Transcripts For CNBC Squawk On The Street 20171016

As Iraqi Forces Advance on kir kuk. Road m as we kick off a busy week for earnings. Plus a win for workers, the white house pitching the tax cut plan countering democratic criticism and seeing middle class americans would see incomes rise. Eye on subs, netflix after the bell and is expected to hit another record today stocks are looking to hit record highs, dow and s p 500 coming off five straight weeks of gains. Yellen saying the ongoing strength will warrant a gradual increase in rates. Meantime oil prices are higher this fighting between iraqi and Kurdish Fighting escalating and wti up almost a buck. 600,000 barrels in play and you also have to believe the area being destabilized has made it at least for a couple of days you get over 50. Ive got to tell you, ive got at least a dozen Oil Companies i monday ter that will be in there selling again today. They have to sell because they are exceeding their cash flow. So when you see 52, you need to see a breakout to like 56 to realize they are all through or that they really finally just feel were making enough money in the cash market, we can do okay most of these companies are not getting 52 in permeon because its land locked theres a lot of pipe but not enough i think oil can break out but there has to be a bigger event than kirkuk. Looking at the companies that did well last week, the stocks, it was anything cloud, anything at all related to block change, i mean it was just then you go over and its everything related to housing, housing. Then everything related to the rails, there was a rail downgrade today. Its like one group after another is great except for food and retail those look terrible. Amazon makes up for all of them. All amazons fault when it comes to food and retail, nobody else to blame, thats it. Any time amazon is resumered to be moving into another market, immediately market down the stocks the stock about sportswear. Nike. We had an excellent ichbt interview with lulu in china what happens if amazon does private label . The answer is you sell nike because nike is not doing that well, not because of amazon. I keep thinking about what happened to people who sold home depot when they did the exclusive tieup with sears. That was exclusive exclusive to what i dont know i do have news out on nordstrom, they do need to file a weve been wondering about the potential buyout and the stock is reacting. On october 13th, representatives of the group advised a special committee and remember its the Nordstrom Family along with private Equity Partners trying to make a bid to buy nordstrom and you have to go through a special committee to receive this offer potentially that was coming they said that they are having difficulty in light of difficulty obtaining financing the current retail environment prior to the Holiday Season, they have suspended active exploration for the possibility of a go positive transaction there you have news on the potential buyout of nordstrom, which indicates difficulty getting financing and therefore they are stepping aside for now. They say they are going to the Group Representatives also advise special committee and plan to continue efforts to explore the possibility of making a proposal for going private after the conclusion of the Holiday Season and no assurance given that that proposal would be made after that time. You see shares down it was at 40 before they made that announcement that they are thinking about doing it so they should go below 40, september surprisingly weak month for a lot of retail with the exception of the Dollar Stores and home depot. Dollar stores are doing incredibly well. We did get ruby tuesday how do you like oh, my. That is going away. People have been averaging down on that and averaging down and the guy who bought it on friday is doing good how about that salad bar they used to have killer salad bar. The white house releasing its first Economic Analysis of the tax reform plan projecting a 20 Corporate Tax cut would be a windfall for workers boosting average middle class incomes by four grand a year. Democrats argue it will primarily help the wealthy Chuck Schumer says, President Trump complains about fake news, this fake math is as bad as any of these socalled fake news he has complained about and there is real debate, guys over the impact of this package Tax Policy Center has much different views than the cea. I woke up on saturday saying when are we going to read the story that says tax reform has been pushed back by the new health care plan, that the president put out. I think tax reform is how many times can you declare something dead on arrival . Were going to go back to health care you have to, its going to be if you get rid of the subsidies no one will write, jack the price up. There is potentially the bipartisan effort now, alexander bipartisan and murray trying to come up with a bill to get bipartisan support on health care in terms of firming up the exchanges or but that fails but does take a huge amount of our time away and nothing happens. Look, anybody who anybody the subsidies, you need the subsidies to get the companies to be in there or they going to raise the rates i think to this central argument in terms of lowering the Corporate Tax rate and benefit for workers, this debate is going to rage for a while i remember when we asked gary cohn about it and he didnt go there in terms of saying it would increase wages he said it will benefit their pensions yeah. It doesnt matter. Its off the table youre saying yet another diversion theyve got to talk health care, its way too big because you get the disparity of income, you cant any republican from jersey and new york and california is running for their lives, connecticut you go back to doing health care and get nothing done but at least you try to save something. They cant leave health care the way it is without executive decision its right, think it was legal because it was a decision by obama sure. But theyve got to go back and Start Talking about it again. When is tax cuts coming whens it been pushed back to . Will they have to work through christmas as speaker ryan says they will . Inconceivable they would ever work through a holiday remember when you first started out and had to work on thanksgiving and christmas they should go back to where they were when they were like 22 yeah, youre the new guy youre working Christmas Eve how is that treating you these guys ought to make some pledge because health care is going to be front and center by mid week. You think so. Yes, has to these sub sid zis are too theres nobody knows whats going to happen in the system. Pelosi i mean we mentioned schumer, pelosi over the weekend said were a little far down the road when asked about would be bipartisan cooperation between the white house and dems i think they definitely fail. I think it gets back on the agenda because theres too many people going to be complaining. Then the entire year will have been spent trying to deal with health care and failing is what youre saying yes. To the exclusion of virtually Everything Else . But the market is up 5. 2 trillion since President Trump was elected. I got that right off of twitter. It doesnt matter, the health care thing these are intractable issues we keep thinking tax reform is easy ive gone over what all of the different brackets if you use a Million Dollars for the new bracket at the top, its not a break for the rich its not its mutual for the rich and some states bad for the rich why cant people admit thats the case its state by state. Okay. Did you see a little cost to buy a gallon of milk no, i didnt. Down two bucks. A gallon . Yeah. Just pointing that out thats watch, the cpi was not a barn burner on friday by a long shot. This is what people are thinking about, they are thinking about the im not kid, after listening to Wells Fargo Bank of america, jp morgan, they are worried about the consumer they are worried that the consumer could be strapped because of health care and rents gone up. Worried. It cost a lot of money to just like get up in the morning and put your clothes on and get the car payment going and im with you, theres a lot going on. Consumer confidence just hit 100. I know, but you go over those Bank Quarters and they are increasing three increase the reserves, theres no more drawdown reserves. Trying to pay the wireless bill and cable bill. Well talk about in the next segment. Im saying its a strange thing when you read quarters, you think the consumer is strapped you look at the car ads i mean, could there be more car ads . No, its incredible. I was urging my wife to go out and buy a car so i dont have to watch this commercial. Maybe theyll stop. They were amazing. Lets come back lets make sure people got the headline on nordstrom. Take a look at the stom again as we head to break there buying efforts have ceased until after the holiday period if they come back at all is what the indication has been from the family trying to take nordxstrom private again in a filing this morning. Wanted to make sure everybody understood that because we were out there first having read that filing for the market to fully digest. We broke the story. We didnt break it. Just read a filing. You got it right how about that. And early. When we come back, the road ahead for netflix, earnings of course after the bell tonight. Also also this morning, the uk chancellor is here on the challenges his country faces as these brexit talks are at the standstill, dow and s p are on track to be up for both september and october. Thats only happened five times in the past 20 years more quauk on the street in a min its not just a car, its your daily treat. Go ahead, spoil yourself. The es and es hybrid. Experience amazing. Netflix to open at the new all time high, due to release results after the bell another strong increase in subs. What are the lines in the sand this time . Ive got to tell you, theyve got to show both acceleration in domestic and Acceleration International and may actually be able to do it put through the price increase, trying to say, this times x equals and theres very little skepticism whatsoever about netflixs quarter which leads me to believe theyll be up big tonight or down then up tomorrow. Put netflix price against the Media Companies and whether its fox or viacom 6 billion. And the discrepancy in terms of one goes this way and Everything Else goes the other way. They thought about the wasted buy backs and when i look at netflix and look at their scaleable model, people continue to think how can this happen only be valued at 80 billion its going to be your worldwide cord cutting play. Thats what. To that point, weve got continued negotiations at this point between viacom and charter. You were here when viacom put out this publicstatement sayin they are committed to building strong relationships with the Distribution Partners but despite efforts, continue to insist on unreasonable extreme terms totally inconsistent with the market that being for a new carriage agreement the old one expired yesterday, but interestingly they have havent gone dark. They continue to negotiate at least for today and often times when we see that and when they extend, even if its for 24 hours, they do end up getting a deal done. The question for viacom shareholders, what would that look like if they do get it done how many backwards is charter trying to get them to take their rate for the key Viacom Networks how do you get a number that everybody can live with and when they announce these things if they do get to an end result, everybody tries to have optics that look good you never know what the deal is. They dont reveal that but this is an important battle here perhaps prestaging whats to come which is so many of these distributors in cable land, just saying nah, were done were going to be broadband providers for the most part, the proliferation of these over the top which keeps happening more and more giving consumers more choice and were just going to go a different way in terms of paying you what you want. Were not going to do it disney did prevail most recently in that negotiation. This is an important one and viacom does no have the market power of a did you look at discovery its been a xadisaster. Its at 19. Unrelenting. Since they announced the scripps deal it has not done what it anticipated it would the idea behind the scripps deal to strengthen discovery both domestically and internationally where it has an important business and enable it to offer some sort of perhaps direct to consumer offering of its own of its channels that it will have thats where everybody is going. Thats where viacom may want to go one of the key questions in these negotiations with charter, if youre going to offer bring a skinny bundle of your own channels and others to the market, why dont i let us also be able to do that at charter, use your networks in a skinny bundle we would offer our own consumers. Were at the key point here where i feel like, watching it last week, not being here but sort of we are. In terms of the real the disa disagreggation of the bundle and falling off dramatically directv now doing well but netflix can earn a dollar you have 200 times earnings and you have these a lot of these Media Companies selling at almost automobile like and i just sit there and think, okay, netflix, again, like i always like, spotify, they have a Worldwide Business model doing fabulous in every country they go to. Why do we limit them to an 80 billion market cap its worth more. Not per share earnings though. The Company Guide for subs is 4 ht 3 million and they exceeded their own guidance 12 of the past 15 quarters and we know that of a lot of names they tend to move a lot post earnings. Narcos 2 drove numbers up because of international and im wondering you do look like pena. I do not. You look like pena i watchwatc watched o zark. Going to be a driver of international subs, it is. Before we end our little media roundup, it is worth mentioning our Parent Company comcast because its got its defenders today. Defending saying we stick with our 45 price target and citi who has a pretty good following puts a report out this morning on comcast saying listen, even if they were to lose 150,000 potential subscriber losses in the Third Quarter is what they pointed to, if you say they keep doing that quarter after quarter and they were going to annualize that and lose 600,000 a year, the market is already priced in 15 years worth of that erosion in their point of the video business going on to go through the math and saying, if you got rid of the entire video business at comcast, that 27 billion in revenue but theres so much cost associated with it 13. 8 billion of programming and 40 of Technical Support costs go away. 50 of Customer Service cost would go away. Without the video business, you would have 7 billion, a third of cable would disappear but your top line would go up. Your growth rate would accelerate and cable margins would rise to 55 . Whats the point these are Broadband Companies and they would not suffer that much of the video business disappears entirely. Somehow in the narrative after the at t, that disappeared. Initially moffett came in and first when they said we have storm problems, dont worry about the upgrade. But the att number, there was more than storm. I know. Right that was a storm field. It was directv. Satellite doesnt have broadband. Is it nfl is it nfl . Well talk about that in a moment, not to mention i know. Not to mention other calls this morning on citi, deckers, bmy, cramers mad dash and unt wncodo to the opening bell in a minute. Because, when you really, really want to be there, but you cant. At cognizant, were helping todays leading Media Companies create more immersive ways to experience entertainment with new Digital Systems and technologies. Get ready, because were helping leading companies see it and see it throughwith digital. Excited, havent done a mad dash in a few days. This morning goldman has a piece, not that much i dont want to say theres not much meat to the bones but goldman goes, takes ulta beauty off, sepphora, is this the level you want to come in and do that . But the company itself is being challenged by amazon. What . I thought they were unamazonable well, theres nothing thats amazon if youre selling product, amazon wants to be its a little like walgreens you notice they are going down gigantically we like the ulta market and sepsep hh sephora has been very hot. You cant very any companies that selfin the mid 20s if amazon is gunning for you. Ulta would say were doing unbelievably well and i would agree with that. I say the downgrade itself is much more like were not going to pay up conviction by to buy a lot of our viewers are trying to say, what happened at ulta and the answer is nothing but the business anybody who is in retail and you can wake up and a amazon is nothing is unamazonable. If they put headquarters to generate excitement, that could be something that is not zero sum for amazon if its good for amazon, its bad for everybody else lets get to an opening bell a few minutes from now were right back on squawk on the street. 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. Feel that . Thats the beat of global markets, the rhythm of the world. But to us, its the pace of tomorrow. With ingenuity, technologies, and markets expertise we create the possible. And when you do that, you dont chase the pace of tomorrow. You set it. Nasdaq. Rewrite tomorrow. Something we all think about as we head into retirement. Its why Brighthouse Financial is committed to help protect what youve earned and ensure it lasts. Introducing shield annuities, a line of products that allow you to take advantage of growth opportunities. While maintaining a level of protection in down markets. So you can head into retirement with confidence. Talk with your advisor about shield annuities from Brighthouse Financial established by metlife. Were watching squawk on the street squt. The opening bell in a minute on this monday morning. Earnings season will heat up netflix tonight and goldman, verizon and ge later on in the week nikkei up ten days in a row. Oil copper at a threeyear high. The commodities are all in bull market mode and we keep getting the same story, china is very worried about air pollution. Its all coming together for alcoa for free port, theres other issues looking good its the rails that have been beneficiaries but we caught these downgrades today of the rails, downgrade of csx and norfolk southern, theyve been incredibly hot stocks as a way to contemplate commodities and then boom. Downgrade. Wells fargo. Lets get to the opening bell at the big board its blackberry celebrating its transfer from the big board to the nasdaq. Well talk to the ceo in about an hour. The ticker goes to bb and at the nasdaq, Exela Technology Enterprise Information management jim, in terms of downgrades today, citi, deckers, adobe, crystal they have an Analyst Meeting coming up. Downgrading ahead of that Analyst Meeting, i think very tough stuff. But what Deutsche Bank is saying, look, weve got to move the sidelines. They are going to guide down i dont know they were very specific in saying this was going to be a tough quarter in the last conference call. I dont know how much gravitas there. All of the things they want to do are good but no real impact for years. The society, citi, i dont know they did a lot of work and it ran a lot. If you decide all that matters is credit cards and listen, were going to have a few people who will not pay, big percentage but then a huge percentage will pay and thats where you can take citi down but youre selling it right to them they are in there buying the heck out of it. And what about bristolmyers . Because its up on valuation. Downgraded. Thats whats research right now. Take it down . You can do to that for 490 stocks. You could. Thats up a lot lets just downgrade it. Weve got to do something. Were sitting around watching the game twominute warning why dont i downgrade lilly, ill take merck off . I take it you do not believe they are value added moves. Im taking those two down honestly what are you going to do, go buy valiant, its not my fave. Yeah. Shares of nordstrom not reacting too badly to the potential buyout Group Walking away from any attempts to take the company private, at least through the Holiday Season the warning shot here may be a broader one for retail at least when they say in light of the difficulty of obtaining Debt Financing in the current retail environment in the filing that company letting the investing public know that they are no longer focused on a buyout at this time but may try to start again after the Holiday Season perhaps, no insurance they will. The norstrom family owns 31. 3 of the shares. When you see Something Like that, the difficulty of obtaining Debt Financing in the retail environment. What does that mean for like a sears . I dont know. I dont know debtor in position financing is easier to come by, when youre loading a company in retail up with debt, you might imagine that presents a risk that some lenders might not want to take on, having a lot of turns of leverage on a company that is in an area that is very amazonable. Thats look, nordstrom guys are unbelievable in saying weve got to get more technology theyve been saying it now for a half dozen years you cant keep up in terms of technology when it comes to amazon and i remember the Nordstrom Family saying amazon has the best Customer Service. We have to catch up. I remember when i used to like remember you used to return things like old shirts at nordstrom, turn craftsman hammers to sears, im tired of it, give me a new one. These are two companies known for service. Im not sure about the Sears Service. Even joe was complaining about Sears Service in the last hour. Yeah. Stanley black and decker really took it to them when they bought the name plate. Speaking of investments in troubled business, Colony Capital is taking a stake in weinstein, an investment in the weinstein company, Just Announced a few moments ago. Were barrack says were pleased to invest and move it forward. We believe the company thats a substantial value in growth potential. Look forward to working with the companys critical streak distribution and Production Partners after a tough week for weinstein, ousted from the academy over the weekend. David, you probably have the most to say about that of anybody . Lots of nothing to say. I mean, what do you say. I dont know very significant fall, very quick although long in coming and that has been i think one of the key questions how about that how about that ge actually . Id like to go to. Jim, i havent listenedto all of your commentary as i watch the stock trade. Last week i was holding my own sword. They add ed garden to the board and stock does nothing but go down. They get rid of a lot of old management and announce their departures is it you know, even though i was out much last week, you cant help but people email and call and want to talk. People are worried about the debt level thats what i guess i picked up because i was of the impression stock might react positively to the moves of last week. You cant break up the company because it doesnt have the cash flow to cover the breakup. What about the dividend its a priority its top priority. I think that the most recent accusation, proving to be really bad. When we look at the history of jeff immelt, my boss for many years. Mine too. You wonder about his buying and selling of assets. It doesnt appear that many were bought many were bought at the top and sold at the bottom. But they insisted that youre always wrong when you say that theyll come on and say, it was really good. What do you do i dont even know where to go with that. They sold ge capital multiple like one times and now Financial Assets trading at higher multiple to book. In the old days when i was at harvard, you know what we used to do . We called these things stupid. Im not at harvard anymore. Is that a technical term . Now its indifferent or sub optimal, right ill advised is another term that we get to use about ge when you say that how did they do that we didnt do it wrong, you just dont know your holding youre holding it upsidedown for heavens sake, its really like this. There are people who particularly many investors out there who own it for the dividend, a lot of retail. They may look to you and say what do you think now . I think its you go to go to 21 cutting the dividend. Which do you think is possible i do not hear i asked them last week, listen, the board should issue a statement saying we have no problem paying that dividend at the current level and they didnt. Thats what i asked for on air, if you guys really mean it, give us the board issues a statement and we did not get the statement and that was critical to me. What that said, hey, youre out there all by yourself saying the dividend is fine. Thats your bear case, dividend gets cut, goes to 20 then flannery does his magic and there is magic to be done. The problem is they are in the wrong industry except for aerospace. These are locomotives, not a great business, power turned out to be not that great health care, flannery fixed that its a decent grower but you know thats his home. Yes, he did a very good job there. That was originally an amateur acquisition, actually his first major over paid for that one too. Overpaid a lot. Theyve done they got out of that big remember they had the bulgarian credit card business and mexican Home Business yeah. They got out of those how about the celtics tickets . Ge i think all weekend i beat myself up about this and last week i was saying that you know, you missed it but i said when i was trapped in what we called the dumb class, thats how i feel im bad. Im trapped and its okay to just admit youre completely wrong in believing in a company. Right. Thats what im admitting another big company guys that i know we all covered last week but was the obviously the outcome of the proxy fight with p and g but we dont know the answer checked in with a number of people, the registered shares of p g and people typically in a big company even, most people dont hold their stock certificates at home you have a much better read. 5 to 6 apparently of the Shareholder Base had their stock certificates ats home. Its a different process doesnt go through broad ridge, so Everybody Knows immediately, were going to get today from p and g telling us what they saw in terms they were the blue card, right . But this thing is going to be not decided for quite a while. Really . This is going to be a hanging chad it could be a hanging chad where you have to go through and review everything. But well get this is important today. Im told it was at least close as. 4 and p g did declare victory. Well get a number from them. Why didnt they say its too close to call if its a hanging chad situation i dont know the answer. Ill bet if you were here they couldnt have gotten away with it . I dont know about that either. Hes registthese register sh make it difficult. You dont know how many registered. Thats true. These are on paper, literally. You took down the cartel and he looks so much like pena. My hard down maybe more, ive got to change my hair style. Lets get to seema modi on the floor. Good morning, carl. Record highs for the dow nasdaq and s p 500, particularly strong session with the dow already up about 46 points on the day we start with an interesting deal in the food space, food supply i should say, buying food and supplys company for a total of 2. 35 billion it is 55 owned by Hotel Operator marriott. Shares of marriott down about. 3 . The big earnings after the bell will be netflix. Netflix has been the big outperformer over the past three months, up about 23 compared to facebook which is up only 9 over the past three months tomorrow we hear from big blue, two big financial names, Morgan Stanley and Goldman Sachs and focus will be on trading revenues and net interest margins as rates continue to climb. A possession so far for the banking stocks with oil rallying on iraqi and kurdish tensions, look at the notable movers in the energy space, specifically oil and gas. Chevron up 1 . And devonn energy up as well in china, the communist Party Congress kicking off on wednesday. It happens every five years, key cabinet selections will be made by president xi, expected to help him consolidate his power the announcements and appointments made could have global implications, thats why inl investors will be watching closely. Speaking of china, if you want exposure to chinese tech which has been on a tear this week, take a look this year, take a look at jd. Com, the number two online retailer in china it trades at a discount to alibaba. Gaining 25 more from here lastly look at ruby tuesday, a deal in the food space with nrd, an atlantic private equity firm. Talk to you soon. Lets get to the bond pits and check in with Rick Santelli at the cme group. Good morning, carl, if you look at the two day of tens you can see whats going on. We gave up a lot when cpi didnt measure up to the nervousness associated with the day before whether its employment or inflation, had a lasting impact. Even though rates are up a bit, they are up a bit but still havent come anywhere near overtaking some of the drops we had based on fridays Early Morning data if we hold a may 1st for the following chart, interesting how its developing. If we look at tens, you can almost see that this market is really prone to trying to go into a range the only part that many traders are deciding now is if the bottom is going to be the 2. 27 close from 2015 or drop down a bit. Its not nearly as volatile or nervous when he was much closer to 2 . You can see the differential continues to widen if you look at 10year yields versus 10year bund yields pound versus dollar, many talk about all of the issues that seem to be cloudy regarding brexit and relationship of the divorce going on between the eu and uk but the pound, you know, its not at its highs but its definitely pretty feisty looking on the chart euro versus dollar lost a good chunk of volatility and seems to be hunkering in a range close to three points from 1. 17 to 1. 20 a lot like treasuries, dollar index seems range bound since august the problem is its range bound at the level thats on the weak side carl, jim and david, back to you. Rick, thank you very much still to come, shares of blackberry are up almost 70 so far this year rebounding to multiyear highs, well talk to john chen about his Growth Strategy in the tech landscape as they move over here netflix after the bell tonight, heres ena from narcos, its the great actor pedpro pascal. Ill get the sunglasses and change my hair and well see if i actually do look like him. Im not sure i do. Hes my hero. Squawk on the street continues in a moment. Impossible to ignore. The strikingly designed lexus nx turbo and hybrid. Lease the 2017 nx turbo for 299 a month for 36 months. Experience amazing at your lexus dealer. Tesla fired 400 workers last week according to multiple reports. It did dismiss workers after a company wide annual review but did not specify the number a lot of that 400 figure guys came out of reuters but no confirmation. Its one of the stories that came out there and those of us that follow the stock said how much is it going to be up on this comes out and says what i did, i fired bottom 10 or bottom 1 and suddenly youve got did it again i think elon musk is hard to pin down. Hes hard to pin down in general because he could be on a flight to mars and could be going intercontinentally between new york harbor and london. Within seconds. And hyperloop somewhere. Deep under neeng the earths crust. Branson on the hyper look train. I thought branson, it could happen with branson. That could really thats going to happen. He could be a simulation himself, elon musk he could be. One thing i think he is is necessary. You need somebody trying to do something more than beat the quarter. Yeah, you do. You need inspirational figures. You think so . I do. And either at least hes going for it with other peoples money but y yes. A lot of those guys do manage to do that he has some of his own in there too. You have to hand it to them some of the best and brightest, goes to work there. Launching rockets, coming back down. They are reusable. When was the last time you did that i wonder what he would have said about the jet call. Wouldnt he have Artificial Intelligence and figuring out whether that was a touchdown or not . You think he would just look no, he would take whether it was a call or not. They could use a. I. In the head office because that call was the worst of the year. Overreach Artificial Intelligence indicated that was the correct call dont joke. Eventually, we might the zeeb rays might be replaced too everybody will be gone. Umpires also. We dont need umpires. We have spectrometespectrome. We could call balls and strikes much more proficientily. Early in the turnaround story, specifics are light they say they think the impact that he would bring would be somewhere in 2019, 2020, meaning they think 18 estimates are too high that was just brutal. I read that. Thats probably true work has to be done. Cheap stock gets you nowhere versus gm that just, just caught the fancy of wall street, so ford, not happening soon enough. Just not ford, its really interesting because when i go back over ford, i never thought that gm and ford were that far apart i knew gm was better at electric, but its really something. Speaking of something, the bank stocks were supposed to have not liked, doing okay. Just get the rates up higher jpm is getting close to your 100 target. Im not changing my target. Im sticking with 100 amex and visa not playing today. What was up three points was envidian now its coming in im urging people to understand what it is its not my dog. Its not crypto currency its a semiconductor currency people still digesting diamonds and finks rants on bitcoin on friday. The bitcoin, you Say Something negative about bitcoin, look out. Okay, i wont then. Well get stop trading with omt. In a men dont go away. 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 people are desperate for plays, they have taken caterpillar all the way up, coal all the way up so yes, theyre going to come back to wynn resorts theres a really good note today that i thought told a very good tale jp morgan, talking about, just saying, im sorry, Deutsche Bank saying the palace, this is what is really important. The palace pickup, if you go back over the quarter after quarter, will they unleash the palace to me, thats where the chinese gamblers are going i think this stock takes out its 150 high i think it keeps going this should get the highest global and theres a tragedy that happened at mgm, so people are selling that stock lvs does not have good assets in macao, and the Deutsche Bank, others are going to join there are a lot of other guys who are on hold. Purchases a while back looking smart. And by the way, if you go back, i know what im doing, im not buying high. He really said please buy it these are not idle buys. And you got a triple jim, whats tonight im trying to find any bank that will give us the story, great quarter, i love the regional banks they are fantastic by the way, i like the way citi acts on a downgrade. Citi should downgrade Society General more get a couple guys sitting around saying i have to take that off the bye list there should be more to it thanthet well see you tonight, mad money. When we return, the uncertainty surrounding brexit an interview with the uk chancellor Philip Hammond in a moment dow is up 67 with advanced safety. Standard. Lease the 2017 rx 350 for 399 a month for 36 months. Experience amazing at your lexus dealer. From godaddy in fact, 68 of people who have built their. Website using gocentral, did it in under an hour, and you can too. Build a better website in under an hour. With gocentral from godaddy. Pthey dont invest inn stalternativesds. Or municipal strategies. What people really invest in is what they hope to get out of life. But helping them get there means you cant approach investing from just one point of view. Because its only when you collaborate and crosspollinate many points of view that Something Wonderful can happen. Those people might just get what they want out of life. Or they could get even more. Of emerging markets obsolete . At pgim, we see alpa in the trends, driving specific sectors of out performance. Where a rising middle class powers a booming auto industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. 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. On the New York Stock Exchange, due doing well, led by big banks this morning earning season going to heat up with netflix tonight oil as well is a story as the iraqi troops advance on kirkuk the s p, nasdaq, and dow hitting record highs earning season gets ready to heat up. Well discuss where you should put your money to work oil prices on the rise. Iraqi forces launch an operation for oil held by the kurds, and a new alltime high as well for netflix as it gets ready to report results after the bell. What can you expect, straight ahead. First up, straight to the markets. All three indices in the green, hitting record highs dow and s p coming off five straight weeks of gains. For more on this, were joined by ubs head of Investment Strategy geropy, as well as david rosenberg. Gent gentlemen, good to have you back david, we talked about risks mostly to the overall economy in the next year, year and a half, but does any of the recent commentary from the fed or the way the markets are reacting ahead of earnings allay your concerns well, no, not really. I think that one of the former big was eric rosen gren, and he was interviewed overnight in the new york times, and he seems pretty bent on reaching rates further, and whats interesting is his comments werent really about consumer inflation, it was about asset inflation. Theres builtin lag, and we havent seen the full brunt of what the feds already been doing, and starting to unwind the Balance Sheet as well, which is a new experiment. I would say keep your eye on the yield curve. If the fed does what they say theyre going to do and the bond market just trades in a range like it has been doing, youre talking about some time in the middle part of next year the yield curve inverting and well talk about a recession again by the time 2019 rolls around i know that probably seems like an eternity to a lot of folks but my sense is this is very much hope based and liquidity based rally. I dont see that the macrofundamentals are as strong as a lot of my competitors think right now. Jeremy, do you agree with that view . If so, is there a disconnect between what earnings and the economy are telling us versus the stock market we have a different perspective. I do think that the fact that in this global synchronized expansion, almost every part of the world is seeing very positive economic growth, has led to very strong Earnings Results this year. So i think that the market really isnt driven by the improvements in both the macrodata but more specifically the earnings environment if you think about this year, the s p is up 16 , but valuations have expanded by 6 , from 17 to 18 times trailing earnings the bulk of the rally we have seen in the u. S. And Global Equities has been driven by the tact the earnings picture and Getting Better to davids point about rosengrin, who sees not just december, but three to four within the year following that, when you talk about the yield curve, the impact of Balance Sheet runoff, which were not aware of, what is your reaction . When will we feel that look, i think that the best part of the investment year is behind us. We have seen, like i mentioned, 16 gains u. S. 24 exu. S. Gains in the market. Its been driven by the fact that growth has been surprising to the upside and inflation has been surprising to the downside. We have been in what i would call a super goldilocks environment for prices specifically, and thats likely to get tougher Going Forward i have some sympathy to the view that yes, were likely to see a bit more of a hawkish tone, particularly relative to what has occurred over the last several years but it doesnt mean that Interest Rates are going to go to the level that it will start to curtail Economic Activity i think the fed and also global Central Banks are going to remain remarkably pragmatic. Theyre going to normalize Interest Rates at a gradual pace and i dont think were likely to see a recession over the next 6 to twefrbl months and perhaps longer than that i was at the Imf World Bank meetings over the weekend and last week. There were a lot of bankers there. We had a lot of discussion about this path to normalization nobodys in a hurry. Theyre keeping an eye on the fact that inflation is a missing ingredient theyre flexible not sure why the chatter has heated up that the fed is going to be too aggressive i know that you are one that is expecting a misstep in this direction. And im not sure where youre getting that based on the feds track record here. Well, im basing it, sara, off the feds track record we have had, you know, 13 fed rate hiking cycles some have been gradual, some have not 13 in the postworld war ii experience, and ten of them landed the economy in a recession. And the question is but how many have there been since this economic recession . Its been pretty slow and steady well, i mean, the recession right now is inevitable. Its really recession expansions are joined at the hip. My point is that, sara, can you tell me a time when a fed tightening cycle ended with the economy accelerating no, they all end with the economy decelerating you get a soft lending growth or a recession. I dont know what the soft lending looks like im told the economy is doing fine theres some economies in europe doing fine, theyre in a different point of the cycle than the u. S. Is right now im not seeing any break out in trend, and growth has been roughly 2 , and all of the lag from what the fed has done and what it says its going to do havent kicked in yet. Even if we get a soft wlending economy, what does that look like in the context of real growth, still running close to a 2 annual rate to me, thats the big question so i would say that, you know, the commentary is about what is the stock market doing i can point to barrens over the weekend showing the big money poll that 87 of Portfolio Managers who are bullish are betting on there being tax reform we have a trade going on, but it transcends what the economy and earnings are doing the multiple has been expanding, so this is, again, one of those hopebased rallies to a large extent based on inflation and trump tax reform, which looking at whats happening in the senate and the relationship with the white house may or may not happen i would say hot is the bond market telling you stock market going to record highs. Why is the tenyear keynote yield refusing to break above 2. 6 , let alone 3 when is it below 2. 3 , telling everybody else who is banking on the inflation trade being sustained for the next several months that has been the question for what feels like forever, jeremy i think back to what bill gross said about 2. 6 being the imaginary line we couldnt crack. It would have said something, he argued back then, if we could have what is the answer to davids question i think that the answer is why bond yields are so low is inflation has undershot everyones expectations and there are structural reasons for that we still have a high level of debt around the world. Many economists have difficulty understanding and quantifying the impact of technology on inflation. And the fact that we have so many goods and services that have transparency and greater utilization rates because of technology has been a disinflationary force. That actually doesnt concern me as an equity investor. That only makes me more positive because if you have reasonably healthy growth, its driven by technology and its keeping inflation low, it means youll have a long period of this mix one last thing. People were circulating a note of yours from a decade ago this in november 28th, 07, where you said recession adds were close to 60 . You obviously ended up being right not too long after that. Safe to say you dont feel as nervous as you did back then i wouldnt exactly say that im overly bullish and i wouldnt say overly bearish. Theres other parts in the world im more bullish than the u. S. Stock market is right now, but back then when i was talking about 60 recession, i didnt realize it was a month away. You know, im just saying, you know, as my grandmother always told me, forewarned is forearmed. Im just saying were late cycle right now. Cycle High Consumer confidence cycle low, Unemployment Rate inflation already peaked for the cycle. We already had inflation cycle thats rolled over everything is telling me that were late cycle, flattening the yield curve. Everything im talking about in terms of the storm clouds coming in are really not one or two months away, but its something to start thinking about over the course of the next couple quarters do not extrapolate todays earnings backdrop into what is going to happen in the 96 six, 12 months. The people who did that in that same stage in 2007 got their hat handed to them in the course of the next 12 months im not bearish, but y im saying were classic late cycle and were going to adjust the portfolio in conjunction with that thank you for that good discussion jeremy and david we are following a developing story in the oil market. Both crude and brent moving higher this morning on news that iraqi troops have seized parts of oil rich kurdistan. Jackie deangelis joins us with more on the story. Good morning. Thats exactly right this is the type of event that can move the market. Iraq is opecs second largest producer remember, prices have been driven by supply and demand dynamics a loss of iraqi supply definitely would move the supply needle lower, but theres no evidence that could happen just yet. These tensions have been building between the iraqis and kurds since late september after a vote for independence. Over the weekend, iraqi forces launched an operation in Northern Iraq to reclaim territory administered by the kurds. It also happens to be where some of the countrys most Important Oil fields are located the Iraqi Oil Ministry has said that oil and gas operations are proceeding normally and theres an understanding that fighting shouldnt take place in the facilities but still, the market is on edge and watching closely just under a Million Barrels a day comes out of the kurdish region iraqs production, according to opecs latest monthly report, is about 4. 5 Million Barrels a day. Its not just this news, though, pushing crude prices igher President Trumps refusal to certify irans compliance with the nuclear deal has also drawn some attention many questions on what happens next and if any iranian supply will be threatened as well crude oil up more than a percent today. More than 5 in the last month and more than 12 in the last three months carl quite a move. Thank you very much, jackie. When we return, Blackberrys John Chen is with us hes going to weigh in on techunder fire, nafta, and a lot more a big push to jump start brexit negotiations is under way. Well hear from the uks chancellor of the exchequer in a moment reaction. S a chain. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. 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Talks were originally set to end sunday, but now they have been extended kayla joins us from washington with more details. I dont know if this is a positive or negative sign as far as where the deal is headed. We will learn what exactly it means tomorrow when we hear from the lead negotiators from each country. What theyll say at this point is unclear talks are said to be inching along with all three countries seeing frustrations abounding. One u. S. Participant telling cnbc that the u. S. Has taken a political not pragmatic approach to the negotiations. In order to please an audience of one President Trump. The market is now pricing in the possibility that the deal falls apart. Thats one reason you have seen the peso sold off in the last week and the dollar rising, making u. S. Exports more expensive. But that might not happen this week current and former trade Officials Say any withdrawal would likely happen in a later round and reuters is reporting that the group of three nations is discussing additional dates for talked in early 2018 one tea leaf that may suggest they will move forward now, take a look at what this would do for jobs. Ripping up nafta would not only preinstitute prenafta tariffs and have a material effect on all of the economies, but take a look at what this would do nearly 256,000 jobs would be lost in the u. S. , according to a new study from impact econ mexico would lose nearly a million jobs Boston Consulting Group in another study in conjunction with one of the auto manufacturing lobbies says 50,000 u. S. Jobs would be lost in that industry alone congress, which would need to approve any new deal before it takes effect, is on edge one gop aide says if the u. S. Brings to lawmakers the deal its currently negotiating, it will go the way of obamas tpp that is, it will not get passed. It will go nowhere a wall street journal editorial today says the America First demands, quote, are growing more bizarre the u. S. Proposes to increase Economic Uncertainty and raise the incentive for businesses to deploy capital to more reliable investment climates. Of the policies that would lead to more american content in autos, the wall street journal says mr. Lite heser needs to get out more well hear from him himself tomorrow, and well await any update on the negotiations yeah, im sure investors are eager to hear a status check with so much economy and jobs at stake. Kayla, thank you blackberry, speaking of canada, moving from the nasdaq after 18 years, now trading here at the New York Stock Exchange reuters reporting that the tech companys patent licensing director has decided to leave the company. Thats also news today in the second key patent official to depart in the last few months. Joining us, blackberry Ceo John Chen nice to see you. Welcome. Nice to be here to kaylas reporting, as a canadian company, clearly intellectual property and software is part of these negotiations how would it impact blackberry if the deal fell apart oh, the best thing to do is no change. No change has been the best so far. And it depends on what the negotiated outcome is going to be it could it could be, you know, very damaging for us if the things go more protective, so its hard to tell but i have been watching it almost like constantly also. When you say damaging, what do you mean . Give us some specifics i think it all started with the pharmaceutical part of the equation you know, the pharmaceutical industry is arguing that the protection of ip, for example, in canada, its much shorter in duration than in the United States so they wanted to change how ips are being managed, valued, arbitrated, resolved conflicts and so forth and i. T. Has always been in good shape. And i thought, at least. So i dont want to lump them together, but i think the u. S. Posture is that i. P. Is i. P. , and theyre lumped together. Theres so many different noise about it out in washington, its very, very hard to follow. Hopefully youll talk to us as we get some type of advance on these discussions speaking of i. P. , i mentioned the reuters report about one of your licensing top executives leaving. Can you confirm that i can confirm that. First of all, we have over 80 people in that group, and very senior people. Number two is all our ip licensings are managed by myself, the cfo, our legal counsel, and the head of the president of the group so i think for some reason this particular reporter chose something a little weird, a little off track it doesnt signal anything about your patent strategy which has been key for you in terms of some of the turnaround at ba blackberry, right . Not at all. Im confident. Im on top of those. I have to ask you why the migration to the nyc a couple reasons. This is a much stronger marketing platform for our company at this stage. This is nothing wrong with nasdaq i dont want them to write me an email and yell at me. We had a great time at nasdaq. I think as i change us more into enterprise focus, beyond just the consumer side of the equation, and all my customers are here, all the banks and all the health care and law groups so theyre all here. We want to get closer to the customer and we want this marketing platform let me make sure i understand you said alt this stage. This stage being youre an Enterprise Company you have always been an Enterprise Company, havent you . Always an Enterprise Company, but we very much market to the consumer, the individuals. When were talking about a pager and a cell phone you used to have a lot of them yes and i know some still use them i think Bill Griffeth still uses it, our colleague it might come back, by the way. It might come back but today, were really focusing on cybersecurity whether its for the cars, for the enterprise of things, for bank systems and so forth. This is why i need to get closer to the customer. And i need a platform thats more global. You just mentioned cars, of course, which leads me to one of my favorite subjects, Autonomous Vehicles theres a lot of concern when we get there, whenever it is, and im curious when you think it will be that we see them on the streets, theres a security issue. That theyll all be networked and the idea that somebody could hack is frightening. This is the dna of blackberry you all have been blackberry users before reliability and security and privacy are the number one things in fact, you could argue that because of our focus on privacy, we have lost a market of mark marketing to the consumer because we didnt use anybodys data, for example. So this has been something that we transport into the car. The interesting thing about a car, everybody talks ibt cars. Not too many people had too much revenue on a car yet thats a different topic all together, but were very much into connected cars. We embedded a lot of software into the actual car itself for example, auto ford sync 3 is all blackberry today how many more partnerships can we expect. You have one with ford, with delphi well, so, we have business with lg and denso and panasonic and ford delphi and everybody else and all the car manufacturers. So you should be able to see a lot more partnership Going Forward. I hope you wont mind a question about hardware in general. A call on apple, a price target increase, but it is an upgrade on more aggressive market segmentation, right . I wonder if you think thats important right now. I cant speak for apple, right . The other fruit company. I cant speak for them but i think it is important. Apple would need to move to the high end, to enterprise, because the asian producers are going to get the lower end of the market. So this to me is quite sensible. Speaking of the stock, since you switched here to the nyse, looking at a long term chart, a long way to go, but i dont know if most people realize its up about 50 over the last 12 months i know you have been repairing the Balance Sheet. Where are you in terms of convincing investors this is no longer a phone Company First of all, we are no longer a phone company only. We license our phone what we have done is get ourselves out of spending the capital to build these phones. And other people are building the phone and we get a royalty check for it so the revenues are down, but the stocks are up. Part of the reason the Balance Sheets have been repaired and income statements are Getting Better the margin is better, and were more profitable. Thats part of the reason. How should investors think about the selfdriving unit . How much of a chunk of revenue is that going to be . For for blackberry, selfdriving cars as i said to you, selfdriving car, the revenue is not going to come that immediate. Its really more about design wins we won the design with delphi, with panasonic, with nvidia and the list goes on when they start shipping those cars, were going to get good revenue and there will be almost real margin, not exactly, but almost real margin have to have a little patience on that point, but we will make progress on securing and the enterprise of things and cybersecurity stuff. Im comfortable in where the company is at today. When will we have fully Autonomous Vehicles on the road . Everyone thinks its 2021 i personally think the time you and i will buy one, maybe youre one of those car guys. I dont know if im going to buy one. Maybe lease one or rent one i think its probably ten years away thing ten years from now . I believe so. John chen, a lot to get through there. Thank you for joining us after moving from the nasdaq to the nyse when we come back, well talk to the uk chancellor Philip Hammond on these challenges with brexit talks President Trump, and a lot more. Dow has given back some of the early gains. Up 28. Were back in a minute uk Prime Minister theresa may calling on german chancellor Angela Merkel to end the European Unions standoff on the brexit talks ahead of the summit this week. I sat down with the minister of the exchequer to ask him about the behind the scenes diplomacy that is happening right now to break this impasse well, i wouldnt call it an impas impasse. Were at a critical phase in the talks. Theres a big meeting of european leaders this week and one in december. That will be the critical phase of negotiation to line up a transitional deal as we leave the European Union and to start to talk about our longterm trade arrangements with the eu its vital that we talk not just to the European Union but also to the leaders of the 27 European Union nations you had to apologize after calling the other side, the brussels side, enemies clearly, tensions rising, emotions are high. How would you describe the dynamic right now and how would you describe the negotiators on the other side, if you dont call them enemies . Actually, the relationship is very constructive. I talked to my european counterparts all the time. What i was doing rather clumsily in washington was trying to make a reference to the infighting on our own side that we need to leave that behind and we need to remember that we all have a common purpose in getting the best possible deal in our negotiations with our partners in the European Union. Thats what were doing. But the relationship is good its a positive relationship is the biggest Sticking Point right now the divorce settlement, the actual payment from the uk for brexit so, the biggest Sticking Point at the moment is process the European Union have decided on a process to follow, and its become apparent that that process isnt going to facilitate the most effective negotiation. I think there are people on both sides that say lets break out of this. Lets just get around the table and start looking at what the options are to move forward about a transition period, about a longterm trade deal, rather than being locked in this ridged sequence that we have to setal one thing before we Start Talking about the next its really about process rather than substance at the moment its all very complicated has the probability risen of a nodeal scenario personally, i dont think so. I think you have to look through the rhetoric you have to look through the process at what the real interests of the parties are it is so blindingly obvious in the best interest of both the uk and the European Union 27 that we do reach a deal so that we can carry on trading together, carry on allowing the supply chains that run across the continent of europe to operate, carry on working together on security this isnt just about trade. Its about Regional Security as well its so blindingly obviously in the best interest of allof us that im confident we will get to a deal. Yet, its so technical and so difficult. In the event of no deal, is that something that parliament would have to put to a vote . Well, it depends how we get to that eventuality. Look, our very strong preference is to do a deal with our european neighbors so that we go on working closely together. But of course, were going to be prepared for the eventuality of not reaching a deal. What does that look like . It looks like we have to be ready for a hard customs border. We have to be ready for tariffs on our trade we dont think its going to happen but we will be ready by march 2019 just in case thats the outcome. What would you tell the folks in brussels or the proeu folks whosay why cant britain negotiate and compromise further . Isnt it a big risk that businesses will already start to move out at the risk of having no deal . Were ready to negotiate. Were absolutely ready to negotiate. The problem is the process thats been laid down, which says we cant Start Talking about the future and our future relationship until we have settled the question of the budget contribution, what were saying is we can only settle that budget contribution question in the context of knowing what our future relationship is. And this seems like a rather silly thing for us to get hung up on. If we could just have a talk about this around the table, im pretty sure well unstick it how high is the trading relationship on your list of priorities very high number one . The economic relationship, protecting british jobs, british prosperity, must be my number one consideration as chancellor of the exchequer we have a very important trading relationship with the European Union. Its also very important to the eu 27. We import huge quantities of manufactured goods, farm produce, from the European Union, and its in everybodys interest that we sort this out so that the supply chains across europe can continue to operate as they do now what about keeping london as the financial hub, the Financial Center of the world. How are your conversations going with bankers as they ponder whether they want to send employees and Market Making activity outside of the uk we understand Financial Institutions in london have to make contingency plans because of their boards of directors, their customers, their regula r regulators were working with them to make sure its done in a nondisruptive way. Most of them intend to keep the vast majority of their staff in london and the bulk of their business in lundening. Eu business is only a fraction of londons total business and were very confident that the uk, london, will remain a global Financial Center all of this have haveing an impact how much more economic pain do you see . We havent even gone through brexit yet we always knew during the process of the negotiations, there would be some uncertainty and we would have to absorb that right now, businesses are waiting to see what the outcome is postponing noncritical Investment Decisions if they can. Maybe delaying hirings while they wait to find out what is happening. So all of that is having a shortterm impact on the economy. But the underlying uk economy, the fundamentals of the uk economy are strong our deficit is down by three quarters employment is at record levels unemployment is at a 30year low. Weve got a vibrant tech sector, the worlds second largest traded Services Sector were in a good position to go as soon as we have cleared this shortterm uncertainty around the brexit negotiation i also asked him whether the government still felt that no deal was better than a bad deal, which he sort of dodged. I did ask about uber he eced Prime Minister mays comments that they do not agree with the decision. Says london has to be open for business with Tech Companies and he expects there to be an agreement reached there. As far as the u. S. And uk trade deal, there has been some hope about this and the Trump Administration has said theres a priority, he said theres bipartisan support, he has himself met with congress, but technically, they cant start to negotiate and lay out this trade deal with the u. S. Until after they exit the eu i made a fair amount of news in that one interview. The pound has started moving on these brexit talks. At first, it crashes after brexit, then it sort of came back and was stable. And everyone just thought a deal would get done he said theres no impasse but it increasingly looks like theres an impasse, whether its process or the budget bill and so clearly, people are paying attention lets get to sue herera, get a news update. Good morning, carl. Good morning, everyone heres whats happening. Search crews looking for a missing man after an oil rig exploded on a lake north of new orleans around dawn. There is speculation cleaning chemicals sparked that blaze seven people have been injured, so far, no immediate reports of deaths ophelia is battering ireland, but now as a tropical storm. It was downgraded overnight. Ophelia pushing 30foot waves into the countrys southern coast. Authorities reporting a woman was killed by a falling tree this is the worst storm to hit ireland in half a century. Deadly wildfires not just hitting california at least 27 people are dead and dozens more injured in portugal. Officials are blaming unusually high temperatures for the fires there. And japan also dealing with a Natural Disaster an active volcano. Authorities expanding the noentry zone around the mountain which is near the southern tip of that country it spews gas and ash nearly 7500 feet skyward on saturday youre up to date. Thats the news update this hour ill send it back to you, david. Lots of Natural Disasters in the news update this morning certainly are unfortunately, lots in the news update over the last couple months as well when we come back, netflix hitting an alltime high right fresh this morning that ahead of of course their earnings report. Were going to break down what you can expect to hear from the mpy xt 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 not rebalancing your portfolio. Focused on what you love, not how your money will last through retirement. We make it easier to plan for retirement with day one target date funds from prudential. Look forward to your 401k plan. I want that song to keep going. Netflix is set to report earnings later today with the stock hitting an alltime high this morning many analysts expecting a strong quarter. Stock up more than 60 this year for more on what we can expect, lets bring in michael morris, media analyst at Guggenheim Securities i didnt even know they raised prices thats how sticky i am are most people not going to care i dont think many people will at this point we were very positive on the approach that the company took they have obviously done a couple of price increases in the u. S. Over the past half decade, with i would say mixed results, to put it politely we felt like they are a compelling value to the consumer they made the price increase this time. They were unapologetic, i think a dollar increase is not something by any means out of the realm of the value that they deliver. So we feel pretty positive about it eah, last quarter, of course, they blew away assumptions in terms of subgrowth, both here and certainly overseas where are you in terms of expectations as we head into the reporting of the Current Quarter . Our expectation, our estimate for the quarter is pretty consistent with the companys guidance at this point so its very difficult to call these quarters on subscribers. Were very focused on what we view as a longterm Value Proposition. We completely understand and respect that the stock will react on earnings day on the subs but i feel pretty confident that they will at least meet the guidance they put forth for the Third Quarter. When you get to valuation, youre still using a dcf model, going where, to a few years out to get back to a number you feel is justified in the stock price . Yeah, we do we have like a fiveyear dcf that we use for the valuation, but i think when youre looking at a stock like netflix, you really have to kind of boil down the complexity into a couple things i think theres two things were looking at were looking at the Value Proposition of the consumer and a tremendously underpenetrated global market. When i take those two things and we break down into details for investors and show them, but look at the International Marketplace alone. Half a billion broadband house hls right now outside of the u. S. , and theyre in about 10 of those at roughly 8 to 12 price point, its incredibly attainable in terms of pricing for the Global Consumer and the penetration has tremendous amount of runway ahead of it explain to viewers then how important u. S. , the domestic subs are tonight, if at all. Theyre still important the u. S. Business, which is clearly the more mature part of the business and half of the subscriber base, and all of the profitability at this point, is viewed at the template for what can happen in the global market. So investors, while the enthusiasm about the longterm upside to the stock is really around the global expansion, the u. S. Is still a very its a critical component of analyzing how much people are willing to pay for the product, how much they engage with the product, and what the profitability can look like. So it is absolutely critical for the company to continue on a strong path domestically but they are moving from a pure subscriber growth phase to a subscriber growth but the importance of incremental profitability phase. Michael, how about the eyepuffing number theyre spending on content. Its hard to pus a price on shows like Stranger Things but 7 billion this year 6 billion last year 5 billion in 20 the year before that, 2015, i guess can investors expects that number to go up by a billionary year is that going to be okay i think it is going to be okay i think they can expect that it could possibly even go up by more than that when we look at it, this is about really solidifying the Value Proposition to the consumer something thats very interesting, we work with a partner who tracks subscriber usage data both in the u. S. And abroad about 8 million subscribers. What we have seen is in the countries that netflix is localized, so countries like israel and south korea in the last year where they made market specific content, the engagement and utilization of the product has gone up dramatically with that type of success in terms of consumers moving to the product when you spend and whats important is that those consumers remain sticky, which was brought up earlier that is why theyre in the phase of spending right now. Growing their spend by a billion dollars to try to penetrate, further penetrate a half billion dollar Global Broadband marketplace seems wise in our opinion. Michael, finally, your coverage universe includes the likes of disney and fox, viacom, cbs, and our Parent Company, which is the only stock of those that i just mentioned that is actually up and not up as much as the broader market. Do netflix gains continue to come at the expense of the rest of your coverage universe . Absolute lay. Theres no two ways about it i think its not just netflix but its going to be other new entrants as well amazon is really starting to step on the gas in terms of the way they want to monetize their content. Facebook is in the early phase of spending on their content when we look at the channels in the bundle that you and i pay for, i assume you and i, but not as many millennials, so much of the value in being able to negotiate price increases in sports so we look at the companies that still have the sports rights, and we think that theyre going to be mustcarry in these packages when we look at general entertainment, and the ability to spend and the ability to meet the consumer increasingly where they are, which is not in a video product that has an 80 entry point, the pressure will continue to come, and these companies that arent carrying the legacy baggage of being part of a bundle are taking advantage of that. Yeah. Of course, viacom and charters current negotiations come to mind story for another day, though. Michael, thank you appreciate your time thank you when we come back, lululemons big bet on china what the retailers ceo told us in an exclusive interview. Well take you to beijing next record highs across the board as the dow and s p are going r t of 5 back in a minute well, its earnings season once again. Yeah. Lot of Tech Companies are reporting today. And, hows it looking . I dont know. Theres so many opinions out there, its hard to make sense of it all. Well, victor, do you have something for him . Check this out. Td ameritrade aggregates thousands of earnings estimates into a single data point. That way you can keep your eyes on the big picture. Huh. Feel better . Much better. Yeah, me too. Wow, you really did a number on this thing. Sorry about that. Thats alright. I got a box of em. Thousands of opinions. One estimate. The earnings tool from td ameritrade. I think its going to be very important to figure out what congress learns from the investigation and if theres a desire in congress to take real legislative steps. Are you concerned that the u. S. Is watering down some of those financial crisis regulations . Short answer, no. It is also consistent with an internunci International Effort to look at the rules. Keep it healthy, do not take risks of any magnitude there i worry about deregulation in this stage lets get over to the group in chicago Rick Santelli with the Santelli Exchange on a monday morning rick thank you, sara i would like to welcome my guest, daniel ocereio. Thank you for taking the time today. Thanks, rick. Good to be here. Okay. We had the Regional Elections in venezuela on the 15th. And the final returns certainly look as the mudaro administration is going to keep their grasp, getting 15, potentially 16 of the 23 governorships. Tell us about the election, pay particularly close attention to fairness was it legitimate, and what does it mean . Yesterdays election was, as you say, for 23 governorships. The opposition and early polling said they would win 18 of them it looks like the government is claiming credit that they have now won 18 of them, more or less, so this is being considered the greatest fraud in the history of venezuelan election cycles. What does that fraud mean for the u. S. In particular with subsets of bond holders, energy, the relationship with the respect to Foreign Relations with china and russia and how it may impact other scenarios we seem to intersect with those two countries in right, in the next couple of weeks, next three weeks, venezuela has about 3. 5 billion in bond payments to make, u. S. Dollar denominated bonds they will not be able to make without the help of russia and or china. I do suspect they will help. But that makes venezuela that much more dependent on those two countries. So, you know, as bonds that are mainly held in the u. S. And andn western europe, were seeing the Largest Oil Reserves in the world, jarring venezuela indebted greatly to russia and china. You know, indebted to russia and china makes me think maybe they need to transact more of these in dollars is there any way to get more u. S. Dollars there and we constantly hear how owning dollars by foreigners can be a dicey proposition were getting close to a fed that may raise rates and make dollars more expensive what are the choices here, specifically, what does it mean for their own currency, the bolivar, and its sustainability . Right, well, i think as russia and china have increased influence on venezuela, we have to wonder in this hemisphere what happened to the Monroe Doctrine i think monroe and his doctrine must be rolling in their graves. We have two questions in venezuela, first is, what is the political future of venezuela, that can only be decided by venezuelans, and how do we help in this humanitarian crisis . So we cannot parachute dollars in we cannot wire dollars in, so i suspect the only way to really get money into the hands of the average venezuelan is through the bitcoinization of venezuela, get that money to the venezuelans. The private sector can help, u. S. Can help, regional governments can help excellent put the money back in their hands. Were just about out of time here bitcoin is an interesting conversation to have in this context. We will have you back. Thank you for taking the time. David faber, back to you thanks, rick. Okay, thank you, rick now over to john fortt and a quick look at whats coming up on squawk alley. John david, the first chief Technology Officer of the United States is going to join us to talk about this increasingly complicated relationship between Tech Companies and the government hey, and our democracy thats coming up on squawk alley. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. You know whats difficult . Adulting. Hi, guys. Im back. Time to slay no,i have a long time girlfriend. 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. Lou lieu lemon making a big bet in china joining us now from beijing, what did the ceo tell you . Thanks so much, sara. Lululemon has six stores in china and plans to open five more and is chinas fourth largest market, but they plan to change that by reaching out to more Young Chinese this is what he had to say its a global citizen, its an affluent rising middle class. You think about 415 million millennials in this country, and more and more of them wanting to live an active lifestyle, its really, really important timing might be right because of the trends on the ground. Chinese are becoming more Health Conscious and in the big cities like beijing and shanghai, more people are hitting the gyms, as well as doing sports since 2008, gym membership here has doubled to 6. 6 million yoga has also gained popularity, growing from 4 million practitioners in 2009, to 10 million today. So lululemons ceo says the company is Building Brand awareness here by going online we actually see the Brand Awareness growing to our digital channels, so whether its through our Offline Online events, through social media, we see awareness growing in those cities and thats what really drives our presence. And one of the challenges is copyright infringement, but lululemons ceo said right now they are not worried its not going to affect their growth plans carl eunice, thank you very much for that, eunice yuan in beijing. When we return, the white house releasing its first Economic Analysis of the president s tax plan well talk to Kevin Hassett first on cnbc next dont go away. Another day at the office. Why do you put up with it . Believe it or not you actually like what you do. Even love it. And today, you can do things you never could before. Youre working in millions of places at once with iot sensors. Analyzing social data on the cloud to create new designs. 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Welcome back to squawk on the street, im dominic chu a rise in Energy Stocks lifting the markets higher, trying to, at least all among the biggest gainers, this as oil jumps on mideast tensions despite the energy gains, sector is still negative for the month. That does it for this hour for squawk on the street. Lets send it downtown for the start of squawk alley. Back to you. Good morning, it is 8 00 a. M. At Amazon Headquarters in seattle, 11 00 a. M. On wall street, and squawk alley is live