Transcripts For CNBC Squawk On The Street 20240713

Charles schwab is expected to buy ameritrade jim as you noted on twitter, the unprecedented influence of robinhood. Yeah, look, when youre out here, you realize there are players. David talks about them a lot, including softbank, theyre fun organizations with no real growth path for earnings a fabulous growth path for revenues this robinhood has been an incredibly well funded sensation particularly among the younger demographic. Its very hard to fight a company that will you play for free and thats exactly what disrupted this industry was Venture Capital money. Think about it, its been a stable oligothic for a while. Why not surrender to schwab . This makes so much sense now schwab will be the largest asset gatherer, incredible machine. I this i schwabs store, we dont know the ratio, this deal done makes schwab go up a lot more than its up right now. David, lets talk about this deem we got some paypal news as well. Mna is getting a bit spicier as we get to year end yes this would be a very big deal. Not completely unexpected when you look at it jim makes such an interesting point there about robinhood, about these Business Models being funded aggressively by Venture Capital. We talk so much about softbank and the money they put in on things still unproven, pressuring this industry as it did, forcing the commissions to go to zero and then forcing continually ameritrade to say, okay, we got to think of consolidation. Schwab is not as big a part of their business as jim said i dont have details this is beckys reporting, i will be watching closely trying to find out what i can as well but we thought there is a pace of deal making going on. But what i continue to hear from the many people who advise on these deals and the ceos who might think about the indication is it still takes an awful lot to get a lot done n. This case, guys, it would seem theyre imperative in terms of the Business Model that change significantly that force them to really consider it and so well i guess wait for some more details here but thats a big deal. Thats a significant size deal and obviously one that means a lot for the industry, itself jim, such an interesting point i think you made in terms of the pressure being brought to bear by money going into potentially unprofitable Business Models nonetheless having an impact what a terrible opponent you have when you got an opponent that basically says, you know what, we want all their assets and get that, the way that they make money is through commissions no commission. Do you know there is a deal this morning, david, involving paypal, which is about buying the lowest price anywhere. Millennials are addicted to finding the lowest price anywhere for the same service. Have you not been able to distinguish for the most part one versus another, if you are a mill helpial, schwab, ameritrade yes, a Venture Capital firm comes along like robinhood, listen, we have the same thing, you dont have pay for it . What do you do you have to throw up the white flag i think thats what Td Ameritrade might be doing. I dont know, certainly, would there be any antitrust question you have to ask here . Again, i dont have anything other than some thoughts about it, guys, in terms of potential consolidation here, were talking about, something i dont have details to offer. You have to wonder i guess in terms of antitrust at least. I dont know the percentage in terms of Online Brokers and the like well, i think if i were an antitrust, if i were thinking about enforcement, i would say, i got to call these two guys in, because the if this turns out to be now, we just have a way that pricing is going to go back up well, we got to try to stop that there is still a lot of players. I think what is really incredible, when ameritrade guy hit, when they announced that they were suspending their fees, the stock got crushed all the way down to 32 david, that had to be when they were in talks. It has to be immediately because this right now the stock at 41 if its still not back to where it was, i think someone is steal eight mer trade here i think its a really good stealing ameritrade here i think its a really good deal for schkwab. Our problem bob pisani spoke to him last month. We were very strong and independent the way we do things so if it happens, appropriate shareholders, we do it all right jim, to your point of what they were thinking as of several weeks ago. Look. Charles schwab, everyone knows, he is the deacon these guys brought a revolution. Dont forget who they were they democratized. They made it everybody can operation something happened on the way to that, everybody can stock etfs a viewer called the ought day, n other day, the amount of baby boomers retiring, not happening. I just think this was done of necessity. But its fabulous. I think a combination would create a powerhouse of asset gathering the likes of which weve never seen i dont understand why schwab stock isnt up much more obviously if deal terms. But its fabulous for them they will be the last man standing they can take on robinhood. We will watch schwab, obviously, look for news on that, we mentioned paypal. You might have some reuters story, but set up whats going to happen today at liberty yeah you kn you. You know its the annual time to sit down with john malone we taped our interview it just finished, guys, where we talk of all things, of course, in terms of the landscape this morning as you might imagine of course dealing with what we talk so often about the streaming services a year ago we were talking about what disney plus might actually look like. Now we have a better sense for that and hbo max and so much of the competition going on we focused on that i tell you man, i encourage everybody online to watch the entire interview, because mr. Malone went all over the map in terms of fought just the landscape but so many different companies, whether its charter or discovery or expedialionsget a or uber. We talked about them all we did talk about at t given its hbo max entrance and how important conceivably that will be for the Company Malone has some reservations hbo is the king of the hill, spendth about 2 billion a year on content domestic, primarily domestic a little international, not much you know, that was the biggest budget, you know, and had been the biggest budget in pay tv for years. All of a sudden, bang, right so the way i look at i, in the u. S. , if you wanted hbo, you already have hbo right . So i dont see that they gain a lot of new customers they might transition some existing ones so that they dont have the wholesale discount. Right . But in exchange for that they have maybe a little more churn and a little more overhead, but i dont see the growth of for hbo in going this route. And, in fact, you could see attrition. Why they certainly dont have the budget to defend and protect their content supply long term and they dont own the rights to International Distribution and it will take them years to develop you know and hold on to enough content so they can be a real player internationally. So i have problems seeing the scale. I really have trouble seeing hbo being able to get to scale to be at the top of the chart in terms of direct consumer subscribers goes, so much more from malone on so many Different Things but thats certainly some of his key take aways when it comes to what was an introduction just a couple weeks ago i was in l. A. Interviewing john stenke, told us what it will be. It wont roll out until the spring of next year. At t shares, by the way, as you both know, down sharply on that downgrade from Craig Moffett a couple days ago, questioning the ability of both directv and warner media assets to perform well and be able to sort of keep things steady while they also are relying on at t on Significant Growth and wireless to meet their overall target of one or so percent Revenue Growth so a lot more to share with you as this day goes on from malone. David, quickly, that was pretty devastating it wasnt that long ago elliot came out with a plans a plan to take the stock dramatically higher and executed. When i took over the plan, a lot of cost savings. They do obviously have a much more optimistic view of what can happen in entertainment. David, thats devastating. He is saying, listen, this one is dead on arrival yeah. He, you know, he continues to believe as our viewers will hear later that disney and netflix are going to certainly be the survivors when it comes to this area but he does have doubts, jim, about the ability of this particular streaming service to really gain traction and, again, as we point out, these days, if you have any hope of capturing the margin that your business had as its been distributed over the typical cable wires, you need to do it globally you need to have that global scale. Again malone questions that in that area. Now, remember, at t will say, this is not just about a streaming service and what were going to get in terms of reaching the consumer. Its also about reducing churn on our wireless business its an important point they continue to make some people question it. Thats a key for them, that they can link the two service and thereby reduce churn, which obviously contributes a great deal to profitability. It brings to mind, david nevins spoke this week, a showtime executive talking about maybe there is potential for some of these other services to get in on that high end hbozeit geist. If they become more hbo and less hbo max. Right and that gets back to spending at the very outset of that clip that we showed you, malone was talking about 2 billion thats what they spent, hbo, years ago when they were number one in terms of spending we know thats been far eclipsed by the likes of netflix and amazon, not to mention disney, everybody else producing their own content for their directtoconsumer platforms the world has changed quickly. We talked a lot more about it as you might imagine, in terms of who he cease winning, losing, evolving not to mention a lot of interesting conversation as well on particular stocks, why they zoned them and we even got to politics a little bit, guys. You want to hear what he wants to say as well. Its going to be a good morning, david at Liberty Media investor day we are with malone and we will get cramers mad dash. We will get to macys, relatively constructive comments out of intel apple, of course, downgrades for amd and Restoration Hardware and the swirl of trade headlines we got overnight. Heres a look at furutes we are back in a minute. We are back in a minute. Ow. The van just talked. Sales guy, give em the employee price, then gimme your foot. Handsfree sliding doors, stow n go seats. Can your car do this . Man, yall getting a hook up and yall dont even work here. Dont act like im not doing yall a favor. Yall should be singing my praises. Pacificaaaaa with employee pricing, get 4,107 below msrp plus 1,000 bonus cash plus 0 financing for 60 months on the 2020 Pacifica Limited welcome back to squawk in the street. Im david faber, Liberty Medias investor day we love the broadcast, of course, with that big news about that possible tieup with schwab and ameritrade one deal that has yet to happen and seems to be frustrating one party is xerox and hb. Er is zer objectitha xero they were disappointed in the response from the company. What was the response . Well, it appears hp has said we are willing to do diligence on you, Due Diligence on xerox. We will not allow you to do it on us. They say we will take our case right to shareholders. They maintain there the a significant amount of overlap of the Respective Companies they believe as was the case at least in terms of looking how the stocks responded to the potential of xerox acquisition of hp, even though remember xerox is far, far smaller. They say, well, market responded well we want to talk to the shareholders, explain the Different Reasons as to why this makes a great deal of sense. The cost synergies they can realize from the deal and it would seem to set up the prospect, guys, of the possible real fight here. The window for nominating hps board opposite on the 25th of december it would close a month later the entire board is up you can replace all of them. It is unclear, still, certainly, this would seem to be the first step toward an all out fight saying, hey, we want to bring there to shareholders, we are going to give them a chance to weigh in you know it still remains very much unclear whether 22 is a number that shareholders actually have interest in, despite what might be xeroxs contention their management team, jim, can deliver on normal cost synergies they say are at least a billion dollars. We talked earlier of the situation with ameritrade schwab. Ameritrade got clocked after getting rid of the piece in the industry this was similar, david, hp was doing well, it surprised people, it generated a lot of cash and slipped up the last quarters, the last quarter was bad in printing and this became a clear way for anyone to say, you know what, theyre not going to get that stock back to the mid20s unless they do something big. What the Company Proposed was big, which is to fire 9,000 people, not big enough i think its interesting it sends a letter to chip and enrique. There is obviously chip who runs hes the chairman of the board of hp. Im starting to think, you know what, that the more that hp stock doesnt go higher, the more likely something has to happen, david. There is just too much opportunity. Im coming around to your view in the end its rational for something to happen. Well see, now again, hp is saying were having Due Diligence on you, no, you want to do Due Diligence on us, they want mutual diligence and because theyre not getting it, theyre going right to shareholders im waiting to see the response, rejection was issued by hp on sunday they left the door opened to potential talks. As ive reported, they had had talks about acquiring xerox not that long ago. But didnt get there in terms of spending enough time at least that they wanted to on diligence to really see. Because they had concerns about xeroxs business in well in terms of the overall declines and revenues theyve seen over the last year. In the january 2018 talks that have been alluded to, where hp contacted xerox, its been public it sure seemed like they were hot to trot. They couldnt solve the joint venture, its positive for xerox. How could it not be more attractive than it was in january, 2018 . No, there is no doubt that was the key here. Thats the reason why xerox came with the offer and the conversation that they did if terms of making the offer that they did because this is no longer that lockup that we talked about with fuji is gone that joint ken e venture dissolved. So that was a key here as you say, jim. Fantastic all right guys when we come back, a lot more damage exclusive with Liberty Medias john malone, taking a look at the opening bell, its less than ten minutes away not much, how about you . Are you answering my text in person . I am. Yeah. Lol. Come on in. This is tech that helps you be there. The nissan altima. Now offering the most techadvanced engine in its class. Now offering the most techadvanced through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From finding out whats selling best. To managing your fleet. To collaborating remotely with your teams. Giving you a nice big edge over your competition. 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Everywhere. people talking for every dollar you spend at a Small Business, an average of 67 cents stays local. Shop small and watch it add up. Small business saturday by American Express is november 30th. When i lost my sight, my biggest fear was losing my independence. Mmm. Good. So ive spent my life developing technology to help the visually impaired. We are so good. We built a guide that uses ibm watson. To help the blind. It is already working in cities like tokyo. My dream is to help millions more people like me. It is already working in cities like tokyo. people talking for every dollar you spend at a Small Business, an average of 67 cents stays local. Shop small and watch it add up. Small business saturday by American Express is november 30th. Just over four minutes to the opening bell, jim, weve not had a chance to do macys. No, macys is bad no two ways about it you have a estimate cut, same store steals e sales are i dont want to call it miserable. Its only 3. 5. But wow, it breaks the nice seven quarters in positive calls. Hes announcing a big february 5 2020 Analyst Meeting he has to do something bold. This is not working. The pleadoff from the mall is crushing these guys. It can no longer just be a Large Department store in a mall and have any sort of a value look at where the stock is it yields 10 he has to put his thinking cap on. I dont like the stock thats why target is going up, once again you are seeing the haves and have nots. Look at targets, its up 15 points because the have notes are putting up the white flag. Jim, you mention ltd. Earlier, how young people like low prices, reuters has a comment from one executive saying we didnt chase our competitors promotions. It cost us sales but also much less margin compression. What are they supposed to do here on price . Well, i think its interesting. They mentioned remember theres macys, theres backstage. Youve got also blue mercury i think what they have to do is they have to pick what they can win on maybe they have to say we will go after sapora. I got to tell you when im out here, david doesnt talk about this all the time. The companies i talk to, theyre like how come macys isnt writing billions of dollars of checks like target did their systems, there was, during this quarter, they had some sort of uptrade they did that slowed their ecommerce. Thats devastating i paid your duty they were talking about monitoring sites, they get 500 thousand they lost every second that goes by when you do Something Like that i they whats really despiriting they and home depot had problems with fear omni channel, not spending enough, not getting it right. David, a lot of people noticed no mention of double digit ecommerce growth yeah, well, as jim points out, its not easy when you have some sort of upgrade going on during that. It is so interesting to see the tale of two cities weve talked so often about when it comes to retail this tweak alone, target yesterday, an incredible performance obviously following up from the last quarter in which they did that as well, contrasting with kohls, which does seem to be going down with terms of the pricing competition area that target perhaps avoided and macys remember, this decline we may see in macys, jim, on top of the decline this week from the kohls numbers, so its getting pretty significant here. Im sure the dividend. I dont have all my data sources if front of me has got to be well above 10 at this price yeah, theyre still making money, but not as much as anyone in in it with the dividend wul one would think. It feels like wire line is the mall we think the others will have landmines, right uhhuh, wireless is target, its omni channel, wireless is walmart. The wire line businesses that verizon spun off of is almost all going to zero. These companies are wire lines in a wireless era. David, rur right, dividend yelled 10. 05 . So theyre right on the money there. Dont change that its stuck in the profit warning of the year, guides comps down negative 1 to 1. 5. They were previously up through 1 heres the opening bell on the s p 500. The exchange at the big board, they are celebrating a listing at the nasdaq. Its provider of High Performance computing including ai chips and algorithms. Jim, if it wasnt macys, it was bjs wholesale yeah. This is just look at these earnings, i am seeing companies that are spending the most who is doing the most. Who is spending the least . Who cant spend enough they come out of private equity, bjs can they spend the money versus costco. Business talks, look, we have to do x, y and z in order to keep the customers coming in. Well do it. You look at costcos Balance Sheet and technology i dont want to be up against them or target or cost colorado the one getting unfairly bruised here, yes, home depot had a problem with its technology. Remember, home depos Comparable Store sales are still much better than lowes, that is the apples to apples judgment. Bjs no, khols no everyone few macys would be bad. Yet it still got bit up 2 bucks ahead. There is no there there. Its existential yeah. I may shop go see santa, first, carl. Mipisani is here on set. You probably have this dichotomy this week. Jims right macys is a 4 billion market cap. Think of that, its the bottom of the s p 500 l brands, nordstrom, 4, 5 billion market cap they re the very smallest market caps. Theyre essentially not moving or having any complunsinfluencel and this is reflective what they have its amazing to see them become unimportant. Hains brand, nordstrom another 5 billion market cap. Think about this, a trillion dollar market cap on apple, nordstrom is a 5 billion market cap. We played a bit of sound of you a moment ago this is an old tagged synergy. More important its a scale story. When your average revenue per customer keeps developing because gow to zero commissions, how do you make more money you find other sources of renew and scale revenue and scale up the business. There is the banking business that used to be very profitable. They charge very low returns, low rates for their commerce there is pressure to raise the amounts of Interest Rates they pay on their banking deposits. Then you have a profitable advisory business. That be thats going to be the batletfront in the future. Theyre going to go out and intrees that business. Schwab has an advisory business. Its small ameritrade, its still small you watch, carl, other companies, lpl that provide advisory service, thats where the money is right now thats where the battleground is going to be in the future. Wow thats going to be a different way of thinking of both of those companies, jim yeah. Im trying to get my arms around how do you make money . I think all morning i have been plagued by etrade, what they have to do because you cant just do nothing. Thats out you have to do something and you have to call these other companies. I like where the battleground is, bob is so right. We dont talk about that area. That will be a lot thats in play i will say it right here, what does goldman do . He is no down market goldman, something will feel like they have a Good Businessman, others feel Good Business plan. Goldman may not be up or big enough to go it alone at this point. Its only 80 billion. It doesnt raise capital or assets the way schwab does think about advisories. Companies that provide services to Wealth Management, compliance investment Just Technology services to these companies. These businesses are growing fast theyre not under the commissions where we go to zero. Thats why im telling you, advisory, Wealth Management advisory is the battleground right now. Thats where i think will you see major acquisitions in the next couple of years, jim. You are dead right. Remember, Technology Costs are exceeding advertising costs. The amount of technology you need for sky bluer security identification the amount of technology you need to be able to hand him the Payment Processing is so huge, goldman took on the apple cart people are worried still that they took on too much. Because you need gigantic scale to make it work. Goldman doesnt have the scale. By the way, jim, there is an etf for this you know i love bringing this in the iai. Can we put the up, please . It is the brokerage etf. The problem is you gotgoldman as well, you got ice, nasdaq, ameritrade, schwab, all about 4 or 5 by market weight there it is, thats a new high for that keep an eye on the iai in the next few months as this whole battle heats up, jim. I think etrade should make a takeover bid, solve a lot of problems thats not the question why didnt they go after etrade . Thats interesting they dont have much in the way of Advisory Services i thought that was going to happen, bob. Thats what i thought we were going to wake up and see, which is why im so thrown that was the one that was supposed to be bought. Yeah. But they dont have a big Advisory Services business if you want to go. You are absolutely right. Thats the sticky money. Advisory money is sticky you know, jim, lets touch on tech, because you got downgrades of amd over at north field ubs cuts Land Research i mean, is it time to ring the register on chips . Well, i think, look, what really controls here is intel put out a letter describing. They still have problems, you could say with supply. But i think they meet demand so anybody who takes advance micro down as northslapped did, pigs get slaughterred, i agree with that. You are dealing with the fact that intel is still not going to make the chips, there will not be a lot of gross margin pressure they will be launching tonight ceo banding. Tiffany, why doesnt tiffany get can david bring it up, david . They dont have the cap . They didnt realize ill try to get him on. Ill get tiffany on. Ill book them right now oscar munozing to a picture of my team. See if you cant get us tiffany. Get on that. I mentioned tiffany, guys, because rob is going to talk a lot about malone as we take a look at who is on mad money tonight. Lets go to lisa su. She is always nearby ill call my wife and have to talk to her. Yeah. You told me that i did want to hit tiffany, i had an opportunity to see if the stock is reacting. There it is, up almost 3 approaching that 130 level that was the price of admission for lv in terms of getting Due Diligence and monitoring this as our viewers might imagine for some time. Weeks have gone by since we first reported on lbs bid, remember they made the bid originally october 15th. The stock was 90 so their argument would be, hey, we are willing to pay 130, a 4 premium. As i reported day one or day oneandahalf, the question is whether they will pay the all time high. That gets to you about 140, 139. 50 so figure 140. Theyre not going hostile here as we sort of indicated previously but the question is, will bernard know or make that decision in theyre getting diligence now. And certainly youd have to imagine there is the possibility they will be able go higher once they conduct that diligence. They talked about talking. Now they are talking but the question still is, jim, are they going to come with a number that gets it done well have to wait and see ill tell you that when you talk offline about what technology is doing in retail, louis vuitton, spends more money on technology, more money on customer relations, and retention than almost all of retailers. Its the highest end what it tells you can tiffany possible spend the way we were talking by the way, we dont talk enough about it its from europe oh my, they are revered as being the company that has the best touch for the wealthy. Its funny, we were just talking with bob pisani, touch for money, in order to have touch on scale you need cap they cannot have it. They dont have the money. They should forks they should go thats good point, jim. The street believes rightfully so that lv will be very successful marketing tiffany in a way tiffany has not been successful and who could blame them look how astonishingly successful lbnh has been in branding and marketing the highest luxury name in the world. Lvmh the street could be optimistic marketing tiffany. David, lets get back to some malone sit down. Threats do it media investor day they go through so many different companies. Dont forget they own a significant stake in charter malone, himself, owns a significant stake . Discovery. Formula one, the old qvc, live nation, trip adviser so many different names connected to this company and we talked about a lot of them during the course of our hour or so talk with mr. Malone. But we also talked about the changing landscape of the Media Business of course, its a business, by the way, that he helped to create right . The distribution model we all know so well when he controlled tci, the largest cable company, took stake in the content company, programmers set up that distribution model that made so many people very wealthy. Its going away. The question is, what is going to replace it . And who are the winners going to be i asked mr. Malone for his thoughts i this i if you ask me, who is going to be around and strong five years from now, i would say, for sure, disney and netflix. Okay disney because they have trick content and tons of it and a great brand globally so, i think their challenge is to get peoples credit cards they have no large direct consumer relationship. So theyre going to have to piggyback on the backs of people who do like verizon or, so, thats going to be an area by area, group by group, in order to get that direct consumer relationship in scale. Netflix, you know, is so far in the lead, that i have such a big base and revenue stream that theyll be around. They may not be as profitable as they would have been if there was no big competition driving up the cost of content and dividing to some degree the available revenue stream i think apple is going to surprise everybody with the numbers they achieve in a short period of time. You do, why do you think that i think even though theyre thin on content. Really thin. Their Distribution Strategy of essentially anybody who buys anything from apple gets a free trial for a year and, of course, apple already has their credit card so when you start with 460 million credit cards or 460 million consumer relationships. 1. 4 billion devices or something. You give them something for free and they get to use it for a year and then they put it on your bill, thats a very interesting way to get large numbers fast and, of course, its chicken and egg. As they get large numbers, then they can gauge what people like what people dont like they can go out and acquire or build more content so their approach is content light, wonderful, mass Distribution Strategy. Disney content heavy right. Needing some way to get consumers to take an action that gives them a relationship. So those are the two entrants going at each other. Im concerned that hbo will continue to be a Decent Service in the u. S but i dont see that they have the revenue stream potentially to match what netflix can spend. Obviously, amazon with prime has an entirely different monetization approach so you could expect, jeff, to step on the accelerator or the brake in terms of how much content he is willing to buy and give away to support prime. And, you know, i think its not his primary business i mean its not so you know the Free Shipping is very powerful a lot of glue content thats unique is kind of a Marketing Tool forbe that. You are spending an awful lot of money on content right now. Well, as a percentage of the value of prime. Right. But actually if you believe that they dont need to sustain it indefinitely. I know there is factions within the company that say this could all go to the bought tolt line i think amazon deserves to be a bundleer of other Peoples Services with less of their own and more of other peoples so, you know, i think ultimately eb, a lot of tech guys would like to be the platform and let everybody waste tear money on content. The real pay day is the examiner and information about the customer and being a gateway and thats where i think ultimately the Tech Companies want to go. Earlier, you were talking about apple and their expectation, it was before we had seen anything really that they would come to play. They started with i dont know, 13, 14 shows i mean, its virtually nothing but do you think theyre going to continue to ramp up spending to your point that as they watch in terms of how many relationships they actually get . Are they committed to this, do you think . Well, i think they have optionality with this. Right . I mean, theyre going to get out there six, eight months down the road, theyre going to look at how many people have signed up or potentially signed up theyll do the arithmetic backwards and decide how much they can afford to spend if it look likes go for them, like that they can include video and some kind of a bundle that includes music and all their other games and, you know, i think they want to be a bundleer and a platform right. And video could be an important component to that and this gives them a relatively inexpensive look at whether or not adding a video component adds value to the bundle that they can offer and glue and Pricing Power and if it does, then they can step on the accelerator a lot more from malone throughout the morning, guys of course, thats just one part of this. We talked a lot about so many other asuspects aspects of not Media Business but a lot of things as well carl. David, again the revelations and the clarity of the thinking, who wants to let the other guys lose billions in entertainment hes so right. Think about the present value of a customer of apple tv or apple programing . Its worth a fortune because if of Customer Knowledge you get, because basically knowing what your customer wants to to is the holy grachl then you can flood the zone not spending it, developing entertainment, yourself. His clarity of thinking is devastating for people that just made acquisition or spent money on content it will not work only cat a log, tim doesnt want to do. Tim cook is right, he is following along with the playbook i think its interesting. I think its also an optionability. Sorry, carl. I was going to say his confidence in netflix is lead. Despite they dont have parts to still or Wireless Services to still or prime members to sell he doesnt seem worried about the pricing levels at this point. No, you know, it is interesting and obviously we did talk a lot more about that again we will make the entire interview Available Online what he likes about net flex i think and what others do as well is the Global Presence right, we focussed to some extent to domestic subs. We know those havent grown strongly lately. Its all about their scale globally their ability to continue to span that around the planet. And that is what he likes. He does point out, though, that they are spending an awful lot and that the opportunity wont be as great given the different directer consumer platforms competing for that content he does, however, see that at some point slowing down as things begin to rationalize. The question for investors is when is that going to come all right fantastic stuff, david a lot more to come from david at liberty investor day as we go to break, take look at shares and schwab and td aper trade. We are hanging on to 30101 here as we seen downgrades in key sectors. Back in a minute is the monolithic view of emerging markets obsolete . At pgim, we see alpha in the trends driving specific sectors of outperformance. 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. Every day, our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. By the way, shes the it wasnext mozart. G day. As usual we were behind schedule. But sophies enthusiasm cannot be dampened. Not even by a runaway donut. We powered through it in our toyota prius. Because a stars got to shine, no matter what. Its unbelievable what you can do in the prius. Toyota lets go places. Big story today is consolidation in the brokerage space as we await a deal according to our becky quick schwab in talks to buy Td Ameritrade etrade being left out of the party, down 6 right now stock trading with jim in a moment Fleetwood Mac which we will get to in a second, jim, but whats stock trading okay. Genius no more now its owned by bristle myers and i believe the doctor has put together a powerhouse company, the numbers are way too low the estimates have to come up. Even with 57 with a 2. 78 yield i would buy bristolmyers right here. We played feet wood mac, it looked like dream force was fun last night. It was great. In the end my lisa said weve got to take our picture with Stevie Knicks. I know you, you are that guy, i listen to you. I said, mad money. She said, yeah, youre honest i wanted to tell her billy joel liked me last week, the eagles have won the super bowl, billy joel and Stevie Knicks likes me, ive died and went to heaven, im moving on. That is a bucket list that song, by the way, she wrote when she was in aspen and thought her career was falling apart. Obviously we know things changed for her. Just amazing what is on mad tonight tribute to tom petty. Okay so tonight, look, lisa su the number with you executive in the company not just in semiconductors. She is tough as nails. Oscar munoz, last year intercontinental was the leader, that stock is no longer leading but oscar has done a good job. We have to find out if they can leapfrog over southwest and jetblue as the performance winner for 2019. Jim, your energy level is astounding great stuff from dream force this week. We will see you tonight. We are going to stay on top of swa Td Ameritrade bumo ot ref davids exclusive with john malone let me tell you something, i wouldnt be here if i thought reverse mortgages took advantage of any american senior, or worse, that it was some way to take your home. 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The lexus december to rembember sales event lease the 2020 rx 350 all wheel drive for 419 a month for 27 months. Experience amazing at your lexus dealer. Welcome back to squawk box squawk on the street, im sorry, Rick Santelli live on the cme floor. A couple bits of october data. Leading Economic Indicators expected down. 2, cut that in half, down. 1, better than expected last month we dropped a tenth on a revision and for our read on october existing home sales lets head east to diana olick rick, existing home sales in october up 1. 9 to a seasonally adjusted annualized rate of 5. 46 million units, that is right in line with expectations sales up 4. 6 year over year the real headline in this report is inventory 1. 77 million homes for sale, that is down 4. 3 year over year to a 3. 9 month supply. Just for context, a healthy Housing Market should have a sixmonth supply of homes for sale and that low supply is pushing prices up. Median existing home price in october 279,900 up 6. 2 year over year and that is the strongest annual increase since june of 2017 you have a lot of buyers out there, there should be more home sales now because Mortgage Rates are a full percentage point lower than they were a year ago. You remember there was a big dropoff in sales a year ago so that 4. 6 annual increase in sales is going to get easier as the coming months because of that difference in Mortgage Rates. Again, the realtors say it is all about supply, lowest on the low end, supply is higher in the 250,000 to 500,000 range interestingly, sales are also offer in the 1 plus Million Dollar range carl, back to you. A lot of important numbers, thank you very much. Good thursday morning, everybody. Welcome back to squawk on the street im Carl Quintanilla with leslie picker in for sara eisen watching the markets, david faber Liberty Medias investor day in new york, he will have an exclusive with greg maffei holding on to 3,101 we will get to all of that. The other big news of the morning our becky quick reporting that Charles Schwab is in talks to buy Td Ameritrade an an announcement is imminent. A deal would create a juggernaut with more than 5 trillion in combined assets and would further consolidate an industry going through massive disruption for a closer look lets bring in bob pisani and mike santoli. Bob, what do you think is the key driver is it scale . Is it the fact that the Commission Fees have been cut to zero what is it that these Companies Need thats driving this deal . First you have the sent irj story, remove costs, keep more revenue but scale is the big thing. If your average revenue per customer keeps dropping because commissions go down, how did you get more revenue you get more customers thats the scale story commissions going to zero, a very Profitable Bank business, 60 of schwabs revenues are banks but the amount they pay to their customers is very low, the rate, the interest rate, some pressure from other competitors like robin hood and fidelity have been making noises, we will pay more to bank for our customers, they are under pressure the final thing thats left is the Advisory Services, the Wealth Management business, its a small part of schwabs business being 25 but its growing. Other parts of that adviser business in other companies are worth a lot. I think that will be the next battle ground, Wealth Management and advisory. How do you see the game theory shaping out now that were anticipating an announcement imminently for this combination, but i think people have been expecting some kind of consolidation for quite some time ever since schwab announced its zero Commission Policy how do you see the chips falling from here . Its redefining what big is for discount brokerage but thats been done over the years, ameritrade was a deacons dater with scott trade but theyve rolled up a bunch of firms, think or swim, water house into what is now ameritrade i do think we see etrade stock go down, they were considered a target, two buyers who are side lined probably if these guys get together but i do think you have to view the industry along with the private competitors, fidelity and vanguard are enormous, they have more client assets, each of them, than this combined en fit will so its not just, oh, these guys are giants within publicly traded discount brokers. They are, but i think its going to redefine what big is and what scale is investments are getting cheaper, more delivered technologically and thats been a process thats going on for a while and i think this accelerates the process. To that point, then, do you think that this growth in passive investing is also, you know, a catalyst for some of this m a activity. 100 . Its all part of it. Every step in the chain people are willing to pay less and be able to deliver these portfolios in a more inexpensive way. Its not just zero commission at robin hood, its robo add video i was. Or ai which some are blaming for the closures of funds weve been seeing. Yet another one today. Absolutely. One thing thats interesting is the role of payment for order flow here. So one of the reasons youre able to get zero commissions now is most of these firms pay for their order flow its very difficult to figure out how much it really costs the customer because its embedded in the transaction robin hood zero commissions, payment for order, all of them do that. Theres an interesting question about this i personally understand if you go to zero commissions somehow you have to pay for the transaction. I guess my point here is its not free completely. The idea like google is free its not free. Making a transaction is not free, there is some payment for order flow involved in all of this and even other competitors have gone the payment for order flow model its an interesting question but everyone should understand zero commissions does not mean free trading that goes on out here. Nothing outofpocket its essentially somewhere along the way a service is being rentered and the information contained in your order is of value to those whole sell terms, those electronic Market Makers that will essentially take that trade for you and trade against it. And that perhaps hits to the point of maybe revenue synergies that could be generated from this deal with regard to scale and getting more customers. Right, and thats why i hate to come back to these Advisory Services, but companies that provide Advisory Services that provide research or back office or technology, that kind of thing, thats out there, are very valuable now to these companies. I think you are going to see a fight for companies as they scale up, maybe we want to bring in another company on the side that helps with the technology, that helps with the clearance, that helps with all of that. Companies that are out there maybe lpl, morning star provides Advisory Services as well. The Wealth Management business is still very profitable even though there might be some pressure on the fees as well, thats where the next fight is going to be. A lot of those names have enjoyed runs already. Yes. S p hits a new s p global hits a new record high. Whats interesting about that you see parts of the industry s p global is an information provider, its kind of a platform, its a Data Platform the exchanges really are viewed as Data Platforms in economics look at the stocks of the actively managed mutual fund companies, theyve been left in the dust thats where the value has beee rung out of the industry and basically big networks provide the investment data. There is an etf for this, i hate to keep dragging this in but thats what i do aia is the one to watch, set a new high today, thats all of the firms weve been talking about right here all rolled into one by market cap and schwab is 5 , ameritrade is 5 , goldman is probably 15 , its bigger there, but you also have cme and all the exchanges. If you want to play this whole game about stock trading and Wealth Advisory management there it is. There it is thank you, bob. Pleasure. Mike, thanks so much for joining us. Its a big day at Liberty Media where our david faber is at the investor day in new york. Hey, david. Hey, carl yeah, chris, as we do every year we sat down with john malone earlier today, with he tape an err interview it typically goes at least an hour, we try to cover so many Different Things and make that available to everybody at cnbc. Com. We spent a lot of time talking about the changing landscape of the way programming is distributed, the way its produced and what that means for the existing players and for the newer entrants we have seen over the number of last year. One name we came to as well and something that you, carl and jim and i have talked about a lot is vie come cbs the deal will close in the not too distant future putting these two Companies Back together. Jim has often commented on how cheap it is and how he regrets owning it in his charitable trust. We did talk to malone about that as well and i asked him he thinks that Company Given it is certainly still dependent on Linear Cable Networks for much of its livelihood and potentially as an arm supply of content to so many of the streaming services whether malone thinks its well positioned right now. I think its cheap at the moment what they dont have is Global Presence while they make a lot of their own content and own a lot of their own content, a lot of it is bought, and the real locomotive in that whole collection in cbs and cbs is totally dependent in my opinion on sports rights the guys who own sports rights know that. So im not sure about longterm profitability or whether or not cbs has enough market power to carry all of those channels, right . And so my guess is at least at the affiliate level what they are going to face is fights over prices on affiliate fees. As they face ever increasing rates from the nfl or the ncaa. Yeah. And so kind of the threat that you wont get cbs and the new york giants game, you know, if you dont agree to carry 12 channels and pay for them, at some point that rubber band breaks, right . And i think in my own opinion, now, sherry is going to be mad at me for saying this, but i think viacom underinvested in the content on their channels for a number of years while they were spending their money buying back stock at high prices and i think that was kind of a tactical mistake in fact, i think i think sumner made a mistake when he split the two companies because they really always belonged together and had it evolved together, there would have been more juice invested in those niche categories that really are sticky now, you know, youve got to say how important is mtv to a distributor . How important is nickelodeon to a distributor . You know, when i see them essentially licensing sponge bob, their best program to other people, i worry about, you know, the sustainability of the model and the fact that they are u. S. Only so they dont get a lot of support internationally to help them pay for their content so, you know, yes, historically they are very cheap. Cheap, but cheap for a reason, carl now, he had a very different take, as you might expect, on discovery which also is very cheap but which he recently bought we will share more on his thoughts on that Company Later in our program for now i will send it back to you. Its going to be interesting to see how viacom responds to some of those words he had with you, david we will hear a lot from you later on in the morning. Still to come right now we will get more were Liberty Medias investor day including an exclusive with ceo greg maffei and then later the ceo of sonos will join us on set. The dow down 29. The street, im david faber Liberty Medias annual investor day and it is an annual tradition as well to be joined by greg maffei the companys ceo. There was a time when you would come on more than once a year. I dont know what happened. I dont get invited, i think. Thats not true at all. Youve made yourself scarce. So many Different Things to talk to you about in terms of the portfolio. Its funny, we started a year ago the same place we will start now which is sirius which has been doing very well, i know you will point out i dont have to youre doing it for me, thank you, david. Theres always that discount and you continue to buy back shares of the tracker. You are at 71. 5 are you just going to keep buying it back two things are happening, you noted sirius is buying its shares back and actually we today are issuing an exchangeable exchangeable series stock and they are buying the underlying shares for the Hedge Fund Buyers who are hedging the stock out. Theyre continuing to buy back, thats pushing our 71. 5 or something up in addition as you rightly noted our tracking stock trades at a discount we bought back through the end of the quarter 860 million of the stock, we have a 350 million profit if you look at the underlying sirius shares so we like that we own about 22 billion worth of sirius stock and the cumulative or absolute discount is about 6 billion. So we will keep attack that go and buying that. If the market is going to give us the liberty sxm shares cheap we will buy them back. But it has. It persists. It doesnt seem to go away. Thank you. Do you wonder why, though i think weve talked about it siri has more share buy back, its a harder borrow to buy against the siri to arber out. Youre chairman of sirius still. I am. Lets talk about the business itself everybody wants to talk about podcasts, even daniel eck joined us on set six months ago to talk about spotifys efforts when it comes to that. You guys are moving into it at sirius. Pandora is big in it. Pandora is big in it. What does it look like in terms of the spending going on, i mean, some people want to equate it to the streaming wars in terms of the spending on content and the profitability it will bring. We have our investor day going on and i usually try to give a think piece last year was why the video scripted content business is a horrible business, this year is why the audio business is not like that. Not only there upside in listenership and the types of content including pod King Abdullahs but theyre undermonetized, there is an opportunity to see increases in how podcasts and other forms of Audio Content are monetized, but the cost structure is way more attractive there is a little bit of a bidding war for Audio Content but you cant spend on audi a great podcast might be 250,000 a year, an hour of one of these high end shows could be 10 million. So the numbers are so far apart and the war is way less and the good news for us is we are a serious player in audio. Yes, you absolutely are so has the music become almost an commodity at the point and the differentiator is the podcast . Your point is right, exclusives are what you want to have and there are different forms of that. We have exclusives in things like howard stern, we have exclusives in the fact that you want to listen to cnbc in the car, we are the way to do it, espn and the like. Podcasts are a piece of that and more and more we have an exclusive with marvel, an exclusive with lebron james calls uninterrupted. Lots of things that are unique just to us. I dont want to steal all the jim myers munder because we will join us as well. Move on to some of the other parts of the portfolio, one that hasnt been as good, trip advisor. I was talking to malone about this as well, you know, google changes their algorithm and suddenly everybody is discombobulated. What can you tell investors there in terms of the hotel clickbased auction system not working as well as it has, experiences not growing as quickly and what your expectations are for trip to turn around. Trip has always had an enormous audience of interested people who want to travel. Historically our best monetization method was the hotel auction. Google has made that a lot harder why . Theyve pushed free search results down the page, particularly as you went interest desktop to mobile and put their own travel on top so were competing with them directly and that has happened, youve seen reduced results for everybody, the otas and people like ourselves but weve seen growth in other forms. Weve seen growth in our direct advertising business, weve seen growth in our restaurants and our experiences business and, yes, theres competition in that space but were growing nicely there. Despite the challenges we have great strength in the audience and great strength in how much Free Cash Flow that business is still generating. Should it be viewed as a Free Cash Flow generating business as opposed to a Growth Business at this point we have growth in certain aspects but we will fight challenges in the auction market. You expect that to continue. Yeah, i dont think google is going away id like to see the government something about them but im not sure im counting on that. The platform is so powerful and changes like that can take billions of Market Capital away interest expedia and trip. And the platform is their platform and they are putting their app on top when i was at microsoft we went through this the government if it gets to be involved will be a different matter. You made this point but youre doing it on this now as opposed to your desktop so you just dont have the room. Screen space a lot smaller, exactly. Formula one. Yes. What can you tell us there in terms of what investors should look for the year ahead thats going to continue to add value. Chase kerry just spoke. We invested when we bought this in about business in 2017 we invested in marketing, research, building the Fan Experience and thats really begun to pay off the leverage is down because of our Free Cash Flow, we have just cut a new deal with the fia, the regulator, that will set forth we think better ontrack performance that equalizes some of the payments, all of that is going to be benefit, i believe formula one is poised for success. Why well, because were seeing growth in fan interest, weve seen attendance up, weve seen viewership up, weve stabilized and set forward a much better regime to make it more compelling than it already is, opportunities to monetize it better im excited. Excited about the future for formula one. Absolutely. Chase kerry is planning on staying with the can. For the foe seebl future. As long as i can keep. You what about yourself. I cant find another job. Is malone going to keep you around you should have asked him. I didnt ask him that the Atlanta Braves another thing People Better than the mets again. Although the mets did not have a bad season. Thats true braves had a great season, unfortunately it ended very early. It did. Wait a minute. You, mr. Mets fan, dont even go there. I really dont like the braves im sorry. I understand. I really dont like the mets. I dont blame you you own the stadium, too what are the trends there that youre seeing. Are you going to have to spend each more in free agency to make that last leap into the world series you know, we are well set up as you know with great young talent, observing in a jr. , al veez, freddie freeman, but in addition we just signed will smith, probably the best reliever in baseball yeah, were going to spend some money and we have relative freedom under the cap and in our payroll compared to most people, including the mets. Okay. We will move through the portfolio. Iheartradio, passive investment, you guys owned the debt, they came out of bankruptcy is that something you could see taking control of . You know, we have no plan or intent on that today we look at the Radio Business as being interesting. Respect, have a lot of respect for what bob pit man and rich are doing that so well watch. Just going to keep watching sometimes you hear the liberty guys might get more active here. What are you watching . Their performance, how that market friends, you know, some people friday terrestrial video will slide the way linear video was. Others think mr. Pitman and bresel have a good future. How do you do it . We own 4. 8 . You have a pretty good view in terms of the way audio is distributed around the world or certainly in this country. They have a big funnel thats very interesting big funnel. Yeah, a lot of users, a lot of listeners. What do you guys own. What do you mean . Whats your economic . Just under 5 . Speaking of very small, you can look at your watch i was wondering what time whats the problem . Places to be. I have an investor day to do. Its all right, you can just wait a second. Speaking of small positions, you guys still own a little bit of viacom. Yeah. Why not get rid of the rest of that. Well see. Should you have told it early. Absolutely, we missed the window were fine. Malone is not doing you any favors, he was not particularly positive on the prospects for the company. What about you i think the stock has performed less well than we thought it would under the merger conditions. Why did you think it would perform better there are synergies between the two businesses we thought it would trade better than it had we were wrong. Finally back to the big picture, you said a year ago you presented on what the future of why scripted television is not necessarily the way to go. Yeah. Do you still feel that way . Only more so. We are here a year later, the ott players over the top players are going to put a big hurt on Linear Television and put a big hurt on each other, somewhat of a circular firing squad. So when does it end when do content prices start to rationalize . You know, its only going to end when these large players some of them decide to reduce or not give up but reduce their efforts. I dont see that happening for, you know, several years. The winner here is the viewer. Theyre getting an unbelievable amount of content, probably too much, no one can consume it all. They are getting a lot of inexpensive content. Greg, always appreciate your taking ten minutes or so for us every year. For you i will go to 12, david. We look forward to it. Thank you. Maybe we can do it twice a year. Back to you guys. Thank you, david. 12minute interview next time, i guess. The braves and the mets. When we return its the worst stock on the s p 500 for the year, we will take a closer look atac mys latest Earnings Report when squawk on the street returns. With a nationleading 150 billion commitment to infrastructure, were creating state of the art, 21st century transportation hubs, constructing new bridges, bringing highspeed internet to every corner of the state, and committing to lowcost clean energy. With infrastructure built for the future, the companies of tomorrow can thrive here today. See your future at esd. Ny. Gov. Ugh, another electronic signature. You have to print, walk, sign, scan, recycle, walk, email yourself. Really . More walking, try again, waiting, recycle, walk, email yourself, then get back to your day. Or not. This isnt working. Introducing samsung paperless workflow solutions. With the galaxy tab s6, you can sign Digital Documents onscreen, with a finger or your s pen. Samsung business solutions. For farmers here, this is our lifes work. But when a recall happens, perfectly good food goes to waste. Now, weve got away around that. Looks good. Were on target. Blockchain on the ibm cloud helps pinpoint a problem anywhere from farm to shelf. Its used by some of the biggest retailers everywhere. A nice wedge. So more food ends up on your table, is that daddys lettuce . Yeah. And less food goes to waste. Good morning, everyone im sue herrera. Here is your cnbc news update at this hour. President trump says he will release a statement on his finances before the president ial election asserting its his call on providing the information in a tweet he said it will show one thing, that he is even richer than people thought. A federal judge has temporarily halted the First Federal execution in 16 years. As a lawsuit on how the government intends to carry it out continues. The judge ruled that the public is not served by shortcircuiting legitimate judicial process. A magnitude 6. 1 earthquake shook a border area between northern thailand and laos this morning. The vibrations were felt in hanoi, vietnam and the u. S. Geological survey said that quake was six miles below the surface. And the vatican Christmas Tree was lowered into position in st. Peters square by a big crane today. The spruce was transported by truck from an area in northern italy that was badly hit by a storm in 2018 causing the destruction of some 14 million trees. You are up to date thats the news update this hour, leslie, i will send it back downtown to you. Thank you, sue. Time for our etf spotlight taking a look at retail. Ticker xrt on track to extend its daily losing streak to four, shares of macys off their lows of the morning but still in the red after cutting its full year forecast and posting its first quarterly same store sales decline in two years this as retailers gear up for black friday next week. Its coming around fast. Right around the corner. Still to come john malone on the content wars andhe wre hes putting money to work. Dont go away. It was sophies big day. By the way, shes the next mozart. As usual we were behind schedule. But sophies enthusiasm cannot be dampened. Not even by a runaway donut. We powered through it in our toyota prius. Because a stars got to shine, no matter what. Its unbelievable what you can do in the prius. Toyota lets go places. Danafarber Cancer Institute discovered the pdl1 pathway. Pdl1. They changed how the world fights cancer. Blocking the pdl1 protein, lets the immune system attack, attack, attack cancer. Pdl1 transformed, revolutionized, immunotherapy. Pdl1 saved my life. Saved my life. Saved my life. What we do here at danafaber, changes lives everywhere. Everywhere. Everywhere. Everywhere. Everywhere. Dow is down 110 here we continue to watch the impeachment hearings at house intelligence, this time fiona hill and david holmes, for that we go to ian mui in washington. Reporter these two witnesses have been incredibly detailed and direct about their concerns that u. S. Policy in ukraine was becoming politicized potentially even by the president himself. Now, david holmes a state Department Aide testified about what he heard when Eu Ambassador Gordon Sondland called President Trump over the phone from kyiv ambassador sondland replied, yes, he was in ukraine and went on to state the president zelensky, quote, loves your ass. I then heard President Trump ask so hes going to do the investigation. Ambassador sondland replied that hes going to do it. Meanwhile, former nsc official fiona hill chastised republican lawmakers during the hearing for promoting what she called politically driven falsehoods. Some of you on this committee appear to believe that russia and its Security Services did not conduct a campaign against our country and that perhaps somehow for some reason ukraine did. This is a fictional narrative that has been perpetrated and propagated by the russian Security Services themselves reporter now, President Trump has been tweeting during the proceedings this morning, guys, his message is simply read the transcripts. Back over to you. Thank you squawk on the street is back after this when you shop small you help support your community from after School Programs to the arts so become a regular, more regularly. Because for every dollar you spend at a Small Business, an average of 67 cents stays in the community. Join me and American Express on Small Business saturday, november 30th, and see how shopping small adds up. But shouldnt somebody this is be listening . Pression. So. Lets talk. Were built for hearing whats important to you, one to one. Edward jones. Its time for investing to feel individual. Nongmo, made with naturally sundown vitamins are all sourced colors and flavors and are gluten dairy free. Theyre all clean. All the time. Even if sometimes were not. Sundown vitamins. All clean. All the time. Not much, how about you . Are you answering my text in person . I am. Yeah. Lol. Come on in. This is tech that helps you be there. The nissan altima. Now offering the most techadvanced engine in its class. Welcome back to squawk on the street, im david faber at Liberty Medias annual investor day. We have a chance here to sit down with the companys chairman john malone. You heard my interview with libertys ceo greg maffei in which we were discussing the proliferation of content, the enormous amounts being spent by netflix, disney, amazon and warner to amass content for their direct to consumer platforms. Maffei says it may have years to go in terms of these inflated prices i did ask mr. Malone as well, when he thinks things will start to ractionalize. I think that the number of people trying to do scripted programming on a global basis and buying this content away from each other will thin out as some people make it and some dont. At some point some of the players are going to look at the numbers and theyre going to say, you know, we no longer have belief that if we that hail mary passes are going to keep working. Read, you know, who has been reed hastings. Yeah, he has been throwing hail mary passes since he started, right, and its worked for him. Now he has a budget thats huge, bigger than anybody elses over time he will have to he will have to turn the dials to modulate that spend to where he has a really Good Business that doesnt churn out on him people will start experimenting with bundling with other services to reduce churn to make it more sticky distributors will start bundling on behalf of some of these people if, in fact, that reduces churn and makes the composite more desirable, more sticky. So it will evolve the same way that the cable business did and the business bundle is created, right . And as those new packages are created, the guys who have uniqueness will start extracting more and more share, the prices will go up and we will see this play again. Exactly i mean, im not for our viewers, of course, to understand, you are not just talking about this idly, you own a significant stake in charter so you see it from the distribution side, significant stake in discovery so you see is from the content side. Internationally we see it. And internationally with Liberty Global as well. Yeah. When you think of cord cutting right now. Right. Everybody is like, oh, my god, its just going to continue at this rate, weve watched the losses at direct and at dish in particular. Right. Does it start to level off at some point yes, i think it does. It doesnt stop the erosion doesnt stop completely but it will make a transition to where in my opinion these distributors will start becoming where you go for a bundle of other services so you may not buy the big bundle but you might end up buying a service from hbo or netflix. Netflix already is distributed by most cable operators, right, as an incremental service. Certainly prime is talking to the distributors about a similar relationship my guess is disney will eventually, you know, be willing to provide some split in order to be an n. A bundle, if that reduces churn or helps distribution my discovery will be in that situation over time. So, you know, this will be a transition it wont be a black and white thing. Right at the moment because the video margins for the u. S. Cable distributors are thin and getting thinner as more and more retrans, treasure and sports pricing pressure comes in, its been sort of discovered that actually margins improve as you lose video customers and you become less capital intensive. So if you shrink the video base and dont try and innovate the video platform, right, your margins go up. Right. Your cap ex goes down, your leverage Free Cash Flow goes up and your stock takes off. What about these companies i mean, does discovery have enough scale does cbs viacom have enough scale . Do we need to see one more round of consolidation among content providers . Well, i mean, if you go back a couple years, you know, discovery is the one im most familiar with. Of course. 32 years, i think, now. But we saw in scripts, for instance, a consolidation opportunity that would give us scale, increase optionality, brands that we understood, talent in the organization, opportunity for synergies of consolidati consolidation. Didnt solve the direct consumer issue, but gave us a lot more firepower. So thats worked out really well and now discovery has got an Investment Grade Balance Sheet, deleveraged quickly. Generating give or take 3 billion a year in leveragefree aftertax cash so they have a lot of juice with which to solve their issues. They own all their content worldwide in all platforms and theyre pretty much the only Global Company right at the moment whose products are in front of audiences on a global basis. So theyve got a lot of the pieces, right. They need to make the transition from linear to interactive, ip, direct to consumer. What we were talking about. Correct thats correct the hybrid approach. They need that hybrid approach and theyre reaching out in a lot of different ways they brought in some extremely highly talented people from examazon guys to help them with this direct consumer opportunity and i personally am willing to bet that they are going to ma i can this transition. You bet a little more earlier this week. I did. It was a pretty big purchase for you, 2. 6 million shares. 75 million bucks. I wrote the check. Yeah. Why did you do it now i believe i believe that they will solve these issues and that they are dramatically undervalued right now. When i put my screen up and i look at Companies Based upon market cap versus leverageFree Cash Flow, they were the cheapest thing on the screen and i said, wait a minute, you know, theyre growing in a world where everybody else is shrinking, theyre they own all their content, theyre generating a ton of cash, theyre an investmentgrade Balance Sheet why are they cheap what is the multiple on its really low, right probably 5. 5 times cash so thats giving them like 16, 17 percent cash return right. After tax. Thats pretty darn cheap for a good company so i said, yeah, i think i will buy some more. I started buying it when the scripts deal got a thumbs down from the market, so i bought some in the teens, then i bought some more in the very low 20s and now im buying some i think i paid 28. 03 for the shares that i bought so ive increased my exposure to discovery and i did it because i believe im going to make money. Lions gate. Right. Why did you sell it i sold it because i i didnt see them execute a strategy of using their library and content capabilities to drive stars. I really thought the opportunity was to take starz, use lions gates creative skills to drive starz globally, aggressively, and they got in my opinion they got hung up on selling our content to somebody else versus putting in our own distribution. My concept originally when i went into it was that they were going to drive their own distribution i also thought that if they were successful in that they would make themselves much more valuable to other people i think that they didnt do that and i became discouraged with their ability to do that now, they seem to be gaining some traction now outside the u. S. In distribution, and theyve gained some traction in the u. S. With amazon as a marketer for starz it was just, you know it was the question you started with. Right. You know, who is going to win in the streaming game . And i didnt see a path for that company to be a winner in that space. If they didnt merge with somebody else they were close i mean, cbs before the viacom deal was pretty close. And may be still. May be still showtime and starz should get together because theres enormous synergy in that combination and that would provide scale. Right. But this is a scale game and youve got to be global to get scale. You know where hes coming from, hes always talked about it, global scale so important to this Business Model. Back to you, guys. All right, thank you, david a dealmaker like none other. Thanks for bringing that to us. Up next the ceo of sonos on the heels of reporng rultiests squawk on the street is back after this dont go away. Every year, our analysts visit thousands of companies, in a multitude of countries, where we get to know the people that drive a companys growth and gain new perspectives. Thats why we go beyond the numbers. T. Rowe price. Invest with confidence. Welcome back to squawk on the street. Were getting a Company Statement on layoffs from wework the layoffs were highly anticipated for quite some time. The number is approximately 2400 employees globally laid off as a result of restructuring. Following the decision not to go public, in a Statement Today said part of the renewed focus on core of wework businesses and they have previously shared with employees plans to make necessary layoffs to create a more efficient organization. It is unclear exactly who is being laid off as a result of this we have been expecting layoffs quite some time. Reports suggested it could be as many as 4,000 employees. This company has more than 12,000 employees at the time they planned on making its debut. Cost cutting necessary as they pivot the ship toward new circumstances where they dont have cash inflow from the ipo. He said he will have a meeting with employees tomorrow, maybe get more clarity on what departments and countries it will come from 2400 is a lot. As many as feared according to some reports we will watch wework and sonos as well, posting better than expected quarterly revenue. Joining us, Patrick Spence good to have you back. Thank you. Revenue up 11 yes. And results getting better. Exactly, third year in a row of delivering more than 10 top line growth, more than 20 bottom line growth we are focused on sustainable profitab profitable growth. Where is it coming from, by region or category we accelerated new product velocity, that helped us getting to a Record Number of new homes. Now in 9 million homes we are seeing it across the globe. There are 8 countries were in today. We have long term opportunity in many other countries right now, seeing it across the United States and western europe. You also announced the acquisition of snips a small startup, 50 employees, paris based. In the ai space, what is your thinking behind this acquisition, how does it drive growth. It is all about experience and experience around audio, golden age of audio. We think in addition to offering alexa and google assistant, we can do Something Special around voice to make the experience better the interesting thing is it runs locally on the device, it is a lot about privacy, keeping your information at home. We think some customers are interested in that as well. You have an ikea partnership. Is the emphasis on new household formation, trying to get existing households to flip to new technology this is the thing least understood about sonos, 37 of sales come from existing customers coming back, buying another sonos. You saw during the year the average number of products went from 2. 8 to 2. 9. Part of what we do with ikea and introducing these products, people dont replace products, they add to them year after year were trying to do both as we go through this, we know in somebodys home, theyre probably coming back to buy more. Talk about the supply chain during the quarter margins took a hit due to tariffs how is it impacting your cap ex as news psychiatrcomes out we mt have a phase one deal by end of the year. We had margin improvement what we did in guidance is point out we assume tariffs continue, take a short term hit while we accelerate to malaysia we planned to expand manufacturing globally and accelerated that because of the tariffs. But thats a short term hit. Long term, continue to stay on track with 10 top line growth, 20 bottom line, take a short term hit on behalf of customers, well eat it instead of the commerc customers. We talked about tariffs during the break why malaysia, what other countries did you consider you are not exiting existing capacity, why. We put years into building relationships and team in china, dont want to lose that. Well use china to service a lot of countries around the world, everywhere except the United States, and chose malaysia looking where are suppliers, expertise to do the high tech manufacturing we want to do. We looked at vietnam, malaysia, taiwan, other locations. We felt malaysia was the best. We had been there, first started and brought it up in malaysia, have familiarity with the market and think it is a great complement to what we do in china. The stock is up about 50 this year. Youre making deals on your own, partnerships on your own some analyst notes out this morning say investors are still trading this as a company that could have the potential to get taken out, whether it is a take private or acquisition is that something youre considering now . As you can see from results, were focused on the business, how we perform in the Public Market have our first year as a Public Company in the books, it was a strong year, did what we said we were going to do were staying focused on that good to see you as we have the past few quarters. Thanks for the time. Market trying to hang onto certain levels, just bowel 3100. Squawk alley starts in just three minutes. Look. Only one things more exciting than getting a lexus. Ahhhh giving one. The lexus december to rembember sales event lease the 2020 nx 300 for 329 a month for 27 months. Experience amazing at your lexus dealer. Good morning it is 9 00 a. M. At Liberty Media headquarters in douglas, california, 11 00 a. M. On wall street, and squawk alley is live. Good thursday morning. I am Carl Quintanilla with Morgan Brennan and jon fortt sirius xm ceo sits down with david faber in another cnbc exclusive this morning, thats moments away a ton of news, impeachment, trade, retail. Well start with this bombshell, schwab in talks to buy td