35%. they save 280 million. plus there's another $100 million a year of free cash flow internationally -- >> -- the -- >> but i would argue the bigger piece is that 3g is going to use burger king now as a platform to roll up lots of resources. they're going to turn it into the nexium brands. >> in addition to that. think about the complement. you've got a breakfast sandwich doughnuts coffee. >> the synergy. >> going to the with burger king. burger king can now go against mcdonald's. >> this is closer to being a real deal than all those other fake deals. that's all i'm saying. >> 15%. and the most we've gotten -- >> you disagree? you think this is not a real deal? >> if the taxes had gone the other way they would have put it in the united states. but it's so obvious they put it in canada. >> tim hortons is considered almost like a national treasure and the government in canada could block a deal like this. >> you miss miles' point which is it's actually better for the united states if they do it this way. because if they want to invest $100 million in the united states, when they -- if they do it from canada there's no repatriation costs. $100 million is $100 million. if they're a u.s. company and bring back $100 million they can only spend $70 million because they've got to give -- >> it's actually pretty interesting because you could then see tim hortons all over the united states. they're going to try to make tim hortons -- >> there are tim hortons -- >> a global empire. >> we've had a lot of experience with 3g they have the smart ees deployer of capital of anybody around. they took $6 billion out of anheuser-busch. they're very clever. >> tim horton could help with the fries at burger king? see i think they've got deep fried doughnuts maybe they know something about frying technology. >> could be. but i've got to tell you -- you haven't lived until you've had these little tim bits. >> are you trying to sound more canadian than normal? >> the who -- >> the other deal of the morning roche is buying biotech company int intermune for $8.3 billion. >> idiopathic pull mon other fibrosis. >> that must be good for other stuff too. that market is not that big but it's very expensive, right? >> that's true. there's nothing out there for this disease. this drug could bring in a billion dollars plus and go up to $1.7 billion. ipf affects about 100,000 people in the u.s. and maybe 100,000 in europe. nobody knows what causes it. that's the idiopathic part. this works on fibrosis and inflammation. but this is really the main focus. this is what drug companies want. they want unmet medical need. they want chronic therapies. they want a lot of pricing power. analysts say this could bring in you know $80,000 per patient per year. that's how much this could cost the united states. obviously it's a lot less in europe. but what's interesting is we're talking so much about inversions, and we've been seeing that more than anywhere in health care. but this is not one of those deals. roche obviously is a swiss company. >> they have an advantage though. >> they have a tax advantage over the company that they've bought. absolutely. >> oh, that's absolutely true -- >> potentially -- >> they can afford that asset because it's worth more to them than an american company buying -- >> right. >> they could pay more -- >> but -- >> so we're losing -- >> by taxes here. roche isn't buying it because of the taxes. >> but it's easier for them -- what's cool about this deal people say return to the big pharma buying biotech for growth and for revenue. >> so a lot of the reasons that the inversions have happened in the uk with pharma is because of the way they tax the profits from intellectual property. >> correct. >> they buy the patent box -- >> -- in this case with roche? >> this is an american company and roche is a swiss company. >> so the swiss the way the swiss taxes -- >> they say it is pretty business friendly but i think the patent box is unique to the uk. something ian reed has brought up the ceo of pfizer -- >> so many shenanigans once you're on the patent box you can move everything around. that's what it is -- >> you assume evil things. >> no, you play the cello while obama is fiddling maybe you could play the cello just have -- >> just like the guys on the "titanic." the orchestra that's playing as they're rearranging the chairs. >> okay. guys in the control room play us out. coming up why global flare-ups including threats from isis could be putting the summer risk of -- summer rally at risk but first before we go check out this video, a colorful building implosion in albany, new york. crews spent three weeks planting explosives in this old 11-story hotel building. the fireworks started the show, and then the building came crashing down. there it is. >> wait for it. implosions are great. these can go very wrong. there's a lot of science here. how do you beat the number one seed? you just have to win 70% of your points at net. and keep unforced errors under 10%. on the ibm cloud, the us open analyzes 41 million data points from 8 years of competition to uncover key insights. data can help show you how to win, no matter what business you're in. today there's a new way to work. and it's made with ibm. it can help your business save money. false. the truth is when you compare our fastest internet to the fastest dsl from the phone company, comcast business gives you more for your money. why pay more for less? call today for a low price on speeds up to 150mbps. and find out more about our two-year price guarantee. comcast business. built for business. stocks on a three week winning streak. joining us now federated chief equity strategist and senior portfolio manager and bob daal, not bob dole, bob daal, chief executive strategist and senior portfolio manager. we're talking earlier about a million more than it went last year and we just pose the question again. did it ever make sense to fight the fed? is that what's going on here, phil? zblaz a rule you never want to fit the fed. you made a good point earlier we're still at the $25 billion -- >> is that where we're going? >> we're going to end that. >> and when the fed eventually beginning to raise the funds rate next year, that's not the death knell of this rally. the market is going to appreciate the fact that the fed is starting to normalize policy. that must mean that the economy is starting to normalize for the first time in seven or eight years. that's good news for investors. >> bob? >> hard to disagree. equities are going higher, as long as the economy is doing better and earnings are growing. >> but from the fed -- >> patients -- >> well the fed is part of the reason that -- >> wait a minute. the fed is part of the reason the economy is getting better and that's why the market -- the fed is just -- you can't make the leap right from fed to stock market? you need to go through the economy? >> the both the economy and the stock market have done better as a result of the fed than they would have done without the fed. no question. so it's direct and it's also linked. >> miles, janet yellen last week inferred that there may be an acceleration of when the next rate hike when the first rate hike will happen. has the market factored that in to itself in the equation? >> not everybody agrees she said that by the way -- >> that's where i was going to go. i'm not sure she really said that or intended to if in fact she did -- >> she has no idea -- >> could say the economy continues to accelerate, and they do move up the first rate hike. does it have an impact on the momentum of the market? >> i think in a positive way. because what it's saying is the economy and earnings are getting better a little faster than we previously thought. that's good news. >> i would jump on one point. the piece i wrote about friday on yellen's speech, one of the key elements that she discussed was that when core pce gets up to 2% that in her mind is not the trigger for beginning to hike the funds rate. >> core pce is an inflation indicator. >> exactly. that's one that the fed prefers. >> so what is the key? >> the key in my mind is that labor dashboard that she's looking at. there are a number of indicators that aren't cranking right now. wage inflation is at 2%. she'd prefer that to be at 3% or 4%. hours worked have been flat for the last five or six months. every increase of only 0.1 of one hour is the equivalent of 350,000 jobs to the economy. participation rate is low. those are indicators that the fed would like to see moving in the right direction before they start to move the funds rate higher. >> miles, what do you do with your money right now? >> managers. >> managers? >> fund guys. high dividend paying stocks, and portfolios. give it to managers. i think throwing darts is a mug's game. i think trying to pick what you're going. are go to people that have professionalism. 80% of all managers don't beat the index. so why would some layperson. >> great line. >> you're not ignorant, are you? >> relative professionals who do it 24 hours a day. >> still haven't seen 10%. neither one of you said cautious -- >> cautious optimism? you didn't say that. >> didn't say he was going to -- didn't say anything. >> where were you on gdp growth out of curiosity for the year? >> three going forward. >> that for us isn't 3 1/2% neighborhood. >> so we've been running -- >> you guys can go ahead and live together -- >> i know. >> you've been running 2% real and 1% inflation. if we're heading to 3% real and call it 2% inflation, that's five nominal. big difference between three and five in terms of corporate america's ability to grow their revenues, and sustain or enhance profit margins. >> why are you above -- >> all right we got to go. miles thank you. well, thank you. >> coming up, mtv and controversy go hand in hand. i think they foster it in fact. last year it was miley cyrus and the twerk. this year nicki minaj opens up the vmas and there was a wardrobe malfunction. we're going to check it out next on "squawk box." 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. [ girl ] my mom, she makes underwater fans that are powered by the moon. ♪ she can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. ♪ my mom works at ge. ♪ it's 5:00 somewhere, so do you need a drink? how about some bourbon. the business is booming. there's new stats out which show, wow, still the best since the '70s. the president of heaven hill distilleries, creator of kevin williams, elijah craig and larceny will be our special guest in the next half hour to talk bourbon and booze. over 20 million kids everyday in our country lack access to healthy food. for the first time american kids are slated to live a shorter life span than their parents. it's a problem that we can turn around and change. revolution foods is a company we started to provide access to healthy, affordable, kid-inspired, chef-crafted food. we looked at what are the aspects of food that will help set up kids for success? making sure foods are made with high quality ingredients and prepared fresh everyday. our collaboration with citi has helped us really accelerate the expansion of our business in terms of how many communities we can serve. working with citi has also helped to fuel our innovation process and the speed at which we can bring new products into the grocery stores. we are employing 1,000 people across 27 urban areas and today, serve over 1 million meals a week. until every kid has built those life-long eating habits, we'll keep working. welcome back to "squawk box." making headlines this morning, amazon reportedly planning to develop its own online advertising software. "the wall street journal" saying that the announced platform is initially planned to replace ads supplied by google on amazon's website. i want to talk to miles about this. also goldman sachs planning to designate no more than 70 employees partners this year. that's also according to "the wall street journal." that's about the same number designated by goldman two years ago, which was the smallest partner class since goldman went public in 1999. they'll officially unveil that information in november. that's in large part, nobody is leaving that place. prices are staying and it's creating a huge issue for the younger guys who are thinking that they got to get out of there because they don't think that they have the kind of upward mobility -- >> get a goldman ceiling? >> we'll worry about this a lot. >> upward mobility within the partnership that is goldman sachs -- >> upward mobility within the sort of -- >> i know i see what you're saying. these poor people who are stuck making one million, two million a year it's harder and harder to move up. >> i'm just making the comment. >> let me tell you about -- what were you going to say, miles? >> i saw blankfein yesterday, he's smiling. >> he is smiling. he's staying. >> business is great. >> good. >> platform is strong. and he's under the lime light. >> you were in london yesterday. >> no, i was -- i was at a function for prostate cancer. >> good for you. >> let's tell you what else is going on this morning. the falling price of crude oil continuing to make its way to the gasoline pump. the latest lundberg survey showing gasoline prices down another four cents over the past two weeks. to an average of $3.48 per gallon. that's what jeffs tells me. vaseline costs eight cents per gallon less than a year ago. you'll be proud to know i was up in connecticut this weekend and i did go to the gas station myself. and was upset because it was a full service gas station, i wanted to pump it myself. and they wouldn't let me. so just -- for you to know. >> we're going to take that little sound bite. i wanted to pump it myself. we're going to have that on the year-end reel again? andrew. >> yes? >> smart car? >> not a smart car. >> a prius. >> no smart car because he doesn't have a car. did you rent one? >> it was a bicycle >> no, no, did you rent from hertz or something? >> yeah, yeah. >> oh, all right. a smart car is just for a day. in this case -- >> you mean a zip car? >> yeah, yeah, yeah. >> this is a larger vehicle. >> okay. and you actually rented it from a bona fide car rental agency? >> yes. >> okay. >> let me tell you what else is going on. >> that's great. >> this is more controversial. >> did you go midsize? >> big. >> the always controversial mtv video music awards didn't disappoint. nicki minaj performing her hit anaconda very explicit dance moves. now, she also had a little bit -- i wouldn't say a little bit, major wardrobe malfunction. >> she is holding the dress closed. >> you can see that, yep. >> but the rapper maintained her grip on the dress or we could have had a janet jackson super bowl moment like there was following last year's twerk heard round the world by miley cyrus. our mtv vma -- >> there was an award -- >> correspondent miles is here. what do you say about this, miles? were you advising her on how to hold onto that dress? >> i am not an expert on any of this. and with young children, young daughters myself i can't comment but -- >> what is her sponsorship -- did her rate go up after this? >> i don't think it has a material impact one way or another. may have affected her fan base positively. >> you're not going to hire her for the next campaign? >> i'm not the talent recruiter guy. >> okay. >> i like better than the green dress she had on earlier. it's much better than the green dress. >> and we know, you know, it's history now that miley cyrus, it was the greatest pr stunt in the history -- >> it was. and the madonna kiss was also -- >> with britney. >> with miley, she was so smart, immediately afterwards she said, huh the whole world is talking about me. >> but justin timberlake that was not -- well that didn't work. right? with janet jackson. neither one of them -- >> it got tivo in trouble. that was the only thing i remember about that. that's when they figured out, they were watching what everybody did with their tivo. >> right. >> the u.s. chamber of commerce says the economy is gradually getting better and will average 3% growth in the second half. marty regalia is the chief economist for the chamber. also with us is christian weller, professor of public policy at the university of massachusetts boston and senior fellow at the center for american progress. i'd really like to discuss what happened on friday in jackson hole with janet yellen. christian, let me start with you. calling the a dashboard of things that she watches within the labor markets, some people have read that that she's going to be easier on rates than you might otherwise expect based on the unemployment rate. do you think that's a good position for her to take? >> well, i think at this point, it's good position to take to take a wait and see attitude. i think the federal reserve can only do harm at this point raising rates. but we need to -- >> why? >> i think we still have in this uncertain world what we have is we have strengthening growth but the labor market is still lagging behind in the federal reserve has played a supportive role, pointing for many years to fiscal policy to step up the game and really invest in infrastructu infrastructure -- >> but isn't employment always a lagging indicator of employment? >> but not as much as it is now. we should have seen much stronger economic growth. much stronger job market growth especially this year. and part of it is that i think generally both on the policy side as well as on the business side we're still sort of stuck in this mind-set of like oh, what happens next month, what will congress do in terms of fiscal policy. i think we need to change both on the business side as well as on the government side on the fiscal side investing in the future and that really means investing infrastructure in -- >> christian, let's get marty in here. you have a survey out you think the economy's getting better. >> the economy is definitely getting better. i mean we saw a little bit of a snapback in the second quarter. we expect 3% growth in the second half of the year. part of that improvement is in the labor market. we've seen consistent but very slow improvement in the labor market. we're now back from where we were in the number of jobs when we went into the recession so we're starting to move ahead. and we're seeing a little bit stronger growth in terms of jobs and wages. so all of that is a plus. i think janet yellen is doing a very good job at the fed, continuing the policies of bernanke. she's being moderately aggressive in terms of, you know, phasing out slowly. but they haven't really begun to divest any of the portfolio that they've accumulated. and they really aren't ready to raise rates any time soon. >> but should they be based on your assessment of the economy? in other words -- >> i don't think so. i think when you look at inflation we've seen inflation relatively benign. so i don't think she's behind the curve yet. and i think they're, you know, continuing to phase out so they haven't stopped that. they're continuing to modestly stimulate the economy with the size of their portfolio. so i think they're about right on target. >> did you think he'd be on the same page -- >> well but i think that the whole thing is that if you look at the economist, about half of them are saying they should phase out quicker. and half of them are saying they're just about right. so when half of the economists are an open side of the equation i think they're probably splitting the baby in half pretty well. >> i agree with marty. i think the federal reserve is doing an admirable job. but i think the other part of the equation that we sort of have shifted to the side is the fiscal policy side. both on the spending and the tax side and i think now is the time that the economy is improving as the federal reserve is easing out its quantitative easing, is tapering and certainly holding its line on interest rates. i think now is the time to have a conversation about what we're going to do in the spending side, infrastructure investments, but also, the long tax reform debate. that's certainly an area where i think marty and i -- >> president obama is very, very interested -- >> i think the need for -- >> yeah. >> sorry? >> well, certainly -- >> but i think the need for tax reform is there and everybody agrees that the mess both on the corporate side as well as on the personal side has to be cleared up. and we're -- >> thank you we're going to leave it there. it's so great to see agreement on both sides of the aisle here. good to see you guys. >> coming up berman is booming. kentucky's distilleries filled 1.2 million barrels last year. up next the president of heaven hill distilleries, creator of evan williams, elijah craig and larceny. and from drinks to food burger king is in talks to buy tim hortons and move its operations to the north. another inversion. cute little guy, huh? this guy could take down your entire company. stay with me. on thursday a hamster video goes online. on friday it goes viral - a network choking phenomenon. why do you care? he's on the same cloud as your business. the more hits he gets, the slower your business may get. do you want to share your cloud with a hamster? today there's a new way to work. and it's made with ibm. not even labor day yet and already beer drinkers are enjoying a taste of autumn. pumpkin beer. last year pumpkin beer sales boomed helping turn a slowdown in overall craft beer sales of 125,000 into a 300,000 case improvement during the season. pumpkin beer outsold even india pale ale craft beer. sales rose 20% to $14.3 billion in 2013. this year you'll have to sift through the pumpkin patch to find your favorite. nearly every craft beermaker has a pumpkin beer. >> is this every shot of you that you've ever drank beer in? >> really hard to find a shot of that. but yeah, these are all the ones that we have on file. >> on file. let's talk about bourbon. because bourbon production is that its highest point since the '70s. the spirit is experiencing a renaissance. joining us is moron the bourbon boom, the president of heaven hill distilleries, the second largest seller of bourbon in the world behind jim beam. good morning to you, max. thank you for joining us. >> good morning. >> you have a number of bourbons there. just explain really to me, maybe the audience understands this. all bourbon is whiskey but not all whiskey is bourbon. correct? >> that is absolutely correct. >> and just give us -- what's the distinction? >> well, bourbon is made under u.s. government standards. and they have a specific set of rules that you have to have. you've got to have a product that's produced and the recipe with a minimum of 51% corn. it's got to be aged in a brand-new white oak barrel and can be aged at no greater than 125 proof, which is 62.5% alcohol by volume. so those are some of the very basic standards which bourbon must adhere to -- >> but isn't the key distinction something about the filtering process between bourbon and whiskey? >> no. we actually filter all of our bourbon after it has aged in our warehouse. it's a charcoal filter product and we do that for all of our products. >> is all whiskey charcoal filter? >> i'm sorry. i didn't hear that. >> is all whiskey charcoal filtered? >> not all whiskey is charcoal filtered, absolutely not. but, that is one of the things we do with our bourbon that makes some of that taste and aroma come through in such a pleasant way. >> so what is the deal then, bourbon has to be created in kentucky or doesn't have to be? it's like champagne? >> bourbon does not have to be produced in the state of kentucky. but 99% of all bourbon is produced here. it's a combination of great water, limestone rock formations which make that water so perfect. it's the humidity, the temperature, the aging factors, all that goes in to making a great whiskey and that all comes together here in this state. >> so, max, what do you attribute the sort of massive increase in sales? it's a marketing thing? what's happened here? >> well, it's a couple of things. first of all it took a long time for this industry to actually get it right. but you see in front of me a variety of different bourbons. there's a wheat-based bourbon. a single barrel. a traditional sour mash. a flavored bourbon, 12-year-old. each of these products have distinctive product characteristics. age, alcohol strength, recipes, who would have thought just as little as much as ten years ago that we would actually have flavored bourbons today. it's brought in a whole new range of consumers, both domestically and around the world. that coupled, those great product offerings, coupled with the flavors and with the mixologist the rise of the cocktail culture has brought that to the consumer in so many different ways. >> what's the gender mix? men versus women? >> well, it's still more men than women consume bourbon. but that trend is rapidly changing. and particularly these new variations are brought in a whole different set of consumers, a whole different set of consumer dynamics to the product. >> max, we have a marketing maven at the table. miles nadal who, do you understand how this has become so successful? >> well, yeah, actually we created a bourbon. one of our agencies called papa's pilar so there's a lot of microbreweries that are now spinning out. max, why is it that what's happened to the beer business is now happening to the bourbon business and other spirits? what is it -- is it about consumer appetite? and fragmentation of the market? what is it that's creating opportunity from people like you and others? >> this is really sort of the age of discovery frankly for consumers and they're interested in a broad range of tastes. so the rise of the craft distillery segment of our business is probably something normally that you would have expected to have occurred. we have done it ourselves. we actually opened a tourist center under the bourbon experience. we have our own craft distillery that produces about a barrel of whiskey a day and that's just all indication of what the consumer wants and desires -- >> so that might be a good explanation why i see here the kentucky distiller's association says the number of distillers is going to double next year from 201040. you're not worried about a glut? >> no we're not worried about a glut. to us the future really looks absolutely unbelievable. remember alled increases that we've seen in the bourbon business today or nearly all of it has been domestic here in the united states. and that's great, but outside the united states i said this for many years if you go outside the united states and ask for a whiskey and water or a whiskey cocktail 99 times out of 100 you're going to get scotch. scotch is a fine product. but all we have to do though is to reduce that 99 times out of 100 to about 95 times out of 100, and there won't be enough bourbon to satisfy that kind of demand for years to come. so the opportunities abroad are rather remarkable and rather interesting and that's really all around the world, whether it's japan, australia, new zeala zealand, capetown. it could be anywhere. >> max, we appreciate it. thank you very much. before we go, i'm a lightweight on this kind of stuff. of the stuff on the table here we have larceny. which would you -- for someone like myself what would you drink, the evan williams? what do you recommend? >> who's your favorite child? >> whoa, i think that you should go with the elijah craig 12-year-old. it's a really unique, unusual, out of the ordinary whiskey. so that's my recommendation. >> okay. there it is. max, thank you so much. >> coming up. >> take care, thank you. >> saving iconic brands, companies like procter & gamble are looking to move weaker performing names that have been around for decades. can you imagine life without jell-o? ivory soap? apparently a lot of people do. a look at some dying brands, turnaround stores. more next. and at the top of the hour, marty feldstein on the fed and the systemic risk balancing act it's taking on. he will be here to explain. "squawk box" will be right back. >> football is back. which means it's busy season for buffalo wild wings. ceo sally smith joins us to explain this fast casual success story. "squawk box" starts tomorrow at 6:00 a.m. eastern. our country. thank you for your sacrifice and thank you for your bravery. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can 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. 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. welcome back to "squawk box." procter & gamble planning to sell up to 100 of its signature brands like ivory soap and duracell and jell-o. sales have tumbled 19% from five years ago so we wonder can nostalgia keep a brand alive? we're going to talk to our guest host miles nadal about what makes a product iconic. are these -- look at these brands behind us. i don't know if -- you can't see it. if you can see what's going on here. we have a list of brands that apparently are on the bubble. blackberry to me it's clear why blackberry is on the bubble. shutter fly? really? is jell-o really on the bubble? kids still eat jell-o. >> i don't know that kids eat jell-o still. >> bill cosby? come on, miles. >> so what makes a brand iconic? something that has a durable competitive manage. >> right. >> a sustainable point of differentiation. and emotional attachment between the consumer, and the brand. okay? an ultimately that emotional attachment induces people to make purchase. >> so what happened to ivory soap? >> that i don't understand. because that's -- it's a clean soap. that's what i have. that's what i use. >> yeah, what do you use irish spring or something? do you know? >> you have the leftovers from the hotel like when they give out the little -- >> no, do you know? you've never -- you've never bought soap. >> i think i do dial. >> you do dial. dial is not that much different than ivory. >> i don't know why. >> not having like a perfumey soap, is there? i'm surprised ivory -- >> most people actually are going away from perfumey soaps because of allergieallergies, e. >> what's wrong with ivory then? >> no, no, ivory is a great product. >> i'm taking it personally. >> ivory soap floats. >> dove -- >> that's what i use. thank you. i use dove. i knew it was -- >> you need a quarter cleansing cream? and dove -- >> because -- >> it moisturizer. >> ivory is square. >> it's curved. >> that's what i use. >> these brands have a resurrection. so we've got kraft macaroni and cheese. it was flat for decades. and now it's had real growth. because people, you know, men are now using it. >> what did you use like product placement? every high end restaurant now has trouble throwing -- >> cheese in people's perception and also expanding it -- >> a little brand extension. >> but also hoping people the application. i mean nobody admits to being eating kraft macaroni & cheese once you leave teenagehood but the reality is is that students do. adults do. i'm always the finisher of the kids' macaroni & cheese. >> me, too. just about every day. >> it was 25 cents a box when i was in college. >> domino's pizza. >> that's back though. >> huge. i mean, but it was moribund before, up until about seven or eight years ago. >> i have a list. you say volvo could be a dying brand. >> i didn't say that. that was melody said that. >> our producer said that. what's happened to volvo? >> just lost its luster. i mean, if you compare it to bmw, if you compare it to -- >> a client of yours -- >> yes, yes, yes, yes. but if you compare it to so many competitive brands, why do you -- what's the competitive advantage of owning a volvo? i mean -- >> it used to be -- >> is a volvo a safety -- >> now all these other cars -- >> everything is safe today. that's no longer a sustainable -- >> but they do have better models now. a little bit better. >> there are certain brands that just people have an emotional attachment to that are iconic. coca-cola is an iconic brand. >> but even they're struggling to grow. >> cnbc. >> "squawk box." >> we're going to go to commercial. >> joe kernen. >> joe kernen. >> miles is our guest host. he will be here for the rest of the program. >> miles nadal. >> and -- >> rafa is not playing at the u.s. open. >> do you play tennis, too? >> janet yellen's message to the markets, and then an earthquake shocking california's napa valley. the governor declaring a state of emergency. we're going to get the latest. 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. 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. where the reward was that what if tnew car smelledit card and the freedom of the open road? a card that gave you that "i'm 16 and just got my first car" feeling. presenting the buypower card from capital one. redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac - with no limits. so every time you use it, you're not just shopping for goods. you're shopping for something great. learn more at buypowercard.com frothere's no reasonn average 17 we can't manufacture in shuthe united states. here at timbuk2, we make more than 70,000 custom bags a year, right here in san francisco. we knew we needed to grow internationally, we also knew that it was much more complicated to deal with. i can't imagine having executed what we've executed without having citi side by side with us. their global expertise was critical to our international expansion into asia, into europe and into canada. so today, a customer can walk into our store in singapore, will design a custom bag and that customer will have that american made bag within a few days in singapore. citi has helped us expand our manufacturing facility; the company has doubled in size since 2007. if it can be done here in san francisco, it can be done anywhere in america. >> a whopper of a deal, burger king looking to buy canadian based tim hortons and move its headquarters to the north. another possible tax inversion deal. >> picking up the pieces. a powerful earthquake rocks nap to valley. an outlook for wine country and the california economy. >> plus it's the smartest helmet on the road. gps rear view camera and bluetooth technology meet skully a disruptor in the motorcycle industry 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 michelle caruso-cabrera and andrew ross sorkin. becky is enjoying some time off today. i don't expect to see her on friday. >> until september. >> that was a mistake that she came in on friday. she had to do -- she had that important show "on the money" and i threw some water on her head. but -- >> did you? >> yeah. but it erased the four days that she had off. the progress she had made in getting to -- >> oh, she did the als challenge? >> yeah, she did. and then she challenged warren and a couple of others -- >> well, i mean warren's been challenged now 100 times. and he's not taken the bait. >> i think maybe this time -- >> this time he will? we can only hope. >> it is back to school time, which still strikes fear in my heart. i get butterflies. if you have teens in your house, the next story will come as no surprise. the american academy of pediatrics said teens need a later start to the school day. my kids are starting at 7:00. >> it's ridiculous. >> therefore high schools and middle schools should begin the day no earlier than 8:30. that's because the group says that the adolescents need more sleep. >> yep. i agree with that. >> for sure. >> kids are up watching -- >> i think the shows should start later, too, by the way. >> part of the reasons why they need more sleep is because they're using their pdas, they're on facebook until all hours. >> biological changes associated with puberty cause teens to get tired later at night, making falling asleep early harder -- >> i thought pda was a public display of affection. >> isn't that what a -- >> it is. >> that is so old school you said pda. >> he said a pda. >> yeah. >> just -- >> i heard they go 21st century digital boy, he doesn't know how to live but he has got a lot of toys. and that made me -- that struck home with me because my kids they're never looking up anymore. they're never looking up. it's like, we're in the car, i say was that a -- what was that? adoberman? and nobody hears me. nobody saw it. nobody sees or hears anything. >> how about when you go to a restaurant the parents walk in the kids are behind and the kids all have their hands down and they're working on their smartphones. and they don't even see what's going on in the restaurant. >> that's what i mean. it's a lot of that. i just wonder what does it mean, andrew? what does it mean? you weren't -- did you have a playstation or anything all the time? >> no. we didn't have anything. >> they had nothing like that? >> it had to be attached to a wire back then. >> i had an atari. >> yeah, i know. there was a time when people used pagers. that used to be -- if you were really high tech. >> if you had a pager you were a drug dealer as far as i was concerned. >> or a physician. >> or a drug dealer. >> all right. >> headlines at this hour. fast food powerhouses in the works. burger king is in talks to acquire canadian coffee and doughnut cham tim hortons in a tax inversion deal. we're going to talk to an analyst who covers the space in just about 20 minutes. because taxes, corporate taxes in canada are lower than they are in the united states. >> right. and of course, the canadians have that big army that they have to support. i forgot about that. >> oh. >> and they need all that money -- >> right. >> because they're fighting over in the middle east. >> you say our taxes -- >> are being used. we have taxes that are being used to build roads and support military and also the things that we have. that other countries don't all have. >> and our personal income tax -- >> we're talking corporate tax. >> i know. >> corporate taxes aren't being used to support that. i mean, it's -- >> well money is fundable. >> you should do it with the assumption -- should do it on an individual level -- >> exactly. >> corporations around the world could be zero and we should all compete on an even plane and whoever competes best gets the most jobs, gets the most facilities and manufacturing facilities in their own homes, capital investment. occurs in your own country. the race to zero would be good. what you're so worried about. this 10% that you're saddling corporations with -- >> 9.9%. >> makes no sense. >> of our revenue comes from corporations. we fight over this little pile of money when it's all income tax. >> right. >> in other deal news roche is buying intramune, a more than 60% premium. when reports first surfaced that the company was valuating strategic options. >> okay. let's get more on jobs, the economy, fed policy from one of our very own "squawk" market masters joining us now is marty feldstein, economics professor at harvard university and former council of economic advisers chairman under president reagan, recently wrote a piece in "the wall street journal" bringing to life the challenges of the fed's macro prudential policy. marty thank you for joining us. you heard what ms. yellen had to say on friday and i wanted to get your thoughts before we even get into the op-ed. >> well, i think she gave a piece trying to -- speech trying to indicate that she wasn't as dovish as she had been made out to be by the press, and the markets, tried to give a more balanced analytic speech. she wasn't giving away any secrets about what the fed was going to do next but she made it clear it's not out of the question that we be surprised at how soon the fed would start raising the federal funds interest rate. >> and what is your sense in terms of gdp for this year? >> my sense is going forward, so forgetting the 1% -- the negative 2% in the first quarter, and the jump in the second quarter, going forward, i think we're going to have about 3% growth. >> so, in your op-ed you talk about this concept where she's made it clear that she didn't think that interest rates should be used to deal with systemic risk, but instead it should be this macro prudential policy which to me sounds like regulati regulation. is that a good way for the federal reserve to be thinking or would using interest rates be a much more efficient -- >> interest rates are -- >> -- bubbles -- >> interest rates are the cause of the problem because interest rates are so low, we've got investors and lenders taking all kinds of risks that they hadn't taken and wouldn't take if interest rates were a more normal level. >> does she think that? >> i think when the fed thinks about setting interest rates they should take that in to account. >> but she doesn't, right? >> well, exactly. what she said was we're going to depend on prudential regulation. now for the banking system, there are things, increased capital requirements, limits on some of the positioning that the banks can do. but for the rest of the financial sector, that's not there. and so very low interest rates are driving lenders in to taking risks. low quality loans, investors buying junk bonds with low spreads and there aren't any prudential regulations to prevent that. >> martin, it's miles nadal. you forecast 3% growth for the second half of the year. where are you on 2015? what kind of gdp growth do you see in '15? >> you know, the further you try to look ahead the cloudier the crystal ball becomes. but i can't see why we're going to see that slow down if we move in to 2015. so i think over the next twelve months i think we see a continuation of that 3% growth. >> marty, the big question we have right now is whether the fed's behind the curve and whether there's going to be any, you know, negative consequences to really staying at like emergency level policy, even though we're five years in to a recovery. then i look at europe -- >> i think there's a risk of that. >> i know. i look at europe -- >> pressures are building. >> i've cited you or druckenmiller, a lot of people, but then i look at what's happening in europe and it almost is if maybe the fed doesn't have interest rates here at artificially low levels, when in a world where germany's below 1% or has been and these other countries that obviously are not as financially -- their balance sheets don't look like ours and they're at 2.3% as well on a ten-year so maybe that means that the fed isn't that far from where interest rates would be naturally and maybe there aren't any negative consequences. >> well, fortunately we're not in europe. europe is dead in the water. even germany saw decrease in gdp, france, italy, decreasing gdp. so for the eurozone as a whole there's no growth. so it's not surprising that the european central bank is trying to keep interest rates low. they have an inflation right of less than one half of one percent. that is not the situation in the u.s. where inflation is picking up. the cpi increased more than 2% which is the target that the fed has set. if you look at the more recent numbers, the last quarter, if the pce inflation measure that the fed likes to focus on was increasing at more than 2%. 2.3%. so i think there's good reason to think our interest rates are just too low. >> i'm sorry to interrupt because we're stuck on time. is the risk that something is coming up in the future that's going to hurt us, or there are those that say our economic recovery has already been tepid because of this low interest rate policy where corporations, instead of investing, they're buying back stock. borrowing money and buying back stock and they're not doing the things that they would normally do in terms of plant and equipment and investment to make it an income statement recovery instead of a balance sheet recovery. are we right now being hurt by the fed? or is it something in the future that's building up that we don't know about? >> it is something in the future in terms of the risk taking that's going on in the economy, and in terms of potential inflation increases. >> okay. yeah. i think you can argue both really. but then again you have people that say the fed can declare victory, and you've got "the new york times." you've got christian weller just on. stay zero forever. why not? you know. so i don't -- you know. >> can i say, marty i know you're not a stock guy but i'm curious, do you watch the stock market and what do you think of all this? >> i think everybody has to watch the stock market. on the other hand, i think that the stock market has been boosted by the quantitative easing and by the promise of low sort-term interest rates for the indefinite future. that's what ben bernanke said was the strategy of the fed in doing quantitative easing. it was to stimulate equity prices so that consumers would feel better and go out and spend. i think that means we've probably got an overvalued stock market. >> okay. we're going to leave it there professor. thank you for joining us this morning. appreciate it very much. coming up isis on the move. capturing an air base in syria. we're going to get the latest after the break. plus winners are picking up the pieces after an earthquake rocked napa valley over the weekend. we're going to get the latest from the wine country after the break. and then, a whopper of a deal, burger king looking to do an inversion deal with canada based tim hortons. we're going to have more on that story in just a bit. the world , 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. that's why i always choose the fastest intern.r slow. the fastest printer. the fastest lunch. turkey club. the fastest pencil sharpener. the fastest elevator. the fastest speed dial. the fastest office plant. so why wouldn't i choose the fastest wifi? i would. switch to comcast business internet and get the fastest wifi included. comcast business. built for business. welcome back to "squawk box." authorities are assessing damage today from a 6.0 earthquake that struck the heart of california's wine country yesterday. that centered about six miles from napa. no reports of deaths so far but the quake injured close to 200 people and dozens of buildings were damaged. it was a winning weekend for new hampshire couple visiting vegas. they hit it big on the legendary lion's share slot machine at the mgm grand, winning $2.4 million. yes, a slot machine. reports say they put $100 into the machine and played the $3 max bet for only five minutes. the machine has quite a reputation because in the past 20 years no one has ever hit the jackpot. wow. >> i heard about that. >> do you know what happened the second they won? there was anners man standing right next to them. >> no. >> no. for sure. it happened to my mother when she won the slot machine and an irs man shows up right away to take half of it. >> that was a vegas story? >> i haven't talked about shug knight in years. >> you heard what happened, though? >> no. >> he got shot. he was at a party over the weekend ahead of the vmas and he got shot. >> oh, that's right. >> six times. >> shug knight. >> is that the guy? >> and tupac had been in his car years ago. >> yeah, yeah. >> when there was also a shooting. he had been shot at. >> with biggie small? >> i don't know about the biggie small part. >> did he live? >> shug knight did live. he's in the hospital. >> this is part of the buzz about the vma that we've been talking about this morning that i have to read now. it was perhaps a 2-year-old who stole the show, blue ivy watched her mom beyonce perform, and then was brought onstage by her dad jay-z. >> oh, wow. they're together. that's good. >> andrew's wondering whether this could put rumors of trouble in paradise to rest. pretty happy there. >> but good. because they had apparently hung out at gwyneth paltrow's house and people all these reports that gwyneth paltrow was giving them advice on coupling and all this kind of -- >> that's weird. >> they could be getting some advice on the conscious uncoupling thing. >> from gwyneth. >> andrew knows all this about pop culture. >> this is really not surprising. >> entertainment -- >> he's not a -- >> there's no stars too small for him to want to meet and somehow get to know, is there? >> i would go to the opening. pretty much. >> he will. >> i mean, sports are called jock sniffers a lot of times if they get very close -- >> every time i go to the academy award dinner, function -- >> there's a term like jock sniffer no matter how small -- >> did you catch what he just said? >> yeah, i did -- >> the academy awards -- >> i know he is. >> he's just flying in -- >> not at the awards. he's like at the parties. >> oh, all the parties. >> not a party. all of the parties. >> we know this. you know what? i like it, too, and i glam onto him to go to drns >> you got one next week. >> i'm going next week with one. i am. >> you know what? credibility by association. >> you know what, miles? wait till the thing on showtime is huge. and he won't even be here. >> i was going to say -- >> we get an invitation. that is what we want -- >> when we get the invitation we'll still get the invitatioin. >> isis -- we are going to switch gears. thank you. >> isis capturing a major air base in syria the last government held outposts in an area dominated by extremists. amen mohyeldin joins us from london. we need you every week as things i can never remember it being this tumultuous in that part of the world, but what can you tell us today? >> well it's a situation that continues to worsen on both sides of the syrian/iraq border. you were talking about isis making gains on one hand taking over very important air base and airfield in the northern part of syria that was held by the regime of president bashar al assad. certainly shows that they have the ability to fight on multiple fronts because also today there was a suicide bombing that took place in baghdad, killing at least 12 people. but more importantly, they have demonstrated the ability to move troops across those borders, in a very open way that now has really pretty much wiped out any kind of border between those two countries, iraq and syria. that certainly is going to be a major cause of concern for the united states. but more importantly, today, the syrian foreign minister warned the u.s. not to engage in any airstrikes against isis targets inside his country without coordinating with damascus. now his government said that they are prepared to work with the united states, and the international community to try and thwart isis' gains but for the time being he is warning the u.s. not to act unilaterally and violate syrian sovereignty. not a lot of good news that comes out of that part of the world these days. today there have been some and that is the release of the american writer theo curtis. that was confirmed by the united nations. obviously since then a lot of confirmation coming out from the u.s. government. it seems the deal to secure his release from a group that is not isis but an al qaeda affiliated group was brokered through the qatari government. they say they did not pay any ransom money but there are going to be a lot of questions as to why this american was released or if there was any kind of deal in place that secured his release. guys? >> and we wondered that. because, you know, you can be less radical than isis, but you know, normally you're not -- if it's al qaeda affiliated you don't think of it being conciliatory unless there's something in it for them and you wonder if we finally do find out. anyway, we do appreciate seeing you this morning. thank you. >> coming up a couple of deals being announced this morning from biotech to burgers. we're going to speak to a man who is no stranger to deal speaking about the state of m&a and why he's throwing money at pet and vet supplier companies. scott sperling is our guest in just a bit. and then later the world's smartest smartest motorcycle helmet from situational awareness to bluetooth connectivity, even a rear view camera it's the helmet of the future and we are showing it off right here on "squawk box." stick around. this is a burrito made with chocolate, soybeans, and apricots. what kind of chef comes up with this? a chef working with ibm watson, on the cloud. ingredients are just data. watson turns big data into new ideas. and not just for food. watson is working with doctors and bankers to help transform their industries. today there's a new way to work. and it's made with ibm. a lot of news about fast food today. burger king is in talks to acquire canadian coffee and doughnut chain tim hortons. mean time the "journal" has a piece this morning suggesting that mcdonald's is facing a so calmed millennial challenge as customers in their 20s and 30s defect to restaurants like chipotle. when i see andrew eating, what is that stuff, that kale that's flat and it crunches when you eat it? i mean, you wouldn't be caught dead with a mcdonald's fry and you eat those, what is that kale stuff? millennials are healthier, right? >> sea weed. >> sea weed. he eats sea weed -- >> no, it's not that. i was doing it six months ago. they were sauled sea weed chips. they're delicious. >> you're not -- >> no, not anymore. >> joining us on the "squawk" news line today, global director of consumer equity research, i think coke has the same problem in carbonated drinks. will millennials ever come back to so-called unhealthy food like mcdonald's or carbonated beverages or do these brands have a problem? >> i think the brand is going to take a look at some of the challenges facing them and traffic upon the millennial audience. i think there is opportunity, meaning the large system, whether it be cokes, bottling system, and mcdonald's obviously, a number of units out there but they have to take a look at what they're offering consumers now. there certainly have to be adjustments made. >> what's so funny is joe refers to the less healthy versus the healthy. eating chipotle burrito, which costs seven to eight times more than a big mac, or a whopper, which has fewer calories, i mean, isn't necessarily more healthy. in fact they're eating more volume. they're spending more money. and yet there's this perception that it's better for you. >> it's lower in -- >> yeah, it's -- there is a perception that mb donald's is the leader in the quick service industry. obviously it gets pegged as being an unhealthier fare than what's out there. to your point on a pure calorie basis there's a comparable. i think mcdonald's looks at the market a little bit differently and it's difficult to overcome when the persona is that it's a quick service restaurant it's difficult to overcome that. >> what do you think of the burger king tim hortons deal? >> very interesting. i think the timing is very interesting given all the issues mcdonald's is having. this is clearly a shot across the bow there. makes sense from a geographic standpoint, and from a -- >> does the inversion thing matter and the reason i ask is in the case of walgreens they decided not to do it because in part they thought people might protest that people would not go to the store. would that -- >> i don't think it's going to happen here. i mean it's only a smaller part of the deal. i think that there's some other things. i think there's some services and overhead type synergies that could come out of the deal. i'm not sure at this point. >> all right. all right dave, thank you. >> thank you. >> okay. >> coming up, road and track calls it the most anticipated motorcycle helmet ever produced. new technologies that will keep ri riders out of harms way you going gps and a rear view camera. the skully is on "squawk box" just ahead. your sacrifice and thank you for your bravery. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can 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. where the reward was that what if tnew car smelledit card and the freedom of the open road? a card that gave you that "i'm 16 and just got my first car" feeling. presenting the buypower card from capital one. redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac - with no limits. so every time you use it, you're not just shopping for goods. you're shopping for something great. learn more at buypowercard.com welcome back to "squawk box." let's take a look at some stocks in the news this morning. biotech firm intermune is surging after roche agreed to buy it for about $74 per share a 38% premium above friday's close. also, activist investors engine capital and red older have ann taylor parent ann inc. in their sights. they sent a letter to the board saying the company is deeply undervalued and urging it to explore all available strategic alternatives to enhance shareholder value. ann inc. says it welcomes open communication with its shareholders. and u.s. steel was upgraded to outperform by underperform by credit suisse which cites raw materials cost advantage over competitors. >> 2014 has been a comeback year for mega deals. joining us is private equity titan scott sperling, thl has invested more than 100 employ yo poll yos, 150 billion since its inception. last time you were on were you saying this was a time to be an opportune time to be selling some stuff in the portfolio, are you still finding things that make sense? >> i think it's both ways. one of the things that we've done over the last few months is use these opportunities to realize on a number of the investments that we've had. it's been a good time to sell. i think there's been strategic interests out there. for the reasons that i think we're all aware of. interest rates are low, the ability to borrow, strategic, very low cost and a lock that ends for an extended period of time gives you the ability to do very accretive transactions at prices that are good for both the buyer and the seller. so we've been looking at taking advantage of those opportunities when they come up. sometimes that means owning a company a little bit sooner than you might have anticipated. but given the performance that we've seen, you know, that makes it a very worthwhile exercise. >> differential tax rates ever factored in to any of the deals you do? why do we talk about it all so much now? why has it become such a -- an issue? >> well, i think it's an issue for the obvious reason that it's yet one more fiscal headwind that we have in the united states. and when we talk about issues having to do with federal reserve, providing stimulus on the monetary side, one thing that we have to keep in mind is whether it's a whole long list of fiscal headwinds that we confront. you know, the average tax rate for a corporation in the united states varies very significantly across the full range of companies -- >> in general is it higher than everywhere else, or andrew's column last week says not really. >> well, i think if you start with the same base, just start with the base rate and forget everything else we put on it's certainly significantly higher. and many of the companies that you see out there, particularly the faster growing companies, tend to have fewer deductions, or opportunity to take advantage of some of the tax incentives out there. so their typical rate is, in fact, higher than it would be. >> i agree with you on the smaller companies, smaller and midsized companies get dinged in the united states but we would all agree that multinationals have figured out how to weave their way around quite nicely. no? >> andrew i think you're exactly right. you know, look at the, your former parent ge which is historically had a wonderfully good tax company that has generated an ability to have tax rates that are often -- >> but weaving around for the company means that -- >> leaving it overseas. and you know what i mean okay? so they found a way to do it. they found a way to do it, but it's bad for the country that we're not attracting capital here. so, that's what i'm saying. >> i am. >> right? >> i am in full agreement on that. >> that's the problem. they can't get down there in >> one of the things that we have to look at is how do we simplify tax regulation and all the other elements that as i said really go in to creating a much more significant fiscal headwind for doing business in this country and consumers in this country. so i think this is just one part of a broader -- >> what's so frustrating -- >> everyone says we need comprehensive tax reform. president says it, but it never gets done because they actually don't want to get it done. >> well let's be -- realistically, obviously, it's not going to get done until this '16 election at very best. closer to '16 election. you're right even then everyone's idea of what comprehensive tax reform means is very different. so it's hard to piece this together. but, nonetheless, we have had periods of time when we've been able to undertake significant simplifications that are intended to be revenue neutral that can be accepted by others. we saw it in the 1980s. we saw it in the 1990s. hopefully we'll be able to see it in the middle of this decade as well. >> scott, it's miles nadal. >> hi, miles. >> how are you? >> i'm good how are you? >> you've enjoyed great success by being opportunityistic at troughs in the market. today, the multiples paid for private equity investments, it's about 10.2 times ebita up from about eight times five years ago. more competition than ever, more liquidity with firms in the private equity space. how are you finding the level of competition, and what do you think it looks like going forward? do multiples continue to increase? obviously with capital being so abundant and low cost, it's provided a great catalyst for activity. but what does it look like going forward when multiples have gone up so substantially? >> you know, that's the multibillion dollar question. i think that, you know, we believe that there is a cyclicality to this and that nothing we've seen breaks out of that. that being said the fact that you have relatively low interest rates, and the weakness, the continued weakness in the economy, i know we talk about looking at 3% growth. i know we talk about an unemployment rate of 6.5%. but when you look at the number of people who don't have full-time jobs in this country, when you look at some other factors, there's still a significant room to go and maintain, and i suspect we will maintain low interest rates, because of all of that for some period of time. if you have those low interest rates you're probably going to see an abundance of capital in the credit markets. and it's the credit markets that tend to be the fuel for the multiples that are being paid in our industry. and as i mentioned earlier, by strategic purchasers who are looking at that very low cost of capital as a way to do accretive transactions at purchase multiples that you might think are otherwise quite high. >> so, scott, as we did as the fed exits and rates start normalizing and going back up, there they -- the tradeoff in it being a better economy, will it just be net-net about the same environment for you? or will it start to hurt as rates go up? >> well, i think from a buying perspective, we've always liked environments where credit markets are a little tighter. and i think it will create opportunities going forward if you see the credit markets tighten up, because interest rates have gone up. that being said, you know, again i think that we're probably in for a more sustained, lower rate environment relative to the normalized rate than we'd all like to see, because your fundamentally right show we'd rather see strong performance at the company level. and while companies are, in fact, doing pretty well right now, they're still not at the level that you would expect them to be given the depth of the recession that we saw a few years ago and the amount of time after that. so i think there's room, there continues to be room before we hit a point where the fed meets to take significant action on the interest rate hikes. >> all right scott sperling, thank you. appreciate it. >> you're very welcome. >> okay. see you soon. >> coming up the world's smartest helmet that could change the motorcycle industry. we introduce you to the skully. tech meets the open road next. and check out the futures. right now they're suggesting that we're going to have positive open. "squawk" rolls on right after a quick break. ♪ [ dog barks ] ♪ [ male announcer ] imagine the cars we drive... being able to see so clearly... to respond so intelligently and so quickly, they can help protect us from a world of unseen danger. it's the stuff of science fiction... minus the fiction. and it is mercedes-benz... today. see your authorized dealer for exceptional offers through mercedes-benz financial services. welcome back to "squawk box." the futures right now are even better if you're long than they were earlier up 72 points. in the news sony's playstation network is back online following a cyber attack that took it down over the weekend. the attack coincided with a bomb scare on a commercial flight carrying a top sony executive in the united states. the threat came from a tweet that originated on a game player's online forum, and the flight from dallas to san diego was diverted to phoenix. sony said on its playstation blog that its network had been taken down by a denial of service style attack but did not compromise any network user information in the process. a group known as lizard squad on twitter said it had also targeted the servers of war craft video gamemaker blizzard entertainment whose website was down and threatened to attack microsoft's xbox live network. you look cooler in this next helmet. >> we are going to talk about one of the coolest motorcycle helmets you will ever see. we are developing an obsession here with new helmet technology on "squawk box." we told you last week about the football helmet. with the camera inside. that is me wearing it on the show. >> you look like that little -- like the little space guy -- >> he looks like rudy. >> i want you to check this out, guys. this is a new juiced up motorcycle helmet. you're watching video of the view from inside the helmet. it's kind of like the tesla of helmets. it has a heads-up display, gps navigation, rear view camera and many other functions. joining us now, to talk about it -- >> it's unfortunate it's on the right-hand side you can't see the little insert camera. >> we'll be able to see it in a second. marcus weller is here, the ceo, chairman and founder of skully the helmetmaker. we think this is very cool, marcus. thank you for joining us this morning. tell us. >> good morning. >> tell us where are you in the production of it. >> so currently we have beta test models on the road. and this is really to get some early stage user feedback and make sure that we're enhancing safety the way that we intended from the beginning. we have been compared to tesla for motorcycle helmets. and i think the comparison is apt in some ways in that we're taking a vastly underinnovated platform, and bringing new technology to bear on this to ultimately make the roads a safer place to be. >> and just to give everyone an idea, you guys did the equivalent of almost like a kick-starter campaign that's begun to support this, and you have become way oversubscribed. >> we did. we ran an indy go-go campaign to validate interest and what we said was a goal of $ 50,000, a quarter million to validate that interest and we vastly overshot that in the first two weeks so we're at $1.4 million as of today. >> this helmet is going to cost how much money? >> it's $1399. but we're actually releasing a $499 reservation model via the website. so if you go to the web site skullysystems.com you can reserve one for $499 and pay $9.99 at ship. >> given all the technology, effectively there's a tv screen on the side of you get a phone call, a camera in the back can you make money on this? >> it's a highly complex consumer electronics device that is for sure. but i think that it's an important, and a needed thing. we've gotten some good interest from investors and i think that the path forward for scully is promising. >> what about the safety issue? the one thing that gets me about this helmet it's great because you can do all of these things, quote unquote multitask while you're driving. then i get nervous -- >> we're really about not multitasking. it's about increasing situational awareness of the rider. taking a 180 degree camera that eliminates blind spots for the rider and rendering it in a translucent heads up display. 180 degree viewing angle showing the heads up display with turn by turn gps navigation will vastly improve riding safety. >> can we bring up the video, there it is. what i see on the big screen here is the open road and lower right-hand screen is a rear view? >> yeah, that's the rear view. >> that's the rear view. >> you're also getting a telephone call in the middle of it. >> that's telling you the phone is ringing? >> that's an option you can enable via the smartphone. so there's companion app and users can configure their helmets for their specific functions. some people like to ride with music and they find that they can increase their concentration whereas some people like to ride just totally pure, and so we're going to enable either one of those modes. >> most of the new helmets, though, do have bluetooth technology. i have a question. what was the derivation of the evolution of this? are you a motorcycle rider? what was it that you saw in current technology that was not in keeping with what you thought the future should look like? >> well, it was really an idea that kind of chose me. so, back in 2011 i was on my motorcycle in barcelona and i looked to my right to read a street sign, because i was doing that i hadn't noticed this little smart car in front of me slammed on the brakes so i smashed into the back of it. then i realized the street signs were there to read. that's what they're there for. that's all i was doing. so i realized there was definitely something that we could do with technology to basically take that information, render it in a heads-up display that's in my line of sight. so it's easier to concentrate on the road ahead. >> so just to go through the price points. a traditional helmet is $300 to $400? >> between $300 and $800. >> this is going to be about $1200. and then there are helmets that are as much as $4,000, i'm still wondering given all the technology inside this helmet what kind of margin you can make. >> the margin is pretty solid for this first production run. but really there's a lot of costs to getting a new type of technology that's category defining out to the market. so we're starting out with strong margins. but honestly, there's a lot of work ahead. and we're very much looking forward to bringing this to market -- >> in this helmet that's not available in cars yet? i haven't seen -- >> this is a rear view camera like there are in cars. >> but you don't see a heads-up display that way in cars this -- >> i guess i haven't seen that on the video to really -- >> i thought rear view cameras in cars were only when you were backing up. >> only when you're backing up. this is all the time. >> yes, right. >> yeah, it's 180 degree viewing angle that's digitally flattened and rendered in a heads-up display. we do have some ip on that and is a pretty big safety advancement for transportation safety in general. >> marcus, we wish you all the success in the world in this project. it's very exciting. please keep us in mind and let us know how it goes. >> certainly will do. thanks very much. >> thank you. >> people said last week side by side -- >> the great gazoo. >> what do you got? >> he's a little green guy from the flintstones. do you remember him? >> oh, yeah. >> i do, actually. >> and you know who did it -- you know who voiced -- >> you know who voiced over, harvey korman was the guy -- >> i wasn't able to put the helmet all the way down because we wear these ifbs in our ears so you couldn't get it -- >> dukakis said you know what i put that on, i didn't want to go -- he had a lot of excuses. he had a lot of excuses, too. he had a lot of excuses, too. he never -- >> it never helped -- >> i know exactly what he was referring to. >> i want you to wind surf with that helmet on. just throw all the things together for that. >> that's good. >> in a wetsuit. >> in a wetsuit. >> maybe i'll wear it in the tough mudder. >> in the tough mudder. >> how about that? >> coming up we'll have jim cramer's take on the burger king action today, possibly moving to the north. also roche is buying intermune. in cash. $8.3 billion. and that is a 38% premium to friday's closing price. and more than a 60% premium to the cles on august 12th. both the ceos are going to be on "squawk on the street." later this morning. "squawk box" will be right back. football is back. which means it's busy season for buffalo wild wings. ceo sally smith joins us to explain this fast casual success story. "squawk box" starts tomorrow at 6:00 a.m. eastern. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price, maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. post a video with your question to the fast money twitter page. fast money traders are help you fast money traders are help you make the grade and make sense of did you know a ten-second test fast money traders are help you make the grade and make sense of could help your business avoid hours of delay caused by slow internet from the phone company? that's enough time to record a memo. idea for sales giveaway. return a call. sign a contract. pick a tie. take a break with mr. duck. practice up for the business trip. fly to florida. win an award. close a deal. hire an intern. and still have time to spare. go to comcastbusiness.com/ checkyourspeed if we can't offer faster speeds - or save you money - we'll give you $150. comcast business. built for business. welcome back to "squawk box" this morning. take a look at futures see how the market's setting it self up. dow looks like it's going to open up higher, 78 points higher, s&p 500, higher as well, ten points. nasdaq higher, about 21 points right about now. >> down to new york stock exchange. jim cramer joins us now what happen did you used to say about intermune. >> we had welch on, asked him whether he felt his company could abchoired. he did say, we have proprietary technologies, continue to develop the tests. this is what happens when your roche and have a good cancer franchise but need to expand, a big sales force already for pulmonary. look for more deals like this. the sector, i think, the most undervalued versus what the federal reserve thinks is the most roovervalued because big pharma has not been able to come up with drugs. >> burger king and tim horton, is it doughnuts, coffee? what's the big seller for tim horton? >> tim horton, coffee and doughnuts. but a dominant chain in canada. a giant step-up in same-store sales when it report the august 6th. interesting, the stock spiked very big. we get in the papers there was some talk that these two companies have been talking before. i condition understand the big spike. though the come store sales were up, they weren't up so much the stock could have had a big run. somebody knew, congratulations. people get aware with this stuff. but this was a deal that must have been known to some insiders or that stock wouldn't have taken off the way it did. >> what do you make of the inversion aspect, tax aspect? we've gone over it, you know, right now burger king has 27% effective tax rate. i'm told, we talked about canada having 17% or 15% tax rate -- >> federally. >> i'm told with the state, for burger king, the combined with tim horton, it gets closer to 26. it can't -- you think this is being driven by the tax component? >> no. look, one company has very good breakfast meal, very strong, tim horton's been trying to move to lunch. burger king has decent lunch. burger king's comparable store sales nothing great. throw in a tax report, we dwell on tax too much and not the strategy of trying to come up with growth in your in the challenged section, that is, where burger king is. these are all in response to the fact that chipotle had 17 same-store sale growth. i don't care whether chipotle is in timbuktu or ireland, this is about growth, trying to elimb national number of competitors. we want to focus on taxes yp? it's easy, something to talk about, good to debate. >> because the president accuses them of being un-american. it's going to be tough to do this because they're brazilian. >> pro-profit. my old partner, larry kudlow, profits. walgreens, cvs was going to attack them and the president. this is a good deal for the two companies. >> mcdonald's having a tough time. think if you weren't the leader, think of some other way to do it. mcdonald's has to say, we've got to get relevant again. maybe -- i'm sure dunkin' donuts will be up for reason to think that those two companies have to get together. >> really. >> somebody has to do something. mcdonald's has to do something because their performance is horrendous. >> all right. >> wow. dunkin' and mcdonald's? >> no, i'm saying -- that's what happens, they both are growth challenged. >> i love. let's float it. >> see you in a couple of minutes. >> is the president going to call the brazilians un-american for this? >> if he hasn't already. coming up, the getco brings coming up, the getco brings green for warren buffett. requires 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. chocolate, soybeans, thisand apricots. made with what kind of chef comes up with this? a chef working with ibm watson, on the cloud. ingredients are just data. watson turns big data into new ideas. and not just for food. watson is working with doctors and bankers to help transform their industries. today there's a new way to work. and it's made with ibm. warren -- it's buffett. >> buffett. >> he is buffo. warren buffett is buffo. >> a nice little fellow. the great gazu -- no, not the great gazu. the gecko lizard. no wonder why the gecko helped sell millions of policies since the debut in 2000. they've had successful campaigns. that's my least favorite, that squirrely little thing. >> i love it. so funny. >> really? >> you remember the cave guys? >> yes. >> they were good. >> hilarious. >> other ones, guise stepping over the great wall. have you seen that one? the "wall street journal" reports that the ads cost more than $1.2 billion. >> billion? >> warren has said that made geico advertising more and aflac as well. do you have gazu? here's a quick gazu. decide for yourself. >> very nice. >> decide. that was harvey korman. >> we want to thank miles for being here today. >> pleasure to be here. >> come on back. join us tomorrow, "squawk on the street" begins right now. >> a lot of fun. ♪ canada canada ♪ ♪ it seems everything's gone wrong since canada came along♪ >> good monday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber is off. stocks up three straight weeks in a nice start to a new one on tap. s&p 2000 should be on your radar today, too. road map begins with flamed broiled doughnuts, burger king in talks to buy tim hortons and the canadian mailing address. the heated tax debate. a biotech company cramer's
departure. soft bank looks to create some hollywood movie magic. the japanese firm is in talks to buy dreamworks animation for more than $3 billion. >> you're watching "worldwide exchange." bringing you business news from around the globe. this is a live shot from the streets of hong kong. the hang seng market closed 2% lower after a week of protests on the streets of hong kong. demonstrators are demanding full democracy from beijing. the hong kong government says it has withdrawn riot police as protests calm down. eunice is in beijing for us, what has been the reaction there to the protests so far? >> reporter: well, so far in beijing, mainly what people are seeing is a very controlled presentation by the government of what is happening on the ground in hong kong. there's been heavy sensorship on the internet where we are seeing instagram blocked, also some of the social media apps, particularly like the messaging and wechat. we are seeing a lot of terms deleted that have any reference at all to hong kong. there is still discussion going on, but as i said it is very controlled where in the state press they are allowing this discussion on some of the social media, but it's mainly been focusing on how these protests are illegal. also, there have been some harsh editorials, one in particular was talking about how these protesters or how the protests resumed and how the demonstrations are just destroying the reputation of hong kong as a global financial center. now, beijing really does have a challenge here whereby we have been seeing from this leadership, actually, a quigt tight approach to political reforms. there's no indication or sign that they want to embrace any type of change when it comes to political rights. in fact, on the mainland itself, there's been -- one could argue there's been a bit of a reversal where they are getting tighter on social media and are getting harsher with dissidence as well as journalists. so now the government here in beijing is facing a situation in hong kong where they are seeing a mass protest about a topic they are very sensitive about. then a is democracy as well as political rights. so there's a lot of question now as to what beijing's options really are. for beijing, they really have, from their standpoint, they have three options. and the first option would be to crack down, which would be something that would receive international condemnation. also undermine the rule of law in hong kong in a promise to the u.k. made a long time ago. also, the second option would be to compromise in some way. but some believe that wouldn't happen because it could potentially embolden the other people and put other people on the mainland. and that's a situation that the government here wouldn't want. the third option, which appears to be happening right now, is that they will do nothing. instead, standing very -- standing by what they want right now, which is that they are just hoping that the situation will resolve itself, but of course the risk with that is they don't address them, the longer-term issues and frustrations with the people in hong kong, who are upset that they don't have -- they are concerned about not having a political future, and one they themselves are hoping to embrace. >> eunice, thank you so much for that from beijing. head to cnbc.com for a live blog on the latest developments in hong kong. we'll be watching that story very closely. of course, the question is, what is the timeline here and what can we expect going forward in terms of the response from beijing. >> we'll bring in the chief investment officer now from llc management. james, not having democratic elections, when you have protests from the people, does it automatically look like the government is dealing with it in a heavy-handed way? >> that's what i fear we have to get used to, but it's a great opportunity for the global economy. one of the real challenges is that china contacts what this means for markets. i do think that china has preparedness as well as the wherewithall to show it does not dip below 5% points. this is also showing us that we will do whatever is necessary, which is really important. >> 5% growth compared to where we are now is a long way. if it dipped to 5%, the markets would be spooked a huge amount. >> you have to wonder what the growth numbers really are. and i suggest what the government is showing us is what is going on. we have lead indicators from the companies because they are telling us how it is on the ground. the government is telling us to read the numbers. i challenge any viewer who can tell me how we rationalize the export -- import numbers from china and its trade partners. i'll be comfortably happy. >> how big of a risk is this as we watch the shanghai market play out in hong kong? >> i think it is a relatively modest risk. i think it's a far bigger challenge for china. getting back on track with the development program, we know over the weekend china said it was going to go much slower in terms of liberalizing the setting of the interest rate. so that's a worry. the big challenge for china is to sort out the housing market. that doesn't appear to be happening any time soon. i'm reasonably optimistic as china as enormous flexibility. when you have the chapability t write checks to keep on the road, you have to do there. >> not just government debt but across the whole economy, it is very high, above 200% and still rising. so how can they continue to write the checks to protect the economy? >> because they are continuing to run significant met tricks. they have the capacity to recycle the cash if they so wish. it is very interesting what central banks have power. the central bank reserves the united states, roughly nigeria, no foreign currency and they want to keep the dollar where it is. china has enormous reserves. >> we'll continue our conversation in just a bit. we also want to get you news on spain. the spanish cabinet is today expected to hold an emergency session in the referendum plans. this after the catalonian government announced it is holding a non-binding vote in the region's parliament. this is a headwind for the markets possibly as well. >> still a long way to go in the spanish issue. if it comes to a head, it will be bigger than scotland because this represents more than 1/5 of the economy. now to the big news from friday and the resignation of bill gross from pimco. big news. >> that's big news. he's the bond king and the founder of pimco in 1971. whenever you have the face or brand of a company exiting or looking into an abrupt departure, many people were calling the move in the treasury market on friday as the bill gross sell-off. because we did see yields spike on that. >> it wouldn't help his ego if one person can cause a spike in the market. how important is this? >> it is very important because it is the brand. and it is highly unusual because pimco has a legion and high caliber among the managers. to have his brand positioning, which i suggest is completely unnecessary. >> interesting enough that it actually moved the bond market a little bit. >> i do worry significantly about the level of bond markets generally. i don't anticipate where we have five-year yields, all the major governments run wild in deep negative territory. investors couldn't have any company at all with the bond yields going anywhere but up. >> we want to get our viewers' opinions as well. the beast versus king, are you worried about gross' departure or are they too small to make a difference? join in on the conversation here on worldwide exchange. e-mail us at worldwide@cnbc.com or twitter @cnbcwex. it will be quite the story going forward. and so european markets struggling for direction today. the stoxx 600 is down stemming from the uncertainty ahead of data releases. we have economic sentiment data coming in 50 minutes' time. but also the ecb meeting on thursday. the important employment report is coming out of the united states on friday. so what does that mean? it means we have red across the board in europe today. the ftse 100 down .34%. germany down a similar amount. likewise france and italy down just half a percent. despite the top stocks, we are getting a boost in shares after pimco named the cio replacing bill gross. this after being cut to neutral and deutsche bank cut the price target on the stock up 1.5% today. fellow asset manager but more of equities than bonds, aberdeen up 1.6% after reporting an increase to assets. 3.1 billion pounds compared to 322 billion at the end of june. the emerging market focus group also said that the pace of outflows slowed during a period. this is in the u.k., we are sliding to the bottom of the ftse 100 after issuing a proper warning for the third time in less than three months citing a write-down 23%. air france is up flying high after agreeing to end the 14-day strike in one of the longest demonstrations in the company's history that cost the carrier 20 million euros a day. meanwhile, commerce bank is slipping near the bottom of the stoxx 600 and is being investigated by the manhattan office for alleged money laundering laws. bill gross moved the market a little bit in the u.s. on friday, but nothing significant. we are around the 2.5% to 3% on the ten-year yield. it's come back from the 2.6% year from a week ago but still not near the 2.4% it was at a few weeks earlier. bonds in germany just below 1%. the gilt below 2.5. and greece above 6%. let's look at the u.s. dollar near a four-year high against a basket of currencies. it is near a two-year high against the euro at 1.2685. we have not seen them move much, but the u.s. dollar is still very strong at 109.59. and we have an action-packed show for you. india's prime minister is given a superstar welcome at madison square garden. but can modi deliver? and we are at the world economic forum as turkey looks set to position itself in the fight against isis. and as team usa leaves scotland emptyhanded again, we look back at the action from the ryder cup. your customers, our financing. your aspirations, our analytics. your goals, our technology. introducing synchrony financial, bringing new meaning to the word partnership. banking. loyalty. analytics. synchrony financial. enagage with us. mr. daniels. mr. daniels. look at this. what's this? clicks are off the charts. yeah. yoshi, we're back. yes, sir! ♪ more shipping! more shipping! ♪ [ beeping ] ♪ you're watching "worldwide exchange." u.k. prime minister david cameron was probably looking forward to his party's annual get-together, but over the weekend the conservatives were dealt two blows. first, a step-down after sexually explicit pictures were september. and the second is hear from david cameron. >> look, these things are frustrating and frankly they are counter productive and rather senseless. >> why do you think you are losing these kind of people? you would have to ask them what they say because you are probably not conservative in the end. >> i disagree with that. in the end it is counter productive. so both people unlike me, they want to leave the european union no matter what. i don't agree with that, i think we should have a real go after reform to get a better deal for britain, but then there is this promise and it's a complete clear and promise of the referendum by the end of 2017. even if you don't agree with my regrogs strategy, i'll the only prime minister to give you the chance to have a vote to stay in or get out of the european union. that's why i say it's so -- >> let's turn to that strategy then. >> halle is live in birmingham with more. >> reporter: good morning, we are here in birmingham where they are rolling off a week showing in manchester yet the weekend is full of stories about scandals. whether it is sex scandals with brooks numark or the society minister caught sending explicit pictures to an undercover journalist which he thought was a political researcher. you also have a much bigger issue and that's the political scandal. this is marked reckless. the second mp touring party defective to the euro skeptic u.k. party. and last night it was about a further deflection in who that might be. remember, we just had a power ful report suggesting that labor may have an outright win at the next general election in may. but that's very serious. and the fractions in the torre party are being blamed for this. so this morning there's been a lot of talk about, well, let's forget about party unity and the panic that we have seen in the headlines over the weekend. and instead let's focus on the economic policy with delivered economic growth, with delivered austerity. george osborne is speaking in a few hours and he's going to talk about giving tax breaks to pensioners. he's going to talk about welfare reforms and he's going to be talking about growth. i caught up with him earlier and i asked him whether he was the man that got it right in austerity and whether the country could do another five years of pain. have a listen in. >> people can see we've got an economic plan in this country that is working. britain has one of the faster growing western economies and we are creating jobs here in this country. so we're going to go work through that in this conservative conference to set up the next stages of the economic plan and deliver this for our country. >> it is really this message on whether the economy plays out. so while the torres are behind in the polls in terms of the general economy, in terms of the labor party, they forgot to talk about the deficit. major blunder. here we have the party trying to make sure they get that message out there. now, for the industry hit by the budget by reforms in the pension fund industry, some of the news from george osborne may not be welcomed. remember, the share pricing took a beating when he announced the measures back in april with the budget. so we'll see how that plays out, but certainly it's a sweet deal for the gray vote, the people coming out hopefully from the torre party perspective in order to vote for them in may. so they are going to be working that very hard. we'll have another few days of it yet and probably a bit more gossip to go, will, but i'll keep you updated on all of that. >> halle, thank you very much for that. on to corporate news, roche says the latest breast cancer trial shows those lived 15 months longer when given the swiss farmer drug. the longest ever reported. looking at shares of roche, they are higher by .10%. but this is big news in a disease, something that requires a lot of treatment. what are your thoughts on roche right here? >> this is an excellent announcement coming on top of a robust fundamental from an excellent company. what do i mean by an excellent company? a company with a lower credit for local government debt. extraordinary idea, really, that a company has a balance sheet that is deemed to be superior in strength to government. also, it is a dividend yield in excess of government bond yields. so you get all the bang but none of the buck to go with it. >> but as we go into the bond and stock rising, certainly that puts pressure on the yield stocks because they could be held for that moment on the pickup. >> you have to see growth as well and i anticipate that roche will continue to premium growth, but if you question what happens to equity markets with climates of rising yields, i'm relatively relaxed for looking at the u.s. equity market to 5.3 percentage points as we speak. if we were to see bond yields rise, i still think the risk premium is 1% too high, meaning that we can see the price of u.s. equities trading near 17 times, plenty of upside to the levels. >> what level to the bond yields will stop the equity markets? >> i think we need to see bond yields rise to four percentage points before we see two things happening. first of all, they see stretch for corporations. secondly, we need to see difficulty for people servicing debt on their own personal balance sheets. four percentage points to me is the critical level. >> if you looked at the bond market locally, the u.s. is offering the most attractive yield at 2.5%. >> it's extraordinary and clearly a lot of confidence in the future management of the u.s. economy. therefore, it's got to be good news for the dollar. when people look across the developed landscape at the economies, they are saying, who is going to be the best player to manage the future from here. and residing answers are the u.s. and not a lot of faith many the u.k. either. >> the dollar just hitting another fresh four-year high now at a six-year high against the yen. at what point does that become a big concern for the multi-nationals who do business overseas. the stronger dollar makes their product less competitive. >> absolutely. it's a major concern for the corporations. frankly, when i look at the low funds numbers, i have difficulty in reconciling what is going on at corporate. earnings are what is going on at the real economy level. and i worry that a big chunk of the reported earnings comes because companies are buying back their own shares and therefore are able to report higher earnings per share. so critical for me is return on revenues as opposed to the finance. >> i was looking at your notes, james, you did some interesting comments on how alan greenspan traded his rhetoric in 2004 when rates would rise and what that meant for equity markets and similarities with today's situation. >> i do worry the markets are very, very trusting in what mrs. yellin is going to do. before she changes the rhetoric, the market will begin to anticipate completely different trajectory for rates that may take two percentage points off the market levels. >> james, thank you. the chief investment officer at ccla investment management. now time to perk up and brew some excitement. it's international coffee day. the day is used to promote fair trade coffee and raise the price for coffee growers, but also for the celebration and enjoyment of the caffeinated creation. several chains in the u.s. are offering free cups of coffee. dunkin donuts, crispy krispy kreme and mcdonald's. >> you have plenty of options here, don't you. >> there was controversy in the clubhouse after veteran phil mickelson appeared to take a swipe at his captain during a press conference. the five-time winner praised the work of the u.s. captain without mentioning the work done by tom watkins. did you see any of it? >> i caught the headlines. once again, europe wins as you predicted last week. >> it's been a long trend in the ryder cup. i have to say this year it wasn't quite as exciting as two years ago because europe took a lead in the first day and it kind of kept going throughout. >> i definitely agree. not as exciting. >> i wonder if europe's economy will bounce back to beat america's this year. looks less likely. still to come on the show, turkish president sharpens his rhetoric against isis as a growing number of refugees flee to istanbul. we'll have the latest after this break. this is a burrito made with chocolate, soybeans, and apricots. what kind of chef comes up with this? a chef working with ibm watson, on the cloud. ingredients are just data. watson turns big data into new ideas. and not just for food. watson is working with doctors and bankers to help transform their industries. today there's a new way to work. and it's made with ibm. you're watching "worldwide exchange." bringing you business news from around the globe. thousands of protesters remain on the streets of hong kong in the worst unrest seen in the city in nearly 20 years. riot police have been recalled and the markets remain rattled with the hang seng losing nearly 2%. pimco spends the weekend reassuring clients as billions flies out the door follow iing their leader's departure. and the german market suggests it is being investigated by a manhattan court for alleged money laundering. and soft bank is looking for movie magic. the japanese firm is in talks to buy dreamworks an nation for more than $3 billion. and your pine markets are in the red today ahead of uncertainty with the ecb coming on thursday, but also some economic sentiment data due at 10:00 a.m. london time. the ftse 100 is off just over .10%. similar movement for france and italy is down a quarter percent. germany just flat. >> and as we see the u.s. economy strengthen, we did see this rotation of capital out of equities and into the bond market on thursday. but a bit of a sell-off in treasuries on friday. also, factoring in the fact that bill gross is departing pimco. we are looking at the ten-year treasury yield at 2.5%. the ten-year germany yield at.99%. below the 1% level. let's have a look at the dollar still at record highs. roughly a four-year high against a basket of currencies. it is against a six-year high against the yen. a two-year high against the euro/dollar. another massive move down 7.5% since the fifth of september and down a massive 19% since april 2013. we'll bring you more u.k. mortgage lend ding data that jot came out a moment ago. july was 66,100, so we saw a slight fall in that. we'll look at the currency boards to see what the sterling/dollar has done. it just ticked down a little bit off the back of that, but essentially for the day it is still flat. and the top story? germany, commer germany commerce bank is being investigated for money laundering laws. the wall street journal says prosecutors are probing claims the lender had lax controls for detecting and protecting money laundering. commerzbank is down 3% and one of the biggest losers. to give us more, annetta is joining us from frankfurt with the latest. >> reporter: it's actually -- if that's going to be true, there's going to be a settlement in the sanction probe because that seems to be a different probe regard i regarding commerzbank as they have reached the sanction rules of the united states. and we thought there would be a settlement at the end of september regarding the sanctions, but now as there will be a new probe according to the wall street journal into actions of whether it comes to breaching the anti-money laundering action of the united states, that could mean that a settlement is not imminent. and that is bad news for the bank because the banks wanted to settle the sanction probe as soon as possible. it looks like the settlement money or the settlement should be in the region of 600 to 800 million euros, which would be a good deal for commerzbank, but now things look a little more dire for the bank. and that, of course, comes just ahead of the stress test result published here in the eurozone. and commerzbank is one of those lenders who might actually pay the tax according to rumors. now the bank is down 2%. back to you. soft bank is in works to buy dreamworks for $3.4 billion. a deal to give japan control of the largest animation studio. makiko is live from tokyo with this story. >> reporter: the news surfaced over the weekend as a soft bank official admitted to the nikkei there was contact between the two companies but added chances of the deal going through were not high. media reports say soft bank is offering to pay $32 per share, which is a 43% mark-up from the close last friday. the deal values the company at $3.4 billion. dreamworks recent releases have disappointed at the box office and have forced the company to take write-downs. meanwhile, soft bank has had windfall of nearly $5 billion from the investments in chinese ecommerce giant alibaba. after taking over sprint, the third largest mobile operator in the u.s., it set its eyes on t-mobile u.s., but last month it dropped its bid and seems to be on the lookout for media content that it can offer through its mobile networks. and that's all from the nikkei. back to you. >> thank you, makiko. u.s.-led air strikes hit oil fields controlled by advertise lambic state in syria as washington and its allies step up the fight against the militant group. u.s. president barack obama has admitted intelligence agencies underestimated the threat posed by the islamic state. in an interview on cbs's "60 minutes," he said syria had become ground zero for jihadists around the world. now turkey's president said this country cannot stay out of the fight. speaking at the world economic forum in istanbul, he said they will be where they need to be in the fight against isis. hadley is there in istanbul for us this morning. good morning, hadley. >> reporter: good morning, wilfred. essentially what we heard from the president overnight is that turkey is an island of stability amidst the chaos, but of course that hasn't kept what's happening around the region and other geopolitical tensions from impacting the turkish economy. i spoke earlier today with the finance minister and i asked him how turkey's bearing the brunt. >> geopolitical tensions have had significant negative impact on turkey's economy in the past and today. a 10% decline in turkish exports to iraq, increases our deficit by 2% gdp because we have a $12 billion surplus with iraq. so clearly it is going forward with all the focus now back in syria and iraq and international intervention, hopefully some sort of normalcy will return. turkey would be the biggest beneficiary of more stable, more prosperous, more democratic middle east. >> reporter: i also asked the finance minister about the growth projections that we heard from the president overnight. he said they were definitely going to meet the 4% goal for 2014. i asked if that was a bit optimistic, he said probably around 3% to 4% he was telling me, but i want to bring in our guest, the ceo of logilitity global logistics form, how is what's happening currently in the region impacting your bottom line? >> well, clearly it's not good for the bottom line. any time you have strife and conflict, it's going to create uncertainty that is bad for business. however, we have to look at the reason for this. and i tend to believe it's an economic reason. we have not done a good enough job in our part of the world creating opportunity for the young people, and if you look at the world bank statistics, it is pretty clear we have 170 million jobs that need to be created by 2020. >> certainly there's the factors that you mentioned, but in terms of looking specifically at iraq, you have interest in iraq. you understand that country. would you say then that after the departure of mr. maliki that we're going to see a more effective confrontation in terms of taking on isis? >> you know, i tend to believe that the solution to isis is not in the political realm, but it is something that is on the economy. the opportunities for youth. and when you talk about a region where it is very difficult to do business, it means the same way where it is difficult to create jobs. so the solution really is into finding a way to energize the economy to make it easier to do business in countries like iraq and the whole emerging market seen for that matter. >> we spoke earlier today with the ceo of economic city who was telling us how important it is in terms of education, in terms of job opportunities to make those opportunities apparent to the young people. particularly in the gulf. you're based in kuwait, what are you seeing in terms of progress in that area? >> well, i think there's some notable exceptions, some good examples where we have seen progress such as the united arabs and saudi arabia. if you look at the other gulf countries, there's a lot to be done at making it easier to do business. without that, we are not going to be able to create the opportunity needed to employ these graduates. and i think that's pretty much the situation that we're seeing across the board. >> it's a lot of challenges going forward. tarek, thank you for joining us. we'll have to leave it there. >> hadley, thank you so much. now a look at emerging markets and where the opportunity is to invest, we'll bring in the portfolio manager at moret asset management. i want to start with hong kong because the protests at this scale are quite rare, and i want to know in terms of investor sentiment, are the protests weighing on sentiment or are you looking at the hang can he thse 2%? >> this is out of hong kong going forward. so from political point of view it's very difficult to expect the time, which is now coming to an end end. but from the equity investment point of view, obviously there's impacts on tourism or kind of the sectors who are benefiting from china demand. so maybe going -- i think in terms of the growth, there would you say an impact, but from our perspective with etf, this is mainly coming from china versus hong kong. so it will be limited. >> sticking on the political issues in china, this anti-corruption charge that is going on, how significant is it that he's now talking to the former standing committee members? >> i think the point of that policy is to give a message to people that we are dealing or failing with everything. so i think this is in line with tradition as the driver of the economy. they have to boost the consumption, right? they want to make the environment for people and the customer to spend more. so the anti-corruption issue sounds a bit different from this, but i think the core and the principle of this is in line with the entire strategy change. so i think, of course, again from the equity investment point of view, we'll -- if you look at the earning school potential or kind of the sectors who are vulnerable or the sentiment sensitive to this kind of mac co issues, it will have impact. but this is a passive step from the long-term and they are making a stride going forward. >> as we broaden out our scope to emerging markets, to what extent can politics drive financial markets? isn't this what we are seeing in india and indonesia? >> indonesia, if you look at last year, the second half of last year, it was underperformers because of all the fear about the possible asian crisis we had in the 1990s. it was one of the top performers in asia because you mentioned the elections and the better that expected fundamentals. if you look at the emerging markets, indonesia, india, just like last year or this year, it will be very volatile. of course, the elections could have positive impacts like in thailand, but we have to kick the bond level of approach this way. we cannot say that the emerging markets will be volatile. so it will be volatile going forward, just like the experience. as long as we keep the right steps there in the country. i think in terms of earnings growth, trend, the trend can have more sustainable growth. >> we'll talk more about the stock picks. do you prefer alibaba? >> i think the most important thing is the capability of management. because it is not just evaluation, but the real value is investing in the capable management who are able to keep pricing us on the upside for a longer period. so from that sense, i think i'm positive on tencent and alibaba. >> in terms of strong consumer demand stories, is the philippines the strongest in asia? >> well, in terms of political issue or fundamentals in income, i think less volatility is there. so long as they can be a leader in their countries or as long as they have the potential to be later in asian countries beyond just philippines, i think there's a huge potential. if you look at the holdings, i think i'm more focusing on the potential components of who are growing as a leader than regional, not just in one country. and we look at the korean companies as well. they are doing very good in other asian countries. so i think we have to focus on very competitive companies who are growing as regional leaders. >> brilliant. thank you very much. the portfolio manager at mirae asset management. the european commission spokesman says it will publish on tuesday reasons for in-depth inquiry into the irish state aid to apple, this of course coming after the financial times reported that apple is benefiting from elicit state aid after striking backroom deals with ireland's authorities. so definitely a developing story. we'll continue to keep and eye out on apple. sticking with tech, facebook is taking on google in the advertising world. the social media giant is launching its new atlas ad tools today to allow marketers to track and measure the impact of their campaigns, not only on facebook but across mobile devices and web browsers so they can send more efficient targeted ads. omnicom is among the first to sign a partnership deal with facebook. facebook is up 26% over the past three months and up fractionally in today's trade. and the price for emaar properties will start trading on thursday. >> you want to get in touch with us and let us know what you think on the markets, we have that wonderful conversation on where the opportunities lie in emerging markets, e-mail us at worldwide@cnbc.com. >> thank you very much. i'm more clearly on social media. just tweet us. still to come on the show, he's not quite a rock star but the indian prime minister modi sold out madison square garden. we'll talk about his visit to the states after the break. ♪ mr. daniels. mr. daniels. look at this. what's this? clicks are off the charts. yeah. yoshi, we're back. yes, sir! ♪ more shipping! more shipping! ♪ [ beeping ] ♪ [ beeping ] your customers, our financing. your aspirations, our analytics. your goals, our technology. introducing synchrony financial, bringing new meaning to the word partnership. banking. loyalty. analytics. synchrony financial. enagage with us. pimco's ceo doug hodge said he spoke to clients over the weekend about the firm's new leadership following doug gross' resignation on friday. he is moving the flagship return fund previously run by gross does not define pimco. hodge says there's an overwhelming sense of relief following gross' departure and employees gave him a standing ovation after he was appointed cio. reports say pimco was planning to fire gross before he resigned. the journal says pimco suffered $10 billion in outflow since gross' departure and could lose $100 billion or more. but the first is confident a majority of clients will stay, but still a big story there. >> absolutely. and pimco's new team received a vote of confidence from its parent company. the financial times says allianz has no plans of selling pimco or to interfere more with the business. allianz fell on friday but shares rebounded today up 1% so far. and pretty much flat over 30 days. and we've been asking viewers, we want to hear from you on the pimco story. how important are the top fund managers? do they deserve the billing they get? and if performance doesn't last, should they move on? please get in touch with us here on worldwide exchange by e-mailing us worldwide@cnbc.com or on twitter @cnbcwex. a superstar reception for prime minister modi at new york's sellout crowd at madison square garden. he said the 21st century would belong to asia and probably india. >> translator: america is the oldest in the world. india is the biggest democracy in the world. the entire world has settled in india and the people in india have gone to settle down in the entire world. >> modi will meet with president obama at the white house on monday. he's on his first trip to the u.s. since being elected in may when the u.s. lifted a visa ban that modi wurnds on grounds of religious intolerance. we'll bring in the managing director and regional head of standard charter bank. samarin, very few leaders from india have received this type of welcoming of an indian leader in the u.s., are investors just as excited by modi and what he has to offer? >> yes, clearly in the last 100 days we have also seen significant interest among investor lines to look into india again. and this is happening because of a nice combination between improving macro meters coming together, kind giving us a sense that growth will not be far beyond. and that's creating enough interest. >> he's due to meet obama this evening. he's also met high-profile politicians from china over the last couple weeks. will he open up investment opportunities there in india? >> yes, if you look at what india has opened up in the last ten years or so, practically almost every sector is now fully opened up. there are just a few which still need to be opened up, so i think modi is going to stress on the few new sectors which this government has opened up, like railways, et cetera. but beyond that, i think that the point he'll try to make is now doing business in india is going to be much easier than before. so the certainty element and the speed of doing business, i think he's definitely going to stress the u.s. companies. >> expectations quite high. i mean, you're looking at the cencex up 20% over the last six months. if you are an investor and want to get in, how do you make money? >> on the price ratio basis, we still think there's upside left for the markets. but if you dig deeper into the market, what you would feel is some of the sectors have yet to benefit from this rally. and that's partly because of policy uncertainties as we expect the policy uncertainties to get resolved over time. those are the sectors that are going to do well. and if europe comes back to the 7% trajectory over the next few years, a large part of the market will rally. >> and obviously the market has already performed quite well since modi's election in may. nevertheless, the last month or two has seen quite a lot of criticism at the pace of reform has not been fast enough. nevertheless, you think that there have been a lot of reforms going on behind the scenes that investors are ignoring? >> absolutely. i think it's going to be a sequence sequenced reform where they are looking to improve administration efficiency. and that would mean that ease of doing business in india will be better. and the next state of reforms that we bring in, the more big bonds investors have for, including subsidiary reforms, etsz. that's more the story of 2015 than the story of 2014. but in 2014, if i start seeing more of these regulations being eased and administered efficiency increasing, then i would be quite happy about it. >> where do you see opportunities in the technology space, because we are expecting to see some level of reform in the technology sector. are you telling investors to put money there? >> well, if you see the years of huge digitization for the economy, you will see the fdi guys to the same portal. so the digitization is going to be humongous over the next 20 years. so i think this offers a really interesting opportunity. >> the director and regional head at standard charter bank. thank you for your time. on to corporate news, new u.s. tax inverse rules could prompt medtronic to renegotiate their $42.9 billion deal to buy ireland's covidian. this would make it more expensive for med tropic. the fashion house said the personal finances of its two ceos were under investigation at prada. they said neither the company nor subsidiaries were involved in the probe. big changes at pimco. the largest bond fund. what does that mean for your portfolio? if you are invested in that fund, we'll discuss that next coming up on "worldwide exchange." ♪ mr. daniels. mr. daniels. look at this. what's this? clicks are off the charts. yeah. yoshi, we're back. yes, sir! ♪ more shipping! more shipping! ♪ [ beeping ] ♪ welcome to "worldwide exchange." i'm seema mody. >> and i'm wilfred frost. >> thousands of dollars are flying out the door after bill gross' departure but they have no plans to sell. and hong kong's market sheds 2% as thousands of protesters remain on the street even after riot police have been called. and there are reports of commerzbank being looked into after money laundering. and we are told softbank is in talks to buy dreamworks for more than $3 billion. you're watching "worldwide exchange," bringing you business news from around the globe. and a lot of focus on the u.s. market. of course, this coming in after what was a volatile move with triple-digit moves on the dow every single day last week. >> more importantly is the sum total of that week with more than a 1% decline at the three major indices. the first time we have had that in september and the first time over the summer. is this the start of a more meaningful correction? >> we did see a rebound on friday with the sectors ending in the green. we'll look at the pre-market trade with arrows indicating a move lower by 61 points. nasdaq down 16 points. you have seen a lot of movement in the tech sector the last couple of days with apple underperforming in the nasdaq. look at the european markets in the red. we have the ecb central bank meeting on thursday where we're expected to get more details around an asset purchase program. the ftse 100 is currently down by 20 points. the xetra dax is down 20. the cac 40 is down to the downside by 15 points. the italian markets, a triple-digit decline by 120 points. we'll get you a look at the biggest stocks on the move, alliant shares are getting a boost in frankfurt after pimco named daniel isaacson replacing bill gross. and deutsche bank cut the price target on the stock. aberdeen has reported an increase in assets under management to $331 billion pounds compared to $322 billion at the end of june. the emerging market focus group also said that the pace of outflows slowed during the period. aberdeen asset management up 1.7%. so some stocks to look forward to. >> absolutely. we'll look at bond markets as well to see how they are trading in europe. of course, in the u.s. on friday we had a bit of a move from one individual moving the bond market himself. bill gross caused treasury yields to come up a little bit on expectations that redemptions might hurt the u.s. treasury market but not significantly. 2.53%. still where we are sitting. not too much of a move. german bond yields below 1%. italy is a similar yield. let's go to check on the u.s. dollar that has been very strong around a four-year high against a basket of currencies. it's around a two-year high against the euro at 1.2677 and a six-year high against the yen at 109.59. but we know that already. it's been very strong against those currencies for a long time. the aussie/dollar i want to draw attention to at .87. it's fallen some 18% since april last year. this is a currency, not an individual stock. and those moves really are significant, even though there's a carry trade to it being closely tied to china with weaker data. it's a big move and i think it's oversold. down .54%. sterling is at 1.6231. no significant move there today. now we'll look at the asian markets. the big move is the hang seng off just under 2% closing down already today. that following the democracy protests that have happened in hong kong over the weekend. we'll bring you more on that story as we get it. now, the u.s. consulate in hong kong has urged protesters to remain on the streets after a weekend of protests. the hong kong government has begun to withdraw riot police as the situation has deescalated slightly. demonstrators aren't happy with beijing's plans to bet candidates for hong kong's 2017 election. we are joined now from the streets of hong kong now. euniye yang is in beijing. but pauline, let's start with you. >> wilfred, things are pretty calm here in the business district in hong kong. as you can see behind me, there are tens of thousands of people on this main roadway near the government buildings. they are calm, people are sitting down and eating, drinking water and banging on drums. and earlier we saw a lot of umbrellas. and that was for two reasons, to protect them from the heat and also they came in handy last night, which was quite a different scene, about 18 hours ago when riot police came out and fired tear gas as well as pepper spray. so this has been dubbed informally the umbrella revolution. now what are these people protesting? they are protesting beijing's definition of what universal suffrage is. there are elections in hong kong for the chief executive in 2017. hong kong has been working toward this. beijing recently said our proposal to you is true democracy. in 2017 each person can have one vote, but you must select one of three or four candidate that is are approved by us, beijing, and many of the people here in hong kong say that is not true democracy. now, wilfred, if you looked the faces in the crowd, many of them are young and teenagers in their early 20s. many are university students. in fact, many of these students have been boycotting classes for about a week now. i spoke with one person from the polytechnic university an hour ago and asked him, why you here? he said, i'm doing my responsibility to fight for democracy. i spoke to another university student and asked her what she wanted to tell presidethe presid she said to keep your promise of 50 years. she was referring to the promise china made to hong kong back during the handover in 1997 when they went from a british colony into chinese hands. the promise that hong kong would remain autonomous with special freedoms and rights for 50 years. wilfred? >> pauline, thank you for the update. amazing pictures of the protesters behind you there, huge numbers. the protests in hong kong being watched closely. eunice yang is joining us from beijing with the latest. eunice? >> reporter: thank you so much. just picking up on what pauline said, the beijing government has given no indication at all it would compromise on political reforms for hong kong. today we heard from beijing and there was a government official this afternoon here who warned other countries not to support the occupy movement in hong kong. and also described the protests in hong kong as illegal. the protests that are going on in hong kong really pose a major challenge to beijing. the government already has shown its cards in that it really is not giving us any signs that it would be willing to compromise on such a sensitive issue such as political rights or political change. we know just based on how the leadership has acted recently that they have a very tough line when it comes to descent. they have cracked down on media as well as just generally on social media as well as others, such as minority groups. now because of this they are faced with a major challenge on their hands where they are looking at a hong kong as the protests continue to grow where people are calling for democracy and political rights, which is a very sensitive issue to this government. now, in terms of going forward, there aren't many options for the government. and that's one of the difficulties that it faces. >> eunice, thank you so much. now another top story for us today, pimco's ceo doug hodge says he and the cio spoke to clients all weekend about the firm's new leadership following bill gross' resignation on friday. doug hodge says they are moving away from the founder model and the flag-ship total return fund previously run by gross was, quote, not defining pimco. hodge also said there's an overwhelming sense of relief following gross' departure and investors gave him a standing ovation after becoming the new cio. pimco suffered $10 billion in outflow since gross' departure and some project it could lose $100 billion or more, but the firm is confident a majority of clients will stay. meanwhile, the financial times reports parent company allianz has no plans to sell pimco or interfere with the business. jay rouse says they have been prepared for gross' departure and have been informed of looking for gross' successor over the past few months. allianz is up today after declining at the back end of last week. we want to hear from you on this. how much off an impact do rock stars have on a firm? does it drive performance or is it a significant start that supports them? we want to hear from you on this. get in touch by e-mail at worldwide@cbs.com or twitt twitter @cnbcwex. what do you think? >> the reality of the situation is you have to focus on the performance. at the end of the day, the pimco total return fund hasn't been doing well according to morning star clients that have pulled more than $60 billion out of the fund between may 2013 and august of 2014. so maybe it's the best move for pimco going forward. >> and i suppose the impact to the fund manager really takes effect when it's a slightly smaller firm than pimco is, which will continue regardless. b mr. gross is a significant characterer in the world of bond investing. now moving on, europe has power to victory at the ryder club. europe led 10-6 into the final day's play and here's the decisive shot to hand the home team the win. there was controversy in the clubhouse after veteran phil mickelson appeared to take a swipe at his captain during a press conference. the five-times major winner praised the work of usa's 2008 captain without mentioning the work done by tom watson. now stay with us on "worldwide exchange" for a lot more after the break. [♪] great rates and safety working in harmony. open an optimizer +plus account from synchrony bank. visit myoptimizerplus.com to open an account. service. security. savings. synchrony bank engage with us. welcome back, let's play damage control. pimco reports billions of dollars are leaving the bond giant. and japan's softbank sets its sites on hollywood to buy dreamworks animation for $3 billion. and thousands of democracy protesters remain in the streets in hong kong. now time for the rundown. here's what you need to keep on your radar. august personal income and spending is out at 8:30 a.m. eastern. income is forecasted to rise .3% and spending by half a percent. at 10:00 a.m., we get august pending home sales which are expected to be unchanged from july. egg producer cal maine foods reports results today. economists are lowering estimates for third quarter gdp but still see the economy growing at a slow pace. they expect growth of 3% this quarter down slightly from 3.1% in june. coming up later today on "squawk box," a first on cnbc interview with chicago fed president charles evans from the annual meeting today at 8:00 a.m. eastern. of course, the fed continues to be a big market mover. we'll bring in lance roberts, chief strategist at stf wealth to get perspective on where the u.s. stocks head. it was a volatile week for u.s. stocks last week, lance, where do you see us head this week with the ecb meeting on thursday? >> right. well, you know, the problem is that the bulls are still very much in charge of the market at the moment. so the trend is still positive. but there is a significant amount of deterioration now occurring below the headlines. so when we look at the s&p 500, very positive in the above trend lines that looks great. mid-caps, small caps, internationals are all deteriorating. so breath in leadership is becoming a bit narrow. so we do want to be paying attention to that, but for right now it is all about the federal reserve and it is about the ecb. hopes are here that the ecb will come in and start doing quantitative easing. the question, though, is, of course we've seen the ecb's actions before and they have not been large enough really to keep the drive behind the market. so the big thing to watch here is really what's going on with the fed and more importantly whether you start to raise interest rates. >> due to a rise in geopolitical tensions, we saw a move in the market, do you think the market will outperform? >> the eurozone now, japan is pending a negative growth. but the rising dollars and the safehaven assets in the u.s., the u.s. dollar has a very strong run here as of late. and money's moving into treasuries because based on a balance of trade situation, the dollar in u.s. treasuries are still the best place to be. as everybody says, wear the cleanest shirt in the laundry. so it is just simply how long this is going to last. >> lance, i noticed in the notes that you sent us that you say the u.s. dollar is now grossly overbrought, but surely this is a move based on the return to positive interest rate differential. >> well, it is. but in the short-term, everything moves in circles. and particularly in price movements in the markets. we've had such a very strong rally in the dollar here. we've got more than three standard deviations in the long-term trends. so you're going to probably get some selling here. so if your long dollar assets or playing a currency trade long u.s. dollar, it may be a good time to take some profits. i'm not sure we are into a new bull trend in the u.s. dollar that's driven by economic strength. this is really a differential between weakness the eurozone and the international markets and strength in the u.s. and the durability of that is what we are going to be watching for. >> the u.s. economy is showing signs of strength, lance. and investors don't seem to be ready to pile back into the small caps, the russel is one of those rallying from last week. >> we had such a strong slowdown over the last q4 and q1. we saw a lot of rebound in the second quarter. the question is, a lot of -- we are all looking at this to say, hey, look, signs of strength. but is it really signs of strength or a rebound? we need to see some trend of this growth continuing forward. but if we have another really cold winter, which is expected, we may see this being more of a trend to worry about which may be what the small caps or mid-caps are telling us. money's rotating out of the momentum risk trades now to more safety trades as we get to a more maturable market. so again, there's nothing wrong with the markets momentarily. we just need to be paying attention to where money is rotating to. >> lance, thank you very much for your time. lance roberts, key strategist at sta wealth management. and it wasn't a rock star, but prime minister modi of india who sold out madison square garden in new york city. but investors, are they as excited as citizens in we'll discuss that next on "worldwide exchange." welcome back. u.s. futures indicating a lower open by 72 points. this coming in after we saw a bit of a rally on friday. all ten s&p sectors ending in the green with energy leading the s&p 500 higher. this week it will be about the september jobs report. that will potentially be a market mover. and we'll look at the european markets in the red so far today. across the board, ahead of the ecb meeting on thursday, the markets have also moved slightly to the negative after september eurozone economic sentiment that came in at 99.9 versus august reading of 100.6. not a significant move but slightly below expectations. so all markets in the red in europe. indian prime minister modi received a sellout crowd at madison area garden yesterday. the prime minister took to the stage calling on indian-americans to turn around the economy saying the 21st century would belong to asia and possibly india. listen in. >> america is the oldest democracy in the world. india is the biggest democracy in the world. the entire world has come and settled down in india and the people of india have gone and settled down in the entire world. >> narendra modi is on his first trip to the u.s. since being elected in may when the u.s. lifted the visa band modi was on for grounds of religious intolerance. we'll bring in the founding partner and ceo of new silk partners. i watched modi's address with optimism on the promise he brings, which is growth and lowering inflation, but i want to know as an investor has modi changed the way you look at opportunities in india? >> i think modi's definitely changed the way not only the way i look at india but, in fact, the way that people in general look at india. the simple data point on that the 30% rise in the indian cencex that is clearly a very strong vote for the governance expected from modi. >> 65% of india's population, i believe, are under the age of 35, but from one of our previous chats in india, you said it's still a challenge for corporations to find high-skilled workers. why is that? >> i had the privilege of a small meeting with the prime minister and interestingly we discussed skill development. and it was one of the things that he has really focused on. i shared the challenges that we had experienced in finding people at our companies. i told him that whether it is barista at a coffee outlet, we have a great need for people. and he talked about the challenge and is planning to focus on it. it's one of the major areas of focus for the prime minister. >> and i want to talk about the government reforms that many investors hope he will bring through. and the market suggests that confidence will come, but they have not been announced yet. is it fair to be skeptical of the political gridlock in india given what's happened in the past? >> when i started in the investment business going back to the early '80s, one of the phrases i remember is, bull markets climb a wall of worry. so it's good that there is worry around whether the prime minister is going to be able to deliver or not. but i think that the promise will be delivered on. as he said in his madison area garden address, and as he has been saying a number of places, he's focusing on small things and getting them done. and if you look underneath the duped campaigns covered well by the press, the make in india campaign is certainly about easing investing in india, which is a major challenge for indians. and just easing the process will make a huge difference. the second part that needs to still be accomplished and hopefully will happy the february budget, will be clarity on some of the things that we are all eagerly waiting. for example, the absence of retroactive action in any fashion. >> thank you so much for your time. founding partner and ceo of new similari similari silk route partners. a quick look at the u.s. futures currently pointing the a lower open. the dow jones indicating a move by 70 points at the open. and we'll leave you with a live shot of hong kong where demonstrations continue to bring the city to a standstill as protesters object to the democracy rules. welcome to "worldwide exchange." i'm seema moody. >> and i'm wilfred frost. softbank looks to create hollywood movie magic as the japanese firm is in talks to buy dreamworks animation for more than $3 billion. commerzbank sinks to the bottom after reports of a man being caught for alleged money laundering. you're watching "worldwide exchange." bringing you business news from around the globe. and if you're just tuning in, thank you so much for joining us here on "worldwide exchange." here's a look at how the markets are faring right now indicating a lower open across the board for the dow, the s&p 500 and the nasdaq. this coming in after what was a volatile week for stocks. we did see a bit of a rebound on friday. energy leading the s&p 500 higher. the treasury market also in focus with the yield at 2.5%. this week, of course, will be focused on the september jobs report. if it's a strong report, experts say the fed could tighten earlier than expected. so it will be interesting to see how the market will respond to that jobs report. of course, ecb on thursday. on that note, the global 300 is a good gauge of stocks around the world currently trading down by 15 points. similar story when you look at the individual european markets to see that it is red across the screen with the ftse mib down 164 points. the cac 40 down 16. the xetra dax down 21 points. the ftse miz down .79% ahead of the ecb meeting on thursday that will be a market mover. so how do you make money in markets like these? here's what the experts have been telling us this morning. >> if we see bond yields rise, i think the risk premium is 1% too high, meaning we could see the u.s. equities trending in 17 times, plenty of upside to the market. i feel like i am more progressing on the potential companies who are growing as leaders in regional, not just in one country. the hang seng also gets a lot of chinese companies. they are doing very good in other asian countries. the u.s. dollar has had a very, very strong run here as of late. and money's moving into treasuries because based on a balance of trade situation, the dollar in u.s. treasuries are still the best place to be. pimco's ceo doug hodge says that he and cio daniel isaacson spoke to clients all weekend following bill gross' redding nation on friday. pimco is moving away from a founder-led model and the flagship total return fund previously run by gross does not define pimco. hodge also said there's an overwhelming sense of relief following gross' depaurture and they gave isaacson a standing ovation after being designated cio. according to the journal, pimco suffered $10 million in outflow and some product it could lose $100 million or more but the firm is confident a majority of the clients will stay. the new vote of confidence from its parent company, the financial times reports allianz insists no plans to sell pimco or to interfere with the business. jay rouse says they have been prepared for gross' departure and were fully informed on the search for a successor in recent months. allianz took a big fall following gross' departure on friday but it is up a tick this morning. a lot of people are saying the move in treasury market on friday was dubbed as the bill gross departure, the big bill gross sell-off, but some say it is better than the gdp data we got on friday. the u.s. saw investors move into risk-oriented sectors. what are your thoughts on where the treasury market heads from here? >> first of all, bill gross is a phenomenal investor with a 30-year bull market behind him, so he's been in the right market at the right time. so the important thing in terms of investment outlook, i think you've got to look at the relative returns. and if you look at ten-year treasuries, they are yielding, what, 2.5%. if you look at the earnings yield on the s&p, it's 6.5%. he's had a fantastic run and a huge bull market, which he's run for 30 years. i suspect equities, we have seen a trending in the market, so i suspect all the excitement is going to be in equities and not bonds. a great map, good position, but i don't think we should get too concerned. >> the evaluation is not a concern if you say equity is the place to be right now? we have seen the s&p steadily rise. >> sure, i don't think evaluations are cheap or excessive. on a 30-year average they are trading about 17 times, which is where they have been on average for the last 30 years. so evaluations are not excessive. >> patrick, if we look at the rally equity markets in the u.s. year to date, could we say it has lacked breath? >> as the bond market gets a little more mature it gets thinner. and that's understandable. it's nearly five years old now so it's hardly surprising. you're seeing a divergence. every time you see risk off, people go to hide in the big cat. you see the divergence between the russell 2000 done for the year and the s&p which is up. i suspect that to normalize as people talk about normal policy. i suspect what's going to happen in the earnings coming up on october 8 for the third quarter. i suspect the u.s. dollar because that's part of that risk will probably hurt one or two of the companies there because of the large multi-national companies. but generally earnings will be good and the outlook for the u.s. company is going to be good. so there's a lot to play for. >> tell me what happened last week, all the major indices up over a percent depending on the size of the company. does that point to further pull-backs as we go to the rest of the year or not? >> i don't think so. you get this trade every year. if you look -- well, i came out this morning and looked exactly at the september swoon that happened last year. from september 18 to october 8, the market was up nearly 4%. if you then look for the balance of 2013, the market was up 12%. this happens every year. this is basically the fuss-up period between now and october 8 where companies preannounce, so you may get a few of those. but it was rash hashanah last week and i suspect returns to be normal. and you have an election year as well, and history says to buy the market on september 30th in an election year. so you've got, i think, a very good run up to tend of christmas. i would be buying the market here. >> this week all eyes will be on the september jobs report in the u.s. will it be good news for the market or will bad news result in the market selling off? the prospect of rising rates? >> of course, yellin mentioned we'll see rates low for a considerable period of time. considerable. so the nuance has changed. i think that's what the bond markets are telling you. we talked about ten-year at 2.5, that's discounting rates going forward. >> patrick sensor, thank you for your time. the indian director of the international institution equity sales at baerd. how much of an impact do rock star managers have on a firm? and how worried are you on the outflows? john where in to say he's more worried about the u.s. market at the end of october and the risk of the end of qe? adam says, we'll see how much influence gross said once he sees results. e-mail us at worldwide@cnbc.com or tweet us, cbs cnbcwex. and alleged violations of money laundering laws are happening against allianz. they are looking if the lender had lax controls. commerzbank is down 4.2% in trade today. hank greenberg is getting his day in court. the trial begins today in the lawsuit filed by the former aig ceo over the terms of a u.s. government's bailout of insurer in 2008. greenberg is disputing whether the fed had the legal right to ask for and hold equity when it took a majority share in the company during the financial crisis. the trial's witness list includes some big names, former treasury secretary hank paulson and tim geithner. and former fed chairman ben bernanke. and now japan's softbank is california dreaming. reportedly setting its sights on a multi-billion deal in hollywood. find out more when we cross the sea after the break. andipple shares were under stress last week. in the last hour, the european commission said it will publish tomorrow the reasons for opening an in-depth inquiry into the irish probe to help apple. the stock dipped lower on thursday ending the week lower by .30%. >> keep your eyes on apple. earlier the colleagues said on "squawk box" that there's something to watch with apple. >> we want most citizens to be playing a fair share. so we all -- one of the last times i was on we were discussing that starbucks doesn't play tax in the u.k. apple sells hundreds of millions of pounds and pays no tax. we won't call that fair. it may be legitimate or legal but it is not fair. we have to be quite careful with our message to management. sometimes they should do the right thing -- >> but it is not level the of tax that is the problem, it's the complexity of the tax regimes to make it expensive and complicated and that is what gives them the loopholes. we have done this story many, many times. he's won the tax code now for war and peace. and two, the u.s. tax code doubles approximately every 24 years. isn't the key here to make it simpler so there are less loopholes and then the harmonization issue will be easier. >> there's no pressure on the irish now to change the system. new u.s. tax inversion rules could prompt medical device maker medtronic to renegotiate the 42.9 billion deal according to sources cited by reuters. the u.s. treasury made it difficult for american companies to move their tax dollars abroad which would make buying comidien more expensive for medtronic. the japanese firm softbank is looking to add shrek and po to their lineup. nevertheless, kate rogers is at cnbc hq with more on this story. >> you guys do not know who po is? >> tell us who is po. >> he's from "kung fu panda." the creator of shrek and "kung fu panda" says softbank is offering $32 a share up $10 a share from where dreamworks closed on friday. that's below the high of $36 that was reached last year. the deal would give softbank control of dreamworks. they have had a number of hits in their franchise and has blazed a trail in china where it signed a joint venture deal with three state-owned media companies to produce movies and tv shows and is building a 2.4 billion entertainment complex in shanghai. dreamworks was spun out of the studio started by david geffon and steven spielberg in 2004. they would sign a five-year contract to stay with the company. buying dreamworks would make them the second japanese company after columbia pictures was bought in 1989. it had more than $17 billion on hand at the end of june and they recently cashed in on alibaba. it still holds a 32% stake making it one of alibaba's largest shareholder. in july a formal google exec was hired that sparked rumors the company could be considering acquisition of a content maker. dreamworks has seen the share price drop 37% after posting two straight quarterly losses. that is due to a string of box office bombs including "mr. peabody" and "sherman." thank you for that, moving on, u.s.-led air strikes have hit in syria as washington and allies step up the fight against the militant group. u.s. president barack obama admitted they underestimated the threat posed by the islamic state. in an interview on "60 minutes" he said this is ground zero for jihadist groups across the world. hadley is in istanbul now with more on this. hadley? >> reporter: so essentially what we have heard from the president over the last 24 hours is he came out swinging, really, he was blasting international media saying they unfairly characterized the turkish position when it comes to syria and iraq. you have to remember that turkey sits on what is essentially a geopolitical faulgtline. his narrative was more that turkey could be a bit more forgiven for the accusations they have been by bipolar in their border with syria and iraq. they want to create a buffer zone, so that's going to be part of the conversation going forward. he also said, listen, we have been fighting terrorists for 30 years. referencing there the pkk. he's like, this is a problem that's going to be ongoing. it is not a one-off for us. it is something we have to prepare for in the long term. military preparedness, this means financial preparedness for the long-term fight. so it's a bigger question for turkey than just joining international leaders in this coalition to fight the islamic state. >> hadley, thank you very much for that. we're going to update you now on the headlines from today. pimco plays damage control in the wake of bill gross's departure amid reports billions of dollars are leaving the bond giant. >> softbank sets its sites on hollywood to buy dreamworks for more than $3 billion. and the hong kong stocks come under pressure as thousands of democracy protesters remain in the streets. economists lower their q3 projections for u.s. gdp, but after a q2 rebound, is it steady as she goes? we'll discuss the u.s. market, next. your customers, our financing. your aspirations, our analytics. your goals, our technology. introducing synchrony financial, bringing new meaning to the word partnership. banking. loyalty. analytics. synchrony financial. enagage with us. welcome back. this is a live shot of hong kong where protesters continue to bring the city to a standstill. many are demanding democracy from beijing. they are withdrawing riot police as protests die down. a lot of protesters there in hong kong to bring the hang seng market down 1.9% in trade overnight. and that negativity has spread through to european markets today. red across the board as you can see. partly because of that sentiment from asia overnight, but also because of data out of the european economic sentiment that came in for 99.6 versus 100.6 in august. that was a september reading versus the august reading, slightly less than expected but nothing significant. but enough to weigh on the markets, germany up 1.3% and the ftse 100 is off a quarter of a percent. what are we expecting in the u.s.? futures are indicating a lower open looking at the s&p 500 down six points. nasdaq down 15 points in pre-market trade after a volatile market. a rebound in stocks on friday with the nasdaq ending up higher. the small cap index may be seen as a leading indicator for the market. it will be interesting to see if the small cap index can play catch-up or if evaluations will continue to be a concern. and it's time for the rundown. here's what to keep on your radar today. august personal income spending is out at 8:30 a.m. eastern. incomes forecast to rise 1.3% and spending by half a percent. at 10:00 a.m. august pending home sale which is are expected to be unchanged from july. and egg producer cal maine foods will report later today also. third quarter gdp is still seen to be growing at a steady pace. the latest poll from u.s. business economics expect us to be down slightly from 3.1% later in june. coming up later on "squaux box," an interview with charles evans from the chicago fed president. that's coming up at 8:00 a.m. eastern. we'll bring in scott, the ceo of tgm investment. scott, love the jacket, as always. got to talk to you about where the markets are headed from here. investors are trying to understand how to position themselves ahead of the jobs report. what would you recommend they do? >> well, they should be on the sidelines here because it has been a volatile number and will continue to be so. we are sitting here watching our federal reserve bank try to keep two stories live. one, the market's doing a lot better and things look good. we may raise rates sooner rather than later. but wait a minute, the market is not doing well enough to do it just yet. so as long as we've got those two stories out there, this is where we're going to see these equity prices kind of linger around these levels to probably slightly lower. and we're going to need to see two to three months of good economic numbers to give the fed a chance to do what they want to do. i'm just going to tell everybody out there right now, the idea of rates sooner rather than later is wrong, but right now that's the bandwagon we are all on. and number two, we'll find the federal reserve in the back pocket for a lot longer than anybody could ever really imagine. they've got qe because we try to buy some inflation. what the dollar is doing and how strong it is, we don't have inflation. we have de-nation. so the fed is in trouble and it will be interesting to see how they react to the numbers coming up. >> scott, i want to thrust at you that the nasdaq is up more than 9% for the year but the average stock within the index is actually down this year. it's bringing us back to a point we have been discussing with a lack of breath in the market strength this year with it being led by the big caps. how are you positioning yourself now as we look into the final three months or so the rest of the year? >> well, i tell you what, it's a good question to ask me because i'm a little different than the rest of the world out there. i think this is where you need to be. you still stay long. a little bit of the stock indices, because i still think that negative news is ultimately good news. and we'll see some sort of -- we could see stimulus in some new form first quarter next year because we are not doing that well. number two, i still want to stay long on the bonds. i think that ten-year rate is telling us that's the truth serum. keep a look at the ten-year rate at something to tell us to worry about. stocks and bonds will be higher, be long both. >> scott, ceo of bull brokerage. that's today's show. >> i'm wilfred frost. >> i'm seema mody. "squawk box" is next. good morning. welcome to "squawk box." pro-democracy protests in hong kong taking a turn for the worst. thousands take to the streets as police move in to contain that massive crowd. pimco seeing billions of dollars walk out the door after bill gross quits. how much more pain will the fund giant feel in the wake of his departure? and dreamworks animation working on its next big story and it could involve a sale to japan's soft dbank. it's monday, september 29, 2014. "squawk box" begins right now. good morning, welcome to "squawk box" here on cnbc. i'm michelle caruso cabrera along with andrew ross sorkin and joe kernan. becky quick is off today. despite a big rally we saw on friday, volatility is back and that is making things a lot more interesting. the dow has closed up or down by 100 points in seven of the last ten sessions. dow basically flat. s&p is down a little more than 1%. the nasdaq is down 1.5%. and the small cap heavy russel 2000 dropped 5%. futures at this hour are suggesting a negative open with concern about the situation in hong kong. dow opens lower by 62
the nasdaq lower by 15 and the s&p 500 lower by 7. andrew? thank you, michelle. hope you had a good weekend. we'll tell you about the corporate news as pimco is working to assure clients it has a solid team in place. that's what they are telling everybody to manage their funds following the very public departure that surprised so many of us of founder bill gross that happened right here on the air on "squawk" friday. the bond giant has seen $10 billion in outflow since that news first broke. and the wall street journal now saying some are projecting withdrawals could hit $100 billion or more. the ripple effects from gross' departure being felt far beyond pimco's doors. in newport beach they dropped upon the gross news. also, meantime pimco's new ceo doug hodge says they are moving away from the founding. in an interview the total return fund run by gross does, in his words, decline pimco. we'll tell you other financial news this morning, goldman sachs tightening its interest rules on investments that bankers can make in individual stocks and bonds effective immediately. bankers are not going to be able to allow in activists with driven hedge funds. this comes as elizabeth warren calls for hearings into issues raised by secretly taped conversations between fed supervisors. did you hear these tapes? >> i didn't hear the tapes. >> the tapes were part of the american life project. i listened to it over the weekend, it's pretty crazy, the tapes. the tapes were secretly recorded by a woman inside the new york fed that is suing -- >> she got fired. >> and i believe this is part of the case that was thrown out. nevertheless, the tapes unto themselves do raise questions about the fed, everything. >> i was startled at the rippled effects of bill gross. you know, italian and spanish ten-year yields rose on fears of whoever takes over the fund isn't going to like spanish. can you imagine you leave a firm and two massive economies see their sovereign debt yields rise? unbelievable. >> no firm is more associated with the founder. i was still trying to think phl took it, his name, but that was weird. and some say it never regained stature to that level. i'm surprised that a trillion dollars -- bill gross single handedly built that firm to where it was. and does anyone -- advertisers, i love them, pimco, you're great, you're wonderful, but does anyone else there know how to manage bonds as well as bill gross? do we know? >> i don't think we know, though i do imagine that hodge is right in that there's a lot more people behind this than bill gross. >> they are going to attract the best and brightest, right? >> very few firms are so associated with it. but then you look at some of the recent -- the erratic behavior that maybe that's coming from the other side that is leaking some of the stuff about writing about his cat. and also getting more and more thin skinned and maybe abusive to employees. >> here's the thing that could have been true for years, but as long as you're making money, you can do whatever you want, right? but the last three years he hasn't done so well. >> there is a person that if he wasn't so guarded and protected and just always saying, you know, seen to be phrasing things like, he looks about the corner, he could tell us everything. and he tells us nothing about this. >> i think there's a contract in place that prevents him from doing that. >> all i can get out of him, you know what i can say is, hey, how are the jets looking? >> here's my question, he could tell us, meaning does he have something to prove? by the way, do people at pimco now have something to prove and therefore -- >> how do you hit a home run in a bond fund with zero interest rates? when you know it's just headed up? i mean, how do you manage that really well? i mean, you still do the global -- >> you try to outperform the other repeaters. >> but you also mentioned the volatility back, it's at 14 and change. but that reminds me of going from the ten-year, you go from 1.8 to 2.5, it's a 50% move but still 2.5. the vix is still $14. >> i wonder if bill gross going to just manage money rather than managing the firm allows him to focus on that which he's very good at. >> i think this could help or hurt. this is as much of a psychological game -- >> how about the people who are on the board of pimco, this guy definitely has to go, but what does it mean? and now it happens and they are just watching billions leave. >> you knew the market cap of allianz is dropping billions. that's unbelievable. >> it was going to hurt the firm alone. it was a decision they felt they had to make. >> during the commercial breaks on friday, i was calling -- you said it happened on the show and i was thinking, we didn't have anything to do with it, did we? >> no, it happened during the program. the timing of those people -- >> it had nothing to do with what you said about gross or what i said about gross. it was simultaneous. it didn't happen on this show, andrew. >> it was announced during the show. >> it's an illusion. you think about that a lot. >> it's the grandeur i have. >> you are not really a part of any of these stories. you have to get over that. you are just reporting on them. >> i am an observer. >> we are just reflecting on what's happening right there in the world in the public. >> i want to reflect you because what have you got? >> no, i just -- fair warning to the viewer, i am sick. i have -- i'm sorry. >> hold on. >> i don't know what is going on around this table, but whatever they had, becky and joe had, now i have it. and -- this week is not the best time. he's stepping back, too. >> we have a guest waiting. he's like very patient. he looks like he's in a tennis match. >> he doesn't want to take my hand and he shouldn't. >> japan ea's softbank is offer $32 a share to buy out dreamworks. that's the studio behind "shrek" and "madagascar." there's dreamworks and dreamworks animation, right? >> dreamworks is not live action, they have cartoons. and this is dwa. >> i never understand, do you only use deodorant on -- >> have mercy on me this morning. >> i know you sweat when you're sick, don't you. it's gross. horrible, clammy, is it up here or everywhere. >> just up here. >> headache, too? >> my throat is on fire. my eyes are hurting. to other news, microsoft's ceo is in a meeting with regulators in beijing. china's government said he promised to cooperate fully with authorities in their anti-trust investigation. they have seized evidence from multiple microsoft offices in china calling in high-level executives for questioning as well. and there's the european commission because it reportedly is set down to accuse apple of benefiting from elicit state aid in ireland. the fda is saying this is based on preliminary funds to tax deals. they suggest the probe could mean apple is facing billions of euros in bonds. what is it called, the irish sandwich or whatever it is? >> hot coffee in the sun, i don't know. >> some very twisted way of -- >> reducing your tax benefit in a very legal way. >> in a very legal way. >> in a shareholder way. >> i don't know if it is legal but we'll find out. the dow is taking investors for a wild ride heading into the trading week. it was my read. it was my read. sorry. >> read it. no, no, you finish what you started. >> it's you. >> generosity. >> what were you talking about? one thing to tell you about ireland, they know how to play golf. >> they do. that's where you are headed, right? >> just like scotland. >> rory and graham. painful. painful for the united states. it's like we just learned how to -- it was born in scotland. >> it was. >> and the euros had it first and it looks like they have a lot more experience with the entire playing of the game than the u.s. did you see -- neither one of you saw it? i watched every minute of it, and the entire time you're hoping against hope, but you're watching what's happening and knowing that you're just not an icecube's chance in hell for a win. >> but it was pretty, right? >> it was, but it was like the varsity team playing the j.v. team. it was incredible. and it's been like that eight out of ten times or nine out of eleven or something. it had nothing to do with tiger but those guys. we congratulate them. ian poulter is a friend of the show. the dow is taking investors for a wild ride. we are at 17,000, so 100 point moves aren't what they used to be. there will be a day when we do 500, 600, 700 points up and down. that will happen. after the fed gets out and all this volatility that had been masked by all this money sloshing around, there will come a time. for the first time since june of last year, stocks are poezing five straight days of triple-digit gains, up or down. what can investors expect as we close the quarter to get ready for the big jobs report coming on friday? >> it is. >> get ready for that. i'll be watching. we want you to do a good job of it. maryann bartel is here with portfolio solutions, the chief investment officer. >> that's a big title, isn't it? >> sounds good. >> people have problems. and you are the solution. >> yes, i am. >> yet it is not pretentious or anything, is it? do you feel you and merrill are in a position to help people? >> we do not guarantee results but we try to get our clients to their goals. >> that's a good -- i assume that. don't all broker firms? >> we have the chief investment officer that actually created how we get to our clients investment results. >> i'm liking it. >> he wrote the paper beyond -- >> are you just an economist? >> just a boring economist. that's all i got. >> that's it? >> do you have any solutions? >> do you expect to talk? >> we have you here and you here. >> i did bring my crystal ball, so hopefully i can tell you more. >> the vix is 14, will it get back to 30? >> i can't want say it will never happen. this year i don't think so. >> is the fed and what we're seeing, it's such a big part of the dollar. it's a big part of the equities market. a big part of the bond market. when they finally exit, and we normalize interest rates and everything else, will volatility return? >> we think volatility will definitely return. but if you study history, this is certainly not normal for the kind of environment that we're in, it takes six months before the market responds to a fed tightening. in fact, normally the economy is booming and that is why the fed is tightening. and the market gets very giddy and it takes a while for the market to realize that the punch bowl was taken away. so believe it or not, six months after a fed tightening on average markets go up double digits. >> so when is the first tightening move? and is it possible that we're wrong and that it gets pushed back because things weaken a little bit? when do you think it -- >> at bank of merrill lynch, our forecast moved up in june. so we are closer to consensus. >> so that gives us all of 2015 before the market reacts to it is what you're saying. >> that's what history has shown, but i think things are different this time. not only are they raising rates at the fed funds, you're the economist, the expert. >> he has no solutions, though. >> they are also going to interest rates on excess reserves and using reverse repos. and i attended an economic summit where 30% of the audience had no idea what a reverse repo was. >> supposedly the repos won't work because it's not going to cause any drain. >> well, the tightening cycle is very different. i think you can get a lot of market behavior not knowing how to react, just like when ben bernanke used the word tapering we treated it as tightening. i think the market can get confused over the coming months by the fed language. and we can continue to see volatility. >> kevin, is june 1st the -- >> i think that's right. >> you do? you think it's june. >> given the economic backdrop it seems like a reasonable forecast. that's our forecast at ubs as well. if you were to say which way the balance tilts, it's probably an earlier exit. q1 is not out of the question, but right now it seems like the fed is, with the kind of economic data we're getting, it can be patient and wait for inflation closer to the 2% threshhold. >> do you think the economy has moved in to a higher level of activity at this point? >> i do. if you look at the last couple of quarters, three out of the last four quarters, you have grown above 3%. the third quarter this year gdp seems to be tracking at 3.2%. in the fourth quarter, 3.4 seems reasonable. we have had a break out here in capex. we'll update this later in the week as it seems to be moving in the right direction. job growth seems to be averaging about 200,000 a month. the unemployment rate has fallen to 6% by friday. so i think the economic backdrop does suggest that the economy is moving. >> if it dropped .20 it would be in the fives, wouldn't it? >> it would. >> we just had someone say last week this is a completely sort of distorted 5% to 6% unemployment rate. and that things are still so weak that we never in the next five years, we never see rates go back because we can't afford to let them go back because it will cost too much on the debt we already own here. >> well, the lower interest rates, the fed's portfolio has been redeeming a lot of cash that they have been sending to the treasury. so, you know, as the normalization of policy takes place, there won't be handing of the money over because they could potentially lose -- >> it's $150 billion per point they said. >> really. >> if it was a four, you're at an obamacare type numbers for a year. >> if you go back to the 1950s, we are very similar type of interest rates. we had zero interest rates in the early '20s, '30s and '40s. we had the ten-year equivalent that took 16 years to normalize back up to 5%. so i'm with you, i think rates will get higher much lower than people anticipate. >> the market, will it continue to go up? i mean, it's at 17,000 now. is it -- >> well, the seasonality is going to get -- >> will it be 50,000? >> we don't have the forecast out that far. we have a solution to where to be invested over time within the marketplace. but i think people should understand that the seasonality going into the fourth quarter is very strong. and very strong even with the midterm election year. and so forecasting next year out, we have -- we don't have an official forecast, but knowing where to invest within the markets. we have talked team usa all year. we have talked about technology, energy, autos and manufacturing. the capex -- >> i like that, team usa. >> we had the olympics and -- >> she's clearly patriotic. >> this a good day for me with andrew. i should bring up -- you're just -- you can't argue. >> i'm so under the weather, just get me -- this tissue is my white flag. just go for it. >> shall we talk corporate taxes? >> how about fairness. >> did you see the piece in "the new york times"? all this data, the data decided -- >> not today. >> this is my thing. >> a person from my church said the only fair in life is the state fair. >> that's not bad. >> just a catholic guy? >> no. >> did you marry someone and change religion? >> yes, i did. >> wow. what do you think of that? >> the only fair is the state fair. >> i think i did, although i play video games on most sundays. it's horrible to admit that, but non-violent. the educational ones. >> thank you for solutions, by the way, all of those. and him for the economic prognostications. coming up, positive news in the battle against breast cancer. the details on the latest advancement from swiss drugmaker roche is coming up next. and forbes is out with the list of the 400 richest americans. we know the usual suspects but this time there are 27 new faces on the list. we'll tell you who they are when "squawk box" returns. e financial noise financial noise financial noise financial noise ♪ in global news thousands of protesters flooding the streets of hong kong's central business district today. this is the worst unrest since china regained control of the former british colony back in 1997. susan lee is joining us from the ground with the very latest. susan, what is the latest? >> hi, michelle. yes, we are seeing more people than the 80,000 estimated on the streets of hong kong over the weekend. and what makes these protests really perk up the international community is the escalation and confrontation from the hong kong government. yesterday firing tear gas into the crowd, pepper spray, at one point holding up signs saying disperse or we will fire. the speculation is they had rubber bullets being fired into the crowd. we don't have confirmation of that, but today it looks to be gav galvanized. this draws comparison to 1989 with a peaceful protest. a student movement here on the streets of hong kong happening all over again. we have seen capital flights today with repeats in sell-off close to a three-month high. no one knows what's going to happen going into the long weekend of october 1st and october 2nd. we have been hearing from the government it's looking like the stock will stand today because of the number of people on the streets. and the people are questioning whether or not hong kong is still independent from beijing. so we have the chief secretary second in command here in hong kong coming out with a statement saying they advise to take a second look at the fight for universal suffrage, which is the right to select the leader of hong kong. she says the government will take some time to take a second look and there's no guarantee that they will do this any time soon. >> you mentioned the comparison to 1989, do they anticipate something as horrific at tiananman square and is there chance that the chinese government may do something like that ever again? >> well, in taking a look at the crowd today, even with it galvanizing with more students moving into the streets of hong kong, it doesn't seem like fear has struck just yet. in fact, i feel like the movement has gained momentum with what's happening on social media. you can't get a hong kong feel without talking about the yellow ribbon movement. this is called the umbrella revolution because that's what they are using to separate themselves from the pepper spray. and they are sleeping in the hot sun because it is very hot. it is bolstering in the city of hong kong. i didn't get a sense of fear from those attending the rallies still in the streets of hong kong heading into the evening here. >> all right, thank you, susan li in the middle of the protests. she'll update us throughout the day. and roche says a new breast cancer drug shows unprecedented benefits in extending lives. meg caruso is here with the latest. >> roche's drug improved the results in targeting genetically defined breast cancers that have spread throughout the body. it is showing overall survival. they improved survival in breast cancer patients to many. the drugs are doing what they are supposed to do and extending survival in breast cancer patients. this is the longest survival in breast cancer and it is a combination of therapy, which is is a big deal right now in the way we are treating cancers and is genetically defined. these are two cancer drugs targeting the protein. >> this is for people who are the mutation in the protein. >> that's about numbers of 25% who have the mutation. and the two drugs target that protein, so projeta binds in a different way. >> so it's additive, putting the two together. what do we do about the other 3/4? is there a difference in the severity or the mortality rate of this versus the other three quarters of breast caps her? >> when this was approved in 1998 it changed things a lot and projeta was approved two years ago. so these are spelling better outcomes as we are seeing today in the patients, but in the other three quarters we have a lot more work to do. >> but there's a her2 in the other three quarters. we just don't know the mechanism or the mutation somewhere else that maybe something similar could be designed. it's an exciting time. >> we are seeing a lot of updates out of the meeting, especially in oncology. we have data from america and bristol myers. merck is working on gastric cancer, so a lot of good data out of this meeting. >> thank you. all right, coming up, the leaves are turning colors, football is in full swing and the halloween decorations are going up. that means the arrival of earnings season. should investors expect scary numbers this time around? that's next. and then, besides being september 29, it's also national coffee day. every day is national coffee day to me. let's raise a cup in honor of what keeps america going each day. dunkin's brand ceo is joining us later on the business side of coffee. but first, we'll take a look at last week's dow winners and losers. >> are you tells us absolutely everything? >> not exactly. we are all select coffee. how do you beat the number one seed? you just have to win 70% of your points at net. and keep unforced errors under 10%. on the ibm cloud, the us open analyzes 41 million data points from 8 years of competition to uncover key insights. data can help show you how to win, no matter what business you're in. today there's a new way to work. and it's made with ibm. 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. good morning. welcome back to "squawk box." i'm joe kernan along with andrew ross sorkin and michelle caruso-cabrera. becky quick is off. it's harvest time in california. experts warn many of the state's crops will be smaller than usual this year because of the historic drought. the water shortage has led to shrinking grape, almond, rice, orange and pistachio crops. speaking of, we have a drought here. if you get a chance, check out the wall street journal piece on germany today on the front page. they are so crazy about water conservation over there that their entire water table in germany is too high. so basements are flooded and they take baths together, supposedly, it says in the article. but don't change the water -- there's two different kinds of flushes. there's the save the -- >> the small button and big button. >> right. >> i always use the big button. >> if it's yellow, let it mellow. they have the whole thing going on, but they have gone overboard. which it's amazing -- >> not really. >> it's a problem. there's too much water around. at this point. it's over there, but it's not -- you won't be able to buy any almonds. >> water is a localized issue. >> all politics are. don't get into an argument about anything, just nod to me because you are not in a position. you are not in a position to give an effective argument. >> today i'm -- i'm under the weather. let me tell you -- it is like mcdonald's. if you plan to use an out of network atm, joe, you're going to be traveling and using the out-of-network atm, a new survey from bankrate.com reports the average fee for using a machine that doesn't belong to your bank has risen 5% to a new high of $4.50 per transaction. this is extortion. they call it overdraft fees that are also increasing to nearly $33 on average. i got some of those that went away. didn't bank of america get rid of these? banks are raising fees with dealing with new regulations after the financial crisis. >> we are similar on this. don't you -- when you do get money, don't you get a lot more. >> i try. absolutely. will you go out of your way, so i'm like a chase guy, would you go out of your way to find one of your banks? >> i have done that. >> so you don't have to pay the fee? >> in the suburbs you can't. >> i just use the atm here at the office. is it tree? >> i don't think they charge a fee. >> here they don't. >> you're in the city, chase is all over. >> i'm hsbc, so i can get money out all over the world. >> good thinking. >> they have chase around the world. >> it's much easier the way hsbc is set up, it's much easier. >> well, excuse us. >> we are too local. >> we are in the domestic banks that we deal with. you are the international correspondent, i keep forgetting about that. do you get a lot out so that you -- >> yes, i do. i always take out money four times a month. >> are you bringing traveler's checks? >> no. most places don't take them anymore. you show them to a 25-year-old and they don't know what they are. >> atms work most places, right? >> they do. >> credit cards are much easier. the third quarter coming to a close means earning seasons is around the corner. analysts say the third quarter profit shows how strong corporate america is right now because earnings stunk to start the year. in the second quarter they surged thanks to the pent-up demand. so what should we be expecting? we are joined by the director of research, great to see you. >> thank you for having me on the show. >> do you think will this break the tie between the first quarter and the bad second quart her? >> absolutely. the first quarter was held down by we don't really know what happened, but weather was supposedly one of the reasons. then there's a rebound, so now this quarter will really give us the lay of the land as for corporate earnings. and there's not much growth expected that's been kind of the trend as well. >> you know what, in fact, i'm going to interrupt you as we show viewers right now a graphic which shows the evolution of third quarter estimates. if you went back to june 27th, analysts thought earnings would be up 6% and slowly but surely today they only think earnings for the quarter will be up more than 1%. why is that? what's happened? >> that's been very persistent trend for more than two years now. we start out with the fairly elevated growth expectations. and then when the earnings season gets going, most corporate management teams will guide lower. and that's what you have been seeing. so right now for q4, the earnings expectations are about 9% to 10%. as this q3 earnings season gets underway and management teams guide for q4, if the trend remains in place, the trend that you have been seeing for more than two years that 9% to 10% growth rate will most likely come down to 3%, 4%, 5% growth rate. and that's how we sign q3 and what we have been seeing for quite some time now. >> bottom line it for us, third quarter is going to be good? good enough? what do you think? >> the key element here is, if we will see any improvement on the guidance front. as i mentioned, more than two-thirds of the companies that guide lower, with stocks as high as they have been, we need to get some reassurance in the earnings front that the outlook for the coming quarters and beyond will be good. so if we see any improvement on the guidance front, i think it will be fair to call the earnings picture improving or better. if not, then it's the sub par earnings environment. >> good to see you, sharez. >> thank you for having me in the show. steve liesman is in chicago today where he's going to be joined by chicago fed president charles evans right here on "squawk box" at 8:00 eastern. but first, here's here with another special guest. good morning to you, steve. >> good morning, andrew. yeah, we have another president here, the incoming president of maine, john silvia at wells fargo. thank you for joining us. is this finally the big pop we have been waiting for after, you know, the recession, how we kept waiting and it was lackluster growth, 2% growth, 2.5%, and now it looks like it's up a little bit. >> oh, absolutely. it looks like it's a return to more like 3% year growth for the year ahead. and it's broad-based. you are talking residential consumer and individual investment. so government is turning a corner from negative to it istive. >> some say it's a bad thing. we'll talk about jobs, what is the forecast when it comes to payrolls and unemployment rate over the next year or so? >> the payrolls are probably not surprising around 200,000 or 220,000. but here's the key, the unemployment rate continues to decline below the 6% level. and it gets to about 5.5, 5.7 by the end of 2015. >> so does that mean that relative to where the fed is, do you think -- 5.5 sounds to me like it could be a full employment number? >> oh, absolutely. i agree. >> how is it that we're approaching full employment with the fed still at zero? >> well, there's the other half of the equation. this is a survey for both financial and non-financial economists. and when you look at the balance between the two mandates, inflation and unemployment, the unemployment rate certainly is approaching full employment, but the inflation number throughout 2015 in terms of the pce deflator is below 2%. we are not as aggressive as the fed is by tend of 2015 in terms of the federal funds rate. >> let me summarize that. you have the unemployment rate hitting the fed's target but don't have the inflation rate hitting the fed target. >> agreed. >> the outlook is below 2% inflation. so here's what is interesting, like our fed survey, they all see the market here for where the fed funds would be and the fed is here. what xaccounts for the difference? >> i think it's the fed's expectations, your survey is simply saying the inflation is probably the primary factor driving any fed aggressive tightening. and in terms of the federal funds rate, and we don't see it. >> john, what are the problems in the economy that the economists want to see, the government or somebody address? >> well, two big issues. one is the housing continuing to be much weaker than expected. housing formation is picking up with jobs being created, but the housing start numbers remain pretty weak. then second, just consumer disposable income. what is going to kick that into gear? a lot of jobs being created are part-time jobs. not all full-time jobs. and the wages in total compensation are modest. >> thank you for joining us and congratulations on becoming the president-elect for business economics. back to joe in new jersey. good morning, joe. >> good morning, steve. and we'll be watching to see what mr. evans says later. coming up, the new rich on the forbes 400 richest list. plus, the shockwaves going through pimco and the entire global bond market. could any of us do anything to royal the entire world? >> you royal the world every day, joe. >> i know. i don't want to do any more royaling. after the bill gross departure, "squawk box" will return in just a moment. 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. welcome back to "squawk box." a thriller winning at the box office. starring denzel washington, debuting with $35 million. and the "mays runner" came in second place. and the universal movie came in third place. >> that sounds great. coming up, we'll talk about the forbes list. you know the forbes richest. buffett, gates, but the list has more than two dozen new faces. we'll tell you who they are when we return. mr. daniels. look at this. what's this? clicks are off the charts. yeah. yoshi, we're back. yes, sir! ♪ more shipping! more shipping! ♪ [ beeping ] ♪ [ beeping ] your customers, our financing. your aspirations, our analytics. your goals, our technology. introducing synchrony financial, bringing new meaning to the word partnership. banking. loyalty. analytics. synchrony financial. enagage with us. i have $40,ney do you have in your pocket right now? $21. could something that small make an impact on something as big as your retirement? i don't think so. well if you start putting that towards your retirement every week and let it grow over time, for twenty to thirty years, that retirement challenge might not seem so big after all. ♪ 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." forbes magazine out with the 400 richest americans of 2014 with 27 newcomers making the cut including the man behind the rockstar energy drink and the founder of theranos. she is one of 47 women on the list. here to unveil that full list, senior editor at forbes. thank you for being here. >> thanks for having me. >> so the question i had during the commercial break, joe was saying i have trouble with this list. i have no trouble with this list. but i imagine there are people on the list, some who desperately want to be on the list. and others who desperately don't want to be on the list. >> yes. >> i want you to tell me about those people. >> the people that -- >> how does that work? >> well, we basically resort to threatening at some point. >> you do? >> we do. we tell them they're going to be on some outrageously high number. i'm joking a little bit, but you want these people to cooperate. obviously there's some cases where we miss people and we then later on find their fortunes and are able to pin it down and they come on new to the list. but sometimes there are just crazy deals happening that push these people into the ranks. >> generally speaking, you're measuring which is measurable, right? if they move things to assets less measurable, it's tough for you. and they do that on purpose? >> of course they do. >> good to bring up. >> we looked at some of the -- >> where's the dubai guy? >> let me take it this way. there are some people that inherited part of it or made a lot out of what they did inherit. but probably more notable and it stands out more, the number of people that did this on their own. >> 2/3 did it on their own. this year we did a self-made score to see who really started with nothing and versus those that kind of maybe had a wealthy father who gave some money. >> bill gates would still be at the top of that list, right? >> no. he came from an upper middle class family, went to private school. >> there's jobs associated with each one of these people that have done it. >> definitely. thousands and thousands of jobs. >> and tax dollars also that go from the revenue that these people have generated too. >> yes. perhaps some not as much as others. >> i can't find a bad angle to this. but i guarantee you "huffington post" would have a rogue salary of these people. and they'd have one of those arrows where you go from each to the next. in this part of the country right now, it's a zero sum game. for every billion these people have, there are people that are blaming the billionaires because they don't have enough money to buy a car. >> i do think billionaires do use their money to influence the issues they think are important. >> who are the biggest philanthropists. >> bill gates and warren buffett. >> where does that come from? why is there a medical center -- what? >> i don't disagree with you. >> yes, you do. in large. >> i don't. >> i would imagine -- i feel like i should defend andrew since he's not feeling like it. >> they somehow influence the dialogue. like the andy reid superpac? so on both sides? >> on both sides. >> so it's not just the nasty koch brothers. >> next year for joe, i want you to assign the number of jobs that each person created. because you look at the what zap guy, he probably created only 30 jobs which is sort of odd. if you had to think about it like that. >> strange ratio. >> although, eventually there would be shareholders and everything else. >> the cutoff is here. $1.55 billion. so i could have $1.5 billion and not on this list. >> definitely. and there were 27 people that were dropoffs that basically -- >> are those the ones calling up saying i've got more dough than you think. >> some people will. one guy is already threatening to sue us because he thinks his number is too low. >> is donald on? >> yes. >> what's his number? >> $4 billion. >> is he always suing to get a higher number? >> actually. real estate is doing fantastic. >> you know if donald has sued anyone over a comment? did he sue someone? >> someone said he was not a billionaire. and he was mad. >> thanks for being here. appreciate it. still to come, should investors expect the dow's roller coaster ride, triple digit gains, and losses to continue. first on cnbc, tim arm strong responded to that report on friday that yahoo! should be showing some interest according to an activist fund. and later inside the departure came bill gross. me latest details of his abrupt divorce. his abdication as one newspaper called it. stick around. "squawk box" will be right back. whenwork with equity experts who work with regional experts that's when expertise happens. mfs. because there is no expertise without collaboration. ♪ who's going to do it? who's going to make it happen? discover a new energy source. turn ocean waves into power. design cars that capture their emissions. build bridges that fix themselves. get more clean water to everyone. who's going to take the leap? who's going to write the code? who's going to do it? engineers. that's who. that's what i want to do. be an engineer. ♪ [ male announcer ] join the scientists and engineers of exxonmobil in inspiring america's future engineers. u . dramatic events in hong kong. thousands pour into the streets for a pro-democracy rally. the police move in to contain the crowd with tear gas and batons. will this create tension on wall street? you've got a possible suitor. is aol the latest takeover of yahoo!? and the bond king leaves his throne. bill gross stepping away from pimco after 43 years. billions of dollars flying out the door. the shock waves of this departure as the second hour of "squawk box" begins right now. good morning and welcome to "squawk box" right here on cnbc. i'm andrew ross sorkin. along with joe kernen and michelle caruso-cabrera. today is national coffee day in america. served hot or cold. starts the day off with millions of people. starbucks, mcdonald's have promotions going on. we'll have the ceo of dunkin brands. just opened up new stores. we're going to do that at 7:40 a.m. if becky has the day off -- >> she probably isn't drinking the coffee. >> probably doesn't need it. it is a precious elixir. corporate news. japan's softbank is offering $32 per share for dreamworks. shares soaring on the news as you can see. take a look. trading higher by 25%. but below the suggested price, right? we have an energy deal this morning. encana buying athlon. the eu will publish probes into apple and fiat. reports the european mission is set to accuse apple of benefitting from illicit state aid in ireland. apple faces billions of euros in fines. stocks coming off a wild week. the dow locking triple digit moves in seven of the last nine sessions. morgan brennan joins us now with a breakdown. good morning. >> good morning, joe. volatility. that's the keyword coming into this week. and mkm partners says it's reading on price wings doubled last week. still not close to the year's highs, but certainly a sign that volatility is coming back. take a look at the volatility index. it surged last week. up about 23% from the week prior and the weekly gains since the end of july. that's down about 4% for the year. a number of factors contributing. and of course the fed. this is as it winds down to bond buying. to likely begin raising rates. the feds created a lot of liquidity in the markets. that has tamped down. that liquidity declines. volatility will return. the dollar index currently trading above a four-year high. 11% over the past five years. all of this affecting parts of the markets most sensitive to rising rates. small caps is one area to keep an eye on. the russell 2000 is down 4%. it's had much larger losses. emerging markets a selloff as well. gold that is near its low for the year. so this week money managers are expecting more swings as we get a tidal wave of data. this is just a few of the highlights for this week. most notably we have the jobs report on friday. not to mention the fact we are coming into october and we do have the start of another earnings season. and is the last round of the feds bond buying. back to you. >> so good morning, morgan. there was a famous disk jockey that would just say good morgan. it's easier. and you know what i'm saying? it's abbreviated and quicker. thank you, morgan. let's dig into the markets with peter fisher. senior director of black rocks investment institute. also rich bernstein. he's also a cnbc contributor and owes me big. never had a middle name, so i gave him that. richard, i'm reading your -- i'm sorry. peter, i'm reading you are very cynical in this talk you gave at m.i.t. >> oh, yeah. yes, i was. >> i wonder how rich is going to feel about this. you are taking the notion -- number one, you're calling people like yellen and bernanke elites. no, no. all macroeconomists. >> you're talking about how future generations and civilizations might look back at what we went through and wonder how had were been so misguided. the notion that if you keep the rate of interest really low on some things, so to finance the purchase of an asset, because you think you're making it cheaper to do that and easier. because the asset rises in price, because of that you're actually not doing that. it's almost the same thing jim grant says. you can make things appear to look better, but you don't really make them better by what we're doing. and there could be negative consequences. have i got that right? >> i think you have. what i'm driving at is monetary policy can only do two things to stimulate an economy. it can try to borrow demand from the future. we're going to have more debt. we're going borrow more from the future and increase indebtedness. we as a society for 10, 20, 30, 40 years think every time we get in trouble, borrow more. and the fed's been part of that too. and here we are, we've been borrowing again against the future. we haven't delevered anything from the crisis. >> it reminds me of being on the "titanic" and everybody thinking it's going well. isn't some looming ahead of us with this? >> i think so. i was nervous about my outlook being this gloomy. but a chapter was fire next time. >> but there are times when demand is so weak which we saw -- >> absolutely. >> -- where you have to pay it forward or whatever it is. >> sometimes it works. but the question is it always going to work. >> it depends on the problem. in europe what i think i've seen happen is money is super easy. those governments that are supposed to be doing all kinds of things to make their economies work better, they haven't had to. because they've been helped by the european central bank instead. >> we keep borrowing from the future. i think people think monetary policy somehow has another secret. that's really all there is. >> you want to talk about this or where we stand in terms of the market? >> we can talk about this. joe, look. history is -- in my memory i can only remember one fed chairman who has been viewed positively in hindsight and that's that paul volcker. each other has been looked at negatively. i don't think this is necessarily new. the other thing i would point out is that i agree with peter in terms of some of the secular bag drops. we have to remember as investors that there are cycles. and i think we're in a very powerful cycle right now for u.s. assets. despite what peter's saying. if we ran emerging markets, i think what peter is saying is much more dire than it is for the united states. i think if you're in europe, it may be more dire. but i think for the united states, i think we're at a very powerful cycle for u.s. assets. >> peter, assuming an iceberg is building, the issue for most investors actually isn't that the iceberg is building. it's when are we going to hit it and what is going to be -- what is it that's going to cause us to hit it? >> i agree with richard. let's be clear. i think there are cycles in only one of two ways. either the fed raises real rates enough to surprise us, to tighten up the economy and we slow down. we borrow less. or we all just keep borrowing and we all borrow too much until it tips over. there are only two ways the cycle ends. doesn't look like the fed is going to tip stuff over. but it looks like we'll keep borrowing until we tip other. >> although there was something disconcerting from one of the fed regional presidents quoted saying the fed has to be careful not to fall behind the curve. i don't think he noticed the curve has been flattening. that's unnerving and that gets to peter's point that the fed has a history of really in retrospect doing kind of unwise actions. maybe we're going to do that again. i don't think so, but that quote this morning was a little unsettling to a bull like me. >> so last week, rich, those were sharp breaks. we only need a hundred points to scare the heck out of people. at 17,000, that's probably good, right? >> joe, you nailed it right there. it's kind of funny how people are still so scared of replaying 2008 which i just want to remind everybody was six years ago. they're scared of replaying 2008 that any bit of volatility, everybody heads for the exits and nobody wants to be caught being long. i think you nailed it with your comment right there. it just takes a hundred points. >> one of these days, you know, people want to buy stocks at a 10% discount. that's what the market never seems to do. we go down 4%, people go okay i'm going to get interested when we're down 10%. and then it goes up and nobody gets in. >> just to add to peter's comment about how cycles end, you have poor monetary policy at that point but also overenthusiasm for stocks. right now people are hypersensitive to what the fed is doing. that's not usually end of cycle behavior. >> peter's going to stay. rich, we're going to let you go. be honest with me. have you ever signed richard e. bernstein. >> i have not. >> so you haven't really fully adopted it. >> no. but people have come up to me and actually asked me if that is my real middle name. >> you know on "seinfeld" seven became popular. and what was the other one he came up with? for names that he thought -- even was for -- and soda. he was going to name a kid soda. >> effin, i want that to be a name. it's a good name for any one middle name. >> high fives. >> was it seven spelled out? >> that's a good question. i don't know whether he did. but you say -- guess who we have on today. richard effin bernstein. >> embrace the effin. >> i'll take it back as easy as i gave to it you. >> i'll keep it. you know -- >> because your parents didn't care enough to give you a middle name. >> there's nobody in my family with a middle name. >> should all be effin bernsteins. and probably your neighbors did call you that. we'll see you. >> see you, guys. all right. a developing story going on this morning. thousands of protesters on the streets of hong kong's central business district. we are joined now live from hong kong. >> yeah. we made it back into the bureau because there were more than the 80,000 that were estimated to have taken the streets over the weekend. so our networks were overloaded and we couldn't get a live signal. we thought there were way more people out tonight than there were over the weekend. and the reason the international community took notice because we've seen mass protests here is the confrontation and stance the riot police has taken. over the weekend you see on your screens they fired in tear gas. you had baton charges and pepper spray being sprayed and lobbed at the crowds. at one point the riot police were saying disperse or we will fire. speculation was maybe they were readying rubber bullets. but we don't have confirmation of that. this was to be a peaceful student protest. and i guess people because it was a student protest, that people made the comparison to 1989 tiananmen square where the tanks rolled in. this is the worst escalation we've seen since the handover to the uk. the fifth largest market in the world here. and nobody wants to hold risk going into the long holiday, the october 1st national holiday. they also canceled fireworks as well. we did get a stance from the government. the chief secretary, number two in kwhand here, says they'll look at the suffrage clause once again. but once the chaos dies down. >> thank you so much. peter, you were head in hong kong? >> all over asia. >> what do you think when you see this? >> it's amazing. it blows my mind. it's hard to fathom. hong kong itself is a pretty stable police. let alone since the chinese peoples republic has taken over. >> market impact? what do you think? >> yeah, i think so it's going to be part of, you know, dollar firming, volatility up. the theme we touched on this morning. i think there's tension in lots of places in the world. and hong kong thought they had a deal with peoples republic about how the chief executor would get wuchb. >> do we have another tiananmen here? >> that would surprise me. i mean, hong kong is different. i think the leadership of the hong kong business community and the society won't want that to happen, won't want it to reach that point. but it's different than i saw before. >> peter is going to be sticking around. when we come back, will aol continue to fly solo? or will a deal with yahoo! interest the company? that's one of the very questions we have for aol chief tim armstrong as he gets ready for ad week. he'll join us right after the break. your customers, our financing. your aspirations, our analytics. your goals, our technology. introducing synchrony financial, bringing new meaning to the word partnership. banking. loyalty. analytics. synchrony financial. enagage with us. 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. welcome back to "squawk box." now let's get down to new york city where julia borston joins us. >> thanks so much. tim armstrong, ceo of aol. thank you for joining us. before we get to e the heart of the ad week news, i have to ask you about yahoo!. are you making a deal with yahoo!? >> it's great to see you. i think the yahoo! situation is the yahoo! situation. we've been really focused on what we're doing at advertising week. we're announcing a deal with google assist today. i wouldn't comment on that speculation. that's two other parties' relationship to work out. >> i have to ask you, this is not the first time speculation has come up about the potential synergies of a yahoo! and aol merger. do you think it's time to bring the companies together? >> i think the interesting thing right now overall is you have giant dynamics happening. scale matters a lot. we went to number four in terms of traffic this year. bumped up a spot. we had done well in news. we're number one in global news, top three in video. so i think those rumors speculate the evaluate aol has been moving up the scale rank. so we're manifest destiny and focused on our strategy. >> andrew, you want to jump in? >> i know you don't want to speak to it, but to the extent you can, you've had conversations over the years with starboard. they're not new to you. have you had conversations with them about this at all? >> you know, andrew, my focus has been on the largest single shareholder at aol. our relationship with star bebo had been around the shareholders and employees. so our focus since then has really been about driving aol's strategy. i think the point we're here to talk about today is where the world is going. advertising is a trillion-dollar industry. aol is in the fore front of that. i haven't focused too much on ' yahoo!star board. >> can i ask one question in terms of broader words, you're not involved. softbank looking to buy dreamworks animation. what do you make of that in this idea you think people are trying to get on one platform? that suggests to me maybe there's something else to how you think about aol in the future. >> i saw last week from softbank, had a chat with him. i saw the news like you saw. content is king. you look at what's happening in the world in terms of the focus. focus we've had around building properties. and then you look at the fact that everybody wants scale. >> now, i want to ask you with this news your announcing this morning. you're expanding to buy traditional ads and tv ads through your program. what's the news? >> the news here is advertising on the internet is growing very quickly. it's now starting to go into tv. so the simple way to think about this is advertising is becoming as easy as e-commerce. in the world where hundreds of millions of dollars gets traded over fax machines. we're the first company to tie the internet advertising target and leadership and digital has been tremendous. and we're the first partner they're going to be launching with. >> what's that going to mean for aol's bottom line? >> the tv market place in the u.s. is tens and tens of billions of dollars. it's hundreds of millions globally. i believe this transition -- we've gone from zero to hundreds of millions of dollars. video landscape online, i believe we will go to hopefully hundreds if not billions of dollars in the future. i think this is a landmark announcement. while all this other noise is going on in the industry, aol is showing up. what is at the fore front of where the world is going. >> expanding that into television. thanks for joining us. tim armstrong, thanks so much. joe, over to you. >> thank you for that. quick programming note. steve casey, aol founder, will be here tomorrow at 7:00 a.m. coming up, we'll be right back. financial noise financial noise financial noise i lochecked bag.free with my united mileageplus explorer card. i have saved $75 in checked bag fees. priority boarding is really important to us. you can just get on the plane and relax. i love to travel, no foreign transaction fees means real savings. we can go to any country and spend money the way we would in the us. when i spend money on this card i can see brazil in my future. i use the explorer card to earn miles in order to go visit my family which means a lot to me. ♪ charlie, the demand on this network, it is increasing by the second. it's crazy, huh? and people are relying on it more than ever. we cover more than 99% of all americans. i know, i can't imagine living without it. it's a place where people can come share knowledge and ideas. it's beautiful. that's deep charlie. my selfie just hit a hundred likes...(gasps) a hundred! at&t is building you a better network. 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. don't move, because coming up we're going to talk about the bond king abdicating his throne. words being tossed around like erratic and eccentric to describe bill gross in his final days at pimco. that's next on "squawk box." know that chasing performance can mean lower returns and fewer choices in retirement. know that proper allocation could help increase returns so you can enjoy that second home sooner. know the right financial planning can help you save for college and retirement. know where you stand with pnc total insight. a new investing and banking experience with personalized guidance and online tools. visit a branch, call or go online today. this guy could take down your entire company.h? stay with me. on thursday a hamster video goes online. on friday it goes viral - a network choking phenomenon. why do you care? he's on the same cloud as your business. the more hits he gets, the slower your business may get. do you want to share your cloud with a hamster? today there's a new way to work. and it's made with ibm. welcome back to "squawk box." among the stories front and center this morning, harley-davidson recalling more than 105,000 motorcycles from the 2014 model year. the company warns clutches may fail causing stopped bikes to creep forward and potentially crash. the faa wants to restore action by mid-october. causing delays at chicago airports. facebook is advertising new launching today. they will now let companies measure the impact of their ads across devices. for the first time in 43 years, bill gross will get up and go to work for a company other than pimco. we're looking at the ripple effects of his departure. >> gross anatomy is a fun wa i of looking at it. >> you're going to try to -- i don't know why he's working anywhere. >> he doesn't have to. >> 70 years old. billion dollars. >> in newport beach. >> he's in the oc somewhere. i want to say probably newport. >> i bet it has a great view. >> i think so. yeah. we talk about this whole bill gross situation. the reports are executives spent the past few days on the phone with top clients to keep assets managed by the company. this past friday, they lost about $10 billion in redemptions. that was an interesting part of this story. a sign that gross' brand and influence could lead to more money leaving pimco, those are all things to be concerned about. the coming days and weeks are big for the company. the look of dan ivascy rks in is to assure clients no hitches will take place. now, pimco's total return bond fund is massive even in the world of gigantic bond funds. the next biggest taxable bond is vanguard and it's got less than half their amount. if there are a lot of client redemptions here, they will have to sell to finance those withdrawals. another thing to watch is a theme developing. that's with regard to unconstrained bond funds. a structure that allows different bond and bondlike assets around the world. when they rise in value, bond values fall. so index funds for bonds may see a trend of declining values. these unconstrained bond funds, they allow to see regardless of rates. and what dan on the team there that runs its global unconstrained bond funds. >> thank you, dom. we're going to bring the reporter that broke the original stories on bill gross and his falling out into the discussion. greg zuckerman at "the wall street journal." i want to get into the imaginations behind the scenes. but first, we're talking about redemptions. morgan stanley this morning looking at the price of allianz's stock saying the reaction discounts $400 become of outflows from pimco. does that make sense to you? >> it makes sense to anticipate that. i'm not sure they're going to get that high. he's built a firm from scratch. he's the bond king. give credit to where credit's due. there are a lot of local clients. >> take us through the past week. you know all of the players. what really happened? >> well, here's a guy who out-performed for many years and then has stumbled. a lot of his idiosyncrasies, he could be a difficult guy to work for. but it got worse. he went from hard to work with to borderline nasty. when you're not performing at the same time, that's a lethal combination. >> in the past two weeks, there must have been a trigger point. was there a specific thing he did? what were they? >> a group of people decided they couldn't take it anymore. they went to management and say it's either you guys letting him go or where we're going. they went one by one. in some ways a surprise chose to go with the employees. >> organized, right? it bunt like there happened to be ten people who walked through the office. like a coup. >> yeah. you almost needed to quite frankly. bill gross is a powerful guy internally. and he headed off all kinds of opposition over the years. one on one. the only way to make any head way against him was to sort of gang up. >> was he really worse or is it simply that when you're making money for everybody, you can do what you want and when you're not, you can't. >> you know, i've asked people internally, hey, wall street's a difficult place to work for. isn't every other place up and down the street hard? he says no, greg, he's harder than anybody else to work for. and that place is full of pressure. that all said, if you stay a few years at pimco, you're set for life. your kids are set for life. and your grandchildren are set for life. you don't want to overdo it with feeling sorry for these guys, but it was a high pressure place to work. >> what happened in the last 72 hours. say, wednesday on. it sounds like bill gross saw the handwriting on the wall. and then he went to janus. that was a surprise for many people at pimco. >> that's very much the case. they were shocked. they were surprised by the timing. one could have expected to take longer. but to his credit, bill gross didn't want to ride off into the sunset. >> real quick, bill is a verbose guy. we have not heard from him. does that mean there is some kind of nda, a contract that's going to prevent him from speaking? is there money involved? will we hear from him soon? >> no. he left a lot of money on the table. i think you will hear from him when he sets up shop in newport beach. it will be quite the challenge for him. >> would you bet on him? >> he's dependent on resources in pimco over the years. he won't have those kinds of resources. he's a great investor and hasn't been on a winning streak. we'll see how he does with them. >> thank you for joining us and walking through what happened there. coming up, time to make the doughnuts and the sandwiches and the coffee in the move to california. what a consent. dunkin brands. >> you gave him that idea right? >> i did. he came up with it, but i said no wonder they hired you. california. that's an idea. let's ask ceo nigel travis as he joins us to celebrate a national coffee day. plus, reading the fed tea leaves and checking the pulse of the economy. quarterback will be right back. 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. . welcome back to "squawk box." the futures right now are suggesting we will have a negative open. software being purchased by $24 a share in cash. it's a $27premium. it is national coffee day. and to celebrate today, dunkin' donuts is ringing the bell at the nasdaq. but one says his shares are down since march. here to tell us what he plans to do to give the results a jolt is nigel travis. the squawk poll is open. we want to know what you drink. log onto cnbc.com/vote. with us now nigel travis. chairman and ceo of dunkin'. i was there saturday and sunday up. you know i go every saturday and sunday. i get the same thing. so i don't need to vote. i the just tell you that i -- what is a latte? i feel silly even saying it. >> we have the best latte out there. >> you do. but it's not $4. >> that's true. great news for you today. a special reward for all your great customer. you can get a free medium hot dark roast coffee. >> because it's national coffee day. >> because it's national coffee day. >> you have to buy a doughnut? >> you can just go in. andrew, i know you like offers. one per person though. >> is the dark roast new? >> it is brand new. we spent years developing it. we're really excited because it's got this bold, smooth finish. and i'm really excited about this. because a lot of consumers say they wanted something other than their original blend that was successful. so we've got a lot of consumers out there who drink our original blend in the morning. now they've got dark roast as well. we've got even more offers. you can get it 99 cents through october 5th. so a lot of opportunities. >> let's -- do people overlap? are there starbucks people in the world and dunkin' people in the world? i think they're different people. >> i think there's a lot of overlap. 80% of overlap based on our research. it's not just people go to starbucks and us. they go to all kinds of different places. they go to convenience stores. so the trick is to make sure they come to you more than anywhere else. >> how do you do that? how do you induce people to skip starbucks and come to dunkin'? what do you think starbucks does to keep them coming there? >> i'll answer with what we do. we're world class on speed. people want in and out of the drive-thru in the morning. we do a great job on that. people are attracted to our breakfast sandwiches as well. and the real thing that adds stickiness is our perks program. we allow people to do mobile payments with our app. you get a fast reward. you get a free coffee very quickly. 250 points. five points for every dollar. >> you won. >> with 10,000 votes. >> we asked people which they prefer. dunkin' over starbucks. >> the speed thing is true. that line -- >> huge. >> we've considered that. i said i was going to stop before i get home, i'll stop at starbucks. you don't have time. because there is the line. >> and now they obviously like our coffee better as well. >> when burger king and tim horton's and all that was happening, cramer came on and said tim horton's is a crappy company. the canadians go crazy when you say that. have they hurt you sfp. >> they've been good competitors in the north of the country. i like to think i'm very competitive. this is a like a sport. we compete with them, mcdonald's, starbucks every day. i think we've done a great job. we've shut down a lot of tim horton's in providence, maine. they've done a good job in other places. we intend to be competitive. see detroit as a real battleground. if you think about it detroit, where my wife comes from so i know it well, is very close to the canadian border. we've got franchisees there. all mergers are difficult. you have to take out cost by definition. that's distracting. so our franchisees are very focused on what we can do to take advantage for probably the next two years. >> what do you make of the problems or challenges that mcdonald's has had over the past couple quarters? >> so i spent 20 years competing. they're a great company. clearly the consumer is looking for something different. whether it was value they want, the range of products. all i know is mcdonald's has tried everything against us. they've been giving away free small coffees for the past two weeks. doesn't really register on our numbers. but i think mcdonald's probably needs to find the new way to win. they've said that publicly. they've got capable people there. i think don thompson is a capable leader. he and i have some of the same challenges. and we've talked about it. so -- >> which are what? >> i think the challenges are the differences between how you manage franchisees and corporate challenge. that's been a well documented issue. there's various legislation around a country coming out that is bad for franchising. to me the number one issue we all have to focus not just in this country but locally is jobs and young people. you're the expert internationally. think about global youth unemployment. >> it's horrendous. >> in our industry is the place to give people the opportunities. >> is there an argument to make, you've embraced doughnuts. you're not trying to pretend to be something else. do you think mcdonald's has strayed too far from its core? >> we have our menu that's focused on what's good for you. a number of consumers take it. most consumers don't. so consumers do bother with that. >> one doughnut. to be totally pc -- >> fewer calories than a bagel or muffin. >> are you in seattle? >> we're in seattle, baskin robbins. >> why aren't you in california? will you go there? and how many minimum wage employees do you have at dunkin'? >> going through those questions, we are now in california. we've opened spectacularly -- i could not be more happy with california. the first three traditional stores have opened. we've had lines out the door. in fact, the only comparison i can give you right now is we opened two weeks ago in southern india and we had lines as long as california there. so we're very excited about california and india. >> you know there's a strip mall on every corner in california? i could see a dunkin' on -- i could see four of them per interchange. >> you're right. >> i can't believe you weren't there. they needed to hire you to figure this out. it was like the 19th century someone said that. >> we're going have a thousand stores in california one day. you asked about minimum wage. >> yeah. how many do you have right now on minimum wage? >> we don't actually have the detail records because they're run by -- >> would it hurt you if it went up $2 3or $3? >> no. it has to go up by state. the thing i've opposed is a federal minimum wage. because that doesn't reflect the individual economy is on a state by state basis. we think each state needs an individual minimum wage. most of our franchisees pay well over minimum wage. >> very few people. >> and the number people don't get, for people to come in our industry within 70% get a promotional opportunity. this is a great way for people to start learning to deal with customers, to learn about marketing, to learn about computers even. >> do people still -- do they still dunk their doughnuts? do you dunk your doughnuts? >> i've done it once. now -- >> it's delicious. >> it's really good. joe dimaggio was a big one. >> that's where the cruller came up. >> sometimes it falls off. >> i'm going too start -- >> you don't dunk your doughnuts. >> i'm going to do it now because you told me to. >> try it. >> i will. >> i'm going to have this doughnut. >> do you dunk your doughnuts? >> no. i like the glazed. >> it's a good doughnut. >> you're going to try dark roast today aren't you? >> i absolutely am. >> he's going to drink 83 coffees. thank you. >> thank you very much. coming up next, new week on wall street set to kick off. look at some of the stocks on the move at this hour. plus just minutes away one-on-one with charlie evans. he made waves last week saying he's uncomfortable with the calls to raise interest rates sooner rather than later. let's take a look at some stocks to watch this morning. nike was upgraded to out perform from neutral at credit suisse. i wonder how long they've been neutral and now they're going to o outperform. the price target was increased to 100 from 80. good move. yahoo! shares were raised to buy from hold. $48 at this point. let's get back to our guest host peter fisher. worked at black brock for a long time. your thoughts on what happened at pimco with bill gross' departure? >> i think about how hard it is to run a big management asset company. >> so magnanimous. >> seven years ago when i joined at black rock, we were jealous of the house view approach. the clients all understood it. >> and every other manager has to follow that whether you agree with it or not. >> and the harder it is ta sustain that. the clients didn't just sign up for one view. they want to know who's running their fund. we had to move in that direction. i was jealous of pimco back then. i think it made sense to move in the direction of less centralization. we still have leaders. you've got to talk to each other and explain what they're doing to each other. part of pulling people together. you can see what happened at pimco over the last two years with mohammed leaving. more faces coming into the pick chu. people running their own funds. >> dancing with glee over at blacksflok. >> i haven't therein there. >> an educated guess? >> i think our turnover and head count in the last ten years, you don't wish that on anyone. i think he's going to run a great leader. >> thank you so much, peter. >> my pleasure. >> with us for the whole hour. when we return, a first on cnbc. interview with charlie evans. and plus we're going check in with our platinum portfolio manager. and later, nfl hall of famer warren sapp set to tackle the. another big hour of "squawk box" coming right up. you can only see it right here on cnbc. if energy could come from anything?. or if power could go anywhere? or if light could seek out the dark? what would happen if that happens? anything. 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. studio shopping. kung fu panda style. softbank, owner of sprint, in talks to buy dreamworks as it looks to become a multimedia powerhouse. details ahead. happening right now, hong kong protests escalate after a weekend of violence. the markets are on edge overseas. we get the latest from the region. plus a bet on energy that hasn't paid off. jim o shaughnessy is down on his picks. 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 andrew ross sorkin and michelle caruso-cabre caruso-cabrera. we have an interview coming up with chicago fed president charles evans. but first michelle has top stories. >> an occupation which started in the early hours of sunday. police have moved in to contain the massive crowd. pimco trying to stem outflows today in the departure of founder bill gross. the bond giant seeing $10 billion in withdrawal since the news first broke. and some say it could hit $100 billion or more. it is being felt far beyond the pimco doors with treasurying being hit. in corporate news, check out shares of dreamworks. looks to be a big winner today. softbank is offering $32 per share for the company. markets coming off a roller coaster week. a correction could be coming down the trap. >> more volatile till peeking back in the market. it's something we outlined in the last hour. triple digits every day last week including thursday when b we saw that brood selloff. the dow, s&p 500, and the nasdaq. economic growth concerns of fraud. we've got the feds shifting monetary policy here. the impedding -- it's also adding to a stronger dollar. so they have posted gains for 11 straight weeks now. the industrial sector, one of the biggest laggers last week. stronger dollar could also weigh on big multinationals. that's something to watch in the revenues the next earning season. but credit suisse says the mid-caps could be the most at risk. their scene is more vulnerable and still have that exposure abroad. speak oging of the small caps. high momentum stocks sensitive to risings rates. hit the technical death last monday. since then the slope has declined. that's a sign the long-term trend or the russell is no longer up. it bodes poorly for the small caps specifically, but this could be an early indicator. lastly, high-yield bopds. all of those tumbling this month. they're all down 2.5% to 4% a piece 37. back to you. >> weird. because there are a couple of down days of a hundred. then down 250. then up almost 200. now what we're looking down 90 today. that's going to be -- could be trim. when you get a 90 this early, usually they push it. morgan, unk ta had. let's go to steve leisman. he joins us from the annual naeb conference with a special guest. hey, steve. >> hey, joe. thanks very much. i'm here at the conference with chicago fed president charles evans. >> welcome to chicago. >> thanks. let's talk about the speech you gave last week. how patient should the fed be? >> the economy has come a long way. the unemployment rate has come down to 6.1%. we're about to get to the end of our asset purchases. now everybody's wondering what considerable period means. i think there will be quite some time before it's appropriate to raise rates. i think that if you look at the risks, we ought to balance those and sometimes coming out of the zero lower is a difficult proposition for economies. so i'd like to be patient and any removal. make sure the economy is strong and will continue to be strong. >> so the market which is completely underable, they try to put a time frame on this. i know ut to do it based on the da data. is that the appropriate time frame? is that patient enough in your opinion? >> well, i think we're going to have to see. i think it's going to be based on the outlook of the consensus view of the committee. that's always challenging. we all have the outlook it will continue the pace of improvement. june is a possibility. once you say appropriate monetary policy, i want to make sure we get inflation up 2%. just to make sure we have confidence if we get there. that's a committee decision. >> from your own personal standpoint, you could see going beyond the summer to make sure -- >> i certainly could, that's right. >> use this term overshoot in your speech last week. and i was a little bit confused as to whether or not to use that as policy. and allow it to be there for awhile. to be symmetrical or even with what you had before. >> i think we want to make sure we get to 2%. it's been a long time. we've never gotten to our 2% inflation sustainably since he called it off january 2012. we need to get up to two. that's what our objective is. we've been below it. it's okay to be above it as long as it's modest above that and in a controlled sense. sometimes in order to get things to the target, you have to make sure you got enough momentum. if you're shooting free throws, you want get to the rim. but if you're short, you don't get there. >> you don't want to be throwing over the back board. >> that wouldn't be controlled. >> let me ask about this issue. the concern out there is that the fed is already fostering bubbles in places like corporate high yield markets. people believe it is just the result of policy that's too loose. how concerned are you about that? what's your response to that? >> we're always worried about financial instability risk. the world economy is dictating low interest rates around the world. in europe interest rates are low. japan, they're low. there's not a chance that the can engineer higher interest rates around the world. the world economy is doing that. we're providing an combination. get up to the 2% objective. and yes it's going to indicate -- that's going to be -- that's going to propel people to go out and borrow more, to spend more. more consumer durables get the economy going. for stability risks, we have to make sure we're using macroprudential tools to make sure those don't emerge. they're not large. that they're in certain places if they exist. so they don't have to indicate did sh. >> there's a piece in "the wall street journal" today written by a scholar from the american enterprise. it says first of all you guys are no good at identifying bubbles and there's no proof that macroprudential works as a tool to keep bubbles from happening. >> well, i don't know there's a lot of evidence of that. i think dodd-frank has been a water shed event. i think what we're doing in terms of stress tests for the financial institutions, the fact we're doing capital investment plans and we're questioning whether or not the largest firms are putting enough capital aside and telling them you need to be more careful and not just waving through their plans. the new liquidity requirements. the table is set for them to be more resilient. i just don't see any evidence in favor of what you just mentioned. >> let me come out in this way that i think the critic of the federal reserve might. you said we're doing better. 6.1% unemployment. inflation is not below 1%. it's up in the 1.5% to 2% range. we have a low alarm fire. but the interest rates are at a five alarm basis. you're at zero with an economy running close to potential. how do you describe extreme policies right now that are at a point where they're like a financial crisis? >> sometimes i think you have to be kidding on this. look at europe. they put the monetary union together and aren't able to hit their target. they're way below. they're worried about the entire integration of that community. look at japan. they've had disinflation for 20 years. china's having its difficulties in ternls of overheating and how they're going to generate growth without bubbles in the housing market. the u.s. economy is the strongest economy in the world. that's what everybody is looking for. also why on everybody else is doing well. we need to make sure we got the fundamentals right to get strong growth so we can exit the zero bound dilemmas. if we stay in this environment for an extended period of time, we've used up all our best. >> you're part of those feds who mentioned this idea we don't want to go back here. that it would be really detrimental to the federal reserve to have to go back to zero. >> you've seen what happened in japan. you've seen what happened in europe after they had to back track. no, we don't want to do that. >> what are the next things in terms of fed policy and statements? did uz that have to go bf you raise rates? what are the steps in terms of liftoff. >> chairman yellen came out and put forward the normalization principles where we indicated the funds rate is going to be the tool we'd like to see thee funds rate become our tool once again and use access on reserves. and we've got an overnight repurchase product that will provide on that. the time is going to have to come when we alter our language just because it's obsolete. we expect asset purchases will end at our next meeting. and so we're going to have to have that language evolve. however, i'm not unhappy with the current posturing of that type of forward guidance. because i think it will be some time. my preferences are we maintain something like that. >> thanks for joining us this morning. interesting discussion. back at andrew at headquarters. >> steve, you didn't correct him on -- it's not considerable period, dude. it's considerable time. you just sat there. >> i'm sorry. >> you told me it's not considerable period. it's considerable time. >> that's your reaction. >> you didn't correct him though. which is it? you said it made a difference. >> i will. charles,ly do that now. i wrote joe an e-mail the other day when he said considerable period on tv, i reminded him it's considerable time. you said the same thing. how's that joe? >> it didn't matter. when we come back, was the government bailout a taxpayer ripoff? we've got the answer when we return? hank greenberg going to court. charlie, the demand on this network, it is increasing by the second. it's crazy, huh? and people are relying on it more than ever. we cover more than 99% of all americans. i know, i can't imagine living without it. it's a place where people can come share knowledge and ideas. it's beautiful. that's deep charlie. my selfie just hit a hundred likes...(gasps) a hundred! at&t is building you a better network. [b♪ll rings] time and sales data. split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade. welcome back to "squawk box" thork. let's look at stocks to watch. macy's to add holiday workers for the shopping season. that's about a 4% increase from a year ago. we'll count that in the good news category. baidu increased to $212. and mattel upgraded. citing the loss of the disney princess license doesn't see a chance of a dividend increase in the near term and believes sales will slow. six years after aig was thrown a lifeline, the former insurance giant claims to say the recovering talkover of the country was unlawful. the now taking place in washington, d.c. that's where we find mary thompson this morning. >> good morning to you. almost from the moment the government put together what became a $182 billion rescue package for aig, hank greenberg saying they were treated unjustly during the government takeover. his lawyers who intend to prove this will come here during a trial in federal claims court in washington, d.c. with testimony from some of the government's key architects of its response during the financial crisis including former federal reserve chairman ben bernanke and hank paulson and tim geithner who at the time was running the new york federal reserve. greenberg's investment firm was formerly the largest shareholder in aurig. this will be argued by david boise. greenberg resigned in 2005 amid an investigation into they have firms accounting. including accepting -- claims in a sister suit greenberg had filed in district court had been thrown out. now damages between $17 billion and $25 billion. um posing unusually high interest rates on loans. and refusing to fatherly compensate. sought to dismiss the case. but the presiding judge said the complexity of it merits a hearing of the facts. the trial opens at 9:30 this morning for each side getting opening arguments. >> thank you for that. i don't know the merits of this case, but it's going to be fascinating to see what happens. coming up next, democracy protests growing in hong kong. today after a weekend of unrest. the live impacts on the market when we return. plus ready to make the case for energy stocks. picks are down, but maybe not out. "squawk box" returns in just a moment. ♪ (train horn) vo: wherever our trains go, the economy comes to life. norfolk southern. one line, infinite possibilities. in a we believe outshining the competition tomorrow requires 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. tens of thousands of democracy protesters on the streets of hong kong's central business district after dramatic scenes of armed police wielding batons and firing tear gas unfolded over the weekend. susan lee joins us with the latest. >> michelle, an update on protests in place. more than 80,000 we saw over the weekend. but still largely peaceful. you saw mostly students out there in the central heart -- >> we're having some issues with the satellite feed from hong kong. apologies there. when question cowe come bac look at equity futures. we do have red arrows. that could change when we get the numbers. dow off 92 points. s&p off 11.5 points. and nasdaq 25 points. we're back in just a moment. 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. all right. we think we fixed the satellite issue. susan lee joins us with the latest on the hong kong demonstration. >> hey, michelle. we were doing the count on the streets and from virtually all of the heads that we saw out there, it was more than the 80,000 out on the streets in hong kong over the weekend. largely peaceful protest so far. we haven't seen any violence, any tear gas or any baton charges of the like. hopefully it will stay that way. we saw the violent clashes take place in the wee hours of yesterday this morning. hopefully we will keep it that way. there are no guarantees of course. we had local television showing these pictures from last night where you did get the tear gas. where you did get bloody faces and also pepper spray. in fact the protest leaders were telling the protesters to retreat in fear maybe rubber bullets will be fired. we have no confirmation of that. i guess people today in hong kong brought to a stand still. people told don't go into work. which is rare here in the city unless there's a typhoon or some weather system. and this is the fifth largest international market in the world. people taking money after their table to prevent the risk. >> you mentioned the market effect. h how worried do you think investigators are? >> we saw volatility spike. trading off close to three-month lows. and given it's a national holiday on wednesday and also thursday. nobody wants to hold that risk. so you can't sell out. and people are making this comparison given that was a peaceful student movement. people are thinking is this 1989 again? do we the pla rolling in the tanks. they do have garrisons in hong kong. >> what do they want? protest want to do what? >> they want to select the chief executive, via leader of the city. which was kind of worded in the basic law when hong kong was handed by to chan from the uk. it looks like they're sticking to their guns saying we are going to choose the nominees. then the 1200 legislative koun s -- can see from there. they want to freely elect and select. >> susanusan, thank you so much. >> you bet. we are seconds away from personal income and spending. the futures right now are suggesting a negative open. let's show you the 10-year yield as well. right now the dow would open lower 90 points. the price of gold at this hour, what do you think? you think the yield is lower because of hong kong? gold is higher? no? >> you want -- if you want to go to hong kong, just make the case, girl. >> i've been e-mailing all morning. >> have you? >> yes, i have. >> because by the time you get there -- >> if we take off this afternoon, want to report tomorrow got to got on the plane this afternoon. i would land some time in the middle of "squawk box." >> right. maybe you're right. they don't -- once they get going, usually -- >> i don't know what gets them to stop at this point. >> that's what i mean. hopefully it's not the same thing that got them to stop last night. >> and it's an intriguing question telling the chinese government you want democracy. think about that. >> and what we're frequently told is that, you know, people are pretty smart about it over there. and they understand that this is a country not ready, really, necessarily for it. and they need to keep order. rick santelli is standing by. the numbers quick. >> breaking news. august personal income rises .3. pretty much as expected. well, it's not only about income. how did spending look? it was strong up half of 1%. unchanged, close to pgs kps down a tenth from our last book. that's month over month. a little hotter than we expect ed .1 cooler. you know, this data is as expected with no serious revisions which leads us to the big fundamentalal of today. it's down 101 in dow futures. that doesn't take it on fair value. but that's in large value what it will look like. we haven't settled under 2.5% in three weeks. here renow hover at $2.49. >> do you think the lower yield this morning has anything to do with hong kong? >> you know, a personally don't. but that isn't to say that it hasn't had some effect. lately i think what the markets are so many things. it's hard to ganl the cause and effect. the market is able to be moved in certain directions easier than others. and all this news may have an effect in one direction or another. but only markets that are willing are able to be pushed. >> rick, before you g, do you have any view on the outflows from pimco and what that means this morning? >> pimco had a unique scenario towards the last year or so. they had a predominant view for a variety of reasons versus cash. bigger than some in their kind of category. and futures are always relatable. there's no doubt. that may take a toll on the market place. but at this point in time, i don't know that it's anything that we can put our finger on directly. and once again, it's a market already a bit nervous about bubbles. having said that, what are yields doing? moving lower. >> thank you for that. we're going to move on and talk about our platinum portfolio. jim o'shaughnessy is here. he's standing by with his three stock picks. jim joined us on april 2nd. since then canadian ole down 12%. i'm sorry about that. says he could is off marginally. and his third pick has dropped 21%. and yet you're doubling down? >> well, we're quantitative investors. we use a formula to select the stocks. >> has your -- the formula would change but given where the stocks are now do your algorithms say i should be doing something different? >> actually no. we're still buying canadian oil. you're getting canadian oil sands at 8%. if anything it's better as continual buyers of the stock to see them go cheaper. cheaper than 80%. you look at canadian oil sands less. so what we have to do is we continue to add to these positions as they become more attractive. then we're one year buying whole. >> you say one year. in this algorithm you created, it's looking at what the stock would be 12 months out? >> basically, yes. >> where do you see these stocks? what would you be expecting given they're down as much as they are right now? >> we don't normally make forecasts. we do is rely upon how the overall strategy has done. and it's done quite well. this is a global high dividends portfolio. and over time, particularly when u.s. rates are rising, we found that global high dividend portfolios do significantly better than domestic portfolios. also the global portfolio is considerably cheaper than the u.s. domestic high dividend stocks. for many, many years you have high dividend stocks. >> is there human intervention that takes place in terms of this algorithm of yours? >> no, there is not. >> so these are the top three picks that are spinning out of control? >> yes. as the most attractive, the best valuations, the best earnings quality, highest dividends. with the brazilian telecom, we're just holding that. so essentially we will act -- >> if you had to replace -- is there one just below on the list? >> basically what we're finding is that lets us get a concentration of names as they're underpchling and increase the dividend. that's a good thing for the strategy overall. >> thank you for coming in. we will watch these three stocks. some of whom may have bought on your recommendation. so right now they may be suffering a little bit, but we hope things turn around for them. when we return, "squawk box" will tackle the nfl problems both on the field and off the field. and we will be joined by hall of fame defensive tackle warren sapp. he'll join us after the break. i think he's in town for the event tonight. check the futures right now. they are indicated sharply lower. we'll be right back. welcome back to "squawk box" this morning. take a look at futures. see how things are setting up for the day. red arrows though. little better than it was before, but not much. dow would open up 86 points. nasdaq off 22 points. and the s&p 500 off over 10 points. the eu is going to be publishing decisions tomorrow on tax pros into apple and fiat. the european commission set to accuse the iphone suggesting they could leave apple facing billions of euros in fine. hall of famer warren sapp in town to attend an event that provides spinal cord research. the league's reputation tarnished in the wake of recent off the field scandals and mounting concerns about concussion. joining us now is warren sapp, the legendary player for the tampa bay bucs. won me super bowl. you got your ring on, warren? >> no, sir. >> not wearing it today? hey, you've watched this and first of all i think i'd just like to get just your overall summary or comments about what we've witnessed for the past couple of months and what you think how it was handled, what it means. >> it's a very unfortunate situation some of those players got into. the league and commissioner will do a wonderful job going forward. we need to implement the policies and procedures we will follow. everything should be okay because it's a great game we all know and love. it's unfortunate that this off-season has been marred that way. >> we've had discussions here and i've got one way i look at it. i think about due process. and normally you want in this country to be given the presumption of innocence. i understand the commissioner needs to dole out punishment to protect the league, but you don't want to rush to judgment in certain cases and being the judge, jury, and sentencer all in one fail swoop. so it's a fine line to walk to protect the league. yet you have to respect someone's right as a citizen. >> i agree with everything you just said. >> i don't know how you come under criticism for not immediately acting more quickly. i understand the two-game suspension, the video changed all that. but one of the other things we talk about a lot is whether the nfl or football players are so coddled all through high school and college. you're me big man on campus. you know, there's a perception that maybe you get an easier time of it because you're a star athlete and that that carries into your professional life. you make a lot of money and somehow football players feel they can get away with things that everyone else can't. do you think there's some truth to that? >> i don't know about that. because when i was growing up, if we even looked at the water bottle, we were soft and everything. so i think it's more of an entitled to now. everything is such an information age. yooer knowing this is the best eighth grader in america. my god. how do we know? it's just the times we have now. there's so much information out there and people looking for likes and nfollowers and things we have. >> what do you make of the argument? i think rosie o'donnell made it, that somehow because the job on the field is to hit and hit hard, that it becomes very difficult off the field for that same emotion not to be there. does that make any sense to you? >> you know, i always say this. this isn't just a problem for the national football league. this is something that happens every day in america on a day in, day out basis. it just becomes a bigger issue when o player is in the news. this is a nationwide problem we have. women are being attacked every day in this country. and it's not just the football players, ray rice or any guy we want to make it that one guy. this is a problem across america. i mean, this is something we need to really get a focus on and handle on. >> we tried to figure out the percentages whether it's more than the general population in the nfl or less. i'm not convinced it is more. because we don't hear how many domestic violence incidents have happened sips bs ray rice pichl. >> it is what it is. if you dig into it, it's a problem across this country. it should not be this way. >> people love this game, guys love to play it. but you are putting yourself at risk not just for head injury. but you see guys 50 years old where their bodies are just after years of playing in the nfl, they're not as healthy. you got to make sure you don't have guys head hunting and stuff like that. but do you think it's okay for someone to accept that risk that maybe one out of three guys are going to be affected long-term from concussions? what can we do about that? >> we need to take care of each other. they've gone e done a real good job on the helmet to helmet. we've grown so accustomed to looking for the big hits on the weekend. and also we have to take care of each other. >> you're a goodell fan. you said you think the league will do a good job and put this behind us and we'll focus on the great games yesterday. >> we'll go forward. no doubt about it. the leadership and everybody will make this thing what it should be. no doubt about that. >> it's a great cause that you're back for tonight. you're being honored, right? >> yeah. 29 years of the miami project where dr. greene founded it in 1985. and since 1985 they've raised over a hundred million dollars for the project. i'm happy to be one of the nominees. i'm here for a wonderful cause with great people. pedro martinez, mary lou retton. i'm just happy to be part of the crew. >> we appreciate you coming on and sharing your thoughts with us this morning, warren. we're all big fans and remember you will. >> thank you. >> you're welcome. coming up, a new week on wal veet t -- wall street. jim cramer will join us next. and tomorrow on "squawk box," cleveland -- excuse me. cleveland cavaliers owner and chairman of quicken loans, dan gilbert. he's going to be here. we're going to talk detroit's recovery, the king coming back to cleveland and more. we're back in a moment. guys! you're not gonna believe this! watch this. sam always gives you the good news in person, bad news in email. good news -- fedex has flat rate shipping. it's called fedex one rate. and it's affordable. sounds great. [ cell phone typing ] [ typing continues ] [ whoosh ] [ cell phones buzz, chirp ] and we have to work the weekend. great. more good news -- it's friday! woo! [ male announcer ] ship a pak via fedex express saver® for as low as $7.50. welcome back to "squawk box." the futures right now, take a look and see what's happening. we'll tell you what's going on. dow would open off about 103 points. nasdaq off 28 points. s&p 500 off about 13 points. as joe hits his golf game. you're getting ready to go. >> i am. i am. but let's get down to -- >> to scotland. >> yeah. let's get to cramer first. i've got a couple things. thing hundred, down a hundred. we saw 90 an hour ago, you get to 90, you see triple digit move at some point because it's not percentage wise it's not that big, but what do you think we're seeing with 100-point swings. we're seeing it more frequently recently. >> yeah, no conviction here, joe. i think people buying friday at the bell disappear on monday. people who were selling thursday at the bell weren't there friday. these moves are not good in the sense what we're having is just -- whatever is the last thing that happens is being exacerbated here. dollar goes higher, sell everything, oil goes lower, sell everything. oil go higher, buy everything. you'll get nike on friday that will be good, and everything that's good is one-off. there's an absolute -- just a gimme, the gimme trade, fed's going to 4%, gotta sell stocks, doesn't mat whether it's factual. >> jim, on the fourth down play, i think he could have thrown it to the guy in front of him. >> i know, he had him right there, you know? it was really -- that was -- wow, that was a bad ending to that game. shouldn't have been in it. >> now it's fun to watch the eagles since kelly has come on board. >> well, g-men are good, cowboys are good. don't know what happened to new orleans. great parody in the nfc east with exception of the redskins. >> game worth watching, wasn't it? >> a must-win for the niners, not the eagles. sometimes that's what matters. >> i thought it was going to happener. >> exciting. >> last drive. then he got it back and almost did it. enjoyed watching it. thought about you. just about ready to tweet, wow, and they took it from the 9 yard line down there. i had to watch something positive after watching every swing in the ryder cup and having a feeling of dread. i knew it wasn't going to happen. >> my golfing this weekend watching you. i was at a wedding, there you were. >> i heard somebody yelling. i and was practicing. >> that was us. that was us saying hi. >> i heard someone say that. and i was like, oh god. all right. >> staff member of "mad money," kay, and we said, let's get him up here. it's two different worlds. >> maybe it was, yeah. the wedding, the wedding was nice. i was -- you could see how focused i was. i've got mental problems with the wedges and i'm -- i need -- >> just that? >> i can't -- i can't face the, you know, killing someone on the other side of the green when i skull it across. >> his wedding almost nice as your wedding. >> thank you. >> one of great events i ever dealt with. >> 16 years ago. we go way back. >> that was fun. >> we're getting old. >> thanks, jim. >> thank you. good to see you. coming up, dreaming up a deal. shares of dreamworks animation rallying. japan's softbank showing interest in shrek and the kung fu panda maker. would a deal like this make sense? that's next on squawk box. razy, and people are relying on it more than ever. we cover more than 99% of all americans. i know, i can't imagine living without it. it's a place where people can come share knowledge and ideas. it's beautiful. that's deep charlie. my selfie just hit a hundred likes...(gasps) a hundred! at&t is building you a better network. starts at 6:30 a.m. - on the (vo) rush hounose.und here but for me, it starts with the opening bell. and the rush i get, lasts way more than an hour. (announcer) at scottrade, we share your passion for trading. that's why we've built powerful technology to alert you to your next opportunity. because at scottrade, our passion is to power yours. 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. e financial noise financial noise financial noise financial noise instagram's ceo and co-founder joining the board of walmart. serving on the technology e-commerce committee. the board now has 15 directors. >> young people adding to the board, too because marissa mayer from yahoo! on the board. dreamworks animation in talks with japanese telecom company softbank. the deal could be worth more than $3.4 billion. joining us on the squawk news line, david bank, managing director. david, i mean, at softbank, does this make sense? what does he want? what does jeffrey katzenberg want? >> i think a deal of this size, right, dreamworks has valuable franchises in i.p., but i don't think it's a game changer, right? i think -- i think -- i think he's looking to control content more globally -- >> for his telecom business? >> i -- i would imagine, right, as the business evolves, this isn't about next year or the year after or the current echo system. i think this is about as the echo system evolves, right? you need exclusivity on your mechanism. you need traction for your distribution by having exclusive content. and globally. and i think -- i really think it's a forward-thinking transaction. i think over time you'll see more but with a deal like dreamworks a game changer, you know, it's probably not the kind of scale that would you know do it. to me, if he's going to play this game, i imagine it's a go bigger or gome hogo home sort o >> at session lows at this moment. back to dreamworks situation, what degree is dreamworks vulnerable in light of the tough second quarter last time? does that make them more vulnerable or something that happened in the quarter that make them more likely to do a deal? >> i think -- i think it wasn't so much the second quarter, you know. i think dreamworks is in search of that next franchise with the size and scale of "shrek," right, or "madagascar" making one or two pieces of i.p. a year, you're making huge bets on developing the next hit. and that's, you know, somewhat risky model. i think by -- in a world where other studios are bigger, they have more resources, they have more i.p. in their library, i think a deal like this would take some of the pressure off having to develop a hit in any given quarter. >> david, before you go, very quickly, jeffrey cattensburg, you think he would stay as the head of the company once its owned, if that happens? >> i think he's so crucial to the creative process, it would be tough to do a deal without him. >> david, appreciate it. thank you for being with us this morning. >> you bet. >> looking, by the way, futures down massively. have you been watching this? >> until session lows, i think we'll bring up the screen to see, last i heard, an opening of about 144 down for the dow jones industrial average. nasdaq open lower by 42 points. s&p open lower by 18 points. >> make up your mind. down, what was it thursday, down 250, almost up -- got almost to 200, then up 160 or something. head fakes like that, you think, wow, looks like we're starting on a correct and, well, scratch that not starting, made it all back. now again. you wonder which way it finally breaks out, you know, moving 100 points. >> you think it's anything but the fed, the -- >> i mean the volatility over the last week? as the fed pulls away, no? >> they haven't started pulling away yet. might be what you're talking about hong kong. >> great seats up front. sometimes kids up there, watch. >> i'm going. make sure you join us tomorrow. "squawk on the street" is next. ♪ good monday morning. welcome to "squawk on the street." carl quintanilla, david faber. we keek an eye not just on the student protests in hong kong but income in spending not bad. jobs number returns this friday. take a look at futures. road map starts with protests in hong kong weighing on the markets. volatility returning to stocks as we closed out the worst week in nearly two months. futures down te
coming up, big ackman losing the bid of allergen and over $2 billion on the deal. that's why the ceo said he's still suing for the back room tactics and valiant hear what was said and if there's moves to close that loophole to engineer a scenario in the first place where he won no matter the outcome. >> fascinating story. i mean, just outwitted everybody on that one. was it ethical? elon musk warned here that robots may turn on humans. he said it with a straight face. now, he says it could happen this decade. and by my calculation we have about five years left in this decade. we'll tell you why elon is moving up the timetable and look at how real the threat of robots to hubls really is. >> yeah. the story -- yeah. strange times. okay. look, the dow up 16. s&p up 2. the nasdaq is a little bit negative and fascinating about the period as they say never short a dull market or what have you, we're climbing to newer and newer highs all the while actual volatility in the market at multi-year, sometimes multi-decade lows. >> later we are talking to a group of college students who won a trading competition in one month. they doubled their money. it was unbelievable. in four weeks. but what a four weeks that was. let's get to the closing bell exchange. anthony chan. mark ibel. david malpas. and so does rick santelli in chicago. david, what about the global economy right now? i mean, when we think about the central bank policies going on, you know, they're going in opposite directions and especially now with japan and the problems that they're having right now. how do you assess where the opportunities are right now? >> hi, bill. well, i think that world nominal gdp, that means just in dollar terms, when's the world doing, it is slowing down and puts downward pressure on earnings and that's putting some kind of a temporary peak on equities. the reason for that is central banks have not really added money to the world economy. when you look at credit growth, whether in the u.s., europe or in japan, it's been slow and that's -- >> right. >> that's disinflation ary. when you look at world dollar gdp, looks to me like it's less in 2015 than it was in 2014. about 77 trillion. >> wow. wow. i mean, that's a huge deal in a global economy. used to be the rule of thumb is anything below 2.5% is a global recession practically. anthony, do you agree with that prognosis? >> i think david is right. credit growth is slow and why today mario draghi says he wants credit growth going again. looking at private sector lending to businesses in europe it's still down 2% but again what's mario draghi saying? safing to continue to put as many steroids in that pipeline as possible and, in fact, not even ruling out the possibility of doing sovereign -- and buying cover-up bonds, private bonds and mortgage-backed securities and almost no limit of what he plan to do if he doesn't see credit growth moving faster. david is right. we'll see more credit growth in the months ahead and japan. we know what's happening there. we know a lot more credit growth will happen. >> rick, this sounds like dollar bulls are still in control right now. how could the dollar go down in this environment? >> no. i mean, it's going to be tough for the dollar to go down. concerning japan, europe and the uk. so the weakness of those currencies, of course, on a relative value trade make the dollar look good. for credit, everybody's correct. there's a major faux pas. central banks can use the test tubes to create credit but how it's used is going to be a completely different question. it's a horse of a different color and i think they're limited as to what they do in that arena and should they try to fine tune their pencil into how the credit that's created gets put to use, the unintended consequences move up exponentially. japan down. if you look at the last 12 months, both of the categories of gdp, 6 out of 12 are negative numbers. this doesn't really fare well for the whole form of central banking and, indeed, david malpass is spot on. global dynamidynamics, less for. i don't care how we stack up relative to others and the economic grading category. less is not better. >> but, david, are you blaming the quantitative easing approach that shinzo abe is taking in japan or still the ramification of the sales tax hike at work? >> i don't think qe is working. if you look in the u.s., the median income levels for americans going down and down and down. because the central bank is channelling the credit toward bigness, toward the government and big corporations. that just doesn't create jobs. so turning to japan, we have a perfect test tube. they have bought a huge amount of bonds and their economy is going slower and slower. >> meanwhile, diane, this week hearing from retailers. earnings, gasoline prices coming down. is that a boost to the bottom line? what are you expecting? >> i don't think she should underestimate the impact of lower gas prices. i think it is key not only for the economy as a whole but in particular for retailers and lower and middle class incomes where gas is such a big component. it wouldn't be surprising to see dramatic increases in retail as everybody heads to the pump and discovers they have more dollars to spend. if you look at friday's consumer confidence data, what we see is biggest increases happening in lower and middle income families and one of the things that's really interesting is number one place to do the spending is in food establish. s. they want to eat and get to the restaurants so we have a lot of companies reporting now. likely to be a really good week. >> i don't know if there's truth to the rumor they conducted that consumer confidence survey at gas stations. >> that would do it. diane, as a follow-up to david's point, do you agree with him that balance sheet expansion by the u.s. central bank hasn't worked? >> i think david hit on a really good point and there's a sutd l point that we need to focus on. one of the statements was, look, he sees lower earnings. that could be true unless, of course, we start to have acquisitions for earnings. right? we are starting to see a lot of transactions where large companies are acquiring small companies that have wonderful earnings. so in the past, we have seen vertical integration. strategic mergers. we might to start to see large companies paying a premium for small and mid cap companies with wonderful, robust, steady earnings and could change the earnings picture and then in the interim lead to m & an activity of now and first half. before the first hike. >> mark, let's bring you into the conversation here. where do you see investment opportunities right now? >> i think what we learned today from japan and i think the announcement of draghi just as important as japan. non-u.s. story is a qe monetary story. similar to what we were a few years ago. our story becomes much more about growing at 3% and can we justify our market valuations earnings getting better? we think there's cheaper values outside of the u.s. within the u.s., i would agree with diane. with that gas tax. strong dollar into christmas looks good and managers are overweight health care and financials. >> david, i want to go back to you on this paint, as well. it feels like the sharplidy veer gent outcomes in the europe and u.s. speak to how well monetary policy worked contrary to europe and has hardly expanded the balance sheet at all. >> i don't think that's the causal effect. europe has these huge structural problems, meaning, you know, the governments are just gigantic, the tax rates are very high and so they're growing slowly. but it's not because of what the central bank is doing, but other factors. in the u.s., our growth is stayed way low. this is a horrible recovery by normal standards. i agreed with diane that you might find some financial engineering by big companies so the current environment is great for wall street. it's great for washington, d.c. but it's been very bad for median income and for wages. >> anthony, i know you have been the big bull on the economy here in the united states. what about the impact of lower gasoline prices? are we over estimating the impact that it could have on retail earnings? >> i don't think so. i have a model the look at november consumer confidence as the best leading indicator of what holiday sales are. remember what diane said. look at consumer confidence. if you look at november's preliminary reading, the highest since november of 2006. and back then, i remember that chain store sales or the general merchandise component of the retail sales november and december up 4.5% year over year basis. if you look at the current readings, they're pointing to holiday sales of 3.5%. that compares to .9% last year. remember that if you continue to hold these gasoline prices at these levels, that's adding close to $100 billion to households purchasing pockets on an analyzed basis. this is going to boost retail sales activity during the holiday sales season. >> you know, anthony, just a follow-up question as well as people try to figure 0 the impact of japan in recession, what are the two different outcomes of a japan mired in recession relative to one beginning to grow again as any of these various policies perhaps work? >> i think that the data speaks for itself. one of the things i noticed of japanese data, with the preliminary number, just like us, it has a lot of information that's missing. so i would not be surprised the numbers are biassed higher. yes, it's recession but pay attention to what they're doing. i agree with rick. not to say we're sanctioning or saying quantitative easing is good but it does boost economic growth and that's why the central bankers are talking about work out there to structural reforms at the same time. and by the way, david is right saying this is a miserable recovery. so far, we have grown on average a little over 2% and the normal recovery is 4.5% go. to europe. >> you agree to him. >> go to europe saying 2.3% is bad. to them it's good. it's not as good as it could be and we're still at a pretty nice looking house in a bad looking neighborhood. >> all relative. thanks all for joining us. appreciate your thoughts. >> thanks, guys. by the way, over the weekend, paid $2.69. >> i saw the picture. not -- not the case in my neck of the woods. certainly better than the recent past, though. so, too, here for the markets. dow up 18. s&p's up a couple of points. 2041. doesn't seem exciting with a point or two every day and the typical forecast coming into this year was for a year end target of 2014 just like the calendar year. well above that despite the volatility. >> wasn't that adam parker that made that forecast? >> a couple of different guys did, yeah. sometimes you win when you lose. hedge fund titan bill ackman making $2.25 million from $66 billion buyout. that despite ackman's work to take over allergen that failed. the pros discuss how he made all that money and if what he did is legal. that's the thorny question right now. td ameritrade ceo talking with us and if gains lie ahead in the new year. college students trading skills to the test. someone turned a virtual $500,000 into more than $1.5 million in a month. that student joins us when we come 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. uh, and i know my iq. confident retirement today. okay. uh, and i know-uh-i know what blood type i have. oh, wow! uh huh, yeah. i don't know my credit score. you don't know your credit score? --i don't know my credit score. that's really important. i mean -- i don't know my credit score. don't you want to buy a house...like, ever? you should probably check out credit karma, it's free. credit? karma? free?...so, that's... how much? that's how much it's free. credit karma really free credit scores. no credit card needed. i am an electric crew foreman out of the cupertino service center. i was born and raised in the cupertino area. it's a fantastic area to work. the new technology that we are installing out in the field is important for the customers because system reliability i believe is number one. pg&e is always trying to plan for the future and we are always trying to build something stronger and bigger and more reliable. i love living here and i love the community i serve. nobody wants to be without power. i don't want my family to be without power. it's much more personal to me for that reason. i don't think there's any place i really would rather be. welcome back. pharmaceutical drug maker actavist announcing to acquire allergen for $60 billion. valiant teamed up with bill ackman to acquire the company raising eyebrows because he had taken a stake in allergen but not in valiant. follow that? >> i'm with you. allergen ceo this morning along with activist ceo. here's what they had to say. >> of course, the goal of any activist investor as you so ably stated is maximize value. that goal presumably is achieved and this is a sideline. our litigation on the inside trading suit continues. >> it continues? >> it continues. >> why? >> at the end of the day i personally am quite disturbed of the shareholders that sold the stock in the period not knowing that there was a bid coming from the other side so i think we have a fiduciary obligation the protect those interests. >> let's talk about that. more re action. mark, did bill ackman do something illegal? >> absolutely not. i think they should be sending him a thank you note. >> do you agree? >> on the legal side -- >> did he do anything unethical? >> okay, look. the question is really important question. i would not have sold the stock if i'd known that deal was going on. right? i mean, if ackman bought -- i if know that he bought 10% position and side deal to make an offer for the company as a seller and owner, i wouldn't have done that. so there's material non-public information that would have influenced my decision. i think that is a violation of the -- but i'll defer. it doesn't pass my sniff test. >> counselor? >> may not pass the sniff test but it's legal. right? as we talk about a lot, material non-public information is basis for a lot of what goes on in the markets and doesn't mean it's illegal insider trading. there's a distinction. the information, alleged information that rises to a violation has to to have been received in violation of a duty. bill ackman had no duty to disclose his own information but the deal with valiant and he did. the law's very clear on this. >> what point, you know, at what point, because you and i are silting on the floor of the new york stock exchange where if you and i say we do a deal and give each other the words and agreement on the floor of the exchange, that's a deal. right? >> that's true. >> so they had an understanding. right? why isn't that a deal? >> they had an understanding but the law is clear on this. and the 2nd circuit case law here in new york most extensive and looked at by the california federal court in connection with the case brought by allergen and until we have an inked deal, we have no duty to disclose. it's not material non-public inside information if it's my information. if to take to that the most logical extension, you would have no activist investing going on. >> but the sellers that sold in the quiet period are looking up and saying look at the money. they should be selling -- sending thank you notes and the money they made and the people that didn't know -- >> the quiet period some sort of problem here? >> yeah. >> i don't think it is. >> whose responsibility is it then to talk about another deal coming up? >> responsibility of the issuer. right? so ackman as a private activist hedge fund other than the 13d obligation filings i believe they met and lawyered to the nth degree. >> michael, isn't this a case of bill ackman outsmarted everybody else? >> yes. >> yeah, i think that's probably what it is and it doesn't feel good and doesn't feel right and when we hear about these sort of things on wall street as investors, we begin to feel icky. i mean, we begin to say we don't trust the system and the big guys doing and getting away with things like in this and mom and pop can't play on this turf. >> just again to try to put it in context, what do you think carl icahn would have done differently in bill ackman's shoes in this deal? >> i think he's more conservative than bill ackman is in terms of taking stuff to the mat as it were to get a deal done. everyone made money here. bill ackman's conduct made money for his investors of mom and pop, the pension funds, the firefighters, the teachers invested with persian square made a ton of money. $2.3 billion, $2.4 billion estimated. allergen shareholders. >> not those that sold. >> they didn't lose money per se. they just didn't make more. >> that's right. not everybody can win on every trade in this industry. >> having -- >> i hate that. >> having said that this, though, mark, do you suspect that there will be somebody to -- a regulator type or even a legal type to come along and want to legislate something? >> does allergen have a case any. >> i think they have no case. to say, oh no, we're good, sends the wrong message. i think the case fails. i said it august 1st on the show when it was announced that the lawsuit was filed. i think the regulators are going to look to see the california district court does and i think ultimately going to turn down and rule against allergen. >> if you need a proxy, a beard, somebody else to represent you, it says -- it does send the wrong message there, right? that valiant needed ackman because had valiant made the purchases, it would have tell the graphed major signals. it's a position in another public company. but if you have a hedge fund manager do it for you and a deal with him on the side, acquire the 10% position under the radar. i mean, go back to your point. i think it was just brilliant, bill. i would hope my kids wouldn't do this. >> sums up a lot of behavior. >> back to my question, though. okay. you don't think under current law allergen has a case. do you think a regulator -- what do you think they would come up with to try to prohibit this from happening again? >> bill, they would need to extend the scope of what is currently under federal law illegal insider trading. >> broader the definition? >> precisely. the facts aren't there and litigated. the 2nd circuit ruled on this multiple times. what happened here is not de nova as we say. it just happens to be high profile. >> if we have a deal, we have a deal. >> we have a deal. >> if we have a deal, you can bank on it. this guy is one of the -- >> that was great stuff. >> worthy lawyers. >> gentlemen -- >> both sides. appreciate it so much. >> thank you so much. good to see you both. we're heading toward the close with 35 minutes left in the trading session. another one of those days. not a lot of volatility. dow up 18 points and boy do we have a volatility in the month of october. >> guess what. that was actually some pretty good news for some savvy traders. td ameritrade ceo speaking with us exclusively about the market and joined by the winner of the td college sink or swim and tripling their investments in a month. yes, it was that month. >> yes, it was. good timing. also coming up, facebook reportedly going head to head with linkedin. google and microsoft on their business turf. we'll have details on what facebook is developing and how serious a threat facebook really is right now. that's coming up. greenline do for you?youry just take a closer look. it works how you want to work. with a fidelity investment professional... or managing your investments on your own. helping you find new ways to plan for retirement. and save on taxes where you can. so you can invest in the life that you want today. tap into the full power of your fidelity greenline. call or come in today for a free one-on-one review. for tapping into a wealth a free oof 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. so only the best and most experienced fund managers could triple the value of the portfolio in four weeks. right? that goes without saying but it was done a few students at the university of north texas, latest winners of the td ameritrade think or swim college challenge. in one month's time, the go mean green team at the university grew $500,000, this was virtual money, right? yeah. not real. >> too bad. >> took $500 thousand dolla,000 into $1.5 million. >> let's see how they made their mark. the captain and the man behind the trade, ceo of td ameritrade. one lucky bet? >> several you could say. it was a lot of learning process, ups and downs. let me thank my teammates. special thanks to dylan, marcus, ervel at unt, especially the student investment team. >> well done, mason. fred, you know, the time frame was fortuitous. it was in october. we all know how much volatility there was. if you have a time trying to trade stocks to make some money, that was the time to do it. >> yeah. we picked a perfect time. it was earnings season which was picked deliberately and other volatility on top and turned out to be a perfect time for a trading competition. >> surprises come out of it as far as you're concerned as to the kind of behavior you saw? >> i think they learned very quick through the sort of kids learn today through games and experiences and they learned quick. they started trading stocks primarily. 55% stocks, 45% options and then all the way back into options, 80%. they were trading what our clients trade. >> yeah. mason, talk about that. i mean, were you guys nimble with your trading or did you just happen to buy the stokts that went up a lot in that time period? >> you could say a little bit of both. we took a quantitytive derivative approach focusing on weeklies. we definitely looked and did the research and analyzed the companies, projected the q-3 earnings. certainly, there's a llt of opportunities to look at. towards the latter of the competition with republicans taking back into the senate, you could certainly look into other types of stocks that weren't doing so well such as oil and there left some opportunities, definitely a learning curve throughout and so definitely changed the strategy day-to-day of how to look at the earnings and how -- >> mason, were you guys using options here as indicated? >> absolutely. this was primarily doing everything from calls, naked calls, naked puts. you could do long to do a few weeks 0er the short. you could get come placated and through butterflies, hedge your risk if you like. >> fred, what do you think? what do you think when you hear all this? >> you know, it's -- it goes to show you, i mean, some people talk about young people today. they're pretty darn good. very sophisticated. >> your surveys shown a great number of his age group aren't interested in stocks. they see saving as the way to retirement. not investing in stock. >> yeah. but i thought it's no different than we were at this age. >> that's true. >> gen-xors. 15 to 20 years old. they can't see it through to the stock market. they're worried about getting through school and saving for school and once they get into it and they learn through it, you know, they're very interested. you heard the language there. i mean i have heard the terms. i couldn't explain them all but we have people that can. >> mason, what about your generation where most of you aren't interested in stocks and want to save, put it in some safe instrument and not try to take a risk in the stock market. what do you say to your fellow brethren? >> well, if you want to take a chance into your investment, check out unt. more specifically, talking about my generation, down here at unt and the student investment group, we teach long-term value stock and minimizing it. and so you could take that approach but if i want to reach out directly to the general y across the nation, i mean, market's due to crash sometime. look for the future, buy low, sell high. that's the most basic principle to give somebody. >> before we go, how long have you been investing? >> what time is it? >> four weeks. >> no. >> it's not always like this, mason. let me tell you. good start, buddy. >> thank you. >> that was great. i'm curious. do you think you guys would have done as well -- i mean, we ran at cnbc a portfolio contest like this back in the '90s and i was always asking the winners, do you think you would have done as well if it's real money? >> absolutely not. this is basically the equivalent of going to vegas and throwing money out there. throwing it on fliers and definitely a lot of risk and if this was a lot of -- real money, it would be a lot more emotion involved which certainly with virtual money there is emotion involved and calculate your risk much more so and so that's when you'd move into stocks instead of options if you want to be a player and a great opportunity for people of my generation, very good way to set yourself up for retirement. >> congratulations to the folks at university of north texas. i have to do a shout out to number two team. >> cal state university fullerton. i'm a proud product of the university system out there. i went to north ridge and fullerton is a nearby school there and they did themselves proud, too, fred. up 124%. >> and suffolk university in boston third. >> yeah. tons of fun. >> good to see you, buddy. may your next four weeks of investing be as successful. >> thank you very much. check out unt. we have a good program. a lot of people to help you. >> working off the scholarship right now. earning it there. >> fred, good to see you. thank you. >> nice to see you. >> appreciate everybody's time. >> 25 minutes to go here into the close. dow holding on to a gain of 17 as we keep an eye on the nasdaq, well. trading to the down side. the s&p roughly flat about 2041. >> been investing for four weeks. that's great stuff. all right. faceoff in the office. facebook, according to the financial times, reportedly developing a new at-work platform to take on linkedin among others and should they be concerned about that? stock's down 5% today. we'll talk about it coming up today. financial noise financial noise financial noise this guy could take down your entire company.h? stay with me. on thursday a hamster video goes online. on friday it goes viral - a network choking phenomenon. why do you care? he's on the same cloud as your business. the more hits he gets, the slower your business may get. do you want to share your cloud with a hamster? today there's a new way to work. and it's made with ibm. welcome back. overall markets moving big here and stocks are. kate rogers looking at the names for us. kate? >> let's begin with dreamworks. trading down about 14% right now. hasbro, the stock up over 4%. tyson foods gaining ground after reporting better than expected fourth quarter earnings. saying it was the second consecutive year of record sales and earnings and currently up over 5.5%. and celldex soaring on the brain tumor drug had improved survival in patients without the disease worsening. trading up near 30% and we'll send with denbury resources. the independent oil and natural gas company announcing the plan to reduce the capital spending by 50% to 550 million in 2015. citing the recent decline in oil prices. trading down over 10,000 now. back the you, bill. >> all right. kate, thank you. i wonder if may jon has bought any of those stocks? get his advice on all of that. we'll take a break. we have about 20 minutes left in the trading session with the dow up 21 points. s&p up 2. nasdaq down. elon musk commenting that machines could turn on humans inside of five years and first sounded it here on "closing bell" back in june. >> i'd like to just keep an eye on artificial intelligence. i think there's potentially a dangerous outcome there. >> if musk is worried, should we all be worried? >> i am now. >> talking about this one coming up. also, with facebook reportedly looking to muscle in to linkedin's turf, we want the know if you think facebook is a direct threat to linkedin. stock is down 5% today. cast your vote. we'll bat this topic around when kelly and i come back right after this. take on the challenge of trading options and futures... with the easy-to-use suite of trading tools... at optionsxpress by charles schwab. and we'll give you a one hundred fifty dollar amazon.com gift card when you open an account. if you're looking for a trade idea, start at the idea hub... where options and futures opportunities are organized by volatility, earnings, market activity and income strategies. then run your new idea through the trade and probability calculator to get a quick look at the possible upside and downside. streaming charts give you the real-time quotes and customized views of the market that can help you make your final decision. and when you're ready to make it happen, walk limit helps you save time by searching for the most favorable price. find new ideas, analyze and execute your trades with just a few simple clicks, with optionsxpress. for a one hundred fifty dollar amazon.com gift card when you open an account, call 1-888-980-5745 today. optionsxpress by charles schwab. 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. facebook reportedly developing an at-work network to post challenge most notely to linkedin and allows employees to communicate with colleagues and create and edit documents. >> shares down sharply today. down 4-plus percent and investors concerned about the newses. should they be? joining us more with their reaction, reporter who broke the story in the financial times, anna cushler and then lance ulanoff. we want to know if you think facebook is a direct threat to linkedin. do you agree? the selloff today, seems to be the case. go to cnbc.com/vote. hannah, good job on breaking this story. >> thank you. >> what did you find? describe it. called facebook at work. >> yep. it looks like it's coming in early part of next year. and it is both a way of linkedin replacement to network with other professionals outside of your company and then a kind of slack or chatter replacement internally and a place to create documents which could challenge microsoft and google. >> is this an other app or profile to create or let you change settings? >> facebook realizes you can't keep the professional profile with the silly pictures and making an effort to keep them separate and i imagine in mobile a separate app and might be sort of separate settings and section on desktop. >> i keep my cat videos over here and i put my documents over there. >> how will i find your cat videos? >> don't worry. you can find them. >> we don't have anything else to talk about. >> is this a viable threat to linkedin? >> i think that's a big leap but it's an absolute must for facebook. how many times have you talked to somebody in another company, did you see it on facebook? i'm sorry. my company blocks facebook. facebook can't afford to be blocked on a single screen. it has to be everywhere. and business is a critical part of its sort of overall strategy sigh this also just a compliment to linkedin and the strategy and have recruiters pay for the information they want, have us willing and able and wanting to put out there that pertinent information and people just across silicone valley saying we need this business? >> i think it's a business that everybody's interested in. with linkedin, it is more of networking. facebook work is about getting work done. clearly this is a tool, yammer, link, you know, all of these things that tried to solve, tried to break the byob social networking habit that began with aol instant messaging ten years ago and fighting against now and everybody's on social networking. they need to have -- facebook needs to them using it for work. >> i think facebook stands a chance with the immense audience of 1.35 billion users every month. so much more than linkedin and really easy to use. and it will often almost certainly be free. and that's huge. if you're a small company, why not take the free option over paying, you know, for office 3.65? >> and showed that they have convert people, 500 million into using a new app pretty quickly. >> pushing it them. >> you say work and enterprise. enterprise doesn't trust and they won't have a trust level out of gate with privacy. they want things to protect the business so have that information, have the documents sitting on this brand new somewhat unknown network is a little birth scary. google has a lot -- google apps if you're using that and in business, that's separate from your google drive, the things you're using personally so i think facebook will have to convince business that it's right if the enterprise. >> would you use the facebook tools as you hear them described? >> i think it's way too soon to tell. i like to keep the facebook world separate from everything else and my business world. >> i'll show that we're asking the viewers to weigh in and the unscientific vote so far as you can see on the screen there, 56% roughly feel that this is a tlelt to linkedin. last i heard you got no comment of facebook on this one, right? they're not showing their hand. >> no, no. i mean, you wouldn't if you were them but i think it probably is a threat to linkedin and a much more widespread there. i do think they have to solve the privacy issue and why you have seen facebook get more and more sort of conscious about privacy. they introduced the dinosaur and guides us around the settings and mark zuckerberg said we have a completely different culture in the company of privacy. >> a dinosaur and not something you see in the tech world. thank you so much. hannah and lance to talk about facebook at work and may be seeing more of. >> there's the vote official now. 58% of our viewers weighing in feeling that it is a direct threat to linkedin. i have not converted over to facebook messenger. should i? >> nor i. >> you haven't either? lance says you should do it? all right. it's safe? >> of course. >> okay. a lot of people message me on facebook. they have no idea why i don't respond anymore. >> are you trying to say it's not because you don't like them? >> 13 minutes left in the trading session. do i look like a people person? >> s&p up and the nasdaq weighed down by linkedin. >> crude oil, crisis stuck in reverse. all systems go for oil and gas deals which have hit record levels this year. jeff cox has a special report on that when we come back on "closing bell." 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. 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. welcome back. certainly lower oil prices have been great for consumers but a concern for some investors. however, recent data suggests it's boosting dealmaking in the oil and gas space right now. >> cnbc.com's jeff cox joining us with more. >> good afternoon. record breaking year for energy deals continued with halliburton's acquisition of baker hughes and valued in cash and stock at $34.9 billion and translates to $78.62 a share. but in a larger sense, this feeds what's a voracious climate for deals in the energy sector totals $368 billion so far in 2014, the highest year to date total since they began keeping records in the 1970s and double the level of last year at this time. that's also a record. so while as you say we hear talk about the lower gas prices taking a bite out of energy stocks and business investment, they haven't obtained a ravenous deal for energy deals in the sector. >> that's for sure. good story. >> we know that's one of the reasons, as well, people have been looking at this space. bottom feeding and saying maybe i'll get a takeover bid. >> a break and come back with the closing countdown and the dow up 14 right now. after the bell earnings, urban outfitters encollusive information on the best hedge fund managers right now. stay tuned. all that coming up after the close. i have a cold with terrible chest congestion. better take something. theraflu severe cold doesn't treat chest congestion. really? new alka-seltzer plus day powder rushes relief to your worst cold symptoms plus chest congestion. oh, what a relief it is. here we go! 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. welcome back. art cashin came by, like $500 million to sell on the close but we're watching the dow move higher here. we're up a whopping 10 points right now and the s&p is up a fraction. let me talk about the earnings tonight. this is a big week for retail stocks to be reporting earnings. we have urban outfitters reporting after the bell and then agilent technology and both stocks trading lower right now. kenny is with us and bob. we were talking about the lack of volatility in the market right now. >> we were -- you were talking about the bell and i can see it, it's starting to flip to the buy side. just slightly. not big. and looking at the s&p, broke out of the range. 2040. you know, it's been a quiet day today. the market is still trying to -- >> what is the market waiting for? the month of october was incredibly volatile. >> right. >> month of november has just flat lined. okay? >> i think the rest of the year is going to flat line unless you get -- i'm surprised. the news out of japan didn't create more noise today. >> should have. you know why? they believe that abe is all in. he is not going to recant on the stimulus package and the program and they believe it's all in and further in. >> they have to believe the ecb will come in, too. >> mario draghi is talking about that. >> he has to step up and do something. listen, italy's in recession. greece is out. italy's not doing so well. europe is muddling along. >> draghi said today we'll do, again, we'll take unconventional measures if needed and buying government bonds and reiterated that position today. he's made it clear. >> that's why you are not getting more of a reaction here. >> it is frustrating. nobody's making any money. >> hello. >> hear it in the voice. you can tell. but sideways consolidation from the technical point of view, it's not a bad thing. >> it is good that it's consolidating. allowing the fundamentals to catch up. >> 75% of the s&p above the 200-day moving average. that's close to the historical norms. moving sideways, the more quiet consolidated the market gets and works. >> you wireally, you won't get of -- >> what could happen, you have a fed meeting to go. you still have this opec meeting coming up at the end of this month. right? >> right. >> what about oil and impact on the equity market? there was a time in the last few years where oil and stocks were moving in tandem. is that changing now? >> i get the sense it is but i think low oil is good for the global economy. i'm not one of the people that thinks it a's huge negative. negative for energy companies aenl great for shipping, transports, autos, airlines. right? for the consumers. >> so much for baker hughes and halliburton good for oil service stocks. think that would have stimulated interest? >> seeing more of that? >> consolidation. >> they have to have a higher oil. all the oil service names are killed today, the shale plays are killed today. baker hughes and halliburton didn't ignite anything. >> that should have kind of -- >> one hour on thursday. >> right. >> what about the retailers? gasoline is one component but the fact that gasoline prices have come down, there's this prevailing wisdom that retailers will benefit of that and report better earnings this week. >> i think they will. listen, they started with the pre-pre-holiday sales. they have the preview, presale. that's true. people are seeing a benefit of lower gas prices. >> walmart at an all-time high right now and will be one of the ben fishes of christmastime. >> i wish the wage growth was better. that is the problem with retail. a guy's still going to go out and buy stuff. i think lower gas prices marginally is effective and helpful for low-end people. wage growth is the big problem, why retailers aren't doing that well right now. >> they're doing all right. walmart at the highs, right? the one to worry about are high-end ones that aren't participating yet. >> all right. good to see you. let you finish the trading. bob, see you later. thank you. going out with modest gains. nasdaq on the downside. stay tuned right now. we have the earnings. on the second hour of "the closing bell." with kelly evans and company. see you tomorrow. thank you, bill. welcome to "the closing bell," everybody. i'm kelly evans. another quiet session and not quiet for the s&p 500. going out at 2041 while the dow jones adds 13 for its part up to 17,650. the nasdaq weaker today and talked about components weighing on that index and off about 17 retreating to 4671 for its part and i shall hesitate no more and get to it with today's panel. david zerbis with michelle caruso kb and along with fast money trader guy adami. welcome, one and all. >> yo! >> david, you were talking about volatility, set to increase. october panned out the way you called it. what happens now? now it's been so, so, so quiet. >> it has. and, you know, i think you have flushed a lot of really bad positions and probably qui healthy. i'm excited about that. i'm excited about the idea we stay with a risk-on theme into the end of the year. it was never an idea to risk the theme but an idea there was going to be communication mishaps of the fed and a market priced for a bit more perfection than probably there is in the world. >> you guys surprised we held up reasonably well after japan off 3% and people making heads and tails of the economy? >> a shocker of a number. missed it by such a wide margin. then, again, japan's not moved for 20 years and ultimately, i mean, it would be nice not to have the head wind. that was an economy to get better. peter farr wrote. we printed the money and got a lousy recession? raises questions of monetary policy theory in the world right now. >> david, you agree? we'll get peter farr in the program in little bit. >> what benefited the stock market is what that's done is help out the u.s. market is pushed out all these rate hike expectations by the fed. going back to, say, you know, mid-september when we first started that corrective activity, market was pricing in the fed starting to go in the early part of 2015. now it's been pushed up and going to 2016 and the principle reason for the market the fed and now taken out of play. >> justified? trying to think of what changed since then really in the u.s. gasoline dropped a bunch. but everything else is much stronger. >> well, inflation expectations is very critical to the fed and, yeah, the economy's doing fine. but the fed's already told you that they still think that there's quite a bit of slack in the labor market. that's unclear how far that's taken out right now. secondarily, not just for the fed and the fact that growth is doing okay. it is the rounds of the bands of uncertainty around that forecast. i think for these guys, all about inflation. they have told anybody willing to listen 2% on core inflation is a floor. not a ceiling and watching core inflation, above 2%, that's a race between watching paint dry and grass grow so that's what the market lost sight of the fed is not sitting in the way of economic growth after missing the great recession. >> where, guy, does that leave investors? time to just kind of go long and sit and wait for this scenario to come, you know, to happen next year? >> hope is not an investment thesis as you know and great to have mcc there. but, you know, to your point, yes, we've sort of puzzled that the u.s. equity market held up and candidly i don't think anybody should be puzzled because u.s. equity market, any piece of bad news it's shrugged off. the one pushback to mcc is survived 20 years of japan but something has changed now and one of the things i've said is the reckless actions of our central bach bank, of our fed to work in kind and japan acted in kind times about five and i'm pretty convinced that they've now lost total -- they've lost control of their financial markets, buying ek tills, kushs sy, you name it. i don't think that ends particularly well. >> you know, when they announced the big move, when the expansion of quantitative easing and the balance sheet, guy, to me, it read like the last gasp. the last grab. one -- maybe this will work. it reeked of desperation. >> that's why i can't understand why they went ahead with the sales tax hike with all of that. >> this was a measure to counteract some of the negatives they were thinking would come from the sales tax and clearly this is an economy which needs even more stimulus and we've been at this for 20 years. the japanese have not done qe properly. they never took real interest rates negative. they never did what we did here in the united states. >> you think that's what europe should be doing, correct? >> absolutely. you ask the big difference to david. the big difference is the dollar. the dollar has changed the u.s. outlook, the u.s. changed the whole outlook for accommodation removal in the united states. the fed does not need to move as much as it needed to before. the dollar does heavy lifting for us. good news all around. good news, as well. the stronger dollar feeds into prices and stimulus to those at the bottom end. >> hold that thought, everybody. the market has its eyes on washington, d.c., shaping up to be a huge week and john harwood has some more on what to watch for. >> we're only two weeks past midterm elections and washington is barrelling twad a confrontation of republicans and democrats. here are the two flash points. one is keystone pipeline. the other is immigration fight. on immigration, president obama's preparing to sign executive order to legalize several million, not sure how many million, illegal immigrants and give them legal status to stay and work here. the question for republicans is, how to counter him. republican leaders will try to temper and avoid, deflect some of the more severe responses of their hard core conservatives like itch peachment or government shutdown or a debt crisis and could be an addition to the legal fight against the president. keystone is more of a straightforward legislative battle. the house passed a bill authorizing keystone. the senate is going to vote tomorrow. but as senator rob portman republican of iowa said it's not clear they have the 60 votes yet to push that through the senate. >> the votes right now are uncertain. i think we are at 59. we need 60. we'll see. that vote is elusive. i think it will happen eventually. >> rob portman is right. it will happen eventually. perhaps the new congress. president would be likely to veto it then in deference to the administrative review of the aides conducting and then if there's a deal between president obama giving republicans keystone which they want if they give him something else. with all that's going on with immigration and other issues, not clear there's much of an appetite for deal making, kelly. >> john harwood, thank you, for now. dave, are we making the right fiscal moves in this country? we talked about the central bank and this is important part of that. >> well, depends how you define fiscal moves. i would say a lot of hard li liftilif lifting done of dividends, capital gains, payroll taxes and then the sequestering and nobody likes it and maybe it's a good thing and remember, you know, three, four years ago we were talking about possible debt default and a 10% definite gdp ratio and people handing me in canada, the zimbabwe dollars and now a two handle on did deficit gdp handle and the fiscal moves are structural in nature and about tax reform. >> doesn't look like it's happening. >> not in the next two years and fundamental reform to help the economy grow, tax reform, we haven't had it since mid-'80s. >> what's amazing of immigration, talk to anyone that believes in capitalism, labor, capital and goods, capital and goods, everybody gets. everybody has a seizure over labor. right? it all stops at the border. it becomes very frustrating and we need immigration reform now. >> do you think it will be easier to go forward? >> always does. anti-immigration sentiment rises in a weak economy. >> same question. what do you think about -- what are the best options here? abandoning the federal reserve trying to do more in terms of corporate tax cuts or the only way? >> i think corporate tax reform would go a long way and some hope for that with the new congress but honestly i don't put a lot of -- i don't have put a lot of goodwill inside fiscal policy. monetary policy does more. heavy lifting. as far as they don't do anything to screw it up then i'm in a good place with letting monetary policy do the job it's already done for us because we didn't get here today to a 5.8% unemployment rate, 200,000 jobs every month, a low -- >> and the congress. >> an envy of every other country with nancy pelosi and mitch mcconnell get it done for us. >> that's the point of tyler cohen of japan, is it less effective, the monetary policy there. they have an unemployment rate in the 3% range. >> this is not a slap in the face against quantitative easing. it is a slap in the face regarding japan towards abe-nomics. the reality is not bank of japan, monetary policy can achieve so many things. cyclically. not the economy and taking a look at core inflation, close to 0. and now for the sales tax hike, over 1%. not where they want it but not deflating anymore. >> that's true. >> the problem in today's number, capital spending. capital spending deeply negative. and the second quarter. it was negative again in the third quarter. that's something that's 'fekted by the sales tax hike. when's missing in action in japan, the third arrow. part of that was taking corporate tax rates, we talk about how hard they are in the united states. tax rates in japan, 30%. the plan down to 20. okay in this is pertinent. and then capital spending, which is really the -- they have the declining working age base and they need growth. >> guy -- >> they need that, too. >> they need $-yen at 140. >> before you go, when's your best trade here? >> i think these moves in the energy sector, i think it forces general electric to do something. that comes out of totally left field. >> it does. >> makes total sense, actually. >> i love jeff immelt. i think he's a stud. he watches the network. there's no denying the stock has not performed well for five or six years. i think this forces the hand in some way. keep an eye on ge. >> i like that. thank you for being here. >> later. >> more of guy adami at 5:00 p.m. talking to the chairman of cst brands about how low gas prices are affecting the food and beverage industry. don't miss that. kate rogers before we go. >> hey, kelly. check out urban outfitters. lower in the after hours after posting weaker than expected third quarter earnings on revenue that matched expectations and that stock trading down over 4%. back to you. >> all right. and we're waiting for the first of the retailers, not the first but a ton more later this week and starting out on a week note there. but moving on, they're the titans of the hedge fund world with bill ackman, carl icahn and david stepper. none of them are ranked above the best. you would be surprised of who's topping the list ahead. also coming up -- >> the path to peace. your extinction. >> next year's new avengers film of a self-aware robot to destroy the human race. that's what elon musk is warning about for sometime now. that's coming up on "the closing bell." 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. first impressions are important. you've got to make every second count. banking designed for the way you live your life. so you can welcome your family home... for the first time. chase. so you can. welcome back. a new report is out on the quarter's best performering hedge fund managers and you will be surprised by the list. kate kelly joins us with exclusive details. drum roll ploez. >> all right. thank you, kelly. steady conducted reveals the single best stock pickers in 1,000 of a fourth quarter to date basis. the results were interesting and perhaps not what you'd expect. they're for the most part names you wouldn't know like whale rock capital management. a boston hedge fund formered by a tech analyst of alexander sacerdote. presuming that they still hold the same positions now as september 30th which is a key assumption of this survey, it appears that the data storage provider was the best performing stock in the long part folio and alibaba and vipshop were close seconds. the second best performing manager is another boston area of matrix capital founded by a tiger management alumnist and focuses on tech names and profiting in particular from tableau and linkedin. the third big winner is prk capital's management. they benefits of airline names including alaska and delta. a few caveats to the study and rarely see in realtime what's contributing to the portfolios and how people do with the quarter in progress. >> are you surprised by the names or when's not on the list? >> no. i think the big names, look, it's been a very difficult macro trading environment so i think it doesn't surprise me that the guys doing the best are coming at it from the bottom up. looking at a single stock story, looking -- doing the homework, getting the balance sheet right and the country right and focusing on something that's going to grow and the airline with the energy story, you know, you nailed that with kind of a long dollar trade, as well. >> you can almost hear the pitches by hedge funds for next year raising capital and saying stock selection matters in this environment. >> one thing that's interesting of airline names are two names that are frequently hedged for oil prices to make sure that they don't pay too much for jet fuel. delta very active, alaska air very active. dy a profile a couple of years ago and hopefully nimble to navigate is waters. >> anything gentlemographic of ? i know investors that don't want to be in new york thinking there's a group think that ends up taking over and go to the same idea meetings, et cetera. maybe not being here is competitive advantage. >> that's very interesting and speaking of group think and not that they share the same stocks they're in the same building in boston. >> a regional group think. >> maybe it's in the water in boston but i would say to your point earlier, i think that the study favors the long-short guys in particular and because you see a better sampling of what they do. third point for example is a great performer in recent years and they're basically multi-strategy, right? they could be in commodities, european stocks, all sorts of fixed income structured products so you're not seeing that but only the long-only holdings so if you do long only or long-short and doing well on the long side -- >> what about the best known names? icahn and ackman. >> semetric that did the study for us, a list of top 20 and they wait for consistency over one year and three-year period. of that list, the household names were pershing square and they were up 40% year to date. >> wow. >> today as well, doing great on allergen, of course. according to these guys, 30% of the long-only portfolio. another one is starwood valley and known for the cage rattling at oaol and yahoo!. that was a name that rang a bell. >> i wonder a message of occupy the board room and activist managers are doing so well and seeing the success that they can have by really shaking things up. >> look. i mean, certain corporate -- sort of anti-activists might argue this is a problem but activism benefits stocks in terms of performance over a five or six-year period and on average they show a gain and look for cost cutting and other investor benefits. so it's a sort of a shareholder friendly approach clearly. question is whether it works over the long term. >> we can trust that before we go the data? that is relatively new thing. >> this is brand new for us using their data. i think the caveats to make are significant. assuming they still hold the stocks. we always do that on cnbc locking at who's benefiting from a deal or whatnot and of course some point you sell them. and the other question is how good a proxy are the long-only holdings? they suggest that there's a very good correlation. like 64% correlation. but that's 36% and multi-strategy, there's a lot to miss. >> that's a nice look in the window of the space. back over to kate rogers far earnings alert. >> check out allergen technologies. missing by a penny. the company's 2015 earnings and revenue guidance a bit like the stock currently trading up about .5%. back the you. >> kate, thank you. that rounds it out for at least urban, agilent and thor andings to start off this monday. federal reserve spending money to stimulate the economy and the next guest says japan's slide into recession proves stimulus doesn't work. peter will lay out the case straight ahead. i see servos shading his head. raiding the staff of three nfl teams of probe of painkiller abuse. how bad could this get for the nfl? 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[ male announcer ] savings worth talking about. state farm. 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. ♪ welcome back. we begin with our kate rogers again. a quick market flash. >> gopro moving lower. selling 10.4 million shares. the ceo is selling 4 pl of those shares. gopro currently down over 2.5%. back the you. >> all right. under pressure. the u.s. economy starting to pick up steam, though. the opposite case in japan which is now officially in a recession despite the central bank's aggressive bond buying program. my next guest says that's proof it doesn't work. welcome. >> thanks, kelly. >> controversial take. you're convinced this is a sure sign that quantitative easing doesn't work. >> i think this is qe 10 or 11 for japan. this is not new and seeing it for the first time and saying it doesn't work. we're seven quarters into abe-nomics. 10-year yield from 1% to .5%. the yen from 75 to north of 100. and this is what we get. the economy over those seven quarters in a cumulative measurement is up less than 2%. >> this was just one piece. it's shinzo abe the prime minister trying to use sort of these arrows, one being monetary policy and other arrows. but do you agree, david? >> completely disagree. and largely, i think, you know, david said it earlier. japan created inflation. for 20 years, they had deflation. if you went to the flank, you put your money, in you brought it back out with a zero interest rate and buying more stuff the next year. they had what we call a positive real interest rate. this is the first time they've actually done what we did here in the united states which is tax people for holding cash. now, we don't yet whether they're going to change the portfolio but we know that the gpif is. and structures are going to do that, as well. >> you say it's working. >> i think it is working amazingly well and for an economy stuck for 20 years doing the wrong thing to expect it to turn the titanic around and turn the whatever ship it is, it was the titanic. now they're lifting it up and filling the holes and sending it out again, i think it's an amazing turnaround story. >> do you grees. >> gree? >> why's the economy down two quarters in a row by 8%? >> i have an answer for that. they had a sales tax increase. they did the same thing back in -- what was it, 1997? >> okay. that explains the two quarters. but out of the last -- >> first quarter was strong. not negative every single quarter. they had a bad second quarter. and of course, the third quarter was disappointing. let's just say that, you know, part of it is lingering impact of the tax hike. talking about, say, you know, bng of japan, the yen come down a long way. i think depreciating -- >> huge move. >> a bright spot and look at the cup half full, exports actually played a role in terms of contributing activity but let me finish off by saying that the one area -- i don't think it's about the boj per se and about abe-nomics, missing in action is third arrow. >> which is -- >> real corporate -- and capital spending was a disappointment today. >> peter? >> i want to agree on the third arrow that's missing. with deflation, i'm of the opinion it's a symptom of the disease of little to no growth in japan. it wasn't the disease. higher tax rate impacted the economy. inflation is a tax, too. wasn't just one tax but two. it was the vat tax and higher inflation and a country that's aging. >> they like cash. >> growth was the solution. >> deflation is not the disease. it's just a symptom of the disease. >> i think at least in the central bank circles i traffic in pretty much every central banker says if you take a bunch of debt and mix it with deflation you destroy an economy. i think irving fisher said that in 1933 and ben bernanke wrote about that in his work at princeton and the idea that deflation is right solution for japan is -- >> he didn't say that. he said it's a symptom. >> but we know that -- growth is wonderful. i can get nominal growth or real growth. i can get nominal growth with a lot of -- >> it's higher -- less real growth with higher inflation. i understand the point. we want to inflate the way out of excessive debt. >> absolutely. >> there's a cost to that. okay? epts in a country that likes to save money, a country that's aging. the aging population doesn't want a higher cost of living and higher inflation is a higher cost of living and same time they're not working, living on zero interest rates and even for those that are working they're getting half of a percent type wage increases. >> only way that david get what is he wants which is capital investment if you make it very costly to sit on cash. only way to do that is create inflation and people take risk like we did here in the united states when our inflation rate started to go up and ben bernanke started to print lots and lots of dollars. everybody said i don't want to hold it. i'll buy shares of caterpillar stock or some company or buy real estate or maybe commodities. >> wouldn't capital investment come from higher demand? >> you can hope for that but what you start with first is getting the companies first and getting the investor to want to take risk again. nobody's wanted to take risk in japan for 20 years because nikkei or real estate you didn't do anything for years. best investment is cash. destroy that mentality. i think abe and karoda have started to do that and i think they'll continue. >> i think the monetary policy path they have gone on now will destroy the country economically. the third arrow is missing. tried qe for 25 years. what we have not tried is deregulating that country. liberalizing that lay bob force. that's not tried. >> by the way, between '95 and '98 we tried printing money in japan and worked pretty well and only when we gave up in '98 and dollar-yen from 140 back to 100 and then below. but when we went up to 140, 96 ''97 were the great years. >> that's the whole problem que. only temporary. once it stops -- >> working well here. >> we just pulled forward activity and returns. >> this is a great economy? >> i think our economy looks pretty good right now. 5.8% unemployment rit. >> you're satisfied with growth levels in america? >> i would like -- >> that's a no. >> i would like more. i'll take what i can get after the biggest recession since the great depression. >> we had -- 11% unemployment. okay? >> worst recession. did not completely collapse the financial system. >> '70s sucked. okay? >> interest rates are somewhat normal again. >> we'll take it right there. i feel like this -- we could take this straight on over to 2008. >> peter, thank you for being here. >> thank you, kelly. >> this discussion clearly needs to be continued. does the stock market have three more years of double digit gains ahead? is the topping the hot list? we'll talk about that next. what are the world's largest oil producers in world. it's coming up. 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. you have made my life special by being apart of it.enough. (everyone) cheers! glad you made it buddy. thanks for inviting me. thanks again my friends. for everything, for all your help. through all life's milestones, our trusted advisors are with you every step of the way. congratulations! thanks for helping me plan for my retirement. you should come celebrate with us. i'd be honored. plan for your goals with advisors you know and trust. so you can celebrate today and feel confident about tomorrow. chase. so you can. the ultimate arena for business. hour after hour of diving deep, touching base, and putting ducks in rows. the only problem with conference calls: eventually they have to end. unless you have the comcast business voiceedge mobile app. it lets you switch seamlessly from your desk phone to your mobile with no interruptions. i've never felt so alive. get the future of phone and the phones are free. comcast business. built for business. welcome back. private equity makes new big bet in a certain area topping the hot list at this hour. let's get back to headquarters with managing editor wastler. what is it? >> energy bets. there's this really in-depth look at how private equity is going into the whole energy play. it's raised more than $157 billion over the last couple of years. to invest in energy. another 32 billion coming this year. and it's actually getting a return of about 14% measured over the last seven years versus about 9% for other private equity funds so really in-depth piece. readers are also taking aing loo at the madoff recoveries topping $10 billion. putting madoff in a headline, people are sucked into the story. and they're doing it on this one, too. finally, you had kate kelly on the show earlier talking about her look at the whales, the whale watching, and who's doing the real stock picking. that story that she wrote for the website on fire all day day. they're loving this story, a lot, too, kelly. >> it's fascinating. thank you for now. good the see you. one of the world's largest oil companies and a corruption is wrecking havoc in technology visionary elon musk is warning about the dangers of artificial intelligence saying robots could decide to start killing people in the near future. more about that coming up. 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. 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. it's time to get to work are finally over, fixing our long-term national debt to help build a stronger economy. with a solid fiscal foundation, we can create more jobs, invest more in innovation and infrastructure, and make america more competitive, giving our kids a better future. a bipartisan solution to our long-term debt means more growth today, more opportunity tomorrow. and the time to start is now. welcome back. we begin with a quick market flash and kate rogers. >> check out shares of xilinx. up about 2%. back did you. >> loving the buybacks. thank you, kate. >> petrobras in a heap of trouble and doesn't have to do with the plunging price of oil. michelle has more. >> horrendous scandal. good, old-fashioned latin american scandal. when the tide goes out, you figure out who's naked. so they arrested a couple of people on friday. always a bad sign. they raided the corporate offices. and the company also said on friday that they don't know when they can report earnings. impossible to know. >> it's funny. those headlines that hit the tape in the show even and people trying to figure out what was going on. >> going to put out numbers in mid-december and they acknowledge the allegations they don't know the value of some of the assets. the fraud is so big and involves money laundering and calling it the car wash. in brazil. today they came out and said, oh, and by the way, the oil production targets for the year, not making those either. and remember, this is a company with $170 billion in debt. right? they have to spend so much money to get so far offshore and the deep water and just like batista, not bringing up as much as they thought. >> they haven't met a production target in years and before the scandal, their production growth rates going down. they near a country still riddled with political uncertainty. you know, a weakening -- >> can brazil bail them out? if they have $170 billion in debt? >> certainly change the regulatory nature of the pricing if they want to. that's the one thing that i think institutional investors might look at. plus the fact that after -- i mean, the stock is down, what? >> 30% in a month. >> yeah. >> wow. >> almost even more than that since -- >> yep. >> in the past three months. like 40% and trades, looking for a deep, deep value but, of course, with a wide confidence interval, trades at -- >> not that wide. >> a five multiple. >> wow. >> trades south of where the russian stock market trades. >> exactly. dave srks this going to provoke a macro response? a way to use the currency or the fiscal bank or something to prop up petrobras? >> i presume they could and i presume the people not the most loved are shareholders. >> oh no. >> it strikes me. >> -- hosed for sure. >> bondholders. but i think it's a dicey one. all of the particularly em associated with oil and energy and mining, it's in a heap of hurt. i don't see that changing any time soon. >> a key takeaway, times are good, everybody looks past all of the risks. but whenever you near one of these countries where there's doubtful rule of law, you know it's loaded with corruption, you have not to be paid a much higher expected return to bear the risk that can come about. we see it right now. look at when's happening in mexico. ditto. right? these are countries that still have a long way. the emerging markets have emerged. not so fast. >> yeah. does this especially after the re-election of the president there provoke -- have we heard public comments or trying to -- >> protests that she should leave. remember, the previous job was chairman of petrobras and would have been around for the allegations talked about. been highly interventionist in the company. and now we're waiting to see how far up the chain does it go? arrested a former director of engineering, et cetera. >> isn't brazil already in recession? >> oh yeah. >> weakened dramatically an their inflation numbers gone up and weakened like that, talking about structural issues before but you have major supply side impediments and growth rate down, inflation to the high end of the central bank range. >> this is where qe doesn't work because basically you can't use qe when you have these inflation problems and no growth. >> great point. >> emerging markets -- >> great point. >> it's venezuela. >> yeah. >> ultimately the currency takes the brunt of it. nfl team doctors illegally providing players with painkillers? federal agents raided three teams on sunday and what may be more trouble for the nfl ahead. also coming up -- >> i think there's potentially a dangerous outcome there and we need to -- >> dangerous? >> potentially, yes. >> how so? >> there have been movies about this like "terminator." >> elon musk sounding the warning here in june on "closing bell" and now saying robots could make their own decisions to kill humans by the end of this decade. that terrifying scenario also ahead. in a world that's changing faster than ever, 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. but parallel parking isn't one you do a lof them.ings great. you're either too far from the curb. or too close to other cars... it's just a matter of time until you rip some guy's bumper off. so, here are your choices: take the bus. or get liberty mutual insurance. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. see car insurance in a whole new light. call liberty mutual insurance. it is another potential black eye for the nfl. "the washington post" first reporting that federal dug agents conducted surprise inspections of three teams on sunday, the san francisco 49ers, seattle seahawks and tampa bay buccaneers as part of a probe of prescription painkiller abuse. the investigation is focused on team doctors questioned and searched because the players themselves wanted this done. joining us with details is sally jenkins, a sports columnist for "the washington post" and co-author of this story. welcome. so glad you got the details on this. people were shocked and especially surprised the hear the players themselves seem to have been behind this. >> well, what we know is that the investigation, the dea investigation, triggered by a lawsuit filed by former players in may about 1,300 former players alleging all kinds of fast and loose practices with heavy narcotic painkillers in the nfl. >> do you know how heavy we're talking? >> well, i mean, some of the things they describe are painkillers being passed out on team airplanes after games, alcohol consumed, that was one allegation contained in the suit that the dea is looking at. trainers who are not authorized by law to dispense medication handing out pills. unlabeled medication, stacking of medications and so on and so forth. >> if this is the case, individual liability, team liability, nfl liability? >> well, that's an interesting question. the players, the former plarl who is have filed the suit say it's a league-wise issue. the league says it's very much dependent on individual teams and individual physicians and so on and so forth. >> did the players feel pressured to take the drugs? >> our reporting shows, yes. we did a survey of 500 former nfl players last year as part of a series of medical practices and we showed that at least 1 in 4 reported taking medication they felt uncomfortable taking. >> by the way, i played division 3 college sports very -- nothing like this. but even then it was -- extremely common, i mean, you always -- the old line about playing sports getting older is playing injured. you're always injured. you always have trouble. and basically, the only way to get on the field is sort of patched together and stitched together and hours in the hot tub and various things and prescription or nonprescription pills to help overcome the pain. >> the dea's interest is there's a difference of treetding injuries and masking injuries and excessive prescription practices by physicians. doesn't matter what the players want. if they want 10 ambien. as a physician, by law, you're not supposed to give them what they want. you're supposed to give them what's prescribed. >> what would that do to the game? >> right. >> the nfl might look an intere question. the nfl might look very different. the interest is the nfl creating a culture in which players are becoming addicted to painkillers. >> plus by having them play ball when they shouldn't play ball they will be playing through pain is one thing but really playing when your body is telling you shouldn't be playing is why the average career span of an nfl player is almost down to five years. >> but when you put all of this together, the lawsuits related to early on set parkinsons, this issue, football cannot possibly look the same in five or ten years can it? >> there's a growing question of public health issue with the nfl. should children be playing tackle football? there are some neurologists who say not before the age of 14. there's a real spike, nfl players are much, much, much more prone to get neurological disease and brain disease according to the latest research. it's a health issue for the players but also potentially a public health issue. >> how long before we know the results of what happened on sunday? >> our understanding is that the dea has been investigating four to five months shortly after this lawsuit was filed. we're told that they're somewhere in the middle of the investigation, we know they're not close to the beginning and we don't believe they're close to the end. however the fact that they did do the surprise inspections tells you they had some things to go on. they don't do this if they had nothing. >> should we expect this to become more common in the weeks ahead. >> our information is its one step in the course of a broader investigation. >> wow, you do wonder at some point if everything adds up to discourage advertisers. this is the biggest part of the whole nfl. we're coming up on the super bowl time of year and just how much of an elephant in the room is it or not. >> at the same time, i don't doubt there will always be people that want to play the game as is and would accept all of the trade offs. the question is do they know the trade offs going in where as 30 years ago i don't think you did. >> nothing that happened in the last few months in the nfl from a public relations standpoint put a dent in the audience. more people are watching the nfl than ever before. >> but they love it rough and tumble. they love people beating each other up. >> one of the interesting side effects is lebron james said i won't let my kids play football. that's an interesting thing that happened in the last week too. >> sally, thank you so much for being here. great reporting. really appreciate it. sally jenkins from the washington post. straight ahead is the terminator franchise a glimpse at the earth's future. self-aware robots could decide to start wiping out humanity within the next five years. that's what he is saying. we're going to talk about it in just a moment. they challenge us. they take us to worlds full of heroes and titans. for respawn, building the best teractive entertainment begins with the cloud. this is "titanfall," the first multi-player game built and run on microsoft azure. empowering gamers around the world to interact in ways they never thought possible. this cloud turns data into excitement. this is the microsoft cloud. 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. 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. welcome back. elan musk warning about the threat of a terminator-like disaster happening in the artificial intelligence world. he wrote the pace of progress in artificial general intelligence, is incredibly fast. the risk of something seriously dangerous happening is in a five year timeframe. this is not a case of crying wolf about something i don't understand. this is a common theme now for musk. he first warned about it here on this show back in june. >> i'd like to just keep an eye on what's going on with artificial intelligence. there's potentially a dangerous outcome there and we need to -- >> dangerous? >> potentially yes, there's been movies like this like terminator. >> or escape to mars. >> the ai will chase us there pretty quickly. >> the awkward laugh administer. is this something we should be seriously considering as a danger though? so he made a couple of investments in companies like deep mind and vicarious and the reason he does it is not for the assessment but for the access he gets to what's happening in this space. what he's learn sd why he's worried about some of the advancements. >> robotics is such a hot area. we've seen google buy a number of robotics companies. i spent a lot of time-out there and they have ai and robotics professors that i dream of creating a robot that will have feelings. he firmly believes we're arriving at the point where humans and robots we will be able to live forever because we will slowly but surely be replaced with robotic parts. he's not alone in what he believes is the progress in the field. as always there's a debate about the technology. >> and the ethics involved. the morality of it. >> look, i don't know where this all goes but i'm imagining milton friedman designing his robotic foms and we can never make a mistake. >> too much money in the system. >> didn't we see this in 1973 where we had this android and western theme park setting. >> yeah. >> so that was only what? 40 years ago? >> yeah but the joke is that it wasn't a joke to some extent. it's only taken us a couple of decades to see the human-like o robots. we can't ignore where we're putting the decisions even in the small level. >> where does that make it on the priority list? >> the nuclear weapons and he's with pakistan and so i don't know -- i guess that's why this is probably left for the last part of the show. >> leave you with the final thought. one of the professors said we won't know. think about the fact that we don't know if a frog has feelings at this point. we don't have a good test for that. so we may come up with a robot that has feelings and we don't even know it yet. >> i'm excited about all the technological advances. >> it's a very bullish world. when you listen to things like that you think our world is going to be so different in 20 years. >> you hear elan musk and you get excited. >> you think i'm not going to have to drive anymore. >> no ro bots doing the jobs of an economist. >> i don't know. >> it's going to be hard. >> the perfect forecast. >> listen just a couple to watch. what are you watching? >> this week is going to be critical for the retail reports we're going to be seeing and i think the guidance from the retailers really to judge whether or not the consumer is going to show up during the christmas shopping season. >> speaking of scandal in brazil, batista goes on trial. the man that lost $30 billion in a year. >> watching the inflation data, particularly the cpi. we get down side surprises, imimportant prices. last months or thes. we're getting good stuff on retail sales. >> i want whatever that is. >> cheaper prices. >> it's a bullish world with killer robots. thank you for being here. i appreciate it. fast money is coming up in just a few moments. melissa lee what's on tap. >> you know gas prices have been falling, falling, falling, so we have one under the radar, falling gas play. we have the ceo in an exclusive. not going to name names. over to you guys. >> thank you, fast money starts right now. i'm melissa lee. your traders are dan nathan, brian kelly, and guy adami. facebook not suitable for work, maybe not anymore. we have details on facebook's move into your office and whether linkedin could have a fighting chance. the stock closing down more than 4% today. we have someone who says the move is way overdone. he'll explain why. but first to japan and the story that surprised much of wall street today. the third largest economy officially entering recession territory and the news shook the nikkei today but we have been raising red flags on japan here on the showin
of data on the docket. building up to friday's jobs report, today we have december auto sales. tomorrow, it's ism nonmanufacturing and factory orders. wednesday we get the adp. and we'll have international trade and minutes from the last fmoc meeting. and thursday the initial claims and the friday payroll report. how are traders viewing 2015? so far with a slant to rise 8.2% this year. the big drivers they are looking at economic expansion and earnings growth. oil prices dominating the market this morning with wti and brent losing half their value since mid-2014 with prices falling to 5 1/2-year lows this morning. among the headlines, iraq's oil exports were at the highest level since 1980 last month. also, we can tell you the new congress meets this week and the incoming chairman of the senate commerce and transportation committee says a gas tax is on the table with them not rising since 1993. i don't, joe, drive, but i think 18.4 cents per gallon for unleaded. i think it's 24.4 for diesel. senator john thune says this is to help with and existing shortfall with the existing plan expiring in may. we'll see how that debate unfolds. >> they are arguing on how to do this by state. we'll look at the stocks to watch this morning. shares of cempra get a boost. the oral version of the lead antibiotic leading the main goal in a late stage trial. i was alerted to this by our interpret pharmaceutical reporter mike huckman on this being a big story today. appreciate that heads-up. and leaders of the american airlines pilots union approved the carrier's contract offer. union members now must vote on it. if approved there will be a retroactive 23% wage hike. and dreamworks animation appointing new co-presidents of feature animation studios chief creative officer is stepping down. >> a check on the markets as we told you what strategists expect this year but that's not the way the futures are headed. right now the dow futures are down by just over 80 points. the s&p futures look to open down 10.5 points. and the nasdaq is down by close to 20 points. you have to believe a lot of that is concern on what's happening in europe right now with greece. if greece might actually end up being let go from the european union. that's something that has been talked about. angela merkel making comments in suggesting that they might not be too upset with something like that happening and that's causing concern. we'll take a look at what is happening in europe where a lot of this is playing out at this point. right now the european markets are all indicating weaker. greece down by 3.7%. france is off by .80%. the ftse in london down by .70%. and the german dax down by .50%. the nikkei was down a quarter percent. the hang seng down by .50%. and the shanghai is down as well. we'll take a look at where gold is trading this morning. you'll see at this hour it looks like gold is up $4.20. 1,190 down. >> a piece in the journal has it very close in greece. i don't know what it's going to be on the 27th. but more and more people are starting to sort of spin the cycle that it would not be that disruptive. you saw the draghi piece in "the times." such fundamental problems in parts of europe that they blame now a lot of it on the common currency that has not really worked out in terms of -- it's been a six or seven-year sort of twilight. >> and it's been a stretch for reforms not being put in place, either. you are trying to put the changes in place but the reforms never came about. >> they are too important, not just the jergermans laying around in the sup all day long. they don't want to give them more money. if greece would exit they are never going to switch currencies. lithuania, i don't know what their currency is i forget. they are going to switch. they are happy but just this tiny -- they want to be wow, we have euros now as part of the trading buck, but the big country like germany, to try to heard off the cats when you don't have a common fiscal authority, it's almost impossible. and then countries that get the austerity from the bureaucrats in brussels and their people spend years trying to live up to the expectations of the bureaucrats, i don't know the whole thing could be a big -- >> angela merkel is suggesting we are in a better position to allow greece to exit. spain has come back a long way. but as you mentioned, you look at italy and some of the situations they still have there was -- did you read the piece over the weekend that suggested, someone was saying this would be lehman brothers squared for the greeks. >> if he's on he's on. i like the equation that he sent us because he had the term -- i was going to talk about the markets and use some of his concerns. because what went from all these positive things if you look more closely at what a lot of these things mean like the drop in oil prices you look at what that means when you take and connect all the dots or look at what's happening in china, driving by the huge ghost towers and stadiums where no one plays, it's a lot to worry about in the year. >> going from positivity to negativity. we are just starting. >> the beginning of the year don't we get to do that? now we are wondering, what will 2015 bring? because it's weird because it's arbitrary to just put a cutting point on 2014. >> you have to measure it from somewhere. >> given what's happening with the euro below $1.20, oil breaking under $50. >> nine-year low for the euro. i mean things that make you start to wonder and reassessing value. >> and the oil prices too, there are major parts of the world that were addicted to $100 oil. everything they do is based on that. and it may stay here for a while. we may have broken the back of the opec cartel. >> but you said that's a great thing. >> it is for consumers. but here's what happens, those economies slow down. our dollar gets even stronger. >> i said that a couple months ago and you said who cares about those economies. >> i didn't really say that andrew. and i don't think you said that either. the dollar gets stronger and it's harder to export. sooner or later we import some of this inflation maybe, and the slowdown that so many of these developing countries need. and they were using our qe. and the qe3 ship has sailed. >> you are wearing the tie. >> qe3 and it looks like -- it's sailed. we would never wear this because it has color. yours are like -- do you ever see your ties, if you ever took a -- the festival and you spray the thing going like that if you spray every single color, that's what comes out. >> i wear -- i wear the classic, this is is a maroon tie. >> it is like a mud. >> i would wear that tie. >> no you wouldn't. let's ring in -- you know the dating fans why dating bengals fans is a good idea? >> why? >> because they never expect to get a ring. the bengals will never win. someone sent that to me on twitter. >> who? >> they want you off the bandwagon. you add mitted you were drawn in to watch it again. >> i left and never came back. it was just -- it was right to what i knew would happen. >> however, you were rooting for the steelers. >> yeah a little bit. but i was rooting for the steelers to undercut some of the other people that love the steelers. >> and it worked. >> i'm angry at them in the first place. >> and it worked. >> it did. investors have plenty of key data to look at. the fed minutes in the first friday jobs report of 2015. come on, is it time for another jobs report? joining us is lou this morning. and on the economy, we have steven wright global chief strategist at citi private bank. lou, are you just being a guy that thinks absentment and consensus, we are going to do 8.2% in the bag. does that make you nervous every one of these guys never right is coming up with 8.2%? >> 8.2% on the stock market? >> s&p, yes. >> it's all right. i don't know what you're supposed to do at the beginning of the year. last year i said the market would move 12% and i was right it moved 12%. >> i don't want to listen to the other people then. you tell me what it is going to do this year. >> except that i thought it was going to move 12% lower. >> okay. >> and this year i'm going with 12% again but not going to make a decision on which way until later in the year. maybe december. >> smart. >> but i think that there's -- the litany of things you just went through are very important for the market overall because that sort of sentiment and whether it goes into the bond market or stock market will be determined by a lot of the things you said. and i think the fed and the housing market reacts to the fed is howto be the most important thing for where the s&p ends up this year. my estimate for going down 12% for the s&p was because i thought that during the taper of the qe that the markets would act as they did when qe ended for both one and two of the strategies. when in other words the s&p went down at the end of qe 1 and 2. and the yields on the ten-year went down when qe ended. so this year when the taper began, the ten-year yield fell from the beginning of the year and continued to fall throughout the end of the year. the s&p after a stumble in the early year had a steady gape but then in mid-september, the day after the fed made it clear that qe was dead and gone after october, the market had a 10% decline or just about a 10% decline in a few weeks. and on october 15th, the s&p was flat on the year. so i think that -- i think that how the market reacts to the fed in con junction with the other things going on is one of the keys. >> steven you have written like a thesis on the asymetric look of things but this will sum it up. acute negative effects are some, but kind of a widespread event for a lot of other people. >> you can't just look at the net effects being positive for the u.s. economy in isolation and see to ignore the big risk things. we are going to have sovereign debt stress. we are going to have tremendous problems of the marginal producers. this is hair whole life as the oil price. for others we all drive cheaper. we all transport things around but we were okay with $100 oil. it is net stimulus but expect a lot of volatility out of this with a long tail effect from the variety of things in the latter. i'm positive on the u.s. outlook and the u.s. economy in the current year but i think economists probably underestimated how strong of a positive effect it had. the positive spillover of growth is oil booming in this case. >> purchasing power for americans benefits when the dollar strengthens. but it seems like all multi-nationals get hurt by that. if we have a nine-year high on the dollar and we are still at zero, does that nine-year high anticipate where the yields are going up or does the dollar get stronger as yields go up? >> it has further to go. >> can't that eventually hurt? >> well, eventually it will hurt, but you look at the ranges the u.s. traded regulated dollar fell eight of ten years in the last decade. you look at a lot of relationships in the markets to be extremes. the u.s. ten-year notes four times the level of german ten-year yields. when you look at currencies and the -- >> we are at low levels. >> but it is a record low spread to germany. these sorts of things actually do matter. surprisingly with as low as the yields are right now. and there are strong inflows from the rest of the world saying, this is not a 2% yield for me. this is a 9% return in my currency. so this is important. what you mentioned about the overseas earnings it is important that we always see the up flows into our marketplace that we see the dollar strengthening drawing investors into the assets they have. that's large cap u.s. equities amazingly attractive around the rest of the world. >> lou, i was thinking 20% with the market this year and not say up or down. but even there you could be wrong if it's not that big as far as magnitude. you have picked the perfect number because 12 it will probably be one or the other and it will be up or down. i guess you could be wrong if it stays where it is too, right? you are very sly. >> you are a genius. >> do you think even the people that we ask they know we have to give them a number but no one really believes this and it's just -- we all just sort of discount even the sort of whole mechanism of trying to do it on january 5th or something? it is a fool's game isn't it? to say what the market is going to do. >> it always has been for me. and i just -- there's too many variables. you can say, well, these are my best guesses on how the dollar is going to go on how the consumer's going to be et cetera. then you plug it into a spreadsheet and say, oh this is what it's going to be on the year. or you wait to see a general opinion survey and go with that. even a lot of times that is what happens. >> even if someone spotted you, i'll give you what the multiple will be and you figure out the earnings. or if they give you the earnings and you figure out the multiple you still couldn't do it. okay. what we are seeing today, we had a lot of positive stuff happen in november and december. and january should be interesting because we kind of predicting this could happen. we are down 80 today? >> january should be interesting. the thing that merkel said greece may or may not be in the euro at some point in the future, that's similar to what she said back in late 2011. and that's important since the odds of the euro membership, being as it is in the future the odds of that changing are not zero. that's very important because if one country leaves there could be an advantage to early movers and somebody else may follow. at least there could be the expectation someone follows. >> okay. you guys are -- i'm riding on what you said because it's the new year you are the first guys predicting. oh, january 2nd we did. but this is the first with all of us together. >> so essentially it didn't happen before. lou, steven, thank you. still to come in this hour we'll get a live report from the midwest where residents are preparing for the arctic blast. strong winter storms expected across the country today. plus, ben white is joining us onset with his stories to watch this year including the early jockeying for the white house. jeb bush will be in greenwich later this week. and this is a sad and strange story, a hedge fund founder killed in his new york city apartment. we'll have the details that when we return in just a moment. e financial noise financial noise financial noise financial noise welcome back to "squawk box." we are watching the arctic blast that is underway and we'll go to mike seidel from the weather channel channel. >> reporter: it is cold in international falls with their temperature at 28 below. the windchill 50 below zero. two arctic air masses coming across the canadian u.s. border this week to impact everybody east of the rockies except for florida and the immediate gulf coast. they won't get as cold as last month. this includes the northeast in a couple days but it is the windchill. you have to layer up wear the hats and gloves and cover the extremities. in the summertime we talk about frying an egg on the sidewalk in midtown manhattan. how about this? i cracked an egg on a piece of paper at 10 below zero there's your frozen egg this morning for breakfast in minneapolis/st. paul. how about that? along with the call, we have a clipper to bring a swath of snow to bring it across iowa and chicago. they get three to four inches tonight and some of the snow will linger to the east coast, new york and philadelphia tomorrow. a little bit there, an inch or less but the bottom line is the next flee three to four days bundle up it is january, after all. >> it took five minutes to freeze to the paper? >> reporter: about five minutes, yes. >> go back in the truck to get somewhat warm. >> reporter: i'm going to save this for kernan. >> i'm back on eggs in a big way. eggs are the perfect food. >> protein. >> if you can just deal with the -- it's the cholesterol issues. which don't have a problem with but you don't want to create it. >> just eat the egg whites. >> i like the yolk. you don't do hard-boiled, do you? >> i'm on a new kick. almonds and -- not kale but green things. >> what is it january 5th? >> yeah. yep. >> we are all on the bandwagon for a few days. >> "the huffington post" i have to check once in a while, five foods you can't eat if you have a belly. i'm going through -- they don't let you get to it ever. i know how to buy insurance policy and know how to buy a ford escort. i click -- i don't know what to click on and never found it. i never found the five foods that you're not allowed to eat. >> i can imagine. >> they are bread, pasta. >> alcohol is not good. >> alcohol is not good. candy. anything white. >> chocolate can be good because it is a healthy fat. >> it can be but only dark chocolate. if the weather has you stuck inside mark zuckerberg suggests you read a book. move over oprah's book club. the facebook founder is creating a year-end book page encouraging friends to read a book every week in to 20 15. he's focusing on learning different cultures. his first book is "the end in power." the title first published in 2013. and it was out of stock on amazon yesterday. how did you like that pronounce area? >> i give you credit. i would just say the name of the book. >> you're right, you would have. you're on your own finding the author. 2016 and the race for the white house kicking into high gear. everyone is talking about the potential for another bush versus clinton election. so what can we expect from the economic platforms in the two frontrunners? ben white is here happy new year. >> happy new year to you. >> we mentioned in the tease that jeb bush is coming up north if the weather doesn't get to him first. he's coming to greenwich. >> the homeland of the bush clan. >> then clinton is doing a little work in the midwest this week. >> yes. the potential for a match-up is there, although jeb bush will have a lot harder time getting the republican nomination than hillary clinton will in getting the democratic. >> the wall street journal which you pick up this morning says iowa democratic leaders are troubled by the prospect hillary clinton could win the state's 2016 presidential caucus without a serious challenge. they are desiring a more liberal candidate or a more robust debate. even though the wisdom is she's it, there seems to be a sense people want somebody else instead. >> i think as far as independents go they think it's -- i think they are worried it is more of the same with obama's policies. if she moves left she's in a real tough spot. >> he'll have to move left. >> but i think independents think she's too liberal and the democratic base think she's too wall street. >> that's very true. the iowa thing is -- she had trouble in iowa the last time around and they like to see a contest. they would like to see elizabeth warren or something in the caucuses to make it a real debate. >> and they want a debate or a different candidate? >> i think it is mainly because they want a debate. and i think they want her to be held accountable on wall street reform issues her ties to wall street on her economic platform whether it is progressive enough, more taxes on the rich, that sort of thing. they want to hear that kind of discussion and maybe nudge her on some of the issues. adding ultimately they and the rest of the democratic party view her as the strongest candidate. >> does she move left? >> i don't think she's going to move significantly left. in rhetoric she will and she has to some degree. >> but she gets in trouble every time. when you start talking about those things and assuming it is only going to play in iowa -- >> it will turn some people off. but i think in terms of her policies, i wouldn't expect to see a very hard left progressive tax policy or wall street reform policy. she'll talk the talk but not going to come out to say i'm going to raise marginal tax rates on the rich by 10% or do a number of things to increase scrutiny on the banks. i don't think the policy platforms move that left. keep your eye on the general election. >> so now we're talking republicans for a second? >> really quickly. at this point, eight years ago did anybody see obama at that point? >> they didn't. this is the classic line on okay clinton is not the de facto nominee because somebody could come out of the woodwork like obama did. he was the rising star in illinois, but there's no one else on the democratic side other than warren. i don't think it is a hard no. she's a very ambitious politician and she'll see a window here. i think if there continues to be stories like this about the iowa democrats really wanting somebody else in the race and people start coming to her with a harder draft movement it will be hard for her to absolutely positively stay out of the race. she probably won't run, but i would give it a 10% to 15% chance yet. >> the republicans, jeb bush comes to greenwich this week. chris christie was at the cowboys game last night. >> he loves the cowboys. >> if it is just a match-up between those two, is it a slam dunk for jeb bush? >> not slam dunk but he has the advantage. he doesn't have any baggage, not as a cowboy fan, but other things that chris christie brings to the table, the snuff from new jersey that has troubled him from the years. jeb has issues with his last name, but as far as a national candidate with the name recognition, the money a lot of the policy proposals, i think to the establishment of the republican party, jeb bush is more attractive than chris christie. >> the articles have been written more recently that the people that don't like him because of common core and immigration, that even those people could get behind him because they are sick of what we have seen in terms of the laws on either side stalling. if we can get -- we need to get a guy elected for the republicans before we can do anything. and that's the same trap they have fallen into a couple times in the past that the conservatives point to. if you run another bush it will be like romney or mccain or something. but the articles are now being written that they can even swallow some of the things -- >> immigration will be an issue for him in the primaries. his policies on normalization of -- >> did you see the piece on -- written by the guy that formulated the strategy with jeb, and he said that when you say he's just an -- that's not true. he wants to enforce the rule of law first and foremost but then there's the compassionate side -- >> finding a way to deal with the people here who nobody thinks we are sending back and we are not sending back. i think he can move the republicans on immigration. some will never support his position. common core is more for the general public. it's for conservative republicans who don't like the state of the federal role of education, but he can explain to people how to compete with the chinese. we need the standards that our kids need to meet. i think he can sell republicans on those two things but won't derail him. >> who is the dark horse for the republican party 2016? you're lizsaying elizabeth warren for the democrats. >> i think the people we don't talk about are kasich or scott walker. one of those people will catch fire to some degree. and they will be competitive in the republican primary process. you'll see state of the state addresses coming up soon where some of them will put forward ideas to catch fire. so i think maybe if we're looking for somebody we are not talking about a lot now but a midwesterner governor. >> the possibilities are there. >> huckabee is possible. >> he won't be president. >> that's not very nice to say. >> do you think he should have just kept the job? >> he had that option. he's talking about running and doing something politically. but he's got a nice business going of selling books and if he runs and doesn't win, he could go back to fox and do a number of things. some of the folks are in it for their -- >> have you ever used a dog as a stool to reach something on a higher shelf? you haven't done that have you? don't do that. sarah palin, one of her children, i guess on a home video, was trying to reach that -- a little kid, the dog didn't even budge. didn't flinch. but peta is going nuts! nuts that the little kid did that. >> i missed that. >> you missed that too? >> it was not in the morning money report. >> this is supposed to be a complete -- it is about sarah palin! how can you miss that? >> ben, great to see you. you keep talking amongst yourselves. when we come back we will talk about a hedge fund owner found slain in his new york city apartment. and check this out with the euro falling for the first time in nine years. and coming up we have last week's winners and losers. welcome back to "squawk box, if" a hem if." we have breaking news with a hedge fund founder found dead in his apartment yesterday afternoon. >> his wife made the discovery, called 911. and police at this hour continue to question his son, thomas gilbert jr. thomas gilbert sr. a founder of wayne scott capital partners found shot once in the head. he was found by the wife and called 911. the new york city police who responded to the scene, that was a shot of the wife being taken away very distraught. she left without comment. and the father a graduate of princeton university, the son also apparently went there. the friends we have spoken with said he has become increasingly volatile in recent years but at this hour has not been charged and police are not yet calling this a murder as the gun was found near the father's body. so they need to try to rule out suicide before any charges can be filed in this case. so the investigation continues. as of now the son is in custody being questioned but not considered under arrest. no charges filed at this hour. >> and i assume we'll hear more about this in the next couple of days. or even in the next day. do we think, there was no struggle or no view that it was a struggle either it was a suicide or something much worse? >> investigators say homicide is the leading theory at this hour but anything is possible. they interviewed neighbors who tell police they heard some sort of loud noise, a big thump, a big bang around the time of the shooting. then the son was seen leaving the apartment building with a hoodie pulled up over his head. that according to the doorman who worked at the building. but again, as of now, the son has not been charged. >> who owned the gun, do you know, john? >> we don't know. we know that it was a .40 caliber weapon, a pretty powerful weapon. but we don't know who it was registered to, if anyone. >> okay. >> tragic story again. thomas gilbert sr. described as a loving husband, a really decent guy. very well-thought of in the apartment building and also in the business community. and the son, who is very popular or was during his high school and college years, and then was described to us by one very close friend of the family that has become volatile and had issues in vept yearrecent years. but again, it is unclear to know if he's to blame for what took place in the apartment. police continue to question him at this hour. >> john thank you for that. of course we'll be looking forward to hearing more on this. >> have you heard the name before? >> i have not heard it before. >> it was a new hedge fund that opened a few years ago. i don't know how much he had in it. he was also a harvard business graduate. >> okay. >> a tough story. we'll talk a little bit about what's been happening in the markets. we have been watching the euro fall to a nine-year low against the dollar coming amid speculation that the european central bank is moving closer to large scale bond purchases. the question is will the eurozone economy face another tumultuous year? i think the answer is probably almost certainly yes. but joining us to talk more about it is mark grant, managing director at southwest securities. i have to get your predictions for the year, but first the situation in europe. how bad of an issue would it be if the greeks would exit the euro? >> it would be difficult not only in terms of contagen but the germans say, well, the bonds, the greek bonds aren't owned by the banks in europe anymore, which is true. however, what they don't tell you is that the ma joejority of the greek debt is held by the ecb and other banks in europe. so there would be significant fallout if they defaulted. >> the front page of the financial times this morning is saying that massive qe wouldn't be enough to revive the eurozone according to many economists. do you think that's the case too? >> i agree with that statement. the reason is that most of the borrowing in europe is done on the five-year and not the ten-year. so they look at the sector more than we do but the five-year sovereign debts are either negative with germany right at zero or right off zero in terms of the netherlands, france austria. so the effect of the quantitative easing would be glenlgable glenlgable negligible. >> rates are pretty low. hey, we're going to drive down rates and spur economic activity. do you think that they will let draghi -- if you were the ecb, would you want to buy the bonds of these countries that aren't going to be able to pay you pack? >> probably not. i haven't lost my mind yet. >> if you were german and they were saying you have to pay for the crappy bonds, how is he going to do it? better not to do it since it wouldn't help anyway but they are just between a rock and a hard place. >> i agree with you, joe. my thought at this point is that the ecb is out of bullets. they don't have anywhere to go. they are facing deflation. i think you are seeing inflation inflationary numbers across the board in january. and i think europe is -- a rock and a hard place to minimize. >> before oil they were facing deflation. >> then with russia we said germany was the first to get hit. now italy is warning that it has been hit by russia too. so you add all that up i think the answer has to be an overwhelming yes. this is a difficult year for the continent. >> difficult may be a mild statement. >> so mark you probably don't think five years out, but the whole euro experiment success in the future at some point? or not? >> i think probably not, joe. i think there are too many warring tribes if you want to look at it that way, that are in opposition to each other. you just have different mindsets in italy, spain, as compared to germany. >> crazy idea. people that didn't switch are going to look smart, i think. >> mark before you go i want to talk to you about what you expect on the ten-year in the united states this year. you were right last year and called it early that the yields will be under pressure. that was counter to what everyone was saying at that point. now we've got a new year and everyone is saying once again that yields have to go up this year. you don't necessarily think that's the case. >> not necessarily, becky. i do not at all think that's the case. i laid out a formula in a piece that you've gotten i think the ten-year goes back to 2% and heads down three quarters probably to 150. and i laid out the reasons why in the formula. it has to do with relative value versus the sovereign debt in europe and asia. but a significant drop in the price of oil. and i don't think the fed is going to do anything right away. the fed is going to get balked in one day. and one day in the spring, they are going to say things are so bad we are not going to do anything about it. >> mark you were right last year, we'll see what happens this year. thank you very much for joining us this morning. we'll talk to you again soon. >> thank you becky. coming up record-setting numbers from amazon. details next. but first heading to break, here's a look back at this day in history. ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ the evolution of luxury continues. the next generation 2015 escalade. hey, jennar fuzz mike troober munny sling... awwwwww scram! i'm crust mike jubby roll bond chow gonna lean up an kiss bet. peas charty get town down. [laughter] ♪ borf a liver tute face stummy wag ♪ pow pam sha-beeps stella nerf berms. saxa-nay nay? badumps a head. temexiss gurrin. juppa left. fluppa jown! brone a brood. what? catch up on what everyone's talking about with the x1 entertainment operating system. preloaded with the latest episodes of the top 100 shows. only from xfinity. 2014 was a good year to have your products on amazon. amazon sellers sold a record-setting 2 billion items. the internet bohemuth introducing an amazon seller app to help the companies with their businesses. coming up the young and successful. i look at you. >> i appreciate it. keep looking. >> from the court to the silver screen, this is you. from wall street to silicon valley the showtown and publishing. forbes unveils -- >> oh under 30. i just missed that by 7 years. >> 30 under 30, next. welcome back to "squawk box." forbes kicking off the new year with its fourth annual 30 under 30 list. excuse me. we were saying things during the commercial break we shouldn't be saying. a who's who of the next crop of entrepreneurs and innovators. gracing the cover this year is palmer lucky, the founder of oculus. he sold last year netting over $5 million. with us now to go through the list is managing editor at forbes. good to see you. >> good to see you. >> was he through the clear winner? do we do this in a rank order? >> no. and it's more like the 600 under 30 in we have 30 people in 30 different industries. it's the day forbes breaks the internet. it's a great cross section of just industry by industry and amazing judges whether it's czarsara blakely and other people that are superstars. $500 million is now a facebook stock booming. he's close to $600 million at 22. the way we figure nobody's ever been that young with that much money. not even zuck or bill gates. when you think about what he accomplished at his age, it's amazing. >> we have a list here showing on the screen here. of everybody on the list if you want to make a bet of who we would hear about the most who could become the next mark zuckerberg, if you will -- >> the next mark zuckerberg. we've got a guy named austin mcchord. he turned down a hundred -- he owned 100% of this thing and he turned down $100 million offer to buy it. he does data backups so if something like hurricane sandy happens and you're a speedy trading operation, he can get you back up in seconds. which is very desired. instead he went out and raised about 40 million bucks. somewhere between 20 and $40 million to try to do it himself. but he turned down a hundred million bucks. that will be fun to watch. >> i'm also looking at this list. i assume this is an accolade of bill ackman. rian israel. will he go off and start his own fund after being put on your list? how does this worth? >> he said he knew more about warren buffett. he was one of the key guys on the burger king deal. this is somebody who again in that industry in private equity hedge fund it takes awhile to get running. here's somebody at 29 is already a goldman vet and ackman thinks is quite the comer. >> and tell the about these women who started the skim. >> a million people are now reading the skim. these are two "today" show colleagues who say -- >> nbc people. >> -- we want to do something that speaks to our generation, have a point of view. so they do basically a news letter that skims the news. and if that sounds simple they went out and raised about 6 million bucks recently to go blow this thing out. they've organically in the last year or so taken this to a million readers every day. >> randall, we appreciate you coming on. always good to see you. congratulations on the issue. look forward to seeing you for the next big list. >> always good. >> thanks. when we come back this morning, the good the bad, and the ugly. we'll talk stocks. the euro dropping below 1.20 when "squawk box" comes right back. u.s. stocks coming off a year of gains, but take warning. dom chu joins us with a big cautious signal for the markets. the euro sliding to a nine-year low against the dollar. we'll tell you how far the euro could fall by february. and it's been a year since colorado said it's okay to toke up recreationally. >> i just want to say that was a great idea! >> a peek at cnbc's new documentary about the cannabis boom. the second hour of "squawk box" begins right now. good morning again, everybody. welcome back to "squawk box" here on cnbc first in business worldwide. i'm becky quick along with joe kernen and andrew ross sorkin. we are watching the euro this morning. it is hitting a nine-year low versus the dollar. the euro has dropped nearly 14% since march. it's picked up very recently though. picked up with that speed in decline. forecasters are now looking at a greater chance of quantitative easing package for the european meeting. also watching the greek elections on january 25th. a victory by a popular far left party could put the bailout in jeopardy. that's a concern this morning and that's why you're looking at the euro at 1.19. also in our headlines, it is jobs week. among the key economic events leading to friday, we're getting the adp payroll report, also minutes from the last fed meeting. jobless claims then on friday. the government's employment report. also the new congress convening this week. seeing a gas tax on the table. they have not risen since 1993. senator john thune saying all options must be looked at. and then the final "hobbit" movie taking the top spot at the box office for the third straight week. you both saw it? >> we did. >> brought in nearly $22 million in north american ticket sales. disney's film version of the broadway musical "into the woods" was second with $19 million. i've not seen that yet. >> have you seen it? >> no. >> i'm interested in it. >> meryl streep? >> yeah. looks good. just haven't gotten there yet. we should tell you there's a warning light out there for the markets. dom chu sounding the alarm for the growing level of debt. this is a big story. >> it's one of the big ones. to help kick off 2015 we here at cnbc are releasing a new and improved online offering called cnbc pro. meant for real market junkies. among the stories you'll look at the margin you were saying. that's borrowing money to buy stocks. the data released by the new york stock exchange every month. as you can see in the chart here, the amount of money people are borrowing to buy stock has reached a peak-like level. we're at the highest level ever, but that's to be expected as the market gets bigger over the years. but now we're at the highest level of margin debt relative to the economy since 1929. we all know what happened there. you can see these circles here around the internet bubble. before the financial crisis. and here we are right now on the far right-hand side of the screen. experts are divided on how important an indicator this really is. one thing it might indicate is when stocks fall in value, that downdraft to the downside again could be more volatile. now, investing editor piece is up on cnbc.com and for a limited time there is a free trial of the cnbc pro product. you can check it out. the full story for margin debt online there. back over to you guys. >> any thoughts as to what leads to that? people just get more interested in making sure they buy, they're more interested eded in buying more because they think they're sure things or something? >> it's not just that. the reason why there's a debate about whether or not this is important is margin debt is not an unhealthy thing. it could signify a longer bull run. these types of things these type of margin buying situations could go over years. this is not to say that this is going to crash any time soon. it's more of a flashing yellow instead of red light about whether people think there's a peak level out there. that's why this is important. it's not so much we're going to see everything crashing down now. it's just one of those indicators that in confluence with other things could indicate we may be due for -- >> but it's another one of those indicators of an economy or sentiment that's getting pretty bullish. but we're still at zero which is classic with all these things that maybe wage pressure started to build up and unemployment is down. margin debt is at a high. and the fed's still at zero. now i'm starting to think they're in a box because now they can't raise. it's not the box they have to stay low. it's now with the rest of the world staying at zero they're going to continue to get screwed for the next year or two. >> that's been the knock on the zero interest rate policy ever since it got put into place. the people with disadvantages are the ones on the older end of the wage spectrum. yes, there's a tradeoff for all of this stuff here. but what this is mostly is just at least an indicator people want to watch to say whether or not their things are going wrong. this is not to say they are, joe. >> well a lot of reasons why it would be nice to have some dry powder next time there's an economic slowdown and not be at zero. and you also worry about so much money moving into areas where maybe it shouldn't be. . where in more prudent times it wouldn't be in emerging markets or whatever. >> but that's whether or not you learned the lessons the last time to keep that dry powder. >> we don't have any right now. and there's a slowdown. i'm worried, dom. i'm very very very worried. >> i've been worried. but i've been worried for six years now. >> by 8:00 i'll probably be fine. probably be bullish by 8:00. >> yeah. stick around right? >> yeah. doesn't really matter. >> dom, thank you. that's really interesting. more on the markets now. we're joined by joe quinlan and jim paulsen. you know paulsen, we'll get to you in a second joe, but last time you were on your thesis was all the good news was pretty well telegraphed and maybe in the market. maybe we're set to ring a little of the complacency out of it. >> i kind of think we're going to be at a broad trading range this year joe. we could go a little higher. but i think we also are going to see some lower levels as the year progresses. kind of digesting the big moves we've made over the last three years. you know it's interesting, we've got this sense we had this big move in 2014 but as we sit here this morning we're probably 50 points away from the level we were at in the summer. and it wouldn't take much of a decline to be flat since last summer if you will. and i think that's kind of what we'll revisit this year. you know i do think -- i'm not as worried about this current deflationary fear everyone has. and worried about whether the ecb's going to do quantitative easing or not. i think it's already been done. i think we've had a massive stimulus applied to the economy. it's the equivalent of a massive fiscal tax cut and equivalent of a massive quantitative easing program that's already been done throughout europe. look how much bond yield sovereign yields have fallen over the last year. i think with the lag we're going to see a pickup in growth not only here in the united states. but across the globe. that might be good for europe and japan, but i think here with the unemployment rate falling close to full employment, i think it's going to put the fed and bond vigilantes in a box in a hurry. >> that's good. i'm glad you're saying that. >> maybe. >> well i was going to say long-term you stayed bullish. i was going to give you all the things mark just talked about to not be bullish and see whether you change them. you're still saying any sideways action we have in 2015 isn't because of the fundamentals have deteriorated. they're still good. >> that's right. >> what about you, joe? >> i agree with that joe. but i am concerned as we start the year. europe's a huge drag. china's probably growing by 5% not really 6.5% or 7%. there's an adjustment there. so i agree with jim. the oil price cut is a huge tax relief for a lot of the global consumers. it's going to take six months for that show up. europe a is huge economy. they've got to get moving. we've been saying that for six years. here we are in 2015 saying the same thing. >> you differ with jim on that then. he says you know i mean what's qe going to do? the germans need to drop down the yield on their bonds? >> the eurozone is a surplus region of the world. they need to spend more. how they spend it that depends. but they're really taking demand away from the global economy as putting more demand in. >> but that's not something the central bank there can be right? their only option is a qe bond buying program. >> they can do more with the infrastructure spending the service industry is terribly fragmented. it's behind the curve. it's really -- there's a lot of regulation that could be broken open to bring out some more growth there. >> those are changes we were expecting over the last six years. right? we thought we were buying time to get the changes through. they didn't really follow through on any of it. >> not at all. here we are 2015 we're still having the same debate we had in 2010. >> is your number 8% to 10% for the s&p positive this year? or is that where you are? >> we are there, joe, in a sense. i do think the u.s. equities are underowned by foreigners. i think at least in the first half of this year you'll see them moving into equityiesequities. >> so what would you put your money on if you had to? >> flat. >> flat. zero. yeah? >> i think we might see over 2200 2250 this year. we might also see 1850 joe. i think the market's caught in the united states between two opposing forces. we've got much better growth here in the united states. i think we're doing 3.5% this year up to 4% in growth. the broadest growth and recovery. but we are also near full employment. and are very close to setting off inflationary indicators which i think is going to be problematic for the markets. we may melt up on better growth and bond vigilantes. >> anybody that's been worried about that has been wrong. you know, that's like still way up there. and everybody's working part-time. nobody can get a better-baying job. you act like there's no slack left. that's sort of an outlier opinion, isn't it? >> i think it is. i think it is. i think we've been worried about slow growth so long that when you head towards 5% unemployment you're creating 2250,000e inging 250,000 jobs a month and you've got net worth over $80 trillion in households 20% higher than the previous peak. isms for manufacturing and service sector are back. bank lendings up almost 8% annual rate. this is an economy which has shifted from 2% stall speed to 3.5% growth probably. but the difference is we're no longer at 8% unemployment. we're closing on it. i think we go into this year with a deflationary spiral fear in the air, but i think we're going to have inflationary concerns before the year is out. >> jim, when is the last time you predicted a flat to down year? >> i haven't been bearish at all in this recovery. i think even in pullbacks previously i just felt the market was so cheap and sentiment was so bad that it wasn't worth worrying about it. they wouldn't last. but we now have a more -- we have a market that's now at 18 times earnings sentiment is the calmest and most confident it's ever been. and we have to do one thing. we have to reconnect interest rates in the united states to the economic cycle. we can no longer have interest rates priced on fear of 0% interest rates 2% 10-years. >> you're calling for correction this year but you're calling longer term over the next two to three years for higher stock prices. we have people watching this program this morning thinking they missed the bus before and wondering should i get in should i wait for the paulsen correction to happen. if the stock market is going to be up in two or three years anyway. i should just forget about even trying to time it. >> i would not try to time this much. where are you going to go? bonds or cash? i'd say overweight. but what i would do is i would minimize my exposure to the united states stock market. i'd go overseas. i like europe. i like japan. i like the emerging world. sfl sfl >> jim as an enigma you're a herbal socialist basically. i don't know whether you do that thing, whether you whip yourself for being a bad guy and a good guy. but have you come to the realization that a paralyzed government is what we need since that's what delivered this rosy scenario. are you finally willing to admit that government is not the answer? maybe a paralyzed gridlock situation is better? >> as an investor joe, i have no problem with gridlock. i think in some steps our founding fathers set that up by creating a crazy thing 550 people have a agree on something. >> and happy days are here again. >> washington has to do -- >> i think people have worried far too long about what government will do or won't do when what they should be focused on is main street. >> and joe, everybody complains we didn't have an energy policy a federal government energy policy. seems like somebody had an energy policy. >> yeah. we did. it was called the private sector. the wildcatters in oklahoma an montana. we changed the world. we can grow without the government. but long-term we need a functioning washington. we need that to kick in. that could be the outlier in 2015. >> oh, no. another kennedy democrat. quinlan, another -- you are, aren't you? >> not really. >> sound like one to me. all right. thank you, joe quinlan and jim paulsen. >> there you have it. when we return we have the growing population of vaping. poised to take off. king rogers has the topic. and a sneak peek at the marijuana documentary one year after the legalization of recreational marijuana in colorado. and then we'll talk about the precipitous slide in the euro. how much farther could it fall by the end of this month and what does it mean? stick around. we'll tell you about it in just a moment. welcome back to "squawk box," everything. we've been watching the futures this morning and they have been under some pressure. the dow futures look like they would open down about 80 points this morning with the nasdaq down by about 20 points. we've also been keeping an eye on shared of cempra after an oral version of its leading antibiotic meeting the main goal in a trial. stock up 30%. oxford dictionary's word of the year is vape. as in vaporizers allowing marijuana and nicotine users to discreetly consume. >> vaping is kind of this family friendly legal cousin to marijuana with ties to that growing industry, but it's also taking on a life of its own. the electronic cigarette and personal vaping industry which allows users to inhale vapor from tobacco, marijuana, and non-nicotine based juices is poised to hit $3.5 billion in the year to come. 2014 was also a big year for vaping. oxford dictionary coneined vape as the word of the year. now, users say it not only helped them quit smoking but it's a way to socialize. >> i'm bringing more and more friends into it. yeah. we sometimes just get together and, you know have a glass of wine and vape. and it's fun and it doesn't smell and it doesn't make you -- >> and with flavors like honey, gummy bear and more even non-smokers are getting in the mix. it's now less about quitting and more about community. >> most people start using them to quit smoking. but then the experience of vaping has grown into this whole kind of social aspect of things. so after, you know -- maybe after they have totally kicked their smoking habit, they've met cool people here. >> but those nicotine-based juices may be off the market in 2015 pending fda regulations that may require brands to apply for approval. the fda says this shrink the market from thousands of products to as low as 20. >> so we were just talking before we got here about what vaping is how it works. you said it smells pretty good in the shop. >> it's basically battery operated devices that have a cartridge on them with a juice. and it heats it up and turns it into vapor. you inhale and exhale it. a lot of flavors do smell great. >> why don't they smell them as an air freshener instead of in your lungs. >> so it's a gateway. and we don't know if it's better than cigarettes. >> there's studies on both side. and the fda only studies e cigs for -- >> how do i know the difference of e-cigarettes being sold at stores by the cigarette companies? >> they're the same. but the fda regularlations could take them out of it. >> before you're addicted to nicotine maybe you think you look cool when you smoke. but there's long been maybe a freudian component to being fix sate fixated in the oral stage. >> and it gives you something to hold. it can satisfy that craving. people who are trying to quit say. >> i don't know if i buy all that. do you buy all that stuff? do you have dreams about washington monument? >> no. >> tunnels, trains? >> no. >> your mother anything? >> no. coming up -- no? >> no. nightmares about you. >> that's good. nothing's going on is there? nothing that there's anything wrong with that. uber's new year's numbers. the ride sharing service releasing stats from a demanding night. and then the euro hitting a nine-year low. how the ecb and elections in greece could drive it even lower. "squawk box" will be right back. take a deeeeep breath in... and... exhale... aflac! and a gentle wavelike motion... ahhh-ahhhhhh. liberate your spine... ahhh-ahhhhhh...aflac! and reach, toes blossoming... not that great at yoga. yeah, but when i slipped a disk he paid my claim in just four days. ahh! four days? yep. see why speed matters, at aflac.com. when we come back this morning, it has been a year since colorado legalized recreational marijuana. we have a sneak peek at a new cnbc documentary showing the unexpected profits and pitfalls from the pot market. stick around. we'll be back. e financial noise financial noise financial noise financial noise welcome back to "squawk box," everybody. in our headlines this morning, the u.s. consumer regulators reportedly writing new rules for payday loans. "the wall street journal" says the goal is to make the money easier to repay. vanguard is reporting a record $216 billion in inflows last year. that data is the last sign they're shunning funds for indexes that charge a lot less money. mark zuckerberg is creating a year ends books page and is urging friends to read a book every other week in 2015. and uber ringing in the new year with a spike in users. the car sharing service says it provided 2 million rides on new year's eve and new year's day. the smartphone app was downloaded more than 20,000 times in the few few hours of 2015. demand for rides in most places peaked from 1:00 to 2:00 a.m. paris, france demand peaking after 4:00 a.m. and the hub blowing up on social media. i saw this between christie and jerry jones last night. christie watching dallas beat the detroit lions 24 to 20 in the ffc wild card game. people might say, wait a minute you were at the knicks game. how did you see that? because i was behind where all the reporters were watching it. and all the tv screens were on and i was able to watch live the knicks and i did see that weird hug. >> i didn't see it. >> and i also watched the simpsons. >> somebody e-mailed me afterwards saying chris christie blew a chance he had. this is coming from a broncos fan. >> twitter was alive. i had my phone like this and it started almost burned up. saying what was that. >> you know what? but chris christie if he wants to be -- you know and he doesn't worry how it looks. i think that's -- for me that's a benefit. it is. >> picking teams makes it tough if you want to be a national politician. >> you should pick a team opposed to well i'm kind of a white sox fan i'm kind of a cubs fan. >> you talking about hillary now? that's much worse. >> apparently he's been a fan. >> what does he do in the awkwardness of the moment. he gives a high five and nobody gives it back. >> andrew's only question does he pay for his own flight down there was your other question. >> that's an interesting -- >> and ticket. >> -- question. >> well the ticket i'm sure he could go as a guest of jerry jones. >> i don't know about that. >> really? >> i don't know what the rules are. >> okay. harry smith is here. we are very happy he's at the table. >> can't keep my mouth shut. >> we're thrilled to have him here. he's here to talk about all things, but one of the main reasons he's here is because it has been a year since colorado became the first state to legalize recreational use of marijuana. tonight on cnbc he's got a take at a look at some profits and pitfalls surrounding the green rush in a new documentary he's been working on "marijuana country: the cannabis boom." here's a look at it. >> dr. edward ma runs the epilepsy center at denver health hospital. he's been studying the effect of charlotte's web on kids with drava syndrome. >> it's one of the newest things. when we think about anti-seizure drugs and the drug development pipeline, this is one of the things that has very very exciting promise. >> but he cautions its overall effectiveness needs more study. research shows charlotte's web reducing seizures in less than a third of the children using it. >> the impact size is not as large as perhaps was being touted in parts of the media. 20% to 30% are having a dramatic reduction and it tails off from there. >> usually we see you across the way. >> happy to be here. >> becky can ask the question. you were asking a question -- >> what is charlotte's web? >> it's a strain of marijuana that's high of cbds. that's the mystery part that they think has some actual healing prots versus tch which is the stuff that is psychoactive, you know that this guy takes most mornings. and so there is this very specific strain. there are more than 200 family who is have moved from across the country just to get to colorado just so they can get this for their very, very sick kids. >> a mistake maybe. if you're saying of a third of the benefit. >> most of these meds because all these kids end up on these. they load them with poisons and they get less and less able to fight uf what they're trying to fight off. one in three is about average for different kinds of meds they might prescribe. >> what is the tch content? >> it's almost zero. and what's interesting is some kids do a little better if there's a little bit of thc. so it's kind of an interesting balance. >> the kids that are hyperactive, who know how this stuff works. >> there's no question. to me one of the things that's most interesting, this schedule one drug forever and ever we don't know anything about it. the research is just now starting to happen. and they say there are actually resenters in the brain that are there for millennia that are clued into some of the properties of marijuana. you know when our hands were dragging on the ground maybe people were smoking this stuff. >> but it could be something else that -- >> of course. >> we did a segment before you came on about vaping. >> yeah. huge. >> and is it safer to vape marijuana than it is to smoke it? >> of course it is. >> that's clear? >> it's just like an e-cigarette. >> and do we believe that e-cigarettes become gateway drugs, if you will to smoking cigarettes and pot? >> who knows about that? you talk to a bunch of different people talk to them about addiction and say marijuana is absolutely a gateway drug. saying absolutely it's not. we talked to veterans out there who say you know what? as opposed to all the opioids and all this other crap that the va is prescribing for me why don't you let me smoke a little weed? the whole -- every time i go out there and i come back and feel like i'm watching a genie come out of a bottle. it is so interesting. >> in a bad or good way? i have to admit sitting here i've been a little concerned about saying i don't want my kids getting into stuff like this. i'm concerned about the legalization spreading. are your views? >> this is already there. what colorado does is it opens the curtain and all of a sudden this thing that's been there forever is out of the closet. that's why we're so interested. >> you spent time there. what do you think it's done to the culture, to the crime rates, to all of the issues people are worried about? >> everybody said this sky is falling. crime is going to go up. serious crime is actually down in denver. everybody's going to drive stoned and kill each other. actually highway deaths are down this year in colorado. so all that kind of anecdotal stuff, there's no way to know because there's not enough data. >> they do now -- you know ding dongs and twinkies under lock and key in convenience stores now. that's where the theft was occurring. and doritos. it's like i know what i'm talking about, don't i? >> did your brain go all the way back to the '70s? >> i remember the '70s which i shouldn't. >> vaguely. >> we're talking boulder in mid-'70s. when they legalized it i was like wait it wasn't legal? >> here's what's interesting about it. you've had two states that have sued the state of colorado because they're saying colorado is a pot exporter. we have the attorney general of the state talking about we know that significant amounts of pot are -- i said to what you are the new mexico. he said yeah kind of. >> if you had to look at the net positives and -- >> cost benefit analysis. >> how many people dies of dwi. and then you look at boardwalk empire and what that spawned when you tried to outlaw it and all these things come into play with this discussion. >> and i think that's whaun one of the interesting things about this documentary tonight at 9:00 eastern. there are so many unintended consequences. hickenlooper, the governor out there, is a smart guy. they're handed this. he's handed this by the voters. legislature never got their hands on it. handed this by the voters and all of a sudden we have to implement it. it's a gigantic crazy experiment. let's legalize it. just wow. big stuff zplp we'll check it out. >> thank you very much. 9:00 p.m. come on back. i want to know about all the business guys cleaning up from this. >> i have stories. you want a real quick one? >> yeah. >> mark twain says picks and shovels and if there's a gold rush. we've got a guy in the story tonight who makes extraction machines in the middle of a farm field in ohio. he cannot make them fast enough. >> for the vape. >> no. to get the raw material out of the -- to get the oils out of the raw material. >> harry smith. the documentary 9:00 p.m. you do not want to miss it. when we come back two big slides at the end of 2014. the price of crude and the euro. our trading block breaking down the move. we're talking about that when "squawk box" returns. this is happening just one week after competitor u.p.s. did the same thing. so what's this mean for online shoppers and online shippers? or own morgan brennan is here with the lowdown. >> hey, andrew. now that the holidays are out of the way, it's all about the new rates. u.p.s. hiked its rates 4.9%. and today fedex is doing the same. but here's where it's interesting. dimensional pricing. they are now charging by size as well weight. that's on all ground shipments. that's the big change to focus on. directly targeted e-retailers with packages that take a lot of space to ship. a 17 inch square box weighing three pounds will be billed close to if it was 30 pounds before. this means more revenue. but u.p.s. and fedex have been working with their customers in laboratories to pack more efficiently. and the big upside here creating more space on trucks and planes for even more goods. but consumers are going to see the shipping bills increase. and this is also why you may see some of your packages from amazon ebay others come through the u.s. postal service instead. while u.p.s. and fedex are hiking prices, the usps has been slashing prices to attract more e-commerce business. >> morgan thank you so much. i always wonder. you get those boxes from amazon that's something this big with a box this big. >> exactly. you see toilet paper sent out in big boxes but doesn't way much. now it may cot most to ship that than buy that toil it paper online. let's get to the first trading block of 2015. this nine year low against the dollar with the euro. joining us now on where question expect the dollar and the oil to trade in the year ahead is becky lien. welcome to both of you. kathy, why don't we talk about what's happened with the dollar. what we've heard from people already today is this is just the beginning. the euro could face significantly more pressure as we get a little closer to that january 22nd meeting coming up. >> you're right. i think the real question to ask right now is why would you want to own euros? an environment where there's weak growth quantitative easing is coming and there's a risk of upset. so i think investors are starting to realize that and as a result they're pressing the gas on the euro slide and there's a very real possibility we could see a minimum of 1.15 by the end of this year. >> 1.15 by the end of this year. so that's something you're expecting more pressure. that's what we heard from analysts last year. >> right. and we're starting to move in that direction. i think the monetary divergence story is really going to be the main headline of 2015. many people have talked about it. i think you're just beginning to see corporations and private sector flows move in that direction. you're probably going to see more hedging as we -- as the euro continues to fall. i think that's really going to exacerbate the slide. even spectators look at the positioning. not at the same levels they were in november of last year. so there is more room to the downside. >> do you expect the federal reserve to raise rates this year? >> absolutely. i think it's a given in terms of when -- in terms of their rate hike. i wouldn't be surprised if they raise by 50 basis points. so the market's certainly looking forward to that. >> if they don't, we had one analyst earlier this morning who said he does not expect them to raise rates this year. if they don't, would that change your guess about where the dollar's headed? >> i think if that were not to happen it would not be realized until the middle of the fourth quarter of this year. between now and then there's still a lot of uncertainty for the eurozone. we have more coming down the pipeline from europe and japan. that's only one side of the story. the other side of the tour is still going to push for dollar gains. >> ken were five-year low for oil prices today. what's happening? what happens from here? >> good morning, becky and happy new year. from here we're probably getting closer and close tore that point where six months from now we'll turn around and say that's when it changed. two things are going on behind the scenes. one is that rigs are slowing here in north america. and the second is that demand though sleepy is going to wake up. eventually people buy more and travel more although apparently based on the previous segment, they may not be using as much logistics for oil. in any case where we are going from here is january is a weak month for demand. so this is not a particularly good time to try to pick the bottom. but it may be near the point where we will start to see signs. most importantly if we start to see this production in north america really is slowing down then the first signs of that can start to show up january, early february. then you might have a different conversation in three months. >> you say it's not a great time to pick a bottom but sounds like you are. >> no no. i'm hedging. i'm picking a near the bottom. which is saying nobody can be sure and the history has always beaten the analyst if you look at the record. >> but when does -- you know here's what i think. or here's what just listening to everyone we have on kevin, they all say it's only a matter of time before we snap back and go to a more realistic level. and just that mind-set one of these days it could be where, you know it doesn't return to 90 in three months like it did the last three or four times this happened. what could -- give me your average price -- give me the range for the average price next five years for oil. >> the next five years, the futures take it above $80. and could be anywhere between $70 and $100. but for this year between $70 and $80 is probably as high as you'd want to go. the real reason is inventories have to burn off before anything can change. >> what if it's $40 to $60 for the next five years. something you're not even admitting the possibility of and no one is. >> i don't think it's likely. >> that's what i mean. >> we're going to use it to grow. >> we all have opinions. but we'll see. >> all right. kevin, kathy, thank you both for joining us this morning. talk to you soon. when we come back this morning, driverless cars on display around the consumer electronics show in las vegas. phil lebeau is there and he's taking a test drive. >> referee: hands-free and foot-free. what's it like to drive the california highways? not really driving the car. a test drive of awwudi's concept car. coming up on "squawk box." why are we so committed to keeping you connected? why combine performance with efficiency? why innovate for a future without accidents? why do any of it? why do all of it? because if it matters to you it's everything to us. the xc60 crossover. from volvo. lease the well-equipped volvo xc60 today. visit your local volvo showroom for details. car companies showing off their self-driving cars. we keep talking about this phil. we must be getting to the point where we've got to take it seriously. >> you should take it seriously because the technology is here. yesterday we had a chance as we were driving from san francisco to here in bakersfield in this car. this is the audi a-7 pilot driving concept car. yes, when i got behind the wheel, i was driving hands free. we're on the highway just outside of palo alto california. the vehicle has let me know that it's okay for it to take control. i press these two buttons right here, an l.e.d. strip on the front dash board as well as the instrument panel lets me know that the piloted driving technology is in control of the car. and that's it. now we are hands free foot free. i'm not controlling the acceleration or the braking of this vehicle. as we're driving down the highway towards san francisco, if there is a car that slows down in front of us and we need to lane change there are 20 sensors in this vehicle that are measuring the other vehicles on the road. if it's safe to make a lane change, it will do so. now, this technology only works on the highway. when you need to exit the highway or you need to slow down and go into street traffic, the vehicle will tell us. now, we're turning right now. i'm not controlling the vehicle at all. but in about a half a mile or so it's going to tell me that our next exit is coming up here and it's time for me to take control of the vehicle which is basically pressing two buttons. 15 seconds until it deactivates. i press these two buttons right here. lets me know that i'm now in manual driving and i'm taking control. in fact, i'm going to lane change here. do it the old fashioned way looking out the back window to make sure it's time to get off at our exit here. so the number one question i got all day long when i was tweeting out that we were driving hands free from san francisco down here to bakersfield, what does it feel like? i have to tell you it's very intuitive and natural. it's like the next extension of cruise control where you set it and you sit there. and the car is literally moving in and out of traffic as it needs to as you're going down the highway. we were coming down i-5 coming down here. we're going to be driving this a-7 live on cnbc hands free a little later this morning on "squak on the street" and "power lunch." it'll be interesting to see how it goes about today in terms of reaction we get from other people who see us driving. because when people pass you and see you're driving hands free there's a bit of a double take. >> wait a second. how do they know you're driefing hands free. are you driving down the road like this just to scare everybody around you? >> i can't see you, becky, but if you're waving while going down the road -- >> can the car do this as night or in the dark? you look like it's dark outside where you are right now. >> it can do it at night although we should point out that this test drive and we were licensed by the state of california to be part of this test drive, it's doing it during the day. now, they have tesd it at night. they eventually will offer this at night. there are some areas, though where it won't be able to happen. a couple of those areas, if it's snowing or raining. because that hurts the sensors. >> you looked a little nervous, i have to say. you looked nervous. >> phil you probably get nervous with cruise control all the time. i've got so many more important things to do instead of driving? i don't have anything to do. i can't read. i get car sick. i'd rather have it just tell me if i'm changing lanes into an 18 wheeler. i'd rather have it stop me from doing than rather than just being in control. >> i don't know joe. very natural. once you're behind the wheel of this, you're very comfortable saying okay. the car knows what's going on. >> all right. >> phil thank you. we'll be watching that live test drive later this morning too. see ya. when we come back this morning, the euro plunging to nine-year lows. how much lower could it go? we've got that story coming up. say you're a finance guy. a farmer. a researcher. you used to depend on experience. the internet. your gut. today you can use ibm watson analytics. it can make sense of all kinds of data. uncover hidden correlations and new opportunities. and give recommendations with more confidence on who will buy. what to make. where to plant. which helps you make smarter decisions. there's a new way to work and it's made with ibm. predictions for 2015. what would a greek euro exit mean for the global markets? is a proxy fight brewing at coke and pepsi? and can investors expect to pay higher bank fees? we'll discuss that issue and others that matter most to your money in the new year. plus which investor should you listen to? unveiling the latest list of who's who on wall street. and we'll introduce you to the next self-made icon. he's the creator of fresco. he will be our very special guest 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 andrew ross sorkin and becky quick. a swath of arctic air going across the nation. we'll see some snow. the fast-moving storm already prompted warnings and other winter advisories. check your flights if you plan on flying today or tomorrow. in new england temperatures are not expected to get above zero. it's january. there's snow. stop the presses. let's get you up to speed on some of the other top stories this hour. the euro sinking below $1.20 since early 2006. among the biggest speculation, worries about greece. more in just a minute on that story. and crude and the supply gut. and calls for the s&p to rise 8.2% this year. that's the average prediction by research firm bernini associates. i always -- >> i have a supply gut. that's actually a glut that we're talking about here. >> it say gut or glut? go back. >> does it matter what it said? you know it's a supply glut right? >> i was thinking -- >> all right. we are less than 90 minutes away from the opening bell on wall street. futures off to the lowest levels of the morning. dow right now down 66 points. s&p indicated down about nine points. and this is coming after red arrows started off the session in europe. in france the cac is off by 1%. ftse down by .7%. a lot of this coming about what's been happening in europe. and along that theme, concerns over the health of the eurozone are resurfacing. michelle caruso carrera is here with more. >> the radical left is still ahead. 25th is the election. let's tell people why you're talking about this. over the weekend there was an article in a german magazine that they say if greece leaves the euro not a big deal. why are they talking about that right now? why would they plant that story right now? because there is an election in greece three weeks from now. the guy in e the lead this guy alexi alexi sampras. he's not nostalgic for the former soviet union. but very much would be against all of the things you talk about in modern capitalism. what makes him different compared to all the other antiestablishment people rising through france and people in the uk is he says he does not want to leave the euro. however, all of the things that he says have to be put in place to stay in the euro make his participation in the euro unattenable in the eyes of the rest of europe. >> would like to stay in the euro but would like you all to keep paying for it. >> exactly. he wants a huge forgiveness of loans and things that are not going to fly. and so now he's basically setting up if he wins and it's not for sure, he's only leading by three percentage points. he used to lead by more than that. if he wins he's setting up a showdown with the rest of the european union about what they're going give greece to get them to stay. that's why you see the greek 10-year falling and all the yields falling relative to germany holds -- greek yields are rising sharply while people are worried about this. practically speaking the germans are right. the greeks no longer have the power to blow up the balance sheets of the banks. that was the whole debt exchange they did. they told all the banks you're not getting paid and then greece was loaded up with debt from the rest of the european countries. so greece still owes a lot of money. but now it's to german taxpayers. right? who want to load them up with more taxes essentially to forgive their loans. that's certain will i aly a possibility. >> if greece leaves who is next? i know ireland's in better shape than they had been. >> i'm not sure anybody is next. maybe cypress but they need to be part of the you're row and -- >> you think it might work out that way sfp. >> that greece would leave? absolutely. >> i think i read it could be a lehman square moment if they would leave. >> personally i don't believe that. because train wrecks that you can see far in advance are not -- >> you can get out of. >> exactly. i don't think it's going to be up to the greek government. when will we know that greece is going to lee the euro when we see bank runs. when the population says this is coming. remember, a currency that is not backed by anything like gold is a deeply psychological thing. and in theory if you look at latin america in the '80s compared to now, you'd say greece should have left the euro a long time ago. but they stayed. that's one thing to keep in mind as we talk about this. it's not going to be some grand macro decision. it's going to be the people on the ground. an economic conference takes place today. steve leisman joins us with the highlights. >> thanks. this is the biggest economy conference of the world. the united states economy is on better footing than others around the world but there are serious concerns about asia and about europe and whether quantitative easing would even work in europe. that comment, becky, about lehman square greece leaving, that came out of this meeting. it was a comment by barry ikengreen. and eric rosengren said the federal reserve needs to tread carefully at raising rates this year. >> low inflation means that we may be able to be a little bit more patient than we've been in the past as long as we're experiencing low inflation there's no reason for the path to be particularly abrupt. >> former economic -- former bush economic adviser glen hubbard says the u.s. has a lot of scope for improvement including things like tax reform. but said looking around the world, the u.s. is the leader of the pack here. >> we have had an uneven global recovery, to be sure. despite the sometimes sour attitudes in this country, the u.s. continues to dominate industrial economy success. even with the downside risks faced by the american economy over the next year it's still likely to be the relative winner of the party. >> bob gordon of northwestern university, he's sticking to his idea of this secular stagnation that because of low popularity we're doomed to 2% growth and low interest rates for a long time to come. but he got a lot of pushback here with u.s. growth rates recently hitting that 5% mark on the euro. a lot of skepticism from guys like marty feldstein who says with interest rates already low over there, he has his doubts about whether draghi's potential qe would have any positive effects like it did here in the u.s. back to you. >> can i ask you one question? is there a historical relationship between the 10-year and fed funds? what should we -- can we multiply it to get it where it snoub the reason i'm asking if they start going up and the 10-year according to some people if yields still drop because of what's happening in europe would it look weird if it keeps responding and the 10-year doesn't respond, does it have to respond? >> it should respond. alan greenspan said they were trying to raise rates but the 10-year didn't respond. so the control of the fed over the 10-year is once that's always been suspect. you can imagine if the market thinks the fed is making a mistake and raising interest rates prematurely, it can come down to reflect the lower inflation. >> it's not just that though. >> however, the balance sheet and the ability to use qe the fed may exercise more control over the long end if it gets into a serious situation. i think it would be a last resort. >> but we had people who pointed out earlier today that hadn't thought about it when you compare it to the german bund when you compare what you're getting on it it looks good particularly if they're facing one much stronger. >> could they do qt? >> what's qt? >> quantitative tightening. could they sell bond? >> absolutely. that's why in our fed survey which you make a lot of fun of which is fair enough but we look at the balance sheet. that's going to be another instrument. you're going to have your interest rates out there. and there's this $4 trillion kind of hammer that hangs over the market that the fed can decide to clamp down if it wants to. i don't think it's going to push against the 10-year right now. i think they would be happy to have a subdued 10-year while it raises just a little bit. larry summers has an interesting idea here by the time the next session rolls around they will not have enough arrows in its quiver to cut rates the way it can. we're getting back to the zero lower gain in the next three years. >> all right. >> thanks, steve. we'll see you soon. reuters is out with predictions for the year ahead. 2015's theme is animal spirits and crisis. rob cox is joining us. it's great to see you this morning. >> great to be here. >> explain that. what are the crisis ghosts and animal spirits. >> you see stock markets around the world are up. you've got m&a at near-record levels. a lot of industries are still dealing with the aftereffects of the 2008 financial crisis. primarily banking. right? so we're seeing a lot of -- that is still a theme we're seeing throughout all the economies that we look at around the world. and that is actually driving some of the things we see that are going to happen in the coming year. >> such as what? >> well activism is going to be a big one. it keeps -- it's the gift that keeps on giving for all of us but it's going to get really interesting. a lot of the lower hanging fruit has been kind of picked right? so as these guys get out there with these really good performances from the past couple of years, lots of noun put to work they're going to struggle to find -- you can't just come in and take another restaurant company and tell them to put more salt in the water. right? you're going to have to do other things. some of the things we think might happen are particularly big banks. one of our predictions is citigroup, jpmorgan, may see a cage rattling. >> become a target. >> and in the past this has been difficult. you're not just dealing with shareholders and boards you've got regulators. but right now any move to simplify big financial -- >> you put citi at the top of that list? or jpmorgan? zblild put citi at the top of the list. there's quite a lot of talk about jpmorgan. it's going better than a lot of competitors, but there is an opportunity to simplify the bank. >> bank of america in that category? >> you could. i'm not saying break up into -- one of the arguments is break it into four pieces. but you could simplify a bank like citigroup and say mexico is a distraction, spin it off. your overseas retail business is a distraction. you're not making enough money on your u.s. retail branches. sell them. you've got regulators index. but right now anything to simplify would be welcome. >> we were talking about ibm who was the worst performer in the dow this year. do you think they become a target of axis? >> yes. again, it's not like you just walk in and say break it up and do this. one of the problems with ibm is it's been a financial engineering play for the past 20 years. it's returned $23 billion, $10 billion of that is buybacks. that's not a good return. if you look at their business, they need to reinvest in the business. >> so they say they are in the middle of a turnaround and we're going to see it in 2015-16. do you believe that? >> no i don't actually believe that. unless they strange strategy. they've got $10 billion in buybacks or something scheduled for this year. we calculated. if you instead of buying back the stock, you invest that in cap-x, you would have a higher return. something like 12%. >> what would you want them to buy? >> there are any number of companies. i wouldn't say they spend all of it on m&a. we both know as you've written many times that m&a doesn't always meet the cost of capital. but you can invest in the business. they have something like a 22% return on capital. >> rob thank you so much for coming in today. we have a lot of things we're going to be covering in 2015. look forward to talking to you about more of them. >> see ya. when we return is it time to add some chips and salsa to your portfolio? or is this the year that burgers and fries will be the big one? the restaurant trade. and a look at the best and worst analysts in 2014. a teenager who turned down a job at apple to start his own company and our first dose of cramer. what's ahead in the money man's forecast for the new year? we're going to ask him. back in a moment. welcome back to "squawk box" this morning. the nation's automakers reporting monthly sales today. chrysler, december sales up 20%. that was weaker than the 25% analysts expected. biggest sellers, jeeps and pickup trucks. the restaurant sector trailed the broader market last year but there were a few fast casual names that topped the trend. chipotle topped up 30%. while buffalo wild wings jumped more than 20%. here now is an analyst that thinks this could be the best year for the sector in a decade. bob darington. because of gas prices bob? >> it's a combination of a lot of things. yeah that's one of the contributing factors. when you look back at the domestic economy, the wealth effective consumers. the jobs growth all these things really kind of set the stage. and then ultimately when you have low gas prices it contributes to that. >> so which sector of this group are you talking about mainly? will it be -- you looking at a monolith or you sit down at an applebee's or a drive-thru? which will do best? >> historically the better performers in the group has been the fast casual brands. and i think as we look out to 2015, the names that we think are going to have especially good years likely will be panera bread. we think they're going to have strong same-store sales growth. we think buffalo wild is set up for strong trends in 2015. and we also like red robin. they think that company is positioned on a valuation basis to be a strong stock price performer. >> seeing improvements in the labor market which probably will usher in higher average pay for the entire group whether it's states doing minimum wage. whether the president is successful. is that a head wind and for which part of the industry? >> to be fair, it's a head wind for the entire sector. whether it's casual dining, fast food, or fast casual. they'll probably all see pressures there. the key thing that we really watch are same store sales trends. without those you're not going to be able to face those head winds. but i think a combination of both better same store sales, lower commodity prices for a lot of these prices could more than offset that. >> in the past i've thought that shareholders and, you know the corporations themselves have done pretty well in recent years. we've all talked about the wealth disparity. let's say the president was successful and we went to a higher level federally, would it hurt profit margins or would it hurt hiring? would it hurt the people that it -- in other words, would it hurt the people intended to help? would fewer people get more jobs or would it just hurt the shareholders of the restaurant chain? >> you make a good point. what i would say is every restaurant brand whether they want to admit it or not are looking at ways theo try to be more efficient. in other words using more labor hours to operate their businesses. and there's a lot of ways they can do that. both in the front of the restaurant and in ethe back of the restaurant. broadly my view is that fast food chains will probably benefit more from a minimum wage lift because that puts more dollars in the lower income strata that ultimately use fast food restaurants more. >> we've had a couple of negative -- we had a taco bell close in springfield. the closest one. >> friendly's closed by us. >> was that a day of mourning for you? >> it sort of was. and also in ft. lee. i think a taco bell there closed. what's happening there? is it economychipotle? can it be stopped? >> you know to be fair chipotle is a juggernaut. no question about that. and i think the key thing people are getting is the fresher, better quality, less processed food. it's really resonating with consumers. i think that's a trend across the board. >> bob, thank you. appreciate it. up next a hedge fund founder fatally shot in his new york apartment on sunday. his son may have pulled the trigger. we'll have the details after the break. 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(see the number on your screen) call now. welcome back to "squawk box." i'm kate kelly with some tragic developing news from overnight that a hedge fund manager tom gilbert who ran wayne scott capital partners was shot dead at his home in manhattan. gilbert was pronounced dead at the scene by paramedics sunday afternoon when they arrived at his apartment. he had been shot in the head. gilbert who was 70 years old was suspected to have been shot by his 30-year-old son tom gilbert jr. according to media reports from late yesterday and today. the nypd confirms this morning and gilbert's son has been take sboon into custody overnight. but it's yet to be ruled a homicide. wayne scott was founded in 2011 by gilbert. company officials at wayne scott did not respond to request for comment on his passing so far. more details as we get them. >> all right. thank you. we'll be listening, watching. still to come breaking new ground. you'll meet a 19-year-old tech whiz kid who's gotten the attention of apple and peter thiel. the reason those folks and a host of media companies think his site could be a game changer for the news business. but up next the best and worst analysts. that's the same guy. here to name names. "squawk box" will be right back. as we head to break, look at u.s. equity futures. yes! so no set up fees! wooh! yeah! so i get help from rollover consultants? wooh! yes! no rollover hassle. great. woah oh, we're spiking things, robbie. for all the confidence you need. that's better! td ameritrade. you got this. e financial noise financial noise financial noise financial noise out of 42 vehicles... based on 6 different criteria... why did a panel of 11 automotive experts... ... name the volkswagen golf motor trend's 2015 car of the year? we'll give you four good reasons the all-new volkswagen golf starting at $17,995. there's an award winning golf for everyone. ♪ welcome back to "squawk box." in our headlines this morning, johnson and johnson buying a license option from isis pharma. shares of cempra are getting a huge jump this morning after an oral version of their lead antibiotic met the main goal in late stage trials. and ford downgrade to neutral for buy. >> and isis. sticking with the name. sticking with it. they had it first. we're going to stick with it. we're going to get through this period. it's rough. been rough. >> how to pay for that? >> al qaeda pharmaceuticals. i don't know. isis. change it. >> or sell it. we're going to take a hard turn i don't know left or right, who were the best and worst analysts of 2014. tip ranks is designed to help retail investors make better decisions figuring out which analysts are worst listing to. here is the cofounder of the list. and also eliot spitzer, the former new york state governor and attorney general. we had you guys on earlier in the year. we wanted you to come back to tell us what happened now yao been doing the rankings. tell us the best and worst of it. >> i'd like to take a few seconds to explain how we determine who is the best and worst. some of them incorporate factors like their compensation, where their work for, and how kind they are. we only measure the performance of the stock they recommend. they're only as good as their call at tip ranks. what we did was look at every stock that they rated, we have 30,000 buy and sell ratings this year. another 15,000 hold neutral ratings that we were agnostic to. and every time an analyst committed to buy a stock, we bought it and then closed the position three months after the position was open. so we found -- let's start by general numbers. we found out just following any analyst you would have made 1.12% every quarter which is less than the s&p that did about 3% every quarter. if you followed the top 100 analysts, you would have made 6.98% every quarter which is almost 30% a year. and about 18% above the s&p. and if you followed the top 50 analysts you would have made 7.5%. i'm talking about those that were ranked highest in 2013. >> that you measured. >> if you started looking towards the top 100 january 1st 2014, these were your results. >> you should do the top ii rated. >> i had gave a speech at an annual awards dinner once and said hate to say it you wouldn't do as an investor if you followed these guys' recommended. >> you said that at their dinner. >> oh, yeah. i had tomatoes thrown at me. i also said it's nice to put faces to the e-mails at that dinner. >> that's funny. >> it was. and what tip ranks has done is create the metric for transparency in the market so investors can use hard numbers. >> are there any matches? any matches between what's on an ii list or any of the other lists and your list? >> there were no matches. >> is there any reason to think that past perfect is indicative of future results? >> there were a lot of academic research on that. and we found out there is some correlation with the top 50 -- >> guys are actually good some of them? that's a new idea for me. >> they have to become our new guests. >> that's what we want people to be able to do. to see who's good and who isn't. so the folks you have here who tip ranks says are worth following. but also investors to get the hard analytical data. this is a market-based answer to the questions we discuss. >> i worry it's going to be hisenburg. >> you study it and change it and it comes back. this is why banks are investing with us. why a lot of platforms want to get us on their sites is you can find those correlation ifs you're smart about it. >> and if we want to go to your site, we pay to be on your site? >> well it's a premium model. you get a lot of information for free. >> what's the stuff you pay for? >> if you want to see the analyzed information. if you want to see what are the best performing analysts are saying. the most recommended stocks. >> go to the wall. let's tell us who the top five. >> so the top five number one is ph.d. from green capital called jonathan nashrof. and his quarterly returns with for did. >> was does he cover? >> health care. you'll see a lot of health care in the best and worst. >> you could rank sectorially. the metrics can be measured precisely to this. >> if we want access to that research, for example, they go through your site to get access to your research or get access separately? >> they have to get access separately. we're only publishing the bottom line. if it's a sell and price target. >> is there anything these guys had in common? did they come from small banks typically? big banks? >> that's a good question. we noticed two interesting things about the top five list. first of all, there were no tier one banks in that list. which we did see on the best performing recommendations. but we didn't see them on the leadership board for the best analysts. the second thing we found is all the five analysts on this list except for the last one were on our top 50 list of 2013. and the last one was ranked number 183 out of almost 4,000. which puts him still in the top. >> you also rate bloggers. and we have viewers who look at blogs. which were -- you have this winter you would have made 239%? >> yeah. so if you look at the best bloggers the interesting thing we found is all the top five came from seeking. even though it's 20% of the information we take from bloggers -- >> bloggers and the stocks they're recommending? >> exactly. we use machine learning technologies to understand. with analysts they have a structured language and set of terminology, buy sell hold et cetera. with bloggers there are no rules or grammar issues. they can be sarcastic and it's more difficult to determine how they perform. >> how do these guy dos it? recently we have discussions about guys that do a lot of leg work and was it inside work? it was and it wasn't. are these guys pushing the envelope on whether they have the ability to -- if he finds out you're going to be -- >> we're not exposing him to everything. >> i wouldn't even tell him half of this stuff. >> the short answer is we don't know. our job is to measure -- >> oh now you don't care. now you're not running for anything. >> i'll be on the phone in seconds. guarantee you. >> while you're here i want to ask. this was this appellate decision on insider trading. did the government overstep in that case? or do you think -- >> it's not possible. >> or do you think it's considered too narrowly? >> i'm not going to pass judgment on the particular case. but here's what i'll say. it's time for a statutory definition of insider trading. back when i was in law school this issue of tipper and tippee liability. >> are you defining it narrowly in the way that the appellate judges would have? >> i think they may have been a little too narrow. but i think that the lack of clarity -- and you'll agree with me on this. all the cases i made we proved an actual lie by the person whom we prosecuted. tipper tippee liability there's an area of ambiguity. that's not good. we need certainty and clarity so people know what the rules are. >> do you think they are getting a statute? >> no. right now congress won't do it. >> if you're a prosecutor you don't want a statute. >> no no. i always believed we did want clarity. i as a prosecutor didn't want to take advantage of ambiguity. i wanted certainty. i always said to the community define the lines and play by that line. it's simple. we don't need regulars or uncertainty. just establish a bright line and live by it. >> okay there. you have it. eliot spitzer, uri, thanks for coming in. >> thank you. up next we'll introduce you to a teenager who turned down a job at apple and is now running a social media site being called the instagram for news. he's getting a lot of attention from bigtime pc firms and media companies. all of this before he turns 20 years old. we have his story after the break. in my world, wall isn't a street... return on investment isn't the only return i'm looking forward to. for some every dollar is earned with sweat, sacrifice, courage. which is why usaa is honored to help our members with everything from investing for retirement to saving for college. our commitment to current and former military members and their families is without equal. start investing with as little as fifty dollars. ♪ well move over getty images. there's a new kid on the block. we mean new kid. this is a 19-year-old who founded fresco news. fresco is a photo sharing app that's dubbed the instagram of news. the start-up actually licenses its photos from amateur photographers at the center of breaking news events. already fresco is on the radar of major media companies. john meyer joins us ceo of fresco. great to have you. >> thank you. it's amazing to be here. >> i love so many things about your story. but tell us a little bit about how you got into this how it all started. . >> it's ridiculous. i got into apps way back in 2008. i grew up incredibly inspired by steve jobs. >> how old were you in 2008? >> 13 i believe. >> wow. >> and it just kept going and going and going. >> and you started building apps like crazy? >> yeah. i built like 40 in high school. i get to nyu and get the idea for fresco news. >> before that you had the flash light app, right? which we've all used. but now it's built in. were you upset when apple built it in? >> i'm not. i loved the brief success i had for the first few years. it was a ton of fun. >> so tell me you loved steve jobs. you followed everything you did. and yet you turned down a job at apple. >> yeah. the reason why i turned down apple was because i was already working on fresco news for six months or so. i was so passionate about saying i cannot be at a low level position at this time in my life. no matter what company it is. and i really believe what i'm doing could potentially have a pretty large impact on the global news industry and hopefully society in general. >> let's talk about what fresco is. >> we started out as sort of this instagram for news app where you can browse your news through images in a neat way. and we realized that licensing images are super expensive. so we worked on some internal tools to be able to source verify, license breaking news video from twitter, facebook and vine. to the point where we are living in an age now where there are half a billion tweets posted every day. the second anything happens, let's say, in downtown manhattan a protest starts taking place. you have a dozen people within 10 or 20 seconds posting photos and videos of that on twitter, facebook, and vine for video. so we'll detect those images and videos within a minute or so. and there's tools for that already. then we'll go beyond that and verify that it's legitimate and then distribute that content to our news partners. let's say like "the wall street journal" or -- >> if i take a picture of a news event, do you then tweet me or send an e-mail say i want to represent -- you basically want to represent me the same way getty images might buy an image. >> yes. an individual will ask can "the wall street journal" use this photo. you click a link, hit approve. and that's it. >> i don't negotiate with you over price. >> not yet. that's something that we're working on now. but we've seen over 98% of everyone we reach out to gives it to us for free. >> if i have the ray rice video and tmz is calling or you're calling, i want to give to the highest payer. >> it's not just you posting. one of those people will get -- >> do they get a photo credit? >> they do. that's probably the biggest reason they give it to us for free. they get their credit on their television screen or newspaper. and in our trials we'll ask, why did you give it to us? we hear as an individual they always say, i really felt the need to get my content out there. i thought it could potentially make a bit of an impact. >> you're 19 years old. you wanted to meet us because you've seen "squawk box" before. am i right? >> i've been watching "squawk box" for about two years now. >> two years and you're 19. you have noticed that media in general, cable news even now movies, people your age and for the next -- i don't know what is it? 12 to 30 are doing things differently that make it hard for us to know who's watching or how to reach certain people. do you have an answer for cable news an how to get young people to watch their -- >> i definitely do think a lot of it comes from incorporating more media in your reporting. if it's a newspaper like "the wall street journal" -- >> oh, no. social media? >> not just that but photos and video. people don't want to read full text articles at all. you're into invigorating photos of videos of the ferguson protests, for example. that's what we need right now. that's what i see in relationship with these companies that a lot of them are going towards. >> john you're on entrepreneur. you're a young entrepreneur. we always think that everyone's young and there's so many young entrepreneurs out there. there's a story in "the wall street journal" here that says young entrepreneur under 30 years old has reached an all-time low. only 3.6% of households headed by younger than 30 have a stake. what do you think is happening? do you think that the young people are less risk takers? i thought young people were more risk friendly than they used to be. aprntly the numbers say i'm wrong. >> and it's an interesting point to bring up. i think what we've seen is that in the past if u years it's become so incredibly competitive in the start-up space that a lot of young people are taking the time to -- let's say you didn't go through college or go to a facebook internship before they founded a start-up. a lot of other young people i know that are my entrepreneur friends are doing that exact thing. because it is very quite risky. especially if you don't have a grasp on your end vision and you're not super passionate about it yet. it all comes down to passion. >> do you worry there's a bubble in the new media media companies? >> i don't think so. i think we're at the cusp of a tremendous increase in these, not even a bubble. because -- i mean for example, with us we see that camera tech in our smartphones are getting incredible over the next few years. we'll be at a point within five years where an iphone camera is on par with an slr that a professional uses. i think a lot of it is going to be about how do you take a smartphone and technology in our pockets or even in our wrists this year and, you know, help out media with that. >> john what's your end game? what do you want to do eventually? >> we want to create a public perception of self-reporting being something you can do. >> but do you do that as an independent company? do you take that public? do you plan on selling eventually to another company? >> if it comes to the case where it's clear that a company like news corp. or like yahoo! or news corp can acquire us, that is something we're open to. but we're building a platform that helps news agencies frely and we're even building a mobile app that will let users submit directly from us. >> do you write your own code? >> yes. i'm a programmer turned entrepreneur. i taught myself objective c when i was 13 going into high school. >> we all between that. objective what? >> objective c. sdl >> how about ruby on rails. >> i'm not into that that much. >> what is he running? >> it's a programming language. it's what i do after the show. i program. you look very clean, but you got the hipster -- >> i keep a nice stub he willsce did stubble. >> you're amaze. >> we're impressed. thank you. when we return jim cramer's 2015 wall street outlook. we'll catch up with him. hi. pete and jon najarian here in new york city outside of the nasdaq, where we bring you live daily market updates. and today, we have a very special free gift for you. so many viewers e-mail us wanting to know our secrets on how we trade options. so we put our secrets into a new book. and if you're one of the first 250 people to call in right now and just cover shipping and handling we'll send you a copy for free. look at the rate of return we've made on some of our recent options trades versus what we would have made had we just bought the stock. there's no comparison. to make the best returns in today's market, you have to learn how to trade options. and our book will show you how to do it for free. jon has been trading options for more than 30 years. pete is one of the top 100 traders in the country. and our book will teach you how to trade options for free. so call now. 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(see the number on your screen) call now. 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. let's get down to the new york stock exchange. jim cramer joins us. crude is down now another buck. we're like $50.85. could we start with a 4 handle soon? >> yeah yeah i think it's realistic. we're not cutting back production enough. and it's demand side. when you look at what is happening with europe what is happening with china, there is no place to put this stuff. venezuela is next to be able to cut out for imports in this country. and the issue is if the export oil, where is that going on go. so i think it's realistic that if can go longer. >> are you worried about a -- >> i'm not worried about anything. one state will get hurt texas. we know governor christie of texas -- oh,. sorry. that's right p it's a different -- >> yeah different state. probably not huge for an eagles fan. >> yeah. i've just -- it slipped my mind. because who was in the box? was it -- it wasn't the guy who forgot the two different cabinet members. i don't know. a little disturbing. >> so should we be worried in terms of the equity market about greece? >> no. honestly, i think it could be a positive. i think it just puts more pressure on germany to be able to say -- germany is like willing to let greece go. it puts more pressure on them to do more quantitative easing. but unless we get construct allstructural re230r78re reform in europe, i don't think we care. >> looking forward to spending a lot of time with you in 2015. see in you a couple minutes. still to come, why richard branson almost quit on virgin galactic. [container door opening] ♪ what makes it an suv is what you can get into it. ♪ [container door closing] what makes it an nx is what you can get out of it. ♪ introducing the first-ever lexus nx turbo and hybrid. once you go beyond utility there's no going back. a cargo ship sitting high and nearly dry. is this a car carrying ship that went aground near south hampton. all 24 crew members were rescued safely. the ship's ocean said it was grounded intentionally to keep it from cap sizing. is this a nearly 57,000 ton ship. it has 1400 cars on board. and sir richard branson putting no regrets on his postings. this coming after october's fatal breakup of the spaceship reflecting on his decision to continue with space travel he said a single visit to california's port confirmed he needed to pursue the project in his own words, he points to the designers, builders and engineers and the pilots and the whole community who still believe truly opening space and making it accessible and safe is of vital importance to all our futures. >> check out the futures. things have taken a turn for the worse. dow futures are down by over 120. s&p 500 off by 15. check it out with "squawk on the street". we'll see you tomorrow. ♪ welcome to "squawk on the street". we are live from the new york stock exchange. carl is off today. it's our first day of 2015 in terms of reporting on these markets. let's give you a look at those markets. in fact we're looking down as you can see. crude oil, yeah it's still going down. in fact i think we hit a new low this morning. a new recent low on wti. you can see it
goes bad. sue herrera has our top story. the snow. she's right here at hq. >> thank you, ty. right now we're going to go to morning city mayor bill deblasio holding a news conference and a presser. let's listen to what he has to say. >> we have very high winds. we know we'll have low visibility and lots of conditions that make travel unsafe. we will give you constant updates as we get information, but everything we know so far makes clear you can't underestimate this storm. this is not a typical storm. it's going to pack a real punch, and we have to expect heavy accumulation in a very short period of time. wills another crucial point. some storms come in in a measured manner. this is going to come in in a sudden spurt of activity. we saw some flurries this morning, and that has largely dissipated. what you are going to see in the few hours is something that hits very hard and very fast and people cannot be caught off guard. best thing to do stay indoors, stay off the roads, stay off the sidewalks, and this is something i want people to start acting on as quickly as possible. in the next hours we want people who can get home to get home early, to get out of work as early as you can, get home but as the evening progresses and the snow intensifies, it will not be an optional matter. as part of our emergency declaration i'm ordering that at 11:00 tonight our streets will only be available to emergency vehicles so all non-emergency vehicles need to be off the streets of morning city by 11:00 p.m. tonight. we will continue that emergency declaration until the situation is safe. so from 11:00 p.m. on tonight, no non-emergency vehicles on the streets, and that is going to be the policy until we state otherwise. we need to let sanitation police, fire do their jobs and this is the way we will guarantee that. on the way home this evening, again, the earlier you can leave, the better. if you can take mass transit, that is a priority to do so. if you are driving, expect tough conditions with each passing hour this evening. go slow. take a lot of precautions. even walking be careful this evening as this storm will intensify very quickly. if you have any evidence if you happen to take for example, for hire vehicles if you have any evidence of people taking advantage of this emergency to unfairly and illegally raise the prices of their rides, it is important to call 311 and report it. price gauging in the context of an emergency is illegal. if you experience it please call 311, and the taxi limousine commission will investigate right away. amplifying what i said yesterday, i want all new yorkers at the end of this afternoon at -- >> we have been listening to new york city mayor bill de blasio. one of the more interesting points in his statement a few minutes ago which we're checking to see if this has been put in place before. 11:00 p.m. tonight all non-emergency vehicles need to be off the streets of new york city, so sanitation and emergency vehicles can go into action. it's going to be a very quick storm in one sense, but it's going to pack a real punch. let's get more now on winter storm juno which is bearing down on the northeast. millions are bracing for brutal blizzard conditions. lots of snow. very high winds. very cold temperatures. new york and new jersey have already declared states of emergency, and now the weather channel's tom nizzle is tracking the storm. >> we're now using terms like historic for winter storm juno as it moves up the northeast coast over the next 36 hours. let's take a look. over 28 million people now under blizzard warnings in the northeast. nearly 60 million under some type of winter alert. take a look at how this system is going to move over the next 24 hours. the snow breaks out and really begins to increase this evening. in that stretch from philly to new york and boston winds will increase as well so that by later tonight, we will be in full-blown blizzard conditions from new york to boston with snowfall coming down at an inch an hour. this continues right into the tuesday morning time frame. now by tuesday evening, new york city will begin to see the snowfall wane across your area but in eastern new england, that snow will continue along with the strong winds and blizzard conditions. it's not until during the day on wednesday that the system begins to lose some of the punch as it moves off shore. those are the snowfall totals. two feet plus in the boston wrar. wouldn't be surprised to see some areas to the west of boston get as much as three feet. new york city right now forecasting a foot of snow but just to the east of us as much as two feet. just to the west it drops off to about eight inches or so. big changes there as we go from west to east. the other part that we're going to look at are the winds, which are going to increase throughout the night tonight and into tuesday, bringing blizzard conditions to this area along coastal new england. that combination of wind and snow will mean that travel by tuesday morning will likely be impossible in some of those areas. stay tuned. we'll keep you updated on winter storm juno the blizzard this week. >> as you might imagine, airlines are cancelling thousands of flights ahead of this blizzard, and kate rogers is live at la guardia with the latest for us. hi kate. >> hey, sue, that's right. flight aware.com has been tracking these cancellations due to winter storm juno between today and tomorrow. more than 5,500 flights have been completely canceled. they're also mapping out the most miserable airports in the country due to these delays and cancellations. in the top spot is newark followed by la guardia, and chicago o'hare is in the third place spot. here at la guardia at nearly 50% of flights have been completely canceled today. close to 300 of them. the passengers and travellers we're talking to they're not feeling that miserable just yet, but they are looking and hoping to get out ahead of the storm. >> we changed to an earlier flight. we had a 3:00 flight this afternoon. >> i'm a little concerned that, you know if this does live up to the hype that things won't be leer in time and i'll get stuck in columbus for the weekend. >> it does remain to be seen though if other airports will follow boston logan's lead in cancelling all flights to and from the airport beginning tonight at 7:00 p.m. extending through tomorrow. they do hope to have things up and running, though by wednesday. back to you, tyler. >> all right, kate. thank you very much. newark airport always a misery place for many people. airlines mostly down today in the stock market. jetblue, the carrier most impacted by the blizzard because it does so much of its business up and down the eastern seaport seaportseaboard. currently down the most, as you see there. about 1 3/5%. in case you are interested, folks, hawaiian airlines is up for the day by 3 1/4%. it's currently trading at $27.50. seth is airline weekly's -- he is joining us from sunny fort lauderdale. welcome barb. let's say i'm at the airport either in the new york marketed boston, or even now where you are in fort lauderdale and i find that my flight has been canceled what should i do? >> one thing is to be creative tyler, and let the airline know how flexible you are. these days airlines do a pretty good job of finding you the next seat from the same airport -- to the same airport where are you flying, but if you don't mind using, oh jfk instead of la guardia and the next seat from yfk is wednesday rather than thursday tell the airline that. if that's the case, tell them that. if you can avoid packing bags -- checking bags, that is. you know, if you're at the airport, it may be too late. hey, what about that flight going to somewhere else? sometimes the gate agent, the first thing they'll ask you is do you have any bags with you? if you don't, it can be simpler to make that very last minute change. >> let's say my flight is leaving from gate 70 and i find that it is canceled but there's another flight that is leaving from gate 42. should i wait in line at the -- at my existing gate or the one where i have been canceled or should i run over to the other one? >> you know it's a matter of getting through to the airline as quickly as possible tyler, so a lot of times these things will say go over to the customer service counter, get in line. do that but call the airline also. if you can reach an agent by phone more quickly than you get to the front of the line and especially, you know if you are an elite traveller and you have a special phone number whatever you can do basically you are, let's face it competing for those very few remaining seats against all your fellow travellers, and whatever you can do to get yours yourself a leg up is worth trying. >> all right, seth. thank you very much. we appreciate it. dominik, market flash. >> we're watching shares of some biotech and pharmaceutical companies. the stock is moving higher for mylan. the stock is currently trading, you can see, up by 4%. as for gilead shares those shares are also moving as well here to the up side. up by 1.5% so far today, sue. back to you. stocks in general off of their worst levels of the day with the dow falling back about from a triple digit loss earlier this session. the dow and the s&p are negative for the month, but the nasdaq so far, is still up. the russell 2,000 also higher. the your wroe bouncing off an 11-year low against the u.s. dollar following the results of the greek election. and the yield on the ten-year note which had climbed to 1.825% is steadying out a little bit. oil prices they've been up as the northeast braces for this major blizzard. let's talk more and bring in christina, u.s. investment strategist at alliance global investors, and scott black. both are bullish on this market. welcome to both of you. pleasure to have you here. scott, let me start with you. you're fairly bullish, but, you know, it hasn't been that great an earnings season in many sectors, and that has some analysts and market participants a little worried. it doesn't sound like that's on your radar screen yet, though. >> it's too short-term oriented. the s&p earnings were finished around 116. keep in mind that the component portion of energy stock, 12.2% of earnings is not the small e & p companies. it's the exxons and chevrons. it's realistic to believe the s&p can earn -- that's not a blow-out kind of number. it's up about 6% 7%. it puts the market about 16.3 times this year earnings. >> let's -- we're going to go to greece and michelle caruso car arabia who has breaking news about greece. >> s&p has cut russia to junk. once again, s&p cutting russia's credit rating to junk. this was entirely unexpected. they had warned they were going to reassess the country's credit worthiness considering the conditions that have been ongoing there as a result of the sanctions by the west against the country in retaliation for what we believe to be the intervention in ukraine militarily, which has heated up in recent days. this isn't necessarily because of what's happened in the last couple of days. s&p has a schedule for sovereign debt ratings, and we knew this was coming but definitely there are issues concerning liquidity because of the decline in the ruble that we've seen going on there as a result. remember ultimately russia doesn't have that much outstanding sovereign debt coming due in the next year or so. it's actually quite small, but the problem is because of the sanctions and their limited pile of foreign exchange reserves they really don't have enough foreign exchange reserves for the countries -- the state-owned companies that have to borrow again, from the markets or have to pay back debts done in other currencies. let's talk more about our market with christina. i'm going to turn to you. you're with alliance global. you like this market as well, and you say the risk in this market is not being long some risk assets correct? >> yes, that's correct. certainly for the long-term. if investors have a long enough time horizon, they need to have exposure to risk assets but they need to be well diversified. >> scott, where would you put money to work? you're giving us a couple of picks. why do you like these particular companies? what appeals to you about them? >> well i think in this type of an environment, you have to go with value which we always do. you want companies with sustainable earning power. the first one is one i used on the roundtable this week. it's out in southern california. it's a semiconductor company that heretoforehas been viewed as a dod. they diversified their business. it's legitimate. 10% top line grower are this we're. bottom line will grow 20%. it's selling at about 12.5 times earnings, even if you back out the stock-based. 20% return on equity. you have great visibility. they have about 8% organic growth. 2% from an acquisition that generate says nothing but free cash. there aren't so many top line double digit growers selling at 12.5 multiples. the other someone a yield conscious play for people who are hungry. aries capital. a business development company. it's well run at the margin. they can put out their debt investments at 9% and fund them at 4%. the stock selling below book with a 9.5% yield, and it's going to grow at least 10% this year, and it's very well managed. there's very little exposure. energy in the portfolio. >> christina, what are your picks at this point? you used to like technology. do you still? what sectors do you like at this point? >> we still like technology very much. you know if you surveyed companies, they've done very well in the last couple of years. they've had very wide profit margins, but they haven't spent very much, and the reason they gave in a lot of surveys was fear of greater regulation, and we know that there is a direct inverse relationship between economic policy uncertainty and corporate spending. we think that's behind us with the midterm elections. we think there's greater economic policy certainty and companies are poised to spend more. a key beneficiary of cap ex spending should be technology. companies recognize that technology makes their workers more productive and so we could see a nice increase in tech stocks this year. >> thank you both. we appreciate it. christina hooper and scott black. all right. >> scott may be bullish on the market overall, but there is one sector he is bearish on. you can go to power lunch.cnbc.com right now to find out why you should avoid it. once again powerlunch.cnbc.com. ty, over to you. president obama wants some of your kids' college money. he wants to tap it a little bit. a white house proposal to tax the 529 college savings plan withdrawals sparking some outrage. the proposal is supposed to ultimately help the middle class pay for college, but will it? plus the blizzard of 2015. the northeast, of course bracing for up to three feet of snow. 75-mile-per-hour winds. is the u.s. economy going to take a hit too? we'll take a look at that. as we head out, let's take a look at the biggest snowstorms in new york city. 27 inches of the white stuff back in february of 2006. welcome back to power lunch. they own hospitals. it's moving higher on news that it will join the s&p 500 after today's closing bell. of course, it's going to replay safeway as the grocery store han is set to be acquired by capital management. sue, those shares up 6% on the day. back to you. >> hey, dom, take a look at this. you don't usually see this on this tense day on the east coast. take a breather. moment of zen, if you will. a herd of elk walking through someone's backyard in ever green, colorado. fancy that. that's the end of the moment of zen. ty, over to you. >> they're going to the elk convention, sue. >> or the elks lodge. president obama pushing to end certain tax breaks on specified college savings plans. it includes 529 fans that have been tax-exempt. the earnings grow tax-free, and then when you take it out, you don't pay tax on it. the move aimed at simplifying the tax code but could it hurt them instead? this is joe, ceo of saving for college.com. a 529 planning site. jared bernstein, cnbc contributor and former economist to joe biden and the obama administration. >> do you think this plan is actually a good idea? i'm going to ask you why because as i understand it what would happen here is while the existing accounts would be grandfathered, new accounts you would still have tax deferred accrual. when you start to withdraw money would be taxed. that money that's going to be taxed would go to memorialize or make permanent a tax credit of up to $2,500 a year for certain moderate income families up to $180,000. i've given a big preface here. you know and i know -- >> good job. >> you know and i know jared, that $2,500 a year pays for about a week. >> well first of all, it is important, as you have just done to look at the plan in its totality. it adds $50,000 in college assistance for their proposal and takes back $1 billion. these are ten-year figures. from the 529. that's the savings generate by a 529 by ten years and it's $1 billion. that has a lot to do with that grandfather. they add in far, far more in terms of helping kids lower and middle income kids with college than they take away. here's what i'll say about the 529. have i two of them and i love them. this is going to hit me. here's the thing. my kids will go to college, the best college they can get into regardless of the 529, and many people in upper income classes can say that. if that's true these tax benefits are wasted. i love the benefit. it's to provide tax relief for people that don't really need them which is to target them -- especially the foels that need them the most. >> joe, how about you? respond to what jared just said and one of the things that occurs to me is that in many cases, joe, the people who benefit the most from financial aid are the very people that jared says would be targeted by this, and that is the folks who have a hard time paying for college at the lower end of the income scale. joe, take it away. >> i was swiz and disappointed because it's been a tremendous success story. these 529 plans, we have millions of american families using these 529 plans now to save for college, and it offers a way for mostly middle income families, they're the participants of these plans, to invest tax deferred and ultimately tax-free to try to keep up with college tuition increases, which you and i both know are gaining much faster than general inflation. >> jared, let me just drill down on something you said a moment ago, which i had heard, but you said it absolutely perfectly. this proposed tax would raise $1 billion over ten years. that's nothing. i mean, why not go somewhere else and get that money? >> a fair point. i think that's largely because of the grandfathering. if you went out to the second ten years, you would see more savings. look i want to get to some of the points that were just made. 70% of the benefits of these 529s go to families whose incomes are above $200,000. the president is trying to create much more robust for actual middle income families. the typical beneficiary of a 529 has an income of about $140,000 and for people who don't, their income is about $45,000. a lot of it depends on what you call middle class. i'm not saying that a family that has $150,000 doesn't need help paying for college. it does and it gets it. >> the 529 plans are ways for families to privately pay for college. isn't that what we want most people to do? >> absolutely it's what we want most people to do and the current data shows that 70% of the participants of the accounts now are held by families with less than $150,000 in income. changing this won't pay for any initiative, and it will no longer use 529 plans. you can't raise revenue and you don't have contributions going into these plans. some people the people that we want to pay for college, will stop entirely because we're telling them don't bother saving for college. wait for this tax credit in 15 years, and that will bail you out. >> you're calling for something that will hurt you in your -- in the long run. >> that's right. no kidding. >> of course, the proposals are very unlikely to pass a republican-controlled congress, but if it does there's another tax-free strategy to save for college. you can find out about it at power lunch.cnbc.com. meantime, we're going to go for some breaking news to josh lipton on -- >> well, tyler, if you are living in new york city and you are hoping to use uber the car hailing app during the snowstorm, we have news for you about how much that's going to cost. remember, the mayor of new york just said that gauging during an emergency like this is illegal. here's what uber is saying. due to the state of emergency declared in new york city, prices will not exceed 2.8 times the normal fair. uber is saying this is developed as a policy with the new york attorney general swren snyderman that balances the goal of reliable transportation, uber is saying, with also what it calls dynamic pricing, surge pricing, and a lot of people talked about it. uber going on to say that any kind of disaster or state of emergency strikes like this, dynamic pricing is capped and all of uber's proceeds have been donated to the american red cross to support relief efforts. guys back to you. >> thank you, swrosh very much. well as you know by now, the northeast getting ready for what could be and is being termed an historic winter storm. blizzard conditions are set to dump up to three feet of snow in many places. last year those winter storms -- it was a long one -- took a big chunk out of economic growth. well, the u.s. economy, will it take another hit? steve liesman is here with weathernomics for us. >> if it's as massive a storm as what's being predicted it's going to have negative impact. measured mostly in hours, not work. hours not completed. lost hours, and pay and productivity, but a lot depends not so much on the amount of snow, but over how wide an area. how quickly it's cleared. of course, how soon it will get back to work. in theory, if the power lines don't go down a lot of work can be done from home but. if that's all it is it will not rise to the level of last year. cold temperatures and lots of snow that was widespread. that way you can see right there that negative number that's surprising 2.1% decline in growth in the first quarter, it was so big many doubted it could even be weather-related, but growth bounced back as did jobs, and some of the gdp. the next two quarters which averaged a whopping 4.8% was a weather induced snapback. awe big part of last year's decline was the cold and snow in places that don't usually have it, like the south. this storm, although dangerous and massive, is hitting in a place that has come to expect large storms more so than i thought. in fact, it's showed there have been more big snowstorms of 15 inches or more in the current 25-year period than at any quarter century since 1790. >> it's almost more the rule than the exception. not this big. it's not a storm. new york city, it will take a lot more than a single blizzard to cause growth to -- i was surprised by that data. by the way, i the highest 15-year too. >> thank you, steve. appreciate it. >> we'll go to swraky deangeles. she's in manhattan where they're getting ready for the storm. as you know, a lot of people need to get into the exchanges tomorrow, and, jackie that's led to a real run on hotel rooms. less people are walking around. do not be sdooefed by the shot where i'm standing. i'm being protected by a building. the wind is kicking up down here. >> the lines pretty much wrapped around the storm, and one of the managers telling me they are going to run out of supplies. people down here are concerned because they're worried about the conditions that came along with hurricane sandy, for example, when they lost power. they are making sure they have been ready. meanwhile, the nyse and the new york merck, they are monitoring the situation, and you have a lot of traders checking into downtown manhattan hotels. the conrad just across from the nymex completely sold out hours ago. traders saying if the markets are open tomorrow they do want to make it easy to be able to get into work and monitor the situation. again, cold down here. very windy. people are really concerned about this. especially as we've been told that this storm is going to pack a punch, and it's going to pack a punch quickly. we'll tell you why this meeting was different. well one of the reasons is a major breakthrough in a nuclear trade deal. all of that straight ahead. your mom's got your back. your friends have your back. your dog's definitely got your back. but who's got your back when you need legal help? we do. we're legalzoom, and 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platinum, and paladium is modestly higher. this is a war zone stunning video just coming in of destruction in ukraine. this morning the separatist stronghold suffered heavy shelling. footage -- a hospital destroyed. meantime, in crimea russian security forces raided a television station seizing equipment, shutting down the broadcast operations and watch, they even stopped this segment which, as you can see, was an interview in progress. atr was dedicated to reflecting the view of crimean war -- and was one of the last stations in crimea criticizing the moscow-backed government. let's send it over to dominik for a quick market flash. >> sue we're watching what's happening with universal display. the stock is soaring on news it signed a technology license and supply agreement with korea's lg display. can you see it up on the day here. as for lg shares up as well by about a percent. nice moves on the green side here for a couple of stocks. back to you. >> thank you. president obama continuing his trip in india joined by a number of the world's top ceos over there. seima modi live. >> hi tyler. i just got off the phones with one of the ceos that attended that roundtable meeting in new delhi with president barack obama and the prime minister. he said most of the discussion was around finding ways to increase bilateral trade with u.s. and i understand wra and brooufg the regulatory environment. for example, around taxes and intellectual property as well as brainstorming ways for corporate america to work more effectively with corporate india. a relationship that has been challenged and stalled over the past couple of years due to tough rules and red tape. now, several business leaders, includingy including pepsi and others were in that meeting to discuss u.s. and india relations with indian business leaders. >> one of the other big shlz that nuclear civil agreement. we're still getting more clarity out of what this detail entails, but we are expecting more details over the next coming months. as the two leaders discuss ways to work together there is something else the media has been taking notice of, and that's a growing friendship between the two leaders. a romance, if you will several sources of mine say there's a notable chemistry between the two leaders. modi addressing president obama as barack many times during his speech. he is also the first to greet obama showing up on the tarmac and welcoming him with a big bear hug. a picture worth 1,000 words. tyler and sue. >> thank you very much. let's go out to the bond market, shall we? rick santelli tracking the action in balmy chicago. hi, rick. >> it is balmy. sorry about that. two days of tens. we're not going anywhere quickly. as a matter of fact, as you look at the year-to-date chart, a couple of things i want to point out. first, we made our extreme. our 21 flow on the 16th of january. keep that in mind. many thought we would see extreme moves to coordinate with the ecb on thursday, last thursday, the 22nd. not the case. this will be the seventh session where it looks like somewhere between 138 and 187. we all know the dollar gets strong earning but what we want to pay attention to is how these weak currencies will end up creating growth if their export markets still don't seem to be rallying outside of germany. tyler, back to you. >> rick huh very much. ready or not, here it comes. the blizzard. is manhattan prepared? new yorkers, we never complain about anything. morgan brennan in times square with the very latest. hi morgan. >> hey, tyler. well, over the next 36 hours we're going to be giving new meaning to the term great white way. we've got what governors, what mayors, what states, local governments, what everybody is doing to prepare. they're all saying about this potentially historic blizzard. we'll have that when we return. push your enterprise and you can move the world. ♪ ♪ but to get from the old way to the new you'll need the right it infrastructure. from a 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[ male announcer ] get a 4 week trial plus $100 in extras including postage and a digital scale. go to stamps.com/tv and never go to the post office again. hard at work during this massive storm. energy stocks outperforming in the five days after four inches of snow or more in the new york city area. eog traded up 60% of the time but the median began is 2.2%. his, meanwhile, traded up 32% of the time. up 1.2%. cabinet and slumberge have been big post-storm bets. much more on big winter weather winners on our home page. go to cnbc. -- power lunch.cnbc.com. power lunch.cnbc.com for winter weather gainers. >> i'm glad you had to say that. >> winter weather winners. netflix, a lot of people were staying home today, the shares are up. so is streaming. julia with the story from los angeles. julia. >> tyler, millions of people are getting ready to hunker down and binge watch. during hurricane sandy in 2012 netflix saw a 20% spike in streaming in a single day. viewership was up over 100%. it's not just netflix. during the most recent big blizzard back in 2013 total streaming volume increased as much as 15% in areas hit by the storm. a number that would have been higher if not for some power outages. no surprise netflix is the biggest gainer on fixed broadband networks while on mobile devices youtube sees the biggest spike. this year it seems like amazon prime could benefit from those people staying home from the storm as well. tyler, back over to you. >> julia, thanks. think of us out there in sunny 75 degree l.a. let's get back to the storm itself. morgan brennan in times square. the snow is starting to fall morgan. >> it certainly is starting to fall tyler. we just got word that both new york area nba games that were scheduled are now on hold even postponed because of the weather. as you can see, the snow is really starting to pick up. it's starting to stick. it's gotten dark outside. it's getting colder out here. this, as officials across the northeast are bracing for what's potentially a historic blizzard. we've got state of emergency declared in multiple states multiple cities. new york governor andrew cuomo just holding a press conference to warn about the difficult and dangerous conditions. the new york state thruway and other state patrol highways will be closing at 10:00 p.m. eastern. also new jersey governor chris christie declaring a state of emergency. massachusetts declaring a state of emergency. connecticut imposing a travel ban that goes into effect tonight at 9:00 p.m. as you can see behind me right now here in midtown manhattan it's still business as usual. guys, back to you. >> all right. thanks very much. some would say that cancelling the knicks and nets game is a public service. dominik for a market flash. >> you did not just go there. >> whoa. >> the new york area for goodness sake guys. the impending blizzard is -- oil prices one of them here. that's sending oil companies higher today's trade as well. you can see a whole slew of them in the energy sector. chevron, exxon, and, of course that stat box you just threw up that has more to that story as well. back to you, guys. >> thank you very much, dom. more weather and more markets after a quick break as you look at new york's times square with the snow starting to come down heavier. welcome back to power lunch. big day in housing. fha lowering the mortgage insurance premiums. what does that do? it solves two problems for the government insurer of home loans. first, it helps get them more business. potentially 50,000 to 100,000 more borrowers a we're. at first it could be mostly refinances, but it keeps the fha, which needed a $1.7 trillion bail-out competitive. with the new 3% down payment loan which would have been cheaper for the best borrowers and could have caused them to jump ship. fha needs the high credit dependable borrower ez to fuel its fund. he denied that that was entirely behind the move but he also stressed the need to protect the fha's fund. you want to see that interview, go to it. realty check.cnbc.com. back to you. let's go to dominik for a market flash. >> we're going to carry on with diana's theme here with the home building stocks and focus today all moving hire as dr hortan posted better than expected first quarter results. a 35% jump in new orders. a 29% jump in -- jumping closings here and nearly 7% rise in average sale prices. it's important, sue, because dr horton is the biggest homebuilder in terms of revenue. back to you. investors piling a ton of money into etf's. bob pasani who has perfect timing is in sunny hollywood, california, with some of the details on that. hey, bob. >> just out at the right moment sue. we're all trying to figure out how we're going to get home again. the bottom line is this is the biggest etf conference in the world. 2,000 investment professionals trying to figure out how to make money for their clients. i'm swroined by dan draper. he runs power shares. this is one of the big four etf's. he knows what he is talking about. smart beta says why should everything be market cap weighted like the s&p 500? you can weight inteks other ways and make more money. what's the argument? is there a real reason i should consider something else other than looking at a market cap weighted index? >> >>. >> it'sover eighty stuff that might be -- >> the russell 1,000, which has big cap index. the s&p 500 is a market cap weighted and the sim bomb is eqal. why equal weighted? why do we need an equal weight index in can you show that would outperform a market cap weight? >> >>. >> you have an index that weights -- they pay the most di dendz. can you show that that would be better buying stocks by dividend rather than just market cap? >> well, the key is always to put this in a portfolio context. what is your advisor portfolio manager trying to achieve? many investors today clearly have hire flk. this gives you an ability to weight those high dividend -- >> low volatility. stlo that's a big winner for us. a lot of people have had bull markets for the last couple of years. i still need to be overweight equities, but i want lower volatility, and the s&p will be 100 lowest volatile stocks in the s&p 500. >> the symbol plv. we're going to be here all of the next two days see dee spite the snow talking about all the big etf's that are out there, and how you can make money using those etf's. sue, back to you. >> okay bob. thank you very much. more updating the latest on the blizzard of 15 and just in to our newsroom new jersey transet is going to shut down the train system after 8:00 p.m. tonight. a lot of people who live in new jersey and work in manhattan use the trains to get into the city. they elizabeth be able to do that because the train lines will not be restored until thursday. so that's going to be a very difficult situation for a lot of people who perhaps on wednesday need to get into work ty but can't. they may have to drive, and, of course governor christie saying earlier that he wants people off of the roads. it's going to be awe very difficult situation for a lot of people. >> indeed sue. a lot of people depend on that njt. stocks, of course, waivering a bit today. let's take a look at the s&p 500 sectors, shall we? energy is the biggest winner there. discretionary health care. tack utilities and telecom. they are the lagards. power lunch will be back after this. of a control... enthusiast. mmm, a perfect 177-degrees. and that's why this road warrior rents from national. 1 1. in this hour of power standard & poor's down grades russia's credit rating to junk. mayor de blasio has ordered a travel ban. roads will be closed to all vehicles except emergency personnel after 11:00 p.m. just in new jersey transit to shut down its system after 8:00 p.m. the train lines will not be restored until thursday. that's going to make a mess out of things. if you missed any of the big stories in this past hour you can go visit our website at power lunch.cnbc.com. all right. let's see what's coming up on "street signs." mandy. >> or brian. >> brian. >> a little taller and 150 pounds heavier. >> there you go. >> same hear. all right. on deck sue, more reaction to both the big russia downgrade and the vote in greece that rocked europe. the one major media company that a prominent analyst says could be insolvent in a few years. we're going to get an update as well. the oil shock continues. oh, yes, there's apparently a storm acoming. we're going to have the latest on blizzard 2015. power lunch will return right after the break. grand prix race car made history when it sold for a record price of just under $30 million. and now, another mercedes-benz makes history selling at just over $30,000. and to think this one actually has a surround-sound stereo. the 2015 cla. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. so, how do you feel about cash back? i would not say i'm into it. but let's see where this goes. [ buzzer ] do you like to travel? i'm all about "free" travel, babe. that's what i do. [ buzzer ] balance transfers -- you up for that? well -- unh. too soon? [ female announcer ] fortunately, there's an easier way, with creditcards.com. compare hundreds of cards from every major bank and find the one that's right for you. creditcards.com. it's simple. search, compare, and apply. [ ice rattles ] i take prilosec otc each morning for my frequent heartburn. because it gives me... zero heartburn! prilosec otc. the number 1 doctor-recommended frequent heartburn medicine for 9 straight years. one pill each morning. 24 hours. zero heartburn. new york city mayor bill de blasio raise the red flag against price gauging. it's illegal to raise -- just now new york attorney general arab schneiderman fired this warning shot to anyone trying to swrak up prices during the storm. "new york state law prohibits excessive increases in essentials like food water, gas, generators batteries, flashlights, hotels, and transportation." sue. >> that pretty much covers the whole gambit. let's get you up-to-date on the markets before we hand it over to street signs. the dow jones industrial average is fractionally higher on a percentage basis. the s&p is up about a quarter of a percent, and the nasdaq composite is up better than a quarter of a percent. we'll see whether or not they hold that all going into the afternoon session. kind of thin trading, we expect as the storm progresses. >> be interesting to see whether the new york stock exchange has a delayed opening like a lot of schools. we should see. >> we will. we'll be following all of that for you. >> all right. thanks for watching. stay with us all afternoon. that's it for power lunch. >> street signs starts now. welcome to "street signs." today not one, but three major storms are brewing and only one has to do with the weather. hello. manned where i is on assignment today, and we've got an incredible news day. storm number one, this time over europe with the aftermath of that shocking fwreek vote. can the euro zone stay together as athens' new leadership sends a big message to germany? storm number two, the continued crude collapse. we have an update where confidence is beginning to shake as oil hits another new low. and storm number three, the actual storm. potentially