Transcripts For CNBC Squawk On The Street 20121024

German Business Confidence unexpectedly weak. Green arrows at a 40month low. Our road map begins with what to do after the selloff. We finally have a dow component raising guidance but has anything changed with 40 of S P Companies beating on the top line . We travel to get cramers take on at t. Facebook is up 20 plus percent this morning. Thats after beating by a penny and showing signs its monetizing mobile at a decent clip. Upgrades are in full force. Shares are still to be unlocked. If theres a true disappointment, it might be netflix. Missing its target on the year on subscriber growth. What does Reid Hastings need to do about that . First off, markets looking to bounce back from yesterdays selloff in which the dow fell more than 200 points for the second time in three sessions. Havent done that since last thanksgiving adding to positive sentiment this morning, pmi out of china threemonth highs a sign the countrys manufacturing slump may be bottoming out on a day in which fed policy makers wrap up the twoday meeting on rates. Earlier on squawk, Warren Buffett was asked if hes been doing any buying during the recent market downturn. Last week i bought some wells fargo. You did . Yeah. We only have 430 million shares. I feel we had enough. So the question is, jim, do we all a billion of wells. What the heck. The interview was remarkable. It was just becky always delivers. This was to me one of those interviews where he just is not only bullish but just basically laying it out saying under either guy its going to be good. Things will be better next year. He has too much credibility to just dismiss it. Wells apparently a lot of people felt was a bad quarter. 6 billion buyback announced. Buffett is doing another billion. A billion year and billion there. You got a real thing going. Talking real money. Talking real money. So today, whats the game plan . Look . Today is the day dominated by the worst ipo in history. Delivering the best Conference Call of the year opposed to the last coveranference call which like a broadway play that never got to broadway. Relative to expectations . Quarter call improvement. Zuckerberg must like being an underdog. This was a call where i thought he was a guy who had been ceo for a dozen years. He owned up immediately to screwing up. Not getting mobile right. Exaggerated by the fact we didnt have a mobile plan. Mobile doing great. Mentioned advertisers that are big. Zynga. We dont have to think about zynga. I think the justified move is occurring. What about those buybacks . We should mention facebook is up 20 plus percent this morning. We want to talk a lot about it. We also want to talk about the markets today in terms of what were going to see. To your point, i mean, it is funny that on that Conference Call he talked a lot about monetizing which is the opposite of what he said he was going to do in the s1 if you recall. As you point out facebook up sharply. Information on visa. A succession plan. Citi may want to learn from them. This is way you do do. Charlie sharp will become ceo to succeed joseph saunders. That will be effective november 1st. That is very quick. Former director of visa and mr. Saunders served the company ceo since 2007 continuing as executive chairman. Its a huge company with an enormous market value. We dont talk about it very often. It is a winner. A. M. Lot of banks owned it. Its a community bank. 110 billion market value. We have buffett saying the right things. Our network has tremendous power. Dont even credit ourselves because theres humility. Who was that company that disappointed yesterday . It was was it dow . No. Doing better than expected. It was guys in wilmington and not the credit card company. Thats what happens in this market. The memory is not long. China was good last night. I got up for china. Went back to bed. Its good. I can sleep. You cant be an investor in the memory isnt long. Think about facebook. Quarter to quarter of the changes that you are seeing or what you get from one moment to the next where you finally get the general perimeters around which this business is unfolding for the first time. Youre getting some sense. You didnt know that that long ago. Its hard to be an investor. Facebook brought in a new operating system. They distinguished themselves from google which was a Conference Call that was jumbled. There were other little tidbits that occurred. Buffett wants to buy another 100,000 houses. I guess probably wants to rival ellison in the number of houses that people have, oracle ceo. You see positives that make it so the taste of yesterday is diminished. Europe didnt help overnight. Then you get flash pmi showing a slight uptick here. 51. 3. This is a new series. It does a good job tracking u. S. Pmi figures because they dictate everything from the industrial cycle frankly to earnings estimate. If theres some strength and stability there, that will quell concerns coming into the session this morning. Lets zero in on facebook for just a moment this morning. A year ago mobile has a percentage of overall ad revenue was 0. It is now 14. Citi calls it a nice beat. Says they can probably effectively grow revenues during this transition without the key is whether or not they grew on the User Experience in the meantime. I think that one of this call unlike the last one was full of facts. Data which indicates advertisers like it. A bold claim. 40 of users are likely to use facebook with desk top but 70 use it on mobile which is why Proctor Gamble reports tomorrow. Walmart. Amazon. Capital one with the best bank quarter all like facebook. I wouldnt be surprised if gm didnt want to come back on facebook and maybe they say, hey, nice to meet you. Were going with the other guys. There is a concern though that too many sponsored stories hitting a Communications Device and people start to say you are loading me up too much here. They want a run rate. At 1 million a day. They went to 3 million a day. They gave us numbers they had never done. They said they wont again. At least it gives some people a sense as to ramping of this significant revenue stream in mobile. That being said, do you really load people up too much on their phone and theyre like enough already. Even upgrades are cautionary in that there are a billion shares coming up. The lockup expirations are not done. It will be a nuance trade, isnt it . Its interesting. I wonder whether a lot of hedge funds owned in this lockup whether they overly hedged. What i hear is long onlies are coming into the main. They are good Old Fashioned straight ahead buy stocks Money Managers are starting to buy the stock ahead of even the lockup expiration. It makes sense. Theres a quote that zuckerberg gave on this amazing job which said, you know what . On mobile going into the year, we hadnt started trying yet. So now they start trying. They didnt have the right operating system. Okay. Just kind of funny. I used to use that one all the time. I wasnt trying. I thought that was a remarkable line. You guys who said we dont have a mobile strategy, its true. Turns out the mobile strategy is pretty good because the User Experience people like on the mobile. Did you see the super bowl line, david . Did you see that . Its a remarkable line. Listen, that might have been sandburg that said targeted audience of the super bowl three times. Three times the audience and they do it every day. Super bowl one time a year from what i can tell. Sandberg used that line before. Suddenly you have different advertising firms agreeing before the i thought advertisers were skeptical. Now it seems like they are checking it off. A huge move in stock. 25 . By the way, what was only a 70 million beat on revenue line. Its a very small beat so to speak. It is clearly the language on that Conference Call, detail they gave us, thats emboldening investors to step in. Well see if it keeps up. That is quite a move today. Payments business was weak. Sorry. Payments business was not strong at all. The other guys had better gaming. Zynga is although, zynga now accounts for 7 of revenue. It was 10 in q2. 12 in q3 11. The last Conference Call talked tremendously about zynga and about rival gaming. This was a Conference Call this was the Conference Call that was ready for broadway prime time Conference Call. The last one was amateurist. Zuckerberg led this Conference Call. No wonder. They had a great quarter. Of course theyre going to deliver on the Conference Call and deliver the level of detail investors want. What i wonder Going Forward when they arent able to serve it up the way the market wants whether they are as forthcoming on the level of detail that we get in this report and whether they will handle the call the way that people are expecting Going Forward. This is basically taking them from as you were saying earlier underperforming on past Quarterly Results to more in line with what we expect of a talent of this caliber. You want that consistency Going Forward. What happened here was they were so bad that the comparisons to themselves was positive and comparisons to google were positive. Happens to come at a moment where there was tremendous despair last night. Think about it. When you left the office, you were left with netflix which was disgusting, i believe. Disgusting. Okay. You were thinking about Norfolk Southern which unfortunately was dark hole than ever. Here we have a different picture of facebook. A rosy clove. At t up profits of 62 cents that Beat Estimates. Phone giant also increasing free cash forecast. As for boeing, blowing past expectations with earnings of 1. 35 raising full year guidance. Good work on commercial side. David, you want to start . Well do more later on. Big news here, huge buyback. 101 million shares. 3. 8 billion. Will they keep it up . Free crash frs are quite strong as a result of lower than anticipated Capital Expenditures. The subscriber edition in wireless, that was not so good. 151,000. Just to put it in perspective. Verizon did 1. 5 million. Well talk a little more deeply about at t and iphone 5 and Everything Else later. How is that possible that verizon can be so far ahead . I dont know. Its remarkable. That was remarkable number from verizon that quarter. We didnt give it enough attention. So far above what anybody was expecting. 1. 5 million additions talking about for the Third Quarter. Were going to hear later. Integral to the food chain of cell phone. Cell phones, we have ipad mini. Theres a lot of conflict right now about how good cell phones are. Arm holding that they are excellent smartphones. So you have this void that was the pc being mentally washed away by the excitement of the smartphone. In other words, some hope where data center, some hope in tech. Tech was the disgrace of the quarter. Its tougher it feel horrible about tech as you did yesterday. Just on at t point, i wonder what a beefed up sprint is going to do here coming into the market with capital behind it at a time when at t and verizon are relying on moving toward more tiered pricing for customers. Will sprint try to come in and undercut their ability to do so and take some of the user growth away . No doubt. Pricing is one key question when you look at the soft bank investment. There are a lot of questions. It will be very interesting, i think, when that deal is completed. Sprint has taken in 3 billion in capital through that convertible. Its convertible 5. 25 a share. It could create real competition. Not that there isnt. Weve been hearing from very Large Global Companies with a weak outlook. Big exporters with a weak outlook. Boeing is number one exporter in this country. Outlook is better. What does that tell us . I have been very hard because we had dupont which as i said yesterday was the super bowl of bad earnings. They distinguish themselves. Gold medal for worst performance, best belly flop, it was that. Boeing seems to only go up four days a year. When they report. In between people just worry and worry. This was a triumphant quarter for boeing. Thats another area that you can feel better about. And the deal falls apart. Doesnt that make boeing have a better outlook from here . Who knows. Sprint has the backer. I was concerned for boeing if that european merger came off. United technology, remember you talked about goodrich and how good the acquisition was. If you have aerospace doing well and housing doing well and autos doing well well hear from ford soon. Domestic and foreign. You end up with a scenario where a lot are doing well. Then you have to try to figure out what in this country is not doing well. We heard coach was good. Its the consumer sort of business split personality. Which of those two is the more reliable signal at this point . Our economy is a Service Based economy. Housing and retail based economy. Im not hearing bad things. Thats a good point. Europe is bad. I was pessimistic about europe. China, maybe a little positive. United states, im not hearing enough negatives to be as glum as i would like to be. You would like to be glum . I dont think you want to be glum. Buffalo wild wings wasnt that good even though i ordered three free separate orders of wings last week in ohio. That didnt make it. Didnt happen. You must have worked those off in this mornings 4 00 a. M. Workout. Im dropping weight. People at home, its by design. When we come back, exclusive with one of wall streets heavy hitters. Lloyd blankfein, 11 00 a. M. Eastern time. A lot to discuss and ahead, broadcom will be in talk about its Quarterly Results. One more look at futures as we try to compare some of the damage from yesterday. Back in a minute. [ male announcer ] at scottrade, we believe the more you know, the better you trade. So we have ongoing webinars and interactive learning, plus, inbranch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. Our teams have the information you want when you need it. Its another reason more investors are saying. [ ] im with scottrade. Throughout our lives. One a day mens 50 is a complete multivitamin designed for mens Health Concerns as we age. It has more of 7 antioxidants to support cell health. One a day mens 50 . What does this mean for the company now . You mentioned that netflix gave an ugly tone to the entire market before we get better figures from facebook. Is this Company Specific or something more broad at play . I think its Company Specific. Streaming subs, huge miss in terms of contribution of profit. The best line and i think you can probably take heart in this. We have been very successful in nordix. When you are focused on trying to come up with a positive and you have to go to the nordix, what does that say . Is that an ikea moment . There are no shortage of shareholders that want them to cut international and raise pricing. That would do positive things. You get chatter that why doesnt take a shot at them right now . I said they may want to wait. When you look back, they should have sold it when things were going gangbusters. The question is will anyone try . John malone was quoted as saying maybe directv should take a shot at them. I dont think anyone will do it. It is interesting because you could raise pricing. Serious charges. A lot more than netflix. International is costing a lot of money right now. I was surprised to hear theres a credit card problem. Theres tons of Online Companies that do well in latin america. Being in u. K. , you see a lot of these illegal streaming websites that people use to watch tv and movies. I wonder if thats part of their challenge in gaining traction overseas. It would call into question how aggressively they can raise price. I like davids call. Maybe its time. Maybe its time to reassess. What do they have to lose . Holy cow. Well see. Well see. Last night on mad money, cramer showed you the way toward a few bright spots in a tough market environment. Whats the pathway to profits today . Jims mad dash is coming up next. And later panera bread raising guidance in a tough earnings season for many restaurants. Well speak with chairman ron shaich about whats ahead for his company. D t the best schools in the world. You see they all have something very interesting in common. They have teachers. With a deeper knowledge of their subjects. As a result, their students achieve at a higher level. Lets develop more stars in education. Lets invest in our teachers. So they can inspire our students. Lets solve this. Are we there yet . Are we there yet . [ male announcer ] its the question we ask ourselves every day. Is it the safest, the most efficient . The kind of vehicle to move not just people. But an Industry Forward . Are we there yet . Are we really . [ male announcer ] are we there yet . We are, for now. Introducing the allnew seven passenger gl. Motor trends 2013 Sport Utility of the year. Mercedesbenz. The best or nothing. We create easy to use, powerful Trading Tools for all. Look at these streaming charts theyre totally customizable and they let you visualize what might happen next. Thats genius strategies, chains, positions. We put em all on one screen could we make placing a trade any easier . Mmmm. Could we . Open an account today and get a free 13month e ibd™ subscription when you call 18882800149 now. Optionsxpress by Charles Schwab. Hey, its sandra from accounting. Peter. I can see that youre busy. But you were gonna help us crunch the numbers for accounts receivable today. I mean i know that this is important. Well, both are important. Lets be clear. They are but this is important too. [ man ] the receivables. [ male announcer ] michelin knows its better for xerox to help manage their finance processing. So they can focus on keeping the world moving. With xerox, youre ready for real business. Every morning you provide inhouse a memo of what youre watching. This thing must be ten pages long this morning. A lot of earnings. I try to give you more meat. I got to tell you, this is a company that was as breather as a lot of people were saying. Its run too much. You know what . Hiv franchise and hep c franchise are humongous. This will go higher. Disappointed out of lillian and others. Hep c is a huge market. Its a horrible disease. Its paying off in spades. The bell of the biotech ball is gilead. Well talk dollar tree after the bell. Its a ceo triple header on squawk. Live interviews with Lloyd Blankfein, ron shaich on earnings and in the world of tech, Scott Mcgregor will join us in the next half hour. Opening bell comes after this break. [ male announcer ] this is joe woods first day of work. And his new boss told him two things cook what you love, and save your money. Joe doesnt know it yet, but hell work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. Hell start investing early, hell find some good people to help guide him, and hell set money aside from his first day of work to his last, which isnt rocket science. Its just common sense. From td ameritrade. What a week we have going. Dow down 243 yesterday. Last time we had two 200plus point losses within three days. November 21 of last year. Well see where we go today. Breath is more positive at the big board. Release of business insiders list of innovators in the tech community. Nasdaq, America Israel Chamber of commerce. We talked facebook at the open. It is poised for its best percentage gain ever. I know were only going back to spring. Thats a big move. I wonder if they have a slide show of henry ringing the opening bell with subtitles. You have to go through each one because it counts as a hit each time. 50 of the traffic is from facebook. I want to tie that into facebook. Well done. Shares up 23 right now. There it is you see it. I wonder, we mentioned a billion shares. Still to come and yet from what i hear, there is real long only demand for the stock that could help. The company is buying back everything. Zuckerberg is not selling. Wale see if that ends up being a concern again as it has been for a number of months in the past. Wouldnt it be something if google could rally. There were so many things that went wrong with google. Google came to facebook. Companies keep flipping. People liked google and they didnt. They thought they had it. Zuckerberg says they do. An amazing moment where i want to reference something david said. These are bad ways to think about the market. What i just offered is not something you can do at home. People are going for pay up for facebook and sell google. Theres a daytoday judgment being made about companies that is so snap that very few people can keep up with it. You get up really early. Go to bed really late. You still havent gotten to Norfolk Southern conference and theres a stock down. Every morning and every night drinking through a fire hydrant. If facebook is the crystallization of whats happening in mobile, then people are going to have to do a big rethink around social. I want to now a company that i like very much and they were on our show and they came on mad money, they did a big secondary. The stock is screaming. Someone is going to need to buy these guys because these are the arbiter of mobile media. Yahoo they said would not be big acquisitions. This company will be bought quickly. It reminds me of yelp which did underwriting and it was a buy. I think social media as a business had a been given up on 24 hours ago. Suddenly people say, you know what . Im going to put my hands in social media. With facebook, theres still a great deal of uncertainty. I dont want to get too carried away. Its not that big on numbers still. The mobile revenue number is still a relatively small number. It is growing. They did sponsor stories and its gone up a lot. Lets see. Im not a regular facebook user. I dont have a real sense as to what it is like. Maybe you do. Im not either. Overnight zuckerberg went from being a frat house guy to let me do this because it will provoke you to know end. The jamie dimon of social media. Thats ridiculous. Thats okay. Remember pandit . I think they took him out. People defriended that guy. He was defriended. Blocking him on twitter. It came to me in a dream that im going to leave. It happens. You want to talk we have not discussed our big story from yesterday and that is the pricing of the ipad mini, right . We know amazon sells these things at cost. 329. As if they spit on investors yesterday. Stock was at a high and sold off in the middle of the presentation. And that calculation about 100 million and how many did they sell. 16 million. If you were buying an ipad at the last minute, maybe you should have waited. I liked what i heard from apple yesterday. John ford, unbelievable job covering that press conference. Just fantastic. Offering far more insight than wall street to it. I liked what i heard from apple. If its a 30, 40 difference in the cost, the ecosystem is worth that. Well hear from Scott Mcgregor. Mentioned amazon as being a key client because of the kindle. Maybe theres room for everything. A nice parallel. They say apple is taking the macys route trying to grab middle end to high end but not going the discount route. The idea is not to compete directly with the kindle. I dont think they have to. Those of us who are applepeople who live and die by apple, you got to have the ipad. You have to have the ipod. This new imac. The numbers that imac are putting up. How cool is that . Thats what i own of all of the apple devices is that sleek thin dont you want to say its too heavy and clunky and freezes constantly. Please go to apple. I will use the keyboard until its the last keyboard on earth. I cant stand touch pads. Thats why i have a blackberry. I like the laptop. Its been so expensive. Interesting to watch google with the new intro to the market. My favorite thing on a new launch is to geek out and watch inhouse corporate video on the website. They had to find a new way to weld this mini ipad together because the glass is so thin. Fascinating stuff. I am doing an interview this weekend. Such great detail about the actual engineering and how jobs was every little detail. That edge isnt rounded enough. Just an amazing attention to detail that i think tim cook is doing too. Meantime, bob pisani is on the floor watching whats moving today. Good morning, bob. The important thing here was we got two data points to help the markets overall. Number one, pmi data better than expected. Futures started moving up at 10 00 last night and stayed up most of the night. The second one was better tone on earnings. I dont want to make too much of it. I look at 10, 11 companies this morning and looked at the numbers here and five of the ten upped their guidance. Boeing, kimberly, lockheed martin, windham, all talk about better guidance in the near term for 2012. That helped. The major earnings trend this period though, we all know what it is. Light on revenues. A good example is lily. Earnings were light and revenues were on the light side. Stock opened now down. Conference call still ongoing. Well get you more on that later. Were still only up 1 for revenues for q3. Thats the new data were getting. Companies consistently missing on the revenue front here. Six of ten of the companies that i read this morning, six out of ten were light on revenues. Thats not a good sign. Job cuts continue too. Theres another little trend i dont want to make too much of it. Dow chemical cutting jobs. Northrop cutting jobs. Dupont announced yesterday they were cutting jobs. Thats something i see as well thats out there. How about time for a bounce. On a shortterm basis the markets are definitely oversold right now. The markets are disappointing. The greatest numbers of people, remember what happened on monday . We had that big rally going into the close. Everyone who bought puts got stripped. Yesterday everyone who bought calls got hurt. One thing thats not helping at all is volume. Were not getting volume on days when we were down. We didnt get big volume yesterday. Normally technicians look for some kind of volume increase for a sign of a bottom or a top. Were not getting that. The problem is High Frequency trading 60 of the volume now. It makes it hard to use traditional metrics in Technical Analysis in volume to mean anything. I dont think volume necessarily means what it used to mean with 60 in High Frequency trading. Notice all of the guys who are Hedge Fund People are still underperforming market. Big article in the journal today about that. That may be bullish going into the close. Back to you. Thank you, bob. Lets head to the pits. Rick santelli at the cme group in chicago. Everyone continues to talk about how the bubble may or may not pop at some point. With inflows going into Corporate Bonds and high yield bond funds but a twoday chart of tens, not a lot going on. Were hunkered in between the 50 day and 200day moving average along with other technicals, wedges, consolidation, really isnt going anywhere. As you open the chart up to september, Pay Attention to how were hovering around that 175 to 180 area. The next chart is the s p going back to the same beginning of september. You can see how weve deteriorated over the last several sessions. Theres been very little response from the bond market. Many traders are scratching their heads about that. Its something to Pay Attention to. Especially of late. Usually weakening in equities brings buying in treasuries. You talk about a market that is going sideways. Look at this chart on the dollar index. Many traders made money selling against that 80 on the top of the range. Will it continue to work . Maybe. The dollar is getting traction against the yen, which is part of the reason why the dollar index is up at the top of that range. Now were going to david faber who has info on at t. Thank you very much, mr. Santelli. Shares of at t down. They had been down as much as 3 at the open. Really coming back a bit. Lets call it down not even quite a percent at this point after the Company Reported Third Quarter results. Some real positives in the report and some other things that investors seizing on perhaps less positive about. One positive, well, lets start with churn. Only 1 of the subscribers are coming off. Thats pretty good. It got better year over year. But Wireless Subscriber growth. Thats your net additions to subscribers. 151,000 versus 1. 5 million for their main competitor. Total adds, 678,000 for at t. That churn number as well there. Iphone activation interesting to look at. Verizon added a subscribers but iphone 5s werent part of that. It gives you a sense that at t has a lot more built in iphone or larger installed base of iphone users and so the question that some investors need to ask is as the iphone 5 starts to proliferate. There is supply constraints. They would not say specifically but clearly there are supply constraints for the iphone 5. What will that mean for this quarter . The Fourth Quarter . What will it mean for at t if youre trying to compete on lte network and they have a lot of things theres a look there. They have a lot of things in their slides that talk about how strong their network is. How much they built. How many people they were addressing in the country. Interesting question. Will they lose more as they compete on iphone 5 now with verizon or not. Can they hold their own . How much is the spectrum verizon playing a role. Its not just spectrum. Its all of the things theyve been doing for all of these years. Its the blocking. Very unexciting. I have to tell you, i think you made a good point on apple. Well have to focus on. The presumption is apple disappointing on ipads. We heard apple is disappointing on iphones. If you wanted to catch a moment where apple has the reduced expectations ahead of the quarter, we have it. People think that apple has been caught flat footed in major devices. Stocks down tremendously. Its a good softening. Expectations tomorrow night. Theyve been reset to the point where people think that apple is just not as good as we thought. Not a demand issue. A supply issue. Fourth quarter could have good numbers. You have enough demand. Finally on at t let me just quickly add, Free Cash Flow is strong. 6. 5 billion. They took Capital Expenditure expectations down or it was down to 13. 8 billion yeartodate from 14. 7. Look how many shares they bought back. Thats a story for so much of corporate america. Played a role here and one reason they beat on the bottom line. Thats impressive. Buying equivalent of whole companies. A lot of cash flow there. Those companies are better than people realize. Joe kernen asked a great question. Why doesnt Warren Buffett buy the phone companies . He said he doesnt know what they are going to look like. Has anyone looked at their phone book . It makes up a large percentage of household expenditures. Its more than my mortgage now because i reduced i would like to refinance my verizon bill. Give them a call. Maybe theyll help you out. You never know. Theyll cut price sometimes. Things are high. Theres competition. Its why you want competition. Thats ridiculous. Ive done it. Chips are up for broadcom and shares rising on better than expected earnings. Scott mardi gras gregor on where despite a challenging environment, the Product Pipeline for the chip maker is stronger than ever and how is Lloyd Blankfein preparing his firm for the fiscal cliff and a look at this mornings early movers. Health Care Companies moving on up. Well be right back. [ male announcer ] how do you trade . With scottrader streaming quotes, any way you want. Fully customize it for your trading process from thought to trade, on every screen. And all in real time. Which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. Try our easytouse scottrader streaming quotes. Its another reason more investors are saying. [ all ] im with scottrade. Oh, hey alex. Just picking up some, brochures, posters copies of my acceptance speech. Great its always good to have a backup plan, in case i get hit by a meteor. Wow, your hair looks great. Didnt realize they did photoshop here. Hey, good call on those mugs. Cant let em see what youre drinking. You know, im glad were both running a nice, clean race. No need to get nasty. Heres your honk if you had an affair with taylor yard sign. Looks good. [ male announcer ] fedex office. Now save 50 on banners. Shares of worldcom are down. This is unbelievable. This quarter was the best of all of the semis i have seen. Scott mcgregor is the president and ceo. Im shocked the stock is down. Shouldnt you be standing there right now 33 bid for 1 million shares . Its great to be here. We did have great quarter. We had growth in all of our businesses and wireless in particular grew almost 14 . Okay. So are people seizing on broadband not growing as much . Talking about expenses being too high . Im grasping because i listened to the call. I heard you guys really are in the sweet spot of everything including amazon obviously talking about apple but apple is big. Please tell me what im missing that the sellers are grasping . I dont know what youre missing. We had a good quarter. Going forward taking mid point of guidance for q4, well be up 11 year over year. Thats showing were taking share and were growing faster than our peers. Theres concern that operating expenses will outpace revenue again this year. What are you doing to stem the doubts that people have . You have to look at whats driving the cost. Its coming from investment in r d. In q4 were seeing growth from tape outs and thats the last process where you tool to go to production for a product. Its a great leading indicator. Isnt it also the case that part of the reason why your Gross Margins were doing better is from selling down net logic inventory . Theres some accounting charges related to acquisitions and thats stepping down in q3 and will step down in q4 and gives us a slight tail wind in terms of gross margin. When you were on mad money you talked about 5g and how its coming. Whats the goal here for 4g and 5g. One thing that distinguished this period, it seeps like at t and verizon stopped spending. Give us a sense of a two to threeyear outlook because of 5g. You see growth in cellar going for faster band width. I think what a lot of people do with tablets or cell phones is connect over wireless land and thats where 5g products deliver band width. If you want to look at video content, download movies, do your facebook application now that they push mobile, all those things will be even better experience if you do it on wifi. 5g gives you that giigabit performance. You mentioned amazon. I know that people arent supposed to talk about apple. I wont put you on the spot there. How is the kindle selling . It seems like youre signaling that theyre doing well. Samsung says theyre doing well. This is so out of sync from what we hear from dell and hewlett packard. Amazon is taking share in this. I think in the tablet space, you have to look at what is the business model. What drives the sales. Apple makes fantastic products. Theyre the leader. They make just a splendid product with a splendid User Experience. Kindle is interesting because it comes in a with a difference business model. They are able to sell tablets at a low cost. So there are different business models. They could be successful but each is great at what they do. I got to tell you, scott, stock was up premarket. Maybe it will come back. Want to thank you. President and ceo of broadcom. Second best in show which is entirely apple. Great to see you, sir. No answer on that 33 bid but a great question. When we come back, ceo parade continues on squawk on the street. An interview with lloyd blank fine with Goldman Sachs later but first coming up, investing in this market can be as tough as an obstacle course. A dirty, muddy, ugly race. But weve got cramer here to steer you in the right direction. Six stocks in 60 seconds is next. Now, go hit the showers. Well be right back. Instinct. Duff phelps finds the sweet spot that powers sound decisions. Duff phelps Financial Advisory and Investment Banking services. Tdd 18003452550 tdd 18003452550 and the streetsmart edge Trading Platform from Charles Schwab. Tdd 18003452550 gives me tools that help me find opportunities more easily. Tdd 18003452550 i can even access it from the cloud and trade on any computer. Tdd 18003452550 and with schwab mobile, tdd 18003452550 i can focus on trading anyplace, anytime. Tdd 18003452550 until i choose to focus on something else. Tdd 18003452550 trade at Charles Schwab for 8. 95 a trade. Tdd 18003452550 open an account and trade up to tdd 18003452550 6 months commissionfree online equity trading tdd 18003452550 with a 50,000 deposit. Tdd 18003452550 call 18662945373. Between listening to the numbers. And listening to your instinct duff phelps finds the sweet spot that powers sound decisions. Duff phelps Financial Advisory and Investment Banking services. The question is whether with a goes down must come up. This is one of the best performers in the mark today. They did 1. 89 versus what people were looking for 1. 15. A nice beat. Itw . A lot of guys didnt get industrial side right. They did. Citi downgrades norfolk. Its a great company. Anheuser downgraded. Youre not going to stop the cement heads. People will drink bud no matter what. They shoot horses. Costco down a bit. A recommended buy. Carl, you know power of costco better than anyone. Ive been waiting for entry point. Its here. Good call. A lot of levels the other company is mcdonalds at 88. 85 is the right level there. Im more concerned because of the price wars. No price wars. Whats tonight . We have a really sexy Biotech Company thats been absolutely in the crosshairs of the bulls and bears and then david and i love martin franklin. Hes just a wild man. Hes delivered, delivered, delivered and well have him do a victory lap. Not just because i have two margaritaville mixers one at the Vacation Home and one at home. More after the break. Dont go away. Looking for a better place to put your cash . Heres one you may not have thought of fidelity. Now you dont have to go to a bank to get the things you want from a bank, like nofee atms, all over the world. Free checkwriting and mobile deposits. Now depositing a check is as easy as taking a picture. Free online bill payments. A highly acclaimed credit card with 2 cash back into your fidelity account. Open a fidelity Cash Management account today and discover another reason serious investors are choosing fidelity. Welcome back to squawk on the street. September new home sales up 5. 7 . Much stronger than expected. The annualized rate 389,000. Last month revised lower from 373 to 368. This now represents the best level of new home sales going back to april of 2010. Now, granted its well below a billion annualized units which 04 and 05 and entire two years above that pace but the best since april of 2010. Carl, back to you. All right. Thanks so much, rick. Lets get reaction to those numbers from diana olick who joins us from washington. Anything to worry about inside these numbers . Im looking at the regional look and its very different when you go northeast big jumps but not so great in the west. Sales dropped a lot. New home sales dropped 37. 3 in the midwest. You have to look at where these markets are looking. This is signed contracts in september not closings. This is a good jump. 5. 7 is well beyond expectation. Four to fivemonth supply. We know builders have been ramping up production. Housing starts and permits going up in september. Theyre looking for that demand. Its good to see that demand is still there because there was some concern going into this fall that we might see a weakening in these numbers. Prices up to 242,000 on the median home price. Thats way up from a year ago when it was 217,000. Obviously builders are able to push the prices higher. That is because theyre not seeing quite so much competition from foreclosures. Foreclosure supplies have really been eaten up by investor and pulling up the price with it. Thats a help for the builders. All in all a good report. Interesting. The market not impressed. Sold off just a tad on the news. Thank you, diana olick. A good dose of breaking news here at the top. Facebook shares on track for the largest percentage gain ever on the back of that strong earnings beat. Is the boost from mobile enough to stabilize growth for the longterm . Goldman sachs rock star will be here to talk markets, economy, fiscal cliff and china. In fact, the man who coined the term brits, jim oneill will join us live. What is Reid Hastings next move as competition increases . Lets focus on the astounding moves that weve had on facebook. Shares of facebook absolutely rocketing today after it beat the streets expectations on the Third Quarter. The street praising the social network for advertising. We dig deeper into an important stock. Were joined by an analyst at stern ag with a buy rating and target of 26. That right . Thats right, simon. Its astounding. Facebook announced it managed to sell now 153 million of mobile advertisements and the stock increases in value by 8. 8 billion as a result by my calculations. Why is the conversation changing . You have to put that in perspective. A few weeks ago people were expecting mobile advertising revenue to be no more than 50 million or 60 million and the big concern was this mobile transition is going to be very hard for facebook. They have shown from march is they created what is a billion dollar run rate in advertising. Wouldnt be surprised if they were closer to 2 billion in the next 18 months. You have a powerful Network Platform that can monetize the Huge Population on facebook as they proved last night. Is the case proven . There are those that would say this is so new. The fact that people are for the moment clicking on these mobile ads doesnt mean to say when they learn that thats a commercial operation that they will click on them in six months time. We still are groping around with a new technology and we still are not sure, are we, really . Really, look, i think in many ways the stock has always been a story about where the longterm is for these guys and again they have a very small market share relative to the number of people they get every day. So the engagement on mobile i think is eight times what weve seen in other platforms and i think that people are realizing the potential power down the road. So will there be hiccups . Sure. I think people are realizing that theres a lot these guys can do. They just dial up a little bit and here you are. Again, the beat wasnt big. I think the story for the next 12 to 18 months look powerful. What about the attitude . Mark zuckerberg was not only on the call last night, he was very strident on the call last night as ceo. And sandberg saying its a priority to focus on getting more mobile ads on news feeds. In other words, that commercialism, that profitability is a major priority. To a certain extent that is new, isnt it . Yeah. I saw a different Mark Zuckerberg last night. I think he was very focused on monetization. He cared about the shareholders from the tone and discussion he had around the companys future. I think investors like that as well. So would you be looking to raise your price target . Were almost at the level you think it should trade up. I dont want to comment on where our target price can go. Suffice for say that i see a big opportunity for facebook over the coming years. Its good to have you on the program. Thank you very much. A big move on a big stock. For the 12th year in a row Goldman Sachs holding Asset Management symposium. Discussions with over 40 founders from the leading hedge funds and private equity funds and real estate funds. Time for another cnbc exclusive. Gary cam ikaminsky has an exclu. A spectacular conference. Amazing group of people. Set the table for us. Explain to the viewers who the clients are, what this is about and what the agenda of the next few days are all about. Im glad you asked me about that. It seems people dont really understand that ssam is Goldman Sachs Asset Management and our purpose is to manage money on behalf of our clients. Many of them are here today. And they are typically u. S. Pension funds. Ones of state Pension Funds as well. Insurance companies. Many important similar type of entities from around the world. Sovereign wealth funds. These kind of people. And as opposed to the rest of Goldman Sachs which is doing other things with some of them and others our prime purpose is to purely look after managing their money. We are owned by Goldman Sachs but we have a different purpose than is incorrectly reported on from what i can see from a number of places. Let me set the record straight with that. With that in mind, i want to go around the world with you. You are looking around the world for Investment Opportunities for those clients. I want to start in europe. I just want to know, is the eyo a are your eurozone in recession . Yes. If it was as easy as that, life would be straightforward. The big issues looking forward because part of the problem of Investment Management is we all get influenced by the past and theres tomorrow and we have to think about the future. The big issue is about how bad is it going to be, how long is it going to be, will it get an even bigger recession or some of the policies and initiatives going to bring it out of it. What is your assumption now . How deep will it be . You know they havent done much since they said they would do anything. Is this going to be a deep prolonged recession . We probably need the rest of the year to talk about this issue. Its so complex. What they are doing is a game changer and for Investment Managers i think it just changed the risk reward for much of the past three years you would want to sell good news rally. I think because of what theyve done and strength of commitment to try to keep a shell in the road, now you want to buy any news selloff which is a subtle change. The idea that were through the problems because of what theyve said unfortunately is not the case. In terms of looking at a global waiting, would you consider europe as a market wait in terms of looking at a Global Portfolio . Thinking about it in what i still do in twoyear anniversary of doing this job, i call it my new life. I look at a lot more conservative ways of valuing and big picture things. And because of the mess, european equities are really cheap despite how much they have grown since summer. My view and the way i try to steer people is to look through a lot of the daily noise and look for opportunities to invest so if anything ill be slightly overweight european equities both absolutely and relative to the u. S. Given the big move. Well get to the u. S. In a minute. Lets go to china. Some data out of china today. Im somewhat surprised before we came on air what you said about china. Explain what you think about the opportunity to invest in china. Not necessarily the chinese economy but invest in china now. This is a dangerous week to quiz me about one of my Favorite Places in the world. I think the chinese data is showing strong signs these guys have pulled off yet another adjustment. The numbers this morning suggest a bounce coming on top of what we saw last week. And most importantly, they are doing it stopping a housing taking a trade surplus from 10 to 2. 5 and the consumer is showing signs of accelerating relative to production. Its fantastic. If it was as simple as that, we would buy chinese stock and forget about it. Unfortunately its not. One of the reasons that these adjustments are taking place is deliberately raising wages so it makes it for Many Chinese Companies particularly exporters, the Profit Margins are under a lot of pressure. And so there may be other winners from that so i find myself thinking mexico. Big winner from the new china. Australia a bit of a loser. But i think from some of our guest speakers which you are interviewing later, it would seem to me a fantastic time to be a genuine chinese stock picker. By that i mean stocks other parts in the world that may be a good way to play the new china. I call it apple versus caterpillar. Not obvious to me caterpillar is a big winner as it has been in the past whereas consumer names in the u. S. , big winners. The message here is going to be to find specific stocks in china to be opportunistic. Lets go to the u. S. You hinted on that. I know you have been down in d. C. For the last 24 hours. Just got up here. Not so optimistic in terms of the u. S. It sounds over the last 24 hours. I have been very optimistic relative to most of the people about the u. S. This year. Ive been a business dismissive of the election and fiscal cliff as being that bigger issue. Im hoping its just the fact ive before in d. C. For 24 hours and after the weekend ill forget about it all. I had a horrible experience. For all of the listeners that influence washington dollars, get it sorted out. Its not a good experience. It seems to me the American People are stuck about big choices, about taxes and spending and we all hope that this election is going to clear some things up but its not entirely clear to me that it is going to. Will the election have a monumental impact on the u. S. Stock market one way or another in two weeks . Even thats tricky. I think people look at the simple fact in theory at least romney is more probusiness relative to obama. Thats good for stocks. Its not that easy. Beyond that theres a whole issue of the future of the fed and their commitment to the fiveyear ranks where they are and under romney that would not be the case. The big thing for us in the election is the bond market. Thats highly asymmetric. Could be a big loser on romney victory and the stock market has to deal with that even if the risk premium would come down. Thanks for having us. Sounds like jim was listening to the squawk on the street discussion we had yesterday on why the romney victory may not be great for stocks. Cramming in a lot of information in a short period of time. Well come to you later. You just heard from jim oneill. Still ahead, an exclusive with the man at the head of Goldman Sachs. Thats Lloyd Blankfein. One restaurant stock thats still feeling the love this earning season. Well talk about panera. For how long can it stay on top of its game . Look at those games today. The companys ceo and executive chairman will join us live on cnbc. If we want to improve our schools. What should we invest in . Maybe New Buildings . What about updated equipment . They can help, but recent research shows. Nothing transforms schools like investing in advanced teacher education. Lets build a strong foundation. Lets invest in our teachers so they can inspire our students. Lets solve this. And his new boss told him two things cook what you love, and save your money. Joe doesnt know it yet, but hell work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. Hell start investing early, hell find some good people to help guide him, and hell set money aside from his first day of work to his last, which isnt rocket science. Its just common sense. From td ameritrade. Its just common sense. We call this our mission. Mpany, green toys teaches children that if i have a milk jug and i stick it in the recycling bin it can turn into something new. Chase allows us to buy Capital Equipment to be able to manufacture in the states to the scale we need to be a global company. With a little luck green toys could be the next Great American brand. Find whats next for your business at chase. Com mainstreet when it comes to excuses, battleground stock is sticking to reality than excuse. Getting slammed by competition. This is something ive talked about on cnbc for months. This quarter a derivative of the word competition was mentioned no fewer than 22 times on the earning call. It is showing up in the numbers. Sales down 9 . Operating earnings down 34 . Net income as best i can tell ready for the First Time Ever and margins, this is an interesting part of the story, they are getting clobbered. Every basis point counts. And sticking with the theme i had here earlier this week about companies that should suspend guidance, they lowered guidance but has limited visibility using a derivative of the word uncertain four times in its earnings call. Meanwhile, dow chemicals ceo gets my candor award of the day today. I kept hearing a cello playing really gloomy music in my head this morning when i was reading the Earnings Release and he said this. The new reality is that we are operating in a slow growth and volatile world. Cannot get any gloomier than that. He was talking about why theyre going into restructuring. Yes. Very candid. Back to you. In the wake of dupont yesterday, thank you for the latest on earnings season. Within earnings season one restaurant name continues to feel the love when others are not. Panera bread coming through with results that have pleased the market. A substantial gain there. Well talk to its coceo next on the program. Theres a question about cost. Theres a question about slowing expansion. Thats next on cnbc. Still ahead, exclusive live interview with Goldman Sachs chairman and ceo lloyd bla blankfein. To supply affordable, cleaner energy, while protecting our environment. Across america, these technologies protect air by monitoring air quality and reducing emissions. Protect water through conservation and selfcontained recycling systems. And protect land by reducing our footprint and respecting wildlife. Americas natural gas. Domestic, abundant, clean energy to power our lives. Thats smarter power today. Domestic, abundant, clean energy to power our lives. Hahahaha hooohooo, hahaha this is awesome folks who save hundreds of dollars switching to geico sure are happy. Id say happier than a slinky on an escalator. Get happy. Get geico. Melons oh yeah well that was uncalled for. Folks who save hundreds of dollars switching to geico sure are happy. How happy, ronny . Happier than gallagher at a farmers market. Get happy. Get geico. In America Today were running out of a vital resource we need to compete on the global stage. What we need are people prepared for the careers of our new economy. By 2025 we could have 20 million jobs without enough College Graduates to fill them. Thats why at devry university, were teaming up with Companies Like cisco to help make sure everyones ready with the know how we need for a new tomorrow. [ male announcer ] make sure americas ready. Make sure youre ready. At devry. Edu knowhow. [ male announcer ] zeebox is the free app that makes tv even better. If your tv were a space captain, zeebox would be an alien, first officer. Together theyd become the best star team in the fleet, able to take on anything in the universe. Whew. Space. Space. [ male announcer ] download zeebox free, and let your tv go where its never gone before. Panera bread raising fullyear guidance. Shares up 5 and up more than 40 in the last year. Here is ron shaich, coceo and founder. Ron, welcome back. Congratulations on a quarter that i was just talking with jim. Looking through it for anything to quibble with whether its margin targets, transaction growth, check growth, guidance, theres not a lot to quibble with. Your job is to worry. Whats left . I do worry. Were feeling great. I mean, this was a superb quarterback. Were targeted another superb quarterback in quarter four. Were looking at earnings on our targets up 31 to 33 in q4. Were growing. Were at the high ends of our growth. Our average weekly sales of new stores are at an alltime high. We feel good. All right. Ron, great to see you. Your store on saturday, jammed. Took me more minutes than i like to get my food. You should have called. Thats a block from my house. I know it is. Thats why i bring it up. Right down the block from you. Chipotle goes from 12 to 8 to 4 this year. Buffalo wild wings last night goes from 4. 7 to 3. 8. How come you are able to buck that trend and go higher . Whats the secret sauce here . Jim, its a stew. Weve been at this now for two decades as a public company. For the last ten years weve been driving growth through a stew of factors. Its about food. Its about operation. Its about marketing. Its about catering. A whole bunch of things have worked for panera over the longterm and continue to work. All of our investment and energy is about building longterm competitive differentiation. Its not complicated. Its just hard. How do people know one and one . Everyone wanted to order a salad and ordered a half sandwich. What are you done so the younger demo gets this . Were basically talking about food that they want. I think as you know, this is healthy food. There are real options. Were the largest provider of all natural chicken in the country. We talk about a range of organic ingredients. We talk about food that gets people excited. Great success this last quarter with our chicken cobb with avocado. Were not talking about an avocado paste. They trust panera. This is food you can trust. It is served in an environment that engages people by people that care. It works, jim. Its been working. Thats why were the best performing stock in the restaurant universe for the last decade and last two years and yeartodate. Looking through sales in the quarter, 6. 2 is your comp. The composition of that is 0. 6 transaction growth, 3 Percentage Points is price and so what of the mix is changing in a way allowing you to grow top line . Thats great. Thats been going on a long time. Theres often a misunderstanding about mix. Mix is driven by changes in the nature of our business. For example, our kpcatering business has grown 50 on a twoyear rate. Its been growing 50 two years of comps throughout this year. That growth in catering changes the mix. It brings up the average check, the average profit per transaction so thats what shows up in mix. All were doing is driving pieces of the business that are more profitable for panera. Its something weve done for a long time. Its something we expect to be able to continue to do. Its not about price. Its about mix of the business. 3 growth in price is significant. How are you able to raise prices in this environment when weve been sort of told and warned about how the consumer is holding up. We have never taken price beyond inflation. We have been able to through the recession to be able to take price to cover inflation. I think that consumers vote with their wallets. They choose things they consider good value. Good value isnt how cheap it is. Its whether its worth the money. What panera continues to do is try to put out a better and better experience thats worth the money. Major agriculture problem this year. Drought. Youre talking about wheat prices going down. Youre a huge bakery. Weve bought forward now for the bulk of next year. We forward buy our wheat and lateral it in. Were already prepared to take very modest price increases to accommodate that inflation. Ron, weve had a lot of ceos on as earnings quarter is gotten under way from both fast casual and qsr. Everyone denies losing share. Everyone talks about share shifting. Its not coming from us. Is the consume e er influx to a degree . Maybe youre stealing from grocery stores. Its hard to tell. We continue to see panera grow. This is not a quarter story. Its not even a oneyear story. This has played out over the last decade. People want real food and places that feel good to them. They want people that care. Panera has continued to take share across a range of competitive options. What part of the country is growing fast as weve heard troublesome and dottidotes abou west, northeast. We have seen no material differentiation between various markets. Panera continues to grow and to perform across the country. I would tell you, its much more important to look at individual companies and look at how theyre performing and whether they have competitive advantage. If they have it, theyll continue to grow. If they dont in this environment, theyre going to be in trouble. You pointed out the share price for performance that youve had. I see there is harvesting of insider share position here. Your cofounder just over a million dollars. Is there a feeling that perhaps the stock might have topped out for the moment . I think theres de minimis selling among officers of the company. I think as you know im the largest individual shareholder than options that are at the point of extinction in the last couple years. Nothing material to that. Where do you think the stock might go . At what point do you think it would be worth you know, i dont ever focus on the stock price. I focus on delivering something that makes a difference to the guests and frankly that strategy has worked for panera for 30 years. Im here for the longterm. Our Management Team is here for the longterm. What were focused on is building something of quality. It seems to reward investors when we do so. Dont be surprised if jim calls on a sunday sometime soon. Too crowded. Thank you. Ron shaich from panera. Thank you so much. Breaking news here on crude oil inventories. Sharon epperson is back at the nimax. Oil prices are falling fast. A big surprise here in terms of the crude oil supply build. 5. 9 Million Barrels. Remember, as of last week we were already 11 above fiveyear average. 17year high and now we get 5. 9 million barrel build in crude supplies in the past week. Analysts expected around 1. 7 Million Barrels for the increase. They also saw an increase in gasoline supplies where a decline was expected. Increase of 1. 4 Million Barrels. This is according to the energy department. Also fuel supplies declined as expected by 600,000 barrels. This report today from the International Department definitely a bit of a surprise. Bigger increase than analysts were anticipating but they were anticipating an increase. That is part of the reason why they are at threemonth lows here for the u. S. Oil price. Theres a great deal of ample supply here in the u. S. Compared to the market which is tight even as it comes out of maintenance season and we have seen brent crude around 108 a barrel. Nowhere near the decline that we see right now in the wti futures. Back to you. All right. Thanks very much for that. Stick around. Netflix shares are plunging after the Company Reported Third Quarter profit took a sharp hit on higher costs. Well sort through those competition concerns and expansion woes next. Also still ahead, Goldman Sachs chairman and ceo Lloyd Blankfein will join us live for an exclusive interview. Back in two. I dont spend money on gasoline. I am probably going to the gas station about once a month. Last time i was at a gas station was about. I would say. Two months ago. I very rarely put gas in my chevy volt. I go to the gas station such a small amount that i forget how to put gas in my car. [ male announcer ] and its not just these owners giving the volt high praise. Volt received the j. D. Power and associates appeal award two years in a row. At legalzoom, weve created a better place to turn for your legal matters. Maybe you want to incorporate a business youd like to start. Or protect your family with a will or living trust. Legalzoom makes it easy with stepbystep help when completing your personalized document or you can even access an attorney to guide you along. With an a rating from the Better Business bureau legalzoom helps you get personalized and affordable Legal Protection. In most states, a legal plan attorney is available with every personalized document to answer any questions. Get started at legalzoom. Com today. Now youre protected. Good morning. 10 34 here on wall street. Main headlines, new home sales up by 5. 7 in september to 389,000. The highest level in almost 2 1 2 years. Facebook shares soaring 22 . The Quarterly Results beating consensus estimates. An upgrade from a number of wall street firms today and boeing is the biggest gainer on the dow reversing course after last years fall on upbeat guidance. Netflix shares taking a big hit after reporting profit fell 88 in the Third Quarter. We have an analyst joining us to talk about whats being seen as one of the high profile misses today and what hastings does to correct it. Was the big sin in promising the 7 million for the year . Absolutely. No doubt. The beginning of the year the street expected new subscribers and company came out early in the year and said they will deliver 7 million net subscriber additions and back end load so that created expectations and that expectations being revised downwards is what we see today. Absolutely. Aside from a stock thats down more than 15 today, how do they back themselves out of that corner . I think you have to wait for the negative sentiment to wash out. It will take a day or two. Third quarter tough for them last year and stock was going down 25 for three days. Were going through adjusting expectations here and i think well pause several days from now and see where it shakes out. International just keep hitting it like with a hammer. Is it nearly enough to make up for whats going on in the u. S. . No, not at all. Internationals are actually where the spending money. Despite downward revision of guidance they are making money domestical domestically. The majority of it, a lot of it comes from dvd rental and they spend money internationally. If the company admitted, 7 to 5 million net ads move was because they misforecasted. If they cant forecast it because of how new the market is and cant forecast threequarters domestically, how can investors be sure the forecast for international where they spend hundreds of millions of dollars are not optimistic. Do you think the business fits with other businesses . Is it a takeover target further down the line . Is what it is doing be easily recreated by amazon or apple . Not only amazon and apple, you and i could start a service like that and technology is silver life and content is nonexclusive. The advantage that they have is the Subscriber Base and knowledge about subscriber behavior they accumulated over time. Rather than proprietary content. Is that near 57 . Theres downside left. The problem with the stock is there is because they spend money on international expansion, there are no earnings to talk of and no variation support. Its all up to the momentum in the market. Weve seen it move from 120 to 70 on pretty much no news. To be fair, i guess there is news in between quarters but largely it surrounds Something Like a content issue expiring, right . You lose stars or you lose something to amazon. Is there anything like that in the near term thats a potential risk . Not that i see. That cut both ways. Remember, i was on the show in january and netflix was the best performing stock for the year. Remember the headlines were. Those were good days. There was just speculation that yahoo would buy it. Nothing changed fundamentally. The stock moves on headlines that have little to do with reality very often. Live by the sword die by the sword is momentum. Good stuff. Thank you for having me. Okay. Were up 37 on the dow. Lets get a market flash with taylor. Were looking at shares in delta seeing weakness today in a percent into the red. Thats off the lows. Delta profit missing estimates for the Third Quarter. The company having a problem with costs especially nonfuel unit costs. Jets, et cetera. The company also saying it will switch out its 50 seaters for bigger jets and its also taking a billion dollar reinstrustruct hit this quarter. Ahead on the program, Goldman Sachs ceo and chairman Lloyd Blankfein will join us live on cnbc. Its an exclusive interview. Plus, a race to the white house gets fever pitch, what might the impact be on the Federal Reserve and fed policy . Thats a huge issue. More on that next on cnbc. At the best schools in the world. You see they all have something very interesting in common. They have teachers. With a deeper knowledge of their subjects. As a result, their students achieve at a higher level. Lets develop more stars in education. Lets invest in our teachers. So they can inspire our students. Lets solve this. You wont just find us online, youll also find us in person, with dedicated support teams at over 500 branches nationwide. So when you call or visit, you can ask for a name you know. Because personal Service Starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. Our support teams are nearby, ready to help. Its no wonder so many investors are saying. [ all ] im with scottrade. As the fed winds up the twoday policy meeting, expectations are muted so the attention turned to the president ial election and potential impact on Federal Reserve and fed policy. Steve liesman joins us with what the election will mean. Wall street is beginning to game out. What will happen to fed policy and rates in the event of a romney president ial victory. The market is taking more seriously his vow to replace ben bernanke and criticism of fed policy including a monetary cliff. Fund manager writing today the election may impact everything from mortgage costs to the costs of financing the u. S. Debt. Trillions are at stake as well as fate of the u. S. Dollar. Columbia Business School Glenn Hubbard is a favorite to lead. He says hubbard will lead toward mopping up liquidity sooner. But a report that came out yesterday any new fed chairman after january 2014 in a romney presidency is likely to be more hawkish than under an obama presidency. Changes will be gradual as a new chair needs the support of the open federal community. They will pull forward higher shortterm rates in a leadup to an announcement in the summer of 2013 of bernankes replacement under a romney presidency. There will be little effect on the long end. In other words, curve flattening but also a question of whether romney would push for tighter policy even before the chairmans term is up. Economist Steven Stanley saying the fed chairman could resist triggering an ugly standoff. It seems doubtful that bernanke would risk the ire of congress and administration that can alter the feds institution structure at any time. The next president will have the ability to appoint the fed chairman, vice chairman, one board member through 2014. Another Board Members term is up in 2016. Simon . Thats a standoff that congress could reign the fed back in. This doubling down is you know, the independence of the fed is not necessarily guaranteed as it has been. I think thats right. On one hand, bernanke would resist the pressure from the administration and congress to assert fed independence. He would need to resist it up to a point where congress and administration could potentially depends again on how the Congressional Elections go and how big a republican majority there is there and how much of a tea Party Presence there is. They could ultimately change the fed starting. And dependent upon whether they have outcome based guidance or increase the buy and all sorts of stuff for the next meeting. Steve, well leave it there for the moment. Thank you very much. Still ahead in the program, live and exclusive interview with Goldman Sachs chairman and ceo Lloyd Blankfein. First, Rick Santelli working on the next hour of squawk on the street. Simon, i tell you what. Good morning, big guy. We saw some better than expected new home sales. Now granted, theyre not a million annualized units but they are better than expected. So were going to talk about some of the positives of housing. Of course, the more positive thoughts i think about housing the more i think about things like fannie and freddie. Were going to talk about the whole picture top of the hour. Apples launching its latest versions of the ipad and imac yesterday. Consumers are looking to trade up. Gazelle experienced a 700 jump in tradeins. Israel joins us here at post nine. Israel, hi. How are you . Thanks for having me on the show. Thanks for stopping by. What was the reaction like and when did you start to see the impact on your website . Weve seen with the rumors around the mini and the ipad but we were taught by surprise as soon as the announcement took place in san jose we saw an immediate spike in the trades online. It was incredible. 700 . 700 over the day before. It was about 1,000 ipads in its first hour since the announcement. Its incredible and it comes at a time when people are looking perhaps at what they can do with their old devices so now that theres all these new product cycles explain how your company works. We try to keep it simple for consumers. We know the Consumers Want to upgrade to the latest device and we provide consumers an easy way to look up the product that they want to trade in, look up the price and if theyre happy with the price, well pay for the shipping, send you the packag g packaging, we get the device and pay you. For an ipad 3 you can get close to 500 towards the upgrade of the new ipad so its a meaningful amount of money. Youre not necessarily linking buyers with sellers. Its almost like cash for gold. Its cash for old devices, correct . Were trying to keep it trustworthy for consumers. We want to tell you when you get up to 500 you get exactly what you were promised online, trying to remove all the friction associated with selling like ebay and craigslist trying to keep it simple. My ipad 3 was stolen. Would it have been resold through your site . We take a lot of care around the issue of stolen goods. It happens a lot with mobile phones. So currently there are a lot of databases you can access sbi databases where you can look up the imbi and if we ever get stolen goods we make sure its returned to the appropriate authorities. So to know if youve resold my stolen ipad do i have to look up what youve got on your site or are you automatically checking the database . We check it and make sure we do not sell stolen goods. The sell rate, i only need one iphone, right, but i might have two or three ipads in my house so is the refresh rate on ipads lower than on the iphones . It is less than the iphones. Iphones were talking about hundreds of thousands of customers trading in their old iphones for the purchase of the 5. The ipad were seeing a lot of activity but not as robust as with the iphones. We got a bunch of imacs as well. Does it work with desktops . Works with all apple products and highend smartphones. We saw triple in trading activities for macs in the last day. When you find old pcs, you have to check the hard drive is clear otherwise you can see what people have done on them. Is that also true of ipads, if my ipad is resold, will they be able to see what my Bank Account Details were . Youre touching on an important point for macs computers we have to take a lot of care how we wipe the data, we use a threeround department of Events Software to wipe the data. Iphones easy, one click, wait a minute, clears the data and your device is safe. And it is something we take seriously at gazelle. You can trade in a blackberry . Absolutely. Was there a spike or any reaction in those product areas during or after these apple product launches . We did see it around the iphone announcement, saw a lot of samsung and lg customers trading up to iphone and when the last samsung came out, upgrading and staying current with the latest devices is very important for customers. Youre a 6yearold company, growing quickly. What do you expect revenues to be this year . Weve been growing revenue 100 , last year 30 million in revenue and the growth continues. As the prices come down, the launch at the lower level presumably its more economical for many people to not buy secondhand, theyll buy a new one. Will your business die over time . Were seeing two different phenomenons. One in the developed world there is insatiable demand for upgrades to the latest models, see it in the u. S. And europe. Lots of supply. Thats supply of products coming our way. What you see on the sell side of the business where we sell the devices that goes to the emerging markets where the consumer demand for apple products for highend device is high, they just cant afford to pay the 700, 800 in some of the countries, i think i mentioned last month, its 1,500 to buy a new iphone in brazil. Not everybody can afford to pay 1,500. Are they happy paying 300, 400 for last years iphone 4, absolutely. There is insatiable demand. When i spoke a month ago there was expectation, we had no problem selling the devices. Thats got to be temporary. The manufacturers have got to move in on that space, i mean youre arbitraging something that theyve got to fill. They continue to move into the space and if you look into the stats the volume for tablets in the world will triple the next three years, in nigeria 4 million smartphone users, growing to 25 million. Lot of people come for new devices but there is tremendous space for use, high end use devices and great conditions. Can people trade in their apple shares at 614 and get the ones that sell that will be our next segment in the next couple years. Its called recommerce. Israel thank you for stopping by. Thank you for having me. Breaking news to Brian Shactman in hq. Multiple sources are reporting that the new York Islanders are going to move to the Barclays Center in brooklyn. Theres a 1 00 p. M. Eastern time News Conference that will be attended by mayor Michael Bloomberg and charles wong, owner of the new York Islanders. You have to keep in mind the new York Islanders play in one of the worst and oldest arenas in the entire world of professional sports and of course this is big news, but it seats only about 14,500 for hockey so they have nba and nhl in brooklyn. They havent had professional sports there since 57, when of course the dodgers left. Back to you. Already on twitter, brian, david, people are wondering, do i have to move to brooklyn now . I know, its a boon for brooklyn. Brings the nets and islanders together. They were together many years ago in the days of dennis potman, ben bossey, dr. J. Theres jokes about sustainable pucks in brooklyn because everything is sustainable and artisanal. Msg it is a challenge to the hegemony of the rangers and the knicks, given it is a part of the burrough. Extra points for the hegemony. Squeezed it in, in the last second. We knew it was a fashion brand so we launched gq and vogue and the company shot off like a rocketship. How Goldman Sachs may be helping the company shooting up further. Well talk to Lloyd Blankfein. Were back in a minute. Ty gets the most rewards of any Small Business credit card how does this thing work . Oh, i like it [ garth ] svens Small Business earns 2 cash back on every purchase, every day woohoo so thats ten security gators, right . Put them on my spark card why settle for less . Testing hot tar. Great businesses deserve the most rewards [ male announcer ] the spark Business Card from capital one. Choose unlimited rewards with 2 cash back or double miles on every purchase, every day whats in your wallet . Heres your invoice. At optionsxpress were all about options trading. We create easytouse, powerful Trading Tools for all. Look at these streaming charts theyre totally customizable and they let you visualize what might happen next. Thats genius we knew you needed a platform that could really help you elevate your trading. So we built it. Chances of making this . Its a lot easier to find out if a trade is potentially profitable. Just use our trade probability calculator and there it is. For all the reasons you trade options from income to Risk Management to diversification youll have the tools to get it done. Strategies. Chains. Positions. We put em all on one screen could we make placing a trade any easier . Mmmm. Could we . Around here, options are everything. Yes mom, ill place a long call to you tomorrow. I promise. Open an account today and get a free 13month eibd™ subscription when you call 18882800154 now. Optionsxpress by Charles Schwab. Welcome to hour three of squawk on the street. Heres whats happening so far. The general economy, i think its a little bit better in the u. S. , certainly better in the u. S. Than it is in europe and in terms of the rate of decline in asia, its reasonably steep, and were still inching ahead. I think everybody believes that were going to be plus or minus 10 of simpsonbowles. Lets get it done. This was the Conference Call that was a ready for broadway, prime time Conference Call. The last one was amateurist. Zuckerberg led this Conference Call. And it was dramatic. Optimistic as i was pessimistic that europe is bad and i was pessimistic about europe, china, maybe a little positive. United states im just not hearing enough negatives to be as glum as id like to be. What a week we have going here. Seems to me a fantastic time to be a genuine chinese stock picker, and by that i mean stocks in some of the parts of the world there may be a way to play china. A whole bunch of things worked for panera, they continue to work, all of our investment and energy is about building longterm competitive differentiation. It continues today. Its not complicated. Its just hard. Good wednesday morning. We are live here at post 9 at the new york stock exchange. Markets climbing back after yesterdays selloff, the dow up around 50 points, currently up 46, s p is up 3 and the nasdaq is up 3 as well. Yelp one of todays biggest gainers benefitting from facebooks rise but the Company Announcing its acquiring kype, located in germany. Buffalo wild wings falling after weaker results, after citing increase in opening expenses. Goldmans ceo lloyd bank fine talking about everything from Venture Capital to the economy to the fiscal cliff. Dont want to miss that in a few moments. Investors liking facebook as signs of hope surge on its mobile business. Then he spent 14 years with goldman and runs a best performing hedge fund, Dinakar Singh gives us his take on the market and what hes investing in now. Netflix takes a tumble. Should investors steer clear at this point . Well show you how to play it. An exclusive on cnbc one of the most prominent names on wall street made its way to the west coast. Julia boorstin joins us from there now along with goldmans chairman and ceo Lloyd Blankfein and two entrepreneurs. Good morning, julia. Good morning to you carl, here with Lloyd Blankfein at the goldman builders and innovators summit. Thanks for having us here today. Thank you, julia. Youre gather so long many interesting entrepreneurs. What opportunity do you see with the entrepreneurs for goldmans business . This is what we do. We try to identify entrepreneurs, wealth creators, job creators, we provide advice, we provide financing, we help them build their businesses, this is a core function of the firm and so really its right down the middle of the plate what we do in our business. How important are the next generation of startups for goldmans business and the economy as a whole . So important and i have to say our business and whats good for the economy line up. We profit from growth and we help contribute to growth but these are the business growers, and we in some ways use our convening power to draw people in, to have these entrepreneurs meet with entrepreneurs from a prior level, from a different generation, learn some stuff, do some clinics, try to help them in their business, but all from a point of view of helping them to do what they do. A lot of these companies seem like theyll be ipo targets down the road. How is your perspective on taking Companies Like these public change in the wake of facebooks ipo debacle . Not everything works out well. I think everyone in the market will try to learn from what mistakes were made and sometimes just things happen, but that wont deter everybody. I would say a lot of the people here have plans. Plants. Some have small operations. Some have very big dreams and want big operations. Lot of people want ipos and want to make their companies bigger. Everybody in our country should want that to happen. These guys are growing very, very quickly and hiring a lot of people along the way. So neil blumfeld, how has your perspective changed . Is there new momentum for ipos with Facebook Stock rocketing today . Were early stage company, two and a half years in. We look towards the future. We have a little over 100 people and looking at the next step now so it seems like the situation is improving, but were more focused on how can we get glasses to people as quickly as possible. Youre taking out a giant in eye glass space, luxotica. As lloyd mentioned theyve been a great convener and bringing along other founders and ceos that are in our similar space but also we had a conversation with the founder and ceo of under armour how he built his organization to 5,000 people or talking to danny meyer the famous new york restaura restauranteur about hospitality and customer service, something we hold sacred to learn about how the coat check is the first and last impression on a customer and how important that is, he created a hotdog stand during the summer to employ his best coat checkers so they wouldnt leave and get other jobs so when restaurant season kicks back up its lessons like these and how that hotdog stand turned into shake shack, which is an amazing hotdog hamburger sort of. Keypads, youre president of keypad. Org. You have a unique approach to microfinance. What are you looking to learn and how are you looking to innovate . One of the things that ive learned from the conference is Reid Hastings who is in the news i found him to be incredibly wise. Hes had to make tough choices at netflix and he said its the leap of faith an entrepreneur takes once you have a successful enterprise. If you look at the railroads none of them have become airlines and we to think about shifting his business completely online and at kiva our model heavily relies on local intermediaries on the ground, around the world. The website allows to you make a microloan to developing world entrepreneurs as well as people in the u. S. So they can lift themselves out of poverty and what were wondering about, are there new ways to reach people directly to go completely digital and one to one and there are risks with it, but the opportunities for greater efficiency and lower cost of capital to entrepreneurs especially some of the poorest entrepreneurs on the planet, its really great if you can incorporate technology so looking at different leaders who have had at a point in their companys history a big decision to make and how they thought about it. We have 100 entrepreneurs here, they offer different products and services, but what dominates here is what they have in common, theyre all risk takers, they all need capital, they all get tested in the market and they all go through trials. We had Larry Ellison speak to us and he, as you would look at his career and think my goodness what a straight line, what a rocketship but he went through a lot of turmoil and soul searching in the early 90s when he had to make certain changes to his business model. Lot of this is very, very reinforcing, and validating to the people who will go through their own moments. Carl you want to jump in from the studio . Lloyd, guys, its a great discussion. Lloyd we know the flow of financing to a lot of these innovators and Small Business owners to some degree we keep hearing has been paralyzed by uncertainty over the election and the fiscal cliff. We know that youve thrown your weight behind getting something done, along with simpson and bowles, but can you put on your trader hat for a moment and aside from what you hope gets done what, do you think is going to get done as best you can read it at this point . With respect to, carl, with respect to the fiscal cliff issues . Yes, yes. Look, the election is only a couple of weeks away now so i think were going to see the outcome but my own view is whatever the outcome, the country is looking at this election as a referendum on specifically those issues that are being thought over now with respect to the budget, with respect to entitlements, with respect to the progress i have y i progressivity of the tax rate. Whoever wins the election, the other side is not going to go into a funk, two years to the Congressional Election or four more years until the white house is up again. The country will have spoken. If the party that wins is wise it wont be a winner take all because at the end of the day they have to bring the other 49 or heck the loser may have 51 of the popular vote, they have to bring that along and that will make the outcome and the compromise more stable in the long run. Depending on who wins we should either have a right of center outcome or a left of center outcome, but personally i dont think it should veer too far from the center or else it will be a volatile and unstable situation. Assuming it happens as you cry, regardless of party, compromise is reached, can you characterize the way in which financing for Small Businesses sentiment among investors will change . Are we springloaded for a blowout q1 first half of 2013 . You know, i cant tell you q1 but i think you can make certain parallels to the period were in to the one that, to the context in which i got moved into, when i got out of school in the late 70s and lived in, in the early 0s. There was a lot of, you know, there was a lot of kind of a depressed mentality, inflation was over 10 . Unemployment at the same time was over 11 . People were demoralized and of course that was the moment that led to a 20year bull market. You have to, you know, the situations, we have a lot of problems to chew from. Theyre more than mere distractions but if you keep your eye on the ball you could see we have an extraordinary amount of terrific things going for us, specifically in this country, demographics, the energy situation, the fact that weve chewed through a lot of our problems, Balance Sheets have been reformed, and if you want to know what the real asset of the United States is, theyre sitting next to me, these entrepreneurs. We looked out at a group of 100 entrepreneurs we were working with at this summit. About a quarter of them were born outside the United States. The attractiveness of the United States to people around the world who have ideas and energy and passion, thats the greatest asset that we have, and while all those things are intact, i cant tell you about next quarter but i could tell you that this next generation is going to have great opportunities. I want to play a bit of sound, i hope you dont mind a couple goldman questions. Warren buffett was on our air earlier today talking about profits, return on equity. Here is a quick listen to what buffett said this morning. The profitability of Bank Something a function of two items, return on ams assets and assets to equity. Return on assets is not going to go up. Usb has done the best, 1. 7 , wells is between 1. 4 and 1. 5 but most banks are lower. Given that lloyd, how are bank profits going anywhere over the next few years and how do you continue to pay 45 comp. With returns like that . Well, there are a lot of first of all on the comp. The only cost a bank like us has is domp. Thats our whole cost. If you look at our lar margins which is what we make less what our expenses are, theyre actually quite high. The only expenses that we really have are comp. And the buildings into which we put our people, which is not that great. We dont have big plants and machinery. When you look at the cost structure of our institutions of course its comp. And its quite flexible because thats quite elastic depending on our results. When you look at what the potential returns are for banks, you know, what we do correlates with growth. You cant really, you cant elaborate from this period that were in now, which i think of as a fourth quartile opportunity set, at a cyclical low, people arent doing things, people are waiting for the resolution of tax issues and other regulatory issues. People are still traumatized by the recent excuse me . Go ahead, finish your thought. By the recent, so you cant elaborate off that any more than you could have extrapolated off the trend, the growth trend in bank profits in 07 and also competition, carl, is a big thing. When warren is talking about the industry hes talking in a macro sense. Lot of the burdens will fall unevenly on certain companies. Europe is pulling in. Were a global firm and i think were going to face a little less competition from some of our global competitors and the opening of new markets like china is going to provide tremendous opportunities for global firms like Goldman Sachs. Were catching it, lloyd. I think this might be your first appearance in the media since greg smiths book came out. I wondered just your post publishing reaction to that. Theres been some discussion that his argument has fizzled a bit because of some things that people were unable to confirm in his own reporting. Can you characterize the level of either monetary or reputational cost to the company as a result of his book, and we all know litigation is not over, lloyd. Theres more to come next summer. Well, on his book, i mean, it started out as an oped, it was jarring. We had no notice of it. I wont go into so much has been written now in the press about who he was and what his position was and what his motivation might have been, but the press drummed it up and of course it was damaging to us and jarring to ourselves. We spent a ton of time trying to parse through the oped to find out what charges there were, and i tell you the truth, i have anxiety about these things. I dont know always what we dont know but we checked on everything exhaustively, didnt find anything and frankly when the book came out i think a lot of people who reviewed the book couldnt find anything. As a result of this we did a tremendous deep dive yet again. Nobody with fladulate themselves as well as Goldman Sachs can. We investigated and turned over everything and at the end of the day, with all the stress and i wouldnt want to go through that again well be a better firm for it anyway because we really, really, really did look at everything again but as far as the book itself, i think the consensus of those who reviewed the book was there really was nothing there but anything that makes us be more intro spectisp and review our processes is not a lost exercise for us. You talk about others review of the book. Have you read the book and if so, what is your own review . No, i havent read the book, and a couple of reviewers who have read the book said you might want to save that hour and a half for something better. Julia . Bringing it back to the conference here, youre having entrepreneurs, this generation talked to entrepreneurs, older entrepreneurs like Larry Ellison, jeffrey katzenberg. What is your outlook for the ipo market and m a. Do you think well see another range of ipos like facebooks and zyngas . Give it enough time. Its not anything can or might happen. Everything will happen. Of course. The experience of these things are not bad experience. Sometimes the markets can get frothy and its partly our possibly gaobligation to assess and attach prices. We read the same newspapers and talk to the same people you do. We dont always get it right. We think were good at it but nobodys perfect at it. This cycle of entrepreneurs like the fellows here, creating businesses, trying to go out capital, investors trying to pick the winners that, kind of cycle of people trying to do well for themselves ultimately is what causes everybody to do well for the country. That seems like a perfect note to end on. Thank you all three so much for joining us. Thank you, julia. Appreciate it, carl back to you. Julia thanks to you. What a Beautiful Day it looks like in california. Facebook bouncing back, can it prove itsity itcritics wron the long run . And a wall street trading legend, Hedge Fund Guru tpgaxons Dinakar Singh. Were back after a short break. , or jumping into the market, he goes with people he trusts, which is why he trades with a company that doesnt nickel and dime him with hidden fees. So he can worry about other things, like what the market is doing and being ready, no matter what happens, which isnt rocket science. Its just common sense, from td ameritrade. Shares of facebook soaring on track for their best percentage gain in their short life as a public company, beating Third Quarter expectations, showing they can make some money from mobile advertising. Theres a look at the shares at 23. 85. Michael packard is an analyst at web bush securities, had a bye rating on the stock since before the ipo and michael you almost apologized to investors for wanting to buy the stock so early on, riding it through the summer. Is today your moment to shine in the sun . Is this today your make good . I think today is the first of a series of great moments for facebook. I mean i think that these guys have been on path ever since the ipo. They just havent really done a great job of communicating that clearly to shareholders and i think yesterday they were Crystal Clear. Every single thing they said was talking about new products, about revenue. They glossed over users. They really talked about delivering ads and the growth of advertising the new products, how successful they are on mobile. Everything they said really should encourage shareholders that this Management Team is aligned with their interest and theyll deliver in the future. I think this is the first of a series of good calls. Does the improvement in mobile going from 0 to 14 , is that accurately reflected in todays move . The stocks up almost 25 michael. I think people had given up on mobile. You had a lot of hand wringing, people saying all the growth is mobile, thats a substitute for desktop and mobile doesnt monetize as well. My math is the 60 of people who use mobile are probably spending about a third of their time on mobile, so a third of 60 is about 20 overall usage. Its monetizing at 14 so its not yet monetizing as well as desktop, 14 over 20, about 70 as well. But thats a great number and thats headed toward monetizing as well. I think Mark Zuckerberg was Crystal Clear the opportunity in mobile is really good because people use it more frequently. Youll see a lot of innovation from facebook in ad delivery and i think youll see those revenues continue to grow a lot so its a really encouraging sign. I think investors should be really happy about what they heard and todays share price reflects that. Even your rivals who are catching up with you going to a buy today have to layer their notes with cautions about lockup expirations and a billion shares coming online. How do you get around that . Do you wait . Yeah, i think its the right thing to do. Monday is the first of two big lockup expirations. The second is after the election, so i think that a lot of people are waiting to see if were going to get a repeal of the bush era tax cuts or let them expire or extended. November 14th were going to know so i think that might be the more meaningful lockup expiration. Once those shares are out in the market eventually the market will absorb that excess supply. I think the stock is a screaming buy after november 14th. I think it will give back about half of the move because theres going to be a flood of shares on the market the next two weeks. Interesting day for fb. Michael thank you for your time. Thank you, carl. Boeing better than expected Third Quarter. Lot more squawk on the street is coming up. Feels like the very first time [ male announcer ] do you have the Legal Protection you need . At legalzoom, weve created a better place to turn for your legal matters. Maybe you want to incorporate a business youd like to start. Or protect your family with a will or living trust. Legalzoom makes it easy with stepbystep help when completing your personalized document or you can even access an attorney to guide you along. With an a rating from the Better Business bureau legalzoom helps you get personalized and affordable Legal Protection. In most states, a legal plan attorney is available with every personalized document to answer any questions. Get started at legalzoom. Com today. And now youre protected. Wooohooo. Hahaahahaha oh. There you go. Wooohooo. Hahaahahaha im gonna stand up to her no youre not. I know. You know ronny folks who save hundreds of dollars switching to geico sure are happy. How happy are they jimmy . Happier than a witch in a broom factory. Get happy. Get geico. Fifteen minutes could save you fifteen percent or more. Europe is about two and a half minutes from their close. Well get to that and details on the impact here this afternoon when we come back in just a minute. The european markets are closing now. Fed date today but also a slew of data out of the eurozone. Simon hobbs here to get us up to speed. The manufacturing contraction is spreading into germany so the data and the corporate side of life continue to be bad but look at the green that you see across europe. We turn through the entire session and the bottom right at greece, and the sort of gains youre getting in athens. The greeks are suggesting they have given an extension to their austerity so the austerity plans can be delayed according to what the finance minister has said in Parliament Well put through legislation next week to confirm that new program, the rest of europe, because we know draghi is over in germany today trying to sell the bond buying to the germans. The rest of europe is saying i am not quite sure that we have gotten a deal, however thats what the greeks are saying and it just adds further gains to those that are in favor of greece. The Greek Stock Market over the last couple of months here, one, two, three, four, five months there, is up 70 and youll be aware the greek bonds have also rallied on the yields there for coming down into negative territory during that period of time. There you go, were way above around 30, now weve carved on that. The rally continues on the greek assets as we look for confirm confirmation what the troika has said to the rest of athens and weve not seen in public but the debate continues. I just want to mention as were talking about yields where we are on the italian and the spanish yields because they have been creeping higher over the last week. Yesterday of course certainly this is the italian yield. Lets look at the spanish yields as well and that also has ticked higher during the course of the week. There is concern about the regions and the downgrade from moodys with the regions earlier in the week and the community of madrid canceling a bond issue, just check were just drifting higher there, and we continue with the will they, wont they, as far as applying for a full bailout in order to get the ecb buying and thats the same as it has been for some time. The corporate side there are winners and losers today as we work through earnings. Oracle sap are raising their targets for the year, the stock gained up almost 5 . I wanted to mention on the upside arm holdings the chipmaker in the uk having a phenomenal wake as it unveils its results and so many appliances, samsung and apple and so on and so forth. Stock is up almost 13 so far this week. Big focus on the automotives amongst steelmakers and the like in europe. Ford is closing its plant in belgium. Volkswagen doing okay, theyre up higher, but the second largest truckmaker in the world is having difficulty in asia and latin america and peugeot has finally got a credit line or guaranty, from the french government to the tune of 267 million to save it from bankruptcy, the stock down 90 over the past five years. I had a peugeot before i moved to the United States. I loved my peugeot. You got to bring photos in. It was a beautiful car. I had to sell it. Always time to get another one. Youll go into a uk garage and theyll go, its french isnt it. But theyll go its not renault. So complicated to fix. I love that internal european stuff. Thanks, simon. Lets hop over to the cme in chicago, Rick Santelli looking at evidence some say of a recovery in housing. Absolutely and the number was pretty good. Now granted theres seasonal adjustments that tend to push the number better than it should be but all things being equal ive always looked at the seasonally adjusted number and i like to be apples to apples so here i stand trying to make a case for improving housing but i cant do it, carl. I cant do it. Ill tell you why i cant do it. Because its improving but its dysfunctional and ill tell you what i mean by that. Here we have housing improvement, but what lies beyond just out of reach . Freddie and fannie. We continue to see gses totally ignored. How many questions did any moderator in any debate ask about freddie and fannie . Nothing. Probably between 150 billion and 200 billion in counting, they have liabilities of 5 trillion, i bet you the number is more. So its like half baked and fully ignored. Its very difficult to get optimistic. Lets look at the stock market. Yes, people are optimistic about the stock market. Whats behind that . The Federal Reserve. What else can we get optimistic about . Im optimistic about a variety of issues with regard to business, but the problem is, jamie dimon, we covered him in front of the Foreign Relations council on october 10th, something he said stuck in my mind, talked about doddfrank his number was maybe 25 written. The volcker rule we could have various agencies, the sec, cftc, all have different interpretations and different rules. You see where im going here . The problem is is that it wont take much to get our economy on track. Weve talked about that. Thats a good thing. But the problem is, this election really, really, really is big about philosophical issues, because theres very little evidence i can give you that the governments ever going to fully finish any of this. How many years does it take . Were not shooting ourselves in the foot. Weve cut our feet off. Dra carl, back to you. Good stuff rick and your point about the questions in the debate well taken. See you in a few moments Rick Santelli. Bob pisani is on post 9 looking at oversold conditions, revenue continues not to be a hot spot . Weve got a modest bounce. Its an oversold situation and thats certainly good news. Market acting a little bit on the rational side. I want to point out what the earnings situation is like. We got a little bit of good news. Number of companies raised guidance, particularly its row space companies. Boeing, lockheed, northrop, raised guidance, trading all to the upside but thats not the big trend. The really big trend you know what it is, the slowdown in revenues. I walked, looked very carefully this morning, 11 companies, all big companies, 7 of the 11 had revenues on the light side. Delta, emc, kimberlyclark, eli lilly and Owens Corning, all in different kinds of industries, all with the same kind of problem, most of them with the exception of Owens Corning which had a terrible time recently trading to the downside. This is where were at right now in terms of the earnings right now. So 37 of the s p 500 had reported so far for q3, earnings are basically flat at 0. 4 . This is not a surprise. This has been expected, it hasnt changed much. What has changed is right here, your revenues only up 1. 4 , this number was much higher even a month ago. Thats whats changing. Look at q4, the numbers are coming down but theyre still talking about a trough here, earnings 8. 4 , revenues were higher a little while ago but still better and this gets back to the earnings trough concept that everybody is talking about whether or not if we are at some kind of trough. Thats the debate. China is the other debate. I want to show you something quickly. There are people calling troughs in china that may be important. Here is the hang seng index for the last six months. Weve been coming off it, up 6 . This was three and a half year lows web they started talking about stimulus a few weeks ago and people started buying. Since then, the market has lifted, the hang seng, have you looked at the hang seng . 52week high on the hang seng index today as people have come off the lows recently. The important thing here, a number of people have been called, isi made a positive call on chinese stocks. Daiwa says chinese economy has hit the trough. Before i let you go let me comment on ricks statement on the housing situation. Hes right, things are Getting Better and nobody is more happy than me. Here is the story look at 2005, 1. 4 million sales new home sales. Today what weve got multiyear highs, 39,000. Its a long, long way to the downside and yes were moving up but even here in the middle we still have to double the new home sales, double them just to get somewhere around the 10, 12year average, thats how far away we are. Thats a great chart. Thats depressing to look at it. Thanks so much, bob. In the last half hour we spoke with goldmans chair and ceo Lloyd Blankfein and asked him about his reaction to the new book by former employee greg smith. Heres what he said . We checked on everythingively and didnt find anything. Frankly when the book came out a lot of people who reviewed the book couldnt find anything. As a result of all this we did a tremendous deep dive yet again, nobody can fladulate themselves better than Goldman Sachs can. At the end of the day with all the stress, i wouldnt want to go through it again well probably be a better firm for it anyway. Gary kaminsky joins us from goldmans headquarters with reaction to that in. I never tend to mince words. Let me say this, were fortunate timing wise to be here at this conference today. I wish i could share with you at tendees but this is a whos who of the institutional investing world. You do not build a client base like this if you dont do the right thing for clients. And thats simply the bottom line. As far as mr. Smith is concerned, i would not be surprised that we never hear another word from mr. Smith by the end of this week and guess what . If you want to buy his book it will be on sale at walmart for 2. 99 by sunday so stay there, wait, could you buy it probably 2. 99 if the publisher is lucky. I think we sort of ended that chapter as far as talking about a firm and whether or not they work for their clients, carl. I also asked him which he did not respond to as explicitly, gary, that the issues arent over. Theres some more litigation, theres more trials that are going to happen next year. I mean, the question will be whether the reputational costs have had a lid put on top of them yet. Lloyd told thaw there was always reputational damage that theyve had to fight through. At the end of the day as i know from experience, ive attended these conferences in one way or another for the last 25 years, if you dont do the right thing for your clients, reputational damage or not, youre not going to have a business, and i think the numbers here and when i look around this room and the people were going to be bringing to you on air the rest of the day from the Conference Call wouldnt exist if you didnt do the right thing for clients. Good to know and thank you very much, gary. Well talk about more to come from you in a few moments. In the meantime i go to Kayla Tausche back at headquarters with some news on iac. Carl we saw a big spike in iac shares, they had been down almost 10 , now down just 5 . You can see the jump just a couple minutes ago triggering a Circuit Breaker at the nasdaq on comments from diller, he said someone may have misread the guidance. Now iac Beat Estimates on the top line and the bottom line attributing that to internet search growth. Theyre unclear what exactly was misread about the guidance but someone was trading on that comment. We dont know when the stock will trade again, currently still halted. Carl . Yeah, reuters has a headline as of 11 39 that trading has resumed, kayla. Okay. But there might be some discrepancy. Were seeing it move up and down just marginally right now. Any additional headlines well come back to you. Thank you. When we come back, he quickly became one of the industrys top performers, tpgaxons Dinakar Singh live from goldman after the break. Well be right back. Its a new day. If youre a man with low testosterone, you should know that axiron is here. The only underarm treatment for low t. Thats right, the one you apply to the underarm. Axiron is not for use in women or anyone younger than 18. Axiron can transfer to others through direct contact. Women, especially those who are or who may become pregnant, and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. Report these signs and symptoms to your doctor if they occur. Tell your doctor about all medical conditions and medications. Do not use if you have prostate or breast cancer. Serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet, or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. See your doctor, and for a 30day free trial, go to axiron. Com. Gary kaminsky is at goldman with another exclusive. Thanks, carl, were here with din awar singh, great to have you here. Runs a very large hedge fund. I want to get right into it. Youve got some strong opinions about a lot of Different Things on the minds of viewers. First off, many people have been buying high dividend stocks because of whats been happening around the Central Banks of the world. You have a warning for people buying a lot of the high dividend stocks and what they may expect in the years out. Explain to us. Sure. The biggest factor youve seen already is theres been a multitrillion flow from equities of credit. We know that. Rates are low now but if you want to make money you have to buy something, so people are moving into dividends. Its not a crazy idea, makes some sense but when you look at where yields have come in, you have to make sure the dividends are real and going to go up so is verizon cheap . Its okay. Its high earnings, and dividend yield. Were trying to find stocks where theres a ton of cash flow which they can use to buy back stock and pay dividends but the market hasnt recognized it yet, time warner cable, sirius, youre getting more return of capital by a lot than you are in reads for sure or stocks like verizon or at t. A greater strategy would be try to identify the stocks and the companies that will be the future difficult payers. Yes. As opposed to ones you are buying today and buying them on the yield. Great cash flow, good businesses and imagine turning the cash flow into cash coming back to you. Are you short at t and verizon or think people buying them here are making a mistake . We are some but theyre okay, but i think if you go one step further there are other Companies Like wind stream et cetera dividends are high but not sustainable. The market is buying the dividend but its not just theyre not going to grow. The warning sign are Companies Line telefonica in europe. People get the fact a lot of the companies cant maintain the dividend. Telefonica had a big yield until they cut it. Another long short thesis, you look at whats happening in terms of Central Banks and the regions and youre long some of the investment banks. Explain to us why you think regional banks overvalue many investment banks undervalued . When you look at whats happening the good news is a lot of the macro headwind is settling down for financials. Capital ratios have doubled pretty much at this point. If anything basel three might bring those back. Lot of the regulatory and capital noise is done. Today most financials have a lot of capital. Their problem is earnings. In regional banks, a bit like with dividend stocks if you had to own a financial, if youre that one person on earth who did you bought regional banks because theyre safe. Now theyre full valuations and their problem is that earnings are going down because their interest margins are getting depressed. Low rates work both ways, they bring down profits, regional banks and some insurance companies. If Risk Appetite goes up it brings up profits for companies with more Capital Markets businesses, the credit suisses of the world. If you can find the european banks that fit in the category or banks that fit in the flows, their earnings go up and it makes sense to buy those but if its about interest margin youre going to get hurt Going Forward. You mentioned the safety of regional banks. People bought them for the safety much like the high dividend stocks. You dont see the regional banks as having safe dividend streams when you look at whats happening. I think there are safe banks but earnings are going down or theyre flat, theyre not going to grow from here. When people buy a financial they think its a bargain, a sense this is the sector thats been underweight and by buying them now youre getting a good deal, a good deal shouldnt mean low valuation on earnings are going to go up. Carl you want to jump in here . Good stuff. Dinakar you said japan is cheap. How do you answer the conventional wisdom they still have big demographic issues longterm, this brewing trade war with china, what looks good about the japanese market . Sure. I think the issue in japan is a bit like you see in almost every country in the world, youve got the public sector, the government somethingor, but their private sector has done an incredible job of restructuring over the last ten years. Profit margins are good. More than any other place in the world we find people not focused on stocks but we talk about verizon before, take at t in japan, their dividend payout ratio is half of verizons, their Balance Sheet is in good shape and for the first time unthinkable for a japanese big company theyre buying back stock on top of dividend. You get 8 , 9 total return with earnings that are growing and a Balance Sheet thats good. Thats incredible. When you look at japan a lot of the companies, some global, some defensive, actually after ten years of restructuring in pretty good shape. I think the comparison is about germany in a way. Strong currency has forced companies to finally change in a way that a hedge fund could not change before. On the government side the government will be missed. Taxes go up or the currency goes down. Looking forward for companies in japan, many of which have assets everywhere and good Balance Sheets i think it will make a difference but frankly your starting point to this point is very good because youve got low multiples and a lot of room for profits to grow. Everywhere else in the world profits are coming down, Profit Margins, japan is the one place where theres room to get bet per zblm jim oneill, same with asia, he said china may be the best opportunity in the world right now. You agree with that or no . I think its mixed. It wouldnt shock me if we never see another double digit year in china of growth. Its not a bad thing. Its china being mortal. Once you get to a certain point you cant grow so much. Theres investor expectation issue if youre betting on a big rebound in stimulus and recovery youre going to be disappointed but there are a lot of stories that now are cheap because the valuations have fallen in half from where they were a couple of years ago. Carl, its always good to get a good reminder of what is value and cheap and why things are cheap. Im with you, garr yea. When we come back, big numbers out of the airline sector, well wrap that. S p has gone negative and the dows gains are fading. Were back in a minute. How theyll live tomorrow. For more than 116 years, Ameriprise Financial has worked for their clients futures. Helping millions of americans retire on their terms. When they want. Where they want. Doing what they want. Ameriprise. The strength of a leader in retirement planning. The heart of 10,000 advisors working with you onetoone. Together for your future. Together for your future. If we want to improve our schools. What should we invest in . Maybe New Buildings . What about updated equipment . They can help, but recent research shows. Nothing transforms schools like investing in advanced teacher education. Lets build a strong foundation. Lets invest in our teachers so they can inspire our students. Lets solve this. Boeing, delta, u. S. Airways reporting this morning. Strong numbers across the board. Delta reports earnings a penny shy of expectations at 90 Cents Per Share but a strong quarter, limited capacity and corporate customers, made 3 more per passenger in the Third Quarter, moving on to u. S. Airways, big number, beat the street by six cents coming in at 99 Cents Per Share, u. S. Airs Third Quarter doubled profit compared to the same quarter last year. U. S. Airways sees strong travel demand continuing through the remainder of this year and finally on boeing, beat the street by 22 cents but more importantly for investors here, boeing has raised its full year guidance due to commercial airplane demand and also seeing the cancellation rate slowing down so strong numbers across the board. Carl . Working our way to the most important quarter of the year. Thanks so much, phil lebeau. Netflix trading sharply lower after their Third Quarter. Well tell you how to trade them in a moment. Look, if you have copd like me, you know it can be hard to breathe, and how that feels. Copd includes chronic bronchitis and emphysema. Spiriva helps control my copd symptoms by keeping my airways open for 24 hours. Plus, it reduces copd flareups. Spiriva is the only oncedaily inhaled copd maintenance treatment that does both. Spiriva handihaler tiotropium bromide inhalation powder does not replace fastacting inhalers for sudden symptoms. Tell your doctor if you have kidney problems, glaucoma, trouble urinating, or an enlarged prostate. These may worsen with spiriva. Discuss all medicines you take, even eye drops. Stop taking spiriva and seek immediate medical help if your breathing suddenly worsens, your throat or tongue swells, you get hives, vision changes or eye pain, or problems passing urine. Other side effects include dry mouth and constipation. Nothing can reverse copd. Spiriva helps me breathe better. blowing sound ask your dr about spiriva. Netflix the big story slipping due to disappointing subscriber growth numbers. Is it time for the online movie dealer to power down . Martin, good morning to you. Good morning. People generally get the idea this morning about the pain, its the biggest loser on the s p. Right. Anything in there on a positive note that people are overlooking, voluntary turn for instance relatively low . Well, you know, netflix is going to add they say 5 million streaming subscribers in the u. S. Thats not what they thought at the beginning of the year but its still a lot of subscriber growth. Theyve got a lot of traction internationally, added a couple million subscribers there, theyre showing some good uptake internationally. But i think the concerning thing about netflix is not just their inability to guide streaming subscribers but the question what is the Market Opportunity here. Theyre spending two or three times hbo, but i think the trajectory of subscribers slowing down makes people question that. At the same time theyre spend so long much theyll be burning cash over the next year there will be Free Cash Flow negative. They could lose 300 million or so of cash off their 800 million balance. Youre having difficulty guiding your burning cash, youve got a business under a lot of change with a lot of competitors so thats making the stock volatile and for us were holding back. We have a neutral rating, dont want to go long or short today. You cant guide well, youre spending money, i guess you could argue like a drunken sailor, you dont need to raise cash. Do they . They say they dont need to, so the risk is that if you cant successfully predict what your business is doing, can we have 100 confidence in their ability to sit within their cash cushion . Given the massive amounts of capital flowing into a massively changing business its a risk. I expect theyll do what they say but it is a warning right now. Finally weve seen the story in other sectors, mobile phones comes to mind where youre burning cash, your best successes appear to be behind you but theres always that possibility of someone coming in and making a bid. How real is that for netflix . Netflix at the right price would be interesting to potentially some players out there but the question is build versus buy. They offer you content that a