Transcripts For CNBC Squawk On The Street 20171009

Both up this morning crude oil, it is still hanging in there right below that 50 mark, of course and theres brent crude as well. Lets get to the road map. It does start with that market coming off a record breaking rally. The question of course, will it continue and big changes at ge the new ceo making his mark on the company as a new investor joins the board. A nail in the could have infor tax reform a top gop senator warns that President Trump threatens world war iii. The markets looking to continue its record run with the dow and s p in the midst of a fourweek winning streak but Technology Closing on friday at the new record high. Bar beingiring a large selloffe trump dow rally ochb track to surpass the 23. 3 gain posted in the year following the election of George Herbert walker bush. One would imagine we will hear tweets or get tweets about that the minute it happens. It is a major accomplishment and were coming off another week where all three major averages closed up a percent and we saw record highs across the dow and s p and nasdaq and small caps and mid caps and transports the leadership has been interesting, banks turning in their fourth week of gains and you mentioned technology also at a record high, although we wonder about the prospect of tax reform i think. Definitely, especially as we have seen in the past month a real perk up in terms of inflation with the thats been the interesting change in the makeup of this market. Right after the election, obviously, we had those gains and they sort of sputtered out we had technology resume the mantle there and now have the rotation here again and some wonder is it time to stick with the trade as we have the prospect of tax reform or if they are to die down, with revert to what had been working before and that is growth in technology thats sort of the key question right now. Sara, as you know, the end of last week i was with a bunch of ceos of fortune 500 companies off the record in terms of the business counsel and their discussions but outside of the venue, what a lot of ceos kept asking me, why is the stock market there seems to be to a certain extent amongst those who lead the businesses a bit of lets just call it wonderment at the new highs we keep reaching. They dont believe tax reform is going to happen no, there is a belief that tax reform will likely happen, if you poll the group of them but more so simply the idea that we continue to grind higher all the time, many wondering what about these other concerns that we have . Whether it be in washington or geopolitical with north korea or in general come back and say the economy is pretty good around the world when you engage in terms of why, but there does seem to be a great deal of questioning at least in terms of just the strength of this market day after day amongst people who are relying on it in part to have value in the businesses they run. Im sure they are happy to see the resilience of this market has been interesting and its also come against a back drop of lower Interest Rates and a we weaker dollar. Both of those are starting to change the dollar has been up for the last four weeks, were not talking about material strength yet but it is worth watching and yields have also gone up is it the end the great big bond bull market . Weve asked that 100 times and a lot of head fakes, maybe we have to get to 3 on the 10year. The bond market is closed for columbus day and stock market is open lets bring in our guests for more on market moves and maybe he can help answer this question chief investment strategist and jack ablin john, why does the market keep pressing higher in the face of big geopolitical worries just right now after this weekend, weve got north korea theres still a push for independence in catalonia and other risks economically as well. I think its a combination of the improving fundamentals that david mentioned and you mentioned but i think what weve got in addition to that is investors are embracing the uncertainty. And contrary to general opinion that the markets dont like uncertainty, because they dont like it but they can accept it and i think with fundamentals good, with economic expansion in the u. S. Around 2. 5 without any stimulus and then potential for some stimulus if we dont get tax reform, we got a tax cut, maybe infrastructure spend after that the thought is theres nor room ahead and in addition to that equities are highly functional for goal oriented investors who havent had much place to go over the last what does that mean highly functional for goal oriented investors. Potential over the interimmediate to longer period of time for total return Dividend Income thats better than what they can get in short and midterm fixed income and the cyclical and secular trends develop over a course of time. It comes back to that point that a lot of people make, theres no alternative when you look at stocks versus bonds, the stock market is the clear answer and the question is, how much longer and what happens if we start to see rates really go higher here . Ell, i think a valid point here that right now bonds are not an attractive alternative to stock. Eventually they could be so the one metric that you can use to view equities to make them look cheap is the bond market right now the trip will be bond yield trading about 1. 5 to 1. 6 below the earnings yield which is just a reciprocal and that would argue if triple b bonds get rise another 1. 5 or so, now youve got kind of even footing and we could see money flow out of stocks into bonds. Then, jack, what happens . I mean, to the extent we can take the simple explanation here, money keeps flowing into index funds and etfs and into the market, if that reverses, one would expect then the market will finally start to crack. Do you think so . Yeah, i mean, i wouldnt be surprised if we saw a 20 pull back sometime if Interest Rates were to rise but it would take a lot to get Interest Rates to rise 1. 5 from where we are right now. Even if we flap our arms and cut taxes and raise infrastructure which right now the market is putting it still a minority chance of any of that stuff happening. So i do think there is a free option on the upside but really the key boogy man here is inflation. It is something that if we do get inflation and i will say, im not worried about that recent wage number, it was a oneoff on overtime. If we do start to see inflation as labor market tightens think were going to see inflation and fed is going to hike aggressively and derail the market rally if inflation comes, thats a sign of an economy that is in fact heating up and continuing to progress. I think thats quite a ways out, melissa if you look back in the last time the fed raised rates, they didnt even raise rates. The market raised rates in anticipation of the feds tapering back in 2013. The 10year yield went from 1. 69 on may 1st or 2nd to 3. 02 by december 31st and that year the s p 500 was up 29 over 30 with dividends reinvested and the economy wasnt as good as it is today. When the fed raises early on, generally what it means things are Getting Better and the fed is just trying to protect against unmanageable inflation it usually takes a significant number of changes. The last time when it did from the end of 2004 to the end of june 04 to end of june 06, it raised 17 times, 25 basis points at a time, 425 basis points from what was then a 1 rate on the funds fed rate and the s p was 11 my recollection is mid caps were up in the teens and russells were up around 20 some percent, im not suggesting this would be the same type when we look back over a nearly twoyear period in this rate hike cycle with only four rate hikes so far, weve even improved on that in terms of equity performance. This is with in back of this, it doesnt appear were heading into some kind of crack but rather things still incrementally Getting Better theres not a heck of a lot of animal spirits out there. There are nine speeches from fed members this week. Jack and john, thank you thanks. President trump and republican senator bob corker of tennessee lashing out at each other on twitter questions being raised about what this could mean for the president s agenda, especially tax reform eamon has the latest. This was an extraordinary exchange between the president of the United States and powerful sitting senator of his own party, the chairman of the Senate Foreign relations committee. Heres how the tweet storm started, the president tweeting out in the wake of bob corkers decision not to run for reelection in 2018, senator bob corker begged me to endorse him for reelection in tennessee i said no. And he dropped out said he could not win without my endorsement and wanted to be secretary of state i said, no thanks. Also largely responsible for the horrendous iran deal hence, i would fully expect corker to be a negative voice and stand in the way of our great agenda didnt have the guts to run. Bob corker disputed that characterization of his conversation with the president of the United States and went on to tweet this, its a shame the white house has become an adult day care center. Someone obviously missed their shift this morning corker saying he knows that white house staff spend a good deal of time trying to contain the president of the United States and then gave an interview to the New York Times in which he said, trump is treating the presidency like a reality show towards other nations could set the u. S. On the path to world war iii. That is extremely tough stuff from someone who has been an occasional supporter of President Trump over the past year but who is also voiced criticism of him and its the senator the president may need when it comes to tax reform, a key republican on capitol hill now in open war politically with the president of the United States weve seen this before where the president has attacked people on his own team jeff sessions, his attorney general, mitch mcconnell, but in those two cases, those two gentlemen decided to stay quiet. Bob corker very much fighting back perhaps because hes not running for reelection in 2018, guys. And hes on the Budget Committee and warned tax reform has to be deficit neutral. Which is a big open question. Right, the question is, how big of a deficit will he be able to swallow as a result of this tax reform, which does not look like its going to be anything like deficit neutral in the long term. He and other republicans and whether theyll speak out. Thank you for setting that up for us this morning. When we return, General Electric announcing changes to its board, while the Procter Gamble fight heads into the homestretch the big vote one day away. Taking another look at futures, its columbus day, stock market open, bond market closed futures look set for a strong start. Reheweetn. S p up almost two mo wn rur its the new iphone, its for our anniversary. Our anniversary . Its thirtyfour days since we first met. I didnt. Get you anything. Oh its, its fine cuz. I got myself one too. Oh from you, for me, happy anniversary. I love it. That is very thoughtful of you. Thank you. Get the amazing new iphone 8. And with all at t unlimited plans, get hbo for life. Less than 40 per line for four lines. Only from at t. Some things are simply impossible to ignore. The strikingly designed lexus nx turbo and hybrid. The suv that dares to go beyond utility. Experience amazing. We have several pieces of news regarding General Electric this morning ge elected ed garden to the board of directors first took a stake in ge in october of 2015, 2. 5 billion stake. Garden is disappointed in the Stock Performance but Still Believes it is a good longterm opportunity. Ge also announcing several executive changes late on friday this includes the impending departure of cfo jeff bornstein, be replaced by jamie miller, currently the head of ges transportation business. These were not insignificant departures one of the key members of management under former chairman and ceo Jeffrey Immelt who only stepped downs the companys chairman and we had john rice and beth comstock, both longterm members of the Senior Management team and certainly sign thats in flannery, the current ceo and chairman of the company is taking over headon and leading a new effort here at the company that i would point you to about a month from now, to get a real sense for. When theyll have an Analyst Meeting at ge. They are going to present the roadmap for this company those looking perhaps for some sort of huge breakup, may be disappointed but im told by people familiar with the situation that nothing is sacred and now mr. Garden of course is going to be able to take part to a certain extent in that conversation as well he had nothing to do with the departure of those executives who are leaving but certainly will be involved from being been in the stock for a couple of years that have not been helpful. The worst performing dow stock this year, down more than 22 . Worst performing stock over the past years, down 16 some are asking does it have implications for this big proxy battle, vote happening tomorrow. Nelson pelts trying to get a board seat heres ed garden getting a board seat a at ge p and g might argue, weve had david taylor here for two years, this is a new ceo at ge. They are looking at their portfolio. We know what were doing with our portfolio and got a strategy and it is starting to work the total shareholder return undertake l taylor but its abot accountability, gore den on the board might lead investors to have nor faith, they have a stake in the company at least in ge and thats part of what they are arguing as well. Where the stocks are positioned going into these board battles, i mean, its notable that the couple of times david taylor appeared on mad money, the stocks that day hit fresh record highs this is a very different backdrop from ge, not only been the worst dow performer year to date this year but also compared to industrials industrials have had had a real renaissance in the last month and ge is severely und underperforming that well see what happens with this for the peltz on p and g, he is saying well expand the board after we get the board seat. Almost what do you got to lose they hate that argument, the why not argument. Im sure they do. But its interesting. Tryann has been there for a couple of years, first the investment seemed to be paying returns and split off of ge capital having been a real benefit briefly but the inability of the company to meet targets in terms of cost cutting previously, the lack of confidence in the leadership of mr. Immelt previously, he wanted to take the board seat for a while. There had been back and forth whether they need to be locked up im told that is not the case at all, a board seat like every other and obviously theyll have the various restrictions placed on Board Members but nothing beyond that in terms of their ability to sell or not sell the underlying stake they are not going to. Flannery will be somebody to watch and i think its going to be fascinating to see what his decisions are when it comes to the idea that nothing is sacred at ge. What is your interpretation of the stocks premarket trade down ge, there are two big caveats here, down a percent, i would have thought a House Cleaning at the top, the new ceo with an analyst a month away, activist creeping into the share you would think that might have helped a little bit but its not clear what can help ge at this point. As for the vote tomorrow, youll be there. Yeah. And its going to be close. Everything says right now p and g versus tryan, the index funds play the most Important Role here, van guard, state street, which way they choose to go. Not all of them are in yet. I would argue retail plays a very Important Role, more so than other companies, they own 40 as youve made the point and that is way more than your typical company. Were going to be in cincinnati and theres a great local story to tell here because this city has rallied around this company against peltz in an interesting way from the mayor onto the employees and alum peltz has gotten a few key shareholders on his side. If you didnt know, sara is from cincinnati. I know that i know that. I was going to have dinner perfect person to send. When we return, art cashin as we move towards the opening bell futures as we head to the open, a higher open across the board, looking to extend record highs from last week and s p looking at dow up 23 and nasdaq to open 14. To err is human. To anticipate is lexus. Experience the lexus rx with advanced safety standard. Experience amazing. But we should be seeing ymore range of motion. , im fine. Okay, well lets see you get up from the couch. Im sorry, what . Grandpa come. 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Art, happy columbus day to you. Happy columbus day and happy thanksgiving to our friends in canada. In canada, exactly. This is probably got a 15 chance of being the slowest full trading day of the year. I was going to ask you about that. Volume was already light on friday. Well, and you also have a holiday in tokyo another one in korea, a lot of reasons to look the other way. Thats pretty much the way it looks right now. And bond markets are closed. You have this extraordinary exchange i know youre following bob corker and President Trump, really going at each other on twitter. Does that make the prospects of tax reform in your view or traders viewless likely and does that impact how we trade at all . I think it increases everybodys reservation, it makes it somewhat more difficult but we never have a weekend without a surprise out of washington so people are getting used to it this market rally has been living on hope and the hope is youll actually get something done in washington its hard for me to believe, they look like they couldnt agree on what time of day it is but there is a hope out there in the market and thats kept th g things and a string of record closing highs. Something else is this idea of reflation, and a trade around it, that narrative everybody talks about refl reflation, but the fed cant get the favorite pce to work in the manner it wants. Thats going to be a little bit of a problem but in the short run, lets see if we can get things together and maybe get something moving in washington. Youve also got very strong growth and economic numbers coming from around the world just this morning, Industrial Production shot up more than 2. 5 china opened after a week of being closed with the gains for the shanghai there are signs, talked to Christine Laguard i dont know if you can hear it, i can barely hear it everybody clapping here. That is the opening bell that question and few others, look at the s p, you can see well end up with a bit more green on that board. Heres the big board, ferrari chairman celebrated the companys 70th anniversary yeah, theres that horse they got great cars outside. They were putices md celebrating its recent listing sara, would you like to repeat i was sort of getting at this idea it has been a global story for the stock market its not just the u. S. And not just hopes of tax reform china comes back from a holiday of being closed rising and the imf looking to upgrade for the Global Economy this week this is really astory of globa economic strength. I think thats a very apt point. It has been general. But its been because all of the Central Banks pretty much been on the same game theyve kept the rates lower for longer reflected in any of the currencies quite yet and that will be an area to keep watching after but youre dead right, its not an american phenomenon. By the way, General Electric, one we were talking about earlier, down 1. 5 at the open we do have ferrari trading higher today it has been an extraordinary run, they are both up 93, 94 year to date gm has had a stellar run in terms of sectors much strength, where are you looking for at this point when you say a lot of this rally has been built on hope is it the russell if tax reform looks more dim . What has happen was for a period of time as the dollar continued to weaken, they went the multinationals because they would be the beneficiaries over the last week or so, a couple of spurts up in the dollar that benefited the russell because they are russell is not really involved in International Trade and so things will work out better. So its been a kind of psychological rotation more than monetary. Sorry to interrupt. We want to get to bob pisani take it away, bob. The important thing, i talked to you in october 2015 when the ipo was happening and you said, we deserve a luxury valuation. A lot of people said you were wrong and youve been proven right. How do you feel about that i feel pretty good. Im long the position. Ive been a shareholder for a long time but i feel good about it the prospect for the company are phenomenal im glad to be here. Im glad to show off those cars in the front of the building, unique pieces of work. I think the brand is finally getting its pace itneeds. Fantastic cars, seven classics but the stock price, you went public at 52 and stock has essentially doubled in less than two years that valuation argument continued to be correct. How are you going to continue that to build on the strength of the house and to increase earnings, were going to make roughly about a billion worth of cash this year and in an ideal we would like to see business double the number. Another important point you make, two years ago you wanted to increase production and a lot of people said no, ferrari is a luxury brand and cant do that without hurting the brand and quaut. Ive seen you increase production 5 a year roughly yeah, about to increase the number of cars per month Utility Vehicle ferrari, different definition of utility but thats never been done historically and could add volume i think the Customer Base is happy. You had interesting comments about electric vehicles, many of your competitors been going to electric vehicles and talking about it you made a comment the other day saying maybe we shouldnt go that fast, maybe electric vehicles dont contribute so much to cleaning doing a full analysis what the origin of the electrical car is where it comes from. You get batteries for these charges co2 on the environment. The analysis save the planet with electric cars is not on the way over from a magazine about Nuclear Power stations coming up now both in china and europe if the base of that electrical production is nuclear, that is a different issue, well do the right thing. Youre embracing that Nuclear Power to produce but i think the issue is much bigger we need to entertain it. Congratulations, 7 o years of ferrari, beautiful cars out front. Real classics thanks again for coming and congratulations on the stock. Back to you. Thank you art, slowest volume days of the year today probably. This week things pick up . I think were getting into the early part of earnings season you can start to see that. In washington, until we get past the clowns and get into something more serious. Big banks coming on thursday. Right art cashin melissa you mentioned interesting to note suddenly all of the enthusiasm for gm with the Autonomous Cars. By quite a bit, tesla for a while had the largest market cap. Tesla, tweeted out elon musk a video of their production this week and they moved some resources i believe as well to help with the production. Yeah, its the resource and for puerto rico, sending additional battery installers and there had been a lot much interchange between the government of puerto rico and as well as elon musk, the two coordinating a delay once again of the semitruck unveiled that had been scheduled for november 16th. This is the second delay this year for the semitruck todays session. Disney got an upgrade by rbc capital saying that its now primarily a unique Global Content Company with clear strategic direction. The big upside risk is execution and disney has a good track record on that front and thats helping shares. Lasts week we detailed disneys successful renegotiation with one of the key distributors of programming in the u. S. In terms of reaching a new agreement. There has been some time a focus on that whether it would erupt into a seminole fight and it didnt and thats a positive for disney should mention shares of honeywell this morning also last week i think it was, they would not announce a spinoff of aerospace but reporting by reuters and bloomberg over the weekend or yesterday indicating that plans spinoff noncore assets and what they are saying two new publicly listed companies and i dont know that is the case. We will be hearing in the not too distant future, not sure if it will be this week or next from the company in terms of review its taken since they took a significant position and put a letter out to the shareholders saying we believe they should certainly look closely at spending aerospace, not doing that but appears they will emerge with some significant move im not getting any specificity the way others are from other sources in terms of what those will be. Well hear from the ceo of the company, whether this week or next, unclear but soon. Its interesting to clear and contrast with General Electric, the push of activity and were seeing honeywell respond more greatly in terms of the stock to these reports that theres a potential spinoff as david mentioned wont be aerospace, it could be turbo chargers a line item so the split of the Company Still unsure but investors like the hope of that split to unlock shareholder value. When it comes to ge and again if youre just joining us, the board seat they long thought or some time since the Company Started to unperform significantly, flannery will be the activist you can put an activist on the board but the way they explain it, hes far out ahead of everybody else in turns of turning that thing upsidedown and considering all different areas other than a complete breakup, when they are not going to do. Investors are taking a wait and see attitude. The issue is i think Analyst Community to what they are worth to be sure no disrespect to them but they are ee evaluating what the business is. There could be a complete reset. We dont know what the lines of business will be, percent of revenue from each area of business, especially how do you value a company you dont even know core business is right now and what it will be in the matter of five months or a year even thats a huge question mark when it comes to investing in a Blue Chip Company walmart, the company has its analyst day tomorrow and there was some positive review of wall mart stock saying they have another 15 or more upside, point to the growing e Commerce Business and word today that walmart will guarantee 30 second returns. Which is actually i would love that. As someone who still goes to physical retail and actually goes back and returns a lot of it, thats what takes a long time and makes a pleasant,down experience unpleasant. It used to take five minutes now they have an express checkout lane and return lane. And somebody who wants the ease and convenience and speed of a dot com purchase, you want that on the other side when you return to the brick and mortar this is kind evof filling out ta omny channel experience and making both sides of the equation equal in terms of convenience and simplicity. Stock up 15 this year. Pretty good run. Not too bad. And steeply discounting which is creating another element of pain for some of the Food Companies, big package Food Companies and Household Products Companies as well, causing pain on fellow grocers like kroger and others. As you have well known and reported. When i hear walmart i turn to amazon which is still up 32. 5 over the course of this year all technology has a bit to it but nothing significant in terms of percentage moves but everything more or less up apple, facebook, amazon even twitter is up this morning. Despite the growing political backlash and revelations coming about the election i know well talk about this throughout the hours including squawk alley, but google was victim to this as well and the operative buying ads during the election scandal continues to grow and continues to be a big issue that some of these companies will have to deal with and if they are not, the regularitors will deal with it. Lets get over to the nasdaq and bertha coombs. Good morning, david, the nasdaq hitting another record high this morning and now on pace for its tenth straight session to the upside. Its been fairly broad rally when you look sectorwise certainly since the beginning of the month, biotech chip have been up 10 but the big cap stocks youre talking about, to the fang names alphabet and facebook have been among the big contributors, both talking more about advertising with regard to the election and facebook infact saying there will be more human review of ads that have to do with politics and specific targeting of ethnic groups and things like that google and alphabet in addition getting permission in puerto rico to fly balloons to create more Wireless Service there. That island continuing to feel the effects of Hurricane Maria amazon, as you mentioned, contributed about 15 of the gains so far this quarter this month for the nasdaq its still 8. 5 below the all time high about 1,000 but amazon continues to be a four tier amazon merchants will likely charge sales tax starting november 1st, thats where the problem has been and one of the things that made the competitive, a lot of merchants dont do the sales tax even as amazon itself on the things itselves directly now does one more reason, perhaps that people will not see necessarily online being a big advantage back to you. Bertha coombs at the nasdaq coming up, dow and nasdaq lk wing new record highs, well taith chief equity strategist to about the future r the stock. When a critical patient is far from the hospital, the hospital must come to the patient. Stay with me, mr. Parker. The at t network is helping First Responders connect with medical teams in near real time. Stay with me, mr. Parker. Saving time when it matters most. Stay with me, mrs. Parker. Thats the power of and. I know when i hand them the its gonna be scary. Car but i also know that were gonna have usaa insurance for both my boys. Its something that theyre not even gonna have to think of. Its just gonna be in the family. Were the tenneys and were usaa members for life. Apple is said to be investigating reports that iphone 8 batteries are swelling. Apple is aware the problem and looking into it. It does appear they are under probably ten cases reported around the world but the big question for investors, is this going to be along the lines of a samsungs note 7 exploding phone fire in my pants kind of situation. Fire phone. They can certainly hope thats not the case. Stock is trading slightly higher. Its down to flat for the month but overall a big winner so far this year and the big question in terms of demand is going to be the iphone 10 a lot of people may be holding out for the 8 and 8 plus and some of that weakness showing up in the stock but they have a big upgrade. Continuing to be unclear where the demand truly comes from whether having launched theyve never done that, launched three phones at one time yeah. We dont know how its dividing the demand picture for these new phones. Right. But there are some concerns still that the iphone 10 will in fact be delayed even though were nearing that november date, day by day by day. Were worried the components will be in short supply. Well keep an eye on apple shares which have opened slightly higher, up a quarter of a percent. Coming down to the big vote in the proxy fight between p and g and nelson peltzexus, clive interviews with david taylor and nelson peltz squawk on the street will be right back the oil markets. Jackie deangelis is at the commodity desk the Energy Stocks are showing strength that is the case in terms of the stock market crude prices are higher but were holding under 50. Some people are wondering if this is a turning point for crude oil. Im going to give you three reasons and the bearish case that potentially it could be here the first is u. S. Production we have been watching these numbers closely on a week to week basis the last eia report showed we were just a little less than 50,000 barrels a day under peak production remember, when oil is closer to 50, it becomes more attractive to keep pumping it for the producers. They can push the price back down the second reason is opec. We found otlast week that the september production number there was up another 10,000 barrels. Remember, they promised us a cut. This is going in the wrong direction if theyre trying to bring this market back into balance. We did see increases in libya and iraq venezuela dropped off, but it didnt manage to balance it all out. The third factor is seasonality and demand demand isnt going up enough at this point globally to absorb the oversupply and the seasonal factor comes into play people just dont hit the road as much as they would say during the Summer Season so demand drops off especially here in the United States. You put all these factors together and folks are saying this could be the turning point where we slowly but surely start to drop back into the low 40s and the support we have seen has been from a variety of factors including hurricanes which are less of an issue right now so watch these prices very closely because this could have an impact then on the Energy Stocks david. Thank you, Jackie Jackie deangelis earlier, we spoke about disney shares beelg up. The rest of the complex, many of the names down viacom leading on the down side. Almost 5 . Actually is above a 5 loss. Citi downgraded the stock to a cell dont have the reasons behind that a relatively new ceo has embarked on a remake in some ways of the company. They are still dealing with the two, a renegotiation with charter for carriage, and the chinese in terms of a Financing Deal for their slate at the paramount studio that appears to not be potentially there for them and they have to go to plan b. But unclear, just getting it in my mailbox right now, havent had a chance to look at it in terms of citis downgrading. Were moving in the right direction, mainly going up, but the question overall for Media Investors is that part of a shrinking audience overall and will advertisers still pay for it paramount is a work in progress. Theyre looking forward to turning things around but it will be a while until they get there. Those shares have not performed well at all, down almost 30 over the last year ask and you shall receive we were going through the citi note here. It sounds like its a broader sort of media sentiment is poor. Viacoms equity trades at historically low valuation and they go through the risk with the old tv, proposition to the fees and thats stuff we have been talking about all the time the renegotiation with charter, as we were talking about disney, will charter put them on a different tier where will they be do you need the networks, of course, the mtvs the nickelodeons are they essential to be vital to programming bundlingprovide by your provider part of this downgrade is the assumption there will be either viacom will be dropped or significantly curtailed. Thats a big driver of the downgrade itself that would be a huge risk. And so many of these companies, though, are developing their own direct to consumer bundles we talked a lot about disney, which is coming in 2019. That was perhaps the seminal event in terms of the largest media companies, but viacom and so many others are going to try be part of the ott packages and create their own in a sense for that very reason melissa mentioned, namely the fear of being dropped and how to adjust to this changing world were in the middle of in terms of programming and the viewing of it coming up, were going to have citis chief u. S. Equity strategist he will talk to us about a lot of things. Tobias levkovich will join us. Keep it here and the wolf huffed and puffed. Like you do sometimes, grandpa . Well, when you have copd, it can be hard to breathe. It can be hard to get air out, which can make it hard to get air in. So i talked to my doctor. She said. Symbicort could help you breathe better, starting within 5 minutes. Symbicort doesnt replace a rescue inhaler for sudden symptoms. Symbicort helps provide significant improvement of your lung function. 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Everyday our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. Welcome back to squawk on the street. Im sara eisen here with david and melissa. Live at the New York Stock Exchange carl has the day off happy columbus day bond markets closed but stocks are open the dow is covering just below a record high. Another interday record. The nasdaq is at a record as well, and the s p 500 not too far from its own were seeing strength in crude below 50 a barrel but Energy Stocks are the leader in the s p right now. Well get to our roadmap. It does start with the busy weekend out of washington. The president takes on bob corker well tell you what that might mean for the agenda straight ahead. The big showdown at Procter Gamble one day away from the shareholder vote on whether to own nelson krauts to the board and earning season about to get under way. Well get you ready for the big bank report straight ahead a lot of news to get to out of washington, starting with President Trump, who sparred with republican senator bob corker on twitter yesterday. Questions now being raised about what impact this could have on the overall agenda for the Trump Administration, of course, one of the key focuses being tax reform corker, an important voice in a lot of different areas were joined now to fill us in on the latest. Good morning, david i cant think of a time when we have seen an open war of words like we saw over the weekend between the president of the United States and a prominent sitting senator like this. Take a look at the tweets back and forth between the presiden and bob corker starting with the president on sunday, this is in the wake of bob corkers announcement hes not going to run for reelection. The president saying senator bob corker begged me to endorse him for reelection in tennessee i said no and he dropped out, said he couldnt win without my endorsement. He also wanted to be secretary of state i said no thanks he is also largely responsible for the horrendous iran deal hence, i would fully expect corker to be a negative voice and stand in the way of our great agenda didnt have the guts to run. To that, bob corker responded on twitter with this. Saying that its a shame the white house has become an adult day care center. Someone obviously missed their shift this morning then he gave an interview to the New York Times in which he said the staff around the president spends much of their time trying to contain him said hes treating the presidency like a reality show and his threats to other nations could set the United States on the path to word war iii hes concerned about the president and anybody who is concerned about america should be concerned as well dramatic falling out between the two men. Bob corker has been a critic of the president in the past, but hes also been an ally, and as you point out, hes someone whose vote the president is likely going to need in terms of tax reform because they only have that twovote margin in the senate if they dont get any democrats to come onboard. Corker has expressed some skepticism about tax reform thats not deficit neutral it looks like the Trump Administration is going to end up with a plan that is not deficit neutral. Where does that leave corker in terms of his vote . Thats to be determined but a real war of words between the two men over the weekend hes freed now, of course, given hes not running for reelection. Thats right. I mean, we have seen the president go sort of to war politically with other republicans on the hill who have not been as willing to fire back as directly as bob corker did. To say that the president of the United States is possibly setting the world on the path to world war iii is as dramatic a criticism as i can recall of a sitting president by a prominent senator of his own party i cant think of a historical precedent for this by the chairman of the Senate Foreign relations committee, no less which is what bob corker is. Thank you. Couldnt be more personal and couldnt be more intense well see how it shakes out despite concern over the future of tax reform, stocks have continued to march higher, setting records today. The dow and s p coming off four straight winning streaks joining us is Tobias Levkovich do the prospects for tax reform get diminished this morning . We have to be careful with the term tax reform. Probably the only reform that will be done is on the territorial tax issue. Its more likely tax cuts. And moderate ones at best. Especially if you have some of this activity on the hill where theres pushback on the deficit neutral issue. I dont think it will be definite neutral, but the question is how big incremental deficit it will get to and what impact it will have on the stock market and the economy. If we see corporate cuts and the onetime repatriation rate go down the tax cut for the s p 500 is about 27 were assuming and we have been for the last few months it will be about 25 when you take the 35 down to 25 . It will only give you about 2 points on the tax rate that would add 4 a share on earnings if it got to 20 , its hard to imagine where the offsets are for that, but if it got there, you could add another 10 to next years numbers. I dont think the street will pay a lot for that kind of tax cut because any congress in the future can change it back. 4 a share in earnings for next year assuming the 25 your estimates include that . Right now, youre about 4 below consensus. Were below top down consensus. Sorry, were top down. Bottoms up consensus is usually higher than the strategists numbers by 3 , 4 . Thats not unusual were at 141 and the consensus is more around the 145 range for next year. I think a lot of analysts will be waiting for guidance. Well get the first hint of 2018 in the quarterly reports in the Third Quarter. Its typically when Companies Give you a hint of what will come in the next year. The problem is they dont know themselves what the tax conditions will be or if theres interest expense deductibility so theyre even going to be reticent to guide one way or another. Were going into earnings this week. Banks kicking it off on wednesday and thursday how much good news is priced in there with financials taking a real leadership position over the last few weeks i think its more about the bond yield and the shape of the yield curve. Companies are going to or the banks specifically are going to probably be, again, cautious a little bit you get that cringe worthy cautious ll lly optimistic terminolo terminology. The real key for the banks is what theyre going to talk about, not in the Third Quarter but moving into the Fourth Quarter results and beyond on loan growth. This has been kind of one of the concerns that there hasnt been growth disrupting the sector as well as other areas where technology has come into the game one of the things that we have highlighted very aggressively to people is the senior loan officer survey from the Federal Reserve board on commercial industrial loans is a critical factor when youre trying to understand whats going on with loan demand. Loan demand lags the standards by six quarters. Its that large a lag. That turns in the Fourth Quarter, gets better in the first half, and most people are still saying theres no loan growth youre expecting that to turn in a good way. If the last 25 years are a history of the trend, yes. Meaning what . What will occur as a result of that well start believing theres growth in these companies and its not just about cost cutting or capital return. Thats only if you believe loan growth is happening because of a better backdrop, a better economy as opposed to lower rates because in six months time, were faced with Companies Facing higher Interest Rates which is what we have seen in the past couple months then it will so lets its an important point. First of all, again, remember theres an 18month lead so even if rates were to tick up, lets say the first half of next year, youre talking about it really impacting in 2019, not in 2018. So i dont think investors are quite looking out 18, 24 months in their investment time lines, i wish they would but theyre not. Number two, whats really interesting is the feds started raising rates over a year ago, and funding costs for business is lower today because of the credit spread coming in so dramatically so you havent had tightening of funding policy or financing capability for businesses. Thats the real key for them in terms of how they think about how to invest. The return on capital versus the cost of capital. The credit or the equity world to the larger question of whether or not higher Interest Rates are going to actually embolden more people to say, you know what. That is a possibility, but they havent invested in stocks anyway you look at the net flow, the combination of both u. S. Oriented equity funds and u. S. Oriented etf both together of the outflow thats the amazing part. We keep hitting records and people are taking money out of the market where are they putting it europe, emerging markets, things like that to the question about stocks and bonds, we have been in this dynamic for so many years where investors are buying stocks and bonds simultaneously, and now why if bonds would sell off would they continue to buy stocks, i guess . So if you look at history and say, okay, where are we in that kind of cycle . If youre losing money in bonds, it usually means ultimately youre going to stop, but it takes a while. You dont recognize youre losing money right away. It often takes a year or two to figure that out. Just to give you an example. In march of 2000 when the tech bubble, you know, peaked and then burst thereafter, it was almost august of 2001 when we saw consistent outflows from Aggressive Growth funds. In other words, it took 17 months for people to register the stocks werent coming back after a 32, 33year bull market, its going to take time to realize theyre not going to make money in bonds. Your final last word, your target for the end of the year 2475, we think the market is a tad ahead of itself. People got a bit too excited on the tax cuts in the final trimester. Tobias levkovich, thank you. Equity strategist of citi group. The countdown is on, one day away from the p g peltz showdown, and Harvey Weinstein is out fired from the company he cofounded amid allegations of Sexual Harassment. We have the details. Squawk on the street will be right back i think its terrific. Your kids go to college and you start trading. Yeah, 5 years already. 5 years, hmm. You ever call your broker for help . Once, when volatility spiked. And . By the time they got me an answer, it was too late. Td ameritrades elite service team can handle your toughest questions right away with volatility, its all about your risk distribution. Good to know. Thanks, mike. We got your back kate. Does he do that all the time . Oh yeah, sometimes he pops out of the couch. Help from real traders. Only with td ameritrade. Big showdown one month from battling with nelson peltz, investors will get to decide whether hes going to get a seat on the companys board. Leslie picker joins us with more reporting. Hey, sara advisers on both sides expect this to be a close vote. Nelson peltz has drummed up support from key institutional investors. Texas teachers and asset management, just to name a few a majority of Asset Managers hedge funds and investors will likely support tryiien, but the represent the base equal proportion is Retail Investors. Mom and pop shareholders who typically side with manage mth if they vote at all. Looking side by side at their shareholder base, this is in many ways a deja vu. When peltz ran a proxy contest at dupont in 2015, he faced a similar breakdown. Institutional investors were about 46 , though, and retail was 32 . He, of course, famously lost that fight with index funds being the pivotal vote in the case of p g, index funds are expected to hold the power once again after speaking with sources on both sides, the index funds votes appear to be a bit of a wild card. They say they need essentially one to side with it to win the fight all together in the meantime, tryon seems to have learned they waged a large Advertising Campaign in cincinnati with ads in the local papers and on tv to appeal to the Retail Investors in p gs hometown. When this is all over, both sides are expected to spend 60 million over one board seat. The most expensive proxy fight ever, guys i think leslie, important to put it in some perspective people wonder why are you spending so much time on theres a belief that should trian win, therefore, any company is vulnerable to an activist if they even have lets call it a couple bad quarters. Theres a lot larger at least theres a view theres a lot more at stake that this one board seat given the side of p g and this battle. We have heard so many times, its just one guy. But on these boards where you have one person with a great deal of knowledge or comes with asymmetrical information because they have all these people doing work for them versus all these other Board Members, they can wear them down over time to add to that, its also a turning point in the Consumer Packaged Goods Company space where there has long been a struggle to grow whether its the invasion of the small brands in ecommerce companies. The shifting models and ways consumers buy these predicts, more online. The fact theyre going to more niche brands something that peltz has mentioned a number of times and the fact that a lot of these big Food Companies, for instance, have been victims activists and they have been pushed on the cross side we saw it with 3g, with peltz and others and the household Products Industry is facing some more challenges as unilever rejected a bid from 3g earlier. Back to the bid that you gave us clearly, black rock, 5 , vanguard, 7 , and state street, 3 those are the indux funds you mentioned if trian has a hope. My guess is they have to win vanguard or block rock and state street together to emerge victorio victorious what are you hearing sph. So far, advisers on both sides say theyre not exactly sure which way any of those three indexes and etf firms will go i think it will come down to when the votes are cast tomorrow you brought up an interesting point earlier, david that is that this represents the fact that any big company can be subject to an activist and subject to an activist that gets a seat on the board. A lot of people look at this situation with p g and say the stock price has gone up over the last year when peltz disclosed his stake and said he was running for the board. This is a pretty decently performing company just from a broad Stock Performance standpoint contrast that with ge, which of course, trian obtained a board seat that stock had been underperforming so it wasnt as surprising to see a settlement made there that would give ed farden a seat on that board, but p g scares a lot of ceos at these Big Companies that believe they have done a good job, that they have been performing well, that the activist isnt pushing for large strategic spinoff, byback, anything like that it has struck fear in a lot of ceos across the board. Leslie picker, thank you. To leslies point about the comparisons with dupont, trian would say it may have lost the vote, but it won the war they got 46 of the vote so what qualifies as a win here . And what would force a company to make changes no matter what how would p g interpret a very close vote would it be a vote of no confidence in the current Board Membership even if p g does win, youll hear the argument that their performance will be highly scrutinized over the next year given the presence of trian and so much focus on it in the media and of course amongst their investor base. Theyre on notice either way, you could make an argument, even if they lose that said, they have spent a lot of time and effort to try to win that board seat. Very unclear whether theyre going to this point about any company being the target of an activist and a target that can be forced to embrace change is a good one, especially as we see a lot of larger investors go after larger and Larger Companies there was a time maybe a few years ago when we would have never thought activist investor said would go over the likes of an apple with carl icahn or p g. It was not done with a relatively small stake it was seen an ineffective thats tranchanged dramaticay over the last few years. Netflix is another one we dont talk a lot about with dan loeb, which is a very important continued conversation going on there. In the same slow growing kind of industry, which sort of speaks to some of the problems a lot more coverage on this live from cincinnati tomorrow the site of the vote at p g. We have an exclusive with david taylor, the chairman and ceo nelson peltz, who is fighting hard for the board seat. Will he win . A lot of intrigue and suspense around this one. And a lot of money spent as well well, media mogul Harvey Weinstein has been fired this after allegations of Sexual Harassment were in los angeles with the latest in this developing story. Thats right. Last night, the board of the Weinstein Company fired Harvey Weinstein of cochairman of the company he and his brother founded saying the decision was, quote, in light of new information about misconduct by weinstein that has emerged in the past few days. Now, there are reports that the company could change its name to help it move past the scandal with coo David Glasser considered most likely to become ceo while harveys brother bob focused on running the Dimension Division so whats next for the Weinstein Company . Dimension has amityville, the awakening opening later this month as well as polaroid next month. Weinstein will have a harder time drawing awards acclaim in the wake of this scandal this could make it all of this could make it harder to sell the companys tv division, which has been on the block since 2014 the division has been bolstered by the value of project runway and its spinoff, but diminished by netflix canceling marco polo. It does have a number of high Profile Projects in the work, including a david o. Russell project for amazon scheduled to star robert de niro. Another factor that could weigh on the companys future. The investigation and settlements will likely cost in the millions if not tens of millions of dollars and it will be harder to raise debt or equity to finance new projects, not to mention how hard it will be to attract top talent top agents refuse to sign a letter of support in weinsteins defense. A tough time for the Company Moving forward thank you julia borston. When we come bax, well have the chairman of indias Largest Company explaining how President Trumps policies could impact his business or his companys business and why the company will be a big player in electric vehicles squawk on the street will be right back i cant wait for her to have that College Experience that i had. The classes, the friends, the independence. And since we planned for it, that student debt is the one experience, im glad shell miss when you have the right financial advisor, life can be brilliant. Ameriprise you know win control . Be this guy. Check it out selfappendectomy oh, thats really attached. Thats why i rent from national. Where i get the control to choose any car in the aisle i want, not some car they choose for me. Which makes me one smooth operator. Ah still a little tender. vo go national. Go like a pro. Has grown into an enterprise. Thats why i switched to the spark cash card from capital one. Now, im earning unlimited 2 cash back on every purchase i make. Everything. Whats in your wallet . Is in the midst of Major Overhaul with 29 publicly traded companies it owns large parts of ranging from autos to steel, their chairman Natarajan Chandrasekaran who took over in january is breaking from tradition to drive more synergies within that empire, something that could be a challenge. I sat down with chanda and asked how President Trumps policies, particularly his protectionist attitude could be a hindrance to his plans for the overall business i think that may be changes of different kinds, not only the u. S. And other parts of the world, given the job situation in terms of complaints, one cannot predict, but i dont think that it will be damage to the business why is that because i believe in two or three points one, tech is fundamentally a business the tech jobs are plenty its a situation that people are not able to find the right talent in many situations. So the joblessness is not related to tech. That is one. The second thing is globally, people want to be competitive. These two things put together, i believe that there will always be demand for tech jobs. So i dont see naturally there is an issue. Yeah. One of the larger debates i think in this country is the advent of Artificial Intelligence and what that really will mean over the time in terms of job losses many people believe the machines ultimately will take a lot of jobs they will, if you go back in history, every time there has been a burst of technology, whether it is during the industrial age, the steam engines or electricity, every one of those times, the magnitude of productivity went up significantly and each of those situations should have meant job losses actually, on the contrary, we saw significant increase in the number of jobs jobs, nevertheless, huge Economic Growth and huge employment you have been running enlargest component of tata for some time, but now youre oversee lg of it what have you learned in your initial stages and what are your goals in terms of the other businesses that you had not had responsibility for i think first of all its a very large and incredible growth and the potential for us is very large. We have 700,000 employees. And the families of the employees, we are 3 Million People if we include the partners, distributors, leaders of our auto sector, et cetera, i think were talking an ecosystem which is 5 million, 6 million, 7 Million People second thing, it is the single biggest name that is known in the country in india, and we are also large in many different countries, also india. The potential in terms of what we can do, the impact we can make, is just huge thats one thing that strikes me so my hope is ill be able to bring a lot of elements together to buy a lot of Group Synergies to make Economic Growth on one side and impact on the other bringing lots of groups is easily said, but not always that easily done. Who said it was easy . Who said it was easy i didnt. You seem to have confidence you can do it. Yes, i do, because the culture collaboration is in the dna of the group and the value system that pressed ethics, integrity, purpose, there are many such Common Elements which run through the group because of the heritage and the history so its going to be a challenge, but its not going to be impossible we have so many automakers trying to develop autonomous systems. Is jaguar and land rover in that race how do you see it yes, we do. We basically have three businesses the Jaguar Land Rover business, which is india, properlyinantly, and a strongbed in india, and then the segment in india market and were going towards electric cars in a big way. Jaguar has already announced its plans and the indian makers also have more on we won the single largest order in india yesterday for 10,000 vehicles in the market so were putting in a lot of r d, in innovation, in the electric vehicle space, and also doing a lot of approval of concepts in the Autonomous Car space. Electric is coming quickly, i think. Pollution figures into that, in india and china as well where they have certain goals within 20 years they have announced their plans very clear that they want to move very significantly towards the electric vehicles and the battery infrastructure in the commissions space so it will be a big player 700,000 employees not an insignificant company you heard about land rover and jaguar as well interesting, on the a. I. Question, i have been talking to a lot of leaders in technology he ran the key consultancy business im getting the same answer. I dont know if you are. Its going to actually add jobs. Suddenly, technology seems to be on the same narrative. No, its actually a. I. Is going to be additive to jobs, not actually take away from them heard that a bunch lately when people who run these companies are asked that question. Because they need engineers and people to program them people will only be better at their jobs it will add components of work to be done it will enhance it, but it will not replace the human being. I dont know people in the consumer industry say the same thing because theyre adding these completely new units as part of their businesses to figure this out. The question is whats the end game i think it sdpds on what kinds of jobs. Theres research that shows its the middle range skilled job thats being replaced by Artificial Intelligence. A lower end job, a higher end job is not yet replaced by automation and technology. The Skills Mismatch good interview lets send it out to sue herera. Good morning heres whats happening at this hour, everyone. Iran says it would be a strategic mistake if the u. S. Imposed new sanctions on tehran. The comments coming from a Foreign Ministry spokesman during a regular briefing. He said if such a decision was taken, it would be followed by a crushing response from iran. The 2017 Nobel Peace Prize has been awarded to Richard Fowler from the university of chicago for his contributions to behavioral economics he discussed his awardwinning research the most important impact is the recognition that Economic Agents are human and that economic models have to incorporate that exactly one week from the minute shots rang out on the las vegas strip, that city dimmed its famous skyline at 10 05 p. M. Pacific time the lights went low to honor the victims and the heroes of that tragic night the lights were dimmed for exactly 11 minutes that is the news update at this hour i will send it back downtown to you, sara. All right, sue, thank you when we come back, it is the latest on interference from russia during the election google saying its platforms were compromised. Well discuss how the president used facebook as his secret weapon quk t see wl be back with this big story next. Google uncovering evidence its platforms notably youtube and gmail were manipulated by russian operatives in an effort to spread disinformation and interfere in the 2016 president ial election. This, of course, as Silicon Valley continues to feel the pressure from washington for its role in promoting fake news and false content. The digital director for the Trump Campaign telling 60 minutes last night that facebook was the reason trump won the election listen i understood early that facebook was how donald trump was going to win twitter is how he talked to the people facebook was going to be how he won. And facebook is how he won. I think so. I mean, i think donald trump won, but i think facebook was the method it was the highway in which his car drove on for more on Silicon Valleys increasing political problems, were joined by nyu stern professor Scott Galloway welcome back thanks. Just to be clear there, the digital director for the Trump Campaign was not talking about the russian interference he was talking about the fact that they got very cozy with facebook, as 60 minutes presented, had embeds that were coming to teach them all the tools. Is this an example of success or danger i think its success. Just as kennedy won the presidency with television with the new medium, i dont think you can fault them for it. In all the platforms have people devoted to their biggest spenders i dont think theres any problem there. What were finding, though, with google, by the way, this is a great morning for facebook now google is the new heat shield for all of this russia stuff. But the idea that these platforms can be weaponized for foreign adversary, thats an entirely different ball game yeah, and what we learned about google is that it wasnt necessarily according to the Washington Post, the same kremlin affiliated troll farm that bought the ads on facebook. So it leads to questions about how widespread this is and how vulnerable these companies were we dont know how widespread it is, but we can be pretty confident its going to spread wider. Its unlikely this feels like every time the onion comes back, its a little more when the platform initially responds to this, the first thing theyre trying to do is minimize it. What we found out is it wasnt as minimal as they had originally reported. Then they go into this nomenclature of were a platform, we dont want to censor, or we cant be an arbiter of truth then they get to the part theyre supposed to, reacting and fixing the best suggestion to any of them is to skip right to the part where they overreact and say were not going to let this happen again regardless of what it takes can you break down what the negative impacts are to these companies . Right now, we have facebook hiring scores of people. Actual human beings to make sure this doesnt happen again. Weve got washington really taking a look at this space. And theres potential maybe regulation that could happen here so in your view, what is the biggest risk that these companies overreact, as you say, hire too many people in the wrong places washington comes in, puts a whole new set of rules in the game the biggest risk is whats happening. I would argue that our hiring scores of people facebook has 250 people to 1,000, which i would affecti affectionately call pissing in the ocean. They spend half a billion on a. I. To help those people identify and flag controversial content. Were you weaponized by russia . Every argument why they cant do that is a function of the profitability. Its a realm of the profitable this Company Needs to inject something called discorrection, friction, and editorial oversight, which theyre unwilling to do. When they say impossible, what they really mean is its unthinkable for us to reduce the profits that have made us the third and fourth most valuable companies in the world the risk here for them is an underreaction, which is what were in the midst of. Do you think they know a lot more than theyre sharing, though theres a general sense, of course, that these Companies Know more than any other companies in the world about their users, that they are the greatest data sources out there. And they use a. I. Very effectively, more so than anybody. Are they simply not telling us everything they know its hard to say, but its impossible to think that the news we find from here isnt going to be more bad news that it was more widespread than we think. And just as in the tobacco industry, when youre paid not to understand something, its easy not to understand it and they couldnt link tobacco with addiction. The Big Media Companies are in certain ways sort of paid not to understand whats going on thats controversial or negative on their platforms and they want to say were a platform but you produce content, you run you make money against that content in 90plus point margins, youre a media company. These companies have been openly embraced, the influence, celebrity, and margins of the media company, but are allergic to the responsibilities. Thats about to change theyre saying were not producing the content, our users are. Which is by the way the greatest Business Model invented. A mcdonalds on one corner produces 500 burkers a day another on the other corner produces a million burgers because were so profitable, we cant check the food quality thats not an excuse if you can figure out a way to insure that literally someone doesnt buy ads on cnbc with rubles, with 100 or 300 in cash flow, a billion in free cash flow. Facebook can figure it out with 12 billion in cash flow the excuses here are going to start to literally implode theres no reason they kaebtd figure this out. The revelations are coming kind of late why is all of this happening now . Because congress has shined a spotlight on the influence in the election that theyre just coming up with these operatives now and then these ad buyers i think were coming to grips with some uncomfortable questions about the fact that 60 of americans get their news from facebook. And theres no editorial control. The reason why organizations such as this and the New York Times and the Washington Post are thriving is a key to a Business Strategy is scarcity and truth in some sort of editorial discretion or veracity is becoming increasingly skas because the media thats overwhelming us has absolutely no veracity. We saw that 80 of the news coming out of facebook, seven days before the election, was fake 80 they say 80 of the political news read i think in the five days before the election where are the advertisers, the p gs, the gms, all the companies that are the Profit Center of the Companies Like facebook and google. Do they have a liability here . I dont think so. As a matter of fact, if you look at the cmo of p g, mark pritcha pritchard, they are been robust spokespeople for trying to force the platforms to come up with tighter standards. I think theyre actually leading the responsibility activities here i also want to take some words back i dont know if it was 80 of 80 of the news was around politics i know more of it was fake, but i need to take that number back because i need to verify that. Regardless, what i will say is the one person who accurately predicted the outcome of this election to me was following engagement on facebook amongst supporters of hillary versus trump, and clearly saw trump had far more engagement, which to your point, they did figure out what the medium was that was being most effective, would be most effective even think about your own experience with the election i dont know about you guys but i was 100 certain hillary was going to win the algorithms on the platform started putting me in the ecochamber i wanted to hear. Im a progressive. All the news stories on facebook, all the recommended videos on youtube were telling me everything i wanted to hear and you start to figure out just how incredibly powerful these platforms are. Its a scary thought. We have to leave the conversation there scott, but im sure well continue to have this. Scott galloway, of nyu when we come back, a rally in financials under way, but taking a bit of a breather today. The big banks kick off earning season this week squawk on the street will be back dont go away. The Cambridge Cyber summit is a rare chance to convene the brightest meendz from government and company to share ideas and concerns and do it in a forum where our viewers can get a firsthand kaekt of the risks and the people dealing with them given all these cyber threats, encryption is one of the most powerful tools to protect all of us. As someone who reports on technology, this has become one of the major stories everyones life is now online. Hacking is now the new digital disaster biotech stocks have skyrocketed this year, but one fund manager sees two good reasons for them to go even higher find out what they are more squawk on the street coming up. Hi, im the internet you know whats difficult . Armless bowling. Ahhhhhhhh you know whats easy . Building your website with godaddy. Get your domain today and get a free trial of gocentral. Build a better website in under an hour. Finances lower this morning, but the sector up almost 10 over the past month. Major banks set to report earnings later this week, including jp morgan and wells fargo. Lets bring in the Senior Research analyze at oppenheimer, and devon ryan good to have you with us good morning. Chris, ill start it off with you. Which side of the financials are we going to hear give guidance, talk about the markets, et cetera, on the Conference Calls . Will we hear from the financials that had been sort of doing okay but sort of sputtering prior to the last month or are we going to hear from the financials that have really gained momentum in the past month you know, the interesting thing is that the underlying fundamentals are incredibly stable credit quality remains good. Loans are growing slowly but theyre growing. And since the fed has started lifting rates, you know, revenues are generally rising. And now with the ccar share buybacks, you have the share count shrink a bit the bank fundaments, theres not any question about them. Theyre stable, chugging along its a law of large numbers kind of business. What does change is the sentiment and the attitude on the stocks and for most of this year, the market has been treating banks as though they are were a proxy for the tenyear treasury. And higher rates do help, but thats not all there is, right, because the banks now do have some revenue growth. Thats good. Theyre buying back stock. That i think is one of the things thats different. If you look at the four big banks this year, they have been approved for 59 billion of share buybacks. 59 billion. If you go back just to 2012, that number was 18 billion. So i think youre going to find ultimately that the financial math is going to power them more than just the sentiment about the tenyear treasury. I think at the time the results were released, we saw a huge pop in bank shares. Going back to what chris is saying, banks have largely been trading as a proxy for the tenyear yield i dont care what you tell me, thats the fact of the matter. Over the past month its no coincidence weve seen the tenyear yield go up to almost 2. 4 , and in that time thats when weve seen the banks really rally. So what can banks tell us this quarter about next year that will snap us out of that sort of proxy trade . Yeah, youre exactly right. Its really been mostly about Interest Rates recently, but i do think that theres a number of things kind of fundamentally with a number of these companies that are still quite positive. If you look at the Capital Markets businesses, i think the bar has lowered quite a bit for trading and thats been a challenge and going to look tough relative to last year, but theres upside for that business if you look at investment banking, good momentum there and still quite a ways to go, so it all kind of correlates back to Interest Rates, because that tends to kind of correlate with Economic Activity and, you know, so it all kind of goes together, but i do think theres quite a bit of other parts of the story that are positive. Weve seen three big themes impacting the group right now. Its the improvement in risk assets, so you had a 4 increase in the s p in the quarter, you have Interest Rates, as weve spoken about the next leg is do we make progress on tax reform i think thats starting to get into the stocks here and we need to get here. Well see guys, thank you. Chris and devin. Thank you thank you all right, lets give you a look at the markets, of course, as we are about an hour and 20 minutes or so into trading there it is. You can see were ever so slightly down at this point. The big loser on the dow does continue to be General Electric, down 2. 7 . This after a series of resignations on friday of Senior Management under previous leader jim immelt and a new board member from tryon, still not helping that stock price, 23. 72 on ge. And there you see the dow less than 4 points, now 5 points. You get the picture. Were back after this. An american behavioral economist has been awarded the nobel prize in economics who he is and why investors should be particularly familiar with his work. Steve . Richard thalor, 70yearold economist from the university of chicago, this years winner of the nobel prize for economics. Thalors run a pioneering ensue recollection, arguing not all individual Financial Decisions and markets are rational economics is based on the assumption that everybody is super rational, has no self control problems, never has a hangover, saves exactly the right amount for retirement, and then invests it perfectly. The rest of the world is nothing like that. Were more like Homer Simpson than we are like spock from star trek, and so really weve built up an edifice, a world, a set of theories that apply to fictional creatures. And we dont really have an economic theory that applies to people thaler found biases include mental accounting, based on where the money comes from one choice with a stock if it has gains and house money, and another with losses. Rational expectations would predict no difference in the decisions. Thalers work goes into the nfl. The best value he found was the 27th pick, david, and he said he was going to spend his prize as rationally as he possibly could. Back to you. Thanks, steve sure. Interesting to hear that. Lets send it over to john fortt, a very rational man, hes in San Francisco with a look at whats coming up on squawk alley. John thats right. Just south of San Francisco at the black enterprise tech connect conference, where ill be interviewing the ceo of intel on stage in a couple of hours, int butch graves is going to jo us in just a few minutes coming up on squawk alley. Throughout my career, ive been fortunate enough to travel to many interesting places. Ive always wanted to create those experiences for others. With my advisors help along the way, its finally my turn to be the host. When you have the right financial advisor, life can be brilliant. Ameriprise welcome back to squawk on the street. Shares of Consumer Staples inching into the green walmart up about 1. 5 , following a positive feature in barns over the weekend, which said shares could rise 15 or more over the next year as ecommerce helps it jump stalled revenue and Profit Growth now heres the team at the New York Stock Exchange with the kickoff of squawk alley. Seema, thank you, and good morning, everyone. Its 8 00 a. M. In Silicon Valley, 11 00 a. M. Here on wall street, and squawk alley is live