Transcripts For CNBC Squawk Box 20141020

After the bell as originally expected. Andrew has more on that. Okay. Thank you, becky. Ibm sending out an advisory that plans to release the results of their Third Quarter at 7 00 a. M. Eastern time. Well have details on what the announcement could be because the wall street journal says they will play global foundings to take its money losing chip business off of its hands. So the deal of sorts where nobody is buying something from them but they are paying to get rid of it. Ibm is talking to potential buyers, but buyers is the wrong term. Neither company is reporting on this, but well hear more about that in just an hour. No one is going to pay them for it . Exactly. That is not a good way to get rid of assets, right . Usually you want them to buy it from you. But this one is pretty interesting. And mark andreesse in is stepping down from ebays board of directors. He was central to the battle with karl ikan. He says its the right time. He said andreessen made a lot of money he made a lot of being part of the skype transaction when ebay sold skype and they turned around and sold microsoft later in the day. I would argue that the argument was suspicious at the time. All right. One of these days we are going to agree on something. You agree on that, right . I dont know. Just because i said it. I like andreessen and icahn. There are some new developments on the ebola front. Remember it is 21 days, thats how long the quarantine is. Can you imagine that . What do you do for 21 days . There was a story in the new york times. It is very difficult for anyone. It was for friends, family members and 50 other people all who came in contact with thomas eric duncap. That period has come to an end. Duncans fiance and her two nephews did not contract the deadly disease and the paramedics who drove duncan and Health Care Workers, they didnt. Neither did people who processed his blood, all those among the dozens cleared. However, officials have not determined yet how to two texas presbyterian nurses came down with the virus. And now government officials are tightening the guidelines for the protective gear worn by Health Care Workers treating ebola patients. And then the Texas Health Care worker who was a passenger on the Carnival Cruise, which we thought had the potential for just being horrific situation, trapped on a boat with this guy, he was cleared of having ebola. Actually, she was cleared of having ebola. She was a Lab Supervisor that handled a blood sample. She and her husband quarantined themselves. Its bad enough being quarantined. I guess it wouldnt matter, but in one of the small state rooms . They sent a blood sample because belize wouldnt let the ship disembark. They sent it ahead off a helicopter to test it, but i thought you wouldnt test positive unless you were already exhibiting symptoms. No, the test the test is fine at any point . The test is testing for ebola. I thought it was not enough of it until you started symptoms. It is not enough to transmit it but you can test it and come back negative. Then why would we be worried about all the people who were because the test takes time to do the why do we make people wait . How long does the test take . I think on this one, it is not im with becky. I thought you had to be exhibiting symptoms otherwise they couldnt test you and the test could be a false negative. I dont know. And i thought, just from what ive read i can imagine. She never had symptoms or had a temperature because the doctor on board was checking her every day. I can see if you were exposed and lets say you did get it in the first two days, i bet the virus level is so low on the first two days they couldnt test for it. But i dont know when it becomes we were told that it is a high tighter virus, which means it multiplies in massive amounts. To be much bigger. It just sounds horrible, it eats your organs and you sweat blood. We are pulling for the first nurse who was downgraded to fair. We are pulling for her. But they said it will get worse before it gets better for her. But they fully expect her to walk out. Maybe thats just positive, but were hoping thats the way it works. Well tell you about news on the International Front as well. The spaish nurse who contracted the disease after taking care of an infect priest has been found ebolafree after three tests. This is according to the special ebola committee. And nigeria is e bo lafree after six weeks of no new cases. The futures are so far so good. We are looking at green arrows with the dow looking like it is up by about 38 points above fair value. Obviously still volatility moving 12 points in the last couple of minutes. The s p futures are up by four with the nasdaq up nine. Now to broader markets including crude oil prices. The crude oil looks to be up by 17 cents still below 83 for wti at 82. 92. If you have been waiting to see what the tenyear note is doing, keep waiting. Were having a couple problems with the boards there. But these have been some of the things we are watching. The tenyear has been certainly something to move stocks and vice versa. Its been a lot of back and forth. We did see stocks come off one of the most turbulent weeks in years last week. Strategists are ready to call the allclear. Others say stocks could test the lows of the past week. Well watch closely counting down to todays open. Joining us is ed and peter. Ed, are we through the worst of it or should people wait and see . I think we are through the worst of it, no one can know for sure, but i think the worst is probably over. You were a buyer last week . Correct, yes. When . Throughout the week, but the biggest purchase were thursday morning. What makes you think we have got on the the allclear in the lack of ebola headlines that are out there . I dont know whats going to happen with ebola. You had a lot of guests on last week experts in the field, but it doesnt seem likely this is a major market event. It will certainly square people and rightly so, but i dont think it will derail what is continuing to be a bull market. Peter, one of the most commoning influences which is the fed, people thinking qe4 could be im not calmed by that because we had qe1 because zero Interest Rates worked. We had qe2 because qe1 didnt work. Now theyre saying, that all didnt work so well have qe4 that temporarily ended declining stocks. Have you been Walking Around over the weekend like you were swaggering like you were finally right about something . No. Do you take copslation that finally the market did some of the things you have been predicting it to do for two years . And is this a visibilictory for that this only went down six points . I call it as asee it. Does it have more to go . It would need more to go for you to have been correct about all the warnings you have given the past two to three years. Well, i answered the warning of the qe causing a disruption in the stock market. Is this it . This is only the beginning, i believe. Then it is not over. No, its not over. What happens now . Is this a clear shutdown or this would be a lot of wobbling back and forth . The next couple of weeks we can stabilize, but i think over the next three to six months as the qe finally ends, were going to roll over again. This turbulence is happening. We have seen this pattern before. We saw it half qe1 and after qe2 and are seeing it again. This is a central bank inflated global stock market rally that when they pull back this is what happens. I think one of the issues now is we have seen in europe everything that the ecb has announced hasnt worked. They announced june 5th a lot of the big steps and the european markets went straight down. So i think the markets are beginning to question their faith in central bankers ability to not only generate Economic Growth but to look up asset prices. So it could be dangerous in terms of the central bankers influence. Does this make u. S. Stocks look more attractive in your opinion . Europe has been struggling to generate growth for years. So people are looking at this like it is something new. To me this is not new, their inability to generate foreign growth that multinationals can rely on. I can make a case for what youre saying, the temper tantrum was not a big deal was they totally panicked and folded. Last week we heard the beginning of a fold down 5 they were worried. These people think the entire globe is on their shoulders and what they do with their little bond buying and keeping the Interest Rates at zero. Everything we do, our whole future is dependent on them being right about this. Thats a sad place to be. I dont think thats right. I dont think that this rally is solely on the fed. They play a role and they obviously intended to play a role. But they are ready to come back in already. I think that was a signal they could do it if the conditions warrant but i dont think they will. Thats just a hypothetical when asked. Two guys said, maybe we shouldnt. And bollard was formally neutral or hawkish. What they have said clearly is they are not going to tighten policy until they see a much better labor market. With higher inflation it seems up likely given the price of oil and the labor market is improving but still wages havent gone up very much. But they put forth the idea they could, that not ending qe this month. Some people said thats why the market they said it was possible. And then people attributed that to the market getting some stability. I guess in any opinion that just isnt necessary. The economy is recovering. One of the constants on wall street is everybody on the street thinks they would make a much better fed whoever is the head of the job at the time, but i think the economy is Strong Enough that it wont be necessary to take any further extraordinary actions and i think the markets driven by fundamentals, recover are i in earnings. I think well see earnings up 8 or so year over year, which is roughly what well get for the year as a whole. At the end of the year, thats how much stock prices will go up. It really is a fundamentally market pushing the prices higher. Peter, what do you think about the fed . I think we could focus on the fundamentals. You do agree they are pretty good . They are decent, but we are in a 2. 5 economy. So its decent, not great. This is not a fundamentally driven stock market, it hasnt been for years. Now granted, earnings have improved so we would have had a good economy and good stock market without the fed. I think just the juice from the fed has impacted evaluations to the extent that we have overrun the underlying fundamentals. So ed was buying last week, what were you doing and what will it take for you to look at stocks to say these are reasonable prices . If you look at evaluations, we we want into the last month with market capped gdp the third highest since the 1920s. We had priced the sales higher than the price of 2,000. Just slapping a multiple on next year earnings is too simplistic for me. So stocks are expensive and they need to get cheaper for me to find them attractive. How much cheaper . But we are in a vicious circle of the central bankers being so involved and every time they walk away we see a decline. Every time they walk back we see a rally. This is a very dangerous situation we are now in, i think. But again, what sort of level for the s p would make you think, okay, now were talking. I think we have seen what happens if qe1 and qe2, take us down to 1600 in the s p over the next three to six months. Nothing very shortterm, but to me thats a much more attractive stock market. Do you think well see levels like that, ed . No. Last year the dividend on the tenyear was above the tenyear buy yield. So you are potentially getting growth protein sotential stocks. I think we saw when we crossed the line where the dividend was above the tenyear is a rough rally. So i think the fundamental basis for the stock market prices being where they are will trend higher as earnings go higher. Peter, ed, thank you for coming in today. If you cant test for ebola until you have symptoms, how do you ever no, they said this in spain. They have given three tests to how do you prove that you dont ever have it . You improve the if you make it fast 21day mark, which is what they historically believe i think you can test anyone. Any time you want, but if a person doesnt have it, they are not going to show symptoms. So you cant just show people that dont have any symptoms. I dont want know why you have 21 days. But if you dont show symptoms, you technically cant really have it. But they just tested this person and it came back negative. How do you test a person and it comes back negative. Why do we bother putting them in quarantine for 21 days . Why dont we test them two days later and let them go . Maybe we dont trust the test. I dont know. There must be a chance for a false negative. Well, this woman they tested her because she did have it. And now she doesnt have it in her blood anymore is what they said about her. The spanish nurse they tested three times and she did. But the lady on the cruise, it hasnt been 21 days how do you test someone, if it comes back negative, they never had symptoms. You cant wait for symptoms to test someone because if they dont have stymptoms, this doesnt make sense. I dont know. I still question when do you test someone . I believe you test somebody once they showed some form of a symptom. If they showed no symptom they do test people that show no symptoms because they have been exposed to the virus. How do you test someone if they are negative . Why do we just test her and say shes not. Thats what i dont get. Because you can develop it. Test negative one day and have it the next deas day because you show symptoms. We are coming back in just a moment and talk about what investors can expect from apple, excuse me, as it gets set to report results and lawn ch apple pay. Were also figure out the whole situation with ebola. And a viagra a day could keep the doctor away. Well have that story next for certain people. And then on sunday night football on nbc, Peyton Manning breaking the passing touchdown record previously held by brett favre. He threw number 509 with a few weeks left in the first half. Well talk about this as squawk box returns in just a moment. E financial noise financial noise financial noise financial noise a viagra a day could keep the doctor away. It could prevent heart thickening and early stage heart failure. But if you have a heart issue, you are not supposed to take viagra. I thought so, too. Well its, youre distorting it a little bit. They say you need your heart needs to be okay to have sex, but in this case, its like strenuous. Blacklist, the latest version of the nbc show, he threatens this guy by putting Something Like viagra in his drink and hes a heart patient and the guy starts seizing up. As you can see here, thats tv viagra. It worked for me. I was like, wow. The dosages used for heart ailments are lower than those used for erectal dysfunction. The drug prevented the heart from changing shape in patients suffering from a left ventricular hytrophy. This also had no effect on. Blood pressure. Normally you just make sure your heart is healthy enough to have sex because there may be there are people that this guy was really sick was on the patient waiting list. While we are on the issue of erectal issues and ebola, we have a tweeter who says, his name is michael, he says the virus can hide in a mens semen for seven weeks after hes cured but does that show up in a blood test . I have read that. Who knew . It can be an std . You can be a carrier and give it to someone through supposedly. Well do a little more looking into this. The other thing that scared people is that rare cases of blindness people get ive got a friend, and people get flushed and they see blue spots. It increases your circulation. Right. Okay. Lets talk about apple. An apple a day can keep the doctor away. Thats the saying. Viagra a day can probably not keep things away. Anyway, shares popping immediately after the iphone 6 lawn ched in late september but the stock has been falling despite the new Product Launch the last week with Quarterly Results coming out after the bell today. Joining us to talk about is dave garrity of gae research. Good morning to you. Good morning. How much are we going to see show up in this Earnings Report . It was only ten days if i was looking at the calendar properly from when the phone came out to tend of their quarter. True, youre not going to have all that significant impact, but nonetheless you have had some fairly strong indications from tim cook with last weeks launch of the ipad. But they were saying basically records by a wide margin being set for the iphone 6. So even though strictly speaking when we look at the september 30 numbers, we are not guessing a large contribution but the indication and the body language from the company is theres far more to come as we look to the december quarter. Does the street understand the true margin . Theres always a breakdown of the machines when they come out, everybody rips the phones apart to figure out how much the component piece of an iphone costs do. We think we understand what the margins look like these days . The standard procedure being done around every product lawn ch, theres been fairly positive breaks. Namely people thinking that the size, the cost of the screen on the iphone 6plus, 5. 5 inches versus 4. 7 for the 6, that this would be significantly more expensive. But it is only 16 more expensive. We know from the material what is the components are, but what is important to see what the costs are versus expectations. And on that side, apple seems to be coming out somewhat better, which should bottom line have an improvement for the company and stock. We are talking about apple in a minute, but how are you looking at this over the next 6 to 12 months . Apple pay is not strictly looking at the margin contribution which is relatively small. Apple gets a 1. 5 fee off the transactions, but if you get enough transactions, clearly these add up. With regards to apple pay, the number of Financial Institutions and retailers they have signed up and how well this Communications Work in terms of people actually checking out. If its a greater convenience feature with peach checking out of a restaurant or store in less than 15 seconds versus 2 minutes, this could be a great feature. What do you worry about . I worry about the broader economy but perhaps concerns about ebola may be starting to stabilize here. And we have a really benefit from the Lower Oil Prices putting money back in the consumers pockets. We think we do get a good setup for the year in the Holiday Shopping season which opens the door for the iphone 6 to be a possible gift of choice. David, thank you. Well see what happens this quarter. And then we talked about the watch, the watch is a big game, i assume, for the next quarter and quarter to come. 2015. Thank you. Thank you very much. Still to come this morning, a chill in the air for the northeast. But not enough to pump up natural gas prices. They are falling even with winter on the way. Well take a check on that and the latest moves in crude with the short report. Plus, a cnbc exclusive. Microsoft Ceo Satya Nadella talks to john ford about hi major blunder for pay and women. And before we go to break, a look at last weeks winners and losers. Act i. Scene 3. Open port twentytwoohoneseven on the firewall for customer db access. Install version twopointthree of db connector and ensure verbose flag is set in case of problems. clapping sound isnt the cloud supposed to make business easier . Get the one that can connect to the systems that you already have. Today theres a new way to work. And its made with ibm. 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You want to bring back the scary music . I dont want know, i think we want a changeup. We department say anything for a week. No. Good morning. Welcome back to squawk box here on cnbc. Im joe kernan with becky quick and andrew ross sorkin. The futures are higher so we are not going to play the scary music. Thats only for when the markets going down. I sang on friday. You can project very well. It was thursday. I sang it on thursday. I didnt need to sing on friday. In the headlines, ibm is paying a contract chip maker global foundries 1. 5 billion to take over the Semiconductor Unit. The two Companies Making that announcement earlier this hour. Ibm is expected to give more details on the transaction along with Quarterly Earnings at 7 00 eastern. And Mark Andreessen stepped down from the board of directors from ebay. Now is the time following the ebay decision to separate the paypal unit. And fury topped the box off in north american sales. How many times would each person have how many times would each person have seen it in the United States . You would need globally, globally you would actually need everyone to see it how many people are in the world now . Bueller . They would only need to see it okay, a billion is wrong. A billion is not correct in this case. No, youre going out on a limb on that for me . So thats a correction youre going to correction. Okay. Have you seen bird man . The new michael k ergskeaton. This is going to be the oscar winning this is the return of michael keaton. First of all, i think bird man was about alcatraz. No, that was bird. What is this about . Who else is in it . This is like everybody in the whole world in it. This movie is going to be did you already see it . I have not. You see ben affleck movies the day they come out. Lets talk about crude oil. Already lost about a fifth of its value since june. So how low can oil go and will we see a bottom soon . Joining me is steve short, editor of the short report. I love the oil going down short because no one called it. But dan, once the stock market started going down, it didnt stop going down until oil stabilized. So suddenly, and i mentioned this to cramer last week, suddenly people that dont want to see the market just collapse were hoping for Interest Rates to go up because the tenyear was getting too low and hoping for oil to stabilize and go up because that would breathe life back into the equity markets. So were in this weird position now where we dont want oil necessarily to go down. But it is good for the consumer, isnt it . When it goes down . Well, oh, absolutely. Its certainly good for the consumer, but are we putting the cart before the horse. Are Oil Prices Falling because of a weak stock market, which i think is the case . Or is the stock market weak because of Falling Oil Prices . So obviously you know where i stand, but joe, were probably at the bottom of the market for no other reason then, i read an editorial yesterday saying now that crude oil prices are low, we should raise the gas tax. So always being late to catch on. We have politicians now wanting higher gas tax. So lets frame out the weakness this summer in oil prices. First and foremost we have the economies. Europe, we know that its a mess, i know, what is new. Asia, the properties slump. So in return, what do we have . A strong dollar at a fiveyear high which correlates to Lower Oil Prices. Weakness as weve said in the stock market, which i think leads to oil prices. And lets talk ebola. That seemed, i dont know why, but that seems to be poopooed in this market. You look back to the 1989 bird flew, the jet fuel prices fell 10 . Sars, the jet fuel prices fell 7 . Now the jet fuel prices are only down 20 . At this pointers not enough demand. On the supply side, we have the fear of situation. Back in the spring, it was isis, iraq, what that could do to iraqi production. We made it through the summer driving season. Iraq is till pumping barrels. We also have the situation in libya. Before the production, libya production was nil. Today the libya production is at 750,000 barrels a day. And venezuela, they are long bond trading, 50 cents on the dollar, that country regardless of price needs to pump oil. So where are we now . We have the budget situation. Lets forget about talking about the saudis and trying to send a message to the guys. No, that situation is because of the sunni shia riff. Now the biggest fear from the economy strandpoint, joe, is that if saudi keeps producing. Because if they keep producing, it is not because they are trying to send a signal. Its because they have real fear of a Global Economic slowdown. To that point, the iea last week which so happened to come out on the same day with historical plunge in oil prices saying oil demand is going to be the lowest since the bottom of the economic recession in 2009. Wait a minute, flow and demand or auto demand growth . Oil demand growth, excuse me. We never go back. Well, you know, lets be careful with that because remember we have a situation we las t elasticities. We got that with karina with oil prices not going the other way, but the big difference over the last ten years are the substitutes in the clean markets. I have drive a diesel right now. Has the oil demand dropped year over year . No, ill see that but it is not the linear growth. Is 80 the bottom . Yes. Between 80 and the 75 level. Now we are at a level that does threaten the budgets, even that of awe dee arabia. We have oil in the low 80s to threaten the transportation economics out of the railroad and pipe line. Most importantly, demand is about to come into the market. We are at the turnaround season. The lowest demand of the season. We are only demanding or only boiling 15. 2 Million Barrels a day. Now, over the summer we were boiling a record 16. 7. So since the summer to today, 1. 5 Million Barrels a day of u. S. Demand has been taken out of the market. Now if we look at the refinery yield, the winter Repeating Oil to crude oil is trading at a 20 premium as opposed to a 13 premium over the last five years. So bottom line is, weve got record capacity. We have a very strong incentive to boil oil. So yes, i do think barring a significant economic global recession that oil prices are at near the bottom. So its the stork report, right . You have a picture of a stork. Yes. Thank you, becky. You dont have a stork because your name is schork. Its confusing, what is it . And ivis. Its for rating seasons, no . In south forklower, the ivis is the first bird to show theres trouble. You in their is schork and knew this could confuse people. At this point its all about branding. All right. Thank you. Do you understand . Yes. Okay. All right. Becky understands. Do you . Not really but im incapable of understanding this. Thank you, steve schork for the stork report. Coming up, is the world ready for a microsoft watch. That and the exclusive interview with Satya Nadella dealing with embarrassing comments on womens pay and asking for raises. Well have a lot more when squawk box returns. Thoughtfully crafted and intelligently designed. With available forward collision warning and new blind spot monitor and a 2014 top safety pick plus rating. Cost of entry . A fortune. Until now. Hey sarah, new jetta . Yup. Can i check it out . Maybe at halftime . Introducing lots of new. The new volkswagen jetta. Isnt it time for german engineering . E financial noise financial noise financial noise financial noise ameriprise asked people a simple question in retirement, will you outlive your money . Uhhh. No, that cant happen. 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Before apple. Next year for apple. Right. They are beating apple. Yes, but well see whether the watch what is great about the apple watch. Well see if any of the watches work. I just said i wouldnt want the watch. But meanwhile the stock was at 102 when the watch was introduced and it is now 97. You got your big iphone 6, right . 6plus. Youve got it and you like it. And it hasnt bent. This weekend without my blazer and coat and just with jeans were they skinny jeans . No, but i had to put it out on a table a lot if you were at the restaurant or doing thing with the kids. There was one point where i had to put it in her purse because i couldnt deal with it. As a woman with a purse all the time its not a problem. But we have more important issues to get to. The microsoft Ceo Satya Nadella is here talking to cnbc and here are the highlights. He wanted to talk about the cloud, but first we had to address the issue of his comments about women. At the grace hopper conference and women in tech, he was asked what women should do if they want to ask for a raise. He said, dont ask for a raise, karma will take care of it. And he said to me, really, he was giving the advice that he had been given, and wasnt really thinking about it from the perspective of people who feel up fairly held back and went on to say more. Take a listen. Some people would say, and have said to me, hes the ceo of microsoft. Microsoft is a big powerful company, he can fix this. Thats what i expect. What do you say to those people . Actually, it is absolutely right. Theres no reason why i shouldnt go to work on it. And one of the data points i share today is one of the things i came back and asked our joint department and said, hey, lets take the principle of equal pay for equal work and lets also talk about equal opportunity for equal work. Those are two Core Principles for us. On the equal pay for equal work, it turns out we have a tight band at 0. 5 . So within a. 5 , all ethnic minorities and women are within that. In fact at microsoft. At microsoft. We looked at women in the u. S. N particular, because thats the data cut easy to do for us, and it turns out last year 99. 7 of their mens salaries are what women makes. So its different than perhaps what is normally felt across all industries, but were doing well on that. But by the way, im not celebrating any of it because all i just said was we pay equally if youre in the same level. But the real issue is, do we have enough people of different ethnicity and women in those levels . Do we have them in our Corporate Vice president ranks . Are we promoting them as vigorously as we are . So there are a lot of other secondary things we have to go actively look at, but to your point, of course the expectation of anyone should be that a ceo like me should go to work on this and have some principles guided. And the two principles to stay ground on equal pay and equal work and opportunity for equal work. And well make progress on that. It is interesting where he took that, going back to the graszhopper conference, i think hell consider his words more carefully next year, guys. There was a very technical analysis, a good analysis of what it is. It is not just equal pay for equal work, its making sure women have the same opportunities to get into the higher paying jobs, some of the top management jobs. What he said ability where microsoft stands right now sounds to me that it is better than much of the Technology Industry from what we have heard from other companies in the valley. There will be a lot of people who are curious, how did you slice this za a . If you slice it narrowly with all the Software Engineer threes, 99 of them are men and one is a woman, theres a question about how fair to compare those things. But he did bring up the point that it is not just about equal pay at level. It is, is everyone having opportunity to get to the certain levels . Microsoft is more than 70 male, i believe. So are those issues they have . We look forward to hearing the rest of his comments throughout the day, two. With the Silicon Valley tie taps like facebook and apple offering females 20,000 to freeze their eggs, that is raising questions as well. Are highpowered women being frozen out of achieving a work and life balance . Well talk to sally, great to see you today. Thank you for having me. Why dont we start with what jon was telling us about the comments from Satya Nadella. Obviously hes had second thoughts. I think every professional in the world said, hold on a second. And im sure this man said, i wish i could pull those back in, but in a way while you dont love the comments, you have to love the aftermath of this, and is the discussion, his comments on it. The fact that we are having this discussion and debate and bringing the issues to light because its still not settled. I guess i appreciate his comment that you need to have equal opportunities for women, too. That seems like its probably the sticking point. Women get derailed a lot of times if they do jump off to have kids. Its hard to get back on. Especially if you have kids young. It would be easy because its not just the fact that we dont have pay parental leave in this country. Its the fact all of us have settle biases and as men become more successful they are more likable. And as women become more successful they are less likable. Thats what research shows. So its about 100 or 1,000 things like this, the subtle issues that end up having us where we are, which is that the progression of women in the workplace has been flat for years and years and years. Not to the last point, this likability issue that you talked about in the studies that have. What do you think thats about . Its hard to say. Look, some of this stuff is just very inherent with us. We know women who are perceived as too aggressive at work, theres backlash. Its the bossy thing. I called one of my kids bossy this weekend and it was my son. I realized i shouldnt have said it. Youre very enlightened. I like you. I like you too. A lot of people dont like me. But as women become more successful, you can watch that. Have you felt that . Do people like you less . Youre very successful. The last honest analyst on wall street. Then at citigroup. Not all my press was great. There were a few that was, oh. And i was the same person here and here and here and here. And theres not a successful woman you talked to that hasnt felt that double bind. That when she got more successful, people did more of this than this. But, look, in my old industry is pose the crisis that we went backwards on diversity. You would have thought we would have gone forward. And instead we got a we have to circle the wagons and go back to first principles. Theres now a debate about what facebook would say about paying to freeze your eggs. I thought it was great. It is fascinating. It gets back to how unsettled it is. I had emails that said apple is forcing women to freeze their eggs. I said, dear lord, theyre forcing women to do that. Youre right. There are some saying this is giving women some options. I sure like that better than not paying for Birth Control for women and health insurance. Sally, i want to thank you very much. Thank you. Coming up, Richard Fisher will join us live at 8 00 a. M. Eastern. To see what he says about whether we continue to taper. There was no question she was the one. She reminds you every day. But your erectile dysfunctionthat could be a question of blood flow. Cialis for daily use helps you be Ready Anytime the moment is right. You can be more confident in your ability to be ready. And the same cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently or urgently. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a free 30tablet trial. Up next, we are expecting results from ibm. The Company Moving up the release of its report to 7 00 a. M. Eastern. The numbers and the instant reaction next. And today is apple payday for iphone 6 users. Were going to hear from an insider at the company about the big launch in the next hour of squawk box. 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. That is why were playing that much. The futures have gone flat at this point. Now the dow is just a couple of points difference. Welcome back to squawk box, everybody. This is cnbc. We are first in business worldwide. Im becky quick along with joe kernen and andrew ross sorkin. We have another major blast of Earnings Reports from about 20 of the s p 500 that are expected to report over the next five days. That includes ibm which we are expecting at any moment. Lets check the futures right now. And, yes, the change of music shows you whats been happening. Dow indicated down by 2. 5 points. About an hour ago these numbers were indicated an open above 50 points for the dow. It shows you some of the volatility. You can still see some pretty big swings even before things get started with the market open at 9 30. Okay. Lets tell you about whats going on in the headlines at this hour. An important day for more than a dozen people exposed to ebola victim Thomas Eric Duncan. Their 21day quarantine period has come to an end. The passenger on a cruise has also arrived back. And andreessen apple pay laumpbls today. The system will allow to purchase items at 120,000 stores using their phone and fingerprint. Josh lipton has an interview later this hour on that. With volatility continuing its streak and the vix all over the place, in fact, jumped to 30 for the first time in nearly three years. And 20 of the s p 500 companies are set to report this week. Should we expect another wild one like we had last week . With us right now Portfolio Manager at pimco. And investment strategist at oppenheimer funds. What the hell happened . Bonds . No. Gross. What was that . What was that, man . Were you there for that . I mean, did you that morning did you know he was going to split . No. I did not. That was a shock. Hes my idol, bill gross. Hes the greatest bond investor of all time. He endorsed my first book of five seven years before i was hired. I was hired by bill gross. He elevated me to the Investment Committee within pimco. He is my idol, always will be. Things got weird and crazy. Pimco was lucky to have him teach us in the past. Were lucky to have all he put in place in the future in terms of how to go forward. Im a disney fan. I have an annual pass in my pocket. I go once a month. You have a possibility of being a great firm in the future. Isnt that the way they characterize it . If you really work hard no, theyll be a great firm. When i go to disney, you know walt. When you go to the park you still feel his presence. Thats the way it is at pimco. That was a good answer. That was a great answer. Heres the next one. How about that day last week everybody talked about with the 10year. Was it weird for you . Was it the volume . Size of the move . In some sense it wasnt extraordinarily surprising. The 10year went to 3. He said when do you think its going to stop. I said here. Because theres a switcheroo from long to short. And since the tantrum they kept building it and building it. The size of the short base in Interest Rate risk is massive going into the past month. So it capitulated. There was a period of stable rates. Then they got caught short. Alex, you heard that. You saw it. You saw oil. Its not just equity markets that are showing a lot of large moves that might be indicating something. What did it indicate for equities in your view . Well, i think the fed is really, you know, in the focus. And theres that has implications for equities as well as commodities. Were surprised to see isnt it dollar related . I think whats going to be interesting this week, the markets pricing at a more dovish tone. Whether were skeptical there. But we do think that consensus now expects some kind of signal to increase dovishness by the fed to account for weaker Global Economic impulses. If we dont get that, we may be a little bit vulnerable. So do you think weve had enough for people looking for reinstilling some fear into the market place, in other words, people that dont like complacency. Was 7 enough for this to make another sustained advance for the s p . If your biggest worry was we is this it . That problem is solved. I think the jurys still out. A lot is relative. If you look where else to put your money, stocks still look like a great bet because longterm treasuries are so unappealing. Stocks could easily go a little bit lower. I think well get into the meat of the earnings this week. Concerns about the future with global growth. Are they reflected with the guidance. Our best guest is the average investor should be using this as a time to add to equities. Theres just not a lot of relative appeal in other places. Ibm is just getting absolutely crushed. These are so bad right now its almost you know, others have talked about that there were a slight of hand, smoke and mirrors, buying back stock constantly. But no Revenue Growth. 368 versus a 431 estimate. And i think 368 is the number. Thats the adjusted number. When you see in the headline we are disappeared by our performance, you dont need to look around too much. And the results point to a pace of change in the industry. How bad was the revenue number . 22. 4. And they wanted thats a billion light almost for revenue as well. Heres the comments from jenny. We are disappointed in our performance. We saw a marked slowdown in september and client buying behavior. Our results also point to the unprecedented change in our industry. While we did not produce the results we expected to chaef, we again performed well in our area. Which cloud, data, security, social, and mobile. Look at the dow futures now. Down 61 right now. Which is about 50 points below fair value. Whats buffetts hes not going to buy more. Last time he did he bought like four shares. Adding lightly. He gave very little. He didnt express a lot of comment. When did he get into this stock . Thats what im looking at. This was about the price level i think he started with. 22 is the closing price. So 170. I think youre right. Hes lucky to be breaking even at this point. It wasnt a good investment. Maybe hell buy more at this point. The future for ibm, jon fortt have you seen this anywhere else theyve seen startling buying patterns. Thats concerning if its beyond ibm. So a couple things with ibm. One is fx. Currency head winds that theyre experiencing. Thats one thing to watch. The other thing, im trying to go through the Business Units and see where the shortcomings are. Looks Like Software is light by about 200 million which is significant in software. You get a lot of margin there. Thats tended to hold up a bit better for them. I was talking to madella last week about the overall business environment. He said he felt good about developed markets. But emerging markets continue to be a struggle. And you see that with ibm too. Their Growth Markets not growing as much. Though theyve had a turn around in china lately. But the scope of this miss has been huge. Theres been people negative on people he made it a point that delivering alpha to talk about ibm. You said we got to worry about earnings this week. I thought after last week im worried about another ebola case. I didnt know that the next one was going to be infected by ibm. This things in the dow. Look at the s p. Itll give you a broader sense of impact. The reality is this is ten times earnings. The fact theyre trouble sd not really new information. So id be careful about extracting this is a big, Broad Company that operates globally. Theres no way not to extrapolate there. I have 167. He started buying in the First Quarter of 2011 with 4. 5 million shares. Continued to buy about another 82. 2 million shares. This gets to 167. I think there might have been additional purchases after that, but i dont know. One other point to make though. The argument that buffett always made on this was that it was a lockin effect. That customers of ibm use so many of their services and it was so wrapped up and in this age of the cloud maybe whats happening is the ability to transfer and get out of an ibm product is so much easier than it used to be. Whatever existed doesnt. Although the cloud is whats working for ibm. Jenny, was she already go ahead. Ask that. Answer that. Talk about the cloud. Its interesting. Were going to get into this more next hour as well. Tried to set the stage for saying in the cloud theyre basically three tech names that are scale. Microsoft, google, and amazon. I think the argument he could make is weve made these Capital Investments that allow us to have the scale and flexibility in this changing market that others dont have. Also remember google missed last week. People sort of brushed it off. This is a different type of miss. This is like were losing business miss. There are people that havent been impressed with their 10year so far at all. A lot of people have been skeptical of the strategy and there wasnt one. Are you going to hear the drum beats louder now for the ceo of ibm . I think it depends on how everybody else reports. We knew that ibm had issues, but how much of this is a macro thing that has to do we merging markets interest and a shift towards the cloud. Is this a broader level when we get into earnings season. Remember you asked bill clinton a number of weeks ago, what would you do if you had 40 billion. Ive quoted you numbers of times in speeches. He said id invest in broadband. Normally it grows at 2 . People, stuff, and how it gets used. The people part is good. So is how it all gets used part. But the capital intensity. Whats in place per unit of labor the last five years has been weak. Companies havent shown the confidence to invest. That can be probably top level the lack of investment by Companies Including also government has been a major force in the economy. I dont have a how do we get a history of revenue over the last ten years . Theyre not going to make 97 now for the year. I have it here. How far do you want to go . The last time they did a number that low was 2009 when they had 95. 7 billion in revenue. 2010 they did 99 billion. Then 106 billion. Then 104 billion. Then 99 billion. Down almost 10 in revenue. Revenue has gone down in the past phi years. Spinning off the boundaries. The server business to lenovo as well. This is a company thats been financially engineering and trying to structure for profit. You can see a lot of big dow components. Not to the extent of how much money they borrowed to get yes. But if youre just looking at the top line number you have to consider what theyre shaving off. Id like to know organically how much. Then theres always the you always say life is relative. Could somebody else manage this better . This is a i mean, its deteriorating business. It is what it is. Thats what they said before gershwin came in. It needed to be turned around big time then. But it was in pain last time. There hasnt been pawn this time. Just retiring more shares. Buffett has been okay with the stock buybacks. No. I dont necessarily have a problem. But if you borrow money and theres no Revenue Growth whatsoever and the only way youre pleasing the street is buying back stock, sooner or later that will come back to haunt you. Going to be an interesting one to watch. Right now 172 to 173 is where ibm is indicated. Youll be around again hopefully. Weve got to talk more. We didnt get to talk much. I just bought a place in Staten Island and laguna beach. You did . That is like you got the whole world covered there. Thanks very much. As we head to a break, check out the futures. Took a big dive right after ibms dow component. And that is affecting the index. Right now down about 70 points. About an hour and 15 minutes ago it was up 50 points. So we could be in for another wild ride. S p futures also down by five points. Squawk box will be right back. Coming up next, the ceo of Valeant Pharmaceuticals in that big takeover battle. Were going to find out if theyre any closer. Squawk box returns with that and all this ibm news thats hitting the market this morning. Were back in a moment. The all new, head turning cadillac ats coupe. Its irresistible. Hi, are we still on for tomorrow . Tomorrow. Quick look at the weather. Nice day, beautiful tomorrow. Tomorrow is full of promise. We can come back tomorrrow. And we promise to keep it that way. Driven to preserve the environment, csx moves a ton of freight nearly 450 miles on one gallon of fuel. What a day. Cant wait til tomorrow. You know how fast you were going . About 55. Where you headed at such an appropriate speed . Across the country to enhance the nations most reliable 4g lte network. Hows it working for ya . Better than ever. Howd you do it . Added cell sites. Increased capacity. And your point is. So you can download music, games, and directions for the road when you need them. Whos this guy . Oh thats charlie. You ever put pepper spray on your burrito . I like it spicy but not like uggggh spicy. He always like this . You have no idea. At t. The nations most reliable 4g lte network. E financial noise financial noise financial noise financial noise welcome back to squawk box. Valeant pharmaceuticals Beat Estimates. Revenue slightly below forecast. Joining us now is michael pearson, ceo of valeant. Lets talk about the earnings. Heres the questions for you. You had originally lowered guidance for the second half, right . And then you came back about a month and a half later and said you would exceed. So what happened exactly . Our businesses outperformed. But what happened in terms of your outlook clearly changed. But what happened to the math . Youre not changing goal posts . We sold a business. We sold a business to a division of nestle. We also had a product approved. That we were not expecting to be approved as soon as it was. And we knew wed have to spend a lot more in terms of watching it. So we lost a bunch of income from tre sale and revenue. And we have we planned a lot of expenses in which we actually spent more than we thought we were going to on the drug. The outperformance of our business this quarter is the big thing. Our dermatology business, neurology business, and a number of our smaller businesses has way outperform what had we expected at that time. Last week bill ackman was your partner in all this accused the ceo of allergan of releasing false information to manipulate valeant stock. Allergan refused to comment on those claims. Theyre out now again. Yes. And you were they are lying about what . I think theyre i guess at the beginning of this they said the third quart ser going to be the true test of valeant. And we will have annualized bausch and lomb. The wheels are falling off the bus. I think todays earnings shows bausch and lomb continues to grow. The rest of the company, you know, 19 including bausch and lomb. They made a lot of allegations that have proved not to be true. Theres a bernstein report i dont know if you saw this where doctors indicated that they would switch from valeant if you took over allergan to other providers. Do you believe that . And what do you think it is about valeant that has the medical community on edge . Ive spent the last three or four weekends with doctors. The leaders in the United States and canada. And for the very purpose of talking to them about valeant and our model. And i think all this misinformation that allergan has put out has affected the doctors. But after each of these weekends, we put a survey out to each of the doctors. And 95 of them havent spent time with us, fully support the deal and allergan. Let me ask you about activist. The reports have been out they would look at bids 200 a share. Do you think thats possible to outbid what youre offering . We can afford to pay more than anyone for allergan. Theres no other company out there that can bend more than us and make a good economic return. Does that mean you think you could pay more than 200 or you dont think their 200 is a real offer . I think we can pay more than anyone else and earn a fair return for our shareholders. We can never stop someone from putting in an uneconomic bid. So anything can happen. But we know were in the best position to win this economically. The 20 analysts that cover allergan have an unaffected stock price of 204. You going to offer 204 . First of all, not all those analysts are saying unaffected. A number of them are saying because of the deal i think a lot of them feel a deals going to happen. Thats why theyre coming out with that estimate. What do you make of the Insider Trading case that allergan brought . I think weve gone through the testimony. Ive seen later today we are going to be filing our response. And i think we win it hands down. And do you think other companies are going to do what youve done in the future . Meaning find a hedge fund or outside investor to bring a sort of make a takeover battle. Get it to a tow hold separately. I cant speak for other companies. But do you think that you are the beginning of a trend . Have other ceos called you and said i want to understand how you did this. No. No one else has called me on that. And we thought it was the appropriate move at the time. And were very pleased we now have 10 of the allergan shares. All right. December 18 the day to watch. Thank you for being here. Appreciate it. Continue to keep an eye on whats happened with shares of ibm. 167. 71. It closed to 182. 05 on friday. This comes in after ibm missed by a mile. Take a quick look there. The stock is down about 8 today. 170 and change. Now losing money. Apple pay live, well talk about that next. 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. Welcome back to squawk box, everybody. Heres what is front and center at this hour. A big miss for ibm in its latest quarter. The company earning 3. 68 a share. That was well below what the street was expecting. It also announced today it is paying global boundaries 1. 5 million to take its Semiconductor Unit nap is putting pressures on the dow futures as well. August of 2011 was the last time it was trading at these levels . So is that three years . Yeah. Just over. Also, a new Business Survey says that hiring is healthy but pay raises are not. Only 24 of surveyed companies hiked wages in the Third Quarter. That is down from 43 in the second quarter. And yahoo is set to unveil cost cutting moves tomorrow. Yahoo under the gun from lowered value that says the company has a bloated cost structure. Seeing a turnaround in the equity futures. Once the ibm news came down, you really saw the pressure building up. At one point this morning dow futures were indicating an open of up 50 points. Right now down 91 points. S p down five points and the nasdaq down nine and a half. Now were talking about real business. Not ebola here. All good news on ebola. We got through the weekend. A weekend in october after a tumultuous week. And here we are. We will talk about apple. Apple has a deal with ibm. Apple set to open up its wallet to users. Apple pay, today is the day. Josh lipton joins us very early in the morning on the west coast. Thats right. Its time to cast off your credit cards. That is apples hope today as it officially launches apple pay. Its new mobile Payment Service that allows users to buy goods with their smart phones. So heres how this service works. Users walk up to the front of a checkout line and hold up their iphone 6 or iphone 6 plus to a special reader. Then by pressing the fingerprint sensor, that is completed. Apple pay is easier and faster than traditional payment methods. What does easy me . Well, taking out our credit card and swiping is pretty easy. We wanted to make something thats even easier than that. Now with touch i. D. And the iphone 6 we can make it so you take your phone out, hold touch i. D. And it automatically pays. So its faster and easier than your credit card. Now, with this new Service Apple is trying to capitalize on the mobile Payments Market which will quadruple to 90 billion. Industry analysts think apple pay will prove a hit with tech savvy consumers. Some are cautious about the broader appeal. Eddie is confident that consumers will embrace this technology. We design all of our products for the mass market. Everyone has to pay every single day multiple times. And if we can make that better, easier, faster, more secure, more private. I certainly believe everyone is going to use it. Apple hasnt disclosed how it tends to monetize the service. But it boasts an Extensive Network here. 220,000 loerkss across the country including whole foods, mcdonalds, and macys. Thank you for that, josh. Im looking at this ibm look at the board of ibm. Not to be ageist about it, its not a young board. For a tech company, its a relatively old board. I think the youngest person on the board is 54 years old. Ibm is a tech company . What do you think it is . I dont think its a tech company anymore. Blue chip services. Maybe thats the problem. So far from being at the forefront of tech at this point. Its the problem. Apparently. Who are they . Who do we got . Ken chenault is on the board. I think Shirley Ann Jackson is on the board. Yes, here she is. Andr andrew libris. Joan spiro is on the board. Allen vida on the board. Michael eskew. Used to run u. P. S. And david farce. So its not so theyre geezers. Thats what andrew said. Im a geezer. Im not saying it. Its substantive boards. These are like the real deal people. On the age thing what were you saying . 54 is the youngest on the board. Most in their 60s and some 70s. Im just saying for what its worth in a tech company trying to keep up with the joneses of these 24yearolds in the valley, you know. Yeah. If youre trying to compete against aaron levee. We shouldnt worry about them because theyre senile . No. Im making an observation. You know, you just wasted enjoy it, andrew. Enjoy it while youre 37 and looking at me like that. All right. Despite a tumultuous trading, our next guest says theres optimism. He tracks sentiment for the individual investors. He joins us right now with more on the numbers. Charles, i guess there was movement given how far they fell. We saw bullish sentiment rise. Besaw Bear Sentiment rise. But then neutral sentiment fall. That has fallen about ten Percentage Points overthe last two weeks. Some people being optimistic. We also saw a few people being pessimistic as well. What do you think drove the optimism . Just the idea the aempverages c down finally . Yeah. I think so exactly. This weeks special question is asking members about the volatility. And these are very early results because were only halfway through the survey period. But 50 of the people said they have bought or are looking to buy on the dip. We did have 20 say on taking a wait and see attitude on wanting to see if theres a bigger drop or wanting to see if theres a confirmation the vol facility has ended. We see whats been happening with the futures. We know that volatility has not ended. What do you typically see over extended periods of volatility. Something where weeks if not months you see swings like this. What happens is human psychological comes into play. The more volatile it is, particularly Everybody Loves upside volatility. Its the downside volatility everybody hates. Thats when you start having fears. Where people think because its been a downward roller coaster lately it will continue to be. Thats where you start having the fear aspect come into play. But right now the early signs is that our members are being value oriented. Theyve been listening to what weve been telling them. Which is to have a longterm viewpoint of the markets. The people youre talking to, theyre investors but are these people you would not consider traders. These are people youd say are in it for how long . Most are investors. We do have some active traders. But most members do take a longterm viewpoint. Whats a longterm . A lot of times through retirement. Theyre looking not only to invest for one or two years but really the rest of their lives. Theyre thinking not only in terms of Market Performance but ensuring their savings last their lifetime. The few people you said had an increase in pessimism. Did that come from those identified as traders . We really cant tell. We had some people looking a the charts thinking of breaking down. There are people who are cautious about the economy, cautious about the Economic Growth. And also worry that valuations are still too high. Even after the small dip weve had in the markets. Charles, i want to thank you for joining us today. Thank you. The s p is coming back. Is it . Yes. How much . This is not an ebola case. This is not a thing to be afraid of. This is ibm. Nobody thought they were going to be any good. But does that signal because its so bad did sh. Right. Is it ibm individually or the market . Its ibm. Going to be cramer. B buy buy buy. I dont think youre necessarily going to see every other Earnings Report like this. There was huge questions that that raised and that was supposed to be an early indicator. But real, normal companies i think are until next quarter were still okay looking back. I dont know. Were going to get a lot of reports this week. Should give an indication. Lets just say we dont know yet. When we come back this morning, were going to talk more about whats been happening with ibm, show you how thats playing out in the stock market. Also toys r us getting heat over breaking bad. We have details over the break. And barbie may be jealous of elsa this morning after hasbro Beat Estimates by a penny. Stick around. Squawk box will be right back. Take a deeeeep breath in. And. Exhale. Aflac and a gentle wavelike motion. Ahhh ahhhhhh. Liberate your spine. Ahhhahhhhhh. Aflac and reach, toes blossoming. Not that great at yoga. Yeah, but when i slipped a disk he paid my claim in just four days. Ahh four days . Yep. See why speed matters at aflac. Com. [sfx] duck snoring its in this spirit that ingu u. S. Is becoming a new kind of company. Ing u. S. Is now voya. Changing the way you think of retirement. Welcome back. Lets start with this story. A florida mom has started an online petition to get toys r us to remove breaking bad Action Figures from its stores. The mother told the today show she was appalled that the items were being sold at the toy store. The toy Line Features charactering walter white and jesse pinkman. Each with their own duffel bag of cash. And they also come with a tray of faux crystal meth. Tell me if im a bad dad. Last halloween my little guys were walter white and we had yes, youre a bad dad. And we had little zip lock bags of blue yes, youre a bad dad. Youre joking, right . No. They sold costumes like that. I held onto the meth. I thought they went as firemen or something last year. No. This year theyre batman and robin. Dig a hole. When i see them, its not really going to be batman and robin. Its going to be your kids. You ruined it for me. Well have the league of heroes in here. The petition this mother started has over 19,000 supporters and that is growing. Toys r us steps into a hornets nest here. They said the toys are labeled suitable for children where meth is fine. 15 years and older. And theyre also located in adult action figure sections. Nobodys having any fun here. Come on, people. What is an adult action figure . Who is that . I didnt know there was an adult action figure section. What is that . Jenna jamison action figure . I dont know. Do you have one . Maybe expensive for star wars like if you pay 50 bucks or over. Ive seen some about this. Theyre telling me stuff. I dont know what it would be. Like walking dead. Did anyone see that last night . No. And stop talking about it. I was watching football. You said too much. You told me too much. Lets talk about hasbro reporting 1. 46 a share. It was higher than estimates. Joining us now on the news line is shawn mcgowan. He covers the toy industry. These are strong results when you compare it against some of the competition. Right . Certainly. I thought if there was going to be any surprise, it would be negative not positive. I think it was the strength of the boys toys they cited. Which things were selling well . Any time youve got spooiper man and transformers in theaters, youll do well. Even though that was back in the summer, a lot of those shipments still happen later in the year. So what do you think about hasbro versus mattel at this point . Clearly hasbro is doing a lot better. That transfer of the disney license gives hasbro a lot of visibility in 2015. And next year they have star wars. That stock is now trading at 53. 75. You would buy it here . Its still not terribly cheap. One thing we have to look at it is how much of the cost surprises with how much is cost getting shifted out of the third quart tore the fourth quarter. They were specific how costs would go. There are a lot of positive surprises here. If they do better than expected, great. But if its just shifting to the fourth quarter, you may give up some upside. What do you expect the Holiday Season . Its ban good year so far in the traditional toy sector. Really the strength has been more of the private companies and small companies. Like lego is doing better. If you look at the. Tone, theyre not so much coming from the big toy companies. Hasbro did well. No surprise with transformers and spiderman. Its smaller ones, the spin master in canada doing pretty well. I think its going to be okay. But its not shifting away from the u. S. Giants. What toys do those Companies Make . Moose one and spin master. Spin master has a good preschool product. Paw patrol. I love that. One of the great, huge part of my daily life. Im just impressed you knew who jenna james son was. Thats joe kernen. Shes the one that makes a Million Dollars a year. Moose makes shop kins which is selling like crazy. They can what . Shop kins. The reason you were impressed who jenna was was because you knew who she was. So watch out, fella. Heal thy self. Outside of hasbro, you said its a little expensive. Would you buy any other stocks like mattel . Mattel is certainly still got some more pain to go through next year not looking hot. But they have a good connection with time warners d. C. Comics franchise. That could give them visibility in 16. Its a lot more washed up. They generate a lot of cash. It could be a better value, but i think theres still more bad news to come here. Id probably hold off. Okay. Sean, appreciate it. Still to come this morning, stocks to watch. We have that coming up next. And at the top of the hour, how worry sd dows fed president about market volatility and asset prices . Well get the chance to ask him coming up at 8 00 a. M. Eastern time. Began, check out the futures after what we heard from ibm this morning. Right now 88 points below fair value. S p futures down by four and a half. Nasdaq down by five and a half. Well check out shares of ibm when we come back. Squawk box will be right back. Ameriprise asked people a simple question in retirement, will you have enough money to live life on your terms . I sure hope so. With healthcare costs, who knows. Umm. 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. Start building your confident retirement today. Welcome back, everybody. The big story this morning is a big miss for ibm in its latest quarter. They earned 3. 68 a share. That was well below the estimates of 4. 31. They also announced today it is paying global foundries to take its Semiconductor Business off its hands. That is having an impact throughout the rest of the stocks. No doubt. We wrote a piece, cnbc did, a couple years ago on whether were nearing risk at ibm. Someone just sent it to me. Interesting. Its value i similarly to apple in terms of metrics. Maybe it shouldnt have been. Ibm gets a pass for a simple reason. And that is i dont know. It has boldly articulated a fiveyear road map on how to get earnings per share to 20 by 2015. Doug kass mentioned there was no word on that. Theyre saying theyre going to be below obviously this years expectations. Do you think they should have warned . Is this big enough you should have warned . The revenue miss was big too. Wasnt just the earnings per share. People havent expected revenue to be good because as john and others have said theyve been financially engineering the 20 a share they were headed to. Lets look at some of other stocks to watch this morning. S. A. P. Has cut its full year profit out. Due to a shift in sale sales. Vf below expectations. Also a 22 hike in dividend. And halliburton Beat Estimates by a penny. They Oil Field Services company also raised its dividend by 20 . Coming up, what does the fed think of the volatility . Weve got an interview request dallas fed president Richard Fisher. Well continue to talk about ibm swell when we return. [ hoof beats ] i wish. Please, please, please, please, please. [ male announcer ] the wish we wish above all. Is health. So we quit selling cigarettes in our cvs pharmacies. Expanded minuteclinic, for walkin medical care. And created programs that encourage people to take their medications regularly. Introducing cvs health. A new purpose. A new promise. To help all those wishes come true. Cvs health. Because health is everything. Cvs health. They take us to worlds full of heroes and titans. For respawn, building the best Interactive Entertainment begins with the cloud. This is titanfall, the first multiplayer game built and run on microsoft azure. Empowering gamers around the world to interact in ways they never thought possible. This cloud turns data into excitement. This is the microsoft cloud. Shares are down. Welcome back to squawk box here on cnbc first in business worldwide. You know the music, things there is trouble in paradise. Im joe kernen along with becky quick and andrew ross sorkin. Ibm missed by a fairly significant margin. The Company Earned 3. 68 a share. It was almost a billion light in revenues. And the company had higher revenues four or five years ago. Its been a slow steady decline. They are bought back shares to try to get it to 20. That was the fiveyear plan. Ibm is putting pressure on the futures right now. Check out the where the dow is. Were indicated down 81. But when ibm was down 15, thats 97 dow points. So 90plus points on the dow are ibm. Your argument says its nothing about the larger economy. And everything about ibm. Let me just temper that a little bit. Just a little bit . I wouldnt extrapolate to every s p company thats going to report this week that they will also be weak. I know google was. And you have microchip with the semiconductors. I think in general i dont think earnings are going to be necessarily i would agree with that, but i wonder if theres something going on in technology were just starting to see. That is my point. Is i dont think youd see it with ibm. I think ibm has not been keeping up with technology for five years. I know theyve got the call going on. I want to know more specifics about what happened in september. They said business dropped off dramatically in september. That didnt sound like it was there were people that saw this coming. You know, the guy miller talked all about the fed. But the one short idea he talked about and he talked a poster child, borrowing money to buy back stock. And buying back some stock right before, you know, get it up to a point before earnings where the stock would have traded 185. You know, really negative on the prospects at that time. Someone can see its happening, then you dont necessarily then the question becomes 168. 80, do you buy it at that price . Is Warren Buffett saying this is opportunity or saying i made a mistake . Typically marries his losers but when he finally does get a divorce, its nasty. You know, when he gets burned he doesnt like it at all. So well see. Maybe he does buy some more. But, you know, there is a time where he stops throwing good money at bad probably too. You know, you dont catch a falling knife necessarily. Ibms ceo will be on squawk on the street at 10 00 eastern in an exclusive interview. Thats probably a good yed. Thats not getting out of front of it. Yeah. Good to get on early. Make the case. Were going to continue talking tech this morning. Mike so soft sitting down with jon fortt to talk about business on the cloud. And jon joins us this morning with more of that interview. Yeah. Its an important conversation especially now given ibms results. Microsoft has done pretty well in the cloud. The ceo was in charge of cloud efforts before he got that big promotion. I talked to him about what microsoft is doing in the cloud. Where it views strategic advantages at being. Who he thinks are on microsofts level in the cloud. I think if youre not already spending a lat of capital many the order of 4 billion, 5 billion each year to just grow your cloud, probably its too late to enter the market. I mean, thats the entry barriers. And there are a few of us on that megascale of cloud. Thats the cost of entry. If youre not willing to spend 5 billion a year, forget it. If you have to be in that business and if youre a megascale cloud provider youre already committing a lot of capital. There are at least two other players like that. Amazon and google in particular. We are with unof the three in that category. China is a great example. For example, we are the only Public Cloud Company from north america that operates in china. And its doing very well for us. Because it now makes what i would say Global Infrastructure available for every multinational that needs to operate in china. Thats the kind of investment learning progress. Youre trying to diagnose whats happening in the cloud right now looking at i be rks m, consider he said microsoft the only multinational thats able to provide full Cloud Services in china. We saw thtarted to see ibm had problems. Nadella arguing it takes several multibilliondollar investments to really be at that megascale. Given the Financial Engineering weve seen ibm doing, deploying cash in lots of different ways. Some people will ask should they have invested more in being at this scale level. Back to ibm for a moment. What do you think the sot is that an activist shows up . Ive been wondering whether an activist would arrive on the scene now. Well, thats the question. Is this a company that has cash on the balance sheet. Could actually get back to. Many hundred fortunately they had to pay the people. Ibm is already acting like a company under activist pressure. If youre a company under assault, you point to ibm saying this is what we dont want to do. Giving lots of cash back to shareholders. Maybe not investing as much in this future was we could. Maybe you dont want to be like them. If youre an activist, what do you argue ibm do . Software kind of drives the business over there. Theyre already chopping off hardware by bits and pieces. Youd have to have a plan. But its a big company. You either grow or harvest, dont you . Well, i think clearly right now clouds is the battle ground. Its not actually a cloud. You need a number of elements to bring together. You need hardware if youre going to offer as a service. You need software to offer on of to have that. Maybe you can argue their futures business is not the future itself. And maybe the cloud is the way forward there. Ibm, their revenue up more than 50 year to date. Is he saying its just too late . Well, i mean 50 if you compare that number to oracles number, its the same. But if you look at the assets, microsoft has ager, office 365. Software offering on to top of that. I think ibm is more sophisticated in the services it offers through its services business. So in terms of Global Infrastructure reach for ibm, i think what nadella is arguing and its clearly a is biased argument because he wants to make the whole of poochl as small as possible. Hes arguing that ibm has not invested in the same level. Can we call warren . Thats what im wondering. Is he up at this hour . Hes up. Okay. Thank you, jon. Hes down. Except he might be back up because its rebounding a little bit above 170. We are going to continue this conversation. Jon, thank you for coming in. When we come back, ibm still under pressure. We will keep you updated on the earnings miss. And that chip deal of course. Later the west coast is not only known for its vineyards but also beer making. But breers there having a tough time getting a main ingredient. Water. Going to look at how beer makers are exacted. Dow looking like it would open off 80 points. Were back in just a moment. Automotive innovation starts. Right here. With a control pad that can read your handwriting, a widescreen multimedia center, and a headup display for enhanced driver focus. All inside a newly redesigned cabin of unrivaled style and comfort. The allnew cclass. At the very touch point of performance and innovation. shouting location. Heres the location that matters the most. Here. Or here. Or here. Its wherever this is. To get customers to come here and stay here, youre going to need an app that connects to all your systems. So they can bank, shop, do what they need to do, and you gotta do it fast. Before the competition does. Its tough out here; you better be on the right cloud. Today theres a new way to work. And its made with ibm. Mark andreessen has resigned. Now says the time is right for him to step down following the ebay decision to separate from the paypal unit. New news on the ebola front. The quarantine for friends and family of Thomas Eric Duncan came to an end. They did not contract the deadly disease. The paramedics and Health Care Workers were also among those cleared. But officials have not determined yet how two of the two nurses at texas presbyterian came down with the virus. Mean while officials are tightening the guidelines on workers that treat ebola patients. And the Texas Health Care worker who was a passenger on a Carnival Cruise ship has been cleared of having ebola. She was a Lab Supervisor that handled a blood sample. She and her husband selfquarantined themselves in those claustrophobic state rooms on a cruise. Ive never been on a cruise. And this makes me less inclined. If you leave the state room, youre near lobster and other things. If you go anywhere out of your state room, theres food and alcohol. So, you know and recirculated water. I wonder. The two nurses from presbyterian that contracted it, i wonder about it. In the beginning they had no protective gear. Gets you back to the point where you wonder was this a problem with that exposure or is there a bigger problem that you need tighter guidelines. On the International Front, the spanish nurse who contracted the disease has been found ebola free after three tests. This is according to spains special ebola committee. And nigeria is expected to be called ebola free after six weeks with no new cases. The feds are expected to bebd their bond buying program. Steve leisman joins us. Last week we talked a lot, steve. It seemed like they said, you know, its not completely out of the rem of possibility. So theres no way theyre not ending qe. I think that train has left the station. When are they waiting to decide . End of october. And they said thats just too soon to recalibrate things. Thats what we were told on friday on squawk box. Gilden stern . No. He was out frolicking in the woods. The story is that theyre going to make changes to policy when it affects the real economy. I think we kind of live in a bubble here. You see the market go up, market goes down. And thats not the real economy. It has a potential effect on the real economy. It could be forecasting the real economy. I dont think its enough for the fed which really has worked hard from the tantrum, then reset policy again to come and say you know what . Were going to end this program and that was something that began youre shaking your head. Because you told us all along they have been engendering the wealth effect. Now youre saying its not well thats what they did. That was their whole tool. I think theyre taking a step back. When i hear williams in an interview with the wall street journal over the weekend saying this is not going to really the recent market volatility will not alter. The outlook for inflation. Youve had this tick down. That was the week before. You saw what happened. You came on and you called mariana a radical. I think we have Richard Fisher on the line here. Richard, are you there . Im here. Thanks for joining us this morning. Go ahead. Shoot. Whats up. Tell me what recent market volatility has changed your outlook if at all on fed policy . It hasnt changed my outlook. And the reason is weve been flooding this market with easy monetary policy. Market had the impact it was expected. It grew from 2009 to now. Regardless of their underlying value. I think the market will search out now. People have to do work. They have to understand analysis in order to make good investments. We did have some volatility last week. For me it was not unexpected. Ive warned my colleagues and in public speeches you know i can see a correction taking place. So were in pretty good shape. Is ritalin the term used by all the fed members now for the easing . Is that what all of you use for that . Ive used that in speeches as you know. But basically heres the point. The underlying economy is improving. I think its important to understand b its not just us. Its north america. We have 500 million people. Were doing well and will continue to do well. I dont personally see any need to not curtail at the end of our next meeting. Sfwlp youre great to join us. You were with us in august. Since then, weve had a recent news report of serious economic weakness in europe, lower inflation numbers. Tell me how you process that. You had been saying that spring 2015 might be a time to raise rates. Are you still there . First, the trim mean which we calculated on the pce has been steady at 1. 7 for several months. So that tells me that theres no slide to the downside nor pressure on the upside. Whether were exactly at 2 in ternls of the way i look at policy pipt doesnt make much difference. The point is we have price stability. Thats the important factor. Prices of crops have come off significantly. Thats because of increased supply, not because demand implosion. We have had bumper crops around the world and also had enormous output production in the United States. This is a positive, good for consumers, good for people buying gasoline. I think that retail sales number we saw last week, i would think would be a slight aberration. Well have to see. I think this is a positive development, not a negative development. Richard, obviously the texas area is ground zero for the concern about ebola if the United States. I know how closely you followed the texas any and economy in your region. Is there any Economic Impact to this point about ebola. And how much concern do you have because of the recent cases there . I think my major concern would be overreaction by the media. We have had had these cases here. I havent seen its awfully soon to get data. I would look at the state fair of texas to see if it impacted attendance. You can see it now already with cocoa prices, sugar prices in terms of the flow of west african tourism. What crews are doing being willing to go into the bothers and so on. As to our local kme here, i dont yet see any impact. I dont expect do see any significant impact. This is a such a hot economy for texas as a hole. Again, its a question of how much people get afraid because report and report and report of it. Right now no impact ive been able to see. You think you could talk us through because of your expertise in the area. Walk us through the kind of double edged sword of oil. Its a big economic contributor in the texas region. So low oil prices would seem to have a negative effect. On the other hand what im hearing for the economy its positive. Tell me how you processed Lower Oil Prices coming through. I do have 60 in my reserve districts. But it takes a long time. With these new fracking techniques, its longterm. Once you start a process its hard to urn wind it. So these prices are a significant shortterm so its not clear how much of a negative impact it will have. Remember this. 2. 5 . 2. 5 of Texas Employment is related to energy, mining, support services. Its 12 of our output so its a highly diverse economy. But i dont think this is a death employee to the economy. Employment growth in my district which a 97 texas is running at about 5. 9 . Wow. So were very hot down here. Energy is clearly a helper, but its not the only part of our economy. Richard, in the midst of all the ebola backdrop last week, germany kept coming out with either numbers or comments or arguing about whether qe is appropriate. Some people think that was at least as important as the fear and bias about ebola. You call it ritalin. I dont know what you think of qe. Is that not the answer for europe . Would you recommend against it . They have a very different situation as you know than we do. They have to deal with 18 different governments includesing the germans. They also have limited power. I hesitate to comment on what theyre going to do because they will be doing what they think is in their best interest spp a. All i can tell you is i feel strongly as my colleague said over the weekend, the program that we had has resulted or helped at least in the United States. And in terms of our quantitative easing, i will support with buying bonds and securities. When are you available . For what . Are you asking me out on a date . You know how i feel about you. But, no. Cnbc contributor is a sweet gig if you can get one. Whens your last month . I am still at the Federal Reserve and i havent announced when ill leave next year. It will be between the beginning of the year and april. Richard, i just want to follow up on one thing quickly. Please. I asked you about the issue are you still thinking spring of 2015. Is that you think the right time to begin raising rates . It depends on how the economy progresses here. Weve had a sharp drop. We have pockets with enormous strengths in areas like texas and the northern district. Were just going to have to watch and mormon t monitor. I think it depends how quick it repairs. Ill be releasing a paper today with my head policy founder. And well be talking about the complexity of the phillips curve. And well release at paper shortly on that subject. One of the things ive seen here in texas my district, once we got below 6 in unemployment we saw wages increase. Right now things are moving ahead. Theyre a couple steps back like retail sales. But were in a much stronger position. Well have to monitor this. Im not going to give you a specific date, steve, because you know im hawkish. But i want to be sensitive about this. Thank you. Thanks so much. Dont be a stranger. Joe would like to ask you out. No, no. The expression he had on his face, the picture was perfect for that. Nasdaqs now up. The s p is now down less than a point. Now its a bit over a point. The dow futures are down, but its entirely now its even more. Now it would be up because we got ibm down 13. All right. When we come back this morning, history is made in denver after 16 seasons Peyton Manning now holds the record for touchdown passes. His brother, well, not fairing quite so well in dallas. The cowboys beat eli and the new york football giants 3121. The cowboys now hold the best record in the nfl. Demarco murray has now rushed for a hundredplus yards in all seven games played. Thats impressive. Squawk box will be right back. We needed 30 new hires for our call center. 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. At a special site for tv viewers; 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. Coming up, were going to talk about the race for an ebola vaccine with the author of the hot zone richard bresdin. The dow would open up off 78 points. Well mark that up to the situation with ibm. 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. Welcome back to squawk box this morning. Heres whats front and center at this hour. Futures getting slammed. Ibm announcing its going to be paying global foundries 1. 5 billion to take over its Semiconductor Unit. Also Mark Andreessen has resigned from ebay. He says its the right time for him to step down after they spin off their paypal unit. And apple is rolling out their pay service allowing users to pay with their iphone and fingerprint. You can do that with your 6 plus cant you . I can. Can you do it with the smaller one . You can. I think the 5s as well. Keep us updated. You have 30 days to get the smaller, one, right . 30 days. I might go and see if i can buy something tonight. Buy your flu shot. I got it this weekend. Peyton manning needed three touchdown passes to become the alltime nfl leader. He got them before halftime last night. Manning surpassed brett favres record for the most touchdown passes in nfl history. The future hall of famer hit Demaryius Thomas for the record 509th touchdown. He has done it in 246 games. From here on out, all of mannings touchdown passes will set the bar a little higher. The closest active player is drew brees who sits in fourth place. Peyton manning, this reminds me of pete rosen almost. Hes going to get to a place thats in such rarefied air, this regard is never going to how much longer . You never know. And he had his neck and everything. Its not affected his play. He has to stay healthy. But he could do 700 probably couldnt he . Six and change maybe. If he keeps playing. Denver suddenly looks like i think its going to be denver dallas . I am on the bandwagon. Im a dallas fan now. Im never ever watching the bengals again. I was excited to be on yesterday. I never ever ive been too many times. Im done. Im finished. Did you watch any of that . I have never seen a more incompetent bunch of bunglers. The kids both took sc. But bengals, youre dead to me. Ill talk to you next week about them. No. I dont care. I dont care who they play. Those in dallas who may have been exposed to ebola are waiting for the all clear. Ameri can the vaccine help save the lives of those in contact with the disease . Our next guest says there is hope. Joining us no talk about his latest piece in the new yorker is richard preston. Richard, thank you so much for being here today. Sure. I went back and reread the hot zone. And think i read demon in the freezer last month or maybe in august. And it puts so much into perspective. This is something that youve been tracking for decades at this point. I want to know before we get to your article what you think about the situation here in the United States. No new headlines over the weekend. No news is good news here. Do you think we dodged a bullet . I think the Health Authorities in the United States are on a steep learning curve. Hospitals made fundamental mistakes that were fatal. The kind of mistakes that Health Workers in africa would never make. But now we are on a learning curve and were learning fast. I think we can we definitely have the means to control ebola in the United States. I believe well do so. What about the situation in west africa . Its a much more dire situation. How are things there . Can it be contained . Right now ebola virus is fully out of control in west africa. One of the things ive been looking at is how the virus is mutating. This is rather a scary subject that has significance for every person on the planet. Ebola is a fastmutator. Its changing rapidly as it explores how many bodies, so to speak. Its learning more and more about us. It comes out of nature. And now its getting into the human species. There are scientists at harvard and m. I. T. That were watching in realtime. Theyre seeing exactly how its mutating. Now, why is this scary . First of all, ebola is not about to mutate to travel through the air. Thats a change. One of the scientists said to me can zebras learn how to fly . Not too likely. But a better question to ask would be can zebras learn to run faster . And that is something that ebola could learn to do, so to speak, as it multiplies in humans. What does that mean realistically . What it means is that a virus has a number of different ways it can mutate in order to spread faster. Not necessarily through the air. But it could, for example, grow to higher concentrations in human blood. Or paradoxically it can become less fatal in humans. So if lets say the death rate became 20 instead of 50 , then more people would be sick with ebola. Could move around longer and potentially spread the virus to more people. Is that like asymptommatic contaminati contamination . We dont see evidence of ebola being able to spread when people dont have symptoms. Richard, its very ive been told by Scott Gottlieb already high already. So already per milliliter already is really concentrated. Some of the patients in this west african type of ebola are developing exceedingly high concentrations of particles. Then to mutate, theres a lot of opportunity to mutate. Do you know dr. Nancy sullivan . Shes been working on a vaccine since 1997 or so. Obviously much more important at this point. Theres no reason to think with where we are and weve made Great Strides in molecular biology we should be able to make a vaccine, shouldnt we . That is exactly right. We have i counted 19 different countermeasures against ebola. This would be medicines and vaccines of that type. Theyre all in development right now. Not all are going to work. But we need to Start Testing them and getting data on them as fast as possible. And we are i think now. We are. Were doing this. Some of these things are going to work. We have a huge potential array of weapons to use against ebola. Fortunately they are being we might even be able to use something that works on other its not like hiv or Something Like that. We may be able to use something that works on another virus. Right . Theres one drug thats apparently effective against influen influenza. What do you feel about the travel ban . Clearly a big debate in washington. I think to me personally it doesnt make a whole lot of sense. Thats not the best way to stop a virus anyway. What we really need is need to have our medical people here in the United States beefed up in terms of their techniques and knowledge for how to deal with ebola patients. Because were going to be getting one or two here or there. These are called imported cases. And the most important thing is to be able to stop those chains of infection quickly. And we can do this through ordinary careful infection control. We dont these these to be able to do that. What we do need them for is to keep people from spreading indefinitely in the human population. In countries where they just cant control it right now. Because the longer ebola stays infecting people, the more opportunity it has to mutate into something that would be tougher to eliminate. Richard, we talk about the Economic Impact of fear in the United States at least perhaps even more so than the actual disease ebola itself. Is there fear, is there rational explanation for that fear . Its a grisly disease. The situation is horrifying in west africa. People use their imaginations and think what would happen if it came here to my community, to my family . But thats not going to happen. We do have a very, very good robust medical care system. So im not worried myself. But i am worried in kind of the longer run. Now, the scientists are watching ebola and they can see it changing. Its mutating a little bit here, a little bit there, and very frequently. And theyre already beginning to adjust their tests for ebola to make sure its changes dont make it less detectable to these tests. Richard, one final question for you. The head of the cdc came on and said what you did. That the first hospital to take on the first case was not prepared. He called that a learning experience. Do you think the lesson has been learned at this point . I think the lesson is being learned. But if youre a medical caregiver and youre dealing with ebola patients, all of a sudden your life is on the line. Believe me, people learn fast in situations like that. All right. Richard, i want to thank you so much for joining us today. Appreciate your time. Thank you. Up next, were going to head to the west coast you know, the Washington Redskins i like too. Did you watch yesterday . Lastsecond field goal. Colt mccoy had to come in for you know, maybe the redskins. I dont know. What about notre dame . What a heart breaker. Did you agree with that call . Did you see the call . No. It was like a pick. They won. And did you see the admirals son . What a great game. Congratulations seminoles. Anyway, up next, were going to head to the west coast far special report from jane wells. If its not pot, its alcohol. Whats on tap . What is the number one ingredient in beer by volume . Water. Hops. Water. What do we look in california more than anything snels. Water. Hops. How beer makers are trying to compensate for no water while theyre making beer. When we come back. 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. Whats wrong with the patriots . Talking to people in there. I guess patriots around here, you cant possibly hope for them. Theres a boston new york rivalry. I went to school in boston. Maybe the patriots. I love kraft. Youre from colorado, ohio. And you ride me about this. L. A. Might get a team. Jane wells might know about this. There would be beer if they got a team. And no water. This is my segue. Its the number one ingredient in beer. Its in short supply in california. I would venture to say, wells, you know, im not here because im stupid. I would say its hard to make beer without water. Almost impossible. You are correct again, joe kernen. How many bottles of water in that beer on the wall . A lot. Water makes up over 90 of beer, can take seven gallons of h 2 o to make one gallon of brew. Theyre using reclaimed water for cleaning for one thing now in california. Also replaced landscaping to save 5 million gallons o year there. And theyre encouraging employees with ways to use less water. Since 2009 weve reduced water usage 31 . 9 the last year. And were targeting 10 in the following year. This was a well paid for by the impact fees that the Brewing Company paid in in advance. There are then californias craft brewers. Bear republic brewing depends on the river. Look at it. Its not there. When it wanted to double in size, the city said we dont have enough water for that. So the brewery paid nearly a half Million Dollars in impact fees ahead of time so that cloverdale could use the cash to drill two new wells. At the same time the brewery has cut down on water usage the same way bud has. Longterm it may not be enough. I mean, can you imagine the drought like this go over the next ten years . Youll see a lot more than breweries leaving this area. Youll see agriculture going somewhere else. Theyre already expanding back east partly to reduce transportation costs and because theyve got more water there. Did you say it takes seven gallons of water to make one gallon of beer . Right. Well, you have to consider its not just the water going into the process of making the beer. Its the water being used to clean the tanks. Yeah. Bottles. All in. Thats rough. We dont have to make it in california, jane, obviously. But it tastes better when its made here. Yeah, please. Do you remember the old Busch Gardens in the valley . Thats where we were. On the 405 . Yeah. Its better than, i guess, like erlingdale, i guess. Youve been out there, right . Theyve got a michelob there. I think youre right. I think they do. Right off the 210. Youre going to get a football team. Is that happening . They have look. This is the deal. Los angeles is used as everybodys threat to leave. Im going to leave if you dont give me a new stadium and well go to los angeles. Until the league wants to expand teams which it doesnt want to, it doesnt seem anyone will actually come here. Although the mayor seems more confident that next year someone is going to come. And the big name everyone tosses around is the rams. Which of course the rams were here before. Where they came from. Thank you. Im pulling for you. Were drinking some water in your honor this morning. Mornin look at futures. Things not looking so hot. This is after a situation with ibm. Dow looks like it would open down close to 80 points. Nasdaq down off marginally. S p 500 off moarginally. The question is whether ibm is a broader economic story or ibm story. Look at shares of ibm. Stock is down sharply after earnings missed on the top and bottom line. It accounts for the entire loss in the dow. The entire drop in the dow. And then some. And we will see what all this means. We will have the ceo of, i bm on squawk on the street at 10 00 a. M. Eastern in a cnbc exclusive interview. Fortunately for us up next we have jim cramer from the new york stock exchange. Well find out what he thinks about these ibm numbers. Plus, tomorrow, Mohammed El Erian will be our guest host at 7 00 a. M. Eastern. M will get you to the loading dock. There should be a truck leaving now. I got it. Now jump off the bridge. What . In 3. 2. 1. Are you kidding me . Go. Right on time. Right now, over 20,000 trains are running reliably. We call that predictable. Thrillingly predictable. Its in this spirit that ingu 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. You want to cut through the noise of an overwhelming amount of analysis. [ all talking ] you want the insights that will help you decide which ideas to execute and which to leave behind. You want your trades executed in one second or less, guaranteed, and routed with institutionalquality technology. Look no further. Open an account and find more of the expertise you need to be a better investor. Cramer joins us now. I alwaysle feel bad about talking about sports with you. Were going to talk about ibm. But god all mighty, jim, youre on espn talking about football. Youre an expert on football. Youre on espn. I said sell dalton. I said sell dalton. I dont know about marvin lewis, either. I got to talk to you about im going to adopt a team. I dont think its going to be the eagles. Lets talk ibm. Combined with europe, jim, and china and, you know, the notion is, hey, american corporations are in great shape. Theyre in great shape. You combine the slowdown in europe with maybe were not in great shape this earning season. It could be a problem. Should we start questioning u. S. Companies with ibm results . I think a lot of what ibm did was frankly being cannibalized by emgs themselves. You see it with sap, too. Ibm has tried to reposition itself as cloud company. When you do that you take away a lot of your value. I think theyre hurting themselves because there are too many areas around world that they did poorly and for me to think the economies are bad, losing schar, this is an actual disaster. Theyve been sticking by this ridiculous game plan since may 12th, 2010, where they said they could do this 20 bucks. Its time they admitted they cant do it. I want to know whether a Warren Buffett is going to pull tesco. The buyback is going to slow. I dont know, jim. I wish i had any insight into that. I wish i could see whats up. I would be surprised if he sold here. Bad quarter. Terrible quarter, wow. Where are you on ginni . I think shes finally realized she was given a terrible hand and she hasnt been able to augument that hand that i can tell. I have a green tie on. Shes going to be on, as you know. Its going to be a great interview. If i go with the jets im worried i8 be right back where i was with the bengals. With the eagles i dont think i can do that. Thats your team. Do you have any suggestions for me because im finished with the bengals. I watch the cowboys. I like tony romo. I think eli looked baffled there at the end. Summit guys. Eli, rex ryan. I have to wish every summit guy a great feeling. You dont hate the cowboys . Carl, scott wapner and i met tony romo at the Correspondence Dinner me said, if you give me 20 minutes you will no longer hate me. Attend of 20 minutes, geez, what can we do, i love this guy. Killed me. Killed me. I dont know. I like the coach. I like the coach. Hes a nice man. Youve got the cheerleaders. Youve got more jobs in the last 12 months than anywhere else. Jim, joes allegiance is for sale here if at least youre a real fan. You stick with the eagles. Silver lining. 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. In a we believe outshining the competition tomorrow requires 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. Alriwe need to do somethinguble widifferent. Ranch. Callahans . Ehh, i mean get away, like, away away. Road trip . Double wings, extra ranch. Feels good to mix it up. The allnew, fuelefficient Volkswagen Golf tdi clean diesel. Up to 594 miles of adventure in every tank. Its monday. A brand new start. Your chance to rise and shine. With centurylink as your trusted technology partner, you can do just that. With our visionary cloud infrastructure, Global Broadband network and Custom Communications solutions, your business is more reliable secure agile. And with responsive, dedicated support, we help you shine every day of the week. Centurylink your link to whats next. Before we go today a special congratulations to a new member of the cnbc family and my family, too. He brother brad and his wife nicole are celebrating the birth of parker renee quick. Beautiful little girl. Thank heaven for little girls. I mentioned the admiral and his son david robinson, he is now following me on twitter. I dont think to do anything else today. Thats great. I just followed him back. Byebye. Join us tomorrow. Squawk on the street is next. Watch ginni at 10 00. Yeah, watch ginni. Thanks, guys. Good monday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim kr cramer at the new york stock exchange. David faber will be with us later on with gin my rni romett. Ibm had a miss. Big week of earnings. More than 20 of the s p concludes this week. Including apple