Transcripts For CNBC Squawk Box 20131029

The full senate for final consideration. Steve liesman reported last week senator rand paul said he was thinking of putting a hold on yellens nomination unless a voet vote was loud on his proposal for more transparency on the fed. Beyond the fed, there are some other economic happenings. Namely, at 8 30 eastern time, we have two reports delayed by the Government Shutdown. First, we go the Consumer Price index. We also get retail sales. At 9 00, we have the s p caseshiller home price index. At 10 00, we get business inventories and Consumer Confidence. As fort corporate news, pfizer, etna, archer daniels, nokia and jet blue. By the way, stocks are coming off a flat session to start this week. The futures this morning, after all of that, youll see at least right now that the futures are indicated slightly higher. The dow futures up by about 23 points. S p futures up by about 2. 3 points. And, joe, ill send it over to you. Another uptake . Eight out of nine for the s p, i think, and the dow, as well. The fed is very, very influential and powerful. But for whatever reason were expecting tapering to continue forever at this point. That may explain no tapering. No tapering. Qe to continue. Its like a double negative. Were not expecting them to not cut ever. Yeah, yeah. Lets watch a couple of stocks this morning. So much at the top. People were worried about margins, but its all explained away this morning when people who know what theyre doing look closely at it. Earnings and revenue beat the street. The companys gross margin outlook initially d appointed investors who sold and as i said at the top, it was up 25 since the last report. So its not a big shock to see profit taking that when the Company Reports with investors cashing in on recent gains. But we will have more on the report in a couple of minutes. Weve got an analyst at this hour and an analyst next hour and well go into why the Gross Margins initially looked like it was a brother forecast. Now theyre saying it has to do with its actually better given what the company said they were going to be doing, the gross margin to be able to keep them where they are is even better than where it was. And right. Right. I dont know. This one is, you know, we would have if it wasnt for ackman and carl icahn, i dont know if it would be our second story to talk about. You pronounce the h or you dont . Herbalife, right . I dont know. Its not herb greenberg, its herb. Its not herb greenberg. This is erb that youre talking about. Herbalife. Reported betterthanexpected earnings. Revenue matched the companys estimates. Somehow, i think theyre it does eventually it sold to someone and the people use it, right . I like their candy bars. They sent me some of those. Oh, they werent candy. They were protein bars, right . Yeah. They were good. I ran out of them, though. Are you looking for more . If i had some more, id be able to talk more clearly about these results because id have more energy. The Company Boosts i like the Peanut Butter ones, in case anyway was wondering. Also boosted its full year forecast and earnings and revenues. Missed wall street consensus. The data gave lighter than expected Current Quarter guidance and that caused the stock to be down. Anyway, its working on it. Working on it. Theyre collaborating with cgi, the obama care firm, to fix our charts. No, theyre not. Im not going to say anything about that at this point. This whole obama care thing, im going back into my microworld of stocks. I get nervous reading about you can do that for about one more story. But im reading about some of these individual people that this guy liked his policy. Now hes getting another one. His Doctor Network is smaller. His deductible is much larger and his premium increase is 66 . Right. It says the deductible is less but the plan doesnt meet my needs. Thats a different guy. This is not just a situation of looking and cherry picking and finding examples of people who are unhappy with it. This is a story where more than 7 Million People are losing health care do the math. I read two of these, and their stories are bad. And then if you multiply that by 7 million let me tell you the story briefly and then well go through mow in detail on this. If you havent heard yet, this is news out there from nbc. Nbc is reporting that the Obama Administration knew millions of people could not keep their Health Insurance. Four sources who were deeply involved in the Affordable Care act tell nbc news that 50 to 75 of the 14 Million Consumers who buy their insurance individually can expect to receive a cancellation letter or equivalent over the next year. Thats because their existing policies dont meet the standards mandated by the new health care law. One number predicts the number could reach as high at 18 for those new people. Many will experience the sticker shock. The white house is pushing back on this report. A White House Press equity is tweeting that the nbc scoop, in parentheses sites normal turnover in the individual Insurance Market thats a, new new, b, not caused by the aca, and c, the problem aca will solve. Lisa myers broke this story and will join us at 7 00 eastern with more. That is misleading, the response to it. Because they were going to grandfather initially people that were in certain plans and then the rules were tightened by hhs to where the grandfather wouldnt count for anyone who had a change in policy. And they change every rear. And by the way, insurance policies change frequently. And the men you change it, youre not grandfathered. They can change the deductible by 00 and your Insurance Plan would no longer qualify. And barack obama, when i was campaigning on this was saying if you like your plan, you can keep it. As late as 2012, the president was saying if you like your plan, you can keep it. They knew a lot of people would get thrown out. But when i listened to him and didnt believe him, i wasnt talking about you were talking about the math. No. I was talking about people that had employer sponsored plans. And it and i was saying the reason its not true is because a lot of on employers are going to decide this isnt worth doing it, im going to let so i was saying you would lose your current plan because youre not because it would be indirect and he could get away with saying it. But this was actually you could not keep your plan. The 14 Million People who individually buy insurance, at least 7 million of them, is what this plan is saying is but thats the total of the uninsured that theyre even trying to get signed up. So with the best Case Scenario to get 7 million uninsured, youre messing with 7 Million People that already have plans. One of the individuals who was cited in this, we talked about some of the individual stories and, again, obviously, there will be exceptions to every year, but youre talking about exception toes a scale of 7 Million People or more. George swabb said he was perfectly happy with his plan from blue cross blue shield. It insured his wife for a 228 monthly premium, but the comparable payment plan that hes now being offered costs 1208 a month. It has a 5500 dedoubleble. And he says im sitting here thinking we ought to pay the fine and wait to get insurance until were sick. Thats the huge problem. If you have people not signing up for these plans, theyre waiting until theyre sick because you cant be turned away for a preexisting condition at this point. And it includes drugs. Right. If the penalty is only 99 a year, you would just pay the 99 other than the 12,000 that it would cost you extra for this man. And at this point, i guess these are letters going out, but people trying to sign up, we dont because of the glitches, were not sure how widespread all this is going to be. Well, another problem is, these 14 Million People or 7 million or however many million, they dont have coverage come january 1st. And one woman who has a sixmonthold baby who is cited in this story says, look, i have a 6monthold. I dont have hours and hours to spend on a website thats not working and come january 1st she wont have coverage. Even they she may not have to pay the fee, the fine until march 31, shes fought going to have coverage come january 1st. Wow. We havent even talked about all the spy stuff. I dont want to wimp out on all the spy stuff and we are going to wimp out, the liekts like. Were going to see the headline in the New York Times were thinking about obama may ban spying on heads of allied states. So each peter king said yesterday, dont wimp out, mr. President. Were on a need to know basis. Its created some huge diplomatic headaches. The second term is not proceeding according to planned, is it . They rarely do. Ross westgate is standing by in london. Good morning. Good morning, becky. Were trying to tick higher. Advancers outpacing decliners here by around about six to three on the Dow Jones Stoxx 600. We have green on the board, as well, for these indices. Got a problem with the camera there. Lets show you where we stand with the ftse 600. Currently up 0. 4 . Were already focused in on earnings. The ftse mib up 1. 3 . The cac 40 and the xetra dax up about 0. 1 specifically. The best performing stock today in europe is the oil made just Third Quarter earnings surprising analyst expect ages. We saw an underlying profit of 26 and thought it would come down 37 . Theyre also returning more money to shareholders by ways of increasing its Quarterly Dividend by 5 , 6 . They have a Divestment Program as well as 10 billion. And bob dudley, the ceo, said we want to get more of that back to shareholders, too. The shareholders have been very, very patient with bp. I think its time for us to do not only keep a progressive dividend policy and we will continue to review it. In addition, we announced today we would sell another 10 billion of assets between now and 2016 and made those available for additional share buyback. Bob dudley speaking to us on cnbc a little earlier. Whats interesting is that bps provisions, they increased by 39 million. Analysts were expecting an increase of 42 billion. The reason they havent is because of recent claims. They recently said there have been claims made and youve lost no money at all. So bp is saying were not going to provision the claims that have not been approved but paid out to just know whether, in fact, we will end up paying them out depending on what the court reelgs are. Banks very much in focus today, as well. The number of earnings out today, lloyds today, a rise in the first nine months of the career, but it set aside an opportunity, 7. 50 Million Pounds for ppi insurance. Standard chartered, the asian focused bank down 1. 17 today. Low, single digit growth in both the revenue and operating cost in the Third Quarter. Also hit by all the fed taper talk, as well, in emerging markets. Deutsche bank posted a 98 drop in quarterly pretax profit. The german lender hit by 1. 2 billion increase in litigation provisions. Third quarter werings beat forecasts. But the bank warned of litigation continuing into next year. As a result, theyre going to defer their aim to achieve a return of equity of 15 by 2015. Theyre deferring that by a year. And the c said look, we want to try and be more transparent. We have been quite up front by our litigation issue in our litigation report and our language. We continue to expect litigation charges for the industry and for us. And a swiss regulator wants them to hold more add on. Thats really not to investors, they didnt expect in fact, the management said we didnt expect it. So huge regulatory risks, as well, to be still for they banks. The stock is down 6 today. Thats where we stand here in europe. Back to you, joe, becky. All right, ross. Thank you. When you make phone calls, are you nervous now . Do you think were lisping . Because we are. I guess your people over there, you guys tap everything, dont you . Im assuming we have a big place outs dchq, which is a huge listening like your nsa, a huge listening im assuming, as i pay my taxes, that theyre listening to everybody. Yes, i hope so. And who is that lady that what theyre not doing, im assuming, is taking notes. I think where we went wrong with the u. S. Administration, joe, they wrote it down that they were listen to go angela merkel. Thats what happens. Whos that lady that tells daniel craig what to do . M. She knows, right . Yes. Im just trying to get this straight. The germans, theyre rich. The germany at this point is it reminds me of cas casablanca. Germany has not earned its spying outrage with all of their arms dealings and all the anyway, we get involved in everything over here, ross. There was a report yesterday, annette talked about it out of frankfurt. There was one report in the german press that said it may because of hangovers from the laws post the war, it may not be illegal for the u. S. To spy on the to listen in on the german fwoft. So there is some debate about whether the u. S. Has broken any german law whatsoever. Right. Anytime you guys want you to stop funding nato and protecting your entire continent, you just let us know if you dont like the way things are going in terms of our subsidizing your security. You got caught. You cant write these things down. Thats the crime. All right. Thank you. Thank you, ross. Just be careful. I dont know what you you know, i read one of your conversations and im not sure what you were talking about in this, but it was a little dicey, ross. Apple reporting Quarterly Results better than wall street. But investors initially werent impressed. Brian white is the head of global is that it . Halloween is right around the corner. Profits like could you turn me into a mouse with me just sitting right here right somehow. Please do. Not going to do it on set. So i just read that last week when apple said it was going to start giving away some software, that thats what changed the growth margin outlook that people initially looked at that looked lower when, in fact, it was better if you include what they said last week. Is that what youre saying . Exactly. They had 150 basis points to close margins. So if you look at the new it yoox to be 1999 and they gave away from ios software, as well. That impacts margins. So margins peaked at 47. Then youve got a couple of quarters that were at 37. Because theres now samsung and competition. But now by staying flat, that means that theyre stemming the decline in margines and people should have probably not mroeted the stock on it. The stock was down 15 bucks until the margin comments were made and it reverts up. So the people figured out what was happening. Okay. Number two, is it a momentum stock now or a value stock . And the reason i ask this is if you have street straight quarters of declining profitability, declining earnlings, then you buy it not for momentum, do you . We buy it because its versus its peers. The way i look at apple is it really has growth characteristics but its a value stock. So think about it trading 2001. Okay. This is our favorite stock and it trades, s p is at 14 1 2. The multiple of apple versus s p since 2007 has contracted 60 . Its amazing. Its a multiple of apple relative to the s p contracted 60 since when . Thats growth rate since 2007. If the growth rate in that time is over 50 and the s p has been about 5. What is the waz complaining about . Did you read that . What should i be is there anything that i should be unhappy about with that . Should i worry that theyre going to be able to that everybody is such an attractive marketplace that everybody is shooting for him now . Is there anything to worry about . I think the stock is ready for liftoff. And the reason being, the profit cycle has bottomed in the june quarter. Second thing is entering a year of growth. So if you look at cps in fiscal 13 declines, were going to grow in fiscal 14. You have a lot of new products coming out, right . Ipad a is the biggest upgrade since the original ipad. Its a big deal. It only weighs a pound. 20 thinner. I think thats going to cause a massive, massive upgrade. Its a significant backlog. But, you happen, theres other innovations out there that, you know, havent been announced and we think in 2014, you know, were going to see new product categories and thats exciting. Okay. Im not even going to the company did not address any activist investors who shall remain nameless. They didnt even address i dont think im going to driveway it because im going to try to do my part to lower the Networks Coverage of that. I do have a question. Does icahn you just said it but the 25 run up, i wanted to ask this, do you think its due to carl icahn or do you think its due to people looking at the fundamental story of apple . I think its definitely helped. I dont think its the whole story. What weve seen is massive Cash Distribution starting with the announcement in april. Then we saw the profit cycle bottoming out. Carl icahn getting involved if is definitely a part of it. They didnt directly get involved. Appear sxl herbalife. He wants to be like miley cyrus. The more youre talking about him, the more he likes it. If he twerks, thats where i draw the line. I dont want to see anybody twerking. Did you see that someone went like a famous person went somewhere dressed in their Halloween Costume as miley cyrus. It was yesterday. It was a famous actress and her Halloween Costume was its probably one of the most popular Halloween Costumes. Miley cyrus . Its the wrecking ball out. She would probably think shes the biggest star. Shes probably not lying. I dont like the way things work any more. You with your outfit, youre trying to make a splash here, too. The profit cycle has bottomed. Were at black. You can turn him into a frog after we go to break here. A frog, a mouse. Thank you. When we come back, a mystery barge thats floating in the San Francisco bay and the possible connection to google. First, we have a squawk Sports News Story for you. Red sox beat the cardinals 31 last night in st. Louis. Boston now has a 32 lead in the world series. It can wrap up its third title in ten seasons as early as tomorrow night. Right now as we head to a break, the weather channels alex wallace joins us with the national forecast. Alex. Good morning to you. Were tracking this system in the middle of the country right now bringing some rain. Some snow to the Northern Tier of the country. You can see that moving through the dakotas into minnesota. Activity with steadier rain back down towards kansas city making the morning commute tougher. Its all thanks to this system moving its way eastbound with moisture flowing northward here. Thats going to aim in the development of showers and storms. Heavier rain out there, as well. Look at the bulls eye, 3 to 5 inches to the north. Sliding up north towards kansas city. And theres also the potential for severe weather, as well, today. From the panhandle of texas, working into oklahoma, we can see damaging winds and hail, that will be a risk. And then in the northeast, late in the week, that system will be approaching from the west and well see our rain chances creep up for thursday into friday. Thats your national forecast. More squawk box coming up next. Bny mellon combines Investment Management investment servicing, giving us unique insights which help us attract the industrys brightest minds who create powerful strategies for a countrys investments which are used to build new schools to build more bright minds. Invested in the world. Bny mellon. Time now for the executive edge. The first story this morning, google is being tied to a mysterious barge in the San Francisco bay. Cnet reports the search giant is almost certainly building a massive structure in plain sight, but behind tight security. It could be a Floating Data Center because google has a patent for a waterbased data center. Meantime wab local tv afillant in San Francisco is reporting that google is reporting a floating Market Center for google glass. A lot of mystery around this and people always like mystery peps. Its crowded, San Francisco. It would be hard to youd have to go way outside the city, probably. Anything google does is high tech. They hired ray curstwile to cure death, right . They are doing a lot of school stuff. Marketing or data center . A marketing center, if you want to create a splash, the way to do it would be to create it out in the middle quite a pun. I didnt think of that. A market would be different than a marketing center. I think marketing is what thats what i had read. A marketing center. So neither one of these, if theyre just if its security that there is a lot of security, but it probably just sounds like they might want a facility. They had the technology to do it and its no it doesnt mean that its like a really that theyre doing evil things. But its interesting. Its a mystery. We look at everything because they dont want to do anything evil, but then we think they might be doing evil. You know why theyve stopped building it . Why . Because they didnt have the permits. Thats according to one of these reports. Arent they essential for all the nsa stuff, too . Theyve got their tentacles everywhere. I dont think that theyre theyre part of the whole google is so powerful. I dont think that theyre but there are a lot of tech firms that are thats government had to but i think the item tech firms have been upset because they i cant tell you that. But also, when we spoke with mark andriesen, he was like, look, if you knew what was going on, you probably wouldnt be as concern, right . I dont know everything thats been attributed to what these companies are i dont think theyre doing. Is google the glasses . Yeah. Those are glasses. They dont want people spying on their technology. You would have to, like, row out there to look at their i think they did exactly what they wanted to do. They got all the free yank and i dont get to read a story because were finished . Yeah, because you talked to long. I like your other story, too. Which one . The story you were going to read. About facebook doesnt work or about gold . Gold is the story i liked. The Central Banks are starting to sell it. In the meantime, it is time for a break. When we come back, well talk about markets, the start of the twoday fed meeting and much more. [ male announcer ] the new twin turbo xts from cadillac. 410 available horses. Room for four. Twice the fun. When we made our commitment to the gulf, bp had two big goals help the gulf recover and learn from what happened so we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. Welcome back, everybody. The market closing at another high. The dow could rise upwards of 10 in 2014. Is this a time to stay bullish . Joining us right now is jason bersen. Rich steinberg, Global Asset Management president and chief Investment Officer and, david, why dont we start with you . Do you think this is a good time to be staying bullish, particularly if its because of what the fed is doing . Well, i certainly dont think the fed will be changing policy anytime soon. Theyve said its going to be any decision they make will be data dependant and the Economic Data will probably be relatively week in part because of the Government Shutdown for a while. When do you think they actually do begin tapering . Is it march or even later . They dont even know. Its going to depend on when the data comes back. I think march is the earliest, but it could well be later. Once the tapering begins, do you think its going to be a gradual thing or, you know, at this point the market is betting we wont hearing any news for quite some time. I think its quite likely it will be a modest tapering. And it may not be until the end of the year, maybe not until 2015. Rich, how about you . We have another situation where washington is going to be weighing in again in january or february. Does that concern you . Or do you think this time will be easier . I think its going to be easier. Unfortunately i have the greed deem yun on one shoulder and the fear monger on the other going through the issues that you and david are talking about. Thats whether or not, a, earnings coming through for next year and what multiple people are willing to pay. We had a 1700 target for this year and i think were probably too low. Yesterday im afraid to put money to work right now until we see what happens in washington, buckeye. The Economic News has been weak. Washington has been a bit ooh a mess. But earnings season has been coming in pretty strongly, rich. 70 of companies that have reported so far have beaten estimates, which is pretty mormal. About 67 of those have already talked down their Fourth Quarter. And we need to keep that in perspective. Earnings right now for next year are 121 is for the s p, which is up from 1110. That is a big move in a weak economy. We keep talking about tapering so much. Im blaming you. I have a quick question about christmas. Not you, to you, david. Im over here. Are you looking at me . Im looking right at you. I thought you were looking behind me. This obama care stuff, if youre paying 200 and all of a sudden youre going to be paying 1,000, is it enough people to where you say im cutting back on christmas or would the sequester cut back on christmas or would the shutdown or does it wealth affect for the stock market and the housing situation being better, does that offset that . I think it will be a modest christmas at best. They probably will be successful. How could that affect the normal person . The normal person shopping for the family at christmas isnt thinking about whether congress has another argument, are they . You know, if we have a debt default, and thats going to be all in the news in disease. If you work for a defense company, you might be right. Well, wa about obama . You dont think the sticker shock will affect . It will affect who its going to affect. Most people arent affected. We have over 300 Million People in the cup, so its not most people. We were looking at gas prices. Gas prices coming down, oil prices coming down, maybe thats offset some . Those are positive things. The wealth effect is positive, as well. But weve had modest Economic News. Why is that going to change . I think christmas will be okay, but not great. Rich, quick last work. Your price target for next year . It was 1780. But i think we may get to a 16 multiple and we may be at 1850 or so on the suspect. I have to reevaluate, to be honest with you. Thats a christmas present. 1850, whoa. Rich, thank you for joining us. David, thanks for coming in. Happy to be here. Coming up, steak and eggs and a taste of the american consumer, which we were just talking about. Well talk to the ceo, the president of the texas road house. But first, a couple of stocks to watch. Etna reporting mixed results. In fact, earnings were 3 cents short of estimates. But revenue was above and we got some news on sears. The company is considering separating two of its lands end and the sears auto center. The two could optimize their Capital Structures and pursue their own Strategic Options as independent operations. Sears says a lands end separation would likely not be separated as a sale, but as a transaction that would allow existing shareholders they built their entire strategy around lands end. Did you see any salespeople . Yep. Hello, hello, hello. The benefit. Okay. Still evaluating a strategy for sears another center. And the same announcement, a lot of news on sears. Reporting 3. 7 decline in comp sales for the 12 weeks ending october 26th. vo you are a business pro. Maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. Joaning us is scott calosi, president of texas road house. Any in new jersey . Theres some in queens i see. You need to add one, i think. Do you know yet, scott sfp. Well, good morning. We are actually in old bridge, new jersey, which is northern new jersey not too far from you guys. Youve got a lot of opportunity still. What, you got 300 locations in how many states . 40 states . Well, were just over 400 stores now in 48 states. 48 . 48 states and were actually going to get up to alaska, which will be our 49th state early next year. Where are you so youre only missing two states, then. But youre not in within driving distance of everyone. So i can get steak. Whats different about this steak or some outback or some other steakhouse . There used to be lone i forget. There were some other ones. Why would i go to your shop . Legendary food and Legendary Service is our mission statement. The legendary food is the first part of that. That begin wes our steaks. We hand cut all of our steaks every day in our restaurants. We use a great quality product. And we also both sear and grill our steaks. The seasonings we use our our steaks is all part of the differentiation we have versus outback and other players in the industry. Actually, i was looking at your website. I think maybe it needs to be updated. I dont know if they got all these locations or not. Youve got that obama care issue, people working on your website maybe. Im not sure. Tell me about the latest report. The samestore sales continue to grow pretty nicely. Yeah. Weve got a lot of momentum in sales and it leads us to be confidence in the things were working on are the right things from the guest perspective. The folks running our restaurants are doing an outstanding job in executing the mission of legendary food and Legendary Service each and every day. So for a long time, weve had a lot of momentum in our sales and were building a lot of stores, 25 to 30 restaurants next year. Were also continuing to grow internationally. We had a few more Stores Coming up in the middle east. Next year, as well. Same size of legendary food and Legendary Service missions, international, as well. So were very, very confident in the direction of our business. You know, ive seen all these have you seen these web people . They make money. You get immediate feedback on a place. I might go public, becky, because im hearing from viewers, texas road house from this guy, you need to try it, far better than outback or lone star. So im getting critiques as im sitting here with you, scott. Do you agree with this guy . Were very, very proud of the food. I think most people would be impressed if they understand how much work goes into our food each day. All of our recipes are from scratch. We even make crew tons from scratch. Really. Its a very impressive production. Where is the consumer right now in your we were trying to figure out, gas prices have come down, thats good. Other things, there are some headwinds, as well. Is it a five or a six on a scale of 1 to 10 . I think thats pretty accurate. Certainly weve seen since 2008, 2009, you know, a slow but steady improvement in unemployment, a slow but steady improvement in the Consumer Confidence index. And so, you know, for us, thats a little bit of a tailwind when youve got unemployment improving and Customer Confidence improving. So, you know, those things continue. Again, well feel very strong about our business. The biggest thing we worry about, quite frankly, is the strength of the economy and unemployment, specifically. I want to check it out. That might be too far. Youve got some texas red chili, too. I clicked on a dessert thing here. What would i get . Whats the best . Im planning out my menu if i come. Were not too big into dessert, actually. The main part of your meal is where youre going to get full, right . Thats right. Get that loaded sweet potato. Thats a little bit of potato and the dessert at the same time. Rattlesnake bites. Yumm. Not real rattlesnake. Taste like chicken. No, just kidding. I like in the summit millburn area of new jersey. Very welcome. Nice talking to you this morning. Just thinking of some places were on it. Route 10, route 22. Thanks. We are talking health care this morning and the problems with rollout. Up next, well take a look at how venture capitalists say they can help the process. Make money, too. Squawk box will be right back. 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So everyone goes home happy. More than a new interior lighting system. It is more than a hot stone massage. And more than your favorite scent infused into the cabin. And the highest expression of mercedesbenz. Introducing the 2014 sclass. The best or nothing. Afghanistan in 2009. On the u. S. S. Saratoga in 1982. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation because it offers a superior level of protection and because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Two of the nations Fastest Growing health care i. T. Firms announcing a partnership this morning with the goal to address some key operational issues that doctors face under the Health Care Reform laws. The cloud cares chairman and ceo and albert, lets talk first of all about the problem you two are trying to address by bringing this together. There was a recent survey with 5,000 u. S. Physicians who said 48 of them said they lacked the resources to accept new patients created under the aca. What can you do to help them . Yeah, that survey was conducted by my company care cloud. And to be honest, i was alarmed when i saw the results of that. Half of those physicians, half, 2,500 said they were completely unprepared to receive new patients under the Affordable Care act. So theres really no better representation of how care cloud brings solution to the market by replatforming health care. The Partnership Access to consumers to doctors apointments. If theres if theres an appointment that opens up, they can let people kind of see those on an as needed daybyday basis. Thats right. Care Cloud Systems are the scheduling systems in the office. The systems open up that schedule to allow better access to care for patients. Why did the doctors say they were unprepared . What was it they thought would keep them from accepting new patients . Doctors are struggling. Theyre struggle with reimbursement, the complexity of the industry. Its really hard for doctors to stay current with all of the legislation and requirements of the meaningful use stuff. And then the icd10 stuff. And its hard to run a small business. I guess thats why weve seen a lot of doctors in recent years who have been consolidating. Absolutely. 6, 10, or 20 or more physicians coming into groups because you have a front office that can take care of a lot of that stuff . Yeah, they get together and leverage better economies across the practices. In theory, it sounds like a great idea. But its going to require some upfront work from the physicians if they dont already have this set up on their screens . But thats where we come in, right. Care cloud is all about taking all that complexity away from the physicians, allowing them to practice medicine. Weve built the system as a platform. Its really easy as opposed to a lot of our competitors who are more close systems, its easy to wire in. Doctors dont have to worry about that much at all. How many doctors do you have right now . Were at about 4,000 docs and growing quickly. The largest Fastest Growing health care i. T. Company around. Were in all 50 states, becky. Wow. It sounds like a good idea for doctors to have somebody else running some of the frontend operations. Yes, yes, absolutely. Its a very complex industry. Probably as complex as it gets. Okay. Well, we want to thank you very much for coming in and joining us today. Thank you for having me. Appreciate your time. Coming up, Quarterly Results from pfizer. Plus, nbcs lisa myers with more on her investigation which found that the Obama Administration knew that millions would not be able to keep their Health Insurance. [ male announcer ] staying warm and dry has never been our priority. Our priority is, was and always will be serving you, the american people. So we improved Priority Mail flat rate to give you a more reliable way to ship. Now with tracking up to eleven scans, specified delivery dates, and free insurance up to 50 all for the same low rate. [ woman ] we are the United States postal service. [ man ] we are the United States postal service. [ male announcer ] and our priority is you. Go to usps. Com® and try it today. Signals from the fed. Markets will be listening for taper talk as the fomc gets ready to kick off a twoday meeting. The latest results from the cnbc fed survey are out and we have the data. Obama care under fire. A report by nbc news says that the Obama Administration knew that millions of americans could not keep their Health Insurance as far back as 2010. We hear from congressman Chris Van Hollen on this issue. And we look past halloween and get a Holiday Shopping update from the ceo of walmart u. S. As the second hour of squawk box begins right now. Good morning, everybody. Welcome back to squawk box here on cnbc. Im becky quick along with joe kernan. Andrew is on assignment today. In studio with us this morning sharing his thoughts on the market and more, david darst. Well hear from him in a moment. The futures this morning have been indicated slightly higher. The dow futures up by about 20 points, s p by two points, and this is coming after the s p hit another record high yesterday, up eight out of the last nine sessions. Take a look at some of our other headlines today. Fed policy makers begin a twoday meeting today. Its widely expected therell be no change to the feds bond buying program. Thats largely because of the expected economic effects of the Government Shutdown. Things are going to be a mess for a while, these numbers arent going to be clear for a while. Its quite a contrast from the last fed meeting when many expected a taper would begin and didnt. Nbc news reports that despite what the white house has been saying, the administration knew that millions of americans would not be able to keep their current plans under the Affordable Care law. The law enforces standards for insurers that many existing policies dont meet. And those consumers will have to buy new ones. The white house says that those numbers reflect normal turnover in the Insurance Market not caused by the law. But nbcs lisa myers that broke the story will be joining us a little bit later this hour. Also, bp beating analyst estimates, also raised the Quarterly Dividend by 5. 6 and announced plans to sell 10 billion in assets over the next two years, anticipates returning money to shareholders, as well. And bp shares higher this morning after the earnings and dividend news. And pfizer, the stock has slowly, steadily sickeningly made its way back to 30 a share. And the company is reporting results that are being received right now sort of, okay. The company is reported 58 cents, the estimate 68 cents a share for the year. The company says 215 to 220 is where it is forecasting its results versus a 217 estimate. Pfizer has been dealing with the lipitor patent expiration for years, obviously, because thats the biggest drug in the world. And at this point, the lipitor revenue down to 533 million it used to be billions of dollars a year obviously. Im also looking for the revenue number which makes a difference here. Do you see that . Just looking through the release right now. Yeah, weve got to actually go into the release. They havent flashed the revenue number. 12. 64 . The estimate was 12. 69. So thats pretty close. The yield on the stock is now 3 . And as i said it in the financial crisis got back down to about 12 a share in the multiyear high going back to the late 99 when it was one of the new nifty fifty. Was it at 60 . 2. 7 times book right now. So the stock at 3. 1 yield is nice. This guy ian reid is cleaning house. I think you can. 59 billion is the annual sales. 59 billion. They had the largest writedown in corporate history before the aol time warner writedown, 300 billion was the Warner Lambert pharmaceuticals. Remember when they bought Warner Lambert . And that was a big writedown years ago. You have david darst. Oh, lets bring on david of Morgan Stanley. Orange tie for halloween. I like your orange tie. I wasnt thinking about it for halloween, but im glad i did. I was. This is not a pumpkin. This is something else. A decorated tiny miniature gourd. Its a miniature gourd. Thats right. We thought it would dress up the set here on halloween week. You know, you have mine has a little dog on it. I cant tell whether thats its a friendly canine. Is that the front of the dog or the back of the dog . Do you . Huh . Why would you give me the back . Its a friendly canine. Can i name this . That is a very frisky, friendly dog. I want to name this al gourd. Do you think thats a good name . I think its a phenomenal name. Really . Well, im going to put my gourd in a lock box. Anyway, so you would buy pfizer here . I think you could buy pfizer here. And i think youre going to see with all of these tech stocks. You see the social messaging services. You see these internet retailers, advertising, online you saw the article in the journal yesterday, becky and joe that showed four companies, two of them are going public with no earnings and two are going public with no sales, joe. And this is harkening back to frothier times. Really . We think theyll get frothier, mind you. This Party Started at 6 00 and its going to end at midnight and its probably 10 00. It will get wilder what time . At night. 6 00 in the evening. Lets do half way through the th this world series. Its world series. What inning is it . Youve got its world series, sixth inning. We havent had the seventh Inning Stretch yet. Its sixth inning. It will get a little bit more frothy. 1,800 on the s p . Adam parkers estimate for next year. Adam parker. You still seriously . Im quoting our u. S. Equity strategist. Hes been bearish for four years. He capitulated who cares . Who cares . You know, let me tell you, hes looking for 118. Look, i dont want to hear what hes looking for. Fine, okay, im giving you our u. S. Equity why was he bearish three years ago . Margins he thought were excessive. Theyve stayed high as companies have made due. Markets up 50 from where he was bearish. Thats right. And youre still paying him for his analysis . He does good statistical work, sector work. Hes good for sectors. Youve got to know what the person is good for. Its like an art expert. Hes good for certain periods, renaissance art, okay, and you use him for that. You dont use him for the whole thing. And listen i stopped listening. Anyway. All right. So as far as the earnings season, what have you thought . I have been unimpressed with the revenues. Okay, the revenue beats as you know have been Something Like 54 , the average longterm for the beats is 61 . And let me tell you, revenues this year are supposed to grow 2 , can you believe that . The markets up so much, 24 that with Revenue Growth this year for the United States, s p 500, only 2 . Last year, it was 4 . Half the Revenue Growth. Theyre squeezing more and more out of what they have. Existing workers. It ties back to what the fed has been concerned about. About inflation being lower than they would like on their targets. If you start worrying about a deflationary environment, revenue would be one of the places you would see that. Our friend mr. Bernanke, his whole academic history and career has been built on as you know deflation in the u. S. And in japan. Yeah. And what you had there was ha supplyinduced deflation morphing into a demand shortfall deflation. Supply induced is where you have asia, where you have technology, where you have globalization causing the decline in prices. Its similar to the United States from 1871 to 1896. 25 years, the prices declined in the United States by 1. 5 per year. That is a good kind of deflation. Theres pernicious deflation, which is when you have demand shortfall. And a couple goes into a Department Store and say lets buy a refrigerator, one spouse says lets wait, they go back a year later its 10 cheaper and they say lets wait again. Thats the kind that janet yellen, ben bernanke are worried about. Youre going with bernanke. Youre with the bernanke pronouncer. As a southerner, as a tennessee boy and hes a South Carolina boy. Is that you know his middle name ben s. Bernanke. His middle name is shelome, means peace. Its okay to call him bernanke, you dont think its wrong. You think bernanke because we have guys in chicago who say bernakkee. We drive to florida and people say yall need how much of the move from, you know, to these new highs in the s p. How much of it is what you were talking about and how much of it is qe . Qe is is responsible the Government Shutdown. How much of the move up is qe . Is 85 billion a month and sort of an you know 2 3 to 3 4. Its not warranted. Thats correct. This party is artificial. This party is i hate to call it A Harry Potter market. This is a this is a dream world market in which its not Revenue Growth. Could have been right about all of this except for the fed has trumped all of that. Trumped all of that. I remember what adam was saying now. Adam was saying that Profit Margins had peaked. And when Profit Margins peaked in the past with companies, a lot of times thats time to get negative. Unfortunately, you needed to put all of your eggs on the fed. And dont fight the fed, took over everything. The market sometimes follows profits and sometimes it doesnt follow profits, thats what youve got to always remember. Sometimes it works, its like its like catch 22. Now, there was an article in the wall street journal last week, 90 million americans not working. And this to me is the great tragedy. Theres 144 million americans working, 90 Million People above 16 years of age are basically have left the labor force. Retired did you say theres more people receiving some type of government help than fulltime employees . Yeah 144 million and higher number than that receiving government assistance. Yeah. Disability benefits, food stamps. It wasnt social security, theyre talking about stuff thats been growing. This is not critical. These people want to be productive. They do, i know. We want to go back to a country of achieving, not receiving. The best Entitlement Program is a job. Ive got these new expressions. I love this. Isnt the best Entitlement Program a job . Corporate executives sitting on 1. 7 trillion of cash. I know. They could bring it back here. Microsoft bought skype last year for 8 billion as a secret way to bring money back here. I know. And its crazy. They paid for it with overseas cash. Its a tremendous tragedy that companies are not hiring and building out there, building out their labor force. Walking away from me and i dont appreciate it. I dont know ill get a leash. Come back come here, boy. Al gourd. All right. Lets talk about apple, the company did Beat Estimates on the top and bottom line selling nearly 34 million iphones for the quarter. Lets get more reaction to the results. Joining us is chris casso. Chris, you were happy with what you heard last night from apple. There were some initial concerns and initial selloff. What did you see you liked . Well, the numbers were good for the reported quarter. They beat on both the top line and margins for the September Quarter which theyd already preannounced. It was above the top end of that range. The guidance for the revenue guidance for the december quarter was also ahead of analysts estimates. The one concern that came out immediately after the report was the gross margin guidance for december. Which was a little below where the street had them for december. What they clarified on the call was that there was an accounting change embedded in that guidance. The margin guidance good, as well. What do you expect for the Holiday Season . This is going to be a key . Joe brought up some of the concerns if consumers arent feeling confident, maybe they pull in a little bit and dont spend quite as much this Holiday Season. What do you expect to see with apple . Right. One of the things apple has going for it going into the holidays, their flagship product, the 5s is pretty well sold out right now. Healthy backlog and they talked about that on the call. Really all they need is the trends to continue. And so far, its pretty good. They also have a new ipad lineup coming out. And, you know, obviously well have to see how that goes. I think theyre in pretty good shape. You rereiterated your positive rating and your price target of 625. How do you get there . Lo and really forward now, and upgrade the stock about a month ago after the details came through from the 5s. And i was worried that wasnt going to be received well by consumers and looks like it has. When i look into next year, theres a bigger product cycle for next years iphone 6. And the hole in the lineup is the screen size. They dont have a larger screen size phone. I think you get that next year and i think thats what moves apple to the next level. What about china mobile . Right. Thats something they dont talk about that on the call because it hasnt happened yet. I believe that the production in the supply chain gets started right about now. And that right now is the largest carrier that in the world that doesnt have the iphone right now. Chinas new years is the big holiday over there and that provides a good catalyst and helps offset some of the seasonality, as well. Chris, the stock by any metric is still cheap. But when youre doing 55 billion, this is apple that five years ago that if you told someone they do 55 billion revenues in a quarter. Its like i think people are just worried that no company can sustain this incredible performance. So thats the disconnect between trading at, you know, 60 of the multiple of everyone else. Is there something looming where they just get eaten up by other people innovate and its like theyre on a treadmill and got to keep running faster and faster . I mean, this is technology. So things change very quickly. You look out a couple years into the future, who knows. At least what you can say now, it was a valid concern about the Android Marketplace was catching up to them. But, what i think what they showed this year when you contrast to what happened with the iphone 5s against samsungs flagship phone, the galaxy s4, that didnt sell as well as they thought. At least for right now, you know, the eco system is very strong and they have the momentum. Looks good for now. A couple years into the future, its always hard to tell. Chris. No. Thank you for joining us today. Thank you. And coming up, nbc, our Sister Network is reporting that the Obama Administration knew that millions of people would not be able to keep their Health Insurance. Nbcs lisa myers joins us next with this story. God bless her, what a scoop. And the fed ready to begin a twoday fomc meeting. What can we expect . Answers from cnbcs exclusive fed survey next. Nbc is reporting that the Obama Administration knew that millions would not be able to keep their Health Insurance as the Affordable Care act took hold. Lisa myers broke the story last night and joins us now with more. And you even, lisa, you probably. Got it from two sources. And you had four really i would do that, by the way, in this case. Great work. Thank you. Joe, basically so we dont scare a lot of people. The 80 of people who get their insurance through their employers or through medicaid or medicare are largely not significantly impacted by this law. What my story is talking about is the 14 Million People who get their policies through individual insurance. They are the ones who have been getting these letters that either cancel their policies or say, look, your policy doesnt meet the requirements of the new law and therefore we have to substitute a better policy with more benefits and often a higher price. So these two groups of people are finding they cannot keep their insurance even if they like it which is what the president promised. We tried to get a sense of how large a scope that was. And i went back to our investigative team. Went back to these regulations that were issued back in 2010 which went to the issue of grandfathering, which is what this comes down to. And it indicates that simply because of the churn that tends to take place in the individual market that they already knew that 40 to 67 of folks in that market were not going to be able to meet the rules for grandfathering. So they knew that a substantial part of the individual market could not meet the test they were laying out for being able to keep the insurance if they wanted it. Now, so its basically a marketing problem. If the president had said most of you, the vast majority of you will be able to keep your insurance if you want it, hed be fine, but hes been saying you can keep your insurance if you like it no matter what, period. But, lisa, in the point we made earlier was that when i listen to the president say that, what i was worried about was all the private was all the employer sponsored plans that as time goes by will become obsolete or employers will decide im going to farm this out to obama care. So i thought it was disenjdisin thats not taking into account your employer might end the plan there. And that will change this is a whole new area that we i mean, i can add these millions on to these other millions and i dont know. I know theres sometimes we dont want to overstate a story, but this is this is significant. And we werent we trying to sign up 7 million uninsured. Wasnt that the total we were trying to . Thats the goal, right . 7 million uninsured . Oh, no, i think the number of uninsured that this was supposed to add. Trying to sign up through the exchanges, that number initially. Right. Initially. This law is supposed to provide Health Insurance too. I think its up to 30 Million People. All of these people are disrupted. This is a bigger number than the people trying to sign up in the first phase, right . Well, we dont know the absolute numbers. The experts i spoke with extrapolated that they their best estimate is that 50 to 75 of those in the individual market will not be able to keep the policies they have either because its canceled or because it doesnt meet the test under obama care and therefore they have to buy a richer policy. Thats the best estimate we will be able to find. But this is going to happen over a period of months. Its not going to happen right away. Its going to be as peoples policies become due, they will get these notices. And one of the things we found in talking to people is that even people who were very much for obama care and believe it has really good elements to it, especially the protection on preexisting conditions and employer, Insurance Company not being able to drop you, they were shocked that they were getting these notices. Lisa go ahead, sorry. No, go ahead. One of the things ive heard from people reaching out today is, well, these cancellations are because the health care didnt provide basic coverage, didnt provide decent coverage. And i guess, can you tell us a little bit more about whats required . It was my understanding if it didnt offer prenatal and Maternity Care, you would be canceled, is that correct . Well, yes. One of the issues the obama care requires that you provide a package of like ten basic benefits that includes Maternity Care, Mental Health care, a number of things that a lot of folks dont have in their policies. And its absolutely true what the Administration Says that a lot of people in the individual market have tried to keep their costs down by buying bare bones insurance and getting just the coverage they need. Are almost selfinsuring to some extent unless they have a catastrophic illness. The administration would argue and does argue those who would lose their policies in this market are going to get a much better policy with better protection. Now, some of the folks i talked to said, look, id like to make that decision. I really dont want the government making it for me. Yeah, i understand the math behind it. The math behind it is that you need young, Healthy People to be paying so that older people are taken care of. And older people that dont need Maternity Care to be paying for earn too. How it was sold, you can keep your plan if you like it, but it doesnt take into account that youre not going to be able to from a math perspective. What if youre not eligible for a subsidy and you wanted a 200 a month plan not a 1,000 a month plan . Well, there are a small number of people who will be able to meet millions of people will be able to meet that individual grandfathering requirement. There wont be many based on what ive heard. But there will be a sliver of those who will be grandfathered. But by and large, if you have that kind of policy, youre going to have to buy Something Better if not today in the very near future. And you may have different doctors. And as you say, these are people that were going to give it, you know, that probably voted for the president and were positive about obama care. And now theyre, you know, now theyre seeing that when it affects them directly, well see what happens. This is not going to be a big help for a current Public Opinion on those in favor of or opposed to obama care, especially with the website glitches. Joe, i think youre absolutely right when you bring up the longterm what may happen was some employer plans. Thats not even factored in here. The other thing i was seeing. And we also under the impression this will really help the budget save 1 billion over ten years. Im wondering whether we have to change some of those calculations now knowing that a lot of people are going to have to spend more money to keep or to have a plan, arent they . Isnt it going to be more expensive than we thought . Or not yet . Well, i think a lot of experts have always suspected or always found it difficult to believe that you could insure that many more people and actually reduce the overall costs to the government. Longterm. But we cant tell how thats going to play out. If were able to bend the curve on health care costs, you know, maybe what the administration projects is possible. But as you know, there are a lot of skeptics. Okay. Thank you for appearing this morning with us. We appreciate it. You bet. Nice to be with you guys. Great to be with you. Thank you. Just a month ago, fed taper talk dominated the markets, but how things have changed in just a months time. Steve liesman with the latest cnbc fed survey. And is taper ever going to happen according to what these people think, steve . Yes, eventually. But far off into next year, becky. This is a big change in our survey here. As we do every month when we do this, we have the september on the top and the last survey and this is the new survey. Lets start off with when the tapers going to happen. The average before in the prior survey, october, sorry was november 2013. Now take a look, all the way over here from the right. April is now the average month for when the market believes taper will begin. However, lets move on now, when will they stop qe . It had been august 2014. Moving on now, youve got to go all the way to december 2014 when they believe quantitative easing will stop. Moving on to when the first fed hike happened at the funds rate, still in the Second Quarter of 2015. No change to that, that gap between stopping qe and hiking the funds rate. Lets take a step back and look at the whole thing. The taper moved ahead, stopping qe moved ahead. I dont know where exactly the market draws this information from. But ultimately what this means is the taper doesnt start until what is probably Janet Yellens first meeting. So the december meeting, the january meeting, all that comes through todays meeting. No taper until then. Lets take a look at what happens to the amounts of quantitative easing. Now we finally got there. A cool trillion expected this year for total purchases by the Federal Reserve under quantitative easing. This is the big change here. 382 billion was the average expected for 2014, almost doubled it. Now were at 646 billion expected next year. I think that numbers going to come up if the amount theyre expecting next year with the length of time is out there. Itd have to be a big reduction or big taper. But thats a big change. I want to show you just the time line on this thing as weve been surveying it. What you see is this number had been very steady at that 370 number through all of our surveys and now you can see a big jumpup to 646 billion. Heres some of the commentary out there. Saying the jobs report, quote, virtually guarantees the fed wont taper qe until 2014. Guys, i will tell you 40 of our guys dont think we start until 2015. Theyre saying unfortunately the economy will look similar to 14. Guys, you can read all about the survey online, cnbc. Com, its all right there. Back at 8 00, ill come back with what the market thinks the effect of the shutdown and the debt ceiling debate had on the economy and expectations for the next debate in january and february. Makes me think that maybe peter fisher is right. He was our guest host yesterday and suggested that the only surprise left would be if the fed actually acted sooner than people have now set up on these deadlines. Such that the its so extended out there now. It is true, becky. And in graphic representation, liesman, to me, it looks like tightening. What do you mean . Goes down. Looks like theyre tightening. Its tightening. And the other thing is, steve, 8 out of 9 days the s ps higher, im on board now. I want to drive that car in every week and say, fill her up. Fill her up with gas because i dont want it to ever end. I want to run on qe. We have a problem of june the fed and the markets being out of sync. September again. I dont know that the market and the fed are in sync on this timetable. We could have another major disruption when the fed starts to talk again. Were setting ourselves up for. Thats what im concerned about. Thank you. Talk to you later. Still to come this morning on squawk box, halloween may be days away, but it is really christmas that the nations retailers are worried about right now. Holiday outlook from the ceo of walmart u. S. Norfolk southern whats your function . Hooking up the country helping business run trains they haul everything, safely and on time. Tracks they connect the factories built along the lines. And that means jobs, lots of people, making lots and lots of things. Lets get your business rolling now, everybody sing. Norfolk southern whats your function . Helping this big country move ahead as one Norfolk Southern hows that function . [ male announcer ] once in a while, everything falls into perfect harmony. [ engine revs ] and you find yourself in exactly the right place at the right time. Just be sure youre in the right car when it happens. The 2014 cclass sports sedan. Power, performance and style in total alignment. 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Those dreams, theres just no way were going to let them die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. Thats what they can do with you. Thats how ameriprise puts more within reach. Welcome back, everyone. According to the National Retail federation, 40 of u. S. Shoppers say they have already begun shopping for the Holiday Season. Our Courtney Reagan with a special guest on the retail front lines. Courtney . Thats exactly right. Good morning to you, becky, i am here in new york city, joined by walmart u. S. Ceo bill simon. Thank you so much for being with us here today, bill. You have a big announcement to make. Walmart has made a number of announcements involving associate initiatives and programs over the past year. Certainly labor has been in the headlines, media, main street, protest, youre no stranger to talking about it. Whats the announcement youre making today. Thank you for having me, by the way. Its terrific to be with you. This is an interesting company, walmart is a place where career progression is important to us. And its a company of opportunity. So today were out and celebrating the promotions of our associates. In any year, and this year in particular, were going to promote over 160,000 people. And as we start to get ready to, you know, kick off the holiday selling season. Im glad to hear a lot of people have already shopped. Its terrific. Were out in 16 cities around the country making promotions for our associates. These are on the spot promotions, but theyre not kind of like winning the lottery. Theyre wellearned, welldeserved, gone through the process. And i get the privilege of showing up today and letting them know theyre being promoted. Why now . You also were hiring 55,000 seasonal associates. Youre right at the end of the year. Obama care to think about too. Why are you making these announcements now . Is it correcting past mistakes . Whats it about . No, at the beginning of the year, i made a speech at the National Federal retail federation. And the importance of our jobs and this year were going to be out and talking and defending our jobs. Were proud of what we offer. Were proud of the opportunity that we provide our associates the opportunity to start and join our Company Really at any career point in their life whether it be, you know, as a teenager or a Senior Citizen and the opportunity to progress. And with the promotions that are available, over 400 promotions a day, we just want to get out and celebrate. We hear from our associates a lot and they ask us, you know, to get out there and defend their jobs and thats what were doing. Were talking about it and celebrating their success. Theres a lot of them. Over 1. 3 million jobs in the u. S. With just walmart alone. Thats right. If we could talk a little bit about the consumer, walmart is the Worlds Largest retailer here and in the United States. You have a very good Cross Section of consumers, albeit, many of the lower income. How do you think they feel about what happened in washington with the shutdown . Did that impact Consumer Sentiment and confidence . And what happens if we go through this all over again in january and february . You know, i continue to be amazed and impressed by the resilience of the customer and consumer, despite the uncertainty thats in the economy. They figure out how to adapt and adjust and support their families. And thats encouraging. They do hear and they do understand for the most part whats happening in washington and theyre not happy about it. That sort of level of conversation and combativeness in washington creates uncertainty in the economy and from a consumers perspective as well as a business perspective, certainty is very important and will free up the their thinking for the Holiday Season. So we were pleased that at least for the time being things were settled and the government was back and operating and hopefully well have a Great Holiday selling season and hopefully washington will get it solved after the first of the year. You used that word resilient, does that mean sales were not impacted by consumers being concerned . Sales, you know, we could tell. We could tell particularly, you know, around military bases and around the, you know, the areas that have heavy government employment. Also, you know, you sort of see this general lack of confidence in the economy during the shutdown. And so were pleased that the governments back up and running. We think its going to be good for the holiday. If we can talk a little bit about the holiday and programs youve announced. Couple tradein programs with the smartphones and tablets. What are you able to tell us about the success of the program or those programs or what it tells you about what the consumers feeling about Holiday Spending . Mobile devices are as hot as they can be and a tradein program has allowed customers the opportunity to trade up. And theyve been excited about it and taking great advantage of it. The holiday selling season is really an exciting time as we were talking about in retail. Its sort of the super bowl in our teams around the country are geared up for it. We bought deep for the holiday selling season. Black fridays going to be an exciting time and were going to have some really great pricing, best pricing of the season and itll be the best black friday ever. All right. I believe becky has a question for you. Courtney, thank you. Weve been watching prices at the pump at the gasoline pump come down pretty substantially. And i just wonder how immediately that shows up in your sales and what kind of an impact . If gasoline comes down by 20 cents, what does that mean for walmart . Typically we see the customer respond to gas prices. Gas prices and employment are two are the most important correlated factors. This ones a little different. With the tail end of gas prices offset by the head winds of the payroll tax change at the beginning of the year, the upcoming snap benefits changes on the first of november, i think it remains to be seen how its going to impact our sales. Its not something showing up in sales to this point . Hard to say. We have our Earnings Release coming up in a couple of weeks, really cant get into the details of it. Okay. Thank you very much. My pleasure. Thank you so much for joining us, mr. Simon. Really appreciate you being with us. And im sure were going to tap into you again as we approach christmas. Appreciate it. Thank you. Up next, nbc reporting that despite the president s reassurance that americans i guess it was an assurance initially and then it became a reassurance like a dozen times. People who like their Health Insurance would be able to keep it. The administration didnt know as long as three years ago that wouldnt be the case. Plus, where congress is on the budget perhaps more importantly with mr. Van hollen. Well be right back. Did the Government Shutdown and debt ceiling debacle leave a bad taste in your mouth . Were asking corporate america, investors and political thinkers what washington needs to do to avoid another debt debacle. Can a grand bargain be reached . Or are we headed for another debt ceiling doomsday . Daily analysis and fresh ideas starting at 6 00 a. M. Eastern time daily. Watch squawk box and tell washington to rise above and win us back. Only on cnbc. Bny mellon combines Investment Management investment servicing, giving us unique insights which help us attract the industrys brightest minds who create powerful strategies for a countrys investments which are used to build new schools to build more bright minds. Invested in the world. Bny mellon. Afghanistan in 2009. On the u. S. S. Saratoga in 1982. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation because it offers a superior level of protection and because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. The house and the senate are meeting this week on the budget. Meanwhile, nbc news says the Obama Administration knew that obama care would force people out of their current coverage. Joining us now, congressman Chris Van Hollen, Ranking Member of the house budget committee. Its chris, its a huge undertaking. And, you know, i know that with the best of intentions, all these things were possible when you try and do Something Like this. You werent around either. I dont remember when lbj introduced a lot of the programs, but they had to have growing pains too. Medicare part the prescription drug, that had some pains too. But they all seem to be happening at once. The glitch and now this. This seems even worse than normal. Would you characterize it otherwise . Are you talking about the rollout of the exchanges . Or are you talking about the most recent nbc report . Are you talking about the whole thing . Thats my point. Thats the problem. Pick your problem. Well pick your poison. Well, a couple things. First of all, as you know, a lot of the Affordable Care act was already in place before october 1st. All the provisions that helped protect, preexisting conditions, also helps seniors on medicare. Those are in place, theyre working very, very well. In terms of the rollout of the exchange, people have been very clear, its unacceptable in terms of the problem that had been encountered. Our focus is to get to the bottom of this as quickly as possible so that we can make sure people can access this product. And i do think the fact that over 20 million americans have visited the website is a clear indication that theres a huge demand for affordable Health Insurance. How about the latest thing that were reporting today that you saw how many times the president said if you like your plan, your can keep it. And as long as three years ago, the administration the white house knew that simply wasnt true. You know, i havent had a chance to dig deeply into the nbc report. The one thing i do know and understand is that the issues were talking about are primarily, first of all, on the individual market. Right. And as you know, long before the Affordable Care act, the individual market was a very turbulent market. You buy Health Policies at 12 months at a time. There is no guarantee. There was no guarantee before the Affordable Care act that you would be able to get the same policy, the same premiums. We all ran throughout the early 2000s about people getting those individual policies in huge price spikes. So first of all, that market, theres never been a guarantee that youre going to get a product. Secondly, it is the case that as a result of the Affordable Care act, there are some minimum standards that apply to the kind of policies that can be offered on the individual market and others. And some of the policies that had been offered no longer qualify. And i will say and i think you know this, many folks who bought those earlier policies later found out they didnt provide any of the coverage that they thought they had, which is why those Consumer Protections were put in place. And the last point i would make is about half of those folks who were getting those policy changes on the individual market will, in fact, qualify for the tax credits and therefore their overall costs will be no higher. Youre not familiar with the report and havent dug deeply into it, but four perfect points refuting the report. I love you guys. I know when you come on that youre sandbagging. No, no, i read the story, but i havent had my guys dig into it yet. You totally refuted i guess, congressman, you were right on all of those points. But youre still talking about not a few isolated incidences. People not only going to get tossed off but end up paying more. Talking about millions of people, not a few isolated incidences. Youre right, not all the coverage was there before, but if it didnt offer Something Like Maternity Care and youre a 62yearold, thats probably not huge not a huge thing that makes yo u feel good about thes issues. If youre going from 200 to 1,200 a month. No, one of the ways you allow coverage for people with preexisting conditions, you get everybody in the pool. That means older people and younger people. And it is the case as a result of that, there are going to be some people who are paying a little bit more. But the whole purpose of the tax credits was to help smooth that impact. Right. Lets talk. Anything going on between now and like three months from now . I mean, can you have you talked to anyone . Are you whats going to happen . Ive got some ideas for you. Will you call me . You know, i will do that. I think you guys should do some Corporate Tax reform. The president said he would do that before. Why dont we get together on that . Thats not even dont even. Well do entitlements eventually, but just for jobs, just for jobs. Lets do Corporate Tax reform where it gets a little bit easier and maybe free up some of the money that the corporations have. Will you do that for me . Sure. I would like to do Corporate Tax reform. The question there is whether you can really do Corporate Tax reform in this relatively short period of time. You may be able to, at least, set up the parameters for the conversation. And that would be progress if people could agree on a framework for Corporate Tax reform. Anything going on, chris . Have you talked to its not going to i really dont think theres any appetite for it on the right at this point to i think they want to get something done with you guys. This is an opportunity. I think it is an opportunity. And as to whether anythings happened, there have been some conversations. The first formal meeting of the Conference Committee will be tomorrow. My guess ask that will be primarily people offering their own perspectives on the budget and the way forward. And it will be after that that people really sit down and begin the negotiations. Look, i do hope that we can find a way to at least take some, you know, small medium steps forward to at least instill a little bit more confidence. You talked earlier with some folks about the uncertainty thats out there in the country and the economy. And i would hope that at the very least we put down the clubs and the threats of Government Shutdown and default and try to make some progress in some of these areas. Corporate tax reform is an area that im certainly open to discussion. Yeah. And weve got to go, chris. But youve got the right doesnt want the defense cuts and the sequester. Theres room to maneuver. But weve got to go. So you just say it was my idea when you bring give me a call. Well talk. All right. Thank you, congressman. Appreciate it. Thank you. When we come back, Apple Earnings are in focus. What the tech giant is saying about sale trends, the Holiday Season and much more. Well ask an analyst what hes expecting. Squawk box will be right back. No, thank you. We know youre always looking for the best fill price. And walk limit automatically tries to find it for you. Just set your start and end price. And let it do its thing. Wow, more fan mail. My uncle wanted to say thanks for idea hub. He loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. [ male announcer ] open an account and get a 150 amazon. Com gift card. Call 18882800149 now. Optionsxpress by charles schwab. Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. Okay, who helps you focus on your recovery . Yo, yo, yo. Aflac. Wow. [ under his breath ] that was horrible. Pays you cash when youre sick or hurt . [ japanese accent ] aflac. Love it. 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Dont feel trapped with the ally raise your rate cd. Ally bank. Your money needs an ally. Ido more with less with buless energy. Hp is helping ups do just that. Soon, the worlds most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. Multiply that across over a thousand locations, and theyll provide the same benefit to the environment as over 60,000 trees. Thats a trend we can all get behind. Apples profits and margins sliding in the quarter. Well talk to an analyst about the challenges for apple in the coming Holiday Season. Seat upgrades and charges are on track to bring in record revenue this year. Im a person who has feelings and all i have to do is do what i want to do and all i want to do is hold on to my bag and not listen to you. How your travel dollars are being spent. Remember this . If youve got Health Insurance, you like your doctor, you like your plan, you can keep your doctor, you can keep your plan. If you like your doctor or health care plan, you can keep it. Nbcs lisa myers is reporting that the Obama Administration has known for three years that millions of americans would receive cancellation letters under the new health law. Plus, breaking data on the consumer and inflation, the third hour of squawk box begins right now. Welcome back to squawk box on cnbc. Andrew ross sorkin is off today and in his chair our guest host david darst, chief investment strategist at Morgan Stanley Wealth Management. More from david still ahead. He brought me a halloween gift, a gourd that ive named al gourd. And its got a dog on it, which he tells me is the actually the dog is coming towards me. Its a dog coming towards you. I thought the dog was leaving. But anyway, and there is lucky, Carl Quintanillas dog. I know what youre thinking, but its okay, its a small apartment. Theres a reason. Sweet puppy. Its closer to a rodent than a dog. I have a designer dog too, but i have a German Shepherd that weighs 100 pounds also to offset the little designer dog. All right. All right. Nbc news is reporting that millions of americans wont be able to keep their Current Health care plan under the Affordable Care act and that the Obama Administration has known about it for more than three years. The law enforces standards for insurers that many existing policies dont meet and consumers with those plans will have to buy new ones. The white house says those numbers reflect normal turnover in the Insurance Market that is not caused by the law. But regulations issued by the department of health and Human Services prevents plans that changed after march of 2010 from being grandfathered into the new system. Lisa myers broke the story and spoke to us in the last hour. Simply because of the churn that tends to take place in the individual market, that they already knew that 40 to 67 of the folks in that market were not going to be able to meet the rules for grandfathering. So they knew that a substantial part of the individual market could not meet the test they were laying out for being able to keep the insurance if they wanted it. Now, so its basically a marketing problem. If the president had said most of you the vast majority of you will be able to keep your insurance if you want it, hed be fine. But hes been saying you can keep your insurance if you like it no matter what, period. We will bring you more on this story throughout the day. See, things do change on a yearly basis. Yeah. But when your policy would change before you could still have that same plan, and thats why theyre being a little bit disingenuous here you can choose whether to take the premium or lower but you were grandfathered if there wasnt something happening every year. But they knew it was going to happen every year and youre no longer grandfathered and youre out. Out of that plan. You know, at this point they should come clean. The president started making that promise back in devine. It wasnt until 2010 that the changes were put in. He was still making the promise three years later. Anyway, some news on sears this morning. Companys considering separating two of the businesses. Lands end and sears auto center. The retailer says the two could optimize their structures and pursue their options as independent operations. Reported a 3. 7 decline for the quarter. Revenue came in line with expectations. Also raised its dividend by 5. 6 plans so sell 10. 6 billion in assets over the next two years. Anticipates returning money to shareholders, as well. And aetna came in with mixed results. The earnings were 3 cents short of expectations but the revenue beat the consensus. Theyre citing cuts in the u. S. Government funding for medicare that hurt its private medicare business. That was a similar story from both United Health and from well point. Across the board. Really changed the medical loss rainbow push whi loss ratio. It was 82. 5 in the medicare business and rose to 87. 8 because of medicare cuts looks like. Yeah, and overall, medical loss ratio went from 80. 1 . Probably reflected there. Yeah. Yeah. Okay. But medical costs were lower in its commercial business. But that didnt help. Also, take a look at shares of nokia. Reported a small profit. Analysts had been expecting a loss and that stocks up by better than 5. 5 . Look at that since the last couple of months. Who wouldve bought it at 3 or 4 . Lets get a check on the markets this morning. 8 out of 9 days the s ps been up, the dows indicated up again and so is the s p. Were closing in on is it possible . Remember 1750 seemed just no way we thought the s p would hit 1750. A lot of the bulls had that as a price target and now were 1762, another 3, 1765, you think we can go to 1800. We talked about apple earlier in the year, stock is up 30 , joe, since the low, below 400. You want to talk apple . We like apple as a big member of the s p. Apple slightly higher in premarket trading now after the Company Reported net Quarterly Results. Well get the opinion after a guy who follows it. Telecom and Technology Analyst at btig in new york. Apple moves around a lot, walter. Last night, i dont know whether you should trust people that maybe werent why did they sell it . They sold it because the margin outlook looked like it was bt necessarily positive. But if you knew all the if you really knew what was going on, it was because of what they announced last week with some of the Free Software and the margin outlook was good. Is that how you view it . You didnt know how the company was going to account for the Free Software. It was a change that no one knew about until they addressed it on the call. The stock sold off because the guidance for the margin wasnt as positive as some people would hope. If they gave a little more color on the call youd hate to sell it to bottom it out yesterday based on something you didnt understand, though. Maybe you shouldnt be selling right off earnings. Everything else, even though earnings were down from last year and the Third Quarter in a row they were down from the previous year, still a really good report, right . It was still good. The ipad number was interesting because it wasnt down sequentially. What weve seen before is as products age, you see this sequential decline, they got a huge purchase from the education segment and now they have new products coming out. That should help that line better. And obviously the iphones were a little bit better than a lot of people expected. Overall, a good report. Keep asking everyone this. Is it a momentum stock or a value stock . For me, its whatever term you want to put on it. If they can give more evidence they can actually return to growth in 2014, its going to catch buyers. I guess that might be more of a value stock than anything. But at, you know, less than 12 times earnings and the expectation has now risen. Ever since this 5c and 5s launch, negative about the 5c, positive about the 5s, but the earnings estimate has gone up a dollar since the products were announced. That should get a higher multiple. Yeah, hard to get its hard to be both a value and a growth stock, i guess. Because if this company starts growing again, if it starts having higher earnings year after year, the multi its going to be just with ha below market multiple, its going to be a 1 trillion stock. Listen, six months ago, people thought they were never going to hit the 2012 earnings they hit at 44. And frankly, even the consensus number doesnt have them getting back to that number. But i think youre right that if they can show that they can grow this behemoth of a company at 10 , next year and the following year, youre going to get youre going to see a much higher valuation on this no matter what that absolute number becomes. Right. But this multiple could stay where it is. And it would still be at 700, 800. And if they get multiple expansion with their peers, you know, but nothing grows to the moon. I think thats implicit in the way the stock trades is people think theres got to be something on the horizon because no stock has gone to 1 trillion. Well, it is also a tech company. I think a lot of times people, you have to put the valuation in perspective. Verizon, their customers pay them every month. Apples got to go out every day and sell a product. And theyre circling, the competitors are circling too. Weve seen this before. If youve done this a while, youve seen a story with motorola in the early days and nokia. You know, companies in tech have been unbeatable and then they are beatable. So you cant necessarily get a premium multiple, i think, but higher relative to the growth. I remember. Novell, cisco, microsoft, they all were unbeatable. A lot of times people like to say this time is different. But we were hearing nokia in the 90s and it wasnt different then. Dont forget the stock buyback. Theyre engaged in the largest stock buyback in history right now, joe. 60 billion, okay. And also, our friends carl icahn is agitating them to jack that up to 150. Youve seen the share count from earlier this year from 947 million shares, down to 909 now. That reinforces the value part of this story. Thank you. Thank you. And david with us until 9 00. The fomc kicking off a twoday policy meeting today. More on the cnbc exclusive survey sees things heading. Well bring you inside the room all little bit at the fed. One of the things we know theyll be talking about. What effect did the shutdown and debt ceiling discussion have on growth. And our fed survey 40 economist strategists polled around wall street saying 80 say growth is lower due to the Government Shutdown and the debt ceiling debate. But maybe not by so much. About a third of a point. Our respondents saying they lowered their Fourth Quarter growth forecast by 0. 3 because of the fiscal debate. No change at all to 2014, and actually, a slight positive really a zero for the Second Quarter. Interesting how this came about. We asked people, what is the source of that negative impact. And what you see here is 53 say for the Fourth Quarter its from a rise in uncertainty and 71 say its uncertainty in the First Quarter if theres any negative impact at all. How about the next budget battle . This survey picked up increasing concern on wall street. Now you can see again a little complacency going on. 67 saying the next budget battle, the one were going to get in january and in february will be less contentious than the one we just had. Well keep monitoring this and see if that concern rises. They did pick up what was going to happen a month or two before it actually did. Lets move on now and look this chart has three stories in it. I want to walk you through the three stories. Back here in january, 80 say the u. S. Needs a deficit plan now. Move along here. That came down in the summertime. Only 40 say, 52 say, you know what, we can take our time on this. Now look again, its come back up, more than half saying we need to have a deficit plan now. I dont know if that goes along with the debate in washington right now or if theres legitimately more concern on wall street over the deficit. But its something we have to watch. This is where this current state of anxiety is on wall street with the nations debt issue. Lets see what they say about this. Diane suanne says brinksmanship has cost us in ways we will not know for years to come economically and geopolitically. Certainly on wall street theyre asking for a little more certainty out of the fiscal debate. Becky, read all about this online, cnbc. Com. Coming up at 10 00, were going to talk about what the expectations are for the markets from these experts. And later in the day, what they think about janet yellen, hint hint, here comes the dove. Back to you. Only one s in brinksmanship. Whats that . Was there are more than one . No, you pronounce it with more than one. Brinksmanship. Oh, you dont pronounce the second s. Theres only one appreciate that correction on national television. Are we still on . I would never look to coming up brinksmanship. Brinkmanship. Theres only one s. Its probably right. Global bank ubs reporting, ubs reporting Quarterly Results this morning. Were going to have the companys cfo on. Its bmo no, he will join us next to talk about the quarter first on cnbc. There is no. The first one is brinkmanship dont go to no, no. Norfolk southern whats your function . Hooking up the country helping business run build were investing big to keep our country in the lead. Load we keep moving to deliver what you need. And that means growth, lots of cargo going all around the globe. Cars and parts, fuel and steel, peas and rice, hey thats nice Norfolk Southern whats your function . Helping this big country move ahead as one Norfolk Southern hows that function . [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you open an account. Ubs reported improved Third Quarter profits earlier today, although the shares have been down on news of a probe by authorities over the possible manipulation of Foreign Exchange markets. In addition, regulators are requiring the bank to hold more capital in anticipation of further unknown litigation. And that is definitely wearing today. Joining us now is tom narital. And tom, this issue of having to hold more money for potential legal writedowns. How big of a problem is that going to be . How much do you anticipate youll need to hold back . Well, becky, you know, weve over the course of the past year since we announced our new strategy for the bank, weve been focused on reducing our riskweighted assets, building our capital ratio. So we end the Third Quarter as the best capitalized bank in the world. So we look at this temporary rw add on as just a speed bump for us as our progress toward total shareholder returns. But it does mean youre not going to meet your profit goals for 2015. This is something that could have a longterm drag . So on the 2015 roe target, roe target of 15 is one of the highest in the banking industry. And weve said as a result of this temporary add on, if its not completely reduced, it would push the achievement out by at least a year. When it comes to legal issues, its banks around the globe that are concerned about whats happening. Weve obviously seen some big agreements that have taken place with some of the major banks in the u. S. From jpmorgan, bank of america and other settlements that have gone through. How difficult is it to kind of see through the future when youre worried about all these issues coming up when it comes to settlements for these things . Well, becky, it certainly is an industry issue. Its hard to talk about bank and earnings today without also mentioning litigation risk. In terms of our approach to it, weve been highlighting for some quarters now that we expect litigation expenses to be elevated for us at least through the end of 2013. We added to that today to say that we think those expenses will remain elevated through the end of 2014. But at the same time, id note that today we reiterated our capital targets. We believe weve got very good momentum in all of our key businesses. And in particular, if you look at our Wealth Management businesses who have had an outstanding year. The supervisory Risk Assessment process as you know begins right here at the beginning of november by the european banking authority. And then you get the asset quality review, aqr and then the stress tests. How do you for 128 european banks, how do you expect that process to play out for your own institution as well as other institutions across europe . So the ebas aqr didnt apply to switzerland as were not a member of the eu. Weve been highlighting in our outlook statement, in terms of sentiment has been concerns about structural issues and the european economy, the u. S. Fiscal situation, but also the european Banking System and concerns about capital. So the aqr review is a necessary step in order to help investors get more comfortable with the capitalization of banks. And no doubt well see some increases to capital as a result of that review. Tom, lets talk a little bit about tapering and what thats done to the volatility and the markets and what in turn has meant for business. The Third Quarter was the period where we had everyone anticipating there was going to be a taper. People have completely changed their minds since then. The expectation is now that they wont taper until march or april of next year. So what has that meant just for volatility in the markets . Whats that mean . Well, if we look at the tapering discussion in the last quarter in the Third Quarter, it certainly affected our results. 8. Although the outcome wasnt what everyone expected, it was spent talking about tapering. And that had an effect on markets most particularly in the emerging markets. It hit emerging markets currencies, emerging markets equity markets. And that caused substantial amount of deleveraging and reduction in client activity. We saw those results in asia where we were down on gross margin. As you look at the start of the Fourth Quarter, you have a similar effect where you started the Fourth Quarter talking about the event that never came. But it was the discussion about a potential default in the u. S. If you talk about that for a the few weeks, no doubt that has an impact on what clients think, how investors behave and activity levels as a result. Tom, we want to thank you for joining us today. Appreciate talking to you. I thought tom was very thoughtful today. Theres a threesecond delay. He considered every answer. Its good to see you. Instead of just shooting from the hip. Right, no, its a threesecond delay. That was a watson come here i need you moment. All right. Coming up, breaking Government Data on inflation and the consumer. Ppi and retail sales are going to hit the tape at 8 30 a. M. Eastern. vo our new planes dont fly any faster. But it sure feels that way. Because with power ports. And wifi. And inseat entertainment, for everyone on board, now when you fly, time flies too. Flight Attendant sir, were about to land. vo were adding a brand new plane, with all this, every week. Its just one way were building the new american. [ male announcer ] the parking lot helps by letting us know whos coming. The carts keep everyone on the right track. The power tools introduce themselves. All the bits and bulbs keep themselves stocked. And the doors even handle the checkout so we can work on that thing thats stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. So everyone goes home happy. Market Research Group forrester, a survey concludes that facebook concludes less Business Value than Business Marketing opportunity. Facebook responded that the report was illogical and irresponsible. When we come back, weve got breaking economic numbers. Well get september retail sales and ppi numbers delayed by the Government Shutdown. Right now as we head to a break, take a look at the u. S. Equity futures. Dow futures up by about 35 points above fair value. Well be right back. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. 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Were seconds away from the retail sales and the Producer Price numbers that were delayed by the shutdown. Rick santelli has them both. Rick . September retail sales, headline down. 1 . But strip out autos, it pops up to the expected level of up. 4 . Pop out autos and gas, it remains at. 4 . So the data on headline looks weaker than it is, it matched expectations and its multiples of what we were looking at with regard to august. Ppi, month over month, september, down. 1 , as well. When was the last time retail sales and headline ppi had the same headline number. This should be expected. But now if you strip out the allimportant food and energy, up. 1 . So theres going to be volatility. If we look at yearoveryear numbers, yearoveryear on headline, that is a fraction of the 1. 4 we looked at for august. 1. 2 yearoveryear,. 1 hotter than august and matched expectation. So i guess if i had to summarize, you know, think weak dollar and still some Commodity Prices going down, i think somewhere in the supply chain were getting a handle on that. Retail sales could have been worse. Not bad, especially considering that it wasnt all attributed to autos, just like the durable number was mostly all attributable to airplanes. Back to you. A lot going on, rick, i dont want to get you started. But did you see this Brett Stevens piece in the journal . You havent . Get a copy. No, i have. Oh, you have . Yes. You know whats weird, its not the wall street journal, the quotes are from the washington post, the New York Times, its really unbelievable. Most of them are from the New York Times and the washington post. I heard that, it scared the heck out of me. For more joe, joe, you know, i think that halloween this year should be downgraded a bit because, of course, many of the viewers and listeners on satellite radio that watch us, theyre getting, you know, i think trick and treated depending on which side of the aisle youre on every day. Steve liesman is here and this is whats its come to. Because there were two brinks, there was the Government Shutdown brink and there was the debt ceiling brink. So there were brinks. Yeah. Brinks. Therefore you are the im struggling. Im clutching at straws. Brinksmanship, because there were two brinks. At least two brinks. There was a brink in 2011. Anyway we need a new word. Talk about retail sales. One is this 2. 2 decline in Motor Vehicle sales that has something to do with the timing of labor day pulling stuff into august. So the idea is that the car business is doing well. And i dont think this is going to continue the idea of a 2. 2 decline in auto sales. That should bounce back. One other thing that i really like, the 0. 7 gain in electronics appliances. Say that again a 0. 7 increase in electronics and appliances. Electronics and appliances. Iphone. Apple, iphone. They have a tendency to affect the macro data. They come in they do an ipad, they do this, that was the expectation among economists. Seems like its there. A 1 increase in Grocery Store sales. I dont know whats up with that. Maybe a lot of barbecuing going on over the labor day. I dont know. 0. 9 decline, Department Store sales, a quick word on ppi which is there aint no inflation in the pipeline, there isnt any inflation in the pipeline. Youre butchering the conventional language. Every time i talk. But when you go up the chain of production, intermediate goods, a 0. 1 increase, thats less of a find, go all the way to crude goods, the least refined products. A 1 decline in core crude goods. This is probably a decent profit story in here. I dont know if david wants to jump on this. But when Producer Prices, the prices that are paid by producers go down or are flat relative to Consumer Prices, theres margin in that. Steven, on the retail sales headline number, we see june, july, august, september, june was. 6 up, august,. 2 up. And now septembers minus. 1 down. This to me feeds into the Consumer Confidence number which is so important in the holidays. Before the shutdown. Right. The Consumer Confidence fell four points last month. From 77 down to 73. Its also before were going to get a little pop from the gasoline price decline. I saw 3. 22 on my way in for regular on the Palisades Park way. We had the ceo of walmart u. S. On earlier today and asked him about that just if gas prices would help. He said it would be a tail wind but youre facing the head wind of higher payroll taxes. And the thing that bugs me a little bit. And i need to call the bureau of labor statistics. All these fees and stuff, im thinking theyre smart enough to include that into the inflation indicators. What fees . Airline fees, baggage fees, everything being a la carte. I wonder how comparable prices are. Phil lebeaus going to be on i know, and thats exactly what im talking about. Its some 40 billion in airline fees and thats a way that prices go up. And you want to be careful that were not having any closeted inflation. The number one performing Industry Group out of 100 this year is the airline stocks. Theyre up 71 on the year. Can you believe that . Followed by biotech, 65 . What theyve been able to do is to make fees acceptable. Before it was outrageous and i dont know if youve gone to theyve done a lot. I mean, the capacity, you know, you cant even cut the capacity. You try to fly some place with six different options. One option. And used to be able to stretch out and not anymore. When you consider, apple it sort of snuck up on me. Not really, though. Do you see what the estimates for revenue in the quarter is . No. Its like 55 to 60 billion. Unbelievable. Well, no wonder it matters. Were surprised it shows up in government numbers . You know, remember, i got to ask that question about the haswell chip in the mac book pro . Yeah. Theres a real reason to have waited and now a real reason to upgrade. If you were hanging around with an old mac book pro, you know, they have this thing. It has eight hours of battery life compared to five. Compared to five. Its a faster chip, youre going to get flash storage which is really fast. Anyway, theres lots of reasons people do it. People would talk about, you know, the ipad. Theres other products that are out there. And its very cool. Theres only a couple of times where a companys product or action shows up in the macro data. The big microsoft dividends have shown up in income data. And now apple sales show up. Its 60 billion for a quarter, divide that by three months, 58, because 19 billion or 20 billion per month. How do you do that . That means per month, 30, 2 3 of 1 billion per day is being sold of apple worldwide. You love that . 660 million. Weve watched the stock go from 50 to 700. I guess we shouldve seen it. Down to 400, to 398. But thats their big quarter, right . The 60 billion. But its 130 a year. Whats walmart going to do in christmas time . They do a lot but the margins are are tiny. Much smaller. They have, i think, over 100. Over 100 in the quarter . Yeah. Its 400 billion per year annually. The Fourth Quarter takes a big chunk on that. All right. Im supposed to did you want to talk more to rick about the wall street journal piece that has you so excited this morning, joe. Its not just the wall street journal. Its lisa myers. Its lisa myers piece too. No, you know what, i dont want to my only thing was when the u. S. It didnt i want to do tax reform. Corporate tax reform. I believe there were certain senators who were saying millions were losing their health care and there was skepticism about that. And now lisa myers has backed up some of those republican senators who made those claims. 480 billion a year. The way you look at it, the way it was rewritten 40 billion but my point, lisa confirmed this. My point was youre going to see employer sponsored plans go away. Its more economical. So you werent going to be able to keep your plan because your employer would take your plan away and put it out thats not even what shes talking about. Thats the big issue is the 80 who s aus tense get their health care from their employer. Annual revenue of 480 billion. And if youve got a 16 trillion gdp, that means 3 cents out of every 100 cents. 3 cents out of every dollar changes hands in a walmart. You love that . Why would you make fun of me for i didnt make fun of you. You dont even know what it says. Yo uh dont know what it says. Rick is standing by. Maybe if you read it youd think it was significant if you read it. Here, read it. Three reports this morning, if you dont mind. Ill get to it but i was trying to be nice to rick. You try to be nice around here and what happens to you . Boom. Rick, see you later. It doesnt pay to be nice. See you later. Coming up, if you have traveled anywhere in the last several years, youve probably paid ancillary fees. Those are the baggage fees, the seat upgrades, the onboard food and at the same time fees. It all adds up to a lot of revenue. Phil lebeau will be here to break down the revenues after this. By the way, on track for a new time high. Airline fees are on track to generate a record amount of revenue this year. Phil lebeau joins us with more. We all know about these fees, hard to say we love them, though. I think people will be surprised, becky. When you see how much the airlines are taking in worldwide this year and compare it with three years ago. Thats really when we saw airline fees, ancillary revenue through things like credit card frequent flyer programs, et cetera, start to take off. Look at this, back in 2010, it was just 22. 6 billion worldwide. Its going to be up to 42. 6 billion this year. Thats according to the firm idea works and theyve been tracking this over the last several years. Thats a 17. 9 jump this year compared to last year. And when you look just at the u. S. Major airlines, theyre expected to take in 14. 3 billion. Heres what might surprise people. Everybody focuses on the bag fees. And yes, thats a big component here, but its not the biggest component. Where the airlines are really making their money is from the frequent flier and credit card programs. They sell those miles to the Credit Card Companies who use them to lure you in. Thats 60 of the revenue, baggage is 25 , onboard Seating Services like you want to board before other people, thats 10 and travel services. If you want to get a rental car or vacation package, thats just 5 for the airlines. But the airlines are increasingly looking at how they can push the envelope because they realize there are people who can pay these fees. In terms of the other 30 passengers who are willing to pay a premium for better service, and the airlines are testing that on a continuous basis to see what the limits are there and see what new services make sense or not. We may not like the fees but you know who loves it, investors. Because the airlines are profitable. Record profitability this year. And thats why you take a look at the airline index, it has had a stunning year. You guys mentioned it earlier, the best performing group of stocks for any industry, its the airlines this year. And thats because these fees are theyre nowhere close to ending, guys, were going to see this continue to go higher and higher. 42. 6 is how much itll be worldwide this year. Phil, we have david here, hes our guest host today. He was looking at numbers in terms of profitability for the entire industry. You know, phil, according to siri and they back it up, they say total earnings were around 4 billion. And so if you have 40 billion of fees, that means, you know, and look, airlines are basically flying hotels. Youve got capital costs and youve got labor costs, its a tough industry. And im glad our airlines are profitable and healthy. However, the fees are really whats keeping them afloat, given this tremendous background of labor restructuring, pension restructuring and consolidation like crazy thats going on in this business just like in the Legal Profession which you all have been reporting on. Its the tight capacity, as well. Joe mentioned earlier, wherever you go, you used to have several choices for the most part. Im in chicago, youve got a number of choices in new york. Try flying out of some place like cincinnati or milwaukee. Youve got fewer choices in those smaller markets. And as a result, theres a set number of seats and the airlines know it so they can raise fees. And there are people who are willing to say, you know what, ill pay 10 to get on board before somebody else because i want the overhead compartment. You are looking at them, viewing their airplanes now. How can we maximize revenue . I think theres one more seat per row than the set number of seats. Isnt there . Are they done with that yet . Theyre getting there. Theyre getting there. Narrower seats, trying to get more seats in and theyre trying to squeeze a little bit more. Theyre pretty close to capacity, but every time you say, oh, the seats cant get any narrower, listen, i fly all the time and, you know i dont envy you, my friend. Youre a tall man too. Yeah, hes tall and im scrunched in these seats and im little. Hes a big boy. Hes full figured. He is not. Hes a tall man. Thanks, joe. I like a manly figure, phil, right . Thats not im not disparaging you, lebeau, you know that. My favorite is you get on early, you put your bag up there, somebody comes in after you and sees a little space and decides to push a Cadillac Escalade in a space for a vw, its crazy. When you bring in easter eggs or something. And youve got to watch Carol Burnett on youtube. Youve got to say budget flying, Carol Burnett, she does a schtick, its classic from the 70s. Youve got to use the sh. Im sorry. Phil. Getting away with a thing here. Dont be afraid to say it. Stocks on the move ahead of the opening bell. Going to check in with jim cramer at the New York Stock Exchange next. Tomorrow on squawk box, the democratic governor of a red state thats having early success implementing obama care. Kentuckys steve bashir will join us and the chairman and ceo of universal Health Services on the glitch with the health exchanges. And early read on employment in october with the adp jobs report. All starts tomorrow at 6 00 a. M. Eastern. The ocean gets warmer. The peruvian anchovy harvest suffers. It raises the price of fishmeal, cattle feed and beef. Bny mellon turns insights like these into powerful investment strategies. For a university endowment. It funds a marine biologist. Who studies the peruvian anchovy. Invested in the world. Bny mellon. I have obligations. Cute tobligations, but obligations. G. I need to rethink the core of my portfolio. What i really need is sleep. Introducing the ishares core, Building Blocks for the heart of your portfolio. Find out why 9 out of 10 large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. Lets get down to the New York Stock Exchange. I keep thinking about apple, jim. The multiple is so low and the company has had three quarters of yearoveryear decline in earnings per share. What if that Company Really does start growing earnings again, even if its only 10 a year, and the multiple just goes up a little. Will this be the first trillion dollar market cap company, jim . There was so much that was good in the quarter. Almost every single headline i read did not capture the conference call, did not capture the idea that this could be a monster Fourth Quarter because of new products. Just kind of other worldly to read the stories. When apple actually was decelerating, they all seemed to think it was pretty good. This was a breakout quarter and it wouldnt shock me to see this stock go up 100 in this quarter. Then i was thinking who would i really never bet apple im still a little bit i dont know. The sharks circle, theres other Smart Companies around. Apple, i feel pretty comfortable but google is the other one. Isnt that company five years from now going to be still google . Google has got a great array of product, it hasnt even started monetizing yet. When they start doing that these are Great American companies. I think people continue to underestimate them. We talk about politics. How about talking about engineering. Look, the public loves our products. You would not believe the satisfaction levels. And we await a second. The public has but wait a second. Do people like the product . Theyre talking across purposes. They did it runs before when it was about china last time. China gets better and suddenly nobody cares about china. The analysts are always playing catch up to apple. This is going to be an apple christmas. Now, that brings us to facebook, where theres these articles that major corporations are supposedly not getting the type of return on their advertising in facebook that they were hoping for. I think of facebook and im not sure id say the same thing about facebook as i do apple and google, though i should recuse myself, im not on it and dont use it. Ive asked almost every single one of the major advertisers on facebook what they think, all the companies that are supposed to not like it. All of them to a person, both on the record and off the record say the same thing. What a great way to be able to reach a billion people worldwide. So maybe some survey said no. Theres no reason for these ceos to lie to me off camera. On camera people say what they want. Off camera, no, you dont understand the power of facebook. But whats the point of snowing me on facebook. Why dont they say, listen, we havent had that much ruesult. It took my five weeyears aro on apple, by the time i do, its too late. I think a lot of Companies Offering products that are monitors for health. Apple should be in that aggressively. They can do that for the risk, they can do that for anything. They should be more involved with health. Thats the next frontier. Instead of 150 billion on stock, they could spend 25 on twitter z twitter. They did dismiss the idea of having to do financial engineering. How about the best products in the world . The analysts are caught up in this cross margin 38. 8 versus 38. 3. Right now apple has leap frogged everybody. Maybe samsung comes back with something else, not unlike our friends at tesla, except this company has real earnings. All right, jim. Thank you. Still to come, well give our guest host the last word when squawk box comes right back. Ready or not, the stock of the day is coming up. Youre watching bsquawk box o cnbc, first in business worldwide. So i c an reach ally bank 24 7, but there are no branches . 24 7. Im sorry, im just really reluctant to try new things. Really . Whats wrong with trying new things . Look mommys new vacuum cat screech you feel that in your muscles . I do. Drink water. Its a long story. Well, not having branches lets us give you great rates and service. Id like that. A new way to bank. A better way to save. Ally bank. Your money needs an ally. 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Its lots of things. All waking up. Connecting to the global phenomenon we call the internet of everything. Its going to be amazing. And exciting. And maybe, most remarkably, not that far away. Were going to wake the world up. And watch, with eyes wide, as it gets to work. Cisco. Tomorrow starts here. Which the private exchanges for Employee Health benefits. On the private medicaid, he said its going to continue to be a challenge in 2014. Lets get back to our guest host for the last word. David, if you had to sum it up, what would it . The tenth letter of the alphabet j, japan. And the they have Equity Capital of 70 billion as well. Alex gore ski of Johnson Johnson is a phenomenal ceo and only 20 of sales are to emerging markets. Really quickly, why japan . Japan is a growth story. It is a valuation story, 1. 2 times book and 4. 2 times book. Growth, valuation structural reform. Its the real deal. David, its been a pleasure having you here. Thank you for our gourd. This is my gourd, al gourd, is going straight in my lock box above my desk. Thank you for joining us. Andrew will be back tomorrow. Make sure you join us, squawk on the streets next. Good tuesday morning, welcome to squawk on the street. Im Carl Quintanilla with david faber and jim cramer at the New York Stock Exchange this morning. The price gains continue, albeit more