Transcripts For CNBC Squawk Box 20141009

But still, the dow futures look like theyre up about 24 points above fair value. S p futures up by 5 points and the nasdaq up by 11 1 2. Among our guests today, we have Lee Cooperman joining uts at 8 00 a. M. Wholesale trade and monthly samestore sales. As for earnings, well get results from pepsi before the bell. Alcoa kick off earnings season last night. The company posting better than expected results. Ceo clause clinefeld was on cnbc last night. On an absolute basis as well as on a margin basis, we saw an increase of profitability year over year of 45 in the mid extreme. And the best quarter in the upextreme brings since the second half of 08 when it started to get weaker. Shares of alcoa are up about 50 in year. In other corporate news, amd is replacing ceo rory reed. The market value is nearly halved since he took over in 2011. The chipmaker is trying to expand beyond its core pc market. Lisa su will take the chief executive role. Some annists were surprised by the timing announcement because the company is set to report Quarterly Results next week. Lets talk about whats important, maybe. The way ta worked yesterday, the fed back en vogue. We were convinced that maybe the market or was bog to respond just to better economics. Thats what it did, better Economic News and the fed was becoming less poet ept because were really assuming the fed is going to become less involved in our lives. But that is not necessarily the case. Those two guys telephonely graphed what was going to be in those minutes. But you read today in the journal, something telling the fed Global Growth is not going to be what they thought. Maybe a 11 german bund. Maybe that the eye tall yab tenyear with italys finances, that tenyear is below our tenyear inspect. The market was not at all impressed or didnt like the news. I thought it was maybe that the market was thinking bad news was bad news. We were saying if its one or two people remember . I thought it was an outlier. Your question is what does yellen think . Apparently the entire federal weakness. I thought we were at the point where the market was going to look the a bad news being bad news. Youre uncomfortable, you question the fundamentals, youre uncomfortable, but historically, it actually starts moving before you see any and i think its not just the that the Global Economy is slow. Weve got the dollar rising, which means its going to continue. Tougher and tougher to export. Slow growth is going to continue here, but also with the strong dollar, when do you think inflation gets to 2 . 2018 before we get to 2 . That adds a whole not only not mid 2015, but that could go through 2016. He was dead wrong three years ago on thinking the bond market rally was over. Hopefully we have we have andreesen some time today . We do. Its coming up. This is another story, carl icahn promising some news today. He did this through a tweet. The activist investors tweeting that hes going to be sending an open letter to apples ceo tim cook. Icahn says he believes it will be interesting, in his words. Since a year ago, the stock is up more than 50 . Icahn himself is going to be on fast money Halftime Report. Thats at noon eastern. You think this is somebody you would have a good working relationship at this point. Tim cook has done a lot of things to try and meet his expectations. The way he thanks him for that is to tweet everybody and say hey, im going to send an open letter to him tomorrow. Lets say i compose an open letter for some company. With regoing to lead with news on that company . Whats the news on apple . Carl icahn imy, i guess i understand that it is. But b. He moves markets when he talks. He does. But i take as andrew loves to say, usually its about inversions, but i take umbrage. I cant wait until langone is on today. I want to have appeared rue, i just just driving me crazy. This is just i wish he was here for langone today. Andrew has missed langone the last few times hes been on, which is unfortunate. For everybody its unfortunate. It really is. Mark andreessen was saying you will not hear him sugar coat most things. This is what he had to say about icahn the. The good capittain kirk and e evil captain kirk . Its one of toss things. And carl is just the exact opposite. He starts off throwing lies, makes stuff up, he slanders, gets the full like his inner 6yearold comes out. He lies, he slappeders and he makes things up. And his inner 6yearold comes out. What was marks history with icahn . Was this the paypal, wasnt it, where he said this is the worst Corporate Governance in the histories of the world . In thats right. He slammed andreessen. He did. No love loss there. During the interview, andreessen says he expects more Tech Companies will follow ebays lead and split up. You see it there. Im just looking here because i guess he had some harsh words for him back in if he february, too. I forgot about the paypal thing. Big news on apple. Hes made 50 . Thats not that doesnt make him happy, either . You can understand why ceos gt weary of activist invery fasters who theyre supposedly supposed to be working with on the same side and the way you announce other deals is to tell the worth about it. I can imagine that would be a tough one to try and work out as a manager. The death of the first person diagnosed with ebola in the United States is urging all kinds of questions today. Meg is back on set and joins us with more on this. Thats right. The death of eric duncan is raising a lot of questions about u. S. Prepared, in hospitals and about the hospital treatment itself. That was yesterday in philadelphia. We spoke to a lot of doctors who said any delay in treating a viral infection can create problems in treating. Dr. Tom frieden from the cdc earlier this week called the hospitals treatment a teachable moment. But we spoke with a doctor from Emory University yesterday which treated some ebola patients. He said hospitals around the world have some catching up to do in terms of emergency prepared ps. A lot of centered around the world are in a framing stage. Were likely to see additional patients slip through the cracks. Theres a lot of question about what t u. S. Is trying to do at first marmg u. S. Airports. That accounts for 94 of the travelers coming in from these three affected countries. New york, jfk, walldulles, new york, chicago ohare and atlanta will start to be implemented next week. Those are only for flights coming in trektly from those countries . What about people who go through belgium or through some other countries . Theyre going to be checking passports and looking to see where people have been and if they have traveled through those countries or originated from those countries, theyll be taken to a separate screening area. Their temperatures will be taken, asked a lot of questions. If they have any other symptoms, theyll go through further. Not a list that newark has never been on any list that you would want toe be on inspect. Your honor. Baggage, luggage. I have a lot of questions on that. Number one, i understand you can bolster someones ability to fight a virus. I dont think you can deal with the virus. We have no way of dealing with it, anyway, necessarily. But you would want someone hydrated, you would want them rested, you would want their immune system as healthy as it could probably be to stave off the virus. But this thing about this yesterday that is i think putting it into words that drove everything home is we think youre going to come here to the United States. And once you get into that United States and you get into our icu that somehow that 70 mortality rate can going to come down to 30 . And it was a shock to see that even in the best hospitals in the world, we were unable to save this guy. That shook us all yesterday, does it not . I think thats absolutely right. I think a lot of peoples expectations were he was getting the best possible care, even though we dont have drugs to treat ebola. He was auto a press operator, he was on dialysis. Every time an organ fails, that means a 20 chance higher of mortality. I also was watching and it was like, all right, we didnt have to have this thing totally approved by the fda, but we know it has some efficacy. These guys are getting the right care. He didnt get the drug until so long along. We had prime coverage. It was going by on the ticker and then it was down two or three after but then it came back. Its still being used. They already knew it worked in that way. Yeah. Originally the stock was on the data. I think another question is how prepared we are been yesterday there was the story that the sheriffs deputy who was in dlal dallas who had been exposed potentially, he showed up at an Urgent Care Center with ebolalike symptoms, flulike symptoms. And, of course, they had to take him and isolate everybody and take him to the hospital. The Urgent Care Center is not going to be able to help him. Its parent to note, also, none of those folks who had exposure to duncan have showed any signs of ebola. But yeah, theres a lot of questions about whether hospitals are prepared, not just in the United States, but overseas where we saw the first case contracted outside of west africa. So a lot of questions. And it could have been taking off protective gear. Folks obviously need to be trained stringently on how to do this. Whats the late ettest on the sheriffs deputy . He went into the the cdc is saying theres no evidence he had contact with the patient. But what if he had symptoms of . They said he had some symptoms. How long does it take to get the results back . He has to show definitive symptoms before the test would even be defenive. So its not clear exactly what symptoms hes showing right now. It wont be definitive unless youre showing the symptoms. Yeah. If theres one, you should be able to see the zens. The rye russ doesnt proliferate. Meg, we will see you back here in the next hour to talk a little bit more about this. But thank you for the update. Thanks. We worried about all these things. You see isis is going the take that city and but at least the fed at least we still have thats what they tell us. Another fed induced rally yesterday. I think its oneday gains of the year after the fed minutes indicated an accommodative stance would remain in place for a while. I cant believe traders needed to see it in print to figure it out. Will the rally hold . Here with us is ed keon. And tavidia from bank of America Merrill lynch global research. And i just want to start with you, ed, because youre well, youre old and youve seen a lot of youve got a lot of the experience. Were gop going up 300 i said it couldnt happen again. We were down 300 and the next day up 300. You go home thinking, wow, i knew this market was weak. I knew it was starting. What is it doing . What does that tell you about traders convictions and stock prices right now . Well, here we are, a few months to go and thats roughly the pace that were on. So it was a daytoday fluctuations have a lot to do with the dollar. I think the stronger dollar, people say to themselves, that means thaernings are going to be weaker, which is true. But that also means inflation is going to be lower. I think the fed Statement Today in context was basically acknowledgement that with the stronger dollar, the threat of inflation has receded and as a result the need to have more aggressive policy has been pushed back even further into the future. Avida, i think that hit the nail on the head. That is all of a sudden we think about growth and we think about the feds effectiveness in spurring the economy, whether its been successful or not. But once you Start Talking about inflation not coming back until 2018 then youre back to where the fed might as well just do whatever its doing, you know . If theres not going to be any inflation, even if you dont know that its working, let them stay in there, anyway. Right. Right, right. I dont think earnings are going to be all that bad this quarter. Here is the thing. Youve got the Dollar Strengthening. But that tends to be i mean, you know, so we calculated that a 5 move in the dollar takes off about a dollars worth of s p earnings. Thats less than a percentage point of earnings. So earnings are going to be already this quarter. If you think about it, the Dollar Strength didnt come until late in the quarter. Youre fought really going to see that big hit to earnings. I agree with you. I think its not going to affect this quarter. I do wonder what the outlook will be for some of these companies and if theyll be more cautious because of whats happening out there. I think youre right. Fourth quarter guide yaps, you could see some staving off of expectations. If the dollar holds at these levels, i think multi nationals have sold off to aggressively, that they might have a little bit of a rally, which is what we saw some of yesterday. It doesnt look all that bad for me. The Third Quarter is about 6 and change. The actually number will be about eight. Conseasonsus for the forty quarter of 11. Its a pretty good year for earnings. What did you say on a percentage basis that was . 1 . 1 or less of earnings. If we stay in a low Interest Rate environment, we can make that 1 up in the multiples, cant we . Multiples dont contract. Thats a dollar in s p earnings is nothing compared to a multiple contraction that we get from the other way to think about it is the dividend yield on the s p is around 2 . The tenyear is down around 2. 3 . Youre paying almost nothing for the Capital Gains potential, for the Growth Potential of u. S. Equities. Do either one of you think we go below 2 on the s p in general . I think you could for a short period of time. Its a slow higher move in the treasury. Im not a technician, but i think here is the missing link is growth. And were starting to see u. S. Growth accelerate. This is what nobody is talking about. I remember the last time i was on the show, we talked a little bit about cap ex. Youre seeing Companies Spending money again. I think its a bullish sign for the u. S. Economy. So even though consumers might be slowsing down and the housing cycle might be slowing down, companies are starting to spend money again. Theyre hiring a little bit more. This is all good news for the u. S. Economy. Were not japan, but how long has japan been under 1 . A long time. Really . Yeah. I can industrialized economy, the third you could be it used to be a third. But we have deflation and a less than 1 . So frightening. Thank you. And youre not old. You and i are roughly the same age. Thats right. Are you living near Kendall Square . Love a bar near Kendall Square, yeah. Is that when it all started . Kendall square. Remember the s p diner . Sure. We used to go there every day. Up next, filling the gap. The ceo is leaving after the holiday rush. Will there be a shift in strategy . Plus, an exclusive interview with the chair woman and devicer. Well show you a selfie oriented smartphone. Squawk box will be right back. That sets you apart. It does . It does. Youre type e. And seeking another perspective is what type e s do. Oh, and your next handhold. Is there. You dont have to go it alone. E trade gives you the support and guidance to make informed decisions. Are you type e . Im spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast . Go to ziprecruiter. Com and post your job to over 30 of the webs leading job boards with a single click; then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter. Com offer2. Courtney reagan joins us now with more on who is going to take over. The retail giant, the age of this gentleman . Yopgs. Hes only 52. So it wasnt age. Is this typically when someone would, you know, in like mid october, you review well, if they want tight be an orderly transition, which they do because hes staying until the end of the fiscal year. House gap its for the holidays at this point, anyway. Have they been putting the right stuff in stores, do you think . Theyve been getting better. They have a couple new creative director. When they fist started, things were rough. And hes done a lot. This is part of why we saw the stock drop a lot. I spoke to both now the outgoing ceo and his executiver. Both say its the first order ler transition in 20 years. Murphy toll me while the board wanted him to stay, i informed them he couldnt make another longterm commitment to the gap. He thinks the leader of strategy should be the one that architects it and he simply cant make that commitment. Art is the current president of growth within innovation and digital. He works closely with murphy, particularly on that strategy and execution. Wall street goes to a lot of those retail conferences. He was just told last wee that he got the top job. Murphy told me there was a global external and internet search for his candidate. Shared sh jumped since murphy took over. When i asked art what his message was to shareholders, he said the transition signals nut by moving ahead. When it comes to murphys next chapter, he told me he doesnt have any plans after january, but if the right opportunity comes along, he would certainly consider it adding, quote, im only 52. Thats a lot older in the retail world. Thats what i was saying. His words. I dont understand why the stock went down so much. Because murphy did so much while he was there. Shares have gained 160 . I dont think he wants to stay through another seven year, eight years, whatever that terms is. He was making a lot of money, wasnt he . Yeah. The new guy has the beard with fashion. But hes older. Hes already inside. Hes been there since 20 05. Hes done a lot together. You talked for about a minute. And no one knew when you moved to the cell phone. We had very few people coming up. Did you notice her . When team talking they go, thats right, joe. And i go, is that really the best you can come up with . Nice move. Thanks, guys. We were on break to say that, right . That takes away the smoothness. It sure does. No one said i was smooth. No. No. Htv is making moves to try to turn the company around. The mobile hand setmaker is rolling out two new products this week. A new selfie oriented smartphone and a new waterproof action camera that they are calling the read. Its coined of their version of the go pro. I talk to the Company Founder and here is what she had to say about staying competitive in china. China still consists of the biggest markets. The smartphone is just a device that you need. You need it. Its a personal device. I think a lot of people are limited. They are in the remote area. They can help their life better. So its a recession proof product . I think so. I think its growing still. She is one of the most powerful women in wireless. Were going to have more on that sunday night. One of the things they come up with is this new camera. Im struggling to try to make the wifi work in the building and it comes out pretty well. This tiny camera is their version of the gopro. Put it anywhere, turn it on and it will send pictures and videos back to this. Its kind of like a school spy cam. I was thinking about putting it somewhere, going to the bathroom and see if i could catch you talking to me, but then i realized you say everything to my face. I do. I didnt know where you were going to go with that. You were going to take it to the bathroom. It is like the google glasses where youre not going to know somebody necessarily. Oh, i dropped it again. Sorry. And we hear what drives all technological innovation. The Tech Industry . Yeah. This could drive it again. It looks like a para scope, though. Its very elegant and light. I like it. Going up against big competition. Were going up against very deep pockets with apple, with samsung who have the marketing muscle, who have the market shares. Htc will have a hard time breaking into that. The mux themselves look interesting. There is video what has a new apps. You can make them work together. I was snapping pictures earlier. Wow. You know . Anyway, coming up, keeping Corporate America in america. Remember jeb henserling, chairman of the house financial Social Security committee known by jim joins us in studio this morning with his plan on making the nation more competitive. And keeping the water flowing in the United States is expected to cost billions over the next 20 years. Were going to talk to the ceo of one of the largest publicly traded utilities in water about this giant instruct. As we head to break, here is a look at yesterdays winners and winners. When change is in the air you see things in a whole new way. Its in this spirit that ing u. S. Is becoming a new kind of company. One that helps you think differently about whats ahead, and whats possible when you get things organized. Ing u. S. Is now voya. Changing the way you think of retirement. Sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. So i can reach ally bank 24 7, but there are24 7branches . Its just im a little reluctant to try new things. Whats wrong with trying new things . Feel that in your muscles . Yeah. I do. Try a new way to bank, where no branches equals great rates. Charlie, the demand on this network, it is increasing by the second. Its crazy, huh . And people are relying on it more than ever. We cover more than 99 of all americans. I know, i cant imagine living without it. Its a place where people can come share knowledge and ideas. Its beautiful. Thats deep charlie. My selfie just hit a hundred likes. gasps a hundred at t is building you a better network. I have 40,ney do you have in your pocket right now . 21. Could something that small make an impact on something as big as your retirement . I dont think so. Well if you start putting that towards your retirement every week and let it grow over time, for twenty to thirty years, that retirement challenge might not seem so big after all. Good morning and welcome back to squawk box here on cnbc. Im joe kernen along with becky quick. Art art got out of here so fast when langone was going to be on today. Have you bought a red bull in the last ten years . If so, the company os you 10 or a free drink. Themaker of the drink filed two class action lawsuits. The lawsuit alleged that the companys Marketing Efforts and statements such as red bull gives you wings misled customers and consumers about the benefits of drinking the beverage. Because they thought that you actually got wings if you drank the it was like when people that are involved with the cloud, they need to come out and say the cloud is not actually a cloud. Remember when someone told us that . But who wants wings . I remember it was a cartoon guy who got the wings when he drank it. I remember those commerce. But partial consumers thought they might get wings . In our other headlines this morning, the hackers believed to be behind the data breach at jpmorgan, the ft says there are no signs that fidelity Customer Data was stolen. Joe. Your, becky . Your turn. Cnbcs results are ought out the finding 74 of americans have somewhat or no confidence at all in president obamas handling of the economy and very little faith in the u. S. Congress. Joining us now, republican congressman jeb hencerling. We call him chairman, right . Jeb works. That is a reference to you were giving him grief about something, the president , werent you . Who, me . Only if he deserves it. At the time that it happen, was it an honest mistake . Because i do that sometimes. I suspect so. I think the the the knows my name now and i certainly know his. I knew it now and i knew it before then. If youre in my face, i would go, okay, jim. Theres a call to call other people. Mr. Chairman, i would think that a lot of the poll results weve seen lately would embolden republicans except for the reason that most republicans in congress have a probably 50 Approval Rating of the president. So its sort of across the board negativi negativity, isnt it . Well, certainly and i understand the numbers that you showed, i think that is the lowest Approval Rating that the president had on his income policies. And its easy to understand. The average working american family, theyre at this flat line, barely keeping up with inflation. They have less net worth. I think thats number one. Most of them have decided they dont like obamacare and i think theyre waking up to the fact that they dont like dodd frank which is frankly a lot responsible for the economic mess that we see today. Pe promised us it would lift the economy in too big to fail. I think theres a growing consensus that it has not. Pe put forward a number of pieces of v of las vegas that regrettably go over to the United States senate where all good ideas go to die. They never see the light of day. I want why the American People are from you traited can congress. I just mentioned the income inequality, the low end hasnt participated even though the high end has. We talk about the fed and raising asset values. The holders of the assets not surprise going the people that own asset res the ones who have been doing better. But both sides have different ideas but b how to rectify that. Ive been around the left for a while. And then on the right, you want to try to help the private sector and then the left comes back to you and says youre trying to help the people, the corporate fat cats that have the big pay chemical. So thats all we see in washington is two sides talking at each other with totally different ideas about how to fix things. Regrettably, the American People are also quite divided. I think the congress represents that. You try to lead by example. Some might say the democratic mt. Might represent idea logical bookends of the United States congress, but even we have found some Common Ground to work on. Shes a piece of work. I like her a lot. I like her, too. We dont see high to eye on a number of issues. Where we do, regulatory relief. We certainly having seen any leadership out of the white house. Weve 2k3w09 a lot of places to go, so today in the journal says that the president is much closer to republicans on Corporate Tax reform. We could definitely do it in 2015. Well, i dont know the answer to the question. But are you closer . Is the republican contingent and the white house anywhere near each other on joe, ive had sweet nothingings whispered into my ear from this administration before. At some point, it seemz to lose a little credibility. Where do you see eye to eye with the administration . I dont know because i dont particularly know where they are at. Where are you . When you say tax reform, i think its broader including the cub chapter s, for example. So individual tax reform, you wouldnt be able to do it just on a corporate level . You know, again, its divided government. Ill take what i can get. So i would hope either corporate or business entity tax reform might be on the table. Ir mean, the president is talking tax inversions. I find it ironic that for 200 years, companies have wanted to come into Corporate America and access our markets and economic policies they want to start to leave. And so the answer is, obviously, Corporate Tax reform. I served on the less than super Super Committee in and cochaired that along with senator patti murray. Regrettably, we did not manage to agree on anything, i would say relatively speaking of all the issues that were before us. We came most closely to finding Common Ground on entity tax reform. You cant abandon hope. If you do, theres a lot of reason to be hopeless. The whole issue of tax inversions, thats the symptom. And we have to go to the root cause and the root cause is a very unfair, uncompetitive complex tax code. I saw last knife theres five or six states where the president s Approval Rating is no higher than 30 in the best place. So the latest figure i saw was 52 gop. 48. Ill take it. Sold. What would that mean, though . How does that change anything for the last two years of his presidency . Well, again, i dont spend a lot of quality time with the president. I dont know how he wants to spend the last two years of his administration. I would hope he would want to negotiate in good faith. Would he be able to say to his base, look, theres nothing i can do. I have to move away from our idea onlial left here. Yao, youre asking me to psycho analyze the president. I dont know. I can tell you the kinds of things republicans would like to achieve. But at the end of the day, most of us came to congress not just to make speeches, but to advance things. In the sector that im in, i would hope maybe there would be some Common Ground that dodd frank did not end too big to fail. There seems to be a growing consensus around that. I would think we can get some conkensus for our Community Institutions grounding in this sea of ink and government red tape. I would hope for fundamental ground on housing reform, fannie and freddie. You can view it. Indeed, but at least its a difference. Its a momentum changer. At least were moving forward. Were presenting the president s with bills and then at least to some extent allows the American People to get educated about the issue. If the president chooses to veto a bill, hoefltly your network and others have to present both sides of the story. But ultimately, i think the American People are contacting that obama nomics is not working for americans much less those who would like a job. You didnt agree with the xm bank. Why take that on . What was your problem . Capital groannyism . When you say take it on, i was happy to let it silently expired. Xm is small relative to the economy, but directally, i think it is very, very important. I do not think you can make the case that the Export Import Bank creates net yox. America. If it helps boeing and ge, it hurts delta and volero energy. And the list goes on. Acoring to the budget off the, if they used gapthing, fair value accounting, it would be losing for the taxpayer, not gaining. But but fought least, its about mrig lending. It has a green mandate. Frankly, yes, corporate welfare, crony im, i think most republicans and were having this discussion within the family believe that your success ought to depend upon how hard you work on main street and not who you know in washington, d. C. But what about when youre compete, airbus from a different nation that has lots of backing from its countries that its supported by . When youre boeing and youre competing with airbus, who does get this help from the europeans, it puts you at a distinct disadvantage. Well, i want to help level the Playing Field for our exporters and manufacturers, but i dont want to do it by putting in on the taxpayer Balance Sheet. For example, the naeshl association of manufacturers have offered the opinion 50 of our competitive disadvantage comes from our tax code. Thus back to fundamental tax reform for corporations and other business entities. I dont quite have the number at my fingertips. But i think we have Something Like 2. 4 times as much liability exposure as our european competitors. So there is a number of ways we can make our manufacturers more competitive without adding to an unstainable Balance Sheet. Coke or pepsi today . The Company Earned 1. 36. Didnt need any. I cant give a short answer. The pepty bottling plant is in my direct, but my father owns cocacola stocks. I cant do carbon yaited. 17. 22 billion in revenue. The estimate was 17. 086. You can see its immediately got the stock up, 1. 06 versus a 93, 94. I knew that. Yeah. Its already up above that. Whenever i talk about pepsi, i think i say that ends in toes, right . Fritos, tostitos, they make you thirsty. Going together . Yeah. Growth margin has expanded, 45 basis points targeting more than 7 billion in free catch flow in 2014. That is going to be a problem in terms of a strong dollar. Thats going to cut a core currency. Cut by earnings per share by 8 . Oh, no, im sorry. Had seen 2014 currency up 8 . Now its going to cut it by about 4 . The Revenue Growth by about 3 . And we knew this was going to be a problem with a lot of the Big Internationals. We had annen list earlier who said about 1 or less. Obviously, its going to be something were watching with all the Big International companies. Youve got a pepsi plant but your dad owns the stock. Is that what you said . Thats what i said. We keep them both in the fwrij. Okay. Chairman, thank you. And you know you can come here anytime youre back here. We love to argue, too. It would be better if youre here when andrew was here, too. Is he more contentious . We know that, yeah. Okay. Well come back and arm wrestle. Okay, good. Thank you. When we come back, well have more on pepsi. Stick around, squawk will be right back. Health can change in a minute. So cvs health is changing healthcare. Making it more accessible and affordable, with over 900 locations for walkin medical care. And more on the way. 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From biotech in brooklyn, to next gen energy in binghamton, to manufacturing in buffalo. Startupny has new businesses popping up across the state. See how startupny can help your business grow at startup. Ny. Gov a deal crossing the tape this morning. Endo is acquiring auxijum pharmaceuticals. About 2. 6 billion including some debt. Approved the deal to 55 premium to auxiliums public. The day it made public that it rejected the unsolicited bid. So it is indicated close to thats the close there. And it is now indicated 32. 50 to 34. 45. It is going to be trading higher. Coming up, this special camel we have is on a mission. Were going to tell you exactly what this guy not an it. Well tell you what this he or she camel. Can you tell from a hump whether its a he or she . I dont know. I cant. Anyway. Well talk about it in the next half hour of squawk box. Yo, bro, you on woowoo . Are you kidding me . Everybodys on woowoo [elevator bell rings] woowoo . 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E trade gives you the tools and resources to get it right. Are you type e . I take prilosec otc each morning for my frequent heartburn. Because it gives me. Zero heartburn prilosec otc. The number 1 doctorrecommended frequent heartburn medicine for 9 straight years. One pill each morning. 24 hours. Zero heartburn. The ultimate arena for business. Hour after hour of diving deep, touching base, and putting ducks in rows. The only problem with Conference Calls eventually they have to end. Unless you have the comcast business voiceedge mobile app. It lets you switch seamlessly from your desk phone to your mobile with no interruptions. Ive never felt so alive. Get the future of phone and the phones are free. Comcast business. Built for business. The bulls roar back. Stocks surge in one of the best days for the markets in all of 2014. How long can the fed keep scaring the bears away from wall street . Carl icahn tweeting again. The billionaire investor picking at apple again with the promise of Something Interesting later today. The second hour of squawk box begins right now. Good morning, everybody. Welcome back to squawk box on cnbc. Im becky quick along with joe kernen. Arnold r andrew is off today. The bulls are hoping to rally. If you add the last two sessions together, the dow is up a grand total of two points. Up though. At least they made back their losses. The futures this morning have turned around a little bit. The dow futures now indicated lower. Down by about 16 points below fair value. Indicated up by about 23 points earlier this morning. The s p futures still up by just about a point and a third. Youve been watching the yields on the 10year treasury. It is dropping. Yeah. Below 2. 3 at this point. 2. 291 . I get notes from mark grant every morning on this. He is waiting for it to fall below 2 . In our corporate headlines this hour, an upbeat quarter for pepsico. Reported a profit of 1. 36 a share. That was better than expected by seven cents. They raised their full year forecast. This all comes despite what the ceo is calling a challenged macroeconomic environment. You see that stock is up by just over 1 . That stock, its in an uptrend. Did you see the 10year yield . That was not in an uptrend. That has not no. The 2. 9 . Its been in a down trend. Who are you . Youre ken langone, arent you . I am. I plead guilty. Lets look at a one year of the 10year note. There it is. I saw andrew last time. On the show right . He wasnt here last time you were on the show. Oh, andrew sorkin. Oh, i thought you were talking about andrew cuomo. Every time i come he ducks. He wasnt here. Im absolutely certain this guy is intimidated by me. Ducking you . Ducking me or whatever it is. It is hard to stand up to you. I think the reason he doesnt show up is because his arguments dont show up. Hes actually at a conference. Well, if he is its convenient. What kind of conference do you think andrew number one, what was the name of the conference and what city would it be in . Vanity fair in san francisco. Its like a moth to a light. What . He was drawn out to that thing. Anyway, i messed it all up. He claims hes an enlightened liberal. I think he can drop that. Lets keep beating up on him. Wild ride for wall street this week. The dow having its best day of the year after the fed minutes soothe investor fears. All of this coming after the 300point loss the day before. Which of theess big moves we saw sets the tone for stocks for the rest of the fall . Lets get to our guest cohost this morning. Ken langone chairman and president of invemed associates. The money that is dropping out of his pockets goes to a good cause. Langone Medical Center and education. Youre a prime example of someone that not only created, i dont know, 100,000 jobs, all those tax dollars. A hundred . 360,000. All right. 360,000 jobs. I dont keep track of them. So thats one thing. All these people pay taxes that have the private sector jobs. Thats another thing. Then all the money that you made, you give a lot of it away too. Well, let me just say this. Thank you for the kind words. Yeah. But elaine and i both feel and we believe this in the bottom of our heart. Weve gotten so much more than we have given. This is the greatest country on earth. And if People Like Us dont reflect it, shame on us. Thats right. Okay . I appreciate your kind words and all those nice things. We need to say it, ken. Because there is a there will be certain people that say weve created too many billionaires and millionaires and that some kind of zero sum game that somehow your gain is somebody elses loss. And if you just look at the actually facts and the jobs youve created and what you do philanthropically, its not true. Its a net positive for the entire world when people create wealth and have earned success. Anyway, we also have this other guy, what has he done . No. Hes got nice hair. Jonathan gollup is somehow here with ken langone. Im kidding, jonathan. You mad . No. You ask if the market is going up and im going to say yes. Heres what im going to ask you and im going to reference a mutual acquaintance of ours. Stan, one of the greatest investors of all time. Weve talked about the fed and how theyve had these emergency measures for much longer than tom people think they should have had them. Yesterday here we are again. Now im hearing if inflation doesnt come back 2018, we may stay like this for years and years. And the market still responded to it. Why . First, the question is has the fed really driven this market and the answer is probably no. I think they did a good job being a backstop. But if you look at the money printing that then is sitting in bank reserves, im not sure thats whats driving this. Wait a second. If you keep rates at zero where theres nowhere else to go, they even sort of admitted that marking up asset values for the wealth effect and hopefully it helps the underlying thats been one of their motives for doing this. Do we have a 2. 3 yield because the fed is keeping it there or because of europe and frankly the u. S. Economy has been growing at two and a quartquart er and cant get out of its own way . Are we pushing on a string on this . Or more importantly can the fed or government be the solution to that, probably not. And its going to be a slow, slogging, but more importantly a long recovery. And i think that ultimately we would come out of this fine. I could almost make the argument thats goldilocks for stocks. Youre not going to overheat the economy. Youre going to have 0 Interest Rates which make stocks attractive to allow people to borrow money. And youre not worried about inflation really. Its like goldilocks. Just right. Not too hot, not too cold. You think we go higher for the rest of this year and next year . If you look historically, bull runs continue until you get your next recession. And because this is such a weak recovery, i think this is a 9, 10, 11yearold cycle. How old is it now . Five and a half. I think were looking at 12 per year return for the next three or four years on this because it is slower and steady and how youre building your money almost. Look. I dont know about bulls. I know about companies. Business is okay. But only okay. We still have to come to grips with the nations finances. And thats a scary thing. You know, i was with stan last night. He made a remark. He said they can keep this thing going another 20 years. You mean the fed with low Interest Rates . Yeah. Where we are. And you think about i always argue older people are taking advantage of younger people. This generational theft. Think of the people retired. Youre kind to me in a way. Can you think of the number of people that are retired that are living on the income money they saved . 2. 3 these people are being decimated. I mean, this is wrong. The only good news is that theres very, very little inflation. So the cost of living is not going up. But 2. 3 on a 10year bond is not is really not a reasonable number to help the economy. 60 years ago there was an economist at harvard who made a remark. Had he said you need 2 or 3 inflation a year for a dynamic economy. You ask anybody that knows numbers, theyd rather have inflation than deflation. Okay . Im very worried that weve set up an artificial platform here where were going pay a hell of a price for it. You say lets not spoil the environment and so forth. Were doing the same thing economically right now. Its like gets drunk. When youre getting drunk, it feels good. But when you wake up in the morning, oh, my god why did i do that . This is my concern. Were set. I dont know how it ends. And stan said 20 years. See, i thought he said they could keep going. He put it in a nice way. He said theyll probably keep it going long after youve left. Ive got to hang around to a hundred because im about to become a grandfather. You were there when they said the 60 years. I want to live to see my grandchild graduate college. So i have to live to be a hundred. And ill do it. Jonathan, thank you. Were going higher. Five and a half years out of nine or ten. 12 to 15 a year. I like that. Well, i hope youre right. For me. And i think the surprising thing is, im not saying i think the economy will be great for the next three to four years, i think the market is going to do better than people think it will. I think youre right. But thats strictly because of supply. Thanks. Ken will be sticking around for the rest of the show. Up next, how will the first ebola death on u. S. Soil change the response from the government . And another case may have popped up in dallas. Updates on that. Plus dr. Anthony fouji from the nih will be here right after this. So ally bank really has no hidden fees on savings accounts . Thats right. Its just that im worried about you know hidden things. Ok, whys that . No hidden fees, from the bank where no branches equals great rates. Sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibil cme group how the world advances. Welcome back, everybody. The death of a man in dallas yesterday from ebola has the country even more concerned about this deadly virus. Meg tirrell joins us on set with an update. Thats right. A lot of people are asking questions about drugs and vaccines given thomas eric duncans death yesterday. Of course seeing a blow to the company chimerix. The camera man flown back to nebraska is also receiving their drug. They will consider all potential drugs. Other companies are also working the space. We were talking to dr. Scott gottlieb from the American Enterprise institute that says africa needs a vaccine and the u. S. Needs a drug. The nature of the outbreaks here are such we wouldnt need a vaccine unless it mutates. But drugs are important. But cdc officials have been emphasizes this is what we really need. Stick around. Weve got more to talk about with those changes from the response from the government after the death yesterday of that ebola patient. Joining us right now is dr. Anthony fauci. Hes the director of the National Institute of allergy and infectious disease. Also our guest host is ken langone. Hes on the board of langone Medical Center. Dr. Fauci, thanks for joining us. Good to be with you. We have questions about how to be perceiving all of this. The death of the gentleman in dallas raised concerns about whether our Health Care System is really going to be able to handle ebola cases if this is something that american hospitals on their own would be doing enough to change the outcome. What can you tell us about what we know and what we should be thinking . Well, i think our Hospital System is able to handle an ebola case. The fact that mr. Duncan unfortunately died really is not relevant to how were going to be able to handle it. Ebola is a very serious disease with the current outbreak having about a 50 mortality and historically under some circumstances the mortality can be as high as 90 . So the very fact that he died, i dont think has any change in any policy or the way we perceive things. Our Health Care System in the United States is such that it is extraordinarily unlikely we would have an outbreak. The reason is we have the capability of doing b the type of isolation that was done with mr. Duncan. Obviously there was a misstep early on there. But the Contract Tracing to identify the people that hes come into contact, all of whom now are under observation for the 21day period to make sure they dont have ebola. And if they do, to put them into the appropriate isolation. So thats where we stand right now. I dont think the fact that he died is going to change anything. Because, in fact, its a serious disease. What i can tell you, though, is we thought we were well prepared before any of this happened. That case shows a lot of lapses along the way. Its not he showed up in the emergency room and sent away for three days. Then we dont know what to do with the cleanup in his apartment. There have been missteps along the way. The head of the cdc says this is a learning experience. Have we learned that lesson . I believe so. If you look at the two things you mentioned and youre quite correct. Its appropriate to bring them up. There were missteps. I think right now with the attention that has been paid to what one must do if someone comes to an emergency room or a clinic complaining of symptoms that are suggestive of ebola, you must ask a travel history. And that travel history has to be properly communicated to the Clinical Team that makes the decisions. I mean, thats very clear. The issue with the waste is obviously that was a glitch that the permits were not ready to be able to remove the waste. That was clearly a big wakeup call now. So cities and hospitals around the country are paying attention to how they would handle waste in the eventuality if there were another patient with ebola. Youre right. There are things that are lessoned learned. I feel like were still learning these lessons. There was a sheriffs depth who had ebola symptoms that was in duncans apartment who went to an urgent clinic yesterday displaying those symptoms. Thats crazy to me. Im sorry. Go ahead, doc. I was just saying the fact he went to a clinic and they immediately recognized that he possibly could have ebola and you saw from the coverage he was immediately put under the proper protocol to evaluate. I dont think thats necessarily a misstep there. I dont think so. We have to understand we have the greatest Health Care System in the world in america. And this goes not just to the hospitals and the doctors and the nurses, but the ems people. Every day routinely we have secret shoppers. This is universal in the system. So were always on our guard. Think about infection generally, not just in the case of ebola. But people come into the hospital and you want make certain they go home healthier than when they came. The entire health care industry. We have to take it seriously. But i also think some people have to take a measure of comfort in knowing we do this every single day. Whether its ebola or whether its sepsis, whatever it is. And i think our Health Care Professionals deserve a lot of credit for this anticipation of crisis. So, look. We ought to be serious about it. I can go in our place and i know dr. Davis was on the phone on the television the other morning when i listened to him. Mt. Sinai. We all do the same thing. That said, its a serious situation and we have to sharpen our wits and make sure we dont take anything for granted. And i dont think we are. Dr. Fauci, what can you tell us about potential drugs and vaccines . That was a huge question yesterday after the chimerix drug. We dont know that much about it. What can you tell us . Virtually every drug right now youre hearing about is still under the experimental stage. The one that got a lot at first was zmapp. That one looked very good in an animal model and is being revved up to production. Once production gets some more drugs, then well be obviously going into a Clinical Trial to determine the right dose and whether it worked. The one you just mentioned brynn si doff vir are being used in a compassionate way with mr. Duncan and others. Still no idea if its going to work in humans. They have good activity. Some just in the test tube. With regard to a vaccine, we started a vaccine trial on september the 2nd here. Phase one trial to see if its safe. That will go until november or december. At that point well know if its safe without any unexpected adverse events. Then well go into a much larger trial to see if it works in west africa likely in liberia. Doctor, do you do a cocktail to try to find similar with hiv trying to find the, i dont know, the point on the surface where the what cells do ebola infect initially . Well, they infect a whole variety of cells. What they do is that as we know now from the clinical manifestations, they involve a breakdown of the mucusal barrier. So you would we have the scientific at this point to rationally design something that would fix this. What would your mechanism be at this point . First of all, find a drug that has good activity and thats safe. For example, we know brincidofovir has been used in over a thousand people for other infectious diseases. Theres a Clinical Trial looking at its activity. If it has antiebola activity, you prove that in a Clinical Trial and then you use it. If you can do it with one drug, thats terrific. You might need a combination of more than one drug, but youve got to sthhow that one at a tim works. Thats why weve got to prove that it works. Right now things are just given on a compassionate basis for obvious reasons because its an emergent situation. But there is a pipeline of drugs that hopefully ultimately will show one or more of them will work. Dr. Fauci, is there a way the u. S. Can accelerate the testing of the drugs to understand if they work and have centralized Decision Making to focus in on the most promising ones and get them out to patients faster . Thats going on right now. The difficulty we have in west africa where all of the disease is right now, i mean, were focusing on cases in the United States. Theres one imported case that came in inadvertently and a couple that were air evaced because they were infected in west africa. The way you prove a drug works is that you do a Clinical Trial. You compare it to someone who doesnt get a drug. The only difficulty is that the infrastructure over in west africa right now is very difficult to get a classical Clinical Trial going. Were going to do it, but its not going to be very easy. I can assure you. Because its a desperate situation over there. And the very brave Health Care Workers are really struggling to just do fundamental basic care for people. Dr. Fauci, thank you very much for joining us today. Good to be with you. Coming up, carl icahn tweeting at apple not now. Can you hear the music . Can you hear it . Take a deep breath in. And. Exhale. Aflac and a gentle wavelike motion. Aahhh ahhhhhh. 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S. Is becoming a new kind of company. One that helps you think differently about whats ahead, and whats possible when you get things organized. Ing u. S. Is now voya. Changing the way you think of retirement. Watch this. Sam always gives you the good news in person, bad news in email. Good news fedex has flat rate shipping. Its called fedex one rate. And its affordable. Sounds great. [ cell phone typing ] [ typing continues ] [ whoosh ] [ cell phones buzz, chirp ] and we have to work the weekend. Great. More good news its friday woo [ male announcer ] ship a pak via Fedex Express saver® for as low as 7. 50. Welcome back to squawk box, everybody. Among the stories that are front and center this morning, pc shipments falling nearly 2 in the Third Quarter compared to a year ago. That is the tenth straight quarter of declines. But its still a smaller drop than expected. Bank of england keeping its key Interest Rate unchanged. That was expected. And check out shares of pepsi. Stock rising after earnings and revenue both beat the street driven by a strong Sales Numbers for snacks. Pepsi also raising its full year forecast. That stock up by about 1. 6 . Billionaire activist carl icahn tweeting yesterday he would be send bing an interesting open letter to apple some time today. Joining us now to weigh in on the economy is brian blair. Hes senior at rosenblat securities. Whoo do you expect this letter to say . I think hes going to suggest that apple maybe break off this itunes side of the business along with beats and create a media platform. You know, we know he was a big investor in netflix back in 2012 and 2013. Realizing a 400 gain on that. I think hes going to say take dr. Dre, separate this itunes unit, and use your cash to really build out a media empire. Start maybe acquiring content, using the radio and the other this beats streaming platform to create a business that can help apple grow maybe even into the tv business. You think thats a good plan . I do. I think it makes a lot of sense. Itunes as a stand alone has been they have a large number of global users. But its really been in decline in terms of usage was weve seen the growth of spotify radio and other platforms. I think this is the main reason they bought beats. So i think that icahn is likely to say split that off and lets build a media empire here. The its not that, it could be related to payments. He obviously was spot on with ebay spinning off the paypal side of the business. So he has great views about increasing the value of company assets. He may have something to say there. Something related to a payment business. But i really like the idea of splitting off itunes and beats into a Media Company and building something from there. What do you think about the way icahn goes about doing this . With issuing opening letters. I guess tim cook will find out later what this is about after weve been speculating about it yesterday and today. Look, its worked. This is a guy in his 80s whos on twitter and using it in a really wonderful way. I was a little skeptical when he was pushing for the larger buyback pushing apple to increase their return of capital to investors a year and a half ago. But he was right. Apple did it. They followed his guide even after he backed off in february. They did it. Paypal obviously spun off from ebay. Its working. And i think the way hes doing it, hes been an activist and investor for a long time. Now activism and investing has become a hot trend. There are a lot of hedge funds that have popped up that are doing it now. This guy is still riding the playbook on the way to do it. Ken, you know him well. I know him well and have a lot of respect for him. Hes incredibly bright. He and his wife gail are committed to education and charter schools. I think what hes doing is constructive. You do . Absolutely. I think any time we can force managements and boards to think about alternatives, which they should be doing anyway, is helpful. If you look at carls record and some of the things hes suggested, every made out pretty well. Let me ask you this. Does it always have to be done in an open letter . Does it have to be sort of a forced way of going at it . Is there any way to make the Companies Work with you from the inside. Let me say this to you. Im for candor. Anything id say to you privately i ought to be willing to have somebody say that. I think when youve got shareholders who are passive or feel disenfranchised for something somethi somebody like carl or nelson the only managements that could be concerned are the ones protecting themselves or let me ask you. Why not do this if you go to management and theyre not responsive to your claims, why not do this first . Theyll stone wall you. Say get around to it. Im not going to name a name. Im not going to. I suggested a board member for a company and the chairman assured me hed contact this fellow. He never did. That sent a signal to me, mind my business. My choice. The way i do it. I sell the stock and move or on i say you know what do i want to get active. I dont think theres anything wrong with carls style or approach. I think hes out front about it. I think he gives everybody the benefit. Apple, they now know hes sent in the first missile. Let them come forward and say we agree with you, disagree with you. Count on us for our help or carl were going to back away on this. Thats fine. Look, we all know full disclosure is the name of the game now. Sure. So why shouldnt this be part of full disclosure . I understand that, but why not give them the benefit of the doubt. If youve had decent working relationship with someone. Which i assumed maybe im wrong i assumed that was the case with icahn and tim cook. It does sometimes seem antagonistic to be doing it so openly. But that was a great point made earlier. Why not do it to unlock value for them. Are the shareholders in the same camp on this . I mean, i can understand why this would get more publicity, might get a bigger pot early on. What matters the most is the results though. And he is getting results through this. He has been right. Companies are changing and following his suggestions. And i think thats really all that matters. Brian, why would carl now, lets go back over some of the things where he doesnt necessarily operate things. He didnt know how to run a cell phone business with motorola. I dont think he knew anything about via tech or biogen and it all worked out. I dont know whether its best to use that cash to buyback stock or make an acquisition of something to allow them to thrive five years from now. How does carl icahn have any idea other than just financial eng b nearing, how does he have any idea what to do with apple . Hold on. Maybe he doesnt. But guess what, hes forcing them to think about it. I like shaking up. But he may not know as well as tim cook how to deploy apples business. You fat cats think you know how to run the world. Guess what, i plead guilty to everything you just said. Ive been poor. Ive been rich. Rich is better. But just because hes got money, he knows what to do with apples cash . Hes in his oles he thinks were always in a bear market. Always. But he has seen it all. He has seen everything. He may not know the best direction to take a tech product no idea. He has no idea. He just knows theyre morons. He does know how to unlock value in an asset. And he does know how to return value to shareholders. Those are his areas of strength. And thats all im not going to continue to hear a love fest for fat cats. Andrews not here, im trying. A couple of weeks ago nelson pelts went to dupont. When the word got out that nelson was doing this, the stock went up 10 . Guess what. Some creative lawyer some place in washington can say, wait a minute. Thats inside information. Hold it. Right. Okay. This is scary stuff. So what does nelson peltz do . Its his information that created the activity. We have to be mindful of the world we live in today. Thats right. I think the apple board ought to say this is what he says to do. Lets give it serious consideration. When you come back and say it doesnt work, you go to icahn and thats exactly whats going to happen here today. Everyones going to be watching this because he has had a great track record. I mean, within tech. When he took a 9 stake in netflix, people were skeptical about it. But he had a 450 return. All the skeptics were gone. A lot of people didnt agree with the paypal spinoff. But they ended up doing it. The fact is hes shown an ability to direct Big Tech Company management teams and boards about the right things to do. They would not be following him if they did not think his ideas were ultimately accurate. And hes an incredibly relevant guy. I find it fascinating because of his age. Youd think he would be way outside of the tech sector, but hes not. Brian, thank you for joining us today. Ken is staying with us. Got my twitter guys on my side. Why should icahn be anointed an apple expert just because hes good at financial engineerengin . We worry about social issues. How about worrying about the business which is the reason people buy stock. You tell me. Is apples best use of its huge Corporate Cash used to buyback stocks . I dont know. You dont. Neither does he. All im saying is he may not know either but at least say thats an al tender div but just go off yelling about tim cooks a moron and do this. I dont think carl said hes a moron. But he said other people are. Ebay. He goes half cocked on things. Hes crazy. His investment style is not mine. Or you walk away. The fact is objectively i honest to god believe he provides a Great Service and value. Im not saying he doesnt. Im just saying, you know, he doesnt know how to operate all these companies. And you think he does. I would plead guilty to another thing. I see this man in a philanthropic setting. Hes a remarkably generous human being. He and his wife. They really care. They dont just write checks. They get involved. I know. I know carl. Just like he gets involved with corporations, he gets involved with charities. Were going to get to hear from the man himself. Quick programming note. Carl icahn and two of his Portfolio Managers will be on fast money Halftime Report today. Still to come this morning, Hedge Fund Titan Lee Cooperman. Yeah, youve seen the picture. Hes the chairman and ceo of omega advisers. But up next the runway is being hijacked. How celebrities are stealing the spotlight from fashion designers. Squawk box will be right back. Im type e. My golden years will not just be gold plated. I had 3 different 401 k s. E trade offers rollover options and a Retirement Planning calculator. Now i know when im going to retire. Not if. Some executive changes in the news this morning. Gap chief executive glen murphy is going to retire in february. He says art peck who is currently the head of gaps Digital Business is going to replace him. Theyve been doing well, people think. Hes going to keep working. Open other opportunities. Knee jerk reaction is down. And Advanced Micro Devices has replaced ceo. Read had been on for just three years. And the market cap cut in half down to just over 2 billion at this point for amd. Hijacking the runway. That is the title of a new book about how celebrities are stealing the spotlight from fashion designers. The author of the book joins us right now. Terri has 30 years of experience. It is great to have you here. Glad to see you again. I am thrilled about this book. Thank you. Youre absolutely right. Celebrities have been taking more and more and more space from the designers. How do you think that actually happened . You know, as i always tell people, dont think of this as a hostile takeover. More of like a tsunami. Because its, like, been a gradual thing. First celebrities were on the red carpet. And that was a big deal. And designers like georiorgio armani, they were the beneficiaries of that. Then celebrities thought we have a lot of clout with consumers. And so lets now have our own brand. So many of them have gone there. In fashion and fragrance. That must drive designers crazy. A lot of them are jealous. They have really hijacked the runway. Jessica simpson has a 1 billion business. Thats middle market products, but that takes away from all the other designers who could be having that business. You know, i understand the opportunity. I understand how were obsessed with celebrities and theyve gone along with that. I have to say, Jessica Simpson has comfortable shoes. I wear them. I think they let them in there because sometimes theyre more comfortable. And the thing about jessica, she was smart because she partnered with one of the founders of nine west. You know, he started making shoes in brazil. Hes really good at this. And he you know, shoes and handbags are the sweet spot in fashion. So now shes in 22 product categories. We still have designers out there that are like celebrity designers. Like michael kors. Michael kors is incredible in particular. Someone in business for 20 years, very kind of quiet. Had clientele. Then he sold 4,000 bags of michael kors every day. Its crazy. Im confused about something. Everybodys celebrity picture i see, they have jeans with a hole in the butt, shirt hanging out of their pocket, they need a shave. Okay . And theyre wearing these ugly sneakers. Wheres the style . Well, the thing is, remember i havent heard you complain about the rips in the jeans on female models . I didnt say boy or girl. You said they have to shave. You know what im saying though . I know what you mean. Celebrities dont have to always be dolled up. I mean, we see them now going to the gym. We see them i mean, thats why we relate to them. We see them as regular people. I guess i see them in their natural habitat. Thats all. What does this mean for changing business fortunes teri . The designers are jealous about some of this. Are they changing the way they play the game . Its one of those things if you cant beat them, join them. Thats why people are trying to become like michael kors where you can figure how to expand their social media footprint and how to be just really relatable so people will really think of them not just as a designer but a person. You mentioned tori birch. Shes on oush next list of people watching the next 25 years. What do you think of her . Well, shes what they call a celebutaunte. Because she had deep pockets to be able to actually start her home business, came up with a tunic top. But the main thing is she came out with a ballerina slipper. The slipper we would all wear when we switch out of our stilettos. They sold some 15 million of those shoes. Maybe five million. But were thinking she might be the next ipo. Who knows. It is great to see you. Thank you for coming in today. Yeah. Thanks. The book again is called hijacking the runway. Thanks for coming in. Great to be here. Youre like a morning show host. I mean, you fit into this for you to do this was nothing, was it . I mean that chair is comfortable. You look good in it. You want to hire me . Im out of work. I have no place to go. Ill come back. Youve got nothing to prove at this point. I thought he was good. Also i love his tie. Thank you so much. You mean im not sharp any other days . This was the first time ive seen you, but you look really good. You do too. Thank you. And the smile. That says everything. We get nothing, beck. Thats okay. Good to see you. When we come back this morning, details on one of ken langones newest investments. Grab a cup of coffee while we take a commercial break. Later, pot entrepreneurs with a new reality show. Squawk box will be right back. Ameriprise asked people a simple question in retirement, will you outlive your money . Uhhh. No, that cant happen. Thats the thing, you dont know how long it has to last. Everyone has retirement questions. So ameriprise created the exclusive. Confident retirement approach. Now you and your ameripise advisor can get the real answers you need. Well, knowing gives you confidence. Start building your confident retirement today. Shh. Watch how i do this. Ken, we want to get your thoughts on some stocks. Would that be okay . Wonderful. Starting with starbucks. You have a new investment in the company. When did you get in . Last couple of weeks. Really . Yes. Could you be more vague . Could you expound on this a little more . Its gone down a little bit. We went in around 75. It was 73 yesterday. It shows a businessman. Theyve got a fabulous franchise. Theyre infusing technology. For example, theyre going to have an app where you can go in ahead so when you get there, your coffee is waiting for you. Weve seen that. They need that. Thats right. I dont know why people would waste three bucks to buy a cup of coffee and then wait. You dont own dunkin. You asked me what i own, not what i dont. Thats why im pushing back on you. Dunkin, theres never a line. Its cheaper. Its good coffee. Why didnt you buy it at 30 . Its up to 80. I love Dunkin Donuts coffee. For years ive loved it. Hes got a great cash flow. Whos this howard . Howard. I think 30 payout. And aggressive buyback in the terms of the percentage. And you want my model, look at what frank lake and the team have done at home depot. From 2. 5 billion shares. Home depot needs fewer dollars to pay the 88 than the 90 cents. Shultz has got a great franchise. Ubiquitous. Its a great product. Its got great brand loyalty. And more importantly, hes a sensible guy. Its almost a new economy play because hes been able to tab into the entire crowd that has all the tracks. They all hang out at starbucks. They have new items on the menu as well. Hes still young. Not even 60 years old yet. I dont know any brand thats gotten such acceptance so quickly. Why now . Did you suddenly meet him . Did you suddenly see something its a combination of two things. If you have money to invest, where do we invest it . Im not going to buy 10year treasuries at 2. 92 . Because im going to lose money down the road. He is a Great Company and Balance Sheet. Everything is working. Look at what hes done. Remember when he left and came back . He did it. And the stock the company had lost its way. And he came back almost like jobs came back and totally transformed it again. A couple weeks ago in seattle i had a chance to meet jim senegal. It was no interest to me why theyre a fabulous company. Its about the people. Well have Lee Cooperman joining us in just a bit. Stick around. Squawk box will 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. I take prilosec otc each morning for my frequent heartburn. Because it gives me. Zero heartburn prilosec otc. The number 1 doctorrecommended frequent heartburn medicine for 9 straight years. One pill each morning. 24 hours. Zero heartburn. An Unprecedented Program arting busithat partners businesses with universities across the state. For better access to talent, cutting edge research, and state of the art facilities. And you pay no taxes for ten years. From biotech in brooklyn, to next gen energy in binghamton, to manufacturing in buffalo. Startupny has new businesses popping up across the state. See how startupny can help your business grow at startup. Ny. Gov my golden years will not just be gold plated. I had 3 different 401 k s. E trade offers rollover options and a Retirement Planning calculator. Now i know when im going to retire. Not if. So open an account with schwab. And when a market move affects, say, a Cloud Computing stock youre holding, we can help you decide what to do. With tools that help you see how market activity is affecting your positions. So when the time comes to decide whether to scale in or scale out. You can make your move, wherever you are. And start working on your next big idea. The scary days of october. We go inside the numbers as we head towards the heart of earnings season. Plus omega adviser ceo Lee Cooperman tells us about whats ahead. And the budding business of marijuana. Have you heard the news . Theres a new doctor in town. New show about potpreneurs. As the final hour of squawk box begins right now. Has nothing to do with marijuana. Rocky Mountain High . Yeah. I know. Its about a young man showing up in colorado for the first time. Right. Welcome back to squawk box here on cnbc, first in business worldwide. Joe kernen here with becky quick. Were going to talk about Hank Greenburg because youre involved with everything. Not everything. Some things. A lot of things. Futures at this hour. Yesterday was amazing. It was up 25 earlier. Now its down 74. We are seeing one thing missing recently and its volatility. So buckle your seat belt and get used to it. It might be here for awhile. Im not convinced anything had to happen from up 25 to down 75. Im not either. It has to do with what people are thinking if theyre going to stay in. I havent seen any spectacularly bad news this morning. Normally it would be europe or hong kong or Something Like that. Theyve been following us with all our swings. We do have a number of stocks on the move this morning. Pepsi shares jumping this morning on an upbeat quarter. Earnings and revenue beating the street. Company also raising its full year from ft. That comes despite what the ceo called a challenging macroeconomic environment. Results helped by higher aluminum prices. That stock up about 1. 8 . And endo is acquiring auxilium pharmaceuticals. Auxilium quit its bid with canada as a result. I would not have said anything. Auxilium. I knew it earlier, but you see it in the prompter sometimes and it looks silly. Carl icahn promising some news today. The investor tweeting he will be sending out an open letter to tim cook. Icahn says he thinks it will be, quote, interesting. Apple shares rising after that tease from icahn. Icahn disclosed a large position about a year ago. Since then the stock is up more than 50 . Often the case with carl. Hes got winners on these things. Dont miss icahn. He will be on fast money Halftime Report at 12 00 noon eastern time. Not everyone is singing the activist investors praises today. Ma Marc Andressen sitting down with andrew yesterday. Remember the evil and goodcap tin kirk . Like carl, its the exact opposite. He lies like he just makes stuff up. He slanders like its the full, like like his inner 6yearold comes out. Ive heard of star warz. Never of star trek. He also said he expects more Tech Companies will follow ebays lead and split up. Tim geithner will be back for more at the aig bailout trial today. Also former fed chairman ben bernanke is on deck. Mary thompson is going to talk to us now with a preview of todays proceedings. And you know whos sitting across from me, someone who knows a little bit about this as well. Ken langone is here as well. Hi, mary. Thats right. And as i understand it, mr. Langone, hello to you, actually took a stake i guess it would say in what would be the payout. Mr. Greenburg being the former ceo of aig. Mr. Geithner is back for his third and what is expected to be his final day of testimony in the aig bailout trial. As he completes his testimony, former federal chairman ben bernanke is expected to take the stand. David boyce pressed geithner about comments he made saying forces or losses were forced on aig shareholders. Geithner replying we forced losses on shareholders proportional to the mistakes of the firms. But then it got testy. Boyce asking if shareholders of banks who also received government aid suffered losses similar to those of aig. Geithner said yes in part because there was dilution to those who had to go out and raise capital. Shareholders allege in this lawsuit thats seeking 50 billion worth of damages that they were treated unfairly in the governments 185 billion bailout. One in which the government took a 92 stake in the firm. Geithners testimony basically suggested along with former treasury secretary that aig had no other options at the time save for the government to rescue the firm. And also he points out during his cross yesterday that aig agreed to all the terms that was by the government including Interest Rates on loans that were described in one email presented yesterday as crazily high. As we mentioned earlier, bernanke will follow geithner on the stand today. He has to leave early swob hes going to leave probably at 3 30. Thats bernanke. And as a result we expect his testimony will spill into friday. So again, court opens at 9 30. Well be here with updates throughout the day. Whos going to leave early, mary . Bernanke has to leave at 3 30 today. Whats he got to do . Where does he have to be . Seriously . What does he got to do . Im sure he has prior engagements. A 250,000 paycheck from a speech. No doubt. I think he has an appointment with a mortgage broker. Still trying to refinance that mortgage of his. Its only worth about 150,000 over the last ten years. Anyway, thanks mary. Ken langone is one of the big wall street titans. Hardly. It said it. They can say what they want. I still go to work every day. You are bank rolling Hank Greenburgs im not bank rolling. I bought a piece because i believe tell us, because we heard wrote the column in New York Times that this company are evil doers. They were going bankrupt anyway and they should be lucky to even first of all, i dont want to get too far into the details because frankly i think id be short sided and admitting i dont understand it all. The fact of the matter is simple. Take guantanamo. The American People would never say its okay to torture them to get names of people so we can stop some of our kids from getting killed. Their rationalization now is the country was so bad and somebody had to be punished and we had to consider the politics. Wait a second. I think thats a stretch. Lets just look at the facts. Youre going to be on Huffington Post. The reality is we have a constitution. These are terms that aig agreed to. They said, okay, well agree to the terms of the deal. Didnt change anything after the fact. The company would have gone bankrupt. The shareholders would have gotten nothing. Hold it. First of all, i dont believe all that. Bernanke said we knew we had them on a good loan. They had 192 billion in loans. They had a trillion dollars in safe assets because of the Insurance Laws but if the government didnt step in, what would have happened the next day . What would have happened to Goldman Sachs or general electric. Why did aig agree to the terms . I have no idea, but youve confiscated thes s assets of pee who werent there. 92 . Guess what, the constitution the fifth amendment makes it very clear. Look, you know the good thing about this, we have a judge. We dont have a jury. We have a judge and hell make a decision. Were going to present a forceful argument. David boyce, theres nobody better. Obviously the government thought a lot of him. My point with andrew and he was taking the side that these guys did some horrible things and that they needed to be actually punished. That there should have been punitive measures. My point was that number one it was probably 300 guys in connecticut. It wasnt a hundred thousand that were at aig that did the derivatives. And number two, it wasnt a solvency issue. Absolutely. It was a liquidity issue. Like with general electric. Not everybody should have been punished and maybe congress should have been punished. Maybe fannie and freddie. But did aig do something wrong . There were the guys who did this. I mean, they had you want to know who did something wrong . He said he would have shut it down. But the ceo didnt. Eliot spitzer. But the ceo didnt shut it down. I understand it wasnt hank at the time. The fact of the matter is we have a constitution. Were a nation of laws. First of all, i plead guilty. Anything Hank Greenburg does, i want to be part of. Hes a great american. I love what he stands for. He built a huge fabulously Successful Company that was stolen from him by a guy i dont want to get into spitzer, but you know i dont think nice things about him. He got that board that hank had, that coward board to vote hank out. If hank was there, this never would have happened. If hank was there, that definitely suggests there was something wrong that aig was doing. I understand him wanting to keep the company and make sure people keep their jobs. How about paulsen saying to Goldman Sachs, to wells fargo, and to jpmorgan, you dont need the money. You think they were wrong with lehman letting them go under . I didnt mention them. Paulsen said you need to take the money. Weve heard it from wells fargo a lot. These guys were fast and loose as far as im concerned. I think they were fast and loose. I think they would admit that too. They were making this up as they went along trying to save worse things from happening. But not preserving anything against the derivatives and by selling all thats what aig did. This is the thing where i do agree to some extent what the other side is. Aig sort of was almost a linchpin in allowing a lot of the stuff to happen. Because it allowed everyone else to have cover on the aaa. On the idea you could put total junk, subprime junk. But if you had the derivative covering the loss, then all of a sudden moodys could say its aaa. Its guaranteed by aig. This 180 billion company and they didnt reserve any of the credit. So the whole house of cards sort of was being held up by aig. All good but emails have come out with counterparties. If you bet right, you shouldnt be punished. The counterparties got 100 cents on the dollar. Whered the money come sfrom . The u. S. Government. The thing paulsen said the other day that shocked me was about politics. Let me give another analogy that works. The stock exchange. Paulsen was part of this. Carol barts wanted to know what dick did wrong. He gave us the money. We voted on it, everybody. And she said you guys on a conference, she said you guys are wusses. We should quit. Instead they fired grasso. And when frank was deposed, he was asked how good was he. He was the best, great ceo. And then put his wife down and said mr. Paulsen, im going to read you back the questions i asked you and your answers. He said tell me something, you believe in those answers . Yes, i agree with them. Then whyd you fire him . To punish him . For money he didnt ask for . He said thank god im blessed. Same thing. Look. As i say im emotional. I love Hank Greenburg. 19yearold kid runs on the beach june 6, 1944. Comes back home, starts at the bottom as a clerk. Goes to Law School Building one of the great corporations in america. Youre damn right i think this case deserves whats good about it . Im not going to disagree with the spitzer problem. But not that the taxpayer needs to bail out the shareholder in this case. Youve got they agreed to the terms. If you have a gun at my head and youre saying to me, tell me what you think of spitzer. And i know if i say hes a bad guy youre going to pull the trigger, but if i say hes the most wonderful man on earth and im going to live, guess what im going to say. I dont think you could say that even with the gun. Probably not. But wonderful thing about this, its being aired. Were going to find out this is true. I love these guys having to show up. And they worked like hell to prevent that from happening. It has been fun watching. When we come back, well have Lee Cooperman. Well find it where hes putting his money to work. Plus his defense of hedge funds that are under fire right now. Will that be all, sir . Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. And often even more. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 89. 95 a month. Comcast business. Built for business. It is october. A cruel month in the past at times for the stock market. Youve been hearing it can be pretty scary. Also part of halloween. And its not just because of 1929 or 1987 or pick your crash. Our dominic chu is here to take us in the numbers of this frightening month. Frightening not just because of the downside but also some of the upside moves. So howard silverblat put together a list of all the times the market has gone up or down by at least 6 . Can you imagine there have been 91 of those occurrences. A lot of them happened the month of october. First of all, speak to your point, joe. If you go back to all the big downside days, check out october of 2008. October of 1937. All these big down moves you can see here even during the Great Depression, 1929. All of these massive downside moves including black monday down 21 . Look at the other side of the equation. Some other names we want to talk more about. Take a look at the overall picture. 25 of the 6 moves have been in october. Both to the up and downside. So 91 times its happened, 25 of the times those moves happened in the month of october. But also the big upside gains happened as well. A lot of time they lead to upside triggers as well. Including the biggest gain of all of them in 1929. That was right after one of the worst days ever in the overall market. So if you take a look at these pictures, yes. Green is a good one as well. Also if you look at the big stats to keep an eye on, october has some market catalysts. Youve got columbus day coming up here. You see action happening there. Fed meeting on the 28th and 29th of this month. Also q3 advantage reads on gdp. Thats in addition to all of the earnings reports that are going to happen this time around. So this is the interesting part, becky, joe, ken. If you look at the 91 times its happened, all of these occurrences have been positive and negative. But on balance, 49 of them have been positive. Big upside swings. 42 have been negative. The big upsize gains have a little bit more prevalence in october. The downside was 20 in 87 and then upside was 9. Im trying to i wanted to accentuate the positive. Do the numbers on 17,000. 10 moves, 1,700 points. A 20 move would be 3,400 points in one day. I dont want to see that. Nobody wants to see that. October on average is not one of the most volatile months, but its when you have these big outside occurrences. I was there for 20 , that will get your attention. Great opportunity. The phone would ring and go, no one here by that name. No. Joe . No. Yeah, your clients its not true. We answered all of our phones. The people saying dom, thanks. But the growth worries have been reignited. Thats what cause the futures to sell off. Growth worries in the United States . In europe. I think it had already been up after that number was already out. Then people looked at it again. German exports or whatever. All right. When we come back today, we are going to talk jobless claims data. Plus a show that brings venture capitalists into the world of marijuana. But up next we have breaking news. Red bull does not give you wings. Guess what. Well give you the details after the break. What if there was a credit card where the reward was that new car smell and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. 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As one of the top four hospitals in the nation, over 100,000 people from around the world come to Cleveland Clinic for care each year. And were ready for you with a Second Opinion or a sameday appointment today today today and everyday. Call today, for an appointment today. Welcome back to squawk box, everybody. Have you bought a red bull in the last 12 years . If you have, guess what. The company owes you 10 or a freedly. Thats because the maker of the drink settled a lawsuit and agreed to pay 13 million to the consumers. Things like red bull gives you wings misled about the actual benefits of drinking the beverage. Two questions on this. Its crazy if people actually thought it would give them wings, theyre idiots. Second, how do i prove i bought one in the last 12 years . Every time you hear a bell ring, someone gets its wings. But ive never even have you had a red bull . It tastes like a red cream soda. But theres a lot of caffeine. Yeah. I think its a club drink. I didnt drink it at a club. I drank it out of a can. I think the kids drink it with vodka. So you can dance all night long. Okay. Thats what im told. Right. No, i dont have any personal experience with that. You know my life. My big night out is back to school night. Well, there was a time. Coming up, weve got jobless claims. Also Lee Cooperman. Squawk box will be right back. When diet and exercise arent enough, adding crestor lowers bad cholesterol up to 55 . Yeah crestor is not for people with Liver Disease or women who are nursing, pregnant, or may become pregnant. Tell your doctor all medicines you take. Call your doctor if you have muscle pain or weakness, feel unusually tired, have loss of appetite, upper belly pain, dark urine, or yellowing of skin or eyes. These could be signs of serious side effects. Are you down with crestor . Ask your doctor about crestor. An Unprecedented Program arting busithat partners businesses with universities across the state. For better access to talent, cutting edge research, and state of the art facilities. And you pay no taxes for ten years. From biotech in brooklyn, to next geenn binghamton, to manufacturing in buffalo. Startupny has new businesses popping up across the state. See how startupny can help your business grow at startup. Ny. Gov can you start tomorrow . Tomorrow were booked solid. We close on the house tomorrow. Tomorrow we go live. Its a day full of promise. And often, that day arrives by train. Big day today . Even bigger one tomorrow. Csx. How tomorrow moves. Welcome back, everybody. Weve been promising to have him here. Lee cooperman is joining us right now. He is the chairman and ceo of omega advisers. Lee, we want to thank you so much for joining us today. We know weve had troubles with the studio, but we are thrilled to have here with us. The reason we originally booked you was to talk about the Hedge Fund Industry. I do want to talk about that. Obviously its com under fire. Youve been vocal in defending it. Youre here on a day weve seen so much volatility over the last week or so. Id love to get your thoughts on the markets and see what you think about these massive swings. Are you worried at this point . You know, you got to get used to the fact that 35 of daily Trading Volume has nothing to do with youve got to ignore it and hopefully are smart enough to capitalize on it. I was on the program in i think december and then three month ago. I said the entire debate determining the outlook for the stock market is a function with what you think is the appropriate multiple for earnings. Because earnings are growing very slowly. So the real leverage is in the multiple. I was saying for a year now that a 16 multiple is a reasonable multiple for earnings. Thats 19. 04. Were now late in the year. So it will start to discount next year. Add about 6 to that number. It gives me a target a little over 2,018 to show you how stupid i am in terms of being precise. The market was 2,000 a couple weeks ago. I think it really was fully valued and has been fully valued for awhile. Not over valued, not priced to perfection. But no longer cheap. So would not be surprised to see volatility when the markets in a fair value. Weve been debating the feds role in all of this. Youre looking at earnings and what happens. But if the fed continues to keep Interest Rates at zero because after these fed minutes were kind of expecting it might be longer than we had originally thought, if thats the case, does that change the multiple . Does it make stocks more valuable in comparison with other Asset Classes . It might encourage people to speculate. At the end of the day, i dont think one should dismiss the significance of zero shortterm Interest Rates and 2. 3 10year bond rates. Its an indication of whats going on in the economy. Were to have significance for the returns you earn in equities. Last year, for example, i think the 10year government average, 2. 3 for the year. Inflation rate was 1. 6. Profits rose 6. S p up 30. Youre just not going to see that continue. The markets got itself into a zone of fair valuation. If Interest Rates are where they are today, a year from today, the stock market is not going to like that. Because basically it has some implications whats going on in the economy. Lee . Yes, sir, ken. Lee wrote a very thoughtful piece. Was it yesterday or the day before we talked . I forgot. He wrote for the wall street journal. On the hedge funds, right . Hedge funds. The other thing is, i think were focusing a lot on numbers. I think one of the things we have to worry about is what excess regulation is doing to our economy and our companies. And i think theres not enough said about it. But were paying a go ahead. I agree 100 . Youre going to get to see a bank loan you more money when you owe them 15 million a month . Its crazy. A lot are made on the fico ratings. Why would i want to make a loan to somebody who may have a problem and if i invoke my rights, im a heavy. Thats where we are today. Apparently mr. Bernanke couldnt get a loan. Thats poetic justice as far as im concerned. But, lee, thats why people say the economy would be doing better if there was demand and we always talk about the chicken and egg. We wouldnt need the fed in full bore if we didnt have all the regulations and if we didnt have the uncertainty about tax policy and if we didnt have obama. If we didnt have all those things, the entire recovery would have been more robust and internally generated instead of orchestrated by central bankers. I tend to agree with that. Ive made my views known about that when i wrote an open letter to the president three years ago. I think mr. Bernanke did what he had to do. But we have not had the leadership on the fiscal side to match up against the monetary side. So the entire burden of this economic recovery has been carried by the fed. In the process theyve destroyed savers in this country. Youre a working man. I dont know what you accumulate over a lifetime. If youre lucky, a million, two million. How do you retire . So its a conundrum. Lee, a portfolio question. Im a longterm investor. Ive got a fiveyear point of view. Where do i have greater risk . In the bond market or stock market . I would say unequivocally in the bond market. Historically the 10year u. S. Government bond in normal times has yielded in line with nominal gdp. Nominal gdp is real growth plus inflation. If you say youre in a world of two to three real growth and two to three inflation, thats four to six nominal. So when the world straightens itself out, its not hard to see they go from 4 or 6 . If you look at those numbers, youll have a capital loss. I think youre playing with dynamite. Buying a bond at 2. 3, keep in mind inflation over time benefits a company. Over time. Because the inflation in a companys costs gets incorporated in their selling prices. That lifts the nominal level of revenue and earnings. The way to adjust is to rise the price. I think were at an unusual time, rates are unusually low. In two of three years time theyll be much higher than they are now. Itll take a couple years for that to happen. I think you have a capital loss in the bond. As of yesterday, 30 of the s p 500 yielded more bonds. I think youre going to find plenty of stocks with a growing 5 , 6 , 8 , yielding 4 of a package. And i would say much more attractive to me than a bond. Keep in mind, Economic Policy in this country, it has to be tilted towards providing economic growth. One of the great Problems Society is facing around the globe, theres 75 million youth unemployed. Right. Unless we give these youngsters a better future, a better sense of opportunity, were going to be going down a very bad path. And so if you have the labor force grow in. 7,. 8 a year and productivity is growing 1. 2 a year, you need something to keep it flat. Lee, you just hit a button. We have got to get these kids educated. Income inequality relates very directly with inequality in education. And opportunity. And opportunity. I think this is where the other side wants to protect itself. We need to get these kids with a good education. We need technicians. We need plumbers. We need electricians. You make a good living as a plumber. Better now than when my father was working. Me too. Listen. Im a great believer in creating equal opportunity. My family just did something very major in new jersey to create the cooperman college scholars. Its about giving back. Youre a leader in this area, ken. I dont have to say it. Everyone knows your generosity. But i think we basically have to give these kids an opportunity. Because if not, were going the have tremendous social unrest. When you see kids in america joining isis, its because they see a bleak future. So they become radicalized. Im very sympathetic to this issue. I think we have to create equal opportunities knowing we cannot create equal outcomes. Have to create equal opportunity. Keep saying it, lee. Yeah. Going back, becky, on the market. While i think its in a zone of fair valuation, bull markets dont die of old age. They die from excesses. And, you know, most the most relevant cause of bear markets basically is recessions. And theres no recession horizon. You know, we have kind of what we call an economic stress list. Inflation is generally accelerating prior to recession. Employment is declining. Leading indicators are declining. We dont see that. We see the economy growing. And basically its growing at a subpar rate, but its growing. Valuations are reasonable. You know, on an up day, people tell me 16 times earnings is too low. On a down day, they want to say the 16 times is too high. Corporate america has never been more liquid in their history. And i think the next crisis is going to come out of Public Sector finance, the governments Balance Sheet unless they get their act together. Let me ask you about why we had you on to begin with. The hedge funds and calpers. You sent a letter saying in part over typical market cycles rather than extended trended bull markets, hedge funds have materially outperformed the Broader Market on a net of fees basis. Having calpers decide its not going to use any hedge funds. I know your hedge fund has done very well. The question becomes when you have over 8,000 hedge funds can you really hold them up as an exclusive class anymore. I just wonder if we can get into this is little. I never held myself or the Hedge Fund Industry in an exclusive class. We have. Well, you created the publicity in a sense. Let me say this. The american dream, you know, somebody wants to be the next julia robinson, david tepper, michael steinhart. There are 12,000 hedge funds happy to manage money and 10,000 mutual funds. If you had a choice youd rather work for 2 and 20 manager than 1 manager. I think the best people have been attracted to the industry. But generally what happens is a shakeout. And a lot of people have come to the industry looking for a pot of gold. Theyve underperformed and theres a high fatality rate. But i would not light any candles. I would not lose any sleep over these masters of the universe. Theyre all over paid, myself included. But i will tell you i have a very, very high regard for carol loumis. If you go back to the archives, youll see an interesting article calling the demise of the Hedge Fund Industry. At that time the hedge fund was managing 50 million. Lee im sorry. We cut you off because icahns letter to apple to tim cook is out. Basically what is it . The market misunderstands and misvalues apple. And i think he once again though is not calling for we would meaningfully increase a magnitude of share repurchases. What do you make of the whole by the way you own about 1. 2 million shares of apple, dont you . Yeah. We bought at much lower prices. Its very complicated. We think the stocks about 20 undervalued. We like it. We still own it. This magic of this buying back stock and retiring stock in a hightechnology business where things are subject to change. My first job out of college i worked for Xerox Corporation as a Quality Control engineer. I noticed how xerox put american photocopy out of business. And recently samsung and apple did damage to blackberry. Technology is a double edged sword. How much leverage they should have and stock to buy back . Ill defer to management. Theres nothing on the horizon nearly as profitable as the iphone. I think they have to reinvest to the future. Carl is a to be admired and respected. Hes got a great track record. But ill let the management do the heavy lifting and ill go along with what they want to do in this particular company. I dont see much new here. Hes basically saying the conclusion, this is not intended as a criticism of you as a ceo nor is it intended to be critical of anything you or your team are doing from an operational perspective. We couldnt be more supportive of you and your time and the excellent work being done at apple as you continue to change the world through innovation. But given the Earnings Growth we forecast, we continue to think the market misunderstands and dramatically undervalues apple and the excess liquidity that the Company Continues to hold on its Balance Sheet gives it affords the company an amazing opportunity to take further advantage of the valuation disconnect by accelerating the repurchase of shares. It seems like hes just more of the same. Isnt it . All i will point out and this is nothing to do with apple. The record repurchase year was 2007. And in 2008 when the stock market was dramatically undervalued, nobody was buying back stock. And the smartest guy i ever dealt with in my entire Business Career was dr. Henry singleton who retired 90 of his market capitalization. Nobody understood what he was doing. In 1982, business week had him on the cover of e the magazine in a very negative article. And now all of a sudden and he told me before he died the fact everybody is buying back stock, there must be something wrong with it. He told me that before 2008. He goes on to say, lee, while we recognize and applaud the companys previously increased share purchase, we ask you to consider our advice once again to accelerate it via a tender offer. Valuation tells us that apple should trade at 203 a share today. We believe the disconnect between that price and todays price reflects an undervaluation anomaly. His last line is interesting. The strength of the Earnings Growth we materialize to correct this mistake only to find themselves competing in the market to do so. De facto short squeeze may occur and we can only hope the company has repurchased all the shares it can before that. Wouldnt you rather buy it after . By the time, youd be buying at 200. Yeah. My goodness. It says its trading at half the s p 500 earnings multiple and he says its going to see eps rising in fiscal 2015. And revenue rising 25 on 2015. Do you agree with this . I own the stock, so im not going to get debating him about the attraction, but the market is not capitalizing one years earnings. The market is basically making a judgment that they dont see whats behind the iphone to perpetuate the growth. And whether this becomes more of a commodity. Now, we agree with him. Were both long b. He has a much higher price objective than we do. I hope hes right. The stock read all of this and decided to go up four cents. I also by the way again, we dont have enough hours in the day, you know, i dont know about all this public communication. You know . Hes terrific. Okay . But maybe he was on with scott and they got into a tiff and scott was asking me a question and carl says i want to talk about what i want to talk about not what you want to talk about. You know, i kind of believe he should have a private communication with the company. Whats the reason for a public communication . You know . But anyway, hes terrific. Hes successful. The only thing and youve seen it as well as i have. The number of corporations that over the years have stone walled their owners not to the best interest of the owners. You know absolutely. Theres a happy balance some place, but overall i think that to the extent we hold management accountable as owners, were doing a good thing. Yeah. I would say theres no question on balance. Its a plus. And on the other hand, something inside of my head says, you know, for 5 billion hedge funds to put 50 billion companies into play as a regular occurrence, we have to worry about it a little bit. We have to make sure it doesnt get carried to an excess. I agree with that. Apples hardly in play though. Right. Absolutely. But getting back to the Hedge Fund Universe i didnt quite finish the point, but as i said carol loumis negative view of hedge funds in 1970. Today the industry is 3 trillion. I think what is important for the investor to understand is the Value Proposition the manager presents. And if the manager does not live up to the Value Proposition he or she presented, they should suffer redemption. Conversely, if the client changes their objectives, you know, they could terminate the manager. But dont blame the manager. So ive been in business now 21 years, 25 years before that i was with goldman. When i started the business, the first page of my pitch book, it was the same first page today, these are my objectives. If my objectives dont resonate with you, dont match up what your looking for, dont invest because were going to have a flawed relationship. So my objectives and by the way ive not met them every year. Ive met them over the cycle. I dont want to lose your money. Number two i want to beat the s p net of my fees. Number three, given my view of the world and i dont use leverage 10 to 14 returns. And less volatility of the market. So thats my Value Proposition. Lee, im a happy client. Thank you, ken. Thank you for your support. Lee, thank you so much for joining us. Okay. We got to straighten out the studio next time. Okay. Coming up, one of president obamas right hand men on the economy. Jason furman will join us. In a world thats changing faster than ever, we believe outshining the competition tomorrow quires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Big day . Ah, the usual. Moved some new cars. Hauled a bunch of steel. Kept the supermarket shelves stocked. Made sure everyone got their latest gadgets. Whats up for the next shift . Ah, nothing much. Just keeping the lights on. laugh nice. Doing the big things that move an economy. See you tomorrow, mac. See you tomorrow, sam. Just another day at norfolk southern. receptionist Gunderman Group is growing. Getting in a groove. Growth is gratifying. Goal is to grow. Gotta get greater growth. I just talked to ups. They got expert advise, special discounts, new technologies. Like smart pick ups. Theyll only show up when you print a label and its automatic. We save time and money. Time . Money . Time and money. Awesome. Awesome awesome awesome awesome all awesome i love logistics. We can work with this guy, jason. The council of economic advisors releasing a report on the health of the millennium generation. A true capitalist . Thats what i tell people. We want the private sector going. I think you push that every day. As does the president. Okay. Convince us. Whats the latest coming from this report . We took a look at the millennial generation, thats a group that is the largest and most diverse generation in american history. Its the most educated and skilled. Its also a group that came of age right when the worst recession since the Great Depression hit. Thats created a lot of challenges for them. We tried to look at the interplay of that in terms of what it means for their work, their education, their housing and even their broader attitudes. Weve been talking about it today again. We are all aware of people being left behind. You probably met ken before. He does a lot with education. We are all talking from different places about how to equalize the opportunity and how to stack the deck so that everybody can have a fair shot at what is still probably the greatest place in the world to try to earn your own success. What are the answers . Education and skills is the most important determinant of your income. If you have a College Education young people have higher Unemployment Rates overall. If you went to college, you have a low Unemployment Rate even in the tough economy people faced in the years after the recession. Thats one really important thing. Of course, with that goes a lot of student debt, which is the second highest category Consumer Debt right now. Helping people manage that debt, making sure they are getting high quality education that enable them to pay it back. If they dont get the earnings income that caps the amount they have to repay, all those steps are central for this generation. Jason, how are you today . Im good. Nixon was the most unlikely president ever to make an effort to develop relations with china. The same could be said for our current president and regulation. I think that washington needs, and im hoping your group gives this a look, how much a price our economy is paying for regulations that really arent necessary. Fast answer. Absolutely agree. The president had their financial regulators in earlier this week. One thing he was pressing them on was exactly that. Take a look at some of their past regulations and see if there are ways to do them more efficiency. Come up again and sit on the set. We appreciate that. Youre object to something here. Thank you. Well be right back. New york state is jumpstarting business with startupny. An Unprecedented Program that partners businesses with universities across the state. For better access to talent, cutting edge research, and state of the art facilities. And you pay no taxes for ten years. From biotech in brooklyn, to next gen energy in binghamton, to manufacturing in buffalo. Startupny has new businesses popping up across the state. See how startupny can help your business grow at startup. Ny. Gov the ultimate arena for business. Hour after hour of diving deep, touching base, and putting ducks in rows. The only problem with Conference Calls eventually they have to end. Unless you have the comcast business voiceedge mobile app. It lets you switch seamlessly from your desk phone to your mobile with no interruptions. Ive never felt so alive. Get the future of phone and the phones are free. Comcast business. Built for business. Lets get down to jim cramer at the new york stock exchange. Dying to hear what you think about the icahn letter to apple. Research firm on steroids. 250 price target, tender offer that causes a de facto short squeeze in the Largest Company on earth . All i can say is tim cook has done a great job. Theres another 49 companies that can get this treatment. Let tim run the company. Nice thoughts here, period. Similar thoughts from Lee Cooperman. Thank you. See you in a few minutes. The World Bank President on squawk on the street. You probably know xerox as the company thats all about printing. But did you know we also support hospitals using Electronic Health records for more than 30 million patients . Or that our Software Helps over 20 million smartphone users remotely configure email every month . Or how about processing nearly 5 billion in electronic toll payments a year . In fact, todays xerox is working in surprising ways to help companies simplify the way work gets done and life gets lived. With xerox, youre ready for real business. And life gets lived. Means keeping seven billion ctransactions flowing. G, and when weather hits, its data mayhem. But airlines running hp endtoend solutions are always calm during a storm. So if your business deals with the unexpected, hp big data and Cloud Solutions make sure you always know whats coming and are ready for it. Make it matter. I have 40,ney do you have in your pocket right now . 21. Could something that small make an impact on something as big as your retirement . I dont think so. Well if you start putting that towards your retirement every week and let it grow over time, for twenty to thirty years, that retirement challenge might not seem so big after all. E financial noise financial noise financial noise financial noise ken, thank you for being here. You are a walk being Huffington Post article. Thank you for having me. I will try to live true to that reputation. Squawk on the street is next. Good thursday morning, im Carl Quintanilla with jim cramer and david faber. Futures have been all over the map. Currently in the red. Earnings out from pepsi. Got icahns letter to apple. Check out the tenyear down to 2. 27 this morning. That is the lowest since well over a year. Our road map begins with carl icahn sending his open